TMI Blog2019 (9) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... e claimed by the assessee while computing the income chargeable under the head profit and gain of business or profession was disallowed, as payment has been made to persons referred in clause (b) of Section 40A(2) of the Act. The said finding has been confirmed by the first appellate authority as well as the Tribunal. Assessee could not deny the factum of relation of the sub-contractors with the partners of the assessee firm, nor would justify the payments so made by the firm to the sub-contractors who did not have the means and the source to make expenses for the work contract, as the balance in the saving accounts was negligible in comparison to the alleged work contract executed by them and the payments so made. As Section 37 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of law:- i. Whether, in view of the fact that the case of the revenue is confined under Section 40A(2)(a) and not section 37 of the Act, the finding of the Tribunal that the appellant did not get sub-contracts executed through Sri Sanjay Agarwal, Sri Subodh Agarwal and Sri R.R. Agarwal is impermissible and suffers from self contradiction? ii. Whether, expenditure incurred by the appellant in execution of work through sub-contractors could have been disallowed, to any extent, under Section 40A(2)(a) in absence of any finding as to the expenditure being excessive or unreasonable having regard to the statutory factors enumerated therein? iv. Whether, even otherwise, the finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced the books of account before the assessing authority. During course of assessment proceedings, to verify the genuineness of payments claimed to have been made to sub-contractors, summons under Section 131 of the Act were issued. In response to the said, Sanjay Agarwal, Subodh Agarwal and R.R. Agarwal appeared and the statement on oath were recorded. During the assessment year in question, assessee had disclosed expenditure of ₹ 2,55,49,027.78/- to 21 different sub-contractors towards execution of work contract. Out of the said amount, assessee incurred expenditure of ₹ 61,76,126/- on 3 sub-contractors namely Sanjay Agarwal (₹ 21,57,500/-), Subodh Agarwal (₹ 26,09,254/-) and R.R. Agarwal (₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fell under Section 37 of the Act, and the Tribunal should have granted entire relief to the assessee once it arrived at the finding that the subcontract was not carried out by the three contractors named above and it confirmed the finding of the assessing authority as well as the first appellate authority. 9. Sri Manu Ghildyal, learned Counsel appearing for the department submitted that the three sub-contractors named above, namely Sanjay Agarwal, Subodh Agarwal and R.R. Agarwal are the sons and relatives of the partners of the firm and are persons covered under Section 40A(2)(b) of the Act. He further invited the attention of the Court to the findings recorded by the assessing authority, wherein these thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee firm, the assessing authority recorded a categorical finding and disallowed the payments so made to them under Section 40A(2)(a) of the Act, on the ground that all these three sub-contractors did not have sufficient amount in their bank accounts so as to incur such expenses for execution of work and disallowed the expenditure so made by the assessee firm as regard these three sub-contractors. The CIT (A) also held that mere filing of affidavits of three persons in support of the claim that work was sub-contracted to them, unless corroborated cannot be taken on its face value. It was further held that these sub-contractors could not produce any shred of evidence to establish that they had actually carried out any work as claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot deny the factum of relation of the sub-contractors with the partners of the assessee firm, nor would justify the payments so made by the firm to the sub-contractors who did not have the means and the source to make expenses for the work contract, as the balance in the saving accounts was negligible in comparison to the alleged work contract executed by them and the payments so made. 16. As Section 37 of the Act envisages for any expenditure made for the purpose of business to be allowed in computing the income, while Section 40A puts a barrier for expenses of payments not deductible in certain circumstances as enumerated in the said section. 17. In the present case, as it was found by the taxing authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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