TMI Blog2012 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking section 40(a)(ia) - non deduction of tax a source - held that:- Find fit and proper to remit the matter back to the file of AO for a decision afresh as the remand is necessitated in view of the decision of the Special Bench in the case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) whereby it has been laid down that the disallowance under section 40(a)(ia) shall be limited to only such expenditure which is found payable as on 31st March of the year and not to expenditure which has otherwise been actually paid during the year itself - appeal of assessee partly allowed. - ITA No. 579/PN/10 - - - Dated:- 25-5-2012 - SHRI I C SUDHIR, SHRI G.S. PANNU, JJ. Appellant by : Shri M K Kulkarni Respondent by : Shri Alok Mishra ORDER PER G.S. PANNU, A.M.: This appeal by the assessee is directed against the order dated 30.3.2009 passed by the Commissioner of Income-tax (Appeals), Kolhapur, which in turn, has arisen from the order dated 26.12.2008 passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961 (in short the Act ), pertaining to the assessment year 2006-07. 2. In this appeal, the assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar that the assessee had incurred site expenses of Rs 51,13,893/-, which were not at all incurred in any of the earlier assessment years and further that the labour payments of Rs 62,62,166/- showed an abnormal increase to 28.97% as compared to 14.92% and 20.23% in assessment years 2003-04 and 2004-05 respectively. It was explained that site expenditure was incurred in this year as the assessee had executed electrical work of windmill at Bramhanwel, Dhulia District, which was a remote place in a hilly and forest area. As the labour and supervising staff deputed to this area was provided with all facilities, the expenditure incurred was on a higher side and that in any case in the past years no such site work was undertaken. The assessee also explained that the labour payment was on a higher side on account of the nature of work carried out in this year. The Assessing Officer considered the submissions of the assessee and found that the site expenses of Rs 51,13,893/- were supported by only self-made vouchers and was also not satisfied with the explanation with regard to the abnormally high labour expenses incurred. Considering the submissions of the assessee, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said explanation has been wrongly rejected so as to hold the book results as unreliable. Notwithstanding the aforesaid, the learned Counsel further pointed out that the addition made by the lower authorities is quite excessive, inasmuch as even if the income is to be estimated after rejection of books of account, the estimation is to be made only of the net income and not the gross profit as done by the Assessing Officer. In this manner, the orders of the authorities below are sought to be assailed. 7. On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below in support of the case of the Revenue, in particular the portion of the order of the Commissioner of Income-tax (Appeals), which we have extracted above. 8. We have carefully considered the rival submissions. Section 145(3) of the Act empowers an Assessing Officer to make an assessment to the best of his judgment as provided in section 144 of the Act, if he is not satisfied about the correctness or completeness of the accounts of the assessee or where the method of accounting provided in sub-section (1) of section 145 or the accounting standard notified in sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee are not so huge, we deem it fit and proper that an addition of Rs 5,00,000/- would suffice to plug the leak of revenue, if any, on this account. Therefore, to that extent, assessee succeeds and we accordingly set aside the order of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the balance addition of Rs 5,80,758/- made on this count. Thus, on this count, assessee partly succeeds. 11. The only other Ground argued by the assessee before us relates to the disallowance made by the Assessing Officer invoking section 40(a)(ia) of the Act on the ground that deduction of expenses on account of labour charges, and tractor rent have been claimed without deduction of tax a source under section 194C of the Act. On this Ground, the primary position taken by the appellant before us is that the entire expenditure has been actually paid out and, therefore, provisions of section 40(a)(ia) are inapplicable. Apart therefrom, the learned Counsel has also pointed out that in relation to the expenditure on tractor rent of Rs 4,18,678/-, it was a case of payment of lease rental for machinery and no tax was liable to be deducted under section 194-I of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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