9911796707
TMI Blog2012 (9) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... o ascertain whether in fact any work has been executed by sub-contractor for which payment was made to him by the assessee as these facts have not been properly brought on record - direction to the AO to make necessary enquiry in this regard - in favour of assessee for statistical purpose. Depreciation on the temporary staff quarters - Held that:- once the AO has disallowed the expenditure claimed by holding it as a capital expenditure then the assessee is entitled to avail depreciation on such capital expenditure - in favour of assessee. - ITA Nos. 779 of 2009,957 & 1204 of 2011 - - - Dated:- 22-6-2012 - SHRI CHANDRA POOJARI, SHRI SAKTIJIT DEY, JJ. Assessee by : Sri S. Rama Rao Department by :Smt. Subhashree Anant Krishna ORDER PER SAKTIJIT DEY, JM: These are three appeals, ITA No.779/Hyd/09 is by the assessee against the order passed by the CIT u/s 263 of the Act and others are cross appeals directed against the order dated 31-3-2011 pertaining to the assessment years 2004- 05. For the sake of convenience, these appeals are clubbed together and disposed of by this combined order. First let us deal with ITA No. 779/Hyd/2009 filed by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total quantity of bitumen purchased from HPCL is around 1226 MTs and the total value of the quantity purchased from HPCL worked out to Rs.1,46,86,485/-If the value of found entries is taken at Rs.8.50 lakhs, the total value of purchases from HPCL worked out to around Rs.1.55 crores whereas the assessee has shown an outstanding liability in the name of HPCL at Rs.1,61,35,587. Similarly, against purchases made from IOC, no payments have been made and the entire purchase amount of Rs.38,14,269 has been shown as outstanding liability. ii) Claim of expenditure on purchase of Bitumen appears to have been inflated when compared to purchases made in the immediately preceding assessment year. The assessee mainly executed road works and these contracts were taken from Central and State Government authorities and its terms and conditions of contracts as per earlier years and most of the contracts happened to be on- going projects carried over from the preceding assessment year 2003-04 and there is no justifiable reason for such huge variation between last years and this year and the same was not examined by the AO. iii) The assessee had debited an amount of Rs.15,80,256/- for quality c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit to the assessee looking at its past records. It was further submitted by the assessee that the outstanding liability was made in the succeeding year. When the CIT asked the assessee to reconcile the figures of outstanding liability appearing in its balance-sheet with the accounts of HPCL and IOCL as appearing in their books, the assessee expressed its inability to produce any such evidence. It is standard practice with the public sector undertaking like HPCL and IOCL that they sell their products only against advance payment in the shape of Demand Drafts. In the aforesaid circumstances, the doubt entertained by the CIT is quite justified. These facts are not at all examined by the AO while completing the assessment which is very much evident from assessment order itself. The CIT has therefore simply directed the AO to call for information from the concerned companies i.e., HPCL and IOCL and ascertain the actual payments made by the assessee relating to purchases made by it during the relevant financial year. We therefore find no infirmity in the order of the CIT on this issue and accordingly the ground raised by the assessee is dismissed. 8. Fourth ground of the appeal rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards quality control can be easily ascertained from the concerned department under which the assessee executed the work. In the circumstances, therefore, addition can be made only after verifying facts from the concerned department. If the assessee s claim towards deduction under the head quality control is found to be correct, then there should not be any addition on this account. We therefore modify the order of the CIT to this extent and direct the AO to verify the claim of the assessee regarding recoveries towards quality control by making necessary enquiry and allow deduction if the claim of the assessee is found to be correct. Hence this ground of the assessee is allowed for statistical purpose. 10. Ground Nos. 6 and 7 relate to the direction of the CIT to add an amount of Rs.45,36,282/- claimed as expenditure towards sub-contract payment to Krishna Kumar Raju. From the accounts of the assessee, the CIT found that the assessee has claimed deduction of Rs.50,62,282/- towards sub-contract expenditure in the name of Krishna Kumar Raju. The assessee during the proceedings u/s 263 submitted before the CIT that sub-contract agreement with Krishna Kumar Raju for execution of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Ground No.2 relates to deletion of an amount of Rs.38,14,269. Briefly stated facts are the CIT from the balance-sheet of the assessee as on 31-3-2004, found an outstanding liability of Rs.38,14,269/- towards IOCL. CIT finding that the AO has not made proper enquiry regarding the claim of outstanding liability, set aside the assessment by directing the AO to make necessary enquiry with IOCL for finding out the real facts on the claim of outstanding liability of Rs.38,14,269/-, The CIT specifically directed the AO to obtain necessary information from IOCL with regard to the payment made by the assessee to IOCL. As it appears from the assessment order, the AO without himself making any enquiry with IOCL, as directed by the CIT, asked the assessee to furnish details of outstanding liability of IOCL. The assessee in course of assessment proceedings submitted a copy of letter dated 11-1-2005 received from IOCL wherein the IOCL had requested the assessee to make payment of the outstanding liability of Rs.38,54,072 within in a period of 30 days. The AO from the letter finding that the outstanding liability of Rs.38,54,072/- was as on 11-1-2005 and not on 31-3-2004 disallowed the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossed cheques or DDs. It was contended by the assessee that bitumen is used in the final process of laying of roads. It was further contended on behalf of the assessee that the AO having not found any deficiency in the books of account, there should not have been any addition on this account. The assessee also contended that there being increase in rates of bitumen and assessee having used best quality of bitumen during the year, no addition was called for. The CIT(A) after considering the contentions raised by the assessee found that the AO has not rejected the books of account of the assessee. There is also no finding by the AO that the purchases of bitumen have not been recorded in the books of account of the assessee. He therefore deleted the amount of Rs.83,49,434/-. 16. We have heard rival contentions of the parties and perused the material from record. It is seen from the assessment order that the AO has made addition of Rs.83,49,434/- simply by observing that the assessee has failed to produce contractual norms towards consumption of bitumen. The AO does not deny the fact that the assessee is engaged in contract for executing the road projects under Central and State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of Rs.3,07,668/- towards excess claim for sales tax payment has to be sustained since the assessee has failed to offer any explanation in this regard. 18. Ground No.5 relates to the allowance of depreciation on the temporary staff quarters of Rs.7,50,540/-. In the original assessment made u/s 143(3), the AO had disallowed the claim of expenditure towards temporary staff quarters amounting to Rs.7,50,540/- by holding it as a capital expenditure. Initially, the assessee did not challenge the assessment order as was passed u/s 143(3). In the assessment order passed in consequence to the order u/s 263, the AO again made the same addition of Rs.7,50,540/-. The assessee challenged the addition before the CIT (A). The CIT (A) found from the order of assessment that the AO has disallowed the claim of expenditure incurred on temporary staff quarters on the ground that it is in the nature of capital expenditure. The CIT (A) has therefore held that once the AO has disallowed the expenditure claimed by holding it as a capital expenditure then the assessee is entitled to avail depreciation on such capital expenditure. He therefore directed the AO to allow depreciation at the appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The CIT (A) in para 11.1 of his order confirmed the addition on the ground that since a specific direction was given to the AO by the CIT to make addition, it cannot be subject matter of appeal. In ground No.5 of the assessee s appeal in ITA No.779/Hyd/2009 (supra), we have dealt with this issue and set aside the matter to the file of the AO for reexamination by modifying the order of the CIT and holding that the AO shall re-examine the issue to find out whether any sub-contract work has been executed by Sri Krishna Kumar Raju for which the amount was paid to him. In view of our aforesaid direction, we restore this issue also back to the file of the AO who shall decide the issue afresh in accordance with law as per directions given by us in ITA No.779/Hyd/2009 (supra). Therefore, this ground of the assessee is treated as allowed for statistical purpose. 23. The third ground relates to the disallowances made by the AO on different dates enumerated in the said order on the following additions:- i. Disallowance of commission on sub contract works Rs.1,01,245/- ii. Disallowance of expenses on account of metal purchases Rs.3,73,957/- iii. Disallowance on account of labour ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
