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TMI Blog2012 (12) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... laring total income of Rs.1,09,870/-. The case was selected for scrutiny and notices u/s 143(2) were issued and served upon the appellant. The assessing officer completed the assessment u/s 143(3) of the IT Act vide order dated 24.12.2009. While computing the total income, the assessing officer disallowed an amount of Rs.44,01,500/- being expenditure incurred on land development on the ground that the appellant failed to deduct tax as required u/s 194C and added back to the total income of the appellant and opined that provisions of section 40(a)(ia) are attracted. 3. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A). 4. Before the CIT(A), the learned AR of the assessee filed copies of computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point that requires to be noted is that at the first instance the assessee should claim the relevant amounts as expenditures by debiting to the profit and loss account. Then, if the deduct the tax in respect of such items of expenditures debited to profit and loss account as per TDS provisions, the expenditure should not be allowed as a deduction. He pointed out that from the profit and loss account the assessee did not claim the above mentioned amounts as expenditures and did not debit the same to the profit and loss account. The learned AR of the assessee contended that when the assessee firm itself did not claim the expenditure/ payments by debiting to profit and loss account the question of disallowance of those amounts by invoking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of expenditure of Rs.44,01,500/- by the assessing officer by invoking the provisions of section 40a(ia) of the IT Act it resulted in computation of the income at Rs.45,11,370/-which is improper and not sustainable. It was pointed out that there was no discussion in the assessment order as to how the assessing officer was convinced to compute the income at Rs.45,11,370/- when the gross receipts itself amounted to RS.l0 lakhs. He, therefore, submitted that the computation made by the assessing officer is illogical and without any basis. 9. It was also submitted that there is no contractual obligation existed between the assessee firm and the above mentioned four persons in respect of whom the assessing officer disallowed amounts. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; d) The learned CIT(A) erred in arriving to a conclusion that the assessee is following project completion method. e) The learned CIT(A) erred in concluding that non-rejection of books of account amounts to acceptance of the system of accounting, hence, disallowance u/s 40(a)(ia) is not correct. f) The CIT(A) ought to have afforded an opportunity to the AO for rebuttal. g) Any other grounds that may be urged at the time of hearing." 12. Before us, the learned counsel for the assessee Shri K.A. Sai Prasad reiterated the submissions made before the CIT(A) and he relied on the decision of the ITAT, Hyderabad Bench in the case of M/s Narne Constructions (P) Ltd. in ITA Nos. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the assessee that in the present case it can be seen from the P&L Account, which was filed by the assessee at the time of hearing that it is not claimed the above amount of Rs. 44,01,500/- as expenditure and did not debit the same to the P&L A/c. When the assessee did not claim the said expenditure/payments by debiting P&L A/c, the question of disallowing this amount by invoking the provisions of section 40(a)(ia) does not arise. 15. In the case of ITO Vs. Savala Associates, on which reliance placed by the CIT(A), the ITAT Mumbai Bench held as under:- "In principle, one agrees with the above view of revenue that in case of 'completed contract method' the AO is empowered to examine the expenditures incu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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