MAHALI CONSTRUCTION CO, MUMBAI V. ASST CIT 15(2), MUMBAI

ITA 2261/MUM/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4132 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Additional evidence; Revised return
• Section: 40A(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , ! '# , % & & & & BEFORE SHRI B.R.MITTAL, JM AND SHRI SANJAY ARORA, A M ./ I.T.A. NO. 2261/MUM/2013 ( ' ( ' ( ' ( ' ( )( )( )( )( / ASSESSMENT YEAR : 2009-10) M/S MAHALI CONSTRUCTION CO., B-17, ROOP KAMAL SOCIETY LTD., 426/27, S.V. ROAD, KANDIVALI(WEST), MUMBAI, 400067 ' ' ' ' / VS. ASSISTANT COMMISSIONER OF INCOME TAX-15(2), MUMBAI * % ./ PAN : AAKFM2785Q ( *+ / APPELLANT ) .. ( ,-*+ / RESPONDENT ) *+ . / / APPELLANT BY : SHRI SANJIV M.SHAH ,-*+ . / / RESPONDENT BY : SHRI O.P.SINGH ' . 0% / DATE OF HEARING : 25-07-2013 1') . 0% / DATE OF PRONOUNCEMENT : 31 -07-2013 2 / O R D E R PER B.R.MITTAL, J.M . THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDE R OF THE LD. CIT(A) DATED 26.02.2013 FOR THE ASSESSMENT YEAR 200 9-10. 2. IN GROUND NO. 1 TO 3 OF THE APPEAL , THE ASSESSE E HAS DISPUTED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWA NCE OF LABOUR CHARGES OF RS.1,74,69,000 U/S 40A(3) OF THE INCOME-TAX ACT. 3. THE RELEVANT FACTS GIVING RISE TO THESE GROUNDS OF APPEAL ARE THAT THE ASSESSEE FIRM IS SUB-CONTRACTORS OF PCC INFRAST RUCTURE PVT. LTD. THE ASSESSEE HAS CLAIMED LABOUR CHARGES OF RS.1,80, 86,729/-.THE ASSESSING OFFICER HAS STATED THAT NO DETAILS ARE FI LED REGARDING TAX DEDUCTION ON EXPENSES CLAIMED NOR ANY RECONCILIATIO N IS FILED ABOUT THE PAYMENTS THAT THEY ARE MADE TO VARIOUS PARTIES AND ALL THE PAYMENTS 2 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. ARE UNDER THRESHOLD LIMIT PRESCRIBED IN THE LAW. T HEREFORE, THE ASSESSING OFFICER DISALLOWED THE ABOVE CLAIM U/S 40 (A)(IA) OF THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. BEING AGGRIEV ED, ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). 4. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT TDS WAS DEDUCTED AND DEPOSITED WITH THE HDFC BANK ON 22/05/ 2009 ON THE AMOUNT OF LABOUR CHARGES PAID TO RS.1,80,86,729/-, BUT THE TDS RETURN U/S 206 WAS FILED ON 27/03/2012. HENCE, THE DETAI LS COULD NOT BE FILED BEFORE THE ASSESSING OFFICER AND THE SAME BE ADMITTED AS FRESH EVIDENCE BY LD. CIT(A) UNDER RULE 46A. THE LD. CIT (A) FORWARDED THE SAID DETAILS TO THE ASSESSING OFFICER FOR COMMENTS. THE LD. CIT(A) HAS STATED THAT THE ASSESSING OFFICER SUBMITTED HIS REM AND REPORT AND MADE THE OBSERVATIONS, WHICH ARE STATED BY LD. CIT( A) AT PAGES 3 AND 4 OF THE IMPUGNED ORDER. IT IS STATED BY THE ASSESSI NG OFFICER IN HIS REMAND REPORT THAT IN RESPECT OF LABOUR CHARGES, AS SESSEE DEDUCTED TDS ON AMOUNT OF RS.87,34,466/-. THAT THE ASSESSEE SHOWED EXPENSES AMOUNTING TO RS.33,80,741/- ON IMPREST SYSTEM BUT D ID NOT PROVIDE PROOF REGARDING THE SAME AND TDS WAS NOT DEDUCTED O N THE ABOVE. THAT FOR THE REST OF LABOUR CHARGES, VOUCHERS PRODU CED WERE SELF MADE. THAT MOST OF THE EXPENSES WERE MADE IN CASH AND ACC ORDINGLY GENUINENESS OF SUCH COULD NOT BE FULLY VERIFIED. T HEREFORE, THE TDS LIABILITY COULD NOT BE ASCERTAINED. FURTHER, THERE WERE OUTSTANDING LABOUR CHARGES OF RS.3,45,850/- AND NO TDS WAS DED UCTED THEREON. 5. THE LD CIT(A) GAVE A COPY OF THE REMAND REPORT T O THE ASSESSEE AND THE ASSESSEE CONTENDED THAT THERE HAD BEEN AN U NAVOIDABLE ERROR IN THE TDS RETURN FILED AS THE TDS AT THE RATE OF 1 % IS REQUIRED TO BE DEDUCTED FROM THE PAYMENTS OR SUCH CONTRACTORS I.E. KAILASHNATH DHURIA AS AGAINST 2% INADVERTENTLY MENTIONED IN THE RETURN. THAT TDS RETURN WAS ACCORDINGLY REVISED BY RECTIFYING THE MI STAKE AND REQUESTED TO ADMIT REVISED RETURN AS ADDITIONAL EVIDENCE UNDE R RULE 46A. LD. CIT(A) HAS STATED THAT SUBMISSION OF THE ASSESSEE W AS ONCE AGAIN 3 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. FORWARDED TO THE ASSESSING OFFICER FOR NECESSARY VE RIFICATION AND THE ASSESSING OFFICER AGAIN SUBMITTED HIS REMAND REPORT DATED 28/12/2012 WHEREIN FOLLOWING IMPORTANT OBSERVATIONS HAVE BEEN MADE BY THE AO. FORM NO. 27A WAS FILED BY THE ASSESSEE ON 27.03.201 2AND THE REVISED TDS RETURN WAS FILED ON 06.09.2012. TAX DE DUCTED IN BOTH THE ORIGINAL AND REVISED TDS RETURN WAS RS.3,09,781 /-. OUT OF LABOUR CHARGES OF RS.1,80,86,729/-, IN THE FRESH SU BMISSION IT WAS STATED THAT RS.1,74,69,000/- WERE PAID TO KAILASNAT H DHURIA WHICH WERE SHOWN AT RS.87,34,466/- IN THE ORIGINAL RETURN . IN THE STATEMENT RECORDED U/S. 131 DATED 07.12.2012, SHRI DHURIA HAS STATED THAT THE BEARER CHEQUES WERE ISSUED BY THE A PPELLANT FOR MOST OF THE PAYMENTS EXCEPT FOR TWO TO THREE TIMES A/C. PAYEE CHEQUES AND AFTER WITHDRAWING ASH HE USED TO PAY THIS MONEY TO LABOURERS. THE REST OF THE LABOUR CHARGES OF RS.617,792/- WERE CLAIMED TO BE LESS THAN RS.20,000/- TO VARIOUS PARTIES FOR WHICH ONLY SELF MADE VOUCHERS WERE PRODUCED WHICH ARE NOT VERIFIABLE, SO THE TDS LIABILITY CANNOT BE ASCERTAINED ON SUCH EXPENSES.. 6. THE LD. CIT(A) HAS STATED THAT SHRI KAILASHNATH DHURIA ALSO CONFIRMED THE RECEIPT OF THE PAYMENTS AND THE SAME IS ALSO MARKED IN THE BANK STATEMENT OF THE ASSESSEE. THE ASSESSEE CO NTENDED THAT THE PAYMENTS IN CASH WERE MADE DUE TO EXCEPTIONAL A ND UNAVOIDABLE CIRCUMSTANCES AND SUBMITTED THAT CLAUSES (G), (J) A ND (K) OF RULE 6DD APPLY AND THEREFORE NO DISALLOWANCE BE MADE U/S 40A (3) OF THE ACT. THE LD. CIT(A) HAS STATED THAT THE ASSESSING OFFICE R HAS MADE THE DISALLOWANCE FOR LABOUR EXPENSES U/S 40(A)(IA) OF T HE ACT. HE HAS STATED THAT OUT OF LABOUR CHARGED OF RS.1,80,86,729/- MAJO RITY OF THE EXPENSES I.E. RS.1,74,69,000/- WERE PAID TO SHRI KAILASHNATH DHURIA AND ASSOCIATES. FROM THE TDS RETURN OF THE ASSESSEE, I T IS CLEAR THAT THE ASSESSEE HAS DEDUCTED AND PAID TAX ON THESE EXPENSE S. THEREFORE, SUCH EXPENSES CANNOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. HOWEVER, THE LD. CIT(A) HAS STATED THAT MAJORITY OF THESE EX PENSES HAVE BEEN PAID IN CASH WHICH IS IN VIOLATION OF PROVISION OF SECTI ON 40A(3) OF THE ACT. PAYMENT BEING MORE THAN RS.20,000/- WHICH HAS NOT B EEN MADE THROUGH ACCOUNT PAYEE CHEQUE. THEREFORE, THE LD. C IT(A) HAS DISALLOWED THE SAID SUM OF RS.1,74,69,000/- U/S 40A(3) OF THE ACT. HENCE THIS APPEAL BY THE ASSESSEE. 4 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. 7. DURING THE COURSE OF HEARING LD. AR REFERRED PAG E NO. 26 OF THE PAPER-BOOK WHICH CONTAINS DETAIL OF PAYMENTS MADE B Y THE ASSESSEE TO MR. KAILASHNATH DHURIA. HE SUBMITTED THAT AN AMOUN T OF RS.18,00,000/- WAS PAID ON ACCOUNT OF BANK TRANSFER , A SUM OF RS.61,35,481/- WERE MADE BY ACCOUNT PAYEE CHEQUES A ND SUM OF RS.97,00,942/- WERE PAID BY BEARER CHEQUES. THUS, AGGREGATE SUM OF RS.1,76,36,423/- WERE PAID TO MR. KAILASNATH DHURIA . LD. AR CONTENDED THAT PAYMENT BY BEARER CHEQUES OF RS.97,0 0,942/- WERE MADE DUE TO EXCEPTIONAL CIRCUMSTANCES AND REFERRED HIS RETURN SUBMISSIONS BEFORE CIT(A) THAT CLAUSES (G), (J), AN D (K) OF RULE 6DD APPLIES. HENCE NO DISALLOWANCE U/S 40A(3) IS TO BE MADE. HOWEVER, LD. CIT(A) HAS NOT EXAMINED THE SAME AND DISALLOWED THE PAYMENT OF TOTAL AMOUNT PAID TO SHRI KAILASHNATH DHURIA INCLUDING TH E PAYMENTS MADE BY THE BANK ENTRIES AS WELL AS ACCOUNT PAYEE CHEQUE S. HE SUBMITTED THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSES SING OFFICER FOR HIS FRESH CONSIDERATION AND NO DISALLOWANCE U/S 40A(3) IS REQUIRED TO BE MADE. THE LD. DR SUBMITTED THAT HE HAS NO OBJECTIO N TO RESTORE THE MATTER TO THE ASSESSING OFFICER AS ASSESSING OFFICE R MADE DISALLOWANCE U/S 40(A)(IA) OF THE ACT, AND THE LD. CIT(A) HAS S USTAINED THE DISALLOWANCE U/S 40A(3) OF THE ACT. 8. WE HAVE CONSIDERED SUBMISSIONS OF LD. REPRESENTA TIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. WE FIND MERITS IN THE CONTENTION OF LD AR. WE OBSERVE THAT LD. CIT(A) HA S MENTIONED THAT ASSESSEE HAS DEDUCTED TDS ON THE PAYMENTS MADE ON A CCOUNT OF LABOUR CHARGES TO SHRI KAILASHNATH DHURIA AND NO DI SALLOWANCE U/S 40(A)(IA) OF THE ACT IS TO BE MADE. HOWEVER, THE L D. CIT(A) HAS DISALLOWED THE AMOUNT PAID TO SHRI KAILASHNATH DHUR IA AGGREGATING TO RS.1,74,69,000/-U/S 40A(3) OF THE ACT. WE OBSERVE ON PERUSAL ON PAGE 26 OF THE PAPER-BOOK THAT ASSESSEE HAD MADE PAYMENT ONLY OF RS.97,00,942/- OUT OF TOTAL PAYMENT OF RS.1,76,36, 423/- BY BEARER CHEQUES AND REST OF THE PAYMENTS WERE MADE BY ACCOU NT PAYEE CHEQUES 5 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. AND/OR BY BANK TRANSFER. FURTHER LD. CIT(A) HAS NO T CONSIDERED THE SUBMISSION OF THE ASSESSEE MADE BEFORE HIM AS TO WH ETHER ANY PAYMENT MADE BY BEARER CHEQUES FALL IN ANY OF THE E XCEPTION AS PROVIDED UNDER RULE 6DD OF INCOME-TAX RULES. HENCE IN THE INTEREST OF THE JUSTICE WE CONSIDER IT PRUDENT TO SET ASIDE THE ORDER OF THE AUTHORITIES BELOW ON THE ABOVE ISSUE AND RESTORE TH E MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE IT AFRESH, AFTER CO NSIDERING SUCH EVIDENCE AS MAY BE FILED BEFORE HIM AND AFTER GIVING DUE OPP ORTUNITY OF HEARING TO THE ASSESSEE, AS PER LAW. HENCE, GROUNDS NO.1 T O 3 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES BY RESTORING THE I SSUE TO THE FILE OF THE ASSESSING OFFICER. 9. IN GROUND NO. 4 OF THE APPEAL, THE ASSESSEE HAS DISPUTED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWA NCE OF SALARY PAID TO MS. SONAL BHATT OF RS.2,00,000/-. 10. THE ASSESSING OFFICER DISALLOWED THE EXPENSES O F RS.2,00,000/- TOWARDS SALARY PAID TO MS. SONAL BHATT ON THE GROUN D THAT THE ASSESSEE STATED BEFORE HIM AS UNDER MS. SONAL BHATT IS THE SISTER OF PARTNER WAS NOT DOING ANY ACTIVITY IN THE FIRM. THE ASSESSEE DISPUTED THE SAID DISALLOWANCE BEFORE THE LD. CIT(A). 11. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT MS. SONAL BHATT WAS ASSISTING THE WORK OF THE FIRM. THAT ASSESSEE F ILED SOME VOUCHERS WHICH WERE SIGNED BY MS. SONAL BHATT TO SUPPORT THE SUBMISSION. THE LD. CIT(A) ASKED REMAND REPORT FROM THE ASSESSING O FFICER. THE ASSESSING OFFICER IN THE REMAND REPORT OBSERVED TH AT SUCH VOUCHERS DOES NOT BEAR NUMBERS. THEREFORE, THE GENUINENESS OF THE SAME IS DOUBTFUL. 12. THE LD. CIT(A) HAS STATED THAT THE GENUINENESS OF THE VOUCHERS ARE DOUBTED. HE HAS STATED THAT EVEN OTHERWISE MERELY SIGNING OF QUITE A FEW VOUCHERS BY ANY RELATIVE PARTNER DOES NOT JUSTI FY A PAYMENT OF 6 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. RS.2,00,000/-TO SUCH PERSON UNLESS IT IS PROVED THA T REGULAR SERVICE WORTH RS.2,00,000/- WAS PROVIDED BY THE SAID PERSON . THEREFORE, THE LD. CIT(A) HAS STATED THAT THE REASONABLENESS OF PA YMENT IS NOT JUSTIFIED. THAT PAYMENTS MADE TO THE SISTER OF THE PARTNER DOES NOT APPEAR REASONABLE CORRESPONDING TO THE SERVICE PROV IDED BY MS. SONAL BHATT. HENCE THIS APPEAL BY THE ASSESSEE. 13. THE LD. AR SUBMITTED THAT THE ASSESSEE STATED B EFORE THE ASSESSING OFFICER THAT SHE WAS NOT DOING ANY ACTIVI TY AT SIGHT BUT SHE WAS WORKING IN THE OFFICE OF THE ASSESSEE. HOWEVER , THE ASSESSING OFFICER HAS TAKEN ABOVE STATEMENT THAT MS. SONAL BH ATT WAS NOT WORKING/DOING ANY ACTIVITY IN THE FIRM WHICH IS NOT CORRECTLY STATED. THE LD. AR HAS SUBMITTED THAT MS. SONAL BHATT IS AN ACTIVE PARTNER OF THE ASSESSEE FIRM AND REFERRED THE DEED OF PARTNERS HIP PLACED AT PAGES 80-90 OF THE PAPER BOOK. DURING THE COURSE OF HEAR ING A QUERY WAS RAISED BY THE BENCH AS TO WHETHER ANY PAYMENT WAS M ADE TO MS. SOANL BHATT IN EARLIER YEARS OR IN SUBSEQUENT YEARS TO TH E ASSESSMENT YEAR UNDER CONSIDERATION, BUT LD. AR SUBMITTED THAT HE I S NOT HAVING THE SAID DETAILS. THE LD. AR WAS ALSO ENQUIRED AS TO W HETHER THE SAID PAYMENT OF RS.2,00,000/- WAS MADE AS A DOWN PAYMENT OR IT WAS A PERIODICAL PAYMENT IN THE FORM OF SALARY. THE LD. AR COULD NOT FURNISH ANY DETAILS IN RESPECT OF MODE OF PAYMENT TO MS. SO NAL BHATT. THE AR ALSO ADMITTED THAT NO DETAILS HAVE BEEN FILED BY TH E ASSESSEE FOR THE SERVICE RENDERED BY HER SAVE AND EXCEPT OF PLACING IN THE PAPER BOOK, SOME VOUCHERS STATED TO BE SIGNED BY HER. HOWEVER, LD. AR SUBMITTED THAT MS. SONAL BHATT WORKED FOR THE FIRM AND SAID D ISALLOWANCE OF RS.2,00,000/- TOWARD PAYMENTS TO MS. SONAL BHATT IS NOT JUSTIFIED. LD. DR RELIED ON THE ORDER OF CIT(A). 14. WE HAVE CONSIDERED SUBMISSIONS OF LD. REPRESENT ATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. IT IS A FACT THAT THE ASSESSEE HAS NOT BEEN ABLE TO PLACE ANY EVIDENCE ON RECORD TO JUSTIF Y THAT MS. SONAL BHATT WAS ACTIVELY WORKING FOR THE FIRM SAVE AND EX CEPT PLACING ON 7 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. RECORD FIVE/SIX VOUCHERS STATED TO BE SIGNED BY HER FOR APPROVING THE PAYMENTS. WE HAVE PERUSED THOSE VOUCHERS, PLACED A T PAGE NO.-92-94 OF THE PAPER BOOK AND OBSERVE THAT EACH VOUCHER IS OF LESS THAN RS.100/- AND ONLY ONE THE VOUCHER IS OF RS.1,000/-. WE ACCORDINGLY AGREE WITH LD. DR THAT THE SIGNING OF THESE VOUCHER S DO NOT ESTABLISH THAT MS. SONAL BHATT IS WORKING IN THE FIRM TO JUST IFY THE PAYMENT OF SALARY OF RS.2,00,000/- IN THE FINANCIAL YEAR RELEV ANT TO ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, IT WAS STATED B Y LD. AR THAT MS. SONAL BHATT IS MBA AND ALSO ONE OF THE PARTNER IN T HE FIRM AS PER DEED OF PARTNERSHIP PLACED ON RECORD AT PAGES 80-90 OF T HE PAPER-BOOK. CONSIDERING THE ABOVE FACTS AND IN THE INTEREST OF JUSTICE, WE CONSIDER IT FAIR AND REASONABLE TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF TH E ASSESSING OFFICER TO RE- EXAMINE THE ISSUE IN THE LIGHT OF THE EVIDENCES AS MAY BE PLACED BEFORE HIM TO JUSTIFY THAT SHE IS WORKING ACTIVELY IN THE FIRM AND THE ASSESSING OFFICER WILL DECIDE THE ISSUE AFRESH AFTER GIVING D UE OPPORTUNITY OF HEARING TO THE ASSESSEE. HENCE GROUND NO.4 IS ALLOW ED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY .2013 2 . 1') % 3'4 31 ST JULY . 2013 ' . 5 SD/- SD/- ( SANJAY ARORA ) ( B.R.MITTAL ) % / ACCOUNTANT MEMBE / JUDICIAL MEMBER MUMBAI ; 3' DATED. 31-07-2013 ' . ./ SHEKHAR 2 2 2 2 . .. . ,06 ,06 ,06 ,06 76)0 76)0 76)0 76)0 / COPY OF THE ORDER FORWARDED TO : 1. *+ / THE APPELLANT 2. ,-*+ / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- CONCERNED, MUMBAI 8 ITA NO.2261/MUM/2013 M/S. MAHALI CONSTRUCTION CO. 4. 8 / CIT CONCERNED, MUMBAI 5. 6 95 ,0' , , / DR, ITAT, MUMBAI BENCH 6. 5:( ; / GUARD FILE. 2' 2' 2' 2' / BY ORDER, -60 ,0 //TRUE COPY// < << < / = = = = ! ! ! ! ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI