TaxTMI 
TaxTMI 
2016 (9) TMI 1557
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....one contract work for Vestas Wind Tech India Ltd. and Vestas RRB Pvt. Ltd. and has disclosed gross turnover of Rs. 10,53,32,956/-, the details of which are as under : S.No. Name of the company Turnover disclosed in the return 1 Vestas RRB Pvt. Ltd. Rs. 3,06,92,375/- 2 Vestas Wind Tech India Pvt. Ltd. Rs. 7,46,40,581/- Total Turnover Rs. 10,53,32,956/- 3. The AO issued notice u/s.l42(1) on various dates calling for the details of sundry creditors, debtors, advances, details of contracts completed, method of revenue recognition, complete address of all creditors and debtors etc. However, there was non-compliance from the side of the assessee on different dates. Subsequently, on 15-12-2009 the authorized representative of the assessee appeared before the AO and submitted a revised profit and loss account signed by the assessee admitting additional receipts from contract of Rs. 1,66,61,839/- and claiming additional expenditure of Rs. 1.53 crores. The AO, therefore, asked the assessee to prove the claim of additional expenditure of Rs. 1.53 crores with proof of creditors shown in the original and revised balance sheet and the date for compli....
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....he assessment in the manner as laid down under section 144 of the I.T. Act. 6. The AO observed that the assessee has shown sundry creditors at Rs. 6,02,16,726/-. Since the sundry creditors were substantial he decided to investigate this aspect. From the details submitted by the assessee on account of sundry creditors he observed that credit balance shown in the name of Vestas Wind Tech India Pvt. Ltd. is Rs. 1,51,97,117/- and the credit balance shown in the name of Vestas RRB Pvt. Ltd. Rs. 5,96,516/-. The AO obtained information u/s.133(6) from the above 2 parties and noted that there is difference of Rs. 3,02,50,842/- in the account of Vestas Wind Tech India Pvt. Ltd. and an amount of Rs. 4,87,271/- in the account of Vestas RRB Pvt. Ltd. He further noted from the information received from Vestas Wind Tech India Pvt. Ltd. that the total bills raised by the assessee during the period from 01-04-2006 to 31-03-2007 was Rs. 10,39,52,580/- against which the assessee has received payment of Rs. 888,98,855/- and amount of Rs. 1,50,53,725/- was receivable from Vestas Wind Tech India Pvt. Ltd. as on 31-03-2007. Therefore, the AO held that income of Rs. 10,39,52,580/- has accrued to the a....
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....penditure to the tune of Rs. 84,82,000/-. The AO similarly observed that the assessee could not prove the additional expenditure of Rs. 1,53,94,840/- by furnishing the necessary evidences, the details of which are as under : S.No. Name Amount 1 Gatiman Earth Movers 600000 2 Masai Multi Service 25,18,500 3 Sachin Constructions 14,50,000 4 Sanskruti Constructions 14,50,000 5 S.R. Patil 12,18,000 6 Yashoda Earth Movers 12,45,000 7 Mohanlal Devichand & Sons 69,13,340 Total 1,53,94,840 10. Similarly, the assessee also could not justify the genuineness of additional expenditure to the tune of Rs. 69,13,340/- towards construction expenditure in the name of M/s. Mohanlal Devichand and Sons. The AO issued summons u/s.131 to the above party. In its reply, it was stated by M/s. Mohanlal Devichand and Sons that they did not have any transaction with Shri D.H. Pawar during A.Y. 2007-08. They have also confirmed that no amount was receivable from the assessee as on 31-03-2007. Since despite giving repeated opportunities the assessee did not appear before him, the AO held that the additional expendit....
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....y have also confirmed that no amount is receivable from the assessee. The AO therefore disallowed the claim of expenditure of Rs. 59 lakhs in the name of M/s. Mohanlal Devichand and Sons. 12. Similarly, for violation of provisions of section 40(a)(ia) the AO made addition of Rs. 31 lakhs in the name of Gatiman Earth Movers, Rs. 80,69,217/- in the name of Masai Multi Services, Rs. 26,05,000/- in the name of Sachin Constructions and Rs. 13 lakhs in the case of Sanskruti Constructions. The AO similarly made addition of Rs. 1 lakh u/s.40A(3) on account of cash payment in excess of Rs. 20,000/- to Gatiman Earth Movers and Pratik Bricks. The AO further disallowed an amount of Rs. 2,100/- under the head donations. Thus, he disallowed the expenditure to the tune of Rs. 4,00,73,036/-. 13. The AO analysed the balance sheet and noted that assessee has shown other liabilities to the tune of Rs. 2,79,33,633/- and sundry creditors to the tune of Rs. 3,22,44,415/-. He examined the genuineness of other liabilities/sundry creditors and noted that there are differences between the figures shown by the assessee and the information collected u/s.133(6) in the name of Vestas Wind Tech India Pvt. ....
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....Rs. 10,67,03,361/- as against the returned income of Rs. 54,00,167/-. 16. Before CIT(A) the assessee filed revised set of financial accounts as additional evidence under Rule 46A of the Income Tax Rules. It was requested for admission of the same as additional evidence. It was argued that though the assessee had got his accounts audited u/s.44AB the counsel who represented the assessee before the AO during assessment proceedings did not present the matter properly leading to unreconciled differences which led the AO to reject the books. It was further argued that though the AO had passed the assessment order u/s.143(3), however, the same was infact completed in the manner provided in section 144. The assessee argued that the assessee's case was clearly covered by situations envisaged in clause (b), clause (c) and clause (d) of Rule 46A justifying the admission of the additional evidence. 17. The Ld.CIT(A) forwarded the additional evidence filed before him to the AO for his comments. The AO in his report opposed the admission of the additional evidences on the ground that the assessee failed to substantiate the existence of any deserving circumstance for the same. After confro....
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....in estimating the net profit of Rs. 36,64,000/- on the alleged unaccounted contract receipt of Rs. 2,93,11,999/- and has also further erred in sustaining the similar estimation made by the Assessing Officer at Rs. 76,69,719/-. Ground No 4: On the facts and in the circumstances of the case CIT(A) has erred in sustaining the disallowance of Rs. 2,12,09,217/- u/s. 40(a)(ia) of the Income Tax Act, 1961. Ground No 5: On the facts and in the circumstances of the case CIT (A) has erred in sustaining the disallowance of Rs. 1,00,000/- u/s. 40A(3)of the Income Tax Act, 1961. Ground No 6: On the facts and in the circumstances of the case CIT(A) has erred in sustaining the addition sundry creditors and other liabilities of Rs. 2,89,31,075/- The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice." 21. The assessee has also filed the following additional grounds : "Additional Ground No.1: On the facts and in the circumstances of the case the order passed by the Assessing Officer is bad in law and invalid on the jurisdictional ground that despite appellant's jurisdiction lying with Additional C....
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....isdiction. 25. He submitted that the AO has obtained assessee's ledger extracts from the books of his customers without providing the same to the assessee for reconciling the difference and thereby making huge additions which is uncalled for and legally not tenable. Similarly, the AO has recorded the statements of various suppliers through ITO, Ward(2) of Satara which is impermissible. Further, those statements were never provided to the assessee nor any opportunity to cross examination was granted to the assessee. He submitted that inadequate opportunities were granted to the assessee to furnish the requisite details. He accordingly submitted that in view of the additional grounds 1 and 2 the entire assessment proceedings should be held as null and void. 26. The Ld. Counsel for the assessee submitted that the AO obtained assessee's ledger accounts from Vestas Wind Tech Pvt. Ltd. on 16-12-2009 and found the difference in the contract receipt of Rs. 2,93,11,999/-. The above ledger extract was not provided to the assessee for reconciliation. Although the assessee filed the reconciliation statement before the CIT(A) with copies of contract bills raised, cheques received, bank st....
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....the file of the AO with a direction to examine the contention of the assessee that the payees have filed their return disclosing the amount received. He accordingly submitted that the issue may be restored to the file of the AO with a direction to verify as to whether the payees have disclosed such receipts and paid tax on that and if so to delete the disallowance. 30. The Ld. Counsel for the assessee further submitted that all the payments have been actually made and nothing is payable at the end of the year. Therefore, in view of the decision of the Hon'ble Allahabad High Court in the case of Vector Shipping Company reported in 262 ITR 545 no disallowance u/s.40(a)(ia) is called for. 31. So far as disallowance u/s.40A(3) is concerned he submitted that no payment exceeding Rs. 20,000/- in each case has been made to Gatiman Earth Movers, therefore, addition of Rs. 2 lakhs u/s.40A(3) on account of payment to Gatiman Earth Movers is uncalled for. As regards the disallowance of Rs. 3 lakhs paid to Pratik Bricks is concerned he submitted that neither any amount has been paid to the above party in violation of section 40A(3) nor the assessee was confronted on this issue. He submit....
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....ers. The AO having jurisdiction over the assessee had issued commission to an officer of the department for conducting local enquiry and there is nothing wrong in it. 36. So far as non supply of statements recorded and the ledger extracts obtained from different parties are concerned he submitted that the assessee was non-cooperative during the course of assessment proceedings. When he was not participating properly he cannot say that he was not provided such statements or ledger extracts. 37. So far as the merit of the case is concerned he submitted that the assessee has got his accounts audited. Subsequently during assessment proceedings he filed revised profit and loss account. He was unable to give proper reply as to why there were such huge differences in the original and recasted profit and loss account and balance sheet. When he was caught for suppression of contract receipts, the assessee filed the revised profit and loss account showing some additional contract receipt and thereby debiting various expenses. Once the assessee has accounted for the expenditure in the original profit and loss account there is no question of incurring any further expenditure. 38. So f....
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....tracts obtained and statements recorded from various parties were not confronted to the assessee. The AO sitting at Pune has called the assessee from Satara to appear before him at Pune Office and therefore there was undue hardship caused to the assessee. 42. So far as the additional ground relating to validity of jurisdiction is concerned, we do not find any merit in the arguments advanced by the Ld. Counsel for the assessee. Admittedly, the AO who was sitting at Pune was also holding charge of Satara Range, Satara. The assessee is assessed at Satara. The Addl. Commissioner has issued all the notices to the assessee from Satara office. However, he has asked the assessee to appear before him at his regular office at Pune. If the assessee had any grievance he could have approached the concerned CIT or CCIT explaining his inability to appear at Pune Office on account of hardship. However, the assessee instead of making any such complain to the higher authorities had appeared before the Addl.CIT at Pune who was holding charge of Satara Range. Now that huge additions have been made the assessee cannot say that he was harassed because of his appearance at Pune Income Tax Office inste....
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.... Ground raised by the assessee therefore being devoid of any merit is dismissed. 45. So far as the ground relating to non admission of additional evidences filed during the course of appeal proceedings is concerned, i.e. revised statements of financial accounts produced before the CIT(A) we find the Ld.CIT(A) has validly rejected such revised financial statements. Admittedly, the accounts were audited by the auditors and the audit report was filed along with the return of income and such audit report was also duly signed by the assessee himself. Therefore, we fail to understand as to how and why the accounts could be re-audited by another Chartered Accountant or the same Auditor by recasting the accounts. We fail to understand as to how such a thing has happened since there is suppression of huge turnover as well as non recording of huge amount of expenses which have now been shown in the revised financial statements which is not only unbelievable but also unimaginable. 46. However, we find some force in the argument of the Ld. Counsel for the assessee that so far as disallowance u/s.40(a)(ia) is concerned the various Benches of the Tribunal following the insertion of the sec....
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....ditional Ground No.1the order passed by the Assessing Officer is bad in law and invalid on the following grounds:- i. Requiring to attend at Pune for assessment proceedings; ii. Obtaining appellant's ledger extracts from the books of his customers and without providing the same to the appellant for reconciling the difference; iii. Recording the statements of several suppliers by the Assessing Officer namely Mr. J.Y. Chavan, ITO Ward 2, Satara, which is impressible in law. iv. Recording the statements of the above several suppliers at the back of the appellant and making addition without providing the copies of those statements and allowing cross examination; v. Allowing inadequate opportunity to furnish the required details. Other Grounds: - Ground No 1: - On the facts and ill the circumstances of the case CIT (A) has erred in not admitting the additional evidence filed in the course of assessment proceedings overlooking the legal proposition that these additional evidences only and clearly reveal the correct assessable income and particularly being admissible in the light of Rule 46A of the Income Tax Rules. Ground No 2:....
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....s acted as a mediator between the windmill companies and the land owners. The difference between the amount received by the assessee from the windmill company and the amount paid to the land owner is the profit of the assessee. However, the assessee did not recognize profit for such land deals. The AO, therefore, confronted the same to the assessee. In response to the same the assessee filed computation of profit from sale of land according to which the sale consideration was shown at Rs. 39,18,500/- and the purchase cost was Rs. 28,04,750/-. The AO, therefore, treated the difference of Rs. 11,13,750/- as the profit earned by the assessee from unaccounted income from land business. 51. Before CIT(A) the assessee challenged the above addition made by the AO on the ground that all the lands in question are rural agricultural lands and thus do not fall within the definition of capital assets and therefore there was no cause for any addition. However, the assessee during the course of appeal before the CIT(A) had submitted the corrected books of account according to which the profit on sale of land was shown at Rs. 96,76,970/-. After making adjustment of compensation expenses amount....
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....29 ITR 295 (SC) b. Lala Indra Sen reported in 8 ITR 187 (Allahabad High Court) c. Kaur Singh reported in 144 ITR 756 (Punjab & Haryana High Court) d. Venkatasubbiah Reddiar reported in 221 ITR 18 (Madras High Court He accordingly submitted that necessary relief should be granted to the assessee. 54. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A) on this issue. He submitted that when the assessee is purchasing and selling land and has even claimed certain expenses in the recasted/revised financial statements, this itself shows that the assessee is in land business. Therefore, the order of the CIT(A) should be upheld. 55. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the AO in the assessment order has made addition of Rs. 11,13,750/- to the total income of the assessee on account of unaccounted income from land business. He arrived at this figure by reducing the cost of land from the sale proceeds. We find the assessee before the Ld.CIT(A) in his recasted financial statements had shown the profit on sale o....