TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 501
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....d in deleting the addition of Rs. 2,25,00,519/- without appreciating the fact that the AO had issued summons during the remand proceedings to creditors and out of 10 creditors only 3 have submitted reply and hence the genuineness of the transaction has not been proved. 4. Any other ground that may be adduced at the time of hearing." 2. The facts of the case are that the assessee, a Civil Contractor, filed a return of income of Rs. 42,58,890/- on 30.09.2015. During the course of assessment proceedings under section 143(3), an addition of Rs. 2,25,00,519/- was made with respect to unexplained unsecured loan. Before the learned Assessing Officer, the assessee submitted that it was the amount of SD (Security Deposit) of sub/petty contractors. The details of the said petty contractors alongwith the names and PAN numbers and the amounts deposited were submitted to the learned Assessing Officer. In order to verify the authenticity, identity and creditworthiness of the said security deposits, the assessee was asked to provide the bank statements, returns of income and other related documents in respect of the sub/petty contractors, from whom these deposits had been received. In reply th....
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....k statements and income tax returns of eight of the said sundry creditors had not been furnished. Their loans were not verifiable and hence they were fit to be added back to the income of the assessee. In respect of two of the sundry creditors, he found that in the returns of the income, no advances had been shown in the name of the assessee or shown at all. Therefore, the learned Assessing Officer concluded that the total claim of Rs. 2,25,00,519/- was fit to be added back to the income of the assessee under section 68 of the I.T. Act, 1961. He, therefore, added this amount back and initiated the proceedings under section 271(1)(c). 3. The assessee went before the learned CIT(A) and submitted, that the addition of Rs. 2,25,00,519/- represented the amount of secured loan and not unsecured loan. It was submitted that all the secured loan creditors had been listed in Schedule B as secured deposit from petty contractors. It was further submitted that as per the agreements, the assessee was required to take security amounts from petty contractors to recover for loss or incomplete works and such security deposits were balanced by assets of similar amount in Schedule H and therefore, th....
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....l work being done unless it was supported by other corroborative evidence. The learned Assessing Officer further submitted that there were various discrepancies in the returns of income of the various sub-contractors. Furthermore, the learned Assessing Officer had made the addition on the basis of the returns in which the same parties had been shown as creditors for unsecured loans. It was further submitted that the learned Assessing Officer had issued summons to these aforesaid parties for production of confirmation letter, audit report, balance-sheet, capital account, copy of return of income and bank statement in respect of the loans given to the assessee but out of ten creditors had submitted a reply and in two cases, the summons had returned undelivered. It was further submitted that the plea of the assessee that these loans were secured, were not acceptable because the same had been shown under unsecured loans in the returns of the assessee and with respect to two parties namely Sh. Bhanu Pratap Singh and Sh. Sanjay Kumar Vaishnav, the so called agreements with these parties, had been prepared after the end of the financial year 2014-15. Furthermore, perusal of the returns of....
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....It was submitted that when these same persons had been accepted as unsecured sundry creditors in previous years, the learned Assessing Officer should not have taken a different view in respect of the same people, as secured creditors, in this year. It was submitted that when there were credits in the balance-sheet on the liability side and debits of the same creditors in the balance sheet on the asset side, only the access of liability over assets could be added back if the creditors were unexplained. Thus, it was submitted that no addition was required to be made. The learned CIT(A) considered all these facts and held that the creditors were petty contractors. Payments had been made to them on which tax were being deducted at source. Details of PAN, payments made to the petty contractors, tax deducted at source and details of security deposit retained, alongwith their affidavits had been filed. The learned CIT(A) held that it was common knowledge that in Government contracts, Contractors have to offer security deposits as in the present case and these security deposits are also raised from the petty / sub-contractors by the main contractor, to safeguard against bad work/incomplete....
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....o as the 'ld. AR') appearing on behalf of the assessee invited our attention to Schedule B of the balance-sheet in which the amount of Rs. 2,25,00,519/- was reflected against security deposit from petty contractors. He also invited our attention to Schedule H of the balance-sheet which contained details of deposits assets with the various Government departments and again reiterated the argument that this amount was essentially taken as security deposits from the petty contractors to whom the works that had been allotted to the assessee, were subsequently allotted for execution. It was submitted that all these amounts that had been received from the said petty contractors had been deposited with the various Government Department, which were reflected in Schedule H of its returns. It was, therefore, submitted that since the amounts received from the petty contractors were secured against the deposits made to the Government Department, they could not be called unsecured loans and therefore, could not be brought within the ambit of limited scrutiny as laid down by the CASS. The ld. AR further invited our attention to page 17 of his paper book, which contained the details of payments ma....