Deputy Commissioner of Income-tax, V. Pundalik Tukaram Chowgule, Pune

ITA 1928/PUN/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9317 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Salary income; Additional evidence; Wrong claim; Accommodation entries
• Section: 44AD; 143(3); 54

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1928/PUN/2014 / ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX, CIRCLE - 4, PUNE. . / APPELLANT V/S PUNDALIK TUKARAM CHOWGULE, C-1/3, ELITE GARDEN, NEAR WIRELESS COLONY, AUNDH, PUNE 411 007. PAN : ACIPC2731L. . / RESPONDENT . / ITA NO.1943/PUN/2014 / ASSESSMENT YEAR : 2006-07 PUNDALIK TUKARAM CHOWGULE, C-1/3, ELITE GARDEN, NEAR WIRELESS COLONY, AUNDH, PUNE 411 007. PAN : ACIPC2731L. . / APPELLANT V/S ADDL. COMMISSIONER OF INCOME TAX, RANGE 4, PUNE. . / RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE. REVENUE BY : SHRI MUKESH JHA. / ORDER PER ANIL CHATURVEDI, AM : 1. THESE CROSS-APPEALS FILED BY ASSESSEE AND REVENUE E MANATE OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (A) II, PUNE DT.16.06.2014 FOR A.Y. 2006-07. / DATE OF HEARING : 18.12.2017 / DATE OF PRONOUNCEMENT: 15.02.2018 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY AND OTHER SOURCES. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2006-07 ON 30.10.2006 DECLARING TOTAL INCOME OF RS.7,81,35,577/-. TH E CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMEN T WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.26.12.2008 AND THE TOTAL INCOME WAS DETERMINED AT RS.11,05,43,570/-. AGGRIEVED BY T HE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.16.06.2014 (IN APPEAL NO.PN/CIT(A)-II/ADDL.CIT R-4/706/2008-09) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 3. THE GROUNDS RAISED BY THE ASSESSEE IN APPEAL NO.1943/PUN/2014 READS AS UNDER : 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.1 , 28 , 01 , 600/- BEING THE PART OF THE AMOUNT ON ESTIMATED BASIS OUT OF THE TOTAL PA Y MENT OF RS. 1 , 46 , 00 , 000/- & RS.14,02 , 000/- MADE TO THE 7 SUB-CONTRACTORS & LABOUR CHARGE S TO THE LABOURERS RESPECTIVELY. 2. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION WI THOUT ACTUALLY TAKING INTO ACCOUNT THE DOCUMENTARY EVIDENCES AND T HE FACTS OF THE CASE. THE ADDITION BE DELETED 3. THE APPELLANT SUBMITS THAT THE LEARNED CIT(A) HA S NOT CONSIDERED THE VARIOUS CONTENTIONS PUT FORWARD IN THE HEARINGS . HE HAS MERELY CONFIRMED ADDITIONS ON ADHOC BASIS . 4. ON THE OTHER HAND, THE GROUND RAISED BY THE REVENUE IN APPEAL NO.1928/PUN/2014 READS AS UNDER : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND C I RCUMSTANCES OF THE CASE. 3 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING THE EXPENDITURE OF RS. 1,61,00 , 399/- TO M/S CHOWGULE INFRASTRUCTURE P . LTD IN ABSENCE OF ANY COGENT REASON TO REFUTE THE CONCLUSION OF THE ASSESSING OFFICER THAT THE NATURE OF WORK MENTIONED IN THE BILLS OF SUBCONTRACTORS AND QUOTAT ION DATED 01 . 12.2005 DO NOT MATCH WITH THE WORK STATED TO BE DON E IN THE SOCIETY ' S LETTER DATED 01 . 02 . 2006 AND THE BURDEN OF PROVING THE NECESSARY FACTS IN THIS REGARD WAS ON THE ASSESSEE . 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING 20% OF EXPENSES AMOUNTING TO RS . 32 , 00 , 400/- IN RESPECT OF PAYMENT MADE TO SEVEN SUB-CONTRACTORS AND LABOUR CH ARGES WHICH I S ARBITRARY AND WITHOUT ANY BASIS CONSIDERING THAT TH E ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE NECESSARY FACT S IN TH I S REGARD TO CONTROVERT THE FINDING OF THE ASSESSING OFFICER THA T NO WORK WAS ACTUALLY DONE BY THE SEVEN SUB-CONTRACTORS FOR THE ASSESSEE 5. SINCE THE GROUNDS RAISED BY THE ASSESSEE AND REVENU E ARE INTER-CONNECTED, BOTH THE APPEALS ARE CONSIDERED TOGETHER. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTIC ED THAT ASSESSEE HAD PURCHASED LAND ADMEASURING 23500 SQ.MT SIT UATED AT SANGAMWADI VILLAGE, YERAWADA, PUNE FROM M/S. SANGAM ESTATE PVT. LTD., VIDE SALE DEED DT.31.03.2000 FOR A CONSIDERATION O F RS.22,64,066/-. OUT OF THIS LAND, LAND ADMEASURING 16000 SQ. MT WAS SOLD TO SANGAM SARITA SOCIETY VIDE SALE DEED DT.30.11 .2005 FOR A CONSIDERATION OF RS.8,61,12,000/-. IT WAS FURTHER NOTICE D THAT ASSESSEE HAD RECEIVED CONTRACT AMOUNT OF RS.4.5 CRORE FROM SANGAM SARITA CO-OPERATIVE HOUSING SOCIETY FOR LEVELING, C LEARING AND FENCING WORK ETC. ON 16000 SQ MTRS LAND SOLD ON 30 .11.2005. ASSESSEE SUBMITTED THE COPIES OF BILLS RAISED BY THE SUB- CONTRACTORS FOR CUTTING OF TREES AND BUSHES, DISMANTLING OR DEMOLITION O F STRUCTURES, EXCAVATION, EMBANKMENT ETC. (THE DETAILS OF W HICH ARE LISTED AT PAGE 3 OF THE ASSESSMENT ORDER) THE AMOUNT BE ING RS.307,00,399/-. AO ALSO NOTICED THAT ASSESSEE APART FRO M INCURRING THE EXPENDITURE FOR SUB-CONTRACTS HAD ALSO C LAIMED TO HAVE INCURRED EXPENDITURE OF RS.14,02,000/- TOWARDS LABO UR 4 CHARGES AND HAS BEEN STATED TO HAVE EARNED PROFIT OF RS.1,28,97,601/- FROM THE CONTRACT OF RS.4.5 CRORES ENTERE D INTO WITH THE SOCIETY. ASSESSEE WAS ASKED TO SUBMIT THE COP Y OF CONTRACT AGREEMENT WITH THE SOCIETY AND TO SHOW THE W ORKING OF THE CONTRACT AMOUNT. IT WAS SUBMITTED THAT THERE WAS NO WRITTEN AGREEMENT WITH THE SOCIETY FOR THE WORK ENTRUSTED TO IT . ASSESSEE WAS CONFRONTED WITH THE FACT THAT THE IDENTITY AND THE G ENUINENESS OF THE SOCIETY AND THE TRANSACTION WITH THE SOCIETY DID NOT APPEAR TO BE GENUINE, IN VIEW OF THE ABSENCE OF ANY WORK OR CONT RACT ORDER FROM THE SOCIETY AND NON-DEDUCTION OF TDS BY THE SOCIETY FROM THE CONTRACT AMOUNT OF RS.4.5 CRORES. THE ASSESSEE WAS THE REFORE ASKED TO PROVE THE GENUINENESS OF THE TRANSACTION. AO ON THE BASIS OF THE PERUSAL OF THE DOCUMENTS AND THE ENQUIRIES NOTED THAT ALTHOUGH THERE WAS NO ENCROACHMENT ON THE LAND AS EVID ENT FROM THE AGREEMENT, THE SOCIETY AGREED TO PAY RS.4.5 CRORES FOR CLEARING THE ILLEGAL ENCROACHMENTS AND UNAUTHORIZED CONSTRUCTIONS FROM THE SOCIETY LAND. THE NATURE OF WORK MENTIONED ON THE BILLS OF SUB-CONTRACTS DID NOT SHOW THAT THE WORK STATED TO HAVE BEEN DONE FOR THE SOCIETY. LATER, ONE OF THE SUB-CONTRACTORS SHR I SUDHER PATIL HAS STATED THAT THE AMOUNT WAS RECEIVED FOR CUTTING OF THE TREES ON LAND. AO NOTED THAT SINCE THE LAND WAS IN GREEN BELT ZO NE, NO TREES COULD HAVE BEEN CUT WITHOUT THE PERMISSION OF THE APPROPRIATE AUTHORITIES AND THE SITE VISIT ON 13.12.2008 SHOWED THAT THE BIG TREES STILL EXISTED ON BOTH SIDES OF THE 30 METER ROAD UNDER CONSTRUCTION. HE ALSO NOTED THAT ASSESSEE DID NOT SUB MIT ANY PLAN TO THE PMC FOR THE DEVELOPMENT OF LAND FOR NON-AGRICULTUR AL USE AND THEREFORE THE ACTIVITIES RELATING TO THE LAND AS CLAIM ED IN THE BILLS OF SUB-CONTRACTS WERE NOT POSSIBLE. AO ALSO NOTED THAT THE PAYMENT TO THE SUB-CONTRACTORS WAS MADE AFTER 9 TO 1 2 MONTHS 5 FROM THE DATE OF COMPLETION OF THE ALLEGED WORK. HE WAS O F THE VIEW THAT IT WAS UNBELIEVABLE THAT THE CONTRACT WORK INVOLVING TRANSPORTATION OF STONES AND DEBRIS BY TRUCKS COULD BE MADE AFTER SUCH A LONG TIME. HE THEREFORE HELD THAT THE ENTIRE TRA NSACTION RELATING TO THE PAYMENT TO ALLEGED SUB-CONTRACTORS TO BE NOT GENUINE AS NO WORK WAS ACTUALLY DONE BY THE ASSESSEE FOR THE SOCIETY. HE THEREFORE CONCLUDED THAT THE PAYMENT FOR TH E SOCIETY AND THE PAYMENTS TO THE ALLEGED SUB-CONTRACTORS WERE NON-GENUINE CONTRACTS. HE ACCORDINGLY TAXED THE ENTIRE RECEIPT OF 4 .5 CRORE RECEIVED FROM THE SOCIETY. AGGRIEVED BY THE ORDER OF LD.C IT(A), ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE REMAND REPORT OF TH E AO AND ASSESSEES REPLY TO THE REMAND REPORT DECIDED THE ISSUE BY HOLDING AS UNDER :- 3.5 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE APPELLANT HAS CONTE STED THE TREATMENT OF CONTRACTUAL RECEIPT AMOUNTING TO RS.4, 50,00,000/- FROM SANGAM SARITA CO-OP HSG. SOCIETY LTD WAS NOT GENUIN E AND ALSO THE EXPENDITURE OF RS.3,23,07 , 997/- AGAINST THE AFORESAID RECEIPT ALSO TO BE NOT GENUINE. THE APPELLANT IS A CIVIL ENGINEER C ARRYING ON THE BUSINESS OF UNDERTAKING DIFFERENT TYPES OF CIVIL CO NTRACT AND DURING THE YEAR UNDER CONSIDERATION HAS TAKEN A CIVIL CONT RACT FROM SANG AM SARITA CO-OP HSG. SOCIETY LTD FOR A SUM OF RS.4.50 CRORES FOR REMOVING ENCROACHMENT, CUTTING TREES, BUSHES, FENCI NG, BOUNDARY FIXING AND OTHER EARTH WORKS FOR THE LAND LOCATED A T S . NO 47B/1, 48A/1 AT SANGAMWADI, PUNE . THE FACT OF THE CASE IS THAT THE ASSESSEE PURCHASED LAND ADMEASURING 23,500 SQ. MTRS . AT SANGAMWADI , YERWADA PUNE FROM SANGAM ESTATE (P) LTD VIDE SALE DEED DATED 31-03-2000 FOR A CONSIDERATION OF RS. 22,64,066/-. THE APPELLANT OUT OF THE AFORESAID LAND SOLD 16000 SQ.F T TO SANGAM SARITA CO-OP HSG. SOCIETY LTD (SOCIETY HEREINAFTER) VIDE SALE DEED DATED 30-11-2005 . THE APPELLANT DISCLOSED THE LONG TERM CAPITAL GAIN OF RS . 6,41 , 92,456/- AFTER CLAIMING EXEMPTION U/S 54 FOR PURCHA SE OF AG R I C ULT UR AL LAN D S A T SANGA MW A D I VI L LAG E AN D A T M A D I L AGE , KOL HA PU R AN D I N V ESTM E NT IN CAPITAL GAIN BO N D. T H E APPE L LANT AGAINST THE CO NT R A CT R ECEIV ED O F R S . 4 . 50 CRORES AFTE R CLAIM I NG . EXPENDITURE OF RS . 3,07,00,399 /- TO WA RDS PAYMENT TO SUB CONTRACTOR AT RS . 14,02,000/- TOWARDS LABOR CHARGES OF F E R E D NE T P ROF IT OF RS. 1,28,97,601/- . THE ASSESSING OFFICER DURING THE ASSESSME NT PROCEEDINGS DID NOT ACCEPT THE DETAI L S AND EXPLANATION FILED BY THE APPE L LA NT T AXED T HE ENTIRE RECEIPT OF RS. 4 . 50 CRORES AND DID NOT ALLOW THE C L AIM OF EXPEND I TURE OF RS . 3,23,07,997/-.THE ASSESSING OFFICER HAS HELD THE EV IDENCES SUBMITTED BY THE APPELLANT TO BE NOT VAL I D AND HAS HELD THAT T HE PAYMENTS R ECEIVED FROM THE SOCIETY AND THE PAYMENT TO THE SUB CONTRACTORS TO BE NON GENU I NE TRANSACTION AND ALSO THAT THE EVIDENCE 6 WERE CREATED WITH A V I EW TO CON CEAL THE R EAL INCOME . THE ASSESSING OFFICER HAS ALSO QUESTI O NE D T HE TRAN SA C TION W I TH THE SOCIETY BY THE APPELLANT FOR THE REASON THAT NO CONT R ACT W ORKS O R DER WAS G I VEN AND NO DEDUCTION OF TAX WAS MADE BY THE SOCIE T Y WITH R ESPE CT TO T HE CONTRACT PAYME N T AMONG OTHE R OBSERVATIONS . THE FACT BROUGHT ON R ECORD , HOWEVER , INDICATE THAT T HE SOC I ETY IS REGISTERED ON 7-11-2005 WITH THE R EGISTRAR OF MAHARASHTRA CO-OP SOCIETY AND SHRI. RAK ESH SHARMA IS T HE C HA I RMA N AND SHRI. BHUPESH GUPTA IS THE SECRETARY OF THE SAID SOCIETY AND THE BY E LAWS AND REGISTRATION OF THE SOC I ETY HAD ALSO BEEN FILED BEFORE T HE ASSESSING O FF I CER . THESE FACTS DO INDICATE THA T THE SOCIETY EXISTS AND , THEREFO R E , ITS G ENU I NENESS PRIMA FACIE COULD NOT BE DOUBTED. THE SOCIETY AFTER THE P U R CHASE OF LA ND GAVE A CONTRACT OF RS . 4 . 50 CRORES TO THE APPELLANT , WHICH WAS IN C ONSEQUENCE TO THE QUOTATION SUBMITTED BY THE APPELL ANT. THE SAID CONTRAC T IS S EEN TO HAVE BEEN GIVEN BY SHR I . RAKESH SHARMA , THE CHAIRMAN OF THE SOC I ETY WH O ALSO SIGNED THE SALE DEED ON BEHALF OF THE SOCIETY FOR THE PU R CHASE OF THE S A I D L AND . THUS IN THE CIRCUMSTANCES THE RESPONSIBILITY TO DEDUCT T DS L AY ON THE S OC I ETY AND , THEREFORE , THE CONTENTION RAISED BY THE ASSESSING OFFICER IN T HIS R EGAR D I S NOT OF MUCH SIGN I FICANCE AS THE APPELLANT CANNOT BE HELD RESPONS I BLE F OR N ON DEDUCTION OF TDS. THE OBSERVATION OF THE ASSESS I NG OFFICER THAT THE QU OTATION GIVEN BY THE APPELLANT HAS BEEN BASED ON THE NEGOTIAT I ON AND D I SCUSSION CARRIED ON WITH THE SOCIETY ' S CHAIRMAN, SHRI RAKESH SHARMA AND THE NAT URE OF W O R K T O B E CARRIED HAS BEEN SPECIFIED B Y THE A PPE L LANT IN T HE S A I D QUOTATIO N I N CONSE Q UENCE TO WHICH T HE WORKS O R DER SPECIFY I NG THE NATU R E OF WORKS TO BE CARRIED OU T AND T H E AMOUNT AGREED HAS BEEN I SS U ED BY THE SOCIETY. THE SOC I ETY ' S L E T TER DA T ED 1-2-2006 WHEREBY T HE CHAIRMAN OF THE SOCIETY H A S AGREED THAT WORK OF CLEARING THE ENCROACHMENT AND OTHER WORK HAS BEEN CARRIED OUT AN D AS PER THE AGREEMENT A DRAFT OF RS. 4.50 CRORES BEARING NO 110 827 DRAWN ON ICICI BANK TOWARDS THE CONSIDERATION AND EXPENSES I NCURRED HAS BEEN . GIVEN . BY THE SOCIETY THROUGH ITS . BANK A/C NO. - 000705012771. HENCE THE SOCIETY DID ACKNOWLEDGE THE WORK CARRIED OUT BY THE APPELLANT AND ONLY AFTER BEING SATISFIED HAS ISSUED THE PAYMENT OF RS. 4.50 CRORES AS AGREED. 3.5.1 SO FAR AS THE OBSERVATION OF THE ASSESSING OF FICER THAT THE CHAIRMAN OF THE SOCIETY IS EMPLOYED WITH DLF LTD AN D THE APPELLANT RECEIVED 1 CRORE FROM DLF LTD EARLIER, AS SUCH THER E IS NO BAR LEGALLY FOR A PERSON BEING AN EMPLOYEE OF A COMPANY CAN ALS O BE A CHAIRMAN OF THE SOCIETY AT THE SAME AND THE PAYMENT OF RS. 1 CRORE RECEIVED FROM DLF LTD BY THE APPELLANT WAS BECAUSE OF THE FACT THAT INITIALLY THE AFORESAID COMPANY WANTED TO PURCHASE THE LAND FROM THE APPELLANT FOR WHICH THE SAID ADVANCE OF 1 CRORE WAS GIVEN BUT SUBSEQUENTLY DECIDED NOT TO PURCHASE THE LAND AND T HE SAID AMOUNT WAS REFUNDED BACK TO THE COMPANY, AND SUBSEQUENT TO THE ABOVE TRANSACTION THE APPELLANT ENTERED INTO THE AGREEMEN T WITH THE SOCIETY FOR THE SALE OF LAND. THE SOCIETY PURCHASED THE LAN D ' ON AS IS WHERE IS BASIS . THUS THE SALE OF LAND DID TAKE PLACE AND THE APPELL ANT HAS ALSO DISCLOSED THE LONG TERM CAPITAL GAIN ARISING O UT OF THE TRANSACTION IN ITS RETURN OF INCOME. THE SOCIETY HAS NOT DENIED TH E CONTRACT GIVEN TO-THE APPELLANT AND WHICH IS ALSO BACKED-BY- EVIDENCES SUBMITTED - BY THE APPELLANT AND HAS ALSO ACKNOWLEDGED THE WORK CONTRACT UNDERTAKEN AND COMPLETED FOR WHIC H PAYMENT OF RS. 4 . 5 CRORES HAS BEEN MADE AND WHICH HAS ALSO BEEN DISC LOSED BY THE APPELLANT. MOREOVER, THE ASSESSING OFFICER HAS OBSERVED THAT THE SOCIETY DID NOT HAVE ANY ACCOUNT WHICH IS FACTUALLY NOT CORRECT AS THE MATERIAL ON RECORD DO POINT OUT THAT THE SOCIETY IS HAVING BANK ACCOUNT NO. 000705012771 WITH THE ICICI BANK THROUG H WHICH THE PAYMENT FOR THE PURCHASE OF LAND AND SUBSEQUENTLY F OR THE CONTRACT WORK HAS BEEN MADE BY THEM TO THE APPELLANT. THIS F ACT BECOMES MORE EVIDENT FROM THE COPY OF THE BANK STATEMENT FI LED BY THE 7 APPELLANT. FURTHER THE ASSESSING OFFICER HAS ALSO P OINTED OUT TO THE FACT THAT THE LAND BEING LOCATED IN A GREEN BELT ZO NE WAS A NO DEVELOPMENT ZONE ON WHICH A 30 METER WIDE ROAD IS P ROPOSED IN THE DEVELOPMENT PLAN IS AN OBSERVATION FOR WHICH THE AP PELLANT WAS IN NO WAY RESPONSIBLE AS IT WAS THE DEC I S ION OF T HE SOC I E TY T O PU R C H ASE TH E L A N D B EIN G F U LL Y A W A RE OF TH E A F OR E S AID F ACT TH OUGH I T HAS BEE N E X P L A IN ED BY T H E APPE L LANT THA T TH E SOC IETY WAN T ED ACCESS TO T HE R I VER VIEW AND OTHE R ADJOIN I NG PLOTS WHIC H I T I N T ENDED TO P U R C HAS E I N F UTURE AND THE ACCESS TO THE OTHER PLOTS WAS POSSIBL E ONLY I F T HE LAND/PLOT O F THE APPELLANT WAS PURCHASED . THE ASSESSING OFFICER HAS ALSO - OBSERVED THAT THERE WAS NO ENCROACHMENT ON THE LAND AND STILL THE SOCIETY AGREED TO PAY RS . 4.50 CRORES FOR CLEARING ILLEGAL ENCROACHMENT , UNAUTHORIZED CONSTRUCT I ON , MAKING PAYMENTS TO ENCROACHERS ETC TO WHICH IT HAS BEEN CONTENDED BY T HE APPELLANT THAT ENCROACHMENT DOES NOT ONLY MEAN ILLEGAL O CCUPATION OF LAND BUT IN A WIDER SENSE I . E . DEBRIS DUMPING , MOVEMENT OF CATTLE AND SUCH ACTIVITIES WHICH PREVENT F R OM PUTTING IT TO USE AS INTENDED . IT HAS ALSO BEEN CONTENDED THAT THERE WAS NO F E N C I NG A N D T HE LAND NEEDED T O BE LEVELED AND BUSHES TO BE CLEARED . T HE AP PE LL ANT I N ORDER TO JUST I FY I TS STAND HAS ALSO DRAWN ATTENT I ON TOWARDS THE N OTICES I SS U ED BY TH E PMC AGAINST T HE I LLEGAL DUMPING IN THE GREEN BE L T OF MULA MU THA RIV E R BED A ND , T HEREFORE , C LEAN ING BECAME NECESSARY OF T H E DEBR I S DU M P IN G IN T HE A R EA . T HUS T HE PAYMENT MADE BY THE SOCIETY H AS BEEN FOR A D I VERSE NATU R E OF WORKS CARRIED OUT WH I CH ALSO I NC L UDED REMOVING OF UNAUTHOR I ZED C ONSTRUCTIONS/ENCROACHMEN T. THE ASSESSING OFFICER HAS ALSO OBSERVED T HAT THE SOCIETY DID NOT SUBMIT ANY PLAN TO THE PMC FOR THE DEVELOPMENT OF THE LAND FOR N ON AGRICULTURAL USE, HENCE ACTIVITIES RELAT I NG TO LAND AS CLAIMED IN THE BILLS OF . T HE SUB CONTRACT WAS NOT POSSIBLE TO WHICH THE . APPELLANT HAS VEHEMENTLY STATED THAT THE SOCIETY BECAUSE THE OWNER OF THE LAND AND IT WAS THE SOCIETY WH I CH WAS REQUIRED TO SUBM I T THE PLAN TO THE PMC FOR DEVELOPMENT OF THE LAND F OR NON AGR I CULTURAL USE AND THE APPE L LANT IN NO WAY IS CONCERNED WITH THE NON SUBMISS I ON OF P L AN TO THE PMC AND HENCE THE ISSUE IS NOT RELEVANT ON ITS PART . IN V IE W OF T HE ABOVE F ACT THE CONTENTION RAISED BY THE AO WITH RESPECT TO THE TR ANSACT I ON O F CONTRACT WORK GIVEN BY THE SOCIETY TO THE APPELLANT I S APPARENTLY N O T CORRECT AS THE MATERIA L BROUGHT ON RECORD INDICATE THE . TRANSACT I ON W I TH RESPECT TO THE CONTRACT WORK TO HAVE TAKEN PLACE AND ITS GENU I NENESS CANNOT BE DOUBTED . 3.5.2 THE APPELLANT HAS ALSO CONTESTED THE DISALLOWANCE O F THE CLA I M OF EXPENSES INCURRED OF RS. 3,23 , 09, ' 997/ - TREATED BY THE ASSESSING OFFICER AS N ON -GE N U INE. IT I S NOT I CED THAT OU T OF T HE T O T AL EXPENSES OF RS. 3 , 23 , 07 , 99 7/- A S UM OF RS . 1 ,61 , 00,399 / - W AS PA I D BY THE APPE L LANT TO CHOWGULE I NFRASTRUC T URE P VT. LT D A COMPANY WHERE THE APPELLANT HIMSELF IS THE MANAGING DIRECTOR AND RS . 14,02,000/- PAID AS LABOR CHARGES DIRECTLY BY THE APPELLANT AND THE REMAINING AMOUNT OF RS.1,48,05,592/- HAS BEEN PAID TO 7 SUB-CONTRACT ORS. THUS IT IS NOTICED THAT THE MAJOR PART OF THE WORK RELATED TO THE CONTRACT WAS SUB-CONTRACTED TO CHOWGULE INFRASTRUCTURE PVT. LTD WHICH HAD THE CAPACITY TO UNDERTAKE SUCH TYPE OF WORKS WITH ITS E XISTING RESOURCES AND MACHINERIES BEING IN SUCH TYPE OF BUSINESS FOR THE PAST EIGHT YEARS. IT HAS BEEN STATED BY THE APPELLANT THAT WIT H A VIEW TO COMPLETE THE WORK WITHIN THE LIMITED TIME OF 3 MONTH S GIVEN BY THE SOCIETY THE PART OF THE CONTRACT WORK HAD TO ' BE SUB CONTRACTED TO OUTSIDE SUB CONTRACTORS. THE APPELLANT HAS OUTLINED THE NATURE OF WORKS CARRIED OUT BY THE SUB CONTRACTORS AND ALSO T HE DETAILS OF THE PAYMENTS MADE TO THEM . FURTHER THE APPELLANT HAS ALSO FILED CERTAIN ADDITIONAL EVIDENCE U/S.46A, WHICH GOES TO THE ROOT OF THE MATTER HENCE, IS NECESSARY FOR ADJUDICATION AND IN DECIDIN G THE ISSUE AT HAND. 8 3.5.3 IT IS TRITE LAW THAT THE POWERS OF THE CIT (APPEALS) ARE COTERMINOUS WITH THE POWERS OF A.O . IN THE CASE OF SMT. PRABHAVATI S. SHAH VS CIT (1998) 231 ITR 1 (MUM) IT WAS HELD T HAT SUB-RULE (4) OF RULE 46A SPECIFICAL L Y RESTORE POWER OF APPELLATE AUTHORITY TO CALL FOR PRODUCTION OF ANY DOCUMENT TO ENABLE HIM TO DIS POSE APPEAL. SUB-SECTION (4) OF SECTION 250 EMPOWERS THE APPELLA TE AUTHORITY TO TAKE ADDITIONAL EVIDENCE. SCOPE OF POWER IS CONTERM INOUS WITH ITO. CONJOINT READING OF SECTION 250 AND RULE 46A SHOWS THAT RESTRICTIONS ON THE APPELLANT DO NOT AFFECT THE POWERS OF THE AP PELLATE AUTHORITY FOR THE PURPOSE OF RULE 46A APPEARS TO BE TO ENSURE THAT EVIDENCE IS PRIMARILY LED BEFORE THE ASSESSING OFFICER. SECTION 250(4) BEING A QUASI-JUDICIAL POWERS, IT IS INCUMBENT ON CIT (APPE ALS) TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JUSTIFY . IT APPEARS THAT DUE TO SOME GENUINE REASONS THE SAME COULD NOT BE PRODUCED DURING THE ASSESSMENT PROCEEDINGS, THEREFORE, THE EVIDENCE PRO DUCED BY THE APPELLANT IS BEING TAKEN INTO CONSIDERATION FOR DEC IDING THE ISSUE AND IS ACCORDINGLY ADMITTED FOR ADJUDICATION . 3.5.4 IN VIEW OF THE ABOVE FACTS THE REQUEST FOR TH E ADMISSION OF ADDITIONAL EVIDENCE FILED BY THE APPELLANT IS ACCED ED TO AND THE SAME IS ADMITTED AS THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE BEFORE THE ASSESSING OF FICER. 3.5.5 I T I S N O TIC ED THAT DUR I NG T HE ASSESSME N T P R OCEED I NGS T HE A SS E SS I N G OFF I CER CAME TO THE CONCLUSION THAT THE ENTIRE EXPENSES CLAIMED TO BE BOGUS AND NON GENUINE AND THE EVIDENC ES REGARDING THE PAYMENT TO THE SUB CONTRACTORS TO BE SELF SERV I NG ACCOMMODATION ENTRIES. THE ASSESS I NG OFF I CER OBSERVED THAT THE P AYMENTS WERE MADE TO THE SUB CONTRACTORS AFTER A GAP OF 9 TO 10 MON T HS FROM TH E DATE OF COMPLETION OF THE CONTRACT WORK EXCEPT TO T HE APPELLAN T' S OWN COMPANY NAMELY CHOWGULE INFRASTRUCTURE P LTD . DURING THE ASSESSMENT PR OCEED I NGS THE ASSESSING OFFICER HAD EXAMINED SHRI. RAMACHANDRA U B IR DAWADE , O N E OF T HE SUB CONTRACTO R ON 24-12- 2008 AND I N H IS STATEMENT HAD R E T RACTED FRO M WHAT H E HAD STATED W I TH RESPECT TO T HE EXISTENCE OF OLD HOUSES WHEN CONFRONTED BY THE ASSESSING OFFICER WITH THE STATEMENT OF T HE APPELLANT. TH E ASSESS IN G OF FI CE R HAS ALSO NOTED THAT MOST OF THE SUB CON T RACTO R S DID NO T H AVE P AN NUM BERS AT THE TIME OF CONTRACT AND FO U R OF THE M H AD BEE N ALLOT T ED PAN N UMBERS ON 3-1-2007 AND SHRI. BIRDAWADE ON 9 - 1 - 2007 . T HE ASSESS I NG OFFICER HAS ALSO OBSERVED THAT NONE OF THE SUB CONTRACTORS HAD PAID ANY ADVANCE T AX AND T HEY HAD FILED THEIR RETURN OF INCOME FOR AY. 2006-07 DISCLOSING INCOME U/ S 44AD A N D PAID SELF ASSESSMENT TAX. THE ASSESSING OFFICER ALSO TREATED THE P A Y MENT T O THE APPELLANT ' S COMPANY CHOWGULE I NFRASTRUCTU R E LTD FOR THE CONTRACT WORK TO BE A SELF SE R VING DOCUMENT TO WHICH NO EVIDENTIARY VALUE COULD - BE ACCORDED . THE ASSESSING OFFICER WITH RESPECT TO THE PAYMENT OF RS . 14 . 02 LACS AS L ABO R CHARGES FOR THE CONTRAC T WORK WAS TREATED AS NON GENU I NE AND NOT R ELA T ED TO CONTRACT WORK AND CREATED ONLY TO JUSTIFY THE CONTRACT WORK . SUBSEQUENTLY DURING THE REMAND PROCEEDINGS THE ASSESSING OFFICER EXAMINED T HE PAYMENT MADE TO THE SUB CONTRACTORS AND ALSO EXAM I NED UNDER OATH. THE ASSESS I NG OFFICER A L SO TOOK INTO ACCOUNT THE ADDITIONAL EV I DENCES PRODUCED BY THE APPELLANT. 3.5.6 THE APPELLANT HAS PAID RS.1,61,00,399/- TO M /S. CHOWGULE INFRASTRUCTURE (P) LTD FOR THE SUB CONTRACT WORK OF EXCAVATION, EMBANKMENT ETC AS NOTED BY THE ASSESSING OFFICER. T HE ASSESSING OFFICER IN THE REMAND REPORT HAS OBSERVED THAT THE APPELLANT FURNISHED THE BANK ACCOUNT STATEMENT, CONTRACT RECE IPT LEDGER ACCOUNT, DETAILS OF EXPENSES RELATED TO SUB CONTRAC T WORK, THE CO PY OF TH E ASSESSMEN T OR DER F OR A .Y. 200 6-0 7 O F TH E S AID C OM PAN Y AND T H E COPY OF THE BI LL RAISED BY THE COMPANY TO THE APPELLANT FOR THE SUB CONTRACT AMOU N T OF RS . 1,61,00,399/- AND THE ASSESSING OFFICER HAS 9 NOTED THAT THE AFORESAID PAYMENT HAD BEEN MADE BY T HE APPELLANT TO T HE COMPANY. THE APPELLANT ON THE OTHER HAND PRODUCE D THE PHOTOGRAPHS OF THE ACTUAL WORK CARRIED OUT BY THE U SE OF MACHINERIES THOUGH THE ASSESSING OFFICE R HAS N OT CONSIDERED THE SAME . HOWEVER, THE FACT REMAINS THE AFORESAID RECEIPT IN THE HANDS OF THE COMPANY HAD BEEN DISCLOSED IN THEIR ACCOUNTS AND THE COMPAN Y HAD ALSO CONFIRMED THE RECEIPT OF THE AMOUNT FOR THE WORK DO NE BY THEM DURING THE REMAND PROCEEDINGS . DURING THE ASSESSMENT PROCEEDINGS OF T HE COMPANY THE ASSESSING OFFICER HAS NOT FOUND ANY DEFECT OR ANY FALSE CLAIM O F EXPE N SES BY THEM . THE ASSESSING OFFICER HAS MERELY DOUBTED THE TRANSACTION BASED O N PRESUMPTION AND ASSUMPTION ARRIVED AT THE FINDING THAT NO WORK HAD BEEN CAR RI ED OUT BY THEM. THE BOOKS OF ACCOUNT OF THE COMPANY HAS AL SO BEEN SUBJECTED T O T AX AUDIT AND NO SUCH ADVERSE FINDING OR OBSERVATION HAS BEEN M ADE BY THE AUDITOR . THE SA I D COMPANY I S IN THE CONTRACT BUSINESS SINCE 8 TO 9 YEA R S. THE ASSESSING OFFICER EITHER DURING THE ASSESSMENT PROCEEDINGS OR D U R ING T HE REMAND PROCEEDINGS HAS NOT BEEN ABLE TO BRING ANY SUCH MATER I AL EV I DENCE WHICH COULD JUSTIFY THE FACT THAT THE AFORESAID COMPANY HAD NOT CA R RIED OUT ANY WORK. THERE IS NO MATERIAL TO SUGGEST T HE SAID VIEW TAKEN BY T HE ASSESS I NG OFFICER . IN THE CIRCUMSTANCES IT IS DIFFICU L T TO DOUBT THE PAYMENTS MADE BY T H E APPELLANT T O CHOWGULE I N FRASTRUCTURE (P) LTD OF R S. 1 , 61 , 00 , 399/-, W HI C H HAS ALSO BEEN OFFERED TO TAX AND THE ASSESSMENT U/S. 143(3) COMPLETED . 3.6 SO FAR AS THE PAYMENTS MADE BY THE APPELLANT T O THE OTHER 7 SUB-CONTRACTORS ARE CONCERNED, THE ASSESSING OFFICE R DURING THE REMAND PROCEEDINGS HAS OBSERVED THAT THE INDIVIDUAL SUB- CONTRACTORS AND PARTNERS OF SAHARA CONSTRUCTIONS, T HE FIRM WERE NEITHER RELATED NOR HAD ANY OTHER RELATIONSHIP WITH THE APPELLANT EXCEPT HAVING BUSINESS TRANSACTIONS. THE DETAILS OF THE WORK CARRIED OUT BY THEM AND THE PAYMENTS MADE TO THEM HAVE BEEN TABULATED BY THE ASSESSING OFFICER. ON GOING THROUGH THE FIND INGS OF ASSESSING OFFICER IN RESPECT OF THE SUB-CONTRACTORS, IT IS NO TICED THAT MOST OF THE SUB CONTRACTORS HAVE ADMITTED TO HAVE CARRIED OUT T HE SUB CONTRACT WORK BUT THE EXTENT OF WORK FOR WHICH THE PAYMENT HAVE BEEN MADE BY THE APPELLANT HAS NOT BEEN CONCLUSIVELY PROVED. IN ALMOST ALL THE CASES IT IS NOTICED THAT AFTER RECEIPT OF THE PAYME NT BY THE SUB CONTRACTORS THERE HAS BEEN IMMEDIATE WITHDRAWAL OF THE AMOUNT DEPOSITED IN CASH BY THEM. SHRI SUDHIR PATIL HAS ST ATED TO HAVE RECEIVED RS.18,11,100/- BY CHEQUE FROM THE APPELLAN T FOR THE WORK CARRIED OUT, HOWEVER, HAS CATEGORICALLY ADMITTED TH AT RS.10 LACS WAS SPEND ON THE CONTRACT WORK AND THE REMAINING AM OUNT OF RS.8,11,000/- WAS GIVEN BACK TO THE APPELLANT. LIKE WISE, SHRI DADAMIYA SHAIKH HAS STATED THAT THE ENTIRE AMOUNT DE POSITED IN HIS BANK ACCOUNT WAS TAKEN BACK BY SHRI. CHOWGULE, THE APPELLANT ON VARIOUS DATES. FURTHER, THE SUB-CONTRACTOR HAS ALS O NOT KEPT ANY RECORDS OF THE WORK DONE BY THEM. THE AFORESAID FAC T CERTAINLY RAISES DOUBT WITH RESPECT TO THE CLAIM OF EXPENDITURE MADE BY THE APPELLANT IN RESPECT OF THE TRANSACTIONS CARRIED OUT WITH THE 7 SUB-CONTRACTORS. FURTHER, ALL THE SUB CONTRACTORS HAVE FILED THEIR R ETURN OF INCOME U/S. 44AD AND DESPITE THE FACT AS CONTENDED BY THE APPEL LANT THAT SUCH INCOME SHOWN' AS PER SEE 44AD AND THERE IS NO REQUI REMENT TO EXPLAIN THE ENTRIES IN THE BANK STATEMENT, CASH WIT HDRAWALS FROM THE BANK ACCOUNT ETC., THE MATERIAL ON RECORD LEAD TO THE INFERENCE THAT THE CLAIM OF THE ENTIRE EXPENDITURE ON ACCOUNT OF THE PAYMENT MADE TO THE SUB CONTRACTOR CANNOT BE HELD TO BE GEN UINE IN ITS ENTIRETY. SIMILARLY, THE PAYMENT MADE OF RS.14.02 L ACS FOR THE LABOR CHARGES THE APPELLANT IS SEEN TO HAVE MADE THE PAYM ENT ENTIRE IN CASH THOUGH HAS PRODUCED THE MUSTER AND THE CASH VO UCHERS AND ALSO THE NAMES OF THE LABORERS DURING THE REMAND PR OCEEDINGS TO JUSTIFY THE SAID PAYMENT THOUGH THE APPELLANT HAD F AILED TO PRODUCE THEM IN VIEW OF THE CONSIDERABLE ELAPSE OF TIME, TH EY BEING NOT 10 TRACEABLE. THE APPELLANT HAS CERTAINLY FAILED TO CO NCLUSIVELY PROVE THAT THE ENTIRE CLAIM OF EXPENSES TO BE GENUINE. ME RE PRODUCTION OF VOUCHERS IN SUPPORT OF THE CLAIM OF DEDUCTION IN EX PLANATION WOULD NOT PROVE THE CLAIM MADE BY THE ASSESSEE. IT IS THE DUTY TO PROVE PAYMENT ESPECIALLY WHEN THE ASSESSING OFFICER DOUBT S THE GENUINENESS THEREOF. 3.7 THE APPELLANT THOUGH HAS OUTLINED THE WORKS AS SIGNED TO THE SEVEN SUB-CONTRACTORS AND HAS VEHEMENTLY EMPHASIZED ON THE PAYMENT MADE TO THEM, HOWEVER, THE APPELLANT HAS FA ILED TO FULLY JUSTIFY THE PAYMENT FOR THE NATURE AND QUANTUM OF W ORKS CARRIED OUT BY THEM. DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS THE ASSESSING OFFICER HAD RECORDED THE STATEMENT OF ONE OF THE SUB- CONTRACTORS SHRI RAMCHANDRA U. BIRDAWADE ON 24.12.2 008 WHO HAD INITIALLY CLAIMED THAT THERE WERE 50 OLD DILAPIDATE D SINGLE STOREY HOUSES AND HE HAS ASSIGNED TO REMOVE THE DEBRIS OF THE DISMANTLED HOUSES BY TRUCKS FOR WHICH RS.1000/- FOR EACH TRIP WAS CHARGED OUT OF WHICH HE RECEIVED A COMMISSION OF RS. 100/-, WHI LE REST WAS KEPT BY THE TRUCK OWNER. HOWEVER, WHEN THE ASSESSING OFF ICER CONFRONTED HIM WITH THE STATEMENT OF THE APPELLANT, SHRI BIRDA WADE RETRACTED FROM HIS EARLIER STATEMENT AND AGREED TO THE FACT T HAT THERE WERE ONLY TWO ROOM HOUSES ON THE PLOT. THE ASSESSING OFFICER ALSO PROVIDED THE APPELLANT THE OPPORTUNITY TO CROSS EXAMINE HIM WHIC H WAS DECLINED. LIKEWISE, IN THE CASE OF SHRI SUDHIR PATIL IT HAS B EEN NOTED BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS THAT OU T OF THE TOTAL PAYMENT MADE OF RS.18,11,000/- A SUM OF RS.10,00,00 0/- WAS STATED TO HAVE BEEN SPENT ON THE WORK AND REMAINING AMOUNT RETURNED BACK TO THE APPELLANT. SIMILAR IS THE CASE OF RAMCHANDA BIRDAWADE WHOLE WORK INVOLVED DISMANTLING OF STRUCT URE HAD EARLIER ADMITTED TO THE FACT OF HAVING ONLY 2 SINGLE STOREY OLD STRUCTURE AS AGAINST 50 CLAIMED EARLIER BY HIM. FURTHER IN THE C ASE OF SHRI DADAMIYA SHAIKH WHO WAS PAID A SUM OF RS. 29.04 LACS HAS CATEGORICALLY ADMITTED THAT HE RECEIVED CONTRACT FO R RS.3 TO 4 LACS IN CASH FROM THE APPELLANT FOR THE WORK CARRIED OUT AN D THAT THE AFORESAID AMOUNT OF RS. 29.04 LACS DEPOSITED IN THE BANK HAS BEEN WITHDRAWN BY THE APPELLANT FOR WHICH HE HAS GIVEN S IGNED CHEQUES AND THE SAME WAS KEPT BY THE APPELLANT AND NOTHING REMAINED WITH HIM. THUS, IT IS NOTICED THAT THOUGH THE SUB-CONTRA CTORS HAVE CONFIRMED TO HAVE CARRIED OUT THE WORK ASSIGNED AND SUB-CONTRACTED BY THE APPELLANT, BUT THE QUANTUM OF WORK SHOWN BY THE APPEL L ANT TO HAVE BEEN CARRIED OU T BY THEM CERTAINLY APPEARS TO BE HIGHLY INFLATED. THE APPE L LANT APART FROM T HE ABOVE PAYMENTS MADE TO THE SEVEN SUB-CONTRACTORS HAS ALSO CLAIMED RS.14 . 02 LACS AS LABOUR CHARGES TO NEARLY 58 - 59 PERSONS TO WHOM PAYMENT H AVE ALSO BEEN MADE IN CASH AND CASH VOUCHERS SUBMITTED IN SUPPORT THOUGH EXP R ESSED I NABILITY TO PRODUCE THEM FOR OBVIOUS REASONS. THE C LAIM OF THE APPELLANT T HAT THE WORK ASS I GNED TO THEM WAS OF CLEANING THE LAND PRIOR TO THE SALE OF LAND DOES NO T APPEAR TO BE FULLY JUSTIFIED AND CONVINCING. IT IS ALSO NOTICED THAT IN MOST CASES I N RESPECT OF THE PAYMENT MADE THERE HAS BEEN WITHDRAWA L OF THE AMOUNT DEPOSITED EITHER ON THE VERY NEXT DAY OR TWO WHICH ALSO RAISE S DOUBTS WITH RESPECT TO THE CREDIBILITY OF THE CLAIM MADE THOUGH IT HAS BEEN CONTENDED BY THE APPELLANT THAT THE WITHDRAWALS MA DE BY THE SUB- CONTRACTORS WERE FOR THE PURPOSES OF MAKING PAYMENT TO THE LABOURERS EMPLOYED AND ALSO THE OTHER PARTIES BY T HEM. DESPITE THE FACT THAT THE SEVEN SUB CONTRACTORS MAY NOT HAVE BE EN RELATED TO THE APPELLANT AND SOME OF THEM BEEN IN THE LINE OF CONT RACT BUSINESS FOR A NUMBER OF YEARS AND THE PAYMENT HAVING BEEN MADE BY WAY OF CHEQUES, THE CLAIM OF THE EXPENSES MADE BY THEM AND APPELLANT HAS NOT BEEN CONCLUSIVELY AND ENTIRELY PROVED. THE APEX COURT IN THE CASE OF CIT VS. CALCUTTA AGENCY LTD. (1951) 19 ITR 191 ( SC) HAS HELD THAT IN ORDER TO CLAIM THOSE EXPENDITURE FALLS U/S. 37(1 ) THE BURDEN OF 11 PROVING THE NECESSARY FACTS IN THAT CONNECTION IS O N THE ASSESSEE. THUS THE MATERIAL BROUGHT ON RECORD AND ALSO IN VIE W OF THE FINDINGS OF THE ASSESSING OFFICER DURING THE REMAND PROCEEDI NGS THE APPELLANT HAS NOT BEEN ABLE TO FULLY JUSTIFY THE CLAIM OF ENT IRE PAYMENT MADE TO THE 7 SUB CONTRACTORS AND LABOR CHARGES AND IT IS S ETTLED LAW THAT FOR JUDGING THE EVIDENCE TEST OF HUMAN PROBABILITIES S HOULD BE APPLIED AND COURTS HAVE HELD THAT THE TAX AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITY. AN EXPLANATION OFFERED, IF NOT ACCEPTE D IS NO EXPLANATION IN LAW. THE APEX COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) HAS HELD THAT 'SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TES T THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR A TRIBUNAL . THEREFORE, THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A P I ECE OF E V IDENCE. - BUT IN THAT SPHERE THE DECISION OF THE FINAL FACT FINDING AUTHORITY IS MAD E CONCLUSIVE BY LAW . ' THE APPELLANT HAS NOT BEEN ABLE TO FULLY JUSTIFY TH E EXTENT OF PAYMENT MADE TO THE SUB-CONTRACTORS AND LABOUR CHARGES AMOU NTING TO RS.1,60,02,000/-(RS.1,46,00,000/- TO SUB CONTRACTOR AND RS. 14,02,000/- AS LABOUR CHARGES) AS THE POSSIBILITY O F INFLATING THE EXPENSES CERTAINLY EXISTS IN THE GIVEN FACT OF THE CASE AND IN THE GIVEN CIRCUMSTANCES THERE IS NO OTHER OPTION THAN T O ESTIMATE THE EXPENSES. KEEPING IN VIEW THE MATERIAL AND FACTS BR OUGHT ON RECORD IN THIS REGARD. 3.8 IN THE FACT AND CIRCUMSTANCES OF THE CASE IT IS HELD THAT THE CLAIM OF EXPENSES ON ACCOUNT OF PAYMENTS TO THE SEV EN SUB- CONTRACTORS AND ON LABOUR CHARGES , 20% OF THE EXPE NSES IS HELD TO BE ALLOWABLE I.E.20% OF RS.1,60,02,000/- I.E. RS.32 ,00,400/- AND THE REMAINING AMOUNT OF RS.1,28,01,600/- IS LIABLE TO B E UPHELD. THUS, OUT OF THE TOTAL DISALLOWANCE OF RS.3,23,07,991/- T HE ADDITION TO THE EXTENT OF RS.1,28,01,600/- IS UPHELD AND THE REMAIN ING AMOUNT OF RS.1,95,06,391/- IS ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 7. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT IF THE ADDITION MA DE BY THE LD.CIT(A) IS SUSTAINED, THE PROFITS WOULD WORK OUT TO A ROUND 50% WHICH IS QUITE HIGH AND NOT POSSIBLE. SHE FURTHER SUBM ITTED THAT OUT OF THE CONTRACT RECEIPT OF RS.4.5 CRORE RECE IVED FROM THE SOCIETY, ASSESSEE HAD SPENT AROUND RS.3 CRORE INCLUDING R S.1.6 CRORE PAID TO CHOWGULE INFRASTRUCTURE PVT. LTD., A COMPA NY IN 12 WHICH ASSESSEE IS A MANAGING DIRECTOR. SHE THEREFORE SU BMITTED THAT THE REMAINING PAYMENT OF RS.1.48 CRORES ARE TO OUTS IDE PARTIES AND THAT ASSESSEE HAS ALREADY OFFERED RS.1.2 CORES AS PR OFIT. SHE THEREFORE SUBMITTED THAT THE ADDITION AS UPHELD BY LD.CIT (A) IS ON HIGHER SIDE AND THE DISALLOWANCE BE RESTRICTED TO REASON ABLE AMOUNT. LD.D.R. ON THE OTHER HAND, TOOK US THROUGH THE ORDER OF AO AND SUPPORTED THE ORDER OF AO. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE OF EXPENSES. WE FIND THAT AS FAR AS PAYMENT TO CHOWGULE INFRASTRUCTURE PVT LTD., IS CONCERNED, LD.CIT(A) H AS NOTED THAT THE AMOUNT PAID BY THE ASSESSEE HAS BEEN REFLECTE D BY CHOWGULE INFRASTRUCTURE IN ITS RETURN OF INCOME AND CHOWG ULE INFRASTRUCTURE HAD ALSO CONFIRMED THE RECEIPT OF WORK DO NE DURING THE REMAND PROCEEDINGS. HE THEREAFTER HAS CONCLUDED T HAT AO HAS NOT FOUND ANY DEFECT OR FALSE IN CLAIM OF EXPENSES BY THEM , THE BOOKS OF ACCOUNTS OF THE CHOWGULE INFRASTRUCTURE WERE S UBJECT TO TAX AUDIT AND THERE WAS NO ADVERSE FINDING AND OBSERVA TION MADE BY THE AUDITOR. HE FURTHER NOTED THAT NO MATERIAL OR EV IDENCE HAS BEEN BROUGHT ON RECORD TO PROVE THAT NO WORK WAS CA RRIED OUT BY CHOWGULE INFRASTRUCTURE. HE ACCORDINGLY ALLOWED THE EX PENSES MADE BY ASSESSEE TO CHOWGULE INFRASTRUCTURE. THE AFO RESAID FINDINGS OF LD.CIT(A) HAS NOT BEEN CONTROVERTED BY REVENU E. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF LD.CIT(A) SO FAR AS ALLOWING THE EXPENSES PAID TO CHOWGULE INFRASTRUCTURE IS CONCERNED. 13 9. WITH RESPECT TO EXPENSES MADE TO OTHER CONTRACTOR S, AFTER NOTING THAT FROM SUB-CONTRACTS TO WHOM THE ASSESSEE H AD PAID, IT IS THE FINDING OF LD.CIT(A) THAT THE AMOUNT PAID TO THE SUB-CO NTRACTORS WERE NOT RELATED TO THE ASSESSEE. LD.CIT(A) HAS ALSO NOTED THAT THOUGH THE SUB-CONTRACTORS HAVE CONFIRMED TO HAVE CAR RIED OUT THE WORK BY THE ASSESSEE BUT THE QUESTION OF WORK ALLOTTED BY ASSESSEE APPEARS TO BE HIGHLY INFLATED, THE WITHDRAWAL OF MONEY IN CA SH IMMEDIATELY AFTER DEPOSIT OF CHEQUE RECEIVED FROM ASSESSEE BY SUB- CONTRACTOR ALSO RAISES DOUBT. AT THE SAME TIME, IT IS ASS ESSEES SUBMISSION THAT THE ADDITION IF MADE BY LD.CIT(A) IS CONSIDERED, THE PROFITS WOULD BE AROUND 50% WHICH IS NOT POSSIBLE IN THE PR ESENT CASE. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, WE AR E OF THE VIEW THAT IN THE PRESENT CASE, ENDS OF JUSTICE SHALL BE ME T IF DISALLOWANCE IS RESTRICTED TO RS.50 LAKHS. WE THEREFORE D IRECT THAT THE DISALLOWANCE BE RESTRICTED TO RS. 50 LAKHS. THUS, THE GROUND OF ASSESSEE AND REVENUE ARE PARTLY ALLOWED. 10. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE AND RE VENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 15 TH DAY OF FEBRUARY, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ' / JUDICIAL MEMBER #' / ACCOUNTANT MEMBER PUNE; DATED : 15 TH FEBRUARY, 2018. YAMINI 14 $%&'()(& / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. CIT(A)-II, PUNE. CIT-II, PUNE. . '#$ %%&',) &', / DR, ITAT, B PUNE; $,-./ GUARD FILE. / BY ORDER , // TRUE COPY // / TRUE COP /01%2&3 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE