M/s Sohan Singh Yadav, Bhopal V. The ACIT, Bhopal

CO 43/IND/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6431 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 22-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Keywords: Corroborative evidences
• Section: 40A(3); 143(3); 234B; 37(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA , AM ITA NO.264/IND/2009 A.Y. 2005-06 ACIT-1(1), BHOPAL . APPELLANT VS. M/S. SOHAN SINGH YADAV, BHOPAL PAN AANFS 5224 P . RESPONDENT CO NO.43/IND/2009 (ARISING OUT OF ITA NO.264/IND/2009) A.Y. 2005-06 M/S. SOHAN SINGH YADAV, BHOPAL PAN AANFS 5224 P . OBJECTOR VS. ACIT-1(1), BHOPAL . RESPONDENT DEPARTMENT BY SHRI ARUN DEWAN, SR. DR ASSESSEE BY NONE ORDER PER R.C. SHARMA, ACCOUNTANT MEMBER THE APPEAL AND THE CROSS-OBJECTION ARE FILED BY THE REVENUE AND ASSESSEE, RESPECTIVELY, AGAINST THE ORDER OF LD . CIT(A)-I, BHOPAL, 2 DATED 20.3.2009 FOR THE AY 2005-06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE I.T. ACT, 1961. IN ITA NO.264/IND /2009 FILED BY THE REVENUE, THE FOLLOWING GROUND HAS BEEN RAISED: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10,00,000/- MADE BY THE AO ON ACCOUNT OF NON- MAINTENANCE OF APPROPRIATE BILLS AND VOUCHERS AND VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE I. T. ACT. 2. NOBODY ATTENDED THE HEARING ON BEHALF OF THE ASS ESSEE DESPITE THE SERVICE EFFECTED UPON THE ASSESSEE THRO UGH THE OFFICE OF THE LD. SR. DR, THEREFORE, ASSESSEE WAS PROCEEDE D EXPARTE. ON THE OTHER HAND, LD. SR. DR RELIED UPON THE ORDER OF THE AO. 3. FACTS OF THE ISSUE ARE THAT AO, AFTER VERIFICATI ON OF BOOKS OF ACCOUNTS OF THE ASSESSEE, NOTED THAT HUGE CASH PAYM ENTS HAVE BEEN MADE TO PARTIES EXCEEDING RS.20,000/- THOUGH B OOKED IN THE BOOKS IN DIFFERENT DATES BY SEPARATE ENTRIES. IT HA D ALSO BEEN NOTED THAT THE CASH PAYMENTS OF SLIGHTLY LESS THAN RS.20, 000/- HAVE BEEN BOOKED IN VARIOUS NAMES, MOST OF THE SUB-CONTRACTOR S TO WHOM HUGE PAYMENTS HAVE BEEN CLAIMED ARE NOT EVEN ASSESS ED TO TAX AND PAYMENTS TO THESE CONTRACTORS HAD MOSTLY BEEN M ADE IN CASH. THE RELEVANT BILLS & VOUCHERS GIVING DETAILS OF ACT UAL NUMBER OF LABOURER EMPLOYED AND SITE ADDRESSES ETC. WERE NOT AVAILABLE IN RECORDS. THE AO WAS, THEREFORE, OF THE VIEW THAT ON ACCOUNT OF 3 AFORESAID REASONS, IT IS NOT POSSIBLE TO VERIFY THE VERACITY OF EXPENSES BOOKED UNDER ACCOUNTING HEADS, LIKE LABO UR EXPENSES, DIESEL & OIL. THE AO, THEREFORE, ON ACCOUNT OF NON- MAINTENANCE OF APPROPRIATE BILLS & VOUCHERS AND VIOLATION OF PROVI SION OF SEC. 40A(3) MADE AN ESTIMATED DISALLOWANCE OF RS.10 LACS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE LD. CIT(A) , ASSESSEE HAD SUBMITTED THAT ASSESSEE HAD NOT MADE ANY PAYMENT IN CASH WHICH EXCEEDS TO RS.20,000/- AS AO HIMSELF ADMITTED IN TH E ASSESSMENT ORDER THAT THE CASH PAYMENTS OF SLIGHTLY LESS THAN RS.20,000/- HAVE BEEN BOOKED IN VARIOUS NAMES, THEREFORE, SEC. 40A(3 ) OF THE ACT IS NOT APPLICABLE IN THE MATTER. THE ASSESSEE ALSO PR ODUCED CASH BOOK FOR VERIFICATION AND SUBMITTED THAT THE MULTIP LE CASH PAYMENTS TO SAME PARTY EVEN IN A SINGLE DAY ALSO AR E NOT REQUIRED TO BE CLUBBED AND TREATED AS ONE CASH PAYMENT AND, FOR THAT REASON, TOTAL CASH PAYMENTS EXCEEDING RS.20,000/- E VEN IN A DAY TO THAT PARTY IS NOT TO BE HELD AS VIOLATION OF SEC. 4 0A(3). RELIANCE WAS ALSO PLACED UPON THE DECISION IN THE CASE OF CIT VS . BAL KRISHNA JAGDISH CHAND, (2007) 213 CTR 174 (P & H). BEFORE L D. CIT(A), IT WAS SUBMITTED THAT ASSESSEE HAD ALREADY FURNISHED THE C OMPLETE DESIRED DETAILS REGARDING SUB-CONTRACTORS. SO FAR A S NON- MAINTENANCE OF APPROPRIATE BILLS AND VOUCHERS LIKE LABOUR EXPENSES, DIESEL & OIL IS CONCERNED, IT WAS SUBMITT ED THAT AT THE 4 TIME OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD PRODUC ED BILLS AND VOUCHERS RELATED TO LABOURS EXPENSES, DIESEL & OIL EXPENSES. SINCE THE ASSESSEE IS A CONTRACTOR AND AS PER NATURE OF B USINESS, IT WAS NOT PRACTICALLY POSSIBLE TO MAINTAIN EACH AND EVERY VOUCHERS ON RECORD. HOWEVER, THE ASSESSEE, TRYING TO KEEP MAXIM UM SUPPORTING EVIDENCE OF EXPENSES, KEPT COMPLETE SET OF ACCOUNTS ALONG WITH SUPPORTING VOUCHERS AND THE SAME WERE DULY AUDITED BY QUALIFIED CHARTERED ACCOUNTANTS. IT WAS ALSO CONTENDED THAT T HE ASSESSEE HAD ALSO SHOWN N.P. @7.38% BEFORE ALLOWING DEPRECIA TION, INTEREST ON CAPITAL AND SALARY TO PARTNERS WHICH IS MOST REA SONABLE. IT WAS ALSO ARGUED THAT THE AO HAD MADE THE ADDITION/DISAL LOWANCE ON ESTIMATED BASIS WITHOUT POINTING OUT ANY SPECIFIC D EFECTS WITH REGARD TO THE BOOKS OF ACCOUNTS. THE AO DID NOT BRI NG ON RECORD ANY SINGLE IOTA OF EVIDENCE IN SUPPORT OF DISALLOWA NCE. THE SAME IS NOT SUSTAINABLE IN LAW AS IT IS OF GENERAL NATURE A ND WITHOUT ANY BASIS. IT WAS FURTHER SUBMITTED THAT THE EXPENDITUR E INCURRED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE CONDITIONS LAID DOWN U/S 37(1) HAVE BEEN FULFILLED, THEREFORE, ADDITION IS NOT PERMISSIBLE IN LAW. RELIANCE WAS AL SO PLACED ON THE FOLLOWING DECISIONS: 1. LOHOTI MEDICARE P. LTD. VS. DCIT (2005) 33 ITC 7 6 (INDORE TRIBUNAL); 2. PROTECTION PRODUCT VS. ITO (1993) 21 ITC 256 (IN DORE TRIBUNAL); 3. CIT VS. DHANRAJGIRI RAJA NARASINGIRI (1973) 91 IT R 544 (SC); 4. JAMSHEDPUR MOTOR ACCESSORIES STORES VS. CIT (197 4) 95 TAXMAN 664 (PAT); 5. CIT VS. PURE PHARMA P. LTD. (2004) 270 ITR 382 (M P); AND 5 6. CIT VS. DALMIA CEMENT (2002) 254 ITR 377 (DEL). THE LD. CIT(A), CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE IN THE LIGHT OF THE SUBMISSIONS & JUDICIAL PRONOUNC EMENTS NARRATED BEFORE HIM, DELETED THE ADDITION OF RS.10 LACS HOLD ING THAT THE ADDITION IS ON A MERE ESTIMATED BASIS. 5. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. ON CONSIDERATION OF ABOVE, WE FIND THAT THE ASSE SSEE HAD SUCCESSFULLY EXPLAINED EACH AND EVERY GENERAL DEFEC T POINTED OUT BY THE AO AS ALSO RECORDED BY THE LD. CIT(A) ABOVE. THE AO HIMSELF ADMITTED IN THE ASSESSMENT ORDER THAT THE CASH PAYM ENTS OF SLIGHTLY LESS THAN RS.20,000/- HAVE BEEN BOOKED IN VARIOUS NAMES, THEREFORE, SEC. 40A(3) OF THE ACT IS NOT APPLICABLE IN THE MATTER. THE ASSESSEE HAD ALREADY FURNISHED THE COMPLETE DESIRED DETAILS REGARDING SUB-CONTRACTORS. THE ASSESSEE IS A CONTRA CTOR AND AS PER NATURE OF BUSINESS, IT WAS NOT PRACTICALLY POSSIBLE TO MAINTAIN EACH AND EVERY VOUCHERS ON RECORD. HOWEVER, THE ASSESSEE , TRYING TO KEEP MAXIMUM SUPPORTING EVIDENCE OF EXPENSES, KEPT COMPLETE SET OF ACCOUNTS ALONG WITH SUPPORTING VOUCHERS AND THE SAME WERE DULY AUDITED BY QUALIFIED CHARTERED ACCOUNTANTS. TH E ASSESSEE HAD REASONABLY SHOWN N.P. @7.38% BEFORE ALLOWING DEPREC IATION, INTEREST ON CAPITAL AND SALARY TO PARTNERS. THE AO HAD MADE THE ADDITION/DISALLOWANCE ON ESTIMATED BASIS WITHOUT PO INTING OUT ANY SPECIFIC DEFECTS WITH REGARD TO THE BOOKS OF ACCOUN TS. THE AO DID 6 NOT BRING ON RECORD ANY SINGLE IOTA OF EVIDENCE IN SUPPORT OF DISALLOWANCE. THE SAME IS, THEREFORE, NOT SUSTAINAB LE IN LAW AS IT IS OF GENERAL NATURE AND WITHOUT ANY BASIS. THE EXPEND ITURE INCURRED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSIN ESS AND THE CONDITIONS LAID DOWN U/S 37(1) HAVE BEEN FULFILLED, THEREFORE, ADDITION IS NOT PERMISSIBLE IN LAW. THE RATIO LAID DOWN IN THE DECISIONS (SUPRA) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE A ND JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.10 LACS. WE CONF IRM THE ORDER OF THE LD. CIT(A). 7. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. 8. IN C.O. NO.43/IND/2009 FILED BY THE ASSESSEE , THE FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF PAYMENT MADE TO FIVE SUB-CONTRACTORS OF RS.1,37,62,110/- BY APPLYING THE SECTION 40(A)(IA) OF THE ACT. (AS MENTIONED SECTION 40(IA) IN ORDER) WHICH IS NOT APPLICABLE DURING THE YEAR UNDER CONSIDERATION. THE SAID PROVISO IS APPLICABLE TO PAYMENTS MADE ON 1.4.2005 AND ONWARDS. THE SECTION 40(A)(IA) CAME INTO EXISTENCE W.E.F. 1.4.05 , THUS THE PAYMENT ALREADY MADE TO SUB- 7 CONTRACTORS BEFORE THIS DATE DOES NOT VIOLATE THE PROVISION OF SECTION 40(A)(IA). (KINDLY FIND ENCLOSED HEREWITH SEC. 40(A)(IA) EXTRACT FROM I.T. ACT, 1961). SINCE THE ASSESSEES CASE PERTAINS TO FY 2004-05, THEREFORE, THE RELEVANT SECTION 40(A)(IA) IS NOT APPLICABLE TO THE ASSESSEE. AS THE AMENDED SECTION 40(A)(IA) IS EFFECTIVE FROM 1.4.05 AND THE LAW WAS NOT PREVALENT ON DATE OF COMMENCEMENT OF OFFENCE, HENCE, THERE IS NO VIOLATION OF SEC. 40(A)(IA). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CHARGING INTEREST UNDER SECTION 234B & 234C OF THE ACT. 9. WITH REGARD TO OBJECTION NO.1, WE FIND THAT LD. CIT(A), HAVING GONE THROUGH THE SUBMISSIONS, PERUSAL OF RECORD AND IN THE LIGHT OF THE COMMENTARY ON FINANCE ACT, 2004, HAS CATEGORICA LLY RECORDED THE FINDING, CONFIRMING THE ADDITION, THAT THE PROV ISIONS OF SEC. 40(A)(IA) OF THE ACT ARE APPLICABLE IN THE AY UNDER CONSIDERATION. THE LD. SR. DR RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. ON THE OTHER HAND, THE ASSESSEE HAS ALSO NOT FILED ANY EVIDENCE OR SUBMISSION TO CONTROVERT THE FINDING RECORDED BY TH E LD. CIT(A). IN VIEW OF THIS, WE CONFIRM THE ORDER OF THE LD. CIT(A ) ON OBJECTION NO.1. 8 10. SO FAR AS OBJECTION NO.2 IS CONCERNED, WE ARE O F THE VIEW THAT CHARGING OF INTEREST IS MANDATORY AND CONSEQUENTIAL IN NATURE, WHICH DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. W E, ACCORDINGLY, DISMISS THIS OBJECTION. 11. IN RESULT, CROSS-OBJECTION FILED BY THE ASSESSE E IS DISMISSED. 12. FINALLY, APPEAL FILED BY REVENUE AND CROSS-OBJE CTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.9.2011. SD/- SD/- (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8.9.2011 !VYAS!