TaxTMI 
TaxTMI 
2014 (4) TMI 1292
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....n law, the ld. CIT(A) has erred in confirming 15% i.e. Rs.23,43,345/- out of the total addition of "Annual Maintenance Contract" expense of Rs.15622300/- made by the Assessing Officer without rejecting the books of accounts u/s.145(3) of the IT Act. 2. It is, therefore, prayed that the addition so confirmed by ld. CIT(A) may kindly be deleted. Revenue's Grounds of Appeal 1. On the facts and circumstances of the case and in law, the Ld. CIT(A)-I, Surat has erred in restricting the addition of Rs.1,56,22,300/- made on account of disallowance of bogus expenses of annual maintenance contract for cable lines & operations & maintenance contract to Rs.23,43,345/- inspite of the fact that the assessee failed to establish ....
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....of Rs.1,56,22,300/-. To verify the genuineness of the expenditure, the AO had issued notices u/s.133(6) of IT Act. The AO has also asked the assessee to file the proof of filing of return of those parties, bank accounts of those parties, etc. One of the proprietors, namely, M/s. Shivam Add was produced to whom a substantial amount was found to be paid/accrued. His statement was recorded. He has stated on oath that the work of laying cables was carried out by him. He has confirmed during the year an amount of Rs.3,40,094/- was received from assessee. The amount was paid towards service tax, education cess and the tax deducted. However, the AO has doubted whether any work was actually carried out by the said concern. The AO has issued summons....
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....arned CIT(A) has called for a remand report and in compliance a report was submitted. In remand proceedings, the assessee was given the statement recorded of 11 persons and the assessee was given a fresh opportunity to produce rest of the persons. The assessee was able to produce few more persons however unable to produce the five persons as noted in the remand report. Out of which it was informed that one of the person, namely, Jairajbhai Manjibhai Sindhav was suffering from cancer; hence, unable to present himself. In respect of the persons who have been produced during remand proceedings it was recorded that they have submitted in writing the confirmation of the payment received along with copy of the return filed and other connected det....
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....ect of part cash expenses also, AO failed to explain that how these expenses are not genuine or against the provisions of income tax Act. Assessee is free to make cash payments if those are covered by income tax provisions. Making payments to the above parties after the end of the financial year also does not conclusively prove that no services were rendered by those persons. In their statements, those persons have admitted on oath that they have received the payments for the work done by them for appellant. The AO has alleged that all this frame work has been created just to claim the expenses and reduce the tax burden. In his opinion, all these payments and expenses are only accommodative entries, However, if such allegation is made by AO....
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....relevant facts it is clear that neither the appellant be able to conclusively prove that all the expenses under the head "Annual Maintenance Contract" are genuine and authentic nor the AO could prove that the expenses under this head are completely bogus and ingenuine. In such situation, it would be justifiable and it .would meet the ends of justice if some part of it is disallowed and remaining part is allowed as business expenditure. In my opinion, disallowing the 15% of the total expenses of Rs.1,56,22,300/- which comes at Rs.23,43,345/- would be justifiable taking into consideration all the relevant facts and aforesaid discussion made. Remaining part of expenses which comes to Rs.1,32,78,955/- is allowed at business expenditure u/s.37(1....