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2016 (10) TMI 993 - ITAT LUCKNOWDisallowances of various expenses - vouchers not produced - Held that:- We take note that in all these assessment years the assessments were completed under section 143(3) of the Act. The assessee is engaged in the same kind of business and without bringing any comparable cases and without rejecting the books of account, the estimation made on ad hoc basis cannot be countenanced. If there were any item-wise expenses, which could not have been supported by vouchers, then the Assessing Officer was at liberty to disallow the expenses item-wise and ought not to have gone for ad hoc disallowances. However taking into consideration the fact that certain vouchers regarding expenses could not be produced before the Assessing Officer to his satisfaction and taking into consideration disallowances made from assessment year 2008-09 to 2013-14, we would like to take an average of ad hoc disallowance which comes to 3%. Barring this year, we find that in assessment year 2008-09 onwards the ad hoc disallowances were @ 0.74%, 1.65%, 0.57%, 0.88% and in assessment year 2013-14 it was 2.47%. In such a scenario taking into consideration the fact that the Assessing Officer has made disallowance of 30.64% in this assessment year and the ld. CIT(A) has restricted it to 4.56%, it would be fair and reasonable if we could fix the percentage of disallowance at 3% and we order accordingly. Addition on outstanding creditors for labour, stone cutting and polishing charges and outstanding labour dues payable - Held that:- The Assessing Officer asked for name and addresses of the individuals to whom the payments were out-standing and to ascertain this fact he issued notice under section 133(6) of the Act to 200 labours at the first instance and to 51 labours after some time. Out of that notices sent, 103 notices returned back with the postal remark that no one was residing and it was incomplete address. Therefore, we find from this fact itself that 148 notices could be served, which means more than 50% notices could be served on the labours to whom the assessee has to pay outstanding dues. Therefore taking into consideration the overall facts, wherein we have already taken note that from assessment year 2008-09 to 2013-14 the assessments were infact carried out under section 143(3) of the Act and disallowances have been very less when compared to this particular assessment year, however, taking into consideration that less than 50% of the notices have been received back without being served, it would be reasonable to both sides if we restrict the disallowance to 50% of ₹ 42,58,791/- which comes to ₹ 21,29,395/- Ad hoc disallowance under the head labour charges - Held that:- Assessing Officer had sent notices to 241 labourers of which only 82 notices have come back. It means 159 notices have been served on the labourers. Therefore the list given by the assessee cannot be disbelieved in toto. There may be various reasons why the notices could not have been served on the labourers in the given addresses. These skilled labourers as we understand are mainly coming from Rajasthan and used to camp in an address/ place for some time which is adjacent to place of work and once the work is over or discontinued, they will move to other locations and thus addresses also keeps changing depending on the location of work they get. Moreover, these labourers cannot be presumed to be literate, so the address might also have some deficiencies and may be incomplete. We also take into account the fact that while adjudicating ground no. 2 of the assessee, we have sustained 50% of the outstanding credits inrespect to labour outstanding and sustained ₹ 21,29,395/-. So we are of the considered opinion that there is no need of any further disallowance and therefore, we delete the addition sustained by the ld. CIT(A) on this issue. Disallowance under the head stone joining & cutting expenses - Held that:- We take note that out of the 51 letters sent, 21 came back which means that 30 notices could be served on the addresses of the labourers. The assessee has handed over the list of 319 labourers and the Assessing Officer preferred to send notices only to 51, out of which 31 could be served. So it cannot be said that the assessee has inflated the expenses by showing huge outstanding dues to the labourers. Not only that, we have already held above that ad-hoc disallowances should not be resorted to and if the Assessing Officer finds that the assessee is unable to produce vouchers item-wise, then the said expenses on those items can be treated as non-genuine and item-wise dis-allowance can be resorted to by the AO. The ad-hoc disallowance is an arbitrary exercise of power, which cannot be countenanced. Therefore, we delete the ad-hoc disallowance made on this count. Ad-hoc disallowance with respect to business promotion of the unit - Held that:- We do not agree to the ad-hoc disallowances as made above. For the same reasons which we have reiterated hereinabove, we delete the ad-hoc disallowance sustained by the Ld. CIT(A) and, therefore, we direct deletion of ₹ 30,000/- on this issue. Non-acceptance of agricultural income - Held that:- We take note that in the Assessment Year 2011-12, assessee has shown an income of ₹ 7,95,000/- as agricultural income of which ₹ 2,50,000/- has been disallowed by the Assessing Officer and in Assessment Year 2013-14, the assessee has shown an agricultural income of ₹ 4,50,000/- and the Assessing Officer has made disallowance of ₹ 1,50,000/- taking into consideration the overall facts stated by the Assessing Officer in respect to the yield from 7.3425 hectare as well as the Department’s stand on the agricultural income claimed by the assessee in subsequent assessment years, we are of the opinion that the confirmation made by the Ld. CIT(A) of ₹ 7,40,000/- is fair and reasonable, so we sustain it ; and therefore we dismiss both the assessee’s appeal as well as that of Revenue on this issue.
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