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TMI Blog2016 (5) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificates and the amount shown in the ledger account of the sub contractors. 5. That the CIT(A) has erred on facts and in law to estimate & disallow Rs. 1628539/- being 20% of payments made to sub contractors when GP rate had increased from 12.59% of immediately proceeding year to 14.78% during the year. 6. That CIT(A) has erred on facts and in law to presume the sale of scrap and to sustain addition of Rs. 50,000/-. 2. Ground No. 1,2,3,4 and 5 raised by the assessee is against the disallowance of a sum of Rs. 16,28,539/- being 20% of the payment made to sub-contractors. 3. Brief facts relating to the issue are that during the impugned assessment year, the assessee had shown payments made on account of sub-contract work to Sh.Sanjay Agarwal, Sh. Subodh Agarwal and Sh. R. R. Agarwal. During the course of assessment proceedings, the AO found that these persons did not have the capacity to do sub-contract work and also no books were maintained by them showing any sub-contract work done. It was also found by the AO that these persons were actually working as employees in the assessee firm. Therefore he concluded that these persons did not do any work in the capacity of sub con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that while the assessee had shown the total payments made to these three sub contractors as per their ledger accounts to be as Rs. 81,32,697/- as follows: Sh. Sanjay Agarwal Rs. 29,61,497/- Sh. Subodh Agarwal Rs. 34,76,798/- Sh. R.R. Agarwal Rs. 16,94,702/- Rs. 81,32,697/- the tax audit report showed the amounts paid to these sub contractors as Rs. 90,12,424/- as follows: Sh. Sanjay Agarwal Rs. 33,32,503/- Sh. Subodh Agarwal Rs. 38,00,077/- Sh. R.R. Agarwal Rs. 18,79,844/- Rs. 90,12,424/- In view of the difference of the two figures, Ld. CIT(A) directed the AO to determine the correct amount paid to the sub contractors and thereafter disallow 20% of the same. 5. Aggrieved by the same, the assessee raised ground no. 1, 2,3,4, & 5 before us. 6. In Ground No. 1 the assessee has agitated against the application of N.P. rate to estimate the income of the assessee without rejecting its books of accounts or invoking the provision of section 145. Ground No. 2 raised by the assessee is against the findings of the Ld. CIT(A) that no contract work was carried out by the impugned three contractors and that excess payment was made to them. 7. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assesse as required under section 40A(2)(b) of the Act. Sri Sanjay Agarwal is son of partner Smt. Uma Devi, Sri Subodh Agarwal is also son of partner Smt. Uma Devi Sri R.R. Agarwal is husband of the partner Smt. Uma Devi. The above details have been noted from the assessee's paper book at page No. 258. In the light of the fact and the material available on record, in principle we agree that the subcontract was not carried out by the above sub-contractors and in this regard the findings of the Revenue authorities is confirmed. However, it is also admitted fact that the assessee has carried out contact work, may be not from these subcontractors but by other parties or by otherwise. On considering the totality of the facts of the case, we notice a comparative chart of G.P. which has been reproduced by the CIT(A) at page no. 2 of his order. We notice that the assessee has shown comparatively lower G.P. rate of 11..2% as against 15.60% in the immediately preceding year i.e. A.Y. 2007-08. Under the facts and circumstances, we find substance in the alternate reason for addition by the AO that it is disallowable under section 40A(20)(a) of the Act. Considering the G.P. declared by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -08, which was considered by the ITAT, while rendering its judgment for Assessment year 2008- 09, we uphold disallowance to the extent of 20% of the contract work done by three sub contractors. 13. In view of the same we dismiss Ground No. 5 raised by the assessee. 14. As regards ground no. 3 and 4 the assessee has agitated against the findings of the Ld. CIT(A) that there is a difference between the amount of payment made on account of sub contractor work to the above mentioned three parties in the ledger accounts and that shown in the tax audit report. We find no infirmity in the order of the Ld. CIT(A) on this aspect also since undisputedly the assessee has shown different figures in the tax audit report and in the ledger accounts of the parties. While the tax audit report shows payments made to these sub-contractors amounting to Rs. 90,12,424/- the ledger account shows the same as Rs. 81,32,697/-. The Ld. AR has not been able to demonstrate before us as to how there was no difference in the two figures. The Ld. CIT(A)has therefore rightly restored the matter to the AO to the limited extent of determining the correct amount of payment made and thereafter disallow 20% of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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