The DCIT, Circle-1,, Surat v. The Karpara Project Engineering Pvt.Ltd.,, Surat

ITA 2341/AHD/2008 | 2005-2006
Pronouncement Date: 10-02-2012 | Result: Dismissed

Appeal Details

RSA Number 234120514 RSA 2008
Assessee PAN AABCK8206A
Bench Ahmedabad
Appeal Number ITA 2341/AHD/2008
Duration Of Justice 3 year(s) 7 month(s) 20 day(s)
Appellant The DCIT, Circle-1,, Surat
Respondent The Karpara Project Engineering Pvt.Ltd.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 10-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 10-02-2012
Date Of Final Hearing 02-02-2012
Next Hearing Date 02-02-2012
Assessment Year 2005-2006
Appeal Filed On 20-06-2008
Judgment Text
-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENC H 'C' . .. .' ' ' ' ' ' ' ' # # # # $ $ $ $ BEFORE SHRI BHAVNESH SAINI J.M.& SHRI A MOHAN ALANK AMONY AM . ITA NO.2261/AHD/2008 ( %& ASSESSMENT YEAR:- 2005-06) KARPARA PROJECT ENGINEERING PVT. LTD. SURAT V/S DCIT CIRCLE-1 SURAT PAN: AABCK 8206A ( '( )/(APPELLANT) ( )*'( /RESPONDENT) . ITA NO.2341/AHD/2008 ( %& ASSESSMENT YEAR:- 2005-06) DCIT CIRCLE-1 SURAT V/S KARPARA PROJECT ENGINEERING PVT. LTD. SURAT ( '( ) /(APPELLANT) ( )*'( / RESPONDENT) + - . /ASSESSEE BY :- SHRI J.P.SHAH AR / - . /REVENUE BY:- SHRI VINOD TANWANI SR.DR 01 - 2# /DATE OF HEARING:- 01-01-2012 3'% - 2# /DATE OF PRONOUNCEMENT:- 10-02-2012 / O R D E R PER SHRI A MOHAN ALANKAMONY AM : THESE TWO APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 ARE FILED BY BOTH T HE PARTIES AGGRIEVED BY THE ORDER OF LD.CIT(A) IN CAS-I/326/07-08 PASSED U/S 250 R.W SECTION 143(3) OF THE ACT ON 02/04/2008. 2 ITA NOS.2261 & 2341-AHD- 2008 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF INSTALLATION OF PLANTS AND INSULATION AND MECHANIC AL CONTRACTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 29.10.2005 DECLARING TOTAL INCOME OF RS.14.16 LAKHS. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) O F THE ACT ON 28.12.2007. THE LD. AO MADE VARIOUS ADDITIONS WHICH WERE PARTLY ALLOWED BY THE LD. CIT(A). NOW BOTH THE REVENUE AND THE ASSESS EE ARE IN APPEAL BEFORE US. REVENUES APPEAL ITA NO.2341/AHD/2008 3. THE REVENUE HAS RAISED FOUR GROUNDS IN ITS APPEA LS WHEREIN GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE AND DO NOT SURVI VE FOR ADJUDICATION. THE REMAINING TWO GROUNDS ARE LISTED HEREIN-BELOW FOR C ONSIDERATION. I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A)-II SURAT HAS ERRED IN DELETING THE DISALLOWANCE OF RS.35 28 237/- MADE BY THE A.O. ON ACCOUNT OF PAYME NT TO BOGUS SUB-CONTRACTOR. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A)-II SURAT HAS ERRED IN DELETING THE DISALLOWANCE OF RS.4 92 343/- MADE BY THE A.O. ON ACCOUNT OF RENT RATES & TAXES. ASSESSEES APPEAL ITA NO.2261/AHD/2008 3.1 THE ASSESSEE HAS RAISED THREE ELABORATE GROUNDS AND THEY ARE LISTED HEREIN-BELOW IN A CONCISE FORM FOR ADJUDICATION. I) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION OF RS.13 77 737/- IN RESPECT OF ESTIMATED WORK-IN-PROG RESS. II) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADHO C DISALLOWANCE OF RS.22 79 637/- AT 5% OF TOTAL WAGES CLAIMED BY THE APPELLANT. 3 ITA NOS.2261 & 2341-AHD- 2008 III) THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISA LLOWANCE OF RS.8 01 187/- ON ACCOUNT OF UNVERIFIABLE EXPENSES D UE TO NON- PRODUCTION OF BILLS AND VOUCHERS. 4. LET US FIRST TAKE UP REVENUES APPEAL IN ITA NO.2341/AHD/2008 GROUND NO.1 - DISALLOWANCE OF RS.35 28 237/- ON ACCOUNT OF PAYMEN T TO BOGUS SUB-CONTRACTORS DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD . AO DISALLOWED AN AMOUNT OF RS.35 28 237/- BEING PAYMENT MADE TO ONE SUB-CONTRACTOR M/S. SHISHIN ERECTORS CONSIDERING IT TO BE BOGUS EXPENDI TURE. THE LD. A.O CAME TO THE FOLLOWING CONCLUSION BECAUSE OF THE FOLLOWING R EASONS. I) THE SUB-CONTRACTOR M/S. SHISHIN ERECTORS WAS FIL ING THE RETURN OF INCOME AT NAGPUR WHEREAS THE ADDRESS OF M/S. SHISHI N ERECTORS WAS SHOWN AT SURATISHA (P.O.) TRINGALE VIA BATAK ARA KOZHIKODE KERALA. II) FURTHER IT WAS NOTICED THAT THE SUB-CONTRACTOR M/S. SHISHIN ERECTORS WERE UNDERTAKING WORK IN REMOTE AREA IN RA JASTHAN WHEREAS HIS NATIVE PLACE AND PLACE OF FILING THE RE TURN OF INCOME ARE FAR OFF FROM RAJASTHAN. III) THE SUB-CONTRACTOR OF THE ASSESSEE M/S. SHISHI N ERECTORS DID NOT PRODUCE THE BOOKS OF ACCOUNTS BEFORE THE AO FOR VER IFICATION. IV) THE ASSESSEE COMPANY WAS SUPPLYING MATERIALS TO THE SUB- CONTRACTOR WHICH APPEARS TO BE A STRANGE PHENOMENON . V) THE ASSESSEE HAS BEEN FILING THE PF RETURN FOR D EDUCTION OF PF AND ESI FOR LABOURERS WORKING IN THE APPELLANTS PR OJECT ON BEHALF OF THE SUB-CONTRACTOR M/S. SHISHIN ERECTORS. 4 ITA NOS.2261 & 2341-AHD- 2008 VI) THE ASSESSEE WAS IN THE HABIT OF PAYING SALARY TO ITS STAFF IN CASH AND DO NOT MAINTAIN SALARY REGISTER OR BOOKS OF ACC OUNTS MAKING IT EVIDENT THAT THIS CASH WAS DRAWN IN THE NAME OF LAB OURERS AND ROUTED BACK. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) WHO DISPENSED THE MATTER BY DELETING THE ADDITION MADE BY THE LD. AO WITH THE FOLLOWING OBSERVATIONS: I) WITH RESPECT TO THE FIRST TWO GRIEVANCES OF THE LD. AO THAT THE SUB-CONTRACTOR HAILED FROM KERALA FILED HIS RET URN ON INCOME IN NAGPUR BUT PURSUED THE SUB-CONTRACTOR WORK AT RAJAS THAN DOES NOT APPEAR TO BE BONA FIDE LD. CIT(A) DISPENSED THE SAME STATING THAT THE ARGUMENT OF LD. AO IS IRRELEVANT AND NON-CONSEQUENT IAL. II) FURTHER THE LD. CIT(A) OBSERVED THAT THE SUB-CO NTRACTOR HAD PRODUCED BEFORE THE LD.AO WHATEVER HE WAS ASKED TO WHICH WAS APPARENT FROM THE NOTICE ISSUED UNDER SECTION 133(6 ) OF THE ACT BY THE LD. AO. THE LD. AO IN FACT HAD NOT CALLED FOR THE B OOKS OF ACCOUNTS FROM THE SUB-CONTRACTOR BUT HAD CALLED VARIOUS DETAILS W HICH WERE PRODUCED BY SHRI RANJIT KUMAR PROPRIETOR OF M/S. SHISHIN ER ECTORS. IT WAS FURTHER OBSERVED BY THE LD. CIT(A) THAT THE LD. AO HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE SUB-CONTRACTOR HAD DENIE D THE TRANSACTION OR DENIED THE PAYMENT. FROM THE BANK STATEMENT OF THE APPELLANT AND THE SUB-CONTRACTOR IT WAS EVIDENT THAT ALL PAYMENTS MA DE BY THE ASSESSEE TO THE SUB-CONTRACTOR WERE GENUINE. LD. CIT(A) THUS DISPOSED OF THE THIRD ARGUMENT TAKEN UP BY THE LD. AO. III) WITH RESPECT TO THE 4 TH ALLEGATION OF THE LD. AO THAT THE ASSESSEE WAS SUPPLYING MATERIALS TO THE SUB-CONTRACTOR LD. CIT(A) HELD THAT AT ANY STRETCH OF IMAGINATION THIS CANNOT BE A RELEVAN T FACTOR TO CONSIDER THE PAYMENT MADE TO THE SUB-CONTRACTOR TO BE BOGUS AND THERE IS 5 ITA NOS.2261 & 2341-AHD- 2008 NOTHING WRONG BY THE ASSESSEE IN SUPPLYING MATERIAL S TO THE SUB- CONTRACTOR. IV) WITH RESPECT TO THE 5 TH GROUND TAKEN BY THE LD. AO THAT THE APPELLANT WAS DEDUCTING PF AND FILING THE RETURN OF PF FOR THE LABOURERS ENGAGED BY THE SUB-CONTRACTOR LD. CIT(A) OPINED TH AT THOUGH THIS FACTOR MAY BE AN IMPORTANT FACTOR FOR INVESTIGATION BUT I T IS A PROVEN FACT THAT THE EMPLOYEES OF THE SUB-CONTRACTOR HAVE BEEN REALL Y WORKING ON THE SITE OF THE ASSESSEE AND AT THE MOST IT COULD BE ON LY STATED THAT THEY ARE THE EMPLOYEES OF THE ASSESSEE COMPANY AND THERE FORE PAYMENT MADE TO THESE LABOURERS ARE ALLOWABLE. THUS THE LD. CIT(A) DISMISSED THIS GROUND TAKEN BY THE LD. AO. V) WITH RESPECT TO THE 6 TH ARGUMENT TAKEN UP BY THE LD. AO LD. CIT(A) OBSERVED AS FOLLOWS AND HELD THAT THE DISALL OWANCE MADE BY THE AO ON THIS GROUND IS BASED ON CONJECTURES AND SURMI SES AND THEREFORE DESERVES TO BE DISMISSED: IN REMOTE SITES THE CASH PAYMENTS ARE GENERALLY MA DE TO THE LABOURERS BECAUSE BANK FACILITIES ARE NOT AVAILABLE AND ALSO BECAUSE THE LABOURERS ARE GENERALLY ON THE MOVE AND DO NOT HAVE ANY BANK ACCOUNT. IN VIEW OF THE ABOVE IT CLEA R THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT T HE SUB- CONTRACTOR IS BOGUS. NOTHING HAS BEEN BROUGHT ON RE CORD TO SHOW THAT THE SUB-CONTRACTOR IS PAYING THE PAYMENT. IT I S CLEAR FROM THE ABOVE THAT THE SUB-CONTRACTOR HAS NOT ONLY ADMITTED THE WORK DONE BUT IN FACT HAS DISCLOSED THE PAYMENTS IN HIS RETURN OF INCOME WHICH HE HAS FILED AT NAGPUR. 6. THE LD. D.R. RELIED ON THE ORDER OF THE AO AND T HE LD.A.R. PRESENTED THE SAME ARGUMENTS TAKEN UP BEFORE THE LD. CIT(A) B EFORE US 6 ITA NOS.2261 & 2341-AHD- 2008 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS PRODUCED BEFORE US. FROM THE FACTS OF THE CASE IT I S APPARENT THAT THE ASSESSEE HAD FURNISHED THE COMPLETE PARTICULARS OF M/S. SHISHIN ERECTORS TO THE LD. AO WITH RESPECT TO (I) NAME AND ADDRESS OF THE SUB-CONTRACTOR (II) THE PA NUMBER OF THE SUB-CONTRACTOR (III) THE DETAILS OF TDS DEDUCTED FROM THE SUB-CONTRACTOR AND PAYMENT MADE THEREON AND DETAILS OF ANNUAL TDS RETURN FILED BY THE ASSESSEE COMPANY (IV) DETAILS OF ALL THE PAYMENTS MADE TO THE SUB-CONTRACTOR WHICH WAS BY WAY OF ACCOUNT PAYEE CH EQUES EVIDENCED BY BANK STATEMENT (V) ENFORCED PERSONAL APPEARANCE OF THE SUB-CONTRACTOR BEFORE THE LD. AO ALONG WITH HIS STATEMENT OF ACCOU NTS AUDIT REPORTS RETURN OF INCOME FILED BEFORE THE REVENUE ETC. FURTHER TH E LD. CIT(A) HAD VERY RATIONALLY COUNTERED THE ARGUMENTS TAKEN UP BY THE LD. AO AND DELETED THE ADDITION OF RS.35 28 237/-. CONSIDERING THE FACTS A ND CIRCUMSTANCES OF THIS ISSUE FOR THE ABOVE-SAID REASONS WE ARE OF THE CON SIDERED OPINION THAT THE ORDER OF THE LD. CIT(A) DOES NOT REQUIRE ANY MODIFI CATION. THEREFORE WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISS TH E GROUND TAKEN UP BY THE REVENUE. 8. GROUND NO.2 - DISALLOWANCE OF RS.4 92 343/- ON ACCOUNT OF RENT RATES & TAXES THE LD. AO HAD MADE A SIMILAR DISALLOWANCE ON THE IDENTICAL ISSUE FOR THE ASSESSMENT YEAR 2004-05 FOR THE SAME ASSESSEE. FOLLOWING THE SAME RATIO THE LD. AO MADE AN ADDITION OF RS.4 92 343/- FOR THE CASH PAYMENT MADE TOWARDS RENT AND RATES. LD. CIT(A) ALLOWED THI S ISSUE IN FAVOUR OF THE ASSESSEE SINCE THE LD. AO HAD MADE THIS DISALLOWANC E WITHOUT ANY DISCUSSION AND SOUND REASON BUT IN AN AD HOC MANNER. AFTER CONSIDERING THE ARGUMENTS SUBMITTED BY BOTH THE PARTIES WE ARE ALS O OF THE CONSIDERED VIEW THAT ANY ADDITION MADE WITHOUT PROPER REASONING CAN NOT BE SUSTAINED. 7 ITA NOS.2261 & 2341-AHD- 2008 THEREFORE WE DISMISS THIS GROUND RAISED BY THE REV ENUE AND ALLOW THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. THUS BOTH THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO.2261/AHD/2008 GROUND NO.1 - ADDITION OF RS.13 77 737/- IN RESPECT OF ESTIMATED WORK- IN-PROGRESS. 10.1 THE LD. AO WORKED OUT RS.13 77 737/- AS THE WORK-IN -PROGRESS OF THE ASSESSEE SINCE THE ASSESSEE DID NOT ACCOUNT FOR THE WORK DONE FOR THE PERIOD 25 TH MARCH 2005 TO 31 ST MARCH 2005 BY FOLLOWING HIS PREDECESSORS ORDER F OR THE ASSESSMENT YEAR 2004-05. THE LD. CIT(A) CONFIRM ED THE ADDITION WITH THE FOLLOWING OBSERVATIONS: 3.3.2 THE APPELLANT HAS ITSELF ADMITTED THAT THE E XPENDITURE IS ACCOUNTED UPTO 25 TH OF EACH MONTH AND HAS STATED THAT IN THE BALANCE FIVE DAYS FROM 26 TH MARCH TO 31 ST MARCH NO MAJOR EXPENSES ARE INCURRED. THIS IS A VERY GENERAL STATE MENT. ADMITTEDLY THE APPELLANT HAS DEBITED THE EXPENDITUR E INCURRED IN THE LAST FIVE TO SIX DAYS BUT HAS NOT SHOWN THE INC OME AS PER THE DECISION OF SUPREME COURT CITED ABOVE. THE EXPENDIT URE WHICH HAS BEEN DEBITED SHOULD EITHER REFLECT IN THE INCOM E SHOWN IN THE P&L ACCOUNT OR AS WORK IN PROGRESS FOR COMPUTATION OF CORRECT PROFIT. SINCE THE APPELLANT HAS NOT SHOWN THE WORK IN PROGRESS THE CORRECT PROFITS HAVE NOT BEEN SHOWN AND HENCE THE A DDITION IN RESPECT OF WORK IN PROGRESS IS CORRECT. AS REGARDS THE COMPUTATION OF THE AMOUNT OF WORK IN PROGRESS IT IS STATED THA T THE APPELLANT HAS NOT GIVEN ANY FIGURES REGARDING THE WORK IN PRO GRESS AND THEREFORE THE AO HAS RIGHTLY COMPUTED THE MONTHLY A VERAGE AND THEREAFTER PROPORTIONATELY CONSIDERED THE EXPENDITU RE INCURRED FOR THE LAST WEEK OF THE YEAR. HENCE THE COMPUTATION OF WORK IN PROGRESS IS ALSO UPHELD. THIS GROUND OF APPEAL IS DISMISSED AND THE ADDITION IS CONFIRMED. 10.2 AT THE OUTSET WE ARE REMINDED OF THE DECISION RENDERED BY US IN THE ASSESSEES OWN GROUP CASE FOR THE ASSESSMENT YEAR 2 004-05 ITA- 8 ITA NOS.2261 & 2341-AHD- 2008 1080/AHD/2008 WHEREIN ON THE IDENTICAL ISSUE WE HE LD IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS REPR ODUCED HEREUNDER:- 10. GROUND NO.2 DELETION OF ADDITION OF RS.12 47 346/- MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK : DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED AO OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSED ITS WORK IN PROGRESS FOR THE PER IOD 26 TH MARCH TO 31 ST MARCH OF THE RELEVANT PREVIOUS YEAR. THE LEARNED AO FURTHER OBSERVED THAT THE ASSESSEE HAD BOOKED EXPENDITURE DURI NG THIS PERIOD OF 26 TH MARCH TO 31 ST MARCH FOR AN AMOUNT OF RS.12 47 346/-. THE ASSESSE E EXPLAINED THAT THE MEASUREMENTS WERE TAKEN FOR THE PERIOD FROM 26 TH OF THE MONTH TO THE SUBSEQUENT 25 TH OF THE MONTH AND RUNNING BILLS WERE RAISED. THIS METHOD IS CONSISTENTLY FOLLOWED BY THE ASSESSEE YEAR AFTER YEAR. THE LEARNED AO WAS NOT CONVINCED WITH THE REP LY OF THE ASSESSEE AND MADE AN ADDITION OF RS.12 47 346/- TREATING IT AS UNDISCLOSED WORK IN PROGRESS AS ON 31-03-2004. THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS: 15. IN THE REMAND REPORT AFTER CONSIDERING THE EX PLANATION OF THE ASSESSEE REGARDING ITS METHOD OF ACCOUNTING CONSIS TENTLY ADOPTED OVER THE YEARS AND ACCEPTED BY THE DEPARTMENT THE AO HOWEVER OBSERVED THAT THE ASSESSEE WAS FOUND TO OFFER THE I NCOME OF THE WHOLE YEAR UNDER CONSIDERATION. I DO NOT ACCEPT THE CONTE NTION OF THE AO. AS A GOING CONCERN THE ASSESSEE HAD BEEN RAISING THE RA BILLS ON THE CONTRACTEES ON THE 27 TH OF EVERY MONTH. THE BILLS COVERED THE PERIOD ENDED ON 26-25 TH OF EACH MONTH. THUS THE RA BILLS RAISED ON 27.7.2 004 COVERED THE PERIOD 26 TH FEBRUARY TO 25 TH MARCH. THE REMAINING PERIOD OF 6 DAYS UPTO 31.3.2004 WOULD HAVE BEEN COVERED IN TH E RA BILL RAISED ON 27.4.2004. THERE WAS THUS NO SCOPE FOR SHOWING T HE WIP FOR THE SIX DAYS OF THE FINANCIAL YEAR. IT WOULD .HAVE MADE NO SENSE SINCE THE WORK DONE DURING THE PERIOD WOULD HAVE BEEN INCLUDED IN THE BILL RAISED ON 27.4.2004. SECONDLY WHATEVER WOULD HAVE BEEN SHOWN AS CLOSING WIP FOR THE SIX DAYS WOULD HAVE TO BE SHOWN AS THE OP ENING WIP AS ON 1.4.2004. MOST IMPORTANTLY THE ASSESSEE HAD BEEN F OLLOWING THE SAME METHOD OF ACCOUNTING EVER SINCE ITS INCEPTION AND THE SAME HAD BEEN 9 ITA NOS.2261 & 2341-AHD- 2008 ACCEPTED BY THE DEPARTMENT OVER THE YEARS EVEN IN S CRUTINY ASSESSMENT PROCEEDINGS. THERE WAS THEREFORE NO RE ASON FOR THE AO TO ENFORCE A CHANGE WITHOUT ANY GROUND WHATSOEVER. THE ACTION OF THE AO WAS THUS WITHOUT ANY LOGIC OR RATIONALE. HE IS D IRECTED TO DELETE THE ADDITION OF THE SUM OF RS.12 37 346/-. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS A CONSISTENT PRACTICE OF THE ASSES SEE TO RAISE RUNNING BILLS WITH RESPECT TO THE CONTRACTS NOT COMPLETED A S ON 25 TH OF ANY GIVEN MONTH. ACCORDINGLY THE ASSESSEE HAS RAISED BILLS F OR THE WORK DONE AS ON 25 TH OF MARCH 2004. STRICTLY SPEAKING THE ASSESSEE SH OULD HAVE PROVIDED FOR THE EXPENDITURE INCURRED FROM 26 TH MARCH TO 31 ST MARCH 2004 AS WORK IN PROGRESS AS CLAIMED BY THE LD.AO. H OWEVER THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING AS STATED ABOVE. FURTHER FROM THE FACTS AND CIRCUMSTAN CES OF THE CASE IT IS EVIDENT THAT:- (I) NO AMOUNT OF CONTRACT RECEIPTS WILL GO UN-TAXED BECAUSE THE CONTRACT RECEIPT OF RS.12 37 346/- BEING CLOSING WO RK IN PROGRESS IS DISCLOSED AS RECEIPTS FOR THE SUBSEQUENT ASSESSM ENT YEAR. (II) SIMILAR TREATMENT IS GIVEN FOR THE CLOSING WO RK IN PROGRESS FOR THE PRECEDING YEAR. (III) COMPARING THE GP RATIO OFFERED BY THE ASSES SEE AT 12.42% FOR THE RELEVANT ASSESSMENT YEAR TO 10.09% OFFERED DURI NG THE PRECEDING ASSESSMENT YEAR THE OVERALL EFFECT WILL BE NEGLIGIBLE. THE LEARNED CIT(A) HAS ALSO TAKEN NOTE OF THESE FAC TS AND GRACIOUSLY DELETED THE ADDITION MADE BY THE LEARNED AO. IN THE SE CIRCUMSTANCES WE DO NOT FIND ANY REASON TO ALTER THE DECISION REN DERED BY THE LEARNED CIT(A). THEREFORE THIS GROUND RAISED BY REVENUE IS DISMISSED. 10.3 SINCE FOR THIS YEAR ALSO THE ISSUE AND FACTS B EFORE US ARE IDENTICAL WE HEREBY STAND BY THE DECISION ALREADY RENDERED BY US AND ALLOW THE GROUND 10 ITA NOS.2261 & 2341-AHD- 2008 RAISED BY THE ASSESSEE IN ITS FAVOUR. THUS GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 11. GROUND NO.2 - ADHOC DISALLOWANCE OF RS.22 79 63 7/- AT 5% OF TOTAL WAGES CLAIMED BY THE ASSESSEE . THE LD. AO FOLLOWING HIS PREDECESSOR DISALLOWED 5% OF THE TOTAL WAGES PAID AMOUNTING TO RS. 22 79 637/- SINCE THE ASSESSE E HAD NOT MAINTAINED PROPER BILLS VOUCHERS AND BOOKS IN REGARD TO PAYME NT OF WAGES. WHEN THE MATTER WAS TAKEN UP BEFORE THE LD. CIT(A) HE CONFI RMED THE ORDER OF THE LD. AO. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREIN-BELOW: 4.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. ADMITTEDLY THE APPELLANT HAS NOT PRODUCED THE BILLS AND VOUCHERS SAYING THAT THEY WERE DESTRO YED IN THE FLOOD AND THIS EXPENDITURE HAS REMAINED UNVERIFIABLE. FUR THER FROM THE APPELLANTS OWN DETAILS IT IS CLEAR THE WAGES AND S ALARY HAS INCREASED SUBSTANTIALLY FROM 40.05% IN THE LAST YEA R TO 51.71% IN THE CURRENT YEAR EVEN THOUGH THE APPELLANT HAS TRIE D TO EXPLAIN THAT THE TOTAL EXPENDITURE INCLUDING PIECE RATE WORK AND SUB CONTRACT WORK IS LESS IN THE CURRENT YEAR . IT IS FURTHER SEEN THAT THE ASSESSEE HAS DECLARED INCOME OF RS.14.16 LACS ON A TURNOVER OF RS.880.34 LACS. THIS SHOWS THAT THE ASSESSEE HAS SHOWN TAXABLE INCO ME OF ONLY 1.6%. THE RETURNED INCOME SEEMS TO VERY LOW. ADMITT EDLY THE BILLS AND VOUCHERS HAVE NOT BEEN PRODUCED AND HENCE THE E XPENDITURE REMAINED UNVERIFIED. THEREFORE THE DISALLOWANCE MAD E BY THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED . 12. LD. A.R. SUBMITTED BEFORE US THAT THE TOTAL PAY MENT TO WORKERS HAS REDUCED IN THE RELEVANT YEAR TO 60.78% FROM 62.09% AS OF THE EARLIER YEAR. THOUGH DURING THE YEAR UNDER REVIEW THERE WAS AN I NCREASE IN WAGES AND SALARY EXPENSES TO 51.79% AS AGAINST 40.05% IN THE EARLIER YEAR THE PIECE RATE WORK EXPENSE AND SUB-CONTRACT WORK EXPENSE HAV E CONSIDERABLY REDUCED FROM 8.4% TO 1.33% AND 13.60% TO 7.66% RESP ECTIVELY. SINCE THE ASSESSEE HAD LOST ITS RECORDS DUE TO NATURAL CALAMI TY AD HOC DISALLOWANCE IS NOT JUSTIFIED FOR NON-PRODUCTION OF CERTAIN BILLS A ND VOUCHERS. EVIDENCE COULD 11 ITA NOS.2261 & 2341-AHD- 2008 BE DEDUCED FROM PF RECORDS BANK STATEMENTS AND BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE THOUGH BILLS AND VOUCHER S WERE NOT AVAILABLE. THE LD. D.R. RELIED ON THE ORDER OF THE LD. CIT(A) AND THE LD. AO. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE IT IS EVIDENT THAT THE LD. AO HAD MADE THIS ADDITION OF RS.22 79 637/- RELYING UP ON THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2004-05 WHEREAS LD. CIT(A) HAS GONE ON A DIFFERENT TANGENT. ON THIS IDENTICAL ISSUE FOR THE ASSESSMENT YEAR 2004- 05 THIS TRIBUNAL HELD THE MATTER IN FAVOUR OF THE ASSESSEE IN ITA NO.1080/AHD/2008 AT PARA NO.14 AND 15. FURTHER ON A NALYSING THE LD. CIT(A)S ORDER IT IS APPARENT THAT HE HAS ARRIVED AT THIS DECISION SINCE THE ASSESSEE HAD DECLARED AN INCOME OF RS.14.16 LAKHS O N A TURNOVER OF RS.880.34 LAKHS. THE LD. CIT(A) WAS OF THE VIEW THA T THE ASSESSEE HAD SHOWN TAXABLE INCOME OF ONLY 1.6% OF THE TURNOVER W HICH IS VERY LOW. THEREFORE IT APPEARS THAT THE DECISION RENDERED BY THE LD. CIT(A) WAS ONLY BASED ON CONJECTURES AND SURMISES AND NOT LOOKING I NTO THE NATURE OF BUSINESS AND VERACITY OF OTHER FACTORS AFFECTING IT . CONSIDERING THE SUBMISSIONS OF THE LD. A.R. WHICH IS NOT CONTROVERT ED BY THE REVENUE AT ANY STAGE WE ARE OF THE CONSIDERED VIEW THAT THE ADDIT ION MADE BY THE REVENUE ON THIS COUNT REQUIRES TO BE DELETED. THEREFORE WE ALLOW THIS GROUND RAISED BY THE ASSESSEE IN ITS FAVOUR. 14 . GROUND NO.3 - DISALLOWANCE OF RS.8 01 187/- ON AC COUNT OF UNVERIFIABLE EXPENSES DUE TO NON-PRODUCTION OF BILL S AND VOUCHERS . 14.1 THE ASSESSEE WAS NOT ABLE TO PRODUCE BILLS AND VOUCHERS FOR RS.8 56 52 117/-. THEREFORE THE LD. AO MADE AN AD HOC ADDITION OF 2% ON RS.8 56 52 117/- AMOUNTING TO RS.17 13 042/-. THE A SSESSEE HAD EXPRESSED 12 ITA NOS.2261 & 2341-AHD- 2008 ITS INABILITY TO PRODUCE THE REQUIRED DOCUMENTS BEF ORE THE LD. AO DUE TO IT BEING AFFECTED FROM THE NATURAL CALAMITY DURING THA T PERIOD. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A) HE REDUCED RS.4 55 9 2 748/- FROM RS.8 56 52 117/- AND FOR THE BALANCE OF RS.4 00 59 369/- WORKED OUT 2% AND ARRIVED AT A FIGURE OF RS.8 01 187/- FOR SUCH DISAL LOWANCE SINCE THE SUB- CONTRACT EXPENSES AND THE RENT AND RATES HAVE ALREA DY BEEN DELETED. THUS THE LD. CIT(A) SUSTAINED THE ADDITION OF RS.8 01 18 7/-. 15. THE LD. A.R. SUBMITTED BEFORE US THAT MOST OF T HE EXPENSES COULD BE VERIFIED FROM THE BANK STATEMENTS. FURTHER NAMES AN D ADDRESS FROM WHOM PURCHASES WERE MADE FOR CONSUMABLE ITEMS WERE FURNI SHED TO THE LD. AO FROM WHOM THE LD. AO COULD HAVE VERIFIED THE PAYMEN T MADE BY THE ASSESSEE. LD. AR FURTHER SUBMITTED THAT ADDITION MA DE BY THE LD. AO AND SUBSEQUENTLY REDUCED BY THE LD. CIT(A) WERE ALL BAS ED ON CONJECTURES AND SURMISES AND THEREFORE THE SAME MAY BE DELETED. 16. THE LD. D.R. RELIED ON THE ORDER OF THE LD. CIT (A). 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT IS APPARENT FROM THE FACTS OF THE CASE THAT THE REVENUE MADE THIS ADDITION ON AD HOC BASIS. AS THE LD. AR POINTED OUT THE LD. AO COULD HAVE MADE SOME FURTHER INVESTIGATIONS FROM TH E INFORMATION FURNISHED BY THE ASSESSEE BEFORE MAKING SUCH AD HOC DISALLOWA NCE. CONSIDERING THE FACTS OF THE CASE WE ARE OF THE CONSIDERED VIEW TH AT THIS AD HOC ADDITION MADE BY THE REVENUE REQUIRES TO BE DELETED. THEREFO RE WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSEE. 13 ITA NOS.2261 & 2341-AHD- 2008 18. THUS GROUND NOS. 1 2 AND 3 RAISED BY THE ASSESS EE ARE ALLOWED IN ITS FAVOUR. 19. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 4 - 3'% 5 & 10 / 02 /201 2 ' 6 - 71 SD/- SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER ( A MOHAN ALANKAMONY ) ACCOUNTANT MEMBER - -- - ) 8 ) 8 ) 8 ) 8 98% & 98% & 98% & 98% &- -- - 1. '( 2. )*'( 3. 0> 4. 0>- - 5. 87 ) A 6. 7C D4 E/ / A TALUKDAR/ SR. P.S. DATE : 10-02-2012