Carreg Commodities Pvt. Ltd Vs ITO (ITAT Bangalore)
Self-Made Vouchers Still Valid – Practical Business Reality Recognised – ITAT Deletes Disallowance of Labour & Farm Expenses; No Third-Party Bills Needed for Coolie Expenses – Tribunal Accepts Remand Report
Assessee, engaged in trading agricultural produce, filed its return for AY 2017-18 declaring income of ₹18.24 lakh. AO completed best judgment assessment u/s 144 on 23.12.2019 & disallowed coolie & labour charges of ₹34.60 lakh & farm expenses of ₹3.81 lakh on the ground that they were not supported by third-party bills. As a result, income was assessed at ₹80.11 lakh. CIT(A) confirmed the disallowances despite additional evidence furnished by the Assessee.
Before Tribunal, it was argued that such expenses are integral to the business of agricultural trading & inherently involve cash payments to unskilled labourers for loading, unloading & hamali charges, where third-party invoices are not available. Assessee had produced self-made vouchers & explanations during remand proceedings. Importantly, AO in his remand report accepted that these expenses were reasonable, common in this line of business & that the vouchers explained the payments. Still, CIT(A) brushed aside the remand report & confirmed the additions.
Tribunal found that once AO himself admitted the nature & necessity of the expenses in the remand report, there was no justification for their disallowance. Merely because vouchers were self-made does not make expenses non-genuine, particularly when such expenses constitute barely 1% of turnover. It emphasised that agricultural trade & farm operations often rely on hamali & labour payments which cannot always be supported by third-party bills. By ignoring this business reality, both AO & CIT(A) erred in law & fact. Accordingly, Tribunal set aside the orders of the lower authorities & directed deletion of the entire disallowance of ₹34.60 lakh & ₹3.81 lakh.
