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TMI Blog2018 (3) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in favour of the assessee. Invocation of provisions u/s. 40(a)(ia) entire provision so made was not liable for tax deduction at source because the expenditure were below the prescribed limits and were in the nature of purchase of raw materials and in some cases required TDS has been deducted at a different point of time i.e., either at the time of giving advance or at later point of time when the actual payee is identified. Detailed finding of CIT(A) has not been controverted by Department by bringing any positive material on record. No reason to interfere in the order of CIT(A). Purchases from the suspicion suppliers - CIT(A) has deleted the addition so made - Held that:- Considering the observation so made by the AO vis-à-vis, finding so recorded by the CIT(A), we are of the opinion that some disallowance is required to be made. Accordingly, we modify the order of lower authorities and direct the AO to restrict addition to the extent of 2% of such purchases. We direct accordingly. - ITA No.902/Mum/2015 - - - Dated:- 19-3-2018 - SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM For The Revenue : Shri V.Vidhyadhar For The Assessee : Shri Rajesh Sanghvi/Shri Subh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord perused. 4. Facts in brief are that assessee is in the business of Builders and Developers is a proprietor of 4 proprietary concerns viz. M/s. Divya Development, M/s Nova Space, M/s Nova Norman Nigam and M/s. Nova Estate, The Tax Audit reports along with Notes on Accounts and Profit and Loss Account and Balance sheet of all these concerns have been filed with the Assessing officer and also perused by the Assessing officer. The assessee filed complete details of provisions so made and also details of actual expenditure incurred in the subsequent year. The submissions and contentions of the Assessee claiming these provisions for the expenses were dismissed by the Assessing officer. 5. By the impugned order, CIT(A) deleted the addition after observing as under:- 2.3 I have carefully considered the Assessment Oder and the Submission of the Ld. AR on the above stated Grounds of Appeal No.1 and 2 on the disallowance of Provisions for expenses of ₹ 85,00,000O/- in M/s Divya Development and ₹ 18,00,000/- in M/s Nova Space. From the same I find that the basic issue that needs to be adjudicated here is whether these provisions are in the nature of contingent liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined with certainty and represents only the basis estimates in the light of available information. More particularly para 6 of AS-1 also substantiates the claim of the Assessee that all the anticipated liabilities and foreseeable losses have to be provided for and that is what the Assessee has exactly done the facts and circumstances of the matter. Even there is no whisper of challenge to the fact of pending work of the respective projects in the entire Assessment order by the Assessing officer. No evidence has been brought on record by the Assessing officer to prove beyond doubt that the previsions of ₹ 85,00,00/- in M/s Divya Development and Rs, 18,00,000/- are the bogus or false and created with the intention of reducing the taxable income more particularly keeping in mind the undisputed fact of subsequent spending against these provisions. Hon. Supreme Court in the case of Calcutta Co. Ltd, vs CIT (37 ITR 1) has held that a estimated liability arising out of the contract should be allowed as and when it arises and should not be postponed to a later date. Further Hon. ITAT Mumbai in the case of Jacobs Engineering India Pvt. Ltd vs DCIT in Appeal No. ITA No. 335 and 336/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the payees were not identified at the time of making these provisions , the tax has not been deducted at source from these provisions at that point of time and therefore TDS mechanism can not operate in the absence of identification of the person in whose hands the said expenditure is taxable as income, These facts are squarely covered by the decisions of Hon. ITAT Mumbai in the case of Industrial Bank of India vs Income Tax Officer 2007(107 ITD 45)/293 ITR 267. However from the details or these expenses filed by the AR, it is observed that the entire provisions are not all liable for the tax deductions at source for the various reasons like below the prescribed limits and in the nature of purchase of Raw materials and in some case the required TDS has been deducted but at different point in time i.e either at the time of giving advance or at later point of time when the actual payee is identified. These facts have not been considered by the Assessing officer while disallowing the expenses u/s 40(a)(ia) . In such circumstance the balance of convenience as well as judicial Rulings cited by the Ld, AR in my considered opinion falls in favour of the Assessee. Therefore on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be allowed on this count. Appellant case also gets support from the latest decision of Hon. ITAT Mumbai in the case of DCIT 25(3) Mumbai vs Shri Rajeev G. Kalathil ITA No. 6727/Mum/2012 decided on 20/08/2014 wherein the Hon. Tribunal on the same facts have held that suspicion of the highest degree can not take the place of evidence and the Assessing officer could have called for the Bank Account of the Supplier to find out whether there was immediate cash withdrawals from their account. From the perusal of the Assessment order I. find that no such exercise has been carried out by the Assessing officer and therefore it remains to be established and conclusively proved by the Assessing officer that the purchases claimed by the Assessee are bogus. Accordingly the I have no hesitation in accepting the claim of the purchases by the Appellant. Mere Non appearance of the vendors in response to the notices u/s 133(6) also can not lead to doubt the authenticity and genuineness of the purchases as held in the case of Rajesh P. Soni vs. ACIT( 2006) 100 TTJ 892(Ahd. Tribunal) and CIT vs. Nangalia Fabrics Pvt. Ltd order dt. 22/04/2013 Tax Appeal No. 689 of 2010 Gujarat High Court. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) also observed that assessee has actually spent ₹ 66,51,354/-in subsequent years(Rs.38,48,253/- in A.Y. 11-12, ₹ 3,79,886 in A.Y. 2012-13 and ₹ 24,23,215/- in A.Y. 2013-14) out of the total provisions of ₹ 85,00,000/- and ₹ 18,48,646/- was written back and offered for taxation in the Assessment year 2013-14 in the project called Vaishnavi Project in M/s Divya Development. We also found that balance amount of ₹ 18,48,646/- which was not spent in the case of Divya Development had also been incorporated by the assessee as its income in the A.Y.2013-14. In view of the detailed finding so recorded by CIT(A), we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of provision of expenses. We also found that similar issue has been dealt with by the Tribunal in assessee s own case for immediately preceding year and decided in favour of the assessee. 10. With regard to invocation of provisions u/s. 40(a)(ia), CIT(A) observed that since it was a mere provision and parties were not identified, therefore, there is no question of deleting any tax at source. View taken by CIT(A) is covered by the decision of ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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