AI Drafter 
TaxTMI 
TaxTMI 
2012 (5) TMI 734
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.... Fuel and Petrol charges u/s 69 and lump sum disall. 55,87,432 5. Repair and Maintenance u/s 40A(3) and u/s 40a(ia) 3,67,256 6. Legal Fees u/s 40a(ia) 39,100 7. Wages Lump sum disallowance of 10% 26,80,466 8. Outstanding Wages u/s 69 62,12,600 Total R/off 3,09,63,950/- 2.3 The basic facts discussed by the ld. CIT(A) at pages 2 to 5 of his order are as under:- ''2.1.1. The basic facts of the case are that the assessee firm is engaged in the business of a civil contractor, executing work on contract basis for various government apartments and others. The return of income was filed on 08-10-2008 declaring a total income of Rs. 1,11,10,330/- (before claiming remuneration and interest to partners) on total contract receipts of Rs. 20,27,87,825/-giving N.P. rate of 9.96%. The AO, while finalizing the assessment proceeding made the following observations:- (a) In Para - 3.B of the Assessment Order, it was noticed by the AO that a sum of Rs. 8,61,928/- has been debited under the head "Freight Charges". During the relevant year out of the above, a payment of Rs. 713662/- has been made to M/s G.R. Con....
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....(a)(ia) of the Act. - In the Para - 3.D(e) of the order, the AO had discussed that the Assessee has shown various payments to "sundry creditors, of Rs. 85,00,000/-. It is further seen that such payments have not been made and are shown as 'outstanding liability'. The assessee was given opportunity to file documentary evidences in support of such expenditure as claimed. However, the assessee failed to provide any details on this account. In view of the above, the AO held that the assessee himself was not aware of the details of such expenses, thus treated them as bogus in nature. The expenses of Rs. 85,00,000/- were, therefore, disallowed and added back to the total income. (d) In Para - 3.E(a) of the Assessment Order, it is mentioned that the assessee has shown various payments of Rs. 40,57,317/- shown payable to "sundry creditors' under the head "Diesel & Petrol Expenses". It is further seen that the payment has not been made and are shown as 'outstanding Liability'. As the assessee could not submitted necessary details in this regard, therefore, it was concluded that such expenses payable are bogus, in nature and Rs. 40,57,317/- are therefore....
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....ra - 3.A to 3.H, on different grounds and under different heads, as discussed above.'' 2.4 The assessee preferred an appeal before the ld. CIT(A). The detailed submissions were filed before him which are tabulated by the ld. CIT(A) at pages 5 to 11 of his order are as under:- ''2.2 During the appellate proceedings, Id. A.R. filed various written submissions and contented as under- 2.2.1. Additions made towards outstanding expenses and on adhoc basis:- Regarding disallowance out of expenses like Fuel and Petrol Charges, Legal Fees, Wages, Outstanding Wages etc., the AO argued in following manner:- (a) The Ld. AR argued that the A.O. has pointed out many defects in the books of accounts in the Assessment Order, such as the discrepancies regarding non maintenance of regular books of accounts, and Stock Register, non availability of proper and complete evidence or vouchers of various expenses claimed, etc. However the appellant was having proper books of account and all necessary details and documents to support the profit declared by him. (b) The Ld. AR further submitted that appellant has declared a NP @ 5.48%, which is higher, as compared to the appellant's ....
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.... Appeal by department. Dismissed Matter is pending before AO In view of the above, the Ld AR submitted that the AO has not made assessment for the current year, according to the past history of the appellant. In the Assessment year 2006-07, Hon'ble ITAT Jaipur bench have passed an order by remanding the case to AO, while holding that the previous history is the best guide especially when no basis have assigned by the AO, while making lump sum disallowances out of the claimed expenses by setting aside the disallowances in question made out of claimed expenses. (d) The Ld AR argued that, in the present case Ld. AO has rejected the book results and made several additions to the returned income. It is most important while making the assessment that AO must go to the root of the matter. Several defects have been pointed out by the AO in the books of accounts maintained by the appellant. Thus, by implication, the AO have found the books of accounts maintained by the appellant as not reliable to deduce the correct income of the appellant. In these circumstances books of accounts of the appellant were rejected by implication. It....
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....n the amount is payable and not applicable where expenditure is already paid. The word payable is not defined though the word "paid" is defined under s. 43(2) to mean actually paid or incurred. Hence, by implication the word payable does not include paid. The difference in the word paid and payable is also there in the rules for depositing the TDS and also for levy of interest under s. 234B where interest is worked out on the basis of tax actually deducted at source and not on the basis of tax deductible. Section 40(a)(ia) otherwise being a legal fiction needs to be construed strictly. The CBDT in circular no. 5 of 2005, dt. 15th July 2005 has also clarified that the provision of the Section 40(a)(ia) is to augment compliance of TDS provision in the case of residents and curb bogus payments to them. In present case the payment is not in dispute and on the issue whether tax is to be deducted at source on such payment is not free from doubt. In any case since appellant has made actual payment of the expenses as per the evidence placed on the record, provisions of Section 40(a)(ia) are not applicable. He relied on the case of "Jaipur Vidyut Vitran Nigam Ltd. Vs. DCIT (2009) 123 TTJ (J....
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....and residing in very remote area, that area have not been served by the banking services. The payment made to Amit Filling Station as mentioned at serial no. 10 and 11 above, was made in parts and one payment does not exceed to Rs. 20,000/- . Although due to centralized accounting system, one journal voucher has been passed for payments to single party in a month. In the given case the payment has been made by Barloot Site, and after getting the details from Barloot site, a consolidated voucher has been passed of Rs. 114240/- and Rs. 100000/- respectively. 2.2.4. With regards to the additions made under section 40(a)(ia), 40A(3), 69 etc., as discussed above, the Ld. AR also relied upon various case laws, which are being discussed as under10 i.) Once the books are rejected, whether implied or specifically mentioning under section 145, than addition under section 40A(3), it was held in the case of CIT vs. Banwari Lal Banshidhar (1998) 229 ITR 229 (ALL) could not be made, as there is no deduction claimed by the appellant firm towards any these expenses. that, when income of the appellant was computed applying the gross profit rate and when no deduction was allowed in regard t....
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....0% of Wages, 5% of Diesel and Petrol, Expenses, Wages Payable, Hire Charges Expenses and Diesel and Petrol Expenses totaling to Rs. 2,27,66,258/-, were reduced to Rs. 31,22,932/-. The other additions under the head (ii) and (iii) which were made u/s 40(a)(ia) and 40A(3), were deleted by the ld. CIT(A) by giving separate findings at pages 14 and 15 of his order. Under head (iv) - other Misc. Addition of Rs. 3,16,191/- was sustained by the ld. CIT(A). 2.7 The finding in respect of adhoc disallowance under head (i) at Rs. 2,27,66,258/- has been given by the ld. CIT(A) vide para 2.3.1 of his order in the following manner. . ''As stated above, the AO has made such additions as he found the books of accounts of the appellant as not reliable and also in wants of sufficient details and supporting documents in this regards. While opposing the above, the Ld. AR has argued that when the books of account have been impliedly rejected by the AO, then best course of action would have, on the part of the AO, to make a composite addition, i.r.o., the net profit only, then making separate addition on different heads as such. In this regard, the decisions of Hon'ble ITAT- Jaipur Bench in ....
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....s squarely binding on the present proceeding as such. Accordingly, while respectfully following the verdict of the Hon'ble ITAT, given in the A.Y. 07-08 of the appellant, I also hold that the AO was not justified in making separate addition on different heads, under deemed rejection of books of a/c u/s 145(3). It is rather felt that he should have make a composite/common addition towards the lower net profit shown by the appellant. The undisputed fact is that the N.P of the immediate preceding year, (i.e. A.Y.07-08), has been estimated by the Hon'ble ITAT at 11.50% in the relevant appellate order, whereas in the current year the same is offered at 9.96% only. Accordingly while following the principles purported by the Hon'ble ITAT as discussed above, the AO is hereby directed to adopt the N.P of previous year i.e. 11.5%, in the current year also (subject to Depreciation, interest and remuneration payable to the partner etc.) to cover up all the discrepancies and short-comings found i.r.o. books of accounts and records, leading to the different additions made by the AO, as referred hereinabove. In other words, an addition to the extent of Rs. 3122932/- [1.54% (gap in the n.p. rates)....
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....th the AO was that after rejecting the books of accounts, the profit rate should have been applied as per past history of the case. The ld. CIT(A) has taken into consideration the past history of the case and then following the order of the Tribunal for the immediately preceding year, had reduced the addition to the reasonable extent. It was further explained that in earlier year i.e. assessment year 2006- 07 also, the Tribunal has held that net profit rate has to be applied as per past history of the case after rejecting the books of accounts. Accordingly, it was submitted that there is no defect in the order of the Tribunal which is liable to be sustained. 2.10 We have heard the rival contentions and considered them carefully. After considering the submissions of both the parties as well as the material on record and on which the attention of the Bench was drawn, we are of the view that the ld. CIT(A) has adopted the reasonable approach. It is seen that in the assessment year 2006-07, similar additions were made and the matter reached to the stage of the Tribunal and the Tribunal has directed the AO to allow the net profit rate as per past history of the case after rejecting t....
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....e with the findings of the Tribunal, therefore, we see no reason to interfere in the findings of the ld. CIT(A) on the issue. Accordingly, we confirm his order in respect of various disallowances made by the AO and reduced by the ld. CIT(A). 3.1 The next ground of the Revenue is against deletion of addition of Rs. 73,27,214/- made by the AO u/s 40(a)(ia) of the Act. 3.2 The ld. CIT(A) has given his findings in para 2.3.2 at page 14 of his order which is as under:- ''2.3.2 Additions made u/s 40(a)(ia) - Rs. 7327214/- In this regard, it can be seen that the AO has made different additions of above nature for non compliance of the provision of sec. 194C, towards the payments made to different sub contractors. In this regards the Ld. AR has pointed out that in view of the decision of the Hon'ble ITAT Jaipur Bench's decision in case of Jaipur Vidyut Nigam Ltd. Vs. DCIT (2009) 123 TTJ (Jp)", the provisions of sec. 40 (a)(ia) are applicable in the situation, wherein the amount due to the sub-contractors are still payable, on the last date of relevant F.Y.. In the present case, the AO has disallowed even such type of expenses, which were paid to the sub- contractors....