Pravendra Singh vs DCIT Circle-62(1) – Disallowance of Job Work Expenses for AY 2016-17

Case Overview: Pravendra Singh vs DCIT Circle-62(1), Assessment Year 2016-17

This case involves Pravendra Singh, a resident of New Delhi, who filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] pertaining to the assessment year 2016-17. The primary issue contested in the appeal was the disallowance of Rs. 5,00,000/- out of job work expenses claimed by the appellant.

Background

Pravendra Singh, the appellant, is the proprietor of M/s S.P. Construction, a business engaged in civil construction. He filed his return of income for the assessment year 2016-17 on 24.11.2016, declaring a total income of Rs. 22,23,540/-. The case was selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) process, and a notice under Section 143(2) of the Income Tax Act, 1961, was issued on 17.08.2017.

During the assessment proceedings, the appellant provided various documentary evidences to substantiate his claim for job work expenses amounting to Rs. 75,73,090/-. Despite the evidence, the Assessing Officer (AO) disallowed Rs. 5,00,000/- out of the total expenses on the grounds that the appellant did not furnish party-wise details of the job work done.

Key Issues Raised

The appellant raised the following ground in his appeal before the Income Tax Appellate Tribunal (ITAT):

• Disallowance of Job Work Expenses: The appellant contested the disallowance of Rs. 5,00,000/- out of the job work expenses of Rs. 75,73,090/-. The appellant argued that all relevant documentary evidence, including payment details, modes of payment, and Tax Deducted at Source (TDS) deductions, were provided to the AO. The disallowance was made without considering these documents and was based on surmises and conjectures.

Tribunal’s Observations and Findings

Disallowance of Job Work Expenses

The Tribunal observed that the appellant had indeed furnished comprehensive evidence to substantiate his claim of job work expenses. This evidence included details of the amounts paid, the parties involved, the modes of payment (majorly through cheques), and TDS deductions. The Tribunal noted that the AO did not properly appreciate these evidences during the assessment proceedings.

Moreover, the Tribunal highlighted that the CIT(A) had partially allowed the appellant’s appeal by directing the AO to provide credit for TDS of Rs. 1,90,372/-. However, the disallowance of Rs. 5,00,000/- was upheld without adequate justification. The Tribunal found this disallowance to be unjustified, given the substantial evidence provided by the appellant.

The Tribunal emphasized that the appellant had complied with all statutory requirements, including the deduction of TDS on the job work payments. The AO’s failure to appreciate these compliance efforts and the evidence provided led to an erroneous disallowance.

Conclusion

The Tribunal ruled in favor of the appellant, Pravendra Singh, and allowed the appeal. The disallowance of Rs. 5,00,000/- was deleted, and the appellant’s claim for job work expenses was fully accepted. The final order was pronounced on 3rd November 2020.

This judgment underscores the importance of proper documentation and compliance with statutory requirements, as well as the need for revenue authorities to thoroughly evaluate the evidence provided by taxpayers before making disallowances.

In conclusion, the case reaffirms the principle that disallowances should not be made arbitrarily and must be supported by solid reasoning and evidence.

Pravendra Singh vs DCIT Circle-62(1) – Disallowance of Job Work Expenses for AY 2016-17