TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 426
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....mounting to Rs. 47,61,266/-. This addition may kindly be deleted. 3. On the facts and circumstances of the case and in law, the Id. Commissioner (Appeal) erred in confirming the action of the Assessing Officer of making an ad hoc disallowance of 20% of machine running expense amounting to Rs. 42,25,120/-. This addition may kindly be deleted. 4. That the Commissioner (Appeal) erred in not disposing off the ground taken by the assessee before him with respect to addition of Rs. 79,25,891 on account of creditors and the Commissioner (Appeal) may kindly be directed to pass appropriate order to dispose off the ground. a) That the Commissioner (Appeal) erred in not disposing off the ground taken by the assessee before him with respect to addition of Rs. 79,25,891 on account of creditors and the Commissioner (Appeal) may kindly be directed to pass appropriate order to dispose off the ground. b) That the Assessing Officer erred in adding Rs. 79,25,891 on account of creditors although the post sent to the creditors was duly served upon them, all the creditors had submitted confirmation, the assessee had paid creditors through banking channel and the AO had added even opening balance....
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....mmissioner (Appeal) erred in confirming the action of the Assessing Officer of treating 50% of electricity expenses as personal expenses of directors. As the expenses have been incurred exclusively for the purpose of business, the addition of Rs. 87,640/- may kindly be deleted. 3. We are first taking up A.Y. 2010-11 being ITA No. 5047/Del/2015. The assessee company is a contractor company. The assessee filed the return of income on 11/1/2011 for Assessment Year 2010-11 declaring at income of Rs. 63,32,647/-. The case was processed u/s 143(1) of the Income Tax Act, 1961. Subsequently, the cases were taken up for scrutiny and notice u/s 143(2) was issued on 25/8/2011 and served upon the assessee. Thereafter, notices u/s 142(1) along with questionnaire was issued and duly served upon the assessee wherein certain specific details were called for. In response to these notices, CA/AR of the assessee attended the assessment proceedings from time to time and filed the necessary details which were taken on record by the Assessing Officer. The Assessing Officer made various additions thereby assessing the total income at Rs. 2,87,28,065/-. 4. Being aggrieved by the assessment order, the a....
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.... by the Assessing Officer and the payments made to the labourers are part of the business activities which cannot be ignored. There is no allegation that the assessee had not made such payments to the labourers or there is no such construction work going on. The Ld. AR submitted that assessee has been maintaining regular books of accounts duly audited under Section 44AB of the Act which have not been rejected by the Assessing Officer. The Ld. AR submitted that the addition has been made on flimsy grounds without there being any basis and completely ignoring the assessee's explanations in this regard. Further, the Assessing Officer had not raised any issue of low net profit while making addition on this count and therefore CIT(A) is not justified in confirming the addition on this ground although the assessee has fully explained the reason for decline in net profit to the Assessing Officer. 6. The Ld. DR relied upon the Assessment order and the order of the CIT(A). The Ld. DR further submitted that the genuineness of the muster rolls were doubted by the Assessing Officer and the same was not properly answered by the Assessee during the Assessment proceedings. Besides that the Ld. ....
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....as been accepted by the Assessing Officer there is no adverse finding of the Assessing Officer in relation to these documents. It is a well settled law that the adhoc additions cannot be made in the hands with the company. The Ld. AR relied upon the judgment of ACIT v. Modi Rubber Ltd. [ITA No. 1952/Del/2014] dated 15/5/2018 of the Tribunal and also relied upon the following judgments: * Nitin Sales Corporation v. ITO in ITA No.1809/Del/2005 dated 11.07.2008 Delhi High Court. * Sh. Devender Kumar v. ITO in ITA No. 3239/Del/2014 dated 30.08.2016 ITAT Delhi. * ACIT v. Amtek Auto Ltd. [2006] 112 TTJ 455 ITAT Delhi. * Sh. Gagan Goyal v. JCIT in ITA No. 1514/Del/2015 dated 02.08.2016 ITAT Delhi. Therefore, the Ld. AR submitted that in view of the above judicial pronouncements, the ad hoc additions made by the Assessing Officer and sustained by the CIT(A) without any basis are bad in law and liable to be deleted. 9. The Ld. DR relied upon the Assessment order and the order of the CIT(A). The Ld. DR further submitted that there is sudden increase in labour charges which was not properly explained by the assessee. Therefore, the Assessing Officer rightly made additions. 10. We ....
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....r. As per these month-wise details, it is evident that the Assessing Officer has ignored that there are payments amounting to Rs. 24,64,963/- in the month of May, Rs. 19,64,043/- in the month of January and therefore it cannot be said that highest expenditure in the month of March. These expenses are high considering the size of operation of the company. The Assessing Officer has completely ignored the fact that turnover of the company is Rs. 17,94,72,968/- and gross value of fixed assets amounting to Rs. 174,374,389/- as on 31.3.2010. The Assessee is in the business of construction and due to heavy use of the machinery, the normal replacement of the spare parts cannot be ignored. Further the Assessing Officer has made this allegation by indulging in surmises without giving any justification for the same. The Assessee has purchased 'valve manifold' however could not provide any detail or explanation to explain the nature of the item. The Ld. AR submitted that the Assessing Officer completely ignored the fact that assessee has submitted copy of bill of Valve Manifold Machine' Rs. 619,645/-. The assessee also submitted the Parts wise structure of 'Hydraulic Assembly' in which 'Valve ....
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.... been accepted by the Assessing Officer there is no adverse finding of the Assessing Officer in relation to these documents. Therefore, the Assessing Officer as well as the CIT(A) was not correct in making this addition. Ground No. 3 is allowed. 15. As relates to Ground No.4, the Ld. AR submitted that addition in respect of non-reconciliation of balance of Creditors amounting to Rs. 79,25,891/-, the Assessing Officer has ignored and overlooked the necessary documents filed. 16. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 17. We have heard both the parties and perused the material available on record. The documents submitted by the Assessee during the assessment proceedings were not at all considered by the Assessing Officer as well as by the CIT(A). Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer and decide it a fresh. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 4 is partly allowed for statistical purpose. 18. As relates to Ground No.5, the Ld. AR submitted that regarding disallowance of Machinery Hire Charges-DG Sets Hire charg....
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....the case was taken up for compulsory scrutiny and notice u/s 143(2) was issued on 4/9/2012 and served upon the assessee. Thereafter, notices u/s 142(1) along with questionnaire was issued and duly served upon the assessee wherein certain specific details were called for. In response to these notices, C.A/AR attended the assessment proceedings from time to time and filed necessary details which were taken on record by the Assessing Officer. The Assessing Officer computed the total taxable income at Rs. 2,91,34,120/- by making various additions and disallowances. 22. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 23. As relates to Ground No.1, the Ld. AR submitted that addition made by the Assessing Officer of Rs. 1,11,37,516/- on account of difference between contract revenue as per 26AS and Contract revenue credited to profit and loss account was in two parts: i. Addition on account of reconciliation of Form 26AS and Contract receipts shown in P & L Account Rs. 73,73,696/- ii Addition on account of undervaluation of WIP Rs. 37,63,820/- As regards to addition of Rs. 73,73,696/-, the ....
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....d that Closing Stock is valued at cost or market value whichever is lower as per AS-2, valuation of inventories. The Ld. AR also submitted that the valuation method is the prescribed method and is consistently following the same. However, the Assessing Officer ignoring the contention of the assessee added the amount of Gross Profit @ 26.78% as declared in Tax Audit report on WIP of Rs. 1,40,54,583/- which comes to Rs. 37,63,820/-. The CIT(A) only confirmed the addition without considering the submissions and evidences placed on record. Since the method followed by the assessee is well accepted method of accounting, the closing stock of WIP is to be valued at Rs. 1,01,30,003/- at the cost or market value whichever is less. Therefore, the Ld. AR submitted that in view of the above, the additions made by the Assessing Officer and sustained by the CIT(A) without any basis are bad in law and liable to be deleted. 25. The Ld. DR relied upon the Assessment Order and order of the CIT(A). 26. We have heard both the parties and perused the material available on record. From the records it can be seen that the Assessee submitted before the Assessing Officer the difference of Rs. 2,14,28,27....
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.... by him in previous issue. But we have taken a view in the previous issue that this amount cannot be added for the reasons set out therein, therefore, Ground No. 2 is allowed. 30. As relates to Ground No.3, the Ld. AR submitted that addition of Rs. 32,09,510/- by treating the purchase of machine spare parts as a capital expenditure instead of revenue expenditure is not correct. The Ld. AR submitted that during the year under consideration, assessee claimed sum of Rs. 99,70,862/- on account of purchase of machine parts for day to day requirement. The assessee is a contractor and deals in taking contract for laying of pipeline for Sewer and Cables etc. in various parts of the country. In laying pipeline, number of parts are broken and therefore the assessee has to purchase new parts for carrying out the work. The Ld. AR submitted that details of Machinery parts/ attachments etc. used in repairing of machinery above Rs. 1 lakh along with copy of bill was already submitted before the Assessing Officer. However, the Assessing Officer identified five bills amounting to Rs. 37,72,886/- and asked the assessee to show cause why the same be not capitalized. In respect of the same assessee ....
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....assessee in his reply filed before the Assessing Officer has given justification for each item purchased during the Assessment Proceedings and the Assessing Officer as well as the CIT(A) did not point out any contradictory records to that effect. Details of Machinery parts/ attachments etc. used in repairing of machinery above Rs. 1 lakh along with copy of bill was submitted before the Assessing Officer. However, the Assessing Officer identified five bills amounting to Rs. 37,72,886/- and asked the assessee to show cause why the same be not capitalized for which the assessee filed the reply. Being a contractor who deals in laying of pipelines for sewer and cables, it is necessity to replace the broken parts which are damaged in transportation and has to purchase the new parts for carrying out the work. However, the Assessing Officer treated the purchase of machine spare parts as a capital expenditure instead of revenue expenditure on the basis that these are heavy parts of machine and added the amount of Rs. 32,09,510/- after deducting depreciation @15% on the value of Rs. 37,72,886/- which is not correct as it is an integral part of the business of the assessee. Therefore, Ground ....
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....y the CIT (A). From the perusal of records it can be seen that there is no doubt raised by the Assessing Officer that these labour charges have not been paid by the assessee and vouchers of the same has been produced before the Assessing Officer. The copy of ledger A/c of 'Labour Expenses were submitted before the Assessing Officer which was ignored by the Assessing Officer as well as by the CIT(A). The fact remains that the company has been regularly maintaining books of accounts which are duly audited and the same has been accepted by the Assessing Officer. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for fresh adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 4 is partly allowed for statistical purpose. 36. As relates to Ground No.5, the Ld. AR submitted that this ground deals with the action of the CIT(A) in confirming the action of the Assessing Officer of treating 50% of electricity expenses as personal expenses of directors. The Ld. AR submitted that during the year under consideration, registered office of the company is in the residence of t....