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2017 (10) TMI 622 - AT - Income TaxDisallowance of wages paid at various sites - nature of expenditure - Held that:- We find that the assessee is a contractor and developing/working on various sites for which labourers were employed and supervised by Shri Dada Kadam and he used to disburse the salaries in cash at the sites by taking the same on the basis of requisition from Mr. Dinesh Ojha who was cashier of the assessee. During the course of hearing before us, the assessee produced the some sample receipts taken from the laborers which proved that the assessee has maintained books and other records of the payments to the laborers. It is customary in the business of construction to pay wages through the Supervisor/munshis and therefore, we are in agreement with the conclusion drawn by the ld.CIT(A) that all these payments were not genuine. However some reasonable disallowance should meet the ends of justice as the assessee has failed to furnish the necessary documentary evidences before the lower authorities. Accordingly we direct the AO to restrict disallowance on account various deficiencies and non vouched cash payments at ₹ 20,00,000/-. This ground is partly allowed. Addition being estimated profit on work-in-progress as appeared in profit and loss account - Held that:- We find that the assessee has been regularly showing the WIP in its accounts which represents the unbilled work done on behalf of the various clients. The nature of business of the assessee is such that materials are normally delivered at the sites of the customers/ contractor’s and necessary modifications and fittings are done at the site of the project. At the yearend incomplete work is shown as WIP. This is a regular feature in business of the assessee. The WIP is automatically accounted for in the next year and also billed accordingly depending upon the completion of work and profit on the said amount is offered to tax accordingly. We find merit in the submissions of the ld.AR and has gone through the previous years in which the ld.CIT(A) has deleted the similar additions made by the department. The department has not further appealed before the higher forum. In view of all the order of CIT(A) is not correct in upholding the additions and therefore we reverse the same and direct the direct the AO to delete the addition. - Decided in favour of assessee. Disallowance being 10% of the cash expenses incurred - addition as unproved and unsubstanted cash expenses u/s 40(A)(3) - Held that:- As clear from the above provision of section 40A(3) of the Act that the expenses exceeding ₹ 20,000/- incurred in cash would be disallowed u/s section 40A(3) of the Act. But in the instant case the AO has made estimation which has been confirmed by the ld.CIT(A). Therefore, we are inclined to set aside the order of the ld.CIT(A) on this issue for the reasons that no disallowance is possible u/s 40A(3) of the Act on estimation and adhoc basis and direct he AO to delete the addition. - Decided in favour of assessee.
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