N. J. Devani Builders Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 1387/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89415 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Principle of natural justice; Period of limitation; Fair market value

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER SL. NO(S) ITA NO(S)/CO NOS. ASSESSMENT YEAR(S) APPEAL(S)/CO BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 923/AHD/2011 2007-08 DY.CIT CIRCLE-5 AHMEDABAD (REVENUE) M/S.N.J.DEVANI BUILDERS PVT.LTD. B/H. ISHWAR BHUVAN NAVRANGPURA AHMEDABAD PAN:AAACN 5952 D (ASSESSEE) 2. CO.NO. 101/AHD/11 2007-08 ASSESSEE REVENUE 3. 1387/AHD/12 2008 - 09 ASSESSEE REVENUE 4. 2126/AHD/12 2009 - 10 ASSESSEE REVENUE 5. 2497/AHD/12 2009-10 REVENUE ASSESSEE REVENUE BY : SHRI M.K. SINGH, SR.DR ASSESSEE BY : SHRI S.N. SOPARKAR, AR / DATE OF HEARING 08/04/2015 !' / DATE OF PRONOUNCEMENT 13/05/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER: THIS BUNCH OF APPEALS BY THE ASSESSEE AND THE REVEN UE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMM ISSIONER OF INCOME ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 2 - TAX(APPEALS)-XI, AHMEDABAD (CIT(A) IN SHORT) PERTAINING TO ASSESSMENT YEARS (AYS) 2007-08, 2008-09 & 2009-10 D ATED 24/01/2011,17/04/2012, & 28/08/2012 RESPECTIVELY. CROSS-OBJECTION BY THE ASSESSEE FOR AY 2007-08. SINCE COMMON ISSUES AND FACTS ARE INVOLVED IN THESE APPEALS/CO, THESE WERE HEARD TOGE THER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE REVENUES APPEAL, I.E. IT A NO.923/AHD/2011 FOR AY 2007-08. THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF 73,61,294/- MADE ON ACCOUNT OF MOBILIZATION ADVANCE. 2. THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF 13,20,000/- MADE ON ACCOUNT OF DIRECTORS REMUNERATION. 3. THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF 16,06,500/- MADE ON ACCOUNT OF CESSATION OF LIABILITY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 3 - 2.1 BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 23/11/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION/DISALLOWANCE OF MOBILIZATION ADVANCE AMOUN TING TO RS.73,61,294/-, DISALLOWANCE OF DIRECTORS REMUNERA TION AMOUNTING TO RS.13,20,000/- AND MADE ADDITION ON ACCOUNT OF CES SATION OF LIABILITY OF RS.16,06,500/-. THE ASSESSEE FEELING AGGRIEVED BY THE ASSESSMENT ORDER, PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS AND FOLLOWING THE DECISION PASSED BY TH E CIT(A) IN ASSESSEES OWN CASE FOR AY 1995-96, PARTLY ALLOWED THE APPEAL; THEREBY THE LD.CIT(A) DELETED THE ADDITION. HOWEVER, THE CREDIT FOR TDS WAS DIRECTED TO BE GIVEN IN THE YEAR WHEN INCOME IS OFF ERED. THE LD.CIT(A) IN RESPECT OF THE DISALLOWANCE OF DIRECTORS REMUNE RATION ALSO, PARTLY ALLOWED THE APPEAL; THEREBY THE DISALLOWANCE WAS SU STAINED TO THE EXTENT OF RS.3.4 LACS AND BALANCE DISALLOWANCE WAS DELETED . HOWEVER, IN RESPECT OF THE ADDITION OF RS.46,06,500/- MADE ON A CCOUNT OF CESSATION OF LIABILITY BY INVOKING THE PROVISIONS OF SECTION 41( 1) OF THE ACT, THE ADDITION WAS DELETED. AGAINST THIS, BOTH THE REVEN UE AND THE ASSESSEE ARE IN APPEALS AND CROSS-OBJECTION(BY ASSESSEE). ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 4 - 3. FIRST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.73,61,294/- MADE ON ACCOUNT OF MOBILIZATION ADVANCE. THE SR.DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION. 3.1. ON THE CONTRARY, LD.SR.COUNSEL FOR THE ASSESSE E POINTED OUT THAT THE LD.CIT(A) HAS FOLLOWED HIS PREDECESSORS ORDER PASS ED IN AY 1995-96. HE SUBMITTED THAT IN AY 1995-96, THE ISSUE TRAVELLE D UPTO THE STAGE OF THE HONBLE TRIBUNAL (ITAT C BENCH, AHMEDABAD) AND TH E HONBLE TRIBUNAL VIDE ITS ORDER DATED 27/06/2008 IN ITA NO. 4380/AHD/2003 HAS CONFIRMED THE FINDING OF THE LD.CIT(A) HOLDING THAT THE ADVANCE RECEIVED BY THE ASSESSEE AGAINST THE PURCHASE OF MATERIAL AT SITE BEFORE THE EXECUTION OF WORK, THE SAME CANNOT BE TREATED AS IN COME OF THE ASSESSEE, ESPECIALLY WHEN THE ASSESSEE IS FOLLOWING THE PRACT ICE OF SHOWING ADVANCE RECEIPTS FROM THE PARTIES IN THE BALANCE-SH EET AND WHEN THE WORK IS EXECUTED, IT IS SHOWN AS RECEIPT AND OFFERED FOR TAX. THE LD.COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE JUDGEM ENT OF HONBLE GUJARAT HIGH COURT RENDERED IN ASSESSEES OWN CASE (SPECIAL CIVIL APPLICATION NO.11111 OF 2011 DATED 28/11/2011) FOR AY 2006-07. HE DREW OUR ATTENTION OF PAPER-BOOK FOR AY 2009-10 AT PAGE NOS. 81 TO 89. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 5 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE DECISION OF HIS PREDECESSOR PASSED IN AY 1995-96 BY OBSERVING AS UNDER:- 2.1. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER. IT IS SEEN THAT SIMILAR ISSUE CA ME UP FOR CONSIDERATION IN APPELLANTS OWN CASE FOR THE A.Y.9 5-96. CIT(A) HELD AS UNDER:- IT IS NATURAL THAT THE PARTY PAYING ADVANCE WILL D EDUCT THE TDS AT THE TIME OF PAYMENT ITSELF BECAUSE AS PER IN COME TAX PROVISIONS IT IS MANDATORY TO DEDUCT TAX AT THE TIM E OF PAYMENT. THEREFORE, IT WILL BE WRONG TO SAY THAT I N A CASE OF RECEIPT OF ADVANCE, IF TDS HAS BEEN DEDUCTED THE AP PELLANT HAS EARNED INCOME IN THE SAME YEAR. THEREFORE, THE ADDITION MADE BY THE A.O. DESERVE TO BE DELETED. FURTHER, I T MAY BE POINTED OUT HERE THAT AS PER THE PROVISIONS OF SECT ION 199 OF THE ACT, THE CREDIT OF THE TDS SHALL BE GIVEN FOR T HE AMOUNT DEDUCTED FOR THE ASSESSMENT YEAR FOR WHICH SUCH INC OME IS ASSESSABLE. THE APPELLANT COMPANY HAD OFFERED THE INCOME IN THE SUBSEQUENT ASSESSMENT YEAR AND THEREFORE, TH E A.O. OUGHT TO HAVE GIVEN THE CREDIT OF THE TDS IN THE YE AR FOR WHICH SUCH INCOME ASSESSABLE, INSTEAD OF TREATING T HE INCOME OF THE SUBSEQUENT YEAR FOR THE YEAR UNDER CONSIDERATION. THE A.O. WHILE GIVING EFFECT TO THI S ORDER, IS DIRECTED TO GIVE CREDIT OF TDS ACCORDINGLY. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 6 - 2.1.2. ON FURTHER APPEAL, TRIBUNAL HELD AS UNDER:- AFTER HEARING BOTH THE PARTIES, WE FIND NO INFIRMI TY IN THE ORDER OF LD.CIT(A) IN HOLDING THAT THE ADVANCE RECE IVED BY THE ASSESSEE AGAINST THE PURCHASE OF MATERIAL AT SI TE BEFORE THE EXECUTION OF WORK, THE SAME CANNOT BE TREATED A S INCOME OF THE ASSESSEE, ESPECIALLY WHEN THE ASSESSEE IS FO LLOWING THE PRACTICE OF SHOWING ADVANCE RECEIPTS FROM THE PARTI ES IN THE BALANCE-SHEET AND WHEN THE WORK IS EXECUTED IT IS S HOWN AS RECEIPT AND OFFERED FOR TAX. CONSEQUENTLY, WE UPHO LD THE ORDER OF LD.CIT(A). 2.1.3. FACTS REMAINING THE SAME, FOLLOWING THE ABO VE DECISIONS, A.O. IS DIRECTED TO DELETE THE IMPUGNED ADDITION. SIMULTANEOUS CREDIT FOR TDS SHALL BE GIVEN ONLY TO THE EXTENT OF INCOME OFFERED DURING THE YEAR (KEEPING IN VIEW THE PROVISIONS OF SEC.199). CREDIT FOR BALANCE TDS SHALL BE GIVEN IN THE YEARS IN WHICH THE INCOME IS OFFERED. THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED. 5. IT IS NOT DISPUTED BY THE LD.SR.DR THAT THIS TRI BUNAL IN ITA NO.4380/AHD/2003 FOR AY 1995-96 HAD CONFIRMED THE D ECISION OF THE LD.CIT(A). FURTHER, RELIANCE IS PLACED ON THE JUD GEMENT OF HONBLE GUJARAT HIGH COURT IN ASSESSEES OWN CASE IN SPECIA L CIVIL APPLICATION NO.11111OF 2011 DATED 28/11/2011, WHEREIN THE HONB LE COURT OBSERVED AS UNDER:- 13. THIS VERY ISSUE HAD CROPPED UP BETWEEN THE ASS ESSEE AND THE DEPARTMENT IN THE EARLIER YEARS AS IT CAN BE SEEN F ROM THE ORDERS OF ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 7 - CIT(APPEALS) AS WELL AS THE TRIBUNAL PRODUCED BY TH E PETITIONER ON RECORD FOR THE ASSESSMENT YEAR 1995-96. CIT(APPEALS ) HAD DISPOSED OF THE ASSESSEE'S APPEAL BY AN ORDER DATED 24.11.1999. SOLE GROUND DECIDED BY CIT(APPEALS) IN THE SAID ORDER WAS WITH RESPECT TO AN AMOUNT OF RS.11.96 LAKHS, WHICH REPRESENTED RETENTI ON MONEY. DURING THE ASSESSMENT PROCEEDINGS, WHILE RECONCILING THE G ROSS RECEIPTS AS PER THE TDS CERTIFICATES AND THAT DISCLOSED BY THE ASSE SSEE IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER NOTICED A DISCR EPANCY BETWEEN THE TWO. UPON DETAILED RECONCILIATION PROVIDED BY THE A SSESSEE, IT WAS REVEALED THAT THE SUM OF RS.11.96 LAKHS REPRESENTED THE RETENTION MONEY WITHHELD BY THE CLIENTS, THOUGH THE WORK WAS DONE. THE ASSESSING OFFICER ENQUIRED WITH THE ASSESSEE THAT WHY SUCH RE TENTION MONEY SHOULD NOT BE TREATED AS THE ASSESSEE'S INCOME. THE ASSESSEE CONTENDED THAT THE RETENTION MONEY AS PER THE TERMS OF THE CO NTRACT WAS CONTINGENT UPON COMPLETION OF THE WORK AND THE SAME WAS NOT DU E AND PAYABLE TO THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT ASSESSEE'S CLAIM HOLDING THAT SINCE THE ASSESSEE WAS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING THE ACCRUAL OF INCOME WAS INDEPENDENT OF ITS RECEIPT. IN APPEAL BEFORE THE COMMISSIONER, THE ASSESSEE CONTEN DED THAT THIS UNIFORM PATTERN HAS BEEN FOLLOWED YEAR AFTER YEAR A ND IN ALL PREVIOUS YEARS, THE STAND OF THE ASSESSEE HAS BEEN ACCEPTED. THE APPELLATE COMMISSIONER DELETED THE ADDITION RELYING ON THE DE CISION OF THE TRIBUNAL. REVENUE HAD CARRIED THE ORDER OF CIT(APP EALS) BEFORE THE TRIBUNAL. THE TRIBUNAL BY ITS JUDGMENT DATED 27.6.2 008 DISMISSED THE REVENUE'S APPEAL. SUCH DECISION OF THE TRIBUNAL WAS CARRIED FURTHER IN APPEAL BEFORE THIS COURT IN TAX APPEAL NO.163 OF 2 009, WHICH WAS DISMISSED BY ORDER DATED 3.5.2011. 14. IN THE RESULT, IT WOULD EMERGE THAT THE CENTRAL ISSUE ON WHICH THE ASSESSING OFFICER SEEKS TO REOPEN THE ASSESSMENT PR EVIOUSLY FRAMED AFTER SCRUTINY, HAS BEEN HELD IN FAVOUR OF THE ASSE SSEE. IN THAT VIEW OF THE MATTER, WE DO NOT FIND THAT THE NOTICE CAN BE S USTAINED IN LAW AND THE SAME IS, THEREFORE, QUASHED. PETITION IS DISPOS ED OF ACCORDINGLY. RULE IS MADE ABSOLUTE ACCORDINGLY. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 8 - 5.1. IN VIEW OF THE JUDGEMENT OF THE HONBLE GUJAR AT HIGH COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO.1 OF THE REVENUE S APPEAL IS REJECTED. 6. GROUND NO.2 IS AGAINST PART DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF DIRECTORS REMUNERATION BY INVOK ING THE PROVISIONS OF SECTION 40A(2). THE LD.SR.DR SUPPORTED THE ORDER O F THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN P ARTLY DELETING THE ADDITION. HE SUBMITTED THAT THE ASSESSEE COULD NO T JUSTIFY HIKE IN REMUNERATION OF DIRECTORS. THEREFORE, THE LD.CIT(A ) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. 6.1. ON THE CONTRARY, LD.SR.COUNSEL FOR THE ASSESSE E SUBMITTED THAT BOTH THE AUTHORITIES BELOW FAILED TO TAKE NOTE OF THE FA CT THAT FOR INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT, THE AO IS REQUIRED TO GIVE A DEFINITE FINDING WITH REGARD TO UNREASONABLENESS OF THE EXPENDITURE WHICH IS NOT GIVEN IN THE PRESENT CASE. HE PLACED RELIAN CE ON THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE(S) O F COMMISSIONER OF INCOME-TAX VS. INDO SAUDI SERVICES (TRAVEL) (P) LTD . REPORTED AT (2011)310 ITR 306 (BOM.), IN THE CASE OF COMMISSI ONER OF INCOME-TAX VS. V.S. DEMPO & CO. (P) LTD. REPORTED AT (2009)336 ITR 209(BOM) AND ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 9 - THE DECISION OF THE COORDINATE BENCH IN THE CASE OF DY.CIT VS. RAVI CERAMICS REPORTED AT (2013) 29 TAXMAN.COM 22 (AHD.) . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO MADE DISALLOWANCE OF EXPENDITURE ON THE BASI S THAT THE EXPENDITURE IS NOT INCURRED FOR WHOLLY AND EXCLUSIV ELY FOR THE BUSINESS PURPOSES OF THE ASSESSEE ON THE GROUND THAT THE ASS ESSEE FAILED TO PRODUCE TO SMT.LEELABEN FOR EXAMINATION THE ASSESSEE FAILED TO EXPLAIN THE NATURE OF SERVICES PERFORMED BY THE SAID DIRECTORS. HOWEV ER, THE LD.CIT(A) RESTRICTED THE ADDITION ON THE BASIS THAT IN THE IM MEDIATELY PRECEDING YEARS, I.E. AYS 2004-05 & 2006-07, THE CLAIM OF THE ASSESSEE WAS ACCEPTED. WE FIND THAT THE LD.CIT(A) HAS GIVEN HIS FINDING IN PARA-3.2 OF HIS ORDER WHICH READS AS UNDER:- 3.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER. COMPARED TO THE IMMEDIATELY PREC EDING A.Y. 2006-07 [FOR WHICH YEAR ALSO ASSESSMENT WAS DONE U/ S.143(3), THE REMUNERATION PAID TO THE THREE DIRECTORS WENT UP FR OM RS.3.6 LAKHS; RS.2.4 LAKHS AND RS.2.28 LAKHS TO RS.4.8 LAK HS; RS.3.6 LAKHS AND RS.3.48 LAKHS RESPECTIVELY IN THE CURRENT YEAR. A.O. DISALLOWED THE ENTIRE REMUNERATION PAID TO DIRECTOR S AFTER DISCUSSING THE ISSUE AT PARA-4 OF THE ORDER. THE A PPELLANT HAS BEEN ABLE TO JUSTIFY TO SOME EXTENT THE PAYMENT OF REMUN ERATION. THE THREE DIRECTORS ARE ASSESSED TO TAX AND THE INCOMES RETURNED BY THEM ARE RS.7.81 LAKHS; RS.3.27 LAKHS AND RS.2.98 L AKHS ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 10 - RESPECTIVELY. TAKING THE FACTS OF THE CASE INTO CO NSIDERATION, I FIND IT REASONABLE TO DIRECT THE A.O. TO ALLOW THE REMUN ERATION TO THE EXTENT ALLOWED IN THE IMMEDIATELY PRECEDING A.Y. T HUS DISALLOWANCE OF ENHANCED REMUNERATION TO THE EXTENT OF RS.3.4 LAKHS STANDS CONFIRMED AND THE BALANCE DISALLOWANCE IS DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 7.1. IT IS NOT CONTROVERTED BY THE REVENUE THAT IN THE IMMEDIATELY PRECEDING YEARS, I.E. AYS 2004-05 & 2006-07 THE CLA IM OF THE ASSESSEE IN RESPECT OF THE REMUNERATION OF DIRECTORS CLAIM WAS ALLOWED IN THE SCRUTINY ASSESSMENT PASSED U/S.143(3) OF THE ACT. SINCE THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD SUGGESTING THAT A NY CHANGE INTO THE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER APPEAL, T HEREFORE WE DO NOT SEE NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A ). THUS, THIS GROUND OF REVENUES APPEAL IS REJECTED. 7.2. GROUND NO.3 IS AGAINST DELETION OF ADDITION MA DE ON ACCOUNT OF CESSATION OF LIABILITY OF RS.16,06,500/-. THE SR.D R SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE ASSESSEE HAS S HOWN A SUM OF RS.16,06,500/- IN RESPECT OF GEP TELIAMURA AS LIABI LITY. HE SUBMITTED THAT THIS LIABILITY HAS BEEN SHOWN FOR MORE THAN FI VE YEARS, THEREFORE THE AO WAS JUSTIFIED IN TREATING THE SAME AS CESSATION OF LIABILITY. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 11 - 7.3. ON THE CONTRARY, THE LD.SR.COUNSEL FOR THE ASS ESSEE SUBMITTED THAT IT WAS CATEGORICALLY SUBMITTED BEFORE THE AO THAT AN A DVANCE RECEIPT RECEIVED FROM CONTRACTEE, GEP TELIAMURA OF AN AMOUN T RS.16,06,500/- FOR ADVANCE AGAINST MATERIALS AT SITE IS OUTSTANDIN G IN OUR BOOKS OF ACCOUNT SINCE 31/03/2001. A DISPUTE AROSE ON 08/ 03/2001 AND THE WORK IS CLOSED SINCE THEN. BOTH PARTIES HAVE MADE CLAIM S AGAINST EACH OTHER AND THE DISPUTE IS LYING FOR ADJUDICATION BEFORE TH E COURT OF DEPUTY COMMISSIONER, EAST KHASI HILLS DISTRICT AT SHILLONG . HE SUBMITTED THAT THE ASSESSEE HAS BEEN REFLECTING THE SAME AS LIABIL ITY AND THE ISSUE IS PENDING FOR ADJUDICATION, THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. NITIN S. GARG REPORTED AT (2012) 22 TAXMANN.COM 59 (GUJ.). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. NITIN S.GARG(SUPRA) HAS HELD AS UNDER:- 14, WE, THEREFORE, FIND THAT THE LEARNED TRIBUNAL BELOW TOTALLY MISCONSTRUED THE PROVISIONS CONTAINED IN SECTION 41 (1) OF THE ACT IN ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 12 - ADDING THE DISPUTED AMOUNT AS THE INCOME OF THE ASS ESSEE FOR THE RELEVANT YEAR.' 15. IN THE CASE BEFORE US, IT IS NOT BEEN ESTABLISH ED THAT THE ASSESSEE HAS WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOK S OF ACCOUNT. THE APPELLATE TRIBUNAL IS JUSTIFIED IN TAKING THE VIEW THAT AS ASSESSEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNTS AS LIABILITI ES IN ITS BALANCE SHEET THE SAME CANNOT BE TREATED AS ASSESSMENT OF L IABILITIES. MERELY BECAUSE THE LIABILITIES ARE OUTSTANDING FOR LAST MA NY YEARS, IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE SEIZED TO E XIST. THE APPELLATE TRIBUNAL HAS RIGHTLY OBSERVED THAT THE ASSESSING OF FICER SHALL HAVE TO PROVE THAT THE ASSESSEE HAS OBTAINED THE BENEFITS I N RESPECT OF SUCH TRADING LIABILITIES BY WAY OF REMISSION OR CESSATIO N THEREOF WHICH IS NOT THE CASE BEFORE US. MERELY BECAUSE THE ASSESSEE OBT AINED BENEFIT OF REDUCTION IN THE EARLIER YEARS AND BALANCE IS CARRI ED FORWARD IN THE SUBSEQUENT YEAR, IT WOULD NOT PROVE THAT THE TRADIN G LIABILITIES OF THE ASSESSEE HAVE BECOME NON EXISTENT. 16. MOREOVER, AS POINTED OUT IN THE EASE OF SUGAULI SUGAR WORKS (P.) LTD. (SUPRA), VIDE THE LAST FIVE LINES OF THE PARAG RAPH-6 OF THE JUDGEMENT, THE QUESTION WHETHER THE LIABILITY IS ACTUALLY BARR ED BY LIMITATION IS NOT A MATTER WHICH CAN BE DECIDED BY CONSIDERING THE AS SESSEE'S CASE ALONE BUT HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFOR E THE CONCERNED AUTHORITY. IN THE ABSENCE OF THE CREDITOR, IT IS NO T POSSIBLE FOR THE AUTHORITY TO COME TO A CONCLUSION THAT THE DEBT IS BARRED AND HAS BECOME UNENFORCEABLE. THERE MAY BE CIRCUMSTANCES WH ICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEEDING FOR ENFORCEM ENT OF THE DEBT EVEN AFTER EXPIRY OF THE NORMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT. 17. WE, THUS, FIND THAT THE VIEWS TAKEN BY THE TRIB UNAL IS ABSOLUTELY CONSISTENT WITH THE ONES TAKEN BY THE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS (P.) LTD. (SUPRA) AND OTHER DEC ISIONS WHICH HAVE ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 13 - BEEN REFERRED TO IN THE JUDGMENT. WE DO NOT FIND AN Y ERROR MUCH LESS AN ERROR OF LAW IN THE JUDGMENT AND ORDER OF THE TRIBU NAL. 8.1. IN VIEW OF THE JUDGEMENT OF THE HONBLE GUJA RAT HIGH COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO.3 OF THE REVENUE S APPEAL IS REJECTED. 9. GROUND NOS.4 & 5 OF REVENUES APPEAL ARE GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.923/AHD/2011 IS DISMISSED. 11. NOW, WE TAKE UP THE ASSESSEES CROSS-OBJECTION NO.101/AHD/2011 FOR AY 2007-08, WHEREIN FOLLOWING G ROUNDS HAVE BEEN TAKEN:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF REMUNERATION PAID TO THE DIRECTORS TO THE EXTENT OF RS.3,40,000/- OUT OF TOTAL DISALLOWANCE O F RS.13,20,000/- MADE BY THE LD.AO. 2. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AN D ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS SUBMI SSIONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS AND NOT PROPERLY APPRECIATING VARIOUS F ACTS AND LOW IN ITS ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 14 - PROPER PERSPECTIVE AND FURTHER ERRED IN PASSING ORD ERS IN GROSS VIOLATION OF THE PRINCIPLES OR NATURAL JUSTICE. 3. LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING UPON THE GROUND CHALLENGING THE ACTION OF AO IN INI TIATING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WITHOUT RECORDIN G MANDATORY SATISFACTION AS CONTEMPLATED UNDER THE ACT. THE APPELLANT CRAVES LEAVE TO AD, AMEND, EDIT, DELE TE, CHANGE OR MODIFY ALL OR ANY OF THE GROUND BEFORE OR AT THE TIME OF H EARING. 11.1. GROUND NO.1 IS AGAINST CONFIRMING THE DISALLO WANCE OF DIRECTORS REMUNERATION TO THE EXTENT OF RS.3,60,000/-. THE L D.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTI FIED IN CONFIRMING THE DIRECTORS REMUNERATION TO THE EXTENT OF RS.3,60,000 /-. HE SUBMITTED THAT UNDER THE FACTS, LD.CIT(A) OUGHT TO HAVE ALLOWED TH E ENTIRE REMUNERATION. 11.2. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF AO. 11.3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE HAS BEEN DEALT WITH US WHILE DECIDING THE DEPARTMENTAL APPEAL, I.E. IN ITA NO.923/AHD/2011 FOR AY 2007-08( SUPRA) IN PARAGRAPH NOS.6 TO 7.1. OF THIS ORDER, WHEREIN WE H AVE DISMISSED THE GROUND RAISED BY THE REVENUE BY UPHOLDING THE ORDER OF THE LD.CIT(A) IN PARTLY ALLOWING THE ASSESSEES CLAIM. THEREFORE, T HIS GROUND OF ASSESSEES CROSS-OBJECTION IS ALSO REJECTED. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 15 - 12. GROUND NOS.2 & 3 ARE GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDICATION. AS A RESULT, ASSESSEES CROSS-OBJEC TION IS DISMISSED. 13. NOW, WE TAKE UP THE ASSESSEES APPEALS; I.E. IT A NO.1387/AHD/2012 FOR AY 2008-09 AND ITA NO.2126/AHD /2012 FOR AY 2009-10. (A) IN ITA NO.1387/AHD/2012 FOR AY 2008-09, THE AS SESSEE HAS RAISED THE FOLLOWING CONCISED GROUNDS OF APPEAL:- 1&2. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIR MING DISALLOWANCE OF LABOUR CHARGES MADE BY AO OF RS.80,59,275/- ON T HE BASIS THAT GENUINENESS OF THE LABOUR PAYMENT REMAINED UNPROVED . LD.CIT(A) OUGHT TO HAVE DELETED THE DISALLOWANCE. IT BE SO H ELD NOW. 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, BO TH THE LOWER AUTHORITIES ERRED IN NOT APPRECIATING THAT APP OFFE RED FOR TAX AMOUNT OF WORK DONE BY LABOUR CONTRACTORS AS PART OF TOTAL CO NTRACT RECEIPTS NO DISALLOWANCE WAS CALLED FOR EVEN IN ABSENCE OF IDEN TITY OF CONTRACTORS NOT SUFFICIENTLY PROVED. 4 TO 6. LD. CIT(A) ERRED IN LAW AND ON FACTS IN C ONFIRMING ACTION OF AO IN DISALLOWING DIRECTORS REMUNERATION OF RS. 15,48,000/- ON THE BASIS OF THE ASSESSMENT ORDER OF PREVIOUS YEAR U/S. 40A(2) OF THE ACT. LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT AO REPRODU CED ONLY EXTRACT OF ASSESSMENT ORDER WITHOUT GIVING ANY DETAILED OR INDEPENDENT FINDING. LD.CIT(A) OUGHT TO HAVE DELETED DISALLOWANCE FOLLOW ING ORDER OF HIS PREDECESSOR. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 16 - 7. LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT AO HAS NOT DETERMINED FAIR MARKET VALUE OF SERVICES RENDERED BY DIRECTORS , WHILE DISALLOWING REMUNERATION PAID TO THEM. 8. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, O NLY UNREASONABLE AND EXCESSIVE AMOUNT OF REMUNERATION AND NOT THE ENTIRE REMUNERATION SHOULD HAVE BEEN ADDED U/S.40A(2) OF THE ACT. 9 TO 11. GENERAL. (B) IN ITA NO.2126/AHD/2012 FOR AY 2009-10, THE AS SESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE DISALLOWANCE OF RS.13,20,000/- MADE U/S.40A(2) OF T HE ACT BY AO IN RESPECT OF DIRECTORS REMUNERATION PAID TO TWO LADY DIRECTORS. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD.AO IN LEVYING INTEREST U/S.234A/B/C/D OF THE ACT. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD.AO IN INITIATING PENALT Y U/S.271(1)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE T IME OF OR BEFORE THE HEARING OF THE APPEAL. 13.1. IN ASSESSEES APPEAL NO.1387/AHD/2012 :- GROUND NOS.1 TO 3 ARE AGAINST CONFIRMING THE DISALLOWANCE OF LABOUR CHARG ES OF RS.80,59,275/- ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 17 - AND NOT APPRECIATING THAT APPELLANT HAS OFFERED FOR TAX THE AMOUNT OF WORK DONE BY CONTRACTORS AS A PART OF TOTAL CONTRAC T RECEIPTS. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPONSE TO THE REMAND REPORT A DETAILED REPLY WAS FILED. HE FURTHER SUBMITTED THAT LD.CIT( A) DESPITE HAVING NOTICED CONFIRMATION PROCEEDED TO CONFIRM DISALLOWA NCE. HE SUBMITTED THAT LD.CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE D ISALLOWANCE. 13.2. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 13.3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) DECIDED THE ISSUES BY OB SERVING AS UNDER:- 3.4. TAKING INTO ACCOUNT THE ENTIRETY OF FACTS, I AM INCLINED TO AGREE WITH THE CONTENTIONS OF THE LD.A.O. FOR THE FOLLOWI NG REASONS:- (A) IN HIS COUNTER COMMENTS THE APPELLANT HAS FURNISHE D NEW ADDRESS IN RESPECT OF THESE LABOUR CONTRACTORS. IN ADDITION T O THIS THE APPELLANT HAS ALSO FURNISHED NEW PAN IN RESPECT OF BASHIRBHAI ALLAHRAKHA. THE BANK STATEMENT REFLECTING PAYMENTS TO THESE CON CERNS WERE ALSO NOT BEFORE THE A.O. DURING THE REMAND REPORT PROCE EDINGS. THESE EVIDENCES CAN BE ACCEPTED DURING THE APPELLANT PROC EEDINGS ONLY AS PER THE PROVISIONS OF RULE 46A OF THE I.T.RULES, 19 62. FOR THIS PURPOSE, THE APPELLANT HAS TO MAKE A SPECIFIC REQUE ST AND HS TO FURNISH DOCUMENTARY EVIDENCES TO PROVE THAT HIS CAS E IS COVERED WITH FROM EXCEPTIONS AS MENTIONED IN RULE 46A. THE APPE LLANT HAS NEITHER MADE A FORMAL REQUEST TO ADMIT THESE ADDITI ONAL EVIDENCES OR FILED EVIDENCES TO PROVE THAT IN HIS CASE THE EXCEP TIONS AS MENTIONED ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 18 - IN RULE 46A ARE ATTRACTED, ACCORDINGLY THESE EVIDEN CES CANNOT BE ACCEPTED. (B) DURING THE APPELLATE PROCEEDINGS, I HAVE RECEIVED CONFIRMATIONS FROM ALL THE LABOUR CONTRACTORS BY POST. IN THESE CONFIRMATIONS IT IS STATED THAT THESE CONFIRMATIONS HAVE BEEN MADE ON T HE REQUEST OF THE APPELLANT I.E. M/S.N.J.DEVANI BUILDERS PVT.LTD. TH ESE CONFIRMATIONS HAVE GOT THE SAME FORMAT AND FONT. THE CONFIRMATIO NS WERE APPARENTLY PREPARED ON THE SAME COMPUTER. THE LABO UR CONTRACTORS HAD SIGNED AT A PLACE WHICH IS CROSS MARKED BY PENC IL. THE ABOVE FACTS REVEALS THAT THESE CONFIRMATIONS WERE PREPARE D ON THE BEHEST OF THE APPELLANT COMPANY AND ACCORDINGLY THESE ARE SEL F SERVING DOCUMENTS AND CANNOT BE RELIED UPON. (C) PERUSAL OF WRITTEN SUBMISSION DATED 28/11/2011 IN R ESPECT OF THIS DISALLOWANCE REVEALS THAT THE SUBMISSIONS HAVE BEEN MADE AS IF THE A.O. HAD MADE ADDITION OF RS.80,59,275/- U/S.68 OF THE I.T.ACT. ALL THE CASES RELIED UPON BY THE APPELLANT PERTAINS TO SEC.68. IN FACT IN THE CONCLUDING PARA NAMELY PARA 4.7 OF THE SUBMISSI ON, THE APPELLANT PRAYED THAT ADDITION MADE BY THE A.O. U/S .68 REQUIRES TO BE DELETED. PERUSAL OF THE ASSESSMENT ORDER REVEAL S THAT THE A.O. HAS MADE DISALLOWANCE OF EXPENDITURE OF RS.80,59,27 5/- AS PER THE PROVISIONS OF SEC.37(1) OF THE I.T.ACT. THE DISALL OWANCE OF EXPENSES HAS BEEN MADE IN THE ASSESSMENT ORDER AS THE APPELL ANT HAS FAILED TO PROVE THE GENUINENESS OF THESE EXPENSES. IN VIEW O F THESE FACTS, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS NOT A DDRESSED THE ISSUE OF DISALLOWANCE OF EXPENSES AT ALL AND ACCORDINGLY THE APPELLANTS SUBMISSIONS ARE IRRELEVANT AND THE SAME DESERVES TO BE REJECTED SUMMARILY. (D) DURING THE APPELLATE PROCEEDINGS AS WELL AS DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAS FAILED TO FILE COGEN T EVIDENCES TO PROVE THAT THE EXPENSES INCURRED IN RESPECT OF FOUR LABOUR CONTRACTORS NAMELY ADVESHKUMAR KUSWAHA, BASHIRBHAI ALLAHRAKHA, ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 19 - KGN ENTERPRISE AND NARPAT AJARAM JHAKAD ARE GENUINE . IN FACT THE APPELLANT HAS NOT EVEN TRIED TO EXPLAIN THESE DISAL LOWANCES AT ALL. IN THE ABSENCE OF COGENT EVIDENCES, I AM INCLINED TO A GREE WITH THE CONTENTIONS OF LD.A.O. (E) DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS FILED COPIES OF TDS CERTIFICATE AND ITS BANK STATEMENT WHEREIN THE PAYMENT HAS BEEN MADE THROUGH BANKING CHANNELS. IT IS SEEN THA T IN MANY CASES BOGUS EXPENSES ARE BEING PAID THROUGH BANKING CHANN ELS AND TDS IS BEING DEDUCTED ON THESE PAYMENTS. THESE EVIDENC ES ARE NOT CLINCHING EVIDENCES TO PROVE THE GENUINENESS OF EXP ENDITURE. IN FACT THE APPELLANT HAS FAILED TO FILE ANY DOCUMENTARY EV IDENCES TO PROVE THE FACTUM OF LABOUR JOBS DONE BY TH4ESE CONTRACTOR S. IN ABSENCE OF SUCH VITAL EVIDENCES, GENUINENESS OF THESE EXPENSES CANNOT BE ACCEPTED. IN VIEW OF ABOVE FACTS, I AM OF THE CONSIDERED VIEW THAT GENUINENESS OF LABOUR CHARGES OF RS.80,59,275/- REMAINS UNPROVE D. ACCORDINGLY, I AM INCLINED TO AGREE WITH THE LD.A.O. AND DISALLO WANCE OF RS.89,59,275/- IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 13.4. IT IS EVIDENT FROM THE ORDER OF LD.CIT(A) THAT HE DECLINED TO ACCEPT THE EVIDENCES ON THE BASIS THAT NO FORMAL RE QUEST HAS BEEN MADE. THE CONTENTION OF THE ASSESSEE HAD BEEN THROUGHOUT BOTH BEFORE THE AO AND THE LD.CIT(A) THAT THE ASSESSEE MADE PAYMENT TO LABOUR CONTRACTORS, SUCH PAYMENT WAS MADE FOR THE PURPOSE OF BUSINESS. WE ARE UNABLE TO UPHOLD THE VIEW OF LD.CIT(A) SINCE THERE IS NO DISP UTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS CARRIED OUT CERTAIN WORK . IN THIS PROCESS, HE EMPLOYED LABOUR CONTRACTORS. NO FURTHER INQUIRY IS MADE BY THE ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 20 - AUTHORITIES BELOW FOR FINDING OUT THE GENUINENESS O F CLAIM OF THE ASSESSEE. IN OUR CONSIDERED VIEW, THE ASSESSEE OUG HT TO HAVE GIVEN CHANCE TO PROVE THE GENUINENESS OF EXPENDITURE SINC E IT IS NOT THE CASE WHERE THE ASSESSEE HAS NOT CARRIED OUT WORK AT ALL. THEREFORE, TO FIND OUT THE QUANTUM AND NATURE OF WORK EXECUTED AND FOR CAR RYING OUT SUCH WORK, IF ANY, THE EXPENDITURE INCURRED ON SUCH WORK, INQU IRY IS TO BE MADE BY THE REVENUE. THE ASSESSEE IS REQUIRED TO FURNISH S UPPORTING EVIDENCES IN RESPECT OF ITS CLAIM OF BUSINESS EXPENDITURE. AF TER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE HEREBY SET AS IDE THE ORDER OF LD.CIT(A) ON THIS ISSUE AND RESTORE BACK TO THE FIL E OF AO. THE ASSESSING OFFICER IS HEREBY DIRECTED TO MAKE FURTHER INQUIRIE S IN RESPECT OF CLAIM OF THE ASSESSEE FROM THE PERSONS TO WHOM THE ASSESSEE MADE PAYMENTS TOWARDS LABOUR EXPENSES. AND THE ASSESSEE IS HEREB Y DIRECTED TO FURNISH BEFORE THE AO ALL THE EVIDENCES IN SUPPORT OF THE C LAIM. THE ASSESSEE IS FURTHER DIRECTED TO FURNISH ALL DETAILS, INFORMATIO N AND EVIDENCES AS AND WHEN CALLED FOR. THE AO TO COMPLETE THIS EXERCIS E AS EARLY AS POSSIBLE PREFERABLY WITHIN FOUR MONTHS ON THE RECEIPT OF THI S ORDER. THUS, GROUND NOS.1 TO 3 OF ASSESSEES APPEAL ARE ALLOWED FOR ST ATISTICAL PURPOSES. 13.5. GROUND NOS.4 TO 8 ARE AGAINST CONFIRMING THE DISALLOWANCE OF DIRECTORS REMUNERATION WORTH RS.15,48,000/- U/S.40 A(2) OF THE ACT. THE ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 21 - SAME ISSUE HAS BEEN DEALT WITH US IN DEPARTMENTAL A PPEAL NO.923/AHD/2011 FOR AY 2007-08(SUPRA) AND IN ASSESS EES CROSS OBJECTION NO.101/AHD/2011 FOR AY 2007-08(SUPRA), WH EREIN WE HAVE DISMISSED THE REVENUES APPEAL AS WELL AS THE CROSS -OBJECTION FILED BY THE ASSESSEE. SINCE NO CHANGE INTO THE FACTS AND CIRC UMSTANCES HAS BEEN POINTED OUT, THEREFORE, TAKING A CONSISTENT VIEW, THIS YEAR ALSO, THESE GROUNDS OF ASSESSEES APPEAL ARE ALSO DISMISSED. 13.5. GROUND NOS.9 TO 11 ARE GENERAL IN NATURE REQU IRE NO INDEPENDENT ADJUDICATION. 13.6. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.13 87/AHD/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. ASSESSEES APPEAL NO.2126/AHD/2012 FOR AY 2009 -10 :- FIRST GROUND IS AGAINST CONFIRMING THE DISALLOWANCE OF DI RECTORS REMUNERATION WORTH RS.13,20,000/- U/S.40A(2) OF THE ACT. 14.1. THE SAME ISSUE HAS BEEN DEALT WITH US IN DEP ARTMENTAL APPEAL NO.923/AHD/2011 FOR AY 2007-08(SUPRA) AND IN ASSESS EES CROSS OBJECTION NO.101/AHD/2011 FOR AY 2007-08(SUPRA), WH EREIN WE HAVE DISMISSED THE REVENUES APPEAL AS WELL AS THE CROSS -OBJECTION FILED BY THE ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 22 - ASSESSEE. THEREFORE, THIS YEAR ALSO, THIS GROUND O F ASSESSEES APPEAL IS ALSO DISMISSED. 14.2. GROUND NOS.2 & 3 ARE GENERAL IN NATURE REQUIR E NO INDEPENDENT ADJUDICATION. 14.3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.2126/AHD/2012 FOR AY 2009-10 IS DISMISSED. 15. LASTLY, WE TAKE UP THE REVENUES APPEAL, I.E. I TA NO.2497/AHD/2012 FOR AY 2009-10, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.85,50,913/- ON ACCOUNT OF RETENTION MONEY ADD ED BACK TO THE INCOME OF THE ASSESSEE. II) THE LD.CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN RELYING ON THE DECISION OF THE HON.GUJ.HIGH COURT IN ASSESSEES OW N CASE FOR THE AY 1995-96 AS THE ISSUE INVOLVED WAS OF ADVANCE MONEY AND NOT OF RETENTION MONEY. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD.COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 23 - IV) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 15.1. FIRST AND SECOND GROUND OF REVENUES APPEAL A RE AGAINST DELETION OF ADDITION OF RS.85,50,913/- ON ACCOUNT OF RETENTI ON MONEY ADDED BACK TO THE INCOME. 15.2. THE LD.SR.DR RELIED ON THE ORDER OF THE AO, W HEREAS LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). LD.SR.DR RELIED UPON THE ORDER OF THE ITAT REPORTED AT (2004) 88 ITD 381 (AHD.) RENDERED IN THE CASE OF DY.CIT VS. AMARSHIV CONSTRUCTION (P) LT D. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID ORDER OF T HE TRIBUNAL IS NOW REVERSED BY HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF AMARSHIV CONSTRUCTION P.LTD. VS. DY.CIT REPORTED AT (2014)367 ITR 659 (GUJ.). THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE BY THE DECISION O F TRIBUNAL (ITAT C BENCH AHMEDABAD) IN ITA NO.4380/AHD/2003 FOR AY 199 5-96, DATED 217/06/2008 AND THE JUDGMENT OF HONBLE GUJARAT HIG H COURT IN ASSESSEES OWN CASE FOR AY 2006-07 IN SPECIAL CIVIL APPLICATION NO.11111OF 2011 DATED 28/11/2011. 15.3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 24 - WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF ASSE SSEE IN THE LIGHT OF JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT REND ERED IN ASSESSEES OWN CASE FOR AY 2006-07 IN SPECIAL CIVIL APPLICATIO N NO.11111 OF 2011 DATED 28/11/2011. THUS, THIS GROUND REVENUES APPE AL IS DISMISSED. 15.4. GROUND NOS.3 & 4 ARE GENERAL IN NATURE REQUI RE NO INDEPENDENT ADJUDICATION. 16. WE SUMMARIZE THE RESULT AS UNDER:- (1)REVENUES APPEAL NO.923/AHD/2011 FOR AY 2007-08 IS DISMISSED. (2)ASSESSEES CO NO.101/AHD/2011 FOR AY 2007-08 IS DISMISSED. (3)ASSESSEES APPEAL NO.1387/AHD/2012 FOR AY 2008-0 9 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (4)ASSESSEES APPEAL NO.2126/AHD/2012 FOR AY 2009-1 0 IS DISMISSED. (5)REVENUES APPEAL NO.2497/AHD/2012 FOR AY 2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY, THE 13 TH DAY OF MAY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/ 05 /2015 (..,.../ T.C. NAIR, SR. PS ITA NO.923/AHD/11(REVENUE), CO NO.101/AHD/11(ASSESS EE ) AND ITA NOS.1387, 2126/AHD/12 (ASSESSEE ) ITA NO.2497/AHD/2012 (REVENUE) DCIT VS. M/S.N.J.DEVANI BUILDERS PVT.LTD. ASST.YEARS 2007-08, 2008-09, 2009-10 - 25 - !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. )* +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. /0/12 3 / CONCERNED CIT 4. 3 ( )* ) / THE CIT(A)-XI, AHMEDABAD 5. 45-12 , )* )12' , )0 / DR, ITAT, AHMEDABAD 6. 5789 / GUARD FILE. / BY ORDER, .4*- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 30.4.15 (DICTATION-PAD 12+ P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..5.5.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.13.5.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.5.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER