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TMI Blog2013 (8) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... n a gross contract turnover of Rs.19,00,15,348/-, which is below 30% of the labour and like charges permitted as allowable in absence of books of accounts and supporting documents. The assessee's books of account were audited u/s 44AB. The estimation of 10% for the purposes of disallowance is not made on any materials or comparative cases or there is any evidence that expenditure is not genuine, on the other hand, disallowance is made on adhoc basis. Thus AO is not justified in disallowing on an adhoc basis 10% of the total wages and the CIT(A) in sustaining the same. Therefore reversing the orders of the Income Tax authorities and direct that disallowance of 10% of total wages is uncalled for. In favour of assessee. - ITA No.638/Bang/2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt wages. 3. Briefly stated the facts are as follows:- The assessee is a Private Limited Company. It is engaged in the business as a Civil Contractor and Designer. For the relevant AY, return of income was filed on 27/09/2008 declaring a total income of Rs.92,07,720/-. The assessment was taken up for scrutiny by issuance of notice u/s 143(2) of the Act and the scrutiny assessment was completed vide order dated 24/12/2010 u/s 143(3) of the Act determining the total income at Rs.2,61,89,638/- as against Rs.92,07,720/- returned by the assessee. The Assessing Officer has made the following additions to the returned income:- (i) Addition under the head Capital nature expenditure'. Rs.2,58,333/- (ii) Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are supplied by labour contractors. The complete credibility of such vouchers is often questionable since labour in question not a regular feature and the vouchers are mostly self-made ones which are signed or thumb imprinted by the labour. Be that as it may, the appellant did not produce the evidence before the Assessing Officer in spite of no less than 18 hearings held to justify claims made by it in the return. I do not consider that it was denied due opportunity, or that it prevented by sufficient cause from producing the evidence before the Assessing Officer at the relevant time. As such, I do not find any reason to interfere with the findings of the Assessing Officer since disallowance of 10% under the circumstances is found to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deduction of 30% of the turnover towards labour and like charges in case of work contract. 8. The learned DR supported the orders of the Income Tax authorities. 9. We have heard the rival submissions and perused the materials on record. There was a survey in the premises of the assessee and in the course of the survey proceedings, the assessing authority had proposed to assess the assessee company at 4% of net work completed and assessment was accordingly completed for the AY 2007-08. For the concerned AY income from business was disclosed at Rs.80,05,158/-, which works out to 4.21% on the net work completed. Therefore, the net profit disclosed for the current year is better than the net profit that was assessed by the department subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow 30% of the labour and like charges permitted as allowable in absence of books of accounts and supporting documents. The assessee's books of account were audited u/s 44AB of the I-T Act. The estimation of 10% for the purposes of disallowance is not made on any materials or comparative cases or there is any evidence that expenditure is not genuine, on the other hand, disallowance is made on adhoc basis. In the light of the above reasoning, we hold that the Assessing Officer is not justified in disallowing on an adhoc basis 10% of the total wages and the CIT(A) in sustaining the same. Therefore, we reverse the orders of the Income Tax authorities and direct that disallowance of 10% of total wages is uncalled for. It is ordered accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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