TMI Blog2012 (2) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ARMA, A.L. GEHLOT, JJ. Sanjay R. Shah for the Appellant. K. Prabhakar for the Respondent. ORDER A.L. Gehlot, Accountant Member Both these appeals are filed by the assessee against the appellate order of Commissioner of Income Tax (Appeals), Rajkot dated 21-06-2010 for assessment years 2005-06 and 2006-07. ITA No. 1116/Rjt/2010. A.Y. 2005-06 2. The first ground is general which is in respect of assessment order u/s. 143(3) is bad in law. The ld. A.R. submitted that this ground is general in nature, therefore, did not press, we therefore, dismiss this ground. 3. The second ground is in respect of addition of Rs. 84,250/- out of foreign tour expenses. During the assessment proceedings, the AO noticed that the assessee claimed foreign tour expenses incurred on Shri Chetan J. Buch and Milan P. Buch who happens to be sons of partners. It was submitted that these persons were part of the family and were technical persons and they had to help their parents in attending to foreign work at a stall booked by the assessee-firm. The AO disallowed the said amount on the ground that both were neither partner of the firm nor employees of the firm. The expenditures clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,484/- made by the AO. The CIT(A) accordingly enhanced the addition to the extent of Rs. 2,02,371/-. 7. The ld. A.R. reiterated the submissions made before the revenue authorities. The ld. A.R. submitted that the building is not owned by the assessee-firm. It was taken on hire since last 30 years. The repairing expenses claimed was in respect of that old building taken on hire. The ld. A.R. submitted that by repairing work, there was no additional construction work of the building. The expenditure of repairing of building was necessitated on account of damages to the building due to earthquake and on account of normal wear and tear. The ld. A.R. submitted that on identical set of fact, in the case of CIT v. Madras Auto Service (P.) Ltd. [1998] 233 ITR 468/99 Taxman 575 (SC) wherein it has been held that expenditure incurred by lessee in demolishing the old building and constructed a new building in its place has been agreed term of lease secured if the benefit of new premises stipulated hence, it was revenue expenditure. 8. The ld. D.R. relied upon the order of revenue authorities. 9. We have heard the learned representatives of the parties. In the case under consideration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are doing the same work and even the bills are of the same date and on the same date M/s. Buddh Enterprise has allegedly done the work of checking. This in itself shows that the bills are not proper because on the same date two different parties do the job of grading and on the same date the another party does the work of checking. This is not possible and all the bills cannot be raised on similar dates. It is also seen that there is vast difference between the actual production and the job work done. The job work done is almost 5 times than the actual production. This clearly shows that the alleged job work charges have been paid to sister concerns merely with a view to avoid payment of legitimate taxes. This is also evident from the fact that those sister concerns are paying very meagre amount of taxes. In such a situation, provisions of section 40A(2)(b) are clearly applicable and I find no reason to interfere with the order of the AO on this issue and the disallowance is confirmed." 11. The ld. A.R. reiterated the submission made before revenue authorities and submitted that AO has compared the quantity of blades mentioned in the job work bills raised by the sister concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson referred to in clause (b) of the section 40A(2) and the AO is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods. The AO is empowered to disallow the excessive or unreasonable expenditure. It is important to note here that for determination of excessive or unreasonable amount of expenditure, the comparison is required to be made with the fair market value of the goods or services or facilities. The unreasonable or excessive expenditure on the basis of other comparison is not covered by section 40A(2)(a) of the Act. In the case under consideration, we find that the AO failed to bring on record that 80% of expenses were excessive or unreasonable in comparison to fair market value of the goods, services or facilities. It was presumption of the AO on the basis of the judgment of the Apex Court in the case of McDowell Co. Ltd. (supra) that it is a colourable device. If the case of the AO is that the assessee booked the labour expenses on the basis of bogus bills issued by the sister concern then entire expenditure is required to be disallowed. There is no basis how the AO has come to a conclusion that 10% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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