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2016 (1) TMI 985 - ITAT AHMEDABAD

2016 (1) TMI 985 - ITAT AHMEDABAD - TMI - Rejection of books of accounts u/s 145(3) - addition on account of low net profit - CIT(A) deleted addition - Held that:- CIT(A) was fully justified in observing that the Assessing Officer was not justified in rejecting the assessee’s books result u/s 145(3) of the Act. The CIT(A) has also rightly observed that the action of Assessing Officer was also not justified in applying the provisions of Section 44AD since the assessee’s total turnover was ₹ .....

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e orders of the Commissioner of Income Tax (Appeals)-II, Surat, dated 12.01.2010 and 29.03.2010 for Assessment Years 2006-07 & 2007-08 respectively. Since both these appeals pertain to same assessee on identical issues; therefore, these were heard together and are being disposed of by this consolidated order for the sake of convenience. ITA No. 1182/Ahd/2010 : AY 2006-07 2. In this appeal, the Revenue has raised following grounds of appeal:- 1) On the facts and circumstance of the case and i .....

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in the business of civil contracts job for the government and semi-government organizations. As required by the Assessing Officer, the assessee produced the books of account and bills & vouchers in course of the assessment proceedings. According to the Assessing Officer, the verification of the books of account revealed that the assessee had incurred huge expenses under some of the heads and had made payments in cash by obtaining signatures of unidentifiable persons. Except for 2 to 3 items .....

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, the Assessing Officer rejected the assessee's book results u/s 145(3) of the Income-tax Act and then he observed that the outstanding labour payments as also the expenses mentioned earlier, were substantially bogus and since it was not possible to ascertain the quantum of the other expenses, he proceeded to apply the provisions of Section 44AD to the total receipts of the assessee and worked out the net profit at ₹ 26,88,774/-. After adjusting the net profit of ₹ 1,86,779/- dis .....

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5(3) and the addition of ₹ 25,01,995/- on account of low net profit; accordingly, the Departmental Representative submitted that the order of the CIT(A) may be set aside and that of Assessing Officer be restored. On the other hand, the Authorized Representative for the assessee supported the order of the CIT(A). 4. We find that the Assessing Officer completed the assessment u/s 143(3) of the Income-tax Act on 22.12.2008, wherein he pointed out in paragraph 4.1 that that certain huge expens .....

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ount-payee cheques. The CIT(A) further observed that the Assessing Officer also failed to take into consideration the nature of the assessee's business and the compulsions. One of the objections taken by the Assessing Officer has been that the expense vouchers did not reflect the address of work-sites. This was not found a relevant ground. The second objection was that no details or record for site-wise purchases or issue of material was maintained. This again was not found relevant since th .....

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reflect whether the payments were made to skilled labourers or unskilled labourers, was also found of no significance by the CIT(A). Even though the rates would obviously have been different yet, it was not required for the vouchers to show whether paid to skilled or unskilled labour. It has to be seen whether payments are bogus or not. The Assessing Officer observed that the assessee had shown outstanding labour payment of ₹ 28,60,400/- but had failed to identify the sites for which thes .....

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