TaxTMI 
TaxTMI 
2020 (11) TMI 367
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.... "i) On the facts and in the circumstances of the case and in law, the Hon'ble DRP has erred in holding that the expenses incurred on jobs completed in earlier years amounting to Rs. 4,82,26,872/- cannot be said to be prior period expenses, ignoring the fact that the assessee cannot claim expenses against the income which has not been earned during the year under consideration. ii) The Hon'ble DRP has erred in directing the AO to delete the disallowance of expenses incurred towards entrance fee and subscription amounting to Rs. 8,462/- ignoring the fact that the said expenses is not wholly and exclusively incurred for the business. 3. Appellant, M/s. Consulting Engineering Services (India) Pvt. Ltd. (hereinafter referred to as 'the assessee') by filing the present appeal sought to set aside the impugned order dated 24.12.2014 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143(3) read with section 144C of the Income-tax Act, 1961 (for short 'the Act') qua the assessment year 2010-11 on the grounds inter alia that:- "A. GENERAL GROUND 1 1.1. That the Ld. AOIDRP have erred on ....
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.... 4.4. The Ld. AO/DRP have erred in law and on facts of the case in relying on the decision of earlier years without appreciating that principle of res judicata is not applicable to Income Tax proceedings. GROUND 5: DISALLOWANCE OF INR 6,50,891/- UNDER 40A(2)(b) 5.1. The Ld. AO/DRP have erred on facts of the case and in law in disallowing a sum of INR 6,50,891 as being covered under 40A(2)(b) of the Act without appreciating that these amounts were incurred wholly and exclusively for the purpose of business, based on conjectures and surmises. 5.2. The Ld. AO/DRP have erred on facts and in law in making the additions under section 40A(2)(b) without bringing on record any material that such expenditure is excessive or unreasonable and therefore not meeting the basic criteria for making disallowance u/s. 40A(2)(b). 5.3 The Ld. AO/DRP have erred on facts and in law in making the aforesaid addition on the basis of disallowance made in the preceding assessment year without appreciating that the principle of res judicata does not apply to Income Tax proceedings. 5.4 Without prejudice to the above sub-grounds, the Ld. AO/DRP have further erred....
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....ect/construction management in infrastructure and other development sectors. Consulting Engineering Services LLC (CES LLC) (registered in the Sultanate of Oman) is a subsidiary of the taxpayer. The taxpayer held 65% shares of CES LLC. CES LLC provides consultancy in infrastructural projects, architectural project and also does the supervision of projects. During the year under assessment, the taxpayer entered into international transactions as under:- Name of the AE with whom the international transaction has been entered Nature of transaction Amount (INR) Consulting Engineering Services LLC, Oman Provision of consultancy in infrastructural architectural project and supervision at various sites in Oman and other sites in Middle East. 148,573,436 5. Assessing Officer (AO) by following the assessment order passed in taxpayer's own case for AY 2009-10 confirmed by the ld. CIT (A) made addition of Rs. 27,58,24,845/- on the ground that the taxpayer has undervalued the closing job in progress by Rs. 27,58,24,845/- for the year under consideration. 6. AO also made addition of Rs. 5,31,08,347/- on account of losses incurred on pre-2003 or post-2003 project compl....
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....ding the same to the cost incurred by the taxpayer relating to the work pertaining to the unbilled amount. 16. Ld. AR for the taxpayer challenging the impugned order contended that AO/DRP have failed to appreciate the method of accounting being regularly followed by the taxpayer and have also not considered the fact that the taxpayer has offered income on the basis of bills raised during the relevant financial years for which the expenses were debited to the profit & loss account in preceding years and relied upon the decisions rendered by Hon'ble Supreme Court in CIT vs. Excel Industries Ltd. (Civil Appeal No. 125/2013), Hon'ble Delhi High Court CIT vs. Triveni Engg. & Industries Ltd. (2011) 196 taxman 94 (Delhi-HC), and coordinate Bench of the Tribunal in Accenture India (P) Ltd. in ITA No. 4541/Mum/2008 dated March 23, 2010. 17. However, on the other hand, ld. DR for the Revenue contended that this issue is identical to the issue before the AO as well as ld. CIT (A) in AY 2009-10 in ITA No. 1735/Del/2014 & 1444/Del/2014 vide order dated 29.05.2019 which has been remitted back to the AO by the Tribunal for de novo determination. 18. When we examine assessment ord....
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....nal as the same are required to be examined first by the AO by examining the facts of the case at hand in entirety, otherwise it will cause prejudice to the Revenue who has merely decided this issue by following its own order for AY 2009-10 which is no more in existence. So, this issue is also remitted back to the AO to decide afresh after providing an opportunity of being heard to the taxpayer. GROUND NO. 5 (ITA NO. 1245/DEL/2015) (TAXPAYER'S APPEAL) 23. AO/DRP have made/confirmed disallowance of Rs. 6,50,891/- claimed by the taxpayer as expenses having been incurred on behalf of its sister concern, namely, M/s. CES Technologies Pvt. Ltd., u/s. 40A(2)(b) of the Act being not related to the business of the taxpayer company. 24. Ld. AR for the taxpayer challenging the impugned disallowance contended inter alia that AO has failed to appreciate the fact that only amount of Rs. 6,00,000/- was paid to CES Technologies Pvt. Ltd. and remaining amount of Rs. 50,891/- was paid to other persons who are not related to the taxpayer; that the taxpayer has obtained a project of "Soil Health Card" from Anand Agriculture University, Government of Gujarat in FY 2004-05 and the estimate....
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.... 9.4.2 So far as the claim of expenditure under "direct expenses" aggregating to Rs. 2,35,32,318/- is concerned, the taxpayer has produced vouchers relating to these before the AO at the remand stage and the AO has affirmed that these vouchers were examined by him on test check basis. In the remand report, the AO has not adversely commented upon these expenses stated them to be, of non verifiable nature. At the same time, the AO has not stated categorically that he has been able to verify the claim of the taxpayer of incurring of expenditure. Under these facts, the Panel directs the AO to allow the claim on this account to the extent these are said to be non-verifiable. In case, the AO proposes any addition on account of non verifiable nature of such expenses, he shall record reasons as to how such expenses are not verifiable or how the genuineness of such expenses is in doubt. The Panel also mentions that the issue of the expenditure Of Rs. 6,50,891/- has already been discussed in detail vide Ground No. 1 and therefore, the AO shall not make any separate addition for the corresponding amount for the said project. For the sake of clarity it is mentioned that the said....
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....entrance fees and subscriptions. The auditor has not stated anything beyond this. Thus, the observation of the AO that such expenses are, not wholly and, exclusively spent for the purposes of the business is, not established. The AO should have identified as to, how the Claim so made is not allowable. Even in AY 2009-10, CIT(A) has not confirmed the said disallowance made by the AO. In para 5:17 of his order, the CIT(A) has directed the AO to delete the addition which has been held to be extended by the taxpayer wholly and exclusively for the purposes of the business and also being in revenue domain. Under these facts and circumstances the Panel directs the AO to delete addition proposed by him on this account." 29. When in Annexure to Tax Audit Report Item No. 17D(1) it has been intimated that amount of Rs. 8,462/- is debited to P & L account being expenditure incurred at club entrance fee and subscription, causal observation made by the AO that same are not wholly and exclusively spent for business purpose, is not sustainable. So, keeping in view the meager amount and the fact that the same has been incurred as entrance fee and subscription for club has been rightly deleted by....