TMI Blog2014 (4) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... -hoc amount was not correct and rightly accepted by both the appellate authorities. Disallowance out of soil testing and surveying expenses – Held that:- Both the ITAT as well as CIT(A) have correctly disallowed the deletion and there was no occasion for any ad-hoc disallowance out of the expenses at the rate of 10% - it has been observed by the CIT (A) and approved by the ITAT that the receipts by the assessee were to the extent of ₹ 85,75,162/- as against the expenditure of ₹ 50,18,663 - even the receipts are substantially higher than the expenditure the disallowance deleted by the CIT(A) and approved by the ITAT cannot be faulted with. Salary/remuneration to the Chairman-cum-Managing Director – Held that:- The CIT(A) rightly deleted the disallowance which was upheld by the ITAT – there was no reason in interfering - on the face of overwhelming evidence on record, salary of ₹ 24 lac cannot be said to be excessive or unreasonable and the revenue has not been able to make out as to whether the salary paid to Shri Viswas Jain was not as per the fair market value as provided u/s 40A(2)(a) and 40A(2)(b) of the IT Act - The ITAT after appreciation of evidence, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. There was a third claim with reference to the remuneration/salary to one Shri Viswas Jain who is Chairman-cum-Managing Director of the respondent-assessee-company to whom salary of Rs.24 lac was paid and according to the AO, the payment is excessive. 5. During the course of hearing, the AO desired explanation on all three points, referred to herein above. In so far as the first issue is concerned, Shri Bhura Ram Chaudhary appeared before the AO and his statements were recorded and he submitted that he does not maintain books of accounts but he has worked for the assesse company and has filed return u/s 44 AF of the IT Act. However, the AO, in view of the statement recorded, was of the view that Shri Bhura Ram Chaudhary was not aware as to what amount he received from the assessee-company as also the payments made by him to his labourers. Finding discrepancies, the AO was not satisfied with the explanation so offered. With reference to M/s. Payal Buidlers and Consultants, it has been observed by the AO that one Smt. Aruna Rajawat, who is the proprietress of the concern, on the receipt of Rs.27,92,267/-, filed return only disclosing an income of Rs.93,045/- and therefore, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respondent-assessee to find out whether they are filing returns under presumptive scheme or otherwise. With reference to other disallowances also, the CIT(A), after considering the arguments advanced by the respondent-assessee, deleted the dis allowances on all the three counts. 9. The revenue carried the matter in appeal before the ITAT where also the ITAT, after considering the submission made by both the sides, upheld the deletion of the disallowances and dismissed the appeal filed by the revenue. Hence this appeal. 10. Shri RB Mathur, ld. counsel for the appellant-revenue submitted that the AO had correctly disallowed all the three expenses out of the aforesaid expenses as the claim was abnormal and the respondent-assessee was unable to lead further evidence and to justify that the expenditures were incurred to a large extent. He contended that merely because those sub-contractors are filing some return, that does not mean that any amount of payment can be made and allowed. He contended that it was the duty of the respondent-assessee to show the justification of payment of huge amounts to the respective sub-contractors which ranged from Rs. 16 lac to Rs.27 lac. He f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was discrepancy in the statements of Shri Bhura Ram Chaudhary is not proper. He had already conveyed that he had filed his return u/s 44AF (should be 44AD as he was not aware of the provisions of law) but did not maintain the books of accounts which, in-fact, is not required to be maintained in a case of presumptive taxation. He has already conveyed that he had taken 25 people for working for the respondent-assessee and used to take 10 to 12 persons as and when required and that the tax was also deducted at source. In so far as the Payal Builders and Consultants Gautam Builders Consultants, both have admitted that they have received amount from the respondent-assessee for the work done by them and tax has also been deducted in their respective cases. It may be that these are small time persons and as required under the IT Act u/s 44AD, they were filing return and therefore, not required to maintain regular and proper books of accounts and if adverse inference is drawn by the AO on account of this fact, in our view, is not proper. It is also an admitted fact, as observed by the CIT(A) as well as the ITAT that income from DPR work had increased by 21.35% over preceding ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonableness is to be judged from the angle of a businessman rather than from the angle of the AO who may not be aware of the realities and peculiarities of business. It has already been explained on the assessment records that the reasonableness or the justification of paying salary to the tune of Rs.24 lac to Shri Viswas Jain was highest as he was the sole person who was influential in getting business for the assessee-company. It is already observed in the assessment record that the receipts of the assessee had increased from 7.73 crores in the assessment year 2003-04 to 9.92 crores during the previous year relevant to the year under appeal due to competence of Shri Viswas Jain whereas the salary has been increased from 12 lac to 24 lac during the previous year under appeal. Not only this, it is a case of a limited company and the said remuneration/increase in the remuneration was approved after passing a proper resolution in an extra-ordinary general meeting of the shareholders u/s 269 of the Companies Act. The minutes of the said meeting where all the directors were present had also been produced before the lower authorities. It is already on record that it was on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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