PRAKASH ENGINEERS, MUMBAI V. ASST CIT 22(2), NAVI MUMBAI

ITA 156/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3332 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI; RAJAT MITTAL
• Assessee Lawyers: KISAN GULE
• Keywords: Search and seizure; Opportunity of being heard; Wrong claim
• Section: 131; 271(1)(c); 44AD; 133(6)

Judgement Text

M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI . G. MANJUNATHA, AM AND SHRI . RAVISH SOOD, JM ./ I.T.A. NO. 1 56/MUM/2017 ( / ASSESSMENT YEAR: 2009 - 10) M/S PRAKASH ENGINEERS 506, 5 TH FLOOR, SHRIKANT CHAMBERS, NEAR R.K STUDIO, PURAV MARG, CHEMBUR, MUMBAI 400 071. / VS. ASST. CIT 22(2), 4 TH FLOOR, VASHI RAILWAY STATION BUILDING, VASHI, NAVI MUMBAI 400 705. ./ ./ PAN/GIR NO. AAGFP5386C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI. KISAN GULE, A.R. / REVENUE BY : SHRI. RAJAT MITTAL & SHRI D.G. PANSARI, SR. D.R / DATE OF HEARING : 16 / 11 /2018 / DATE OF PRONOUNCEMENT : 13 / 0 2 /201 9 / O R D E R PER RAVISH SOOD, JM: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 25, MUMBAI, DATED 10.10.2016, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C) OF THE INCOME - TAX ACT, 1961 (FOR SHORT I.T ACT), DATED 19.02.2014 FOR ASSESSMENT YEAR 2009 - 10 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPE AL: 1. THE LD. CIT(A) ERRED IN LAW AND IN FACT UPHOLDING THE PENALTY OF RS. 1,53,16,970/ - UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961. THE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 2 SAME IS CONTRARY TO THE VARIOUS WELL SETTLED JUDICIAL PRONOUNCEMENTS IN FAVOUR OF THE APPELLANT AND SHOULD BE DELETED. 2. THE LD. CIT(A) ERRED IN LAW AND IN FACT THAT PENALTY PROCEEDINGS IS DIFFERENT FROM ASSESSMENT PROCEEDINGS AS DECIDED UNDER VARIOUS JUDICIAL AND IGNORED RECORD PRODUCE BEFORE IT AND UPHOLD PENALTY LEVIED ONLY BASED ON ASSESSMENT PROCEEDINGS. 3. THE LD. CIT(A) ERRED IN LAW AND IN FACT WHILE IGNORING RATIO LAID DOWN BY JURISDICTIONAL HIGH COURT AND TRIBUNAL HAVING SIMILAR FACTS AND QUESTION AND RELYING ON DECISION OF NON - JURISDICTIONAL COURT HAVING DIFFERENT FACT AND ISSUES. 4. THE LD. CIT(A) ERRED IN LAW IN NOT FOLLOWING RULE OF JUDICIAL PRECEDENT AS DECIDED UNDER VARIOUS HIGH COURT AND SUPREME COURT IN TERMS OF ARTICLE 227 READ WITH ARTICLE 141 OF THE CONSTITUTION. 5. THE LD. CIT(A) ERRED IN LAW AND IN FACT THAT DECISION AND SUBMISSIO N ON WHICH HE RELIED HAS NOT BEEN DISCUSSED WITH ASSESSES REPRESENTATIVE DURING THE HEARING AND OPPORTUNITY OF BEING HEARD HAS NOT BEEN GIVEN WHILE EXECUTING HIS JUDICIAL POWER. 6. THE LD. CIT(A) ERRED IN LAW AND IN FACT THAT JURISDICTIONAL COURT AND TRI BUNAL RATION ON WHICH THE ASSESSEE RELIED SUMMARILY REJECTED WITHOUT DISCUSSING CASE AND GIVING OPPORTUNITY OF BEING HEARD TO ASSESSES REPRESENTATIVE. 7. THE ORDER OF PENALTY PASSED UNDER SECTION 271(109C) OF THE ACT IS BAD IN LAW AS THE NOTICE ISSUED UN DER SECTION 274 READ WITH SECTION 271 OF THE ACT IS NOT DISCERNIBLE AS TO WHETHER THE PENALTY PROCEEDINGS IS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CA SE AND THEREFORE, THE IMPUGNED ORDER DESERVES TO BE CANCELLED. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR MODIFY ANY OF THE ABOVE GROUNDS AT THE TIME OR BEFORE THE TIME OF HEARING. 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS A CIVIL CONT RACTOR MAINLY ENGAGED IN UNDERTAKING ROAD CONSTRUCTION WORK FOR THE MUNICIPAL CORPORATION OF GREATER MUMBAI HAD FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10 ON 30.09.2009, DECLARING TOTAL INCOME AT RS. 3,84,44,670/ - . SUBSEQUENTLY, T HE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER 143(2) OF THE I.T ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 3 10,38,65,766/ - IN ITS PROFIT & LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES. ON A PERUSAL OF THE DETAILS , IT WAS GATHERED BY THE A.O THAT T HE AFORESAID LABOUR CHARGES INCLUDED AN AMOUNT OF RS. 4,38,41,043/ - THAT WAS BOOKED UNDER THE HEAD CASUAL LABOUR. APART THEREFROM, THE ASSESSEE HAD ALSO DEBITED AN A MOUNT OF RS. 7,57,54,195/ - UNDER THE HEAD JOB WORK WHICH MAINLY OMPRISED OF LABOUR CHARGES. ON THE BASIS OF DETAILED ENQUIRIES IT WAS NOTICED BY THE A.O THAT OUT OF THE TOTAL CASH PAYMENTS OF RS. 4,35,06,549/ - ( SIC RS. 4,38,41,043/ - ) CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE TOWARDS CASUAL LABOUR , ONLY THOSE AMOUNTING TO RS. 2,37,39,862/ - WERE SUPPORTED BY VOUCHERS. IT WAS FURTHER OBSERVED BY HIM THAT EVEN THE PAYMENTS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE THROUGH CHEQUES TO THE RECIPIEN TS OF LABOUR CHARGES (HEREINAFTER REFERRED TO AS PAYEES) WERE ALSO NOT FREE FROM DISCREPANCIES. ON THE BASIS OF THE DETAILS PROVIDED BY THE ASSESSEE IT WAS NOTICED BY THE A.O THAT 16 PARTIES WERE CLAIMED TO HAVE BEEN PAID LABOUR CHARGES IN EXCESS OF RS. 10 LACS BY CHEQUES. IN ORDER TO VERIFY THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT PAYMENTS WERE MADE TO THE AFOREMENTIONED PARTIES TOWARDS LABOUR CHARGES THE A.O ISSUED NOTICES U/S 133(6) OF THE I.T ACT TO THEM. HOWEVER, NEITHER OF THE SAID NOTICES WER E COMPLIED WITH BY THE SAID PARTIES AND THE EFFORTS OF THE A.O TO MAKE NECESSARY VERIFICATIONS FAILED. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O DEPUTED HIS INSPECTORS TO CONDUCT FIELD ENQUIRIES IN RESPECT OF THE AFOREMENTIONED PERSONS. IN THE MEAN TI ME THE COPIES OF THE CHEQUES WHICH WERE USED TO WITHDRAW CASH FROM THE ACCOUNTS OF THE SAID PAYEES WERE ALSO OBTAINED BY THE A.O FROM THE BANK. THE VERIFICATIONS CONDUCTED BY THE A.O REVEALED STARTLING INFORMATION VIZ. (I). THAT THE PAYMENTS TO THE AFORESAID PAYEES WERE MADE BY THE ASSESSEE BY CHEQUES DRAWN ON ITS BANK ACCOUNT WITH VIJAYA BANK, BRANCH: CHEMBUR MUMBAI; (I I ). THAT MANY OF THE PAYEES OF LABOUR CHARGES M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 4 ( HEREINAFTER REFERRED TO AS PAYEES ) HAD OPENED UP THEIR BANK A CCOUNTS WITH VIJAYA BANK, BRANCH: CHEMBUR, MUMBAI WITH THE INTRODUCTION OF AN EMPLOYEE OF THE ASSESSEE VIZ. MS. SYED NIGHAT; (III). THAT A PERUSAL OF THE BANK STATEMENTS OF MANY OF THE AFORESAID PAYEES REVEALED THAT THE AMOUNTS DEPOSITED IN THEIR RESPECTIV E ACCOUNTS WERE IMMEDIATELY WITHDRAWN IN CASH; (IV). THE BALANCE IN THE BANK ACCOUNTS OF THE AFORESAID PAYEES REMAINED ON AN AVERAGE IN THE RANGE OF RS. 1,000/ - TO RS. 1,500/ - AT ANY GIVEN POINT OF TIME DURING THE YEAR; (V). THAT A PERUSAL OF THE XEROX COP IES OF THE CHEQUES (BOTH SIDES) PERTAINING TO THE CASH WITHDRAWALS MADE FROM THE ACCOUNTS OF SOME OF THE PAYEES REVEALED THAT THOUGH THE SAME WERE SIGNED BY THEM , HOWEVER , CASH WAS WITHDRAWN FROM ALL THE SAID BANK ACCOUNTS BY A GROUP OF PERSONS VIZ. MS. SY ED NIGHAT, S/SHRI RAM BAHADUR, PUNJABI ETC. WHO WERE THE EMPLOYEES OF THE ASSESSEE; (V I ). THAT A PERUSAL OF CERTAIN CHEQUES PERTAINING TO CASH WITHDRAWALS FROM THE ACCOUNT OF THE ASSESSEE WITH VIJAYA BANK, BRANCH: CHEMBUR (ON AND AROUND THE SAME DATES WHEN CASH WITHDRAWALS WERE MADE FROM THE ACCOUNTS OF THE PAYEES) REVEALED THAT THE PERSONS WHO HAD WITHDRAWN CASH FROM THE IR ACCOUNTS AND THE PERSONS WHO HAD WITHDRAWN CASH FROM THE ACCOUNT OF THE ASSESSEE WITH VIJAYA BANK (WHERE ALL THE ACCOUNTS OF THE ASSESSEE WERE HELD) WERE THE SAME. I N ORDER TO VERIFY THE FACTUAL POSITION THE A.O ON 09.12.2011 RECORDED THE STATEMENT OF MS. SYED NAIGHAT, EMPLOYEE OF THE ASSESSEE FIRM UNDER SEC. 131 OF THE I.T ACT. INITIALLY, THE AFORESAID EMPLOYEE TRIED TO IMPR ESS UPON THE A.O THAT SHE HAD ONLY AT THE REQUEST OF THE PAYEES ACCOMPANIED AND ASSISTED THEM FOR WITHDRAWING CASH FROM THEIR BANK ACCOUNTS. HOWEVER, IN REPLY TO A QUERY VIZ. Q.NO. 33 RAISED BY THE A.O IN RESPECT OF CERTAIN SPECIFIC CHEQUES WHERE HER SIGNA TURES WERE APPEARING AT THE BACKSIDE OF THE CHEQUES, SHE STATED THAT THE CASH CORRESPONDING TO THE SAID CHEQUES WAS HANDED OVER BY HER TO ONE OF THE PARTNERS OF THE ASSESSEE FIRM M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 5 WHO AT THE RELEVANT POINT OF TIME WAS AVAILABLE IN THE OFFICE. IT WAS FURTHER ADMITTED BY HER THAT THE FATE OF THE CASH WITHDRAWN IN RESPECT OF OTHER SIMILAR CHEQUES WAS ALSO THE SAME. INTERESTINGLY, THE PARTNER OF THE ASSESSEE FIRM VIZ. SH. NAND K. BIJLANI IN T H E COURSE OF HIS STATEMENT RECORDED BY THE A.O UNDER SEC. 131 OF THE I. T ACT ON 12.12.2011 ON BEING CONFRONTED WITH THE AFORESAID ADMISSION OF MS. SYED NIGHAT (SUPRA) ACCEPTED THE FACT SO STATED BY HER, BUT CLAIMED THAT THE S AID CASH WAS EVENTUALLY GIVEN TO THE LABOURER CONCERNED. FURTHER, THE OPPORTUNITY THAT WAS AFFORDED BY THE A.O TO SH. NAND K. BIJLANI TO CROSS - EXAMINE MS. SYED NIGHAT W A S DECLINED BY HIM . 4. THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS NOT ONLY CONFINED HIMSELF TO THE INFORMATION GATHERED FROM THE BANK UNDER SEC. 131 OF THE I.T ACT, BUT ALSO C ONDUCTED INDEPENDENT INQUIRIES UNDER SEC. 142(2) BY DEPUTING SEVERAL TEAMS OF INSPECTORS OF INCOME - TAX TO THE PLACES OF RESIDENCES OF THE PAYEES WHO WERE STATED TO HAVE BEEN PAID AN AMOUNT IN EXCESS OF RS. 10 LAC EACH BY CHEQUES . OUT OF SIXTEEN SUCH PAYEES INQUIRIES WERE CONDUCTED UNDER SEC. 142(2) IN RESPECT OF SIX PAYEES VIZ. (I). SHRI ASHOK GAIKWAD (RS. 33,57,512/ - ); (II). SHRI. ASHOK HANUMANTA KAMBLE (RS. 39,24,619/ - ); (III). SHRI MARUTI BHIMA MANKE (RS. 37,08,638/ - ); (IV). SHRI DURGA DURGAPPA BANDIVADA R (RS. 33,09,967/ - ); (V). SHRI. HANUMANTHA NARSAPPA (RS. 37,52,712/ - ); AND (VI). SHRI. HANUMANTHA PAWAR (RS. 37,96,919/ - ). IN CASE OF TWO PAYEES VIZ. (I). SHRI. PARSHURAM IRAPPA DHOTRE; AND (II). SHRI KUMAR GAIKWAD (RS. 37,08,973/ - ), THOUGH THE SAID RESPE CTIVE PERSONS WERE NOT AVAILABLE AT THE IR ADDRESS ES , HOWEVER THEIR BANK ACCOUNTS CLEARLY REVEALED THAT CASH WAS WITHDRAWN FROM THEIR BANK ACCOUNTS BY THE EMPLOYEES/AIDES OF THE ASSESSEE. IN CASE OF TWO OTHER PAYEES VIZ. (I). SHRI NANA PANJU PATIL (RS. 37,2 1,733/ - ); AND (XII). SHRI NERKAR SHANTARAM SHIVRAM (RS. 38,04,143/ - ) THOUGH NO ENQUIRY WAS DONE UNDER SEC. 142(2), BUT COPIES OF THE CHEQUES OBTAINED FROM THE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 6 BANK REVEALED THAT CASH WAS WITHDRAWN FROM THEIR BANK ACCOUNTS BY THE EMPLOYEES/AIDES OF THE ASSE SSEE. O NE OF THE PAYEE VIZ. SHRI ANANDA PAWELKAR (RS. 11,44,326/ - ) WAS NOT FOUND AVAILABLE AT THE ADDRESS GIVEN BY THE ASSESSEE. APART THEREFROM, O NE OF THE PAYEE VIZ. SHRI RAJU BHIMA MANKE (RS. 38,10,245/ - ) IN THE COURSE OF THE ENQUIRY CONDUCTED UNDER SEC . 142(2) CLAIMED THAT HE HAD RECEIVED PAYMENT TOWARDS LABOUR CHARGES . H OWEVER , IT WAS OBSERVED BY THE A.O THAT A PERUSAL OF HIS BANK ACCOUNT REVEALED THAT CASH WAS WITHDRAWN FROM HIS ACCOUNT BY THE EMPLOYEES/AIDES OF THE ASSESSEE. T HE ENQUIRIES CONDUCTED UNDER SEC. 142(2) WITH THE RESPECTIVE PAYEES WHO WERE FOUND TO BE THE EMPLOYEES OF THE ASSESSEE AND WERE RENDERING THEIR SERVICES AS DRIVERS/ROAD ROLLER OPERATORS IS BRIEFLY CULLED OUT AS UNDER : SR. NO. NAME OF THE PAYEE ADDRESS AGGREGATE AMT. PAID BY THE ASSESSEE (RS.) REMARKS 1. SHRI ASHOK GAIKWAD ROOM NO. 1962, OPP. AMBEDKAR STATUE, TURBHE STORE, THANE BELAPUR ROAD, NAVE MUMBAI - 705 33,57,512/ - RECEIPT OF PAYMENT DENIED BY PAYEE U/S. 142(2). 2. SHRI ASHOK KAMBLE ROOM NO.1949, OPP. AMBEDKAR STATUE, TURBHE STORE, THANE BELAPUR ROAD, NAVE MUMBAI - 705 39,24,619/ - RECEIPT OF PAYMENT DENIED BY PAYEE U/S. 142(2). 3. SHRI MARUTI BHIMA MANKE MUKTI NAGAR, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 37,08,638/ - RECEIPT OF PAYMENT DENIED BY PAYEE U/S. 142(2). 4. SHRI DURGA DURGAPPA BANDIVADAR 357, MUKTI NAGAR, NEAR SHIV SENA SAKHA, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 33,09,967/ - RECEIPT OF PAYMENT DENIED BY PAYEE U/S. 142(2). 5. SHRI HANUMAN TA NARSAPPA 374, MUKTI NAGAR, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 37,52,712/ - RECEIPT OF PAYMENT DENIED BY PAYEE U/S. 142(2). 6. SHRI HANUMANTHA PAWAR ROOM NO. 122, MUKTI NAGAR, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 37,96,919/ - RECEIPT OF PAYMENT DENIED BY PAYEE U/S. 142(2). 7. SHRI PARSHURAM I. DHOTRE MUKTI NAGAR, NEAR SHIV SENA SAKHA, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 36,31,620/ - PAYEE NOT AVAILABLE AT ADDRESS GIVEN. BANK RECORDS SHOW CASH WAS WITHDRAWN FROM PAYEES ACCOUNT B Y ASSESSES EMPLOYEES/AIDES. 8. SHRI KUMAR GAIKWAD ROOM NO. 599, K.K. ROAD, TURBHE STORE, NAVI MUMBAI - 705 37,08,973/ - PAYEE NOT AVAILABLE AT ADDRESS GIVEN. BANK RECORDS SHOW CASH WAS WITHDRAWN FROM PAYEES ACCOUNT BY ASSESSES EMPLOYEES/AIDES. M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 7 9. SHRI RAJU BHIMA MANKE ROOM NO. 406, MUKTI NAGAR, NEAR SHIV SENA SAKHA WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 38,10,245/ - RECEIPT OF PAYMENT CLAIMED BY PAYEE U/S. 142(2). BUT BANK RECORDS SHOW CASH WITHDRAWAL FROM PAYEES ACCOUNT BY ASSESSEES EMPLOYEES/A SSOCIATES 10. SHRI NANA PUNJU PATIL KUKTI NAGAR, NEAR SHIV SENA SAKHA, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 37,21,733/ - NO ENQUIRY DONE U/S. 142(2), BUT COPIES OF CHEQUES OBTAINED FROM BANK SHOW CASH WITHDRAWAL BY ASSESSEES EMPLOYEES/ASSOCIATES FROM THE PAYEES ACCOUNT. 11. SHRI NERKAR SHANTARAM MUKTI NAGAR, NEAR SHIV SENA SAKHA, WAMAN TUKARAM PATIL MARG, CHEMBUR, MUMBAI - 71 38,04,143/ - NO ENQUIRY DONE U/S. 142(2), BUT C OPIES OF CHEQUES OBTAINED FROM BANK SHOW CASH WITHDRAWAL BY ASSESSEES EMPLOYEES/ASSOCIATES FROM THE PAYEES ACCOUNT. 12. SHRI ANANDA PAWALEKAR PLOT NO. 4, SHIV SHAKTI SEVA SANG, NEW GAUTAM NAGAR, GOVANDI, MUMBAI - 43., 11,44,326/ - PAYEE NOT AVAILABLE AT T HE ADDRESS GIVEN. NO RETURN FILED BY HIM. TOTAL 4,16,71,407/ - 5. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O CALLED UPON THE ASSESSEE TO PRODUCE ITS CASH BOOK, LEDGER AND OTHER BOOKS OF ACCOUNTS. IN PARTICULAR , THE ASSESSEE WAS REQUIRED TO PRODUCE THE VOUCHERS RELATING TO THE LABOUR CHARGES PAID IN CASH. THE A.O ISSUED NOTICE U/S 142(1), DATED 30.08.2011 CALLING UPON THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS ALONGWITH THE VOUCHERS RELATING TO THE CASH EXPE NSES, WHICH HOWEVER WAS NOT COMPLIED WITH BY THE ASSESSEE. THE A.O ISSUED SUMMONS UNDER SEC. 131 TO THE ASSESSEE WHICH TOO REMAINED WERE COMPLIED WITH AND THE BOOKS OF ACCOUNTS INCLUDING THE VOUCHERS REL A TING TO LABOUR CHARGES WERE NOT PRODUCED BY THE ASSE SSEE. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O ISSUED A COMMISSION U/S 131 AND INSPECTION OF THE BOOKS OF ACCOUNTS AND DOCUMENTS WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE WHERE THE SAME WERE BEING MAINTAINED . IN THE COURSE OF INQUIRY C ONDUCTED UNDER SEC. 131 , IT WAS DEPOSED BY SH. NAND K. BIJLANI , PARTNER OF THE ASSESSEE FIRM VIZ. (I). THAT ALL THE VOUCHERS TO SUPPORT T HE LABOUR CHARGES PAID IN CASH RELATING TO A.Y 2009 - 10 WERE BEING PRODUCED FOR INSPECTION; AND (II). THAT THERE WERE NO OTHER VOUCHERS M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 8 APART FROM THE SAID VOUCHERS EITHER AT THE BUSINESS PREMISES OF THE ASSESSEE OR ANYWHERE ELSE. AFTER RECORDING THE AFORESAID ADMISSION OF SH. NAND K. BIJLANI THE A.O IMPOUNDED THE VOUCHERS RELATING TO LABOUR CHARGES FOR A.Y 2009 - 10, APART F ROM FEW OTHER RELEVANT DOCUMENTS UNDER SEC. 131(3) OF THE I.T ACT. IN THE COURSE OF THE PROCEEDINGS CONDUCTED UNDER SEC. 131 AT THE BUSINESS PREMISES OF THE ASSESSEE, THE A.O BROUGHT IT TO T H E NOTICE OF SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM THA T APART FROM THE LABOUR CHARGES PAID IN CASH TH E RE WERE ALSO DISCREPANCIES IN THE LABOUR CHARGES THAT WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID BY CHEQUES . APART THEREFROM, THE A.O BROUGHT TO THE NOTICE OF THE ASSESSEE THE RESULTS OF THE ENQUIRIES THA T WERE CONDUCTED UNDER SEC. 142(2) AT THE PREMISES OF THE PAYEES , WHICH PROVED TO THE HILT THE FALSITY OF TH E CLAIM OF THE ASSESSEE OF HAVING PAID LABOUR CHARGES TO THEM BY CHEQUES. FACED WITH SUCH EVIDENCE, SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIR M IN HIS STATEMENT RECO R D ED UNDER SEC. 131 OFFERED AN ADDITION OF RS. 2 CRORES IN TE HANDS OF THE ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION I.E A.Y 2009 - 10 . I T WAS OBSERVED BY THE A.O THAT THOUGH THE ASSESSEE HAD CLAIMED TO HAVE INCURRED ASUAL LABOUR EXPENSES IN CASH OF RS. 4,38,41,043/ - BUT THE DETAILS FILED BY THE ASSESSEE VIDE HIS LETTER DATED 13.09.2011 WERE ONLY TO THE EXTENT OF RS. 4,35,06,549/ - . AS THE ASSESSEE HAD NO EXPLANATION IN RESPECT OF THE AFORESAID VARIANCE OF RS. 3,34,494/ - [RS . 4,38,41,043/ - ( - ) RS. 4,35,06,549/ - ], THEREFORE, THE A.O DISALLOWED THE SAME BY HOLDING IT AS AN EXCESS DEBIT TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES. APART THEREFROM, IT WAS OBSERVED BY THE A.O THAT AS AGAINST THE CLAIM OF THE ASSES SEE OF HAVING PAID LABOUR CHARGES IN CASH OF RS. 4,35,06,549/ - THE VOUCHERS IMPOUNDED FROM HIS BUSINESS PREMISES UNDER SEC. 131(3) WERE ONLY TO THE EXTENT OF RS. 2,37,39,862/ - . HOWEVER, AS THE ASSESSEE HAD ALREADY CONCEDED ADDITIONAL INCOME OF RS. 2 CRORE, THEREFORE, FOR THE SAID M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 9 REASON THE A.O DID NOT MAKE ANY SEPARATE ADDITION IN RESPECT OF THE UNPROVED LABOUR CHARGES EXPENDITURE TO THE SAID EXTENT. INTERESTINGLY, SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM IN HIS EXPLANATION FOR THE AFORESAISD DISC REPANCY CAME FORTH WITH TWO FEEBLE CLAIMS VIZ. (I) THAT AS THE ROAD - LAYING WORK CARRIED OUT BY THE ASSESSEE WAS A LABOUR INTENSIVE WORK WHICH INVOLVED MIGRANT LABOURERS WHO WOULD KEEP SHIFTING THEIR PLACE OF RESIDENCE DEPENDING ON THE SITE WHERE THEY WOULD BE WORK ING , THUS THEIR ADDRESSES COULD NOT BE FURNISHED; AND (II). THAT THE NET PROFIT RATE OF 7.6% SHOWN BY THE ASSESSEE AFTER CONSIDERING THE ADDITIONAL INCOME OF RS. 2 CRORE THAT WAS OFFERED BY THE ASSESSEE IN RESPECT OF DISCREPANCIES IN LABOUR CHARGES WOULD GET RAISED TO ABOUT 12%, WHICH WOULD BE IN EXCESS OF 8% PRESCRIBED UNDER SEC. 44AD OF THE I.T ACT. APART THEREFROM, IT WAS THE CLAIM OF THE ASSESSEE THAT DUE TO PASSAGE OF TIME AND LARGE NUMBER OF VOUCHERS INVOLVED PART OF SUCH VOUCHERS COULD NOT BE PRESERVED OR LOCATED. 6. ON THE BASIS OF THE AFORESAID FACTS , THE A.O ARMOURED WITH DEFINITE EVIDENCE THAT THE ASSESSEE HAD CLAIMED BOGUS LABOUR CHARGES OF RS. 4,16,71,407/ - PAID THROUGH CHEQUES ADDED THE SAME TO THE TOTAL INCOME OF THE AS SESSEE. STILL FURTHER, IT WAS OBSERVED BY THE A.O THAT LABOUR CHARGES OF RS. 1,97,66,787/ - [RS. 4,35,06,549/ - ( - ) RS. 2,37,39,862/ - ] CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID IN CASH WERE ALSO NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE OR VOUCHERS. HOWEVER, TAKING NOTE OF THE FACT THAT THE ASSESSEE HAD OFFERED AN ADDITIONAL INCOME OF RS. 2,00,00,000/ - , THEREFORE, THE A.O DID NOT MAKE A NY SEPARATE ADDITION IN RESPECT OF THE UNSUBSTANTIATED LABOUR EXPENSES OF RS. 1,97,66,787/ - CLAIMED BY THE ASSESSEE TO HAVE B EEN PAID IN CASH. ON THE BASIS OF THE AFORESAID D ELIBERATIONS THE INCOME OF THE ASSESSEE WAS INTER ALIA ASSESSED AT RS. 9,73,26,570/ - . THE A.O WHILE FRAMING THE ASSESSMENT ALSO INITIATED PENALTY PROCEEDINGS UNDER M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 10 SEC. 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. 7. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE UPHELD THE DISALLOWANCE OF THE BOGUS LABOUR CHARGES OF RS. 4,16,7 1,407/ - CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID THROUGH CHEQUES. HOWEVER, THE CIT(A) RESTRICTED THE ADDITION AS REGARDS THE LABOUR CHARGES THAT WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN INCURRED IN CASH TO AN AMOUNT OF RS. 43,84,104/ - I.E 10% OF SUCH LABOUR CHARGES OF RS. 4,38,41,043/ - WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID IN CASH. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE CIT(A) RESTRICTED THE TOTAL DISALLOWANCE OF LABOUR CHARGES TO RS. 4,60,55,511/ - [RS. 4,16,71,407 (+) RS. 43,84, 104/ - ]. ON FURTHER APPEAL, THE TRIBUNAL RESTRICTED THE DISALLOWANCE TO RS. 2,00,00,000/ - (I.E ADDITIONAL INCOME OFFERED BY THE ASSESSEE) PLUS 10% OF THE LABOUR EXPENSES INCURRED BY THE ASSESSEE BY CHEQUES. IN SUM AND SUBSTANCE, THE DISALLOWANCE OF THE LABO UR EXPENSES WAS RESTRICTED BY THE TRIBUNAL TO AN AMOUNT OF RS. 2,46,67,140/ - [RS. 2,00,00,000/ - (+) RS. 4 1 ,67,140/ - ]. 8 . THE A.O WHILE FRAMING THE ASSESSMENT HAD ALSO ISSUED A SHOW CAUSE NOTICE (FOR SHORT SCN) UNDER SEC. 274 R.W . S 271(1)(C) OF THE I.T ACT, DATED 21.12.2011, THEREIN CALLING UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY UNDER SEC. 271(1)(C) MAY NOT BE IMPOSED ON IT. STILL FURTHER, AS IS DISCERNIBLE FROM A PERUSAL OF THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C), ANOTHER SCN, DAT ED 06.02.2014 WAS ISSUED TO THE ASSESSEE, THEREIN CALLING UPON IT TO EXPLAIN AS TO WHY PENALTY UNDER SEC. 271(1)(C) MAY NOT BE IMPOSED ON IT.. THE EXPLANATION OF THE ASSESSEE THAT NO PENALTY WAS LIABLE TO IMPOSED IN ITS HANDS UNDER SEC. 271(1)(C) DID NOT F IND FAVOR WITH THE A.O. IT WAS OBSERVED BY THE A.O M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 11 THAT IN RESPECT OF THE LABOUR CHARGES CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID BY CHEQUES TO VARIOUS PARTIES ( I.E ABOVE RS. 10 LAC) AMOUNTING TO RS. 4,16,71,407/ - , THE ASSESSEE HAD FAILED TO REBUT THE EV IDENCES THAT WERE COLLECTED BY THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS FROM THE BANKS WHICH WERE INDEPENDENT AND UNBIASED THIRD PARTIES . IT WAS OBSERVED BY THE A.O THAT THE EVIDENCE GATHERED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS PROVED TH AT VIZ. (I). THE AMOUNTS DEPOSITED IN THE BANK ACCOUNTS OF THE PAYEES WERE WITHDRAWN BY THE EMPLOYEES OF THE ASSESSEE; (II). THE BANK ACCOUNTS OF THE PAYEES WERE OPENED WITH THE INTRODUCTION OF THE PARTNER AND/OR EMPLOYEES OF THE ASSESSEE FIRM; (II). THAT THE ASSESSEE COULD NOT CONTRADICT THE STATEMENTS OF THE PAYEES THAT THEY WERE NOT LABOUR CONTRACTORS/MUKADAMS BUT WERE THE EMPLOYEES OF THE ASSESSEE FIRM; AND (III). THAT EVEN OTHERWISE NO DETAILS OF THE LABOURERS FOR WHOM THE PAYEES WERE STATED TO BE MUKA DAMS WAS PLACED ON RECORD. IT WAS FURTHER OBSERVED BY THE A.O THAT THE CONFIRMATIONS OF THE PAYEES SUBSEQUENT TO RECORDING OF THEIR STATEMENT S CLEARLY MILITATED AGAINST THE FACTS AS WERE STATED BY THEM IN THE COURSE OF THE ENQUIRY, AND AS SUCH THE SAME WAS CLEARLY A RESULT OF AN AFTERTHOUGHT ON THE PART OF THE ASSESSEE. INSOFAR, THE PAYMENTS TOWARDS LABOUR CHARGES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE IN CASH WERE CONCERNED , IT WAS OBSERVED BY THE A.O THAT THE ADDITION IN RESPECT OF THE SAME WAS RESTRIC TED BY THE CIT(A) TO RS. 43,84,104/ - I.E 10% OF TOTAL CASH LABOUR CHARGES OF RS. 4,38,41,043/ - . THE A.O NOTICED THAT THE NECESSARY VERIFICATION S IN THE COURSE OF THE ASSESSMENT PROCEEDINGS REVEALED THAT THERE WERE NO SUPPORTING VOUCHERS IN RESPECT OF LABOUR CHARGES OF RS. 1,97,66,687/ - CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID IN CASH. APART THEREFROM, IT WAS OBSERVED BY HIM THAT AS THE SELF - MADE VOUCHERS FOR THE BALANCE AMOUNT OF RS. 2,37,39,862/ - WHICH WERE AVAILABLE WITH THE ASSESSEE HAD NO EVIDENTI ARY VALUE FOR WANT OF M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 12 IDENTITY AND AUTHENTICITY, THUS THE SAME INSPIRED NO CONFIDENCE AS REGARDS THE VERACITY OF THE CLAIM OF THE ASSESSEE OF HAVING INCURRED THE SAID EXPENDITURE. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE A.O HOLDING A CONVICTION THA T THE ASSESSEE HAD PURPOSIVELY CONCEALED ITS INCOME BY FURNISHING INACCURATE PARTICULARS IN RESPECT OF ITS INCOME CHARGEABLE TO TAX, THUS IMPOSED A PENALTY UNDER SEC. 271(1)(C) OF RS. 1,53,16,970/ - ON THE ASSESSEE. 9 . AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY IMPOSED IN ITS HANDS UNDER SEC. 271(1)(C) IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE THAT NO PENALTY UNDER SEC. 271(1)(C) WAS CALLED FOR IN ITS HANDS UPHELD THE ORDER OF THE A.O A ND SUSTAINED THE PENALTY OF RS. 1,53,16,970/ - IMPOSED BY HIM. 10 . THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) WHO HAD UPHELD THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THOUGH THE A.O HAD VIDE HIS NOTICE ISSUED UNDER SEC. 274 R.W. SEC. 271(1)(C) OF THE I.T ACT, DATED 21.12.2011 HAD CALLED UPON THE ASSESSEE TO S HOW CAUSE AS TO WHY PENALTY UNDER SEC. 271(1)(C) MAY NOT BE IMPOSED ON IT, BUT AS THE DEFAULT FOR WHICH THE PENALTY WAS SOUGHT TO BE IMPOSED WAS NOT POINTED OUT IN THE SAID SHOW CAUSE NOTICE, THEREFORE, THE ASSESSEE REMAINED UNAWARE OF THE CHARGE FOR WHI CH IT WAS SOUGHT TO BE PROCEEDED AGAINST. THE LD. A.R IN ORDER TO FORTIFY HIS AFORESAID CLAIM DREW OUR ATTENTION TO THE COPY OF THE SHOW CAUSE NOTICE, DATED 21.12.2011 AT PAGE 16 OF THE PAPER BOOK OF THE ASSESSEE (FOR SHORT APB). THE LD. A.R VEHEMENT LY SUBMITTED THAT AS THE ASSESSEE WAS NOT PUT TO NOTICE IN CLEAR TERMS ABOUT THE DEFAULT FOR WHICH IT WAS CALLED M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 13 UPON TO EXPLAIN AS TO WHY PENALTY UNDER SEC. 271(1)(C) MAY NOT BE IMPOSED , THEREFORE, THERE WAS NO OCCASION FOR THE ASSESSEE TO DEFEND ITS CASE AND ESTABLISH THAT NO PENALTY UNDER THE AFORESAID STATUTORY PROVISION WAS CALLED FOR IN ITS HANDS. THE LD. A.R SUBMITTED THAT THEREAFTER THE A.O VIDE HIS ORDER DATED 19.03.2014 , HAD IMPOSED A PENALTY OF RS. 1,53,16,970/ - UNDER SEC. 271(1)(C) FOR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME. IN SUM AND SUBSTANCE, IT WAS THE CONTENTION OF THE LD. A.R THAT AS THE IRRELEVANT DEFAULT IN THE SHOW CAUSE NOTICE WAS NOT STRUCK OFF BY THE A.O , THEREFORE, THE ASSESSEE HAD REMAINED UNAWARE OF DEFAULT FOR WHICH IT WAS CALLED UPON TO EXPLAIN AS TO WHY NO PENALTY MAY BE IMPOSED ON IT. ON THE BASIS OF HIS AFORESAID CONTENTION IT WAS AVERRED BY THE LD. A.R THAT PENALTY IMPOSED IN THE HANDS OF THE ASSESSEE UNDER SEC. 271(1)(C) WITHOUT CLEARLY PUTTING IT TO NOTICE ABOUT T HE DEFAULT FOR WHICH IT WAS CALLED UPON TO PUT FORTH AN EXPLANATION IN ITS DEFEN S E , THUS COULD NOT BE SUSTAINED AND WAS LIABLE TO BE VACATED. THE LD. A.R IN SUPPORT OF HIS CONTENTION RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME - TAX - II VS. SHRI SAMSON PERINCHERY (ITA NO. 1154 OF 2014; DT. 05.01.2017). THE LD. A.R FURTHER TOOK SUPPORT OF HOST OF O RDER S OF THE COORDINATE BENCHES OF THE TRIBUNAL, VIZ. (I). ITAT C BENCH, MUMBAI IN THE CASE OF M/S ORBIT ENTERP RISES VS. ITO - 15(2)(2), [ITA NO. 1596 & 1597/MUM/2014; DATED 01/09.2017]; (II). ITAT J BENCH, MUMBAI IN THE CASE OF SHRI JAYANT B. PATEL VS. ACIT [ITA NO. 1650/MUM/2017; DATED 26.07.2017]; (III). ITAT A BENCH, MUMBAI IN THE CASE OF GAGANDEEP SINGH ALA G VS. ITO - 21(2)(1), MUMBAI [ITA NO. 6851/MUM/2016; DATED 30.05.2018]; AND (IV). ITAT, AGRA IN THE CASE OF SACHIN ARORA VS. ITO - 3(4), MATHURA [ITA NO. 118/AGR/2015; DT. 19.12.2017] . ALTERNATIVELY, ON MERITS I T WAS SUBMITTED BY THE LD. A.R THAT AS THE A.O HAD MADE AN ADHOC DISALLOWANCE OF THE LABOUR CHARGES, THEREFORE, NO PENALTY COULD M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 14 HAVE BEEN IMPOSED ON THE ASSESSEE UNDER SEC. 271(1)(C). IT WAS THE CONTENTION OF THE LD. A.R THAT AS IT WAS A CASE OF AN UNPROV ED CLAIM OF EXPENSE S INCURRED BY THE ASSESSEE AND NOT THAT OF A DISPROVED CLAIM, THUS NO PENALTY UNDER SEC. 271(1)(C) WAS LIABLE TO BE IMPOSED. THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE ORDER OF THE ITAT A, DELHI IN THE CASE OF ARU N DUGGAL VS. DCIT [ITA NO. 740/DEL/2014; DATED 21.12.2016]. 11 . PER CONTRA, IT WAS SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) THAT NOW WHEN THE ASSESSEE HAD OFFERED AN ADDITIONAL INCOME OF RS. 2,00,00,000/ - AND THUS ADMITTED THE F ALSITY OF ITS CLAIM OF LABOUR CHARGES, THEREFORE, IT WAS INCORRECT ON ITS PART TO NOW CLAIM THAT THE DISALLOWANCE OF THE LABOUR CHARGES WAS MADE ON AN ADHOC BASIS. APART THEREFROM, THE LD. D.R TAKING US THROUGH THE RELEVANT EXTRACTS OF THE ASSESSMENT ORDER SUBMITTED THAT AS ON THE BASIS OF INDEPTH AND DETAILED INVESTIGATIONS CARRIED OUT BY THE A.O IT WAS IRREFUTABLY PROVED TO THE HILT THAT THE ASSESSEE HAD BOOKED BOGUS LABOUR CHARGES, HENCE THE PENALTY UNDER SEC. 271(1)(C) FOR FURNISHING OF INACCURATE PARTI CULARS OF INCOME WAS RIGHTLY IMPOSED AND NO INFIRMITY DID EMERGE THEREFROM. 1 2 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE SHALL FIRST ADVERT TO A ND ADJUDICATE UPON THE SUSTAINABILITY OF THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C), IN THE BACKDROP OF THE CONTENTIONS ADVANCED BY THE LD. A.R THAT THE A.O HAD INVALIDLY ASSUMED JURISDICTION AND IMPOSED PENALTY UNDER SEC. 271(1)(C) ON THE ASSESSE E WITHOUT CLEARLY PUTTING IT TO NOTICE AS REGARDS THE NATURE OF THE DEFAULT FOR WHICH IT WAS CALLED UPON TO EXPLAIN AS TO WHY THE SAME MAY NOT BE IMPOSED IN ITS HANDS. WE FIND THAT THE ASSESSEE HAD AT NO STAGE CHALLENGED THE VALIDITY OF THE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 15 JURISDICTION ASSUMED BY THE A.O BEFORE THE LOWER AUTHORITIES , AND HAD RATHER ASSAILED THE SAME FOR THE VERY FIRST TIME IN ITS APPEAL BEFORE US. WE HAVE PERUSED THE SHOW CAUSE NOTICE, DATED 21.12.2011 ISSUED BY THE A.O UNDER SEC. 274 R.W.S. 271(1)(C) ( PAGE 16 - 17 OF A PB) AND ARE PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE LD. A.R THAT THE SAME IS CLEARLY A DUMB NOTICE , AS THE A.O BY FAILING TO STRIKE OFF THE IRRELEVANT DEFAULT HAD FAILED TO PUT THE ASSESSEE TO A CLEAR NOTICE AS REGARDS THE DEFAULT FOR WHICH HE WAS SOUG HT TO BE PROCEEDED WITH AND SUBJECTED TO PENALTY UNDER SEC. 271(1)(C). HOWEVER, WE FIND FROM A PERUSAL OF THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C) THAT HE HAD AFTER RECEIVING THE ORDER PASSED BY THE CIT(A) IN THE QUANTUM APPEAL OF THE ASSESSEE ISSU ED ANOTHER S HOW CAUSE NOTICE , DATED 06.02. 2014 REQUIRING IT TO EXPLAIN AS TO WHY PENALTY UNDER SEC.271(1)(C) MAY NOT BE IMPOSED ON IT. IN REPLY, THE ASSESSEE HAD VIDE ITS LETTER DATED NIL (FILED WITH THE A. O ON 18.03.2014) HAD SUBMITTED THAT NO PENALTY U NDER SEC. 271(1)(C) WAS LIABLE TO BE IMPOSED IN ITS HANDS. HOWEVER, THE A.O OBSERVING THAT THE EXPLANATION OF THE ASSESSEE WAS DEVOID OF MERITS AND HENCE NOT TENABLE AND IT HAD NOT OFFERED ANY SPECIFIC REASON AS TO WHY NO PENALTY WAS CALLED FOR IN ITS HAND S, THUS NOT FINDING FAVOUR WITH THE SAME THEREIN PROCEEDED WITH THE PENALTY PROCEEDINGS ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. WE MAY HEREIN OBSERVE THAT THOUGH THE LD. A.R HAS ASSAILED BEFORE US THE VALIDITY OF THE SHOW CAUSE NOTICE, DATED 21 .12.2011 ISSUED UNDER SEC. 274 R.W.S. 271(1)(C), ON THE GROUND THAT THE A.O HAD INVALIDLY ASSUMED JURISDICTION AND IMPOSED PENALTY UNDER SEC. 271(1)(C) WITHOUT POINTING OUT THE DEFAULT FOR WHICH THE PENALTY WAS SOUGHT TO BE IMPOSED IN THE HANDS OF THE ASSE SSEE, HOWEVER, NO SUCH CONTENTION THEREIN CHALLENGING THE VALIDITY OF THE SHOW CAUSE NOTICE, DATED 06.02.2014 ISSUED UNDER SEC.271(1)(C) HA S BEEN RAISED BEFORE US. WE ARE OF THE CONSIDERED VIEW THAT AS THE VALIDITY OF THE SHOW CAUSE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 16 NOTICE, DATED 06.02 .2014 HA S NOT BEEN CHALLENGED BY THE LD. A.R BEFORE US, THEREFORE, IT CAN SAFELY BE CONCLUDED THAT THE SAME IS WELL IN ORDER. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, WE ARE OF THE CONSIDERED VIEW THAT AS THE LD. A.R HA S NOT ASSAILED THE VALIDITY OF THE SHOW CAUSE NOTICE, DATED 06.02.2014 ISSUED BY THE A.O UNDER SEC. 271(1)(C) , THEREFORE, THE CONTENTIONS ADVANCED BY HIM AS REGARDS THE VALIDITY OF THE JURISDICTION ASSUMED BY THE A.O FOR IMPOSING PENALTY UNDER SEC. 271(1)(C) DOES NOT MERIT ACCEPTANCE AND ARE LIABLE TO BE DISMISSED. THE GROUND OF APPEAL NO.7 RAISED BY THE ASSESSEE IS DISMISSED. 1 3 . WE SHALL NOW ADVERT TO THE CONTENTIONS ADVANCED BY THE AUTHORIZED REPRESENTATIVES FOR THE PARTIES AS REGARDS THE SUSTAINABILITY OF THE PENALTY IMPOSED UNDER SEC. 271(1)(C), ON MERITS. WE HAVE DELIBERATED AT LENGTH ON THE FACT UAL OBSERVATIONS THAT WERE ARRIVED AT BY THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. ON A PERUSAL OF THE ASSESSMENT ORDER, IT STANDS REVEALED THAT THE A.O O N THE BASIS OF INDEPTH INVESTIGATIONS CONDUCTED BY HIM IN A METICULOUS MANNER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS , HAD PROVED TO THE HILT THAT THE PAYMENTS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE TO THE PAYEES TOWARDS LABOUR CHARGES BY CHEQUES HA D FACTUALLY FOUND ITS WAY BACK TO THE ASSESSEE IN THE FORM OF CASH WITHDRAWN BY THE EMPLOYEES OF THE ASSESSEE (AS PER THE DIRECTIONS OF THE ASSESSEE) FROM THE BANK ACCOUNTS OF THE SAID PAYEES . WE FIND THAT THE IRREFUTABLE AND CLINCHING EVIDENCE GATHERED BY THE A.O IN THE FORM OF COPIES OF THE CHEQUES THAT WERE USED FOR WITHDRAWING CASH FROM THE BANK ACCOUNTS OF THE AFORESAID PAYEES, REVEALED THAT THE AMOUNTS WERE WITHDRAWN FROM THE SAID BANK ACCOUNTS BY A GROUP OF PERSONS VIZ. MS. SYED NIGHAT, S/SHRI RAM BA HADUR, PUNJABI ETC. WHO ALL WERE THE EMPLOYEES OF THE ASSESSEE. FURTHER, THE INQUIRIES CONDUCTED BY THE A.O UNDER SEC. 142(2) IN RESPECT OF THE AFORESAID PAYEES CLEARLY REVEALED THE FALSITY OF M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 17 THE CLAIM OF THE ASSESSEE THAT PAYMENTS WERE MADE TO THEM TOWAR DS LABOUR CHARGES IN THEIR CAPACITY AS THAT OF L ABOUR CONTRACTORS/MUKADAMS . RATHER, THE SIX PAYEES IN WHOSE CASE INQUIR IES WERE CONDUCTED UNDER SEC. 142(2) WERE FOUND TO BE THE EMPLOYE ES OF THE ASSESSES FIRM WORKING AS DRIVERS/ROAD ROLLER OPERATORS ETC. ON A MEAGER SALARY AND THEY HAD ADMITTED THAT SINCE THEY WERE DEPENDANT ON THE ASSESSEE FOR THEIR LIVELIHOOD , THEREFORE, THEY HAD SIGNED ON THE CHEQUES AS AND WHEN THEY WERE ASKED TO DO SO BY THE ASSESSEE . WE FIND THAT THE A.O ON THE BASIS OF METICULOUS INVE STIGATIONS CARRIED OUT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS HAD ESTABLISHED THAT ALL OF THE AFORESAID PAYEES WERE PERSONS OF MEAGER RESOURCES AND MAJORITY OF T H EM WERE RESIDING TOGETHER IN SMALL ROOMS OF BARELY 100 SQ. FT IN AREA . APART TH E REFROM, T HE AFORESAID PAYEES IN WHOSE CASE INQUIR IES WERE CONDUCTED UNDER SEC. 142(2) , HAD STATED THAT THEY KNEW NOTHING ABOUT THE CHEQUES FOR LABOUR CHARGES ISSUED IN THEIR FAVOUR , AND THAT ONLY THE ASSESSE E WAS AWARE OF WHAT TRANSPIRED. INFACT, SOME OF THE PAYEES HAD BANK ACCOUNTS WITH NOMINAL BALANCES RANGING BETWEEN RS. 1000/ - TO RS. 2,000/ - , BUT WERE UNAWARE ABOUT THEIR BANK ACCOUNTS IN VIJAYA BANK, BRANCH: CHEMBUR, MUMBAI WHERE THE CHEQUES ISSUED BY THE ASSESSEE TO THEM WERE DEPOSITED, WHILE FOR SOME OF THE PA YEES STATED THAT THEY WOULD WITHDRAW THE CASH FROM VIJAYA BANK ACCOUNT AND GIVE IT BACK TO THE ASSESSEE . IN CERTAIN CASES IT WAS CLAIMED BY THE PAYEES THAT THEY HAD SIGNED (BEARER) CHEQUES AND HANDED OVER THE SAME TO THE ASSESSEE. WE FIND THAT THE A.O WHILE FRAMING THE ASSESSMENT HAD METICULOUSLY DELIBERATED AT LENGTH ON EACH AND EVERY RESPECTIVE CHEQUE PAYMENT S MADE BY THE ASSESSEE TO THE AFOREMENTIONED PAYEES AND HAD PROVED TO THE HILT TH AT THE AMOUNTS DEPOSITED IN THE SAID BANK ACCOUNTS WERE SUBSEQUENTLY WITHDRAWN BY THE EMPLOYEES OF THE ASSESSEE . INTERESTINGLY, THE ASSESSEE IN T H E COURSE OF THE ASSESSMENT M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 18 PROCEEDINGS IN ORDER TO IMPRESS UPON THE A.O THAT ITS CLAIM OF HAVING MADE PAYMENTS TO THE AFOREMENTIONED PAYEES TOWARDS LABOUR CHARGES WAS WELL IN ORDER, HAD PLACED ON RECORD THE CONFIRMATIONS OF THE AFOREMENTIONED 16 PAYEES IN RESPONSE TO NOTICES WHICH WERE WAY BACK ISSUED TO THEM BY THE A.O UNDER SEC. 133(6) ON 24.08.2011 , ALONGWITH T HE COPIES OF THEIR RESPECTIVE RETURNS OF INCOME WHEREIN THE SAID RESPECTIVE PAYEES HAD PAID TAX ON THE AFORESAID RECEIPTS @ 8% UNDER SEC. 44AD OF THE I.T ACT. WE FIND THAT THE FALSITY OF THE CLAIM OF THE ASSESSEE OF HAVING MADE PAYMENTS TOWARDS LABOUR CHAR GES TO THE AFORESAID PAYEES IS FURTHER SUBSTANTIALLY SUPPLEMENTED BY THE FACT THAT MS. SYED NAIGHAT, EMPLOYEE OF THE ASSESSEE FIRM IN H E R STATEMENT RECORDED BY THE A.O UNDER SEC. 131 OF THE I.T ACT, HAD IN HER REPLY TO Q.NO. 33 RAISED BY THE A.O IN RESPEC T OF HER SIGNATURES THAT WERE APPEARING AT THE BACKSIDE OF THE CHEQUES ADMITTED THAT THE CASH CORRESPONDING TO THE SAID CHEQUES WAS WITHDRAWN FROM THE BANK ACCOUNTS OF THE PAYEES AND WAS HANDED OVER BY HER TO ONE OF THE PARTNERS OF THE ASSESSEE FIRM WHO AT THE RELEVANT POINT OF TIME WAS AVAILABLE IN THE OFFICE. IT WAS FURTHER ADMITTED BY HER THAT THE FATE OF THE CASH WITHDRAWN IN RESPECT OF OTHER SIMILAR CHEQUES OF THE PAYEES WAS ALSO THE SAME. INTERESTINGLY, WE FIND THAT THE PARTNER OF THE ASSESSEE FIRM VI Z. SH. NAND K. BIJLANI IN THE COURSE OF HIS STATEMENT RECORDED BY THE A.O UNDER SEC. 131 OF THE I.T ACT ON 12.12.2011, ON BEING CONFRONTED WITH THE AFORESAID ADMISSION OF MS. SYED NIGHAT (SUPRA) ACCEPTED THE FACT SO STATED BY HER, BUT RAISED AN UNSUBSTANTI ATED CLAIM THAT THE SAID CASH WAS EVENTUALLY GIVEN TO THE LABOURER CONCERNED. APART THEREFROM, SH. NAND K. BIJLANI DECLINED TO AVAIL THE OPPORTUNITY TO CROSS - EXAMINE MS. SYED NIGHAT. 14. WE FIND THAT SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM I N THE COURSE OF HIS STATEMENT RECORDED UNDER SEC. 131 ON 12.12.2011 COULD NOT REBUT THE MATERIAL GATHERED BY THE A.O WHICH PROVED TO THE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 19 HILT THAT THE ASSESSEE FIRM IN THE GUISE OF ITS BOGUS CLAIM OF MAKING PAYMENT TOWARDS LABOUR CHARGES TO THE AFOREMENTIONE D PAYEES BY CHEQUES, HAD INFACT SYSTEMATICALLY AND RATHER METICULOUSLY SUPPRESSED ITS PROFITS. IN SUM AND SUBSTANCE, WE FIND THAT THE A.O HAD ON THE BASIS OF CONCRETE MATERIAL ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE WITH THE ASSISTANCE OF HIS EMPLOYEES AND AIDES HAD LABORIOUSLY AND SYSTEMATICALLY INFLATED THE LABOUR CHARGES IN T H E GARB OF PAYMENTS MADE BY CHEQUES. WE THUS ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAD RIGHTLY UPHELD THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) IN RESPECT OF THE LA BOUR CHARGES THAT WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE BY CHEQUES. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS UPHOLD THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) IN RESPECT OF THE PAYMENTS OF RS. 41,67,140/ - (AS SUSTAINED BY THE TRIBUNA L W HILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASSESSEE) THAT WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE BY CHEQUES TOWARDS LABOUR CHARGES. 1 5 . WE SHALL NOW ADVERT TO THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LABOUR CHARGES WHICH WERE STATED TO HAVE BEEN PAID IN CASH. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O HAD CALLED UPON THE ASSESSEE TO PRODUCE HIS CASH BOOK, LEDGER AND OTHER BOOKS OF ACCOUNTS. IN PARTICULAR , THE ASSESSEE WA S REQUIRED TO PRODUCE THE VOUCHERS RELATING TO THE LABOUR C HARGES PAID IN CASH. THE A.O ISSUED NOTICE U/S 142(1), DATED 30.08.2011 CALLING UPON THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS ALONGWITH THE VOUCHERS RELATING TO THE CASH EXPENSES , WHICH HOWEVER WAS NOT COMPLIED WITH BY THE ASSESSEE . THE A.O ISSUED S UMMONS UNDER SEC. 131 TO THE ASSESSEE, WHICH TOO WE FIND WERE PARTLY COMPLIED WITH AND THE BOOKS OF ACCOUNTS INCLUDING THE VOUCHERS REL A TING TO LABOUR CHARGES WERE NOT PRODUCED BY THE ASSESSEE. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O HAD ISSUED A CO MMISSION U/S 131 OF THE I.T ACT AND CARRIED OUT AN INSPECTION OF THE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 20 BOOKS OF ACCOUNTS AND DOCUMENTS OF THE ASSESSEE AT ITS BUSINESS PREMISES WHERE THEY WERE KEPT. IN THE COURSE OF THE INQUIRY CONDUCTED UNDER SEC. 131 OF THE I.T ACT, IT WAS DEPOSED B Y SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM VIZ. (I). THAT ALL THE VOUCHERS TO SUPPORT T HE LABOUR CHARGES PAID IN CASH RELATING TO A.Y 2009 - 10 WERE BEING PRODUCED FOR INSPECTION; AND (II). THAT THERE WERE NO OTHER VOUCHERS APART FROM THE SAID VOUCHERS EI THER AT THE BUSINESS PREMISES OF THE ASSESSEE OR ANYWHERE ELSE. AFTER RECORDING THE AFORESAID ADMISSION OF SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM THE A.O HAD IMPOUNDED THE VOUCHERS RELATING TO LABOUR CHARGES FOR A.Y 2009 - 10 AP A RT FROM FEW OTHER RELEVANT DOCUMENTS UNDER SEC. 131(3) OF THE I.T ACT. IN THE COURSE OF THE PROCEEDINGS CONDUCTED UNDER SEC. 131 AT THE BUSINESS PREMISES OF THE ASSESSEE, THE A.O HAD BROUGHT IT TO T H E NOTICE OF THE ASSESSEE THAT APART FROM THE LABOUR CHARGES PAID IN CASH, T H E RE WERE DISCREPANCIES IN THE LABOUR CHARGES PAID BY CHEQUES TOO. APART THEREFROM, THE A.O BROUGHT TO THE NOTICE OF THE ASSESSEE THE RESULTS OF THE ENQUIRIES THAT WERE CONDUCTED UNDER SEC. 142(2) AT THE PREMISES OF THE RECIPIENTS OF THE LABOUR CHARGES (PA ID BY CHEQUES) WHICH CLEARLY PROVED TO THE HILT THE FALSITY OF THE CLAIM OF THE ASSESSEE OF HAVING PAID LABOUR CHARGES TO THEM BY CHEQUES. WE FIND THAT THE ASSESSEE F ACED WIT H THE AFORESAID EVIDENCE WHICH CLEARLY DISLODGED THE VERACITY OF ITS CLAIM OF LABO UR CHARGES, THUS IN HIS STATEMENT RECO R DED UNDER SEC. 131 OFFERED AN ADDITION AL INCOME OF RS. 2 CRORES. ON THE BASIS OF NECESSARY V ERIFICATIONS CARRIED OUT BY THE A.O, IT STOOD REVEALED THAT AS AGAINST THE CLAIM OF THE ASSESSEE OF HAVING PAID LABOUR CHARGE S IN CASH OF RS. 4,35,06,549/ - THE VOUCHERS IMPOUNDED FROM HIS BUSINESS PREMISES UNDER SEC. 131(3) WERE ONLY TO THE EXTENT OF RS. 2,37,39,862/ - . IT WAS ALSO OBSERVED BY THE A.O THAT THOUGH THE ASSESSE E HAD CLAIMED TO HAVE INCURRED ASUAL LABOUR EXPENSES IN CASH OF RS. 4,38,41,043/ - , HOWEVER THE DETAILS FILED BY THE ASSESSEE M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 21 VIDE HIS LETTER DATED 13.09.2011 WERE ONLY TO THE EXTENT OF RS. 4,35,06,549/ - . AS THE ASSESSEE HAD NO EXPLANATION AS REGARDS THE AFORESAID V ARIANCE OF RS. 3,34,494/ - [RS. 4,38,41,043/ - ( - ) RS. 4,35,06,549/ - ], THEREFORE, THE A.O DISALLOWED THE SAME BY HOLDING IT AS AN EXCESS DEBIT TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES. HOWEVER, AS THE ASSESSEE HAD ALREADY CONCEDED ADDITIONAL INCOME OF RS. 2 CRORE, THEREFORE, FOR TH E SAID REASON THE A.O DID NOT MAKE ANY SEPARATE ADDITION IN RESPECT OF THE UNPROVED EXPENDITURE TO THE SAID EXTENT. WE FIND THAT SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM HAD TRIED TO JUSTIFY THE NON - AVAILABILITY OF THE VOUCHERS IN RESPECT OF THE L ABOUR CHARGES PAID IN CASH ON TWO GROUNDS VIZ. (I) THAT AS THE ROAD - LAYING WORK CARRIED OUT BY THE ASSESSEE FIRM WAS A LABOUR INTENSIVE WORK THAT INVOLVED MIGRANT LABOURERS WHO WOULD KEEP SHIFTING THEIR PLACE OF RESIDENCE DEPENDING ON THE SITE THEY WORK, T HUS THEIR ADDRESSES COULD NOT BE FURNISHED; AND (II). THAT THE NET PROFIT RATE OF 7.6% SHOWN BY THE ASSESSEE AFTER CONSIDERING THE ADDITIONAL INCOME OF RS. 2 CRORE THAT WAS OFFERED BY IT IN RESPECT OF DISCREPANCIES IN LABOUR CHARGES WOULD GET RAISED TO ABO UT 12%, WHICH WOULD BE IN EXCESS OF 8% PRESCRIBED UNDER SEC. 44AD OF THE I.T ACT. APART THEREFROM, IT WAS THE CLAIM OF THE ASSESSEE THAT DUE TO PASSAGE OF TIME AND LARGE NUMBER OF VOUCHERS INVOLVED, PART OF SUCH VOUCHERS COULD NOT BE PRESERVED OR LOCATED. 1 6 . ADMITTEDLY, THE CLAIM OF THE ASSESSEE OF HAVING PAID LABOUR CHARGES IN CASH COULD NOT BE SUBSTANTIATED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. AS OBSERVED BY US HEREINABOVE, THE SAID CLAIM OF EXPENSES RAISED BY THE ASSESSEE CAN BE BIFURCATED INTO TWO PARTS VIZ. (I). THE EXCESS CLAIM OF LABOUR CHARGES OF RS. 3 ,34,494/ - [RS. 4,38,41,043/ - ( - ) RS. 4,35,06,549/ - ] RAISED BY THE ASSESSEE, WHICH WAS DISALLOWED BY THE A.O BY HOLDING IT AS AN EXCESS DEBIT TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES; AND (II). THE LABOUR M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 22 CHARGES OF RS. 1,97,66,787/ - [RS . 4,35,06,549/ - ( - ) RS. 2,37,39,862/ - ] CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID IN CASH, WHICH IN THE COURSE OF ENQUIRIES UNDER SEC. 142(2) AT THE PREMISES OF THE ASSESSEE WERE NOT FOUND TO BE SUPPORTED BY ANY DOCUMENTARY EVIDENCE OR VOUCHERS AT ALL . WE F IND THAT THE A.O TAKING NOTE OF THE FACT THAT THE ASSESSEE HAD OFFERED AN ADDITIONAL INCOME OF RS. 2,00,00,000/ - IN HIS STATEMENT RECORDED UNDER SEC. 131, THEREFORE, DID NOT MAKE A SEPARATE ADDITION OF THE AFORESAID UNSUBSTANTIATED CASH LABOUR EXPENSES OF RS. 1,97,66,787/ - . INSOFAR, THE EXCESS CLAIM OF LABOUR CHARGES OF RS. 3,34,494/ - [RS. 4,38,41,043/ - ( - ) RS. 4,35,06,549/ - ] AS WERE GATHERED BY THE A.O FROM THE RECORDS WAS CONCERNED , THE SAME AS OBSERVED BY US HEREINABOVE WAS DISALLOWED BY THE A.O BY HOLDI NG IT AS AN EXCESS DEBIT TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES. 1 7 . WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION AND ARE OF THE CONSIDERED VIEW THAT THE DISCLOSURE OF THE ADDITIONAL INCOME OF RS. 2 CRORE S BY SHRI N AND K. BIJLANI , PARTNER OF THE ASSESSEE FIRM IN THE COURSE OF HIS DEPOSITION UNDER SEC. 131 OF THE I.T ACT RECORDED ON 25.11.2011WAS NOT VOLUNTARILY MADE IN THE SENSE THAT HE HAD CAME FORTH WITH IT ONLY WHEN SERIOUS INFIRMITIES IN THE CLAIM OF LABOUR CHARG ES OF THE ASSESSEE HAD SURFACED AND WAS BROUGHT TO HIS NOTICE. IN SUM AND SUBSTANCE, SHRI NAND K. BIJLANI HAD CAME UP WITH AN OFFER OF THE ADDITIONAL INCOME ONLY AFTER DISCREPANCIES AS REGARDS THE CLAIM OF LABOUR CHARGES RAISED BY THE ASSESSEE FIRM WERE DETECTED BY THE A.O . IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. APART THEREFROM, W E FIND THAT OUT OF THE LABOUR CHARGES OF RS. 4,38,06,549/ - CLAIMED BY THE ASSESSEE AS AN EXPENDITURE IN ITS PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION , AN AMOUNT OF RS. 3,34,494/ - WAS FOUND BY THE A.O TO HAVE BE EN EXCESSIVELY CLAIMED BY THE ASSESSEE. RATHER, THE SAID MISTAKE HAD CAME TO THE NOTICE OF THE A.O ON THE BASIS OF THE BREAK - UP OF LABOUR CHARGES OF RS. 4,35,06,549/ - THA T WAS M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 23 FURNISHED BY THE ASSESSEE ALONG WITH ITS LETTER DATED 13.09.2011 IN THE COURSE OF THE ASSESSMENT PROCEEDINGS . THE A.O SPECIFICALLY BY WAY OF A QUERY CONFRONTED THE SHRI NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM WHILE RECORDING HIS STATEMENT UNDER SEC. 131 ABOUT THE AFORESAID EXCESS CLAIM OF EXPENDITURE OF RS. 3,34,494/ - IN THE RETURN OF INCOME . H OWEVER , EXCEPT FOR EMPHASISING ON THE REASONS FOR NON - AVAILABILITY OF TOTAL SUPPORTING VOUCHERS, SH. NAND K. BIJLANI DID NOT ADDRESS THE AFORESAID QUERY SO RAISED BY THE A.O. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O DISALLOWED THE SAID AMOUNT BY DUBBING IT AS AN EXCESS DEBIT TO THE P ROFIT & LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES. IN OUR CONSIDERED VIEW THE FAILURE ON THE PART OF THE ASSESSEE TO C OME FORTH WITH ANY EXPLANATION FOR HAVING RAISED THE AFORESAID EXCESS CLAIM OF EXPENDITURE OF RS. 3,34,494/ - CLEARLY BRINGS THE SAID ADDITION/DISALLOWANCE SO MADE BY THE A.O WITHIN THE SWEEP OF SEC. 271(1)(C). 1 8 . INSOFAR, THE LABOUR CHARGES OF RS. 1 ,97,66,787/ - [RS. 4,35,06,549/ - ( - ) RS. 2,37,39,862/ - ] CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID IN CASH ARE CONCERNED, THE SAME AS OBSERVED BY US HEREINABOVE WERE NOT SUPPORTED BY ANY EVIDENCE. RATHER, THE CONDUCT OF THE ASSESSEE WHEREIN IT HAD TRIED ITS LEVEL BEST TO WITHHOLD THE INFORMATION DESPITE SPECIFIC DIRECTIONS BY THE A.O TO PRODUCE THE SAME DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , ALSO DOES NOT INSPIRE MUCH OF CONFIDENCE AS REGARDS THE BONAFIDES OF THE CLAIM OF THE ASSESSEE THAT THE VOUCH ERS PERTAINING TO THE CASH LABOUR CHARGES OF RS. 1,97,66,787/ - DUE TO PASSAGE OF TIME COULD NOT BE PRESERVED OR LOCATED. IN OUR CONSIDERED VIEW , IT WOULD BE RELEVANT TO DWELL UPON THE FACTS WHICH HAD LED TO THE DETECTION OF THE AFORESAID UNSUBSTANTIATED CL AIM OF LABOUR CHARGES OF RS. 1,97,66,787/ - THAT ARE CLAIMED BY THE ASSESSEE TO HAVE BEEN INCURRED IN CASH , AS UNDER: M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 24 (I). THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS HAD ISSUED A NOTICE U/S 142(1), DATED 30.08.2011 CALLING UPON THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS ALONGWITH THE VOUCHERS RELATING TO THE CASH EXPENSES, WHICH HOWEVER WAS NOT COMPLIED WITH BY THE ASSESSEE; (II). THE A.O ISSUED SUMMONS UNDER SEC. 131 TO THE ASSESSEE, WHICH TOO WAS PARTLY COMPLIED WITH AND THE BOOKS OF ACCOUNTS INCLUDING THE VOUCHERS RELATING TO LABOUR CHARGES WERE NOT PRODUCED BY THE ASSESSEE . (III). THE A.O I N THE BACKDROP OF THE AFORESAID FACTS ISSUED A COMMISSION U/S 131 OF THE I.T ACT AND CARRIED OUT AN INSPECTION OF THE BOOKS OF ACCOUNTS AND DOCUMENTS OF THE ASSESSEE AT ITS BUSINESS PREMISES WHERE THEY WERE KEPT. (IV). THAT IN THE COURSE OF THE ENQUIRY CONDUCTED UNDER SEC. 131 AT THE OFFICE PREMISES OF THE ASSESSEE, IT WAS DEPOSED BY SHRI. NAND K. BIJLANI THAT ALL THE VOUCHERS TO SUPPORT THE LABOUR CHARGES PAID IN CASH DURING THE YEAR UNDER CONSIDERATION WERE BEING PRODUCED AND THERE WERE NO OTHER VOUCHERS APART FROM TH O SE, EITHER AT THE BUSINESS PREMISES OF THE ASSESSEE OR ANYWHERE ELSE. (V). THE AFORESAID VOUCHERS PERTAINING TO LABOUR CHARES PAID DURING THE YEAR ALONGWITH CERTAIN OTHER DOCUMENTS WERE IMPOUNDED UNDER SEC. 131(3) OF THE I.T ACT BY THE A.O. (VI). THAT IT WAS DURING THE COURSE OF RECORDING OF THE STATEMENT OF SH. NAND K. BIJLANI, PARTNER OF THE ASSESSEE FIRM UNDER SEC. 131 , IT WAS ONLY WHEN IT WAS BROUGHT TO HIS NOTICE BY THE A.O THAT APART FROM THE LABOUR CHARGES PAID BY THE ASSESSEE IN CASH THERE WERE DISCREPANCIES IN THE LABOUR CHARGES PAID BY CHEQUES TOO, M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 25 THAT HE HAD CAME FO R TH WITH AN OFFER OF ADDITIONAL INCOME OF RS. 2 CRORE IN RESPECT OF LABOUR CHARGES EXPENSES THE HANDS OF THE ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION . (VII). THAT SH. NAND K. BIJLANI IN HIS SUBSEQUENT STATEMENT THAT WAS RECORDED BY THE A,O UNDER SEC. 131 ON 12.12.2011 HAD FURTHER CLARIFIED THAT THE ADDITIONAL INCOME WAS OFFERED IN RESPECT OF LABOUR CHARGES PAID IN CASH AS WELL AS PAID BY CHEQUES. ON A PERUSAL OF THE AFORESAID FACTS , IT CAN SAFELY BE CONCLUDED THAT THE ASSESSEE HAD INITIALLY TRIED ITS LEVEL BEST TO WITHHOLD THE PRODUCTION OF THE VOUCHERS OF LABOUR EXPENSES. HOWEVER, FINDING ITSELF CORNERED AFTER THE A.O HAD ISSUED COMMISSION UNDER SEC. 131 ON 25,11.2011 AND HAD CARRIED OUT THE INSPECTION OF THE BOOKS OF ACCOU NTS AND DOCUMENTS (INCLUDING VOUCHERS OF LABOUR CHARGES) AT THE BUSINESS PREMISES OF THE ASSESSEE WHERE THEY WERE KEPT, THAT IT WAS ONLY THEN THE ASSESSEE HAD CAME FORTH WITH A DISCLOSURE OF THE AFORESAID ADDITIONAL INCOME OF RS. 2 CRORES IN ORDER TO COV ER THE DISCREPANCIES IN ITS LABOUR EXPENSES VOUCHERS. W E FIND THAT THE ASSESSEE EXCEPT FOR EMPHASISING THAT IT WAS ENGAGED IN LABOUR INTENSIVE WORK AND THAT DUE TO PASSAGE OF TIME AND LARGE NUMBER OF VOUCHERS INVOLVED , PART OF SUCH VOUCHERS COULD NOT BE PR ESERVED OR LOCATED, HAD HOWEVER FAILED TO COME FORTH WITH ANY PLAUSIBLE EXPLANATION AS REGARDS THE AFORESAID UNSUBSTANTIATED LABOUR EXPENSES OF RS. 1,97,66,787/ - THAT WERE CLAIMED BY IT AS AN EXPENDITURE WHILE COMPUTING ITS INCOME IN THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION. INSOFAR, THE ADDITIONAL INCOME OF RS. 2 CRORE THAT WAS OFFERED BY THE ASSESSEE TO COV E R UP THE DISCREPANCIES IN THE LABOUR CHARGES ARE CONCERNED, WE ARE AFRAID THAT THE SAME AS OBSERVED BY US HEREINABOVE WAS NOT VOLUNTARILY , AND WAS MADE ONLY WHEN THE ASSESSEE WHO HAD TRIED ITS LEVEL BEST TO WITHHOLD THE INFORMATION IN THE COURSE OF THE ASSESSMENT M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 26 PROCEEDINGS ON FINDING ITSELF CORNERED BY THE A.O HAD CAME FORTH WITH THE SAID OFFER OF THE ADDITIONAL INCOME. IN OUR CONSIDERED VIEW AS T HE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF ITS AFORESAID CLAIM OF LABOUR CHARGES STATED TO HAVE BEEN INCURRED IN CASH , THUS PENALTY UNDER SEC. 271(1)(C) WAS RIGHTLY IMPOSED UPON IT . THE CLAIM OF THE ASSESSEE THAT THE AFORESAID ADDITIONAL INCOME WAS OFFERED TO AVOID LITIGATION WOULD NOT EXPLAIN AWAY ITS CONDUCT. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. VS. CIT (2013 ) 358 ITR 593 (SC). WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS UPHOLD THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) IN RESPECT OF THE ADDITION OF RS. 2 CRORE (AS HAD BEEN SUSTAINED BY THE TRIBUNAL WHILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASS ESSEE) IN RESPECT OF THE LABOUR CHARGES INCURRED BY THE ASSESSEE IN CASH. 1 9 . WE THUS NOT FINDING ANY INFIRMITY IN THE ORDER OF THE CIT(A), UPHOLD THE SAME IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUNDS OF APPEAL NOS. 1 TO 6 ARE DISMISSED IN TERMS O F OUR AFORESAID OBSERVATIONS. THE GROUND OF APPEAL NO. 8 BEING GENERAL IN NATURE IS DISMISSED AS NOT PRESSED. 20 . THE APPEAL OF THE ASSESSEE IS DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 13 .0 2 .201 9 SD/ - SD/ - (G. MANJUNATHA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 . 02.2019 PS. ROHIT M/S PRAKASH ENGINEERS VS. ASST. CIT - 22(2), MUMBAI ITA NO. 156/MUM/2017 27 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI