Royal Construction Co., Patan V. The Income tax Officer,Ward-1, Patan

ITA 2372/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6683 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHSUDAN SRDR
• Keywords: Additional evidence
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI G.D. AGARWAL, HONBLE VICE-PRESIDENT (AZ) AND SHRI T.K. SHARMA, HONBLE JUDICIAL MEMBER ITA NO.2372/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING: 21.4.11 DRAFTED:27.4.11 ROYAL CONSTRUCTION CO. 17, SARVODAY NAGAR SOCIETY, OPP. R.M.PTROL PUMP, DEESA HIGH WAY, TALUKA-PTAN 384265 PAN NO.AAHFR8591C V/S . INCOME TAX OFFICER, WRD-1, PATAN, AYKAR BHAVAN, RAJMAHAL ROAD, PATAN-384265 (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI PRITESH SHAH, AR RESPONDENT BY:- SHRI K MADHSUDAN SR-DR O R D E R PER T.K. SHARMA, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED15-05-2009 OF COMMISSIONER OF INCOME-TAX (APPEALS) GANDHINAGAR FO R THE ASSESSMENT YEAR 2006-07. 2. VARIOUS GROUNDS RAISED BY THE ASSESSEE IN THIS A PPEAL ARE AS UNDER:- 1. THE LEARNED CIT(A)-GANDHINAGAR ERRED IN CONFIRM ING ADDITION OF RS.11,300/- IN RESPECT OF MACHINERY-OFFICE EXPENSES . 2. THE LEARNED CIT(A)-GANDHINAGAR ERRED IN CONFIRMI NG ADDITION OF RS.1,41,281/- IN CLOSING STOCK IN RESPECT OF PURCHA SE OF CEMENT OF RS.4,575/- & METAL/KAPCHI OF RS.1,36,706/- ITA NO.2372/AHD/2009 A.Y. 2006-07 ROYAL CONSTN. CO. V. ITO WD-1 PATAN PAGE 2 3. THE LEARNED CIT(A)-GANDHINAGAR ERRED IN CONFIRMI NG ADDITION OF RS.65,200/- UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961 IN RESPECT OF CASH PAYMENTS. 3. GROUND NO.1 WAS NOT PRESSED AT THE TIME OF HEARI NG. THIS GROUND OF APPEAL ACCORDINGLY IS DISMISSED BEING NOT PRESSED. 4. THE BRIEF FACTS RELATED TO CONTROVERSY INVOLVED IN THE GROUND NO.2 THAT IN THE ASSESSMENT ORDER ASSESSING OFFICER MADE ADDITIO N OF RS.1,41,281/- TOWARDS CLOSING STOCK. ON APPEAL IN THE IMPUGNED OR DER LD. CIT(A) CONFIRMED THE SAME FOR THE DETAILED GIVEN IN PARA-3.3 WHICH READS AS UNDER:- 3.3 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. I T IS SEEN THAT THE ISSUE HAS BEEN DISCUSSED BY THE ASSESSING OFFICER I N DETAIL AND THAT THE OUT OF A TOTAL SUM OF RS.1,94,981/-, WHICH HE START ED WITH, GAVE THE ALLOWANCE OF RS.53,700/-. IT APPEARS THAT HE ADDED ONLY THE ITEMS WHICH HAVE BEEN DELIVERED ON 31/03/2006. OUT OF THIS AMOU NT, THE MAJOR ITEM IS THAT OF METAL AMOUNTING TO RS.1,36,706/-. IF ONE STUDIES THE DETAILS GIVEN BY THE AUTHORIZED REPRESENTATIVE, THE CLOSING STOCK OF METAL OF THIS AMOUNT WOULD BE THE PURCHASES DONE FROM 25/03/ 2006 ONLY, EVEN IF THE STATEMENT OF M/S. AMBICA TRADES NOW FILED BEFOR E ME IS CORRECT. BESIDES THE FACT THAT THESE ARE DOCUMENTS CLAIMED T O BE ON THE BASIS OF BOOKS OF ACCOUNTS AND THERE IS NO REASON WHY THESE COULD NOT BE PRODUCED AT THE TIME OF HEARING AND THEREFORE PRODU CING THEM NOW WOULD TANTAMOUNT TO NOT PRODUCING CONTEMPORANEOUS E VIDENCE. IT IS TO BE NORMALLY ACCEPTED THAT SO MUCH CLOSING STOCK OF METAL WOULD CONTINUE IN THE APPELLANTS HAND IN A RUNNING PROJE CT. IN ANY CONSTRUCTION ACTIVITY, METAL IN ITSELF CANNOT USE ALONE. SO IF T HE ASSESSEE HAD BOUGHT THESE LARGE AMOUNT, THERE SHOULD HAVE BEEN CORRESPO NDING CEMENT, SAND ETC. TO CARRY OUT THE ACTIVITY, WHICH IS NOT O N RECORD. THEREFORE, OVERALL, I THINK THE ASSESSING OFFICER IS WELL JUST IFIED IN MAKING THE ADDITION AND THE SAME IS CONFIRMED. AGGRIEVED ASSESSEE IS IN APPEAL. 5. AT THE TIME OF HEARING, SHRI PRITESH SHAH APPEAR ED ON BEHALF OF ASSESSEE COULD NOT POINT OUT IN WHAT RESPECT THE VI EW TAKEN BY LD. CIT(A) IS NOT ACCEPTABLE. HE MERELY STATED THAT ONE MORE OPPO RTUNITY BE GIVEN TO THE ASSESSEE TO EXPLAIN ITS CASE. LD. SR-DR STRONGLY OB JECTED THE SAME. ITA NO.2372/AHD/2009 A.Y. 2006-07 ROYAL CONSTN. CO. V. ITO WD-1 PATAN PAGE 3 6. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUTH ORITY BELOW. IT IS PERTINENT TO NOTE THAT ASSESSING OFFICER MADE ADDIT ION OF RS.1,41,281/- TOWARDS CLOSING STOCK. NO USEFUL PURPOSE WILL BE SE RVED BY GIVING ONE MORE OPPORTUNITY. LOOKING TO THE FACT THE ADD OF RS.1,41 ,281/- IN THE CLOSING STOCK IS RIGHTLY MADE BY ASSESSING OFFICER AND LD. CIT(APPEA LS) IS LEGALLY AND FACTUALLY CORRECT IN CONFIRMING THE SAME. THE CLOSING STOCK O F THIS YEAR IS OPENING STOCK OF SUBSEQUENT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2007-08. WE THEREFORE DIRECT THE AO TO ADOPT THE VALUE OF CLOSING STOCK O F THIS YEAR (INCLUDING THE ADDITION OF RS.1,41,281/-) AS OPENING STOCK OF THE ASSESSMENT YEAR 2007-08. SUBJECT TO THIS DIRECTION, THE VIEW TAKEN BY LD. CI T(APPEALS) IS UPHELD. 7. THE FACTS RELATING TO THE CONTROVERSY INVOLVED I N GROUND NO.3 ARE THAT IN THE ASSESSMENT ORDER ASSESSING OFFICER MADE ADDITIO N U/S 40A(3) OF THE ACT AMOUNTING TO RS.66,200/- BEING 20% OF RS.3.26 LAKH. ON APPEAL BEFORE LD. CIT(A) IT WAS CONTENDED THAT THE VENDOR HAD INSISTE D FOR FULL CASH PAYMENT BUT UPON REQUEST BY THE ASSESSEE HE BECAME READY TO SUP PLY THE MATERIAL SUBJECT TO 60% CASH IMMEDIATELY. CONSEQUENTLY, THE PAYMENT OF RS.3.04 LAKH WAS MADE IN ORDER TO CARRY ON THE ASSESSEES BUSINESS. BILL OF M/S MANALI ENTERPRISES AND THE LETTER M/S MANALI ENTERPRISE ME NTIONING THE FACT THAT THEY HAD REFUSED PAYMENT THROUGH CHEQUE AND HAD INSISTED ON CASH PAYMENT WERE FILED. IT WAS ALSO STATED THAT THIS DOCUMENT COULD NOT BE FILED BEFORE ASSESSING OFFICER BECAUSE THE VENDOR WAS NOT RESPONDING TO IS SUE SUCH A LETTER. HENCE, IT WAS CONTENDED THAT IT BE TREATED AN ADDITIONAL E VIDENCE TO BE COVERED UNDER RULE 46A AND ASSESSING OFFICER BE ASKED TO FILE REM AND REPORT. 8. REGARDING BALANCE AMOUNT OF RS.22,320/- IT WAS C ONTENDED THAT THESE WERE TOWARDS LUNCH AND FOOD EXPENSES OF LABOURERS A T TWO SITES AND AMOUNT INVOLVED IS AT RS.7,900/- AND RS.14,100/-. SINCE TH E ENTRIES WERE MADE ON THE SAME DAY, THE AMOUNTS GOT CLUBBED FOR THE PURPOSE O F U/S.40A(3). IT WAS FURTHER SUBMITTED THAT VOUCHERS COULD NOT BE PRODUC ED BEFORE ASSESSING ITA NO.2372/AHD/2009 A.Y. 2006-07 ROYAL CONSTN. CO. V. ITO WD-1 PATAN PAGE 4 OFFICER BECAUSE THE VOUCHERS WERE IN THE POSSESSION S OF THE LABOUR SUPERVISOR. 9. AFTER CONSIDERING THE AFORESAID SUBMISSION, IN T HE IMPUGNED ORDER LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY ASSESSING OFFICER U/S 40A(3) OF THE ACT FOR THE DETAILED REASON GIVEN IN PARA-4.2 , WHICH READS AS UNDER:- 4.2 AS STATED EARLIER, IN MY VIEW, THE CONCEPT OF ADDITIONAL EVIDENCE ON THE PART OF THE ASSESSEE IS NOT CORRECT. THE ASSESS EES BOOKS OF ACCOUNTS, THE VOUCHERS, THE BILLS, ETC. WHICH WERE IN POSSESSION OF THE APPELLANT, WERE REQUIRED TO BE PRODUCED BEFORE THE ASSESSING OFFICER. HAVING NOT PRODUCED BEFORE THE ASSESSING OFFICER TH E ASSESSEE CANNOT TURN BACK AND SAY AT A LATER STAGE THAT THIS IS FRE SH EVIDENCES WHICH HE IS PRODUCING. HENCE I DO NOT FIND ANY JUSTIFICATION IN ADMITTING THE SO CALLED FRESH EVIDENCES AT THIS STAGED. THE ONLY ITE M WHICH CAN BE CALLED FRESH EVIDENCE IS A LETTER FROM M/S. MANALI ENTERPR ISES. HOWEVER, AS STATED EARLIER, THE ASSESSEE HAD AMPLE TIME TO PROD UCE ALL SUCH DOCUMENTS IN SUPPORT OF ITS CONTENTION WHICH IT WAN TED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT HAS NOT GIVEN ANY SUCH INDICATION OF INSISTENCE ON THE PART OF M/S. MANALI ENTERPRISE S. CONSEQUENTLY, THE SAME APPEARS TO BE AN AFTER THOUGHT ONLY. SIMILAR I S MY VIEW WITH RESPECT TO THE VOUCHERS CONCERNING THE SITE EXPENSE S. HENCE, IN MY VIEW, THE EXPENSES INCURRED IN CASH OVER RS.20,000/ - DO NOT FALL IN ANY OF THE EXCEPTIONAL CLAUSES LISTED UNDER THE RULES. THEREFORE, THE ASSESSING OFFICERS ACTION IN DISALLOWING THESE U/S .40A(3) AND CONSEQUENT ADDITION OF 20% APPEARS TO BE JUSTIFIED. THIS GROUND OF APPEAL IS ALSO REJECTED. AGGRIEVED ASSESSEE IS IN APPEAL. 10. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE RELYING WITH THE VARIOUS PLEA BEFORE LD. CIT(A) AND CONTENDED THAT D ISALLOWANCE MADE U/S.40A(3) BE DELETED. FOR EXCEPTIONAL AND UNAVOIDA BLE CIRCUMSTANCES LD. COUNSEL FOR ASSESSEE RELIED ON THE FOLLOWING CASE L AWS:- 1. CIT V. SAPNA TRADERS (2007) 165 TAXMAN 211 (ALL ) 2. ITO V. SOM DUTT (2007) 165 TAXMAN 99 (P & H) 3. CIT V. NARANGRAM CHIRANJI LAL (1999) 157 CTR 38 9 (ALL) 4. CIT V. RAM AGYA SHYAMA NARAIN (1991) 189 ITR 47 0 (ALL) ITA NO.2372/AHD/2009 A.Y. 2006-07 ROYAL CONSTN. CO. V. ITO WD-1 PATAN PAGE 5 11. TO QUERY FROM THE BENCH THAT HOW THE AFORESAID DECISION ARE APPLICABLE IN THE ASSESSMENT OF APPEAL LD. COUNSEL FOR THE ASS ESSEE FAIRLY ADMITTED THAT NOW THERE IS NO CLAUSE-J IN RULE 6DD OF I.T. RULES, 1962 WHICH COVER EXCEPTIONALLY OR UNAVOIDABLE CIRCUMSTANCES BEFORE L D. CIT(A) CITED. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF LD. CIT(A) . 12. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUT HORITIES BELOW. RULE 6 DD(J) IN ITS ORIGINAL TERM WAS REMOVED WITH EFFECT FROM 25-07-1995 AND HAS BEEN SUBSTITUTED BY NEW PROVISIONS WITH EFFECT FROM 01-12-1995. ON ITS SUBSTITUTION, IT IS NO LONGER POSSIBLE TO ACCEPT A TRANSACTION IN CASH MERELY BECAUSE IT IS GENUINE AND PAYMENT IN CASH HAD BEEN OCCASIONAL BY UNAVOIDABLE CIRCUMSTANCES. IT IS PERTINENT TO NOTE THAT DECISION RELIED BY LD. COUNSEL FOR THE ASSESSEE PERTAINS TO EARLIER YEAR W HEN RULE 6DD(J) OF I.T. RULES, 1962 PROVIDES FOR EXCEPTIONAL AND UNAVOIDABL E CIRCUMSTANCES MENTIONED IN THOSE DECISIONS. ADMITTEDLY, IN THE AS SESSMENT YEAR UNDER APPEAL THERE IS NO CLAUSE IN RULE 6DD OF THE I.T. R ULES, 1962 WHICH COVERS THE EXCEPTIONAL CIRCUMSTANCES POINTED OUT BY LD. COUNSE L FOR THE ASSESSEE. FOR REFUSING TO ADMIT ADDITIONAL EVIDENCE REASONING GIV EN BY LD. CIT(A) ALSO NEEDS INTERFERENCE. WE THEREFORE DECLINE TO INTERFE RE. THIS GROUND OF APPEAL IS REJECTED. 13. RESULTANT FOR THE STATISTICAL PURPOSES THE APPEAL O F THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS DAY OF 29 TH APRIL, 2011 SD/- SD/- ( G.D.AGARWAL ) ( T.K. SHARMA ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 29/04/2011 ITA NO.2372/AHD/2009 A.Y. 2006-07 ROYAL CONSTN. CO. V. ITO WD-1 PATAN PAGE 6 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-GNG 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD