M/s R. K. Bajpai, Auraiya V. C.I.T.-1, Agra

ITA 170/AGR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1971 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DIPENDRA MOHAN
• Keywords: Depreciation; Assessment record
• Section: 143(3); 194C; 263; 63

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.170/AG/2013 ASSESSMENT YEAR:2008-09 M/S R.K. BAJPAI, VS. THE CIT-I AURAIYA AGRA PAN NO. AAFFR8521G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. DIPENDRA MOHAN RESPONDENT BY : SH. RAJARSHI DWIVEDY DATE OF HEARING : 27/01/2016 DATE OF PRONOUNCEMENT : 26/04/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(1), AGRA DT. 26/03/2013, PASSED UNDER SECTION 263 OF TH E INCOME TAX ACT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. BECAUSE THE LD. COMMISSIONER OF INCOME TAX-I, AG RA HAS ERRED N LAW AND ON FACTS IN TREATING PAYMENTS MADE TO AMANI LABOUR (DAILY WAGES) AS AMOUNT PAID TO CONTRACTORS FOR SUPPLY OF LABOUR AND TRANSP ORTATION AND MAKING ADDITION OF RS. 86,65,626/- U/S 40A(IA) OF THE INCOME TAX AC T, 1961. 2. BECAUSE THE LD. CIT HAS ERRED IN LAW AND ON FACT S IN DISALLOWING THE CLAIM OF WRITE OFF OF TEMPORARY STRUCTURES AT RS. 13,82,3 00/- BECAUSE THE ABOVE AMOUNT HAS BEEN CLAIMED ONLY ONCE AND NOT TWICE AS ALLEGED , THEREFORE THE QUESTION OF DOUBLE DEDUCTION DOES NOT ARISE. 3. BECAUSE THE LD. CIT HAS ERRED IN LAW AND ON FACT S IN CHALLENGING THE GENUINITY OF PURCHASES OF RS. 15,95,001/- MADE IN T HE MONTH OF FEBRUARY MERELY ON THE GROUND THAT DUE TO TYPOGRAPHICAL ERROR THE D ATE OF END OF MONTH WAS WRONGLY MENTIONED AS 31.02.2008 INSTEAD OF 29.02.20 08. 4. BECAUSE THE LD. CIT HAS ERRED IN LAW AND ON FACT S IN TREATING THE PURCHASES MADE ON DIFFERENT DATES FROM M/S BAJRANG INT UDHYOG- RS. 47,31,100/- AND M/S RAHIMUDDIN & SONS- RS. 53,60,594/- AS INGEN UINE ON THE PRESUMPTION THAT THESE PARTIES ARE NOT REGISTERED WITH THE TRADE TAX DEPARTMENT AND ARE ALSO LIABLE TO GET THEIR ACCOUNTS AUDITED U/S 44AB OF THE INCOM E TAX ACT, 1961. WHEREAS, THE ASSESSEE HAS COMPLETE BILLS AND VOUCHERS OF THE PUR CHASES MADE FROM THEM AND THE ASSESSEE SHOULD NOT BE HELD RESPONSIBLE IF THES E PERSONS ARE PRESUMED TO BE DEFAULTERS. 2 5. BECAUSE THE LD. CIT HAS ERRED IN LAW AND ON FACT S IN ADDING BACK THE AMOUNT OF PURCHASES OF RS. 10,09,208/- MADE ON 31. 03.2008, AS IT IS NOT BEING REFLECTED IN CLOSING STOCK OR WORK IN PROGRESS. HE HAS COMPLETELY IGNORED THE FACT THAT AS A CONSISTENTLY ADOPTED ACCOUNTING POLICY TH E ASSESSEE TREATS THE STOCK DELIVERED AT SITE AS CONSUMED AND NEITHER INCLUDES THE SAME IN OPENING NOR IN CLOSING STOCK. 6. BECAUSE THE LD. CIT HAS ERRED IN LAW AND ON FACT S IN MAKING DISALLOWANCES UNDER SECTION 40A(IA) OF THE INCOME TAX ACT, 1961 O F A SUM OF RS. 4,92,250/- DEBITED TOWARDS RENT OF EQUIPMENT AND RS. 34,150/- AS LEGAL EXPENSE AS NO TDS HAS BEEN MADE. HE HAS FAILED TO APPRECIATE THAT THE SE PAYMENTS HAVE BEEN MADE TO DIFFERENT PERSONS AND NO SINGLE PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A SINGLE PERSON IS OUTSIDE THE LIMIT PRESCR IBED U/S 194 I AND 194 J OF THE INCOME TAX ACT, 1961. 7. BECAUSE THE NOTICE U/S 263 IS BAD IN LAW AND THE LEARNED CIT HAS TAKEN A CONSCIOUS DECISION ON THE ALLOWABILITY OF EXPENSES AND ESTIMATION OF INCOME. TO DISREGARD HIS FINDINGS WOULD TANTAMOUNT TO CHANGE O F OPINION, WHICHIS CONTRARY TO THE PROVISION OF LAW. 8. BECAUSE THE ORDER OF THE LD. CIT, AGRA U/S 263 O F THE IT ACT, IS ARBITRARY , UNJUST, MERELY BASED ON PRESUMPTIONS AND THAT NO ER ROR EXISTED OR PREJUDICE WAS CAUSED TO THE REVENUE, THEREFORE, THE ORDER OF CIT, AGRA PASSED U/S 263 OF THE IT ACT DESERVES TO BE QUASHED. 9. BECAUSE THE ORDER OF LD. CIT, AGRA PASSED U/S 26 3 OF THE IT ACT, 1961, IS INSUPPORTABLE IN LAW AND ON FACTS AND IS ALSO CONTR ARY TO THE DOCTRINE OF FINALITY THEREFORE, DESERVES TO BE QUASHED. ANY OTHER RELIEF OR RELIEFS DEEMED FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE MAY BE GRANTED. 3. BRIEF FACTS RELATING TO THE CASE ARE THAT RETURN DECLARING INCOME OF RS. 10,19,330/- WAS FILED ON 26/09/2008. ASSESSMENT UN DER SECTION 143(3) WAS COMPLETED ON 29/10/2010 AT AN INCOME OF RS. 22,19,3 30/- AFTER MAKING AN ADDITION OF RS. 12,00,000/- ON AGREED BASIS, SINCE THE AO NOTED THAT SOME OF THE VOUCHERS OF PURCHASES AND EXPENSES WERE OF UNVERIFI ABLE NATURE. SUBSEQUENTLY A SHOW CAUSE NOTICE UNDER SECTION 263 OF THE INCOME TAX ACT DT. 11/02/2013 WAS ISSUED TO THE ASSESSEE ON THE FOLLOWING POINTS. I. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE FIL ED MONTH-WISE DETAILS OF PURCHASES MADE DURING THE YEAR VIDE POINT NO. 22 OF HIS UNDATED REPLY. IN THE SAID LIST NATURE OF PURCHASES HAS BEEN MENTIONED IN THE LAST COLUMN OF THE LIST DESCRIBED AS . ON PERUSAL OF LIST IT IS FOUND THAT THE ASSESSEE HAS MADE PAYMENTS TO THE CONTRACTORS FOR SUPPLY OF LABOUR AN D TRANSPORTATION TO THE TUNE OF RS. 86,65,626/-, HOWEVER, NO TDS HAS BEEN MADE ON T HESE PAYMENTS MADE TO THE CONTRACTORS FOR SUPPLY OF LABOUR AND TRANSPORTATION . THEREFORE, AS PER PROVISION OF SECTION 40A(IA) OF THE ACT, AND AMOUNT OF RS. 86,65 ,626/- IS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE FIRM. II. FROM PERUSAL OF ASSESSMENT RECORDS IT IS FOUND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AMOUNTING TO RS. 13,82,300/- O N THE TEMPORARY STRUCTURE OF 3 OFFICE, WHEREAS NO SEPARATE CAPITAL BILLS & VOUCHER S WERE FURNISHED IN SUPPORT OF THIS CLAIM OF CAPITAL NATURE OF EXPENDITURE. THEREF ORE, BY DEBITING THE DEPRECIATION OF RS. 13,82,300/-, THE ASSESSEE HAS C LAIMED DOUBLE DEDUCTION FOR THE SAME AMOUNT. HENCE, AN AMOUNT OF RS. 13,82,300/ - IS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE FIRM. III. FROM PERUSAL OF MONTH-WISE DETAILS OF PURCHASE S MADE DURING THE YEARIT IS NOTICED THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASES TO THE TUNE OF RS. 15,95,001/- FROM FOUR PARTIES NAMELY (I) M/S KUMAR BUILDING MATERIAL, (II) M/S RAHIMUDDIN & SONS, (III) SH. TULA RAM RAJPUT AND (I V) SH. BHANWAR LAL THEKEDAR. THE GENUINENESS OF ABOVE PURCHASES ARE ALSO TO BE V ERIFIED AS THE PURCHASES ARE CLAIMED TO HAVE BEEN MADE ON 31.02.2008. IV. IT IS FURTHER NOTICED THAT THE ASSESSEE FIRM HA S MADE PURCHASES ON DIFFERENT DATES WHICH EXCEEDS RS. 40 LACS FROM FOLLOWING PART IES- A. BAJRANT INT UDYOG RS. 47,31,100/- B. RAHIMUDDIN & SONS RS. 53,60,594/- BOTH ABOVE PARTIES ARE NOT REGISTERED IN THE TRADE TAX DEPARTMENT THOUGH, THE TURNOVER EXCEEDS RS. 40 LACS. THEREFORE, THE GENUIN ENESS OF THE ABOVE PURCHASES NEED TO BE VERIFIED AS THE SELLERS HAVING TURNOVER EXCEEDING RS. 40 LACS IS COVERED U/S 44AB OF THE IT ACT. V. FROM PERUSAL OF ASSESSMENT RECORDS IT IS FURTHER NOTICED THAT THE ASSESSEE HAS NOT SHOWN WORK IN PROGRESS OR CLOSING STOCK OUT OF PURCHASES MADE ON 31.03.2008 TO THE TUNE OF RS. 10,09,208/- FROM FOUR PARTIES. THEREFORE, THIS AMOUNT OF RS. 10,09,208/- SHOULD BE ADDED AS WORK IN PROGR ESS OR CLOSING STOCK AS IT MIGHT NOT HAVE BEEN CONSUMED ON THE SAME DAY. THEREFORE, AN AMOUNT OF RS. 10,09,208/- MAY BE ADDED TO THE TOTAL INCOME OF TH E ASSESSEE. VI. FROM PERUSAL OF PROFIT & LOSS ACCOUNT AND TDS CERTIFICATES IT IS NOTICED THTAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS RECEIVED INTEREST AT RS. 81,507/- AS INTEREST FROM SH. RAMESH LAL PROP. M/S VIDHA MAL IDAN DAS, DIBIAPUR AND CLAIMED TDS OF RS. 8,395/- BUT IN THE PROFIT & LOSS ACCOUNT IT WAS SHOWN AT RS. 45,220/- . HENCE THE DIFFERENCE OF RS. 36,287/- IS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE FIRM. VII. FURTHER, FROM PERUSAL OF PROFIT & LOSS ACCOUN T IT IS NOTICED THAT A SUM OF RS. 4,92,250/- HAS BEEN DEBITED TOWARDS RENT EQUIPMENT AND RS. 34,150/- AS LEGAL EXPENSES. NO TDS WAS MADE BY THE ASSESSEE AS PER PR OVISIONS OF SECTION 194 I AND 194 J ON THE ABOVE AMOUNTS OF EXPENSES. HENCE, AN A MOUNT OF RS. 5,26,400/- [ RS. 4,92,250 + RS. 34,150/- ] IS LIABLE TO BE ADDED U/S 40A(IA) OF THE ACT. 4. DURING PROCEEDINGS BEFORE THE LD. CIT THE ASSESS EE FILED DETAILED SUBMISSION ON THE VARIOUS ISSUES RAISED. AFTER CONS IDERING THE SAME THE LD. CIT HELD THAT ON ALL THE ISSUES RAISED, THE ASSESSMENT ORDER DT. 29/10/2010 WAS ERRONEOUS IN SO FAR AS PRE JUDICIAL TO THE INTEREST OF THE REVENUE AS IT WAS PASSED WITHOUT MAKING SUFFICIENT AND PROPER ENQUIRIES. LD. CIT HELD THAT THE AO DID NOT MAKE ANY ATTEMPT TO VERIFY THE GENUINENESS OF THE V ARIOUS TRANSACTIONS OUTLINED IN THE NOTICE ISSUE UNDER SECTION 263 AND THEREFORE HE SET ASIDE THE ASSESSMENT 4 ORDER AND ASKED THE AO TO PASS A FRESH ORDER AFTER MAKING PROPER ENQUIRIES AND VERIFICATION. 5. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 6. IN ALL THE GROUNDS RAISED BEFORE US THE ASSESSE E HAS CHALLENGED THE EXERCISE OF REVISIONARY POWERS BY THE LD. CIT U/S 2 63 ON VARIOUS ISSUES. 7. BEFORE US THE LD. AR STATED THAT THE ORDER PASSE D BY THE AO WAS NOT ERRONEOUS IN SO FAR AS BEING PRE JUDICIAL TO THE IN TEREST OF THE REVENUE AND CHALLENGED THE VALIDITY OF THE ORDER PASSED UNDER S ECTION 263 BY THE LD. CIT. 8. THE FIRST ISSUE RAISED IN THE PROCEEDING UNDER S ECTION 263, IS THAT, IT WAS FOUND THAT THE ASSESSEE HAD MADE PAYMENT TO CONTRAC TOR FOR SUPPLY OF LABOUR, AND TRANSPORTATION TO THE TUNE OF RS. 86,65,626/- B UT NO TDS HAD BEEN DEDUCTED ON THE SAME. THEREFORE AS PER THE LD. CIT THE AMOUN T OUGHT TO HAVE BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS PER TH E PROVISION OF SECTION 40A(IA) OF THE ACT. WITH REGARD TO THE SAME LD. AR SUBMITTED THAT IT WA S DEMONSTRATED BEFORE THE LD. CIT THAT NO TDS WAS REQUIRED TO BE DEDUCTED ON THE AFOR ESTATED PAYMENTS. LD. AR DREW OUT ATTENTION TO THE ASSESSES LETTER DT. 26/03/2013 PLACED AT PB NO. 3 6 FILED BEFORE THE LD. CIT WHEREIN IT WAS EXPLAINED THAT THE IMPUGNED AMOUNT RELATED TO PAYMENTS MADE TO TEMPORARY LABOUR TO WHOM PAYMENT WAS MADE ON A D AILY BASIS AND SINCE IT WAS NOT POSSIBLE TO RECORD PAYMENT IN THE NAME OF EACH INDI VIDUAL LABOUR, THE SAME WAS SHOWN AGAINST THE NAME OF CONTRACTORS LIKE SH. TULA RAM R AJPUT AND SH. BHAWAR LAL THEKEDAR ETC. THESE CONTRACTORS IN THEIR TURN WOULD TAKE 10% COMMISSION FROM THE LABOURER AND NO PAYMENT WAS BEING MADE BY THE ASSESSEE TO THE CO NTRACTOR THEMSELVES. LD. AR FURTHER STATED THAT THE AFORESAID AMOUNT ALSO INCLU DED PAYMENT MADE ON ACCOUNT OF TRANSPORTATION MADE BY RAM TRANSPORT FOR TAKING TRA CTOR TROLLY, LABOUR ETC. ON RENT FOR TRANSPORT PURPOSES OF THE ASSESSEE. LD. AR STATED T HAT IN THIS CASE ALSO PAYMENT WAS MADE BY THE ASSESSEE DIRECTLY TO THE TRACTOR OWNER FROM WHOM RAM TRANSPORT USED TO TAKE COMMISSION. LD. AR THEREFORE SUBMITTED THAT NO PAYMENT WAS MADE TO ANY CONTRACTOR BUT INFACT IT WAS A DIRECT PAYMENT TO TH E LABOUR OR TO THE TRANSPORTER AND NO PAYMENT EXCEEDED RS. 20,000/- AND THEREFORE THERE W AS NO CASE FOR 5 DEDUCTING ANY TDS ON THE SAME. LD. AR DREW OUR ATTE NTION TO THE DETAILS RELATING TO THE AFORESAID PAYMENT FILED BEFORE THE LD. CIT PLACED A T PB 22-101 IN SUPPORT OF ITS ABOVE PLEADINGS. LD. AR PLACED RELIANCE ON THE DECISION O F THE HYDERABAD BENCH OF ITAT IN THE CASE OF TEJA CONSTRUCTION VS. CIT (2010) 39 SOT (HYD) IN THIS REGARD. ALTERNATIVELY THE LD. AR PLEADED THAT THE ENTIRE AMOUNT HAD BEEN PAID DURING THE YEAR ITSELF WHICH WAS AN ADMITTED FACT AND NOTHING WAS OUTSTANDING FOR PA YMENT. THEREFORE FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. M/S VECTOR SHIPPING SERVICES (P) LTD. MUZAFFARNAGAR IN ITA NO. 122 OF 2 013 DT. 09/07/2013, NO DISALLOWANCE UNDER SECTION 40A(IA) COULD BE MADE ON THE AMOUNT W HICH HAD BEEN PAID DURING THE YEAR. LD. AR THEREFORE PLEADED THAT THERE WAS NO E RROR IN THE ORDER OF THE AO ON THIS COUNT. 9. LD. DR ON THE OTHER HAND STATED THAT THE ASSESSE E HAD HIMSELF ADMITTED BEFORE THE LD. CIT THAT THE PAYMENT WERE MADE TO CONTRACTO R WHICH EXCEEDED THE PRESCRIBED LIMIT UNDER SECTION 194 C AS IS EVIDENT FROM THE DE TAIL / LEDGER ACCOUNT SUBMITTED BY THE ASSESSEE HIMSELF, THEREFORE TDS OUGHT TO HAVE BEEN DEDUCTED BY THE ASSESSEE ON THE SAME IN THE ABSENCE OF WHICH THE ENTIRE PAYMENT WAS LIABLE TO BE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE AS PER THE PROVISION OF SECTION 40A(IA) OF THE ACT. LD. DR THEREFORE STATED THAT THERE WAS A CLEAR ERROR IN THE ORDER OF THE AO WHO HAD NOT LOOKED THIS ASPECT WHILE FRAMING THE ASSESSMENT ON THE ASSESSEE AS A CONSEQUENCE OF WHICH THERE WAS PREJUDICE CAUSE TO T HE REVENUE. THE ORDER PASSED UNDER SECTION 263 ON THIS COUNT WAS THEREFORE VALID . 10. WE FIND THAT ON THIS ISSUE THERE IS NO ERROR I N THE ORDER OF THE AO CAUSING PREJUDICE TO THE REVENUE. THE ASSESSEE HAD DULY DEM ONSTRATED BEFORE THE LD. CIT, THAT IT WAS NOT REQUIRED TO DEDUCT TDS ON THE IMPUGNED PAYMENTS. THE ASSESSEE HAS STATED BEFORE THE LD. CIT THAT NO PAYM ENT WAS MADE FOR SUPPLY OF LABOUR & TRANSPORTATION, IN PURSUANCE TO ANY CONTRA CT FOR THE SUPPLY OF THE SAME. IN FACT, THE ASSESSEE HAD EXPLAINED, THAT THE SO CALLED CONTRACTORS USED TO ONLY FACILITATE PAYMENTS TO VARIOUS TEMPORARY UN SKILLED LABOUR EMPLOYED BY THE ASSESSEE. THE MODUS OPERANDI WAS EXPLAINED AS BEING THAT ENTIRE PAYMENT RELATING TO A GROUP OF LABOURERS BEING MADE TO ONE SO-CALLED CONTRACTOR, WHO IN 6 TURN DISTRIBUTED IT TO THE INDIVIDUAL LABOURERS. TH E ASSESSEE HAD DEMONSTRATED THE SAME THROUGH MONTHLY WAGE SHEETS OF VARIOUS LABOURS ATTACHED TO THE SO CALLED CONTRACTOR WHICH STATED ETC. THE ASSESSEE HAD ALSO STATED THAT IT HAD NOT PAID ANY COMMISSION TO THESE SO-CALLED CONTRACTORS. FURTHER THE ASSESSEE DEMONSTRATED BEFO RE THE LD. CIT THAT NO PAYMENT TO A SINGLE LABOUR EXCEEDED RS. 20,000/- I. E., THE PRESCRIBED LIMIT FOR DEDUCTING TAX AT SOURCE. THE LD. CIT WE FIND HAS NO T CONTROVERTED ALL THESE FACTS. IN FACT THE ENTIRE CASE OF THE LD. CIT RESTS ON THE SUBMISSION OF THE ASSESSEE IN WHICH HE HAS TERMED THESE PERSONS AS CONTRACTOR T HIS ALONE CANNOT LEAD TO THE CONCLUSION THAT THE PAYMENTS WERE MADE TO CONTR ACTOR, WITHOUT CONTROVERTING THE EVIDENCES PRODUCED BY THE ASSESSE E IN SUPPORT OF ITS CONTENTION. IN VIEW OF THE SAME, WE HOLD THAT THE I MPUGNED PAYMENTS OF RS. 86,65,626/- ON ACCOUNT OF LABOUR AND TRANSPORTATION WAS NOT MADE TO CONTRACTORS AND THEREFORE PROVISION OF SECTION 194C OF THE ACT WERE NOT VIOLATED BY THE ASSESSEE. THERE WAS THEREFORE NO ERROR IN TH E ORDER OF THE AO SO AS TO CAUSE PREJUDICE TO THE REVENUE AND THE REVISIONARY PROCEEDINGS ON THIS ISSUE ARE THEREFORE SET ASIDE. 11. THE SECOND ISSUE PERTAINED TO CLAIM OF 100% DEP RECIATION AMOUNTING TO RS. 13,82,300/- ON TEMPORARY STRUCTURES OF OFFICE W HICH THE LD. CIT HELD THAT THE ASSESSEE HAD CLAIMED DOUBLE DEDUCTION SINCE NO BILL S AND VOUCHERS IN SUPPORT OF THIS EXPENDITURE HAD BEEN FURNISHED BY THE ASSES SEE ON THIS ASPECT. LD. AR STATED THAT THIS ISSUE HAD BEEN EXAMINED DUR ING ASSESSMENT PROCEEDING AND DUE REPLY WAS FILED BY THE ASSESSEE AFTER CONSI DERING WHICH THE AO HAD FORMED AN OPINION THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM 100% DEPRECIATION ON THE SAME . LD. AR DREW OUR ATTENTION TO THE QUESTIO N RAISED DURING THE ASSESSMENT PROCEEDING WHEREIN VIDE QUESTION NO. 13 THE ASSESSEE WAS REQUIRED TO FURNISH DETAILS OF ALL FIXED ASSETS ACQUIRED DUR ING THE YEAR AND DEPRECIATION CLAIMED THEREON PLACED AT PAPER BOOK PAGE NO. 10. L D. AR FURTHER DREW OUR 7 ATTENTION TO THE REPLY FURNISHED BY THE ASSESSEE PL ACED AT PAPER BOOK PAGE NO. 17 WHEREIN THE ASSESSEE HAD CLEARLY STATED THAT IT HAD NOT ACQUIRED ANY FIXED ASSETS DURING THE YEAR AND FURTHER THAT IT WAS CARR YING OUT WORK AT VARIOUS PLACES LIKE BHAGYA NAGAR ROAD, ERWA KATRA ROAD, GOPIYAPUR, ITAILI, GARHWANA, SODHEYPUR ETC. WHEREIN IT HAD TO CONSTRUCT TEMPORAR Y STRUCTURES OF THIS OFFICE WHICH WERE DEMOLISHED ON COMPLETION OF THE WORK. TH E ASSESSEE HAD FURTHER STATED THAT IT SPEND AN AMOUNT OF RS. 13,82,300/- O N THE CONSTRUCTION OF SUCH TEMPORARY STRUCTURES. THE REPLY OF THE ASSESSEE IS REPRODUCED HEREUNDER. ! , #$ % ! , !& , '%(), *$, !+ , '-. /0 , #$ 1$ 2 , /&$ 34 5 ( 1 6 7 89 34 : #$ ; ! &$<$ : ) +/= /== > ? 1382300.00 E5 - E , ( ' E5 F ! G H-IJ K$ $ ( - (%)2 #$ $ L!! ) M #$ &$<$ ! N% ! MO LD. AR STATED THAT IT IS EVIDENT THAT THIS MATTER H AD BEEN INVESTIGATED DURING THE ASSESSMENT PROCEEDING ALSO AND DUE REPLY HAD BEEN FURNISHED BY THE ASSESSEE, AFTER CONSIDERING WHICH THE AO HAD AL LOWED THE ASSESSEE DEPRECIATION @100% FOR TEMPORARY STRUCTURE CONSTRUC TED. IN SUCH CIRCUMSTANCES IT COULD NOT BE SAID THAT THERE WAS ANY ERROR IN TH E ORDER OF THE AO, SO AS TO GIVE REVISIONARY POWER FOR THE SAME TO THE LD. CIT UNDER SECTION 263. 12. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. CIT. 13. WE FIND THAT THIS ISSUE HAD BEEN INVESTIGATED D URING ASSESSMENT PROCEEDINGS AND THE AO AFTER CONSIDERING THE ASSESS EE REPLY, HAD TAKEN A PLAUSIBLE VIEW AND ALLOWED THE ASSESSEE 100% DEPREC IATION ON THE TEMPORARY STRUCTURE. MOREOVER THE CASE OF THE LD. CIT WE FIND IS THAT IN THE ABSENCE OF BILLS AND VOUCHERS PERTAINING TO THE IMPUGNED EXPENSES, T HE ASSESSEE HAS CLAIMED DOUBLE DEDUCTION. WE FAIL TO UNDERSTAND HOW THE ASS ESSEE HAS CLAIMED DOUBLE DEDUCTION WHEN THE FACT IS THAT THE IMPUGNED AMOUNT WAS DEBITED TO CAPITAL ACCOUNT AND 100% DEPRECIATION CLAIMED THEREON. 8 THE ASSESSMENT ORDER WE THEREFORE HOLD CANNOT BE HE LD TO BE ERRONEOUS AND THE LD. CIT HAS WRONGLY INVOKED REVISIONARY POWERS UNDER SECTION 263 OF THE ACT ON THIS ISSUE. 14. THE THIRD ISSUE, PERTAINS TO PURCHASES MADE FRO M FOUR PARTIES NAMELY (I) M/S KUMAR BUILDING MATERIAL, (II) M/S RAHIMUDDIN & SONS, (III) SH. TULA RAM RAJPUT AND (IV) SH. BHANVAR LAL THEKEDAR AMOUNTING IN ALL RS. 15,95,001/-WHICH AS PER THE LD. CIT NEEDED TO BE VERIFIED, SINCE THE SAME W ERE MADE ON 31/02/2008. LD. AR SUBMITTED THAT WITH REGARD TO THE SAME COPIE S OF BILLS RELATING TO THE SAME HAD BEEN SUBMITTED BEFORE THE LD. CIT. FURTHER IT WAS STATED THAT THE BILL WAS RAISED ON A SINGLE DATE SINCE IT WAS A COMPILATION OF PURCHASES MADE ON VARIOUS DATES BY THE ASSESSEE AGAINST WHICH A SINGLE BILL WAS RAISED MON TH WISE BY THE PARTIES ON A FIXED DATE. LD. AR SUBMITTED THAT THIS WAS EVIDENT FROM T HE COPIES OF BILLS SUBMITTED WHICH MENTIONED THE VARIOUS DATES ON WHICH PURCHASE WAS M ADE BY THE ASSESSEE. WITH REGARD TO PAYMENT MADE TO SH. TULA RAM RAJPUT AND S H. BHAWAR LAL THEKEDAR. LD. AR SUBMITTED THAT THEY WERE PERSONS WHO SUPPLIED TEMPO RARY LABOURERS TO THE ASSESSEE ON DAILY BASIS AND SINCE PAYMENTS COULD NOT BE RECORDE D IN THE NAME OF EACH LABOUR, SINCE THE LABOUR CHANGED EVERY DAY THE PAYMENT WAS SHOWN TO BE MADE IN THE NAME OF THE CONTRACTOR. LD. AR SUBMITTED THAT THESE CONT RACTORS HAD NO AGREEMENT WITH THE ASSESSEE AND RECEIVED NO PAYMENT FOR THEIR SERVICES FROM THE ASSESSEE BUT INFACT RECEIVED COMMISSION FROM THE LABOUR THEMSELVES. FURTHER THE LD. CIT ALSO RAISED THE ISSUE OF PURCHA SE MADE FROM TWO DIFFERENT PARTIES I.E. BAJRANG INT UDYOG AMOUNTING TO RS. 47, 31,100/- AND RAHIMUDDIN & SONS AMOUNTING TO RS. 53,60,594/- WHOSE GENUINENES S NEEDED TO BE VERIFIED SINCE THE PARTIES WERE NOT REGISTERED WITH THE TRAD E TAX DEPARTMENT THOUGH THERE TURNOVER EXCEEDED RS. 40 LACS. WITH REGARD TO PURCHASES MADE FROM THE BAJRANT INT UDYOG AND RAHIMUDDIN & SONS. LD. AR STATED THAT THE LD. CIT HAD DOUBTED THESE PURCHA SES FOR THE REASON THAT THEY WERE NOT REGISTERED WITH THE TRADE TAX DEPARTMENT THOUGH THEIR TURNOVER EXCEEDED RS. 40 LACS. LD. AR STATED THAT THE ASSESSEE HAD FURNISHED COMPLETE BILLS AND VOUCHERS OF THE PURCHASE MADE FROM THEM AND THE ASSESSEE SHOULD NOT BE HELD RESPONSIBLE IF THESE 9 PERSONS WERE PRESUMED TO BE DEFAULTERS. LD. AR FURTHER STATED THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSEE HAD HIMSELF SUR RENDERED AN AMOUNT OF RS. 12 LACS ON ACCOUNT OF UNVERIFIABLE PURCHASE AND EXP ENSES AND THEREFORE CLEARLY THIS ISSUE HAD BEEN CONSIDERED DURING THE ASSESSMEN T PROCEEDING AND THEREFORE COULD NOT BE A SUBJECT MATTER OF REVISION UNDER SEC TION 263. BESIDE LD. AR STATED THAT M/S BAJRANT INT. UDYOG AND RAHIMUDDIN & SONS N OT BEING REGISTERED WITH THE TRADE TAX DEPARTMENT WAS NOT THE FAULT OF THE ASSES SEE AND NOTHING ADVERSE COULD BE ATTRIBUTED TO THE ASSESSEE ON THIS ACCOUNT . 15. LD. DR ON THE OTHER HAND STATED THAT WITH REGAR D TO PURCHASES MADE FROM THE FOUR PARTIES AMOUNTING TO RS. 15,95,001/- IT WAS FO UND FROM THE COPIES OF BILLS SUBMITTED BY THE ASSESSEE THAT THERE WERE VARIOUS DISCREPANCY IN THE SAME. LD. DR POINTED OUT THE OBSERVATIONS OF THE LD. CIT IN THIS REGARD REPR ODUCED AT PARA 6 OF ITS ORDER: 6. REGARDING PURCHASE CLAIMED TO HAVE BEEN MADE FRO M FOUR PARTIES ON 31.02.2008 THE ASSESSEE FIRM IN ITS REPLY HAS STATED THEREFORE, THE EN TIRE PURCHASE MADE IN THE MONTH OF FEBRUARY, 2008 CANNOT BE HELD TO BE BOGUS JUST BECA USE OF A TYPOGRAPHICAL ERROR. ASSESSEES CONTENTION IS NOT CORRECT. THE ENTIRE PURCHASE MADE DURING THE MONTH OF FEBRUARY IS NOT BEING DOUBT. ASSESSEE HAS FURNISHED COPIES OF BILLS OF M/ S KUMAR BUILDING MATERIAL AND M/S RAHIMUDDIN & SONS. FROM PERUSAL OF THESE COPIES IT IS NOTICED THAT THE BILL NO. 940 OF RS. 9163/- IS DATED 01.02.2008 TO 29.02.2008 WHEREAS IN THE LIST OF MON TH WISE PURCHASES FURNISHED BY THE ASSESSEE BEFORE THE AO BILL NO. 940 OF RS. 9163/- IS MENTION ED IN MONTH OF JULY 2007DATED 31.03.2007. SIMILARLY, BILL NO. 340 DATED 31.07.2007 IS LISTED IN THE MONTH OF FEBRUARY, 2008 DATED 31.02.2008. SIMILARLY BILL NO. NIL DATED 31.01.2008 OF RAHIMUDD IN & SONS IS NOT MENTIONED INTEREST THE LIST IN THE MONTH OF JANUARY, 2008. LD. DR THEREFORE STATED THAT THE GENUINENESS OF THE SE PURCHASES NEEDED TO BE VERIFIED IN THE LIGHT OF THE ABOVE FACTS AND THEREFORE THERE WAS ERROR IN THE ORDER OF THE AO WHO HAD NOT EXAMINED THIS ISSUE DURING ASSESSMENT PROCE EDING CAUSING PREJUDICE TO THE REVENUE AND HENCE THE PROCEEDING UNDER SECTION 263 ON THIS COUNT WERE VALID. AS REGARD PURCHASES ABOVE RS. 40 LACS MADE FROM BAJRAN G INT UDYOG AND RAHIMUDDING & SONS. LD. DR RELIED UPON THE ORDER OF THE LD. CIT. 16. WE FIND THAT DURING ASSESSMENT PROCEEDINGS, THE ISSUE OF PURCHASES WAS CONSIDERED BY THE AO AND A LUMP SUM ADDITION OF RS. 12 LACS ON ACCOUNT OF UNVERIFIED PURCHASES WAS MADE. HAVING DONE SO, WE FIND THAT TH E LD. CIT INTENDS TO REVISIT THIS VERY ISSUE IN THE CURRENT PROCEEDINGS AND THAT TOO FOR V ERIFYING THE GENUINENESS OF THE IMPUGNED PURCHASES. MEANING THEREBY THAT THERE IS N O CATEGORICAL FINDING OF ANY ERROR IN THE ORDER OF THE AO. IN OUR CONSIDERED OPINION, REVISIONARY POWERS UNDER SECTION 263 CANNOT BE EXERCISED IN SUCH CIRCUMSTANCES. MOREOVER , THE FACT THAT TWO SUPPLIES ARE 10 PRESUMABLY DEFAULTERS BEING NOT REGISTERED UNDER TH E RELEVANT LAW, DOES NOT LEAD TO ANY ADVERSE INFERENCE BEING DRAWN AGAINST THE ASSES SEE, MORE PARTICULARLY WHEN NO DEFECT HAS BEEN FOUND IN THE BILLS AND VOUCHERS PRO DUCED BY THE ASSESSEE. FURTHER WE FIND THAT IN THE ASSESSMENT ORDER PASSED IN CONSEQU ENCE TO THE ORDER PASSED UNDER SECTION 263, NO ADDITION ON THIS ISSUE HAS BEEN MAD E. THEREFORE THE ISSUE REMAINS PURELY ACADEMIC IN NATURE. WE THEREFORE HOLD THAT ON THE I SSUE OF PURCHASES MADE FROM FOUR PARTIES AMOUNTING TO RS. 15,95,001/- & RS 47,31,400 /- FROM M/S BAJRANG INT UDYOG, & RS. 53,60,594/- FROM M/S RAHIMUDDIN & SONS, THERE IS NO CATEGORICAL FINDING OF ANY ERROR IN THE ORDER OF THE AO AND THE ORDER OF THE LD. CIT ON THESE ISSUES IS ALSO SET ASIDE. 17. THE NEXT ISSUE PERTAINS TO PURCHASE MADE ON 31/ 03/2008 BUT NOT SHOWN AS WORK IN PROGRESS. ON THIS ISSUE LD. AR SUBMITTED THAT IT HAD BEEN EXPLAINED TO THE LD. CIT THAT ALL PURCHASES MADE ON THE 31/03/2008 WAS UTILIZED THE SAME DAY ITSELF AND THEREFORE NO AMOUNT REMAINED AS STOCK AS SUCH. LD. AR STATED THA T BEING IN THE BUSINESS OF CONSTRUCTION THE RAW MATERIAL PURCHASED BY THE ASSE SSEE BEING RODI, SARIYA ETC WAS NEVER KEPT IN STOCK SINCE THERE WAS NO PLACE OR STO RE HOUSE FOR KEEPING AS STOCK NOR WAS THERE ANY REQUIREMENT TO KEEP STOCK OF THE AFOR ESAID RAW MATERIAL. LD. AR SUBMITTED THAT ALL RAW MATERIAL PURCHASED WAS LAID OUT ON THE CONSTRUCTION SITE ITSELF AND CONSUMED IN THE CONSTRUCTION WORK ON THE SAME D AY THEREFORE THE ASSESSEE NEVER SHOWED ANY STOCK OF RAW MATERIAL IN ITS BOOKS OF AC COUNT. 18. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE LD. CIT AND STATED THAT THIS MATTER REQUIRED VERIFICATION SINCE THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO PROVE THAT SIMILAR PURCHASES MADE IN THE PRECEDING YEAR WERE NOT SHOWN AS OPENING STOCK IN THIS YEAR. THEREFORE LD. DR PLEADED THAT P ROCEEDING UNDER SECTION 263 ON THIS COUNT WERE VALID. 19. WE FIND THAT NO ADDITION ON THIS ACCOUNT HAS BE EN MADE IN THE ASSESSMENT ORDER PASSED IN CONSEQUENCE TO THE ORDER PASSED UNDER SEC TION 263. ANY ADJUDICATION ON THIS ISSUE IS OF NO CONSEQUENCE AND IT REMAINS ONLY ACAD EMIC IN NATURE. 20. THE NEXT ISSUE RELATES TO INTEREST AMOUNTING TO RS. 36,287 NOT FOUND TO HAVE BEEN INCLUDED IN THE INCOME OF THE ASSESSEE. WHILE THE T DS CERTIFICATE SHOWED THAT THE ASSESSEE HAD RECEIVED INTEREST OF RS. 81,507/- DURI NG THE YEAR FROM VIDHAMAL IDANDAS, DIBIYAPUR ON WHICH TDS OF RS. 8,395/- HAD BEEN DEDU CTED, THE ASSESSEE HAD SHOWN ONLY 11 RS. 45,330 IN ITS P&L ACCOUNT AND HENCE THE DIFFERE NCE OF RS. 36,287/- AS PER THE LD. CIT WAS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. LD. AR STATED THAT DURING THE IMPUGNED AY THE ASSES SEE HAD RECEIVED INTEREST OF ONLY RS. 45,220/- WHICH IT HAD DULY REFLECTED IN THE P& L ACCOUNT. SINCE THE BALANCE AMOUNT OF RS. 36,287/- HAD NOT BEEN RECEIVED BY IT DURING THE YEAR THERE WAS NO OCCASION TO INCLUDE THE SAME IN ITS P&L ACCOUNT AND HENCE THERE WAS NO ERROR IN THE ORDER OF THE AO ON THIS COUNT. LD. DR STATED THAT THE ASSESSEE HAD NOT FURNISHED A NY EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT IT ONLY RECEIVED INTEREST OF RS. 45,220/- DURI NG THE YEAR AND THEREFORE THE PROCEEDING UNDER SECTION 263 ON THIS COUNT WAS VALI D. 21. ON THIS ISSUE, WE UPHOLD THE ORDER OF THE LD. C IT, SINCE CLEARLY THERE WAS AN ERROR IN THE ORDER OF THE AO, HAVING NOT EXAMINED T HE ISSUE OF TAXABILITY OF INTEREST, WHICH RESULTED IN AN AMOUNT OF RS. 36,287 /- ESCAPING ASSESSMENT THUS CAUSING PREJUDICE TO THE REVENUE. THE ASSESSSEE WE FIND HAS GIVEN NO PLAUSIBLE EXPLANATION FOR NOT DISCLOSING THE IMPUGNED AMOUNT IN ITS PROFIT & LOSS ACCOUNT. 22. WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. 23. THE NEXT ISSUE PERTAINS TO DISALLOWANCE OF REN T PAID FOR EQUIPMENT AMOUNTING TO RS. 4,92,250/- AND LEGAL EXPENSES OF R S. 34,150/- ON WHICH NO TDS WAS FOUND TO HAVE BEEN DEDUCTED AND WHICH AS PER TH E LD. CIT HAD TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE AS PER THE PROVISION OF SECTION 40A(IA) OF THE ACT. ON THE ISSUE OF LEGAL EXPENSES LD. AR DREW OUR ATTE NTION TO THE COPY OF ACCOUNT OF LEGAL EXPENSES AND POINTED OUT THAT THE SAME PER TAINED TO TWO PAYMENTS OF RS. 16,050/-AND 18,100/- MADE TO TWO DIFFERENT PERS ONS AND SINCE THE PAYMENT TO A SINGLE PERSON DID NOT EXCEED RS. 20,000/- THER E WAS NO REQUIREMENT TO DEDUCT TAX ON THE SAME. AS REGARD THE RENT PAID, TH E ASSESSEE DREW OUR ATTENTION TO THE ACCOUNT OF RENT OF EQUIPMENT AND P OINTED OUT THAT THE PAYMENT DID NOT EXCEED THE SPECIFIED LIMIT OF RS. 1 ,80,000/- TO ANY SINGLE PERSON AND THEREFORE THERE WAS NO CAUSE TO DEDUCT TDS ON T HE SAME. LD. AR THEREFORE 12 STATED THAT ON THIS ISSUE ALSO THERE WAS NO ERROR I N THE ORDER OF THE AO. 24. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE LD. CIT AND STATED THAT NO COPIES OF LEDGER ACCOUNTS AND BILLS OR VOUC HERS IN SUPPORT OF THE CONTENTION OF THE ASSESSEE WAS PLACED BEFORE THE LD . CIT, THEREFORE THE ORDER OF LD. CIT ON THIS ISSUE OUGHT TO BE UPHELD 25. UNDENIABLY THE ISSUE OF TAX DEDUCTION AT SOURCE ON LEGAL EXPENSES & RENT WAS NOT EXAMINED DURING ASSESSMENT PROCEEDINGS. EV EN BEFORE THE LD. CIT THE ASSESSEE THOUGH FURNISHED AN EXPLANATION FOR NOT DE DUCTING TAX AT SOURCE BUT FAILED TO SUBSTANTIATE THE SAME WITH COPIES OF LED GER ACCOUNTS , BILLS AND VOUCHER. IN VIEW OF THE SAME WE HOLD THAT THE ASSES SEE HAS NOT BEEN ABLE TO ESTABLISH CATEGORICALLY BEFORE THE LD. CIT THAT IT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE IN THE PAYMENTS OF RENT AND LEGAL EXPENSE S AND THE SAME HAVING NOT BEEN EXAMINED DURING ASSESSMENT PROCEEDINGS ALSO, T HE LD. CIT HAD RIGHTLY HELD THE ORDER OF THE AO TO BE ERRONEOUS SO AS TO CAUSE PREJUDICE TO THE REVENUE. 26. WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. 27. TO SUM UP WE UPHOLD THE ORDER OF THE LD. CIT ON THE ISSUE OF INTEREST OF RS. 36,287/- NOT REFLECTED IN THE INCOME OF THE ASSESSE E AND THE ISSUE OF DISALLOWABILITY OF LEGAL AND RENT EXPENSES UNDER SE CTION 40(A)(IA) OF THE ACT AMOUNTING TO RS. 34,150/- AND RS. 4,92,250/- RESPEC TIVELY AND SET ASIDE THE ORDER OF THE LD. CIT ON THE REMAINING ISSUES. 28. THE APPEAL OF THE ASSESSEE IS THEREFORE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 26/04/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, T HE CIT(A), THE DR