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2015 (9) TMI 381 - ITAT MUMBAI

2015 (9) TMI 381 - ITAT MUMBAI - TMI - Disallowance of wages - CIT(A) deleted part addition - Held that:- Perusal of the remand report shows that the Assessing Officer has examined all the facts and evidences. The assessee submitted Muster Sheet of wages before the Assessing Officer. Nothing adverse therein has been found by the Assessing Officer. Further, it may be seen from the history chart that the ratio of wages in the year under consideration is lowest in four years. There is no prohibitio .....

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d evidence and he was free to make any further verification if he had any doubts. Thus, in our considered opinion, the learned CIT(A) was very fair in reducing the disallowance to 10% of the total claim made by the assessee. - Decided against revenue.

Disallowance of salary - CIT(A) deleted addition - Held that:- complete details and evidences have been furnished before the learned CIT(A). The Assessing Officer has examined the details and evidences and nothing adverse was found and h .....

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venue.

Admission of additional evidence by the learned CIT(A) in terms of rule 46A of the I.T. Rules, 1962 - Held that:- No case has been brought out by the learned Departmental Representative to convince us as to how and in what manner provisions of rule 46A has not been complied with by the learned CIT(A). On the other hand, it is seen by us that the learned CIT(A) had called for the remand report, providing thus adequate opportunity to the Assessing Officer to examine all the detai .....

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preferred by the Revenue is directed against the impugned order dated 22nd August 2012, passed by the learned Commissioner of Income Tax (Appeals)-26, Mumbai, for the assessment year 2009-10. 2. Ground no.1, is with respect of the relief provided by the learned CIT(A) of ₹ 87,85,011, out of the disallowance of ₹ 1,13,85,293, on account of wages made by the Assessing Officer. 3. The brief facts, as culled out from the orders of the authorities below are that the assessee is a proprie .....

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eding year, the assessee had debited wages of ₹ 1,25,42,896, on the total receipts of ₹ 3,44,54,829, which comes to 36% of the total receipt. The Assessing Officer observed that the claim of wages was reasonable at 30% of the total receipt and, accordingly, he restricted the claim of the assessee to 30% of the total receipt. Consequently, disallowance of ₹ 1,82,01,975/- was made by the Assessing Officer. 4. The assessee filed appeal before the learned CIT(A) and made submission .....

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of the Assessing Officer and contended that the disallowance was rightly made by the Assessing Officer and the learned CIT(A) has wrongly reduced the amount of disallowance, praying for reversing the action of the learned CIT(A). 6. The learned Counsel for the assessee submitted that, in fact, no disallowance was called for. The learned CIT(A) has been very fair and reasonable in sustaining the part disallowance whereas full disallowance ought to have been deleted by the learned CIT(A). He also .....

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Revenue. Pages-4 and 5 of contain the relevant portion of the remand report, which is on this issue and the same is reproduced hereunder for the sake of ready reference:- C) Disallowance of Rs.1,82,01,975/- out of wages i. During the course of the assessment proceedings, it was noticed that the assessee has debited a sum of ₹ 2,60,02,822/- on account of wages to the P&L account, which constitutes 53% of the total receipts of ₹ 4,87,25,095/- credited to the P&L account. In the .....

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was restricted to 30% of the total receipts. Here it may be mentioned that although, a disallowance of ₹ 1,82,01,975/- was made in the assessment order, the same was subsequently rectified under section 154 on account of an arithmetical error .in the computation of the disallowance. In the order under section 154, passed on 21/2/2012, the disallowance was correctly worked out at ₹ 1,13,85,293/-. ii. During the course of the remand proceedings, the assessee has filed a comparative ch .....

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as under:- Particulars 31/3/2011 31/3/2010 31/3/2009 31/3/2008 Labour charges received Rs. 4,15,10,100 Rs.2,72,40,734 Rs. 4,87,25,095 Rs. 3,44,54,829 COST OF LABOUR (a) Payments to sub- contractors Rs.1,41,22,423 Rs. 59,46,437 Rs.26,08,279 Rs.1,25,07,518 (b) Wages Rs.1,28,24,737 Rs. 1,08,35,175 Rs. 2,60,02,822 Rs. 1,25,42,896 (c) Salary Rs.24,00,000 Rs. 22,47,400 Rs.29,22,620 Rs. 1,25,42,896 Ratio of cost of labour to receipts 70.70% 69.85% 64.72% 80.44% iii. The wages are claimed to have been p .....

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ing adverse therein has been found by the Assessing Officer. Further, it may be seen from the history chart that the ratio of wages in the year under consideration is lowest in four years. There is no prohibition under the law that the wages cannot be paid in cash. It is a widely prevalent practice that wages are usually paid in cash in our country. The workers do not necessarily have bank accounts. The law itself has provided the provision of making payment in cash subject to the limits as have .....

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and the ground raised by the Revenue is dismissed. 8. Ground no.2, deals with the action of the learned CIT(A) in deleting the disallowance of ₹ 14,61,310, that was made out of salary of ₹ 29,22,620, by the Assessing Officer. 9. The disallowance was made by the Assessing Officer on ad-hoc basis @ 50% of the total claim on the ground that this claim should have been further substantiated by the assessee along with adequate supporting evidence. 10. In the appeal before the learned CIT .....

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of wages. In the absence of any supporting evidences in this regard, 50% of the expenditure claimed under 'this head was: disallowed. An addition of ₹ 14,61,31O/- was, consequently, made to the returned income. Along with the letter dated 11/4/2012 filed before your good 'self, the assessee has filed a chart giving names of 25 persons to whom salary payment has been made. Out of the same, 8 persons have permanent account numbers. Out of the balance parties, 7 parties apparently bel .....

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e restored and the order passed by the learned CIT(A) should be reversed. 12. The learned Counsel for the assessee submitted that the learned CIT(A) has rightly deleted the disallowance and submitted that everything has been examined by the Assessing Officer and, therefore, there was no reason to uphold the disallowance. 13. We have heard the rival contentions and perused the material available on record. It is seen that complete details and evidences have been furnished before the learned CIT(A .....

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