Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (6) TMI 532 - ITAT MUMBAIBogus contractual expenditure - Addition for direct expenses material only on estimation and without any basis - HELD THAT:- It is very clear that payment made to M/s Metcon India is a bogus expenditure which was routed through own associated company in order to reduce profit from sale of land at Nagpur. The AO had also obtained external information and conducted field enquiry which clearly proves the fact of not carrying out any development work at Nagpur Land. In fact the position of land was unchanged when compared to date of purchase and date of inspection and this fact was further strengthened by the letter of Jt. MD, MSHCL. The ld. CIT(A) has ignored all these facts while allowing relief to the assessee. Disallowance of direct expenses materials - HELD THAT:- There is no bar under any law for purchases from associate/ sister concern and when there is no bar under law, the AO cannot disallow entire expenditure for the simple reason that it has been purchased from associate concern. But, what is to be seen is whether such purchase is at arm’s length and it was made for the purpose of business of the assessee or not. In this case, there is no doubt of whatsoever with regard to purchases of materials for the purpose of development of land. In fact, the assessee has established nexus between materials purchase and land development at Nagpur. The ld. CIT(A), having accepted the fact that development work has been executed, has disallowed 50% adhac expense without assigning any reasons. When 50% direct expense is genuine, then remaining 50% cannot be non-genuine merely because it was purchased from associate concern. Therefore, we are of the considered view that the AO as well as the ld. CIT(A) were erred in disallowing direct expenses materials purchase. Hence, we direct the AO to delete additions made towards direct expenses materials. Additions made towards contract charges - HELD THAT:- Order passed u/s 245D(4) in the case of the assessee firm has clearly recorded categorical findings that accommodation bills taken by M/s Metcon India is in connection with works undertaken for contract with assessee firm for development work at Nagpur land. Therefore, once addition on total expenditure was having been made in the name M/s Metcon India, the Revenue recommending making additions of similar amount in the case of the assessee was out rightly rejected by the ITSC. M/s Metcon India has already offered expenses related to Nagpur land as its income and the nexus of the same having been accepted by the Income Tax Settlement Commission and the Commissioner of Income Tax in his rule 9 report. We are of the considered view that on this count also, the addition made by the AO cannot be sustained. The ld. CIT(A) after considering relevant facts, has rightly deleted additions made by the AO towards contract charges paid to M/s Metcon India. We do not find any error or infirmity in the findings of the ld. CIT(A) and hence, we are inclined to uphold findings of the ld. CIT(A) and direct the ld. AO to delete additions made towards contract charge. Disallowances of compensation to ex-partners and salary and wage expenses - HELD THAT:- The fact that claims was allowed in earlier year does not ipso facto lead to a conclusion that the same shall be allowed in subsequent years. No reasons to interfere with findings of the ld. AO as well as the ld. CIT(A) and hence, we confirm addition made towards compensation to ex-partners. In so far as salary and wages is concerned, the ld. CIT(A) has recorded a clear findings that the assessee did not furnished any cogent evidences to prove payment of salary to huge number of employees, when there is no business activity after sale of land at Nagpur. Mere submitting PAN and other details of employees and deduction of TDS alone would not sufficient enough to prove payment of salary. Facts remain unchanged - assessee did not controvert findings recorded by the ld. AO as well as the ld. CIT(A) with any cogent evidences. Therefore, we are of the considered view that there is no error in the findings of the ld. CIT(A) and hence, we are inclined to uphold order of the ld. CIT(A) and confirmed additions made by the AO towards salary and wages.
|