TMI Blog2010 (2) TMI 757X X X X Extracts X X X X X X X X Extracts X X X X ..... als by the assessee and the Revenue are directed against the respective orders of the learned Commissioner of Income-tax (Appeals)-VI, Baroda. Since common issue is involved in all these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience. Assessee's appeal, I. T. A. No. 974/Ahd/2007 assessment year 2004-05:- This appeal is directed against the order of the learned Commissioner of Income-tax (Appeals)-VI, Baroda dated December 18, 2006 in an appeal against the assessment framed under section 143(3) of the Income-tax Act, 1961 (in short "the Act"). Since on the basis of assessment framed for this year, the assessment for earlier years were reopened. We deem it fit to dispose of this appeal at first instance. The assessee is a partnership firm engaged in the business of painting of industrial shed, machinery and office premises and also the work of anti-corrosion work. A survey was conducted at the business premises of the assessee on August 24, 2005. The first ground of appeal is against invoking the provisions of section 145(3) regarding rejection of books of account. At the time of hearing the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Therefore, total amount of Rs. 37,05,021 was disallowed. The Assessing Officer and the Commissioner of Income-tax (Appeals) observed that the difference between the claim in the profit and loss account and that of impounded wage registers were not properly explained. The discrepancy was accepted by the assessee during the course of survey. The payments are made in cash and, therefore, the amount is disallowable. The learned authorised representative for the assessee submitted that though at the time of survey the discrepancy could not be reconciled in the absence of wage register found but later on when the wage register were produced before the Assessing Officer and the Commissioner of Income-tax (Appeals), the same were ignored on the plea of being additional evidence. The evidence is not an additional evidence, as if for some reason, the wage register is not impounded, it could not be said that wages are not paid. Mere statement recorded during the course of survey under section 133A is not binding. For this proposition the learned authorised representative for the assessee placed reliance on the following case law:- Sl. No. In the case of . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, i.e., from the assessment year 1999-2000, 2000-01 and 2001-02 and, therefore, on the basis of these years average expenses were allowed producing the wage register at later stage amounts to filing of additional evidence, which were not made available during the course of survey. Therefore, the action of the Assessing Officer is to be upheld. We have considered the rival submissions. Since it is held that books of account are not correct and complete, the income is to be computed to the best of judgment as per the provisions of section 144 of the Act. Section 144 provides that the Assessing Officer, after taking into account all the relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment. When the income is to be computed to the best of judgment, the same has to be on the basis of considering all the relevant materials. It is settled law that even if the assessment is to be made to the best of judgment such assessment cannot be arbitrary or fanciful, but after considering the past history and the present circumstances. Even the guidelines provided by the statutory provisions can also be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipts, no further disallowance by way of labour charges is called for. The third ground of appeal is against upholding the addition of Rs. 2,99,590 due to difference in the accounts of the assessee with M/s. Ber-ger Paints Ltd. The fourth ground of appeal is against the addition of Rs. 5,36,761 being difference in the closing balance of creditors' account including a sum of Rs. 2,91,590 being difference in the accounts of M/s. Berger Paints India Ltd. Ground No. 5 is against the addition in respect of Rs. 3,18,059 under section 69A being the amount deposited in bank account. Since the income has been estimated to the best of judgment and the difference in the accounts of creditors on deposit in bank account being an application of such income, no separate addition for this year is called for. It is also made clear that the discount of Rs. 2,91,590 stated to be received by the assessee during this year is part of income assessed for this year and hence the same amount shown as income in the subsequent year is to be excluded. Therefore, since the addition is made in this year hence in subsequent year it is to be excluded when the amount is actually offered for tax by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-tax (Appeals)-VI, Baroda, dated September 28, 2007 pertaining to the assessment years 2002-03 and 2003-04 in appeals against the assessment framed under section 143(3) read with section 147 of the Act. In appeals by the assessee, the first ground of appeal relates to rejection of book result and invoking the provisions of section 145(3) of the Act. Since, the facts related to these issues are the same as discussed by us in the assessee's appeal for the assessment year 2004-05, following our reasoning therein, this ground is required to be dismissed. We also hold that since books of account are to be rejected, the income is to be estimated based on our findings for the assessment year 2004-05. The income to be assessed for this year shall be computed at 10 per cent. of the contract receipts and not on the basis of books of account maintained by the assessee. The next ground of appeal is partial disallowance of wage and labour expenses as claimed by the assessee. The Assessing Officer held that as per the impounded wage register, the payment of wages and labour charges are worked out at Rs. 22,77,894 for the assessment year 2002-03 and Rs. 36,41,712 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is apparently simpler to inflate such unverifiable expenses. The survey has revealed that the practice was continuing for the past few years. However it is also true that certain labour and wage expenses specially for March would remain payable. Since accounts of the appellant are not reliable and receipts of appellant are not challenged it can be fairly estimated that at best 10 per cent. of receipt are unpaid labour charges. The plea of the appellant is thus partly accepted and net of unpaid expenses, e.g., 10 per cent. of (receipts of the assessment year 2003-04 receipts of the assessment year 2002-03, Rs. 1,55,09,474 - Rs. 1,07,01,727 = Rs. 48,07,747) i.e., Rs. 4,80,775 and (receipts of the assessment year 2002-03 receipt of the assessment year 2001-02, Rs. 1,07,01,727 - Rs. 98,04,156 = Rs. 8,97,571) i.e., Rs. 89,757 is to be allowed." Against sustenance of disallowance, the assessee is in appeal before us, whereas against the partial relief granted by the Commissioner of Income-tax (Appeals), the Revenue is in further appeal. We find that the facts of these cases are identical as discussed by us in appeal of the assessee for the assessment year 2004-05. By applying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mishra and if so assessed is required to be excluded from her income. In the result, both these appeals of the assessee are partly allowed and that of the Revenue's are dismissed. I. T. A. Nos. 4403, 4404 and 4405/Ahd/2007 (by the Revenue) and the cross-objection Nos. 29, 30 and 31/Ahd/2008 by the assessee for the assessment years : 1999-2000, 2000-01 and 2001-02 respectively:- These appeals by the Revenue and the cross-objections by the assessee are directed against the common order of the learned Commissioner of Income-tax (Appeals)-VI, Baroda, dated September 28, 2007 in an appeal against the assessment framed under section 143(3) read with section 147 for the assessment years 1999-2000, 2000-01 and 2001-02. The Assessing Officer noted that average wages paid as per the impounded wage register for the assessment years 2002-03, 2003-04 and 2004-05 were worked out at 22.41 per cent. of the contract receipt. The wages paid for the years under appeals were higher. The average wages paid as percentage of labour charges claimed as per profit and loss account were found to be 41.62 per cent. The Assessing Officer, therefore, concluded that even for the earlier years th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In regard to the assessment year 2001-02 however documents/registers impounded revealed excess labour/wages charges than those claimed in the profit and loss account. Even after discounting wage charges and accounting for net unpaid labour charges at 10 per cent., the labour charges claimed in the profit and loss account are less than those found recorded in the impounded documents/records. Accordingly, no addition is justified for the assessment years 2001-02. The addition of Rs. 18,54,946 is thus deleted." Against the deletion of disallowance, the Revenue is in appeal, whereas the assessee in cross-objection has challenged the estimation of income at 12 per cent. The facts of these issues are identical with the issues decided by us in the assessee's own case for the assessment year 2004-05 hereinabove. Following our reasoning therein we uphold the rejection of books of account as per section 145(3) of the Act. Consequently the income is to be estimated as per the provisions of section 144 of the Act to the best of judgment. By applying our decision for the assessment year 2004-05, we direct the Assessing Officer to estimate the income at 10 per cent. of contract receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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