TMI Blog2020 (12) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... re of accounting salary - HELD THAT:- Counsel has failed to demonstrate the relationship between payer and payee as a master and servant. The ld. Counsel did not file any document/evidence, before the Bench which can show that said payment is on account of accountant`s salary. We find merit in the submissions of Ms. Anupama Singla, ld. DR for the Revenue, as she pointed out before the Bench that in order to constitute salary expense, the ld. Counsel should. demonstrate master and servant relationship between payer (assessee) and payee. Considering this factual position, we confirm the addition sustained by the ld. CIT(A) - Decided against assessee. - ITA No.1487/AHD/2015 - - - Dated:- 6-11-2020 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Sapnesh Sheth - CA For the Respondent : Ms Anupama Singla Sr. DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: By way of this appeal, the assessee has challenged correctness of the order dated 04.03.2015 passed by the learned CIT(A), in the matter of assessment under section 143(3) the Income Tax Act 1961( for short the Act ), for the assessment year 2010-11. Grievances raised by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 50,42,420/-, for the month of February 2010 at ₹ 41,67,885/- and for month of March at ₹ 1,12,06,265/-. The assessing officer noticed that the assessee has shown unpaid labour charges of ₹ 90,75,500/- in the assessment year 2010-11. In order to verify the details of unpaid labour charges, copy of labour charges account of subsequent year 2010-11 was called for and furnished by the assessee which is reproduced hereunder: Labour Payable Account Apr. 2010 4256950 May. 2010 2504180 Jun. 2010 2266100 Jul. 2010 48270 Total 90,75,500 On perusal of the above, it was noticed by the assessing officer that there was huge increase in the labour charges in the month of March 2010. As against labour charges of only ₹ 41,67,885/- in the month of February 2010, it had increased nearly threefold. in March 2010, to ₹ 1,12,06,265/-. The assessing officer further noticed that assessee had shown huge outstanding payment of labour exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bench the labour expenses ratio and Net Profit Ratio of the previous years and contended that these ratios should. be taken as a base for addition, if any, to be made in the assessee`s case under consideration, which are reproduced below: Labour expense ratio for March 2010:- [Page no. 4] Particulars Labour Expenses Turnover / Contract income March 20 10 ₹ 11 2.06 lacs ₹ 368. 19 lacs Total for the entire year ₹ 360.22 lacs ₹ 938. 06 lacs Ratio for the month of March 2010(%) 31.11% 39.25% Labour expense ratio for various years:- [Page no. 5] Particulars A.Y 2007-08 A.Y 2003-10 A.Y 2010-11 Labour Expenses (Rs.) 128.91 lacs 230.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information in specified format, which had been reproduced on page nos. 4 and 5 of the assessment order, however, the assessee had failed to submit the same, therefore addition made by the assessing officer should. be sustained. 10. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. First contention of the learned counsel is that the Gross Profit percentage taken by the ld. CIT(A) at the rate of 12%, is arbitrary and taken by the ld. CIT(A) outside the books of accounts of the assessee, therefore it is not acceptable. In order to verify the veracity of the contention of the ld. Counsel, let us examine the order of ld. CIT(A), which is reproduced below (To the extent relevant for our analysis): 8.1 However, the total addition made by the assessing officer on the basis of average labour charges in the months of January and February come to 7% of the turnover of the appellant, which pushes - up the gross profit of the appellant from 8.2 % to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articularly site-wise break-up of monthly labour charges could. have helped the assessing officer to correlate the reasonableness of the quantum of labour expenses, incurred at each site with the quantum of work done at each site in that month. Such data would. have helped assessing officer to examine whether the labour expenses incurred at each site are reasonable or not. The refusal of the assessee to furnish the said evidences is like pushing the assessing officer to wall and then challenging his estimation on the ground that assessing officer`s/CIT(A) estimation is arbitrary and without base. Thus, it is clear that the assessee is having a non-complaint and blatant attitude towards the revenue. 11. We note that Assessing Officer has not held that labour expenses so claimed by the assessee were not incurred by the assessee for the purpose of business. Apart from this, we note that assessee is engaged in labor oriented industry and ld. Counsel submitted before us labour expenses ratio to justify the assessee`s claim, therefore considering the nature of assessee`s business, we find some merit in the contentions of the ld. Counsel. Therefore, while the case of the assessee merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental Representative (DR) for the revenue submits before the Bench that assessee has not produced any evidence to establish the relationship of employer and employee, that is, master and servant relationship is absent between payer and payee. It is a lump sum payment of ₹ 1,00,000/- which does not relate to salary expense. Therefore, addition made by the assessing officer should. be confirmed. 17. We have heard both the parties and perused the material available on record. We note that during the year under consideration, on verification of accounts assessing officer noticed that assessee has shown expenditure of ₹ 1,00,000/- to Shri Ghanshyambhai Vekariya under the head account charges which was subsequently paid on 01.01.2011 but no TDS was deducted by assessee. Assessing officer issued a show cause notice dated 21.03.2013 as to why disallowance should not be made u/s 40(a)(ia) of the Act . In response, assessee stated that the expense was in the nature of accounting salary. However, assessing officer did not accept the contention of the assessee and he disallowed the above claim of ₹ 1,00,000/- on account of non-deduction of TDS u/s 40(a)(ia) of the I. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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