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TMI Blog2022 (1) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "1. Whether on the facts and in the circumstances of the case, and in law, ld. CIT(A) was correct in restricting the disallowance to 2% of cost of material as against 20% made by the Assessing Officer, when the assessee has failed to discharge it's onus as per section 37 of the I.T. Act by substantiating the expenditure claimed with relevant documentary evidences. 2. Whether on the facts and in the circumstances of the case, and in law, ld. CIT(A) was correct in restricting the disallowance to 1% of construction costs as against 10% made by the Assessing Officer, when the assessee has failed to discharge it's onus as per section 37 of the I.T. Act by substantiating the expenditure claimed with relevant documentary evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head cost of material. During the course of assessment proceedings, the assessee's AR was asked to produce bills/vouchers in respect of this expenditure incurred by the assessee company. On verification of the same, it was found that some of the vouchers are not signed properly and not supported by proper bills. Hence, 20% of the expenditure incurred towards cost of material is disallowed and added back to the total income which works out to Rs. 28,19,78,338/-." 4.1 During the appellate proceedings, the appellant contended as under: "The appellant submits that the total cost of material consumed was Rs. 140,98,91,690/-. The AO disallowed 20% of the said cost on the ground that the bills and vouchers were not available for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this head is disallowed and added back to the total income which works out to Rs. 8,54,99,436/-. 6.1 Further, the AR contended as under: "This amount consists of subcontract charges, payment of royalty and repairs and maintenance. It is submitted that in so far as sub-contract charges and the royalty are concerned, no part of the amount should have been disallowed by the AO. Further, the percentage adopted by the AO is too high." 6.2 I have considered the assessment order and submissions of the appellant. The Act has not specified/quantified the expenses not properly vouched. Disallowance on estimation has to be on some basis. Disallowance of 10% of expenses is on higher side. Considering the turnover, nature of business and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck to the total income." 6.1 During the appellate proceedings, the AR contended as under: "The AO disallowed an amount of Rs. 6,00,00,000/- on the ground that out of the other expenses of Rs. 66,42,64,152/-, the appellant already disallowed Rs. 36,86,87,743/- being the provisions towards bad and doubtful debts and provision for expenses respectively. The balance of the amount was worked out to Rs. 22,21,63,802/-. The AO compared the same with the earlier years and stated that an amount of Rs. 6,00,00,000/- is disallowable. The AO adopted an ad hoc basis. The details of other expenses are available. They are rent, power and fuel, repairs and maintenance, rates and taxes, legal and professional charges, payment to auditors, travel and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers followed by confirmation of the corresponding payees. It was very much imperative for the assessee to file all the necessary particulars pertaining to these three heads of material cost, construction and other expenses involving varying sums (supra). It is an admitted fact that the CIT(A) has simply reproduced assessment findings while restricting these three heads of disallowance(s) to a paltry percentage ranging between 1 to 2% (supra). The fact also remains that both the learned lower authorities are fair enough in not pinpointing any kind of abnormal trend in the assessee's corresponding expenditure claims as well. Faced with this situation and in larger interest of justice, we are of the opinion that the Assessing Officer' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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