:1: bgp bgp bgp IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION INCOME INCOME INCOME TAX APPEAL NO.748 OF 2004 TAX APPEAL NO.748 OF 2004 TAX APPEAL NO.748 OF 2004 The Commissioner of Income Tax, ..Appellant Vs. M/s.Mega Management Services Pvt.Ltd. ..Respondent Mr.Suresh Kumar for the Appellant. Mr.P.J.Pardiwalla i/b.Megandhi Shah & Himayatullah for the Respondent. CORAM CORAM CORAM :- DR.S.RADHAKRISHNAN & :- DR.S.RADHAKRISHNAN & :- DR.S.RADHAKRISHNAN & V.C.DAGA, V.C.DAGA, V.C.DAGA, JJ. JJ. JJ. DATE DATE DATE : 29TH SEPTEMBER, 2008 : 29TH SEPTEMBER, 2008 : 29TH SEPTEMBER, 2008 P.C. P.C. P.C. . Heard the learned Counsel for the parties. The above Appeal was admitted on the following substantial question of law: Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal is right in deleting the disallowance of Rs.1.32 crores claimed as a deduction by the Assessee on account of the project expenses which are held to be non genuine by the Assessing Officer? 2. We have perused the judgment dated 12th November,2003 passed by the Income Tax Appellate Tribunal. In fact, the above question of law does not arise at all out of the order passed by the Income Tax Appellate Tribunal, the same would arise out of the original Assessment Order. However, the Tribunal on the basis of material available and after considering the same has concluded that the Appellant is entitled :2: to claim Rs.1.32 crores as an expenditure. In that behalf, the Tribunal after considering the matter in depth has observed in paragraph No.12, as under: 12. We have heard the rival submissions and perused the material available on record. As far as the project expenses are concerned, it is clear that in pursuance to the directions of the CIT(A) in remand proceeding, the confirmations filed by the assessee were examined. The confirmations contained various details. The AO summoned the parties in response to which both the parties, i.e. Shri.Shantilal Jain and Smt.Sukhidevi appeared. It is undisputed that the assessee has earned Rs.2 Crores by way of project report from Welspun. The assessee is following mercantile system of accounting. The assessee produced the above parties, who were examined on oath u/s.131. They confirmed having supplied the project report for the agreed consideration. The details of expenditure incurred by them have been given in response to question No.23. Shri.Shantilal Jain confirmed having deployed various professionals. In effect, it emerges from the record that the recipients of the project expenses confirmed having rendered services, i.e. supply of project reports and raised the debit notes. Both of them are assessed to tax. Their details about permanent account number, filing of return etc. have been answered in the above statement. It shall be pertinent here to mention that there is no adverse inference or discrepancy, which has been reported by the AO in these statements. Coming to the objections of CIT(A), the learned Counsel has laid arguments on the seven points in this behalf. According to us, these arguments are sufficient to meet the objections raised by the learned CIT(A). Coming to the additional evidence filed by the assessee, we are not inclined to accept the same regarding the subsequent payments to these parties. The same is therefore not considered. However, the assessee before CIT(A), while responding to the remand report, gave the reason for non-payment, which are reproduced above. This was to the effect that Sidharth Traders and M/s.Sumo Sales Corporation were given additional assignments for Rs.12 lakhs and Rs.10 lakhs respectively, which were not honoured by them. Therefore the payments were held back. Consequently, the assessee had given the reasons for :3: withholding the payments before CIT(A). There is no adverse comment on this issue. Under these circumstances, it emerges from record that the assessee’s non-payment to these parties was on the basis of proper reasons. In fine, the identity of the parties, the amount of consideration and genuineness of the transaction stand proved by the assessee. The parties have confirmed the same in remand proceedings in statement u/s.131. The seven objections raised by the CIT(A) have been met out by the assessee. besides, the assessee has also explained the reason for withholding of the payment as the subsequent obligations were not honoured by these two parties. The assessee was following mercantile system of accounting, which is accepted by the department and the expenses have been incurred in the previous year. Under these circumstances, the expenses have to be allowed in this year. In view of all the above facts, we hold that the expenses incurred by the assessee were genuine and for the purposes of its business and the same are allowable expenditure. Therefore the same should be allowed to the assessee. Ground No.1 of the assessee succeeds. 3. In view of all the above facts, the Tribunal has categorically held that the Assessee was entitled for the expenses he had incurred and it was incurred for the business purpose and hence, the same are allowable as expenditure. 4. The aforesaid findings of the Tribunal are based on the appreciation of evidence. There is absolutely no substantial question of law involved in the above Appeal. Hence, the Appeal stands dismissed. (V.C.DAGA,J.) (V.C.DAGA,J.) (V.C.DAGA,J.) (DR.S.RADHAKRISHNAN,J.) (DR.S.RADHAKRISHNAN,J.) (DR.S.RADHAKRISHNAN,J.)