Dwarkes Infrastructure Pvt. Ltd., Ahmedabad V. DCIT, Circle-1(1)(2), Ahmedabad

ITA 1477/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1492 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-03-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 05-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARIMAL
• Keywords: Principle of natural justice; TDS; Bogus
• Section: 131; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) [THROUGH VIRTUAL COURT] ITA. NO: 1477/AHD/2018 (ASSESSMENT YEAR: 2015-16) DWARKESH INFRASTRUCTURE PVT. LTD. S-1, NEELKANTH APARTMENTS, B/H VISHRAM NAGAR, MEMNAGAR, AHMEDABAD-380052 PAN NO. AACCD 0020C V/S THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TUSHAR HEMANI & SHRI PARIMAL SINGH PARMAR, SR. ADV. RESPONDENT BY : SHRI DILEEP KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 02-11-2020 DATE OF PRONOUNCEMENT : 10-12-2020 PER MAHAVIR PRASAD, J.M. 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (HEREINAFTER CALLED CIT(A)) ORDER NO. CIT(A)-1/DCIT CIRCLE- ITA NO. 1477/AHD/2018 . A.Y. 2015-16 2 1(1)(2)/10263/2017-18 ORDER DATED 25/04/2018 ARISING OUT OF ASSESSMENT ORDER DATED 21/11/2017. ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN REPRODUCING THE FINDINGS OF THE CIT(A) FOR PREVIOUS ASSESSMENT YEARS AND MERELY SUBSTITUTING THE FIGURES FOR AY 15-16 WITHOUT ANY INDEPENDENT APPLICATION OF MIND. 2. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF AO IN DISALLOWING LABOUR EXPENSE OF RS.63,27,167/- U/S.37(L) OF THE ACT. 3. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACTS AND THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 4. THE LEARNED CTT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S.234A/B/C OF THE ACT. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN INITIATING PENALTY U/S.271(L)(C) OF THE ACT. 2. BRIEFLY STATING THE FACTS OF THE CASE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FROM THE DETAILS FILED BY THE ASSESSE, THE ASSESSE HAS DEBITED AN AMOUNT OF RS. 6,40,06,393/- BEING EXPENDITURE TOWARDS LABOUR CHARGES. ON FURTHER VERIFICATION, IT WAS NOTICED THAT THE ASSESSE HAD INCURRED CERTAIN EXPENSES ON ACCOUNT OF LABOUR CHARGES AMOUNTING IN RESPECT OF TRANSACTIONS WITH M/S B A PAVAGADHI LABOUR CONTRACTORS AND M/S M.H. SHAH LABOUR CONTRACTORS RESPECTIVELY DURING THE YEAR UNDER CONSIDERATION. 3. THE A.O. ISSUED SUMMONS TO THE ABOVE SAID LABOUR CONTRACTOR IN ORDER TO VERIFYING THE GENUINENESS OF SUCH TRANSACTION THEIR STATEMENT WAS RECORDED. BOTH OF THE CONTRACTOR AFFIRMED STAND OF THE ASSESSE BUT COULD NOT GIVE MINUTE DETAILS RELATED TO WORK AND A.O. NOTED THAT MS. BHAVNABEN PAVAGADHI IS WIFE OF AMIT PAVAGADHI, ACCOUNTANT OF THE ASSESSE AND BOOKS OF ACCOUNTS OF M/S M H SHAH WERE MAINTAINED BY AMIT PAVAGADHI AT THE PREMISES OF THE ASSESSE. THE ASSESSING OFFICER DISALLOWED THE LABOUR EXPENSES ON THE GROUND THAT ABOVE CONTRACTOR ARE DUMMY CONTRACTOR AND DISALLOWED LABOUR EXPENSES OF RS. 63,27,167/-. ITA NO. 1477/AHD/2018 . A.Y. 2015-16 3 4. AGAINST THE ORDER OF THE ASSESSING OFFICER, ASSESSE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER WITH FOLLOWING OBSERVATIONS: 2.6 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF APPELLANT. APPELLANT HAS DEBITED BUT NOT PAID LABOUR EXPENSES TO TWO SUB-CONTRACTORS TOTALING TO RS. 63,27,167/- ASSESSING OFFICER HAS CALLED FOR THE DETAILS OF THE EXPENDITURE AND TO PRODUCE THE SUB-CONTRACTORS BEFORE HIM. THE APPELLANT HAS DEBITED AN AMOUNT OF RS. RS. 37,59,579/- AND RS. 31,67,588/- BEING LABOUR PAYMENT MADE TO B.A PAVAGADHI A PROPRITORY CONCERN CARRIED ON BY MRS. BHAVNA AMIT PAVAGADHI AND M. H. SHAH PROP. MRS. MALTIBEN HARISH SHAH RESPECTIVELY. IN THE STATEMENTS RECORDED U/S 131 OF THE IT ACT, BHAVNA AMIT PAVAGADHI AND MALTIBEN HARISH SHAH HAVE BOTH STATED THAT THEY DONOT KNOW ANYTHING ABOUT THE BUSINESS OF THE LABOUR CONTRACTOR AND THEY ARE SIMPLY HOUSEWIVES. THE BOOKS OF ACCOUNT ARE MAINTAINED IN THE OFFICE OF DWARKESH CONSTRUCTION AND LOOKED AFTER BY AMIT PAVAGADHI, MAIN ACCOUNTANT OF THE DWARKESH CONSTRUCTION. FROM THE REPLY OF SMT. MALTIBEN HARISH SHAH, IT IS CRYSTAL CLEAR THAT SHE IS NOT CARRYING ON ANY LABOUR CONTRACTOR FOR DWARKESH INFRASTRUCTURE PRIVATE LIMITED INASMUCH AS THE LABOUR CONTRACTOR IS NOT AWARE OF THE COMPANY'S PROPER NAME FOR WHICH IT STATED TO BE CARRIED OUT LABOUR CONTRACT WORK. 2.7. IT HAS BEEN NOTED HERE THAT THE STATEMENT RECORDED FROM SMT. MALTIBEN HARISH SHAH AND SMT. BHAVNA AMIT PAVAGADHI WERE PROVIDED TO THE ASSESSEE BY THE AO IN EARLIER YEAR WHICH IS ALSO RELATED TO THIS YEAR. HOWEVER, THE ASSESSEE HAS NEVER SOUGHT FOR CROSS EXAMINATION OF THE LABOUR CONTRACTORS WHICH CLEARLY PROVED THAT THE ASSESSEE HAS MADE THEM AN ALIBI TO INFLATE THE EXPENDITURE IN THE FORM OF LABOUR PAYMENT. IT MAY BE NOTED THAT BOTH OF THEM WERE UNAWARE ABOUT THE NUMBER OF LABOURERS DEPLOYED ON THE PROJECTS WHERE THE LABOUR ARE DEPLOYED. THEY WERE TOTALLY IGNORANT ABOUT THE PROJECT WHERE THE LABOUR ARE DEPLOYED, THE MODUS OPERAND! OF CONTRACT. FROM THE STATEMENTS OF BOTH THE LADIES IT CONFIRMS THAT THE ACTUAL STATE OF AFFAIRES ARE MANIPULATED BY AMIT PAVAGADHI MAIN ACCOUNTANT OF THE APPELLANT COMPANY. FROM THE ABOVE, IT IS VERY CLEAR THAT SMT. MALTIBEN HARISH SHAH AND SMT. BHAVNA AMIT PAVAGADHI ARE A DUMMY CONTRACTORS MANIPULATED BY THE ASSESSEE TO INFLATE THE EXPENDITURE IN THE FORM OF LABOUR PAYMENTS THE SAME ISSUE RELATED TO THE SAME PARTIES HAS CROPPED UP IN THE PREVIOUS YEARS. THE CIT(A)-1 VIDE APPEAL NO. CIT(A)-1/DCIT, CIR-1(1){2)/208/2015-16 DATED 30/08/2016 AND AGAIN VIDE APPEAL NO. CIT(A)-1/DCLT, CIR-1(1)(2)/247/2016-17 DATED 31/08/2017 HAS HELD THE SAME AS BOGUS AND INFLATED ONE. IN VIEW OF THE ABOVE, AND IN VIEW OF THE DIRECT EVIDENCES AS WELL AS CIRCUMSTANTIAL EVIDENCES AS DISCUSSED ABOVE, THE EXPENDITURE OF RS.63,27,167/- [31,59,579/- + 37,67,588/-/ DISALLOWED TREATING THE SAME AS BOGUS AND INFLATED ONE AS THE ASSESSEE FAILED TO PROVIDE ANY DOCUMENTARY EVIDENCE IN RESPECT OF SUCH EXPENDITURE CLAIMED BY THE A.O. IS CONFIRMED. ITA NO. 1477/AHD/2018 . A.Y. 2015-16 4 5. NOW ASSESSE HAS COME BEFORE US BY WAY OF SECOND STATUTORY APPEAL. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND HEARD BOTH THE PARTIES. THE QUESTION IS BEFORE US THAT WHETHER LABOUR EXPENSES OF RS. 63,27,167/- ARE GENUINE OR NOT. THE ASSESSE IS IN THE BUSINESS OF ROAD-CONSTRUCTION AND IT GETS CONTRACTS FROM AUDA, AMC, ETC., IN ORDER TO FINISH THE CONTRACTUAL WORK WHICH GETS A PART OF LABOUR WORK DONE FROM LABOUR CONTRACTORS SO AS TO ENSURE THAT IT DOES NOT HAVE TO EMPLOY LABORERS BECAUSE IN THAT THAT CASE, ASSESSE WILL HAVE TO COMPLY WITH THE PREVAILING LABOUR LAWS. AND SAME MIGHT NOT BE BENEFICIAL TO THE INTEREST OF THE ASSESSE. 7. IN SUPPORT OF ITS CONTENTION, ASSESSE FILED CERTAIN DOCUMENTARY EVIDENCES BEFORE THE LOWER AUTHORITIES SUCH AS COPY OF LEDGERS, INVOICES ISSUED BY THE B.A. CONSTRUCTION TO THE ASSESSE, INVOICES ISSUED BY ASSESSE TO AUDA AS WELL AS WORK COMPLETION CERTIFICATE WITH REGARD TO WORK CARRIED OUT BY M/S B.A. CONSTRUCTION ON BEHALF OF THE ASSESSE AND RELEASE OF PAYMENT FROM AUDA. AND WITH REGARD TO M.H. CONSTRUCTION, ASSESSE FILED COPY OF LEDGER, INVOICES ISSUED BY M.H. CONSTRUCTION TO THE ASSESSE. INVOICES ISSUED BY ASSESSE TO AUDA AS WELL AS WORK COMPLETION CERTIFICATE WITH REGARD TO WORK CARRIED OUT BY M/S. M. H. CONSTRUCTION ON BEHALF OF THE ASSESSE AND RELEASE OF PAYMENT FROM AUDA. IT IS PERTINENT TO NOTE HERE AMC AND AUDA ARE GOVERNMENT AGENCIES AND ASSESSE GOT WORK ORDER FROM THE ABOVE SAID GOVT. AGENCIES AND AS PER STANDARD PRACTICE INSPECTIONS ARE DULY BEING CARRIED OUT BY THE ENGINEERS OF THE AFORESAID GOVT. AGENCIES. 8. ASSESSEE FILED AN ORDER OF CO-ORDINATE BENCH WHEREIN IN SIMILAR FACTS AND CIRCUMSTANCES IN ASSESSEES OWN CASE FOR A.Y. 2013-14 IN ITA NO. 2813/AHD/2016 , CO-ORDINATE BENCH HAS GRANTED RELIEF TO THE ASSESSE AND OPERATIVE PARA OF THE ABOVE SAID ORDER IS REPRODUCED: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF LD. CIT(A)-L, AHMEDABAD DATED 30.8.2016 PASSED FOR THE ASSTT. YEAR 2013-14. ITA NO. 1477/AHD/2018 . A.Y. 2015-16 5 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.1,04,98,580/- WHICH HAS BEEN DISALLOWED BY THE AO OUL OF LABOUR EXPENDITURE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF ROAD-CONSTRUCTION. IT HAS FILED ITS RETURN OF INCOME ON 28.9.2013 ELECTRONICALLY DECLARING TOTAL INCOME AT RS.72,09,250/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSEE HAS SHOWN TOTAL RECEIPT OF RS.24,74,51,027/- ON WHICH NET PROFIT OF RS.71,670,948/- HAS BEEN DECLARED. IT IS PERTINENT TO OBSERVE THAT THE ASSESSEE IS USED TO GET CONTRACTS FROM AUDA AND AMC ETC. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.6,77,69,053/- TOWARDS LABOUR CHARGES WHICH INCLUDED THE AMOUNT OF RS.26,57,765/- AND RS.70,90,815/- PAYABLE TO B.A.PAVAGADH AND M.H. SHAH LABOUR CONTRACTORS RESPECTIVELY. IN ORDER TO EXAMINE GENUINENESS OF THE EXPENDITURE, THE ID.AO ISSUED NOTICE UNDER SECTION 131 OF THE ACT AND RECORDED STATEMENT OF THE LABOUR CONTRACTORS. HE CONFRONTED THE ASSESSEE WITH THE OUTCOME OF THESE STATEMENTS. QUA QUERY OF THE AO, IT WAS CONTAINED THAT SOMEHOW BUSINESS IS BEING CARRIED OUT IN THE NAME OF WIFE BY HER HUSBAND. HENCE WITH REGARD TO THE DETAILS OF BUSINESS, ITS NATURE, DEALING WITH OTHERS, MUST BE IN THE KNOWLEDGE OF THE HUSBAND WHO WERE ACTUALLY CONDUCTING BUSINESS. THE ASSESSEE HAS SUBMITTED COMPLETE DETAILS OF SUCH LABOUR EXPENDITURE. IT HAS SUBMITTED LEDGER ACCOUNT, LABOUR BILLS & CONTRACTS, BANK STATEMENTS ETC. SHOWING PAYMENT THROUGH BANK CHANNEL, ACKNOWLEDGEMENT OF INCOME TAX RETURNS OF THE RECIPIENTS WHO HAVE OFFERED THIS LABOUR CHARGES AS THEIR INCOME. THE ASSESSEE HAS SUBMITTED TDS DETAILS. SOMEHOW, THE ID.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, SIMPLY FOR THE REASONS THAT THE LADY-CONTRACTOR COULD NOT EXPLAIN THE NATURE OF WORK DONE BY THEM OR ANY OUTSTANDING AMOUNTS, IF ANY TOWARDS THE ASSESSEE. THE AO TOOK THESE CIRCUMSTANCES AS IF THE ASSESSEE HAS CREATED DEMI-CONTRACTORS AND INFLATED THE EXPENDITURE. HE DISALLOWED LABOUR EXPENDITURE OF RS.26,57,765/- AND RS.70,90,815/- PAYABLE TO B.A.PAVAGADH AND M.H. SHAH LABOUR CONTRACTORS RESPECTIVELY. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING ORDERS OF THE LD. REVENUE AUTHORITIES CONTENDED THAT THE ASSESSEE HAS ESTABLISHED DIRECT LINK BETWEEN THE WORK OBTAINED FROM GOVERNMENT INSTRUMENTALITIES I.E. AUDA AND AMC, AND HOW THESE WORKS HAVE BEEN GOT PERFORMED BY IT WITH THE HELP OF LABOUR CONTRACTORS. COMPLETE LEDGER DETAILS EXHIBITING THE NATURE OF CONTRACT OBTAINED FROM THESE AGENCIES, AND ASSIGNMENT TO THE LABOUR CONTRACTOR HAS BEEN FILED. THE ID.COUNSEL FOR THE ASSESSEE TOOK US THROUGH PAGE NOS.42 TO 47 OF THE PAPER BOOK, WHERE THE DETAILS OF BILLS, NATURE OF WORK, RATES AND HOW THESE WORKS HAVE BEEN CARRIED OUT ARE BEING PLACED ON RECORD. HE THEREAFTER MADE REFERENCE TO THE BANK STATEMENT VIDE WHICH THE PAYMENTS HAVE BEEN MADE. HE POINTED OUT THAT PAYMENTS TO LABOUR CONTRACTOR IS BEING MADE THROUGH BANKING CHANNELS. IT IS BEING RECEIVED BY THE ASSESSEE FROM THE CONTRACTEES I.E. AUDA AND AMC, A COMPLETE RE- CONCILIATION IS AVAILABLE WITH THE ASSESSEE. HE THEREAFTER MADE REFERENCE TO THE LEDGER ITA NO. 1477/AHD/2018 . A.Y. 2015-16 6 ACCOUNT CONTAINING ALL THESE DETAILS, TDS DETAILS. HE FURTHER CONTENDED THAT THESE PARTIES ARE ASSESSED TO TAX, AND THEIR RESPECTIVE INCOME ARE NOT DISTURBED OR ALTERED BY THE DEPARTMENT. THEY HAVE INCLUDED THESE RECEIPTS IN THEIR INCOME TAX RETURN. HE POINTED OUT THAT GP IN THIS YEAR IS 9.66% WHICH IS BETTER THAN THE LAST YEAR I.E. 8.09%. THIS 8.09% WAS ACCEPTED BY THE DEPARTMENT IN SCRUTINY ASSESSMENT UNDER SECTION 143(3). IF THE DISALLOWANCE IS INCLUDED THEN GP WILL BE INCREASE TO 13.90%. THE NET PROFIT WILL COME AROUND 6.03% WHICH IS NOT POSSIBLE TO ACHIEVE IN THIS LINE OF BUSINESS. THE NET PROFIT IN EARLIER YEAR WAS 0.99% AND 0.74% WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN SCRUTINY ASSESSMENTS. ON THE STRENGTH OF THIS COMPARATIVE ANALYSIS HE POINTED OUT THAT THE REASONS ASSIGNED BY THE LD. REVENUE AUTHORITIES ARE ONLY PERIPHERAL AND NOT BASED ON SOUND EVIDENCE. THE LD. COUNSEL FOR THE ASSESSEE PRAYED THAT DISALLOWANCE BE DELETED. 9. THUS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PARITY WITH THE CO- ORDINATE BENCH DECISION, WE ALLOW THE APPEAL OF THE ASSESSE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 12- 2020 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 10 /12/2020 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,AHMEDABAD