Danayya Shavaputrayya Math D S Math Vs ACIT (ITAT Bangalore)
In the case of Danayya Shavaputrayya Math D S Math Vs ACIT, the Bangalore Bench of the ITAT ruled that the adhoc disallowance of expenses without rejecting the assessee’s books of accounts is unjustified. This decision was based on the jurisdictional Karnataka High Court’s precedent in CIT Vs. Konkan Marine Agencies and a prior ITAT order in Hassan Hajee & Company. The case involved the disallowance of ₹1,30,98,709, equating to 25% of the claimed expenses, during the 2014-15 assessment year. The assessee, a civil contractor, argued that the expenses were backed by self-made vouchers, common in the nature of their work, and had their accounts audited under Section 44AB. The ITAT observed that without rejecting the books of accounts, the Assessing Officer (AO) had no jurisdiction to make such an estimate. Additionally, the tribunal noted an increase in the assessee’s net profit ratio from the previous year, further supporting the legitimacy of the claimed expenses. The ITAT dismissed the adhoc disallowance, reinforcing the principle that such actions require a prior rejection of the books of accounts.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by assessee is directed against order of NFAC for the assessment year 2014-15 dated 26.6.2024. The assessee raised following grounds:
1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in upholding the order passed under sec 143(3)of the Act by the learned assessing authority is opposed to law and not valid and accordingly liable to be cancelled
2. The ld. CIT(A) erred in confirming the disallowance/ addition made by AO towards the Labour payment and hire and water charges paid on estimation basis without considering the facts of the case
3. The ld. CIT(A) ought to have appreciated that the Appellant is a civil contractor and most of the payments were made to various persons and at various sites where he had done work being a civil contractor. The Ld. CIT(A) further ought to have appreciated that the Appellant has submitted all the self-made vouchers and relevant documents which shows the genuine transaction. Thus, the addition made has to be deleted.
4. The learned CIT(A) ought to have appreciated the submission of Appellant that to produce the confirmation for vouchers is not possible and in the absence of the same, to buy peace with department the Appellant requested that to estimate profit at 10% as estimated in work agreement. Thus, the without appreciating the facts of the case the Ld. CIT(A) upheld the order of the AO is bad in law and has to be cancelled.
5. The learned CIT (A) erred in confirming the order of the AO by not considering the fact of the case and not giving further opportunity to make a submission.
6. The CIT(A) ought to have appreciated that the addition or disallowance cannot make without affording proper opportunity to the Appellant. Accordingly, a fresh opportunity has to be given to considered the request made by the Appellant that that to estimate profit at 10% as estimated in work agreement. Accordingly, it is prayed.
7. The Id. CIT(A) erred in confirming the interest levied by AO.
8. Without prejudice, the disallowance as made in excessive and arbitrary and liable to be deleted.
9. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.
2. The assessee raised following additional grounds:
1. On the facts, the ld. CIT(A) erred in confirming the addition made on estimation without rejecting the appellant’s books of accounts u/s 145 of the Act.
2. The ld. CIT(A) ought to have appreciated that the appellant is following mercantile system of accounting from the beginning. Thus, the addition on estimation basis has to be deleted.”
3. We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above grounds. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide.
