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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 ..... st have been sold by the assessee. We find no infirmity in the order of the Ld. CIT(A) in this respect and agree with his findings that it is impossible to believe that no scrap was sold during the year and that the entire scrap is reused in the business of the assessee. We therefore uphold the order of the Ld. CIT(A) sustaining the addition made on account of sale of scrap - Decided against assessee - ITA No.152/Ag/2014 - - - Dated:- 21-4-2016 - SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER For The Appellant : Sh. R.C. Tomar For The Respondent : Sh. Waseem Arshad ORDER PER ANNAPURNA MEHROTRA A.M. This appeal has been filed by the assessee against the order of Ld. CIT(A)- II, Agra dated 10/12/2013. The assessee has raised the following grounds of appeal : 1. That there is no rejection of books of accounts or invoking of provision of section 145. 2. That CIT(A) has erred on facts and in law to presume that sub contract work was not actually carried out by Sh. Sanjay Agarwal, Subodh Agarwal, RR Agarwal and presume possibility of making excess payment to the aforesaid sub contractors. 3. That the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the ITAT in Assessment year 2008-09 squarely applied to the assessee s case. Following the same Ld. CIT(A) held that no sub contract work was carried out by the above named sub-contractors but at the same time it could not be denied that since the assessee had undertaken contractual work, the subcontract work had been carried out by other parties. Therefore in the facts of the case it was considered fair and reasonable that 20% of the payment made to sub contractors be disallowed. It was also argued by the assessee before the Ld. CIT(A) that the Hon ble ITAT had sustained the addition of 20% in the preceding year since there was a fall in GP rate from the immediately preceding year. Ld. Counsel for the assessee pleaded before the Ld. CIT(A) that since there was an increase in the GP rate in the impugned year as compared to the preceding year, the disallowance to the extent of 20% also could not be sustained. Ld. CIT(A) rejected the assessee s contention by pointing out that though there was an improvement in GP rate, the Net Profit rate had gone down and further the Ld. CIT(A) stated that despite the GP rate showing an improvement as compared to last year, it was still lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agarwal, payments made to whom was disallowed by the AO in this year, are the same whose payments were disallowed in the preceding year also. The reason for disallowing the payments are also identical to that in the preceding year being that no sub contract work was found to have been done by these three persons and infact they were found to be employees of the assessee firm. The Ld. AR has not been able to point out before us as to how the facts of the case differ from the preceding year. Therefore, since on identical set of facts , the Hon ble ITAT had in the preceding year held that no sub contract work was carried out by these three persons, but at the same time since original contract was executed by the assessee, the sub contract work was carried out by other parties and in view of the same it was fair and reasonable to disallow 20% on amount of payment made on account of sub contract work, the same ruling applies in the present case also. The Hon ble ITAT while dealing with this issue in the preceding year in the case of the assessee in ITA No. 129/Ag/2012 157/Ag/2012 held as follows: 23. We have heard the Ld. Representative of the parties and records perused. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce addition of ₹ 49,40,901/- is deleted. In view of the above, we concur with the findings of the Ld. CIT(A) that no sub contract work was executed by the three sub contractors and infact excess payment was made to them. Further we concur with the Ld. CIT(A) in holding that though sub contract work has not been carried out by the three sub contractors, it has been carried out by some other parties and in the view thereof it is fair and reasonable to disallow 20% of the amount paid on account of subcontract work. 10. Ground No. 1 2 raised by the assessee are therefore dismissed. 11. In Ground No. 5 the assessee has agitated against the disallowance of 20% of the sub contract expenses made by following earlier years order when the G.P. rate shown by the assessee in the impugned year was progressive as compared to the preceding year. 12. Before us Ld. AR stated that disallowance to the extent of 20% had been upheld by the Hon ble ITAT in the preceding year, in view of the fall in G.P. rate shown by the assessee, but in the impugned year since the G.P. rate had shown an improvement having increased from 12.59% in the preceding year to 14.785% in the impugned yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the sale on account of scrap and empty bags to be ₹ 1,00,000/- and made addition of the same. Before the Ld. CIT(A) the assessee argued that the addition has been made merely an conjectures and surmises without any supplementary material and moreover since the trading results were progressive, no such addition was warranted. Ld. CIT(A) rejected the assessee s contentions and upheld the addition made by stating that generation of scrap could not be ruled out, as also the sale of scrap. Ld. CIT(A) held at para 8 of his order as follows: I have consider the contention of the Ld. AR and also discussion made by AO in assessment order and as pointed out by the AO, in the nature of contract work done by the assessee (appellant), generation of scrap and empty bags of cement cannot be ruled out. It is true that no evidence has been brought on record by the AO to show sale of any bag or scrap but looking to the nature of contract work being done by the assessee (appellant), such sale of scrap and empty bags cannot be ruled out. It is really difficult to gather any evidence of sale of scrap or empty bags during the course of assessment proceedings after filing of Income Tax Retu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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