TMI Blog2019 (11) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. According to us to decide about the allowability of the outstanding the wages payable it is necessary for AO to examine whether this liability exist or not, as the learned assessing officer himself has allowed the labour expenditure debited to the profit and loss account, this option is now not available with him. Therefore, only option left with AO is to verify whether such liability has been discharged by the assessee in subsequent year or not. As AO has not given his comments on this aspect, then questioned by the bench to the learned authorised representative, he readily agreed that such an evidences can be produced before the assessing officer. DR also agreed that if such outstanding wages is paid in subsequent year, it could not be disallowed. Therefore, to determine the allowability with respect to the genuineness of the outstanding wages it is necessary to verify whether such expenditure have been paid in the subsequent month or not. We set aside the whole issue back to the file of the learned assessing officer to examine payment of such wages in the subsequent month. The assessee is directed to produce the relevant information before the learned assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. At the time of hearing of the stay petition, at the consent of the parties and looking at the nature of the issue involved, the appeal was also heard. 4. The assessee has preferred this appeal against the order of the learned that Commissioner of income tax (appeals) 2, New Delhi dated the 30/8/2019 for assessment year 2016 17 raising following grounds of appeal:- 1 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in concluding that it would be a better course to reject books of accounts under section 145 of the Act and make reasonable estimation of profits. The said finding is not only without jurisdiction and beyond the scope of the appeal and in violation of section 251 of the Act but also factually incorrect, legally misconceived and wholly untenable 1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the solitary issue involved in the appeal was adhoc addition made of 50% of the outstanding wages of ₹ 5,36,60,065/- and brought to tax under section 68 of the Act and therefore, there was no justification either in law or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed by the appellant in the course of assessment proceedings and appellate proceedings. 2.3 That the learned Commissioner of Income Tax (Appeals) has further erred in rejecting the books of accounts on assumption and presumption and thereby failing to appreciate that surmise, conjecture and suspicion can neither in law and nor on fact can be made a valid basis to reject books of Accounts u/s 145 of the Act. 2.4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that no specific defect has been pointed out by the learned Assessing Officer in the books of accounts maintained by the appellant company 2.5 That while invoking such rate of profit @ 2.3%, the learned Commissioner of Income Tax (Appeals) has enhanced the assessment without granting any opportunity to the appellant and is in violation of section 251(2) of the Act and therefore, the same is not in accordance with law and unsustainable. 3 That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in upholding an order of assessment as the same being without jurisdiction and therefore deser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected the learned assessing officer to calculate the net profit at the rate of 2.3 percentage of the turnover for this year too. Consequently he sustained the addition to this extent. He deleted the interest disallowance of INR 3890/ . With respect to the grant of tax deduction at source of INR 5 27229/ the learned CIT A did not allow the claim of the assessee on the premises that mobilization advance had not been offered for tax as income in the impugned assessment year. He further noted that the learned assessing officer has already examined the reconciliation of TDS with gross receipts and allowed the eligible credit of tax deduction at source on the income part, which was offered by the assessee during the year. 7. Thus, assessee aggrieved with the order of the learned CIT A has preferred this appeal before us. 8. The first disallowance/addition is with respect to 50% of the outstanding liability of ₹ 107320130/- because of the wages amounting to INR 5 3660065/ made by the learned assessing officer. During the course of assessment proceedings the learned assessing officer noted that main reason for selection of the case in scrutin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment year. He further noted that as assessee is the civil contractor profit of the contract is generally assumed at 10% which is not in the case of the assessee. Therefore, the learned assessing officer also noted that assessee has hired subcontractors for carrying out the work. Therefore in the end, the learned assessing officer noted that the claim of the assessee that it had INR 1 07320130/ on account of the outstanding wages payable as at the end of the year is not correct as the same is also not supported by the books of accounts maintained by the assessee. He also noted that the outstanding wages are for the month of February and March 2016, which is feasible and not correct. Therefore he made an addition to the extent of 50% of the outstanding liability because of the wages amounting to INR 5 3660065/ . 9. On appeal before the learned CIT A, he rejected the books of accounts of the assessee and determined net profit by adopting the net profit of the previous year at the rate of 2.3% of the turnover where the assessee s net profit for the current year was only 1.23 percentage. Thus, he sustained the addition to that extent. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coming to the order of the learned CIT A, he submitted that the learned CIT A has rejected the books of accounts of the assessee without even looking at the books of accounts. He submitted that before the learned CIT A the books of accounts were not at all produced as he never demanded the same. He otherwise stated that the profits of the assessee are comparable with respect to the earlier years. On the merits of the addition he submitted that the outstanding wages have been paid in the subsequent month which the learned assessing officer as well as the learned CIT A has not verified. He further submitted that in the Ledger account of the outstanding wages payable, only 2 entries can logically appear, 1 of the outstanding amount and 2nd of the payment of this liability in the subsequent month. He submitted that the learned assessing officer has failed to appreciate the accounting entries. With respect to the thumb impression of the labourers, he submitted that most of the labourers are uneducated and may not sign, which cannot be harped on for making any disallowance. He further stated that assessee has produced the muster roll, the Ledger account, the atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No 143(3) NIL 2013-14 370,57,22,247 16,45,40,066 7,08,93,972 1.91 No 143(3) NIL 2014-15 528,91,87,874 19,99,50,619 8,33,89,733 1.58 No 143(3) NIL 2015-16 840,05,86,960 37,23,65,516 17,93,00,815 2.13 No 143(3) NIL 2016-17 1009,02,73,917 28,21,85,576 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92,020 4,47,36,156 13.25 3.16 2011-12 204,66,89,492 4,47,36,156 13,92,70,014 17,24,07,713 1,15,98,457 6.92 0.5 2012-13 255,73,35,265 1,15,98,457 27,28,25,745 22,19,07,468 6,25,16,734 10.74 2.44 2013-14 370,57,22,247 6,25,16,734 24,51,58,738 21,24,44,949 9,52,30,522 6.57 2.57 2014-15 528,91,87,874 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover of the assessee is also in consonance with the earlier years percentage shown by the assessee. Further, the learned assessing officer could not show that how the assessee has not complied with the contract (regulation and abolition) act, without finding any fault by the respective authority under that act. The learned assessing officer also did not find any fault with the name of the labourers, the rate of wages paid to them, the amount of advances paid to them. The learned assessing officer has the complete information of such muster was produced before him along with the attendance register. Merely because there is a thumb impression on the labour wages payment acknowledgement receipt it cannot be said that it is not evidence. Further, the learned assessing officer also did not show that what is the evidences assessee could have produced before him to prove the genuineness of outstanding labour expenditure wherein AO himself has allowed the labour wages for this year. Further, the AO did not give any reason that why he is considering only 50% of the outstanding wages payable as disallowable. It is not the case of the learned assessing officer that subsequently these amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und any fault with the records of the assessee. Further, we are not in a position to approve the action of the learned CIT A in rejecting the books of accounts and estimating the net profit of the assessee adopting the net profit percentage disclosed by the assessee in earlier year. It is apparent that in this case the learned CIT A did not look at the books of accounts as it were not produced before him or neither had he asked assessee to produce them. For the purpose of rejection of the books of accounts, the assessing officer/CIT A is required to show some latent, patent and glaring defects in the books of accounts. When the books of accounts produced before the learned assessing officer, even he did not mention any defects in the books of accounts and accepted the book results and made ad hoc addition of 50% of the outstanding wages, then we fail to understand that how the learned CIT A estimated the net profit of the assessee rejecting the books of accounts. Even otherwise looking to the facts of the case assessee has produced the complete muster roll, attendance register and the Ledger accounts before the assessing officer. However, the learned AO has not seen details o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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