M/s. Shiv Construction Co., Baroda V. The Income Tax Officer, Ward-5(2), Baroda

ITA 120/AHD/2017

AI Insights

The case involves M/s. Shiv Construction Co., which appealed against the order of the CIT(Appeals)-3, Vadodara, concerning the assessment year 2009-10. The primary issues in the appeal included disallowances under Section 40(a)(ia) and additions under Section 68 of the Income Tax Act. The Assessing Officer had made various additions and disallowances based on non-deduction of tax at source and unexplained cash credits. The CIT(A) partly allowed the appeal, which led to further appeals on specific grounds. The Tribunal's decision addressed the verification of tax payments by the payee for certain disallowances and confirmed the genuineness of a loan transaction that was initially treated as an unexplained cash credit.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299954 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 12-04-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 12-01-2017
• Other Referred Cases: Electronic Instrumentation & Control Pvt. Ltd. vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 144; 40A(3); 40(a)(ia); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I .T .A . No .1 20 /A h d / 20 17 ( A s se ss m e nt Y e a r : 20 09- 10 ) M/ s . S hiv C o n s t r u c tio n C o . 3, So na li S oc ie t y, Wa t er T a n k R o ad , K ar el ib a u g , B ar od a V s . I T O War d - 5 ( 2) , B ar od a [ P AN N o. A A KF S 6 03 1P ] (Appellant) .. (Respondent) Appellant by : Shri M. K. Patel, A.R. Respondent by: Shri Bholaram Devashi, Sr. D.R. D a t e of H ea r i ng 13.04.2023 D a t e of P r o no u n ce me nt 19.04.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-3, Vadodara on 06.10.2016 for A.Y. 2009-10. 2. The grounds of appeal raised by the assessee are as under: “1. The Learned CIT erred in confirming disallowance u/s 40(a)(ia) amounting to Rs.8,48,000/-. 2. The Learned CIT erred in confirming the disallowance u/s 40(a)(ia) of the Act of Rs.75,550/-. 3. The Learned CIT erred in confirming addition of Rs.14,50,000/- u/s 68 of the Act despite the fact that the said amount has been added in the hands of Smt. Sarlaben M Patel from whom the loans were received in the order passed u/s 144 r.w.s. 147 for A.Y. 2009-10 wherein a sum of Rs.26,62,560/- has been determined as her income. 4. The appellant firm craves to leave, add or alter any of the grounds mentioned above.” 3. The assessee is engaged in the business of construction of roads, dam, canals etc. Assessee filed return of income on 30.09.2009 showing total income of Rs. 10,13,510/-. The return of income was processed under Section 143(1) of the Income Act. The case was taken up for scrutiny and accordingly notice under Section 143(2) of the Act was issued and served the assessee. The Assessing Officer observed that the assessee has shown total turnover of ITA No. 120/Ahd/2017 M/s. Shiv Construction Co. vs. ITO Asst.Year–2009-10 - 2 - Rs. 8,65,72,724/- on which Gross Profit (“in short G.P.”) is declared at 13.22% i.e. Rs. 1,14,44,589/- as against the Gross Profit declared at 13.06% on total turnover of Rs. 20,26,91,819/- shown in the immediate preceding year. During the year under consideration the assessee made payments in respect of purchase of spare parts and battery, tractor rent and metal purchases in cash. The Assessing Officer observed that as per provision of Section 40A(3) of the Act where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise by an account payee cheque drawn on a bank or account payee bank draft exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. The Assessing Officer made addition of Rs. 1,23,825/- under Section 40A(3) of the Act. The Assessing Officer further made addition of Rs. 14,75,370/- in respect of tax not deducted at source from the payments of machinery hire charges. The Assessing Officer also made addition of Rs. 2,06,397/- towards truck expenses, machinery expenses and work expenses as well as miscellaneous expenses including office expenses. The Assessing Officer also made addition of Rs. 14,50,000/- as unexplained cash credit under Section 68 of the Act. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. A.R. submitted that as regards Ground No. 1 the CIT(A) was not right in confirming disallowance under Section 40(a)(ia) amounting to Rs. 8,48,000/- as the assessee should have been given opportunity of producing evidence in respect of payment made by the payee related to the tax element and therefore, the assessee does not treat as defaulter and is not liable to deduct tax at source. In alternate the Ld. A.R. submitted that as per the amendment ITA No. 120/Ahd/2017 M/s. Shiv Construction Co. vs. ITO Asst.Year–2009-10 - 3 - 30% of disallowance should have been taken into cognizance by the Assessing Officer by giving retrospective effect. The Ld. A.R. relied upon the decision of the Tribunal in case of Electronic Instrumentation & Control Pvt. Ltd. vs. ITO (in ITA No. 3055&3056/Ahd/2013 order dated 20.04.2017). As regards Ground No. 2 the Ld. A.R. submitted that the CIT(A) was not right in confirming the disallowance under Section 40(a)(ia) of the Act of Rs. 75,550/-. As regards Ground No. 3 related to addition of Rs. 14,50,000/- under Section 68 of the Act, the Ld. A.R. submitted that the said amount was added in the hands of Smt. Sarlaben M. Patel from whom the loans were received in the order passed under Section 144 r.w.s. 147 for A.Y. 2009-10 wherein a sum of Rs. 26,62,560/- was determined as her income. The Ld. A.R. submitted that all the relevant documents related to genuineness, creditworthiness and identity of the person has been established by the assessee before the Assessing Officer and therefore, the addition does not sustain. 6. The Ld. D.R. relied upon the assessment order and the order of the CIT(A). As regards Grounds No. 3 the Ld. D.R. submitted that the assessee did not establish the genuineness and creditworthiness of the person and therefore, the CIT(A) was right in performing the addition under Section 68. 7. Heard both the parties and perused all the relevant material available on record. As regards Ground No. 1 it is pertinent to note that the contention of the Ld. A.R. that the payee has paid the taxes on the said amount needs to be verified and therefore, to that extent this issue is restored to the file of the Assessing Officer for verifying the same and taking cognizance of the payment of taxes on the said amount in the hands of the payee and decide accordingly as per law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 1 is partly allowed for ITA No. 120/Ahd/2017 M/s. Shiv Construction Co. vs. ITO Asst.Year–2009-10 - 4 - statistical purpose. As regards Ground No. 2 related to payment of labour no details were filed by the assessee before the Assessing Officer as well as CIT(A), therefore, Ground No. 2 is dismissed. As relates to Ground No. 3 bank details of NRI account of Smt. Sarlaben M. Patel was produced before the Assessing Officer as well as CIT(A) and the same was not taken into account. Besides this the Revenue has reopened the case of Sarlaben M. Patel on the same amount of Rs. 26,62,560/- from which the assessee firm received Rs. 14,50,000/-, thus, the transaction was established by the assessee and cannot be treated as unaccounted cash credit. The assessee established the genuineness as the assessee firm received the said loan and the loan agreement was there on record. Thus, the CIT(A) was not right in confirming the addition. Hence, Ground No. 3 is allowed. 8. In result, the appeal of the assessee is partly allowed for statistical purpose. This Order pronounced in Open Court on 19/04/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 19/04/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad