TaxTMI 
TaxTMI 
2024 (10) TMI 1804
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....naging partner as per his directions which was accepted by Shri Manvendra More, Partner of the Firm and he declared the amount of Rs. 13,22,460/- along with credit entries of different years towards cession of liability of sunder creditors for the A.Y. 2020-21 and admitted the same in his statement. Therefore, the A.O. added the unexplained expenditure u/s 69C of the IT Act, 1961 to the income of the assessee. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 74,51,358/- made on account of explained expenditure u/s. 69C of the IT Act 1961, without appreciating the facts that during the course of survey proceedings it was found that the land is in the name of Shri Vishnu Mor and the building has nothing to do with the business of the Firm. Therefore, the A.O. had rightly added the expenditure of Rs. 74,51,358 u/s 69C r.w.s. 115BBE of the Act booked in the books of M/s. RBSSD & FN Das for the A.Y. 2020-21, since the same was not related with the business of the assessee and the Ld. CIT(A) erred in treating the same as personal expenses of the partner and liable to be disallowed u/s 37(1) of the Act. 3. On ....
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....d. Notice under section 142(1) of the Act was also issued on 01/02/2022. Accordingly, the Assessing Officer has made assessment under section 143(3) on 19/09/2022, determining total assessed income at Rs. 19,45,78,986, after making following addition. S. No. Income Assessed Addition made On account of 1. Rs. 19,45,78,986/- Rs. 13,22,460/- u/s 69C of the Act 2. Rs. 90,40,562/- u/s 69C of the Act 3. Rs. 15,28,680/- u/s 69C of the Act 4. Rs. 25,06,079/- u/s 69C of the Act Aggrieved by the assessment order, the assessee has filed appeal before the first appellate authority. The assessee has made details submission before the CIT(A), which is reproduced below :- "1. Assessee is a partnership firm carrying on business of Mining of Manganese Ore minerals. It maintains regular books of accounts which are audited u/s 44AB of I T Act. 2. A Survey u/s 133A of IT act was conducted at premises of the assessee on 25.08.2021. Assessee filed return of income on 13.02.2022 declaring total income of Rs. 18,01,81,210/-. Case was selected for scrutiny and notice under section 143(2) and 142(1) were issued which were....
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....nour is requested not to add Rs. 1179/- to the total income of the assessee. c) Pradeepkumar Katakwar : Please refer copy of account enclosed. The assessee on 13/12/2019 has paid a sum of Rs. 3954/- on behalf of Katakwar for service tax purpose under Sabka Vikas Scheme. On 26/12/2019, the party has returned the said amount paid by the firm (Copy of Bank Statement with State Bank of India, Garivide enclosed). The amount of Rs .3954/- is neither any cessation of liability nor does it represent any expenditure. Your honour is requested to look into the fact and it is requested not to add Rs.3954/- to the total income of the assessee. d) S.Hussain : Please refer copy of account of the party. The assessee on 13/12/2019 has paid a sum of Rs. 3,17,327/- on behalf of S.Hussain for service tax purpose under Sabka Vikas Scheme. On 26/12/2019 the party has returned the said amount paid by the firm on 13/12/2019. (Copy of bank statement with State Bank of India, Garividi enclosed). The amount of Rs. 3,17,327/- is neither cessation of liability nor does it represent any expenditure. Your honour is requested not to add Rs. 3,17,327/- to the total income of the assessee." ....
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....ssessment order, the AO has made addition of Rs. 74,51,358/-. However, AO has invoked s. 69C r.w.s. 115BBE which is under challenge in present appeal before your honour. As regards expenditure of Rs. 15,89,204/- it was submitted that they are related to general repairs and maintenance of labour quarter which were constructed in the year 1984. The expenses are revenue in nature. Complete details of expenses including bills and vouchers were submitted during assessment proceedings. 4.3 The AO, in the assessment order, without pointing out any defect in the bills and vouchers produced before him, held that the assessee has not furnished copy of agreement for expenses on labour quarter and hence disallowed the entire expenditure on Building Repairs & Maintenance and made addition of Rs. 15,89,000/- to the returned income. 4.4 Invocation of s. 69C r.w.s. 115BBE on addition of Rs. 74,51,358/- 4.4.1 In this regard it is submitted that all expenses on construction of Beemli House totaling to Rs. 74,51,358/- are recorded in regular books of accounts of the assessee which are audited u/s 44AB of I T Act and were produced before the AO during assessment pro....
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....ssee firm is carrying on mining activity since 1984 from a remote village Garividi in Vizianagaram district of Andhra Pradesh. The firm has mine office, staff and labour quarters and creches at mining site for accommodating the labourers who come a long way from other villages. There are hundreds of labour working in the mine area and as per the Mining Safety Act proper shelter / quarters / crèches has to be provided for mine workers and the assessee is also having different offices like Mine Office, Transport Office, Weighbridge Office, Accounts Office, Canteen Area, etc. All the above labour quarters, crèches, office buildings and places were constructed during the period from 1984 to 1990 and the same being temporary in nature, necessary repairs and maintenance are required from time to time to upkeep the same. During the year under consideration the assessee has incurred expenditure of Rs. 15,89,000/- towards general repairs and maintenance of all these buildings at mine area. The expenses are current repairs to upkeep these buildings and no new capital asset has been acquired out of it. The expenses comprises of labour wages, cement, sand and other miscellaneous ....
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....ct in the bills and vouchers produced before him, the disallowance of Rs. 15,89,204/- out of Building Repairs & Maintenance expenses is unjustified and deserves to be allowed. 4.5.5 Without prejudice to above submissions it is submitted that similar expenses on Building Repairs and Maintenance have been incurred by assessee in other assessment years also. The AO has completed assessment of AY 2018-19 vide order u/s 147 r.w.s. 143(3) of I T Act on 28/03/2023 wherein the claim of expenditure of Building Repairs and maintenance has been accepted by the AO. Copy of assessment order is enclosed herewith. 5. Brokerage and Commission of Rs. 15,28,680/- 5.1 During the relevant previous year assessee has claimed expenses of Rs 15,28,000/-/- on account of Brokerage and Commission paid to Shri DVN Divya. It was submitted to the AO that Shri DVN Divya looks after follow up of orders and recovery of outstanding amounts from debtors. He is neither related to the assessee nor is he an employee of the assessee group. Payment to him has been made after due deduction of TDS at applicable rate. 5.2 During the assessment proceedings, the assessee has submitted follo....
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....ty of being an involuntary. The law relating to retraction is well-settled by Supreme Court in Sri Krishna V. Kurukshetra University, AIR 1976 SC 376, wherein it is held that if the original statement suffers from any defects the person is entitled to go back on the statement already made by making correct statement. The Supreme Court have laid down the ratio, after considering S. 18 of the Evidence Act, 1872 that any admission made in the ignorance of the legal rights or under duress, cannot bind the maker of the admission. This right has been tested under Income-Tax Act and the same has been upheld by Punjab & Haryana High court in Kisan Lal Shivchand Raj V. CIT, (88 ITR 293). 5.6 It is humbly submitted that the CBDT has issued an instruction to its field officers vide F. No. 286/2/2003-IT (INV) dated March 10, 2003 in following words- "Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based on credible evidence, are later retracted by the concerned assessee while filing returns....
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....ue emphasis should not be placed on the recorded statement. While the statement rendered at the time of search u/s 132(4) may be used in evidence in any proceeding, yet, that by itself, does not become the sole material to rest the assessment more so when the appellant seeks to withdraw the same by producing material evidence in support of such retraction. It is always open to a person, who made the admission, to show that the statement to offer income is incorrect and had material to substantiate so; the Tribunal was not justified in placing undue emphasis on the confession statements made by the appellant. When the appellant had explained the statement made on the second day of the search with materials, that the amounts offered were the loans taken the relatives who were already assessed on the said amount; apart from this, even otherwise, the transactions relating to pawn broking related to years prior to the date of assessment and had no relevance to the year under consideration, rightly the CIT(A) accepted the case of appellant to cancel the assessment on Rs. 4 Lakhs. Thus when the appellant had explained his statement as not correct in the context of the materials produced, ....
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....nts reflecting payments to the parties. 6.3 However, the AO, in the assessment order has held that assessee has not furnished copy of agreement for work contract, nature and proof of services provided and hence disallowed the claim of expenditure of Rs.25,06,079/- and made addition u/s 69C r.w.s. 115BBE of I T Act. 6.4 In this regard it is submitted that the Assessee is carrying on mining activities since 1944. The mines are open cast manual mine situated at Garividi, Dist : Vizianagaram. As the mining activities are going on since 1944, the depth of the mine has reached over 250 Ft. To carry on such deep mining activities, huge teams of man-power in terms of labourers are required. The team of the management has appointed several labour contractors to carry out various mining activities. The management has given the contract work to different persons as there are so many labour problems and different labour laws. The work awarded to the labour contractor comprises of digging, carrying over burden, making path, stacking of ore and mutty, etc. The contractors are being appointed by the agent of the company who normally takes the stock situation of labour team, thei....
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....sallowance under section 69C of the Act for Rs. 13,22,460. 5. The learned Departmental Representative ("the learned D.R.") strongly relied on the order of the Assessing Officer and stated that the employee of the assessee firm admitted his statement recorded during survey proceedings the amount of Rs. 13,22,460, along with credit entries of different years towards cessation of liability of sundry creditors for the assessment year 2020-21. 6. The Ld. Counsel for the assessee relied on the order of the learned CIT(A), wherein the learned CIT(A) has dealt with the issue at Page-16 and 17 of his order, which is reproduced below :- "Ground No. 3 is regarding the addition of Rs. 13,22,460/- made u/s. 69C r.w.s. 115BBE of the Act as unexplained expenditure. During assessment proceedings the AO raised a query related to credit entries of Rs. 13,22,460/- in the books of accounts. Appellant submitted that the amount of Rs. 13,22,460/- neither represent any expenses incurred during the year nor represent any cessation of liability. Appellant also submitted party wise details of sum of Rs. 13,22,460/- which relates to 4 parties. Appellant also submitted ledger account of above p....
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....ii) N.Applalaramalu 1,179.00 (iii) Pradeepkumar Katakwar 3,954.00 (iv) S.Hussain 3,17,327.00 Total 13,22,460.00 a) B.V.G. Sudhakar : B.V.G. Sudhakar is working as manager in the firm and on 16/11/2019, the company has advanced to him a sum of Rs. 10,00,000/- for company work by cheque No. 8025692 of ICICI Bank. The said amount was returned by Shri B.V.G. Sudhakar on 21/11/2019 (Copy of bank statement enclosed). The said amount of Rs. 10,00,000/- does not represent any cessation of liability nor towards any expenditure incurred during the year. The amount advanced and received back is the regular transaction for the business purpose. Thus amount of Rs. 10,00,000/- under any circumstances should not be added to the total income. b) N. Applaramulu : The assessee is carrying on mining business and during the course of business a sum of Rs. 1179/- was paid in excess and as such on 25/03/2020 the amount from the party was recovered by receiving Rs. 1179/- in cash. The amount of Rs. 1179/- neither represent any cessation of liability nor does represent any expenditure incurred and your honour is requested not to add Rs. 1179/- to the total inco....
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....itted, therefore, the provisions of section 69C are not application to the facts of the issue in hand. Consequently, we hold that the learned CIT(A) has rightly deleted the addition. Accordingly, the order passed by the learned CIT(A) is hereby upheld. Ground no.1, raised by the Revenue is dismissed. 10. Ground no.2, raised by the Revenue relates to disallowance under section 69C of the Act for Rs. 74,51,358. 11. The learned D.R. assailing the order passed by the learned CIT(A) submitted that the assessee has claimed Rs. 74.56 lakh towards building repair and renovation at Bheemlipatnam by the partner only and a sum of Rs. 74.56 lakh should be treated as expenses incurred as construction. 12. The learned Counsel for the assessee relied on order passed by the learned CIT(A). The learned CIT(A), vide Page-16 & 17 of his order, dealt with the issue, which is reproduced as under :- "Ground No. 4 is regarding the addition of Rs. 90,40,562/- on account of disallowance of expenses on Building Repairs & Maintenance. During the course of survey at the premises of the appellant details of expenses on account of building repairs and maintenance amounting to Rs. 90,40,562/- w....
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....nation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the 2448[Assessing Officer], satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year 13. From the above it is clear that there are two conditions for invoking section 69C. First is, that the assessee has incurred any expenditure in the relevant previous year, and second is that the assessee does not offer any explanation about source of such expenditure. If both the conditions are fulfilled, then only section 69C can be applied. In the present case though the assessee has incurred expenditure during the year but all these expenses are duly recorded in books of accounts and they have been incurred from the regular business income of the assessee. The Assessing Officer has neither during entire assessment proceedings nor in the assessment order doubted about the source of such expenditure. Therefore, the second limb of section 69C is not attracted and hence in my considered view the Assessing Officer is not correct in making addition under section 69....
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....ate proceeding appellant submitted that the learned AO has not pointed out any defect in the books of account and bills and voucher produced before him as such the disallowance of Rs. 15,89,204/- is unjustified. Appellant also submitted that similar expenditure made by it in AY 2018-19 have been accepted by the AO in a subsequent assessment order passed under section 147 read with section 143(3) of I T Act on 28.03.2023. The argument of the appellant carries weight and I am in agreement with the same. It is undisputed that the appellant has incurred expenses of Rs. 15,89,204/- for repairs and the building which are quite old. From the details of expenses furnished by the appellant it can be seen that the expenses are revenue in nature and no capital asset has been created out of such expenses. The observation of the AO that the appellant has not furnished copy of agreement with labour contractor in misconceived as the appellant has not made any payment to labour contractor under this head and it has made small payments to labourers for execution of repair work. The AO has also not pointed out any defect in the bills and vouchers produced by the appellant. It is settled pos....
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....an make disallowance under the provision of the Act. The Assessing Officer cannot make disallowance on ad-hoc basic without pointing out any specific defect. Considering the facts of the case and respectfully following the view taken by various Benches of the Tribunal, the addition of Rs. 15,89,204, out of building repairs and maintenance is directed to be deleted. Hence, ground No.3, raised by the Revenue is partly allowed. 20. Ground no.4, raised by the Revenue relates to deletion of addition under section 69C of the Act for Rs. 15,28,680. 21. The learned D.R. strongly argued and relied on the assessment order. The assessee has incurred Rs. 15,28,680 lakh brokerage and commission. The assessee has not submitted any copy of agreement, nature and proof of service provided of the same and the payment made to these persons are without any supporting material with respect of Brokerage & Commission. The partner of the firm also admitted the same expenditure as additional income of the assessee for the relevant year. 22. We find that the learned CIT(A), vide Page-19 and 20 of his order, dealt with the issue which is reproduced below :- "Ground no. 5 is regarding the ad....
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....idence on record that the expenditure of Commission and brokerage is bogus. In fact, in answer to question No. 40 related to Commission expenses of Rs. 15,28,680/-, Shri Manvendra Mor has stated that these expenses are genuine and the person has given services. Therefore, the reliance of AO on statement of Shri Manvendra Mor to disallow expenditure of Rs. 15,28,680/- is misconceived and incorrect. CBDT has issued an instruction to its field officers vide F. No. 286/ 2/2003-IT (INV) dated March 10, 2003 in following words- "Instances have come to the notice of the Board where appellants have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based on credible evidence, are later retracted by the concerned appellant while filing returns of income. In these circumstances, on confession during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus on concentration on collection of evidence of income which leads to information on what has not been disclosed or is not ....
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....e person has given service. Therefore, the reliance of Assessing Officer on statement of Shri Manvendra Mor, to disallowed expenditure of the Rs. 15,28,680, is misconceived and incorrect. 24. We have gone through the order passed by the learned CIT(A) as well as details submitted before us. We also find that Shri DVN Divya looks after follow up of ordered recovery of outstanding amounts from debtors. He is neither related to the assessee nor is he an employee of the assessee group. The payment made to him has been made after due deduction of TDS as applicable. The Assessing Officer has nowhere in the assessment order doubted about genuineness of the expenditure of Rs. 15,28,680. The Assessing Officer has also not falsified the various documents submitted by the assessee in support of the expenditure. Consequently, we hold that the learned CIT(A) has rightly deleted the addition and the order passed by the learned CIT(A) is hereby upheld Thus, ground no.4, raised by the Revenue is dismissed. 25. Ground no.5, relates to deletion of addition under section 69C of the Act deleting the addition under section 69C of the Act for Rs. 25,06,079. 26. The learned D.R. strongly argued ....
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....of labour team, their financial condition and integrity of the contractor. After appointment, work is awarded to different contractors for different pits so as to calculate the work done by them. The agent personally supervises the work of each contractor and verifying the same directs the contractor to prepare his work bill. The work bill is being verified by the mining supervisor who transfers the said bill to the accounts department. After receiving the bills, the accounts department verifies the rates, etc. and after deduction "Tax at Source" make payment to the contractor. The village Garividi is a very small place, and it is very difficult to find labour contractors, so some time also happens that some known persons of the appellant's firm/staff also engaged in contract work and with their acquaintances form a labour team they execute the contract work. Appellant further submitted that the expenses on account of labour contractors are genuine business expenses, supported by bills issued by contractors, and their acceptance of it by showing contract receipts in Income Tax return filed by them. The appellant has discharged it onus by providing copy of bill....
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....l labour contractors to carry out various mining activities. The work awarded to the labour contractor comprises of digging, carrying over burden, making path, stacking of ore and mutty, etc. The contractors are being appointed by the agent of the company who normally takes the stock situation of labour team, there financial condition and integrity of the contractor. After appointment, work is awarded to different contractors for different pits so as to calculated the work done by them. The agent personally supervises the work of each contractor and verifying the same directs the contractor to prepare his work bill. The work bill is being verified by the mining supervisor who transfers the said bill to the accounts department. After receiving the bills, the accounts department verifies the rates, etc. and after deducting "Tax at Source" makes payment to the contractor. The village Garividi is a very small place, and it is very difficult to find labour contractors, so some time it also happens that some known persons of the assessee's firm/staff also engage in contract work and with their acquaintances from a labour team they execute the contract work. We are also gone through t....