TMI Blog2022 (6) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to give relief to the assessee by deleting the disallowance made by the AO on account of labour expenses. We, therefore, find no justifiable reason to interfere with the impugned order of CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No. 1 of the Revenue s appeal. Liability accrued under development agreement was not provided for by the assessee in the books of account - HELD THAT:- As noted by the CIT(A) in his impugned order on the basis of the relevant clause 3.4 of the Development Agreement, there was an understanding between both the parties that the land would finally be transferred to the prospective buyers of the bungalows in the scheme directly and because of this understanding the liability was not provided for in the books of accounts of the assessee. In any case, as rightly observed by the CIT(A) in his impugned order, there was no question of any loss to the Revenue by this accounting treatment given by the assessee because had the liability been provided in the books of accounts of the assessee, the profit declared by the assessee would have decreased to that extent. As rightly concluded by the learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purchase which is impossible. The assessee has not shown any reason as to how the labour is claimed at such higher abnormal rate. During the verification of labour expenses the assessee was asked to produce Shri Babubhai Vanzara and Shri Ashok K. Thakor. However, the assessee could produce only Shri Babubhai Vanzara and that to without any books at account. It was later on found that Shri Babubhai Vanzara has issued bills of only Rs.66,54,420/-. The books of account maintained by Shri Babubhai Vanzara are audited accounts and it accounts for all the bills issued by him. The affidavit of Shri Babubhai Vanzara supplied by you shows that he has carried out and raised bills of Rs.1,74,15,920/- in F.Y.2009-10. Hence, the cognizance of affidavit cannot be taken as it is not describing the bills raise in F.Y.2010-11. Further, at Sr. No.6 of the affidavit, Shri Babubhai Vanzara has confirmed books of account of M/s. Shree Infras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 agreement entered into by the assessee-firm with the concerned landowners and found that the liability arising under the said development agreement of Rs.60,00,000/- payable to the landowners was not provided for by the assessee in the books of accounts. He accordingly made a further addition of Rs.60,00,000/- to the total income of the assessee for the following reasons given in the assessment order. The Liability rose on account of Land Expanses have also not been accounted for by the assessee. The assessed vide his letter dated 12.02.2014 stated that (Repeated again): Regarding value of sale of land of Rs. 90,67,801 and construction of Rs. 69,32,200, it is to submit that same represented actual amount of consideration received towards land and constructions respectively for units for which all significant risks and rewards were transferred unto the buyers by the assessee firm by way of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 labour charges vide paragraph Nos. 4.3 and 4.4 of his impugned order as under:- 4.3 I have examined facts contained in Assessment Order/Remand Report and written submission submitted by the appellant. Both the grounds have common factors. AO has not rejected books of account u/s 145(3) for inconsistency or inaccuracy observed by him during assessment proceedings. As regards addition in connection with Ashokbhai Thakor of Rs.50,74,830/- it is observed that Shri Ashokbhai Thakor filed an affidavit mentioning nature of work done by him for the appellant and amount of work etc. The TDS has been deducted for the payment received by Shri Ashokbhai Thakor as per affidavit. In the Remand proceedings, the assessing Officer issued summons to him and was examined by the assessing officer on oath. The statement on oath was recorded the A.O. The AO obtained copy of his Bank Passbook and verified pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 executed for M/s. Shree Infrastructure was involving materials as well as labour and I have issued various bills including materials for Rs.1,74,15,920/- for the F.Y.2010-11 (A.Y.2011-12). 5. I have executed an affidavit as on 12.02.2014 before notary Rajendrabhai T. Parekh. In the impugned affidavit an inadvertent error was made in mentioning F Y. as 2009-10 instead of 2010-11. In fact, we only commenced construction work in the F.Y.2010-11 only. We never executed any work for Shree Infrastructure in the F.Y 2009- 10. 6. For the work executed for Shree Infrastructure in F.Y.2010-11, we issued bills of Rs.1,74.15,920/- and received payments of Rs.71,44,686/- by cheques and cash. For balance amount due to us I intended to purchase a house in the scheme floated by Shri Mineshbhai one of the partners of the firm at Dholka and my account was settled in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 related parties in question have submitted copy of affidavits indicating quantum of work done, value of work done, details of payments and other related particulars duly supported by various evidences, In my opinion, the appellant has discharged its onus by filing all possible details including confirmations/affidavits and TDS and successfully established that the genuine expenditure has been expended for the business purposes. Further action, if any, was required by the assessing officers of Babubhai R. Vanzara and Ashokbhai K. Thakor. On thin other hand, the AO could not gather the positive evidences for the department and taken decision which can be construed to have been based on presumptions and not on the facts on record. In view of facts of the case and the ratio laid down by Hon'ble Gujarat High Court in the Supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 revenue has occurred because by passing said entry profit would be decreased to that extent. Similar is the case with entry of Rs.60,00,000/- as that would decrease the taxable profits of appellant. At the most it is a case of pre-ponement of tax liability and not postponement of tax liability. The department cannot sit on the armchair of the businessman especially when the decision taken is not against its interest. As revenue is not at loss, I agree with the argument of appellant and delete that addition of Rs.60,00,000/-. The ground No.4 of appeal is allowed. 8. Aggrieved by the order of the learned CIT(A), the Revenue has preferred this appeal before the Tribunal on the following grounds:- 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,58,36,330/- made on account of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmations/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 assessee by deleting the disallowance made by the Assessing Officer on account of labour expenses. We, therefore, find no justifiable reason to interfere with the impugned order of learned CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No. 1 of the Revenue s appeal. 10. As regards the other issue raised in Ground No.2 of the Revenue s appeal relating to the deletion by the learned CIT(A) of the addition of Rs.60,00,000/- made by the Assessing Officer on the ground that the said liability accrued under development agreement was not provided for by the assessee in the books of account, it is observed that the partners of the assessee-firm were mostly the landowners and the amount of Rs.60,00,000/- in question was thus payable by the assessee-firm mainly to them ..... X X X X Extracts X X X X X X X X Extracts X X X X
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