AEMAA PROJECTS LTD, MUMBAI V. ITO 2(1)(4), MUMBAI

ITA 1422/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9028 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARKAMOL SOHI
• Keywords: Rejection of books of accounts
• Section: 143(3); 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER ITA NO. 1422 /MUM/201 7 (A.Y: 2011 - 12) M/S. AEMAA PROJECTS PVT LTD., BUILDING NO. D - 9/002, YOGI NAGAR, BORIVALI (WEST), MUMBAI 400 091 PAN: AAACH 2612 N V. INCOME TAX OFFICER 2(1)(4) 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHESH SABOO DEPARTMENT BY : SHRI HARKAMOL SOHI DATE OF HEARING : 09 .10.2018 DATE OF PRONOUNCEMENT : 12 .12 .2018 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) 3 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 20.01.2012 FO R THE ASSESSMENT YEAR 2011 - 12. 2. ASSESSEE IN ITS APPEAL CHALLENGED THAT ORDER OF THE LD.CIT(A) IN ESTIMATING THE NET PROFIT OF THE BUSINESS OF THE ASSE SSEE AT 12% OF THE GROSS RECEIPTS . 2 ITA NO.1422/MUM/2017 (A.Y: 2011 - 12) M/S. AEMAA PROJECTS PVT LTD., 3. BRIEFLY ST ATED THE FACTS ARE THAT, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 28.03.2014 DETERMINING THE INCOME AT .8,34,15,717/ - . WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE EXPENDITURE INCURRED ON LABOUR CHARGES OF .8,18,11,290/ - . ASSESSEE SUBMITTED THAT IT HAS UNDERTAKEN WORK OF B OULDER BREAKING SPREADING AND LEVELLING WITH DUST OF ROAD CONSTRUCTION WORK FOR M/S . KETI CONSTRUCTION LTD., INDORE [ KCL] FOR CONTRACT VALUE OF . 8.38 CRORES . THE WORK WAS CARRIED AT FOUR LAN E OF HIGHWAY ROAD FROM JALNA - DEULGAON RAJA - BERALA PHATA (MAHARASHTRA). THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE K C L AND IN RESPONSE TO THE SAME KCL HAS SUBMITTED WORK ORDER ISSUED TO THE ASSESSEE COMPANY. BASED ON THE WORK ORDER ISSUED TO THE ASSESSEE COMPANY AND SUBSEQUENT REPLIES BY KCL THE ASSESSING OFFICER DOUBTED THE WORK CARRIED OUT BY THE ASSESSEE. ASSESSING OFFICER HAS DRAWN AN INFERENCE THAT THE WORK ORDER ISSUED BY THE KCL HAS NOT BEEN ENFORCED ON THE TERMS AGREED THEREIN. ASSES SING OFFICER HAS DISBELIEVED THAT THE ASSESSEE HAS CARRIED OUT ANY LABOUR CONTRACT AND T HEREFORE HE DISALLOWED THE TOTAL LABOUR CHA RGES EXPENDED BY THE ASSESSEE. 4. ON APPEAL THE LD.CIT(A) CO NSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS OF THE ASSESSING OFFICER, HE ALSO EXAMINED THE BOOKS OF ACCOUNTS AND SINCE THEY ARE NOT VERIFIABLE HE HAS HELD THAT 3 ITA NO.1422/MUM/2017 (A.Y: 2011 - 12) M/S. AEMAA PROJECTS PVT LTD., BOOKS OF ACCOUNTS DO NOT REFLECT THE TRUE PICTURE OF RECEIPTS AND PAYMENTS AND TH EREB Y THE CORRECT TOTAL INCOME , AND T HEREFORE THE BOOKS WERE REJECTED. HE ESTIMATED THE INCOME OF THE ASSESSEE AT 12% OF GROSS RECEIPTS , AGAINST THIS ORDER THE ASSESSEE IN APPEAL BEFORE US. 5. LD. COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE T HE LOWER AUTHORITIES. 6. LD. DR VEHEMENTLY SUPPORTED THE OR DERS OF THE ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ASSESSING OFFICER REJECTED THE SUBMISSIONS OF THE ASSESSEE THAT IT HAD CARRIED OUT WO RKS CONTRACT OF KCL , THE ASSESSING OFFICER DOUBTED THE INCURRING OF EXPENSES BY THE ASSESSEE ON THE LABOUR CONTRACT OBTAINED BY THE ASSESSEE FROM KCL . THEREFORE, HE DISALLOWED ENTIRE LABOUR CHARGES AMOUNTING TO .8,18,11,290/ - . THE LD.CIT(A) AFTER EXAMINI NG THE BOOKS OF ACCOUNTS , HE REJECTED THE SAME AS THEY ARE NOT RELIABLE / UN VERIFIABLE AND DO NOT REFLECT TRUE PICTURE OF RECEIPTS AND PAYMENTS AND CORRECT TOTAL INCOME. HE REJECTED THE BOOKS OF ACCOUNTS. HAVING REJECTED THE BOOKS OF ACCOUNTS , THE LD.CIT(A ) ESTIMATED THE INCOME OF THE ASSESSEE AT 12% OF GROSS RECEIPTS OF .8,38,28,776/ - OBSERVING AS UNDER: - 6.9 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND THE FACTS OF THE CASE. THE AO IS NOT JUSTIFIED IN DISALLOWIN G THE ENTIRE EXPENSES OF RS. 8,18,11,290 / - AND TREATING SAME AS INCOME OF THE APPELLANT. THE AO HAS NOT BROUGHT ON RECORD ANY 4 ITA NO.1422/MUM/2017 (A.Y: 2011 - 12) M/S. AEMAA PROJECTS PVT LTD., EVIDENCE TO ARRIVE AT A CONCLUSION THAT THERE WAS NO BUSINESS CARRIED OUT BY THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT SUBMITTE D THE AUDITED COPIES OF ACCOUNTS, BOOKS OF ACCOUNTS, PHOTOGRAPHS OF THE SITE AND OTHER DETAILS RELATING TO EXECUTION OF WORK DONE AT THE JALNA ROAD HIGHWAY. 6.10 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT ALSO PRODUCED THE BOOKS OF ACCOUNTS AND THE VOUCHERS OF VARIOUS LABOUR PAYMENTS PAID IN CASH. THE AR PRODUCED VOUCHERS RELATING TO LABOUR EXPENSES WHICH ARE MOSTLY PAID IN CASH AND SOME ARE NOT VERIFIABLE NATURE. IT IS A SETTLED LAW THAT THE POWERS OF THE COMMISSIONER OF INCOME TAX IS CO - TE RMINUS WITH THAT OF ASSESSING OFFICER. UNDER THE CIRCUMSTANCES, THE PARTICULAR ENQUIRY THAT WAS NOT MADE BY THE ASSESSING OFFICER WHICH WAS NECESSARY IN THE FACTS OF THE CASE, SHOULD HAVE BEEN DONE BY THE LD. COMMISSIONER OF INCOME TAX (A). UNDER THE SAME ANALOGY, VIDE ORDER SHEET ENTRY DATED 29.11.2016, OBSERVATIONS IN RESPECT OF BOOKS OF ACCOUNT OF APPELLANT HAS BEEN RECORDED AND BROUGHT TO THE NOTICE OF THE APPELLANT AS: 'MANY VOUCHERS ARE THUMB IMPRESSIONS, SELF MADE VOUCHERS AND VERY FEW ARE SIGNED, RE SULTED INTO SUSPICIOUS NATURE. IN VIEW OF THE SAME, I PROPOSE TO DISALLOW THE EXPENSES. YOU ARE SHOW CAUSE AS TO WHY PROFIT AT RATE OF 12% OF RECEIPT SHOULD NOT BE TREATED AS PROFIT ON ESTIMATE BASIS AFTER REJECTED THE BOOKS OF ACCOUNT.' 6.11 . DURING THE COURSE OF APPELLANT PROCEEDING, BOOKS OF ACCOUNTS WERE EXAMINED WHICH WERE FOUND UNRELIABLE AS MOST OF THE VOUCHERS WERE FOUND SELF MADE AND NON - VERIFIABLE. THE APPELLANT WAS GIVEN AN OPPORTUNITY TO EXPLAIN THE REASON FOR INCORRECT PROFIT SHOWN. THE APPELLANT HAS NOT DISPUTED THE OBSERVATION WHILE GIVEN AN OPPORTUNITY TO THE APPELLANT TO CONTRADICT THE MATERIALS UPON TO BASE THE ESTIMATE OF INCOME. THE BOOKS OF ACCOUNTS INCLUDING THE VOUCHER DO NOT REFLECT TRUE PICTURE OF RECEIPTS AND PAYMENTS AN D THEREBY THE CORRECT TOTAL INCOME AND RESULTED INTO REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145 (3) OF THE IT ACT, 1961. 'SECTION 145 OF THE I TACT, 1961: (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB SECTION (I) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB SECTION (2), HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SEC 144.' 6.12 THE APPELLANT IS ENGAGED IN THE BUSINESS OF CREATING INFRASTRUCTURE IN THE REMOTE AREAS, WHERE THE FACILITY OF BANKING MAY BE LACKING. HOWEVER, CORRECTNESS OF PAYMENTS EVEN MADE IN CASH IS REQUIRED TO BE ENSURED AS TO ARRIVE AT A TRUE AND CORRECT INCOME AFTER INCURRING EXPENDITURE TO EARN THE SAID INCOME. WHERE THE GOVERNMENT IS COMMITTED TO DEVELOP INFRASTRUCTURE IN THE FORM OF NATIONAL HIGHWAYS AND STATE HIGHWAYS, WE HAVE TO CONSIDER THE CIRCUMSTANCES WHERE THERE IS A LABOR PROB LEM AND PAYMENTS ARE REQUIRED TO BE MADE IN CASH. THERE IS NO JUSTIFICATION TO ASSESS THE ENTIRE RECEIPTS WITHOUT ALLOWING THE EXPENDITURE BE INCURRED TO EARN THE SAID RECEIPTS. SINCE THE APPELLANT HAS PRODUCED VOUCHERS RELATING TO LABOUR EXPENSES, WHICH W ERE MOSTLY PAID IN CASH AND SOME ARE NOT OF VERIFIABLE NATURE NEED ESTIMATION OF INCOME. MANY VOUCHERS ARE THUMB IMPRESSIONS, SELF MADE VOUCHERS, VERY FEW ARE SIGNED RESULTED INTO SUSPICIOUS 5 ITA NO.1422/MUM/2017 (A.Y: 2011 - 12) M/S. AEMAA PROJECTS PVT LTD., NATURE. IN VIEW OF THE SAME, I AM OF THE OPINION THAT EXPENSES CL AIMED CANNOT BE TREATED AS PROFIT OF THE APPELLANT, CONTRARY THE INCOME COULD BE ESTIMATED AFTER REJECTING THE BOOKS OF ACCOUNTS. THE APPELLANT WAS SHOW CAUSED TO THE SAME, WHICH THE APPELLANT AGREED UPON VIDE ORDER SHEET NOTING DATED 29.11.2016. IN VIEW O F THE SAME, THE INCOME OF - THE APPELLANT IS BEING ESTIMATED AT 12% OF THE T OTAL RECEIPTS OF RS.8,38,28,776/ - - I.E. RS. 1,00 ,59,453/ - IS TREATED AS INCOME OF THE APPELLANT AND SAME IS CONFIRMED. THE AO IS DIRECTED TO DELETE THE REMAINING ADDITION OF RS. 7,3 7,69,323/ - . IN VIEW OF THE SAME, GROUND NO. 1 IS PARTLY ALLOWED. 8. ON A CAREFUL READING OF THE LD.CIT(A) ORDER, WE ARE OF THE VIEW THAT THE LD.CIT(A) RIGHTLY REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE NET PROFIT AT 12% OF GROSS RECEIPTS. THUS , WE SUSTAIN THE ORDER OF THE LD.CIT(A) AND REJECT THE G ROUNDS RAISED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH DECEMBER , 2018 SD/ - SD/ - ( RAJESH KUMAR ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 12 / 12 / 2018 GIRIDHAR , SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM