Shivam Construction Co., Baroda V. The Dy.CIT-2(1), Baroda

CO 44/AHD/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6424 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 09-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Gross profit estimation; Rejection of books of accounts; Unexplained investment; Depreciation; Corroborative evidences; TDS; Set aside
• Section: 40A(3); 143(3); 142(1); 133(6); 201; 143(2); 69; 145; 6; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1(2), BARODA (APPELLANT /RESPONDENT ) VS M/S. SHIVAM CONSTRUCTION CO. B/5, DEVKINANDAN PARK, NR. RAJESH APARTMENTS, GOTRI ROAD, VADODARA - 390011 (RESPONDENT /CROSS OBJECTOR ) REVENUE BY : S H RI L. P. JAIN , SR. D . R. ASSESSEE BY: SHRI TUSHAR HEMANI, A.R. DATE OF HEARING : 25 - 01 - 2 019 DATE OF PRONOUNCEMENT : 18 - 02 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCO UNTANT MEMBER : - THIS REVENUE S APPEAL AND CROSS OBJECTION FILED BY ASSESSEE FOR A.Y. 2011 - 12 , ARI SE FROM ORDER OF THE CIT(A) - II, BARODA DATED 15 - 10 - 2 014 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 346 & CO NO. 44 / A HD/20 15 A SS ESSMENT YEAR 2011 - 12 I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 2 2. THE REVEN UE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ( 1) WHETHER ON FACTS AND IN LAW THE LD. CIT(A) HAS MISDIRECTED HIMSELF IN HOLDING THAT FOLLOWING ARE NOT SERIOUS DEFECTS IN THE BOOKS - (A) OUT OF TETAL PAYMENTS OF RS. 399 LACS ON ACCOUNT OF LABOUR PAYMENT S AN AMOUNT OF RS. 323 LACS IS COMPLETELY UNVERIFIABLE. (B) IN SEVERAL INSTANCES, THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF TRANSACTION AS NOTED BY THE A.O. IN PARA NO. 3 OF THE ASSESSMENT ORDER. (C) THAT THE ASSESSEE HAS NOT PRODUCED THE DETAILS OF EXPENSES AS REQUIRED BY THE A.O. (2) WHETHER THE LD. CIT(A) HAS ERRED IN LAW IN REDUCING THE GP ESTIMATED BY THE A.O. FROM RS. 81,79,705/ - TO RS. 15,00,000/ - WITHOUT ANY BASIS AND HAS FAILED TO GIVE ANY REASONS WHY HIS ESTIMATE IS MORE JUSTIFIA BLE THEN THAT OF A.O. (3) WHETHER THE LD. CIT(A) HAS ERRED IN LAW IN NOT APPRECIATING THAT IF ASSESSEE'S CONTENTION THAT SUPPORTING EVIDENCE IS NOT REQUIRED FOR BOOK ENTRIES AND YET BOOKS ARE CONSIDERED COMPLETE AND THUS, THE PROVISION OF ACT REGARDING MAI NTENANCE OF TRUE AND CORRECT BOOKS WOULD BECOME REDUNDANT. 3. ALL THE GROUNDS OF APPEALS ARE CONNECTED TO THE COMMON ISSUE REJECTING THE BOOKS OF ACCOUNT AND REDUCING THE GROSS PROFIT ESTIMATING BY THE ASSESSING OFFICER FROM RS. 8179705/ - TO R S. 15 LACS AND GENUINENESS OF TRANSACTION RELATED TO SUNDRY PARTIES , THEREFORE FOR THE SAKE OF CONVENIENCE ALL THE GROUND OF APPEAL ARE ADJUDICATED TOGETHER AS UNDER. 4. THE BRIEF FACT OF THE CASE IS THAT ASSESSEE HAS FILED RE T URN OF INCOME ON 29 TH SEP, 2011 DEC LARING TO T AL INCOME AT RS. 41 , 0 8 , 980/ - . THE SAME WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 1 ST AUGUST, 2012. THE ASSESSEE WAS ENGAGED IN T HE BUSINESS OF CONSTRUCTION AND WAS ALSO A GOVT. CONTRACTOR. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 12,63,000/ - AS PARA 3 O F THE ASSESSMENT ORDER ON NOT PROVING THE GENUINENESS OF SUNDRY CREDITORS AND LABOUR EXPENSES UNDER THE HEAD SUNDRY PARTIES PERTAINING TO RS. 50,000/ - DUE F R OM AUTO MARK MOTORS PVT. LTD., RS. 1 LAC DUE FROM JAYSHREE CHAMUNDA , RS. 11,30,000/ - BEING AMOUNT OF L ABOUR CHARGES PAID TO CHAI T A LI CONSTRUCTION. I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 3 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN RESPECT OF AMOUNT OF RS. 23 , 09 , 0513/ - REFLECTED IN THE BA LANCE SHEET DURING THE YEAR UNDER CONSIDERATION T HE ASSESSE HAS SUBMITTED DETAILS OF THE SUNDRY CREDITORS ALONG WITH THEIR NAMES / ADDRESS, PAN, AMOUNT DUE AS ON 31 ST MARCH, 2010 , TRANSACTION DURING THE YEAR AND BALANCE AS ON 31 ST MARCH, 2011. THE REAFTER TH E ASSESSING OFFICER HAS ISSUED NOTICE U/S. 133(6) OF THE ACT TO VARIOUS PARTIES. IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSING OFFICER HAS NOT RECEIVED ANY REPLY FROM THE THREE PARTIES NAMELY JAYSHREE CHAMUNDA TILES, AUTO MARK MOTORS PVT. LTD. AND CHAI TALIA CONSTRUCTION. IN RESPECT OF RS. 50,000/ - SUNDRY CREDITORS AGAINST THE NAME OF AUTO MARK MOTORS PVT. LTD THE ASSEESING OFFICER HAS NOT RECEIVED ANY RESPON SE TO T H E NOTICE ISSUED U/S. 133(6) OF THE ACT THEREFORE THE AMOUNT OF RS. 50,000/ - WA S TREATED AS UNEXPLAINED INVESTMENT AND ADDED TO THE TOT AL INCOME OF THE ASSESSEE U/S. 6 9 OF THE ACT. SIMILARLY, THE ASSESSING OFFICER HAS NOT RECEIVED ANY CONFIRMATION OF TRANSACTION FROM JAYSHREE CHAMUNDA TILES , THEREFORE, THE ASSESSING OFFICER HELD T HAT THE ASSESSEE HAS FILED TO PROVE THE GENUINENESS OF LIABILITY OF RS. 1 ,00000/ THEREFORE, THE ASSESSING OFFICER HAS TREATED THE SAID LIABILITY AS REMISSION OF LIABILITY U/S. 41(1) OF T HE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN RESPECT OF CHATALI CONSTRUCTION , THE ASSESSING OFFICER HA D ISSUED NOTICE/S. 133(6) OF THE ACT WHICH WAS RETURNED UN - SERVED. THE ASSESSING OFFICER ALSO NOTICED LABOUR EX PENSES OF RS. 11,30,000/ - CREDITED IN T H E SAID PARTY ACCOUNT. CONSEQUENTLY, THE ASSESSING OFF ICER HAS TREATED THE CLAIM OF LABOUR EXPENSES TO THE AMOUNT OF RS. 11,13,000/ - AS BOGUS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 4 6 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSE EE. RELEVANT PART OF DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 4.3.1. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. IN RESPECT OF ADDITION OF RS.50,000/ - , IT IS SEEN THAT M/S AUTO MOTIVE MANUFACTURERS PVT. LTD. HAS IN RESPONSE TO LETTER U/S 133(6) STATED THAT 'WE WOULD LIKE TO INFORM THAT WE DO NOT HAVE ANY TRANSACTION IN OUR BOOK DURING THE PERIOD 01.04.2010 TO 31.03.2011 IN THE NAME OF M/S SHIVAM CONSTRUCTION CO.' THUS, THE SAID P ARTY HAS NEVER CONFIRMED EARLIER BALANCE AS DESIRED BY THE ASSESSING OFFICER. THE LD. AUTHORIZED REPRESENTATIVE HAS EXPLAINED THAT DURING IMMEDIATELY PRECEDING A.Y 2010 - 11, THE FIRM HAS PAID ADVANCE BOOKING AMOUNT OF RS.50,000/ - FOR PURCHASE OF CAR IN THE NAME OF PARTNER SHRI HEMAL P. SHAH AND ENCLOSED RECEIPT OF ADVANCE BOOKING(ANNEX. NO. 1). THE AMOUNT WAS PAID IN ADVANCE AND NOT RECEIVED BY THE FIRM AND HENCE REFLECTED IN THE BALANCE SHEET AS ADVANCE AMOUNT THE ABOVE SUBMISSION OF THE AUTHORIZED REPRESEN TATIVE AND THE FACT THAT M/S AUTOMOTIVE MANUFACTURERS PVT. LTD. HAS NOT CONFIRMED ANY TRANSACTION PRIOR TO 31.03.2010, THEREFORE THE AMOUNT OF RS.50,000/ - WAS RIGHTLY TREATED AS UNEXPLAINED BY THE ASSESSING OFFICER AND THE SAME IS HEREBY CONFIRMED. 4.3.2. IN RESPECT OF ADDITION MADE U/S 41(1) OF THE ACT OF RS.1,00,000/ - SHOWN AS PAYABLE TO JAYSHREE CHAMUNDA, IT IS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE APPELLANT HAS PURCHASED TILES AND PAVER BLOCKS REQUIRED FOR BUSINESS OF THE APPELLANT FROM JAYSHREE CHAMUNDA IN EARLIER YEARS AND LAST TRANSACTION WAS DONE DURING A.Y.2009 - 10. HOWEVER, THE LIABILITY IS NOT CEASED IN ASSESSEE'S BOOKS AND THE SAME IS STILL CONTINUING. THE FIRM HAD CONTINUOUS BUSINESS DEALINGS WITH THE SUPPLIER. IT IS ALSO SUBMITT ED THAT THE ASSESSEE HAD ALSO - PRODUCED THE CONFIRMATION OF THE PARTY BUT SINCE DURING A.Y.2010 - 11 AND A.Y.2011 - 12, THE ASSESSEE HAD NOT MADE ANY PURCHASES FROM THE PARTY, HE HAD NOT COOPERATED WITH THE APPELLANT AND HENCE THE PARTNER OF JAY CHAMUNDA COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER WHICH RESULTED IN ADDITION U/S 41(1) OF THE ACT WHICH IS NOT JUSTIFIED. TO SUBSTANTIATE THIS, LD.AR HAS ENCLOSED LEDGER ACCOUNT OF JAY CHAMUNDA FOR A.Y.2009 - 10 AND SUBMITTED THAT DURING A.Y.2010 - 11, THE ASSESSEE HAS PAID RS.1,59,208/ - TO THE CONCERNED PARTY. THIS CLEARLY ESTABLISHES THAT THE LIABILITY OF RS.1,00,000/ - SHOWN AS PAYABLE TO JAYSHREE CHAMUNDA DID NOT CEASE DURING THE YEAR UNDER CONSIDERATION AND HENCE, IT IS HELD THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER U/S 41(1) OF THE ACT WAS NOT JUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. 4.3.3. IN RESPECT OF ADDITION OF RS.11,13,000/ - PAYABLE TO CHAITALI CONSTRUCTION IT CAN BE SEEN THAT THE ASSESSING OFFICER HAS MADE THE ADDITION TREATING THE LIABILIT Y AS BOGUS ON THE PRESUMPTION THAT THE ALLEGED CONFIRMATION OF THE SAID PARTY OBTAINED BY THE ASSESSEE IS ONLY A COPY OF ALLEGED TRANSACTION WHICH APPEARS TO BE PREPARED BY THE ASSESSEE BECAUSE, THE PARTY HAS ALLEGEDLY RAISED LABOUR BILLS TO THE ASSESSEE D URING THE YEAR. THE ASSESSING OFFICER ALSO DOUBTED THE PARTY CHAITALI CONSTRUCTION ON THE GROUND THAT THE ADDRESS OF THE SAID PARTY IN THE CONFIRMATION IS SHOWN AS CHAITALI CONSTRUCTION, VADODARA, WHICH IS NOT A COMPLETE ADDRESS. ANOTHER OBJECTION OF THE A SSESSING OFFICER WAS THAT ALL THE LABOUR BILLS ARE SHOWN IN ROUND FIGURES RS.1,00,000/ - , RS.1,50,000/ - , RS.1,50,000/ - , RS.1,00,000/, RS.2,00,000/ - , RS.2,13,000/ - , AND RS.2,00,000/ - . LAST OBJECTION OF THE AO WA S THAT T HE TDS AMOUNT OF RS,LL,130/ - AGAINST TH E CLAIM OF SUCH LABOUR EXPENSES OF RS.11,30,000/ - IS ALSO AGAIN CREDITED IN THE PARTY'S ACCOUNT AS 'BY CASH RS.11,130/ - ,' WHICH INDICATED THAT ASSESSEE CREDITED THE TDS AMOUNT ALSO INSTEAD OF CLAIM BY THE PARTY IN THE INCOME - TAX RETURN FOR THE ASSESSMENT YEAR. THEREFORE IT WAS NOT RELIABLE. IN THE ASSESSMENT ORDER ASSESSING OFFICER HAS MENTIONED THAT THIS INABILITY ON THE PART OF THE ASSESSEE HAS PROVED THAT THE EXPENSES SHOWN IN THE NAME OF CHAITALI CONSTRUCT ION WAS ONLY ON PAPER AND THE GENUINENESS OF TH E SAME IS NOT PROVED AS THE NOTICE ISSUED BY THE DEPARTMENT RETURNED UN - SERVED WITH REMARK 'NOT KNOWN' WHICH PROVES OTHERWISE ABOUT THE GENUINENESS OF THE PARTY AND THE CLAIM OF LABOUR EXPENSES AGAINST THIS PARTY. THEREFORE, THE CLAIM OF THE LABOUR EXPENSE S AMOUNTING TO RS.11,13,000/ - AGAINST THE ABOVE PARTY WAS TREATED AS A BOGUS AND THE SAME WAS DISALLOWED. I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 5 HOWEVER, FROM THE SUBMISSION MADE BY THE LD. AUTHORIZED REPRESENTATIVE, IT TRANSPIRES THAT M/S CHAITALI CONSTRUCTION IS A SUBCONTRACTOR WHO HAS CARRIE D OUT THE WORK ON BEHALF OF THE ASSESSEE. THE PARTY HAS CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE AS APPEARING IN BOOKS OF ACCOUNTS OF THE ASSESSEE AND THERE SEEMS TO BE SOME MISUNDERSTANDING WITH ASSESSING OFFICER. THE APPELLANT HAS NOT PRODUCED COPY O F ITS ACCOUNT FROM BOOKS OF ACCOUNTS OF CHAITALI CONSTRUCTION BUT THEIR ACCOUNT FORM APPELLANT'S BOOKS OF ACCOUNTS. THE COPY OF ACCOUNT DULY CONFIRMED BY CHAITALI CONSTRUCTION IS ALSO ENCLOSED BY THE APPELLANT AND PLACED AS ANNEX.NO.3 OF THE PAPER BOOK.. T HIS PRACTICE OF GETTING ONE'S COPY OF ACCOUNTS AS APPEARING IN ASSESSEE'S BOOKS OF ACCOUNTS IS NOT AN UNUSUAL OR STRANGE PHENOMENON BUT A IS A NORMAL AND ACCEPTABLE PRACTICE. THE APPELLANT HAS FURTHER CONTENDED THAT DURING THE PERIOD RELEVANT TO A.Y 2011 - 1 2, THE SUB - CONTRACTOR HAD SOME PROBLEM WITH VADODARA MUNICIAPAL COPORATION (VM C) AND HENCE HAD LEFT THIS BUSINESS PREMISES TO SAVE HIMSELF FROM THE LEGAL PROBLEMS, HE WAS ABSCONDING BUT THE ASSESSEE COULD SUBMIT CONFIRMATION DULY SIGNED BY CHAITALI CONSTRUCTION. THE AMOUNT OUTSTANDING WAS PAID IN SUBSEQUENT ASSESSMENT YEARS FOR WHICH THE APPELLANT HAD FURNISHED DETAILS OF BANK STATEMENTS. FROM THE ANNEX. IMO.4 (PAGES 1 - 6), IT IS FOUND THAT ALL THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES. FROM THE COPY OF BANK STATEMENTS FILED, IT CAN BE SEEN THAT THE NAME OF CHAITALI CONSTRUCTION APPEARS AS DRAWEE IN MAJORITY ENTRIES IN THE STATEMENTS. LD.AR HAS FURTHER CONTENDED THAT THE APPELLANT HAS DEDUCTED TAX AT SOURCE ON THE BILLS RAISED BY THE PARTY AN D CREDITED TO HIS ACCOUNT. THE TDS DEDUCTION IS REPORTED IN THE RETURNS OF TDS FILED BY THE ASSESSEE AND THE COPIES OF RETURNS OF TDS OF ALL THE QUARTERS ALONG WITH ACK. RECEIPTS OF FILING OF RETURNS AND COPY FORM 26AS ARE ALSO SUBMITTED AS ANNEX.NO.5 (PA GES 1 - 17) OF PAPER BOOK. I AM IN AGREEMENT WITH THE AUTHORIZED REPRESENTATIVE THAT ONCE THE APPELLANT HAS SUBMITTED ALL THE EVIDENCES SUCH AS BILLS OF PARTY, HIS CONFIRMATION, COPY OF BANK STATEMENTS IN WHICH MOST OF THE PAYMENTS HIS NAME APPEARS AND EVID ENCES OF TAX DEDUCTED AT SOURCE, NO DISALLOWANCE WAS WARRANTED ONLY BECAUSE THE CONFIRMATION WAS NOT AS PER ASSESSING OFFICER'S SPECIFICATION AND THE NOTICE WAS RETURNED UN - SERVED. FOR THAT APPELLANT HAD FURNISHED EXPLANATION WHICH WAS NOT CONTROVERTED BY THE ASSESSING OFFICER. CONSIDERING DETAILED SUBMISSIONS AND EVIDENCE PRODUCED BEFORE ME, I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.11,13,000/ - PAYABLE TO CHAITALI CONSTRUCTION AND THE SAME IS DIRECTED TO BE DELETED. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. AS PER THE CONFIRMATION FROM JAYSHREE CHAMUNDA TILES PLACED A T PAGE NO. 12 TO 13 OF PAPER BOOK THE AFORESAID AMOUNT IS SHOWN A S OUTSTANDING OF THE EARLIER YEAR AND THE ASS ESSEE HAS NOT MADE AN Y PURCHASE FROM THE SAID PART Y IN THE ASSESSMENT YEAR 2010 - 11 TO 2011 - 12 . IT IS ALSO NOTICED THAT PART OF THE PAYMENT HAS BEEN MADE IN ASSESSMENT YEAR 2010 - 11 AND T HE AMOUNT PAYABLE WAS OUTSTANDING IN I T S BOOKS OF ACCOUNT. WE HAVE ALSO CONSIDERED THE DECISION OF CIT VS. BOGILAL RA NJIBHAI ATARA (2014) 43 TAXMAN.CM 55 (GUJ) WHEREIN IT IS HELD THAT EVEN IF T HE GENUINENESS OF CRE DITOR IS UNDER SERIOUS DOUBT NO ADDITION CAN BE MADE U/S. 41(1) OF THE ACT. I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 6 IN THE LIGHT OF THE ABOVE , WE FIND NO ERROR IN THE DECISION LD. CIT(A) IN DELETING THE AFORESAID ADDITION. 8. IN RESPECT OF ADDITION OF R S. 11,13,000/ - PERTAINING TO CHAITALI CONSTRUCTION AS SUNDRY CREDITOR , IT IS NOTICED THAT ASSESSEE HAS SUBMITTED DETAILS OF SUNDRY CREDITOR SUC H AS NAME, ADDRESS, PAN AMOUNT OUTSTANDING ETC. HOWEVER, THE NOTICE U/S. 133(6) COULD NOT BE SERVE D ON THE AFORESAID PARTIES. WE FIND THAT THE CONFIRMATION FROM C HAITALI CONSTRUCTION WAS PLACED AT PAGE NO. 19 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE . IT WAS ALSO REPORTED THAT AFORESAID PARTY WAS ABSCONDING BECAUSE OF SOME PROBLEM WITH THE VADODARA MUNICIPAL CORPORATION, THEREFORE, FURTHER DETAIL IN RESPECT TO THE SAID ACCOUNT WAS NOT FURNISHED BY THE ASSESSEE. I T IS OBSERVED THAT THE AFORESAID L IABILITY WAS STILL OUTSTANDING IN T H E BOOKS OF ACCOUNT AND ASSESSEE HAS NOT WRITTEN OFF THE OUTSTANDING AMOUNT, THEREFORE, KEEPING RELIANCE ON THE AFORESAID DECISION OF HON BLE GU JARAT HIGH COURT AS SUPRA , WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF L D. CIT(A). 9 . IN RESPECT OF T HE OTHER GROUNDS OF APPEAL OF THE REVENUE REGARDING THE REJECTION OF BOOKS OF ACCOUNT U/S. 145 OF THE ACT AND DELETING THE ADDITION OF R S. 8 , 179 , 705/ - MADE ON ACCOUNT OF FALL IN GP , THE BRIEF FACT IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THERE WAS SIGNIFICANT FALL IN T H E GP COMPARED TO THE PRECEDING ASSESSMENT YEAR. ON QUERY T HE ASSESSEE EXPLAINED THAT THE FALL IN GP WAS BECAUSE OF INCREASE IN TRANSPORTATION EXPENSES , DIESEL EXPENSES AND LABOUR EXPENSES DUR I N G THE YEAR UNDER CONSIDERATION COMPARED TO THE SAID EXPENSES INCURRED IN THE PRECEDING ASSESSMENT YEAR. IT WAS EXPLAINED THAT TRANSPORTATION I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 7 EXPENSES DURING THE YEAR UNDER CONSIDERATION WAS INCREASED TO RS. 226.21 LACS FROM RS. 68.74 LACS A S INCURRED IN THE PRECEDING YEAR AND IN THE IN THE EARLIER YEAR THE BUSINESS TURNOVER WAS LOWER AS COMPARED TO YEAR UNDER CONSIDERATION. THE DIESEL EXPENSES WAS INCURRED AT RS. 130 .30 LACS AS AGAINST RS. 94.6 LACS INCURRED DURING T HE F.Y. 2009 - 10. THE LABOUR CHARGES WERE INCREASED BY 40.63% COMPARED TO THE PRECEDING YEAR. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT T HERE WAS CONSIDERABLE RISE IN CLAIM OF EXPENSES COMPARED TO PRECEDI NG YEAR AND SITE WISE DETAIL WAS NOT PRODUCED , T HEREFORE, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE FOLLOWING GROUNDS: - I) ASSESSEE HAS NOT PRODUCED THE DETAILS OF MATERIAL PURCHASES BY PARTY WISE AND SITE W ISE AS REQUIRED. II) PROPER DETAILS OF MAJOR EXPENSES I.E. LABOUR EXPENSES NOT PRODUCED AND MOST OF THE PAYMENTS ARE PAID IN CASH OR NON ACCOUNT PAYEE CHEQUE FOR JUST BELOW 20,000/ - WITHOUT PROPER AND COMPLETE ADDRESS OR PAN TO RENDER IT UNVERIFIABLE. III) THIRD PARTY VERIFICATION COULD NOT BE MADE IN SOME CASES AS DISCUSSED IN PARA IV) THE DRASTIC FALL IS NOT FULLY JUSTIFIED OR EXPLAINED. ACCORDINGLY, THE ASSESSING OFFICER HAS HELD THAT BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT RELIABLE AN D SAME WERE REJECTED U/S. 145A OF THE ACT AND THE GROSS PROFIT OF THE ASSSESSEE WAS ESTIMATED ON THE BASIS OF AVERAGE GROSS PROFIT OF THE IMMEDIATE PRECEDING ASSESSMENT YEAR, THEREFORE , THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 81 , 79 , 705/ - 10 . AGGRI EVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) . T HE LD. CIT(A) HAS ALLOWED THE APP EA L OF THE ASSESSE. RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 6.3.1. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESE NTATIVE AND THE ORDER OF THE ASSESSING OFFICER. FROM THE ASSESSMENT IT TRANSPIRES THAT THE ASSESSEE HAS ADMITTED THAT ONLY RS.76.48 LACS OUT OF TOTAL LABOUR EXPENSES OF RS.399.54 LACS IS PAID BY ACCOUNT PAYEE CHEQUE. THE REST ARE PAID BY 'CASH' OR 'CHEQUE' . THESE EXPENSES ARE NOT FULLY VERIFIABLE, AS NO SPECIFIC DETAILS WERE PRODUCED OR FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT FILED OR PRODUCED THE I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 8 MATERIALS PURCHASES/CONSUMED FOR EACH SITE AS REQUIRED DURING ASSESSMENT PROCEEDINGS AND VIDE NOTI CE U/S 142(1). IT IS ALSO A FACT THA T SO ME THIRD PARTY VERIFICATION AS DISCUSSED IN PARA.3 ABOVE COULD NOT BE MADE AND ASSESSEE HAS FAILED TO SUBSTANTIATE WITH EVIDENCE REGARDING THE AMOUNTS SHOWN AGAINST THESE PARTIES. FROM THE SUBMISSION OF THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THERE IS A DRASTIC FALL IN GROSS PROFIT IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE IS A CONSIDERABLE RISE IN CLAIM OF EXPENSES IN THE ACCOUNTS FOR WHICH THE ASSESSEE COULD NOT PRODUCE OR FURNISH ANY SATISFACTORY REASON AND ALSO THE DETAILS OF EXPENSES WERE NOT PRODUCED WITH COMPLETE DETAILS. THEREFORE, THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN AS TO WHY THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED AND TO ESTIMATE THE GROSS PROFIT RATIO AS PER THE IMMEDIATE PREVIOUS ASSESSMENT YEAR. 6.3.2. THE ASSESSING OFFICER HAS FURTHER NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT GIVEN ANY REASONS WHATSOEVER FOR SUCH WIDE VARIATION IN SHORT FALL IN GROSS PROFIT BETWEEN TH E LAST TWO EARLIER ASSESSMENT YEARS. THE ASSESSEE HAS SUBMITTED THAT THERE IS SUBSTANTIAL RISE IN EXPENSES BUT HAS FAILED TO PRODUCE ANY DETAILS OR EVIDENCE TO. SHOW THAT THERE WAS ANY DRASTIC CHANGE DURING THE FINANCIAL YEAR 2010 - 2011 IN COMPARISON TO 200 9 - 10. THE ASSESSEE HAS SUBMITTED THE RISE IN COST AS ONE OF THE GROUND FOR LESS GROSS PROFIT DURING THE YEAR. THE SUBMISSION ALSO DOES NOT MATCH IF THE FIGURES ARE COMPARED WITH PREVIOUS ASSESSMENT YEAR. FOR EXAMPLE, ASSESSEE HAS STATED THE RISE IN TRANSPO RT CHARGES AS 50% UPTO DECEMBER, 2010 AND 74% FROM JANUARY, 2011, THEREFORE THE AVERAGE GROWTH IN TRANSPORT COST DUE TO RISE IN COST WOULD BE 62%. THERE IS AGAIN A RISE IN TURNOVER BY 16% IN THIS YEAR WHICH WOULD NATURALLY HAVE A BEARING ON COST. THE TRANS PORTATION COST IN THE FINANCIAL YEAR 2009 - 10 WAS RS.68.74 LACS, IF INCREASED BY 62% DUE TO AVERAGE INCOME IN COST, IT BECOMES RS.111.36 LACS. IF IT IS FURTHER ENHANCED BY 16% (AS PER RISE IN TURN OVER), THE ATE TRANSPORTATION COST FOR THE YEAR SHOULD HAVE BEEN AROUND RS. 1 29.18 LACS. WHEREAS THE ASSESSEE HAS CLAIMED RS.226.21 LACS IN THE PROFIT AND LOSS ACCOUNT. SIMILARLY, THE ASSESSEE SUBMITTED THAT, THERE IS AVERAGE RISE IN DIESEL COST BY 14% AND IF SIMILAR METHOD ADOPTED, DIESEL EXPENSES WOULD BE OF RS.1 25.15 LACS, WHEREAS THE ASSESSEE HAS CLAIMED RS.130.30 LACS. THE ASSESSEE HAS NOT GIVEN THE SITE WISE OR PROJECT WISE MATERIALS PURCHASED/CONSUMED AS WELL AS OTHER COSTS, HENCE THE CLAIM OF THE ASSESSEE REGARDING RISE IN MATERIAL COST AND LABOUR COST IS FU LLY NOT JUSTIFIABLE OR SUBSTANTIATED. TO VERIFY THE REASONABILITY OF VARIOUS EXPENSES, THE ASSESSING OFFICER REQUESTED THE ASSESSEE TO PRODUCE THE DETAILS OF SITE WISE PURCHASE OR MATERIALS AS WAS REQUIRED IN THE NOLICE U/S 142(1) AS WELL AS DURING THE ASS ESSMENT PROCEEDINGS. MATERIAL PURCHASE IS ONE OF THE MAJOR EXPENSES OF THE ASSESSEE. BUT THE ASSESSEE HAS NOT FURNISHED SUCH DETAILS FOR EACH SITE. THIS WOULD HAVE SHOWN WHAT WERE THE RAW MATERIAL COST, PURCHASED AND CONSUMED AND OTHER COST FOR EACH SITE/P ROJECT TO ASCERTAIN THE GENUINE PROFIT RATIO OF THE SITE. . 6.3.3. OTHER OBJECTION OF THE ASSESSING OFFICER WAS THAT IN RESPECT OF LABOUR EXPENSES, SUBSTANTIAL PORTIONS OF THE PAYMENT ARE MADE BY CASH OR BY NON - A/C PAYEE CHEQUE. THOUGH, THE ASSESSEE HAS CL AIMED TO HAVE MADE SOME PAYMENT BY CHEQUE, BUT WHEN THE ASSESSEE WAS REQUESTED TO CONFIRM WHETHER THOSE CHEQUES ARE ISSUED AS ACCOUNT PAYEE CHEQUES, HE HAS NOT MADE CATEGORICAL CONFIRMATION FOR HAVING PAID BY ISSUING ACCOUNT PAYEE CHEQUE BUT ADMITTED TO HA VE PAID MAJORITY OF THE AMOUNT BY OTHER THAN ACCOUNT PAYEE CHEQUE. IT CAN ALSO BE SEEN FROM THE DETAILS FILED THAT ALL SUCH PAYMENTS ARE JUST BELOW RS.20,000/ - TO AVOID THE APPLICABILITY OF PROVISION U/S 40A(3) OF THE ACT. IT ' IS ALSO SEEN THAT ONLY SOME NAME OF THE INDIVIDUALS ARE STATED WITHOUT ANY FURTHER DETAILS. IN VIEW OF THE DETAILS AS DISCUSSED ABOVE THE FOLLOWING MAJOR DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER TO JUSTIFY REJECTION OF BOOKS OF ACCOUNTS: - I ) ASSESSEE HAS NOT PRODUCED THE DETAILS OF MATERIAL PURCHASES BY PARTY WISE AND SITE WISE AS REQUIRED. : II) PROPER DETAILS OF MAJOR EXPENSES I.E. LABOUR EXPENSES NOT PRODUCED AND MOST OF THE PAYMENTS ARE PAID IN CASH OR NON ACCOUNT PAYEE CHEQUE FOR JUST BELOW RS.20,00 0/ - WITHOUT PROPER AND COMPLETE ADDRESS OR PAN TO RENDER IT UNVERIFIABLE. II) THIRD PARTY VERIFICATION COULD NOT BE MADE IN SOME CASES AS DISCUSSED IN PARA 3. IV) THE DRASTIC FALL IS NOT FULLY JUSTIFIED OR EXPLAINED. 6.3.4. HOWEVER, FROM THE DET AILED SUBMISSIONS MADE BY THE LD. AUTHORIZED REPRESENTATIVE BEFORE ME, IT TRANSPIRES THAT NO SERIOUS DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 9 ACCOUNTS OF THE ASSESSEE WHICH ARE DULY AUDITED EXCEPT INSTANCES OF CASH PAYMENTS TO LABO UR WHICH IS NORMAL IN THIS LINE OF BUSINESS. THERE IS CONSIDERABLE INCREASE IN THE COST OF TRANSPORTATION WHICH HAS RESULTED IN FALL IN NET PROFIT RATION THIS YEAR. THE ASSESSING OFFICER HAD ASKED SPECIFIC QUESTIONS ABOUT THE REASONS FOR INCREASE IN TRANSP ORT COST FOR WHICH DETAILED REPLIES WERE FURNISHED BY THE APPELLANT FROM TIME TO TIME. THESE SUBMISSIONS ARE REITERATED BY LD. AUTHORIZED REPRESENTATIVE VIDE HIS LETTER DATED 12.10.2014.1 AM IN AGREEMENT WITH THE AR THAT NO SERIOUS DEFECTS HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN RESPECT OF THIS HEAD OF EXPENSES AND THAT MOST OF THE PAYMENTS (ABOUT 95%) TO THE TRANSPORTERS WERE BY WAY OF ACCOUNT PAYEE CHEQUES WHICH HAVE ALSO TEST CHECKED BY ME AND IT IS ALSO SEEN THAT APPLICABLE TDS HAS BEEN MADE BY THE APPELLANT ON ELIGIBLE PARTIES WHERE PAYMENTS ARE MORE THAN RS.20,000/ - . IN SUPPORT OF THIS, THE AUTHORIZED REPRESENTATIVE HAS ATTACHED COPY OF FORM26AIS WHICH TESTIFIES THE CONTENTION OF THE APPELLANT. THUS, THERE IS NO SERIOUS FINDING OF THE ASSESSI NG OFFICER IN RESPECT OF TRANSPORTATION COST EXCEPT OF INSTANCES OF CASH PAYMENTS OF SMALL AMOUNTS FOR WHICH SUITABLE DISALLOWANCE COULD HAVE BEEN MADE BY THE ASSESSING OFFICER. EXCEPT OF ONE CREDIT BALANCE OF RS.50,000/ - IN THE NAME OF M/S AUTOMOTIVE MANU FACTURERS PVT. LTD., ALL OTHER DISCREPANCIES OF BALANCE SHEETS ARE RECONCILED WITH PROPER EVIDENCE. THE APPELLANT HAS NOT BEEN ABLE TO FURNISH PURCHASE OF MATERIAL SITE - WISE WHICH IS NOT OBLIGATORY UPON HIM AND THE ASSESSING OFFICER TOO HAS NOT DEMONSTRAT ED THAT OVERALL CONSUMPTION OF MATERIAL WAS INFLATED OR EXCESSIVE. SO FAR AS DECLINE IN NET PROFIT RATE IS CONCERNED, ASSESSEE HAS FURNISHED ALL POSSIBLE DETAILS BEFORE THE ASSESSING OFFICER AND HAS DEMONSTRATED WITH EVIDENCE THAT THE RATE OF METAL CONSUME D IN CONSTRUCTION OF ROAD HAD INCREASED CONSIDERABLY AND THUS REDUCED THE PROFIT OF THE YEAR AS ALMOST 50% OF THE WORK DONE DURING THE YEAR UNDER CONSIDERATION, PERTAINED TO THE WORK ALLOTTED 2 - 3 YEARS BACK AND THERE WAS NO ESCALATION CLAUSE IN THE CONTRAC T AGREEMENT APPELLANT SUBMITTED BEFORE THE ASSESSING OFFICER THAT DURING THE YEAR UNDER CONSIDERATION, IT HAD EXECUTED WORK OF RS.128.36 CR. WHICH CONSISTED WORK OF RS.96.16 CR AND 32.20 CR. ALLOTTED IN R.ULICR YEARS I.E., F.Y.2007 - 08 AND F.Y.2008 - 09. THIS HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. 6.3.5. THESE EXPLANATION OF THE APPELLANT AND SUMMARY OF CONSUMPTION OF METAL HAVE NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER AND NO FURTHER ENQUIRY WAS CAUSED BY THE ASSESSING OFFICER FROM THE CONTRACTE ES REGARDING ESCALATION. CONSIDERING THE DETAILED SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE AND THE FACTS OF THE CASE, I AM OF THE OPINION THAT THERE WAS NO FOR REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT. MY OPINION IS BASED ON THE RECENT DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SYMPHONY COMFORT SYSTEM LTD. [2013] 35 TAXRNANN.COM 533 (GUJ.) WHEREIN IT HAS BEEN HELD THAT MERELY BECAUSE ASSESSING OFFICER NOTICED THAT THERE WAS FALL IN GROSS PROFIT RATE DECLARED BY ASSESSEE AS COMPA RED TO PRECEDING YEAR AND HE MADE ADDITION OIL ACCOUNT OF LOW GROSS PROFIT RATE TO ASSESSEE'S INCOME WITHOUT SPECIFIC DEFECT IN MAINTENANCE OF BOOKS OF ACCOUNT BY ASSESSEE HAVING BEEN POINTED OUT BY ASSESSING OFFICER, REJECTION OF BOOKS OF ACCOUNTS AND APP LICATION OF HIGHER FATE OF PROFIT CANNOT BE JUSTIFIED. RECENTLY, HON'BLE HIGH COURT OF MADRAS IN THE CASE OF G.V.D.I. & CO. VS DCIT SPECIAL RANGE, COIMBATORE [2014] 43 TAXMANN.COM 246 (MADRAS) HAS HELD THAT ASSESSING OFFICER COMPARED RESULTS OF YEAR UNDER CONSIDERATION WITH EARLIER YEARS AND HELD THAT FALL IN GP RATE WAS NOT EXPLAINED PROPERLY BUT WHEN ASSESSEE EXPLAINED REASON FOR FALL IN GP, AND REVENUE DID NOT VERIFY SAME BY SUBSTANTIVE MATERIALS, IMPUGNED ORDER OF ASSESSING OFFICER WAS TO BE SET ASIDE. 6.3.6. HOWEVER, THERE IS CONSIDERABLE FORCE IN THE OBSERVATION OF THE ASSESSING OFFICER REGARDING CASH PAYMENTS MADE TO THE LABOUR WHICH ARE NOT FULLY VERIFIABLE. DURING THE YEAR, THE RATIO OF LABOUR EXPENSES IS 19.48% AS AGAINST 16.46% AND 17.27% OF TWO I MMEDIATE PRECEDING YEARS. THERE ARE INSTANCES OF PAYMENTS BY BEARER CHEQUES ALSO. SIMILARLY APPELLANT HAS NOT PRODUCED COMPLETE BILLS FOR TRANSPORTATION CHARGES WHERE CASH PAYMENTS HAVE BEEN MADE DURING THE YEAR. TO CHECK THE LEAKAGE OF REVENUE IN RESPECT OF LABOUR PAYMENTS AND TRANSPORTATION, A SUM OF RS.15,00,000/ - (TEN LAKHS) IS DISALLOWED AND ADDED BACK UNDER THESE TWO HEADS AND THIS GROUND OF APPEAL IS PARTLY ALLOWED. I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 10 11 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULL Y. THE ASSESSEE HAS FURNISHED THE PARTY WISE DETAIL OF MATERIAL . THE SITE WISE DETAILS OF MATERIAL WAS NOT MAINTAINED AS THE CONSTRUCTION WO RK WAS CARRIED OUT ON 23 SITES DURING T H E YEAR UNDER CONSIDERATION . THE MAJOR PART OF THE PAYMENT WAS MADE TO THE LABOURERS FROM LOCAL AREA DEPLOY ED AT DIFFERENT SITES HAVING NO BANK ACCOUNT ET C. THE ASSESSEE HAS SPECIFIED THE REASON FOR FALL IN GROSS PROFITS . A ND 95% OF INCREASE IN THE TRANSPORTATION CHARGES WERE MADE BY ACCOUNT P AY EE CH EQUES . T HE BO OKS OF ACCOUNT ALONG WITH BILLS/VOUCHERS WERE PRODUCED AND THE ASSESSING OFFICER HA D NOT POINTED OUT ANY SPECIFIC INCORRECTNESS OR INCOMPLETENESS IN THE ACCOUNT OF THE ASSESSEE. IN THE LIGHT OF THE ABOVE FACTS AND AFTER CONSIDERING THE FINDINGS OF THE LD. CIT(A), WE ARE OF THE VIEW THE THERE WAS NO JUSTIFICATION FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145A OF THE ACT. THE ASSESSING OFFICE R HAS COMPARED THE GROSS PROFIT OF THE YEAR UNDER CONSIDERATION OF 11.46% WITH T HE GROSS PROJECT OF 20.73% SHOWN I N T H E PRECEDING ASSESSMENT YEAR AND MADE ADDITION OF R S. 81 , 79 , 705/ - AFTER COMPARING GROSS PROFIT RATIO OF 11.46% SHOWN DURING THE YEAR WITH THE AVERG E GROSS PROFIT OF 16.09% OF THE IMMEDIATE PRECEDING ASSESSMENT YEAR AND THIS YEAR. I T IS NOTICED THAT T HE ASSESSEE WAS MAINLY UNDERTAKING WORK CONTRACT FROM VARIOUS GOVERNMENT , SEMI - GOVERNMENT AND LOCAL BODIES FOR WORK OF ROAD CONSTRUCTION . IT HAS FURNISHED THE SUPPORT ING MATERIAL DEMONSTRATING THAT FREIGHT CHARGES FOR TRUCKS H A S GONE UP T O 15 5 PER M.T. F ROM RS. 55 PER MT IN IMMEDIATELY PRECEDING YEAR AND ALSO FURNISHED THE DETAIL SHOWING INCREASE IN THE COST OF R AW MATERIAL AND LABOUR CHARGES DURING THE YEAR UNDER I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 11 CONSIDERATION COMPARED TO THE PRECEDING YEARS. WE OBSERVE THAT THE ASSESSING OFFICER HAS NO T MADE ANY INVESTIGATION TO DISPROVE THE AFORESAID FACTS THAT THE 95% OF THE PAYMENT TO THE TRANSPORTERS WERE MADE BY THE WAY OF ACCOUNT PAYEE CHEQ U E S . THE ASSESSEE HA D HIRED CAUSAL LABORERS FROM THE VICINITY OF THE SITE AND PA ID THEM IN CASH BECAUSE THESE LABOURERS WERE SMALL TIME WORKERS AND MAJORITY OF THEM INSIST ED ON CASH PAYMENT. T HE TURN - OVER OF T HE ASSESSEE HAS INCREASED FROM 1768.15 LACS IN ASSESSMENT YEAR 2010 - 11 TO RS. 2050.14 LACS IN ASSESSMENT YEAR 2011 - 12 AND D URING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED COPIES OF WORK ORDER SHOWING DATE OF TENDER , DATE OF WORK ORDER ETC. I N THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES, WE ARE INCLINED WITH THE FINDINGS OF T HE LD. CIT(A) THAT QUANTUM OF LABOUR EXPENSES OF NON - VE RIFIABLE NATURE WAS SUBSTANTIALLY LOW AS COMPARED TO TOTAL EXPENSES INCURRED IN ASSESSEE S BUSINESS, THEREFORE, WE UPHOLD HIS DECISION OF RESTRICTING THE DISALLOWANCE OF RS. 15 LACS. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. CO NO. 44/AHD/201 5 FILED BY ASSESSEE 12 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF CROSS OBJECTION: - 1. THE ORDER PASSED BY THE ID. CIT(A),BARODA IS ILLEGAL AND BAD IN LAW. THE LD. CIT (A), BARODA HAS ERRED BOTH ON FACTS AND LAW. IT IS SUBMITTED THAT IT MAY BE HELD SO NOW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW, THE LD.CIT(A), BARODA ERRED IN CONFIRMING ADDITION OF RS.50,000/ - ON ACCOUNT OF DISALLOWANCE OF ADVANCE GIVEN FOR PURCHASE OF CAR UNDER THE HEAD SUNDRY CREDITOR. IT IS SUBMITTED THAT THE SAID AMOUNT IS AN ADVANCE PAID FOR BOOKING THE CAR ON THE NAME OF PARTNER OF THE FIRM MR.HEMAL P.SHAH. SINCE THE CONFIRMATION REQUESTED BY LD.CIT(A), BARODA WAS FOR SHIVAM CONSTRUCTION, THE PARTY DID NOT CONFIRMED. IT IS SUBMITTED THAT LD.CIT(A), BARODA ER RED ON FACTS AND IN LAW OF THE CASE. IT IS SUBMITTED THAT THE ADDITION MADE BY ID. ASSESSING OFFICER BE DELETED NOW 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW, THE LD.CIT(A), BARODA ERRED IN CONFIRMING ADDITION OF RS.2,13,755/ - ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION @ 50% ON T& MOTORCAR PURCHASED DURING 1.1.2009 TO 30.09.2009. IT IS SUBMITTED THAT LD.CIT(A), BARODA ERRED ON FACTS AND IN LAW OF THE CASE. IT IS SUBMITTED THAT THE ADDITION MADE BY ID. ASSESSING OFFICER BE DELETED NOW 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW, THE LD.CIT(A), BARODA ERRED IN CONFIRMING ADDITION OF RS. 15,00,000/ - ON ACCOUNT OF DISALLOWANCE OF TRANSPORTATION & LABOUR I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 12 CHARGES. IT IS SUBMITTED THAT LD.CIT(A), BARODA ERRED ON FACTS AND IN LAW OF THE CASE. IT IS SUBMITTED THAT THE ADDITION MADE BY ID. ASSESSING OFFICER BE DELEED NOW GROUND NO. 1 13 . THE ASSESSING OFFICER HAD ISSUED NOTICE U/S. 1 33(6) TO THIS PARTY WHICH WAS RETURNED UN - SERVED . THEREAFTER, THE ASSESSEE HAS NEITHER OFFERED ANY EXP LANATION DESPI TE OF SEVERAL OPPORTUNITIES NOR ANY CON FIRMATION FROM THE SAID PARTY T HEREFORE DEBIT BALANCE OF RS. 50,000/ - WAS TREATED AS UNEXPLAINED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S. 69 OF THE ACT. 14 . A AGGRIEVED ASSESSEE FILED APPEAL BE FORE THE LD. CIT(A). THE LD. CIT(A) HAS CONFIRMED THE ADDITION STATING THAT THE SAID PARTY HAS NOT CONFIRMED ANY TRANSACTION. 15 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT IS OBSERVED THAT ASSESSEE HAS NOT PR ODUCED ANY DOCUMENT OR CONFIRMAT ION TO PROVE THE GENUINENESS OF THE AFORESAID ADVANCE SHOWN IN THE NAME OF THE AFORESAID PARTIES, THEREFORE, WE DO NOT FIND ANY MERIT IN T HIS GROUND OF CROSS OBJECTION AND THE SAME IS DISMISSED. GROUND NO. 2 16 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION @ 50% IN RESPECT OF NEW MOTOR CAR. THE ASSESSEE WAS ASKED TO EXPLAIN WITH EVIDENCES THE CLA I M OF DEPRECATION @ 50% ON THE M OTOR CAR. THE ASSESSEE HAS FAILED TO SUBMIT ANY PROOF OF CLAIM OF DEPRECIATION @ 50%. THEREFORE , THE ASSESSING OFFICER HAS I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 13 RESTRICTED THE DEPRECIATION @ 5 0 % AND MADE ADDITION OF RS. 2 , 13 , 755 / - TO THE TOTAL INCOME OF THE ASSESSEE. 17 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE HE L D. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION STATING THAT ASSESSEE HAS FAILED TO PROVE THE EXACT USE OF SAID VEHICLE FOR COMMERCIAL PURPOSE. 18 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE FIND THAT ASS ESSE HAS FAILED TO SUBSTANTIATE WITH RELEVANT EVIDENCES ITS CLAIM OF DEPRECIATION ON HIGHER RATE, THEREFORE, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A) AND THIS GROUND OF APPEAL IS DISMISSED. GROUND NO. 3 CONFIRMING ADDITION IN RESPECT TO THE EXTENT OF RS. 15 , 00 , 000/ BY THE LD. CIT (A) WAS NOT PRESSED, THEREFORE THIS CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 19 . IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF ASSESSEE ARE DISMISSED. ORDER PR ONOUNCED I N THE OPEN C OURT ON 18 - 02 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER I.T.A NO. 346 & CO NO. 44 /AHD/20 15 A.Y. 2011 - 12 PAGE NO D CIT VS. M/S. SHIVAM CONSTRUCTION CO. 14 AHMEDABAD : DATED 18 /02 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVE NUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,