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2013 (6) TMI 549 - AT - Income TaxUnaccounted purchases - not supported by any evidence such as bills or evidence of payment etc. - disallowance of labour charges - Held that - There is no dispute to the fact that the assessee, during the course assessment proceedings, has not furnished the full details of the labour charges for which the AO made disallowance of Rs.50 lakhs out of the labour charges paid in cash to the tune of Rs.50,42,100/-. CIT(A) after obtaining the remand report from AO sustained addition of Rs.19,42,515/- out of the addition of Rs.50 lakhs & noted that certain unaccounted payments are recorded in the ledger in the form of cash paid to various persons mostly labour contractors/labour supervisors whereas no such payments are recorded in the cash book. It is the submission of the assessee that the addition of Rs.19,42,515/- on account of labour charges brings the margin of profit to 25%, which is not possible in this line of business & under identical facts and circumstances the same AO in assessee s own case for A.Y. 2008-09 has estimated the profit from contract work at 8%. Thus finding force in the above contention of assessee & the fact that during the impugned assessment year there are certain defects, i.e. entries found in the ledger are not found in the cash book, estimation of profit @10% of the turnover will meet the ends of justice - ground raised by the assessee is partly allowed.
Issues:
1. Delay in filing appeal by the assessee. 2. Disallowance of consumable purchases and hiring charges. 3. Disallowance of labor charges. 4. Adverse inference on discrepancies in payments. 5. Addition of Rs.19,42,515 on labor charges upheld by CIT(A). 6. Estimation of profit percentage by the Assessing Officer. Issue 1: Delay in filing appeal by the assessee The assessee filed an appeal with a delay of 13 months, leading to a condonation petition. The delay was considered, and after hearing both sides, the delay was condoned. Issue 2: Disallowance of consumable purchases and hiring charges The Assessing Officer disallowed Rs.1,00,900 and Rs.1,42,000 on account of unsupported consumable purchases and hiring charges, respectively. The assessee did not challenge these additions before the CIT(A). Issue 3: Disallowance of labor charges The Assessing Officer disallowed Rs.50 lakhs on labor charges due to lack of supporting evidence. The CIT(A) restricted the addition to Rs.19,42,515 after considering additional evidence and discrepancies in vouchers. Both the Revenue and the Assessee appealed against this decision. Issue 4: Adverse inference on discrepancies in payments The Revenue contended that adverse inferences should have been drawn on discrepancies in payments, alleging fabrication of vouchers by the assessee. The CIT(A) upheld the disallowance based on specific discrepancies pointed out in the remand report. Issue 5: Addition of Rs.19,42,515 on labor charges upheld by CIT(A) The CIT(A) upheld the addition of Rs.19,42,515 on labor charges, considering unaccounted payments recorded in the ledger. The Assessee challenged this decision in their appeal. Issue 6: Estimation of profit percentage by the Assessing Officer The Assessing Officer estimated the profit percentage at 10% of turnover due to discrepancies in accounts and unexplained payments. The Tribunal considered the facts and circumstances, comparing it to a similar case for the next assessment year, and directed an estimation of profit at 10% of turnover, dismissing the Revenue's appeal and partly allowing the Assessee's appeal. This judgment addressed various issues including delay in filing the appeal, disallowance of consumable purchases and hiring charges, disallowance of labor charges, adverse inferences on discrepancies in payments, the CIT(A)'s decision to uphold the addition on labor charges, and the estimation of profit percentage by the Assessing Officer. The Tribunal considered evidence, discrepancies in vouchers, and the nature of the business to make a decision. The Revenue's appeal was dismissed, and the Assessee's appeal was partly allowed based on the Tribunal's assessment of the facts and circumstances presented.
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