TaxTMI 
TaxTMI 
2025 (7) TMI 880
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....ed in law and on facts and in circumstances of the case, in deleting the addition of Rs. 42,57,000/- made by the Assessing officer, on account of 50% disallowances on account of excavation and compaction expenses." 3. The appellant craves to be allowed to add and alter any fresh ground(s) of appeal and/or delete or amend any of the ground(s) of appeal." 3 Brief facts leading to the case are that the assessee company is engaged in the business of civil and road construction as government contractors/subcontractors and has furnished its original return of income for A.Y. 2016-17 on 17.10.2016 declaring an income of Rs. 1,33,91,530/-. The case was selected for scrutiny under CASS. During the year under consideration the assessee company has claimed labour expenses of Rs. 85,14,000/- under head "Excavation and Compaction", and ld. AO having not satisfied with explanation rendered by the assessee has disallowed 50% of expenses on adhoc basis. 3.1 Apart thereof, the Ld. AO has noticed that the assessee company has also claimed expenses of Rs. 15,38,36,700/- under the head "Sub Contract Work". Even assessee company itself is a sub-contractor and engaged in sub-contract work....
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.... Nil Ashish Kumar 1,09,01,250.00 Nil Bal Mukund Sharma 15,24,600.00 Nil Mukesh Kumar Prajpati 25,01,400.00 Nil Total 15,38,36,700.04 14,33,12,243.96 Contractual Receipts 27,12,24,112.00 19,84,26,770.00 % of Sub-Contract Exp. 56.72% 72.22% 3.2 The AO made the disallowance on the basis of following observations: 1. The appellant received contract from H.G. Infra Engg. Ltd. by entering into agreement on 26.07.2014 but the work was subcontracted to Saran Construction Co. vide agreement dated 24.06.2014. 2. The assessee company did not submit any documents which could imply that any work actually done by the sub-contractor M/s R. S. Infra & M/s Saran Construction Co. 3. Mere making payments through banking channel and deducting TDS on the same does not make any expense an allowable expense under section 36 & 37 of the Act. Besides the assessee is also required to establish the business purpose. 4. The work order is issued on the letter head of the company and not the stamp paper. 5. The assessee has failed to establish the genuineness of the subcontract expenses Based on ....
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....king payment and deducting TDS is very strong evidence because it gives the entire trail as to whom the payment was made and also the TDS implies that the person receiving payments is duly filing the return of income. The PAN No. of the recipients can also enable the Assessing Officer to know their true statues. It appears that the Ld. AO is thoroughly under estimating these compliance of TDS and making payments by banking channels. It becomes the duty of L.d. AO now to show why he thinks otherwise. 4. Regarding the fact that the contract is made on plain paper/letterhead, the Ld. AO has failed to show as to why the contract on letter head is not acceptable or how it violates the Indian Contract Act. The assessee apart from the contract is also giving corroborative evidences to show the execution of the contract. Moreover the contracts were duly accepted in the F.Y. 2014-15 and how in this year any fact is different. 5. That the quantum of expenses is beyond doubt because the actual work was done for which the payment was duly received by the assessee. Based on the work done by the sub-contractors, payments were made after deduction of TDS. The Ld. AO has not made....
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....questions raised by the Ld. AO - "Your goodself has proceeded on a very wrong premise that the assessee has claimed HUGE labour expenses. Your kind attention is invited to the following facts- A.Y. 2016-17 Α.Υ. 2015-16 Amount % to Turnover Amount % to Turnover Contract Receipts 271224112 198426770 Labour Payments- Excavation & Compaction Expenses 85140000 3.14% 7013100 3.53% Structure Exp. 3209400 1.18% 3195300 1.61% Survey Safety Mining Expenses 2813100 1.04% 3007000 1.52% Total 14536500 5.36% 13215400 6.66% Assessment proceedings us 143(3) us 143(3) An expenditure cannot be seen in isolation. It has to be relative and should be corroborated with the revenue. From the aforesaid figures, it is crystal clear that your presumption of huge labour expenses is without substance, in fact the labour expenses of the assessee have been substantially reduced in each segment and overall it has reduced from 6.66% to 5.36%. This comparison gains greater significance b....
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...., but what were those expenses, he should make out in the assessment order, only then he can disallow them. ............... no interference is called for in the order of Id. CIT(A) on this issue, the first ground of appeal is rejected." 4.4. It is also noted that the appellant has been consistently allowed these expenses in earlier years. Since no cogent reason is put forth by the AO for the disallowance and the fact that the appellant has been allowed relief in earlier years, I do not see any reason to uphold the disallowance. The addition of Rs. 7,69,18,350/- and Rs 42,57,000 is ordered to be deleted. These grounds of appeal are ruled in favour of the appellant." 7. We have perused the order of assessment and submissions made by assessee before the lower authorities and the decision of the Ld. CIT(A). Even otherwise the Ld. AR brought to the notice of the Bench that, subsequent to the decision of the Ld. CIT(A), in pursuance to search conducted on the assessee, in the order of assessment dated 29.09.2021 u/s 153A read with 143(3) of the Act, for year under consideration itself, disallowance of sub-contract expenses paid to one of subcontract under considerati....