Bogus sub-contract expenditure disallowance reduced to 12.5% after Tribunal applied earlier-year precedent and facts.

Estimated disallowance on alleged bogus sub-contract transactions was found excessive where the contracts had been routed on a back-to-back basis through concerns that had admitted accommodation entries, but the underlying work was certified as completed. Relying on the assessee's own earlier years, where similar bogus expenditure had been restricted to 12.5%, the Tribunal applied the same approach to the present year. The addition sustained at 16% was therefore reduced and restricted to 12.5% of the sub-contract amount, granting partial relief to the assessee.

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Issues: Whether the addition sustained by estimating profit at 16% on the alleged bogus sub-contract transactions was justified, or whether it should be restricted to a lower percentage.

Analysis: The sub-contracts were admittedly routed on a back-to-back basis through concerns that had admitted to providing accommodation entries, while the underlying work was certified as completed. In the assessee's own earlier years, the Tribunal had already restricted disallowance on similar bogus expenditure to 12.5%. Following that settled approach and the facts of the present year, the Tribunal held that the addition sustained at 16% was excessive.

Conclusion: The addition was restricted to 12.5% of the sub-contract amount, resulting in partial relief to the assessee.

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