The DCIT(OSD-1)Circle-4, Ahmedabad V. Kiri Dyes Inds.Ltd., Ahmedabad

ITA 2027/AHD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8834 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business expenditure; Principle of natural justice; Third party statement; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.1027/AHD/2012 & C.O NO.119/AHD/2012 (A/O ITA NO.1027/AHD/2012) ASSESSMENT YEAR:2009-10 INCOME TAX OFFICER, WARD-4, NAVSARI SHIVALEEK INFRASTRUCTURES BLOCK NO.2, RADHA KRUSHNA SOC., NR. SOMNATH TEMPLE, SHANTADEVI ROAD, NAVSARI 396445 [ PAN NO.ABIFS 2198G ] V/S . V/S . M/S SHIVALEEK INFRASTRUCTURES, BLOCK NO.2, RADHA KRUSHNA SOCIETY, NR. SOMNATH TEMPLE, SHANTADEVI ROAD, NAVSARI, PIN 396445 INCOME TAX OFFICER, WARD-4, NAVSARI / APPELLANT .. / RESPONDENT) /BY ASSESSEE NONE /BY REVENUE SHRI RAHUL KUMAR, SR-DR /DATE OF HEARING 27-09-2012 ! /DATE OF PRONOUNCEMENT 25 -10-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE AND CROSS OBJECTION (CO) BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOM E-TAX (APPEALS)-VALSAD DATED 21-02-2012 FOR THE ASSESSMENT YEAR (AY) 2009- 10. FIRST WE TAKE UP REVENUES APPEAL. ITA NO.1027/AHD/2012 & CO 119/AHD/12 A.Y. 2009-10 ITO WD-4 NAVSARI V. M/S. SHIVALEEK INFRASTURUCTUR ES PAGE 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.75,000/- MA DE BY THE ASSESSING OFFICER IN RESPECT OF CASH RECEIVED US/. 68 OF THE ACT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.29,19,323/- MADE BY THE ASSESSING OFFICER IN RESPECT OF BOGUS PURCHASE U/S. 41(1) OF THE ACT. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.16,55,246/- MADE BY THE ASSESSING OFFICER IN RESPECT OF LABOUR WAGES U/S. 3 7 OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT CASE OF ASSESSEE W AS TAKEN UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S. 143(3) OF THE IN COME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FINALIZE D THEREBY THE ASSESSING OFFICER (AO) MADE DISALLOWANCE U/S.40A(3)(A) OF THE ACT OF RS.3,03,908/-, DISALLOWANCE OF CASH CREDIT U/S. 68 OF THE ACT OF R S.75,000/-, DISALLOWANCE OF BOGUS PURCHASES/CESSATION OF LIABILITY U/S. 41(1) O F THE ACT OF RS.29,19,323/- AND DISALLOWANCE OF LABOUR WAGES U/S. 37 OF THE ACT OF RS.82,76,231/- AGAINST THESE, ASSESSEE FILED APPEAL BEFORE LD. CIT(A) IN R ESPECT OF ADDITION MADE U/S 68 OF THE ACT OF RS.75,000/- TREATING THE PURCHASES AS BOGUS / CESSATION OF LIABILITY OF RS.29,19,323/- AND DISALLOWANCE OF LAB OUR CHARGES AMOUNTING TO RS.16,55,246/-, WHO AFTER CONSIDERING THE SUBMISSIO NS OF ASSESSEE PARTLY ALLOWED THE APPEAL. 4. NOW BOTH THE REVENUE AND ASSESSEE HAS CHALLENGED THE ORDER OF LD. CIT(A) BY WAY OF APPEAL AND CO BEFORE US. 5. NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY APPL ICATION FOR ADJOURNMENT OF HEARING IS ON RECORD, HOWEVER, THE N OTICE OF HEARING WAS DULY SERVED AND THE ACKNOWLEDGEMENT DUE IS ON RECORD. TH EREFORE, UNDER THE CIRCUMSTANCES, THIS APPEAL IS TAKEN UP FOR HEARING IN THE ABSENCE OF ASSESSEE. ITA NO.1027/AHD/2012 & CO 119/AHD/12 A.Y. 2009-10 ITO WD-4 NAVSARI V. M/S. SHIVALEEK INFRASTURUCTUR ES PAGE 3 6. GROUND NO.1 IS AGAINST THE DELETION OF ADDITION OF RS.75,000/- U/S. 68 OF THE ACT IN RESPECT OF CASH RECEIVED. LD. SR-DR, SHR I RAHUL KUMAR STRONGLY ARGUED THAT THE ASSESSEE COULD NOT EXPLAIN THE RECE IPT OF RS.75,000/- AS THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS AND G ENUINENESS OF THE TRANSACTIONS ENTERED SHRI DHARMESH H SUDHANI. HE SU BMITTED THAT IT WAS CONTENDED BEFORE LD. CIT(A) BY THE ASSESSEE THAT TH E CASH WAS RECEIVED OUT OF BUSINESS EXPEDIENCY AS MR. DHARMESH H SUDHANI WA S LIVING SIDE OF THE ASSESSEE-COMPANY AND THIS FACT WAS NOT SUBMITTED BE FORE THE ASSESSING OFFICER. 7. HAVING HEARD THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD WE FIND THAT LD. CIT(A) HAS DELETED THE DISALLOWANC E ON THE GROUND THAT THE PAYMENT OF RS.75,000/- IS DULY REFLECTED IN THE EAR LIER YEAR AND THE ASSESSEE WOULD NOT HAVE WAITED TILL THE RECEIPT OF CHEQUE FR OM THE MR. DHARMESH H SUDANI. LD. CIT(A) HAS OBSERVED THAT THE CASE OF TH E ASSESSEE FALL UNDER THE EXCEPTIONAL CIRCUMSTANCES AND THEREFORE UNDER THE R ELAX TERMS OF PROVISIONS OF U/S 68 OF THE ACT THIS RECEIPT OUGHT TO HAVE BEEN A CCEPTED AS RECEIPT OUT OF BUSINESS EXPEDIENCY. FROM THE ABOVE DISCUSSED FACTS , WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A) AS UN DER THE PECULIAR FACTS AND NATURE OF THE BUSINESS OF THE ASSESSEE, THIS RECEIP T OF RS.75,000/- IS RIGHTLY TREATED BY THE LD. CIT(A) AS RECEIVED UNDER THE COM MERCIAL EXPEDIENCY. MOREOVER, AS PER SECTION 68 OF THE ACT AO CAN MAKE ADDITION ON THE GROUND THAT THE EXPLANATION OFFERED BY THE ASSESSEE IN HIS OPINION IS NOT SATISFACTORY. SINCE THE ASSESSEE HAS GIVEN A PLAUSIBLE EXPLANATIO N THEREFORE, LD. CIT(A) HAS RIGHTLY ACCEPTED THE SAME KEEPING IN VIEW OF TH E NATURE OF BUSINESS BEING CARRIED OUT BY THE ASSESSEE. IN THIS VIEW OF THE MA TTER, WE CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND OF REVENUES APPEAL IS DISM ISSED. 8. SECOND GROUND IS AGAINST THE DELETION OF ADDITIO N OF RS.29,19,323/- ON ACCOUNT OF BOGUS PURCHASES U/S. 41(1) OF THE ACT. L D. DR STRONGLY RELIED ON THE ORDER OF ASSESSING OFFICER AND HE SUBMITTED THA T LD. CIT(A) HAS NOT ITA NO.1027/AHD/2012 & CO 119/AHD/12 A.Y. 2009-10 ITO WD-4 NAVSARI V. M/S. SHIVALEEK INFRASTURUCTUR ES PAGE 4 APPRECIATED THE FACTS IN RIGHT PERSPECTIVE. IT IS F URTHER SUBMITTED AND STATED IN THE SHOW-CAUSE NOTICE THAT THE TOTAL CREDITORS OF R S.41,40,699/- OUTSTANDING AS ON 31-03-2009, OUT OF WHICH CONFIRMATION OF MS. SHR EENATH FOUNDATION AMOUNTING TO RS.3,50,809/-, PREMJIBHAI A DALSANIA A MOUNTING TO RS.8,00,427/- AND AMI ENTERPRISE AMOUNTING TO RS.70 ,140/- WAS FOUND TO BE CORRECTED BUT THE AMOUNT OF RS.29,19,323/- REMAINED UNVEFIABLE WHICH HAS BEEN CLAIMED BY THE ASSESSEE. HE SUBMITTED IN THE A BSENCE OF CONTRA CONFIRMATION FROM THE ABOVE AND PROOF OF SERVICES R ENDERED BY THEM FROM THE PARTIES CONCERNED AND PROOF OF SERVICED RENDERED BY THEM THE AMOUNT OF RS.29,19,323/- DEBITED BY THE ASSESSEE WAS TREATED AS BOGUS EXPENDITURE ON ACCOUNT OF PURCHASE AND DISALLOWED AND NON-BUSINESS EXPENDITURE. THE AMOUNT IS FURTHER DISALLOWED U/S. 41(1) OF THE ACT AS CESSATION OF LIABILITY. 9. HAVING HEARD THE LD. DR AND PERUSED THE MATERIAL S AVAILABLE ON RECORD WE FIND THAT LD. CIT(A) HAS OBSERVED THAT ASSESSEE HAS BILLS AND EVIDENCES OF PURCHASE OF MATERIAL AND SUB-CONTRACT WORK DONE, PA YMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE ADDITION AFTER DEDUCTING TAX D EDUCTED AT SOURCES. THESE EVIDENCES AS WELL AS DETAILS OF TDS DEDUCED A ND PAID HAVE BEEN FURNISHED TO ASSESSING OFFICER AT THE TIME OF ASSES SMENT. LD. CIT(A) FURTHER OBSERVED THAT THE BASIS OF ADDITION MADE BY THE AO IN THIS RESPECT IS THAT AO ISSUED NOTICES U/S. 133(6) OF THE ACT TO ALL CREDIT ORS WHOSE BALANCES WERE REFLECTED IN THE BALANCE-SHEET AS MENTIONED IN THE ASSESSMENT ORDER. THOSE PARTIES DID NOT RESPOND TO THOSE NOTICES, THEREFORE THE AO ASSUMED THAT THOSE CREDITED BALANCES ARE BOGUS AND NON-EXISTENCE. IT I S ALSO NOTED BY THE LD. CIT(A) THAT THE AO TREATED THOSE BALANCES AS BOGUS PURCHASE AT THE SAME TIME HE INVOKED THE SECTION 41(1) OF THE ACT. LD. C IT(A) HAS GIVEN A FINDING OF THE FACT THAT FROM THE LEDGER ACCOUNT OF THOSE PART IES, IT IS NOTICED THAT MAJOR PAYMENTS TO THOSE PARTIES WERE THROUGH CHEQUE WHERE VER TDS IS APPLICABLE, IT HAS BEEN MADE. WE FIND THAT LD. CIT(A) OPINED THAT IF ANY EXPENDITURE NEEDED TO BE DISALLOWED, IT MUST BE VERIFIED AND A CLEAR FINDING MUST BE GIVEN AD HOC DISALLOWANCE WITHOUT ANY BASIS CANNOT SUGGESTING IN THE EYES OF LAW. THE ITA NO.1027/AHD/2012 & CO 119/AHD/12 A.Y. 2009-10 ITO WD-4 NAVSARI V. M/S. SHIVALEEK INFRASTURUCTUR ES PAGE 5 ASSESSEE HAS SUBSTANTIATED THE GENUINENESS OF THOSE CREDITORS BY MAKING PAYMENT THROUGH CHEQUES IN THE SUBSEQUENT YEAR. THE AO HAS NOT BROUGHT OUT ON RECORD WHICH PURCHASES HE SUSPECTED TO BE BO GUS PURCHASES. MOREOVER, BOGUS PURCHASES AND PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE CLUBBED TOGETHER. SO FAR GENUINENESS OF THE CRED ITORS ARE CONCERNED, ON THE BASIS OF MATERIAL ON RECORD AND EXPLANATION SUB MITTED BEFORE LD. CIT(A), HE WAS CONVINCED THAT THE ASSESSEE HAS DISCHARGED T HE ONUS AND WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT (A) AS HE HAS EXAMINED ALL ASPECTS OF THE MATTER, THE AO AT ONE HAND TREATED I NCREASES AS A TRADE LIABILITY WHICH BECAME LIABLE FOR TAX AFTER CESSATION OF THOS E LIABILITIES. BOTH BOGUS PURCHASES AND CESSATION OF LIABILITY ARE DIFFERENT ALTOGETHER. IN THE CASE OF CESSATION OF LIABILITY, THE LIABILITY DOES NOT REMA IN TO BE PAID AT A LATER DATE BUT IN THE CASE OF BOGUS PURCHASE, THE PURCHASES ARE NE VER MADE AND THE ASSESSEE FURNISHES UNVERIFIABLE EVIDENCE OF SUCH PU RCHASES. IN THE CASE IN HAND, THE ASSESSEE HAS PAID BY ACCOUNT PAYEE CHEQUE AND TDS IS ALSO DEDUCTED ON SUCH PAYMENT THIS FACT IS NOT CONTROVER TED BY REVENUE. MOREOVER, THE AO HAS NOT BROUGHT ANY MATERIAL ON RE CORD SUGGESTING THAT THE PAYMENT MADE BY CHEQUES TO THE PARTIES WAS SUBSEQUE NTLY REPAID IN CASH TO THE ASSESSEE BY THE CONCERNED PARTIES. IN THIS VIEW OF THE MATTER, WE CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND OF REVENUES A PPEAL IS DISMISSED. 10. THIRD GROUND OF REVENUES APPEAL IS AGAINST THE DELETION OF RS.16,55,246/- IN REGARD TO LABOUR WAGS U/S 37 OF THE ACT. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 11. HAVING HEARD THE LD. DR AND PERUSED THE MATERIA LS AVAILABLE ON RECORD WE FIND THAT LD. CIT(A) HAS OBSERVED THAT ASSESSING OFFICER HAS MADE ADDITION ON THE BASIS THAT ASSESSEE COULD NOT FURNI SH THE RELEVANT BILLS AND VOUCHERS AT THE TIME OF ASSESSMENT PROCEEDINGS. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT B ILLS AND VOUCHERS AND THE BOOKS OF ACCOUNT HAVE BEEN DULY AUDITED. WE FIND TH AT LD. CIT(A) HAS ITA NO.1027/AHD/2012 & CO 119/AHD/12 A.Y. 2009-10 ITO WD-4 NAVSARI V. M/S. SHIVALEEK INFRASTURUCTUR ES PAGE 6 OBSERVED THAT TURNOVER OF THE ASSESSEE-COMPANY HAS DROPPED DRASTICALLY COMPARED TO PREVIOUS YEAR THE LABOUR EXPENSES REMAI NED CONSTANT BUT THE GROSS PROFIT (GP) HAS BEEN MORE THAN DOUBLE I.E. 11 .65% TO 26.43% IN THE YEAR UNDER CONSIDERATION BUT AT THE SAME TIME, IN T HIS SECTOR OF BUSINESS, THE BILLS/VOUCHERS ARE MADE BY SELF VOUCHER PARTICULARL Y LABOUR PAYMENTS IN LARGE NUMBER OF CASES, THE PAYMENTS MADE ARE BY CASH AND SELF-MADE. IN THAT SITUATION, THERE IS A SCOPE FOR MANIPULATION AND LE ADING TO INFLATE THE EXPENSES. SINCE THE GP HAS DOUBLED IN THIS YEAR, TH E LOGIC OF MANIPULATION DOES NOT HOLD MUCH WATER. LD. CIT(A) RESTRICTED THE DISALLOWANCE FROM 20% TO 5%. THE FACT THAT THE BOOKS OF ACCOUNT ARE DULY AUD ITED AND AO HAS NOT REJECTED THE BOOKS IS NOT CONTROVERTED BY THE REVEN UE. THE AO IN HIS ORDER, HAS OBSERVED THAT ON CAREFUL PERUSAL OF REPLY SUBMI TTED BY THE ASSESSEE IT IS FOUND THAT ASSESSEE HAS PAID LABOUR WAGES OF RS.82, 76,231/- BUT THE ASSESSEE HAS NOT MAINTAINED ANY VOUCHERS FOR THE LA BOUR PAYMENT AND ASSESSEE HAS NOT PRODUCED DETAILS OF IDENTIFICATION AND IN THE ABSENCE OF DETAILS OF BASIS OF PAYMENT AND WORK DONE BY THE LA BOUR IS NOT VERIFIABLE. THUS, THE VERIFICATION OF THE LABOUR WAGES IS NOT J UST UNDER THE CIRCUMSTANCES AND ALSO KEEPING NATURAL JUSTICE IN MIND, THE AO DI SALLOWED 20% OF LABOUR WAGES AS NON-BUSINESS EXPENDITURE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. FROM THE OBSERVATION OF AO IT IS EVIDENT THAT 20% OF LABOUR WAGES IS MADE ON AD HOC BASIS. NO BASIS HAS BEEN GIVEN BY THE AO AS TO WHY 20% OF THE LABOUR WAGE ARE LIABLE TO BE DISALLOWED. DES PITE THE FACT THAT BOOKS OF ACCOUNT OF ASSESSEE HAS NOT BEEN REJECTED, IN OUR C ONSIDERED OPINION, WHILE MAKING DISALLOWANCE ON THE ESTIMATION BASIS, THE AO SHOULD GIVE SOME BASIS ON WHICH THE ESTIMATION HAS BEEN MADE FOR DISALLOWA NCE OF THE EXPENSES. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMI TY INTO THE ORDER PASSED BY LD. CIT(A) AND SAME IS HEREBY CONFIRMED. THIS GROUN D OF REVENUES APPEAL IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ASSESSEES CO. 13. THE ASSESSEE HAS RAISED THE GROUND OF CO. ITA NO.1027/AHD/2012 & CO 119/AHD/12 A.Y. 2009-10 ITO WD-4 NAVSARI V. M/S. SHIVALEEK INFRASTURUCTUR ES PAGE 7 1. LOOKING TO THE NATURE OF BUSINESS OF THE ASSESS EE AS ROAD CONTRACTOR, THE LEARNED CIT(APPEALS) OUGHT TO HAVE ALLOWED THE EXPENDITURE OF LABOUR WAGES OF RS.1655246/-, INSTEA D PARTY ALLOWED RS.1241434/-. 14. AT THE TIME OF HEARING NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY ADJOURNMENT APPLICATION IS MADE ON BEHALF OF ASSESS EE. HOWEVER, THE NOTICE OF HEARING IS DULY SERVED AS ACKNOWLEDGEMENT DUE IS ON RECORD. WE FEEL THAT ASSESSEE IS NOT INTERESTED IN PROSECUTING THIS CO A ND RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH DELHI RENDERED IN THE CASE OF MULTIPLAN (INDIA) (P) LTD. (38 ITD 320). HENCE, THIS CO OF ASSESSEE IS HEREBY DISMISSED FOR WANT OF PROSECUTION. 15. IN THE RESULT, ASSESSEES CO IS DISMISSED FOR W ANT OF PROSECUTION. 16. IN COMBINED RESULT, APPEAL OF REVENUE IS DISMISSED AND THAT OF ASSESSEES CO IS DISMISSED FOR WANT OF PROSECUTION. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP '#$- 25/10/2012 *+, - . . . . //0 //0 //0 //0 10 10 10 10 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. #,#/4 5 / CONCERNED CIT 4. 5- / CIT (A) 5. 0 78 ///4, /4!, *+, / DR, ITAT, AHMEDABAD 6. 8;< => / GUARD FILE. ?/* # /TRUE COPY/ /4!, *+, -