M/s Baba Builders vs. Asstt. Commissioner of Income Tax

Parties Involved

Facts Summary

The assessee is a firm engaged in Civil Construction works. The Assessing Officer made adhoc disallowances out of the labour charges and material purchases amounting to Rs. 21,69,596/- and Rs. 44,62,373/-, respectively. The assessee had claimed labour charges amounting to Rs.2,16,95,955/-. Since the assessee furnished only the ledger account of labour charges, the Assessing Officer held that in the absence of evidence, labour payments were not verifiable. Similarly, with regard to materials purchased, the assessee could not furnish complete bills and vouchers and the Assessing Officer observed that the material purchased was not verifiable, in the absence of proof. The matter was agitated before the Commissioner of Income Tax (Appeal) and the Commissioner of Income Tax (Appeal) after considering the matter in great detail, deemed it fit to apply a net profit rate of 6% on the total turnover of the assessee and computed it at Rs.44,71,866/-. The assessee was granted relief for the remaining amount. Additionally, the Assessing Officer added a sum of Rs. 1,53,57,250/-, on account of sundry creditors that were not proved. The assessee had shown current liability of Rs.5,00,34,679/- under the head sundry creditors. The Assessing Officer asked the assessee to furnish the list of sundry creditors along with complete addresses. Notices under section 133(6) were sent to a few sundry creditors. All the letters were returned by the postal authority with certain remarks. Therefore, the A…

Legal Issues

• 1. The issue of sundry creditors being old balances

Judgment Outcome

Decided in favour of Assessee.

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