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TMI Blog2020 (12) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,76,088 on account of liquidated damages incurred by the Appellant in the ordinary course of business. 1.1 That the CIT(A) erred on facts and in law in not appreciating that liability on account of aforesaid liquidated damages is allowable as business expenditure under Section 37(1) of the Income-tax Act, 1961. 1.2 That the CIT(A) erred on facts and in law in alleging that the aforesaid liability of liquidated damages is not allowable since the Appellant did not furnish confirmation from the other party, without appreciating that the Appellant had furnished voluminous documentary evidences which, inter-alia, included copies of party ledger account, copy of the relevant contract, copies of the invoices etc. The Appellant craves leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, however, according to him, the evidence produced by the assessee in respect of 'Chandrapura Thermal Power Station' were of the unilateral nature and, therefore, he sustained the disallowance in respect of this party and deleted the amount of Rs. 21,900/- in respect of 'IFFCL'. The relevant finding of the Ld. CIT(A) is reproduced as under: "4. FINDINGS: Grounds 1,3 & 4 were carefully analysed by me. Upon a careful consideration I am of the confirmed view that the same are of highly subjective nature. Hence, I do not feel persuaded to deal with them. Ground no. 2 was carefully examined by me. By reason of the said ground the assessee sought to raise objections to the disallowance of Rs. 22,97,988/- of business expenses booked under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Act. - The expenditure must have been laid out wholly and exclusively for the purposes of the business of the assessee. - The expenditure must not be capital in nature - The expenditure must not be personal in nature - The expenditure must not be incurred for a purpose which is an offence or which is prohibited by any law - The expenditure must not be incurred on advertisement in any souvenir, brochure, etc. published by a political party As a token of proof the assessee also furnished a list of the parties who had made short payments to the assessee by way of liquidated damages. The sum of Rs. 22,97,988/- represented the liquidated damages from two parties i.e. Chandrapura Thermal Power Station. DVC Jharkhand and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was therefore, requested on 27.07.2017 by the undersigned to submit concrete proof of the fact that the liquidated damages claimed by the assessee were confirmed /certified by the above said two parties also. In other words, confirmations for the substantiation of the above claim were specifically demanded by me. On 17.08.2017 the afore stated documents only were produced before me. In my considered view, the materials produced do not satisfy the requirement of the law of burden of proof. Whatever the assessee produced in the form of correspondences were self serving evidence and of unilateral nature. In a nut shell the assessee badly failed to produce the confirmation of Chandrapura Thermal Power Station, DVC Jharkhand and its copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. DR relied on the order of the lower authorities and submitted that disallowance has been sustained mainly on the ground of failure on the part of the assessee to produce confirmation from the party stating the sum of money with held in the form of the liquidated damages. 5. We have heard rival submission of the parties and perused relevant material on record, including the order of the lower authorities. We find that the Assessing Officer has originally made disallowance in respect of expenditure of liquidated damages in relation to two parties, holding the same as penal in nature. But the Ld. CIT(A) has in principle agreed that expenses towards liquidated damages are not penal in nature and on production of confirmation from one part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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