Shri Madhav P.Patel, Baroda V. The Income tax Officer,Ward-3(1), Baroda

ITA 1552/AHD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1848 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAMES KUREIN
• Keywords: Unexplained expenditure; Business expenditure; Assessment record
• Section: 44AD; 69C; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO. 1552/AHD/2010 ASST. YEAR:2005-06 SHRI MADHAV P. PATEL, PROP. OF PARAS BUILDERS, A-15, JAY YOGESHWAR SOCIETY, SAMA ROAD, BARODA. VS. ITO, WD-3(1), BARODA. APPELLANT RESPONDENT PAN ACSPP 1839Q APPELLANT BY SHRI TUSHAR HEMANI, AR RESPONDENT BY SHRI JAMES KUREIN, SR. DR DATE OF HEARING: 9/2/2016 DATE OF PRONOUNCEMENT: 5/4/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THE APPEAL OF ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-II, BARODA, DATED 9.1.2010 IN APPEAL NO.CAB/ II-162/07-08. ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE I T ACT, 1961 (IN SHORT THE ACT) FOR ASST. YEAR 2005-06 ON 28.9.2007 BY ITO, WD-3(1), BARODA. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING THE AD DITION OF RS. 23,74,073/- BEING THE AGGREGATE AMOUNT OF CASH PAYMENTS MADE TO THE SUB-CONTRACTORS AND AMOUNT OUTSTANDING/DUE TO THE SUB-CONTRACTORS T REATING THE SAME AS NON- GENUINE/BOGUS/UNEXPLAINED EXPENDITURE U/S 69C OF TH E INCOME TAX ACT, 1961. ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 2 ALTERNATE GROUND: . 2. THE LEARNED ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN NOT APPLYING THE PROVISION OF SECTION 44AD OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN CHARGING INTERES T U/S 234B OF THE INCOME TAX ACT, 1961. 4. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATING PENAL TY PROCEEDING U/S 271(L)(C) OF THE INCOME TAX ACT, 1961. 2. BRIEFLY STATED FACTS OF THE CASE AS CULLED OUT F ROM THE ASSESSMENT RECORDS ARE THAT ASSESSEE IS AN INDIVIDU AL ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION WORK UNDER HIS PROPR IETARY CONCERN NAMELY PARAS BUILDERS. HE FILED HIS RETURN OF INCOM E ON 30,9,2005 SHOWING TOTAL INCOME OF RS.3,53,128/-, ACCOMPANIED BY AUDITORS REPORT IN FORM NO.3CB AND 3CD AS WELL AS AUDITED BA LANCE SHEET AND PROFIT AND LOSS ACCOUNT. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISS UED ON 8.3.2007 AND SERVED ON THE ASSESSEE ON 28.9.2007. DURING THE YEAR UNDER APPEAL ASSESSEE HAS SHOWN TOTAL CONTRACT RECEIPTS O F RS.59,93,127/- AND AFTER CLAIMING VARIOUS EXPENSES, THE NET PROFIT WAS WORKED OUT AT RS.3,22,187/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DE BITED EXPENDITURE OF RS.50,84,073/- AS PAYMENT TO TWO FOL LOWING SUB- CONTRACTORS :- 1) SHRI SHARADBHAI MOHANBHAI KAKADIA RS.36,68,149/ - 2) SHRI SUDHIRBHAI N. MODHIYA RS.14,15,924/- --------------------- RS.50,84,073/- ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 3 3. ON VERIFICATION OF DETAILS FURNISHED, IT WAS NOT ICED BY THE ASSESSING OFFICER THAT DURING THE YEAR RS.31 LACS W AS PAID TO SHRI SHARADBHAI M. KAKADIA AND THE CLOSING BALANCE IN TH E NAME OF SHRI S. M. KAKADIA WAS SHOWN AT RS.5,68,149/-. OUT OF RS .31 LACS PAID TO SHRI S. M. KAKADIA RS.18,80,000/- WAS PAID BY ACCOU NT PAYEE CHEQUE AND BALANCE WAS PAID BY CASH. SIMILARLY, IN THE CASE OF SHRI S.. N. MODHIYA RS.11,30,000/- WAS PAID DURING THE YEAR AND RS.2,85,924/- WAS SHOWN OUTSTANDING CLOSING BALANCE IN THE NAME OF SHRI S. N. MODHIYA. FURTHER OUT OF THE PAYMENT OF R S.11,30,000/- TO SHRI S. N. MODHIYA RS.8,30,00/- WAS PAID THROUGH AC COUNT PAYEE CHEQUE AND RS.3,00,000/- IN CASH. IN ORDER TO FURT HER CROSS-VERIFY THE PAYMENT DETAILS AND OUTSTANDING BALANCE IN RESPECT OF SHRI S. M. KAKADIA AND SHRI S. N. MODHIYA LETTERS WERE ISSUED AND THEREAFTER STATEMENTS WERE ALSO RECORDED. AFTER GATHERING VARI OUS INFORMATION AND STATEMENTS OF THESE TWO PARTIES NAMELY SHRI S. M. KAKADIA AND SHRI S. N. MODHIYA AND VERIFYING AVAILABLE INCOME-T AX RETURNS, LD. ASSESSING OFFICER OBSERVED THAT CASH PAYMENTS SHOWN BY THE ASSESSEE WHICH WERE BIFURCATED INTO INDIVIDUAL AMOU NT BEING LESS THAN OR EQUAL TO RS.20,000/- WERE ACCEPTED TO HAVE NOT BEEN RECEIVED BY BOTH THE PARTIES NAMELY SHRI S. M. KAKA DIA AND SHRI S. N. MODHIYA AND ONLY THE PAYMENTS WHICH WERE MADE THRO UGH ACCOUNT PAYEE CHEQUES WERE ACCOUNTED IN THEIR BOOKS OF ACCO UNT. AS A RESULT LD. ASSESSING OFFICER DISALLOWED THE CASH PAYMENTS OF RS.15,50,000/- (RS.12,20,000/- PLUS RS.3,00,000/-) AND ALSO OUTSTA NDING BALANCE IN THE NAMES OF THESE TWO PARTIES FOR RS.8,54,073/- (R S. 5,68,149/- PLUS RS. 2,85,924/-) TOTAL RS.23,74,073/- AND THIS AMOU NT WAS ADDED BACK ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 4 TO THE INCOME OF ASSESSEE. INCOME OF THE ASSESSEE W AS ASSESSED AT RS.27,27,200/-. 4. ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) WHO DI SMISSED THE APPEAL OF ASSESSEE BY OBSERVING AS UNDER :- 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE AND THE ORDER OF -THE 'ASSESSING OFFICER. THE ONLY ISSUE TO BE CONSIDERED IS WHETHER PAYMENT SAID TO HAVE BEEN MADE IN CASH BY THE APPELLANT WIL L CONSTITUTE AN ADMISSIBLE EXPENDITURE OR NOT. TO CLAIM EXPENDITURE UNDER THE INCOME-TAX ACT, THE APPELLANT SHOULD HAVE EVIDENCE THAT SUCH EXPENDITURE HAS ACTU ALLY BEEN INCURRED. THE APPELLANT CLAIMS THAT HE HAS MADE PAYMENTS IN CASH OF RS.15,20,000/-. HE ALSO CLAIMS THAT HE HAS TO MAKE A PAYMENT OF RS.8.53 LAK HS (5.68 + 2.85) TO THE SUB CONTRACTORS. ON VERIFICATION OF THE APPELLANT'S CLA IM, IT WAS ESTABLISHED BY THE ASSESSING OFFICER THAT NO SUCH PAYMENT HAS BEEN MAD E BY THE APPELLANT TO THE SUB CONTRACTORS. WHEN AN OPPORTUNITY TO CROSS EXAMINE THE SUB CONTRACTORS WAS GIVEN TO THE APPELLANT, AT THAT STAGE ALSO IT COULD NOT BE ESTABLISHED THAT PAYMENTS HAD BEEN MADE BY THE APPELLANT TO THE SUB CONTRACTO RS. IT IS NOTED THAT THE CROSS EXAMINATION WAS DONE ON 27.05.2008 FOR THE ACCOUNTS ENDING ON 31.03.2005 I.E. MORE THAN THREE YEARS LATER. THE APPELLANT HAS SUBM ITTED THAT THE WORK HAS BEEN COMPLETED HENCE SSNNL HAS RELEASED THE FUNDS ON COM PLETION OF THE WORK. HE HAS ALSO STATED THAT BOTH THE SUB CONTRACTORS HAVE ADMI TTED TO HAVE BEEN DONE THE WORK. HOWEVER, IT DOES NOT STAND ESTABLISHED THAT THE FUL L PAYMENT OF THE CONTRACTUAL AMOUNT HAS BEEN PAID TO THE SUB CONTRACTORS . BOTH THE SUB CONTRACTORS HAVE CATEGORICALLY DENIED RECEIVING THE PAYMENT. THE APPELLANT'S SUBMISSION THAT REGARDING PAYMENTS IN CASH IS BETWEEN HIM AND THE S UB CONTRACTORS A DISPUTE IF ANY ALSO INDICATES THAT THE PAYMENT HAS NOT BEEN MADE. THERE COULD BE SOME ELEMENT OF TRUTH IN THE ASSERTION THAT TO AVOID PENAL CONSEQUE NCES SHRI SHARADBHAI M. KAKADIYA HAS NOT ADMITTED TO RECEIPT OF CASH. HOWEVER, IT DO ES NOT EXPLAIN THE BEHAVIOUR OF SHRI SUDHIRBHAI N. MODHIYA WHO HAS ALREADY FILED HI S RETURN OF INCOME AND HAS NOT SHOWN ANY RECEIPTS IN CASH. IF THE ACTIONS OF THE A PPELLANT WERE INDEED GENUINE THEN (A) WHAT WAS, THE NEED TO MAKE THE PAYMENT IN CASH WHEN THE APPELLANT AS WELL AS SUB CONTRACTORS HAVE ACCOUNT IN THE SAME BANK? (B) WHAT WAS THE NEED TO FILE CONFIRMATIONS WHICH A PPEAR TO BE PATENTLY FABRICATED AND HAVE NOT BEEN ACCEPTED BY THE SUB CONTRACTORS E VEN AT THE STAGE OF CROSS EXAMINATION. THE APPELLANT HAS NOT GIVEN AN EXPLANA TION FOR HIS ACTIONS. FURTHER, THE APPELLANTS ADMISSION THAT THE INCOME W HICH HE HAS RETURNED IS NOT FULLY AND TRULY CORRECT AND HE HAS EARNED RS.6,59,244/- A GAINST THE RETURN OF INCOME OF RS.3,22,187/- GOES A LONG WAY IN ESTABLISHING THE F ACT THAT THE APPELLANT'S SUBMISSIONS CANNOT BE RELIED UPON. THE APPELLANT HA S SOUGHT TO TAKE REFUGE IN THE FACT THAT IN CONSTRUCTION WORK THE GROSS PROFIT ACC EPTED BY VARIOUS COURTS HAS BEEN ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 5 AROUND 8%. THAT MAY BE SO, BUT IN A CASE WHERE BOTH THE SUB CONTRACTORS ADMIT TO COMPLETING THE WORK AND THE APPELLANT IS UNABLE TO ESTABLISH THAT THE WORK DONE BY THE SUB CONTRACTORS HAVE INDEED BEEN PAID BY HIM TH E NORMAL GROSS PROFIT RATIO ACCEPTABLE CANNOT BE APPLIED. IT IS A WELL ESTABLIS HED PRINCIPLE THAT THE ONUS OF PROVING THE DEBITS IN HIS PROFIT AND LOSS ACCOUNT L IES SQUARELY ON THE APPELLANT. HE HAS FAILED TO SUBSTANTIATE HIS CLAIM OF EXPENDITURE . THE APPELLANT HAS ALSO SOUGHT TO STATE THAT IN THE SUBSEQUENT YEARS HE HAS DEDUCTED TAX AT SOURCE WHICH HAS BEEN DULY REFLECTED BY THE SUB CONTRACTORS. WHILE THE IN COME TAX RETURN OF SHRI SUDHIRBHAI N. MODHIYA IS ON RECORD, THAT OF SHRI SHARADBHAI M. KAKADIYA IS ONLY ESTABLISHED THROUGH THE IDS CERTIFICATE ISSUED BY THE APPELLANT , WHEREIN THE TAX DEDUCTED AT SOURCE AS CLAIMED BY THE APPELLANT HAS NOT BEEN CRE DITED TO THE GOVERNMENT ACCOUNT THEREBY ONCE AGAIN LEADING TO THE CONCLUSIO N THAT THE IDS CERTIFICATE CANNOT BE RELIED UPON. THE APPELLANTS CLAIM THAT SINCE HE FOLLOWS A MERCANTILE SYSTEM OF ACCOUNTING, EXPENDITURE INCURRED ON THE WORK COMPLE TED IN AN ADMISSIBLE BUSINESS EXPENDITURE CANNOT BE ACCEPTED. IT CANNOT BE DOUBTE D THAT THE WORK HAS BEEN DONE, HENCE PRESUMABLY EXPENDITURE WOULD HAVE BEEN INCURR ED, THE QUESTION WHICH REMAINS .UNANSWERED IS WHO INCURRED THE EXPENDITURE . SINCE IT HAS NOT BEEN ESTABLISHED THAT THE APPELLANT INCURRED THE EXPENDI TURE. I DO NOT SEE THIS AS A FIT CASE TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICE R. THE ADDITION IS CONFIRMED. 4. IN THE RESULT, THE APPEAL IS DISMISSED. 5. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 6. LD. AR SUBMITTED THAT FOR THE YEAR UNDER CONSIDE RATION THE APPELLANT WAS ENGAGED IN CIVIL CONSTRUCTION WORK IN THE NAME OF PARAS BUILDERS. THE APPELLANT WAS AWARDED THE CONSTRUCTIO N CONTRACT FROM SSNNL WHICH WAS BEING SUBCONTRACTED TO MR. SUDHIRBH AI MODHIA FOR BLOCK 9A AND SHARADHBHAI KAKADIYA FOR BLOCK 9C1 AS PER THE WORKS AGREEMENT. AS PER THE WORK AGREEMENT WITH BOTH THE SUB-CONTRACTORS THE APPELLANT HAD TO PAY 90% OF THE WORK BILL OF SS NNL AFTER DEDUCTING TDS AND ROYALTY. TOTAL WORK BILL CHARGED TO SSNNL FOR BLOCK 9A SUBCONTRACTED TO MR. SUDHIR MODHIA AND BLO CK 9C1 SUBCONTRACTED TO MR. SHARADBHAI KAKADIYA CAME TO RS .16,50,737/- AND RS.43,11,160/- RESPECTIVELY DURING THE YEAR UND ER CONSIDERATION. ACCORDINGLY, THE APPELLANT WAS LIABLE TO PAY 90% TO THE SUB- CONTRACTORS I.E. RS.50,84,073/- AFTER DEDUCTING TDS OF RS.125206/- ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 6 AND ROYALTY OF RS.187721/- OUT WHICH A SUM OF RS.27 ,10,000/- WAS DISCHARGED VIA BANK PAYMENT, RS.15,50,000/- VIA CAS H AND RS.8,54,073/- WAS LYING OUTSTANDING AT THE END OF T HE YEAR. A CHART EXPLAINING THE WHOLE POSITION IS SHOWN. LD. ASSESSI NG OFFICER COMPLETELY ERRED IN LAW AND ON THE FACTS BY DENYING THE SAID EXPENDITURE MERELY BECAUSE THE CASH QUOTIENT FROM T HE ABOVE DISPOSED OF LIABILITY HAS NOT BEEN SHOWN BY THE SUB -CONTRACTORS IN THEIR RETURN OF INCOME AND RELIED UPON THE STATEMEN TS GIVEN ON OATH BY THEM DENYING TO HAVE RECEIVED ANY PAYMENT IN CAS H FROM THE APPELLANT. THEREBY DISALLOWING A TOTAL OF RS.23,04, 740/- I.E. AMOUNT PAID IN CASH AND AMOUNT STANDING AT THE END OF THE YEAR. LD. ASSESSING OFFICER DID NOT APPRECIATE THE FACTS THAT THE APPELLANT HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IN C OMPLIANCE OF S.145 OF THE ACT AND ACCORDINGLY BOOKS EXPENDITURE AS AND WHEN IT ACCRUES. LD. ASSESSING OFFICER DID NOT APPRECIATE T HE FACT THAT EXPENDITURE OF RS.50,84,073/- I.E. 90% OF THE INCOM E BOOKED BY THE ASSESSEE ON ACCOUNT OF CONTRACT INCOME FROM SSNNL H AS ACCRUED DURING THE YEAR FOR EARNING THE ABOVE SAID CONTRACT UAL INCOME. LD. ASSESSING OFFICER HAS IGNORED THE CARDINAL PRINCIPL E OF LAW THAT WHERE ANY INCOME SUBJECT TO TAX THE EXPENDITURE INCURRED FOR EARNING SUCH INCOME SHOULD BE ALLOWED. LD. AO COMPLETELY ERRED O N LAW AND ON THE FACTS BY CONSIDERING ONLY SOME PARTS OF STATEME NTS GIVEN BY SUBCONTRACTOR. LD. AO OUGHT TO HAVE CONSIDERED THE FACT THAT SUBCONTRACTORS HAVE AGREED ON HAVING PERFORMED THE CONTRACTUAL WORK OF SSNNL AWARDED FROM APPELLANT. LD. AO COMPLE TELY ERRED ON FACTS AS THE ISSUE OF CASH PAYMENTS NOT CONFIRMED B Y THE SUBCONTRACTORS IS A MATTER OF DISPUTE BETWEEN APPEL LANT AND THE ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 7 SUBCONTRACTORS AND HAS NOTHING TO DO WITH THE ACCRU AL AND ALLOW ABILITY OF THE EXPENDITURE UNDER THE PROVISIONS OF THE ACT. LD. AO COMPLETELY ERRED IN LAW AND ON THE FACTS BY DISALLO WING THE ABOVE SAID PAYMENTS TREATING THE SAME AS NON-GENUINE/UNEX PLAINED EXPENDITURE U/S 69C OF THE ACT. S.69C CANNOT BE INV OKED UNDER THE ABOVE MENTIONED FACTS AS THE SOURCE OF EXPENDITURE IS CONTRACT INCOME OF SSNNL WHICH HAS NOT BEEN CHALLENGED BY TH E LD.AO. LD. CIT (A) COMPLETELY ERRED IN LAW AND CIRCUMSTANCES O F THE CASE BY UPHOLDING THE ORDER OF AO. WITHOUT PREJUDICE TO THE ABOVE LD. AO OUGHT TO HAVE ALLOWED REASONABLE EXPENDITURE TOWARD S WORK ADMITTEDLY EXECUTED BY THE APPELLANT RATHER THAN DI SALLOWING ALMOST 46.70% OF THE TOTAL EXPENDITURE CLAIMED BY THE APPE LLANT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE BEFORE US IS IN REGARD TO ADDI TION OF RS.23,74,073/- BEING MADE BY LD. ASSESSING OFFICER ON ACCOUNT OF NON-GENUINE/BOGUS/UNEXPLAINED EXPENDITURE U/S 69C O F THE ACT WHICH HAVE BEEN CONFIRMED BY LD. CIT(A) AND ASSESSEE IS N OW IN APPEAL BEFORE US. FROM GOING THROUGH THE RECORDS, WE OBSER VE THAT ASSESSEE GOT CONTRACT FROM SARDAR SAROVAR NARMADA NIGAM LTD. (SSNNL) AND DURING THE YEAR UNDER APPEAL TOTAL BILL RAISED BY T HE ASSESSEE TO SSNNL WAS AT RS.59,61,897/- AND ASSESSEE GAVE FURT HER SUB- CONTRACT FOR RS.50,84,073/- TO FOLLOWING TWO PARTIE S :- 1) SHRI SHARADBHAI MOHANBHAI KAKADIA RS.36,68,149/ - 3) SHRI SUDHIRBHAI N. MODHIYA RS.14,15,924/- --------------------- RS.50,84,073/- ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 8 8. IN THE CASE OF SUB-CONTRACT WORK GIVEN TO SHRI S . M. KAKADIA AT RS. 36,68,149/- A SUM OF RS. 18,80,000/- WAS PAID B Y ACCOUNT PAYEE CHEQUE DURING THE YEAR AND SUM OF RS.12,20,000/- WA S PAID IN CASH DURING THE YEAR, HOWEVER, SINGLE PAYMENT WAS NOT EX CEEDING RS.20,000/-. AS PER THE BOOKS OF ACCOUNTS OF ASSESS EE CLOSING BALANCE OF THE SUNDRY CREDITOR SHRI S. M. KAKADIA W AS SHOWN AT RS. 5,68,149/-. THEREAFTER WHEN LD. ASSESSING OFFICER V ERIFIED THE GENUINENESS OF THE TRANSACTION STATEMENT ON OATH WA S TAKEN FROM SHRI S. M. KAKADIA AND IT WAS REVEALED THAT S.M.KAK ADIA ONLY ACCEPTED THE PAYMENT OF RS.18,80,000/- WHICH WAS MA DE BY ACCOUNT PAYEE CHEQUE AND COMPLETELY DENIED RECEIVING CASH S UM OF RS.12,20,000/- AND ALSO DENIED TO HAVE SIGNED ANY C ONFIRMATION (WHICH WAS PUT FORTH BY THE ASSESSEE BEFORE THE ASS ESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS) NOR SIGNED ANY A GREEMENT (WHICH CANNOT BE PUT FORTH BEFORE THE ASSESSING OFF ICER DURING ASSESSMENT PROCEEDINGS). FURTHER SHRI S. M. KAKADIA DID NOT FILE HIS RETURN OF INCOME AND, THEREFORE, THE IMPUGNED AMOUN T OF SUB-CONTRACT OF RS,36,68,149/- WAS NOT SHOWN AS REVENUE BEFORE T HE INCOME-TAX DEPARTMENT. NO TDS WAS DEDUCTED ON THE SUB-CONTRACT OF RS.36,68,149/- BECAUSE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS AS THE TOTAL TURNOVER OF THE ASSESSEE DURING FINANCIAL YEAR 2003-04 WAS BELOW THE PRESCRIBED LIMIT MENTIONED IN SECTION 44A B OF THE ACT. 9. IN THE CASE OF SUB-CONTRACT GIVEN TO SHRI S. N. MODHIYA RS. 14,15,924/- WHICH WAS REVEALED FROM THE BOOKS OF AS SESSEE, THAT, OUT ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 9 OF TOTAL BILL SUB-CONTRACT WORK AMOUNT OF RS. 14,15 ,924/-, A SUM OF RS.8,30,000/- WAS PAID BY ACCOUNT PAYEE CHEQUE AND RS.3,00,000/- WAS PAID IN CASH (ONCE AGAIN EACH PAYMENT WAS NOT E XCEEDING RS.20,000/- DURING THE YEAR WHICH STOOD AT RS. 2,85 ,924/- IN THE BOOKS OF ASSESSEE). ON EXAMINATION OF THE INCOME-TA X RETURN AND FINANCIAL STATEMENT OF SUB-CONTRACTOR S. N. MODHIY A IT WAS REVEALED THAT ONLY RS.8,30,000/- WAS CREDITED IN THE PROFIT AND LOSS ACCOUNT OF S. N. MODHIYA TOWARDS EARTH WORK CONTRACT AND THERE WAS NO MENTION OF THE CASH PAYMENT RECEIVED FOR RS.3 LACS AND NOR ASSESSEES NAME WAS APPEARING AS DEBTOR FOR RS.2,85,924/-. 10. ALL THE FACTS DISCUSSED ABOVE, IN RELATION TO S UB CONTRACT TO S. M. KAKADIA AND S. N. MODHIYA HAS NOT BEEN CONTROVER TED BY THE ASSESSEE AND THE ONLY SUBMISSIONS MADE BY HIM IS TH AT ALL THE EXPENDITURE CLAIMED BY HIM ARE GENUINE AND THE ISSU E RELATING TO THE CASH PAYMENT IS MATTER OF DISPUTE BETWEEN THE CONTR ACTOR AND THE SUB-CONTRACTORS. 11. WE FURTHER OBSERVE THAT LD. ASSESSING OFFICER H AS NOT DOUBTED THE REVENUE OF THE ASSESSEE WHICH SHOWS AT RS.59,61 ,897/- AND IT IS ALSO UNDISPUTED FACT THAT WORK WAS CARRIED OUT BY T HE ASSESSEE AND THE SAME WAS COMPLETED AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND S. M. KAKADIA AND S.N. MODHIYA. 12. LOOKING TO THE FACTS OF THE CASE, ONE FACT IS V ERY CLEAR THAT THERE IS COMPLETE MISMATCH IN BETWEEN THE CLAIM MADE BY T HE ASSESSEE TOWARDS SUB-CONTRACT EXPENDITURE AND THE REVENUE SH OWN BY THE SUB- ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 10 CONTRACTOR IN THEIR RESPECTIVE INCOME-TAX RETURNS O R FROM THE STATEMENT ON OATH. THE ACT OF ASSESSEE LOOKS TO BE SUSPICIOUS IN RELATION TO VARIOUS CASH PAYMENTS OF RS.15,50,000/- DURING THE YEAR TO BOTH THE SUB-CONTRACTORS WHEREIN EACH TRANSACTIO N HAS BEEN SHOWN AT RS.20,000/- EVEN WHEN ASSESSEE AND BOTH THE SUB- CONTRACTORS WERE HAVING ACCOUNT WITH THE SAME BANK AND BRANCH A ND NO JUSTIFICATION HAS BEEN GIVEN BY THE ASSESSEE FOR DO ING SO. ASSESSEE HAS TAKEN A PLEA THAT IF THE AMOUNT OF RS. 23,04,74 0/- IS ADDED TO ITS INCOME THEN THE GROSS PROFIT WILL BE CALCULATED AT 54.54% WHICH IS NOT AT ALL JUSTIFIABLE IN THE TYPE OF CONTRACT HE HAS U NDERTAKEN WHEREIN THE ACCRUED G.P. ELEMENT WAS 9.53% AND 17.95% FOR CONTR ACT WORK FOR BLOCK NO.9C-1 AND BLOCK 9A6/11 GIVEN BY SSNNL FOR T HE TOTAL COST OF CONTRACT AT RS.83,14,999/- AND RS.74,98,000/- RESPE CTIVELY. 13. IN OUR VIEW GP PERCENTAGE WHICH IS JUST AN ESTI MATION AND THE REAL PROFITS OF THE ASSESSEE CAN BE MUCH HIGHER DEP ENDING UPON THE COST EFFICIENCY BUT CERTAINLY IT CANNOT GO TO THE E XTENT OF 54.54% AS RIGHTLY SUBMITTED BY THE ASSESSEE BUT LOOKING TO TH E UNDISPUTED FACTS THAT THE CASH PAYMENTS OF RS.15,20,000/- AND OUTSTA NDING AMOUNT OF 8,54,073/- TOTAL RS.23,74,073/- HAS NOT BEEN SHOWN AS INCOME/REVENUE BY THE TWO SUB-CONTRACTORS AND WORK WAS COMPLETED. WE, IN ORDER TO MEET THE ENDS OF JUSTICE, ARE OF TH E VIEW THAT 20% OF RS.23,74,073/- WORKING OUT AT RS.4,74,815/- TO BE S USTAINED AS NON- GENUINE EXPENSES AT THE PLACE OF RS.23,74,073/- MAD E BY THE ASSESSING OFFICER. ACCORDINGLY, THIS GROUND OF ASSE SSEE IS PARTLY ALLOWED. ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 11 14. GROUND NO.2 IS GENERAL IN NATURE. 15. GROUND NO.3 IS CONSEQUENTIAL. 16. GROUND NO.4 IS PREMATURE. 17. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/04/ 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 5/4/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1552/AHD/2010 ASST. YEAR 2005-06 12 1. DATE OF DICTATION: 31 03/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: /04/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:5 /4/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: