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TMI Blog2025 (3) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... 011-12 which covers the issues of AY 2010-11 also. Thus wherever relevant the facts and impugned orders of AY 2011-12 shall be referred and reproduced. Infact the ld. CIT(A) has passed a consolidated order in appeal. While arguing the cases the ld. DR has relied the findings of ld. AO and submitted that same are quite reasoned and based on test of human probability. Ld. AR relied the facts as appreciated by the ld. CIT(A) to give the relief. 3. The background to present appeals is the search & seizure action u/s. 132(1) of the Tax conducted on 28.10.2010 in Sweka Power Tech Engineers Group of cases at its business premises and the residential premises of the Directors. Consequent upon this action u/s. 132 of the Act, the case of the aforesaid assessee company was centralized in Central Circle-5, New Delhi vide orders passed u/s. 127 of the Act and notice under section 153A of the Act. 4. In the assessment proceedings, for AY 2011-12 the Ld. AO made four additions on account of cash seized during search, additions on account of bogus charges paid for installation of electricity polls, bogus purchases and addition on account of disallowance of bad debts. In AY 2010-11 ld. AO made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Singh Giani resigned from the directorship of the company and Shri Jasminder Pal Singh, younger brother of Shri Tejinder Pal Singh joined as new director of the company. The main activities of the company are securing Government Contracts from Government and Semi Government agencies such as MCD, NDPL, and BSES etc. The company has executed various projects related to CWG 2010 awarded through MCD apart from its regular work. The assessee company has duly executed the project of street lighting of various roads belonging to MCD. 7. Table given below mentions the amounts of projects executed by the company, which were subject of scrutiny by the ld. AO, to make additions on account of bogus charges paid for installation of electricity polls and bogus purchases: S. No. Project details Value of the contract 1. Upgradation of street lighting on roads in Delhi under jurisdiction of MCD (Phase-I) 34, 53, 68, 925/- 2. Upgradation of street lighting on roads in Delhi under jurisdiction of MCD (Phase-I) 60, 74, 12, 210/- 3. Chhatrasal stadium sports lighting 2, 56, 82, 000/- Total 97, 84, 63, 135/- 8. Case of department is that action u/s 132 of the Act was carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 4th entity namely M/s Rose Electricals. 8.4 We find that the findings of the department during search / survey actions in respect of the said 7 labour parties involved in supply of labour and erection of poles is that certain adverse inferences have been drawn indicating therein that the assessee could not have incurred expenditure on these labour contractors. During the assessment proceedings, the ld. AO called upon the assessee to produce the said 7 parties for verification and cross-examination by the assessee. At para 6.3 the ld. AO has given the list of details which he required from the assessee and from the said 7 parties which is reproduced below:- (i) In regard to these parties; Books of Accounts audited Their P&L a/c, B/sheet, ROI and Ack of ROI All relevant documents including the transportation bills evidencing the purchase of material & supply of your site Bills of loading and unloading of the material Your ledger a/c in their books of accounts (ii) In regard to assessee; Books of Accounts Transportation Bills debited by you purchase of material from these parties Ledger A/c of these parties in you Books of Accounts Stock Register kept at site ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount paid Rs. Α.Υ. 2009-10 Α.Υ. 2010-11 Α.Υ. 2011-12 Total 1. Gill Electricals 6, 68, 936 66, 43, 069 18, 80, 598 91, 92, 603 2. Jayna Electricals --- 35, 61, 558 30, 89, 679 66, 51, 337 3. R. C. Electricals --- 11, 28, 242 39, 89, 597 51, 17, 839 4. Rose Electricals 5, 27, 941 41, 66, 159 14, 75, 232 61, 69, 332 5. SSR Engineers --- 62, 71, 332 40, 67, 976 103, 39, 308 6. Swastic Hitech Ass 34, 37, 072 25, 33, 804 20, 29, 124 80, 00, 000 7. Unique Electricals 13, 07, 479 68, 00, 712 3, 94, 112 85, 02, 294 Total 59, 41, 419 3, 11, 04, 975 169, 26, 318 539, 72, 713 Hence, the amount of Rs. 59, 41, 419/- debited under this head during the relevant assessment year is held to be bogus and added to the total income of the assessee. 8.6 In regard to the issue of bogus material purchases, we find that along with action u/s 132 the investigation team had conducted actions u/s 133A on several parties who had supplied material in connection with execution of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has taken note of all the relevant documents and information furnished by the assessee before the Ld. AO, but which were not given any indulgence by the ld. AO to find any infirmity or discrepancy in them but instead the ld. AO has drawn adverse inference on the basis that some parties could not be produced and in survey necessary corroborative evidences could not be found. This is a very strange way of assessment by expecting the assessee to prove the genuineness of an expenditure on the basis of assertion that nothing incriminating or corroborating the expenditure was found in search of vendors of material or the labour. At the same time it can be seen that Ld.CIT(A) has very meticulously examined the evidence of each of the suspicious or doubtful vendors. Nothing could be cited before us to allege that the appreciation of evidence and inferences drawn on the basis of evidences was so perverse so as to be interfered with in these appeals. We are of considered view that when the only ground of revenue to challenge the findings of ld. FAA is that appreciation of evidences or information is erroneous then ld. DR should be able to show some absurdity or perversity in the infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company's cash which was at his disposal, in the brief case kept at his residence. He had also stated that some cash of the company was also held by Mr. T.P. Singh and that the exact amount was not known to him. The relevant answers of Mr. T.P. Singh and Mr. J.P. Singh have been reproduced by the ld. CIT(A). Same establish that the promoters of the appellant company had at the time of search itself explained that the cash found at the residence and in their possession in the brief case etc belonged to the appellant company or represented their family savings. The amount mentioned in the statement is slightly lesser than what was actually found during search. What is material is that when the promoters of the company had made it clear on the day of search itself that the cash belonged to the company thereafter there is no finding of fact by the ld. AO that the books of accounts did not reflect such cash balance on the day of search. The assessee has duly submitted before the ld. AO, copies of imprest accounts standing in the names of Mr. T.P. Singh and Mr. J.P. Singh in the books of the company and same have been relied by the ld. CIT(A) to delete the addition. There is no error in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a capital loss. The reasons for forfeiture of such security are also not given by the assessee. Why are remedial action has not been taken so far. 12. The ld. AO, therefore, observed that the assessee could not claim bad debts in respect of payments which have not yet become bad and for which legal remedies have not been exhausted. He opined that the appellant was entitled to receive the payment only after completion of the project and fulfillment of the conditions of the contract. He, therefore, held that the appellant has made wrong claim of bad debts and disallowed the same. During the appeal proceedings the AR had submitted that the ld. AO has disallowed the legally allowable claim by whims and surmises and only on doubts ignoring explanation given by the assessee. He explained that post 01.04.1989, in order to claim a deduction of bad debts, the only condition, to be fulfilled, is that the debt should be written off as bad in the accounts of the assessee. He explained that MCD had awarded the CWG contract for erection of electric poles with lights etc. during the F.Y. 2008-09. Bills for the work done were raised during the period 2009-10 relevant to A.Y. 2010-11. MCD, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing the court of law and spending money on litigation an assessee can be given benefit of his claim that reasonable efforts for recovery were made. The amounts were due from a statutory body so if there was any denial on the basis of audit objections, then that was sufficient for assessee to assume that the amount is non-recoverable. 15. As regards the ld. AO's observation that Rs. 2, 46, 16, 149/- represented capital loss the fact is that said amount was security deposit retained by MCD out of the bill amount payable to the assessee. This amount was retained by the MCD while remitting payments, as security towards future warranty etc. By no stretch of imagination such amount could be treated as capital in nature. It is the portion of the trade receipts retained out of bill payment. We find that before the ld. CIT(A), the ld. AR submitted copies of the relevant ledger accounts and submitted that the security deposits of Rs. 2.64 crores written off as bad debt represented amount retained by MCD while releasing the payments on the bills raised by the appellant. He explained that as per the terms of the contract, MCD used to retain 10% of the bill amount as performance guarantee/war ..... X X X X Extracts X X X X X X X X Extracts X X X X
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