9911796707
TMI Blog2022 (6) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... ort) was issued by the Assessing Officer to the assessee on 06.08.2012. As noted by the Assessing Officer during the course of assessment proceedings, the assessee-firm had undertaken a scheme of residential farm house at Village Chandisar, Tal: Dholka, Dist: Ahmedabad. It had entered into a development agreement in December 2010 with three landowners for development of land admeasuring 41,413 sq. mtrs. for developing a scheme of 33 bungalows. As further noted by the Assessing Officer from the Profit and Loss account filed by the assessee with its return of income, the assessee had claimed expenses on account of labour at very unusual higher ratio. He, therefore, proceeded to verify the claim of the assessee for labour expenses and on such verification he recorded his findings/observations as under:- ".... The normal ratio of material purchase and labour is 1:1 when the construction is not pertaining to multi storied building. The assessee has constructed bungalows and hence the above ratio is applies in its case. However, as mentioned earlier the assessee bas claimed material purchases V/s. labour at 1:4.41. This means the assessee has claimed labour at 4.41 time to the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thakor for A.Y.2012-13 & 2013-14 for verification of payment made to them of outstanding amount shown in the books of account. The assessee has shown outstanding labour to Shri Babubhai Vanzara at Rs.1,02,71,234/- and Shri Ashok Thakor at Rs.25,11,082/-. The assessee ha;- not supplied copy of account for this A.Ys. and hence the genuineness of expenses could not be verified. * The assessee was supplied with summons on 04.03.2014 issued in the name of Shri Babubhai Vanzara. However, the assessee failed to produce him on 14.03.2014 reasonable time to produce the witness was granted. * The assessee has failed to prove the labour expenses claimed by it are wholly for the purpose of business and allowable U/s. 37(1) of the Income Tax Act. * Numerous payment below Rs.20,000/- made to these contractors in cash shows that the expenses are not incurred for the purpose of business." 3. On the basis of the above findings/observations recorded by him, the Assessing Officer rejected the book results declared by the assessee and made an addition of Rs.1,58,36,330/- to the total income of the assessee on account of disallowance of labour expenses. 4. He also verified the development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,21,67,900/- in the assessment completed under Section 143(3) of the Act vide an order dated 26.03.2014. 6. Against the order passed by the Assessing Officer under Section 143(3) of the Act, an appeal was preferred by the assessee before the learned CIT(A) challenging both the additions made by the Assessing Officer to its total income. During the course of appellate proceedings before the learned CIT(A), various details and documents were furnished by the assessee to support and substantiate its claim on both the issues. The same were forwarded by the learned CIT(A) to the Assessing Officer for verification and comments. In the remand report submitted to the learned CIT(A) on 08.02.2016, the Assessing Officer offered his comments and when the said remand report was confronted by the learned CIT(A) to the assessee, the assessee also filed its rejoinder on 23.02.2016. After considering the submission made by the assessee and the material available on record including the remand report of the Assessing Officer and rejoinder of the assessee, the learned CIT(A) proceeded to decide the issue relating to the disallowance of Rs.1,58,36,330/- made by the Assessing Officer on account of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it report which says that it was on mercantile basis. However, this cannot be conclusive prove for disallowing payments made to Shri Babubhai Vanzara. There are other sufficient evidences to indicate that actual work has been done by him which was verified by the engineer by taking measurement of work done on site visits. All bills issued by him were not only for labour but also pertaining to construction material, such as stone. This is proved as no separate expenditure on purchase of stone has been claimed by the appellant. Affidavit by Shri Babubhai Vanzara has been filed which was considered during remand proceedings and the relevant portion is reproduced under;- "......2. That I am registered with Income Tax Department vide PAN AJVPV1776H and assessed to Income Tax Officer, Ward-1, Himatnagar and filing the return of income from time to time. 3. That I undertook various work relating construction, filling with stone and rocks of foundation of various bungalows, Roads, Boundaries Walls, compound wall etc. with material to M/s. Shree Infrastructure, a partnership firm for its site at village Chandisar, Tal. Dhokka, Dist. Ahmedabad known as "33 Oaks". 4 That works execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O and successfully shifted the burden to prove on revenues as has been held in [159 ITR 78 (SC)] - Orissa Corporation. The stand of appellant has support from judgment in the case of Bharat Bijli Ltd. reported at [71 ITD 412 (Mum.)]. I am inclined to accept the argument of appellant and rely on the ratio laid down by Hon'ble Gujarat High Court in the case of Rohini Builders reported at [256 ITR 3GO (Guj.)] which is delivered in slightly different context. However, principle laid down by different Courts for allowing any expenditure in certain circumstances dependent on evidence placed on record. Similarly, I also rely on the ratio laid down by ITAT, Ahmedabad in the case of Deputy Commissioner of Inc jme Tax Vs. Tyco Valves & Control India (P) Ltd. [(2013) 81 DTR(Ahd) (Trib) 48] which is relevant: Assessee having furnished the statement of commission payment giving the names of the commission agents and the services rendered by them as well as voucher numbers, dates of payments, PANs of the agents, amount of invoices, rate of commission, etc. and the AO having not found the payment of commission to be bogus payments, deduction thereof is allowable." The appellant or the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lots to the Prospective Purchaser, or the society or any other body corporate that may be formed of or for the Prospective Purchaser(s) or in the favor of any other person (including itself), in such manner as may be instructed by the "Said Partnership Firm". The appellant followed the mercantile system was required to pass entry regarding Rs. 60,00,000/- debiting to P& L account and crediting to land owners account has been pointed out by A.O. but it is not absolutely correct. In mercantile system, appellant was required to make entry regarding accrued liabilities and deemed accrued liabilities. Here, liabilities regarding land charges Rs, 60,00,000/- was not accrued and was not deemed accrued as per understanding. Hence the appellant was not required to pass entry regarding Rs.60,00,000/-. At the most appellant was required to pass entries regarding Rs.9,01,958/- towards land charges of 4 bungalows which were sold during the year. But by mutual understanding of both the parties it was agreed that said liability would be fulfilled in concluding year of scheme and hence no entry was passed for Rs.9,01,958/-. Even by not passing entry regarding Rs.9,01,9587- no loss to the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors were also filed by the assessee confirming the execution of work by them for the assessee as well as value thereof as claimed by the assessee. The discrepancies pointed out by the Assessing Officer while disallowing the claim of the assessee for labour charges paid to the said two contractors were also explained and clarified by the assessee during the course of remand proceedings and the same was apparently accepted even by the learned Assessing Officer. The details of work executed by the said contractors for the assessee were also duly supported by the copies of bills and certificates issued by Engineer Geometric Consultant. Keeping in view the same, the learned CIT(A) found that the onus that lay on the assessee was satisfactorily discharged by him by filing all possible details including confirmations/affidavits and TDS; and, the business expediency as well as genuineness of the labour expenses was successfully established by the assessee. At the time of hearing before us, the learned DR has not been able to dispute this finding of fact specifically recorded by the learned CIT(A) on the basis of details and documents furnished by the assessee to give relief to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
