Shri Ranu Satsangi, Meerut V. ACIT, Meerut

ITA 3476/DEL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98110 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES SINGSUN SENIOR
• Assessee Lawyers: AVNEESH SHARMA
• Keywords: Unexplained cash credit; Business expenditure
• Section: 143(3); 142(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G: NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.3476/DEL./2015 (ASSESSMENT YEAR : 2007-08) SHRI RANU SATSANGI, VS. ACIT, CIRCLE II, C/O SHRI AVNEESH SHARMA, ADVOCATE MEERUT. 51, MANSAROVAR, LANE NO.4, MEERUT CANTT. (PAN : AGGPS3939L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AVNEESH SHARMA, ADVOCATE REVENUE BY : SHRI JAMES SINGSUN, SENIOR DR DATE OF HEARING : 23.09.2015 DATE OF PRONOUNCEMENT : 18.12.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIR ECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), MEERUT DA TED 30.03.2015 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS TAKEN TH E FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LD COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE VIEW TAKEN BY LD ASSESSING AUTHORITY AND THEREBY ALLOWING THE APPEAL IN PART O NLY. 2 ITA NO.3476/DEL/2015 2. THAT THE LD COMMISSIONER OF APPEALS BASED HIS OBSERVATIONS ON THE BASIS OF VIEW TAKEN BY ASSESSIN G OFFICER ONLY AND REPEATED HER VERSION ONLY IN HIS ORDER. HE DID NOT VERIFY THE DOCUMENTS/EVIDENCES FURNISHED BY APPELLANT BEFORE H IM AT THE TIME OF HEARING OF APPEAL. THEREFORE THE CONFIRMATION OF ADDITION OF RS.19,04,731.00 ON ACCOUNT OF LABOUR EXPENSES BY TH E LD COMMISSIONER OF APPEALS IS UNJUSTIFIED. 3. THAT THE LD COMMISSIONER OF APPEALS DID NOT CONS IDER THE DEFENCE TAKEN BY APPELLANT THAT THE APPELLANT DECLA RED NET PROFIT IN EXCESS TO PROFIT OF 8% WHICH IS NORMALLY ACCEPTED B Y THE DEPARTMENT EVEN IN THE CASE WHERE BOOKS OF ACCOUNTS ARE NOT MAINTAINED. THEREFORE THE VIEW TAKEN BY APPELLATE A UTHORITY IS NOT JUSTIFIED. 4. THAT THE LD ASSESSING OFFICER MADE ADDITIONS ON TECHNICAL GROUND ONLY CONSIDERING THE LABOUR AS SKILLED AND W ELL EDUCATED AGAINST ACTUAL FACTS AND CIRCUMSTANCES. THE CONFIRM ATION OF SUCH VIEWS BY THE APPELLATE AUTHORITY IS UNJUST AND ARBI TRARY. 5. THAT THE APPELLANT MAY KINDLY BE PERMITTED TO AD D ANY OTHER GROUND AT THE TIME OF HEARING OF THE APPEAL. 6. THAT THE ORDERS PASSED BY LOWER AUTHORITIES ARE ARBITRARY AND CONTRARY TO CORRECT FACTS AND MAY KINDLY BE SET ASI DE OR MODIFIED IN TERMS OF GROUNDS OF APPEAL. 2. THE ONLY EFFECTIVE GROUND TAKEN BY THE ASSESSEE IN THE AFORESAID GROUNDS IS AGAINST THE CONFIRMATION OF ADDITION OF RS.19,04 ,731/- ON ACCOUNT OF LABOUR EXPENSES . 3. THE ASSESSEE WAS DERIVING INCOME FROM CONTRACT W ORK OF SUPPLYING AND INSTALLATION OF ELECTRICAL EQUIPMENT. THE RETURN OF INCOME WAS FILED ON 31.10.2007 DECLARING INCOME OF RS.5,53,168/-. THE CASE WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER TH E ACT) ON 31.01.2008 AT THE DECLARED INCOME. LATER, THE ASSESSEES CASE WAS SE LECTED FOR SCRUTINY AND 3 ITA NO.3476/DEL/2015 NOTICES U/S 143(2) AND 142(1) ALONG WITH QUESTIONNA IRE WERE ISSUED ON 22.09.2008 AND 25.06.2009 RESPECTIVELY. IN RESPONS E TO THESE NOTICES, THE ASSESSEE FILED THE REQUISITE DETAILS / INFORMATION. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AT A TOTAL TAXABLE INCOME AT RS.24,99,110/- AND THE COMPUTATION OF INCOME MADE BY THE AO IS AS UNDER :- NET PROFIT AS DECLARED BY THE ASSESSEE RS. 5,53 ,168/- ADD : DISALLOWANCE OF BENEFIT OF TDS CLAIMED BY THE ASSESSEE RS. 23,297/- ADD : DISALLOWANCE OF OUTSTANDING LIABILITIES SHOWN IN THE BALANCE SHEET RS.19,04,731/- ADD : DISALLOWANCE OF TELEPHONE AND CAR EXPENSES CLAIMED RS. 15,412/- ADD : DISALLOWANCE OF DONATION CLAIMED RS. 2,500/ - TOTAL INCOME : RS.24,99,108/- OR ROUNDED OFF TO : RS.24,99,110/- 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO T HE FIRST APPELLATE AUTHORITY AGAINST THE DISALLOWANCE OF BENEFIT OF TDS CLAIMED OF RS.23,297/- AND DISALLOWANCE OF RS.19,04,731/- OF OUTSTANDING LIABI LITIES SHOWN IN THE BALANCE SHEET. THE CIT (A) HAD DELETED THE ADDITION ON ACC OUNT OF TDS CLAIMED AND, HOWEVER, UPHELD THE ADDITION OF RS.19,04,731/- 5. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US AGAINST THE AFORESAID ADDITION. 4 ITA NO.3476/DEL/2015 6. BRIEF FACTS RELATING TO THE AFORESAID ADDITION O F RS.19,04,731/- ARE THAT THE AO OBSERVED THAT THE ASSESSEE HAD SHOWN OUTSTANDING LIABILITY OF RS.19,82,131/- UNDER THE HEAD SALARY AND WAGES AND LABOUR CHARGES. THE AO NOTED THAT THE OUTSTANDING LIABILITY WAS MORE THAN 80% OF THE TOTA L EXPENSES CLAIMED IN THE P&L ACCOUNT UNDER THE HEADS OF SALARY AND WAGES. TH E AO, THEREFORE, ASKED THE ASSESSEE TO SUBSTANTIATE THE GENUINENESS OF THE LIA BILITY AND TO ESTABLISH THE IDENTITY OF CREDITORS. THE AO ALSO QUESTIONED THE L OGIC OF UNPAID LIABILITIES. THE RELEVANT PORTION OF THE AO'S ORDER IS REPRODUCED AS UNDER :- 4,3 THE ASSESSEE WAS ASKED TO PROVE THE GENUINENE SS OF THESE CREDITORS, VIDE VARIOUS ORDER SHEET ENTRIES AS ALRE ADY DISCUSSED IN EARLIER PARA. DESPITE OF SEVERAL OPPORTUNITIES GIVE N TO THE ASSESSEE, THE GENUINENESS OF THESE TRANSACTIONS COULD NOT BE PROVED BY THE ASSESSEE. I, THEREFORE, ON THE FOLLOWING GROUNDS, R EASONS AND FACTS HOLD THESE LIABILITIES AS UNEXPLAINED:- IDENTITY : - THE ASSESSEE COULD NOT PROVE THE IDENTITY OF THESE CREDITORS DESPITE SEVERAL OPPORTUNITIES GIVEN TO TH E ASSESSEE. IN THE PRESENT CASE, THE FACTOR OF 'IDENTITY' IS VERY MUC H IMPORTANT AS IT IS NOT A CASE OF LABOUR CONTRACT, WHERE WORK CAN BE CO MPLETED WITH THE HELP OF UNSKILLED LABOUR. IT IS A CASE OF ELECT RICAL CONTRACT WHERE, THERE IS INSTALLATION OF ELECTRICAL EQUIPMEN TS IS THE MAIN SUBSTANCE OF BUSINESS. THIS FACT IS ALSO SUPPORTED FROM THE ATTENDANCE REGISTER IN WHICH THE DESIGNATION OF THE SE LABOUR IS, FITTER, WIREMAN, ELECTRICIAN ETC. HAS BEEN MENTIONE D AND NORMALLY THESE LABOUR TAKE SHORT TIME TRAINING FROM THE INST ITUTE SUCH AS I.T.I. ETC AND GET PROPER IDENTITY CARD, DIPLOMA CERTIFICA TES ETC. FOR THE IDENTITY. SO THE CLAIM OF THE ASSESSEE THAT THERE I S NO IDENTITY OF THE POOR LABOUR IS NOT ACCEPTABLE AND ASSESSEE COULD NO T PROVE THE IDENTITY OF THE LABOUR SHOWN AS THE LIABILITY OF OU TSTANDING WAGES. LOGIC OF UNPAID LIABILITIES:- THE ASSESSEE HAS SHOWN LIABILITY NOT ONLY OF THE PREVIOUS MONTH I.E. MARCH 2007) BUT A H UGE LIABILITY OF PRECEDING YEAR TO THE PREVIOUS YEAR I.E. FINANCIAL YEAR 2005-06 HAS ALSO BEEN SHOWN. THE PENDENCY OF THIS LIABILITY IS BEYOND THE LOGIC 5 ITA NO.3476/DEL/2015 AS THE LABOUR SUCH AS FITTER, ELECTRICIAN, WIREMAN ARE GENERALLY FROM THE POOR CLASS, THE PAYMENT OF THESE PERSONS CAN ON LY BE HELD FOR 2- 3 DAYS, BUT NOT MORE THAN THIS, IN MOST OF SUCH TYP E OF CLASS, THE FOOD IS COOKED FROM THE DAILY RECEIPT OF THESE LABO UR, HENCE THE CIRCUMSTANTIAL EVIDENCE IS AGAINST THE ASSESSEE. DOCUMENTARY EVIDENCE OF REJECTION OF THE CLAIM:- THE ASSESSEE WAS REQUIRED TO FURNISH ATTENDANCE REGISTER OF THE LABOUR FIXED FOR INSTALLATION OF WORK CONTRACT. THE SAME WERE FURNI SHED. A PERUSAL OF THIS REGISTER SHOWS THAT THERE ARE A BIG NUMBER OF CASES, WHERE THE LABOUR HAVE RECEIVED THE PAYMENT OF THEIR WORK DONE IN THE MONTH OF JUNE 2006 IN THE SAME MONTH, BUT THEY HAVE NOT RECEIVED THEIR PAYMENT OF THE WORK DONE DURING THE FINANCIAL YEAR 2005- 2006. FOR EXAMPLE IN THE LIST AMOUNTING TO RS.4,03, 000/- (SHOWN AS LIABILITY OF PAYMENT OF EXPENSES) AT S.NO.11 TO 20 AND AT S.NO.41 TO 50, HAVE BEEN SHOWN AS PENDING AND THESE PERSONS HAVE NOT RECEIVED THEIR PAYMENT SO FAR, BUT IN THE NEXT YEAR , THE NAME OF THESE PERSONS ARE APPEARING AT THE SAME S.NO. I.E. 41 TO 50 AND 11 TO 20 AND THE DUE PAYMENT TO THESE PERSONS HAVE BEE N MADE ON THE SAME MONTH. WHY WILL A LABOUR CLASS PERSON WHO HAS NOT RECEIVED THE PAYMENT OF THEIR WORK DONE IN THE PRECEDING YEA R, WILL WORK IN THE NEXT YEAR AND IT IS MORE INTERESTINGLY, THAT OL D PAYMENTS HAVE NOT BEEN MADE CLEAR THOUGH NEW PAYMENTS ARE BEING D ONE. 4.4 MOREOVER, THE SIGNATURE OF RIZWAN S/O FAROOK WI REMAN, HAS BEEN MADE IN A RUNNING FLOW OF ENGLISH ON THE R ECEIPT OF JUNE 2006 (AT S.NO.42), BUT IN THE LIST OF PRECEDING YEA R 2005-06, THE SIGNATURE OF RIZWAN S/O FAROOK, WIREMAN ARE IN A VE RY ILLITERATE MANNER IN 'HINDI'. SAME TYPE OF DISCREPANCY IS SEEN IN THE SIGNATURE OF VEER (S.NO. 18). BESIDES THIS, SIGNATU RE OF OTHER PERSON ALSO DO NOT SEEM COMPARABLE. 4.5 IN VIEW OF THE ABOVE FACTS, CIRCUMSTANCES, EVID ENCES AND CIRCUMSTANTIAL EVIDENCES, IT HAS DULY BEEN PROVED T HAT THE LIABILITY SHOWN IN THE DISGUISE OF OUTSTANDING LIABILITY IS B OGUS AND THE ASSESSEE HAS FAILED TO PROVE THESE LIABILITY. I, TH EREFORE, TREAT THE LIABILITY OF EXPENSES AS BOGUS AND THE SAME IS HERE BY ADDED TO THE INCOME OF THE ASSESSEE. (ADDITION OF RS.19,04,731/-) 6 ITA NO.3476/DEL/2015 6.1 THE LD. CIT (A), AFTER GOING THROUGH THE WRITTE N SUBMISSIONS OF THE ASSESSEE, CONCLUDED THAT THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THE GENUINENESS OF OUTSTANDING LIABILITY OF RS.19,04,73 1/- AND ACCORDINGLY, CONFIRMED THE ADDITION MADE BY THE AO. 7. THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMI SSIONS MADE BEFORE THE LD. CIT (A) AND ALSO FILED THE WRITTEN SUBMISSIONS BEFO RE THE TRIBUNAL WHICH READ AS UNDER :- BRIEF FACTS OF THE CASE: THE APPELLANT IS ENGAGED IN THE BUSINESS OF SUPPLYI NG, FIXING AND REPAIR WORK OF ELECTRICAL GOODS/EQUIPMENTS UNDER WORKS CON TRACT, COMPRISING MAINLY LABOUR WORK ONLY WITH PUBLIC LIMITED' COMPAN IES. THE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN ACCEPTED IN THE PAST AND IN SUBSEQUENT YEARS. THE APPELLANT HAS MAINTAINED PROP ER BOOKS OF ACCOUNTS AS PER THE PROVISIONS OF SEC-44AA OF I.T. ACT AND UNDER OTHER ENACTMENTS. THE APPELLANT IS REGISTERED UNDER DIFFERENT ENACTME NTS OF CENTRAL AND STATE GOVERNMENT. THE BOOKS OF ACCOUNTS OF APPELLAN T WERE AUDITED BY THE CHARTERED ACCOUNTANT FOR THE YEAR AS PER THE PR OVISIONS OF SEC-44AB OF IT ACT. THE APPELLANT PRODUCED ALL BOOKS OF ACCO UNTS BEFORE THE LD ASSESSING OFFICER AT THE TIME OF HEARING OF THE CAS E AS ADMITTED, BY HER IN FIRST PARA AT PAGE-01 OF THE ASSESSMENT ORDER. THE LD ASSESSING OFFICER REJECTED BOOKS OF ACCOUNTS OF APPELLANT ON TECHNICAL GROUNDS AND IMPOSED HEAVY TAX FOR THE YEA R UPON APPELLANT. FIRST APPEAL OF APPELLANT WAS PARTLY ALLOWED AND LD CIT APPEAL DELETED THE ADDITION OF RS.23,297.00 MADE ON ACCOUNT OF TD S DEDUCTED. HE CONFIRMED OTHER ADDITIONS. BEING AGGRIEVED BY THE O RDER THE APPELLANT PREFERRED THIS APPEAL BEFORE THE HON'BLE COURT. MAI N GROUNDS OF THE APPEAL ARE DISCUSSED HERE UNDER: THE LD ASSESSING OFFICER MADE ADDITION OF RS.19,04, 731.00 ON ACCOUNT OF SUNDRY CREDITORS FOR EXPENSES PAYABLE: THESE CRE DITORS WERE PAYABLE ON ACCOUNT OF WAGES AND LABOUR CHARGES. TOTAL BREAK UP OF THESE EXPENSES ARE AS UNDER : 7 ITA NO.3476/DEL/2015 S.NO. PARTICULARS AMOUNT 1. LABOUR CHARGES PAYABLE, BHIWADI RS.10,72,640.0 0 2. LABOUR CHARGES PAYABLE, MEERUT RS. 5,06,491. 00 3. LABOUR CHARGES PAYABLE, PANIPAT RS. 4,03,000 .00 TOTAL RS.19,82,131,00 THE LD ASSESSING OFFICER MADE THE ADDITION ON FRIVO LOUS AND TECHNICAL BASIS ONLY. SHE VIEWED THAT THE APPELLANT INCURRED TOTAL EXPENSES OF RS.24,45,283.00 ON ACCOUNT OF LABOUR/WAGES AND OUTS TANDING EXPENSES ARE MORE THAN 80% OF THE TOTAL EXPENSES. SHE COMMIT TED A MISTAKE IN VIEWING THE ABOVE INFERENCE. THE APPELLANT DISBURSED TOTAL LIABILITY OF LABOUR/W AGES DURING THE YEAR AS UNDER: F. Y. 2006-2007 [AY 2007-08][01.4.2006 TO 31.03.200 7] THE LIABILITY OF WAGES PAYABLE AS ON 31.03.2006 RS .19,20,699.00 THE LIABILITY OF WAGES ACCRUED FOR THE YEAR 31.03.0 7 RS.19,81,900.00 THE LIABILITY OF WAGES ACCRUED FOR THE YEAR 31.03.0 7 RS. 4,63,383.00 TOTAL RS.43,65,982.00 THE LIABILITY PAID DURING THE YEAR RS.23,83,851 .00 THE LIABILITY PAYABLE AS ON 31.03.2007 RS.19,82,131.00 F. Y. 2007-2008 [AY 2008-09][01.4.2007 TO 31.03.20 08] LIABILITY PAYABLE AS ON 31.03.2007 RS.19,82,131 .00 THE LIABILITY OF WAGES ACCRUED ON 31.03.2008 RS.2 4,13,129.00 TOTAL RS.43,95,260.00 THE LIABILITY PAID DURING THE YEAR RS.23,42,965 .00 THE LIABILITY PAYABLE AS ON 31.03.2008 RS.20,52, 295.00 THE TABLE MENTIONED ABOVE CLEARLY REFLECTS THAT THE APPELLANT DISBURSED ALMOST SIMILAR AMOUNT OF LIABILITY DURING THE F. Y. 2006-2007. PHOTOCOPIES OF BALANCE SHEETS ARE BEING APPENDED FO R THE READY REFERENCE OF THE HON'BLE COURT. IN THE FOLLOWING YEAR THE APPELLANT PAID LIABILITY OF RS.23,42,965.00, ALMOST SIMILAR AMOUNT WHICH WAS INCURRED ON LABOUR EXPENSES AS ON 31.03.2008. IT PROVES THAT MAJOR AMOUNT OF BALANCE PAYABLE AS ON 31.03.2007 WAS PAID IN THE FOLLOWING YEAR ENDING ON 31.03.2008. THE MODUS OPERANDI CONTINUED IN THE SAME MANNER AND OUT STANDING PAYMENT OF WAGES WAS MADE IN THE FOLLOWING YEAR. ANNEXURE: A1, A2 8 ITA NO.3476/DEL/2015 THEREFORE THE GROUND TAKEN BY L'D ASSESSING OFFICER THAT THE LABOUR/WAGES EXPENSES SHOWN PAYABLE DO NOT SEEM GEN UINE, IS INCORRECT. THE LD ASSESSING OFFICER VIEWED THAT THE APPELLANT DETAINED PAYMENT OF PREVIOUS YEAR I.E. F.Y. 2006-07 WHEREAS MADE PAYMEN T FOR F.Y. 2007- 08 HENCE MADE IT A GROUND FOR ADDITION. THE APPELLA NT MADE PAYMENT AS PER MARKET PRACTICE. SOMETIMES PAYMENTS ARE BLOCKED TO DETAIN THE LABOUR FOR LONGER PERIOD. SINCE PAYMENTS' ARE MADE IN RUNNING MANNER HENCE ACCEPTABLE BY LABOUR ALSO. IT IS NOT A CRITER ION HOW AND WHEN THE PAYMENTS ARE MADE TO LABOUR. ANOTHER REASON FOR DET AINING PAYMENT IS SHORTAGE OF FUNDS ALSO. ANOTHER GROUND TAKEN BY LD ASSESSING OFFICER THAT T HE ADDRESS OF SHRI SHIV DAYAL AND SHRI GAUTAM PANDEY WAS DEPICTED M/S BALKISHAN INDUSTRIES LTD., BHIWADI, PREVIOUSLY KNOWN AS M/S B ALKISHAN TYER LTD., AND IS A CONTRACTOR COMPANY THEREFORE THE LIST GIVE N BY APPELLANT IS NOT GENUINE, HAS NO SUBSTANCE. SAID LABOUR WAS LOCAL AN D WAS ENGAGED FROM NEARBY AREA OF THE CONTRACTOR THEREFORE THE ADDRESS WAS GIVEN C/O M/S BALKRISHAN INDUSTRIES LTD. THE LD ASSESSING OFFICER HERSELF ADMITTED THAT APPE LLANT FURNISHED COPY OF ATTENDANCE/WAGES REGISTER (PARA 4.2 OF ORDER) BU T DID NOT ACCEPT THE SAME FOR WANT OF IDENTITY OF LABOURS. SHE DEMANDED I CARD, CERTIFICATE OF ITI, DIPLOMA CERTIFICATE. NOTHING OF SUCH DOCUMENTS CAN BE EXPECTED FROM A LABOUR PERSON ESPECIALLY FOR SMALL KIND OF J OB , PERFORMANCE BY APPELLANT. THE BUSINESS OF APPELLANT IS NOT THAT BI G WHICH COULD AFFORD SUCH TYPE OF ENGINEERS, TECHNICIANS AND SKILLED LAB OUR. THE APPELLANT RECEIVED TOTAL PAYMENT OF RS. 44.70 L ACS ONLY DURING THE YEAR. THE APPELLANT HAS ONE MASTER CUM SUPERVISOR W HO GUIDES THE REST OF THE LABOUR. THEY LEARN FROM EXPERIENCE ONLY. THE GROUND TAKEN BY LD ASSESSING OFFICER THAT ONE O F THE LABOUR SHRI RIZWAN S/O SHRI FAROOK, WIREMAN PUT HIS SIGNATURE I N ENGLISH IN WAGES REGISTER IN AY. 2007-98 WHEREAS HE PUT HIS SIGNATUR E IN HINDI IN PREVIOUS YEAR I.E. AY. 2006-07, IS NOT RELEVANT. AN Y PERSON CAN CHANGE HIS SIGNATURE IN THE FOLLOWING YEAR. THE BOOKS OF A CCOUNTS OF AN ASSESSEE CANNOT BE REJECTED ON THE BASIS OF REASON THAT HE P UT DIFFERENT SIGNATURE IN PREVIOUS YEAR, ESPECIALLY WHEN THE BOOKS OF ACCO UNTS WERE ACCEPTED ON THIS GROUND IN THE PREVIOUS YEAR. THE LID ASSESSING OFFICER ALLOWED THE PAYMENT TO LA BOUR IN THE PREVIOUS YEAR IN THE PROCEEDINGS U/S 143(3) OF I. T. ACT. PH OTOCOPY OF ORDER FOR A.Y. 2006-07 IS ENCLOSED FOR YOUR KIND REFERENCE. T HE APPELLANT ADOPTED 9 ITA NO.3476/DEL/2015 SAME KIND OF ACCOUNTING .METHOD AS IN THE PREVIOUS YEAR. ANNEXURE: B THE WAGES/LABOUR CANNOT BE REJECTED SIMPLY FOR THE REASON THAT I CARD/CERTIFICATES OF LABOURS WERE NOT PRODUCED. THE L'D ASSESSING OFFICER HERSELF ADMITTED THAT SUCH LABOUR ARE FROM POOR CLA SS (LAST PARA AT PAGE- 3 OF ASSESSMENT ORDER). THE COPIES OF ATTENDANCE/WA GES REGISTERS ARE BEING APPENDED HEREWITH IN SUPPORT OF THE DEFENCE T HAT PROPER WAGES REGISTER WAS MAINTAINED BY APPELLANT. ANNEXURE: C1, C2 IT IS IMPORTANT TO MENTION THAT UNEXPLAINED CREDITS CAN BE ADDED U/S 68 OF I.T. ACT ONLY WHEN NATURE AND SOURCE OF CREDIT I S NOT EXPLAINED. IN THE PRESENT CASE NATURE AND SOURCE WAS EXPLAINED AND HE NCE ADDITIONS ON ACCOUNT OF UNEXPLAINED CREDITS IS NOT JUSTIFIED. IT IS IMPORTANT TO MENTION THAT APPELLANT DECLARED NET PROFIT OF RS.6,61,805.00 FROM CONTRACT WORK OF RS.44,70,000.0 0 WHICH COMES TO AROUND 14.81% OF GROSS RECEIPTS. IT WAS ALMOST DOU BLE OF THE 8.0% PROFIT CONSIDERED BY THE DEPARTMENT IN A ROUTINE MA NNER. THE LID 'ASSESSING' OFFICER ACTED ARBITRARILY IN MAKING ADD ITION OF RS.19,04,731.00 ON ACCOUNT OF LABOUR/WAGES PAYABLE. THE LD ASSESSING OFFICER COMMITTED ANOTHER LEGAL WRONG IN ADDING THO SE EXPENSES OF RS.15,412.00 ON ACCOUNT OF MISC. EXPENSES CONSIDERI NG AS MADE ON PERSONAL USAGE. THE APPELLANT CLAIMED ONLY REASONAB LE AND BUSINESS EXPENSES. THE APPELLANT PLACES RELIANCE UPON THE OBSERVATION OF HON'BLE APEX COURT IN THE CASE OF CIT VS SMT. P.K. NOORJAHAN, IT R-237, 1999 AT PAGE 570 IN WHICH THE COURT OBSERVED THAT EACH AND EVERY INVESTMENT CAN'T BE TREATED AS UNEXPLAINED WHEN EVER EXPLANATI ON REGARDING IT IS NOT SATISFACTORY IN THE EYES OF ASSESSING OFFICER. THE ASSESSING OFFICER HAS TO PROVE THAT CREDIT WORT HINESS OF SUCH INVESTMENT IS BOGUS. THE SAME VIEW WAS ADOPTED BY H ON'BLE MADRAS HIGH COURT IN THE CASE OF R. THIAGARAJAN V/S CIT RE PORTED IN ITR-239, 1999 AT PAGE 557 AND GAUHATI HIGH COURT IN THE CASE OF M/S ROOPCHAND MANOJ KUMAR V /S CIT, REPORTED IN ITR-235, 1999 AT PAGE 461. IN THE PRESENT CASE NATURE OF OUTSTANDING WAS EXPENSES PAY ABLE AND WAS NOT DOUBTFUL. THE L'D ASSESSING OFFICER MADE ADDITIONS OF RS.15,4 12.00 ON ACCOUNT OF MISC. HEADS WITHOUT ANY SUSTAINABLE REASON CONSIDER ING PERSONAL USAGE OF CAR AND TELEPHONE WHEREAS THE APPELLANT PRODUCED ALL RESPECTIVE INVOICES AND VOUCHERS. THE L'D ASSESSING OFFICER MA DE ADDITION OF RS. 2,500.00 ON ACCOUNT OF DONATION MADE BY APPELLANT W ITHOUT ANY SUSTAINABLE REASON WHICH IS DEDUCTABLE FROM TOTAL I NCOME. THE ADDITION 10 ITA NO.3476/DEL/2015 WAS AGAINST THE OBSERVATION OF HON'BLE KARNATAKA HI GH COURT IN THE CASE OF CIT V/S M/S DAVANGERE COTTON MILLS LTD. REP ORTED IN ITR-243, 2000 AT PAGE 864. THE L'D FIRST APPELLATE AUTHORITY WAS UNJUST IN NOT GIVING RELIEF TO APPELLANT ON ABOVE SUBJECT AND MERELY CONFIRMED THE VIEW ADOPTED BY L'D ASSESSING OFFICER. THE L'D FIRST APPELLATE AUT HORITY DID NOT CONSIDER THE GROUND THAT THE APPELLANT WAS SMALL CO NTRACTOR, PERFORMING MAINLY LABOUR WORK. THE, PAYMENTS OF APPELLANT ARE BLOCKED BY THE EMPLOYERS WHOSE WORK ARE PERFORMED BY THE APPELLANT . THEREFORE THE REJECTION OF APPEAL IS NOT JUSTIFIED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES IT IS PRAYED THAT THE ORDER OF LOWER .AUTHORITIES MAY KINDLY BE SET ASIDE AND T HE APPEAL MAY KINDLY BE ALLOWED. IN CASE, HOWEVER, ANY FURTHER INFORMATI ON/ EVIDENCE / CLARIFICATION ON ANY ISSUE IS STILL CONSIDERED NECE SSARY, THE SAME WOULD BE DULY FURNISHED, IF SO DIRECTED. LD. AR ALSO FILED PAPER BOOK CONTAINING THE COPY OF STATEMENT OF INCOME FOR AY 2007-08, COPIES OF BALANCE SHEET FOR AYS 2007-08 & 2008-09, ASSESSMENT ORDER FOR AY 2006-07, PAYMENT TO LABOUR REGISTER, C OPY OF JUDGMENTS OF CIT VS. SMT. P.K. NOORJAHAN AND R. THIAGARAJAN VS. CIT TO S UBSTANTIATE HIS ARGUMENTS. HE ACCORDINGLY PLEADED TO SET ASIDE THE ORDERS OF T HE AUTHORITIES BELOW AND DELETE THE ADDITION. 8. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL. WE FIND THAT THE ASSESSEE HAS DECLARED INCOME OF RS.5,53,168/- WHICH HAS BEEN ACCEPTED BY THE AO MEANING THEREBY WORKING OF THE PROFIT HAS BEEN A CCEPTED BY HIM. A PERUSAL OF THE P&L ACCOUNT SHOWS THAT TO ARRIVE AT THE PROF IT, AN AMOUNT OF RS.19,81,900/- REPRESENTING LABOUR EXPENSES AND RS. 4,63,383/- REPRESENTING 11 ITA NO.3476/DEL/2015 EXPENSES INCURRED ON STAFF WERE CLAIMED AND ACCEPT ED. THEREAFTER, IT WAS STRANGE ON THE PART OF THE AO TO TURN AROUND AND DI SALLOW THE LIABILITY OF RS.19,82,131/-. WE TAKE NOTE OF THE FACT THAT THE ASSESSEE HAS SUBMITTED THAT IT HAS PAID THE ENTIRE AMOUNT IN THE NEXT FINANCIAL YE AR, THEREBY THE LIABILITY OUTSTANDING AND BROUGHT TO TAX STANDS DISCHARGED AN D, THEREFORE, IT CANNOT BE CALLED A BOGUS LIABILITY. WE ALSO TAKE NOTE THAT A S PER SECTION 44AD, THE WORKS CONTRACTOR LIKE ASSESSEE, IN CASE IF THE TURN OVER OR GROSS RECEIPTS IN PREVIOUS YEARS DOES NOT EXCEED AN AMOUNT OF RUPEES FORTY LAK HS, AS THE LAW THEN WAS, THEN A SUM EQUAL TO EIGHT PER CENT OF THE TOTAL TURNOVE R OR GROSS RECEIPTS OF THE ASSESSEE SHALL BE DEEMED TO BE THE PROFITS AND GAIN S OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION. HERE IN THE INSTANT CASE ASSESSEES GROSS RECEIPT WAS RS 44,70, 000/=, AND THE ASSESSEE DECLARED PROFIT OF 14.81% WHICH IS REASONABLE AND M OREOVER IN EARLIER YEAR I.E. AY 2006-07, THE AO HAS ACCEPTED THE MODUS OPERANDI OF THE ASSESSEE. THEREFORE, WE FIND MERITS IN THE APPEAL OF THE ASSE SSEE AND DISALLOWANCE MADE BY THE AUTHORITIES BELOW NEEDS TO BE DELETED. WE O RDER ACCORDINGLY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DECEMBER, 2015. SD/- SD/- (N.K. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 18 TH DAY OF DECEMBER, 2015/TS 12 ITA NO.3476/DEL/2015 COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A)-XII, NEW DELHI. 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI