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TaxTMI 
TaxTMI 
TaxTMI 
2020 (8) TMI 278
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....re assigned by the Respondent/Assessee/ Contractor were not produced before the Assessing Authority upon summons being issued to them and thereupon, disbelieving their existence and the sub contract work carried out by them, the entire payments made to them were disallowed by the Assessing Authority and they were added back to the income of the Assessee. 4. On appeal by the Assessee before the learned Commissioner of Income Tax (Appeals), the said addition was restricted to 10% of the total sum of Rs. 4,41,08,210/- on the agreement of the Assessee and thus, relief to the extent of 90% was granted by the Commissioner of Income Tax (Appeals), which order was upheld by the learned Tribunal by the order impugned before us. 5. The following substantial questions of law are suggested in the Memorandum of Appeal filed by the revenue:- "(i) Whether the Tribunal was correct in restricting the disallowance to 10% of expenditure of Rs. 4,41,08,210/- incurred towards subcontractors even though the assessee had failed to prove the identity, credibility and genuineness of the sub contractors? (ii) Whether the Tribunal was right in not appreciating the findings of the assessing officer that....
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.... 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 increase in GP and Net profit ratio declared by the appellant as compared to the GP and Net profit ratio declared in the earlier years. However the net profit declared by the appellant at 3.83% is less than the 5% of the Net profit accepted by the department in the earlier years. The 5% of the Net profit on the turnover of Rs. 3334.16 lacs comes to Rs. 166.7 lacs. The appellant had de....
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....ce 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 parties in response to summons issued to them have furnished the copies of income-tax return and also copies of bank account. Some of the parties also confirmed that they do not have invoice copies and maintain only Method book which was returned by the assessee. The copy of M.Book gave details of work done for a particular period, measurement up to the date of work with the signature of ....
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....ppreciated as held by the Tribunal in the case of EDAC 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. W....
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....sessing Authority, and one of them being 94 years old, the Assessing Authority was justified in believing that the payments made to those Sub contractors were not the actual expenditure incurred by the respondent/assessee Contractor and therefore, he was justified in disallowing the same and adding back the same as the income of the Assessee. He also submitted that though the learned Commissioner of Income Tax (Appeals) had found that 11 out of these 14 sub contractors had not appeared before the Assessing Authority but submitted their confirmation forms, the payments made to them tallied with TDS (Tax Deducted at Source) claimed by the Respondent/Assessee Company. However, since these persons were not produced before the Assessing Authority, no proper verification could be carried out by the Assessing Authority for such payments made to them, and merely on the basis of Measurement Books (M Book) maintained by the Respondent Contractor Company, the allowance could not be made. 8. Upon the court's question, however, the learned Senior Standing Counsel for the Appellant/Revenue was unable to satisfy as to how the work, in the absence of sub contractors, was really carried out by....
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....hority that some of the sub contractors could not be produced before the Assessing Authority, does not result in any perversity in the findings of the learned Commissioner of Income Tax (Appeals) as well as the learned Tribunal. 13. It is well known that where the books of accounts maintained by the contractors are not accepted by the Department, the estimation of profit made on the basis of history of Gross Profit rate and Net Profit rate of the Assessee in the previous years or comparable cases of contractors can be made. Once such profit rates are compared, the additions on account of non confirmation or non production of the sub contractors, etc. is totally irrelevant and cannot be made. 14. In the hierarchy of the fact finding bodies created under the Income Tax Act, obviously the findings of the Assessing Authority stand superseded for all purposes, by the findings of the higher appellate authorities. Unless glaring perversity in the findings of the appellate authorities are pointed out and established by the Revenue in the Appeals filed by them under Section 260A of the Act, there is nothing for the High Court or Constitutional Courts to do in such matters. The findings of....