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TMI Blog2020 (10) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance to Rs. 25,14,015/- of the additions made by the AO on account of Labour Payment to Rs. 2,96,19,146/-. 4. For this and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 5. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 2. The brief facts in this case are that the assessee is a private company engaged in carrying out the business of execution of turnkey jobs/projects of water supply schemes awarded by various Governments/ Governments Undertaking like Maharashtra Jeevan Pradhikaran, Maharashtra Industrial Development Corporation, Public Works Department- Goa State, Maharashtra Krishna Valley Development Corporation, Tapi Irrigation Development Corporation etc. The turnkey job includes laying of pipelines ranging from 100mm diameter to 3,000mm diameter of mild steel, PSC Pipes and AC pipes, PVC pipes and all other allied activities/works etc. Mainly the work includes laying of pipelines for raw water, potable water, sewage and ash slurry, excavation and weldi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2010 was deficient by an amount of Rs. 8,32,44,990/-. According to the Assessing Officer, the assessee had understated the amount of debtors by an amount of Rs. 8,32,44,990/- and the said amount was added to the income of the assessee. 6. At the time of hearing, the Ld. DR vehemently contended that the Ld. CIT(Appeals) has not specifically reasoned his order and he has accepted the explanation of the assessee without giving any reasons. That even, no explanations were called for from the assessee rather the Assessing Officer deduced the calculation on analyzing the chart/books of account submitted by the assessee and not on estimation. The Ld. DR further submitted that reconciliation of books of account submitted by the assessee was not correct, therefore, for verification of this reconciliation on this issue, the matter may be restored to the file of the Assessing Officer. 7. Per contra, the Ld. AR for the assessee reiterated the submissions placed before the Assessing Officer as well as before the Ld. CIT(Appeals) that the assessee gets works from Government Department/ contracts for escalation projects. The assessee has a contracting division and also a manufacturing division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the Assessing Officer. The Assessing Officer has just made an estimated calculation and actual figures of various deductions such as TDS, Works Contract Tax, Security Deposit, Royalty, Secured Advances (EMD), Retention money has not been considered. In view of all these facts, I find logic in the contention of the appellant and accordingly the additions made on account of suppression of debtors amounting to Rs. 8,32,44,990/- is deleted. This ground is accordingly allowed." 9. We have heard the rival contentions and considered the relevant materials available on record. We have also given considerable thought to the findings arrived at by the Sub-ordinate Authorities. It is an undisputed fact that the entire turnover of the assessee is exclusively from Government Department and the said turnover has not been disputed by the Assessing Officer. The Assessing Officer has also not considered the debtors of other divisions and only considered debtors of contracting division. It has been brought on facts that as a matter of practice, no Government Department issues any confirmation, an issue which has been raised by the Assessing Officer. The Assessing Officer has just made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee in this regard has made detailed written submissions before the Revenue Authorities and submitted that work in progress of the assessee company is related to manufacturing division and contracting division. The Assessing Officer in Para 13, Page 9 has stated that as per Schedule H of the Balance Sheet as on 31st March, 2010 the closing WIP is shown at Rs. 6,89,78,640/- whereas as per project wise details submitted by the company it amounted to Rs. 6,54,28,578/-. It was submitted by the assessee that the project wise details of WIP were related to the contracting division only amounting to Rs. 6,54,28,578/- and after adding the WIP of manufacturing division amounting to Rs. 35,50,062/- , it correctly tallies with Rs. 6,89,78,640/- as appearing in Schedule H of the Balance Sheet. 13. At the time of hearing, the Ld. DR heavily placed reliance on the findings of the Assessing Officer. 14. Per contra, the Ld. AR submitted that the addition made by the Assessing Officer is on the basis of profit calculation made by the assessee in subsequent assessment year 2011-12. The Assessing Officer has considered only 17 projects out of 30-35 projects undertaken by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived at a conclusion by selecting some particular sites and taking recourse to reverse calculation on the basis of subsequent years profitability. On the facts on records, the Assessing Officer failed to consider specifies of each project. The facts such as escalation in some projects, were not considered. In the case of amount of escalation, there is no corresponding expenditure against the same and therefore, it would not have any impact on WIP. That further, the Assessing Officer has not considered the figures and accounts of all the sites. Adoption of accounts of subsequent years cannot be the basis for calculating work in progress of the year. In view of our above observations, we do not find any reason to interfere with the findings of the Ld. CIT(Appeals) and therefore, relief provided to the assessee is sustained. Thus, Ground No.2 raised in appeal by the Revenue is dismissed. 17. Ground No.3 pertains to the fact that the Ld. CIT(Appeals) has restricted the disallowance at Rs. 25,14,015/- of the additions made by the Assessing Officer on account of labour payment at Rs. 2,96,19,146/-. 18. The facts on this issue are that Assessing Officer found that the assessee had incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the totality of the above said facts and circumstances, we find merit in the aforesaid disallowance made by the authorities below. However, we restrict the same to 3% of labour charges." 19.1 The Ld. DR, therefore, submitted that this ground is covered one, since on the disallowance of 5% on the entire "site expenses‟ by the Assessing Officer, the Ld. CIT(Appeals) has given relief for all other expenses under the head site expenses and had upheld the disallowance to 5% only on labour charges. Now that also was held to be excessive by the Tribunal which was reduced to 3%. 20. In view of above, we are of the considered view that the ground of the Revenue was against restricting of disallowance to 5% of labour charges by the Ld. CIT(Appeals). However, with the order of the Tribunal (supra.), this 5% disallowance on labour charges has been overturned and instead 3% disallowance on labour charges has been retained. In such scenario, the ground of appeal by the Revenue before us on this issue needs to be dismissed. We order accordingly. Thus, Ground No.3 raised in appeal by the Revenue is dismissed. 21. In the result, appeal of the Revenue is dismissed. Order pronounced on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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