9911796707
TMI Blog2016 (8) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... iced that the assessee has claimed consultancy charges of Rs. 35 lakhs in the name of M/s. SMV Projects Ltd. and also material handling charges of Rs. 26 lakhs in the name of M/s. Malleshwar Enterprises. Therefore, issued a notice and asked to explain the nature of payments made to these companies. The assessee in response to show cause notice submitted that she had taken up turnkey project contract for M/s. Rawmet Ferros Industries Pvt. Ltd. for design and supply of equipments/components for 2x16.5 MW submerged arc furnaces to produce bulk ferro alloys. The assessee further submitted that she had paid consultancy charges of Rs. 35 lakhs to M/s. SMV Projects Ltd. for design, consultancy and detailed engineering work for the sub-merged arc furnace to be supplied to M/s. Rawmet Ferros Industries Pvt. Ltd. The assessee further submitted that she had entered into an agreement with the contractor for providing design and consultancy services, issued work order and also paid the amount by way of account payee cheque after deducting applicable TDS. Similarly, she had paid a sum of Rs. 26 lakhs to M/s. Malleshwar Enterprises towards material handling charges. The assessee further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that she had entered into a contract with M/s. SMV Project Ltd. according to which the contractor rendered services/executed works and provided services for design and consultancy for execution of submerged arc furnace to be provided to the principals. The assessee further submitted that she had taken up the work on turnkey basis and incurred the expenditure towards preparation of plan, design, the material and also consultancy for manufacture and supply of the material. It was further submitted that the A.O. has not doubted the genuineness of the payments, however, disallowed the expenditure for the simple reason that the contractor does not have requisite experience and resources to execute the work. The assessee further submitted that the A.O. during the course of assessment proceedings recorded statement from the Managing Director and partner of the company and partnership firm. Wherein, the Managing Director has stated that they have executed the work for the assessee and also received the payment. The assessee further submitted that she had entered into agreement with the contractor, issued work order and the payment has been made subsequently by way of che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessing officer. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 4. The Ld. A.R. for the assessee submitted that the CIT(A) was erred in holding that expenditure incurred by the assessee is bogus and not substantiated with necessary evidences. The A.R. further submitte4d that the assessee has entered into an agreement with the contractors and issued detailed work order for supply, consultancy and detailed engineering support for the turnkey contract entered with M/s. Rawmet Ferros Industries Pvt. Ltd. The A.R. further submitted that the assessee has furnished details of identity of the contractors, their income tax assessment particulars and also confirmation letters from the contractors wherein the contractors have confirmed that they have rendered services to the assessee. The A.R. further submitted that during the course of assessment proceedings, the A.O. has examined the Managing Director of the company and also Managing Partner of the firm wherein they have categorically stated that they have provided or supplying requisite services to the assessee company. The A.R. further submitted that the A.O. never doubted the genuineness of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that there is no nexus between the works contract executed by the assessee and expenditure incurred in relation to consultancy charges. The A.O. was of the opinion that the assessee has inflated the expenditure by creating fictitious entries in the books of accounts. The A.O. has given elaborate reasons for coming to the conclusion that the expenditure claimed by the assessee is bogus, therefore, disallowed the expenditure and added back to the total income of the assessee. It is the contention of the assessee that it has incurred the expenditure and the expenditure was supported by proper bills & vouchers. The assessee further contended that the payment has been through bank after complying with the TDS provisions. The contractors have issued bills and also confirmed the transaction by filing necessary confirmation letters. The assessee further submitted that the contractors have included the receipts in their financial statements and filed the income tax returns. Therefore, the A.O. was not correct in coming to the conclusion that the expenditure incurred by the assessee is bogus. 7. The A.O. disallowed the amount for the sole reason that the contractor does not have r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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