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The Asstt. Commissioner of Income-tax, Company Circle VI (3) , Chennai Versus M/s SPL Infrastructure Pvt. Ltd

2016 (2) TMI 565 - ITAT CHENNAI

Disallowance 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 maintaine .....

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penditure 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 .....

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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 n .....

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on made by the CIT(A) is confirmed. - Decided in favour of assessee. - I.T.A.No.2488/Mds/2014 - Dated:- 14-1-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri A B Koli, JCIT For The Respondent : Shri Philip George, Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-VI, Chennai, dated 30.6.2014 for assessment year 2010-11. 2. The fi .....

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onfirmation alongwith the copies of income-tax records from 15 parties in whose name the expenses are debited and also the details of the services provided by them alongwith invoices. The assessee vide letter dated 10.2.2013 furnished confirmation letters from each of 15 parties, the copies of bank statement of the assessee explaining the nature of work carried on by it as formation of internal road with gravel as subbase including cutting, dozing, filling to required level, removal of loose soi .....

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15 parties to appear personally with the relevant details. In response to the summons, none appeared before the Assessing Officer. However, the summon letters in respect of the two parties were returned stating that no such persons were existing in the addresses provided. The Assessing Officer accepted the letter of confirmation received from M/s Sakthi Kanna Construction Pvt. Ltd as genuine and held that the expenses debited in the name of other 14 parties as non-genuine. The Assessing Officer .....

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ction as TDS the assessee-company has benefited. He further observed that the PAN number quoted by two individuals in confirmation letter is not belonging to the same individual but to the different persons. On the basis of the above, the Assessing Officer held the expenses debited by the assessee-company to the tune of ₹ 4,41,08,210/- in the name of 14 parties as non-genuine and disallowed the same. 4. On appeal, the CIT(A) has restricted the disallowance to ₹ 44,10,821/- as against .....

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ounts. Some of the parities have also confirmed that they do not have invoice copies and maintain only M. Book which was retained by the assessee i.e M/s SPL Infrastructure Private Limited. The copy of the M. Book placed before me give the details of work done for particular period, measurement upto date of work done witn signature of the supervlsor of me company.11 parties have sent the details from far of places to the assessing officer through courier. One party namely M/s Sakthi Kanna Constr .....

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an power is necessarily required. There is no evidence available on the record that the appellant had not executed the road work at Thermal Power Plant, Rathnagiri. The most of the labour contractors were either relatives of the appellant or known to the appellant. The entire disallowance made by the assessing officer in respective expense debited in the name 14 parties cannot be accepted without disproving the confirmations received, disproving the payments made to them beyond doubt, disproving .....

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earlier years. However the net profit declared by the appellant at 3.83% is less than the 5% of the Net profit accepted by the department in the earlier years. The 5% of the Net profit on the turnover of ₹ 3334.16 lacs comes to ₹ 166.7 lacs. The appellant had declared ₹ 127.53 lacs as Net profit. The difference comes to about ₹ 39.178 lacs. In the course of the appellant proceedings, the AR of the appellant had come out to offer 10% of the disallowance of RsA,41,08,210.0 .....

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statement of the two persons who admitted that they had not carried out any work of the nature mentioned. In spite of the denial of the work carried out by Sri N. Erulappan and Sri S. Kesavan, on examination of the facts, the Honorable tribunal came to conclusion that the entire disallowance made by the assessing officer cannot be sustained and restricted the disallowance to 25% of the total claim of ₹ 22.10 crores. The Honorable Gujarath High Court in the case of Bholanath Poli Fab Pvt. L .....

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proved. The only fact was that the parties have not appeared before assessing officer for the summons issued to them but have given confirmation to the assessing officer. Since all the parties are known to the appellant, the appellant would have taken to the adequate steps for producing before the assessing officer for examinations. The net profit ratio declared by the appellant in the year under consideration is also less as compared to the net profit computed by the assessing officer in the ea .....

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sessing officer in the earlier years. Therefore, the assessing officer is directed to restrict the disallowance to ₹ 44,10,821.00 as against the disallowance of ₹ 4,41,08,210.00. The grounds of appeal raised by the appellant on this issue are treated as disposed off accordingly. Against the above, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. In this case, it is admitted fact that 14 persons have furnished confirmation and s .....

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ficer through courier. However, there was no response from two parties. The assessee has taken the road laying work and also completed that work. Most of the payments are not supported by bills issued by the above parties. On the above reasons, the Assessing Officer disallowed ₹ 4,41,08,210/-. However, the CIT(A) considering the nature of business of the assessee and also chances of inflated expenses, sustained the disallowance to 10% of above expenditure. As seen from the fact brought on .....

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cheques and the assessee has maintained the M. book which is signed by the sub-contractors. 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 .....

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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. This ground of the Revenue is dismissed. 6. The next ground is with regard to deletion of addition made u/s 41(1) of the Act as cessation of liability. 7. The facts of this issue are th .....

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ted the addition against which the Revenue is in appeal before us. 8. We have heard both the parties and perused the material available on record. In the present case, the Assessing Officer has not issued any notice to the creditors to confirm from them whether they have given up their dues from the assessee. The assessee has also not written back these amounts in its books of account. Except for the fact that the amounts are outstanding, there was no material evidence to show that there was rem .....

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