2017 (8) TMI 659 - AT - Income Tax

Allowability of GSB Expenses - addition u/s 40(a)(ia) - allowable busniss expenditure - Held that - Admittedly, these expenses were not disallowed by invoking the provision of section 40(a)(ia) by the Assessing Officer in the Assessment Order. Therefore, the Ld. CIT(A) has also not accepted the contention of the Assessing Officer and there is no ground by the revenue in this respect. Therefore, it can be inferred that the genuinity of expenditure is not doubted by the AO. Under these facts we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. Ground no. 1 of the Revenue s appeal is dismissed. Addition of the Stone Expenses - CIT-A restricted the addition - Held that - Approach of the Ld. CIT(A) is self-contradictory, therefore, same cannot be sustained in view of the fact that the assessee has not placed any bills and vouchers for supporting its claim. Hence, he restores the finding of the AO on this issue. On the other hand he restricted the disallowance on adhoc basis. Therefore, we set aside the order on this issue and confirm the finding of AO. This ground of Revenue s appeal is allowed. Disallowance of the Labour Expenses - Held that - CIT(A) has restricted the disallowance on adhoc basis at the one hand he has confirmed that the assessee has not keeping proper record and the Assessing Officer has made disallowance @ of 5% of the total labour expenses that appears to be justified. Therefore, we set aside the order of Ld. CIT(A) and restore the finding of the AO. This ground of Revenue s appeal is allowed. Disallowance of expenses to Hire Charges and Crane Loader Expenses - Held that - CIT(A) delete the addition in the basis, that Assessing Officer has not given specific instance. There is no dispute with regard to the fact that this expenditure was made on adhoc basis. Therefore, we do not see any reason into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue s appeal is dismissed. Disallowance of JCB (Hot Mix Plant) - Held that - As regards Sh. Zakir Hussain being a creditor for outstanding Hot mix plant related expenses he had earlier denied any transaction with the assessee. Later on he failed to appear before the AO in the second round (His affidavit was submitted by the assessee as replacement for his physical presence). Accordingly the amount shown against his name is also considered not verified & the balance addition is directed to be deleted. - Decided against revenue Invoking the provision of section 40A(3) - Held that - We find that Ld. CIT(A) considered the statement of Shri Satya Narayan Nagar who stated in the revised statement that no payment was made exceeding to ₹ 20,000/-. The Revenue has not placed any contrary material. Since the Assessing Officer has invoked the provision of Section 40A(3) on the basis of the statement of Shri Satya Narayn Nagar who subsequently retracted the statement and made a fresh statement. Under these facts, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue s appeal is dismissed. Addition invoking the provision of section 40A(3)

Issues Involved:
1. Deletion of addition of ?92,19,029/- related to 40 creditors.
2. Deletion of addition of ?2,36,994/- out of total addition of ?3,36,994/- for stone expenses.
3. Deletion of addition of ?2,20,066/- out of total addition of ?3,36,994/- for labour expenses.
4. Deletion of addition of ?3,05,455/- for sand expenses.
5. Deletion of addition of ?76,978/- for hire charges and crane loader expenses.
6. Deletion of addition of ?3,35,000/- out of total addition of ?5,44,160/- for JCB (Hot Mix Plant) expenses.
7. Deletion of addition of ?1,60,000/- under Section 40A(3).
8. General grounds for appeal.

Detailed Analysis:

1. Deletion of Addition of ?92,19,029/- Related to 40 Creditors:
The Revenue contended that the Ld. CIT(A) erred in deleting the addition without proper verification of all creditors. The Ld. CIT(A) had directed the AO to examine the remaining creditors, which was done, and the AO did not report any adverse findings on the genuineness of the expenses. The Ld. CIT(A) concluded that the creditors were verified on a test-check basis, and the balance amount of ?92,19,029/- was considered explained, except for ?1,98,458/- which was treated as unexplained. The Tribunal found no reason to interfere with the Ld. CIT(A)'s order and dismissed this ground of the Revenue's appeal.

2. Deletion of Addition of ?2,36,994/- Out of Total Addition of ?3,36,994/- for Stone Expenses:
The Revenue argued that the Ld. CIT(A) was self-contradictory in restricting the addition while acknowledging the absence of bills and vouchers. The Tribunal agreed with the Revenue, noting the lack of supporting bills and vouchers, and restored the AO's original finding, allowing this ground of the Revenue's appeal.

3. Deletion of Addition of ?2,20,066/- Out of Total Addition of ?3,36,994/- for Labour Expenses:
The Ld. CIT(A) had restricted the disallowance on an ad hoc basis, which the Tribunal found unjustified given the absence of proper records. The Tribunal restored the AO’s finding, allowing this ground of the Revenue’s appeal.

4. Deletion of Addition of ?3,05,455/- for Sand Expenses:
The Ld. CIT(A) followed its reasoning from ground no. 2 to delete the addition. Since the Tribunal dismissed ground no. 1 of the Revenue’s appeal, it also dismissed this ground for the same reasoning.

5. Deletion of Addition of ?76,978/- for Hire Charges and Crane Loader Expenses:
The Ld. CIT(A) deleted the addition on the basis that the AO did not provide specific instances of disallowance. The Tribunal found no reason to interfere with this finding and dismissed this ground of the Revenue’s appeal.

6. Deletion of Addition of ?3,35,000/- Out of Total Addition of ?5,44,160/- for JCB (Hot Mix Plant) Expenses:
The Ld. CIT(A) confirmed the disallowance of ?2,09,160/- related to Sh. Zakir Hussain but deleted the balance ?3,35,000/- due to lack of verification. The Tribunal upheld this finding, dismissing this ground of the Revenue’s appeal.

7. Deletion of Addition of ?1,60,000/- Under Section 40A(3):
The Ld. CIT(A) based its finding on a revised statement by Shri Satya Narayan Nagar, indicating no payment exceeding ?20,000/-. The Tribunal found no contrary material from the Revenue and affirmed the Ld. CIT(A)’s finding, dismissing this ground of the Revenue’s appeal.

8. General Grounds for Appeal:
This ground was considered general in nature and required no separate adjudication.

Conclusion:
The appeal of the Revenue was partly allowed, with the Tribunal affirming some findings of the Ld. CIT(A) and restoring others to the AO's original findings. The detailed analysis ensures the preservation of legal terminology and significant phrases from the original judgment.

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