9911796707
TMI Blog2019 (7) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... re the matter in issue to the file of A.O. with directions - Ground No.1 of the appeal of Assessee is allowed for statistical purposes. Addition on account of mismatch in the physical and book balance of diesel - as mentioned that in the Special Audit Report [ SAR ] there is a difference of 8610.86 litres of diesel which was unexplained - HELD THAT:- After considering the rival submission and in the light of documents available on record i.e., PB-A1/172 and 173 it is clear that assessee has been able to reconcile the difference of 4283 litres, therefore, to that extent addition is liable to be deleted. However, for the remaining amount, Learned Counsel for the Assessee did not press this ground for a sum of 2,40,160/-. We, accordingly, set aside the part addition and restrict the addition of 2,40,160/-. Ground of appeal of Assessee is partly allowed. Addition on account of mismatch in physical and book balance of steel - A.O. made this addition on the ground that there is a difference in the balance of TMT as per stock statement given by the Special Auditor and as per physical verification, the detail of which is given by the A.O. in the assessment order - HELD THAT:- The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., 60% per annum against the normal depreciation rate which was to be allowed @ 10% per annum and difference of the same was added by the A.O - HELD THAT:- the matter requires reconsideration at the level of the A.O. because the A.O. shall have to verify the exact item and exact depreciation allowable as per rules. The assessee has filed complete details in the paper book which requires verification at the end of the A.O. as to on which item specific depreciation is allowable to the assessee as per rules. We, accordingly, set aside the orders of the authorities below and restore this issue to the file of A.O. with a direction to consider each item on which depreciation is claimed and allow depreciation to assessee as per rules Disallowance of depreciation on account of excess payment for acquiring fixed assets - HELD THAT:- There was a difference between the installation of machinery and commissioning as Shanghai Pudong specially manufacture TBM for assessee s requirements. The details of all invoices/bills etc., are brought on record which clearly reveal that assessee has paid reasonable price for purchase of TBM to M/s. Shanghai Pudong. The assessee has, therefore, been able to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Law and allow depreciation as per I.T. Act and Rules. Addition on account of foreign exchange gain - HELD THAT:- Assessee made a book entry at the end of the year with reference to capital asset on account of foreign exchange fluctuation gain which was capitalized. Thus the gain on transaction of foreign currency liability was in respect of capital asset which should have been considered as capital receipt only. Further even if Section 43A would not apply to the matter in issue because no actual settlement of liability has happened during the assessment year under appeal, therefore, book entries would not be relevant to determine the income of assessee. It is well settled Law that book entries are not determinative of income of assessee whether income of assessee is taxable or not, it has to be decided as per Law. We rely upon Judgment of Sutlez Cotton Mills Ltd., vs. CIT [ 1978 (9) TMI 1 - SUPREME COURT] and Tuticorn Alcali Chemicals Fertilizers Ltd [ 1997 (7) TMI 4 - SUPREME COURT] - Even if in this case assessee has made an entry of gain on transaction of foreign currency liability in respect of capital asset at the year end, which would not be income of the assessee, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke or sustain any addition. We, accordingly, set aside the Orders of the authorities below and delete the entire addition Non deduction of tds - Disallowance in respect of expenses incurred on four items i.e., Food expenses for staff outside Office, staff mess expenses, rent, co-lease BUNG project related, rent guest house and car hire charges - expenses spent by the assessee on Chinees expats as per the observation of the Special Auditor which is in the nature of perquisites in the hands of the employees and should have been added to the salary for computation of TDS liability - HELD THAT:- It may also be noted here that the Special Auditor has admitted that these are allowable as business expenses, therefore, it should have been pointed out in the Orders as to how these were perquisite in nature. It is also observed by the Special Auditor that these perquisites should be added to the salary of the employees for computation of TDS liability. In Section 40(a)(ia) the word salary have not been used so as to make disallowance on account of non-deduction of TDS. Therefore, there was no justification for the authorities below to make adhoc addition Addition on account of mismatching ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELD THAT:- There were no bar for the assessee to explain the issue by filing confirmation of the difference. Therefore, the matter requires reconsideration at the level of the A.O. We, accordingly, set aside the Orders of the authorities below and restore this issue to the file of A.O. with a direction to re-decide this issue in the light of confirmation filed by assessee from L T to explain the above issue. Addition on account of notional interest - A.O. made this addition which is the notional interest on the ground that one of the member of JV i.e., L T has provided initial investment of 13 crores, whereas the capital contribution which were required to be made by other member SUCG of 5,95,86,471/- has not been made - HELD THAT:- The assessee explained before the authorities below that it is for the Supervisory Board as per JV Agreement to see that funds are made available by both the members of the JV. The entire proceedings are supervised by the Supervisory Board, therefore, merely because one member of the JV has not contributed their capital in the JV is no ground of charging notional interest on the capital which is not contributed by the member of the JV. There is no provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted the addition. The assessee explained before the Ld. CIT(A) that regular physical verification of stock was made and assessee has already credited 16.66 crores as closing entry in P L A/c, therefore, it would be double addition. CIT(A) found that there were no basis for the A.O. or Special Auditor to make the addition. It was an adhoc addition merely on presumption. D.R. could not produce any evidence or material to contradict the finding of fact recorded by the Ld. CIT(A) Unexplained sub-contract - A.O. made the addition on the ground that Special Auditor has observed that assessee has sub-contracted few activities like catering, travelling, etc. to small individual contractors and bills of these subcontractors was not produced - HELD THAT:- The assessee produced complete details before the authorities below on which no enquiry have been made by the A.O. The Ld. CIT(A) after going through the details on record found that assessee made the payment through account payee cheques and identity of all the parties have been established. This adhoc addition was made merely on surmises and presumptions. D.R. did not produce any evidence or material to contradict the finding of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO be quashed and AO be directed to delete the addition of ₹ 25,00,000/- on account of alleged discrepancy in stock of scrap. GROUND-5 Disallowance of amortization expenses of ₹ 1,54,12,773/- The CIT(A) erred in law and on facts of the case by confirming disallowance of ₹ 1,54,12,773/- by treating the same as depreciation as against the amortization of expenses. In doing so, the CIT(A) failed to appreciate the fact that the appellant had in fact amortized these expenses over the lifetime of the project. The appellant respectfully prays that the directions of the CIT(A) to the A.O. be quashed and A.O. be directed to allow an amount of ₹ 1,54,12,773/- on account of amortization expenses. GROUND -6 Disallowance of depreciation on alleged Excess payment for acquiring Fixed Assets of ₹ 18,52,44,595/- The CIT(A) erred in law and on facts of the case by confirming disallowance of depreciation claimed on alleged excess payment of ₹ 18,52,44,595/- made for acquiring Tunnel Boring Machine ('TBM') and related equipments from M/s Shanghai Pudong Machinery Complete Equipment Co. Ltd. In doing so, the CIT(A) failed to appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the addition of ₹ 4,15,68,750/-. GROUND -10 Disallowance of Design expenses of ₹ 5,51,31,704/- The CIT(A) erred in law and on facts of the case by confirming the disallowance of design expenses of ₹ 5,51,31,704/- by treating it to be deferred revenue expenditure. In doing so, the CIT(A) failed to appreciate that making design and approval thereof is an initial activity for the purpose of execution of the project. Accordingly, the CIT(A) ought to have appreciated that expenditure towards design charges was allowable as deduction in the year of incurrence. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to allow deduction of ₹ 5,51,31,704/- on account of Design Expenses. GROUND -11 Disallowance of bank guarantee expenses of ₹ 2,22,37,267/- The CIT(A) erred in law and on facts of the case by confirming the disallowance of bank guarantee charges of ₹ 2,22,37,267/- which comprises of ₹ 1,84,77,400/- actually spent by the appellant and treated by AO as deferred revenue e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconciliation of balance as per books of appellant and the confirmation. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the addition of ₹ 90,29,913/-. GROUND-15 Addition of ₹ 8,66,87,701/-. The CIT(A) erred in law and on facts of the case by confirming addition of ₹ 8,66,87,701/- on account of alleged mismatch in the balance confirmation sought from approx. 300 vendors on the following logic : a. Discrepancy in reconciliation statements filed by the appellant in respect of difference of ₹ 4,12,78,764/-. b. Non-submission of confirmations of vendors amounting to ₹ 4,54,08,937/-. The appellant respectfully prays that the directions of the CIT (A) to the AO be quashed and AO be directed to delete the addition of ₹ 8,66,87,701/-. GROUND - 16 Addition of ₹ 34,00,000/- The CIT(A) erred in law and on facts of the case by confirming addition of ₹ 34,00,000/- on account of alleged mismatch in balance of L&T as per the books of appellant vis-a-vis the value of investment as per books of L&T. In doing so, CIT(A) disregarded the fact that investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 Request for leave to add, alter, amend and/ or supplement the grounds of appeal The appellant craves leave to add, alter, amend and/ or supplement any ground or grounds if necessary, at the time of hearing of the appeal." 2. Briefly the facts of the case are that the return of income in this case was filed on 25.11.2014 declaring income at ₹ 8,11,82,250/- The return of income was processed under section 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for scrutiny under "Complete Scrutiny" under CASS. The Reasons for CASS Selection under Complete Scrutiny are as under. (1) Large difference in the closing stock shown in Balance sheet and Profit & Loss account of current year as per Return of Income. (2) Mismatch in amount paid to related persons under section 40A(2)(b) reported in Audit report and ITR. 2.1. Statutory notices were issued for completion of the assessment. During the year under consideration, the assessee is engaged in a Joint Venture in the business of Design & Construction of Tunnel which is awarded by Delhi Metro Rail Corporation (DMRC). The A.O. observed that assessee had not provided completion information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by the Special Auditor noted that assessee did not cooperate and no plausible answers have been given to the query raised by the Auditor, made certain additions. The A.O. assessed the income of assessee at ₹ 297,18,46,560/- vide assessment order under section 143(3)/142(2A) of the I.T. Act, 1961 Dated 04.08.2017. The assessee challenged all the additions before the Ld. CIT(A) and the appeal of Assessee was allowed partly. The assessee is in appeal on above grounds of appeals. We deal all the grounds separately along with common grounds raised by Revenue. 3. We have heard the Learned Representatives of both the parties and perused the material available on record and gone through the findings of the authorities below. 4. It may be noted that while hearing of the case was going on, vide Order Dated 06.02.2019 it was noted that on Ground Nos. 1 to 4 and 19 of the appeal of assessee, verification is required at the end of the A.O. Both parties suggested that assessee may produce the entire record before A.O. for his verification and final of remand report. The A.O. was directed to file remand report on these grounds. The A.O. has filed the remand report which is taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion of the project was ₹ 12,41,95,20,939/-. The estimated profit margin was ₹ 18,91,29,761/- which was 1.50% of total estimated revenue. The percentage of completion as on 31-03-2014 was 34.63%. This percentage is arrived at by dividing the total expenditure incurred till F.Y. 2013-14 with total estimated contract cost for the completion of the project. 6. That the revenue for the financial year 2013-14 comes to ₹ 436,60,28,076/- by applying percentage of completion method. This is calculated by applying percentage of completion on contract value of the project i.e. ₹ 12,60,86,50,700 * 34.63%. 7. That the total expenditure of ₹ 430,05,37,654/-, on the basis of which percentage of completion was worked out for the F.Y. 2013-14 includes total expenditures of ₹ 27,30,48,673 incurred in the F.Y. 2012-13. In the F.Y. 2012-13, 25% completion of the project was not achieved; therefore closing Work-in-progress was recognised as revenue to the extent of total expenditure incurred in that year. 8. The total revenue recognised based on total expenditure incurred till was ₹ 436,60,28,076/-. The total expenditure included cost of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,915 Revenue recognised during the financial year (J) = (H)-(I) 27,30,48,673 4,09,29,79,403 5,61,65,07,839 2,49,16,24,749 Invoices raised during the financial year (K) - 3,29,51,03,593 8,58,31,40,998 11,07,51,75,004 Closing WIP (L) = (H) - (K) 27,30,48,673 1,07,09,24,483 1,39,93,94,917 1,39,89,85,660 Note : In the financial year 2012-13, JV recognised 100% cost incurred as revenue as the minimum percentage of completion was not achieved as per Accounting Standard-7 5.2. The assessee filed copies of the balance-sheet for all these years in support of the above statement which was provided to the Ld. D.R. for his comments also. The A.O. made the addition of ₹ 7,70,79,009/- on the ground that the Special Auditor has mentioned in his Special Audit Report ["SAR"] that in the inventory ledger, there is a negative balance of this amount which was not taken into account by the assessee. The assessee, however, submitted before the A.O. during the course of assessment proceedings that on receipt of material, Material Receipt Note ("MRN") is prepared which is then entered into the inventory module of the system. The inventory recognises the receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dry creditors. The written submissions of the assessee filed before the Ld. CIT(A) is reproduced at pages 118 to 120 of the impugned order in which the assessee reiterated the same facts and explained that the figures given by the A.O. in its report are wrong and actual defects shows that there was no negative balance. The copies of ledger account and financial statement on 31.03.2013 were also filed. Whatever was the closing stock as on 31.03.2013 is the opening stock as on 01.04.2013. It was also explained that closing as on 31.03.2013 in respect of sundry creditors was Rs.[-]12,55,31,618/- and not Rs.[- ]20,26,10,627/- as reported by the Special Auditor. The assessee filed copy of the ledger account of sundry creditors as on 31.03.2013 and 31.03.2014 in support of the above explanation. The Special Auditor is trying to justify the difference between ₹ 20,26,10,627/- and ₹ 12,55,31,618 as being written off in books. Whereas the fact is amount of ₹ 7,70,79,009/- worth purchases of material was booked in 31.03.2013 thereby reducing the balance as on 31.03.2013 from ₹ 20,26,10,627/- to ₹ 12,55,31,618/-. This led to increase in value of stock inventory b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of advances given to creditors/suppliers outstanding before adjustment of material received prior to 31.03.2013 and approved internally after 31.03.2013 in a sum of ₹ 20,26,10,627/-. PB-45 is the details of creditors/ suppliers supplied material prior to 31.03.2013 and approved internally after 31.03.2013 in a sum of ₹ 7,70,79,009/-. PB-46 to 48 are the details of advances given to creditors/suppliers outstanding in the balance-sheet as on 31.03.2013 in a sum of ₹ 12,55,31,619/- which tally with PB-7, Schedule-H of the balance-sheet. Learned Counsel for the Assessee, therefore, submitted that this entry would have no impact on taxability of income subjected to taxes. He has submitted that as regards the observation of Special Auditor, it may be explained that closing creditors as on 31.03.2013 was Rs.[-]20,26,10,627/-, therefore, there was an advance recoverable from the sundry creditors as on 31.03.2013. Against these advances, certain material was received and was lying with the assessee on 31.03.2013. An amount of ₹ 7,70,79,009/- was booked as purchases and correspondingly the debit balance in the sundry creditor's account was reduced by corres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by all the bills and vouchers. The assessee also filed copies of the audited report to show that in preceding A.Y. 2013-2014, the closing stock was of ₹ 3,71,19,081/- which is opening balance in assessment year under appeal. The assessee also filed assessment order for preceding A.Y. 2013-2014 under section 143(3) on record in which the A.O. did not disturb the book results of the assessee. However, two small additions on account of disallowances of expenses have been made. It is, thus, clear that in preceding A.Y. 2013-2014 the A.O. accepted the book results declared by the assessee which includes the closing balance of the stock as on 31.03.2013 in a sum of ₹ 3,71,19,081/-. The assessee also filed copy of the trial balance as on 31.03.2013 which also support the fact that stock at site have been declared in a sum of ₹ 3,71,19,081/-. The assessee has also filed other details of purchases advances given to suppliers and details of advances given to creditors/suppliers and how the entries have been made in the books of account which are supported by the bills and vouchers. It appears that Special Auditor has considered the issue of negative balance as on 31.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is taken differently, it has to be given effect in closing stock of this year, resultantly, opening stock of next assessment year would be enhanced by same amount. It would be tax neutral exercise only. The explanation of assessee is accepted that there was no justification to make this addition. Same is liable to be deleted. It may also be noted here that for the first time it is come on record that assessee adopted Percentage of Completion Method ["POCM"] for recognizing the revenue, details of the same are noted above. It would, therefore, show that when assessee followed POCM for recognizing the revenue, then the total cost incurred by assessee during assessment year under appeal, shall have to be verified by the A.O. in order to verify the income determined by the assessee for assessment year under appeal. The other details of preceding assessment year as well as subsequent years have also been reproduced above which support the explanation of assessee that revenue was recognised on POCM method. We may note certain salient feature of POCM as under. 8.1. The percentage of completion method is an accounting method in which the revenues and expenses of long-term contracts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Calculate the cost of earned revenue in the same manner. This means multiplying the same percentage of completion by the total estimated contract cost and subtracting the amount of cost already recognized to arrive at the cost of earned revenue to be recognized in the current accounting period. 8.2. It may also be noted here that the chart reproduced above would reveal the revised contract value which would require incurring of substantial amount towards cost. Therefore, it would not be possible to assessee to earn income of ₹ 297.18 crores in assessment year under appeal as is computed by the A.O. in the assessment order. The entirety of the facts and circumstances and total cost of the project shall have to be seen and considered by the authorities below. Since the POCM is pleaded for the first time which have an impact on this addition and other project completion expenses disallowed by the authorities below and these additions are left with academic discussion only, therefore, we are of the view that the matter requires reconsideration at the level of the A.O. We, accordingly, set aside the Orders of the authorities below and restore the matter in issue to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No.2 of appeal of Assessee is partly allowed. 11. On Ground No.3, the assessee challenged the addition of ₹ 2.40 crores on account of mismatch in physical and book balance of steel. The A.O. made this addition on the ground that there is a difference in the balance of TMT as per stock statement given by the Special Auditor and as per physical verification, the detail of which is given by the A.O. in the assessment order. During the course of assessment proceedings, assessee has mentioned that this difference is on account of theoretical verification of reconciliation. The Special Auditor has pointed out in SAR that this is related to inflation of stock and reduction of profit of the actual weight on a particular date. The A.O. did not accept the explanation of assessee. The Ld. CIT(A) on the same reasoning confirmed the addition. 11.1. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that in the assessment order an alleged table has been reproduced at page-18 whereby the difference of about 600 MT has been worked out between book stock and the physical stock. The same is reads as under : Particulars As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s verified the facts mentioned in the Special Audit Report. The assessee has not pointed out the differences. The assessee has not produced any fresh evidence and has changed the stand at different level. Stock in the Rebar Yard is already issued to consumption is not part of the stock. Therefore, the addition may be confirmed. 14. We have considered the rival submissions. The A.O. has reproduced the above table which is the basis for making the addition as prepared by the Special Auditor. The A.O. on that basis noted that the above instance indicated excess issue of stock in books of account resulting in excess expenditure by the assessee. However, the above table would show that physical quantity of the stock as on 25.03.2014 TMT bars has been compared with the book stock and the resulting difference was 428.32 MT on account of scrap generated. Therefore, the physical stock was short and not in excess as noted by the Auditor. The assessee company has filed re-enforcement details at page-54 of the PB explaining the above issue in which the differences between theoretical and actual stock have been mentioned in 428.23 MT and scrap at 2.30%. The assessee explained before A.O. that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has explained that here is always a gap between theoretical calculation visà- vis actual calculation. The Ld. CIT(A) however, confirmed the addition. 16. The Learned Counsel for the Assessee submitted that this addition is made on the basis of difference in quantity of scrap generated and sold. As per books, scrap was of 428.82 MT but the scrap sold as per books was 340.325 MT. Thus the difference was found of 88.50 MT. He has submitted that on examination of Annexure-21 would reveal that scrap weighing approximately 340.325MT have been sold and recognised as income. Further remaining scrap stock was sold in subsequent year and therefore, corresponding income has been booked in A.Y. 2015-2016. In order to substantiate the same, he has referred to PB-A1- 182 and 183 which is disposal order dated 27.02.2014 for disposal of 100 MT of scrap @ ₹ 30,000/- per MT. This fact was also explained before the Ld. CIT(A) as well as before A.O. in the remand proceedings who has not been able to controvert the same. He has also submitted that it is interesting to point-out that on the issue pertaining to excess consumption of TMT bars the Special Auditor reported a finding of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and Rules to claim excess depreciation. The addition was, therefore, confirmed. 20. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that there are several items described in the Annexures. Some of them are in the nature of furniture and fixtures on which rate of depreciation is 10%. Further, there are several items which are in the nature of plant and machinery such as concrete block making machine, plate compactor, fax machine, computers and peripheries. There are also several items in the nature of consumables such as coffee power, sugar cubes etc., It was submitted that items in the nature of plant and machinery qualified for depreciation @ 15%, Computer and peripherals are eligible for depreciation @ 60% and consumables can be charged off in entirety. He has referred to details of the same at PB-77 to 81 of the PB. He has submitted that this issue needs reconsideration for computing the exact amount of eligible depreciation. Ld. D.R. also suggested that matter may be sent back to the file of A.O. to ascertain the correct amount of depreciation. 21. Considering the submissions of the parties in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding TBM purchase from "Hubei Tiandi for ₹ 32,43,95,142/- and 3rd TBM purchased from one of the JV of L & T i.e., related party for ₹ 28,18,18,901/- and that the website of this company is actually a betting site which is taken from warranty certificate by Special Auditor. Further it was also observed that two batching plants were purchased from Jinan Jufu, the L1 party, while another batching plant was imported from SG Electric which is higher than the price quoted by the L1. On the basis of this, Special Auditor observed that assessee has arbitrarily factored into the transactions with the related parties and he proposed for an addition of ₹ 30 crores which is 25% of the total value of the transaction. The A.O. accordingly made the addition after detailed discussion. 22.2. The assessee challenged the addition before the Ld. CIT(A) and written submissions was filed, copy of which is given to the Special Auditor and the A.O. for comments. The assessee has mentioned that there is a commercial rationale for this transaction and repeated the reply given before A.O. Further, the Special Auditor has mentioned that assessee has neither explicitly stated nor subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed assets from the Associate Concern i.e., Shanghai - Pudong, the A.O. should have disallow only depreciation part. The Ld. CIT(A), accordingly, directed the A.O. to disallow 25% of the depreciation in relation to transactions made with Shanghai - Pudong and disallow ₹ 18,52,44,595/- which was considered as excess payment to the Associated Concern and rest of the addition was deleted. 22.3. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that admittedly the assessee purchased the capital asset. No expenses have been claimed in P & L A/c. The Ld. CIT(A) disallowed part of the depreciation. PB-89 is chart explaining relationship between the SUCG (Partners of L & T SUCG JV) and Shanghai - Pudong Machinery Complete Equipment Company Ltd., It was explained that there was no relationship between assessee and Shanghai - Pudong. He has further submitted that there was no basis for A.O. or the Ld. CIT(A) to make the addition. He has submitted that the Ld. CIT(A) accepted the contention of assessee that this issue relates to purchase of fixed assets. No evidence has been brought on record for excess payment made to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee changed the stand before the Ld. CIT(A). 24. We have considered the rival submissions. The authorities below considered this issue in the light of Special Audit Report which reported that assessee purchased fixed assets at unfavourable price. It was noted that M/s. Shanghai Pudong is related party to the assessee, but, the details submitted on record clearly suggest that one of the J.V. of assessee SUCG was controlled by SASAC who had controlled other entities as mentioned at page-89 of the PB and ultimately, Far-reaching controlled company is, Shanghai - Pudong. Therefore, assessee is not directly related to the seller party. The assessee purchased the capital asset for business purpose, for which, no expenses have been claimed in the P &L A/c. No definite evidence or material has been brought on record as to how the assessee made excessive payment to the seller for purchase of TBM. The assessee has explained that difference in the price of German Company Herrenknecht and M/s. Shanghai - Pudong was merely USD 0.03 million. The authorities below have not considered that the transaction with Shanghai - Pudong was without L.C. and in that event assessee would have saved the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lized, therefore, assessee has wrongly claimed it to be revenue expenditure. The reply of the assessee before A.O. was that J.V. has adopted policy of not removing the original spares from the gross block and the replacement spares are charged to revenue in the year of purchase which was not accepted by the A.O. and disallow the same amount after allowing depreciation. The assessee in the written submissions before the Ld. CIT(A) has claimed that spares are purchased and utilized for replacement and did not increase the capacity of TBM which were meant for maintenance of TBM, therefore, it should be allowed. The Ld. CIT(A) however, dismissed this ground of appeal of assessee. 25.1. Learned Counsel for the Assessee submitted that TBM machine was used for boring tunnel. Original spares are taken as capital and replacements were claimed as revenue expenditure. The details of the same are given at page-93 of the PB. It would not enhance the capacity of TBM machinery. He has submitted that TBM was used for mechanized tunneling to carry-out tunnel boring. The said operation involves the cutting the ground with the help of cutter head which is fixed in front of the TBM, removing, excava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock sensor, hydro cylenders, belt, pipe, cable, single disc cutter etc., The nature of these items thus shows that these are consumable in nature and need for day-to-day wear and tear. The nature of tunnel boring machine itself shows that it is doing a specified job of cutting the ground, removing the excavated material and make a tunnel. In this process, the back-up consumable items are frequently required for completing the operation related to the business activity of the assessee. The assessee did not remove the original spares from the block of assets, therefore, replacement of the items have been rightly claimed as revenue expenditure in nature. Considering the nature of the machine and the items replaced in the machinery, it is clear that the TMB spare parts are consumable in nature, therefore, assessee rightly claimed it to be revenue expenditure. The authorities below, therefore, were not justified in denying the claim of expenses under section 37 of the I.T. Act. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Ground No.7 of the appeal of Assessee is allowed. 28. On Ground No.8, the assessee challenged the addition of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which depreciation is claimed and also decide application under section 154 of I.T. Act as per Law and allow depreciation as per I.T. Act and Rules. With these observations, Ground No.8 of the appeal of assessee is disposed of. 31. On Ground No.9, assessee challenged the addition of ₹ 4,15,68,750/- on account of foreign exchange gain. 31.1. The A.O. made this addition based on observation of the Special Auditor that regarding foreign exchange gain as on 31.03.2014, the assessee was required to restate the foreign currency value into Indian currency as per AS-11. During the course of assessment proceedings, assessee has given reply relating to the provisions of Section 43A of the I.T. Act, which was not accepted by the A.O. on the ground that Section 43A applies to the exchange reference determined at the time of payment for the equipment or at the time of actual repayment of its loan. Whereas, the process of ascertaining the exchange rate difference (profit or loss) at the end of each financial year is not governed by Section 43A. During the appellate proceedings assessee filed written submissions in which it was claimed that in respect of foreign exchange currency tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital nature. Now, in the instant case, no finding was given by the tribunal as to whether the sums were held by the assessee in West Pakistan on capital account or revenue account and whether they were part of fixed capital or of circulating capital embarked and adventured in the business in West Pakistan. If the amounts in question were employed in the business in West Pakistan and formed part of the circulating capital of that business, the loss resulting to the assessee on remission of those two amounts in India, on account of alteration in the rate of exchange, would be a trading loss, but if, instead, those amounts were held on capital account and were part of fixed capital, the loss would plainly be a capital loss. The question whether the loss suffered by the assessee was a trading loss or a capital loss could not, therefore, be answered unless it was first determined whether the amounts in question were held by the assessee on capital account or on revenue account or, to put it differently, as part of fixed capita! or of circulating capital." 32.1. He has further relied upon Judgment in the case of CIT vs. Jagatjeet Industries Ltd., 199 taxmann.com 54 in which it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Thus the gain on transaction of foreign currency liability was in respect of capital asset which should have been considered as capital receipt only. Further even if Section 43A would not apply to the matter in issue because no actual settlement of liability has happened during the assessment year under appeal, therefore, book entries would not be relevant to determine the income of assessee. It is well settled Law that book entries are not determinative of income of assessee whether income of assessee is taxable or not, it has to be decided as per Law. We rely upon Judgment of Hon'ble Supreme Court in the case of Sutlez Cotton Mills Ltd., vs. CIT (supra) and Tuticorn Alcali Chemicals & Fertilizers Ltd., (supra). Even if in this case assessee has made an entry of gain on transaction of foreign currency liability in respect of capital asset at the year end, which would not be income of the assessee, therefore, no addition could be made against the assessee of this nature. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Ground No.9 of the appeal of Assessee is allowed. 35. On Ground No.10, assessee challenged the disallowance of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. relied upon Orders of the authorities below and submitted that design charges are for whole of the period of the contract having enduring benefit. Therefore, whole expenditure cannot be allowed. It was deferred revenue expenditure in nature. Therefore, addition is justified. 38. We have considered the rival submissions. In this case, the authorities below have allowed part of the expenditure on account of design charges on the proposition of deferred revenue expenditure. Section 37 of the I.T. Act provides deduction of the expenditure, if the same is incurred wholly and exclusively for the purpose of business. Under the Income Tax Act there is no concept of deferred revenue expenditure. Any expenditure of revenue nature is fully allowable in the year in which it was incurred. It is not in dispute that the expenses in question is revenue in nature. The assessee claimed that amount was incurred on account of design charges which is approved by DMRC in the initial stage. When the design is approved only then the execution of the work would start, therefore, design charges shall have to be incurred once for start of the execution of the project. Therefore, it could not be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 37,59,867/- Total amounting to ₹ 2,22,37,267/-. 40.1. He has referred to observations of the A.O. based on Special Audit Report. It was submitted before the Ld. CIT(A) that A.O. has disallowed a sum of ₹ 1.84 crores as deferred revenue expenses without giving any basis. The Ld. CIT(A) while giving final relief, has allowed amount which is paid by JV and disallowed the bank guarantee charges claimed by the assessee JV but pertain to liability of JV partner as per Agreement. It was submitted that amount of ₹ 1.84 crores could not be treated as deferred revenue expenditure. It was submitted that bank guarantee charges may have been paid for duration of more than one year and once the same is incurred, the same are not recoverable once charged by the Bank. Therefore, it could not be deferred revenue expenditure. An amount of ₹ 37,59,867/- have been disallowed by the authorities below because same was to be borne by the JV partner. It was submitted that Clause 13.1 of the Agreement clearly provides that any fronting guarantee cost paid to the local Bank shall be paid directly by the JV. Since the entire amount is paid by the JV, therefore, no disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f two parts as explained above. The assessee has referred to JV Agreement which clearly provide that any fronting guarantee cost paid to the local Bank shall be paid directly by the JV, therefore, there was no justification to sustain any of the addition on this issue. It is well settled Law that guarantee expenses paid by the assessee was a revenue expenditure and an allowable deduction. Judgment in the case of Sivakami Mills Ltd. vs. CIT [1979] 120 ITR 211 (Mad.) clearly apply to the facts of this case. Following the same, we set aside the Orders of the authorities below and delete the entire addition. In the result, Ground No.11 of the assessee is allowed and Ground No.6 of the Departmental Appeal is dismissed. 43. On Ground No.12, assessee challenged the disallowance of expenses of ₹ 9,99,67,544/-. The A.O. disallowed the above amount towards prior period expenditure. The Special Auditor has observed that the purchases of ₹ 6.42 crores was made in F.Y. 2012-2013 but the expenses of the same have been booked in the year under consideration. The A.O, therefore, made the addition considering it to be prior period expenditure. The assessee submitted before the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., Food expenses for staff outside Office, staff mess expenses, rent, co-lease BUNG project related, rent guest house and car hire charges which were spent by the assessee on Chinees expats as per the observation of the Special Auditor which is in the nature of perquisites in the hands of the employees and should have been added to the salary for computation of TDS liability. The Special Auditor has proposed the addition of ₹ 1,51,72,806/- as per the details mentioned in the assessment order. However, after considering the reply of the assessee, the A.O. has made addition of ₹ 50 lakhs on this account in absence of any reliable submission. The assessee submitted various invoice ledger etc., before A.O. which were ignored. The Ld. CIT(A) on the same reasoning, confirmed the addition. 47. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that perquisite is definied in Section 17(2) of the I.T. Act which includes value of rent free or concessional rent accommodation provided by the employer, value of any benefit/amenity granted free or at concessional rate to specified employees, any sum paid by the employer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. Therefore, genuineness of the expenses have not been doubted by the A.O. that these expenses have been incurred wholly and exclusively for the purpose of business. However, A.O. was of the view that these expenses should be added to the salary of the employee of computation of TDS liability. A.O. has however, not pointed out as to how these business expenses were perquisite in nature. The Auditor has proposed total amount of ₹ 1.51 crores for addition. However, the A.O. made adhoc addition of ₹ 50 lakhs only without giving any specific reasoning for making part addition. The assessee explained before A.O. that these expenses were incurred upon the staff for the purpose of business and explanation of assessee have not been disputed by the A.O. The nature of these expenses apparently shows that same have been incurred during the official duties by the staff in the course of execution of the project. The nature of business of the assessee clearly show that many staff shall have to be present at the project at different places and levels. The project is executed in odd hours also, therefore, if small amount have been incurred on staff for the purpose of business which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 028/- as well as advance shown by the assessee of ₹ 90,29,913/-. Hence, this addition was confirmed by the Ld. CIT(A). 51. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee produced complete copies of bills, payment vouchers and bank statements to prove its genuineness of the books and recording of the liability. Latest confirmation was also filed. Copies of the same are filed at PB-A2-474 to 479. He has submitted that in the assessment order addition has been made for failure to provide vendors balance confirmation whereas Appellate Order upholds the said addition on the ground that payment of this amount which is booked by the assessee as expenses is not supported by confirmation from the vendor. A close examination of the reconciliation appearing on page-479 of PB-A2 would reveal that invoice of ₹ 71,99,538/- raised by the vendor M/s. SB Protech Pvt. Ltd., have been booked by the assessee in next financial year on June, 2014. Therefore, the CIT(A) have fell in error in holding that purchases have been booked by the higher amount. The assessee has reconciled all the figures. 52. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee. The A.O. has also mentioned that various confirmations which relates to the foreign parties could also have been arranged by the assessee by email as these confirmations could not be provided before Special Auditor or during the course of assessment proceedings, A.O. made the aforesaid addition. 56. The assessee challenged the addition before the Ld. CIT(A) and filed an application under Rule 46A of I.T. Rules mentioning that Special Auditor has directly asked confirmation from 300 parties and it was received for only 44 parties and no suggestion of the addition was made by the Special Auditor on this account as the reconciliation of balance mismatch has been given before the Special Auditor. However, the A.O. made the above addition. The assessee has mentioned that now the confirmation of ₹ 121.98 crores was obtained by the assessee which is submitted along with application under Rule 46A of the I.T. Rules which could not be submitted before A.O. as these are received after framing of the assessment. These confirmations were sent to the A.O. for remand report which was received by the Ld. CIT(A). In the remand report, A.O. has mainly objected the admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special audit and these vouchers are again given during the course of appellate proceedings by a separate letter dated 19/03/2018 mentioned supra in Para 16. As the appellant has given these invoices along with the custom clearance and no inquiry was conducted by the Assessing Officer regarding the verification of the same and the Special Auditor has also given his observation in the special audit against the genuineness of this transaction, a letter was written to the Commissioner of Custom (Import) for verification of these invoices which was given by the appellant along with the bills of entries vide letter Commissioner of Customs have confirmed all these transactions by e-mail as well as by his letter received in this office by speed post and screen shorts of all the bills of entries pertaining to these invoices have been given. The result of this inquiry is also informed to the Assessing Officer for verification during the course of appellate proceedings. From this, it is gathered that the claim made by the appellant regarding the import of machinery and related spare parts from Shanghai Pudong Machinery Complete Equipment Co. Ltd. cannot be doubted and the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4509360.4 4847009 (337,648.60) 7. CONDAT CHINA CHEMICALS CO.LTD. 3959956 3959956.06 (0.06) 8. DEXTRA INDIA P.LTD. 4120071.4 4506134 (386,062.60) 9. ADOADDITIVES TECHNOLOGIES P. LTD. 3671971.8 3785928.84 (113,957.04) 10. VEEJAY SERVICE STATION 3247959 6960237.99 (3,712,278.99) 11. SHIVAM MINERAL SUPPLIERS 283081.7 43670258 (1,536,212.30) 12. MANGLAM ENTERPRISES 2654598.2 3449577 (794,978.80) 13. COMPETENT ENGINEERING CO. 2514128.2 2944232 (430,103.80) 14. K3G ISPAT P.LTD. 2504811 2960613 (455,802.00) 15. GARG ROADLINES 2465356.2 4226838 (1,761,481.80) 16. S.B.HEAVY EQUIPMENTS 2395017 3891491 (1,496,474.00) 17. MINA CONCRETE SYSTEMS P. LTD. 2047380 2758965 (711,585.00) 18. METROPOLITAN DISTRIBUTORS PVT. LTD. 2046323.1 2292788.18 (246,465.08) 19. GEMINI EQUIPMENTS & RENTALS P.LTD. 1459589 3010404 (1,550,815.00) 20. G.I.GROUP NETWORK SECURITY TECHNOLOGY P.LTD. 1403573 1850822 (447,249.00) 21. JINDAL STEEL & POWER LTD. (NEW DELHI) 116260561 135032265.4 (18,771,704.40) 22. POPAN TRADING CO. 35267142.9 35267143 (0.10) 23. NARAIN ENTERPRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant even at appellate stage. The details are as below : S.No Name of the Vendor Amount as per books of the appellant Amount as per books of vendor Difference 1. JSW Steel Ltd. 47302834.2 208238.06 26479028.20 2. Amberg. TTI Eng. Pvt. Ltd. 14349402 486830 13862572 3. Tondon Consultants Pvt. Ltd. 38,74,006 3864995 9011 4. Jet-First Intl. Log Pvt. Ltd. 35,92,539 3581777.92 10761.08 5. CT Nova Equipment Pvt. Ltd. 14,98,465 5,81,073 9,17,392 TOTAL 7,06,17,246.20 87,22,913.98 4,12,78,764.28 In the light of the above, the excess credit shown by the appellant as per the confirmation of the vendors of ₹ 4,12,78,764.28 deserves to be confirmed as unexplained credit u/s68 of the Act. (e) Further the appellant has filed the confirmation for the amount of ₹ 121,98,95,398/.- out of ₹ 126,53,04,335/.-, hence, the difference of ₹ 4,54,08,937/- (126,53,04,335 - 121,98,95,398) for which no confirmation could be given by the appellant even at appellate stage deserves to be confirmed. (f) In this light, the addition made by the Assessing Officer of ₹ 126,53,04,335/- is restricted to ₹ 8,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as regards the Departmental Appeal, he has submitted that A.O. did not get proper opportunity to examine the sundry creditors, therefore, matter may be remanded to the A.O. for fresh verification and investigation. 59. We have considered the rival submissions. The findings of the Ld. CIT(A) are reproduced above in which Ld. CIT(A) have discussed each and every item and verified the facts from the record. It may also be noted here that assessee filed application Under Rule 46A of the I.T. Rules before the Ld. CIT(A) along with confirmations from the parties. The Ld. CIT(A) considered these additional evidences as per Rules and the Revenue is not in appeal, but, challenged the finding of fact recorded by the Ld. CIT(A) after considering the additional evidences. No ground have been raised in the Departmental Appeal to challenge the request of the assessee for filing additional evidences at appellate stage. Even otherwise, whatever additional evidences were considered by the Ld. CIT(A), were sent to the A.O. for filing the remand report. The A.O. objected to the admission of the additional evidences and also submitted a reply on merit. Therefore, there is a sufficient compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res reconsideration at the level of the A.O. We, accordingly, set aside the Orders of the authorities below to the extent of addition sustained by the Ld. CIT(A) of ₹ 8,66,87,704/- and restore this issue to the file of A.O. with a direction to redecide this issue in the light of decisions relied upon by the Learned Counsel for the Assessee as per Law. A.O. shall give reasonable, sufficient opportunity of being heard to the assessee. In the result, Ground No.15 of the appeal of Assessee is allowed for statistical purposes. 60. On Ground No.16, assessee challenged the addition of ₹ 34 lakhs. The A.O. made this addition on the ground that investment shown by the assessee from its Member L & T is ₹ 13 crores, whereas, investment shown by the L & T in J.V. is of ₹ 12.66 crores and on this account the Special Auditor has proposed the addition of ₹ 34 lakhs. During the course of assessment proceedings, assessee has explained that assessee has received the amount of ₹ 13 crores as contribution towards working capital from L & T whereas the figure of ₹ 12.66 crores shown in the return of L & T is the investment by L & T in J.V. which is not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities below and restore this issue to the file of A.O. with a direction to re-decide this issue in the light of confirmation filed by assessee from L & T to explain the above issue. A.O. shall verify break-up of the amount in question as mentioned in the confirmation. A.O. shall give reasonable, sufficient opportunity of being heard to the assessee. In the result, Ground No.16 of the Assessee is allowed for statistical purposes. 64. On Ground No.17, assessee challenged the addition of ₹ 44,68,235/- on account of notional interest. The A.O. made this addition which is the notional interest on the ground that one of the member of JV i.e., L & T has provided initial investment of ₹ 13 crores, whereas the capital contribution which were required to be made by other member SUCG of ₹ 5,95,86,471/- has not been made. On this, A.O. has calculated 7.5% interest which comes to ₹ 44,68,235/- as notional interest which were disallowed by the A.O. The A.O. has not accepted the submission of the assessee made during the course of assessment proceedings that the fund has to be given to the JV as per Supervisory Board as it is clearly mentioned in the JV Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Counsel for the Assessee also demonstrated that in fact assessee has declared negative expenditure of ₹ 2,26,95,787/- on account of interest (PB A1/26). Therefore, there is no justification of charging notional interest which were not due or collected by the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Ground No.17 of the appeal of Assessee is allowed. 68. On Ground No.18, assessee challenged the disallowance of ₹ 12,01,000/- on account of customary gift. The A.O. disallowed this amount on account of customary gift given to the clients and business associates at the time of Diwali. From the details submitted by the assessee, it was noted that the above gifts includes the gold purchase for gifting and no documentary evidences for the purchase of such gift could be given by the assessee. The Ld. CIT(A) also confirmed the addition, despite assessee produced copies of the vouchers to show that it has purchased gold coins for giving as gift. 69. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee incurred the above expenditure on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociated Concern. However, the allegation of the Auditor was not controverted. The A.O. rejected T.P. study and added back the entire amount of ₹ 58,28,54,544/- made to the Associated Concern to the total income of the assessee. 73.1. During the course of appellate proceedings, the assessee filed written submissions claimed therein that quotation of building Diaphragm was called from these parties i.e., IPEX Infrastructure Pvt. Ltd., and Valecha Engineering Ltd., and related party L &T Geo Structure LLP and detailed T.P. study was also undertaken and submitted to the A.O. The T.P. study contains quotations, comparative statement and basis for Awarding the contract to related party. But the A.O. has not taken into account and disallowed the entire transaction value and made the addition of the entire amount. The assessee also pointed out that even the Special Auditor did not recommend for making any disallowance on this issue. During the course of appellate proceedings, the assessee was asked to produce the T.P. Study papers which was filed by the assessee which contain forwarding letter of quotation, without quotations of both the parties. Further the comparison is given i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e letter of intent shows that actual work order given to the Associated Concern is on entirely different rate which is shown in T.P. study and the actual work given to the associated concern relates to labour as well as supply of the material but, what was given to other concerns only for labour and it cannot be ascertained whether comparison chart is even made on the basis of quotation. The Ld. CIT(A) also noted that DMRC for making Metro Station has given contract to various parties on identical work, therefore, T.P. study could have been made on real transaction by market survey. However, such study was not done. The Ld. CIT(A), therefore, held that CUP method cannot be applied in such case. The Ld. CIT(A) also referred to Rule10B of I.T. Rules and noted that this Rule provides that the comparison can be done only with actual transaction and not with the quotations. The Ld. CIT(A) relied upon decisions of the ITAT in the case of Sino Steel India Pvt. Ltd., 159 TTJ 581 (Del.) and Noble Resources and Trading India Pvt. Ltd., 64 SOT 4 (Delhi.). The Ld. CIT(A), however, found that the findings of the A.O. are not correct because entire amount have been added. The Ld. CIT(A) consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Geo is in relation to charges for supply of material as well as for labour charges incurred on civil work. The addition is made on the basis of the comparison given in the table reproduced in this order showing the rates as per T.P. study and as per letter of intent. The addition is made on the basis of comparison given in this table. In Sl.No.1 "Installing cost (-) in (-) Situ in Soil 800 mm thick." 87% increase in the letter of intent as compared to the rate as per T.P. study is due to inclusion of material in the price quoted as per letter of intent. On this basis, addition is made to entire amount of the work awarded to L & T geo at 80% without taking into consideration the material involved in the price quoted and no comparison is possible in other variables of the work contract. The final bills of all the above three entities is filed on record for comparison. The work of installing cast in SITU appearing in Column No.10 of the final bill of L & T Geo, the rate at which the work was contracted was ₹ 8824.81% which includes shuttering, reinforcement, fixing and concrete placing and this rate was inclusive of material. Similarly work appearing in Column No.9 of the final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) at page 152 of the appellate order has also recorded the same submissions of the assessee which are also mentioned in the T.P. study which was filed before the Ld. CIT(A). Since assessee claimed that there was a marked difference in the comparison of the rates of both the parties with reference to the work awarded to them, therefore, there cannot be any comparison. At page 157 of the appellate order, the Ld. CIT(A) similarly noted that actual work order given to the associated concern is on entirely different rate which is shown in T.P. study and the actual work given to the associated concern related to labour as well as for supply of material. The Special Auditor did not recommend for any addition on this issue. The A.O. merely on estimate basis without bringing any evidence on record against the assessee of any excess payment made to related party, made the addition without any just reasons. The assessee could not earn the profit of ₹ 25.90 crores out of total payment of ₹ 58.28 crores as per nature of the contract awarded to it by DMRC. It may also be noted here that assessee has followed CUP method. But, the authorities below without applying any other method ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on this basis made the above addition as unexplained stock on estimate basis. The assessee submitted before the Ld. CIT(A) that regular physical verification of the stock was made and assessee has already credited ₹ 16,66,70,541/- as closing entry in the P & L A/c so again addition of ₹ 16.17 crores amount to doble taxation of the closing entry. 79. The submission of the assessee was given to the Special Auditor and A.O. for comments which were received in which it was reiterated by the Special Auditor that no stock statement was submitted at the time of special audit except verification of the stock of the value of ₹ 15 lakhs and no monthly verification or technical analysis was provided nor any reconciliation statement between physical and book inventory was given and in these circumstances, the A.O. estimated the actual inventory and made an adhoc addition. The Ld. CIT(A) considering the material on record and in the light of findings of the A.O. and Special Auditor noted that it is apparent that addition of ₹ 16.17 crores as suggested by the Special Auditor and A.O. has no solid basis and it was only on the basis of presumption that such closing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) accordingly deleted the addition.
84. The Ld. D.R. relied upon the Order of the A.O.
85. On the other hand, Learned Counsel for the Assessee submitted that all details were furnished before the authorities below. It is an adhoc addition.
86. We have considered the rival submissions and do not find any justification to interfere with the Order of the Ld. CIT(A) in deleting the addition. The assessee produced complete details before the authorities below on which no enquiry have been made by the A.O. The Ld. CIT(A) after going through the details on record found that assessee made the payment through account payee cheques and identity of all the parties have been established. This adhoc addition was made merely on surmises and presumptions. The Ld. D.R. did not produce any evidence or material to contradict the finding of fact recorded by the Ld. CIT(A). The Ld. CIT(A), therefore, correctly deleted the addition. Ground No.4 of the appeal of the Department is dismissed.
87. In the result, appeal of the Department is dismissed.
88. To sum-up, Appeal of the Assessee Partly Allowed and Appeal of the Department dismissed.
Order pronounced in the open Court. X X X X Extracts X X X X X X X X Extracts X X X X
|
