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TMI Blog1994 (2) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... d income-tax return for the transitional previous year for 19 months up to 31-3-1989. During the previous year in question, the assessee took up two projects, namely, 'Hill view' and 'Parimala Bhawan'. The total turnover was Rs. 15,33,000. The gross profit declared was Rs. 1,08,612 and the net profit declared was Rs. 51,065. The assessee is a Commerce graduate with no prior experience in construction and that too in apartments. The assessee handed over civil works to two sub-contractors M/s. A. Gantayya and M/s. Sree Venkateswara Engineers. The assessee maintained books of account for his business. In the profit and loss account, a sum of Rs. 13,70,740 was debited and was shown as having been paid to sub-contractors. The assessee entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned. Thus the Assessing Officer passed his assessment order dated 30-3-1990 under section 143(3). The Deputy Commissioner of Income-tax (Appeals), Visakhapatnam, on appeal by the assessee, deleted the addition. 3. Before the Deputy Commissioner. It was argued that details about salary and other things were never asked to be produced and all other details were submitted which were not doubted. The Assessing Officer has not drawn any adverse inference from payments made to sub-contractors. Various reasons stated in the assessment order do not throw any specific light of defects in the accounts. Therefore, the addition made had no basis. The Deputy Commissioner (Appeals) held that the Assessing Officer had not noticed any specific defect whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the law is stated to be that 'payment in excess of the amount which an assessee is liable to pay under the terms of an agreement is not an allowable deduction under section 37(1)'. Here in this case, the assessee merely filed sub-contracts. The Assessing Officer wanted to verify how much payment was made under each of the sub-contracts and whether such payments made are in excess of or in short of the payment contemplated to be made or agreed to be made under each of the sub-contracts. The Assessing Officer has got authority to verify the payments under the sub-contracts. This is clearly to be seen from India Cements Ltd.'s case. Further on the strength of the Supreme Court's decision, inter alia, in Lachminarayan Madan Lal v. CIT [1972] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Departmental Representative also brought to my notice the decision of the Patna High Court in Ram Chandra Singh Ramnik Lal v. CIT [1961] 42 ITR 780. The principle of law followed by the Hon'ble Supreme Court stating category of cases where proviso to section 13 of the Indian Income tax Act, 1922, should be applied was held to be as follows : "The principle has been applied by a Bench of this Court in Sri Sukhdeodas Jalan v. Commissioner of Income-tax, where it was pointed out that if the method of accounting adopted by the assessee did not reflect the true profits of the preceding year, the proviso to section 13 would apply and the income-tax authorities were entitled to proceed in accordance with that proviso and to compute the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer that there is no basis for work in progress estimated by the assessee at Rs. 14,116. I hold that the burden to prove the sub-contracts, to bring the sub-contractors and examine them with reference to the sub-contracts entered into by them with the assessee, as also to satisfy the Assessing Officer with regard to the various payments received by them under the sub-contracts lay squarely upon the assessee and not on the Department. I also hold that despite several opportunities granted to the assessee, the assessee failed to produce them and, therefore, the Assessing Officer had reason to doubt the payments said to have been made under the sub-contracts. Further, the details for salaries and staff welfare expenses debited at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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