PCIT Vs R. G. Buildwell Engineers Ltd. (Supreme Court of India)
Revenue challenged the findings of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT), which had deleted disallowances and consequential additions relating to two categories of expenses for Assessment Year 2010-11: (i) expenses on bricks, machinery repair, cartage, etc. amounting to approximately Rs. 1.1 crore, and (ii) labour expenses amounting to approximately Rs. 2.3 crore.
The Assessing Officer (AO) held that insufficient evidence had been produced in support of the expenses on bricks, machinery repair, cartage, and similar items. Accordingly, 10% of the claim was disallowed. The Commissioner (Appeals) reduced this disallowance by half.
The ITAT set aside the disallowance on two grounds. First, the books of account had not been rejected. Second, similar expenses had consistently been allowed in scrutiny assessments in earlier years. The ITAT adopted the same reasoning in relation to labour expenses and deleted the corresponding addition.
The High Court held that the principal reasoning adopted by the ITAT could not be termed unreasonable. It observed that the books of account had not been rejected and that the historical treatment of such expenses supported the ITAT’s conclusion. The High Court therefore held that no substantial question of law arose and dismissed the Revenue’s appeals.
