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DCIT, Circle-1 (1) , Baroda And Others Versus Amarshiv Construction P. Ltd.

2015 (5) TMI 713 - ITAT AHMEDABAD

Addition under section 41(1) - amount of creditors remained unpaid for more than 3 years - CIT(A) deleted the addition - Held that:- We find that no material was brought on record by the revenue to show that the liabilities ceased to exist and the assessee has obtained the benefits in respect of such liabilities by way of Remission or cessation thereof. Further it has been admitted by the Revenue that the assessee has not written off the outstanding liabilities in the books of account. In the ab .....

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e of 27% of purchase of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% on purchases of grit from M/s MRB Builders Pvt. Ltd. Thus, both the lower authorities were not justified in their action. We find that the bifurcation of total purchases of ₹ 14,45,366/- as to how much for metal and how much was for grit has not been brought on record by either of the lower authorities and by either of the parties before us. We, therefore, set aside the orders of the lower authorities, .....

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ke sustainable disallowance, it must be shown on the basis of some material on record that the claim made by the assessee was incorrect or fraudulent. Accounts of the assessee are audited and the auditor has certified the correctness of the claim of the expenses. Hence, without any material, it would be incumbent on the A.O. to accept the claim. In the absence of any material defects in the claim, in his opinion, the A.O. was not justified in making the disallowance of ₹ 8,55,313/- and, th .....

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A.Y. 1992-93 held that where assessee was awarded a construction contract and in terms of contract certain amount was withheld by employer of contract towards retention money for satisfactory execution of contract by assessee, retention money was to be taxed in assessment year relevant to ‘previous year’ in which it became payable to assessee as per terms of contract i.e., after defect liability was over and after engineer-in-charge certified that no liability was attached to assesse. Thus addit .....

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leting the addition of ₹ 39,17,182/- made under section 41(1) of the Act in respect of amount of creditors remained unpaid for more than 3 years. 3. The brief facts of the case are that the A.O. observed during the course of assessment proceedings that there were outstanding balances in the case of four creditors which remained unpaid for more than 3 years, the details of which are as under :- 1) Ganesh Carting : ₹ 29,57,645/- 2) Jivanlal Joitaram Patel : ₹ 1,67,082/- 3) Shiv C .....

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show the same in its books of account and, therefore, it acknowledged the liability to make the payment, hence section 41(1) of the Act was not applicable. The assessee had not received any benefit by way of remission or cessation of liability. CIT(A) observed that Section 18 of the Limitation Act, 1963, provides that where a debt is acknowledged in writing before the expiry of limitation period, this would amount to sufficient acknowledgement and fresh limitation shall be computed from the time .....

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(Guj.) and submitted that the Hon ble High Court has held that where the assessee had continued to show the admitted amounts as liabilities in its balance sheet, the same cannot be treated as a case of cessation of liabilities. Merely because liabilities are outstanding for last many years, it cannot be inferred that the said liabilities had ceased to exist. The A.O. shall have to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or ces .....

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ons. The A.O. found that these liabilities are unpaid for more than three years, accordingly he held that there was cessation of liability and by invoking section 41(1) of the Act made addition of ₹ 39,17,182/- to the income of the assessee. On appeal, the CIT(A) deleted the addition on the ground that the assessee has shown liabilities in its books of account and, therefore, the limitation period will start from the time when such acknowledgement is made in the books of account by it. It .....

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h Court of Gujarat in the case of CIT vs. Nitin S. Garg (supra) squarely applies. Therefore, we confirm the order of CIT(A) and dismiss this ground of appeal of the Revenue. 10. Ground no.2 of the appeal of the Revenue is directed against the order of CIT(A) in deleting the addition of ₹ 2,39,642/- on account of excessive payments made for purchase of metal from the person specified under section 40A(2)(b) of the Act. 11. The brief facts are that the assessee is engaged in the business of .....

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he show cause, the assessee submitted that the purchases made from M/s MRB Builders Pvt. Ltd. and Amar Mining Company were at the rates charged by those parties even from other purchasers. There was no inflation of purchase price. It was also submitted that both M/s MRB Builders Pvt. Ltd. and Amar Mining Company were paying tax at the same rate as the assessee. However, the explanation of the assessee was not accepted by the A.O. who held that the fair market price was ₹ 87.50 against whic .....

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7; 120 and 107.50. 13. The CIT(A) after considering the submission of the assessee held that metal was purchased from Amar Mining Company @ ₹ 107.50 and grit was purchased at 87.50. From M/s MRB Builders Pvt. Ltd. The purchases of metal and grit were both @ ₹ 120/- per annum. Hence the comparison between the purchase price from Amar Mining Company of grit with the purchase price from M/s MRB Builders Pvt. Ltd. of metal was not comparable. However, he held that the assessee was unable .....

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#8377; 1,50,607/- and deleted the balance amount of addition of ₹ 2,39,642/- 14. Before us, the Departmental Representative supported the order of A.O. whereas the Authorised Representative supported the order of CIT(A). 15. We find that according to the AO, the assessee has purchased metal at an excessive rate of 12.50 per MT. and grit at an excessive rate of 32.50 per MT from M/s MRB Builders Pvt. Ltd. than its fair market value. Thus, according to the AO, both the items were purchased b .....

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s, the lower authorities should have disallowed at the rate of 27% of purchase of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% on purchases of grit from M/s MRB Builders Pvt. Ltd. Thus, both the lower authorities were not justified in their action. We find that the bifurcation of total purchases of ₹ 14,45,366/- as to how much for metal and how much was for grit has not been brought on record by either of the lower authorities and by either of the parties before us. We, .....

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) erred in deleting the addition of ₹ 8,55,313/- made on account of gratuity payment, legal & professional fees and misc. expenses. 19. The brief facts of the case are that the A.O. made disallowance of following expenses:- 1. Gratuity 4,00,613 2. Legal & Professional Fees 3,35,662/- 3. Misc & Office Expenses 19,385 4. Motor Cycle Expenses 19,677 5. Postage & Telegram 3,559 6. Travelling & Conveyance Expenses 76,417 Total 8,55,313 20. The A.O. observed that gratuity was .....

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urn. No defect in the claim of expenses relating to the above amount was pointed out either by Auditor or by the A.O. himself. It was submitted that the payment of gratuity was ex gratia payment and was not required to be made through an approved gratuity fund. The increase in other expenses was a normal increase on account of increase in petrol, stationery, tickets etc. Legal and professional fees increased since the bills were presented by the advocates in respect of arbitration claims and oth .....

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al, it would be incumbent on the A.O. to accept the claim. In the absence of any material defects in the claim, in his opinion, the A.O. was not justified in making the disallowance of ₹ 8,55,313/- and, therefore, he deleted the same. 23. The DR merely supported the order of the AO and could not point out any specific error in the findings of the CIT(A). We find that disallowance made by the AO for the reasons stated in the assessment order cannot be sustained. We, therefore, do not find a .....

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usiness deducted an amount of ₹ 27,81,076/- from the net profit arrived at as per Profit & Loss Account. This amount represented retention money/security deposits returned by persons for whom the assessee had undertaken contract work during the year. In reply to the show cause notice, the assessee submitted that it was engaged in the business of construction of civil works, dams, roads etc. The company had undertaken work for various government agencies who had retained security deposi .....

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79 ITR 8 The A.O. did not accept the explanation of the assessee on the ground that this was a recurring issue and in A.Ys. 1992-93 and 1993-94 the Tribunal had decided the issue in favour of the Revenue and assessee s appeal before the Hon ble High Court of Gujarat was pending adjudication. 26. On appeal, the CIT(A) confirmed the action of the A.O. 27. Before us the Authorised Representative of the assessee submitted that the Hon ble Gujarat High Court has decided the issue in favour of the ass .....

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record, we find that it is not in dispute that the assessee had not included retention money of ₹ 27,81,076/- in its income on the ground that the money will be received after satisfactory completion of work and removal of defects. Till that time the right to receive the amount did not accrue to the assessee. We find that the Hon ble High Court of Gujarat in the case of the assessee itself in A.Y. 1992-93 held as under:- Where assessee was awarded a construction contract and in terms of c .....

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f ₹ 27,81,076/- and allow these grounds of appeal. 31. In ground no.4 of the appeal the grievance of the assessee is that the CIT(A) erred in confirming the disallowance of ₹ 10,000/-. 32. The brief facts of the case are that the assessee claimed deduction of ₹ 10,000/- under the head voluntary retirement expenses. According to the assessee, the expenses were payable to the employees on retirement/resignation. He observed that the expenses are not covered under section 35DDA an .....

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is directed against the of CIT(A) confirming addition of ₹ 2,81,124/- under section 40A(2)(b) of the Act. 35. The brief facts of the case are that the assessee claimed commission paid to Samrat Trading Corporation, Proprietor Ashok M. Patel (HUF) of ₹ 2,81,124/-. A.O. observed that the assessee failed to prove the genuineness of payment of commission where the Karta of HUF has already died in March 2000.He also observed that similar addition was made in the case of the assessee in A. .....

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ch is hereby confirmed and thus this ground of appeal of the assessee is dismissed. 37. Ground no.6 of the appeal is directed against the order of CIT(A) confirming disallowance of ₹ 2,33,648/-. 38. The brief facts of the case are that the A.O. observed from the balance sheet of the assessee that it had advanced money to various parties and out of these advances the assessee has also advanced money to M/s Amarshiv Engineering Co. on which no interest was charged. He also observed from the .....

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