Appeal details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 6782 (ITAT-LUCKNOW)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 8 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2011-2012
Appeal Filed On
03-06-2016
Judgement Text
I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NOS.330 TO 332 & 508/LKW/2016 ASSESSMENT YEARS:2010-11 TO 2013-14 DY.C.I.T., RANGE-6, LUCKNOW. VS. M/S U.P. PROJECTS CORPN. LTD., GOMTI BARRAGE, GOMTI NAGAR, LUCKNOW. PAN:AAACU 3393 F (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS A GROUP OF FOUR APPEALS RELATING TO ASSESS MENT YEAR 2010-11 TO 2013-14 FILED BY THE REVENUE AGAINST THE SEPARATE O RDERS OF LEARNED CIT(A)-II, LUCKNOW DATED 02/03/2016, 14/03/2016, 14 /03/2016 AND 17/06/2016. SOME OF THE ISSUES, INVOLVED IN THIS A PPEALS, ARE COMMON THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND A COMMON AND CONSOLIDATED ORDER IS BEING PASSED. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE REPRODUCED BELOW: I.T.A. NO.330/LKW/2016 (ASSESSMENT YEAR 2010-11) 1. THE CIT (A) HAS ERRED IN LAW AND ON FACT DELETI NG THE ADDITION OF RS.73,97,943/- MADE ON ACCOUNT OF DISAL LOWANCE OF APPELLANT BY S HRI A. K. BAR, CIT, (DR) RESPONDENT BY SHRI RAKESH GARG, ADVOCATE DATE OF HEARING 21 / 02 /201 9 DATE OF PRONOUNCEMENT 28/02/2019 I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 2 SURVEY, TESTING AND DRAWING EXPENSES TREATING THE S AME IN THE NATURE OF PRELIMINARY EXPENSES U/S 35 OF THE ACT WI THOUT APPRECIATING THE FACT THAT THE ABOVE EXPENSES WERE INCURRED BEFORE THE COMMENCEMENT OF THE PROJECT. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.94,30,394/- MADE ON ACCOUNT OF EXCES S EXPENDITURE CLAIMED ON PROJECT COMPLETED AND HANDED OVER TO CLIENT WITHOUT APPRECIATING THE FACT THAT THE AO MA DE ADDITION IN ABSENCE OF DOCUMENTARY EVIDENCE TO PROVE THE JUS TIFICATION OF EXPENSES CLAIMED. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.30,94,199/- WITHOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION ON ACCOUNT OF EXCESS LOSS CLAI MED ON PROJECTS IN THE ABSENCE OF COMPLETE DOCUMENTARY EVI DENCES FOR CLAIMING OF LOSS. 4. THE CIT(A)HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITIONS OF RS.29,31,44,630/- ON ACCOUNT OF INTERE ST INCOME WITHOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTEREST INCOME RECEIVED FROM THE FDRS AND S.B. ACCOUNTS IN THE NAME OF THE ASSESSEE, AND THE ASSESSEE CLAIM ED TDS DEDUCTED BY THE BANK ON INTEREST WHICH IS AGAINST T HE PROVISION OF SECTION 198 AND 199 OF I.T. ACT. 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITIONS OF RS.54,15,933/- ON DISALLOWANCE U/S 40( A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS MADE THE ADDITION FOR NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIED AND LABOUR CHARGES. 6. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.15,36,760/- MADE ON ACCOUNT OF EXCES S EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE AO MADE ADDITION IN ABSENCE OF DOCUMENTARY EVIDENCE TO PROV E THE JUSTIFICATION OF EXPENSES CLAIMED. 7. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN R ESTRICTING THE ADDITION TO RS.4,49,347/- AS AGAINST RS.5,71,922/- MADE ON ACCOUNT OF SHORT COMPUTATION OF WIP WITHOUT APPRECI ATING THE FACT THAT THE ASSESSING OFFICER HAS MADE THE ADDITI ON IN ABSENCE OF REASONS FOR SHORT COMPUTATION OF WIP OF I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 3 RS.5,71,922/- AS MENTIONED BY SPECIAL AUDITOR IN RE SPECT OF BAREILLY UNIT. 8. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITION TO RS.15,09,999/- AS AGAINST RS.18,58, 061/- MADE ON ACCOUNT OF CAPITAL EXPENDITURE CLAIMED AS REVENU E EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE ON THE RENOVATION OF BUILD ING INCLUDING CIVIL WORK. 9. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITIONS OF RS.37,18,845/- AS AGAINST RS.53,81 ,981/- DISALLOWED U/S 43B OF THE ACT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE OF PAYMENT. 10. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITIONS OF RS.1,13,63,781/- ON ACCOUNT OF PRIOR P ERIOD EXPENSES NOT DEDUCTABLE IN MERCANTILE SYSTEM OF ACC OUNTING. 11. THE CIT (A) HAS ERRED IN AND ON FACTS IN DELET ING THE ADDITIONS OF RS.6,32,63,235/- MADE ON ACCOUNT OF DI SALLOWANCE U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT TH E ASSESSING OFFICER HAS MADE THE ADDITION FOR NOT DEDUCTING TDS ON POL OF HIRED VEHICLES AND TDS AT THE LESER RATE OF 2%. 12. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.21,20,09,287/- WITHOUT APPRECIATING THE FACT THAT THE AO MADE ADDITION FOR NOT FOLLOWING PERCENTAGE C OMPLETION METHOD RECOGNITION FOR REVENUE RECOGNITION AS GIVEN IN ACCOUNTING STANDARD-AS-7(REVISED) AND ALSO, THE ASS ESSEE IS DEDUCTION AMOUNTS FROM PROFITS AND CREDITING IN RET ENTION RESERVE WITHOUT ANY JURISDICTION. 13. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITIONS OF RS. 17,68,458/- MADE ON ACCOUNT OF DIS ALLOWANCE U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT TH E ASSESSING OFFICER HAS MADE THE ADDITION FOR SHORT DEDUCTION O F TDS. 14. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITIONS OF RS.13,75,49,494/- MADE ON ACCOUNT OF D ISALLOWANCE U/S 49(A)(IA) WITHOUT APPRECIATING THE FACT THAT TH E ASSESSING I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 4 OFFICER HAS MADE THE ADDITION FOR NOT DEDUCTION TDS ON THE PAYMENTS COVERED U/S 194C OF THE ACT. I.T.A. NO.331/LKW/2016 (ASSESSMENT YEAR 2011-12) 1. THE CIT (A) HAS ERRED IN LAW AND ON FACT IN DIR ECTING THE A.O. TO ACCEPT REVISED INCOME FILED THROUGH REVISED COMPUTATION BY THE ASSESSEE WHICH IS CONTRADICTORY TO THE PROVI SION OF SECTION 139(4) OF THE I.T. ACT THAT DO NOT ALLOW TO ACCEPT REVISED INCOME EXCEPT ONLY THROUGH FILLING OF REVIS ED RETURN OF INCOME. 2. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.25,12,26,591/- WITHOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION FOR NOT FOLLOWING PERCENTA GE COMPLETION METHOD RECOGNITION FOR REVENUE RECOGNITI ON AS GIVE IN ACCOUNTING STANDARD-AS-7(REVISED) AND ALSO, THE ASSESSEE IS DEDUCTION AMOUNT FROM PROFITS AND CREDITING IN RETE NTION RESERVE WITHOUT ANY JURISDICTION. 3. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.39,88,10,901/- ON ACCOUNT OF INTERES T INCOME WITHOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTEREST INCOME REVISED FROM THE FDRS AND S.B. ACCOUNTS IN THE NAME OF THE ASSESSEE, AND THE ASSESSEE CLAIMED TDS DEDUCTED BY THE BANK ON INTEREST WHICH IS AGAINST T HE PROVISION OF SECTION 198 AND 199 OF I.T. ACT. 4. THE CIT (A)HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITIONS OF RS.34,77,796/- MADE ON ACCOUNT OF DISA LLOWANCE OF SURVEY, TESTING AND DRAWING EXPENSES TREATING THE S AME IN THE NATURE OF PRELIMINARY EXPENSES U/S 35D OF THE ACT W ITHOUT APPRECIATING THE FACT THAT THE ABOVE EXPENSES WERE INCURRED BEFORE THE COMMENCEMENT OF THE PROJECT. 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITIONS OF RS.50,62,979/- ON DISALLOWANCE U/S 40( A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS MADE THE ADDITION FOR NOT DEDUCTING TDS ON POL OF H IRED VEHICLES AND TDS AT THE LESER RATE OF 2%. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 5 6. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.12,24,49,122/- ON DISALLOWANCE U/S 4 0(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS MADE THE ADDITION FOR NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIED AND LABOUR CHARGES. I.T.A. NO.332/LKW/2016 (ASSESSMENT YEAR 2012-13) 1. THE CIT (A) HAS ERRED IN LAW AND ON FACT IN DEL ETING THE ADDITION OF RS.17,00,70,000/- WITHOUT APPRECIATING THE FACT THAT THE A.O. MADE ADDITION FOR NOT FOLLOWING PERCENTAGE COMPLETION METHOD RECOGNITION FOR REVENUE RECOGNITION AS GIVEN IN ACCOUNTING STANDARD-AS-7(REVISED) AND ALSO, THE ASS ESSEE IS DEDUCTING AMOUNTS FROM PROFITS AND CREDITING IN RET ENTION RESERVE WITHOUT ANY JURISDICTION. 2. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.42,21,00,000/- ON ACCOUNT OF INTERES T INCOME WITHOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTEREST INCOME REVISED FROM THE FDRS AND S.B. ACCOUNTS IN THE NAME OF THE ASSESSEE, AND THE ASSESSEE CLAIMED TDS DEDUCTED BY THE BANK ON INTEREST WHICH IS AGAINST T HE PROVISION OF SECTION 198 AND 199 OF I.T. ACT. 3. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITIONS OF RS.3,92,24,085/- ON DISALLOWANCE U/S 4 0(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS MADE THE ADDITION FOR NOT DEDUCTING TDS ON POL OF H IRED VEHICLES AND TDS AT THE LESSER RATE OF 2%. 4. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.6,19,18,021/- ON DISALLOWANCE U/S 40 (A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS MADE THE ADDITION FOR NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIED AND LABOUR CHARGES. 5. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITIONS OF RS.1,63,386/- ON ACCOUNT OF LOSS AGAIN ST DISPOSAL OF STOCK WITHOUT APPRECIATING THE FACT THAT THE ASSESS ING OFFICER MADE THE ADDITION IN ABSENCE OF ANY EXPLANATION PRO VIDED BY THE ASSESSEE AGAINST THE EXPENSES CLAIMED. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 6 6. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITIONS OF RS.7,08,78,373/- ON ACCOUNT OF CONTRIB UTION/ PROVISION TO PROVIDENT GRATUITY FUND IN ABSENCE OF ANY DOCUMENTARY EVIDENCE OF PAYMENT FOR PROOF OF CONTRI BUTION NECESSARY AS PER SECTION 43B. 7. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITIONS OF RS. 1,25,561/- ON ACCOUNT OF PRIOR PER IOD EXPENSES NOT DEDUCTABLE IN MERCANTILE SYSTEM OF ACCOUNTING. I.T.A. NO.508/LKW/2016 (ASSESSMENT YEAR 2013-14) 1. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERR ED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.14, 43,61,802/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT FOLLOWING PERCENTAGE COMPLETION METHOD AS RECOGNIZED IN ACCOU NTING STANDARD-AS-7(REVISED) AND ALSO DEDUCTION AMOUNTS F ROM PROFITS AND CREDITING IN RETENTION RESERVE WITHOUT ANY JUSTIFICATION. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) LUCKNOW , HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.43,28,49,105/- MADE BY THE ASSESSING OFFICER AS 'INCOME FORM OTHER SOURCES' WITHOUT APPRECIATING THE FACT, THAT ALL THE FDR'S AND S.B. ACCOUNTS WERE IN THE NAME OF THE ASS ESSEE AND ASSESSEE HAS CLAIMED THE TDS DEDUCTED BY BANKS ON A BOVE DEPOSITS WHICH IS AGAINST THE PROVISIONS OF SEE-198 AND 199 OF I.T.ACT, 1961. 3. THE COMMISSIONER OF INCOME TAX (APPEALS)LUCKNOW, HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS.3,58,85,285/- ON DISALLOWED BY THE ASSESSING OFF ICER U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE HAS NOT DEDUCTED THE TDS ON POL OF HIRED VEHICLES AND T DS AT THE LESSER RATE OF 2% WAS DEDUCTED ON HIRE CHARGES ON V EHICLE. 4. THE COMMISSIONER OF INCOME TAX (APPEALS), LUCKNO W HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.1,86,20,613/- MADE U/S 68 OF I.T. ACT , 1961 WIT HOUT APPRECIATING THE FACT THAT NO REPLY WAS RECEIVED BY POST IN RESPONSE TO THE NOTICES ISSUED U/S 133(3) OF THE I. T. ACT , 1961 FOR VERIFICATION OF CREDITORS. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 7 5. THE COMMISSIONER OF INCOME TAX(APPEALS), LUCKNOW , HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT IONS OF RS.11,50,020/- MADE ON ACCOUNT OF PRIOR EXPENSES WI THOUT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND COULD NOT PROVE THE EXPENSES CRYSTALLIZED DURING THE YEAR. 2. AT THE OUTSET, LEARNED D. R. INVITED OUR ATTENTI ON TO THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HAD MADE VARIOUS ADDITIONS WHICH THE LEARNED CIT(A) HAS WRONGLY DELE TED AND IN THIS RESPECT LEARNED D. R. ALSO FILED WRITTEN SYNOPSIS. LEARNED A. R. ALSO FILED WRITTEN SUBMISSIONS AND HEAVILY PLACED RELIANCE ON THE ORDE R OF LEARNED CIT(A) AND IT WAS PRAYED BY BOTH THE PARTIES THAT THE CASE OF THE REVENUE BE DECIDED ON THE BASIS OF WRITTEN SUBMISSIONS FILED BY THE RE SPECTIVE PARTIES. THE WRITTEN SUBMISSIONS FILED BY THE REVENUE, YEAR-WISE , ARE REPRODUCED BELOW: ITA NO. 330/LKW/2016-A.Y. 2010-11 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1.GROUND NO. 1 THE CIT(A) HAS ERRED IN LAW AND ON FACT DELETING TH E ADDITION OF RS.73,97,943/- MADE ON ACCOUNT OF DISALLOWANCE OF S URVEY, TESTING AND DRAWING EXPENSES TREATING THE SAME IN THE NATURE OF PRELIMINARY EXPENSES U/S 35 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ABOVE EXPENSES WERE INCURRED BEFORE THE COMMENCEMENT OF T HE PROJECT. [PARA 6(B) PAGES 6-7 OF AOS ORDER] [PARA 5(1) TO 5(6) OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD MADE THE ADDITION OF RS.7 3,97,943/- ON ACCOUNT OF TESTING AND DRAWING EXPENSES TREATING TH E SAME AS PRELIMINARY EXPENSES. HE HAS APPLIED THE PROVISIONS OF SECTION 35 OF THE ACT. THE NATURE OF THE EXPENSES THEMSELVES SPEAK TH AT THEY ARE EXPENSES WHICH HAVE BEEN INCURRED BEFORE THE COMMEN CEMENT OF THE PROJECT. THE CIT(A) HAS HELD, THAT SINCE THE BUSINE SS OF THE ASSESSEE CORPORATION, IS THAT OF CONSTRUCTION WHICH IS NOT A NEW BUSINESS, THE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 8 EXPENSES CANNOT BE TREATED AS PRELIMINARY EXPENSES. THE CIT(A) HAS DELETED THE SAME. THERE IS NO DISPUTE WITH RESPECT TO THE EXPENSES IN CURRED AND THE PURPOSE FOR WHICH IT HAS BEEN INCURRED. THE FACT RE MAINS THAT THE EXPENSES INCURRED WERE BEFORE THE COMMENCEMENT OF T HE PROJECT WHICH ARE PROPOSED TO BE UNDERTAKEN. THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER, THEREFORE, BE KINDLY SUSTAINED A ND THE ORDER OF THE LD. CIT(A) BE SET-ASIDE. 2. GROUND NO. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.94,30,394/- MADE ON ACCOUNT OF EXCESS EXPENDITUR E CLAIMED ON PROJECT COMPLETED AND HANDED OVER TO CLIENT WITHOUT APPRECIATING THE FACT THAT THE AO MADE ADDITION IN ABSENCE OF DOCUME NTARY EVIDENCES TO PROVE THE JUSTIFICATION OF EXPENSES CLAIMED. [PARA 6(C) PAGES 7-9 OF AOS ORDER] [PARA 6(1) TO 6(4) PAGES 6-9 OF CIT(A) S ORDER] THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS.94 ,30,394/- BEING EXCESS EXPENDITURE CLAIMED ON PROJECT COMPLETED. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THERE IS NO DISPUTE THAT THE EXPENDITURE HAD BEEN INCURRED, AND IN REAL ESTA TE THERE IS ALWAYS A POSSIBILITY OF PROJECT COST BEING OVER RUN OUT PRIC E ESCALATION AND DELAY IN PROJECT. THE CIT(A) HAS WRONGLY DELETED THE SAME. THE PROJEC T COST OF THE ASSESSEE IS FIXED PRE-HAND BEFORE THE COMMENCEMENT OF THE PROJECT ITSELF, THE ASSESSEEE SHOULD OUGHT TO HAVE COMPLETE D THE PROJECT WITHIN THE FINANCIAL LIMIT AS LAID DOWN FOR EVERY PARTICUL AR PROJECT. THERE WAS NO REASON FOR ESCALATION OR COST OVER RUN, THE CIT( A) WAS NOT JUSTIFIED IN DELETING THE EXPENDITURE INCURRED AND THUS THE O RDER OF THE LD. CIT(A) BE REVERSED AND THAT OF THE AO BE SUBSTAINED . 3. GROUND NO. 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.30,94,199/- WITHOUT APPRECIATING THE FACT THE AO MADE THE ADDITION ON ACCOUNT OF EXCESS LOSS CLAIMED ON PROJECTS IN TH E ABSENCE OF COMPLETE DOCUMENTARY EVIDENCE FOR CLAIMING OF LOSS. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 9 THIS GROUND IS NOT EMERGING FROM THE CIT(A)S ORDER : THERE IS NO EXCESS LOSS CLAIMED ON PROJECTS. THE DISALLOWANCE I S OUT OF EXPENSES CLAIMED. [PARA 6(D) PAGES 9-10 OF AOS ORDER] [PARA 7(1) TO 7(4) PAGES 9-10 OF CIT(A)S ORDER] THE ASSESSING OFFICER ADDED THE AMOUNT OF RS.30,94, 199/- BEING EXCESS LOSS CLAIMED ON PROJECT IN ABSENCE OF DOCUMENTARY E VIDENCES. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT HE HAS VE RIFIED THE SAME AND ALSO THERE IS NO DISPUTE THAT THE LOSS HAD TAKEN PL ACE. AS PER THE CIT(A), THE AMOUNT INCURRED IN EXCESS, IS WITH REFERENCE TO THE BUSINESS PROJECT ONLY AND HENCE, NO DISALLOWANCE BE MADE. THE FINDING OF THE CIT(A) IS ERRONEOUS. THE ADDITIO N MADE BY THE ASSESSING OFFICER BE UPHELD. 4. GROUND NO. 4 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.29,31,44,630/- ON ACCOUNT OF INTEREST INCOME WIT HOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTER EST INCOME RECEIVED FROM THE FDRS AND SB ACCOUNTS IN THE NAME OF THE A SSESSEE, AND THE ASSESSEE CLAIMED TDS DEDUCTED BY THE BANK ON INTERE ST WHICH IS AGAINST THE PROVISION OF SECTION 198 AND 199 OF THE IT ACT. [PARA 6(E) PAGES 10- 11 OF AOS ORDER] [PARA 8(1) TO 8(5) PAGES 11-13 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.29 ,31,44,630/- ON ACCOUNT OF INTEREST INCOME ON FDRS. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THE FUNDS GRANTED TO THE ASSESSEE COR PORATION WERE TO BE UTILIZED FOR A PARTICULAR PURPOSE AND IN ABSENCE OF THE SAME BEING UTILIZED FOR SPECIFIC PURPOSE, THE SAME IS TO BE RE FUNDED BACK TO THE GOVERNMENT WITH INTEREST ACCRUED THEREON. THE CIT(A ) HAS RELIED UPON THE NOTIFICATION OF THE STATE GOVERNMENT AND ALSO T HE CASE LAWS OF U.P. POLICE AND THAT OF THE GUJARAT TRIBUNAL. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN WRONGLY DELETED BY THE CIT(A). NO DOUBT, THE FUNDS HAVE TO BE RETUR NED BACK TO THE GOVERNMENT ALONGWITH THE INTEREST ACCRUED THEREON, YET SINCE THE FDRS ARE IN THE NAME OF THE ASSESSEE CORPORATION THE INT EREST WOULD BELONG TO THE ASSESSEEE AND THE ASSESSING OFFICER HAS RIGHTLY TAXED THE SAME AND THEREFORE THE SAME BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 10 5. GROUND NO. 5 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.54,19,933/- ON DISALLOWANCE U/S 40(A)(IA) WITHOU T APPRECIATING THE FACT THE ASSESSING OFFICER HAS MADE THE ADDITION FO R NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIED AND LABOUR C HARGES. [PARA 6(F) PAGE 11-13 OF AOS ORDER] [PARA 9(1) TO 9(4) PAGES 18-19 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.54 ,15,933/- ON ACCCOUNT OF NON DEDUCTION OF TAX ON FREIGHT EXPENSE S, MATERIAL SUPPLIED AND LABOUR CHARGES DUE TO DEDUCTION OF TDS PROVISIO NS OF ACT. THE CIT(A) HAS DISCUSSED THE DIFFERENT HEADS OF EXPENDI TURE INCURRED BY THE ASSESSEE AND HAS HELD, THAT OUT OF THE TOTAL DISALL OWANCE OF RS.54,15,933/- ONLY DISALLOWANCE OF RS.4,08,525/- A ND RS.5,70,000/- HAVING MADE WITHOUT DEDUCTION OF TDS, IS TO BE DISA LLOWED UNDER SECTION 40(A)(IA). THE CIT(A) HAS WRONGLY INTERPRETED THE PROVISIONS O F THE ACT. ONCE IF IT IS FOUND THE TAX HAS NOT BEEN DEDUCTED AT SOURCE ON THE EXPENDITURE CLAIMED AS PER THE PROVISIONS OF LAW, THE DISALLOWA NCE IS TO BE UPHELD. 6. GROUND NO. 6 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.15,36,760/- MADE ON ACCOUNT OF EXCESS EXPENDITUR E WITHOUT APPRECIATING THE FACT THAT THE AO MADE ADDITION IN ABSENCE OF DOCUMENTARY EVIDENCE TO PROVE THE JUSTIFICATION OF EXPENSES CLAIMED. [PARA 6(G) PAGES 13 OF AOS ORDER] [PARA 10(1) TO 1 0(4) PAGES 18-19 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE OF RS.15,36,760/- BY HOLDING THAT EXCESS EXPENSES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE CIT(A) HAS DELETED THE SAME, BASED ON THE VERIFICATION DONE BY THE FIELD STAFF DURING THE CURRENT YEAR. ADMITTEDLY, THE EXPENDITURE DOES NOT RELATE TO THE YEAR UNDER CONSIDERATION HENCE, THE CIT(A) WAS NOT JUSTIFIED I N DELETING THE SAME AND THEREFORE THE DISALLOWANCE MADE BY THE AO BE UP HELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 11 7. GROUND NO. 7 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRIC TING THE ADDITION TO RS.4,49,347/- AS AGAINST RS.5,71,922/- MADE ON ACCO UNT OF SHORT COMPUTATION OF WIP WITHOUT APPRECIATING THE FACT TH AT THE ASSESSING OFFICER HAS MADE THE ADDITION IN ABSENCE OF REASONS OF SHORT COMPUTATION OF WIP OF RS.5,71,922/- AS MENTIONED BY SPECIAL AUDITOR IN RESPECT OF BAREILLY UNIT. [PARA 6(H) PAGES 14 OF AOS ORDER] [PARA 11(1) TO 11(4) PAGES 19-21 OF CIT(A)S ORDER] THE ASSESSING OFFICER MADE THE ADDITION OF RS.5,71, 922/- ON ACCOUNT OF SHORT WORK IN PROGRESS (WIP) IN RESPECT OF BAREILLY PROJECT. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THE EXPENSES ARE NEITHER EXCESS NOR NON-RELATED TO BUSINESS. HOWEVER, THE CIT(A) HAS UP HELD THE ADDITION TO THE EXTENT OF RS.1,22,575/- AS AGAINST RS.5,71,9 22/-. THE RELIEF GIVEN BY THE CIT(A) IS TOTALLY UNJUSTIFIED. 8. GROUND NO. 8 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRIC TING THE ADDITION TO RS.15,09,999/- AS AGAINST RS.18,58,061/- MADE ON AC COUNT OF CAPITAL EXPENDITURE CLAIMED AS REVENUE EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE ON THE RENOVATION OF BUILDING INCLUDING CIVIL WORK. [PARA 6(I) PAGES 14- 15 OF AOS ORDER] [PARA 12(1-5) PAGES 21-23 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS.18 ,58,061/- BEING EXPENDITURE CLAIMED, TREATING THE SAME AS CAPITAL E XPENDITURE. THE CIT(A) HAS DELETED RS.15,09,999/- OUT OF THE DISALL OWANCE MADE BY THE ASSESSING OFFICER HOLDING, THAT THE REPAIR AND MAIN TENANCE TO THE BUILDING ARE IN THE NATURE OF CURRENT REPAIRS. THE CIT(A) HAS UPHELD THE ADDITION OF RS.3,48,062/-. THE FINDING OF THE CIT(A ) IS NOT ACCEPTABLE FOR THE REASON THAT ONCE IT IS HELD, THAT THE EXPEN SES HAVE BEEN INCURRED ON MAINTENANCE OF EXISTING OFFICE BUILDING WHICH AR E CAPITAL IN NATURE GIVING ENDURING BENEFIT TO THE ASSESSEE, THE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD HAVE BEEN SUSTAINED. 9. GROUND NO. 9 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRIC TING THE ADDITION OF RS.37,18,845/- AS AGAINST RS.53,81,981/- DISALLOWED U/S 43B OF THE ACT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 12 IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE OF PAYME NT. [PARA 6(I) PAGES 15-17 OF AOS ORDER] [PARA 13(1) TO 13(8) PAG ES 23-26 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS.53 ,81,981/- BY APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT. THE CIT(A) HAS RESTRICTED THE DISALLOWANCE AT RS.37,18,845/-. THE CIT(A) HAS DELETED THE ADDITION OF RS.17,15,898/-. THE DETAILS HAVE BE EN MENTIONED IN THE APPEAL ORDER. RELIANCE IS PLACED ON THE ORDER OF THE ASSESSING OF FICER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD B E UPHELD. 10. GROUND NO. 10 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.1,13,63,781/- ON ACCOUNT OF PRIOR PERIOD EXPENSE S NOT DEDUCTABLE IN MERCANTILE SYSTEM OF ACCOUNTING. [PARA 6(I) PAGE 17 -18 OF AOS ORDER] [PARA 14(1) TO 14(4) PAGES 26-28 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS.1, 13,63,781/- AS PRIOR PERIOD EXPENSES NOT RELATABLE TO THE YEAR UND ER CONSIDERATION. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THE NATUR E OF THE WORK OF THE ASSESSEE IS THAT OF RUNNING OF CONTINUOUS WORK IN P ROGRESS. ONCE IT IS HELD, THAT THE EXPENSES RELATE TO PRIOR PERIOD, ADMITTEDLY, THEY ARE NOT FOR THE YEAR UNDER CONSIDERATION AND HENCE, THEY CANNOT BE ALLOWED. THE CIT(A) HAS THEREFORE, ERRED IN DELETIN G THE SAME. THE ADDITIONS MADE BY THE AO MAY BE RESTORED. 11. GROUND NO. 11 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADDITIO NS OF RS.6,32,63,235/- MADE ON ACCOUNT OF DISALLOWANCE U/ S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S MADE THE ADDITION FOR NOT DEDUCTING TDS ON POL OF HIRED VEHICLES AND TDS AT THE LESER RATE OF 2%. [PARA 6(I) PAGES 18-19 OF AOS ORDER] [ PARA 15(1) TO 15(4) PAGES 28-30 OF CIT(A)S ORDER] THE ASSESSING OFFICER MADE AN ADDITION OF RS.6,32,6 3,235/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DUE TO FAILURE TO I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 13 DEDUCT TAX AT SOURCE ON THE PAYMENT MADE. THE CIT(A ) HAS DELETED THE SAME HOLDING, THAT THE TAX AT SOURCE WAS DEDUCTED W HEREVER THE SAME WAS APPLICABLE. HE HAS FURTHER HELD, THAT NO DEDUCT ION OF TDS IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESEL AND THESE EXPENSES WERE BORNE BY THE APPELLANT. SINCE THE ASSESSEE HAD TAKEN THE VEHICLE ON HIRE, T HERE WAS A LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE , THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND DELETED BY THE CI T(A) BE UPHLED. 12. GROUND NO. 12 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.21,20,09,287/- WITHOUT APPRECIATING THE FACT THA T THE AO MADE ADDITION FOR NOT FOLLOWING PERCENTAGE COMPLETION ME THOD RECOGNITION FOR REVENUE RECOGNITION AS GIVEN IN ACCOUNTING STAN DARD-AS-7 (REVISED) AND ALSO, THE ASSESSEE IS DEDUCTION AMOUN TS FROM PROFITS AND CREDITING IN RETENTION RESERVE WITHOUT ANY JRISDICT ION. [PARA 6(M) PAGES 19-21 OF AOS ORDER] [PARA 16(1) TO 16(4) PAGES 30- 32 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.21 ,20,09,287/- ON ACCOUNT OF PERCENTAGE COMPLETION METHOD. THE CIT(A) HAS DELETED THE SAME. THE CIT(A) HAS HELD, THAT THE ASSESSEE IS FOL LOWING THE REVENUE RECOGNITION METHOD DEPENDING UPON THE STAGE ON WHIC H THE PROJECT IS AT THE END OF THE YEAR. ONCE THE ASSESSEE IS FOLLOWING THE REVENUE RECOGNIT ION METHOD, THEN REVENUE IS TO BE RECOGNIZED ON THE WORK DONE, IRRES PECTIVE OF THE STAGE OF COMPLETION. THOUGH, THERE IS NO CHANGE IN THE PR ACTICE OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE ADDITION MADE BY THE ASSESING OFFICER AND DELETED BY THE CIT(A) BE UPHELD. 13. GROUND NO. 13 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.17,68,458/- MADE ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S MADE THE ADDITION FOR SHORT DEDUCTION OF TDS. [PARA 6(N) PAGES 22-23 OF AOS ORDER] [PARA 17(1) TO 17(4) PAGES 32-34 OF CIT(A)S ORDER] I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 14 THE ASSESSING OFFICER DISALLOWED A SUM OF RS.17,68, 458/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) ON THE GROUND T HAT TAX HAS NOT BEEN DEDUCTED ON VEHICLE HIRED. THE CIT(A) HAS DELETED T HE SAME HOLDING, THAT NO DOUBT THERE WAS SHORT DEDUCTION OF TAX, BUT SHORT DEDUCTION OF TAX ITSELF WOULD NOT BE THE CAUSE FOR DISALLOWANCE. ONCE IT IS HELD THAT THE ASSESSEE HAS MADE SHORT DE DUCTION OF TDS, THEN THE EXPENDITURE TO THE EXTENT RELATABLE TO TAX DEDU CTION AT SOURCE SHOULD HAVE BEEN ALLOWED. THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE DISALLOWANCE. 14. GROUND NO. 14 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.13,75,49,494/- MADE ON ACCOUNT OF DISALLOWANCE U /S 499A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS MADE THE ADDITION FOR NON DEDUCTION OF TDS ON THE PAYMENTS C OVERED U/S 194C OF THE ACT. [PARA 6(O) PAGES 23-24 OF AOS ORDER] [ PARA 18(1) TO 18(4) PAGES 35-36 OF CIT(A)S ORDER] THE ASSESSING OFFICER DISALLOWED RS.13,75,49,491/- ON ACCOUNT OF LABOUR CHARGES. THE CIT(A) HAS DELETED THE SAME HOL DING, THAT SINCE NO EXPENDITURE WAS INCURRED BY THE ASSESSEE ON TRANSPO RTATION OF MATERIAL, WHICH WAS BORNE BY THE SUPPLIERS THEMSELVES, THE AS SESSEE WAS UNDER NO OBLIGATION TO DEDUCT TAX AT SOURCE. THE ADDITION DELETED BY THE CIT(A) IS TOTALLY UNJUSTIFIED AND THE ADDITION MADE BY THE AO BE RESTORED. SUBMITTED FOR KIND PERUSAL AND CONSIDERATION. (DR. A.K. BAR) COMMISSIONER OF INCOME TAX(DR)-1, ITAT, LUCKNOW ITA NO. 331/LKW/2016-A.Y. 2011-12 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1.GROUND NO. 1 THE CIT(A) HAS ERRED IN DIRECTING THE AO TO ACCEPT REVISED INCOME FILED THROUGH REVISED COMPUTATION BY THE ASSESSEE W HICH IS CONTRADICTORY TO THE PROVISION OF SECTION 139(4) OF THE IT ACT THAT DO NOT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 15 ALLOW TO ACCEPT REVISED INCOME EXCEPT ONLY FILING O F REVISED RETURN OF INCOME. [PARA 2 PAGES 1-2 OF AOS ORDER] [PARA 5(1) 5(6) PAGE 2-4 OF CIT(A)S ORDER] IN THIS GROUND, THE AO HAD IGNORED THE REVISED COMP UTATION OF INCOME FILED BY THE ASSESSEE. THE RETURN WAS FILED ON 27.0 3.2012 DECLARING INCOME OF RS.29,16,04,350/-. THE ASSESSEE FILED REV ISED COMPUTATION OF INCOME. AS PER THE AO, IN VIEW IN THE INCOME RETURN ED, THEN HE HAS TO FILE A REVISED RETURN. SUCH COMPUTATION IS TO BE FI LED THROUGH THE REVISED RETURN. THE CIT(A) HAS ACCEPTED THE REVISED COMPUTA TION AND DIRECTED THE AO TO MAKE THE COMPUTATION OF INCOME ON THE BAS IS OF REVISED COMPUTATION MADE. THE CIT(A) WHILE DIRECTING THIS H AS HELD, THAT THE DECISION OF GOETZ INDIA LTD. DOES NOT APPLY TO ANY PROCEEDINGS IN APPEAL. THE DECISION OF THE CIT(A) IS ERRONEOUS AND THE REV ISED COMPUTATION FILED BY THE ASSESSEE SHOULD BE IGNORED SINCE IT WA S NOT FILED ALONG WITH REVISED RETURN. 2. GROUND NO. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.25,12,26,591/- WITHOUT APPRECIATING THE FACT THA T THE AO MADE ADDITION FOR NOT FOLLOWING PERCENTAGE COMPLETION ME THOD RECOGNITION FOR REVENUE RECOGNITION AS GIVEN IN ACCOUNTING STAN DARD-AS-7 (REVISED) AND ALSO, THE ASSESSEE IS DEDUCTION AMOUN TS FROM PROFITS AND CREATING IN RETENTION RESERVE WITHOUT ANY JURISDICT ION. [PARA 3 PAGES 2-3 OF AOS ORDER] [PARA 6(1) TO 6(4) PAGES 4-7 OF CIT( A)S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.25 ,12,26,591/- ON ACCOUNT OF PERCENTAGE COMPLETION METHOD. THE CIT(A) HAS DELETED THE SAME. THE CIT(A) HAS HELD, THAT THE ASSESSEE IS FOL LOWING THE REVENUE RECOGNITION METHOD DEPENDING UPON THE STAGE ON WHIC H THE PROJECT IS AT THE END OF THE YEAR. ONCE THE ASSESSEE IS FOLLOWING THE REVENUE RECOGNIT ION METHOD, THEN REVENUE IS TO BE RECOGNIZED ON THE WORK DONE, IRRES PECTIVE OF THE STAGE OF COMPLETION. THOUGH, THERE IS NO CHANGE IN THE PR ACTICE OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE ADDITION MADE BY THE ASSESSING OFFICER AND DELETED BY THE CIT(A) BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 16 3. GROUND NO. 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.39,88,10,901/- ON ACCOUNT OF INTEREST INCOME WIT HOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTER EST INCOME RECEIVED FROM THE FDRS AND SB ACCOUNTS IN THE NAME OF THE AS SESSEE, AND THE ASSESSEE CLAIMED TDS DEDUCTED BY THE BANK ON INTERE ST WHICH IS AGAINST THE PROVISION OF SECTION 198 AND 199 OF THE IT ACT [PARA 4 PAGES 3-4 OF AOS ORDER] [PARA 7(1) TO 7(5) PAGES 8-10 OF CIT(A) S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.39 ,88,10,901/- ON ACCOUNT OF INTEREST IN FDRS. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THE FUNDS GRANTED TO THE ASSESSEE CORPORATION WERE TO BE UTILIZED FOR A PARTICULAR PURPOSE AND IN ABSENCE OF THE SAME BEI NG UTILIZED FOR SPECIFIC PURPOSE, THE SAME IS TO BE REFUNDED BACK T O THE GOVERNMENT WITH INTEREST ACCRUED THEREON. THE CIT(A) HAS RELIE D UPON THE NOTIFICATION OF THE STATE GOVERNMENT AND ALSO THE C ASE LAWS OF U.P. POLICE AND THAT OF THE GUJARAT TRIBUNAL. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN WRONGLY DELETED BY THE CIT(A). NO DOUBT, THE FUNDS, HAVE TO BE RETU RNED BACK TO THE GOVERNMENT ALONG WITH INTEREST ACCRUED THEREON, YET SINCE THE FDRS ARE IN THE NAME OF THE ASSESSEE CORPORATION, THE INTERE ST WOULD BELONG TO THE ASSESSEE AN THE ASSESSING OFFICER HAS RIGHTLY TAXED THE SAME AND THEREFORE THE ADDITION OF THE AO BE UPHELD. 4. GROUND NO. 4 THE CIT(A) HAS ERRED IN LAW AND ON FACT DELETING TH E ADDITION OF RS.34,77,796/- MADE ON ACCOUNT OF DISALLOWANCE OF S URVEY, TESTING AND DRAWING EXPENSES TREATING THE SAME IN THE NATURE OF PRELIMINARY EXPENSES U/S 35 OF THE ACT WITHOUT APPRECIATING THE FACT THE ABOVE EXPENSES WERE INCURRED BEFORE THE COMMENCEMENT OF T HE PROJECT. [PARA 4 PAGES 4-5 OF AOS ORDER] [ PARA 8(1) TO 8(6) PAGE S 11-16 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD MADE THE ADDITION OF RS.3 4,77,796/- ON ACCOUNT OF TESTING AND DRAWING EXPENSES TREATING TH E SAME AS PRELIMINARY EXPENSES. HE HAS APPLIED THE PROVISION OF SECTION 35 OF THE ACT. THE NATURE OF THE EXPENSES THEMSELVES SPEAK TH AT THEY ARE EXPENSES WHICH HAVE BEEN INCURRED BEFORE THE COMMEN CEMENT OF THE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 17 PROJECT. THE CIT(A) HAS HELD, THAT SINCE THE BUSINE SS OF THE ASSESSEE CORPORATION, IS THAT OF CONSTRUCTION WHICH IS NOT A NEW BUSINESS, THE EXPENSES CANNOT BE TREATED AS PRELIMINARY EXPENSES. THE CIT(A) HAS DELETED THE SAME. THERE IS NO DISPUTE WITH RESPECT TO THE EXPENSES IN CURRED AND THE PURPOSE FOR WHICH IT HAS BEEN INCURRED. THE FACT RE MAINS THAT THE EXPENSES INCURRED WERE BEFORE THE COMMENCEMENT OF T HE PROJECTS WHICH ARE PROPOSED TO BE UNDER TAKEN. THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER BE UPHELD. 5. GROUND NO. 5 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADDITIO N OF RS.50,62,979/- MADE ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) WITHO UT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAS MADE THE ADDITI ON FOR NOT DEDUCTING TDS ON POL OF HIRED VEHICLES AND TDS AT THE LESER R ATE OF 2%. [PARA 6 PAGES 5 OF AOS ORDER] [PARA 9(1) TO 9(7) PAGES 16- 19 OF CIT(A)S ORDER] THE ASSESSING OFFICER MADE AN ADDITION OF RS.50,62, 979/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND TO FAILURE TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE. THE CIT(A) HAS DELET ED THE SAME HOLDING, THAT THE TAX AT SOURCE WAS DEDUCTED WHEREV ER THE SAME WAS APPLICABLE. HE HAS FURTHER HELD, THAT NO DEDUCTION OF TDS IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESEL A ND THESE EXPENSES WERE BORNE BY THE APPELLANT. SINCE THE ASSESSEE HAD TAKEN THE VEHICLE ON HIRE, T HERE WAS A LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE, T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND DELETED BY THE CIT(A) BE UPHLED. 6. GROUND NO. 6 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.12,24,49,122/- ON DISALLOWANCE U/S 40(A)(IA) WIT HOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAS MADE THE AD DITION FOR NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIE D AND LABOUR CHARGES. [PARA 7 PAGES 5-6 OF AOS ORDER] [PARA 10( 1) TO 10(4) PAGES 19-21 OF CIT(A)S ORDER] I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 18 THE ASSESSING OFFICER HAD DISALLOWED RS.12,24,49,12 2/- BEING EXPENSES INCURRED WITHOUT DEDUCTION OF TAX AT SOURC E. THE CIT(A) HAS HELD THAT THE ASSESSEE MAKES THE PAYMENTS FOR SUPPL Y OF MATERIAL TO THE SUPPLIER AND NO TRANSPORTATION CHARGE IS BORNE BY T HE APPELLANT, HENCE, THAT THE APPELLANT DOES NOT MAKE ANY PAYMENT TO THE TRANSPORTERS AND THE PAYMENT IS MAKE TO SPPLIERS FOR PURCHASE OF GOO DS. FURTHER, HE HELD THAT THE QUESTION OF ANY TDS BEING DEDUCTED BY THE APPELLANT ON THE GOODS PURCHASED DOES NOT ARISE. NO SUCH DISALLOWANC E HAS BEEN MADE BY THE AO IN EARLIER YEARS WHEN ALSO PAYMENT FOR PU RCHASE WAS MADE WITHOUT DEDUCTION OF TDS. ACCORDINGLY, THE ADDITION MADE AT RS.12,24,49,122/- MADE BY THE AO WAS DELETED TO GIV ING RELIEF TO APPELLANT. THE CIT(A) HAS WRONGLY DELETED THE ADDIT ION, THE SAME BE UPHELD. 7. GROUND NO. 7 THE APPELLANT WERE LEAVES TO ADD OR AMEND ANY ON OR MORE OF THE GROUND OF APPEALS, AS STATED ABOVE, AS AND WHEN NEE D TO DOING SO ARISES WITH THE PRIOR PERMISSION OF THE COURT. [PARA 14 PA GE 25 OF CIT(A)S ORDER] T HIS GROUND IS GENERAL IN NATURE. SUBMITTED FOR KIND PERUSAL AND CONSIDERATION. (DR. A.K. BAR) COMMISSIONER OF INCOME TAX(DR)-1, ITAT, LUCKNOW ITA NO. 332/LKW/2016-A.Y. 2012-13 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1. GROUND NO. 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.17,00,70,000/- WITHOUT APPRECIATING THE FACT THA T THE AO MADE ADDITION FOR NOT FOLLOWING PERCENTAGE COMPLETION ME THOD RECOGNITION FOR REVENUE RECOGNITION AS GIVEN IN ACCOUNTING STAN DARD-AS-7 (REVISED) AND ALSO, THE ASSESSEE IS DEDUCTION AMOUN TS FROM PROFITS AND CREATING IN RETENTION RESERVE WITHOUT ANY JURISDICT ION. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 19 THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.17 ,00,70,000/- ON ACCOUNT OF PERCENTAGE COMPLETION METHOD. THE CIT(A) HAS DELETED THE SAME. THE CIT(A) HAS HELD, THAT THE ASSESSEE IS FOL LOWING THE REVENUE RECOGNITION METHOD DEPENDING UPON THE STAGE ON WHIC H THE PROJECT IS AT THE END OF THE YEAR. ONCE THE ASSESSEE IS FOLLOWING THE REVENUE RECOGNIT ION METHOD, THEN REVENUE IS TO BE RECOGNIZED ON THE WORK DONE, IRRES PECTIVE OF THE STAGE OF COMPLETION. THOUGH, THERE IS NO CHANGE IN THE PR ACTICE OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE ADDITION MADE BY THE ASSESSING OFFICER AND DELETED BY THE CIT(A) BE UPHELD. 2. GROUND NO. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.42,21,00,000/- ON ACCOUNT OF INTEREST INCOME WIT HOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTER EST INCOME RECEIVED FROM THE FDRS AND SB ACCOUNTS IN THE NAME OF THE AS SESSEE, AND THE ASSESSEE CLAIMED TDS DEDUCTED BY THE BANK ON INTERE ST WHICH IS AGAINST THE PROVISION OF SECTION 198 AND 199 OF THE IT ACT [PARA 4 PAGES 3-4 OF AOS ORDER] [PARA 5(1) TO 5(4) PAGES 3-4 OF CIT(A) S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.42 ,21,00,000/- ON ACCOUNT OF INTEREST IN FDRS. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THE FUNDS GRANTED TO THE ASSESSEE CORPORATION WERE TO BE UTILIZED FOR A PARTICULAR PURPOSE AND IN ABSENCE OF THE SAME BEI NG UTILIZED FOR SPECIFIC PURPOSE, THE SAME IS TO BE REFUNDED BACK T O THE GOVERNMENT WITH INTEREST ACCRUED THEREON. THE CIT(A) HAS RELIE D UPON THE NOTIFICATION OF THE STATE GOVERNMENT AND ALSO THE C ASE LAWS OF U.P. POLICE AND THAT OF THE GUJARAT TRIBUNAL. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN WRONGLY DELETED BY THE CIT(A). NO DOUBT, THE FUNDS, HAVE TO BE RETU RNED BACK TO THE GOVERNMENT ALONG WITH INTEREST ACCRUED THEREON, YET SINCE THE FDRS ARE IN THE NAME OF THE ASSESSEE CORPORATION, THE INTERE ST WOULD BELONG TO THE ASSESSEE AN THE ASSESSING OFFICER HAS RIGHTLY TAXED THE SAME AND THEREFORE THE ADDITION OF THE AO BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 20 3. GROUND NO. 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADDITIO N OF RS.3,92,24,085/- MADE ON ACCOUNT OF DISALLOWANCE U/ S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S MADE THE ADDITION FOR NOT DEDUCTING TDS ON POL OF HIRED VEHICLES AND TDS AT THE LESER RATE OF 2%. [PARA 5 PAGES 4-5 OF AOS ORDER] [PARA 6(1) TO 6(9) PAGES 6- 9 OF CIT(A)S ORDER] THE ASSESSING OFFICER MADE AN ADDITION OF RS. 3,92, 24,085/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND TO FAILURE TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE. THE CIT(A ) HAS DELETED THE SAME HOLDING, THAT THE TAX AT SOURCE WAS DEDUCTED W HEREVER THE SAME WAS APPLICABLE. HE HAS FURTHER HELD, THAT NO DEDUCT ION OF TDS IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESEL AND THESE EXPENSES WERE BORNE BY THE APPELLANT. SINCE THE ASSESSEE HAD TAKEN THE VEHICLE ON HIRE, T HERE WAS A LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE, T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND DELETED BY THE CIT(A) BE UPHLED. 4. GROUND NO. 4 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.6,19,18,021/- ON DISALLOWANCE U/S 40(A)(IA) WITH OUT APPRECIATING THE FACT THE ASSESSING OFFICER HAS MADE THE ADDITION FO R NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIED AND LABOUR C HARGES. [PARA 6 PAGE 6-7 OF AOS ORDER] [PARA 7(1) TO 7(4) PAGES 9-12 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD DISALLOWED RS.6,19,18,021 /- BEING EXPENSES INCURRED WITHOUT DEDUCTION OF TAX AT SOURCE. THE CI T(A) FOLLOWING HIS ORDERS FOR A.Y. 2010-11 APPEAL NO. 77/60/DCIT/R-6/L KO/13-14 AND 2011-12 APPEAL NO. 22/03/DCIT/R-6/LKO/14-15 AS THE SAME HAS DELETED ENTIRE AMOUNT OF ADDITION OF RS.6,19,18,021/- MADE U/S 40(A)(IA). THE CIT(A) HAS WRONGLY INTERPRETED THE PROVISIONS O F THE ACT. ONCE IT IS FOUND THE TAX HAS NOT BEEN DEDUCTED AT SOURCE ON THE EXPENDITURE CLAIMED AS PER THE PROVISIONS OF LAW, THE DISALLOWA NCE IS TO BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 21 5. GROUND NO. 5 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.1,63,396/- ON ACCOUNT OF LOSS AGAINST DISPOSAL O F STOCK WITHOUT APPRECIATING THE FACT THAT THE AO HAS MADE THE ADDI TION FOR NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIE D AND LABOR CHARGES. [PARA 7 PAGE 7 OF AOS ORDER] [PARA 8(1) T O 8(4) PAGES 9-12 OF CIT(A)S ORDER] THE AO HAD MADE AN ADDITION OF RS.1,63,386/- BEING LOSS AGAINST DISPOSAL OF STOCK FOR THE REASON THAT NO TAX WAS DE DUCTED AT SOURCE. THE CIT(A) HAS DELETED THE SAME. THE DELETION MADE BY T HE CIT(A) IS CONTRARY TO FACTS AS WELL AS LAW, IN AS MUCH AS, TH E PROVISIONS OF TDS ARE APPLICABLE ON FREIGHT EXPENSES, MATERIAL SUPPLI ED AND LABOUR CHARGES. ACCORDINGLY, THE ADDITION MADE BY THE AO B E RESTORED. 6. GROUND NO. 6 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRIC TING THE ADDITION OF RS.7,08,78,373/- AS AGAINST RS.53,81,981/- DISALLOW ED U/S 43B OF THE ACT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE OF P AYMENT. [PARA 8 PAGE 7 OF AOS ORDER] [PARA 9(1) TO 9(5) PAGES 3-6 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS. 7 ,08,78,373/- BY APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT. THE CIT(A) HAS RESTRICTED THE DISALLOWANCE AT RS.37,18,845/-. THE CIT(A) HAS DELETED THE ADDITION OF RS.17,15,898/-. THE DETAILS HAVE BE EN MENTIONED IN THE APPEAL ORDER. RELIANCE IS PLACED ON THE ORDER OF THE ASSESSING OF FICER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD B E UPHELD. 7. GROUND NO. 7 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.1,25,561/- ON ACCOUNT OF PRIOR PERIOD EXPENSES N OT DEDUCTABLE IN MERCANTILE SYSTEM OF ACCOUNTING. [PARA 9 PAGE 7 OF AOS ORDER] [PARA 10(1-4) PAGES 15-16 OF CIT(A)S ORDER] THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS. 1 ,25,561/- AS PRIOR PERIOD EXPENSES NOT RELATABLE TO THE YEAR UNDER CON SIDERATION. THE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 22 CIT(A) HAS DELETED THE SAME HOLDING, THAT THE NATUR E OF THE WORK OF THE ASSESSEE IS THAT OF RUNNING OF CONTINUOUS WORK IN P ROGRESS. ONCE IT IS HELD, THAT THE EXPENSES RELATE TO PRIOR PERIOD, ADMITTEDLY, THEY ARE NOT FOR THE YEAR UNDER CONSIDERATION AND HENCE, THEY CANNOT BE ALLOWED. THE CIT(A) HAS THEREFORE, ERRED IN DELETIN G THE SAME. THE ADDITIONS MADE BY THE AO MAY BE RESTRORED. 8. GROUND NO. 8 THE APPELLANT CRAVE LEAVES TO ADD OR AMEND ANY ON O R MORE OF THE GROUNDS OF APPEALS, AS STATED ABOVE, AS AND WHEN NE ED TO DOING SO ARISES WITH THE PRIOR PERMISSION OF THE COURT. [PARA 13 PA GE 18 OF CIT(A)S ORDER] THIS GROUND IS GENERAL IN NATURE. SUBMITTED FOR KIND PERUSAL AND CONSIDERATION. (DR. A.K. BAR) COMMISSIONER OF INCOME TAX(DR)-1, ITAT, LUCKNOW ITA NO. 508/LKW/2016-A.Y. 2013-14 U.P. PROJECT CORPORATION LTD. BRIEF SYNOPSIS & WRITEEN SUBMISSION BY DR 1. GROUND NO. 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.14,43,61,802/- WITHOUT APPRECIATING THE FACT THA T THE AO MADE ADDITION FOR NOT FOLLOWING PERCENTAGE COMPLETION ME THOD RECOGNITION FOR REVENUE RECOGNITION AS GIVEN IN ACCOUNTING STAN DARD-AS-7 (REVISED) AND ALSO, THE ASSESSEE IS DEDUCTION AMOUN TS FROM PROFITS AND CREDITING IN RETENTION RESERVE WITHOUT ANY JURISDIC TION. [PARA 3 PAGES 2-3 OF AOS ORDER] [PARA 5(1) TO 5(4) PAGES 2-4 OF CIT( A)S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.21 ,20,09,287/- ON ACCOUNT OF PERCENTAGE COMPLETION METHOD. THE CIT(A) HAS DELETED THE SAME. THE CIT(A) HAS HELD, THAT THE ASSESSEE IS FOL LOWING THE REVENUE RECOGNITION METHOD DEPENDING UPON THE STAGE ON WHIC H THE PROJECT IS AT THE END OF THE YEAR. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 23 ONCE THE ASSESSEE IS FOLLOWING THE REVENUE RECOGNIT ION METHOD, THEN REVENUE IS TO BE RECOGNIZED ON THE WORK DONE, IRRES PECTIVE OF THE STAGE OF COMPLETION. THOUGH, THERE IS NO CHANGE IN THE PR ACTICE OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE ADDITION MADE BY THE ASSESING OFFICER AND DELETED BY THE CIT(A) BE UPHELD. 2. GROUND NO. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.43,28,49,105/- ON ACCOUNT OF INTEREST INCOME WIT HOUT APPRECIATING THE FACT THAT THE AO MADE THE ADDITION OF THE INTER EST INCOME RECEIVED FROM THE FDRS AND SB ACCOUNTS IN THE NAME OF THE A SSESSEE, AND THE ASSESSEE CLAIMED TDS DEDUCTED BY THE BANK ON INTERE ST WHICH IS AGAINST THE PROVISION OF SECTION 198 AND 199 OF THE IT ACT. [PARA 4 PAGES 3-5 OF AOS ORDER] [PARA 7(1) TO 7(5) PAGES 6-11 OF CIT(A) S ORDER] THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.29 ,31,44,630/- ON ACCOUNT OF INTEREST INCOME ON FDRS. THE CIT(A) HAS DELETED THE SAME HOLDING, THAT THE FUNDS GRANTED TO THE ASSESSEE COR PORATION WERE TO BE UTILIZED FOR A PARTICULAR PURPOSE AND IN ABSENCE OF THE SAME BEING UTILIZED FOR SPECIFIC PURPOSE, THE SAME IS TO BE RE FUNDED BACK TO THE GOVERNMENT WITH INTEREST ACCRUED THEREON. THE CIT(A ) HAS RELIED UPON THE NOTIFICATION OF THE STATE GOVERNMENT AND ALSO T HE CASE LAWS OF U.P. POLICE AND THAT OF THE GUJARAT TRIBUNAL. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN WRONGLY DELETED BY THE CIT(A). NO DOUBT, THE FUNDS HAVE TO BE RETUR NED BACK TO THE GOVERNMENT ALONGWITH THE INTEREST ACCRUED THEREON, YET SINCE THE FDRS ARE IN THE NAME OF THE ASSESSEE CORPORATION THE INT EREST WOULD BELONG TO THE ASSESSEEE AND THE ASSESSING OFFICER HAS RIGHTLY TAXED THE SAME. 3. GROUND NO. 3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADDITIO NS OF RS.3,58,85,285/- MADE ON ACCOUNT OF DISALLOWANCE U/ S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S MADE THE ADDITION FOR NOT DEDUCTING TDS ON POL OF HIRED VEHICLES AND TDS AT THE LESER RATE OF 2%. [PARA 5 PAGES 6-7 OF AOS ORDER] [PARA 8(1) TO 8(4) PAGES 11-13 OF CIT(A)S ORDER] I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 24 THE ASSESSING OFFICER MADE AN ADDITION OF RS.6,32,6 3,235/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DUE TO FAILURE TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE. THE CIT(A ) HAS DELETED THE SAME HOLDING, THAT THE TAX AT SOURCE WAS DEDUCTED W HEREVER THE SAME WAS APPLICABLE. HE HAS FURTHER HELD, THAT NO DEDUCT ION OF TDS IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESEL AND THESE EXPENSES WERE BORNE BY THE APPELLANT. SINCE THE ASSESSEE HAD TAKEN THE VEHICLE ON HIRE, T HERE WAS A LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE , THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND DELETED BY THE CI T(A) BE UPHLED. 4. GROUND NO. 4 THE CIT(A), LUCKNOW HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.1,86,20,613/- MADE U/S 68 OF IT ACT, WITHOUT APPRECIATING THE FACT THAT NO REPLY WAS RECEIVED BY POST IN RESPONSE TO THE NOTICES ISSUES U/S 133(3) OF THE IT ACT, 1961 F OR VERIFICATION OF CREDITORS. [PARA 8 PAGES 8-9 OF AOS ORDER] [PARA 1 1(1) TO 11(4) PAGES 15-18 OF CIT(A)S ORDER] THE AO MADE THE ADDITION IN RESPECT OF THE OUTSTAND ING CREDITORS. NOTICE U/S 133(6) WAS ISSUED BY THE AO TO THE CREDI TORS WHOSE BALANCE WERE OUTSTANDING. IN RESPONSE TO NOTICE U/S 133(6) OUT OF THE 14 CREDITORS, ONLY 1 CREDITOR IN THE NAME OF AJAY ASSO CIATES RESPONDED. OTHER DID NOT RESPOND. THE AO ON THE BASIS OF TEST CHECK METHOD, OUT OF 100 (HUNDRED) CREDITORS IN VARIOUS UNITS, SELECTED 14 (FOURTEEN) PARTIES AND MADE AN ADDITION OF RS.1,86,20,613/- U/S 68 TRE ATING AS UNVERIFIABLE. IN RESPONSE TO SHOW CAUSE NOTICE TO T HE ASSESSEE, THE ASSESSEE FILED CONFRMATIONS FROM ALL THE RESPECTIVE PARTIES. ASSESSEE ALSO SUBMITTED EXPLANATION IN RESPECT TO NON COMPLI ANCE TO THE NOTICE U/S 133(6). THE CIT(A) HAS HELD THAT THE ASSESSEE HAD COMPLIED TO THE QUESTIONNAIRE AND HAS FILED CONFIRMATIONS OF ALL TH E REMAINING CREDITORS TO WHOM NOTICES WERE ISSUED U/S 133(6) OF THE ACT. CIT(A) HAS HELD THAT THESE CREDITORS RELATE TO NORMAL BUSINESS TRAN SACTION AND THE CREDIT HAVE BEEN GIVEN TO THE TRADE CREDITORS FOR THE CONT RACT WORK DONE BY THEM. PAYMENTS ARE BEING MADE TO THESE PARTIES BY C HEQUE. THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED. THE TRANSACTIONS RESULTING AS INCOME I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 25 FROM CONTRACT FOR THE WORK DONE BY THEM HAVE BEEN A CCEPTED BY THE AO. THE CIT(A) HAS DELETED THE ADDITION. THE ACTION OF THE CIT(A) IS NOT ACCEPTABLE FOR REAS ONS THAT ON ENQUIRIES BY AO THE CREDITORS DID NOT RESPOND TO THE NOTICES U/S 133(6). THE CREDIT BALANCE CANNOT BE SAID TO BE VERIFIABLE. THE ADDITI ONS DELETED BE RESTORED. 5. GROUND NO. 5 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITIONS OF RS.11,50,020/- ON ACCOUNT OF PRIOR PERIOD EXPENSES NOT DEDUCTABLE IN MERCANTILE SYSTEM OF ACCOUNTING. [PARA 7 PAGE 7 OF AOS ORDER] [PARA 10(1) TO 10(4) PAGES 14-15 OF CIT(A)S ORDER] THE AO MADE ADDITION OF RS.11,50,020/- ON ACCOUNT O F PRIOR PERIOD EXPENDITURE. THE CIT(A) HAS DELETED THE SAME RELYIN G ON THE DECISION OF THE HONBLE ITAT, LUCKNOW IN THE APPELLANTS OWN CASE FOR THE A.Y. 2009-10. THE FACT REMAINS THAT THE PRIOR PERIOD EXPENSES CAN NOT BE ALLOWED AS DEDUCTION IN THE SUBSEQUENT YEARS. THE DELETION MAD E BY THE CIT(A) BE RESTORED. 6. GROUND NO. 6 THE APPELLANT CRAVE LEAVES TO ADD OR AMEND ANY ON O R MORE OF THE GROUNDS OF APPEALS, AS STATED ABOVE, AS AND WHEN NE ED TO DOING SO ARISES WITH THE PRIOR PERMISSION OF THE COURT. [PARA 16 PA GE 21 OF CIT(A)S ORDER] THIS GROUND IS GENERAL IN NATURE. SUBMITTED FOR KIND PERUSAL AND CONSIDERATION. (DR. A.K. BAR) COMMISSIONER OF INCOME TAX(DR)-1, ITAT, LUCKNOW I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 26 THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, YEAR -WISE, ARE REPRODUCED BELOW: ASSESSMENT YEAR:2010-11 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY ASSESSEE 1. GROUND NO 1- ADDITION OF AN AMT OF RS 73,97,943/ - FROM THE LANGUAGE OF SECTION 35D , THE EXPENSES WHI CH ARE FALLING UNDER SECTION 35D(2) ARE TO BE CONSIDERED FOR AMORTIZATIO N. IN CASE THE BUSINESS IS ALREADY IN EXISTENCE THEN T HE REVENUE EXPENSES CANNOT BE DISALLOWED ON THE GROUND THAT BUSINESS HA S NOT COMMENCED. THE EXPENSES ON SURVEY, TESTING & DRAWING ETC HAVE BEE N INCURRED IN CONNECTION WITH THE CONSTRUCTION PROJECTS UNDERTAKE N BY APPLICANT. THESE DO NOT RELATE TO THE APPLICANTS BUSINESS COMING INTO E XISTENCE. AN EXPENDITURE WHICH IS OTHERWISE ALLOWABLE CANNOT BE CONSIDERED U NDER SECTION 35D OF THE ACT . IF THE EXPENDITURE IS ALLOWABLE UNDER SECTION 37 OF THE ACT THEN THE SAME IS TO BE ALLOWED. THE EXPENSES DEBITED ARE MAI NLY OF REVENUE NATURE AND IT IS NOT NECESSARY THAT THESE EXPENSES WILL BE ALLOWABLE ONLY WHEN THERE ARE RECEIPTS . IN THE INSTANT CASE SECTION 35 D OF THE ACT IS NOT APPLICABLE AS THE BUSINESS HAS ALREADY COMMENCED AN D IT IS NOT THE CASE OF EXTENSION OF INDUSTRIAL UNDERTAKING. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 2. GROUND NO 2- ADDITION OF AN AMT OF AMT OF RS. 9 4,30,394.00 'WE HAVE ALREADY SUBMITTED THAT THE SANCTIONED AMOU NT OF THE WORK ALLOTTED IS FIXED BY GOVERNMENT ON THE ESTIMATIONS INCLUDING CENTAGE. THE ACTUAL AMOUNT INCURRED TOWARDS THE COST OF CONSTRUCTION AS RECORDED IN THE BOOKS OF ACCOUNT ON DAY TO DAY BASIS BY THE UNITS OF THE CORPORATION ' TOTAL AMOUNT INCLUDING CENTAGE ARRIVED ON THE BASIS OF THE BOOK OF ACCOUNTS CANNOT TALLY WITH THE ESTIMATIONS. THE ACTUAL EXPENDITURE DEPEND S ON NUMBER OF FACTORS INCLUDING COST INDEX, DAY TO DAY RATE FLUCTUATIONS IN MATERIAL, DELAY IN EXECUTION AND RISE IN PRICES FOR WHICH THERE IS NO ESCALATION CLAUSE AND SOME TIME INCREASE IN LABOUR COST DUE TO TECHNICALI TY OF WORK. ALL THE EXPENDITURES ARE ACTUALLY INCURRED IN COMPLETION OF THE PROJECT ARE DULY SUPPORTED BY BILLS AND VOUCHERS AND VERIFIABLE FROM THE BOOKS OF ACCOUNTS. THE CORPORATION IS A WHOLLY OWNED GOVERNMENT CORPO RATION AND IS SUBJECT TO AUDIT BY STATUTORY AUDIT BY CHARTERED ACCOUNTANT S FIRM DULY APPOINTED BY C & AG OF INDIA AND AS WELL AS BY C & AG OF INDIA. AS REGARDS LOSS OF RS. 85,65,495.00 IN RESPECT OF SISWA SAGAR RESERVOIR THAT UNIT NO.-14, LUCKNOW HAS CARRIED OU T. THE UNIT HAS CARRIED OUT TWO WORKS NAMELY SISWA SAGER RESERVOIR AND BA HAJA SAGAR RESERVOIR DURING THE FINANCIAL YEAR 2004-05 TO 2007-08 . DUE TO MISTAKE IN BOOKING OF EXPENDITURE ON THESE WORKS SOME PAYMENTS PERTAININ G TO BAHAJA SAGAR RESERVOIR WAS WRONGLY DEBITED TO SISWA SAGAR RESER VOIR . AS A RESULT AGAINST THE EXPENDITURE OF RS. 1,30,56,475.97(INCLU DING CENTAGE), THE PROFIT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 27 OF RS. 1,11,14,111.03, IS APPEARING IN COST SHEET, WHICH IS APPROX 85% OF THE EXPENDITURE. ACTUAL EXPENDITURE INCURRED FROM 2 004-05 TO 2007-08 AND BILL AMOUNT OF THESE WORKS ARE AS UNDER: NAME OF WORKS EXPENDITURE CENTAGE CLAIMED BILL AMT SISWA SAGAR RESERVOIR 1,71,57,955.36 22,64,440.64 1,94,22,396.00 BAHAJA SAGAR RESERVOIR 2,13,00,300.71 28,70,269.29 2,41,70,570.00 TOTAL 3,84,58,256.07 51,34,709.93 4,35,92,966.00 CHART SHOWING YEAR WISE EXPENDITURE INCURRED AND C ENTAGE CHARGED THEREON IS ENCLOSED. FROM THE ABOVE, IT IS CLEAR THAT LOSS ON THIS WORK AS APPEARING COST SHEET IS DUE TO MISTAKE ONLY. HOWEVER IF EXPEN DITURE ON BOTH THE WORKS AND BILL AMOUNT ARE TAKEN TOGETHER THERE IS NO LOSS AND ALSO THERE IS NO CHANGE IN THE EXPENDITURE AND THE BILL AMOUNT . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 3. GROUND NO 3 THE AO MADE AN ADDITION OF RS 30,94,199/- SINCE THE PROFIT EARNED IS LOWER THAN SPECIFIED PERCENTAGE OF COST. THE DISALLOWANCE HAS BEEN MADE ON THE PLEA THAT EXC ESS EXPENDITURE HAS BEEN INCURRED . IN THIS RESPECT IT IS TO SUBMIT THA T THE ASSESSEE ACCOUNTS ARE SUBJECT TO AUDIT BY STATUTORY AUDITORS AND ALSO BY THE C & AG OF INDIA . THE EXPENSES ARE FULLY VOUCHED AND THE LEARNED AO HAS N OT POINTED OUT ANY INSTANCE OF EXPENSES NOT BEING SUPPORTED BY VOUCHER S. THE EXPENSES HAVE ACTUALLY BEEN INCURRED BY THE ASSESSEE AND ARE NOT BOGUS. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 4. GROUND NO 4 THE ASSESSEE IS A WHOLLY OWNED GOVERNMENT CORPORATI ON AND RECEIVES DEPOSITS AND FUNDS FROM THE GOVERNMENT FOR EXECUTIN G THE DEPOSIT CIVIL CONTRACT WORKS . AS PER GOVERNMENT GO A COPY OF WHI CH WAS ALREADY PROVIDED TO LEARNED ASSESSING OFFICER DURING THE AS SESSMENT PROCEEDINGS ALONG WITH REPLY EXPLAINING THE TREATMENT MADE BY T HE ASSESSEE, THE INTEREST ON SUCH UNUTILIZED FUNDS LYING IN BANK FIXED & SAVI NG DEPOSITS PERTAINS TO GOVERNMENT AND NOT TO THE ASSESSEE. AS PER GO NO B-1/564/10-7/97 DATED 02.03.1998 IT HA S BEEN SPECIFICALLY MENTIONED THAT WHATEVER INTEREST INCOME IS ACCRUED ON ADVANCES /FUNDS FROM BANKS IT WOULD BE INCOME OF GOVERNMENT AND IS TO BE REMITTED TO GOVERNMENT. THUS THE INTEREST ACCRUED ON THE ADVANC ES RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT FOR CONSTRUCTION ACTIV ITIES WOULD BE THE INCOME OF THE GOVERNMENT AND NOT OF THE ASSESSEE. O N ITS ACCRUAL, IT BECOMES A LIABILITY TO THE GOVERNMENT WHICH IS TO B E REMITTED BY THE ASSESSEE TO THE GOVERNMENT IN DUE COURSE. SINCE THE INCOME HAS NOT BEEN ACCRUED TO THE ASSESSEE IT CANNOT BE CHARGED TO TAX IN ITS HANDS. A I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 28 REFERENCE IN THIS CONNECTION MAY BE MADE TO THE DEC ISION OF HONBLE ITAT LUCKNOW IN THE CASE OF UP POLICE AWAS NIGAM LTD VS ACIT IN ITA NO 344 & 345 /LKW/1999 DATED 22.08.2012. A REFERENCE MAY ALS O BE MADE TO THE DECISION OF HONBLE GUJRAT HIGHCOURT IN THE CASE OF CIT VS SAR INFRACON (P) LTD 222 TAXMAN 294 WHEREIN ON CONSIDERING STIPULATI ON OF THE CENTRAL GOVERNMENT WHILE SANCTIONING THE GRANT IN FAVOR OF THE ASSESSEE THAT INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRANT LIMIT , THE COURT LAID DOWN THAT HELD, CONSIDERING THE CONDITION IMPOSED BY THE CENTRAL GOVERNMENT, WHILE RELEASING THE GRANT IN FAVOR OF THE ASSESSEE, WHEN THE INTEREST EARNED ON THE CENTRAL GRANT ALREA DY RELEASED WAS REQUIRED TO BE FORMING PART OF THE CENTRAL GRANT, T RIBUNAL HAS RIGHTLY HELD THAT THE INTEREST EARNED ON CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE-NO ERROR HAD BEEN COMMITTED BY THE T RIBUNAL IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 5. GROUND NO 5 AN ADDITION OF RS 54,19,933 WAS MADE TO INCOME SINC E EITHER NO TDS WAS DEDUCTED OR SHORT TDS WAS DEDUCTED OR BILLS HAVE NO T BEEN PRODUCED . A) ADDITION OF RS 7,05,920/- THE AO DISALLOWED A SU M OF RS 3,52,960/- ON THE GROUND THAT BILLS ARE NOT AVAILABLE , THOUGH B ILLS AMOUNTING TO RS 3,52,960/- EACH WERE AVAILABLE. B) THE AO DISALLOWED SUM OF RS 34,19,550 UNDER SECT ION 40 (A) (IA) OF THE ACT FOR THE REASON THAT PAYMENT S WERE MADE WITHOUT DEDUCTION OF TDS OR AFTER DEDUCTION OF TDS AT LOWER RATE. I)A PAYMENT OF RS 16,54,500 WAS MADE TO IIT ROORKIE WHERE A CERTIFICATE NO 2/2009-10 DATED 24.07.2009 UNDER SECTION 197 OF THE ACT ISSUED BY ITO ( TDS) HARIDWAR WHEREBY PAYMENTS TO IIT ROORKIE HAVE BEEN ALLOWED TO BE MADE WITHOUT DEDUCTION OF TDS. THIS C ERTIFICATE HAS BEEN ISSUED ON THYE BASIS OF CBDT NOTIFICATION NO SO 48 (E) DT 12.01.2004 AND CIRCULAR NO 4/2002 DATED 16.07.2002. II) THE AO DISALLOWED SUMS OF RS 8,28,712/- AND RS 7,68,338/- AS PAYMENTS HAVE BEEN MADE DEDUCTING TDS @1% INSTEAD O F 2% . IN THIS CONNECTION REFERENCE CAN BE MADE TO DECISION OF HON BLE A BENCH OF ITA , KOLKATTA IN CASE OF ITO VS PREMIER MEDICAL SU PPLIES & STORES IN IT APPEAL NO 1061 & 1062 (KOL) OF 2010 CO NOS 86 & 87 (KOL) OF 2010 DT OCT 28, 2011. THE CASE LAYS DOWN THAT WHERE TAX IS DEDUCTED BY TH E ASSESSEE, EVEN UNDER BONAFIED WRONG IMPRESSION, UNDER WRONG PROVIS ION OF TDS, THE PROVISIONS OF SECTION 40 (A) (IA) OF THE ACT CANNOT BE INVOKED. III) THE AO DISALLOWED A SUM OF RS 60,000 AND RS 1, 08,000 ON THE GROUND THAT TDS HAS BEEN DEDUCTED AT LOWER RATE. TH ESE PAYMENTS WERE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 29 FOR VEHICLE HIRED. THE ASSESSEE WAS OF THE VIEW THA T THEY WERE LIABLE TO TDS UNDER SECTION 194 C OF THE ACT WHEREAS AO HAS T AKEN THE VIEW THAT PAYMENT WAS ON ACCOUNT OF RENT . A REFERENCE IN THI S CONNECTION IS MAY BE MADE TO THE DECISION IN DCIT VS S K TEKRIWAL (20 11) 48 SOT 515 (KOL) IN THIS CASE THE ASSESSEE PAID MACHINERY HIRE CHARGES ON WHICH IT DEDUCTED TDS AT 1% UNDER SECTION 194C OF THE ACT. T HE AO CLAIMED THAT THE AMOUNT WAS IN THE NATURE OF RENT AND TDS @10% O UGHT TO HAVE DEDUCTED UNDER SECTION 194I OF THE ACT. A PROPORTIO NATE DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT WAS MADE ON THE GROUND THAT THERE WAS A FAILURE TO DEDUCT TDS ON THE PAYMENT . THE HO NBLE TRIBUNAL UPHELD THE ASSESSEE PLE THAT IN SECTION 40(A) (IA) OF THE ACT DISALLOWANCE COULD NOT BE MADE WHEN THERE WAS A SHORTFALL IN TDS DEDUCTION . ON APPEAL BY DEPARTMENT TO THE HON BLE HIGH COURT , T HE HIGH COURT UPHELD THE HONBLE TRIBUNAL ORDER . C) THE AO DISALLOWED SUM OF RS 3,50,000/- AS THE PA YMENT HAS BEEN MADE ON THE LETTER HEAD OF CONTRACTOR WITHOUT TIN/BILL N O . NO FINDING HAS BEEN GIVEN BY AO THAT THE PAYMENT IS BOGUS OR PAYMENT WA S NOT ACTUALLY MADE. THE PAYMENT WAS MADE THROUGH BANKING CHANNEL BY ACCOUNT PAYEE CHEQUE WHICH ESTABLISHES GENUINESS OF TRANSAC TION. D) THE AO DISALLOWED SUM OF RS 1,54,338 FOR THE REA SON BILL WAS NOT AVAILABLE , THE PAYMENT RELATES TO PAYMENT OF TRADE TAX A GOVT DUE AND CHALLAN FOR SAME IS AVAILABLE. E) AN AMT OF RS 1,60,000 WAS DISALLOWED FOR THE REA SON VOUCHER WAS NOT ATTACHED FOR THE PURPOSE OF TDS DEDUCTION , TDS OF RS 16,480/- HAS ALREADY BEEN DEDUCTED IN THE PAYMENT . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 6. GROUND NO 6 THE LEARNED ASSESSING OFFICER HAS MADE AN ADDITION OF RS 15,36,760/- ON THE PLEA THAT EXCESS EXPENDITURE HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT. AT THE VERY OUTSET, WE WOULD LIKE TO STATE THAT THIS AMOUNT HAS BEEN INCLUDED IN WORK IN PROGRESS (WIP) AND CENTAGE HAS ALSO BEEN CHARGED ON THE SAME . AS A COROLLARY OF MAKING THE ADDITION TH E LEARNED AO OUGHT TO HAVE REDUCED IT FROM WIP ALSO ALONG WITH CENTAGE . THUS THE CLAIM OF EXPENDITURE IS REVENUE NEUTRAL. H ENCE THE ORDER OF CIT ( A) TO BE UPHELD. 7. THE LEARNED ASSESSING OFFICER HAS MADE AN ADDITI ON OF RS 5,71,922 BY STATING THAT WIP HAS BEEN TAKEN SHORT IN RESPECT OF COST SHEET OF BARELLI UNIT . HOWEVER THE AT ANOTHER PLACE IN THE SAME COST SHE ET AN EXCESS AMOUNT OF RS 4,49,347 HAS BEEN TAKEN . AS SUCH THE NET EFFECT SHALL BE RS 1,22,575/-. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 8. REPAIRS AND MAINTENANCE EXPENDITURES I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 30 THE ASSESSEE INCURRED EXPENDITURE OF 18,58,061 /- O N REPAIRS AND MAINTENANCE OF EXISTING OFFICE BUILDING , THE NATUR E OF EXPENDITURE WAS REVENUE FOR RS 15,09,999/- THE EXPENSES BEEN INCURRED WERE TOWARDS REPAIRING T HE PREMISES LIKE PAINTING , CHANGE OF CURTAINS ETC . IT HAS NOT BROU GHT ABOUT ANY NEW ASSET AND MORE IMPORTANTLY IT WAS NOT THE INTENTION OF TH E APPELLANT TO BRING ABOUT ANY NEW CAPITAL ASSET . THE EXPENSES INCURRED CLEAR LY FALL WITHIN THE EXPRESSION OF REPAIRS TO PREMISES AS APPEARING IN S ECTION 30(A) OF THE ACT. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 9. A) DISALLOWANCE OF EXPENDITURE UNDER 43B OF ACT HAS BEEN MADE . VAT TDS OF RS 17,15,898 IS NOT AN EXPENDITURE IT IS A L IABILITY AND MOREOVER TDS IS NOT PASSED THROUGH PROFIT AND LOSS ACCOUNT HENCE CANNOT BE DISALLOWED UNDER SECTION 43 B OF THE ACT. B) OF THE AMOUNT OF RS 10,85,878 AN AMOUNT OF RS 4, 61,559/- HAS BEEN PAID BEFORE THE DUE DATE OF FILLING RETURN OF INCOME. C) RELIEF OF RS 53,441/- HAS BEEN PROVIDED SINCE AM T PAID BEFORE DUE DATE OF FILLING RETURN OF INCOME D) RELIEF OF RS 14,87,947 HAS BEEN GIVEN SINCE THE NATURE OF AMOUNT WAS RETENTION MONEY WHICH ARE RELEASED ONCE THE SUPPLIE R SUBMITS PROOF OF PAYMENT OF ROYALTY . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 10. THE LEARNED ASSESSING OFFICER HAS DISALLOWED A SUM OF RS 1,13,63,781 ON THE BASIS OF SPECIAL AUDIT REPORT. THE SPECIAL AUDI TORS DID NOT PROVIDE ANY OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE ENTITIES POINT OF VIEW AND , THUS ,THE EXPLANATIONS OF THE ASSESSEE WERE NOT CONSIDER ED BY THE SPECIAL AUDITORS. THE MATTER WAS EXPLAINED TO LEARNED AO VI DE WRITTEN SUBMISSIONS DATED 20.09.2013 AND THE BILL AND VOUCHERS WERE PRO DUCED FOR VERIFICATION IN SUPPORT OF THE CONTENTION OF THE ASSESSEE. HOWEVER, WITHOUT POINTING OUT ANY FLAW IN THE EXPLANATION OF THE ASSESSEE OR IN T HE VOUCHERS PRODUCED THE LEARNED ASSESSING OFFICER IN A SUMMARY MANNER HAS S TATED THAT THE ASSESSEE REPLY WAS EXAMINED BUT IS NOT TENABLE . T HE LEARNED ASSESSING OFFICER ALSO STATED THAT THE ASSESSEE FOLLOWS MERCA NTILE SYSTEM OF ACCOUNTING AND THEREFORE BY PERIOD EXPENSES ARE NOT ALLOWABLE. IT MAY BE STATED HERE THAT THE ASSESSEE HAS DEMONSTRATED BEFO RE THE LEARNED ASSESSING OFFICER THAT THE LIABILITY HAS ARISEN IN THE PREVIOUS YEARS RELEVANT TO AY 2010-11 AND HENCE IT IS LIABLE TO BE ALLOWED IN ANY CASE , IT IS SUBMITTED THAT ASSESSEE RECOGNIZED THE EXPENDITURE IN AY 2010- 11.ACCORDINGLY CORRESPONDING INCOME IN THE SHAPE OF WIP AND PERCENTAGE OF CENTAGE HAS BEEN CHARGED ACCORDINGLY IN THE PRE VIOUS YEAR RELEVANT TO AY 10-11 ON THE BASIS OF RECOGNITION OF EXPENDITURE THEREFORE THE EFFECT IS REVENUE NEUTRAL. THUS THE ORDER OF CIT ( A) TO BE U PHELD. 11. ADDITION OF RS 6,32,63,235 MADE ON ACCOUNT OF D ISALLOWANCE U/S 40 (A) (IA) I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 31 THE ASSESSEE HAD FILED A DETAILED LIST DURING HEARI NG IN ASSESSMENT PROCEEDINGS DETAILING THE INCOME TAX DEPOSITED AND THE DATE OF DEPOSIT OF SUCH TAX AS ALSO MENTIONING THE CIRCUMSTANCES UNDER WHICH TAX IS NOT DEDUCTED EG. BILL AMOUNT WAS LESS THAN RS 20,000/- OR THE PAYMENT WAS AGAINST SUPPLY OF MATERIAL ON WHICH TDS WAS NOT APP LICABLE OR WHERE THE PAYEE WAS EXEMPT FROM INCOME TAX OR WHERE THE PAYM ENT WAS AGAINST THE LIABILITY PROVIDED EARLIER AND TDS WAS DEDUCTED AND PAID AT THE TIME OF BOOKING THE LIABILITY ETC . WITH REGARD TO EXPENSE S INCURRED ON HIRED VEHICLES AND BOOKED UNDER THE HEAD POL OF HIRED VEHICLES, WE HAVE TO STATE THAT WE HAVE DEDUCTED TAX @2% ON HIRING OF VEHICLES. THE AM OUNT WHICH HAS BEEN SUBJECTED TO DISALLOWANCE PERTAINS TO THE EXPENSES ON DIESEL AND PETROL CHARGES OF VEHICLES. IT IS SUBMITTED THAT THIS EXPE NDITURE IS BORNE BY THE ASSESSEE AND HENCE IT IS SUBMITTED THAT IT IS NOT L IABLE TO FOR DEDUCTION UNDER SECTION 194C OF THE ACT . T HE ISSUE CAN BE VIEWED FROM ANOTHER ANGLE ALSO THAT IF TDS IS CONSIDERED ON THE ENTIRE AMOUNT OF BILL I.E CONSISTING OF HIRE CHARGES AND PETROL /DIESEL EXPENSES OF VEHICLES THEN IT IS ONLY A MATTER OF SH ORT DEDUCTION OF TAX ON WHICH THE PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE HENCE THE DISALLOWANCE IS LIABLE TO BE DELETED. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 12 THE ASSESSEE IS CREATING RETENTION RESERVE ON T HE BASIS OF ACCOUNTING POLICIES (POLICY ON REVENUE RECOGNITION IN SCHEDULE B OF SCHEDULE OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES ANNEXED T O AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH 2010 ) FOLL OWED BY IT FOR PAST SEVERAL YEARS WHICH ARE IN CONFORMITY WITH THE REQU IREMENTS OF AS-7 (REVISED). THE SAID RETENTION RESERVE IS IN FACT TH E AMOUNT OF PROFITS OF FUTURE YEARS DEDUCTED FROM THE WORK IN PROGRESS ON THE BASIS OF STAGE OF COMPLETION OF WORK IN ACCORDANCE WITH THE ACCOUNTIN G POLICY OF THE CORPORATION. ANOTHER IMPORTANT FACTOR IS THAT WHEN THE STAGE OF COMPLETION IS MORE THAN 50 % AND LESS THAN 100% THE ASSESSEE RECO GNIZES 2/3 OF THE PROFIT AND ON COMPLETION OF WORK THE ENTIRE PROFIT IS ACCOUNTED FOR. THUS IN RESPECT OF THOSE WORKS WHICH WERE MORE THAN 50% COM PLETED 2/3 RD OF THE PROFIT OR TOTALLY COMPLETED IN SUBSEQUENT YEARS THE ENTIRE PROFIT STANDS ACCOUNTED FOR AND HAS BEEN OFFERED FOR TAXATION OR ACTUALLY ASSESSED BY THE AO . THUS IF SAME PROFIT IS TAXED IN AY 2010-11 ALS O BY MAKING ADDITION OF RETENTION RESERVES , IT WILL AMOUNT TO TAXATION OF SAME INCOME TWICE. THUS THERE IS ABSOLUTELY NO JUSTIFICATION FOR THIS ADDIT ION AS THE RESERVES FOR CONTINGENCIES PURSUANT TO ACCOUNTING POLICY CONSIST ENTLY FOLLOWED BY THE ASSESSEE IS CONTINUING FOR THE PAST SEVERAL YEARS A ND THERE IS NO JUSTIFICATION FOR MAKING THE ADDITION OF RESERVE FOR CONTINGENCY WHICH IS IN PURSUANCE OF ACCOUNTING POLICY REGULARLY FOLLOWED BY THE ASSESSE E . I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 32 FURTHER THE STATUTORY AUDITORS HAVE NOT TAKEN EXCEP TION OR QUALIFICATION TO CREATION OF RESERVE AND THE C & AG OF INDIA HAVE AL SO NOT GIVEN ANY ADVERSE COMMENT ON THIS ISSUE. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 13. THE LEARNED ASSESSING OFFICER HAS MADE ON ADDIT ION OF RS 17,68,458 ON THE PLEA THAT IT IS A SHORT DEDUCTION OF TDS . IF WE RE FER TO VARIOUS DECISIONS OF TRIBUNALS AND COURTS IT IS NOW SETTLED THAT INCASE OF VARIATION OF RATE OF TDS, THE DISALLOWANCE OF SECTION 40 (A) (IA) IS NOT APPL ICABLE .FURTHER IT ALSO STANDS SETTLED BY SEVERAL DECISIONS THAT CONTRACTS FOR LETTING OUT OF VEHICLES OF THE TYPE ENTERED INTO BY ASSESSEE IS COVERED U/S 194 C AND NOT 194 I OF THE ACT . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 14. ADDITION OF RS 13,75,49,494/- THE ASSESSEE PURCHASES VARIOUS ITEMS LIKE SAND, COA RSE SAND, BOULDERS , GRITS ETC IN ITS BUSINESS OF CONTRACT WORK . THESE ITEMS ARE SUPPLIED BY THE PARTIES AT THE RATE FOR AT WORK SITES. AS SUCH THE TRANSPORTATION COST IS BORNE BY THE SUPPLIER. THE ASSESSEE MAKES PAYMENT F OR SUPPLY OF MATERIAL TO SUPPLIER. SINCE NO TRANSPORTATION CHARGES ARE BO RNE BY THE ASSESSEE ,HENCE THE ASSESSEE DOES NT MAKES ANY PAYMENT TO T RANSPORTERS AND THE ASSESSEE MAKES PAYMENT TO SUPPLIERS FOR GOODS. THE QUESTION OF ANY TDS DOESNT ARISE. THERE IS NO PROVISION IN THE ACT WHI CH REQUIRES FOR DEDUCTION OF TDS ON PURCHASE OF GOODS FOR WHICH PAYMENT IS MADE TO SUPPLIERS. THUS THE ORDER OF CIT ( A) TO BE UPHELD. ASSESSMENT YEAR 2011-12 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY RESPONDENT 12. GROUND NO 1 THE RETURN OF INCOME WAS A BELATED RETURN BEING FIL ED AFTER THE DUE DATE AND HENCE CANNOT BE REVISED , THE ASSESSEE DURING T HE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED A REVISED COMPUTAT ION OF INCOME RECTIFYING CERTAIN MISTAKES APPEARING IN THE ORIGIN AL RETURN OF INCOME. HOWEVER , THE LEARNED ASSESSING OFFICER REJECTED T HE REVISED COMPUTATION OF INCOME FILED DURING THE ASSESSMENT PROCEEDINGS APPA NTELY BECAUSE THE TOTAL INCOME AS PER REVISED COMPUTATION OF INCOME W AS LESS THAN THE TOTAL INCOME AS PER COMPUTATION OF INCOME FILED IN THE OR IGINAL RETURN OF INCOME . IT MAY BE STATED HERE THAT ASSESSMENT HAS BEEN COMP LETED ON THE BASIS OF ACCOUNTS AUDITED BY STATUTORY AUDITORS WHO ARE DULY APPOINTED BY C & AG OF INDIA AND HENCE THE INCOME AS PER REVISED COMPUTATI ON OUGHT TO HAVE BEEN ACCEPTED BY LEARNED AO. THUS THE ORDER OF CIT ( A) TO BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 33 2 THE ASSESSEE IS CREATING RETENTION RESERVE ON THE BASIS OF ACCOUNTING POLICIES (POLICY ON REVENUE RECOGNITION IN SCHEDULE B OF SCHEDULE OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES ANNEXED T O AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH 2010 ) FOLL OWED BY IT FOR PAST SEVERAL YEARS WHICH ARE IN CONFORMITY WITH THE REQU IREMENTS OF AS-7 (REVISED). THE SAID RETENTION RESERVE IS IN FACT TH E AMOUNT OF PROFITS OF FUTURE YEARS DEDUCTED FROM THE WORK IN PROGRESS ON THE BASIS OF STAGE OF COMPLETION OF WORK IN ACCORDANCE WITH THE ACCOUNTIN G POLICY OF THE CORPORATION. ANOTHER IMPORTANT FACTOR IS THAT WHEN THE STAGE OF COMPLETION IS MORE THAN 50 % AND LESS THAN 100% THE ASSESSEE RECO GNIZES 2/3 OF THE PROFIT AND ON COMPLETION OF WORK THE ENTIRE PROFIT IS ACCOUNTED FOR. THUS IN RESPECT OF THOSE WORKS WHICH WERE MORE THAN 50% COM PLETED 2/3 RD OF THE PROFIT OR TOTALLY COMPLETED IN SUBSEQUENT YEARS THE ENTIRE PROFIT STANDS ACCOUNTED FOR AND HAS BEEN OFFERED FOR TAXATION OR ACTUALLY ASSESSED BY THE AO . THUS IF SAME PROFIT IS TAXED IN AY 2010-11 ALS O BY MAKING ADDITION OF RETENTION RESERVES , IT WILL AMOUNT TO TAXATION OF SAME INCOME TWICE. THUS THERE IS ABSOLUTELY NO JUSTIFICATION FOR THIS ADDIT ION AS THE RESERVES FOR CONTINGENCIES PURSUANT TO ACCOUNTING POLICY CONSIST ENTLY FOLLOWED BY THE ASSESSEE IS CONTINUING FOR THE PAST SEVERAL YEARS A ND THERE IS NO JUSTIFICATION FOR MAKING THE ADDITION OF RESERVE FOR CONTINGENCY WHICH IS IN PURSUANCE OF ACCOUNTING POLICY REGULARLY FOLLOWED BY THE ASSESSE E . FURTHER THE STATUTORY AUDITORS HAVE NOT TAKEN EXCEP TION OR QUALIFICATION TO CREATION OF RESERVE AND THE C & AG OF INDIA HAVE AL SO NOT GIVEN ANY ADVERSE COMMENT ON THIS ISSUE. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 3 GROUND NO 3 THE ASSESSEE IS A WHOLLY OWNED GOVERNMENT CORPORATI ON AND RECEIVES DEPOSITS AND FUNDS FROM THE GOVERNMENT FOR EXECUTIN G THE DEPOSIT CIVIL CONTRACT WORKS . AS PER GOVERNMENT GO A COPY OF WHI CH WAS ALREADY PROVIDED TO LEARNED ASSESSING OFFICER DURING THE AS SESSMENT PROCEEDINGS ALONG WITH REPLY EXPLAINING THE TREATMENT MADE BY T HE ASSESSEE, THE INTEREST ON SUCH UNUTILIZED FUNDS LYING IN BANK FIXED & SAVI NG DEPOSITS PERTAINS TO GOVERNMENT AND NOT TO THE ASSESSEE. AS PER GO NO B-1/564/10-7/97 DATED 02.03.1998 IT HA S BEEN SPECIFICALLY MENTIONED THAT WHATEVER INTEREST INCOME IS ACCRUED ON ADVANCES /FUNDS FROM BANKS IT WOULD BE INCOME OF GOVERNMENT AND IS TO BE REMITTED TO GOVERNMENT. THUS THE INTEREST ACCRUED ON THE ADVANC ES RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT FOR CONSTRUCTION ACTIV ITIES WOULD BE THE INCOME OF THE GOVERNMENT AND NOT OF THE ASSESSEE. O N ITS ACCRUAL, IT BECOMES A LIABILITY TO THE GOVERNMENT WHICH IS TO B E REMITTED BY THE ASSESSEE TO THE GOVERNMENT IN DUE COURSE. SINCE THE INCOME HAS NOT BEEN ACCRUED TO THE ASSESSEE IT CANNOT BE CHARGED TO TAX IN ITS HANDS. A REFERENCE IN THIS CONNECTION MAY BE MADE TO THE DEC ISION OF HONBLE ITAT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 34 LUCKNOW IN THE CASE OF UP POLICE AWAS NIGAM LTD VS ACIT IN ITA NO 344 & 345 /LKW/1999 DATED 22.08.2012. A REFERENCE MAY ALS O BE MADE TO THE DECISION OF HONBLE GUJRAT HIGHCOURT IN THE CASE OF CIT VS SAR INFRACON (P) LTD 222 TAXMAN 294 WHEREIN ON CONSIDERING STIPULATI ON OF THE CENTRAL GOVERNMENT WHILE SANCTIONING THE GRANT IN FAVOR OF THE ASSESSEE THAT INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRANT LIMIT , THE COURT LAID DOWN THAT HELD, CONSIDERING THE CONDITION IMPOSED BY THE CENTRAL GOVERNMENT, WHILE RELEASING THE GRANT IN FAVOR OF THE ASSESSEE, WHEN THE INTEREST EARNED ON THE CENTRAL GRANT ALREA DY RELEASED WAS REQUIRED TO BE FORMING PART OF THE CENTRAL GRANT, T RIBUNAL HAS RIGHTLY HELD THAT THE INTEREST EARNED ON CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE-NO ERROR HAD BEEN COMMITTED BY THE T RIBUNAL IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 4 GROUND NO 4 FROM THE LANGUAGE OF SECTION 35D, THE EXPENSES WHIC H ARE FALLING UNDER SECTION 35D(2) ARE TO BE CONSIDERED FOR AMORTIZATIO N. IN CASE THE BUSINESS IS ALREADY IN EXISTENCE THEN T HE REVENUE EXPENSES CANNOT BE DISALLOWED ON THE GROUND THAT BUSINESS HA S NOT COMMENCED. THE EXPENSES ON SURVEY, TESTING & DRAWING ETC HAVE BEEN INCURRED IN CONNECTION WITH THE CONSTRUCTION PROJECTS UNDERTAKEN BY APPLIC ANT. THESE DO NOT RELATE TO THE APPLICANTS BUSINESS COMING INTO EXISTENCE. A N EXPENDITURE WHICH IS OTHERWISE ALLOWABLE CANNOT BE CONSIDERED UNDER SECT ION 35D OF THE ACT . IF THE EXPENDITURE IS ALLOWABLE UNDER SECTION 37 OF TH E ACT THEN THE SAME IS TO BE ALLOWED. THE EXPENSES DEBITED ARE MAINLY OF REVE NUE NATURE AND IT IS NOT NECESSARY THAT THESE EXPENSES WILL BE ALLOWABLE ONL Y WHEN THERE ARE RECEIPTS . IN THE INSTANT CASE SECTION 35D OF THE A CT IS NOT APPLICABLE AS THE BUSINESS HAS ALREADY COMMENCED AND IT IS NOT THE CA SE OF EXTENSION OF INDUSTRIAL UNDERTAKING. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 5 GROUND NO 5 - ADDITION OF RS 50,62,979 MADE ON A CCOUNT OF DISALLOWANCE U/S 40 (A) (IA) THE LD AO DISALLOWED RS 50,62,979 U/S 40(A) (IA) OF THE ACT IN RESPECT OF POL EXPENSES I.E PETROL. OIL, LUBRICANT ETC OF HIRED VEHICLES ON THE PLEA THAT THE ASSESSEE HAD NOT DEDUCTED TDS ON THE SAME. IT IS NOTEWORTHY THAT EXPENDITURE ON POL ON HIRED VEHICLE HAS BEEN I NCURRED BY THE ASSESSEE. OBVIOUSLY SUCH EXPENSES ARE NOT COVERED U /S 194 C OF THE ACT . THE ASSESSEE HAS NOT DEDUCTED TDS U/S 194 C ON POL EXPENSES I.E PETROL, OIL , LUBRICANT ETC INCURRED ON HIRED VEHICLES AS S UCH EXPENSES HAVE BEEN PAID ON PURCHASE OF POL EXPENSES I.E PETROL, OIL , LUBRICANT ETC. THESE RAE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 35 REIMBURSEMENT OF EXPENSES IN RESPECT OF EXPENSES IN CURRED ON THESE HEADS. AS THE PAYMENT OF SUCH EXPENSES IS NOT AGAIN ST ANY WORK CONTRACT BUT THESE ARE FOR PURCHASE OF ITEMS , TAX DEDUCTION U/S 194 C IS NOT APPLICABLE. THE LD AO HAS MISUNDERSTOOD REIMBURSEMENT OF POL EX PENSES OF RS 50,62,979 U/S 40 (A) (IA) . SUCH ADDITION IS LIABLE TO BE DELETED T HE ISSUE CAN BE VIEWED FROM ANOTHER ANGLE ALSO THAT IF TDS IS CONSIDERED ON THE ENTIRE AMOUNT OF BILL I.E CONSISTING OF HIRE CHARGES AND PETROL /DIESEL EXPENSES OF VEHICLES THEN IT IS ONLY A MATTER OF SH ORT DEDUCTION OF TAX ON WHICH THE PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE HENCE THE DISALLOWANCE IS LIABLE TO BE DELETED. THUS THE ORDER OF CIT ( A) TO BE UPHELD. . 6. GROUND NO 6- PURCHASES , ADDITION THE ASSESSEE PURCHASES VARIOUS ITEMS LIKE SAND, COA RSE SAND, BOULDERS , GRITS ETC IN ITS BUSINESS OF CONTRACT WORK . THESE ITEMS ARE SUPPLIED BY THE PARTIES AT THE RATE FOR AT WORK SITES. AS SUCH THE TRANSPORTATION COST IS BORNE BY THE SUPPLIER. THE ASSESSEE MAKES PAYMENT F OR SUPPLY OF MATERIAL TO SUPPLIER. SINCE NO TRANSPORTATION CHARGES ARE BO RNE BY THE ASSESSEE ,HENCE THE ASSESSEE DOES NT MAKES ANY PAYMENT TO T RANSPORTERS AND THE ASSESSEE MAKES PAYMENT TO SUPPLIERS FOR GOODS. THE QUESTION OF ANY TDS DOESNT ARISE. THERE IS NO PROVISION IN THE ACT WHI CH REQUIRES FOR DEDUCTION OF TDS ON PURCHASE OF GOODS FOR WHICH PAYMENT IS MADE TO SUPPLIERS. THUS THE ORDER OF CIT ( A) TO BE UPHELD. ASSESSMENT YEAR 2012-13 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY ASSESSEE 13. GROUND NO 1 THE ASSESSEE IS CREATING RETENTION RESERVE ON THE B ASIS OF ACCOUNTING POLICIES (POLICY ON REVENUE RECOGNITION IN SCHEDULE B OF SCHEDULE OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES ANNEXED TO AND FORMIN G PART OF ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH 2010 ) FOLLOWED BY IT FOR PA ST SEVERAL YEARS WHICH ARE IN CONFORMITY WITH THE REQUIREMENTS OF AS-7 (REVISE D). THE SAID RETENTION RESERVE IS IN FACT THE AMOUNT OF PROFITS OF FUTURE YEARS DEDUCTED FROM THE WORK IN PROGRESS ON THE BASIS OF STAGE OF COMPLETION OF WORK IN ACCORDANCE WITH THE ACCOUNTING POLICY OF THE CORPORATION. ANOTHER IMPOR TANT FACTOR IS THAT WHEN THE STAGE OF COMPLETION IS MORE THAN 50 % AND LESS THAN 100% THE ASSESSEE RECOGNIZES 2/3 OF THE PROFIT AND ON COMPLETION OF W ORK THE ENTIRE PROFIT IS ACCOUNTED FOR. THUS IN RESPECT OF THOSE WORKS WHICH WERE MORE THAN 50% COMPLETED 2/3 RD OF THE PROFIT OR TOTALLY COMPLETED IN SUBSEQUENT YEARS THE ENTIRE PROFIT STANDS ACCOUNTED FOR AND HAS BEEN OFF ERED FOR TAXATION OR ACTUALLY ASSESSED BY THE AO . THUS IF SAME PROFIT IS TAXED I N AY 2010-11 ALSO BY MAKING ADDITION OF RETENTION RESERVES , IT WILL AMO UNT TO TAXATION OF SAME INCOME TWICE. THUS THERE IS ABSOLUTELY NO JUSTIFICA TION FOR THIS ADDITION AS THE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 36 RESERVES FOR CONTINGENCIES PURSUANT TO ACCOUNTING P OLICY CONSISTENTLY FOLLOWED BY THE ASSESSEE IS CONTINUING FOR THE PAST SEVERAL YEARS AND THERE IS NO JUSTIFICATION FOR MAKING THE ADDITION OF RESERVE FO R CONTINGENCY WHICH IS IN PURSUANCE OF ACCOUNTING POLICY REGULARLY FOLLOWED B Y THE ASSESSEE . FURTHER THE STATUTORY AUDITORS HAVE NOT TAKEN EXCEP TION OR QUALIFICATION TO CREATION OF RESERVE AND THE C & AG OF INDIA HAVE AL SO NOT GIVEN ANY ADVERSE COMMENT ON THIS ISSUE. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 14. GROUND NO 2 THE ASSESSEE IS A WHOLLY OWNED GOVERNMENT CORPORATI ON AND RECEIVES DEPOSITS AND FUNDS FROM THE GOVERNMENT FOR EXECUTIN G THE DEPOSIT CIVIL CONTRACT WORKS . AS PER GOVERNMENT GO A COPY OF WHI CH WAS ALREADY PROVIDED TO LEARNED ASSESSING OFFICER DURING THE AS SESSMENT PROCEEDINGS ALONG WITH REPLY EXPLAINING THE TREATMENT MADE BY T HE ASSESSEE, THE INTEREST ON SUCH UNUTILIZED FUNDS LYING IN BANK FIXED & SAVI NG DEPOSITS PERTAINS TO GOVERNMENT AND NOT TO THE ASSESSEE. AS PER GO NO B-1/564/10-7/97 DATED 02.03.1998 IT HA S BEEN SPECIFICALLY MENTIONED THAT WHATEVER INTEREST INCOME IS ACCRUED ON ADVANCES /FUNDS FROM BANKS IT WOULD BE INCOME OF GOVERNMENT AND IS TO BE REMITTED TO GOVERNMENT. THUS THE INTEREST ACCRUED ON THE ADVANC ES RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT FOR CONSTRUCTION ACTIV ITIES WOULD BE THE INCOME OF THE GOVERNMENT AND NOT OF THE ASSESSEE. O N ITS ACCRUAL, IT BECOMES A LIABILITY TO THE GOVERNMENT WHICH IS TO B E REMITTED BY THE ASSESSEE TO THE GOVERNMENT IN DUE COURSE. SINCE THE INCOME HAS NOT BEEN ACCRUED TO THE ASSESSEE IT CANNOT BE CHARGED TO TAX IN ITS HANDS. A REFERENCE IN THIS CONNECTION MAY BE MADE TO THE DEC ISION OF HONBLE ITAT LUCKNOW IN THE CASE OF UP POLICE AWAS NIGAM LTD VS ACIT IN ITA NO 344 & 345 /LKW/1999 DATED 22.08.2012. A REFERENCE MAY ALS O BE MADE TO THE DECISION OF HONBLE GUJRAT HIGHCOURT IN THE CASE OF CIT VS SAR INFRACON (P) LTD 222 TAXMAN 294 WHEREIN ON CONSIDERING STIPULATI ON OF THE CENTRAL GOVERNMENT WHILE SANCTIONING THE GRANT IN FAVOR OF THE ASSESSEE THAT INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRANT LIMIT , THE COURT LAID DOWN THAT HELD, CONSIDERING THE CONDITION IMPOSED BY THE CENTRAL GOVERNMENT, WHILE RELEASING THE GRANT IN FAVOR OF THE ASSESSEE, WHEN THE INTEREST EARNED ON THE CENTRAL GRANT ALREA DY RELEASED WAS REQUIRED TO BE FORMING PART OF THE CENTRAL GRANT, T RIBUNAL HAS RIGHTLY HELD THAT THE INTEREST EARNED ON CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE-NO ERROR HAD BEEN COMMITTED BY THE T RIBUNAL IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . THUS THE ORDER OF CIT ( A) TO BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 37 15. GROUND NO 3 THE COMPANY TAKES HIRED VEHICLES ON CONTRACT BASIS . THE BASIC TERM OF THE CONTRACT IS THAT THE RUNNING COST OF THE VEHICLE WI LL BE BORNE BY THE APPELLANT CORPORATION. THIS RUNNING COST COMPRISES OF THE COS T OF PETROL , DIESEL AND LUBRICANTS BEING POL EXPENSES. HENCE THE COMPANY FR OM PAST SEVERAL YEARS HAVE BEEN DEDUCTING TDS @2% ON THE CONTRACTUA L COST PAID FOR THESE HIRED VEHICLES OWNERS WHERE EVER THE PAYMENT WAS I N EXCESS OF SPECIFIED LIMIT OF RS 20000/- ON PAYMENTS MADE FOR HIRING OF VEHICLES. THE AMOUNT WHICH HAS BEEN SUBJECTED TO DISALLOWANCE PERTAINS TO THE EXPENSES ON DIESEL AND PETROL CHARGES OF VEHICLES. IT IS SUBMITTED THAT THIS EXPENDITURE IS BORNE BY THE ASSESSEE AND HENCE IT I S SUBMITTED THAT IT IS NOT LIABLE TO FOR DEDUCTION UNDER SECTION 194C OF THE A CT . T HE ISSUE CAN BE VIEWED FROM ANOTHER ANGLE ALSO THAT IF TDS IS CONSIDERED ON THE ENTIRE AMOUNT OF BILL I.E CONSISTING OF HIRE CHARGES AND PETROL /DIESEL EXPENSES OF VEHICLES THEN IT IS ONLY A MATTER OF SH ORT DEDUCTION OF TAX ON WHICH THE PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE HENCE THE DISALLOWANCE IS LIABLE TO BE DELETED. ACCORDINGLY , PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT ARE NOT APPLICABLE IN THE PRESENT CASE AS IT IS NOT A CASE WHERE TDS HAS NOT BEEN DEDUCTED . ON THE CONTRARY IT IS A CASE WHERE TDS HAS BEEN DEDUCT ED . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 16. GROUND NO 4 THE ASSESSEE PURCHASES VARIOUS ITEMS LIKE SAND, COA RSE SAND, BOULDERS, GRITS ETC IN ITS BUSINESS OF CONTRACT WORK . THESE ITEMS ARE SUPPLIED BY THE PARTIES AT THE RATE FOR AT WORK SITES. AS SUCH THE TRANSPORTATION COST IS BORNE BY THE SUPPLIER. THE ASSESSEE MAKES PAYMENT F OR SUPPLY OF MATERIAL TO SUPPLIER. SINCE NO TRANSPORTATION CHARGES ARE BO RNE BY THE ASSESSEE, HENCE THE ASSESSEE DOES NT MAKES ANY PAYMENT TO TR ANSPORTERS AND THE ASSESSEE MAKES PAYMENT TO SUPPLIERS FOR GOODS. THE QUESTION OF ANY TDS DOESNT ARISE. THERE IS NO PROVISION IN THE ACT WHI CH REQUIRES FOR DEDUCTION OF TDS ON PURCHASE OF GOODS FOR WHICH PAYMENT IS MADE TO SUPPLIERS. HOWEVER THE LD. ASSESSING OFFICER OVERLOOKED THE AF ORESAID FACT AND ONLY FOLLOWED HIS PREDECESSORS ASSESSMENT ORDER . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 17. GROUND NO 5 IN THIS RESPECT WE WOULD LIKE TO SUBMIT THAT THE CO RPORATION HAD SOLD SCRAP COLLECTED AT SITE FROM PAST SEVERAL YEARS AFTER TAK ING DUE AUTHORIZATION FROM THE CONCERNED AUTHORITIES . THE OLD PVC PIPES , RUS TED IRON RODS , PIPES , I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 38 PUMP SETS ETC THAT WERE PURCHASED IN PAST YEARS WER E AS DEAD STOCK AND WERE ALSO OF NO USE FOR THE CORPORATION . THE STOCK VALUE WAS DECLINING DAY BY DAY DUE TO EROSION. THUS THE SCRAP WHEN SOLD IN OPEN TENDER CAUSED LOSS OF RS 1,63,386 WHICH WAS ACCOUNTED FOR IN THE BOOKS OF THE CORPORATION. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 6 GROUND NO 6 AN AMOUNT OF RS 7,08,78,737/- WAS DISALLOWED ON TH E GROUND THAT ASSESSEE HAS NOT FURNISHED PAYMENT PROOF OF CONTRIB UTION TO PROVIDENT FUND AND ALSO NO BIFURCATION OF AMT CLAIMED AS CONTRIBUT ION AND AMT CLAIMED AS PROVISION HAS BEEN FURNISHED. THE ASSESSEE HAS DEPOSITED RS 7,08,78,737 ON ACCOUN T OF CONTRIBUTIONS TO EPF ACT , CONTRIBUTION TOWARDS GROUP GRATUITY , GRO UP LEAVE ENCASHMENT AND CONTRIBUTION TOWARDS LEAVE SALARY AND PENSION C ONTRIBUTION . NECESSARY DOCUMENTS ALONG WITH COPIES OF ACKNOWLEDG EMENT FOR PAYMENT TO LIC OF INDIA ON ACCOUNT OF GRATUITY AND GLES AND COPIES OF CHALLAN FOR PAYMENT TO EPF CONTRIBUTION WERE PRODUCED . FURTHER THE PROVISIONS OF SECTION 43B OF THE ACT ARE NOT APPLICABLE TO LEAVE SALARY AND PENSION CONTRIBUTION. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 7. ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES RS 1,25,561/- THE ASSESSEE HAS ALREADY ADDED BACK AN AMOUNT OF RS 1,15,500/- TO INCOME AS PER COMPUTATION AS PER DETAILS BELOW PRIOR PERIOD EXPENSES AMT ROAD TAX AND OTHERS 5500.00 CONTRACT EXPENSES 66531.00 SURVEY TESTING 53530.00 TOTAL 125561.00 LESS PRIOR PERIOD INCOME 10061.00 NET EXPENSES ADDED BACK 115500.00 ADDING THE SAME AMOUNT GAIN IS NOT LOGICAL ON THE P ART OF AO. THUS THE ORDER OF CIT (A) SHOULD BE UPHELD . ASSESSMENT YEAR 2013-14 BRIEF SYNOPSIS AND WRITTEN STATEMENT BY RESPONDENT 1. GROUND NO 1 THE ASSESSEE IS CREATING RETENTION RESERVE ON THE B ASIS OF ACCOUNTING POLICIES (POLICY ON REVENUE RECOGNITION IN SCHEDULE B OF SCHEDULE OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES ANNEXED TO AND FORMIN G PART OF ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH 2010 ) FOLLOWED BY IT FOR PA ST SEVERAL YEARS WHICH ARE IN CONFORMITY WITH THE REQUIREMENTS OF AS-7 (REVISE D). THE SAID RETENTION I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 39 RESERVE IS IN FACT THE AMOUNT OF PROFITS OF FUTURE YEARS DEDUCTED FROM THE WORK IN PROGRESS ON THE BASIS OF STAGE OF COMPLETION OF WORK IN ACCORDANCE WITH THE ACCOUNTING POLICY OF THE CORPORATION. ANOTHER IMPOR TANT FACTOR IS THAT WHEN THE STAGE OF COMPLETION IS MORE THAN 50 % AND LESS THAN 100% THE ASSESSEE RECOGNIZES 2/3 OF THE PROFIT AND ON COMPLETION OF W ORK THE ENTIRE PROFIT IS ACCOUNTED FOR. THUS IN RESPECT OF THOSE WORKS WHICH WERE MORE THAN 50% COMPLETED 2/3 RD OF THE PROFIT OR TOTALLY COMPLETED IN SUBSEQUENT YEARS THE ENTIRE PROFIT STANDS ACCOUNTED FOR AND HAS BEEN OFF ERED FOR TAXATION OR ACTUALLY ASSESSED BY THE AO . THUS IF SAME PROFIT IS TAXED I N AY 2010-11 ALSO BY MAKING ADDITION OF RETENTION RESERVES , IT WILL AMO UNT TO TAXATION OF SAME INCOME TWICE. THUS THERE IS ABSOLUTELY NO JUSTIFICA TION FOR THIS ADDITION AS THE RESERVES FOR CONTINGENCIES PURSUANT TO ACCOUNTING P OLICY CONSISTENTLY FOLLOWED BY THE ASSESSEE IS CONTINUING FOR THE PAST SEVERAL YEARS AND THERE IS NO JUSTIFICATION FOR MAKING THE ADDITION OF RESERVE FO R CONTINGENCY WHICH IS IN PURSUANCE OF ACCOUNTING POLICY REGULARLY FOLLOWED B Y THE ASSESSEE . FURTHER THE STATUTORY AUDITORS HAVE NOT TAKEN EXCEP TION OR QUALIFICATION TO CREATION OF RESERVE AND THE C & AG OF INDIA HAVE AL SO NOT GIVEN ANY ADVERSE COMMENT ON THIS ISSUE. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 2. GROUND NO 2 THE ASSESSEE IS A WHOLLY OWNED GOVERNMENT CORPORATI ON AND RECEIVES DEPOSITS AND FUNDS FROM THE GOVERNMENT FOR EXECUTIN G THE DEPOSIT CIVIL CONTRACT WORKS . AS PER GOVERNMENT GO A COPY OF WHI CH WAS ALREADY PROVIDED TO LEARNED ASSESSING OFFICER DURING THE AS SESSMENT PROCEEDINGS ALONG WITH REPLY EXPLAINING THE TREATMENT MADE BY T HE ASSESSEE, THE INTEREST ON SUCH UNUTILIZED FUNDS LYING IN BANK FIXED & SAVI NG DEPOSITS PERTAINS TO GOVERNMENT AND NOT TO THE ASSESSEE. AS PER GO NO B-1/564/10-7/97 DATED 02.03.1998 IT HA S BEEN SPECIFICALLY MENTIONED THAT WHATEVER INTEREST INCOME IS ACCRUED ON ADVANCES /FUNDS FROM BANKS IT WOULD BE INCOME OF GOVERNMENT AND IS TO BE REMITTED TO GOVERNMENT. THUS THE INTEREST ACCRUED ON THE ADVANC ES RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT FOR CONSTRUCTION ACTIV ITIES WOULD BE THE INCOME OF THE GOVERNMENT AND NOT OF THE ASSESSEE. O N ITS ACCRUAL, IT BECOMES A LIABILITY TO THE GOVERNMENT WHICH IS TO B E REMITTED BY THE ASSESSEE TO THE GOVERNMENT IN DUE COURSE. SINCE THE INCOME HAS NOT BEEN ACCRUED TO THE ASSESSEE IT CANNOT BE CHARGED TO TAX IN ITS HANDS. A REFERENCE IN THIS CONNECTION MAY BE MADE TO THE DEC ISION OF HONBLE ITAT LUCKNOW IN THE CASE OF UP POLICE AWAS NIGAM LTD VS ACIT IN ITA NO 344 & 345 /LKW/1999 DATED 22.08.2012. A REFERENCE MAY ALS O BE MADE TO THE DECISION OF HONBLE GUJRAT HIGHCOURT IN THE CASE OF CIT VS SAR INFRACON (P) LTD 222 TAXMAN 294 WHEREIN ON CONSIDERING STIPULATI ON OF THE CENTRAL GOVERNMENT WHILE SANCTIONING THE GRANT IN FAVOR OF THE ASSESSEE THAT INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRANT LIMIT , THE COURT LAID DOWN THAT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 40 HELD, CONSIDERING THE CONDITION IMPOSED BY THE CENTRAL GOVERNMENT, WHILE RELEASING THE GRANT IN FAVOR OF THE ASSESSEE, WHEN THE INTEREST EARNED ON THE CENTRAL GRANT ALREA DY RELEASED WAS REQUIRED TO BE FORMING PART OF THE CENTRAL GRANT, T RIBUNAL HAS RIGHTLY HELD THAT THE INTEREST EARNED ON CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE-NO ERROR HAD BEEN COMMITTED BY THE T RIBUNAL IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . THUS THE ORDER OF CIT ( A) TO BE UPHELD. 3. GROUND NO 3 THE COMPANY TAKES HIRED VEHICLES ON CONTRACT BASIS. THE BASIC TERM OF THE CONTRACT IS THAT THE RUNNING COST OF THE VEHICLE WI LL BE BORNE BY THE APPELLANT CORPORATION. THIS RUNNING COST COMPRISES OF THE COS T OF PETROL, DIESEL AND LUBRICANTS BEING POL EXPENSES. HENCE THE COMPANY FR OM PAST SEVERAL YEARS HAVE BEEN DEDUCTING TDS @2% ON THE CONTRACTUA L COST PAID FOR THESE HIRED VEHICLES OWNERS WHERE EVER THE PAYMENT WAS I N EXCESS OF SPECIFIED LIMIT OF RS 20000/- ON PAYMENTS MADE FOR HIRING OF VEHICLES. THE AMOUNT WHICH HAS BEEN SUBJECTED TO DISALLOWANCE PERTAINS TO THE EXPENSES ON DIESEL AND PETROL CHARGES OF VEHICLES. IT IS SUBMITTED THAT THIS EXPENDITURE IS BORNE BY THE ASSESSEE AND HENCE IT I S SUBMITTED THAT IT IS NOT LIABLE TO FOR DEDUCTION UNDER SECTION 194C OF THE A CT . T HE ISSUE CAN BE VIEWED FROM ANOTHER ANGLE ALSO THAT IF TDS IS CONSIDERED ON THE ENTIRE AMOUNT OF BILL I.E CONSISTING OF HIRE CHARGES AND PETROL /DIESEL EXPENSES OF VEHICLES THEN IT IS ONLY A MATTER OF SH ORT DEDUCTION OF TAX ON WHICH THE PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE HENCE THE DISALLOWANCE IS LIABLE TO BE DELETED. ACCORDINGLY, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN THE PRESENT CASE AS IT IS NOT A CASE WHERE TDS HAS NOT BEEN DEDUCTED . ON THE CONTRARY IT IS A CASE WHERE TDS HAS BEEN DEDUCT ED.THUS THE ORDER OF CIT ( A) TO BE UPHELD. 4. GROUND NO 4 THE LD. AO HAS MADE THE ADDITION OF RS 1,86,20,613 U/S 68 OF THE ACT ONLY ON THE PLEA THAT THE PARTIES FAILED TO RESPOND TO N OTICES ISSUED U/S 133(6) OF THE ACT. THE ASSESSEE HAD PROVIDE FULL DETAILS OF T HE SUNDRY CREDITORS WITH THEIR NAMES , ADDRESSES AND AMT OUTSTANDING AS ON 3 1.03.2013 AND ALSO FURNISHED CONFIRMATION OF BALANCES OF CREDITORS TO WHOM NOTICES WERE ISSUED BY LD AO. IT MAY BE STATED HERE THAT IN MOST OF THE CASES THERE ARE REGULAR TRANSACTIONS WITH THE PARTIES. NO AMT HAS BEEN RECD IN CASH BY FROM THEM. THEY ARE TRADE CREDITORS AND CREDIT HAS BEEN GIVEN TO THEM FOR CONTRACT WORKS DONE BY THEM AND PAYMENTS ARE BEING MADE BY C HEQUE. THUS THE ORDER OF CIT ( A) TO BE UPHELD. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 41 5. GROUND NO 5 THE ASSESSEE HAS FILED THE ORIGINAL RETURN OF INCOM E ON 29-09-2013 AND SUBSEQUENTLY THE RETURN OF INCOME WAS REVISED ON 28 -02-2015 ON THE BASIS OF FINANCIAL STATEMENTS AUDITED BY THE STATUTORY AU DITORS APPOINTED BY THE CENTRAL GOVERNMENT. IT IS OBVIOUS THAT VARIOUS FIGU RES OF ORIGINAL RETURN OF INCOME WOULD VARY WITH THE REVISED RETURN OF INCOME . ACCORDINGLY IN THE REVISED RETURN OF INCOME RS. 3,60,210/- WAS ADDED I N THE COMPUTATION OF INCOME ON ACCOUNT OF PRIOR PERIOD INCOME/EXPENSES. IGNORING THE FACT THE LEARNED ASSESSING OFFICER HAS ADDED RS. 11,50,020/- ON ACCOUNT OF PRIOR PERIOD INCOME/EXPENSES ON THE BASIS OF ORIGINAL RET URN OF INCOME. SINCE THE LEARNED AO HAS DONE THE ASSESSMENT ON THE BASIS OF REVISED RETURN, HENCE ADDITION MADE ON THE BASIS OF ORIGINAL RETURN WHICH BECOMES NON-EST ON FILING THE REVISED RETURN, IS LIABLE TO BE DELETED. WE HAVE ALSO TO POINT OUT THAT THE DETAILS OF EXPENDITURE SHOWN UNDER THE HEA D OF PRIOR PERIOD ADJUSTMENTS INCLUDED IN EXTRA ORDINARY ITEMS OF PR OFIT & LOSS ACCOUNT . IT WOULD BE NOTICED THAT AS AGAINST THE EXPENDITURE OF RS. 13,20,796/- THE INCOME IS RS. 9,60,586/- RESULTING IN NET DEBIT BAL ANCE I.E. EXPENDITURE OF RS. 3,60,210/- WHICH HAS BEEN DISALLOWED BY THE ASS ESSEE ON ITS OWN AS WOULD BE SEEN IN THE COMPUTATION OF INCOME. WE DRAW YOUR KIND ATTENTION TO THE ITAT DECISION IN OUR OWN CASE IN ITA NO.547/LKW/2012 FOR A.Y.2009-10 IN WHICH IN PARAGRA PH 4 ON PAGE 2 AND 3 OF THE ITAT ORDER, IT HAS BEEN HELD THAT WHERE THE NET PRIOR PERIOD INCOME HAS BEEN OFFERED TO TAX, NO ADDITION IS JUSTIFIED. WE THEREFORE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. AS SUCH IN THIS YEAR ALSO THE OFFERING OF THE NET A MOUNT WHICH IS EXPENDITURE IN THIS YEAR IS FULLY COVERED BY THE IT AT ORDER. THUS THE ORDER OF CIT ( A) TO BE UPHELD. 3. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD INCLUDING THE WRITTEN SUBMISSIONS FILED BY BOTH THE PARTIES. WE FIND THAT THE FIRST GROUND TAKEN IN ASSESSMENT Y EAR 2010-11 REGARDING DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANC E OF SURVEY, TESTING AND DRAWING EXPENSES ETC. ARE SIMILAR IN I.T.A. NO.331/ LKW/2016 FOR ASSESSMENT YEAR 2011-12 WHICH THE REVENUE HAS TAKEN IN ASSESSM ENT YEAR 2011-12 AS GROUND NO. 4. SIMILARLY, GROUND NO. 4 IN ASSESSMEN T YEAR 2010-11 IS SIMILAR TO GROUND NO. 3 IN ASSESSMENT YEAR 2011-12 AND GROU ND NO. 2 IN ASSESSMENT YEAR 2012-13 AND 13-14. GROUND NO. 5 RE LATING TO DISALLOWANCE U/S 40(A)(IA) IN ASSESSMENT YEAR 2010-11 HAS ALSO B EEN TAKEN IN ASSESSMENT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 42 YEAR 2011-12 AND 2012-13 VIDE GROUND NO. 6 & 4 RESP ECTIVELY. GROUND NO. 11 IN ASSESSMENT YEAR 2010-11 HAS ALSO BEEN TAKEN B Y THE REVENUE IN ASSESSMENT YEAR 2011-12, 2012-13 AND 2013-14 VIDE G ROUND NO. 5, 3 & 3 RESPECTIVELY. SIMILAR IS THE POSITION WITH RESPECT TO GROUND NO. 12 WHERE THE SAME ISSUE HAS BEEN TAKEN BY THE REVENUE IN ASSESSM ENT YEAR 2011-12, 2012-13 AND 2013-14 VIDE GROUND NO. 2, 1 & 1 RESPEC TIVELY. 4. FIRST WE TAKE UP THE APPEAL IN I.T.A. NO.330/LKW /2016 FOR ASSESSMENT YEAR 2010-11. THE FIRST GROUND IS FOR DISALLOWANCE OF SURVEY, TESTING AND DRAWING EXPENSES AS THE ASSESSING OFFICER TREATED T HE SAME IN THE NATURE OF PRELIMINARY EXPENSES WHEREAS THE LEARNED CIT(A) HAS HELD THAT SINCE THE ASSESSEE WAS ALREADY ENGAGED IN THE BUSINESS OF CON STRUCTION, SUCH EXPENSES CANNOT BE TREATED AS PRELIMINARY EXPENSES AND THEREFORE, HE HAS RIGHTLY DELETED THE SAME HOLDING THE SAME TO BE OF REVENUE IN NATURE. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 5(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE APPELLANT IS A GOVERNMENT COMPANY WITHIN T HE MEANING SECTION 617 OF THE COMPANIES ACT, 1956 AND ITS ENTIRE SHARE CAPITAL IS OWNED BY THE GOVERNMENT OF UTTAR P RADESH AND GOVERNMENT OF INDIA. IT IS ENGAGED IN THE BUSINESS OF CIVIL WORKS AND CONSTRUCTION OF TUBE-WELLS MAINLY FOR GOV ERNMENT DEPARTMENTS. THE APPELLANT CLAIMED EXPENSES OF RS.82,19,937/- ON SURVEY TESTING AND DRAWING WHICH WERE TREATED AS PRELIMINARY EXPENSES BY THE AO UNDER SEC TION 35D OF THE ACT. SECTION 35D OF THE ACT WAS INSERTED BY TAX ATION LAWS AMENDMENT ACT, 1970 WITH EFFECT FROM 01.04.1971. TH E CBDT ISSUED CIRCULAR NO. 56 DATED 19TH MARCH, 1971 TO EX PLAIN THE PROVISIONS IN THE TAXATION LAWS AMENDMENT ACT, 1970 . PARA 42 AND 43 OF THE CIRCULAR ARE REPRODUCED AS UNDER.- '42. SECTION 8 OF THE AMENDING ACT HAS INTRODUCED T WO NEW SECTIONS 35B AND 35E WITH EFFECT FROM 1/4/1971 NEW I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 43 SECTION 35B PROVIDES FOR THE AMORTISATION OF CERTAI N PRELIMINARY EXPENSES INCURRED BY AN INDIAN COMPANY OR A RESIDENT ASSESSEE OTHER THAN A COMPANY BEFORE THE COMMENCEMENT OF BUSINESS OR IN CONNECTION WITH THE EXTENSION OF AN INDUSTRIAL UNDERTAKING OR THE SETTI NG UP OF A NEW INDUSTRIAL UNIT. THE AMORTISATION WILL BE ALL OWED AGAINST THE PROFITS OF THE COMPANY OR OTHER TAXPAYE R IN 10 EQUAL INSTALLMENTS OVER A PERIOD OF 10 YEARS BEG INNING WITH THE PREVIOUS YEAR IN WHICH THE BUSINESS COMMEN CES OR AS THE CASE MAY BE, THE PREVIOUS YEAR IN WHICH T HE EXTENSION OF THE INDUSTRIAL UNDERTAKING IS COMPLETE D OR THE NEW INDUSTRIAL UNIT COMMENCES PRODUCTION OR OPERATION. SUCH-AMORTISATION WILL BE ALLOWED ONLY I N. RESPECT OF EXPENDITURE INCURRED AFTER 31.3.1970 UND ER SPECIFIED HEADS. THE HEADS OF QUALIFYING EXPENDITUR E SPECIFIED FOR THIS PURPOSE ARE THE FOLLOWING: 1. EXPENDITURE IN CONNECTION WITH : (I) PREPARATION OF FEASIBILITY REPORT; (II) I PREPARATION OF PROJECT R EPORT; (HI) CONDUCTING MARKET SURVEY OR ANY OTHER SURVEY NECESSARY FOR THE BUSINESS OF THE ASSESSEE; AND (IV ) ENGINEERING SERVICES RELATING TO THE BUSINESS OF TH E ASSESSEE. THESE ITEMS OF EXPENDITURE WILL QUALIFY F OR AMORTISATION WHERE THE WORK IN CONNECTION WITH THE PREPARATION OF THE FEASIBILITY REPORT OR THE PROJEC T REPORT OR THE CONDUCTING OF THE MARKET SURVEY OR OT HER SURVEY OR THE ENGINEERING SERVICES, IS CARRIED OUT WITHIN THE ORGANIZATION OF THE COMPANY OR OTHER ASSESSEE HIMSELF, OR, WHERE IT IS ENTRUSTED TO AN OUTSIDE CONCERN, SUCH CONCERN IS, FOR THE TIME BEIN G, APPROVED FOR THE PURPOSE OF THIS PROVISION BY THE CENTRAL BOARD OF DIRECT TAXES, 2. LEGAL CHARGES FOR DRAFTING ANY AGREEMENT BETWEEN THE ASSESSEE AND ANY OTHER PERSON FOR ANY PURPOSE RELATING TO THE SETTING UP OR CONDUCT OF THE BUSIN ESS OF THE ASSESSEE . 3. IN THE CASE OF A COMPANY, IN ADDITION TO THE EXPENDITURE FALLING UNDER ITEMS (1) AND (2) ABOVE, THE FOLLOWING ITEMS OF EXPENDITURE WILL ALSO QUALIFY FO R AMORTIZATION: A)LEGAL CHARGES FOR DRAFTING THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY; B) EXPENDITURE ON PRINTING OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION; C) FEES FOR I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 44 REGISTERING THE COMPANY UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956; PROVISIONS OF THE COMPANIES ACT, 1956; D) EXPENDITURE IN CONNECTION WITH THE ISSUE, FOR PUBLIC SUBSCRIPTION, OF SHARE IN OR DEBENTURES OF THE COMPANY, BY WAY OF UNDERWRITING COMMISSION, BROKERAGE AND CHARGES FOR DRAFTING, TYPING, PRINTING AND ADVERTISEMENT OF THE PROSPECTU S. THIS WILL INCLUDE LEGAL CHARGES AND AUDITORS' FEES FOR DRAFTING OF THE PROSPECTUS]. THE CENTRAL BOARD OF DIRECT TAXES IS ALSO EMPOWERED TO SPECIFY IN THE INCOME-TAX RULES ANY OTHER ITEM OR ITEMS OF EXPENDITURE IN RESPECT OF WHICH THE LAW DOES NOT PROVIDE FOR ANY ALLOWANCE OR DEDUCTION, AND, THEREUPON THE ITEMS OF EXPENDITURE SO SPECIFIED WIL L ALSO BE ELIGIBLE FOR AMORTIZATION UNDER SECTION 350 . 43.THE AGGREGATE AMOUNT OF THE EXPENDITURE UNDER AL L THE SPECIFIED HEADS WILL, FOR THE PURPOSE OF AMORTISATION BE LIMITED TO 21/2 PER CENT OF THE COS T OF THE PROJECT THE 'COST OF THE PROJECT HAS BEEN DEFIN ED TO MEAN THE ACTUAL COST OF THE FIXED ASSETS, NAMELY , LAND, BUILDINGS, LEASEHOLDS, PLANT, MACHINERY, FURNITURE, FITTINGS AND RAILWAY SIDINGS (INCLUDING EXPENDITURE ON DEVELOPMENT OF LAND AND BUILDINGS), WHICH ARE SHOWN IN THE BOOKS OF THE ASSESSEE AS ON THE LAST DAY OF THE PREVIOUS YEAR IN WHICH THE BUSI NESS OF THE ASSESSEE COMMENCES. WHERE THE AMORTISATION IS TO BE ALLOWED WITH REFERENCE TO EXPENDITURE INCU RRED IN CONNECTION WITH THE EXTENSION OF AN EXISTING INDUSTRIAL UNDERTAKING OR IN CONNECTION WITH THE SE TTING UP OF A NEW INDUSTRIAL UNIT, THE 'COST OF THE PROJE CT' IS DEFINED TO MEAN THE ACTUAL COST OF THE FIXED ASSETS AS STATED ABOVE WHICH ARE SHOWN IN THE BOOKS OF THE ASSESSEE AS ON THE LAST DAY OF THE PREVIOUS YEAR IN WHICH THE EXTENSION OF THE INDUSTRIAL UNDERTAKING I S - COMPLETED OR, AS THE CASE-MAY BE, THE NEW INDUSTRIA L UNIT COMMENCES PRODUCTION OR OPERATION INSOFAR AS SUCH FIXED ASSETS HAVE BEEN ACQUIRED OR DEVELOPED I N CONNECTION WITH THE EXTENSION OF THE INDUSTRIAL UNDERTAKING OR SETTING UP OF THE NEW INDUSTRIAL UNI T OF THE ASSESSEE'. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 45 5(5) FROM THE LANGUAGE OF THE SECTION AS WELL AS F ROM THE CIRCULAR, IT IS CLEAR THAT THE (EXPENSES WHICH ARE FALLING UNDER SECTION 35D(2) OF THE ACT ARE TO BE CONSIDERED FOR AMORTIZATION UNDER SECTION 35D OF THE ACT. IN A CASE WHERE THE B USINESS IS ALREADY IN EXISTENCE, THEN THE REVENUE EXPENSES CAN NOT BE DISALLOWED ON THE GROUND THAT BUSINESS HAS NOT COMM ENCED. IT IS NOT THE CASE OF THE AO THAT BUSINESS WAS NOT IN EXISTENCE. THE EXPENSES ON SURVEY TESTING AND DRAWING ETC. HAV E BEEN INCURRED IN CONNECTION WITH THE CONSTRUCTION PROJEC TS UNDERTAKEN BY THE APPELLANT. THESE DO NOT RELATE TO THE APPELLANT'S BUSINESS COMING INTO EXISTENCE. AN EXPE NDITURE WHICH IS OTHERWISE ALLOWABLE CANNOT BE CONSIDERED U NDER SECTION 35D OF THE ACT. IF THE EXPENDITURE IS ALLOW ABLE UNDER SECTION 37 OF THE ACT THEN THE SAME IS TO BE ALLOWE D. THE HBN'BLE APEX COURT IN THE CASE OF CIT V SWARAJ ENGI NEERS LTD. 171 TAXMAN 495 HAD AN OCCASION TO CONSIDER THE APPL ICABILITY OF SECTION 35AB OF THE ACT IN RESPECT OF EXPENDITUR E. THE HON'BLE APEX COURT OBSERVED AS UNDER:- 'AT THE SAME TIME IT IS IMPORTANT TO NOTE THAT EVEN IF THE APPLICABILITY OF SECTION 35AB, THE NATURE OF EXPEND ITURE IS REQUIRED TO BE DECIDED AT THE THRESHOLD BECAUSE IF THE EXPENDITURE IS FOUND TO BE REVENUE IN NATURE, THEN SECTION 35AB MAY NOT APPLY. HOWEVER, IF IT IS FOUND TO BE CAPITAL IN NATURE, THEN THE QUESTION OF AMORTIZATIO N AND SPREAD OVER AS CONTEMPLATED BY SECTION 35AB WOULD CERTAINTY COME INTO PLAY'. 5(6) ONE HAS TO SEE THE ALLOWABILITY OF EXPENDIT URE AS PER THE PROVISIONS OF THE ACT. THE EXPENSES DEBITED ARE MAI NLY OF REVENUE NATURE AND IT IS NOT NECESSARY THAT THESE E XPENSES WILL BE ALLOWABLE ONLY WHEN THERE ARE RECEIPTS. IF THE E XPENSES ARE INCURRED FOR THE ARE TO BE ALLOWED. IN THE INSTANT CASE SECTION 35D OF THE ACT IS NOT APPLICABLE AS THE BUSINESS HA S ALREADY COMMENCED AND IT IS NOT THE CASE OF THE EXTENSION O F INDUSTRIAL UNDERTAKING. THE ASSESSEE WAS EARLIER CARRYING OUT CONSTRUCTION ACTIVITIES IS EARLIER YEARS ALSO WHEN SUCH EXPENDIT URE WAS INCURRED IN CONNECTION WITH CONSTRUCTION ACTIVITIES UNDER TAKEN BY THE APPELLANT. THE EXPENSES CLAIMED ARE OF REVEN UE NATURE IN CONNECTION WITH THE CONTINUING BUSINESS ACTIVITI ES OF THE APPELLANT AND IS ALLOWABLE UNDER SECTION 37 OF THE ACT IN COMPUTING THE BUSINESS INCOME OF THE APPELLANT AND THEREFORE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 46 CANNOT BE DISALLOWED UNDER SECTION 35D OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE EXPENDIT URE AS REVENUE AND THEREFORE, THE ADDITION OF RS.73,97,943 /- MADE BY THE ASSESSING OFFICER IS DELETED GIVING RELIEF TO T HE APPELLANT. 4.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION BY HOLDING THAT ASSESSEE WAS ALREADY INTO BUSINESS AND THEREFORE, DISALLOWANCE W AS NOT WARRANTED U/S 35D OF THE ACT. THE LEARNED CIT(A) HAS RIGHTLY OBS ERVED THAT EXPENSES WERE INCURRED BY ASSESSEE ON ITS CONSTRUCTION PROJE CTS IN WHICH THE ASSESSEE WAS ALREADY ENGAGED. IN VIEW OF THE ABOVE, GROUND N O. 1 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMIS SED. SIMILARLY, GROUND NO. 3 IN ASSESSMENT YEAR 2011-12 RELATING TO THE SA ME ISSUE IS ALSO DISMISSED. 5. VIDE GROUND NO. 2 THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.94,30,394/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED EXCESS EXPENDITURE CL AIMED ON PROJECT COMPLETED AND HANDED OVER TO CLIENT WITHOUT APPRECI ATING THE FACT THAT THE ASSESSING OFFICER MADE ADDITION IN ABSENCE OF DOCUM ENTARY EVIDENCE TO PROVE THE JUSTIFICATION OF EXPENSES CLAIMED. LEARN ED CIT(A) HAS HELD THAT THE EXPENDITURE CANNOT BE DISALLOWED MERELY BECAUSE THE EXPENSES INCURRED ACTUALLY WERE MORE THAN THE BUDGETED EXPENSES. THE DISALLOWANCE MADE BY THE AO HAS NO BASIS AS THE EXPENDITURE HAS ACTUALLY BEEN INCURRED AND RECORDED IN THE BOOKS OF ACCOUNTS WHICH HAVE BEEN S UBJECTED TO MULTIPLE AUDITS THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY DE LETED THE SAME. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 6(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE AO DISALLOWED A SUM OF RS. 94,30,394/- ON THE BASIS OF I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 47 SPECIAL AUDIT REPORT THAT IN CERTAIN EXCESS EXPENDI TURE TO THE EXTENT OF RS.94,30,394/- WAS INCURRED OVER AND ABOV E THE ESTIMATIONS ON PROJECTS. A COST OERRUN, ALSO KNOWN AS A COST INCREASE OR BUDGET OVERRUN, INVOLVES UNEXPECTED COS TS INCURRED IN EXCESS OF BUDGETED AMOUNTS DUE TO AN UNDERESTIMA TION OF THE ACTUAL COST DURING BUDGETING. COST OVERRUN INCL UDES COST ESCALATION, WHICH IS USED TO EXPRESS AN ANTICIPATED GROWTH IN A BUDGETED COST DUE TO FACTORS SUCH AS INFLATION. COS T OVERRUN IS COMMON IN INFRASTRUCTURE, BUILDING, AND TECHNOLOGY PROJECT. THE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN MAINTA INED AND AUDITED BY THE STATUTORY AUDITOR AS WELL AS THE COM PTROLLER AND AUDITOR GENERAL OF INDIA (C&AG IN SHORT). THE BOOKS OF ACCOUNTS HAVE ALSO BEEN SUBJECTED TO SPECIAL AUDIT BY THE AUDITOR APPOINTED BY THE DEPARTMENT. IT IS ON THE B ASIS OF THE BOOKS OF ACCOUNTS AUDITED BY THE SPECIAL AUDITOR TH AT THE COST OVERRUN OF RS.94,30,394/- HAS BEEN IDENTIFIED BY TH E AUDITOR. IT IS NOT THE CASE THAT THESE EXPENSES ARE BOGUS RATHE R THESE EXPENSES HAVE ACTUALLY BEEN INCURRED BY THE APPELLA NT ON THE PROJECTS UNDER TAKEN. THE EXPENDITURE CANNOT BE DIS ALLOWED MERELY BECAUSE THE EXPENSES INCURRED ACTUALLY ARE M ORE THAN THE BUDGETED EXPENSES. IF THIS WAS THE CASE THEN TH ERE WOULD BE NO COST AND TIME OVER RUNS IN THE CONSTRUCTION B USINESS. THE DISALLOWANCE MADE BY THE AO HAS NO BASIS AS THE EXP ENDITURE HAS ACTUALLY, BEEN INCURRED AND RECORDED IN THE BOO KS OF ACCOUNTS WHICH HAVE BEEN SUBJECTED TO MULTIPLE AUDI TS. THE ADDITION OF RS.04,30,394/- MADE BY THE ASSESSING OF FICER IS DELETED GIVING RELIEF TO THE APPELLANT. 5.1 WE FIND THAT LEARNED CIT(A) HAS DEALT WITH THE ISSUE EXHAUSTIVELY AND HAS RIGHTLY DELETED THE ADDITION WHICH THE ASSESSIN G OFFICER HAD WRONGLY MADE. WE AGREE WITH THE FINDINGS OF LEARNED CIT(A) THAT THE EXPENDITURE CANNOT BE DISALLOWED MERELY BECAUSE THE EXPENSES IN CURRED ACTUALLY WERE MORE THAN THE BUDGETED EXPENSES WHEN THE EXPENDITUR E HAS ACTUALLY BEEN INCURRED AND RECORDED IN THE BOOKS OF ACCOUNTS WHIC H HAVE BEEN SUBJECTED TO MULTIPLE AUDITS. IN VIEW OF THE ABOVE, GROUND N O. 2 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMIS SED. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 48 6. VIDE GROUND NO. 3 THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.30,94,199/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS LOSS CLAIMED ON PROJEC TS IN THE ABSENCE OF COMPLETE DOCUMENTARY EVIDENCES FOR CLAIMING OF LOSS . LEARNED CIT(A) HAS HELD THAT IT IS NOT THE CASE THAT THESE EXPENSES AR E BOGUS RATHER THESE EXPENSES HAVE ACTUALLY BEEN INCURRED BY THE ASSESSE E ON PROJECTS UNDER TAKEN. THIS EXCESS EXPENDITURE IS RELATED TO PROJEC TS WHICH ARE ABOUT TO BE COMPLETED OR EVEN IN SOME CASES COMPLETED BUT NOT H ANDED OVER TO CLIENT THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY DELETED T HE SAME. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 7(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BE EN MAINTAINED AND AUDITED BY THE STATUTORY AUDITOR AS WELL AS THE C&AG. THE BOOKS OF ACCOUNTS HAVE ALSO BEEN SUBJECTE D TO SPECIAL AUDIT BY THE AUDITOR APPOINTED BY THE DEPAR TMENT. IT IS ON THE BASIS OF THE BOOKS OF ACCOUNTS AUDITED BY TH E SPECIAL AUDITOR THAT THE COST OF RS.30,94,199/- HAS BEEN ID ENTIFIED BY THE AUDITOR. IT IS NOT THE CASE THAT THESE EXPENSES ARE BOGUS RATHER THESE EXPENSES HAVE ACTUALLY BEEN INCURRED B Y THE APPELLANT ON PROJECTS UNDER TAKEN. THIS EXCESS EXPE NDITURE IS RELATED TO PROJECTS WHICH ARE ABOUT TO BE COMPLETED OR EVEN IN SOME CASES COMPLETED BUT NOT HANDED OVER TO CLIENT. THE ASSESSMENT PROCEEDINGS FOR THE EARLIER YEARS ALSO H AVE BEEN COMPLETED BY THE AO VIDE ORDER UNDER SECTION 143(3) OF THE ACT WHEREIN ADDITION ON ACCOUNT OF CENTAGE WAS MADE. I N VIEW THEREOF AND SINCE THE EXPENSES HAVE ACTUALLY BEEN I NCURRED, THE DISALLOWANCE OF RS.30,94,199 /- IS DELETED GIVING RELIEF TO THE APPELLANT. 6.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION WHI CH THE ASSESSING OFFICER HAD WRONGLY MADE. IN VIEW OF THE ABOVE, GROUND NO. 3 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMIS SED. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 49 7. VIDE GROUND NO. 4, THE REVENUE HAS CHALLENGED TH E ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.29,31,44,630/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST INCOME FROM THE FDRS AND SB ACCOUNTS. LEARNED CIT(A) HAS HELD THAT THE INTEREST EARNED BY THE ASSESSEE ON BANK FIXED AND SAVINGS DEPOSITS MADE OUT OF FUNDS RECEIV ED FROM THE GOVERNMENT FOR EXECUTING THE CIVIL CONTRACT WORK IS TO BE CONS IDERED AS INCOME OF THE UP GOVERNMENT AS PER GO NO. B-1/564/10-7/97 DATED 02.0 3.1998 WHEREIN IT HAS BEEN SPECIFICALLY MENTIONED THAT WHATEVER INTER EST INCOME IS ACCRUED ON THE ADVANCES FROM THE BANK, IT WOULD BE REMITTED TO THE GOVERNMENT AND THEREFORE, THE LEARNED CIT(A) HELD THAT SINCE THE I NCOME HAS NOT BEEN ACCRUED TO THE ASSESSEE, IT CANNOT BE CHARGED TO TA X IN THE HANDS OF THE ASSESSEE. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 8.4 I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE AMOUNT OF INTEREST OF RS.29,71,44,630/- EA RNED BY THE APPELLANT ON BANK FIXED AND SAVINGS DEPOSITS MADE O UT OF FUNDS RECEIVED FROM THE GOVERNMENT FOR EXECUTING THE DEPO SIT CIVIL CONTRACT WORK IS TO BE CONSIDERED AS INCOME OF THE UP GOVERNMENT AS PER GO NO. B-1/564/10-7/97 DATED 02.0 3.1998. IN THIS LETTER, IT HAS BEEN SPECIFICALLY MENTIONED THAT WHATEVER INTEREST INCOME IS ACCRUED ON THE ADVANCES FROM THE BANK, IT WOULD BE REMITTED TO THE GOVERNMENT. A REFERENCE IN THIS CONNECTION MAY BE MADE TO THE DECISION OF HON'BLE I TAT, LUCKOW IN THE CASE OF U.P. POLICE AVAS VIKAS NIGAM LTD VS ACIT IN ITA NO. 344 & 345/LKW/1999 DATED 22.08.2012. A R EFERENCE MAY ALSO BE MADE TO THE DECISION OF THE HON'BLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS SAR INFRACON (P) LTD 22 2 TAXMAN 294 WHEREIN ON CONSIDERING STIPULATION OF THE CENTR AL GOVERNMENT WHILE SANCTIONING THE GRANT IN FAVOUR OF THE ASSESSEE THAT INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRANT LIMIT , THE COURT LAID DOWN THAT I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 50 HELD, CONSIDERING THE CONDITION IMPOSED BY THE CENT RAL GOVERNMENT, WHILE RELEASING THE GRANT IN FAVOUR OF THE ASSESSEE, WHEN THE INTEREST EARNED ON THE CENTRAL G RANT ALREADY RELEASED WAS REQUIRED TO BE FORMING PART OF THE CENTRAL GRANT, TRIBUNAL HAS RIGHTLY HELD THAT THE I NTEREST EARNED ON CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEENO ERROR HAD BEEN COMMITTED BY THE TRIBUNA L IN DELETING THE ADDITION MADE BY THE ASSESSING OFFI CER. 8(5) IN VIEW THEREOF I AM OF THE CONSIDERED OPINIO N THAT THE INTEREST ACCRUED ON THE ADVANCES RECEIVED BY THE AP PELLANT FROM THE GOVERNMENT FOR CONSTRUCTION ACTIVITIES WOU LD BE THE INCOME OF THE GOVERNMENT AND NOT OF THE APPELLANT. ON ITS ACCRUAL, IT BECOMES A LIABILITY TO THE GOVERNMENT W HICH IS TO BE REMITTED BY THE APPELLANT TO THE GOVERNMENT IN DUE COURSE. SINCE THE INCOME HAS NOT BEEN ACCRUED TO THE APPELL ANT, IT CANNOT BE CHARGED TO TAX IN ITS HANDS. THE ADDITIO N OF RS.29,31,44.630/- MADE BY THE ASSESSING OFFICER IS DELETED GIVING RELIEF TO THE APPELLANT. 7.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION WHI CH THE ASSESSING OFFICER HAD WRONGLY MADE. THE LEARNED CIT(A) HAS RIGHTLY RE LIED ON THE CASE LAWS WHERE THE HON'BLE COURT HAD HELD THAT WHERE THE AMO UNT OF INTEREST ON CENTRAL GRANTS HAS TO BE REMITTED BACK TO GOVERNMEN T FOR THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. IN VIEW OF TH E ABOVE, GROUND NO. 4 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 201 0-11 IS DISMISSED. SIMILARLY, GROUND NO. 3 IN ASSESSMENT YEAR 2011-12, GROUND NO. 2 IN ASSESSMENT YEAR 2012-13 AND GROUND NO. 2 IN ASSESSM ENT YEAR 2013-14 RELATING TO THE SAME ISSUE IS ALSO DISMISSED. 8. VIDE GROUND NO. 5, THE REVENUE HAS CHALLENGED TH E ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.54,15,933/- M ADE BY THE ASSESSING OFFICER FOR NOT DEDUCTING TDS ON FREIGHT EXPENSES, MATERIAL SUPPLIED AND LABOUR CHARGES. THE LEARNED CIT(A), WHILE DEALING WITH THE ADDITIONS MADE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 51 UNDER DIFFERENT HEADS, HAS REPRODUCED A CHART AND H AS DEALT WITH EACH ISSUE IN DETAIL. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 9(4)(A) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCE S OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. THE AO HAS DISALLOWED A SUM OF RS. 3,52,960/- ON THE GR OUND THAT THIS WAS THE PAYMENT OUT OF RS. 7,05,920/- WHICH WA S APPROVED. I FIND THAT THERE ARE TWO BILLS OF RS. 3, 20,000/- EACH WHICH INCLUSIVE OF SERVICE TAX @ 10.3% TOTAL RS. 3, 52,960/-. THE TWO BILLS CUMULATIVELY ARE FOR THE AMOUNT OF RS . 7,05,920/-. THE BILLS SHOW THAT THE ENTIRE AMOUNT OF RS. 7,05,9 20/- WAS APPROVED FOR THE TWO BILLS SEPARATELY. IN VIEW THER EOF THE ADDITION OF RS.3,52,960/- MADE BY THE ASSESSING OFF ICER IS DELETED GIVING RELIEF TO THE APPELLANT. 9(4)(B) THE AO DISALLOWED A SUM OF RS. 34,19,550/- UNDER SECTION 40(A)(IA) OF THE ACT AS PER S. NO. 2, 3, 4, 7 AND 8 OF THE CHART INCORPORATED IN THE ASSESSMENT ORDER AS REPRO DUCED ABOVE FOR THE REASON THAT THE PAYMENTS WERE MADE WI THOUT DEDUCTION OF TDS OR AFTER DEDUCTION OF TDS AT LOWER RATE.I FIND THAT THE PAYMENT OF RS. 16,54,500/- AS PER S. NO. 2 HAS BEEN MADE TO INDIAN INSTITUTE OF TECHNOLOGY, ROORKEE (II T, ROORKEE IN SHORT) APPARENTLY WITHOUT DEDUCTION OF TDS. IN T HIS CONNECTION MY ATTENTION HAS BEEN DRAWN TO THE CERTI FICATE NO. 2/2009-10 DATED 24.07.2009 UNDER SECTION 197 OF THE ACT ISSUED BY INCOME TAX OFFICER (TDS), HARIDWAR WHEREB Y THE PAYMENTS TO IIT, ROORKEE HAVE BEEN ALLOWED TO BE MA DE WITHOUT DEDUCTION OF TDS. THIS CERTIFICATE HAS BEEN ISSUED ON THE BASIS OF CBDT NOTIFICATION NUMBER S.O. 48(E) DA TED 12.01.2004 AND CIRCULAR NO. 4/2002 DATED. 16.07.200 2. IN VIEW THEREOF THERE IS NO LIABILITY OF DEDUCTING TDS ON P AYMENTS MADE TO IIT, ROORKEE AND CONSEQUENTLY, THE PAYMENT OF RS . 16,54,500/- MADE WITHOUT DEDUCTION OF TDS SHALL NOT ENTAIL DISALLOWANCE UNDER SECTION 40(A)(I A) OF THE ACT. THE ADDITION OF RS. 16,54,500/- MADE BY THE AO IS D ELETED GIVING RELIEF TO THE APPELLANT. 9(4)(C) THE AO DISALLOWED A SUM OF RS. 8,28,712/- A ND RS.7,68,338/- AS PER S. NO. 3 AND 4 OF THE CHART IN CORPORATED IN THE ASSESSMENT ORDER AS REPRODUCED ABOVE AS THE PAY MENT HAS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 52 BEEN AFTER DEDUCTION OF TDS @1% INSTEAD OF 2%. IN T HIS CONNECTION A REFERENCE MAY BE MADE TO THE DECISION OF HON'BLE 'A' BENCH OF ITAT, KOLKATA IN THE CASE OF ITO VS PR EMIER MEDICAL SUPPLIES & STORES IN IT APPEAL NOS. 1061 & 1062 (KOL.) OF 2010 C.O. NOS. 86 & 87 (KOL) OF 2010 [ASSESSMENT YEARS 2006-07 & 2007-08] DATED OCTOBER 28, 2011. IT IS LAID DOWN IN THE CASE AS UNDER- WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HAS TWO LIMBS, ONE IS WHERE, I NTER ALIA, ASSESSEE HAS TO DEDUCT TAX AND THE SECOND WHE REIN AFTER DEDUCTING TAX, INTER ALIA, THE ASSESSEE HAS T O PAY INTO GOVERNMENT ACCOUNT. THERE IS NOTHING IN THE SA ID SECTION TO TREAT, INTER ALIA, THE ASSESSEE AS DEFAU LTER WHERE THERE IS A SHORTFALL IN DEDUCTION. WITH REGAR D TO THE SHORTFALL, IT CANNOT BE ASSUMED THAT THERE IS A DEF AULT AS THE DEDUCTION IS NOT AS REQUIRED BY OR UNDER THE AC T, BUT THE FACTS IS THAT THIS EXPRESSION, 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT B EEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SEC TION (1) OF SECTION 139'. THIS SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO THE DUTY TO DEDUCT TAX AND PAY TO GOVERNMEN T ACCOUNT. IF THERE IS ANY SHORTFALL DUE TO ANY DIFFE RENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR THE NAT URE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAU LT U/S. 201 OF THE ACT AND NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE CASE SUPRA LAYS DOWN THAT WHERE TAX IS DEDUCTED BY THE ASSESSEE, EVEN UNDER BONA FIDE WRONG IMPRESSION, UN DER WRONG PROVISIONS OF TDS, THE PROVISIONS OF SECTION 40(A)( IA) EF THE ACT CANNOT BE INVOKED. RESPECTFULLY FOLLOWING THE DECIS ION OF HON'BLE ITAT (SUPRA), I FIND THAT NO DISALLOWANCE I S CALLED FOR UNDER SECTION 40(A)(IA) OF THE ACT AS THE AMOUNT OF RS.8,28,712/- AND RS. 7,68,338/- WAS PAID DURING TH E YEAR AFTER DEDUCTION OF TDS ALBEIT INCORRECT AMOUNT HAS BEEN D EDUCTED AT A LOWER RATE. THE ADDITION OF RS.8,28,712/- AND RS. 7,68,338/- MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPE LLANT. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 53 9(4)(D) THE AO DISALLOWED A SUM OF RS. 60,000 AND RS.1,08,000/- AS PER S. NO. 7 AND 8 OF THE CHART IN CORPORATED IN THE ASSESSMENT ORDER AS REPRODUCED ABOVE AS THE PAY MENT HAS BEEN AFTER DEDUCTION OF TDS ALBEIT AT A LOWER RATE. THESE PAYMENTS ARE FOR VEHICLE HIRE AND WERE SUBJECTED TO SERVICE TAX @ 2.27%. THE APPELLANT WAS OF THE VIEW THAT SUCH PA YMENTS WERE LIABLE TO TDS UNDER SECTION 194C OF THE ACT WH EREAS THE AO HAS TAKEN THE VIEW THAT THE PAYMENT WAS ON ACCOU NT OF RENT. A REFERENCE IN THIS CONNECTION MAY BE MADE TO THE DECISION IN DCIT VS S.K.TEKERIWAL (2011) 48 SOT 515 (KOL). IN THIS CASE THE ASSESSEE PAID MACHINERY HIRE CHARGES ON WHICH IT DEDUCTED TDS AT 1% UNDER SECTION 194C OF THE ACT. T HE AO CLAIMED THAT THE AMOUNT WAS IN THE NATURE OF 'RENT' AND TDS AT 10% OUGHT TO HAVE DEDUCTED UNDER SECTION 194I OF TH E ACT. A PROPORTIONATE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT WAS MADE ON THE GROUND THAT THERE WAS A 'FAILURE' T O DEDUCT TDS ON THE PAYMENT. THE HON'BLE TRIBUNAL UPHELD THE ASSESSEE'S PLEA THAT IN SECTION 40(A)(IA) OF THE AC T DISALLOWANCE COULD NOT BE MADE WHEN THERE WAS A SHORTFALL IN TDS DEDUCTION. ON APPEAL BY THE DEPARTMENT TO THE HIGH COURT, HELD DISMISSING THE APPEAL: S. 40(A)(IA) CAN BE INVOKED ONLY WHEN THE TWO CONDI TIONS, NAMELY, THAT TAX IS DEDUCTIBLE AT SOURCE AND SUCH T AX HAS NOT BEEN DEDUCTED IS SATISFIED. WHERE TAX IS DEDUCT ED BY THE ASSESSEE UNDER A WRONG PROVISIONS OF TDS AND TH ERE IS A SHORTFALL, S. 40(A)(IA) DISALLOWANCE CANNOT BE MADE. RESPECTFULLY FOLLOWING THE DECISION SUPRA, I FIND T HAT NO DISALLOWANCE IS CALLED FOR UNDER SECTION 40(A)(IA) OF THE ACT AS THE AMOUNT OF RS.60,000 AND RS.1,08,000/- WAS PAID DURING THE YEAR AFTER DEDUCTION OF TDS ALBEIT INCORRECT AMOUNT HAS BEEN DEDUCTED AT A LOWER RATE. THE ADDITION OF RS.60,000 /- AND RS.1,08,000/- MADE BY THE ASSESSING OFFICER IS DELE TED GIVING RELIEF TO THE ASSESSEE. 9(4)(E) THE AO DISALLOWED A SUM OF RS. 3,50,000/- A S PER S. NO. 5 OF THE CHART INCORPORATED IN THE ASSESSMENT O RDER AS REPRODUCED ABOVE AS THE PAYMENT HAS BEEN MADE ON TH E LETTER HEAD OF CONTRACTOR WITHOUT TIN, BILL NO. I FIND THA T THE AO HAS NOT GIVEN ANY FINDING THAT THE PAYMENT WAS BOGUS OR THAT THE PAYMENT WAS NOT ACTUALLY MADE. THE PAYMENT TO THE P ARTY HAS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 54 BEEN MADE THROUGH BANKING CHANNELS BY ACCOUNT PAYEE CHEQUE WHICH ESTABLISHES THE GENUINENESS OF THE EXPENDITUR E. IN VIEW THEREOF THE DISALLOWANCE OF RS.3,50,000/- IS DELETE D GIVING RELIEF TO THE APPELLANT. 9(4)(F) THE AO DISALLOWED A SUM OF RS.1,54,338/- AS PER S. NO. 5 OF THE CHART INCORPORATED IN THE ASSESSMENT ORDER AS REPRODUCED ABOVE FOR THE REASON THAT THE BILL WAS N OT AVAILABLE. I FIND THAT THE IMPUGNED PAYMENT OF RS. 1,54,338/- RELATES TO PAYMENT OF TRADE TAX AS PER CHALLAN. THE QUESTION O F BILL DOES NOT MAKE SENSE AS THE CHALLAN FOR PAYMENT OF GOVERN MENT DUES IS AVAILABLE. THE ADDITION OF RS.1,54,338/- IS THE REFORE DELETED GIVING RELIEF TO THE APPELLANT. 9(4)(G) THE AO DISALLOWED A SUM OF RS. 4,08,535/-, RS.5,70,000/- AND RS. 1,60,000/- AS PER S. NO. 9, 1 0 AND 11 OF THE CHART INCORPORATED IN THE ASSESSMENT ORDER AS R EPRODUCED ABOVE FOR THE REASON THAT THE VOUCHERS WERE NOT ATT ACHED FOR CLARITY OF TDS DEDUCTION. I FIND THAT IN RESPECT OF PAYMENT OF RS. 1,60,000/-, TDS OF RS. 16,480/- WAS DEDUCTED AN D BALANCE AMOUNT OF RS. 1,43,520/- WAS PAID. FURTHER, THE AMO UNT OF RS.4,08,525/- AND RS. 5,70,000/- ARE INCLUDED IN WO RK IN PROGRESS AS THE PAYMENTS RELATE TO SURVEY TESTING A ND DRAWING CHARGES. I FIND THAT THE APPELLANT HAS NOT BEEN ABL E TO DEMONSTRATE BY EVIDENCE THAT THESE PAYMENTS WERE MA DE AFTER DEDUCTION OF TDS OR THAT NO TDS WAS DEDUCTIBLE ON T HESE PAYMENTS. ACCORDINGLY, THE PAYMENTS OF RS. 4,08,525 /- AND RS.5,70,000/- HAVING BEEN MADE WITHOUT DEDUCTION OF TDS QUALIFY FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THE ADDITIONS OF RS. 4,08,525/- AND RS. 5,70,000/- ARE THEREFORE CONFIRMED GIVING RELIEF OF RS. 1,60,000/- THE APPEL LANT. 8.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A), WHILE DEALING WITH THE ADDITIONS MA DE UNDER DIFFERENT HEADS, HAS REPRODUCED A CHART AND HAS DEALT WITH EA CH ISSUE IN DETAIL AND HAS RIGHTLY DELETED THE ADDITION WHICH THE ASSESSIN G OFFICER HAD WRONGLY MADE. WE FIND THAT RELYING ON A NUMBER OF CASE LA WS HE HAS RIGHTLY HELD THAT FOR A SHORTFALL IN DEDUCTION OF TAX AT SOURCE, AN ASSESSEE CANNOT BE SAID TO ASSESSEE IN DEFAULT AND THEREFORE, CANNOT BE SUB JECTED TO DISALLOWANCE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 55 U/S 40(A)(IA) OF THE ACT. WE FIND NO INFIRMITY IN T HE FINDINGS OF LEARNED CIT(A). IN VIEW OF THE ABOVE, GROUND NO. 5 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. SIMILARL Y, GROUND NO. 5 IN ASSESSMENT YEAR 2011-12, GROUND NO. 4 IN ASSESSMENT YEAR 2012-13 RELATING TO THE SAME ISSUE ARE ALSO DISMISSED. 9. VIDE GROUND NO. 6, THE REVENUE HAS CHALLENGED T HE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.15,36,760/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS EXPENDITURE. THE LEAR NED CIT(A) HAS HELD THAT THESE PAYMENTS INCLUDE PAYMENTS WHICH HAVE BEEN REC TIFIED AND REVERSED IN FINANCIAL YEAR 2013-2014 RELEVANT TO ASSESSMENT YEA R 2014-2015 OR ARE THE PAYMENTS WHICH RELATE TO FINAL SETTLEMENT AFTER REC EIPT OF PROPER BILLS IN CASE WHERE THE EXPENDITURE IN EARLIER YEARS WAS RECORDED IN THE BOOKS OF ACCOUNTS ON ESTIMATE BASIS. THE CLAIM OF EXPENDITUR E IS REVENUE NEUTRAL WHICH IS ANY CASE HAS BEEN RECTIFIED IN SUBSEQUENT YEARS. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 10(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THESE PAYMENTS OF RS. 15,36,760/- INCLUDE PAYM ENTS WHICH HAVE BEEN RECTIFIED AND REVERSED IN FINANCIAL YEAR 2013-2014 RELEVANT TO ASSESSMENT YEAR 2014-2015 OR ARE THE PA YMENTS WHICH RELATE TO FINAL SETTLEMENT AFTER RECEIPT OF P ROPER BILLS IN CASE WHERE THE EXPENDITURE IN EARLIER YEARS WAS REC ORDED IN THE BOOKS OF ACCOUNTS ON ESTIMATE BASIS. THIS EXPENDITU RE OF RS. 15,36,760/- IS THEREFORE INCLUDED IN THE WORK IN PR OGRESS SHOWN IN THE PROFIT AND LOSS ACCOUNT. IN CASE THE EXPENDI TURE IS DISALLOWED THE PROPER COURSE WOULD BE TO REDUCE THE WORK IN PROGRESS BY EQUIVALENT AMOUNT. HENCE, THE CLAIM OF EXPENDITURE IS REVENUE NEUTRAL WHICH IS ANY CASE HAS BEEN RECTI FIED IN SUBSEQUENT YEARS. THE EXPENDITURE OF RS. 15,36,760/ - HAVING BEEN INCLUDED IN WORK IN PROGRESS IS REVENUE NEUTRA L AND THEREFORE THE ADDITION OF RS.15,36,760/- IS DELETED GIVING RELIEF TO THE APPELLANT. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 56 9.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A) HAS HELD THAT THESE PAYMENTS INCLUDE PAYMENTS WHICH HAVE BEEN RECTIFIED AND REVERSED IN FINANCIAL YEAR 2013- 2014 RELEVANT TO ASSESSMENT YEAR 2014-2015 OR ARE THE PAYMENTS WHICH RELATE TO FINAL SETTLEMENT AFTER RECEIPT OF PROPER BILLS IN CASE WH ERE THE EXPENDITURE IN EARLIER YEARS WAS RECORDED IN THE BOOKS OF ACCOUNTS ON ESTIMATE BASIS. HIS FINDINGS, THAT IN CASE THE EXPENDITURE IS DISALLOWE D, THE PROPER COURSE WOULD BE TO REDUCE THE WORK IN PROGRESS BY EQUIVALENT AMO UNT AND THEREFORE, WOULD BE REVENUE NEUTRAL ARE, CORRECT. WE FIND THA T LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION WHICH THE ASSESSING OF FICER HAD WRONGLY MADE. IN VIEW OF THE ABOVE, GROUND NO. 6 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. 10. VIDE GROUND NO. 7, THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN RESTRICTING THE ADDITION TO RS.4,49,347/- AS AGAINST RS.5,71,922/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHORT C OMPUTATION OF WIP. THE LEARNED CIT(A) HAS GIVEN PART RELIEF TO THE ASS ESSEE. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 11(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. I FIND THAT AS PER PAGE NO.42, PARAGRAPH 7 OF SPECIAL AUDIT REPORT WHICH IS THE COST SHEET OF BAREILLY UNIT-VI, THE CO RRECT WIP AS ON 31.03.2010 HAS BEEN COMPUTED AT RS.4,83,34,357/- AS AGAINST CALCULATION MADE BY THE APPELLANT AT RS. 4, 77,52,434/-. THE WORK IN PROGRESS HAS BEEN TAKEN SHORT AT RS.5,7 1,9227-. AT THE SAME TIME THE SUBMISSIONS OF THE APPELLANT SHOW THAT IN THE SAME COST SHEET TABULATED ON PAGE 231 OF THE SP ECIAL AUDIT REPORT AN EXCESS AMOUNT OF RS.4,49,347/- HAS BEEN T AKEN. IN VIEW THEREOF THE ADDITION MADE BY THE AO IS SUSTAIN ED TO THE EXTENT OF RS.1,22,575/- (RS.5,71,922/- LESS RS.4,49 ,347/-) GIVING RELIEF OF RS.4,49,347/- TO THE APPELLANT. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 57 10.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A) HAS RIGHTLY RESTRICTED THE ADDITION TO RS.4,49,347/- AS AGAINST RS.5,71,922/- WHICH THE ASSESSING OFFICER HAD MADE. WE FIND NO INFIRMITY IN THE FINDINGS ARRIVED AT BY LEARNED CIT(A). IN VIEW OF THE ABOVE, GROUND NO. 7 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEA R 2010-11 IS DISMISSED. 11. VIDE GROUND NO. 8, THE REVENUE HAS CHALLENGED T HE ACTION OF LEARNED CIT(A) IN RESTRICTING THE ADDITION TO RS.15,09,999/ - AS AGAINST RS.18,58,061/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF CAPITAL EXPENDITURE CLAIMED AS REVENUE EXPENDITURE. THE LE ARNED CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE. THE RELEVANT FINDINGS OF LEARNED CIT(A) ARE REPRODUCED BELOW: 12(4)I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE DISALLOWANCE OF RS.18,58,061/- BY TREATING THE EXPENDITURE AS CAPITAL AS AGAINST OF REVENUE NATURE HAS BEEN MADE BY THE ASSESSING OFFICER ONLY ON THE BASIS OF THE AUDIT REPORT WITHOUT GIVING DUE CONSIDERATION TO THE NATU RE OF EXPENDITURE CLAIMED. I FIND THAT THE APPELLANT'S CL AIM FOR EXPENDITURE OF THE NATURE INCURRED UNDER SECTION 30 (A) OF THE ACT HAS NOT BEEN RIGHTLY DISALLOWED BY THE AO. THER E IS A CLEAR DISTINCTION BETWEEN THE EXPRESSION 'REPAIRS' AND TH E EXPRESSION 'CURRENT REPAIRS'. IT IS OBVIOUS THAT THE WORD 'REP AIRS' IS MUCH WIDER THAN THE EXPRESSION 'CURRENT REPAIRS'. THIS F ACT HAS ALSO BEEN TAKEN NOTE OF BY THE SUPREME COURT IN THE CASE OF SARAVANA SPINNING MILLS P.LTD. THE EXPRESSION 'CURR ENT REPAIRS' IS MUCH MORE RESTRICTED THAN THE WORD 'REPAIRS' BEC AUSE THE LATTER IS QUALIFIED BY THE WORD 'CURRENT'. WHAT THE APPELLANT HAS DONE IN THE PRESENT CASE IS TO BE CONSTRUED TO BE R EPAIRS. IT HAS NOT BROUGHT ABOUT ANY NEW ASSET AND MORE IMPORTANTL Y IT WAS NOT THE INTENTION OF THE APPELLANT TO BRING ABOUT A NY NEW CAPITAL ASSET. THE EXPENSES THAT WERE INCURRED BY THE APPEL LANT WERE TOWARDS REPAIRING THE PREMISES LIKE PAINTING, CHANG E OF CURTAINS, FIXING OF TILES ETC SO AS TO MAKE IT MORE CONDUCIVE TO ITS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 58 BUSINESS ACTIVITY. SUCH EXPENSES WOULD CLEARLY FALL WITHIN THE EXPRESSION OF REPAIRS TO THE PREMISES AS APPEARING IN SECTION 30(A) OF THE ACT. THE LEGISLATURE HAS MADE A DISTIN CTION BETWEEN I EXPENSES INCURRED BY A TENANT FOR 'REPAIR S' OF THE PREMISES AND EXPENSES INCURRED BY A PERSON WHO IS N OT A TENANT TOWARDS 'CURRENT REPAIRS' TO THE PREMISES. T HIS DISTINCTION HAS TO BE GIVEN MEANING. PERHAPS THE LOGIC BEHIND T HE DISTINCTION WAS THAT A TENANT WOULD, BY THE VERY NA TURE OF HIS STATUS AS A TENANT, NOT UNDERTAKE EXPENDITURES AS W OULD ENDURE BEYOND HIS LIKELY PERIOD OF TENANCY OR CREATE A NEW ASSET. WHEREAS, AN OWNER MAY UNDERTAKE EXPENDITURES SO AS TO EVEN BRING ABOUT NEW ASSETS OF CAPITAL NATURE. IT WAS, T HEREFORE, NECESSARY TO QUALIFY THE EXPENDITURE ON REPAIRS. TH E DEDUCTION WAS, THEREFORE, LIMITED TO EXPENDITURE ON 'CURRENT REPAIRS' ONLY. THE QUESTION OF DISALLOWING SUCH EXPENDITURE AND RE LEGATING THE ASSESSEE TO CLAIM DEPRECIATION UNDER SECTION 32 OF THE ACT DOES NOT ARISE. THE APPELLANT HAS NOT CLAIMED DEPRECIATI ON. IT HAS CLAIMED DEDUCTION UNDER SECTION 30(A) OF THE ACT. 12(5) HOWEVER, THE EXPENDITURE OF RS.3,48,062/- HAS BEEN INCURRED ON CONSTRUCTION OF A NEW GUARD ROOM WHICH GIVES RISE TO A CAPITAL ASSET OF ENDURING NATURE. IN VIEW THER EOF THE ADDITION OF RS.18,58,061/- MADE BY THE ASSESSING OF FICER IS RESTRICTED TO RS.3,48,062/- GIVING RELIEF OF RS.15, 09,999/- TO THE APPELLANT. THE ASSESSING OFFICER IS HOWEVER DIRECT ED TO ALLOW DEPRECIATION AT APPLICABLE RATE ON AMOUNT OF RS.3,4 8,062/-. 11.1 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE. THE LEARNED CIT(A) HAS HELD THAT THE EXPENDITURE OF RS. 3,48,062/- HAS BEEN INCURRED ON CONSTRUCTION OF A NEW GUARD ROOM WHICH GIVES RISE TO A CAPITAL ASSET OF ENDURING NATURE AND THE ADDITION OF RS.18, 58,061/- MADE BY THE ASSESSING OFFICER WAS RESTRICTED TO RS.3,48,062/- G IVING RELIEF OF RS.15,09,999/- TO THE ASSESSEE. WE FIND NO INFIRMI TY IN THE FINDINGS ARRIVED AT BY LEARNED CIT(A). IN VIEW OF THE ABOVE, GROUND NO. 8 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMIS SED. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 59 12. VIDE GROUND NO. 9, THE REVENUE HAS CHALLENGED T HE ACTION OF LEARNED CIT(A) IN RESTRICTING THE ADDITIONS OF RS.37,18,485 /- AS AGAINST RS.53,81,981/- MADE BY THE ASSESSING OFFICER U/S 4 3B OF THE I.T. ACT UNDER DIFFERENT HEAD. LEARNED CIT(A) HAS DELETED THE ADDI TIONS BY OBSERVING AS UNDER: 13(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFIC ER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE AO HAS DISALLOWED THE FOLLOWING AMOUNTS UNDER S ECTION 43B OF THE ACT S. NO. DESCRIPTION AS PER SAR ALLOWED BY AO DISALLOWANCE 1. VAT TDS - 23,29,764 6,13,866 17,15,898 2. TRADE TAX PAYABLE 10,85,878 NIL 10,85,878 3. BONUS 7,62,685 NIL 7,62,685 4. SERVICE TAX PAYABLE 18,424 NIL 18,424 5. EPF/GPF/VPF/GIS 3,11,148 NIL 3,11,148 6. ROYALTY PAYABLE 17,63,610 2,75,663 14,87,947 7. ENTRY TAX 52,928 52,928 NIL TOTAL RS.53,81,981/ - 1 3(5) NON-PAYMENT OF ANY STATUTORY LIABILITY THAT IS OTHERWISE ALLOWABLE AS EXPENDITURE WILL ATTRACT DISALLOWANCE UNDER SECTION 43B OF THE ACT IF THE PAYMENT IS NOT MADE BEFORE THE DU E DATE FOR FILING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE AC T. THE AO DISALLOWED A SUM OF RS.17,15,898/- UNDER SECTION 43 B OF THE ACT AS PER S. NO. 1 OF THE CHART ABOVE. I FIND THAT TDS IS NOT A EXPENDITURE FOR THE DEDUCTOR; IT IS A LIABILITY. TDS IS NOT PAS SED THROUGH PROFIT AND LOSS ACCOUNT AND HENCE CANNOT BE DISALLOWED UNDER S ECTION 43B OF THE ACT. ACCORDINGLY, THE ADDITION OF RS.17,15,898/ - MADE BY THE ASSESSING OFFICER IS DELETED GIVING RELIEF TO THE A SSESSEE. I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 60 13(6) THE AO DISALLOWED A SUM OF RS. 10,85,878/- UN DER SECTION 43B OF THE ACT AS PER S. NO. 2 OF THE CHART ABOVE. I FIN D THAT THE APPELLANT HAS FILED CHALLANS DATED 22.09.2010 FOR PAYMENT OF TRADE TAX OF RS.1,70,915/- AND RS. 2,90,644/- PAID ON 22.04.2010 . THESE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILI NG OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. ACCORDINGLY , THE ADDITION OF RS.10,85,878/- MADE BY THE AO UNDER SECTION 43B OF THE ACT IS RESTRICTED TO RS.6,24,319/- GIVING RELIEF OF RS.4,6 1,559/- (RS.1,70,915/- + RS. 2,90,644/-) TO THE APPELLANT. 13(7) THE AO DISALLOWED A SUM OF RS. 7,62,685/-, RS . 18,424/- AND RS.3,11,148/- UNDER SECTION 43B OF THE ACT AS PER S . NO. 3, 4 AND 5 OF THE CHART ABOVE. I FIND THAT THE APPELLANT HAS NO T BEEN ABLE TO DEMONSTRATE THAT THE BONUS AND SERVICE TAX WERE PAI D BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 13 9(1) OF THE ACT EXCEPT FOR AN AMOUNT OF PF OF RS. 53,441/-. ACCORDI NGLY, THE ADDITION OF RS. 7,62,685/-, RS. 18,424/- AND RS. 2,57,707/- ARE CONFIRMED GIVING RELIEF OF RS. 53/441/- TO THE APPELLANT. THE AO IS HOWEVER DIRECTED TO ALLOW THE AFORESAID EXPENDITURE IN THE YEAR IN WHICH IT IS PAID. 13(8) THE AO DISALLOWED A SUM OF RS. 14,87,947/- UN DER SECTION 43B OF THE ACT AS PER S. NO. 6 OF THE CHART ABOVE. I FIN D THAT THE APPELLANT AS PER ITS PRACTICE DEDUCTS AN AMOUNT AS ROYALTY FR OM THE PAYMENTS TO BE MADE TO SUPPLIERS ON THE BASIS OF BILLS RAISE D BY THEM. THE AMOUNT SO RETAINED IS THE LIABILITY OF THE APPELLAN T WHICH IS DISCHARGED WHEN THE SUPPLIER SUBMITS PROOF OF PAYME NT OF ROYALTY. THE AMOUNT RETAINED BY THE APPELLANT IS THEREFORE N OT A PAYMENT COVERED UNDER SECTION 43B OF THE ACT. ACCORDINGLY, THE ADDITION OF RS. 14,87,947/- MADE BY THE AO IS DELETED GIVING RE LIEF TO THE APPELLANT. 12.1 WE FIND THAT LEARNED CIT(A) HAS DEALT WITH THE ISSUE EXHAUSTIVELY AND BY REPRODUCING A CHART OF ALL THE HEADS WHERE THE D ISALLOWANCE HAS BEEN MADE U/S 43B, THE LEARNED CIT(A) HAS DEALT WITH ALL THE HEADS SEPARATELY AND GIVEN A DETAILED FINDING AND WHEREVER THE ADDIT ION WAS REQUIRED TO BE UPHELD, HE HAS UPHELD THE SAME. FINDING NO INFIRMI TY IN HIS ORDER, WE CONFIRM THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. IN VIEW OF THE ABOVE, GROUND NO. 9 OF THE APPEAL IN I.T.A. NO.330 FOR ASS ESSMENT YEAR 2010-11 IS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 61 DISMISSED. SIMILARLY, GROUND NO. 6 IN ASSESSMENT Y EAR 2012-13 RELATING TO THE SAME ISSUE ARE ALSO DISMISSED. 13. VIDE GROUND NO. 10, THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS1,13,6 3,781/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PRIOR PERIOD EXPENS ES. THE LEARNED CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: 14(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE APPELLANT FILED COMPLETE DETAILS OF SUCH E XPENDITURE BEFORE THE AO VIDE LETTER DATED 20.09.2013. THE DET AILS SHOW THAT THE IMPUGNED EXPENDITURE CRYSTALLIZED IN THE Y EAR UNDER CONSIDERATION. THE EXPENDITURE ACCRUES IN THE YEAR IN WHICH IT CRYSTALLIZES. MOREOVER, CORRESPONDING INCOME IN THE SHAPE OF WORK-IN-PROGRESS AND PERCENTAGE OF CENTAGE HAS BEEN CHARGED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. DISALL OWANCE OF SUCH EXPENDITURE IN THE CURRENT YEAR WILL RESULT IN REDUCING THE CORRESPONDING WORK-IN-PROGRESS AND CENTAGE AND THER EFORE, THE EFFECT IS REVENUE NEUTRAL. THE ADDITION OF RS.1,13 ,63,781/- MADE BY THE ASSESSING OFFICER IS DELETED GIVING REL IEF TO THE APPELLANT. 13.1 WE FIND THAT THE ABOVE FINDINGS OF LEARNED CI T(A) ARE QUITE EXHAUSTIVE. WE AGREE WITH THE FINDINGS OF LEARNED CIT(A) THAT THE ASSESSEE HAD FILED COMPLETE DETAILS OF EXPENDITURE BEFORE TH E ASSESSING OFFICER AND THE IMPUGNED EXPENDITURE CRYSTALLIZED IN THE YEAR U NDER CONSIDERATION. THE EXPENDITURE ACCRUES IN THE YEAR IN WHICH IT CRYSTAL LIZES. MOREOVER, CORRESPONDING INCOME IN THE SHAPE OF WORK-IN-PROGRE SS AND PERCENTAGE OF CENTAGE HAS BEEN CHARGED IN THE ASSESSMENT YEAR UND ER CONSIDERATION. DISALLOWANCE OF SUCH EXPENDITURE IN THE CURRENT YEA R WILL RESULT IN REDUCING THE CORRESPONDING WORK-IN-PROGRESS AND CENTAGE AND THEREFORE, THE EFFECT IS REVENUE NEUTRAL. AS SUCH WE FIND THAT LEARNED CIT( A) HAS RIGHTLY DELETED THE I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 62 ADDITION WHICH THE ASSESSING OFFICER HAD WRONGLY MA DE. IN VIEW OF THE ABOVE, GROUND NO. 10 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. SIMILARLY, GROUND NO. 7 IN A SSESSMENT YEAR 2012-13 AND GROUND NO. 5 IN ASSESSMENT YEAR 2013-14 RELATIN G TO THE SAME ISSUE ARE ALSO DISMISSED. 14. VIDE GROUND NO. 11, THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.6,32, 63,235/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE U/S 40 (A)(IA) OF THE ACT. LEARNED CIT(A) HAS HELD THAT THE ASSESSEE HAS DEDUC TED TDS @2% WHEREVER THE PAYMENT WAS IN EXCESS OF SPECIFIED LIM IT OF RS.20,000/- ON PAYMENTS MADE FOR HIRING OF VEHICLES. NO DEDUCTION IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESEL AS THESE WERE BORNE BY THE ASSESSEE. THE RELEVANT FINDINGS OF LEARNED CIT(A) A RE REPRODUCED BELOW: 15(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. I FIND THAT THE APPELLANT HAS DEDUCTED IDS @2% WHEREV ER THE PAYMENT WAS IN EXCESS OF SPECIFIED LIMIT OF RS. 20, 000/- ON PAYMENTS MADE FOR HIRING OF VEHICLES. NO DEDUCTION IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESE L AS THESE WERE BORNE BY THE APPELLANT. IN THIS CONNECTION A R EFERENCE MAY BE MADE TO THE DECISION OF HON'BLE COCHIN BENCH OF ITAT IN THE CASE OF M/S THREE STAR GRANITES (P) LTD. VER SUS ACIT., CIR. 1 (1) THRISSUR - 2014 (4) TMI 1058 - ITAT COCH IN - ITAT COCHIN WHEREIN THE ISSUE INVOLVED AND DECISION THER EON WAS AS UNDER DISALLOWANCE MADE UNDER SECTION 40(A)(IA) - SHORT DEDUCTION OF TAX - IDS AT 10 PER CENT, UNDER SECTIO N 194- 1 OR AT THE RATE OF 2.06 PER CENT, UNDER SECTION 19 4C - HELD THAT:- AS RELYING ON APOLLO TYRES LTD. V. DEPU TY CIT [2013 (11) TMI 209 - ITAT COCHIN ] THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SHORT DEDUCTION OF TAX CANNOT BE A REASON/BASIS FOR DISALLOWANCE UNDER SECTION I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 63 40(A)(IA) OF THE ACT. ACCORDINGLY, THE ORDERS OF TH E LOWER AUTHORITIES ARE SET ASIDE AND THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) IS DELETED. RESPECTFULLY RELYING ON THE DECISION ABOVE, THE DIS ALLOWANCE OF RS.6,32,63,235/- MADE BY THE ASSESSING OFFICER IS D ELETED GIVING RELIEF TO THE APPELLANT. 14.1 WE FIND THAT LEARNED CIT(A) HAS DEALT WITH TH E ISSUE EXHAUSTIVELY AND HAS OBSERVED THAT THE ASSESSEE HAS DEDUCTED TDS @2% WHEREVER THE PAYMENT WAS IN EXCESS OF SPECIFIED LIMIT OF RS.20,0 00/- ON PAYMENTS MADE FOR HIRING OF VEHICLES. NO DEDUCTION IS REQUIRED TO BE MADE ON EXPENSES INCURRED ON PETROL AND DIESEL AS THESE WERE BORNE B Y THE ASSESSEE. WHILE DELETING THE ADDITION, LEARNED CIT(A) HAS RELIED ON THE ORDER OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF M/S THREE STAR GRANITES (P) LTD. VERSUS ACIT., CIR. 1 (1) THRISSUR - 2014 (4) TMI 1058 - IT AT COCHIN - ITAT COCHIN. IN VIEW OF THE ABOVE, GROUND NO. 11 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. S IMILARLY, GROUND NO. 5 IN ASSESSMENT YEAR 2011-12, GROUND NO. 3 IN ASSESSM ENT YEAR 2012-13 AND GROUND NO. 3 IN ASSESSMENT YEAR 2013-14 RELATING TO THE SAME ISSUE ARE ALSO DISMISSED. 15. VIDE GROUND NO. 12, THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.21,20 ,09,287/- MADE BY THE ASSESSING OFFICER FOR NOT FOLLOWING PERCENTAGE COMP LETION METHOD RECOGNITION FOR REVENUE RECOGNITION. LEARNED CIT(A ) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: 16(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. I FIND THAT AS PER SYSTEM OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE APPELLANT WHILE ACCOUNTING FOR THE INCOME OF A PROJECT AS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 64 PER REQUIREMENTS OF AS- 7(REVISED), WHEN THE STAGE OF COMPLETION OF A PROJECT IS MORE THAN 50% AND LESS T HAN 100% THE APPELLANT RECOGNIZES 2/3 OF THE PROFIT AND ON C OMPLETION OF WORK THE ENTIRE PROFIT IS ACCOUNTED FOR. THUS, IN R ESPECT OF THOSE WORKS WHICH WERE MORE THAN 50% COMPLETED IN EARLIER YEARS, 2/3 OF THE PROFIT THEREON OR IN RESPECT OF PROJECTS COMPLETED IN SUBSEQUENT YEARS, THE ENTIRE PROFIT STANDS ACCOUNTE D FOR AND HAS BEEN OFFERED FOR TAXATION OR ACTUALLY ASSESSED BY THE ASSESSING OFFICER. FURTHER, THE STATUTORY AUDITORS HAVE NOT TAKEN EXCEPTION OR QUALIFICATION TO CREATION OF RESERVE A ND THE C&AG OF INDIA HAVE ALSO NOT GIVEN ANY ADVERSE COMMENT ON THIS ISSUE. IN OTHER WORDS TAXATION OF THE RETENTION RES ERVE WILL LEAD TO TAXATION OF SAME AMOUNT TWICE AND MOREOVER NO SU CH ADDITION WAS MADE IN EARLIER YEARS IN RESPECT OF TH E RETENTION RESERVE. IN VIEW THEREOF THE ADDITION OF RS.21,20,0 9,287/- ON ACCOUNT OF RETENTION RESERVE IS DELETED GIVING RELI EF TO THE APPELLANT. 15.1 WE FIND THAT LEARNED CIT(A) HAS DEALT WITH THE ISSUE EXHAUSTIVELY AND HAS OBSERVED THAT AS PER SYSTEM OF ACCOUNTING CONSI STENTLY BEING FOLLOWED BY THE ASSESSEE WHILE ACCOUNTING FOR THE INCOME OF A PROJECT AS PER REQUIREMENTS OF AS-7(REVISED), WHEN THE STAGE OF CO MPLETION OF A PROJECT IS MORE THAN 50% AND LESS THAN 100% THE ASSESSEE RECOG NIZES 2/3 OF THE PROFIT AND ON COMPLETION OF WORK THE ENTIRE PROFIT IS ACCOUNTED FOR. THUS, IN RESPECT OF THOSE WORKS WHICH WERE MORE THAN 50% COM PLETED IN EARLIER YEARS, 2/3 OF THE PROFIT THEREON OR IN RESPECT OF P ROJECTS COMPLETED IN SUBSEQUENT YEARS, THE ENTIRE PROFIT STANDS ACCOUNTE D FOR AND HAS BEEN OFFERED FOR TAXATION OR ACTUALLY ASSESSED BY THE AS SESSING OFFICER. FURTHER, THE STATUTORY AUDITORS HAVE NOT TAKEN EXCEPTION OR QUALIFICATION TO CREATION OF RESERVE AND THE C&AG OF INDIA HAVE ALSO NOT GIVE N ANY ADVERSE COMMENT ON THIS ISSUE. WE FIND OURSELVES IN AGREEMENT WITH THE FINDINGS OF LEARNED CIT(A) ON THIS ISSUE. IN VIEW OF THE ABOVE, GROUND NO. 12 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMIS SED. SIMILARLY, GROUND NO. 2 IN ASSESSMENT YEAR 2011-12, GROUND NO. 1 IN A SSESSMENT YEAR 2012- I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 65 13 AND GROUND NO. 1 IN ASSESSMENT YEAR 2013-14 RELA TING TO THE SAME ISSUE ARE ALSO DISMISSED. 16. VIDE GROUND NO. 13, THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.17,68 ,458/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE U/S 40 (A)(IA) OF THE ACT. THE LEARNED CIT(A) HAS DELETED THE ADDITION BY OBSERVIN G AS UNDER: 17(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. I FIND THAT THE AO DISALLOWED THE EXPENDITURE OF RS.1 7,68,458/- UNDER SECTION 40(A)(IA) OF THE ACT ON THE GROUND TH AT THE PAYMENT WAS MADE AFTER DEDUCTION OF TDS AT A RATE L OWER THAN THAT PRESCRIBED UNDER THE RELEVANT PROVISIONS OF TH E ACT RESORTED TO BY THE AO. AT THE OUTSET I FIND THAT TH E CASE AUTHORITY RELIED UPON BY THE AO IS NOT APPLICABLE I N THE INSTANT CASE FOR THE REASON THAT THE DECISION IN THE CASE O F FRONTIER OFFSHORE EXPLORATION (INDIA) LTD. VS DCIT (ITAT, CH ENNAI) 118 ITD 494 IS RELATED TO THE LIABILITY OF THE ASSESSEE TOWARDS DEDUCTION OF TDS ON A SPECIFIC PAYMENT WHEREAS THE ISSUE INVOLVED IS DISALLOW-ABILITY OF THE EXPENDITURE UND ER SECTION 40(A)(IA)OF THE ACT ON ACCOUNT OF DEDUCTION OF TDS AT A LOWER RATE. I HAVE ALREADY DISCUSSED SEVERAL CASE AUTHORI TIES IN THE PARAGRAPHS ABOVE WHICH LAY DOWN THAT THE SHORT DEDU CTION OF TAX CANNOT BE A REASON/BASIS FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. IN VIEW OF THE DECISIONS DISC USSED SUPRA THE ADDITION OF RS.17,68,458/- MADE BY THE AO IS DE LETED GIVING RELIEF TO THE APPELLANT. 17. WE FIND THAT WHILE DELETING THE ADDITION, THE L EARNED CIT(A) HAS OBSERVED THAT THE SHORT DEDUCTION OF TAX CANNOT BE A REASON/BASIS FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. T HE LEARNED CIT(A) HAS RIGHTLY RELIED ON A NUMBER OF CASE LAWS FOR THE PRO POSITION THAT IN CASE OF SHORT DEDUCTION OF TAX, DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE. FINDING NO INFIRMITY IN THE ORDER OF LEARNED CIT(A), WE CON FIRM THE SAME ON THIS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 66 ISSUE. IN VIEW OF THE ABOVE, GROUND NO. 13 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. 18. VIDE GROUND NO. 14, THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.13,75 ,49,494/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE U/S 49 (A)(IA) OF THE ACT. THE LEARNED CIT(A) HAS DELETED THE ADDITION BY OBSERVIN G AS UNDER: 18(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. I FIND THAT THE AO HAS DISALLOWED ENTIRE PURCHASES OF RS.13,75,49,494/- FOR THE REASON THAT THE PAYMENTS INCLUDED EXPENSES ON FREIGHT ON WHICH TDS WAS NOT DEDUCTED. THE APPELLANT PURCHASES VARIOUS ITEMS LIKE SAND, COARSE SAND, BOULDERS, GRITS ETC. IN ITS BUSINESS OF CONTRACT WO RK. THESE ITEMS ARE SUPPLIED BY THE PARTIES AT WORK SITES. AS SUCH THE TRANSPORTATION COST IS BORNE BY THE SUPPLIER. THE A SSESSEE MAKES PAYMENT FOR SUPPLY OF MATERIAL TO THE SUPPLIE R. SINCE NO TRANSPORTATION CHARGE IS BORNE BY THE APPELLANT HEN CE THE APPELLANT DOES NOT MAKE ANY PAYMENT TO THE TRANSPOR TERS AND THE PAYMENT IS MADE TO SUPPLIERS FOR PURCHASE OF GO ODS. THE QUESTION OF ANY TDS BEING DEDUCTED BY THE APPELLANT ON THE GOODS PURCHASED DOES NOT ARISE. NO SUCH DISALLOWANC E HAS BEEN MADE BY THE AO IN EARLIER YEARS WHEN ALSO PAYMENT F OR PURCHASES WAS MADE WITHOUT DEDUCTION OF IDS. THERE IS NO PROVISION IN THE ACT WHICH REQUIRES FOR DEDUCTION O F TDS ON PURCHASE OF GOODS FOR WHICH PAYMENT IS MADE TO SUPP LIERS. ACCORDINGLY, THE ADDITION OF RS.13,75,49,191/- MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 18.1 WE FIND THAT WHILE DELETING THE ADDITION, THE LEARNED CIT(A) HAS OBSERVED THAT NO TRANSPORTATION CHARGE IS BORNE BY THE ASSESSEE AND THE ASSESSEE DOES NOT MAKE ANY PAYMENT TO THE TRANSPORT ERS AND THE PAYMENT IS MADE TO SUPPLIERS FOR PURCHASE OF GOODS. THE QUE STION OF ANY TDS BEING DEDUCTED BY THE ASSESSEE ON THE GOODS PURCHASED TH US DOES NOT ARISE. NO SUCH DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OF FICER IN EARLIER YEARS I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 67 ALSO WHEN PAYMENT FOR PURCHASES WAS MADE WITHOUT DE DUCTION OF TDS. FINDING NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) , WE CONFIRM THE SAME ON THIS ISSUE. IN VIEW OF THE ABOVE, GROUND NO. 14 OF THE APPEAL IN I.T.A. NO.330 FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. 19. THE ONLY GROUND WHICH REMAINS FOR ADJUDICATION IN I.T.A. NO.332/LKW/2016 FOR ASSESSMENT YEAR 2012-13 IS GROU ND NO. 5 BY WHICH THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CI T(A) IN DELETING THE ADDITIONS OF RS.1,63,386/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF LOSS AGAINST DISPOSAL OF STOCK. THE LEARNED CIT(A), WHI LE DELETING THIS ADDITION, HAS OBSERVED AS UNDER: 8(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES O F THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. I FIND THAT THE APPELLANT SOLD OLD UNUSABLE STOCK COMPRISI NG OF OLD PVC PIPES, RUSTED IRON RODS, PIPES, PUMP SETS ETC THAT WERE PURCHASED IN EARLIER YEARS THROUGH OPEN TENDER AND SUFFERED A LOSS OF RS. 1,63,386/- THEREON. THE LOSS IS THE VAL UE OF THE STOCK AS PER THE BOOKS OF ACCOUNTS AND THE AMOUNT REALIZE D OF SALE THEREOF WHICH WAS DISALLOWED BY THE AO. IN CASE OF CIT VS. DHANRAJGIRIJI RAJA NARSINGHGIRI 91 ITR 544 (SC), WH ILE DECIDING ALLOWABILITY OF CERTAIN EXPENDITURE CLAIMED BY THE APPELLANT UNDER SECTION 37(1) OF THE ACT, THE HON'BLE SUPREME COURT HAS OBSERVED THAT IT WAS FOR THE ASSESSEE TO DECIDE HOW BEST TO PROTECT HIS OWN INTEREST. IT IS FURTHER HELD BY THE HON'BLE APEX COURT THAT IT IS NOT OPEN TO THE DEPARTMENT TO PRES CRIBE WHAT EXPENDITURE AN ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR THAT EXPENDITURE. EVE RY BUSINESSMAN KNOWS HIS INTEREST BEST. IN VIEW OF THE ABOVE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT, IT IS FOR T HE ASSESSEE TO DECIDE ABOUT THE MARKET VALUE OF ITS STOCK LOOKI NG TO THE CONDITION OF THE STOCK LYING WITH IT. IN THE CASE U NDER CONSIDERATION, THE AO PUT HIS LEGS TO THE SHOES OF THE ASSESSEE AND DETERMINED WHETHER THE STOCK OF OLD UNUSABLE IT EMS SOLD WAS RIGHTLY SOLD OR NOT. I FIND THAT THE LOSS HAS B EEN SUFFERED ON SALE OF OLD STOCK IN THE COURSE OF BUSINESS OF THE APPELLANT AND I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 68 IS ALLOWABLE UNDER THE ACT. THE DISALLOWANCE OF RS. 1,63,386/- MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPE LLANT. 19.1 WE FIND THAT WHILE DELETING THE ADDITION, THE LEARNED CIT(A) HAS OBSERVED THAT THE ASSESSEE HAD SOLD OLD UNUSABLE ST OCK WHICH WERE PURCHASED IN EARLIER YEARS. THE LOSS IS THE VALUE O F THE STOCK AS PER THE BOOKS OF ACCOUNTS AND THE AMOUNT REALIZED OF SALE T HEREOF WHICH WAS DISALLOWED BY THE AO. IN THE PRESENT CASE, THE ASS ESSING OFFICER DETERMINED WHETHER THE STOCK OF OLD UNUSABLE ITEMS SOLD WAS RI GHTLY SOLD OR NOT. WE ALSO FIND THAT THE LOSS HAS BEEN SUFFERED ON SALE O F OLD STOCK IN THE COURSE OF BUSINESS OF THE ASSESSEE AND IS ALLOWABLE UNDER THE ACT. IN VIEW OF THE ABOVE, GROUND NO. 5 OF THE APPEAL IN I.T.A. NO.333 FOR ASSESSMENT YEAR 2012-13 IS DISMISSED. 20. THE ONLY GROUND WHICH REMAINS FOR ADJUDICATION IN I.T.A. NO.508/LKW/2016 FOR ASSESSMENT YEAR 2013-14 IS GROU ND NO. 4 BY WHICH THE REVENUE HAS CHALLENGED THE ACTION OF LEARNED CI T(A) IN DELETING THE ADDITIONS OF RS.1,86,20,613/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. THE LEARNED CIT(A), WHILE DELETING THIS ADDITI ON, HAS OBSERVED AS UNDER: 11(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT. I FIND THAT THE APPELLANT HAS DURING THE COURSE OF AS SESSMENT PROCEEDINGS FILED CONFIRMATION OF BALANCES OF CREDI TORS TO WHOM NOTICES WERE ISSUED UNDER SECTION 133(6) OF THE ACT BY THE ASSESSING OFFICER. THESE CREDITORS RELATE TO NORMAL BUSINESS TRANSACTIONS AND CREDIT HAS BEEN GIVEN TO THESE TRA DE CREDITORS FOR CONTRACT WORK DONE BY THEM AND PAYMENTS ARE BEI NG MADE TO THE PARTIES BY CHEQUES. THE TRANSACTIONS RESULTI NG IN INCOME FROM CONTRACT WORK DONE BY THEM HAVE BEEN ACCEPTED BY THE AO AND THEREFORE THERE IS NO JUSTIFICATION IN ADDIT ION OF THE CLOSING BALANCES APPEARING IN THEIR ACCOUNTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT PARTICULARLY AS THE BALAN CES STAND I.T.A. NO.330, 331, 332 &508/LKW/2016 ASSTT. YRS.:2010-11, 11-12, 12-13, 13-14 69 CONFIRMED. THE ADDITION OF RS.1,86,20,613/- MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 20.1 WE FIND THAT WHILE DELETING THE ADDITION, THE LEARNED CIT(A) HAS OBSERVED THAT THE ASSESSEE, DURING THE COURSE OF AS SESSMENT PROCEEDINGS, HAD FILED CONFIRMATION OF BALANCES OF CREDITORS TO WHOM NOTICES WERE ISSUED UNDER SECTION 133(6) OF THE ACT BY THE ASSESSING OF FICER. THESE CREDITORS RELATE TO NORMAL BUSINESS TRANSACTIONS AND CREDIT H AS BEEN GIVEN TO THESE TRADE CREDITORS FOR CONTRACT WORK DONE BY THEM AND PAYMENTS ARE BEING MADE TO THE PARTIES BY CHEQUES. THE TRANSACTIONS RE SULTING IN INCOME FROM CONTRACT WORK DONE BY THEM HAVE BEEN ACCEPTED BY TH E ASSESSING OFFICER AND THEREFORE, THERE IS NO JUSTIFICATION IN ADDITIO N OF THE CLOSING BALANCES APPEARING IN THEIR ACCOUNTS IN THE BOOKS OF ACCOUNT S OF THE ASSESSEE PARTICULARLY AS THE BALANCES STAND CONFIRMED. IN VI EW OF THE ABOVE, GROUND NO. 4 OF THE APPEAL IN I.T.A. NO.508 FOR ASSESSMENT YEAR 2013-14 IS DISMISSED. 21. IN THE RESULT, ALL THE APPEALS OF THE REVENUE S TAND DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/2019) SD/. SD/. ( A. D. JAIN ) ( T. S. KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:28/02/2019 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSISTANT REGISTRAR
Mehul