M/s Shankaranarayana Consultancy Services Private Limited , Bangalore V. Deputy Commissioner of Income tax Circle-12(3), Bangalore

ITA 1525/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1384 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-05-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS J
• Section: 143(3); 142(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, BENGALURU BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NOS.1524 TO 1526/BANG/2018 (ASSESSMENT YEARS: 2005-06 TO 2007-08) M/S.SHANKARANARAYANA CONSULTANCY SERVICES PVT. LTD. NO.64, 1 ST MAIN, S.T.BED, 4 TH BLOCK, KORAMANGALA, BENGALURU-560034. PAN:AAGCS2530 N VS. APPELLANT DY. COMMISSIONER OF INCOME-TAX, CIRCLE 12(3), BANGALORE. RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE. RESPONDENT BY : SWAPNA DAS, JCIT(DR) DATE OF HEARING: 06/05/2019 DATE OF PRONOUNCEMENT: 07/06/2019 O R D E R PER BENCH: THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST DIFFERENT ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08. 2. AT THE TIME OF HEARING, LEARNED AR OF THE ASSESSEE SUBMITTED THAT ITA NO.1524/BANG/2018 FOR THE ASSESSMENT YEAR 2005-06 IS NOT PRESSED AND ACCORDINGLY THE SAME IS DISMISSED AS ITA NOS.1524 TO 1526/BANG/2018 PAGE 2 OF 7 NOT PRESSED. SINCE THE ISSUES ARE IDENTICAL, THE APPEALS ARE CLUBBED TOGETHER AND DISPOSED OF BY THE COMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE UP ITA NO.1525/BANG/2018 FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSED ON THE INCOME DETERMINED BY THE LEARNED AUTHORITIES BELOW AS AGAINST THE BUSINESS LOSS RETURNED BY THE APPELLANT OF RS. 4,65,26,010/-, ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF OUTSTANDING BALANCES OF SUNDRY CREDITORS AMOUNTING TO RS. 6,65,060/-, WITHOUT APPRECIATING THE FACT THAT THE SAID AMOUNTS CANNOT BE ADDED AS INCOME FOR THE IMPUGNED ASSESSMENT YEAR, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IS NOT JUSTIFIED IN CONFIRMING THE ADHOC ADDITION MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF WORK-IN PROGRESS AMOUNTING TO RS. 50,00,000/-, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. WITHOUT PREJUDICE THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] OUGHT TO HAVE GIVEN THE DIRECTION TO THE LEARNED ASSESSING OFFICER TO GIVE CONSEQUENT EFFECT IN THE OPENING WORK-IN-PROGRESS FOR THE FOLLOWING ASSESSMENT YEAR I.E., 2007-08. ON THE FACTS ITA NOS.1524 TO 1526/BANG/2018 PAGE 3 OF 7 AND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF ADHOC DISALLOWANCE OF WAGES AMOUNTING TO RS. 5,00,000/-, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, MODIFY. DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 8. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. 4. AT THE TIME OF HEARING, THE LEARNED AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO.3 AND THE EFFECTIVE GROUNDS OF APPEAL ARE 1, 2, 4, 5, 6, 7 AND 8. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION AND INFRASTRUCTURE WORKS AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 29/11/2006 DECLARING TOTAL LOSS OF RS.4,65,26,010/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) ON 25/08/2007. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED. IN COMPLIANCE, LEARNED AR APPEARED FROM TIME TO TIME AND INFORMATION WAS SUBMITTED AND THE CASE DISCUSSED. THE AO, ON PERUSAL OF THE FINANCIAL STATEMENTS FOUND THAT THE ASSESSEE HAS A TURNOVER OF RS.8,62,66,323/- AND CERTAIN DETAILS ITA NOS.1524 TO 1526/BANG/2018 PAGE 4 OF 7 WERE CALLED IN RESPECT OF ADDITION TO FIXED ASSETS, BROUGHT FORWARD LOSS, COMPLIANCE OF STATUTORY REQUIREMENTS OF LOAN CREDITORS. THE AO MADE ADDITION IN RESPECT OF THE DISPUTED ISSUE THAT WHILE EXAMINING THE WORK-IN-PROGRESS ASSESSEE VALUED BOULDERS, SAND AND MORUMUM DUMPED AT RS.1.5 CRORES AND THE LEARNED AR WAS CALLED TO EXPLAIN THE BASIS OF EVALUATION OF WORK-IN-PROGRESS (WIP) AND IT WAS SUBMITTED VALUATION WAS ONLY ON ESTIMATION. BUT THE AO IS OF THE OPINION BASED ON THE VALUE OF BOULDERS, TRANSPORT CRUSHED, LABOUR AND OTHER INCIDENTAL COSTS, AND THE VALUED OF WORK-IN-PROGRESS AT RS.2 CRORES AND MADE ADDITION OF DIFFERENCE OF RS.50 LAKHS. SIMILARLY ON THE DISPUTED ISSUE OF EXPENSES AO FOUND THAT PAYMENTS MADE TO CASUAL LABOURERS ARE NOT PROPERLY SUPPORTED AND ONLY SELF-MADE VOUCHERS. HENCE, MADE AN ADDITION OF RS.5 LAKHS AND WITH OTHER ADDITIONS AND ASSESSED THE TOTAL INCOME AFTER SET OFF OF BUSINESS LOSS OF EARLIER ASSESSMENT YEAR2004-05 AS RS.NIL AND PASSED THE ORDER U/S 143(3) OF THE ACT ON 29/9/2008. 6. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A). THE CIT(A) HAS CONFIRMED THE ADDITION OF RS.50 LAKHS IN RESPECT OF WORK-IN PROGRESS AND AD-HOC ADDITION OF LABOUR CHARGES RS.5 LAKHS AND GRANTED RELIEF ON OTHER ADDITIONS AND PARTLY ALLOWED THE APPEAL. ITA NOS.1524 TO 1526/BANG/2018 PAGE 5 OF 7 7. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED APPEAL WITH THE TRIBUNAL. THE LEARNED AR SUBMITTED ON THE DISPUTED ISSUE WHERE THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF VALUATION OF WORK- IN-PROGRESS OF RS.50 LAKHS AND AD HOC ADDITION OF RS.5 LAKHS IN RESPECT OF LABOUR CHARGES. THE LEARNED AR FURTHER EMPHASIZED THAT RS.50LAKHS ADDITION MADE IN SAID FINANCIAL YEAR SHALL BE CONSIDERED IN THE OPENING BALANCE OF THE NEXT YEAR. BUT ON AD HOC ADDITIONS THE LEARNED AR MENTIONED THAT CONSIDERING THE BUSINESS WORKS AND HIGHER TURNOVER, THE ADDITION OF LABOUR CHARGES DOES NOT WARRANT AND PRAYED FOR ALLOWING OF APPEAL. CONTRA, THE LD. DR RELIED ON THE ORDER OF THE CIT(A). 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON THE DISPUTED ISSUE, THE LEARNED AR CONTENTION THAT THE AO HAS MADE ADDITION OF RS.50 LAKHS TO THE WORK-IN-PROGRESS ON THE ESTIMATED BASIS AND THE SAME HAS TO BE CONSIDERED AS OPENING BALANCE IN THE SUBSEQUENT ASSESSMENT YEAR. WE FOUND THERE IS A REASONABILITY IN THE SUBMISSION OF THE LEARNED AR AS THE ASSESSEE IS SUBJECTED TO RS.50 LAKHS ADDITION IN THE PRESENT YEAR DUE TO DIFFERENCE IN VALUATION OF STOCK FOR WORK-IN-PROGRESS AND THE SAME VALUE BE CONSIDERED AS OPINING STOCK NEXT YEAR. ACCORDINGLY, WE DIRECT THE AO TO TREAT THE OPENING STOCK IN THE NEXT FINANCIAL YEAR ITA NOS.1524 TO 1526/BANG/2018 PAGE 6 OF 7 WITH INCREASE OF RS.50 LAKHS AS THE ASSESSEE HAS ACCEPTED THE ADDITION IN THE PRESENT ASSESSMENT YEAR AND WE ORDER ACCORDINGLY. 9. ON THE NEXT DISPUTED ISSUE WITH RESPECT OF AD-HOC ADDITION OF LABOUR CHARGES, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRUCTION WORKS AND ENGAGED AT VARIOUS PLACES. THOUGH THE ASSESSEE HAS MADE PAYMENTS BUT COULD NOT SUBSTANTIATE WITH THIRD PARTY VOUCHERS BUT ONLY RELIED ON THE SELF- MADE VOUCHERS. THEREFORE, CONSIDERING THE SELF-MADE VOUCHERS AND THE NATURE OF WORK UNDERTAKEN BY THE ASSESSEE, WE DIRECT THE AO TO RESTRICT THE ADDITION OF LABOUR CHARGES TO THE EXTENT OF RS.3 LAKHS AND WE MODIFY THE CIT(A) ORDER ACCORDINGLY. 10. IN THE RESULT, THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. 11. NOW WE SHALL TAKE UP THE APPEAL ITA NO.1526/BANG/2018 FOR THE ASSESSMENT YEAR 2007-08. AT THE TIME OF HEARING, THE LEARNED AR ARGUED ONLY GROUND NO.3 IN RESPECT OF DISALLOWANCE OF WAGES OF RS.5 LAKHS MADE BY THE AO AND OTHER GROUNDS OF APPEAL NOT PROSECUTED AND ARE DISMISSED. WE HAVE DEALT ON THIS ISSUE IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 AT PARA 9 ABOVE AND RESTRICTED THE ADDITION TO RS.3 LAKHS. APPLYING THE SAME RATIO, ITA NOS.1524 TO 1526/BANG/2018 PAGE 7 OF 7 WE DIRECT THE AO TO RESTRICT THE ADDITION FOR THE ASSESSMENT YEAR 2007-08 TO RS.3 LAKHS AND ORDER ACCORDINGLY. 12. IN THE RESULT, ITA NO.1524/BANG/2018 IS DISMISSED AND ITA NOS.1525 & 1526/BANG/2018 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JUNE, 2019. SD/- SD/- (B.R. BASKARAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU D A T E : 07/06/2019 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE