Case Law Details
M/s. K.V. Joseph & Sons Engineering Contractors Vs ACIT (ITAT Cochin)
In this case the assessee paid Rs. 200 lakhs as an advance payment to Mr. K.J. Paul to carry out sub contract work of road at Edapally, High Court. The plea of the assessee is that it was incurred for the purpose of business. However, the assessee has not placed the relevant details of work carried out by Mr. K.J. Paul with reference to this payment. It is the primary duty of the assessee to give details of the work carried out by Mr. K.J. Paul and corresponding bills raised by him. It is noticed by the lower authorities that it was not shown as an income in the hands of Mr. K.J. Paul by crediting in the Profit & Loss account. Had it been Mr. K.J. Paul carried out the work of road entrusted to him, he should have shown the same as income in his hands and correspondingly issue a bill towards that work to the assessee. All the payments made by the assessee cannot be treated as an expenditure in the hands of the assessee as incurred wholly and exclusively for the purpose of business unless it was incurred for the purpose of business and supported by bills and vouchers. The mere existence of an agreement between the assessee and the sub-contractor or making a payment by a cheque, does not bind the Assessing Officer to hold that the payment was made exclusively and wholly for the purpose of assessee’s business. Although there might be such an agreement in existence and the payment might have been made, it is still open to the Assessing Officer to consider the relevant facts and to determine for himself whether the payment said to have been paid to the sub-contractor or any part thereof is properly deductible. In the present case, though the assessee made payment of Rs. 2 crores to Mr. K. J. Paul, it was not shown as income in the hands of Mr. K.J. Paul by crediting the said amount in his P&L account and also no bills were raised with reference to this payment against the assessee. On the other hand, it was shown as advance in his hands and no corresponding bills were raised against the assessee. In such circumstances, it is not possible to hold that the assessee actually incurred expenditure wholly and exclusively for the purpose of business. Hence, we do not find any infirmity in the order of the lower authorities and the case law relied on by the assessee’s Counsel is of no assistance to the assessee as the facts of this case are entirely different from the facts of the present case. Accordingly, this ground of appeal of the assessee is rejected.
FULL TEXT OF THE ITAT JUDGMENT
These cross appeals, one filed by the assessee and the other by the Revenue are directed against the order of the CIT(A)-II, Kochi dated 28/06/2016 and pertains to the assessment year 2011-12. The assessee has also filed Cross Objection in C.O. No. 43/Coch/2016 against Revenue’s appeal in ITA No. 446/coch/2016 for the assessment year 2011-12.
ITA No. 444/Coch/2016 : Assessee’s appeal
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