TaxTMI 
TaxTMI 
2014 (7) TMI 212
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....the Assessing Officer u/s 69C of the Act being deleted by the CIT (A). 3. Briefly the facts are, the assessee a private limited company is engaged in the business of executing contract works. For the assessment year under consideration, the assessee filed its return of incomeon1-11- 2004 declaring total income of Rs. 10,73,OOO/-. Initially, the assessment was completed u/s 143(3) of the Act on 18- 12-2006 accepting the income declared by the assessee. Subsequently, the Assessing Officer noted that the assessee was awarded a contract to construct a road-cum-bridge consisting of 17 KMs on National Highway No.5. Out of the said contract, the assessee sub-contracted certain portions of work to a sister concern viz., M/s Soma Enterprises Limi....
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.... and SEL respectively in their books of accounts. Being aggrieved of the addition made, the assessee preferred an appeal before the CIT (A). 4. In course of hearing before the first appellate authority, the assessee again reconciling the payments as appearing in the assessee's books as well as in the books of SEL, submitted that the assessee in fact has paid an amount of Rs. 44,00,62,552/- in the financial year 2002-03 relevant to the assessment year 2003-04 out of which M/s SEL had admitted contract receipts of Rs. 12,01,12,205/-. Explaining further it was submitted that the difference between the payment of Rs. 44,00,62,552/- made by the assessee and receipts shown of Rs. 12,01,12,205/- has been shown in the balance-sheet of SEL as....
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....ear only but also on the advances received and outstanding as k the end of the earlier year which are adjusted against bills raised for the works executed. The CIT(A) after considering the submission of the assessee and verifying all the details submitted before him as well as the comments made by the Assessing Officer in the remand report was of the view that the addition made by the Assessing Officer is legally unsustainable as in reality there exists no difference between the payments and receipts. The finding of the ClT (A) in this regard is reproduced hereunder:- "8. I agree that in a given case it is not necessary that the payments made by an employer even of advances must exactly correspond to the work receipts admitted by the con....
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....that there is any escapement of income or incurring of expenditure which IS unexplained. When all payments made are established to be by way of bank cheques and no cash transactions were involved there could be no question of not being satisfied with the explanation of the assessee regarding expenditure. The assessee did not make the payment of Rs. 45,16,69,046/- in this year, nor even incurred that amount as expenditure in this year expenditure incurred is not explained to the satisfaction of the AD. In the instant case, the assessee incurred expenditure on capital account, recorded it in the books and made all payments by way of bank cheques. The assessee has fully explained the expenditure. Nor the SEL received the amount of Rs. 45,16,69....
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.... of the revenue authorities as well as materials available on record. As can be seen from the facts available on record, the assessee was awarded contract work for construction of Nellore Bye pass Road Project on NH- 5,section linking the metros of Kolkata and Chennai. It is also a fact on record that the assessee sub-contracted certain portion of the work of the value of Rs. 68 crores to its sister concern M/s. SEL. The dispute lies within a narrow compass as to whether the actual payment made by the assessee during the year to M/s SEL is Rs. 22,60,62,390 after TDS. as shown by the assessee in its books or an amount of Rs. 45,16,69,046 shown as contract receipts by M/s. SEL for the year under consideration. The assessee has reconciled the ....
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....d also reflected in the bank accounts which have been submitted by the assessee for verification. From the aforesaid facts, it becomes absolutely clear that so called difference as noted by the Assessing Officer is only an imaginary one and on that basis addition cannot be made. When it has been proved that the assessee has made the payments as per the entries made in the books of accounts, which is also corroborated by the bank statement furnished before the departmental authorities, only because M/s SEL has given a different accounting treatment in its books of account, it cannot be said that the assessee has 'suppressed the expenditure. It may further be put on record that the reconciliation made by the assessee with supporting evide....