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TMI Blog2022 (11) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... evoid of merits and the same is rejected. Adhoc disallowance of labour expenses - HELD THAT:- The assessee produced all the details namely Ledger account, bills/vouchers and Muster Roll of the employees who worked for the construction project. It is seen from record, the same have been produced before the AO but without assigning any good reason, the A.O. has made an adhoc disallowance at 20%. Therefore the addition is without any legal basis and therefore the deletion made by CIT(A) is hereby upheld. - ITA Nos. 577, 578/Ind/2018 & C.O. Nos. 26, 27/Ind/2019 - - - Dated:- 8-9-2022 - Shri T.R. Senthil Kumar, Judicial Member And Shri B.M. Biyani, Accountant Member Appellant by : Shri P.K. Mitra, CIT/DR Respondent by : Shri Manoj Fadnis, A.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These appeals have been filed by the Revenue as against the orders dated 26.03.2018 23.03.2018 passed by the Commissioner of Income Tax (Appeals)-1, Indore as against the assessment orders passed u/s. 153C read with section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year (A.Y) 2010-11 and assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure u/s. 69C of the Act. On further examination of the construction expenses, the A.O. noticed the assessee has made payment of legal and professional fees for Rs. 41,65,093/- and advertisement expenditure of Rs. 49,34,909/- but no TDS has been deducted on these payments. Therefore the A.O. disallowed the same u/s. 40(a)(ia) of the Act. The Assessing Officer while perusing the labour charges, found that they had made vouchers were not signed by the labours and therefore made an adhoc disallowance of 20% of the labour expenses and made an addition of Rs. 7,52,564/-. 4. Aggrieved against the additions, the assessee filed an appeal before the Ld. CIT(A). The assessee submitted the A.O. was not justified in making the addition on the basis of report of the DVO. When the books of accounts and documents seized by the department in respect of the Project itself was available to the department. There was no requirement to refer the matter to the DVO u/s. 142A of the Act and no addition can be made u/s. 69C of the Act. Relying upon the Hon ble Supreme Court judgment in the case of Sargam Cinema vs. CIT [2011] 197 Taxmann.com 203 (SC), the Ld. CIT(A) held that without rejection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore the Ld. CIT(A) is correct in deleting the addition made by the Ld. A.O. As far as regarding the second ground of addition made u/s. 40(a)(ia), the ld. CIT/DR supported the order of the Assessing Officer. Similarly, ground no. 3 namely adhoc disallowance on labour charges, the ld. CIT/DR supported the order of the Assessing Officer. 8. Per contra, Ld. Counsel Mr. Manoj Fadnis submitted that the accounts of the assessee company have been duly audited the assessing officer has not pointed out specific deficiency in the books of account. However the Assesing Officer has not accepted the expenditure claimed by the assessee in the construction of the project and has referred the matter to the District Valuation Officer without rejecting the books of account which is against the settled principle of law laid down by the Hon ble Supreme Court in the case of Sargam Cinema (cited supra). 8.1. The ld. A.R. also relied upon the Hon ble Madras High Court judgment in the case of CIT vs. A.L. Homes reported in (2018) 401 ITR 285 and Tribunal judgment in the case of Westland Buildtech (P.) Ltd. vs. ITO New Delhi reported in (2016) 76 taxmann.com 142 and also Delhi Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon ble Supreme Court of India in the case of Sargam Cinema that assessing authority cannot refer any matter to DVO without books of account being rejected by him. This judgment is being followed by Hon ble Madras High Court in the case of A.L. Homes (cited supra) wherein the Hon ble High Court held that the judgment of the Supreme Court in Sargam Cinema clearly laid down the law without rejection of books of account, the A.O. cannot refer the matter under 142A with the DVO. 9.2. It is appropriate to quote the applicability of Section 142A of the Act, the Co-ordinate Bench of Delhi Tribunal in Westland Miltech Pvt. Ltd. (cited supra) held as follows: 4. . It is observed that the only dispute on this issue is about the investment made by the assessee in purchase of 11 plots in the course of its business. Whereas the assessee went by the rates given in sale deeds as a proper measure of investment made, the AO estimated the investment made by the assessee on the basis of the DVO's report, which valuation was partially reduced by the Id. CIT (A). The AO, in making this addition did not reject the books of account maintained by the assessee and straightway went ahe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Project of the assessee. Therefore the ground no. 1 raised by the Revenue does not find any merit and the addition made u/s. 69A deleted by the Ld. CIT(A) is hereby upheld. 9.4. Regarding addition made u/s. 40(a)(ia), it is seen from page no. 57 to 71 of the Paper Book filed by the assessee wherein the assessee filed its quarterly TDS returns by the assessee relating to the assessment year 2010-11. However without looking into these details, the assessing officer made disallowance u/s. 40(a)(ia) which is arbitrary. The Ld. CIT(A) after verification of the details have deleted the additions which does not require any interference by us. Therefore Ground no. 2 is devoid of merits and the same is rejected. 9.5. Regarding ground no. 3 namely adhoc disallowance of labour expenses, the assessee produced all the details namely Ledger account, bills/vouchers and Muster Roll of the employees who worked for the construction project. It is seen from record, the same have been produced before the Assessing officer, but without assigning any good reason, the A.O. has made an adhoc disallowance at 20%. Therefore the addition is without any legal basis and therefore the deletion made b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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