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of <h1>Assessee's Appeal on Disallowance & Net Profit Rate Upheld; Partial Success for Revenue</h1> The assessee's appeal against the disallowance of Rs. 17,08,933/- for labour charges was allowed as per the Tribunal's direction to verify payment ... - Issues Involved:1. Disallowance of Rs. 17,08,933/- on account of labour charges paid without deduction of tax at source.2. Rejection of books of account by the Assessing Officer.3. Deletion of addition of Rs. 11,73,861/- by applying net profit @ 12% of total receipts.4. Deletion of addition of Rs. 8,04,948/- on account of raw material and work in progress.Summary:Issue 1: Disallowance of Rs. 17,08,933/- on account of labour charges paid without deduction of tax at sourceThe assessee's appeal against the disallowance of Rs. 17,08,933/- was based on the application of section 40(a)(ia) of the Act by the Assessing Officer. The CIT (Appeals) confirmed this disallowance. However, the Tribunal referred to the Special Bench decision in ACIT Vs. Merilyn Shipping & Transports [136 ITD 23 (SB) (Vishakhapatnam)], which stated that no disallowance is warranted u/s 40(a)(ia) if the amounts were paid during the year and nothing was payable at the close of the year. The Tribunal directed the Assessing Officer to verify the assessee's claim and, if the amounts were indeed paid during the year, no disallowance should be made. The appeal was allowed for statistical purposes.Issue 2: Rejection of books of account by the Assessing OfficerThe Revenue's appeal contested the CIT (Appeals)'s decision to hold that the rejection of books of account by the Assessing Officer was not in order. The Tribunal noted various discrepancies highlighted by the Assessing Officer, including unverifiable vouchers, non-maintenance of muster rolls, discrepancies in the Balance Sheet, and others. The Tribunal found merit in the Assessing Officer's rejection of the books of account u/s 145 of the Act and reversed the CIT (Appeals)'s order, upholding the rejection of the books of account.Issue 3: Deletion of addition of Rs. 11,73,861/- by applying net profit @ 12% of total receiptsThe Tribunal found no merit in the Assessing Officer's application of a 12% net profit rate to determine the income. Instead, it referred to the Tribunal's decision in Shri Sukhwinder Singh Vs. ITO, where a net profit rate of 6% was applied. The Tribunal directed the Assessing Officer to apply a 6% net profit rate to the gross receipts of Rs. 97,82,181/- to determine the income. The Revenue's appeal on this ground was partly allowed.Issue 4: Deletion of addition of Rs. 8,04,948/- on account of raw material and work in progressThe Revenue's appeal against the deletion of Rs. 8,04,948/- was based on the Assessing Officer's observation that the amount was missing in the trading account. The CIT (Appeals) deleted the addition, noting that the closing work in progress was already accounted for in the total works cost, thus avoiding double addition. The Tribunal found no merit in the Revenue's appeal on this ground and dismissed it.Conclusion:The appeal of the assessee in ITA No. 582/Chd/2011 was allowed for statistical purposes, and the appeal of the Revenue in ITA No. 606/Chd/2011 was partly allowed. The order was pronounced in the open court on August 28, 2012.
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