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TMI Blog2023 (3) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in the assessment order u/s 143(3) has examined the books of account of the assessee and accepted the net profit percentage of 2.39%. AO was not justified in making the addition towards bogus purchase and towards bogus expenditure. We hold that ld. CIT(A) erred in sustaining the addition by making ad hoc disallowance without specifying any defect in the books of accounts and records maintained by the assessee. We thus set aside the findings of the ld. CIT(A) sustaining ad hoc disallowance and delete the total additions made by the AO. Thus, grounds of appeal raised by the assessee are allowed and that of the Revenue are dismissed. - I.T.A No. 567/Kol/2020 I.T.A No.633/Kol/2020 - - - Dated:- 13-3-2023 - Dr. Manish Borad, Accountant Member And Shri Sonjoy Sarma, Judicial Member Shri Anil Kochar, Adv., Shri Aryan Kochar, CA, appeared on behalf of the appellant Shri Vivek Verma, CIT-DR, appeared on behalf of the respondent ORDER Per Manish Borad, Accountant Member: The above captioned appeal for assessment year 2010-11 filed by the assessee and cross appeal filed by the Revenue are directed against the order of ld. Commissioner of Income Tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of mining contractor and transporter. A survey operation u/s 133A of the Act was conducted on 26.03.2010. A profit and loss account on the date of survey was printed out from the computer installed in the office of the assessee and the same has been reproduced in the assessment order, wherein, the assessee has offered additional income at Rs.17047290/-. Thereafter, return of income for assessment year 2010-11 e-filed on 14.10.2010 declaring income at Rs.68,44,270/-. The case selected for scrutiny under CASS followed by serving of notices u/s 143(2) and 142(1) of the Act. During the assessment proceedings, the ld. Assessing Officer enquired about the purchases made by the assessee as well as sub-contract expenses incurred on transportation etc. The ld. Assessing Officer thereafter also discussed the net profit rate offered by other assessees in similar kind of business and finally arrived at a conclusion that the expenses and purchases to the tune of Rs.2,69,47,417/- deserves to be disallowed and along with other minor additions of Rs.28,598/- assessed income at Rs.3,38,20,285/-. 4. Aggrieved, the assessee preferred appeal before the ld. CIT(A), who after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of these machines. The appellant has also purchased a number of heavy dumpers costing Rs.4.24 crores and Rs.1.69 crores, loaders worth Rs.13.79 lakhs and HEMM dozers worth Rs.7.43 lakhs. Many of these machines have been bought as far as back as 1985, 1986, 1983, 2003, 2004 2000. Hence, it cannot be denied that the appellant had purchased its own HEMM and other machines and have also used hired machines to do the job of excavation. It also cannot be denied that these machines are used in far flung, tough terrains and many of these machines were quite old. Hence, they were in need of regular repairs and maintenances. The fact cannot be denied that these heavy equipments were required to be used and these heavy equipments require repairs and maintenances for undertaking the job as per the contract. Thus, the Assessing Officer has been wrong in deleting the entire amount of repairs and maintenance amounting to Rs.1,62,45,056/-. However, the Assessing Officer had made certain enquiries, in which the suppliers of these spare parts etc. could not be tracked. It is seen that all the payments have been made in cheque and bills for purchase have been issued by the suppliers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reclaimed area for three years. As per the agreement entered by the appellant with Jharkhand State Minerals Development Corporation dt. 01.9.2004, it has been mentioned in Items of Work that the appellant has to remove soft and hard top soil, sand stone, shale, coal and stack coal, top soil and over burden (OB) separately up to a distance of 1.5 kms in the non-coal zone as specified by JSMDC and back fill the excavated area including afforestation thereof. The manner in which all these works have to be done and the technical details of the job have been mentioned in the contract. Hence, from the above, it is observed that contract was in respect of removal of soil, shale etc, stacking of coal up to a distance of 1.5 k.ms or more from the quarry, stacking of soil and over burden separately, maintenance of quality control by hand picking of stones and foreign materials from coal, afforestation work and fill up the dug up area as per environmental stipulations. All these information are there in the agreement entered into between the two parties. Hence, the prime job of the appellant was removal, stacking, filling up and afforestation for which the appellant was paid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y audited. Net profit percentage in the immediately preceding financial year i.e. F.Y 2008- 09 was 0.5% and for the year under appeal, net profit declared is 3.03% and in subsequent year 2.39% is declared. Reference was also made to the decision of this Tribunal in assessee s own case for assessment year 2008-09, wherein, also similar types of additions were made alleging the genuineness of expenditure/trade creditors. However, Hon ble Tribunal decided in favour of the assessee. Further, the ld. counsel for the assessee referring to the paper-book containing 142 pages stated that the case of the assessee stands assessed u/s 143(3) of the Act for assessment year 2009-10 and so far as the claim of expenditure towards purchase and other expenses are concerned, the same was not disputed by the revenue authorities. Reference was also made to the assessment order for assessment year 2011-12 placed at page 140-142 of the paper-book, wherein, also book results declared by the assessee has been accepted. Further, it was submitted that all the purchases are duly supported with the purchase invoices, payments are made through account payee cheques and mostly through banking channel, TDS where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,59,520.00 12.03.1999 Total cost of machines 3,80,60,833.00 Note: Parts amounting to Rs.(9,67,200.00+410228.00+567320.00+ 553280.00+1001520.00+1044160.00+1045096.00) Total Rs. 55,88,804.00 used for repairs during the year under review. From above this is very clear that these are very old and costly machines and used under very difficult situations. (HEMM purchase invoices and repairs bills are attached separately) (VIII) Heavy Dumpers stands in the name of Our Firm Name of Machines (Dumper Cost of the Machine Year of purchase (a)TIL Limited (Invoice No.IM5200000063) 76,57,520.00 06.05.2005 b)TIL Limited(Invoice No. IM5200000064) 76,57,520.00 06.05.2005 (c)TIL Limited(Invoice No.IM100000423) 90,48,000.00 13.02.2009 (d)TIL Limited(Invoice No.IM100000420) 90,48,000.00 07.02.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal proceedings, the appellant stated as under:- At para 2 page 10 and onwards the AO had dwelled upon the issue of expenditure incurred towards: Stone picking and staging expenses: Rs 48, 86,100/- Forestation expenses: Rs 18, 38,561/- Overburden removal expenses: Rs 44, 77,700/- Total Rs.1,09, 02,361/- and which has been disallowed in full without specifically pointing out the defects in the details and evidences submitted by the appellant. The appellant has furnished full details of such payments to the AO. Since these expenditures were made on the contract work at Sikni Site and through sub-contractors or hiring the AO had alleged that this being in violation of the agreement entered into with JSMD Corporation Ranchi the expenditure is not an allowable one. The AO, however, made extensive enquiries and the crux of the case is that according to him on the basis of the agreement no sub-contracting or hiring is allowed. The appellant replied to the charges levelled and which is reproduced at page 11 of the order of assessment. The AO however has reproduced the applicable clauses of the agreement and has harped heavily on the same. He fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted u/s 143(3) of the Act and the profit percentage ranges from 2.5% to 3.5%. 9. The AO has tried to make out his case for addition relying solely on the assessee statement recorded w/s 131 which does not have any evidentiary value as held in the case of S Khader Khan (2008) 300 ITR 157 (MAD) and affirmed by the Hon'ble Supreme Court in Civil Appeal No. 13224 of 2008 and 6747 of 2012 dated 20-09-2012. 10. With regard to stone picking and staging expenses, Forestation Expenses and Overburden removal expenses which have been disallowed in full, complete details of the same for the assessment years: 2009-10 2011-12 are enclosed. In none of the years involved no amount was disallowed in the scrutiny assessment. 11. Copies of assessment orders for the assessment years 2009-10 2011-12 passed u/s 143(3) are enclosed. To conclude it the prayer of the appellant that the additions/disallowances so made by the Assessing Office being illegal and bad in law, in the facts and circumstance narrated earlier deserves to be deleted. (A) Regarding Stone picking and staking, afforestation and Overburden removal (O.B) expenses. 1. That this if for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t certain expenses could not be fully substantiated by the appellant. Thus, it would be fair to disallow only a portion of the expenses so incurred. In view of this I estimate that 20% of the expenses amounting to Rs.21,80,472/- as bogus. Thus, appeal to the extent of Rs.21,80,472/- is disallowed. Hence, appeal is partly allowed. 11. The above finding of the ld. CIT(A) that the expenditure have been incurred towards purchase of spare parts and sub-contract expenses remained unrebutted by the ld. Departmental Representative. The disallowance made by the ld. CIT(A) is merely ad hoc in nature. Sales/gross receipts are not disputed at any stage and for achieving the same assessee needs to incur expenditure. It is also brought to our notice that for assessment year 2008-09 in assessee s own case similar type of disallowances of the purchases and expenses were made and this Tribunal after considering the facts of the case, regularly books of account maintained by the assessee, deleted the said disallowances and for necessary reference, the relevant observations of this Tribunal in ITA No.1627/Kol/2011 dated 20.11.2015 are reproduced below (Para 4, Para 9 and Para 10): 4. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO required the assessee to explain the purchase made with evidence. According to Assessing Officer, no evidence has been filed recording the veracity of the transactions and accordingly he added the same. The CIT(A) deleted the addition by observing as under: Perusal of the assessment order reveals that the A.O. has discounted evidence that these parties are assessed to sales tax and the payments to them, during the year have been made by account payee cheques. In his view, these are circumstantial evidence. But, in that event, it appears that the appellant has indeed provided such evidence. Evidence, whether primary or circumstantial, cannot he brushed aside summarily. No enquiry is on record, as per the assessment order, wherein the A.O. could have been said to have negated even this circumstantial evidence. As per the A.O. only primary evidence in the nature of return of income/ balance sheet/P I. account is acceptable as evidence of creditworthiness and none of these have been filed by the appellant in respect of these parties. The A.O. states that his view is based on the pronouncements of various Courts including the Hon'ble Supreme Court. If the A.O. states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases were made and also details transaction as are available on record and even now before us i.e. purchase bills, payment by cheque and these party s I.T. Details. Despite the fact that these details are available before the Assessing Officer, the Assessing Officer has not carried out any further enquiry on the basis of these evidence and straightway made addition on unverifiable purchases. From the order of CIT(A) we find that complete details were available before him and on the basis of the same he has allowed the claim of the assessee. Even the sales arising out of the same purchases have not been doubted by the AO. Here in the present case only exception is M/s. Vishal Enterprises wherein it has not verified the veracity of the transaction. Hence qua this only, we set aside the matter to the file of the AO so that assessee can prove the veracity of the transaction and for the balance purchases, we confirm the order of CIT(A) and this issue of revenue's appeal is partly allowed. 12. Further, we also observe that the books of accounts of the assessee are regularly audited and a chart has been filed by the assessee for assessment years 2009-10, 2010-11 2011-12 giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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