The Deputy Commissioner of Income Tax, Srinagar V. M/s. Construction Engineers, Srinagar

ITA 127/ASR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63513 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: M A MIR COST ACCTT
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.127(ASR)/2012 ASSESSMENT YEAR:2008-09 DY. COMMR. OF INCOME TAX, VS. M/S. CONSTRUCTION ENG INEERS, CIRCLE-3, SRINAGAR. SRINAGAR. (APPELLANT) (RESPONDENT) AND I.T.A. NO.102(ASR)/2012 ASSESSMENT YEAR:2008-09 PAN :AABFC7715P M/S. CONSTRUCTION ENGINEERS, VS. ADDL. COMMISSIONER OF INCOME TAX, 541/E, BARZULLA, SRINAGAR. RANGE-3, SRINAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH. M.A. MIR, COST. ACCTT. DEPARTMENT BY:SH.R.L.CHHANALIA, DR DATE OF HEARING:26/09/2012 DATE OF PRONOUNCEMENT:15/10/2012 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU, DATED 24.02.2012 FOR THE ASSESSMENT YEAR 200 8-09. THE ASSESSEE HAS ALSO FILED CROSS APPEAL AGAINST REVENUES APPEAL. ITA NO. 127(ASR)/2012 & ITA NO.102(ASR)/2012 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DIRECTING THE AO TO MAKE DISALLOWANCE @ 20 % I.E. ON ESTIMATE BASIS WHEN THE ASSESSEE HAS FAILED TO PROD UCE BILLS/VOUCHERS AMOUNTING TO RS.40,84,809/- IN RESPE CT OF EXPENSES UNDER THE HEAD MATERIAL PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO MAKE DISALLOWANCE @ 10 % INSTEAD OF 20% MADE BY THE A.O. WHEN THE ASSESSEE HAS FAILE D TO PRODUCE BILLS/VOUCHERS IN RESPECT OF EXPENSES UNDER THE HEAD SITE EXPENSES. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO MAKE DISALLOWANCE ON E STIMATE BASIS WHEN THE ASSESSEE HAS FAILED TO PRODUCE PROPE R BILLS/VOUCHERS AND NATURE OF EXPENSES NOT KNOWN, A MOUNTING TO RS.6,50,436/- IN RESPECT OF EXPENSES UNDER THE HEAD MISC. EXPENSES. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS BY CO NFIRMING AN ADDITION OF RS.9,36,962/- ON ACCOUNT OF DISALLOWANC E OF 20% OF THE MATERIAL PURCHASE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS BY UPH OLDING THE ADDITION OF RS.24,11,260/- MADE BY THE LD. AO ON AC COUNT OF LABOUR PAID. THE ADDITION IS UNJUSTIFIED AND LIABLE TO BE DELETED. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS BY CON FIRMING AN ADDITION ON ACCOUNT OF DISALLOWANCE OF 10% OF THE S ITE EXPENSES. THE ADDITION IS ARBITRARY AND LIABLE TO B E DELETED. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS BY CON FIRMING AN ADDITION OF RS.1,30,087/- ON ACCOUNT OF DISALLOWANC E OF 20% OF THE MISC. EXPENSES. THE ADDITION IS UNJUSTIFIED AND LIABLE TO BE DELETED. 5. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER, MODIFY AND AMEND THE GROUNDS OF APPEAL. ITA NO. 127(ASR)/2012 & ITA NO.102(ASR)/2012 3 4. THE BRIEF FACTS IN THE PRESENT CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS OF CIVIL CONTRACTORS ON C IVIL CONTRACT PROJECT OF GOVERNMENT AND SEMI GOVERNMENT AGENCIES. THE ASSESS E HAS DECLARED GROSS CONTRACT RECEIPTS OF RS.29,24,49,596/- AND DE CLARED NET PROFIT OF RS.1,80,89,310/- AT NET PROFIT RATE OF 6.19% AS AGA INST 5.08% IN THE IMMEDIATE PRECEDING YEAR. THE ASSESSEE HAS REVISED ITS RETURN DATED 23.02.2010 AND HAD DECLARED GROSS RECEIPTS OF RS.30 ,56,45,984/- AND HAS CLAIMED DEPRECIATION OF RS.73,60,165/- AND INTEREST & SALARY PAID TO PARTNERS OF RS.45,37,758/- AND OTHER CLAIMS HAVE ALSO BEEN M ADE. THE ASSESSEE WAS ASKED TO FILE DETAILS OF MATERIAL CONSUMED, LABOUR ACCOUNT, SITE EXPENSES AND MISCELLANEOUS EXPENSES ETC., WHICH WERE FILED BY TH E ASSESSEE. IT WAS OBSERVED BY THE AO THAT CERTAIN SUPPORTING BILLS AN D VOUCHERS WERE NOT THERE IN THE CASE OF MATERIAL CONSUMED AND IT WAS EXPLAIN ED WITH REGARD TO THE DUST & BAZRI ETC. FOR WHICH BILLS WERE NOT READILY AVAILABLE, THE AO MADE AN ADDITION OF RS.46,84,809/-. AS REGARDS THE LABOUR A CCOUNT, THE ASSESSEE HAD FILED COMPLETE DETAILS OF LABOUR MUSTER ROLLS OF TO TAL AMOUNT PAID TO THE TUNE OF RS.4,82,25,191/-. THE AO WAS NOT SATISFIED WITH THE SAID MUSTER ROLLS SINCE THE GENUINENESS OF THESE EXPENSES COULD NOT B E ASCERTAINED AND ACCORDINGLY MADE AN ADDITION OF RS.24,11,260/-. AS REGARDS THE SITE EXPENSES CLAIMED AT RS.87,76,558/-, WHICH HAS BEEN EXPLAINED TO HAVE BEEN ITA NO. 127(ASR)/2012 & ITA NO.102(ASR)/2012 4 PAID ACTUALLY AT ALL THE SITES, FOR THE WELFARE PU RPOSES WHICH INCLUDES THE COST OF ERECTION OF TEMPORARY ACCOMMODATION FOR LAB OUR. THE AO IN THE ABSENCE OF PROPER VOUCHERS/BILLS AND EVIDENCE DISAL LOWED 20% OF THE AFORESAID EXPENDITURE, WHICH WORKS OUT TO RS.17,55, 312/-. AS REGARDS THE MISCELLANEOUS EXPENSES OF RS.18,10,096/-, THE ASSES SEE FILED COPY OF ACCOUNT. THE AO OBSERVED THAT THE ASSESSEE HAD PAI D RS.1 LAC, RS.2 LACS AND RS.2.60 LACS BY CHEQUES AND NO EXPLANATION WAS FURN ISHED WITH REGARD TO THE NATURE OF PAYMENTS MADE THROUGH CHEQUES. THE AO ACC ORDINGLY DISALLOWED THE SAME ALONGWITH OTHER PAYMENTS MADE IN CASH AT R S.6,50,436/-. 5. THE LD. CIT(A) VIDE HIS ORDER RESTRICTED THE DIS ALLOWANCE AT 20% IN THE CASE OF MATERIAL PURCHASED, 10% IN THE CASE OF SITE EXPENSES AND 10% IN THE CASE OF MISC. EXPENSES. THE LD. CIT(A) CONFIRME D THE DISALLOWANCE ON ACCOUNT OF LABOUR EXPENSES. 6. THE LD. DR, MR. R.L. CHHANALIA, RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER. 7. THE LD. COUNSEL FOR THE ASSESSEE, MR. M.A. MIR, COST ACCOUNTANT, ARGUED THAT THE ASSESSEE HAD PROVIDED ALL THE DETAI LS OF THE MATERIAL PURCHASED ALONGWITH BILLS AND VOUCHERS. AS REGARDS THE BILLS FOR DUST & BAZRI ETC. WHICH WERE NOT READILY AVAILABLE, THE AO WAS NOT JUSTIFIED IN DISALLOWING THE WHOLE AMOUNT OF THE EXPENSES SO CLA IMED. AS REGARDS THE ITA NO. 127(ASR)/2012 & ITA NO.102(ASR)/2012 5 LABOUR EXPENSES, THE ASSESSEE HAD SUBMITTED MUSTER ROLLS, WHICH ARE HAVING COMPLETE DETAILS OF THE LABOUR AND THE PROOF OF HAV ING RECEIVED THE LABOUR CHARGES BY THE SAID LABOUR. THE SAID AMOUNT IS NOT UNDER DISPUTE AND THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION AND THE LD . CIT(A) IN TURN, IS NOT JUSTIFIED IN CONFIRMING THE SAID ADDITION. AS REGAR DS THE SITE EXPENSES, THE ASSESSEE HAD SUBMITTED ALL THE DETAILS WITH REGARD TO SITE EXPENSES AND MISC. EXPENSES. HE FURTHER STATED THAT SINCE THE ASSESSEE HAS SUBMITTED ALL THE DETAILS AND NO DEFECT IN THE SAME HAS BEEN POINTED OUT, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION AND THE LD. CIT(A) WAS NOT JUSTIFIED IN RETAINING THE ADDITION. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE MATERIAL CONSUMED, THE ASSESSEE HAS SUBMITTED ALL THE BILLS AND VOUCHERS. AS REGARDS THE BILLS OF SAND, DUST & BAZRI ETC., ALL THE DETAILS WERE SUBMITTED. THE PAYMENTS MADE TO VARIOUS PERSON S WITH REGARD TO SAND, DUST & BAZRI, WERE AVAILABLE WITH THE A.O. WHICH AC TUALLY HAVE NOT BEEN CONSIDERED IN RIGHT SPIRIT. THE LD. CIT(A) IS NOT J USTIFIED IN RETAINING THE DISALLOWANCE @ 20% OF THE CLAIM OF THE ASSESSEE, WH ICH APPEARS TO BE EXCESSIVE KEEPING IN VIEW THE NON-MAINTENANCE OF BILLS OF SAND, DUST & BAZRI AND TO MEET BOTH ENDS OF JUSTICE, THE ADDITION OF RS. 4 LACS WILL BE JUSTIFIED AND THE A.O. IS DIRECTED TO SUSTAIN AN ADDITION OF RS. 4 LACS ON ACCOUNT OF MAT ERIAL CONSUMED. ITA NO. 127(ASR)/2012 & ITA NO.102(ASR)/2012 6 6.1. AS REGARDS LABOUR EXPENSES, THE ASSESSEE HAS S UBMITTED AND PRODUCED THE MUSTER ROLL, WHICH IS HAVING ALL THE DETAILS O F LABOUR AND ITS PAYMENT FOR WHICH, THERE IS NO DISPUTE AND THE AO IS NOT JUSTIF IED IN MAKING ANY ADDITION WITHOUT POINTING OUT ANY DEFECT IN THE SAME. ACCORD INGLY, THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE AND THE ORDER OF THE LD. CIT(A) IS REVERSED ACCORDINGLY. 6.2. AS REGARDS THE SITE EXPENSES, THE ASSESSEE HAS SUBMITTED ALL THE DETAILS, BUT IN FACT, NO VOUCHERS HAVE BEEN MAINTAINED. THE ASSESSEE HAS SUBMITTED THE EXPLANATION WHICH IS WITH REGARD TO THE WELFARE OF THE LABOUR WHERE THE TURNOVER IS MORE THAN RS. 30 CRORES AND KEEPING IN VIEW THE SIZE OF THE BUSINESS AND PAST HISTORY OF THE CASE, THE DISALLOW ANCE RETAINED BY THE LD. CIT(A) APPEARS TO BE EXCESSIVE AND THEREFORE, IT WI LL BE IN THE INTEREST OF JUSTICE IF AN ADDITION OF RS. 4 LACS IS SUSTAINED.. THE AO IS DIRECTED ACCORDINGLY. 6.3. AS REGARDS THE MISC. EXPENSES, THE ASSESSEE MA DE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES OF RS. 1 LAC, RS.2 LAC & RS.2 .60 LACS AND THEREFORE, THE AO COULD VERIFY THE PAYMENTS FROM THE BANK, WH ICH HAS NOT BEEN DONE IN THE PRESENT CASE. THERE IS NOTHING ON RECORD WIT H REGARDS TO THE MISC. EXPENSES CLAIMED FOR RS.40,000/- AND RS.50,436/- AN D THEREFORE, THE SAID ITA NO. 127(ASR)/2012 & ITA NO.102(ASR)/2012 7 RS.90,436/- IN TOTAL IS REQUIRED TO BE SUSTAINED AN D THE AO IS DIRECTED TO SUSTAIN THE SAME. THE AO IS DIRECTED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.127(ASR)/2012 IS DISMISSED AND THE APPEAL OF THE ASSESSEE IN ITA NO. 102(ASR)/2012 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH OCTOBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15TH OCTOBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. CONSTRUCTION ENGINEERS, SRINAGAR. 2. THE DCIT, CIR.3, SRINAGAR 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.