ITO Vs Gauram Prasad Nishad (ITAT Raipur)
The Revenue appealed against the Commissioner of Income-tax (Appeals)’s order for Assessment Year 2007-08, challenging deletion of additions relating to unexplained capital, loan account differences, wage disallowance, unexplained cash credits under Section 68, and admission of additional evidence under Rule 46A. The assessee also filed a cross-objection supporting the CIT(A)’s order.
Regarding the addition of Rs.5,66,753 as unexplained capital under Section 68, the Tribunal noted that the Assessing Officer, in the remand report, accepted that the assessee had explained the source of the capital introduced during the year. Holding that no addition was warranted in view of this admission, the Tribunal upheld the deletion made by the CIT(A).
On the addition of Rs.65,274 for differences in the loan account, the Tribunal observed that the Assessing Officer admitted in the remand report that the addition had been made through oversight and that the assessee’s explanation appeared to be correct. The deletion by the CIT(A) was accordingly upheld.
With respect to the Rs.22,83,288 disallowance out of wages, the Tribunal found that the Assessing Officer had made an ad hoc disallowance of 25% on the grounds that wage registers were not produced, wages appeared excessive, and documents for verification were lacking. The Tribunal observed that the assessee was engaged in supplying labour for industrial operations, that the wage-to-gross receipt ratio was broadly consistent with the preceding year except for a marginal increase, and that in the subsequent year the Assessing Officer had accepted the wage claim subject to a minor disallowance of Rs.70,000. While holding that a 25% ad hoc disallowance was not sustainable, the Tribunal, considering the marginal increase in wages and the assessee’s concession that a small disallowance could be made, modified the CIT(A)’s order and sustained a disallowance of Rs.1 lakh.
