INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C": NEW DELHI
BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER
AND
SHRI A. T. VARKEY, JUDICIAL MEMBER
(ITA No. 2105/Del/2013)
(Assessment Year: 2008-09)
Macro Nirman Pvt. Ltd, ITO
Surya Farm, Kasra No.427, Ward-6(1),
Behind Sector-3, Pkt-D, Vs. C.R.Building,
Vasant Kunj, New Delhi New Delhi
PAN:AADCM5066G
(Appellant) (Respondent)
Appellant by : Sh. Ashwani Taneja, Adv
Respondent by : Sh. K.K. Jaiswal, Sr. DR
Date of Hearing 17.04.2015
Date of pronouncement 27.04.2015
ORDER
PER A. T. VARKEY, JUDICIAL MEMBER
This is an appeal preferred by the assessee against the order of the ld
CIT(A), IX, New Delhi dated 27.02.2013 for the Assessment Year 2008-09.
2. The grounds of appeal preferred by the assessee are as follows:-
" 1. That in the facts and circumstances of the case and in law the
order passed by Ld. Commissioner of Income Tax (Appeal), in
short "CIT(A)", to the extent challenged in this appeal is perverse
and against the settled principles of law and therefore liable to
be set aside and returned income to be accepted save
admitted disallowances.
2. That in the facts and circumstances of the case and in law the
Ld. CIT(A) erred in upholding addition of Rs.1,09,92,260/-, on
account of alleged difference in contract receipts accounted
for in the books of accounts by the appellant viz-a-viz contract
receipts accounted for by M/s. Uniproducts India Ltd. in the TDS
certificates issued on the ground that statutory auditor as well
as tax auditor did not mention that the appellant has been
following percentage completion method stipulated in the
Accounting Standard (AS) - 7 and by giving complete go by to
the admitted fact that bill of Rs.1,08,92,867/- has been
accounted for and assessed in next assessment year.
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3. That in the facts and circumstances of the case and in law Ld.
CIT (A) in perversity of facts upheld addition of Rs.16,61,161/-
under section 69 of Act on account of purchases made from
M/s. Amit Steel.
4. That in the facts and circumstances of the case and in law Ld.
CIT (A) erred in upholding disallowance of service tax of
Rs.15,64,994/- under section 43 B of act.
5. That in the facts and circumstances of the case and in law Ld.
CIT (A) erred in upholding disallowance under section 40 (a) (ia)
of Act to the extent of Rs.69,320/-."
3. Ground No.1 is general in nature so is not adjudicated.
4. Ground No.2 relates to the addition of Rs.1,09,92,260/- on account of
difference in contract receipts shown by the appellant and accounted for by
the customer M/s Uniproducts India Ltd.
5. Brief facts of the case are that the assessee company is in the business of
civil construction. During the course of assessment proceedings, it was noticed
by the AO that the receipts of the assessee as per the P&L Account did not
match the receipts as per the total reflected in the TDS certificates furnished
from its client M/s Uniproducts India Ltd. On being summoned M/s. Uniproducts
appeared before the AO and filed copy of account of the assessee in its books
along with copy of bills issued by the assessee company during the year. From
the perusal of the account of the assessee company in the books of M/s
Uniproducts, it was observed by the AO that expenses of Rs.3,73,39,842/- have
been booked by the said concern on the basis of bills raised by the assessee
company, whereas the assessee has booked receipts of only Rs.2,63,47,582/-
from M/s Uniproducts India Ltd. in the instant Assessment Year. Though asked by
the AO to reconcile the said difference however according the AO, the
assessee did not file the reconciliation. According to the AO, the AR simply
stated that the difference in receipts has been booked in the next year without
giving any reasons. The AO did not accept the said contention of the assessee
and held that the assessee's contention that part of the bills have been
accounted for in the next year cannot be accepted when the expenses
related to the work done in respect of those bills have been booked by the
assessee in the present year. Therefore, the difference of Rs.1,09,92,260/- net of
service tax was added to the income of the assessee.
Page 3 of 12
6. On appeal before the ld CIT(A), the ld CIT(A) had confirmed the order of
the AO. Aggrieved by the order of the ld CIT(A) the assessee is before us.
7. The ld AR of the assessee Shri Ashwani Teneja contended that the
addition was made on the ground that assessee has raised the bill aggregating
to Rs.3,73,39,842/- to the customer namely M/s Uni Products India Ltd. on which
the said customer has deducted TDS also but assessee has accounted for
receipts in its books of accounts only to the tune of Rs.2,63,47,582/- and thus,
the receipt was shown less for a sum of Rs.1,09,92,260/-. According to Shri
Ashwani Teneja, case of the assessee is that assessee being a construction
company has to follow the Accounting Standard (AS) -7 according to which a
company engaged in construction business has to follow revenue recognition
method based on percentage completion. Therefore, the revenue was
recognized less in this year but it has been recognized in the next assessment
year i.e. A. Y. 2009-10. It was pointed out to us by the ld AR that this exercise of
recognizing the said amount next year was done much before this question
was raised in the year under appeal and so it was not an afterthought.
Assessment order of the assessee reveals that the said income was already
offered to tax in A.Y. 2009-10 and this has been so offered in the return filed in
October, 2009 whereas impugned assessment has been made on 31.12.2010,
this according to the ld AR is stated to show the bona-fide conduct of the
assessee. According to Shri Ashwani Taneja the Hon'ble Delhi High Court in the
following cases have held that if tax rates in both the years are same, it should
not be of much concern as to whether income gets taxed in one year or in the
other year.
CIT vs. Vishnu Industrial Gases (P) Ltd. in ITR no. 229/1988 dated 06.05.2008
CIT Vs. Dinesh Kumar Goel (331 ITR 10 (Del)
CIT Vs. Excel Industries Ltd. (2013) 38 taxmann. Com 100 (SC)/ 358 ITR 295
(SC)
8. On the other hand, the ld DR relied on the order of the ld CIT(A) and AO.
9. We have heard both the parties and have perused the records and case
laws cited by both the parties. We find that the impugned addition was made
by the AO, which was confirmed by the ld CIT(A) has been brought to tax in the
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immediate succeeding year i.e. Assessment Year 2009-10 and Hon'ble Supreme
Court in Excel Industries 358 ITR 295 (SC) held in para 32 as under:-
"32. Thirdly, the real question concerning us is the year in which the
assessee is required to pay tax. There is no dispute that in the subsequent
accounting year, the assessee did make imports and did derive benefits
under the advance licence and the duty entitlement pass book and
paid tax thereon. Therefore, it is not as if the Revenue has been deprived
of any tax. We are told that the rate of tax remained the same in the
present assessment year as well as in the subsequent assessment year.
Therefore, the dispute raised by the Revenue is entirely academic or at
best may have a minor tax effect. There was, therefore, no need for the
Revenue to continue with this litigation when it was quite clear that not
only was it fruitless (on merits) but also that it may not have added
anything much to the public coffers."
10. We find that the assessee company is in the business of the building
contract work and has followed AS-7 accounting standard, while finalizing
account as per mercantile system. The ld CIT(A) and AO erred in not taking
notice the working submitted by the assessee which is enclosed in Page 95, 96
and 221 of the Paper Book, wherein the assessee has shown the working
demonstrating that revenue earned from M/s Uniproduct Ltd, has been shown
in the accounts on the percentage completion method. So viewed from this
angle also the action of the authorities below is legally and factually untenable.
So we find no justification to make the addition and so we allow the said
ground of the assessee and direct the AO to delete the impugned addition
made on this account.
11. Ground No.3 relates to the disallowance of Rs.16,61,161/- on account of
the purchase made from M/s. Amit Steel on the ground that the said party was
not traceable.
12. AO inorder to verify the purchase made by the assessee during the year,
sent notice u/s 133(6) to several parties including M/s Dharam Steel calling for
copies of account of assessee in their books of account. The copy of accounts
received from M/s Dharam Steel showed discrepancies. The purchase as shown
by the assessee from the concern are Rs.38,59,019/- whereas as per the party it
has made sales of Rs.21,91,993/- only. Further, AO noted that there was a
difference in the credit balance also. These facts were confronted to the
counsel of the assessee vide order sheet entry dated 21.12.2010 and he was
Page 5 of 12
asked to explain as to why adverse inference be not drawn from these facts. As
the appellant failed to produce its books of accounts during the course of
assessment proceedings and notices issued by the AO to verify such purchases
remained uncomplied and as also there was difference in amount of M/s
Dharam Steel Traders, the account as per ledger of M/s.Dharam Steel Traders
could not be reconciled by the assessee company and therefore, difference of
Rs.16,67,026/- was added to the income of the assessee company as
unexplained expenditure.
13. Aggrieved assessee preferred an appeal before the ld CIT(A)
14. During the course of appellate proceedings the appellant filed
confirmation of account of these parties. The matter was remanded to the AO
for comments. Therein it was stated by the AO in his remand report "To verify the
genuineness of the documents and transactions, an Inspector of Income-tax
was deputed to make local enquires and to confirm the transactions. He has
reported as under:
"Inspector Report
I, Hemminlun Haokip, Inspector of Income-tax, New Delhi as per direction
of the ITO, Ward-6(1), New Delhi in the case of M/s Macro Nirman (P) Ltd.
visited the following parties at the addresses.
S.No. Name of the Partv Address
M/s Multicolor Steel White Hosue, 1118-20, Rani Jhansi
1
(India) P Ltd Road, New Delhi-55
Khasra No. 567, Village Satbari
Mls Swastik Marbles
2 Opp. Mallu Farm, Chattarpur
Traders
Mandir Road, New Delhi-30
71,Hazipabad, Chandan Holla
3 Sh. Is/amuddin
Village, Delhi-74
Sec.-4A, Shona Road, Dharuhera,
4 M/s Dharam Steel
Distt. Rewari (H.R.)
5 M/s Thawar Steel Traders Circular Road, Rewari-123401
M/s Nandani Roofing 0-31, Meerut Road, Industrial Area,
6
Systems (P) Ltd Ghaziabad (U.P.)
Amit Steel, Bhiwadi and MI5 Dharam Steel,Dheruhere are owned by the
same party M/s Amd Steel IS not presently existing now.
All the above six parties exist at the addresses above. They have
confirmed having sold material to M/s Macro Nirman Pvt. Ltd. Copies of
Page 6 of 12
ledger and visiting card of these parties are enclosed herewith this report
and copy of PAN of Sh. 8ahadur Singh of M/s Thawar Steel Traders and
copy of voter card issued by Election Commission in respect of Sh.
Islamuddin is also enclosed."
15. The Ld. CIT(A) after taking note of the Remand Report as aforestated,
held as under:-
"On the next issue, in the remand report it was stated "as regards
difference in the amount statement of Dharam Steel, the stand taken by
the assessee company is that the vendor had supplied material under
two different entities Dharam Steel and Amit Steel. The difference was
because of transactions with Amit Steel were included by the assessee
company in the ledger account of Dharam Steel. However, no
documentary evidence could be filed by the assessee company to
substantiate its claim. As per report of the Inspector no such firm is in
existence now.
Nothing has been brought on record to show that the two firms were
indeed owned by the same person. In the appellate proceedings
submissions were made that a bill of M/s Amit of Rs. 16,61,161/- was
wrongly accounted in the books of M/s Dharam Steel. That it was a
clerical error. As M/s Amit is now not in existence the claims of the
appellant cannot be verified. As the appellant has not been able to
substantiate its claim with documentary evidenced the same is dismissed.
The addition ofRs. 16,61,161/- is upheld."
16. Aggrieved by the said order of the Ld. CIT(A), the assessee is before us.
17. The Ld. AR submitted that the case of the assessee is that the purchase
was made from M/s Amit Steel but was wrongly shown in the account of M/s
Dharam Steel because both the concerns were owned by the same person.
But fact of the matter is that purchase was made from M/s Amit Steel. Ld. AR
took our attention towards Paper Book Page 25-26 which are the submissions
before the Ld. CIT(A) submitting that bill of Amit Steel was wrongly entered in
the account of M/s Dharam Steel and the error was so apparent which was
sought to be noted by the Ld. CIT(A). According to the Ld. AR the assessee
wrongly accounted for Bill No. 2 dated 3.12.2007 of M/s Amit Steels of Rs.
16,61,161/- in the account of M/s Dharam Steel. In may not be out of place to
mention that on 3.12.2007 M/s Dharam Steel was issuing invoice no. 1367 which
was received by the assessee whereas invoice / challan no of Amit Steel is 2,
which clearly suggest that the invoice has wrongly been accounted of [copy
of invoice/challan issued by Amit Steels and took our attention to the page 108
Page 7 of 12
of PB wherein we note that it is a delivery challan in the name of Amit Steel on
3.12.07 to the assessee for an amount of Rs. 16,61,161/-. Ld. Counsel of the
Assessee also submitted that M/s Dharama Steels did not account for Bill NO.
1378 dated 24.12.2007 of Rs. 2,505/- issued by them to assessee in their books of
accounts however, same has duly been recorded by the appellant. Ld.
Counsel of the assessee further submitted that the appellant while accounting
bills of M/s Dharam Steels made clerical errors resulting the difference of Rs.
3,360/- details of which is as under:-
S.No. Date Bill NO. Invoice Amount Difference
amount recorded as in
purchase recording.
1 6.9.2007 1243 2,09,228 2,09,288 60
2 21.9.2007 1273 1,40,100 1,40,400 300
3 5.11.2007 1336 64,749 67,749 3,000
Total 4,14,077 4,17,437 3,360
18. Ld. AR further stated that since the difference in account is only clerical in
posting the amount therefore, addition made of Rs. 16,67,026/- on account of
difference in account of ledger of M/s Dharam Steels is liable to be deleted.Ld.
AR also took our attention to the PB Page 89-90 which is the copy of the
delivery challan of M/s Amit Steels showing the purchases from M/s Amit Steels.
And then PB Page 206-207 which is the submission in response to remand
report submitting that the error has been accepted by the AO in the remand
report. And also draw our attention towards the copy of the Inspector Report
(Supra), wherein in para 4, AO himself has reproduced in his remand report that
M/s Amit Steel and M/s Dharam Steel are owned by the same party. So
according to the ld AR, the clerical mistake as pointed out above should not
be the basis for the impugned addition and prayed that it may be deleted.
19. The Ld. DR relied on the AO and the Ld. CIT(A) and does not want to
interfere in the order.
20. We have heard both the parties and have gone through the records and
submissions made by both the parties. We find that assessee has purchased
steel from M/s Amit Steel but it was wrongly shown in the account of M/s
Dharam Steel, because both the concerns belonged to the same person. And
Page 8 of 12
the mistake was clerical in nature. The assessee has pointed out the mistake
which has arisen and on perusal of the Remand Report of the AO in which the
Inspector's Report wherein the Inspector has clearly mentioned that the M/s
Amit Steel and Dharam Steel belongs to one and the same person and the
mistake made by the assessee accountant need not come in their way to
saddle them with the liability. The explanation of the assessee has been
corroborated by evidence on record, therefore, there is no justification for
impugned disallowance. We find force in the contention of the assessee's
counsel regarding this factual aspect and the ld. DR could not point out
anything contrary to the said fact so we are inclined to allow this ground and
direct the AO to delete the addition in dispute made on this account.
21. Ground no. 4 relates to the disallowance of the service tax payable
amounting to Rs. 15,64,994/- under section 43B of the Act.
22. The AO has stated in his assessment order that from the perusal of the
balance sheet as on 31.3.2008 the assessee has shown Rs. 15,64,994/- as
service tax payable and Rs. 3,04,284/- as sales tax payable. When it was asked
by the AO to explain, the assessee replied that the service tax was paid on
16.6.2009 and 22.6.2009 and has also submitted that "we hereby surrender the
amount of service tax of Rs. 11,76,203/- for addition due to deposit of the same
late". According to the AO since the Assessee has not informed as to when the
remaining amount was paid / deposited, he disallowed the same.
23. Aggrieved by the said order, the assessee preferred the Appeal before
the Ld. CIT(A) , who confirmed the said disallowance made by the AO on the
ground that service tax deduction is allowable in the P&L Account only when
the amount is actually paid as per section 43B of the Act and since the claim of
the assessee is that it has not claimed any deduction on account of service tax
is not borne out of the Audit Report of the Assessee, he did not accept the said
contention.
24. Aggrieved by the said impugned order, the assessee is before us.
25. Ld. Counsel of the assessee submitted before us that it is pertinent to note
that the assessee did not claim any deduction on account of service tax paid
Page 9 of 12
nor did it debit the amount as an expenditure in the profit and loss account.
Since the assessee did not debit the amount in the profit and loss account as
an expenditure nor did the assessee claimed any deduction in respect of the
amount which is sine qua non for making disallowance u/s. 43B of the Act
therefore, the disallowance made by the AO is against the provisions of law
and is liable to be deleted. Ld. Counsel of the assessee further submitted that
section 29 of the Act stipulates provisions for computing income from profits
and gains of business or profession which inter alia reads:-
"The income referred to in section 28 shall be computed in accordance
with the provisions contained in section 30 to 43D."
26. Whereas section 43B stipulates the provision for deduction of expense
specified under the section only on actual payment therefore claiming of
deduction of particular expense is prerequisite condition for invoking provision
of section 43B of the Act. Since the assessee has not claimed any deduction
on account of service tax therefore, the disallowance u/s. 43B is erroneous and
is liable to be deleted. The Assessee in support of contention raised in relying
upon the judgment of the Hon'ble Delhi High Court in the matter of CIT vs.
Noble & Hewitt (I) P. Ltd. (2008) 305 ITR 324 (Delhi).
27. On the contrary, the Ld. DR relied on the AO and the Ld. CIT(A) and does
not want to interfere in the order.
28. We have heard both the parties and have gone through the records and
submissions made by both the parties. We find from the records that the Service
Tax payable has not been claimed as deduction in the P&L account. We
further find that assessee is following the mercantile system of accounting.
Similar case was decided by the Hon'ble Jurisdictional High Court in the case
CIT vs. Noble & Hewitt (I) P. Ltd. (2008) 305 ITR 324 (Delhi) (Supra) has held "in
our opinion, since the assessee did not debit the amount to the P&L account as
an expenditure nor did the assessee claimed any deduction in respect of the
amount and considering that the assessee is following the mercantile system of
accounting the question of disallowance of deduction not claimed could not
arise." The aforesaid case is similar to that case in hand and therefore ratio laid
Page 10 of 12
down in that case is squarely applicable to the case in hand, therefore, we
allow the claim of the assessee.
29. Ground no. 5 it relates to the disallowance of Rs. 69,320/- under section
40(a)(ia) of the Act.
30. The AO noticed that assessee has booked shuttering expenses of
Rs.18,03,690/-. On a query by the AO, he filed the party wise details of the
shuttering expenses. After perusal of the details filed by the assessee, the AO
noticed that no TDS has been deducted while making payments shuttering /
hire charges. So the entire amount was disallowed by the AO u/s. 40(a)(ia) of
the Act.
31. Aggrieved by the said order, the assessee preferred an Appeal before
the Ld. CIT(A) and before him Ld. AR contended that the assessee paid
shuttering/hire charges of Rs.18,03,690/ out of which Rs.69,320/- were paid to
three different parties for whom no tax was liable to be deducted. The Ld.
CIT(A) did not agree to the said contention of the assessee because it has not
clarified and elaborated as to why Rs.69,320/- was not liable for tax deduction.
Therefore, he confirmed the action of the AO on this account.
32. Aggrieved by the said impugned order, the assessee is before us.
33. Ld. Counsel of the assessee submitted before us that in respect of the
three parties to whom the payment is to tune of Rs.69,320/-, provision of section
194I is not attracted and therefore, disallowance could not be made under
section 40(a)(ia) of the Act. According to the Ld. AR details of the shuttering /
hire charges would show that a sum of Rs.42,320/- was paid to Mr. Arjun Singh;
Rs. 12,000/- to Mr. Krishna and Rs.15,000/- to M/s NTS Scaffolding aggregating
to Rs. 69,320/- were paid to 3 parties which according the Ld. AR is less than
that the threshold limit of Rs.1,20,000/- given in section 194I. So therefore, the
Ld. AR wanted us to direct the disallowance to be reduced by Rs.69,320/-.
34. On the other hand, the Ld. DR relied on the AO and the Ld. CIT(A) and
does not want to interfere in the order.
Page 11 of 12
35. We have heard both the parties and have gone through the records and
submissions made by both the parties. We find from the perusal of page no.
91 of the PB that amount given to Arjun Singh was 42,300, Krishan Rs.12,000/-
and NTS Scaffolding Rs. 15,000/- which total amounting to Rs.69,320/- which is
admittedly less than the threshold limit of Rs. 1,20,000/- given in section 194I of
the Act. Hence, we find force in the contention of the Ld. AR in this regard, so
we direct the deduction of Rs. 69,320/-, out of Rs.18,03,690/- from the
disallowance made under section 49(a)(ia) of the Act.
36. In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 27.04.2015.
-Sd/- -Sd/-
(J. S. REDDY) (A. T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 27 /04/2015
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
Page 12 of 12
Date
1. Draft dictated on 25.04.2015 PS
2. Draft placed before author 25.04.2015 PS
3. Draft proposed & placed before the second JM/AM
member
4. Draft discussed/approved by Second JM/AM
Member.
5. Approved Draft comes to the Sr.PS/PS 27.04.2015 PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 27.04.2015 PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
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