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TMI Blog2016 (8) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... diture claimed is genuine in nature and also furnished necessary evidences before the A.O. to prove his case. Another important point to be noted here is that the A.O. during the course of assessment proceedings recorded statement from the Managing Director of the company and also Managing Partner of the firm wherein both the parties have confirmed that they have supplied or rendered the services to the assessee. Therefore, we are of the view that the A.O. without any reasons simply disbelieved the evidences filed by the assessee and disallowed the expenditure. The CIT(A) without appreciating the facts confirmed the additions made by the A.O. Hence, we set aside the order passed by the CIT(A) and direct the A.O. to allow the expenditure claimed by the assessee. - Decided in favour of assessee - I.T.A.No.371/Vizag/2012 - - - Dated:- 17-6-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri K.J.D. Srinivas, AR For The Respondent : Shri M.K. Sethi, DR ORDER PER V. DURGA RAO, Judicial Member: This appeal filed by the assessee is directed against the order of CIT(A), Visakhapatnam dated 31.7.2012 and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prises were not in a position to provide the kind of services required by the assessee. The work orders issued by the assessee actually shows that the work done is that of supply and fabrication including designing. However, the assessee has paid towards design and consultancy charges. The A.O. further observed that the assessee has made a provision in the books of accounts without any payment during the relevant financial year and also the contractors are not having requisite experience in providing this kind of service, therefore opined that the assessee has inflated the expenditure by creating fictitious entries in the books of accounts. The A.O. further observed that on verification of the financial statement of the contractors, it was noticed that the contractors M/s. SMV Projects Ltd. and M/s. Malleshwar Enterprises have not provided any services to the assessee. The profit loss account of M/s. SMV Projects Ltd. shows expenditure under the head like bricks, cement and material purchases, whereas the receipts is shown under the head consultancy charges. There is no relationship between the income earned and the expenditure incurred by the contractor. Similarly, in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their income tax returns. The CIT(A) after considering the submissions of the assessee held that on perusal of the work orders issued by the assessee, it is seen that the work assigned to M/s. SMV Projects Ltd. is design, consultancy and detailed engineering of the submerged arc furnaces which produce ferro alloys. M/s. SMV Projects Ltd. is a company which runs from a small rented premises along with many other concerns. The company neither has any factory nor the work place to do the kind of job it was supposed to do. It neither has a technical manpower nor the machinery support to either design or engineer submerged furnace from the details of location and the financial statements of M/s. SMV Projects Ltd., does not seem to be having any capability in any of the required fields. The CIT further observed that though the assessee has furnished the details of M/s. SMV Projects Ltd. and its financial statements where the contractor has executed the works or not cannot be ascertained from the mere existence of the contractor. It has to be looked into whether the person entrusted with the work is having capacity to do the work. M/s. SMV Projects Ltd. is not having any requisite experie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expenditure claimed by the assessee is genuine, which was supported by proper bills vouchers. The payment has been made through bank account after deducting applicable TDS as per the Act. Therefore, the A.O. was not correct in disallowing the expenditure simply stated that the expenditure claimed by the assessee is bogus. 5. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A). The D.R. further argued that during the course of assessment proceedings, the A.O. has conducted detailed enquiry of the contractors and pointed out that the contractors does not have requisite experience and resources to execute these kind of contracts. On verification of the financial statements of the two entities, it was noticed that they have incurred expenditure in relation to their businesses which is not having any nexus between the receipts received from the assessee towards execution of the work. From this the A.O. come to the conclusion that the assessee has created fictitious entries in the books of accounts without there being any actual payments to inflate the expenditure. Therefore, his order should be upheld. 6. We have heard both the parties, perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued detailed work orders. The contractors have issued proper bills and also confirmed the transactions with the assessee. We also noticed that the assessee has made the payment by cheque. The assessee also deducted TDS on such payments and the contractors have included the receipts from the assessee in their books of accounts and filed the income tax returns. The A.O. simply disbelieved the evidences filed by the assessee and made additions by holding that the expenditure incurred by the assessee is bogus. Once the assessee has proved with necessary evidences that the expenditure incurred is genuine, the A.O. cannot disallow the expenditure simply on assumption or surmises basis by holding that the contractor does not have requisite experience in handling this kind of contracts. Whether the contractor itself do the work or get the work done by others was not a matter of subject with the assessee as long as there was no interruption with the work. The assessee is concerned whether the contractor has executed the work or not? In the present case on hand, on perusal of the facts available on record, we find that the assessee has furnished all the details necessary to prove the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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