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2016 (2) TMI 565 - AT - Income TaxDisallowance of sub-contract expenses not supported by proper bills - Held that:- The only discrepancy noticed by the Assessing Officer is that the payments are not supported by the bills raised by the parties and only self-made vouchers were maintained by the assessee. In our opinion, considering the nature of work carried on by the assessee, there is no question of not incurring of expenditure by the assessee to carry on the road work contracts and the work is mentioned in the M book maintained by the assessee and counter signed by the sub contractors. However, there is chances of inflating the expenditure for which the CIT(A) has already disallowed 10% of the expenditure claimed by the assessee to the extent of ₹ 4,41,08,210/-. Hence, the contention of the ld. DR that the entire amount of ₹ 4,41,08,210/- is to be disallowed cannot be appreciated as held by the Tribunal in the case of EDAC Engineering Ltd vs ACIT, [2013 (9) TMI 1090 - ITAT CHENNAI] wherein held that if expenditure claimed was not supported by proper evidence and some deficiency persist in evidence, part expenditure is disallowed on estimated basis. Being so, by placing reliance on the above decision of the Tribunal, the CIT(A) is justified in disallowing only 10% of the sub-contract expenses not supported by proper bills.- Decided in favour of assessee in part. Addition made u/s 41(1) as cessation of liability - Held that:- Before coming to the conclusion by the Assessing Officer that the creditors were no more existing, it is incumbent upon the Assessing Officer to make necessary enquiry to bring on record material that the creditors were ceased to exist. He could have made necessary enquiry to this effect. The assessee herein is a limited company and as per the legal position the acknowledgement of the liability in favour of the creditors in its Balance Sheet extends the period of limitation for the purpose of sec. 18 of the Limitation Act. It is the assessee’s claim that the debts are subsisting and it continues to be liable to pay the creditors. Therefore, it is not open to the Assessing Officer to draw the conclusion that the creditors have remitted the liability or that the liability has otherwise ceased without evidence or material when the assessee acknowledges a liability in the Balance Sheet and Explanation 1 is not applicable. Since the creditors are continued to be appearing in the Balance Sheet from year to year and the accounts of the creditors have not been written back, the conclusion of the Assessing Officer that it was ceased to exist is not proper. Accordingly, in our opinion, the CIT(A) is justified in deleting the addition made by the Assessing Officer u/s 41(1) of the Act. This view of our is fortified by the judgment of the Delhi High Court in the case of CIT vs Hotline Electronics Ltd, [2011 (12) TMI 90 - DELHI HIGH COURT ] and CIT vs GP International Ltd, [2009 (12) TMI 33 - PUNJAB AND HARYANA HIGH COURT ]. Accordingly, the deletion made by the CIT(A) is confirmed. - Decided in favour of assessee.
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