Supreme Construction, Hooghly V. ACIT, Circle - 2, Hooghly, Hooghly

ITA 1272/KOL/2011

• Counselvise Citation: 127223514 RSA 2011
• Duration Of Justice: 2 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 27-09-2011
• Court: TRIBUNAL
• Department Lawyers: IMLIMEREN JAMIR JCIT LD
• Assessee Lawyers: SOMNATH GHOSH LD
• Keywords: Corroborative evidences
• Section: 142(1); 133(6); 37(1); 194C

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH: KO LKATA ( ) , 1 , BEFORE HONBLE SRI SHAMIM YAHY A, AM & HONBLE SRI GEORGE MATHAN, JM $ / ITA NO.1272/KOL/2011 A.Y 2007-08 M/S. SUPREME CONSTRUCTION PAN: AAXFS 5334A % % - VERSUS -. ACIT, CIRCLE-2, HOOGHLY ( ' / APPELLANT ) ( )*' / RESPONDENT ) ITA NO. 1649/KOL/2011 A.Y 2007-08 J C I T (OSD), CIRCLE-2, HOOGHLY % % - VERSUS -. M/S. SUPREME CONSTRUCTION PAN : AAXFS 5334A ( ' / APPELLANT ) ( )*' / RESPONDENT ) ' / FOR THE APPELLANT/DEPARTMENT /SHRI SOMNATH GHOSH, ADVOCATE, LD. AR )*' / FOR THE RESPONDENT/ASSESSEE: / SHRI IMLIMEREN JAMIR, JCIT/ LD.SR. DR / 0 /DATE OF HEARING: 05-08-2014 / 0 /DATE OF PRONOUNCEMENT: 08-08-2014 / ORDER 1 , SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 1272/KOL/2011 IS AN APPEAL FILED BY THE ASSESSEE AND ITA NO. 1649/KOL/2011 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDE RS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), XXXVI, KOLKATA IN APPEAL NO. 788/CIT(A) -XXXVI/KOL/CIR-2, HGL/09-10 DATED 05/09/2011 FOR THE ASSESSMENT YEAR 2007-08. 2. SHRI SOMNATH GHOSH, ADVOCATE, LEARNED AR REPR ESENTED ON BEHALF OF THE ASSESSEE AND .SHRI IMLIMEREN JAMIR, LEARNED JCIT/SR.DR REPRESEN TED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY SHRI SOMNATH GHOSH, ADVOCAT E, LEARNED AR FOR THE ASSESSEE THAT GROUND NOS. 1 & 2 OF ASSESSEES APPEAL WERE AGAINS T THE ACTIONS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN HOLDING THAT SUM OF RS.1 ,66,175/- WAS NOT ALLOWABLE IN RESPECT OF ADVERTISEMENT EXPENDITURE ON THE GROUND THAT THE SAME WAS NOT ALLOWABLE AS PER PROVISIONS OF SECTION 37(1) OF THE I.T ACT, 1961. IT WAS THE SUB MISSION THAT IN THE COURSE OF ASSESSMENT THE AO HAD DISALLOWED AN AMOUNT OF RS.1,36,675/- REPRESENT ING THE PAYMENTS MADE ON ACCOUNT OF ADVERTISEMENT BY HOLDING THAT NO TDS HAD BEEN MADE U/S. 194C OF THE ACT. IT WAS THE SUBMISSION BY HIM THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAD ACCEPTED THE ITA NOS. 1272 & 1649/KOL/11-M/S. SUPREME CONSTRUCTI ON-A-JM 2 CONTENTION OF THE ASSESSEE THAT THE PAYMENTS WERE N OT MADE FOR CARRYING OUT ANY WORK IN PURSUANCE TO ANY CONTRACT. THEREFORE, THE SAME DI D NOT COME UNDER THE PURVIEW OF SECTION 194C OF THE ACT. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE PAYMENTS WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS, BUT FOR THE BENEFIT OF THE SISTER CONCERNS. CONSEQUENTLY, HE ENHANCED THE DISALLOWANCE AT RS. 1,66,175/- U/S. 37 (1) OF THE ACT. IT WAS THE FURTHER SUBMISSION THAT THIS AMOUNT OF RS.1,66,175/- REPRESENTING THE ADVERTISEMENT CHARGES WAS A SUBJECT MATTER OF FBT (FRINGE BENEFIT TAX). THE ASSESSEE HAS ALSO OF FERED THE SAME UNDER THE FBT (FRINGE BENEFIT TAX). THE LEARNED AR FOR THE ASSESSEE HAS ALSO DREW OUR ATTENTION TO THE PAGE 181 OF THE PAPER BOOK, WHICH WAS ANNEXURE-II OF FORM 3CD, WHEREIN T HE SALES PROMOTION INCLUDING PUBLICITY HAD BEEN DISCLOSED AS FRINGE BENEFIT TAX. THE LEAR NED AR FOR THE ASSESSEE HAS ALSO PLACED BEFORE US A COPY OF THE FRINGE BENEFIT TAX (FBT) ORDER FO R THE ASSESSMENT YEAR 2007-08 DATED 31-12- 2009, WHERE THE SAME HAS BEEN ASSESSED. IT WAS THE SUBMISSION THAT CONSEQUENTLY NO DISALLOWANCE CALLED FOR IN THE HANDS OF THE ASSESSE E. 4. IN REPLY, SHRI IMLIMEREN JAMIR, JCIT/ LD.SR. DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON THI S ISSUE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE AMOUNT OF RS.1,66,175/- HAS ALREADY BEEN OFFERED UNDER THE FBT, ADMITTEDLY, THIS AMOUNT CANNOT BE NOW DISALLOWED U/S. 37(1) OF THE ACT BY HOLDING THAT TH E SAME WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN THE CIRCUMSTANCES, T HE DISALLOWANCE AS ENHANCED/MADE BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) STANDS DELETED. 6. IN RESPECT OF GROUND NOS. 3,4 & 5 OF THE ASSESSE ES APPEAL, IT WAS SUBMITTED BY SHRI SOMNATH GHOSH, ADVOCATE, THE LEARNED AR FOR THE AS SESSEE THAT THE ISSUE WAS AGAINST THE ACTION OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN REJECTING THE ASSESSEES BOOKS OF ACCOUNT AND ESTIMATING THE NET PROFIT OF THE BUILDING PROJE CT BY 1/3 RD OF THE LABOUR CHARGES. IT WAS THE SUBMISSION BY HIM THAT IN THE COURSE OF ASSESSMENT THE AO HAD MADE DISALLOWANCE OF RS.9,37,997/- AS SUNDRY CREDITORS. IT WAS THE SUBM ISSION THAT THE SUNDRY CREDITORS REPRESENTING THE LABOUR CHARGES WERE LIABLE TO BE PAID BY THE A SSESSEE. IT WAS THE SUBMISSION THAT ON APPEAL THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA D CALLED FOR A REMAND REPORT. IN THE REMAND REPORT THE AO THOUGH REFRAINED FROM COMMENTING ON THE VERY ISSUE OF DISALLOWANCE, BUT EXPRESSED SERIOUS DOUBTS ABOUT AUTHENTICITY ON TH E PART OF THE LABOUR CHARGES ON THE GROUND THAT THE LABOUR CHARGES WERE INCURRED AFTER GIVING POSS ESSION OF THREE FLAT TO THE OWNERS IN THE MONTHS OF MAY, JUNE AND JULY 2006. THE MUSTER ROLLS SHOW ING LABOUR CHARGES PAYMENTS FOR FEW DAYS IN A MONTH WERE NOT GENUINE AND THE CLOSING STOCK WA S NOT INCLUSIVE OF ANY LABOUR CHARGES. IT WAS THE SUBMISSION BY HIM THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAD ACCEPTED THE ITA NOS. 1272 & 1649/KOL/11-M/S. SUPREME CONSTRUCTI ON-A-JM 3 CONTENTION OF THE ASSESSEE THAT PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT DID NOT APPLY TO THE SAID LABOUR PAYMENTS, BUT BECAUSE THE AO HAD MENTIONED I N HIS REMAND REPORT THAT SUBSTANTIAL PORTION OF THE LABOUR CHARGES WERE INCURRED AFTER GIVING PO SSESSION TO SOME OF THE FLAT TO THE OWNERS AS ALSO ON THE GROUND THAT NO LABOUR CHARGES WERE INC LUDED IN THE CLOSING STOCK FOR AN ONGOING PROJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS REJECTED THE ASSESSEES BOOKS OF ACCOUNT AND ESTIMATED THE NET PROFIT OF THE PROJECT BY ENHANCING 1/3 RD OF THE LABOUR CHARGES. IT WAS THE SUBMISSION THAT THE PROJECT CONSISTED OF 36 FLA TS AND THREE OF THE FLAT OWNERS WANTED TO DO INTERIOR DECORATION, THREE FLATS HAD BEEN HANDED O VER TO THE THREE FLAT OWNERS. THE LABOUR CHARGES HAD BEEN INCURRED ON THE PROJECT AND THE SAME HAD BEEN PAID THROUGH LABOUR SARDARS. IT WAS THE FURTHER SUBMISSION THAT THE LABOUR CHARGES WERE N OT INCLUDIBLE IN THE CLOSING STOCK, BUT WAS INCLUDIBLE IN THE WORK-IN-PROGRESS. IT WAS THE SUB MISSION THAT NO DEFECT HAD BEEN POINTED OUT IN RESPECT OF THE WORK- IN- PROGRESS AND REJECTION OF ASSESSEES BOOKS OF ACCOUNT BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS WRONG. 7. IN REPLY, SHRI IMLIMEREN JAMIR, JCIT, THE LEARNE D SR.DR HAS SUBMITTED THAT THIS ISSUE WAS CONNECTED WITH GROUND NO.1 OF THE REVENUES APPEAL . IT WAS THE SUBMISSION THAT THE AO HAVING EXPRESSED SERIOUS DOUBTS ABOUT AUTHENTICITY OF PAR T OF THE LABOUR CHARGES PAYMENT. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAVING ACCEPTE D THAT THERE WERE CLEAR DEFECTS IN THE ACCOUNTS OF THE ASSESSEE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT NOT TO HAVE GIVEN ANY RELIEF TO THE EXTENT OF 2/3 RD OF THE LABOUR CHARGES DISALLOWED BY THE AO. HE HA S VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) CLEARLY SHOWS THAT THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) HAS DELETED THE DISALLOWANCE MADE BY THE AO U/S.40(A)(IA) OF THE ACT. THE REVENUE IS NOT IN APPEAL BEFORE US AGAINST THIS DELETION OF DISALLOWANCE. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS THEN PROCEEDED TO REJECT T HE ASSESSEES BOOKS OF ACCOUNT ON THE GROUND THAT SUBSTANTIAL PORTION OF LABOUR CHARGES WERE IN CURRED AFTER GIVING POSSESSION TO SOME OF THE FLAT OWNERS AND ON THE GROUND THAT NO LABOUR CHARGES WER E NOT INCLUDED IN THE CLOSING STOCK FOR AN ONGOING PROJECT. AFTER HAVING RAISED THESE TWO ISSU ES THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) REJECTED THE ASSESSEES BOOKS OF ACCOUNT AND MADE ENHANCEMENT OF THE NET PROFIT OF THE PROJECT BY 1/3 RD OF THE LABOUR CHARGES. A PERUSAL OF THE TWO REASO NS AS MENTIONED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FOR RE JECTING THE ASSESSEES BOOKS ITSELF CONTRADICT TO EACH OTHER. ONE REASON IS THAT SUBS TANTIAL PORTION OF LABOUR CHARGES WERE INCURRED AFTER GIVING POSSESSION TO SOME OF THE FLAT OWNERS . SECOND THE LABOUR CHARGES WERE NOT INCLUDED IN THE CLOSING STOCK FOR AN ONGOING PROJECT. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ITA NOS. 1272 & 1649/KOL/11-M/S. SUPREME CONSTRUCTI ON-A-JM 4 IS TAKING THE ASSUMPTION THAT PROJECT HAS BEEN COMP LETED BECAUSE SOME OF THE FLATS HAVE BEEN HANDED OVER TO THE FLAT OWNERS MORE SPECIFICALLY T HREE OWNERS OUT OF THIRTY SIX. THEN HE HAS ASSUMED THAT THE PROJECT STILL CONTINUES. THUS, TH IS IS A CONTRADICTED STAND ADOPTED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FOR REJECTION OF ASSESSEES BOOKS OF ACCOUNT. THIS IS NOT PERMISSIBLE. IN ANY CASE, THE LABOUR CHARGES ARE N OT INCLUDIBLE IN THE CLOSING STOCK, BUT INCLUDIBLE IN THE WORK IN PROGRESS. CONSEQUENTLY, WE ARE OF T HE VIEW THAT THE REJECTION OF ASSESSEES BOOKS OF ACCOUNT AND CONSEQUENT ENHANCEMENT OF THE NET PR OFIT OF THE PROJECT BY 1/3 RD OF THE LABOUR CHARGES BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS UNSUSTAINABLE IN LAW. THE SAME STANDS DELETED. CONSEQUENTLY, THESE GROUNDS OF AS SESSEES APPEAL STAND ALLOWED AND GROUND NO.1 OF THE REVENUES APPEAL STANDS DISMISSED. 9. COMING TO GROUND NO.2 OF THE REVENUES APPEAL, I T WAS SUBMITTED BY SHRI IMLIMEREN JAMIR, LEARNED JCIT/ SR.DR THAT THIS ISSUE WAS AGAINST TH E ACTION OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN DELETING THE VARIOUS ADDITI ONS BY CONTRAVENTION OF PROVISIONS OF RULE 46A OF THE I.T RULES 1962. THE LEARNED JCIT/SR.DR HAS DREW OUR ATTENTION TO PAGE 2 OF THE ASSESSMENT ORDER AND SUBMITS THAT FOR THE EXPENS ES UNDER THE SUB-HEAD CONSTRUCTION MATERIAL VARIOUS DISALLOWANCES HAVE BEEN MADE ON THE GROUND THAT NOTICES ISSUED U/S. 133(6) OF THE ACT BY THE AO HAVE NOT BEEN RETURNED UNSERVED AND FOR CERTAIN LOCAL PURCHASES THE ASSESSEE HAD NO SUPPORTING EVIDENCES. IT WAS THE SUBMISSION BY HIM THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAD DELETED THE SAME BY HOLDING THAT ASS ESSEE FILED FULL DETAILS ALONG WITH SUPPORTING EVIDENCES FOR THE TRANSACTION. IT WAS THE SUBMISSI ON THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE WAS LIABLE TO BE REVERSED. 10. IN REPLY, SHRI SOMNATH GHOSH, ADVOCATE, THE LEA RNED AR FOR THE ASSESSEE HAS DREW OUR ATTENTION TO THE VARIOUS CORRESPONDENCES FILED WITH THE AO AVAILABLE IN THE PAPER BOOK AT PAGES 67-96 AS ALSO THE DETAILS CALLED FOR BY THE AO IN THE NOTICE ISSUED U/S. 142(1) OF THE ACT. IT WAS THE SUBMISSION THAT ALL THE EVIDENCES WERE MADE AVA ILABLE BEFORE THE AO AND ALL THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES. IT WAS THE SUBMISSI ON BY HIM THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE WAS LIABLE TO BE UPHELD. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF GROUND NO.2 OF THE REVENUES APPEAL SHOWS THAT THE REVENUE CHALLENGES AGAINST THE VIOLATION OF RULE 46A OF THE I.T RULES 1962. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT AS TO WHAT THE FRESH EVIDENCE THAT LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS TAKEN INTO CONSIDERATION FOR GIVING RELIEF TO THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) HAS ALSO RECOGNIZED THAT ALL THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES AND ALL THE EVIDENCES WERE MADE AVAILABLE BEFORE THE AO. IN THE CIRCUMSTANCE, WE ARE OF THE VIEW THAT T HE FINDING OF THE LEARNED COMMISSIONER OF ITA NOS. 1272 & 1649/KOL/11-M/S. SUPREME CONSTRUCTI ON-A-JM 5 INCOME-TAX (APPEALS) ON THIS ISSUE IS ON A RIGHT F OOTING AND DOES NOT CALL FOR ANY INTERFERENCE. WE UPHOLD THE SAME. THE GROUND RAISED BY THE REVENU E STANDS DISMISSED. 12. IN THE RESULT, THE ASSESSEES APPEALS IN ITA NO. 1272/KOL/2011 FOR THE ASSESSMENT YEAR 2007-08 IS ALLOWED AND REVENUES APPEAL IN ITA NO. 1649/KOL/2011 FOR THE ASSESSMENT YEAR 2007-08 IS DISMISSED. 4 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 08/08 /2014 SD/- SD/- ** PRADIP SPS / )7 87 / COPY OF THE ORDER FORWARDED TO: 1. . ' / THE APPELLANT : M/S. SUPREME CONSTRUCTION C/O A DVOCATE, SHRI SOMNATH GHOSH, SEVEN BROTEHRS LODGE, P.O BUROSHIBT ALA, P.S CHINSURAH, DIST:HOOGHLY, PIN 712105. 2 )*' / THE RESPONDENT- ACIT, CIR-2, HOOGHLY, AAYKAR BH AWAN, G.T RD, P.O CHINSURAH, P.S CHINSURAH, DIST: HOOGHLY PIN 712 101. 3. 4. . / THE CIT, ( )/ THE CIT(A) 5 . ) / DR, KOLKATA BENCH 6 . GUARD FILE . *7 )/ TRUE COPY, / BY ORDER, /ASSTT REGISTRAR ( , ) (SHAMIM YAHYA, ACCOUNTANT MEMBER) ( 1 , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( ( 0 0 0 0 ) )) ) DATE 08/08/2014