Case Law Details

Case Name : ITO Vs M/s Buildcon Engineers (ITAT Ahmedabad)
Appeal Number : I.T.A. No.2648/Ahd/2011 & I.T.A. No.2490/Ahd/2011
Date of Judgement/Order : 21/08/2015
Related Assessment Year : 2008-09
Courts : All ITAT (1730) ITAT Ahmedabad (155)

Brief of the Case

ITAT Ahmedabad held in the case of ITO vs. M/s Buildcon Engineers that the AO had made disallowance of labour payments on the basis of estimation to the extent of 20% of the expenditure. The AO has not given any basis on which he has based his finding to disallow at 20% of the expenditure on estimate basis. In our considered view, if the payment is bogus, it would be 100%. The CIT (A) has given his finding on the fact that the PAN furnished during the appellate proceedings was found to be correct, which was the sole reason for addition. Under these facts, we do not see any reason to interfere with the order of the CIT (A) since the Revenue has not placed any contrary material on record. Accordingly on estimation basis, disallowance of expenses not valid.

Facts of the Case

The assessee was picked up for scrutiny assessment and the assessment u/s.143(3) was framed vide order dated 27/12/2010, thereby the AO made addition on accou8nt of difference in gross receipts of   Rs.37,12,662/-, disallowance of labour payments of Rs.11,50,254/- and Rs.15,52,560/- respectively and disallowance of machine repair of Rs.5,000/- and disallowance of supervision charge of Rs.20,000/-.

Contention of the Assessee

The ld counsel of the assessee submitted that it was categorically submitted before the authorities below that the assessee carried out construction work of M/s. Ankur Textiles (a division of Arvind Textiles), which was doing for last several years. It was submitted before the authorities below that the difference occurred because of the contra entries passed by M/s. Ankur Textiles.

With regard to disallowance of labour payments, he submitted that all details in respect of labour payments were submitted before the authorities below. He submitted that the AO without considering the submissions of the assessee proceeded to make disallowance of the payments and adding the same to the total income of the assessee.

Contention of the Revenue

The ld counsel of the revenue submitted that CIT (A) was not justified in restricting the addition. He submitted that before the AO, the assessee was unable to reconcile the gross receipts. He submitted that under these facts, the CIT (A) was not justified in restricting the addition.

Held by CIT (A)

CIT (A) partly allowed the appeal of the assessee. CIT (A) restricted the difference in GP to the extent of Rs.9,68,951/- and deleted the balance amount. Further, the CIT (A) upheld the disallowance of labour payments of Rs.11,50,254/- and deleted the disallowance of labour payments of Rs.15,52,560/- and confirmed the addition(s) of Rs.5,000/- and Rs.20,000/- made on account of adhoc disallowance of expenditure.

With regard to disallowance of labour payments, CIT (A) held that during the course of appellate proceedings, it was argued by the ld.AR that AO has disallowed amount out of payments with PANs, only on the basis of test check of PAN of one Contractor & Sons. It was stated that this concern is the proprietorship concern of one Mr. Shreyas R Contractor and PAN can be found when searched by the proprietor’s name. During the course of appellate proceedings vide page no.104 of the paper book PAN copy was submitted of Shreyas R Contractor. In the remand report the AO reiterated the stand taken in the assessment order. As the PAN furnished during appellate proceedings is found correct, in my view, there is no justification for disallowing 20% of labour payments with PAN merely on a presumption which is found wrong.

Held by ITAT

ITAT held that The CIT (A) after considering the submissions of the assessee and the remand report, restricted the addition to the extent of Rs.9,68,951/-.During the assessment proceedings, the AO admittedly not called for the veracity of the letter of M/s.Ankur Textiles, however, on the basis of conjectures & surmises, submitted the remand report. Therefore, the Revenue has also not placed any contrary material suggesting that the letter of M/s.Ankur Textiles is fake and over the contents of the same are contrary to the material available on record. In the absence of such finding by the AO, we do not see any reason to interfere with the order of the CIT (A), same is hereby upheld. Thus, this ground of Revenue’s appeal is rejected.

With regard to disallowance of labour payments, ITAT held that he AO had made disallowance of labour payments on the basis of estimation to the extent of 20% of the expenditure.   The AO has not given any basis on which he has based his finding to disallow at 20% of the expenditure on estimate basis. In our considered view, if the payment is bogus, it would be 100%. The CIT (A) has given his finding on the fact that the PAN furnished during the appellate proceedings was found to be correct. Under these facts, we do not see any reason to interfere with the order of the CIT (A) since the Revenue has not placed any contrary material on record.

Accordingly appeal of the revenue dismissed.

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