Sh. Harbans Singh Sahni, Patiala V. ACIT, Patiala

CO 5/CHANDI/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7636 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: K P BAJAJ
• Keywords: Rejection of books of accounts
• Section: 40A(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 17/CHD/2010 ASSESSMENT YEAR: 2006-07 THE ACIT, VS SHRI HARBANS SINGH SAHNI, CIRCLE, PATIALA PATIALA PAN NO. AFNPS3490Q & C.O. NO.5/CHD/2010 (IN ITA NO. 17/CHD/2010) ASSESSMENT YEAR: 2006-07 SHRI HARBAN SINGH SAHNI, VS THE ACIT, CIRCLE, PATIALA PATIALA PAN NO. AFNPS3490Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P.BAJAJ RESPONDENT BY : SHRI N.K. SAINI DATE OF HEARING : 17.07.2012 DATE OF PRONOUNCEMENT : 24.08.2012 ORDER PER MEHAR SINGH, AM THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N BY THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A), PATIALA D ATED 4.11.2009 RELATING TO ASSESSMENT YEAR 2006-07 PASSED U/S 250 (6) OF THE INCOME- TAX ACT,1961 (IN SHORT 'THE ACT'). 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.13,53,862/- OUT OF THE TOTAL ADDITION OF RS.18,54,464/-, IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM ON THE BASIS OF CE RTIFICATE REGARDING WARRANTIES WHICH WAS FOUND TO BE NOT IN CONSONANCE WITH THE CONTRACT AND HENCE REMAINED UNPROVED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADDITIO N TO 20% OF THE TOTAL DISALLOWANCE OF RS.22,73,530/- ON ACCOUNT OF BOGUS LIABILITY AS WAGES PAYABLE SHOWN A T THE END OF THE YEAR, WITHOUT ANY BASIS AND IGNORING WIT HOUT ANY MATERIAL THE FACT THAT THE WAGES HAD ALREADY BE EN PAID BY THE ASSESSEE, WHICH FACT HAD ALSO BEEN ADMI TTED BY THE LABOURERS DURING THE ASSESSMENT PROCEEDINGS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADDITIO N, ARBITRARILY AND ILLEGALLY, TO 25% OF THE TOTAL DISA LLOWANCE OF RS.9,65,000/- MADE U/S 40A(3), WITHOUT ANY BASIS AND IGNORING THAT PAYMENTS-IN-CASH EXCEEDING RS.20,000/ - WERE ESTABLISHED BY EXAMINATION OF WORKERS RECORDED DURING THE ASSESSMENT PROCEEDINGS. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT BOOKS OF ACCOUNTS WERE REJECTED BY THE AO, WHICH IS PERVERSE AND 3 INCORRECT, SINCE THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AT ALL. 6. IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A ) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORE D. 7. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OF. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS B EFORE US, THE LD. DR REFERRED TO VARIOUS PAGES OF THE ASSESSMENT ORDE R AS WELL AS THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. FUR THER, THE LD. DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 4. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE, RELEVANT RECORDS AND MATERIAL AVAILABLE ON RE CORDS. THE LD. DR CONTENDED THAT CIT(A) ERRED IN DELETING THE ADDITI ON OF RS. 13,53,862/- OUT OF TOTAL ADDITION OF RS. 18,54,464/ - IGNORING THE FACT THAT ASSESSEE HAD FAILED TO SUBSTANTIATE IT CLAIM O N THE BASIS OF CERTIFICATE REGARDING WARRANTIES WHICH WAS FOUND TO BE IN CONSONANCE WITH THE CONTRACT AND HENCE REMAINED UNPROVED. 5. THE FACTS OF THE CASE IN BRIEF ARE THAT THE APPE LLANT MADE PURCHASES WORTH RS. 18,67,808/- IN THE LAST QUARTER OF THE FINANCIAL YEAR. A PART OF SUCH PURCHASES AT RS. 8,53,260/- W AS UTILIZED FOR COMPLETION OF CONTRACT WORKS BEFORE THE LAST PAYMEN T WAS RECEIVED ON 6.2.2006. ANOTHER AMOUNT OF RS. 10,01,204/- WAS UT ILIZED FOR 4 REPLACEMENT OF POLES UPROOTED DURING THE WARRANTY P ERIOD AND INSTALLATION OF MISSING TRANSFORMERS AS PER THE DET AILS FILED BEFORE THE LD. ASSESSING OFFICER. LABOUR CHARGES TO THE TUNE OF RS. 3,21,550/- WERE ALSO INCURRED. THE BALANCE STOCK AVAILABLE WI TH THE ASSESSEE AT THE END OF THE YEAR WAS TO BE TUNE OF RS. 13,244/-. NO NEW CONTRACT WAS TAKEN BY THE APPELLANT IN THE LAST QUARTER OF T HE FINANCIAL YEAR, HOWEVER, WARRANTIES WERE EXECUTED WHICH ARE THE CON DITIONS OF THE AGREEMENT, CERTIFIED BY THE CONTRACTING DEPARTMENT AND ALSO EVIDENCE BY THE BILLS THE GOODS COVERED BY WHICH WERE TRANSP ORT TO ATTARI / LOPOKE NEAR AMRITSAR. THE ASSESSING OFFICER DID NO T AGREE WITH THE EXPLANATION OF THE ASSESSEE THAT WARRANTIES WERE CA RRIED OUT AND CLAIM OF THE ASSESSEE IN RESPECT OF AMOUNT OF RS. 10,01,2 04/- REMAINS UNVERIFIED BEFORE THE ASSESSING OFFICER. THE ASSES SING OFFICER MADE ADDITION OF RS. 18,54,464/- (PURCHASES MADE IN THE LAST QUARTER AT RS. 18,67,708/- MINUS CLOSING STOCK OF RS. 13,244/-). THE CASE OF THE ASSESSEE IS THAT THE ASSESSING OFFICER WAS NOT JUST IFIED IN GIVING CREDIT FOR THE MATERIAL CONSUMED AT RS. 8,53,26/- IN CARRY ING OUT THE CONTRACT WORK PAYMENTS FOR WHICH WERE RECEIVED UP TO 6.2.200 6 AND THAT THE FACT OF WARRANTY BEING SUPPORTED BY THE AGREEMENT, THE C ERTIFICATE FURNISHED FROM THE CONTRACTING AUTHORITIES AND DISPATCH OF GOODS TO THE SITES WHERE THE WARRANTIES WERE CLAIMED TO HAVE BEEN CARR IED OUT, NO DISALLOWANCE COULD BE MADE. 6. THE LD. CIT(A), ON APPRECIATION OF THE SUBMISSIO NS FILED BEFORE HIS, UPHELD THE ADDITION OF RS. 5,00,602/- AND THE BALANCE OF RS. 5 5,00,602/- IS DELETED. THE FINDINGS OF THE LD. CIT (A) IS REPRODUCED HEREIN UNDER:- 3.6 I HAVE GONE THROUGH THE RIVAL SUBMISSIONS. TO M Y MIND THE ADDITION MADE AT RS.18,54,464!- HAS TWO FACETS; ONE RELATING TO RS. 8,53,260/-WHICH IS THE COST OF MATERIAL UTILIZED IN EARNING THE RECEIPTS UPTO 06.02.2006 AND THE OTHER TO RS. 10,01,2O4/- BE ING THE AMOUNT WHICH IS CLAIMED TO HAVE BEEN SPENT ON CARRYING OUT THE W ARRANTIES. IN FACT IN PARA (III) AT PAGE 7 THE A.O HAS OBSERVED AS UNDER: - '(III) THE ASSESSEE'S CLAIM FOR CONSUMING OF MATER IAL AMOUNTING TO RS.10,01,204/- REMAINS UNVERIFIABLE AS HE COULD NOT DISCHARGE THE ONUS OF PROVING THAT THE SAID MATERIAL HAD IN F ACT BEEN CONSUMED BY HIM ON ACCOUNT OF REPAIRS RELATED TO TH EFT, DEFECT & DEFICIENCY AND NO CERTIFICATE HAS BEEN PLACED ON RECORD BY THE AUTHORITY COMPETENT TO CERTIFY I.E. THE EXECUTI VE ENGINEER (ELECTRICIAN) PUNJAB MANDI BOARD, CHANDIGARH 3.7 IT IS APPARENT FROM THE ABOVE PART OF THE ORDER TH AT THE A.O DID NOT DISPUTE THE MATERIAL OF THE VALUE OF RS. 8,53,2 60/- WHICH WAS USED IN CARRYING OUT THE CONTRACT BUT WHILE WORKING OUT THE ADDITION HE HAS TAKEN THE ENTIRE FIGURE OF PURCHASE FOR THE LAST QUARTER. THE ADDITION TO THE EXTENT OF RS.8,53,260/ - IS NOT AT ALL JUSTIFIED HENCE THE SAME IS HEREBY DELETED. 3.8 REGARDING THE BALANCE VALUE OF MATERI AL AT RS. 10,01,204/- ALLEGED TO HAVE BEEN SPENT ON WARRANTIE S THE CONTENTION OF THE ASSESSEE THAT THE SAME ARE THE CO NDITION OF THE AGREEMENT CANNOT BE DENIED. THE CLAUSE OF THE AGREE MENT ALSO STANDS CONFIRMED BY THE CERTIFICATE OF THE CONTRACTING DEPARTMENT. THE FACT THAT THE GOODS PURCHASED WERE TRANSPORTED TO THE SITES WHERE THE CONTRACTS ARE SAID TO BE EX ECUTED CANNOT BE IGNORED. WHY WOULD AN ASSESSEE TRANSPORT MATERIAL A T A PLACE WHERE HE IS NOT CARRYING OUT ANY WORK. THE CLAIM OF THE ASSESSEE IS, 6 THEREFORE, FOUNDED ON DOCUMENTS AND FACTS. AT THE SAME TIME IT IS NOT CLEAR AS TO HOW MUCH MATERIAL W AS CONSUMED IN MAKING UP THE LOSSES. KEEPING IN VIEW THE FACTS OF THE CASE, IN MY VIEW, IT WILL BE FAIR IF 50% OF THE MATERIAL IS T REATED AS HAVING BEEN UTILIZED FOR MAKING UP THE WARRANTIES. IN THE RESUL T THE ADDITION OF RS. 5,00,602/- IS SUSTAINED AND THE BALANCE OF RS. 5,00,602/- IS DELETED. 7. A BARE PERUSAL OF THE FACTUAL MATRIX OF THE CASE , FINDINGS OF THE ASSESSING OFFICER, SUBMISSIONS FILED BY THE ASSESSE E IN THE MATTER AND THE EVIDENCE FILED IN THE COURSE OF APPELLATE PROCE EDINGS BEFORE US, WE DO NOT SEE ANY INFIRMITY IN THE FINDINGS OF LD. CIT (A). THE ORDER OF CIT(A) ON THIS ISSUE IS UPHELD. THUS, GROUND RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO.2 RAISED BY THE REVENUE IS THAT LD. CI T(A) ERRED IN RESTRICTING THE ADDITION TO 20% OF THE TOTAL DISALL OWANCE OF RS. 22,73,530/- ON ACCOUNT OF BOGUS LIABILITY AS WAGES PAYABLE SHOWN AT THE END OF THE YEAR WITHOUT ANY BASIS. 9. THE ASSESSING OFFICER REJECTED THE EXPLANATION F ILED BY THE ASSESSEE AND ADDED THE WAGES AS BOGUS LIABILITY U/S 68 OF THE ACT. THE LD. CIT(A) PARTIALLY DELETED THE ADDITION. THE FIN DINGS OF THE LD. CIT(A) AS CONTAINED IN PARA 4.5 ARE AS UNDER:- 4.5 I HAVE GONE THROUGH THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT IS FOUND THAT THE WAGES WERE SHOWN T O BE PAYABLE BY THE ASSESSEE AND THE ONUS WAS ON HIM TO PROVE THE CREDIT. BUT, HOWEVER, IT IS NOT NECESSARY THAT THE FACT 7 SHOULD BE PROVED IN THE SAME MANNER AS A CASH CREDI T. IT IS NOT UNCOMMON THAT THE LABOURERS COMING FROM FAR AW AY PLACES DO KEEP THEIR SAVINGS WITH THE EMPLOYER AND TAKE THE SAME WHILE VISITING THEIR NATIVE PLACES. THE FACT W AS DULY DEPOSED BY THE LABOURERS WHO WERE PRODUCED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. THE MATTER BEING MORE THAN TWO YEARS OLD IT IS UNLIKELY THAT ALL THE LABO RUERS WOULD CONTINUE WORKING WITH THE ASSESSEE. IN SUCH CIRCUMS TANCES FIRSTLY, THE QUANTUM OF EXPENDITURE WILL BE RELEVAN T. IT IS NOTICED FROM THE FACTS ON RECORD THAT THE EXPENDITU RE ON LABOUR WAS ALL TIMES LOW AS COMPARED TO EARLIER TWO YEARS. IT CANNOT, THEREFORE, BE SAID THAT THE LIABILITY WAS F ICTITIOUS. THE STATEMENT OF THE LABOURERS EXAMINED BY THE A.O ALSO SERVE AS A GUIDE TO THE FACT AND PROVE THE CASE OF THE ASSESSEE. THE FACT THAT THE PAYMENTS WERE MADE WITH IN THREE FOLLOWING MONTHS IS ALSO RELEVANT. THE FACT OF EXPE NDITURE ON LABOUR AND ITS PARKING WITH THE ASSESSEE ARE PROVED BY EVIDENCE. THE ADDITION MADE AT RS. 22,73,530/- CANN OT BE SUSTAINED. HOWEVER, TO PROVIDE FOR ANY LEAKAGE OR L ACK OF EVIDENCE IT WILL MEET THE ENDS OF JUSTICE IF 20% DI SALLOWANCE MADE BY THE A.O IS UPHELD. THE VIEW TAKEN IS IN CO NSONANCE MY DECISION TAKEN IN THE CASE OF M/S NARINDER KUMAR SINGLA, PATIALA IN APPEAL NO. 166/IT/CIT(A)/PTA/O8-09 DATED 08.07.2009. THIS WOULD MEAN UPHOLDING THE ADDITION OF RS. 4,54,706/-. THE ASSESSEE GETS RELIEF OF RS.18,18,8 24/-. 10. HAVING REGARD TO THE FACT SITUATION OF THE PRES ENT CASE, THE FINDINGS OF THE CIT(A) ARE NOT IN CONSONANCE WITH T HE VIEW TAKEN IN THE CASE OF M/S NARENDER KUMAR SINGLA, PATIALA, WHEREIN DISALLOWANCE WAS RESTRICTED TO 15% OF SUCH DISALLOWANCE, WHICH WAS U PHELD BY THE TRIBUNAL VIDE ORDER DATED 9.3.2009 IN ITA NO. 829/ CHANDI/2009, FOR 8 THE ASSESSMENT YEAR 2006-07. IN VIEW OF THIS, DISA LLOWANCE IS RESTRICTED TO 15% OF THE DISALLOWANCE MADE BY THE A SSESSING OFFICER. THE FINDING ALSO DISPOSES THE CROSS-OBJECTION BEARI NG NUMBER 3 OF THE APPELLANT. 11. THE REVENUE VIDE GROUND NO.3 CONTENDS THAT CIT( A) ERRED IN RESTRICTING THE ADDITION ARBITRARILY AND ILLEGALLY , TO 25% OF THE TOTAL DISALLOWANCE OF RS. 9,65,000/- MADE U/S 40A(3) OF T HE ACT. 12. THE ASSESSING OFFICER ON THE BASIS OF CASH WITH DRAWALS FROM THE BANK ACCOUNT MAINTAINED BY THE APPELLANT INVOKED TH E PROVISIONS OF SECTION 40A(3) AND CONSEQUENTLY MADE DISALLOWANCE O F RS. 9,65,000/-. 13. THE LD. CIT(A) IN THE INTEREST OF JUSTICE, REST RICTED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO 25% A ND RECORDED FINDINGS IN PARA 5.4 AS UNDER:- 5.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND THE A.O. IT IS FOUND THAT THE FACT OF WITHDRAWAL OF AMOUNT O FRS. 48,50,000/- IS APPARENT FROM THE BANK ACCOUNT. WE HAVE ALSO THE STATEMENTS OF WORKERS ON RECORD WH O HAVE DEPOSED THE PAYMENT EXCEEDING RS. 20,000/- WER E MADE TO THEM IN CASH. THE PLEA OF THE ASSESSEE IS THA T DEPOSITION WAS MADE ARE NOT BORNE OUT THE BOOKS O F ACCOUNT. IT IS PERTINENT TO NOTE THAT BOOKS OF ACC OUNT WERE REJECTED BY THE A.O. HOWEVER, NEITHER THE FACT OF P AYMENTS EXCEEDING RS. 20,000/- CAN BE DENIED KEEPING THE FOCUS ON STATEMENTS OF WORKERS NOR THE PAYMENT SO VIEWED REC ORDED 9 IN THE BOOKS OF ACCOUNTS HAVING BEEN MADE IN EXC ESS OF PARAMETER LAID DOWN IN THE SECTION. IN THE INTERES T OF JUSTICE IT WILL BE FAIR IF 25% OF THE DISALLOWANCE MADE BY THE A.O. IS UPHELD WHICH WOULD RESULT INTO THE DISALLOWANCE OF RS. 2,41,250/- . HENCE, THE A.O. IS DIRECTED TO CALCULATE THE FIGURE AND ALLOW RELIEF ACCORDINGL Y. 14. HAVING REGARD TO THE FACT SITUATION OF THE PRES ENT CASE AND THE FINDINGS OF LD. CIT(A), WE DO NOT FIND ANY INFIRMIT Y IN THE FINDINGS OF LD. CIT(A) AND WE UPHOLD THE FINDINGS OF LD. CIT(A) . 15. THE REVENUE VIDE GROUND NO.4 CONTENDED THAT THE CIT(A) ERRED IN HOLDING THAT BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER, WHICH IS PERVERSE AND INCORRECT, SINCE THE ASSESSING OFFICER HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESS EE AT ALL. 16. THE BARE PERUSAL OF THE ORDER PASSED BY THE ASS ESSING OFFICER REVEALS THAT NO BOOKS OF ACCOUNT WERE REJECTED BY H IM. IN VIEW OF THIS, THIS GROUND OF APPEAL OF THE REVENUE IS FACTUALLY C ORRECT. 17. THE GROUND NOS. 5 & 6 RAISED BY THE REVENUE ARE GENERAL IN NATURE AND HENCE NEED NOT REQUIRE ANY ADJUDICATION C.O. NO.5/CHD/2010 18. THE LD. AR STATED THAT GROUND NO.1 RAISED BY TH E ASSESSEE IN CROSS OBJECTION IS NOT PRESSED, HENCE THE SAME IS D ISMISSED AS NOT PRESSED. 10 19. GROUND NOS. 2 & 4 ARE DISMISSED IN VIEW OF THE RELEVANT FINDINGS GIVEN IN REVENUES APPEAL IN THE MATTER. THE GROUN D NO.3 RAISED IN CROSS OBJECTION IS PARTLY ALLOWED IN VIEW OF THE FI NDING GIVEN IN PARA 10 OF THIS ORDER. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS OBJECTIONS RAISED BY THE APPELLANT ARE PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF AUGUST, 2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH AUGUST, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR 11