M/s N.K.Electricals, Indore V. The ACIT 4(1), Indore

ITA 228/IND/2013

• Counselvise Citation: 22822714 RSA 2013
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHEEM KUNWAR
• Keywords: Unexplained cash credit
• Section: 142(1); 68

Judgement Text

PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACFN6436D I.T.A.NO. 228 /IND/201 3 A.Y. : 2009-10 M/S.N.K. ELECTRICALS, 413, M. G. ROAD, INDORE. VS. ASSISTANT COM MISSIONER OF INCOME TAX, 4(1), INDORE APPELLANT RESPONDENT APPELLANT BY : SHRI ANIL KAMAL GARG, C. A. RESPONDENT BY : SHRI BHEEMKUNWAR, SR. DR DATE OF HEARING : 29 . 1 0 .201 3 DATE OF PRONOUNCEMENT : 2 0 . 1 1 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A), DATED 28.01.2013 FOR THE ASSE SSMENT YEAR 2009-10. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ELECTRICAL LABOUR CONTRACTOR. DURING CO URSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER MADE ADD ITION ON M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 2 PAGE 2 OF 9 ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 AMOUNTING TO RS. 27,23,716/-. THE PRECISE OBSERVATION OF ASSESSING O FFICER WAS AS UNDER :- 3.1. ON EXAMINATION OF CAPITAL ACCOUNT OF THE FIRM IT IS FOUND THAT THERE IS ADDITION IN THE CAPITAL OF T HE FIRM BY RS 27,23,716/- BY PARTNERS SHRI NITIN JAIN AND SMT. KUSUMLATA JAIN RS 651,123/- AND RS 20,72,593/- RESPECTIVELY. IN THIS REGARD ASSESSEE WAS ASKED SPECIFICALLY VIDE NOTICE U/S 142(1) DATED 11.04.2011 TO FURNISH THE PROOF OF ADDITION IN CAPI TAL ACCOUNT OF FIRM. IN REPLY TO THE NOTICE ASSESSEE SUBMITTED THAT PROOF OF ADDITION IS ANNEXURE ATTACHED, SURPRISINGLY ONLY BANK ACCOUNT OF M/S. N.K. ELECTRICAL IS ATTACHED IN ANNEXURE. THERE WAS NO EXPLANATION PERTAINING TO SOURCE OF ADDITION IN THE FIRM'S CAPITAL. DUE TO CHANGE IN INCUMBENT CASE WAS REHEARD AND NOTICE UNDER SECTION 143(2) WAS DULY SERVED ON 14.11.11. THEREAFTER, ASSESSEE WAS AGAIN GIVEN OPPORTUNITY VIDE ORDER SHEET ENTRY DATED M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 3 PAGE 3 OF 9 16/11/2011 TO ESTABLISH SOURCE OF INCREASE IN CAPITAL. THE SUBMISSION WAS FILED ON 21/11/2011, HOWEVER NOTHING WAS MENTIONED ABOUT THE SOURCE OF ADDITION IN CAPITAL. NEXT DATE OF HEARING WAS FIXED ON 13/12/2011. SUBSEQUENTLY, ASSESSEE WAS ASKED TO FURNISH THE SOURCE OF INCREASE IN THE CAPITAL VIDE NOTE SHEET ENTRY ON 13.12.11 WHICH READS AS FOLLOWS : 'ESTABLISH SOURCE OF INCREASE IN CAPITAL AND FURNISH FUND FLOW STATEMENT THEREOF.' THE ASSESSEE AGAIN FAILED TO SUBMIT ANY EVIDENCE IN THIS REGARD. ON 19.12.11 AR OF ASSESSEE SHRI S.S. WADHWANI APPEARED DURING ASSESSMENT PROCEEDING, I FINAL OPPORTUNITY WAS GIVEN VIDE ORDER SHEET ENTR Y DATED 19.12.2011 WHICH IS AS FOLLOWS 'THE QUERY WAS RAISED ON 13.12.2011 ASKING THE SOURCES OF INCREASE IN CAPITAL, HOWEVER SUCH QUERY REMAINED UNANSWERED. M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 4 PAGE 4 OF 9 3. THE ASSESSING OFFICER FURTHER OBSERVED THAT CAPITAL ADDITION IN THE FIRM IS NOTHING BUT ASSESSEES INCO ME FROM UNDISCLOSED SOURCES, WHICH HAS BEEN INTRODUCED IN T HE GUISE OF ADDITION TO THE CAPITAL FROM THE ACCOUNTS OF PAR TNERS. 4. THE ASSESSING OFFICER ALSO DISALLOWED RS. 5 LAKHS O UT OF LABOUR EXPENSES INCURRED BY THE ASSESSEE AFTER O BSERVING AS UNDER :- THE ASSESSEE HAS CLAIMED LABOUR EXPENSES AT RS. 2,05,38,497/-. ON PERUSAL OF BILLS AND VOUCHERS, IT WAS NOTICED THAT THE ASSESSEE DOES NOT HAVE COMPLET E VOUCHERS FOR THE SAME. SOME OF THE VOUCHERS WERE SE LF MADE AND PAYMENTS WERE MADE IN CASH. THEREFORE, THE VERIFICATION OF CORRECTNESS OF THE EXPENSES IS NOT POSSIBLE. KEEPING THIS VIEW IN MIND, LABOUR EXPENSE S ARE DISALLOWED TO THE EXTENT OF RS. 5,00,000/- AND SAME IS BEING ADDED TO THE TOTAL INCOME OF THE ASSESSEE. M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 5 PAGE 5 OF 9 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) NOT ONLY CONFIRMED THE ADDITION IN RESPECT OF CAPITAL INTROD UCED BY PARTNER NITIN JAIN, BUT ALSO ENHANCED THE SAME BY R S. 3,01,877/-. 6. DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) IS SUED NOTICE OF ENHANCEMENT U/S 251(1) READ WITH SECTION 251(2). THE PRECISE OBSERVATION OF CIT(A) WAS AS UNDER :- 4.3.4 NOW COMING TO QUANTUM OF ADDITION, THE PARTNER GAVE LOAN OF RS. 9,53,000/- TO APPELLANT FI RM AND HE WITHDREW RS. 3,01,877/- AND AS A RESULT HIS NET BALANCE REMAINED WITH FIRM OF RS. 6,51,123/-. THE ASSESSING OFFICER ADDED ONLY THIS BALANCE AMOUNT OF RS. 6,51,123/- WHICH IS NOT CORRECT. SINC E ENTIRE AMOUNT OF CREDIT OF RS. 9,53,000/- IS UNEXPLAINED, ADDITION OF ENTIRE AMOUNT OF RS. 9,53,000/- IS MADE IN HANDS OF APPELLANT FIRM U/S 68 OF THE INCOME-TAX ACT BY INVOKING THE POWER OF ENHANCEMENT U/S 251(1) R.W.S. 251(2) OF THE INCOME- TAX ACT. IN THIS REGARD RELIANCE IS PLACED ON KASHI NATH CHANDIWALA, [2006] 280 ITR 318 (ALL), NIRBHERAM DAULATRAM, [1997] 224 ITR 610 ( S.C.), KANPUR COAL SYNDICATE, [1964] 53 ITR 225 ( S.C.), SMT. PRABHAVAT SHAH, [1998] 231 ITR 1 (BOM), M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 6 PAGE 6 OF 9 AHMEDABAD CRUCIBLE CO. [1994] 206 ITR 574 (GUJ) AND RANICHERRA TEA CO. LTD.,[ 1994] 207 ITR 979 (CAL). AS RESULT GROUND NO. 2 OF APPEAL IS PARTLY ALLOWED. 7. THE LD. CIT(A) ALSO CONFIRMED THE DISALLOWANCE OF LABOUR EXPENSES. 8. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORDS PERUSED. WE FOUND THAT ADDITION OF RS. 20,72,593/- MADE IN RESPECT OF CAPITAL INTRODUCED BY PARTNER SMT. KUSUM LATA JAIN WAS DELETED BY THE LD.CIT(A) BY OBSERVING THAT THIS AMOUNT WAS ALREADY ADDED BY THE ASSESSING OFFICER IN HER INDIV IDUAL ASSESSMENT, THEREFORE, AGAIN MAKING ADDITION IN THE HANDS OF THE FIRM WILL AMOUNT TO DOUBLE ADDITION. REVENUE IS NOT IN APPEAL BEFORE US AGAINST THE SAID DELETION. 9. WITH REGARD TO THE ADDITION OF RS. 6,51,123/- INTRODUCED BY SHRI NITIN JAIN, WE FOUND THAT LD. CI T(A) HAS ENHANCED THE ADDITION BY OBSERVING THAT PARTNER SHR I NITIN JAIN HAS GIVEN LOAN OF RS. 9,53,000/- TO THE ASSESS EE FIRM AND HE WITHDREW RS. 3,01,877/-. AS A RESULT OF THIS, TH E NET BALANCE REMAINED WITH THE FIRM WAS OF RS. 6,51,123 /-. THE LD. M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 7 PAGE 7 OF 9 CIT(A) FOUND THAT ENTIRE AMOUNT OF CREDIT OF RS. 9, 53,000/- IS UNEXPLAINED AND NOT THE AMOUNT OF RS. 6,51,123/-. ACCORDINGLY, THE LD. CIT(A) ENHANCED THE ASSESSMENT BY RS. 3,01,877/- BY INVOKING THE POWERS OF ENHANCEMENT U/ S 251(1) READ WITH SECTION 251(2). FROM THE RECORD, WE FOUND THAT THIS AMOUNT WAS RECEIVED BY THE ASSESSEE FIRM THROUGH AC COUNT PAYEE CHEQUE BEARING NO. 537289 DATED 27.3.2009 DRA WN BY PARTNER SHRI NITIN JAIN ON HIS SAVING BANK ACCOUNT NO. 05010100003310 MAINTAINED WITH BANK OF BARODA, SITL AMATA BAZAR, INDORE. THE ASSESSEE HAS ALSO PLACED ON RECO RD RELEVANT BANK STATEMENT OF SHRI NITIN JAIN. AS PER THE COMPU TATION OF TOTAL INCOME FILED BY SHRI NITIN JAIN WITH THE SAME ASSESSING OFFICER, BESIDES DERIVING INCOME FROM THE ASSESSEE FIRM AND INTEREST INCOME FROM BANK, INCOME DERIVED FROM CONT RACT RECEIPT OF BUSINESS CARRIED ON BY HIM IN HIS INDIVI DUAL CAPACITY WAS ALSO SHOWN. THE CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS THAT THE ASSESSEE FIRM HAD ACCE PTED CAPITAL FROM ONE OF ITS PARTNERS ONLY, IDENTITY OF WHOSE WAS NOT IN DISPUTE, TRANSACTION WAS BY ACCEPTING CAPITAL TH ROUGH M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 8 PAGE 8 OF 9 ACCOUNT PAYEE CHEQUE, THE GENUINENESS OF TRANSACTIO N CANNOT BE DISPUTED. AFTER CONSIDERING ENTIRE MATERIAL PLAC ED ON RECORD, WE ARE OF THE VIEW THAT THE CAPITAL INTRODU CED BY THE PARTNER THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE ADDE D IN THE HANDS OF THE FIRM, WHEN THE INDIVIDUAL PARTNER IS H AVING AN INDEPENDENT SOURCE OF INCOME AND ALSO FILING HIS RE TURN OF INCOME IN HIS INDIVIDUAL CAPACITY. UNDER THESE CIRC UMSTANCES, THE ASSESSING OFFICER IS AT LIBERTY TO EXAMINE THE AVAILABILITY OF FUNDS IN THE HANDS OF PARTNERS IN HIS INDIVIDUAL CA PACITY AND TO DECIDE THE ISSUE OF ADDITION IN THE HANDS OF PAR TNER IN HIS INDIVIDUAL CAPACITY RATHER THAN ADDING THE SAME IN THE HANDS OF THE FIRM. IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMI NING AND DECIDING THE SAME AFRESH IN TERMS OF OUR ABOVE DISC USSION. 10. WITH REGARD TO AD HOC DISALLOWANCE OF LABOUR CHARGE S, WE FOUND THAT DURING THE YEAR, THE ASSESSEE FIRM HA S EXECUTED THE SUPPLY-CUM-INSTALLATION CONTRACT FOR A SUM OF R S. 6,31,51,542/- AND ON SUCH CONTRACT THE ASSESSEE HAS SHOWN NET PROFIT OF RS. 31,66,696/-, WHICH WORKS OUT TO B E 5.01 OF M/S. N.K. ELECTRICALS, INDORE. I.T.A.NO. 228/IND/2013 A.Y. 2009-10 9 PAGE 9 OF 9 THE TURNOVER, WHICH APPEARS TO BE QUITE REASONABLE. THUS, THE AD HOC DISALLOWANCE OF LABOUR CHARGES ALLEGED TO BE PAID THROUGH SELF MADE VOUCHERS, WAS NOT JUSTIFIED. ACCO RDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE AD HOC D ISALLOWANCE OF LABOUR CHARGES, IN VIEW OF THE FACT THAT NET PRO FIT SHOWN BY THE ASSESSEE WAS QUITE REASONABLE LOOKING TO NATURE OF WORK CONTRACT UNDERTAKEN BY IT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH NOVEMBER, 2013. CPU* 21.11