The ITO, Ward-3(4), Surat V. M/s. Orient Builders, Surat

ITA 1183/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94836 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Rejection of books of accounts
• Section: 44AD; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ ITA NOS. 1183 & 2076/AHD/2010 / ASSESSMENT YEAR: 2006-07 & 2007-08 ITO, WARD 3(4), SURAT .. APPELLANT VS M/S. ORIENT BUILDERS A-301, YOGI COMPLEX, OPP. PATEL WADI, NEW RANDER ROAD, SURAT .. RESPONDENT PAN : AAAFO 4669 H REVENUE BY MS. S ANYOGITA NAGPAL, SR DR ASSESSEE(S) BY SHRI M.K. PATEL , AR / DATE OF HEARING 03/12/2015 /DATE OF PRONOUNCEMENT 08/12/2015 / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST RESPECTIVE ORDERS OF THE COMMISSIONER OF IN COME TAX (APPEALS)-II, SURAT, DATED 12.01.2010 AND 29.03.201 0 FOR ASSESSMENT YEARS 2006-07 & 2007-08 RESPECTIVELY. SI NCE BOTH THESE APPEALS PERTAIN TO SAME ASSESSEE ON IDENTICAL ISSUES; THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 2 - ITA NO. 1182/AHD/2010 : AY 2006-07 2. IN THIS APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1) ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING THE REJECTION OF B OOK RESULTS U/S 145(3) OF THE ACT AND THE ADDITION OF RS.25,01,995/- ON ACCOUNT OF LOW NET PROFIT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED TO THE ABOVE EXTENT. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS JOB FOR THE GOVE RNMENT AND SEMI-GOVERNMENT ORGANIZATIONS. AS REQUIRED BY THE ASSESSING OFFICER, THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT AND BILLS & VOUCHERS IN COURSE OF THE ASSESSMENT PROCEEDINGS. A CCORDING TO THE ASSESSING OFFICER, THE VERIFICATION OF THE B OOKS OF ACCOUNT REVEALED THAT THE ASSESSEE HAD INCURRED HUGE EXPENS ES UNDER SOME OF THE HEADS AND HAD MADE PAYMENTS IN CASH BY OBTAINING SIGNATURES OF UNIDENTIFIABLE PERSONS. EXC EPT FOR 2 TO 3 ITEMS OF EXPENDITURE, NO BILL WAS AVAILABLE. THE ASSESSING OFFICER HAS LISTED OUT SUCH EXPENSES IN HIS ORDER. HE ALSO NOTED THAT THE ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER OR ANY RECORD OF MEASUREMENT OF CIVIL WORK DONE AT VAR IOUS SITES. ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 3 - THEREFORE, THERE WAS NO VERIFIABLE BASIS FOR THE VA LUATION OF THE STOCK AND THE CONSUMPTION OF THE RAW MATERIALS UTIL IZED IN CONSTRUCTION WORK. HE LISTED OUT THE VARIOUS DEFECT S IN PARA-4.2 OF THE ASSESSMENT ORDER. ON THE BASIS OF SUCH FINDI NGS AND OBSERVATIONS, THE ASSESSING OFFICER REJECTED THE AS SESSEE'S BOOK RESULTS U/S 145(3) OF THE INCOME-TAX ACT AND THEN H E OBSERVED THAT THE OUTSTANDING LABOUR PAYMENTS AS ALSO THE EX PENSES MENTIONED EARLIER, WERE SUBSTANTIALLY BOGUS AND SIN CE IT WAS NOT POSSIBLE TO ASCERTAIN THE QUANTUM OF THE OTHER EXPENSES, HE PROCEEDED TO APPLY THE PROVISIONS OF SECTION 44A D TO THE TOTAL RECEIPTS OF THE ASSESSEE AND WORKED OUT THE N ET PROFIT AT RS.26,88,774/-. AFTER ADJUSTING THE NET PROFIT OF R S.1,86,779/- DISCLOSED BY THE ASSESSEE, THE ASSESSING OFFICER M ADE THE ADDITION OF RS.25,01,995 TO THE ASSESSEE'S TOTAL IN COME. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS DELETED THE ADDITION IN QUESTION ON BOTH ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING TH E REJECTION OF BOOK RESULT U/S 145(3) AND THE ADDITION OF RS.25,01 ,995/- ON ACCOUNT OF LOW NET PROFIT; ACCORDINGLY, THE DEPARTM ENTAL ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 4 - REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE CIT( A MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED . ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE SUPPORTED THE ORDER OF THE CIT(A). 4. WE FIND THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT ON 22.1 2.2008, WHEREIN HE POINTED OUT IN PARAGRAPH 4.1 THAT THAT C ERTAIN HUGE EXPENSES HAD BEEN CLAIMED BY THE ASSESSEE, MOST OF WHICH HAD BEEN INCURRED IN CASH AND THAT, THERE WAS NO BILL T O SUPPORT ANY SUCH EXPENSES. HOWEVER, IN APPEAL, THE CIT(A) O BSERVED THAT THE ASSESSING OFFICER FAILED TO POINT OUT ANY SPECIFIC EXAMPLE FROM THE ASSESSEES BOOKS OR OTHER RECORDS WHICH WOULD SUPPORT SUCH OBSERVATION. THE CARTING EXPENS ES OF RS.17,88,553/- WAS FULLY BACKED UP BY BILLS EXCEPT FOR A SMALL SUM OF RS 15,300/- WHICH WAS PAID FOR IN CASH AND T HE REST WERE PAID FOR BY ACCOUNT-PAYEE CHEQUES. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER ALSO FAILED TO TAKE INTO CONSIDERATION THE NATURE OF THE ASSESSEE'S BUSINESS AND THE COMPULSIONS. ONE OF THE OBJECTIONS TAKEN BY THE ASS ESSING OFFICER HAS BEEN THAT THE EXPENSE VOUCHERS DID NOT REFLECT THE ADDRESS OF WORK-SITES. THIS WAS NOT FOUND A RELEVAN T GROUND. THE SECOND OBJECTION WAS THAT NO DETAILS OR RECORD FOR SITE-WISE ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 5 - PURCHASES OR ISSUE OF MATERIAL WAS MAINTAINED. THIS AGAIN WAS NOT FOUND RELEVANT SINCE THE ASSESSEE DID NOT NECES SARILY HAVE TO MAKE PURCHASES SEPARATELY IN EACH SITE. SIMILARL Y, THERE WAS NO REQUIREMENT FOR MAINTAINING SITE-WISE DETAILS OF CLOSING STOCK OR CONSUMPTION OF MATERIALS. THE DIFFERENCE I N THE LABOUR PAYMENT OF RS 37,000/- AS RECORDED IN THE LEDGER AN D RS. 39,000/- AS PER THE RESPONDING VOUCHER, WAS TOO INS IGNIFICANT TO BE TAKEN INTO ACCOUNT WHEN COMPARED TO THE TOTAL LABOUR EXPENDITURE OF RS.1,23,17,102/-. THE OTHER OBJECTIO N WITH REGARD TO VOUCHERS DID NOT REFLECT WHETHER THE PAYM ENTS WERE MADE TO SKILLED LABOURERS OR UNSKILLED LABOURERS, W AS ALSO FOUND OF NO SIGNIFICANCE BY THE CIT(A). EVEN THOUG H THE RATES WOULD OBVIOUSLY HAVE BEEN DIFFERENT YET, IT WAS NOT REQUIRED FOR THE VOUCHERS TO SHOW WHETHER PAID TO SKILLED OR UNS KILLED LABOUR. IT HAS TO BE SEEN WHETHER PAYMENTS ARE BOGU S OR NOT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D SHOWN OUTSTANDING LABOUR PAYMENT OF RS 28,60,400/- BUT HA D FAILED TO IDENTIFY THE SITES FOR WHICH THESE PAYMENTS WERE OUTSTANDING. IN THE SUBSEQUENT YEAR, SUCH LIABILITI ES HAD BEEN DISCHARGED BY THE ASSESSEE. ACCORDING TO THE ASSESS ING OFFICER, NO LABOURER WOULD AFFORD TO DELAY THE RECEIPT OF HI S WAGES. IN THIS BACKGROUND, IT WAS OBSERVED BY THE CIT(A) THAT THE ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 6 - ASSESSING OFFICER DID NOT EVEN BOTHER TO DISCUSS WH AT THIS OUTSTANDING LABOUR PAYMENT WAS ALL ABOUT. THE VERY FACT THAT THE ENTIRE LIABILITY HAD BEEN DISCHARGED IN A FEW M ONTHS SHOWED THAT THE LIABILITY WAS GENUINE. THE ASSESSIN G OFFICER WAS NOT COMPETENT TO QUESTION WHY THE LABOURERS HAD DEFERRED THE RECEIPT OF THEIR WAGES. SIMILARLY, ONCE THE LI ABILITY WAS SHOWN AS OUTSTANDING AT THE END OF THE YEAR, IT WAS NOT RELEVANT FOR THE ASSESSEE TO ESTABLISH THE MONTH OR MONTHS TO WHICH SUCH LIABILITY PERTAINED. THE OBSERVATION OF THE ASSESSING OFFICER IN THIS REGARD WERE FOUND COMPLETELY BASELE SS. THE LAST OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSES SEE HAD INFLATED THE EXPENSES BY PREPARING BOGUS VOUCHERS W AS TOTALLY UNSUBSTANTIATED. SUCH A SWEEPING OBSERVATION WAS NO T WARRANTED WITHOUT THE SUPPORT OF CONCRETE FINDINGS IN THIS REGARD. IF THE BOOKS OF ACCOUNT OF THE ASSESSEE HA S BEEN KEPT AS PER NORMAL ACCOUNTING STANDARDS, THEN ASSESSING OFFICER SHOULD NOT BE DISTURBED THE SAME WITHOUT RAISING AN Y SPECIFIC DEFECT THEREIN. IN THESE FACTS AND CIRCUMSTANCES, THE CIT(A) WAS FULLY JUSTIFIED IN OBSERVING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES BOOKS RES ULT U/S 145(3) OF THE ACT. THE CIT(A) HAS ALSO RIGHTLY OBSERVED T HAT THE ACTION OF ASSESSING OFFICER WAS ALSO NOT JUSTIFIED IN APPL YING THE ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 7 - PROVISIONS OF SECTION 44AD SINCE THE ASSESSEES TOT AL TURNOVER WAS RS.3.36 CRORES; ACCORDINGLY, THE CIT(A) HAS RIG HTLY DELETED THE ADDITION OF RS.25,01,995/-. THIS REASONED FACTU AL FINDING NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, THIS REVENUES APPEAL IS DISMISS ED. ITA NO. 2076/AHD/2010 : AY 2007-08 6. SIMILAR ISSUE AROSE IN ITA NO. 2076/AHD/2010 FOR AY 2007-08 ALSO. FACTS BEING SIMILAR, SO FOLLOWING SA ME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A) IN THIS YEAR AS WELL WHEREIN CIT(A) HAS GRAN TED THE SIMILAR RELIEF, I.E., RS.42,76,380/-, ON SAME LINE AFTER REJECTING THE REJECTION OF BOOKS OF ACCOUNTS. WE U PHOLD THE ORDER OF CIT(A) IN THIS YEAR AS WELL. 7. IN THE RESULT, REVENUES BOTH APPEALS FOR AYS 20 06-07 AND 2007-08 ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 8TH OF DECEMBER, 2 015 AT AHMEDABAD. SD/- SD/- (RAJESH KUMAR) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 08/12/2015 *BT ITA NOS. 1183 & 2076/AHD 2010 ITO VS. ORIENT BUILDERS AY 2006-07 & 2007-08 - 8 - / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A), 5. ()* $++ , , / DR, ITAT, AHMEDABAD 6. *, / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! , / ITAT, AHMEDABAD