ACIT, Jhansi V. M/s Ramestha Construction, Jhansi

ITA 559/AGR/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6715 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R C SHARMA
• Assessee Lawyers: R C TOMAR I T P
• Keywords: TDS; Set aside
• Section: 40A(3); 143(3); 68; 69; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.559/AGR/2008 ASST. YEAR: 2004-05 ASSTT. C.I.T. 6, JHANSI. VS. M/S. RAMESTHA CON STRUCTIONS, PARICHHA, JHANSI. (PAN : AAGFR 7383 B). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. SHARMA, JR. D.R. RESPONDENT BY : SHRI R.C. TOMAR, I.T.P. ORDER PER P.K. BANSAL, A.M.: THIS APPEAL HAS BEEN FIELD BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 27.05.2008 BY TAKING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL :- (1) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIR CUMSTANCES IN HOLDING THAT BOOKS OF ACCOUNTS HAVE WRONGLY BEEN REJECTED BY ASS ESSING OFFICER BECAUSE WHILE DECIDING THIS ISSUE HE HAS IGNORED THE FACTS MENTIO NED BY ASSESSING OFFICER IN ASSESSMENT ORDER. (2) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIRC UMSTANCES IN DELETING RS.59,429/- OUT OF DISALLOWANCE MADE OUT OF PRIOR P ERIOD EXPENSES OF RS.74,309/- IGNORING THE FACT THAT ASSESSEE WAS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING. (3) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIRC UMSTANCES IN DELETING ADDITION OF RS.5,000/- MADE ON ACCOUNT OF PENALTY I GNORING THE FACT THAT THE SAID PENALTY WAS IMPOSED FOR AN ILLEGAL ACT HENCE NOT AL LOWABLE. (4) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIRC UMSTANCES IN DELETING ADDITION OF RS.29,091/- MADE ON ACCOUNT OF DEDUCTIO NS MADE BY OTHER DEPARTMENTS PARTICULARLY WHEN THERE IS NO RELIABLE EVIDENCE FOR SUCH DEDUCTION IS AVAILABLE ON RECORD. 2 (5) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIRC UMSTANCES IN DELETING DISALLOWANCE OF RS.54,385/- MADE U/S 40A(3) IGNORIN G THE FACTS OF THE CASE. (6) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIRC UMSTANCES IN DELETING ADDITION OF RS.28,40,000/- MADE ON ACCOUNT OF UNEXP LAINED ADVANCES PARTICULARLY WHEN IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS IS NOT ESTABLISHED. (7) LD. CIT(A)-II, AGRA HAS ERRED IN FACTS AND CIRC UMSTANCES IN DELETING ADDITION OF RS.4,13,700/- MADE ON ACCOUNT OF UNEXPL AINED LIABILITY IGNORING THE FACTS GIVEN IN ASSESSMENT ORDER AS WELL AS IN REMAN D REPORT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CONTRACTOR AND HAVING A TOTAL CONTRACT RECEIPT AT RS.4,07,93,334/- INCLUDING RS.2,56,28,75 2/- FROM EXCAVATION WORK. AGAINST THE NET PROFIT DISCLOSED AT RS.7,93,793/- THE ASSESSMENT WA S COMPLETED ON AN INCOME OF RS.38,29,174/-. 3. THE GROUND NO.1 IS AGAINST NOT UPHOLDING THE ACT ION OF THE A.O. FOR THE REJECTION OF THE BOOKS OF ACCOUNTS. 4. THE LD D.R. RELIED ON THE STATEMENT OF FACTS WHI LE THE LD. A.R. RELIED ON THE ORDER OF THE CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AS HAS BE EN RECOGNIZED UNDER SECTION 145(1). THE BOOKS HAVE NOT BEEN REJECTED BY THE A.O. BY INVOKIN G THE PROVISIONS OF SECTION 145(2). THE BOOKS HAVE BEEN REJECTED BY THE A.O. BY INVOKING TH E PROVISIONS OF SECTION 145(3) AS THE ACCOUNTS SUBMITTED BY THE ASSESSEE DOES NOT DEPICT THE CORRECT PICTURE. THE A.O. NOTED THAT THE ASSESSEE HAS NOT MAINTAINED SITE-WISE EXPENSES IN R ESPECT OF CONTRACT BEING CARRIED OUT AT VARIOUS 3 SITES. IT WAS ALSO NOTED THAT THE ASSESSEE HAS DOU BTED FREIGHT EXPENSES OF RS.20,13,449/- BUT NO EVIDENCE ABOUT THE PAYMENT OF THESE EXPENSES WERE F URNISHED OR MADE AVAILABLE. EVEN THE NAME OF THE DRIVERS TO WHOM THE PAYMENT WERE MADE WAS NO T SUPPLIED BY THE ASSESSEE EVEN THOUGH THE A.O. HAS SPECIFICALLY ASKED FOR THE SAME. IN R ESPECT OF THE EXCAVATION RECEIPT SHOWN AT RS.4,05,735/-, THE ASSESSEE SUBMITTED THE ADDRESSES OF SHRI SANTOSH SINGH, BIJOLI, JHANSI AND NOTICE WAS SENT TO HIM BY THE A.O, BUT WHEN HE APPE ARED HE REFUSED THAT NEITHER HE HAS DONE WORK OF THE ASSESSEE NOR THE ASSESSEE HAS DONE HIS WORK. THE ASSESSEE HAS NEITHER GAVE THE REASONS NOR ASKED FOR THE CROSS EXAMINATION OF THE PARTY. THIS CLEARLY DENOTE THAT THE EXCAVATION RECEIPT SHOWN BY THE ASSESSEE WAS ALSO NOT VERIFIAB LE. THE EXPENSES HAS BEEN DEBITED UNDER VARIOUS HEADS LIKE SITE EXPENSES, OIL AND SPARES, F UEL ETC. BY MENTIONING THAT THE EXPENSES HAD BEEN INCURRED BY ABC BUT WHEN THE A.O. ASKED FO R THE IDENTITY OF THESE PERSONS THE ASSESSEE FAILED TO SUPPLY THE SAME. EVEN NO CONFIR MATION IN RESPECT OF THE EXPENSES BEING INCURRED ON BEHALF OF THE ASSESSEE BY THIRD PARTY W AS EVER FILED. EXCEPT SELF MADE VOUCHER NOTHING WAS BROUGHT ON RECORD. EVEN IN THE CASE OF THE SUPPORTING VOUCHERS, BILL AND CASH MEMOS EVEN THOUGH THEY ARE IN THE NAME OF THE ASSES SEE BUT THE ASSESSEE COULD NOT PROVE THE IDENTITY OF THE PERSONS WHO HAS INCURRED THE EXPENS ES AS THE ASSESSEE HAS SHOWN THESE EXPENSES BEING INCURRED BY THE THIRD PARTY. UNDER THESE FACT S AND CIRCUMSTANCES, THE A.O. FORMS OPINION THAT THE BOOKS MAINTAINED BY THE ASSESSEE ARE NOT C ORRECT OR COMPLETE. IN OUR OPINION, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE BOOKS MAINTAINED ARE CORRECT AND COMPLETE. IT IS NOT A CASE WHERE THE BOOKS HAS BEEN AUDITED AND NEITHER ANY SU CH PLEA WAS RAISED BY THE LD. A.R. BEFORE US. MERELY THE ASSESSEE HAS FOLLOWED THE SAME BASIS OF RECORDING THE TRANSACTION OF ACCOUNTS AS IN THE EARLIER YEAR AND THE A.O. FAILED TO REJECT THE BOOKS, IN OUR OPINION, CANNOT BE THE GROUND FOR NOT REJECTING THE BOOKS DURING THE YEAR. EACH ASSE SSMENT YEAR IS AN INDEPENDENT A.Y. IF THE A.O. HAS COME ACROSS DURING THE PARTICULAR A.Y. THA T THE BOOKS ARE NOT CORRECT OR ARE NOT 4 COMPLETE, IN OUR OPINION, THE A.O. CAN VERY WELL RE JECT THE BOOKS OF ACCOUNTS. THE CIT(A) HAS MERELY DID NOT UPHOLD THE ACTION OF THE A.O. ON THE BASIS THAT THE A.O. IN THE EARLIER YEAR DID NOT REJECT THE BOOKS OF ACCOUNTS. WE ACCORDINGLY ALLOW THIS GROUND AND HOLD THAT THE A.O. WAS CORRECT IN LAW IN REJECTING THE BOOKS OF ACCOUNTS O F THE ASSESSEE. 6. GROUND NO.2 RELATES TO THE DISALLOWANCE OUT OF T HE PRIOR PERIOD EXPENSES. 7. THE FACTS RELATING TO THIS GROUND ARE THAT THE A .O. NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS DEBITED THE EXPEN SES ON THE PAYMENT OF LABOUR FOR THE PERIOD 05.03.2003 TO31.03.2003 AS UNDER :- S.NO. AMOUNT DATE PERIOD FOR WHICH EXPENSES DEBIT ED/EXPENSES RELATED TO PRIOR PERIOD 1. RS.14,880/- 1.4.2003 BEING PAYMENT OF LABOUR EXP ENSES FOR THE PERIOD 25.3.2003 TO 31.03.2003. 2. RS.45,600/- 20.04.2003 BEING PAYMENT OF LABOUR E XPENSES FOR THE PERIOD 10/3 TO 10/4. (RAS.29,925/- RELATED TO PREVIOUS ASSESSMENT Y EAR). 3. RS.51,360/- 30.4.2003 BEING PAYMENT OF LABOUR EX PENSE FOR THE PERIOD 5/3 TO 20/4. (RS.29,504/- RELATED TO PREVIOUS ASSESSMENT YE AR). 8. THE ASSESSEE WAS ASKED FOR EXPLANATION BUT DID N OT SUBMIT ANYTHING. ACCORDINGLY, THE A.O. DISALLOWED A SUM OF RS.74,309/-. WHEN THE MAT TER WENT BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS.14,880/-. 5 9. BEFORE US, LD. D.R. POINTED OUT THAT THE SUM OF RS.45,600/- RELATES TO THE EXPENSES UPTO 31.03.2003 AND ACCORDINGLY THE SUM OF RS.51,360/- A LSO RELATES TO THE EXPENSES FOR THE PERIOD 25.03.2003 TO 31.03.2003 AND THE EXPENSES TO THAT E XTENT HAS BEEN INCURRED ON THE BASIS OF THE METHOD OF ACCOUNTING I.E. MERCANTILE SYSTEM FOLLOWE D BY THE ASSESSEE DURING THE PREVIOUS YEAR CANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATI ON. LD. A.R., ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A). 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. SECTION 145 HAS BEEN RECASTED W.E.F. 01.04.1997 SO AS TO PERMIT ONLY CASH OR MERCANTILE SYSTEM OF ACCOUNTING. MIXED SYSTEM OF ACCOUNTING IS NO MO RE PERMITTED. UNDER SECTION 145(2), THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICIAL GAZET TE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. IN EXERCISE OF POWER CONFERRED UNDER SECTION 145(2) THE CENTRAL GOVERNME NT HAS NOTIFIED TWO ACCOUNTING STANDARDS I.E. ACCOUNTING STANDARD NO.1 AND ACCOUNTING STANDA RD NO.2. ACCOUNTING STANDARD NO.1 WHICH RELATES TO THE DISCLOSURE OF THE ACCOUNTING POLICIE S CLEARLY LAID DOWN THAT ACCOUNTING POLICIES ADOPTED BY AN ASSESSEE SHOULD BE SUCH SO AS TO REPR ESENT A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS OF THE BUSINESS IN THE FINANCIAL STATEMENT S PREPARED AND PRESENTED ON THE BASIS OF SUCH ACCOUNTING POLICIES. FOR THIS PURPOSE, IT HAS BEEN MENTIONED THAT PRUDENCE IS ONE OF THE BASIS FOR SELECTION AND APPLICATION OF THE ACCOUNTING POLICIE S. THIS BASIC CONSIDERATION REQUIRES THAT THE PROVISIONS SHOULD BE MADE FOR ALL KNOWN LIABILITIES AND LOSSES EVEN THOUGH THE AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BES T ESTIMATE IN THE LIGHT OF AVAILABLE INFORMATION. RULE 5 OF THE ACCOUNTING STANDARD NO. 1 FURTHER STATES THAT THE FUNDAMENTAL ACCOUNTING ASSUMPTIONS RELATING TO GOING CONCERNS, CONSISTENCY AND ACCRUAL ARE TO BE FOLLOWED IN FINANCIAL STATEMENTS. ACCRUAL UNDER RULE 6 HAS B EEN DEFINED TO THE ASSUMPTION THAT REVENUES 6 AND COSTS ARE ACCRUED, THAT IS, RECOGNIZED AS THEY ARE EARNED OR INCURRED (AND NOT AS MONEY IS RECEIVED OR PAID) AND RECORDED IN THE FINANCIAL STA TEMENTS OF THE PERIODS TO WHICH THEY RELATE. ACCOUNTING STANDARD NO.2 REQUIRES THAT PRIOR PERIOD ITEMS SHALL BE SEPARATELY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT IN THE PREVIOUS YEAR TOGETH ER WITH THEIR NATURE AND AMOUNT IN A MANNER SO THAT THEIR IMPACT ON PROFIT OR LOSS IN THE PREVIOUS YEAR CAN BE PERCEIVED. THE ACCOUNTING STANDARDS AS NOTIFIED ARE MANDATORY AND HAVE TO BE FOLLOWED. THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND ACCORDING TO TH E MERCANTILE SYSTEM OF ACCOUNTING TO THE EXTENT EXPENSE HAS BEEN INCURRED BY THE ASSESSEE DU RING THE YEAR AND RELATES TO THE YEAR UNDER CONSIDERATION, IT MUST BE CHARGED TO THE P&L ACCOUN T OF THE YEAR UNDER CONSIDERATION AND THE PRIOR PERIOD EXPENSES SHOULD BE SHOWN SEPARATELY. ACCORDINGLY, WE ARE OF THE VIEW THAT THE SALARY WHICH HAS ACCRUED UPTO 31.03.2003 RELATES TO THE PREVIOUS YEAR AND CANNOT BE CLAIMED IN THE YEAR UNDER CONSIDERATION. MERELY, THE ASSESSEE HAS PREPARED BILLS ON MONTHLY BASIS AND HAS MADE THE PAYMENT ON 10.04.2003 EVEN FOR THE PERIOD ENDED 31.3.2003, IT CANNOT BE SAID THAT THE EXPENSES FOR THE PERIOD 31.3.2003 HAS NOT ACCRUED I N THE YEAR ENDED 31.3.2003. THE EXPENSES FOR THE PERIOD ENDED 31.3.2003 HAS ACCRUED ON 31.3.2003 AND HAS NOT ACCRUED DURING THE YEAR UNDER CONSIDERATION. SIMILARLY, OUT OF THE SUM OF RS.51, 360/-, THE THE WAGES TO THE EXTENT IT RELATE TO THE PERIOD ENDED 31.3.2003 I.E. RS.29504/- HAS ACCR UED IN THE EARLIER YEAR AND CANNOT BE ALLOWED IN THE YEAR UNDER CONSIDERATION, MERELY ON THE BASI S THAT THE ASSESSEE HAS MADE THE PAYMENT DURING THE YEAR UNDER CONSIDERATION. THERE IS NO D ISPUTE THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. THESE EXPENSES TO THE EXTENT OF RS.29925/- AND RS.29504/- SINCE RELATE TO THE EARLIER YEAR, CANNOT BE SAID TO HAVE ACCRUED DURING THE YEAR. WE ACCORDINGLY DO NOT AGREE WITH THE ORDER OF THE CIT(A) SO FAR IT RELATES TO THE DELETION OF THE DISALLOWANCE OF RS.59,429/- IS CONCERNED, WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW GROUND NO.2 OF THE REVENUE. 7 11. GROUND NO.3 RELATES TO THE DISALLOWANCE OF RS.5 000/-. 12. THE FACTS RELATING TO THIS GROUND ARE THAT THE A.O. NOTED THAT THE ASSESSEE HAD PAID A SUM OF RS.5,000/- TOWARDS PENALTY FOR ROYALTY CHARGES A ND ACCORDINGLY HE DISALLOWED THE SAME. WHEN THE MATTER WENT BEFORE THE CIT(A) THE A.O. CON TENDED THAT THE SUM OF RS.5,000/- HOLD AS PENALTY REPRESENTING THE PAYMENT FOR THE RELEASE OF GITTY. THE CIT(A) DELETED THE DISALLOWANCE. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT THE SUM OF RS.5,000/- PAID BY THE ASSESSEE TOWARDS DELAYED PAYMENT OF ROYALTY IS ON ACCOUNT OF EXPEDIENCY OF BUSINESS AND IS COMPENSATORY IN NATUR E WHICH CANNOT BE REGARDED TO BE PENALTY. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) DELE TING THE DISALLOWANCE OF RS.5,000/-. THIS GROUND IS THUS DISMISSED. 14. THE NEXT GROUND RELATES TO THE DISALLOWANCE OF RS.29,091/-. THE A.O. DISALLOWED A SUM OF RS.29,091/- ON THE GROUND OF OTHER DEDUCTIONS O F THE ASSESSEE AS NON-ALLOWABLE EXPENDITURE WHEREAS THE ASSESSEE HAS CLAIMED THE SUM AS ALLOWAB LE EXPENDITURE BECAUSE THE DEDUCTION WAS MADE BY THE DEPARTMENT MAKING THE CONTRACT PAYMENT OUT OF THE RECEIPT DERIVED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THE NECESSARY EVIDENCE BEFOR E THE CIT(A) THAT THIS REPRESENTED THE DEDUCTION MADE BY THE DEPARTMENT. THE CIT(A), AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UNDER PARA NO.7 OF THE ORDER, DELETED THE DISALLOWANCE. LD. D.R. RELIED ON THE STATEMENT OF FACTS WHILE THE LD A.R. RELIED ON THE ORDER OF T HE CIT(A). 8 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT THE CIT(A) HAS GIVEN A CLEAR CUT FINDING THAT AFTER ISSUING THE TDS CERTIFICATE ALSO THAT AMOUNT REPRESENT OTHER DEDUCTION MADE BY THE DEPARTMENT AN D THE DEDUCTION IS NOT OF REIMBURSEMENT NATURE. THIS REPRESENTED THE MISC. RECOVERY MADE OU T OF WORK CARRIED OUT BY THE ASSESSEE AND THE EXPENDITURE IN OUR OPINION HAS BEEN INCURRED FOR TH E PURPOSE OF BUSINESS. WE, ACCORDINGLY DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) A ND ACCORDINGLY WE CONFIRM THE DELETION OF THE DISALLOWANCE OF RS.29,091/-. THUS, THIS GROUND STA NDS DISMISSED. 16. THE NEXT GROUND RELATES TO THE DISALLOWANCE OF RS.54,385/- UNDER SECTION 40A(3). 17. THE BRIEF FACTS RELATING TO THIS GROUND ARE THA T THE A.O. NOTED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.2,71,927/- AS EXPENSES INCURRED BY OTHE R PERSONS. THE A.O. DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS MA DE THE PAYMENT TO THE OTHER PARTIES WHICH INCURRED THE EXPENDITURE ON BEHALF OF THE ASSESSEE FOR WHOM THE ASSESSEE WAS CARRYING ON THE CONTRACT WORK AND WAS ULTIMATELY REIMBURSED TO THEM IN FRACTIONAL SUM NOT EXCEEDING RS.20,000/- IN A SINGLE DAY. HE, THEREFORE, DISALL OWED THE SUM OF RS.54,385/-. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) VERIFIED THE CON TENTION TAKEN BY THE ASSESSEE AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT INCURRED T HE EXPENSES BUT HAS BEEN INCURRED BY OTHER PERSONS TO WHOM THE REIMBURSEMENT WAS MADE BY THE A SSESSEE BUT IN ANY CASE IN THE CASE OF REIMBURSEMENT ON A SINGLE DAY THE AMOUNT IS NOT EX CEEDING RS.20,000/-. BEFORE US, LD D.R. RELIED ON THE STATEMENT OF FACTS WHILE THE LD. A.R. RELIED ON THE ORDER OF THE CIT(A). 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE CIT(A) HAS CLEARLY GIVEN A FINDING OF 9 FACT AFTER GOING THOUGH THE EVIDENCE ON RECORD THAT THE CONTRACTOR HAS INCURRED THE EXPENSES ON FUEL FOR RUNNING OF EXCAVATOR MACHINE ON BEHALF OF THE ASSESSEE AND STATED THE AMOUNT WAS SUBSEQUENTLY REIMBURSED BY THE ASSESSEE ON DIFFEREN T DATES IN FRACTIONAL SUM NOT EXCEEDING RS.20,000/- IN A SINGE DAY. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. D.R. WHICH MAY PROVE THE FINDING GIVEN BY THE C IT(A) TO BE INCORRECT. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF SECTIO N 40A(3) AS WAS IN EXISTENCE DURING THE YEAR UNDER CONSIDERATION, WILL NOT APPLY AND WE ACCORDIN GLY CONFIRM THE ORDER OF THE CIT(A). WE, THEREFORE, DISMISS THIS GROUND OF APPEAL. 19. GROUND NO.6 RELATES TO THE DELETION OF ADDITION OF RS.28,40,000/- AS UNEXPLAINED ADVANCE. 20. THE BRIEF FACTS RELATING TO THIS GROUND ARE THA T THE A.O. NOTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS SHOWN THE ADVANCES OF RS.28,40,000/- IN THE NAME OF FOLLOWING PERSONS :- SHRI JINESH NIRANJAN RS.1,50,000/- SHRI VISHAL JAIN RS.1,65,000/- SHRI HARISH CHAND RAWAT RS.1,50,000/- SHRI BALVIR SINGH RS.2,05,000/- SHRI DHIRENDRA SINGH RS.1,15,000/- SHRI KAILASH YADAV RS.1,75,000/- SHRI MOHAN SINGH RS.2,10,000/- SHRI TRILOK SINGH RS.1,85,000/- SJHRI VINOD GUPTA RS.1,95,000/- SHRI VINOD NAYAK RS.1,85,000/- SHRI VIVEK PACHHARIYA RS.2,15,000/- SHRIYADVENDRA SINGH RS.1,70,000/- SHRI NEERAJ TIWARI RS.1,50,000/- SHRI RAKESH YADAV RS.2,30,000/- SHRI SANTOSH YADAV RS.1,80,000/- SHRI PRASANNA JAIN RS.1,55,000/- 10 21. THE ASSESSEE WAS REQUIRED TO FILE CONFIRMATIONS , PROVE THEIR IDENTITY AND PAYING CAPACITY. THE ASSESSEE DID NOT FILE ANY DOCUMENT BUT CONTENDE D THAT ADVANCES RECEIVED FROM PARTIES WERE ON ACCOUNT OF WORK CONTRACT TO BE IMPLEMENTED SUBSE QUENTLY. SUCH PAYMENTS ARE PART AND PARCEL OF THE BUSINESS ACTIVITIES AND ARE SETT OFF AS AND WHEN THE CONTRACT IS BEING COMPLETED TO THE SATISFACTION OF THE CONTRACTEE. THE SAME HAS BEEN ADJUSTED IN THE NEXT YEAR AND MAY NOT BE TREATED AS UNEXPLAINED. THE ASSESSEE DID NOT FILE COPY OF ACCOUNTS OF THESE PARTIES. EVEN THE ASSESSEE VIDE REPLY ON 21.08.2006 MENTIONED THAT TH E PHOTOCOPY OF THE CONFIRMATION OF ADVANCES FROM THE CUSTOMERS ARE PRODUCED BUT HE DID NOT ENCL OSE ANY SUCH CONFIRMATION. THE A.O., THEREFORE, GAVE HIM FURTHER OPPORTUNITY BUT HE COUL D NOT FILE THE CONFIRMATION EXCEPT COPIES OF ACCOUNTS OF 16 PERSONS. THE A.O. ALSO NOTED THAT T HE ASSESSEE HAS SHOWN CASH ADVANCES RECEIVED FROM SHRI RAKESH YADAV, SHRI SANTOSH YADAV AND SHRI YADUVENDRA SINGH BUT THE ASSESSEE DID NOT FILE COMPLETE POSTAL ADDRESSES, CONFIRMATION, D ETAILS AND EVIDENCES. THE ASSESSEE ALSO SUBSEQUENTLY SUBMITTED PHOTOCOPIES OF BILL AGAINST WHICH ADVANCES WERE ADJUSTED BUT THESE BILLS DID NOT HAVE THE PARTICULARS THESE PARTIES. EVEN N O REFERENCE OF THESE PARTIES WAS AVAILABLE ON THE BILLS. ULTIMATELY WHEN THE ASSESSEE DID NOT COMPLY WITH NUMBER OF OPPORTUNITIES, THE AO SENT NOTICES THROUGH REGISTERED POST, NOTICE IN THE CASE OF SHRI HARISH CHANDRA RAWAT RETURNED UNNERVED WITH THE REMARK INCOMPLETE ADDRESS. WHE N SHRI SANTOSH YADAV, BIJOLI, JHANSI ATTENDED THE OFFICE OF THE A.O. ON 13.12.2006, HE DENIED ANY WORK HAS BEEN DONE FOR HIM BY THE ASSESSEE OR HE HAD CARRIED OUT ANY WORK FOR THE ASS ESSEE. THIS WAS DULY INFORMED TO THE ASSESSEE. THE A.O. AFTER GIVING OPPORTUNITY TO THE ASSESSEE T REATED THE ADVANCE AS BOGUS AND ADDED TO THE INCOME OF THE ASSESSEE. WHEN THE MATTER WENT BEFOR E THE CIT(A), THE CIT(A) DELETED THE ABOVE ADDITION ON THE GROUND THAT THE COPIES OF AUDITED A CCOUNTS ARE FOUND ACCEPTED IN THE SUBSEQUENT A.Y. UNDER SCRUTINY AND NO FAULT HAS BEEN FOUND ABO UT THE GENUINENESS AND SET OFF OF THE BROUGHT FORWARD BALANCES ON ACCOUNT OF EXPENSES INCURRED BY THE CONTRACTEE. THE CONTRACT RECEIPT HAS NOT 11 BEEN DOUBTED BY THE A.O. IN THE A.Y. 2005-06. HE A CCORDINGLY HELD THAT THE CONTRACTEE DID NOT HAVE INCURRED EXPENDITURE. 22. BEFORE US THE LD. D.R. RELIED ON THE STATEMENT OF FACTS AND FROM THE STATEMENT OF FACTS HE POINTED OUT THAT THE CIT(A) HAS NOT TAKEN INTO CONS IDERATION THE FACT THAT THE EXISTENCE OF THE CONTRACTEES/THE PERSONS IN WHOSE NAME ADVANCES WERE SHOWN BY THE ASSESSEE WERE NOT PROVED BY THE ASSESSEE. EACH A.Y. IS INDEPENDENT A.Y. IN TH E SUCCEEDING YEAR, THE A.O. HAS TO LOOK INTO THE CONTRACT RECEIPT. THE EXPENSES HAVE NOT BEEN I NCURRED IN THE SUBSEQUENT YEAR. MERELY THE OPENING BALANCE WAS SET OFF AGAINST THE CONTRACT RE CEIPT DURING THE SUBSEQUENT YEAR. THUS, IT CANNOT BE SAID THAT THE ASSESSEE HAS DISCHARGED HIS ONUS. IN FACT THE SAID PERSONS WERE FICTITIOUS PERSONS OR THE PERSONS WHO HAS NOT DONE THE WORK OF THE ASSESSEE. SHRI SANTOSH SINGH HAS CATEGORICALLY DENIED THIS FACT. LD. A.R., ON THE O THER HAND, RELIED ON THE ORDER OF THE CIT(A). 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE CIT(A) HAS DELETED ADDITION MERELY ON THE BASIS THAT THE OPENING BALAN CE BROUGHT FORWARD IN THE SUBSEQUENT YEAR HAS BEEN ACCEPTED BY THE A.O. IN THE SUBSEQUENT YEAR. THE EXPENSE HAS BEEN INURED AND SHOWN TO HAVE INCURRED DURING THE YEAR UNDER CONSIDERATION. THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDIT CAPACITY HAS TO BE PROVED ONLY DURING TH E YEAR UNDER CONSIDERATION. EVEN, WE NOTED THAT THE ASSESSEE HAS SHOWN A CASH ADVANCE FROM THR EE PARTIES NAMELY SHRI RAKESH YADAV, SHRI SANTOSH YADAV AND SHRI YADUVENDRA SINGH. EVEN THE ASSESSEE FAILED TO PROVE THE INGREDIENTS AS STIPULATED UNDER SECTION 68 DURING THE YEAR. THE AM OUNT HAS TO BE ADDED ONLY DURING THE YEAR UNDER CONSIDERATION. IN OUR OPINION, MERELY THE AM OUNT HAS BEEN SET OFF IN THE SUBSEQUENT YEAR AGAINST CONTRACT RECEIPT WILL NOT DISSOLVE THE ASSE SSEE TO PROVE THE GENUINENESS OF THE TRANSACTION 12 BEING CARRIED OUT DURING THE YEAR UNDER CONSIDERATI ON. OTHERWISE, THE PROVISION OF SECTION 68 WILL BECOME OTIOSE. SECTION 68 LAYS DOWN THE RULE OF EVI DENCE AND IS A DEEMING PROVISION. THE ONUS IS ON THE ASSESSEE TO PROVE TO THE SATISFACTION OF THE AO THAT ANY SUM FOUND CREDITED IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR TH E NATURE AND SOURCE OF THE SUM SO CREDITED . FROM THE FACTS AS ARE APPARENT, WE NOTED THAT THE A SSESSEE HAS NOT DISCHARGED THE ONUS AS LAID DOWN ON HIM DURING THE YEAR. EVEN IT HAD TWISTED T HE FACTS BY STATING IN LETTER DATED 21.08.2006 BEFORE THE A.O. THAT THE PHOTOCOPY OF THE CONFIRMAT IONS FROM THE CUSTOMERS ARE PRODUCED. WHILE, IN FACT, NO SUCH CONFIRMATION WAS EVER ENCLO SED ALONG WITH LETTER AND THE A.O. HAS TO GIVE FURTHER OPPORTUNITY STATING THIS FACT TO THE ASSESS EE. EVEN ONE PARTY SHRI SANTOSH SINGH APPEARED AND HAS DENIED THE ENTRY IN THE BOOKS OF THE ASSESS EE. EVEN FROM THREE PARTIES THE ASSESSEE HAS RECEIVED CASH WHICH WAS NOT ADJUSTED AGAINST THE SA LES. THE CIT(A), IN OUR OPINION, HAS NOT PROPERLY APPRECIATED THE FACTS OF THE CASE AND HAS MERELY DELETED THE ADDITIONS ON THE BASIS OF THE FACT THAT THE EXPENSES SO INCURRED (WHILE IN CASE T HE ASSESSEE RECEIVED CASH AMOUNT) WERE SET OFF AGAINST THE CONTRACTOR RECEIPT. BEFORE US, SINCE N O PAPER BOOK OR EVIDENCE WERE SUBMITTED, WE ALSO COULD NOT APPRECIATE THE FACTS PROPERLY. WE, A CCORDINGLY, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES, SET ASIDE THE ORDER OF CI T(A) AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION THAT THE A.O. SHALL RE-DECIDE TH IS ISSUE AFRESH AFTER GOING THROUGH THE PROVISIONS OF SECTION 68 & 69 OF THE I.T. ACT AND A FTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO ADDUCE THE EVIDENC E ON WHICH HE MAY RELY BEFORE THE AO IN THIS REGARD. THUS, THIS AGROUND IS ALLOWED FOR STATISTI CAL PURPOSES. 24. GROUND NO.7 RELATES TO THE DELETION OF THE ADDI TION OF RS.4,13,700/-. 13 25. THE FACTS RELATING TO THIS GROUNDS ARE THAT THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS SHOWN THE L IABILITY OF RS.4,13,470/- IN THE NAME OF M/S KRISHNA ENERGIES, JHANSI. WHEN THE A.O. VERIFIED T HE SAME FROM THE PROPRIETOR SHRI SURENDRA SINGH YADAV, HE INDICATED NIL BALANCE AND THE A.O. MADE THE SAID LETTER AS PART OF THE ASSESSMENT ORDER. HE ACCORDINGLY MADE THE ADDITION . THE ASSESSEE EVEN THOUGH EXPLAINED THAT IT HAS PAID THE AMOUNT IN THE NEXT A.Y. BUT NO EVID ENCE WAS BROUGHT ON RECORD. IT WAS ALSO NOTED BY THE A.O. THAT IN THE NEXT YEAR EXCEPT RS.63,470/ - THE REMAINING AMOUNT WAS PAID IN CASH. THE A.O., THEREFORE, TREATED THE DISALLOWANCE OF RS.4,1 3,470/- AS BOGUS. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE ADDITION. THE LD. D.R. RELIED ON THE STATEMENT OF THE FACTS AND THE LD. A.R. ON THE ORDER OF THE CIT(A). 26. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THIS IS A FACT ON RECORD THAT THE ASSESSEE HAS SHOWN THE CREDIT LIABILITY IN THE NAME OF M/S SRI KRISHNA ENERGIES AMOUNTING TO RS.4,13,470/- WHILE THE PROPRIETOR OF THE SAME FIRM SHRI SURENDRA SINGH YADAV HAS SHOWN THE BALANCE TO BE NIL. THE ASSESSEE CLAIMED THAT THE A MOUNT HAS BEEN PAID IN THE NEXT A.Y. BUT NO EVIDENCE WAS PLACED NEITHER BEFORE THE AUTHORITIES BELOW NOR BEFORE US. IT WAS NOTED THAT THE SUM OF RS.63,470/- REMAINING PENDING BALANCE SHOWN BY THE ASSESSEE WAS PAID IN THE NEXT YEAR. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) AFTER PERUSING THE COPY OF THE ACCOUNTS OF THESE PARTIES AND THE CONFIRMATION OF THE PARTIES, WHICH ARE AVAILABLE IN THE PAPER BOOK FILED BEFORE HIM, DELETED THE ADDITION BY OBSERVING AS UN DER :- THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CO NSIDERED AT LENGTH. IT IS FOUND THAT THE EXISTENCE OF M/S KRISHNA ENERG IES, JHANSI WHO IS THE DEALER OF BHARAT PETROLEUM CORPORATION LIMITED REGISTERED UND ER UPTT NO.JH-0151218 IS NOT IN DISPUTE. THE PURCHASES MADE BY THE APPELLAN T TO THE TUNE OF RS.4,13,470/- FOR THE PERIOD 16.04.2003 TO 28.01.2004 ARE ALSO SU PPORTED BY DIFFERENT VOUCHERS, 14 DETAILS OF WHICH WITH COMMODITY PURCHASED I.E. HSD, 2T OIL, PETROL ALONG WITH QUANTITY AND RATE SUPPORTED BY VOUCHER NO.732 TO 75 0 IS NOT ALSO IN DISPUTE. THE AMOUNT OF RS.4,13,470/- WAS BROUGHT FORWARD TO SUBS EQUENT ASSESSMENT YEAR 2005-06 AND THIS FACT HAS BEEN CONFIRMED BY M/S. SH RI KRISHNA ENERGIES AS PER COPY OF THEIR LETTER DATED 04.07.2004 ADDRESSED TO APPELLANT, A COPY OF WHICH WAS ALSO SENT TO A.O. AND HE HAS NOT DISPUTED THE AUTHE NTICITY OF THE CONTENTS OF THE LETTER AND BROUGHT FORWARD BALANCE. THE PAYMENT OF THE AFORESAID OUTSTANDING BALANCES HAVE BEEN MADE IN CASH AND BY CHEQUE ALSO. ONE OF THE CHEQUE DRAWN ON CENTRAL BANK OF INDIA, OD 91 A/C, FOR THE PAYMEN T OF RS.3470/- WHICH WAS ISSUED TO SQUARE UP PART OF BALANCE BROUGHT FORWARD AT RS.4,13,470/-. THE SAID CHEQUE IS DEBITED IN ASSESSEES BANK ACCOUNT NO.OD9 1 ON 24.06.2004 AND THE COPY OF BANK ACCOUNT WHICH IS AN INDEPENDENT CHANNE L CANNOT BE DOUBTED, THOUGH THERE MAY BE DELAY IN PASSING THE ENTRY IN COPY OF LEDGER ACCOUNT OF ASSESSEE. HENCE NO ADVERSE INFERENCE THAT THE ENTRY OF ISSUE OF CHEQUE WAS POSTED IN ASSESSEE LEDGER ON 30.06.2004, THOUGH THE CHEQUE WA S DEBITED AND CLEARED IN ASSESSEES BANK ACCOUNT ON 24.06.04 AS PER RECORD O F THE BANK, CAN NOT BE MADE A GROUND TO DISALLOW THE ENTIRE PAYMENTS WHEN THE AMO UNT OF CHEQUE AND CHEQUE NO. BOTH TALLIES BESIDES OTHER PAYMENTS RANGING FRO M RS.15000 TO 20000 AS PER COPY OF LEDGER ACCOUNTS AND CASH BOOK. THE COPY OF THE LEDGER ACCOUNT PRODUCED FOR THE PERIOD ENDING 31.03.2005 WAS ALSO SUBJECT M ATTER OF SCRUTINY ASSESSMENT U/S 143(3) A COPY OF WHICH WAS ALSO PRODUCED BY THE APPELLANT. NO ADVERSE MATERIAL WAS NOTICED BY THE A.O. ON THE BASIS OF TH E COPY OF ACCOUNT OF SHRI KRISHNA ENERGY, THE CREDIT SIDE OF WHICH WAS OF RS. 12,04,376/- INCLUSIVE OF OPENING BALANCE OF RS.4,13,470/- DISALLOWED BY THE A.O. IN ASSESSMENT YEAR 2004- 05. AFTER ADJUSTING THE PAYMENTS OF RS.9,56,154/-, THE CLOSING BALANCE AS ON 31.03.2005 DRAWN AT RS.2,48,222/- HAS BEEN ACCEPTED AND NO ADVERSE COMMENTS APPEAR IN THE ASSESSMENT ORDER 2005-06 PASSED UNDER SCRUTINY. THEREFORE IN VIEW OF THE AFORESAID FACTS THERE REMAINS NO CASE TO TRE AT THE LIABILITY OF RS.4,13,470/- AS BOGUS. AFTER CONSIDERING THE ELABORATE SUBMISSI ONS AND THE EVIDENCE BROUGHT ON RECORD AS MENTIONED ABOVE THE ADDITION MADE BY T HE A.O. IS FOUND TO BE WITHOUT ANY MERIT AND THE SAME IS DIRECTED TO BE DE LETED. 27. THE AFORESAID FINDING OF THE CIT(A) ARE CLEAR C UT AND POINT OUT THAT THE CHEQUE HAS BEEN GIVEN BY THE ASSESSEE FOR A SUM OF RS.4,13,470/- IN THE SUCCEEDING YEAR AND THE AMOUNT OF RS.4,13,470/- WAS BROUGHT FORWARD IN THE SUBSEQUENT A.Y. 2004-05 AND 2005-06. THIS FACT WAS DULY CONFIRMED BY M/S SRI KRISHNA ENERGIES AS PER C OPY OF THEIR LETTER DATED 04.07.2004 ADDRESSED TO THE ASSESSEE. A COPY OF WHICH WAS ALS O SENT TO THE A.O BY THE CIT(A). THE AUTHENTICITY OF THE CONTENTS OF THE LETTER WAS NOT DISPUTED BY THE DEPARTMENT. NO COGENT MATERIAL 15 OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. D.R. WHICH MAY CONTRADICT THE FINDING GIVEN BY THE CIT(A). UNDER THESE FACTS AND CIRCUMS TANCES, WE CONFIRM THE ORDER OF THE CIT(A). 28. IN THE RESULT, APPEAL FIELD BY THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 23.07.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 23 RD JULY, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY