ACE Infrastructure Pvt.Ltd., Nadiad V. The Dy.CIT.,Cent.Circle-2, Baroda

ITSSA 186/AHD/2013

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0526 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNA KUMAR
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained cash credit; Rejection of books of accounts; Depreciation; Loose papers; Principle of natural justice; Peak credit; Additional evidence

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1-3. (SS) ./ IT(SS)A NOS.184,185 & 186/AHD/2013 ( / ASSESSMENT YEARS : 2006-07, 2007-08 & 2008-09 RESPECTIVELY) ACE INFRASTRUCTURE PVT.LTD. 501, CITY POINT, NR.PARAS CINEMA NADIAD / VS. THE DCIT CENTRAL CIR-2 BARODA ' ./ ./ PAN/GIR NO. : AAFCA 2444 J ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '%( / APPELLANT BY : SHRI S.N. DIVATIA, AR &''%)( / RESPONDENT BY : SHRI T.P.KRISHNA KUMAR, CIT-DR *) / DATE OF HEARING 21/01/2015 +,-.) / DATE OF PRONOUNCEMENT 23/01/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD.COMMISSIONER OF INCOME TAX(A PPEALS)-III, AHMEDABAD (CIT(A) IN SHORT) DATED 21/02/2013 PER TAINING TO ASSESSMENT YEARS (AYS) 2006-07, 2007-08 & 2008-09. SINCE COMMON IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 2 - ISSUES ARE INVOLVED, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE ASSESSEES APPEAL IN IT(SS )A NO.184/AHD/2013 FOR AY 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1.1. THE ORDER PASSED U/S.250 ON 21.2.13 FOR AY 200 6-07 BY CIT()- III, ABAD PARTLY UPHOLDING THE ADDITION/DISALLOWANC ES MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGN ED ADDITIONS. 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE FOLLOWING ADDITIONS/DISALLOWANCES:- UNEXPLAINED CREDITS FROM LOOSE PAPERS - RS.58,904 DISALLOWANCE OF DEPRECIATION - RS.1,34,679 DISALLOWANCE OUT OF LABOUR EXPNS. @ 10% RS.5,29,591 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION S/DISALLOWANCES AS ABOVE SAID. 3.0 THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR MOD IFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. IT IS, THEREFORE, PRAYED THAT THE ADDITIONS/DISALLO WANCES UPHELD BY THE CIT(A) MAY KINDLY BE DELETED. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 3 - 2. BRIEFLY STATED FACTS ARE THAT A SEARCH ACTION U /S.132 OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE- COMPANY. THE PROCEEDINGS U/S.153A WAS INITIATED. IN RESPONSE TO THE NOTICE U/S.153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME ON 31/03/2009 DECLARING TOTAL LOSS AT RS.(-) 11,72,720/-. THE ASSESSMENT OR DER PASSED U/S.153A R.W.S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 19/11/2010, THER EBY THE ASSESSING OFFICER (AO) MADE ADDITION OF RS.63,45,601/- ON ACC OUNT OF THE UNEXPLAINED CASH RECEIPTS, AMOUNT OF RS.15,31,250/- ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEPRECIATION AND RS.13,23, 900/- ON ACCOUNT OF DISALLOWANCE OF LABOUR EXPENSES. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPEAL. THE LD.CIT(A) WHILE PA RTLY ALLOWING THE APPEAL RESTRICTED THE ADDITION TO RS.58,904/- AS AG AINST RS.63,45,601/- ON ACCOUNT OF PEAK CREDITS, IN RESPECT OF DISALLOWANCE OF DEPRECIATION THE LD.CIT(A) HAS ALLOWED THE DEPRECIATION, BUT WRITTEN DOWN VALUE (WDV) OF ASSETS DIRECTED TO BE TAKEN (AS ON 1.4.2005) AT RS.93,26,476/- AS AGAINST 99,75,000/- AND IN RESPECT OF LABOUR EXPENS ES, THE LD.CIT(A) RESTRICTED DISALLOWANCE @10% IN PLACE OF 20% AS MAD E BY THE AO. FEELING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NO W THE ASSESSEE IS FURTHER IN APPEAL BEFORE US. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 4 - 3. DURING THE COURSE OF HEARING, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ONLY EFFECTIVE GROUND IN THIS AP PEAL IS GROUND NO.2.1. THE LD.COUNSEL FOR THE ASSESSEE HAS NOT BEEN PRESSE D GROUND NO.1.1. HE SUBMITTED THAT GROUND NOS.1.2, 2.2 & 3 ARE GENERAL IN NATURE AND THE SAME MAY BE HELD ACCORDINGLY. THEREFORE, WE PROC EED TO DECIDE GROUND NO.2.1 IN THE PRESENT APPEAL. 4. IN RESPECT OF THE UNEXPLAINED CREDITS RESTRICTED TO RS.58,904/-, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.C IT(A) ERRED IN TAKING THE PEAK CREDITS. HE SUBMITTED THAT THE LD.CIT(A) OUGHT TO HAVE TAKEN THE INCREMENTAL APPEAL. IN SUPPORT OF THIS CONTENTION , THE LD.COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THIS TR IBUNAL (ITAT A BENCH AHMEDABAD) IN ITA NOS.59 & 106/AHD/2013 FOR AYS 2006-07 & 2009-10, DATED 14/08/2013. 4.1. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDER OF THE LD.CIT(A) AS HE HAS ADOPTED THE PEAK PERIOD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE L D.COUNSEL FOR THE IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 5 - ASSESSEE AS DURING THE REMAND PROCEEDINGS THE ASSES SEE HIMSELF OFFERED ADDITIONAL INCOME BY REWORKING THE PEAK CREDITS. AT PAGE NOS.33 OF THE REMAND REPORT DATED 19/09/2012, THE AO HAS REPRODUC ED THE EXPLANATION OF THE ASSESSEE WHICH READS AS UNDER:- '1) REGARDING THE PEAK CALCULATION:- IN RESPONSE TO THE ABOVE POINT, WE SUBMIT AS UNDER :- A) WE HAVE ALREADY SUBMITTED THE REVISED CALCULATIO N OF PEAK BALANCE ALONG WITH THE SUBMISSION TO THE H'BLE CIT (A) FOR THE A. Y. 2006-07 TO A. Y. 2008- 09. INSPECTOR APPOINTED FOR THE PURPOSE BY YOUR OFF ICE HAS VERIFIED EACH AND EVERY ENTRY MENTIONED IN THE REVISED PEAK WORKING W ITH THE SEIZED MATERIALS AND RECORDS FOUND DURING THE COURSE OF SEARCH. EACH AND EVERY ENTRIES MENTIONED IN THE PEAK WORKING HAVE BEEN TALLIED WIT H THE SEIZED MATERIALS. B) THE INSPECTOR HAS ALSO VERIFIED THE REPEAT ENTRIES MENTIONED IN THE PEAK WORKING. WE WOULD ALSO LIKE TO MENTION THAT IN THE PEAK WORKING ALSO, WE HAVE GIVEN THE REPEAT PAGE REFERENCE AGAINST EACH ENTRY. HOWEVER, SOME OF THE INSTANCES ARE MENTIONED AS PER THE ANNEXURE - A ENCLOSED HEREWITH FOR YOUR SATISFACTION. C) THE INSPECTOR HAS ALSO VERIFIED THE ROTATION OF THE MONEY. WE WOULD ALSO LIKE TO MENTION THAT WE HAVE GIVEN SUBMISSIONS AND DETAIL WORKING IN THE SUBMISSIONS MADE EITHER AT THE TIME OF HEARING OR B EFORE THE H'BLE CIT (A). HOWEVER WE HAVE ENCLOSED VIDE ANNEXURE - B, THE REL EVANT PARAS SUBMITTED BEFORE THE ACIT, CIRCLE-2, BARODA VIDE LETTER DATED 18-10-2010. WE HAVE ALSO GIVEN POINT WISE SUBMISSION BEFORE THE H'BLE CIT (A ) AGAINST THE POINTS RAISED BY THE ASSESSING OFFICE FOR NOT ACCEPTING PEAK BALA NCE THEORY. (COPY ENCLOSED VIDE ANNEXURE - C FOR A. Y. 2006-07 TO A. Y. 2008-09). THE INSPECTOR APPOINTED FOR THE PURPOSE BY YOUR OFF ICE HAS VERIFIED EACH AND EVERY ENTRY MENTIONED IN THE REVISED PEAK WORKING W ITH THE SEIZED MATERIALS AND RECORDS FOUND DURING THE COURSE OF SEARCH. HE H AS ALSO VERIFIED THE PEAK WORKING THAT MOST OF THE ENTRIES ARE OF THE ROTATIO N OF MONEY. ALL THE ENTRIES ARE OF RECEIPT AND PAYMENTS NATURE EXCEPT TREATED S EPARATELY AS EXPENSES. THE ENTRIES OF EXPENSES ARE TREATED SEPARATELY IN THE R EVISED PEAK WORKING. THERE IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 6 - ARE AMPLE OF ENTRIES REFLECTING ROTATION OF MONEY. HOWEVER WE HAVE ENCLOSED SOME OF THE INSTANCES MENTIONED AS PER THE ANNEXURE - D ENCLOSED HEREWITH AS PROOF OF ROTATION OF MONEY FOR YOUR SATISFACTION. D) THE POINTS RAISED FOR DISALLOWING THE PEAK THEOR Y THAT THE EXPENSES ARE NOT CIRCULATING EXPENSES AND COULD NOT BE CONSIDERED IN PEAK BALANCE WORKING. IN REVISED PEAK WORKING SUBMITTED BEFORE THE H'BLE CIT (A), WE HAVE ADDED ONE COLUM OF EXPENSES AND DISREGARD THE FIGURES OF EXPE NSES WHILE ARRIVING THE PEAK BALANCE FOR THE YEAR. DUE TO THE REVISED WORKI NG, THE PEAK BALANCE TO BE OFFERED TO TAX HAS BEEN INCREASED AS UNDER :- A.Y. OFFERED TO TAX IN OFFERED TO TAX IN ADDITI ONAL INCOME ORIGINAL WORKING REVISED WORKING OFFERED ----------- --------------------- ---------------- ---- ---------------------- 2006-07 25,09,592 25,68,496 58,904 (PEAK BALANCE RS.25,09,592 REVISED PEAK BALANCE R S.25,68,496) 2007-08 4,37,663 11,21,224 6,83,561 (PEAK BALANCE RS.29,47,255 REVISED PEAK BALANCE R S.36,89,720) 2008-09 31,29,540 34,60,190 3,30,650 (PEAK BALANCE RS.60,76,795 REVISED PEAK BALANCE R S.71,49,910) ------------ ------------ ------------ 60,76,795 71,49,910 10,73,115 ====== ====== ====== REGARDING THE ENTRIES OF EXPENSES, WE HAVE TO SUBMI T THAT THE INSPECTOR APPOINTED FOR THE PURPOSE BY YOUR OFFICE HAS VERIFI ED EACH AND EVERY ENTRY MENTIONED IN THE REVISED PEAK WORKING WITH THE SEIZ ED MATERIALS AND RECORDS FOUND DURING THE COURSE OF SEARCH. HE HAS ALSO VERI FIED EVERY ENTRY MENTIONED IN THE ORDER AS EXPENSES, HAVE BEEN TREATED CORRECT LY OR NOT. WE HAVE ALSO GIVEN CLARIFICATION IN THE SUBMISSION MADE TO THE H 'BLE CIT(A) REGARDING EACH ENTRY. THE INSPECTOR HAS. ALSO VERIFIED THE PEAK WORKING THAT ALL THE ENTRIES OF EXPENSES ARE TREATED SEPARATELY AND NOT CONSIDERED WHILE ARRIVING THE PEAK. E) WE HAVE ENCLOSED THE REVISED STATEMENT OF TOTAL INCOME AFTER CONSIDERING THE REVISED PEAK BALANCE OFFER AS PER T HE ANNEXURE-E.' IV. THUS, THE ADDITIONAL INCOME TO BE OFFERED AS PER REVISED PEAK WORKING WORKS OUT AS UNDER: IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 7 - ASSESSMENT YEAR AS PER ORIGINAL PEAK WORKING RS. AS PER REVISED PEAK WORKING RS. ADDITIONAL INCOME OFFERED RS. 2006-07 2509592 2568496 58904 2007 - 08 432663 1121224 683561 2008 - 09 3729540 3460190 330650 TOTAL RS. 6676795 7149910 1073115 IN VIEW OF THE FACTS AND CIRCUMSTANCES MENTIONED AB OVE, THE MATTER MAY BE DECIDED ON MERITS AND THE ASSESSEE MAY BE ALLOWED B ENEFIT OF PEAK THEORY, IF DEEMED FIT. 5.1. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFE RE WITH THE ORDER OF THE LD.CIT(A) ON THIS ISSUE, SAME IS HEREBY UPHELD. 5.2. IN RESPECT OF THE DEPRECIATION, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PLACED ON RECORD THE RE LEVANT DOCUMENTS IN SUPPORT OF ITS CONTENTION THAT IT HAD PURCHASED MAC HINERY FROM M/S.ABHISHEK POOJA CONSTRUCTION OF RS.99,75,000/- HOWEVER, THE LD.CIT(A) ADOPTED THE WDV WHICH WAS REFLECTED IN T HE BOOKS OF THE M/S.ABHISHEK POOJA CONSTRRUCTION. HE SUBMITTED THA T THE ASSESSEE HAD PURCHASED AT A HIGHER RATE THAN RECORDED BY THE CON CERNED PARTY. HE SUBMITTED THAT THE WDV FOR THE PURPOSE OF ALLOWANC E OF DEPRECIATION OF ASSET WAS THE ACTUAL PAYMENT MADE, BUT NOT WHAT WAS REFLECTED IN THE BOOKS OF ACCOUNTS OF THAT CONCERN. HE SUBMITTED THAT BEFORE THE LD.CIT(A) IT WAS SUBMITTED THAT THE FIRM M/S.ABHISH EK POOJA CONSTRUCTION SUBSEQUENTLY REVISED THE WDV AS ON 31. 03.2005 FROM IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 8 - RS.78,83,512/- TO RS.93,26,476/-. THIS FACT IS DUL Y RECORDED BY THE AO. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT BEFO RE THE LD.CIT(A) THE ENTIRE BLOCK OF ASSETS WAS TRANSFERRED TO THE ASSES SEE WHICH HAS BEEN VERIFIED BY THE INSPECTOR. HE SUBMITTED THAT THE C OST OF ACQUISITION SHOULD BE ADOPTED AS THE PURCHASE VALUE OF THE ASSE TS AND DEPRECIATION THEREOF OUGHT TO HAVE BEEN ALLOWED. 5.3. ON THE CONTRARY, THE LD.CIT-DR SUPPORTED THE O RDER OF THE LD.CIT(A) AND SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT REMAINS THAT THE LD.CIT(A) HAS ADOPTED THE WDV AS WAS REFLECTED BY THE SELLER OF THE BLOCK OF ASSETS IN ITS BOOKS OF ACCOUNTS AND THE REVENUE HAS NOT DOUBTED THE VALUE PAID BY T HE ASSESSEE-COMPANY FOR ACQUIRING THE BLOCK OF ASSETS. UNDER THESE FAC TS, THE LD.CIT(A) WAS NOT JUSTIFIED IN DENYING THE CLAIM ON THE PURCHASE VALUE OF ASSETS. IN THE CASE OF THE ASSESSEE, THE WDV OF THE ASSETS WOULD T HE PURCHASE VALUE OF THE ASSETS. THEREFORE, THE AO IS HEREBY DIRECTED T O ADOPT THE WDV ACCORDINGLY. HENCE, THE ADDITION SUSTAINED BY TH E LD.CIT(A) ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION IS HEREBY DELETED. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 9 - 7. IN RESPECT OF THE DISALLOWANCE OUT OF LABOUR EXP ENSES AMOUNTING TO RS.13,23,900/-, THE LD.CIT(A) RESTRICTED TO RS.5,29 ,591/-. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO BASIS T O ADOPT 10% OF DISALLOWANCE AS ADOPTED BY THE LD.CIT(A). HE SUBMI TTED THAT ALL THE EVIDENCES WERE GIVEN IN RESPECT OF THE EXPENDITURE INCURRED. HE FURTHER SUBMITTED THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS. 7.1. ON THE CONTRARY, THE LD.CIT-DR SUBMITTED THAT THE AO HAS GIVEN SPECIFIC DEFECTS REGARDING THE CLAIM OF THE EXPEND ITURE INCURRED ON LABOUR CHARGES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO IN THE ASSESSMENT ORDER HAS DOUBTED THE EVID ENCE FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. THE AO FOLLO WED THE ORDER OF THIS TRIBUNAL (ITAT C BENCH AHMEDABAD) RENDERED IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT REPORTED AT 58 ITD 428 AND D ISALLOWED 25% OF THE CASH EXPENDITURE. THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT THE ORDER OF THIS TRIBUNAL RENDERED IN THE CAS E OF VIJAY PROTEINS LTD.(SUPRA) WAS WRONGLY APPLIED AS IN THE INSTANT C ASE, IT IS NOT THE CASE THAT THE CLAIM OF THE ASSESSEE IS BOGUS. THE ASSES SEE HAS CARRIED OUT THE WORKS THROUGH HIRED LABOURERS, HENCE THE AO WAS NOT JUSTIFIED IN APPLYING THE RATIO LAID DOWN BY THE TRIBUNAL RENDER ED IN THE CASE OF VIJAY PROTEINS LTD. HOWEVER, THE LD.CIT-DR SUBMITTED THA T THE EVIDENCE IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 10 - FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM D ID NOT INSPIRE CONFIDENCE. HE SUBMITTED THAT IT WAS INCUMBENT UPO N THE ASSESSEE TO PROVE THAT THESE EXPENSES WERE, IN FACT, INCURRED. WE FIND THAT THE AO HAS DISBELIEVED THE EVIDENCE ON THE BASIS THAT MANY OF THE LABOURERS DID NOT PUT THEIR SIGNATURES, BUT PUT THEIR THUMB-IMPRE SSIONS. AFTER CONSIDERING THE TOTALITY OF THE FACTS AVAILABLE ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE OF 25% AND 10 % CONFIRMED BY THE LD.CIT(A) APPEARS TO BE HIGHER IN THE PRESENT CASE AS THE AO HAS NOT IN CLEAR TERMS AND GIVEN A FINDING THAT THE ENTIRE EXP ENSES CLAIMED TOWARDS LABOUR EXPENSES WERE NOT GENUINE OR NOT VERIFIABLE. OUT OF TOTAL EXPENDITURE, THE AO HAS NOT GIVEN ANY FINDING THAT WHETHER THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE WAS NOT VERIFIA BLE OR SOME PERCENTAGE OF SUCH EXPENDITURE WAS NOT VERIFIABLE. IT IS NOT DISPUTED THAT THE ASSESSEE HAD CARRIED OUT THE WORK THROUGH LABOU RERS. UNDER THESE FACTS, IT CANNOT BE PRESUMED THAT THE WORKS WERE C ARRIED OUT WITHOUT ANY INVOLVEMENT OF THE LABOURERS. HOWEVER, THE ASSESSE E OUGHT TO HAVE SUPPLIED COMPLETE DETAILS, I.E. ADDRESS OF PERSONS AND THEIR CONFIRMATION, IT WOULD BE FAIR TO RESTRICT THE DISALLOWANCE TO 5% OF THE LABOUR EXPENSE CLAIMED BY THE ASSESSEE. MOREOVER, THE AO HAS NOT PLACED ANY MATERIAL OR RECORD THAT ANY ENQUIRY WAS MADE FROM LABOURERS. ACCORDINGLY, THE AO IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE @ 5% OF GROSS LABOUR EXPENSES. THUS, THIS GROUND OF ASSESSEES APPEAL I S PARTLY ALLOWED. AS A IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 11 - RESULT, ASSESSEES APPEAL BEARING IT(SS)A NO.184/AH D/2013 FOR AY 2006- 07 IS PARTLY ALLOWED. 9. NOW, WE TAKE UP THE IT(SS)A NO.185/AHD/2013 FOR AY 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1.1. THE ORDER PASSED U/S.250 ON 21.2.13 FOR AY 200 7-08 BY CIT(A)- III, ABAD PARTLY UPHOLDING THE ADDITION/DISALLOWANC ES MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGN ED ADDITIONS. 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE FOLLOWING ADDITIONS/DISALLOWANCES:- UNEXPLAINED CREDITS FROM LOOSE PAPERS - RS.6,83,561 DISALLOWANCE OF DEPRECIATION - RS.84,480 DISALLOWANCE OUT OF LABOUR EXPNS. @ 10% RS.7,95,787 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION S/DISALLOWANCES AS ABOVE SAID. 3.0 THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR MOD IFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. IT IS, THEREFORE, PRAYED THAT THE ADDITIONS/DISALLO WANCES UPHELD BY THE CIT(A) MAY KINDLY BE DELETED. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 12 - 9.1. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AG AINST GROUND NO.2.1 WHICH RELATED TO ADDITIONS/DISALLOWANCES OF UNEXPLA INED CREDITS, DISALLOWANCE OF DEPRECIATION AND LABOUR EXPENSES. 10. WE HAVE DECIDED THE IDENTICAL ISSUES IN ASSESSE ES OWN CASE BEARING IT(SS)A NO.184/AHD/2013 FOR AY 2006-07(SUPR A). SINCE THE ISSUES ARE IDENTICAL TO THE ISSUES AS WERE RAISED I N ASSESSEES APPEAL FOR AY 2006-07, THEREFORE FOR THE SAME REASONING, THESE ISSUES OF ASSESSEES APPEAL FOR AY 2007-08 ARE DECIDED ACCORDINGLY. HEN CE, THE ISSUE REGARDING CREDIT BALANCE IS DECIDED AGAINST THE ASS ESSEE, IN RESPECT OF CLAIM OF DEPRECIATION THE CLAIM OF THE ASSESSEE IS REJECTED AND DISALLOWANCE LABOUR EXPENDITURE IS RESTRICTED TO 5% OF GROSS LABOUR EXPENDITURE. ACCORDINGLY, THE APPEAL OF THE ASSES SEE IN IT(SS)A NO.185/AHD/2013 FOR AY 2007-08 IS PARTLY ALLOWED. 11. LASTLY, WE TAKE UP THE ASSESSEES APPEAL BEARIN G IT(SS)A NO.186/AHD/2013 FOR AY 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1.1. THE ORDER PASSED U/S.250 ON 21.2.13 FOR AY 200 8-09 BY CIT(A)- III, ABAD PARTLY UPHOLDING THE ADDITION/DISALLOWANC ES MADE BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGN ED ADDITIONS. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 13 - 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE FOLLOWING ADDITIONS/DISALLOWANCES:- UNEXPLAINED CREDITS FROM LOOSE PAPERS- RS.3,30,650 DISALLOWANCE OF DEPRECIATION - RS.60,654 DISALLOWANCE OUT OF LABOUR EXPNS. @ 10% RS.89,381 CR.BALANCE OF DIC-NCC RS.1,22,77,133 FOREIGN TOUR EXPENSES RS.72,300 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION S/DISALLOWANCES AS ABOVE SAID. 3.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN NOT APPRE CIATING PROPERLY THE EXPLANATION AND EVIDENCE PRODUCED BY THE APPELL ANT WITH REGARD TO THE ALLEGED DIFFERENCE IN THE ACCOUNT BETWEEN THE A PPELLANT AND DIC- NCC. 4.1. THE LD.AO HAS FAILED TO APPRECIATE THAT THE ON E OF THE DIRECTOR OF THE APPELLANT COMPANY HAS TRAVELLED FOR BUSINESS PU RPOSE AND PAID FBT ALSO. OTHER THAN BUSINESS TOUR EITHER ALONE OR WIT H THE FAMILY MEMBERS HAD BEEN PAID BY HIS PERSON ACCOUNT AND NOT BY THE APPELLANT COMPANY. 5.1. THE APPELLANT HAS OFFERED LUMP SUM AMOUNT OF R S.6,00,000 TOWARDS ANY ERROR OR OMISSION IN THE AY 2008-09 WHI LE FILING THE RETURN OF INCOME U/S.153A. THE SAME IS NOT ALLOWED TO BE ADJUSTED AGAINST THE PROBABLE NEW ADDITIONS WHILE ASSESSMENT. 6.0 THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR MOD IFY ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. IT IS, THEREFORE, PRAYED THAT THE ADDITIONS/DISALLO WANCES UPHELD BY THE CIT(A) MAY KINDLY BE DELETED. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 14 - 12. IN THIS APPEAL ALSO, THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS GROUND NO.2.1 WHICH READS AS UNDER:- 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE FOLLOWING ADDITIONS/DISALLOWANCES:- UNEXPLAINED CREDITS FROM LOOSE PAPERS- RS.3,30,650 DISALLOWANCE OF DEPRECIATION - RS.60,654 DISALLOWANCE OUT OF LABOUR EXPNS. @ 10% RS.89,381 CR.BALANCE OF DIC-NCC RS.1,22,77,133 FOREIGN TOUR EXPENSES RS.72,300 12.1. IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CREDIT OF RS.3,30,650/- AND DISALLOWANCE OF DEPRECIATION AMOU NTING TO RS.60,654/- AND DEPRECIATION OF LABOUR EXPENSES OF RS.89,381/-. THE FACTS AND THE ISSUES ARE IDENTICAL AS WERE RAISED IN ASSESSEES O WN APPEAL BEARING IT(SS)A NO.184/AHD/2013 FOR AY 2006-07 (SUPRA). TH E PARTIES WERE ADOPTED THEIR ARGUMENTS AS WERE RAISED IN IT(SS)A N O.184/AHD/2013. 12.2. IN IT(SS)A NO.184/AHD/2013, WE CONFIRM THE DE CISION OF LD.CIT(A) IN RESPECT OF THE UNEXPLAINED CREDITS SUS TAINED AND DISALLOWANCE OF DEPRECIATION CONFIRMED BY THE LD.CI T(A) IS DELETED AND THE DISALLOWANCE OUT OF LABOUR EXPENSES AMOUNTING T O RS.89,381/- IS FURTHER REDUCED TO 5% OF THE TOTAL EXPENSES, HENCE, THE ASSESSEE GETS A IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 15 - RELIEF OF RS.44,691/-. THUS, THIS GROUND OF ASSES SEES APPEAL IS PARTLY ALLOWED. 12.3. IN THIS APPEAL, THE ASSESSEE HAS TWO OTHER I SSUES IN RESPECT OF CREDIT BALANCE OF DIC-NCC AMOUNTING TO RS.1,22,77,133/- AN D IN RESPECT OF FOREIGN TOUR EXPENSES OF RS.72,300/-. THE LD.COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY WAS CARRIED OUT THE SUB-CONTRACT WORK OF UPGRADING OF ROAD FROM PALANPUR TO RADHNAPU R IN A JV OF M/S.DAELIM INDUSTRIAL CO.LTD. & NAGARJUN CONSTRUCTI ON CO. LTD. (IN SHORT DICL & NCCL RESPECTIVELY). THE SAID JV USED TO MAKE PAYMENTS, MOBILIZATION ADVANCES, ETC. TO THE APPELLANT EITHER ON SITE OR FROM REGIONAL OFFICE. HE SUBMITTED THAT IT ALSO USED TO SUPPLY STORES AND OTHER FACILITIES AT THE SITE. HE SUBMITTED THAT TH E ASSESSEE HAD EXPLAINED THE DIFFERENCE BETWEEN ACCOUNTS OF BOTH THE PARTIES THAT THERE WAS DISPUTE WITH REGARD TO CERTAIN BILLS, WHICH THE SAID JV HAD NOT TAKEN INTO CONSIDERATION, THOUGH THE ASSESSEE HAS DULY ACCOUNT ED FOR APPLYING MERCANTILE ACCOUNTING SYSTEM. HE SUBMITTED THAT TH E MATTER WAS REFERRED FOR ARBITRATION AND THE ISSUES ARE PENDING FOR ARBI TRATION INCLUDING THE IMPUGNED ADDITION. HE SUBMITTED THAT THE LIABILITI ES HAVE NOT BEEN CRYSTALLIZED AS ARBITRATOR HAS NOT GIVEN AWARD. HE SUBMITTED THAT THE AO HAS NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE IN RIGHT PERSPECTIVE. HE ALSO SUBMITTED THAT AN APPLICATION FOR ADDITIONA L EVIDENCE IS MOVED TO PLACE ON RECORD. THE ADDITIONAL EVIDENCE RELATED TO ARBITRATION. HE IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 16 - SUBMITTED THAT IN THE REMAND REPORT, THE AO HAS ADM ITTED THE FACT THAT BEFORE THE ARBITRAL TRIBUNAL, THE CONTRACTEE-COMPAN Y HAD FILED SUIT AGAINST THE ASSESSEE-COMPANY. 12.4. ON THE CONTRARY, THE LD.CIT-DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO IN PARA-5.4 HAS OBSERVED THAT IN AYS 2006-07-2007-08, THE ASSESSEE-COMPANY HAS CONSI DERED THE INCOME ONLY TO THE EXTENT OF BILLS PASSED BY THE DIC-NCC. THAT MEANS, THE ASSESSEE WAS ACCOUNTING THE INCOME AS PER BILLS APP ROVED BY DIC-NCC AND THE BALANCE WAS BEING SHOWN IN THE BALANCE-SHEE T AS LIABILITY ON ACCOUNT OF ADVANCES. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE-COMPANY REFLECTED AN AMOUNT OF RS.2,04,28, 868/- UNDER THE HEAD OF OTHER INCOME IN P&L ACCOUNT AND THE DEBIT EFFECT WAS GIVEN TO THE ACCOUNT OF DIC-NCC ON 31/03/2008. IT PROVES THAT THE ASSESSEE- COMPANY WAS CARRYING OUT THE WORK AS PER CONTRACTUA L OBLIGATION TILL AY 2008-09. THUS, IT IS SEEN THAT BILLS WERE SENT TO THE DIC-NCC FOR APPROVAL BUT SINCE IN SOME BILLS APPROVAL WAS NOT G RANTED, THE ASSESSEE HAS TAKEN IT IN PROFIT & LOSS ACCOUNT AS OTHER INCO ME. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BY OBSERVING AS UNDER:- (A) AS DISCUSSED EARLIER, THIS WAS THE LAST YEAR O F THE CONTRACT, AND THEREFORE THE ASSESSEE WAS REQUIRED TO CREDIT A LL THE INCOME, RELATED TO THIS WORK IN THIS YEAR. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 17 - (B) IN THE NEXT ASSESSMENT YEAR 2009-10 THE ASSESS EE HAS NOT SHOWN ANY SITE WORK INCOME FROM THIS BUSINESS ACTIV ITY WITH DIC- NCC. (C) THE ASSESSEE HAS NOT DONE ANY EXPENDITURE ON A CCOUNT OF THIS BUSINESS WITH DIC-NCC IN THE AY 2009-10. (D) THEREFORE THIS GOES ON TO PROVE THAT WORK WAS C OMPLETED IN THIS YEAR. THEREFORE THE ENTIRE AMOUNT OF RECEIPT SHOULD HAVE BEEN SHOWN AS INCOME. (E) SINCE ALL THE EXPENSES HAVE BEEN DEBITED TILL T HIS YEAR, ALL THE CORRESPONDING RECEIPTS SHOULD HAVE BEEN CREDITED. THE SAME HAS NOT BEEN DONE AND THEREFORE THE GP RATIO HAS FALLEN IN THIS YEAR FROM 9.69% IN AY 2007-08 TO (-) 13.52% IN THIS AY 1 008-09 BEING LOSS. THE LABOUR, CONSTRUCTION & DIRECT EXPENSES A S PERCENTAGE OF TURN OVER HAS ALSO INCREASED FROM 76% TO 113% IN AY 2008-09, AND THIS AGAIN SUPPORTS THE CONTENTION THAT ALL THE EXPENSES HAVE BEEN BOOKED BUT THE RECEIPTS HAVE NOT BEEN ACCOUNTE D AS INCOME. (F) AS PER THE CONCEPT OF MATCHING PRINCIPLE ALL THE RECEIPTS RELATABLE TO THE EXPENDITURE INCURRED AND DEBITED T O THE PROFIT & LOSS ACCOUNT, SHOULD HAVE BEEN CREDITED TO THE PROF IT & LOSS ACCOUNT, BUT IT APPEARS THAT THE SAME HAS NOT BEEN DONE IN THIS CASE. (G) IF THE CONTENTION OF THE ASSESSEE THAT THIS A MOUNT OF RS.1,22,77,133/- WAS LIABILITY ON ACCOUNT OF ADVANC E RECEIVED IS ACCEPTED TO BE TRUE FOR THE SAKE OF ARGUMENT THEN, THERE WAS NO REASON FOR THE ASSESSEE TO NOT TO RETURN THIS MONEY TO DIC-NCC TILL DATE. SINCE THE WORK HAS BEEN COMPLETED IN AY 2008 -09 AND THIS AMOUNT IS BEING CLAIMED BY THE ASSESSEE TO BE ADVAN CE AND NO WORK HAS BEEN DONE BY IT AND NO WORK WILL BE DONE I N FUTURE THEN IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 18 - THERE WAS NO REASON FOR THE ASSESSEE TO NOT TO RETU RN THIS MONEY TO THE DIC-NCC TILL DATE. (H) IT IS ONLY THE ACCOUNTING TREATMENT GIVEN IN TH E BOOKS OF THE ASSESSEE-COMPANY AS LIABILITY INSTEAD OF INCOME. T HE CONTRACT CEASED TO EXIST, AND THE ASSESSEE HAS NOT PAID ANYT HING TILL DATE AND HAS NOT INCURRED ANY EXPENSES OR CREDITED ANY I NCOME ON THIS PROJECT TILL DATE. IT WAS ALSO ALLEGED BY DIC-NCC THAT THE ASSESSEE ABRUPTLY STOPPED THE WORK OF DIC-NCC AND HENCE RS.1,22,77,133/- BECOMES A DISPUTED CONTRACTUAL LIA BILITY WHICH IS ONLY CONTINGENT LIABILITY. (I) THE ASSESSEE-COMPANY HAS NOT ACCOUNTED FOR, THE CORRECT RECEIPTS BUT SHOWED THEM AS OUTSTANDING ADVANCES. HENCE, THE ASSESSEE-COMPANY HAS NOT ACCOUNTED THE INCOME OF RS.1,22,77,133/- AS PER PROVISIONS OF SECTION 5 OF THE ACT. (J) THUS, IT IS SEEN THAT THE ASSESSEE HAS NOT DECL ARED THE TRUE & CORRECT INCOME, THOUGH IT WAS OBLIGATORY ON THE PAR T OF THE ASSESSEE TO REFLECT THE ACCRUED INCOME OF RS.1,22,7 7,133, IN THE LAST YEAR OF CONTRACT, I.E. AY 2008-09. 12.5 HOWEVER, THE LD.COUNSEL FOR THE ASSESSEE CIT(A ) HAS DECIDED THIS ISSUE IN PARA-25 OF HIS ORDER BY OBSERVING AS UNDER :- 25. FROM THE PERUSAL OF RECORDS IT IS FOUND THAT A PPELLANT HAS BOOKED ALL THE EXPENSES IN RESPECT OF CONSTRUCTION WORK UNDERTAKE BY HIM TILL AY 2008-09. IT IS WORTHWHILE TO MENTIO N THAT AY 2008- 09 WAS THE LAST YEAR OF THE CONTRACT AND FROM SUBSE QUENT YEAR NEITHER ANY INCOME HAS BEEN DECLARED FROM CONSTRUCT ION WORK NOR ANY EXPENSES HAVE BEEN CLAIMED. IN SUCH A SITUATIO N, AO HAS RIGHTLY OBSERVED THAT THE ENTIRE AMOUNT OF RECEIPT FROM DIC-NCC SHOULD HAVE BEEN SHOWN BY THE APPELLANT AS INCOME F OR AY 2008- 09. BY NOT SHOWING THE ENTIRE RECEIPT AS INCOME AP PELLANT HAS IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 19 - DECLARED G.P. OF (-) 13.52% IN THIS YEAR AS AGAINST 9.69% IN THE EARLIER YEAR (AY 2007-08). I THEREFORE, HOLD THAT CLAIM OF APPELLANT TO TREAT SUM OF RS.1,22,77,133/- AS A LIA BILITY INSTEAD OF INCOME IS NOT CORRECT. AO HAS RIGHTLY MADE ADDITIO N OF THIS AMOUNT TO THE TOTAL INCOME AND THE ADDITION IS CONF IRMED. THIS GROUND OF APPEAL IS DISMISSED FOR AY 2008-09. 12.6. THE UNDISPUTED FACT FROM THE RECORDS ARE THAT CERTAIN PAYMENTS WERE MADE TO THE ASSESSEE BY THE CONTRACTEE-COMPANY ; NAMELY, DICL- NCCL. AGAINST SUCH PAYMENTS, THE ASSESSEE RAISED C ERTAIN BILLS IN RESPECT OF THE WORK CARRIED OUT. THE BILLS IN RESP ECT OF THE AMOUNT IN DISPUTE WAS NOT APPROVED BY THE DICL-NCCL AND THE A SSESSEE DEBITED THE AMOUNT AS OTHER INCOME IN THE P&L ACCOUNT. T HE CONTENTION OF THE ASSESSEE IS THAT THE AMOUNT IS LIABILITY AND IT CANNOT BE TREATED AS INCOME AS THE CONTRACTEE-COMPANY; NAMELY, DICL-NCCL HAVE INCLUDED ARBITRATION CLAUSE FOR RECOVERY. HE SUBMITTED TH AT UNTIL AND UNLESS THE DISPUTE IS DECIDED ARBITRAL TRIBUNAL, IT CANNOT BE CONCLUDED THAT LIABILITIES HAVE BEEN ASCERTAINED. 12.7. ON THE CONTRARTY, LD.CIT-DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW AND CONTENDED THAT THERE IS NO INFIRMITY IN T HE ORDER OF THE LD.CIT(A). 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, PERUS ED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE HAS NOT DISPUTED THE FACT THAT ARBITRAT ION PROCEEDINGS IS PENDING IN RESPECT OF THE IMPUGNED ADDITION, THEREF ORE IN OUR CONSIDERED IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 20 - VIEW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN P ROCEEDINGS FOR MAKING THE ADDITION WHEN THE RIGHTS AND LIABILITIES ARE UN DER DISPUTE BEFORE THE ARBITRAL TRIBUNAL. IT IS SETTLED PRINCIPLE OF LAW THAT ONLY INCOME OF THE ASSESSEE IS TO BE TAXED. IN THE INSTANT CASE, AGAIN ST THE ADVANCE IS RECEIVED BY THE ASSESSEE, THE ASSESSEE RAISED CERTAIN BILLS WHICH WERE DISPUTED BY THE CONTRACTEE-COMPANY; NAMELY, DICL-NCCL. IN OU R CONSIDERED VIEW, SUCH AMOUNT WOULD NOT PARTAKE THE CHARACTER OF INCOME, UNLESS RIGHTS OF THE PARTIES ARE DECIDED BY THE ARBITRAL T RIBUNAL. THEREFORE, THE ISSUE IS RESTORED BACK TO THE FILE OF AO, WHO SHAL L DECIDE THE ISSUE AFTER VERIFYING WHAT DISPUTE IS PENDING BEFORE THE ARBITR AL TRIBUNAL WHETHER THE IMPUGNED ADDITION OF RS.1,22,77,133/- ALSO FORM S PART OF THE CLAIM MADE BY THE CONTRACTEE-COMPANY. FURTHER, WHETHER T HE ASSESSEE HAS CLAIMED IN ITS COUNTER-CLAIM, THE IMPUGNED AMOUNT A S EXPENDITURE. THE ASSESSEE IS HEREBY DIRECTED TO PROVIDE ALL THE EVID ENCES RELATED TO THE DISPUTE PENDING BEFORE THE ARBITRAL TRIBUNAL TO THE AO FOR ARRIVING AT A RIGHT CONCLUSION. THUS, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES. 14. THE NEXT ISSUE IS WITH REGARD TO ADDITION OF R S.72,300/- IN RESPECT OF DISALLOWANCE OF FOREIGN TOUR EXPENSES. THE LD.C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN C ONFIRMING THE DISALLOWANCE OF EXPENDITURE INCURRED ON FOREIGN TOU R OF THE DIRECTORS. HE SUBMITTED THAT DIRECTORS HAD UNDERTAKEN THE TOUR FOR BUSINESS PURPOSE. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 21 - HE FURTHER SUBMITTED THAT FBT ON SUCH AMOUNT WAS DU LY PAID BY THE COMPANY, THEREFORE THE AO WAS NOT JUSTIFIED IN MAKI NG THE DISALLOWANCE. 14.1. ON THE CONTRAY, THE LD.CIT-DR SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. DURING THE COURSE OF HEARING, A QUERY WAS RAISED TO THE LD.COUNSEL FOR THE ASSESSEE, WHETHER THE DIRECTORS OF THE ASSESSEE-COM PANY HAD APPLIED FOR THE TOURIST VISA OR BUSINESS VISA. THE LD.COUNSEL FOR THE ASSESSEE COULD NOT REPLY TO THE QUERY. ON PERUSAL OF THE RECORD, THERE IS NOTHING ON RECORD TO PROVE THAT THE DIRECTORS HAVE VISITED THE FOREIGN COUNTRIES ON BUSINESS VISA. IT WAS INCUMBENT UPON THE ASSESSEE TO PLACE ON RECORD WHICH COULD HAVE ASCERTAINED THE PURPOSE OF THE DIR ECTORS FOR VISITING THE FOREIGN COUNTRIES. IN THE ABSENCE OF SUCH EVIDENC E, WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF THE LD.COUNSEL FOR THE AS SESSEE IN THIS REGARD. HENCE, THE ORDER OF LD.CIT(A) ON THIS ISSUE IS UPHE LD. THUS, THIS ISSUE RAISED IN THE ASSESSEES APPEAL IS REJECTED. 16. APROPOS TO GROUND NO.5.1 RAISED IN THE YEAR UND ER CONSIDERATION, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPELLANT HAD OFFERED A IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 22 - LUMP-SUM AMOUNT OF RS.6 LACS TOWARDS ANY ERROR OR O MISSION IN THE AY 2008-09, WHILING FILING THE RETURN OF INCOME U/S.15 3A OF THE ACT. THE SAME IS NOT ALLOWED TO BE ADJUSTED AGAINST THE PROB ABLE NEW ADDITIONS WHILE ASSESSMENT. 16.1. ON THE CONTRARY, THE LD.CIT-DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE NEEDS VERIFICATION AT THE END OF THE AO. THEREFORE, THE ISSUE IS RESTORED TO THE FILE OF AO AND, IN CASE, IT IS FOUND THAT THE ASSESSEE HAD OFFERED AN AMOUNT OF RS.6 LAC S TOWARDS ANY VIEW, THEN IN THE INTEREST OF JUSTICE, THE SAME MAY BE AL LOWED. THUS, THIS ISSUE RAISED IN THE ASSESSEES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. 18. GROUND NOS.4.1 & 6 ARE GENERAL IN NATURE REQUIR E NO INDEPENDENT ADJUDICATION. IT(SS)A NOS.184 TO 186 /AHD/2013 ACE INFRASTRUCTURE PVT.LTD. VS. DCIT, CENTRAL CIRC LE-2 ASST.YEARS 2006-07, 2007-08 & 2008-09 RESPECTIVEL Y - 23 - 19. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE PERTAINING TO AYS 2006-07, 2007-08 & 2008-09 ARE PARTLY ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 23RD O F JANUARY, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23 / 01 /2015 2..,.../ T.C. NAIR, SR. PS !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-III, AHMEDABAD 5. 78& 45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<* / GUARD FILE. ! / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 22.1.15 (DICTATION-PAD 32+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.1.15 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23.1.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.1.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER