Shinde and Sons, Ahmednagar V. DCIT, Ahmednagar

ITA 1762/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0821 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 20-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Section: 143(3); 133(6)

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1762/PN/2013 ASSESSMENT YEAR : 2005-06 SHINDE AND SONS, OPP- BHAIRAVNATH PATHSANSTHA, NAGAR PUNE ROAD, KEDGAON, AHMEDNAGAR. PAN : AAJFS1688P . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . RESPONDENT ITA NO.1979/PN/2013 ASSESSMENT YEAR : 2005-06 THE ASSTT. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . APPELLANT VS. SHINDE AND SONS, OPP- BHAIRAVNATH PATHSANSTHA, NAGAR PUNE ROAD, KEDGAON, AHMEDNAGAR. PAN : AAJFS1688P . RESPONDENT ASSESSEE BY : NONE DEPARTMENT BY : SHRI B. C. MALAKAR / DATE OF HEARING : 03.11.2015 / DATE OF PRONOUNCEMENT: 27.11.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF CIT(A)-IT/TP, PUNE, DATED 29.08.2013 RELAT ING TO ASSESSMENT YEAR 2005-06 PASSED UNDER SECTION 143(3) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO.1762/PN/2013 ITA NO.1979/PN/2013 2. FIRST, WE SHALL TAKE-UP THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1762/PN/2013 RELATING TO ASSESSMENT YEAR 2005-06 . THE SUBSTANTIVE GROUND ARISING FROM THE APPEAL OF THE ASSESSEE IS A GAINST THE ADDITION OF RS.8,26,000/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF ESTIMATED DISALLOWANCE OF LABOUR CHARGES AND SUSTAINED BY THE CIT(A). 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A REGISTERED PARTNERSHIP FIRM AND IS A GOVERNMENT CONTRACTOR ENG AGED IN THE BUSINESS OF CIVIL CONSTRUCTION I.E. CONSTRUCTION OF DAMS, CANAL S, BRIDGES, PERCULATION TANKS, ETC. FOR THE IRRIGATION DEPARTMENT, GOVERNME NT OF MAHARASHTRA. DURING THE YEAR, THE ASSESSEE, INTER-ALIA, INCURRED LABOUR CHARGES OF RS.5,51,05,850/- IN COURSE OF BUSINESS ACTIVITIES. THE ASSESSING OFFICE R ESTIMATED A DISALLOWANCE OF RS.8,26,000/- WHICH IS NEARLY 1.50% OF THE IMPUG NED LABOUR CHARGES TOWARDS INFLATED EXPENSES. FROM THE ASSESSMENT ORD ER, IT APPEARS THAT IN THE PRECEDING ASSESSMENT YEAR I.E. A.Y. 2004-05 ALSO AN ESTIMATED DISALLOWANCE OF 1% OUT OF LABOUR CHARGES WERE MADE WHICH IS PRIMARI LY THE BASIS FOR RESORTING TO AFORESAID ESTIMATION IN THIS YEAR. 4. THE CIT(A), INTER-ALIA , OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT IN SUPPORT OF THE EXPENSES CLAIMED . HE ALSO OBSERVED THAT IT IS A PREVALENT PERCEPTION THAT LABOUR CHARGES ARE C OMMONLY INFLATED BY THE CONTRACTORS. HE, ACCORDINGLY, ENDORSED THE ACTION O F THE ASSESSING OFFICER. 5. BEFORE US, NONE APPEARED FOR THE ASSESSEE. NO AD JOURNMENT APPLICATION WAS MOVED EITHER. IT IS SEEN FROM THE RECORDS THAT THE NOTICE HAS BEEN PROPERLY SERVED AND THE RECEIPT HAS BEEN DULY ACKNOWLEDGED B Y THE ASSESSEE. THUS, IT CAN BE INFERRED THAT THE ASSESSEE IS INDOLENT IN CO MPLIANCE WITH THE APPOINTED DATE OF HEARING. HENCE, THE MATTER IS PROCEEDED EXPARTE AND IS BEING DISPOSED ON THE BASIS OF SUBMISSION MADE ON BEHALF OF THE RE VENUE AND MATERIAL PLACED ON RECORD. 3 ITA NO.1762/PN/2013 ITA NO.1979/PN/2013 6. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND PLEADED THAT ES TIMATION IS FAIR AND REASONABLE AND THUS NO INTERFERENCE WITH THE FINDIN GS OF THE AUTHORITIES IS CALLED FOR. 7. WE HAVE CAREFULLY CONSIDERED THE PLEA OF THE ASS ESSEE BEFORE THE REVENUE AUTHORITIES AS WELL AS THE SUBMISSIONS MADE ON BEHALF OF THE REVENUE. WE NOTICE FROM THE SUBMISSIONS OF THE ASSESSEE BEFO RE CIT(A) THAT IN THE EARLIER ASSESSMENT YEAR I.E. 2004-05, ESTIMATED DIS ALLOWANCE WERE MADE BECAUSE THE ASSESSEE WAS NOT HAVING THE RELEVANT RE CORDS I.E. MUSTER FOR CASUAL WORKERS AND ALSO OWING TO NON MAINTENANCE OF PROPER BOOKS OF ACCOUNT. IT IS THE CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT THE AFORESAID DEFECT HAS BEEN CURED DURING THE YEAR. THE BOOKS OF ACCOUNT OF IMPU GNED ASSESSMENT YEAR 2005-06 ARE AUDITED UNDER SECTION 44AB OF THE ACT. THE ASSESSEE STATES TO HAVE EXPRESSED ITS INABILITY TO PRODUCE THE BOOKS B EFORE THE CIT(A) OWING TO THE FACT THAT THE BOOKS WERE IN THE CUSTODY OF THE OLD CHARTERED ACCOUNTANT AND IS NOT AVAILABLE AT PRESENT. IT IS FURTHER CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT INFORMATION IN RESPECT OF LABOUR CHARGES FOR E ACH INDIVIDUAL CONTRACT SEPARATELY WAS PROVIDED TO THE ASSESSING OFFICER FO R CASUAL WORKERS. BEFORE THE CIT(A), IT WAS SUBMITTED ON BEHALF OF THE ASSES SEE THAT LABOUR CHARGES FOR ASSESSMENT YEAR 2005-06 IN APPEAL IS ONLY 51.54% OF THE CONTRACT RECEIPTS AS COMPARED TO LABOUR CHARGES OF 66.50% IN ASSESSMENT YEAR 2004-05. THEREFORE, HIGHER DISALLOWANCE IN THIS YEAR IS NOT JUSTIFIED O N THESE FACTS. WE FIND IT EVIDENT FROM THE ASSERTIONS MADE IN THE ORDER OF TH E CIT(A) THAT REGULAR BOOKS OF ACCOUNT COULD NOT BE PRODUCED BY THE ASSESSEE BE FORE THE CIT(A) IN JUSTIFICATION OF THE LABOUR CHARGES INCURRED. AS A COROLLARY, WE ARE IN AGREEMENT WITH THE VIEW OF THE LOWER AUTHORITIES TH AT SOME ESTIMATION OF DISALLOWANCE OUT OF THE LABOUR CHARGES IS CALLED FO R WHICH WILL BALANCE EQUITY AND WOULD BE JUSTIFIED IN THE CIRCUMSTANCES. HOWEV ER, WE DO NOT FIND ANY DISCERNABLE REASON IN THE ORDER OF THE LOWER AUTHOR ITIES TO DEVIATE FROM EARLIER YEAR ESTIMATION AND JUSTIFY THE ENHANCED DISALLOWAN CE OF 1.5% OF LABOUR CHARGES THIS YEAR VIS A VIS 1% IN THE EARLIER YEAR. IN THE ABSENCE OF ANY 4 ITA NO.1762/PN/2013 ITA NO.1979/PN/2013 CHANGED CIRCUMSTANCES, THE ACTION OF ENHANCED DISAL LOWANCE APPEARS ONLY ARBITRARY AND MERE IPSE-DISIT OF THE ASSESSING OFFICER WHICH CANNOT BE APPROVED. ACCORDINGLY, WE DIRECT THE ASSESSING OFF ICER TO RESTRICT THE ESTIMATION OF DISALLOWANCE TO 1% OF THE LABOUR CHAR GES IN THIS YEAR ALSO. THUS, THE ASSESSEE GETS PARTIAL RELIEF ON THIS SCORE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TIALLY ALLOWED. 9. NOW, WE MAY TAKE-UP THE APPEAL OF THE REVENUE IN ITA NO.1979/PN/2013 RELATING TO THE SAME ASSESSMENT YEA R 2005-06. THE SUBSTANTIVE GROUND OF THE APPEAL OF THE REVENUE IS TOWARDS DELETION OF ADDITION OF RS.13,12,422/- BY THE CIT(A). 10. THE RELEVANT FACTS CONCERNING THE ISSUE IN BRIE F ARE THAT THE ASSESSING OFFICER, INTER-ALIA, OBSERVED THAT INFORMATION WAS COLLECTED UNDER SECT ION 133(6) OF THE ACT FROM THE ONE OF THE CONTRACTEE(S) , NAMELY M/S SHAAMMA CONSTRUCTION CO., NASHIK WHICH REVEALED MISMATCH IN THE TRANSACTIONS RECORDED BY THE SAID CONTRACTEE IN ITS BOOKS QUA WHAT WAS RECORDED BY THE ASSESSEE. DURING THE YEAR, ASSESSEE HAS UNDERTAKEN SUB-CONTRACT FOR EXECUTION OF WORK FROM THE SAID AGENCY. AS PER THE EXTRACT O F THE ACCOUNT RECEIVED FROM SHAAMMA CONSTRUCTIONS, THE ASSESSEE HAS EXECUTED TH E WORK TO THE TUNE OF RS.2,47,73,807/- FOR THE PARTY AS AGAINST WHICH THE PAYMENT IS MADE BY THE SAID CONCERN TO THE ASSESSEE TO THE EXTENT OF RS.2, 34,61,385/- ONLY. AS SUCH, THERE IS ASSESSEES CREDIT BALANCE OF RS.13,12,422/ - AS ON 31.03.2005. AS PER THE AO, SAID BALANCE PAYABLE TO THE ASSESSEE AS APP EARING IN THE BOOKS OF ACCOUNT OF M/S SHAAMMA CONSTRUCTION CO., NASHIK SHO ULD HAVE BEEN CORRESPONDINGLY REFLECTED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE AS DEBIT BALANCE I.E. AMOUNT RECEIVABLE FROM THE SAID CONCER N. HOWEVER, THE BALANCE- SHEET FILED ALONG WITH THE RETURN DOES NOT REFLECT ANY SUCH CORRESPONDING ACCOUNT AND THEREFORE BOOK DIFFERENCE TO THE EXTENT OF RS.13,12,422/- HAS NOT PRESUMABLY BEEN RECORDED AS INCOME BY THE ASSESSEE FOR WHICH ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE. 5 ITA NO.1762/PN/2013 ITA NO.1979/PN/2013 11. THE CIT(A), ON THE OTHER HAND, AGREED WITH THE CONTENTIONS OF THE ASSESSEE THAT THE ADDITION IN QUESTION REPRESENTS T HE DIFFERENCE APPEARING AS DEBIT BALANCE IN THE FINANCIAL STATEMENT OF THE C ONTRACTEE. IT WAS THE CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT DIFFERENCE BEIN G ON THE DEBIT SIDE WHICH REPRESENTS THE INCOME DISCLOSED AND BEING RECEIVABL E AND NOT THE DIFFERENCE IN THE CREDIT WHICH REPRESENTS UNDISCLOSED INCOME. THE CIT(A) OBSERVED THAT THE AFORESAID AMOUNT IS PRESUMABLY ACCOUNTED FOR ON ACC RUED BASIS SINCE THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. I N LIGHT OF ABOVE, THE CIT(A) APPRECIATED THE ARGUMENTS OF THE ASSESSEE PO SITIVELY AND GRANTED THE RELIEF ON THIS COUNT. 12. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE CONSIDER IT JUST AND EXPEDIENT THAT AN OPPORTUNITY SHOULD BE GRANTED TO THE ASSESSING OFFICER TO RE- APPRECIATE THE CONTENTIONS MARSHALED BY THE ASSESSE E BEFORE THE CIT(A). ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO V ERIFY AFRESH WHETHER CORRESPONDING INCOME EQUIVALENT TO THE AFORESAID AM OUNT IN QUESTION HAS BEEN OFFERED FOR TAXATION TO ARRIVE AT A RATIONAL CONCLU SION ON THE ISSUE. NEEDLESS TO SAY, IF THE CORRESPONDING INCOME HAS ALREADY BEEN A CCOUNTED FOR AS CLAIMED, IT CANNOT BE TAXED AGAIN. ACCORDINGLY, THE ISSUE IS S ET-ASIDE TO THE FILE OF THE ASSESSING OFFICER IN TERMS OF AFORESAID DIRECTIONS. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. 14. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED AND THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 27 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 27 TH NOVEMBER, 2015. 6 ITA NO.1762/PN/2013 ITA NO.1979/PN/2013 & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-I, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , //TRUE COPY// ! '# / SR. PRIVATE SECRETARY $ %& %'' , / ITAT, PUNE