Income Tax Appellate Tribunal - Delhi
Gupta Bros. (India), New Delhi vs Assessee on 31 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : C : NEW DELHI
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI A.D. JAIN, JUDICIAL MEMBER
ITA No.5674/Del/2012
Assessment Year : 2009-10
ACIT, Vs. Gupta Bros. (India),
Circle-38(1), 232, Jor Bagh,
New Delhi. New Delhi.
PAN : AAAFG4325Q
C.O. No.476/Del/2012
(ITA No.5674/Del/2012)
Assessment Year : 2009-10
Gupta Bros. (India), Vs. ACIT,
232, Jor Bagh, Circle-38(1),
New Delhi. New Delhi.
PAN : AAAFG4325Q
(Appellant) (Respondent)
Assessee by : Shri J.C. Kapoor, CA
Revenue by : Shri Satpal Singh, Sr. DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER
The appeal by the assessee and the Cross Objections by the department is for Assessment Year 2009-08 against the order dated 31.08.2012 passed by the CIT (A)-XXVIII, New Delhi. The Department has taken the following grounds:-
" On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in:2 ITA No.5674/Del/2012
CO No.476/DeL2012
(i) The Ld. CIT (A) erred in deleting the addition of Rs.2,00,000/- on account of labour expenses/wages in the absence of proper evidence.
(ii) The Ld. CIT (A) grossly erred in deleting the addition of Rs.8,00,000/- made by the Assessing Officer on account of unverifiable purchases. The Ld. CIT (A) has failed to appreciate that merely because the assessee's accounts are audited, the claims does not become admissible, particularly so when the assessee fails to substantiate his claim.
(iii) That the grounds of appeal are without prejudice to each other."
2. The cross objections raised by the assessee are as follows:-
"1. In spite of the fact that the Gross Profit of the assessee is better than the preceding year, there is no reason and justification of making an addition of Rs.11,00,000/- i.e., Rs.3,00,000/- on account of disallowance of Labour expenses and Rs.8,00,000/- on account of disallowance of Material expenses.
2. During the year Gross Profit rate was 13.10% as against 12.90% in the preceding year.
3. In the preceding year 2008-09 the addition was also made on these two counts and the same were deleted in appeal and deletion was also confirmed by the Hon'ble Tribunal."
3. The Ld. DR has submitted that the Ld. CIT (A) has erred in deleting the addition of ` 2 lac on account of labour expenses/wages, despite the fact that no proper evidence was furnished by the assessee in support of such claim; that the addition of ` 8 lac made on account of unverifiable purchases has also wrongly been deleted by the Ld. CIT (A), failing to appreciate that the claim of the assessee did not become admissible only due to the fact that the assessee's accounts were audited, whereas the claim made by the assessee remained entirely unsubstantiated.
4. Apropos the Cross Objections, the ld. counsel for the assessee has submitted that the addition of ` 11 lac comprising ` 3 lac on 3 ITA No.5674/Del/2012 CO No.476/DeL2012 account of disallowance on labour expenses and ` 8 lac on account of disallowance on account of material expenses, was wholly unjustified and the same has been correctly deleted by the Ld. CIT (A); that the gross profit of the assessee for the year under consideration is better than that shown for the preceding year, i.e., 13.10% this year as against 12.90% in the preceding year; that similar additions made for Assessment Year 2008-09 were deleted by the Ld. CIT (A) and such deletion has been confirmed by the Tribunal. The ld. counsel for the assessee has drawn our attention to pages 25-32 of the assessee's paper book, which is a copy of the Tribunal order dated 15.06.2012, passed by the Tribunal in the assessee's case for Assessment Year 2008-09, in ITA No.1313/Del/2012 in the appeal preferred by the department against the CIT (A)'s order.
5. Apropos the labour expenses/wages claimed by the assessee, it is seen that the assessee, who was carrying on the business of civil construction work during the year, had shown a decrease in the net profit rate of 4.09% to 3.40% as compared to the earlier year. On query, the assessee contended that its gross profit had increased from 12.9% in the earlier year to 13.1% for the year under consideration. The assessee had claimed wages at ` 6,94,22,689/-. The assessee produced muster roll concerning of few sites. The Assessing Officer observed that some of the bills were not verifiable, that all the muster rolls were self-generated and payment had been made in cash. As such, the Assessing Officer made a disallowance of ` 3 lac. The CIT (A) restricted the disallowance to ` 1 lac, observing that as contended by the assessee, the muster roll payments were authenticated by the recipients and there was no outstanding payments due to the labourers. The CIT (A) also observed that on a similar issue for Assessment Year 2008-09 in the assessee's case, the CIT (A) had partly allowed the assessee's appeal.
4 ITA No.5674/Del/2012CO No.476/DeL2012
6. The ITAT, vide its order dated 15.06.2012 (supra) for Assessment Year 2008-09 upheld the CIT (A)'s action in restricting a similar disallowance to ` 1 lac. While doing so, it was observed that the Assessing Officer had not recorded any specific finding to reach the figure of disallowance of ` 3 lac, which was an ad hoc addition made, ignoring the fact that the percentage of labour wages to gross turnover had come down to 13.73% for that year (Assessment Year 2008-09) as against that of 16.99% in the earlier year.
7. The addition in the year under consideration, it is seen, is similar to that made for Assessment Year 2008-09. Under similar facts and circumstances as in that year, the Ld. CIT (A) has restricted the addition to ` 1 lac which, in our considered opinion is well justified. Accordingly, ground No.1 raised by the department is rejected.
8. So far as regards ground No.2, the assessee had claimed material purchased of ` 32,33,17,184/-. The Assessing Officer verified the books of account with vouchers on a test check basis. It was observed that small purchases of items at sites were not supported by adequate purchase bills. An ad hoc disallowance of ` 8 lac was made by the Assessing Officer, allegedly to cover up the possibility of loss in the revenue arising out of the stated unverifiable nature of the expenses. The CIT (A) deleted the addition, observing that the accounts of the assessee were audited and the assessee had shown better results than the earlier year.
9. The Tribunal, in its order (supra) for Assessment Year 2008-09, has, upheld the CIT (A)'s action in restricting a similar addition of ` 3 lac to ` 90,537/-.
5 ITA No.5674/Del/2012CO No.476/DeL2012
10. The addition made by the Assessing Officer for the year under consideration, like that made in the earlier year, was on an ad hoc basis. Undisputedly, the assessee has shown better results during the year, over those for the earlier assessment year. The gross profit has gone up to 13.10% against 12.90% in the earlier year. In view thereof, the Ld. CIT (A) cannot be said to have erred in holding the addition made on estimate basis to be unjustified. Accordingly, here also, the order of the Ld. CIT (A) is upheld rejecting ground No.2 raised by the department.
11. The cross objections filed by the assessee are supportive of the CIT (A)'s order.
12. In the result, the appeal filed by the department is dismissed and the COs filed by the assessee are allowed.
The order pronounced in the open court on 21.06.2013.
Sd/- Sd/-
[S.V. MEHROTRA] [A.D. JAIN]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 21.06.2013.
dk
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches