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Income Tax Appellate Tribunal, Hyderabad ‘ A‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
ITA Nos 1189 & 1190 of 2017 Achyutha Electricals and Industries P Ltd
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA Nos.1189 & 1190/Hyd/2017 Assessment Years: 2009-10 & 2011-12 Achyutha Electricals & Vs. Dy. C.I.T. Industries (P) Ltd, Circle 1(1) Hyderabad Hyderabad PAN:AACCA9417C (Appellant) (Respondent) Assessee by: N o n e Revenue by: Sri Rajendra Kumar, CIT(DR) Date of hearing: 11/07/2022 Date of pronouncement: 15/07/2022 ORDER Per R.K. Panda, A.M The above two appeals filed by the assessee are directed against the separate orders dated 27.03.2017 of the learned CIT (A)-1, Hyderabad relating to A.Ys 2009-10 & 2011-12 respectively. For the sake of convenience, both these appeals were heard together and are being disposed of by this common order.
None appeared on behalf of the assessee at the time of hearing despite service of notices through RPAD. Perusal of the order sheet entries show that these appeals were fixed for hearing on a number of times and was last fixed for hearing on 30.11.2021 on which date the cases were adjourned to 27.01.2022 at the request of the learned Counsel for the assessee. Page 1 of 22
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However, on 27.1.2022 none appeared for which these appeals were fixed for hearing on 7.3.2022. Again on 7.3.2022, none appeared for which the appeals were adjourned to 10.03.2022. Since none appeared on 10.3.2022, notice through RPAD was sent fixing the appeals for hearing on 11.07.2022. However, when the name of the assessee was called today, none appeared on behalf of the assessee nor any adjournment application seeking adjournment of the cases was filed. Under these circumstances, we have no other option but to decide these appeals on the basis of material available on record and after hearing the learned DR.
Facts of the case, in brief, are that the assessee is a private limited company and filed its return of income declaring total income at Rs.54,55,800/-. The case was selected for scrutiny and the assessment order u/s 143(3) of the Act dated 30.12.2011 was passed determining the total income of the assessee at Rs.89,38,051/-. Subsequently, the Assessing Officer on verification of the assessment records noticed that the assessee has claimed Rs.22,72,67,203/- as sub-contract payments paid to MCC Projects Ltd. However, as per the TDS certificate issued to MCC Projects Ltd on 12.10.2009, it was noticed that the assessee has paid only Rs.15,53,04,930/- as sub-contract payments. This resulted excess allowance of expenditure by Rs.6,70,76,705/-. The Assessing Officer, therefore, after recording reasons reopened the assessment u/s 147 of the I.T. Act and issued notice u/s 148 of the Act. The reasons for reopening were also communicated to the assessee. Subsequently, the Assessing Officer issued statutory notices u/s 142(1) of the Act calling for certain information. In response to the same, the assessee filed requisite details from time to time. After considering the various submissions made by the assessee, the Assessing Officer completed the assessment Page 2 of 22
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determining the total income at Rs.9,56,37,043/- where he made addition of Rs.6,70,76,705/- being the discrepancies in the payments made to sub-contractor as per the claim made by the assessee and TDS certificate was issued by the assessee to the MCC Projects on the ground that the assessee failed to explain to his satisfaction regarding the discrepancies on excess allowances of expenditure.
The Assessing Officer similarly made addition of Rs.45,76,000/- on account of supervision commission on the ground that the assessee could not explain to his satisfaction for claiming such expenditure. Similarly, the Assessing Officer made an addition of Rs.19.00 lakhs on account of share application money on the ground that the assessee failed to substantiate the creditworthiness and genuineness of the transaction being the share application money from Smt. P. Sudha Rani. The Assessing Officer also made addition of Rs.48,85,568/- being sub- contract charges on account of failure to submit the details of TDS made on relevant items and to explain properly as to why the same should not be disallowed u/s 37 of the I.T. Act. The Assessing Officer further made an addition of Rs.82,60,719/- being inability of the assessee to explain the sundry creditors to this extent. Thus, the Assessing Officer determined the total income of the assessee at Rs.8,66,98,992/-.
Before the learned CIT (A), the assessee apart from challenging the additions on merit, challenged the validity of the re-assessment proceedings. However, the learned CIT (A) was not fully satisfied with the arguments advances by the assessee and
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upheld the validity of the re-assessment proceedings as well as the various additions on merits.
Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal by raising the following grounds of appeal: “1. Learned Commissioner of Income Tax (Appeals)-1- Hyderabad - [CIT(A)] has grossly erred on facts and in law. 2. (a). Learned CIT(A) is not correct in sustaining the reopening of assessment vi]«. 147 of by erroneously holding that the reopening fulfills all the conditions laid down by section 147 . (b). There is no tangible material for reopening the assessment. The assessment u/s 143(3) was originally completed on the basis of P&L AI c filed along with the return which had been subjected to extensive and intensive scrutiny during original assessment proceedings while the assessment has been reopened on the basis of the P&L AI c only without any other tangible material. (c). The reopening of assessment on the basis of facts and figures existing in the record and also scrutinized during original proceedings shows that reopening is on account change of opinion, on the same set of facts. (d). There is no nexus or live link between the reasons recorded u/s 148(2) of the I.T. Act and the belief entertained u/s 147 of the I.T. Act because A.O failed to appreciate that tax is deductible under the Act on the basis of actual payments made, that is on cash basis while the expenditure is booked on mercantile basis that is when the bills by the payee for contract works are accepted and passed by the assessee. Without prejudice to the above grounds, and Additional Grounds below: 3. CIT(A) has grossly erred in sustaining the addition of Rs. 6,70,76,705/- (22,23,81,631 - 15,53,04,930). 4. (a). A.O is not truthful in stating that assessee has not submitted any relevant details regarding his query about the difference between the payment made during the year to MCC projects of Rs. 15.53 crores and the expenditure claimed in the profit & loss A/c. at Rs. 22.23 crores. The details were submitted by A.R through letter dated 27th February 2014 and reiterated through letters dated 6th March 2014 and 10th Apri12014. Page 4 of 22
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(b). A.O has failed to consider the explanation that the expenses for the subcontract work executed for a total of Rs. 22,23,831/- in this year, consists of Rs. 15.53 Crores which was paid after deduction of tax in this year and Rs. 6,70,76,705/- which was paid as advance in the earlier year after deduction of tax against both of which work is executed in this year by the sub contractor MCC Projects Ltd. 5. (a). A.O is not justified in making addition of Rs. 45,76,000/- neither paid by MCC Projects Ltd nor received by the assessee. (b) CIT(A) is not justified in sustaining the addition on surmise that the assessee must have received commission. (c) CIT(A) has grossly erred in enhancing the commission amount over the amount assessed by the A.O and in estimating the same @ 10% without giving opportunity as required under law. Enhancement is legally invalid. (d) Enhancement is made on the basis of assumption that it could be taken @ 10% of gross receipts of MCC Projects Ltd. This is not in accordance with the agreement with Meenakshi Power Ltd & MCC Projects Ltd. CIT(A). Enhancement is against facts & law. The rate enjoined to be adopted is arbitrary and capricious. 6. (a) A.O is not justified in adding Rs. 19,00,000/- of Share Application Money invested by Mrs. P. Sudha Rani. (b) CIT(A) is not justified in sustaining the addition of Rs. 19,00,000/- on the ground that Mrs. P. Sudha Rani's LT return does not reflect the investment which is irrelevant. (c) Source of Rs. 19,00,000/- as received by cheque from P.A. Ramaiah (HUF) and confirmed by him cannot be held to have not been explained by the assessee. 7. (a) A.O is not justified in making addition of Rs. 48,85,568/- incurred for purposes of business on irrelevant considerations. He failed to notice receipt of advance of Rs. 30,00,000/- received from M/s. Viswanath Projects Ltd towards contract for constructing Electric Sub-station on which expenses were incurred right from 12.04.2008 up to 31.03.2009 against more than 200 invoices which is evident from relevant ledger account. Expenses incurred are for purposes of business allowable u/s.37(1) of the LT. Act. (b) CIT(A) is not justified in sustaining the addition of Rs. 48,85,568/- on the ground that documentary evidence regarding expenses and the ledger account was not submitted before her ignoring that the same was submitted as stated by the A.O in the assessment order. CIT(A)
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sustained the addition also on the erroneous impression that these expenses were already claimed in P&L A/ c. and that these expenses are being claimed once again which is not correct. 8. (a) The A.O is not justified in making addition of Rs. 82,60,719/- which is credit balance in the ledger account of Supreme Enterprises. (b) A.O has made the addition stating the absence of proof of payment to Supreme Enterprises as the reason for addition although the addition made is only after giving credit for the payments of amount in the ledger account of Supreme Enterprises. Approach of the A.O is contradictory in accepting payments to Supreme Enterprises on one hand but at the same time doubting the rest of the credits which all (credits and debits) relate to business. (c) A.O & CIT(A) failed to appreciate that the source of credits in Supreme Enterprises (S.E) ledger account represent L.Cs opened by assessee got discounted by S.E with banks/financial institutions. They also failed to appreciate that M/s. Global Trade Finance Ltd was paid by assessee from their acc Account with Andhra Bank against the discounted LCs. ADDITIONAL GROUNDS OF APPEAL 9. Reassessment proceedings are not legally valid. Fresh reasons other than those recorded are cited to justify reopening of assessment while disposing of objections of assessee. Reassessment proceedings are sought to be justified on the basis of surmises and conjectures other than on the basis of reasons recorded. Therefore reassessment proceedings are not valid. 10.Reassessment order made u f «. 143(3) r.w.s.147 is legally invalid because notice ii]«. 143(2) has not been issued within the statutory period of six months from the end of the financial year in which return has been filed in response to Notice u/s 148. The Judgement of Hon'ble Supreme Court in the case of ACIT v. Hotel Blue Moon (321 ITR 362) applies. Reassessment proceedings are not saved by sec. 292BB of LT. Act, where notice u/s 143(2) was not issued before the limitation date i.e. 30.09.2014 in the case. l1.The amount of Rs. 45,76,000/- added is not any other income that escaped assessment coming under explanation 3 to Sec. 147 of the LT. Act, 1961. Copy of sub-contract Agreement was furnished in the course of original assessment proceedings on 22.11.2011 and considered in the course of original assessment proceedings. No addition has been made in the original assessment. There are no new
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facts before the A.O in reassessment proceedings to change his opinion. 12.Rs. 19,00,000/- invested by Mrs. P. Sudha Rani is not any other income that escaped assessment coming under Explanation 3 to Sec. 147 of the LT. Act. A.O has erred on facts and in law in making the addition of Rs. 19,00,000/-. 13.During original assessment proceedings, the Authorized Representative through his letter dated 20th October 2011 filed confirmation letter of Smt. P. Sudha Rani and through letter dated 22nd November 2011 the confirmation letter from P.A. Ramaiah (HUF) for advance given to Mrs. P. Sudha Rani which were accepted and no addition made. There are no new facts before the Assessing Officer a in the case of reassessment proceedings to change his opinion to make the addition of Rs. 19,00,000/ -. 14.Amount of Rs. 48.85,568, - added is not income escaping assessment coming under Explanation 3 to Sec. 147 of the I.T. Act. During original assessment proceedings, books of account were called for and produced on 12th July 2011, inventories were called for which were filed on 20th October 2011, TDS reconciliation were filed on 22nd November 2011 and statement of details of party -wise purchases filed on 12th July 2011. At the time of original assessment A.O accepted this expenditure. There are no new facts in the reassessment proceedings before the A.O to change his opinion and make the addition. 15.Amount of Rs. 82,60,719/- added is not income that escaped assessment coming under Explanation 3 to Sec. 147 of the I.T. Act because at the time of original assessment books of account were produced for verification and statement of details of creditors/ liabilities were furnished on 12th July 2011 in response to notices u/s 143(2)/142(1) dated 18.05.2011 calling for the same. Assessment was made u/s. 143(3) after considering the credit balances in the accounts. There are no new facts before the A.O in the reassessment proceedings to change his opinion. 16. For these and any other grounds that may be raised at/before the date of hearing of appeal, it is prayed that the reassessment be held as invalid in law or alternatively delete all the additions made”.
We have heard the learned DR and perused the record. So far as the grounds relating to validity of re-assessment proceedings are concerned, we find the learned CIT (A) while deciding the issue has observed as under:
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“5.4 The appellant has not pointed out any technical mistake regarding the reopening of the assessment. However, on issues/grounds for reopening appellant has submitted that these additions are not to be made during this year. The reasons given by the appellant does not have any validity in terms of reopening of assessment based on further findings. The reopening fulfills all the conditions laid down by section 147. Hence the ground is dismissed”.
Since nothing has been brought before us to take a contrary view than the view taken by the learned CIT (A), we do not find any infirmity in the order of the learned CIT(A) on this issue. Accordingly, the grounds challenging the re-assessment proceedings are dismissed.
So far as the grounds challenging the addition of Rs.6,70,76,705/- towards excess allowance of expenditure is concerned, we find the learned CIT (A) while deciding the issue has observed as under:
“6.2 Before me, the appellant claimed that it maintains a current account with MCC Projects (P) Ltd, sub-contractor of the appellant. Apart from receiving invoices from MCC Projects during the course of the contradict also makes advance payments for ease of business. The appellant submitted that it had already an advance lying with MCC Projects Pvt Ltd from the preceding AY 2008-09 of Rs.7.21 crores, on which TDS was deducted and remitted during that year. During the AY 2009-10, when the contract purchase of Rs.22.23 crores was booked, the assessee deducted this advance payment of R.7.21 crores (on which TDS was already effected) and calculated TDS on the balance Rs.15,53,04,930/-, which is reflected in the form 16A issued by the assessee to 1'-1CC Projects Pvt Ltd. 1herefore, addition of Rs,6,70,76170S/- made by the Assessing Officer stating that TDS was not deducted is incorrect. 6.3 The appellant submitted payments made to i\~CC projects Vis-a-vis contract purchases along "with TDS details from AY 2006-07 to A.Y 2009-10. However, it is seen from the submissions, that there have a shortfall In TDS deductions on the advances/bills raised towards M/s, MMCC Projects Pvt Ltd.
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A.Y Advance TDS TDS @ 2% Shortfall in Contract Balance with paid/bills deducted TDS purchase MC Projects raised 2006-07 10,21,19,000 11,46,000 20,42,180 8,96,180 - 10,21,09,000 2007-08 9,06,06,808 10,16,608 18,12,136 7,95,528 15,72,82,072 3,54,33,736 2008-09 9,72,74,951 10,48,432 19,45,499 8,97,067 6,05,48,861 7,21,59,826 2009-10 15,53,04,930 17,59,604 31,06,099 13,46,495 22,23,81,635 50,83,121
From the above, it is clear that there is shortfall In deduction of TDS for last four years. I direct the Assessing Officer to verify non-deduction of Taxes at Source (TDS) over the last four years, as per law, then if found correct to treat the appellant as Assessee in default u/s.201(1A). 6.4 Coming to the issue raised in the appeal. as per P&L account appellant has claimed payment to son-contractor Rs.22,72,67,203/-. As per TDS deducted (TDS certificates) filed before me and the Assessing Officer, the payment during the year has been only Rs 15,53,04,930/" The difference of subcontract amount paid is R.7,19,62,273/- On verification, it was submitted by the appellant that this amount relates to earlier year advance payment and for which TDS has already been deducted. Hence, it is seen that the amounts have been paid to lt5 sob· contractor MI5. MCC Projects Pvt Ltd without proper deduction Taxes at source. Appellant has been claiming subcontract payments as expenditure in the P&L A/c every year. It is pertinent to point out the decision of Hon’ble AP High Court in the case of Y. Rathiesh Vs CIT (2015) 124 DTR 283, where it was held that unless the very income subjected to TDS is offered for taxation no credit can be taken under TDS u/s.198. 6.5 As per appellant's own submission, this amount relates to the payments. made earlier years and not paid during the year. Appellant has submitted ledger account of M/s. MCC Projects Limited for the FY 2007-08 and FINANCIAL YEAR 2008-09. It is seen on 31.03.2008, appellant has made journal entries of Rs.6,05,48,861/- and Rs.8,03,55,282/- by contract by M/s. Meenakshi Power Limited respectively totaling to Rs.14,09,04,143/=. These are just journal entries no actual payment have been made. The TOS for Rs.14,09,04,143/- works out to be @l% (sub-contract) Rs.14,09,041/-. As per ledger account and TDS certificate dated 23.09.2009 for the year 1.4.2007 to 31.3.2008, no TDS has been deducted while making this payment. Hence, it cannot be said that this amount of Rs.6,70,76,705/- paid during the previous financial year. In light of all these findings, it is dear that the appellant submission is incorrect on this issue, Assessing Officer contention is correct that no actual payment has been made, nor TDS has been deducted on the balance amount
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Rs.6,70,76,705/-. I uphold the addition of differential amount, made by the Assessing Officer. Ground Dismissed”.
Since the learned CIT (A) has passed a detailed order giving justification for sustaining the addition, we do not find any infirmity in his order in absence of any contrary material before us. Accordingly, the order of the learned CIT (A) is upheld and the grounds raised by the assessee challenging the above addition is dismissed.
So far as the grounds challenging the enhancement of disallowance from Rs.45,76,000/- to Rs.2,27,53,764/- towards supervision commission is concerned, we find the learned CIT (A) while deciding the issue has observed as under: “7.2 Before me, the appellant submitted that they had received contract from M/s. Meenakshi P Ltd and sub- contracts it to M/s. MCC Projects. TDS deducted by M/s. Meenakshi power Ltd on the payments it makes to the assessee and likewise the assessee deducts TDS before remitting any amount to M/s. MCC Projects. During the AY 2009-10, the assessee has not received any supervision commission from M/s. MCC Projects Ltd. Moreover, only the gross amount of Rs.22,7S,37,648/- is shown as 'Contract Receipts' by the assessee ln its Profit and Loss account. which includes the TDS amount of Rs.45,76,OOO/-. Hence the Assessing Officer is not justified in adding the TOS amount of Rs45,76,000/- as the assessee had not received any supervision commission during the year from M/s. MCC Projects Ltd. In fact, the supervision commission has not been received in any of the years till date. Nor any account entry made being debit or credit. 7.3 It Is seen from the annual accounts, the assessee has claimed contract receipts of Rs.22,75,37,648/- and also claimed the same amount as expenditure. Summarily, it is seen that no contract income has been offered by the appellant. On further verification, It is seen that the appellant has entered an agreement with M/s. Meenakshi Power (P) Ltd. As per the submissions made before the Assessing Officer and before me, the appellant has not received any supervision commission for the contract received of Rs.22,75,37,648/-. It is pertinent to note that M/s. Meenakshi Power Pvt Ltd and M/s. MCC Projects Pvt Ltd are group companies. The appellant has not submitted Page 10 of 22
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anything on the issue as to why the appellant has acted as post office for the payment. If this contract received as shown in the P&L account as income and same shown as expenditure only shows it is a sham transaction and that is what the appellant try to submit before me. However, the appellant has categorically submitted that there Is an agreement between M/s. Meenakshi Power Ltd and the appellant. Hence, there should have been an income for supervision commission of the contract or else the whole transaction of getting contract and giving it to sub- contracting falls short of invalid transaction. In case we agree the submission of the appellant which only shows that the appellant has not got its books properly audited as no remarks have been made in the audit report of annual accounts. Since as per the TDS certificate, the amount of outflow after this contract has been only to the extent of Rs.l,55,304,903/-, the balance amount should be taken as commission on part of appellant paid by M/s. Meenakshi Power Ltd. 7.4 I agree with the Assessing Officer that commission must have been received for sub-contracting work. However, the quantum of addition made by the Assessing Officer of Rs,45,76,0001- has no basis. Even if, we take commission of 10%of the gross receipts which works out to be Rs, 2,27,53,764/-(10% of 22,75,37,648/-) should have been received from M/s. Meenakshi Power Ltd as commission for supervision. I enhance the addition made by the Assessing Officer to Rs.2,27J53,764/-. Ground Dismissed”
Since the learned CIT (A) has elaborately discussed the issue which is a factual one and there is nothing before us to take a contrary view than the view taken by the learned CIT (A) on this issue, therefore, we uphold the enhancement of addition to Rs.2,27,53,764/- as against 45,76,000/- made by the Assessing Officer. The grounds raised by the assessee on this issue are accordingly dismissed.
So far as the grounds challenging the addition of Rs.19,00,000/-received from Smt. P. Sudha Rani towards share application money is concerned, we find the learned CIT (A) while deciding the issue has observed as under:
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“8.2 Before me, the appellant submitted that Rs.19,OO,OOO/- was paid by Smt. P. Sudha Rani from her HUF bank account. The appellant :submitted copy of the bank statement and confirmation received from Smt. P. Sudha Rani. The appellant submitted that it is not correct on the part of the Assessing officer to ask for the bank statement of Smt. P .Sudha Rani, since the assessee cannot request the lender of money to provide her bank statement, which is against the persona! and confidential nature of the account of the lender. The disallowance has been made only on the ground that the bank statement of the creditor was not produced by the assessee, which is absurd in the very nature of human relations. 8.3 The appellant has submitted that the share application money was received from Smt. P. Sudha Rani to the tune of Rs.19 lakhs through RTGS dated 3rd October, 2008 from the account of Sri P.A. Ramaiah, HUF account. By letter dated 16.01.2011, Smt. P. Sudha Rani submitted; "With reference to the above subject, I have invested in M/s. Achyuta Electricals Pvt Limited for Rs.19,OO,OOO/- (In Rupees Nineteen Lakhs only) Through RTGS dated on 3rd October 2008, from P.A. RAMAIAN (HUF) a/c. The amount was paid to him during earlier years, as Share Application Money in the FY 2008-09.” Appellant submitted Income tax return of Srnt. Sudha Rani Paluvur showing taxable income of Rs.99,790/- for the AY 2009-10. The appellant also submitted the computation of taxable income of Smt. P,Sudha Rani, W/o. of Sri P.A. Ramaiah showing that she has received salary from MI5. G.P. Associates. It Is important to submit that audit of the annual accounts has been done by MI5. G.!'. Associates. It is very dear that Smt. P. Sudha Rani does not have financial creditworthiness to apply for a shares in the appellant's company. Also, it is seen in the bank account of Sri P.A. Ramaiah, Corporation Bank Ale No.0591, submitted by the appellant, the same amount is not reflected on the date mentioned in the submission dated 16.07.2011(seen above). There is a payment Rs.19,02,245/-on 03.10.2008. However, just two days before i.e.,01.10.2008 by Cheque No.201230, Andhra Bank, an amount of Rs.19,181,OOO/- was received in the account. It is not clarified by the appellant that as to how the appellant has received similar amount of money a day before issuing money for share application money. The appellant had submitted that the appellant company had LC limit of Rs.150.00 lakhs with Andhra Bank, Balanaqar branch, Hyderabad. This makes the whole transaction doubtful. 8.4 in absence of any submission regarding this, the creditworthiness of the appellant is very much doubted. It
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is also not confirmed whether the cheque/RTGS payment from Sri P.A. Ramaiah, Husband of Smt. P. Sudha Rani, has a PAN number or Income tax assessee. It is very important to note that the share application made in name of Smt. P. Sudha Rani is not reflected in her I.T return. In light of the above, it is dear that the appellant tI9S not enable to prove as to whether Smt. P .Sudha Rani has the capacity to invest, and even she has taken loan from her husband, she has not reflected in her Income tax return. In this background, 1 uphold addition made of Rs.19,OO,OOO/- by the Assessing Officer. Ground Dismissed”
Since the learned CIT (A) while sustaining the addition has elaborately discussed the issue and there is nothing before us to take a contrary view than the view taken by the learned CIT (A), we do not find any infirmity in his order on this issue. Accordingly, the order of the learned CIT (A) on this issue is upheld and the grounds raised by the assessee are dismissed.
So far as the grounds challenging the disallowance of Rs.48,85,568/- towards sub-contract charges is concerned, we find that the learned CIT (A) while deciding the issue has held as under: “9.2 Before me, the appellant submitted Rs48,58,568/- consists of sub-station work which was sub-contracted to multiple parties. Since the nature of work necessarily Involves incurring different types of expenditure like purchases, labor charges, meals expenses, etc. for completion of the contract and without incurring these expenses, it would not be possible to execute a contract/sub-contract, the total expenditure has been accounted under the head sub- contract charges' in the P&L account. Since these expenses were incurred wholly and exclusively for the purpose of business only, the Assessing Officer is not justified in d1sallowing the amount of Rs,48,58,S68/- u/s.37 of the IT Ac 1961. The Supreme Court has interpreted the provisions of section 37 in several cases holding that the expression 'for the purposes of business' is very wide in nature. The Assessing Officer has not denied that the expenses were not incurred for the purpose of business. The Items like meals, tube lights transport, petrol, engine oil, labour charges, cooking items, watchman’s salary could not be either personal expenses or expenses of a capital nature which Page 13 of 22
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alone are disallowable u/5.37(1) of the 1.T Act. The disallowance made is on the basis of A.01s subjective judgment of the accounts and the dis-allowability of the expenses actually incurred. 9.3 The appellant has considered Rs.48,85,568/- as part of sub-contract charges and these expenses are relating to business like meals, tube lights, transport, petrol, engine oil, labour charges, cooking items, watchman's salary. Appellant has not submitted to whom these payments were made nor was any ledger account submitted before me. Except written submission no evidence, vouchers, invoices, ledger accounts was submitted by the appellant. However, as per the P&L account, appellant has already claimed expenses under the head of Power and fuel, transport charges, staff welfare expenses and consumables. Hence, I do not agree that Rs.48,8S,568/- relates to expenditure paid as part of sub- contract charges. In absence of documentary evidence regarding the expenses; addition made by the Assessing Officer is upheld. Ground Dismissed”.
Since the assessee failed to produce any documentary evidence regarding the expenses for which the learned CIT (A) sustained the addition and since nothing has been brought before us to take a contrary view than the view taken by the learned CIT (A) on this issue, we do not find any infirmity in the order of the CIT (A) on this issue. Accordingly, the same is upheld and the grounds raised by the assessee on this are dismissed.
So far as the grounds challenging the addition of Rs.82,60,719/- towards payments towards Global Trade Finance through Supreme Enterprises (creditor) is concerned, we find while deciding the issue, the learned CIT (A) has held as under:
10.2 Before me, the appellant submitted ledger account of Supreme enterprises starts with an opening balance of Rs.19/00,.OOO/-. The appellant submitted that the appellant company had Le limit of RS.15CI,OO lakhs with Andhra Bank, Balanagar branch, Hyderabad. LCs were opened in favour of M/s. Supreme Enterprises for a period of 90 days and on expiry, M/s.Supreme Enterprises remitted funds to the appellant company. Whatever, charges and interest for the le period was debited in the
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appellant's books of accounts. No commission was paid to them and neither appellant company received any cash nor paid any cash to them. The appellant submitted that the explanation was already submitted to the Assessing Officer which Is not considered. The appellant submitted that the Assessing officer failed to notice the continuity of the transactions coming from the earlier year and going into tater year. Hence, the appellant submitted that the addition made u/s.68 is liable to be deleted. 10.3 Appellant submitted before me, ledger account of M/s. supreme Enterprises in the books of the appellant. It is submitted before me that ~4/s. Supreme Enterprises are sundry creditors providing Le for 90 days. However, no commission was paid to them and it is only a transaction in the books. During the year, the appellant has made transactions for an amount of Rs.2,22,43,092/- with a debit balance of Rs.82,60,719/-. All these submissions are as per the ledger account in the books of the appellant. No confirmation was submitted regarding the transaction. Appellant could not submit any confirmation from M/s. Supreme Enterprises regarding the transaction or the opening and closing balance. From the ledger account, it shows that these payments were not made through banks. In absence of any cross-confirmation, the contention of the appellant is not accepted. Hence ground is dismissed. Ground Dismissed”.
Since the learned CIT (A) has decided the issue against the assessee on the ground that neither any confirmation was submitted, nor any other documentary evidence were produced before us and since nothing has been brought before us to take a contrary view than the view taken by the learned CIT (A) on this issue, we do not find any infirmity in the order of the learned CIT (A) on this issue. Accordingly, the grounds raised by the assessee on this issue are dismissed.
In the result, the appeals filed by the assessee is dismissed.
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ITA No.1190/Hyd/2017 – A.Y 2011-12 20. Facts of the case, in brief, are that the assessee filed its return of income on 27.9.2011 declaring total income of Rs.36,88,387/-. The Assessing Officer completed the assessment u/s 143(3) on 3.3.2014 determining the total income at Rs.1,10,00,200/- wherein he made the following addition: Income returned Rs.36,88,387 Add: Towards fee for increase in authorize share capital (as Rs. 1,00,000 discussed at Para 2) Add: Rs.22,633/- as exceeded on delayed payment as well as PLA Rs. 22,633 (as discussed at Para 3) Add: Rs.1,34,335/- is disallowed u/s 40(a)(ia) ( as discussed at Para Rs. 1,34,335 4) Add: Share application money is treated as unexplained credits u/s Rs. 5,90,000 68 (as discussed at Para 5) Add: Share application money is treated as unexplained credit u/s Rs. 1,09,114 68 (as discussed at Para 6) Add: In the absence of any details and compliance to notice u/s Rs.54,00,000 142(1), the entire amount of Rs.54,00,000/- is treated as unexplained credit (as discussed at Para 7) Add: Excess credit shown by the assessee to the extent of Rs. 6,66,200 Rs.6,66,200/- (as discussed at Para 8) Add: In the absence of information and TDS particulars on the Rs. 2,89,531 interest payments (as discussed at Para 9)
Before the learned CIT (A), the assessee reiterated the same submissions as made before the Assessing Officer. However, the learned CIT (A) was not satisfied with the argument made by the assessee and dismissed the appeal.
Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds: “1. Learned Commissioner of Income Tax (Appeals)-1, Hyderabad [CIT(A)] has erred on facts and in law. 2. Learned CIT(A) and the Assessing Officer (A.O.) have dealt with the Appeal Grounds & assessee's explanations in a very summary manner without giving adequate & meaningful opportunity to furnish the details considered necessary by them. 3. Learned CIT(A) and A.O. have erred respectively in sustaining and disallowing the expenditure of Rs.22,633j- Page 16 of 22
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incurred towards penal interest on account of delay in payment of excise duty and other taxes. The interest liability is compensatory in nature and not a penalty. 4. Learned CIT(A) has erred in sustaining the addition of Rs.5,90,000/-u/s. 68 of the I.T. Act in respect of the Share Application Money of Sri Mahesh Kumar, though the source is out of his withdrawals from the same account and although there is actually a decrease in Share Application Money during the year. 5. Learned CIT(A) has erred in sustaining the addition of Rs. 1,09,114/- u/s 68 of the I.T. Act in respect of the Account of Sri Kalyan Chakravarthy presuming that Rs.1,09,114/-was invested by him in Share Application Money while that is the decrease in his Share Application Money Account. 6. Learned CIT(A) has erred in sustaining the addition u/s. 68 of the I.T. Act of the credit of Rs. 54,00,000/- in the Share Application Money ledger account of M/s A P Transmissions although the amounts comprising it are received by way of RTGS through bank. A P Transmissions is an assessee to income tax and the A.O. has made addition without verifying the explanation. 7. Learned CIT(A) is not justified in sustaining the addition of Rs.6,66,200/- made by A.O. u/s. 68 of the Income Tax Act on the basis of entries in the books of Splash Media & Infra Ltd without supplying to the assessee the account copy obtained by him u/s 133(6) of the Income Tax Act. 8. Learned CIT(A) is not justified in sustaining disallowance of Rs.2,89,531/- u/s 40(a)(ia), on account of transaction with G.E. Money although that amount is not claimed as expenditure. 9. For these and any other grounds of appeal that may be raised at/before the date of hearing it is prayed that all the additions made u/s 68 of the Income Tax Act, disallowances u/s 37(1) & 40(a)(ia) be deleted”.
We have heard the learned DR and perused the record. We find the learned CIT (A) while dismissing the appeal filed by the assessee has observed as under: “4. Decision: The facts of the case and the order passed by the A.O have been carefully considered. 5. Ground No. 1. & 8 are general in nature. 6 Ground No.2 Addition of Rs.22,633/- towards penal interest:
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6.1 During the assessment proceedings, the Assessing Officer noticed that the assessee has paid an amount of Rs.22,663/- as exceeded on delayed payment as well as PLA. Since this payment is penal in nature, the same was disallowed by the Assessing Officer. 6.2 Before met the appellant submitted that Rs.22,633/- was paid towards penal interest on account of delay ln payment of excise duty and other taxes. The interest payment is compensatory in nature and not penal in nature. 6.3 During the appeal proceedings, the appellant did not submit any details or documentary evidence to substantiate that the payment was made towards penal interest on delay in payment of excise duty and other taxes. In the absence of any proof, the appellant’s contention cannot be accepted. Hence, I agree with the addition made by the Assessing Officer. Ground Dismissed 7. Ground No.3 Addition u/s 68 of Rs.5,90,000/- towards unexplained credit by Sri V. Mahesh Kumar. 7.1 During the assessment proceedings, the Assessing Officer noticed that the assessee filed confirmation letter regarding confirmation letter regarding contribution to share application money from Sri V. Mahesh Kumar for an amount of Rs.2.75 lakhs. However, as per the details filed it is seen that during the year Sri V. Mahesh Kumar has contributed Rs.5,90,000/- towards share application money. However, the assessee company stated that it has received only Rs.1.6 lakhs from the above Sri Mahesh Kumar. Contrary to this, the account copy of Sri Mahesh Kumar shows only Rs.2.75 lakhs as payment made to the company towards share application money. The Assessing Officer concluded that in view of the above contradictions the confirmation given by Sri Mahesh Kumar is not accepted as genuine and treated the entire amount of Rs.5.9 lakhs credit in the name of Sri Mahesh Kumar share as application money, as unexplained credits u/s 68. 7.2 The applicant submitted that the Assessing Officer is not justified in making addition of Rs.5,90,000/- received from Sri V. Mahesh Kumar towards share application money. The appellant submitted that Rs.2,75,000/- was received by cheque and Rs.1.6 lakhs was received in cash, this is borne out by the entries in a/c maintained in usual course. The appellant submitted that the Assessing Officer has failed to notice that Sri Mahesh Kumar was paid back a sum of Rs.10 lakhs during the year. This fact goes to show the genuineness of transaction. Sri Mahesh Kumar is an income-tax assessee. Hence, the appellant submitted that the addition of
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Rs.5,90,000 made by the Assessing Officer is not justified without obtaining any evidence from Sri Mahesh Kumar. 7.3 During the appeal proceedings, the appellant did not submit any details, 7.3 bank statements or confirmation letter regarding the genuineness of transaction made with Sri V.Mahesh Kumar for an amount of made with Sri V.Mahesh Kumar for an amount of Rs.5,90,000/-. In absence of any proof, the appellant's contention has no strength. Hence, I agree with the addition made by the Assessing Officer. - Ground Dismissed 8. Ground No.4 Addition u/s 68 of Rs. 1,09,114/- towards unexplained credit by Sri Kalyan Chakravarthy 8.1 During the assessment proceedings, the Assessing Officer noticed that during the year share application money was contributed by Sri Kalyan Chakravarthy of Rs. 1,09,114/-. The assessee did not submit any confirmation letter regarding contribution of share application money by Sri Kalyan Chakravarthy. Accordingly, the Assessing officer treated the same as unexplained credit u/s. 68 and added to the income returned. 8.2 The appellant submitted that the Assessing Officer erred in making addition of Rs. 1,09,114/- u/s 68 of the IT Act. This is the returned to Sri Kalyan amount Chakravarthy, Managing Director and is not in nature of credit the u/s 68 of the IT Act. 8.3 During the appeal proceedings, the appellant did not submit any details, bank statements or confirmation letter regarding the amount returned Sri Kalyan Chakravarthy. In absence of any proof, the appellant's contention not accepted. Hence, I agree with the addition made by the Assessing Ground Dismissed. Ground No.5 Addition of Rs. 54,00,000/-towards unexplained credit by M/s.AP Tranmission, Islampet, Ongole 9.1 During the assessment proceedings, the Assessing Officer noticed that an amount of Rs.54,00,000/- received from M/s.AP Transmissions, 37-1-159(18), Islampet, Ongole as share application money. The assessee had not furnished the confirmation, account copy or any particulars of receipt before the Assessing Officer. In the absence of any details and compliance to the notices issued, the Assessing Officer treated the entire amount of Rs.54,00,000/- as unexplained credit. 9.2 The appellant submitted that the Assessing Officer was not justified in making addition of Rs.54,00,000/- received from M/s.AP Transmissions Islampet, Ongole which was
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received by way of RTGS from Bank account of AP Transmission. The appellant submitted that the Assessing Officer was not justified in making huge addition without carrying out any verification. 9.3 During the appeal proceedings, the appellant did not submit any details of bank statements or documentary evidence regarding the share application an amount of from M/s.AP Transmissions for money received Rs.54,00,000/-. In absence of any documentary evidence, the appellant's contention is not accepted. Hence, I agree with the addition made by the Assessing Officer Ground Dismissed 10. 0. Ground No.6 Addition of Rs. 6,66.200/-towards excess credit in the case of M/s. Splash Media B& Infra Ltd. 10.1 During the assessment proceedings, the Assessing Officer noticed from me information received from u/s. 133(6) from M/s.Splash Media & Infra Ltd., that there is excess credit shown by the assessee to the extent of Rs.6,66,200/- Hence, the Assessing Officer added Rs.6,66,200/- u/s.68. 10.2 The Appellant submitted that the Assessing Officer is not justified in making addition of credit of Rs.6,66,200/- in the ledger account of M/s.Splash Media and Infra Limited. The appellant submitted that this amount was a genuine credit which has been repaid in the subsequent years. The appellant submitted that lack of corresponding entry in the books of M/s.Splash Media and Infra Limited cannot be used as evidence against the assessee especially when the assessee actually repaid the money in subsequent years. 10.3 During the appeal proceedings, the appellant did not submit any details or ledger account copy or confirmation letter from M/s. Splash Media and Infra Limited. In absence of any documentary evidence, the appellants contention has no strength. Hence, I agree with the addition made by the Assessing Officer - Ground Dismissed 11. Ground no.7 Addition of Rs. 2.89.531/-u/s 40(a) (ia) 11.1 During the assessment proceedings, the Assessing Officer noticed that the assessee had repaid the loan to the extent of Rs. 2,89,531/- to M/s. GE Money and has not given the breakup of interest. The Assessing Officer concluded that in absence of any information and TDS particulars on the interest payments, the entire amount represents the interest portion and disallowed u/s.40(a)(ia).
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11.2 The appellant submitted that the Assessing Officer was not justified in making the addition of Rs.2,89,531/-. The appellant submitted that this amount had not been claimed as expenditure and therefore, the disallowance made by the Assessing Officer is incorrect. 11.3 During the appeal proceedings, the appellant did not submit any details regarding the repayment of loan to the extent of Rs.2,89,531/- to M/s. GE Money. The appellant also not submitted any confirmation letter from M/s.GE Money. In absence of any documentary evidence, the appellant's contention is not accepted. Hence, I agree with the addition made by the Assessing Officer - Ground Dismissed. 12. In the result, the appeal is DISMISSED.”
After hearing the learned DR and perusal of the order, we do not find any infirmity in the order of the learned CIT (A). We find the learned CIT (A) while deciding the appeal has elaborately discussed the issue and passed a very reasonable and speaking order. There is nothing before us to take a contrary view than the view taken by the learned CIT (A). We, therefore, uphold the order of the learned CIT (A) and the grounds raised by the assessee are dismissed.
In the result, both the appeals filed by the assessee are dismissed.
Order pronounced in the Open Court on 15th July, 2022. Sd/- Sd/- (LALIET KUMAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 15th July, 2022. Vinodan/sps
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Copy to: S.No Addresses 1 M/s. Achyutha Electricals & Industries Pvt. Ltd, Shed No.5B, Plot No.47, C.I.E (Extn.) Gandhi Nagar, Hyderabad 500037 2 Dy.CIT, Circle 11(1) 7th Floor, IT Towers, AC Guards, Hyderabad 3 CIT (A)- 1,Hyderabad 4 Pr. CIT-1, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File
By Order
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