The ACIT, Gandhidham Circle, GANDHIDHAM V. M/s Katira Construction Ltd., GANDHIDHAM

ITA 1000/RJT/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50011 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained cash credit
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SH. A.L. GEHLOT, ACCOUNTANT MEMBER AND SH. N.R.S. GANESAN, JUDICIAL MEMBER I.T.A. NO. 1000(RJT)/2010 ASSESSMENT YEAR:2006-07 ASSTT. COMMR. OF INCOME-TAX, VS. M/S. KATIRA CONSTR UCTION LTD; GANDHIDHAM KUTCH. BHUJ-KUTCH. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. JAI RAJ KUMAR, DR RESPONDENT BY: SH. J.C. RANPURA, CA ORDER PER A.L. GEHLOT, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, RAJKOT, DATED 25.02.2010 FOR THE ASSESSM ENT YEAR 2006-07. GROUNDS RAISED BY REVENUE IN ITS APPEAL READ AS UND ER: A) THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO RS.2,00,000/- AS AGAINS T THE TOTAL ADDITION OF RS.19,77,729/- MADE ON ACCOUNT OF LABOUR CHARGES. B) THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ENTIRE ADDITION OF RS.5,82,646/- MADE ON ACCOUNT OF DISALLOWANCE U/S 80IA DEDUCTION. 2 C) THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ENTIRE ADDITION OF RS.8,00,000/- TREAT ED AS UNEXPLAINED CASH CREDIT BY THE AO. 2. THE BRIEF FACTS OF THE FIRST GROUND ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED LABOUR EXPENSES IN CASH ON SELF PREPARED VOUCHERS. SELF PREPARED VOUCHERS, WERE INCOMPLETE I N RESPECT OF COMPLETE ADDRESS, SIGNATURES, SERIAL NO. AND OTHERS . THE A.O. DISALLOWED 10% OF LABOUR EXPENSES OF WHICH CALCULAT ION COMES AT RS.19,77,729/-. HE MADE THE ADDITION ACCORDINGLY. 2.1 THE LD. CIT(A), RESTRICTED THE SAID ADDITION TO THE EXTENT OF RS.2,00,000/- AND ALLOWED THE RELIEF OF RS.17,77,72 9/- BY ACCEPTING THE CONTENTION OF ASSESSEE THAT THE DISALLOWANCE W AS MADE WITHOUT REJECTING BOOKS OF ACCOUNT. THERE WAS NOTHING ON RE CORD TO SHOW THAT THE EXPENDITURE WERE NOT INCURRED FOR THE PURPOSE O F BUSINESS. THE LD. CIT(A), HELD THAT THE DISALLOWANCE WAS MADE WIT HOUT BRINGING ANY MATERIAL ON RECORD AND HENCE, WAS HYPOTHETICAL IN N ATURE. HOWEVER, CONSIDERING THE FACT THAT THERE MIGHT BY CERTAIN VO UCHERS, WHICH WERE UNVERIFIABLE, IN THE INTEREST OF JUSTICE, HE RESTRI CTED THE ADDITION TO RS.2,00,000/-. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTICE D THAT THE A.O. DISALLOWED LABOUR EXPENSES WITHOUT REJECTING BOOKS OF ACCOUNT. HE MADE THE ADDITION MERELY ON THE GROUND THAT THE LA BOUR EXPENSES VOUCHERS WERE SELF-MADE. THE CONTENTION OF THE LD. COUNSEL FOR THE 3 ASSESSEE IS THAT THE NET PROFIT RATE FOR THE YEAR U NDER CONSIDERATION WAS 2.68% AS AGAINST 1.21% IN THE IMMEDIATE PRECEDI NG YEAR. HE RELIED UPON THE FOLLOWING DECISIONS: I) ITAT, DELHI BENCH IN THE CASE OF ACIT VS. ALLIED CONSTRUCTION 106 TTJ(DEL)616. II) ITAT, JAIPUR BENCH IN THE CASE OF UTTAM CHUNA P ATHAR UDYOG VS. ITO 65 ITD 460 (JP). III) HONBLE ALLAHABAD HIGH COURT IN THE CASE OF NI SAR BIRI SIKKA NO.1 VS. CIT 174 TAXMAN 51 (ALL). SINCE THERE IS NO MATERIAL ON RECORD TO SHOW THAT T HE EXPENDITURE INCURRED WAS NOT FOR THE PURPOSE OF BUSINESS, THE S AME CANNOT BE DISALLOWED. HOWEVER, THE LD. CIT(A), HAS KEPT IN M IND THE ISSUE RELATING TO PROPER MAINTENANCE OF VOUCHERS AND SUST AINED THE ADDITION TO THE EXTENT OF RS.2 LACS AGAINST WHICH THE ASSESSEE DID NOT FILE ANY APPEAL. CONSIDERING THE TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS UPHELD. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 4. THE BRIEF FACTS RELATING TO SECOND GROUND OF APP EAL RAISED BY THE REVENUE ARE THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT, IN RESPECT OF INTEREST INCOME, WHI CH HAS BEEN DISALLOWED BY THE A.O. FOLLOWING THE JUDGMENT OF T HE HONBLE SUPREME COURT, IN THE CASE OF PANDIAN CHEMICALS LTD . VS. CIT 262 ITR 278 (SC). THE LD. CIT(A), ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE FDRS WERE KEPT AS SECURITY MONEY WITH THE BANK. DEPOSITING FDRS IS A MANDATORY PART OF THE EXECUTI ON OF A CONTRACT, 4 AND HENCE, THE SAME IS TO BE CONSIDERED TO HAVE BEE N DERIVED FROM THE INDUSTRIAL UNDERTAKING. THE LD. CIT(A), FURTHER , OBSERVED THAT THOUGH THE A.O. RELIED UPON THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD., HOWEVER, UND ER SIMILAR CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, THE HONBLE SUPREME COURT, IN THE CASE OF VELLORE ELECTRIC CORPORATION LTD. VS. CIT (1997) 227 ITR 557 (SC), DIRECTED THE AO TO ALLOW DEDUCTI ON UNDER SECTION 80-I OF THE ACT. THE CIT(A) HELD THAT SINCE FDRS W ERE REQUIRED TO BE KEPT COMPULSORILY AS PART OF SECURITY FOR THE PURPO SE OF CONTRACT BUSINESS, DEDUCTION U/S 80IA IS ALLOWABLE. 5. AFTER HEARING LEARNED REPRESENTATIVES OF THE BOT H THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE F IND THAT BOMBAY HIGH COURT IN THE CASE OF CIT VS JAGDISHPRASAD M JO SHI 318 ITR 420 (BOM) WHEREIN IT HAS BEEN HELD THAT INTEREST ON FIX ED DEPOSITS FROM BANK IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. FOLLOWING THE ABOVE JUDGMENT OF BOMBAY HIGH COURT WE ALLOW THE CLAIM OF THE ASSESSEE. 6. IN THE LIGHT OF ABOVE DISCUSSION WE CONFIRM THE ORDER OF CIT(A) IN ALLOWING DEDUCTION U/S 80IA ON INTEREST INCOME. 7. THE LAST GROUND OF APPEAL RAISED BY THE REVENUE IS THAT THE LD. CIT(A), WAS NOT JUSTIFIED IN DELETING THE ENTIRE AD DITION OF RS.8,00,000/- TREATED AS UNEXPLAINED CASH CREDIT BY THE A.O. 7.1. THE BRIEF FACTS OF THIS GROUND ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE UNDER SECTION 133 (6) OF THE ACT TO 5 M/S. BHOOMI TRANSPORT , IN WHOSE ACCOUNT RS.8,00,00 /- WAS SHOWN AS OUTSTANDING CREDIT. NO COMPLIANCE HAS BEEN RECEI VED FROM M/S. BHOOMI TRANSPOT. THEREFORE, THE A.O. MADE AN ADDIT ION OF RS. 8,00,000/- UNDER SECTION 68 OF THE ACT. ON APPEAL B Y THE ASSESSEE, THE LD. CIT(A), DELETED THE SAID ADDITION OBSERVING THAT THERE WAS NOTHING IN THE POSSESSION OF THE A.O., WHICH ESTABL ISHED THAT THE CREDITOR WAS BOGUS. MERELY BECAUSE THE NOTICE U/S 133(6) REMAINED TO BE COMPLIED, IT COULD NOT BE HELD THAT THE ENTIR E TRANSACTION WAS BOGUS. THE LD. CIT(A), HAS ALSO OBSERVED THAT MATT ER DID NOT PERTAIN TO THE ASSESSMENT YEAR UNDER CONSIDERATION, AS NO T RANSACTION WAS UNDERTAKEN BY THE ASSESSEE WITH M/S. BHOOMI TRANSPO RT, AS THE OPENING BALANCE OUTSTANDING. 8. AFTER HEARING THE LD. REPRESENTATIVES OF THE PAR TIES, WE FIND THAT THERE IS NO MATERIAL ON RECORD AGAINST THE FIN DINGS OF CIT(A). THEREFORE, WE FIND THAT THE FINDING OF THE LD. CIT( A) IS VERY CLEAR, WHICH DID NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY , THE ORDER OF THE CIT(A) IS CONFIRMED AND THIS GROUND OF APPEAL IS DI SMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON AP RIL, 2011 (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED : APRIL, 2011 COPY TO : 6 1) THE ASSESSEE:KATIRA CONSTUCTION LTD. BHUJ 2) THE DEPTT. ACIT, GHANDIGHAN-KUTCH 3) THE CIT(A) 4) THE CIT 5) THE DR TRUE COPY BY ORDER (ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT