A. V. Pandhe, Solapur V. Deputy Commissioner of Income-tax,

ITA 1012/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1937 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: VIPIN GUJARATHI
• Keywords: Deemed dividend
• Section: 43B; 143(3); 148; 144

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM SL. NO. ITA NO. NAME OF APPELLANT NAME OF RESPONDEN T A.Y. 1. 937/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q ACIT, CIRCLE-2, SOLAPUR 2002-03 2. 1157/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PANDH E, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2002-03 3. 1158/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PANDH E, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2003-04 4. 1236/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q ACIT, CIRCLE-2, SOLAPUR 2003-04 5. 1008/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q ACIT, CIRCLE-2, SOLAPUR 2004-05 6. 1159/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PANDH E, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2004-05 7. 1009/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q DCIT, CIRCLE-2, SOLAPUR 2005-06 8. 1160/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PANDH E, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2005-06 9. 1010/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q ADDL. CIT, RANGE-2, SOLAPUR 2006-07 10. 1161/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PAND HE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2006-07 2 11. 1011/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q ADDL. CIT, RANGE-1, SOLAPUR 2007-08 12. 1162/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PAND HE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2007-08 13. 1012/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q JOINT CIT, RANGE-2, SOLAPUR 2008-09 14. 1163/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PAND HE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2008-09 15. 938/PN/2014 A. V. PANDHE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q ADDL. CIT, RANGE-1, SOLAPUR 2009-10 16. 1164/PN/2014 ACIT, CIRCLE-2, SOLAPUR A. V. PAND HE, 157, RAILWAY LINES, SUSHILA APARTMENT, SOLAPUR 413 001. PAN : AABFA7510Q 2009-10 ASSESSEE BY : SHRI VIPIN GUJARATHI DEPARTMENT BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 04.04.2016 / DATE OF PRONOUNCEMENT: 15.04.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THESE ARE BUNCH OF 16 APPEALS AND CROSS APPEALS OF ASSESSEE AND REVENUE FOR THE ASSESSMENT YEARS 2002-03 TO 2009-10 . SINCE THE FACTS ARE SIMILAR AND MOST OF THE ISSUES INVOLVED ARE COMMON IN THESE 16 APPEALS AND CROSS APPEALS, THEREFORE, THEY ARE BEING DISPOSED O F BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3 2. SINCE ISSUES RAISED IN ASSESSEES APPEAL AND THE REVENUES APPEAL ARE QUITE DIFFERENT, WE SHALL FIRST TAKE TO DECIDE THE ASSESSEES APPEAL YEAR-WISE FOR ADJUDICATION. ITA NO.937/PN/2014, A.Y. 2002-03 (BY ASSESSEE) : 3. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A)-III, PUNE DATED 27.03.2014 PASSED UNDER SECTION 144 R.W.S. 147 OF T HE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) RELATING TO ASSESSMENT YEAR 20 02-03. 4. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED AO OF RS. 36,443/- ON ACCOUNT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PROSPECTIVE. THE APPELLANT HEREBY REQUESTS TO DELET E THE DISALLOWANCE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 2,68,755/- BEING INTEREST PERTAINING TO EARLIER YEAR AND TREATING THEM AS PRIOR EXPENSES WITHOUT APPRECIATIN G THE FACTS OF THE CASE IN PROPER PROSPECTIVE. THE APPELLANT HEREBY REQUESTS T O DELETE THE DISALLOWANCE. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 7,26,049/- BEING MSEB DEPO SIT DEBITED TO SITE DEVELOPMENT EXPENSES TREATING THEM AS PRIOR PERIOD EXPENSES WIT HOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PROSPECTIVE. THE APPELLANT HEREBY RE QUESTS TO DELETE THE DISALLOWANCE. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A)- III PUNE ERRED IN CONFIRMING THE DISALLOWAN CE MADE BY THE LEARNED ASSESSING OFFICER (ACIT CIRCLE -2 SOLAPUR) OF RS. 1 8,91,108/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WI THOUT APPRECIATING THE FACT THAT THE INTEREST FREE CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN THE ADVANCE GIVEN TO THE SI STER CONCERN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE AP PELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 4 6) THE LEARNED AO DISALLOWED RS. 25,00,000/- ON AD HOC BASIC OUT OF THE TOTAL EXPENDITURE ON ACCOUNT OF LABOUR PAYMENT AND SALARI ES OF RS. 10,03,37,222/-. OUT OF THE TOTAL EXPENDITURE OF RS. 10,03,37,222/- AN AMOUNT OF RS. 1,66,19,000/- WAS NOT SUBJECTED TO TDS AND PAID IN CASH. THE HONOURABLE CIT(A) RESTRICTED THE DISALLOWANCE TO 5% OF RS. 1,6 6,19,701/- I.E. RS. 8,00,000/- AS AGAINST RS. 25,00,000/- MADE BY THE L EARNED AO. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 8,00,000/- FROM AND OUT OF DISALLOWANCE OF RS. 25,00,000/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF LABOUR PAYMENT AND SALARY WITHOUT APP RECIATING THE FACT THAT THE LABOUR PAYMENTS OF RS. 1,66,19,701/- THOUGH NOT SUB JECTED TO TDS AND THOUGH PAID IN CASH WERE INCURRED FOR THE PURPOSE O F BUSINESS AND IT WAS NOT THE CASE OF THE LEARNED AO THAT THE EXPENDITURE IS BOGUS. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE AD DITION AND OBLIGE. 7) THE LEARNED AO DISALLOWED A SUM OF RS. 35,00,000 /- ON AD HOC BASIC OUT OF THE TOTAL EXPENDITURE INCURRED ON ACCOUNT OF TRANSP ORT, CARRIAGE & CARTAGE OF RS. 1,10,63,104/-. THE HONOURABLE CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 6,60,000/- AS AGAINST RS. 35,00,000/- MADE BY THE L EARNED AO. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 6,60,000/- FROM AND OUT OF DISALLOWANCE OF RS. 35,00,000/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF TRANSPORT, CARRIAGE & CARTAGE WITHOUT APPRECIATING THE FACTS IN PROPER PERSPECTIVE. THE APPELLANT HEREBY REQUESTS Y OUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 98,200/- FROM AND OUT OF THE DISALLOWANCE MADE BY THE LEARNED AO OF R S. 3,00,000/- ON ACCOUNT OF TRAVELING EXPENSES WITHOUT APPRECIATING THE FACT S IN PROPER PERSPECTIVE. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 9) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 4,00,000/- MADE BY THE LEARNED AO ON ACCOUNT OF VEHICLE AND MACHINERY HIRE CHARGES WITHOUT APPRECIATING THE FACTS IN PROPER PERSPECTIVE. THE A PPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 10) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, DELETE ANY ADDITIONAL GROUND/GROUNDS BEFORE THE COMPLETION OF THE HEARING . 5. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN CI VIL CONSTRUCTION WORK ETC.. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 WAS FILED ON 31.03.2004 DECLARING TOTAL INCOME OF RS.1,63,50,590 /- WHICH WAS INITIALLY ACCEPTED UNDER SECTION 143(1) OF THE ACT. THEREAFT ER, THE CASE WAS RE-OPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 0 5.04.2005. PURSUANT THERETO, THE RE-ASSESSMENT WAS COMPLETED WHICH IS S UBJECT-MATTER OF PRESENT APPEAL. SEVERAL GROUNDS HAVE BEEN RAISED BY THE AS SESSEE AGITATING VARIOUS ADDITIONS/ DISALLOWANCES MADE BY THE ASSESSING OFFI CER AND SUSTAINED BY THE CIT(A). 5 6. GROUND NO.1 CONCERNS DISALLOWANCE OF RS.36,433/- ON ACCOUNT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVID ENT FUND. 6.1 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE, SHRI VIPIN GUJARATHI, AT THE OUTSET, ADVERTED OUR ATTENTION AT PAGE 14 OF THE PAPER BOOK WHEREIN TABULATED STATEMENT HAS BEEN ANNEXED SHOWIN G THE DETAILS CONCERNING THE PAYMENT OF PROVIDENT FUND, WHICH IS SUBJECT-MAT TER OF LITIGATION. THE SIMILAR DETAILS ARE TABULATED BY THE CIT(A) IN PARA 4.2 OF ITS ORDER, WHICH READS AS UNDER :- MONTH DUE DATE MENTIONED BY AUDITOR DATE OF PAYMENT DATE OF PAYMENT OF SALARY DUE DATE OF PAYMENT REMARK APR 2001 15/05/2001 21/05/2001 05/05/2001 15/06/200 1 NO DELAY JUN 2001 15/07/2001 23/07/2001 05/07/2001 15/08/200 1 NO DELAY JAN 2002 15/02/2002 21/02/2002 05/02/2002 15/03/200 2 NO DELAY 6.2 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT THE EPF CONTRIBUTIONS WERE PAID BEYOND THE SPECIFIED DA TES UNDER THE RELEVANT ACT IN SOME INSTANCES BUT WERE DEPOSITED BEFORE THE DUE DATE OF FILING OF THE RETURN. 6.3 WE FIND THAT THE DISALLOWANCE UNDER THE PROVISI ONS OF SECTION 43B IS NOT APPLICABLE WHERE THE CONTRIBUTIONS TO THE PF, ETC. HAVE BEEN PAID ALBEIT BELATEDLY BUT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THE ISSUE IS SQUARELY COVERED BY THE DECISIONS OF THE HONBLE BO MBAY HIGH COURT IN THE CASE OF (I) CIT VS. GHATGE PATIL TRANSPORTS LTD. IN INCOME TAX APPEAL NO.1002 OF 2012 AND OTHER, ORDER DATED 14 TH OCTOBER, 2014 AND (II) CIT VS. M/S HINDUSTAN ORGANICS CHEMICALS LTD. IN INCOME TAX APPEAL NO.399 OF 2012, ORDER DATED 11 TH JULY, 2014. 6.4 ACCORDINGLY, GROUND NO.1 OF THE ASSESSEES APPE AL IS ALLOWED. 7. GROUND NO.2 AND 3 ARE NOT PRESSED AND ACCORDINGL Y THE SAME ARE DISMISSED. 6 8. GROUND NO.4 CONCERNS THE DISALLOWANCE OF INTERES T OF RS.18,91,108/- BEING INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SIS TER CONCERNS. 8.1 SHRI VIPIN GUJARATHI, LD. AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS INTEREST FREE FUNDS IN THE FORM OF CAPITAL CONTRIBUTION OF PARTNERS AND INTEREST FREE LOANS OF RS.307.72 LACS AT ITS DISPOSAL AS AGAINST INTEREST FREE ADVANCES GIVEN RS.128.55 L ACS WHICH INCLUDES ADVANCES TO M/S SON ANKUR EXPORTS PVT. LTD. RS.111.91 LACS A ND OTHER ADVANCES RS.16.64 LACS. HE ADVERTED OUR ATTENTION TO A TABU LAR STATEMENT SHOWING INTEREST FREE FUNDS AVAILABLE AT THE DISPOSAL OF TH E ASSESSEE AND INTEREST FREE ADVANCES MADE AS APPEARING ON PAGE 1 OF THE PAPER B OOK CONCERNING ALL THE YEARS IN APPEAL. THE CONSOLIDATED TABULAR STATEMEN T IS REPRODUCED HEREUNDER :- ----- ... _. -- _ - ----- .. _ ..... _ -- - - _ .. _ - -- .. . YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 31.03.2001 31.03.2002 31.03.2003 31 03.2004 31.03.2 005 31.03.2006 31.03.2007 31.03.2008 31.03.2009 A PARTNER'S CAPITAL 22990718 30514262 35931013 44569250 39762364 38790244 43080055 125730198 266870793 B NON INTEREST BEARING ADVANCES RECEIVED FROM PANDHE CONSTRUCTION PVT LTD 3689779 0 0 0 0 0 0 0 0 PANDHE RA 79425 79425 0 0 0 0 0 0 0 PANDHE A V INDIVIDUAL 0 0 0 0 5880938 0 0 0 0 DEPOSIT FROM TENANT 178875 178875 178875 178875 178875 178875 178875 178875 2628 75 INTEREST FREE UNSECURED LOANS 0 0 0 0 0 0 0 0 0 SUB-TOTAL B 3948079 258300 178875 178875 6059813 178875 178875 178875 262875 C TOTAL NON INTEREST BEARING FUNDS A+ B 26938797 30772562 36109888 44748125 45822177 38969119 43258930 125909073 267133668 D LESS NON INTEREST BEARING ADVANCES GIVEN TO SON-ANKUR EXPORTS PVT LTD 10152244 11191500 14373680 15010664 15605372 9910155 1620155 1620155 1620155 PANDHE A V HUF 1611584 1664223 168 5443 5071393 71529 24141 120214 612442 749258 PANDHE A V INDIVIDUAL 0 0 0 0 0 1944436 5854851 0 0 PANDHE RA 605538 0 0 0 0 0 0 0 0 OTHER ADVANCES 2706376 2706376 2319244 2319244 2319244 2264244 SUB-TOTAL D 12369366 12855723 16059123 22788433 18383277 14197976 9914464 4551841 4633657 E SURPLUS OF NON INTEREST BEARING FUNDS (C-D 14569431 17916839 20050765 21959692 27438900 24771143 33344466 121357232 262500011 8.2 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT IN VIEW OF THE FACT THAT THE ASSESSEE POSSESSED SUFFIC IENT INTEREST FREE FUNDS OF ITS OWN COMPRISING OF PARTNERS CAPITAL AND OTHER FUNDS , PRESUMPTION STANDS ESTABLISHED IN FAVOUR OF THE ASSESSEE THAT INTEREST FREE ADVANCES TO SISTER CONCERNS WERE MADE BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AVAILABLE WITH IT. THEREFORE, NO PART OF INTEREST OF BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT INTEREST FREE ADVANCES WERE GIVEN OUT OF INTEREST B EARING FUNDS. 7 8.3 WE FIND ON FACTS THAT THE ISSUE IS SQUARELY COV ERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RE LIANCE UTILITIES & POWER LTD., (2009) 313 ITR 340 (BOM). WE ALSO FIND THAT THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.936/PN/20 14 RELATING TO ASSESSMENT YEAR 2001-02, ORDER DATED 28.10.2015 HAD AN OCCASIO N TO DEAL WITH IDENTICAL ISSUE AND HAS DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE. FOLLOWING THE SAME, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE. 8.4 IN THE RESULT, GROUND NO.4 IS OF THE ASSESSEES APPEAL IS ALLOWED. 9. GROUND NOS.6, 7 AND 8 ARE NOT PRESSED AND THEREF ORE THE SAME ARE DISMISSED. 10. GROUND NO.9 CONCERNS ESTIMATED DISALLOWANCE OF RS.4,00,000/- OUT OF VEHICLE AND MACHINERY HIRE CHARGES SUSTAINED BY THE CIT(A). THE RELEVANT PARA FROM THE ORDER OF THE CIT(A) NARRATING THE FAC TS AND CONCLUSIONS OF THE CIT(A) THEREON IS REPRODUCED HEREUNDER :- 16. GROUND OF APPEAL NO.12 IS DIRECTED AGAINST TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.4,00,000/- OUT OF VEHICLE A ND MACHINERY HIRE CHARGES. 16.1 THE EXPENDITURE CLAIMED IN RESPECT OF VEHICLE AND MACHINERY HIRE CHARGES WAS FOUND TO BE AT RS.67,65,854/-. AS PER THE ASSES SING OFFICER, VERIFICATION OF THE RELEVANT DETAILS SHOWED THAT VOUCHERS RELATING TO EXPENDITURE TO THE EXTENT OF RS.2,65,387/- DID NOT MENTION THE SITE IN RESPECT O F WHICH SUCH EXPENDITURE WAS INCURRED. SIMILARLY, IT WAS ALSO FOUND BY THE ASSES SING OFFICER THAT THE APPELLANT DID NOT MAINTAIN ANY LOG BOOK OR REGISTER INDICATIN G THE PERIOD OF USAGE OF VEHICLES OR MACHINERIES. THE SUPPORTING VOUCHERS WE RE ALSO FOUND TO BE INCOMPLETE AND UNVERIFIABLE BY THE ASSESSING OFFICE R. CONCLUDING THAT THE APPELLANT FAILED TO SUBSTANTIATE THAT THE ENTIRE EX PENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS, THE ASSESSING OFFICER MADE A D ISALLOWANCE OF RS.4,00,000/- OUT OF THIS EXPENDITURE. 16.2 DURING THE APPELLATE PROCEEDINGS, STRONGLY OBJ ECTING TO THE DISALLOWANCE MADE, THE APPELLANT SUBMITTED THAT COMPLETE DETAILS OF SITE WISE EXPENDITURE INCURRED ON VEHICLE AND MACHINERY HIRE CHARGES WERE SUBMITTED BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 13 TH JUNE, 2006 WHICH IS APPEARING ON PAGE NO.117 TO 127 THE PAPER BOOK. IT IS STATED THAT THE APPELLANT FIRM HAD GIVEN THE DETAILS SUCH AS DATE, NAME OF THE PARTY FROM WHOM T HE MACHINERY WAS HIRED, THE NATURE AND THE NAME OF THE MACHINERY HIRED, AMOUNT OF HIRE CHARGES PAID AND THE NAME OF THE SITE IN RESPECT OF WHICH THE MACHIN ERY WAS HIRED. THE DETAILS RELATING TO RATES AND NUMBER OF DAYS/HOURS OF MACHI NERY HIRED IN MOST OF THE CASES WERE ALSO STATED TO HAVE BEEN FURNISHED BEFOR E THE ASSESSING OFFICER. IT IS CLAIMED THAT THE APPELLANT FIRM THROUGH OVERSIGHT D ID NOT MENTION THE NAME OF 'WATEGAON SITE' AGAINST THE MACHINERY HIRED FROM AJ ANTA EARTH MOVERS FOR WHICH 8 THE APPELLANT HAD PAID RS.2,65,038/-. THEREFORE, AS SERTING THAT THE DETAILS SUBMITTED BEFORE THE ASSESSING OFFICER IS COMPLETE IN ALL RES PECTS, IT IS STATED THAT THE OBSERVATION OF THE ASSESSING OFFICER IS IRRELEV ANT AND IS OUT OF CONTEXT. 16.2.1 IN THE CONTEXT OF THE OBSERVATION OF THE ASS ESSING OFFICER WHILE DISALLOWING A SUM OF RS. 4,00,000/- THAT THE APPELL ANT FIRM DID NOT MAINTAIN THE LOG BOOK OR REGISTER AND THAT THE APPELLANT HAS NOT MAINTAINED THE RECORDS RELATING TO NUMBER OF DAYS OR HOURS FOR WHICH MACHI NERY WAS HIRED, THE APPELLANT SUBMITTED THAT FROM THE DETAILS SUBMITTED TO THE AS SESSING OFFICER, THE ENTIRE INFORMATION WAS BEFORE HIM AND THE DETAILS MAINTAIN ED, EVEN THOUGH NOT IN THE FORM OF LOG BOOK OR REGISTER, THEY WERE SUFFICIENT TO PROVE THE GENUINENESS OF THE EXPENSES AS WELL AS THE NECESSITY OF THE SAME AND T HE PLACE - PROJECT WHERE IT HAS BEEN USED. IT IS FURTHER STATED THAT MAJORITY O F THE VOUCHERS CONTAIN THE DETAILS OF TYPE OF VEHICLE/MACHINERY HIRED, THE TYP E OF WORK CARRIED OUT WITH QUANTITY/HOURS FOR THE PERIOD THE MACHINE WAS USED. IT IS ALSO STATED THAT SINCE THE VARIOUS MACHINES/VEHICLES WERE HIRED FOR TEMPOR ARY PERIOD DEPENDING UPON TYPE AND QUANTITY OF WORK TO BE COMPLETED AND ON JO B BASIS ONLY, IT WAS NOT PRACTICABLE TO MAINTAIN LOG BOOK. TERMING THE DISAL LOWANCE AS UNJUSTIFIABLE, IT IS SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED 6% OF THE TOTAL EXPENDITURE ON ADHOC BASIS. IT IS SUBMITTED THAT WHILE DOING SO, T HE ASSESSING OFFICER ALSO IGNORED THE FACT THAT MAJORITY OF HIRE CHARGES ARE MADE BY ACCOUNT PAYEE CHEQUE. THE APPELLANT ALSO POINTED OUT THAT THOUGH THE ASSESSIN G OFFICER HAS OBSERVED THAT THE VOUCHERS ARE SELF MADE AND THE VOUCHERS ARE NOT SIG NED BY THE ACCOUNTANT OR SITE SUPERVISOR, IT IS NOT HIS CASE THAT THE EXPEND ITURE IS BOGUS OR THE APPELLANT FIRM HAS INFLATED THE EXPENSES. IT IS ACCORDINGLY P LEADED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE DELETED. 16.3 THE SUBMISSIONS OF THE APPELLANT ARE CAREFULLY CONSIDERED WITH REFERENCE TO THE FACTS OF THE CASE, NATURE OF EXPENSES AND MATER IAL AVAILABLE ON RECORD. THE MAIN OBSERVATIONS OF THE ASSESSING OFFICER WHILE MA KING THE IMPUGNED DISALLOWANCE IS THAT THE APPELLANT FAILED TO MENTIO N THE NAME OF THE RELEVANT SITE IN RESPECT OF EXPENDITURE AMOUNTING TO RS.2,65,038/ - IN THE DETAILS FURNISHED BEFORE HIM. THE APPELLANT CLAIMS THAT THE EXPENDITU RE RELATES TO 'WATEGAON SITE' AGAINST THE MACHINERY HIRED FROM AJANTA EARTH MOVER S FOR WHICH THE APPELLANT HAD PAID RS. 2,65,038/- WHICH THE APPELLANT FAILED TO MENTION THROUGH OVERSIGHT. HOWEVER, NO SUPPORTING DOCUMENTARY EVIDENCE WAS BRO UGHT ON RECORD BY THE APPELLANT TO BACK ITS CLAIM. SIMILARLY, IT IS ALSO NOTED THAT THE DISCREPANCY WAS BROUGHT TO THE NOTICE OF THE APPELLANT BY THE ASSES SING OFFICER ON 24/11/2006 BUT THE APPELLANT APPARENTLY FAILED TO CLARIFY THE DISC REPANCY. SIMILARLY, IT IS ALSO NOTED FROM THE DETAILS OF THE PAYMENTS FURNISHED TH AT ON MANY OCCASIONS, THE PAYMENTS WERE MADE IN CASH. SIMILARLY, AT SOME INST ANCES, EVEN THE NATURE OF THE PAYMENTS IS NOT SPECIFIED. CONSIDERING ALL THES E ASPECTS, I AM OF THE VIEW THAT THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED DISALLOWANCE IS JUSTIFIED. ACCORDINGLY, THE SAME IS UPHELD. GROUND OF APPEAL NO.12 IS DISMISSED. 10.1 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE CONTENDED THAT THE ASSESSEE HAD SUBMITTED DETAILS OF VEHICLE AND MACHI NERY HIRE CHARGES BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(A) WHICH I NCLUDED DATE, NAME OF THE PARTY FROM WHOM MACHINERY WAS HIRED, AMOUNT, NAME O F THE MACHINERY HIRED, NUMBER OF DAYS/HOURS AND PROJECT SIDE. HE ALSO SUB MITTED THAT THE RELEVANT DETAILS ARE ALSO ANNEXED AT PAGES 40 TO 47 OF THE P APER BOOK PLACED BEFORE THE TRIBUNAL. HE SUBMITTED THAT THE ESTIMATED DISALLOW ANCE AMOUNTS TO 6% OF THE 9 TOTAL EXPENSES ON THIS ACCOUNT WHICH IS HIGHLY EXCE SSIVE. HE ACCORDINGLY REQUESTED FOR APPROPRIATE RELIEF. 10.2 WE NOTICE FROM THE ORDERS OF THE AUTHORITIES B ELOW THAT THE PAYMENT AGAINST THE AFORESAID CHARGES HAVE BEEN MADE BOTH B Y CASH AND ALSO BY CHEQUE. THE VOUCHERS ARE ALSO SELF MADE IN SOME CASES AND A LSO NOT PROPERLY SIGNED. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES, WE F IND THAT THE REVENUE WAS JUSTIFIED IN RESORTING THE ESTIMATED DISALLOWANCE, HOWEVER, WE FEEL THAT DISALLOWANCE @ 5% INSTEAD OF 6% BY THE ASSESSING OF FICER WILL BALANCE EQUITY AND MEET THE ENDS OF JUSTICE. 10.3 IN THE RESULT, THE GROUND NO.9 IS PARTLY ALLOW ED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.937/PN/2014 RELATING TO ASSESSMENT YEAR 2002-03 IS PARTLY ALLOWED. ITA NO.1236/PN/2014, A.Y. 2003-04 (BY ASSESSEE) : 12. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 27.03.2014 PASSED UNDER SECTION 144 R.W.S. 147 OF T HE ACT RELATING TO ASSESSMENT YEAR 2003-04. 13. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A)-III, PUNE ERRED IN CONFIRMING THE DISALLOWAN CE MADE BY THE LEARNED AO OF RS.50,564/- ON ACCOUNT OF BELATED PAYMENT OF EMPLOY EES CONTRIBUTION OF PROVIDENT FUND WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PROSPECTIVE. THE APPELLANT HEREBY REQUESTS TO DELETE THE DISALLOWANCE. 2) THE LEARNED AO MADE FOLLOWING ADDITIONS TO THE R ETURNED INCOME ON THE GROUND THAT THESE PERTAIN TO THE PERIOD PRIOR TO TH E YEAR UNDER CONSIDERATION. A) LAND PURCHASED RS.7,31,200/- B) INTEREST ON OVERDRAFT RS.27,473/- C) HOUSE RENT RS.50,200/- D) MSEB CHARGES RS.7,650/- 10 A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING TH E DISALLOWANCE MADE BY THE LEARNED AO OF RS. 7,31,200/- ON ACCOUNT OF L AND PURCHASED DURING THE YEAR BEING PRIOR PERIOD EXPENDITURE MADE DURING THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING THE FACT THAT TH E PROFIT AND LOSS ACCOUNT WAS DEBITED BY THE COST OF PURCHASE OF THE LAND AND THE SAME WAS ADDED TO WORK IN PROGRESS. SINCE, THE APPELLANT HAD NOT C LAIMED THE LAND COST DURING THE YEAR UNDER CONSIDERATION THERE WAS NO QU ESTION OF EXPENDITURE PERTAINING TO THE PRIOR PERIOD CLAIMED DURING THE Y EAR. THE APPELLANT HEREBY REQUESTS TO DELETE THE DISALLOWANCE. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING TH E DISALLOWANCE MADE BY THE LEARNED AO OF RS. 27,473/- ON ACCOUNT OF INT EREST ON OVERDRAFT ACCOUNT DURING THE YEAR BEING PRIOR PERIOD EXPENDIT URE MADE DURING THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING THE F ACTS OF THE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREBY REQUESTS T O DELETE THE DISALLOWANCE. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING TH E DISALLOWANCE MADE BY THE LEARNED AO OF RS. 50,200/- ON ACCOUNT OF HOU SE RENT PAID DURING THE YEAR BEING PRIOR PERIOD EXPENDITURE MADE DURING THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREBY REQUESTS TO DELET E THE DISALLOWANCE. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) -III PUNE ERRED IN CONFIRMING THE DISALLOWAN CE MADE BY THE LEARNED AO OF RS. 9,46,554/- BEING INTEREST RECEIVED ON FIX ED DEPOSIT WITH BANKS WITHOUT APPRECIATING THE FACTS THAT THE APPELLANT H AD ALREADY RECOGNIZED THE SAME AS INCOME IN EARLIER YEARS. THE APPELLANT HERE BY REQUESTS TO DELETE THE DISALLOWANCE. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER (ACIT CIRCLE -2 SOLAPUR) OF RS. 2 6,32,918/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WI THOUT APPRECIATING THE FACT THAT THE INTEREST FREE CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN THE ADVANCE GIVEN TO THE SI STER CONCERN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE AP PELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 6) THE LEARNED AO DISALLOWED RS. 20,00,000/- ON AD HOC BASIC OUT OF THE TOTAL EXPENDITURE ON ACCOUNT OF LABOUR PAYMENT AND SALARI ES OF RS. 8,73,63,870/-. OUT OF THE TOTAL EXPENDITURE OF RS. 8,73,63,870/-, AN AMOUNT OF RS. 3,77,69,918/- WAS NOT SUBJECTED TO TDS. THE HONOURA BLE CIT(A) CONFIRMED THE DISALLOWANCE TO 5% OF RS. 3,77,68,918/- I.E. RS . 18,88,000/- AS AGAINST RS. 20,00,000/- MADE BY THE LEARNED AO. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 18,88,000/- FROM AND 11 OUT OF DISALLOWANCE OF RS. 20,00,000/- MADE BY THE LEARNED AO ON ACCOUNT OF LABOUR PAYMENT AND SALARY WITHOUT APPRECIATING THE FACT THAT THE LABOUR PAYMENTS OF RS. 3,77,69,918/- THOUGH NOT SUBJECTED TO TDS AND THOUGH PAID IN CASH WERE INCURRED FOR THE PURPOSE OF BUSINESS A ND IT WAS NOT THE CASE OF THE LEARNED AO THAT THE EXPENDITURE IS BOGUS OR FIC TITIOUS. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE AD DITION AND OBLIGE. 7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5,88,000/- FROM AND OUT OF DISALLOWANCE OF RS. 35,00,000/- MADE BY THE LEARNED AO ON ACCOUNT OF TRANSPORT AND OCTROI EXPENSES WITHOUT APPRECIATING THE FACTS OF T HE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DEL ETE THE ADDITION AND OBLIGE. 8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5,00,000/- MADE BY THE LEARNED AO ON ACCOUNT OF POWER AND FUEL EXPENSES WI THOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREB Y REQUEST YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 9) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, DELETE ANY ADDITIONAL GROUND/GROUNDS BEFORE THE COMPLETION OF THE HEARING . 14. THE FIRST GROUND CONCERNS THE DISALLOWANCE OF B ELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND OF RS.50,5 64/-. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSESSEE IN ITA NO.937/PN/2014 BY WAY OF GROUND NO.1 RELATING TO ASSESSMENT YEAR 2002 -03. THUS, FOR THE PARITY OF REASONING OUR DECISION IN ASSESSMENT YEAR 2002-0 3 BY WAY OF GROUND NO.1 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NO.1 IN ASSESSMENT YEAR 2003-04. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEES APPEAL I S ALLOWED. 15. GROUND NOS.2 AND 3 ARE NOT PRESSED AND THE SAME ARE DISMISSED. 16. GROUND NOS.4 AND 5 CONCERNS THE DISALLOWANCE OF INTEREST OF RS.26,32,918/- BEING INTEREST ATTRIBUTABLE TO ADVAN CE GIVEN TO SISTER CONCERN. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED IN FAVOUR OF ASSESSEE BY US IN ITA NO.937/PN/2014 BY WAY OF GROUND NO.4 RELATING TO AS SESSMENT YEAR 2002-03. THUS, FOR THE PARITY OF REASONING OUR DECISION IN A SSESSMENT YEAR 2002-03 BY WAY OF GROUND NO.4 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NOS.4 AND 5 IN ASSESSMENT YEAR 2003-04. ACCORDINGLY, GROUND NO S.4 AND 5 OF THE ASSESSEES APPEAL ARE ALLOWED. 17. IN GROUND NO.6, THE ASSESSEE HAS AGITATED THE A CTION OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.18,88,000/- OUT O F DISALLOWANCE OF 12 RS.20,00,000/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF LABOUR AND SALARY PAYMENT. 17.1 FROM PARA 11 OF THE CIT(A) ORDER, IT IS SEEN T HAT THE ASSESSEE STRONGLY OBJECTED TO THE DISALLOWANCE TO THE EXTENT OF 5% OF LABOUR EXPENSES OF RS.3,77,69,918/- ON THE FOLLOWING GROUNDS :- 1) THE LEARNED ASSESSING OFFICER HAS MADE COMPARIS ON OF THE FIGURES OF MATERIAL CONSUMPTION LABOUR PAYMENT ETC OF THE ASSESSMENT YE AR 2003-04 (F.Y. 2002-03 YEAR UNDER CONSIDERATION) WITH THE FIGURES PERTAINING TO ASSESSMENT YEAR 2001-02 (F.Y. 2000-01). THE COMPARISON OF FIGURES IS ABSOLUTELY ILLOGICAL AND RIDICULOUS. THE COMPARISON SEEMS TO HAVE BEEN MADE WITH THE PREDETE RMINED STAND OF MAKING ADDITION. 2) THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN MAKING COMPARISON OF ABSOLUTE FIGURES OF MATERIAL CONSUMPTION, LABOUR PA YMENT WITHOUT REFERENCE TO THE TURNOVER/CONTRACT RECEIPT. IT MAY BE APPRECIATED THAT TURNOVER OF THE YEAR UNDER CONSIDERATION IS 2597.46 LACS AS COMPARED TO TURNOVER OF RS. 1695.66 LACS FOR THE ASSESSMENT YEA R 2001-02. THE COMPARISON OF THE FIGURES HAVE TO BE BETWEEN THE CO MPARABLE. THE COMPARISON OF THE FIGURES OF UNRELATED YEARS WITHOU T REFERENCE TO THE RISE IN CONTRACT RECEIPT ARE APT TO GIVE MISLEADING RESU LTS. THEREFORE, THE COMPARISON MADE BY THE LEARNED ASSESSING OFFICER HA S NO MEANING AND REQUIRES TO BE DISCARDED IN DECIDING THE ISSUE UNDE R CONSIDERATION. 3) A SEPARATE CHART IS WORKED OUT TAKING INTO CONSI DERATION THE INCREASE IN CONTRACT RECEIPTS IN THE ASSESSMENT YEAR UNDER CONS IDERATION WITH ASSESSMENT YEAR 2002-03 AND 2001-02. THE EXPENSES A RE INCREASED IN PROPORTION TO INCREASE IN CONTRACT RECEIPT. A COPY OF THE SAID CHART IS APPEARING ON PAGE NO. 60 & 61 OF THE PAPER BOOK. A CLOSE READING OF THE CHART WILL PROVE THAT THE COMPARISON MADE BY THE LE ARNED ASSESSING OFFICER IS ABSURD. 4) THE DETAILS OF THE EXPENDITURE ON ADMINISTRATIVE STAFF AND PAYMENT TO CONTRACTOR AND SUB CONTRACTOR ARE APPENDED ON PAGE NO 64 & 65 OF THE PAPER BOOK. FROM THE DETAILS IT IS AMPLY CLEAR THAT LABOUR PAYMENTS HAVE DECREASED BY 2.03% AS COMPARED TO ASSESSMENT YEAR 2002-03. R EFERENCE IS INVITED TO PAGE NO.61 OF THE PAPER BOOK. 5) THE APPELLANT FIRM IS MAINTAINING THE SITE-WISE CONTRACT ACCOUNTS. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT FIRM HA D SECURED CONTRACT WORK OF MAKAI SSK LTD. AND. NATIONAL HEALTH SYSTEM WHICH WERE ENTIRELY SUBLET TO OUTSIDE CONTRACTING FIRM VIZ. M/S BACHUWAR & BACHUWAR SOLAP UR AND OTHER CONTRACTING FIRMS ON BACK-TO-BACK BASIS. A COPY OF AGREEMENT WI TH SAID BACHUWAR & BACHUWAR WAS SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER AND A COPY IS ALREADY SUBMITTED IN THE CASE OF APPEAL OF THE APPELLANT FIRM FOR THE ASSESSMENT YEAR 2002-03. THE APPELLANT FIRM RECEIVED CONTRACT RECEIPTS TO THE TU NE OF RS. 354.38 LACS & APPELLANT FIRM MADE PAYMENT TO M/S BACHUWAR & BACHUWAR AND OT HER CONTRACTING FIRM OF RS.297.65 LACS, WHICH ARE INCLUDED IN LABOUR PAYMEN T. THE APPELLANT FIRM'S MARGIN OF PROFIT ON THIS WORK COMES TO 4.50% ONLY. THIS AR RANGEMENT HAS RESULTED INTO I) INCREASE IN CONTRACT RECEIPTS BUT DECREASE IN OV ERALL GROSS PROFIT RATIO II) INCREASE IN LABOUR PAYMENT AS THE PAYMENTS MADE TO BACHUWAR & BACHUWAR ARE INCLUDED IN LABOUR PAYMENT. 13 6) THE APPELLANT FIRM HAS DEDUCTED TAX AT SOURCE OF RS. 5,24,932/- FROM PAYMENTS MADE TO SUBCONTRACTOR OF RS. 4,95,93,952/- . 7) THE LABOUR PAYMENT INCLUDES SALARY PAID TO ADMIN ISTRATIVE STAFF AMOUNTING TO RS. 69.05 LACS FOR THE A Y 2003-04. SALARY PAID TO ADMINISTRATIVE STAFF WAS RS. 48.76 LACS AND RS. 61.81 LACS IN A Y 2001-2 002 AND A Y 2002-03 RESPECTIVELY. ADMINISTRATIVE SALARIES ARE INCREASED CONSEQUENT UPON THE INCREASE IN THE TOTAL TURNOVER AND INFLATION. 8) THE APPELLANT FIRM HAS WORKED AS CIVIL CONTRACTO R FOR VARIOUS SUGAR FACTORIES & SPINNING MILLS. OUT OF THESE SOME OF THE CONTRACT S WERE ALLOTTED TO THE APPELLANT IN EARLIER YEARS BUT THE WORK WAS DELAYED ON ACCOUNT O F WHICH THE PERCENTAGE OF GROSS PROFIT HAS FALLEN DOWN. THE TOTAL OF SUCH CONTRACT RECEIPTS IS RS. 196.34 LACS, THE CONTRACTS OF WHICH WERE ALLOTTED IN THE YEAR 1994, 1995, 1997 & 1999. OBVIOUSLY CONSIDERING THE INFLATION OVER THE PERIOD & TENDER RATES BEING NOT REVISED/ESCALATION CLAIMS BEING NOT CONSIDERED THE RATIO OF GROSS PROF IT HAS BEEN AFFECTED. THE LIST OF SUCH CONTRACTS & THE AMOUNT RECEIVED DURING THE YEA R UNDER CONSIDERATION IS APPENDED AT PAGE NO.66 OF THE PAPER BOOK. 9) THE LEARNED ASSESSING OFFICER HAS OBSERVED THAT THE APPELLANT HAS NOT PRODUCED THE LABOUR CONTRACTORS TO WHOM THE PAYMENT S WERE MADE. THIS IS A FACTUALLY WRONG STATEMENT AND THE APPELLANT FIRM STRONGLY OBJECTS TO THE SAME. THE ASSESSMENTS FOR A Y 2002-03 AND A Y 2003- 04 WERE TAKEN UP SIMULTANEOUSLY. THE LEARNED ASSESSING OFFICER REQUI RED THE PRESENCE OF THE CONTRACTORS AND SUB-CONTRACTORS FOR THE PURPOSES OF FRAMING ASSESSMENT ORDER FOR A. Y. 2002-03. THE APPELLANT FIRM PRODUCE D TWO CONTRACTORS FOR VERIFICATION AND THE STATEMENT OF THOSE CONTRACTORS WERE RECORDED BY THE LEARNED ASSESSING OFFICER. 10) WHILE CONSIDERING THE INCREASE IN LABOUR PAYMEN T THE POINT OF INFLATION & CONSEQUENT INCREASED IN THE LABOUR RATES SHOULD ALS O HAVE BEEN CONSIDERED BY THE LEARNED ASSESSING OFFICER. THEREFORE THE INC REASE IN THE LABOUR PAYMENT IS JUSTIFIABLE & THE DISALLOWANCE/ADDITION IS UNWARRANTED & NOT JUSTIFIED ON THE FACTS & CIRCUMSTANCES OF THE CASE. 11) THE ADDITION/DISALLOWANCE MADE BY THE LEARNED A SSESSING OFFICER IS ARBITRARY, ADHOC & WITHOUT ANY BASIS. THEREFORE THE APPELLANT PRAYS FOR DELETION OF THE SAME. 12) IT IS NOT THE CASE OF THE LEARNED ASSESSING OFF ICER THAT THE EXPENDITURE IS BOGUS OR FICTITIOUS. 17.2 ON THE BASIS OF ABOVE SUBMISSIONS, ASSESSEE CO NTENDED BEFORE THE CIT(A) THAT THERE IS NO JUSTIFIABLE BASIS FOR ADDIT ION MADE BY THE ASSESSING OFFICER. THE CIT(A) OBSERVED THAT BASIS OF ADDITIO N OF THE ASSESSING OFFICER IS THAT THERE WAS UNREASONABLE INCREASE IN THE EXPENDI TURE COMPARED TO CORRESPONDING EARLIER YEAR. THE CIT(A) COMPARED AN D ANALYZED THE POSITION OF GROSS RECEIPTS AND GROSS PROFITS DISCLOSED BY THE A SSESSEE IN THE PRESENT AS WELL AS THE PRECEDING ASSESSMENT YEARS AND OBSERVED THAT THERE IS FALL IN THE GROSS PROFIT RATIO QUA EARLIER YEARS. THE CIT(A) BIFURCATED AND TABULATE D GROSS PROFIT FOR CONTRACT AND BACK TO BACK SUB-CONTRACT WORKS AN D FOUND THAT GROSS PROFIT BECOMES COMPARABLE WHEN THE SUB-CONTRACT TURNOVER I S EXCLUDED. HE OBSERVED 14 THAT OUT OF TOTAL LABOUR PAYMENT OF RS.8,73,63,870/ - PAYMENTS TO THE EXTENT OF RS.4,95,93,952/- WERE SUBJECTED TO TDS. THEREFORE, THE CIT(A) OBSERVED THAT INFERENCE DRAWN BY THE ASSESSING OFFICER THAT THERE WAS UNREASONABLE JUMP ON THE EXPENDITURE ON THE BASIS OF COMPARISON MADE BY HIM CANNOT BE ENDORSED. HOWEVER, THE CIT(A) ESTIMATED AD-HOC DISALLOWANCE O N THE GROUND THAT SUBSTANTIAL PAYMENT ARE MADE IN CASH. ACCORDINGLY, HE RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% IS COMPONENT OF LA BOUR PAYMENT WHICH IS NOT SUBJECTED TO TDS. THE DISALLOWANCE WAS THUS SCALED DOWN TO RS.18,88,000/- AS AGAINST RS.20,00,000/- MADE BY THE ASSESSING OFF ICER. 17.3 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED THAT THE DISALLOWANCE @ 5% ON LABOUR PAYMENTS WHICH IS NOT S UBJECTED TO TDS AS ESTIMATED BY CIT(A) IS HIGHLY EXCESSIVE HAVING REGA RD TO THE NATURE OF BUSINESS OF THE ASSESSEE WHICH IS LABOUR INTENSIVE. HE SUBMITTED THAT IT IS NOT THE CASE OF THE REVENUE THAT THESE PAYMENTS WERE BO GUS OR FICTITIOUS. THE TDS HAS NOT BEEN DEDUCTED ON PAYMENTS AMONG TO SUB- CONTRACTOR WHOSE PAYMENTS ARE WITHIN THRESHOLD LIMIT PRESCRIBED UNDE R STATUTE. THEREFORE, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLEA DED FOR SUITABLE RELIEF. 17.4 HAVING REGARD TO THE TOTALITY OF CIRCUMSTANCES , WE FIND THAT THE CIT(A) HAS OBJECTIVELY ANALYZED THE FACT-SITUATION AND GRA NTED PARTIAL RELIEF. HOWEVER, IN THE LIGHT OF SUBMISSIONS MADE BY THE LD. AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE THAT REQUISITE DETAILS WERE GIVEN AND TDS WERE NOT DEDUCTED OWING TO CERTAIN THRESHOLD LIMIT. WE CONSIDER IT JUST AND F AIR THAT DISALLOWANCE BE RESTRICTED TO 4% AS AGAINST THE 5% DETERMINED BY TH E CIT(A), WHICH, IN OUR VIEW, WILL BE APPROPRIATE AND WILL MEET THE ENDS OF JUSTICE. 17.5 IN THE RESULT, GROUND NO.6 IS PARTLY ALLOWED. 18. GROUND NOS.7 AND 8 ARE NOT PRESSED AT THE TIME OF HEARING AND THUS THE SAME ARE DISMISSED AS NOT PRESSED. 15 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1236/PN/2014 RELATING TO ASSESSMENT YEAR 2003-04 IS PARTLY ALLOW ED. ITA NO.1008/PN/2014, A.Y. 2004-05 (BY ASSESSEE) : 20. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 28.03.2014 PASSED UNDER SECTION 143(3) R.W.S. 147 O F THE ACT RELATING TO ASSESSMENT YEAR 2004-05. 21. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE OF RS. 1,01,676/- MADE BY THE LEARNED AO (ACIT CIRCLE -2 SOLAPUR) ON ACCOU NT OF BELATED PAYMENT OF EMPLOYEE'S CONTRIBUTION OF PROVIDENT FUND. THE APPE LLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER (ACIT CIRCLE -2 SOLAPUR) OF RS. 2 1,00,232/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WI THOUT APPRECIATING THE FACT THAT THE INTEREST FREE CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN THE ADVANCE GIVEN TO THE SI STER CONCERN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE APPELL ANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE OF RS. 10,88,607/- MADE BY THE LEARNED AO AS INTEREST ATTRIBUTABLE TO ADVANCES MADE TO OTHERS WITHOUT APPRECIATING THE FACTS IN PROPER PERSPECTIV E. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 5) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, ANY ADDITIONAL GROUND/GROUNDS OR DELETE THE GROUND OF APPEAL ON OR BEFORE THE COMPLETION OF THE HEARING. 22. THE FIRST GROUND CONCERNS THE DISALLOWANCE OF B ELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND OF RS.1,01 ,676/-. THE IDENTICAL 16 ISSUE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSES SEE IN ITA NO.937/PN/2014 BY WAY OF GROUND NO.1 RELATING TO ASSESSMENT YEAR 2 002-03. THUS, FOR THE PARITY OF REASONING OUR DECISION IN ASSESSMENT YEAR 2002-03 BY WAY OF GROUND NO.1 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NO.1 IN ASSESSMENT YEAR 2004-05. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEE S APPEAL IS ALLOWED. 23. GROUND NOS.2, 3 AND 4 CONCERNS THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SISTER CONCERN. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSESSEE IN ITA NO.937/PN/2014 BY W AY OF GROUND NO.4 AND 5 RELATING TO ASSESSMENT YEAR 2002-03. THUS, FOR THE PARITY OF REASONING, OUR DECISION IN ASSESSMENT YEAR 2002-03 BY WAY OF GROUN D NO.4 AND 5 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NOS.2, 3 AND 4 IN ASSESSMENT YEAR 2 004-05. ACCORDINGLY, GROUND NOS.2, 3 AND 4 OF THE ASSESSEE S APPEAL ARE ALLOWED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1008/PN/2014 RELATING TO ASSESSMENT YEAR 2004-05 IS PARTLY ALLOW ED. ITA NO.1009/PN/2014, A.Y. 2005-06 (BY ASSESSEE) : 25. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 28.03.2014 PASSED UNDER SECTION 143(3) OF THE ACT R ELATING TO ASSESSMENT YEAR 2005-06. 26. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE OF RS. 85,380/- MADE BY THE LEARNED AO (DCIT CIRCLE -2 SOLAPUR) ON ACCOU NT OF BELATED PAYMENT OF EMPLOYEE'S CONTRIBUTION OF PROVIDENT FUND. THE APPE LLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED AO OF RS. 18,91,108/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WITHOUT APPRECIATING THE FACT THAT THE INTEREST FRE E CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN TH E ADVANCE GIVEN TO THE SISTER CONCERN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE AP PELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 17 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE APPELL ANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE OF RS. 7,72,119/- MADE BY THE LEARNED AO AS INTEREST ATTRIBUTABLE TO ADVANCES MADE TO OTHERS WITHOUT APPRECIATING THE FACTS IN PROPER PERSPECTIV E. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 5) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, ANY ADDITIONAL GROUND/GROUNDS BEFORE THE COMPLETION OF THE HEARING . 27. THE FIRST GROUND CONCERNS THE DISALLOWANCE OF B ELATED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND OF RS.85,3 80/-. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSESSEE IN ITA NO.937/PN/2014 BY WAY OF GROUND NO.1 RELATING TO ASSESSMENT YEAR 2002 -03. THUS, FOR THE PARITY OF REASONING OUR DECISION IN ASSESSMENT YEAR 2002-0 3 BY WAY OF GROUND NO.1 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NO.1 IN ASSESSMENT YEAR 2005-06. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEES APPEAL I S ALLOWED. 28. GROUND NOS.2, 3 AND 4 CONCERNS THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SISTER CONCERN. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSESSEE IN ITA NO.937/PN/2014 BY W AY OF GROUND NO.4 AND 5 RELATING TO ASSESSMENT YEAR 2002-03. THUS, FOR THE PARITY OF REASONING OUR DECISION IN ASSESSMENT YEAR 2002-03 BY WAY OF GROUN D NO.4 AND 5 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NOS.2, 3 AND 4 IN ASSESSMENT YEAR 2 005-06. ACCORDINGLY, GROUND NOS.2, 3 AND 4 OF THE ASSESSEE S APPEAL ARE ALLOWED. 29. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1009/PN/2014 RELATING TO ASSESSMENT YEAR 2005-06 IS PARTLY ALLOW ED. 18 ITA NO.1010/PN/2014, A.Y. 2006-07 (BY ASSESSEE) : 30. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 28.03.2014 PASSED UNDER SECTION 143(3) OF THE ACT R ELATING TO ASSESSMENT YEAR 2006-07. 31. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER (ACIT CIRCLE -2 SOLAPUR) OF RS. 1 3,87,422/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WI THOUT APPRECIATING THE FACT THAT THE INTEREST FREE CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN THE ADVANCE GIVEN TO THE SISTER CONCE RN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE APPELLANT HEREBY REQUESTS YOUR HONOU R TO KINDLY DELETE THE ADDITION AND OBLIGE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE APPELL ANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE OF RS. 11,19,155/- MADE BY THE LEARNED AO AS INTEREST ATTRIBUTABLE TO ADVANCES MADE TO OTHERS WITHOUT APPRECIATING THE FACTS IN PROPER PERSPECTIV E. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) III, PUNE ERRED IN CONFIRMING DISALLOWANCE OF RS.3,00,000/- OUT OF DISALLOWANCE OF RS.5,00,000/- MADE BY THE LEARNED A O OUT OF LABOUR PAYMENTS ON THE FOLLOWING GROUNDS. A. THE APPELLANT HAS NOT FURNISHED THE BREAKUP OF P AYMENTS MADE THROUGH CHEQUES AND CASH. B. MOST OF THE PAYMENTS MADE TO THE SUB CONTRACTORS WERE NOT SUBJECTED TO TDS ON THE STRENGTH NON DEDUCTION CERTIFICATE OB TAINED FROM PERSONS CONCERNED. THE HONOURABLE CIT(A) FAILED TO APPRECIATE THAT OUT OF TOTAL EXPENDITURE OF RS.11,28,31,234/- ON ACCOUNT OF LABOUR PAYMENTS THE APPELLANT HAS MAINTAINED AND PRODUCED DETAILS RECORDS IN RESPECT OF PAYMENTS MAD E TO THE CONTRACTORS AND SUB CONTRACTORS. THE APPELLANT HEREBY PRAYS THAT THE D ISALLOWANCE MAY PLEASE BE DELETED. 5) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE ANY ADDITIONAL GROUND/GROUNDS OR DELETE ANY GROUND OF APPEAL ON OR BEFORE THE COMPLETION OF THE HEARING. 19 32. GROUND NOS.1, 2 AND 3 CONCERNS THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SISTER CONCERN. THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSESSEE IN ITA NO.937/PN/2014 BY W AY OF GROUND NO.4 AND 5 RELATING TO ASSESSMENT YEAR 2002-03. THUS, FOR THE PARITY OF REASONING, OUR DECISION IN ASSESSMENT YEAR 2002-03 BY WAY OF GROUN D NO.4 AND 5 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NOS.1, 2 AND 3 IN ASSESSMENT YEAR 2 006-07. ACCORDINGLY, GROUND NOS.1, 2 AND 3 OF THE ASSESSEE S APPEAL ARE ALLOWED. 33. GROUND NO.4 IS NOT PRESSED AND THE SAME IS DISM ISSED. 34. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1010/PN/2014 RELATING TO ASSESSMENT YEAR 2006-07 IS PARTLY ALLOW ED. ITA NO.1011/PN/2014, A.Y. 2007-08 (BY ASSESSEE) : 35. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 28.03.2014 PASSED UNDER SECTION 143(3) OF THE ACT R ELATING TO ASSESSMENT YEAR 2007-08. 36. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER (ACIT CIRCLE -2 SOLAPUR) OF RS. 8 ,84,514/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WI THOUT APPRECIATING THE FACT THAT THE INTEREST FREE CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN THE ADVANCE GIVEN TO THE SISTER CONCE RN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE APPELLANT HEREBY REQUESTS YOUR HONOU R TO KINDLY DELETE THE ADDITION AND OBLIGE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE APPELL ANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 20 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) III, PUNE ERRED IN CONFIRMING DISALLOWANCE OF RS.7,00,000/- OUT OF DISALLOWANCE OF RS.15,28,595/- MADE BY THE LEARNED AO OUT OF LABOUR PAYMENTS ON THE FOLLOWING GROUNDS. A. THE APPELLANT HAS NOT FURNISHED THE BREAKUP OF P AYMENTS MADE THROUGH CHEQUES AND CASH. B. MOST OF THE PAYMENTS MADE TO THE SUB CONTRACTORS WERE NOT SUBJECTED TO TDS ON THE STRENGTH NON DEDUCTION CERTIFICATE OB TAINED FROM PERSONS CONCERNED. THE HONOURABLE CIT(A) FAILED TO APPRECIATE THAT OUT OF TOTAL EXPENDITURE OF RS.15,28,59,588/- ON ACCOUNT OF LABOUR PAYMENTS THE APPELLANT HAS MAINTAINED AND PRODUCED DETAILS RECORDS IN RESPECT OF PAYMENTS MAD E TO THE CONTRACTORS AND SUB CONTRACTORS TO THE TUNE OF RS.14,12,31,214/-. THE APPELLANT HEREBY PRAYS THAT THE DISALLOWANCE MAY PLEASE BE DELETED. 4) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, DELETE ANY ADDITIONAL GROUND/GROUNDS BEFORE THE COMPLETION OF THE HEARING . 37. GROUND NOS.1 AND 2 CONCERNS THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SISTER CONCERN. THE IDENTICAL ISS UE HAS BEEN ADJUDICATED BY US IN FAVOUR OF ASSESSEE IN ITA NO.937/PN/2014 BY WAY OF GROUND NO.4 AND 5 RELATING TO ASSESSMENT YEAR 2002-03. THUS, FOR THE PARITY OF REASONING, OUR DECISION IN ASSESSMENT YEAR 2002-03 BY WAY OF GROUN D NO.4 AND 5 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NOS.1 AND 2 IN ASSESSMENT YEAR 2007 -08. ACCORDINGLY, GROUND NOS.1 AND 2 OF THE ASSESSEES A PPEAL ARE ALLOWED. 38. IN GROUND NO.3, THE ASSESSEE HAS AGITATED THE A CTION OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.7,00,000/- OUT OF DISALLOWANCE OF RS.15,28,595/- MADE BY THE ASSESSING OFFICER OUT OF LABOUR PAYMENTS. 39. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSE E HAS DEBITED LABOUR PAYMENT EXPENSES TO THE TUNE OF RS.15,28,59,588/-. HAVING REGARD TO THE CASH PAYMENTS MADE TOWARDS SUCH EXPENSES BASED ON SELF M ADE VOUCHERS AND IN THE ABSENCE OF PROPER VERIFIABILITY OF SUCH EXPENSES, H E RESORTED TO AD-HOC DISALLOWANCE @ 1% OF THE TOTAL EXPENDITURE CLAIMED OUT OF SUB-CONTRACTORS LABOUR PAYMENTS. 39.1 THE CIT(A) SCALED DOWN THE ESTIMATED DISALLOWA NCE TO 0.5% OF THE TOTAL LABOUR PAYMENTS. THE RELEVANT PARAS OF THE CIT(A) ORDER CONCERNING THE ISSUE ARE EXTRACTED HEREUNDER :- 21 6.1 IN THIS REGARD, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE APPELLANT HAD DEBITED SUB-CONTRACTORS AND LABOUR PAYMENTS OF RS.1 5,28,59,588/-. THOUGH IT WAS FOUND THAT FOR THE PAYMENTS MADE TO SUB-CONTRAC TORS THE APPELLANT HAD MADE DETAILED RECORDS AND ALSO OBTAINED NON-TDS CER TIFICATES AND THE APPELLANT ALSO HAD MAINTAINED SITE-WISE LABOUR PAYMENT REGIST ER, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE PAYMENTS WERE MADE IN CA SH. THESE CASH PAYMENTS WERE FOUND TO BE SUPPORTED ONLY SELF MADE VOUCHERS WHICH MERELY BORE THE SIGNATURE OF THE LABOURS. HOLDING THAT SOME OF THE EXPENSES WERE NOT VERIFIABLE, THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS.15,28,595/- EQUIV ALENT TO 1% OF THE TOTAL EXPENDITURE CLAIMED OUT OF SUB-CONTRACTORS LABOUR PAYMENT. 6.2 DURING THE APPELLATE PROCEEDINGS, THE BREAKUP O F THE EXPENDITURE WAS FURNISHED AS UNDER :- NATURE OF EXPENDITURE AMOUNT (RS.) LABOUR PAYMENT TO CONTRACTOR/SUB-CONTRACTOR : 14,12 ,31,214/- OFFICE STAFF SALARIES AND WAGES : 1,02,77,247/- DEPARTMENTAL WAGES : 59,932/- ADMINISTRATIVE SERVICE CHARGES OF PF : 20,684/- EXTRA WORK, INCENTIVES AND ALLOWANCES : 76,439/- PETROL ALLOWANCES : 21,415/- PF EMPLOYERS SHARE : 1,56,431/- PF & ESI CONSULTANCY : 5,400/- SECURITY SERVICE CHARGES : 8,17,902/- WORKMENS COMPENSATION INSURANCE : 1,92,923/- TOTAL : 15,28,59,588/- THE ID. A.R. EMPHASIZED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT THE APPELLANT HAS MAINTAINED DETAILED RECORDS AND ALSO OBTAINED NON TDS CERTIFICATES AND THAT SITE-WISE LABOUR PAYMENT REGISTER AND MUST ER IS MAINTAINED. IT IS ALSO STRESSED THAT IT IS NOT THE CASE OF THE ASSESSING O FFICER THAT THE EXPENDITURE ARE FICTITIOUS OR BOGUS. HE EXPLAINED THAT MAJORITY OF THE CONTRACTORS AND SUB- CONTRACTORS DO NOT HAVE OFFICE AND ORGANIZATIONAL S ET UP AND VERY FEW OF THEM ARE CAPABLE TO GENERATE THEIR OWN BILLS THEREFORE THE B ILLS ARE PREPARED BY SITE ENGINEERS BUT THOSE ARE SIGNED BY THE CONTRACTORS. HE POINTED OUT THAT THE EXACT NATURE OF WORK ALONG WITH MEASUREMENT IS DULY RECOR DED ON THE BILLS. FURTHER, DENYING THAT ALL THE PAYMENTS ARE IN CASH, THE A.R. INSISTED THAT ON THE CONTRARY, MAJORITY OF THE PAYMENTS ARE BY ACCOUNT PAYEE CHEQU ES ONLY. TERMING THE ADDITION/DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AS ARBITRARY, AD-HOC & WITHOUT ANY BASIS, THE ID. A.R. FOR THE APPELLANT PLEADED FOR DELETION OF THE SAME. 6.3 THE SUBMISSIONS OF THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE, NATURE OF EXPENSES AND OTHER RELEVANT DETAILS PLACED ON RECORD. IT IS NOT IN DISPUTE THAT MAJOR PORTION OF THE EXPE NDITURE I.E. RS.14,12,31,214/- ARE PAYMENTS MADE TO SUB-CONTRACTORS IN RESPECT OF WHIC H THE APPELLANT HAS MAINTAINED DETAILED RECORDS. SIMILARLY, THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THAT EVEN IN CASES WHERE THE PAYMENTS ARE MADE IN CASH, THE APPE LLANT HAS MAINTAINED VOUCHERS AND OBTAINED SIGNATURE OF THE LABOURERS ON THE VOUC HERS. THUS, THERE ARE NO MAJOR FLAWS POINTED OUT BY THE ASSESSING OFFICER IN RESPE CT OF THE EXPENDITURE. AS REGARDS THE REST OF THE EXPENDITURE, THEY MAINLY REPRESENT ADMINISTRATIVE SALARIES AND OTHER DEDUCTIONS ON ACCOUNT OF VARIOUS STATUTORY LIABILIT IES, THE AUTHENTICITY OF WHICH HAS NOT BEEN QUESTIONED BY THE ASSESSING OFFICER. AT TH E SAME, IT IS ALSO TO BE NOTED THAT THE APPELLANT HAS NOT FURNISHED THE BREAK-UP OF PAY MENTS MADE THROUGH CHEQUE AND CASH THOUGH IT INSISTS THAT MAJOR PART OF THE PAYME NTS MADE TO SUB-CONTRACTORS WERE THROUGH CHEQUE. SIMILARLY, ADMITTEDLY, MOST OF THE PAYMENTS WERE NOT SUBJECTED TO 22 TDS ON THE STRENGTH OF NON-DEDUCTION CERTIFICATES O BTAINED FROM THE PERSONS CONCERNED. FURTHER, THE APPELLANT ITSELF ADMITS THA T MOST OF THE LABOURERS ARE ILLITERATE AND GIVEN THE FACT THAT THE PAYMENTS ARE ALSO MADE IN CASH, IT CANNOT BE VOUCHED THAT WHAT HAS BEEN SHOWN AS PAID HAS ACTUAL LY BEEN PAID TO THE LABOURERS IN SUCH CASES AND THERE COULD BE POSSIBLE OMISSIONS. CONSIDERING THESE ASPECTS, THOUGH THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER DOES NOT DESERVE TO BE UPHELD IN ITS ENTIRETY, THE SAME CANNOT BE TE RMED AS FULLY UNJUSTIFIED ALSO. HAVING CONSIDERED THE ENTIRE CONSPECTUS OF THE MATT ER, I AM OF THE VIEW THAT IT WOULD BE JUSTIFIED IF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS REDUCED TO RS.7,00,000/- WHICH ROUGHLY CONSTITUTES 0.5% OF THE TOTAL LABOUR PAYMENTS MADE AS AGAINST RS.15,28,595/- DISALLOWED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ADDITION IS SUSTAINED TO THE EXTENT OF RS.7,00,000/ -. THE APPELLANT GETS A CONSEQUENTIAL RELIEF OF RS.8,28,595/- ON THIS GROUN D. GROUND OF APPEAL NO.4 IS PARTLY ALLOWED. 39.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE IS HIGHLY EXCESSIVE HAVING RE GARD TO THE FACTS OF THE CASE. HE OBSERVED THAT OUT OF TOTAL PAYMENTS OF RS.15.28 CRORES, TDS HAS BEEN DEDUCTED ON NEARLY 15 CRORES LABOUR PAYMENTS, REGIS TER AND MUSTER HAS BEEN MAINTAINED AND PAYMENTS ARE SUPPORTED BY VOUCHERS. HE ACCORDINGLY PLEADED FOR APPROPRIATE RELIEF IN THE MATTER. 40. ON CONSIDERATION OF THE TOTALITY OF CIRCUMSTANC ES AND HAVING REGARD TO THE FACT THAT SUBSTANTIAL PAYMENT HAS BEEN SUBJECTE D TO TDS AND ALSO HAVING REGARD TO THE FACT THAT THE LABOUR REGISTER HAS BEE N MAINTAINED, WE DEEM IT APPROPRIATE TO FURTHER GRANT RELIEF AND RESTRICT TH E DISALLOWANCE TO 0.25% AS AGAINST 0.5% OF THE TOTAL LABOUR EXPENSES ESTIMATED BY THE CIT(A). ACCORDINGLY, THE GROUND NO.3 IS PARTLY ALLOWED. 41. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1011/PN/2014 RELATING TO ASSESSMENT YEAR 2007-08 IS PARTLY ALLOW ED. ITA NO.1012/PN/2014, A.Y. 2008-09 (BY ASSESSEE) : 42. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 28.03.2014 PASSED UNDER SECTION 143(3) OF THE ACT R ELATING TO ASSESSMENT YEAR 2008-09. 23 43. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER (ACIT CIRCLE -2 SOLAPUR) OF RS. 1 ,94,419/- BEING INTEREST ATTRIBUTABLE TO ADVANCES GIVEN TO SISTER CONCERN WI THOUT APPRECIATING THE FACT THAT THE INTEREST FREE CAPITAL AS WELL AS INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WAS MORE THAN THE ADVANCE GIVEN TO THE SISTER CONCE RN NAMELY 'SON-ANKUR EXPORTS PVT. LTD'. THE APPELLANT HEREBY REQUESTS YOUR HONOU R TO KINDLY DELETE THE ADDITION AND OBLIGE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN NOT ACCEPTING THE JUDGME NT OF THE HONOURABLE ITAT PUNE BENCH IN THE CASE OF THE APPELLANT FOR THE ASS ESSMENT YEAR 1999-00 AND 2000-01 ON THE GROUND THAT THE DECISION RENDERE D BY THE ITAT FOR THE PRECEDING YEARS 1999-00 AND 2000-01 HAS TO BE TREAT ED AS APPLICABLE ONLY FOR THOSE YEARS FOR WHICH IT PERTAINED. THE HONOURABLE CIT(A) ERRED IN NOT APPRECIATING THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 IN PROPER PERSPECTIVE. THE APPELL ANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIG E. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING DISALLOWANCE OF RS. 3,00,000/- OUT OF DISALLOWANCE OF RS.5,53,260/- MADE BY THE LE ARNED AO OUT OF MESS, MEDICAL AND STAFF WELFARE EXPENDITURE WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PERSPECTIVE. THE APPELLANT HEREBY PRAYS THAT THE D ISALLOWANCE MAY PLEASE BE DELETED. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) III, PUNE ERRED IN CONFIRMING DISALLOWANCE OF RS.25,00,000/- OUT OF DISALLOWANCE OF RS.51,63,128/- MADE BY THE LEARNED AO OUT OF LABOUR PAYMENTS ON THE FOLLOWING GROUNDS. A) THE APPELLANT HAS NOT FURNISHED THE BREAKUP OF P AYMENTS MADE THROUGH CHEQUES AND CASH. B) MOST OF THE PAYMENTS MADE TO THE SUB CONTRACTORS WERE NOT SUBJECTED TO TDS ON THE STRENGTH NON DEDUCTION CERTIFICATE OB TAINED FROM PERSONS CONCERNED. THE HONOURABLE CIT(A) FAILED TO APPRECIATE THAT OUT OF TOTAL EXPENDITURE OF RS.51,63,12,836/- ON ACCOUNT OF LABOUR PAYMENTS THE APPELLANT HAS MAINTAINED AND PRODUCED DETAILS RECORDS IN RESPECT OF PAYMENTS MAD E TO THE CONTRACTORS AND SUB CONTRACTORS TO THE TUNE OF RS.48,50,69,810/-. THE APPELLANT HEREBY PRAYS THAT THE DISALLOWANCE MAY PLEASE BE DELETED. 5) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, DELETE ANY ADDITIONAL GROUND/GROUNDS BEFORE THE COMPLETION OF THE HEARING . 44. GROUND NOS.1 AND 2 CONCERNS THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO ADVANCE GIVEN TO SISTER CONCERN. THE IDENTICAL ISS UE HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE IN ITA NO.937/PN/2014 BY WAY OF GROUND NO.4 AND 5 RELATING TO ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THUS, FOR THE PARITY OF REASONING, OUR DECISION IN ASSESSMENT YEAR 2002- 03 BY WAY OF GROUND NO.4 24 AND 5 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NOS.1 AND 2 IN ASSESSMENT YEAR 2008-09. ACCORDINGLY, GROUND NOS.1 AND 2 OF T HE ASSESSEES APPEAL ARE ALLOWED. 45. GROUND NO.3 IS NOT PRESSED AND THE SAME IS BEIN G DISMISSED. 46. GROUND NO.3 CONCERNS THE CONFIRMATION OF DISALL OWANCE OF RS.25,00,000/- BY CIT(A) OUT OF RS.51,68,128 DISALL OWED BY THE ASSESSING OFFICER OUT OF LABOUR PAYMENTS. THE IDENTICAL ISSU E HAS BEEN DECIDED BY US IN ITA NO.1011/PN/2014 BY WAY OF GROUND NO.3 RELATING TO ASSESSMENT YEAR 2007-08 WHEREIN PARTIAL RELIEF WAS EXTENDED TO THE ASSESSEE. THUS, FOR THE PARITY OF REASONING, OUR DECISION IN ASSESSMENT YEA R 2007-08 BY WAY OF GROUND NO.3 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NO.3 IN ASSESSMENT YEAR 2008-09. IN KEEPING WITH THE VIEW TAKEN IN AS SESSMENT YEAR 2007-08, THE DISALLOWANCE OUT OF LABOUR PAYMENTS IS RESTRICTED T O 0.25% OF THE TOTAL LABOUR PAYMENTS. ACCORDINGLY, GROUND NO.3 OF THE ASSESSEE S APPEAL IS PARTLY ALLOWED. 47. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1012/PN/2014 RELATING TO ASSESSMENT YEAR 2008-09 IS PARTLY ALLOW ED. ITA NO.938/PN/2014, A.Y. 2009-10 (BY ASSESSEE) : 48. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, PUNE DATED 28.03.2014 PASSED UNDER SECTION 143(3) OF THE ACT R ELATING TO ASSESSMENT YEAR 2009-10. 49. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 4,00,000/- FROM AND OUT OF MESS, MEDICAL & STAFF WELFARE EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE AD DITION AND OBLIGE. 25 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 22,00,000/- FROM AND OUT O F LABOUR PAYMENTS AMOUNTING TO RS. 44,02,410/- WITHOUT APPRECIATING T HE FACTS OF THE CASE. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DEL ETE THE ADDITION AND OBLIGE. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 3,74,665/- FROM AND OUT OF TRAVELING, MISCELLANEOUS EXPENSES AND SITE EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DEL ETE THE ADDITION AND OBLIGE. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 1,14,824/- FROM AND OUT OF ADVERTISEMENT EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE. THE APP ELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DELETE THE ADDITION AND OBLIGE. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONOURABLE CIT(A) - III PUNE ERRED IN CONFIRMING THE DISALLOWA NCE MADE BY THE LEARNED ASSESSING OFFICER OF RS. 2,50,000/- FROM AND OUT OF FUEL, OIL & LUBRICANT EXPENSES OF RS. 4,39,043/- WITHOUT APPRECIATING THE FACTS OF THE CASE. THE APPELLANT HEREBY REQUESTS YOUR HONOUR TO KINDLY DEL ETE THE ADDITION AND OBLIGE. 6) THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD, RAISE, ANY ADDITIONAL GROUND/GROUNDS BEFORE THE COMPLETION OF THE HEARING . 50. GROUND NO.1 CONCERNS THE SUSTENANCE OF DISALLOW ANCE OF RS.4,00,000/- BY CIT(A) OUT OF RS.7,17,962/- DISALLOWED BY THE AS SESSING OFFICER FROM MESS, MEDICAL AND STAFF WELFARE. 50.1 THE ASSESSING OFFICER MADE ADDITION OF RS.7,17 ,962/- ESTIMATED AT 5% OF THE TOTAL EXPENSES OF RS.1,43,59,245/- ON MESS, MEDICAL AND STAFF WELFARE EXPENSES PRIMARILY ON THE GROUND THAT EXPENSES ARE BOOKED ON THE BASIS OF SELF MADE VOUCHERS. THE CIT(A) SCALED DOWN THE DISALLOW ANCE TO RS.4,00,000/- IN KEEPING WITH EARLIER YEARS. THE LD. AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS MAINTAINED SITE-WIS E DETAILS. SINCE THE PROJECT SITES ARE LOCATED IN REMOTE INTERIOR AREAS, THE VEG ETABLES, MILLS AND DAILY PROVISIONS HAVE TO BE PURCHASED FROM LOCAL MARKET F OR WHICH ADEQUATE SUPPORTINGS ARE NOT AVAILABLE AT TIMES. WE FIND TH AT THE CIT(A) HAS ALREADY GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT DISALLOWANCE OF RS.4,00,000/- ESTIMATED BY CIT(A) IS JUST AND REASONABLE AND THEREFORE NO I NTERFERENCE IS CALLED FOR. 26 50.2 THE GROUND NO.1 IS THUS DISMISSED. 51. IN GROUND NO.2, THE ASSESSEE HAS AGITATED THE A CTION OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.22,00,000/- OUT O F RS.44,02,410/- DISALLOWED BY THE ASSESSING OFFICER OUT OF LABOUR PAYMENT. TH E IDENTICAL ISSUE HAS BEEN ADJUDICATED BY US IN ITA NO.1011/PN/2014 BY WAY OF GROUND NO.3 RELATING TO ASSESSMENT YEAR 2007-08 WHEREIN THE ESTIMATED DISAL LOWANCE WAS RESTRICTED TO 0.25% OF THE TOTAL LABOUR PAYMENTS. THUS, FOR THE PARITY OF REASONING, OUR DECISION IN ASSESSMENT YEAR 2007-08 BY WAY OF GROUN D NO.3 SHALL APPLY MUTATIS-MUTANDIS TO THIS GROUND NO.2 IN ASSESSMENT YEAR 2009-10. ACCORDINGLY, GROUND NO.2 OF THE ASSESSEES APPEAL I S PARTLY ALLOWED. 52. GROUND NO.3 IS NOT PRESSED AND THE SAME IS DISM ISSED. 53. GROUND NO.4 CONCERNS THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER OF RS.1,14,824/- OUT OF ADVERTISEMENT EXPENSES. TH E ASSESSEE IS STATED TO HAVE CLAIMED EXPENDITURE AMOUNTING TO RS.7,79,407/- UNDE R THE HEAD ADVERTISEMENT EXPENSES. AS PER THE ASSESSING OFFICER, ALTHOUGH, THERE IS INCREASE OF MORE THAN 100% EXPENSES UNDER THIS HEAD, THE ASSESSEE CO ULD NOT SATISFACTORILY EXPLAIN THE UTILIZATION FOR THE PURPOSE OF ITS BUSI NESS. ACCORDINGLY, HE DISALLOWED 25% OF THE INCREMENTAL EXPENDITURE OF RS .4,59,295/- WHICH WAS INCURRED DURING THE YEAR OVER AND ABOVE THE PREVIOU S YEAR RESULTING IN AN ADDITION OF RS.1,14,824/-. THE CIT(A) CONFIRMED TH E DISALLOWANCE. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTE D THAT ASSESSEE HAS INCURRED RS.6,41,050/- ON CORPORATE BROACHER AND DO CUMENTARY FILMS IN RESPECT OF THE CRITICAL WORK EXECUTED AT ANDMAN & NICOBAR TSUNAMI REHABILITATION FOR PRESENTATION TO PROSPECTIVE CUSTOMERS. WE FIND THA T THE CLAIM OF THE ADVERTISEMENT EXPENSES DESERVES TO BE ALLOWED IN EN TIRETY. THE EXPENDITURE INCURRED CAN BE SAID TO HAVE HELPED IN BUILDING THE BRAND IMAGE OF THE ASSESSEE COMPANY AND ENHANCING REPUTATION IN PUBLIC EYE. TH E EXPENDITURE IS IN THE REVENUE FIELD AND THE AMOUNT HAS THE TRAPPINGS OF C OMMERCIAL EXPEDIENCY. IN THE RESULT, THE GROUND NO.4 OF ASSESSEES APPEAL IS ALLOWED. 27 54. GROUND NO.5 IS NOT PRESSED AND THE SAME IS ALSO BEING DISMISSED. 55. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.938/PN/2014 RELATING TO ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED. ITA NOS.1157 TO 1164/PN/2014, A.YS. 2002-03 TO 2009 -10 (BY REVENUE): 56. THE REVENUE IN ITS CROSS APPEALS FOR ALL THE IM PUGNED ASSESSMENT YEARS I.E. A.Y. 2002-03 TO 2009-10 HAS ASSAILED THE ACTIO N OF THE CIT(A) IN GRANTING RELIEF TOWARDS ADDITIONS MADE BY ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT IN THE H ANDS OF THE ASSESSEE. 57. SINCE THE FACTS AND ISSUES ARE COMMON AND IDENT ICAL IN ALL THE CAPTIONED CROSS APPEALS, WE PROPOSED TO TAKE THE CROSS APPEAL OF THE REVENUE IN ITA NO.1157/PN/2014 RELATING TO ASSESSMENT YEAR 2002-03 AS THE LEAD CASE FOR ADJUDICATION OF THE ISSUE. 58. THE RELEVANT FACTS CONCERNING THE SOLITARY ISSU E INVOLVED ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE (PARTN ERSHIP FIRM) HAS DONE CERTAIN TRANSACTIONS WITH A CLOSELY HELD COMPANY NA MELY M/S PANDHE CONSTRUCTIONS PVT. LTD. IN WHICH A. V. PANDHE, PART NER OF THE ASSESSEE FIRM HOLDS 50% VOTING POWER. THE ASSESSEE (PARTNERSHIP FIRM) WAS CALLED UPON BY THE ASSESSING OFFICER AS TO WHY ADVANCES SHOWN TO H AVE BEEN RECEIVED FROM M/S PANDHE CONSTRUCTIONS PVT. LTD. BE NOT CONSIDERE D AS DEEMED DIVIDEND IN VIEW OF LEGAL FICTION UNDER SECTION 2(22)(E) OF THE ACT. THE ASSESSEE MADE OUT A CASE BEFORE THE ASSESSING OFFICER THAT THERE IS N O SIPHONING OF FUNDS IN THE GUISE OF DEPOSITS OR LOANS. THE TRANSACTIONS WERE CARRIED OUT IN THE COURSE OF BUSINESS LIKE A CURRENT ACCOUNT TO FULFILL THE FINA NCIAL COMMITMENTS ON A SHORT TERM PERIOD BASED ON MUTUAL NEEDS AND AT TIMES, THE BALANCES HAD ALSO BEEN REVERSE AND THERE WERE DEBIT BALANCES ALSO. THE AS SESSING OFFICER WAS NOT IMPRESSED WITH THE ARGUMENT OF THE ASSESSEE AND INV OKED SECTION 2(22)(E) OF THE ACT AND ADVANCES/LOANS RECEIVED BY THE ASSESSEE WERE TREATED AS TAXABLE 28 INCOME TO THE EXTENT OF ACCUMULATIVE PROFITS OF THE LENDING COMPANY UNDER SECTION 2(22)(E) OF THE ACT. 59. THE CIT(A) REVERSED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT DEEMED DIVIDEND UNDER SECTION 2(22)(E) CAN BE TAXED ONLY IN THE HANDS OF THE PERSON WHO IS A SHAREHOLDER IN THE LENDING COMP ANY AND NOT IN THE HANDS OF THE COMPANY OTHER THAN THE SHAREHOLDER. THE ASSESS EE HEREIN WHICH IS A PARTNERSHIP FIRM IS NEITHER A REGISTERED NOR A BENE FICIAL SHAREHOLDER IN THE COMPANY PER SE AND THEREFORE AMOUNT RECEIVED CANNOT BE TAXED UNDER SECTION 2(22)(E) OF THE ACT. 60. WE FIND THAT THE ASSESSEE WHICH IS RECIPIENT OF THE IMPUGNED LOANS/ADVANCES IS A PARTNERSHIP FIRM. THE PARTNER OF THE ASSESSEE FIRM IS STATED TO BE HOLDING SUBSTANTIAL INTEREST IN THE LENDING C OMPANY IN TERMS OF SECTION 2(22)(E) OF THE ACT. HOWEVER, THE FIRM IS NOT A SH AREHOLDER OF THE LENDING COMPANY PER SE . SECTION 2(22)(E) PROVIDES THAT DEEMED DIVIDEND C AN BE TAXED ONLY IN THE HANDS OF THE PERSON WHO IS A SHAREHOLDE R OF THE LENDING COMPANY AND NOT IN THE HANDS OF THE PERSON WHO IS OTHER THA N A SHAREHOLDER HOLDING SUBSTANTIAL INTEREST. THE ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF (I) CIT VS. IMPACT CONTAINERS PVT. LTD., (2014) 367 ITR 346 (BOM) AND (II) CIT VS. UNIVERSAL MEDICARE (P) LTD., (2010) 324 ITR 263 (BOM). IN VI EW OF THE SETTLED LEGAL POSITION AS PER JURISDICTIONAL HIGH COURT AS NOTED ABOVE, WE FIND NO MERIT IN THE GROUND RAISED BY THE REVENUE. THUS, THE REVENU E FAILS ON THIS GROUND. 61. IN THE RESULT, THE CROSS APPEAL OF THE REVENUE IN ITA NO.1157/PN/2014 RELATING TO ASSESSMENT YEAR 2002-03 IS DISMISSED. 62. SINCE THE FACTS AND ISSUES IN ALL THE REMAINING CAPTIONED CROSS APPEALS RELATING TO ASSESSMENT YEARS 2003-04 TO 2009-10 ARE IDENTICAL, OUR DECISION IN ASSESSMENT YEAR 2002-03 SHALL APPLY MUTATIS-MUTANDIS IN ALL THE REMAINING IMPUGNED ASSESSMENT YEARS I.E. A.Y. 2003-04 TO 2009 -10. IN THE RESULT, THE 29 CROSS APPEAL IN ITA NOS.1158 TO 1164//PN/2014 RELAT ING TO ASSESSMENT YEARS 2003-04 TO 2009-10 ARE ALSO DISMISSED. 63. RESULTANTLY, ALL THE CAPTIONED APPEALS OF THE A SSESSEE ARE PARTLY ALLOWED AND ALL THE CAPTIONED CROSS APPEAL OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THIS 15 TH DAY OF APRIL, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 15 TH APRIL, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , //TRUE COPY// ! '# / SR. PRIVATE SECRETARY $ %& %'' , / ITAT, PUNE