TMI Blog2021 (10) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, and therefore, it was claimed as business loss while computing the profit and loss account for the year under consideration. Firstly in the case of Govinda Infraproperty Pvt. Ltd. (Govinda) in whose account the assessee has written off the advance of ₹ 3,92,00,000/-, there was an agreement between the assessee and the said party for the purpose of developing the assessee s security business across the India wherein the assessee was required to pay service fee of 10% of the business value that service provider would generate for the assessee - it cannot be held that there was no business advance or there can be any iota of doubt that such advance had become irrecoverable which assessee has written off. Once, during the course of carrying out business any advance has been given for the business purpose and the same was not being recovered or it had become irrecoverable due to dispute, then if it has been written off by the assessee, then such a loss has to be allowed in the computation of profit and loss account. It is a decision of the company or the businessman to write off such an advance. There are cogent reasons for non recovery and consequently any loss arising fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposed deduction and liability towards the sub-contractor which were discharged by the assessee on its behalf, however, Om Sai failed to settled the accounts and there arose a dispute between the assessee and Om Sai. There is a letter written by the assessee raising a final demand notice on 01.04.2014 calling upon it to make a payment of ₹ 1,56,64,000/- towards the excess amount towards deductions proposed by Environ Energy - said party did not make the payment. The assessee has also filed the suit against the High Court claiming the amount along with interest and OM Sai has filed a counter claim before the High Court against the assessee for recovery of sum of ₹ 9.30 crores against the appellant. Thereafter, the assessee finally considered that there is no point going through for protracted litigation and took a business decision to write off the amount in its books. Such write off of loss is incidental to the business operation; therefore, we do not find any reason as to why such loss can be disallowed. With regard to Metro Railways Kolkata entire detail and discussion about the manner in which the dispute had arisen and why the assessee was forced to write of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to business, due to the non-recovery of certain business advances made to certain parties in the normal course of its business. 2. That the Ld. A.O. and the Ld. C.I.T.(A) have erred in ignoring that such loss incidental to business, upon being written off in the Books of the Appellant is a claimable deduction allowable u/s 28 r.w.s. 37 of the Income Tax Act, 1961. 3. That the Ld. A.O. and the Ld. C.I.T.(A) have erred in holding that the deduction claimed on account of advances written off was a claimable deduction only u/s 36(l)(vii) r.w.s.36(2) of the Income Tax Act, 1961 but was impermissible in the case at hand since the Appellant had failed to meet the statutory pre-conditions stipulated therein. 4. That the Ld. A.O. and the Ld. C.I.T.(A) have erred in holding that the Appellant s method of computing the disallowance u/s 14A of the Income Tax Act, 1961 is not in accordance with Rule 8D of the Income Tax Rules, 1962. 5. That the Impugned Orders of the Ld. A.O. and the Ld. CIT(A) suffer from illegality, infirmity, and are devoid of any merit. The same are therefore prayed to be quashed and the relief(s) prayed for by the Appellant may be pleased to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of computing the profit and loss of the business/profession u/s. 28 r.w. section 37 of the Act for the relevant assessment year. During the course of the assessment proceedings the ld. A.O. had sought details in respect of the aforesaid business advances, the reasons for the appellant writing off the same in the books and the justification for claiming the same as business loss for computation of income. All the details along with evidences were duly provided to the ld. A.O. The appellant also explained that business advance given by the appellant to the parties during the course of business with them could not be received back by the appellant despite best efforts and, therefore, it took a business decision to write off the same. Thereafter, the appellant urged the ld. A.O. that the loss incurred in not getting back the trade advances and consequential writing off the same in the accounts should be allowed as a deductible expenditure u/s 28 r.w. section37 of the Act. 4. Further, ld. Assessing Officer noted that the assessee had made investment of ₹ 219,58,096/- in equity shares as on 31st March, 2015 as against ₹ 1,86,83,563/- as on 31.03.2014 and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01/04/2012 and assessee going to make it payments continuously upto 09/12/2013. When there was disagreement between them, what was the need to make further payments. In the case of M/s Om Sai Assotech Pvt. Ltd., the assessee has not submitted the ledger accounts of earlier period and in the F.Y. 14-15, the opening balance was ₹ 1,56,77,731/- which has been written off. Regarding the efforts made for recovery, copy of two e-mail printouts have also been submitted by the assessee where the message are as under:- 1. please note as informed earlier we are unable to refund the advances since the funds are not readily available with us. 2. Presently we are not in a position to refund the advances. The above communication is not sufficient to prove that there were proper efforts to make the effective recovery, that too against such a huge amount of advances. Besides these facts, which were considered relevant to discuss here, the legal position as discussed above also cannot permit an assessee to make claim of amounts written off which were earlier not taken into account as income. The provisions of Sec. 36(1)(vii) read with section 36(2) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Client (appellant). Yearly business of ₹ 50,00,00,000/- was also promised by Govinda and Advance of ₹ 4,15,00,000/- was given on 03/05/2011 to Govinda as per the Agreement dated 02/05/2011. 9. Thereafter disputes arose between the appellant and Govinda regarding the following businesses procured by appellant, which were claimed to have been sourced/procured by Govinda Business developments with Kolkata Metro Railways (F.Y. 2011-12), Business developments with M/s Environ Energy Corpn. India P. Ltd. (F.Y. 2012-13) Business developments with AGC Network Ltd. for subcontract of work of Hindustan petroleum Corporation Ltd. (F.Y. 2013-14) Business developments with Wal-mart India. 10. In view of these disputes with regard to business development services of Govinda and being observed that no substantial, profit earning business was received by the appellant by virtue of the efforts of Govinda, the appellant made several correspondences with Govinda (copies of which were submitted before the ld. CIT (A)) for pursuance of business with them, extension of the contract, seeking of refund of the advance and ultimately the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,50,000/- was all made to Linton, Linton intimated the appellant that it had suffered a loss of ₹ 25,00,000/- on the disposal of the rejected fabric and it was thus requested by them to the appellant to increase the Contract value by ₹ 25,00,000/-. 16. Vehemently opposing the above, the appellant company immediately vide its letter dated 25/06/2012 informed Linton that they were in no way liable for any loss that Linton may suffer due to its negligence. It was also informed to Linton that based on the assurances extended by them to the appellant about the execution of the PO, the termination of the Order was not sought. 17. Also, as per the request for further advance by Linton, the appellant company again in full and good faith made all advance payments totaling to the total consideration as per the PO by the year end of 2013 which was duly acknowledged by Linton vide its letter dated 04/04/2013. 18. Thereafter as four years had passed and there was no work yet done on the said order,thus, finally realizing the futility of the Order, the appellant company immediately vide its letter dated 15/01/2014 informed Linton of the termination of the Order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learnt that certain excess payments were made by the appellant on behalf of OM Sai and thus a total amount of ₹ 1065.37 lakhs were required to be deducted from the total payments required to be made to OM Sai. The said amount also included the amount paid by VIOM Networks towards the salary of Orion Security guards on the different sites on behalf of OM Sai. 24. To the above, OM Sai vide its email dated 17.07.2013 accepted the payments required to be made to Orion Securities, which was by mistake made to OM Sai. 25. The appellant company vide repeated mails duly informed OM Sai about the said proposed deductions and also of its liability towards the sub-contractors which was discharged by it. Emails were sent requesting OM Sai to come forward and hold a meeting to settle the accounts between the parties. However, OM Sai failed to hold any discussions for settlement of accounts and in fact made false allegations on the appellant of acting unreasonably. 26. Eventually, since OM Sai failed and neglected to settle the account and to refund the excess amount towards deductions proposed by Environ, the appellant was constrained to address a final Demand Notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement dated 03/06/2011 ( MOA for short) was finally executed between the appellant and KMR. Immediately upon signing of the MOA, the appellant started mobilizing manpower and material and commenced activities which included site visits. The appellant was however shocked to notice that when it s personnel arrived at the respective locations/sites, the said sites were not ready for the appellant to perform its obligations as per the MOA. As a result of the inaction on the part of KMR, the appellant incurred substantial losses in the form of project overrun cost. The appellant had communicated this situation to KMR vide letters dated 27.01.2014 and 11.02.2014. The appellant however did not receive a response from KMR, without which it could not get necessary clearance to begin with the vital security equipment. The foregoing also resulted in failure of the appellant to utilize various listed materials because the KMR failed to release dispensation of overseas inspection under the provisions of the tender document, despite requests to this effect, being made by the appellant. 33. Surprisingly however, despite the considerable delays attributable to KMR, the appellant was shock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reply, issued another notice dated June 25, 2015 stating that it is serving the 48 hours notice on the appellant and thenceforth the contract shall stand rescinded and that after the expiry of the 48 hour period, the contract shall stand rescinded with immediate effect in terms with clause 62 of General Condition of Contract, the balance work will be carried out without the participation of the appellant and the Tender Security Deposit shall be forfeited and the Performance Bank Guarantee shall be encashed. 36. Thus in order to cover up its own failures and omissions, KMR invoked the extreme measure of terminating the MOA which was disputed by the appellant, of forfeiting the tender security deposit and also encashing the BG. 37. Inasmuch as disputes and differences arose between the parties as aforesaid, the appellant by it s letter dated August 12, 2015 invoked the Arbitration clause in its MOA. KMR having agreed to go ahead with the arbitration, thereafter again a difference/dispute arose between KMR and the appellant regarding appointment of arbitrator for adjudication of the disputes relating to termination of the contract. The matter travelled upto the Hon ble Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the relevant A.Y. and write off, of the same in the accounts of the appellant. If that would be so, it was totally irrational when he disallowed such advances, which had already become irrecoverable, as not business loss and considered the same as bad debt falling within the scope of provisions of section 36(1)(vii) r.w. section 36(2) of the Act. The appellant thus submitted before the ld. CIT(A) that the basis of disallowance was therefore, a misunderstanding of facts and an erroneous application of the provisions of the said sections. The appellant also submitted before the ld. CIT(A) that the ld. AO on the basic wrong presumption that the said write off of the business advances fell under the provisions of section 36(1)(vii) r.w. section 36(2) of the Act had failed to appreciate that for giving a bona fide business advance, that too as per agreement/purchase order/mutual consent, as the case may be, it is not necessary for an assessee to be engaged in the business of money lending. The appellant thereafter submitted that thus it s case is that for such advances, the same cannot be included in the income of earlier years, as is the case with bad debts coming within the scope o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 03.10.2018 seeking information and explanation from the appellant u/s. 133(6) of the Act, in connection with the evidences submitted by the appellant before the ld. CIT(A), during the appellate proceedings of the relevant A.Y. (2015-16). 48. The ld. DCIT had asked the appellant vide the said letter dated 03.10.2018 that the letter dated 20/12/2013 placed at Page 104 of the Paper book filed with the written Submission before the ld. CIT (A),purported to be written by the appellant to Govinda, was however issued on the letter head of Govinda instead of the letter head of the appellant and thus why the same should not be considered to be fabricated. 49. The appellant in response to this query submitted and explained that the same was very clearly a mistake on it s part whereby the draft prepared by Govinda was inadvertently enclosed in the Paper book submitted by the appellant. 50. The appellant submitted that Govinda, being the Service Provider to the appellant, had procured a business proposal for the appellant with AGC Network Ltd. for sub-contract of work of Hindustan petroleum Corporation Ltd. on back to back basis and the proposal for the same was given by Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant s office in Delhi dealing with the A.O. was not aware of the correspondences at the Kolkata office, because after 2016, due to disputes with the KMR contract, the Kolkata office was lying closed and defunct. The appellant submitted that it was only during the appellate proceedings, when the Director of the Company came to know of the matter, that the documents were all traced and recovered from the Kolkata office. Hence for this reason the evidences submitted before the ld. CIT(A) could not be furnished during the assessment proceedings. 56. Pursuant to the above, the ld. DCIT in connection to the appellant s case, gave her specific comments in a Remand Report dated 15.11.2018 to the ld. CIT(A), accompanied by a covering letter of the Additional Range Head dated 16.11.2018. A copy of the ld. DCIT s Remand Report was thereafter forwarded to the appellant by the ld. CIT(A). 57. The appellant submitted its response to the ld. DCIT s Remand Report before the ld. CIT(A) vide Reply dated 21.12.2018 58. The ld. DCIT referring to her earlier notice issued u/s 133(6) of the Act to the appellant, stated in the Remand Report that the appellant s response to her query reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64. The ld. DCIT in the impugned Remand Report had stated with regard to Govinda (₹ 3,92,00,000/-) that the appellant s contention appears to be true that it had offered around ₹ 98 lacs receipts on account of dispute, but this fact was not confirmed by the other party and the contention of the appellant cannot be viewed in isolation. 65. In response to the above, the appellant submitted its detailed response in page 05 of the Reply dated 21.12.2018. 66. The ld. DCIT in the impugned Remand Report had stated that the appellant had submitted documents related to suit filed in the High Court of Delhi vide petition dated 28/08/2014 for recovery of the excess payments made. However, the appellant had written off the amount due in the same F.Y. 2014-15 without waiting for even the initiation of legal proceedings. The ld. DCIT with regard to the appellant s write off, of retention security deposit given to Metro Railway, Kolkata, stated that the appellant claims to have filed case of contempt before Calcutta High Court and on the other hand writing off the amount before waiting for the outcome of the case. 67. With regard to the other small balances of adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. Before going into the specific allegations of the ld. CIT(A) vis- -vis the appellant s submission, it is pertinent to explain the background facts which gave rise to the advance given to Govinda being written off : BACKGROUND: (i) The appellant being an emerging company in the business of integrated security solutions provider, was in the lookout for more business and growth. In this connection Govinda was a Private Limited Company actively engaged in the business of providing Business Development services to its various clients in PAN India. Govinda thus approached the appellant company on 10/08/2010 with a proposal to engage them as a Service Provider who, based on their expertise in the said field and also based on their strong connections in the various Government Departments could help the appellant company, being an emerging company, gain various businesses. Letter dated 10/08/2010 is enclosed at pages 83 of the paper book. The said proposal was accepted by the appellant company vide its letter dated 12/08/2010 (copy of letter enclosed at page 84 of the paper book) and pursuant to various discussions and formalities, the propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- was paid to Govinda on 14/05/2013 but it was on account of a certain payment made merely on behalf of the Service provider. It was not on account of Advance against the Agreement entered into by the Appellant with the Service Provider. (iii) Now, however during the years, business was gradually obtained by the appellant company and there was continuous dispute with Govinda as to whether the same was on account of the efforts of Govinda or due to efforts of the appellant company. Also there were disputes regarding sums to be paid to Govinda. The disputes arising between the appellant company and Govinda are listed out as under: - Re: Business developments with Kolkata Metro Railways (KMR) - F.Y. 2011-12 Pursuant to initial discussions and proposals to the appellant company, Govinda on 02/09/2010 vide a letter (Copy enclosed at page 92 of the paper book) informed the appellant company of a Tender by Kolkata Metro in connection with providing security arrangements in the form of CCTV, etc at the Stations, with the suggestion that the appellant company should participate in the same and try to secure the said business which would be of a big amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telecom Towers on PAN India basis. Pursuant to the same the appellant vide it s letter dated 12/08/2012, duly confirmed to Govinda for going ahead with the said discussions. Copy of the said letters are enclosed at pages 96 and 97 of the paper book. Thus, pursuant to the above, Contract dated 14/08/2012 was executed with Environ for comprehensive operations and maintenance of sites in Rest of West Bengal (ROWB) circle maintained by VIOM Networks (Principal)amounting to ₹ 18.00 Cr. Immediate to the above, Govinda immediately raised its Invoice on the appellant vide its letter dated 14/08/2012. Copy enclosed at page 98-98a of the paper book. Acknowledging the above Invoice, the appellant company vide its letter dated 16/08/2012 informed Govinda to take the necessary steps to ensure that Environ does not impose unnecessary and frivolous deductions on them. Copy of the same is enclosed at page 99 of the paper book. However, without taking any steps to ensure that Environ does not impose frivolous deductions on the appellant, Govinda, simply in a hurry to extract money from the appellant, raised its Invoice vide letter dated 15/04/2014 on the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mart India it was informed by Govinda vide its letter dated 10/04/2014 that it proposed to enter into discussions with the said company for securing its business for the appellant which would work out to ₹ 8 crores in value. Copy of the said letter is enclosed at page 107 of the paper book. Immediate to the above, the appellant company, vide its letter dated 15/04/2014 informed Govinda that they were already in discussions with Wal-mart for the said business and thus Govinda was not required to proceed with any discussions at their end. Copy of the said letter is enclosed at page 108 of the paper book. Thus it is again seen that the appellant company regarding it s business with Wal-mart also entered into disputes with Govinda. (iv) Thus, over a period of time, in view of the above disputes with regard to business development services of Govinda and being observed that no substantial, profit earning business was received by the appellant by virtue of the efforts of Govinda, the appellant made several correspondences, with this debtor party during the span of the four years, for pursuance of business with them, extension of the contract, seeking of ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying forward the unrealizable and dead amounts of advance, decided to write off the same in its books before the yearend 2014-15. Accordingly on 27/03/2015, the balance advance of ₹ 3,92,00,000/- lying unpaid in it s books of account was written off, by the appellant and resultantly the appellant incurred a loss of ₹ 3,92,00,000/-in carrying out the operation of the business . The said action of the appellant shall be evident from the copy of the ledger accounts of the said party in the books of the appellant for the F.Y.s.2011-12, 2012-13, 2013-14 2014-15 placed at pages 109-112 of the paper book. Herein it is pertinent to mention that this advance of ₹ 4,15,00,000/- given to Govinda by the appellant on 03/05/2011 was the subject matter of assessment for A.Y.s. 2012-13, 2013-14 and 2014- 15 wherein the efficacy of the advance given to Govinda was never questioned in the previous A.Y.s. Now when the said advance was written off in the assessment year under consideration, it being questioned on the grounds of commercial expediency thereby a ploy by the Department for disallowing the appellant s claim. Also, it is a matter which is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant s Response Letter dated 20/12/2013 placed at Page 104 of the Paper book filed with the written Submission before the ld. CIT(A), purported to be written by the appellant to Govinda, was however issued on the letter head of Govinda instead of the letter head of the appellant and thus why the same should not be considered to be fabricated. The same was very clearly a mistake on the appellant s part whereby the draft that was prepared by Govinda was inadvertently enclosed in the paper book and submitted by the appellant. The fact is that Govinda, being the Service Provider to the appellant, had procured a business proposal for the appellant with AGC Network Ltd. for sub-contract of work of Hindustan petroleum Corporation Ltd. on back to back basis and the proposal for the same was given by Govinda to the appellant vide the letter dated 15/12/2013 which had been placed at page 103 of the paper book. The appellant had immediately given the go ahead for the said proposal verbally. However Govinda wanted a go ahead in writing and thus it prepared a draft of the said letter to be issued by the appellant, in its own letter head an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter, that the documents were all traced and recovered from the Kolkata office. Hence for this reason the evidences submitted before the ld. CIT(A) could not be furnished during the assessment proceedings. REMAND REPORT AND ISSUES RAISED: (xi) Pursuant to the above, the ld. DCIT provided specific comments and raised queries as well, in a Remand Report dated 15.11.2018 to the ld. CIT(A), accompanied by a covering letter of the Addl. CIT, Range-4, New Delhi dated 16.11.2018. Copy of the Remand Report is enclosed at pages 578 to 582 of the paper book . (xii) A copy of the ld. DCIT s Remand Report was thereafter forwarded to the appellant by the ld. CIT(A), in response to which the appellant submitted it s Reply dated 21.12.2018 (copy enclosed at pages 584 to 593 of the paper book) before the ld. CIT(A), as detailed out in a table hereunder: Issue raised/stated by DCIT in Remand Report Appellant s Response The appellant s response to query regarding (letter dated 20/12/2013 placed at Page 104 of the Paper book filed with the written Submission before the ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income. Hence the appellant s contentions in this regard were not verifiable. The ld. DCIT had clearly admitted that the documents submitted by the appellant during the appeal proceedings did show that it had obtained registration certificate at 216A A.J.C. Bose Road, 2nd Floor, Kolkata 700017. Further the Certificate of Enlistment of the Kolkata Municipal Corporation in the name of the appellant showed the said address in Kolkata which clearly prove beyond any doubt that indeed the appellant has a Branch (Work) office in Kolkata. Thereafter, the statement of the ld. DCIT that the said fact still remained unverified was indeed a very casual statement which could hold any weightage at all. Further it was submitted by the appellant that nowhere is it a requirement of law that the Branch office of any Company has to be stated in the Returns, in the accounts, in the letter head or in the letters of the Company. The appellant also submitted that the ld. DCIT also pointed out that the letters from Govinda were all addressed to the appellant at its Delhi address without appreciating that the Kolkata Branch office was in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes had taken place, that the Director remembered that certain correspondences could be found at the Kolkata office and thus after intensive searching that the file was retrieved from the Kolkata office. With regard to advances given to Govinda being written off (₹ 3,92,00,000/-), the appellant s contention appears to be true that it had offered around ₹ 98 lacs receipts on account of dispute, but this fact was not confirmed by the other party and the contention of the appellant cannot be viewed in isolation. The ld. DCIT stated that in view of the background of the dealings between the appellant and the party, it is a matter of perspective to infer that whether the appellant had gained ₹ 0.98 Cr or it had lost ₹ 3.92 Cr. The appellant submitted that it had stated earlier, in the alternative and without prejudice to the fact that the sum due from Govinda had in fact become irrecoverable and thus the same was written off, and that if the dispute had not arisen with Govinda, then 10% of the contract value as claimed and contracted with Govinda amounting to ₹ 4.90 crores would have become payable as servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 when, after lots of insistence and follow ups, a refund of ₹ 23,00,000/- was received from them. Pursuant to that, on realizing the futility of recovery of the balances, on 27/03/2015 the balance lying in the account of Govinda Infra was written off as loss incidental to business (evidencing the same, Govinda s ledger account from 01.04.2011 to 31.03.2015 is enclosed at pages 109-112 of the paper book). The appellant further submits that since then, it had no business transactions with Govinda and no communication whatsoever has been there between Govinda and the appellant. Lastly it is submitted by the appellant in this regard that Govinda is now a defunct company and even all efforts by the appellant to contact them has failed. Thus the notices u/s 133(6) of the Act issued by the ld. DCIT/AO at the end of the year 2018 had seemingly gone non replied to by Govinda. The appellant in this regard would like to add by submitting that it is not understood it as to how the no reply from Govinda can determine the genuineness of its transactions with the appellant which were dated four years back. In such a scenario, after a gap of more than four years and that too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledge the inadvertent action on the part of the appellant and to excuse the same. The appellant thereafter submits that however, the ld. CIT(A) has completely ignored the humble and honest admission of mistake of the appellant and based on this alleged premise upheld the Ld. AO s disallowance of advance written off. The appellant also submits in this regard that it is pertinent to mention that a perusal of the paper book submitted before the Ld. CIT(A) would reveal that the appellant, with regard to its transactions with Govinda had enclosed documents supporting the same, from pages 83 to 112. The same contained various letters exchanged between the appellant and Govinda with regard to numerous discussions and transactions. All the said letters and documents have been all examined in full details by the ld. AO and the ld. CIT(A) and all of them have been found to be genuine. The appellant submits that out of the 21 (to be specific) letters exchanged between the appellant and Govinda, only one letter has been found to be incorrect which has also been in full humility accepted as a mistake. In these circumstances, it is grossly unfair of the ld. CIT(A) to arrive at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore it is beyond comprehension why one party will guide and advise the other party in drafting a simple two line letter and that too under its signature and letter head. That appellant s contention regarding Kolkata office is not verifiable as from the perusal of appellant s records and its ITR/Form 3CD/Ledger accounts submitted during assessment proceedings it is revealed that there is no branch office at Kolkata. The letter head of the appellant showed no branch office with Kolkata address and that the letters from these two parties were addressed to the appellant company at its Delhi address. Not a single letter was found addressed to the appellant s Kolkata branch office, however, during the course of appellate proceedings before the ld. CIT(A), the documents submitted by the appellant showed that it had obtained registration certificate at 216A A.J.C. Bose Road, 2nd Floor, Kolkata 700017 but it was not mentioned in any correspondence with the parties as well as in the return of income. That if the contention of the appellant, that whether there is any branch office at Kolkata or not, is not verifiable, then the question of correspondence with Kolkata offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ERCIALS Refundable Advance/Deposit In the interim, on the request of Service Provider, the Client has agreed to pay ₹ 4,15,00,000 (Rupees Four Crore Fifteen Lakh only) as a non-interest bearing and nonadjustable refundable advance/deposit. It is expressly agreed between the parties that amount would be refunded forthwith in case the Service Provider fails to develop business for the client as committed hereinabove by the end of the year. In any case, the advance/deposit are refundable latest by March 31, 2013 . With regard to Breach of Contract or any differences and claims, it was laid out in the Agreement vide Clause XIII that in case of any dispute or differences or claims or demands whatsoever between the First party and the second party which do not get resolved amicably, the matter shall be referred to Arbitration before a Sole Arbitrator to be mutually appointed by both the parties . Thus in terms of the Agreement dated 02/05/2011 , the first instalment of ₹ 4,15,00,000/- was paid on 03/05/2011 to the Service provider as Advance against the said service to be provided. From the above it is crystal clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Metro railways, Kolkata project. The appellant submits that the contract between the appellant and Govinda had nothing to do with the Kolkata Work office. Govinda s dealing was with the appellant company in Delhi, however since it was based out of Kolkata, simply for convenience sake, the letters were received by the appellant in its Kolkata office. Thus this allegation of the ld. CIT(A) that confusion regarding letterhead is also an important pointer to the ambiguity in the nature of the transaction is indeed a very casual statement/allegation which cannot hold any weightage at all and thus has no basis to hold ground. In addition to the above the appellant would further like to submit that the ld. CIT(A) has alleged that theory of prudence would suggest that no prudent business man will advance such sums without well laid down outcome agreements and during remand or appellate proceedings the appellant has not come up with any cogent reasons as to why the entity was chosen with respect to its proven track record. The appellant in this regard would like to reiterate that it had advanced ₹ 4,15,00,000/- to Govinda on the basis of a well laid down Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of the work assigned, as an incentive/remuneration for successful completion of such work and is different from advance which is given before completion of the work assigned. Since the appellant had given refundable advance of ₹ 4,15,00,000/- to Govinda (which by no stretch of imagination can be considered as a commission), hence there was no requirement of deducting tax on such payment as has been held in the following judicial pronouncements: The Hon ble ITAT, Hyderabad in the case of Shri A. Naga Srinivas vs. DCIT, Circle 13(1), ITA No. 944/Hyd/2017 held the following: 10. Even on merits, we find that the advance received by the assessee towards his professional fee, when it is returned, is not covered by any of the provisions of Chapter XVIIB requiring TDS. However, in view of our holding that the re-assessment proceedings are not valid, the grounds against the disallowance u/s 40(a)(ia) of the Act need no adjudication. Therefore, grounds 5 6 are not adjudicated at this stage. The Hon ble ITAT, Bangalore in the case of Prestige Estates Projects Ltd. vs. ACIT, Circle 18(1), Bangalore reported in [2021] 125 taxmann.com 127 held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were made to Govinda for procurement of business and payment amounting to ₹ 4,15,00,000/- was made on 03/05/2011. Further Govinda was engaged for procuring business for the appellant from various concerns like Metro Railways, Kolkata, Environ Energy Corporation India Pvt. Ltd., AGC Network Ltd. and Walmart India, out of which two concerns are in the nature of PSUs and it is not known how the appellant could take advantage of the tendering process by engaging an entity like Govinda. Most of the public procurements done by such companies are transparent and undertaken through an open competitive bidding process. Similarly Walmart India is a reputed MNC and therefore explanation offered by appellant is of doubtful vintage. Moreover during the course of remand proceedings the AO brought out inconsistencies in the approach of the appellant which includes issues of clarifications on behalf of Govinda and non delivery of letter u/s 133(6) of the Act at the designated address. Under the provisions of the Act, the onus of proving that expenditure has wholly and exclusively related to the business of the appellant and that the same was incurred on account of commercial expedien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tendering process by engaging an entity like Govinda ( when out of concerns like Metro Railways, Kolkata, Environ Energy Corporation India Pvt. Ltd., AGC Network Ltd. and Walmart India, two concerns were in the nature of PSUs and Walmart was a MNC ), stands explained from the role of Govinda as a Service Provider, explained above. Further there is no such requirement of law that for participating in tenders of PSUs or MNCs, the help of Service Providers cannot be taken or are not required. It is quite a practice in the service industry to hire Service Providers for successful bidding of tenders as explained above. Having submitted the above with regard to the ld. CIT(A) s further allegations it is submitted by the appellant that there is no inconsistency in the appellant s approach regarding issues of clarifications on behalf of Govinda and non delivery of letter u/s 133(6) of the Act at the designated address. Firstly it is submitted herein that the ld. CIT(A) has not specified which issues were clarified by the appellant on behalf of Govinda which led to inconsistency, hence the said allegation cannot be met completely. As far as the ld. CIT(A) s allegation regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Herein it is pertinent to mention that this advance of ₹ 4,15,00,000/- given to Govinda by the appellant on 03/05/2011 was the subject matter of assessment for A.Y.s. 2012-13, 2013-14 and 2014- 15 wherein the efficacy of the advance given to Govinda was never questioned in the previous A.Y.s. Now when the said advance was written off in the assessment year under consideration, it being questioned on the grounds of commercial expediency thereby a ploy by the Department for disallowing the appellant s claim. Also, it is a matter which is in the domain of a business man where considering the commercial expediency of his business, an advance is given in course of his business. The same cannot be questioned by the Department.The Hon ble S.C. in its recent decision has held that commercial expediency has to be adjudged from the point of view of the assessee and not the Revenue in the case of Shiv Raj Gupta vs. CIT reported in (2020) 425 ITR 420 , where the Hon ble Apex Court held that commercial expediency has to be adjudged from the point of view of the assessee and that the Income-tax Department cannot enter into the thicket of reasonableness of amounts pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant s explanation fails the test of human probability, without however specifying and/or explaining as to how these decisions are applicable in the appellant s case or how the appellant s explanations fails the test of human probabilities as per these decisions. Further both these decision of Durga Prasad Moore (supra) and Sumati Dayal (supra) are distinguishable on facts from the appellant s case. In the case of Sumati Dayal (supra) , the assessee had explained that the credited amounts represent her winnings in races. On facts, it was found that the explanation was unsatisfactory because the assessee had no expertise in races; to accept that a race goer had won jackpot events so many times in a short period of two years, was highly improbable; in the books of account of the assessee, the amount representing travelling expenses of assessee to Hyderabad and Bangalore had not been debited at all; likewise, losses suffered by the assessee in the races had not been shown at all in the books of account and lastly, from the year 1972 onwards, she had stopped going to races as from that year onwards, winnings in races were brought within the tax purview ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that in the appellant s case the ld. CIT(A) has nowhere alleged that the appellant has executed any document itself or that it has got any document executed in its favour so as to evade tax, as in the case of Durga Prasad Moore (supra) . Also no doubtful/suspicious instances have been pointed out by the ld. CIT(A) or no such surrounding circumstances have been pointed out by the ld. CIT(A) which showed that the apparent was not the real on which the test of human probability (as laid down in the case of Durga Prasad Moore (supra) ) can be applied to. All the allegations/suspicion of the ld. CIT(A) regarding - notice u/s 133(6) of the Act not being replied to by Govinda, correspondences between the appellant and Govinda being hand delivered in the appellant s Branch Office in Kolkata but address on the letter head being that of the appellant s Delhi office, one letter out of 21 letters to Govinda being submitted on the letterhead of Govinda and signed by Govinda as an inadvertent mistake by the appellant, have all been duly explained by the appellant before the ld. CIT(A). Hence in the appellant s case, there are no such surrounding circumstances (none of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A). Moreover it is laid down by the Hon ble ITAT, Delhi in the case of Brij Bhushan (supra) that the theory of preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side and the conclusions have to be drawn based on certain admitted facts and materials and not based on presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material, then nothing can be implicated against the assessee. In light of the same as in the appellant s case nothing has been proved against it with aid of any direct material, the theory of preponderance of probability' cannot be applied in the appellant s case. In view of the above the ld. CIT(A) s alleged premise for upholding the ld. A.O. s disallowance of the claim of Write off, of advances given to Govinda has no basis to stand. Lastly , the appellant would further like to submit that the ld. CIT(A) has alleged that the appellant has failed to prove the genuineness and commercial expediency of the expenditure incurred. No prudent reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would involve huge amounts of legal fees and also unfruitful investment of time and effort. Hence the appellant, pursuant to the recovery of only ₹ 23,00,000/- (after total non refund of the advance even after the expiry of the agreed period of time limit being March 31, 2013 and beyond), desirous thus of not pursuing the balance refund and of not carrying forward the unrealizable and dead amounts of advance, decided to write off the same in its books before the year end 2014-15. Accordingly on 27/03/2015, the balance advance of ₹ 3,92,00,000/- lying unpaid in its books of account was written off by the appellant and resultantly the appellant incurred a loss of ₹ 3,92,00,000/- in carrying out the operation of the business. The said action of the appellant shall be evident from the copy of the ledger accounts of the said party in the books of the appellant for F.Ys 2012-13, 2013-14 2014-15 placed at pages 109-112 of the paper book. Thus the above sufficiently proves the genuineness and commercial expediency of the expenditure incurred by the appellant. As far as the ld. CIT(A) s allegation is concerned that no prudent reasonable man wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad held that once it was established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. Relevant extracts of the same are reproduced below: Under section 37(1) of the Income-tax Act, 1961, the jurisdiction of the Revenue is confined to deciding the reality of the business expenditure, viz., whether the amount claimed as a deduction was factually expended or laid out and whether it was wholly and exclusively for the purpose of the business. It must not, however, suffer from the vice of collusiveness or colourable device. The reasonableness of the expenditure could be gone into only for the purpose of determining whether, in fact, the amount was spent. Once it is established that there was a nexus between the expenditure and the purpose of the business, the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) The Order was for 5250 pieces of Complete Uniform comprising of Shirt, Trouser, Belt and Cap at ₹ 2000/- per set. Also 2625 number of shoes at the rate of 480 was ordered. Thus a total Purchase Order ( after discount ) of ₹ 1,17,50,000/- was drawn up. A complete list of such caretakers including the Site/Tower Number, the Site/Tower Name and the Caretaker s name who manned the said site whose uniforms were to be made were also provided with the PO and the same can be seen at pages 114-152of the paper book. (iii) The Purchase Order, laying down the Terms and Conditions of the Purchase/ Supply, laid out that against such order of Purchase, 100% advance would be given in as much the uniforms required immediate investment in the materials and also the uniforms being tailor made specific to each caretaker, the payment was all to be made in advance. With regard to defective material it was clearly laid out that Any material which is found defective due to manufacturing defects/not as per specifications, will be notified to you within 15 days from the receipt at site, will be rejected and the same will be replaced and removed at own cost by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t page 167 of the paper book), expressing displeasure to the rejection, however promised the appellant of changing the fabric and they assured the appellant of completing the Order as per specifications. Further advance for procurement of other materials as per the Order was requested and the same was also advanced by the appellant in good faith. The appellant company was concerned about the proper execution of the Order and the same was expressed to Linton vide letters dated 05/12/2011 and 15/12/2011. Copy of the said letters are enclosed at pages 168 and 169 of the paper book. (vi) However, suddenly on 13/06/2012, when an advance of ₹ 1,11,50,000/- was all made to Linton, vide its letter dated 13/06/2012 Linton intimated the appellant that it had suffered a loss of ₹ 25,00,000/- on the disposal of the rejected fabric and it was thus requested by them to the appellant to increase the Contract value by ₹ 25,00,000/- (Copy enclosed at page 170 of the paper book). Vehemently opposing to the abovementioned, the appellant company immediately vide its letter dated 25/06/2012 informed Linton that they were in no way liable for any loss that Linton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Ultimately in view of the delay in the entire Order, and in order to avoid long drawn litigation process, the appellant company was consequently forced to write off, as on 27/03/2015 before closing the books for the said year, the entire advance lying unpaid in its books of account and resultantly incurred in the said year, a loss of ₹ 1,17,50,000/- in carrying out the operation of the business. The Ledger account of Linton is enclosed at pages 153-157 of the paper book. It is to be noted here that the appellant all along, having paid the huge sums of ₹ 1,11,50,000/- was hopeful that the Order would be completed. Only during the year under assessment being theF.Y.2014-15 did the appellant realize that inspite of repeated correspondences and pressures, the money was irrecoverable and only then the write off was done. (ix) Accordingly, the said loss incidental to the operation of the business was claimed as deduction for computing the profit and loss of the business/profession u/s28 of the Act for the assessment year under appeal. (x) Before concluding on the said topic, bringing out the action of the ld. A.O., it is stated that the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sent by it to Linton were all hand delivered. The Receipt Acknowledgement of the letters of the appellant, as stamped by Linton were all enclosed by the appellant along with the reply to the ld. DCIT, for her perusal which are now also enclosed at pages 568 to 577 of the paper book. The ld. DCIT sought an explanation as to the reason why the evidence submitted before the ld. CIT(A) could not be furnished during the assessment proceedings. The appellant submitted that having it s branch office in Kolkata, most of the documents and correspondences relating to the debtors from Kolkata were all kept in the Kolkata office. During the course of the assessment proceedings before the A.O., however the person of the appellant s office in Delhi dealing with the A.O. was not aware of the correspondences at the Kolkata office, because after 2016, due to disputes with the KMR contract, the Kolkata office was lying closed and defunct. It was only during the Appellate proceedings, when the Director of the Company came to know of the matter, that the documents were all traced and recovered from the Kolkata office. Hence for this reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice in Kolkata at is also not verifiable as from the perusal of appellant s records and its ITR/Form 3CD/Ledger accounts submitted during assessment proceedings it is revealed that there is no branch office at Kolkata. It was also stated that the letter head of the appellant showed no branch office with Kolkata address and that the letters from these two parties were addressed to the appellant at its Delhi address. Not a single letter was found addressed to the appellant s Kolkata branch office. Howeverduring appellate proceedings before the ld. CIT(A), the documents submitted by the appellant showed that it had obtained registration certificate at 216A A.J.C. Bose Road, 2nd Floor, Kolkata 700017 but it was not mentioned in any correspondence with the parties as well as in the ROI. The ld. DCIT had clearly admitted that the documents submitted by the appellant during the appeal proceedings did show that it had obtained registration certificate at 216A A.J.C. Bose Road, 2nd Floor, Kolkata 700017. Further the Certificate of Enlistment of the Kolkata Municipal Corporation in the name of the appellant showed the said address in Kolkata which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng totally stalled, there was absolutely no activity between the Delhi office and the Kolkata Branch office.During the assessment proceedings in the year 2017, thus the person looking after the taxation matter of the Delhi main office was not aware of the correspondences which were exchanged by the parties in the Kolkata office. Only when during the appellate proceedings, the Director of the Company came to know of the matter, that the documents were all traced and recovered from the Kolkata office, as he informed the Delhi office of the correspondences between the appellant company and the parties in Kolkata office. Infact it was that since major financial disputes had taken place, that the Director remembered that certain correspondences could be found at the Kolkata office and thus after intensive searching that the file was retrieved from the Kolkata office. That Linton was given an advance of ₹ 1,00,00,000 on 28.06.2010. On 21.09.2010, Linton while acknowledging receipt of advance informed the appellant that it had duly set up the required infrastructure for the preparation and delivery of order. Thus it was to be noted that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation of giving 100% advance by making full payment of ₹ 1,17,50,000/- even when there were no sign of delivery by the party. The Ld. DCIT with an absolute prejudiced and predetermined mindset was picking up individual terms of the Contract. The appellant also submitted that the Order having been placed and evidenced by the Purchase Order, the payments having been made by the appellant vide the regular banking channels, all evidenced by supporting communications, the commercial intelligence of the appellant was being unnecessarily questioned by the ld. DCIT who travelled beyond her jurisdiction as pointed out earlier. The appellant also submitted that the ld. DCIT had time and again pointed out that no delivery was made by Linton which infact supports the facts of the appellant s case that indeed the party was failing its commitments and thus the fact of the appellant that the amount advanced was in all surety irrecoverable stands confirmed. The appellant further submitted that the ld. DCIT pointed out to the fact that inspite of non delivery and empty promises, the appellant kept making the payments to Linton, ignoring the fact that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions, share a common address, how the said fact affects the recoverability of the due sums from each of them or even the genuineness of the transactions with them is not understood. Further the payments to Govinda and Linton do not proceed on the same trajectory as alleged by the ld. CIT(A). This is because Govinda was paid an advance money of ₹ 4,15,00,000/- as a Service Provider for sourcing business relating to providing of security services worth ₹ 50,00,00,000/-, i.e. 8.3% of the worth of business to be sourced was paid as advance to Govinda. As for Linton, 100% advance was given by the appellant and that too for making/procuring of uniform and shoes for security guards/care takers. Thus it is amply clear that the payments to both Govinda and Linton did not proceed on similar trajectory and both the parties having the same address cannot lead to drawing of an adverse conclusion against the appellant. In view of the above, the ld. CIT(A) s alleged premise for confirming the ld. A.O. s disallowance of the claim of Write off, of advances given to Linton has no basis to stand. 2. CIT(A) s Allegation: That 100% advance was paid on 10.05.2010 amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with which the appellant had only one time commercial transaction and it is not at all probable that a prudent businessman would make a payment of ₹ 1,17,50,000/- as a one off transaction to one entity, which did not have any prior experience in manufacturing products which the appellant required. The entire transaction of advancing of an amount to Linton therefore cannot be taken on face value. That the Remand proceedings also clearly brought out the anomalies which needs to be accepted against the appellant. Appellant s Reply: In this regard the appellant would like to reiterate that that the appellant issued Purchase Order dated 11.05.2010 (PO) to Linton for supply of Uniforms and shoes for Care Takers/Security Guards @ 2 uniform plus 1 shoes pair for each care taker . (Copy of the Purchase Order with the details of security guards are placed at pages 113-152 of the paper book). The Order was for 5250 pieces of Complete Uniform comprising of Shirt, Trouser, Belt and Cap at ₹ 2,000/- per set. Also 2625 pair of shoes at the rate of ₹ 480/- per pair was ordered. Thus a total Purchase Order (after discount) of ₹ 1,17,50,000/- was dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the material facts in this regard and what constituted infrastructure for the purpose of the appellant s orders and further without bringing any material/information across which would substantiate his allegations. Hence the same cannot be relied upon to draw any adverse inference against the appellant. The ld. CIT(A) further alleged that the Remand proceedings also clearly brought out anomalies which needs to be accepted against the appellant. In this regard it is firstly submitted that all the anomalies brought out in the Remand Report has been duly responded to by the appellant vide reply dated 21.12.2018 (copy enclosed at pages 584 to 593 of the paper book) and have been further reproduced in this submission above at pages 49 to 52 . Reliance on the same is once again placed in response to the ld. CIT (A) s allegation that Remand proceedings also clearly brought out anomalies which needs to be accepted against the appellant. 4. CIT(A) s Allegation: That as brought out in the Theory of Human Probability as laid down in CIT vs. Durga Prasad (1971) 82 ITR 540 (SC), [Sumati Dayal vs. CIT (1995) 214 CTR 124; 80 taxman 89 (SC)], are equally applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being made in the same trajectory, have all been duly explained by the appellant before the ld. CIT(A) and also before Your Honours now. Hence there is no such surrounding circumstances (none of such circumstance even being pointed out by the ld. CIT(A) while applying the Supreme Court decisions) on which the test of human probability (as laid down in the case of Sumati Dayal (supra) based on the facts of that case) can be applied to. Similarly in the case of Durga Prasad Moore (supra) the Hon ble Supreme Court was considering the explanation offered by the assessee that the property, from which income was generated was the trust property; the sale deed in favour of the assessee showed that he purchased the property as a trustee and there was a subsequent deed creating a trust which recorded a corpus of ₹ 2 lakhs left in the hands of the assessee. In this case it was held that if all that an assessee who wanted to evade tax was to have some recitals made in a document either executed by him or executed in his favour then the door would be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn based on certain admitted facts and materials and not based on presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. The reliance placed by the learned AO on the decision of the honourable Supreme Court is clearly distinguishable. In view of the interpretation of the theory of preponderance of probability' as laid down by the Hon ble ITAT, Delhi in the case of Brij Bhushan (supra) it is thus easily discernible that in the appellant s case the theory of preponderance of probability' cannot be applied as the basic test of direct and factual evidences does not fail in the appellant s case. Further the complete evidences placed by the appellant before the Ld. CIT(A) have not been found to be false but only allegation has been made that transactions are sham, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Award dated 20/08/2012 with OM Sai in terms of which it subcontracted the work for comprehensive operations and maintenance of Passive Infrastructure of sites in ROWB Circle maintained by VIOM Networks (Principal). Copy of the said LOA is enclosed at pages 181-192 of the paper book. In terms of the LOA, OM Sai was required to undertake the construction work in different stages till 31/03/2014 on the basis of which the payments were required to be made to OM Sai. The LOA clearly defined the scope of the services required to be undertaken by OM Sai and also provided for the payment terms required to be made by the appellant to OM Sai. As per the LOA, the 1styear rate was of ₹ 12,000/- per site per month and the 2nd year rate was ₹ 11,500/- per site per month. The payments required to be made by the appellant to OM Sai were subject to the deductions on account of uptime, fuel pilferage and non performance. OM Sai was solely responsible for any deductions made by Environ Energy. (iv) During the process of the execution of the Contract, however, the appellant company and Environ Energy, both made lots of payments to the sub-contractors and vendors of OM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said amount, based on invoices, made total payments amounting to ₹ 468.59 lakhs. (vi) However after making the entire payments in terms of the demands raised by OM Sai, it was learnt by the appellant that due to certain defaults/ shortcomings of OM Sai, Environ Energy had made certain deductions which the appellant, after making repeated requests and having series of discussions with the top level management of Environ Energy, managed to get the said deductions / penalties reduced. (vii) Also it was learnt that certain excess payments were made by the appellant on behalf of OM Sai and thus a total amount of ₹ 1065.37 lakhs were required to be deducted from the total payments required to be made to OM Sai. The said amount also included the amount paid by VIOM Networks towards the salary of Orion Security guards on the different sites on behalf of OM Sai. To the above, OM Sai vide its email dated 17.07.2013 accepted the payments required to be made to Orion Securities, which was by mistake made to OM Sai . Copy of the same is enclosed at pages 197- 199 of the paperbook. (viii) The appellant company vide repeated mails duly informed OM Sai a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter was likely to go through protracted litigation involving huge costs and harassment, took the decision to write off the amount in its books. The said write off was accordingly done on 27/03/2015 . Copy of the ledger account of OM Sai for the entire period 01/09/2012 to 31/03/2015 is enclosed at pages 264-272 of the paper book. (xv) Pursuant to such write off, the said loss incidental to the operation of the business was claimed as deduction for computing the profit and loss of the business/ profession u/s28 of the Act for the assessment year under appeal. (xvi) The abovementioned detailed facts were also submitted by the appellant before the ld. CIT(A). REMAND REPORT AND ISSUES RAISED: (xvii) Pursuant to the above, the ld. DCIT provided specific comments and raised queries as well, in a Remand Report dated 15.11.2018 to the ld. CIT(A), accompanied by a covering letter of the Additional Range Head. Copy of the Remand Report is enclosed at pages 578 to 582 of the paper book. (xviii) A copy of the ld. DCIT s Remand Report was thereafter forwarded to the appellant by the ld. CIT(A), in response to which the appellant submitted it s Reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess payments were made by the appellant on behalf of OM Sai and thus a total amount of ₹ 1065.37 lakhs were required to be deducted from the total payments required to be made to OM Sai. The appellant vide repeated mails duly informed OM Sai about the said proposed deductions and also of its liability towards the sub-contractors which were discharged by the appellant. Eventually, since OM Sai failed and neglected to settle the account and to refund the excess amount towards deductions proposed by Environ Energy, the appellant was constrained to address a final Demand Notice dated 01.04.2014 to OM Sai, calling upon it to make a payment of ₹ 1,56,64,000/- towards the excess amount towards deductions proposed by Environ Energy. However OM Sai, instead of making the payments towards the legitimate demands raised by the appellant, sent a reply dated 08.04.2014, making false and baseless averments about being entitled to claim an amount of ₹ 9,30,10,552/- from the appellant. Thus the Appellant in the light of the above facts, filed on 28/08/2014 the Suit for recovery of an amount of ₹ 1,56,64,000/- along with interest thereon @ 18% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) further stated that the same argument can be extended to issues relating to expenditure as well. Thus the Ld. CIT(A) held that during the pendency of a judicial dispute, the amount can be treated as neither determined nor crystallized and hence the same cannot be allowed as a business expenditure. Appellant s Reply: In this regard the appellant would like to submit that since in light of the disputes with OM Sai regarding recovery of advance, the appellant filed before the Hon ble High Court of Delhi on 28/08/2014 a Suit for recovery .Thereafter theld. CIT(A) s allegation that deduction of the advances written off claimed by the appellant, without waiting for outcome of such legal proceedings is premature as the transaction is still the subject matter of litigation, is grossly incorrect . There is no such law which prohibits writing off, of non recoverable advances and claiming deduction of the same if the transaction is a subject matter of litigation or is pending adjudication before a Court. This is so when on the other hand OM Sai, with no desire to settle the accounts in fact filed a counter claim against the appellant before the Hon ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 1992-93 the question of law which arose for consideration was whether the Tribunal was right in law in holding that interest amounting to ₹ 6,63,275 accrued to the assessed during the previous year relevant to asst. yr. 1992- 93 was includible in its total income. The facts of this case were that there was a contract between Paragon Construction and the New Delhi Municipal Commissioner (for short NDMC ). There were disputes about implementation of the contract in time and the default committed by NDMC. Ultimately the matter was referred to the arbitrator and the arbitrator by his award dated 27th Aug, 1987, held that NDMC shall pay to Paragon Constructions a sum of ₹ 33,45,669.24 with simple interest as specified in the award.Paragon Constructions moved the High Court praying that the arbitrator be directed to file the original award for making the award a rule of the Court. Against the award, objections were filed by NDMC and in those proceedings NDMC deposited the amount in the Court without prejudice to its objections to the award in order to avoid further interest. By an order dated 23rd March, 1988, the High Court directed that the amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court thereafter relying on the Hon ble Supreme Court s decision in the case of CIT v. Hindustan Housing Land Development Trust Ltd. reported in (1986) 161 ITR 524 (SC) and its own decision in the case of Harish Chandra Ors. v. CW reported in (1985) 154 ITR 478 (Del) held that in the instant case (Paragon Construction s case), it was very clear that it was only in view of the order made by the Court that the amount was permitted to be withdrawn and that too on the furnishing of a bank guarantee of a nationalised bank. Further the appellant (Paragon Constructions) was required to refund the amount with interest to the respondent (NDMC) in case the respondent succeeded. Therefore, the determinative date would be the date on which the decision was rendered by the Court and it would be for that relevant year (i.e. A.Y. 1995-96) that the incometax will have to be assessed as it can be said that the amount accrued on that date only. Paragon Constructions (supra) distinguished: From a bare reading of the judgment in the case of Paragon Constructions (supra) it is clear that the same firstly pertains to receipt of income while the appellant s case pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, which led to writing off, of the said excess payments by the appellant. In the appellant s case the protracted litigation with no timeline of ending does not determine its right to receive the refund of excess payment made to OM Sai as in the case of Paragon Constructions (supra) . *excess payment made by appellant to OM Sai included deductions made by the Contractor Environ Energy Corp. India Pvt. Ltd. on the appellant for payment made by Environ Energy on behalf of OM Sai and payment made by the appellant towards the sub-contractors of Om Sai on behalf of Om Sai . From the above it is clearly evident that the issues involved in the decision of Paragon Constructions (supra) are also completely different, besides the facts of the two cases also being distinguishable from each other. In view of the above thus the ld. CIT (A) cannot disallow the write off, of excess payments/advance made to OM Sai by the appellant, alleging that during the pendency of a judicial dispute, the amount can be treated as neither determined nor crystallized and hence the same cannot be allowed as a business expenditure, by relying on the decision of Paragon Constructions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e detection and disposal system. (ii) Notice Inviting Tender (NIIT) dated 30/08/2010 was issued by the Metro Railway Department, Kolkata (KMR) for Supply, installation, commissioning, operation maintenance of IP based Surveillance system, Personal Baggage Screening system and Explosive Detection Disposal System at 23 Metro Railway station premises and Metro Rail Bhavan , in response to which the appellant company (BCL) had bid for the same. (iii) Having satisfied the technical parameters required under the NIIT and since the appellant s bid was the lowest, it was awarded the contract for Supply, installation, commissioning, operation maintenance of IP based Surveillance system, Personal Baggage Screening system and Explosive Detection Disposal System at 23 Metro Railway station premises and Metro Rail Bhavan , vide Letter of Acceptance issued on 25/02/2011. Copy at page 273-277 of the paper book . The Contract value of the work was at ₹ 17,07,35,271/-. A total Security Deposit for the Contract @ 5 % of the accepted value of ₹ 17,07,35,271/- being ₹ 85,36,764/- was to be deposited. However, ₹ 14,15,130/- being the Earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MOA. It is pertinent to mention that the performance of the MOA by the appellant depended on the KMR performing their reciprocal promises which included inter alia approval of vendors within time, approval of drawings and allotment of store on time, control room preparation and finalization. (vi) Immediately upon signing of the MOA, the appellant started mobilizing manpower and material and commenced activities which included site visits. (vii) The appellant was however shocked to notice that when it s personnel arrived at the respective locations/sites, the said sites were not ready to enable the appellant to perform its obligations of the MOA. Among the actions/approvals that the KMR had failed to carryout were approval of vendors within time, approval of drawings and allotment of store on time, control room preparation and finalization, infrastructure to be provided to integrate the Respondent s surveillance system of all 23 stations using the existing WAN/infrastructure on optical/microwave backbone network. KMR also did not provide the diagrams for installation locations, nor approved the number of CCTVs or the surveillance cameras to be installed at e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able amount. Thus a sum of ₹ 1,89,49,857/- along with interest was due and payable by KMR to the appellant. (xii) Despite repeated requests and reminders KMR had failed and neglected to pay the aforesaid amount and in fact on the contrary, the KMR had been writing letters to the appellant mentioning alleged defects and berating the appellant for doing unsatisfactory work. (xiii) Here, at this stage before closing the books of accounts as on 31/03/2015 for the A.Y. 2015- 16, the appellant in view of the discussions made in the preceding paras, realized that in a situation where there were outstanding to the tune of more than ₹ 8 crores, the Retention Security Deposit of ₹ 71,21,634/- was no longer realizable at all. Thus on 27/03/2015 the management of the appellant company took the decision to treat the impugned sum as loss incidental to business and thus the appellant company wrote off the said sum in its books. The Security Deposit Ledger Account namely Security Deposit at Kol Metro for the period 01/04/2011 to 31/03/2015 is enclosed at pages 505 to 509 of the paper book. A perusal of the same will reveal that as and when the Sales Bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclosed at pages 348-350 of the P/B. Letters from KMR addressed to the appellant dated 21/07/2015, 29/07/2015 and 25/08/2015 intimated the appellant of taking over possession of the uninstalled materials and the CCTV systems. Copy of the said letters are enclosed at pages 351-357 of the paper book. (xix) In light of the abovementioned delays, it is clear that KMR was evading payment and had terminated the contract without referring the point of dispute to arbitration and invoking Performance BG by encashing it. It had misused its superior position in the entire arrangement and time and again issued baseless claims of unsatisfactory work alleging the appellant to create dispute. The appellant had duly discharged its obligation in terms of the agreement and was entitled to receive the outstanding payment of ₹ 5,10,44,112/- (billed and unbilled amount) as aforesaid from KMR and KMR was obliged to make payment thereof, which notwithstanding repeated demands and/or requests, KMR failed and/or neglected and/or refused to do. (xx) By reason of the aforesaid, disputes and differences arose between the appellant and KMR, which required adjudication. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one out of them as the contractor s nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator from amongst the 3 arbitrators so appointed. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor s nominees. While nominating the arbitrators, it will be necessary to ensure that one of them is from the Accounts Department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railway for the purpose of appointment of arbitrator . (xxi) Inasmuch as disputes and differences arose between the parties as aforesaid, the appellant by it s letter dated August 12, 2015 invoked the said Arbitration clause and requested KMR to provide a panel of more than 3 names so that the appellant could suggest two names for appointment for adjudication of the disputes in terms of the said arbitration agreement. Copy enclosed at pages 359- 364 of the paper book. (xxii) KMR however did not dispute the arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of an arbitrator to be made by the contractor keeping in mind the fifth schedule to the Act . (xxiv) On 24/02/2017, KMR forwarded to the appellant three names. According to the arbitration clause the contractor had to choose two out of which the railways would appoint one as the arbitrator. (copy enclosed at page 374 of the P/B) (xxv) However again the appellant filed an Application before the Hon ble Calcutta High Court challenging the above Order on the ground that the said Order was against the permitted relationship of the arbitrator with the parties, mentioned in the fifth and seventh schedules. (xxvi) The aforesaid application was disposed of by the Hon ble High Court vide Order dated July 19, 2017 , (copy enclosed at pages 375-381 of the paper book) directing KMR to forward a panel of atleast 30 names of persons of different backgrounds and professional avocations and attainments to the appellant. The Hon ble Court had also directed in the said Order that the said panel may contain names of serving or retired officers of other organizations, thereby, implying that the names to be forwarded to the appellant must exclude those persons who bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld. DCIT s Remand Report was thereafter forwarded to the appellant by the ld. CIT(A), in response to which the appellant submitted it s Reply dated 21.12.2018 (copy enclosed at pages 584 to 593 of the paper book) before the ld. CIT(A), as detailed out in a table hereunder: Issue raised/stated by DCIT in Remand Report Appellant s Response With regard to the appellant s write off, of retention security deposit given to Metro Railway, Kolkata, it was stated that the appellant claims to have filed case of contempt before Calcutta High Court and on the other hand it is writing off the amount before waiting for the outcome of the case. The appellant submitted before the ld. CIT(A) that all the complete details were before him for adjudication which were being relied upon and that the ld. DCIT was overstepping her jurisdiction in commenting on the facts which were all before the ld. A.O. and the ld. CIT(A). CIT(A) s ALLEGATIONS and APPELLANT s RESPONSE (xxxiv) As has already been submitted above, pursuant to the appellant s submission made before the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same if the transaction is pending adjudication before a Court or is sub judice. Besides, it is pertinent to mention that KMR in order to cover its own failures and omissions having taken the extreme step of terminating its contract with the appellant after July 09, 2015 and having forfeited the appellant s tender security deposit and encashed its Bank Guarantee, the appellant invoked the Arbitration Clause in its MOA. KMR having agreed to go ahead with the arbitration, thereafter, a difference/dispute arose between KMR and the appellant regarding appointment of arbitrator for adjudication of the disputes in the matter of termination of the contract. The matter travelled up to the Hon ble Calcutta High Court where certain directions were given by the Hon ble Court to KMR for suggesting/nominating names for arbitrators in a panel, out of which the arbitrators can be selected. However since KMR did not abide by the directions of the Hon ble Calcutta High Court in nominating members for appointment of arbitrator as directed by the Hon ble Court, the appellant filed a case of contempt against KMR as it had committed contempt of the court orders and the said case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parganas and belonging to Hindustan Housing , were requisitioned by the Government of West Bengal. Subsequently the land was acquired permanently in the State Government under s. 5, Requisition of Land (Continuance of Powers) Act, 1951 by a notice of acquisition dated December 27, 1952 published in the Gazette dated January 8, 1953. The Land Acquisition Officer awarded a sum of ₹ 24,97,249/- as compensation payable to Hindustan Housing who, however was not satisfied with the amount of compensation, and preferred an appeal before the Arbitrator, 24 Parganas, Calcutta. The Arbitrator made an award dated July 29, 1955 whereby he fixed the amount of compensation at ₹ 30,10,873/- on account of the permanent acquisition of the land, thus enhancing the original amount of compensation by ₹ 5,13,624/- on which he directed interest at 5 per cent per annum from January 8, 1953, the date of acquisition, to the date of payment . The Arbitrator also directed that further recurring compensation at ₹ 6272/10/4 per mensem should be paid to Hindustan Housing from the date of requisition till the date of the acquisition. The State Government then appealed to the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion would arise or accrue and till then there was no liability in present in respect of the additional amount of compensation claimed by the owner of the land. The Apex Court thus held in the case of Hindustan Housing (supra) : That there was a clear distinction between cases such as the assessee s (Hindustan Housing), where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles. The Apex Court thereafter held that the High Court was right in the view taken by it and, therefore, the Revenue s appeal must be dismissed. That in the present case, although the award was made by the Arbitrator on July 29, 1955 enhancing the amount of compensation payable to the assessee, the entire amount was in dispute in the appeal filed by the State Government. Indeed, the dispute was regarded by the Court as real and substantial, because the assessee was not permitted to withdraw the sum of ₹ 7,36,691 deposited by the State Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant s case, the appellant having completed 90% of the work, its right to receive the retention security deposit (deducted by Metro Railways, Kolkata on the bills raised on it) had accrued and become absolute and crystallized during the relevant Assessment Year itself. It is not dependant on the outcome of the case of contempt and hence deduction claimed on write off, of the said retention security deposit (on having become non recoverable) is allowable at this stage. Thirdly , since in the case of Hindustan Housing (supra) the right to receive payment was in dispute before the Court during the relevant A.Y. i.e. A.Y. 1956-57, therefore it was held by the Hon ble Apex Court that the income was not received by the assessee during that year. However in the appellant s case, during the relevant Assessment Year the non recoverability of the retention security deposit was not in dispute either before a Court or even otherwise as the appellant s bills more than ₹ 8 crores were pending with Metro Railways, Kolkata during the relevant Assessment Year which were not paid. Therefore there was no way the retention security deposit of ₹ 71,21,635/- would be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that deduction of such expenses and losses is to be allowed, if it arises in carrying on business and is incidental to it. It was held as under: While section 10(1) of the Indian Income-tax Act, 1922, imposes a charge on the profits or gains of a business, it does not provide how these profits are to be computed. Section 10(2) enumerates various items which are admissible as deductions but they are not exhaustive of all allowances which could be made in ascertaining the profits of a business taxable under section 10(1). Profits and gains which are liable to be taxed under section 10(1) are what are understood to be such under ordinary commercial principles. .. When a claim is made for a deduction for which there is no specific provision under section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and be incidental to it.The loss for which a deduction is claimed must be one that springs directly from the carrying on of the business and is incidental to it, and not any loss sustained by the assessee even if it has some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace in the carrying on of the business. CIT vs. Mysore Sugar Co. Ltd. (1962) 46 ITR 649 (SC) In this case, the assessee, a sugar manufacturer, gave seedlings, fertilizers and money in advance to sugarcane growers to be adjusted towards price of sugarcane to be supplied latter. The assessee incurred loss for non-delivery of sugarcane and the said loss was allowed as trading loss and not as a capital loss. For better appreciation, the finding of the Hon ble Supreme Court is reproduced below: The assessee who carried on the manufacture of sugar used to advance seedlings, fertilisers and money to sugarcane growers under an agreement by which the growers agreed to sell the next crop of the sugarcane grown by them exclusively to the assessee at current market rates and to have the advances adjusted towards the price of the sugarcane to be delivered to the company. In a certain year owing to drought the sugarcane growers could not grow sugarcane and the advances remained unrecovered. A Committee appointed by the Government recommended that the assessee should ex gratia forgo some of its dues. The assessee accordingly waived its right in respect of ₹ 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the money is a part of the stock-in-trade, such as, of a banking company or a money-lender, or is directly connected with the other business operations. The risk is inherent in the carrying on of the business and is either directly connected with it or incidental to it. Mohan Meakin Ltd. vs. CIT (2012) 348 ITR 109 (Del) The facts before the Hon ble jurisdictional High Court were that the assessee was dealing in leather products and had made advance payments for import of materials to a supplier in the U.S.A. The advances were not adjusted or realised. The assessee was unsuccessful in its attempts for recovery. The Tribunal accepted the Revenue s objection that the write-off of such advances could not be the subject-matter of deduction for bad debt u/s. 36(1)(vii) of the Act. But the Hon ble High Court found that it could be allowed as a business loss u/s. 37 of the Act. The High Court further found that giving such advance is a normal trade practice and that there was no reason for disallowing the same, when it was admissible even as a normal business loss. The held portion of the judgment is reproduced below: Held, allowing the appeal, that continuity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ₹ 1,01,604/- as per Rule 8D(2)(iii) of the Income Tax Rules, 1962 (which provides for attribution of 0.5% of the dividend yielding average investments). Thereafter it is submitted that for the purpose of computing proportionate expenses as per Rule 8D(2)(ii) of the Income Tax Rules, 1962 by applying the prescribed formula of Interest Expense*Average Investment/Average Assets, the Ld. AO has computed proportionate interest at a figure of ₹ 87,234/-. However the exempt dividend income of ₹ 6,525/- being earned from the investment in shares of LIC Housing Finance Corporation Ltd. which stood at a figure of ₹ 2,83,563/- both as on 31.03.2015 and 31.03.2014, no interest bearing funds were invested during the relevant Assessment Year in earning the exempt dividend income and hence no interest expenditure can be attributed for disallowance u/s 14A of the Income Tax Act, 1961 read with Rule 8D(2)(ii) of the Income Tax Rules, 1962 . Therefore no disallowance on account of interest expense can be made in the appellant s case under Rule 8D (2)(ii) of the Income Tax Rules, 1962. Further as per Rule 8D (2)(iii) of the Income Tax Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction with the correctness of the claim made by the assesssee. Therefore, the judgment cited by Mr. Bhowmick has not manner of application. We have considered the rival submissions and are of the opinion that on the basis of the judgment cited by Mr. Bhowmick, it cannot be said that the appeal raises any question or substantial question of law. The appeal is, therefore, not admitted and is, consequently, dismissed. Hence, the investment which gave rise to the dividend of ₹ 6,525/- in the relevant Assessment Year being the shares of LIC Housing Finance Corporation Ltd. which stood at a figure of ₹ 2,83,563/- both as on 31.03.2015 and 31.03.2014, disallowance u/s 14A r/w Rule 8D(2)(iii) of the Income Tax Rules, 1962 stands at ₹ 1,418/- { 0.5% of ( [2,83,563 + 2,83,563]/2 )}. Thus the total disallowance in the appellant s case as per Rule 8D(2) of the Income Tax Rules, 1962 comes to ₹ 1,418/-. 69. On the other hand, ld. DR referred to each and every observation of the ld. CIT(A) and strongly relied upon the said order and submitted that there is a categorical finding as to why such advances cannot be allowed as business loss as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice provider has requested for interim sum of ₹ 4,15,00,000/- during the course of business as a refundable business advance /deposits, but thereafter there arose a dispute with the said party as assessee claimed that sufficient efforts were not made the said party for bringing the business and most of the efforts was made by the assessee. The nature of disputes along with various documentary evidences and the submission has been filed and discussed in the foregoing paragraphs with regard to each and every business development arrangement with Govinda Infraproperty. Nowhere has it been disputed that such an advance was not given nor it has been found that it was not a genuine transaction. The only reason given by ld. CIT (A) is that why such an advance was given and same has been rejected by the Ld. CIT (A) flimsy ground. Each and every point raised by the DCIT in response to inquiry u/s. 133(6) and the finding of the Assessing Officer in the remand report which has been followed by the ld. CIT (A) has duly been explained with cogent reasons and documents. Thus, it cannot be held that there was no business advance or there can be any iota of doubt that such advance had become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned from the exchange of letters placed in the paper book as incorporated above. It is also not in dispute that the Linton has also acknowledged the amount of ₹ 1,05,00,000/-. Further, it was found that the fabrics so procured by Linton was not to the specification of the appellant and were sub-standard, and there further dispute to the supply of materials with regard to the quality and the Linton has also made a counter claim of loss of ₹ 25 lacs. It then requested to increase the contract value by the said amount which was immediately opposed. The factum of the transaction and the dispute between the parties has been discussed in detail which was for more than four years and no work was done on the said order and accordingly the order was terminated resulting into loss to the assessee. Assessee in order to avoid long drawn litigation process hence decided to write off the advance on 27.03.2015. Again there is no dispute that the assessee did paid the amount for purchase order and also demonstrated that such an order was not carried out in the manner in which both the parties have agreed and serious dispute arose between the parties which force the assessee to write of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 468.59 lacs was made after the payment as per the demand raised by the Om Sai, it was discovered that due to certain defaults and short comings of Om Sai in the execution of the work Environ Energy had made certain deduction for which the assessee after making repeated request and series of discussion managed to get the said deduction/penalty reduced. The assessee also realized that certain excess payments were made by the appellant on behalf of Om Sai as discussed above. The assessee requested and duly informed Om Sai about the proposed deduction and liability towards the sub-contractor which were discharged by the assessee on its behalf, however, Om Sai failed to settled the accounts and there arose a dispute between the assessee and Om Sai. There is a letter written by the assessee raising a final demand notice on 01.04.2014 calling upon it to make a payment of ₹ 1,56,64,000/- towards the excess amount towards deductions proposed by Environ Energy. However, the said party did not make the payment. The assessee has also filed the suit against the High Court claiming the amount along with interest and OM Sai has filed a counter claim before the High Court against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit with KMR in the books of the appellant can be seen at pages 505-509 of the paper book. Also, the appellant company was to immediately furnish the performance bank guarantee to the tune of ₹ 85,36,764/- equivalent to 5% of the Contract value. Another Letter of Acceptance dated 11/04/2011 was issued by KMR in continuation of the previous letter giving in details the description of works, units, quantities, etc. However, after a delay of almost four months from the date of issuance of the Letter of Acceptance, a Memorandum of Agreement dated 03/06/2011 ( MOA ) was finally executed between the appellant and KMR whereby the appellant s scope of work included supply, installation, commissioning of Internet Protocol based Surveillance System, Personal and Baggage Screening System and Explosive Detection and Disposal System at 23 Metro Railway Station premises and Metro Rail Bhavan. The appellant was to maintain equipment at all locations as specified by KMR. The said contract would require deployment of manpower in the number of 145 personnel. The payment terms were as follows: (i) The KMR was to pay 70% of the value of supply against physical receipt of material in good c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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