ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, KURNOOL vs. SURESH CONSTRUCTIONS, GUNTAKAL
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI K. NARASIMHA CHARY & SHRI MADHUSUDAN SAWDIA
आआआआ आआआआआआ आआआआआआ, आआआआआआआआ आआआ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad
BEFORE SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER
आ.आआआ.आआ /ITA No.659/Hyd/2023 (आआआआआआआआ आआआआ/Assessment Year:2021-22)
Assistant Commissioner of Income Tax, M/s. Suresh Constructions, Vs. Circle-1, Kurnool. Guntakal. PAN:ABCFS8982J (Appellant) (Respondent)
आआआआआआआआआआ आआआआआआ/Assessee by: Shri S. Rama Rao, Advocate आआआआआआ आआआआआआ/Revenue by:: Shri Madan Mohan Meena, SR-DR
आआआआआआ आआ आआआआआ/Date of hearing: 21/10/2024 आआआआआ आआ आआआआआ/Pronouncement: 23/10/2024
आआआआ/ORDER PER MADHUSUDAN SAWDIA, A.M: This appeal is filed by M/s. Suresh Constructions, Guntakal (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 01.11.2023 for the AY 2021-22.
The brief facts of the case are that the assessee is a company engaged in
the business of construction and also carrying out contract work for central
government, state government and railways, filed its return of income on
ITA No.659/Hyd/2023 2
30.11.2021 for A.Y. 2021-22 admitting total income of Rs.1,33,63,090/-. The
case of the assessee was selected for scrutiny and the assessment was
completed u/s.143(3) r.w.s. 144B of the Income Tax Act, 1961 (“the Act”) by
the Learned Assessing Officer (“Ld. AO”) vide his order dated 28.12.2022 by
determining the total income at Rs.3,28,58,698/-.
Aggrieved by the order of Ld. AO, the assessee filed appeal before the Ld.
CIT(A). The Ld. CIT(A) going through the submission of the assessee partly
allowed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), the revenue is in appeal before us.
The Ld. DR submitted that the assessee has incurred expenditure on account of
sub-contract payments of Rs.5,52,020/-, machinery rent payment of
Rs.49,27,475/- and labour charges of Rs.1,06,66,083/- (alleged expenditure).
However, the payments for the alleged expenditure had been made by the
assessee to other parties instead of the party who actually had performed the
works (“the creditors”). Therefore the Ld. AO had made the additions u/s.69C
of the Act treating the alleged expenditure as unexplained expenditure.
However the Ld. CIT(A) partly allowed the appeal of the assessee. Hence the
Ld. DR submitted that as the assessee had get the work done from the
creditors, he should have made the payment to the respective creditors only.
ITA No.659/Hyd/2023 3
Therefore the Ld. DR relying on the order of Ld. AO requested the bench to
disallow all these expenditure.
Per contra, the Learned Authorised Representative (“Ld. AR”) relying on
the order of Ld. CIT(A) submitted that there was no dispute about the facts
that the work against which the alleged expenditure have been incurred by the
assessee was not carried out by the creditors. Further there was no dispute
about the facts that the payment has actually not made against the alleged
expenditure. The Ld. AR further submitted that the Ld. AO without questioning
the genuinity of the alleged expenditure made the addition u/s.69C of the Act
treating the same as unexplained expenditure. However, the Ld. CIT(A) partly
allowed the appeal of the assessee, by contending that provision of section
69C of the Act is not applicable in the case of the assessee. Therefore the Ld.
AR prayed before the bench to uphold the order of the Ld. CIT(A).
We have heard the rival contentions and gone through the records in the
light of the submissions made by either side. The Ld. CIT(A) has categorically
given the finding that the Ld. AO has nowhere doubted about the occurrence
of the alleged expenditure incurred by the assessee. Further, the Ld. AO also
had not brought on record any material evidence to prove that the alleged
expenditure were not incurred by the assessee. With regard to the alleged
expenditure, the creditors have provided the bills to the assessee, the assessee
ITA No.659/Hyd/2023 4
has made TDS on all such alleged expenditure, the creditors have confirmed
the payments made by the assessee in the name of other parties and the
creditors have also confirmed that the work has been carried out by them.
Under these circumstances, we are of the view that, the genuineness of the
expenditure cannot be doubted and the same is allowable as business
expenditure, which the Ld. AO had also rightly not made any disallowance
u/s.37(1) of the Act. However the Ld. AO had added the alleged expenditure
u/s. 69C of the Act by treating the same as unexplained expenditure. For the
sake of clarity we extract the relevant part of section 69C of the Act, which is
as under :
“ Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.”
From the perusal of provisions of section 69C of the Act, it is clear that section
69C of the Act is applicable in a case where the assessee fails to explain the
ITA No.659/Hyd/2023 5
source for the expenditure incurred. However, in the case of the assessee, the
sources of payments against the alleged expenditure had been explained by
the assessee by submitting that, payments were made from the overdraft
account maintained with the State Bank of India (“SBI”) and the sources of
those payments were also explained by the assessee i.e. the sources of
payments where from received from customer and utilisation of overdraft
facility. The Ld. AO also did not noticed any discrepancy regarding the sources
explained by the assessee. Therefore there is no doubt regarding the source of
making payment towards alleged expenditure. The Ld. AO made the addition
u/s.69C of the Act on the ground that the payments against the alleged
expenditure should have been made directly to the creditor instead of other
parties. In our view, once the assessee has properly explained the sources of
the alleged expenditure, the Ld. AO did not noticed any irregularity on the
submission of the assessee, the addition of the alleged expenditure made by
the Ld. AO u/s.69C of the Act is not as per law. Therefore we do not find any
ITA No.659/Hyd/2023 6
irregularity in the order of Ld. CIT(A). Accordingly, we uphold the order of Ld.
CIT(A) and dismiss the appeal of the revenue.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open Court on 23rd Oct., 2024.
Sd/- Sd/-
(K. NARASIMHA CHARY) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad. Dated: 23.10.2024. * Reddy gp
Copy of the Order forwarded to : 1. M/s. Suresh Constructions, 17-1094, Rajendra Nagar, Guntakal-515801, Anantapur District, A.P. 2. ACIT, Circle-1, Kurnool. 3. Pr.CIT, Kurnool. 4. DR, ITAT, Hyderabad. 5. Guard file.
BY ORDER,
