Assistant Commissioner of Income Tax,Chandrapur Circle, Chandrapur V. Shri. Pramod Yadavrao Chilwe, Gadchiroli

ITA 137/NAG/2011

• Counselvise Citation: 13723914 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Section: 131

Judgement Text

- -- - IN THE INCOME TAX APPELLATE TRIBUNAL-E-BENCH, NAGPU R ( ! '#$ $ % '$ / THROUGH VIDEO CONFERENCE AT MUMBAI) '& ' '& ' '& ' '& ' ( (( (. .. . . .. . , ,, ,%+ %+ %+ %+ ' '' ' ,$-. ,$-. ,$-. ,$-., ,, ,$ $$ $. .. .' '' '. . . . BEFORE S/SH.H.L.KARWA, PRESIDENT AND RAJENDRA,ACCOUNTANT MEMBER ' ./ ITA NO. 137 /NAG/2011 & & & & /& /& /& /& / ASSESSMENT YEAR 2007-08 ACIT, CHANDRAPUR CIRCLE AAYAKAR BHAVAN, NEAR RAILWAY STATION CHANDRAPUR-442401 VS. PRAMOD Y.CHILWE, MAIN ROAD, DESAIGANJ, WADSA, DISTRICT-GADCHIROLI-441207 PAN: ADRPC7165J ( 01 / // / APPELLANT ) ( 3401 / RESPONDENT ) REVENUE BY : NARENDRA KUMAR ASSESSEE BY : C.J.THAKAR & S.C. THAKAR ' 56 / DATE OF HEARING : 20 - 01 -201 4 7!/ 56 /DATE OF PRONOUNCEMENT : 24- 01 -201 4 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) )$ $$ $ -5&5 -5&5 -5&5 -5&5 ?$@ ?$@ ?$@ ?$@ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM - -- -$ '?A $ '?A $ '?A $ '?A, ,, ,,$-. $ ' ,$-. $ ' ,$-. $ ' ,$-. $ ' : CHALLENGING THE ORDER DATED 29.07.2011 OF THE CIT(A )-II,NAGPUR,ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE COMMISSIONER OF INCOME TAX(APPEALS) WAS JUSTIFIED IN ADOPTING THE RATE OF ONE HALF PERC ENTAGE OF TURNOVER FOR THE UNVERIFIABLE LABOUR PAYMENTS. 2.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN ALLOWING THE LABOUR EXPENSES AT TH E RATE OF 31.78% OF THE TURNOVER IGNORING THE FACT ADMITTED BY THE ASSESSEE IN HIS STATEMENT GIVE N U/S 131 OF THE I.T. ACT, 1961 THAT THE LABOUR EXPENSE ARE ABOUT 25% THEREOF. 3.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN ALLOWING THE LABOUR EXPENSES IGNOR ING THE COMPARABLE CASES CONSIDERED BY A.O. 4.ANY OTHER GROUNDS THAT MAY BE RAISED AT THE TIME OF HEARING. 2. ASSESSEE,AN INDIVIDUAL,WAS CARRYING THE BUSINESS OF CIVIL CONSTRUCTION RELATED WITH ROAD WORK IN THE NAME AND STYLE OF M/S. PRAMOD CONSTRUCTION CO.H E FILED HIS RETURN OF INCOME 30.10.2007 SHOWING AN INCOME OF RS 26 58 180/-.ASSESSING OFFIC ER FINALISED THE ASSESSMENT U/S.143(3)OF THE ACT ON 31.12.2009 DETERMINING THE INCOME OF THE ASS ESSEE AT RS.27,88,934/- . EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION MADE U NDER THE HEAD LABOUR EXPENSES.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT SURVEY U/S.133 A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 27.02.2009,THAT AT THE TIME OF SURVEY EXPENSES OF LABOUR CHARGES AND PURCHASE OF GITTI, MURRAM FROM UNREGISTERED DEALERS WERE FOUND TO BE NOT PROPERLY VOUCHED AND WERE SELF MADE,THAT THE DETAILS RECORDED IN THE VOU CHERS WERE NOT VERIFIABLE,THAT THE ASSESSEE HAD 2 ITA NO. 137/NAG/2011 PRAMOD Y. CHILWE CLAIMED RS.1,14,82,736/- AS LABOUR PAYMENT AND RS. 1,80,51,887/- AS LABOUR PAYMENT ON SITE FOR THE YEAR UNDER CONSIDERATION,THAT THE LABOUR CHARGE S WERE CLAIMED @ 32.28% OF TURNOVER (RS.9,18,50,946/-). A.O. RESTRICTED THE CLAIM OF TH E ASSESSEE TO 25% CONSIDERING THAT THE ASSESSEE WAS DOING THE CIVIL CONTRACT IN NAXAL-INFESTED AREA AND MADE AN ADDITION OF RS. 66, 96,024/- @7.28% OF TURNOVER. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).DURING THE COURSE OF APPELLATE PROCEEDINGS,ASSESSEE PRODUCED A COMPARATI VE CHART FOR FOUR YERS ABOUT THE LABOUR CHARGES.HE SUBMITTED THAT PERCENTAGE OF CONTRACT LA BOUR COMPONENTS WAS COMPARABLE FOR THE LAST FOUR YEARS PERIOD,THAT THE GROSS MARGINS HAD SHOWN CONSISTENT IMPROVEMENT.FAA FOUND THAT IN FIRST TWO YEARS I.E. A.YS. 2005-06 AND 2006-07ASSES SEE HAD EXTRACTED THE MATERIAL HIMSELF , THAT LABOUR PAYMENT INCLUDED THE CHARGES OF EXTRACTION O F MATERIAL ALSO FOR THOSE TWO YEARS,THAT IN SUBSEQUENT YEARS ASSESSEE DIRECTLY PURCHASED THE MA TERIALS,THAT COST OF MATERIAL WAS AROUND 50. 06%(AVERAGE OF FOUR YEARS) OF THE TOTAL RECEIPT,THA T IN THE YEAR UNDER CONSIDERATION THE PERCENTAGE OF MATERIAL COST WAS LOWER THAN THE EARLIER YEAR,TH AT COST WAS 49.15%. FAA CALLED FOR A REMAND REPORT FROM THE ASSESSEE IN THIS REGARD.AFTER CONSIDERING THE REPORT AND THE SUBMISSIONS OF THE ASSESSEE ,HE HELD THAT THE L ABOUR PAYMENTS TO CONTRACT RECEIPT WAS VARYING FROM YEAR TO YEAR THAT DURING THE AYS.2008-09,2007- 08,2006-07 AND 2005-06 LABOUR CHARGES WERE16.94%,14. 49%,19.79% AND 21.17% OF THE RECEIPT S RESPECTIVELY,THAT THE AVERAGE OF LABOUR PAYMENT WAS ABOUT 18.09% FOR THE PERIOD AY.2005-06 TO 2008-09.HE FURTHER HELD THAT IN THE YEAR UNDER CONSIDERATION CONTRACT LABOUR COST WAS SLIGHT LY ON HIGHER SIDE,THAT THERE WAS ALWAYS POSSIBILITY OF CERTAIN REVENUE LEAKAGES WHEN THE VO UCHERS WERE SELF MADE.FAA FURTHER HELD THAT THE AO HAD THE ADDITION BECAUSE HE HAD INCLUDED THE LABOUR COST WITH THE LABOUR PAYMENTS RELATED TO EXTRACTION OF MATERIAL,THAT THE COST OF MATERIAL HAD REMAINED ALMOST SAME FOR THESE YEARS.AFTER CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE HE HELD THAT % OF THE DISALLOWANCE WAS JUSTIFIED.ACCORDINGLY,HE DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO RS.4,59,254/-. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR) SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR REDUCING THE ADDITION MADE BY THE AO, THAT THERE WA S INCREASED IN LABOUR CHARGES PAYMENT , AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT THERE WAS CONSISTENCY IN LABOUR PAYMENTS,THAT THE ASSESSEE WAS OPERATING IN THE AREAS THAT ARE BADLY HIT BY NAXAL MOVEMENT,THAT LABOUR EXPENSES INCURRED BY THE ASSESSEE FOR EXTRACTING MATERIAL SH OULD NOT BE CONSIDERED UNDER THE HEAD GENERAL LABOUR PAYMENTS,THAT THE ASSESSEE HAD SHOWN REASONA BLE MARGIN OF PROFIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE APPEAL,THE FAA HAD CONSIDERED ALL THE RELEVANT FACTS OF THE CASE UNDER CONSIDERATION AND HAD ARRIVED AT A REASONABLE CONCLUSION.HE HAS G IVEN A CATEGORICAL FINDING OF FACT THAT IN THE UNDER APPEAL COST OF MATERIAL WAS LOWER THAN THE EA RLIER YEAR AND COST OF LABOUR CHARGES WAS SLIGHTLY HIGHER.WE ARE OF THE OPINION THAT HIS CONC LUSION IS BASED ON CORRECT APPRECIATION OF FACTS. WE FIND THAT THERE WAS IMPROVEMENT IN GROSS PROFIT MARGINS OF THE ASSESSEE OVER THE YEARS. CONSIDERING THE FACTS OF THE CASE WE ARE OF THE OPI NION THAT DECISION OF THE FAA TO RESTRICT THE ADDITION TO % IS REASONABLE AND MEETS THE ENDS OF JUSTICE.THEREFORE,CONFIRMING HIS ORDERS WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILE D BY THE AO STANDS DISMISSED. B 5C &B5 6 D ?E ,F ,5 G . ORDER PRONOUNCED IN T HE OPEN COURT ON 24 TH JANUARY, 2014. 3 ITA NO. 137/NAG/2011 PRAMOD Y. CHILWE ?$@ 7!/ $ - 24 , 6 , 2014 ! . SD/- SD/- (H.L.KARWA/ ( (( (. .. . . .. . ) ( ,$-. ,$-. ,$-. ,$-. / RAJENDRA) PRESIDENT/ %+ $ $ $ $ '?A '?A '?A '?A /ACCOUNTANT MEMBER / MUMBAI, ? / DATE: 24.01.2014 SK ?$@ ?$@ ?$@ ?$@ 35 35 35 35 H$ H$ H$ H$/5 /5/5 /5 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 01 2. RESPONDENT / 3401 3. THE CONCERNED CIT(A)/ 'I J , 4. THE CONCERNED CIT / 'I J 5. DR ITAT,NAGPUR BENCH/ K 35 , . . - . - . 6. GUARD FILE/ & L . '45 35 //TRUE COPY// ?$@ ' / BY ORDER, M / ' , DY./ASST. REGISTRAR , /ITAT, MUMBAI.