INCOME TAX OFFICER, WARD-12(2)(1), MUMBAI vs. F A INFRAPROJECTS LIMITED, MUMBAI

This appeal is filed by Income Tax Officer-12(2) (1), Mumbai (the learned Assessing Officer) for A.Y. 2012-13 against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 29th August, 2018, wherein the appeal filed by the assessee against the assessment order dated 26th March, 2015, passed under Section 143(3) of the Income tax Act [ the Act] by the learned Assessing Officer was allowed.

The learned Assessing Officer is aggrieved with the deletion of the addition of ₹8,46,87,207/- under Section

The assessee preferred the appeal against the assessment order before the learned CIT (A). With respect to the addition under Section 41(1) of the Act, the learned CIT (A) held that though the learned Assessing Officer has made the additions but the assessee provided explanation during the assessment proceedings that the accounts of the creditors was a running account when there was a opening balance payable to a person as added by the further amounts payable for the work done as reduced by the amounts paid leaving a sum outstanding at the year end, the same cycle repeats year to year. Accordingly, the liability payable to laborers is paid continuously and the question of cessation of liability does not arise. Accordingly, he held that the addition made by the learned Assessing Officer is on mis-appreciation of facts. Thus, the addition was deleted.

The learned Authorized Representative vehemently supported the order of the learned CIT (A) as well as the provisions of the law.

We have carefully considered the rival contentions and the orders of the lower authorities. The fact shows that assessee is a company carrying on the contract business of civil work by sub contractor and available labour. When questioned during assessment proceedings, the assessee submitted that as per the nature of business the work is carried out at different locations. As the assessee is a contractor, if there is a delay in payment of dues by theprincipal to the assessee naturally results in delay in payment of the creditors of the assessee. The amount payable to the creditors is outstanding at the end of the year, the bills or the payments made are also adjusted and further the closing balance becomes a running cycle. A continuous payment is made to these parties. Assessee is assessed under Section 143(3) of the Act for A.Y. 2010-

In Principal Commissioner of Income-tax Vs Batliboi Environmental Engineering Ltd.[2022] 446 ITR 238 (Bomb) it is held that :-

In Principal Commissioner of Income Tax-6 V New World Synthetics Ltd[2018] 97 taxmann.com 399 (Delhi) it is held thatNon-payment of outstanding liability which is admitted and acknowledged as due and payable by an assessee does not indicate remission or cessation of liability.

In view of the above facts, we do not find any infirmity in the order of the learned CIT (A) in deleting the addition of ₹8,46,87,207/- under Section 41(1) of the Act. Ground no 1 of appeal is dismissed.

Ground no.2 is with respect to the disallowance on adhoc amount out of direct expenses claimed. The learned CIT (A) has categorically held that there is no reason to uphold the addition because it was merely an estimate and that toowithout any basis. The learned Departmental Representative submitted that in the assessment proceedings for earlier years, identical disallowance should be upheld. We find that in the earlier years this was the only dispute and same was not challenged before any appellate authority. In the present year, the learned CIT (A) held that all the details of expenses were provided to the learned Assessing Officer. If the learned Assessing Officer was of the view that some of the vouchers are missing, the amount of addition should have been made of the same amount. Further, merely due to smallness of

In the result, on both counts, the order of the learned CIT (A) is upheld, and the appeal of the learned Assessing Officer is dismissed.