TMI Blog2015 (8) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... The dispute relating to disallowance of part of labour expenses would meet the ends of justice, if we restrict the disallowance to ₹ 2.00 crores (being the amount offered by the assessee) plus 10% of the labour expenses incurred by way of cheque. We order accordingly. The decision rendered by the Ld CIT(A) on this issue would stand modified accordingly. - Decided partly in favour of assessee. Disallowance of Repairs and Maintenance expenses - CIT(A) deleted the addition - Held that:- The assessee has incurred the expenses towards purchase of concrete silo. The Ld CIT(A) noticed that it formed part of “ready mix concrete plant” having no independent functioning. Before us, the Ld A.R submitted that the said part is required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , examined one of the partners of the firm as well as one of its employees. The AO noticed that the assessee has claimed expenditure of ₹ 10.38 crores as Labour charges and ₹ 7.57 crores as job work charges. The AO noticed that the job work charges were also essentially labour charges only. Thus, the assessee had claimed a sum of ₹ 17.95 crores as labour 3 5925 6130/M/12 expenses which accounted for 39.30% of the civil contract receipts. Major amount of expenses were also found to have been incurred in cash. 4. In the statement taken from one of the partners named Shri Nand K Bijlani u/s 131 of the Act, he admitted that there were deficiencies in the vouchers. The relevant observations made by the AO are extracted bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving made on account of unproved cash expenses incurred towards labour charges. Further, the AO proceeded to discuss the details of enquiries made by him in respect of payments made by way of cheque. In paragraph 4.7 of the order, the AO came to the conclusion that the payments to the extent of ₹ 4,16,71,407/- made to 12 parties cannot be considered to be genuine. The AO arrived at such a conclusion mainly for the reason that the relevant cheques were seen to have been encashed by the assessee s employees or the payees were not available at the given address. Accordingly, the AO disallowed the labour expenses to the tune of ₹ 4,16,71,407/-. 6. The AO noticed that the assessee has paid a sum of ₹ 5,60,000/- to M/s New In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque. However, the AO only has presumed that the said offer was in the context of labour charges incurred by way of cash only. It is pertinent to note that the Ld CIT(A) has verified by the audited financial statements and have given a finding that the financial statement was showing liability as labour charges payable. However, the Ld CIT(A) declined to accept the same on the reasoning that the assessee has failed to establish the nexus between the bank withdrawals and the cash payments. Further, they were supported by self made vouchers. However, the Ld CIT(A) also held that the claim of the assessee could not be rejected in toto. Accordingly he held that the disallowance of ₹ 1,97,66,687/- should be restricted to ₹ 43,84,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered ₹ 2.00 crores to cover up the deficiencies in respect of labour charges incurred by way of cash as well as cheque. With regard to the cheque expenses, the contention of the assessee is that the cheque expenses have been properly verified and the practice followed has not been properly appreciated. In support of the same, the assessee has worked out the G.P ratio, N.P ratio and rate of profit declared by comparable cases. When we compare the profit ratios and comparable cases, we find some force in the contentions of the assessee. It is an admitted fact that the assessee is executing mainly road contract works, wherein the labour expenses are tend to be high. Hence, we are of the view the disallowance of entire expenses incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee would stand partly allowed, since in the facts and circumstances of the case, it may not be proper to disallow entire expenses incurred by way of cheque. 13. The next issue urged by the revenue relates to the deletion of disallowance of ₹ 5,60,000/-. We notice that the assessee has incurred the expenses towards purchase of concrete silo. The Ld CIT(A) noticed that it formed part of ready mix concrete plant having no independent functioning. Before us, the Ld A.R submitted that the said part is required to be replaced frequently. Accordingly, the Ld CIT(A) held that the same is revenue expenditure. On consideration of the above facts, we do not find any infirmity in the order of Ld CIT(A) on this issue. 14. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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