TMI Blog2017 (4) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of gross receipts, TDS certificates, details of opening stock, work in progress, payment of wages, payment of interest, payment of vehicle hire and machinery charges, copy of sales tax order, etc. Therefore, when the assessee has furnished all the details which are required in completing assessments, this Tribunal is of the considered opinion that mere omission of auditor to mention certain items in the audit report prepared under Section 44AB of the Act, that alone cannot be a reason to say that there was negligence on the part of the assessee. This Tribunal is of the considered opinion that when the assessees furnished all the details, there was no negligence on the part of the assessees, hence, proviso to Section 147 of the Act would come into operation. In view of the above, the order passed by the Assessing Officer is barred by limitation. Therefore, it cannot stand in the eye of law. - Decided in favour of assessee. Disallowance of travel expenses - Held that:- The expenditure said to be incurred by the assessee for travelling to Singapore, USA, etc. Even though the assessee claims that the Managing Director’s travel to Singapore was for purchase of machinery, no mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor - Held that:- We have heard Sh. Philip George, the Ld.counsel for the assessee and Dr. Milind Madhukar Bhusari, the Ld. Departmental Representative. The assessee admittedly incurred ₹ 7,79,899- towards setting up of subsidiary in Oman. Expenditure for setting up of subsidiary is capital expenditure. Therefore, the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer.- Decided against assessee. Disallowance for setting up of subsidiary - Held that:- The assessee admittedly incurred ₹ 7,79,899- towards setting up of subsidiary in Oman. Expenditure for setting up of subsidiary is capital expenditure. Therefore, the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer. - Decided against assessee. Expenditure incurred on water connection - Held that:- In the absence of any material evidence / receipt for payment for getting water connection for new office at Bangalore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2012-13 2007-08, the other assessee, M/s Bharati Constructions, has filed appeal for assessment year 2007-08. Since common issues arise for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order. 2. Both the assessees have raised issue of limitation in their respective appeals in I.T.A. No. 2759, 1870 1871/Mds/2016. Therefore, let s take these appeals first for adjudication. 3. Sh. Philip George, the Ld.counsel for the assessee, submitted that for all the assessment years, the assessments were completed under Section 143(3) of the Income-tax Act, 1961 (in short 'the Act'). After expiry of four years from the end of relevant assessment year, the Assessing Officer on the basis of material already available on record, came to a conclusion that the assessees have not deducted tax. According to the Ld. counsel, the Assessing Officer has no new information after processing of the assessment order. There was no negligence on the part of the assessees in furnishing relevant material in completing the assessment. Referring to the orders of the Assessing Officer, the Ld.counsel submitted that it is a change of op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the facts of the case. Hence, according to the Ld. D.R., the Assessing Officer has rightly reopened the assessments. 7. We have considered the rival submissions on either side and perused the relevant material available on record. A copy of the reasons recorded for reopening of the assessment in the case of the assessee, M/s URC Construction (P) Ltd., is available at page 52 of the paper-book. For the purpose of convenience, the reasons recorded by the Assessing Officer is reproduced hereunder:- The assessee is liable to deduct TDS u/s 194I for the payments exceeding ₹ 1,20,000/- in respect of payments towards machinery hire charges amounting to ₹ 4,89,06,168/-. As the assessee had failed to deduct TDS on such payments, the expenses are bound to be disallowed u/s. 40(a)(ia) of Income-tax Act. Also it is seen in the Form 3CD, against item No.27 (b) the auditor was required to report the details of non-compliance with the TDS provision in Chapter XVII B of the I.T. Act. The Auditor has quantified only certain items of non-compliance and omitted to mention the other items such as Machinery Hire Charges paid in excess of the prescribed limits. This failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports under Section 44AB of the Act do not disclose correct and full particulars. The assessees have furnished all the details before the Assessing Officer. The auditor, who prepared the report under Section 44AB of the Act, is expected to examine all the materials and record the same in the report prepared under Section 44AB of the Act. If the auditor fails to record the lapses committed by the assessee, the assessee cannot be blamed for the same. Auditor being expert in accountancy, he has to examine the material independently and prepare the report as required under Section 44AB of the Act. The assessee, at the best, can produce all the relevant material before the auditor for the purpose of preparing the audit report. 11. Preparation of audit report is the exclusive function of auditor, therefore, if at all there was any negligence and omission to disclose correct fact in the report prepared under Section 44AB of the Act, this Tribunal is of the considered opinion that the assessee cannot be found fault. If the assessee suppresses any material either before the auditor or before the Assessing Officer, then we may say there was negligence on the part of the assessee. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndra P. Shah. According to the Ld. D.R., these expenditures are personal nature, therefore, the CIT(Appeals) has rightly confirmed the disallowance of ₹ 10,64,857/- 15. We have considered the rival submissions on either side and perused the relevant material available on record. The expenditure said to be incurred by the assessee for travelling to Singapore, USA, etc. Even though the assessee claims that the Managing Director s travel to Singapore was for purchase of machinery, no material was produced either before the lower authorities or before this Tribunal. The travel of Shri Devarajan, MD along with his wife for a holiday cannot be construed as business expenditure at all. The claim of expenditure on Shri Surendra P. Shah cannot be construed as business expenditure at all. Therefore, the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 16. The next issue is disallowance of electricity charges of ₹ 3,45,210/-. 17. Sh. Philip George, the Ld.counsel for the assessee, submitted that the ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hukar Bhusari, the Ld. Departmental Representative, submitted that Shri S. Kathirvel joined the company on 03.08.2011. Admittedly, he was sponsored for Post Graduate Programme and the assessee also paid the tuition fee. The assessee has not obtained any bond from the said Shri Kathirvel and there was no compulsion on the part of Shri Kathirvel to work for the assessee-company. According to the Ld. D.R., in the absence of any details regarding the bond or agreement between the employee and the assessee-company, the Assessing Officer has rightly disallowed the claim of the assessee. 23. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that one Shri S. Kathirvel joined the assessee-company on 03.08.2011 and he was sponsored for higher education for the academic year 2012-14. The assessee could not produce any material to show that the said Shri Kathirvel agreed to work for the company even after completion of higher education. No bond was produced either before the Assessing Officer or before the CIT(Appeals) or before this Tribunal and no agreement was also produced. Therefore, as rightly observed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 31. The next issue arises for consideration is disallowance of ₹ 16,59,967/- towards higher education of Vice President (Operations) of the company. 32. Sh. Philip George, the Ld.counsel for the assessee, submitted that the Vice President (Operations) is none other than the son of Managing Director. Since Shri P. Ramprasad is working as Vice President (Operations) with the assessee-company, the assessee claims the expenditure as revenue expenditure. Therefore, according to the Ld. counsel, the CIT(Appeals) is not justified in confirming the addition made by the Assessing Officer. 33. On the contrary, Dr. Milind Madhukar Bhusari, the Ld. Departmental Representative, submitted that admittedly, the assessee incurred the expenditure in higher education of Shri P. Ramprasad, the son of Managing Director. During the period, the assessee did not pay any salary. Therefore, according to the Ld. D.R., it does not mean to say that Shri P. Ramprasad worked as Vice President of the assessee-company. This expenditure was incurred for higher education ..... X X X X Extracts X X X X X X X X Extracts X X X X
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