TMI Blog2020 (8) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, there is nothing for the High Court or Constitutional Courts to do in such matters. The findings of fact arrived at by the Authorities below are binding on the High Court under Section 260A of the Act, unless the perversity as aforesaid is clearly visible, established and proved. As against the perversity in these findings, we see abetter taxable income finally taxed in the hands of the Assessee, albeit with the agreement to disallowance to the extent of 10% of the payments made to the sub contractors, which the Assessee appears to have agreed under the compulsion of circumstances to avoid litigation and to buy peace. Results declared by the Assessee of the net profit rate at the rate of 3.83% was much better as compared to previous three years and only marginally less than the previous two years of 2005-06 and 2006-07, which were at the rate of 4.20% and 3.94%. In these circumstances, no disallowance was called for. Still, if the Assessee agreed to such addition to apparently buy peace with the Department, we fail to understand as to why the Revenue has filed these Appeals to drag cases further in the High Court incurring the loss of man hours and cost of litigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded back to the income of the Assessee. 4. On appeal by the Assessee before the learned Commissioner of Income Tax (Appeals), the said addition was restricted to 10% of the total sum of ₹ 4,41,08,210/- on the agreement of the Assessee and thus, relief to the extent of 90% was granted by the Commissioner of Income Tax (Appeals), which order was upheld by the learned Tribunal by the order impugned before us. 5. The following substantial questions of law are suggested in the Memorandum of Appeal filed by the revenue:- (i) Whether the Tribunal was correct in restricting the disallowance to 10% of expenditure of ₹ 4,41,08,210/- incurred towards subcontractors even though the assessee had failed to prove the identity, credibility and genuineness of the sub contractors? (ii) Whether the Tribunal was right in not appreciating the findings of the assessing officer that the contractors were nonexistent, inexperienced, incompetent and bogus and the assessee had claimed the said expenditure only to reduce the income and the tax incidence on the income. (iii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the name 14 parties cannot be accepted without disproving the confirmations received, disproving the payments made to them beyond doubt, disproving the execution of the work order. However there is a possibility of the inflation of the expenses in respect of road work carried out by the appellant as a whole. In the earlier A.Ys, the department accepted the 5% of the turnover declared by the appellant after detection of the inflation of the expenses by carrying out survey action. In the year under consideration, there was increase in GP and Net profit ratio declared by the appellant as compared to the GP and Net profit ratio declared in the earlier years. However the net profit declared by the appellant at 3.83% is less than the 5% of the Net profit accepted by the department in the earlier years. The 5% of the Net profit on the turnover of ₹ 3334.16 lacs comes to ₹ 166.7 lacs. The appellant had declared ₹ 127.53 lacs as Net profit. The difference comes to about ₹ 39.178 lacs. In the course of the appellant proceedings, the AR of the appellant had come out to offer 10% of the disallowance of ₹ 4,41,08,210.00 which comes to about ₹ 44,10,821.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 5% of the turnover which was any way accepted by assessing officer in the earlier years. Therefore, the assessing officer is directed to restrict the disallowance to ₹ 44,10,821.00 as against the disallowance of ₹ 4,41,08,210.00. The grounds of appeal raised by the appellant on this issue are treated as disposed off accordingly. . Against the above, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. In this case, it is admitted fact that 14 persons have furnished confirmation and some of the parties in response to summons issued to them have furnished the copies of income-tax return and also copies of bank account. Some of the parties also confirmed that they do not have invoice copies and maintain only Method book which was returned by the assessee. The copy of M.Book gave details of work done for a particular period, measurement up to the date of work with the signature of supervisor of the company. 11 parties have sent the details from far off places to the Assessing Officer through courier. However, there was no response from two parties. The assessee has taken the road laying work and also compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy noticed by the Assessing Officer is that the payments are not supported by the bills raised by the parties and only self-made vouchers were maintained by the assessee. In our opinion, considering the nature of work carried on by the assessee, there is no question of not incurring of expenditure by the assessee to carry on the road work contracts and the work is mentioned in the M book maintained by the assessee and counter signed by the sub contractors. However, there is chances of inflating the expenditure for which the CIT(A) has, already disallowed 10% of the expenditure claimed by the assessee to the extent of ₹ 4,41,08,210/-. Hence, the contention of the ld. DR that the entire amount of ₹ 4,41,08,210/- is to be disallowed cannot be appreciated as held by the Tribunal in the case of EDAC Engineering Ltd vs ACIT, 149 ITD 341, wherein held that if expenditure claimed was not supported by proper evidence and some deficiency persist in evidence, part expenditure is disallowed on estimated basis. Being so, by placing reliance on the above decision of the Tribunal, the CIT(A) is justified in disallowing only 10% of the sub-contract expenses not supported by proper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts of the creditors have not been written back, the conclusion of the Assessing Officer that it was ceased to exist is not proper. Accordingly, in our opinion, the CIT(A) is justified in deleting the addition made by the Assessing Officer u/s 41(1) of the Act. This view of our is fortified by the judgment of the Delhi High Court in the case of CIT vs Hotline Electronics Ltd, [2012] 80 CCH 156, and Punjab Haryana High Court judgment in the case of CIT vs GP International Ltd, 325 ITR 25 . Accordingly, the deletion made by the CIT(A) is confirmed. 9. In the result, the appeal of the Revenue is dismissed 7. The learned Senior Standing Counsel Mr.J.Narayanasamy appearing for the Appellant/Revenue submitted that for want of production of the Sub Contractors before the Assessing Authority, and one of them being 94 years old, the Assessing Authority was justified in believing that the payments made to those Sub contractors were not the actual expenditure incurred by the respondent/assessee Contractor and therefore, he was justified in disallowing the same and adding back the same as the income of the Assessee. He also submitted that though the learned Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e compared results of the Gross Profit and Net Profit by the Assessee given in para 7 of the Tribunal's order clearly shows that the said Gross Profit at the rate of 14.21% and Net Profit at the rate of 3.83% declared by the Assessee, with the addition of 10% agreed by the Assessee before the learned Commissioner of Income Tax (Appeals), resulted in a much better result of profits declared by the Assessee in the present Assessment Year viz., A.Y.2010-11 as compared to the previous years. The Net Profit rate in the previous three years was less than 3%, whereas the Assessee himself declared the net profit at the rate of 3.83% before the aforesaid addition of 10% of ₹ 4,41,08,210/-. Therefore, the estimation of profit by the Appellate Authorities even on the premise taken by the Assessing Authority that some of the sub contractors could not be produced before the Assessing Authority, does not result in any perversity in the findings of the learned Commissioner of Income Tax (Appeals) as well as the learned Tribunal. 13. It is well known that where the books of accounts maintained by the contractors are not accepted by the Department, the estimation of profit made on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of facts, are also filed in an absolutely reckless manner. We strongly deprecate this practice of the Revenue Authorities, as there seems to be no application of mind by the higher Authorities in sanctioning filing of these appeals before the High Court. We would have imposed exemplary costs in the present case also to compensate the Respondent/Assessee, who had to incur such litigation expenditure at all the levels of appellate forums, three in number, beyond the Assessing Authority, viz., before Commissioner of Income Tax (Appeals), before the Income Tax Appellate Tribunal and before the High Court. However, we are not imposing the said costs with a clear warning to the Revenue Authorities in this regard. They should, as responsible Authorities, try to give quietus to litigation instead of mindlessly increasing the same before the Constitutional Courts. Even to dismiss such frivolous appeals, the precious time of the court is taken. In the present case itself, during Covid times, when we are hearing urgent matters through Video Conferencing, such matters are brought before us to be heard at least for an hour and then to pass such a detailed order. 18. We expect and have a sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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