RMEC Project Ltd., V. ACIT, Cen.Cir. 2(2), Pune,

ITA 155/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56448 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 02-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MITHALI MADHUSMITA
• Assessee Lawyers: S U PATHAK
• Keywords: Income from undisclosed sources; Rectification of order; Loose papers; Block assessment; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO. 95/PN/2009 (BLOCK PERIOD 1997-98 TO 2003-04) ACIT , CENTRAL CIRCLE 2(2) ,PUNE ... APPELLANT P.M.T. BUILDING, 4 TH FLOOR, CWING, PUNE V. RMEC PROJECT LIMITED RESPONDENT KALPANA TARANG, 42/9 ERANDWANA, KARVE ROAD, PUNE 411 004 ITA NO. 155/PN/2009 (BLOCK PERIOD 1997-98 TO 2003-04) RMEC PROJECT LIMITED APPELLANT KALPANA TARANG, 42/9 ERANDWANA, KARVE ROAD, PUNE 411 004 V. ACIT, CENTRAL CIRCLE 2(2) ,PUNE ... RESPONDENT P.M.T. BUILDING, 4 TH FLOOR, CWING, PUNE DEPARTMENT BY : SMT. MITHALI MADHUSMITA, CI T (DR) ASSESSEE BY : S/SHRI S.U. PATHAK & NIKH IL PATHAK ORDER PER I.C. SUDHIR, JM THE REVENUE HAS QUESTIONED THE FIRST APPELLATE OR DER ON SEVERAL GROUNDS INVOLVING THE ISSUE AS TO WHETHER THE LD CIT(A) HA S ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNDISCLOSED INCOME OF RS. 6,56,55,669 /- MADE BY THE A.O BY MAKING SPECIFIC DISALLOWANCE AT 15% OF THE EXPENDITURE DE BITED TO PROFIT & LOSS ACCOUNT FOR THE A.YS. 1999-2000 TO 2001-02. THE ASSESSEE, ON TH E OTHER HAND, HAS RAISED THE ISSUE IN THE GROUNDS OF ITS APPEAL AS TO WHETHER T HE LD CIT(A) HAS ERRED IN ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 2 CONFIRMING AN ADDITION OF RS.37,43,181/- ON ACCOUNT OF EXPENDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF THE PAYMENT MADE TO THE SUB CONTRACTOR, SHRI SUNIL KUMAR, PROP. SIMRAN ENTERPRISES. SINCE THE ABOVE ISSUES R AISED BY THE PARTIES ARE CONNECTED, HENCE BOTH THE APPEALS ARE BEING DISPOSE D OFF VIDE A CONSOLIDATED ORDER. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD CAR RIED OUT SEVERAL CONTRACT WORKS IN DIFFERENT F.YS. IT WAS SUBJECTED TO SEARC H AND SEIZURE OPERATION U/S. 132 OF THE ACT CONDUCTED AT ITS OFFICE PREMISES AT DELH I, NOIDA AND PUNE, AS WELL AS AT THE RESIDENTIAL PREMISES OF THE CONTRACTORS, AND I TS SUB-CONTRACTORS AND OTHER PERSONS. DURING THE COURSE OF SEARCH, LARGE NUMBER OF DOCUMENTS AND LOOSE PAPERS WERE FOUND AND INVENTORIES. ON THE BASIS OF SEIZED MATERIAL, THE A.O CONCLUDED THAT THE ASSESSEE HAD INFLATED ITS EXPENSES ON ACCOUNT O F PAYMENTS MADE TO SUB CONTRACTORS. HE, ACCORDINGLY, COMPUTED UNDISCLOSE D INCOME OF THE ASSESSEE AT RS.8,97,50,478/- BY MAKING DISALLOWANCE OF RS. 7,2 2,50,014/-. FURTHER, RECTIFICATION ORDER U/S. 154 WAS PASSED BY THE A.O. AND ASSESSED INCOME WAS REDUCED TO RS.6,93,98,850/-. THE ASSESSEE HAD CLAI MED TOTAL CONTRACT RECEIPT FROM LABOUR PAYMENT AT RS.48,16,66,763/-. THE A.O DISBE LIEVED THE CLAIM ON THE BASIS THAT THE SO-CALLED SUB-CONTRACTORS OF THE ASSESSEE ARE NOTHING BUT ONLY THE NAME LENDERS. AFTER DISCUSSING THE ISSUE IN DETAIL, HE HAS DISALLOWED 15% OF THE TOTAL AMOUNT RESULTING INTO DISALLOWANCE OF RS. 7,22,50,0 14/-, WHICH HAS BEEN REDUCED TO RS.6,93,98,850/- VIDE RECTIFICATION ORDER PASSED U/ S. 154. THE LD CIT(A) AGAIN DISCUSSING THE CASES OF THE PARTIES ESPECIALLY THE EXPLANATION OF THE ASSESSEE MEETING OUT THE OBJECTIONS AND DOUBTS RAISED BY THE AO, HAS SUSTAINED THE DISALLOWANCE TO RS. 36,43,181/- ON ACCOUNT OF EXP ENDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF THE PAYMENT MADE TO THE SUB-CONTRACTO R SHRI SUNIL KUMAR, PROP. SIMRAN ENTERPRISES. SAME HAS BEEN QUESTIONED BY TH E ASSESSEE BEFORE US IN ITS APPEAL. THE CONSEQUENTIAL RELIEF OF RS. 6,56,55,66 9/- GIVEN BY THE LD CIT(A) TO THE ASSESSEE HAS BEEN QUESTIONED BY THE REVENUE BEFORE US IN ITS APPEAL. ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 3 3. IN SUPPORT OF THE GROUNDS RAISED IN THE APPEAL P REFERRED BY THE REVENUE, THE LD. D.R. HAS BASICALLY PLACED RELIANCE ON THE ASSES SMENT ORDER. SHE SUBMITTED THAT ENTIRE DISALLOWANCE HAS BEEN MADE BY THE A.O ON THE BASIS OF MATERIALS SEIZED DURING THE COURSE OF SEARCH. THE LD CIT(A) WAS THU S NOT JUSTIFIED IN DELETING THE SUBSTANTIAL DISALLOWANCE OF EXPENSES CLAIMED TO HAV E BEEN MADE BY WAY OF PAYMENT TO THE SO-CALLED SUB-CONTRACTORS ON ACCOUNT OF LABO UR PAYMENT. HE POINTED OUT THAT DURING THE COURSE OF SEARCH, BLANK LETTER-HEADS OF THE SO-CALLED SUB-CONTRACTORS WERE FOUND, ON WHICH, THE ASSESSEE USED TO CLAIM THE PAY MENT MADE TO SUB-CONTRACTORS. THE LD. D.R. REFERRED PAGE NO. 51 OF THE PAPER BOOK I.E. STATEMENTS OF SHRI NEERAJ HONDA, CHAIRMAN & MANAGING DIRECTOR OF THE ASSESSEE RECORDED U/S. 132 OF THE ACT. THE STATEMENTS RUNNING IN PAGE NOS. 48 TO 57 OF T HE PAPER BOOK . AT PAGE 51, IN ANSWER TO QUESTION NO. 16, SHRI HONDA HAS REPLIED T HAT HE IS IN THE LOWER END OF THE BUSINESS OF LABOUR SUPPLY. IN REPLY TO QUESTION NO .1, HE HAS STATED THAT HE NEVER SAID THAT HE WILLINGLY ALLOWED CONTRACTORS TO INFLA TE BILLS AND MAKE MONEY. THE LD. D.R. ALSO REFERRED QUESTION NO. 35 AND REPLY THERET O OF SHRI HONDA AT PAGE NO. 54 OF THE PAPER BOOK. IN REPLY TO SAID QUESTION NO. 35, SHRI HONDA HAS STATED THAT HE SUSPECTED FOUL PLAY IN THE NORTHERN REGION INCURRIN G LARGE LOSSES AND THUS DECIDED TO CLOSE HIS BUSINESS IN NORTHERN REGION. THE LD. D.R . ALSO REFERRED PAGE NO. 103 OF THE PAPER BOOK I.E. EXTRACT OF STATEMENTS OF SHRI J ASWINDER SINGH OF PANIPAT, EXECUTIVE DIRECTOR OF THE ASSESSEE, WHEREIN IN REP LY TO THE QUESTION, HE HAS STATED THAT HE HAD NEVER HEARD THE NAME OF THE CONCERNED P ANIPAT ENGINEERING SERVICES NOR ANY WORK WAS DONE BY PANIPAT ENGINEERING SERVIC ES FOR THE ASSESSEE. NOT ANY PAYMENT WAS MADE BY THE ASSESSEE TO THE SAID CONCER N. THE LD. D.R. ALSO REFERRED PAGE NO. 107 OF THE PAPER BOOK, WHEREIN IN REPLY TO QUESTION NO.17, SHRI JASWINDER SINGH HAS STATED THAT HE IS PROP. OF SIMRAN ENTERPR ISES WHICH WAS FLOATED ONE MONTH BEFORE. THAT CONCERN HAD TAKEN A JOB OF SUB-C ONTRACT FROM THE ASSESSEE. HE FURTHER STATED THAT HE HAS NOT GOT ANY ACCOUNT OF T HIS CONCERN NOR HE IS POSSESSING ANY PAYMENT VOUCHER. HE HAS FURTHER STATED THAT M/ S. APEX TRADERS IS PARTNERSHIP FIRM OF HIS WIFE AND DILAWAR. THIS CONCERN HAS NOT DONE ANY JOB SO FAR NOR HAS ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 4 RECEIVED ANY PAYMENT. THE LD. D.R. ALSO REFERRED T HE STATEMENTS OF SHRI SUNIL KUMAR SHARMA, PROP. OF SIMRAN ENTERPRISES AT PAGE NO. 271 AND 274 OF THE PAPER BOOK. IN REPLY TO QUESTION NO. 10, SHRI SUNIL KUMA R COULD NOT FURNISH THE DETAILS OF THE PERSONS WHO HAD SUPPLIED LABOURERS TO HIS CONCE RN, USED BY THE CONCERN. THE LD. D.R. CONCLUDED HIS ARGUMENT WITH THIS CONTENTIO N THAT ONUS WAS LYING UPON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE CLAIM MADE BY IT ON ACCOUNT OF PAYMENT MADE TO THE SUB-CONTRACTORS FOR SUPPLY OF T HE LABOURERS TO WHICH, ASSESSEE HAS THOROUGHLY FAILED TO. THE LD CIT(A) WAS THUS NOT JUSTIFIED IN ACCEPTING THE CLAIM ASSUMING TO THE EXTENT OF RS.6,56,55,669/-. 4. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE RELIEF GIVEN BY THE LD CIT(A) TOWARDS THE CLAIMED PAYMENT MADE TO THE SUB CONTRACTORS. HE SUBMITTED THAT THE LD CIT(A) UNDER THE FACTS AND CIRCUMSTANCE S OF THE PRESENT CASE, SHOULD HAVE ALLOWED THE ENTIRE CLAIM. HE SUBMITTED THAT O UT OF 92 SUB-CONTRACTORS, WHO HAD SUPPLIED THE LABOURERS TO THE ASSESSEE DURING T HE YEAR, THE A.O HAS EXAMINED ONLY 8 CONTRACTORS. ONLY LETTER HEADS OF SUB-CONTR ACTORS WERE FOUND WITH EX- EMPLOYEE OF THE ASSESSEE, WHICH WERE NOT SUFFICIENT TO DOUBT THE GENUINENESS OF THE CLAIM MADE BY THE ASSESSEE. THE LD. A.R. SUBMITTED THAT BILLS ARE MADE BY ENGINEERS AT THE SITE OF WORK. HE SUBMITTED THAT T HE ASSESSEE HAD FURNISHED THE DETAILS OF EXPENSES AND PARTIES TO WHOM PAYMENTS WE RE MADE, AS IT IS EVIDENT FROM THE CONTENTS OF PAGE NO. 6 OF THE ASSESSMENT ORDER. NO EVIDENCE WAS FOUND AGAINST THE ASSESSEE TO DOUBT THE GENUINENESS OF THE CLAIM. THE LD. A.R. CONTENDED THAT THE STATEMENTS RECORDED U/S. 132 PER SE ARE NOT SU FFICIENT TO MAKE ADDITION IN BLOCK ASSESSMENT IN ABSENCE OF INCRIMINATING DOCUMENT TO CONTRADICT THE CLAIM. THE LD. A.R. SUBMITTED THAT MR. JASWINDER SINGH AND MR. MOH AR SINGH ARE EX-EMPLOYEES OF THE ASSESSEE WHO WERE REMOVED FROM THEIR SERVICES B Y THE ASSESSEE WELL BEFORE THE DATE OF SEARCH. EX-EMPLOYEES WERE BLACKMAILING THE ASSESSEE. THUS, THEIR STATEMENTS ARE NOT CREDIT-WORTHY. NO UNACCOUNTED A SSETS OF ASSESSEE WAS FOUND DURING THE COURSE OF SEARCH. THE LD. A.R. REFERRED PAGE NOS. 1 TO 340 OF THE PAPER ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 5 BOOK VOLUME I AND PAGE NOS. 341 TO 497 OF THE PAPE R BOOK VOLUME NO. 2 FILED ON BEHALF OF THE ASSESSEE. THESE ARE THE COPIES OF DO CUMENTS INCLUDING VARIOUS PANCHNAMAS ALONG WITH ENCLOSURES IN RESPECT OF SEAR CH AND SEIZURE ACTION, STATEMENTS OF PERSONS RECORDED U/S. 132(4) AND OTHE R PROVISIONS OF THE ACT, CORRESPONDENCES AND SUBMISSIONS MADE BY THE ASSESSE E, COPIES OF AUDITED BALANCE SHEET OF THE ASSESSEE ALONG WITH PROFIT & LOSS ACC OUNT FOR DIFFERENT YEARS, AFFIDAVITS OF THE SUB-CONTRACTORS, THEIR ASSESSMENT ORDERS ETC . THE LD. A.R. ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS : A) MANGE RAM MITTAL V. ACIT, 103 ITD 389 (SB) (DEL .) B) MORARJEE GOCULDAS SPG. & WVG. CO. LTD., V. DCIT , 95 ITD 1 (TM)(MUM) C) CIT V. ORISSA CORPORATION P. LTD., 159 ITR 78 ( SC) 5. IN REJOINDER, THE LD. D.R. SUBMITTED THAT THE C ONTRACTOR OF THE ASSESSEE IN HIS STATEMENTS HAS ACCEPTED INFLATION. AFTER SEARCH, A SSESSEE HAD OFFERED UNACCOUNTED INCOME FOR TAX. SHRI SUNIL SHARMA, PROP. SIMRAN E NTERPRISES, IN HIS STATEMENTS HAD ACCEPTED THAT HE HAS NOT MAINTAINED ANY ACCOUNT. OP PORTUNITY OF CROSS-EXAMINATION OF SHRI SUNIL SHARMA WAS OFFERED TO THE ASSESSEE. 6. THE LD. A.R. SUBMITTED FURTHER THAT ASSESSEE HA D OFFERED INCOME TO BUY PEACE, WHICH CANNOT BE INFERRED AS ACCEPTANCE OF IN FLATION OF EXPENDITURE BY THE ASSESSEE. IN THIS REGARD, HE PLACED RELIANCE ON TH E DECISION OF THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SANMUKHDAS WADH WANI, 85 ITD 734 (NAG.). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE P ARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. THE AUTHORITIES BELOW HAVE PASSED DETAILED ORDER O N THE ISSUE. THE LD CIT(A) HAS CONSIDERED THE OBJECTIONS RAISED BY THE A.O AGAINST THE GENUINENESS OF THE CLAIMED ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 6 EXPENDITURE INCURRED ON HIRING THE LABOURERS THROUG H SUB CONTRACTORS AND REPLY OF THE ASSESSEE THERETO WHILE DECIDING THE ISSUE. DUR ING THE BLOCK PERIOD, THE ASSESSEE HAD COMPLETED THE FOLLOWING PROJECTS FOR DIFFERENT CONCERNS, WHERE LABOUR SUPPLY WAS THE MAIN JOB OF THE ASSESSEE : A.Y. NAME OF CONCERN/PROJECT NATURE OF TOTAL CONTRACT AMOUNT CONTRACT 1999-00 (I) OSWAL CHEMICAL & LABOUR SUPPLY 5,49,47,078 FERTILIZERS LTD.(OCFL), PARADEEP, ORISSA (II) OTHER SITES - DO- 3,39,17,691 2000-01 (I) OCFL - DO- 27,94 ,71,780 (II) OTHER SITES -DO- 3 ,45,86,357 2001-02 (I) OCFIL -DO- 2,29,14,609 (II) OTHER SITES -DO- 5,58,29,248 48,16,66,763 THE A.O. NOTED THAT THE MAIN ISSUE FOR HIS CONSIDE RATION WAS AS TO WHETHER THE COMPANY WAS SHOWING THE CORRECT PICTURE OF THE PROF IT FOR THE BLOCK PERIOD OR CONCEALING ITS INCOME FOR THE BLOCK PERIOD BY INFLA TING THE PAYMENTS MADE TO VARIOUS EXISTENT AND NON-EXISTENT SUB-CONTRACTORS. THE A.O , ON THE BASIS OF CONTENTS OF THE SEIZED MATERIAL ASKED THE ASSESSEE TO GIVE NAMES AN D COMPLETE ADDRESSES OF THE SUB-CONTRACTORS (LIKE M/S. DASHMESH CONSTRUCTION GR OUP, M/S. GAGAN ENTERPRISES, M/S. APEX FABRICATORS, M/S. BHARAT CONSTRUCTION CO. , M/S. ESS & ESS CO., M/S. SIMRAN ENTERPRISES, M/S. PANIPAT ENGINEERING SERVIC ES, M/S. G.S. ERECTORS ), NATURE OF CONTRACT GIVEN TO THEM BY THE ASSESSEE COMPANY, MODE OF PAYMENTS FOR THE BILLS RAISED AND TO EXPLAIN DISCREPANCIES FOUND IN THE BI LLS AND RECEIPTS SUBMITTED BY SUCH SUB-CONTRACTORS ALONG WITH THE FOLLOWING DETAILS IN RESPECT OF THE ABOVE MENTIONED PARTIES : I) COPIES OF AGREEMENT FOR THE CONTRACT II) WORK DONE WITH SPECIFICATION OF THE JOB III) LOCATION OF THE WORK SITE IV) COMPLETION DATE OF SUCH WORK V) BILLS (RUNNING AS WELL AS FINAL) VI) PAYMENT WITH DETAILS ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 7 VII) DETAILS OF TDS MADE FROM SUCH CONTRACTS VIZ., THE D ATE OF DEDUCTION AND PAYMENT TO GOVT. ACCOUNT. VIII) COPIES OF TDS CERTIFICATES THE A.O ALSO CONFRONTED THE ASSESSEE WITH VARIOUS DOCUMENTS SEIZED FROM THE PREMISES OF THE SEARCHED PERSONS AND ASKED TO EXPL AIN THE ENTRIES/NOTINGS ON THE SAME. 8. THE A.O. ALSO POINTED OUT THE 8 DISCREPANCIES NO TICED FROM THE SEIZED MATERIAL FOR THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE FURNISHED ITS EXPLANATION THERETO. THE A.O, HOWEVER, WAS NOT SAT ISFIED WITH THE EXPLANATION OF THE ASSESSEE AND CAME TO THE CONCLUSION THAT THE SO -CALLED SUB-CONTRACTORS WERE MERE NAME LENDERS AND TRANSACTIONS WITH THEM WERE N OT GENUINE. THE A.O. ACCORDINGLY DISALLOWED 15% OF THE TOTAL CONTRACT RE CEIPT OF RS. 48,16,66,763/- RESULTING INTO DISALLOWANCE OF RS. 7,22,50,014/-. THIS DISALLOWANCE WAS MADE BY THE A.O AT 15% OF THE TOTAL CONTRACT RECEIPTS. ON AN A PPLICATION BY THE ASSESSEE, AN ORDER U/S. 154 OF THE ACT WAS PASSED DISALLOWING 1 5% OF THE EXPENDITURE INSTEAD OF THE CONTRACT RECEIPT, CLAIMED BY THE ASSESSEE IN IT S RETURN OF INCOME FOR THE 3 A.YS. 1999-2000 TO 2001-02 COVERED IN THE BLOCK PERIOD. THUS THE ULTIMATE DISALLOWANCE HAS BEEN REDUCED TO RS. 6,93,98,850/-. THE LD CIT( A) HAS DISCUSSED IN DETAILS THE OBJECTIONS RAISED BY THE A.O AND REPLY OF THE ASSES SEE THERETO, THE REMAND REPORT OF THE A.O AS WELL AS REJOINDER OF THE ASSESSEE TO THO SE REPORT. HAVING GONE THROUGH ALL THESE DETAILS, WE ARE OF THE VIEW THAT THE MATE RIAL TESTS TO DECIDE THE ISSUE REGARDING GENUINENESS OF THE CLAIMED EXPENDITURE IS AS TO WHETHER THE SUB- CONTRACTORS IN QUESTION HAVE CONFIRMED THE PAYMENT CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE TO THEM ON ACCOUNT OF SUPPLY OF LABOUR AND ACCEPTABILITY OF THEIR CONFIRMATION ESPECIALLY WHEN EXECUTION OF WORK AWAR DED TO THE ASSESSEE COMPANY BY ITS CUSTOMER IS NOT IN DISPUTE. IT IS, THUS, NA TURAL THAT FOR AN EXECUTION OF THOSE WORK AWARDED TO THE ASSESSEE, THE ASSESSEE MUST HAV E ENGAGED LABOURERS AS THE ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 8 WORK AWARDED, UNDISPUTEDLY, WAS LABOUR ORIENTED. O UT OF 92 SUB CONTRACTORS ENGAGED BY THE ASSESSEE, THE A.O HAS EXAMINED AND DISCUSSED ABOUT 8 CONTRACTORS ONLY AND ON THE BASIS OF HIS OBSERVATIONS ABOUT 7 C ONTRACTORS, HE HAS MADE DISALLOWANCE AT THE ESTIMATED RATE OF 15% OF THE E NTIRE CLAIMED EXPENDITURE IN THIS REGARD ON THE ALLEGATION THAT EXPENDITURE IS INFLA TED. THE LD CIT(A) HAS AGAIN DISCUSSED ABOUT THE 6 SUB-CONTRACTORS IN WHOSE CASE S, THE A.O HAD MADE CERTAIN OBSERVATIONS AND ON THE BASIS OF WHICH, THE A.O. HAD MADE DISALLOWANCE. AFTER CONSIDERING THE RESPONSE OF THE ASSESSEE ON EACH OF THE ISSUES RAISED AND THE STATEMENTS OF THE SUB-CONTRACTORS PRODUCED BEFORE T HE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O HELD THAT M/S. GAG AN ENTERPRISES TO WHOM PAYMENT OF RS. 89,01,287/- MADE WAS NOT CAPABLE TO HANDLE THE TASK OF SUPPLYING LABOURERS FOR SUCH HUGE WORK AND THAT HE WAS ONLY A NAME LENDER IN THE ENTIRE TRANSACTION, THE AMOUNT OF RS. 89,01,287/- WAS DIS ALLOWED. FURTHER DISALLOWANCES WERE MADE IN THE CASE OF SHRI NAREND RASINGH, PROP: M/S. DASHMESH CONSTRUCTION; M/S. PANIPAT ENGINEERING SERVICES; M/ S. APEX FABRICATORS AND M/S. SIMRAN ENTERPRISES. REFERRING TO THESE STATEMENTS OF SHRI NEERAJ HONDA, ONE OF THE DIRECTORS HAVING SUBSTANTIAL INTEREST IN THE ASSESS EE COMPANY, STATEMENTS OF SHRI JASWINDER SINGH, ANOTHER EXECUTION OF CONTRACT OPER ATION FOR ASSESSEE IN NORTHERN REGION, BLANK LETTERHEADS OF VARIOUS FIRMS FOUND A ND SEIZED FROM THE POSSESSION OF SHRI JASWINDER SINGH AND SHRI G.M. KIRTANE, DIRECTO R AND SHRI MOHARSINGH, MANAGER, AS OF WHOM HAD FIRST HAND ACCESS TO THE SUB-CONTR ACTORS AND DIRECTOR INVOLVED IN THE SALES OPERATION, THE A.O HELD THAT THE COMPANY HAD HUGE COLOURABLE DEVICE OF INTRODUCING BOGUS BILLS AND THEREBY INFLATE THE EXP ENDITURE TO DIVEST THE INCOME. THE LD CIT(A) HAS COMMENTED THAT THE A.O IN ITS ASS ESSMENT ORDER HAS NOT DIVULGED THE REASONS FOR APPLYING THE RATE OF 15% OF CONTRAC T RECEIPTS OR EXPENDITURE FOR DISALLOWANCES. WE, HOWEVER, FIND THAT ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY, SHRI NEERAJ HANDA HAS STATED THAT POSSIBI LITY OF 10 TO 15% OF INFLATION IN THE CLAIMED EXPENDITURE WAS THERE. WHEN WE CONSID ER HIS STATEMENT IN ENTIRETY, WE FOUND THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ESPECIALLY, THE ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 9 NATURE OF EXECUTION OF JOB AT VARIOUS SITES, SHRI H ANDA IN HIS STATEMENT HAS SHOWN A POSSIBILITY OF INFLATION OF 10 TO 15% IN THE CLAIME D EXPENDITURE, WHICH IN OUR VIEW, CANNOT BE THE SOLE BASIS FOR DISALLOWING 15% OF TH E CLAIMED EXPENDITURE. IT IS NOT THE CASE OF THE A.O THAT THE ASSESSEE HAD VOLUNTARI LY AGREED UPON DISALLOWANCE OF 10 TO 15% OF THE CLAIMED EXPENDITURE. HAD IT BEEN SO, THERE WAS NO QUESTION OF RAISING THIS ISSUE BEFORE THE AUTHORITIES BELOW OR THE TRIBUNAL BY THE ASSESSEE. KEEPING ALL THESE IN MIND, IN ITS TOTALITY, WE HAVE TO EXAMINE AS TO WHETHER THERE WAS SUFFICIENT MATERIAL BEFORE THE A.O TO MAKE DIS ALLOWANCE OF 15% OF THE CLAIMED EXPENDITURE STATED TO BE INCURRED ON HIRING THE LAB OURERS THROUGH SUB-CONTRACTORS. IF WE READ QUESTION NO. 9 TO 14 AND ANSWERS THERETO OF SHRI NEERAJ HANDA RECORDED U/S. 132(4) OF THE ACT ON 26.7.2002, A COPY WHEREOF FOR THE SAID QUESTIONS AND ANSWERS HAVE BEEN PLACED AT PAGE NO. 51 AND 52 OF T HE PAPER BOOK, VOLUME 1, IT IS CLEAR THAT SHRI HANDA WAS SHOWING POSSIBILITY OF IN FLATION IN EXPENSES RANGING FROM 10% TO 15%. IN ANSWER TO QUESTION NO. 11, HE HAS SPECIFICALLY STATED AS I NEVER SAID THAT I WILLINGLY ALLOWED CONTRACTORS TO INFLATE BILLS AND MAKE MONEY. I WAS COMMENTING ON NATURE OF INDUSTRY THAT THIS WOULD BE HAPPENING IN MOST OF THE PROFESSIONALLY MANAGED COMPANY. ONLY WAY TO CONTRO L IT IS TO FORGET YOUR FAMILY AND SIT AT SITE. LIVING CONDITIONS ARE NORMALLY PATHET IC. THUS, SUCH STATEMENT CANNOT BE TAKEN AS A SOLE BASIS FOR MAKING A HUGE DISALLOWANC E AT THE RATE OF 15% OF THE CLAIMED EXPENDITURE. NO OTHER REASON HAS BEEN SHOW N BY THE A.O FOR MAKING DISALLOWANCE AT THE RATE OF 15% OF THE CLAIMED EXPE NDITURE. THE LD CIT(A) HAS EXAMINED THE CASE OF 6 SUB-CONTRACTORS AND HAS COM E TO THE CONCLUSION THAT ADHOC DISALLOWANCE OF 15% OF THE EXPENDITURE DEBITED TO T HE PROFIT & LOSS ACCOUNT ON THE BASIS OF CERTAIN SPECIFIC DISALLOWANCES WAS MADE ON SURMISES, CONJECTURES AND SUSPICION WITHOUT BRINGING ANY OF THE COGENT MATERI AL ON RECORD. CERTAIN RELEVANT OBSERVATIONS ABOUT THESE SUB-CONTRACTORS ARE BRIEFL Y MENTIONED OVER HERE. REGARDING SUB-CONTRACTOR M/S. GAGAN ENTERPRISES, PR OP. SHRI HARKEWAL SINGH THE OBSERVATION IS THAT OUT OF THE TOTAL PAYMENT CONSID ERED FOR DISALLOWANCE, THE PAYMENT OF RS. 86,58,643/- TO THE CONCERN WAS MADE THROUGH CROSSED ACCOUNT ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 10 PAYEE CHEQUE AND PART OF THE AMOUNT OF RS.1,44,728/ - WAS PAID IN CASH IN EMERGENT CIRCUMSTANCES. RS. 97,916/- REPRESENTS TDS OUT OF CONTRACT FOR THE A.Y. 2000-01. THE BANK ACCOUNT WAS OPERATED BY HIM. THE PERSON H AD FILED HIS RETURN OF INCOME BEFORE THE ITO, WARD 2(7), AMRITSAR ALONG WITH AUDI T REPORT AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. REFUND WAS ALSO RECEIV ED BY HIM. REGARDING M/S. DASHMESH CONSTRUCTION GROUP, OUT OF THE TOTAL PAYME NT, THE AMOUNT OF RS.1,11,49,133/- WAS PAID BY ACCOUNT PAYEE CHEQUE, PART OF THE AMOUNT OF RS.6,95,705/- WAS PAID BY CASH AND RS.1,32,927/- RE PRESENTS TDS. THE CHEQUES ISSUED WERE DEPOSITED BY THE PERSON IN HIS BANK ACC OUNT AND THE ASSESSEE HAS NO CONNECTION WITH SUCH OPERATION OF THE ACCOUNT. THE PERSON HAS ALSO FILED HIS RETURN OF INCOME AND THE DEPARTMENT HAS ALLOWED THE REFUND TO HIM WHICH HAS BEEN ENCASHED BY HIM, WHEREIN THE INVOLVEMENT BY THE ASS ESSEE BY ANY STRETCH OF IMAGINATION CANNOT BE CONSIDERED. 9. THE A.O HAS MENTIONED THAT MR. MOHARSINGH WAS I NSTRUMENTAL PERSON TO MAKE THE ARRANGEMENT. ABOUT THIS, IT WAS SUBMITTED THAT HE WAS EMPLOYEE OF THE COMPANY TO LOOK AFTER THE APPOINTMENT OF SUB-CONTRA CTOR AND SMOOTH RUNNING OF THE WORK. HE WAS HELPING THE PERSON TO GET THE THINGS SETTLED SMOOTHLY BY INTRODUCING HIM TO OPEN THE BANK ACCOUNT WHICH IN ANY CASE, MAY NOT BE DOUBTED. IT WAS FURTHER SUBMITTED THAT THE STATEMENT OF MR. NARENDE R SINGH WAS RECORDED BY THE A.O ON 13.9.2006, I.E. 12 DAYS PRIOR TO THE COMPLET ION OF THE ASSESSMENT AND IF THE A.O HAD ANY DOUBT AS OBSERVED BY HIM, HE COULD HA VE GOT THE CLARIFICATION FROM THE DEPARTMENT INSTEAD OF RAISING DOUBT IN THE ASSESSM ENT ORDER. 10. ABOUT THE SUB-CONTRACTOR M/S. PANIPAT ENGINEERI NG SERVICES, IT HAS BEEN OBSERVED THAT PAYMENT TO MRS. BAGIRATH GODRE WAS ON LY OF RS.89,25,617/- AND NOT THE AMOUNT AS CONSIDERED AND ASSUMED BY THE A.O IN THE ASSESSMENT ORDER. OUT OF THE TOTAL PAYMENT OF RS. 89,25,617/-, THE PAYMENT O F RS. 86,13,000/- WAS MADE BY ACCOUNT PAYEE CHEQUE, THE PAYMENT OF RS.2,23,360/- WAS MADE IN CASH AND THE ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 11 BALANCE AMOUNT OF RS. 89,257/- REPRESENTS THE TDS. OUT OF THE TOTAL PAYMENT OF RS. 89,25,617/-, THE PAYMENT OF RS. 33,25,617/- WAS CLAIMED TO HAVE BEEN MADE FOR PARADEEP SITE AND RS. 65,00,000/- FOR ANOTHER SITE OF ASSESSEE COMPANY AT SHAHAJAHANPUR. A.O HAS NOT DISPUTED THE PAYMENT M ADE FOR THE PAYMENT AT SHAHAJAHANPUR. IT WAS SUBMITTED THAT THE SUB-CONTR ACTOR HAS CARRIED OUT WORK AT PARADEEP BASICALLY FOR ONE MONTH AND DECIDED THAT T HEY CANNOT KEEP WITH ENVIRONMENT AT PARADEEP AND LEFT ALL THEIR LABOUR FOR SHAHAJAHANPUR. THUS, NATURALLY, THE PAYMENT WAS REQUIRED TO BE MADE AT S HAHAJAHAPUR. CHEQUES ISSUED WERE DEPOSITED BY THE SUB-CONTRACTOR IN ITS BANK AC COUNT TO WHICH, ASSESSEE WAS HAVING NO CONNECTION. 11. ABOUT THE TRANSACTION OF M/S. J.R.S. ENGINEERIN G SERVICES, IT HAS BEEN MENTIONED THAT OUT OF THE TOTAL PAYMENT OF RS. 75, 95,833/-, THE AMOUNT OF RS. 27,36,240/- WAS PAID TO CONTRACTOR BY ACCOUNT PAYEE CHEQUE. A DEBIT NOTE WAS ISSUED TOWARDS PAYMENT DIRECTLY PAID TO THE WORKERS AND STAFF TOWARDS SALARY, RENT ETC., OF RS. 47,11,809/- AND THE BALANCE AMOUNT REP RESENTS TDS OF RS. 82,793/-. FURTHER, THE AMOUNT OF RS. 67,000/- WERE RECEIVED BACK FROM THE CONCERN ACCOUNTED IN THE BOOKS OF ACCOUNT. ABOUT MR. KIRTA NE, IT WAS SUBMITTED THAT HE WAS CEASED TO BE EX- DIRECTOR OF ASSESSEE COMPANY W.E.F . 31 ST MARCH 2001 AND HE WOULD HAVE FOUND SOME WAY TO MAKE HIS LIVELIHOOD. HE WA S WORKING INDEPENDENTLY FROM 1.4.2002 ONWARDS AND ASSESSEE COMPANY HAD NO IDEA A BOUT WHAT HE WAS DOING. 12. REGARDING THE TRANSACTION OF M/S. APEX FABRICAT ORS, IT HAS BEEN MENTIONED THAT MR. DILAWAR HUSSEIN WAS NEVER THE PROP. OF M/ S. JRS ENGINEERING SERVICES AS STATED AT THE INITIAL STAGE BY THE A.O, AND IN FACT , HE WAS NO WAY CONNECTED WITH JRS ENGINEERS. MR. DILAWAR HUSSEIN WAS SOLE PROPRIETO R OF APEX FABRICATORS AND ASSESSEE WOULD NOT HAVE ANY PARTNER IN THAT FIRM AS WRONGLY STATED THEREIN AND ASSUMED BY THE A.O. IT HAS BEEN MENTIONED THAT AFT ER TERMINATION OF HIS SERVICES FROM THE ASSESSEE ON 15.3.2002, MR. MOHARSINGH WAS FREE TO DO ANY BUSINESS HE ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 12 DEEMED FIT FOR HIS LIVELIHOOD. SIMILARLY, MR. JASW INDER SINGH DID NOT RECEIVE ANY SALARY AFTER 18.3.2002 AND WAS FREE TO DO ANYTHING FOR HIS BENEFIT. HE JOINED HANDS WITH MR. DILAWAR HUSSEIN AND FLOATED NEW CONCERN ON 16 TH JUNE 2002 AS PARTNERSHIP OF 3 PERSONS KNOWN AS M/S. APEX TRADERS. THIS FAC T HAS ALSO BEEN ADMITTED BY MR. JASWINDER SINGH IN HIS STATEMENT DT. 23.7.2002. 13. REGARDING THE VARIATION IN SIGNATURE ON THE REC EIPT, MR. DILAWAR HUSSEIN HAS ACCEPTED THAT IT WAS NOT HIS SIGNATURE, BUT HAD THE CONFIRMATION OF DIT THAT THE PAYMENT AGAINST THAT RECEIPT WAS RECEIVED BY CHEQUE AND ACCOUNTED FOR IN HIS BOOKS OF ACCOUNT WHILE FILING HIS RETURN OF INCOME. AS SUCH, THERE WAS NO NEED TO GIVE TOO MUCH EMPHASIS ON HIS SIGNATURE ON THE RECEIPT. 14. ABOUT THE TRANSACTION OF M/S. SIMRAN ENTERPRISE S, IT HAS BEEN MENTIONED THAT THE A.O HELD THAT MR. JASWINDER SINGH WAS OWNER OF SIMRAN ENTERPRISES WHEREAS HE HAS ACCEPTED IN HIS STATEMENT THAT HE WAS PROPRIETO R OF M/S. SIMMER ENTERPRISES AND NOT OF SIMRAN ENTERPRISES. THE PROPRIETOR OF T HIS CONCERN WAS MR. SUNIL KUMAR. 15. IT WAS FURTHER STATED THAT ALTHOUGH MR. SUNIL K UMAR HAD STATED THAT HE USED TO KEEP SIGNED COPIES OF THE CHEQUES IN THE OFFICE OF ASSESSEE AND WAS ONLY OPERATING SIMRAN ENTERPRISES ON BEHALF OF MR. MOHAR SINGH AND MR. JASWINDER SINGH. SHRI JASWINDER SINGH HAS FILED HIS RETURN OF INCOME AS PROPRIETOR OF THIS CONCERN AND AFTER GIVING STATEMENT TO A DIT, PUNE ON 3.10.2002, HAS GONE AHEAD AND CLAIMED REFUND OF TDS AMOUNT FROM PARADEEP IN HIS RETURN OF INCOME WHICH WAS ACCEPTED BY THE DEPARTMENT. THE DEPARTMENT ALSO REFUNDED HIM IN DECEMBER 2002. 16. ON THE BASIS OF ABOVE SUBMISSIONS, AND OTHERS, THE LD CIT(A) HAS DELETED THE DISALLOWANCES MADE BY THE A.O IN VIEW OF HIS OBSERV ATIONS ABOUT THE ABOVE STATED 6 TO 8 SUB-CONTRACTORS, EXCEPT UPHOLDING THE DISALLOW ANCE MADE IN THE CASE OF THE SUB-CONTRACTOR SHRI SUNIL KUMAR, PROPRIETOR OF M/S . SIMRAN ENTERPRISES AMOUNTING ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 13 TO RS. 37,43,181/-. WE DO NOT FIND ANY INFIRMITY I N THE FIRST APPELLATE ORDER SO FAR AS IN THE ACTION OF THE LD CIT(A) IN DELETING THE DISA LLOWANCES MADE BY THE A.O ON THE BASIS OF HIS OBSERVATION ABOUT THE ABOVE STATED 6 T O 8 SUB-CONTRACTORS , .AS WE FIND ALL THESE SUB-CONTRACTORS IN THEIR SUBMISSIONS BEFO RE THE A.O HAVE CONFIRMED THE CLAIMED TRANSACTION WITH THE ASSESSEE AND THERE WAS NO SUBSTANTIVE REASON TO DOUBT THEIR CONFIRMATION EXCEPT IN THE CASE OF SIMRAN ENT ERPRISES AS WE HAVE ALREADY DISCUSSED HEREIN. WE ARE THUS HAVING NO REASON B UT TO UPHOLD THE DELETION OF DISALLOWANCE OF RS. 6,56,55,669/-. THE LD CIT(A) A FTER DISCUSSING THE ISSUE IN DETAIL HAS RIGHTLY COME TO THE CONCLUSION THAT THE DISALLO WANCE IN QUESTION ON ADHOC BASIS AT 15% OF THE EXPENDITURE DEBITED TO THE PROFIT & L OSS ACCOUNT IS ON THE BASIS OF SURMISES, CONJUNCTURE AND SUSPICION WITHOUT BRINGIN G ANY COGENT MATERIAL ON RECORD. GROUND NOS. 1 & 3 OF THE APPEAL PREFERRED BY THE RE VENUE INVOLVING THE ISSUE ARE THUS REJECTED. 17. SO FAR AS SUSTAINING OF DISALLOWANCE OF RS. 37, 43,181/- MADE BY THE A.O AND SUSTAINED BY THE LD CIT(A) RELATING TO THE CLAIMED TRANSACTION WITH SHRI SUNIL KUMAR, PROPRIETOR SIMRAN ENTERPRISES, QUESTIONED B Y THE ASSESSEE IN HIS APPEAL IS CONCERNED, THE LD. A.R. HAS REITERATED THE SAME ARG UMENT AS ADVANCED BEFORE THE AUTHORITIES BELOW. 18. THE MAIN CONTENTION OF LD. A.R. IS THAT IN THE COURSE OF SEARCH, NO INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED WHICH SHOWED ANY INFLATED OR BOGUS EXPENSES TO THE PROFIT & LOSS ACCOUNT REGARDING PAY MENT MADE TO SHRI SUNIL KUMAR PROP. OF M/S. SIMRAN ENTERPRISES. HE SUBMITTED T HAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DETAILED EXPLANATION TO EA CH AND EVERY QUERY RAISED IN THE CASE HAS BEEN GIVEN AND THERE IS NO REBUTTAL IN TH E ASSESSMENT ORDER THERETO. HE SUBMITTED THAT EX-EMPLOYEES OF THE ASSESSEE COMPANY WERE BLACK-MAILING THE ASSESSEE BY GIVING ADVERSE STATEMENTS AGAINST THE A SSESSEE. HE PLACED RELIANCE ON THE DECISIONS RELIED HEREINABOVE IN HIS SUBMISSIONS . ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 14 19. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE OF DISALLOWANCE MADE TOWARDS THE CLAIMED PAYMENT TO M/S. SIMRAN ENTERPRISES. HE SUBMITTED THAT THERE WAS CLEAR EVI DENCE TO DOUBT GENUINENESS OF THE CLAIMED PAYMENT BY THE ASSESSEE TO THE SAID PAR TY. 20. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT THE LD CIT(A) HAS DEALT WITH THE ISSUE IN DETAIL AND SUMMA RIZED THE OBSERVATIONS ABOUT THE TRANSACTIONS WITH SHRI SUNIL KUMAR, PROP. OF M/S. S IMRAN ENTERPRISES IN PARA NO. 6.9 AND 6.10 OF THE FIRST APPELLATE ORDER. FOR A READY REFERENCE PARA NOS. 6.9 AND 6.10 OF THE FIRST APPELLATE ORDER ARE BEING REPRODUCED H EREUNDER : 6.9 HOWEVER, IN THE CASE OF SHRI. SUNIL KUMAR, PROPRIE TOR OF M/S. SIMRAN ENTERPRISES WHOSE STATEMENT ON OATH WAS RECORDED DU RING THE COURSE OF SEARCH PROCEEDINGS ON -1-10-2002 AND 03-10-2002 AND WHO CLAIMED TO BE PROPRIETOR OF M/S SIMRAN ENTERPRISES STATED WHILE A NSWERING QUESTION NO. 31 THAT DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS FOR THE CONTRACT RECEIPTS. IN REPLY TO QUESTION NOS. 5 AND 6 OF THE STATEMENT REC ORDED ON 03-10-2002, IT WAS STATED THAT WITH THE HELP OF ONE SHRI. MOHAR SI NGH HE PRINTED LETTERHEADS OF M/S SIMRAN ENTERPRISES. IT MAY BE MENTIONED HER E THAT MANY BLANK LETTERHEADS OF M/S. SIMRAN ENTERPRISES WERE FOUND I N THE RESIDENTIAL PREMISES OF SHRI. MOHAR SINGH, MANAGER AND A KEY PERSON IN T HE APPELLANT COMPANY. IN RESPONSE TO QUESTION NO. 13 IT WAS ADMITTED THAT NO SUB-CONTRACT ACTIVITY WAS CARRIED OUT BY HIM FOR RMEC AND THAT HE WAS MER ELY AN EMPLOYEE OF THE APPELLANT COMPANY. IT WAS ALSO ADMITTED THAT THE B ANK ACCOUNT WAS OPENED WITH THE HELP OF SHRI. MOHAR SINGH AND SHRI.JASWIND ER SINGH. MORE IMPORTANTLY, IT WAS CONFESSED THAT SIGNED BLANK CHE QUE LEAVES TO WITHDRAW MONEY WERE KEPT AT THE OFFICE OF RMEC AND PEOPLE FR OM THE COMPANY USED TO WITHDRAW MONEY AGAINST THE ALLEGED BILLS RAISED FOR SUB-CONTRACTS. IT WAS CONTENDED THAT THE APPELLANT WAS NOT GIVEN ANY OPPO RTUNITY TO CROSS EXAMINE AND THE ASSESSING OFFICER FAILED TO SUMMON HIM AT T HE PERMANENT ADDRESS GIVEN BY THE COMPANY AFTER HIS STATEMENT WAS RECOR DED ON 01-10-2002 AND 03-10-2002. IT WAS STATED THAT SHRI. SUNIL KUMAR H AD FILED A RETURN OF INCOME AS PROPRIETOR OF M/S. SIMRAN ENTERPRISES AND HAD CLAIMED REFUND OF ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 15 TDS AMOUNT IN HIS RETURN WHICH WAS ACCEPTED BY THE DEPARTMENT. COPY OF THE ORDER U/S 143(1) WAS ENCLOSED. IT WAS FURTHER STATED THAT THESE DETAILS BECAME IRRELEVANT BECAUSE THE ASSESSING OFFICER HAS ACCEPTED THE PAYMENT MADE TO HIM IN THE ASSESSMENT ORDER AND NO ADDITION HAD BEEN MADE ON THIS BEHALF. IT WAS FURTHER CONTENDED THAT NO PAYMENTS WERE MADE TO THE ABOVE CONTRACTOR DURING ASSESSMENT YEAR 2001-2002 IN WHIC H ADDITION OF RS.1,18,11,578/- WAS MADE. 6.10 THE ASSESSING OFFICER FOUND FROM THE PHOTOCOPY OF T HE RETURN OF INCOME FILED BY SHRI. SUNIL KUMAR WHICH WAS PRODUCE D BEFORE HIM BY THE APPELLANT THAT THE SIGNATURES OF SHRI. SUNIL KUMAR WERE NOT MATCHING WITH THE SIGNATURES HE HAD MADE WHILE BEING PHYSICALLY PRESE NT FOR RECORDING THE STATEMENT ON OATH ON 03-10-2002. THIS FACT WAS BRO UGHT TO THE NOTICE OF THE APPELLANT. FURTHER, IT IS NOT SHOWN THAT THE APPEL LANT HAD ASKED FOR CROSS EXAMINATION OF SHRI. SUNIL KUMAR WHICH WAS NOT ALLO WED BY THE ASSESSING OFFICER. IN ANY CASE, SHRI. SUNIL KUMAR WAS NEVER THE WITNESS OF THE DEPARTMENT FOR THE APPELLANT HAD CLAIMED SUB-CONTRA CT PAYMENTS TO SHRI. SUNIL KUMAR, WHO HAD IN HIS STATEMENT UNEQUIVOCALLY ADMITTED THAT NO SUB- CONTRACT WORK WAS DONE BY HIM AND THAT THE LETTERHE ADS OF M/S. SIMRAN ENTERPRISES WERE PRINTED ON THE INSTRUCTIONS OF SHR I. MOHAR SINGH, MANAGER OF THE COMPANY, AND ALSO THAT SIGNED CHEQUE LEAVES WER E LEFT WITH THE COMPANY TO WITHDRAW THE MONEY ON THE BASIS OF BOGUS SUB-CON TRACT BILLS FILED. ONCE THE STATEMENT OF SHRI. SUNIL KUMAR WAS CONFRONTED T O THE APPELLANT IN CONTRADICTION TO THE CLAIM OF EXPENDITURE BY HIM, THE ONUS LIES UPON HIM TO PROVE THAT THE EXPENDITURE CLAIMED WAS GENUINE AND ALSO THAT IT WAS CLAIMED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. AS T HE SIGNATURES ON THE RETURN OF INCOME WERE NOT OF SHRI. SUNIL KUMAR, THE ARGUME NT THAT RETURN WAS FILED BY HIM AND THE REFUND OF TDS WAS DEPOSITED AND WITH DRAWN BY HIM WHEN THE SIGNED CHEQUES WERE KEPT WITH THE COMPANY DOES NOT HOLD ANY WATER. IN THIS PARTICULAR CASE THE SUB-CONTRACT AMOUNT DEPO SITED IN THE BANK ACCOUNT IS HELD TO HAVE BEEN WITHDRAWN BY THE COMPANY. THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 37,43,181/- ON ACCOUNT OF T RANSACTION WITH THIS CONCERN. THE APPELLANT HAS STATED, AS MENTIONED ABO VE THAT NO ADDITION HAS BEEN MADE ON THIS BEHALF IN THE ASSESSMENT YEAR 200 1-2002 WHEN THE ENTIRE TURNOVER WITH THIS CONCERN WAS MADE IN THAT YEAR. IN THE SAME BREATH IT WAS STATED THAT THE ASSESSING OFFICER HAS DISALLOW ED AND MADE THE ADDITION OF RS.1,18,11,578/- FOR THE ASSESSMENT YEAR 2001-20 02 WHICH WAS STATED TO ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 16 BE TOTALLY INCORRECT. THERE IS A CONFUSION IN THE MIND OF THE APPELLANT IN SO FAR AS THE ASSESSING OFFICER HAS MADE SPECIFIC ADDI TIONS IN RESPECT OF CERTAIN SUB-CONTRACTORS AND ON THAT BASIS THE EXPENDITURE WAS DISALLOWED ON ADHOC BASIS AT THE RATE OF 15%. IN VIEW OF THE OVERWHELM ING PROOF IN THE CASE OF SHRI. SUNIL KUMAR, PROPRIETOR OF M/S. SIMRAN ENTERP RISES, THE DISALLOWANCE OF RS.37,43,181/- MADE BY THE ASSESSING OFFICER IS CON FIRMED. 21. SINCE THE LD. A.R. HAS NOT BEEN ABLE TO REBUT T HE ABOVE ADVERSE OBSERVATIONS OF THE LD CIT(A) REGARDING THE CLAIMED PAYMENT TO S HRI SUNIL KUMAR, PROP. M/S. SIMRAN ENTERPRISES, EVEN BEFORE THE TRIBUNAL, WE AR E NOT INCLINED TO INTERFERE WITH THE FIRST APPELLATE ORDER IN THIS REGARD AS THE FIR ST APPELLATE ORDER ON THE ISSUE IS COMPREHENSIVE AND REASONED ONE. THE SAME IS UPHELD . GROUND IS ACCORDINGLY REJECTED. 22. IN RESULT, BOTH THE APPEALS ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30TH AUGUST 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 30TH AUGUST, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-(C), PUNE 4. THE CIT(A)- II, PUNE ITA 95 & 155/PN/2009 RMEC PROJECT LTD., BLOCK PERIOD 1997-98 TO 2003- 04 PAGE OF 17 17 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE