The ACIT, Gandhidham Circle, GANDHIDHAM V. Shri Narendrasinh R. Chauhan, GANDHIDHAM

ITA 220/RJT/2013

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60078 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Keywords: Onus to prove

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER 1. ./ I.T.A. NO.209/RJT/2013 2. ./ I.T.A. NO.220/RJT/2013 ( / ASSESSMENT YEAR : 2008-09) 1. SHRI NARENDRASINH R.CHAUHAN PROP. OF SHIV LOGISTICS SHOP NO.66, SHAKTI SHOPPING CENTRE MUNDRA-KUTCH 2. ADDL.CIT GANDHIDHAM RANGE GANDHIDHAM / VS. 1. ADDL.CIT GANDHIDHAM RANGE GANDHIDHAM 2. SHRI NARENDRASINH R.CHAUHAN, MUNDRA-KUTCH ./ ./ PAN/GIR NO. AHAPC 6703 H ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : MR.VIMAL DESAI, AR REVENUE BY : MR.C.S. ANJARIA, SR.DR !'# $ % / DATE OF HEARING 15/03/2017 &' $ % / DATE OF PRONOUNCEMENT 21/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED CROSS-APPEALS BY THE ASSESSEE AND T HE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)- ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 2 - II, RAJKOT [CIT(A) IN SHORT] DATED 21/02/2013 FOR A SSESSMENT YEAR (AY) 2008-09. BOTH THE APPEALS ARE BEING DISPOSED OF BY WAY OF A CONSOLIDATED ORDER. ITA NO.209/RJT/2013 FOR AY 2008-09 ASSESSEES APP EAL: 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- THE GROUNDS OF APPEAL MENTIONED HEREIN BELOW ARE WI THOUT PREJUDICE TO ONE ANOTHER. 1. THE ORDER U/S.143(3) IS BAD IN LAW. 2. THE LD.ASSESSING OFFICER HAS ERRED IN LAW AS WELL A S ON FACTS IN MAKING ADDITION OF RS.45,04,785/- ON ACCOUNT OF LAB OUR EXPENSES CONSIDERING ENTIRE AS BOGUS. THE LD.CIT(A ) HAS ERRED IN CONFIRMING RS.22,52,392/- (I.E. 50% OF RS.45,04, 785) BY DISBELIEVING APPELLANTS EXPLANATIONS AND MAKING BA SELESS ESTIMATION. 3. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FR OM CONTRACT WORK WITH MUNDRA PORT & SEZ WHICH INVOLVES MAINLY HANDLI NG AND INTERNAL SHIFTING OF BAGGED CARGO AT MUNDRA PORT AND THE WOR K WAS CARRIED OUT THROUGH VARIOUS SUB-CONTRACTORS. THE TOTAL LABOUR CHARGES DEBITED TO P&L ACCOUNT WAS AT RS.16,32,56,824/- INCLUDING PAYM ENT OF RS.45,04,785/- MADE TO CASUAL LABOURERS OUT OF WHI CH MORE THAN 50% I.E. RS.23,90,935/- WAS SHOWN AS OUTSTANDING. THE ASSE SSING OFFICER (AO) ALLEGED THAT THE AFORESAID LABOUR CHARGES TOWARDS C ASUAL LABOURER IS NOT BACKED BY ANY INDEPENDENT PROOF OF ANY WORK DONE BY ALLEGED CASUAL ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 3 - LABOURERS. ACCORDINGLY, THE EXPENSES TOWARDS CASUAL LABOURERS WERE HELD TO BE BOGUS AND ACCORDINGLY DISALLOWED BY THE AO. THE AO WHILE DISALLOWING THE LABOUR EXPENSES AMOUNTING TO RS.45, 04,785/- INCURRED TOWARDS CASUAL LABOURERS ALLEGED THAT NO DETAILS IN TERMS OF QUANTITY OF WORK DONE OR DATE ON WHICH WORK DONE IS MAINTAINED. THE VOUCHERS PREPARED WERE FOUND TO UNSIGNED. IT WAS FURTHER AL LEGED THAT VOUCHERS FOR PAYMENT FROM JULY-2007 TO MARCH-2008 WERE ALMOST IN SERIAL AND PREPARED SIMULTANEOUSLY. ATTENDANCE REGISTER FOR T HE CASUAL LABOURERS WAS ALSO NOT PRODUCED. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) RE-EXAMINED THE ISSU E AND RESTRICTED THE AFORESAID DISALLOWANCE TO 50% OF THE CASUAL LABOURE RS AT RS.22,52,392/-. THE RELEVANT FINDINGS OF THE CIT(A) WHILE DEALING W ITH THE ISSUE ARE REPRODUCED HEREUNDER: 3.3. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE MOST IMPORTANT PO INT WHICH EMERGES AND HAS ALSO BEEN CATEGORICALLY CONFIRMED B Y THE APPELLANT HIMSELF IS THAT THE PAYMENT TO CASUAL LAB OURERS IS ALWAYS AN UNORGANIZED STATE OF AFFAIRS BUT THEIR REQUIREME NT AND INEVITABILITY CANNOT BE DENIED. IN OTHER WORDS, TH E APPELLANT HIMSELF IS AGREEING THAT THE PAYMENT OF THESE CASUA L LABOURERS HAS BUILT IN LEAKAGES AND AMPLE SCOPE FOR MANEUVERABILI TY. ON THE OTHER HAND, THE REQUIREMENT AND INVEVITABILITY OF T HE CASUAL LABOURERS, ESPECIALLY FOR SUCH LABOUR INTENSIVE ACT IVITIES, VIZ. CARGO HANDLING WORK, CANNOT BE OVERLOOKED. I AGREE WITH THE APPELLANT THAT IF THE ENTIRE CASUAL LABOUR EXPENSES ARE DISAL LOWED ASSUMING ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 4 - THERE WERE NO CASUAL LABOURERS, THE WORK WOULD COME TO A STAND- STILL. ON THE OTHER HAND, I FULLY AGREE WITH THE O BSERVATIONS OF THE A.O. REGARDING THE DEFECTS IN THE METHOD AND MAINTE NANCE OF ACCOUNTS / EVIDENCES REGARDING THE CASUAL LABOURS. SO WHILE I AGREE WITH THE APPELLANT THAT THE ENTIRE DISALLOWAN CE OF CASUAL LABOUR EXPENSES IS NOT CALLED FOR, I ALSO AGREE WIT H THE A.O. THAT THE CASUAL LABOUR EXPENSES HAVE NOT BEEN PROPERLY R ECORDED AND HENCE CANNOT BE FULLY AUTHENTICATED. 3.4. IT ALSO REQUIRES TO BE SEEN AS TO WHETHER THE APPELLANT HAS DISCHARGED HIS ONUS PROPERLY OR NOT. IN THE CASE O F CIT VS. MODI STONE LTD. (DELHI) 203 TAXMAN 123, THE HONBLE DELH I HIGH COURT HAS OPINED AS UNDER:- THE COMMISSIONER OF INCOME TAX (APPEALS) RIGHTLY N OTED THAT IT WAS FOR THE ASSESSEE WHO HAD CLAIMED THESE PAYMENTS TO PRODUCE RELEVANT MATERIAL BEFORE THE ASSESSING O FFICER TO SATISFY HIM WITH RESPECT TO THESE PAYMENTS. BUT ST RANGELY, THE CIT(A) DESPITE NOTING THAT THE ASSESSEE HAD NOT DISCHARGED THE ONUS PLACED ON HIM AND HAD NOT FURNI SHED NECESSARY DETAILS, ALLOWED THESE PAYMENTS ON THE BA SIS OF THE PAST RECORD AND NATURE OF THE CLAIM ALONE. WE FAIL TO APPRECIATE HOW COMMISSION OF PAYMENT/DISCOUNT IN A PREVIOUS YEAR COULD BY ITSELF AND WITHOUT ANYTHING MORE HAVE BEEN MADE THE BASIS FOR ALLOWING SUCH PAYMENTS FOR THE SUBSEQUENT YEARS. IT IS VERY MUCH POSSIBLE THAT TH E COMMISSION/DISCOUNT PAID DURING THE PREVIOUS ASSESS MENT YEARS WAS NOT PAID DURING ASSESSMENT YEARS IN QUEST ION OR THE PAYMENT WAS NOT TO THE EXTENT CLAIMED BY THE AS SESSEE. IT WAS OBLIGATORY FOR THE ASSESSEE TO PRODUCE RELEV ANT EVIDENCE BEFORE THE ASSESSING OFFICER TO PROVE THE ALLEGED PAYMENTS, PARTICULAR WHEN IT WAS SPECIFICALLY CALLE D UPON TO DO SO AND AN OPPORTUNITY WAS SUBSEQUENTLY GIVEN TO IT FOR THIS PURPOSE. ONCE IT WAS FOUND THAT THE ONUS OF P ROVING THE ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 5 - ALLEGED PAYMENT ON THE ASSESSEE AND HE HAD NOT PROD UCED ANY EVIDENCE TO PROVE THOSE PAYMENTS, NEITHER CIT(A ) NOR ITAT COULD HAVE ALLOWED THESE PAYMENTS, WITHOUT HAV ING ANY MATERIAL BEFORE THEM TO SUBSTANTIATE SUCH PAYME NTS. THE CIT(A) AS WELL AS THE ITAT, IN OUR VIEW, COMMIT TED A SERIOUS ERROR OF LAW IN UPHOLDING THESE PAYMENTS DE SPITE FINDING THAT NO MATERIAL HAD BEEN PRODUCED BY THE A SSESSEE TO SUBSTANTIATE THESE PAYMENTS. THE ITAT WAS NOT J USTIFIED IN REJECTING THE APPEAL OF THE REVENUE ON THE SOLE GROUND THAT THE DEPARTMENT HAD NOT PRODUCED ANY MATERIAL T O PROVE THAT THE FINDINGS OF CIT(A) WERE NOT BASED ON PAST RECORDS. IT WAS FOR THE ASSESSEE TO PROVE THE ALLEGED PAYMEN TS DURING THE ASSESSMENT YEARS 1995-96, 1996-97 AND 1997-98 A ND FOR THE DEPARTMENT TO PROVE OTHERWISE. FOR THE REASONS GIVEN IN THE PRECEDING PARAGRAPHS, WE HOLD THAT THE ITAT COMMITTED AN ERROR OF LAW IN ALLOWING THE AFORESAID PAYMENT DESPITE ONUS OF PROVING BEING ON THE ASSESSEE AND NO EVIDENCE HAVING BEEN PRODUCED BY TH E ASSESSEE TO PROVE THOSE PAYMENTS, AND THEREBY MISPL ACING THE BURDEN OF PROOF ON THE REVENUE. SIMILARLY, IN THE CASE OF CIT VS. S.G. EXPORTS (P&H ) 336 ITR 2, THE HONBLE P&H HIGH COURT HAS OPINED AS UNDER:- A PERUSAL OF THE FINDINGS OF THE COMMISSIONER OF I NCOME- TAX(APPEALS) AND THE TRIBUNAL SHOWS THAT BOTH THE AUTHORITIES HAVE PLACED ONUS ON THE REVENUE TO ESTA BLISH THE INGENUINENESS AND NON-EXISTENCE OF THE PARTIES WHIC H IS WRONG. SINCE THE ASSESSEE HAD CLAIMED THAT IT HAD INCURRED EXPENSES ON ACCOUNT OF THE LABOUR CHARGES, THE ONUS WAS ON THE ASSESSEE TO PROVE THE SAID FACT BY PRODUCING CO GENT AND CONVINCING EVIDENCE INCLUDING THE IDENTITY OF THE P ARTIES ALONG WITH EVIDENCE OF PAYMENT TO THOSE PERSONS. ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 6 - ACCORDINGLY, THE ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL CANNOT BE LEG ALLY SUSTAINED. IT IS THUS CLEAR THAT IN RESPECT OF THE LABOUR CHAR GES, THE ONUS IS ON THE ASSESSEE TO IDENTIFY THE PARTIES ALONG WITH EVI DENCE OF PAYMENT. IT CANNOT BE SAID THAT THE ONUS HAS BEEN FULLY DISC HARGED BY THE APPELLANT IN THE PRESENT CASE. THERE ARE TOO MANY STRIKING SIMILARITIES IN THE BILLS POINTING TO OBVIOUS MANIP ULATION. THE A.O. HAS SUCCESSFULLY POINTED OUT ALL THESE ANOMALIES. HOWEVER, HE HAS NOT BEEN ABLE TO MAKE ANY QUANTIFICATION ABOUT THE QUANTUM OF THE MANIPULATION. THE A.O. HAS DISALLOWED 100% OF THE CASUAL LABOUR EXPENSES. IN MY CONSIDERED OPINION AND IN LIGHT OF THE ABOVE DISCUSSION, TO MEET THE ENDS OF JUSTICE, IT WOULD B E FAIR IF THE DISALLOWANCE IS RESTRICTED TO 50% OF THE CASUAL LAB OUR EXPENSES. THE A.O. HAS DISALLOWED RS.45,04,785/- @ 100%. THE DISALLOWANCE IS RESTRICTED TO RS.22,52,392/- @ 5%. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. BOTH THE ASSESSEE AS WELL AS REVENUE ARE AGGRIEV ED BY THE ORDERS OF THE CIT(A) AND FILED RESPECTIVE APPEALS. THE AS SESSEE HAS ASSAILED SUSTENANCE OF DISALLOWANCE CASUAL LABOUR EXPENSES P ARTIALLY, WHEREAS THE REVENUE, ON THE OTHER HAND, HAS CHALLENGED THE PART IAL RELIEF GRANTED TO THE ASSESSEE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATE RIAL PLACED ON RECORD. THE LD.AR IN THE COURSE OF HEARING BEFORE US POINTE D OUT THAT THE AMOUNT TOWARDS CASUAL LABOUR PAYMENT IS VERY PALTRY HAVING REGARD TO THE TOTAL ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 7 - EXPENSES. WE ALSO NOTE THE CONTENTION OF THE LD.AR FOR THE ASSESSEE THAT THE CASUAL LABOURERS ARE INDISPENSABLE HAVING REGAR D TO THE LABOUR INTENSIVE WORK. WE ALSO NOTE THE REFERENCE MADE ON BEHALF OF THE ASSESSEE TO THE ASSESSMENT ORDER PASSED UNDER S.143 (3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') RE LEVANT TO AY 2010-11, WHEREIN AN ESTIMATED SUMMARY DISALLOWANCE OF RS.1,5 0,000/- HAS BEEN MADE TO PLUG ANY REVENUE LEAKAGE ON ACCOUNT OF SIMI LAR EXPENSES. SIMILARLY, THE CASE WAS ALSO SCRUTINIZED IN THE AY 2007-08 WHERE THE DISALLOWANCE ON SIMILAR EXPENSE DETERMINED AT A LUM P SUM AMOUNT OF RS.2 LACS ON ACCOUNT OF DEFECTIVE BILLS/VOUCHERS. IN THIS BACKGROUND, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE EN TIRE AMOUNT OF RS.45,04,785/- DISALLOWED BY THE AO AND RESTRICTED TO RS.22,52,392/- BY THE CIT(A) IS HIGHLY EXCESSIVE AND IS IN DEPARTURE WITH THE STAND TAKEN BY THE REVENUE IN OTHER YEARS. HOWEVER, IN THE SAME V AIN, WE NOTE THAT CERTAIN PECULIAR FACTS, AS OBSERVED BY THE AO. WE NOTE THAT MORE THAN 50% OF THE CASUAL LABOUR EXPENSES IS OUTSTANDING E ND OF THE YEAR WHICH IS QUITE UNUSUAL. WE ALSO NOTE THAT THE ASSESSEE C OULD NOT SUPPORT THE CLAIM OF CASUAL LABOURERS BY ANY CORROBORATIVE EVID ENCE. THE AO HAS POINTED OUT SPECIFIC DEFECTS IN THE NATURE OF VOUCH ERS UNSIGNED, VOUCHERS PREPARED IN SERIAL NUMBER, ATTENDANCE REGISTER, DET AILS OF WORK DONE NOT TO AVAILABLE AND PROOF IN THE FORM OF SMART CARDS/GATE -PASS ISSUED BY THE PORT AUTHORITIES FOR THE EXECUTION OF WORK IN PORT AREA TOWARDS IMPUGNED CASUAL LABOURERS IS NOT AVAILABLE. IN THE LIGHT OF AFORESAID FACTS AND THE ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 8 - CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE SIMILARITY OF EXPENSES CLAIMED AND ALLOWED BY THE REVENUE IN OTHER YEARS S UBJECT TO SOME DISALLOWANCES, WE CONSIDER IT JUST AND PROPER TO RE STRICT THE DISALLOWANCE TO 25% OF THE CASUAL LABOUR EXPENSES CLAIMED BY THE ASSESSEE INSTEAD OF 50% DISALLOWANCE CONFIRMED BY THE CIT(A). THIS IN OUR VIEW, WILL MEET THE ENDS OF JUSTICE. CONSEQUENTLY, THE ORDER OF THE CIT(A) STANDS MODIFIED AND THE DISALLOWANCE OF THE LABOUR EXPENSE IS RESTRICTED TO RS.11,26,196/-. THE ASSESSEE SIMULTANEOUSLY GETS R ELIEF OF THE SAME AMOUNT OF RS.11,26,196/- BEING 25% OF THE CASUAL LA BOUR EXPENSES. IN TERMS OF THE AFORESAID FINDINGS, APPEAL OF THE ASSE SSEE IS PARTLY ALLOWED. 7. THE REVENUE HAS ALSO PREFERRED APPEAL AGAINST TH E ORDER OF THE CIT(A)-II, RAJKOT, DATED 21/02/2013 BY WAY OF ITA NO.220/RJT/2013 FOR AY 2008-09. 7.1. THE GROUNDS RAISED BY THE REVENUE READ AS UND ER:- 1) WHETHER LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 50%, WITHOUT APPRECIATING THE FACT THAT FOR EVERY L ABOUR EMPLOYED EVEN FOR A DAY, ASSESSEE HAS TO HAVE GATE PASS FROM PORT AUTHORITY; WHILE IN CASE OF ASSESSEE HE HAS SHOWN ALL THE PERSONS WORKI NG ATLEAST FOR ALL THE DAYS OF PARTICULAR MONTH, WHICH IS NOT POSSIBLE WIT HOUT VALID GATE PASS ISSUED BY PORT AUTHORITIES, IN ABSENCE OF SUCH VITA L DOCUMENTS, IT CANNOT BE CONSIDERED THAT EVEN A SINGLE PERSON HAS WORKED AS CASUAL LABOUR. 2) WHETHER LD.CIT(A) WAS RIGHT IN ALLOWING 50% OF CASUAL LABOUR EXPENSES DESPITE THE FACT THAT ASSESSEE IS NOT ABLE TO SUPPORT ITS CLAIM THROUGH ATTENDANCE REGISTER, WHICH HAS TO BE PREPAR ED BY ASSESSEE AND SUBMITTED TO HR AUTHORITIES TO PORT DEPARTMENT. ITA NOS.209 & 220/RAJKOT/2013 SH.NARENDRASINH R.CHAHAN VS. ADDL.CIT ASST.YEAR 2008-09 (CROSS-APPEALS) - 9 - 8. SINCE THE ISSUE RAISED BY THE REVENUE INVOLVED I S ONLY OTHER SIDE OF THE SAME COIN, I.E. PARTIAL RELIEF GRANTED BY TH E CIT(A) TOWARDS CASUAL LABOUR EXPENSES, THE APPEAL OF THE REVENUE DOES NOT REQUIRE SEPARATE ADJUDICATION. ACCORDINGLY, THE APPEAL OF THE REVE NUE ALSO STANDS DISPOSED OF AS DISMISSED. 9. IN THE COMBINED RESULT, ASSESSEES APPEAL IS PAR TLY ALLOWED, WHEREAS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21/ 03/ 2017 AT AHMEDABAD. SD/- SD/- ( MAHAVIR PRASAD) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD ; DATED 21/03/2017 ..!, '.+!../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , % -% / CONCERNED CIT 4. -% ( ) / THE CIT(A)-II, RAJKOT 5. 1'23 +%+! , , /DR,ITAT, RAJKOT 6. 3>? @# / GUARD FILE. / BY ORDER, 1% +% //TRUE COPY// / ( DY./ASSTT.REGISTRAR) %&, / ITAT, RAJKOT