TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 978
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....2. 2. Upon hearing, we note that the issues raised in all the two appeals and cross objections are similar basing on the same identical facts. With the consent of both the parties, we proceed to hear all the two appeals and cross objections together and to pass a consolidated order for the sake of convenience. 3. First, we shall take up Cross Objection in CO No. 27/PUN/2018 (Arising out of ITA No. 1497/PUN/2016) for A.Y. 2011-12. The ITA No. 1497/PUN/2016 has been dismissed as withdrawn on account of low tax effect. 4. The brief facts of the case are that the assessee is a company and is engaged in the business of civil and electrical contracts. The projects of assessee are located across various cities in India. The contracts undertaken by the assessee are highly labour intensive. To fulfill these contracts the assessee company either employs its own labour force or outsources the work to other subcontractors. 5. The only issue raised by the assessee to be decided is as to whether the CIT(A) is justified in restricting the disallowance at 2% of total labour expenditure in the facts and circumstances of the case. 6. Heard both the parties and perused the material available on ....
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.... of Krishna Electricals & Engineers. Further, the trading & profit & loss account for A.Y. 2011-12 which reflects work done of Rs. 1,00,44,368/- in the F.Y. 2010-11, which is much more than the labour expenditure of Rs. 43,58,502/- booked by the assessee in his accounts in the name of Krishna Electricals & Engineers. We note that the ledger account of assessee maintained by Krishna Electricals & Engineers in its books was also filed by Shri Bhoi before the AO, wherein, it is seen, the total of the debit entries made in the assessee's ledger account on account of bills raised by Krishna Electricals & Engineers on the assessee for A.Y. 2010-11 amounts to Rs. 51,53,739/- and for A.Y. 2011-12 amounts to Rs. 24,08,710/-, which clearly suggests that if this party has done work of only Rs. 51,53,739/- for A.Y. 2010-11 and Rs. 24,08,710/- for A.Y.2011-12 for the assessee, in respect of which other parties must have done the remaining work to arrive at the sales as mentioned in the trading account. 9. We note, further, on perusal of copies of Bills raised by M/s. Krishna Electricals & Engineers on the assessee, which were filed by M/s. Krishna Electricals & Engineers before the AO show....
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....is of the turnover as per Form 26AS and no separate record for M/s. Shalaka Infra Tech Pvt. Ltd. was maintained. The ld. AR submits that the confirmation from Mr. Mohan Shivatare proprietor of M/s. Rohan Electrical of the account of M/s. Rohan Electrical company was filed before the AO and all the payment to the labour contractor have been made through cheques by deducting the tax at source through the normal banking channel. We note that the AO in his order observed that as per the statement of Mr. Mohan Shivatare recorded on 07-03-2013 vide Q. No. 5 that he used to make payments to the labour engaged by him on fortnightly basis and vide Q. No. 11 the labour payment was made by him out of the payments received form M/s Shalaka Infra Tech Pvt. Ltd. Further, as per the ledger of Rohan Electricals in the books of account of the assessee M/s Rohan Electricals has carried out the cable laying work of more than Rs. 85.75 lakhs in the F.Y. 2009-10 and doubted that during this period M/s. Rohan Electrical have received payment of only Rs. 41.96 lakhs from the assessee and according to AO, we note that the labour engaged by M/s. Rohan Electrical remained unpaid, concluded that the expenses....
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....nts proves the same. The ld. AR vehemently contended that the entire amount of the bills raised by the sub-contractors are not required to be disbursed to the labourers and the labour content is only a part of the expenses of the sub-contractors, according to him there is an element of profit in the sub-contracts, in addition the sub-contractors also deploy their own funds. We note that the proprietors of Rohan Electricals & Krishna Electricals & Engineers have stated in their statements that all the payments to the labour was made by them only out of the payments received from the assessee, the ld. AR submits that it is only to avoid explaining to the Revenue their own sources of funds for payments of the labour. Further, we note that all the payments to M/s Krishna Electricals and Engineers and Rohan Electricals have been made through banking channels and the copies of the relevant bank accounts showing relevant debit entries were filed before the AO. We find that the payment of labour charges constitutes a major portion of the expenses of these contracts and the assessee has duly deducted TDS on the labours expenses claimed by it and M/s. Krishan Electrical and Engineers have cl....
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....ed u/s. 133(6) of the Act carries no evidence the allegation of the cash is being withdrawn immediately after credit of cheque cannot be accepted. Further, we note that the Managing Director of assessee clearly stated that all the payments paid to the labour contractors are genuine and we find, the AO could not bring on record anything contrary to the statement made by the Managing Director except making the allegation that the said Managing Director refused to cross-examine the concern persons of all the four entities i.e. M/s. Krishna Electricals and Engineers, M/s. Rohan Electricals, M/s. Kalyani Electricals and M/s. Om Electricals. 18. Another contention raised by the ld. AR is that there was no adverse finding against the credits found in Form No. 26AS and the AO without examination the same held the payments made to all these four entities are not genuine, in our opinion, without any basis on record. We note that the AO made disallowance at 4% of total labour expenses (Rs. 47,15,94,654/- @ 4%) is Rs. 1,88,63,786/- which is inclusive of disallowance made against M/s. Krishna Electricals and Engineers and M/s. Rohan Electricals which clearly establishes there was no basis made....
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....find that in Para No. 501 of the assessment order, without there being any examination and verification proceeded to disallow labour expenses being excessive payment by the assessee on M/s. Rohan Electricals and M/s. Kalyani Electricals only on presumption that in A.Ys. 2010-11 and 2011-12 disallowance were made against two entities. On perusal of the assessment order from Para Nos. 5.2 we find that the AO mentioned profit and loss account for the period from 01-04- 2010 to 31-03-2011 which is relevant to A.Y. 2011-12 which amply proves that there was no enquiry and examination by the AO in respect of above said three entities separately concerning the year under consideration. We also note that the statements of Shri Krishna Dayaram Bhoi representing M/s. Krishna Electricals and Engineers and bills raised by the M/s. Krishna Electricals and Engineers were reproduced at Para Nos. 4, 5 and 6 of the paper book which clearly demonstrate that the statements of Shri Krishna Dayaram Bhoi representing M/s. Krishna Electricals and Engineers and bills raised by M/s. Krishna Electricals and Engineers shown A.Y. 2010-11 but not to the year under consideration. Further, the AO also reproduced ....
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..... AR submits that the assessee is not interested to prosecute ground No. 3 and requested us to treat the same as not pressed. Accordingly, the ground No. 3 is dismissed as not pressed. 27. Ground No. 2 raised by the assessee is as to whether the CIT(A) is justified in confirming the disallowance on labour expenses to an extent of Rs. 16,63,524/- in the facts and circumstances of the case. 28. We note that the ld. AR placed on record the details of expenditure for ETC and Civil Work relating to Government contractor for the period of 01-04-2011 to 31-03-2012 relevant to the year under consideration wherein we note that the assessee debited an amount of Rs. 46,37,67,463/- which is reflected in the assessment order relating to 109 parties. We held in the appeal filed by the Revenue in the aforementioned paragraphs that the assessment made by the AO on ad hoc basis is not justified without there being separate enquiry concerning the year under consideration. We find that as rightly pointed by the ld. AR that no discrepancies or whatsoever material concerning the same were reflected in the assessment order against M/s. Rohan Electricals, M/s. Kalyani Electricals and M/s. Sanjivani Ele....
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.... AO was that the complete address of M/s. BVG India Limited, BESCOM Karnataka were not submitted, but, we note that vide submissions dated 03-11-2015 the assessee brought on record the complete details of the work. Further, the AO observed that the notice issued u/s. 133(6) of the Act to M/s. BVG India Limited was returned as "not served". We note that in response to notice u/s. 133(6) of the Act, the copies of invoices raised by BVG India Limited on the assessee towards the work executed by them were submitted before the AO vide Annexure III of submission dated 12-02-2016. The assessee vide Annexure IIIA-IIID brought on record complete relevant documentation of transaction with BVG India Limited i.e. description of work allotted by BESCOM, Work Order allotted by BESCOM to the assessee, Ledger Extract of BVG India Limited appearing in books of assessee along with invoices raised by BVG India Limited on the assessee and ledger Extract of BESCOM in the books of the assessee and invoices raised by the assessee on BESCOM. TDS has been deducted on advance payments made to them in the previous Assessment Years i.e. A.Y. 2012-2013 and corresponding invoices towards the same were booked in....