M/s Great India Steel Fabricators, Yamunanagar V. DCIT, Yamunanagar

ITA 1108/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5138 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 31-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 1108/CHD/2016 ASSESSMENT YEAR: 2012-13 M/S GREAT INDIA STEEL FABRICATORS, VS. THE DCIT, YAMUNANAGAR YAMUNANAGAR PAN NO. AAEFG7595E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHOK GOYAL RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 20.04.2017 DATE OF PRONOUNCEMENT : 19.05.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 29.08.2016 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)], PANCHKULA. 2. THE ASSESSEE IS AGGRIEVED BY THE ACTION OF THE C IT(A) IN CONFIRMING DISALLOWANCE OF RS. 64,19,820/- (THE ACTUAL FIGURE CLAIMED BY THE ASSESSEE 2 IS RS. 50,87,512/-) MADE BY THE ASSESSING OFFICER O UT OF PAYMENTS MADE TO CONTRACTORS AS FABRICATION CHARGES. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF FABRICATION AND ERECTION OF MACH INERY EQUIPMENTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTED FROM PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT T HE ASSESSEE FIRM HAD SHOWED DEBIT OF FABRICATION CHARGES OF RS. 1,79,35, 068/- BOOKED IN THE NAME OF 12 CONTRACTORS. TO VERIFY THE GENUINENESS O F THE PAYMENTS, THE ASSESSING OFFICER (HEREIN REFEREED TO AO') ISSUED SUMMONS TO ALL THE 12 CONTRACTORS. THE ASSESSEE PRODUCED 08 CONTRACTORS O UT OF THE 12 CONTRACTORS WHO WERE EXAMINED. THE ASSESSEE, HOWEVER, COULD NO T PRODUCE THE REMAINING FOUR CONTRACTORS NAMELY SHRI MAHESH CHAND ER, MOHD. ASHRAF ZAKARIA, SH. MANGE RAM AND SH. DUSHYANT KAUSHIK. TH E ASSESSING OFFICER HELD THAT ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE PAYMENT MADE TO THE ABOVE STATED FOUR CONTRACTORS. HENCE, THE ASSES SING OFFICER DISALLOWED THE AMOUNT CLAIMED TO HAVE BEEN PAID TO THE ABOVE S TATED FOUR CONTRACTORS FOR THEIR JOB WORK OF FABRICATION FOR WANT OF VERIF ICATION OF THE PAYMENT AND ADDED BACK THE SAME TO THE TAXABLE INCOME OF T HE ASSESSEE. BEING AGGRIEVED BY THE ADDITION, MADE BY THE ASSESSIN G OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4. THE LD. CIT(A) OBSERVED THAT THE IDENTICAL ISSU E REGARDING THE PAYMENT OF FABRICATION CHARGES HAS ALREADY BEEN DEC IDED BY HIM IN THE ASSESSEES OWN CASE OF THE EARLIER ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2010-11 WHEREIN IT HAS BEEN OBSERVED THAT OUT OF TH E ABOVE STATED FOUR 3 PERSONS, TWO PERSONS NAMELY SHRI MANGE RAM AND SH. DUSHYANT KAUSHIK WERE FOUND TO BE EMPLOYEES OF THE ASSESSEE AND THAT THE CHARGES PAID ON CONTRACT WORK TO THEM WERE BOGUS. THE CONTENTION OF THE ASSESSEE WAS THAT THE MAIN CUSTOMERS OF THE ASSESSEE WERE BHARAT HEAV Y ELECTRICALS LTD (BHEL) AND LARSON AND TOUBRO (L&T), THE FIRST ONE B EING A RENOWNED GOVERNMENT OF INDIA PUBLIC SECTOR UNDERTAKING AND T HE SECOND ONE A VERY REPUTED PRIVATE SECTOR UNDERTAKING. THE ASSESSEE WA S SUPPLIED WITH THE DESIGNS AND DRAWINGS OF THE JOB WORK WHICH AS PER T ERMS OF THE AGREEMENT WAS COVERED UNDER THE CONFIDENTIALITY CLAUSE. WIT H A VIEW TO MAINTAIN PRIVACY OF TRANSACTIONS, THE ASSESSEE HAD CHOSEN TO GET THE FABRICATION CHARGES DONE BY ITS CONTRACTORS AT ITS OWN PREMISES . THEREFORE, THE ASSESSEE HAD ENGAGED ITS OWN TECHNICAL STAFF TO DEVELOP A TE AM OF THEIR OWN WORKERS TO ACT AS ITS CONTRACTOR AND TO DO THE JOB ASSIGNED IN THE FACTORY PREMISES OF THE ASSESSEE AFTER THEIR NORMAL WORKING HOURS. THE LD. CIT(A), HOWEVER, WHILE FOLLOWING HIS DECISION IN THE EARLIER ASSESSM ENT YEAR, OBSERVED THAT DURING THE RELEVANT YEAR, OUT OF THE SAID FOUR PER SONS, TWO PERSONS SHRI MANGE RAM AND SHRI DUSHYANT KAUSHIK WERE COMMON AND IN THE EARLIER ASSESSMENT YEAR, PAYMENT CLAIMED TO BE MADE TO THEM WAS PROVED TO BE BOGUS. HE FURTHER OBSERVED THAT THE ASSESSEE DURING THE YEAR HAD ALSO FAILED TO PRODUCE THE ABOVE STATED FOUR PERSONS FOR EXAMIN ATION. HE REJECTED THE CONTENTION OF THE ASSESSEE THAT THE CIRCUMSTANCES U NDER WHICH THE ASSESSEE WAS NOT ABLE TO PRODUCE THE SAID FOUR CONTRACTORS, WHO HAD RE-LOCATED THEMSELVES IN FAR AWAY PALACES, WERE EXPLAINED TO T HE ASSESSING OFFICER. HE ALSO REJECTED THE CONTENTION OF THE ASSESSEE THA T THE INFORMATION ABOUT THE CONTRACTORS REGARDING THEIR PAN NUMBERS, LAST KNOWN ADDRESSES, DUE TAX DEDUCTION BY THE ASSESSEE WAS PROVIDED TO THE A SSESSING OFFICER AND 4 THAT EVEN THE AFFIDAVITS OF THE SAID FOUR CONTRACTO RS WERE ALSO FILED BEFORE THE ASSESSING OFFICER CONFIRMING THE PAYMENTS OF TR ANSACTIONS. THE LD. CIT(A) OBSERVED IN THIS RESPECT THAT THE ABOVE EVID ENCES PRODUCED BY THE ASSESSEE ARE NOT SUFFICIENT TO ESTABLISH THE GENUIN ENESS OF THE TRANSACTIONS; RATHER THE SAME WAS A MODUS OPERANDI ADOPTED BY THE ASSESSEE TO BOOK THE BOGUS FABRICATIONS CHARGES IN THE NAME OF ITS OWN E MPLOYEES. HE, THEREFORE, DISMISSED THE APPEAL OF THE ASSESSEE. 5. BEFORE US, THE LD. AR HAS PRODUCED A COPY OF THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL DATED 3.3.2017 PAS SED IN ITA NO. 746/CHD/2014 AND ANOTHER RELEVANT TO ASSESSMENT YE AR 2010-11 WHEREIN THE TRIBUNAL HAS REVERSED THE FINDINGS OF THE CIT( A) AND HAS HELD THAT THE ASSESSEE HAD BEEN ABLE TO DISCHARGE ITS ONUS OF PRO VING THAT THE FABRICATION CHARGES WERE INCURRED BY IT FOR THE PURPOSE OF ITS BUSINESS AND THAT THERE WAS NO REASON FOR DISALLOWANCE OF THE EXPENSES TO THE ASSESSEE AT ALL. 6. WE FURTHER FIND THAT THE FACTS OF THE YEAR UNDER CONSIDERATION ARE ON BETTER FOOTING. IN THE EARLIER ASSESSMENT YEAR 201 0-11, THE ABOVE STATED TWO CONTRACTORS NAMELY SHRI DUSHYANT KAUSHIK, AND SHRI MANGE RAM HAD DENIED ANY CONTRACT WORK DONE FOR THE ASSESSEE. HOW EVER, THE TRIBUNAL AFTER EXAMINATION OF THE DETAILED EVIDENCES PRODUCE D, HELD THAT THE ASSESSEE HAD BEEN ABLE TO PROVE THE PAYMENT OF CHAR GES TO THE ABOVE STATED TWO PERSONS. IN THE ASSESSMENT YEAR UNDER CONSIDERA TION I.E. ASSESSMENT YEAR 2012-13, THE FOUR CONTRACTORS INCLUDING THE AB OVE STATED TWO PERSONS SHRI MANGE RAN AND SHRI DUSHYANT KAUSHIK HAVE FILED THEIR DULY SWORN AFFIDAVITS CONFIRMING THE RECEIPTS OF PAYMENT ON AC COUNT OF FABRICATION 5 CHARGES. THE NECESSARY EVIDENCES SUCH AS PAN NUMBE RS, DETAILS OF TDS DEDUCTED, LAST ADDRESSES ETC. HAVE BEEN PROVIDED BY THE ASSESSEE TO THE AO AND EVEN THE SAID CONTRACTORS HAD FILED THEIR INDIV IDUAL RETURNS AND CLAIMED CREDIT FOR THE TAX DEDUCTED AT SOURCE. THE LD. CIT( A) HAS REJECTED THE EVIDENCES PRODUCED BY THE ASSESSEE IN A MECHANICAL MANNER WITHOUT PROPER APPRECIATION OF THE SAME. HE HAS JUST FOLLOW ED HIS ORDER FOR THE EARLIER ASSESSMENT YEAR 2010-11 IN THE CASE OF THE ASSESSEE, WHICH HAS BEEN REVERSED BY THE TRIBUNAL VIDE ORDER DATED 3.3.2017 (SUPRA). IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION OF THE DISALLOWANCE OF THE EXPENSES ON THE PART OF THE LOWER AUTHORITIES. THE ORDER OF THE LOWER AUTHORITIES REGARDING DISALLOWANCE OF THE ABOVE STA TED EXPENSES IS, THEREFORE, REVERSED AND THE ASSESSING OFFICER IS DI RECTED TO ALLOW THE EXPENSES INCURRED ON FABRICATION CHARGES BY THE ASS ESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.05.2017 SD/- SD/- ( ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19TH MAY, 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR