TMI Blog2019 (7) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is allowed for statistical purposes. Addition on account of mismatch in the physical and book balance of diesel - as mentioned that in the Special Audit Report [ SAR ] there is a difference of 8610.86 litres of diesel which was unexplained - HELD THAT:- After considering the rival submission and in the light of documents available on record i.e., PB-A1/172 and 173 it is clear that assessee has been able to reconcile the difference of 4283 litres, therefore, to that extent addition is liable to be deleted. However, for the remaining amount, Learned Counsel for the Assessee did not press this ground for a sum of ₹ 2,40,160/-. We, accordingly, set aside the part addition and restrict the addition of ₹ 2,40,160/-. Ground of appeal of Assessee is partly allowed. Addition on account of mismatch in physical and book balance of steel - A.O. made this addition on the ground that there is a difference in the balance of TMT as per stock statement given by the Special Auditor and as per physical verification, the detail of which is given by the A.O. in the assessment order - HELD THAT:- The assessee also explained that TMT is not used in the same length in which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate which was to be allowed @ 10% per annum and difference of the same was added by the A.O - HELD THAT:- the matter requires reconsideration at the level of the A.O. because the A.O. shall have to verify the exact item and exact depreciation allowable as per rules. The assessee has filed complete details in the paper book which requires verification at the end of the A.O. as to on which item specific depreciation is allowable to the assessee as per rules. We, accordingly, set aside the orders of the authorities below and restore this issue to the file of A.O. with a direction to consider each item on which depreciation is claimed and allow depreciation to assessee as per rules Disallowance of depreciation on account of excess payment for acquiring fixed assets - HELD THAT:- There was a difference between the installation of machinery and commissioning as Shanghai Pudong specially manufacture TBM for assessee s requirements. The details of all invoices/bills etc., are brought on record which clearly reveal that assessee has paid reasonable price for purchase of TBM to M/s. Shanghai Pudong. The assessee has, therefore, been able to explain that assessee has paid reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per I.T. Act and Rules. Addition on account of foreign exchange gain - HELD THAT:- Assessee made a book entry at the end of the year with reference to capital asset on account of foreign exchange fluctuation gain which was capitalized. Thus the gain on transaction of foreign currency liability was in respect of capital asset which should have been considered as capital receipt only. Further even if Section 43A would not apply to the matter in issue because no actual settlement of liability has happened during the assessment year under appeal, therefore, book entries would not be relevant to determine the income of assessee. It is well settled Law that book entries are not determinative of income of assessee whether income of assessee is taxable or not, it has to be decided as per Law. We rely upon Judgment of Sutlez Cotton Mills Ltd., vs. CIT [ 1978 (9) TMI 1 - SUPREME COURT] and Tuticorn Alcali Chemicals Fertilizers Ltd [ 1997 (7) TMI 4 - SUPREME COURT] - Even if in this case assessee has made an entry of gain on transaction of foreign currency liability in respect of capital asset at the year end, which would not be income of the assessee, therefore, no addition could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow to make or sustain any addition. We, accordingly, set aside the Orders of the authorities below and delete the entire addition Non deduction of tds - Disallowance in respect of expenses incurred on four items i.e., Food expenses for staff outside Office, staff mess expenses, rent, co-lease BUNG project related, rent guest house and car hire charges - expenses spent by the assessee on Chinees expats as per the observation of the Special Auditor which is in the nature of perquisites in the hands of the employees and should have been added to the salary for computation of TDS liability - HELD THAT:- It may also be noted here that the Special Auditor has admitted that these are allowable as business expenses, therefore, it should have been pointed out in the Orders as to how these were perquisite in nature. It is also observed by the Special Auditor that these perquisites should be added to the salary of the employees for computation of TDS liability. In Section 40(a)(ia) the word salary have not been used so as to make disallowance on account of non-deduction of TDS. Therefore, there was no justification for the authorities below to make adhoc addition Addition on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on this account the Special Auditor has proposed the addition - HELD THAT:- There were no bar for the assessee to explain the issue by filing confirmation of the difference. Therefore, the matter requires reconsideration at the level of the A.O. We, accordingly, set aside the Orders of the authorities below and restore this issue to the file of A.O. with a direction to re-decide this issue in the light of confirmation filed by assessee from L T to explain the above issue. Addition on account of notional interest - A.O. made this addition which is the notional interest on the ground that one of the member of JV i.e., L T has provided initial investment of ₹ 13 crores, whereas the capital contribution which were required to be made by other member SUCG of ₹ 5,95,86,471/- has not been made - HELD THAT:- The assessee explained before the authorities below that it is for the Supervisory Board as per JV Agreement to see that funds are made available by both the members of the JV. The entire proceedings are supervised by the Supervisory Board, therefore, merely because one member of the JV has not contributed their capital in the JV is no ground of charging notio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o physical verification actually took place regarding stock in the case of the assessee - HELD THAT:- CIT(A) correctly deleted the addition. The assessee explained before the Ld. CIT(A) that regular physical verification of stock was made and assessee has already credited ₹ 16.66 crores as closing entry in P L A/c, therefore, it would be double addition. CIT(A) found that there were no basis for the A.O. or Special Auditor to make the addition. It was an adhoc addition merely on presumption. D.R. could not produce any evidence or material to contradict the finding of fact recorded by the Ld. CIT(A) Unexplained sub-contract - A.O. made the addition on the ground that Special Auditor has observed that assessee has sub-contracted few activities like catering, travelling, etc. to small individual contractors and bills of these subcontractors was not produced - HELD THAT:- The assessee produced complete details before the authorities below on which no enquiry have been made by the A.O. The Ld. CIT(A) after going through the details on record found that assessee made the payment through account payee cheques and identity of all the parties have been established. This adhoc a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd AO be directed to delete the addition of ₹ 2,40,00,000/- on account alleged discrepancy in the stock of Steel. Ground 4 - Addition of ₹ 25,00,000/-. The CIT(A) erred in law and on facts of the case by confirming an amount of ₹ 25,00,000/- on account of alleged stock of scrap determined based on theoretical computation without appreciating the explanations submitted by the appellant. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the addition of ₹ 25,00,000/- on account of alleged discrepancy in stock of scrap. GROUND-5 Disallowance of amortization expenses of ₹ 1,54,12,773/- The CIT(A) erred in law and on facts of the case by confirming disallowance of ₹ 1,54,12,773/- by treating the same as depreciation as against the amortization of expenses. In doing so, the CIT(A) failed to appreciate the fact that the appellant had in fact amortized these expenses over the lifetime of the project. The appellant respectfully prays that the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by appellant based on the lifetime of the project as per books vis-a-vis depreciation calculated under Income Tax Rules, 1962. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to allow deduction of ₹ 4,90,78,282/- on account of amortization expenses. GROUND- 9 Addition on account of Foreign Exchange Gain of ₹ 4,15,68,750/- The CIT(A) erred in law and on facts of the case by confirming an amount of ₹ 4,15,68,750/- on account of foreign exchange gain on restatement of liabilities on account of capital purchase. In doing so, the CIT(A) disregarded the fact that gain on translation/ conversion of foreign currency liability in respect of purchase of capital asset was capital receipt not subject to tax. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the addition of ₹ 4,15,68,750/-. GROUND -10 Disallowance of Design expenses of ₹ 5,51,31,704/- The CIT(A) erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed and AO be directed to delete the disallowance of ₹ 9,99,67,544/-. GROUND -13 Disallowance of expenses of ₹ 50,00,000/- The CIT(A) erred in law and on facts of the case by confirming ad-hoc disallowance to the extent of ₹ 50,00,000/- by treating it as perquisites in the hands of employees and accordingly the appellant failed to deduct TDS thereon. In doing so, the CIT(A) disregarded the details of expenditure submitted by the appellant such as staff meal expenses, food expenses, rent and car hire charges incurred for all employees. The CIT(A) accordingly failed to appreciate that expenses incurred by the appellant were towards staff welfare and not in the nature of perquisites. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the disallowance of ₹ 50,00,000/-. GROUND -14 Addition of ₹ 90,29,913/- The CIT(A) erred in law and on facts of the case by confirming addition of ₹ 90,29,913/- on account alleged mismatch in balance confirmation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the addition of ₹ 44,68,235/-. Ground 18. Disallowance of expenses of ₹ 12,01,000/-. The CIT(A) erred in law erred in law and on facts of the case by confirming disallowance of an expense of ₹ 12,01,000/- incurred on gifts given to clients and business associates disregarding the same as a normal business practice. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the disallowance of ₹ 12,01,000/-. GROUND -19 Addition on account determination of ALP in respect of transaction with AE of ₹ 25,90,46,464/- The CIT(A) erred in law and on facts of the case by confirming addition to the extent of ₹ 25,90,46,464/- in respect of transactions with an Associate Enterprise viz. M/s L T Geostructure LLP by determining the Arm's Length Price ('ALP') of the transaction on an adhoc basis in contravention of the provisions of the Income Tax Act, 1961. The appellant respectfully prays that the directions of the CIT(A) to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 05.06.2017. The basic observation of the audit report is reproduced in the assessment order. In the Special Audit so reproduced in the assessment order, the Auditor has noted that assessee is a Joint Venture (in short JV ) comprising of two Members having the participating interest (i.e., profit/loss sharing ratio) as under : Sl.No. Name of Member Participating Interest. a. Shanghai Urban Construction (Group) Corporation, (SUCG) 32.0% b. Larsen Toubro Limited (L T) 68.0% 2.2. Delhi Metro Rail Corporation Limited ( DMRC ) in short) had invited bids for the design and construction of tunnel from end of underground ramp (near Shankar Vihar Metro Station) to Hauz Khas Metro Station and underground ramp near Shankar Vihar metro station and Underground metro stations at Vasant Vihar, Munirka, R.K Puram, IIT and Hauz Khas on Janakpuri west- Botanical Garden Corridor of Delhi MRTS Project of Phase-III The abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce that assessee has been following the percentage of completion method while recognizing the revenue. Learned Counsel for the Assessee, therefore, submitted that this addition would be academic in nature. The assessee also filed written submissions on this issue which reads as under. 1. During the relevant assessment year the appellant JV was engaged in execution of a project awarded by Delhi Metro Rail Corporation (DMRC). The work awarded to the JV involved construction of underground tunnel from Shankar Vihar Metro Station to Hauz Khas Metro Station and construction of five Metro Stations at Vasant Vihar, Munirka, R.K. Puram, IIT and Hauz Khas in Delhi Metro Phase-III. 2. The total value of the work awarded by DMRC to JV was ₹ 12,60,86,50,700/- . The work of DMRC project was commenced by JV during the financial year 2012-13 itself. However, since 25% completion of the project was not achieved, the return of income for the assessment year 2013-14 was filed declaring nil income. 3. During the financial year 2012-13, the assessee JV recognised the revenue from sales and service under the head income of Profit Loss Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 27,30,48,673/- was shown in Schedule-K by reducing the same from revenue. The total profit before other income of ₹ 1,56,66,920/- was ₹ 6,54,90,421/- which is 1.50% of revenue of ₹ 436,60,28,076/- 9. Alternatively, the opening WIP of ₹ 27,30,48,673/- could have been shown under expense in the profit loss account for the year ended 31-03-2014 and therefore not reducing the same from revenue recognised the profit would have still been the same. 10. From the above it is clear that reduction in the revenue by an amount of opening WIP is merely a difference in presentation in the profit and loss account and has no impact on the profit as per profit and loss for the year ended 31-03-2014. The revenue was correctly recognised by considering total cost incurred up to 31.03.2014. 5.1. In support of the same, the assessee also filed a chart of preceding assessment years, assessment year under appeal as well as subsequent assessment years to show as to how the revenue has been recognised on Percentage Completion Method. The same is reads as under: L T SUCG JV CC 27 Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,36,60,28,076 9,98,25,35,915 12,47,41,60,664 Revenue recognised in previous financial years (1) - 27,30,48,673 4,36,60,28,076 9,98,25,35,915 Revenue recognised during the financial year (J) = (H)-(I) 27,30,48,673 4,09,29,79,403 5,61,65,07,839 2,49,16,24,749 Invoices raised during the financial year (K) - 3,29,51,03,593 8,58,31,40,998 11,07,51,75,004 Closing WIP (L) = (H) - (K) 27,30,48,673 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 7,70,79,009/- as pointed out by the Special Auditor. The assessee tried to explain this issue many times clearly explaining the flow of entries into the system but some how they were bent upon reporting the said figure of issue in isolation. 5.3. The A.O. however did not accept the reasons given by the assessee and made the addition. The assessee challenged the addition before the Ld. CIT(A) explaining therein the same facts that there was no negative stock. The Ld. CIT(A) reproduced the clarification of the Special Auditor in the impugned order reiterating the same facts that there was a negative balance of stock in main depot A/c ledger as on 31.03.2013. The Special Auditor also referred to reply of the assessee as to how the difference of negative inventory adjusted in the books. The A.O. in the remand report also stated and reiterated that there was a negative balance as on 31.03.2013. The Ld. CIT(A) asked the assessee to produce ledger account of main depot account and other materials of stock and details of sundry creditors. The written submissions of the assessee filed before the Ld. CIT(A) is reproduced at pages 118 to 120 of the impugned order in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 shows closing inventory at ₹ 3,71,19,081/- in Schedules-G M. He has, therefore, submitted that there was no negative stock. It is an accepted proposition in accounting that the closing stock of the previous year is considered as opening stock of the subsequent year. An examination of Schedule-M at page-19 of the PB-A1 would reveal that opening stock in the balance sheet as on 31.03.2013 has been reckoned at the figure of ₹ 3,71,19,081/-. Therefore, there is no infirmity in the financial figures in both the balance-sheets. PB-A1/32 is the assessment order for preceding A.Y. 2013-2014 under section 143(3) Dated 18.03.2016 in which some routine disallowance of expenses have been made. The A.O. accepted the books of account of assessee and the bank statements. PB-1 to 6 are the report of the Special Auditor. PB-24 is trial balance as on 31.03.2013 showing stock on site at ₹ 3,71,19,081/-. PB-26 to 42 is details of purchases of ₹ 7,70,79,009/- which is supported by bills and vouchers, copies of the same are filed on record. PB-43 and 44 are the details of advances given to creditors/suppliers outstanding before adjustment of material received prior to 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or the A.O. The assessee filed purchases entered into the books supported by bills and vouchers. He has, therefore, submitted that there was no difference in the accounts or in the balance-sheet. Since the assessee followed Percentage of Completion Method ( POCM ) and offered income accordingly, therefore, this addition could not be made against the assessee. 7. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that the trial balance of the Special Auditor was not supplied to the assessee. The assessee did not cooperate with the Special Auditor or the A.O. Ld. D.R. submitted that assessee failed to explain the transactions and no proper verification or investigation could be done for default of the assessee. The Ld. D.R, therefore, suggested that in view of the above fact matter may be set aside to the file of A.O. for fresh consideration. 8. We have considered the rival submissions and perused the material available on record. The assessee has filed complete details of purchases in a sum of ₹ 7,70,79,009/- supported by all the bills and vouchers. The assessee also filed copies of the audited report to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... piled by the Auditor was not provided to the assessee considering it to be an internal document at assessment stage, therefore, it cannot be used in evidence against the assessee so as to make this addition. Further, it is well settled law that entries made in the books of account are not determinative of question whether the assessee has earned any profit or suffered any losses. What is necessary is to consider, is the true nature of transaction and whether in fact it has resulted in profit or loss to the assessee. If income does not result at all, there cannot be taxed even though in book keeping an entry made by virtue of hypothetical income which does not materialize. Thus, the Income Tax Act does not recognise hypothetical or notional income which is not received or accrued to the assessee. We rely upon Judgments of Hon ble Supreme Court in the cases of Sutlez Cotton Mills vs. CIT 116 ITR 1 (SC); Tuticorin Alcali Chemicals and Fertilizers Ltd., 227 ITR 172 (SC) and Godhra Electricity Co. Ltd., 225 ITR 746 (SC). If this addition is considered in assessment year under appeal and stock position is taken differently, it has to be given effect in closing stock of this year, resulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax liability for the year. For example, a project that is 20% complete in year one and 35% complete in year two would only have the incremental 15% of revenue recognized in the second year. The recognition of income and expenses on this work-in-progress basis applies to the income statement. The steps needed for the percentage of completion method are as follows : 1. Subtract total estimated contract costs from total estimated contract revenues to arrive at the total estimated gross margin. 2. Measure the extent of progress toward completion, by comparing total actual cost incurred till date with total estimated cost to arrive at percentage that contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs. 3. Multiply total estimated contract revenue by the estimated completion percentage to arrive at the total amount of revenue that can be recognized. 4. Subtract the contract revenue recognized to date through the preceding period from the total amount of revenue that can be recognized. Recognize the result in the current accounting period. 5. Calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reply filed before the authorities below in which it was explained that the diesel stock as per stock statement as on 31.03.2014 was 5000 litres. This comprise of 717 litres of Cost Centre Code LS 125002 and 4283 Cost Centre Code LS125001. He has referred to PB-A1/172 and 173 in support of this contention that this much stock was available to assessee. Learned Counsel for the Assessee, therefore, submitted that since assessee reconciled difference of 4283 litres, therefore, assessee would not be pressing for the remaining difference of 4328 litres of diesel which will be aggregating to ₹ 2,40,160/-. 9. On the other hand, Ld. D.R. submitted that no documents were filed before A.O. Therefore, addition is liable to be sustained. 10. After considering the rival submission and in the light of documents available on record i.e., PB-A1/172 and 173 it is clear that assessee has been able to reconcile the difference of 4283 litres, therefore, to that extent addition is liable to be deleted. However, for the remaining amount, Learned Counsel for the Assessee did not press this ground for a sum of ₹ 2,40,160/-. We, accordingly, set aside the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 mm dia 149.49 MT 466.96 MT -317.47 MT 32 mm dia 377.52 MT 597.74 MT -220.02 MT Grand Total -601.89 MT 11.2. The A.O. made the addition by holding that assessee has booked higher expenses of the matching amount by booking excess consumption of TMT bars. Apart from the above hypothesis, there is no other reason, evidence or material in the orders to make the addition. He has submitted that details mentioned in the above table are appearing in the Annexure filed in the Paper Book. As per the above table, the figures indicated in Column-A are as per stock statement in Annexure-4 and figures mentioned in Column-B are as per physical verification report as on 25.03.2014 and difference is worked out as per Column-C. The comparison made in the table in the Special Audit Report is totally incorrect. Such an incorrect comparison was bound to lead ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the actual weight and this weight of the TMT Bar supplied is called theoretical weight i.e., the reason for using this term in the reconciliation statement of TMT Bar. The assessee also explained that the same facts are mentioned in the Special Audit Report of physical quantity vs. theoretical quantity. It was also explained that it is a normal practice. The assessee also explained that TMT is not used in the same length in which it is supplied, rather it was cut into various sizes as per requirements. This process result in some of the permitted wastage. The above explanation of assessee have not been rebutted by the authorities below or the Special Auditor. The same facts are mentioned in the reconciliation statement at page-54 of the PB. Even by the nature of the item i.e., TMT used in construction would also supports the explanation of assessee that TMT could not be used in the same shape as have been supplied by the supplier. The assessee also explained that TMT bar suppliers given the weight of supplies with 2 to 5% margin in actual weight. Since all these facts have not been controverted by the authorities below, therefore, it appears to be an adhoc addition without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to the same on the issue of scrap sale, the Special Auditor is highlighting deficit in physical quantity, therefore, contradictory allegation have been made in the physical stock which cannot exist. The sale of scrap in subsequent year have been shown as income and accounted for in A.Y. 2015-2016. Learned Counsel for the Assessee referred to PB-61 to 66 to show sale of scrap. 17. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that assessee has not accounted for the value of the remaining stock in the books. He has submitted that the sale of scrap in subsequent year may be verified by the A.O. 18. We have considered the rival submissions and do not find any justification to sustain the addition. This ground is co-related with Ground No.3 above in which we have deleted the addition on account of theoretical and actual stock which is the basis for making this addition as well. The assessee has produced sufficient evidence on record to prove that in subsequent year assessee has sold further scrap which have been accounted for as income in subsequent year. The A.O. has given contradictory finding on Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the parties in the light of fact recorded by the authorities below, we are of the view that the matter requires reconsideration at the level of the A.O. because the A.O. shall have to verify the exact item and exact depreciation allowable as per rules. The assessee has filed complete details in the paper book which requires verification at the end of the A.O. as to on which item specific depreciation is allowable to the assessee as per rules. We, accordingly, set aside the orders of the authorities below and restore this issue to the file of A.O. with a direction to consider each item on which depreciation is claimed and allow depreciation to assessee as per rules, by giving reasonable, sufficient opportunity of being heard to the assessee. Ground No.5 of appeal of Assessee is allowed for statistical purposes. 22. On Ground No.6, the assessee challenged the disallowance of depreciation on account of excess payment for acquiring fixed assets of ₹ 18,52,44,595/-. 22.1. The A.O. made the addition of ₹ 30 crores on the ground that Special Auditor has proposed this addition as the Tunnel Boring Machine ( TBM ) purchased from Shanghai P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned that assessee has neither explicitly stated nor submitted evidence in relation to independent status of Shanghai Pudong. Further, the Special Auditor has mentioned that quotation submitted by the assessee to the Auditor are different from one submitted during the appellate proceedings. The A.O. in the remand proceedings reiterated the facts stated in the assessment order and also explained that the remittance against imports should be completed not less than six months from the date of shipment. Therefore, there is a violation of FEMA. The Ld. CIT(A) noted that assessee has not produced any details of relationship with this companies neither this exercise have been done by the A.O. Assessee was asked to produce details and asked to give details of shareholders having substantial interest in the Member of JV SUCG and the Company viz., Shanghai - Pudong. The assessee in the written submissions has mentioned and claimed that in order to establish that Shanghai Urban Construction (Group) Corporation and Shanghai Pudong are not related parties, Enclosed herewith the shareholding of both the companies as sent by the respective Companies. It would establish that both are not relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No evidence has been brought on record for excess payment made to this party. He has submitted that the price offered by the German Company Herrenknecht for TBM was USD 9.75 million with L.C and that offered by the Shanghai Pudong was USD 9.78 million without L.C. The authorities below disregarded the interest savings and the L.C. cost which were influenced by mere difference of USD 0.03 million. The assessee made savings in the interest and working capital as the party was not paid till 31.03.2014. Copies of quotation of both the parties are filed in the paper book at PB-A1 189 to 196 and 198 to 200. The A.O. without any reasons doubted the genuineness of M/s. Hubei Tiandi on the basis of allegation that website of the party is betting website only. As regards lesser number of RTMs in respect of machinery purchased from L T JV, it may be noted that correspondingly the price computed was also less by an amount of ₹ 4 crores. Further German company Herrenknecht has set-up manufacturing plant in China and TBM purchased from Shanghai Pudong was manufactured for this plant. There is a time gap between installation and commissioning in both the cases. There is no difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction with Shanghai Pudong was without L.C. and in that event assessee would have saved the interest and L.C. cost. Further there was a difference between the installation of machinery and commissioning as Shanghai Pudong specially manufacture TBM for assessee s requirements. The details of all invoices/bills etc., are brought on record which clearly reveal that assessee has paid reasonable price for purchase of TBM to M/s. Shanghai Pudong. The assessee has, therefore, been able to explain that assessee has paid reasonable price for purchase of TBM. The authorities below have not brought any evidence or material on record to justify their finding. The findings of the authorities below are based on mere presumption and surmises. The A.O. cannot step into the shoes of a businessman to determine the price. The assessee also explained that TBM was purchased in preceding assessment year in which assessment under section 143(3) have already been completed. Therefore, such an item could not be disputed in assessment year under appeal. The Ld. CIT(A) without any basis or justification held that assessee has paid excess payment for purchase of TBM. The Ld. CIT(A) without any justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid operation involves the cutting the ground with the help of cutter head which is fixed in front of the TBM, removing, excavated material from cutter head chamber to the back of the machine, ring building and filling the annular space between the rings and the cut ground with grout. All the operations are carried out with the help of back-up system installed in the shields and gantries i.e., lube system, Grease system, belt conveyor system, hydraulic system, water system etc., The above systems are comprised of different components like pumps, motors, hoses, switches sensors, transmitters, belts, rollers pulleys, pressures gauges etc., These items are replaced from time to time for completing the operation. He has, therefore, submitted that these were revenue expenditure in nature and could not be termed as capital expenditure. He has relied upon Judgment of Hon ble Gujarat High Court in the case of CIT vs. Banco Aluminium Ltd., 93 taxmann.com 52 in which it was held that where assessee engaged in business of manufacturing of Aluminium extruded sections, claimed deduction of expenditure incurred on tools and dies, in view of the fact said tools and dies were consumable in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below and delete the entire addition. Ground No.7 of the appeal of Assessee is allowed. 28. On Ground No.8, the assessee challenged the addition of ₹ 4,90,78,282/- on account of disallowance of amortization expenses. 28.1. The A.O. made this addition which is the difference between depreciation claimed by assessee as per books and depreciation calculated as per Income Tax Rules. The Special Auditor has observed that assessee has provided depreciation based on useful life of the asset over the contractual period of the project and the rate prescribed in Rule-5 of the Income Tax Rules are not followed. Whereas, it is mandatory for all the Companies to prepare their annual accounts in accordance with the mandatory Accounting Standard issued by the ICAI, yet adjustments declared to the P L A/c are required to be made in order to arrive at assessable income as per the Act and Rules. The Special Auditor has also mentioned that the contention of the assessee that it has not charged depreciation, but, in fact amortized the cost of the asset is not acceptable under section 37 of the I.T. Act as the capital expenditure is not allowable. The Special Aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exchange rate difference (profit or loss) at the end of each financial year is not governed by Section 43A. During the appellate proceedings assessee filed written submissions in which it was claimed that in respect of foreign exchange currency transaction, AS-11 is regularly followed by the assessee. Assessee has claimed again that on transaction of foreign currency liability in respect of purchase of capital asset, it is the capital receipt and not subject to tax in the hands of the assessee. The Ld. CIT(A), however, did not accept the contention of assessee and noted that assessee has wrongly relied upon provisions of Section 43A which should be applied at the time of payment of capital expenditure and not for the year end valuation of foreign exchange. The Ld. CIT(A), therefore, confirmed the addition. 32. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee admittedly purchased the machine i.e., TBM and gain on foreign exchange is not taxable because it is capital receipt. Section 43A apply to capital expenditure, details are filed at pages-98 and 99 of the PB. The assessee restated the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts in question were held by the assessee on capital account or on revenue account or, to put it differently, as part of fixed capita! or of circulating capital. 32.1. He has further relied upon Judgment in the case of CIT vs. Jagatjeet Industries Ltd., 199 taxmann.com 54 in which it was held that the foreign exchange fluctuation gain accrue on account of money raised through issue of equity share and it was held that fluctuation gain is to be treated as capital receipt in the event of such share capital has been collected in foreign exchange irrespective of end use of share capital . Learned Counsel for the Assessee without prejudice to the above submissions submitted that in case it is held that provisions of Section 43A are not applicable since there was no actual settlement and liability during the year, then, there would not be any need to pass any accounting entry at the close of the year and same entry would have to be based on date of settlement of the outstanding liability. In such a scenario, the fluctuation gain cannot be brought to tax in the hands of assessee being on account of capital transaction. He has also relied upon Judgment of Hon ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear end, which would not be income of the assessee, therefore, no addition could be made against the assessee of this nature. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Ground No.9 of the appeal of Assessee is allowed. 35. On Ground No.10, assessee challenged the disallowance of design expenses of ₹ 5,51,31,704/-. 35.1. The A.O. disallowed the above amount towards design charges as the Special Auditor has observed that certain expenses of deferred nature were charged fully to Profit Loss Account such as design charges are in the nature of deferred revenue expenditure which is incurred for ₹ 7,71,84,385/- and this expenses has to be spread over the life of the project which was fully claimed in the initial year of the operation of the JV. The assessee submitted before the A.O. that design is made and approval by DMRC in the initial stage is taken and on approval of this only the execution of work started, therefore, it should be allowed at the start of the execution itself and it would not fall in the category of deferred revenue expenditure. The A.O. did not accept the contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not in dispute that the expenses in question is revenue in nature. The assessee claimed that amount was incurred on account of design charges which is approved by DMRC in the initial stage. When the design is approved only then the execution of the work would start, therefore, design charges shall have to be incurred once for start of the execution of the project. Therefore, it could not be treated as deferred revenue expenditure in nature. The decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. In the result, Ground No.10 of the appeal of Assessee is allowed. 39. On ground No.11, the assessee challenged the disallowance of bank guarantee expenses of ₹ 2,22,37,267/-. This issue relates to disallowance of ₹ 8.38 crores towards bank guarantee charges which was made by the A.O. on the observation of the Special Auditor that assessee had debited ₹ 2,67,28.095/- as bank guarantee charges, out of which, charges of ₹ 1,84,74,400/- pertains to subsequent years and charges amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is incurred, the same are not recoverable once charged by the Bank. Therefore, it could not be deferred revenue expenditure. An amount of ₹ 37,59,867/- have been disallowed by the authorities below because same was to be borne by the JV partner. It was submitted that Clause 13.1 of the Agreement clearly provides that any fronting guarantee cost paid to the local Bank shall be paid directly by the JV. Since the entire amount is paid by the JV, therefore, no disallowance could be made. Learned Counsel for the Assessee, therefore, submitted that no addition should have been maintained. In support of the contention, he has relied upon Judgment of the Hon ble Madras High Court in the case of Sivakami Mills Ltd., vs. CIT [1979] 120 ITR 211 (Madras) in which it was held as under : Where the assessee-company purchased for its business some machinery from abroad on deferred payment basis and had to pay some commission to a bank which had guaranteed the installment payments by it : Held that the expenditure incurred for the purchase of the machinery was undoubtedly a capital expenditure, for it brought in an asset of enduring advantage. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is allowed and Ground No.6 of the Departmental Appeal is dismissed. 43. On Ground No.12, assessee challenged the disallowance of expenses of ₹ 9,99,67,544/-. The A.O. disallowed the above amount towards prior period expenditure. The Special Auditor has observed that the purchases of ₹ 6.42 crores was made in F.Y. 2012-2013 but the expenses of the same have been booked in the year under consideration. The A.O, therefore, made the addition considering it to be prior period expenditure. The assessee submitted before the Ld. CIT(A) that assessee follows common accounting practice of reversing the provisions created at the end of the previous financial year on the First Day of the Next Financial Year. The amounts booked on receipt of invoices during financial year are charged to the P L A/c which has the effect of knocking off the same against credit in the expenses account. Thus, there is no impact on the profit of the current financial year and this does not lead to prior period expenses being debited to P L A/c. The A.O. did not accept the contention of assessee and the Ld. CIT(A) on the same reasoning confirmed the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made addition of ₹ 50 lakhs on this account in absence of any reliable submission. The assessee submitted various invoice ledger etc., before A.O. which were ignored. The Ld. CIT(A) on the same reasoning, confirmed the addition. 47. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that perquisite is definied in Section 17(2) of the I.T. Act which includes value of rent free or concessional rent accommodation provided by the employer, value of any benefit/amenity granted free or at concessional rate to specified employees, any sum paid by the employer in respect of an obligation, which was actually payable by the assessee, any sum paid by the employer for assurance on life of the employee or to effect contract for an annuity and value of any other fringe benefit as may be prescribed. He has submitted that assessee has incurred expenses for business purpose which are allowable deduction. He has submitted that findings of the authorities below are incorrect. The assessee incurred food expenses for staff outside office. These are the expenses reimbursed to the expats staff against food including snacks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly without giving any specific reasoning for making part addition. The assessee explained before A.O. that these expenses were incurred upon the staff for the purpose of business and explanation of assessee have not been disputed by the A.O. The nature of these expenses apparently shows that same have been incurred during the official duties by the staff in the course of execution of the project. The nature of business of the assessee clearly show that many staff shall have to be present at the project at different places and levels. The project is executed in odd hours also, therefore, if small amount have been incurred on staff for the purpose of business which have not been disputed by the A.O. it would not fall within the definition of perquisite for the staff. It may also be noted here that the Special Auditor has admitted that these are allowable as business expenses, therefore, it should have been pointed out in the Orders as to how these were perquisite in nature. It is also observed by the Special Auditor that these perquisites should be added to the salary of the employees for computation of TDS liability. In Section 40(a)(ia) the word salary have not been used so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the assessment order addition has been made for failure to provide vendors balance confirmation whereas Appellate Order upholds the said addition on the ground that payment of this amount which is booked by the assessee as expenses is not supported by confirmation from the vendor. A close examination of the reconciliation appearing on page-479 of PB-A2 would reveal that invoice of ₹ 71,99,538/- raised by the vendor M/s. SB Protech Pvt. Ltd., have been booked by the assessee in next financial year on June, 2014. Therefore, the CIT(A) have fell in error in holding that purchases have been booked by the higher amount. The assessee has reconciled all the figures. 52. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that there was an difference in the account of party and fresh evidence was not filed as per I.T. Rules. There were difference in two confirmations. Therefore, matter requires fresh investigation /examination at the level of the A.O. 53. We have considered the rival submissions and perused the material on record. It is an issue of mismatch in the account of the assessee and the vendor. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioning that Special Auditor has directly asked confirmation from 300 parties and it was received for only 44 parties and no suggestion of the addition was made by the Special Auditor on this account as the reconciliation of balance mismatch has been given before the Special Auditor. However, the A.O. made the above addition. The assessee has mentioned that now the confirmation of ₹ 121.98 crores was obtained by the assessee which is submitted along with application under Rule 46A of the I.T. Rules which could not be submitted before A.O. as these are received after framing of the assessment. These confirmations were sent to the A.O. for remand report which was received by the Ld. CIT(A). In the remand report, A.O. has mainly objected the admission of the fresh evidence at the appellate stage. However, discrepancies noticed in the case of some of the parties were mentioned by the A.O. on merits also. The assessee filed rejoinder to the remand report. As the A.O. has not given reply on merit on all the confirmations, the report from the A.O. was sought. The A.O. has given his comments on all the 36 confirmations. The assessee also filed rejoinder. The Ld. CIT(A) consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he special audit against the genuineness of this transaction, a letter was written to the Commissioner of Custom (Import) for verification of these invoices which was given by the appellant along with the bills of entries vide letter Commissioner of Customs have confirmed all these transactions by e-mail as well as by his letter received in this office by speed post and screen shorts of all the bills of entries pertaining to these invoices have been given. The result of this inquiry is also informed to the Assessing Officer for verification during the course of appellate proceedings. From this, it is gathered that the claim made by the appellant regarding the import of machinery and related spare parts from Shanghai Pudong Machinery Complete Equipment Co. Ltd. cannot be doubted and the addition made by the Assessing Officer of ₹ 74.09 crores on this account deserves to be deleted. This is also relevant that the appellant has claimed that the expense of these machineries which was imported from Shanghai Pudong Machinery Complete Equipment Co. Ltd. are booked under the head Fixed Asset in the books of the appellant on which the appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20573772 (2,497,879.90) 4. SHREE GOPALA GRIT CO. 15122800.7 15713472.9 (590,672.20) 5. ORIENTAL FERRO ALLOYS P.LTD. 7097972.9 7097973 (0.10) 6. A.S. TRADERS 4509360.4 4847009 (337,648.60) 7. CONDAT CHINA CHEMICALS CO.LTD. 3959956 3959956.06 (0.06) 8. DEXTRA INDIA P.LTD. 4120071.4 4506134 (386,062.60) 9. ADOADDITIVES TECHNOLOGIES P. LTD. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. JINDAL STEEL POWER LTD. (NEW DELHI) 116260561 135032265.4 (18,771,704.40) 22. POPAN TRADING CO. 35267142.9 35267143 (0.10) 23. NARAIN ENTERPRISES 6098876.7 6098877 (0.30) 24. A.P. INDUSTRIES 4053035 4357431 (304,396.00) 25. HERRENKNECH INDIA P. LTD. (CHENNAI) 2796238 11336685 (8,540,447.00) 26. SHREE SHYAM ELECTROCRAFT P. LTD. 2029677.5 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age. The details are as below : S.No Name of the Vendor Amount as per books of the appellant Amount as per books of vendor Difference 1. JSW Steel Ltd. 47302834.2 208238.06 26479028.20 2. Amberg. TTI Eng. Pvt. Ltd. 14349402 486830 13862572 3. Tondon Consultants Pvt. Ltd. 38,74,006 3864995 9011 4. Jet-First Intl. Log Pvt. Ltd. 35,92,539 3581777.92 10761.08 5. CT Nova Equipment Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g decisions : (i) Zazsons Exports Ltd., vs. CIT 88 taxmann.com 617 (Alld.) (HC) (ii) Raghubir Singh vs. DCIT 83 taxmann.com 187 (iii) DCIT vs. Divine International 16 taxmann.com 262 (iv) Bhagyanagar Oil Industries vs. ITO ITA.No.1178/Hyd/2012 (Hyderabad (Bench). (v) ITO vs. Smt. Umadevi Shankarappa Thimmaiah 49 taxmann.com 496. 57.1. Learned Counsel for the Assessee submitted that Ld. CIT(A) correctly deleted the substantial addition and on the proposition of the above decisions, the Ld. CIT(A) should have deleted the remaining addition as well. 58. On the other hand, the Ld. D.R. relied upon the Orders of the Ld. CIT(A) as regards the appeal of the assessee and relied upon the Order of the A.O. for deletion of the addition. He has submitted that the A.O. made the additions because the accounts could not be reconciled by the assessee and no confirmation have been filed by the assessee, therefore, appeal of assessee has no merit, same may be dismissed. However, as regards the Departmental Appeal, he has submitted that A.O. did not get proper opportunity to examine the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the view that Ld. CIT(A) correctly deleted the substantial addition. No material have been brought on record to contradict the finding of fact recorded by the Ld. CIT(A). Therefore, Departmental Appeal has no merit and Ground No.3 of the appeal of the Department is dismissed. 59.1. As regards appeal of assessee, Ld. CIT(A) found that assessee could not reconcile difference of ₹ 4.12 crores and for the rest of the amount of ₹ 4.54 crores, no confirmation have been filed. The Ld. D.R, therefore, rightly contended that since difference could not be reconciled and no confirmation have been filed, therefore, no interference is required in the matter. However, Learned Counsel for the Assessee has relied upon several decisions noted above in which it was held that when assessee disclosed purchases from the vendors, part of which have not been confirmed by them, no addition under section 68 of the I.T. Act, could be made. However, no such plea was taken before the authorities below and no such issue have been decided by the authorities below, therefore, this issue requires reconsideration at the level of the A.O. We, accordingly, set aside the Orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the assessee of the equivalent amount and there is no difference. The L T has furnished confirmation along with reconciliation of both the two breakup should be verified by the A.O. 62. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that fresh evidence should not be admitted at this stage. 63. We have considered the rival submissions. The assessee has filed confirmation of L T before authorities below, copy of which is filed in the paper book as well. It is reproduced in the appellate order in which in para 22.19.2 in the confirmation of L T, it is explained that the total amount of ₹ 13 crores is two bifurcations of approx. ₹ 12.65 crores and approx. ₹ 35 lakhs. When both the figures are taken together there would be no difference in the investment. The Ld. CIT(A) noted that it was a new plea taken before him, therefore, addition was confirmed. There were no bar for the assessee to explain the issue by filing confirmation of the difference. Therefore, the matter requires reconsideration at the level of the A.O. We, accordingly, set aside the Orders of the authorities below an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above contention. 66. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that net interest could be considered in the matter. 67. We have considered the rival submissions and do not sustain the orders of the authorities below. The Hon ble Gauhati High Court in the case B A Plantation and Industries Ltd., 242 ITR 22 (Gau.) held that there is no provision in Income Tax Act empowering the ITO to include in the income of the assessee interest which was not due or collected. The Hon ble Supreme Court in the case of A. Raman Co. 67 ITR 11 (SC) held that Law does not oblige a trader to make maximum profit. The assessee explained before the authorities below that it is for the Supervisory Board as per JV Agreement to see that funds are made available by both the members of the JV. The entire proceedings are supervised by the Supervisory Board, therefore, merely because one member of the JV has not contributed their capital in the JV is no ground of charging notional interest on the capital which is not contributed by the member of the JV. There is no provision under the Income Tax Act to charge notional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is allowed. 72. On Ground NO.19 assessee challenged the addition on account of determination of ALP in respect of transaction with AE of ₹ 25,90,46,464 and the Revenue on Ground No.5 has challenged the Order of the Ld. CIT(A) in deleting the addition of ₹ 32,38,08,080/-. 73. The A.O. has made the addition of ₹ 58,28,54,544/- on the ground that the Special Auditor has observed that the transactions with the related concerned i.e., L T Geo Structures is made where contract was awarded on available terms and actual comparison has never taken place as the contract is awarded to the Associated Concern on 10.12.2012 whereas the quotation of one of the Vendor was obtained on 14.12.2012. Besides this assessee has declared CUP method Arms Length Price ( ALP ) which is based on quotation received from the Vendors, whereas, the CUP method evaluate the ALP by comparing the price and addition of the similar transaction between the taxable and unrelated party or between two unrelated parties. During the course of assessment proceedings, assessee has mentioned that this contract was given to the Associated Concern as the quotations of ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Valecha IPEX L T Geo Particulars Rate as per TP study Rate as per letter of intent Rate as per TP study Rate as per letter of intent Rate as per TP study Rate as per letter of intent Percentage of excess payment to L T as per letter of intent of L-1 Installing cast in situ in soil 800mm thick (item 1.1a) 5,677 5166 5569 5100 5407 9536 87% Installing cast in situ in soil 1000mm thick (item 1.1a) 6,477 - 6354 - 6169 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such study was not done. The Ld. CIT(A), therefore, held that CUP method cannot be applied in such case. The Ld. CIT(A) also referred to Rule10B of I.T. Rules and noted that this Rule provides that the comparison can be done only with actual transaction and not with the quotations. The Ld. CIT(A) relied upon decisions of the ITAT in the case of Sino Steel India Pvt. Ltd., 159 TTJ 581 (Del.) and Noble Resources and Trading India Pvt. Ltd., 64 SOT 4 (Delhi.). The Ld. CIT(A), however, found that the findings of the A.O. are not correct because entire amount have been added. The Ld. CIT(A) considering the above discussion found excess payment to the Associated Concern in a sum of ₹ 25,90,46,464/- and deleted the remaining addition. His findings in para 22.23.8 and 22.23.9 is reproduced as under [at pages 159 and 160 of the Order]. 22.23.8. However, at the same time, I am convinced that the Assessing officer is not correct in making the addition of the entire transaction of ₹ 58,28,54,544/- as the Assessing Officer has not doubted the work done by the associated concern, hence, there is no basis of making the addition of the entire amount which is paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er letter of intent. On this basis, addition is made to entire amount of the work awarded to L T geo at 80% without taking into consideration the material involved in the price quoted and no comparison is possible in other variables of the work contract. The final bills of all the above three entities is filed on record for comparison. The work of installing cast in SITU appearing in Column No.10 of the final bill of L T Geo, the rate at which the work was contracted was ₹ 8824.81% which includes shuttering, reinforcement, fixing and concrete placing and this rate was inclusive of material. Similarly work appearing in Column No.9 of the final bill of IPEX Infrastructure Pvt. Ltd., the rate was ₹ 5100/- which was excluding the reinforcement, concrete work and material. Similarly, the same work in Column No.9 of final bill of Valecha Engineering Ltd., the rate as ₹ 5166/- which was excluding the reinforcement concrete work and material. These facts clearly shows that the price quoted by L T Geo was not comparable with the price quoted by the other companies. Since cost was higher, therefore, work was awarded to A.E.. The Ld. CIT(A) noted this fact at page-157 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent rate which is shown in T.P. study and the actual work given to the associated concern related to labour as well as for supply of material. The Special Auditor did not recommend for any addition on this issue. The A.O. merely on estimate basis without bringing any evidence on record against the assessee of any excess payment made to related party, made the addition without any just reasons. The assessee could not earn the profit of ₹ 25.90 crores out of total payment of ₹ 58.28 crores as per nature of the contract awarded to it by DMRC. It may also be noted here that assessee has followed CUP method. But, the authorities below without applying any other method has made the addition merely on estimate. The Ld. CIT(A) in principle has accepted that the amount given to the related party is reasonable and justified. However, for the rest of the amount sustained, no basis have been shown as to why this addition has been made against the assessee. It may also be noted here that admittedly assessee followed POCM method for the purpose of recognizing the revenue and paid the taxes on the same which method is also applied consistently in subsequent years. The details of sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived in which it was reiterated by the Special Auditor that no stock statement was submitted at the time of special audit except verification of the stock of the value of ₹ 15 lakhs and no monthly verification or technical analysis was provided nor any reconciliation statement between physical and book inventory was given and in these circumstances, the A.O. estimated the actual inventory and made an adhoc addition. The Ld. CIT(A) considering the material on record and in the light of findings of the A.O. and Special Auditor noted that it is apparent that addition of ₹ 16.17 crores as suggested by the Special Auditor and A.O. has no solid basis and it was only on the basis of presumption that such closing stock might be there made the addition. The Ld. CIT(A) found that there is no lapse on the part of the assessee of physical verification. Therefore, the Ld. CIT(A) deleted the addition. 80. The Ld. D.R. merely relied upon the order of the A.O. without pointing-out any infirmity in the order of the Ld. CIT(A). 81. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
