9911796707
TMI Blog2000 (2) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... to works as discussed above. 40,31,743 2. Disallowance out of salary given to lady director as discussed above. 48,000 3. Disallowance out of staff welfare, conveyance, travelling, festival and telephone expenses as discussed above (20 per cent of 1,80,581 + 19,460 + 1,52,675 + 51,724 + 28,460) 88,580 --------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made his report on annexure of the assessment order itself. The AO on the basis of the aforesaid report, rejected the assessee's books of account and proceeded to estimate the assessee's income in accordance, with the provisions of s. 145(1) should be 145(2). The AO observed that whole of the wage bill cannot be treated as wholly and exclusively incurred for business purposes and cannot be treated as genuine expenditure. In fact, 25 per cent of the wage bill is in the form of bogus payment. The reason is that out of the sample of thumb impression and signatures, more than 25 per cent were found to be bogus. The assesses has claimed vide letter dt. 21st Dec, 1990 that 15 labourers are required for one packer machine, whereas on p. 2 of the contract for loading of cement dt. 20th Jan., 1994, it is stated that the contractor shall engage a maximum of 14 workmen per packer per shift for all the operations of packing for loading both Jumbo, ordinary wagons and trucks. The AO observed that this also showed that the assessee has been claiming the deployment of excess labour and inflated wage bills without employing so much labour. The AO accordingly disallowed 25 per cent of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent of the wage payment is bogus. No material has been brought on record by the AO to prove that any part of the wages payment made by the assessee is bogus or fictitious. The provisions of various labour laws, PF, etc. are applicable to the assessee. The labour authorities and PF authorities have not found any defect in the muster rolls, attendance register and payment registers maintained by the assessee. Shri Ranka submitted that not a single wades earner has ever complained that he has not received the payment for wages or has received less payment of wages out of the payment shown to have been made by the assessee. Neither under the labour law nor under any other law, contravention of any statutory provision was ever noticed by any authority. The AO has also not examined even a single wage warner. The AO simply sent four wages by payment labourers, to the fingerprint expert out of 38 registers maintained by the assessee. Out of various payments, reflected in those four registers only seven thumb impressions were made the subject-matter of report by the said expert. He simply says that these thumb impressions appear to be identical or of same persons. This does not lead to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract receipts for the year under consideration was 83.55 per cent as against 84.10 in asst. yr. 1993-94 which was assessed under s. 143(3). Like this the wage payment ranged between 83 per cent to 84 per cent in different years. During the year under assessment, it was 83.55 per cent which cannot be treated as unreasonable or excessive. Shri Ranka further submitted that the AO has failed to point out any comparative cases where the ratio of various payment on such contract receipts is lower than ratio of assessee's wage payments. 13. Shri Ranka invited our attention towards detailed written submissions dt. 23rd June, 1999, submitted before the CIT(A). He submitted that the appellant company keep supervisors/accountants at the site of work. The supervisors employ and engage labourers. Muster rolls are prepared by accountant/supervisor. Attendance is taken by the supervisor. Wages for every month based on such muster rolls, are paid and debited by the accountant in the account books. The payments to labourers are made by the employees of the appellant company, and no actual payment, thumb impression/signatures are obtained and recorded. The directors have not made any payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity was allowed to the assessee to cross-examine the expert nor for giving his comments or report of another expert in rebuttal of Prof. Kashyap's report. Without prejudice to this submission. Shri Ranka further submitted that what is the sanctity of such a report of the expert and what is the evidentiary value thereof? For this purpose, Shri Ranka drew our attention to the following decisions: (a) Madan Beharilal vs. State of Punjab AIR 1977 SC 1091. This judgment was cited before the learned CIT(A) in pars 1.16 of the written submissions. It has been held in the judgment that expert's opinion must always be received with great caution and it is unsafe to base a conviction solely on expert opinion without substantial corroboration. (b) AIR 1989 (All) 133. It was held by the Hon'ble Allahabad High Court that report of the handwriting experts would not admissible in evidence in absence of formal proof and examining the experts. An expert's report cannot straight away be admitted without examining him and without asking him to cross-examine. (c) The learned counsel also relied upon the judgment of the Madras High Court in Jay Frozen Foods & Ors. vs. ITO (1992) 196 ITR 724 (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned representatives of the parties and have perused the orders of the learned Departmental authorities. We have also gone through the judgments relied upon by the learned counsel. We have also carefully gone through all other documents submitted in the compilation, to which our attention was drawn during the course of hearing. 17. It is an undisputed, fact that the copy of report given by Prop. B.S. Kashyap was supplied to the assessee on 30th March, 1999 at 5 p.m. and the assessment was completed on the very next day i.e. on 31st March, 1999. The report obtained by the AO from Prof. B.B. Kashyap is dt. 16th March, 1999. It is beyond comprehension as to why the said report was not given to the assessee soon after it was received by the AO so as to provide the assessee a reasonable opportunity to submit his report thereon and also to submit another expert's report in rebuttal thereof if considered proper or necessary. The report of Prof. Kashyap was handed over the assessee on 30th March, 1999 at 5 p.m. This fact stated in the written submissions before the CIT(A) has not been challenged or contradicted by the Departmental authorities nor by the learned Departmental Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said expert for cross-examination by the assessee, as the AO has obtained the report from the expert and placed reliance thereon for making such a disallowance. 19. Ordinarily, the burden to prove the correctness of Claim of the any deduction/expenses lies on the assessee. In the present case, the AO by way of a sample/test check sent the wages payment register to the expert for getting his opinion. The expert has examined the various thumb impressions obtained by the assessee in the said wages payment register and gave opinion that thumb impressions of seven person/claimed to be respective thumb impression of seven persons, are, in fact, thumb impressions of one and the same person. The assessee has contended that this report does not establish that payments shown to have been made to those seven persons were not genuine, it could be a case where payment has been made to a co-labourer after the supervisor was satisfied about the reliability of the co-labourer. But the burden lies on the assessee to prove that those persons really existed and they really did render their services to the assessee. The assessee could produce those labourers before the AO to prove that they had, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and whose existence in the relevant year also could not be proved by the assessee. In such a situation, the net profit rate of 8 per cent declared by the assessee will not disentitle the AO to make further disallowance because then it will be a clear case of showing payments to workers, who were not in existence at all. On the basis of a test check an estimated disallowance/addition call be validly made. The AO should, however, make a fair, reasonable and honest estimate after taking into consideration all the facts and circumstances as may be submitted on behalf of the assessee before him in relation to estimation of the reasonable amount of net profit on declared contract receipts. 21. In view of the aforesaid facts and circumstances, the order of the CIT(A) and the order of the AO in relation to the aforesaid ground is set aside and the matter is restored back to the AO for passing a fresh order in accordance with the provisions of law and after providing reasonable opportunity to the assessee. The AO will also keep in mind the aforesaid observations while passing fresh order. 22. The other ground in assessee's appeal relates to confirmation of disallowance of 20 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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