M/S AUSTEES HYDRO POWER & CONSTRUCTION COMPANY (P) LTD.,BILASPUR vs. INCOME TAX OFFICER, BILASPUR

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ITA 729/CHANDI/2017Status: DisposedITAT Chandigarh21 August 2018AY 2012-1332 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted the assessee's repeated non-appearance and adjournments. For the assessee's appeal, some grounds were allowed for statistical purposes, while others were dismissed. The Revenue's appeal was also allowed for statistical purposes.

What were the facts?

The assessee and the Revenue filed cross-appeals against the CIT(A)'s order. The assessee repeatedly sought adjournments, leading the Tribunal to believe they were not interested in prosecuting their appeal. Ultimately, the assessee did not appear for the hearing.

What were the issues?

The primary issues involved the disallowance of diesel expenses and donations, and the charging of interest. The Tribunal found that proper inquiry was not conducted by the Revenue on these matters.

Which sections of the Income-tax Act were involved?

Section 80G,Section 244A,Section 234B,Section 234D

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, DIVISION BENCH ‘B’, CHANDIGARH

Before: SHRI SANJAY GARG & MS. ANNAPURNA GUPTA&

Hearing: 24.05.2018Pronounced: 21.08.2018

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘B’, CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.729/Chd/2017 (Assessment Year : 2012-13) M/s Austees Hydro Power & Vs. The Income Tax Officer, Construction Company (P) Ltd., Bilaspur Distt. Bilaspur VPO Bahot Kasol, Tehsil Sadar, (HP). Distt Bilaspur (HP), Through its Authorised Signatory PAN: AAFCA8697M & ITA No.837/Chd/2017 (Assessment Year : 2012-13) The Income Tax Officer, Vs. M/s Austees Hydro Power & Bilaspur Distt. Bilaspur Construction Company (P) Ltd., (HP). VPO Bahot Kasol, Tehsil Sadar, Distt Bilaspur (HP), Through its Authorised Signatory PAN: AAFCA8697M (Appellant) (Respondent)

Assessee by : None Department by : Dr.Gulshan Raj, CIT(DR) Date of hearing : 24.05.2018 Date of Pronouncement : 21.08.2018 ORDER PER ANNAPURNA GUPTA, A.M. :

The impugned Cross appeals, by the assessee and the

Revenue, have been filed against the order of Learned

Commissioner of Income Tax (Appeals), Palampur dated

09.02.2017, relating to assessment year 2012-13.

At the outset it is stated that the case was fixed for

hearing on several occasions, and adjournment was sought

time and again by the Ld. counsel for assessee ,on most

ITA No.729/Chd/2017 2 & ITA No.837/Chd/2017 A.Y.2012-13

occasions on the identical ground that he is busy in the

High Court, despite the fact that the assessee had also filed

appeal. On 23.5.2018, when the case was fixed for hearing

and adjournment sought again by the Ld. counsel for

assessee citing the same reason, the Bench took note of the

repeated adjournments sought by the Ld. counsel for

assessee and noted that it appeared that the assessee is not

interested in prosecuting its appeal. However, in the interest

of justice another opportunity was given to the assessee to

present its case, fixing the hearing of the same for the next

day i.e. 24.05.2018, which was conveyed to the proxy

counsel who appeared on behalf of the assessee Shri Jaspal

Sharma, Advocate in the open court. The order sheet entry

on the said date reads as under:

23.05.2018 Present f or assessee Sh.Jaspal Sh arma, Adv. (Proxy Counsel) Present f or Deppt. Dr.Gulshan R aj, CIT(DR) Adjournment Application has been moved by the assessee’s counsel stating th at he has to appe ar in the High Court of Himach al Pradesh at Shimla. Earlier als o on 22.6.2017 none appe ared on behalf of the assessee and notice was issued to the assessee. On 5.9.2017 Bench did not f unction and the matter was adjourned to 7.11.2017. On 7.11.2017 Bench did not f unction and th e matter is adjourned to 16.11.2017. On 16.11.2017, assessee’s counsel appeared bef ore the Bench and sought adjournment. The matter was adjourned f or 8.1.2018. The adjournment was sought by assessee’s counsel on the similar grounds on 8.1.2018. The matter ` was adjourned to 14.3.2018 and none appe ared on 14.3.2018. Then notice th rough Departmen t was issued f or 9.4.2018. On 9.4.2018, the hearing was adjourned on the request of the assessee’s counsel on similar gro unds f or 23.5.2018. Though it is the appe al of the assessee and the assessee is supposed to pursue it, ho wever, time and again notice is issued to the assessee to come present. Ho wever, repeated adjournment applications have been received f rom counsel citing identical ground th at he is busy in High Court. In vie w of above f acts, it appe ars th at the assessee is not inte rested in prosecuting his appe al. Ho wever, on the request of Proxy counsel that the case be adjourned to to morrow and in the interest of justice a las t and f inal opportunity given to the assessee and the hearing adjourned to 24.5.2018. Sd/- Sd/- (AG) (SG) (AM) (JM)

ITA No.729/Chd/2017 3 & ITA No.837/Chd/2017 A.Y.2012-13

2.

On the next date also i.e. 24.5.2018, none appeared on

behalf of the assessee, nor any application was moved for

adjournment. The case was, therefore, proceeded to be heard

with.

We shall first be taking up the appeal of the assessee in

ITA No.729/Chd/2017 for A.Y 2012-13.

3.

Grounds of appeal raised by the assessee are as under:

“A The Ld. Assessing Officer has erred in law and facts of the case by not deciding the matter in view of the different judgments of the court that even if the charitable society is making profit even then it qualifies for various exemptions under the provisions of the IT Act. The orders of the Ld. Assessing Officer is contrary to the law, equity and justice and facts and material on record, devoid of jurisdiction arbitrary based on conjunctions and surmises. B That the impugned order (Annexure A- 2) passed by the Respondent No.5 is arbitrary, unreasonable, illegal, bad in law and facts of the case and hence is liable to be set aside. C That the impugned order is against the provisions of the Act and no proper procedure as is prescribed under the Act has been followed while issuing the impugned orders. Hence, on this ground alone, the impugned order deserve to be quashed and set aside. D That orders of the Ld A.O. dated 27.02.2015 is illegal, wrong, null and void being passed without application of legal mind, hence deserve to set be aside. That Respondent is not justified in orders by making additions on account of diesel transactions with Mr Ajay Kumar Rs.l,70,20,367/- and Rs.55,00,000/- with Surender Kumar. Ld A.O. orders para wise contradicts in principle of justice, false, concocted story and bad in law. Ld A.O. did not verify the transaction justification to end user/transporters who used the diesel. Ld A.O. treated it as expenses where as it was not an expenses of company but just a facilitation to the Transporters to increase the

ITA No.729/Chd/2017 4 & ITA No.837/Chd/2017 A.Y.2012-13

working efficiency and increase the targets of AH.PC. It was the need of the business. Hence finding of the Respondent are based on surmises and conjecture & as such not sustainable in the eyes of law. E That the Ld A.O. has not followed the provisions of law in the proceedings of the case no opportunity of cross examination of witnesses. Hence, the examination not justified in orders by making additions on account of unexplained expenditure taken by Rs.1,15,,65,717/-. Appellant did not claimed any such amount as expenditure of Rs. 1,15,66717/-. But was based on a statement of Mr Anil Kumar i.e Nikhil filling station. Ld A.O. in para 4.7 of its order stated that "which in any financial year an Appellant has incurred any expenditure and he offers no explanation about of such expenditure or part there of or the explanation, if any offered by him is not, in the opinion of the (Assessing Officer) satisfactory, the amount covered such expenditure or part thereof, as the case may be, deemed to be income of the Appellant for such financial year.” Appellant had made transaction for transporters with Nikhil filling station of Rs. 11,01,150/- which was accepted by the Ld A.O. Addition made by the Ld A.O. was not claimed by the Appellant, it was taken Rs.1,15,65,717/- (i.e Rs. 1,26,66,867- Rs. 11,01,150) from Mr Anil Kumar statement. Nothing to do with it by the Appellant. Keeping in view the orders should be set aside. Order of Ld. Respondent No.5 is self contradictor) and is resulted confusion, hence same is liable to be set aside. F That the Ld. A.O. is not justified in orders by making additions on account of diesel expenses Rs.1,39,452/- since affidavit of Mr.Sada Ram was not further verified by the Lei. A.O. Since the Learned A O did not gone through for further verification of affidavit". Hence failed to appreciate the record and its evidence. It is also supported by case laws — howkchand Balabux vs. CIT, (1961) 41 ITR 465 (Assam)AND Mehta Parekh & Co. vs. CIT, (1956) 30 ITR 181 (SC). G That the Ld A.O. is not justified by disallowing expenses of Rs. 87,650/-treating it as donation. It was considered Rs. 87,650/- instead actual amount was Rs. 85,550/-. Since the payment was of the nature of

ITA No.729/Chd/2017 5 & ITA No.837/Chd/2017 A.Y.2012-13

Advertisement/Souvenir. Payments made to Nalwari Fair ( Bilaspur &, S,nagar) to Deputy Commissioner Bilaspur & Mandi office and local melas. Al all the places wrestling's, bull/ buffalo exhibition, agriculture sponsorship programmes, etc done by state govt agencies. Hence disallowance of expenses is not justified. H The Ld. Assessing Officer has erred in law and fact of the case by charging / imposing interest under section 244-A and 234-B. 234- 1) of the IT Act, without appreciating the circumstances and fact of the case and not giving any reason on what grounds the interest has been charged / imposed. On this ground also the appeal deserves to be allowed. I That the orders of the Ld. Commissioner of Income Tax (Appeals), Shimla as well as LD IT AT" are contrary to the law, equity ar.cl justice and facts and material on record, devoid of jurisdiction, arbitrary based on conjectures and surmises. The inference and conclusions as drawn by the Ld. Court below are neither supported by the facts and record neither of the case nor by any provisions of law as such does the order deserves to be set aside.” 4. The issue raised in Ground ‘A’, we find relates to

charitable society and it was pointed out to us by the Ld. DR

that the assessee was carrying on business and was neither

a charitable society nor had ever claimed to be so. It was

pointed out that the issue raised in the impugned ground

therefore did not arise from the order of the CIT(A) and

needed to be dismissed for this reason alone. Nothing to the

contrary was brought to our notice. In view of the same we

dismiss this ground raised before us

5.

Ground ‘B’ & ‘C’ are general in nature and need no

adjudication.

6.

In Ground ‘D’ & ‘E’ the issue relates to addition made

to the income of the assessee on account of purchase of

ITA No.729/Chd/2017 6 & ITA No.837/Chd/2017 A.Y.2012-13

diesel. The Assessing Officer made addition of

Rs.2,25,18,367/- treating the payment made by the assessee

for purchase of diesel to be bogus and further of

Rs.1,15,65,717/-, by holding that diesel was purchased

outside the books of the assessee thereby making addition

u/s 69C of the Act ,of the same. The CIT(Appeals) in turn,

dealt with both the additions together and deleted the said

addition to the extent of Rs.1,26,66,867/- out of the

addition made of Rs.2,25,18,367/- upholding the balance of

Rs.98,51,500/-. The addition made u/s 69C of

Rs.1,15,65,717/- was also deleted by the CIT(Appeals).

Against the disallowance upheld by the CIT(Appeals), the

assessee has come up in appeal before us .

7.

The facts relating to the issue are that the Assessing

Officer observed that during the year the assessee company

did sub-contract work for M/s Italian Thai Development

Public Company Ltd. (in short ITD Ltd.), having been

awarded contract for supply of clay and labour to the Kol

Dam Project. The Assessing Officer noted that the assessee

had debited expenses on account of hiring of vehicles

amounting to Rs.6,49,93,168 /- in its Profit and Loss

account which was explained by the assessee as comprising

the following:

SI. No. Name of item Amount (Rs.) 1. Diesel 2,36,21,517/- 2. TDS 6,63,841/- 3. Retention 31,87,298/- 4. Water Tank 2,38,284/- 5. To sub-contractors/ Transporters 3,72,82,228/- Total 6,49,93,168/-

ITA No.729/Chd/2017 7 & ITA No.837/Chd/2017 A.Y.2012-13

8.

The Director of the company Sh. Joginder Singh Thakur

was asked to furnish documentary evidence i.e. bills &

vouchers for purchase of diesel. In response, it was stated

that the diesel was purchased and got filled in the vehicles

of the sub-contractors/ transporters, transporting clay for

the assessee company. It was contended that as only one or

two petrol pumps existed near the project site, diesel was not

easily available. Hence, to achieve the monthly targets of the

contract work and to avoid penalty, the transporters/drivers of

vehicles had requested the assessee company to arrange diesel

for the vehicles and deduct the cost of diesel from their bills.

The assessee company accordingly purchased diesel and made

payments for diesel directly to the suppliers and deducted it

from the bills of the transporters alongwith other costs and

TDS. It was stated that this was done to facilitate the

transporters and the amount was deducted from their bills.

The assessee contended that the amount so paid for purchase

of diesel was neither an expense of the company nor had been

claimed as such in the P&L account. Diesel was stated to be

purchased from the following persons:

SI. Name & address of the person who diesel Amount of No. supplied for the F.Y. 201 1-12 to the diesel supplied 1. 11,01,150/- Nikhil Filling Station, NH-21, Slapper, Sundernagar, Mandi 2. 1,70,20,367/- Sh. Ajay Kumar S/o Sh. Lachman Dass, Vill, Chamyoun, P.O. Harnora, Sadar, 3. 55,00,000/- Sh. Surender Kumar Thakur S/o Sh. L.R. Thakur, Vill. Chamyoun, P.O. Harnora, Total diesel supplied 2,36,21,517

9.

The A.O. issued summons u/s 131 to the above three

persons from whom the diesel was stated to have been

ITA No.729/Chd/2017 8 & ITA No.837/Chd/2017 A.Y.2012-13

purchased and after examination held the purchases to be

not genuine on the following grounds :

i) Sh. Surinder Kumar Thakur

10.

In his statement recorded u/s 131, Sh. Surender Kumar

stated that he was engaged in the business of LIC during

F.Y. 2011-12 besides having interest income from FDRs. It

was stated by him that he had received payments through

cheque for supply of diesel to the Austees Hydro

Construction Co. Pvt. Ltd. during F.Y. 2011-12 and had

received payment of Rs.55,00,000/-approximately. He

produced Sale Bills for supply of diesel to Austees Hydro

Power Construction Pvt. Ltd. as under :

For Rs. 31,68,120/- on 08.06.2011, For Rs. 22,74,644/- on 25.05.2011 and For Rs. 57,240/-on 01.07.2011.

11.

However, when asked by the A.O. as to from where

diesel was purchased by him for being sold to the appellant,

and to produce copies of the bills of purchase of diesel and

copy of the license for sale of the petroleum product, Sh.

Surender Kumar stated that he had no purchase bills of

diesel or any other documentary evidence with him to show

the purchase of diesel by him. The AO noted that Sh.

Surender Kumar was the real brother of Sh. Joginder Singh

Thakur, Director of the assessee company.

ii) Sh. Ajay Kumar 12. In response to summon u/s 131, Sh. Ajay Kumar

attended on 18.02.2015 and again appeared on 25.02.2015

ITA No.729/Chd/2017 9 & ITA No.837/Chd/2017 A.Y.2012-13

and stated that he was having income from two heavy

commercial vehicles (Trucks), salary income & was also

engaged in purchase and sale of diesel during F.Y. 2011-12.

During the year, he received Rs. 17.33 lacs approximately

through cheque on account of "Hiring of Vehicles" to Austees

Hydro Construction Co. Pvt. Ltd. Apart from this, he received

a payment of Rs.170.18 lacs approximately on account of

"Sale of Diesel" from Austees Hydro Construction Co. Pvt.

Ltd. The said payments for work done and for sale of diesel

received from Austees Hydro Construction Pvt. Ltd. were

deposited by him in his four bank accounts. However, upon

perusal of the sale bills issued by him to the assessee

company, it was noticed by Ld. A.O. that there was no VAT

No. on the bills. When confronted, Sh. Ajay Kumar admitted

that he had not obtained any sales tax number and was not

filing any VAT returns. When asked by the A.O. to produce

copies of the bills of purchase of diesel and copy of the

license for sale of petroleum product for about Rs. 170.18

lacs, he stated that he had no bills for purchase of diesel.

However, he confirmed that he had issued bills for sale of

diesel to the assessee company. It was also stated that he

had purchased diesel from Nikhil Filling Station and Murari

Filling Station. Copy of ITR of Sh. Ajay Kumar for A.Y. 2012-

13 was generated from AST which showed income of Rs.

1,20,000/- from two commercial vehicles and Rs.60,000/-

from salary only.

ITA No.729/Chd/2017 10 & ITA No.837/Chd/2017 A.Y.2012-13

iii) Sh. Anil Kumar

13.

Statement of Sh. Anil Kumar, Manager of Nikhil Filling

Station was recorded u/s 131 on 11.02.2015, 13.02.2015 of

the Act. He furnished copy of ledger account of Austees

Hydro Power Construction Co. Pvt. Ltd., details of payments

received from it, and bank account statement of Nikhil

Filling Station. As per these, diesel of Rs.1,26,66,867/- was

stated to have been sold to the assessee out of which

payment of Rs.1,24,85,111/- was stated to have been

received by cheque and cash during F.Y. 2011-12. On

23.02.2015, Sh. Anil Kumar filed a written reply stating that

direct sale of diesel to the assessee was of Rs. 11,01,150/-

and that Ajay Kumar and Surender Kumar also filled diesel

for the vehicles attached with Austeese Hydro Power

Construction Co.(AHPC) in the year 2011-12. At the petrol

pump a consolidated account for vehicles attached with

AHPC was kept. The value of sale of diesel is for all three

during the year. No books of account for Nikhil Filling

Station were produced. Payments of Rs.11,54,901/- marked

in the ledger to have been made by RTGS/cheque by the

assessee to Nikhil Filling Station were not found credited in

the bank account statement of Nikhil Filling Station.

14.

After considering the explanation of the assessee and

the statements of the above persons, Ld. A.O. held that the

bills submitted by the assessee to substantiate purchase of

diesel by him from Surender Kumar & Ajay Kumar were

bogus bills. Both the above persons had no VAT number and

ITA No.729/Chd/2017 11 & ITA No.837/Chd/2017 A.Y.2012-13

no license for sale of a petroleum product. Both of them

failed to produce any purchase bills or any other evidence to

show the purchase of diesel by them out of which sale could

have been made to the assessee. Neither of the two persons

could produce any books of accounts or the bill books from

where the bills were issued by them to the assessee. No

income from the purchase/sale of diesel was shown by them

in their ITRs. Placing reliance upon a series of judgments as

mentioned in para-3.11 of the assessment order, Ld. A.O.

therefore, held that even if payments were made by cheque

and TDS was deducted therefrom, still the transactions

could be treated as unexplained in view of the facts of the

case. The Assessing Officer held that the assessee had filed

the purchase bills of diesel purchased from the above two

persons only to cover up expenses booked under the head

"Operating & other expenses" in the P&L account. The

expenditure booked on account of "diesel purchased" from

the said two persons was, therefore, disallowed and

additions of Rs.1,70,18,367/- and Rs.55,00,000/- were made

to the income of the assessee company.

15.

Further the Assessing Officer noted that the Manager of

Nikhil Filling Station Sh. Anil Kumar, had stated to have

sold diesel of Rs.1,26,66,867/- to the assessee and received

a total amount of Rs.1,24,85,111/- on account of the same

during the impugned year, however, diesel of Rs.11,01,150/-

only was shown by the assessee as purchased from Nikhil

Filling Station. Thus, difference of Rs.1,15,65,717/- was

ITA No.729/Chd/2017 12 & ITA No.837/Chd/2017 A.Y.2012-13

held by Ld. Assessing Officer, to be expenditure incurred out

of the books of accounts of the company and added to the

income of the assessee u/s 69C as unexplained expenses.

16.

The matter was carried in appeal before the

CIT(Appeals) where the assessee contended that no

disallowance could be made of the payment made on

purchase of diesel since this was not the expense of the

assessee but was only a mode of payment of hiring charges

of vehicles hired by getting diesel filled in the same on

behalf of the contractors. The Ld.CIT(Appeals) dismissed the

said contention, holding that the disallowance had been

rightly made since out of the expenses claimed on account of

hiring of vehicles, the assessee was found to have not

actually paid to the transporters/sub contractors but had

retained the same. The Ld.CIT(A) further accepted the

purchases stated to have been made by the assessee from

the three parties to the extent of Rs. 1,26,66,867/-,

believing the statement of the manager of Nikhil Filling

Station, Shri Anil Kumar who had stated to have sold diesel

of Rs. 1,26,66,867/- to the assessee attributing direct sale

out of the same to the extent of Rs.11,01,150/- while the

rest through Shri Surender Kumar and Sh.Ajay Kumar. As

for the assessee’s claim for balance payment made to Shri

Surender Kumar and Shri Ajay Kumar, amounting in all to

Rs.98,51,500/- the same was rejected stating that the said

party could not demonstrate that they had made purchase of

diesel to the assessee to this extent since they had failed to

ITA No.729/Chd/2017 13 & ITA No.837/Chd/2017 A.Y.2012-13

produce purchase bills, nor had any licence of sale of

petroleum product, nor had any VAT registration number.

The Ld.CIT(Appeals) also noted that no income from the

same was returned by them in their return of income filed.

He, therefore, treated purchases made from the said two

persons to the extent of Rs.98,51,500- as bogus purchases.

The relevant findings of the Ld.CIT(Appeals) at para 5.3 of

its order are as under:

“5.3 I have considered the facts of the case and written submissions of the appellant. The appellant is engaged in doing sub-contract work of supply of clay & labour for M/s Italian Thai Development Public Company Ltd. (in short ITD Ltd.) which is referred to in the Letter of Intent as the Contractor. The appellant is mentioned in the Letter of Intent as sub-contractor. During the year, the appellant has done work of Rs.7,57,51,534/- out of which Rs.6,77,11,058/- is from Clay work and Rs.80,40,476/- from receipt of wages to workers. Besides, income of Rs.1,38,272/- is received on account of interest etc. Return of income has been filed declared income of Rs.8,45,396/-. The appellant has thus shown net profit of about 1.13% only which is apparently very low. The argument of the appellant that Rs. 2,36,21,577/- is not an expenditure claimed by it in its P&L account and hence no addition could be made of the same is not tenable. The appellant has claimed an expenditure of Rs. 6,49,93,168/- under the head "Hiring of Vehicles". However, during the course of examination of books of accounts during assessment proceedings, it was found by Ld. A.O. that out of the above expenditure of Rs. 6,49,93,168/-, Rs. 2,36,21,517/- had not been actually paid to the transporters /sub-contractors. The amount was retained by the appellant with itself. The explanation of the appellant before the A.O. was that this amount was retained on account of diesel expenses as the diesel in the vehicles of the transporters engaged in carrying clay were got filled by the appellant on behalf of the transporters. The appellant further stated that the diesel was got filled from three persons, i.e. Nikhil Filling Station, Sh. Ajay Kumar & Sh. Surender Kumar. As mentioned in detail in para-5.1 above, both Surender Kumar who is also brother of the

ITA No.729/Chd/2017 14 & ITA No.837/Chd/2017 A.Y.2012-13

appellant and Ajay Kumar, in their statements recorded u/s 131 of the Act, admitted sale of diesel to the appellant and even produced sale bills issued by them. However, when required to produce purchase bills showing the diesel purchased by them, they could not produce any purchase bills. Neither of them had a license for the sale of petroleum product and neither of them had any VAT registration number. No profit from sale of vehicles was found to have been shown by them in their ITRs. In view of the above, Ld. A.O. has rightly held that the appellant has booked bogus expenditure on account of diesel purchased from Sh. Surender Kumar & Sh. Ajay Kumar for vehicles of the transporters. It was stated by Sh. Surender Kumar & Ajay Kumar that the diesel was got filled by them in the vehicles attached with Austees Hydro Power Const. Pvt. Ltd. (AHPC) from Nikhil Filling Station & Mata Murari Filling Station. In such a station, the payments could have been made by the appellant directly to Nikhil Filling Station or Mata Murari Filling Station. The payments were made instead to Sh. Ajay Kumar who had also provided vehicles to AHPC and to Surender Kumar, brother of a Director of the Company. It was slated that payments were made by cheque. However, the appellant failed to produce any evidence in this regard that the payments were made by cheque. Also no documentary evidence was filed showing payments made by Surender Kumar & Ajay Kumar for purchase of diesel to the various filling stations. The appellant has further relied upon the assessments made u/s 143(3) / 147 in the hands of Surender Kumar and Ajay Kumar. No income from business of sale of diesel was shown by Sh. Surender Kumar & Ajay Kumar in their original returns of income. Subsequently, after the completion of assessment in the case of the appellant, information was passed to the A.O. exercising jurisdiction over Sh. Surender Kumar and Ajay Kumar regarding the sale of diesel admitted by them in their statements u/s 131 of the Act. In response to notice u/s 148, they still stated that the returns originally filed by them may be treated as returns filed in response to notice u/s 148. During their assessment proceedings, both of them stated that vehicles were fuelled by them on behalf of the AHPC from the petrol pumps on commission basis. However, the assessments were completed in both cases in an adhoc and cursory manner by applying net profit rate @ 2.17% to the amounts found deposited in their bank accounts. There is no material on record to establish that the

ITA No.729/Chd/2017 15 & ITA No.837/Chd/2017 A.Y.2012-13

amounts deposited by them in their bank accounts were received by them from the appellant for sale of diesel. Similarly there is no evidence on record that they made payments to Nikhil Filling Station or any other filling station for filling up diesel for the vehicles of the transporters doing contract work for the appellant (AHPC). During assessment proceedings, statement was also recorded u/s 131 of the Act of Sh. Anil Kumar, Manager of Nikhil Filling Station on 11.02.2015 and then on 13.02.2015. He furnished copy of the Ledger account of Austees Hydro Construction Company Pvt. Ltd. (Appellant) for F.Y. 2011-12 and the bank account statement of Nikhil Filling Station. No books of accounts of Nikhil Filling Station were produced. However, it was stated by him in his statement and in his written reply filed before Ld. A.O. that diesel of Rs.1,26,66,867/- was sold by Nikhil Filling Station to the appellant during F.Y. 2011-12 out of which payment of Rs. 1,24,85,111/- was also received either by cheque or through cash. Rs. 11,54,901/- was stated to be received by cheque / RTGS. However, the same could not be got verified by him. It was clarified by him through his written reply dated 23.02.2015 that "…….. I wish to explain that at our petrol pump, AHPC, Ajay Kumar & Surender Kumar filled the diesel for vehicles attached with AHPC in the year 2011-12. Bills issued to all these parties separately and payments received separately on the basis of diesel filled of vehicles for AHPC. So at petrol pump we kept one account (consolidated) for vehicles attached to AHPC. The value of sale of diesel is for all three during the year. Actual transaction of AHPC directly for F.Y. 2011-12 was Rs.11,01,ISO/- ……..". The statements of Sh. Surender Kumar, Ajay Kumar & Anil Kumar recorded by Ld. A.O. are not conclusive. Books of accounts have not been produced and examined in only of the three cases. Ld. A.O. has also not verified the payments made/received by cheque in the bank accounts of the appellant and the above three persons though some of these clearly bear a narration mentioning their names. Even the assessment orders u/s 147/ 143(3) of Sh. Surender Kumar & Sh. Ajay Kumar do not record any finding of fact that the amounts received in their bank accounts were received, (most of which are received in cash), from the appellant out of the amounts retained by him / deducted by him from the bills of the transporters

ITA No.729/Chd/2017 16 & ITA No.837/Chd/2017 A.Y.2012-13

as claimed by it. Similarly, there is no documentary evidence on record that Sh. Surender Kumar & Ajay Kumar made cash payments or any payments by cheque to the various petrol pumps. The only statement / reply that has come on record in this regard is of Sh. Anil Kumar, Manger of the Nikhil Filling Station, who attended in response to summons u/s 131 of the Act. In the absence of any other evidence on record, his statement that a consolidated account was kept at the petrol pump for filling diesel in the vehicles attached with AHPC and that the sale of diesel of Rs. 1,26,66,867/- as per the ledger account was made to all the three persons (parties) can be accepted as a reasonable and plausible explanation. In the present case, Ld. A.O. has not rejected the books of accounts u/s 145(3) of the Act. However, the N.P. rate of 1.13% shown by the appellant is apparently very low. Keeping in view the totality of above facts, it would be reasonable if the purchase of diesel for the vehicles of the transporters by the appellant is accepted to the extent of Rs.1,26,66,867/-. After confirming the above addition of Rs.98,51,500/-, the net profit works out to 14.14%. The appellant gets a relief of Rs.1,26,66,867/-. The addition of Rs.98,51,500./- (Rs.2,25,18,367 (-) Rs.1,26,66,867) is upheld. The ground of appeal is partly allowed.” 17. As for the addition made on account of unexplained

expenditure amounting to Rs.1,15,65,717/- the

Ld.CIT(Appeals) held that since he had accepted the payment

made to Nikhil Filling Station as genuine, there was no

reason to uphold the said addition. The relevant findings of

the CIT(Appeals) at para 6.3 of his order are as under:

“6.3 I have considered the facts of the case and written submissions of the appellant. As discussed in detail in para-5.2 & 5.3 above, the payment of Rs.11,01,150/- was shown to have been made by the appellant directly to Nikhil Filling Station. Ld. A.O. has accepted this payment as genuine. However, he has made an addition of Rs.1,15,65,717/- with reference to the total cost of diesel purchased from Nikhil Filling Station, i.e., Rs.1,26,66,867/- as per the statement of Sh.Anil Kumar. As the addition of Rs.98,51,500/- has already been upheld out

ITA No.729/Chd/2017 17 & ITA No.837/Chd/2017 A.Y.2012-13

of the amount of Rs.2,25,18,367/- the addition for Rs.1,15,65,717/- which amounts to double addition cannot be sustained and is accordingly deleted.” 18. Before us, vis-à-vis the disallowance of diesel expenses

upheld of Rs.98,51,500/- the Ld. DR relied heavily on the

order of the CIT(Appeals) stating that in the absence of any

evidence of purchase of diesel by the persons who had

supplied diesel to the assessee, the said expenses had been

rightly disallowed. As for the diesel expenses deleted by the

Ld.CIT(Appeals) amounting to Rs.1,26,66,867/-, being the

diesel purchased from Nikhil Filling Station as per the

statement of the manager of the Filling Station, it was

contended that since the CIT(Appeals) had himself found the

purchase made from the said parties to be bogus in the

absence of license to sell diesel, VAT registration number

and bills of purchases of the same and no evidence of either

payment received by them from the assessee for the same or

they having paid to the suppliers of diesel, and also having

found to have not returned any income from the said

transaction to tax, there was no reason to accept the

genuineness of the impugned purchase merely on the basis

of the statement and copy of account of Nikhil Filling

Station. The Ld. DR relied upon the findings of the

Assessing Officer vis-à-vis the ingenuineness of purchase

made from Shri Ajay Kumar and Shri Surender Kumar,

which he pointed out had been upheld by the CIT(Appeals)

also at para 5.3 of his order as reproduced above. The Ld.

DR, therefore, stated that there was no reason to delete the

ITA No.729/Chd/2017 18 & ITA No.837/Chd/2017 A.Y.2012-13

disallowance made of purchases shown to have been made

from Shri Ajay Kumar and Shri Surender Kumar.

19.

The submissions of the assessee, as can be gathered

from the statement of facts filed before us, is that the

disallowance made of payment made on account of purchase

of diesel was not the expenses of the assessee and was made

on behalf of the transporters from whom vehicles were hired

by the assessee for clay work. It was stated that the amount

so paid was by way of settlement of the ultimate payment to

be made to the transporters of Rs.6,49,93,168/-. The

contention of the assessee was that the payment was in fact

in the nature of hire charges paid and there being no

question relating to the genuineness of the same, no

disallowance could be made. The assessee also contended

that even otherwise the payment made on account of

purchase of diesel on behalf of the transporters had been

wrongly held to be bogus since the suppliers had confirmed

the said fact in their statements recorded, had also filed

copies of bills issued to the assessee in this regard and had

stated that payments had been received through cheque and

or deposited in their bank accounts. Thus it was contended

that all necessary documents proving the genuineness of the

said transaction had been filed by the assessee. It was also

submitted that in the case of purchase of diesel made from

one Shri Ajay Kumar, the copy of bill book had also been

produced before the ITO who had impounded the same but

the Assessing Officer had omitted to mention this fact. The

ITA No.729/Chd/2017 19 & ITA No.837/Chd/2017 A.Y.2012-13

assessee has further contended that there was no

requirement of any licence for making the said purchases of

diesel by the suppliers of the same since the said parties

were only suppliers who had arranged for the diesel from

authorised petrol pump owners to fill the diesel in the

transporters’ vehicles. It has further been contended in the

statements of facts that the CIT(Appeals) while upholding

the disallowance of diesel purchased amounting to

Rs.98,51,500/- had accepted the statement of the manager

of Nikhil Filling Station even when no books of account were

produced by him. The contention of the assessee also is that

assessment of the two suppliers had been completed and

income from this transaction had been assessed in their

hands. The assessee has also contended that in any case,

the provisions of section 69C of the Act apply only to

unexplained expenses and since the said amount did not

pertain to any expenses incurred, there was no question of

making any addition u/s 69C of the Act at all.

20.

We have considered the contentions of both the parties

and gone through the orders of the authorities below. The

issue before us relates to the addition made on account of

purchases made of diesel by the assessee holding the same

to be bogus amounting in all to Rs.2,25,18,367/- and

addition made on account of purchase of diesel made out of

books of the assessee u/s 69C of the Act amounting to

Rs.1,15,65,717/- by the Assessing Officer. Out of the

addition made on account of bogus purchases, the

ITA No.729/Chd/2017 20 & ITA No.837/Chd/2017 A.Y.2012-13

CIT(Appeals) deleted the same to the extent of

Rs.1,26,66,867/- and upheld the balance of Rs.98,51,500/-.

As for the addition made on account of expenditure incurred

out of the books of the assessee, the same was entirely

deleted by the CIT(Appeals).

21.

Coming to the facts of the case, it is not in dispute that

the diesel expenses of Rs. 2,36,21,257/- were in fact part of

hiring charges paid by the assessee amounting in all to

Rs.6,49,93,168/-and debited to the Profit & Loss Account of

the assessee. The break-up of the Hiring Charges is as

under:

Diesel = Rs.2,36,21,257/- TDS = Rs.6,63,841/- Retention = Rs.31,87,298/- Water Tank = Rs.2,38,284/- To Sub Contractors/ Transporters = Rs.3,72,82,228/- Total = Rs.6,49,93,168/- 22. The contention and the explanation of the assessee vis-

à-vis the same is that it was in the business of contract

work and supply/transportation of clay to Koldam project

and had hired vehicles of transporters for clay work. That

the total cost of hiring was Rs.6,49,93,168/- which was

accordingly debited under the head ‘vehicle hiring charges’

which was paid to the transporters directly amounting to

Rs.3.72 crores as above and indirectly by getting diesel

filled in their vehicles, on incurring water tank expenses,

deducting TDS on the payment made and retaining certain

amount for any mistake or failing of contract by the

ITA No.729/Chd/2017 21 & ITA No.837/Chd/2017 A.Y.2012-13

transporters. The above contention of the assessee has not

been controverted by the Revenue at any stage even before

us. Therefore, it is clear and we agree with the Ld. counsel

for assessee that the payment made by the assessee for

purchase of diesel was not the expenses of the assessee at

all. The expense of the assessee in fact was hiring charges.

Therefore, the question of disallowance, if any, which arises

can be only of hiring charges paid. We find that vis-à-vis the

hiring charges no enquiry or investigation has been done by

the Revenue at all. No effort has been made by the Revenue

to find out whether the claim of the assessee that it had

incurred expenditure of Rs.6.49 crores on account of hiring

of vehicles was correct or not. There is no whisper in the

entire order of the Assessing Officer of any enquiry or

investigation conducted in this regard except from one

contractor Sh Narinder Singh, to whom the assessee had

claimed to have paid Rs.6,70,423/- while the said person

stated that he had received only Rs.1,16,569/-. This ,by any

standards cannot be said to be a sufficient inquiry so as to

arrive at a conclusion that the expenses claimed on account

of hiring charges were not entirely genuine, considering the

quantum of hiring charges book of Rs.6.49 crores and the

inquiry done of Rs.6.70 lacs only. Without, therefore,

questioning the genuineness of the claim of the assessee of

hiring charges paid, we fail to understand how the Revenue

could have held a portion of the payment claimed to have

been made by the assessee by way of purchase of diesel on

behalf of the transporters to be bogus or not genuine. By

ITA No.729/Chd/2017 22 & ITA No.837/Chd/2017 A.Y.2012-13

making addition/holding the diesel charges paid by the

assessee on behalf of the transporters of Rs.2.36 crores as

being bogus, the Revenue’s claim, in effect, is that the hiring

charges claimed by the assessee to this extent were bogus.

In our view, the line of enquiry and investigation of the

Revenue, therefore, should have been first and foremost

regarding genuineness of the claim of hiring charges of the

assessee, which should have been supplanted by the

subsequent enquiry regarding the diesel expenses incurred

by the assessee. Without first establishing that the claim of

hiring charges was not genuine and without making any

direct enquiry and investigation in this regard, the Revenue

was wrong in disallowing hiring charges to this extent by

way of indirect enquiries conducted vis-à-vis payment of any

diesel charges made by the assessee or not. Therefore, in our

view, the enquiry and investigation conducted by the

Revenue is totally flawed and the entire exercise has not

been approached correctly by the Revenue.

23.

Further even vis-à-vis enquiry conducted regarding

payment made on account of diesel charges, we find that the

authorities below have not properly appreciated the

evidences collected. Undisputedly the diesel was supplied

by the following three parties to the assessee:

1) Nikhil Filling Station = Rs.11,01,150/- 2) Shri Ajay Kumar = Rs.1,70,20,367/- 3) Shri Surender Kumar Thakur = Rs.55,00,000/- Total = Rs.2,36,21,517/-

ITA No.729/Chd/2017 23 & ITA No.837/Chd/2017 A.Y.2012-13

24.

The assessee had claimed the payments to the aforesaid

parties to have been made by cheques and or depositing the

entire receipts in bank and even bills relating to purchase of

diesel were submitted. All the three parties statements were

recorded and they had admitted selling of diesel to the

assessee and receiving payment by cheque. The parties had

claimed to have purchased the diesel from Nikhil Filling

station and Murari Filling station. What turned the table

against the assessee was the fact that Shri Ajay Kumar and

Shri Surender Kumar Thakur from whom majority of the

purchases were made to the extent of Rs.2.25 crores out of

total purchase of Rs.2.36 crores, failed to explain or

substantiate the source from where they had purchased the

diesel for supplying to the assessee by producing any

documentary evidence in this regard in the form of purchase

bills. It was also noted by the Assessing Officer that they

had no licence to sell diesel, nor were registered under VAT

for the same. At the same time, we find that the third party

Nikhil Filling Station had admitted making sales of Rs.1.26

cores to the assessee, while the assessee has claimed to have

purchased diesel of only Rs.11 lacs from him. The Assessing

Officer on the basis of this fact has presumed that the

assessee has made purchases of diesel outside the books

while the CIT(Appeals) has read it otherwise and has held

that the actual purchase of diesel by the assessee can be

taken only to the extent purchased from Nikhil Filling

Station to the extent of Rs.1.26 crores and, therefore,

deleted the addition made to this extent. The picture which

ITA No.729/Chd/2017 24 & ITA No.837/Chd/2017 A.Y.2012-13

emerges is that the Assessing Officer had held the purchases

made from Shri Ajay Kumar and Shri Surender Kumar to be

bogus while in the same breath he has held that from Nikhil

Filling Station the assessee has made purchases of diesel

outside the books. The said conclusion of the Assessing

Officer, in our view, does not appear to be logical

conclusion. The Assessing Officer appears to be blowing hot

and cold at the same time. It is difficult to comprehend as to

why the assessee on claiming to have purchased diesel on

behalf of its transporters would at the same time make a

bogus claim and also purchase diesel outside his books of

account. Therefore, it appears that the enquiry and

investigation conducted by the Revenue is inconclusive.

Further we find that the CIT(Appeals) has believed the

version of Nikhil Filling Station of having sold diesel to the

assessee of Rs.1.26 crores merely on the basis of statement

of the manager despite the fact that no books of account

were produced by the manager to corroborate his statement.

The CIT(A) has, we find, at the same time held that the

purchases from Surinder Kumar and Ajay Kumar to be

bogus, but has also accepted that purchases to the extent of

Rs.1.24 crores were made by them from Nikhil Filling station

for supplying to the assessee, believing the version

/statement of the manager of the filling station. The

conclusion derived by the Ld.CIT(A) is clearly not

sustainable. Therefore, in our view, the entire exercise of

the Revenue and the entire enquiry and investigation

conducted is inconclusive and incomplete and the matter

ITA No.729/Chd/2017 25 & ITA No.837/Chd/2017 A.Y.2012-13

needs to be considered afresh. We find that even the

Ld.CIT(Appeals) has made identical observations about the

inconclusive nature of the inquiry in his order while stating

so at pages 13 and 14 of his order as under:

“The statements of Sh. Surender Kumar, Ajay Kumar & Anil Kumar recorded by Ld. A.O. are not conclusive. Books of accounts have not been produced and examined in only of the three cases. Ld. A.O. has also not verified the payments made/received by cheque in the bank accounts of the appellant and the above three persons though some of these clearly bear a narration mentioning their names. Even the assessment orders u/s 147/ 143(3) of Sh. Surender Kumar & Sh. Ajay Kumar do not record any finding of fact that the amounts received in their bank accounts were received, (most of which are received in cash), from the appellant out of the amounts retained by him / deducted by him from the bills of the transporters as claimed by it. Similarly, there is no documentary evidence on record that Sh. Surender Kumar & Ajay Kumar made cash payments or any payments by cheque to the various petrol pumps. The only statement / reply that has come on record in this regard is of Sh. Anil Kumar, Manger of the Nikhil Filling Station, who attended in response to summons u/s 131 of the Act. In the absence of any other evidence on record, his statement that a consolidated account was kept at the petrol pump for filling diesel in the vehicles attached with AHPC and that the sale of diesel of Rs. 1,26,66,867/- as per the ledger account was made to all the three persons (parties) can be accepted as a reasonable and plausible explanation. In the present case, Ld. A.O. has not rejected the books of accounts u/s 145(3) of the Act. However, the N.P. rate of 1.13% shown by the appellant is apparently very low. Keeping in view the totality of above facts, it would be reasonable if the purchase of diesel for the vehicles of the transporters by the appellant is accepted to the extent of Rs.1,26,66,867/-. After confirming the above addition of Rs.98,51,500/-, the net profit works out to 14.14%. The appellant gets a relief of Rs.1,26,66,867/-. The addition of Rs.98,51,500./- (Rs.2,25,18,367 (-) Rs.1,26,66,867) is upheld. The ground of appeal is partly allowed.”

ITA No.729/Chd/2017 26 & ITA No.837/Chd/2017 A.Y.2012-13

25.

Therefore, we consider it fit to restore the issue back to

the Assessing Officer to conduct proper enquiries in the

present case beginning with first examining the claim of the

assessee vis-à-vis the genuineness of expenses claimed of

hire charges and further making complete enquiries

regarding the purchases of diesel from the aforesaid three

parties so as to arrive at proper conclusion thereafter in

accordance with law. Grounds ‘D’ & ‘E’ raised by the

assessee therefore, with regard to the diesel expenses

incurred and addition made u/s 69C on account of the same

stand allowed for statistical purposes

26.

Ground ‘F’ raised by the assessee relates to

disallowance of diesel expenses claimed by the assessee

amounting to Rs.1,39,452/-.

27.

The A.O. made the above addition of Rs.1,39,452/- on

account of diesel expenses claimed by the assessee in P&L

account which was explained to be incurred to run a

generator set at the work site. Ld. A.O. noted that there was

no generator set appearing in the schedule of fixed assets.

The explanation of the assessee that the generator set was

arranged by the Director of company from one of his friend

Shri Sada Ram and the affidavit of Shri Sada Ram submitted

in this regard were rejected by Ld. A.O. on ground that no

purchase bill or any other documentary evidence regarding

the purchase of generator by Shri Sada Ram could be

produced. Hence, the diesel expenses of Rs.1,39,452/- was

disallowed u/s 69C of the Act.

ITA No.729/Chd/2017 27 & ITA No.837/Chd/2017 A.Y.2012-13

28.

During appellate proceedings the assessee contended

that the Assessing Officer had rejected the affidavit of Shri

Sada Ram without any verification or without summoning

Shri Sada Ram and in the absence of any adverse material

brought on record in this regard, the Assessing Officer could

not have rejected the affidavit in a summary manner. The

Ld.CIT(Appeals) rejected the assessee’s contention stating

that the assessee had only produced an affidavit from his

friend and had failed to established the veracity of the

recital in the affidavit by producing any affidavit regarding

purchase of generator by Shri Sada Ram or by producing him

for cross examination.

29.

On perusing the statement of facts filed before us we

find that the contention of the assessee is the same as that

before the lower authorities, being that the expenses were

incurred to run generator at project site and that the

assessee did not have any generator, the same was arranged

by the Director of the assessee company from his friend Shri

Sada Ram free of cost whose affidavit to this effect had also

been filed before the lower authorities. The contention of

the assessee was that if no effort is made to controvert the

contents of the affidavit, the same has to be accepted as

true. The assessee has cited the decision of the Hon'ble High

Court of Gauhati in the case of Chowkchand Balabux Vs.

CIT (1961) 41 ITR 465 and the decision of the Hon'ble Apex

Court in the case of Mehta Parekh & Co. Vs. CIT (1956) 30

ITR 181 in this regard.

ITA No.729/Chd/2017 28 & ITA No.837/Chd/2017 A.Y.2012-13

30.

The Ld. DR, on the other hand, has relied upon the

order of the CIT(Appeals).

31.

We have considered the rival contentions and find merit

in the contention of the Ld. counsel for assessee. The

assessee’s explanation of having purchased diesel for

running its generator set which was owned by the friend of

the Director of the company from whom it was borrowed, has

been duly evidenced by the affidavit of the said person Shri

Sada Ram. Without controverting the contents of the

affidavit or without making any effort to verify the same, the

Revenue could not have doubted the veracity of the same.

Further having filed the affidavit it was for the Revenue to

make further enquiries vis-à-vis the veracity of the same, the

onus in this regard had been wrongfully shifted on the

assessee. Also since we have restored the issue of diesel

expenses to the Assessing Officer in the absence of adequate

enquiry conducted and noting that on the present issue also

complete and adequate enquiry has not been conducted by

the Revenue, we restore this issue also back to the Assessing

Officer for conducting proper enquiry and thereafter

adjudicate the same in accordance with law. Ground.F raised

by the assessee is, therefore, also allowed for statistical

purposes.

32.

Ground ‘G’ raised by the assessee relates to

disallowance of expenses of Rs.87,650/- as donation

expenses.

ITA No.729/Chd/2017 29 & ITA No.837/Chd/2017 A.Y.2012-13

33.

A perusal of the order of the CIT(Appeals) reveals that

the said expenses claimed by the assessee had been allowed

by him. Therefore, we find no merit in the present ground

raised by the assessee, the assessee not being aggrieved by

the order of the CIT(Appeals) on this issue. Ground G raised

by the assessee is, therefore, dismissed.

34.

Ground No. ‘H’ raised by the assessee relating to

charging/imposing interest u/ss 244-A, 234B & 234D of the

Act are consequential and, therefore, needs no adjudication.

Ground No. ‘H’ raised by the assessee is dismissed.

35.

Ground No. ‘I’ raised by the assessee is general and no

adjudication is required.

In the result the appeal of the assessee is partly

allowed for statistical purposes.

36.

We shall now be taking up the appeal of the Revenue in

ITA No.837/Chd/2017 for A.Y 2012-13.

37.

The Revenue has raised following grounds:

“1. On the facts and in the circumstances, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,26,66,867/- made by the A.O. on account of expenditure allegedly booked in operating and other expenses in the name of Sh. Ajay Kumar and Sh. Surender Kumar as the assesses company could not produce documentary evidences and could not satisfactorily prove purchases of diesel from both the persons. 2. On the facts and in the circumstances, the Ld. CIT(A) has erred in deleting the addition of Rs.1,15,65,717/- as the assessee company could not justify the difference of Rs.1,15,65,717/- occurred in diesel ledger account of Austee Hydro Power & Construction Company Pvt Ltd (assessee ) and Nikhil Filling Station (Saler).

ITA No.729/Chd/2017 30 & ITA No.837/Chd/2017 A.Y.2012-13

3.

On the facts and in the circumstances, the Ld. CI-T(A) has erred in deleting the addition of Rs.87,650/-made on account of donation paid as the assessee company paid donation to such persons who do not come under the preview of Section 80G. 38. Ground Nos.1 and 2, it was pointed out and we have

also noted, are on the issue of diesel expenses disallowed by

the Assessing Officer which was partially deleted by the

CIT(Appeals). Since this issue has already been dealt with by

us in ground ‘D’ and ‘E’ of the assessee’s appeal wherein we

have restored the entire issue back to the Assessing Officer

for conducting proper enquiry at paras 20 to 25 of our order

above, The issue raised by the Revenue stands covered by

the same and thus restored to the Assessing Officer. In view

of the above, ground Nos.1 and 2 raised by the Revenue are

allowed for statistical purposes.

39.

Ground No.3 relates to the issue of donation expenses

disallowed by the Assessing Officer on the ground that the

assessee had failed to establish that the persons to whom

donations were given were registered u/s 80G of the Act.

40.

Before the Ld.CIT(Appeals), the assessee had contended

that the amounts paid were not donations but were made in

connection with festival, melas, tournaments, etc. sponsored

by Deputy Commissioner, Mandi/Panchayat and were

advertisement expenses incidental to the business of the

assessee. The CIT(Appeals) found the explanation of the

assessee to be plausible and, therefore, allowed the claim of

the assessee.

ITA No.729/Chd/2017 31 & ITA No.837/Chd/2017 A.Y.2012-13

41.

Before us, the Ld. DR relied upon the order of the

Assessing Officer.

42.

We have gone through the order of the Assessing

Officer. We find that the impugned expenses of Rs.87,650/-

were incurred on the following:

Detisl of Staff Welfare Exp. [fair & festivals office expenses] for the F.Y. 2011-12 Date Particulars Total Return cheque 04/04/2011 Guga Mela committee 2100/- Barmana 13/06/2011 5200/- Guga Mela committee Barmana 23/08/2011 5100/- Guga Mela committee Barmana 25/08/2011 5100/- Guga Mela committee Barmana Jay Shri Ram Yuvak Mandal 14/09/2011 5000/- Slapper HP Basket Ball Association 29/11/2011 Paddal Ground Mandi 11000/- 02/12/2011 10000/- Jay Shri Ram Yuvak Mandal Slapper 09/01/2012 11000/- Lohari Utsav Committee Bahot Kasol Kasol 06/03/2012 State Level Nalwari Fair 250/- Bilaspur 15/03/2012 35000/- State Level Nalwari Fairsunder nagar Total 87650 2100

43.

There is no evidence on record to show the nature of

the expenses, whether donations, as claimed by the Revenue

or advertisements, as claimed by the assessee. The

Assessing Officer has given no basis for holding the said

expenses to be donations ,while the CIT(Appeals) has

accepted the assessee’s claim of the same being

advertisements stating it to be a plausible explanation. None

has cared to verify the facts relating to the said expenses.

ITA No.729/Chd/2017 32 & ITA No.837/Chd/2017 A.Y.2012-13

We, therefore, restore this issue also back to the Assessing

Officer to verify the exact nature of the expenses and

thereafter adjudicate the issue in accordance with law.

Ground No.3 raised by the Revenue is allowed for statistical

purposes.

The appeal of the Revenue is allowed for statistical

purposes.

44.

In the result, the appeal of the assessee is partly

allowed for statistical purposes and the appeal of the

Revenue is allowed for statistical purposes.

Order pronounced in the Open Court.

Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 21st August, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR

Assistant Registrar, ITAT, Chandigarh

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