TMI Blog2019 (7) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... recondition is that assessee must show that he has followed the method regularly for his own purposes. On careful analysis of the section 5 of the act, it is amply clear that income of the assessee is chargeable to tax when it accrues and arises. The assessee has right to offer such income if the same is though accrued but not received, to offer it for taxation on receipt basis. In this case, the bills that are not received by the assessee are not at all admitted by the person who is supposed to pay it. - no obligation of payment on the shoulder of Organizing Committee. Thus the outstanding payments, on the facts of the case, has neither accrued to the assessee, nor received by it. Not accepting the books of accounts maintained by the assessee on Cash basis and stated that the profit of the assessee cannot be deduced from it - real income - In the present case assessee itself has shown that though it has raised the bills but some of the bills have not been received till now because of protracted litigation which itself proves that even in the mercantile system of accounting such income has not accrued. Nothing more could have been shown as an income then what is received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete details are available before them. No reasons are shown before us by the learned CIT DR that comparable selected by the assessee does not have the similar FAR analysis. He further also could not show us that taking the current year data of the above comparable; the margin of the assessee is not quite high then those comparables. In view of this, we do not find any reason to uphold the adjustment proposed by the learned transfer-pricing officer to the arm‟s-length price of the international transactions of the assessee. Accordingly, ground number 3 of the appeal of the assessee is allowed. Disallowance of differential amount of bill seized - HELD THAT:- Payment of such bills were also made by account payee cheque and which were already on record at the time of search as well as produced before the learned assessing officer. The bank statement of the assessee also showed that those bills have been discharged by the assessee. Before the AO assessee also produced the original copies of the invoices. It is also fact that assessee was awarded the contract of the two clusters of the Commonwealth games which is at different sites. The one site was games , the other site was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide any reason or any evidences and on complete surmise held that the bills produced by the appellant are bogus. Further, the learned assessing officer has not commented anything on the amount of purchases made by the assessee from the party existing at the same address with the Garg Road lines. The learned assessing officer also did not grant any opportunity of cross-examination of the partner of M/s Garg Road lines to the assessee. The facts in the present case are similar to the facts in case of M/s Nitin Enterprises . Therefore we direct the learned assessing officer to delete the disallowance of INR 5 87058/ because of purchases made from Garg Road lines treated by him as a bogus purchases. Accordingly, ground number 6 of the appeal of the assessee is allowed. Addition of professional fees paid by the assessee - bogu bills produced - HELD THAT:- AO ignoring all the details and documents on record and without providing any reason held that the bills are bogus as the appellant was involved in receiving bogus bills, which was uncorroborated. Even otherwise, the Ld. AO made the addition of professional fees three times. Firstly, the professional fees of ₹ 1,03,15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. This very clearly shows that the A.O. did not proceed in accordance with law. Accordingly, for the reasons provided in deleting the disallowance in case of Meroform P Ltd, we also direct the ld AO to delete the above disallowance. Accordingly ground no 9 of the appeal is allowed. Addition u/s 69C on negative cash balance - HELD THAT:- On careful reading of these orders of the lower authorities we found that the cashbook of the assessee showed negative balance on certain days and therefore the addition is made of such negative balance as expenditure have been incurred by the assessee without having known source of such income. We have also considered the explanation given by the assessee but we are not convinced. Accordingly, we confirm the order of the learned assessing officer on this issue. Ground number 10 of the appeal of the assessee is dismissed Disallowance of revenue expenditure treated as capital expenditure - HELD THAT:- Assessee is engaged in the business of the event organization and has been part of the Organization, which conducted the Commonwealth games 2010. Looking at the nature of the business of the assessee the Fire detection alarm which has been fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the details of the closing stock stating the items, quantity, rate, and amount of the closing stock and despite the above information available with the assessing officer he made the addition u/s 68 - No reason to sustain the above addition for the reason that 1st of all it is a double addition and 2nd it cannot be added when the assessee has given a complete details of the quantity and the items along with the rates and the amount of the closing stock carried forward to the next year, the stock has also been sold by the assessee in next year and receipt of such sale has already been disclosed in the subsequent year. In view of this ground number 13 of the appeal of the assessee is allowed. Addition towards the advances recoverable - HELD THAT:- Sum included custom duty refundable of which was paid by the assessee to the government of India. Further sum of assignment credit refund was with respect to the Senate credit on service tax. Further sum was commercial taxes paid by the assessee under protest to U P since tax authorities. Advance to an employee for the expenses incurred by her for the business of the assessee company. Since the advances were not utilized it was outst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 of the appeal of the assessee is allowed with above directions. Addition of unsecured loan - addition u/s 68 - HELD THAT:- assessee has discharged its onus cast up on it u/s 68 - AO has not carried out any inquiry on the same. Thus, addition was made incorrectly by the AO and did not have any valid reason to disprove the documents submitted by the assessee. Therefore, it is clear that assessee has established identity, creditworthiness, and genuineness of the transactions by submitting adequate evidences, which has not been disapproved by the learned assessing officer by cogent inquiries. - delete the addition u/s 68 - ground number 17 of the appeal is allowed. Addition being alleged difference between the purported target costs - addition u/s 69A - HELD THAT:- Merely looking at the price of the material the addition cannot be made in the hands of the assessee. Even otherwise the learned assessing officer has invoked the provisions of section 69A of the act which can only be invoked in those cases where the money in question is not recorded in the books of accounts of the taxpayer. In the present case the assessee has moved the total sale consideration, the total purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on overall basis and disallowed whole of the expenditure. Finding of ld DRP is that definitely 100% expenses cannot be held bogus. Definitely, no business can be done without incurring any expenditure. However, they have directed to make the disallowance of ₹ 35.85 Crores, but on what basis there is no finding. The only reason given is that at least the sum of ₹ 35.85 crores paid to the OC and DDA have been recouped through the bogus billing in the books of accounts. DRP also did not care to find out the actual bogus expenditure, if any incurred by the assessee. No merit in the disallowance made by the ld AO and sustained by the ld DRP. Accordingly Ground no 20 of the appeal is allowed. - ITA No. 2502/Del/2015 - - - Dated:- 1-7-2019 - SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. N. CHARY, JUDICIAL MEMBER For The Assessee : Shri S. K. Tulsiyan, Adv., Ms. Nisha Rachh, FCA, Ms. Bhoomija Verma, Adv And Ms. Lata Goyal, CA For The Revenue : Shri Sanjay I Bara, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by GL LITMUS EVENTS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred on facts and in law in making an addition of ₹ 35,85,00,000/- to the total income of the Assessee by erroneously holding that the said amount represents unexplained expenditure under Section 69(7 Section 37 of the Act. 2.4 That the Assessing Officer erred on facts and in law in making an addition of ₹ 35,85.00,000/- to the total income of the Assessee by invoking the provisions of Section 292C of the Act. 3. That the Assessing Officer and Transfer Pricing Officer ( TPO ) have erred on facts and in law in making transfer pricing addition of ₹ 58,43,94,894/- (being the value of expenditure) to the total income of the Assessee. 3.1 That the transfer pricing provisions are not applicable to the Assessee in as much as per the Cash Method of Accounting followed by the Assessee no international transaction has been entered with any Associated Enterprise. The following sub-grounds are without prejudice to the above ground 3.1 above 3.2 That the transfer pricing addition of ₹ 58,43.94.894/- is patently against the principles of natural justice as the Transfer Pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original bill produced by the Assessee is bogus. 4.3 That the Assessing Officer erred on facts and in law in summarily rejecting the original bills produced by the Assessee by treating the same as bogus, without any reason leave alone a cogent and valid reason.. 4.4 That the Assessing Officer erred on facts and in law in making an addition of Rs. l1,22.32,956/- to the total income of the Assessee by invoking the provisions of Section 69C/ Section 37 of the Act. 5. That the Assessing Officer has erred on facts and in law in making addition of ₹ 2,14,59,000/- (being the value of per diem expenses) to the total income of the Assessee. 5.1 That the Assessing Officer erred on facts and in law in making a substantive addition of ₹ 2,14,59,000/- in spite of a specific finding that such addition has to be made on protective basis only. The following sub-grounds are without prejudice to the above ground 5.1 above. 5.2 That the addition of ₹ 2,14,59,000/- made by the Assessing Officer is against the principles of natural justice as the copies of incrimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee to provide to the Assessee with an opportunity to cross examine the person whose alleged statement(s) where relied upon in the assessment order for making the addition of ₹ 31,71.400/- to the total income of the Assessee. 6.4 That the Assessing Officer erred on facts and in law in arriving at the finding that the Assessee was involved in the practice of receiving bogus bills in as much as there was no material whatsoever on record to suggest that any of the original bill produced by the Assessee is bogus. 6.5 That the Assessing Officer erred on facts and in law in summarily rejecting the original bills produced by the Assessee by treating the same as bogus, without any cogent reason. 6.6 That the Assessing Officer erred on facts and in law in making an addition of ₹ 31,71.400/- to the total income of the Assessee by invoking the provisions of Section 69C/ Section 37 of the Act. 7. That the Assessing Officer has erred on facts and in law in making addition of ₹ 1.03,15.369/-(being the value of expenditure on professional services) to the total income of the Assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon in the impugned assessment order were not supplied to the Assessee in spite of repeated requests. 8.3 That the addition of ₹ 5,39,23,603/- made by the Assessing Officer is against the principles of natural justice as the Assessing Officer failed despite a specific request being made by the Assessee to provide to the Assessee the opportunity to cross examine the relevant officers of M/s PDOC whose alleged documents where relied upon in the assessment order for making the addition of ₹ 5.39,23,603/- to the total income of the Assessee. 8.4 That the addition of ₹ 5,39,23,603/- made by the Assessing Officer is against the principle of natural justice in as much as the show cause notice issued by the Assessing Officer only proposed addition of ₹ 97,40.350/- and therefore, the addition in excess of ₹ 97,40,350/-. Which was made without giving an opportunity to the Assessee to deal with the same is liable to be set aside. 8.5 That the Assessing Officer erred on facts and in law in arriving at the finding that the Assessee was involved in the practice of receiving bogus bills in as much as ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of ₹ 4,90.08,835/- to the total income of the Assessee by invoking the provisions of Section 40A(2)(b) of the Act in as much as no finding whatsoever has been recorded by the Assessing Officer to suggest that the expenditure incurred by the Assessee is excessive or unreasonable. 10. That the Assessing Officer has erred on facts and in law in making addition of Rs. l,22,696/- (being the value of alleged negative cash balance) to the total income of the Assessee in total disregard of the fact that the said negative cash balance arose only on account of an inadvertent and bonafide clerical error made while making entries in the books of accounts which had not been duly rectified up to the date of search proceedings. 11. That the Assessing Officer has erred on facts and in law in making addition of ₹ 1,18.24.175/- (being the value of alleged capital expenditure) to the total income of the Assessee. 11.1 That the Assessing Officer erred on facts and in law in making a substantive addition of Rs. l,18,24,175/- in spite of a specific finding that such addition has to be made on protective basis only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law in making addition of ₹ 4.65.78,484/- being the value of balance sheet item of Sundry Creditors and ₹ 6.98.13.499/- being the value of balance sheet item of Other Liabilities, to the total income of the Assessee. 15.1 That the Assessing Officer erred on facts and in law in arriving at the finding that the Sundry Creditors Other Liabilities are bogus merely because confirmation letters have not been filed by the Assessee in relation to such Sundry Creditors. 15.2 That the Assessing Officer erred on facts and in law' in making an addition of ₹ 4,65,78.484/- plus ₹ 6,98,13,499/- to the total income of the Assessee by invoking the provisions of Section 37/ Section 69C of the Act. 15.3 That the Assessing Officer erred on facts and in law in making a substantive addition of ₹ 4.65.78,484/- plus ₹ 6,98.13,499/- in spite of the fact that Dispute Resolution Panel ( DRP ) had duly directed that such addition should be made on protective basis only. 16. That the Assessing Officer has erred on facts and in law in making addition of ₹ 15,53,10,286/- being the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 68 of the Act. 18. That the Assessing Officer has erred on facts and in law in making addition of ₹ 30,32,55,951/- (being the alleged difference between the purported target cost and consideration to be received from OC), to the total income of the Assessee. 18.1 That the addition of ₹ 30,32.55.951/- made by the Assessing Officer on account of the alleged difference between the purported target cost and consideration to be received from OC has led to duplicative addition as the entire consideration received/ receivable by the Assessee from OC has already been accrued in the profit and loss account. 18.2 That the Assessing Officer erred on facts and in law in making a duplicate addition of ₹ 30, 32, 55, 951 /- in spite of the fact that, DRP had directed that no duplicate addition should be made. The following sub-grounds are without prejudice to the above ground 18.1 18.2 above. 18.3 That the addition of ₹ 30,32,55,951/- made by the Assessing Officer is against the principles of natural justice as the copies of the allegedly incriminating material/ doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) the Assessing Officer is against the principles of natural justice as the Assessing Officer-failed to provide to the Assessee the opportunity to cross examine the relevant officers of other vendors whose prices have been relied upon in the assessment order for making the addition of ₹ 34,10,40,959/- to the total income of the Assessee. 19.5 That the Assessing Officer erred on facts and in law in disregarding the material and relevant details submissions/ documents and information furnished by the Assessee and has instead erroneously relied on extraneous considerations for making addition of ₹ 34,10,40,959/- to the total income of the Assessee. 19.6 That the Assessing Officer erred on facts in not appreciating the nature of Assessee's business by treating the Assessee as a reseller of goods as against a service provider. 19.7 That the Assessing Officer erred on facts and in law in making an addition of ₹ 34.10.40,959/- as the said addition arises only as a result of cherry picking in as much as only those items have been cherry picked where the price quoted by the Assessee was high in comparison to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in initiating penalty proceedings under section 271 (1 )(c) of the Act. 23. That the Assessing Officer has erred on facts and in law in initiating penalty proceedings under section 271G of the Act. 2. The brief facts of the case are related to XIX addition of Commonwealth games held in New Delhi from 3/10/2010 to 14/10/2010. The organization and conduct of this mega event was controlled and supervised by The Commonwealth Games Organizing Committee (OC, CWT) specifically formed and authorised to deal with the various aspects relating to the smooth organization of the above event. The budget of this committee was estimated at about INR 2300 crores. Out of this amount, the sum of INR 600 crores were estimated to be spent on the execution of the overlays contracts. These contracts were awarded to four different parties with each party executing the work in respect of one or more of the seven clusters into which the sporting and training venues were divided. 3. M/s GL events Meroform is a consortium formed on 19/05/2009 is a joint venture formed for the purpose of winning the contracts for the execution of overlays project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous aspects related to the overlay contracts. The report has also commented that the organizing committee has paid differential rates two different contractors for the same items and paying of hire charges for the same items has resulted in huge loss to the exchequer. It was apprehended that the huge margins are not to be disclosed by the assessee to the income tax Department. Therefore, search u/s 132 of The Income Tax Act was carried out at the residence and business premises of M/s GL Litmus Events Private Limited and the Meroform group on 19/10/2010 at New Delhi and Noida. Survey under section 133A of The Income Tax Act was also carried out along with the search actions. During the course of search and survey, various documents were found and seized. Statements of Shri Binu Nanu were recorded on 19/10/2010 and on 16/12/2010. Statement of Mr. Sebastian Brunet, Director of GLLE, was also recorded on 19/10/2010. 8. Meanwhile on 05/01/2011 an FIR No.RC-DAI-2011-A-0001 was filed under section 154 Cr.P.C by CBI for criminal conspiracy, cheating, and abuse of official position against the Assessee and other persons. The FIR was in the name of ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Meanwhile, increasing disputes and agitations towards payments to be made to all the Contractors by the OC, CWG led to the Ministry of Youth Affairs Sports, vide its letter dated 19/05/2011, to instruct that payments of bills to the overlays vendor, including assessee could not be held to be legitimate dues and hence it would not be appropriate to release the said amount due to them. Further in the event of absolutely no payments being released, the Appellant Company on 12/07/2011, issued notice to OC, CWG whereby listing out its bills, it invited discussion from OC, CWG regarding the disputes and differences in order to reach a mutually agreeable solution. Again, since there was no response from OC, CWG, another letter dated 23/08/2011 was issued to OC, CWG, requesting it to refer the disputes to its Chairman and CEO for their resolution. Finally the OC, CWG vide its letter dated 25/08/2011 appraised the Appellant Company that the contract relating to overlays was under investigation of various agencies including the CBI and an FIR had also been lodged in which assessee was cited as an accused for suspected offences of criminal conspiracy, cheating and abuse of official posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting for income tax purposes. Books were also maintained on the accrual basis also for purposes of compliance with the requirements of section 209 of The Companies Act, 1956. Thus, accordingly, Return was filed on cash basis at an income of ₹ 5,23,39,490/- Assessee declared income under the head income from business or profession. It was alleged therein that the Appellant regularly maintained books of account on accrual basis, Return of income on cash basis was rejected. Against the returned income of the assessee of INR 52339490/ , the learned AO passed the draft assessment order on 27/3/2014 determining the total income of the assessee of INR 10,45,48,31,720/ . There were 25 different type of additions which are made by the learned assessing officer amounting in all INR 10,45,48,31,721/ . During the course of assessment proceedings, reference u/s 92CA (1) was made by the learned assessing officer to the learned transfer pricing officer to determine arm‟s the price of the international transaction undertaken by the assessee. The assessee submitted that there were no international transactions between the assessee and its associated enterprises. However the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was computed at INR 359,40,96,536/ against the returned income of INR 5,23,39,490/ . Against this order, the assessee is in appeal before us raising various grounds of appeal listed above. 18. The first ground of appeal is against the order of the learned assessing officer in rejecting the cash method of accounting followed by the assessee and completing the assessment as per accrual/mercantile method of accounting. 19. The learned assessing officer in the draft assessment order noted that accounts of the appellant should be in the nature of venture account‟ wherein the correct profitability could be arrived at only by following the accrual method‟ of accounting, rejected the cash system of accounting followed by the assessee. The learned assessing officer noted in the show cause notice dated 9/1/2013 that the assessee company has been regularly maintaining books of account on accrual basis as is evident from the financial statements filed by the company under the companies act and the books of account seized during the course of search. He noted that even for the income tax purposes the company has followed the accrual basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome tax act. It was further noted by the learned dispute resolution panel that the assessee is not going to incur any expenditure in relation to CWG, which has not accrued in view, and therefore the assessee‟s income has to be worked out on accrual basis. Thus, the learned assessing officer as per the direction of the learned dispute resolution panel rejected the books of accounts of the appellant maintained on cash basis and proceeded to conclude the assessment as per accrual method of accounting. 20. The learned authorised representative submitted that the business income could be computed as based on the cash system of accounting or on mercantile system of accounting. Choice of employing either of the two methods of accounting rests with the assessee. He further relied upon the provisions of section 5 of the income tax act and submitted that cash systems of accounting as well as the mercantile system of accounting both are recognized for the purpose of the computing total income of the assessee. He further referred to the provisions of section 145 of the income tax act which lays down that the business income is required to be computed in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. He further submitted that the appellant company was joint venture Company of two different parties who were engaged in the business of providing overly services, event management services et cetera. During the relevant year, the appellant performed a contract for organizing committee Commonwealth Games 2010 for providing overlays on turnkey basis including supply, installation, testing, commissioning, operation, maintenance and the decommissioning and removal of the games overlays of Commonwealth Games 2010 in respect of various clusters along with other contract with the Delhi Development Authority. Thus being in the nature of a joint venture company in the 1st year of its operation with the limited vision of completing the side projects, it was the 1st choice of the appellant to maintain the non-complicated cash method of accounting, wherein income was recorded only when it is received and expenses were recorded only when it is paid. He further justified the cash system of accounting stating that owing to the nature of the industry being the service industry in which the appellant company operated and that too with the government agencies, the invoices and bills raised on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be legitimate dues. He therefore submitted that by 25/8/2011, bills beyond INR 70.18 Crores did not give rise to any acknowledged sum, income could be held to arising and accruing on the remaining balance of INR 72.73 crores. He therefore submitted that the appellant company following the prudent accounting principles and on commercial prudence filed its return of income on cash system of accounting, wherein the income was recognized on its receipts and expenses on their payments and thus any invoices as and when realized in future would accordingly be offered as income. He further referred to the fact that the arbitral tribunal was formed and assessee has made the claim of INR 172.43 crores along with other claims and the organizing committee denied all the claims of the appellant and raised counter claim of recovery of INR 70.18 crores along with the interest on the claim that the agreement became void ab initio due to criminal conspiracy/fraud. He therefore submitted that the organizing committee has not only denied all the remaining balance as legitimate dues but has raised counterclaims for the recovery. He further referred to the original award dated 23/2/2018 passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for income tax purposes should be regularly followed by the assessee company. Therefore, he submitted that the cash system of accounting, which has been regularly employed by the assessee company, must be accepted as such. He further submitted that the learned assessing officer has incorrectly held that the assessee is following regularly books of account on accrual basis. He submitted that such reference is with respect to the provisions of section 209 of the companies act 1956. He further submitted that the assessee has submitted its profit and loss account and balance sheet on cash basis along with the requisite details, which abundantly proves that for the purpose of the income tax act the assessee has followed the cash system of accounting. To support his view he referred to the draft assessment order at page number 4 where the assessing officer stated that the books of accounts for the financial year 2010 11 of the assessee were analyzed during post search proceedings were therefore reflective of the actual payments and receipts only. Therefore, he submitted that the learned assessing officer has also recognized that the assessee is maintaining the books of accounts on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties who were not declared as bogus, onus lies on the learned assessing officer to prove that the part payments to the same parties are bogus. He therefore stated that the disallowing the part payment made to the same party only because some bills were not seized and found is baseless. He further stated that the learned dispute resolution panel‟s 3rd ground and stated that there is a negative cash balance of INR 1,22,696/ . He further referred that this was explained to the learned assessing officer because of minor clerical errors raising doubts on the authenticity of the accounts maintained by the appellant on cash basis. He otherwise submitted that how the method of accounting is impacted by this issue is beyond comprehension. He therefore stated that the above three instances which has been raised by the learned dispute resolution panel for rejecting the books of accounts are baseless. He further submitted that in order to invoke the provisions of section 145 (3) of the act and to disturb the existing system of accounting , assessing officer must necessarily expresses dissatisfaction about the correctness or completeness of the accounts of the assessee and also note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that outgoings as per the cash flow statements were INR 932672998. He further referred that total income of ₹ 22890171 has been received by the assessee from the sale of scrap posts CWG, 2010. However, in the audited balance sheet of the assessee for assessment year 2011 12 there is no mention of income received or accruing through the sale of scrap. Therefore he referred that the addition of INR 132,04,11,565/ was made u/s 69C of The Income Tax Act being unexplained expenditure an addition of INR 22890171/ as discussed above has been made. He further referred to the order of the learned Dispute Resolution Panel at para number 5 and noted that on reading of the emails found during the course of search, it is clear-cut that the sum of INR 35.85 crore is paid by the assessee to the organizing committee and the Delhi development authority which does not get reflected in the books of accounts. He further referred to the difference in the bills debited in the books of accounts and the bills found during the course of search showing huge difference. Therefore, he submitted that the provision of section 145 clearly shows that assessee has not followed the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. We have carefully considered the rival contention and perused the orders of the lower authorities. The only dispute with respect to the above ground of appeal is whether the assessee has maintained its books of accounts on cash basis of accounting from which the correct profit can be deduced or not. It is also not in dispute that the assessee has followed the cash basis of accounting for the purpose of income tax return and maintained its books of accounts on accrual basis to comply with the provisions of section 209 of The Companies Act 1956. According to the provisions of section 145 of the income tax act, to compute the income chargeable under the head profits and gains of business or profession or income from other sources, assessee can either follow cash or Mercantile system of accounting, which is regularly employed by him. This is subject to the provisions of subsection (2) of section 145 of the income tax act. Further, provisions of section 145 (3) also provides that where the assessing officer is not satisfied about the correctness or completeness of accounts of the assessee or where the method of accounting provided in subsection (1) has not been regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the closing stock, it is open to the assessee to value it at the cost or market value, whichever is lower; ( 2) In the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn. A taxpayer is free to employ for the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade at either cost or market price. ( 3) A method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation. ( 4) The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within their recognized limits. ( 5) Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. ( 6) Under section 145 of the Act, in a case where accounts are correct and complete but the method employed is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Madras (1959) 36 ITR 162 (Mad) wherein it has been held 8 page number 167 168 as under: Apparently the tribunal accepted the contention of the assessee, that though the accounts related to the 1st accounting period of its activities, it was a system of accounting regularly employed within the meaning of section 13 of the act, though there was no such express finding. In any event, considering it was the same system of accounting that the assessee adopted in the subsequent accounting period is also, the test of regularly employed must be held to have been satisfied in this case. That was the principle laid down in an unreported decision of a division bench of this court in Manickavasagam ltd V Commissioner of Income Tax ( case referred no 21 of 1954). 26. Further, in 149 ITR 738 and at page number 79 in CIT vs. Sikka honourable Delhi High Court also held so. In view of this, we do not have any hesitation in holding that the assessee is maintaining its books of accounts on cash method of accounting and the same method of accounting is regularly employed by the assessee during this year as well as in subsequent years. Therefore i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer has held that owing to the jointventure nature of the business of the appellant, the appellant company followed the cash system of accounting for income tax purposes, which is not proper. According to him as the consortium consisting of GL litmus events private limited was found with the specific and exclusive purpose of executing the overlays contract for CWG 2010. Other than the overlays contracts and contract with DDA it has not undertaken any other project either in respect of Commonwealth games or otherwise. Therefore, according to the assessing officer, activities of the assessee are not carried forward from one accounting period to the next. Therefore, according to him, the books of the assessee should therefore be in the nature of venture account only and the correct profitability can be arrived at by following the accrual method of accounting only. Therefore, the books of accounts maintained by the assessee on Cash basis were rejected. The claim of the assessee is that assessee is engaged in the business of performing the contract for services, and is in the 1st year of its operations with the limited vision of completing the said venture, therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areful analysis of the section 5 of the act, it is amply clear that income of the assessee is chargeable to tax when it accrues and arises. The assessee has right to offer such income if the same is though accrued but not received, to offer it for taxation on receipt basis. In this case, the bills that are not received by the assessee are not at all admitted by the person who is supposed to pay it. Thus, there is no obligation of payment on the shoulder of Organizing Committee. Thus the outstanding payments, on the facts of the case, has neither accrued to the assessee, nor received by it. 31. The next reason given by the learned AO for not accepting the books of accounts maintained by the assessee on Cash basis and stated that the profit of the assessee cannot be deduced from it for the reason that i. total value of the bills found and seized during the course of search comes to only INR 2 75505611/ as against the total of the above parties as per the books of accounts on 16/10/2010 comes to INR 3 87738567/ . Therefore, according to the learned assessing officer there is a discrepancy of approximately INR 11 crore for which no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is further the case that it is not for the assessee to suggest that what document should be seized by the search party and what document should not be seized. It is solely the discretion of the search team to decide that. Further, all those vendors parties were also paid by account payee cheques. Thus merely for the reason that assessee produced those bills but assessing officer rejected them for the sole reason that assessee is in practice of receiving bogus bills, without proving that, the learned assessing officer is not authorised to reject the method of accounting regularly employed by the assessee. Therefore, it is not proper to state that for this reason, the profits of the assessee cannot be derived for taxation purposes correctly. In fact the rejection should be based on cogent reason as held by the honourable Supreme Court in CIT vs. British paints 188 ITR 44 (SC). ii. The another issue for which the method of accounting adopted by the assessee is rejected is for the reason that from the residence of a director in the appellant company are rough handwritten note and a print out of an email dated 16/6/2010 which was sent by Mr. Oliver of GL events Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the method of accounting followed by the assessee that is cash method of accounting is not acceptable and assessee should follow accrual method of accounting. iii. On careful consideration of the argument of the learned AO, we do not find any substance that for this reason the method of accounting employed by the assessee can be challenged or this could be the reason because of which the profits of the assessee or the real income earned by the assessee cannot be deduced. In fact, the learned dispute resolution panel despite having the copies of the email and was having a belief that assessee has paid INR 35.85 crores as an illegal gratification by booking the bogus bills, therefore, it was mandatory for the learned assessing officer, learned dispute resolution panel to have enquired into the bills debited by the assessee and to show that these are the bogus bills. Not all these exercise has been carried out by the learned assessing officer or the learned dispute resolution panel. Over and above, assessee was directed by the learned dispute resolution panel to produce the copies of the bills before the learned assessing officer, the learned assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng employed by the assessee. Therefore, for this reason it cannot be stated that the profits of the assessee cannot be correctly deduced because there is a negative cash balance in the books of the assessee. In view of this, we do not find this reason to sustain the rejection of the method of accounting employed by the assessee on this ground. 32. Thus the accounting defect of the bills, emails and seized documents found and negative cash cannot be the reasons, individually or collectively to reject the method of accounting regularly followed by the assessee to reach at the real profit / income of the assessee. 33. The learned dispute resolution panel/assessing officer has heavily relied on the decision of the honourable Supreme Court in case of Commissioner Of Income Tax Vs British Paints India Ltd (1991) 188 ITR 44 (SC). The learned dispute resolution panel in para number 5.11 stated that the honourable Supreme Court in case of the above decision has held that it is only the right but the duty of the learned assessing officer to consider whether or not the books disclose the true state of accounts and the correct income can be deduced there fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd complete account but which, in the opinion of the officer, does not disclose the true and proper income. 35. Further at page number 53 the honourable Supreme Court further held that:- it is not only the right but the duty of the assessing officer to consider whether or not the books disclose the true state of accounts and the correct income can be deduced therefrom. It is incorrect to say, as contended on behalf of the assessee, that the officer is bound to accept the system of accounting regularly employed by the assessee the correctness of which had not been questioned in the past. There is no estoppel in these matters and officer is not bound by the method followed in the earlier years. 36. Therefore, it is evident from the decision of the honourable Supreme Court that the books of accounts and the method of accounting regularly employed by the assessee can be discarded, only if the proper profits, real income, there from cannot be deduced. Therefore, if an assessing officer desires to reject the method of accounting regularly employed by the assessee, he must give a cogent reason, which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of OC, and 5% in respect of DDA, and discusses the methods by which these expenses have to be adjusted in the books. Similarly, at page no.68 of the said annexure, there are hand written entries wherein calculations have been made corresponding to the details in the e-mail referred above. As per this document, payments to the extent of ₹ 27,00,00,000/- are required to be made to the officers of the OC, CWG and DDA. The document also contains the modus operandi to be adopted for this purpose. It states that ₹ 5,00,00,000/- may be adjusted by way of entries in the form of consultation‟ and ₹ 22,00,00,000/- may be adjusted by way of bogus bills. The e-mail, therefore, makes it clear that bogus expenses have to be booked so that illegal gratifications may be paid to officials of OC, CWG and DDA. The details contained in the e-mail and the modus operandi discussed is corroborated by the findings as discussed in the previous para of this order wherein it has been concluded that the habit bogus purchases have been booked from M/s. Nitin Enterprises and from M/s. Garg Roadlines. These findings are in consonance with the entries made in Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is evident that the documents belong to the company. Shri Binu Nanu has admitted that page no.68 is in his own handwriting and as is evident from page 69 the mail has been sent by Shri Binu Nanu himself. Shri Binu Nanu was not willing to explain the documents during the recording of his statement. As discussed above, the documents pertain to M/s. G L Litmus Events Pvt. Ltd. Shri Binu Nanu is a director in the company. Further the documents have been found in the possession of Shri Binu Nanu. As per section 292C of the Act, there is a presumption, that documents found in the possession or control of any person in the course of search u/s.132 be presumed that such documents belong to such person. Hence, in order to protect the interest of revenue, the amount of ₹ 35.85 crores was added to the income of the Shri Binu Nanu on a protective basis. Hence, the same amount of ₹ 35,85,00,000/- is now being added back to the total income of the assessee company for the year under consideration on substantial basis. 38. The learned dispute resolution panel with respect to the objection filed by the assessee dealt with the whole issue as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account with any concrete evidence. Thus, factual mistake and technical default, if any, in the impugned order or on the part of the AO does not give an edge to the assessee to claim such expenses as genuine expenses. 6.5 Here, in the present case, definitely 100% expenses can not be held bogus. Definitely, no business can be done without incurring any expenditure. Therefore, we do not find merit in disallowance of entire expenses. Definitely, in view of above mentioned facts, at least the sum of ₹ 35.85 crores paid to the OC and DDA have been recouped through the bogus billing debited in the books of account. Beside, other specific disallowances based on facts have to be made separately on protective basis to the extent of bogus expenditure of ₹ 35.85 crores and disallowance based on facts over and above of ₹ 35.85 crores on substantive basis to avoid double taxation. 39. The learned authorised representative vehemently contested the addition in his submissions broadly were as under:- i. That the documents seized from the residence of director in the appellant company are handwritten note by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the present case, there was a search by Central bureau of investigation and after that, no charge sheet has been filed which even remotely suggests that there is any illegal gratification paid by the assessee. He further referred to the 1st information report filed by CBI xi. He further referred to the arbitral tribunal award on 19/12/2013, which is clearly stated that there is no illegal gratification involved in the whole contracts. He extensively referred to paragraph number 31 62 where there is a detailed examination and cross-examination of each witness. xii. He further relied up on following decisions:- a. Common Cause V UOI b. CBI V V C Shukla 3 SCC 410 c. ACIT V Satyapal Wassan 295 ITR (AT)352 d. ACIT V Ashok Poddar ( Kol) 16 DTR 0055 e. CIT V Praveen Juneja (del) (HC) ITA 57/2017 40. In view of all this argument, he submitted that the action of the learned assessing officer to make addition to the tune of INR 35. 85 crores based on such a rough loose sheet containing scribbles and cancellation is grossly unju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quest for Proposal (RPF). Next vide Letter of Intent (LOI) dated 18/05/2010, the value of the Contract stood finalized at ₹ 156.73 crores. Thus, it is not understood as to how the mail sent on 16/06/2010 still contained estimated figures, when the final figures of the contract were available. Further calculations and hand written notes were definitely after the date of the mail. Thus, it is seen that the date of the mail in no way matches with any dates related to the contract awarded to the assessee company. Further rough sheet contains the handwritten figures 15 and then 120, then 18 and a total of 20. Now again the genesis of these figures is not understood. The contract values were never 200 or 150 or 120. They also could not be deciphered and correlated with the contract value of the assessee. In addition, it is seen that the printout per se contains no date and is does not show any ingredient of transactions such as date, payee, payer, details of payment etc. Further during the entire search proceedings and in the assessment proceedings following the same, nothing at all, even a noting to the said effect, was unearthed by the Ld.AO showing actual payment made by the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lysis of various facts on record, various affidavits on record and after various statements taken, the Appellant has been given clean chit from the allegation that any bribe was paid in the obtaining of the said Overlays Contracts. However, before concluding on this subject it would be of relevance to analyze in details the sequence of events leading to the Arbitral award and the findings of the Arbitral award. 43. Firstly, in the FIR it was complained that during 2009-10 Shri V K Verma, Director General, organizing Committee (OC) Commonwealth Games 2010 and other officials of OC entered into a criminal conspiracy with i. Shri Binu Nanu, Managing Director of M/s. Meroform India Pvt. Ltd. / M/s. G.L. Events Pvt. Ltd. Meroform, France; ii. M/s. PICO Deepali Overlays Consortium, Delhi; iii. M/s. Nussli (Switzerland) Ltd., Switzerland and iv. M/s. ESAJV:D Art: Indo Consortium, New Delhi in the award of contracts for overlays for different venues of Commonwealth Games 2010, Delhi at exorbitant rates. The accused public servants by abusing their official positions there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pursuant to the above claims and counter claims, Arbitral Tribunal comprising of Mr. Justice Anil Dev Singh (Retd.), Mr. Justice A.P. Shah (Retd.) and Mr. Justice M.L. Varma (Retd.) duly passed the Final Corrected Arbitration Award on 14/05/2018. In the said Award, the Issue no. 8 being preliminary in nature was dealt with first. The issue was that that in case there is evidence to show that the contract between the parties is vitiated by fraud, conspiracy, and corrupt practice, as alleged by the respondent, OC CWG, the claims of the Claimant will not survive. It was specifically urged by the Respondent, OC CWG, (1) that the Consortium secured the contract by corrupt means and by practicing fraud upon the OC CWG. (2) That the Consortium along with three other overlays providers colluded with the officials of the OC CWG and received favourable treatment. (3) With regards to Sh Binu Nanu, it was specifically urged by OC CWG that Binu-Nanu of the Consortium made illegal payments to the officials of the OC CWG to the extent of 15% of the contract money as per the FIR lodged against the accused by the CBI. (4) That the Claimant and three other overlay providers formed a cartel and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llusion between Verma and Claimant as was alleged by him in para 6 of his affidavit, he had to admit that there was no such mention in the reports. The said question and answer thereto is reproduced, which would show that the allegation was recklessly made: Q. 101 Can u show one paragraph from the Shunglu Committee Report or the CAG Reports which say that the opinion expressed by Mr. V. K. Verma in his note dated April 10, 2010 from pages 71 to 73 of Vol. R-4 was prepared in apparent collusion with the Claimant? A. It is not there in the said Reports. 56. It appears that there has been a misreading of the Shunglu Committee and CAG reports by RW1. The allegations, according to the RW1, were also based on the contents of the FIR lodged against the Claimant. It will be apposite to set out the questions put to him in regard to the FIR and his answers thereto: Q. 102. In so far as the FIR is concerned it was lodged on 5th januray 2011, is that correct? A. Yes. Q. 103. Pursuant to the FIR has any charge sheet been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has clearly negated the accusations of fraud, corrupt practices, collusion and cartelization leveled against the Appellant Company (Claimant). Also it is to be seen that from the award above, it is derived that the said accusation against the Appellant was purely and solely based on the Shunglu Committee Report, FIR lodged by the CBI based on which the search was conducted on the Appellant Company and pursuant to which in the assessment above addition was made. In view of above facts and without commenting on any other report or investigation, it is apparent that charges against the assessee of paying illegal gratification and its consequent addition u/s 69 of the income tax act is without any evidence of incurring such expenses. Thus ground no 2 of the appeal is allowed. 46. Ground no 3 is relating to the adjustment of ₹ 58,43,94,894/- towards the Arms Length price of International Transactions. During the year, the assessee has entered into following international transactions entered into with its associated enterprise. S. No. Details of International Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents Pvt Ltd for execution of the contract awarded by OC, CWG in India. As it was not possible for a France Company to directly conduct overlays activities in India and therefore it was undertaken by forming an Indian Company. The contract was provided by the consortium to the company at cost-to-cost basis without any mark up. As It is apparent from above that contract of overlays was awarded to M/s G L Events Meroform whose place of business is France and an Indian Company named G L Litmus Events Pvt Ltd (appellant) was formed by the partners of consortium only to manage the event and related activities in India. Had the event been managed by M/S G L Events Meroform, all the equipments, professional, expatriates, consumables and technical services would have been deployed by it from France directly, but, the event was being managed by the appellant which was acting as Special Purpose Vehicle (SPV) and therefore, these equipments, professional, expatriates, consumables and technical services were purchased from associated enterprises. 48. In form no 3CEB Report The accountant did not determine the arm‟s length price relating to international transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant with its Associated Enterprise. The Ld. TPO issued notice u/s 92CA (2) and 92D (3) of the Act on 02.01.2013 and asked the appellant to furnish various details and documents. The appellant vide letter dated 14.2.2014 submitted the reply to the aforesaid notice along with details and documents. Subsequently on 15.01.2014, the Ld. TPO issued show cause notice in which, based on the above comments of the auditor given in form 3CEB, he proposed to treat the arm‟s length price of the international transactions at NIL. The appellant submitted reply to the above notice vide letter dated 20.1.2014 along with the Transfer Pricing study Report. Assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method selecting three comparables and holding that as the margins of the comparable is less than the margins of the assessee, its International transactions are at arm‟s length price. Thus, it was submitted in the reply that in view of the transfer pricing study all the international transactions were at the arm‟s length. The Ld. TPO after rejecting the above transfer study and passed an order u/s 92CA(3) determining the arm‟s length price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original supplier are enclosed and produced before him. He submitted that determination of ALP of such purchases at nil is devoid of any merit. 52. He further referred to the rental expenditure of INR 349054107 which are paid to associated enterprise for equipment taken on lease. He submitted that various equipments were taken only is our tents including flooring, doors, ramps, grandstand seating et cetera and portable facilities, containers holding, office facilities, furniture said fittings et cetera. He further referred that the rental charges were paid as well the equipment lease agreement. He further stated that it couldn‟t be anybody‟s case that without these equipments the appellant could have completed the contract undertaken by it. All these were items were essentially to complete the work assigned to it and evidence are there to show that such items were in fact provided and transported to the appellant by its associated enterprise. He further referred to the fact that there is shipment freight of INR 25.41 crores, the custom duty of INR 8.96 crores, which has been incurred by the assessee for import of these equipments. He therefore stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the appellant only seeing the experience of its holding company therefore the appellant was taking special administrative, financial, legal and technical assistance from that company and for that the appellant has paid 2.5% of its annual net sales before tax to the associated enterprise. He further referred to the agreement and stated that the services have been rendered by the associated enterprise on need basis and they are not shareholder services or duplicative in nature resulting into direct benefit to the assessee and therefore their determination of the prize at arm‟s-length at Rs. Nil by the learned transfer-pricing officer is incorrect. 55. He further referred to the reimbursement of expenses of ₹ 33193514 made by the assessee to its associated enterprise relating to the travelling, viz, consumables, insurance, telephone expenses and other expenses incurred by its associated enterprise on behalf of the appellant. He submitted that these expenses are to be reimbursed by the appellant to the AE as these are the expenditure for the purpose of the event which is organized in India and same may been reimbursed without any cost but on actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. He submitted that out of the 3 parties one party did not exist in the current year and therefore only 2 parties remained as a comparable company whose average margin using the current year data was 6.19% as against the margin of the appellant at 12.57%, which is much higher than the margin of the comparables and therefore even using the current year data the transaction of the assessee are at arm‟slength. He further submitted that assessee has given a detailed transfer pricing study report to the learned transfer pricing officer stating that transactional net margin method is the most appropriate method , however the learned to TPO has held that only the cup method is the most appropriate method but no data was provided by the learned transfer pricing officer. He stated that the learned transfer pricing officer determines the arm‟s-length price of the transaction of INR 5 854392894/ as Rs. Nil only. In view of this, he submitted that the method adopted by the learned transfer pricing officer for determining the arm‟s-length price of the international transaction at Rs. Nil only is not sustainable. Even otherwise, he submitted that the complete data is availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Wakefield India private limited stating that the above decision does not prohibit the transfer-pricing officer for determining the arm‟s-length price of a transaction at nil as has been done by the learned transfer-pricing officer in this case. It further held that considering the facts of this case, it is also clear that the payment for intragroup services is not wholly and exclusively for the purpose of the business in terms of section 37 (1) of the income tax act. In view of these facts, the learned dispute resolution panel further directed the learned assessing officer disallowed the same u/s 37 (1) of the act on protective basis to avoid double taxation. It was further held that consequent to this finding, the disallowance of the entire expenses made by the learned assessing officer should be further reduced by INR 5 84346638/ to avoid double taxation. Accordingly, the learned dispute resolution panel noted that as the learned assessing officer has been directed to disallow the above expenditure completely, The adjustment of the arm‟s-length price will result into double addition and therefore protectively there were upheld the transfer pricing adjustment also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of TV is placed at page 195 of the paper book VI. The invoice consists of the reference of the invoice numbers along with the date of invoice and amount at which the TVs were purchased by them. Hence, it is evident from the invoice that that the associated enterprise had charged the amount at cost without any mark up from the appellant. 60. Second transaction of Rental Expenses of ₹ 34,90,54,107/- include the rent paid to associated enterprises for the equipment taken on lease. Various equipments taken on lease are tents (including flooring, doors, ramps), grandstand seating (under structure and seats), portable ablution facilities, containers, scaffolding, office facilities, furniture and fixtures, fittings and equipments, carpeting, partitioning, ceilings, audio-visual equipment, electrical, power generators, IT T, HVAC, public address system, security, signage elements, fencing, flag poles, fire equipment, security equipment and other commodities which may be requested as part of the Main Contract or the other Contracts. Further, equipment also comprises of TV screens, fences and other commodities that may be requested as part of main contract or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical service agreement is placed at page 113-126 of the paper book VI. Copies of Bills are also enclosed at page 229-230 of paper book VI. Undoubtedly, the completion of the contract required highly skilled manpower, which had vast experience in organizing such big events. The appellant being new was not having such work force. The AEs on the other hand were having vast experience of organizing events like Common Wealth Games, G20 summit Meetings, Cannes Film festivals, organizing more than 300 trade shows all over the world, etc and having operations in more than 19 countries with employee strength of more 3500, did have these expertise. The appellant, therefore, utilized services of the employees of the AEs and paid them the service charges as per the aforesaid agreement. It is not the case of AO/ TPO that such big events can be organized without the help of the skilled manpower. There is enough evidence to show that such experienced personnel of the AEs came to India and rendered services to the appellant. Further, the flight expense incurred for travelling of technical and specialized workers from abroad to India and back to abroad also clearly specify that the contractual m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses were not only required but were also in fact incurred the only question that arises for consideration is whether or not the same were at the arm‟s length. In this regards it is hereby submitted the Ld. TPO issued show cause notice to the appellant vide letter dated 15.01.2014. The appellant, vide reply dated 20.01.2014, submitted the Transfer Pricing Study Report placed at page 34-92 of paper book VI. The Ld. TPO rejected the TP documentation only because the same was not corroborated with statutory certificate. In this regards, it was submitted that the statutory certificate in form 3CEB was already furnished before the Ld. TPO wherein the auditor had clearly held that he was unable to determine the price and method due to limitation and significance of the matter. The Form 3CEB was prepared based on accrual figures and was filed before the Ld. AO on 30.03.2012 in order to avoid the penalty. As the appellant has stated in its submission that it was following cash basis of accounting, the provision of transfer pricing are not applicable for the year under appeal. Therefore, the transferpricing document was not prepared at that time. Thus, the TP Study report was prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to designing, fabrication, construction, and execution of various works in organizing an event. Copy of the Balance Sheet enclosed at page 302-314 of paper book VI. The third comparable The Pavilions Interiors I Pvt Ltd is a Pvt. Ltd. company engaged in business of designing, constructing and decorating pavilions in exhibitions and trade fairs. It takes the job on a turnkey basis for its clients i.e. designing, developing, and constructing the pavilions and interior designing. Copy of the Balance Sheet enclosed at page 269-283 of paper book VI. Thus, it is apparent form the above that the above companies are engaged in similar kind of business as that of appellant. Hence, the functions, Assets and Risk of those comparable are comparable with the FAR analysis of the assessee. Hence, the information available in the TP documentation cannot be said to be unjustified and unverified. Further, the Ld. TPO had not provided any reason to hold that the information in the documents was not verifiable. This shows that the Ld. TPO had no basis to reject the documents. 67. With respect to multiple year data used by the assessee initially, assessee submitted the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny particular or specific document was required by the Ld. TPO then, he should have asked the appellant to submit the same. However, no such specific efforts were made. Apart from the above, appellant submitted the TP documents on 20.01.2014 in response to the show cause notice. The Ld. TPO passed the order u/s 92C on 28.01.2014. It is claimed by AR and not controverted by ld DR That No further notice was issued to the appellant between the periods of 20.01.2014 to 28.01.2014. The Ld. Ld DR did not show that ld asked any other information from appellant. Thus, the ld TPO neither asked the appellant to further explain any queries nor called for any further documents in support of TNMM. Further, the Ld. TPO also did not provide any reason or justification in his order in relation to the above allegation. In view of the above, the reason of rejecting the study is without any basis. 70. As mentioned above the TPO after summarily rejecting the TP study wherein TNMM was used to determine the arm‟s length price of the international transaction, he applied CUP method. Under CUP, method the TPO simply stated that since the assessee was engaged in obtaining bogus bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly, for availing services of the AEs‟ manpower, the manpower hired from the associated enterprises were highly trained and experienced in constructing and organizing activities, which were not comparable with that manpower locally available in India. The high quality equipments imported from associated enterprise could not have been managed by the local staff available in India due to lack of knowledge about fixing such equipments. Therefore, when such equipments are imported, it is apparent that the knowledgeable persons having complete idea about those equipments, managing, and fixing them will be required. No direct comparables for applying CUP method was thus available for such payments also. Further, contract was awarded to the appellant only based on the experience of the associated enterprise. The associated enterprises assisted the appellant in the elaboration of its commercial policy, its communication policy, its strategy, its purchases, its management, and its organization. The major eligibility criteria mentioned in Expression of Interest of CWG, 2010 was that ... have experience of providing overlays for at least one major multi s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AE is acting only as an intermediary in the provision of services and incur costs on behalf of the assessee, which the assessee would have incurred directly, it may well be appropriate for the AE to pass on these costs without a mark-up. It is not in dispute that the costs were actually incurred by the AE under instructions from the assessee and it is also not in dispute that the assessee has reimbursed these costs, without any mark up, to the AE. It is not even the case of the TPO that this reimbursement was reimbursement of normal business expenditure of the AE, and, therefore, it cannot amount to any advantage to the AE that these expenses are reimbursed by the assessee. As long as expenses are incurred under instructions from, and on behalf of, the assessee, as is the uncontroverted position before us, the arm's length price of the same cannot be taken at zero. Whether the assessee was under an obligation to make this reimbursement or not could be relevant only when the expenses were normal business expenses of the AE and yet the assessee decides to bear the same. There is nothing to indicate that the reimbursement is for expenses already incurred by the AE in its normal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted. The learned dispute resolution panel has also upheld the above ALP of transaction only on the protective basis without giving any reason that why they are agreeing with the finding of the learned transfer-pricing officer to apply the cup method. Even during proceedings before them, no enquiries were made with respect to the arm‟s-length price of these international transactions when complete details are available before them. No reasons are shown before us by the learned CIT DR that comparable selected by the assessee does not have the similar FAR analysis. He further also could not show us that taking the current year data of the above comparable; the margin of the assessee is not quite high then those comparables. In view of this, we do not find any reason to uphold the adjustment proposed by the learned transfer-pricing officer to the arm‟s-length price of the international transactions of the assessee. Accordingly, ground number 3 of the appeal of the assessee is allowed. 78. Ground number 4 of the appeal of the assessee is against the disallowance of differential amount of bill seized of ₹ 112232956/ . The brief fact shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be received therefore the addition made by the learned AO is devoid of any merit. He further referred to the comment of the statutory auditor on the audit of the company. He further referred that the contract awarded to the appellant was 42 different clusters, which are at different sites. He further stated that Commonwealth games 2010 were completed on 14/10/2010 and the search in the appellant premises was conducted on 19/10/2010. Thus he submitted that the contention of the assessee that some of the invoices were lying at the site should not have been rejected. He further submitted that the real worth ₹ 112232956/ was not seized during the search the details of all the parties along with their address and permanent account number were available in the bills. The payments in relation to those bills were made by the account payee cheques and were already on record at the time of search as well as before the learned assessing officer. He further stated that the bank statement in the date and original copies of the bills were also furnished before the learned assessing officer and therefore the assessee has shown that these bills do exist and have been discharged through ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what documents must be seized by the search party and what documents must be left out. In view of this, the above addition cannot be sustained. Thus, ground number 4 of the appeal of the assessee is allowed. 82. Ground number 5 of the appeal is with respect to the disallowance of part-time expenses of ₹ 21459000/ . Facts shows that during the course of search, the Income Tax Authorities seized the ledger of per diem expenses which reveals the daily cash allowances paid to several foreign expatriates, totaling to ₹ 2,14,59,000/-. In this regards the Ld. AO during the course of assessment issued notice dated 24.09.2014 to the appellant to show cause why the said expenses in excess of ₹ 20,000/- should not be disallowed u/s 40A(3) of the Act. In response the above, the appellant submitted the reply dated 02.01.2013 wherein the Extract of Section 40A(3) and Extract of Rule 6DD was furnished along with the daily allowance details. Assessee submitted that the expatriates being specialists in their areas visited India at site located in Delhi. They visited India on a temporary visa and return on completion of work and accordingly did not maintain bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83. The learned authorised representative referred to the agreement by which the various expatriates came to India for the performance of the contract. He further referred that in terms of the agreement of technical assistant the assessee was to reimburse various expenditure of those expatriates employees. And therefore it was the responsibility of the appellant to pay Delhi allowances to the foreign expatriates coming to India from abroad for construction in setting up of those activities he also referred to the list of 4 annexure expatriates who came to India along with the resignation and passport number. He further submitted that assessee has paid 26286000/ 02/01/1998 foreign expatriates for 180 days and thus for each day the expenditure of such elements as INR 7 38 per day per foreigner. He therefore stated that the above part-time allowances are only and exclusively incurred by the assessee for the purposes of its business. With respect to the comparison of the same with the other contract, he submitted that the learned assessing officer did not found that identical technical agreement was there and the foreign expatriates came to perform such activities. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e telegram, cable and other communication provided the same are approved by the Client d) Travel and Hotel Expenses in case where the technical personnel makes a business trip on request of the Client. e) Other Cost and expenses necessary for the conduct of activities, only after due approval by the Client. 86. From the above Para of the agreement, it is clear that it was the responsibility of the appellant to pay daily allowances to the foreign expatriates coming to India from Abroad for construction and setting up activities. Further, the list of foreign expatriates who came to India along with their designation and passport number was submitted before ld AO and enclosed at page 47-50 of paper book VII. Further copies of bills in relation to the travel and copies of passports were also submitted. Thus, it clearly shows that foreign expatriates were hired by the appellant. The list includes the name of 198 foreign expatriates along with their designation and passports number. Further contract very clearly specifies that the period of stay for those expatriates should not exceed 180 days. Hence, keeping in view of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has not been incurred by such consortium. The Ld. AO has compared the appellant with M/s Pico Deepali Overlays Consortium without providing the relevant details of this party to the appellant. Admittedly, no opportunity was given to the appellant to examine/ cross-examine the relevant officials of M/s M/ Pico Deepali Overlays Consortium to challenge the comparison drawn with M/s Pico Deepali Overlays Consortium. Ld AO should have at least compared the requirement of Foreign Technical experts of that company with the appellant. It is also a cardinal principle that any material used against the assessee, should be confronted to the assessee with reasonable opportunity of explaining it. This has not been done. Therefore, in view of overwhelming evidences produced by the assessee of presence of foreign expatriates, with their passport detail and expenses details coupled with the liability of assessee to bear it, it cannot be said that these expenses were not incurred wholly and exclusively for the purposes of the business of the assessee. In view of this, we direct the learned assessing officer to delete the disallowance of ₹ 21459000/ made because of partdiem payment made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant in its written submission dated January 11, 2013 had submitted that there is no material on record of GLLE to enable it to comment on these documents. On the face of it, they appear to be invoices addressed on GLLE. They have not been received at GLLE‟s office and neither entered in GLLE‟s books of account. Accordingly, GLLE is not in a position to comment on the same. However, the Ld. AO passed draft assessment order by making addition of ₹ 79,93,917/- on account of bills issued by Nitin Enterprise and ₹ 5,87,058/- on account of bills issued by Garg Road Lines. The appellant raised an objection before the DRP against the DRAFT ASSESSMENT ORDER and furnished the submission in relation to Nitin Enterprise and Garg Road Lines respectively. In the submissions, the appellant submitted that the AO did not provide any incriminating material found during the search. The AO also did not provide the copies of statement of third party recorded by him and also did not provide an opportunity to cross-examine the third party. The appellant placed reliance on several case laws to justify the same. The appellant also submitted the copies of ledger account, copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the coordinate bench wherein the issue related to the bogus billing of the same party was considered. He therefore submitted that the issue squarely covered in favour of the assessee. 90. The learned departmental representative vehemently supported the order of the learned assessing officer and the learned dispute resolution panel and submitted that when the survey was conducted both the parties have denied the existence of those bills and therefore the it is the onus of the assessee to prove that the purchases were genuine. Therefore, it stated that the learned assessing officer and the learned dispute resolution panel have correctly upheld the disallowance. 91. We have carefully considered the rival contention and perused the orders of the lower authorities. The fact shows that in case of these two parties the learned assessing officer has made the addition because of bogus purchases. 92. The fact shows that in case of Nitin Enterprises , In spite of request by the appellant to supply the statement of Mr. Nitin Bansal, partner in M/s Nitin Enterprises, recorded by the Income Tax Authorities and allow the opportunity to cross e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses before the hon'ble Delhi High Court; (iii) copy of statement of account and reconciliation filed by M/s. Nitin Enterprises during the suit for recovery before the hon'ble High Court confirming the transaction of purchase and balance amount recoverable from the assessee; (iv) copy of ledger account and reconciliation of balance in the books of account of both the parties; and (v) settlement deed between the assessee and M/s. Nitin Enterprises whereby parties have settled the dues which got ratified by the settlement order of the hon'ble Delhi High Court. All these evidences have neither been rebutted nor has any adverse view been given by the Assessing Officer. Apart from that, there is a categorical finding that the statement of Shri Nitin Bansal recorded by the survey parties was behind the back of the assessee and the copy of the statement was neither provided nor was any opportunity given for cross examination. The assessee has made the payment to the party through banking channels and simply relying upon the statement of one of the partner that cash has been returned in lieu of cheque cannot be accepted without such a person being subjected to cross-examination. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by Sh. Praveen Garg, partner in the firm during the course of survey u/s 133A of the Act, in the case of Garg Road Lines. The Ld. AO stated that- Sh. Praveen Garg stated that they have not supplied any diesel to the assessee. The manager in the firm stated that he has never heard the name of appellant. No invoices corresponding to any transaction with the appellant were recovered during the course of survey and no corresponding entries were found in the books of a/c of Garg Roadlines.. 95. On this account, the purchases made from Garg Road Lines were treated as bogus. The appellant on the above issue raised an objection before the DRP, however the same was rejected by the DRP. The Ld. AO did not considered the submission of the appellant and made addition of ₹ 5,87,058/- In regards to the above, it is submitted that during the course of survey u/s 133A in the case of Garg Road Lines, it was not found that the firm is involved in issuing bogus bills. The addition was made based on statement of partner/manager of the concern that he never heard the name of appellant, no entry found in the books of Garg Road Lines and diesels we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO conducted survey only based on material seized from assessee . He did not verify out whether the Garg Road Lines have shown the effect of the credit entries in its bank account, which related to the amount received from appellant. However, we are not concerned about the books of accounts and its veracity of Garg Roadlines. Further, it is also settled law that the initial onus is of the appellant to prove the transaction as genuine, which was duly discharged, by the appellant by producing the original bills and copy of ledger account and bank statement before the Ld. AO. After the appellant duly discharged its onus to prove the transaction as genuine, the onus shifts to the Ld. AO to disprove the appellant with due evidence and reasons. However, in the instant case the Ld. AO did not provide any reason or any evidences and on complete surmise held that the bills produced by the appellant are bogus. Further, the learned assessing officer has not commented anything on the amount of purchases made by the assessee from the party existing at the same address with the Garg Road lines. The learned assessing officer also did not grant any opportunity of cross-examination of the partner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned assessing officer has not given any reason but has merely disallowed the above sum on the conjectures and surmises surmise. He submitted that assessee has produced the original bills before the learned assessing officer, which contained the complete details of such expenditure. Even otherwise, he submitted that the disallowance of the professional fees paid to the various parties cannot be disallowed stating that company was involved in the practice of receiving bogus bills without verification of those bills and without pointing out any defect in those bills. He submitted that assessee has received the services from those professionals, which are not in dispute, and has not been challenged by the learned assessing officer. He further submitted that in the draft assessment order the learned assessing officer has disallowed the above sum holding that that the appellant must have necessary inhouse expertise to executive projects of such nature and magnitude and the external legal and professional services shall be only for limited and highly specialized services on a very small scale. He submitted that the reasons for disallowance in the draft assessment order and the reasons fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sum of ₹ 1,03,15,369/- on account of bogus billing. The same was disallowed while disallowing whole of the expense and hence this has led to double disallowance. Further the professional fees of ₹ 28,52,376/- was allowed by the Ld. AO in draft assessment order holding that the same has been paid to the auditors and authorised representatives of the appellant before various Govt. agencies. The said expense has already been dealt by the Ld. AO separately in para 16 of Draft order. The Ld. AO while disallowing the entire expenses in para 24 of the draft order ignored these expenses allowed by him on account of professional fees and disallowed the same while disallowing entire expenses on surmise and conjecture. This very clearly shows that the Ld. AO made assessment wholly based on surmise and suspicion. He did not consider while disallowing the entire expenses that the expense amounting to ₹ 28,52,376/- in relation to professional fees was already allowed by him and should be reduced from the amount of entire expenses. The balance of the Professional Fees of ₹ 1,27,40,869/- (i.e. after reducing the amount of ₹ 459,96,007/- plus 28,52,376/- plus 16,93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year had legal advice in relation to the customs demand and sales tax demand raised by the department, which was also an evidence for those bills raised in these respects. Further, during the period, the search was conducted in the office of the appellant and therefore the appellant had taken legal advice from the professionals in relation to income tax matter held after the search proceedings and the bills are in relation to these matters. Hence, the professional expenses claimed by the appellant were supported with all the evidences and were before the Ld. AO. In the invoices and copy of Ledger account of Professional fees is enclosed at page 110-119 of the paper book VII wherein the purposes for which the professional services were received had been specified in the narration. From the above facts and submissions, which are not contradicted, appellant had duly discharged its onus to prove the genuineness of the transaction. All the details and documents in order to justify the said transaction were submitted before the Ld. AO. However, the Ld. AO ignoring all the details and documents on record and without providing any reason held that the bills are bogus as the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s PDOC of ₹ 32,62,098/- was allowed and the balance of ₹ 6,61,067,087/- was disallowed by the Ld. AO. Thereafter, the appellant raised an objection before the Ld. AO against the draft assessment order . The DRP considered the submission of the appellant and directed the Ld. AO to conduct verification and grant consequential relief to the appellant, if any. The appellant also produced original bills before the Ld. AO. However the Ld. AO did not rely upon the bills alleging that the appellant was involved in practice of receiving bogus bills and made addition of ₹ 5,39,23,603/- u/s 37 of the Act after reducing the amount related to transfer pricing. 102. Learned authorised representative referred to the nature of expenditure incurred such as conveyance, accommodation in hotels, flights, and travels. He further referred to the nature of each of the expenditure and stated that this expenditure has been incurred by the assessee for the purposes of the business. He submitted that the complete details of such expenses including the supporting vouchers et cetera were produced before the learned assessing officer. However, the learned assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnical workers, specialist, and coordinators for the site construction of Common Wealth Programme 2010. Since, large numbers of high quality equipments were hired from abroad, foreign experts having knowledge to organize and operate those equipments would also be required, and therefore the appellant hired the foreigners for the constriction activities at CWG, 2010. Assessee submitted, list of foreign expatriates along with their designation and passports number. These foreign expert staffs were engaged in construction and other activities of Common Wealth Programmes. Since, they were hired by the appellant, all the expense in relation to flight, hotel accommodation and tours and travels of the foreign staffs were incurred by the appellant. Agreement also provides that these expenditures be required to be incurred by the appellant. All these expense are said to be incurred for business purpose. Looking at the nature of various expenses, Conveyance expenses are nominal and the same are being incurred for the business purpose. These are the expenses incurred by the employees working in the appellant company and are reimbursed by the appellant company to the employees and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount of ₹ 97,40,350/- but the addition was made for ₹ 5,39,23,603/- which is again in violation of principle of natural justice. All the expenditure incurred by the appellant was duly supported with the agreements, list of foreigners along with the copies of passports and passports no., original bills, payment details and the copies of ledgers along with the narrations. This shows that the appellant had maintained proper documentation and record of all the transaction and produced before the A.O. to prove the genuineness of the transaction. The Ld. AO did not find any reason to reject the claim of the appellant and therefore without applying his mind disallowed the said expenses simply alleging that the appellant is engaged in receiving the bogus bills. The action of the Ld. AO was purely on surmises and conjectures. Even otherwise expenditure incurred by M/s Pico Deepali Overlays Consortium is less than the appellant still such alleged factum cannot form the basis for disallowing expenditure incurred by the appellant under Section 37 of the Act. No adverse inference can be drawn simply because some other party has allegedly incurred expenditure less than the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding. The Ld. DRP declined to interfere with the finding of the Ld. AO. Thereafter, the appellant produced original bills before the Ld. AO. However, the Ld. AO did not rely on the bills and held that the appellant was involved in practice of receiving bogus bills. He, therefore, made addition of ₹ 4,90,08,835/- on account for bogus related party transaction u/s 40(2)(b)/37 of the Act. 107. The learned authorised representative referred to the various expenditure incurred by the assessee and payment made to the related parties. He submitted that 1 of the party was assessed by the same was assessing officer is that of the appellant and such income was already offered by that party in its return of income and has paid tax due thereon. According to him the recipient of the income has duly suffered tax in the hands of the recipient at the same rate and therefore disallowance under section 40A (2) cannot be made. He further stated that no comparable cases is brought on record by the learned assessing officer and therefore the disallowance cannot be made he referred to the several judicial precedent on the issue. He further stated that there is no evasion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned sum paid to Meroform India Private Limited was offered as Income during the year of receipt and paid taxes accordingly. Copy of the order passed by Delhi Tribunal in the case of Meroform India Pvt Ltd is also submitted. Thus The said sum under section 40A(2)(b) has duly suffered tax in the hand of recipient at the same rate of taxes . To disallow a sum, which has been paid to a sister concern for the goods services procured and reimbursement of expenses without proving that the expenses incurred are, excessive is incorrect. Admittedly, the AO has not doubted the genuineness of the payments involved. He has invoked the provisions of section 40A(2) holding that the bill produced cannot be relied upon as the assessee company was involved in the practice of receiving bogus bills. The AO has however, not brought on record any basis or comparable cases to prove that the payments made by appellant company to its sister concern is in excess of the fair market value of the services rendered but has proceeded purely on assumptions. Such an action on the part of the AO is unsustainable in the eyes of law. Honourable Delhi High court in CIT Vs. Modi Revlon (Pvt.) Ltd. (2012) 78 DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner Of Income Tax vs Indo Saudi Services (Travel) P. Ltd. as reported as (2009) 310 ITR 306 (Bom). 15. It is pertinent to note that so far as the Circular dated 6.7.1968 is concerned, it makes clear that the provisions under Section 40A (2) and particularly with regard to the transaction between the relatives and associates is concerned, the same shall be treated as bona fide case unless the officer finds it that one of them is trying to evade payment of tax. Considering the overall facts of the case and the ratio laid down by the Hon‟ble Apex Court, we are of the opinion that the appeals are meritless and the same deserve to be dismissed and accordingly dismissed 112. In the present case the ld AO has failed to bring on record any evidence or cite any comparable cases to prove that the payment made by the appellant company to its sister concerns for the aforesaid services was excessive or not at arm‟s length. The AO has merely resorted to and suspicions in making the impugned disallowance u/s 40A(2). All the original bills, ledger accounts, and bank statement were already on record before the A.O. The tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,57,987/- alleging that bills could not be relied upon as the appellant was engaged in the practice of receiving bogus bills. In regards to above, he reason provided by the Ld. AO is not acceptable for making addition u/s 40A(2)(b). The Ld. AO is required to provide the comparable cases that the same is not at arm‟s length or in excess of the fair market value of such services, which was not done. Further, the addition made by the Ld. AO of ₹ 15,57,987/- against the bill seized instead of paid amount of ₹ 26,55,954/- shows the non-application of mind by the AO. The Ld. AO did not verify the amount of actual payment of ₹ 26,55,954/-, the details of which were already on record before the Ld. AO. He was only concerned with the bill seized value of ₹ 15,57,987/-. This very clearly shows that the A.O. did not proceed in accordance with law. Accordingly, for the reasons provided in deleting the disallowance in case of Meroform P Ltd, we also direct the ld AO to delete the above disallowance. Accordingly ground no 9 of the appeal is allowed. 114. Ground no 10 of appeal is against the addition of ₹ 1,22,696/- . During the search u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by making addition of ₹ 1,22,696/- to the total income of the appellant company alleging as unexplained expenditure u/s 69C of the Act. 117. Ld AR submitted that the appellant duly provided the reason for the cash balance being negative on the date mentioned above and produced the final cashbook which was a part of audited books of accounts. Further the error in the cash book seized is duly explained as under: a) 9th April 2010 : ₹ 15,000/- The error was that the actual date of transaction was 10th April 2010 but it was wrongly recorded in books as 9th April 2010. The company had no cash in hand at the beginning of the year. The amount of ₹ 50,000/- was withdrawn on 10th April 2010 out of which the sum of ₹ 15,000/- was paid. However, it was only due to the wrong entry of date that the cash balance became negative. b) 18th May 2010: ₹ 2,767/- Some of the entries in the cashbook were recorded by the accountant which were not known to him. The same was identified while finalising the books and found that such entries had no relation with the appellant company. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the addition made by the Ld. AO on these grounds could not be accepted as appellant company had duly corrected all the clerical errors as per the identification and instruction by the auditors during the course of audit. Therefore, it is humbly prayed before your honours to delete the addition of ₹ 1,22,696/- on account of negative cash balance made u/s 69C of the Act. 118. Learned departmental representative vehemently supported the order of the lower authorities. 119. We have carefully considered the rival contentions and perused the orders of the lower authorities. On careful reading of these orders of the lower authorities we found that the cashbook of the assessee showed negative balance on certain days and therefore the addition is made of such negative balance as expenditure have been incurred by the assessee without having known source of such income. We have also considered the explanation given by the assessee but we are not convinced. Accordingly, we confirm the order of the learned assessing officer on this issue. Ground number 10 of the appeal of the assessee is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,80,445/- 10 SAB Computech Computers 1,96,875/- 11 Kamal Construction Mobile Phones 1,42,450/- 12 Speed 4 Prefab Chemical Blocks Toilet 71,45,415/- 121 . During assessment proceedings assessee submitted the explanation of these expenditure as under :- Sl Party Items of Purchase Amount (Rs.) Treatment in books of Accounts 1. Daksh Automation Fire Detection Alarms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have a very low resale value. Therefore as per the method of accounting followed by the Company, the purchase cost was claimed as expenditure and scrap value was reduced from the amount of expenditure. 7. Nizammudin Furnitures Furniture 3,90,094/- Revenue expense under the head operating expense. These cones are generally no re-usable and have a very low resale value. Therefore as per the method of accounting followed by the Company, the purchase cost was claimed as expenditure and scrap value was reduced from the amount of expenditure. 8. Associated Business Computers Printers 3,32,325/- Capitalized and shown under the head fixed assets 9. Gemini Hydraulics Dynamomet er 2,80,445/- Revenue expense under the head operating expense. These cones are generall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts damages and becomes scrap while dismantling. These equipments become totally scrap for those event management companies and cannot be reused. Therefore, these type of expenses forms part of direct expenses. He stated that the appellant being event management company had acquired furniture fixtures like sofa sets, chairs and table frames in large numbers. Many of these furniture and fixtures were damaged during the period of games. Further the appellant also did not have any godown or place to store all these furniture and fixture. This furniture and fixtures were only acquired for the purpose of CWG. After the end of CWG, there was no use of such large no of furniture to the appellant. Therefore, the appellant sold these items of purchase as lump sum scrap. He further stated that Since, it was not possible for the appellant to divide the scrap sale value into the furniture fixtures, electrical equipments and other scrap items, the appellant treated all this items as part of consumable claimed as direct expenses. He stated that in the event not management companies, all the items, and equipments purchased for use in the event can form part of fixed assets. For example, if 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes were over. Had it been taken as the assets then also the impact on the net profit would be same. Ultimately, the appellant company had no vehicles at the end of the year. He also gave explanation to those items S. No. Party Items of Purchase Amount (Rs.) Treatment in Books of Accounts 1 Daksh Automation Fire Detection Alarms 57,25,400/- This expense are related to fire alarms, heat detector, hooter, smoke detector etc. These devices were deployed at various project sites of CWG. These types of devices are not re-usable. After dismantling the site of CWG, these devices were only scrap to the company which had no resale value and are not reusable. The appellant sold this as a part of scrap. Therefore, these are recorded as capital expenditure. 2 DD Motor Gypsy Purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the aforesaid items were of no use after dismantling. Hence, the appellant contention to record the aforesaid items as consumables was found genuine and therefore the disallowance on this ground is not justified. Therefore, he submitted to delete the disallowance of ₹ 1,18,24,175/-. 125. The learned departmental representative vehemently supported the order of the lower authorities and stated that these are the capital expenditure, which cannot be allowed as revenue expenditure. He further stated that assessee has purchased the motor car which cannot be held to be the item of revenue expenditure. 126. We have carefully considered the rival contention and perused the orders of the lower authorities. As already stated that assessee is engaged in the business of the event organization and has been part of the Organization, which conducted the Commonwealth games 2010. Looking at the nature of the business of the assessee the Fire detection alarm of INR 5 725400 which has been fitted at the various places cannot be held to be the item of the capital expenditure as it related to fire alarms, heat detector, smoke detector et cetera which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment was made to the said party for the security guard service provided by the said party and not the security deposit. However, the Ld. AO did not consider the reply of the assessee and repeatedly held that the payment was in the nature of security deposit and was refundable and therefore the same cannot be in the nature of revenue expenditure. Therefore the Ld. AO made addition of ₹ 1,22,626/- to the total income of the appellant u/s 37 of the Act. On objection , The DRP directed the Ld. AO to verify the genuineness of the aforesaid expenditure and allow the relief to the appellant. However, the ignoring the direction of the DRP, the Ld. AO disallowed the expenditure of ₹ 1,22,626/- considering it as security deposit in the assessment order. 129. The learned authorised representative reiterated the submission made before the learned assessing officer and stated that when the security service charges paid by the assessee to various security guards have been added by the learned assessing officer holding that this is a security deposit which is totally incorrect. 130. The learned departmental representative vehemently supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Therefore, the Ld. AO added the closing stock of ₹ 15,47,141/- to the total income of the appellant. On objection before the DRP and furnished submission in the Ld. AO was directed to verify the said transaction. Subsequently, the Ld. AO passed assessment order, held that the submission of the appellant was not sufficient to establish the genuineness of the closing stock, and therefore disallowed ₹ 15, 47, 141/- u/s 68 of the Act. 133. The ld AR submitted that closing stock is not an item for consideration u/s 68 of the Act. He further submitted that in the case of appellant, closing stock relates to those purchases of material lying in stock of the company for which the payment is made or to be made. Hence, the Ld. AO has erred in invoking the provision of section 68 of the Act on account of closing stock of ₹ 15,47,141/-. He submitted that the appellant during the year had closing stock of ₹ 15,47,141/- details of which is enclosed at page 480 of the P/b VII. The appellant has shown the closing stock as an item of Balance Sheet as well as P/L Account. It is evident from the profit and loss statement of the appellant enclosed at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant to furnish the supporting evidence in relation to the current assets and loans and advances of INR 1044924844/ outstanding in the books of accounts. The assessee submitted the complete details of the all the current assets and loans and advances along with the copies of the Ledger in the books of accounts of the assessee. However the learned assessing officer made the addition is appellant could not produce the original invoices and confirmation and could not establish the genuineness of the transaction and authenticity in relation of such expenses therein with the business of the assessee and therefore he made an addition of INR 1 049224844/-. Assessee raised objection before the learned dispute resolution panel wherein the AO was directed to verify the said transaction and grant relief to the appellant in accordance with the genuineness of the transaction. Consequent to that the learned assessing officer made an addition of ₹ 115875146 with relation to duties and taxes paid to the government. 137. The learned authorised representative submitted a complete chart of the item of dispute, which is custom duty recoverable, assignment credit of service tax, commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance sheet. In response to that the appellant submitted the complete details of the sundry creditors and other liabilities along with the name and address of the person/vendor and amount. The learned assessing officer rejected the contention of the assessee and stated that appellant could not produce the original invoices and confirmation and could not establish the genuineness of the transaction and authenticity in relation of such expenses and liabilities wherein the business of the assessee, he made the addition of INR 898684373/ to the total income of the appellant. Subsequently the objections were filed before the learned dispute resolution panel and DRP directed the learned assessing officer to verify the said transaction and grant relief to the appellant if required. The learned DRP also directed the AO to reduce the amount of creditors by the amount covered in transfer pricing addition made by the learned transfer pricing officer. Subsequent to that the learned assessing officer again made the addition stating that the assessee has failed to provide any confirmation in relation to the liabilities and rejected the contention of the appellant and made the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived, TDS deducted and amount outstanding as on 31.03.2011. The copies of the ledger accounts and the original bills already furnished before the Ld. AO. Hence, this clearly shows that the said creditors are genuine. Further, when all the expenses are already disallowed by the Ld. AO in para 28 of the assessment order then the question of disallowing the sundry creditors does not arise. Therefore, the addition made because of sundry creditors has lead to disallowance of expenses twice i.e. one by way of disallowing expenses and second by adding sundry creditors. This clearly shows that the addition was made by the Ld. AO on surmises and conjectures. In light of the aforesaid submission, it is humbly prayed before your good self to delete the addition made on account of Sundry Creditors of ₹ 4,65,78,484/-. ii. Other Expense Liabilities: ₹ 6,98,13,499/- i. Other Expense Liabilities Comprises of the following: Conveyance Payable: ₹ 1,625/- Salary Payable: ₹ 2,48,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of custom documents has been enclosed at page 261-267 of the P/b VI which proves the genuineness of the import and export of the equipments. Therefore the expenses in relation to Customs and Freight payable are genuine and duly supported with proper bills and supporting details, which were duly furnished before the Ld. AO. vii. Further, the original bills in relation to the previously mentioned liabilities and copies of the ledger account were already furnished before the Ld. AO, which ascertains the genuineness of the transaction. Hence, the onus to prove the expense liability as genuine was duly discharged by the appellant. In addition, thereafter, as per law the onus was on the Ld. AO to disprove the claim of appellant. However, the Ld. AO instead of providing the valid reason for rejection of appellant claim only held that the confirmation was not submitted by the appellant and therefore the claim could not be accepted. This clearly shows that the Ld. AO had no valid reasons to reject the claim of the appellant. viii. The original bills produced before the Ld. AO and the ledger account and the bank statement were sufficient to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import and export of the above equipments. The learned assessing officer has disallowed/added the above sum without making any enquiry to substantiate his belief that these are non-genuine liabilities. As the assessee has produced all relevant details available with respect to the above sundry creditors and other expenses outstanding and the learned assessing officer has not made any enquiry to prove that these are non- genuine liabilities, the addition in the hands of the assessee cannot be sustained. Accordingly, we direct the learned AO to delete the disallowance of INR 46578484/ with respect to sundry creditors and INR 69813499/ towards the other expenses outstanding as liabilities. Accordingly ground number 15 of the appeal of the assessee is allowed 144. Ground number 16 relates to the disallowance of statutory liabilities of INR 155310286/ . During the course of assessment proceedings the learned assessing officer asked the assessee to provide the details of the all the current liabilities and provisions along with supporting evidences. In response to this, the appellant submitted the details of sundry creditors and other liabilities along with the name a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted by the assessee on various payments of the salaries, interest, payment to contractors and rent to various service providers. This amount has not been claimed by the assessee as deduction from the total income. Therefore the learned assessing officer is directed to delete the disallowance of INR 5 5889554/ to the total income of the assessee. 148. With respect to the service tax payable of INR 97626284/ and VAT and CST payable of INR 1794448/ , the learned assessing officer has incorrectly made the above addition under section 37/69C of the income tax act. These are the statutory liabilities covered under section 43B of the income tax act. The above provisions of section 43B of the income tax act apply to every assessee irrespective of the method of accounting employed by them. If those sums have been paid by the assessee before the due date of the filing of the return of income for the impugned assessment year, both these sums are required to be granted as deduction to the assessee. Even otherwise, the above addition cannot be sustained u/s 37/69C of the income tax act. Therefore, the above ground of appeal is sent back to the file of the learned assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax act all of them confirmed the above loan transactions. Thus, he submitted that assessee has discharged initial onus cast upon him as per provisions of section 68 of the income tax act. He submitted that assessee could not have produced more details than this. He therefore submitted that addition u/s 68 of the income tax act made by the learned assessing officer deserves to be deleted. 151. Learned departmental representative supported the order of the learned AO and dispute resolution panel. 152. We have carefully considered the rival contentions and perused the orders of the lower authorities. The appellant company had no outstanding unsecured loans in the books of accounts during the year. The loan was taken from the following parties which were duly repaid during the year: Binu Nanu (Director) : (Assessed by same AO) ₹ 27,00,000/- Cash Loan from directors : (Assessed by same AO) ₹ 10,000/- Merofrom India Pvt Ltd : (Assessed by same AO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing: I gave an interest free short term loan of INR 7,00,000/- on May 25,2010 vide cheque No.107440 drawn on HSBC Bank to M/s G L Litmus Events Private Limited. The said loan was duly repaid by M/s G L Litmus events Private Limited to me on May 25, 2010 vide Cheque No.657687 drawn on HSBC Bank . The above statement u/s 131(1) is a confirmation of loan only. Repayment of the same was the confirmation letter as required by the Ld. AO . iii. In the case of Meroform India Pvt Ltd, appellant submitted the copy of Ledger Account of G L Litmus Events Pvt Ltd in the books of Meroform India Pvt Ltd. The Ledger account of Meroform India Pvt Ltd in the books of appellant was also submitted. This very clearly shows that the loan of ₹ 71,00,000/- was taken from Meroform India Pvt Ltd. These duly act as confirmation of the Loan. Further, copy of ITR Acknowledgement , PAN card and bank statement of Meroform India Pvt Ltd was submitted. 154. In light of the aforesaid submission, it is clear that all the material including the party confirmation on record, the Ld. AO had made addition of ₹ 1,05,10,000/- which clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wall Clock Delhi Watch Marketing Pvt. Ltd. 3. Traffic Cones AJS International 4. Table Patio Sabharwal International 5. Door Mats Gee Bee Distributors 6. Rubbish Bins Peakshow 7. Folding Beds Madan Cotton Stores 8. Fans Delhi watch marketing Pvt. Ltd. 156. The ld. A.O. then adopting the alleged cost rates and the selling rates as appearing in the seized material and applying the same to BOQ as recorded in the books of the Appellant determined the margin of ₹ 30,32,55,951 (At G.P.of 68%) and added u/s 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we hereby direct the AO to carry out the verification work for ascertaining the true facts. However, the above additions have to be made on protective basis also. In case, the assessee‟s income on the basis of outgoings / expenditure / investments is more than that on accrual basis by applying the profit margin appearing in the above mentioned seized documents; is found more, then the assessment has to be completed on the basis of outgoings / expenditure / investments on accrual basis. It is hereby clarified that the set off of outgoings / expenditure / investments has to be subsequent to the receipt of income as it cannot precedes to that. Accordingly, grounds of objection A-5 and A-6 are disposed of. 158. From the above it is thus seen that the DRP has held the G.P. rate to be at 68% which should be applied to the entire contract. SO this addition was made by the ld AO. Hence, assessee has challenged the same before us. 159. Ld AR submitted that that assessee is engaged in the business of providing services. In provision of the services of the assessee has procured that the material and given the product, infrastru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and its nature it is unfair to compare the prices of the individual items and then to make an addition in the hands of the assessee. He further referred to the schedule of other operating expenditure which is of INR 1 416922016/ , he therefore stated that the above cost is required to be added to the material price shown on those when the prices which has been ignored by the learned assessing officer. He therefore submitted that the above addition is not sustainable on the facts and circumstances of the case. 160. The learned departmental representative vehemently supported the order of the learned assessing officer and the learned dispute resolution panel and submitted that there is a huge margin between the prices quoted by the vendor and the prices at which the material has been supplied by the assessee to the organizing committee and therefore the learned assessing officer has made the addition u/s 69A of the income tax act. 161. We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently, in this case certain documents were seized during the course of search, which shows that the price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... producing the cogent reasons and evidences, the above analysis made by the learned assessing officer is fruitless.. We are not here to decide the assessee has cheated the organizing committee or not, we are here to decide that assessee has maintained the books of accounts, which are duly supported with the relevant evidences and the profit disclosed by the assessee after investigation by the learned assessing officer can be disturbed or not. In the whole assessment order, the learned assessing officer has not carried out any investigation to show that the expenditure booked by the assessee is bogus and therefore the assessee has earned higher profit but it has disclosed lesser profit. Such suppression of profit should have been investigated by the learned assessing officer instead of that he merely relied upon the report of other committees, and other organizations are investigative agencies et cetera. Merely on these bases, such addition cannot be made. Even otherwise, the learned assessing officer did not even care to look at the number of items that has been used by the assessee for the purpose of performance of the contract, which is stated to be more than 1000. Out of this, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a comparison has been drawn of the process at which various items were procured from vendors for the purpose of overlays contracts, and the prices at which they have been supplied to the OC, CWG is totally incorrect. 162. Thus it is not the case of the revenue that there are no such instances at which the rates quoted by the vendor are higher than the rates at which the material supplied by the assessee to the organizing committee. Further it is apparent that assessee has the contract in the form of turnkey agreement to executive and complete the work of these clusters from 15/10/2010 and remove it by 30/11/2010. The terms and conditions of the contract were not for supply of any material but design services. The contract also included all the cost on the account of the assessee.. Such cost include all labour, material, plant and equipment necessary to carry out the above and any other work that may be required to ensure successful functioning of the entire overlays contract. Thus the nature of contract was a turnkey basis contract the rates given in the schedule of rates shall include all cost expenses charges and inputs. Therefore making the addition merely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer referred to the findings of Shunglu committee regarding the fact that the organizing committee had paid differential rates to different contractors for the same items and the allegation that the paying of the higher rates for same items resulted in huge loss to the exchequer which stood vindicated by the computation of INR 3 41040959/ and he made the addition u/s 69C of the above sum being unexplained expenditure. The assessee challenged the same before the learned dispute resolution panel by filing an objection. 164. The learned dispute resolution panel dealt with the above objection at para number 15 of its direction as under:- The next issue is in respect of additions of ₹ 30,32,55,951/- and ₹ 34,10,40,959/- on account of exorbitant profit margin. The actual cost of the goods and services found mentioned in the seized documents vis- -vis rate quoted to OC/DDA do reveal the rate of margin of profit. The assessee was not doing business wherein normal profit is earned. Actually, it is collusive loot of our Exchequer. These seized materials are simple illustration of the profiteering of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y comparing the prices of the two suppliers, he should not have made the addition by cherry picking the items. He further stated that the addition u/s 69C cannot be made as it relates to an expenditure which is not applicable in the present case. He therefore submitted that there is no evidence available with the assessing officer to make the above addition. 166. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that assessee has supplied the material to the organizing committee at a very huge price difference, therefore the learned assessing officer compared the prices of other 4 contractors and found that the minimum price of the contract price cited by the 1 of the 4 contractors was compared with the price charged by the assessee and differential amount the addition has been made. 167. We have carefully considered the rival contention and perused the orders of the lower authorities. It is apparent that above addition has been made without finding any evidences against the assessee but on mere allegation that the assessee has supplied the material to the organizing committee at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould show that the condition precedent to the application of provisions of Section 69C of the Act is that the assessee should have incurred any expenditure‟. In the instant case, the Assessee has executed projects related to Commonwealth Games. The allegation of the Ld. AO is that the Assessee has charged more consideration for these projects in comparison to other vendors. Even if it is presumed that, the allegation of the Ld. AO is correct, still charging of higher consideration is undoubtedly an item of income for the Assessee, which has been duly recorded in the books of accounts of the Assessee as per the Method of Accounting and not an expenditure incurred by the Assessee. Therefore, the condition precedent to the application of provisions of Section 69C of the Act is not fulfilled in the instant case. In view of the above action of the ld AO in making the addition of ₹ 30,1040,959/- invoking the provisions of Section 69C of the Act is not sustainable. Thus, we direct the ld AO to delete the same. Ground no 19 of the appeal is allowed. 168. Ground no 20 of the appeal is against the disallowance of total expenditure incurred by the assessee of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee filed objections before ld DRP. the ld DRP held the following: Here, in the present case, definitely 100% expenses cannot be held bogus. Definitely, no business can be done without incurring any expenditure. Therefore, we do not find merit in disallowance of entire expense. Definitely, in view of the abovementioned facts, at least the sum of ₹ 35.85 crores paid to the OC and DDA have been recouped through the bogus billing in the books of accounts. Besides, other specific disallowances based on facts have to be made separately on protective basis to the extent of bogus expenditure of ₹ 35.85 crores and disallowance based on facts over and above of ₹ 35.85 crores on substantive basis to avoid double taxation. 169. Subsequently, the appellant produced the original bills before the Ld. AO. However, the Ld. AO did not accepted the bills and on direction of the DRP made addition of ₹ 129,27,50,026/- (₹ 165,12,50,026 ₹ 35,85,00,000) u/s 69C of the Act. 170. The ld AR submitted that i. The appellant filed its return of income following the cash method as of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books. The Ld. AO also accepted that the appellant had maintained proper books of accounts as all the additions and disallowances were made according to the amount reflected in the books. However, the Ld. AO instead of examining the material on record and books of accounts before him proceeded purely on his whims, fancies, surmises, and conjectures and disallowed all the expenditure. vi. bills amounting to ₹ 27,55,05,611/- were seized by the Income Tax Authorities during the search u/s 132 conducted in the case of appellant which were duly accepted u/s 292C of the Act. The List of expenses in relation to these bills which were recorded in books are Sl. No. Particulars Amount 1 Air, Sea and other Freight 5,90,66,914.00 2 Consumables 1,87,08,297.00 3 Fixed Assets Repairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole of the expenditure. viii. Ld. AO did not record any proper reason for disallowing the expenditure. The Ld. AO also did not hold that the expenditure remained unexplained by the appellant. It shall be evident from the above that the Ld. AO had disallowed all the expenditure, which was claim by the appellant in the P/L A/c. However, he was still dissatisfied and thought of again making disallowance in totality over and above individual disallowance made. The absurdity of the action of the Ld. AO was evident. In this matter, the entire addition made capriciously without any application of mind need to be deleted. 171. The ld Departmental representative vehemently supported the order of the ld DRP. 172. We have carefully considered the rival contentions and found that the appellant filed its return of income following the cash method as of the IT Act, 1961. All the incoming and outgoing of receipts and payments were all evidenced, verified and accepted as such. However, while making the disallowance about the expenses, the AO has disallowed it on accrual basis in as much as rejecting the cash system of accounting. The AO on no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified separately. It was the responsibility of the assessing officer to verify the expenditure individually head wise. However, instead of doing so the Ld. AO assessed on overall basis and disallowed whole of the expenditure. Further the finding of ld DRP is that definitely 100% expenses cannot be held bogus. Definitely, no business can be done without incurring any expenditure. However, they have directed to make the disallowance of ₹ 35.85 Crores, but on what basis there is no finding. The only reason given is that at least the sum of ₹ 35.85 crores paid to the OC and DDA have been recouped through the bogus billing in the books of accounts. The ld DRP also did not care to find out the actual bogus expenditure, if any incurred by the assessee. In view of this we do not find any merit in the disallowance made by the ld AO and sustained by the ld DRP. Accordingly Ground no 20 of the appeal is allowed. 173. Ground no 21 is general in nature and no specific arguments were advanced therefore it is dismissed. 174. Ground no 22 is against the initiation of penalty proceedings, which is premature at this stage. Though arguments are advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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