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TMI Blog2019 (8) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 68 of the Income Tax Act, 1961 being unconfirmed creditors." 2. The facts in brief are that the assessee company is engaged in the business of construction activity. During the course of assessment proceedings the AO noted that assessee has debited a sum of Rs. 28,20,900/- in the profit and loss account as commission paid. However, assessee has not deducted TDS on the same amount. Accordingly, AO has made disallowance u/s 40(a)(ia). Further, he noted that assessee has claimed Labour expenses of Rs. 1,48,13,585/-as a part of construction expenses shown at Rs. 11,65,55,315/- . Ld. AO has made adhoc disallowance of 10% after observing and holding as under:- "The assessee has claimed labour expenses of Rs. 1,48,13,585/-as part of the construction expenses at Rs. 11,65,55,315/-. The assessee has furnished month wise/labour-wise detail of expenditure incurred. However, on verification of such detail, it has been observed that inspite of labour in number being on an average 200 on month to month basis, the assessee company has not complied with Labour Law Provisions such EPF & ESI etc. Moreover, it is not clear whether the so called muster roll of the labour as submitted belong to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is there, IT Act does not provide disallowance of wages on this account. The Ld. AO has not given any basis for disallowance of 10% of wages. Therefore, in view of the facts already on the record, the disallowance may kindly be deleted." 6. In the first appeal, Ld. CIT (A) after perusing the entire details filed before him and the explanation of the assessee has deleted the said disallowance on the ground that AO has not given any basis for 10% of disallowance and payment of EPF and ESI is not necessary for the purpose of disallowance. 7. Lastly, on the issue of addition u/s 68 on account of sundry creditors, the assessee has given a detailed submission which has been noted in the impugned order from pages 11 to 14. One of the main contention raised by the assessee before the Ld.CIT(A) was that the addition under the head sundry creditors during the year on account of sundry creditor was only Rs. 35,36,546/- and therefore under no circumstances the sundry creditors coming from the earlier years could have been added in this year u/s 68. Ld. CIT (A) has deleted the said addition after observing and holding as under:- " (iii) I have considered the issue and noticed that Ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (Delhi) of 2016, Dated 12.05.2017] 9.1 We have heard the rival submissions and also perused the relevant finding given in the impugned orders qua the disallowance u/s 40(a)(ia). Admittedly the Ld. CIT(A) has deleted the disallowance on the ground that the only amount which has been shown as payable in the books of account will entail disallowance u/s 40(a)(ia) and not the amount which has been paid even though TDS has been deducted. Now this issue has been set at rest by the Hon'ble Supreme Court in the case of Palam Gas Service (supra) that disallowance u/s 40(a)(ia) is applicable not only on the payable amount but also on paid and under both the circumstances TDS should be deducted. Thus, reasoning given by the Ld. CIT (A) is rejected. However, we agree with the other contention of the Ld. Counsel that if the payee has accounted for the commission as his income and has shown it in his return of income and also paid tax thereon then no disallowance can be made in terms of second proviso to section 40(a)(ia) r.w.s first proviso to section 201. The AO is accordingly directed to verify the contention of the assessee that if payee has accounted for the commission payment receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with supporting bills and vouchers and other necessary documents have not been produced therefore, AO was justified in making adhoc disallowance. In support he relied upon the following two judgments:- 1. CIT v. S.G. Exports [2011] 12 taxmann.com 77/200 Taxman 132 (Mag)/336 ITR 2 (Punj-Hary.) 2. Rajasthan Metal Store v ITO Thus, he submitted that the disallowance made by the AO should be confirmed. 13. On the other hand, Ld. Counsel for the assessee submitted that assessee has produced all the details of month wise wages and muster roll labour payment which was filed not only before the AO but also before the Ld. CIT (A) and also the copy of which has been placed on the paper book from pages 40 to 80. Thus, without there being any discrepancy in muster roll no disallowance can be made. 14. After considering the relevant finding given in the impugned order as well as material placed before us, we find that from the perusal of the muster roll that it clearly pertains to the assessee company and month wise details of labour payment has been given along with rate and days of work and the quantum wages paid. Nowhere has it been pointed out that such labour payments is excessive a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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