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TMI Blog2014 (11) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained – Decided against revenue. Labour charges and site expenses deleted – Held that:- The assessee has made the expenses of ₹ 58,17,088/- in cash and all the vouchers on the cash payment are not verifiable, therefore, the disallowance made by AO on these two accounts amounting to ₹ 25,00,000/- is excessive and very high, thus, a reasonable disallowance on these two accounts would be ₹ 2.50 lacs – the AO is directed to the disallowance to ₹ 2,00,000/- on account of labour charges and ₹ 50,000/- on account of site expenses – Decided partly in favour of revenue. Addition of purchases expenses deleted – Held that:- The AO issued the summons u/s 131 to the suppliers of the assessee from whom the assessee made the purchases - without discussing anything about the evidence produced by the assessee in respect of the claim except pointing out some wrong PAN No., the AO had made the addition on the basis of the report of the inspector of income tax - when the assessee has produced income tax returns, VAT returns and all other relevant documents and evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made on the ground of Purchase expenses of 3 parties amounting to ₹ 94,58,077/- without considering the report of the inspector on the genuineness of the relevant parties and the fact that the assessee had failed to establish during the assessment proceedings that the transactions were wholly and exclusively for the purposes of business. v) On the fact and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of expenses on account of purchases from three parties without appreciating the fact that the additional evidences submitted during the appellate proceedings were not provided during the assessment proceedings. 2. Ground no. 1 is regarding deletion of addition of retention money. 2.1 During the assessment proceedings, the Assessing Officer noted that the assessee has shown turnover in respect of MCGM contract amounting to ₹ 20,85,90,788/- whereas from the TDS certificate the gross amount of turn over is Rs/ 22,0452,020/-. The Assessing Officer noted that that the assessee has shown this turnover by reducing the retention money amounting to ₹ 1,17,98,002/- and other tax of ₹ 63,230/-. Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt because it has accrued only on satisfaction of stipulated conditions and fulfillment of specified criteria and after lapse of stipulated time. This method of accounting has been regularly followed by the assessee. He has pointed out that for all the previous years right from the A.Y. 2002-03 to 2008-09, the Assessing Officer accepted this method of accounting and retention money shown and offered by the assessee only in the year of receipt after deduction if any by the authorities. In support of his contention he has relied upon the following decisions:- (i) DY. CIT Vs. Amarshiv Const. (P) Ltd. (88 ITD 381) (ii) Anup Engg. Ltd. Vs. CIT (247 ITR 457) (iii) Janatha Conract Co. Vs. CIT (105 ITR 627) (iv) CIT Vs. Associated Cables (P) Ltd. (286 ITR 596) 2.5 The Ld. Authorized Representative has further submitted that the issue has been considered in the various decisions and it has been held that as per the contract certain amount was to be retained by the buyers and consumers was to be paid to the assessee on the satisfactory completion of the contract. The retention money did not accrue to the assessee and could not be considered to be the income of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of retention money in the case of contract is deferred and is contingent on satisfactory completion of contract work. The right to receive the retention money is accrued only after the obligations under the contract are fulfilled and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained. The other judgment relied upon is in the case of CIT v. Ignifluid Boilers (I) Ltd. reported in [2006] 283 ITR 295 (Mad). In that judgment also, a Division Bench of the Madras High Court has held that the amount retained does not accrue to the assessee and, therefore, the assessee would not be liable. 2.7 Thus the Hon'ble High Court has held that the the right to receive the retention money is accrued only after the obligations under the contract are fulfilled and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained. Following the decision of Hon ble Jurisdictional High Court, we do not find any error or illegality in the order of CIT(A) qua this issue. 3. Ground No. 2 and 3 is regarding deletion of addition made on account of labour charges and site expenses. 3.1 The assessee has cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the labour incentive work carried out by the assessee. The assessee s Books of Accounts are audited and, therefore, in the absence of any defect in the Books of Accounts the ad hoc disallowance is not warranted. 3.5 We have considered the rival submissions and relevant material on record. The Assessing Officer has made an ad hoc disallowance on account of labour charges and site expenses on the ground that some of the expenses were incurred in cash and further all the vouchers were not produced by the assessee for verification. The Ld. Authorized Representative has disputed the observation of Assessing Officer and submitted that the assessee has produced all the vouchers and Books of Accounts on test cheque basis. It was not asked by the Assessing Officer to produce all the vouchers. Even otherwise, we note that the expenditure on account of labour charges and site expenses are in the line with the earlier years and it is not the case of higher claim of expenditure for the year under consideration in comparison to other years. The CIT(A) has considered the relevant facts and decided this issue in para 8.3 and 9.3 as under:- 8.3 I have considered the relevant facts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case. In view of the explanation given and the submission filed by the appellant the addition is deleted. 3.6 Though the claim of the assessee is not on higher side, however, we note that the assessee has made the expenses of ₹ 58,17,088/- in cash and all the vouchers on the cash payment are not verifiable, therefore, in the facts and circumstances of the case and in the interest of justice, we find that the disallowance made by Assessing Officer on these two accounts amounting to ₹ 25,00,000/- is excessive and very high, therefore, we are of the view that a reasonable disallowance on these two accounts would be ₹ 2.50 lacs. Accordingly, we direct the Assessing Officer to restrict the disallowance to ₹ 2,00,000/- on account of labour charges and ₹ 50,000/- on account o site expenses. 4. Ground No. 4 is regarding deletion of addition on account of purchases expenses. 4.1 In order to test check the genuineness of the purchase, notice u/s 136(3) were issued by the Assessing Officer to some of the parties from whom the assessee made the purchases. Thereafter summons u/s 131 were also issued in some of the cases to enforce th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the claim of genuineness of purchase from these parties. He has pointed out that the assessee has produced the confirmation from all the parties as affidavits were filed, statement of invoices and copy of invoices showing the purchase made from these parties. The statement of payments and receipt by the purchaser through bank were also produced before the Assessing Officer along with confirmation of bank account. Bank book of the purchaser and bank statement of the purchaser along with VAT return, income tax return were filed before the Assessing Officer. He has further submitted that the copy of electricity bill raised and financial status of these parties were also produced in respect of the claim. The assessee discharged onus without any doubt by producing all the relevant documents. The payment in respect of M/s Bharat Trading was fully settled, therefore, the cheque payment appears on all the bills through stamp. The Assessing Officer has made the addition on assumption and surmises without bringing any record to disapprove the evidence produced by the assessee. He has supported the order of CIT(A) as well as relied upon a series of decisions. 4.4 We have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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