The ACIT, Circle-3, Surat V. M/s. Karpara Project Engg., Surat

ITA 1080/AHD/2008

• Counselvise Citation: 108020514 RSA 2008
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-02-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 26-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Principle of natural justice; Additional evidence; Wrong claim; Bad and doubtful debts; Onus to prove; TDS
• Section: 143(3); 133(6); 250; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) ITA NO.1080/AHD/2008 A. Y.: 2004-05 THE A. C. I. T., CIRCLE-3, SURAT VS M/S. KARPARA PRJECT, 36,MILAN BUNGALOW, OPP. VALENTINE CINEMA, SURAT DUMAS ROAD, SUAT PA NO. AAEFK 2935 Q (APPELLANT) (RESPONDENT) C. O. NO. 99/AHD/2008 (IN ITA NO.1080/AHD/2008:A.Y.: 2004-05) M/S. KARPARA PRJECT, 36,MILAN BUNGALOW, OPP. VALENTINE CINEMA, SURAT DUMAS ROAD, SUAT PA NO. AAEFK 2935 Q VS THE A. C. I. T., CIRCLE-3, SURAT (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI VINOD TANWANI, SR. DR ASSESSEE BY SHRI J. P. SHAH, AR 2 DATE OF HEARING: 02-02-2012 DATE OF PRONOUNCEMENT: 10-02-2012 O R D E R PER A. MOHAN ALANKAMONY: THESE ARE APPEAL AND CROSS APPEAL, FILED BY THE REVENUE AND BY THE ASSESSEE FOR THE AS SESSMENT YEAR 2004-05 RESPECTIVELY IN ITA 1080 AND CO 99, AGGRIEV ED BY THE ORDER OF LD. CIT(A) IN CAS/II/338/06-07 PASSED U/S 250 R. W SECTION 143(3) OF THE ACT ON 31/12/2007. FOR THE SAKE OF CONVENIENCE BOTH THE APPEAL AND CROSS APPEAL ARE HEARD TOGETHER FOR ADJUDICATION BY A COMMON ORDER. ITA-1080/A/08 2. THE REVENUE HAS RAISED ELEVEN GROUNDS IN ITS APP EAL WHERE IN GROUND NO.10 & 11 ARE GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE OTHER GROUNDS ARE LISTED HEREIN F OR CONSIDERATION:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING ADDITION OF RS.42,88,013/- IN RESPECT OF THERMAX BEAWAR SITE AND OF RS.9,50,000/- IN RESPEC T OF ACC LTD. MADE ON ACCOUNT OF CONTRACT RECEIPTS NOT SHOWN BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.12,47, 346/- MADE BY THE A. O. ON ACCOUNT OF UNDERVALUATION OF CLOSING S TOCK. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.17,16,4 16/- MADE BY THE A. O. ON ACCOUNT OF OUTSTANDING INTEREST PAYABLE. 3 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.13,29,5 61/- MADE BY THE A. O. ON ACCOUNT OF DISALLOWANCE OF WAGES. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.29,010 /- OUT OF TOTAL ADDITION OF RS.58,621/- MADE BY THE A. O. ON ACCOU NT OF BEAWAR SITE EXPENSES. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,89,80 9/- MADE BY THE A. O. ON ACCOUNT OF RENT AND RATES. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,69,29 1/- MADE BY THE A. O. ON ACCOUNT OF LABOUR WELFARE, LABOUR CHARGES AND OFFICE EXPENSES. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.40,65,0 03/- MADE BY THE A.O. ON ACCOUNT OF NON-EXISTING AND BOGUS SUB CONTR ACT EXPENSES. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,71,0 94/- MADE BY THE A. O. ON ACCOUNT OF PAYMENTS MADE OUT OF BOOKS OF A CCOUNT FROM UNEXPLAINED SOURCES. CO-99/A/08 3. THE ASSESSEE HAS RAISED SIXTEEN GROUNDS IN ITS C ROSS APPEAL, HOWEVER AT THE TIME OF HEARING BARRING GROUND NO.12 LD. AR DID NOT PRESS THE OTHER GROUNDS, THEREFORE ALL THE GROUNDS BARING GROUND NO.12 ARE DISMISSED AS NOT PRESSED. GROUND NO12 IS REPROD UCED HEREIN BELOW FOR ADJUDICATION. 4 12. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF EXPENSES OF RS.3,94,249/- FOR THE MONTH FOR APRIL,2003 AND MAY 2003 BY NOT ADMITTING ADDITIONAL EVIDENCES BEING THE EVIDENCES FOR INCURRING SUCH EXPENSES, WHICH NEEDS TO BE DELETED IN THE INT EREST OF NATURAL JUSTICE AND EQUITY SINCE THE COMPLETE RECORDS/EVIDE NCES FOR INCURRING SUCH EXPENSES ARE AVAILABLE AND PRODUCED FOR VERIFICATION. 4. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F ENGINEERING WORKS CONTRACT FILED ITS RETURN OF INCOME FOR THE R ELEVANT ASSESSMENT YEAR ON 31-10-2004 DECLARING AN INCOME OF RS.11.99 LACS ALONG WITH AUDITED PROFIT & LOSS ACCOUNT, BALANCE SHEET, TAX AUDIT REP ORT U/S 44AB OF THE IT ACT. INITIALLY THE RETURN WAS PROCESSED U/S 143 (1) AND SUBSEQUENTLY THE CASE WAS TAKEN FOR SCRUTINY AND ASSESSMENT WAS COMP LETED U/S 143(3|) OF THE ACT ON 22-12-2006 WHEREIN VARIOUS ADDITIONS WERE MADE. THE ASSESSEE AGGRIEVED BY THE ORDER OF THE AO PREFERRED APPEAL BEFORE THE LEARNED CIT(A) WHO IN TURN ALLOWED THE APPEAL OF TH E ASSESSEE PARTLY. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) BOTH T HE REVENUE AND THE ASSESSEE ARE ON APPEAL AND CROSS APPEAL BEFORE US. REVENUES APPEAL NO.1080/AHD/2008 5. GROUND NO.1 (A) DELETION OF THE ADDITION OF RS .42,88,013/- IN RESPECT OF THERMAX BEAWARE SITE, AND, (B) RS.9,50,0 00/- IN RESPECT OF ACC LTD.: 5 A) THERMAX BEAWARE SITE DELETION OF RS.42,88,013/ -: THE LEARNED AO OBSERVED THAT THE ASSESSEE HAD DISCLOSED TOTAL C ONTRACT RECEIPTS OF RS.1,68,578/- FROM M/S. THERMAX BEAWARE, WHILE AS AN AMOUNT OF RS.44,56,591/- OUGHT TO HAVE BEEN DISCLOSED. THUS, THERE WAS A SHORT DISCLOSURE OF RS.42,88,013/- WITH RESPECT TO CONTRA CT RECEIPTS. THE ASSESSEE SUBMITTED BEFORE THE AO THAT NEGOTIATIONS WERE GOING ON WITH THE CONTRACTEE FOR RECONCILIATION. HOWEVER, THE LEA RNED AO MADE AN ADDITION OF RS.42,88,013/- AS UNDISCLOSED INCOME SI NCE THE ASSESSEE HAD NOT DISCLOSED THIS AMOUNT AS ITS TURNOVER. WHEN THE MATTER CROPPED UP BEFORE THE LEARNED CIT(A), THE LEARNED CIT(A) DE LETED THIS ADDITION WITH THE FOLLOWING OBSERVATIONS: 7.3 WITH REGARD TO THE RECEIPTS FROM THERMAX, BEAW ARE SITE, IT HAS BEEN REPORTED BY THE AO THAT DURING THE PRECEDI NG ASSESSMENT YEAR, THE ASSESSEE HAD DISCLOSED A SUM O F RS.16,81,857, AS RECEIPTS FROM M/S. THERMAX BABCOCK AND WILCOX LTD., ANOTHER SUM OF RS.16,75,564 HAD BEEN DISCLOSE D IN THE SAME YEAR AS RECEIPTS FROM M/S. THERMAX LTD., BEAWARE. B OTH THE COMPANIES WERE ENGAGED IN THE DEVELOPMENT OF A PROJ ECT AT BEAWAR FOR WHICH THEY HAD CONTRACTED THE ASSESSEE. THUS, WHILE THE ASSESSEE ACCOUNTED FOR THE RECEIPTS FROM THE JO B DONE ON THE SIDE, THE PAYMENTS WERE MADE SEPARATELY BY THE TWO COMPANIES AND TAX WAS DEDUCTED AT SOURCE ACCORDINGLY. SUCH RE CEIPTS TOALLED RS.33,57,421/-. IT HAS BEEN FURTHER CONFIRMED BY TH E AO IN HIS REMAND REPORT THAT ANOTHER SUM OF RS.12,70,847 WAS SHOWN TO HAVE BEEN RECEIVED FROM M/S. THERMAX LTD., BEAWARE ACCOUNT, DURING THE YEAR UNDER CONSIDERATION. THE TOTAL RECE IPTS DISCLOSED BY THE ASSESSEE FROM THE SAID CONTRACT WAS THEREFOR E, RS.46,28,268/-, WHEREAS, THE AO HAD WORKED OUT THE PAYMENTS RECEIVABLE BY THE ASSESSEE FROM M/S. THERMAX LTD. A T RS.44,56,591/-. THIS MEANT THAT DURING THESE TWO YE ARS, THE ASSESSEE HAD MADE AN EXCESS DISCLOSURE OF RS.1,71,6 77. 7.3 HOWEVER, AFTER HAVING FURNISHED SUCH A DETAILED REPORT WHICH INCLUDED DATE-WISE AND BILL-WISE ENTRIES OF VARIOUS AMOUNTS IN THE LEDGER, THE AO HAS VERY CURIOUSLY OBSERVED IN THE R EMAND REPORT THAT THE ASSESSEES CLAIM THAT THE SUM OF RS.33,57 ,121 HAD BEEN 6 ACCOUNTED FOR IN THE PRECEDING ASSESSMENT YEAR WAS TO FACTUALLY CORRECT. THIS CONCLUSION OF THE AO DOES NOT CORRESP OND TO THE DETAILED FINDING RECORDED BY HIM IN THE REMAND REPO RT. SUCH A COMMENT IS THEREFORE IGNORED. HOWEVER, THE DETAILS CLEARLY SHOW THAT THE ASSESSEE HAD NOT ONLY ACCOUNTED FOR THE RE CEIPTS FROM THERMAX AS REFLECTED IN THE TDS CERTIFICATES, BUT T HE DISCLOSURE WAS IN EXCESS OF THE AMOUNTS REFLECTED IN THE TDS CERTIFICATE. THIS WAS PERHAPS BECAUSE, AS CLAIMED BY THE AR, THE ASSESSEE ACCOUNTED FOR CONTRACTUAL AMOUNTS IN THE LEDGER ACC OUNT OF DIFFERENT CONTRACTEES AT THE TIME OF RAISING RA BIL LS. HOWEVER, THE PAYMENTS WERE MADE BY THE CONTRACTEES AFTER APPROVI NG THE SAME, WHICH OFTEN RESULTED VARIOUS AMOUNTS BEING DEDUCTED SO THAT THE AMOUNTS ULTIMATELY RECEIVED BY THE ASSESSEE, MAY NO T HAVE TALLIED WITH THE AMOUNTS ACCOUNTED FOR BY THE ASSESSEE. THE TAX IS DEDUCTED ON THE AMOUNT DISBURSED BY THE CONTRACTEES . CONSEQUENTLY, NOT ONLY WOULD THERE BE A DIFFERENCE IN THE YEARS IN WHICH THE RECEIPTS ARE ACCOUNTED FOR BY THE ASSESSE E AND THE YEAR IN WHICH PAYMENT IS ACTUALLY RECEIVED AFTER DEDUCTI ON OF TAX, BUT THERE WOULD ALSO BE A DIFFERENCE IN THE AMOUNTS ACC OUNTED FOR AND THE AMOUNTS ACTUALLY RECEIVED. THE AO IS DIRECTED T O DELETE THE ADDITION OF RS.42,88,013. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS PRODUCED BEFORE US. IN A SITUATION WHERE RUNNING BI LLS ARE RAISED, IT OFTEN HAPPENS THAT TDS IS DEDUCTED AT THE TIME OF PAYMENT OF THE BILLS WHICH MAY EVEN PERTAIN TO PREVIOUS YEARS CONTRACT WORK. S INCE THE TDS CERTIFICATES ARE ISSUED BY THE DEDUCTEES QUITE OFTE N LATE, DIFFICULTIES ARISE TO THE RECIPIENTS FOR THE PURPOSE OF ACCOUNTING OF THE CONTRACT PROCEEDS. THE LEARNED CIT(A) ON EXAMINING THE MATTER HAD ARRI VED AT A CONCLUSION THAT THE ASSESSEE HAS NOT ONLY ACCOUNTED FOR THE CO NTRACT RECEIPTS FROM THERMAX AS REFLECTED IN THE TDS CERTIFICATES, BUT T HE DISCLOSURE WAS IN EXCESS OF THE AMOUNTS REFLECTED IN THE TDS CERTIFIC ATES. THEREFORE, LOOKING AT THE FACTS AND CIRCUMSTANCES OF THE CASE AND OVERALL ANALYSIS OF THE ISSUE, WE ARE OF THE FIRM BELIEF THAT THE OR DER OF THE LEARNED CIT(A) 7 NEED NOT BE DISTURBED AT THIS STAGE. THEREFORE, THI S ISSUE RAISED BY THE REVENUE IS DISMISSED. 7. B) M/S. ACC LTD. DELETION OF ADDITION RS.9,50, 000/-: THE LEARNED AO OBSERVED THAT THE ASSESSEE HAS CLAIMED A N AMOUNT OF RS.9,50,000/- AS DEDUCTION ON THE GROUND THAT FOR T HIS AMOUNT CONTRACT RECEIPT WAS IRRECOVERABLE FROM M/S. ACC LTD. THE LE ARNED AO DISALLOWED THE CLAIM OF THE ASSESSEE AND MADE AN ADDITION OF R S.9,50,000/- DUE TO THE FOLLOWING REASONS:- I) THE ASSESSEE DID NOT FURNISH CONFIRMATION LETTER FROM M/S. ACC LTD. II) THE ASSESSEE WAS NOT ABLE TO PROVE THAT THIS AM OUNT IS IRRECOVERABLE. III) THE ASSESSEE DID NOT FURNISH THE ADDRESS OF TH E PARTY FOR THE AO TO MAKE ENQUIRY. 8. WHEN THE MATTER WAS CROPPED UP BEFORE THE LEARNE D CIT(A), THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE AO FOR RS.9,50,000/- WITH THE FOLLOWING OBSERVATIONS: 7.8 THE LAST ADDITION MADE BY THE AO ON THE BASIS OF TDS CERTIFICATES WAS A SUM OF RS.9,50,000 ALLEGEDLY REC EIVED FROM M/S. ACC LTD. THE ASSESSE SUBMITTED BEFORE THE AO THAT T HIS SUM WAS NOT RECEIVABLE. THE AO HOWEVER MADE THE ADDITION ON THE GROUND THAT REQUISITE EVIDENCE, INCLUDING CONFIRMATORY LET TER FROM THE SAID PARTY, HAD NOT BEEN FURNISHED. THE AH HAS CLAIMED T HAT THE CONTRACT WITH THE SAID PARTY HAD CONCLUDED ON 16.10 .2002. SUBSEQUENTLY, AS PER THE TERMS OF THE CONTRACT, A C LAIM OF RS.9,50,000 HAD BEEN MADE AND BOOKED AS INCOME ON 3 1.3.2003 AS OVER-RUN COMPENSATION. THIS MEANS THAT THE SAI D SUM HAD ALREADY BEEN DISCLOSED IN THE PRECEDING YEAR. HOWEV ER, SINCE M/S. 8 ACC LIMITED DID NOT ACCEPT THE ASSESSEES CLAIM, TH E AMOUNT HAD SUBSEQUENTLY BEEN WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION. THE AR HAS FURNISHED A COPY OF THE LEDGER ACCOUNT O F M/S. ACC LTD. IN THE BOOKS OF THE ASSESSEE TO SUBSTANTIATE H IS CLAIM. THE CLAIM OF THE AR HAS BEEN SUPPORTED BY THE AO IN THE REMAND REPORT. HE HAS FURTHER CONFIRMED THAT VIDE VOUCHER NO.666, THE ASSESSEE HAD WRITTEN OFF THE SAID SUM ON 31.3.2004 SO THAT THE RESULTANT BALANCE WITH THE SAID COMPANY WAS NIL. IN SUCH VIEW OF THE MATER, I HAVE NO OTHER OPTION BUT TO DELETE THE ADDITION OF THE SUM OF RS.9,50,000. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT IT IS A CASE OF BAD DEBTS. THE ASSESSEE HAS WRITTEN OFF THIS AMOUNT FRO M ITS BOOKS OF ACCOUNTS DURING THE RELEVANT ASSESSMENT YEAR. THE S AME WAS OFFERED FOR TAX DURING THE ASSESSMENT YEAR 2003-04. THIS IS SUE IS DIRECTLY COVERED BY THE DECISION RENDERED BY THE HONBLE APE X COURT IN THE CASE OF T. R. F. LTD. V/S CIT, 323 ITR 397, WHEREIN IT W AS HELD THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT I N FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE. THEREFORE, THIS ISSUE RAISED BY THE REVENUE IS DISMISSED. THUS GROUND NO.1 OF THE REVEN UE IS DISMISSED. 10. GROUND NO.2 DELETION OF ADDITION OF RS.12,47, 346/- MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK : DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED AO OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSED ITS WORK IN PROGRESS FOR THE PER IOD 26 TH MARCH TO 31 ST MARCH OF THE RELEVANT PREVIOUS YEAR. THE LEARNED AO FURTHER OBSERVED THAT THE ASSESSEE HAD BOOKED EXPENDITURE DURI NG THIS PERIOD OF 26 TH MARCH TO 31 ST MARCH FOR AN AMOUNT OF RS.12,47,346/-. THE ASSESSE E 9 EXPLAINED THAT THE MEASUREMENTS WERE TAKEN FOR THE PERIOD FROM 26 TH OF THE MONTH TO THE SUBSEQUENT 25 TH OF THE MONTH AND RUNNING BILLS WERE RAISED. THIS METHOD IS CONSISTENTLY FOLLOWED BY THE ASSESSEE YEAR AFTER YEAR. THE LEARNED AO WAS NOT CONVINCED WITH THE REP LY OF THE ASSESSEE AND MADE AN ADDITION OF RS.12,47,346/- TREATING IT AS UNDISCLOSED WORK IN PROGRESS AS ON 31-03-2004. THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS: 15. IN THE REMAND REPORT, AFTER CONSIDERING THE EX PLANATION OF THE ASSESSEE REGARDING ITS METHOD OF ACCOUNTING, CONSIS TENTLY ADOPTED OVER THE YEARS AND ACCEPTED BY THE DEPARTMENT, THE AO HOWEVER OBSERVED THAT THE ASSESSEE WAS FOUND TO OFFER THE I NCOME OF THE WHOLE YEAR UNDER CONSIDERATION. I DO NOT ACCEPT THE CONTENTION OF THE AO. AS A GOING CONCERN, THE ASSESSEE HAD BEEN R AISING THE RA BILLS ON THE CONTRACTEES ON THE 27 TH OF EVERY MONTH. THE BILLS COVERED THE PERIOD ENDED ON 26-25 TH OF EACH MONTH. THUS, THE RA BILLS RAISED ON 27.7.2004 COVERED THE PERIOD 26 TH FEBRUARY TO 25 TH MARCH. THE REMAINING PERIOD OF 6 DAYS UPTO 31.3.200 4 WOULD HAVE BEEN COVERED IN THE RA BILL RAISED ON 27.4.2004. TH ERE WAS THUS NO SCOPE FOR SHOWING THE WIP FOR THE SIX DAYS OF TH E FINANCIAL YEAR. IT WOULD HAVE MADE NO SENSE SINCE THE WORK DONE DUR ING THE PERIOD WOULD HAVE BEEN INCLUDED IN THE BILL RAISED ON 27.4.2004. SECONDLY, WHATEVER WOULD HAVE BEEN SHOWN AS CLOSING WIP FOR THE SIX DAYS, WOULD HAVE TO BE SHOWN AS THE OPENIN G WIP AS ON 1.4.2004. MOST IMPORTANTLY, THE ASSESSEE HAD BEEN F OLLOWING THE SAME METHOD OF ACCOUNTING EVER SINCE ITS INCEPTION, AND THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT OVER THE YEARS EVEN IN SCRUTINY ASSESSMENT PROCEEDINGS. THERE WAS THEREFOR E, NO REASON FOR THE AO TO ENFORCE A CHANGE WITHOUT ANY GROUND W HATSOEVER. THE ACTION OF THE AO WAS THUS WITHOUT ANY LOGIC OR RATIONALE. HE IS DIRECTED TO DELETE THE ADDITION OF THE SUM OF RS.12 ,37,346/-. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS A CONSISTENT PRACTICE OF THE ASSESSEE TO RAISE RUNNING BILLS WITH RESPECT TO THE CONTRACTS NOT COMPLETED AS ON 2 5 TH OF ANY GIVEN 10 MONTH. ACCORDINGLY, THE ASSESSEE HAS RAISED BILLS F OR THE WORK DONE AS ON 25 TH OF MARCH, 2004. STRICTLY SPEAKING, THE ASSESSEE SH OULD HAVE PROVIDED FOR THE EXPENDITURE INCURRED FROM 26 TH MARCH TO 31 ST MARCH, 2004 AS WORK IN PROGRESS AS CLAIMED BY THE LD.AO. H OWEVER, THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING AS STATED ABOVE. FURTHER FROM THE FACTS AND CIRCUMSTAN CES OF THE CASE, IT IS EVIDENT THAT:- (I) NO AMOUNT OF CONTRACT RECEIPTS WILL GO UN-TAXED BECAUSE THE CONTRACT RECEIPT OF RS.12,37,346/- BEING CLOSING WO RK IN PROGRESS IS DISCLOSED AS RECEIPTS FOR THE SUBSEQUENT ASSESSM ENT YEAR. (II) SIMILAR TREATMENT IS GIVEN FOR THE CLOSING WO RK IN PROGRESS FOR THE PRECEDING YEAR. (III) COMPARING THE GP RATIO OFFERED BY THE ASSES SEE AT 12.42% FOR THE RELEVANT ASSESSMENT YEAR TO 10.09% OFFERED DURI NG THE PRECEDING ASSESSMENT YEAR, THE OVERALL EFFECT WILL BE NEGLIGIBLE. THE LEARNED CIT(A) HAS ALSO TAKEN NOTE OF THESE FAC TS AND GRACIOUSLY DELETED THE ADDITION MADE BY THE LEARNED AO. IN THE SE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO ALTER THE DECISION REN DERED BY THE LEARNED CIT(A). THEREFORE, THIS GROUND RAISED BY REVENUE IS DISMISSED. 12. GROUND NO.3 DELETION OF ADDITION OF RS.17,16, 416/- BEING OUTSTANDING INTEREST PAYABLE : THE LEARNED AO NOTIC ED THAT THE ASSESSEE HAD DISCLOSED AN AMOUNT OF RS.17,16,416/- BEING OUT STANDING INTEREST PAYABLE. IT WAS FURTHER OBSERVED BY THE LEARNED AO THAT THE ASSESSEE HAD DISCLOSED OUTSTANDING INTEREST PAYABLE OF RS.14 ,22,268/- FOR THE ASSESSMENT YEAR 2001-02, RS.14,88,839/- FOR THE AS SESSMENT YEAR 11 2002-03 AND RS.16,35,710/- FOR ASSESSMENT YEAR 2003 -04. THE LEARNED AO DIRECTED THE ASSESSEE TO FURNISH CONFIRMATION LE TTERS FROM THE PARTIES WITH WHOM THE OUTSTANDING INTEREST OF RS.17,16,416/ - WAS DUE. THE ASSESSEE FAILED TO FURNISH THE CONFIRMATION LETTERS . THEREFORE, THE LEARNED AO MADE AN ADDITION OF THE ENTIRE AMOUNT OF RS.17,1 6,416/- HOLDING IT TO BE A BOGUS AND NON-EXISTENT LIABILITY DELIBERATELY BROUGHT INTO THE BOOKS OF ACCOUNTS WITH AN INTENTION TO REDUCED PROFITS YE AR AFTER YEAR. THE ASSESSEE TOOK UP THE MATTER BEFORE THE LEARNED CIT( A). THE LEARNED CIT(A) AFTER CAREFUL AND DETAILED CONSIDERATION DEL ETED THE ADDITION OF RS.17,16,416/- MADE BY THE AO WITH THE FOLLOWING OB SERVATIONS: 19. FIRST OF ALL, I FIND THAT THE AO DID NOT TAKE CARE TO MENTION THE SECTION UNDER WHICH HE DISALLOWED THE SUM OF RS.17, 16,416 AS A BOGUS/NON-EXISTING LIABILITY. FROM THE DETAILS FURN ISHED BY THE AR, IT IS SEEN THAT THIS SUM WAS THE OPENING BALANCE AS ON 1.4.2003 OF THE OUTSTANDING INTEREST ACCOUNT. DURING THE YEAR , THE ASSESSEE MADE A PAYMENT OF RS.93,205 WHILE FURTHER LIABILITY OF RS.32,500 HAD ARISEN SO THAT, THE CLOSING BALANCE IN THE SAID ACCOUNT AT THE END OF THE YEAR UNDER CONSIDERATION WAS RS.16,75,71 1. THE AO DISALLOWED ONLY THE OPENING BALANCE ON THE GROUND T HAT THE ASSESSEES CLAIM UNDER THE SAID HEAD HAD BEEN INCRE ASING FROM YEAR TO YEAR, AND THAT, THE ASSESSEE HAD FAILED TO FURNISH CONFIRMATORY LETTERS FROM THE PARTIES TO WHO SUCH I NTEREST WAS PAYABLE. IT HAS BEEN EXPLAINED BY THE AR THAT THIS ACCOUNT REPRESENTED INTEREST PAYABLE ON LOANS MOST OF WHICH HAD BEEN TAKEN FROM THE SPOUSE OF THE MANAGING DIRECTOR. WHI LE THE ASSESSEE ACCOUNTS FOR THE LOANS UNDER THE LOAN ACCO UNT, IT MAINTAINS A SEPARATE ACCOUNT FOR THE INTEREST PAYAB LE ON SUCH LOANS. TDS HAD BEEN DEDUCTED ON SUCH INTEREST PAYAB LE/PAID AND THE DETAILS OF SUCH DEDUCTIONS HAD BEEN FURNISHED B EFORE THE AO. THEREFORE, IT COULD NOT BE SAID THAT THE INTEREST L IABILITIES WERE BOGUS. MORE IMPORTANTLY, THE LOANS ON SUCH INTEREST HAD BECOME PAYABLE HAD BEEN TAKEN IN EARLIER YEARS WHEN THE GE NUINENESS OF THE LOANS HAS BEEN ACCEPTED IN ASSESSMENT PROCEEDIN GS U/S 143 (3) FOR THE AYS 2003-04 AND 2002-03. APPARENTLY, TH E AO FAILED TO TAKE INTO CONSIDERATION THIS ASPECT OF THE MATTER. IF THE LOANS THEMSELVES HAD BEEN ACCEPTED AS GENUINE AFTER SCRUT INY AND 12 VERIFICATION, THERE WAS NO REASON WHY THE INTEREST PAYABLE ON SUCH LOANS IN A SUBSEQUENT YEAR SHOULD BE DISALLOWED ON THE SIMPLE GROUND THAT CONFIRMATORY LETTERS HAD NOT BEEN FURNI SHED FROM THE CONCERNED PARTIES. FURTHER, THE AO, MADE THE DISALL OWANCE AS A NON-EXISTING/BOGUS LIABILITY WHICH WOULD MEAN THAT ACCORDING TO THE AO SUCH LIABILITY DID NOT EXIST. IN ORDER TO MAKE A N ADDITION THE PROVISIONS OF SEC. 41(1) WOULD HAVE TO BE APPLIED. IN ORDER TO APPLY THE PROVISIONS OF THE SAID SECTION, THE CONDITIONS AS LAID DOWN THEREIN WOULD HAVE TO BE FULFILLED. SINCE, SUCH CON DITIONS WERE NOT MET OR FULFILLED NOR WERE THEY ESTABLISHED BY THE A O, HE WAS NOT WITHIN HIS POWERS TO MAKE SUCH A DISALLOWANCE. THE ADDITION OF THE SUM OF RS.17,16,416 WILL THEREFORE, STAND DELETED. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE SUBMISSIONS AND MATERIALS PRODUCED BEFORE US. IT IS PERTINENT TO NOTE THAT THE ASSESSEE FIRM AVAILED LOAN FROM FAMILY MEM BERS OF THE PARTNERS FROM TIME TO TIME. OUTSTANDING INTEREST FROM THESE FAMILY MEMBERS VARIED FROM RS.14,22,268/- FROM THE ASSESSMENT YEAR ENDING AS ON 31- 3-2001 STEADILY INCREASING APPROXIMATELY NOT BEYOND AN AMOUNT OF RS.1,00,000/- PER ANNUM EVERY YEAR AND THUS RESULTI NG IN A CLOSING BALANCE OF RS.17,16,416/- FOR THE YEAR ENDING 31-03 -2004. IT IS APPARENT FROM THE ORDER OF THE LEARNED AO THAT HE HAS NOT DO UBTED THE EXISTENCE OF THE LOANS. FURTHER, FROM THE REMAND REPORT OF TH E LEARNED AO IT IS EVIDENT THAT THE LEARNED AO IS INFORMED THAT THE MA JOR PORTION OF THE OUTSTANDING INTEREST TO THE EXTENT OF RS.10,50,000/ - WAS DUE TO THE SPOUSE OF THE MANAGING DIRECTOR, MR. J. CHANDRA. IT WAS ALSO BROUGHT TO HIS NOTICE OF THE LEARNED AO THAT TAX HAS BEEN DEDU CTED AT SOURCE ON THE INTEREST PAYMENT DULY. FROM THESE FACTS AND FROM TH E OBSERVATION OF THE LEARNED CIT(A) WE ARE OF THE CONSIDERED VIEW THAT T HE ORDER OF THE LEARNED CIT(A) SHOULD BE SUSTAINED ON THIS ISSUE. T HEREFORE, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 13 14. GROUND NO.4 DISALLOWANCE OF RS.13,29,561/-OUT OF WAGES: ON ANALYSING THE WAGES PAYMENT MADE BY THE ASSESSEE, T HE LEARNED AO OBSERVED THAT THERE IS NO CORRELATION BETWEEN THE I NCOME CREDITED IN A PARTICULAR MONTH WITH THE WAGES SHOWN FOR THAT MONT H. FURTHER, IT WAS NOTED THAT THE WAGES CLAIMED AS PERCENTAGE OF TOTAL RECEIPTS FOR THE ASSESSMENT YEAR 2002-03 WAS 34.17%, ASSESSMENT YEAR 2003-04 WAS 35.34%, HOWEVER, FOR THE ASSESSMENT YEAR 2004-05 IT WAS 51.32%. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD CONTRIBUT ED TO PROVIDENT FUND RS.8,60,146/-. THE TOTAL WAGES DEBITED TO PROFIT & LOSS ACCOUNT WAS RS.2,65,91,228/-. THE LEARNED AO OPINED SINCE MOST OF THE WORKERS DO NOT HAVE WAGES OF MORE THAN RS.6,500/- PER MONTH, T HE ASSESSEE SHOULD HAVE DEDUCTED 12% OF WORKERS WAGES TOWARDS PF, THUS AMOUNTING TO RS.31,90,947/-. ACCORDING TO THE LD.AO , WITH RESPECT TO THIS DISCREPANCY, THE ASSESSEE WAS NOT ABLE TO FURN ISH CONVINCING EXPLANATION. FURTHER, SINCE THE CLAIM OF THE ASSESS EE WAS NOT VERIFIABLE, THE IDENTITY AND ADDRESS OF THE LABOURERS COULD NOT BE ESTABLISHED, NON- MAINTENANCE OF ATTENDANCE SHEET ETC., THE LEARNED A O MADE AN ADDITION OF 5% ON THE TOTAL WAGES DEBITED TO THE PROFIT & LO SS ACCOUNT (5% OF RS.2,65,91,228/-) AMOUNTING TO RS.13,29,561/-. THIS ISSUE WAS BROUGHT BEFORE THE LEARNED CIT(A) BY THE ASSESSEE. THE LEAR NED CIT(A) CONSIDERED THE ISSUE ELABORATELY DELETED THIS ADDIT ION OF RS.13,29,561/- MADE BY THE LEARNED AO WITHOUT ANY HESITATION. HIS DETAILED FINDINGS ARE REPRODUCED HEREIN BELOW FOR REFERENCE: 24. THE MAIN GROUND ON WHICH THE AO SOUGHT TO MAKE THE DISALLOWANCE WAS THAT DURING THE YEAR UNDER CONSIDE RATION, THE EXPENDITURE CLAIMED UNDER THE HEAD OF WAGES AS A PERCENTAGE OF THE TOTAL RECEIPTS WAS MUCH HIGHER TH AN IN THE PRECEDING YEARS, WHICH MEANT THAT THE EXPENDITURE C LAIMED WAS IN EXCESS OF WHAT SHOULD HAVE NORMALLY BEEN CLA IMED. IN ORDER TO BUTTRESS THIS VIEW, THE AO ATTEMPTED AND M ARSHALLED 14 VARIOUS GROUNDS. THE FIRST GROUND TAKEN BY HIM WAS THAT SALARIES WERE PAID IN PART OR IN MORE THAN ONE INST ALMENT, AS A RESULT OF WHICH, SOME AMOUNTS WERE ENTERED IN ROU ND FIGURES WHILE ON SUBSEQUENT DATES IT WAS AN ODD FIG URE. THE ARS EXPLANATION IS THAT, SOMETIMES WAGES WERE PAID ON- ACCOUNT AND ON LUMPSUM BASIS. SUBSEQUENTLY AFTER VE RIFYING THE NUMBER OF DAYS AND HOURS PUT IN BY A PARTICULAR WORKER, THE FINAL AMOUNT WOULD BE PAID. THIS APPEARS TO BE A PLAUSIBLE EXPLANATION. SUCH A METHOD IS OFTEN ADOPT ED BY EMPLOYERS, ESPECIALLY IN THE CASE OF THE ASSESSEE W HO HAD BEEN WORKING ON CONTRACT BASIS AT VARIOUS SITES SPR EAD ACROSS THE COUNTRY WHERE CONTROL AND SUPERVISION WO ULD HAVE BEEN DIFFICULT. THE SECOND GROUND TAKEN BY HIM WAS THAT THERE WAS NO CO-RELATION BETWEEN THE INCOME CREDITE D IN A PARTICULAR MONTH AND THE WAGES CLAIMED FOR THAT MON TH. IN SOME MONTHS OF THE YEAR WAGES CLAIMED WAS 40.52% OF THE RECEIPTS WHILE IN ANOTHER MONTH IT WAS 44.49%. IN T HE MONTH OF MARCH IT WAS 66.41%. I AM OF THE VIEW THAT THIS IS NOT A REASONABLE GROUND. IF THE ASSESSEE EMPLOYS A LARGER NUMBER OF WORKERS IN THE MONTH OF SAY JANUARY, HIS WAGS B ILL WILL GO HIGH. HOWEVER, THE EFFECT OF SUCH INCREASED DEPLOYM ENT WOULD BE FELT IN THE NEXT MONTH OR THE MONTH AFTER. SINCE THE RA BILL IS RAISED TOWARDS THE END OF EACH MONTH ON THE COMPLETION OF A CERTAIN STAGE OF WORK, THE NUMBER O F EMPLOYEES OR WORKERS DEPLOYED IN A PARTICULAR MONTH COULD NOT BE CO-RELATED OR COMPARED WITH THE RECEIPTS OF THE SAME MONTH. IN ANY CASE, IT WAS NOT THE CASE THE AO THAT THE WAGS CLAIMED BY THE ASSESSEE WERE NOT ACTUALLY PAID OR T HAT THE CLAIM OF THE ASSESSEE WAS BOGUS. THE THIRD GROUND T AKEN BY THE AO WAS THAT, THE ASSESSEE HAD SHOWN PF CONTRIBU TION OF ONLY RS.8,60,146 AS AGAINST TOTAL EXPENDITURE ON WA GES OF RS.2,65,91,228. SINCE, UNDER THE PF ACT, CONTRIBUTI ON @12% IS REQUIRED TO BE MADE FOR WORKERS EARNING WAGES LE SS THAN RS.6,500 PER MONTH AND SINCE, MOST OF THE WORKERS EMPLOYED BY THE ASSESSEE EARNED LESS THAN RS.6,500 P.M. , THE ASSESSEE SHOULD HAVE MADE A TOTAL CONTRIBUTION OF RS.31,90,947. IT IS THE ARS ARGUMENT THAT SUCH CON TRIBUTION IS REQUIRED TO BE MADE UNDER THE PF ACT IF THE EMPL OYEE OR THE WORKER IS ON THE ROLL FOR THE ENTIRE 12 MONTHS. IN ANY CASE, IF THE PF CONTRIBUTIONS WERE INDEED MADE LESS ER THAN WHAT SHOULD HAVE BEEN MADE BY THE ASSESSEE, IT WOUL D HAVE BEEN A DEFAULT UNDER THE PF ACT, AND COULD NOT BE U SED AS 15 AN INDICATOR FOR EXCESSIVE CLAIM OF WAGS. THE CONTR IBUTION MADE UNDER THE PF ACT IS ALLOWABLE AS A DEDUCTION U /S. 43B. IT SHOULD SERVE NO PURPOSE FOR THE ASSESSEE TO CLAI M A MUCH LOWER SUM THAN WHAT SHOULD HAVE BEEN PAYABLE AS PER THE CALCULATIONS OF THE A.O. 24.1 FINALLY, COMING TO THE FINDING OF THE AO THAT THE EXPENDITURE CLAIMED UNDER THE HEAD OF WAGS WAS 51.3 2% OF THE TOTAL RECEIPTS DURING THE YEAR AS COMPARED TO 3 5.34% IN THE A. Y. 2003-04 AND 34.17% IN THE AY 2002-03, IT HAS BEEN CONTENDED BY THE AR THAT THE ASSESSEE INCURS EXPENDITURE UNDER THREE SUB-HEADS BEING WAGES AND S ALARY, PAYMENT FOR PIECE-RATE WORK AND PAYMENT FOR SUB-CON TACTS. DURING THE YEAR, THE EXPENDITURE INCURRED ON PAYMEN TS TO SUB-CONTRACTORS HAD REDUCED TO 12.84% AS COMPARED T O 26.54% IN THE PRECEDING YEAR. SIMILARLY, THE EXPEND ITURE ON PIECE-RATE WORK HAD DECREASED TO 1.07% AS COMPARED TO 2.13% IN THE PRECEDING YEAR, EVEN THOUGH, THE WAGES AND SALARY EXPENDITURE HAD INCREASED TO 50.32% DURING T HE YEAR AS COMPARED TO 35.34% IN THE IMMEDIATELY PRECEDING YEAR. OVERALL, THE TOTAL PERCENTAGE OF SUCH PAYMENTS IN R ELATION TO THE TOTAL RECEIPTS WAS 64.23% DURING THE YEAR, AS A GAINST 64.04% IN THE PRECEDING YEAR AND 51.56% THE YEAR BE FORE. THE INCREASE WAS THUS, ONLY OF 0.22%. ON THE OTHER HAND, I FIND THAT APART FROM MAKING A SUMMARY OBSERVATION R EGARDING THE INCREASE IN WAGES AS A PERCENTAGE OF TOTAL RECE IPT, THE AO DID NOT GIVE ANY OTHER FINDING AND SIMPLY MADE A DISALLOWANCE OF 5% OF THE TOTAL WAGE BILL. I FIND M ERIT IN THE SUBMISSIONS OF THE AR. THERE IS NO DOUBT ABOUT THE FACT THAT SALARY AND WAGS ARE PAID TO REGULAR EMPLOYEES AND T HE ASSESSEE WOULD HAVE TO PROVIDE FOR INCREASE THEIR W AGES ON ACCOUNT OF INCREMENTS, SPECIAL ALLOWANCES, AND SITE COMPENSATORY ALLOWANCES. SUCH INCREASES WOULD NOT H AVE ANY RELATION TO THE CONTRACT RECEIPTS, WHICH MAY NO T INCREASE AT ALL. IN FACT, THE AO APPEARS TO HAVE GONE SIMPLY BY RATIOS WHICH MAY NOT ALWAYS BE WORKABLE. DURING THE AY 200 2-03, THE PERCENTAGE OF WAGES AND SALARY TO THE TOTAL TUR NOVER OF RS.3,72,75,104 WAS 34.17%. IN AY 2003-04, THE TURNO VER MORE THAN DOUBLED TO RS.7,86,94,462 AND THE PERCENT AGE OF WAGES AND SALARY TO THE TURNOVER INCREASED APPROXIM ATELY BY 1.17% TO 35.34%. DURING THE YEAR UNDER CONSIDERATIO N, THE TURNOVER FELL DRASTICALLY TO RS.5,28,41,277, WITH T HE MAJORITY OF 16 THE EMPLOYEES BEING REGULAR EMPLOYEES OR WORKERS WH O NOT ONLY HAD TO BE RETAINED BUT ALSO HAD TO BE GRANTED INCREASE IN SALARIES AND ALLOWANCES. THE PERCENTAGE OF WAGES AND SALARY THEREFORE WENT UPTO 50.32%. PERCENTAGES AND RATIOS CAN ALWAYS BE MISLEADING AND CANNOT ALWAYS BE TAKEN AS A GROUND TO TAKE THE VIEW THAT THE EXPENDITURE CLAIME D WAS EXCESSIVE. TAKING ALL SUCH FACTS AND CIRCUMSTANCES INTO ACCOUNT, I HAVE COME TO THE CONCLUSION THAT THERE W AS NO BASIS FOR THE AO TO DISALLOW 5% OF THE WAGES CLAIME D, AND HE IS THEREFORE DIRECTED TO DELETE THE ADDITION OF THE SUM OF RS.13,29,561/- 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT FROM THE ORDER OF THE LEARNED AO THAT THE LEARNED AO MADE AN AD HOC ADDITION OF RS.13,29,561/- BASED ON THE CALCULATION OF 5% ON THE TOTAL WAGES DEBITED TO THE PROFIT & LOSS ACCOUNT. IT APPEARS THAT THE LEARNED AO HAS NOT MADE A PROPER ANALYSIS OF THE ISSUE. FROM THE SUBMISSION OF THE ASSESSEE IT IS APPARENT THAT THE AVERAGE PERCENTAGE OF WAGES PAYMENT WITH RESPECT TO TOTAL T URNOVER WORKS OUT TO 64.23%. THIS FIGURE IS SOMEWHAT STATIC RIGHT FROM T HE ASSESSMENT YEAR 2002-03. FURTHER, THE ASSESSEE HAS RIGHTLY EXPLAINE D THAT PF CONTRIBUTION @12% IS REQUIRED TO BE MADE FOR WORKER S EARNING WAGES LESS THAN RS.6,500/- PER MONTH AND THE SAME WAS ALS O NOT DEDUCTIBLE IN THE CASE OF TEMPORARY WORKERS. THEREFORE, THE PF CO NTRIBUTION CANNOT BE DIRECTLY WORKED OUT AT 12% OF THE TOTAL WAGES DEBIT ED IN THE PROFIT & LOSS ACCOUNT AND INFER ANY INFORMATION FROM THE SAME. FU RTHER, IT IS PERTINENT TO NOTE THAT THE GROSS PROFIT OF THE ASSESSEE HAS I NCREASED TO 12.42% FOR THE ASSESSMENT YEAR 2004-05 FROM 10.94% FOR THE ASS ESSMENT YEAR 2003-04. CONSIDERING THE DETAILED FINDINGS OF THE L EARNED CIT(A) AND FROM OUR DISCUSSIONS ABOVE, WE ALSO DO NOT HAVE ANY HESITATION TO 17 UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSU E. THEREFORE, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 16. GROUND NO.5 DELETING THE ADDITION OF RS.29,01 0/- BEING 50% OF BEAWAR SITE EXPENSES: THE LD.AO NOTICED THAT BILLS AND VOUCHERS WERE NOT AVAILABLE FOR THE EXPENSES INCURRED BY THE ASSE SSEE ON BEAWAR SITE TOWARDS OFFICE EXPENSES RS.3,658/-, REPAIRS & MAINT ENANCE RS.9,373/-, RENT & RATES RS.13,870/-, LABOUR CHARGES RS.2,175/- , LABOUR WELFARE RS.3,945/- TRAVELLING EXPENSES RS.10,982/-, TRANSPO RTATION CHARGES RS.8,560/-, AND TELEPHONE & TELEX RS.5,458/- AGGREG ATING TO RS.58,021/-. SINCE THE ASSESSEE EXPRESSED ITS INABI LITY TO PRODUCE THE BILLS AND VOUCHERS THE LD.AO DISALLOWED THE ENTIRE EXPENDITURE AND ADDED TO THE INCOME OF THE ASSESSEE. WHEN THE ISSUE WAS BROUGHT BEFORE THE LD. CIT(A), THE LD. CIT(A) RESTRICTED TH E ADDITION TO 50% OF THE TOTAL EXPENDITURE THUS CONFIRMED THE ADDITION T O RS.29,011/- WITH THE FOLLOWING OBSERVATION:- 35. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS . IT HAS BEEN ACCEPTED BY THE AR THAT THE RELEVANT BILLS AND VOUC HERS CANNOT BE PRODUCED EVEN NOW. HOWEVER, I DO NOT ACCEPT THE CLA IM THAT THE SAME WERE DESTROYED IN THE FLOOD WHICH TOOK PLACE I N SURAT SINCE, THERE WAS NO FLOOD AT BEAWAR AND ALL THE VOUCHERS O F SUCH PETTY EXPENSES WOULD HAVE BEEN KEPT AND MAINTAINED AT THE SITE ITSELF. HOWEVER, I ALSO FEEL THAT THE AO SHOULD NOT HAVE DI SALLOWED ALL THE EXPENSES IN FULL. IN THE INTEREST OF EQUITY AND JUS TICE THEREFORE, I DIRECT THE AO TO RESTRICT ETH DISALLOWANCE TO 50%, WHICH MEANS THAT THE DISALLOWANCE WOULD BE RESTRICTED TO RS.29,010, WHILE THE ASSESSEE WOULD GET RELIEF OF AN EQUIVALENT AMOUNT. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD AND TAKEN NOTE OF THE WRITTEN SUBMISSIONS. F ROM THE ORDER OF THE 18 LD.CIT(A) IT IS EVIDENT THAT THE NATURE OF THE EXPE NDITURES INCURRED ARE NOT DOUBTED BUT THE ADDITIONS ARE SUSTAINED TO 50% OF THE EXPENDITURES BECAUSE OF THE REASON FOR NON-PRODUCTION OF BILLS A ND VOUCHERS. IN THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT TH E ORDER OF THE LD.CIT(A) DOES NOT BE REQUIRED TO BE INTERFERED. TH US THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 18. GROUND NO.6: DELETION OF ADDITION OF RS.4,89,80 9/- BEING RENT AND RATES. DURING THE COURSE OF ASSESSMENT ON SCRUTINIZ ING THE RENT AND RATES DEBITED BY THE ASSESSE IN ITS PROFIT & LOSS ACCOUNT IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAD PAID IN CASH RS.4,89,809/- TOWARDS RENT IN RESPECT OF ACCOMMODATION TAKEN FOR WORKERS. THE ASS ESSEE WAS ASKED TO FURNISH COPY OF THE RENT AGREEMENT, ADDRESS OF T HE LANDLORD AND DETAILS OF ACCOMMODATION TAKEN ON RENT AND NAMES AND PARTIC ULARS OF THE WORKERS WHO HAS STAYED IN THE RENTED ACCOMMODATION. SINCE, THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTICULARS A SKED FOR, THE LEARNED AO MADE AN ADDITION OF RS.4,89,809/- HOLDING THE CL AIM OF RENTAL PAYMENT TO BE BOGUS AND INGENUINE. WHEN THE MATTER WAS TAKEN UP FOR CONSIDERATION BEFORE THE LEARNED CIT(A) THIS ADDITI ON OF RS.4,89,809/- WAS DELETED WITH THE FOLLOWING OBSERVATIONS: 43. I HAVE CAREFULLY CONSIDERED THE MATTER. FROM T HE DETAILS OF CONTRACT RECEIPTS ITSELF IT WAS QUITE APPARENT THAT THE ASSESSEE HAD BEEN ENGAGED IN EXECUTING CONTRACTS AT SEVERAL SITE S SOME OF WHICH WERE LOCATED IN REMOTE PLACES. FIRSTLY, TO BE GIN WORK ON ANY SITE THE ASSESSEE WOULD NECESSARILY HAVE TO PROVIDE ACCOMMODATION TO ALL THE WORKERS ESPECIALLY THOSE W HO ARE BROUGHT IN FROM OUTSIDE. FOR THIS PURPOSE, THE ASS ESSEE COULD NOT BE EXPECTED TO CONSTRUCT ACCOMMODATION AT EVERY SIT E AND WOULD BE FORCED TO TAKE SUCH ACCOMMODATION ON HIRE. WHERE THE URBAN AND SEMI-URBAN AREAS ITSELF THE LANDLORDS TAKE THE MAJOR PART OF THE RENT IN CASH, THE VILLAGERS IN SUCH PLACES COULD NO T BE EXPECTED TO 19 ACCEPT THE RENTAL PAYMENT IN ANY OTHER MANNER THAN IN CASH. ALSO THERE WOULD HAVE BEEN NO SCOPE TO ENTER INTO ANY FO RMAL AGREEMENT WITH THE VILLAGERS AND LOCAL LANDLORDS MO ST OF WHOM WOULD BE ILLITERATE AND THERE WOULD BE NO FACILITY FOR NOTARISING OR REGISTERING AN AGREEMENT. ON THE FLIP SIDE, IF THE ASSESSEE HAD INDEED SOUGHT TO MAKE A BOGUS CLAIM IT COULD HAVE E ASILY PREPARED BOGUS AGREEMENTS ON ITS OWN AND COULD HAVE PUT ANY ONES SIGNATURE AS LANDLORD. ALMOST CERTAINLY, THE AO WOU LD NOT HAVE MADE INQUIRIES WITH THE LOCAL PEOPLE IN VARIOUS PLA CES TO VERIFY THE GENUINENESS OF SUCH RENTAL AGREEMENT. IN OTHER WORD S, GIVEN THE SITUATION WHICH PREVAILED IN SUCH SITES, THERE COUL D BE NO DOUBT ABOUT THE CLAIM MADE BY THE ASSESSE. IT IS NECESSAR Y IN SUCH SITUATION TO LOOK AT THE TOTAL PICTURE AND TAKE A H OLISTIC VIEW INSTEAD OF TAKING FOR EVIDENCE WHICH SIMPLY COULD NOT BE TH ERE. FURTHER, THE TOTAL EXPENDITURE CLAIMED TOWARDS RENT FOR ACCOMMOD ATION WAS ONLY RS.4,89,809 AND CONSIDERING THE LARGE NUMBER O F SITES IN WHICH THE ASSESSEE HAD BEEN OPERATING, I AM OF THE VIEW THAT THE EXPENDITURE CLAIMED WAS MOST REASONABLE. THEREFORE, ACCORDING TO ME, THERE WAS NO JUSTIFICATION FOR MAKING ANY DISAL LOWANCE OUT OF SUCH EXPENSES CLAIMED BY THE ASSESSEE. THE ADDITION OF THE SUM OF RS.4,89,809 WILL THEREFORE CONSEQUENTLY STAND DE LETED. 19. WE HAVE HEARD THE RIVAL SUBMISSION, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL ON RE CORD. THE LEARNED CIT(A) HAS CONSIDERED THE ISSUE IN DETAIL. IT IS AP PARENT FROM RECORD THAT THE ASSESSEE WAS ENGAGED IN EXECUTING ENGINEERING W ORKS CONTRACT AT THE SITE OF ASSESSEES CLIENTS AND SOME OF THE SITE S WERE LOCATED IN REMOTE AREAS. IN SUCH SITUATION IT IS OBVIOUS THAT THE ASSESSEE WOULD HAVE TO PROVIDE ACCOMMODATION TO ITS WORKERS AT SIT E. IT IS A COMMON PRACTICE THAT IN SUCH SCENARIO ACCOMMODATIONS ARE R ENTED OUT IN THE NEIGHBOURING VILLAGES OR SEMI-URBAN AREAS SITUATED NEAR THE SITE. IN SUCH REMOTE AREAS NORMALLY THE LANDLORDS FURNISH TEMPORA RY STRUCTURES FOR ACCOMMODATION AND AT TIMES PERMANENT STRUCTURES. FU RTHER, IN SUCH REMOTE AREAS THE LANDLORDS INSIST ON CASH PAYMENT A ND THE PAYMENTS MADE PER ACCOMMODATION ARE GENERALLY NOMINAL. CONSI DERING THE FACTS 20 AND CIRCUMSTANCES OF THE CASE, WE ARE IN CONFORMITY WITH THE FINDINGS OF THE LEARNED CIT(A). THEREFORE, THIS GROUND RAISED B Y THE REVENUE IS DISMISSED. 20. GROUND NO.7: (A) DELETION OF ADDITION OF RS.1,6 9,291/- BEING LABOUR WELFARE EXPENSES, LABOUR CHARGES AND OFFICE EXPENSE S. 21. THE ASSESSE HAD CLAIMED DEDUCTION ON ACCOUNT OF LABOUR WELFARE EXPENSES RS.3,24,556/-, LABOUR CHARGES RS.3,24,554/ -, OFFICE EXPENSES RS.1,97,347/- AGGREGATING TO RS.8,46,457/-. WHILE T EST CHECKING THE BILLS AND VOUCHERS FOR THE EXPENSES IT WAS NOTICED THAT S OME OF THE CASH VOUCHERS WERE NOT SUPPORTED BY ANY BILLS, THEREFORE , THE LEARNED AO MADE A DISALLOWANCE OF 20% ON THE AGGREGATE SUM OF RS.8,46,457/- AMOUNTING TO RS.1,69,291/-. THE LEARNED CIT(A) DELE TED THIS ADDITION OF RS.1,69,291/- WITH THE FOLLOWING OBSERVATIONS: 47. THE DISALLOWANCES MADE BY THE AO WERE ON THE S AME GROUND THAT THE DISALLOWANCES OF RENT AND RATES HAD BEEN MADE. THESE EXPENSES WERE INCURRED AT REMOTE SITES ON LAB OURERS, STAFF, TECHNICIANS AND ENGINEERS. THEY WERE OBVIOUSLY PETT Y EXPENSES FOR WHICH NO LOCAL PERSON WOULD RAISE ANY BILL. ON THE PART OF THE ASSESSEE HOWEVER, IT WOULD HAVE BEEN OF UTMOST IMPO RTANCE TO KEEP STRICT CONTROL OTHERWISE, IT WOULD RESULT IN W ASTEFUL EXPENDITURE AND CONSEQUENT LOSES TO THE ASSESSEE. THEREFORE, TH E AO OUGHT TO HAVE TAKEN INTO CONSIDERATION THE GROUND LEVEL SITU ATION AT SUCH SITES AND SHOULD NOT HAVE MADE THE DISALLOWANCE ON THE SIMPLE GROUND THAT THE EXPENSE CLAIMED WERE NOT SUPPORTED BY BILLS, ESPECIALLY WHEN, THE EXPENSES WERE DULY AUDITED. I AM OF THE VIEW THEREFORE, THAT THERE WAS NO MERIT IN THE ACTION TA KEN BY THE AO AND CONSEQUENTLY, HE IS DIRECTED TO DELETE THE ADDI TION OF THE SUM OF RS.1,69,291. 22. AFTER HEARING BOTH THE SIDES AND LOOKING AT THE NATURE OF BUSINESS OF THE ASSESSEE BEING EXECUTION OF ENGINEERING JOB WORKS AT THE CLIENTS 21 SITE MOSTLY IN REMOTE AREAS, WE ARE OF THE OPINION THAT THE LEARNED CIT(A) HAS RIGHTLY COME TO THE CONCLUSION AND DELET ED THE ADDITION OF RS.1,69,291/- MADE ON ACCOUNT OF ABSENCE OF FEW BIL LS AND VOUCHERS. THEREFORE, THIS GROUND RAISED BY THE REVENUE IS DIS MISSED. 23. GROUND NO.8: DELETION OF ADDITION OF RS.40,65,0 03/- BEING PAYMENT TO THREE SUB-CONTRACTORS. 24. THE LEARNED AO ISSUED NOTICE U/S 133(6) TO THRE E SUB-CONTRACTORS OF THE ASSESSEE TO WHOM AGGREGATING A SUM OF RS.40, 65,003/- WAS PAID BY THE ASSESSEE, DETAILS OF WHICH ARE AS FOLLOWS: (1) M/S. CAUVER CONSTRUCTION CO. RS.4,85,792/- (2) M/S. MANSA ENGINEERING RS.11,50,325/- (3) M/S. S. N. ENGINEERING RS.24,28,886/- THESE NOTICES ISSUED TO THE PARTIES RETURNED UN-SER VED. THE LEARNED AO DIRECTED THE ASSESSE TO FURNISH THE NEW ADDRESSES. HOWEVER, THE ASSESSEE COULD NOT FURNISH THE NEW ADDRESS OF THE A BOVE SUB- CONTRACTORS AND WAS ALSO NOT IN A POSITION TO PRODU CE CONFIRMATION LETTERS FROM THE ABOVE PARTIES. THE LEARNED AO FOR THESE RE ASONS CONSIDERED THE PAYMENTS TO BE BOGUS AND INGENUINE AND MADE ADD ITION OF RS.40,65,003/- IN THE TOTAL INCOME OF THE ASSESSEE SINCE THIS AMOUNT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT OF THE ASS ESSEE. THE LEARNED CIT(A) CONSIDERED THE ISSUE IN DETAIL AND WITH THE FOLLOWING OBSERVATIONS DELETED THE ADDITION OF RS.40,65,003/-. 22 51. I FIND THAT THE AO MADE THE DISALLOWANCE ON BA SICALLY TWO GROUNDS, FIRSTLY, BECAUSE THE LETTERS U/S. 133(6) W ERE RETURNED UNSEVED AND SECONDLY, NO CONFIRMATIVE LETTER WAS FU RNISHED FROM ANY OF THE PARTIES. ON HIS PART, THE AR HAS ARGUED THAT MEW ADDRESSES OF THE SAID PARTIES HAD BEEN PROVIDED TO THE AO AND AN OFFER HAD BEEN MADE TO PROVIDE ASSISTANCE IN CASE T HE AO WISHED TO ISSUE COMMISSION. IT HAS ALSO BEEN ARGUED THAT C ONFIRMATION LETTERS HAD BEEN FURNISHED BEFORE THE AO. IN SUPPOR T OF HIS CONTENTIONS, THE AR HAS FURNISHED COPIES OF LETTERS ADDRESSED TO THE AO IN COURSE OF ASSESSMENT PROCEEDINGS. IT HAS ALSO BEEN ARGUED THAT THE ASSESSEE HAD TO NECESSARILY DEPEND ON LOCAL CONTRACTORS AND OTHER SUB-CONTRACTORS IN EXECUTING VARIOUS CONTRACTS AT DIFFERENT SITES. ALL SUCH SUB-CONTRACT ORS WERE REGULARLY ASSESSED TO TAX AND HAD PROPER PAN WHICH HAD BEEN D ULY FURNISHED BEFORE THE AO. TAX HAD BEEN DEDUCTED AT S OURCE AND SUCH TAX HAD BEEN DEPOSITED IN THE GOVT. ACCOUNT. T HE ASSESSEE HAD FILED THE ANNUAL TDS RETURN REFLECTING SUCH DED UCTIONS AND DEPOSITS. THESE HAD BEEN PRESENTED BEFORE THE AO. I T HAS ALSO BEEN CLAIMED THAT THE PROPRIETOR OF M/S. MANSA ENGI NEERING HAD PERSONALLY APPEARED BEFORE THE AO AND HAD CONFIRMED THE TRANSACTION WITH THE ASSESSEE. FROM THE VERIFICATIO N OF THE COPIES OF THE LETTERS ADDRESSED TO THE AO, I FIND THAT CON FIRMATION LETTERS HAD BEEN FURNISHED FROM M/S. KAVERI CONSTRUCTION CO . IT WAS FROM THESE CONFIRMATION LETTERS THE AO OBTAINED ADDRESSE S AND ISSUED THE LETTERS U/S. 133(6). HOWEVER, HE FAILED TO FOLL OW IT UP EITHER WITH FRESH LETTERS UNDER THE SAME SECTION OR BY ISSUE OF SUMMONS, ESPECIALLY WHEN THE ASSESSEE HAD PROVIDED NEW ADDRE SSES OF ALL THE THREE PARTIES. THOUGH IT HAS BEEN CLAIMED THAT THE PROPRIETOR OF M/S. MANSA ENGINEERING HAD APPEARED BEFORE THE AO, I DO NOT FIND ANY EVIDENCE TO SUPPORT SUCH CLAIM. IN ANY CASE, WH ILE ON ONE HAND THE AO FAILED TO CARRY OUT HIS INQUIRIES TO IT S LOGICAL END, ON THE OTHER HAND, THE ASSESSEE HAD FAILED TO FURNISH ALL REQUISITE EVIDENCE INCLUDING THE DETAILS OF PAYMENTS MADE BY ACCOUNT- PAYEE CHEQUES. THESE COULD HAVE ALSO BEEN TRACED FR OM THE BANKS TO IDENTIFY THEIR ULTIMATE DESTINATIONS. TAX HAD BEEN DEDUCTED AT SOURCE AND THE ANNUAL TDS RETURNS FILED BY THE ASSESSEE HAD BEEN PRODUCED. THESE WERE CONCLUSIVE E VIDENCE WHICH THE AO COULD NOT IGNORE. THEIR ASSESSMENT STA TUS COULD HAVE BEEN VERIFIED FROM THEIR PAN WHICH HAD BEEN PR OVIDED BY THE ASSESSEE. INSTEAD OF CARRYING THROUGH WITH SUCH INQ UIRIES WHICH WERE EXTREMELY RELEVANT FOR THE PURPOSE OF ASCERTAI NING AS TO WHETHER OR NOT THE PAYMENTS TO THE SUB-CONTRACTORS WERE GENUINE, 23 THE AO SIMPLY MADE THE DISALLOWANCE ON THE BASIS OF LETTERS U/S 133(6) NOT BEING SERVED ON THE SAID PARTIES. MOST I MPORTANTLY, THE AO FAILED TO TAKE ADVANTAGE OF THE OPPORTUNITY OF A SECOND INNINGS OFFERED TO HIM BY WAY OF THE REMAND PROCEEDINGS ON TWO OCCASIONS. HE COULD HAVE EASILY CONCLUDED THE INQUI RIES AND INVESTIGATIONS WHICH WERE LEFT INCOMPLETE BY HIS PR EDECESSOR. GIVEN THE FACTS AND CIRCUMSTANCES CONCERNING THIS P ARTICULAR ISSUE, I AM OF THE VIEW THAT THE ASSESSEE HAD DISCHARGED I TS INITIAL BURDEN OF PROVING THE GENUINENESS OF THE CLAIM. THE BURDEN OF PROOF HAD BEEN SHIFTED TO THE AO WHO FAILED TO DISCHARGE SUCH BURDEN. CONSEQUENTLY, THERE APPEARS TO BE NO MERIT IN THE A CTION TAKEN BY THE AO WHICH WAS BASED ON INCOMPLETE AND UNSUSTAINE D INQUIRIES. HE IS THEREFORE DIRECTED TO DELETE THE ADDITION OF THE SUM OF RS.40,65,003. 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD AND THE WRITTEN SUBMISSIONS PRO DUCED BEFORE US. FROM THE ORDER OF THE LEARNED CIT(A) IT IS APPARENT THAT THE ASSESSEE HAS FURNISHED THE FOLLOWING DETAILS: (1) PAN A/C NUMBERS OF ALL THE 3 SUB-CONTRACTORS. (2) CONFIRMATION LETTERS FROM THE TWO SUB-CONTRACT ORS M/S. MANSA ENGINEERING AND M/S. S. N. ENGINEERING. (3) DETAILS OF ACCOUNT PAYEE CHEQUES BY WHICH PAYME NT WAS MADE TO ALL THESE THREE SUB-CONTRACTORS. (4) NEW ADDRESS OF ALL THE THREE SUB-CONTRACTORS. (5) DETAILS OF TAX DEDUCTED AT SOURCE FOR ALL THE T HREE SUB-CONTRACTORS FOR THE PAYMENTS MADE TO THEM. FROM THE ABOVE, IT IS APPARENT THAT THE ASSESSEE HA S FURNISHED ENOUGH MATERIALS TO THE LEARNED AO FOR HIM TO MAKE PROPER ENQUIRIES. FURTHER, THE ASSESSEE HAS EVEN PRODUCED THE PROPRIETOR OF M/ S. MANSA 24 ENGINEERING BEFORE THE LEARNED AO. CONSIDERING ALL THESE FACTS, WE ARE LEFT WITH NO OTHER OPTION BUT TO SUSTAIN THE ORDER OF THE LEARNED CIT(A). THEREFORE, THIS ISSUE RAISED BY THE REVENUE IS DISM ISSED. 26. GROUND NO.9: DELETION OF ADDITION OF RS.11,71,0 94/- BEING PAYMENT MADE OUT OF BOOKS FROM UNEXPLAINED SOURCES. 27. THE LEARNED AO NOTICED THAT THE ASSESSEE HAS DI SCLOSED RS.17,77,094/- SIC RS.11,77.094/- IN THE BALANCE SH EET DATED 31-03- 2004 UNDER THE HEAD LOAN FROM OTHER PARTIES. THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATION LETTERS FROM THESE PARTIES TO VERIFY THE GENUINENESS AND EXISTENCE OF THE LIABILITY AS ON 31 -03-2004. HOWEVER, THE ASSESSEE DID NOT FURNISH CONFIRMATION STATEMENT FROM THE PERSONS WHO HAVE ADVANCED THE LOANS. THEREFORE, THE LEARNED AO MADE AN ADDITION OF RS.11,77,094/- SINCE THE ASSESSEE HAS F AILED TO FURNISH ANY EVIDENCE TO PROVE EXISTENCE OF THE LIABILITY AS ON 31-03-2004. THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE AO BECAUSE THE ENTIRE AMOUNT PERTAINED TO EARLIER PERIOD AND THEREFORE, A DDITION COULD NOT BE SUSTAINED U/S 68 OF THE IT ACT. 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FOLLOWING FACTS EMERGE FROM THE WRITTEN SUBMISSION SUBMITTED BY THE APPELLANT BEFORE US: (1) DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAD CARRIED FORWARD OLD UNSECURED LOANS OF EARLIER YEARS UNDER THE HEAD LOAN 25 FROM OTHER PARTIES IN ITS BALANCE SHEET, THE SUMMA RY OF WHICH IS AS FOLLOWS. DESCRIPTIONS AMOUNT OPENING BALANCE AS ON 01-04-2003 LESS: REPAYMENTS MADE DURING THE YEAR CLOSING BALANCE AS ON 31-03-2004 18,77,094 1,00,000 17,77,094 (2) THE SAID DETAILS WERE SUBMITTED TO THE LEARNED AO FOR WHICH HE OBSERVED THAT THE ASSESSE HAS FAILED TO FURNISH ANY EVIDENCE OF EXISTENCE OF THE SAID LIABILITY AND ALSO THE NAME A ND ADDRESS OF THE PERSONS AND ACCORDINGLY, HE MADE AN ADDITION OF THE CLOSING BALANCE OF RS.11,71,094/- WHEN THE ACTUAL CLOSING B ALANCE IS RS.17,77,094/- (3) THE FOLLOWING DETAIL IN RESPECT OF THE SAID LO ANS CARRIED FORWARD FROM THE EARLIER YEARS WAS SUBMITTED TOT EH LEARNED CIT(A) WHICH WAS REMANDED FOR VERIFICATION TO THE LEARNED AO. SR. NO. NAME OF THE DEPOSITORS AMOUNT (RS.) YEAR OF LOAN 1 JANU V. NAIR 10,50,000 1998-99 & 2001-02 2 MR. RADHA KRISHNAN 80,000 1998-99 3 DR. SOMA SUNDARAM 50,000 1998-99 4 DR. JAYCHANDRAN 5,00,000 2001-02 26 5 OTHER SMALL LOANS TOTAL 97,094 17,77,094 PRIOR TO 1998 (4) THE HONBLE BENCH MAY NOTE THAT NOT ONLY IN TH E ASSESSMENT ORDER BUT ALSO IN THE REMAND REPORT, THE LEARNED AO HAS ACCEPTED THE FACT THAT UNSECURED LOANS BOUGHT FORWARD FROM T HE EARLIER YEARS. FROM THE ABOVE SUBMISSIONS, IT APPEARS THAT LEARNED AO HAD FAILED TO MAKE REQUISITE INQUIRIES BEFORE FURNISHING THE REMA ND REPORT IN SPITE OF THE ASSESSEE HAVING FURNISHED SUFFICIENT DETAILS OF THE LOAN DEPOSITORS. IN SUCH CIRCUMSTANCES, THE ASSESSEE CANNOT BE HELD TO BE AT DEFAULT. THEREFORE, WE HOLD THE ISSUE IN FAVOUR OF THE ASSES SEE AND SUSTAIN THE DELETION MADE BY THE LEARNED CIT(A). THEREFORE, THI S GROUND RAISED BY THE REVENUE IS ALSO DISMISSED. 29. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. C. O. NO. 99/AHD/2008(IN ITA NO.1080/AHD/2008) 30. THE ONLY SURVIVING GROUND RAISED IN THE CROSS O BJECTION WAS THAT THE LEARNED CIT(A) ERRED IN DISALLOWING THE CLAIM O F RS.3,94,249/- FOR WANT OF PROPER BILLS AND VOUCHERS. DURING THE COURS E OF ASSESSMENT THE LEARNED AO NOTICED CERTAIN BILLS AND VOUCHES WERE M ISSING IN REGARD TO VARIOUS EXPENDITURES AND THEREFORE, TO THAT EXTENT OF RS.3,94,249/- DISALLOWANCE WAS MADE. WHEN THE MATTER CROPPED UP B EFORE THE LEARNED 27 CIT(A) THE ASSESSEE ATTEMPTED TO FURNISH THE BILLS AND VOUCHERS, HOWEVER, THE SAME WERE NOT ADMITTED BY THE LEARNED CIT(A) WHO IN TURN CONFIRMED THE ORDER OF THE LEARNED AO. EVEN THOUGH, THE LEARNED AR ARGUED BEFORE US THAT THE BILLS AND VOUCHERS ARE NO W IN THE POSSESSION OF THE ASSESSEE AND THE LEARNED CIT(A) WAS NOT JUST IFIED IN ADMITTING THE ADDITIONAL EVIDENCE, WE ARE NOT CONVINCED WITH THE SUBMISSIONS OF THE LEARNED AR BECAUSE EVEN AT THIS STAGE BEFORE US THE SAME WERE NOT PRODUCED. THEREFORE, WE UPHOLD THE ORDER OF THE LEA RNED CIT(A). ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 31. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 32. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - 28 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD