M/s. Fitwell Construction, Paradeep V. ITO, Ward-1, Paradeep, Paradeep

ITA 201/CTK/2013

• Counselvise Citation: 20122114 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 20-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2013
• Court: TRIBUNAL
• Department Lawyers: SHOVAN KRISHNA SAHU
• Assessee Lawyers: P R MOHANTY
• Keywords: Depreciation; Business expenditure; Assessment record; Onus to prove
• Section: 40A(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH , CUTTACK , . . , BEFORE SHRI SUNIL KUMAR YADAV , J M & SHRI B.P.JAIN , A M ./ ITA NO. 201 /CTK/201 3 ( / ASSESSMENT YEAR : 200 6 - 07 ) M/S FITWELL CONSTRUCTION, BIJAYACHANDRAPUR, ATHARBANKI, PARADEEP VS. ITO, PARADEEP, WARD - 1, PARADEEP ./ ./ PAN/GIR NO. : A A BFF 2629 M ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI P.R.MOHANTY /REVENUE BY : SHRI SHOVAN KRISHNA SAHU / DATE OF HEARING : 20 TH MAY , 201 5 / DATE OF PRONOUNCEMENT 22 ND MA Y ,2015 / O R D E R PER SUNIL KUMAR YADAV (J.M) : TH IS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT (A) , CUTTACK FOR THE ASSESSMENT YEAR 2006 - 07 , INTER ALIA , ON FOLLOWING GROUNDS . : - 1. FOR THAT, THE APPELLATE ORDER PASSED IN ITA NO - 0498/2 011 - 12 ON DATED 28 TH FEB, 2013, FOR THE A/Y 2006 - 07 IS ARBITRARY, ILLEGAL AND DEVOID OF MERIT, BEING UNJUSTIFIED & UNWARRANTED DESERVES TO BE QUASHED IN LIMIN E . 2. FOR THAT, THE REVISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT U/S 147 BY ISSUANC E OF NOTICE U/S148 IN THE PRETEXT THAT INCOME ESCAPED ASSESSMENT, IN ABSENCE OF ANY CREDIBLE ADDITIONAL MATERIAL EVIDENCES IS NOT PERMISSIBLE ON THE GROUND THAT, THE WHOLE EXERCISE AMOUNTS TO REVIEW NOT PERMISSIBLE BY LAW, PARTICULARLY WHEN THE ASSESSMENT IS COMPLETED U/S143(3). 3. FOR THAT, THE ADDITION OF RS.11,93,761 / - FOR THE ALLEGED CONTRAVENTION OF SECTION 40A(3) DESERVES TO BE DELETED ON ITA NO.201/2013 2 THE GROUND THAT, THE PAYMENTS DOES NOT COME UNDER THE PURVIEW OF SECTION 40A(3) DUE TO COMPILING GROUND REALITIE S AND EXISTENCE OF EXCEPTIONAL AND UNAVOIDABLE CIRCUMSTANCES. 4. FOR THAT, THE ADDITION OF RS. 11,93,761 / - U/S 40A(3) IS A PRESUMPTION, ASSUMPTION & MISCONCEPTION AND OUGHT TO HAVE BEEN ALLOWED & DESERVES TO BE DELETED ON THE GROUND THAT NO ADDITION U/S4 0A(3) CAN BE JUSTIFIABLE AND LEGALLY SUSTAI N ABLE WHEN THE VERY CONDITION PRECEDENT FOR INVOCATION OF SECTION 40A(3) IS ABSENT. 5. FOR THAT, DISA LLOWANCE OF AN AMOUNT OF RS.4. 15,000 / - FOR THE ALLEGED CONTRAVENTION OF SECTION 4 0 (A)(IA) FOR NON DEDUCTION OF TDS U/S 194 - I DESERVES TO BE DELETED BEING ILLEGAL, UNJUSTIFIED AND UNWARRANTED AND DEVOID OF ANY MERIT, BEING GENUINE BUSINESS EXPENDITURES, DESERVES TO BE ALLOWED IN TOTO . 6. FOR THAT , THE DISALLOWANCE OF RS 12,424/ - TOWARDS EXCESS CLAIM OF DEPRECI ATION AGAIN DESERVES TO BE DELETED BEING UNLAWFUL, UNREASONABLE & UNJUSTIFIED 7. FOR THAT, THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND FURTHER GROUNDS, IF ANY, AT THE TIME OF HEARING OF APPEAL. 2. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO ADJUDICA TION. 3. WITH REGARD TO GROUND NO.2, LEARNED COUNSEL FOR THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE REOPENING OF THE ASSESSMENT ON THE GROUND THAT THERE WAS NO CREDIBLE ADDITIONAL MATERIAL EVIDENCES BEFORE THE ASSESSING OFFICER TO FORM A BELIEF THAT I NCOME HAS ESCAPED ASSESSMENT. THEREFORE, THE REOPENING IS BAD AND THE ASSESSMENT FRAMED CONSEQUENT THERETO DESERVES TO BE QUASHED. HE ALSO INVITED OUR ATTENTION TO THE ASSESSMENT ORDER IN WHICH THE ASSESSING OFFICER HAS RECORDED THE REASONS FOR REOPENING T HE ASSESSMENT. 4. LEARNED DR, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSING OFFICER HAS DULY RECORDED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE HAS ITA NO.201/2013 3 NOT MADE TDS UNDER CHAPTER XVII - B FROM HIRE CHARGES OF MACHINERIES, CLOSING STOCK SHOWN IN THE BALANCE SHEET HAS NOT BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT, CASH PAYMENTS EXCEEDING RS.20,000/ - HAVE BEEN MADE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AND EXCESS CLAIM OF DEPRECIATION. THE AO HAS RECORDED THE OBSERVATION ON THE BASIS OF THE MATERIAL AVA ILABLE ON RECORD, THEREFORE, THE CREDIBLE MATERIAL AVAILABLE BEFORE THE AO TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 5. HAVING GONE THROUGH THE ASSESSMENT ORDER IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE AO HAS C ATEGORICALLY RECORDED IN HIS ORDER THAT THE ASSESSMENT WAS REOPENED U/S.147 OF THE ACT ON THE GROUND THAT ASSESSEE HAS NOT MADE TDS UNDER CHAPTER XVII - B FROM HIRE CHARGES OF MACHINERIES, CLOSING STOCK SHOWN IN THE BALANCE SHEET HAS NOT BEEN SHOWN IN THE PR OFIT AND LOSS ACCOUNT, CASH PAYMENTS EXCEEDING RS.20,000/ - HAVE BEEN MADE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AND EXCESS CLAIM OF DEPRECIATION. WE HAVE ALSO CAREFULLY EXAMINED THE ORIGINAL ASSESSMENT ORDER AND FO U ND THAT THIS ASPECT WAS NEVER EXAM INED BY THE AO WHILE COMPLETING THE ORIGINAL ASSESSMENT. NOTHING HAS ALSO PLACED BEFORE US WITH REGARD TO THE APPLICATION OF MIND OF THE AO IN THIS REGARD. THEREFORE, WE ARE OF THE VIEW THAT WHEN THE AO HAS NOTICED THAT THESE ASPECTS WERE NOT EXAMINED BY T HE AO IN HIS ORIGINAL PROCEEDINGS AND IT AMOUNTS TO AN ESCAPEMENT OF INCOME, THE AO HAS RIGHTLY REOPENED THE ASSESSMENT HAVING FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ITA NO.201/2013 4 ESCAPED ASSESSMENT ON THE AFORESAID ISSUES. THEREFORE, WE ARE OF THE VIEW THAT REOPENING OF THE ASSESSMENT IS VALID AND WE ACCORDINGLY REJECT THIS GROUND OF THE ASSESSEE. 6. WITH REGARD TO GROUNDS NO. 3 TO 6, NO ARGUMENT WAS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND HE HAS CANDIDLY ADMITTED THAT HE HAS NOT A GOOD CASE ON TH ESE ISSUES. 7. WE, HOWEVER, CAREFULLY EXAMINED THE ORDER OF THE CIT(A) IN RESPECT OF ALL THESE ISSUES AND WE FIND THAT THE CIT(A) HAS PROPERLY EXAMINED THE ASSESSMENT ORDER AND THE ISSUES IN THE LIGHT OF THE ASSESSEES CONTENTION WHILE ADJUDICATING THE IS SUES. WE, HOWEVER, FOR THE SAKE OF REFERENCE, EXTRACT THE ORDER OF THE CIT(A) AS UNDER : - 4.1 THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED IN THE P & L A/C. EXPENSES OF RS.4,15,000/ - TOWARDS HIRE CHARGES OF MACHINERIES. THE ASSESSEE FILED ONLY THE LEDGER A/C. OF THE SAME DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING. NAME OF THE PARTIES TO WHOM SUCH PAYMENTS HAVE BEEN MADE WERE NOT MENTIONED IN THE LEDGER A/C. AS MENTIONED EARLIER AT PARA - 4, THERE WAS NON - COMPLIANCE BY THE ASSESSEE TO THE NOTICE U/S .142(1) DURING THE COURSE OF RE - ASSESSMENT PROCEEDING. THE AO FOUND THAT IN THE PRESENT CASE TAX IS DEDUCTIBLE U/S.194I. THE ASSESSEE DID NOT FURNISH ANYTHING TO SUBSTANTIATE THAT TAX WAS DEDUCTED ON THE AFORESAID CLAIM OF PAYMENTS EXCEEDING RS.1,20,000/ - IN THE PRESENT CASE. THEREFORE THE AO DISALLOWED RS.4,15,000/ - U/S.40(A)(IA)OF THE ACT. 4.2 IN THE BALANCE SHEET THE ASSESSEE HAS SHOWN RS.2,05,960/ - TOWARDS CLOSING STOCK OF RAW MATERIAL UNDER THE HEAD CURRENT ASSETS. BUT NO SUCH CLOSING STOCK OF MATERIAL HAS BEEN SHOWN IN THE P & L A/C. THE AO ASKED THE ASSESSEE VIDE HIS OFFICE LETTER DATED 27.9.2011 TO EXPLAIN THE ABOVE. THE ASSESSEE DID NOT FILE ANYTHING IN THIS REGARD BEFORE THE AO. THE AO THEREFORE MADE AN ADDITION OF RS.2,05,960/ - TO THE TOTAL INCOME OF THE ASSESSEE. 4.3 THE ASSESSEE HAS SHOWN IN THE P & L A/C. EXPENSES OF RS.56,88,744/ - AND RS.3,14,700/ - UNDER THE HEAD MATERIAL CONSUMPTION AND TRANSPORTATION RESPECTIVELY. ON VERIFICATION OF ITA NO.201/2013 5 THE COMPUTERIZED LEDGER A/C. OF THE AFORESAID HEAD OF EXPEN SES SUBMITTED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING, IT WAS FOUND BY THE AO THAT ONLY DATE - WISE ENTRY, CORRESPONDING VOUCHER NUMBERS AND THE AMOUNTS HAVE BEEN REFLECTED. NOWHERE THE NAME OF THE PARTIES AND THE MODE OF PAYMENT HAVE BEEN MENTIO NED. ALL THE EXPENSES INCURRED UNDER THE HEAD MATERIAL CONSUMPTION WERE IN EXCESS OF RS.20,000/ - . SIMILARLY, OUT OF THE TOTAL EXPENSES OF RS.3,14,700/ - UNDER THE HEAD TRANSPORTATION, ONLY ON TWO OCCASIONS PAYMENT OF RS.16,745/ - AND RS.17,895/ - HAVE BEEN MA DE ON 15.8.2005 & 22.12.2005 RESPECTIVELY. IN THE PRESENT CASE THE ASSESSEE DID NOT FILE ANY EXPLANATION BEFORE THE AO TO SUBSTANTIATE THAT THE AFORESAID PAYMENTS WERE COVERED UNDER THE MITIGATING CIRCUMSTANCES AS PROVIDED IN RULE 6DD. SECTION 40A(3) STATE S THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENT MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS RS.20,000/ - , NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THEREFORE THE AO DISALLOWED 20% OF THE TOTAL PAYMENT OF RS.59,68,804/ - (RS.56,88,744 + RS.3,14,700 - RS.34,640). IT COMES TO RS.11,93,761/ - . 4.4 THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.31,165/ - IN THE P & L A /C. THE AO ON VERIFICATION OF THE SCHEDULE OF FIXED ASSETS FOUND THAT THIS AMOUNT INCLUDES DEPRECIATION CHARGED @25% ON MIXTURE MACHINE, WATER PUMP, SHUTTERING PLATE, MISC. TOOLS AND EQUIPMENTS AS AGAINST ALLOWABLE RATE OF 15%. SIMILARLY, DEPRECIATION ON F URNITURE & FIXTURE HAS BEEN ALLOWED @15% IN PLACE OF 10%. THEREFORE HE BROUGHT TO TAX THE EXCESS CLAIM OF DEPRECIATION OF RS.12,424/ - . REASONS FOR THE DECISION 5. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT CALL FOR ANY SPECIFIC FINDING. 5.1 GROUND NO.2 IN INDO - ADEN SALT MFG. & TRADING CO. P. LTD. V. CIT (1986) 159 ITR 624, THE HON'BLE SUPREME COURT HELD: 'THE ASSESSEE S CONTENTION IS THAT THE INCOME - TAX OFFICER COULD HAVE FOUND OUT THE POSITION BY FURTHER PROBING. THAT, HOWEVER, DOES NOT EXONERATE THE ASSESSEE TO MAKE FULL DISCLOSURE TRULY. EXPLANATION 2 TO SECTION 147 OF THE ACT MAKES THE POSITION ABUNDANTLY CLEAR. THE PRINCIPLES HAVE ALSO BEEN WELL - SETTLED AND REITERATED IN NUMEROUS ITA NO.201/2013 6 DECISIONS OF THIS COURT : SEE KANTAMANI VENKATA NARAYA NA & SONS V. FIRST ITO [1967] 63 ITR 638 (SC) AND ITO V, LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC). HIDAYATULLAH ]., AS THE LEARNED CHIEF JUSTICE THEN WAS, OBSERVED IN CALCUTTA DISCOUNT CO.S CASE [1961] 41 ITR 191 (SC) THAT MERE PRODUCTION OF EVIDENCE BEF ORE THE INCOME - TAX OFFICER WAS NOT ENOUGH, THAT THERE MAY BE OMISSION OR FAILURE TO MAKE A TRUE AND FULL DISCLOSURE, IF SOME MATERIAL FOR THE ASSESSMENT LAY EMBEDDED IN THE EVIDENCE WHICH THE REVENUE COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF THE ASSESSING AUTHORITY. THE ASSESSEE KNOWS ALL THE MATERIAL AND RELEVANT FACTS - THE ASSESSING AUTHORITY MIGHT NOT. IN RESPECT OF THE FAILURE TO DISCLOSE, THE OMISSION TO DISCLOSE MAY BE DELIBERATE OR INADVERTENT . THAT WAS IMMATERIAL. BUT IF THERE IS OMISSION TO DISCLOSE MATERIAL FACTS, THEN, SUBJECT TO THE OTHER CONDITIONS, JURISDICTION TO REOPEN IS ATTRACTED. IT IS SUFFICIENT TO REFER TO THE DECISION OF THIS COURT IN CALCUTTA DISCOUNT CO.S CASE [1961] 41 ITR 191 (SC) WHERE IT HAD BEEN HELD THAT IF THERE ARE SOME PRIMARY FACTS FROM WHICH A REASONABLE BELIEF COULD BE FORMED THAT THERE WAS SOME NON - DISCLOSURE OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS ; THE INCOME - TAX OFFICER HAS JURISDICTION TO REOPEN THE ASSESSMENT. THIS POSITION WAS AGAIN REITERATED BY THIS COURT IN MALEGAON ELECTRICITY CO. P. LTD. V. CIT [1970] 78 ITR 466 (SC).' IN VIEW OF THE ABOVE AND ALSO PARA - 4 HERE - IN - ABOVE, THERE IS NO MERIT IN THE ABOVE GROUND OF THE APPELLANT. 5.2 GRO UND NO.3 TO 7 THE ABOVE GROUNDS ARE TAKEN TOGETHER AS THEY ADDRESS A COMMON ISSUE. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) ON 08.12.2008 ON A TOTAL INCOME OF RS.2,24,590/ - . THEN THE ASSESSMENT WAS REOPENED U/S.147 ON THE GROUND THAT THE ASSESSEE HAS NOT MADE TDS UNDER CHAPTER - XVII - B FROM HIRE CHARGES OF MACHINERIES, CLOSING STOCK SHOWN IN THE BALANCE SHEET HAS NOT BEEN SHOWN IN THE P & L A/C., CASH PAYMENTS EXCEEDING RS.20,000/ - HAVE BEEN MADE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AND EXCES S CLAIM OF DEPRECIATION. THERE WAS NON - COMPLIANCE BY THE ASSESSEE ON TO THE NOTICE U/S.148 AND ON 09.8.2011, 05,9.2011, 15.9.2011 & 11.10.2011 TO THE NOTICE U/S. 1 42( 1 ). I HAVE GONE THROUGH THE 'INCOME - TAX ASSESSMENT RECORD' OF THE APPELLANT FOR THE AY 200 6 - 07. I FIND THAT THE AO VIDE HIS OFFICE ITA NO.201/2013 7 LETTER NO.2027 DATED 27.9.2011 SENT BY RPAD ASKED THE ASSESSEE TO FILE DETAILS MENTIONED THEREIN. A COPY OF THE ABOVE LETTER OF THE AO IS ANNEXED HEREWITH AS 'APPENDIX - 1'. IT SUMMARIES THE ISSUES. THE ASSESSEE RECEI VED IT AS PER THE ACKNOWLEDGEMENT SLIP. THERE WAS NO COMPLIANCE BY THE ASSESSEE TO THE ABOVE LETTER OF THE AO. ALLOCATION OF THE BURDEN OF PROOF THAT THE ONUS SHIFTED TO THE ASSESSEE IS SUPPORTED BY THE FOLLOWING JUDGMENTS : (I) SESHASAYEE BROS LTD, V. CIT 42 ITR 568 (MAD.) (II) CIT V. CALCUTTA AGENCY LTD. 19 ITR 19 1 (SC) ( III ) NUND & SAMONT CO. (P) LTD. V. CIT 78 ITR 268 (SC) (IV) CIT V. CALCUTTA AGENCY 19 ITR 191 (SC) (V) UNITED STEEL V. CULLINGTO 9 ITR SUPPL 20, 35 (HL) (V I) GOPINATH V. CIT 6 ITR 243 (LAH - HC) (VII) HOTZ V. CIT 21 ITR 149 (PUNJ - HC) THE HON'BLE SUPREME COURT HELD IN A.RAGHAVAMMA V. A. CHENCHAMMA AIR 1964 SC 136 THAT SUCH A SHIFTING OF ONUS IS TO BE SEEN IN THE EVALUATION OF EVIDENCE. THE HON'BLE COURT NEED NOT ACCEPT A TAX PAYER'S SELF - SERVING TESTIMONY WHEN TH E TAX PAYER FAILS TO PRESENT CORROBORATIVE EVIDENCE. IT HAS BEEN HELD SO IN BEAM V. COMMISSIONER, T.C.MEMO. 1990 - 304 CITING TOKARSKI V. COMMISSIONER, 87 T,C. 74, 77 (1986). PRODUCTION OF BOOKS OF ACCOUNTS, RECEIPTS AND VOUC HERS COULD HAVE CLARIFIED THE ISSUE. CASE LAWS WOULD NOT SOLVE THE PROBLEM. I REFER HERE TO PARA 7 OF PAGE 623 IN J.SUMERMAL(HUF) V, ACIT (2012)344 ITR 618(KAR.). I FIND FROM THE 'INCOME - TAX ASSESSMENT RECORD' THAT THE APPELLANT FAILED TO CARRY ITS BURDEN OF PROOF. THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF MACHINERY HIRE CHARGES OF RS.4,15,000/ - U/S.40(A)(IA). ALSO HE HAS RIGHTLY DISALLOWED RS.11,93,761/ - U/S.40A(3). THE EXCESS CLAIM OF DEPRECIATION OF RS.12,424/ - HAS BEEN RIGHTLY DISALLOWED BY HIM. IN V IEW OF THE ABOVE, THE DISALLOWANCE OF RS.4,15,000/ - , RS.11,93,761/ - AND RS.12,424/ - MADE BY THE AO ARE CONFIRMED. ITA NO.201/2013 8 8. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN RESPECT OF THE AFORESAID GROUNDS, WE, THEREFORE, CONFIRM THE ORDER OF CIT(A). 9 . IN THE RESULT, AP PEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 / 05 / 201 5 . SD/ - SD/ - ( . . ) ( B. P. JAIN ) ( ) ( SUN IL KUMAR YADAV) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 22 /0 5 / 201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT , CUTTACK 6. / GUARD FILE. //TRUE COPY//