M/S. Mitra Guha Builders (India) Co., Kolkata V. ACIT, Circle-33, Kolkata,

CO 113/KOL/2014

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3085 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 31-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J M THARD
• Keywords: Question of law; Bad and doubtful debts; Corroborative evidences
• Section: 40A(3); 133(6); 194C; 131

Judgement Text

ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1558/KOL/2014 ASSES SMENT YEAR : 2009-10 M/S. MITRA GUHA BUILDERS (INDIA) CO. -VS.- I.T. O., WARD-33(3) KOLKATA KOLKATA [PAN : AAFFM 2988 Q] (APPELLANT) (RESPONDENT) I.T.A. NO.1594/KOL/2014 ASSESSMENT YEAR 2010-11 A.C.I.T., CIRCLE-33, -VS- M/S. MITRA GUHA BUILD ERS KOLKATA (INDIA ) CO. KOLKATA [PAN : AAFFM 2988 Q] (APPELLANT) (RESPONDENT) C.O.NO.113/KOL/2014 (A/O I.T.A NO. 1594/KOL/2014) ASSES SMENT YEAR : 2010-11 M/S. MITRA GUHA BUILDERS (INDIA) CO. -VS.- A.C. I.T., CIRCLE-33, KOLKATA KOLKATA [PAN : AAFFM 2988 Q] (CROSS OBJECTOR) (RESPONDENT) FOR THE ASSESSEE : SHRI J.M.THARD, ADVOCATE FOR THE ASSESSEE : SHRI NICHOLAS MURMU, JCIT, SR.DR DATE OF HEARING : 27.07.2017 DATE OF PRONOUNCEMENT : 31.07.2017. ORDER PER N.V.VASUDEVAN, JM I.T.A.NO.1558/KOL/2014 IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 20.05.2014 OF CIT(A)-XIX, KOLKATA, RELATING TO AY 2 009-10. ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 2 2. GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE ARE WITH REGARD TO DISALLOWANCE OF A SUM OF RS.54,73,328/- BY THE REVENUE AUTHORITIES IN VOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (ACT). 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CA RRYING OUT CONSTRUCTION CONTRACT (CIVIL WORK) FOR DIFFERENT PROJECTS OF THE GOVERNME NT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD N OT DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE FOR EXECUTION OF CONTRACT OF WORK FOR WHICH THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE IN TERMS OF SECTION 194C OF THE ACT. UNDER SECTION 40(A)(IA) OF THE ACT ANY EXPENDITURE CLAIMED BY AN ASSESSEE WHIC H IS CLAIMED AS DEDUCTION BY COMPUTING THE INCOME FROM BUSINESS WHICH ARE PAID W ITHOUT DEDUCTING TAX AT SOURCE WILL NOT BE ALLOWED AS DEDUCTION. THE AO INVOKING T HE AFORESAID PROVISION DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF A SUM OF RS.54,73,328/-. THE BREAKUP OF THE AFORESAID SUM IS AS FOLLOWS :- I) RS. 4,40,000/ UNDER THE HEAD CONSULTANCY CHARGE S II) RS. 3,99,684/- UNDER THE HEAD SERVICE CHARGES TO COOL TECH III) RS. 1,18,320/- UNDER THE HEAD GENERATOR HIRE CHARGES TO M/S. SIVAM GENERATOR IV) RS. 10,52,320/- UNDER THE HEAD SECURITY SERVICE S CHARGES TO M/S. JVS SECURITY P. LTD. & M/S. JAI HANUMAN SECURITY SERVIC ES V) RS. 1,28,903/- UNDER THE HEAD THE FIRE (SECURI TY SERVICES) VI) RS. 9,78,818/- PAYMENT TO MR. MAINUL AN D MR. RAJA RAM VII) RS. 3,90,847/- OUT OF REPAIRING & MAINTENA NCE CHARGES PAID TO M/S. M/S. ACTIVE ENGINEERING RS.1,37,635/- M/S. SHRE E KRISHNA COOL CONNEXION RS.79,682/- & M/S. RAC HANA MOTORS RS.1,73,530/- VIII) RS. 6,83,833/- ON ACCOUNT OF CONSULTANCY AND DESIGNING SERVICES AND SUB-CONTRACTOR IX) RS.12,80,576/- PAYMENT TO M/S. S.G. CONSTRUCT ION REGARDING CONTRACT CHARGES TOTAL RS.54,73,328/- 4. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED THE ORDER OF AO. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 3 5. THE PRAYER OF THE ASSESSEE BEFORE THE TRIBUNA L IS FOR A REMAND OF THE ISSUE TO THE AO WITH A DIRECTION TO THE AO TO VERIFY IF THE PAYE ES HAVE DECLARED THE RECEIPT FROM THE ASSESSEE IN THEIR RETURN OF INCOME AND IF THEY HAVE SO DECLARED THEN THE ADDITION U/S.40(A)(IA) OF THE ACT SHOULD BE DELETED BY THE A O. THE ABOVE SUBMISSION WAS MADE IN THE CONTEXT OF THE AMENDMENTS TO THE PROVIS IONS OF SEC.40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2012 W.E.F. 1-4-2013, WHEREBY A SE COND PROVISO WAS INSERTED WHICH PROVIDED THAT IF THE PAYEES HAVE FILED THEIR RETURN OF INCOME SHOWING THE RECEIPTS FROM THE ASSESSEE IN THEIR RETURN OF INCOME THAN THE IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN SEC.40(A)(IA) OF THE ACT. 6. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER AND FIRST APPELLATE AUTHORITIES ARE VESTED WITH STA TUTORY POWERS U/S 133(6) OR 131 AND OR OTHER PROVISIONS AND THEY COULD HAVE MADE INQUIR ES WITH THE PARTIES OR THEIR RESPECTIVE ASSESSING OFFICER. IN THIS REGARD IT WAS SUBMITTED THAT ALL THE RELEVANT DETAILS OF THE PAYEES WERE FURNISHED AND ARE AVAILA BLE ON RECORD WITH THEIR PAN AND AO DETAILS. 7. IT WAS POINTED OUT THAT ITAT, KOLKATA IN THE CASE OF RAMAKRISHNA VEDANTA MATH V. INCOME-TAX OFFICER, WARD 59 (1), KOLKATA, [2012] 24 TAXMANN.COM 29 (KOL.) HAS TAKEN A VIEW THAT ONCE ASSESSEE FURNISHES LAWFULLY MAINTAINED INFORMATION ABOUT RECIPIENTS, ASSESSING OFFICER SHOULD FIRST ASCERTAI N RELATED FACTS ABOUT PAYMENT OF TAXES DIRECTLY FROM RECIPIENTS BEFORE INVOKING SECT ION 201 (1). IT WAS SUBMITTED THAT THE ABOVE DECISION ITAT KOLKATA IN THE ABOVE MENTIO NED CASE WILL ALSO APPLY FOR THE PURPOSES OF SECTION 40(A)(IA) OF THE ACT. FURTHER R ELIANCE WAS ALSO PLACED ON THE DECISION OF THE ITAT KOLKATA IN THE CASE OF VAS ELE CTRONICS VS. ACIT, ITAT KOLKATA IN I.T.A NO. 662/KOL/2013 DATED 24-11-2015 WHEREIN FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANS AL LAND MARK TOWNSHIP P. LTD. (2015) 377 ITR 635 (DEL), THE AO IS DIRECTED TO VER IFY WHETHER THE RECIPIENTS HAVE ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 4 INCLUDED THE RECEIPTS PAID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. 8. IT WAS THEREFORE SUBMITTED THAT THE DISALLOWA NCE U/S.40(A)(IA) OF THE ACT TO THE EXTENT SUSTAINED BY THE CIT(A) SHOULD BE SET ASIDE AND REMANDED TO THE AO TO VERIFY WHETHER THE RECIPIENTS HAVE INCLUDED THE RECEIPTS P AID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED THE S UM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISALLOWANCE U/S.40(A)(IA) OF TH E ACT SHOULD BE MADE BY THE AO. IN CASE THE RECIPIENT PARTIES ARE NOT COOPERATING I N PROVIDING DETAILS, THE AO SHOULD BE DIRECTED TO CALL FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE SAME. 9. THE LEARNED DR RELIED ON THE ORDER OF THE CI T(A) AND SUBMITTED THAT THE BENEFIT OF THE SECOND PROVISO SHOULD NOT BE ALLOWED TO THE ASSESSEE AS THE TAX DEDUCTED AT SOURCE HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S.139(1) OF THE ACT. 10. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANS AL LAND MARK TOWNSHIP (I) PVT.LTD., IN ITA NO.160/2015 JUDGMENT DATED 26.8.20 15 HAS TAKEN THE VIEW THAT THE INSERTION OF THE SECOND PROVISO TO SEC.40(A)(IA) OF THE ACT IS RETROSPECTIVE AND WILL APPLY FROM 1.4.2005. ONCE IT IS HELD THAT THE ASSE SSEE IS ENTITLED TO THE BENEFIT OF 2 ND PROVISO TO SEC.40(A)(IA) OF THE ACT, THE CIT(A) OUG HT TO HAVE DIRECTED THE AO TO VERIFY WHETHER THE RECIPIENTS HAVE INCLUDED THE REC EIPTS PAID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED THE S UM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISALLOWANCE U/S.40(A)(IA) OF TH E ACT OUGHT TO HAVE BEEN SUSTAINED BY THE CIT(A). WE THEREFORE HOLD AND DIRECT THAT IN CASE THE RECIPIENT PARTIES ARE NOT COOPERATING IN PROVIDING DETAILS, THE AO SHOULD CAL L FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE SAME. IN THIS REGARD WE ALSO DIRECT THE ASSESSEE ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 5 TO FURNISH ALL THE DETAILS OF ASSESSMENT PARTICULA RS OF THE RECIPIENTS OF PAYMENT FROM THE ASSESSEE. THE AO THEREFORE SHOULD NOT HAVE ANY DIFFICULTY IN MAKING THE REQUIRED VERIFICATION. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) TO THE EXTENT TO WHICH HE HAD SUSTAINED THE ORDER OF THE AO ON THE D ISALLOWANCE U/S.40(A)(IA) OF THE ACT AND REMAND THE ISSUE TO THE AO TO VERIFY WHETHE R THE RECIPIENTS HAVE INCLUDED THE RECEIPTS PAID BY THE ASSESSEE IN THEIR RESPECTIVE R ETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED THE SUM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO D ISALLOWANCE U/S.40(A)(IA) OF THE ACT SHOULD BE MADE BY THE AO. IN CASE THE RECIPIENT PA RTIES ARE NOT COOPERATING IN PROVIDING DETAILS, THE AO SHOULD BE DIRECTED TO CAL L FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE SAME. GROUN D NOS.1 AND 2 ARE ACCORDINGLY TREATED AS ALLOWED. 11. GROUND NOS. 3 AND 4 RAISED BY THE ASSESSEE I S WITH REGARD TO DISALLOWANCE OF A SUM OF RS. 5,05,060/- FOR THE REASON THAT THE AFORE SAID SUM WHICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS WAS PAID OTHERWISE BY WAY OF A CROSSED ACCOUNT PAYEE CHEQUE AND CONTRARY TO THE PR OVISION OF SECTION 40A(3) OF THE ACT. UNDER THE PROVISION OF SECTION 40A(3) OF THE A CT WHERE THE ASSESSEE INCURS ANY EXPENDITURE OF WHICH A PAYMENT OR AGGREGATE OF PAYM ENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY WAY OF AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOW ED IN RESPECT OF SUCH EXPENDITURE. SINCE THE ASSESSEE PAID A SUM OF RS.5,05,060/- TO V ARIOUS PARTIES AND SINCE EACH OF THE PAYMENTS EXCEEDED RS.20,000/- AND WERE PAID IN CASH , THE AO INVOKING THE PROVISION OF SECTION 40A(3) OF THE ACT DISALLOWED T HE CLAIM OF THE ASSESSEE FOR DEDUCTION OF A SUM OF RS.5,05,060/-. THE BREAK-UP O F THE SUM DISALLOWED BY THE AO IS AS FOLLOWS :- SL.NO. NAME & ADDRESS OF THE PARTY TO WHOM PAYMENT WAS MADE DATE OF PAYMENT AMOUNT MODE OF PAYMENT 1 KHANDELWAL ENTERPRISE MOHANDANGA ROAD, P.O.CHANDERNAGORE, HOOGHLY 16/09/2009 RS.28000/- BY CASH ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 6 2. -DO- 15/10/2008 RS.30,000/- BY CASH 3. SHREE RADHEYSHAM 17, SREENATH DAS LANE, KOL-12 25/09/2008 RS.50000/- BY CASH 5. MOHAN MECHANICAL WORKS 20/02/2009 RS.90,000/- BY CASH 6 SHAURYA BHUSHAN FILING STATION 25/08/08 RS.20,000/- RS.20,000/- RS.10,000/- BY CASH 11. NAVKUSH ENTERPRISE 04/09/2008 04/09/2008 20/09/2008 2009/2008 27/11/2008 27/11/2008 RS.20000/- RS.5000/- RS.20000/- RS.5000/- RS/20000/- RS.5000/- BY CASH 12 13. 14. AGARWAL & STORES PAYMENTS MADE TO COOL TECH PAYMENTS MADE TO KBS SCAFFOLDING 25/06/2008 08/07/2008 15/07/2008 RS.21420/- RS.22,223/- RS.22417/- RS.50,000/- RS.60,000/- BY CASH BY CASH BY CASH TOTAL RS.5,05,060/- 12. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRM ED THE ORDER OF AO. THE PRAYER OF THE LD. COUNSEL FOR THE ASSESSEE BEFORE US, WHICH W AS ALSO THE PRAYER BEFORE THE LOWER AUTHORITIES AND WHICH WAS REJECTED, IS THAT THE PAR TIES INSISTED ON CASH PAYMENTS OWING TO BUSINESS EXIGENCIES AND THEREFORE PAYMENTS WERE MADE IN CASH. IT WAS ALSO SUBMITTED THAT KEEPING IN VIEW OF BUSINESS EXPEDIEN CY AND OTHER RELEVANT FACTORS THE DISALLOWANCE OUGHT NOT TO HAVE BEEN MADE BY THE REV ENUE AUTHORITIES. 13. THE CIT(A) IN DECIDING THIS ISSUE HELD AS FOLL OWS :- I HAVE CONSIDERED THE RIVAL CONTENTIONS ON THE ISS UE WITH REGARD TO THE DISALLOWANCES U/S 40A(3) OF THE ACT. I HAVE GONE TH ROUGH THE RECORDS OF THE CASE AND HAVE CONSIDERED THE CONTENTION OF THE APPELLANT . I DO NOT FIND ANY FORCE IN THE APPELLANT'S CONTENTION AS THE PROVISIONS OF SECTION 40A(3) ARE VERY CLEAR AND THE PRESCRIBED UNDER RULE 6DD OF THE I.T. RULES. THE CA SES OF CIRCUMSTANCES IN WHICH PAYMENT IN SUM EXCEEDING RS.20,000/- MAY BE MADE OTHERWISE THAN A/C ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 7 PAYEE CHEQUE/A/C PAYEE DRAFT ARE SPECIFIED UNDER RU LE 600. THE CONTENTION OF THE APPELLANT IN THIS RESPECT IS NOT TENABLE AND DE SERVES TO BE REJECTED. THE DISALLOWANCE OF RS.5,05,060/- MADE BY THE AO UNDER SECTION 40A(3) OF THE ACT IS THUS CONFIRMED. 14. THE LD. COUNSEL FOR THE ASSESSEE HAS HOWEVER RELIED ON THE DECISION OF TAT, KOLKATA IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS JCIT IN ITA NO.541/KOL/2001 ORDER DATED 28.06.2004 WHEREIN THE TRIBUNAL TOOK TH E VIEW THAT WHEN CIRCUMSTANCES UNDER WHICH CASH PAYMENTS WERE MADE AND GENUINENESS OF THE PAYMENTS ARE NOT DISPUTED, THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT SHOULD NOT BE MADE. RELIANCE WAS ALSO PLACED BY HIM ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF IN ITA NO.202 OF 2008 DATED 20.07.20 08 IN THE CASE OF CIT VS CRESCENT EXPORT SYNDICATE WHEREIN THE HONBLE HIGH COURT WHI LE DEALING WITH A CASE OF DELETION OF ADDITION IN RESPECT OF PURCHASES MADE B Y AN ASSESSEE, OBSERVED AS FOLLOWS :- IT ALSO APPEARS THAT THE PURCHASES HAVE BEEN HELD TO BE GENUINE BY THE LEARNED CIT APPEAL) BUT THE LEARNED CIT (APPEAL) HAS INVOKE D SECTION 40A(3) FOR PAYMENT EXCEEDING RS.20,000/- SINCE IT IS NOT MADE BY CROSSED CHEQUE OR BANK DRAFT BUT BY BEARER CHEQUES AND HAS COMPUTED THE PA YMENTS FALLING UNDER PROVISIONS TO SECTION 40A (3) FOR RS.78,45,580/- A ND DISALLOWED @ 20% THEREON RS.15,69,116/-. IT IS ALSO MADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY BEARER CHEQUE THESE GOODS COULD NOT HAVE BEEN PROCU RED AND IT WOULD HAVE HAMPERED THE SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THEREFORE, THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY TH E ID. CIT. (APPEAL) WHICH HAS ALSO NOT BEEN DISPUTED BY THE DEPARTMENT AS. IT APPEARS FROM THE ORDER SO PASSED BY THE LEARNED TRIBUNAL. IT FURTHER APPEARS FROM THE ASSESSMENT ORDER THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEAL) HAS DISBELIEVED THE GENUINENESS OF THE TRANSACTION. THERE WAS NO DISPUT E THAT THE PURCHASES WERE GENUINE. ACCORDINGLY, IN OUR OPINION, THE LEARNE D TRIBUNAL HAS CORRECTLY CAME TO THE CONCLUSION BY DELETING THE ADDITION OF RS. 25,6 9,116/- UNDER SECTION 40A(3) OF THE ACT. ON THE OTHER GROUND AS IT APPEARS THAT THE CIT (APPEAL) HAS BEEN DIRECTED ,TO RECONSIDER THE MATTER. IN VIEW OF THAT WE DO NOT THINK THAT ANY SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS MAT TER. HENCE THE APPEAL BEING ITA NO. 202 OF 2008 IS DISMISSED. 15. THE LD. DR RELIED ON THE ORDER OF CIT(A). WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DECISION OF THE HONBLE CALCUTTA HIGH COURT THE DISALLOWANCE OUGHT NOT TO HAVE BEEN MADE BY THE REVENUE AUTHORITIES. IT HAS NOT BE EN DISPUTED BY THE REVENUE ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 8 AUTHORITIES THAT CUSTOMERS INSISTED ON CASH PAYMENT S AND THERE WERE BUSINESS EXIGENCIES AND ABSENCE OF BANKING FACILITIES WHICH WARRANTED PAYMENT IN CASH. IN SUCH CIRCUMSTANCES THE DISALLOWANCE WAS NOT JUSTIFIED. T HE SAME IS DIRECTED TO BE DELETED. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TR EATED AS PARTLY ALLOWED. 17. ITA NO.1594/KOL/2014 IS AN APPEAL BY THE REVE NUE AGAINST THE ORDER DATED 20.05.2014 OF CIT(A)-XIX, KOLKATA RELATING TO A.Y.2 010-11. 18. GROUND NO.1 RAISED BY THE REVENUE READS AS FO LLOWS :- 'THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.13,14,401/- MADE ON ACCOUNT OF INTEREST LESS SHOWN WHEN COMPARED TO THE INTEREST DETAIL GIVEN IN INDIVIDUAL TRANSACTION STATEMENT (ITS).' 19. AS FAR AS GROUND NO.1 IS CONCERNED, THE FACT S ARE THAT THE AO FROM THE ANNUAL INFORMATION REPORT (AIR) ITS NOTICED THAT THE ASSES SEE HAS RECEIVED INTEREST INCOME FROM CANARA BANK, NOIDA OF RS.93,70,300/-. THE ASSE SSEE HAS HOWEVER DECLARED ONLY A SUM OF RS.80,55,819/- IN THE PROFIT AND LOSS ACCO UNT. THE DIFFERENCE OF A SUM OF RS.13,14,401/- WAS ADDED BY THE ASSESSING OFFICER T O THE TOTAL INCOME OF THE ASSESSEE AS INTEREST INCOME NOT DISCLOSED BY THE ASSESSEE. 20. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT IT HAD OFFERED INTEREST INCOME RECEIVED FROM BANKS ON FIXED DEPOSITS ON ACCRUAL BA SIS AS PER CERTIFICATE ISSUED BY THE BANK WHEREAS THE AIR INFORMATION OBTAINED BY THE AO WAS ON THE BASIS OF FORM NO.26-AS FILED BY THE BANK. THE ASSESSEE GAVE THE D ETAILS OF THE INTEREST INCOME OFFERED BY IT IN VARIOUS ASSESSMENT YEARS AND CLAIM ED BEFORE CIT(A) THAT THE ENTIRE INTEREST INCOME RECEIVED FROM THE BANK HAD BEEN OFF ERED TO TAX IN THE PERIOD FROM A.Y.2008-09 TO 2011-12. THE DETAILS SO FILED BY THE ASSESSEE BEFORE CIT(A) IS GIVEN IN ANNEXURE-I TO THIS ORDER. THE CIT(A) ON CONSIDERATION OF THE AFORESAID DETAILS DELETED THE ADDITION MADE BY THE AO OBSERVING AS FO LLOWS :- ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 9 I HAVE GONE THROUGH THE RECORDS AND VERIFIED THE F ACTS. THE CERTIFICATE OF CANARA BANK ON THE BASIS OF WHICH THE APPELLANT HAS INCLU DED THE INTEREST INCOME IS FOR RS.80,55,819/- AND TDS HAS ALSO BEEN MADE AND CLAIM ED BY THE APPELLANT ON THE SAID AMOUNT. I HAVE ALSO PERUSED THE BANK CERTIFICA TES FOR AY 2008-09 AND 2009- 10 TOR WHICH SEPARATE ORDERS ARE BEING PASSED. THE MISMATCH IN THE AIR INFORMATION AND BANK CERTIFICATES HAS ALSO BEEN VER IFIED BY ME. I HAVE ALSO GONE THROUGH RELEVANT PROVISIONS OF LAW AND THE TWO JUDG MENTS RELIED ON BY THE AR IN THIS RESPECT. THE OVERALL DIFFERENCE AS PER BANK CE RTIFICATE AND AIR INFORMATION HAS BEEN CLAIMED AND EXPLAINED I ALSO FIND THAT THE APPELLANT HAS OFFERED EXCESS INTEREST OF RS.4,27,671/- FOR TAXATION AS COMPARED TO AIR INFORMATION AND INTEREST INCOME FROM FDS OFFERED BY THE APPELLANT FOR FOUR Y EARS (AY 2008-09 TO AY 2011-12). IN VIEW OF THE LAW LAID IN CITATIONS AND FACTS EXPLAINED BY THE APPELLANT FOR DIFFERENCE AND MISMATCH, THE ADDITION OF RS.13, 14,401/- MADE BY AO ON ACCOUNT OF DIFFERENCE IN BANK INTEREST IN AY 2010-1 1 IS DELETED AND THE APPELLANT'S CONTENTION IS ACCEPTED. 21. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED GROUND NO.1 BEFORE THE TRIBUNAL. 22. THE LD. DR RELIED ON THE ORDER OF AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). IT APPEARS TO US THAT THERE IS NO LOSS TO THE REVENUE IN AS MUCH AS INTEREST INCOME RECEIVED FROM THE BANK HAS IN FACT BEEN OFFERED AT A HIGHER SUM BY THE ASSESSEE THAN WHAT WAS RECEIVED BY IT. IT IS PURELY DUE TO MIS-MATCH BETWEEN THE AIR INFORMATION AND BANK CERTIFICATES. THE ORDER OF CIT (A) THEREFORE IN OUR VIEW HAS TO BE UPHELD AS IT PROCEEDS ON THE PRINCIPLE THAT THE SA ME CANNOT BE TAXED TWICE. BESIDES THE ABOVE, THE OVERALL DIFFERENCE AS PER THE BANK C ERTIFICATES AND AIR AS HAS BEEN PROPERLY EXPLAINED BY THE ASSESSEE. IN SUCH CIRCUMS TANCES WE DO NOT FIND ANY GROUND TO INTERFERE IN THE ORDER OF CIT(A). CONSEQUENTLY G ROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 23. GROUND NO.2 RAISED BY THE REVENUE READS AS FO LLOWS :- '2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.48,01,645/- MADE ON ACCOUNT OF FAILING TO PRODUCE ANY DOCUMENTARY EVIDE NCE AS PER CONDITIONS LAID DOWN U/S. 36(2) OF THE INCOME-TAX ACT, 1961 IN RESP ECT OF BAD DEBTS CLAIMED WRITTEN OFF.' ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 10 24. THE ASSESSEE CLAIMED AS A DEDUCTION OF A SUM OF RS.48,10,645/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF. THE AO HOWEVER DID NOT ALLO W THE CLAIM OF THE ASSESSEE FOR THE FOLLOWING REASONS :- 'IT IS FOUND FROM THE RECORDS SUBMITTED BY THE ASSE SSEE THAT DURING THE YEAR DEBITED RS 48 10,645/- FOR THE BAD DEBTS WRITE OFF. DURING THE ASSESSMENT PROCEEDING THE ASSESSEE WAS ASKED TO EXPLAIN TILE F OLLOWING POINTS AS PER THE SECTION 36 (1) (VII) AND SECTION 36 (2) OF THE INCO ME TAX ACT, '1961: (A) WHETHER THE BAD DEBT OF RS.48,10,645/- WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE PREVIOUS Y EAR 2009-10. (B) WHETHER THE BAD DEBT OF RS.48,10,645/-/- HAVE B EEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR THE EARLIE R YEARS. IF YES THEN PROVIDE SUPPORTING EVIDENCES. (C) WHETHER THE BAD DEBT OF RS.48,10,645/- INCIDENT AL TO THE BUSINESS OF THE PROFESSION OF THE ASSESSEE. (D) WHAT EFFORTS DONE BY ASSESSEE FOR RECOVERY OF DEBTS. THE ASSESSEE FAILED TO PRODUCE THE SUPPORTING DOCUM ENTS WHICH EXPLAIN THE ABOVE POINTS AND THE CONDITION GIVEN IN THE SECTION 36 (2 ) OF THE INCOME TAX ACT, 1961. SO THE MOUNT OF RS 48,10,645/- IS DISALLOWED AND AD DED TO THE TOTAL INCOME OF THE ASSESSEE. 25. ON APPEAL BY THE ASSESSERE THE CIT(A) DELETED THE ADDITION MADE BY THE AO FOR THE REASON THAT IT WAS NO LONGER NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT WRITTEN OFF AS BAD DEBTS SHOULD BE SHOWN TO BECOME BAD IN VIEW OF THE STATUTORY AMENDMENT TO THE PROVISION OF SECTION 36(1)(VII) OF THE ACT AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED 32 3 ITR 397 (SC). 26. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. 27. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COU NSEL FOR THE ASSESSEE AND THE LD. DR. THE DETAILS OF THE DEBTS THAT WERE WRITTEN OFF AS BAD DEBTS AND THE YEAR IN WHICH THE SUMS WERE OFFERED AS INCOME BY THE ASSESSEE ARE GIVEN IN ANNEXURE-II TO THIS ORDER. THEREFORE THERE APPEARS TO BE NO MERIT IN T HE STAND TAKEN BY THE AO THAT THE DEBTS WRITTEN OFF AS BAD DEBT WAS NOT SHOWN AS INCO ME IN THE EARLIER YEARS. AS FAR AS THE QUESTION WHETHER THE ASSESSEE HAS TO ESTABLISH THAT THE DEBTS ARE BAD AND IRRESPECTIVE WE ARE OF THE VIEW THAT IN THE LIGHT O F THE STATUTORY AMENDMENT AND THE ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 11 DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LTD (SUPRA) IT IS NO LONGER NECESSARY FOR THE ASSESSEE TO SAY THAT THE DEBTS WR ITTEN OFF AS BAD DEBT HAS IN FACT BECOME BD. THIS OBJECTION OF THE AO IS ALSO HELD TO BE WITHOUT ANY BASIS. THE QUESTION WHETHER THE DEBT WAS WRITTEN OFF AS BAD DE BTS BY SQUARING OFF THE ACCOUNT OF THE DEBTORS IS ONLY ASPECT WHICH IS REQUIRED TO BE SEEN. FOR THIS LIMITED PURPOSE WE REMAND THE ISSUE TO THE AO. GROUND NO.2 IS ALLOWED. 28. GROUND NO.3 RAISED BY THE REVENUE READS AS FO LLOWS :- '3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN REDUCING THE DISALLOWANCE OF RS.1 ,80,886/ - I.E. 1% OF LABOUR CHARGES TO RS.1,00,000/- BY TREATING THE SAM E ON HIGHER SIDE AS THE ASSESSEE MADE THE PAYMENT OF LABOUR CHARGES IN CASH THROUGH SELF- MADE VOUCHERS HAVING NEITHER THE ADDRESS NOR COMPLETE ID ENTITY OF THE PAYEES.' 29. THIS GROUND CAN BE CONVENIENTLY DECIDED TOGET HER WITH THE ONLY GROUND AND CROSS OBJECTION OF ASSESSMENT PROCEEDINGS WHICH IS TO THE EFFECT THE CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION MADE BY THE AO. 30. THE AO IN THE COURSE OF ASSESSMENT PROCEEDIN GS NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.7,35,48,256/- AS LABOUR CHARGES AT THE SITE OF BANGALORE PROJECT AND KOLKATA PROJECTS ETC. OUT OF THE AFORESAID SUM A SUM OF RS.1,80,88,654/- WAS LABOUR CHARGES ON WHICH NO TAX HAS BEEN DEDUCTED AT SOURCE. ACCORDING TO THE AO THESE LABOUR CHARGES WERE PAID IN CASH THROUGH SELF MADE VOUCHERS. THE ASSESSEE PRODUCED SELF MADE VOUCHERS AND MASTER SHEET IN SUP PORT OF THE CLAIM FOR PAYMENT OF WAGES. THE AO WAS OF THE VIEW THAT THE DOCUMENTS PR ODUCED BY THE ASSESSEE DO NOT HAVE THE ADDRESSES OF THE LABOURERS AND IDENTITY OF THE PAYEE. THE AO THEREFORE DISALLOWED 1% OF THE AFORESAID LABOUR CHARGES RESUL TING IN DISALLOWANCE OF RS.1,80,886/- ON THE GROUND THAT IT WAS AN ATTEMPT BY THE ASSESSEE TO INFLATED EXPENDITURE AND REDUCE THE INCOME. ON APPEAL BY THE ASSESSEE THE CIT(A) RESTRICTED THE DISALLOWANCE TO A SUM OF RS.1,00,000/-. AGGRIEV ED BY THE RELIEF GRANTED BY CIT(A) THE REVENUE HAS RAISED GROUND NO.3 BEFORE TH E TRIBUNAL. AGGRIEVED BY THE ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 12 ORDER OF CIT(A) SUSTAINING OF ADDITION TO THE EXTE NT OF RS.1,00,000/-, THE ASSESSEE HAS FILED CROSS OBJECTION BEFORE THE TRIBUNAL. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS.. THE COM PARATIVE CHARGE OF LABOUR CHARGES FOR THE PRESENT AND SUCCEEDING ASSESSMENT YEARS ARE AS FOLLOWS :- 2009-10 2010-11 2011-12 TURNOVER RS.38,75,76,828 RS.37,30,84,791 RS.47,22 ,41,277 LABOUR CHARGES RS.8,93,60,108 RS.7,35,48,257 RS.10 ,91,10,172 32. FROM A PERUSAL OF THE CHART GIVEN ABOVE, IT IS EVIDENT THAT THE CHARGE OF THE AO THAT THE ASSESSEE HAS INFLATED EXPENDITURE TO REDUC E PROFIT CANNOT BE SUSTAINED IN THE LIGHT OF THE PROPORTION OF TURN-OVER TO THE LABOUR CHARGES FOR THE SUBSEQUENT ASSESSMENT YEARS WHICH IS COMMENSURATE WITH THE QUA NTUM OF TURNOVER. WE THEREFORE DELETE THE ADDITION SUSTAINED BY CIT(A), TAKING INT O CONSIDERATION THE BUSINESS EXIGENCIES WHERE IT IS NOT POSSIBLE TO HAVE ADDRESS ES OF MIGRANT LABOURERS. THUS GROUND OF APPEAL BY THE REVENUE IS DISMISSED WHILE GROUND OF CROSS OBJECTION OF THE ASSESSEE IS PARTY ALLOWED. 33. IN THE RESULT ITA NO.1594/KOL/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND C.O.NO.113/KOL/2014 IS ALLOWED. 34. IN THE RESULT ITA NO.1598/KOL/2014 IS PARTLY AL LOWED. ITA NO.1594/KOL/2014 IS PARTLY ALLOWED AND C.O.NO.113 IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 31.07.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31.07.2017. [RG PS] ITA NO.1558 & 1594/KOL/2014&CO.113/K/2014 M/S. MITR A GUHA BUILDERS (INDIA)CO. A.Y.2009-10 13 COPY OF THE ORDER FORWARDED TO: 1. M/S. MITRA GUHA BUILDERS (INDIA) CO., 8/2, KIRAN SHANKAR ROY ROAD, KOLKATA. 2.I.T.O., WARD-33(3)), KOLKATA. 3. CIT(A)-XIX, KOLKATA. 4. C.I.T.-XI, KOLKAT A. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SR.PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT KOLKATA