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2015 (6) TMI 287 - ITAT AHMEDABAD

2015 (6) TMI 287 - ITAT AHMEDABAD - TMI - Addition on account of Mobilization advance - CIT(A) deleted the addition - Held that:- As relying on assessee's own case [2011 (11) TMI 506 - Gujarat High Court ]the advance received by the assessee against the purchase of material at site before the execution of work, the same cannot be treated as income of the assessee, especially when the assessee is following the practice of showing advance receipts from the parties in the balance-sheet and when the .....

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ecord suggesting that any change into the facts and circumstances in the year under appeal, therefore we do not see no reason to interfere in the order of the ld.CIT(A).- Decided in favour of assessee.

Addition on account of cessation of liability - CIT(A) deleted the addition - Held that:- Ss relying on CIT vs. Nitin S.Garg [2012 (5) TMI 30 - Gujarat High Court] wherein held that ITAT is justified in taking the view that as assessee had continued to show the admitted amounts as liabi .....

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is barred and has become unenforceable - Decided in favour of assessee.

Disallowance of labour charges - Held that:- is evident from the order of ld.CIT(A) that he declined to accept the evidences on the basis that no formal request has been made. The contention of the assessee had been throughout both before the AO and the ld.CIT(A) that the assessee made payment to labour contractors, such payment was made for the purpose of business. We are unable to uphold the view of ld.CIT(A) si .....

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nd for carrying out such work, if any, the expenditure incurred on such work, inquiry is to be made by the Revenue. AO is hereby directed to make further inquiries in respect of claim of the assessee from the persons to whom the assessee made payments towards labour expenses - Decided in favour of assessee for statistical purposes. - ITA No. 923/Ahd/2011,ITA NO.CO.NO.101/Ahd/11,ITA NO.1387/Ahd/12,ITA NO. 2126/Ahd/12,ITA NO.2497/Ahd/12 - Dated:- 13-5-2015 - Shri N.S.Saini and Shri Kul Bharat, .....

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and facts are involved in these appeals/CO, these were heard together and are being disposed of by way of this consolidated order for the sake of convenience. 2. First, we take up the Revenue s appeal, i.e. ITA No.923/Ahd/2011 for AY 2007-08. The Revenue has raised the following grounds of appeal:- 1. The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 73,61,294/- made on account of Mobilization advance. 2. The Ld.Commissioner of Income tax (A) .....

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for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 23/11/2009, thereby the Assessing Officer (AO in short) made addition/disallowance of mobilization advance amounting to ₹ 73,61,294/-, disallowance of Directors remuneration amounting to ₹ 13,20,000/- and made addition on account of cessation of liability of ₹ 16,06,500/-. The assessee feeling aggrieved by the assessment order, prefe .....

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and balance disallowance was deleted. However, in respect of the addition of ₹ 46,06,500/- made on account of cessation of liability by invoking the provisions of section 41(1) of the Act, the addition was deleted. Against this, both the Revenue and the assessee are in appeals and cross-objection(by assessee). 3. First ground is against the deletion of addition of ₹ 73,61,294/- made on account of mobilization advance. The Sr.DR supported the order of the AO and submitted that the ld. .....

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rchase of material at site before the execution of work, the same cannot be treated as income of the assessee, especially when the assessee is following the practice of showing advance receipts from the parties in the balance-sheet and when the work is executed, it is shown as receipt and offered for tax. The ld.counsel for the assessee also placed reliance on the judgement of Hon ble Gujarat High Court rendered in assessee s own case (Special Civil Application No.11111 of 2011 dated 28/11/2011) .....

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ent order. It is seen that similar issue came up for consideration in appellant s own case for the A.Y.95-96. CIT(A) held as under:- It is natural that the party paying advance will deduct the TDS at the time of payment itself because as per income tax provisions it is mandatory to deduct tax at the time of payment. Therefore, it will be wrong to say that in a case of receipt of advance, if TDS has been deducted the appellant has earned income in the same year. Therefore, the addition made by th .....

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under consideration. The A.O. while giving effect to this order, is directed to give credit of TDS accordingly. 2.1.2. On further appeal, Tribunal held as under:- After hearing both the parties, we find no infirmity in the order of Ld.CIT(A) in holding that the advance received by the assessee against the purchase of material at site before the execution of work, the same cannot be treated as income of the assessee, especially when the assessee is following the practice of showing advance receip .....

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This ground of appeal is treated as partly allowed. 5. It is not disputed by the ld.Sr.DR that this Tribunal in ITA No.4380/Ahd/2003 for AY 1995-96 had confirmed the decision of the ld.CIT(A). Further, reliance is placed on the judgement of Hon ble Gujarat High Court in assessee s own case in Special Civil Application No.11111of 2011 dated 28/11/2011, wherein the Hon ble Court observed as under:- 13. This very issue had cropped up between the assessee and the department in the earlier years as .....

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see in the Profit and Loss account, the Assessing Officer noticed a discrepancy between the two. Upon detailed reconciliation provided by the assessee, it was revealed that the sum of ₹ 11.96 lakhs represented the retention money withheld by the clients, though the work was done. The Assessing Officer enquired with the assessee that why such retention money should not be treated as the assessee's income. The assessee contended that the retention money as per the terms of the contract w .....

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er deleted the addition relying on the decision of the Tribunal. Revenue had carried the order of CIT(Appeals) before the Tribunal. The Tribunal by its judgment dated 27.6.2008 dismissed the Revenue's appeal. Such decision of the Tribunal was carried further in appeal before this Court in Tax Appeal No.163 of 2009, which was dismissed by order dated 3.5.2011. 14. In the result, it would emerge that the central issue on which the Assessing Officer seeks to reopen the assessment previously fra .....

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eletion of addition made on account of disallowance of Directors remuneration by invoking the provisions of section 40A(2). The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in partly deleting the addition. He submitted that the assessee could not justify hike in remuneration of directors. Therefore, the ld.CIT(A) ought to have confirmed the addition made by the AO. 6.1. On the contrary, ld.Sr.counsel for the assessee submitted that both the authoritie .....

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Co. (P) Ltd. reported at (2009)336 ITR 209(Bom) and the decision of the Coordinate Bench in the case of Dy.CIT vs. Ravi Ceramics reported at (2013) 29 taxman.com 22 (Ahd.). 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO made disallowance of expenditure on the basis that the expenditure is not incurred for wholly and exclusively for the business purposes of the assessee on the ground that the assessee .....

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of the assessing officer in the assessment order. Compared to the immediately preceding A.Y. 2006-07 [for which year also assessment was done u/s.143(3), the remuneration paid to the three directors went up from ₹ 3.6 lakhs; ₹ 2.4 lakhs and ₹ 2.28 lakhs to ₹ 4.8 lakhs; ₹ 3.6 lakhs and ₹ 3.48 lakhs respectively in the current year. A.O. disallowed the entire remuneration paid to directors after discussing the issue at para-4 of the order. The appellant has bee .....

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allowance is deleted. This ground of appeal is partly allowed. 7.1. It is not controverted by the Revenue that in the immediately preceding years, i.e. AYs 2004-05 & 2006-07 the claim of the assessee in respect of the remuneration of Directors claim was allowed in the scrutiny assessment passed u/s.143(3) of the Act. Since the Revenue has not placed any material on record suggesting that any change into the facts and circumstances in the year under appeal, therefore we do not see no reason t .....

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five years, therefore the AO was justified in treating the same as cessation of liability. 7.3. On the contrary, the ld.Sr.counsel for the assessee submitted that it was categorically submitted before the AO that an advance receipt received from contractee, GEP Teliamura of an amount ₹ 16,06,500/- for advance against materials at site is outstanding in our books of account since 31/03/2001. A dispute arose on 08/03/2001 and the work is closed since then. Both parties have made claims again .....

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sions, perused the material available on record and gone through the orders of the authorities below. The Hon ble Gujarat High Court in the case of CIT vs. Nitin S.Garg(supra) has held as under:- 14, We, therefore, find that the learned Tribunal below totally misconstrued the provisions contained in Section 41(1) of the Act in adding the disputed amount as the income of the assessee for the relevant year." 15. In the case before us, it is not been established that the assessee has written o .....

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e assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation thereof which is not the case before us. Merely because the assessee obtained benefit of reduction in the earlier years and balance is carried forward in the subsequent year, it would not prove that the trading liabilities of the assessee have become non existent. 16. Moreover, as pointed out in the ease of Sugauli Sugar Works (P.) Ltd. (supra), vide the last five lines of the paragraph-6 .....

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debt even after expiry of the normal period of limitation as provided in the Limitation Act. 17. We, thus, find that the views taken by the Tribunal is absolutely consistent with the ones taken by the Supreme Court in the case of Sugauli Sugar Works (P.) Ltd. (supra) and other decisions which have been referred to in the judgment. We do not find any error much less an error of law in the judgment and order of the Tribunal. 8.1. In view of the judgement of the Hon ble Gujarat High Court, we do no .....

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acts of the case in confirming disallowance of remuneration paid to the directors to the extent of ₹ 3,40,000/- out of total disallowance of ₹ 13,20,000/- made by the ld.AO. 2. Both the lower authorities have erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of the assessment proceedings and not properly appreciating various facts and low in its proper perspective and further erred i .....

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nce of directors remuneration to the extent of ₹ 3,60,000/-. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in confirming the directors remuneration to the extent of ₹ 3,60,000/-. He submitted that under the facts, ld.CIT(A) ought to have allowed the entire remuneration. 11.2. On the contrary, ld.Sr.DR supported the order of AO. 11.3. We have heard the rival submissions, perused the material available on record and gone through the orders of the author .....

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ss-objection is dismissed. 13. Now, we take up the assessee s appeals; i.e. ITA No.1387/Ahd/2012 for AY 2008-09 and ITA No.2126/Ahd/2012 for AY 2009-10. (a) In ITA No.1387/Ahd/2012 for AY 2008-09, the assessee has raised the following concised grounds of appeal:- 1&2. Ld.CIT(A) erred in law and on facts in confirming disallowance of labour charges made by AO of ₹ 80,59,275/- on the basis that genuineness of the labour payment remained unproved. Ld.CIT(A) ought to have deleted the disal .....

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r of previous year u/s.40A(2) of the Act. Ld.CIT(A) ought to have appreciated that AO reproduced only extract of assessment order without giving any detailed or independent finding. Ld.CIT(A) ought to have deleted disallowance following order of his predecessor. 7. Ld.CIT(A) ought to have appreciated that AO has not determined fair market value of services rendered by directors, while disallowing remuneration paid to them. 8. Alternatively and without prejudice to above, only unreasonable and ex .....

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rming action of the ld.AO in levying interest u/s.234A/B/C/D of the Act. 3. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in initiating penalty u/s.271(1)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 13.1. In Assessee s Appeal No.1387/Ahd/2012:- Ground Nos.1 to 3 are against confirming the disallowance of labour .....

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rder of the authorities below. 13.3. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) decided the issues by observing as under:- 3.4. Taking into account the entirety of facts, I am inclined to agree with the contentions of the Ld.A.O. for the following reasons:- (a) In his counter comments the appellant has furnished new address in respect of these labour contractors. In addition to thi .....

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ned in Rule 46A. The appellant has neither made a formal request to admit these additional evidences or filed evidences to prove that in his case the exceptions as mentioned in rule 46A are attracted, accordingly these evidences cannot be accepted. (b) During the appellate proceedings, I have received confirmations from all the labour contractors by post. In these confirmations it is stated that these confirmations have been made on the request of the appellant i.e. M/s.N.J.Devani Builders Pvt.L .....

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n made as if the A.O. had made addition of ₹ 80,59,275/- u/s.68 of the I.T.Act. All the cases relied upon by the appellant pertains to sec.68. In fact in the concluding para namely para 4.7 of the submission, the appellant prayed that addition made by the A.O. u/s.68 requires to be deleted. Perusal of the assessment order reveals that the A.O. has made disallowance of expenditure of ₹ 80,59,275/- as per the provisions of Sec.37(1) of the I.T.Act. The disallowance of expenses has been .....

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s incurred in respect of four labour contractors namely Adveshkumar Kuswaha, Bashirbhai Allahrakha, KGN Enterprise and Narpat Ajaram Jhakad are genuine. In fact the appellant has not even tried to explain these disallowances at all. In the absence of cogent evidences, I am inclined to agree with the contentions of Ld.A.O. (e) During the appellate proceedings the appellant has filed copies of TDS certificate and its bank statement wherein the payment has been made through banking channels. It is .....

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our charges of ₹ 80,59,275/- remains unproved. Accordingly, I am inclined to agree with the Ld.A.O. and disallowance of ₹ 89,59,275/- is confirmed. This ground of appeal is dismissed. 13.4. It is evident from the order of ld.CIT(A) that he declined to accept the evidences on the basis that no formal request has been made. The contention of the assessee had been throughout both before the AO and the ld.CIT(A) that the assessee made payment to labour contractors, such payment was made .....

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work at all. Therefore, to find out the quantum and nature of work executed and for carrying out such work, if any, the expenditure incurred on such work, inquiry is to be made by the Revenue. The assessee is required to furnish supporting evidences in respect of its claim of business expenditure. After considering the totality of the facts of the case, we hereby set aside the order of ld.CIT(A) on this issue and restore back to the file of AO. The Assessing Officer is hereby directed to make fu .....

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re allowed for statistical purposes. 13.5. Ground Nos.4 to 8 are against confirming the disallowance of directors remuneration worth ₹ 15,48,000/- u/s.40A(2) of the Act. The same issue has been dealt with us in Departmental appeal No.923/Ahd/2011 for AY 2007-08(supra) and in Assessee s Cross Objection No.101/Ahd/2011 for AY 2007-08(supra), wherein we have dismissed the Revenue s appeal as well as the cross-objection filed by the assessee. Since no change into the facts and circumstances ha .....

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. 14.1. The same issue has been dealt with us in Departmental appeal No.923/Ahd/2011 for AY 2007-08(supra) and in Assessee s Cross Objection No.101/Ahd/2011 for AY 2007-08(supra), wherein we have dismissed the Revenue s appeal as well as the cross-objection filed by the assessee. Therefore, this year also, this ground of Assessee s appeal is also dismissed. 14.2. Ground Nos.2 & 3 are general in nature require no independent adjudication. 14.3. In the result, the appeal of the assessee in ITA .....

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he issue involved was of Advance money and not of Retention money. iii) On the facts and circumstances of the case, the Ld.Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. iv) It is, therefore, prayed that the order of the Ld.Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 15.1. First and second ground of Revenue s appeal are against deletion of addition of ₹ 85,50,913/- on account of retention money adde .....

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