Deputy Commissioner of Income Tax, Tirupathi V. M/s Tirumala Constructions, Tirupathi

ITA 1644/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82330 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Corroborative evidences
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1644/HYD/2012 ASSESSMENT YEAR 2009-10 THE DEPUTY CIT CIRCLE-2(1) TIRUPATI VS. M/S. TIRUMALA CONSTRUCTIONS, TIRUPATI PAN: AADFT9134F APPELLANT RESPONDENT APPELLANT BY: SRI SOLGY JOSE T. KOTTARAM RESPONDENT BY: SRI V. RAGHAVENDRA RAO DATE OF HEARING: 0 7 .07.2014 DATE OF PRONOUNCEMENT: 05 .0 9 .2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), GUNTUR DATED 22.08.2012 FOR ASSESSMENT YEAR 2009-10. 2. THE PRESENT APPEAL WAS EARLIER HEARD BY THE 'B' BENCH OF THE TRIBUNAL ON 21.6.203 AND A MISCELLANEO US APPLICATION IN MA NO. 189/HYD/2013 WAS FILED AGAINS T THE ORDER PASSED BY THE BENCH ON 21.6.2013. BY THE MA ORDER DATED 27 TH SEPTEMBER, 2013 THE MA WAS PARTLY ALLOWED AND THE RECALLED MATTER WAS POSTED FOR HEAR ING ON 7.7.2014 BEFORE US. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE IS CARRYING ON CIVIL CONTRACT WORKS AND FILED ITS RETURN OF INC OME FOR A.Y. 2009-10 ON 30.09.2009 DECLARING INCOME OF RS. 10,88,270. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSEE WAS ASKED TO PRODUCE VOUCHERS FOR THE 2 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= EXPENDITURE TOWARDS LABOUR CHARGES, SAND, DUST, FRE IGHT CHARGES, ETC. THE ASSESSING OFFICER HELD THAT MAJO R PORTION OF EXPENDITURE WAS NOT VERIFIABLE AND DUE T O SUCH NON AVAILABILITY OF VOUCHERS FOR MORE THAN 48% OF T HE EXPENDITURE CLAIMED, THE BOOK RESULTS WERE TO BE RE JECTED U/S. 145 OF THE ACT AND THE INCOME IS TO BE ESTIMAT ED AT 12.5% OF THE NET RECEIPTS WITHOUT ALLOWING FURTHER DEDUCTIONS. 4. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER HAD WRONGLY REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME AT 12.5% OF THE GROSS BILL OF RS. 8,45,04,69 5 BASED ON TWO GROUNDS (A) PAYMENTS MADE TO LABOURERS ARE N OT VERIFIABLE AND (B) TDS NOT EFFECTED ON TRANSPORT PA YMENTS. 5. BEFORE THE CIT(A), WITH REGARD TO THE PAYMENTS MADE TO THE LABOURERS, THE ASSESSEE SUBMITTED THAT IT IS REGULARLY MAKING WEEKLY PAYMENTS OF SMALL AMOUNTS T O VARIOUS LABOURERS IN CASH. THE ASSESSEE SUBMITTED THAT IT HAD OBTAINED PAYMENT VOUCHERS FROM 33 HONEST AND RELIABLE LABOURERS THROUGH WHOM WEEKLY PAYMENTS TO VARIOUS LABOURERS HAD BEEN MADE. THE ASSESSEE SUBMITTED THAT ACTION OF THE ASSESSING OFFICER IN R EJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT STATING THAT THE PAYMENTS MADE TO LABOURERS ARE NOT VERIFIABLE IN SPITE OF SUBMISSION OF RELEVANT EVIDENCES IS NOT CORRECT. 6. THE CIT(A) HELD THAT IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED WHATEVER WAS NEEDED BY THE AO AND THE AO HAS POINTED OUT THAT IN AS MUCH AS THE VOUCHERS FOR LABOUR PAYMENTS, ARE 3 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= CONCERNED, THE PAYMENTS WERE MADE THROUGH A REGISTE R HAVING COLUMNS LIKE NAME OF THE PERSON/DATES OF WOR K IN A WEEK/ NO. OF DAYS WORKED/ WAGES PER DAY/TOTAL WAG ES/ DATE OF PAYMENT/SIGNATURE OR THUMB IMPRESSION. THE CIT(A) OBSERVED THAT THE AO WAS NOT IMPRESSED THE W AY SUCH REGISTER WAS MAINTAINED, INSTEAD, THE AO WAS O F THE VIEW THAT ALL THE INDIVIDUAL VOUCHERS FOR ALL THE L ABOURERS FOR THEIR WEEKLY LABOUR PAYMENTS NEEDS TO BE MAINTA INED. FOR THIS REASON, THE AO HAS REJECTED THE BOOKS OF A CCOUNT AND RESORTED TO ESTIMATION AT 12.5% ON THE GROSS RE CEIPTS MINUS RECOVERIES. THE CIT(A) STATED THAT NOTHING WR ONG COULD BE ATTRIBUTED TO THE WAY THE EVIDENCES WERE MAINTAINED FOR LABOUR PAYMENTS, NEVERTHELESS HE POI NTED OUT THAT MAINTAINING INDIVIDUAL VOUCHERS COULD BE M ORE AUTHENTIC. THE CIT(A) FURTHER STATED THAT THERE IS NO MALA FIDE INTENTION ON THE PART OF THE ASSESSEE AND MERE LY BECAUSE LEAKAGE OF REVENUE IS SUSPECTED FROM MAINTA INING THE EVIDENCES FOR LABOUR PAYMENTS, THE WHOLE LOT OF BOOKS COULD NOT BE REJECTED, PROVIDED NO OTHER DEFECTS WE RE POINTED OUT BY THE AO. 7. SINCE, THERE IS A FINDING THAT LEAKAGE OF REVENUE I S POSSIBLE, IN THE GIVEN FACTUAL BACKGROUND OF THE CA SE, WHICH COULD NOT BE DENIED, THE CIT(A) HELD THAT END S OF JUSTICE ARE MET IF 1% OF LABOURER EXPENSES OF RS. 4,16,89,874 I.E., RS. 4,16,900 IS ADDED TO THE RETU RNED INCOME AT RS. 10,88,270 AND THE CIT(A) DIRECTED THE AO ACCORDINGLY. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 8. BEFORE US, THE LEARNED AR SUBMITTED THAT T HE NAMES AND ADDRESSES O F ALL THESE 33 MEMBERS HAVE BEEN 4 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= CLEARLY MENTIONED ON THE BACK SIDE OF THE PAYMENT VOUCHERS. THE NO. OF MALE WORKERS AND NO. O F FEMALE WORKERS INCLUDING THE NO. OF DAYS WORKED DURING THE WEE K HAS BEEN CLEARLY MENTIONED IN EACH AND EVERY PAYMEN T VOUCHER . FURTHER, THESE 33 MEMBERS, IN TURN OBTAINED EITHER SIGNATURES OR THUMB IMPRESSION OF ALL THE LABO U RERS TO WHOM THEY HAVE MADE PAYMENTS ACKNOWLEDGING THE RECEIPT OF LABO U R PAYMENTS IN A SEPARATE SHEET AND HANDING OVER THE SAME TO THE ASSESSEE AFTE R MAKING THE PAYMENTS TO VARIOUS LABO U RERS. COPIES OF ALL THE PAYMEN T VOUCHERS TO LABO U R ER S AND ALSO COPIES OF SHEETS WITH SI G NATU RES OR THUMB IMPRESSIONS OF ALL THE LABO U RERS TO WHOM PAYMENTS WERE MADE THROUGH THESE 33 MEMBERS HAVE BEEN SUBMITTED. 9. THE AR FURTHER S U BMI TTED T HAT IT HAS PRODUCED ALL THE RELEVAN T BILLS AND VOUCHERS IN RESPECT OF EXPENDITURE CLAIMED IN THE PROFI T AND LOSS ACCOUNT EXCEPT FOR RECOVERIES MADE BY THE RELEVAN T DEPARTMENTS ALONG WITH THE BOOKS OF ACCOUNT ON 14-11-2011 INCLUDING THE LABO U R VOUCHERS OBTAINED FROM ALL THE 33 MEMBER S ALONG WITH THE ABOVE MENTIONED SHEETS WITH EITHER SIGNATURES OR THUMB IMPRESSIONS OF ALL THE LABO U RERS ACKNOWLEDGING THE RECEIPT OF PAYMENTS MADE TO THEM. 10. THE AR SUBMITTED THAT T HOUGH THE ASSESSEE PRODUCED BILLS AND VOUCHERS IN RESPECT OF EXPENDITURE CLAIMED IN THE PROFIT & LOSS ACCOUNT ALONG WITH BOOKS OF ACCOUNT AND OTHER RELEVANT DETAILS AS SOUGHT BY THE ASSESSING OFFICER ON 14.11.2011, THE ASSESSING OFFICER ISSUED A LETTER O N 23.11. 2011 MENTIONING THAT 'PLEASE STATE AS TO WHY INCOME SHOULD NOT BE ESTIMATED AS NO PROPER BILLS A ND 5 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= VOUCHERS ARE FURNISHED'. COPY OF THE ASSESSEE 'S LETTER SUBMITTED ON 14-11-2011 AS WELL AS A COPY OF THE LE TTER DT 23-11-2011 ISSUED BY THE ASSESSING OFFICER ARE KEPT ON RECORD AS DOCUMENT NO S . 5 AND 6. WHEN THE ASSESSEE BROUGHT FACT OF PRODUCING PROPER BILLS AND VOUCHERS IN RESPECT OF THE EXPENDITURE CLAIMED IN THE PROFIT & LOSS ACCOUNT VIDE ITS LETTER DT. 29-11-2011 TO THE NOTICE OF THE ASSESSING OFFICER, HE ACCEPTED THE SUBMISSION OF PR OPER BILLS AND VOUCHERS IN RESPECT OF THE EXPENDITURE CL AIMED IN THE PROFIT & LOSS ACCOUNT ALONG WITH THE BOOKS O F ACCOUNT ON 14-11-2011 VIDE HIS LETTER DT. 09- 1 2-2011 . COPIES OF THE ASSESSEE'S LETTER DT. 29-11-2011 AND ALSO A COPY OF THE ASSESSING OFFICER'S LETTER DT. 09-12-2011 ARE KEPT ON RECORD AS DOCUMENT NOS. 7 AND 8. 11. THE AR SUBMITTED THAT T HE ASSESSING OFFICER VIDE HIS LETTER DT. 09-12-2011, PROPOSED TO REJECT THE BOOKS OF ACCOUNT STATING THAT THE ASSESSEE PRODUCED SELF MAD E VOUCHERS, SINCE THE NAMES AND ADDRESSES OF THE PERS ONS TO WHOM PAYMENTS WERE MADE ARE NOT AVAILABLE ON REC ORD AND HENCE THE EXPENDITURE IS NOT VERIFIABLE IN RESP ECT OF PAYMENTS MADE TOWARDS LABOUR, SAND, GRAVEL, METAL E TC., THOUGH THE RELEVANT NAMES AND ADDRESSES ARE AVAILAB LE ON THE BACK SIDE OF THE RELEVANT PAYMENT VOUCHERS. WHEN THE ASSESSEE BROUGHT THE FACT OF AVAILABILITY OF RELEVANT NAM ES AND ADDRESSES ON THE BACK OF PAYMENT VOUCHERS TO THE NOTICE OF THE ASSESSING OFFICER VIDE ITS LETTER DT. 16-12-2012, THE ASSESSING OFFICER HAS CONFIRMED THE AVAILABILITY OF THE RELEVANT NAMES AND ADDRESSES OF THE LABO U RERS IN POINT NO. 5 (PAGE NO. 4) OF THE ASSESSMENT ORDER. COPY OF THE ASSESSEE 'S LETTER DATED 16-12-2012 IS BROUGHT ON RECORD AS DOCUMENT NO. 9. 6 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= 12. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. THE LEARNED DR FURTHER SUBMITTED THAT THE SE IMPRESSIONS APPEARED TO BE SIMILAR AND HENCE CANNOT BE RELIED UPON. THE LEARNED DR POINTED OUT THAT IN PO INT NO. 6 THE ASSESSING OFFICER STATED THAT VOUCHERS SHOUL D BE AVAILABLE FROM THE PERSONS TO WHOM THE PAYMENTS WER E MADE, EITHER THEIR SIGNATURE OR THUMB IMPRESSION SH OULD BE AVAILABLE. ONLY THEN IT CAN BE SAID THAT THE EXPENDITURE IS VERIFIABLE. THE DR STATED THAT INST EAD OF SIGNATURE OR THUMB IMPRESSION OF INDIVIDUAL LABOURE RS 33 HONEST MEMBERS HAVE BEEN SELECTED AS AGENTS WHICH MAKES THE EXPENDITURE UNVERIFIABLE. 13. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT THE ASSESSING OFFICER HIMSELF CONFIRMED THE FACT OF PRO DUCING PROPER BILLS AND VOUCHERS IN A LETTER ISSUED BY HIM ON 9.12.2011. FURTHER, THE NAMES AND ADDRESSES OF THE LABOURERS FROM WHOM PAYMENT VOUCHERS WERE OBTAINED ARE AVAILABLE ON RECORD. HOWEVER, THE DEPARTMENT H AS TAKEN A PLEA THAT THE CIT(A) HAS GIVEN RELIEF IN TH IS CASE WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFI CER OR WITHOUT CALLING FOR ANY REMAND REPORT. 14. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRODUCED NECESSARY DETAILS AT PAGE NOS. 40 TO 55 OF THE PAPER BOOK AND STATED THAT HE HAS PRODUCED ALL THE DETAILS PERTAINING TO LABOUR PAYMENTS AND EVIDENCES BEFORE THE ASSESSING OFFICER. 15. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE O F 7 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= SAINATH ESTATES (P) LTD. VS. DCIT (142 ITR 370) (HY D) WHEREIN THE TRIBUNAL HELD AS UNDER: '36. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES ON THE ISSUE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS A FACT ON RECORD THAT THE ASSESSING OFFICER HAS DISALLOWED 10% OF THE EXPENDITURE CLAIMED SINCE THE ASSESSEE DID NOT PRODUCE THE NECESSARY DETAILS ALONG WITH SUPPORTING EVIDENCE IN RESPECT OF THE EXPENSES CLAIMED. THE CIT(A) HAS DELETED THE ADDITION MADE BY OBSERVING THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT. WHEN THE ASSESSEE HAS NOT SUBMITTED THE DETAILS CALLED FOR BY THE ASSESSING OFFICER, HE WAS LEFT WITH NO OPTION BUT TO DISALLOW PART OF THE EXPENSES ON AD-HOC BASIS. THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE IN TOTO. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT A DISALLOWANCE OF 5% OF THE EXPENDITURE UNDER BOTH THE HEADS WOULD SERVE THE PURPOSE. WE ORDER ACCORDINGLY. THE GROUND RAISED BY THE DEPARTMENT IS PARTLY ALLOWED.' 16. THE LEARNED COUNSEL FURTHER SUBMITTED THAT FOLLOWING DECISION IN THE CASE OF SAINATH REAL ESTA TES (P) LTD. THE DISALLOWANCE SHALL BE RESTRICTED TO 5% OF THE CASH PAYMENTS. 17. IN OUR OPINION, SINCE THE ASSESSEE HAS PROVED THAT IT HAS PRODUCED PROPER BILLS/ VOUCHERS AND THE ASSE SSING OFFICER HAS CONFIRMED THE AVAILABILITY OF RELEVANT NAMES AND ADDRESSES OF THE LABOURERS VIDE HIS LETTER DATE D 16.12.2012, HENCE IT IS NOT NECESSARY FOR THE CIT(A ) TO ASK FOR A REMAND REPORT. WE FIND THAT DUE TO DISCREPAN CIES FOUND IN THE ACCOUNTS, THE ASSESSING OFFICER HAS ESTIMATED THE INCOME AT 12.5% OF THE GROSS BILLS MI NUS RECOVERIES AND REJECTED THE BOOKS OF ACCOUNT. TAKI NG A 8 ITA NO. 1644/HYD/2012 M/S. TIRUMALA CONSTRUCTIONS. ======================= CONSISTENT VIEW, AS IN THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF SAINATH ESTATES PVT. LTD. (SUPRA) AND HYDERABAD HOUSE PVT. LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 5 % OF THE LABOUR PAYMENTS. 18. IN THE RESULT, APPEAL OF THE DEPARTMENT IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 5 TH SEPTEMBER, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 5 TH SEPTEMBER, 2014 TPRAO COPY TO: 1. THE DEPUTY CIT, CIRCLE - 2(1), 2 ND FLOOR, AAYAKAR BHAVAN, KT ROAD, TIRUPATI. 2. M/S. TIRUMALA CONSTRUCTIONS, 18 - 4 - 111/2, RAILWAY COLONY, TIRUPATI. 3. THE CIT(A), GUNTUR . 4. THE CIT, TIRUPATI . 5. THE DR, B - BENCH, ITAT, HYDERABAD.