TaxTMI 
TaxTMI 
2010 (11) TMI 1127
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.... The learned DR relied upon the order of the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below. 3. Ground No.1 of the appeal of the revenue reads as under: "1 On the facts and in the circumstances of the case and in Law, the Ld. CIT(A)-III, Surat has erred in restricting the addition of Rs.26,82,206/- to Rs. 1,00,000/-, made by the Assessing Officer on the ground of disallowance of labour charges." 4. The AO disallowed Rs.26,82,206/- being 30% of the labour charges/payments. The AO observed that the assessee was engaged in construction activity and had subcontracted the work to other contractors. The total payments made to five sub contractors was Rs.89,40....
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....nged before the learned CIT(A) and it was submitted before the learned CIT(A) that all the labour contractors had in their statements recorded by the AO confirmed having worked for the assessee and having received the payments. Proper bills were raised for the work contract and the income was disclosed in their returns of income. The labour contract payment was 28.90% of the total turn over which was the lowest in the last four years. The net profit also increased to 2.22% compared to 1.16% last year whereas gross profit increased to 12.69% compared to 5.58% last year. No defect was found in the books of account and the sub contractors made weekly payments to their workers but actually it is only the weekly expenditure which was paid to the....
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....s would say at the construction site only and their basic expenditure like food and miscellaneous items would be taken care of by the main contractor a the construction site itself and they would be paid their entire wages at the time of their annual break for going to their villages. Therefore, AO's contention that the payments were not made to the laborers is without appreciating the practicality of the construction business. Further, all the sub contractors confirmed working for the appellant and each of them in their statement before the AO categorically stated that they received total payments for the work done by them. Further, the AO's observation that the sub contractor also did not know about the receivables from the appellant is a....
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....ion of the assessee and the material on record correctly noted that the disallowance is totally unjustified. Since the payments have been accepted by the sub contractors and the payments were subjected to TDS and also were made by account payee cheques, therefore, there was no reason to presume that the payments withdrawn by the sub contractors from their accounts have returned back to the assessee. In the absence of any specific material available against the assessee on record, we do not find it to be a fit case for interference. The AO without considering the entire material on record disallowed 30% out of the expenditure which is the major component for earning income by the assessee. No basis has been given as to why 30% out of the tot....