AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 796
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....ee had offered for taxation during the course of assessment proceedings. The 2nd ground of Revenue relates to action of Ld. CIT(A) by which he had deleted an addition of Rs. 52,46,328/- which the A.O. had made by disallowing 10% of total administrative expenses. The case was earlier heard on 19.08.2014. However the case was refixed for clarification and which was finally heard on 29.09.2014. 2. The brief facts of the case are that the assessee is engaged in the business of design, supply, erection and commissioning of water and waste water treatment plants, machinery and equipments. The case of the assessee was selected for scrutiny. During the assessment proceedings, the A.O. observed from the balance confirmation obtained u/s 133(6) from certain creditors and debtors that there was difference between the balance declared by assessee and balance as confirmed by parties. Therefore, the A.O. made an addition of Rs. 59,10,262/- being difference between balance declared by the assessee and confirmed by various parties. The A.O. further observed that in respect of 7 parties to whom notices u/s 133(6) were issued, the confirmation / reply was not received by his office and notices had ....
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....d from the parties were neither shared with the appellant nor was an opportunity provided to cross-examine or to get the balances reconciled or checked with the respective parties. 5.1 After that ld. AR of the appellant has also relied on the various judgments which were considered. In fact the figures have been reconciled by submitting the details during the course of appellant proceedings on which AO's comments were also taken. It is evident from the reply of the appellant that there is mistake in issuing the notice u/s. 133(6), due to which whole the confusion has arrived by giving opportunity during the course of earlier report AO was provided all the details. However, AO has objected the admission of the additional evidence-in this regard. In my considered opinion action of AO deserves to be deleted. Ground No.2 of the appellant is allowed." ii) Addition on account of no confirmation amounting to Rs. 1,41,17,462/-: "Determination: In this regard even after considering additional evidence filed during the course of appellate stage ld. AR of the appellant could have filed on three confirmations viz. Unique Construction and Engineers, MIs. Pee Pee Mandal Construction and M....
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....h Court book hole of many other judgments of many other High Courts " and on analysis of those judgments, formulated the following propositions which emerge as under CITvs. Divine Leasing & Finance Ltd. (supra) .In this analysis, a distillation of the precedents yields the following propositions of law in the context of s. 68 of the 1T Act. The assessee has to prima facie prove7 * The identity of the creditor/subscriber. The genuineness of the transaction, namely, whether it has been transmitted through banking or other undisputable channels. The creditworthiness of financial strength of the creditor/subscriber are furnished in the Department along with copies of the shareholders register, share application forms, share transfer registers, etc. it would constitute acceptable proof or acceptable explanation by the assessee. The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices. The onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the , assessee nor should the AO take such repudiation at face value and construe it, without more, ....
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....aining four cases, as discussed above, confirmations of the parties have not been put on the record even after giving ample opportunity. So, out of addition of Rs.l,41,17,462/-, addition of Rs. 81,051701- is allowed. In the case of remaining balance pertaining to four parties as discussed above, addition made by AO to the tune of Rs. 60,12,2921- is confirmed. Ground No.3 is partly allowed." iii) Addition on account of administrative expenses: "8. Ground No.4.l is against the ad-hoc disallowance of 10% of Administrative Expenses amounting to Rs. 52,46,828/-. In this regard AO has discussed in the body of the assessment order, wherein, in para 7, 10% of Administrative Expenses have been disallowed. In this regard nothing has been brought on record by the AO as to how he has arrived at the figure of 10% and ad-hoc disallowance has been made. Vide letter dated 20-3-20l2 the issue has been challenged as under:- "Ad hoc disallowance of Administrative expenses : It is submitted before Your Honour that the expenses claimed by the company have been incurred wholly and exclusively for the purposes of the business carried on by the appellant during the subject year. The expenses have been....
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....d that in support of credit balance appearing in the balance sheet of the assessee, the assessee had furnished copy of ledger account, invoices, work order sheet for obtaining work order, copy of bank statement, evidence of payment to them in subsequent year. In this respect, Ld. A.R. submitted that out of 7 parties as listed in assessment order at page 9, Ld. CIT(A) has allowed relief in respect of 3 sundry creditors on the basis that confirmation was filed. However, in respect of 4 sundry creditors appearing at Sl. No.4-7, Ld. CIT(A) did not allow relief as the confirmation could not be filed. However, it was submitted that the payment to these creditors were made in the subsequent year and also documents evidencing payment to these creditors along with invoices and work order, were submitted to Ld. CIT(A) who had forwarded the same to the A.O. for his comments and A.O. without going into the merits of the case, again reiterated that notices were not responded and Ld. CIT(A) also upheld the disallowances on the same reasons without looking into the documents evidencing payments in subsequent years. Our attention was invited to paper book pages 47-60 where copies of account of Mr.....
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....outstanding reflects credit balances on account of purchases and the addition of such credit balances was not as per law specifically in view of the fact that payment to these creditors was made in the subsequent years. 6. Ld. D.R. on the other hand submitted that when A.O. made the addition on account of outstanding credit balance it itself amounted part rejection of books of account and therefore, the contention of Ld. A.R. that books of accounts were not rejected, does not carry any force. It was further submitted that during assessment proceedings sufficient opportunity were provided to assessee with which he did not cooperate. Regarding payments referred to by Ld. A.R., Ld. D.R. submitted that payments to these creditors were made after a period of 2 years if for payments can be made after a period of two years, what was the hitch in getting confirmations from them. He argued that mere fact that the payments were made through bank account is not the conclusive evidence for genuineness of transactions. In respect of AMS Engineers Ld. D.R. submitted that no evidence was submitted from this party and from Agrawal Engineers he referred to paper book page 91 and submitted that thi....
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.... page 3 of his order had directed the A.O. to give comments on the additional evidences and in this respect, remand report placed at paper book 92-94 was referred. The A.O. in fact did not make any comment on merits and jumped to the ground that confirmation u/s 133(6) were not filed. Ld. A.R. further submitted that nowhere the assessee had offered the difference for taxation and even if the same was offered for taxation there is no estoppel in law for an assessee if it discovers that difference was explainable. Reliance was placed on the judgement of Hon'ble Calcutta High Court in the case of Sail DSP VR Employees Association Vs Union of India 262 ITR 638 and invited our attention not page 647 of the said judgement. Arguing upon 2nd ground of appeal, Ld. D.R. submitted that the assessee itself had offered for disallowance for an amount equivalent of 10% of administrative expenses and in this respect our attention was invited to para 7 of assessment order. Ld. A.R. on the other hand submitted that assessment order was passed on 27.12.2010. It was submitted that vide letter dated 24.12.2010 the assessee had requested the A.O. to grant it at-least one working day to substantiate ....
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....submissions. This fact is verifiable form Ld. CIT(A) order at page 3. However, A.O. did not comment on the merits during appellate proceedings before us, Ld. A.R. had demonstrated that credit balances were due to genuine business transactions and in succeeding years, the payments were actually made to these parties. We find that Section 68 relied upon by Ld. CIT(A) is not applicable in the present case as Section 68 relates to unexplained credit outstanding in the books of account of the assessee whereas the outstanding amounts in the books of account of the assessee related to business transactions of the assessee as has been demonstrated by Ld. A.R., therefore, we allow the appeal filed by assessee. 11. Now, coming to ground No.1 of the appeal filed by the Revenue, we find that Ld. CIT(A) on the basis of confirmation and explanation filed by assessee had allowed the relief to the assessee. The relevant finding of Ld. CIT(A) are already produced at para 3(i) of of this order. From the perusal of the same, we find that overall Ld. CIT(A) had decided the issue in right perspective. However, we find that in the case of Auma India Pvt. Ltd. the difference was explained to be due to a....