TaxTMI 
TaxTMI 
2025 (3) TMI 945
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....icated together. The lead case being of AY 2011-12 which covers the issues of AY 2010-11 also. Thus wherever relevant the facts and impugned orders of AY 2011-12 shall be referred and reproduced. Infact the ld. CIT(A) has passed a consolidated order in appeal. While arguing the cases the ld. DR has relied the findings of ld. AO and submitted that same are quite reasoned and based on test of human probability. Ld. AR relied the facts as appreciated by the ld. CIT(A) to give the relief. 3. The background to present appeals is the search & seizure action u/s. 132(1) of the Tax conducted on 28.10.2010 in Sweka Power Tech Engineers Group of cases at its business premises and the residential premises of the Directors. Consequent upon this action u/s. 132 of the Act, the case of the aforesaid assessee company was centralized in Central Circle-5, New Delhi vide orders passed u/s. 127 of the Act and notice under section 153A of the Act. 4. In the assessment proceedings, for AY 2011-12 the Ld. AO made four additions on account of cash seized during search, additions on account of bogus charges paid for installation of electricity polls, bogus purchases and addition on account of disall....
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....arbhajan Singh Giani were the director of the company. Later on in the year 2004, Shri Harbhajan Singh Giani resigned from the directorship of the company and Shri Jasminder Pal Singh, younger brother of Shri Tejinder Pal Singh joined as new director of the company. The main activities of the company are securing Government Contracts from Government and Semi Government agencies such as MCD, NDPL, and BSES etc. The company has executed various projects related to CWG 2010 awarded through MCD apart from its regular work. The assessee company has duly executed the project of street lighting of various roads belonging to MCD. 7. Table given below mentions the amounts of projects executed by the company, which were subject of scrutiny by the ld. AO, to make additions on account of bogus charges paid for installation of electricity polls and bogus purchases: S. No. Project details Value of the contract 1. Upgradation of street lighting on roads in Delhi under jurisdiction of MCD (Phase-I) 34, 53, 68, 925/- 2. Upgradation of street lighting on roads in Delhi under jurisdiction of MCD (Phase-I) 60, 74, 12, 210/- 3. Chhatrasal stadium sports lighting 2....
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....epresentatives / Proprietors of M/s R.C. Electricals, M/s Swastik Hightech Associates and M/s S.S.R. Engineers. The assessee could not produce before the Investigation Team any representative or proprietor of the 4th entity namely M/s Rose Electricals. 8.4 We find that the findings of the department during search / survey actions in respect of the said 7 labour parties involved in supply of labour and erection of poles is that certain adverse inferences have been drawn indicating therein that the assessee could not have incurred expenditure on these labour contractors. During the assessment proceedings, the ld. AO called upon the assessee to produce the said 7 parties for verification and cross-examination by the assessee. At para 6.3 the ld. AO has given the list of details which he required from the assessee and from the said 7 parties which is reproduced below:- (i) In regard to these parties; Books of Accounts audited Their P&L a/c, B/sheet, ROI and Ack of ROI All relevant documents including the transportation bills evidencing the purchase of material & supply of your site Bills of loading and unloading of the material Y....
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....ion charges as debited in the books of accounts is tabulated as under:- Parties/Sub-contractors to whom payment under the head Erection Charges was made during the FY. 2008-09 to 2010-11 relevant to A.Y. 2009-10 to A.Y. 2011-12 S.No. Name of the Party Amount paid Rs. Amount paid Rs Amount paid Rs. Amount paid Rs. Α.Υ. 2009-10 Α.Υ. 2010-11 Α.Υ. 2011-12 Total 1. Gill Electricals 6, 68, 936 66, 43, 069 18, 80, 598 91, 92, 603 2. Jayna Electricals --- 35, 61, 558 30, 89, 679 66, 51, 337 3. R. C. Electricals --- 11, 28, 242 39, 89, 597 51, 17, 839 4. Rose Electricals 5, 27, 941 41, 66, 159 14, 75, 232 61, 69, 332 5. SSR Engineers --- 62, 71, 332 40, 67, 976 103, 39, 308 6. Swastic Hitech Ass 34, 37, 072 25, 33, 804 20, 29, 124 80, 00, 000 7. Unique Electricals 13, 07, 479 68, 00, 712 3, 94, 112 85, 02, 294 Total 59, 41, 419 3, 11, 04, 975 169, 26, 318 539, ....
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....rties. In view of the findings of the search and survey operations coupled with post search and during assessment enquiries, it is held that the transactions with the above parties are not genuine and the assessee has claimed these expenses to reduce the actual profit. Hence, the payment made to these parties is held to be bogus to inflate the expenses and is liable to be added back to the total income of the assessee for respective assessment years. 8.8 As we go through the impugned order of ld. CIT(A) we find that ld. CIT(A) has taken note of all the relevant documents and information furnished by the assessee before the Ld. AO, but which were not given any indulgence by the ld. AO to find any infirmity or discrepancy in them but instead the ld. AO has drawn adverse inference on the basis that some parties could not be produced and in survey necessary corroborative evidences could not be found. This is a very strange way of assessment by expecting the assessee to prove the genuineness of an expenditure on the basis of assertion that nothing incriminating or corroborating the expenditure was found in search of vendors of material or the labour. At the same time it can be seen t....
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....Mrs. Shweka Kaur is the foundation of addition by the ld. AO. It is noted that Mr. T.P. Singh had allegedly stated during the search, before the beginning of actual search, that there was about Rs. 6 lac cash and out of it Rs. 4 lacs roughly belonged to the appellant company and the rest belonged to him and his family members. Mr. J.P. Singh had also stated on oath that he was having approximately Rs. 1.04 lacs of cash in his office brief case which belongs to the company. As he was not having a locker in his cabin, he kept the Company's cash which was at his disposal, in the brief case kept at his residence. He had also stated that some cash of the company was also held by Mr. T.P. Singh and that the exact amount was not known to him. The relevant answers of Mr. T.P. Singh and Mr. J.P. Singh have been reproduced by the ld. CIT(A). Same establish that the promoters of the appellant company had at the time of search itself explained that the cash found at the residence and in their possession in the brief case etc belonged to the appellant company or represented their family savings. The amount mentioned in the statement is slightly lesser than what was actually found during search.....
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....There is arbitration mechanism in such cases, which has not been tried, indicating that such works may be of sub standard quality or bill raised but not executed. (c) Further on perusal of projects agreement it is seen that the assessee company has reversed the entry in respect of invoice number 1432 amounting to Rs. 5, 39, 67, 805/- without even pursuing the matter with the authorities and resorting to the legal recourse. (d) Besides this amount of security deposit of Rs. 2, 46, 16, 149/- with MCD has also been claimed as bad debts, which is a capital loss. The reasons for forfeiture of such security are also not given by the assessee. Why are remedial action has not been taken so far. 12. The ld. AO, therefore, observed that the assessee could not claim bad debts in respect of payments which have not yet become bad and for which legal remedies have not been exhausted. He opined that the appellant was entitled to receive the payment only after completion of the project and fulfillment of the conditions of the contract. He, therefore, held that the appellant has made wrong claim of bad debts and disallowed the same. During the appeal proceedings the AR had subm....
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....dated 17.10.2011 from the MCD to the assessee company which refers to the legal notice dated 29.7.2011 given by the assessee to MCD claiming outstanding Rs. 9, 62, 53, 749/-. MCD stated in the said letter that the amount demanded by the assessee is less than the recoveries pointed out by audit and other investigation agencies. 14. Thus quite apparently the company had made all reasonable efforts to recover the dues, but failed to do so. Accordingly they wrote off dues outstanding as required u/s 36(1)(vii) of the Act. It is not necessary that only after approaching the court of law and spending money on litigation an assessee can be given benefit of his claim that reasonable efforts for recovery were made. The amounts were due from a statutory body so if there was any denial on the basis of audit objections, then that was sufficient for assessee to assume that the amount is non-recoverable. 15. As regards the ld. AO's observation that Rs. 2, 46, 16, 149/- represented capital loss the fact is that said amount was security deposit retained by MCD out of the bill amount payable to the assessee. This amount was retained by the MCD while remitting payments, as security towards fut....