TaxTMI 
TaxTMI 
2016 (2) TMI 565
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....whose name the expenses are debited and also the details of the services provided by them alongwith invoices. The assessee vide letter dated 10.2.2013 furnished confirmation letters from each of 15 parties, the copies of bank statement of the assessee explaining the nature of work carried on by it as formation of internal road with gravel as subbase including cutting, dozing, filling to required level, removal of loose soil etc and also explaining that the payment is made to respective persons based on the quantity of the work executed by each of them as recorded in the M. Book. On verification of the M. Book produced by the assessee before the Assessing Officer, the Assessing Officer found that the entries made in the M.Book was without any separate bill or invoice, but were found to be based on self-made hand written by the assessee itself. Thereafter, the Assessing Officer issued summons u/s 131 to each of the 15 parties to appear personally with the relevant details. In response to the summons, none appeared before the Assessing Officer. However, the summon letters in respect of the two parties were returned stating that no such persons were existing in the addresses provided. ....
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....re remain un- complied with only two parties. It is also fact that the appellant carried out the sub contract work with EDAC Engineering Limited for laying the road work at the remote places for the purpose of Thermal Power Plant, JSW Energy (Rathnagiri limited), Nandiwadi Maharashtra State. For laying out road work man power is necessarily required. There is no evidence available on the record that the appellant had not executed the road work at Thermal Power Plant, Rathnagiri. The most of the labour contractors were either relatives of the appellant or known to the appellant. The entire disallowance made by the assessing officer in respective expense debited in the name 14 parties cannot be accepted without disproving the confirmations received, disproving the payments made to them beyond doubt, disproving the execution of the work order. However there is a possibility of the inflation of the expenses in respect of road work carried out by the appellant as a whole. In the earlier A.Ys, the department accepted the 5% of the turnover declared by the appellant after detection of the inflation of the expenses by carrying out survey action. In the year under consideration, there was i....
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....ing officer for examinations. The net profit ratio declared by the appellant in the year under consideration is also less as compared to the net profit computed by the assessing officer in the earlier years which was also accepted by the appellant. Looking to the facts of the case in totality and legal position on this issue, I am convinced that the offer of the 10% of the total disallowance of Rs. 4,41,08,210.00 made by the appellant during the course of the appellate proceedings as additional income over and above retuned income is reasonable. The offer of the 10% of the total disallowance would lead to net profit ratio more than 5% of the turnover which was any way accepted by assessing officer in the earlier years. Therefore, the assessing officer is directed to restrict the disallowance to Rs. 44,10,821.00 as against the disallowance of Rs. 4,41,08,210.00. The grounds of appeal raised by the appellant on this issue are treated as disposed off accordingly." Against the above, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. In this case, it is admitted fact that 14 persons have furnished confirmation and some of the par....
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....C Engineering Ltd vs ACIT, 149 ITD 341, wherein held that if expenditure claimed was not supported by proper evidence and some deficiency persist in evidence, part expenditure is disallowed on estimated basis. Being so, by placing reliance on the above decision of the Tribunal, the CIT(A) is justified in disallowing only 10% of the sub-contract expenses not supported by proper bills. This ground of the Revenue is dismissed. 6. The next ground is with regard to deletion of addition made u/s 41(1) of the Act as cessation of liability. 7. The facts of this issue are that the Assessing Officer made an addition of Rs. 18,16,728/- towards creditors as they are outstanding for more than three years and any claim beyond three years is not good in law as per Limitation Act. However, the CIT(A) observed that there is no cessation of liability as on the date of the accounts since the assessee has not written off these amounts in its books of account. According to the CIT(A), Explanation 1 sec. 41(1)(4) also to apply to the facts of this case. Accordingly, he deleted the addition against which the Revenue is in appeal before us. 8. We have heard both the parties and perused the material ava....