2015 (8) TMI 1022

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....y of cheques. The revenue is aggrieved by the decision of Ld CIT(A) in restricting the addition of labour charges paid by way of cash to 10% of the expenses. The revenue is also aggrieved by the decision of Ld CIT(A) in deleting the disallowance of Rs. 5,60,000/- made from Repairs and Maintenance expenses. 3. We heard the parties and perused the record. The assessee firm is a civil contractor engaged in undertaking road construction work, mainly for Municipal Corporation of Greater Mumbai. It filed its return of income for the year under consideration declaring a total income of Rs. 3.48 crores. The assessing officer, during the course of assessment proceedings, examined one of the partners of the firm as well as one of its employees. Th....

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.... never reached them (i.e., the labourers concerned)." When the partner of the assessee was confronted with the findings of the AO, he offered additional income of Rs. 2.00 crores for AY 2009-10, apparently to cover up the deficiencies. The Assessing officer accordingly added to the total income the sum of Rs. 2.00 crores offered by the assessee in the sworn statement. 5. The AO examined the labour charges incurred by way of cash and noticed that the assessee did not possess primary evidence to support the claim to the tune of Rs. 1,97,66,687/-. Hence, the offer of Rs. 2.00 crores made by the assessee was considered by the AO as having made on account of unproved cash expenses incurred towards labour charges. Further, the AO proceeded ....

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....ision on the telescoping benefit given by the AO against the offer of Rs. 2.00 crores made by the assessee. The Ld CIT(A) held that the expenditure of Rs. 5,60,000/- incurred on concrete silo is allowable as revenue expenditure. 8. Aggrieved by the orders passed by Ld CIT(A), both the parties have filed these appeals before us. We have heard the parties extensively and perused the record. A perusal of statement recorded from the partner u/s 131 of the Act would show that the assessee has offered a sum of Rs. 2.00 crores for the labour charges incurred by way of cash as well as by way of cheque. However, the AO only has presumed that the said offer was in the context of labour charges incurred by way of cash only. It is pertinent to note ....

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....stry average was only around 9% only. Accordingly the Ld A.R contended that the tax authorities have made the impugned additions only on presumptions and surmises. 10. The Ld D.R, while supporting the order of Ld CIT(A) with regard to the confirmation of addition of Rs. 4.16 crores, contended that the Ld CIT(A) should not have granted relief in respect of cash expenditure, when the assessee itself had offered Rs. 2.00 crores as income. 11. It can be seen that the entire addition revolves around the labour expenses only. As noticed earlier, the assessee has offered Rs. 2.00 crores to cover up the deficiencies in respect of labour charges incurred by way of cash as well as cheque. With regard to the cheque expenses, the contention of th....

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....of part of labour expenses would meet the ends of justice, if we restrict the disallowance to Rs. 2.00 crores (being the amount offered by the assessee) plus 10% of the labour expenses incurred by way of cheque. We order accordingly. The decision rendered by the Ld CIT(A) on this issue would stand modified accordingly. Hence, the grounds 1 & 2 raised by the revenue would stand allowed, since the additional income of Rs. 2.00 crores offered by the assessee would cover up lack of supporting vouchers in respect of cash payments. The grounds urged by the assessee would stand partly allowed, since in the facts and circumstances of the case, it may not be proper to disallow entire expenses incurred by way of cheque. 13. The next issue urged by....