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TMI Blog2012 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... multiple Grounds of appeal. However, essentially the appeal has been prosecuted on two issues relating to (i) invoking of section 145(3) of the Act and rejecting the book results and making an addition of Rs 10,80,758/- on this count, and (ii) invoking of section 40(a)(ia) of the Act and to make a disallowance of Rs 9,05,772/- for nondeduction of tax at source under section 194C of the Act. The other Grounds raised by the assessee, namely, Ground Nos. (1) and (2) relating to selection of the assessment for scrutiny as per CBDT instructions, Ground No. 4 relating to disallowance under section 40A(3) of the Act have not been pressed at the time of hearing and are accordingly dismissed. Similarly, Ground Nos. (6), (7), (8) and (9) being gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover in this year had doubled and, hence lower profit margin. The Assessing Officer considered the submissions of the assessee and found in particular 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals) has upheld the action of the Assessing Officer of rejecting the book results. In particular, the following discussion in the order of the Commissioner of Income-tax (Appeals) is worthy of notice: "In the audit report, the auditors made various qualifications which have a bearing on the income of the appellant, e.g. (i) work-in-progress at the end of the year was not physically verified by them, (ii) for expenses like draft commission, miscellaneous expenses, transportation, travelling, site expenses, salary, hamali, office expenses, site engineer payment, vehicle repairs, etc only home vouchers were on record, (iii) provision as on 31.3.2006 of site expense nd labour charges payable is made on ad hoc basis, (iv) perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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-section (2) of section 145 have not been regularly followed by the assessee. In this case, ostensibly the provisions of section 145(3) have been invoked by the Assessing Officer on not being satisfied about the correctness and completeness of the accounts of the assessee. The said action has since been up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese, in our view, section 145(3) of the Act has been correctly invoked by the Revenue authorities in this case. 10. Now we may come to the quantum of income determined by the Assessing Officer after rejection of the book results. On that account, we find that the estimation is quite excessive and unjustified. Having regard to the discussion in the order of the Assessing Officer, we find that the main objection was in relation to the expenses incurred on account of site expenses and labour payments. Considering the aforesaid aspects and also past history wherein level of profits declared by 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 acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource under section 194C, disallowance under section 40(a)(ia) cannot be made having regard to the ratio of the judgment of the Special Bench in the case of Merilyn Shipping & Transports (supra) 12. 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. 13. Having considered the rival submissions on this aspect, we deem it fit and proper to remit the matter back to the file of the Assessing Officer for a decision afresh. In our view, the remand is necessitated in view of the subsequent decision of the Special Bench in the case of Merilyn Shipping & Transports (supra) whereby it has been laid down that the disallowance under section 40(a)(ia) sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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