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TMI Blog2019 (10) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Rule - Difference between the amount of purchases shown by the assessee viz a viz the amount of sales shown by the party to the assessee in its books of accounts - HELD THAT:- Even the amount of rupees 2,01,054.00 is treated as an advance to JPSCPL; the assessee is entitled to write it off in the books of accounts if it becomes irrecoverable as it is arising in the course of the business. As the assessee has not shown the amount as an advance in its books of accounts, therefore it can be inferred that it has been written off by the assessee in the year under consideration. Disallowance cannot be made for the expenses claimed by the assessee merely on the ground that the other party has shown liability in its books of accounts. The treatment of the accounting entries in the books of 3rd parties cannot be decisive for the claim of the assessee. It is settled law that the expenses/advances written off in the course of the business are eligible for deduction either under section 28(i) or 37(1) of the Act - assessee is eligible for the deduction for ₹2,01,054.00 on account of the money paid to JPSCPL in the course of the business. Hence we disagree with the view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The aggrieved assessee preferred an appeal to learned CIT-A. 3. The assessee before the learned CIT (A) filed the additional evidence under rule 46A of Income Tax Rule. The additional evidences filed by the assessee were represented by the copy of the account confirmation along with the bills maintained by the assessee in its books and contra confirmation from the party. 3.1 The learner CIT (A) accordingly called for the remand report from the AO who submitted the same vide letter dated 28th August 2014 as detailed under: i. The entire purchases of diesel and oil from Ashapura petroleum were made within the duration of 25 days from 4 March 2010 to 29th of March 2010. ii. The photocopies of the bills filed by the assessee were tempered. There was overwriting and correction on the bills. iii. The assessee did not file the original bills. 3.2 The assessee in his rejoinder before the learned CIT (A) submitted that the diesel and the oil expenses were directly incurred in connection with the LAKHTAR project . It has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion, we note that the activity of the assessee under the LAKHTAR project was to construct the canal which certainly requires digging and removal of the sand from the earth. Essentially for this activity, the assessee has to use machinery and vehicles for the transportation of the sand. This fact was not disputed by the authorities below. 6.2 Similarly, the fact that the payment was made through account payee cheque was not in dispute. 6.3 There was no allegation in the order of the authorities below that the notice issued under section 133(6) of the Act was not served upon the assessee. 6.4 We also note that the assessee has also purchased diesel and oil from Ashapura petroleum in the subsequent assessment year 2011-12 which were accepted by the AO in the assessment framed under section 143(3) of the Act. Thus it is not a case that the purchases were made only in the year under consideration. Therefore, in such circumstances, we are of the view that the assessee deserves some relief. 6.5 However, we further note that the assessee has claimed the expenses under the head die ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the diesel and oil expenses on its plant and machinery used by it. The learned AR for the assessee also admitted the fact that the assessee has not maintained the separate ledger for the diesel and oil expenses incurred for in-house consumption and supplied to the subcontractors. 6.8 Considering the facts as stated above, the in-house consumption of diesel and oil cannot be neglected. But the fact that the assessee has not maintained separate ledgers for the in-house consumption of the diesel and oil viz a viz supplied to the subcontractors cannot be ignored. Therefore in the interest of justice and fair play, we are inclined to restrict the disallowance to the tune of ₹1,13,371.00 being 50% of the expenses under the head diesel and oil as discussed above. Hence the ground of appeal of the assessee is partly allowed. The 2nd issue raised by the assessee is that learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of ₹ 2,01,054.00 out of the total purchases of ₹ 22,60,400.00 from J.P. Stone Crusher Pvt. Ltd. (for short JPSCPL) 7. The assessee in the year under consideration has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the payment to JPSCPL in the course of the business. In view of the above, even the amount of rupees 2,01,054.00 is treated as an advance to JPSCPL; the assessee is entitled to write it off in the books of accounts if it becomes irrecoverable as it is arising in the course of the business. As the assessee has not shown the amount as an advance in its books of accounts, therefore it can be inferred that it has been written off by the assessee in the year under consideration. 12.2 In addition to the above, we are of the view that the disallowance cannot be made for the expenses claimed by the assessee merely on the ground that the other party has shown liability in its books of accounts. The treatment of the accounting entries in the books of 3rd parties cannot be decisive for the claim of the assessee. 12.3 It is settled law that the expenses/advances written off in the course of the business are eligible for deduction either under section 28(i) or 37(1) of the Act. 12.4 In view of the above we hold that the assessee is eligible for the deduction for ₹2,01,054.00 on account of the money paid to JPSCPL in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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