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2016 (5) TMI 152 - ITAT AHMEDABAD

2016 (5) TMI 152 - ITAT AHMEDABAD - TMI - Disallowance of prior period expenses - Held that:- According to the assessee, it has recognized the contract receipts in the F.Y.2005-06, but could not realize the total receipts, and therefore, in the Asstt.Year 2008-09 i.e. F.Y.2007-08, he has reduced the sales. Had he claimed bad debts, there could not be any problem to the AO. In our opinion, instead of strictly going by the accounting treatment given by the assessee in the books, the ld.AO ought to .....

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nce to the confirmation from ESSAR. He ought to have reconciled the contract receipt accounted by assessee on accrual basis and ultimately realized. It account has The ld.CIT(A) has considered this issue with this angle and deleted the disallowance. We do not find any error in the order of the ld.CIT(A) - Decided against revenue

Disallowance of labour expenses - CIT(A) restricted it to 2% instead of 10% made by the AO - Held that:- has nowhere alleged the specific information which ha .....

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d.CIT(A) he had reiterated his contentions in the written submission. The ld.CIT(A), though concurred with the AO with regard to the submissions of the details, but scaled down the disallowance to 2% on adhoc basis. He made reference to his order in the Asstt.Year 2007-08 also. No doubt in the Asstt.Year 2007-08, the Tribunal has restored this disallowance to 10%, but reasons for such restoration was that no details were submitted by the assessee. It was an ex parte order. Had the assessee chall .....

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his issue is squarely covered against the assessee by the decision of the Hon’ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation Ltd. [2014 (1) TMI 502 - GUJARAT HIGH COURT ] - Decided in favour of revenue - ITA. No. 2141/Ahd/2011 - Dated:- 2-5-2016 - Shri Rajpal Yadav, Judicial Member And Shri N. K. Billaiya, Accountant Member For the Petitioner : Shri C.S. Sharma, SR.DR For the Respondent : Shri R.B. Shah, AR ORDER Per Rajpal Yadav, Judicial Member The Reven .....

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.Maruti Constructions . He has filed his return of income electronically on 30.9.2008 declaring total income at ₹ 45,88,990/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Income Tax Act was issued and served upon the assessee on 27.8.2009. On scrutiny of the accounts, it revealed to the AO that the assessee had debited an amount of ₹ 59,39,127/- with respect to the construction carried out at Jamnagar. It further merges out tha .....

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he accounting year relevant to the A.Y.2008-09. The assessee has written off a sum of ₹ 59,39,127/- on the ground that out of total bills raised by it against the Essar Construction Ltd., there are no chance to recovery of this amount, because, the payer has retained this amount on account of certain disputes. The assessee has claimed the deduction of this amount. The AO has disallowed the claim of the assessee. The twist of the dispute is that the assessee, instead of claiming it as bad d .....

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e following submissions: 5.2. Before me, the AR of the appellant also contended that the nature of transactions between assessee and company is recurring in nature and it is general practice of him to credit the contract receipts at time of raising the bills to the company with the amount of bill raised by him and offer it for taxation accordingly in the relevant assessment year. The Company sanctioned the bills raised by the assessee after reconciling the work done by him certified by the engin .....

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. During the year in concern the assessee discussed the difference amount with the company and tried to reconcile the same as there is long gap of almost three years passed away. The company cleared the matter replying that the amount approved and sanctioned by the engineer of the company if full and final amount and there is not further outstanding these bills are concerns as per records of the company. As the amounts is parts of debts which is irrecoverable and the same is already offered for .....

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as been written off as irrecoverable in the accounts of the assessee, it will sufficient for claiming bad debts and after amended provisions of this section w.e.f. 1st April 1989 word "established" has been deleted and once the assessee write off the amounts in the books of accounts, he is entitled to claim deduction for the same without further providing any evidence to establish the facts before assessing officer. The AR of the assessee relied on various judgments to prove his conten .....

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rpretation given to the transaction. According to the assessee, it has recognized the contract receipts in the F.Y.2005-06, but could not realize the total receipts, and therefore, in the Asstt.Year 2008-09 i.e. F.Y.2007-08, he has reduced the sales. Had he claimed bad debts, there could not be any problem to the AO. In our opinion, instead of strictly going by the accounting treatment given by the assessee in the books, the ld.AO ought to have visualized the transaction itself and if a sale was .....

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nciled the contract receipt accounted by assessee on accrual basis and ultimately realized. It account has The ld.CIT(A) has considered this issue with this angle and deleted the disallowance. We do not find any error in the order of the ld.CIT(A), and therefore, the ground no.1 and 2 are rejected. 7. The ground nos.3 and 4 are inter-connected. In these grounds, the grievance of the Revenue is that the ld.CIT(A) has erred in restricting the disallowance at 2% instead of 10% made by the AO out of .....

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6.2 of his order. The said submissions of the assessee along with the finding of the ld.CIT(A) is worth to note. It reads as under: 6.2 The AR appellant in his written submission has contended that full set of labour register was produced before the AO. Copy of certain pages randomly selected for each month of the year was also submitted before to my office. The assessee contended that he used to deploy two types of labour one contractual labour and other own labour. The Ld. AO had no contentio .....

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r in concern one at Surat and the other at Vadinar, Jamnagar. Separate labour registers were maintained by the appellant for both the places. It was also vehemently argued before me that audit report with all books of accounts was produced before the AO. The assessee has shown an increase in gross profit 4.85% to 11.27% vis-a-vis the preceding previous year. The assessee was subjected to scrutiny u/s 143(3) in A.Y. 06-07 & 07-08 and no such addition were made in the year other than some mino .....

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ge work to work details cannot be provided in such type of work as it is not a continuous production activity but construction activity a part of infrastructure sector. The addition as made by the AO results in a GP rate of 13.85% which is unheard of in this type of business. Further, the AR also submitted that the assessee has reduced his burden of labour charges vis-a-vis the previous year when the labour to turnover ratio is compared. The assessee had expended 49.37% of expenses on labour vis .....

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that what can be tax is the real income and not the hypothetical income and hence labour wages of the appellant should be allowed as an legitimate business expenditure. Decision: 6.3. I have carefully gone through the assessment order as well as the submissions of the appellant. I have also gone through the copies of submissions made by the appellant during assessment proceedings. I have also gone through the copies of labour register as produced before me. It can be clearly made out from the s .....

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sion, a lump-sum amount of ₹ 5,25,000/- is sustained and the balance is deleted. 10. The ld.DR, while impugning the order of the ld.CIT(A) contended that in the Asstt.Year 2007-08, the ITAT has upheld the disallowance at 10%. He placed on record copy of the Tribunal order passed in ITA No.3054/Ahd/2010. 11. On the other hand, the ld.counsel for the assessee contended that there were specific reasons for upholding the disallowance to the extent of 10% in the Asstt.Year 2007-08. He firstly c .....

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labourers were hired by the assessee at site. They were not having any PAN and it was not possible at all for the assessee to ask them to have PAN. The assessee has submitted labour ledger which contained names of labourers in full, designated work in which he was employed i.e. carpenter, plumber, electrician etc. The amount of wages paid to them is discernible, signature/thumb impression on revenue stamps were submitted. The ld.CIT(A) has retained a nominal disallowance at 2%, therefore, the a .....

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e have duly considered rival contentions and gone through the record carefully. It is very important to take note of the finding of the AO on this issue. It reads as under: After careful consideration of the submission made by the assessee I found that the contention put forth by the assessee is acceptable to some extent only. It is true that the gross profit and net profit ratio of the assessee has been increased as compare to immediate preceding year. But the assessee did not furnish all the d .....

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es of ₹ 22,71,698/- and added back to the total income of the assessee for A.Y. 2008-09. Disallowance 22,71,698/- 13. Copy of the show cause notice issued by the AO on 24.12.2010 has also been reproduced in the assessment order on page no.7. The AO has alleged that the assessee was asked to furnish details of labour wages along with names and address and PAN of the labourers, details of work at which site they have performed their duties along with nature of work done by them. The AO has o .....

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e he wanted to inquire from the labourers ? The assessee has alleged that name, date of payment, site, designation of the workers i.e. carpenters, plumber, electrician etc. were disclosed to the AO. In spite of that, the AO simply disallowed 10% of the expenditure by observing that details were not submitted. The challenge of the assessee is which detail was not submitted to the AO. Before the ld.CIT(A) he had reiterated his contentions in the written submission. The ld.CIT(A), though concurred .....

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