TMI Blog2023 (1) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. He therefore held that the entries made by the assessee was only a hypothetical income and not a real income. Before us Revenue has not pointed to any fallacy in the finding of the Ld. CIT(A) nor has placed on record any contrary binding decision in its support. Appeal of revenue dismissed. - ITA. No. 4149/Del./2019 - - - Dated:- 20-1-2023 - SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER For the Revenue : Shri Amaresh Singh , Sr. DR For the Assessee : Shri M. P Rastogi , Advocate Shri P. N Shastry , CA ORDER PER ANIL CHATURVEDI , A. M. This appeal filed by the Revenue has been directed against the order of the Ld. CIT(A)-8, New Delhi in Appeal No. 10505/17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, learned DR submitted that both the grounds of the Revenue are interconnected. During the course of assessment proceedings and on perusing the details of other expense , AO noted that assessee has claimed expenditure of Rs. 29,80,00,000/- on account of claims/bills submitted but not acknowledged . The assessee was asked to furnish the details and supporting documents and justify the expenses. Before AO, assessee inter alia submitted that these expenses were just a reflection of the claim lodged to various authorities but not acknowledged by them. It was further stated that the same amount was shown in the P L account to nullify the turnover. Assessee also furnished the details of the claims lodged which are tabulated by AO at page 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for instance in the case of BHEL arbitration, the amount of claim has been reduced. 4.1 As per AO, the claim lodged of Rs. 29.80 crores and credited to the P L account were income accrued as it was following mercantile system of accounting, and disallowed the debit of Rs. 29.80 cr as Claims/Bills submitted but not acknowledged on the ground that the same has not been expended wholly and exclusively for the purpose of business. 4.2 According to the appellant, since the claims of Rs 29.80 crores lodged were not accepted but were to be referred for arbitration there was no certainty of its ultimate collection on account of which income on account of the claims of Rs 29.80 crores did not accrue and thus were not needed be recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact of none of the clients accepting /crediting the claims to the appellant is borne out by the fact that such amounts do not appear in the Form No. 26AS statement for the year also. Thus it is evident the Contractees / Employers have not accepted the claim amounts, since they would have otherwise deducted TDS, if accepted and credited to the appellant, even if not paid. It is a settled law that Contractors are not assessed on Mercantile basis of accounting but they are assessed in accordance to Accounting Standards AS 7 -which was accepted by the Department for assessment. The principles of accounting income by Contractors has adopted by the Income Tax Authorities in ICDS III (which were published by then but its application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved by debiting those in the P L account separately as Claim/Bills submitted but not acknowledged . 6. Learned CIT thereafter relied on the various decisions cited therein and thereafter observed as under:- 4.5 In the instant case, the additional claims lodged by the appellant with various parties have not been admitted by the aforesaid parties and in relation thereto, the arbitration proceedings are going on. So unless and until those very parties accept the claim of the appellant, no income can be said to have accrued to the appellant, no right can be said to have vested in the appellant to recover the said amount and accordingly under the law no debt can be said to have created in favour of the appellant by somebody. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form No. 26AS of the appellant for the year under consideration. Hence in view of such position of law, both the credit and debit entries of Rs.29.80 crores, being contra entries only and are to be discarded while computing the taxable income otherwise it would give a distorted picture not permissible under law. Therefore, considering the facts and circumstances of the case and the legal position discussed above, the addition of Rs 29.80 crores made by the AO to the income is hereby deleted, as no income has accrued on account of the claims lodged but not accepted -which was countered by a contra entry as Claims/Bills submitted but not acknowledged . 7. Aggrieved by the order of Ld. CIT(A), Revenue is now before us. 8. Before us l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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