Shri.Y.N.Prakash, Davangere V. Income Tax Officer, Davangere

ITA 1836/BANG/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6200 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 27-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.1836/BANG/2016 ASSESSMENT YEAR : 2009-10 Y.N PRAKASH, THORANGATTE VILLAGE AND POST, JAGALUR TALUK, DAVANAGERE DISTRICT 577 521. PAN ALDPP 0339 D. VS. THE INCOME-TAX OFFICER, WARD-2, DAVANGERE. APPELLANT RESPONDENT APPELLANT BY : SHRI H GURUSWAMY, ITP RESPONDENT BY : DR. P.V PRADEEP KUMAR, ADDL. CIT DATE OF HEARING : 31.07.2019 DATE OF PRONOUNCEMENT : 07.08.2019 O R D E R PERB.R BASKARAN,ACCOUNTANT MEMBER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 30/6/2016 PASSED BY THE LD CIT(A), DAVANGERE AND IT RELATES TO ASST. YEAR 2009-10. 2. GROUND NOS.1 AND 4 ARE GENERAL IN NATURE. GROUN D NO.2 RELATES TO ADDITION OF RS.11.52 LAKHS PERTAINING TO OUTSTANDING LABOUR CHARGES. GROUND NO.3 RELATES TO THE ADDITIO N OF RS.4.73 LAKHS RELATING TO ADHOC DISALLOWANCES MADE OUT OF E XPENSES, WHICH HAS BEEN TELESCOPED AGAINST THE ADDITION OF RS.11.5 2 LAKHS. ITA NO.1836/BANG/2016 PAGE 2 OF 7 3. AT THE TIME OF HEARING THE LD AR DID NOT PRESS G ROUND NO.3 RELATING TO THE ADDITION OF RS.4.75 LAKHS. HOWEVER , WE NOTICE THAT THE LD CIT(A) HAS TELESCOPED THIS ADDITION AGAINST THE ADDITION OF RS.11.52 LAKHS RELATING TO LABOUR CHARGES AND HENCE BOTH THE ISSUES ARE INTERLINKED. HENCE THE ASSESSEES REQUE ST COULD NOT BE ACCEPTED. ACCORDINGLY, BOTH THE ISSUES ARE ADJUDIC ATED TOGETHER. 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSEE IS A CIVIL CONTRACTOR UNDERTAKING WORKS ALLOTTED TO HI M BY EE, PRE DEPARTMENTS. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.RS.3.1 8 LAKHS. THE AO HOWEVER COMPLETED THE ASST. BY DETERMINING THE TOTA L INCOME AT RS.65.91 LAKHS BY MAKING VARIOUS ADDITIONS. THE AP PEAL FILED BEFORE LD CIT(A) WAS PARTLY ALLOWED. STILL AGGRIEV ED THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE FACTS RELATING TO THE ADDITION OF RS.11.52 L AKHS ARE STATED IN BRIEF:- THE AO NOTICED THAT THE CURRENT LIABILITIES DECLARE D BY THE ASSESSEE WAS RS.39.55 LAKHS, WHICH INCLUDED OUTSTAN DING LABOUR CHARGES OF RS.11.52 LAKHS. THE AO ASKED THE ASSESS EE TO OBTAIN CONFIRMATION LETTERS FROM ALL THE CREDITORS. IN RE SPECT OF OUTSTANDING LABOUR CHARGES, THE ASSESSEE FURNISHED THE BREAK UP DETAILS OF THE SAME AND ALSO FURNISHED LETTERS OF CONFIRMATION OBT AINED FROM EACH OF THE LABOURERS. THE AO OBSERVED THAT THE LETTERS OF CONFIRMATION DID NOT MENTION THE FATHERS NAME OF THE WORKERS AN D IT DID NOT CONTAIN PROOF OF IDENTITY. HE ALSO OBSERVED THAT S OME OF THE ITA NO.1836/BANG/2016 PAGE 3 OF 7 CONFIRMATION LETTERS CONTAINED LEFT HAND THUMB IMPR ESSION, WITHOUT BEING IDENTIFIED BY ANOTHER PERSON. ACCORDINGLY HE TOOK THE VIEW THAT THE CONFIRMATION LETTERS FURNISHED BY THE ASSE SSEE CANNOT BE ACCEPTED. ACCORDINGLY HE ADDED THE ENTIRE AMOUNT O F OUTSTANDING LABOUR CHARGES OF RS.11.52 LAKHS AS INCOME OF THE A SSESSEE. THE LD CIT(A) ALSO CONFIRMED THE SAME. 6. SINCE THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCO UNTS AND VOUCHERS, THE AO DISALLOWED 10% OF LABOUR CHARGES, MATERIAL CONSUMED, EARTH WORK CHARGES AND FREIGHT CHARGES AM OUNTING TO RS.5.77 LAKHS. IN THE APPELLATE PROCEEDINGS, THE L D CIT(A) CONFIRMED THE ADDITION OF RS.11.52 LAKHS REFERRED ABOVE. WIT H REGARD ADHOC DISALLOWANCE OF RS.5.77 LAKHS, EVEN THOUGH THE LD C IT(A) CONFIRMED THE SAME, YET HE TELESCOPED THE SAME AGAINST THE A DDITION OF RS.11.52 LAKHS RELATING TO OUTSTANDING LABOUR CHARG ES. AGGRIEVED BY THE ORDER PASSED BY LD CIT(A), THE ASSESSEE HAS FILED THIS APPEAL. 7. THE LD AR SUBMITTED THAT THE ASSESSEE HAS FURNIS HED CONFIRMATION LETTERS OBTAINED FROM WORKERS, TO WHOM THE WAGES HAVE BEEN PAID DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE OUTSTANDING LABOUR CHARGES HAVE BEEN SQUAR ED OFF BY MAKING PAYMENT TO THE WORKERS IN THE SUCCEEDING YEA R. ACCORDINGLY HE SUBMITTED THAT THERE WAS NO REASON T O SUSPECT THE OUTSTANDING LABOUR CHARGES. HE FURTHER SUBMITTED T HAT THE AO HAS ACCEPTED THE LABOUR CHARGES CLAIMED BY THE ASSESSEE , BUT HAS DISALLOWED 10% OF THE SAME ON ADHOC BASIS FOR WANT OF VOUCHERS. ACCORDINGLY HE SUBMITTED THAT THERE IS NO REASON TO SUSPECT THE ABOVE SAID AMOUNTS OF RS.11.52 LAKHS, WHEN THE AO H AS ACCEPTED ITA NO.1836/BANG/2016 PAGE 4 OF 7 THE EXPENDITURE. ACCORDINGLY HE CONTENDED THAT THE ABOVE SAID ADDITION SHOULD BE DELETED. 8. THE LD DR, ON THE CONTRARY SUBMITTED THAT THE AS SESSEE HAS NOT PRODUCED BOOKS OF ACCOUNT, VOUCHERS INVOICES ET C., BEFORE THE AO. HE FURTHER SUBMITTED THAT THE CONFIRMATION LET TERS FILED BY THE ASSESSEE DID NOT CONTAIN VITAL DETAILS LIKE FATHER S NAME AND DOCUMENTARY EVIDENCE TO PROVE THE IDENTITY. ACCORD INGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN CONFI RMING THE ADDITION. 9. IN THE REJOINDER THE LD AR SUBMITTED THAT THE AO HAS ALREADY DISALLOWED 10% OF LABOUR CHARGES AND ACCORDINGLY HE HAS ACCEPTED THE GENUINENESS OF THE REMAINING LABOUR CHARGES. TH E LD AR HOWEVER AGREED THAT THE ADDITION MAY BE RESTRICTED TO RS.2,52,650/-, BEING 10% OF LABOUR CHARGES TO TAKE CARE OF DEFICIENCIES IF ANY RELATING TO LABOUR CHARGES. 10. WITH REGARD TO THE ADHOC ADDITION MADE FROM OTHER EXPENSES, THE LD A.R SUBMITTED THAT THE AO HAS MADE THE ADDIT ION WITHOUT ANY BASIS. ON THE CONTRARY, THE LD D.R SUPPORTED T HE ORDER PASSED BY THE AO. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS ACCEPTED 9 0% OF LABOUR CHARGES CLAIMED BY THE ASSESSEE. THE OUTSTANDING L ABOUR CHARGES RELATES TO THE LABOUR CHARGES SO CLAIMED BY THE ASS ESSEE. THERE IS NO DISPUTE THAT THE ASSESSEE HAS FILED CONFIRMATION LETTERS OBTAINED ITA NO.1836/BANG/2016 PAGE 5 OF 7 FROM THE WORKERS CONFIRMING THE OUTSTANDING BALANCE S. WE NOTICE THAT THE AO HAS REJECTED THE CONFIRMATION LETTERS O N FLIMSY GROUNDS. IF THE AO HAD ANY DOUBTS, HE COULD HAVE SUMMONED TH E CONCERNED WORKERS. THE LD A.R SUBMITTED THAT THE OUTSTANDING LABOUR CHARGES HAVE BEEN FULLY PAID IN THE SUCCEEDING YEAR . HENCE, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN ADDING THE OUTSTANDING BALANCE OF LABOUR CHARGES AND ACCORDINGLY THE LD CI T(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAID ADDITION. ACCORDI NGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIR ECT THE AO TO DELETE THE ADDITION OF RS.11.52 LAKHS RELATING TO O UTSTANDING LABOUR CHARGES. 12. THE NEXT ISSUE RELATES TO ADHOC DISALLOWANCE MADE FROM OUT OF EXPENSES. SINCE THE ASSESSEE HAS NOT PRODUCED BOO KS OF ACCOUNT, SUPPORTING VOUCHERS ETC., BEFORE THE AO, THE ASSESS ING OFFICER WAS CONSTRAINED TO DISALLOW 10% OF THE EXPENSES TO TAKE CARE OF DEFICIENCIES, IF ANY. WE NOTICE THAT THE ASSESSEE HAS NOT PRODUCED THE VOUCHERS BEFORE LD CIT(A) ALSO AND HENCE HAS CO NFIRMED THE DISALLOWANCE. HOWEVER, THE FIRST APPELLATE AUTHORI TY TELESCOPED THIS ADDITION AGAINST THE ADDITION OF RS.11.52 LAKHS REL ATING TO OUTSTANDING LABOUR CHARGES. 13. IN THE PRECEDING PARAGRAPHS, WE HAVE DELETED THE ADDITION OF RS.11.52 LAKHS AND HENCE THE QUESTION OF TELESCOPIN G WOULD NOT ARISE. ACCORDINGLY THE DISALLOWANCE MADE OUT OF EX PENSES NEEDS TO BE EXAMINED SEPARATELY. ITA NO.1836/BANG/2016 PAGE 6 OF 7 14. SINCE THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND VOUCHERS ETC., BEFORE THE AO, DISALLOWANCE OF PART OF EXPENSES IS WARRANTED TO TAKE CARE OF DEFICIENCIES. WHILE ARGU ING THE ISSUE RELATING TO DISALLOWANCE OF RS.11.52 LAKHS, THE LD A.R AGREED FOR CONFIRMING THE DISALLOWANCE OF 10% OF THE LABOUR CH ARGES. ACCORDINGLY WE CONFIRM THE DISALLOWANCE MADE OUT OF LABOUR CHARGES. REMAINING DISALLOWANCE HAS BEEN MADE OUT OF MATERIAL CONSUMED, EARTH WORK CHARGES AND FREIGHT. WE ARE O F THE VIEW THAT THE DISALLOWANCE MADE OUT OF THOSE EXPENSES @ 10% I S ON THE HIGHER SIDE. ACCORDINGLY, WE MODIFY THE ORDER OF L D CIT(A) AND DIRECT THE AO TO SUSTAIN THE DISALLOWANCE MADE OUT MATERIAL CONSUMED, EARTH WORK CHARGES AND FREIGHT TO 5% OF R ESPECTIVE EXPENSES. WE ORDER ACCORDINGLY. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 7 TH AUGUST, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.1836/BANG/2016 PAGE 7 OF 7 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. DICTATION NOTE ENCLOSED . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER .