B.Patel Infrastructurre Pvt.Ltd., Ahmedabad V. The JT.CIT.,Mehsana Range, Mehsana

ITA 2369/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8214 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 15-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 10-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Fair market value; Corroborative evidences
• Section: 143(3); 142(1); 133(6); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD , ACCOUNTANT MEMBER B. PATEL INFRASTRUCTURE PVT. LTD. 1, KANCHI CO - OP. HOUSING SOCIETY, NR. HOTEL EDEN, SG HIGHWAY ROAD, THALTEJ, AHMEDABAD PAN: AAACB8590K (APPELLANT) VS JT. CIT MEHSANA RANGE, MEHSANA (RESPONDENT) JT. CIT MEHSANA RANGE, MEHSANA (APPELLANT) VS B. PATEL INFRASTRUCTURE PVT. LTD. 1, KANCHI CO - OP. HOUSING SOCIETY, NR. HOTEL EDEN, SG HIGHWAY ROAD, THALTEJ, AHMEDABAD PAN: AAACB8590K (RESPONDENT) REVENUE B Y : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI T.P. HEMANI , A.R. I T A NO . 2369 / A HD/20 15 A S SESSMENT YEAR 2011 - 12 ITA NO. 2472 /AHD /20 15 ASSESSMENT YEAR 2011 - 12 I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 2 DATE OF HEARING : 29 - 09 - 2 017 DATE OF PRONOUNCEMENT : 30 - 10 - 2 017 / ORDER P ER : MANISH BORAD , ACCOUNTANT MEMBER : - THESE CROSS APPEALS FOR ASSESSMENT YEAR 2011 - 12 ARE FILED AGAINST THE ORDER OF CIT(A), GANDHINAGAR, DATED 26 TH JUNE, 2015 ARISING OUT OF THE ORDER U/S. 143(3) OF THE ACT DATED 30 TH MARCH, 2014 FRAMED BY ACIT CIRCLE, MEHSANA. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS A PRIVATE LTD . COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AS WELL AS CONSTRUCTION OF EARTH WORK, CEMENT, CONCRETE MINING ETC. RETURN OF I NCOME FILED AS ON 30 TH SEPTEMBER, 2011 CLAIMING A LOSS OF RS. 56 , 50 , 431/ - . CASE SELECTED FOR SCRUTINY THROUGH CAS S , NOTICE U/S. 143(2) AND 142(1) OF THE ACT DULY SERVED UPON THE ASSESSEE. 3. DURING THE COURSE ASSESSMENT PROCEEDINGS, LD. ASSESSING OFFICER EXAMINED THE VALUATION OF CLOSING STOCK AND WORK IN PROGRESS AS ON 31 - 03 - 2011 . A SSESSEE HAS SHOWN CLOSING STOCK AND WORK IN PROGRESS (WIP ) AT RS. 4 , 05 , 45 , 100/ - WHICH INTER ALIA INCLUDED THE STOCK IN WIP OF JHINJHUWADA BRANCH DASHADA SITE AT RS. 1 , 81 , 20 , 961/ - . LD. ASSESSING OFFICER ALSO CALLED FOR THE DETAILS U/S. 133(6) OF THE ACT FROM ASSESSEE S BANKER I.E. ALLAHABAD BANK AND RECEIVED THE INFORMATION ABOUT THE CLOSING STOCK OF MATERIAL AT VARIOUS I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 3 SITES. AS PER THESE DETAILS, THE VALUE OF STOCK WAS RS. 44 , 50 ,8 69/ - . SHOW CAUSE NOTICE WAS ISSUED TO ASSESSEE TO GIVE THE EXPLA NATION ABOUT NOT SHOWING CLOSING STOCK OF MATERIAL AT SITE. ASSESSEE REPLIED THAT ONCE A MATERIAL IS ISSUED FROM HEAD OFFICE TO DIFFERENT SITES , THEN THE MATERIAL AT THE SITE IS CONS IDERED AS WORK IN PROGRESS. HOWEVER , THE LD. ASSESSING OFFICER WAS NOT CONVINCED. HE WAS OF THE OPINION THAT ASSESSEE HAD NOT DISCLOSED THE MATERIAL AT SITE OF RS. 44 , 50 , 869/ - IN THE BOOKS OF ACCOUNTS. LD. ASSESSING OFFICER FURTHER EXAMINED THE QUANTIT A TIVE DETAILS OF CLOSING STOCK AT DASHADA SITE AND CONCLUDED THAT THERE WAS A DIFFERENCE ON ACCOUNT OF STOCK OF MATERIAL NOT SHOWN IN WORK IN PROGRESS AT RS. 30 , 66 , 154/ - AND HE ALSO CALCULATED DIFFERENCE BETWEEN VALUE OF CLOSING STOCK OF MATERIAL AS SHOWN B Y ASSESSEE IN THE BALANCE SHEET AS AGAINST SHOWN TO THE BANK AT RS. 17 , 61 ,4 85/ - . I N TOTAL LEARNED ASSESSING OFFICER MADE AN ADDITION OF RS. 48 , 27 , 639/ - WAS MADE U/S. 69 OF THE ACT. LEARNED ASSESSING OFFICER ALSO MADE A DDITION AT RS. 4,86 , 000/ - U/S. 40A(2) (B) OF THE A CT TOWARD S TRACTOR RENT PAID TO THE DIRECTOR AND DISALLOWANCE OF RS. 573086/ - BEING 20% OF CASH EXPENSES INCURRED TOWARDS EAR TH WORK, LABOUR EXPENSES ETC. F OR WANT OF COMPLETE DETAILS. ACCORDINGLY, AFTER MAKING ADDITIONS OF RS . 58 , 86 , 725/ - ( R S. 48 , 27 , 634+4,86 , 000+ 5 , 73 , 086), INCOME ASSESSED AT RS. 2 , 36 , 294/ - . 4 . AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND PARTLY SUCCEEDED. NOW BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL RAISING FOLLOWING GROUNDS OF APPEALS: - I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 4 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN MAKING THE ADDITION OF RS. 17,61,485/ - U/S 69 OF THE ACT ON ACCOUNT OF VARIATION IN THE FIG URE OF CLOSING STOCK AS PER THE BOOKS AND STOCK STATEMENT GIVEN TO THE BANK. 2. BOTH THE POWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACTS AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSION, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THE ACTION OF THE LOWER AUTHORITIES IS CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE Q UASHED. 3. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN CONFIRMING ACTION OF LD. AO IN LEVYING INTEREST U/S 234A/B/C/D OF THE ACT. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN CONFIRMING THE ACTION OF LD. AO IN INITIATI NG PENALTY U/S 271(1)(C) OF THE ACT. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - I) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS, IN DELETING THE ADDITION OF RS. 30,66,154/ - MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF ADDITION OF VALUATION OF CLOSING STOCK. II) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS, IN DELETING THE DISALLOWANCE OF RS.4,86,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OUT OF TRACTOR RENT. III) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS, IN DELETING T HE DISALLOWANCE OF RS.5,73,086/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OUT OF EXPENSES. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. V) IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE' AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 5. FROM PERUSAL OF THE GROUNDS RAISED BY ASSESSEE AND REVENUE, WE FIND THAT THE FIRST ISSUE COMMONLY RAISED IN BOTH THE APPEALS RELATES TO THE ADDITION U /S. 69 OF THE ACT FOR ALLEGED DIFFERENCE IN THE STOCK SHOWN IN THE BANK VIS - - VIS DE CLARED BY ASSESSEE IN BOOKS OF I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 5 ACCOUNTS AT RS. 48,27,639/ - . THIS ADDITION COMPRISES OF TWO COMPONENTS (I) RS.30,66,154/ - BEING THE DIFFERENCE IN VALUE OF CLOSING STOCK SHOW N TO THE BANK AT RS. 44 , 50 , 869/ - AND VALUE OF CLOSING STOCK DECLARED BY ASSESSEE AT D A S HA D SITE AT RS. 13 , 84 , 715/ - (II) RS. 17 , 61 , 485/ - ARRIVED AT BY CALCULATING DIFFERENCE BETWEEN VALUE AS PER STATEMENT GIVEN TO BANK AT RS. 3 1 , 46 , 200/ - AS AGAINST RS. 13 , 84 , 715/ - SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. 6. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY AR GUED REFERRING TO THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER ADDED THAT LD. CIT(A) HAS RIGHTLY DELETED THE ALLEGED ADDITION OF RS. 30 , 66 , 154/ - BY FOLLOWING THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH C OURT IN THE CASE O F RIDDHI STEEL & TUBES PVT. LTD VS. AC I T IN 220 TAXMAN 148. HE FURTHER SUBMITTED THAT THERE IS NO DIFFERENCE IN THE VALUE OF CLOSING STOCK GIVEN TO THE BANK AS WELL AS FIGUR ES OF STOCK AND WORK - IN - PROGRESS SHOWN IN THE AUDITED FINANCIAL STATEMENTS . B OOKS OF ACCOUNTS HAVE NO T BEEN REJECTED AND THERE IS NO COGENT REASON GIVEN BY THE ASSESSING OFFICER FOR MAKING ADDITION. THE MATERIAL ISSUE D TO EACH SITE IS SHOWN UNDER THE HEA D WORK IN PROGRESS AND THEREFORE THE ALLEGED STOCK FIGURE OF RS. 44 , 5 0, 869/ - GIVEN TO THE BANK IS PART AND PARCEL OF THE TOTAL CLOSING STOCK IN WORK IN PROGRESS OF RS. 4 , 05 , 45 , 100/ - . LD. COUNSEL FURTHER REFERRING TO THE IMPUGNED ADDITION OF RS. 17 , 61 , 485/ - SUBMITTED THAT THIS AD DITION CANNOT SUSTAIN BECAUSE THE ALLEGED DIFFERENCE HAS ALREADY BEEN CONSIDERED WHILE CALCULATING THE ADDITION OF RS. 30 , 66 , 154/ - AND THEREFORE IT WILL TANTAMOUNT TO DOUBLE ADDITION. I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 6 7. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESE NTATIVE SUPPORTED THE ORDER OF LD. ASSESSING OFFICER. 8 . WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE RECORD BEFORE US. COMMON ISSUE RAISED BY BOTH THE PARTIES RELATES TO ADDITION OF RS. 48 ,27, 639/ - BY THE ASSESSING OFFICER U/S. 68 OF THE ACT . THE F ACTS RELATING TO THIS ADDITION HAVE BEEN DISCUSSED IN DETAIL IN PRECEDING PARAGRAPHS . OUT OF THE TOTAL ADDITION OF RS. 48 , 27 , 639/ - , LD. CIT(A) DELETED THE ADDITION OF RS. 30 , 66 , 154/ - FOR THE ALLEGED DIFFERENCE IN THE VALUE OF CLOSING STOCK SHOWN IN THE ST ATEMENT SUBMITTED TO ASSESSEE S BANKER M/S ALLAHABAD BANK AS AGAINST THE VALUE OF CLOSING STOCK DECLARED B Y ASSESSEE AT DASHAD SITE OF JHI NJH WADA BY OBSERVING AS UNDER: - 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLANT. IN THE ENTIRETY OF THE FACTS AS NARRATED IN THE PRECEDING PARAGRAPHS, I AM OF THE OPINION THAT THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE IN THE EYES OF LAW INASMUCH AS FACTS OF THE CASE. I HAVE SEEN THE SIGNIFICANT ACCOUNTING POLICY OF THE APPELLANT AND SCHEDULE - H OF THE BALANCE SHEET WHICH SHOWS THAT AS PER THE ACCOUNTING POLICY ADOPTED BY THE APPELLANT THE CLOSING STOCK OF MATERIAL WHETHER USED OR LYING AT SITES IS SHOWN AS INCLUDED IN THE WORK IN PROGRESS. IT IS FURTHER SEEN THAT TH E AO HAS NOT FOUND THIS ACCOUNTING POLICY AS UNTRUE OR INACCURATE AND THE BOOKS OF ACCOUNTS AND SUCH ACCOUNTING POLICY HAS BEEN ACCEPTED BY THE AO. I FURTHER AGREE WITH THE ARGUMENTS OF THE AR OF THE APPELLANT THAT THE ADDITION ON ACCOUNT NON DISCLOSURE OF STOCK CANNOT BE MADE MERELY RELYING ON THE BANK STATEMENT SUBMITTED TO THE BANK. I HAVE ALSO CONSIDERED THE AHMEDABAD TRIBUNAL ORDER IN THE CASE OF RIDDHI STEEL & TUBES (P) LTD. VS. ACIT 144 ITD 397, WHICH IS SUBSEQUENTLY CONFIRMED BY THE GUJ'ARAT HIGH CO URT IN 220 TAXMAN 148. THE AHMEDABAD TRIBUNAL IN RIDDHI (SUPRA) HAS HELD AS UNDER: '16(I) WE HAVE AT LENGTH HEARD BOTH THE SIDES. WE AGREE WITH THE ARGUMENTS OF THE LD. COUNSEL OF THE ASSESSEE THAT THE CASE OF THE ASSESSEE IS COVERED BY THE GUJARAT HIGH C OURT DECISIONS IN THE CASE OF ARROW EXIM PVT. LTD.(SUPRA) AND MEICO BONDS PVT. LTD .(SUPRA). IT IS SEEN THAT HON'BL E THE GUJARAT HIGH COURT IN THE CASE OF ARROW EXIM PVT. LTD. (SUPRA) HAS CONFIRMED THE ORDER OF ITAT AND CIT(A) IN DELETING ADDITION MADE U/S 69B OF THE ACT UNDER IDENTICAL CIRCUMSTANCES OF THE CASE AFTER MAKING OBSERVATIONS THAT (A) THE STOCK STATEMENT SHOWING INFLATED I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 7 QUANTITY AND VALUE OF STOCK WAS FURNISHED TO THE BANKING AUTHORITIES TO AVAIL MORE CREDIT FACILITIES; (B) THE STOCKS WERE HYPOT HECATED AND NOT PLEDGED AND (C) THE BOOKS OF ACCOUNTS ARE NOT FOUND TO BE DEFECTIVE OR NON - GENUINE BY THE AO. (D) THE ASSESSEE EXPLAINED THE DIFFERENCE EITHER ON ACCOUNT OF INFLATED VALUATION OF STOCK OR EXCESS QUANTITY SHOWN TO BANK. WE FURTHER FIND THAT HON'BLE THE GUJARAT HIGH COURT IN THE CASE OF MEICO BONDS PVT. LTD. (SUPRA) HAS ALSO CONFIRMED THE ORDER OF /TAT IN DELETING THE ADDITION MADE ON ACCOUNT OF UNDERSTATEMENT AND UNDERVALUATION OF STOCK AFTER MAKING OBSERVATIONS THAT (A) THE ASSESSEE HAD BEEN CONTENDING THAT THE VALUATION SUPPLIED TO THE BANK DID NOT REFLECT THE ACCURATE OR THE CORRECT PICTURE; (B) THE STATEMENT WAS DRAWN ON THE BASIS OF ESTIMATION AND SUCH ESTIMATE IS BASED ON HIGHER SIDE TO BORROW HIGHER LOAN AND (C) THE CLOSING STOCK REFLEC TED IN THE BOOKS MAINTAINED FOR INCOME - TAX REFLECTS THE CORRECT PICTURE. HON'BLE GUJARAT HIGH COURT IN THE CASE OF MEICO BONDS PVT. LTD. (SUPRA) HAS FURTHER STRENGTHENED THE VIEW TAKEN IN ARROW EXIM PVT. LTD. (SUPRA). 16(II) THIS VIEW IS FURTHER SUPPORTED BY HON'BLE ALLAHABAD HIGH COURT'S DECISION IN THE CASE OF KHAN & SIROHI ROLLING MILLS (SUPRA), WHEREIN ALSO, THE HON'BLE COURT DID NOT FIND ANY ERROR IN THE ORDER OF TRIBUNAL IN ACCEPTING THAT (A) THE ASSESSE INFLATED THE VALUE OF THE STOCKS IN THE BANK DE CLARATION TO OBTAIN A NUMBER OF DRAFTS FROM THE BANK; (B) THERE WAS ACTUALLY NO VERIFICATION OF THE STOCK MADE BY ANY BANK OFFICIAL; (C) THE STOCKS WERE ONLY HYPOTHECATED AND NOT PLEDGED; (D) THE INCOME - TAX OFFICER COULD NOT POINT OUT ANY DEFECT IN THE T RADING ACCOUNTS OF THE ASSESSEE AND (E) THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE HAS ALSO BEEN ACCEPTED BY THE CENTRAL EXCISE DEPARTMENT AS WELL AS BY THE SALES TAX DEPARTMENT COULD NOT BE DISBELIEVED. 16(III) ON PERUSAL OF THE DECISIONS AS REFERR ED ABOVE, IT IS GATHERED THAT HON'BLE COURTS HAVE LAID DOWN THAT ADDITIONS CANNOT BE MADE ON ACCOUNT OF DIFFERENCE ARISING IN THE QUANTITY AND VALUE OF STOCK SHOWN IN THE BOOKS OF ACCOUNTS AND THE STATEMENT FURNISHED TO THE BANKING AUTHORITIES, ADMITTEDLY TO AVAIL HIGHER CREDIT FACILITIES. COURTS HAVE LAID DOWN THE FOLLOWING GUIDELINES WHILE DEALING WITH THE ISSUE: (A) THE STOCK IN QUANTITY AND VALUE IS INFLATED ON ESTIMATE BASIS IN THE STATEMENT FURNISHED TO THE BANKING AUTHORITIES TO AVAIL HIGHER FINANCIA L CREDITS; (B) THE INFLATED AND ESTIMATED STOCK IS HYPOTHECATED AND NOT PLEDGED; (C) NO ACTUAL PHYSICAL VERIFICATION OF STOCK IS CARRIED OUT BY THE OFFICER OF BANKING AUTHORITIES DURING THE YEAR OR AS ON DATE OF VALUATION OF STOCK; (D) THE ASSESSEE HAS MAI NTAINED STOCK REGISTER; (E) THE ASSESSEE'S BOOKS OF ACCOUNTS ARE NOT FOUND TO BE DEFECTIVE OR NONGENUINE BY AO; (F) THE BOOKS CCOUNTS MAINTAINED BY THE ASSESSEE ARE ACCEPTED BY THE CENTRAL EXCISE AND/OR SALES TAX DEPARTMENT.' IN THE PRESET CASE IN HAND, IT IS SEEN THAT - (A) THE STOCK STATEMENT FURNISHED TO THE BANK IS FOR AVAILING CREDIT FACILITIES; (B) IT IS NOT THE FINDING OF THE AO THAT THE STOCK MENTIONED IN SUCH STATEMENT WAS VERIFIED BY THE OFFICER OF THE BANK WITH THE STOCK MENTIONED IN THE B OOKS OF ACCOUNTS OF THE APPELLANT; AND (C) BOOKS OF ACCOUNTS AND METHOD OF ACCOUNTING I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 8 AND ACCOUNTING POLICY IS NOT FOUND TO BE NON - GENUINE OR DEFECTIVE BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. ON CONSIDERATION OF THE ABOVE DECISI ON AND FACTS OF THE CASE, I AGREE THAT THE DECISION RELIED UPON BY THE AR OF THE APPELLANT SUPPORTS THE APPELLANT'S CLAIM THAT ADDITION ON THE BASIS OF STATEMENT OF STOCK GIVEN TO BANK, ADDITION MADE BY THE AO IS NOT JUSTIFIED. HOWEVER, IT IS SEEN THAT ADD ITION IS FOR DIFFERENCE IN STOCK AT TWO SITES AND FOR ONE SITE AT JINJHWADIA OF RS.30,66,154/ - , APPELLANT HAS PROVIDED CERTIFICATE OF THE ENGINEER TO THE EFFECT THAT MATERIAL ISSUED IS INCLUDED IN WIP. HOWEVER, IN RESPECT OF SECOND SITE VIZ. DASHADA, NO SU CH CERTIFICATE HAS BEEN SUBMITTED. FURTHER, AS NOTED BY THE AO, THERE IS DIFFERENCE EVEN IN QUANTITY REFLECTED IN THE DETAILS OF STOCK AS PER APPELLANT AND THAT AS PER CERTIFICATE GIVEN TO THE BANK FOR WHICH NO EXPLANATION IS GIVEN. CONSIDERING THESE FACTS , THE ADDITION TO THE EXTENT OF RS.30,66,154/ - IS DELETED FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT AND ADDITION OF RS.17,61,485/ - FOR DIFFERENCE OF STOCK LYING AT DASHADA IS CONFIRMED. THUS, THE GROUND OF APPEAL IS PARTLY ALLOWED. 8.1 FROM TH E PERUSAL OF FINDING OF LD. CIT(A) AS WELL AS PERUSAL OF THE ORDER OF AHMEDABAD TRIBUNAL IN THE CASE OF RIDDHI STEEL AND TUBES PVT. LTD. VS. ACIT 144 ITD 397 SUBSEQUENTLY CONFIRMED BY THE H ON BLE JURISDICTIONAL HIGH COURT, WE FIND THAT THE ISSUES DEALT WIT H ARE SIMILAR SO MUCH SO THAT ASSESSEE FURNISHED THE STOCK STATEMENT FOR AVAILING CREDIT FACILITIES AND THERE IS NO FINDING THAT SUCH STOCK STATEMENT WAS VERIFIED BY THE OFFICER OF THE BANK WITH THE STOCK MAINTAINED IN THE BOOKS OF ACCOUNTS AND FURTHER LD. ASSESSING OFFICER HAS NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNTS AND METHOD OF ACCOUNTING AND ACCOUNTING POLICIES REGULARLY FOLLOWED. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO LOOKING TO THE FACT THAT ASSESSEE HAS PROVIDED THE CERTIFICATE OF THE ENGINEER FOR THE CALCULATION OF CLOSING STOCK AND WORK IN PROGRESS FOR ALL THE SITES FIND NO REASON T O INTERFERE IN THE FINDINGS OF LD. CIT(A) DELETING THE IMPUGNED ADDITION OF RS. 30 , 66 , 154/ - . WE UP HOLD THE SAME. I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 9 8.2 . AS REGARDS THE ADDITION OF RS. 17 , 61 , 485/ - , WE FIND THAT LD. CIT(A) ERRED IN ADJUDICATING THE FACTS PROPERLY IN THE FINDINGS GIVEN B Y HIM. L D. CIT(A) IS CONSIDERED THE D ASHAD A SITE AND JHINJHUWADA SITE SEPARATELY WHEREAS THE FACT IS JHINJHUWADA IS A BRANCH AND THE NAME OF SITE IS DASHAD A AND T HE CLOSING STOCK AS ON 31 - 03 - 2011 OF DASHAD A SITE OF RS. 1 , 8 1 , 2 0 , 961/ - INCLUDES THE CLOS ING STOCK OF MAT ERIAL OF RS. 44 , 50 , 869/ - SHOWN TO THE BANK. REGARDING THE ALLEGED ADDITION OF RS . 17 , 61 , 485/ - , WE FIND THAT THIS DIFFERE NCE IS CALCULATED BY THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT SUBMITTED TO ALL AHABAD BANK. THE ADDITION OF RS . 30 , 66 , 154/ - ( WHICH HAS BEEN DELETED BY THE LD. CIT(A) ) IS CALCULATED BY SUBTRACTING THE VALUE OF CLOSING STOCK OF MATERIAL DECLARED B Y ASSESSEE AT RS .13 , 84 , 715/ - AS AGAINST CLOSING OF MATERIAL SHOWN TO T HE BANK AT RS . 44 ,5 0 ,8 69/ - . HOWEVER , LD. ASSESSING OFFICER HAS AGAIN MADE ADDITION OF RS . 17 , 61 , 485/ - ON THE BASIS OF STATEMENT GIVEN TO ALLAHABAD BANK BUT THIS TIME CALCULATING THE VA LUE ON THE BASIS OF VALUING THE QUANTITY , WHICH IS SHOWN AT RS. 31 , 46 , 200/ - . W E FIND NO SUBSTANCE IN THE IMPUGNED ADDITION OF RS. 17 , 61 , 485/ - AS IT HAS ALREADY BEEN CONSIDERED IN THE ADDITION OF RS. 30 , 66 , 154/ - WHICH ALREADY STANDS DELETED BY US IN PRECEDI NG PARAS . 8.3 WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES ARE OF THE VIEW THAT BOTH THE LOWER AUTHORITIES ERRED IN SUSTAINING THE ADDITION OF RS . 17 , 61 , 485/ - , WE ACCORDINGLY DELETE THE SAME. I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 10 8.4 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AND GROUND NO. 1 OF REVENUE IS DISMISSED. 9. NOW WE TAKE UP GROUND NO. 2 OF REVENUE S APPEAL AGAINST THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS. 4,86 , 000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OUT OF TRACTOR RENT. 9.1 HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. WE FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS DEBITED TRACTOR RENT EXPENDITURE OF RS. 9,72 , 000/ - SHOWN UNDER THE HEAD MACHINE RY RENT. THIS RENT IS GIVEN TO THE SUBSTANTIAL SHARE - HOLDER AND DIRECTOR MR. KAUSHIKBHAI V. PATEL. LD. ASSESSING OFFICER CALLED FOR JUSTIFICATION ABOUT THE REASONABLENESS OF THE RENT PAID TO THE DIRECTOR. A GENERAL REPLY WAS GIVEN BY THE ASSESSEE INCLUD ING THE OWNERSHIP DOCUMENTS OF THE TRACTOR. THERE IS NO WRITTEN AGREEMENT FOR HIRING THE TRACTOR. LD. ASSESSING OFFICER ALSO OBSERVED THAT THESE TRACTORS WORKED FOR ENTIRE PERIOD OF 9 MONTHS WITHOUT ANY GAP. HE ACCORDINGLY ESTIMATED 50% DISALLOWANCE OF RS. 4,86,000/ - . IN THE APPEAL BEFORE LD. CIT(A), ASSESSEE SUCCEEDED AS LD. CIT(A) HELD THAT THE ASSESSING OFFICER FAILED TO BRING ON RECORD ANY COMPARISON/COMPARABLE RATE WHICH COULD DEMONSTRATE THAT THE PAYMENT MAD E BY THE APPELLANT TO THE RELAT E D PARTY IS EXCESSIVE AND UNREASONABLE. 9.2. NOW, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 11 9.3 LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER AND LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FLINGING OF LD. CIT(A). 9.4 W E FIN D THAT THIS ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER U/S. 40A(2 )(A) R.W.S. 40A(2)(B). THIS FACT IS NOT IN DISPUTE THAT THE PAYMENT HAS BEEN MADE TO A RELATED PARTY WHICH IN THIS CASE IS THE DIRECTOR AND SUBSTANTIAL SHARE - HOLDER OF THE COMPANY. TRA CTOR RENT OF RS. 9,72 , 000/ - HAS BEEN PAID. THERE IS NO AGREEMENT BETWEEN THE ASSESSEE AND THE DIRECTOR. THE LD. ASSESSING OFFICER HAS SPECIFICALLY CALLED FOR THE DETAILS FROM THE COMPANY TO PROVE THAT THE RENT PAID T O THE DIRECTORS IS AT ARMS LENGT H PRICE AND AS PER THE NORMAL BUSINESS TRANSACTIONS . HOWEVER , ASSESSEE MERELY SUPPLIED THE COPY OF RETURN OF INCOME OF MR. K.B. PATEL ALONG WITH OWNERSHIP PROOF OF TRACTOR. WE OBSERVE THAT THE LD. ASSESSING OFFICER HAS SPENT MORE ENERGY ON INVESTIGATING THE DETAILS OF IMPUGNED TRANSACTION OF THE TRACTOR RENT RATHER THAN GATHERING SOME INFORMATION FOR CALCULATING THE FAIR MARKET VALUE OF SUCH TYPE OF TRANSACTION OF HIRING THE TRACTORS. THE OBSERVATIONS GIVEN IN THE IMPUGNED ASSESSM ENT ORDER ARE GENERAL IN NATURE. W E THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES FIND NO REASON TO INTERFERE IN THE FINDINGS OF LD. CIT(A) DELETING THE IMPUGNED ADDITION OF RS. 4,68,000/ - FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. ENVIRO CONTROL ASSOC IATE D 225 TAXMAN 56 AND KASHI E XPORTS PVT. LTD. VS. DCIT IN TAXMAN 156 OF 2013 BY OBSERVING AS UNDER: - 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER, SUBMISSION MADE BY THE APPELLANT AND THE CASE LAWS RELIED UPON. IT IS OBLIGATORY ON THE PART OF THE I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 12 AO, TO INVOKE PROVISIONS OF S.40A(2) OF THE ACT, TO BRING ON RECORD COMPARABLE RATE WHICH COULD DEMONSTRATE THAT THE PAYMENT MADE BY THE APPELLANT TO THE RELATIVE PARTY IS EXCESSIVE AND UNREASONABLENESS. IT IS SEEN THAT THOUGH THE AO HAS MADE ADDITI ON U/S 40A(2)(B) OF THE ACT, AO HAS NOT BROUGHT ON RECORD ANY COMPARISON/ COMPARABLE RATE WHICH COULD DEMONSTRATE THAT THE PAYMENT MADE BY THE APPELLANT TO THE RELATIVE PARTY IS EXCESSIVE AND UNREASONABLENESS, THEREFORE THE VERY PREMISE TO INVOKE PROVISION S OF S.40A(2) IS ABSENT, HENCE ADDITION MADE BY THE AO IS HEREBY DELETED. MY SUCH FINDING IS SUPPORTED BY THE JURISDICTIONAL GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS. ENVIRO CONTROL ASSOCIATED (P) LTD. 225 TAXMAN 56, WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER: 12. WE ARE I N COMPLETE AGREEMENT WITH THE REASONING AND OBSERVATIONS MADE BY THE LEARNED CIT(A) CONFIRMED BY THE LEARNED ITAT. IN ABSENCE OF ANY MATERIAL BEFORE THE ASSESSING OFFICER, SUCH AS COMPARATIVE CHART ETC. TO SUGGEST THAT ANY EXCESSIVE PAYMENT WAS MADE TO M/S. POLLUCON ENGINEERS AND THE 10% AD'HOC DISALLOWANCE WAS MADE ON THE PAYMENT MADE UNDER SECTION 40A(2)(B) OF THE ACT TO M/S. POLLUCON ENGINEERS SOLELY ON THE GROUND THAT M/S. POLLUCON ENGINEERS TO WHOM THE PAYMENT WAS MADE, WAS RUN BY THE WIFE OF THE DIRECTOR . OF THE ASSESSEE COMPANY AND THEREFORE, THERE WAS AN ELEMENT OF EXCESSIVE CLAIM, WE ARE OF THE OPINION THAT - THE 'ASSESSING OFFICER WAS NOT JUSTIFIED IN ADOPTING DISALLOWANCE TO THE EXTENT OF 10% - PAYMENT UNDER SECTION 40A(2)(B) OF THE ACT. UNDER THE CIRCUMSTANCES/DISALLOWANCE MADE BY THE ASSESSING OFFICER IS RIGHTLY DELETED BY THE LEARNED CIT(A) CONFIRMED BY THE LEARNED ITAT. THE CONTENTION OF THE APPELLANT IS ALSO SUPPORTED BY THE UNREPORTED DECISION OF THE HON'BLE GU JARAT HIGH COURT IN THE CASE S OF KASHI EXPORTS PVT. LTD, VS. DCIT IN/TAX APPEAL NO,156 OF 2013, WHEREIN ALSO THE HON'BLE HIGH COURT HAS HELD THAT - 'WE HELD THAT THE INTERPRETATION OF SECTION 40A(2)(B) WOULD NOT PERMIT DISALLOWANCE WHEN THERE WAS NO FINDING THE EFFECT THAT THE LABOUR CHARGES PAID WERE IN EXCESS OF THE FAIR MARKET CHARGES AND THAT THE AUTHORITIES BELOW DISALLOWED THE LABOUR CHARGES WITHOUT. ASCERTAINING THE FAIR MARKET VALUE OF THE SAME. IN VIEW OF ABOVE, THE ACTION OF THE AO IS HELD NOT JUS TIFIED AND AO IS HEREBY DIRECTED TO DELETE THE ADDITION OF RS.4,86,000/ - MADE U/S 40A(2)(B) OF THE ACT AND ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 10. IN THE RESULT, GROUND NO. 2 OF REVENUE S APPEAL IS DISMISSED . 11 . NOW, WE TAKE UP GROUND NO. 3 O F REVENUE S APPEAL RAISED AGAINST THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS. 5 , 73 , 086/ - . LD. ASSESSING OFFICER OBSERVED IN RELATION TO CERTAIN I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 13 CIRCUMSTANCES NAMELY EARTH WORK, LABOUR EXPENSES, MATERIAL CATERING EXPENSES AND SAND CATERING EXPE NSES THAT MOST OF THE PAYMENTS ARE IN CASH AND THE VOUCHERS DO NOT HAVE PROPER VERIFICATIONS, NATURE OF EXACT WORK, SITE OF WORK, RATE OF WORK ETC. HE ACCORDINGLY DISALLOWED 1/5 OF SUCH EXPENSES MADE ADDITION OF RS. 5 , 73 , 086/ - . LD. CIT(A) DELETED THE IMP UGNED ADDITION BECAUSE THE ADDITION MADE BY THE ASSESSING OFFICER WAS ON ESTIMATE BASIS. 1 2. NOW , THE REVENUE IS IN APPEAL. LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFI CER AND LEARNED COUNSEL SUPPORTED THE FINDINGS OF LD. CIT(A) . 13 . WE HAVE HEAR D RIVAL CONTENTIONS AND PERUSED THE RECORD BEFORE US. REVENUE S GRIEVANCE IS AGAINST DELET ION OF ADDITION OF RS. 5 , 73 , 086/ - . THIS ADDITION WAS MADE BY THE ASSESSING OFFICER BY DISALLOWAN CE 20% OF VARIOUS EXPENSES OF RS . 28 , 65 , 460/ - R ELATING TO EARTH WORK LABOUR EXPENDITURE OF MATER IAL AND SAND C ARTING EXPENSES. WE OBSERVE THAT BOOKS OF AC COUNTS OF THE ASSESSEE ARE AUDITED AND NO DEFECT HAS BEEN POINTED OUT BY THE A SSESSING AUTHORITY IN THE BOOKS OF ACCOUNTS AND THE DETAILS SHOWN IN T HE FINANCIAL STATEMENTS. REVENUE OF THE ASSESSEE HAS ALMOST DOUBLE D THIS YEAR. HOWEVER , THERE IS A NET LOSS DURING THE YEAR AS AGAINST THE POSITIVE INCOME IN THE PRE CEDING FINANCIAL YEAR AND THE ADMINISTRATIVE EXPENSES WHICH HAVE INCREASED ABNORMA LLY DUE TO EXPENDITURE OF RENT RATES AND TAXES OF RS. 12017223/ - AS AGAINST THE 3 , 09 , 532/ - IN PRECEDING YEAR . A LL THE OTHER HEADS OF EXPENDITURE HAVE PROPORTIONATELY INCREASED IN I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 14 COMPARISON TO THE TURNOVER. LD. ASSESSING OFFICER HAS NOT PLACED ON RECORD ANY SPECIFIC FINDING ABOUT THE DOCUMENTS VERIFIED A ND DETAILS NOT FOUND PROPER AND EXPENSES LACKING NE CESSARY SUPPORTING EVIDENCES AND MERELY REVERTED TO A LUMP - SUM DISALLOWANCE WHICH IS NOT JUSTIFIED IN NATURE . 14. WE THEREFORE IN THE GIV EN FACTS AND CIRCUMSTANCES AND DUE TO ABSENCE OF SPECIF IC DEFECTS BEING POINTED OUT IN T H E ALLEGED EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR FIND NO REASON TO INTERFERE WI T H THE FINDIN G S OF LD. CIT(A) DELETING THE IMPUGNED AD - HOC DISALLOWANCE OF RS. 5 , 73 , 086/ - . ACCORDINGLY, T HIS GROUND NO. 3 OF REVENUE IS DISMISSED. 15. OTHER GROUNDS OF APPEAL ARE GEN ERAL IN NATURE WHICH DO NOT REQUIRE ANY ADJUDICATION. 16 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED ORDER PR ONOUNCED IN THE OPEN C OURT ON 30 - 10 - 201 7 SD/ - SD/ - ( S.S. GODARA ) ( MANISH BORAD ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 30 /10 /2017 I.T.A NO S . 2369 & 2472 /AHD/20 15 A.Y. 201 1 - 12 PAGE NO B. PATEL INFRASTRUCTURE VS. JT. CIT 15 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,