The ACIT, Circle-1, RAJKOT-GUJARAT V. Jitendra G. Patel Project Ltd., RAJKOT-GUJARAT

ITA 1103/RJT/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50002 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.1103 & 1104/RJT/2009 (ASSESSMENT YEARS 2005-06 & 2006-07) ACIT, CIR.1 VS JITENDRA G PATEL PROJECTS LTD RAJKOT USHA KIRAN APARTMENT SARDARNAGAR, MAIN ROAD RAJKOT PAN : AABCJ3182G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVINASH KUMAR RESPONDENT BY : SHRI DM RINDANI O R D E R PER AL GEHLOT, AM THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE ORDER DATED 20-08- 2009 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPE ALS), RAJKOT FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. ITA NO.1103/RJT/2009 (AY 2005-06) 2. STARTING WITH THE APPEAL FOR ASSESSMENT YEAR 200 5-06, THE FIRST GROUND RAISED IS AGAINST THE ORDER OF CIT(A) DIRECTING TO GRANT PART RELIEF OF RS.1,75,100 OUT OF THE TOTAL ADDITION OF RS.3,10,100 U/S 40(A)(IA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE MADE FO LLOWING PAYMENT WITHOUT DEDUCTING TAX AT SOURCE AND THEREFORE, COMMITTED DEFAULT U/S 194-I OF THE ACT: SR.NO. NAME OF THE PARTY DATE AMOUNT PAID / CREDITED NATURE OF WORK 1 M/S TIRUPATI CONSTRUCTION 15-04- 2004 50,000 VEHICLE RENT 2 -DO- 17-05- 2004 40,100 -DO- 3 M/S PATEL EARTH MOVER 31-03- 2005 135000 -DO- 4 M/S SHRADDHADEE P 31-03- 2005 85000 -DO- ITA NO.1103 & 1104/RJT/2009 2 CONSTRUCTION TOTAL 310100 THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.3,10,100. THE CIT(A) DELETED THE ADDITION OF RS.1,75,100 (RS.50,000 + RS.40,100 AND RS.85,000 ON THE GROUND THAT THE AMOUNTS PAID TO INDIVIDUAL PARTIES DID NOT EXCEED R S.1,20,000. THEREFORE, THERE IS NO NEED FOR DISALLOWING THESE AMOUNTS U/S 40(A)(IA) OF THE ACT. IN THE LIGHT OF THAT CLEAR FINDING, THE ORDER OF CIT(A) IS CONFIRMED. 3. THE SECOND GROUND IS IN RESPECT OF DELETION OF A DDITION OF RS. 2,75,000 OUT OF RS. 3 LAKHS ON ACCOUNT OF GROSS PROFIT. DURING THE ASS ESSMENT PROCEEDINGS IT WAS NOTICED THAT TOTAL TURNOVER OF THE ASSESSEE WAS RS.31.63 CR ORES WITH THE GROSS PROFIT OF RS.2.94 CRORES AND NET PROFIT OF RS.78.49 LAKHS. THE NET P ROFIT PERCENTAGE WAS RS.2.48% WHEREAS, THE ASSESSING OFFICER FOUND THAT THERE WAS NET PROFIT OF 2.96% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSI NG OFFICER ASKED FOR A CLARIFICATION. IT HAS ALSO BEEN NOTICED BY THE ASSESSING OFFICER T HAT THERE WERE CERTAIN IRREGULARITIES. SOME OF THE VOUCHERS WERE FOUND MISSING, SOME OF TH EM WERE WITHOUT RECIPIENTS SIGNATURE, SOME OF THEM WERE WITHOUT DATE AND SOME OF THEM WERE WITHOUT DESCRIPTION OF THE WORK DONE. AFTER CONSIDERING ASSESSEES REPLY , THE ASSESSING OFFICER ESTIMATED LUMP SUM ADDITION OF RS.3 LAKHS TO COVER UP THE POS SIBLE LEAKAGES IN THE PROFIT. THE CIT(A) DID NOT AGREE WITH THE ASSESSING OFFICER. T HE CIT(A) NOTED THAT THE FALL IN PROFIT WAS NOT SUBSTANTIAL; IT WAS ONLY 0.48%. THE CIT(A) NOTED THAT BY RESTRICTING THE CLAIM OF DEDUCTION U/S 80IA AT RS.32.98 LAKHS, THE RATIO OF GROSS PROFIT WOULD GO UP. THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON ACCO UNT OF GROSS PROFIT, BUT HE MADE LUMP SUM ADDITION ON ACCOUNT OF EXPENDITURE AS VOUCHERS WERE NOT PROPER. THE CIT(A) NOTED THAT THE ASSESSING OFFICER DID NOT MAKE OUT A STRON G CASE. HE ACCORDINGLY RESTRICTED DISALLOWANCE TO RS.25,000 INSTEAD OF RS.3 LAKHS. 4. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES WE FIND THAT IT IS A CASE OF ESTIMATION UNDER THE CIRCUMSTANCES, WHERE THE ASSES SEE DID NOT MAINTAIN DETAILS OF PROPER VOUCHERS. THE ASSESSING OFFICER WAS OF THE VIEW THAT TO COVER UP THESE LEAKAGES ADDITION OF RS.3 LAKHS IS REASONABLE WHEREAS THE CI T(A) FOUND THAT THE ADDITION OF RS.25,000 IS REASONABLE. THE CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF RS.25,000 AFTER CONSIDERING THE MATERIAL ON RECORD AND AFTER CONSIDERING THE ASSESSEES SUBMISSION. BEFORE US, THE REVENUE DID NOT FURNISH ANY MATERIAL OR EVIDENCE WHICH COULD ITA NO.1103 & 1104/RJT/2009 3 BE POINTED OUT TO US FROM RECORD BASED ON WHICH A D IFFERENT ESTIMATION CAN BE MADE AT THIS STAGE. SINCE THERE IS NO CONTRARY MATERIAL TO THE FINDING OF THE CIT(A), WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A). ACCORD INGLY WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE ALSO. 5. GROUND NO.3 IS IN RESPECT OF GRANTING RELIEF OF RS.4,54,716 OUT OF ADDITION OF RS.5,04,716 MADE ON ACCOUNT OF ADMINISTRATIVE EXPEN SES. THE ASSESSING OFFICER DISALLOWED RS.5,04,716 BEING 5% OF KITCHEN EXPENSES , PETROL & DIESEL EXPENSES SINCE THE ASSESSING OFFICER NOTICED SOME DISCREPANCIES IN THE VOUCHERS OF THESE EXPENSES MAINTAINED BY THE ASSESSEE. THE CIT(A), AFTER CONS IDERING ASSESSEES SUBMISSION THAT THE ASSESSEE COMPANY IS ENGAGED IN CIVIL CONSTRUCTI ON AT SITES WHERE THE WORK WAS BEING CARRIED OUT WERE LOCATED MOSTLY IN REMOTE ARE AS, AREAS WHERE NO FACILITY OF LODGING AND BOARDING WERE AVAILABLE. THE ASSESSEE HAD TO M AINTAIN A KITCHEN FOR THEIR STAFF AND WORKERS. THE DISCREPANCY IN VOUCHERS POINTED OUT B Y THE ASSESSING OFFICER WERE NOT SIGNIFICANT ENOUGH TO GO FOR HUGE DISALLOWANCE UNLE SS THEY WERE FOUND TO BE BOGUS BY THE ASSESSING OFFICER, THE CIT(A) OBSERVED. THE CI T(A) ACCORDINGLY REDUCED THE DISALLOWANCE TO THE EXTENT OF RS.50,000. 6. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF ADHOC DISAL LOWANCE BEING 5% OUT OF KITCHEN, PETROL AND DIESEL EXPENSES ON ACCOUNT OF SOME DISCR EPANCIES IN THE VOUCHERS. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE CLAIM OF THE ASSESSEE WAS A BOGUS CLAIM OR THE EXPENSES INCURRED WAS NOT FOR THE PURPOSE OF BUSINE SS. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSION AND AFTER CONSIDERING BUSINES S ACTIVITY OF THE ASSESSEE TO COVER THE LEAKAGES SUSTAINED THE ADDITION OF RS.50,000. AS PER THE DISCUSSION MADE WHILE DECIDING GROUND NO.2 THAT IT IS A CASE OF ESTIMATIO N AND CONSIDERING THAT DISCUSSION WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). WE, THEREFORE, CONFIRM THE ORDER OF CIT(A) ON THE ISSUE. GROUND 3 OF THE REVENUE FAILS . 7. THE FOURTH GROUND IS IN RESPECT OF CIT(A) DIRECT ING RELIEF OF RS.1 LAKH OUT OF ADDITION OF RS.1,22,543 MADE ON ACCOUNT OF ADMINIST RATIVE EXPENSES BY THE CIT(A). THE ASSESSING OFFICER DISALLOWED RS.1,22,543 BEING 10% OF THE EXPENSES SUCH AS VEHICLE RENT / TRAVELING / TELEPHONE AND MOBILE CHARGES. T HE ASSESSING OFFICER FOUND THAT THESE EXPENSES CONTAINED SOME PERSONAL ELEMENT. THE CIT( A), AFTER CONSIDERING ASSESSEES ITA NO.1103 & 1104/RJT/2009 4 SUBMISSION RESTRICTED THE DISALLOWANCE TO THE EXTEN T OF RS.22,543 AND ALLOWED RELIEF OF RS.1 LAKH. 8. AFTER HEARING LEARNED REPRESENTATIVES OF THE PAR TIES, WE ARE OF THE VIEW THAT THE PERSONAL ELEMENT OF EXPENSES CLAIMED BY THE ASSESSE E TOWARDS VEHICLE RENT, TRAVELING, TELEPHONE AND MOBILE CHARGES CANNOT BE RULED OUT. NOW THE QUESTION IS ESTIMATION ON ACCOUNT OF PERSONAL EXPENSES. THE ASSESSING OFFICE R ESTIMATED 10% DISALLOWANCE. THE CIT(A) FOUND THAT DISALLOWANCE TO THE EXTENT OF RS. 22,543 IS REASONABLE. IN THE LIGHT OF DISCUSSION MADE WHILE DECIDING GROUNDS NO.2 & 3 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A). GROUND 4 IS REJECTED. ITA NO.1104/RJT/2009 AY 2006-07 9. THE FIRST GROUND IS IN RESPECT OF DISALLOWANCE M ADE U/S 40(A)(IA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAS CLAIMED LABOUR EXPENSES TO THE FOLLOWING PARTIES AN D NO TAX WAS DEDUCTED AT SOURCE: SR NO. NAME OF PARTY DATE OF PAYMENT / CREDIT AMOUNT REMARKS 1 PIRAMID CONSTRUCTION 08.04.2005 50,000 2 KIRITKUMAR PATEL 04.04.2005 39,000 PAID BY CHEQUE NO.177124 DATED 04.04.2005 3 PREMDAS TIWARI 16.05.2005 47,000 PAID BY SINGLE CHEQUE NO.25366 DATED 16.05.2005 4 NARENDRA J PATEL 17.06.2005 39,000 - 5 AMBICA ENG. & STEEL WORKS, SRT 25-07-2005 19,311 - 6 -DO- 23-08-2005 28,740 - 7 -DO- 08-10-2005 9,360 - 8 DINESH RATILAL 22-12-2005 139920 - 9 V.M. PATEL 01-03-2006 45509 - TOTAL 4,17,840 IN ADDITION TO ABOVE AMOUNT, THE ASSESSING OFFICER HAS ALSO NOTICED THAT IN CASE OF GAYATRI ENTERPRISES, THE ASSESSEE CREDITED TOTAL BI LLS OF RS.23,26,701. THE TAX AT SOURCE SHOULD HAVE BEEN DEDUCTED AT 1.13% WHICH WORKS OUT TO RS.30,247 BUT AS PER TDS FORM ITA NO.1103 & 1104/RJT/2009 5 NO.16A, THE TOTAL TAX DEDUCTED WAS RS.15,481. THER EFORE, THERE WAS A SHORT DEDUCTION OF TAX BY THE ASSESSEE FOR RS.14,766. THE ASSESSIN G OFFICER WORKED OUT THE PROPORTIONATE PAYMENT ON WHICH THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE AT RS.11,35,846. THE TOTAL DISALLOWANCE THUS WORKED OUT BY THE ASSESSING OFFICER CAME TO RS.16,63,244. ACCORDINGLY, THE ASSESSING OFFICER M ADE ADDITION OF RS. 16,63,244 U/S 40(A)(IA) OF THE ACT. 10. THE CIT(A) NOTED THAT THE ABOVE PAYMENTS TABULA TED WERE MADE IN LUMP SUM. BUT AS PER THE ASSESSEE, THE AMOUNTS WERE PAID IN P IECEMEALS. AS THE PAYMENTS WERE MADE BY CHEQUES TO KIRITKUMAR PATEL AND PREMDAS TIW ARI AND THE PAYMENTS EXCEEDED RS.20000/-, DISALLOWANCE OF THE SAID AMOUNTS OF RS. 39000/-, AND RS.47000/- IS CONFIRMED. LIKEWISE, THE AMOUNT DISALLOWED OF RS.1 399920 IN THE CASE OF DINESH RATILAL IS ALSO TO BE CONFIRMED AS THE TOTAL AMOUNT EXCEEDE D RS.5000/-. FURTHER, THE CIT(A) OBSERVED THAT THE SAME IS THE POSITION WITH REGARD TO AMBICA ENGG & STEEL WORKS, SRT WHERE THE AMOUNT PAID WERE IN EXCESS OF RS.50,000 I .E. RS.19,311, RS.28,740 AND RS.9,360. AS REGARDS THE PAYMENT TO PYRAMID CONSTRU CTION OF RS.50,000 AND SHRI NARENDRA J PATEL RS.39,000 AND SHRI VM PATEL RS.45, 509 FOR WHICH THE ASSESSEE SUBMITTED THAT THE AMOUNTS WERE CREDITED ON A SINGL E DATE AND THAT THE AMOUNTS WERE PAID IN SMALL QUANTITY COVERING NUMBER OF DAYS AND THERE WAS NO SINGLE PAYMENT EXCEEDING RS.20,000. LIKEWISE IN CASE OF SMT.VIJAYA BEN P BHATODI A SHORT DEDUCTION OF TAX WAS CALCULATED AT RS.1,238 AND ACCORDINGLY A PR OPORTIONATE DISALLOWANCE OF RS.1,09,558 WAS MADE. HOWEVER, THE CIT(A) DIRECTED THE ASSESSEE TO SUBMIT THE VOUCHERS FOR THE PERUSAL OF THE ASSESSING OFFICER, WHO WILL DERIVE SATISFACTION. AS REGARDS THE DISALLOWANCE OF PAYMENT MADE TO GAYATRI ENTERPR ISES AND SMT. VIJAYABEN P BHALODI, THE CIT(A) DIRECTED THE ASSESSEE TO PRODUCE THE REL EVANT TDS CERTIFICATE AS PROOF FOR THE PERUSAL OF THE ASSESSING OFFICER BEFORE HE ALLOWED THE SAID SUMS. 11. THE LD.DR AT THE OUTSET SUBMITTED THAT THE CIT( A) HAS GIVEN DIRECTION TO THE ASSESSING OFFICER WHICH IS BEYOND HIS POWER U/S 250 (1) AFTER 01 ST JUNE, 2001. 12. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES. WE FIND FORCE IN THE SUBMISSIONS OF THE LD.DEPARTMENTAL REPRESENTATIVE T HAT THE CIT(A) DIRECTED ASSESSEE TO PRODUCE CERTAIN VOUCHERS AND TDS CERTIFICATES AND T HE ASSESSING OFFICER AFTER VERIFICATION OF THESE MATERIALS IS DIRECTED TO DECIDE THE ISSUE. THIS DIRECTION OF THE CIT(A) IS CONTRARY ITA NO.1103 & 1104/RJT/2009 6 TO THE PROVISIONS OF SECTION 250(1) OF THE ACT. WE , THEREFORE, THINK PROPER TO SEND BACK THIS MATTER TO THE FILE OF THE CIT(A) WITH DIRECTIO N TO DECIDE THOSE ITEMS WHICH HAVE BEEN SENT BACK TO AO BY THE CIT(A) AT HIS LEVEL INSTEAD OF SENDING BACK THE SAME TO THE ASSESSING OFFICER AFTER PROVIDING OPPORTUNITY OF HE ARING TO BOTH THE SIDES. 13. GROUNDS 2 & 3 ARE IN RESPECT OF DELETION OF ADD ITION OF RS.2,75,000 OUT OF TOTAL ADDITION OF RS.3 LAKHS ON ACCOUNT OF GROSS PROFIT A ND DELETION OF RS.2,50,000 OUT OF TOTAL ADDITION OF RS.3 LAKHS OUT OF ADMINISTRATIVE EXPENS ES. THE FACTS OF BOTH THE GROUNDS ARE IDENTICAL TO THE FACTS DECIDED IN ASSESSMENT YEAR 2 005-06. CONSIDERING THE DETAILED DISCUSSION ON THESE ISSUES WE ARE INCLINED TO UPHOL D THE ORDER OF THE CIT(A) IN THIS CASE ALSO. 14. IN THE RESULT APPEAL FOR ASSESSMENT YEAR 2005-0 6 IS DISMISSED AND THE APPEAL FOR ASSESSMENT YEAR 2006-07 IS TREATED AS PARTLY ALLOWE D, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29-04-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 29 TH APRIL, 2011 PK/- COPY TO: 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, RAJKOT 2. SHRI JITENDRA G. PATEL, RAJKOT 3. THE CIT(A)-I, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT