Dharma Promoters Pvt Limited, CHENNAI V. ACIT, CHENNAI

ITA 2085/CHNY/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2968 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRI SHANMUGA PRIYA
• Keywords: Onus to prove
• Section: 143(3); 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , ! ' # , $ #% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2085/CHNY/2014 & '& /ASSESSMENT YEAR: 2008-09 M/S. DHARMA PROMOTERS PVT. LTD., TIMES PARNTER, NO.58, PERAMBUR BARRACKS ROAD, CHENNAI 600 007. VS. ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(4), CHENNAI. [PAN: AACCD 8274C] ( () /APPELLANT) ( *+() /RESPONDENT) () , - / APPELLANT BY : SHRI RAJIV SAXENA, ADVOCATE *+() , - /RESPONDENT BY : MS. SRI SHANMUGA PRIYA, JCIT . , /$ /DATE OF HEARING : 11.12.2018 01' , /$ / DATE OF PRONOUNCEMENT : 04.03.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -II, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 30.03.2014 F OR THE ASSESSMENT YEAR (AY) 2008-09. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE IMPUGNED ORDER IS NOT ONLY BAD IN LAW AND NATURE BUT IT ALSO WHIMSICAL HENCE IT IS LIABLE TO BE DELETED. ITA NO.2085/CHNY/2014 :- 2 -: 2. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE (I) THE LD.CIT(A)(C)-LL HAS GROSSLY ERRED IN CONFIR MING THE ADDITIONS OF RS.36,16,000I- MADE BY THE LD. A.O. BE ING 8% OF THE GROSS RECEIPTS OF TOTAL WORK DONE OF RS.4,52,00 ,000/-;. (II) THE LD.CIT(A)(C)-LL HAS ERRED IN UPHOLDING THE 8% OF THE INCOME OF TOTAL WORK DONE OF RS. 4,52,00,000/- IN V IEW OFTHE FACTS THAT THE LD. ACIT HAS NOT REJECTED THE BOOKS OF ACC OUNTS AND HAS NOT CONTROVERTED THE SUBMISSIONS MADE BY THE ASSESS EE COMPANY WITHOUT A COGENT REASONS OR FACTS BEING BRO UGHT ON RECORDS; (III) THE LD. CIT(A)(C)-LL HAS ERRED IN IGNORING TH E EVIDENCES PLACED BY THE ASSESSEE IN FORM OF LIST OF WORKERS T O WHOM WAGES WERE PAID; AND 3. THE LD. CIT(A)(C)-LL HAS GROSSLY ERRED BY ENHANC ING AND THEREBY TREATING THE WORK DONE AS INCOME OF THE ASSESSEE IN VIEW OF THE FOLLOWING FACTS: A). ON PHYSICAL VERIFICATION AT DIFFERENT SITES OF WORK DONE BY THE ASSESSEE, THE REPORT OF OFFICER VISITED THE FIELDS AND LOCAL ENQUIRES CONDUCTED BY THEM AND IN MOST OF THE CASES THE REPORT INSCRIBES THE WORK MAY HAVE BEEN DONE THAT HAS BEEN TOTALLY IGNORED BY THE LD. CIT(A)(C)-LL INSPITE OF THE SUBM ISSIONS MADE BY THE AR OF THE APPELLANT IN CONFRONTING THE REMAN D REPORT. A PHYSICAL VERIFICATION WAS CONDUCTED BY THE INVESTIG ATION WING OF THE DEPARTMENT; B). THE LD. CIT(A)(C)-LL HAS ALSO ERRED IN IGNORING THE VITAL FACTS REPORTED BY THE INVESTIGATION WING WHICH CLEARLY IN DICATED THAT THE WORK HAS BEEN DONE BY THE ASSESSEE. C). THE LD.CIT(A)(C)-LL HAS FAILED TO JUSTIFY THE A DDITION IN VIEW OF THE FACT THAT ACCOUNTS WERE AUDITED AND HOW THE WHO LE OF THE WORK DONE BY THE ASSESSEE HAS BECOME THE TAXABLE IN COME OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, IT IS STATED TO BE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THE RETURN OF INCOME FOR THE AY 2008-09 WAS FILED ON 26.09.2008 DECLARING INCOME OF RS. 3,141/-. AFTER P ROCESSING THE SAID RETURN OF INCOME U/S. 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), THE CASE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND THE ASSESSMENT ITA NO.2085/CHNY/2014 :- 3 -: WAS COMPLETED BY THE ASST. CIT, COMPANY CIRCLE-I(4) , CHENNAI VIDE ORDER DATED 30.12.2010 PASSED U/S. 143(3) OF THE AC T AT A TOTAL INCOME OF RS. 36,16,000/-. WHILE DOING SO, THE AO ESTIMATED THE INCOME @ 8% ON GROSS RECEIPTS OF RS. 4,52,00,000/- SAID TO BE RECE IVED FROM PACL INDIA LTD. TOWARDS LAND DEVELOPMENT EXPENDITURE. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT WAS CALLED UP ON BY THE AO TO FURNISH THE VARIOUS DETAILS SUCH AS NATURE OF WORK CARRIED OUT AND THE PROOF OF THE EXPENSES INCURRED ON LAND DEVELOPMENT EXPENSES OF RS. 4,51,96,859/-. THE AO FURTHER OBSERVED THAT ALL TH E INVOICES RAISED BY THE APPELLANT OR FOR THE IDENTICAL AMOUNT OF RS. 18 LAKHS AND THE EXPENDITURE SIDE ALSO THE AO OBSERVED FROM THE LEDG ER COPY OF THE LAND DEVELOPMENT EXPENSES, THE ASSESSEE HAD DEBITED ON E VERYDAY A SUM OF RS. 4,15,000/- TO RS. 4,25,000/- WITH A NARRATION T HAT THE LAND DEVELOPMENT EXPENSES AND LABOUR PAYMENT. THE AO AL SO NOTED THAT THE APPELLANT HAD ISSUED CHEQUES TOWARDS LABOUR CHARGES , WHICH WERE ENCASHED BY ONE SHRI ASHOK KUMAR. THE AO ISSUED A QUESTIONNAIRE DATED 20.12.2010 CALLING UPON THE APPELLANT TO FILE CERTAIN DETAILS. THE QUESTIONNAIRE IS REPRODUCED BY THE AO AT PARA 6 OF THE ASSESSMENT ORDER. ADMITTEDLY, THE ASSESSEE COULD NOT FURNISH THE INFORMATION IN RESPONSE TO THE QUESTIONNAIRE ISSUED. IN THE CIRCUM STANCES, THE AO INFERRED THAT THE APPELLANT COMPANY HAD NOT CARRIED ANY BUSINESS ACTIVITY, THE APPELLANT MERELY ACTED AS A CONDUIT FOR ANOTHER COMPANY TO SIPHON ITA NO.2085/CHNY/2014 :- 4 -: OFF FUNDS. THEN, THE AO HAS CHOSEN TO ESTIMATE THE INCOME @ 8% OF THE TOTAL RECEIPTS RECORDED IN THE BOOKS OF ACCOUNT AND ACCORDINGLY BROUGHT TO TAX A SUM OF RS. 36,16,000/- BEING 8% OF THE GRO SS RECEIPTS. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER ENHANCED THE ASSESSMENT BY DIRE CTING THE AO TO ASSESS THE ENTIRE GROSS RECEIPTS OF RS. 4,52,00,000 /- AS THE AO DISBELIEVED THAT APPELLANT ACTUALLY CARRIED ON ANY BUSINESS ACTIVITY. 5. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFO RE US IN THE PRESENT APPEAL. 6. IT IS SUBMITTED THAT THE APPELLANT HAD A CONTRAC T FROM M/S. PACL INDIA LTD. FOR FILLING UP, LEVELLING THE AGRICULTUR AL LAND, DIGGING, FENCING AND SOIL COST WORK FOR A TOTAL CONSIDERATION OF RS. 4,5 2,00,000/- @ RS. 70,000/- PER ACRE. THE CONTRACT WAS FOR THE LAND D EVELOPMENT ACTIVITY TO MAKE THE AGRICULTURAL LAND FIT FOR AGRICULTURAL ACT IVITY. THIS ACTIVITY WAS UNDERTAKEN WITH THE HELP OF LABOUR AND TO WHOM THE WAGES WERE PAID. IT IS FURTHER STATED THAT THE VILLAGE LABOURERS DO NOT ACCEPT THE PAYMENT IN CHEQUES THEREFORE, THE APPELLANT WAS FORCED TO MAKE THE PAYMENT IN CASH ON DAILY OR WEEKLY BASIS. THE AO MERELY MADE THE ADDITION ON SUSPICIONS AND SURMISES WITHOUT CAUSING NECESSARY E NQUIRY AND THE APPELLANT HAS NOT INDULGED IN PROVIDING AN ACCOMMOD ATION ENTRY FOR ITA NO.2085/CHNY/2014 :- 5 -: PACL LTD. HE FURTHER SUBMITTED THAT WITHOUT REJECT ING BOOKS OF ACCOUNT, NO ESTIMATION OF THE INCOME CAN BE MADE. HE FURTHE R CONTENDED THAT THE LD. CIT(A) CANNOT COME TO THE CONCLUSION THAT THE A PPELLANT HAD NOT CARRIED ON ANY BUSINESS IN THE ABSENCE OF ANY MATER IAL TO SHOW THAT THE APPELLANT RETURNED BACK MONEY TO M/S. PACL INDIA LT D. HE FURTHER SUBMITTED THAT DURING THE COURSE OF PROCEEDINGS, TH E LD. CIT(A) HAS CALLED FOR REMAND REPORT FROM ADIT (INVEST.) TO VERIFY WIT HER THE AMOUNT OF LAND DEVELOPMENT WAS ACTUALLY CARRIED OUT BY THE APPELLA NT. THIS VERIFICATION WAS CARRIED OUT AFTER PERIOD OF SIX YEARS WHEN IT W AS FOUND THAT THE LAND BELONGS TO M/S. PACL INDIA LTD. AND THE AGRICULTURA L ACTIVITIES WERE BEING CARRIED OUT BY THE VILLAGERS. IT IS FURTHER SUBMITT ED THAT THE AGRICULTURAL ACTIVITIES WERE POSSIBLE ONLY BECAUSE OF DEVELOPMEN T WORK DONE BY THE APPELLANT. FINALLY, HE PLACED RELIANCE ON THE DECI SION OF CO-ORDINATE BENCH OF THE TRIBUNAL, DELHI IN THE CASE OF ITO V. MADHAV PROPCORN PVT. LTD. IN ITA NO.6011/DEL./2012 DATED 12.03.2015 , WHEREIN THE TRIBUNAL HAD ESTIMATED THE PROFIT @ 2.24% OF THE TURNOVER IN VOLVING THE IDENTICAL FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 7. ON THE OTHER HAND, THE LD. SR. DR PLACED RELIANC E ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE SUBJEC T TRANSACTION IS A COLOURABLE TRANSACTION, AND HE SUBMITTED THAT THE L D. CIT(A) HAD RIGHTLY ITA NO.2085/CHNY/2014 :- 6 -: HELD THAT THE ENTIRE GROSS RECEIPTS ARE TAXABLE IN THE HANDS OF THE APPELLANT AND NO INTERFERENCE IS CALLED FOR. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL RELATES TO WHETHER THE ENTIRE GROSS RECEIPTS RECEIVED BY THE APPELLANT FROM M/S. PACL INDIA LTD. ARE TAXABLE HAVING REGARD TO THE FACTS OF THE CASE. IT IS THE CASE OF THE APPELLANT THAT IT IS ENGAGED IN THE LAND DEVELOPMEN T ACTIVITY FOR M/S. PACL INDIA LTD. FOR DEVELOPMENT OF AGRICULTURAL LAN D SITUATED IN THE DISTRICTS OF ADHILABAD, PRAKASAM, NELLORE AND MEDAK @ RS. 70,000/- PER ACRE. THE FACTS POINTED OUT BY THE AO SUCH AS RAIS ING INDIVIDUAL FOR IDENTICAL AMOUNTS AND THE WITHDRAWAL OF CASH FROM T HE BANK BY NOMINE OF THE APPELLANT GIVE RISE TO DOUBTS AS TO THE GENUINE NESS OF THE BUSINESS ACTIVITIES OF THE APPELLANT. FURTHER, THE APPELLAN T COULD NOT SUBSTANTIATE THE CLAIM BY LEADING THE NECESSARY EVIDENCE IN THIS REGARD. UNDOUBTEDLY, THE APPELLANT HAD FAILED TO PROVE THE CLAIM TO THE SATISFACTION OF THE AO. THE FACTS NECESSARY TO PROVE THE CLAIM ARE WITHIN T HE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE. THE FAILURE OF THE ASSE SSEE TO SUBSTANTIATE THE CLAIM WOULD JUSTIFY THE ASSESSING OFFICER TO DR AW ADVERSE INFERENCE. ONCE THE ASSESSING OFFICER ENTERTAINS DOUBT AS TO T HE CORRECTNESS OF THE CLAIM MADE IT IS FOR THE ASSESSEE TO SATISFY THE AS SESSING OFFICER BY PRODUCING NECESSARY MATERIALS. IN THE EVENT OF ASSE SSEE FAILING TO ITA NO.2085/CHNY/2014 :- 7 -: ESTABLISH THE CLAIM TO THE SATISFACTION OF THE ASSE SSING OFFICER, THE ASSESSING OFFICER IS JUSTIFIED IN REJECTING THE CLA IM. IN THIS REGARD, RELIANCE CAN BE MADE ON THE DECISION OF HONBLE HIGH COURT O F MADRAS IN THE CASE OF BOMBAY HARDWARE SYNDICATE V. CIT [1973] 92 ITR 160 (MAD.) . FURTHER, THE LAW DOES NOT IMPOSE ANY BURDEN ON THE AUTHORITIES TO PROVE BY POSITIVE EVIDENCE THAT THE ACCOUNTS ARE UNRELIAB LE OR THAT INCOME ASSESSED IS THE CORRECT FIGURE. FACT NECESSARY TO P ROVE THE CLAIM WOULD BE WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS T HE DUTY OF THE ASSESSEE ALONE TO PROVE THAT WHAT IS CLAIMED IS TRU E AND CORRECT. ( GANGA RAM BALMOKAND VS. CIT (5 ITR 464), LAL MOHAN KRISHNA LAL PAUL VS. CIT (12 ITR 441)(CAL.) AND SECTION 106 OF THE EVIDENCE ACT). THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT OF CALCUTTA I N THE CASE OF LAL MOHAN KRISHNA LAL PAUL (SUPRA) IS AS FOLLOWS: THE QUESTION AS FRAMED FOR THE OPINION OF THIS COU RT IS WHETHER THERE IS ANYTHING IN LAW WHICH CASTS THE BURDEN OF PROOF ON THE INCOME-TAX OFFICER OR THE APPELLATE AUTHORITY TO PROVE BY POSI TIVE EVIDENCE THAT THEY ARE ITEMS ASSESSABLE TO TAX. THIS QUESTION WAS DEALT WITH BY A BENCH OF THE LAHORE HIGH COURT IN A CASE (GANGA RAM BALMOKAND V. COMMISSIONER OF INCOME-TAX, PUNJAB) REPORTED IN 193 7, 5 INCOME-TAX REPORTS, 464 AT PAGE 475 : 'I AM NOT, HOWEVER, PREP ARED TO HOLD,' SAYS MR. JUSTICE DIN MOHAMMAD, 'THAT ANY BURDEN IS IMPOSED ON THE INCOME-TAX AUTHORITIES TO PROVE BY 'POSITIVE EVIDEN CE' THAT THE ACCOUNTS ARE UNRELIABLE OR THAT THE FIGURE AT WHICH THEY ASSESS IS THE CORRECT FIGURE. IN THE FIRST PLACE, THE QUESTION OF UNRELIABILITY OF ACCOUNTS IS A QUESTION OF FACT AND PRIMARILY FALLS FOR THE DETERMINATION OF THE INCOME-TAX AUTHORITIES ALONE................ SECONDLY, THE INCOMETAX OFFICER CANNOT BE FIXED WITH THE KNOWLEDGE OF THE S TATE OF THE ASSESSEE'S ACCOUNTS AND CANNOT CONSEQUENTLY BE EXPE CTED TO LEAD EVIDENCE TO PROVE THE ASSESSEE'S TRANSACTIONS FOR T HE ACCOUNTING YEAR. UNDER SECTION 106 OF THE EVIDENCE ACT, THE ON US OF PROVING A FACT ALWAYS LIES ON THE PERSON WITHIN WHOSE KNOWLED GE ESPECIALLY THAT FACT IS AND IT CANNOT BE DENIED THAT IT IS THE ASSESSEE WHO IS THE PERSON CONTEMPLATED BY THIS SECTION.' ITA NO.2085/CHNY/2014 :- 8 -: WE HAVE ALSO BEEN REFERRED IN THE COURSE AR GUMENT TO SECTION 114 OF THE EVIDENCE ACT WHICH PROVIDES IN ILLUSTRAT ION (G) THAT THE COURT MAY PRESUME THAT EVIDENCE WHICH COULD BE, AND IS NOT, PRODUCED WOULD, IF PRODUCED, BE UNFAVOURABLE TO THE PERSON WHO WITHHOLDS IT. THE INCOME-TAX OFFICER MAY SIMILARLY PRESUME THAT IF THERE IS EVIDENCE WHICH MIGHT HAVE BEEN PRODUCED, I N SUPPORT OF THE ASSESSEE'S CASE AND THAT EVIDENCE HAS NOT BEEN PROD UCED, THE REASON IS THAT IT WOULD NOT ASSIST THE ASSESSEE'S C ONTENTION. 9. THEREFORE, IT CANNOT BE SAID THAT THE ADDITIONS HAVE BEEN MADE BASED ON THE PRESUMPTIONS AND SURMISES. IT IS A CA SE OF FAILURE OF THE ASSESSEE TO PROVE THE CLAIM TO THE SATISFACTIONS OF THE ASSESSING OFFICER. THE FACTS OF THE CASE DISCUSSED ABOVE, JUSTIFIES TH E ASSESSING OFFICER TO INFER THAT IT IS A COLOURABLE TRANSACTION. WHEN TH E TRANSACTION HAD BEEN HELD TO BE A COLOURABLE TRANSACTION, THE ENTIRE GRO SS RECEIPTS ARE LIABLE TO BE TAXED. THE ASSESSEE CANNOT BE PERMITTED TO TAKE ADVANTAGE OF FRAUD OF HIMSELF, HENCE THE AO WAS NOT JUSTIFIED IN ESTIM ATING THE TOTAL INCOME AT 8% OF THE GROSS RECEIPTS INSTEAD OF BRINGING THE ENTIRE GROSS RECEIPTS TO TAX. THE ORDER OF THE LD. CIT(A) IS WELL REASONED, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). IN THE CIRCUMSTANCES, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN ENHANCE T HE ASSESSMENT AND WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE ASSESSEE. ITA NO.2085/CHNY/2014 :- 9 -: 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 4 TH DAY OF MARCH, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' # ) (INTURI RAMA RAO) $ /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 4 TH MARCH, 2019. EDN, SR. P.S , */34 54'/ /COPY TO: 1. () /APPELLANT 4. . 6/ /CIT 2. *+() /RESPONDENT 5. 47 */ /DR 3. . 6/ ( )/CIT(A) 6. 8& 9 /GF