TMI Blog2016 (5) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... zed. 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 has disabled him to deduce the true income from the contract receipts of the assessee. What was the angle 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 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 disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,014/-. There was a difference of ₹ 59,39,127/-. According to the assessee, it has carried out the work in the Asstt.Year 2005-06. The bills were raised in that year. The assessee has recognized the contract receipt of ₹ 2,76,46,141/- in the Asstt.Year 2005-06. In the 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 debts, has reduced the sales in the ledger to that extent. The contentions of the assessee is that by changing nomenclature of the accounts, would not change the nature of receipts. The AO did not accept the contentions of the assessee and observed that the expenses pertaining to F.Y.2005-06 and it cannot be claimed in the F.Y.2007-08. Accordingly, he made addition of ₹ 59,39,127/-. 4. Dissatisfied with the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 contention. 5. The ld.CIT(A) has accepted the contentions of the assessee and deleted the addition. 6. With the assistance of the ld.representatives, we have gone through the record carefully. We find that the assessee has submitted the details of receipts. He has disclosed the bill amounts, the amounts sanctioned by Essar Projects and the difference. The assessee has also disclosed invoice numbers to the AO and produced the details. The area of the dispute between the assessee and the AO are the interpretation 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 recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his name for example carpenter, plumber etc. Moreover the appellant has only two sites working in the year 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 minor estimated additions. Copy of such orders was submitted during the course of appellate proceedings before my office. The nature of business carried out by the appellant remains the same as in the earlier years. The only adverse inference that has been drawn by the AO is about labour register. The assessee further submitted that labour register is maintained at the site place where it is always not possible to keep all details as working conditions are not very human. More over due to shift change work to work details cannot be provided in such type of work as it is not a continuous producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2007-08. He firstly contended that in the Asstt.Year 2007-08, the assessee did not produce the details of labour expenses, because, it was an ex parte assessment order. In the present year, the assessee has produced complete details. The AO has not pointed out specific defect in the details maintained by the assessee. The defect pointed out by the AO that the assessee failed to give permanent account number of the labourers with the Income Tax Department. The ld.counsel for the assessee has emphasised that all these 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 assessee did not choose to file appeal before the ITAT. Otherwise, this disallowance at 2% would not be remained there. He further contended that the Revenue cannot draw any bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 challenged the order of the ld.CIT(A), probably this 2% would have not remained there in this assessment year, because, in our understanding the AO has not made a case for adhoc disallowance at 10%. In view of the above discussion, we do not find any merit in these grounds of appeal. These are rejected. 14. The ground nos.5 and 6 are inter-connected with each ..... X X X X Extracts X X X X X X X X Extracts X X X X
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