Nikshep Infra Projects Vs ITO (ITAT Bangalore)
ITAT Bangalore held that disallowing outstanding sub-contract expenses payable under section 68 of the Income Tax Act as unexplained cash credit without specific reasoning and without pointing out defects in books of accounts is not justifiable. Accordingly, appeal is allowed and disallowance is deleted.
Facts- The present appeal has been filed by the appellant. It is mainly contested that CIT(A) erred in not considering that the Assessing officer had made arbitrary addition of the amount payable to Sub-contractors of Rs. 15,03,62,905 as Unexplained Cash Credits U/s 68 without considering the details furnished by the Appellant and without giving adequate opportunity.
Conclusion- Held that the AO himself was confused whether to disallow the expenditure of sub-contract expenses or to is disallow the amount payable at the yearend shown as liability by the assessee. The assessee maintains books of accounts on day to day basis. Further, the books of accounts of the assessee was also audited u/s 44AB of the Act by a CA. Neither the auditor nor the AO found any fault in the books of accounts of the assessee. The books of accounts were also not rejected by the AO u/s 145(3) of the Act. The AO had neither disputed the amount of sub-contract expenses debited to profit & loss account by the assessee nor find it bogus. The AO had also not disputed the gross receipts as made as well as the total purchases as declared by the assessee in the P&L account. Before us, the assessee by way of additional evidences had also produced the details of the work sub contracted along with sub-contract agreements, confirmation of accounts, Copies of the invoices raised by the sub contractors, details of payment to sub contractors & the amount outstanding which were perused. The assessee also submitted the details of payment of these outstanding amount of sub-contractors during the subsequent years along with the reconciliation statement by bifurcating the Opening balances, Actual work conducted, Payment received, Amount of TDS along with the closing amount payables. We are of the firm opinion that when the AO had accepted the expenditure of Rs.38,46,99,507.73 towards the sub-contract expenses debited to P&L account, then there is no question of disallowing the payables of the same.
