TMI Blog2011 (12) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... tone Supply, NB Complex, Pratapnagar, Bypass, Udaipur. 3. M/s. Mateshwari Gitti Supplier, Titardi, Jaisarnand Road, Udaipur. 4. M/s. Mahaveer Material Supplier, Pratapnagar Chouraha, Sukher Highway, Udaipur. 5. M/s. Bharat Enterprises, Dabok Choraya, Airport Road, Udaipur. 6. M/s. Shivam Enterprises, Dabok Main, Airport Road, Udaipur. 7. M/s. Tirupati Building Material Suppliers, Dabok Chouraha, Airport Road, Udaipur. 8. M/s. Shreeji Building Material, Airport Road, Bus Stand, Bedwaas, PO: Zinc Smelter, Debari. 9. M/s. Puja Welding Work, E-Class, Pratapnagar, Udaipur 10. M/s. Shree Hingraj Fabricators, Village Odwadia, P.O. Gudli, Teh. Mavli, Distt. Udaipur. 11. M/s. Jai Laxmi Construction, Vill. Namri, Bedwas, Pratapnagar Road, Udaipur. The AO has mentioned the name of the suppliers, bill numbers and dates as under:- 1. Puja Welding Work Bill No. 423 dated 15th July. 2. Puja Welding Work Bill No. 465 dated 18th Aug. 3. M/s. Rahul Enterprises Bill No. 2024 dated 27th Aug.. The AO has also discussed construction labour charges in the assessment order from page Nos. 9 to 17. The month-wise payment of various civil works is as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jan.05 78 52 130 3 100:02 Feb. 05 78 39 117 26 100:22 March 05 78 31 109 4 100:22 525 57 The AO has concluded that 130 mistry/karigars are doing work with the help of 3 labours only and 101 karigars with the help of 4 workers. In general, out of 260 labours are required for 130 mistries/karigars. It is imagine that how during four months, 525 karigars have done the work with the help of 57 labours only. One labour himself mixing the cement with sand had supplied the same to different 10 karigars which is not possible. The assessee has also shown payment of part period of the day even to the extent of 1/4`x' of the day. The labour payments are shown till 3 1St March, the last day of the financial year. According to this list, the construction work were carried on con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18165 18611 19400 TOTAL 108841 JULY 2004 NAME DEVI LAL MEENA UDAI LAL MEENA GANESH RAGHAV MEENA DALCHAND RATAN NARAIN AMOUNT 16800 19200 17300 19945 19555 17500 18000 NAME BHERA DANGI PITHAJI PYARE JI AMOUNT 17800 19285 18915 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TOTAL 81545 NOVEMBER 2004 NAME RAJU BABU BHAI RAM LAL BHANWAR PRAKASH TULSI RAM CHAMAN LAL AMOUNT 19000 19000 18580 18500 19500 18400 17020 TOTAL 130000 DECEMBER 2004 NAME KANAJI VARIOUS CIVIL WORKS AMOUNT 19720 18770 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance expenditure i.e.1,50,78,302/- ₹ 2,50,08,048/- [46,81,086/- + 52,48,660/-] shown by assessee the AO observed that the assessee has shown addition to the fixed assets are also not fully reliable because since the bills of labour payment for Gitti, payment for bricks. etc. are found not acceptable and realistic and payment for other materials etc. are not fully acceptable because in construction the work depends on each other material i.e. only cement cannot use without sand or Gitti same as only steel cannot be used without cement and sand . Hence in these circumstances the AO held that balance expenditure of ₹ 1,50,78,302/- wereot fully vouched by acceptable vouchers/bills. The AO, theefore, disallowed 50% of the expenditure. 9. The assessee has shown total addition in factory building during the year after 1-9-2004 at ₹ 2,50,08,048/- out of which ₹ 1,74,68,897/- for labour, material supply. ₹ 1,74,68,897/- were excluded for calculation of depreciation allowable. The AO, therefore, disallowed depreciation @ 5% being 1/2of 10% at ₹ 8,73,445/-. 5. Detailed submissions were filed before ld. CIT (A) which has been tabulated in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction activity. There are 3 types of construction persons under a Mistri (Who is the head) viz., Karigar, Veldar and Mazdoor. He has added up Karigar and Veldar and taken them as Mistri Karigar and calculated distorted Mistri/Karigar vs Veldar/Mazdoor ratio to prove construction as bogus. The A.O. has held the payment to the suppliers bogus by assumptions. Our detailed point-wise reply to the various other observations of A.O.'s are placed at page no E- 11 to E- 16 to this letter. we are producing below some.of the assumptions of A.O. which are grossly incorrect: Observation of A.O. Our Reply A}bills of 12 concerns whose names are given on page no.8 of A.O. s order are prepared by one or two persons.Handwriting on these bills also seems to be same The bils are placed at Page B-1 to B-35 of A.O. s order .your goodself will observe upon perusal of the bills that neither they have been prepared by one or two persons nor the handwriting is the same. B) Format of these bills is approxiamately common.(Page no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO which have not been dealt with in main reply dated 20.03.2008 and our replies thereto are as under:- i) This is genuine mistake which can be committed by anybody.- When dealing in many 100 bills, mistake on 3 bills is not material factor. It is necessary to see whether expenditure has been incurred rather than finding small errors in the bills, vouchers etc. Even if there is some overwriting in the bills it cannot be presumed that such expenditure has not been incurred. ii) The observation of the AO is wrong that all entries appear to be done on same day. The wage sheets have been regularly maintained. iii) The AO has erred in observing that signatures have been done by same person which has written the name on the sheets. AO has generally used the word appear , seems , almost same , but he has not brought on record anything to be prove those assumptions. iv) The AR pointed out that construction process involves 4 types of people, Mistri,Karigar, Veldar and Mazdoor. In any construction site there are Karigars, Veldars and Mazdoors. The AO has treated Karigar as Mistri, Veldar as Karigar and Mazdoor as Veldar and accordingly calculated the ratio by adding up Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Summons issued to total parties : 16 3) Summons served on parties : 05 4) Parties appeared before A.O. statement recorded u/s 131. 05 05 5) Summons could not be served on parties : 11 The A.O. has enclosed statements of two parties viz., M/s Jai Laxmi Construction and M/s Shreenath Material Suppliers in his order. Other than these two parties the AO also recorded the statement of M/s Raj Builders, M/s Bharat Enterprises and M/s Techno creations. a) Jai Laxmi Construction M/s Jai Laxmi, Construction has clearly stated that work has been done by them and merely because they stated that their work was over by 31.05.04 the AO concluded that the entire construction work was over by 31.05.2004. There is no dispute regarding the work done or payment received by Jai Laxmi Construction. b) Shreenath Material Suppliers Shreenath Material Suppliers have also stated that they have supplied the stones for a sum of ₹ 3.00 lakhs. c d) Rai Builders and Bharat Enterprises Shri Rahul Sharma appeared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, without bringing any material on record, the AO has treated 50% of other material purchased for ₹ 1,51 crore to be bogus. The purchase of material can be verified from the chart prepared by the AO himself. All the bills/vouchers have been produced before the AO and he has not proved that the price or the quantity mentioned in the original invoices is not genuine. The AO also not pointed out ay other defects in the bills/vouchers. The books of account are properly maintained and the expenditure is recorded therein with full details and supported by bills, vouchers. Further, the books of accounts have been duly audited and, therefore, the valuation as per books of accounts ought to have been taken. 6. Thereafter the ld. CIT (A) allowed the issue in favour of the assessee recording his finding in para 12 to 15 at pges 22 to 25 are as under :- 12. I have considered the facts of the case and submission of the Id. AR and found that The AO made the disallowance of depreciation on the ground of unverifiable nature of expenses incurred on construction of building. The AR produced ledger, cash book, wage sheets, bills for purchase of construction materials, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the party confirming the balance of ₹ 4,97,930/- alongwith cash vouchers duly signed by the party were submitted to the AO. The AR also stated that the amount of ₹ 3 lacs included in other items of ₹ 8,30,302/-. On going through these facts, it is held that it is wrong on the part of the AO to disallow the amounts by treating it as bogus payment. Even in case of Shri Dali Chand Dangi, partner of M/s. Jai Laxmi Construction, he interpreted the statement to suit his best way as Shri Dali Chand Dangi stated that he had completed the work of foundation, set columns, 'Platforms, cutting of rods, tanks and machinery hopper by the end of June, 2004. He interpreted that the construction work was completed by June end and in the rest of the months of the year construction of factory building was not continued by other contractors. If his job was over in June end, it does not mean that all other works were completed by the end of June. In some cases, the summons u/s. 131 of the Act issued by the AO came unserved with the remark from postal authorities that no shop by this name, left or incomplete address. Out of 16 summonses issued to the suppliers, only 5 had tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account and no defect whatsoever was found by the Assessing Officer. He simply rejected the entire labour expenses and expenses incurred on tiles etc. for constructing the additional part of the building used for business purposes. The Assessing Officer on adhoc basis made disallowance @ 50% and reduced this depreciation on this account as assessee has already capitalized the amount. No material was before the Assessing Officer to draw any adverse inference by holding that expenses incurred on labour and other raw material was bogus. Only there are technical error and which has been explained before ld. CIT (A) who was fair in accepting those errors as technical error. Accordingly, it was submitted that the order of ld. CIT (A) is liable to be sustained on this issue. We have heard rival submissions and considered them carefully. We have gone through the orders of Assessing Officer and ld. CIT (A) and the submissions of ld. A/R and found that ld. CIT (A) has examined the issue thread bear as all the aspects have been taken into consideration. The assessee has maintained complete purchase vouchers and vouchers of payment to the labourers. There were certain technical mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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