TaxTMI 
TaxTMI 
2016 (5) TMI 525
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....well as the Commissioner of Income Tax (Appeals) erred in fact and in law in not applying the provision of section 44AD of the Act. 3. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in charging interest u/s 234B of the Income Tax Act, 1961. 4. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in initiating penalty proceeding u/s 271(l)(c) of the Income Tax Act, 1961. 2. Briefly stated facts of the case as culled out from the assessment records are that assessee is an individual engaged in the business of civil construction work under his proprietary concern namely Paras Builders. He filed his return of income on 30,9,2005 showing total income of Rs. 3,53,128/-, accompanied by auditors' report in form No.3CB and 3CD as well as audited balance sheet and profit and loss account. The case was selected for scrutiny assessment and notice u/s 143(2) of the Act was issued on 8.3.2007 and served on the assessee on 28.9.2007. During the year under appeal assessee has shown total contract receipts of Rs. 59,93,127/- and after claiming various expenses, ....
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....he order of -the "Assessing Officer. The only issue to be considered is whether payment said to have been made in cash by the appellant will constitute an admissible expenditure or not. To claim expenditure under the Income-tax Act, the appellant should have evidence that such expenditure has actually been incurred. The appellant claims that he has made payments in cash of Rs. 15,20,000/-. He also claims that he has to make a payment of Rs. 8.53 lakhs (5.68 + 2.85) to the sub contractors. On verification of the appellant's claim, it was established by the Assessing Officer that no such payment has been made by the appellant to the sub Contractors. When an opportunity to cross examine the sub contractors was given to the appellant, at that stage also it could not be established that payments had been made by the appellant to the sub contractors. It is noted that the cross examination was done on 27.05.2008 for the accounts ending on 31.03.2005 i.e. more than three years later. The appellant has submitted that the work has been completed hence SSNNL has released the funds on completion of the work. He has also stated that both the sub contractors have admitted to have been done t....
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....lant has not been credited to the Government account thereby once again leading to the conclusion that the IDS certificate cannot be relied upon. The appellants claim that since he follows a Mercantile System of Accounting, expenditure incurred on the work completed in an admissible business expenditure cannot be accepted. It cannot be doubted that the work has been done, hence presumably expenditure would have been incurred, the question which remains .unanswered is who incurred the expenditure. Since it has not been established that the appellant incurred the expenditure. I do not see this as a fit case to interfere with the order of the Assessing Officer. The addition is confirmed. 4. In the result, the appeal is dismissed. 5. Aggrieved, assessee is now in appeal before the Tribunal. 6. Ld. AR submitted that for the year under consideration the appellant was engaged in civil construction work in the name of Paras Builders. The appellant was awarded the construction contract from SSNNL which was being subcontracted to Mr. Sudhirbhai Modhia for Block 9A and Sharadhbhai Kakadiya for block 9C1 as per the works agreement. As per the work agreement with both the sub-con....
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....payments treating the same as non-genuine/Unexplained expenditure u/s 69C of the Act. S.69C cannot be invoked under the above mentioned facts as the source of expenditure is contract income of SSNNL which has not been challenged by the Ld.AO. Ld. CIT (A) completely erred in law and circumstances of the case by upholding the order of AO. Without prejudice to the above Ld. AO ought to have allowed reasonable expenditure towards work admittedly executed by the appellant rather than disallowing almost 46.70% of the total expenditure claimed by the appellant. 7. We have heard the rival contentions and perused the material on record. The issue before us is in regard to addition of Rs. 23,74,073/- being made by ld. Assessing Officer on account of non-genuine/bogus/unexplained expenditure u/s 69C of the Act which have been confirmed by ld. CIT(A) and assessee is now in appeal before us. From going through the records, we observe that assessee got contract from Sardar Sarovar Narmada Nigam Ltd. (SSNNL) and during the year under appeal total bill raised by the assessee to SSNNL was at Rs. 59,61,897/- and assessee gave further subcontract for Rs. 50,84,073/- to following two parties :- ....
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....tion to sub contract to S. M. Kakadia and S. N. Modhiya has not been controverted by the assessee and the only submissions made by him is that all the expenditure claimed by him are genuine and the issue relating to the cash payment is matter of dispute between the contractor and the sub-contractors. 11. We further observe that ld. Assessing Officer has not doubted the revenue of the assessee which shows at Rs. 59,61,897/- and it is also undisputed fact that work was carried out by the assessee and the same was completed as per the agreement between the assessee and S. M. Kakadia and S.N. Modhiya. 12. Looking to the facts of the case, one fact is very clear that there is complete mismatch in between the claim made by the assessee towards sub-contract expenditure and the revenue shown by the subITA contractor in their respective income-tax returns or from the statement on oath. The act of assessee looks to be suspicious in relation to various cash payments of Rs. 15,50,000/- during the year to both the sub-contractors wherein each transaction has been shown at Rs. 20,000/- even when assessee and both the sub-contractors were having account with the same bank and branch and no ....