Shri Badriprasad B.Meena, Panchmahal V. The Income tax Officer,Ward-2, Godhra

ITA 1013/AHD/2011

• Counselvise Citation: 101320514 RSA 2011
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Assessee Lawyers: U S BHATI
• Keywords: Depreciation
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1013/AHD/2011 ASSESSMENT YEARS :2007-08 BADRIPRASAD B. MEENA 57/B, KALOL HOUSING SOCIETY, KALOL, DISTRICT- PANCHMAHAL V/S . I.T.O. WARD-2, GODHRA PAN NO. A DAPM2476R (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI U. S. BHATI, A.R. /BY RESPONDENT SHRI Y.P. VERMA, SR. DR /DATE OF HEARING 12.12.2012 /DATE OF PRONOUNCEMENT 14.12.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT(A)-VI, BARODA, ORDER DATED 31 .01.2011 FOR A.Y. 2007-08. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CO NFIRMING ADHOC DISALLOWANCE OF RS.29,87,452/- @ 25% OF LABOU R SALARY, OVERTIME EXPENSES AND BONUS AGGREGATING TO RS.1,19, 49,806/-. 2. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CON FIRMING ADHOC DISALLOWANCE OF RS.10,128/- @ 15% OF OFFICE E XPENSES, STATIONERY EXPENSES AND SWEET EXPENSES AGGREGATING TO RS.67,517/-. ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 2 3. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN CON FIRMING ADDITION OF RS.1,49,500/- U/S. 68 OF THE ACT. 2. THE LD. A.O. OBSERVED THAT HE HAS ISSUED NUMBER OF NOTICES TO THE ASSESSEE BUT NOBODY WAS ATTENDED BEFORE HIM. THERE FORE, HE MADE ORDER U/S. 144 OF THE IT ACT. THE ASSESSEE WAS SUPPLYING LABOUR TO PANCHMAHAL STEEL LIMITED. TOTAL RECEIPTS HAD BEEN REFLECTED A T RS.1,38,67,382/- AND OTHER EXPENSES DEBITED AT RS.1,21,87,187/- IN P&L ACCOUNT . THE NET PROFIT HAD BEEN DISCLOSED BY THE APPELLANT AT RS.2,10,616/-. HE HA D ALSO SHOWN OUTSTANDING LIABILITY AND SUNDRY CREDITORS AT RS.1,49,500/- IN THE BALANCE SHEET. AS DISCUSSED ABOVE, ON REPEATED REQUEST BY ISSUING NOT ICES, THE ASSESSEE NEITHER ATTENDED IN PERSON, NOR FILED ANY SUBMISSIO N AS DESIRED BY THE A.O. THEREFORE, CLAIM OF EXPENSES MADE BY THE ASSESSEE I N P&L ACCOUNT WAS NOT VERIFIABLE. THUS, 25% OF EXPENSES DEBITED IN THE P &L ACCOUNT AT RS.1,21,87,187/- I.E. 30,46,796/- WAS DISALLOWED BY THE A.O. AND ADDED BACK IN THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAD NOT FILED ANY EVIDENCE OF UNSECURED LOAN OF RS.1,49,500/- EVEN ON REPEATED NOTICES. THEREFORE, IN ABSENCE OF ANY PAN AND CONFIRMATION, THE A.O. TREAT ED THIS AMOUNT AS ASSESSEES INCOME AND ADDED BACK IN IT. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE CIT(A) WHO HAD ALSO GIVEN VARIOUS DAT ES TO THE APPELLANT BUT FINALLY HE DECIDED THE CASE ON 31.01.2011 ON THE BA SIS OF FACT AND EVIDENCE AVAILABLE WITH HIM. HE ANALYZED THE SUBMISSION FIL ED BY THE APPELLANT, DATED ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 3 27.10.2010, WHEREIN IT WAS FOUND BY THE LD. CIT(A) THAT PERCENTAGE OF DIRECT EXPENSES HAD REDUCED AS COMPARED TO PREVIOUS YEAR A ND NET PROFIT RATIO HAD INCREASED FROM 0.99% TO 1.52%. COMPARATIVE POSITIO N OF EXPENSES FOR F.Y. 2006-07 VIS--VIS F.Y. 2005-06 WAS AS UNDER: (RS.) PARTICULARS 2006-07 % OF SALES 2005-06 % OF SALES R EDUCTION% GROSS RECEIPTS 13867383 14001195 DIRECT EXPENSES LABOUR SALARY 9692266 69.89 11112060 79.36 9.47 PL ENCASHMENT 320391 2.31 351424 2051 0.20 OVER TIME EXPENSES 2122540 15.30 2176270 15.54 0.24 INDIRECT EXPENSES OTHER EXPENSES 270180 1.95 222405 1.59 (0.36) SERVICE TAX 1251390 STATUTORY PAYMENTS PAID AND AUD ITOR DOES NOT COMMENT FOR VIOLATION OF SECTION 43B NET PROFIT 210616 1.52 139036 0.99 0.53 LD. CIT(A) FURTHER OBSERVED AS UNDER: AS PER APPELLANT, AMOUNTS DEBITED TO PROFIT AND LO SS ACCOUNT WERE EXPENSES INHERENT TO NATURE OF BUSINESS AND NE CESSARY FOR THE PURPOSE OF BUSINESS. AS PER APPELLANT, THE DIS ALLOWANCE MADE BY ASSESSING OFFICER IS ADHOC AND CANNOT BE SU PPORTED IN VIEW OF FOLLOWING DECISIONS: 1. MAHENDRA OIL CAKE INDUSTRIES (PR.) LTD. VS. ACIT 55 TTJ 2. ACIT VS. ARTHUR ANDERSEN & CO. 94 TTJ P.736(BOM) 3. COCA COLA IND.(PR.) LTD. VS. DCIT 116 TTJ P.880( PUNE) ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 4 4. MIDLAND INTERNATIONAL LTD. VS. DCIT 109 ITD P.19 8 (DELHI) 5. VICTORIA CAP. VENTURES LTD. VS. ITO WARD 2(3)(3) ITAT MUMBAI 2.2 I HAVE CONSIDERED THE MATTER. APPELLANT HAS NO T EXPLAINED AS TO WHAT PREVENTED HIM FROM FURNISHING THE DETAIL S CALLED FOR BY THE ASSESSING OFFICER OR EVIDENCES IN SUPPORT OF CL AIM OF EXPENSES. EVIDENCES IN SUPPORT OF EXPENSES WERE NO T FILED DURING APPELLATE PROCEEDINGS AS WELL. AUDIT OF BOO KS U/S 44AB CANNOT BE CONSIDERED SUFFICIENT PROOF FOR GENUINENE SS OF EXPENSES OR COMPLIANCE WITH STATUTORY NOTICES U/S 1 42(1)/143(2). APPELLANTS NET PROFIT OF RS.2,10,670/- ON GROSS RE CEIPTS OF RS.1,38,67,383/- IS TOO LOW. APPELLANTS NET PROFI T RATIO I.E. 1.52% DURING THIS YEAR AS WELL AS 0.99% IN THE PRECEDING YEAR IS TOO LOW FOR THIS LINE OF BUSINESS AND AS SUCH COMPARATIVE A NALYSIS OF EXPENSES VIS--VIS THE PRECEDING YEAR IS A MEANINGL ESS EXERCISE. APPELLANT HAS NOT ASSIGNED ANY REASONS FOR SUCH LOW NET PROFIT IN HIS BUSINESS. IN ANY CASE, REGARDLESS OF PROFITABI LITY RATIOS, ONUS OF PROVING GENUINENESS OF THE EXPENSES CLAIMED WAS SQUARELY OF THE APPELLANT, WHICH HAS NOT BEEN DISCHARGED. IN S UCH A SITUATION, DISALLOWANCE OF EXPENSES ON A PERCENTAGE BASIS IS FULLY JUSTIFIED. THE TOTAL EXPENSES CLAIMED BY THE APPEL LANT COMPRISE THE FOLLOWING: PARTICULARS AMOUNT (RS.) LABOUR SALARY 9692266 OFFICE EXPENSES 16745 TRAVELLING EXPENSES 15527 PL ENCASHMENT 320391 STATIONARY EXPENSES 7745 BONUS 135000 ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 5 SWEET EXPENSES 27500 OVER TIME EXPENSES 2122540 DEPRECIATION 800 BANK CHARGES 15240 SERVICE TAX 1251390 BANK INTEREST 23623 STAFF SALARY 28000 EXPENSES CLAIMED ARE INCURRED ALMOST ENTIRELY IN CA SH AND ARE UNVERIFIABLE. CONSIDERING ALL ASPECTS, DISALLOWANC E IS DIRECTED TO BE MADE @ 25% OF LABOUR SALARY (RS.96,92,266), OVER TIME EXPENSES (RS.21,22540) AND BONUS (RS.1,35,000) AND 15% OF OFFICE EXPENSES (RS.16,745), TRAVELLING EXPENSES (R S.15,527), STATIONARY EXPENSES (RS.7,745) AND SWEET EXPENSES ( RS.27,500). NO DISALLOWANCE IS REQUIRED TO BE MADE OUT OF PL EN CASHMENT, BANK CHARGES, STAFF SALARY AND DEPRECIATION. REGAR DING EXPENSES OF RS.12,51,390/- BEING SERVICE TAX, ASSESSING OFFI CER IS DIRECTED TO VERIFY AND ALLOW THE SAME ON PRODUCTION OF PROOF OF PAYMENT BY THE APPELLANT SUBJECT TO SECTION 43B. THE DISALLOW ANCE WORKS OUT TO: OUT OF LABOUR SALARY/OVER TIME EXP./BONUS RS.29,87 ,452/- OUT OF OFFICE EXPENSE/TRAVELLING/ STATIONARY/SWEET EXPENSES RS. 10,128/- -------------------- TOTAL.. RS. 29,97,580/- ============ DISALLOWANCE OF RS.29,97,580/- IS ACCORDINGLY DIREC TED TO BE MADE INSTEAD OF RS.30,46,796/-. THE CIT(A) ALLOWED THE GROUND OF APPEAL PARTLY IN F AVOUR OF THE APPELLANT. HOWEVER, THE ADDITION ON ACCOUNT OF OUTSTANDING LIA BILITY, ON ACCOUNT OF LOAN HAD BEEN CONFIRMED BY HIM IN ABSENCE OF ANY EVIDENC E. ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 6 4. NOW THE APPELLANT CARRIED THE MATTER BEFORE US. LD. COUNSEL FOR THE APPELLANT CONTENDED THAT THE APPELLANT IS AN ILLITE RATE PERSON. HE CAN WRITE ONLY HIS NAME IN HINDI BUT DO NOT UNDERSTAND THE CO MPLEXITY OF IT LAW. HE FILED AN AFFIDAVIT WHEREIN IT IS CLARIFIED. HE TOT ALLY RELIED UPON THE ACCOUNTANT, NAMELY, SHRI ASHISH PANDYA WHO USED TO WRITE BOOKS OF ACCOUNT AND ALSO WAS REPRESENTING HIS CASE BEFORE INCOME TAX AND SALES T AX AUTHORITIES, WHO WAS ENGAGED THROUGH HIS FRIEND. HE PREPARED BOOKS OF A CCOUNT REGULARLY FOR THE FINANCIAL YEAR 06-07 AND GOT THEM AUDITED. HE ALSO FILED THE INCOME RETURN FOR A.Y. 07-08 ON 31 ST OCTOBER, 2007, WHERE TOTAL INCOME OF RS.2,10,670/- WAS DECLARED ON THE BASIS OF AUDIT ACCOUNT. THE RETURN WAS ACCOMPLISHED WITH THE AUDIT REPORT IN FORM NO. 3CD DATED 26 TH OCTOBER, 2007. AS HIS RETURN WAS SELECTED FOR SCRUTINY, HE HAD AUTHORIZED SHRI ASHIS H PANDYA TO REPRESENT THE CASE BEFORE ITO, GODHRA. ACCORDINGLY, WHATEVER NOT ICES RECEIVED FROM THE ITO, GODHRA, HAD BEEN HANDED OVER TO HIM. IT WAS F AILURE ON PART OF HIS ACCOUNTANT AND HAD RESULTED HIGH PITCH EX PARTE ASS ESSMENT IN HAS CASE. AFTER RECEIVING THE ASSESSMENT ORDER FOR A.Y. 07-08 , IT WAS DISCUSSED THAT SHRI ASHISH PANDYA, ACCOUNTANT, BUT, HE AGAIN HAD GIVEN ASSURANCE THAT THESE ADDITIONS WOULD BE DELETED IN APPEAL BY THE CIT(A)- VI, BARODA. HE, ACCORDINGLY, ARRANGED C.A., SHRI Y. M. SHAH TO REPR ESENT THE CASE BEFORE THE CIT(A). THE APPELLANT ALSO MET WITH C.A. AND ON DI SCUSSION, IT WAS FOUND THAT HE WOULD GET RELIEF FROM HIM. ON 27 TH OCTOBER,2010, THE APPELLANT SENT HIS SON ALONG WITH ACCOUNTANT AND C.A. TO APPEAR BEFORE THE CIT(A)-VI, BARODA. LATER ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 7 ON, ALL NOTICES RECEIVED FROM THE CIT(A)-VI, BARODA , HAD BEEN HANDED OVER TO HIM. WHEN CASE WAS FINALLY DECIDED FOR HEARING ON 31 ST JANUARY, 2011 BY THE CIT(A), HE REQUESTED TO SHRI PANDYA, ACCOUNTANT, ON TELEPHONE THAT HE WAS OUT OF STATION AND RETURNED BACK ON 1 ST FEBRUARY,2011 IN PAVAGARH ON 31.01.2011. SHRI Y.M. SHAH, C.A. AND SHRI CHANDERP RAKASH, SON OF THE ASSESSEE, HAD ATTENDED ON 31.01.2011 THE LD. CIT(A) -VI, BARODA AND REQUESTED TO GIVE TWO MORE DAYS TIME TO MAKE COMPLI ANCE OF THE NOTICE. BUT, LD. CIT(A) HAS REFUSED TO ALLOW EVEN A DAY TIME AND HE DECIDED THE CASE ON 31.01.2011. LD. A.R. ALSO PRODUCED COMPLETE BOOKS OF ACCOUNTS FOR VERIFICATION BEFORE BENCH TO PROVE THAT THERE IS NO CHANCE OF LICKAGE OF REVENUE AS ALL THE PAYMENTS WERE RECEIVED THROUGH C HEQUE FROM THE COMPANIES. HE FURTHER, DRAWN OUR ATTENTION ON TOTA L RECEIPTS WHICH WERE MAINLY FROM PANCHMAHAL STEEL LTD., KALOL, AT RS. 1, 13,64,962/-. THE ASSESSEE HAD SUPPLIED LABOUR TO PANCHMAHAL STEEL LTD. ON WHI CH TDS HAD BEEN DEDUCTED BY THE COMPANY. THE APPELLANT HAD PAID PR OVIDENT FUND, ESI ON LABOUR PAYMENTS. HE ALSO FILED THE COPY OF PAYMENT S MADE BY HIM WHICH SHOWS THAT HOW MANY PERSONS AND WHAT RATE OF PER PE RSON WAS GIVEN TO HIM BY PANCHMAHAL STEEL LTD FOR VARIOUS DEPARTMENTS OF THE COMPANY. HE FURTHER, ALSO FILED THE COPY OF AUDIT REPORT FOR TH E YEAR UNDER CONSIDERATION AND ALSO COPY OF THE CIT(A) ORDER FOR A.Y. 05-06 WHEREI N ADDITION OF RS. 11,21,580/- ON ACCOUNT OF DEBTORS HAD BEEN DELETED BY THE CIT(A). THE A.O., IN A.Y. 05-06, HAS CALCULATED NET PROFIT @ 5% ON TO TAL RECEIPTS WHICH HAS BEEN ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 8 REDUCED BY THE LD. CIT(A) TO @ 3.5%. HE, FURTHER C ONTENDED THAT THERE IS VERY SMALL MARGIN IN THIS BUSINESS AND ASSESSEES PAST R ETURN HAD BEEN ACCEPTED BY THE DEPARTMENT WITH MINOR ADDITION. THEREFORE, HE PRAYED TO DELETE THE ADDITION. FROM THE SIDE OF THE REVENUE, LD.SR.D.R. VEHEMENTLY RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND ARGUED THAT THE APPELLANT HAD BEEN PROVIDED SUFFICIENT OPPORTUNITY BY BOTH THE AUTHORITIES, BUT , THE APPELLANT HAD NOT COOPERATED. THUS, HE REQUESTED TO CONFIRM THE ADDI TION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT HAD SHOWN NET PROFIT RATE @ 1.52% WHICH IS BETTER COMPARE TO IMMEDIATE PRECEDING YEAR I.E. .99%. THE GROSS RECEIPTS ARE MORE OR LESS SAME. THE LABOUR EXPENDITURE HAD REDUCED T O SOME EXTENT. OTHER EXPENSES ALSO HAD BEEN SUBSTANTIALLY GONE DOWN. TH E APPELLANT HAD DEBITED LABOUR EXPENSES OF RS.96,92,266/-, PL ENCASHMENT RS .3,20,391/-, BONUS 1,35,00/-, OVER TIME EXPENSES RS.21,22,540/- & SERV ICE TAX 12,51,390/- IN THE P&L ACCOUNT. THUS, TOTAL EXPENDITURE AT RS.1, 35,21,587/- WAS DEBITED IN THE P&L ACCOUNT. HARDLY DIFFERENCE BETWEEN TOTAL G ROSS RECEIPTS AND EXPENDITURE AS RS. 3,45,796/- IS REMAINED. THE ASS ESSEE HAD NOT COOPERATED TO THE LOWER AUTHORITIES AND HEAVILY RELIED ON THE ACCOUNTANT AND LEGAL REPRESENTATIVE, IN PAST, ALSO CERTAIN ADDITIONS HAD BEEN CONFIRMED BY THE CIT(A) WHICH HAD NOT BEEN CHALLENGED BEFORE THE ITA T. THUS, IN THE INTEREST OF JUSTICE, WE CONFIRM THE ADDITION OF RS.1.5 LACS IN ADDITION TO INCOME DISCLOSED BY THE APPELLANT. AS TOTAL ADDITION OF R S. 1.5 LAC HAS BEEN CONFIRMED ITA NO. 1013/AHD/11 A.Y. 07-08 PAGE 9 BY THIS BENCH, THEREFORE, NO OTHER ADDITION AS PER GROUND NOS. 2 & 3 ARE REQUIRED. THUS, WE ALLOW THE APPEAL PARTLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 14/12/2012 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 12.12.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 13.12.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 14/12/2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 14/12/2012