TMI Blog2016 (5) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view GP percentage which is just an estimation and the real profits of the assessee can be much higher depending upon the cost efficiency but certainly it cannot go to the extent of 54.54% as rightly submitted by the assessee but looking to the undisputed facts that the cash payments of ₹ 15,20,000/- and outstanding amount of 8,54,073/- total ₹ 23,74,073/- has not been shown as income/revenue by the two sub-contractors and work was completed. We, in order to meet the ends of justice, are of the view that 20% of ₹ 23,74,073/- working out at ₹ 4,74,815/- to be sustained as nongenuine expenses at the place of ₹ 23,74,073/- made by the Assessing Officer. - Decided partly in favour of assessee - ITA No. 1552/Ahd/2010 - - - Dated:- 5-4-2016 - Shri Rajpal Yadav, JM, Shri Manish Borad, AM. For The Appellant : Shri Tushar Hemani, AR For The Respondent : Shri James Kurein, Sr. DR ORDER PER Manish Borad, Accountant Member . The appeal of assessee is directed against the order of ld. CIT(A)-II, Baroda, dated 9.1.2010 in appeal No.CAB/II-162/07-08. Assessment was framed under section 143(3) of the IT Act, 1961 (in short the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 lacs was paid to Shri Sharadbhai M. Kakadia and the closing balance in the name of Shri S. M. Kakadia was shown at ₹ 5,68,149/-. Out of ₹ 31 lacs paid to Shri S. M. Kakadia ₹ 18,80,000/- was paid by account payee cheque and balance was paid by cash. Similarly, in the case of Shri S.. N. Modhiya ₹ 11,30,000/- was paid during the year and ₹ 2,85,924/- was shown outstanding closing balance in the name of Shri S. N. Modhiya. Further out of the payment of ₹ 11,30,000/- to Shri S. N. Modhiya ₹ 8,30,00/- was paid through account payee cheque and ₹ 3,00,000/- in cash. In order to further cross-verify the payment details and outstanding balance in respect of Shri S. M. Kakadia and Shri S. N. Modhiya letters were issued and thereafter statements were also recorded. After gathering various information and statements of these two parties namely Shri S. M. Kakadia and Shri S. N. Modhiya and verifying available income-tax returns, ld. Assessing Officer observed that cash payments shown by the assessee which were bifurcated into individual amount being less than or equal to ₹ 20,000/- were accepted to have not been received by both the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid penal consequences Shri Sharadbhai M. Kakadiya has not admitted to receipt of cash. However, it does not explain the behaviour of Shri Sudhirbhai N. Modhiya who has already filed his return of income and has not shown any receipts in cash. If the actions of the appellant were indeed genuine then (a) What was, the need to make the payment in cash when the appellant as well as sub contractors have account in the same bank? (b) What was the need to file confirmations which appear to be patently fabricated and have not been accepted by the sub contractors even at the stage of cross examination. The appellant has not given an explanation for his actions. Further, the appellants admission that the income which he has returned is not fully and truly correct and he has earned ₹ 6,59,244/- against the return of income of ₹ 3,22,187/- goes a long way in establishing the fact that the appellant's submissions cannot be relied upon. The appellant has sought to take refuge in the fact that in construction work the gross profit accepted by various courts has been around 8%. That may be so, but in a case where both the sub contractors admit to completing the work and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 125206/- and royalty of ₹ 187721/- out which a sum of ₹ 27,10,000/- was discharged via bank payment, ₹ 15,50,000/- via cash and ₹ 8,54,073/- was lying outstanding at the end of the year. A chart explaining the whole position is shown. Ld. Assessing Officer completely erred in law and on the facts by denying the said expenditure merely because the cash quotient from the above disposed of liability has not been shown by the sub-contractors in their return of income and relied upon the statements given on oath by them denying to have received any payment in cash from the appellant. Thereby disallowing a total of ₹ 23,04,740/- i.e. amount paid in cash and amount standing at the end of the year. Ld. Assessing Officer did not appreciate the facts that the appellant has been following mercantile system of accounting in compliance of S.145 of the Act and accordingly books expenditure as and when it accrues. Ld. Assessing Officer did not appreciate the fact that expenditure of ₹ 50,84,073/- i.e. 90% of the income booked by the assessee on account of contract income from SSNNL has accrued during the year for earning the above said contractual income. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid by account payee cheque during the year and sum of ₹ 12,20,000/- was paid in cash during the year, however, single payment was not exceeding ₹ 20,000/-. As per the books of accounts of assessee closing balance of the sundry creditor Shri S. M. Kakadia was shown at ₹ 5,68,149/-. Thereafter when ld. Assessing Officer verified the genuineness of the transaction statement on oath was taken from Shri S. M. Kakadia and it was revealed that S.M.Kakadia only accepted the payment of ₹ 18,80,000/- which was made by account payee cheque and completely denied receiving cash sum of ₹ 12,20,000/- and also denied to have signed any confirmation (which was put forth by the assessee before the Assessing Officer during the assessment proceedings) nor signed any agreement (which cannot be put forth before the Assessing Officer during assessment proceedings). Further Shri S. M. Kakadia did not file his return of income and, therefore, the impugned amount of sub-contract of Rs,36,68,149/- was not shown as revenue before the income-tax department. No TDS was deducted on the sub-contract of ₹ 36,68,149/- because assessee was not required to deduct TDS as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4% which is not at all justifiable in the type of contract he has undertaken wherein the accrued G.P. element was 9.53% and 17.95% for contract work for block no.9C-1 and block 9A6/11 given by SSNNL for the total cost of contract at ₹ 83,14,999/- and ₹ 74,98,000/- respectively. 13. In our view GP percentage which is just an estimation and the real profits of the assessee can be much higher depending upon the cost efficiency but certainly it cannot go to the extent of 54.54% as rightly submitted by the assessee but looking to the undisputed facts that the cash payments of ₹ 15,20,000/- and outstanding amount of 8,54,073/- total ₹ 23,74,073/- has not been shown as income/revenue by the two sub-contractors and work was completed. We, in order to meet the ends of justice, are of the view that 20% of ₹ 23,74,073/- working out at ₹ 4,74,815/- to be sustained as nongenuine expenses at the place of ₹ 23,74,073/- made by the Assessing Officer. Accordingly, this ground of assessee is partly allowed. 14. Ground No.2 is general in nature. 15. Ground No.3 is consequential. 16. Ground no.4 is premature. 17. In the result, appeal of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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