RANJEET SINGH CHOUDHARY,AJMER vs. ACIT, AJMER

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ITA 780/JPR/2016Status: DisposedITAT Jaipur23 May 2018AY 2010-1118 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the deletion of additions related to the sub-contract amount and creditors by the CIT(A) was not justified due to lack of supporting evidence. The disallowance for non-deduction of TDS was upheld.

What were the facts?

The assessee, a civil contractor, had a sub-contract with Shri Uttam Prakash. The Assessing Officer (AO) made additions for alleged undisclosed investment and unverified creditors. The CIT(A) deleted these additions, estimating profit at 8% after rejecting the assessee's books.

What were the issues?

Whether the CIT(A) erred in deleting additions for undisclosed investment and unverified creditors, and whether disallowance for non-deduction of TDS is warranted when books are rejected.

Which sections of the Income-tax Act were involved?

Section 145(3),Section 40(a)(ia),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR

Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM

Heard together (2 matters)

ITA No. 780/JP/2016
ITA No. 880/JP/2016

Read from the judgment's own cause title. This page is filed under one of them.

PER VIJAY PAL RAO, JM :

These cross appeals are directed against the order dated 12th July, 2016 of ld. CIT (A), Ajmer for the assessment year 2010-11. First, we take up the revenue’s appeal wherein the revenue has raised the following grounds :-

2 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

“In view of the facts and circumstances of the case the ld. CIT (A), Ajmer has erred in :-

(1) Deleting the addition of Rs. 1,51,71,386/- & Rs. 27,76,030/- without appreciating the facts of the case;

(2) Deleting the addition of Rs. 24,47,859/- without appreciating the fact that the expenses of Rs. 24,47,859/- are not allowable looking to the terms and condition of the sub-contract agreement entered between Shri Uttam Prakash and the assessee.

(3) Deleting the addition of Rs. 1,26,328/- without appreciating the fact that assessee did not produce any proof in this regard regarding during assessment as well as sub contractors were also not complied with the summons issued u/s 131 by the AO.

(4) The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing.

Ground No. 1 is regarding the addition of Rs. 1.51 crore and Rs.

27.76 lacs made by the AO was deleted by ld. CIT (A).

2.

The assessee is a civil contractor and also taken up sub-contract of Rs. 6.20

crores from one Shri Uttam Prakash at the fixed profit rate of 4.5% as agreed under

the Works Contract. During the assessment proceedings, the AO on examination of

ledger accounts of the assessee in the books of Shri Uttam Prakash noted that Shri

Uttam Prakash is having credit balance of Rs. 1,51,71,836/- to be paid to the

assessee whereas no such debit balance has been shown by the assessee in the

Balance Sheet. Accordingly, the AO issued a show cause to the assessee as to

why the debit balance of Rs. 1,51,71,836/- in the books of Shri Uttam Prakash

should not be added to the total income of the assessee. The assessee filed a

reconciliation statement and submitted that various cheques as per the reconciliation

3 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

enclosed for total amount of Rs. 1,79,47,866/- have been issued to Shri Uttam Prakash from 15th March, 2010 to 31st March, 2010 but the same were cleared only after 31st March, 2010 and, therefore, the discrepancy pointed out by the AO was

claimed to have been reconciled. The assessee accordingly explained that the final

balance of Rs. 27,76,030/- credited is appearing in its books as creditors whereas these cheques were issued by assessee before 31st March, 2010 and debited to the account of Shri Uttam Prtakash upto 31st March, 2010. The AO did not accept the

said explanation for the reason that the debit balance of Rs. 1,51,71,836/- is

appearing in the ledger account of Shri Uttam Prakash as well as in the ledger

account of the assessee and both accounts are tallied but debit balance is not

appearing in the Balance Sheet of the assessee. Accordingly, the AO has made an

addition of Rs. 1,51,71,836/- treating the same as undisclosed investment. Further,

the AO has also noted that there was a credit balance of Rs. 9,04,570/- as per the

Balance Sheet but there is no detailed schedule of the creditors. The assessee was

asked to furnish the schedule of creditors. The assessee submitted schedule of

creditors annexed as Annexure-C. However, the AO found that it is unsigned

schedule of creditors whereas all other schedules of the Balance Sheet are signed by

the auditors as well as assessee. Since there is a credit balance of Rs. 27,76,030/-

on account of advance to Shri Uttam Prakash, the AO proposed to make an addition of the said amount vide show cause notice dated 5th January, 2013. In the absence

of compliance on the part of the assessee, the AO made the addition of the said

amount of Rs. 27,76,030/-. On appeal, the ld. CIT (A) called for a remand report from the AO. The AO submitted the remand report dated 6th May, 2016 wherein the

4 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

AO found that the cheques to the tune of Rs. 1,79,76,192/- were issued by the assessee prior to 31st March, 2010. However, the AO pointed out that most of the

cheques have been drawn as self and must have been withdrawn by the assessee

himself or his staff and thus there are no creditors of the assessee. The balance

amount of Rs. 27,76,030/- was shown by the assessee as difference between total

cheque amount of Rs. 1,79,47,866/- and the credit balance shown in the Uttam

Prakash account for Rs. 1,51,71,836/-. Hence the AO accepted in the remand report

dated 6.5.2016 that the corresponding debit and credit entries of Rs. 1,51,71,836/-

in the books of both the parties was factually correct. However, the assessee has

not shown the balance in the balance sheet, therefore, the AO reiterated the

addition of Rs. 1,51,71,836/- made in the assessment proceedings. After considering

the said remand report as well as the explanation of the assessee, the ld. CIT (A)

held that when the Balance in the books of the assessee as well as Uttam Prakash

are tallied, then no addition on account of this amount is called for which includes

Rs. 1,51,71,836/- and Rs. 27,76,030/-. The ld.CIT (A) then proceeded to reject the

books of accounts under section 145(3) and reasonable profit of the assessee was

estimated. After considering the profit in respect of the self executed jobs, the ld.

CIT (A) has finally estimated the profit of the assessee from self executed job work

at 8% whereas the profit from the sub-contract was accepted at fixed rate as per

the agreement. Aggrieved by this order of the ld. CIT (A), the revenue has filed this

appeal.

3.

Before us, the ld. D/R has submitted that the ld. CIT (A) has deleted the

addition without addressing the issue that the said amount of Rs. 1,51,71,836/- was

5 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

not reflected in the balance sheet of the assessee whereas it was shown in the

ledger account in the books of the assessee as well as in the books of Shri Uttam

Prakash. The ld. D/R has relied upon the order of the AO.

3.1. On the other hand, the ld. A/R of the assessee has submitted that as per the

agreement, the assessee has undertaken the sub contract work from Shri Uttam

Prakash at fixed profit rate of 4.5%. The payment of the said contract work was

received through bank and the assessee has also paid the profit share of Shri Uttam

Prakash through cheques which is not in dispute as it was accepted by the AO in the

remand report. The ld. A/R has further contended that since the whole work was

granted by Shri Uttam Prakash to the assessee and, therefore, all the payments and

receipts have been debited and credited in this account for reconciliation. These amounts were received from CRPF against the work completed upto 31st March,

2010 and the expenses to this work for material, wages and other services were

already booked to the work account. Hence for this corresponding liability the

cheques for such supplies/expenses have been issued for and on behalf of Shri

Uttam Prakash as evident from the reconciliation statement. The amount of Rs.

1,51,71,836/- is for work completed as sub-contractor against which supply in the

form of material, wages and other services received and booked to work account.

Since such liabilities were to be paid off against this work and cheques issued upto 31st March, 2010 but not encashed upto the last date of the financial year has been

credited in this account to disclose the net figure of assets/liabilities. The ld. A/R

has thus supported the finding of the ld. CIT (A) on this issue.

6 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

4.

Having considered the rival submissions as well as the relevant material on

record, we note that the entire confusion on the issue is the amount of Rs.

1,51,71,836/- appearing in the ledger accounts in the books of the assessee as well

as of Shri Uttam Prakash but the said amount was not appearing in the balance

sheet of the assessee due to the method of accounting adopted by the assessee.

This receipt is on account of sub-contract executed by the assessee on behalf of Shri

Uttam Prakash for construction of CRPF wall and therefore as far as the amount

received on account of the said execution and corresponding payment by the

assessee to Shri Uttam Prakash is concerned, the same is not in dispute. Further,

the AO has not considered the various expenses on account of supply of material,

wages and other expenditures which is shown in the work account to make this

addition of not showing the entire amount in the Balance Sheet. In the remand

report, the AO has not disputed the correctness of the amount of receipt and

payment but the addition was made only on the ground that an equal amount was

not appearing in the balance sheet of the assessee. The ld. CIT (A) after

considering the remand report and balance sheet of the assessee as well as of Shri

Uttam Prakash has finally given the finding as under :-

“ From the various accounting statements reproduced above, it can be appreciated that as per the books of accounts of Shri Uttam Prakash, sum of Rs. 1,51,71,836/- was payable to the appellant as on 31.03.2010. The balance of Rs. 1,51,71,836/- (debit) is also appearing in the account of Uttam Prakash (Works) as appearing in the books of accounts of the appellant. Thus, as far as the closing balance of Shri Uttam Prakash in the books of the appellant (as appearing in Uttam

7 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

Prakash Works account) and closing balance of the appellant in the books of accounts of Shri Uttam Prakash are concerned, both are same and there is no difference in the balances appearing in the books of accounts of both the parties. However, in the balance sheet dated 31.3.10 of the appellant, no debit balance of Rs. 1,51,71,836/- in the name of Shri Uttam Prakash was appearing. Hence, the AO made the addition of Rs. 1,51,71,836/- treating the amount as unreconciled balance of Shri Uttam Prakash. If the balance sheet of the appellant along with annexure C of the balance sheet is seen then it can be appreciated that the assessee has shown credit balance of Rs. 9,04,570/- which includes the amount of Rs. 27,76,030/- under the head ‘Advances for Uttam Prakash Works’. In other words, the appellant instead of showing debit balance of Rs. 1,51,71,836/- in the name of Shri Uttam Prakash, has shown credit balance of Rs. 27,76,030/- under the head ‘Advances for Uttam Prakash Works’. If the detailed submission furnished by the appellant is perused, it can be comprehended that there was unpaid liability of Rs. 1,79,47,866/- in respect of the works executed by the appellant on behalf of Shri Uttam Prtakash on sub contract basis. The assessee instead of showing this unpaid liability of Rs. 1,79,47,866/- in the liabilities side of the balance sheet and Rs. 1,51,71,836/- in the asset side of the balance sheet has netted both the balances and has shown the net credit balance of Rs. 27,76,030/- (debit balance of Rs. 1,51,71,836/- of Shri Uttam Prakash – unpaid liabilities of Rs. 1,79,47,866) in respect of works executed by the appellant on behalf of Shri Uttam Prakash on sub contract basis. Thus, as far as balance in the account of the appellant in the books of Shri Uttam Prakash and balance of Shri Uttam Prakash in the books of the appellant are concerned, there is no difference. The different figures appearing in the balance sheet of the appellant and in the balance sheet of Shri Uttam Prakash are only because of the manner in which these figures have been presented in the balance sheet. If the

8 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

assessee had not reduced the unpaid liability of Rs. 1,79,47,866/- from the debit balance of Rs.1,51,71,836/- of Shri Uttam Prakash, the debit balance of Rs. 1,51,71,836/- would have been shown in the asset side and unpaid liabilities of Rs. 1,79,47,866/- would have been shown under the liability side of the balance sheet and there would not have been any credit balance of Rs. 27,76,030/- under the head ‘advances for Uttam Prakash Works’. In view of these facts, I am of the considered view that as far as balance of Shri Uttam Prakash in the books of appellant and the balance of the appellant in the books of Shri Uttam Prakash are concerned same are tallied and no addition on account of any unreconciled difference of Rs. 1,51,71,836/- or Rs.27,76,030/- is called for.”

Thus all the relevant facts and figures were considered by the ld. CIT (A) to

reconcile the differences appearing in the Balance Sheet of the assessee as well as

in the balance sheet of Shri Uttam Prakash. Accordingly, in view of the facts and

circumstances of the case, we do not find any error or illegality in the impugned

order of ld. CIT (A) qua this issue.

Ground No. 2 is regarding the addition of Rs. 24,47,859/- deleted by

the CIT (A).

5.

The AO noted that Shri Uttam Prakash has passed entries in the books in

respect of Works Contract Tax expenses of Rs. 9,74,980/- and sub-contract

expenses of Rs. 14,72,879/- to tally his account. The AO further noted that as per

the contract agreement, there is no such condition regarding transfer of expenses.

Accordingly the AO issued a show cause to the assessee as to why these expenses

of Rs. 24,47,859/- should not be disallowed. In response, the assessee submitted

9 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

that he has taken sub contract work from Shri Uttam Prakash at a fixed rate of 4.5%

on gross receipts. The assessee furnished the details of Rs. 24,47,859/- on account

of various expenses deducted by Shri Uttam Prakash. The assessee has further

clarified that this amount of Rs. 24,47,859/- was payable to Shri Uttam Prakash out

of the gross receipts and, therefore, the assessee’s profit at fixed rate of 4.5% on

the gross receipts is not affected as it comes to Rs. 27,93,317/-. Thus the assessee

explained that the amount of deduction for WCT and sub contract charges were

debited to the account of Shri Uttam Prakash. The AO did not accept this

explanation of the assessee on the ground that these expenses are also claimed by

Shri Uttam Prakash in his books of account and, therefore, double deduction of the

same expenses cannot be allowed. Further, the AO held that since the assessee has

not deducted TDS on such payments, therefore, the same is not allowable under

section 40(a)(ia) of the Act. On appeal, the ld. CIT (A) accepted the claim of the

assessee. However, the ld. CIT (A) has confirmed the disallowance to the extent of

Rs. 14,72,879/- separately while considering the other issues and, therefore, the

said addition made by the AO was deleted.

6.

We have heard the ld. D/R as well as the ld. A/R and considered the relevant

material on record. Both these expenses were deducted by the department at the

time of releasing the contract payment and, therefore, these amounts were

deducted from the gross receipts of the contract. The ld. CIT (A) has dealt with this

issue in para 5.3 as under :-

5.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It can be seen from the profit and loss account of the appellant as appearing in the books of Uttam

10 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

Prakash that Shri Uttam Prakash has debited the account of the appellant by sum of Rs. 9,74,890/- under the head WCT (WCT EXP deducted by dept on behalf of sub contractor) and sum of Rs. 14,72,879/- under the head 'sub contract expenses' (TDS deducted by department transferred to sub contract basis). Thus, it can be appreciated that the account of the appellant has been debited by Uttam Prakash (main contractor) by sum of Rs. 24,47,859/- (Rs. 9,74,890 + Rs. 14,72,879). I am of the considered view that the works contract tax deducted by the department on behalf of sub contractor is an admissible deduction for the purpose of computing business income of the appellant. However, TDS is not an expenditure deductible for the purpose of computing the business income. As far as TDS of Rs. 14,72,879/- is concerned while deciding ground No. 1 and 2, I have already added this amount to the profit declared by the appellant, for the purpose of computing the net profit rate of the appellant. Therefore, here the addition of Rs. 14,72,879/- made by the AO is deleted. As I have already held above that WCT is an expenditure admissible as deduction for the purpose of computing the business income, therefore, WCT of Rs. 9,74,980/- disallowed by the AO is also deleted. Accordingly, the entire addition of Rs. 24,47,859/- is deleted.”

Therefore, it is clear that the ld. CIT (A) has deleted the addition by considering the

fact that the amount of Rs. 14,72,879/- has already been added to the profit of the

assessee for want of TDS and the balance amount of Rs. 9,74,980/- was considered

as expenditure admissible as deduction for the purpose of computing the business

income. Having considered the facts and circumstances of the case, when this

deduction was made by the department from the contract receipts, the same are

allowable deductions and, therefore, we do not find any error or illegality in the

order of the ld. CIT (A).

Ground No. 3 is regarding an addition of Rs. 1,26,328/- which was

deleted by the CIT (A).

7.

During the year under consideration, the assessee has given sub contract

worth Rs. 84,81,885/- to nine sub-contractors. The assessee has offered the profit

@ 3% on such sub contract work given to the others. The AO asked the assessee as

11 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

to why the rate of profit should not be taken as 4.5% instead of 3% on this sub

contract work of Rs. 84,21,885/- as in case of Shri Uttam Prakash the work has been

taken @ 4.5%. The AO accordingly made an addition by considering the profit rate

at 4.5% which has resulted an additional income of Rs. 1,26,328/-. On appeal, the

ld. CIT (A) has accepted the explanation of the assessee that the assessee has

shared the profit with the sub contractors and, therefore, the assessee has received

only 3% profit from the sub contractors.

8.

We have heard the ld. D/R as well as the ld. A/R and considered the relevant

material on record. At the outset, the AO is not justified in comparing the profit rate

received by the assessee on the sub contract work undertaken by the assessee with

the profit declared by the assessee on the sub contract work given by the assessee.

Even otherwise, applying the same rate of 4.5% of profit to the sub contractor than

the balance profit in the said contract would not be more than 3%. Hence the AO

has not applied the correct parameter for estimating the profit in the case of the

assessee. The ld. CIT (A) has dealt with the issue in para 6.3 as under :-

“ 6.3. I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the AO has estimated the profit by adopting the fixed profit rate @ 4.5% as against the rate of fixed profit of 3% declared by the appellant on the sub contract of Rs. 84,81,885/- given by the appellant. The estimation has been made by the AO without any basis. No evidence of what-so-ever of nature has been brought on record by the AO to justify the estimation of profit @ 4.5% as against the declared profit rate of 3%. Addition made without any basis can not be sustained.

12 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

Accordingly, addition of Rs. 1,26,328/- made by the AO is hereby deleted.”

Having regard to the facts and circumstances of the case as discussed above, we do

not find any error in the order of the ld. CIT (A) qua this issue.

ITA No. 780/JP/2016 :

9.

The assessee has raised the following grounds in this appeal :-

“ Under the facts & circumstances of case the ld. CIT (A) has erred on confirming the following additions :-

(1) Rs. 21,97,740.00 for creditors as per accounts not verifiable.

(2) Rs. 26,839.00 being payment made to Kapilansh Dhatu Udhyog u/sec. 40(a)(ia).

(3) Any other matter with the prior permission of chair.”

Ground No. 1 is regarding the addition of Rs. 21,97,740/- on

account of unverifiable creditors.

10.

The AO noted that the assessee has executed the work during the year under

consideration through sub contractors and payments were made. Therefore, there

should not be any balance payment outstanding to such persons. Accordingly, the

AO made the addition of the outstanding amount of Rs. 21,97,740/- appearing in the

names of 4 creditors. The assessee challenged the action of the AO before ld. CIT

(A) and filed the confirmation cum copy of accounts of such credit balances. The ld.

CIT (A) confirmed the addition made by the AO by considering the fact that the

13 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

confirmation filed by the assessee could not have been verified as the notices issued

to these persons under section 131 were not responded by these parties except only

one Shri Sanjeev Bansal personally appeared and filed the details, whose statement

was also recorded by the AO. Further, these amounts were not appearing in the

accounts of the creditors and the alleged payment was also not found from the

record.

11.

Before us, the ld. A/R of the assessee has submitted that the complete

confirmation cum copy of credit balance were filed before the AO for verification.

These are petty sub contractors covered by the provisions of section 44AF/44AD of

the IT Act. Hence they do not maintain books of accounts and other records and,

therefore, were unable to furnish the details of expenses. However, they have confirmed the receipts and balance as on 31st March, 2010. The ld. A/R has further

contended that once the ld. CIT (A) has rejected the books of accounts of the

assessee and estimated the income from the assessee’s own execution of contract,

then no further addition is called for.

11.1. On the other hand, the ld. D/R has submitted that the assessee has failed to

discharge its onus about the genuineness of the claim of outstanding amount when

the assessee has claimed to have paid all the dues to the sub contractors. She has

relied upon the orders of the authorities below.

12.

We have considered the rival submissions as well as the relevant material on

record. The AO noted that the assessee has shown the outstanding of Rs.

21,97,740/- in respect of 4 creditors as under :-

14 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

(a) Prabhu Lal Jat Rs. 4,95,240.00 (b) Prabhu Singh Choudhary Rs. 6,77,425.00 (c) Sanjeev Kumar Bansal Rs. 1,46,125.00 (d) Sharad Gupta Rs. 8,78,950.00 Rs.21,97,740.00

When the AO asked the assessee to explain the outstanding of these amounts, the

assessee filed the confirmation of these parties. However, the notices issued under

section 131 were not responded by these parties except only one person. The ld.

CIT (A) has considered this issue in para 7.3 as under :-

“ 7.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the AO has mainly made the addition on the ground that confirmation furnished by these creditors are not reliable. All creditors except Shri Sanjeev Kumar Bansal are family members of the appellant. According to AO, though some of the sub contractors have submitted copy of acknowledgement, computation and bank accounts, but according to AO, these documents does not prove the fact that credit balance of the sub contractors was outstanding. The sub contractors have not confirmed their balance in the submissions. It is seen that all the creditors have filed `Satyapan Patra' before the AO confirming the balance receivable- from the assessee as on 31.03.2010. Copy of account of these creditors in the books of the assessee duly verified by these creditors have also been filed before the AO. Hence, according to the assessee, the credit balances appearing against the name of these persons should have been accepted by the AO as genuine. I have gone through the copies of documents filed before the AO. As far as Shri Prabhu Lal Jat is concerned, the amount receivable by this person from the assessee (Rs. 4,95,240/-) is not appearing in his balance sheet dated 31.03.2010. Hence, the credit balance appearing against the name of this person can not be accepted as genuine credit balance. In the case of Shri Prabhu Singh Choudhary, copy of his bank pass book has been filed. In his bank passbook there is no receipt from the appellant credited till 21.01.2013. Therefore, it can not be accepted that sum Rs. 6,77,425/- was receivable by this person on 31.03.2010 from the assessee, which was received by him in the subsequent years. Statement of Shri Sanjeev Kumar Bansal was recorded by the AO on 06.02.2013. In reply to Question No. 13, it was stated by him that he will submit by 11.02.2013, the details of payment received or receivable from the appellant. However no such detail was furnished by him before the AO. Therefore the claim of the appellant that sum of Rs. 1,46,125/- was payable to Shri Sanjeev Kumar Bansal is not found acceptable. Copy of return of income of Shri Sharad Gupta for the A.Y. 2010-11 filed on 23.02.2011 in Form No. ITR — IV has been filed by the assessee. It is seen from

15 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

the return of income that Shri Sharad Gupta had shown debtors of Rs. 1,84,568/- only. Thus, the contention of the appellant that sum of Rs. 8,78,950/- was payable to Shri Sharad Gupta as on 31.03.2010 is not found be correct. In view of these facts, though the assessee has furnished confirmatory letter from these four persons, yet the credit balances appearing against the names of these persons cannot be accepted as genuine liability. Hence, the addition of Rs. 21,97,740/- made by the AO is hereby confirmed.”

Thus all the relevant details including copy of return of income, bank details were

examined by the ld. CIT (A). However, no supporting evidence was furnished to

establish the genuineness of the claim of the assessee. The assessee has taken a

plea that all these sub contractors are falling under the provisions of section 44AF

and 44AD, therefore, they were not maintaining the books of account. However, the

assessee cannot take the excuse of not maintaining the books of account and other

records by the creditors. Accordingly, in view of the above facts and circumstances,

we do not find any error or irregularity in the orders of the authorities below qua this

issue.

Ground No. 2 of the assessee is regarding disallowance made under

section 40(a)(ia) of the Act.

13.

The AO has made a disallowance of Rs. 26,839/- being the payment made to

Kapilansh Dhatu Udhyog for want of TDS by invoking the provisions of section

40(a)(ia) of the Act. The ld. CIT (A) confirmed the disallowance for non-compliance

of TDS.

14.

We have heard the ld. A/R as well as the ld. D/R and considered the relevant

material on record. The ld. A/R of the assessee has submitted that once the income

16 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

of the assessee was estimated by the ld. CIT (A) after rejection of books of accounts

then no further disallowance is called for under section 40(a)(ia).

14.1. On the other hand the ld. D/R has relied upon the orders of the authorities

below.

15.

Having considered the rival submissions and the relevant material on record,

we note that so far as the deficiency in books of accounts is covered under the

exercise of estimation of income, the same does not warrant the other non

compliance of the provisions of the Income Tax Act. The estimation of income

under section 145(3) covers only to the extent of the deficiency and defects in the

quantum of results being correctness of the receipts and claims made in the books

of account. However, the said defect in the books of account would not subsume a

claim which is otherwise not permissible under the provisions of the Act due to non

compliance of the provisions including the deduction of TDS. Accordingly, we do not

find any reason to interfere with the orders of the authorities below qua this issue.

16.

In the result, the cross appeals are dismissed.

Order is pronounced in the open court on 24/05/2018.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Jaipur Dated:- 24/05/2018. Das/

17 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

1.

The Appellant- Shri Ranjeet Singh Choudhary, Ajmer. 2. The Respondent – The ACIT, Circle-2, Ajmer. 3. The CIT(A). 4. The CIT, 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 780 & 880/JP/2016) vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

18 ITA No. 780 & 880/JP/2016 Shri Ranjeet Singh Choudhary

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