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TMI Blog2012 (8) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and interpreting the law. 2. The CIT (A) erred in holding that the assesseee has incurred expenditure towards labour and metal charges, though the onus vests on the assessee to substantiate his claim with copies of purchase invoice/bills/vouchers. 3. The CIT (A) erred i in holding that the assessee has incurred expenditure towards departmental recoveries, though the assessee failed to explain the nature of payment at the satisfactory of the AO. 4. The CIT (A) erred in holding that the assessee incurred expenditure towards labour payments though the assessee violated provisions u/s 40A(3) of Income-tax Act, 1961 by making payments exceeding Rs.20,000/-. 5. Any other ground of appeal that may be urged at the time of hearing." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The assessee being aggrieved of the addition made, filed appeal before the CIT (A). 6. On appeal before the CIT (A), the assessee reiterated its stand taken before the AO and contended that the AO has failed to consider the fact that in the relevant assessment year, the assessee was engaged in construction of new roads which final layer of bitumen involve laying of three layers of metal over which it is laid. This involves more labour as earth has to be dug up to the required depth to facilitate three layers of metal. It is further contended that road work is subject to strict scrutiny therefore there is little scope to increase expenditure on labour and metal purchases exorbitantly. The CIT (A) after considering contentions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso has not disputed these facts. However, the AO was not ready to accept the entire expenditure claimed on the ground that the assessee has not submitted any supporting bills and vouchers. The CIT (A) has correctly observed that it is not possible to obtain vouchers for this type of expenditure and they have to be allowed on a reasonable basis. It is seen from the record that the assessee had declared 11.5% which appears to be reasonable considering the nature of work executed by the assessee. In view of aforesaid facts, direction of CIT (A) to restrict the disallowance at 5% on total expenditure claimed needs no interference. Hence, this ground stand rejected. 10. Ground No.3 relates to deletion of an amount of Rs.67,209 being the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of appellate proceedings, the AR of the appellant has submitted that the departmental recoveries are in the nature of quality control charges which are normally deducted in every contractor case by the concerned departments and the deductions are certified by the respective engineers and he has also produced evidence relating to the recoveries made by the departments. In view of the above, the disallowance of Rs.67,209/- stands explained and accordingly, the additions made on this count is deleted." 11. We have heard rival contentions of the parties and perused the material on record. It is seen from the order of CIT (A) which is quoted above, the recoveries were made by the government departments towards quality control charges in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo teams under supervision of team leader (mestri) who supervise the labourers, gets the work done by them and disburses payments to them. The assessee contended that the payments were made weekly and there are 53 such payments during the year as per ledger. The assessee contended that each of the payment though exceeds Rs.20,000/- but in reality the amount is aggregate of payment made to individual labourers working under team leader (mestri) and payment to each individual labourer is much less than Rs.20,000/-. If the AO's finding of treating each weekly payment as a single payment to be accepted, then it would effectively mean the assessee executed all the work by employing only one labourer to whom weekly payment was made. The CIT (A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused material on record. After going through the finding of the CIT (A) extracted above, we are of the view that the CIT (A) has come to his conclusion on sound reasoning. It is an accepted practice in such nature of contract works that payments are made either daily or weekly to the labourers through team leader (mestri) and such payment is recorded in single entry in cash book as it is simply not possible to make entries for payment made to each labourer as they are large in number. However, in reality, the payment made is an aggregate payment made to each labourer, if considered individually will be much less than Rs.20,000/-. In the aforesaid view of the matter, no disallowance u/s 40A (3) is called for considering peculiar facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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