M/S HIMUDA,SHIMLA vs. ADDL. CIT, SHIMLA

Following grounds has been raised in this appeal:

Vide Ground No. 1 & 2 the grievance of the assessee relates to the sustenance of addition made by the A.O. on account of liabilities appearing under the head ‘Current Liabilities and Provisions’ and the sundry creditors.

Facts related to the issue in brief are that the assessee has been constituted vide Himachal Pradesh Housing Board (HPHB), 1972 enacted by the Himachal Pradesh Assembly, and its main function is to develop housing accommodation facility in the state of H.P. During the year under consideration the assessee created a provision for anticipated works of various housing colonies amounting to Rs. 1,52,66,861/-. The A.O. asked the assessee to give justification for the same. In response the assessee submitted that it was developing housing colonies on no profit no loss basis and that the provisions of various colonies were to be made for anticipated works / arbitration etc. However the A.O. held that the liability of the provision had seized to exist and as such those liabilities were not genuine. He therefore made the addition of Rs. 1,52,66,861/- to the income of the assessee. The A.O. also made the addition of Rs. 3,36,182/- which was outstanding as sundry creditors by observing that the assessee was not able to give the name and address of those creditors as well as reason for non clearance.

Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that all the provisions had been made against the genuine crystallized expenditure to be incurred and the provisions were made prior to 01/04/2003 i.e; prior to the amendment in Section 10(20A) and were akin to reserves. It was also stated that as the income of the assessee was exempt under section 10(20A) of the Act, prior to 01/04/2003, the addition made becomes bluntly illegal and factually wrong, since the corresponding expenditure booked had not been charged to the revenue and there was no loss to the revenue in the prior period particularly when the A.O. himself admitted that the entire amount was pertaining to the period prior to A.Y. 2003-04 and the assessee was developing colonies on no profit no loss basis.

As regards to the another addition on account of sundry creditors the assessee submitted that the addition made by the A.O. was least warranted when the assessee is a Government body and secondly the corresponding debit had not resulted in the loss to the revenue as the same was pertaining to the period prior to 01/04/2003.

Ld. CIT(A) after considering the submissions of the assessee sustained the addition by observing in para 3(iv) and 4(iv) as under :

Now the assessee is in appeal.

Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that neither the A.O. nor the Ld. CIT(A) appreciated the facts in right perspective therefore the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified.

In his rival submissions the Ld. Sr. DR strongly supported the orders passed by the authorities below and reiterated the observations made by them in their respective orders.

We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the Ld. CIT(A) sustained the addition by observing that assessee failed to provide any reliable documentary evidence and that the documents which were filed before him during the course of assessment proceedings were unsigned and had no evidentiary value. However it is not clear which documents were furnished before the Ld. CIT(A) and how those were not reliable. We therefore in the absence of clear facts on record deem it appropriate to set aside this issue back to the file of the Ld. CIT(A) to adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.

The another issue raised by the assessee in ground no. 3 relates to the sustenance of addition of Rs. 3,85,230/- made by the A.O. on account of outstanding EPF under section 43-B of the Act.

The facts related to this issue in brief are that the A.O. made the impugned addition by observing that the Audit Report revealed that date of payment had not been mentioned and space was kept blank.

Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that the provision of Section 43B were not applicable as the liability was not on account of regular EPF but had arisen because of dispute as to the applicability of PF on daily wagers. It was further submitted that the amount was pertaining to period prior to A.Y. 2003-04 and that the amount had been reversed in the subsequent years.

Ld. CIT(A) after considering the submissions of the assessee sustained the addition by observing as under:

Now the assessee is in appeal.

The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that neither the A.O. nor the Ld. CIT(A) appreciated the facts in right perspective particularly this fact that the amount was specifically rectified and reversed in the subsequent years had not been considered.

In his rival submissions the Ld. DR supported the orders of the authorities below.

After considering the submissions of both the parties and the material available on the record, we are of the view that the claim of the Ld. Counsel for the assessee that the amount was reversed in subsequent years requires verification particularly when the Ld. CIT(A) has mentioned in the impugned order that no documentary evidence was furnished before him. We therefore deem it appropriate to set aside this issue also back to the file of the Ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.

In the result appeal of the assessee is allowed for statistical purposes.