9911796707
TMI Blog2014 (1) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Income Tax Act, 1961 various information relating to the assessee's income was called for. The Managing Director of the assessee-company appeared before the Assessing Officer and stated that he is not able to submit the material required by the Assessing Officer because of shifting of his office as well as residence to another place, the material is misplaced and also due to the sickness of his mother and sister and requested the Assessing Officer to complete the assessment on the basis of his submissions. The Assessing Officer observed that out of the total expenses of Rs.1,33,57,000/- towards the cost of material the assessee has produced proof of cost of materials to the extent of Rs.1.01 crore only while no evidence is produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in of profit in this line of business can never be more than 2 to 3%. It was submitted that the assessee is subjected to statutory audit and therefore, the results declared by the assessee should be accepted. After considering the assessee's submissions, the learned CIT(A) confirmed the addition of Rs.16,28,570/- being 50% of the unsubstantiated claim of cost of materials. As regards the claim of labour charges, she restricted the disallowance to 25% of the claim and as regards the disallowance of machinery hire charges and vehicle hire charges under section 40(a)(ia) of the Income Tax Act, she directed the Assessing Officer to verify the assessee's claim that none of the payments exceeded Rs.20,000/- singularly and that in no case the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meetings and for each and every item, it is not possible to obtain bills or maintain vouchers. He submitted that assessee has maintained the vouchers to a large extent i.e., up to Rs.1.01 crore as observed by the Assessing Officer and there is only a sum of Rs. Rs.32,57,139/- for which the assessee could not maintain the vouchers. It is submitted that the disallowance of 50% of Rs.32,57,139/- is not called for and is excessive. As regards the direction of the CIT(A) to the Assessing Officer to verify the claim of the assessee under section 40(a)(ia) is concerned, he submitted that the CIT(A) has no power to give such a direction to the Assessing Officer. 4. The learned D.R. on the other hand, supported the Orders of the authorities below a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, we are inclined to restrict the disallowance of labour charges to 10% of the total labour expenses claimed by the assessee. 6. As regards the cost of materials disallowed by the Assessing Officer and confirmed by the CIT(A), we observe that in such functions as conducted by the assessee there may be certain miscellaneous items, for which the assessee may not be able to obtain the bills or vouchers while it also cannot be ruled out that the assessee might have inflated the expenses. We, therefore, are of the opinion that some disallowance is justified but disallowance of 50% of the expenses is excessive and restrict the disallowance to 15% of the unsubstantiated cost of materials. 7. As regards the CIT(A)'s direction to the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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