REINFORCE BUILDCON PVT. LTD, MUMBAI V. INCOME TAX OFFICER 3(3) , THANE

ITA 2385/MUM/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9938 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC-1
• Assessment Year: 2016-2017
• Appeal Filed On: 19-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non compliance
• Section: 271(1)(c); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 2385/Mum/2021 (A.Y. 2016-17) Reinforce Buildcon Pvt. Ltd. 303/B, Darul Aman Co-op.Hsg. Society Ltd. Kausar Baug, Amrutnagar, Mumbra, Thane-400612. PAN: AAFCR6762C ...... Appellant Vs. ITO-3(3), Ashar IT Park, 6 th Floor, Road No.16Z, Wagle Industrial Estate, Thane-400064. ..... Respondent Appellant by : Sh. D.M. Shah, Adv. Respondent by : Sh. Ashish Kumar, Sr. DR Date of hearing : 05/07/2022 Date of pronouncement : 26/09/2022 ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as (‘NFAC)] dated 21.10.2021 for the Assessment Year (AY) 2016-17. The assessee has raised the following grounds of appeal: 2 ITA No. 2385/Mum/2021-Reinforce Buildcon Pvt. Ltd. “1. (a) On the facts and in the circumstances of the case, the learned Assessing Officer (AO) erred in estimating income at 25% i.e. Rs.2,60,467/- on "Other Expenses" of Rs 10,41,868/, which is bad in law and contrary to the details on record. (b) The learned A.O. erred in making such estimation based on certain expenses, without recording which such expenses are and why such income addition has been in general manner. (c) The learned CIT (A) erred in observing that, no supporting documents were produced in support of such expenses is not correct. (d) The appellant prays that, the addition of Rs.2, 60,467/-be deleted. Without Prejudice, the addition be reduced. 2. (a) On the facts and in the circumstances of the case, the learned A.O. erred in not allowing deduction of Rs 1,94,000/- made on account of contribution to the Employee Provident Fund which addition be deleted and deduction allowed. (b) The learned A.O. erred in observing that, payment of Provident Fund was excess contribution under Rule 87 of IT Rules which is not correct. The A.O. failed to appreciate the facts that the payment made is not in excess but it's paid on Assessee's behalf by M/s. Larsen & Toubro LTD i.e. (to whom the appellant is registered contractor) and the same is deducted from sale bill proceeds of the Assessee as it is Assessee sub-contractor's employee who PF has been deducted as per EPF rules. (c) The appellant prays that, addition made be deleted.” 2. Brief facts of the case are that the assessee company e-filed its return of income on 28.10.2017 declaring total income of Rs. 2, 28,000/-. The case was selected for complete scrutiny through CASS for verification of excess contribution to provident fund or superannuation fund. Notice u/s. 143(2) of the Income Tax Act (for short ‘the Act’) was issued on 13.08.2018. 3. Findings of the assessment order in brief are reproduced here-in-below: 3 ITA No. 2385/Mum/2021-Reinforce Buildcon Pvt. Ltd. “A final show cause enumerating the details above was issued on 26/11/2018 through ITBA Portal wherein the assessee was requested to show cause by 04/12/2018 why in the absence of any explanation the income estimated @ 25% i.e. 2,60,467/- of the other expenses of Rs. 10,41,868/-, should not be disallowed and added to the returned income. The assessee was also requested to show-cause why the amount of Rs. 1, 94,600/- the excess contribution to provident fund as per rule 87 of IT rules, 1962 should not be disallowed and added to the returned of income and why penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 should not be initiated for furnishing inaccurate particulars on the above both issues. The assessee was also informed that this was the last and final opportunity and in case of non compliance by the due date, the assessment would be finalized as mentioned above. The show-cause letter was also served through Notice Server on 28/11/2018. In the response to the show cause notice, the assessee vide his reply in tapal on 03/12/2018 submitted that the expenses claimed were actual and the excess contribution of Rs. 1,94,600/- to provident fund was paid by Larsen Turbo Limited. However, no supporting documents were submitted. In view of fact that the assessee not submitted of supporting documents on the issues despite repeated opportunities and the fact that the date of limitation has almost arrived, the undersigned is left with no option but to finalise the assessment order. This office has provided enough opportunities to the assessee to explain the above issues by sending letters/notices through ITBA Portal and also through notice server. In the absence of any supporting documents the claimed of the assessee remain unverifiable. Accordingly, the income estimated @ 25% i.e. 2,60,467/- of the other expenses of Rs. 10,41,868/- and amount of Rs. 1,94,600/- the excess contribution to provident fund as per rule 87 of IT Rules, 1962 are disallowed and added to the returned income as his unexplained income.” 4. We have gone through the order of AO, which categorically denied submission of any information/details of the expenses claimed by the assessee amounting to Rs. 10,41,865/-. The order of Ld. CIT (A) is also confirming the view of AO. Although assessee submitted a Paper Book of 297 pages before us in which assessee has submitted its audited accounts along with relevant ledgers, receipts/invoices for various expenses claimed. Assessee further certified with reference to the abovementioned Paper Book that the same has been submitted 4 ITA No. 2385/Mum/2021-Reinforce Buildcon Pvt. Ltd. before the authorities below. Ld. CIT (A) confirmed this fact through his order that this Paper Book has been submitted before him, despite he has not asked for any report from the AO who is claiming that the same is not submitted before him. 5. In our observation, the adhoc disallowance made by AO and procedure followed by Ld. CIT (A) is not justified. In the given situation such action of AO is prejudicial to meet the ends of justice and puts an unnecessary tax burden on the assessee. To be just and fair, we restore this matter back to the file of AO for verification of internal/external vouchers, financials of the assessee along with ledgers after giving a proper opportunity to the assessee. In these terms, Ground No.1 of assessee is allowed for statistical purposes. 6. Ground No. 2. We have gone through into the matrix of the matter and found that the assessee is a sub-contractor of M/s Larson & Turbo. As per EPF and MP Act, 1952, M/s Larson & Turbo is deemed employer for the purposes of compliance with respect to EPF and MP Act, 1952. Being deemed employer, they are supposed to deduct Provident Fund (PF) out of running salary bill submitted by assessee and to be deposited with the PF Department. Assessee is entitled for balance payment after deduction of PF made by deemed employers i.e. Larson & Turbo. Assessee has no control on this deduction and quantification of PF amount. Moreover, we relied on decision of co-ordinate bench of ITAT in ITA No. 1917/Mum/2021 (A.Y. 2018- 19) in the case of Span Intermediates Pvt. Ltd. Vs. ITO, Ward-2(3)(1). Wherein it was held vide para-10 of the order. “10. the limit prescribed in Rule 87, having reference of the word ‘Provident Fund’ is just for sake of fulfilment of conditions laid down with reference to 5 ITA No. 2385/Mum/2021-Reinforce Buildcon Pvt. Ltd. maximum limit of contribution to be made under Superannuation Fund. It’s nothing to do with Rule 75 applicable to contributions to be made under Provident Fund.” 7. As observed above that assessee has no control over the payments made under the head PF by the deemed employer i.e. M/s Larson & Turbo, no disallowance in the hands of assessee can be made. In addition to this relying on ITA No. 1917/Mum/2021 (supra), there is no maximum limit prescribed under the Rules for contribution to PF. On both the counts, addition is not sustainable. In the result, Ground No.2 raised by assessee is fully allowed. 8. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 26 th day of September, 2022. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 26/09/2022 SK, Sr.PS Copy of the Order forwarded to: 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/ The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai