TMI Blog2019 (12) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee. - ITA No. 1948/Ahd/2014 - - - Dated:- 18-12-2019 - Shri Kul Bharat, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Appellant : Shri Anil R.Shah And Ms. Kinjal Shah, ARs For the Respondent : Shri Satish Solanki, Sr.DR ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals) III, Baroda [CIT(A) in short] vide appeal no.CIB/III-008/2013-14 dated 22/05/2014 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(hereinafter referred to as the Act ) dated 11/03/2013 relevant to Assessment Year (AY) 2010-11. 2. The assessee has raised the following grounds of appeal:- 1. (a) The CIT(A) has erred both in Law and in fact in confirming disallowance of ₹ 47,07,974/- made by Assessing Officer out of Labour Charges Expenses A/c. It is submitted by your Appellant that he has been maintaining regular and proper Books of Accounts duly Audited and all ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urs were paid in the range of ₹ 515 to 575 daily wages iii. 239 labours were paid in the range of ₹ 600 to 750 daily wages including the amount of compensation for the overtime. 4.3. The assessee also submitted that the labourers were working under highly hazardous conditions involving higher risk to their life. 4.4. The payments of the wages was made in cash as the labourers were working in the area of remote sites and they did not maintain any bank account but the wages was paid under the responsibility of the supervisor. The payment of wages was always paid directly in the hands of the labourers which were duly acknowledged by them by putting the initial on the wages payment register. 4.5. The assessee also submitted that the net profit for the year under consideration declared by it was comparatively higher than the earlier years. Similarly the Labour expenses incurred by it in the year under consideration are comparatively lower than the immediate preceding assessment year. 4.6. In view of the above the assessee claimed that the genuineness of the wages expenses cannot be doubted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year whereas 2245 workers were claimed to have been paid in the range of ₹ 470/- to ₹ 750/- per day which constitutes 31% of the workers hired. Even if, it is considered that some of the mechanical workers would be competent and skilled for specialized job to whom payment might have been made above ₹ 500/- per day, the same cannot constitute 31% of the total hired worker force. Considering the facts and circumstances in totality, I am of the considered opinion that claims of payment to at least 40% of the work force is excessive and not justified by the reasoning provided by the assessee and in the facts as apparent from record. 3.7. The total wages claimed during the year amounts to ₹ 8.23 crores. Out of which ₹ 1,25,10,496/- amounts to payment of salary to permanent employees and balance ₹ 6,98,80,983/- amounts to payment towards wages. As discussed earlier, 40% of wages which falls in the category of daily payment of ₹ 450/- to ₹ 800/- amount to ₹ 2,35,39,868/-, has been found as excessive in the facts and circumstances of the case. Considering the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h labourers is not believable. 4.3.2. As Already stated by the Assessing Officer, several such labourers have been paid over and above minimum wages. In the show cause notice issued to the appellant, the Assessing Officer had mentioned that in the salary register there was no specification as to whether the individuals who were paid higher wages are qualified technicians or general labourers. The Assessing Officer has analyzed the wage paid to such persons and has held that the claim of the appellant of ₹ 450 and above per day to the technical workers does not have any justification and the same is rather contradictory to the claim of salary to its permanent employees. From the details furnished, the Assessing Officer has concluded that 2245 workers were claimed to have been paid in the range of ₹ 470/- to ₹ 750/- per day which constitutes 35% of the workers hired. On the basis of such analysis, the Assessing Officer has disallowed 20% of wages which falls in the category of daily payments of ₹ 450/- to ₹ 800/- amounting to ₹ 2,35,39,868/-. The appellant in its reply has changed the criteria adopted by the Assessing Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO. The relevant extract of the order is reproduced as under: 3.5. The contention of the assessee that professional tax and PF has been paid in respect of wages does not in any way justify the case of the assessee as it at best can be an evidence for number of persons engaged during the year. However, in the case of the assessee, it is not the number of workers engaged is under question, but the amount of wages claimed to have been paid. 7.1. Thus, from the above we hold that the genuineness of the payment of the wages to the temporary staff cannot be suspected as it was subject to professional tax and Provident fund. Once the genuineness of the expenses is established, then in our considered view the AO cannot occupy the armchair of the assessee and direct it to make the payment of wages at particular rate. As such it was the wisdom of the assessee for making the payment of the wages at the particular rate which cannot be questioned by the AO. 7.2. We also note that in the similar facts and circumstances the disallowance made by the AO in the case of the assessee in the earlier assessment year i.e. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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