TaxTMI 
TaxTMI 
2010 (2) TMI 757
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....pose of this appeal at first instance. The assessee is a partnership firm engaged in the business of painting of industrial shed, machinery and office premises and also the work of anti-corrosion work. A survey was conducted at the business premises of the assessee on August 24, 2005. The first ground of appeal is against invoking the provisions of section 145(3) regarding rejection of books of account. At the time of hearing the learned authorised representative for the assessee submitted that since no discrepancies were found in the books of account but also relating to wages paid as per wage register and that recorded in the books of account, the books of account were rejected, which is not in accordance with law. We are not convinced with the arguments raised in this behalf. Since the entries as per the books of account were such which were not supported by wage register/vouchers for the same, therefore, as per section 145(3), there is no justification about the correctness or completeness of the accounts, such book results are liable to be rejected and the Assessing Officer is competent to make an assessment in the manner provided in section 144....
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....peals), the same were ignored on the plea of being additional evidence. The evidence is not an additional evidence, as if for some reason, the wage register is not impounded, it could not be said that wages are not paid. Mere statement recorded during the course of survey under section 133A is not binding. For this proposition the learned authorised representative for the assessee placed reliance on the following case law:- Sl. No. In the case of . . . Reported in ... 1. Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker) 2. CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad) 3. Kailashben Manharlal Chokshi v. CIT 14 DTR 257 (Guj) 4. Ashok Manilal Thakkar v. Asst. CIT [2005] 279 ITR (AT) 143 (Ahd); 97 ITD 361 The learned authorised representative further submitted that even for earlier years when no wage register was found, the learned Commissioner of Income-tax (Appeals) deleted the disallowance but estimated the net profit at 12 per cent. of the gross receipt. Though, the income is to be estimated, estimation of 12 per cent. of gross receipt is higher. The estimation cannot be arbitrary as held by the hon'ble Rajasthan High Court in the case of CIT v. Inan....
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....be computed to the best of judgment, the same has to be on the basis of considering all the relevant materials. It is settled law that even if the assessment is to be made to the best of judgment such assessment cannot be arbitrary or fanciful, but after considering the past history and the present circumstances. Even the guidelines provided by the statutory provisions can also be considered. Computing the income as per presumptive taxation scheme is found in section 44AD of the Act. Section 44AD provides that where an assessee is engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent. of the gross receipts paid shall be deemed to be the profits and gains of such business. Section 44AD also exempts the assessee from maintenance of books of account. As per the Explanation to section 44AD, the expression "civil construction" includes:- (a) the construction or repair of any building, bridge, dam or other structure or of any canal or road; (b) the execution of any works contract. The assessee is found to be engaged in the business of executing works contracts like painting work of the premises. Thu....
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....ddition for this year is called for. It is also made clear that the discount of Rs. 2,91,590 stated to be received by the assessee during this year is part of income assessed for this year and hence the same amount shown as income in the subsequent year is to be excluded. Therefore, since the addition is made in this year hence in subsequent year it is to be excluded when the amount is actually offered for tax by the assessee. Similarly, the addition of Rs. 5,36,761 is also not sustainable as the income is estimated and the difference in the account of the creditors being application of such income, no separate addition is called for. Similarly, the deposit in bank account being application of the income, no separate addition is called for since source is taxed by estimating net profit. The hon'ble Punjab and Haryana High Court in the case of CIT v. Aggarwal Engg. Co. [2008] 302 ITR 246 held that when the income is estimated from the contract by application of net profit ratio, no further addition was called for under sections 68 and 69B of the Act. Similar view has been adopted by the hon'ble Allahabad High Court in the case of CIT v. Banwari Lal Banshidhar [1998] 229 ITR 229. App....
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....ar shall be computed at 10 per cent. of the contract receipts and not on the basis of books of account maintained by the assessee. The next ground of appeal is partial disallowance of wage and labour expenses as claimed by the assessee. The Assessing Officer held that as per the impounded wage register, the payment of wages and labour charges are worked out at Rs. 22,77,894 for the assessment year 2002-03 and Rs. 36,41,712 for the assessment year 2003-04 but the assessee has claimed expenses of Rs. 47,77,811 for the assessment year 2002-03 and Rs. 64,27,250 for the assessment year 2003-04. The Assessing Officer also found that payments were made without the signatures of the workers on the wage/labour register. These payments were Rs. 2,07,962 and Rs. 1,23,075 for the assessment years 2002-03 and 2003-04 respectively. Thus, the difference between expenses claimed as per the profit and loss account and that between the wages payable according to the wage register impounded and the expenses paid without the signatures of the workers on the vouchers were disallowed. Before the Commissioner of Income-tax (Appeals), it was contended that the difference cannot be worked o....
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....sessment year 2001-02, Rs. 1,07,01,727 - Rs. 98,04,156 = Rs. 8,97,571) i.e., Rs. 89,757 is to be allowed." Against sustenance of disallowance, the assessee is in appeal before us, whereas against the partial relief granted by the Commissioner of Income-tax (Appeals), the Revenue is in further appeal. We find that the facts of these cases are identical as discussed by us in appeal of the assessee for the assessment year 2004-05. By applying the said findings, we uphold the rejection of books of account and consequential estimate of net profit at 10 per cent. of the contract receipts as held by us for the assessment year 2004-05 in the assessee's own case hereinabove. Since the net profit is estimated, no further disallowance for labour charges is called for. We, therefore, delete the disallowance of labour/wages charges as made by the Assessing Officer. Ground No. 4 for the assessment year 2002-03 is against the addition of Rs. 1,66,934 being unaccounted advances to workers treated as unexplained expenses under section 69A of the Act. Ground No. 5 for the assessment year 2002-03 and ground No. 3 for the assessment year 2003-04 is against the addition of Rs. ....
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...., 2000-01 and 2001-02. The Assessing Officer noted that average wages paid as per the impounded wage register for the assessment years 2002-03, 2003-04 and 2004-05 were worked out at 22.41 per cent. of the contract receipt. The wages paid for the years under appeals were higher. The average wages paid as percentage of labour charges claimed as per profit and loss account were found to be 41.62 per cent. The Assessing Officer, therefore, concluded that even for the earlier years there is inflation in wages paid and hence, the assessments were reopened. The Assessing Officer disallowed the excessive wages on the basis of average ratio for the assessment years 2002-03, 2003-04 and 2004-05. The learned Commissioner of Income-tax (Appeals) upheld the action of the Assessing Officer in rejecting the book result by invoking the provisions of section 145(3). However, regarding the estimation of income, the learned Commissioner of Income-tax (Appeals) held as under:- "5.3.2. From the facts and circumstances of the case and the fact that the labour charges were made in cash to workers who are illiterate and whose whereabouts are not known to the appellant and also from the ap....