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2018 (6) TMI 553 - AT - Income TaxAddition in respect to labour expenses and piece work charges - adhoc estimated addition - genuineness of labour expenses - cash payments - Held that:- We note that assessee is engaging/executing government contracts, It's area of work is spread far and wide. Hundred percent external watchers in case of such labour payments are not possible to be maintained. The piece rate payment are duly documented and corroborated by VAT audit report. Assessee's profits have not been rejected. The profit shown by the assessee during the current year is better than that disclosed in earlier year. There is no justification for any ad hoc disallowance in this regard. Accordingly, we delete the disallowance made by the CIT (Appeals). Addition on account of VAT refund - account on case receipt basis - Held that:- The approach of the authorities below in this regard is erroneous. By no stretch of imagination, mercantile system of accounting mandates that contingent amounts should be accounted for. This is more apparent by the instance mentioned by the learned counsel of the assessee where in the assessment order a demand of ₹ 404.6 lakh was raised against the assessee and thereafter on appeal the assessee was granted refund. Hence, the assessee's plea that the VAT refund accrues in the financial year in which the assessment attains finality is cogent. In the case of Nuchem Ltd. [2011 (2) TMI 159 - PUNJAB AND HARYANA HIGH COURT] where similar claim of excise duly refund was there and the addition was deleted on the ground that the same was not to be accounted for till the matter attains finality. - Decided in favour of assessee.
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