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TMI Blog2017 (10) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... ciencies and non vouched cash payments at ₹ 20,00,000/-. This ground is partly allowed. Addition being estimated profit on work-in-progress as appeared in profit and loss account - Held that:- We find that the assessee has been regularly showing the WIP in its accounts which represents the unbilled work done on behalf of the various clients. The nature of business of the assessee is such that materials are normally delivered at the sites of the customers/ contractor’s and necessary modifications and fittings are done at the site of the project. At the yearend incomplete work is shown as WIP. This is a regular feature in business of the assessee. The WIP is automatically accounted for in the next year and also billed accordingly depending upon the completion of work and profit on the said amount is offered to tax accordingly. We find merit in the submissions of the ld.AR and has gone through the previous years in which the ld.CIT(A) has deleted the similar additions made by the department. The department has not further appealed before the higher forum. In view of all the order of CIT(A) is not correct in upholding the additions and therefore we reverse the same and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated as non-genuine, which was replied by the assessee on 19.2.2013 submitting therein that Mr.Dagdu Kadam is a supervisor who is responsible to visit and look after various sites and pay daily labour/salary on the sites also. However, the AO did not accept the contention of the assessee on the ground that Mr.Dinesh Ojha in his statement recorded on 25.4.2012 stated that he has not taken any cash and denied to have made any such payments, however, Shri Dinesh Ojha stated that he gave cash payments when requisition was received from the Supervisor. The AO also observed that the assessee has not supplied bills and vouchers of cash payments and finally added the same to the total income of the assessee. 4. In the appellate proceedings, the ld. CIT(A) dismissed the appeal of the assessee after considering the reply of the assessee vide para 5.3 of the appellate order: 5.3 I have considered the facts and circumstances of the case, the submissions of the appellant and the assessment order. The arguments and submissions of the appellant do not address the finding of the AO that the amount stated to be business expenditure, made through Dinesh Ojha and Dagdu Kadam, were not duly accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring before us, the assessee produced the some sample receipts taken from the laborers which proved that the assessee has maintained books and other records of the payments to the laborers. It is customary in the business of construction to pay wages through the Supervisor/munshis and therefore, we are in agreement with the conclusion drawn by the ld.CIT(A) that all these payments were not genuine. However some reasonable disallowance should meet the ends of justice as the assessee has failed to furnish the necessary documentary evidences before the lower authorities. Accordingly we direct the AO to restrict disallowance on account various deficiencies and non vouched cash payments at ₹ 20,00,000/-This ground is partly allowed. 6. The second ground of appeal is with regard to upholding of addition of ₹ 63,80,442/- being estimated profit on work-in-progress as appeared in profit and loss account amounting to ₹ 2,76,83,279/- by the ld.CIT(A). 7. Facts of the issue are that during the course of assessment proceedings, the AO noticed that the assessee has not billed the goods cleared with excise component despite physical delivery of goods to the clients and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gress. It is strange to the Accounting Standards/norms that once goods are delivered to the clients, the same amounts to sale and there is no justification for retaining the amounts of such sale under work-in-progress. In fact, delivery of goods in case of movable articles amounts to completed sale and it is liable to be accounted as sales. Retaining such amounts in work in progress is complete negation of a transaction and amounts to its wrong accounting when it is included in work in progress. The AO has discussed in detail bringing on record that the delivered goods amount to sale and profit on such transactions is liable to be included in determining the income of the year; as per Mercantile System of Accounting. 6.2.1 The AO has also considered the submissions of the appellant before him, so as to treat such sales and related amounts as part of contract work and that is why the AO has taken 90% of the work done as discussed in para 4.3(d) of the assessment order, reproduced above. The ratio of Gross Profit are also taken after consideration of the facts and figures and worksheets furru shed by the appellant during the hearing before the AO, noted in para 4.3(f) of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld.CIT(A) has deleted the similar additions made by the department. The department has not further appealed before the higher forum. In view of these facts and circumstances we are of the considered view that the order of CIT(A) is not correct in upholding the additions and therefore we reverse the same and direct the direct the AO to delete the addition. 11. The issue raised in ground no.3 is against the confirmation of disallowance of ₹ 15,70,393/- being 10% of the cash expenses incurred . 12. During the course of assessment proceedings, the AO observed that the assessee has incurred the expenses in cash to the tune of ₹ 1,57,03,922/- of which the assessee could not furnish the complete books, bills and vouchers for verification. As a result the AO disallowed the 10% of the total expenses towards unproved and unsubstanted cash expenses u/s 40(A)(3). 13 In the appellate proceedings, the ld.CIT(A) sustained the addition by observing and holding as under : 7.2 I have considered the facts and circumstances of the case, the submissions of the appellant and the assessment order, It has been categorically noted by the AO that 'The assessee furnished the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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