Ad-Hoc 30% Site Maintenance Expense Disallowance Reduced to 10% Due to Partial Supporting Voucher Evidence

ORDER

Manjunatha, G. Accountant Member.- This appeal filed by the assessee is directed against the order dated 06/01/2025 of the learned CIT (A)-NFAC Delhi, relating to A.Y.2017-18.

2. The brief facts of the case are that, the appellant company is engaged in the business of real estate projects and civil construction works and power projects. The appellant had filed its return of income for the A.Y 2017-18 on 29/10/2017 admitting total loss of Rs.22,97,14,286/- under the normal provisions of the I.T. Act, 1961 and the said return was revised on 30/10/2018 and admitted total loss of Rs.11,75,58,268/-. The assessment has been completed u/s 143(3) of the Act on 30/12/2019 where the Assessing Officer has made adhoc disallowance @30% of site maintenance expenditure of Rs.1,49,42,675/- and made addition of Rs.44,82,802/- on the ground that, the expenditure incurred under the head “site maintenance expenses” are supported only by internal self-made voucher and hence, not amenable for verification.

3. On appeal, the learned CIT (A) sustained the additions made by the Assessing Officer.

4. Aggrieved by the order of the learned CIT (A), the assessee is in appeal before the Tribunal.

5. The learned Counsel for the assessee submitted that, the learned CIT (A) erred in sustaining the additions made by the Assessing Officer towards 30% adhoc disallowance of site maintenance expenses without appreciating the fact that, the Assessing Officer never rejected the books of account maintained by the assessee and not pointed out any discrepancy in the expenditure claimed under the head “site maintenance expenditure”. The learned Counsel for the assessee further referring to the various evidences submitted that, the assessee has maintained a pay roll for daily wage workers and obtained their signatures after payment of wages at the site. The payment of wages is supported by a wage register and this has been produced before the Assessing Officer. The Assessing Officer although accepted the fact that, the assessee has produced the relevant evidences but, made adhoc disallowance of expenditure on the ground that, the said expenditure is supported buy selfmade vouchers even though, the assessee cannot have more than the evidences that were submitted before the Assessing Officer. Therefore, he submitted that the additions made by the Assessing Officer should be deleted.

6. On the other hand, the learned Sr. AR supported the orders of the learned CIT (A) and submitted that, the appellant could not furnish any evidences except a self-made muster roll of daily wage workers and a cash payment voucher. The muster roll maintained by the assessee is not supported by attendance register and it is not verifiable. Therefore, the Assessing Officer, after considering the relevant fact has rightly made 30% adhoc disallowance of expenditure and the same has been upheld by the learned CIT (A). Therefore, he submitted that the order of the learned CIT (A) should be upheld.

7. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. Admittedly, the appellant is a company and maintaining regular books of account for its business. It is also not in dispute that, the books of account maintained by the appellant are audited by an Accountant. The Assessing Officer did not reject the books of account before making the adhoc disallowance of 30% of site maintenance expenditure. The Assessing Officer made adhoc disallowance only on the ground that, the expenditure is supported only by an internal self-made voucher and not amenable for verification. Except this, there is no observation with regard to the incorrectness in the claim made by the assessee towards site maintenance expenditure. Even before the learned CIT (A), the assessee has explained the expenditure with relevant muster roll maintained for this purpose and cash payment vouchers and argued that the appellant is carrying out works at 2 sites by employing daily wage workers and paid them wages on the basis of muster roll. The learned CIT (A) rejected the explanation of the assessee once again on the very same ground that they are supported only by self-made vouchers. In our considered view, in case of expenditure incurred by the assessee which is nothing but wages payment to daily wage workers, except muster roll and cash payment vouchers, the assessee cannot maintain any other evidences as claimed by the Assessing Officer. In case of payment of wages, only evidence that can be placed before the authorities is muster roll and the supporting attendance register. In the present case, the assessee has furnished the muster roll which contains the details of wages paid to various workers and the signatures of said employees. Therefore, in our considered view, when the assessee has furnished said evidences, the Assessing Officer ought not to have made 30% adhoc disallowance of expenditure for want of evidence. At the same time, the assessee is also not fully supported its expenses with relevant evidences except furnishing a muster roll prepared for this purpose with signature of the employees. Further, no other evidence including attendance register of the employees was furnished in support of the claim of the assessee. Since the assessee is also failed to substantiate the expenditure with relevant evidences, in our considered view, a reasonable amount of disallowances needs to be made towards the site maintenance expenditure. Therefore, considering the facts of the case and also evidences furnished by the assessee, in our considered view, disallowance of 10% of the expenditure incurred under the head site maintenance expenditure would meet the ends of justice. Thus, we direct the Assessing Officer to make 10% disallowance of expenditure incurred under the head “Site Maintenance Expenditure”. We order accordingly.

8. In the result, appeal filed by the assessee is partly allowed.