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2017 (8) TMI 1247 - AT - Income TaxAddition to the sales tax payment - proof of actual payment u/s 43B - Held that - AO made the addition of the remaining amount and the Ld. CIT(Appeals) has confirmed the addition made by the assessing officer. During the appeal hearing also the assessee did not produce any evidence to show that the balance amount of ₹ 3,90,032/- was paid by the assessee before due date of filing return of income. The sales tax payment required to be allowed on actual payment basis as per section 43B of IT Act. During the appeal hearing also, the assessee did not furnish any evidence. Therefore, we do not find any infirmity in the order of the Ld.CIT(Appeals) and the same is upheld. This ground of appeal is dismissed. Addition towards staff salaries - genuineness of payment - proof of maintaining the acquittance register for payment of salaries and deduct PF/ESI - Held that - The assessee is carrying on two divisions i.e. RMC and the civil contracts. The AR argued that the assessing officer has allowed the entire expenditure relating to the civil contracts, but stated to be disallowed the entire expenses relating to ready mix contract business. This fact was not supported by any tangible evidence. The assessee has to maintain the acquittance register for payment of salaries and deduct PF/ESI etc. to establish the genuineness of salaries. In this case assessee has not produced any evidence with regard to payment of salaries and contribution to PF/ESI etc. Therefore we don‟t find any infirmity in the order of the Ld.CIT(A) and the same is confirmed. On this ground, appeal of the assessee is dismissed. Disallowance of 10% of labour charges - Held that - It is undisputed fact that the assessee has failed to furnish the registers and muster rolls relating to the payment of labour charges and did not produce any evidence before us also. The assessee did not produce the details of payment of PF, ESI etc., in support of the labour employed. Therefore, we do not find any reason to interfere with the order of the CIT(Appeals) and the same is upheld. The appeal of the assessee on this ground is dismissed. Addition towards the creditors for expenses - Held that - The assessee did not submit the details and confirmations from the respective sundry creditors for expenses. The Ld. A.R argued that the income is admitted on estimation basis and the expenditure also required to be allowed on estimation basis following the matching concept. This argument is not acceptable since the assessee has to establish the genuineness of expenditure as well as outstanding amount. The assessee failed to substantiate the genuineness of outstanding amount with the tangible evidence such as confirmation from the creditors, details of party wise outstanding with names, addresses and the amount outstanding with PAN No. etc. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A). However, with respect to the bonus outstanding, the assessee required to submit the details with the name, and date of payment and the evidence for payment since the bonus is allowable on actual payment basis u/s 43B of IT Act in the year in which it is actually paid. Therefore, we remit the matter back to the file of the assessing officer to verify the payment of bonus and decide the issue afresh on merits. In the result, out of the total addition made by the assessing officer amounting to ₹ 21.40 lakhs a sum of ₹ 11,40,000/- is confirmed and the addition relating to bonus is remitted back to the file of the assessing officer Addition under the head labour charges - Held that - Whether the expenditure disallowed under head labour charges debited to the P&L account and the outstanding labour charges (Balance Sheet item) are one and the same or different is not clarified in the assessment order. If the outstanding labour charges in the Balance Sheet and the labour charges debited to the P&L account, both are one and the same this amounts to double taxation of the same amount which is not permissible. In case, both are different, in the absence of non production of vouchers and non furnishing the details of outstanding liabilities the disallowance is justified. Therefore, we remit the matter back to the file of the assessing officer and direct the assessing officer to verify the outstanding expenses and the labour charges and decide the issue a fresh on merits Disallowance made u/s 40(A)(3) - Held that - assessing officer disallowed the entire payments made in cash without identifying the specific payments which exceeded ₹ 20,000/- per person, per day. As per the provisions of Section 40A(3) of the I.T. Act, where the assessee incurred such expenditure in respect of which the payment is made to a person in aggregate exceeds ₹ 20,000/-, is not an allowable expenditure. Therefore, it is the obligation on the part of the assessing officer to identify each payment which exceeds ₹ 20,000/- per day and make the disallowance. In this case, no such exercise has been done by the assessing officer. Instead, the assessing officer disallowed the entire cash payments. Therefore, we set aside this ground to the file the assessing officer to identify the payments made in cash or otherwise than by a crossed cheque exceedingRs.20,000/- per day per person and disallow the resulting amount after giving opportunity to the assessee to explain the reasons for making such payments. Accordingly, this issue is remitted to the file of the assessing officer. Disallowances under the various heads including some balance sheet items as well as the expenses - Estimation of income reasonably - Held that - The assessee has maintained the books of accounts which are audited by the qualified CA. As per 44AB of the IT Act, the assessee is required to maintain the regular books of accounts and the income is to be computed in accordance with the books of accounts maintained. As rightly argued by the AO, the assessee is requesting for estimation of income when the AO detected the defects in the books of accounts and failed to furnish the necessary evidence in support of its claim and the same is not permissible. Therefore, we do not find any merit in argument of the Ld.AR to resort for estimation of income. Appeal filed by the assessee is partly allowed.
Issues Involved:
1. General ground. 2. Disallowance under Section 40(a)(ia) of the IT Act. 3. Addition related to sales tax payment. 4. Addition towards staff salaries. 5. Disallowance of labor charges. 6. Addition towards creditors for expenses. 7. Addition under the head "labor charges". 8. Disallowance under Section 40(A)(3) of the IT Act. 9. Alternative ground to estimate income reasonably. Issue-wise Detailed Analysis: 1. General Ground: - Ground No.1 is general in nature and does not require specific adjudication. 2. Disallowance under Section 40(a)(ia) of the IT Act: - The assessee claimed a deduction of ?11,73,630 under earthwork expenses. The AO disallowed this amount as TDS was not deducted. The CIT(A) deleted the addition based on precedents, but the Supreme Court's judgment in Palam Gas Service v. CIT ruled against the assessee. The assessee did not press this ground during the appeal, leading to its dismissal. 3. Addition related to sales tax payment: - The assessee debited ?12,63,637 in the profit and loss account but provided evidence for only ?8,73,605. The AO added the remaining ?3,90,032, and the CIT(A) confirmed this addition. The assessee failed to provide evidence of payment before the due date for filing the return. The appeal on this ground was dismissed. 4. Addition towards staff salaries: - The AO disallowed ?25,23,182 out of ?47,44,386 debited towards staff salaries due to lack of proper records and suspected inflated expenses. The CIT(A) confirmed the addition. The assessee argued that the salaries were necessary for the declared turnover of ?7,84,94,244. However, the Tribunal upheld the CIT(A)'s order due to the absence of evidence like salary registers or PF/ESI contributions. 5. Disallowance of labor charges: - The AO disallowed 10% of labor charges amounting to ?9,92,136 due to lack of evidence for payment. The CIT(A) confirmed this addition. The Tribunal upheld the CIT(A)'s order as the assessee failed to furnish necessary records or evidence. 6. Addition towards creditors for expenses: - The AO added ?21,40,000 under creditors for expenses due to lack of supporting vouchers and confirmations. Out of this, ?10,00,000 was for bonus payable, which is allowable on actual payment basis under Section 43B. The Tribunal confirmed ?11,40,000 of the addition and remitted the bonus-related addition back to the AO for verification. 7. Addition under the head "labor charges": - The AO disallowed ?29,80,000 under labor charges, of which the CIT(A) confirmed ?15,30,000 and remitted ?14,50,000 back to the AO for verification. The Tribunal remitted the matter back to the AO to verify if the disallowed labor charges and the outstanding labor charges were the same or different to avoid double taxation. 8. Disallowance under Section 40(A)(3) of the IT Act: - The AO disallowed ?20,94,917 for cash payments exceeding ?20,000. The CIT(A) confirmed the addition. The Tribunal remitted the issue back to the AO to identify specific payments exceeding ?20,000 per person per day and disallow only those amounts, allowing the assessee to explain the reasons for such payments. 9. Alternative ground to estimate income reasonably: - The assessee argued for income estimation due to unverifiable expenses. The Tribunal dismissed this ground, stating that the assessee maintained audited books of accounts and should not resort to estimation after defects were pointed out. The AO's method of assessment based on the books of accounts was upheld. Conclusion: - The appeal was partly allowed, with certain issues remitted back to the AO for further verification, while other grounds were dismissed or upheld as per the findings of the Tribunal.
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