TMI Blog2011 (4) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... e work of Manmad site of BPCL. However, since the assessee could not explain the reasons for such scaling down at a higher percentage and since the retention money, on account of which the assessee scaled down such value which was not more than 10%, the Assessing Officer recomputed the value of the closing work-in-progress by scaling down such figure of ₹ 49,21,063 by 10%. Accordingly the assessee has added a sum of ₹ 5,64,717 towards difference in value of closing work-in-progress to the returned income of the assessee. 3. In the Profit and Loss A/c. the assessee has claimed an amount of ₹ 9.5 crores towards subcontract expenses. During the course of assessment proceedings the Assessing Officer had asked the assessee to furnish copies of bills raised by the subcontractors, full particulars of payments made to those parties, stating the nature of instrument, name of the bank/branch and date of payment etc. However, the assessee could not furnish such documents and information. During the assessment proceedings the Assessing Officer written letters to 12 of those subcontractors at the addressed given by the assessee calling for information u/s. 133(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny vide letter dated 9.6.2009 for comments. However, there was no compliance by the assessee. Later a letter was filed by the AR of the assessee wherein it was stated that after the order of the Hon ble ITAT, Hyderabad in ITA No. 547/Hyd/04, dt. 07.02.2008, deleting the addition made by the Assessing Officer, no issue was pending with the Department. The CIT(A) held that vide the said order the Tribunal deleted the addition to the extent of ₹ 84,31,000 made in the assessment order dated 31.3.2003 passed u/s. 143(3) r.w.s. 147 of the Act for the said assessment year. However, the present appeal had arisen from the earlier order of the Tribunal in ITA No. 74/Hyd/2002 dt. 7.10.2005 wherein the Tribunal set aside the matter to the file of the CIT(A). The assessee had missed attention the above order dated 7.10.2005 of the Tribunal passed in their case. Since the assessee could not furnish any information on the Remand Report of the Assessing Officer, the CIT(A) proceeded to decided the case on merit. 7. With regard to the first issue i.e., addition of ₹ 5,64,717 the CIT(A) opined that the assessee could value correctly the uncertified work-in-progress as on 31.03.1998. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 11.05.2009 furnished by the DCIT, Circle-2(2), Hyderabad. 1. The CIT(A)-III is not justified in upholding the addition of ₹ 2,35,37,562/- made by the AO to the income returned by the appellant without proper appraisal of the facts and issues of the case. 2. The CIT(A)-III has intentionally not given the appellant an opportunity in spite of the fact that the appellant company s representative was not fully aware of the facts of the case and denied to give any information or time to submit further information in the course of hearing. 3. The CIT(A)-III has not considered the fact that the subsequent order passed by the DCIT, Circle-1(3) on 31-03-2003 u/s. 143(3) r.w.s. 147 of the I.T. Act has nowhere mentioned the pendency of the first order passed by the JCIT, Spl. Range-6, Hyderabad. 4. The CIT(A)-III has ignored the fact that even the separate additions made by the AO on similar facts and issues vide his order dated 31-03-2003 u/s. 143(3) r.w.s. 147 of the I.T. Act were deleted by the Hon ble Tribunal vide its order dt. 07- 02-2008 in ITA No. 547/Hyd/04. 5. The remand report dt. 11-05-2009 given by the DCIT, Circle-2(2) is without proper enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in respect of return of income filed by the said subcontractor GS, proprietor of RC for assessment year 1998-99, application for Permanent Account No., copies of bank account, letter of confirmation, copies of concessional annual travel photo identity card issued by APSRTC, caste certificate issued by MRO, Nativity Certificate issued by the Secretary of Village Gram Panchayat, Mudigubba Village, Anantpur Dist. It was also requested by the assessee vide letter dated 25th November, 2003 to get confirmation from the jurisdictional ITO about the execution of subcontract work by the RC. The assessee has thus discharged its primary onus that the payment was made through banking channel to the subcontractor. The main reason for the disallowance of the subcontract payment is that the assessee has failed to produce the subcontractor. However, the assessee has filed substantial evidence to establish that alleged subcontract work has been done. And also filed material to show that the subcontractor is also assessed to tax and has filed audited financial statements along with tax audit reports under S. 44AB ................................... The CIT(A) examined these documents and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was difficult to keep track of small service providers, i.e., carpenters, masons, etc., in order to get confirmation from them after three or four years. All major payments were made through account payee cheques and the bank statement was submitted before the Assessing Officer. The assessee had disclosed permanent account number in respect of A. The Assessing Officer did not bother to make investigation in his case. The reasoning assigned by the Assessing Officer was not sufficient to make the disallowance. The disallowance has to be deleted. 11. Further he submitted that for the A.Y. 1999-2000 similar addition was deleted by the CIT(A) holding that the payment is genuine. He relied on the order of the Tribunal dated 30th December, 2005 in I.T.A. No. 769/Hyd/2003 as the Assessing Officer confirmed the payment made to the subcontractor and has not cited any substantial objection with material challenging the genuineness of the payment. 12. On the other hand, the learned DR submitted the ratio laid down by the Tribunal in the cases cited by the assessee cannot be applied blindly. The facts should be examined for each case and then only the ratio can be applied. He s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction. The mere object of incurring of expenditure is not decisive whether it is of a capital nature or revenue nature. We take support from the judgement of the Supreme Court in the case of CIT vs. Calcutta Agency Ltd., (1951) 19 ITR 191 and CIT vs. Imperial Chemical Industries (India) Pvt. Ltd., 74 ITR. 17. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility to deduction is not in the nature of capital expenditure. Further mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same was proved to be paid for commercial consideration. The onus of proving always is upon the assessee. It cannot be said that even if tax payer does not produce any evidence in support of this claim of deduction, the Assessing Officer himself independently is to collect evidence and decide that the deduction claim is baseless having regard to the legitimate business needs of the assessee. It is for the tax payer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served on parties at Sr. No. 2, 3, 5, 6 and 12. In respect of the remaining parties, the letters are returned un-served by postal authorities. In respect of parties where letters were served, replies were received only from Sr. No. 12. According to the Assessing Officer, the parties are either not available at the cited address or chosen not to confirm the transactions and the assessee has not been able to furnish full particulars of the payments made to these parties. Since the claim of the assessee was not verifiable, the Assessing Officer disallowed the entire amount of ₹ 2,29,72,845. The view of the Assessing Officer was affirmed by the CIT(A) on second round though it was deleted by the CIT(A) on earlier occasion. In our opinion, the entire amount of ₹ 2,29,72,845 cannot be disallowed in view of the fact that the Assessing Officer did not conclusively prove that the payment was not made by the assessee to the subcontractors. The Assessing Officer has merely doubted these payments to subcontractors. As a matter of fact, he has given a finding that the subcontract payment is not verifiable in view of the fact that the assessee failed to furnish full particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to allow this allowance and whether the assessee has discharged its burden cast on it with regard to genuineness of the expenditure. Therefore, it is not open to allow this allowance solely on the ground that in respect of such an earlier claim such allowance was allowed and to allow the claim, the genuineness of payment to be examined with reference to each payment. Therefore, the claim of the assessee in any particular case that it is entitled to deduction on certain items of expenditure involves the application of law to the facts found in setting of particular case. Thus, it will depend upon the facts and nature of each case. In the present case the Assessing Officer has not doubted the incurring of expenditure through subcontracts. However, he doubted the quantum of expenditure. The payment is supported by the account payee cheques and it is also subjected to tax deduction. It is the specific stand of the Assessing Officer that the amount received by the alleged subcontractors was less than the amount debited in the books of account and there is no evidence of payment of balance amount in subsequent years. Further there was an observation by the Assessing Officer that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be raised by the assessing officer on the reason that the assessee is following the mercantile system of accounting and this method of accounting has been accepted by the Department. Once the department accepted the method of accounting as mercantile the assessing officer is precluded from raising this question. If the amount was outstanding in the assessment year under consideration and no payment was made in the subsequent years, the assessing officer is at liberty to invoke the other provisions of the Act as applicable. He cannot prejudge the issue and take a decision against the assessee. Adverting to the facts of the case, the letters written by the assessing officer were served to the following parties: (1) Ravishankar Nambalkar ₹ 17,12,766, (2) Ashok Patil ₹ 19,60,730, (3) S.R. Patil ₹ 12,34,848, (4) Vijaya Raj Morabi ₹ 12,98,432 and (5) Girish V. Kangana ₹ 11,51,704. 17. Thus, it means that the above parties were existing and who has received the notice from the Department. More so, Girish V. Kangana has confirmed the receipt of the payment. Further out of the above, the payments to Ravishnakar Nimbalkar and S.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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