THE DCIT, CIRCLE-4(1) (1), , AHMEDABAD vs. SANGHI INFRASTRUCTURE LTD.,, AHMEDABAD

The assessee has raised the following grounds of appeal:

The first issue raised by the Revenue is that the Ld. CIT(A), erred in deleting the addition made by the AO for Rs. 33,75,921/- being the amount of interest attributable on the diversion of loan fund.

The facts in brief are that the assessee in the present case is a Limited company and engaged in the business of providing Dredger and other Infrastructure Facilities. The AO during the assessment proceedings found that the assessee on one hand has borrowed the fund and incurred interest cost thereon and likewise, on the other hand, the assessee has advanced money without charging any interest thereon to its different group concerns. Accordingly, the AO was of the view that the assessee has diverted interest bearing funds for non-commercial purposes. Thus, the AO computed amount of Rs. 33,7951/- being 14% of the interest free loans and advances of Rs. 2,41,13,723/- and added to the total income of the assessee.

The Ld. CIT(A), after considering the submission made by the assessee has deleted the addition made by the AO by observing as under: 6.2 1 have considered the assessment order, facts of the case and the submissions made by the appellant. A perusal of the same shows that identical issue was before the Id. Hon'ble C1T(A) for the preceding two years as well wherein on identical, facts the CIT(A) has deleted the disallowances made on account of interest expenditure. Further, it has also seen that the appellant's case is squarely covered by the decision of Hon'ble Gujarat High Court in the case of C1T Vs. Raghuvir Synthetics 36 Taxinan.com 275 and by the decision of Hon'ble Supreme Court in the case of Hero Cycles [PJ Ltd. Vs. CIT in Civil Appeal No. 51 of 2008. Following the decision of Hon'ble Courts as discussed supra and the decision of my ld. predecessors for the preceding two years, the disallowance of Rs.33,75,921/- made by the AO u/s. 3fi(L)[iii] is deleted. Ground of appeal No.2 is allowed.

Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Both the Ld. DR and Ld. AR vehemently supported the order of the authorities below as favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the interest was disallowed by the AO on the reasoning that there was diversion of interest bearing fund for non-commercial purposes. Admittedly, the interest free fund available with the assessee exceeds the amount of interest free advances

The second issue raised by the Revenue is that the Ld. CIT(A), erred in deleting the addition made by the AO for Rs. 52,58,144.00 on account of mismatch in the income reported in the profit and loss account vis-à-vis form 26AS.

The AO during the assessment proceedings found the difference between the income reported in form 26AS and in the profit and loss account with respect to one party namely M/s Dharti Dredging & Infrastructure Ltd. amounting to Rs. 52,58,144/- only. It was contended by the assessee that the party namely M/s Dharti Dredging & Infrastructure Limited has claimed service expenses on provisional basis in the year under consideration though there was no income accrued to it (the assesse) from the party. As such the assesse has offered the income from the M/s Dharti Dredging & Infrastructure Limited in the subsequent assessment year. However, the AO disagreed with the contention of the assessee on the reasoning that the assessee failed to file the confirmation from M/s Dharti Dredging & Infrastructure to justify that such expenses were claimed on provisional basis. The AO further observed that under the Mercantile System of Accounting the income has to be accounted in the year in which the services were rendered. There was no submission from the assessee that it has not rendered services to the party in the year under consideration. Therefore, the same was added to the total income of the assessee.

Aggrieved, assessee preferred an appeal to the Ld. CIT(A).

The assessee before the Ld.CIT(A), has filed the reconciliation statement placed on page 9 of Ld. CIT(A) order wherein it was demonstrated that the income to the tune of Rs. 49,63,500/- has been booked in the Financial Year 2012-13 whereas the TDS was deducted by the party in the Financial Year 2011-12.

The Ld. CIT(A), after considering the submission of the assessee allowed the grounds of appeal of the assessee in part subject to verification by the AO by observing as under:

Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Both the Ld. DR and Ld. AR before us vehemently supported the order of the authorities below as favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the income of Rs. 49,63,600/- has been offered to tax in the Assessment Year 2013-14 and thus, if any addition is made in the year under consideration than it will lead to the double addition which is unwarranted under the provision of law. Thus, we are of the view that the Ld. CIT(A), has rightly directed the AO to delete the addition made by him after necessary verification. Thus, we hold that there is no infirmity in the order of the Ld. CIT(A) and accordingly ground of appeal of the Revenue is dismissed.

The third issue raised by the revenue is that the Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 25,18,460.00 and 35,53,900.00 on account of suppression of income.

The AO during the Assessment proceedings found that the assessee has reduced its income in the profit and loss account by the amount of Rs. 57,40,491/- only. It was contended by the assessee that there was invoice raised in the name

The aggrieved assessee preferred an appeal before the learned CIT(A).

The assessee before the Ld.CIT(A), contended that there was reversal of income of Rs. 57,40,491.00 which was reduced from the profit and loss account. Further this amount was finally settled at Rs. 32,22,031/- by raising the invoice in the name of Larsen & Turbo. As such the assessee is very much entitled to claim the bad debt for the invoice raised in the name of M/s Meka Dredging Pvt. Ltd. for Rs.57,40,491/- and therefore there cannot be any addition to the total income of the assessee.

Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Both the Ld. DR and Ld. AR before us vehemently supported the order of the authorities below as favourable to them.

We have heard the rival contention of both the parties and perused the materials available on record. From the preceding discussion, we note that the claim of the assesse was allowed by the Ld. CIT(A), after carrying out the necessary verification as discussed above. Admittedly, if the income has been offered to tax for Rs. 57,40,491/- then the assessee can claim the bad debts under the provision of section 36(1)(vi) of the Act. Likewise, if the income has been debited in the name of Larsen & Turbo for Rs.35,53,900/-, then there is no un-reported of income as alleged by the AO. Nevertheless, the Ld.CIT(A), has given relief to the assessee subject to the necessary verification to be done by the AO. Thus, we do not find any infirmity in the order of the Ld.CIT(A), and uphold the same. Hence, the ground of appeal of the revenue is hereby dismissed.

The fourth issue raised by the revenue is that the Ld.CIT(A), erred in deleting the addition made by the AO for Rs. 68,694/- on account of cessation of liability.

The AO during the assessment proceedings found mismatch in the balance shown by the assessee vis-à-vis the balance reflecting in the books of accounts of the party namely M/s. K.B. Shipping & Company. The difference was of Rs. 26,485/- only.

Aggrieved assessee carried the matter before the Ld.CIT(A), wherein it was submitted that the it was not in the knowledge that the party has written off the sum of Rs. 42,479/- as bad debts in its books of accounts.

The Ld.CIT(A), after considering the submission of the assessee has allowed the ground of appeal after necessary verification to be done by the AO by observing as under:

Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Both the Ld. DR and Ld. AR before us vehemently supported the order of the authorities below as favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. As far as cessation of liability is concern for Rs. 42,470/-, we note that the assessee has not disputed for the same and therefore the same represent the cessation of liability and therefore the same is liable to be added. As regard to difference in the opening balance of Rs.15,994/- pertaining to the earlier year, we find that the Ld.CIT(A) has allowed deduction to the assessee subject to the necessary verification to be done by the AO. We find no infirmity in the direction of the Ld. CIT(A). However, we find that the Revenue has challenged the deletion of addition of Rs.68,994/- in the ground of appeal which to our understanding is not correct. It is for the reason that the Ld. CIT(A), has not given any relief to the assessee with respect to the cessation of liability of Rs.42,470/- as the same has been confirmed. Thus, there should not be any grievance to the Revenue with respect to such addition. Thus, the ground of appeal of the Revenue is dismissed.

The last issue raised by the Revenue is that the Ld. CIT(A), erred in deleting the addition made by the AO for Rs. 33 lakhs on account of cessation of liability under the provision of section 41(1) of the Act.

The AO during the assessment proceedings found that the assessee has shown liabilities in its books of accounts for Rs.33 lakhs in the name of M/s.Wartsial India Limited. But the assessee has not furnished the necessary details such as

The assessee carried the matter before the Ld.CIT(A), wherein it was contended that the liability in the name of M/s Wartsial India has been settled in the next year and therefore the same cannot be treated as unexplained liability.

The Ld. CIT(A), has allowed the ground of appeal of the assessee subject to the verification to be done by the AO observing as under: I have considered the assessment order, facts of the case and the submissions made by the appellant. It has been submitted by the appellant that the outstanding balance of Rs.33,00,000/- reflected in the account of Wartsilla India Ltd. was settled in the next year i.e. relevant to Asst.Year 13-14 and therefore the amount does not reflect cessation of liability. The AO is directed to verify the claim of appellant that this amount has actually been paid in the subsequent year to Wartsilla India Ltd and allow the same, if found correct. Ground of appeal No.8 is allowed subject to verification by the AO.

Being aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Both the Ld. DR and Ld. AR before us vehemently supported the order of the authorities below as favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. The addition made by the AO on the reasoning that the liability shown by the assessee for Rs. 33 lakhs in the name of the party namely M/s Wartsial India has ceased to exist. However, from the submission of the assessee, we note that such liability has been settled in the subsequent year. Therefore, the Ld.CIT(A), allowed the ground of appeal subject to the verification by the AO about the payment made by the assessee to the party. We do not find