ACIT, Aluva V. M/s.Mary Matha construction Co., Muvattupuzha

ITA 121/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81318 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K K JOHN

Judgement Text

1 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 106/COCH/2013 (ASSESSMENT YEAR 2009-10) & CO. 05/COCH/2013 (ARISING OUT OF I.T.A NO. 106/COCH/2013) (ASSESSMENT YEAR 2009-10) M/S MARY MATHA CONSTRUCTION CO VS J.C.I.T., ALUVA RANGE MARY MATHA SQUARE, ARAKUZHA ROAD ALUVA MUVATTUPUZHA 686 661 PAN : AAEFM5712B (APPELLANT) (RESPONDENT) I.T.A NO. 121/COCH/2013 (ASSESSMENT YEAR 2009-10) A.C.I.T., CIR.1 VS M/S MARY MATHA CONSTRN CO ALUVA MUVATTUPUZHA 686 661 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MATHEW JOSEPH RESPONDENT BY : SHRI K.K. JOHN, SR DR DATE OF HEARING : 21-07-2014 DATE OF PRONOUNCEMENT : 14-08-2014 2 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 O R D E R PER N.R.S. GANESAN (JM) BOTH THE ASSESSEE AND REVENUE HAVE FILED THE PRESE NT APPEALS AGAINST THE ORDER OF CIT(A)-II, KOCHI DATED 03-12-2 012 FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS ALSO FILED CROSS OB JECTION. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS AND THE CROSS OBJECTION, WE HEARD THE SAME TOGETHER AND DISPOSE O F THE SAME BY THIS COMMON ORDER. 2. LET US FIRST TAKE THE ASSESSEES APPEAL IN ITA N O.106/COCH/2013. 3. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF RS.30 LAKHS TOWARDS PURCHASE OF ROCKS. 4. SHRI MATHEW JOSEPH, THE LD.REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CONTRACTOR HAVING DIFFERENT WORKS AT DIFFERENT SITES. ACCORDING TO THE LD.REPRESENTATIV E, AT KOILANDI SITE THE ASSESSEE WAS DOING ROCK FORMATION FOR THE HARBOURS. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE USED TO SUPPLY ROCK S FROM ITS OWN QUARRY AND DEBIT ONLY TRANSPORTATION AND WAGES IN THE BOOK S OF ACCOUNT. DURING THE MONTH OF MARCH, IN ORDER TO REACH THE TARGET OF QUANTITY, THE ASSESSEE 3 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 PURCHASED ROCKS FROM OUTSIDE. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS PRODUCED THE ENTIRE DETAILS LIKE VEHIC LE NUMBER, WEIGH BRIDGE RECEIPT, NAME OF THE PARTY, ETC BEFORE THE A SSESSING OFFICER. ACCORDING TO THE LD.REPRESENTATIVE, THE GOVERNMENT DEPARTMENTS USED TO FORCE THE CONTRACTOR TO DO MORE WORKS DURING THE EN D OF THE FINANCIAL YEAR SO AS TO EXHAUST THE FUNDS ALLOCATION. 5. REFERRING TO THE ASSESSMENT ORDER, THE LD.REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS N OT DOUBTED THE PURCHASES MADE BY THE ASSESSEE. THOUGH THE ASSESSI NG OFFICER ACCEPTED THE DETAILS FURNISHED BY THE ASSESSEE, THE DISALLOW ANCE WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT ABNORMAL PURCH ASE OF METAL AND ROCKS WAS ACCOUNTED FOR IN THE MONTH OF MARCH. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING OFFICER FOUND THAT THE CLAIM OF PURCHASES FOR THE MONTH OF MARCH IS EXCESSIVE. THEREFORE, HE DISALLOWED PART OF THE PURCHASES TO THE EXTENT OF RS.50 LAKHS. ACCORDING TO THE LD.REPRESENTATIVE, WHEN THE PURCHASE OF ROCKS WAS SUBSTANTIATED BY PRO DUCING THE MATERIAL EVIDENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING ANY PART OF THE PURCHASES ON ESTIMATE BASIS. ACCORDING TO THE LD.R EPRESENTATIVE, WHEN THE ROCKS FROM ITS OWN QUARRY WERE USED, WHAT WAS DEBIT ED IN THE BOOKS OF ACCOUNT IS ONLY COST OF TRANSPORTATION AND WAGES. THEREFORE, THE VALUE 4 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 MAY BE LESS FOR OTHER MONTHS. IN THE MONTH OF MARC H, THE PURCHASE WAS MADE FROM OUTSIDE QUARRIES AND COST WAS ALSO PAID T OWARDS ROCK. THE TRANSPORTATION OF THE ROCKS BY LORRIES AND WEIGH BR IDGE DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING OFFICER IS NOT JUS TIFIED IN RESTRICTING THE DISALLOWANCE. THE LD.REPRESENTATIVE FURTHER SUBMIT TED THAT THE CIT(A) MODIFIED THE DISALLOWANCE AND RESTRICTED THE SAME T O RS.30 LAKHS INSTEAD OF RS.50 LAKHS. THE CIT(A) FOUND THAT THERE IS NO SUBSTANCE IN THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD.EPRESENTATIVE, T HERE IS NO QUESTION OF ANY RESTRICTION OF THE DISALLOWANCE. 6. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT NO DOUBT, THE ASSESSEE HAS PRODUCED THE DETAILS FOR PURCHASE OF METAL AND ROCKS. AFTER CONSIDERING THE SUBMISSIONS OF THE LD.REPRESE NTATIVE FOR THE ASSESSEE, THE ASSESSING OFFICER HIMSELF ACCEPTED PA RT OF THE CONTENTIONS RAISED BY THE ASSESSEE. HOWEVER, THE CONSUMPTION O F METAL AND ROCKS AT KOILANDI SITE WAS EXCESSIVE WHEN COMPARED TO THE OT HER WORKS. DUE TO ABNORMAL PURCHASE OF METAL AND ROCKS AT KOILANDI SI TE, ACCORDING TO THE LD.DR, THE ASSESSING OFFICER DISALLOWED 50% OF THE TOTAL COST OF THE ROCKS AND METALS. THE CIT(A), AFTER CONSIDERING THE FACT S OF THE CASE HAS RESTRICTED THE SAME TO RS.30 LAKHS. 5 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE ENGAGED ITSELF IN EXECUTION OF CONTRACT WORK WITH THE GOVERNMENT DEPA RTMENT. AS PART OF THEIR WORK, THE ASSESSEE ENGAGED IN ROCK FORMATION FOR THE HARBOR AT KOILANDI. IN RESPECT OF OTHER CONTRACTS THERE IS N O DISPUTE. WITH REGARD TO KOILANDI WORK SITE, THE ASSESSING OFFICER FOUND THA T THE PURCHASE WAS MADE EXCESSIVELY IN THE MONTH OF MARCH WHEN COMPARED TO OTHER MONTHS OF THE FINANCIAL YEAR. IN OTHER WORDS, FOR THE MONTH OF M ARCH, THE ASSESSEE HAS CLAIMED EXCESSIVE PURCHASES OF ROCKS AND METALS. T HE CASE OF THE ASSESSEE IS THAT DURING THE END OF THE FINANCIAL YE AR, THE GOVERNMENT DEPARTMENT URGED THE CONTRACTOR TO UTILIZE ALL THE ALLOCATED FUNDS AND CARRY OUT THE MAXIMUM WORK. THIS IS TRUE THAT NORMALLY T HE GOVERNMENT DEPARTMENTS WILL MAKE ALL THE ATTEMPTS TO EXHAUST T HE ALLOCATED FUNDS AT THE END OF THE FINANCIAL YEAR. IN THE CASE BEFORE US, THE ASSESSEE HAS PURCHASED ROCKS FROM OUTSIDE PARTIES DURING THE MO NTH OF MARCH. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE USED TO TAKE ROCK FROM ITS OWN QUARRY AND DEBIT ONLY THE TRANSPORTATION CHARGES AND WAGES. T HEREFORE, THE EXPENDITURE FOR OTHER MONTHS IN THE FINANCIAL YEAR WOULD BE VERY LESS. WHEN THE ASSESSEE PURCHASED ROCKS FROM OUTSIDE PART IES, NECESSARILY IT HAS TO PAY THE COST OF ROCKS APART FROM THE COST OF TRANSPORTATION AND 6 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 WAGES. THEREFORE, THE EXPENDITURE WOULD BE MORE WH EN COMPARED TO THE PURCHASES MADE FROM OUTSIDE PARTIES. IN THE CASE B EFORE US, THE ASSESSEE CLAIMS THAT THE ROCKS WERE PURCHASED FROM OUTSIDE P ARTIES IN THE MONTH OF MARCH. THE ASSESSEE HAS FURNISHED ALL THE DETAILS INCLUDING LORRY NUMBER, WEIGH BRIDGE RECEIPT AND THE NAME OF THE PARTY FROM WHOM THE ROCKS WERE PURCHASED. THEREFORE, THE ASSESSEE HAS DISCHARGED ITS PRIMARY OBLIGATION IN PURCHASE OF ROCKS. WHEN THE ASSESSEE HAS ESTABL ISHED THE PURCHASE OF ROCKS BY PRODUCING NECESSARY DETAILS, THE ASSESSING OFFICER CANNOT PRESUME THAT THE ASSESSEE WOULD NOT HAVE PURCHASED THE SAME BECAUSE THE PURCHASES SHOWN IN THE MONTH OF MARCH IS EXCESS IVE WHEN COMPARED TO OTHER MONTHS. WHAT IS NECESSARY TO LOOK INTO IS - WHETHER THE ASSESSEE HAS ACTUALLY PURCHASED ROCKS OR NOT? BY COMPARING THE PURCHASES MADE IN THE EARLIER MONTH, THE ASSESSING OFFICER CANNOT DISALLOW ANY PART OF THE PURCHASES. THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT WHEN THE ASSESSEE PRODUCED ALL THE DETAILS INCLUDING THE NAM E OF THE PARTIES FROM WHOM THE ROCKS WERE PURCHASED, THERE IS NO QUESTION OF ANY DISALLOWANCE. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N DISALLOWING RS.50 LAKHS ON ESTIMATE BASIS. THE CIT(A) OUGHT TO HAVE ALLOWE D THE CLAIM OF THE ASSESSEE IN TOTO INSTEAD OF RESTRICTING THE DISALLO WANCE TO RS.30 LAKHS. 7 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 8. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL I S UNABLE TO UPHOLD THE ORDERS OF LOWERY AUTHORITIES. ACCORDINGLY THE ORDE RS OF AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ADDITION OF RS.50 LAKH S IS DELETED. 9. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF VEHICLE LOAN INTEREST TO THE EXTENT OF RS.7,92,653 AND DISA LLOWANCE OF RS.15,12,902 U/S 40(A)(IA) OF THE ACT. 10. SHRI MATHEW JOSEPH, THE LD.REPRESENTATIVE FOR T HE ASSESSEE SUBMITTED THAT THE LOANS WERE BORROWED FROM THE BAN KS AND FINANCIAL INSTITUTIONS AND INTEREST WAS PAID. SINCE THE DETA ILS OF INTEREST COULD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES DUE TO MERGER OF BANKS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE. SIMILARLY, THE ASSSESSING OFFICER DISALLOWED RS.15,12,902 UNDER SE CTION 40(A)(IA). THE LD.REPRESENTATIVE SUBMITTED THAT HE IS NOT PRESSING THESE TWO DISALLOWANCES MADE BY THE ASSESSING OFFICER. THE LD.REPRESENTATI VE HAS ALSO MADE AN ENDORSEMENT TO THAT EFFECT ON THE GROUNDS OF APPEAL . IN VIEW OF THE ABOVE, THE GROUNDS RELATING TO INTEREST ON LOAN TO THE EXT ENT OF RS.7,92,653 AND DISALLOWANCE OF RS.15,12,908 U/S 40(A)(IA) IS DISMI SSED AS NOT PRESSED. 8 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 11. THE NEXT GROUND OF APPEAL IS WITH REGARD DISALL OWANCE OF RS.24.74 LAKHS TOWARDS WORK IN PROGRESS. 12. SHRI MATHEW JOSEPH, THE LD.REPRESENTATIVE FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS.24.74 LAKHS ON ESTIMATE BASIS. ACCORDING TO THE LD.REPRESENTATIVE , THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE ON ESTIMATE BASIS WITHOUT ANY REASON. 13. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBM ITTED THAT THE TOTAL QUANTITY OF ROCKS RECEIVED BY THE ASSESSEE AT KOILA NDI DURING THE MONTH OF MARCH IS NOT PAR WITH PURCHASE MADE FOR OTHER MONTH S IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSING OFFICER ES TIMATED THE COST OF ROCKS AND METALS AT KOILANDI AT RS.30 LAKHS AND THE DIFFE RENCE TO THE EXTENT OF RS.24,74,000 WAS ADDED BACK TO THE CLOSING WORK IN PROGRESS. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DISA LLOWANCE IS ONLY IN RESPECT OF THE ROCKS AND METALS RECEIVED AT KOILAND I SITE. THERE IS NO DISPUTE IN RESPECT OF OTHER SITES. WHEN THE QUANTI TY OF PURCHASE OF ROCK IS ESTABLISHED BY PRODUCING NECESSARY MATERIALS LIKE V EHICLE NUMBERS, PARTY NAME, WEIGH BRIDGE RECEIPT, IT MAY NOT BE CORRECT T O SAY THAT QUANTITY OF 9 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 ROCKS CLAIMED BY THE ASSESSEE IS NOT IN PAR WITH TH E VALUE ESTIMATED BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEE IS A CONTRACTOR WITH GOVERNMENT DEPARTMENTS. THE PURCHASE OF ROCKS AND METALS ARE NOT IN DISPUTE. THE ASSESSING OFFICER DISALLOWED THE PURCHASES ONLY ON THE GROUND THAT IT WAS NOT IN PAR WITH THE PURCHASES MADE BY THE ASSESSEE FOR OTHER MONTHS IN THE VERY SAME FINANCIAL YEAR. AS DISCUSSED IN THE EARLIER PART OF THIS ORDER, THE ASSESSEE HAS PRODUCED ENTIRE DETAILS FOR PURCHA SE OF ROCKS AND METALS, LIKE LORRY NUMBER, WEIGH BRIDGE DETAILS AND NAME AND DETAILS OF THE PARTIES. SALE OF ROCKS AND METALS IN THIS COUNTRY IS DEALT IN THE UNREGULATED MARKET. THEREFORE, WHEN THE ASSESSEE FURNISHED THE DETAILS IT IS FOR THE ASSESSING OFFICER TO VERIFY AND ASCERTAIN WHETHER S UCH PURCHASES WERE ACTUALLY MADE OR NOT? IN THIS CASE, THE PURCHASES WERE NOT DISPUTED; ONLY A COMPARISON IS MADE WITH THAT OF THE EARLIER FINAN CIAL YEAR AND THE DISALLOWANCE WAS MADE. IN THOSE CIRCUMSTANCES, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO JUSTIFICATION O N THE PART OF THE ASSESSING OFFICER TO DISALLOW ANY PART OF THE CLAIM. EVEN TH E DIFFERENCE OF WORK-IN- PROGRESS WAS ADDED TO THE TOTAL INCOME ONLY ON ESTI MATE BASIS ON THE GROUND THAT THE QUANTITY OF ROCKS RECEIVED AT KOILA NDI SITE IS NOT IN PAR WITH THE VALUE ESTIMATED BY THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE PURCHASES OF ROCKS AND RECEIP T OF THE SAME IS UPHELD BY THIS TRIBUNAL IN THE EARLIER PART OF THIS ORDER, THERE IS NO QUESTION OF ANY 10 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 DISALLOWANCE. ACCORDINGLY, THE ORDERS OF LOWER AUT HORITIES ARE SET ASIDE AND THE ADDITION OF RS. 24,74,000 TOWARDS CLOSING W ORK-IN-PROGRESS IS DELETED. 15. NOW COMING TO REVENUES APPEAL, THE ONLY ISSUE IS WITH REGARD TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE ASSESSE E ALSO RAISED THESE ISSUES IN ITS APPEAL AS GROUND NO.3 AND THE SAME IS NOT PRESSED. IN VIEW OF THE SAME, THE ORDER OF CIT(A) ON THIS ISSUE IS S ET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. IN THE CROSS OBJECT ION THE ASSESSEE HAS RAISED THE SAME GROUND AS IT IS IN THE APPEAL IN IT A NO.106/COCH/2013. THEREFORE, THE CROSS OBJECTION BECOMES INFRUCTUOUS. 16. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.106/ COCH/2017 IS PARTLY ALLOWED. REVENUES APPEAL IN ITA NO.21/COCH/2013 I S ALLOWED. ASSESSEES CROSS OBJECTION IN C.O. NO.5/COCH/2013 I S DISMISSED AS INFRUCTUOUS. 11 ITA NO.106 & 121/COCH/2013 CO 05/COCH/2013 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH AUGUST, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH AUGUST, 2014 PK/- COPY TO: 1. M/S MARY MATHA CONSTRUCTION CO, MARY MATHA SQUAR E, ARAKUZHA ROAD, MUVATTUPUZHA 686 661 2. THE JCIT, ALUVA RANGE, ALUVA 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH