M/s Dinesh Engineering & Co, Purulia V. J.C.I.T Rg - 3,Asansol, Asansol

ITA 1216/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4759 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 12-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-05-2013
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: R N RAM
• Keywords: Business income; Depreciation; Business expenditure; Corroborative evidences; Tax effect; Capital expenditure

Judgement Text

I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1216/KOL/ 2013 ASSESSMENT YEAR : 2009-2010 M/S. DINESH ENGINEERING & CO.,..................... ....................APPELLANT VILL. CHAKBAD, P.O. BOGRA, DIST. PURULIA-723 101 [PAN : AAFFD 6909 C] -VS.- JOINT COMMISSIONER OF INCOME TAX,.................. ................RESPONDENT RANGE-3, ASANSOL, PARMAR BUILDING, 54, G.T. ROAD (WEST) ASANSOL-713 304 & I.T.A. NO. 1453/KOL/ 2013 ASSESSMENT YEAR : 2009-2010 ASSISTANT COMMISSIONER OF INCOME TAX,.............. .............APPELLANT RANGE-3, ASANSOL, PARMAR BUILDING, 54, G.T. ROAD (WEST) ASANSOL-713 304 -VS.- M/S. DINESH ENGINEERING & CO.,..................... ...................RESPONDENT VILL. CHAKBAD, P.O. BOGRA, DIST. PURULIA-723 101 [PAN : AAFFD 6909 C] APPEARANCES BY: SHRI R.N. RAM, A.R. , FOR THE ASSESSEE SHRI KALYAN NATH, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : MAY 12, 2016 DATE OF PRONOUNCING THE ORDER : JUNE 03, 2016 I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 7 O R D E R PER SHRI P.M. JAGTAP :- THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 1216/KOL/2013 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO. 1453/KOL/2013, ARE CROSS APPEALS, WHICH ARE DIRECTE D AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), AS ANSOL DATED 18.03.2013. 2. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSES SEE, AT THE OUTSET, THE TAX EFFECT INVOLVED IN THE APPEAL OF THE REVENUE IS LESS THAN THE REVISED MONETARY LIMIT RECENTLY FIXED BY THE CBDT VIDE CIRC ULAR NO. 21/2015 DATED 10 TH DECEMBER, 2015 AT RS.10,00,000/- FOR FILING THE AP PEAL BEFORE THE TRIBUNAL AND THIS POSITION CLEARLY EVIDENT FROM THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL IS NOT DISPUTED EVEN BY THE LD. D.R. IN CIRCULAR NO. 21/2015 (SUPRA) RECENTLY ISSUED BY THE CBDT, TH E MONETARY LIMIT FOR FILING THE APPEAL BY THE REVENUE BEFORE THE TRIBUNA L HAS BEEN INCREASED TO RS.10,00,000/- AND AS CLARIFIED IN THE SAID CIRC ULAR, THE SAID MONETARY LIMIT IS APPLICABLE RETROSPECTIVELY EVEN TO THE APP EALS PENDING BEFORE THE TRIBUNAL. THE CBDT HAS ALSO INSTRUCTED THAT SUCH PE NDING APPEALS BELOW THIS SPECIFIED TAX LIMIT OF RS.10,00,000/- MAY BE W ITHDRAWN/ NOT PRESSED. KEEPING IN VIEW THE INSTRUCTION GIVEN BY THE CBDT V IDE CIRCULAR NO. 21/2015 DATED 10.12.2015, WHICH IS SQUARELY APPLICA BLE IN THE PRESENT CASE, THE APPEAL FILED BY THE REVENUE IS TREATED AS WITHDRAWN/NOT PRESSED AND DISMISSED ACCORDINGLY. 3. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL READ AS UNDER:- (1) THAT ON THE FACT AND CIRCUMSTANCE OF THE CASE THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS 487800, IN THE CASE OF HYWA (DUM PER) WB-37B-2627 PURCHASED FROM RAJESH LODHA ON THE GROUND THAT THE APPELLANT WAS NOT THE OWNER OF THE VEHICLE WHERE AS SUBSTANTIAL AMOUNT WAS PAID AND TH E BALANCE SUM WAS AGREED TO BE PAID IN INSTALMENT AND I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 7 WHERE AS NO HIRE CHARGES WAS DEBITED IN RESPECT OF SUCH DUMPER AND WHERE AS THE DUMPER WAS USED IN THE BUSINESS OF THE APPELLANT. 2. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.11,69,614/- OUT OF RS.20,00,000/- DISALLOWED BY THE ASSESSING OFFICER ON AD-HOC BASIS WHERE AS REGULAR BOOKS OF ACCOUNTS INCLUDING BILLS AND VOUCHERS WERE PRODU CED BEFORE THE AO AND HE COULD NOT PIN POINT OR SINGLE EXPENDITURE WHICH WAS INCURRED OTHERWISE THEN FOR T HE PURPOSE OF BUSINESS OF THE APPELLANT AND WHERE AS T HE BOOKS OF ACCOUNTS WERE NOT REJECTED AND WERE AS THE ENTIRE EXPENSE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. 3. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN NOT DIRECTING THE AO TO TREAT THE S UM OF RS.23,73,702/- AS INCOME FROM BUSINESS WHERE AS THE ASSESSING OFFICER HAS ASSESSED THIS SUM AS INCOME F ROM OTHER SOURCES, WHICH ACTION OF THE AO WAS NOT CORRE CT AS HIRE CHARGES WERE INCIDENTAL TO THE BUSINESS OF THE APPELLANT AND IS ASSESSABLE UNDER THE HEAD BUSINESS ONLY. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1. THE SAME IS ACCORDINGLY D ISMISSED AS NOT PRESSED. 5. THE ISSUE INVOLVED IN GROUND NO. 2 OF THE ASSESS EES APPEAL RELATES TO THE DISALLOWANCE OF RS.20,00,000/- MADE BY THE A SSESSING OFFICER OUT OF VARIOUS EXPENSES, WHICH IS SUSTAINED BY THE LD. CIT(APPEALS) TO THE EXTENT OF RS.11,69,614/-. 6. THE MATERIAL FACTS RELEVANT TO THIS ISSUE ARE TH AT THE ASSESSEE IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACTS AND ERECTING BUILDINGS AND STRUCTURES MAI NLY FOR BHEL. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 30.09.2009 DECLARING TOTAL INCOME OF RS.37,61,377/- . IN THE SAID RETURN, I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 7 VARIOUS EXPENSES AGGREGATING TO RS.9,05,67,687/- WE RE CLAIMED BY THE ASSESSEE AS AGAINST THE TOTAL RECEIPTS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR THE SAID EXPENSES WAS EXAMINED BY THE ASSESSING OFFICER. ON SUCH EXAMINAT ION, HE FOUND THAT MANY EXPENSES CLAIMED BY THE ASSESSEE WERE PAID IN CASH THROUGH SELF- MADE VOUCHERS AND THE SAME WERE NOT SUPPORTED BY PR OPER THIRD PARTY EVIDENCE. HE ALSO FOUND THAT SOME OF THE EXPENSES C LAIMED BY THE ASSESSEE WERE IN THE NATURE OF DONATION, ETC., WHIC H WERE NOT ALLOWABLE AS DEDUCTION. HE ALSO FOUND THAT THE NAMES OF THE RECI PIENTS IN RESPECT OF CERTAIN EXPENDITURE WERE NOT AVAILABLE WITH THE ASS ESSEE. WHEN THESE ADVERSE FINDINGS WERE CONFRONTED BY THE ASSESSING O FFICER TO THE ASSESSEE, THE LATER AGREED THAT HE COULD NOT PRODUC E THE SUPPORTING EVIDENCE IN RESPECT OF CERTAIN EXPENDITURE DUE TO S OME UNAVOIDABLE REASONS. HE ALSO SAID TO HAVE NO OBJECTION FOR THE ASSESSING OFFICER TO DETERMINE HIS BUSINESS INCOME AT 8% OF THE TURNOVER AFTER ALLOWING DEDUCTION FOR MATERIAL SUPPLIED BY THE CONTRACTEE A S AGAINST THE PROFIT OF 6.8% DECLARED IN THE RETURN OF INCOME. THIS OFFER O F THE ASSESSEE WAS NOT FOUND FULLY ACCEPTABLE BY THE ASSESSING OFFICER. AC CORDING TO HIM, THE NET PROFIT OF 6.8% DECLARED BY THE ASSESSEE WAS VERY LO W AND KEEPING IN VIEW THE ADVERSE FINDINGS RECORDED BY HIM IN RESPECT OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE, THE DISALLOWANCE OF RS.20, 00,000/- WAS MADE BY THE ASSESSING OFFICER OUT OF VARIOUS EXPENSES CLAIM ED BY THE ASSESSEE. 7. THE DISALLOWANCE OF RS.20,00,000/- MADE BY THE A SSESSING OFFICER OUT OF VARIOUS EXPENSES WAS CHALLENGED BY THE ASSES SEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND THE FOLLOWING SUBMI SSION WAS MADE BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) IN SUPPORT OF ITS CASE ON THIS ISSUE:- DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.20.00 LACS ON AD-HOC BASIS: THE ASSESSING OFFICER NOTICED THAT A SUBSTANTIAL AM OUNT OF EXPENDITURE IS DEBITED IN P&L A/C. HE FURTHER POINT ED OUT THAT SOME OF THE EXPENSES ARE NOT SUBJECT TO THIRD PARTY VERI FICATION AND SOME ARE COVERED BY SELF MADE VOUCHERS ONLY. HE ALSO POI NTED OUT THAT I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 7 A.R. HAS GIVEN NO OBJECTION IF THE INCOME IS ESTIMA TED @8% OF THE TOTAL TURNOVER SUBJECT TO FURTHER DEDUCTION ON ACCO UNT OF INTEREST ON CAPITAL TO PARTNERS AND REMUNERATION TO PARTNERS . FIRST OF ALL, THE ASSESSING OFFICER HAS NOT BROUGHT OUT A SPECIFIC CASE WHERE THE EXPENDITURE IS NOT VERIFIABLE FROM THE TH IRD PARTY. HE HAS ALSO NOT BROUGHT OUT ON RECORD THE DETAILS OF EXPEN DITURE WHICH ARE COVERED BY SELF MADE VOUCHERS ONLY. IT IS TRUE THAT IN A CONTRACT BUSINESS SOME OF THE EXPENSES ALWAYS INCURRED ON SELF MADE VOUCHERS AFTER OBTAINI NG THE SIGNATURE/THUMB IMPRESSION OF THE RECIPIENT AND IS ALWAYS ALLOWABLE AS BUSINESS EXPENDITURE. THE ASSESSEE IS A CONTRACTOR AND MAINTAINS REGULAR BOOKS OF ACCOUNTS SUPPORTED BY AL L BILLS AND VOUCHERS AND THEY WERE PRODUCED BEFORE THE ASSESSIN G OFFICER IN COURSE OF ASSESSMENT PROCEEDINGS, HOWEVER A PROPOSA L CAME FROM THE ASSESSING OFFICER THAT HE WANTS TO ESTIMATE THE INCOME @8% OF THE TURNOVER AND TO THIS PROPOSAL THE AUTHORIZED RE PRESENTATIVE APPEARING BEFORE HIM AGREED ON THE CONDITION THAT H E WILL NOT MAKE ANY DISALLOWANCES WHEN THE INCOME ESTIMATED IS @8%. BUT THE ASSESSING OFFICER DID NOT DO SO AND MADE VARIOUS DI SALLOWANCES AND IN ORDER TO COVER UP THE DISALLOWANCE OF EXPENDITUR E A HUGE SUM OF RS. 20.00 LACS, HE HAS GIVEN THE LOGIC OF 8% AS AGR EED BY THE A.R. IN FACT, THE ENTIRE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. NO PART OF IT IS EITHE R CAPITAL EXPENDITURE OR PERSONAL IN NATURE. THE VARIOUS JUDI CIAL PRONOUNCEMENTS HAVE ADVERSELY COMMENTED ON AD-HOC D ISALLOWANCE OF EXPENSES AS DONE BY THE PRESENT ASSESSING OFFICE R. I, THEREFORE REQUEST YOU TO KINDLY DELETE THE ENTIR E DISALLOWANCE OF RS.20.00 LACS MADE BY THE ASSESSING OFFICER. 8. THE ABOVE SUBMISSION MADE BY THE ASSESSEE WAS NO T FOUND FULLY ACCEPTABLE BY THE LD. CIT(APPEALS) AND HE PROCEEDED TO SUSTAIN THE DISALLOWANCE OF RS.20,00,000/- MADE BY THE ASSESSIN G OFFICER TO THE EXTENT OF RS.11,69,614/- FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 19 & 20 OF HIS IMPUGNED ORDER:- 19. I HAD CONSIDERED THE CONTENTS OF LETTER GIVEN DURING ASSESSMENT, THE VIEWS OF ASSESSING OFFICER AND THE APPEAL NOTES. THE THRUST IN APPEAL IS THAT THE CONDITION OF ESTIM ATION AT 8% ADMITTED BEFORE APPELLANT WAS SUBJECT TO 'HE WILL N OT MAKE ANY DISALLOWANCE'. I HAD GONE THROUGH THE CONTENTS OF T HE LETTER. IT IS STATED THAT 'I HAVE NO OBJECTION IF YOU ASSESSED OR DETERMINED THE PROFIT OF THE FIRM THE TUNE OF 8% ON TURNOVER AFTER ALLOWING MATERIAL DEDUCTION WHICH SUPPLIED BY I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 7 CONTRACTEE, BEFORE ALLOWING INTEREST ON CAPITAL AND REMUNERATION'. THEREFORE THE CONDITION IS IMPLICITL Y PRESENT. 20. THE ADDITION SUSTAINED IN APPEAL IN PARA 3 TO 1 5 OF THIS ORDER IS AS UNDER:- (A) ARTIFICIAL DISALLOWANCE U/S 40(A)(IA) 1,57,000 (B) RESTRICTION OF CLAIM ON NTS 352 (SOUTH) 1,86,388 (C) HYWA DEPRECIATION 4,87,000 8,30,388 IF THE CONTENTION THAT ABOVE ARE TO BE ABSORBED IN THE SAME THEN THE ADDITION IS TO BE RESTRICTED TO RS.11,69,6 14/-. THIS IS THE MINIMUM TO BE SUSTAINED OUT OF RS.20,00,000/ -. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. BESIDES REIT ERATING THE SUBMISSIONS MADE BEFORE THE LD. CIT(APPEALS), THE LD. COUNSEL F OR THE ASSESSEE HAS CONTENDED THAT NO SPECIFIC OR MATERIAL DEFECTS ARE FOUND BY THE ASSESSING OFFICER IN THE VOUCHERS MAINTAINED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR VARIOUS EXPENSES. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS OBSERVED THAT SPECI FIC AND MATERIAL DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER IN THE VO UCHERS MAINTAINED BY THE ASSESSEE IN SUPPORT OF THE VARIOUS EXPENSES AND WHEN THE SAME WERE CONFRONTED BY HIM TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE NOT ONLY FAILED TO REBUT OR CONTROVERT THE SAME BUT ALSO AGREED FOR A DISALLOWANCE OUT OF VARIOUS E XPENSES BY REQUESTING THE ASSESSING OFFICER TO DETERMINE HIS PROFIT AT 8% OF THE TURNOVER AS AGAINST 6.8% DECLARED IN THE RETURN OF INCOME. ALTH OUGH THE ASSESSING OFFICER DID NOT ACCEPT THIS OFFER OF THE ASSESSEE F OR THE REASONS GIVEN IN THE ASSESSMENT ORDER, THE LD. CIT(APPEALS) VIDE HIS IMPUGNED ORDER HAS RESTRICTED THE DISALLOWANCE OF RS.20,00,000/- MADE BY THE ASSESSING OFFICER ON THIS ISSUE TO RS.11,69,614/- ON THE BASI S OF THE OFFER MADE BY THE ASSESSEE HIMSELF. WE, THEREFORE, FIND NO JUSTIF IABLE REASON TO INTERFERE I.T.A. NO. 1216/KOL/2013 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 1453/KOL/2013 ASSESSMENT YEAR: 2009-2010 PAGE 7 OF 7 WITH THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 2 OF THE ASSESSEES APPEAL. 10. AS REGARDS GROUND NO. 3, THE LD. COUNSEL FOR TH E ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED THEREIN HAS VIRTU ALLY BECOME INFRUCTUOUS AS A RESULT OF THE RELIEF ALLOWED BY TH E LD. CIT(APPEALS) BY ALLOWING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION , WHICH NOW STANDS CONFIRMED AS A RESULT OF DISMISSAL OF THE REVENUES APPEAL ON ACCOUNT OF LOW TAX EFFECT. GROUND NO. 3 ACCORDINGLY IS DISMISS ED AS INFRUCTUOUS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WE LL AS THE APPEAL OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 03, 201 6. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 3 RD DAY OF JUNE, 2016 COPIES TO : (1) M/S. DINESH ENGINEERING & CO., VILL. CHAKBAD, P.O. BOGRA, DIST. PURULIA-723 101 (2) JOINT/ ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-3, ASANSOL, PARMAR BUILDING, 54, G.T. ROAD (WEST) ASANSOL-713 304 (3) COMMISSIONER OF INCOME-TAX (APPEALS), ASANSOL (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.