THE DY. CIT-1(2), RAIPUR (CG) V. M/S. A.P. NIRMAN LTD., RAIPUR (CG)

ITA 139/BIL/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8921 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 04-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: PRAVEEN JAIN R B DOSH I
• Keywords: Presumptive income; Depreciation
• Section: 44AD; 143(3); 133A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER) ITA. NO: 139/RAIPUR/2013 (ASSESSMENT YEAR: 2010-11) DY. COMMISSIONER OF INCOME-TAX-1(2), RAIPUR V/S M/S A.P. NIRMAN LTD., H-6, STREET NO. 4, SHRI RAM NAGAR, PHASE-I, SHANKAR NAGAR, RAIPUR (C.G.) (APPELLANT) (RESPONDENT) PAN: AABCA4677R APPELLANT BY : SHRI P.K. MISHRA, DR RESPONDENT BY : SHRI PRAVEEN JAIN& R.B. DOSH I, CA ( )/ ORDER DATE OF HEARING : 05 -03-201 8 DATE OF PRONOUNCEMENT : 08 -03-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A), RAIPUR DATED 08.08.2013 PERTAINING TO A.Y. 2010-11. ITA NO. 139/RAIPUR/2013 . A.Y. 2010-11 2 2. THE FIRST GRIEVANCE OF THE REVENUE RELATES TO THE D ELETION OF THE DISALLOWANCE OF RS. 2,13,94,500/- MADE BY THE A.O. ON ACCOUNT OF BO GUS WORK PAYMENT EXPENSES AND THE SECOND GRIEVANCE OF THE REVENUE RE LATES TO THE DELETION OF THE DISALLOWANCE OF RS. 7,96,72,605/- MADE BY THE A.O. ON ACCOUNT OF BOGUS EXCAVATION CHARGES ALLEGED TO HAVE BEEN PAID TO M/S . SAUMYA MINING LIMITED. 3. THE UNDERLYING FACTS IN BOTH THE ISSUES ARE COMMON AND THEREFORE BOTH THE GROUNDS ARE TAKEN UP TOGETHER FOR DISPOSAL. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACT WORK. THE RETURN OF INCOME FOR THE YEAR WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY ST ATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED ON 2.06.2010 ON THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF THE SURVEY OPERA TIONS, STATEMENT OF SHRI RAJESH AGRAWAL WAS RECORDED WHO OFFERED AN AMOUNT O F RS. 3.75 CRORES ON ACCOUNT OF BOGUS TRADE CREITORS AS HIS UNDISCLOSED INCOME FOR THE YEAR UNDER CONSIDERATION. 5. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS OF EXPENSES CLAIMED UNDER THE HEAD WORK PAYMENT AT RS. 18.06 CRORES. THE A.O. FOUND THAT IN THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE HAS CLAIMED RS. 12.50 CRORES. TH E ASSESSEE WAS ASKED TO JUSTIFY THE INCREASE IN THE EXPENDITURE. THE ASSESS E FILED THE DETAILS OF THE WORK PAYMENTS AND THE SAME READ AS UNDER:- SR. NO. NAME OF THE PARTY AMOUNT OF WORK PAYMENT GIVEN RELATION WITH SHRI RAJESH AGRAWAL, DIRECTOR OF THE ITA NO. 139/RAIPUR/2013 . A.Y. 2010-11 3 DURING THE YEAR COMPANY 1 GOPIRAM AGRAWAL (HUF) RS. 27,35,200/- KARTA SHRI RAJESH AGRAWAL 2 MEENA AGRWAWAL RS. 29,34,100/- W/O SHRI RAJESH A GRAWAL 3 MUKESH KUMAR AGRAWAL (HUF) RS. 33,45,200/- 4 NEETU AGRAWAL RS. 17,26,900/- SISTER OF SHRI RAJ ESH AGRAWAL 5 POOJA AGRAWAL RS. 18,78,300/- SISTER OF SHRI RAJ ESH AGRAWAL 6 RAJESH KUMAR AGRAWAL (HUF) RS. 35,32,700/- KARTA SHRI RAJESH AGRAWAL 7 USHA DEVI AGRAWAL RS. 27,04,500/- MOTHER OF SHRI RAJESH AGRAWAL 8 VINITA AGRAWAL RS. 25,37,600/- W/O SHRI MUKESH AGDRWAWAL, SISTER-IN-LAW OF SHRI RAJESH AGRAWAL 6. THE A.O. FUND THAT THE ABOVE 8 PERSONS ARE CLOSE/ RELATIVES OF THE DIRECTOR OF THE ASSESSEE COMPANY, THE A.O. OBSERVED THAT IN ALL THE ABOVE CASES, THE PAYMENTS WERE SHOWN AS CREDITS AT THE YEAR END AND FURTHER OBSERVED THAT NONE OF THESE PERSONS HAVE EXECUTED ANY CONTRACT WORK FO R ANY OTHER PERSONS OTHER THAN THE ASSESSEE COMPANY. 7. ON FURTHER QUERY, THE ASSESSEE FURNISHED THE COPY O F ACCOUNTS OF ALL THE PERSONS. THE A.O. WAS OF THE OPINION THAT THE ASSES SEE IS IN THE HABIT OF CLAIMING BOGUS EXPENSES, THEREFORE NOT CONVINCED WI TH THE CONTENTIONS OF THE ASSESSEE. THE A.O. DISALLOWED THE SUM OF RS. 2,13,9 4,500/- TREATING THE WORK PAYMENT EXPENSES AS BOGUS. ITA NO. 139/RAIPUR/2013 . A.Y. 2010-11 4 8. PROCEEDING FURTHER, THE A.O. NOTICED THAT THE ASSE SSEE HAS CLAIMED EXPENDITURE OF RS. 7,96,72,605/- ON ACCOUNT OF EXCAVATION AND D RESSING OF SOIL BEING PAID TO SAUMYA MINING LIMITED. THE ASSESSEE WAS ASKED TO FU RNISH THE RELEVANT DETAILS IN SUPPORT OF ITS CLAIM. THE ASSESSEE SUBMITTED QUA NTITY DETAILS OF WORK DONE BY SAUMYA MINING LIMITED AND BILL SUBMITTED TO GOVERNM ENT DEPARTMENT. THE A.O. WAS NOT SATISFIED WITH THE CONTENTIONS OF THE ASSESSEE. THE A.O. WAS OF THE FIRM BELIEF THAT BY CLAIMING THESE BOGUS EXPENS ES, THE PROFIT OF THE ASSESSEE HAS REDUCED SUBSTANTIALLY. COMPARING THE PROFIT RAT IO WITH THE IMMEDIATELY PRECEDING YEAR, THE A.O. FORMED A BELIEF THAT THE E XPENDITURES ARE BOGUS AND ACCORDINGLY DISALLOWED THE SAME. 9. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A) AND VEHEMENTLY SUBMITTED THAT THE A.O. HAS NOT APPRECIATED THE FAC TS OF THE CASE IN TRUE PERSPECTIVE. IT WAS STRONGLY CONTENDED THAT THE PRO FIT RATIO FOR THE YEAR UNDER CONSIDERATION WAS BETTER THAN THE RATIO OF THE IMME DIATELY PRECEDING YEAR AND THE A.O. HAS WRONGLY CALCULATED THE PROFIT RATE. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT ALL THE NECESSARY DE TAILS WERE FURNISHED AND THE A.O. HIMSELF AS VERIFIED THE DETAILS BY ISSUING NOT ICE U/S. 133(6) OF THE ACT AND THEREFORE, THE DISALLOWANCES MADE BY THE A.O. ARE U NCALLED FOR. 10. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) FOUND THAT THE A.O. HAS WRONGLY CALCULATED THE GROSS PROFIT RATE A T 2.77% WHEREAS THE ACTUAL RATE IS 11.66% WHICH IS MORE THAN THE GP RATE IN TH E LAST YEARS WHICH WAS 10.35%. THE LD. CIT(A) FURTHER OBSERVED THAT THE PA N DETAILS OF ALL THE SUB- CONTRACTORS WERE MADE AVAILABLE TO THE A.O. AND THE A.O. HAS NOT BROUGHT ON RECORD ANYTHING IN REJECTION OF THE CLAIM OF EXPEND ITURE BY THE ASESSEE. THE ASSESSEE HAS CALCULATED THE INCOME SURRENDERED DURI NG THE COURSE OF SURVEY ITA NO. 139/RAIPUR/2013 . A.Y. 2010-11 5 SEPARATELY. HAVING CONVINCED WITH THE CONTENTIONS O F THE ASSESSEE, THE LD. CIT(A) DELETED BOTH THE DISALLOWANCES. 11. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FO R THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE CONSIDERED THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE FORM OF PAPER BOOK IN THE LIGHT OF RULE 18(6) OF THE ITAT RULES. WE FIND THA T THE A.O. HAS BEEN SIMPLY CARRIED AWAY WITH THE FACT THAT THE PAYEES ARE RELA TED TO ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. AT THE SAME TIME, WE FIND THA T THE A.O. HAS NOT DRAWN SUPPORT FROM THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. NEITHER THE A.O. HAS BROUGHT ON RECORD ANY COMPARABLE CASE NOR HE HA S BROUGHT ANY MATERIAL ON RECORD TO DISBELIEF THE CLAIM OF THE ASSESSEE. THE WORK CONTRACT PAYMENTS MADE TO 8 PERSONS ARE DULY SUPPORTED BY RESPECTIVE BILLS FURNISHED BY THEM AND SO ALSO EXCAVATION WORK DONE BY SAUMYA MINING COMPANY. THE RECIPIENTS OF THE WORK CONTRACT HAVE SHOWN THEIR INCOME IN THEIR RESP ECTIVE RETURN FILED ON PRESUMPTIVE TAXATION BASIS U/S. 44AD OF THE ACT. TH E CONTENTION OF THE A.O. THAT THE RECIPIENTS ARE NOT MAINTAINING ANY DETAILS IS ILL-FOUNDED BECAUSE OF THE IMMUNITY GRANTED U/S. 44AD OF THE ACT. THE RECIPIEN TS ARE NOT OBLIGED TO MAINTAIN ANY BOOKS OF ACCOUNTS IF THEY RETURN THEIR PROFIT U/S. 44ADOF THE ACT. FURTHER, THE INCOME OF SAUMYA MINING LTD. HAS BEEN ACCEPTED AS SUCH IN ITS ASSESSMENT FRAMED U/S. 143(3) OF THE ACT. ITA NO. 139/RAIPUR/2013 . A.Y. 2010-11 6 13. IN OUR CONSIDERED OPINION, WHEN THE CONTRACT RECEIP TS OF THE ASSESSEE HAS BEEN ACCEPTED IN TOTO. WE FAIL TO UNDERSTAND IF THE ASSE SSEE HAS NOT INCURRED THESE EXPENDITURES THEN HOW COULD IT EXECUTE THE CONTRACT WORK ALLOTTED TO IT. 14. MOREOVER, THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE A.O. HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. MORE IMPORTANTLY, THE ALLEGATION THAT THE ASSESSEES GRO SS PROFIT AND NET PROFIT HAVE SUBSTANTIALLY REDUCED DURING THE YEAR IS ALSO NOT C ORRECT. THE FOLLOWING CHART SHOWS THE PROFITABILITY OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION VIS--VIS PREVIOUS YEAR:- PARTICULARS YEAR ENDED 31.03.2010 YEAR ENDED 31.03.2009 TOTAL RECEIPT INCLUDING INCREASE/ (DECREASE) IN CLOSING STOCK CONTRACT AND OTHER EXPENSES 4,362.22 3,944.81 CONTRACT AND OTHER EXPENSES 3853.57 3536.39 GROSS PROFIT 508.65 408.42 GRO SS PROFIT RATIO% 11.66% 10.35% DEPRECIATION 212.68 132.26 OTHER INDIRECT EXPENSES 215.49 198.86 NET PROFIT 80.49 77.30 NET CASH PROFIT BEFORE DEPRECIATION 293.16 209.55 CASH PROFIT 6.72% 5.31% 15. ASSUMING, YET NOT ACCEPTING, THESE EXPENDITURES ARE BOGUS THEN THE PROFIT OF THE ASSESSEE WOULD BE HIGHER BY RS. 10 CRORES WHICH WOULD MAKE THE GROSS PROFIT AROUND 25% WHICH IS NOT CONCEIVABLE IN THIS LINE OF BUSINESS. ITA NO. 139/RAIPUR/2013 . A.Y. 2010-11 7 16. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 17. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 08- 03- 20 18 SD/- SD/- (RAM LAL NEGI) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER RAIPUR: DATED 08/03/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,RAIP UR