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TMI Blog2016 (4) TMI 1368X X X X Extracts X X X X X X X X Extracts X X X X ..... ough 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. Addition on account of sale of scrap - HELD THAT:- The facts emerging in the present case are that undeniably during the carrying on of the business of construction some scrap of iron and aluminium pieces is generated as also empty bags. While the assessee s contention is that this scrap is reused in the construction business and the empty bags are used by the labour for resting and other purposes and no scrap is therefore sold, the case of the revenue is that the explanation of the assessee is not plausible and some scrap must have been sold by the assessee. We find no infirmity in the order of the 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 CIT(A) sustaining the addition of ₹ 50,000/- made on account of sale of scrap. This ground of appeal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k in the capacity of sub contractors but were supervisors for which salary as paid to other supervisors was to be allowed, disallowing the balance amount. Moreover, the AO also found that these persons were close relatives of the partners of the assessee firm. Therefore the excess amount being ₹ 29,37,497/-, ₹ 16,94,702/- ₹ 34,28,498/- paid to the three persons otherwise than by salary was disallowed also by involving the provisions of the section 40A(2) of the Act. 4. The matter was carried in appeal before the Ld. CIT(A) where the assessee argued that similar addition was made in assessment year 2008-09 also which was sustained to the extent of 20% only by the ITAT, Agra in its order No. 129/Agr/2012 and 157/Agr/2012. After considering the same the Ld. CIT(A) held that since the facts in Assessment year 2008-09 were identical to the facts in the present case, the decision rendered 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 undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractors 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. Before us, Ld. AR agreed that on identical set of facts in the preceding year, disallowance to the extent of 20% of the amount paid to the three subcontractors been upheld by the ITAT. 8. We have heard the rival submissions and perused the order of the authorities below. 9. We find no infirmity in the order of the CIT(A). Undisputedly the facts in the present case are identical to that in the preceding year i.e. Assessment year 2008-09. The three sub contractors i.e; Sh. Sanjay Agarwal , Sh. Subodh Agarwal, Sh. R. R. Agarwal, payments made to whom was disallowed by the AO in this year, are the same whose paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee on the income declared in the return of ₹ 30,06,760/- considering the fact that the sub-contractor work may be carried out by other mode of carrying out work not by these sub-contractors, we are of the view that it will be fair and reasonable if 20% of the expenditure claimed as payment to sub-contractors is disallowed of which calculation comes to ₹ 12,35,225/- (20% of 61,76,126/-)(21,57,500 + 26,09,254 + 14,09,372). The addition to the extent of ₹ 12,35,225/- is confirmed and the balance addition of ₹ 49,40,901/- is deleted. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dger 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 ₹ 90,12,424/- the ledger account shows the same as ₹ 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 same. 15. Ground No. 3 and 4 raised by assessee are therefore dismissed. 16. In effect ground no. 1,2, 3, 4 and 5 raised by the assessee are dismissed. 17. Ground No. 6 raised by the assesse is against the addition of a sum of ₹ 60,000/- on account of sale of scrap. 18. Brief facts relating to the issue assessee that during assessment proceedings AO held that scrap generated during construction process must have been sold by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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