THIRUMALA EARTH MOVERS,MEDAK vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-15(1), HYDERABAD

The assessee’s sole substantive grievance raised in the instant appeal seeks to reverse both the lower authorities’ action disallowing 8% of labour charges amounting to Rs.5,77,93,359/-; coming to Rs.46,23,469/- in issue.

It transpires during the course of hearing that both the learned lower authorities have made the impugned disallowance holding the assessee to have failed in filing all the necessary details of the payees viz-a-viz the labour work executed in civil construction contracts business. The Assessing Officer could not verify the assessee’s claim in other words which formed the sole reason for him to estimate the assessee’s disallowance of labour charges @8% as upheld in the CIT(A)’s order.

Learned counsel has filed the assessee’s paper book inter alia stating that this tribunal had directed the lower authorities to estimate his income @8% on contract receipts. And that going by the very formula, the impugned disallowance results in enhancing the said estimation from 8% to 9.2% resulting in a very much abnormal profit trend.

The Revenue has strongly supported the impugned disallowance made in both the lower proceedings.

We have given our thoughtful consideration to rival pleadings and find no reason to accept the same in either party’s favour in entirety. This is for the reason that the assessee has failed to get all the labour charges verified on the one hand whereas the department’s impugned disallowance has resulted in enhancement of the former’s profits in above terms. Faced with this situation, we deem it appropriate to affirm the impugned disallowance to a lumpsum amount of Rs.30 lakhs only with a rider that the same shall not be taken as a precedent in any other case. Necessary computation shall follow as per law.

This assessee’s appeal is partly allowed in above terms.