The ITO, Ward-3, Mehsana V. Smt. Kapilaben Bharatbhai Patel, Kalol

ITA 2366/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0407 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 16-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI S.S. GODARA, JM, & SHRI MANISH BORAD , AM. ITA NO. 2366/AHD/2011 ASST. YEAR: 2008-09 ITO, WD-3, MEHSANA. VS. SMT. KAPILABEN BHARATBHAI PATEL, PROP.OF M/S SHITAL ENTERPRISE, 10, RANGIJOT SOCIETY, OPP. GIDC ESTATE, KALOL (N>G). APPELLANT RESPONDENT PAN AEIPP 7803A APPELLANT BY SHRI PRASOON KABRA, SR.DR RESPONDENT BY SHRI M. K. PATEL, AR DATE OF HEARING: 19/9/2016 DATE OF PRONOUNCEMENT: 30/09/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY THE REVENUE FOR ASST. YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF LD. CIT)A), GANDHINAGAR, AHMED ABAD DATED 23.6.2011 IN APPEAL NO.CIT(A)/GNR/97/2010-11 PASSED AGAINST ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 2/12/2010 BY ITO, WARD -3, MEHSANA. GROUNDS OF APPE AL RAISED BY REVENUE READ AS UNDER :- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE U/S 40A(IA) OF THE I T ACT OF RS.74,6 9,869/-. ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 2 2. THE LEARNED CIT(APPEALS) HAS ERRED IN NOT CONSID ERING THE FACT THAT SUBCONTRACT PAYMENT WAS PART OF EXPENSES CLAIMED UN DER THE HEAD OF SALARY AND WAGES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEA RNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE A BOVE EXTENT. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS AN INDIVIDUAL RUNNING A SOLE PROPRIETARY CONCERN M/S S HITAL ENTERPRISE WHICH IS ENGAGED IN THE BUSINESS OF LABOUR CONTRACT OR. RETURN OF INCOME FOR ASST. YEAR 2008-09 WAS FILED ON 29.09.20 08 DECLARING TOTAL INCOME AT RS.3,03,890/-. CASE WAS SELECTED FOR SCRU TINY ASSESSMENT THROUGH CASS AND NOTICE U/S 143(2) OF THE ACT WAS S ERVED FOLLOWED BY QUESTIONNAIRE SEEKING VARIOUS INFORMATION. IN CO MPLIANCE THERETO ASSESSEE HAS FILED NECESSARY DETAILS ALONG WITH TAX AUDIT REPORT, AUDITED FINANCIAL STATEMENTS AND PRODUCED BOOKS FOR VERIFICATION. IN THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER NOTICED THAT ASSESSEE HAS TRANSFERRED RS.74,69,846/- TO HER DAUGHTER MS. SHEETAL B. PATEL WHICH WAS THEREAFTER WITHDRAWN IN CASH ON VARIOUS DATES. ON SEEKING REASONS FOR THIS TRANSFER OF RS.7 4,69,846/- ASSESSEE REPLIED THAT SHE IS PARTLY PARALYSED AND I S HAVING PROBLEM IN SIGNING THE CHEQUE(S) AND BANK TRANSACTIONS TAX IS PAYABLE ON WITHDRAWAL ABOVE RS.50,000/- FROM CURRENT ACCOUNT. IN ORDER TO MITIGATE BOTH THESE PROBLEMS SHE OPERATES THE JOINT LY HELD SB ACCOUNT WITH HER DAUGHTER AND THE CONTRACT RECEIPTS RECEIVED IN HER CURRENT ACCOUNT WERE MOSTLY TRANSFERRED TO THIS SB ACCOUNT AND CASH USED TO BE WITHDRAWN REGULARLY BY THE CHEQUE SIGNED BY THE DAUGHTER. ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 3 ALL THESE CASH WITHDRAWALS HAVE BEEN USED FOR PAYME NTS TO LABOURERS AND ALL THESE TRANSACTIONS IN THIS IMPUGNED JOINT S .B. A/C ARE FORMING PART OF REGULAR BOOKS OF ACCOUNT. HOWEVER, LD. ASSE SSING OFFICER WAS NOT SATISFIED WITH THIS REPLY AND WAS OF THE VIEW T HAT THE PAYMENT OF RS. 74,69,846/- IS IN THE NATURE OF SUB-CONTRACT CH ARGES AND DISALLOWED THIS AMOUNT BY APPLYING THE PROVISIONS O F SECTION 40(A)(IA) OF THE ACT. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND SUCCEEDED IN FULL AS LD. CIT(A) DELETED THE ADDITIO N. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 5. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 6. ON THE OTHER HAND, LD. AR REITERATED THE SUBMISS IONS MADE BEFORE THE FIRST APPELLATE AUTHORITY AND ALSO ADDED THAT BOOKS OF ACCOUNTS ARE AUDITED, NO QUALIFICATION HAS BEEN MAD E BY THE AUDITOR IN THE TAX AUDIT REPORT. GP DURING THE YEAR IS 24.0 5% IN COMPARISON TO PREVIOUS YEAR GP AT 20.73%. NET PROFIT RATE DURI NG YEAR UNDER APPEAL IS 2.65% AS COMPARED TO N.P. AT 4.95% IN THE PREVIOUS YEAR. NO DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFF ICER IN THE BOOKS OF ACCOUNT AND IN TOTAL EXPENDITURE AT RS.1,35,38, 811/- CLAIMED AS AGAINST TOTAL CONTRACT RECEIPT AT RS.1,40,27,756/-. LD. AR FURTHER SUBMITTED THAT LD. ASSESSING OFFICER FAILED TO EXAM INE THAT IF THE IMPUGNED SUB-CONTRACT AMOUNT OF RS.74,69,846/- IS T REATED AS EXPENDITURE THEN THE INCOME OF THE ASSESSEE WILL TU RN INTO LOSSES. ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 4 ALSO BEFORE THE FIRST APPELLATE AUTHORITY ASSESSEE HAS FILED AFFIDAVIT CONFIRMING THE FACT THAT HER DAUGHTER MS. SHEETAL B . PATEL IS NOW RESIDING IN CANADA AND THE BANK ACCOUNT RUN IN HER NAME IS OWNED UP AND OPERATED BY HER MOTHER AND SHEETAL B. PATEL HAS NOTHING TO DO WITH THIS BANK ACCOUNT WHEREIN RS.74,69,846/- HA S BEEN TRANSFERRED BY THE ASSESSEE. FURTHER TOTAL EXPENDIT URE OF RS.1,35,38,811/- ARE DULY SUPPORTED BY PROPER BILLS AND VOUCHERS AND NO ANOMALY HAS BEEN OBSERVED BY ASSESSING OFFICER A ND, THEREFORE, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. SOLITARY GRIEVANCE OF THE REVENUE IN THIS APPEAL IS AGAINST THE DELETION OF DISALLOWANCE MADE BY ASSESS ING OFFICER FOR RS.74,69,846/- U/S 40(A)(IA) OF THE ACT FOR NON-DED UCTION OF TDS ON THE ALLEGED SUB-CONTRACT AMOUNT OF RS.74,69,846/-. 8. WE OBSERVE THAT ASSESSEE BEING A LABOUR CONTRACT OR HAS SHOWN A TOTAL CONTRACT RECEIPT OF RS. 1,40,27,756/- AND H AS CLAIMED EXPENDITURE OF RS. 1,35,38,811/- WHICH INTER ALIA I NCLUDES SALARY AND WAGES, LEAVE ENCASHMENT, PF, BONUS, SERVICE-TAX AND SUPERVISION EXPENSES. BOOKS OF ACCOUNTS ARE AUDITED AND GP & NP RATES ARE MARGINALLY LOWER DURING THE YEAR UNDER APPEAL. THE ISSUE EMANATED FROM THE FACT THAT ASSESSEE HAS SHOWN A SB A/C JOIN TLY HELD WITH HER DAUGHTER SHEETAL B. PATEL. DURING THE YEAR AN AMOUN T OF RS.74,69,846/- WAS TRANSFERRED TO THIS S.B. A/C JOI NTLY HELD BY THE ASSESSEE AND HER DAUGHTER AND REGULAR CASH HAS BEEN WITHDRAWN. ASSESSING OFFICER HAS ALLEGED THAT THE AMOUNT OF RS .74,69,846/- IS A ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 5 SUB-CONTRACT CHARGES SUBJECT TO DEDUCTION OF TDS AN D AS THERE IS NO TAX DEDUCTED AT SOURCE BY ASSESSEE IT CALLS FOR DIS ALLOWANCE U/S 40(A)(IA) OF THE ACT WHEREAS ON THE BASIS OF MATERI AL PLACED BEFORE THE LOWER AUTHORITIES WE ARE ABLE TO UNDERSTAND THA T ASSESSEE WHO IS SUFFERING FROM PARTIAL PARALYSIS AND FINDS IT DIFFI CULT TO SIGN ON THE CHEQUES AND WITHDRAW MONEY AS AND WHEN REQUIRED TO PAY TO THE LABOURERS TOWARDS WAGES ETC. AND ALSO TO BRING DOWN THE COST OF BANKING TRANSACTIONS TAX FOR WITHDRAWING CASH FROM THE CURRENT ACCOUNT THOUGHT IT APPROPRIATE TO ROUTE THESE TRANS ACTIONS OF WITHDRAWING CASH THROUGH THIS S.B ACCOUNT JOINTLY H ELD WITH HER DAUGHTER. IN THIS PROCESS SHE HAS TO TRANSFER SOME OF THE CONTRACT RECEIPTS THROUGH ACCOUNT PAYEE CHEQUE FROM THE CURR ENT ACCOUNT TO THE S.B. A/C AND THEN WITHDRAW THE SAME AS AND WHEN REQUIRED TO MEET THE REGULAR EXPENDITURE. 9. WE FURTHER OBSERVE THAT LD. CIT(A) HAS DELETED T HE ADDITION BY THOROUGHLY EXAMINING THE FACTS BY OBSERVING AS UNDE R :- 6. I HAVE CONSIDERED THE ASSESSMENT ORDER AN D SUBMISSIONS. THE FOLLOWING MATERIAL OBSERVATIONS ARE MADE ON THE ISSUE: A) THE DISALLOWANCE U/S. 40(A)(IA) HAS BEEN MADE WI THOUT UNDERSTANDING THE LAW. WHEN NO EXPENSE HAS BEEN CLAIMED OR ALLOWED ON ANY SUB-CONTRACT, WHERE IS THE QUESTION OF DISALLOWANCE. WHAT ARE THE EXPENSES DISALLOWED? B) THE AO HIMSELF HAS NOTED IN THE ASSESSMENT ORDER AT PRIORI THAT MAJOR EXPENSES DEBITED TO THE. P&L ACCOUNT INCLUDED PAYME NTS RELATED TO EMPLOYEES (SALARY & WAGES, PF EXPENSES ETC.) AND SERVICE TAX EXPENSES. THE TOTAL EXPENSES NOTED BY HIM WITHOUT ANY ADVERSE COMMENTS OR INFERENCE ARE RS.1,35,38,811/-. THE TOTAL CONTRACT RECEIPTS SHOWN BY THE ASSESSEE ARE RS.1,40,27,756/- (NOTED BY AO AT PG.2.OF THE ASSESS MENT ORDER). ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 6 C) IF THE ASSESSEE HAS GIVEN SUB-CONTRACT AMOUNTING TO RS.74,69,846/- AS HELD BY THE AO, THEN HOW THE EXPENSES OF RS.1,35,38,811/- C AN BE SAID TO HAVE BEEN INCURRED ON REMAINING CONTRACT OF AROUND RS.65 LACS ONLY . IT IS TO BE NOTED THAT SERVICE TAX PAYMENTS ARE DEBITED IN ASSESSEE'S ACCO UNT AND IT IS NOT THE AO'S CASE THAT THESE DID NOT PERTAIN TO HER. THE PF HAS BEEN DEDUCTED FOR EMPLOYEES WHOSE SALARY AND WAGES HAS BEEN DEBITED. WHEN THE S ALARY AND WAGES ARE OF THE ASSESSEE AND SO IS THE PF DEDUCTED, HOW CAN IT BE SAID THAT THE WORK IS DONE BY SOMEBODY ELSE. D) THERE IS NO DOUBT THAT THE ASSESSEE WAS NOT KEEP ING WELL AND THERE IS VALID REASON FOR THE DAY TO DAY TRANSACTIONS WERE ROUTED THROUGH HER DAUGHTER'S ACCOUNT. THE ASSESSEE'S REASON GIVEN THAT IT WAS TO SAVE CASH TRANSACTION TAX AND CHEQUES ARE GOT SIGNED BY THE ASSESSEE IN ADVANCE, STANDS TO REASON ON THE TEST OF HUMAN PROBABILITIES AND BUSINESS PRA CTICES. E) EVEN IF THERE WAS NO REASON AS ABOVE, JUST TO E NTER TRANSACTIONS THROUGH ACCOUNT IN OTHER NAME WOULD BE IMMATERIAL TO THE QU ESTION. THE BANK ACCOUNT IN QUESTION HAS BEEN SHOWN IN THE BOOKS OF ACCOUNTS AN D THE AUDITED ACCOUNTS AS BELONGING TO THE ASSESSEE. JUST BECAUSE THE ACCOUNT IS IN ANYBODY'S ELSE NAME DOES NOT CHANGE THIS POSITION. THE ACCOUNTS IN BUSI NESS ARE KNOWN TO BE OPERATED BY MANAGERS, AGENTS ETC, THE POSITION WOUL D HAVE BEEN DIFFERENT ONLY IF THE ACCOUNT WAS UNDISCLOSED OR THE TRANSACTIONS WER E NOT REFLECTED IN THE BOOKS OF ACCOUNTS. WHEN ALL THE TRANSACTIONS THEREIN ARE REFLECTED IN ASSESSEE'S AUDITED BOOKS OF ACCOUNTS, HOW IT CALLS FOR AN ADVERSE INFE RENCE IS BEYOND ANY LOGIC. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES,. THE DI SALLOWANCE U/S. 40(A)(IA) AND SUBSEQUENT ADDITION IN INCOME IS HELD TO BE BAD IN LAW AS WELL AS ON THE FACTS OF THE CASE; WHERE NO EXPENSE HAS BEEN CLAIMED OR ALLO WED ON ANY SUB-CONTRACT, THE ACCEPTED EXPENSES ON EMPLOYEES AND SERVICE TAX ETC SHOW THAT AIL THE WORK WAS DONE BY ASSESSEE, THE BANK ACCOUNT IN QUESTION HAS BEEN SHOWN IN THE BOOKS OF ACCOUNTS AND THE AUDITED ACCOUNTS AS BELON GING TO THE ASSESSEE AND ALL THE TRANSACTIONS THEREIN ARE REFLECTED IN ASSESSEE' S AUDITED BOOKS OF ACCOUNTS. THE ADDITION SO MADE TO THE TOTAL INCOME IS DIRECTE D TO BE DELETED. 10. FROM GOING THROUGH THE FINDINGS OF LD. CIT(A) A ND IN THE LIGHT OF FACTS DISCUSSED ABOVE, WE FIND THAT THIS IMPUGNED A MOUNT OF RS.74,69,846/- CANNOT BE TERMED AS A SUB-CONTRACT A MOUNT BECAUSE ALL THE TRANSACTIONS IN THIS BANK ACCOUNT HAVE BEEN PASSED THROUGH REGULAR BOOKS WHICH HAVE BEEN AUDITED AND THE EFFEC T OF ALL THESE TRANSACTIONS ARE DULY REFLECTED IN THE PROFIT AND L OSS ACCOUNT. FURTHER ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 7 THERE IS NO MAJOR DOWN FALL IN THE GP OR NP RATE. N O ADVERSITY HAS BEEN OBSERVED BY THE ASSESSING AUTHORITY IN THE EXP ENDITURE CLAIMED FOR THE YEAR UNDER APPEAL AT RS. 1,35,38,811/- AND ALSO DUE DEDUCTION HAS BEEN MADE TOWARDS PF, IN SALARY & WAGES AND SER VICE TAX IS REGULARLY DEPOSITED. WE ARE, THEREFORE, OF THE VIEW THAT THE IMPUGNED AMOUNT OF RS.74,69,846/- CANNOT BE CONSIDERED AS SU B-CONTRACT EXPENDITURE AND CERTAINLY CANNOT CALL FOR DISALLOWA NCE U/S 40(A)(IA) OF THE ACT. WE FIND NO REASON TO INTERFERE WITH THE OR DER OF LD. CIT(A). WE UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE REVENUE. 11. OTHER GROUNDS OF THE APPEAL ARE OF GENERAL NATU RE, WHICH NEED NO ADJUDICATION. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2016 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 30/ 9 /2016 MAHATA/- ITA NO. 2366/AHD/2011 ASST. YEAR 2008-09 8 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 30/09/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 30/09/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 30/9/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: