TMI Blog2019 (8) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 3 - DELHI HIGH COURT] that the Hon ble Supreme Court in the case of Goetze (India) Ltd. (supra) has made it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the appellate authority. The ground raised by the revenue is accordingly dismissed. Bogus expenses addition - construction material purchased - assessee failed to prove the identity, credit worthiness and genuienss of the transaction - AO issued notices u/s 133(6) to these parties, in most of the cases notices were received back with remarks no such party exists in some there were huge differences - CIT(A) find that GP rate of each property is more or less 8% to 13% except two properties - HELD THAT:- We are of the considered opinion that out of the total disallowance of ₹ 4,33,89,009/- only the amount of ₹ 52,85,490/-relating to the project J-174 is doubtful and the balance amount should not have been added by the Assessing Officer especially when the assessee has made payments against the sundry creditors in the subsequent years or has offered to tax the same in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember And Sh. R. K. Panda, Accountant Member For the Appellant : Sh. Surender Pal, Sr. DR For the Respondent : Sh. Rajeev Saxena, Advocate, Sh. Shyam Sunder, Advocate ORDER PER R.K. PANDA, AM: This appeal filed by the revenue is directed against the order dated 29.12.2015 of the CIT(A)-4, New Delhi relating to A. Y. 2012-13. 2. The ground of appeal No.1 by the revenue reads as under :- 1. Whether on the facts and circumstances of the case and in law Ld. CIT(A) is correct in deleting the disallowance made by the AO on account of set off of the losses claimed by assessee without filing revised return ignoring the ratio decidendi of the case of Goetze India Ltd. that the assessee cannot claim for deduction otherwise by filing a revised return. 3. Facts of the case, in brief, are that the assessee is a company and is engaged in the business of builders and civil contractors, share trading on MCS and NSE. It filed its return of income on 16.08.2012 declaring total income of ₹ 35,61,030/-. During the course of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and claimed the loss. The assessee is not well versed of the tax provisions and has to be dependent on the professionals for the same. The error made at the time of filing return was rectified later during the assessment proceedings by filing revised computation of income, which is required to be accepted. I therefore hold that the loss incurred by the assessee of ₹ 17,20,728/- on account of futures and options is directed to off against the business profits. Thus Ground No. 2 is allowed. 5. Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal. 6. We have heard the rival arguments made by both the sides and perused the material available on record. We find the assessee during the course of assessment proceedings had filed a revised computation of income reducing taxable income from ₹ 35,61,030/- to ₹ 18.40,306/-. We find the Assessing Officer rejected the claim of the assessee on the ground that the loss on Futures and Options cannot be claimed by filing a revised computation since assessee has not filed a revised return within the meaning of section 139 (5) and, therefore, follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings failed to prove the identity, credit worthiness and genuienss of the transaction. 8. The facts of the case, in brief, are that during the year under reference, the assessee company disclosed revenue from operation at ₹ 7,78,00,000/- and cost of material consumed at ₹ 5,45,36,447/-. The Assessing Officer asked the assessee company to furnish details of material used with supporting vouchers. In compliance thereto, the assessee filed statement showing details of construction material purchased during the year. The Assessing Officer asked the assessee to produce the vouchers of the expenses but the assessee furnished only 8 to 10 vouchers. The Assessing Officer observed from the above details that the amount of ₹ 5,45,36,447/- has been worked out by making entries of amazing figures and in these items no amount for construction either through contractor or on his own is appearing which according to him clearly establishes the fact that the amount claimed on account of construction material is not supported by any voucher. He observed from the list of sundry creditors that sundry creditors of ₹ 433,89,009/- has been shown payable w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as bogus expenses claimed which was shown as payable without any details. 12. In appeal the Ld. CIT(A) deleted the addition made by the Assessing Officer by observing as under :- 6. Ground No. 3 - After going through the submissions of the assessee and clarifications sought by me on the queries raised, I find that the assessing officer has disallowed almost whole of the expenses by giving flimsy grounds on the basis of enquiry made by him from some of the creditors who denied any sale to the assessee. I find from the order sheet submitted before me which was obtained after inspection that assessing officer has not asked any single query from the assessee on the enquires made by him or on denial by those creditors. The written submissions and paper book consisting of various documents, submissions dated 13.03.2015 filed before the AO, were also filed before me. After going through the assessment order, I find that the AO did not refer to these submissions. In the reply to the queries raised by me, the AR submitted before me the certified true copy of the submission dated 13.03.2015 as annexure-2. I find that apart from the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors which were received back. On these reasons, the AO disallowed ₹ 4,33,89,009/- which is not understandable. The AO did not examine the accounts submitted before him and which was explained by way of various charts. One of the charts i.e. GP chart provide the analysis of various properties sold from FY 2009-10 to 2013- 14 against which total cost incurred ranges from 78% to 98%. Except two properties, the percentage of cost of construction ranges between 87% to 92% in all these years. The GP rate of each property is also more or less 8% to 13% except the aforesaid two properties. The AO in this year did not accept whole of the expenditure relating to the cost of the construction claimed by the assessee against the sale of the three properties merely because some of the creditors have denied the transactions. I find that during the course of the assessment proceeding, no opportunity was provided to the assessee to counter the version of these creditors and also opportunity to cross examine these parties. Thus the evidence relied upon at the back of the assessee for making the addition was against the principles of the natural justice and cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before me ledger accounts of J-174 building material which includes both these parties i.e. M/s Vishnu Timber and Shiv Building Material as on 31.03.2012. It is not understood that Vishnu Timber has accepted the bills of ₹ 2,48,294/- while other bills were not accepted by them. It means this creditor is genuine though due to some reasons best known to him, he denied some of the bills. Another creditor Shiv Building Material Centra has supplied POP material and finishing paneling etc. It is very well known that POP workers are normally laborers/ mistries and don't maintain books of accounts due to which they did not accept their bills before the merely by denial of these two creditors which are both related to construction of J-174, whole of the expenditure was disallowed, is highly arbitrary and without application of mind. The AO did not understand that the building cannot be constructed without the building material and assessee is claiming cost of construction only at the time of sale of properties. During the year, three properties were sold, i.e. 2, Uday Park which was purchased in FY 2010-11 and purchase cost and construction was shown during the FY 2010-11 under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -174, Saket, New Delhi. This was mainly because the settlement agreement was not fully implemented by the owners of the J-174. Saket, New Delhi. A bank statement sought by me clearly shows that payments were made through account payee cheques to most of these creditors in subsequent years. This shows that outstanding sundry creditors relate to the construction business of the assessee. Merely because some of the creditors were outstanding, and payment is not made, these creditors cannot be treated as bogus. I therefore delete the addition of ₹ 4,33,89,009/-. Ground no. 3 is allowed. 13. Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal. 14. The Ld. DR strongly relied on the order of the Assessing Officer. He submitted that when the Assessing Officer has given categorical finding that the sundry creditors are bogus which are outstanding on the last day of the accounting year, therefore, the Ld. CIT(A) was not justified in deleting the addition. He accordingly submitted that the order of the CIT(A) being contrary to facts and law should be set aside and the order of the Assessing Officer be restored. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch Pvt Ltd who was managing the construction on their own and represented by the sons of the owner Sh. Ram Kishan Singh with whom collaboration agreement was made. The father Sh. Ram Kishan Singh was totally ignored and the whole charge has been taken by his son Raghuvinder Singh. The dispute occurred as they were not handing over the possession of third floor and also not clearing the bills relating to construction of building due to which sundry creditors were outstanding in the books of assessee company in the separate head J-174 Building Material . Ledger accounts of various parties relating to this account are also placed at PB 112-117 along with bills at PB-118 to 127. 15.2 Referring to pages 94 95 of the paper book he submitted that the Hon ble High Court has directed to settle the dispute before mediation and conciliation center Delhi High Court which was made on 10/01/2014 by which M/s ASRA Buildtech Pvt Ltd was asked to return ₹ 2 crores and they were also directed to pay ₹ 2 crores as full and final settlement of all the disputes to the assessee company towards construction of building except third floor. Subsequently vide order dated 24/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee against the property sold during that year and the remaining cost of construction is declared in the closing WIP. The property J-174 was purchased in FY 2010-11 by incurring purchase cost of 2.2 crores and cost of construction amounting to ₹ 37,47,310/- was depicted in closing WIP of FY 2010-11, subsequent cost of construction was incurred of ₹ 52,85,490/- due to which WIP as on 31/03/2012 was declared at ₹ 2,90,32,800/- in connection with J-174. There was no construction due to dispute subsequently in FY 2012-13 and 2013-14 and so the same WIP was continued. 15.6 He submitted that the AO who has made the addition of ₹ 4,83,89,009/- on the ground of denial of certain bills by various parties which related to J-174 and after finding the detailed explanation and ledgers accounts, he opted not to refer all the facts and circumstances which were looked into thoroughly by the Ld. CIT(A) who has noticed that all the parties who have denied the bills were relating to J-174 building material only. Most of the creditors have partly accepted and denied bills partly but all work relating to building material of J-174 only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of purchase of material to inflate the expenditure and reduce the profit. He therefore, made addition of ₹ 4,83,89,009/-. We find the Ld. CIT(A) deleted the addition, the reasons for which have already been reproduced in the preceding paragraph. It is the submission of the Ld. DR that the order of the CIT(A) is contrary to evidence regarding the huge bogus outstanding expenses shown as payable on account of purchase of material. It is the submission of the Ld. Counsel for the assessee that the Ld. CIT(A) while deleting the addition has given valid reasons and therefore, the same is justified and ground raised by the revenue should be dismissed. 17. We find the Assessing Officer at various places in the Assessment order has given different figures of outstanding sundry creditors. Although his intention was for addition of ₹ 4,33,89,009/-, however, the Assessing Officer has made addition of ₹ 4,83,89,009/- and the Ld. CIT(A) deleted the excess addition of ₹ 50 lacs i.e. considering ₹ 4,33,89,009/- as the correct figure. We, therefore, do not find any infirmity in the order of the CIT(A) deleting the addition to the extent of ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, it is the submission of the Ld. Counsel for the assessee that assessee has declared this amount in financial year 2018-19 as income i.e. assessment year 2019- 20 after court matter was settled. We, therefore, deem it proper to restore this issue to the file of the Assessing Officer for the limited purpose of verification of the property in dispute i.e.J-174, the outcome of the court case, the settlement arrived at by the assessee and subsequent offer of the assessee for taxation during financial year 2018-19. The Assessing Officer shall decide the issue of allowability of ₹ 52,85,490/- as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the revenue on this issue is accordingly partly allowed for statistical purpose. 20. The ground of appeal No.3 by the revenue reads as under :- 3. Whether on the facts and circumstances of the case and in law Ld. CIT(A) is correct in deleting the addition made by AO on account of cessation of liability u/s. 41 (1) of the IT Act without appreciating the fact that the assessee during the assessment proceedings, itself had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy adjusted against those advances. All these details were filed before the AO and all the ledger accounts were produced before him as noticed by the AO at para 2 of the assessment order. The AO did not mention any discrepancy in the books of the accounts nor he commented in respect of these creditors except recording the surrender of Income. Since the surrender was already retracted and AO was fully aware about the same and ignored the subsequent letter, I don't find any reason to sustain such addition. The AO has failed to appreciate the submissions as well as the relevant details filed before him. Once it is found that the creditors are not static and mistake committed by AR before the AO was rectified subsequently, the AO was duty bound to look into those submissions before making addition in respect of the aforesaid creditors. In fact, assessee has already declared some of these creditors as income by writing off the same or adjusted against the advances and the remaining were still continued under WIP due to dispute with the owners of J- 174, Saket, New Delhi. I therefore delete the addition of ₹ 70,79,504/- and Ground No. 4 is allowed. 23. Aggrie ..... 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