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2020 (12) TMI 462 - AT - Income TaxAddition u/s. 40A(3) - payments were made in cash in contravention of provisions of section 40A(3) - HELD THAT:- DR has initially raised an objection for sending the matter back to the Assessing Officer again for verification on the ground that sufficient opportunity was already offered to the assessee in this regard, he has finally submitted the matter can be sent back to the AO for proper verification if the assessee undertakes to produce the cash book and other evidence to support and substantiate his explanation in the matter. Since the ld. counsel for the assessee has undertaken to produce the cash book and other evidence to support and substantiate the case of assessee on this issue, consider it fair and proper and in the interest of justice to set aside the impugned order of ld. CIT(A) on this issue and remit the matter to the file of Assessing Officer for deciding the same afresh after verifying the explanation of the assessee from the relevant record including especially the cash book and other evidences which the assessee is directed to produce. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes. Disallowance of 15% of the wages - Addition sustained by the ld. CIT(A) to the extent of 7% - HELD THAT:- As rightly noted by CIT(A) in this regard, there was a mistake in the working made by the Assessing Officer in as much as the substantial increase in work-in-progress during the year under consideration was not taken into consideration by the Assessing Officer while working the percentage of wages at 31.36%. Since the wages as correctly worked out by the ld. CIT(A) at 22.73% was fair and reasonable, disallowance of 7% of the wages sustained by the ld. CIT(A) for the unverifiable element involved in the wages is slightly on the higher side and it would be fair and reasonable to restrict the same to 5%. Accordingly, modify the impugned order of ld. CIT(A) on this issue and direct the Assessing Officer to re-compute the disallowance out of wages to the extent of 5%. Ground No. 2 is thus, partly allowed.
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