Jayant Ramabhai Sanghadia, Valsad V. The ACIT., Cent.Circle-4, Surat

CO 214/AHD/2007

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4798 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 27-07-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: KAMLESH N BHATT
• Keywords: Depreciation; Loose papers
• Section: 44AD; 40A(3); 133A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.728/AHD/2007 A. Y.: 2003-04 THE A. C. I. T., CENT. CIRCLE-4, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS SHRI JAYANT RAMBHAI SANGHADIA, PROP. M/S. JAY & ASSOCIATES, 4 TH FLOOR, AMAR CHAMBERS, STATION ROAD, VALSAD PA NO.ACOPS 2980 B (APPELLANT) (RESPONDENT) C.O. NO.214/AHD/2007 (IN ITA NO.728/AHD/2007 Y.: 2003-04) SHRI JAYANT RAMBHAI SANGHADIA, PROP. M/S. JAY & ASSOCIATES, 4 TH FLOOR, AMAR CHAMBERS, STATION ROAD, VALSAD PA NO.ACOPS 2980 B VS THE A. C. I. T., CENT. CIRCLE-4, AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPLICANT) (RESPONDENT) DEPARTMENT BY SMT. NEETA SHAH, DR ASSESSEE BY SHRI KAMLESH N. BHATT, AR O R D E R PER BHAVNESH SAINI: THE DEPARTMENTAL APPEAL AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST ORDE R OF THE LEARNED CIT(A)-II, AHMEDABAD DATED 11-12-2006 FOR ASSESSMEN T YEAR 2003-04. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SEEKS PERMI SSION TO WITHDRAW THE CROSS OBJECTION WHICH IS FILED MAINLY IN SUPPOR T OF ORDER OF THE ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 2 LEARNED CIT(A). THE CROSS OBJECTION OF THE ASSESSEE IS THUS DISMISSED AS WITHDRAWN BECAUSE NO CROSS OBJECTION COULD BE FILED IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A) UNLESS SPECIFIC RELIEF IS CLAIMED IN THE CROSS OBJECTION. THE SAME IS ACCORDINGLY DISMISSED. 4. NOW, WE TAKE UP THE DEPARTMENTAL APPEAL FOR THE PURPOSE OF DISPOSAL. 5. ON GROUND NO.1, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.16,83,050/- MADE BY THE AO ON ACCOUNT OF LOW GRO SS PROFIT IGNORING THE NOTINGS FOUND TO BE RECORDED IN THE IMPOUNDED M ATERIAL. 6. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO O BSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION WORK AND IN JOB WORK. SURVEY WAS CARRIED OUT U/S 133A OF THE IT ACT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 18-06-2003. DURING THE COURSE OF SURVEY CERTAIN LOOSE PAPERS WERE FOUND AND IMPOUNDED AS PE R ANNEXURE BF-1 TO BF-7. ON PERUSAL OF FILE NO.BF-1 IT WAS NOTICED THA T PAGE NO.18 RELATED TO THE ASSESSEE ON WHICH DETAILS OF INCOME OF CONSTRUC TION WORK OF SITES AT SANKESHWAR, UNAI, VALLAB ASHRAM, VALLAB SEVA WAS WR ITTEN. THE DETAILS OF HEAD WISE EXPENDITURE DURING THE YEAR UNDER CONS IDERATION WERE FOUND WHICH INCLUDED CEMENT, CENTERING MATERIAL, LABOUR A ND METAL ETC. THE RECEIPT AS MENTIONED ON THE REVERSE OF THIS PAGE MA TCHES WITH THE BUILDING CONSTRUCTION ACCOUNT FOR THE YEAR ENDED ON 31-03-2003. ON THE REVERSE SIDE OF THIS PAGE CALCULATION OF GROSS PROF IT WAS MADE WHICH IS RS.38,19,863/- AS AGAINST GROSS PROFIT AS PER PROFI T & LOSS ACCOUNT AMOUNTING TO RS.21,37,820/-. AS REGARDS THE LOSE PA PERS FILE, THE ASSESSEE HAD EXPLAINED BEFORE THE AO THAT IT CONTAI N PAPERS OF M/S. RITESH ASSOCIATES, M/S. BEST BUILDERS AND M/S. JAY ASSOCIATES. THE AO OBSERVED THAT THE ASSESSEE HAD NOT EXPLAINED EACH A ND EVERY ENTRY OF PAGE NO.18 AND THE ONUS LIES UPON THE ASSESSEE TO F URNISH THE EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTION AND ON FAILURE OF THE ASSESSEE ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 3 TO DO SO, THE AO WAS CONSTRAINED TO DRAW ADVERSE IN FERENCE. IT WAS FURTHER STATED THAT THE AO IS NOT BOUND BY TECHNICA L RULES ABOUT THE EVIDENCE AS PER INDIAN EVIDENCE ACT. THE ADDITION C OULD BE MADE ON THE BASIS OF INFERENCE WHICH IN CRIMINAL OR CIVIL JUSTI CE MAY BE SUFFICIENT. HE HAS FURTHER REFERRED TO THE SHOW CAUSE NOTICE AND S TATED THAT THE SUBMISSIONS GIVEN BY THE ASSESSEE WERE NOT ACCEPTAB LE. THE AO OBSERVED THAT SHRI ANIL PANCHAL, ACCOUNTANT OF THE ASSESSEE IN HIS REPLY TO QUESTION NO.5 HAD STATED THAT THE BOOKS OF ACCOUNT FOR THE Y8EAR ENDED 31-03-2003 WERE NOT CLOSED BY THAT TIME. THE AO FUR THER OBSERVED THAT ON LOOSE PAPER PAGE 18 THERE WAS WORKING OF GROSS P ROFIT AFTER CONSIDERING ALL EXPENSES. IT WAS STATED THAT THE AS SESSEE HAD INCLUDED ALL INCOME AND EXPENSES IN THE LOSE PAPER FILE FOR WORK ING OUT THE CORRECT PROFIT OF THE BUSINESS BUT THE ASSESSEE HAD NOT GIV EN ANY JUSTIFIED REASONS FOR THE DIFFERENCE IN THE EXPENDITURE CLAIM ED IN THE ACCOUNTS FILED WITH THE RETURN AS COMPARED TO LOOSE PAPER PA GE 18. THE AO HAS GIVEN COMPARATIVE CHART OF THE FIGURES AS PER LOOSE PAPER FILE AND TH4E FIGURES AS PER THE ANNUAL ACCOUNTS AND HAS WORKED O UT DI0FFERENCE IN THE INCOME/EXPENSES UNDER VARIOUS HEADS. THE AO OBSERVE D THAT THERE WAS VAST DIFFERENCE IN THE FIGURES OF LABOUR CHARGES, T RANSPORT CHARGES ETC. THE AO ISSUED NOTICES U/S 133(6) OF THE IT ACT TO V ARIOUS PERSONS BUT MOST OF THEM DID NOT REPLY OR IN SOME CASES NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITIES. THE AO REQUIRED THE ASSE SSEE TO PRODUCE THE SAID PERSONS BUT THE ASSESSEE DID NOT PRODUCE THEM BEFORE HIM ON THE APPOINTED DATE. THE AO ALSO OBSERVED THAT THE ASSES SEE HAD CLAIMED THAT THE ASSESSEE DEDUCTED TAX AT SOURCE MUCH BEFORE THE DATE OF SURVEY AND TAX WAS DEPOSITED TO THE GOVERNMENT. IN THIS RESPEC T, THE AO OBSERVED THAT TDS WAS ONLY 2% AND BY PAYING 2% TDS DEDUCTION FOR 98% OF EXPENSES WOULD GO TO THE BENEFIT OF THE ASSESSEE AN D MERE DEDUCTION OF TAX COULD NOT MAKE IT A GENUINE TRANSACTION. THE A O FURTHER OBSERVED THAT THE CONTRACTORS TO WHOM PAYMENTS WERE MADE WER E REGULAR CONTRACTORS TO WHOM ADVANCE PAYMENTS WERE MADE THRO UGH OUT THE ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 4 PREVIOUS YEAR AND RUNNING BILLS WERE RECEIVED AND N OTICES ISSUED U/S 133(6) WERE NOT COMPLIED WITH. THE AO REQUIRED THE ASSESSEE TO PRODUCE 9 PERSONS BUT THE ASSESSEE FAILED TO PRODUCE THEM O N THE PLEA THAT THE SAID PERSONS WERE LABOUR CONTRACTORS STAYING AT SIT ES AND ON COMPLETION OF THEIR WORK THEY LEFT THE WORK SITE, HOWEVER, TDS WAS MADE WHEREIN DETAILS OF ADDRESS OF THE SITES WERE DULY FURNISHED . THE AO OBSERVED THAT THERE IS DIFFERENCE IN PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT AND PROFIT AS PER THE LOOSE PAPER PAGE 18 AND THE STATEMENT OF INCOME AND EXPENDITURE PREPARED BY THE ASSESSEE IS AN ADMISSIO N AND IS BINDING ON IT. THE ENTRIES WERE WITHIN THE KNOWLEDGE OF THE AS SESSEE AND HENCE, BURDEN WAS ON THE ASSESSEE TO PROVE ITS CORRECTNESS . IN PARA 4.7OF THE ASSESSMENT ORDER THE AO HAS REFERRED TO THE CASH PA YMENT EXCEEDING RS.20,000/- EACH AS PER THE REPORT U/S 44AB OF THE IT ACT FOR WHICH HE MADE DISALLOWANCE OF 20% OF SUCH EXPENSES. ACCORDIN GLY, THE AO HELD THAT PROVISIONS OF SECTION 145(3) ARE APPLICABLE AND HE REJECTED THE BOOK RESULT SHOWN BY THE ASSESSEE AND ADOPT ED GROS S PROFIT AT RS.38,19,870/- AS PER LOOSE PAPER PAGE 18 AGAINST G ROSS PROFIT OF RS.21,36,820/- SHOWN BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT AND MADE ADDITION OF THE DIFFERENCE AMOUNTING TO RS.16, 83,050/-. 7. IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE HAD SHOWN RECEIPT OF RS.142.71 LAKHS. IT WAS SUBMITTED THAT THE INCOME OF RS.11.23 LAKHS AFTER CONSIDERING DEPRECIATION IS AR OUND 8% WHICH IS NEAR TO AS ENVISAGED U/S 44AD AND THE BOOKS OF ACCOUNT A RE ALSO AUDITED U/S 44AB AND THE AUDITORS HAVE NOT FOUND ANY FAULT WITH THE METHOD OF ACCOUNTING AND MAINTENANCE OF BOOKS. THE ASSESSEE F URTHER SUBMITTED THAT SURVEY WAS CARRIED OUT ON 18-06-2003 WHEREAS T HE ASSESSEE DEDUCTED TAX DURING THE YEAR AND PAID THE SAME FROM ALL THE BILLS OF LABOUR ON 30-04-2003 AS AGAINST TIME LIMIT PRESCRIB ED OF 31-05-2003 AND THE TDS CERTIFICATES WERE ALSO ISSUED ON 30-04-2003 . PAYMENTS OF LABOUR CHARGES WERE MADE TO THE CONTRACTORS BEFORE THE END OF THE YEAR BUT THE ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 5 BILLS WERE RECEIVED SUBSEQUENTLY. IT WAS FURTHER SU BMITTED THAT THE LOOSE PAPER IS THE ROUGH FIGURE JOTTED DOWN WHEN THE ENTR IES FOR THE FINAL BILLS TO BE RECEIVED WERE PENDING AND HENCE, THE LOOSE PA PER ROUGH SHEET DID NOT INCLUDE SUCH EXPENSES. THE ASSESSEE SUBMITTED T HAT SUCH ENTRIES FOR THE BILLS OUTSTANDING ON ACCOUNT OF LABORERS AS ON 31-03-2003 WAS VERY LOW AS COMPARED TO THEIR LAST BILL AND SHRI ANIL PA NCHAL HAD JOTTED DOWN THE ROUGH FIGURES IN THE BEGINNING OF APRIL, 2003. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE MAINTAINED CONTRACT WIS E ACCOUNT AND ACCORDINGLY GROSS PROFIT OF EACH CONTRACT WAS SEPAR ATELY MADE. THE AO HAS NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNT O R METHOD OF ACCOUNTING EITHER IN THE YEAR UNDER CONSIDERATION O R IN THE EARLIER YEARS AND THE PAST THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE ACCEPTED BY THE AO. THE FIGURES OF INCOME AND MATERIAL EXPENSES APP EARED IN THE PROFIT & LOSS ACCOUNT TALLIES WITH THAT OF THE LOOSE PAPERS AND THE VARIATION IS MAINLY IN THE FIGURE OF LABOUR CHARGES AS PER THE B ILLS WHICH WERE TO BE RECEIVED FROM THE SITES WHERE THE LOOSE SHEETS WERE PREPARED. IT WAS SUBMITTED THAT MERELY BECAUSE DIFFERENCE IS FOUND I N THE GROSS PROFIT AS PER ROUGH NOTINGS ION THE LOOSE PAPER AND THE GROSS PROFIT AS PER THE PROFIT & LOSS ACCOUNT, THE ADDITION CANNOT BE MADE SINCE NO DEFECT HAS BEEN FOUND IN THE BOOKS OF ACCOUNT MAINTAINED BY TH E ASSESSEE OR THE VOUCHERS PRODUCED BEFORE THE AO. IT WAS, THEREFORE, SUBMITTED THAT THERE IS NO JUSTIFICATION FOR REJECTING THE BOOKS OF ACCO UNT U/S 145(3) OF THE ACT AND IN MAKING THE ADDITION ON ACCOUNT OF ALLEGED DI FFERENCE IN THE GROSS PROFIT. 8. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE MATERIAL ON RECORD DELETED THE ENTIRE ADDIT ION. HIS FINDINGS IN PARA 3.2 OF THE IMPUGNED ORDER ARE REPRODUCED AS UN DER: 3.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND THE ABOVE SUBMISSIONS. THE A. O. HAS FOUND LOOS E SHEET WHICH WAS IMPOUNDED IN THE COURSE OF SURVEY U/S. 13 3A OF ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 6 I. T. ACT. IN THE SAID LOOSE SHEET WORKING OF PROFI T IS SHOWN. MOST OF THE FIGURES IN THIS LOOSE SHEET TALLY UNDER DIFFERENT HEADS IN THE ANNUAL ACCOUNT FURNISHED BY THE APPELL ANT. IN CERTAIN CASES THERE IS DIFFERENCE AS WORKED OUT BY THE A. O. THIS IS MAINLY UNDER THE HEAD LABOUR CHARGES, CENTE RING HIRE CHARGES, SHUTTER EXPENSES ETC. THE MAJOR DIFFERENCE FOUND BY THE A. O. IS IN LABOUR EXPENSES. THE APPELLANT HAS EXPLAINED THAT SUCH LABOUR CHARGES AND OTHER EXPENSES WERE AL READY PAID BEFORE THE END OF THE YEAR. THUS PAYMENT WAS A LREADY MADE BUT THE BILLS WERE AWAITED WHEN THE LOOSE SHEE T WAS PREPARED BY THE ACCOUNTANT IN THE FIRST WEEK OF APR IL 2006. THE APPELLANT HAS THUS EXPLAINED THE REASON THAT CE RTAIN EXPENSES WERE NOT NOTED WHILE PREPARING THE LOOSE S HEET. THIS IS THE REASON FOR DIFFERENCE IN MAJOR EXPENSES. IT IS ALSO EXPLAINED THAT THE ASSESSEE HAS DEDUCTED TDS AT THE TIME OF MAKING PAYMENT OF SUCH TDS IS PAID TO THE GOVERNMEN T. THIS IS NOT AN EVIDENCE CREATED AFTERWARDS. THE A. O. SI MPLY REJECTED THESE ASPECTS STATING THAT THE ASSESSEE HA S PAID TDS OF 2% AND CLAIMED DEDUCTION FOR BALANCE 98% OF EXPE NSES. THE QUESTION IS THAT THE EXPENSES WERE ALREADY INCU RRED BEFORE THE CLOSE OF THE YEAR AND THERE IS EXPLANATI ON FROM THE APPELLANT FOR THE DIFFERENCE WHICH IS ON ACCOUNT OF RECEIPT OF RESPECTIVE BILLS SUBSEQUENTLY. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE DULY AUDITED U/S. 44AB. THE AUDITORS H AVE NOT FOUND ANY DEFECTS IN THE BOOKS OR IN THE VOUCHERS F OR THE PAYMENTS MADE. CONSIDERING ALL THESE ASPECTS, THE A . O. WAS NOT JUSTIFIED IN SIMPLY ADOPTING THE FIGURE AS PER THE LOOSE SHEET WHICH IS NOT COMPLETE RECORD OF THE BOOK AND IGNORING THE PROFIT & LOSS ACCOUNT DULY AUDITED FURNISHED BY THE APPELLANT. THE ADDITION MADE IS THUS UNJUSTIFIED AN D IS DELETED. 9. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND REFERRED TO THE CHART GIVEN BY THE AO IN THE ASSESSMENT ORDER AT P AGE 4 TO 8 WHICH IS THE DETAILS OF THE EXPENSES AND INCOME AS PER RETUR N OF INCOME AND AS PER LOOSE PAPER AND THE DIFFERENCE WORKED OUT ACCORDINGLY. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS INFLATED THE LABOUR EXPENSES WHICH IS THE MAIN COMPONENT FOR THE PURPOSE OF MAKI NG THE ADDITION, THEREFORE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS MADE CASH PAYMENTS AGAINST THE RULES AND THEREFORE, IT WOULD CLEARLY P ROVE THAT THE FIGURES OF ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 7 THE GROSS PROFIT SHOWN IN THE LOOSE PAPER WAS THE C ORRECT PROFIT AS AGAINST THE PROFIT DECLARED IN THE BOOKS OF ACCOUNT. THE LE ARNED DR FURTHER SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN NOTING THAT MOST OF THE FIGURES IN THE LOOSE SHEET TALLY WITH THE ACCOU NTS OF THE ASSESSEE, RATHER IT WOULD PROVE THAT THE MATERIAL SEIZED DURI NG THE COURSE OF SURVEY PERTAIN TO THE ASSESSMENT YEAR UNDER APPEAL AND AS SUCH THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESULTS AND IN MAKI NG THE ADDITION ON ACCOUNT OF GROSS PROFIT. 10. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND ALSO REFERRED TO PAGE 4 TO 8 OF THE ASSESSMENT ORDER AS ARE REFERRED TO BY THE LEARNED DR AND SUBMITTED THAT THE DIFFERENCE AS PER BOOKS OF A CCOUNT AND LOOSE PAPER WAS WORKED OUT BY THE AO IN NEGATIVE, IT WOUL D SHOW THAT THE ASSESSEE HAS SHOWN LESSER LABOUR EXPENSES IN THE LO OSE PAPER. HE HAS ALSO REFERRED TO PB-11 WHICH IS CHART SHOWING LABOU R CHARGES FOR THE ASSESSMENT YEAR UNDER APPEAL WHICH SHOWS THAT BILLS FOR LABOUR EXPENSES UP TO MARCH ,2003 WERE RS.15,57,611/- AND PAYMENT MADE TILL MARCH, 2003 WAS RS.5,25,059/- AND BALANCE AS ON 31- 03-2003 WAS RS.10,32,552/-. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD AND DO NOT FIND ANY JUSTIFICATI ON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THE LEARNED COUNSEL FO R THE ASSESSEE WAS JUSTIFIED IN REFERRING TO THE FIGURES NOTED BY THE AO IN THE ASSESSMENT ORDER TO SHOW THAT EVEN AS PER THE DIFFERENCE NOTED BY THE AO IN THE INCOME AND DIRECT EXPENSES, THERE WERE ONLY FEW NEG ATIVE FIGURES AS PER THE LOSE PAPERS WHICH WOULD SHOW THAT THE ASSESSEE HAS CORRECTLY SHOWN THE DETAILS OF THE INCOME AND EXPENDITURE IN THE BO OKS OF ACCOUNT AS AGAINST THE DETAILS MENTIONED IN THE LOOSE PAPER. T HE NEGATIVE FIGURES OF CEMENT, SHUTTERING, MISC. EXPENSES, LABOUR WORK TRA NSPORT ETC. WOULD ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 8 SHOW THAT ULTIMATELY THERE IS A NEGATIVE FIGURE WIT H THE DIFFERENCE AS NOTED BY THE AO ACCORDING TO THE LOOSE PAPER. IT WO ULD INDICATE THAT THE ASSESSEE CLAIMED LESSER EXPENSES AS PER THE LOOSE P APER. ACCORDING TO THE ASSESSEE, THE BOOKS OF ACCOUNT ARE AUDITED IN WHICH NO DEFECT HAS BEEN POINTED OUT. ACCORDING TO THE ASSESSEE, SURVEY WAS CARRIED OUT ON 18-06-2003 AND THE ASSESSEE DEDUCTED TAX DURING THE YEAR AND PAID THE SAME FROM ALL THE BILLS OF LABOUR ON 30-04-2003 I.E . PRIOR TO SURVEY. THE TDS CERTIFICATES WERE ALSO ISSUED ON 30-04-2003. IT WOULD, THEREFORE, SHOW THAT PAYMENTS TO THE LABOURERS/CONTRACTORS WER E ALREADY MADE PRIOR TO THE SURVEY UPON WHICH TDS WAS DEDUCTED AND PAID. THE FIGURES SHOWN BY THE ASSESSEE ARE THUS TALLIED WITH THE FIG URES IN THE BOOKS OF ACCOUNT. THE AO WITHOUT EXAMINING THE CORRECTNESS O F THE BOOKS OF ACCOUNT AND THE SUPPORTING VOUCHERS HAD MERELY TAKE N THE FIGURES FROM THE LOOSE PAPER IN ORDER TO MAKE THE ADDITION. THE AO HAS NOT VERIFIED WHETHER THE FIGURES GIVEN IN THE LOOSE PAPER WERE C ORRECT OR NOT. THE FIGURES OF INCOME AS WELL AS MATERIAL EXPENSES APPE ARED IN THE PROFIT & LOSS ACCOUNT TALLY WITH THE FIGURES OF LOOSE PAPER. THE VARIATION WAS MOSTLY IN THE FIGURES OF LABOUR CHARGES AS PER THE BILLS WHICH WERE TO BE RECEIVED BY THE ASSESSEE FROM THE SITES WHERE THE L OOSE SHEETS WERE PREPARED. THUS, THE AO WITHOUT ANY VERIFICATION OF THE FACTS TOOK THE FIGURES OF GROSS PROFIT FROM THE LOOSE SHEETS AND M ADE THE ADDITION. IT IS, THEREFORE, CLEAR THAT THE ASSESSEE HAS EXPLAINED TH E REASONS ABOUT CERTAIN EXPENSES WHICH WERE NOT NOTED WHILE PREPARI NG THE LOOSE SHEETS. THIS WAS THE MAIN REASON FOR THE DIFFERENCE WHICH S TOOD EXPLAINED BEFORE THE LEARNED CIT(A). THE DEDUCTION OF TDS AT THE TIM E OF MAKING THE PAYMENT AND PAYMENT OF THE TAX TO THE GOVERNMENT WO ULD ALSO SUGGEST THAT THE ASSESSEE DEDUCTED THE TAX PRIOR TO THE SUR VEY AND ALSO PAID THE SAME TO THE GOVERNMENT PRIOR TO SURVEY, WOULD ALSO SUPPORT THE FINDINGS OF THE LEARNED CIT(A) THAT THE ASSESSEE RECORDED GE NUINE EXPENSES IN THE BOOKS OF ACCOUNT. THE AO HAS NOT POINTED OUT ANY OT HER SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE SUPPOR TING VOUCHERS FOR THE ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 9 PAYMENTS MADE. THE LEARNED CIT(A) WAS, THEREFORE, J USTIFIED IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN TAKING THE FIGURES OF THE PROFIT FROM THE LOOSE PAPER AS AGAINST THE FIGURES SHOWN IN THE BOO KS OF ACCOUNT AND THE PROFIT & LOSS ACCOUNT. THE LEARNED CIT(A) WAS, THER EFORE, JUSTIFIED IN DELETING THE ENTIRE ADDITION. WE CONFIRM HIS FINDIN GS AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 12. ON GROUND NO.2, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.1,23,572/- U/S. 40A(3) OF THE IT ACT. THE AO DIS ALLOWED 20% OF THE TOTAL PAYMENT MADE OF RS.6,17,859/- EACH OF WHICH W ERE EXCEEDING RS.20,000/- WHICH WERE NOT MADE BY ACCOUNT PAYEE CH EQUES. IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE ASSESS EE IS A CONTRACTOR AND HAS EMPLOYED LABOURERS AT VARIOUS REMOTE SITES. THE WORKERS ARE HAVING SMALL EARNING AND SMALL PAYMENTS ARE MADE TO THEM T HROUGH THE MOKADAMS WHO DISTRIBUTE THE PAYMENTS TO THE WORKERS . SINCE THE WORKERS ARE AT REMOTE AREAS THEY DID NOT HAVE THEIR PERMANENT RESIDENCE AT WORK SITES AND THAT NO BANKING FACILITY IS AVAIL ABLE TO THEM. THEREFORE, IT IS COMMON PRACTICE TO MAKE PAYMENTS THROUGH BEAR ER CHEQUES. IT WAS, THEREFORE, EXPLAINED THAT IT IS A CASE OF EXCEPTION PROVIDED U/S. 40A (3) OF THE IT ACT. THE LEARNED CIT(A) ACCEPTED THE CONTENT ION OF THE ASSESSEE THAT THE ASSESSEE IS ENGAGED IN DEVELOPMENT WORK AT DIFFERENT SITES IN REMOTE AREAS WHERE LABOURERS HAVE NO PERMANENT RESI DENCE AND THEY CANNOT BE EXPECTED TO HAVE BANK ACCOUNTS. THE LEARN ED CIT(A) ACCORDINGLY DELETED THE ADDITION. 13. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 14. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION. THE ASSESSEE HAS EMPLOYED TEMPORARY LABOURERS THROUGH MOKADAMS AT TH E PLACE OF THE ITA NO.728/AHD/2007 AND CO NO.214/AHD/2007 ACIT, SURAT VS JAYANT RAMBHAI SANGHADIA 10 SITES WHERE ACCORDING TO THE ASSESSEE BANKING FACIL ITIES ARE NOT AVAILABLE. THUS, THE ASSESSEE DUE TO THE ABOVE FACTS HAS MADE CASH PAYMENTS TO THE LABOURERS THROUGH MOKADAMS. IT IS ONE OF THE EX CEPTIONAL REASONS WHICH WARRANTED THE ASSESSEE TO MAKE THE PAYMENTS I N CASH. WE RELY ON CIRCULAR NO.220 DATED 31-05-1977. MOREOVER GENUINEN ESS OF CASH PAYMENTS IS NOT DOUBTED BY THE AO. WE, THEREFORE, D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THIS GROUND OF APPEAL OF T HE REVENUE. 15. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-06-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 04-06-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD