The DCITNavsari Circle, Navsari V. M/s. Arun Construction Company, Navsari

ITA 1002/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76650 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: M K PATEL
• Section: 40A(3); 2

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER !./ I.T.A. NO.1002/AHD/2011 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2007-08) DY.CIT NAVSARI RANGE NAVSARI / VS. M/S.ARUN CONSTRUCTION COMPANY GANESH BHAWAN VIJALPORE, NAVSARI ( !./)* !./ PAN/GIR NO. : AAEFA 2296 C ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI P.L. KUREEL, SR.DR ,-(+ / . / RESPONDENT BY : SHRI M.K. PATEL ' 0 / $1 / / / / DATE OF HEARING : 28/03/2014 23' / $1 / DATE OF PRONOUNCEMENT : 04/04/2014 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VALSAD (CIT(A) FOR SHORT) DATED 21/12/2010 PERTAINING TO ASSESSMENT YEAR (AY) 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS .9,12,549/- MADE ON ACCOUNT OF MATERIAL PURCHASE BECAUSE IT WAS NOT USE D FOR BUSINESS PURPOSE. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS .1,00,341/- MADE BY ITA NO.1002/AHD /2011 DY.CIT VS. M/S.ARUN CONSTRUCTION CO. ASST.YEAR 2007-08 - 2 - INVOKING SECTION 40(A)(3) OF THE IT ACT IN RESPECT OF CASH PAYMENT EXCEEDING RS.20,000/- IN A SINGLE DAY AT ONE TIME. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MADE BY THE A.O. [4] IT IS, THEREFORE, PRAYED TO SET ASIDE THE ORDE R PASSED BY THE CIT(A) AND THAT OF THE ORDER PASSED BY THE AO BE RESTORED. [5] THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE-FIRM ENGAGED IN THE BUSINESS OF FABRICATION AND ERECTION OF REDI AL GATES FOR VARIOUS STATE GOVT. DEPARTMENT AND S.S.N.L, AS ALSO WORKING ON SUB-CONTRACTS FROM PRIVATE PARTIES. THE ASSESSEE FILED ITS RETU RN OF INCOME DECLARING TOTAL INCOME AT RS.13,46,814/- AND VALUE OF FRINGE BENEFITS OF RS.1,98,159/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT). T HEREAFTER, THE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSES SMENT U/S.143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 30/11/2009, THEREBY THE ASSESSING OFFICER(AO) MADE DISALLOWANCE OF RS.9,12,549/- ON ACCOUNT OF MATERIAL PURCHASE AND MADE ADDITION OF RS.1,00,341/- BY INVO KING SECTION 40A(3) OF THE ACT IN RESPECT OF CASH PAYMENT EXCEEDING RS. 20,000/- IN A SINGLE DAY AT ONE TIME. AGAINST THIS, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL THEREBY HE DELETED THE ADDITION MADE BY THE AO. NOW, THE REVENUE IS FURTHER IN APPEAL BEFORE US. ITA NO.1002/AHD /2011 DY.CIT VS. M/S.ARUN CONSTRUCTION CO. ASST.YEAR 2007-08 - 3 - 3. FIRST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.9,12,549/- MADE ON ACCOUNT OF MATERIAL PURCHASES. THE LD.SR.D R SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE ASSES SEE IS MERELY A LABOUR CONTRACTOR. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT AS PER AGREEMENT, THE ASSESSEE WAS REQUIRED TO PURCHASE CONSUMABLES AND SUBMITTED THAT APART FROM LABOUR CONTRACT, ASSESSEE ALSO CARRIED OUT CERTAIN OTHER WORKS IN WHICH THE MATERIAL WAS REQUIRED TO BE PURCHASED. HE SUBMITTE D THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE EXPENDITURE WAS N OT FOR THE BUSINESS PURPOSE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT WAS FOUND THAT THE EXPENSES HAVE BEEN CLAIMED IN RESPECT OF MATERIAL CONSUMED DESPITE THE ASSESSEE-COMPANY A LABOUR WORK CONTRACTOR BEFORE AO, IT WAS SUBMITTED BY THE ASSESSEE THAT APART FRO M LABOUR CONTRACT, THEY WERE EXECUTING OTHER CONTRACT WORKS ALSO IN WHICH T HE MATERIAL IS PROVIDED. THE LD.CIT(A) AFTER GOING THROUGH THE AG REEMENT AND THE SUBMISSION OF THE ASSESSEE GAVE A FINDING ON FACT THAT THE APPELLANT HAD EARNED RS.2,47,14,317/- FROM CONTRACT WORK AND THE SPENT ON MATERIALS WAS ONLY RS.9,12,549/- WHICH IS VERY NEGLIGIBLE. F URTHER, THE TERMS OF AGREEMENT ALSO PROVIDES FOR USE/SUPPLY OF SOME MATE RIALS. AGAIN ON THIS LEARNED AO HAS NOT GIVEN ANY FINDING IN THE ASSESSM ENT ORDER. ITA NO.1002/AHD /2011 DY.CIT VS. M/S.ARUN CONSTRUCTION CO. ASST.YEAR 2007-08 - 4 - CONSIDERING THE ABOVE, IT IS CLEAR THAT THE AO HAD NOT MADE A CASE FOR JUSTIFYING SUCH ADDITIONS. THIS FINDING OF THE L D.CIT(A) HAS NOT BEEN CONTROVERTED BY THE LD.SR.DR BY BRINGING ANY CONTRA RY MATERIAL ON RECORD. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), THE SAME IS HEREBY UPHELD. THUS, THIS G ROUND OF REVENUES APPEAL IS REJECTED. 5. SECOND GROUND IS AGAINST THE DELETION OF ADDITIO N OF RS.1,00,341/- MADE BY INVOKING SECTION 40A(3) OF THE IT ACT. T HE SR.DR SUPPORTED THE ORDER OF THE AO. 5.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE EXEMPTIO N PROVIDED UNDER RULE 6DD(G) OF THE INCOME TAX RULES, 1962. HE SUBMITTED THAT UNDISPUTEDLY THE PAYMENT WAS MADE TO PETROL PUMP SITUATED AT REM OTE PLACE WHERE NO BANKING FACILITY WAS AVAILABLE. THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE V IDE PARA-6.3 OF HIS ORDER, WHICH IS REPRODUCED HEREUNDER FOR THE SAKE O F CLARITY. 6.3. CONCLUSION : I HAVE CAREFULLY CONSIDERED THE FINDING OF THE AO AND THE SUBMISSIONS MADE BY THE LD.AR. THER E IS NO DISPUTE THAT THE APPELLANT HAD TAKEN UP PROJECT AT: SARANGKHEDA, MAHARASHTRA. THE PROJECT WAS AT REMOTE PLACE WHERE NO BANKING FACILITY IS AVAILABLE. LOOKING TO THE NATURE OF AS SESSEES BUSINESS, FIRM NEEDS PETROL AND DIESEL FREQUENTLY. THE PETRO L PUMP IS AT ITA NO.1002/AHD /2011 DY.CIT VS. M/S.ARUN CONSTRUCTION CO. ASST.YEAR 2007-08 - 5 - NEAREST VILLAGE NAMELY SHAHDA, A 20 K.M. AWAY FROM SARANGKHEDA, MAHARASHTRA. BECAUSE THERE WAS NO BAN KING FACILITY AVAILABLE IN THAT AREA, THE ASSESSEE HAD N O OPTION BUT TO PAY CASH FOR PURCHASE OF PETROL AND DIESEL. THERE IS A FORCE IN THE CONTENTION OF THE LD.AR. THE PROVISIONS U/S.40A(3) OF THE ACT PROVIDES FOR CERTAIN EXCEPTION FOR THE APPLICATION OF THE PROVISIONS. IN THE INSTANT CASE, THE PROJECT UNDERTAKEN BY THE APPELLANT WAS IN A REMOTE AREA AND NO BANKING FACILITY WAS AVAILABLE . THE NEAREST PETROL/DIESEL STATION WAS ABOUT 20 KMS. FROM THE SI DE. THE PETROL/DIESEL STATION DOES NOT PROVIDE CREDIT FACIL ITY. IN THIS CIRCUMSTANCES, THE APPELLANT HAD NO OTHER ALTERNATI VE BUT TO PAY I CASH FOR PURCHASE OF PETROL/DIESEL. THE LD.AR HAD ALSO SUPPORTED HIS CONTENTION WITH RELEVANT CASE LAWS. CONSDIERIN G THE ABOVE FACTS, I AM CONVINCED WITH THE SUBMISSION OF THE AP PELLANT. THE AO HAD MISSED THE POINT OF EXCEPTION PROVIDED IN TH E SEC.40A(3) OF THE ACT. THE AO IS DIRECTED TO DELETE THE ADDITION S MADE IN THIS GROUND OF APPEAL. THUS, THE APPELLANT GETS RELIEF IN THE GROUND OF APPEAL. 6.1. RULE 6DD(G) OF THE INCOME TAX RULES, 1962, REA DS AS UNDER:- RULE 6DD :- NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTI ON (3A) OF SECTION 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PARSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWEN TY THOUSAND RUPEES IN THE CASES AND CIRCUMSTANCES SPECIFIED HER EUNDER, NAMELY : (A) (B) (C) (D) (E) (F) (G) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ITA NO.1002/AHD /2011 DY.CIT VS. M/S.ARUN CONSTRUCTION CO. ASST.YEAR 2007-08 - 6 - ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN; 6.2. FROM THE ABOVE PROVISION, IT IS EVIDENT THAT I F THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAY MENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLA GE OR TOWN. IN THE CASE IN HAND, THE UNDISPUTED FACT REMAINS THAT THE SITE WHERE THE WORK IS BEING CARRIED OUT IS NOT SERVED BY ANY BANK. THE REVENUE HAS NOT PLACED ANYTHING ON RECORD SUGGESTING THAT THERE WAS ANY BR ANCH OF BANK NEAR THE PLACE WHERE THE PAYMENT HAS BEEN MADE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), THE SAME I S HEREBY UPHELD. THUS, THIS GROUND OF REVENUES APPEAL IS REJECTED. 7. GROUND NOS.3, 4 & 5 ARE GENERAL IN NATURE REQUIR E NO INDEPENDENT ADJUDICATION. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 04/ 04 /2014 71.., .../ T.C. NAIR, SR. PS ITA NO.1002/AHD /2011 DY.CIT VS. M/S.ARUN CONSTRUCTION CO. ASST.YEAR 2007-08 - 7 - 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT 4. ':() / THE CIT(A)-VALSAD 5. 8 #; ,$ , , / DR, ITAT, AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER, -8$ ,$ //TRUE COPY // > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 31.3.14 (DICTATION-PAD 9-PAGE S ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 2.4.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.4.4.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 4.4.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER