TaxTMI 
TaxTMI 
2016 (10) TMI 993
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....moulding, carving, engraving, carving and fixing by labours, who were specialized for completing the work of statues, fixing statues, etc. The assessee filed its return of income declaring total income of Rs. 4,76,89,660/-. Later on the case was selected for scrutiny and the Assessing Officer records that the assessee complied with notices and participated in the scrutiny proceedings. The Assessing Officer has stated that the assessee derives income from two proprietorship concerns, namely M/s Lucknow Marble Industries and M/s Marble Engravers. The Assessing Officer took note that M/s Lucknow Marble Industries has shown net profit of Rs. 4,43,50,467/- and that this amount also includes interest on FDRs amounting to Rs. 1,36,18,858/-. So if the interest on FDRs is excluded, according to the Assessing Officer, the net profit will come to only Rs. 3,07,31,609/- which gives a net profit rate of 5.54% on the total contract receipt of Rs. 55,47,08,699/-. According to the Assessing Officer, when the net profit of the previous year is considered on the total turnover of Rs. 38,19,02,981/-, the assessee was able to show the net profit rate of 6.90%. Since there is a decline in the net profi....
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....000.00 8.00 150000.00 4.00 2- Staff Welfare Expenses 2079552.00 200000.00 10.00 100000.00 5.00 3- Carving & Moulding 1870660.00 300000.00 16.00 150000.00 8.00 4- Clamp Making charges 3520210.00 700000.00 20.00 350000.00 10.00 5- Over Time Expenses 2000000.00 300000.00 15.00 150000.00 8.00 6- Business Promotion 3402954.00 800000.00 24.00 400000.00 12.00 7- Cartage 1718533.00 200000.00 12.00 100000.00 6.00 8- Conveyance 1349331.00 300000.00 22.00 150000.00 11.00 9- Crane Maintenance 5758554.00 500000.00 9.00 250000.00 4.00 10- Deepawali Festival Exp 310550.00 50000.00 16.00 25000.00 8.00 11- Repairs and Maint. 1121787.00 300000.00 27.00 150000.00 13.00 12- Vehicle Running Exp. 1331085.00 200000.00 15.00 100000.00 8.00 4150000.00 2075000.00 8. Aggrieved, the assessee has preferred an appeal before us contesting the confirmation of 50% disallowance sustained by the ld. CIT(A) and the Revenue is against the 50% relief granted to the assessee, vide ground No.1 of their respective appeals. 9. We have heard both the parties and perused the record. We find th....
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....ee also relied upon the decision of the jurisdictional High Court in the case of Nisar Biri Sikka No.1 vs. CIT, 41 SITC 125 (Alld) wherein the Hon'ble High Court has upheld the order of the Tribunal and in that case the assessee had to pay wages by cash to the specialized stone carving labours, which was disallowed by the AO citing excess cash payment which was allowed by the Tribunal and the said view of the Tribunal has been upheld by the Hon'ble High Court. According to the ld. A.R. of the assessee without pointing out any defect in the books or without satisfying the pre-conditions laid in section 145(3) of the Act and without rejecting the books of account, ad hoc disallowance as done in this case was not warranted and according to him, though the ld. CIT(A) appreciated these facts, has restricted the disallowance only to 50% which also, according to the ld. A.R. of the assessee, is arbitrary and no disallowance is warranted in the instant case. The ld. D.R., however, was of the opinion that the ld. CIT(A) should not have disturbed the disallowance made by the Assessing Officer. 10. We take note that the ld. CIT(A) has observed that though the Assessing Officer has co....
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....as of Rs. 25,06,057/- and for assessment year 2012-13, the ad hoc disallowance was to the tune of Rs. 4,98,410/- which is 0.88% and for assessment year 2013-14, the ad hoc disallowance was of Rs. 4,29,254/- which is 2.45%. We take note that in all these assessment years the assessments were completed under section 143(3) of the Act. The assessee is engaged in the same kind of business and without bringing any comparable cases and without rejecting the books of account, the estimation made on ad hoc basis cannot be countenanced. If there were any item-wise expenses, which could not have been supported by vouchers, then the Assessing Officer was at liberty to disallow the expenses item-wise and ought not to have gone for ad hoc disallowances. However taking into consideration the fact that certain vouchers regarding expenses could not be produced before the Assessing Officer to his satisfaction and taking into consideration disallowances made from assessment year 2008-09 to 2013-14, we would like to take an average of ad hoc disallowance which comes to 3%. Barring this year, we find that in assessment year 2008-09 onwards the ad hoc disallowances were @ 0.74%, 1.65%, 0.57%, 0.88% and....
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.... Rs. 42,58,791/-. 15. We have heard both the parties and perused the record. We find that the assessee has claimed that the outstanding labour dues and stone cutting and polishing charges payable was of an amount of Rs. 42,58,791/-. The Assessing Officer asked for name and addresses of the individuals to whom the payments were out-standing and to ascertain this fact he issued notice under section 133(6) of the Act to 200 labours at the first instance and to 51 labours after some time. Out of that notices sent, 103 notices returned back with the postal remark that no one was residing and it was incomplete address. Therefore, we find from this fact itself that 148 notices could be served, which means more than 50% notices could be served on the labours to whom the assessee has to pay outstanding dues. Therefore taking into consideration the overall facts, wherein we have already taken note that from assessment year 2008-09 to 2013-14 the assessments were infact carried out under section 143(3) of the Act and disallowances have been very less when compared to this particular assessment year, however, taking into consideration that less than 50% of the notices have been received back ....
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....sum of Rs. 1,35,00,630/- is outstanding as on 31.03.2010. The Assessing Officer asked for the list of outstanding labour charges payable and the assessee provided the list of 319 persons, out of which notice u/s 133(6) were issued in 51 cases. The Assessing Officer took note of the fact that in 21 cases notices have returned back unserved. Taking note of the said fact and since the payments have been made in cash and in the absence of vouchers, a sum of Rs. 10 lakhs was disallowed. 19. Aggrieved by the said order of the Assessing Officer, assessee preferred an appeal before the Ld. CIT(A) who was pleased to restrict the addition by holding as under:- "Regarding disallowance of Rs. 75,00,000/- out of labour charges and Rs. 10,00,000/- out of stone cutting and joining expenses, contention of Ld. AR that since additions have been already done u/s 68 of the Act, these disallowance are excessive. It is also a fact that the Assessing Officer has verified only a small part of labour payments outstanding at the year end. Payments are all in cash. It is also a matter of record that the net profit of the year was down by more than 1.4% in comparison to earlier year for which the appellant ....
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.... work and once the work is over or discontinued, they will move to other locations and thus addresses also keeps changing depending on the location of work they get. Moreover, these labourers cannot be presumed to be literate, so the address might also have some deficiencies and may be incomplete. We also take into account the fact that while adjudicating ground no. 2 of the assessee, we have sustained 50% of the outstanding credits inrespect to labour outstanding and sustained Rs. 21,29,395/-. So we are of the considered opinion that there is no need of any further disallowance and therefore, we delete the addition sustained by the ld. CIT(A) on this issue. 23. Coming to the next issue, we note that the assessee has claimed expenses of Rs. 1,20,15,610/- under head stone joining & cutting expenses, against which Rs. 1,35,00,630/- was outstanding as on 31.03.2010. The assessee handed over a list of 319 persons, to whom the wages were due. Out of these 319 persons, notices u/s 133(6) of the Act were issued to 51 cases out of which 21 letters came back. The Assessing Officer disallowed Rs. 10 lakhs since the payments were made in cash and no supporting vouchers were produced. The CIT....
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....nish the source of addition in the capital account, the assessee replied that he has earned agricultural income of Rs. 7,75,000/- during the Financial Year 2009-10 and Rs. 7,60,000/- during the Financial Year 2008-09 and the assessee has deposited part of agricultural income in the capital account of M/s. Marble Engravers. The Assessing Officer asked the assessee to furnish computation of agricultural income along with supporting evidence such as Khasra Khatauni of the land, copy of bill of sale of crops, etc. Pursuant to the said letter, assessee filed copy of the Khasra Khatauni, however, the Assessing Officer noted that no bills of sale of crops were produced. The Assessing Officer noted that assessee has agricultural holding of 7.3425 hectare in district Barabanki and that according to the assessee he has cultivated wheat for rabi season and urad for khareef season. The Assessing Officer collected the details regarding yield of aforesaid crops from Joint Director of Agricultural (Statistics) for district Barabanki. Thereafter, taking note of the reply of the Joint Director of Agricultural (Statistics), the Assessing Officer noted that the net income computed by assessee at Rs. ....