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Issues Involved:
1. Disallowance of service charges paid to M/s. Jay Infra Trade Pvt. Ltd. u/s 40A(2)(b) of the I.T. Act, 1961. 2. Disallowance of 1/7th of total expenses on account of labour contract charges, repair and maintenance charges, and miscellaneous expenses for the Assessment Year 2004-05. Summary: Issue 1: Disallowance of Service Charges u/s 40A(2)(b) Both these appeals concern the disallowance of Rs. 11,01,535/- for each of the Assessment Years 2003-04 and 2004-05, paid to M/s. Jay Infra Trade Pvt. Ltd., by invoking the provisions of section 40A(2)(b) of the I.T. Act, 1961. The Assessing Officer (AO) found the service charges excessive and unreasonable, allowing only Rs. 98,465/- and disallowing the rest. The CIT(Appeals) deleted the addition, holding that no imaginary attempt could be made to split the payment which was otherwise found to be genuine. The Tribunal upheld the CIT(Appeals)' decision, emphasizing judicial discipline and consistency with past decisions, including those of the Respected Co-ordinate Bench ITAT Ahmedabad and the Hon'ble Supreme Court in Union of India v/s. Paras Laminates (186 ITR 722). Issue 2: Disallowance of 1/7th of Total Expenses for AY 2004-05The AO disallowed Rs. 13,97,687/-, being 1/7th of the total claim of Rs. 97,83,809/- on account of labour contract charges, repair and maintenance charges, and miscellaneous expenses, due to the assessee's inability to produce bills and vouchers for verification. The CIT(Appeals) deleted the disallowance, noting that the expenses had decreased compared to the preceding year and were subject to TDS. However, the Tribunal found that the CIT(Appeals) granted relief without proper verification and remanded the issue back to the first appellate authority for a de novo decision, ensuring reasonable opportunity of hearing to both sides. Conclusion:The appeal of the Revenue for Assessment Year 2003-04 is dismissed, whereas for Assessment Year 2004-05 is partly allowed for statistical purposes.
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