TaxTMI 
TaxTMI 
2006 (9) TMI 217
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.... per cent in the asst. yrs. 1997-98 and 1996-97, respectively. 3. He further observed that further examination of various details of expenses revealed that following expenses on account of wages have been incurred in the month of March, 1998: S.No. Amount Date of payment Month to which it pertains 1. Rs. 6,30,185 30.3.1998 January, 1998 2. Rs. 3,96,025 31.3.1998 March, 1998 3. Rs. 4,96,215 10.3.1998 February, 1998 From above facts he found that wages for the month of January, 1998 have allegedly been paid on 30th March, 1998 for the month of February, 1999 on 10th March, 1998 and for month of March, 1998 on....
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....t of labour and wages. Without the payment to labour of their wages in time, no labour will work. The AO has brought out in the order a peculiar position. The appellant has shown payment of wages for January, 1998 in the month of March, 1998 on the 30th of March i.e. after a gap of two months. The appellant does not give the names and addresses of the workers. There is no co-relation of the work done by the labour and the payment of wages. The appellant has given a very vague reply: 'It is humanly not possible to provide the details as to what work a particular labourer has done at the site. Duties are shifted from place to place, work to work, their wages are paid on the basis of day-to-day basis'. This reply itself shows that the payment of wages for January, 1998 shown to be made on30th March, 1998, cannot be accepted to be the correct position depicted in the accounts maintained. This does not appeal to commonsense where the wages are on the basis of day-to-day work, no labour class will work if not paid on time. The appellant has also not given any explanation as to why the wages for January were paid in end-March". 7. The CIT(A) also found that in the course of assessment,....
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.... in the books of account or the system of accounting being regularly followed by the assessee, rejected the book results and estimated profit at 8 per cent of gross contract receipts, even by disregarding the fact that cost of material supplied by the department to the assessee for execution of contract was not earning any profit. He further submitted that only adverse observation of the AO relates to payment of wages for the month of January, in the month of March. For this, he submitted that sufficient justification was furnished before the AO to the effect that in the month of January, the assessee did not receive the payment in respect of the work executed, and which was actually received by it in month of March, therefore, as soon as the payment was received from the Government, the assessee paid the wages immediately. As per learned Authorised Representative, no fault can be found on the part of assessee for delay of one month in the payment of labour charges which was attributable to reasonable cause being financial crises and the same cannot be made the basis for rejection of books of account. With regard to AO's allegations regarding the addresses of the labourers to whom ....
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....ed the rival contentions carefully, gone through the materials placed on record and the orders of the authorities below. We have also deliberated on the case law cited by the AO and CIT(A) in their respective orders, as well as referred to by the learned Authorised Representative and Departmental Representative with respect to rejection of book results and estimation of profit on contract receipts. From the record, we found that assessee was engaged in business of construction since 1984, mainly undertaking work of Central Public Works Department (CPWD) and Department of Telecommunication (DOT) as class one contractor. During the year under consideration, the assessee firm had undertaken various civil projects. The proprietor of firm is a qualified civil engineer and looked after business with the help of a son who was also qualified engineer. Undisputedly, the turnover of the assessee exceeded beyond the limit prescribed for the audit under s. 44AB of the IT Act, 1961. The books of account regularly maintained were got audited and there was no adverse comment of the auditor with regard to the system of accounting being followed by the assessee or with regard to the true and fair p....
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....ed out difference at Rs. 1,42,990. However, the CIT(A) called reconciliation statement and confirmation was furnished by the Government department with regard to release of such secured advance whereon no TDS was deducted. Therefore, the CIT(A) accepted the assessee's contention and deleted the addition made by the AO on account of such difference. During the course of scrutiny assessment under s. 143(3), the assessee produced books of account and which were also examined by the AO. The point which disturbed the AO relates to the labour payment for months of January, February and March, 1998. The AO found that labour payment for the month of January was actually paid in March, 1998 and labour payment of February was paid in the next month of March. Labour payment for March, 1998 was paid by the end of March, 1998 itself. The AO, however, did not accept the assessee's version that delay in payment of labour wages was on account of financial difficulty. From the record, we found that assessee got the payment in respect of work executed in the month of March, therefore, immediately on receipt of payment he paid the labour charges for January, 1998. Otherwise also, the labour payment f....
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....nd other expenses, copy of labour charges account, copy of staff salary rolls from October, 1997 to March, 1998, copy of cash book from February, 1998 to March, 1998, as placed in the paper book page Nos. 23, 29 to 54, and do not find any mistake therein. After production of books of account and submission of explanation by the assessee, if any, asked for, with respect to the contents of the return and books of account, the Revenue may accept the same or after pointing out the specific defect may reject the books of account and proceed to determine the assessee's income as per the provisions of s. 145. Income-tax provisions nowhere either authorize the AO or cast an obligation on the assessee to prove the negative result, i.e., to prove as to why he failed to make a profit at a particular rate. Before rejecting the books of account, the Department has to prove that accounts are unreliable, incorrect or incomplete. 13. The accounts regularly maintained in the course of business, duly audited under the provisions of IT Act and free from any qualification by the auditors, should be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable.....
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....chers and to make them basis for rejection of books of account. We also found that payment to the assessee contractor was also made on the basis of work completed and measured by the department itself and not on the basis of what the labourer has done. The bills for such a contract was prepared, which were got verified by the engineers of contractee before making payments. On the basis of bills which are finally approved by the Government engineers/contractee, the payment was given to the assessee contractor after deducting TDS. Thus, it was humanly not possible to provide the details as to what work a particular labourer has done at the site. AO's allegations to the effect that there was no record on the scrolls as to whom payment is made and against what work done, is not sustainable, since wages scrolls were prepared not on the basis of the work which the labourer carries on, but his/her name, the details such as the number of days the person has worked, the rate of wages, the total amount is given and the receipt is taken from the labourer concerned. It is not possible to mention the work which a particular labourer has carried out during the day. We also found that in earlier ....
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....re the ITO and only two defects were found by him : (1) absence of cash memos which means sales are not verifiable, and (2) certain transactions were noted in lump sums. 15. But, no finding has been recorded by either of the authorities below as to the unacceptability of the method and irregularity of the accounts kept by the assessee. It is well-settled that in the absence of such a finding recorded by the authorities, the book results cannot be ignored or brushed aside. Very important principle of law was laid down by the Patna High Court in the following words: "There is no finding in the present case that any of the entries in the books of account was not correct; there is no finding that the assessee is not employing a method of accounting; and there is no finding that such a method of accounting has been irregularly employed by the assessee. In the absence of any such finding. there being no reason germane to the unacceptability of the book results, it must be held that the Tribunal as well as the Revenue authorities below had no materials before them, 011 the basis of which it could be said that the trading results were not verifiable and that, therefore, they should n....