9911796707
TMI Blog2020 (12) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to produce confirmation of the liquidated damages charged by said company to the assessee. If the accounts of both the assessee and the said party can be reconciled, then matter ends and no disallowance would be required in the case of the assessee. Accordingly, we feel it appropriate to restore this issue back to the file of the CIT(A) with the direction to the assessee to produce document in support of its claim of liquidated damages including confirmation of Chandrapura Thermal Power Station and copy of ledger account of the assessee in their books of accounts specifying money withheld in the form of liquidated charges. It is needless to mention that both the assessee and the Assessing Officer shall be provided adequate opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be considered necessary and to submit such statements, documents and papers as may be considered necessary wither before or during the time of hearing. 2. Briefly stated facts of the case are that the assessee was engaged in the business of repair and servicing of steam turbines and generators and trading of related dispute parts. For the year under consideration, the assessee filed return of income on 20/11/2011 declaring total income of ₹11,19,56,303/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short the Act ) were issued and complied with. In the scrutiny assessment completed under section 143(3) of the Act on 27/02/2015, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable under section 37 of the Act. In order to appreciate the facts of the matter, the contentions of the AO were gone into. The case of the AO was that liquidated damages were suffered by the assessee on account of non-compliance of business obligations towards certain parties. According to the AO the assessee sustained the damages due to its negligence or non compliance with its business promises which resulted in levy of penalty in the shape of under payments or compensatory payments which deprived the assessee of the right to claim expenditure u/s 37 of the Act. Per contra it was contended by the authorized representative for the assessee that the damages suffered by it were wholly and fully connected with the business of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illy. During the appellate proceedings, the assessee was called upon to elaborate on the validity of claim of expenditure as liquidated damages by producing documentary evidence like bills, communications/confirmations by the parties who charged liquidated damages from the assessee. The AR for the assessee produced the copies of the agreements and the texts of various case laws to defend its position. The correspondences entered into between the assessee and the aforesaid two parties were produced before me on 17 August 2017. The details comprised the copies of account of M/s Indian Farmers Fertilizers Co-operative Ltd., Bareilly, invoice and challan dated 16.07.2010 issued in favour of 1FFCL , confirmation of IFFCL Bareilly UP, regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the effect that any sum of money was withheld by it in the form of liquidated charges in the case of the assessee. In such a scenario the claim of liquidated damages by the assessee cannot be regarded as in congruence with law and facts. Therefore, the so called liquidated charges allegedly recovered by Chandrapura Thermal Power Station, DVC Jharkhand were rightly disallowed by the AO. The disallowance is upheld in full in the case of this party. As regards IFFCL confirmation of retention of only ₹ 21,900/- by this party was produced by the assessee before me. Regarding the balance amount the assessee could not produce any evidence of bilateral nature. In the said circumstances, ₹ 21,900/- only is deleted and the remainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party i.e. M/s IFFCL deleted the disallowance made by the Assessing Officer. The Ld. CIT(A) has held that the assessee was asked to produced confirmation from another party i.e. M/s Chandrapura Thermal Power Station , DVC Jharkhand but the assessee only produced letter issued by it to the said company requesting to release the liquidated charges amounting to ₹ 10,00,692; ₹ 3,40,442; ₹ 1,66,266/- and ₹ 1,17,500/-. Though, the Ld. CIT(A) in absence of reconciliation of amount of the liquidated damages claimed, has rejected the claim of the assessee, however, in our opinion, it is matter of verification from the third-party only and the interest of the justice, one more opportunity can be allowed to the assessee to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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