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TaxTMI 
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2023 (3) TMI 1204
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....e interests of the appellant. 2. For that the Ld. CIT (A) erred in confirming the disallowance at the rate of 20% of the total claim made on account of purchase of HEMM Spare parts/Repairing charges on estimate. 3. For that in the absence of any irregularity in accounts detected in the course of Survey operation u/s 133A, books of accounts could not be rejected on whims to make addition on estimate basis. 4. For that the Ld. CIT (A) erred in confirming the disallowance at the rate of 20% of the total expenditure incurred through sub-contractors on estimate. 5. For that in the absence of any irregularity in accounts detected in the course of Survey operation u/s 133A, books of accounts could not be rejected on whims to make addition on estimate basis. 6. For that at any rate the estimation towards disallowances of expenditure was wrong & uncalled for and/or otherwise high & excessive. 7. For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds." 2. The revenue in cross-appeal in ITA No.633/Kol/2020 has taken the following grounds of appeal: ....
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....inding that some of the expenses could not be substantiated fully by the assessee, therefore, sustained the addition to the extent of 20% of the additions made by the Assessing Officer. 4.1 Thus, against the disallowance of purchases made by the Assessing Officer at Rs.1,62,45,056/-, the ld. CIT(A) sustained the addition at Rs.32,49,011/- observing as follows: "The contentions of the appellant and the assessment order have been carefully perused. During the course of appeal proceedings, the appellant produced a copy of the agreement entered into with Jharkhand State Minerals Development Corporation. At para-2 under the head 'Items of Work' the agreement states as under:- "Removal of soil (soft and hard top soil) sandstone, shale, coal etc. by deploying Heavy Earth Moving Machines and stacking of coal top soil and OO B separately up to a distance of about 1.50 or more in the non coal zone as specified by JSMDC and back filling the excavated area including afforestation thereof." It is seen that the appellant is dealing in mining activities since 2007 with Jharkhand State Minerals Development Corporation. They have been assigned to do the job of ....
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.... portion of the same may be disallowed. In view of this I estimate that 20% of the expenses incurred by the appellant is unsubstantiated in nature and deserves to be added back to the income of the appellant. Hence, appeal to the extent of Rs.32,49,011/- is not allowed. Hence, appeal is partly allowed." 4.2 Further against the disallowance of expenses of Rs.1,09,02,361/- made the Assessing Officer, the ld. CIT(A) sustained the addition only to the extent of 20% calculating at Rs.21,80,472/- observing as follows: "The assessment order and the submission of the appellant have been carefully perused. During the course of appeal proceedings, the appellant produced a copy of the agreement entered into with Jharkhand State Mineral Development Corporation. At para-2 under the head 'Items of Work the agreement states as under- "Removal of soil (soft and hard top soil) sandstone, shale, coal etc. by deploying Heavy Earth Moving Machines and stacking of coal top soil and OO B separately up to a distance of about 1.50 or more in the non coal zone as specified by JSMDC and back filling the excavated area including afforestation thereof. The excavated earth excluding to....
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....pellant had to incur all kinds of necessary and relevant expenditure and it is observed that it has been mentioned specifically in the agreement also that labours have to be engaged for hand picking of stone and foreign materials from coal. Thus, it cannot be denied that the appellant had to incur any expenditure in respect of stone picking and stacking expenses, forestation expenses, over burden removal expenses as per the terms of the contract. Thus, the Assessing Officer was wrong in deleting the entire amount of expenses worth Rs.1,09,02,361/-. However, it cannot be denied that the Assessing Officer made certain investigations and the incurring of all these expenses cannot be proved fully to the satisfaction of the Assessing Officer. The Assessing Officer had desired the submission of the names and addresses of the labours who were engaged in these mining works. In activities of this kind, the names and addresses of casual labours are never mentioned and noted down. They are in the nature of daily wage earners and payments to them are made in cash as is the general practice. Hence, it is very harsh and unrealistic on the part of the Assessing Officer to state that sinc....
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....e Assessing Officer. 8. We have heard rival contentions and persued the record placed before us. We observe that the ld. Assessing Officer, during the course of the assessment proceedings u/s 143(3) of the Act for assessment year 2010-11, which were carried out after the survey operation u/s 133A of the Act conducted on 26.03.2010, has gone through the profit and loss account filed by the assessee in the course of survey operation as well as audited financial statement filed in the course of assessment proceedings and came to the conclusion that the assessee has claimed bogus expenditure towards purchase of spare parts at Rs.1,60,45,056/- and bogus sub-contract expenses at Rs.1,09,02,361/-. Further, we notice that ld. CIT(A) after examining the facts of the case on one hand did not dispute the type of expenditure incurred by the assessee towards purchase of spare parts and sub-contract expenses but, on the other hand, made an ad hoc disallowance of 20% of the alleged addition made by the Assessing Officer. 8.1 We notice that in the course of appellate proceedings before the CIT(A), the assessee has given complete details of the expenditure on spare parts as well as the machin....
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....640.00+1071200+1086800) Total Rs. 57,53,800.00 used for repairs during the year under review. From above this is very clear that these are very old and costly machines and also two of above dumpers are purchased second hand. (X) Other HEMM used stands in the name of Our Firm Name of Machines (Loader) Cost of the Machine year of purchase (a) Hindustan Motors LTd. (Inv. No. PRO/101) 12,00,000.00 03.01.1986 (b) Arun & CO 1,79,000.00 04.04.1986 Total cost of machines 13,79,000.00 Note: Parts amounting to Rs.7,61,280.00 The machines are very old, around 25 years old and needs heavy repairing. " 9. Similarly, with regard to sub-contract, justification about genuineness of the expenditure was stated in the following manner: "During the course of the appeal proceedings, the appellant stated as under:- At para 2 page 10 and onwards the AO had dwelled upon the issue of expenditure incurred towards: Stone picking and staging expenses: Rs 48, 86,100/- Forestation expenses: Rs 18, 38,561/- Overburden removal expenses: Rs 44, 77,700/- Total Rs.1,09, 02,361/- and which has been dis....
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....ing at the back of the appellant without affording an opportunity to cross examine those persons/evidences is an error fatal to the assessment proceeding. 4. That no infringement of law has been found during survey proceeding and or detected. 5. That the case laws relied upon by the AO dates back to 1950 and on facts has got no relevancy with the facts of the case. 6. That no entries which can be said to be incriminating have been found out in the computer. 7. That a summary of profit and loss account for two proceeding years and subsequent year giving the amount of contractual receipt and NP are enclosed. 8. If the amount of Rs 26947417 is considered as additional income then the profit percentage will 18.01% whopping sum keeping in view the past records of the appellant where almost all the assessments have been completed u/s 143(3) of the Act and the profit percentage ranges from 2.5% to 3.5%. 9. The AO has tried to make out his case for addition relying solely on the assessee statement recorded w/s 131 which does not have any evidentiary value as held in the case of S Khader Khan (2008) 300 ITR 157 (MAD) and affirmed by the ....
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....ing as follows: "However, it cannot be denied that the Assessing Officer made certain investigations and the incurring of all these expenses cannot be proved fully to the satisfaction of the Assessing Officer. The Assessing Officer had desired the submission of the names and addresses of the labours who were engaged in these mining works. In activities of this kind, the names and addresses of casual labours are never mentioned and noted down. They are in the nature of daily wage earners and payments to them are made in cash as is the general practice. Hence, it is very harsh and unrealistic on the part of the Assessing Officer to state that since the names and addresses of the casual labours have not been mentioned or could not be properly substantiated, hence, the entire expenses was bogus. Without incurring these expenses the contract cannot be discharged. However, it cannot be denied that certain expenses could not be fully substantiated by the appellant. Thus, it would be fair to disallow only a portion of the expenses so incurred. In view of this I estimate that 20% of the expenses amounting to Rs.21,80,472/- as bogus. Thus, appeal to the extent of Rs.21,80,472/- is d....
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....the case. We find that the assessee claimed to have made purchase from following three parties: Sl. No. Name of the person Amount of transaction entered during the year (Rs.) Misc 1 Vishal Enterprises 36,62,361 No evidence of creditworthiness/third party evidence is filed. Not even confirmation is filed by the party although it was mentioned in the letter that the confirmation is enclosed. 2 Nandi Ispat Corporation 36,64,024 No evidence of creditworthiness/third party evidence is filed. 3 Goodwill Agencies 13.15.322 No evidence of creditworthiness/third party evidence is filed. The AO required the assessee to explain the purchase made with evidence. According to Assessing Officer, no evidence has been filed recording the veracity of the transactions and accordingly he added the same. The CIT(A) deleted the addition by observing as under: "Perusal of the assessment order reveals that the A.O. has discounted evidence that these parties are assessed to sales tax and the payments to them, during the year have been made by account payee cheques. In his view, these are circumstantial evidence. But, in that event, it appear....
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....ase, even the A.O. admits that circumstantial evidence has been provided. Under the circumstances, in my opinion, the appellant has charged its primary onus. If the A.O. doubted the creditworthiness of the parties, he should have made his own enquiries regarding them. Without doing so, in my view, he cannot doubt their creditworthiness and disallow the appellant's claim of purchases. The disallowances are directed to be deleted. This ground of appeal is allowed" ******************************* 10. We find from the above facts and circumstances of the case that the assessee has filed confirmation from the parties from whom purchases were made and also details transaction as are available on record and even now before us i.e. purchase bills, payment by cheque and these party's I.T. Details. Despite the fact that these details are available before the Assessing Officer, the Assessing Officer has not carried out any further enquiry on the basis of these evidence and straightway made addition on unverifiable purchases. From the order of CIT(A) we find that complete details were available before him and on the basis of the same he has allowed the claim of the assess....