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2020 (1) TMI 954 - AT - Income TaxDisallowance of labour expenses - CIT (A) confirmed disallowance to the extent of 25% instead of 50% disallowed by AO - HELD THAT - CIT(A) has stated that assessee has also produced bills in respect of most of the discrepancies and the gross profit of the assessee firm has tremendously gone up from 4.89% to 14.01% in the earlier years. CIT(A) has held that many discrepancies noted by the assessing officer were explained by the assessee during the course of appellate proceedings but many have not been explained. Therefore, the ld. CIT(A) has restricted he disallowance to the extent of ₹ 25% to the amount of ₹ 37,28,270/-. In the light of the findings of the ld. CIT(A) and considering the there was tremendous jump in the gross profit from 4.89% to 14.01% in the year, we consider it will be reasonable to restrict the disallowance to the extent of 12.5% to meet the end of justice for want of verification on account of not providing proper supporting bill/vouchers. Therefore, addition to the extent of ₹ 18,64,135/- is confirmed. This ground of appeal is partly allowed. Disallowance of salary expenses - HELD THAT - The assessee has only furnished the copies of ledger account but failed to demonstrate with relevant evidences, the nature of work done by the employees, copies of bank statement reflecting the payment made and other relevant evidences that the aforesaid employees have employed with assessee. Therefore, we do not find any reason to interfere in the finding of ld. CIT(A). Accordingly, this ground of appeal of the assessee is dismissed. Disallowance of supervision charges - assessee has failed to substantiate the incurring of such expenses with relevant evidences - HELD THAT - It is noticed that assessee has claimed that such supervision charges paid to Shri Gaurang Patel, however, the assessee has failed to prove the genuineness of incurring of such expenditure with relevant supporting documentary evidences about the nature of work performed by him and details of payment etc., therefore, we do not find any reason to interfere in the finding of ld. CIT(A). Accordingly, this ground of appeal of assessee is dismissed. Addition by treating advance booking as unexplained credit - Identity and creditworthiness of the parties and the genuineness of the transaction were not proved - HELD THAT - The assessing officer has not made any inquiry/verification from the aforesaid parties to contradict the claim of the assessee that amount was received as booking amount. In the light of the above facts and circumstances, we consider that decision of ld. CIT(A) is not justified. Therefore, this ground of appeal of the assessee is allowed. Disallowance on account of unexplained expenditure - assessee has failed to substantiate the genuineness of such payment with any relevant supporting evidences - HELD THAT - It is observed that before the lower authorities, the assessee has not submitted any evidences, detail and nature of expenditure incurred, therefore, the claim of the assessee was disallowed. Even during the course of appellate proceedings before us, the assessee has failed to furnish any relevant supporting evidences to demonstrate that the aforesaid expenditure was incurred for the purpose of business, therefore, we do not find any merit in this ground of appeal of the assessee and the same is dismissed. Disallowance on account unexplained expenditure - HELD THAT - Assessee has not furnished any relevant supporting evidences to substantiate that differences in the purchases was assessed on account of groping change in account. Further at the level of CIT(A) the assessee has failed to meet reconciliation in the aforesaid difference detected by the assessing officer. Even during the course of appellate proceedings before us, the assessee has failed to furnish supporting evidences to demonstrate that the differences in the purchase was arsied on account of grouping change in account. Therefore, we do not find any reason to interfere in the finding of ld. CIT(A). Accordingly, this ground of appeal of the assessee is dismissed. Disallowance as remuneration paid to partner Dashrathbhai S. Chaudhary, HUF - HELD THAT - As relying on P. GAUTAM CO. 2011 (8) TMI 750 - ITAT AHMEDABAD and HEMTEJ IMPRINT, 4, NARAYAN CHAMBER'S 2010 (7) TMI 1100 - ITAT AHMEDABAD claim of remuneration paid to the partners as representative of HUF were allowed.
Issues Involved:
1. Disallowance of 25% of labor expenses. 2. Disallowance of salary expenses. 3. Disallowance of supervision charges. 4. Addition of advance booking receipt as unexplained credits. 5. Disallowance of unexplained expenditure. 6. Disallowance of unexplained expenditure due to difference in purchase register. 7. Disallowance of remuneration to partner acting in HUF capacity. 8. Levy of interest under sections 234A, 234B, 234C, and 234D. 9. Initiation of penalty proceedings under section 271(1)(c). Detailed Analysis: 1. Disallowance of 25% of Labor Expenses: The assessee claimed ?1,65,31,290 as labor expenses. The Assessing Officer (AO) disallowed 50% due to discrepancies in supporting documents, such as undated and unsigned bills. The CIT(A) reduced the disallowance to 25%, acknowledging an increase in gross profit from 4.89% to 14.01%. The Tribunal further reduced the disallowance to 12.5%, confirming an addition of ?18,64,135, considering the significant increase in gross profit and partial verification issues. 2. Disallowance of Salary Expenses: The AO disallowed ?4,25,000 out of ?9,47,366 claimed as salary expenses due to lack of supporting evidence. The CIT(A) upheld the disallowance. The Tribunal also dismissed the appeal, noting the assessee failed to demonstrate the nature of work done or provide relevant evidence. 3. Disallowance of Supervision Charges: The AO disallowed ?2,22,200 claimed as supervision charges due to lack of evidence. The CIT(A) upheld the disallowance. The Tribunal dismissed the appeal, as the assessee failed to prove the genuineness of the expenditure. 4. Addition of Advance Booking Receipt as Unexplained Credits: The AO treated ?19,40,000 received from two individuals as unexplained credits, questioning the identity, genuineness, and creditworthiness of the transactions. The CIT(A) upheld the addition. The Tribunal allowed the appeal, noting that the assessee provided sale deed copies and other documents demonstrating the transactions were genuine booking amounts. 5. Disallowance of Unexplained Expenditure: The AO disallowed ?4,12,500 paid to an individual due to lack of supporting evidence. The CIT(A) upheld the disallowance. The Tribunal dismissed the appeal, as the assessee failed to provide any relevant evidence. 6. Disallowance of Unexplained Expenditure Due to Difference in Purchase Register: The AO added ?3,34,874 to the total income due to discrepancies between the purchase register and the Profit & Loss account, which the assessee attributed to grouping changes. The CIT(A) upheld the addition. The Tribunal dismissed the appeal, noting the assessee failed to provide supporting evidence for the grouping changes. 7. Disallowance of Remuneration to Partner Acting in HUF Capacity: The AO disallowed ?7,50,735 claimed as remuneration paid to a partner in HUF capacity, citing Explanation 4 to section 40(b) which allows remuneration only to individual partners. The CIT(A) upheld the disallowance. The Tribunal allowed the appeal, referencing decisions from Co-ordinate Benches that remuneration paid to partners representing HUFs is allowable, as the individual is considered a partner. 8. Levy of Interest Under Sections 234A, 234B, 234C, and 234D: The issue of interest levy under sections 234A, 234B, 234C, and 234D was raised but not specifically addressed in the judgment summary provided. 9. Initiation of Penalty Proceedings Under Section 271(1)(c): The initiation of penalty proceedings under section 271(1)(c) was also raised but not specifically addressed in the judgment summary provided. Conclusion: The appeal was partly allowed, with significant reductions in disallowances related to labor expenses and the addition of advance booking receipts, while other disallowances were upheld. The Tribunal's decisions were based on the evidence provided and adherence to relevant legal precedents.
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