DCIT, V. M/s Technoart Construction Pvt. Ltd.,

ITA 1539/BANG/2013

• Counselvise Citation: 153921114 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-12-2014
• Assessment Year: misc
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1539/BANG/2013 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, BANGALORE. VS. M/S. TECHNOART CONSTRUCTION PVT. LTD., NO.19 & 19/1, 3 RD FLOOR, SOUTHEND ROAD, BASAVANGUDI, BANGALORE 560 004. PAN : AAACT 5910B APPELLANT RESPONDENT APPELLANT BY : SHRI P. DHIVAHAR, JT. CIT(DR) RESPONDENT BY : SHRI KASHINATH KALMATH, ADVOCATE DATE OF HEARING : 29.12.2014 DATE OF PRONOUNCEMENT : 23.01.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 27.8.2013 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSM ENT YEAR 2009-10. 2. GROUND NO.2,WHICH IS THE EFFECTIVE GROUND OF APP EAL RAISED BY THE REVENUE, READS AS FOLLOWS:- ITA NO.1539/BANG/2013 PAGE 2 OF 5 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW IN DELETING THE ADDITIO N OF 10% OF WAGES CLAIMED BY PLACING RELIANCE ON THE ORDER OF T HE ITAT IN THE CASE OF ASSESSEE FOR AY 08-09 WITHOUT APPRECIAT ING THE FACT THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM OF THE DISALLOWED EXPENDITURE. 3. THE ASSESSEE IS A COMPANY WHICH CARRIES ON BUSIN ESS AS CIVIL ENGINEERS AND CONTRACTORS. THE ASSESSEE HAD DEBITE D A SUM OF RS.5,38,62,780 AS WAGES. OUT OF THE ABOVE, SUM OF RS.97,18,469 WAS PAID TO SUB-CONTRACTORS. REMAINING SUM OF RS.4,41, 44,311 WAS WAGES PAID BY THE ASSESSEE. THE AO CALLED UPON THE ASSES SEE TO SUBSTANTIATE THE EXPENDITURE INCURRED UNDER THE HEAD 'WAGES' OF RS.4,41,44,311 WITH DOCUMENTS AND EVIDENCE INCLUDING PAY ROLL REGISTER, PF, ESI & GRATUITY PAYMENTS, TDS CERTIFICATES, CONTRACTS ETC. ACCORDI NG TO THE AO, ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE CLAIM OF EXPENDITU RE ON WAGES AS DEMANDED BY THE AO. THE AO WAS, THEREFORE, OF THE VIEW THAT GENUINENESS OF THE EXPENDITURE WAS DOUBTFUL. HE DI SALLOWED 10% OF RS.4,41,44,311 AND THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE CIT(APPEALS), THE ASSESSEE POINTED OUT T HAT THE ASSESSEE PRODUCED VOUCHERS AND STATEMENTS MAINTAINED AT SITE FOR PAYMENT OF WAGES AND ALSO INFORMED THE AO THAT NO PAYROLL REGI STER WAS MAINTAINED, AS THE LABOURERS WERE NOT PERMANENT AND WAGES PAID WERE DAILY WAGES. THE ASSESSEE ALSO POINTED OUT THAT WAGES WERE PAID BASED ON THE STATEMENT SUBMITTED BY THE SITE IN-CHARGE ENGINEER. IT WAS ALSO POINTED OUT ITA NO.1539/BANG/2013 PAGE 3 OF 5 THAT UNDER RULE 3(2)(M) OF THE KARNATAKA VAT RULES, 30% OF THE TOTAL CONTRACT RECEIPTS WHILE DETERMINING TOTAL TAXABLE T URNOVER IS CONSIDERED AS TOWARDS LABOUR COST, WHERE BOOKS ARE NOT MAINTAINED , OR, ARE NOT RELIABLE. THE ASSESSEE POINTED OUT THAT WAGES PAID BY THE ASS ESSEE WAS LESS THAN 30% OF THE GROSS CONTRACT RECEIPTS AND DISALLOWANCE WAS NOT WARRANTED. THE ASSESSEE ALSO POINTED OUT THAT ITAT IN ASSESSEE 'S OWN CASE FOR THE A.Y. 2008-09 BY ORDER DATED 17.5.2013 IN ITA NO.638 /BANG/2012, IN RESPECT OF IDENTICAL DISALLOWANCE MADE BY THE AO WH ICH WAS SUSTAINED BY THE CIT(A), DELETED THE ADDITION OBSERVING AS UNDER :- 9.2 IN THE INSTANT CASE, THE TOTAL EXPENDITURE C LAIMED TOWARDS LABOUR/WAGES IS RS.4,27,42,817/- ON A GROSS CONTRAC T TURNOVER OF RS.19,00,15,348/-, WHICH IS BELOW 30% OF THE LABOUR AND LIKE CHARGES PERMITTED AS ALLOWABLE IN ABSENCE OF BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS. THE ASSESSEES BOOKS OF A CCOUNT WERE AUDITED U/S 44AB OF THE I T ACT. THE ESTIMATION OF 10% FOR THE PURPOSES OF DISALLOWANCE IS NOT MADE ON ANY MATERIA LS OR COMPARATIVE CASES OR THERE IS ANY EVIDENCE THAT EXP ENDITURE IS NOT GENUINE, ON THE OTHER HAND, DISALLOWANCE IS MADE ON ADHOC BASIS. IN THE LIGHT OF THE ABOVE REASONING, WE HOLD THAT T HE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING ON AN ADHOC BASIS 10% OF THE TOTAL WAGES AND THE CIT(A) IN SUSTAINING THE SA ME. THEREFORE, WE REVERSE THE ORDERS OF THE INCOME TAX AUTHORITIES AND DIRECT THAT DISALLOWANCE OF 10% OF TOTAL WAGES IS UNCALLED FOR. IT IS ORDERED ACCORDINGLY. 5. THE CIT(A), ON CONSIDERATION OF THE ABOVE SUBMIS SIONS, WAS OF THE VIEW THAT THE ADDITION MADE BY THE AO WAS WITHOUT A NY BASIS AND THAT THE FACTS AND CIRCUMSTANCES IN A.Y. 2008-09 AND THE PRE SENT A.Y. 2009-10 WAS IDENTICAL AND THE DECISION RENDERED BY THE TRIBUNAL WAS APPLICABLE TO A.Y. ITA NO.1539/BANG/2013 PAGE 4 OF 5 2009-10 ALSO. ACCORDINGLY, THE ADDITION MADE BY TH E AO WAS DELETED BY THE CIT(A). 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE H AS RAISED THE AFORESAID GROUND OF APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WH O RELIED ON THE ORDER OF AO. THE LD. COUNSEL FOR THE ASSESSEE RELI ED ON THE ORDER OF CIT(A). 8. THE FACTUAL POSITION WITH REGARD TO THE TOTAL R ECEIPT OF THE ASSESSEE IN RESPECT OF CONTRACT WORKS AND THE WAGES PAID AS PERCENTAGE OF TOTAL CONTRACT RECEIPTS ARE AS FOLLOWS:- 1. TOTAL RECEIPTS UNDER WORKS COMPLETED AS PER PROFIT & LOSS A/C. RS.23,12,20,732 2 WAGES PAID IN THE YEAR AS PER PROFIT & LOSS A/C R S.05,96,77,524 3 WORKS OUT TO 25.81% IT CAN BE SEEN FROM THE ORDER OF TRIBUNAL FOR A.Y. 2007-08 THAT A VIEW WAS TAKEN THAT 30% OF THE TOTAL CONTRACT RECEIPTS CAN B E TAKEN AS TOWARDS LABOUR CHARGES. PERCENTAGE OF LABOUR CHARGES TO THE CONTR ACT RECEIPTS IN THE PRESENT A.Y. IS LESS THAN 30%. THEREFORE, THE DECI SION RENDERED BY THE TRIBUNAL FOR A.Y. 2007-08 IS SQUARELY APPLICABLE TO THE PRESENT ASSESSMENT YEAR ALSO. WE ARE, THEREFORE, OF THE VIEW THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. HER ORDER DO ES NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY, THE APPEAL BY THE REVE NUE IS DISMISSED. ITA NO.1539/BANG/2013 PAGE 5 OF 5 9. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JANUARY, 2015. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 23 RD JANUARY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.