MOHAN AGRAWAL CONSTRUCTION CO.,,GWALIOR vs. I.T.O.-3(2), GWALIOR

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH ‘DB’: AGRA

BEFORE, SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No.115/Agr/2015 (ASSESSMENT YEAR: 2010-11) Mohan Agrawal Income Tax Officer-3(2) Construction Company Gwalior A-2, Site No.1 Vs. City Centre, Gwalior PAN-AAMFM 3878J (Appellant) (Respondent) Appellant by Mr. Rajendra Sharma, Advocate Respondent by Mr. Shailendra Shrivastava, Sr-DR Date of Hearing 19/07/2023 Date of Pronouncement 08/08/2023 ORDER PER YOGESH KUMAR U.S., JM: This appeal by Assessee is filed against the order of Learned

Commissioner of Income Tax (Appeals), Gwalior [“Ld. CIT(A)”, for

short], dated 24/03/2015 for the Assessment Year 2010-11.

Grounds taken in this appeal are as under: “Ground No.1- On the facts and in the circumstances of the case, the learned CIT(Appeals) were not justified in confirming the disallowance of Rs.66000/- on account of rent payment by account payee cheque for the

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ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO premises taken at the works-site for business purpose. The above disallowance may kindly be deleted.

Ground No.2- On the facts and in the circumstances of the case, the learned CIT(Appeals) was not justified in confirming the disallowance of Rs.1189800/- paid to Shri Vijay Sharma who stood guarantee to various petty and local suppliers of sand, BT metal, moram & other material. The above disallowance may kindly be deleted.

Ground No.3- On the facts and in the circumstances of the case, the learned CIT(Appeals) was not justified in confirming an addition of Rs.350000/- u/s 68 despite furnishing the copy of legal notice and conclusive proof of repayment of the above loan to the creditor (Shri Ashutosh Maheswari). The said addition be deleted. Ground No.4- On the facts and in the circumstances of the case, the learned CIT(Appeals) was not justified in party confirming a disallowance of Rs.2000000/- out of I) Site, advertisement, business, traveling, printing, stationary and repairs II) fabrication expenses III) labour & wages and IV) bricks BT metal, oil & paints, sand stone, moram, shuttering expenses etc. Necessary interference may kindly be made and suitable relief allowed to the appellant firm. Ground No.5- The appellant craves leave to add, amend, alter, modify, substitute or delete nay ground at the time or before hearing of appeal.”

Assessment Year 2010-11 declaring income of Rs. 9,58,920/-, the case of the

assessee was selected for scrutiny under CASS and an assessment order came to be passed u/s 143(3) of the Act by computing the total income of the

assessee at Rs. 71,20,720/-. As against the assessment order, the assessee

preferred an appeal before the CIT(A). The CIT(A) vide order dated

24/03/2015, upheld the disallowance of claim of rent of Rs.66,000/-, disallowance of Rs. 11,89,800/- claimed as guarantee payment and also

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ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO

upheld the addition of Rs. 3,50,000/- made u/s 68 of the Act and also partly

confirmed addition of Rs. 20,00,000/- out of disallowance for

(i) Site advertisement, travelling, printing, stationary, repairs (ii) Fabrication (iii) Labour and Wages (iv) Bricks, BT Metal, oil and paint, sand, moram, shuttering expenses etc.

additions/disallowance made by the A.O., the assessee preferred the present

appeal on the grounds mentioned above.

Ground No. 1: Disallowance of Rs. 66,000/- claimed as expenses under the

head Rent.

undertaking his contract work at very far and remote area at where one Sh.

Vijay Sharma was a ‘prominent person’ had provided the premises to the

assessee with the undertaking that the amount for rent is to be paid to Sh.

Vijay Sharma who will settle or pay the rent to the actual owner. Therefore

submitted that, the rent paid to Sh. Vijay Sharma ought to have allowed.

Further, submitted that the A.O. has not given any opportunity to cross-

examine the Sh. Vijay Sharma . Therefore, the Ground No. 1 deserves to be

allowed.

Sh. Vijay Sharma whom the cheque of Rs. 66,000/- is paid as rent has denied

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ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO

receiving any rent from the assessee. Therefore, the ld. A.O. has not committed

any error in making the above said disallowance.

record. Though the assessee has claimed to have paid Rs. 66,000/- by way of

cheque to Sh. Vijay Sharma as rent, the said Sh. Vijay Sharma has specifically

denied before the A.O. of receipt of any such rent from the assessee. It is also

noted that the Assessing Officer has not provided an opportunity of cross

examining the said Sh. Vijay Sharma. Therefore, we restore the issue to the file

of the A.O. with a direction to provide an opportunity of cross examining Sh.

Vijay Sharma to the Assessee and decide the matter afresh, accordingly,

Ground No. 1 is partly allowed for statistical purpose.

Ground No. 2:- Disallowance of Rs. 11,89,800/- claimed as outstanding

amount payable.

disallowing the outstanding amount appearing in the balance sheet as payable

to various vendors against which the name of one Sh. Vijay Sharma was

mentioned. The Ld. Counsel for the assessee submitted that the A.O made

addition of Rs.11,89,800/- towards the assessee income by not accepting the

liability appearing in the balance sheet in respect of outstanding payment to be

made to various vendors related with the purchases. As against the

outstanding liability the name of Sh. Vijay Sharma was mentioned in the Page 4 of 10

ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO

balance sheet of the Assessee. Further submitted that, the said Sh. Vijay

Sharma in his statement and also in the affidavit has accepted that he stood

guarantee for the assessee for purchasing of material from various vendors on

credit basis. The Ld. Counsel further submitted that the A.O. without making

any enquiry or verification from the vendors whose name were given during the

assessment proceedings, disallowed the liability related with the outstanding

payments. Therefore, submitted that the CIT(A) should have deleted the

disallowance.

Sharma whose name has been reflected in the balance-sheet in respect of

outstanding payment to be made has specifically denied before the A.O. an

outstanding amount payable to various vendors appearing in the balance-

sheet. Therefore the assessee cannot find fault with the order of the Lower

Authorities.

record. It is not in dispute that the assessee in his balance sheet mentioned

the name of Sh. Vijay Sharma against the outstanding liability. It is also not in

dispute that the said Sh. Vijay Sharma has denied before the Assessing Officer

that ‘no such amount is due with the assessee’. It is the case of the assessee

that the assessee is doing construction work at far and remote place,

approached one Sh. Vijay Sharma who is a prominent figure in the area which Page 5 of 10

ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO

has taken the guarantee of the assessee before the vendor from whom the

purchases are to be made by the assessee on credit and the assessee for the

sake of convenience has mentioned in the balance sheet the name of Sh. Vijay

Sharma against the outstanding amount payable to various vendors having

total number of 50. Further submitted that, the said Sh. Vijay Sharma has

sworn an affidavit by admitting the above facts which is placed that Page No.

23 of the paper book, therefore submitted that the disallowance of Rs.

11,89,800/- deserves to be deleted.

Sh. Vijay Sharma has specifically denied about the outstanding amount

payable to various vendors appearing in the balance sheet of the assessee and

the alleged affidavit produced by the assessee cannot be taken into account

since the same was not before the A.O. therefore, submitted that the Ground

No. 2 of the assessee is liable to be dismissed.

record. The assessee himself shown the name of Sh. Vijay Sharma in the

balance sheet stating outstanding amount payable to various vendor, but the

said Sh. Vijay Sharma has denied about outstanding amount payable to

various vendors appearing in the balance sheet. The assessee has filed an

affidavit of Sh. Vijay Sharma before us at page No. 23 of the Paper Book,

wherein the said Sh. Vijay Sharma has made certain averments supporting the

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ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO

claim of the assessee. Considering the above peculiar facts and circumstances

and also considering the fact that the said Sh. Vijay Sharma has filed an

affidavit supporting the claim of the assessee, we deem it fit to restore the

matter to the file of the A.O. for de-novo consideration and the assessee is

directed to establish the claim before the A.O. Accordingly, the Ground No. 2

of the assessee is partly allowed for statistical purpose.

Ground No. 3:- Addition of Rs. 3,50,000/- unexplained loan.

unexplained loan. The Ld. Counsel for the assessee submitted that the said

Rs. 3,50,000/- are not related to the year under consideration and are the old

outstanding amount carried forward from the previous years, which is reflected

in the balance sheet as liability payable to three persons. In support of the

above contention of the Assessee, the assessee has produced the copy of the

account of three creditors.

year under consideration and are the old balance and also the assessee has

paid the aforesaid amount to the creditors in the subsequent years through

cheques, we find no reason to sustain the addition made u/s 68 of the Act.

Accordingly, Ground No. 3 of the assessee is allowed and the addition made by

the A.O. of Rs. 3,50,000/- u/s 68 of the Act is hereby deleted.

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ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO

Ground NO. 4:- Disallowance of expenses of Rs. 20,00,000/-.

the CIT(A) out of the disallowance made by the A.O. at Rs. 45,56,000/- from

various heads of expenses which are as under:-

disallowance by way of estimation without pointing out that any expenses

which is either not related with the business or incurred for the purpose other

than the business. Though the A.O. has accepted the books of accounts, while

disallowing the expenses, no specific reason expressed that the expenses which

are either not related with the business or incurred for other than business.

Further submitted that even the CIT(A) without any basis restricted the

addition at Rs. 20,00,000/-. Further submitted that, once the books of

account are accepted the entire accounts are liable to be accepted no

disallowance out of accepted books of accounts should be made.

and conclusions of the CIT(A.

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ITA No.115/Agr/2015 Mohan Agrawal Construction Co. vs. ITO 18. We have heard the parties perused the material available on record. It is

found from the record the Ld. A.O. while disallowing the expenses from various

heads of expenses, has not given specific finding, even the CIT(A) while restricting the addition made by the A.O. at Rs. 45,56,000/- to Rs. 20,00,000/,

has only considered the past history of the Appellant and not referred to any of

the documents produced by the Assessee. The CIT(A) has not given any

specific finding in respect of expenses claimed by the assessee and the assessee pleaded that the entire expenses should have been allowed by the

CIT(A). Considering the above submissions and also the submissions made by

the parties, we deem it fit to restore the issue of disallowance of expenses of Rs.

20,00,000/- which was sustained by the CIT(A) to the file of A.O. to pass speaking order by considering the past history of the assessee and also the

documents produced by the assessee. Ordered accordingly. Thus, the Ground

No. 4 of the assessee is partly allowed for statistical purpose.

purpose.

Order pronounced in open Court on 8th August, 2023

Sd/- Sd/- (SHAMIM YAHYA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 08/08/2023 Pk/R.N, Sr.ps

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