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TMI Blog2025 (1) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigated within the parameters selected under the CASS. As this is clearly outside the jurisdiction of the ld. AO, the addition made by him in this regard is unsustainable on this count. Also amounts that were collected from these petty/sub-contractors were against project that were executed by them on behalf of the assessee and the fact remains that the assessee has made payments to the sub-contractors against execution of such contracts which is proved by the deduction of tax at source against such payments. Therefore, there does not appear to be any reason to doubt the receipt of this security money, which has subsequently been deposited with the Government Departments. As unsecured loans as referred to in Schedule C of the assessee s balance-sheet pertained to altogether different parties and the ld. AO has already satisfied himself that these were on account of opening balances, not calling for any action in this assessment - Unsecured loan in Schedule F pertain to different amounts which do not seem to be the subject matter of the additions. Therefore, on the basis of the aforesaid facts, we hold that the addition made by the AO of security deposits from sub/petty contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans which was outside the scope of the scrutiny assessment. Without prejudice to the above, the assessee submitted that all the secured loan creditors were petty contractors and income tax payees and TDS had been deducted on all payments to them. A copy of the TDS returns showing the deduction while making the payments to these loan creditors were enclosed. It was further submitted that security deposits from petty contractors was shown as secured loans as per Schedule B of the copy of balance-sheet. As per agreement, the assessee was required to obtain the security amount of these petty contractors as, in case of some work not been done or there being any loss, it could be easily be recovered from them. Therefore, in the balance-sheet, deposits received from these petty contractors had been shown as liability and against them on the assets side, the assessee had shown deposits vide Schedule H of the balance-sheet. Against the liability of Rs. 2,25,00,519/-, the assessee had shown assets of Rs. 28266528/-. Thus, no addition was required to be made on account of these secured loans contractors. The assessee also submitted a chart showing the provision of liability and assets in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that it was not known that whether the said petty contractors were maintaining any books of accounts or showing all their receipts in their books of accounts and it was not within the control of the assessee to ensure that. Therefore, the assessee had requested the learned Assessing Officer to issue summons under section 131 of the Income Tax Act to verify the facts. During the course of the appeal proceedings, the assessee also filed an affidavit, from the various sub/petty contractors in support of the fact of having made deposits before the learned CIT(A) and moved an application under Rule 46A of the Income Tax Rules submitting that the affidavits could not be filed at the time of assessment proceedings, as the assessment was taken up at the fag end and the assessee could not contact the aforesaid creditors. Therefore, it was prayed that the additional evidence may be admitted under Rule 46A. The assessee also submitted that all the so called loans taken from the above ten sundry creditors had been duly secured against assets as reflected in Schedule H of its balance-sheet and the learned Assessing Officer had made huge addition, without properly examining the accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was justified in making the addition. It was further submitted that at the time of completion of assessment, no details had been provided to the learned Assessing Officer for the purposes of issuance of summons. With regard to the claim of the assessee that it had shown SD from petty contractor of Rs. 2,25,00,519/- as secured loan in Schedule B of the balance-sheet and also made a corresponding deposit in Schedule H of the balance-sheet, it was submitted that it was not clear that the same amounts which had been received from sub-contractors as security deposits that had been shown in Schedule B of the balance-sheet, were also balanced by assets of deposits against various departments for obtaining work contracts. In fact, he observed that there was a larger amount of deposit in Schedule H than there was in Schedule B and therefore, the claim of the assessee was not acceptable. In responding to this remand report, the assessee submitted that the PAN details, the address, the confirmation of loan, the affidavit and other necessary details had been submitted and since the identity of the creditors, genuineness of the transaction and creditworthiness was proved, the learned Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also merit in the contention of the learned AR that while the total receipts were Rs. 15 Crores. The income has been determined at Rs. 2,68,00,000/- i.e. 18% of gross receipts, which was impossible. The learned CIT(A) quoted from various judgments which held that the law did not expect the impossible on the part of the tax payer; if the explanation was prima facie reasonable, it could not be rejected on mere surmises; affidavits filed could not be rejected outright without cross examination; where the assessee s account were otherwise found to be correct it was ordinarily not possible to show that the credits therein did not come from the sources attributable to them and once the assessee had pointed out the sources from it had got its credits, there was no further burden upon it to show that it had come from accounted sources of those creditors. On the strength of all these judgments, the ld. CIT(A) held that the addition made by the ld. AO was not justified and therefore he deleted the same. 5. The Revenue is aggrieved at this relief granted by the ld. CIT(A) and has accordingly come before us. Sh. Aok Bhura, ld. Sr. DR (hereinafter referred to as the ld. DR ) submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted 1% TDS amounting to Rs. 13,72,902/- on the same. It was submitted that once there was no denying the fact of execution of these contracts by the various sub-contractors and the payments to them or the fact of deposit of security amounts with the Government departments, there was no reason to disbelieve the fact that these security deposit had been sourced from the petty contractors as reflected in the agreements signed between the assessees and these petty/sub-contractors. It was further submitted that the reflection of credit balances with relation to some of these parties in the details of sundry creditors as per Schedule F, amounting to Rs. 43,31,652/- would not entitle the ld. AO to go beyond the parameters of limited scrutiny and investigate the security deposit from petty contractors while investigating the unsecured loans from some of these parties. It was, therefore, submitted that the additions were fit to be deleted. 7. We have duly considered the facts and circumstances of the case. It is observed that the case was selected for limited scrutiny on the parameters of; i. Refund claim ii. Failure to pay TDS deducted/collected iii. Unsecured loans iv. Other expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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