Referred Sections:
Section 139 (5) of the IT Act, 1961
Section 139 (5)
Section 271(l)(c)
Section 41 (1)
Referred Cases / Judgments
Supreme Court in the case of Goetze India Ltd. Vs. CIT [284 ITR 223]
CIT Vs. Pruthvi Brokers and Shareholders Pvt. Ltd. reported in 349 ITR
CIT Vs. Jai Parabolic Springs Ltd. (2008) reported in 306 ITR 42.
Andaman Timber Industries vs. CCE.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `F', NEW DELHI
BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER
AND
SH. R. K. PANDA, ACCOUNTANT MEMBER
ITA No.1258/Del/2016
Assessment Year: 2012-13
DCIT, Circle 10 (1) M/s. GGC Constructions Pvt.
New Delhi Vs Ltd., D-4, Panchsheel
Enclave, New Delhi-110017
PAN No. AACCG3719P
(APPELLANT) (RESPONDENT)
Appellant by Sh. Surender Pal, Sr. DR
Respondent by Sh. Rajeev Saxena, Advocate
Sh. Shyam Sunder, Advocate
Date of hearing: 28/05/2019
Date of Pronouncement: 30/07/2019
ORDER
PER R.K. PANDA, AM:
This appeal filed by the revenue is directed against the order
dated 29.12.2015 of the CIT(A)-4, New Delhi relating to A. Y.
2012-13.
2. The ground of appeal No.1 by the revenue reads as under :-
"1. Whether on the facts and circumstances of the case and
in law Ld. CIT(A) is correct in deleting the disallowance made
by the AO on account of set off of the losses claimed by
assessee without filing revised return ignoring the ratio
decidendi of the case of Goetze India Ltd. that the assessee
cannot claim for deduction otherwise by filing a revised return."
3. Facts of the case, in brief, are that the assessee is a
company and is engaged in the business of builders and civil
contractors, share trading on MCS and NSE. It filed its return of
income on 16.08.2012 declaring total income of Rs.35,61,030/-.
During the course of assessment proceedings, the assessee
company filed written reply on 24.11.2014 stating that business
loss of Futures and Options was not claimed in the original
return. Therefore, the revised computation of income reducing
the taxable income from 35,61,034/- to 18,04,306/- was filed.
The assessee company was required to show cause as to how the
loss of Futures & Options by way of filing revised computation is
allowable. In compliance thereto the AR of the assessee company
repeated the same reply as filed on 24.11.2014. The Assessing
Officer referred to the decision of Hon'ble Supreme Court in the
case of Goetze India Ltd. Vs. CIT [284 ITR 223] and held that the
deduction could not be made without a valid revised return.
Since in the instant case the return has not been revised within
the meaning of section 139 (5) of the IT Act, 1961 therefore, he
rejected the claim of the assessee company.
4. In appeal the Ld. CIT(A) allowed the claim of the assessee by
observing as under :-
Page | 2
"5. The Ground No. 1 is general in nature. The Ground No. 2, I
find that the only reason given by the AO was by referring the
judgment of the Apex Court in the case of Goetze India Ltd. 284 ITR
223 (SC). The AO did not comment upon the submissions of the
assessee on revised computation of income. The AR also referred to
the audited accounts in which specifically this loss was set off. At
time of computation of taxable income, the error made in the return
was rectified by filing revised computation of income. Once it was
found that error was made by the assessee, the AO himself could
rectify the same by computing the correct income of the assessee. In
the present case, the assessee had highlighted the same during the
assessment proceedings and AO once found the error, should not take
shelter of decision in 289 ITR 223 (SC). After going through the
decision of the Hon'ble Supreme Court which was several times
discussed by various High Courts including Jurisdictional High Court
in the decisions cited before me and also gone through by me, I find
that the Hon'ble Supreme Court as also interprerated by the various
High Courts that the assessee is not entitled for any new claim
without filing revised return. However, in the instant case, there is no
fresh claim as assessee himself declared the same in the audited
accounts and claimed the loss. The assessee is not well versed of the
tax provisions and has to be dependent on the professionals for the
same. The error made at the time of filing return was rectified later
during the assessment proceedings by filing revised computation of
income, which is required to be accepted. I therefore hold that the loss
incurred by the assessee of Rs. 17,20,728/- on account of futures
and options is directed to off against the business profits. Thus
Ground No. 2 is allowed."
Page | 3
5. Aggrieved with such order of the CIT(A), the revenue is in
appeal before the Tribunal.
6. We have heard the rival arguments made by both the sides
and perused the material available on record. We find the
assessee during the course of assessment proceedings had filed a
revised computation of income reducing taxable income from
Rs.35,61,030/- to Rs.18.40,306/-. We find the Assessing Officer
rejected the claim of the assessee on the ground that the loss on
Futures and Options cannot be claimed by filing a revised
computation since assessee has not filed a revised return within
the meaning of section 139 (5) and, therefore, following the
decision of Hon'ble Supreme Court in the case of Goetz India
Limited (supra), he rejected the claim. We find the Ld. CIT(A)
following the decision of Hon'ble Supreme Court in the same case
allowed the loss claimed by the assessee to be set off against the
business profit. We do not find any infirmity in the order of the
Ld. CIT(A) in allowing the claim of the assessee on account of loss
of future and option by filing a revised computation during the
assessment proceedings instead of filing a revised return of
income. The Hon'ble Bombay High Court in the case of CIT Vs.
Pruthvi Brokers and Shareholders Pvt. Ltd. reported in 349 ITR
336 has held that the appellate authorities have power to
consider a claim not made in the return of income. While doing
so, the Hon'ble High court has relied on various decisions
including the decision of Hon'ble Supreme Court in the case of
Page | 4
Goetze (India) Ltd. Vs. CIT reported in 284 ITR 323 and the
decision of Hon'ble Delhi High Court in the case of CIT Vs. Jai
Parabolic Springs Ltd. (2008) reported in 306 ITR 42. It has been
held by the Hon'ble Delhi High Court in the case of Jai Parabolic
Springs Ltd. (supra) that the Hon'ble Supreme Court in the case
of Goetze (India) Ltd. (supra) has made it clear that the decision
was limited to the power of the assessing authority to entertain a
claim for deduction otherwise than by a revised return and did
not impinge on the powers of the appellate authority. It has been
held by the Hon'ble Delhi High Court that there was no
prohibition on the powers of the Tribunal to entertain an
additional ground which according to the Tribunal arose in the
matter and for the just decision of the case. In view of the above
discussion and in view of the reasons given by the CIT(A) we do
not find any infirmity in his order in directing the Assessing
Officer to delete the disallowance on account of set off of the
losses claimed by the assessee without filing a revised return. The
ground raised by the revenue is accordingly dismissed.
7. The ground of appeal No.2 by the revenue reads as under :-
"2. Whether on the facts and circumstances of the case
and in law Ld. CIT(A) is correct in deleting the addition made
by AO on account of bogus expenses claimed of
Rs.4,83,89,009/- by the assessee without appreciating the fact
that the assessee during the assessment proceedings failed to
prove the identity, credit worthiness and genuienss of the
transaction."
Page | 5
8. The facts of the case, in brief, are that during the year
under reference, the assessee company disclosed revenue from
operation at Rs.7,78,00,000/- and cost of material consumed
at Rs.5,45,36,447/-. The Assessing Officer asked the assessee
company to furnish details of material used with supporting
vouchers. In compliance thereto, the assessee filed statement
showing details of construction material purchased during the
year. The Assessing Officer asked the assessee to produce the
vouchers of the expenses but the assessee furnished only 8 to
10 vouchers. The Assessing Officer observed from the above
details that the amount of Rs. 5,45,36,447/- has been worked
out by making entries of amazing figures and in these items
no amount for construction either through contractor or on
his own is appearing which according to him clearly
establishes the fact that the amount claimed on account of
construction material is not supported by any voucher. He
observed from the list of sundry creditors that sundry
creditors of Rs.433,89,009/- has been shown payable without
indicating any particular party to whom this amount is
payable. He, therefore, asked the assessee to produce the bills
for purchase of material. In compliance thereto, the assessee
company filed bills in the name of Shiv Stone Crushing
Company, Shiv Stone Company, Shiv Building Material
Centre, Minlus Hi-Tech Builders, Aggarwal and Company,
Tech Solutions, Vishnu Timber and Plywood company, A. K.
Electrical Works and Narayan Furniture.
Page | 6
10. The Assessing Office on perusal of the bills noted that the
bills have been prepared just to create documentary evidence. He
observed a particular feature that is noticeable is numbering of
these bills. Numbering on these bills has been stamped
separately just to show that the bills are actual. He, therefore,
issued notices u/s 133(6) to these parties. In most of the cases
notices were received back with remarks "no such party exists".
The notices were received back in the case of Shiv Store
Company, Narayan Furniture, A. K. Electrical Works and
Aggarwal and Company. In 3 cases, replies were received from
the parties stating that they didn't know any company namely
GGC Construction and stated that their name and addresses has
been copied just to create documentary evidence.
11. The Assessing Officer, therefore, held that the assessee
company has copied their bills and there is huge difference
between the original bill issued by M/s Vishnu Timber and two
bills prepared by the assessee company itself. The two bills
prepared in the name of Vishnu Timber and plywood Company
are not recorded in the books of M/s Vishnu Timber and Plywood
Company and actual bill issued by M/s Vishnu Timber and
Plywood Company is not appearing in the books of assessee
company. He, therefore, confronted the assessee with the above
noted fact and asked the assessee to produce all the bills of
material purchased as it has been established that the expenses
on account of Construction material has been claimed without
Page | 7
supporting evidence. The assessee company was also required to
file confirmation of static creditors appearing without any name.
Rejecting the various explanations given by the assessee and
observing that copies of bills furnished by the company are
found to be bogus, the Assessing Officer made addition of
Rs.4,33,89,009/- to the total income of the assessee as
bogus expenses claimed which was shown as payable without
any details.
12. In appeal the Ld. CIT(A) deleted the addition made by the
Assessing Officer by observing as under :-
"6. Ground No. 3 - After going through the submissions of the
assessee and clarifications sought by me on the queries raised, I
find that the assessing officer has disallowed almost whole of the
expenses by giving flimsy grounds on the basis of enquiry made
by him from some of the creditors who denied any sale to the
assessee. I find from the order sheet submitted before me which
was obtained after inspection that assessing officer has not
asked any single query from the assessee on the enquires
made by him or on denial by those creditors. The written
submissions and paper book consisting of various documents,
submissions dated 13.03.2015 filed before the AO, were also filed
before me. After going through the assessment order, I find that
the AO did not refer to these submissions. In the reply to the
queries raised by me, the AR submitted before me the certified
true copy of the submission dated 13.03.2015 as annexure-2.
Page | 8
I find that apart from the aforementioned documents, annexure-1
was also filed which is an application dated 05.06.2015 i.e.
rectification application u/s 154/155 highlighting the error made in
the order of assessment by wrongly mentioning the addition of Rs.
4,83,89,009/-instead of Rs. 4,33,89,009/-. A typographical error of 8
was made instead of 3 in recording the figures in the order of
assessment.
Thus the whole issue in the ground of appeal relates to addition
of Rs. 4,33,89,009/- as against Rs. 4,83,89,009/-. The mistake
apparent from record was required to be rectified but it seems no
rectification order has been passed. I find that the AO did not give
any calculation for arriving at the figure of 4,83,89,009/- while at
various places he referred to the figure of Rs. 4,33,89,009;-. Thus the
addition of Rs. 50,00,000/-is frivolous and required to be deleted at
the outset due to typographical errors.
After going through the assessment order, I find that the whole
discussion made by the AO for making this huge addition of
Rs.4,33,89,009/- (wrongly mentioned as Rs. 4,83,89,009/-) was
about not finding confirmation from the creditors and accordingly he
made the additions u/s 41 of the IT Act by referring to the creditors of
Rs.5,83,86,165/- out of which sundry creditors of Rs. 4,33,89,009/-
were expenses on account of purchase of material to that extent has
been claimed excessively. The assessing officer arrived at this
conclusion on the ground that out of the bills sought by him of various
parties namely, Shiv Stone Crushing Co., Shiv Stone Company, Shiv
Building Material Center, Nimbus Hi-Tech Builders (wrongly mentioned
as Minlus instead of Nimbus), Aggarwal & Co., Tech Solutions. Vishnu
Page | 9
Timber and Plywood Company. A.K. Electrical Works, Narain
Furnitures, (scanned Copy of bills have been reproduced in the order of
assessment), some of the parties namely Shiv Building Material, Vishnu
Timber and Plywood have denied some of their bills which were not
tallying from their books of accounts. These bills amounted Rs.
29,04,916/- only as against the total expenditure claimed by the
assessee of Rs. 5,45,36,447/- of the material consumed. The assessing
officer has referred to these discrepancies but has disallowed Rs.
4,33,89,009/-. The AO also referred to certain notices sent by him to
some of these creditors which were received back. On these reasons, the
AO disallowed Rs. 4,33,89,009/- which is not understandable. The AO
did not examine the accounts submitted before him and which was
explained by way of various charts. One of the charts i.e. GP chart
provide the analysis of various properties sold from FY 2009-10 to 2013-
14 against which total cost incurred ranges from 78% to 98%. Except
two properties, the percentage of cost of construction ranges between
87% to 92% in all these years. The GP rate of each property is also more
or less 8% to 13% except the aforesaid two properties. The AO in this
year did not accept whole of the expenditure relating to the cost of the
construction claimed by the assessee against the sale of the three
properties merely because some of the creditors have denied the
transactions. I find that during the course of the assessment proceeding,
no opportunity was provided to the assessee to counter the version of
these creditors and also opportunity to cross examine these parties.
Thus the evidence relied upon at the back of the assessee for making
the addition was against the principles of the natural justice and cannot
be accepted.
Before me the AR highlighted various documents filed before the
AO which were not taken note of in the order of assessment. These
Page | 10
documents include collaboration agreement and settlement agreement
between the owners of J-174 Saket New Delhi and assessee. The
agreement to build this property was made on 06.05.2010 with Shri.
Ram Kishan Singh and after the disputes between these parties, later
on settlement agreement was signed by the assessee with Shri.
Raghuvinder Singh Director of Asra Buildtech Pvt. Ltd. This property
was purchased by the assessee from one Shri. Ram Kishan Singh by
registered sale deed dated 17.10.2011 after the collaboration
agreement but later on due to disputes assessee has agreement for
settlement agreement before the Hon'ble Delhi High Court. The
assessee company has paid Rs. 2 crore for buying this property and
incurred huge expenditure in construction as depicted in WIP chart
filed before the AO and also before me from AY 2009-10 to 2013-14.
From perusal of these charts, it can be easily be seen that the
expenditure incurred for purchase of the property and construction
cost have been separately depicted. The construction cost is only
claimed by the assessee against the property sold during that year
while the remaining cost of construction is declared in the WIP. The
property J-174 was purchased in FY 2010-11 by incurring purchase
cost of Rs. 2.2 Crore and cost of construction in FY 2010-11 amounted
to Rs. 37,47,310/-and whole of the amount have been depicted in the
closing WIP as the property was not sold. In subsequent year, again,
cost of construction was incurred of Rs. 52,85,490/- and closing WIP
as on 31.03.2012 was declared at Rs. 2,90,32,800/-. This amount is
also declared even in FY 2013-14 due to disputes. There was no
construction activities in FY 2012-13 and 2013- 14. This clearly
shows that there was a dispute between the owners of J-174 due to
which construction was stopped. The other properties as shown in
these charts were build and cost of construction was claimed only in
Page | 11
the year property was sold. This method of accounting is regularly
followed by the assessee. The explanation of the AR found to be
convincing due to disputes with the owners of J-174, some of the
parties denied who supplied material for construction of J- 174. The
AR furnished before me ledger accounts of J-174 building material
which includes both these parties i.e. M/s Vishnu Timber and Shiv
Building Material as on 31.03.2012. It is not understood that Vishnu
Timber has accepted the bills of Rs. 2,48,294/- while other bills were
not accepted by them. It means this creditor is genuine though due to
some reasons best known to him, he denied some of the bills. Another
creditor Shiv Building Material Centra has supplied POP material and
finishing paneling etc. It is very well known that POP workers are
normally laborers/ mistries and don't maintain books of accounts due
to which they did not accept their bills before the merely by denial of
these two creditors which are both related to construction of J-174,
whole of the expenditure was disallowed, is highly arbitrary and
without application of mind. The AO did not understand that the
building cannot be constructed without the building material and
assessee is claiming cost of construction only at the time of sale of
properties. During the year, three properties were sold, i.e. 2, Uday
Park which was purchased in FY 2010-11 and purchase cost and
construction was shown during the FY 2010-11 under closing WIP at
Rs. 2.30 crores. During the Year, construction cost was incurred on
this property of Rs. 1,77,76,458/- and after the property is sold, the
closing WIP was declared at Rs. 2,03,29,172/-. Second property i.e. F-
12, Geetanjali was purchased in FY 2009-10 and after incurring cost
of construction in FY 2009-10 and 2010-11 as on 31.03.2011
amounted to Rs. 1,56,96,614/- which is shown as opening WIP in FY
2011-12. Since this property was totally sold, the closing WIP is NIL
Page | 12
and cost of construction incurred during this year of Rs. 1,33,40,890/-
was claimed against the sale of this property. Likewise, the third
property i.e A-6/18, Vasant Vihar was continuing from earlier years
and closing WIP as on 2009-10 was declared of Rs. 1,31,56,093/-.
Since this property was partly sold in FY 2010-11 closing WIP was
declared at Rs. 48,93,327/-as on 31.03.2011 which is continued in
the year in question and cost of construction incurred of Rs.
1,66,39,900/- was claimed against the sale of this property. This
shows that the AO though accepted the books of accounts of earlier
years, and GP on sale of those properties in earlier years, yet he is
denying the expenses incurred during the year. The AO has failed to
understand the book results declared from year to year and accepted
by him, the whole of the expenditure incurred cannot be disallowed
merely because of dispute with owner of J-174.
The AO further failed to look into the list of the sundry creditors
submitted by the assessee of Rs. 5,83,86,166/- clearly mentioning the
names of all the parties. The finding of the AO that sundry creditors of
Rs. 4,33,89,009/- have been shown payable without indicating any
particular party is factually incorrect, as the assessee has submitted
before him the complete list of sundry creditors. During the course of
hearing specific query was raised by me for submitting the latest
position of these creditors.
The AR of the assessee submitted the list of sundrv creditors as on
which amounted to Rs, 2,04,63,291/-. These sundry creditors were
reduced. From the perusal of the WIP chart, I find that there was not
much construction activity during the FY 2012-13 and 2013-14. The
assessee company has cleared the outstanding of the sundry creditors
except creditors relating to construction of J-174, Saket, New Delhi. This
Page | 13
was mainly because the settlement agreement was not fully
implemented by the owners of the J-174. Saket, New Delhi. A bank
statement sought by me clearly shows that payments were made
through account payee cheques to most of these creditors in subsequent
years. This shows that outstanding sundry creditors relate to the
construction business of the assessee. Merely because some of the
creditors were outstanding, and payment is not made, these creditors
cannot be treated as bogus. I therefore delete the addition of Rs.
4,33,89,009/-. Ground no. 3 is allowed.
13. Aggrieved with such order of the CIT(A), the revenue is in
appeal before the Tribunal.
14. The Ld. DR strongly relied on the order of the Assessing
Officer. He submitted that when the Assessing Officer has given
categorical finding that the sundry creditors are bogus which are
outstanding on the last day of the accounting year, therefore, the
Ld. CIT(A) was not justified in deleting the addition. He
accordingly submitted that the order of the CIT(A) being contrary
to facts and law should be set aside and the order of the
Assessing Officer be restored.
15. The Ld. Counsel for the assessee on the other hand strongly
relied on the order of the CIT(A). He filed a detailed written
synopsis according to which the assessee company is engaged in
the business of Civil construction since 2004 and takes contracts
for construction of building and after construction hands over the
Page | 14
floor agreed with the owner. After selling the remaining floors, it
earns profit or / loss. The cost of construction is borne by the
assessee company and till the floor is handed over and sold the
same is kept under work in progress because of non completion
of construction. This method is being followed from several years
i.e. since assessment year 2006-07. Referring to paper book
pages 84 to 91 he submitted that one of the agreement called as
collaboration agreement was made between the owners of J-174,
Saket, New Delhi on 6th May 2010. As per terms and conditions
the owners have agreed to deliver the ownership transfer rights of
entire third floor along with one servant quarter with common
toilet on top terrace and two car parking in the stilt area in
consideration of construction of a building by the assessee
company. The assessee company was entitled to sell the third
floor etc. on its own to subsequent buyer. The assessee company
was asked to bear the full cost of construction and to pay Rs 10
lacs non refundable and contractual amount of Rs 501acs and to
construct entire basement, entire ground floor, stilt, entire 1st, 2nd
and 3rd floor as per Annexure enclosed.
15.1 Referring to pages 93 of the paper book he submitted that
assessee company has paid Rs. 2.22 crs. initially instead of
501acs however Rs 221acs was returned subsequently for the full
satisfaction of the owners and they can look into the quality of
material on their own and clear the bills accordingly which are
required to be submitted to the assessee so that it can claim
Page | 15
against the income declared after completion of the building and
against the receipts of sale of 3rd floor which is to be handed over
to the assessee. Subsequently vide sale deed dated 17/10/2011
the owner has sold-the entire property except third floor to his
son Sh. Raghuvinder Singh.
Referring to pages 110 to 127 of the paper book he
submitted that the owners of J-174, Saket, New Delhi who have
formed a company named ASRA Buildtech Pvt Ltd who was
managing the construction on their own and represented by the
sons of the owner Sh. Ram Kishan Singh with whom
collaboration agreement was made. The father Sh. Ram Kishan
Singh was totally ignored and the whole charge has been taken
by his son Raghuvinder Singh. The dispute occurred as they were
not handing over the possession of third floor and also not
clearing the bills relating to construction of building due to which
sundry creditors were outstanding in the books of assessee
company in the separate head "J-174 Building Material". Ledger
accounts of various parties relating to this account are also
placed at PB 112-117 along with bills at PB-118 to 127.
15.2 Referring to pages 94 & 95 of the paper book he
submitted that the Hon'ble High Court has directed to settle the
dispute before mediation and conciliation center Delhi High
Court which was made on 10/01/2014 by which M/s ASRA
Buildtech Pvt Ltd was asked to return Rs. 2 crores and they were
also directed to pay Rs 2 crores as full and final settlement of all
Page | 16
the disputes to the assessee company towards construction of
building except third floor. Subsequently vide order dated
24/04/2014 the Hon'ble High Court passed the order after this
settlement and both the parties were directed to be bound by the
terms of settlement (PB 102-103). The ASRA Buildtech Pvt Ltd
filed CC(P)/49/2014 due to remaining disputes which was settled
subsequently vide order dated 29/01/2016 in connection with 3rd
floor by which all the accounts were settled but due to prolonged
litigation with them assessee company has not written off the
accounts and the balances of the parties relating to building
material which were written off now on 31/01/2019 after 3 years
of final settlement.
15.3 He submitted that assessing officer has neither raised
any query during the assessment proceedings nor informed about
the enquiry made by him. The AR however understood the
intention of the AO and so has filed detailed reply explaining on
the revised claimed computation for claiming loss to be set off
against business income, note on construction business and
outstanding sundry creditors explaining disputes with owners of
J-174 and sundry creditors to whom nothing was paid and also
retracted on the surrender made by presuming static creditors
whose outstanding balance was already cleared and some of
them have already been written off in AY 2015-16 along with
various charts and documents, orders of High Court etc.
Page | 17
15.4 He submitted that AO did not refer to all these documents
and made the disallowance / additions of all the expenditure and
an addition of Rs 4,83,89,009/- has been made. The AO refers to
various enquires made by him and pasted in the assessment
order various bills and hurriedly made the addition of Rs
4,83,89,009/- instead of sundry creditors mentioned in the order
of Rs 4,33,89,009/- without explaining the difference which is
clearly evident from the assessment order itself.
15.5 He submitted that the Ld. CIT (A) examined each and every
document and found that all the documents were already in the
assessment record. The CIT (A) has appreciated the orders of the
settlement agreement and the Hon'ble Delhi High Court by which
Rs 2 crores was returned and the huge expenditure was incurred
as depicted in work in progress (WIP) charts from AY 2009-10 to
2013-14 by which the expenditure incurred for purchase and
construction of the property has been separately depicted. The
construction cost is only claimed by the assessee against the
property sold during that year and the remaining cost of
construction is declared in the closing WIP. The property J-174
was purchased in FY 2010-11 by incurring purchase cost of 2.2
crores and cost of construction amounting to Rs 37,47,310/- was
depicted in closing WIP of FY 2010-11, subsequent cost of
construction was incurred of Rs 52,85,490/- due to which WIP as
on 31/03/2012 was declared at Rs 2,90,32,800/- in connection
with J-174. There was no construction due to dispute
Page | 18
subsequently in FY 2012-13 and 2013-14 and so the same WIP
was continued.
15.6 He submitted that the AO who has made the addition
of Rs 4,83,89,009/- on the ground of denial of certain bills by
various parties which related to J-174 and after finding the
detailed explanation and ledgers accounts, he opted not to refer
all the facts and circumstances which were looked into
thoroughly by the Ld. CIT(A) who has noticed that all the parties
who have denied the bills were relating to J-174 building material
only. Most of the creditors have partly accepted and denied bills
partly but all work relating to building material of J-174 only.
15.7 He submitted that CIT(A) has rightly examined in
different context that GP rate declared by the assessee company
was accepted and construction cost ranges between 87% to 92%
except few properties and so GP rate of each property is also
more or less 8% to 13% except two properties. The addition was
deleted after noticing that AO though accepted the books of
accounts of earlier years and GP for the sale of those properties
in earlier years yet he is denying expense incurred during the
year. The Ld. CIT(A) has found that whole of the expenditure was
disallowed merely because of denial of some of the sundry
creditors because of disputes with owners of J-174. The AO did
not look into the disputes which were settled upto Delhi Court.
The CIT(A) has called the details during the course of appellate
Page | 19
proceedings of payments made in subsequent years relating to
sundry creditors and it was explained that almost all the
creditors except J-174 were cleared except few outstanding which
were mainly relating to J-174.
15.8 He submitted that even these creditors were written off
after the period of 3 years after the final settlement on
29/01/2016 and the entries were made on 31/01/2019 of
sundry creditors. The CIT(A) has noticed all these accounts and
thereafter deleted the addition. He accordingly submitted that the
ground of the revenue is also not tenable as the AO before filing
the appeal has not examined his own assessment record and the
relevant evidence placed before him. In fact during the course of
assessment proceedings as evident from the order sheet, he has
not raised any query or provided any material to counter by the
assessee. Such evidence relied upon by the AO for making
addition/ disallowance which was not provided to the assessee
cannot be made basis as held by the Hon'ble Supreme Court in
the case of Andaman Timber Industries vs. CCE. He also relied
on various decisions.
16. We have considered the rival arguments made by both the
sides, perused the orders of the AO and CIT(A) and the paper
book filed on behalf of the assessee. We find the Assessing Officer
on the basis of information obtained from various parties u/s.
Page | 20
133 (6) of the IT Act, 1961 observed that an amount of
Rs.4,83,89,009/- has been shown as payable without any details
which according to him are bogus expenses on account of
purchase of material to inflate the expenditure and reduce the
profit. He therefore, made addition of Rs.4,83,89,009/-. We find
the Ld. CIT(A) deleted the addition, the reasons for which have
already been reproduced in the preceding paragraph. It is the
submission of the Ld. DR that the order of the CIT(A) is contrary
to evidence regarding the huge bogus outstanding expenses
shown as payable on account of purchase of material. It is the
submission of the Ld. Counsel for the assessee that the Ld. CIT(A)
while deleting the addition has given valid reasons and therefore,
the same is justified and ground raised by the revenue should be
dismissed.
17. We find the Assessing Officer at various places in the
Assessment order has given different figures of outstanding
sundry creditors. Although his intention was for addition of
Rs.4,33,89,009/-, however, the Assessing Officer has made
addition of Rs.4,83,89,009/- and the Ld. CIT(A) deleted the
excess addition of Rs.50 lacs i.e. considering Rs.4,33,89,009/- as
the correct figure. We, therefore, do not find any infirmity in the
order of the CIT(A) deleting the addition to the extent of Rs.50
lacs which is a typographical error that has crept in the order of
the Assessing Officer.
Page | 21
18. Now, so far as the addition of Rs.4,33,89,009/- is
concerned, the very basis of the addition is that certain bills/
vouchers produced by the assessee during the course of
assessment proceedings were found to be bogus. Further the
notices issued u/s.133 (6) were either returned unserved or
where in some cases replies were received, the concerned parties
have denied to have supplied any such material to the assessee.
Since an amount of Rs.4,33,89,009/- was shown as payable the
Assessing Officer made addition of the same as bogus
outstanding. We find the Ld. Counsel for the assessee
demonstrated before us that the bills and vouchers, which were
referred to by the Assessing Officer, relate to the property relating
to J-174 only. He has also filed the relevant documents to show
that there was some dispute relating to the said property /
project and the matter was ultimately travelled up to the Hon'ble
Delhi High Court where it was settled. We find creditors except
the creditors relating to property bearing No. J-174 were cleared
subsequently. Even the creditors relating to property J-174 were
written off after the period of 3 years after the final settlement on
29.01.2016. While we cannot accept the order of the CIT(A) in
toto deleting the entire addition, however, from the various details
furnished by the assessee we find the expenditure claimed by the
assessee as work in progress in respect of a project J-174 is only
Rs.52,85,490/-. We further find the assessee in the subsequent
years has also written off this amount alongwith other
outstanding creditors. Under these circumstances we are of the
Page | 22
considered opinion that out of the total disallowance of
Rs.4,33,89,009/- only the amount of Rs.52,85,490/-relating to
the project J-174 is doubtful and the balance amount should not
have been added by the Assessing Officer especially when the
assessee has made payments against the sundry creditors in the
subsequent years or has offered to tax the same in the return of
income of subsequent years. We, therefore, uphold the order of
the CIT(A) to the extent of Rs.3,81,03,519/- (i.e. Rs.4,33,89,009-
52,85,490).
19. So far as the amount of Rs.52,85,490/- relating to the
project J-174 is concerned, it is the submission of the Ld.
Counsel for the assessee that assessee has declared this amount
in financial year 2018-19 as income i.e. assessment year 2019-
20 after court matter was settled. We, therefore, deem it proper
to restore this issue to the file of the Assessing Officer for the
limited purpose of verification of the property in dispute i.e.J-174,
the outcome of the court case, the settlement arrived at by the
assessee and subsequent offer of the assessee for taxation during
financial year 2018-19. The Assessing Officer shall decide the
issue of allowability of Rs.52,85,490/- as per fact and law after
giving due opportunity of being heard to the assessee. We hold
and direct accordingly. The ground raised by the revenue on this
issue is accordingly partly allowed for statistical purpose.
20. The ground of appeal No.3 by the revenue reads as under :-
Page | 23
"3. Whether on the facts and circumstances of the case
and in law Ld. CIT(A) is correct in deleting the addition made
by AO on account of cessation of liability u/s. 41 (1) of the IT
Act without appreciating the fact that the assessee during the
assessment proceedings, itself had surrendered the said
income."
21. Facts of the case, in brief, are that during the assessment
proceedings, the Assessing Officer asked the assessee to file
confirmation of creditors shown without name and addresses. In
compliance thereto the assessee vide letter filed the list of such
creditors and agreed for an addition of Rs. 70,79,504/- stating as
under;
"In order to buy peace from Income Tax Department and avoid
prolonged litigation, we hereby offering for taxation amount as static
Creditors as per statement enclosed under the head income from other
sources. (Annexure-XI) provided penalty under section 271(l)(c) is not
initiated. The amount of static creditors is Rs. 70,79,504/-."
21.1 The Assessing Officer accordingly made addition of the same to
the total income of the assessee u/s.41 (1) of the IT Act, 1961. He
however, has not discussed anything about the subsequent letters of
the assessee retracting from the surrender.
22. In appeal the Ld. CIT(A) deleted addition by observing as
under :-
Page | 24
7. "Ground No. 4, the AO has made the addition of Rs.
70,79,504/- by referring to earlier letter surrendering the income,
but has ignored the subsequent submissions filed before him. By
this submission, assessee has not only retracted from the
surrender but also filed detailed explanation that creditors were
not static as some of the creditors in subsequent period were
cleared/squared up/adjusted or written off. List of sundry
creditors was filed in which no such creditor was continued
during FY 2014- 15. A copy of the letter dated 13.03.2015 duly
certified by the AO in which the list of sundry creditors was filed.
And before me a separate list of these sundry creditors of Rs.
70,79,504/- was filed showing that out of these creditors to the
tune of Rs. 16,62,575/- were already written off and assessee
had declared the same as income in FY 2014-15 and creditors to
the tune of Rs. 37,42,070/- were relating to building material of J-
174 and were duly transferred in that head. This property is still
disputed and no expenditure is claimed during the year as this
amount continued from earlier year was declared under WIP. Rs.
16,84 700/-. It relates to advances given to Kitchen Appliances
suppliers i.e. Pantaloon Retail Ltd. and so already adjusted
against those advances. All these details were filed before the AO
and all the ledger accounts were produced before him as noticed
by the AO at para 2 of the assessment order. The AO did not
mention any discrepancy in the books of the accounts nor he
commented in respect of these creditors except recording the
surrender of Income. Since the surrender was already retracted
and AO was fully aware about the same and ignored the
subsequent letter, I don't find any reason to sustain such
addition. The AO has failed to appreciate the submissions as well
Page | 25
as the relevant details filed before him. Once it is found that the
creditors are not static and mistake committed by AR before the
AO was rectified subsequently, the AO was duty bound to look
into those submissions before making addition in respect of the
aforesaid creditors. In fact, assessee has already declared some
of these creditors as income by writing off the same or adjusted
against the advances and the remaining were still continued
under WIP due to dispute with the owners of J- 174, Saket, New
Delhi. I therefore delete the addition of Rs. 70,79,504/- and
Ground No. 4 is allowed."
23. Aggrieved with such order of the CIT(A), the revenue is
in appeal before the Tribunal.
24. The DR heavily relied on the order of the Assessing
Officer.
25. The Ld. Counsel for the assessee on the other hand
while supporting the order of the CIT(A) submitted that the
assessee had retracted from the surrender so made earlier
before the Assessing Officer himself and has infact filed
detailed explanation that creditors were not static since some
of the creditors were cleared / squaredup / written off in
subsequent period. He submitted that the provisions of section
41 (1) are not applicable to the facts of the present case. He
accordingly submitted that since the Ld. CIT(A) has given valid
reasons, therefore, the same being in order should be upheld
and the ground raised by the revenue should be dismissed.
Page | 26
26. We have considered the rival arguments made by both
the sides, perused the orders of the AO and CIT(A) and the
paper book filed on behalf of the assessee. We have also
considered the various decisions cited before us. We find the
Assessing Officer made addition of Rs.70,79,504/- being the
static creditors on the ground that the assessee has offered
the same for taxation during the course of assessment
proceedings. We find the Ld. CIT(A) deleted the addition on
the ground that assessee in the subsequent letter to the
Assessing Officer has not only retracted from the surrender
but also had filed detailed explanation that the creditors were
not static since some of the creditors in subsequent period
were squad off / either paid off or written off on account of
building material of J-174 project. Since the assessee had
already retracted from the surrender made before the
Assessing Officer and the Assessing Officer is fully aware of
the same, therefore, ignoring such letter of retraction the
Assessing Officer could not have made the addition on account
of static creditors by invoking the provisions of section 41 (1).
Since the order of the CIT(A) on this issue is based on facts
and the order is a reasoned one and since the Ld. DR could
not bring any material to take a contrary view than the view
taken by the CIT(A) on this issue, therefore, we do not find any
infirmity in the order of the CIT(A) on this issue and
accordingly uphold the same. The ground raised by the
revenue is accordingly dismissed.
Page | 27
27. In the result, the appeal filed by the revenue is partly
allowed for statistical purpose.
Order pronounced in the open court on 30.07.2019.
Sd/- Sd/-
(H. S. SIDHU) (R.K PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
*Neha*
Date:- 30.07.2019
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date of dictation
Date on which the typed draft is placed before the dictating
Member
Date on which the approved draft comes to the Sr.PS/PS
Date on which the fair order is placed before the Dictating
Member for Pronouncement
Date on which the fair order comes back to the Sr. PS/ PS
Date on which the final order is uploaded on the website of 30.07.2019
ITAT
Date on which the file goes to the Bench Clerk
Date on which file goes to the Head Clerk.
The date on which file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
Page | 28
|
