TMI Blog2015 (9) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... see has not maintained complete details such as bills and vouchers for purchases. Since no specific defect was pointed out by the Assessing Officer, we find no merit in the disallowance. Accordingly we confirm the order of the ld. CIT(A) on this issue who has rightly deleted the addition. - Decided against revenue. - ITA No.799/LKW/2014 - - - Dated:- 27-8-2015 - SHRI SUNIL KUMAR YADAV AND SHRI. A. K. GARODIA, JJ. For The Appellant : Smt. Swati Ratna, D.R. For The Respondent : Shri. K. R. Rastogi, C.A. ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on the following grounds:- 1. The CIT(A) has erred in law and on facts of the case in deleting the addition of ₹ 2,44,87,614/- in respect of sundry creditors, which remained unverified and in restricting the estimate of profit of the appellant to 7.5% of gross receipts on the basis of past history of the case of the assessee. He failed to appreciate that huge unverified creditors shown as outstanding in the balance sheet are an extension of bogus purchases claimed in the P L A/c, which has a direct bearing on the net profit of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of funds , the payments to labourers are made in subsequent year for the work executed in last month of the year. It was further contended that the dues were cleared in succeeding months i.e. April and May, 2010 immediately after realizing the payments. It was further contended that notices were issued to 44 persons on random basis to whom payments were due of ₹ 9,81,613/-, therefore, if the contention of the Assessing Officer is to be accepted, only disallowance can be made to the extent of ₹ 9,81,613/- and not the entire payment. 4. The ld. CIT(A) re-examined the issue in the light of assessee s contentions and being convinced with it, he deleted the addition. He, however, estimated the profit for the assessee at 7.5% of the gross receipts of ₹ 6,74,52,799/-. Accordingly the addition was restricted to ₹ 9,63,634/-. 5. Aggrieved, the Revenue has preferred an appeal before the Tribunal with the submission that when the assessee could not prove the outstanding liabilities at the end of the year by placing relevant evidence, the Assessing Officer was justified in making the addition of the same; whereas the ld. CIT(A) without any cogent reason has dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of ₹ 2,44,87,614/- has remained outstanding at the end of the year. The entire outstanding liability has been paid in the months of April May, 2010 in the subsequent financial year. It is noted that the AO has conducted enquiries with 44 persons out of the list of 1050 subcontractors and disallowed the entire labour charges payable of ₹ 2,44,87,614/- whereas the amount payable to these 44 persons amounted to ₹ 9,81,613/- only. It is also noted that if the disallowance made by the AO is taken into account the net profit rate will increase to 46.20% which is not possible in the case of a contractor. However, the argument of the AO that the labourers who are surviving on day to day basis cannot keep the payments pending for more than one year is plausible. In the case of the appellant it is noted that about 45% of such payments debited in the profit and loss account remained outstanding at the end of the year. Further, the appellant is also not justified in taking the plea that he is not required to verify the addresses of the labourers and it is not his duty to maintain such record. It may be mentioned that in respect of expenses claimed in the profit and lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guesswork in the matter, it must be honest guesswork. In that sense, too, the assessment must be, to some extent, arbitrary. Since the law relating to best judgment assessment is the same both in the case of income-tax assessment and sales tax assessment, the following observations in Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770 , 778 (SQ, a case under the Bihar Sales Tax Act, would be material: *No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must.be related to some evidence or material and it must be something more than mere suspicion. Again in State of Kerala v. G Velokutty [1966] 60 TTR 239 (SC), which was a case under the Travancore-Cochin General Sales Tax Act, the court observed: The limits of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer if intended to make an addition on the basis of random check, it can only be restricted at ₹ 9,13,613/-, but the entire outstanding liabilities cannot be treated to be bogus on the basis of sample check. But in any case, the ld. CIT(A) has estimated the profit of the assessee @ 7.5% of the gross receipts resulting into an addition of ₹ 9,63,634/-. We have also carefully examined the findings of the ld. CIT(A) and we find that the ld. CIT(A) has properly adjudicated the issue in the given facts and circumstances of the case. Since we find no infirmity therein, we confirm his order on this issue. 9. With regard to ground No.2, it is noticed that during the course of assessment proceedings, the Assessing Officer noticed the purchases amounting to ₹ 1,78,63,188/- relating to contract work, consumables amounting to ₹ 66,73,750/- and material shifting charges amounting to ₹ 13,00,538/-. The Assessing Officer made disallowance of 10% having observed that the assessee has not maintained complete bills and vouchers and made addition of ₹ 25,83,748/-, against which an appeal was filed before the ld. CIT(A) with the submission that ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
