2010 (11) TMI 1127 - AT - Income Tax

Summary

Issues involved: Disallowance of labour charges, Disallowance of various expenses

Disallowance of labour charges:
The AO disallowed Rs.26,82,206/- (30% of labour charges) due to irregularities in payments to subcontractors. Subcontractors confirmed working for the assessee but AO suspected money was routed back to the assessee. The CIT(A) restricted the disallowance to Rs.1,00,000/- citing lack of proof of money reverting back to the assessee and practicality of construction business. The Tribunal upheld the CIT(A)'s decision, noting the genuineness of payments, TDS deductions, and lack of evidence against the assessee. The AO's disallowance lacked basis and the CIT(A) rightly deleted the addition.

Disallowance of various expenses:
The AO disallowed Rs.82,510/- (20% of certain expenses) for potential non-business use. The CIT(A) accepted some personal use elements but restricted the addition to Rs.41,190/- as many expenses were found to be related to business activities. The Tribunal upheld the CIT(A)'s decision, stating that the expenses were connected with the business activities of the assessee. No adverse material was found against the assessee, leading to the dismissal of the revenue's appeal on this issue.

In conclusion, the Tribunal dismissed the departmental appeal, upholding the CIT(A)'s decisions on both issues.