ACIT, Circle-1, Warangal V. Shri Challa Linga Reddy, Warangal

ITA 1174/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53689 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S RAMA RAO
• Assessee Lawyers: V SRINIVAS
• Keywords: Business expenditure; Additional evidence
• Section: 40A(3); 142(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYA RAGHAVAN, JUDICIAL MEMBER ITA NO.1174/HYD/2011 ASSESSMENT YEAR 2007-08 THE ACIT, CIRCLE - 1, WARANGAL VS SHRI CHAL LA LINGA REDDY, WARANGAL (ACEPC 1921 C) APPELLANT RESPONDENT CO.56/HYD/2011 IN ITA NO.1174/HYD/2011 ASSESSMENT YEAR 2007-08 SHRI CHALLA LINGA REDDY, WARANGAL (ACEPC 1921 C) VS THE ACIT, CIRCLE - 1, WARANGAL APPELLANT RESPONDENT ASSESSEE BY : SHRI V. SRINIVAS REVENUE BY : SHRI S. RAMA RAO DATE OF HEARING : 28.9.2011 DATE OF PRONOUNCEMENT : 13.10.2011 ORDER PER ASHA VIJAYA RAGHAVAN, J.M. THESE ARE CROSS APPEALS PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) VI, HYDERABAD DATED 31.3.2011 AND PE RTAINS TO THE ASSESSMENT YEAR 2007-08. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HEREIN IS AN INDIVIDUAL DERIVING INCOME FROM CIVIL CONTRACTS. FOR THE ASSESSMENT YEAR 2007-08, HE FILED THE RETURN OF INC OME ON 2.11.2007 AND LATER ON 13.11.2007 ADMITTING AN INCO ME OF ITA NO.1174 OF 2011, CO.56 OF 2011 SHRI CHALLAN LINGA REDDY, WARANGAL 2 RS.30,60,430/-. THE ASSESSING OFFICER HAS ISSUED N OTICES U/S 143(2) AND 142(1) AND COMPLETED THE ASSESSMENT BY ESTIMATING THE NET INCOME AT 8% OF THE GROSS CONTRA CT RECEIPTS AND REDUCED THE PAYMENTS TO THE SUB CONTRA CTORS. THE ASSESSING OFFICER ARRIVED AT NET INCOME OF RS.37,84,322/- UNDER THE HEAD BUSINESS. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER AD DED CERTAIN CREDITS AMOUNTING TO RS.38,55,000/- BY APPL YING PROVISIONS OF SECTION 68 OF THE IT ACT. FURTHER, T HE ASSESSING OFFICER HAS DISALLOWED CASH PAYMENTS U/S 40A(3) OF THE ACT. THE ASSESSING OFFICER HELD THAT THE OU TSTANDING LIABILITIES AGGREGATING TO RS.53,11,800/- UNDER THR EE HEADS WERE NOT PROVED AND HENCE MADE AN ADDITION OF THE A MOUNT OF RS.53,11,800/-. FURTHER, THE ASSESSING OFFICER HELD THAT THE AMOUNT DUE TO SHRI ROSY REDDY WAS NOT PROPERLY EXPLAINED AND MADE AN ADDITION OF RS.11 LAKHS. BES IDES, THE ASSESSING OFFICER CHARGED INTEREST U/S 234A & 2 34B OF THE IT ACT. AGGRIEVED WITH THE ORDER OF THE ASSE SSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A). THE CIT(A) PARTLY CONFIRMED THE ADDITION MADE BY TH E ASSESSING OFFICER HOLDING THAT IN THE CASE OF SHRI B. SATHI REDDY, SHRI CH. SUBHASH AND SHRI DHARMA, THE CONFIRMATION LETTERS WERE NOT FILED TO PROVE THE GE NUINENESS OF THE CREDITORS AND CONFIRMED THE ADDITION OF RS.10,45,000/-. WITH RESPECT TO THE BALANCE CREDITS AMOUNTING TO RS.28,10,000/-, THE CIT(A) DELETED TH E ADDITION BY HOLDING THAT THE ASSESSEE HAS DISCHARGE D THE ONUS AS THE LETTERS OF CONFIRMATION FROM THE CREDIT ORS HAVE BEEN FILED. 4. WITH RESPECT TO DISALLOWANCE MADE BY THE ASSESS ING OFFICER U/S 40A(3) OF THE IT ACT, THE CIT(A) DELETE D THE ITA NO.1174 OF 2011, CO.56 OF 2011 SHRI CHALLAN LINGA REDDY, WARANGAL 3 ADDITION. THE CIT(A) OBSERVED THAT THE STATEMENT S HOWING THE DEDUCTION MADE BY THE EXECUTIVE ENGINEER, TRIBA L WELFARE INDICATES THAT AN AMOUNT OF RS.16 LAKHS WAS DEDUCTED TOWARDS SUPPLY OF RICE TO THE LABOURERS EN GAGED IN LAYING THE ROAD AND ONLY AN AMOUNT OF RS.30,20,884/ - WAS PAID. AS THE ASSESSEE RECORDED GROSS CONTRACT RECE IPTS, THE BOOKS OF ACCOUNTS AN AMOUNT OF RS.16 LAKHS WAS DEBI TED TO THE PROFIT AND LOSS ACCOUNT AND HENCE THE SAID AMOU NT ACTUALLY REPRESENTS THE RECOVERY MADE AND NOT THE EXPENDITURE INCURRED BY THE ASSESSEE. 5. FURTHER, WITH RESPECT TO THE ADDITION OF RS.53,11,800/- BEING THE OUTSTANDING LIABILITY AS A PPEARING IN THE BALANCE SHEET, THE CIT(A) HELD THAT IN SO FA R AS THE AMOUNTS OF OUTSTANDING ARE CONCERNED, THE ASSESSEE PROVED THAT SUCH PAYMENTS HAVE BEEN MADE IN THE SUCCEEDING YEAR AND, THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIF IED IN MAKING ANY ADDITION ON THIS ACCOUNT. THEREFORE, TH E ADDITION OF RS.53,11,800/- IS DELETED. 6. AN ADDITION OF RS.11 LAKHS WAS MADE BY THE ASSESSING OFFICER HOLDING THAT THE AMOUNT TO SHRI R OSY REDDY WAS NOT PROPERLY EXPLAINED. THE LEARNED AUTH ORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT T HE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND T HAT NO EVIDENCE WAS FILED BY THE ASSESSEE. THE ASSESSEE S UBMITTED THAT THE SAID AMOUNT WAS PAID IN THE IMMEDIATELY SUCCEEDING YEAR AND THERE IS NO EVIDENCE BY THE DEP ARTMENT TO SHOW THAT THE SAID AMOUNT WAS PAID DURING THE YE AR UNDER CONSIDERATION. FURTHER, THE ASSESSING OFFICE R DID NOT FIND THAT THE SUPPLY OF MATERIAL AS RECORDED IN THE BOOKS OF ACCOUNTS IS NOT GENUINE. ITA NO.1174 OF 2011, CO.56 OF 2011 SHRI CHALLAN LINGA REDDY, WARANGAL 4 7. THE CIT(A) DELETED THE ADDITION OF RS.11 LAKHS BEING CONVINCED BY THE SUBMISSIONS MADE BY THE ASSESSEE. AGGRIEVED AGAINST THIS, THE REVENUE IS IN APPEAL BE FORE US AND RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) HAS ERRED ON BOTH FACTS AND LAW 2. THE CIT(A) ERRED IN DELETING DISALLOWANCE MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF NEW CREDITS INTRODUCED BY THE ASSESSEE. SINCE THE IDENTITY, CR EDIT WORTHINESS AND GENUINENESS OF TRANSACTION WAS NOT PROVED BY THE ASSESSEE. FURTHER, THE CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE IN RESPECT OF SOME OF THE LOAN CREDITORS WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THEIR IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. 3. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH PAYMENTS BY THE ASSESSEE SINCE THE CASH PAYMENTS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40(A)(3) OF THE IT ACT, 1961 AND CIT(A) HAS RELIED ON THE ADDITIONA L EVIDENCE FURNISHED BY THE ASSESSEE IN CONTRAVENTION TO RULE 46A OF THE IT ACT, 1961. 4. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANC E MADE BY THE ASSESSING OFFICER OF THE EXPENDITURE CLAIMED ON ACCOUNT OF OUTSTANDING LIABILITY SINCE EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT PROVED GENUINE AS THE ASSESSEE NOT PROVIDED DETAILS HENCE THE SAME IS NOT ALLOWABLE BUSINESS EXPENDITURE AND CIT( A) ITA NO.1174 OF 2011, CO.56 OF 2011 SHRI CHALLAN LINGA REDDY, WARANGAL 5 HAS RELIED ON THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE IN CONTRAVENTION TO RULE 46A OF THE IT ACT , 1961. 5. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANC E MADE BY THE ASSESSING OFFICER OF THE EXPENDITURE CLAIMED ON ACCOUNT OF METAL SUPPLY (ROSI REDDY). SI NCE THE EXPENDITURE/OUTSTANDING LIABILITY CLAIMED BY TH E ASSESSEE NOT PROVED GENUINE, IS NOT ALLOWABLE BUSINESS EXPENDITURE AND CIT(A) HAS RELIED ON THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE IN CONTRAVENTION TO RULE 46A OF THE IT ACT, 1961. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 8. AND THE ASSESSEE FILED CROSS OBJECTION AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED IN CONFIRMING THE FOLLOWING ADDITIONS MADE BY THE ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECTION 68 OF THE IT ACT. A) B. SATHI REDDY RS.5,00,000 B) CH. SUBHASH REDDY RS.2,45,000 C) G. DHARMA RS.3,00,000 2. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 9. AT THE TIME OF HEARING BEFORE US SHRI V. SRINIV AS, THE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THA T THE ITA NO.1174 OF 2011, CO.56 OF 2011 SHRI CHALLAN LINGA REDDY, WARANGAL 6 CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE IN RESPECT OF SOME OF THE LOAN CREDITORS WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THEIR IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. AG AIN WITH RESPECT TO DISALLOWANCE UNDER SECTION 40A(3), THE DEPARTMENT REPRESENTATIVE STRESSED THAT THE CIT(A) HAD NOT GIVEN AN OPPORTUNITY UNDER RULE 46A OF THE ACT. TH E SAME WAS THE POINT RAISED BY THE DEPARTMENT WITH RESPECT TO THE OTHER TWO GROUNDS ALLOWED BY THE CIT(A). THE LEARN ED COUNSEL FOR THE ASSESSEE HAS ALSO CONCEDED THAT THE MATTER SHOULD BE SENT BACK TO THE ASSESSING OFFICER TO GO THROUGH THE DETAILS WHICH WERE FURNISHED BY HIM BEFORE THE CIT(A). UNDER THESE CIRCUMSTANCES, WE DEEM IT FIT TO RESTOR E THE ISSUES TO THE FILE OF THE ASSESSING OFFICER WHO SHA LL DECIDE THE ISSUES IN ACCORDANCE WITH LAW, AFTER APPRECIATI NG THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE AFTE R GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE. 10. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 13. 10.2011 S D/ - (CHANDRA POOJARI) S D/ - (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH OCTOBER, 2011 ITA NO.1174 OF 2011, CO.56 OF 2011 SHRI CHALLAN LINGA REDDY, WARANGAL 7 COPY FORWARDED TO: 1. THE ACIT, CIRCLE 1, WARANGAL 2. SHRI CHALLA LINGA REDDY, H.NO.5-10-31/1, KISHANPURA, HANAMKONDA, WARANGAL 3. THE CIT(A) VI, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/