DCIT, Sambalpur V. M/s. L.N. Infrastructure & Construction Pvt. Ltd., Bargarh

ITA 233/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3667 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: BINOD KUMAR AGRAWAL
• Keywords: Depreciation; Corroborative evidences

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ./ ITA NO. 2 33 / CTK /20 1 5 ( / ASSESSMENT YEAR : 20 10 - 20 11 ) DCIT, CIRCLE - 2(1), SA MBALPUR VS. M/S L.N.INFRASTRUCTURE & CONSTRUCTION PVT. LTD., AT - PADAMPUR, DIST - BARGARH ./ ./ PAN/GIR NO. : A ABCL 3028 R ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI D.K.PRADHAN, DR /AS SESSEE BY : SHRI BINOD KUMAR AGRAWAL ,AR / DATE OF HEARING : 11 / 0 7 /201 7 / DATE OF PRONOUNCEMENT 28 / 0 7 /201 7 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH E REVENUE HAS FILED AN APPEAL AGAI NST THE ORDER OF CIT(A) - 2 , BHUBANESWAR, PASSED IN ITA NO. 0478 /201 3 - 1 4 , DATED 2 0 .2.2015, U/S.143(3) OF THE INCOME TAX ACT . 2. THE REVENUE HAS RAISED THE AND SUBSTANTIVE GROUND THAT THE CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION AS DISALLOWED BY THE AO IN THE ABSENCE OF BILLS AND VOUCHERS FOR EXPENSES TOWARDS EARTH, MURROM & SAND AND FOR STONES PRODUCTS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE EXECUTION OF CONTRACT WORKS AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 2011 ON 24.09.2010 WITH TOTAL INCOME OF RS. 99,91,910 / - AND THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT THROUGH CASS AND THE LD. AO ISSUED NOTICES U/S.143(2) & ITA NO. 2 33 /201 5 2 14 2(1) OF THE ACT. IN COMPLIANCE TO THE SAME, LD. AR APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS AND DOCUMENTS AND THE AO ON VERIFICATION OF THE VARIOUS DETAILS FOUND THAT OUT OF THE CONTRACT , EXPENSES OF RS. 23 .47 CRORES WHICH WERE DEBITED IN THE PR OFIT AND LOSS ACCOUNT, THE ASSESSEE FURNISHED THE EXPLANATION S AND SUPPORTING IN MOST OF THE CASES BUT IN THE CASE OF OTHER EXPENSES OF RS. 18,20,000/ - IN RESPECT OF EARTH, MURROM AND SAND AND RS.20,38,000/ - ON ACCOUNT OF STONE PRODUCTS WERE NOT SUPPORTED A ND HENCE, T HE AO COULD NOT VERIFY AND DISAL L OWED AND PASSED THE ORDER U/S.143(3), DATED 18.3.2013. 4 . AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) . IN THE APPELLATE PROCEEDINGS, LD. AR ARGUED THE GROUNDS AND REITERATED T HE SUBMISSIONS MADE BEFORE THE LD.AO. LD.CIT(A) CONSIDERED THE FINDINGS OF THE AO AND THE ARGUMENTS OF LD. AR AND DEALT ON THE DISPUTED ISSUE OF CONSOLIDATED ADDITION OF RS. 38,58,000/ - AT PAGE 4 AND ALSO ON THE VARIOUS ISSUES RELATING TO NET PROFIT MARGIN AND FINALLY CAME TO A CONCLUSION AT PAGE 4 TO 8 AND DEALT EXHAUSTIVELY ON FACTS CONSIDERING THE TURNOVER OF CONTRACT RECEIPTS OF THE ASSESSEE ALLOWED THE APPEAL AND OBSERV ED AT PAGE 9 AS UNDER : - VIEWS AGAINST THE ABOVE BACKDROP, THE IMPUGNED EXPENSES T OTALLING RS.38,58,000/ - IS A MEAGRE 1.45% OF THE CONTRACT RECEIPTS OF THE APPELLANT OF RS.26,61,72,948/ - AND A SIMILARLY LOW 1.64% OF ITS TOTAL CONTRACT EXPENSES OF 23,47,46,247/ - . THIS PERCENTAGE IS SO MINISCULE TO BE WITHIN STATISTICALLY PERMISSIBLE LIMI TS. THESE PROPORTIONS AND THEIR ACCEPTABLE AND WITHIN BOUNDS STATISTICAL AFTERMATH REVEAL THAT THERE WAS NO REAL NEED FOR THE AO TO MAKE THE IMPUGNED DISALLOWANCES. THAT THE APPELLANTS NET PROFIT MARGIN DURING THE IMPUGNED F.Y. 2009 - 10 WAS AN ENHANCED VAL UE OF 4% AS AGAINST THE CORRESPONDING VALUE OF 3.24% FOR THE PRECEDING F.Y.2008 - 09 DESPITE THE HIGHER CLAIM OF DEPRECIATION (ABOUT 0.8% OF THE CONTRACT RECEIPTS) OWING TO THE PURCHASES OF NEW ASSETS AND A ITA NO. 2 33 /201 5 3 126% INCREASE IN TURNOVER, TOO ARE MATERIAL FACTS S UPPORTING THE APPELLANTS CASE. I) IN VIEW OF ALL THE ABOVE, THE IMPUGNED CONTRACT EXPENSES TOTALLING RS. 38,58,000/ - TREATED AS NON - GENUINE BY THE AO AND ADDED BACK AND ASSESSED AS THE TAXABLE INCOME OF THE APPELLANT FOR THE IMPUGNED A.Y. 2010 - 11 ARE HEL D TO BE GENUINE AND MATERIALLY RELEVANT TO THE BUSINESS AFFAIRS AND PURPOSES OF THE APPELLANT. NO CONTRADICTORY EVIDENCE HAS BEEN DETERMINED TO NEGATE THIS LATTER POSITION AND DENY THE APPELLANT THE CLAIM OF THE IMPUGNED EXPENSES AS DEDUCTIONS. 7. TH E CONTENTIONS OF THE APPELLANT VIDE THE GROUNDS OF APPEAL FILED AND THE SUBMISSIONS MADE ARE ACCEPTED IN TOTO. IN SUM, THE APPEAL IS ALLOWED. 5 . AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6 . BEFORE US, LD. D R CONTENDE D THAT THE CIT(A) ERRED IN DELETING THE ADDITION IRRESPECTIVE OF THE FACT THAT THE AO COULD NOT VERIFY THE DETAILS AND WERE NOT PRESENTED, WHEREAS LD. AR SUBMITTED THAT COMPLETE INFORMATION IS FURNISHED BEFORE THE AO AND THE LD. CIT(A) HAS ALSO CONSIDERED THESE FACTS AND PROOF AND ALLOWED THE APPEAL. 7 . WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD. PRIMA FACIE , LD. DRS CONTENTION IS THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION WITHOUT CONSIDERING THE FINDINGS OF AO. WE FOUND FROM T HE ORDER OF THE CIT(A) THAT HE HAS DEALT O N NET PROFIT MARGIN AND MADE COMPARISON OF CIVIL CONSTRUCTION OF VARIOUS OTHER COMPANIES FOR THE SAID QUARTER BASED ON THE SALES AND RELIED ON THE JUDICIAL DECISIONS AND ALSO COMPAR ED NET PROFIT MARGIN (NPM) AND TH E PERCENTAGE OF DISALLOWANCE BASED ON THE TURNOVER OF THE ASSESSEE. FURTHER, THESE FACTS WERE NOT DISCUSSED BEFORE THE AO AND THE LD. AO HAS MADE DISALLOWANCE PURELY DUE TO LACK OF PROPER SUPPORTING EVIDENCE S . ACCORDINGLY, W E CONSIDER ED THE APPARENT ITA NO. 2 33 /201 5 4 FACTS AND MATERIAL AND IN THE INTEREST OF JUSTICE REMIT THE DISPUTED ISSUE TO THE FILE OF AO FOR VERIFICATION AND EXAMINATION AND THE ASSESSEE SHALL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING AND SHALL FILE INFORMATION BEFORE PASSING THE ORDER AND GROUNDS OF APPEAL OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 28 /07 / 201 7 . SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GAD ALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 28 / 0 7 /201 7 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, C UTTACK 1. / THE APPELLANT - DCIT , CIRCLE - 2(1), SAMBALPUR 2. / THE RESPONDENT - M/S L.N.INFRASTRUCTURE & CONSTRUCTION PVT. LTD., AT - PADAMPUR, DIST - BARGARH 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//