Shri Mahipal Mohanbhai Sindhav, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(2), RAJKOT-GUJARAT

ITA 244/RJT/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6693 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND N SONTAKE
• Assessee Lawyers: D M RINDANI AR
• Keywords: Unexplained expenditure; Opportunity of being heard; Corroborative evidences; Assessment record
• Section: 69C; 143(3); 142(1); 194C; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) [CORAM: SHRI S. S. GODARA, JM & SHRI MANISH BORAD, AM ] ITA NO. 244/RJT/2014 ASST. YEAR: -2009-10 SHRI MAHIPAL M. SINDHAV, MANMOHAR NIWAS, NR. KASHIVISHVANATH TEMPLE, GONDAL, DIST. RAJKOT. VS. COMMISSIONER OF INCOME TAX-1, RAJKOT. APPELLANT RESPONDENT PAN BBBPS 9399K AND ITA NO. 270/RJT/2014 ASST. YEAR: -2009-10 SHRI SURESHBHAI K. KATARIA, POST- AT PANCHIAVADAR, GONDAL, DIST. RAJKOT. VS. COMMISSIONER OF INCOME TAX-1, RAJKOT. APPELLANT RESPONDENT PAN ADSPK 4928L APPELLANT BY SHRI D.M. RINDANI,AR RESPONDENT BY SHRI ARVIND N. SONTAKE, SR.DR DATE OF HEARING: 15/2/2017 DATE OF PRONOUNCEMENT: 22/02/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE TWO APPEALS FILED BY DIFFERENT ASSESSEES FOR ASST. YEAR 2009-10 ARE DIRECTED AGAINST THE ORDERS OF LD. COMM ISSIONER OF ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 2 INCOME TAX-1, RAJKOT, DATED 19.03.2014 PASSED U/S 2 63 OF THE IT ACT, 1961 (IN SHORT THE ACT). SINCE THE ISSUE INVOLVED I N THIS APPEALS ARE SIMILAR, THESE WERE HEARD TOGETHER AND ARE BEING DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. FOLLOWING GROUNDS HAVE BEEN RAISED BY ASSESSEE. GROUNDS IN ITA NO. 244/RJT/2014 ARE: (1) THE LEARNED COMMISSIONER OF INCOME TAX RAJKOT - I, RAJKOT HAS ERRED IN PASSING ORDER U/S. 263 OF THE ACT WHEREBY SETTING A SIDE THE ORDER PASSED BY THE ASSESSING OFFICER IS UNWARRANTED, UNJUSTIFIED A ND BAD IN LAW. THE COMMISSIONER OF INCOME TAX ALLEGED THAT THE ORDER P ASSED U/S. 143(3) ON 14.11.2011 FOR THE YEAR UNDER CONSIDERATION IS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. (2) THE LEARNED COMMISSIONER OF INCOME TAX RAJKOT - I, RAJKOT HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO REASSESS THE ALL OWABILITY OF DEDUCTION FOR LABOUR EXPENSES U/S. 40(A)(IA) OF THE ACT OR UNEXPL AINED LABOUR EXPENSES U/S. 69C AND COMPLETE THE ASSESSMENT AFRESH IS UNWARRANT ED, UNJUSTIFIED AND BAD IN LAW. YOUR APPLICANT RESERVES THE RIGHT IN ADDITION OR AL TERATION IN THE GROUNDS OF APPEAL AT THE TIME OF HEARING. GROUNDS IN ITA NO.270/RJT/2014 ARE - (1) THE LEARNED COMMISSIONER OF INCOME TAX RAJKOT - I, RAJKOT HAS ERRED IN PASSING ORDER U/S. 263 OF THE ACT WHEREBY SETTING A SIDE THE ORDER PASSED BY THE ASSESSING OFFICER IS UNWARRANTED, UNJUSTIFIED A ND BAD IN LAW. THE COMMISSIONER OF INCOME TAX ALLEGED THAT THE ORDER P ASSED U/S. 143(3) ON 14.11.2011 FOR THE YEAR UNDER CONSIDERATION IS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. (2) THE LEARNED COMMISSIONER OF INCOME TAX RAJKOT - I, RAJKOT HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO REASSESS THE ALL OWABILITY OF DEDUCTION FOR LABOUR EXPENSES U/S. 40(A)(IA) OF THE ACT OR UNEXPL AINED LABOUR EXPENSES U/S. 69C AND COMPLETE THE ASSESSMENT AFRESH IS UNWARRANT ED, UNJUSTIFIED AND BAD IN LAW. YOUR APPLICANT RESERVES THE RIGHT IN ADDITION OR AL TERATION IN THE GROUNDS OF APPEAL AT THE TIME OF HEARING. ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 3 2. AT THE OUTSET LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEES SUBMITTED THAT BOTH THESE APPEALS ARE SQUARELY COVE RED BY THE DECISION OF THE CO-ORDINATE BENCH, RAJKOTH IN THE C ASE OF INDRAJITSINH B. DABHI VS. ITO, WD-1(2), RAJKOT IN ITA NO.245/RJT /2014 DATED 4.3.2016 WHEREIN SIMILAR FACTS HAVE BEEN DEALT WITH . 3. WE FIRST TAKE UP ITA NO.244/RJT/2014 FOR ASST. Y EAR 2009-10. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN INDIVI DUAL ENGAGED IN THE ACTIVITIES OF LABOUR CONTRACTOR. RETURN OF INCOME F OR ASST. YEAR 2009- 10 WAS FILED ON 16.9.2009 DECLARING TOTAL INCOME AT RS.9,13,390/-. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTIC E U/S 143(2) OF THE ACT DATED 23.08.2010 WAS ISSUED FOLLOWED BY NOT ICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE DULY SERVED UPON ON THE ASSESSEE. ASSESSMENT PROCEEDINGS WERE ATTENDED BY LD. AUTHORI SED REPRESENTATIVE AND SUBMITTED DETAILS AS CALLED FOR AND PRODUCED BOOKS OF ACCOUNTS WHICH WERE DULY CHECKED BY LD. AS SESSING OFFICER. ASSESSMENT U/S 143(3) OF THE ACT WAS FRAMED ON 14.1 1.2011 AFTER DISALLOWING CERTAIN EXPENSES TOTALING TO RS.79,480/ - AND ASSESSING THE INCOME AT RS.9,92,870/-. NO FURTHER APPEAL WAS FILED BY THE ASSESSEE AGAINST THE IMPUGNED ADDITION. 4. THEREAFTER LD. COMMISSIONER OF INCOME TAX, RAJKO T-1, INVOKED HIS POWER U/S 263 OF THE ACT AND ON PERUSAL OF THE ASSESSMENT RECORD OF ASSESSEE FOR ASST. YEAR 2009-10 AND OBSERVED THA T ASSESSEE HAD CLAIMED DEDUCTION FOR LABOUR CHARGES OF RS.6,53,06, 032/- IN PROFIT & LOSS A/C AND BALANCE SHEET SUNDRY CREDITORS PAYABL E AS ON 31.3.2009 SHOWN AT RS.8,94,69,871/-. HOWEVER, NO D ETAILS OF THE ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 4 PERSONS TO WHOM LABOUR EXPENSES WERE PAYABLE WERE M ENTIONED IN THE SCHEDULE ATTACHED TO THE BALANCE SHEET. SO LD. COMMISSIONER OF INCOME TAX OBSERVED THAT LABOUR EXPENSES PAYABLE AS ON 31.3.2009 WAS MORE THAN THE ENTIRE SUM OF LABOUR EXPENSES CLA IMED DURING THE YEAR. HE ALSO OBSERVED THAT NO TAX WAS DEDUCTED AT SOURCE DURING THE YEAR. THEREAFTER NOTICE U/S 263 OF THE ACT DATED 25 .11.2013 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE WHICH READ S AS UNDER :- ''UPON PERUSAL OF RECORDS OF AY 2009-10, IT IS SEEN THAT ON ORDER U/S 143(3) OF THE ACT WAS PASSED BY THE AO ON 14/11/2011 BY MAKING AD DITION OF SITE EXPENSES OF RS 79,480/- OUT OF SITE EXPENSE, MATIKAM EXPENSES, WAT ER EXPENSES AND TRANSPORT EXPENSES AND TOTAL INCOME WAS ASSESSED TO RS.9,92,8 72/-. 2. IT IS FOUND THAT DURING THE PREVIOUS YEAR RELEVA NT TO THE ABOVE A. Y, YOU DERIVED INCOME FROM LABOUR JOB WORK AS OBSERVED FROM THE CO NTRACT ACCOUNT. WHERE TOTAL RECEIPTS OF RS. 6,69,88,650/~ HAVE BEEN SHOWN. DURI NG THE RELEVANT PERIOD, YOU HAVE ALSO CLAIMED DEDUCTION FOR LABOUR CHARGES OFRS . 6,53,06,032/-. 3. PERUSAL OF YOUR BALANCE SHEET AS ON 31-03-2009 S HOWS THAT THERE WERE A LIABILITY OF RS. 8,94,69,871/- FOR SUNDRY CREDITORS . THE DETAIL OF SUNDRY CREDITORS SHOWS THAT ALL THE SUNDRY CREDITORS WERE PERTAINING TO LABOUR EXPENSE PAYABLE, HOWEVER, NO DETAILS OF THE PERSONS HAVE BEEN GIVEN IN THE BALANCE SHEET, TO WHOM YOU WERE LIABLE TO MAKE PAYMENT ON ACCOUNT OF LABOU R CHARGES. ON ANALYSIS OF THE LABOUR EXPENSE CLAIMED IN CONTRACT ACCOUNT AND LABO UR EXPENSE PAYABLE AS SHOWN IN THE BALANCE SHEET, IT IS FOUND THAT LABOUR EXPE NSE PAYABLE AS ON 31 S ' MARCH WAS MORE THAN THE. ENTIRE SUM OF LABOUR EXPENSE CLAIMED DURING THE RELEVANT PERIOD, 4. FURTHER, IN POINT 4 OF NOTES TO ACCOUNTS IN SCHE DULE-7 OF THE TAX AUDIT REPORT, IT IS MENTIONED IN RESPECT OF THE CREDITORS THAT THE N AMES APPEARING AGAINST AMOUNT OUTSTANDING WERE THOSE OF LABOUR SUPPLIERS, WHO HAV E SUPPLIED LABOUR, IT IS FURTHER MENTIONED THAT RELEVANT PAYMENTS WERE MADE DIRECTLY TO THE LABOUR NOT THROUGH OR TO THE LABOUR SUPPLIERS AND THEREFORE YOU DID NOT D EDUCT TAX AT SOURCE AS THE INDIVIDUAL PAYMENT WAS BELOW THE LIMIT PRESCRIBED. 5. IN THE INCOME TAX ACT, 1961, IT IS PROVIDED IN S EC. 194C THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO A SUB-CONTRACTOR INCLUDING A LABOUR SUPPLIER SHALL MAKE TDS AT PRESCRIBED SALE AT THE TIME OF CR EDIT OF SUCH SUM TO THE SUB- CONTRACTOR. ON GOING THROUGH THE PREPARA, IT IS OBS ERVED THAT YOU HAVE ENGAGED LABOUR THROUGH LABOUR SUPPLIERS AND THE SUM SHOWN O UTSTANDING ON ACCOUNT OF LABOUR EXPENSE PAYABLE WAS PERTAINING TO SUCH SUB-C ONTRACTORS. THEREFORE IT IS ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 5 APPARENT THAT YOU WERE RESPONSIBLE TO MAKE TDS AMOU NT OF THE SUM AT THE TIME MAKING CREDIT IN THE ACCOUNTS OF SUCH PERSONS, WHIC H YOU FAILED TO DO SO. 6. AS PER SEC. 40(A)(IA) OF THE ACT, NO DEDUCTION S HALL ALLOWED FOR ANY AMOUNT PAYABLE TO SUB-CONTRACTOR, IF THE TDS AS PER SEC. 1 94C OF THE ACT HAS NOT BEEN MADE. IT IS DULY ADMITTED BY YOU THAT NO ANY TDS WA S MADE OUT OF LABOUR EXPENSE. 7. THE ASSESSING OFFICER HAS NOT VERIFIED THE GENUI NENESS OF LABOUR CHARGES PAID TO INDIVIDUAL LABOUR BY EXAMINING SUCH LABOURERS. THIS EXAMINATION WAS NECESSARY ON ACCOUNT OF THE CLAIM OF THE ASSESSES THAT THE LA BOURERS WERE UNPAID CREDITORS FOR A LONG PERIOD, BECAUSE LABOURS CANNOT WAIL FOR THE PAYMENT OF THEIR WAGES FOR A LONG PERIOD OF 12 MONTHS OR SO. THIS EXAMINATION WAS ALSO NECESSARY ON ACCOUNT OF THE CLAIM OF THE ASSESSEE THAT BY MAKING PAYMENT S INDIVIDUALLY TO EACH LABOUR, THE LIABILITY TO DEDUCT TAX FROM THE COMBINED LIABI LITIES OF SUCH LABOURERS STANDING IN THE NAMES OF THEIR SUPPLIERS WAS NOT THERE. THIS INACTION ON THE PART OF AO IS ERRONEOUS AND IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. THE ABOVE FACTS SHOW THAT THE ASSESSMENT ORDER P ASSED BY THE ASSESSING OFFICER IN RESPECT OF A. Y. 2009-10 APPEARS TO HE E RRONEOUS BECAUSE THE AO DID NOT APPLY HIS MIND ON THE LABOUR EXPENSE AND LABOUR EXPENSE PAYABLE AS APPEARING THE FINAL ACCOUNT VIS-A-VIS FACTS MENTION ED IN THE TAX AUDIT REPORT AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECA USE THE ASSESSEE WAS ALLOWED THE CLAIM OF DEDUCTION OF LABOUR EXPENSE WITHOUT MA KING NECESSARY VERIFICATION FOR APPLICATION OF SEC, 194C R.W.S. 40(A)(IA) OF TH E ACT. THEREFORE, I INTEND TO INITIATE PROCEEDINGS U/S 263 OF THE ACT AND PASS A SUITABLE ORDER. BEFORE PASSING SUCH ORDER, YOU ARE HEREBY GIVEN AN OPPORTU NITY OF BEING HEARD IN THE MATTER. PLEASE STATE AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER IN YOUR CASE SHOULD NOT BE REVISED AFTER MAKING NECESSARY I NQUIRY. IN THIS CONNECTION, YOU ARE REQUESTED TO ATTEND THIS OFFICE ON 05-12-20 13 AT 4.30PM.-' 5. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED ASSE SSEE THROUGH ITS SUBMISSIONS ASSERTED UPON THE FACT THAT ALL NEC ESSARY INFORMATION RELATING TO THE FINANCIAL TRANSACTIONS ENTERED BY T HE ASSESSEE WERE DULY FILED BEFORE THE LD. ASSESSING OFFICER WHO HAS TEST CHECKED THE DOCUMENTS AND HAS MADE PROPER APPLICATION OF MIND W HILE FRAMING THE ASSESSMENT ORDER. SUBMISSIONS MADE BY ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX ARE REPRODUCED BELOW:- ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 6 3. IN RESPONSE TO THE SAID NOTICE, SHRI DHIREN H. L OTIA, ITP AND AR APPEARED AND FURNISHED A WRITTEN SUBMISSION DATED 10-12-2013. TH E RELEVANT PORTION OF THE REPLY OF THE ASSESSEE IS REPRODUCED HEREUNDER: '1.1 IN (HIS 'CONTEXT, IT IS TO BE STATED THAT AT THE TI ME OF ORIGINAL ASSESSMENT THE APPELLANT PRODUCED BOOKS OF ACCOUNTS, DETAILED VOUC HERS ETC. AT THE TIME OF ORIGINAL ASSESSMENT. THE APPELLANT HAS REGULARLY MA INTAINED VOUCHERS IN RESPECT OF PAYMENTS TO LABOURERS. THE ASSESSING OFFICER HA S THOROUGHLY VERIFIED EACH AND EVERY BILLS/VOUCHERS ETC. AND NOT DOUBLED THE CLAIM OF THE APPELLANT REGARDING THE DIRECT PAYMENTS MADE TO THE LABOURERS. THEREFORE TH E QUESTION OFNON VERIFICATION OF THE GENUINENESS OF LABOUR CHARGES PAID LO INDIVI DUAL LABOUR BY EXAMINING SUCH LABOURERS BY THE ASSESSING OFFICER DOES NO! ARISE. IT WOULD BE PERTINENT TO MENTION HERE THAT AT THE TIME OF ASSESS MEN! PROCEEDINGS, T HE APPELLANT PRODUCED BOOKS OF ACCOUNTS, DETAILED VOUCHERS ETC. THE ASSE SSING OFFICER HAS MADE THROUGH VERIFICATION AND NOT DOUBTED THE CLAIM OF T HE APPELLANT IN RESPECT OF LABOUR CHARGES. THE CONTENTION THAT THE APPELLANT HAS DIRECTLY MADE PAYMENT TO THE LABOURERS AND NOT THROUGH MUKADAM AND THAI THE LABOUR PAYMENT DOES NOT EXCEED RS. 20,000/- IN EACH CASE IS ALSO ACCEPTED B Y THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. 1.2 THE APPELLANT REPRODUCE HEREUNDER THE NOTES FOR MING PART OF AUDITED ACCOUNTS NOTES/REMARKS ON 3CD FOR THE YEAR ENDED J/ 5 ' MARCH, 2006. (2) IN RESPECT OF SCHEDULE 'B' CREDITORS FOR GOODS AND EXPENSES THIS IS TO CLARIFY THAT NAMES APPEARING AGAINST CREDIT AMOUNT OUTSTAND ING ARE THOSE OF LABOUR SUPPLIERS WHO HAVE SUPPLIED LABOUR AT THROUGH PAYME NTS ARE MADE DIRECTLY TO THE LABOURERS NOT THROUGH OR TO THE LABOUR SUPPLIER S AND THEREFORE THE ASSESSEE DOES NOT HAVE DEDUCT TAX AT SOURCE AND NO TDS HAS B EEN MADE SINCE THE INDIVIDUAL PAYMENTS ARE BELOW THE LIMIT PRESCRIBED, ' 1.3 AT THE TIME OF ASSESSMENT PROCEEDINGS, THE APPE LLANT SUBMITTED VOUCHERS IN RESPECT OF PAYMENT MADE TO THE LABOURERS IN SUPPORT OF ITS CONTENTION THAT THE APPELLANT HAS DIRECTLY MADE PAYMENTS TO THE LABOURE RS AND NOT THROUGH MUKADAM. MOREOVER, IT IS RESPECTFULLY SUBMITTED THA T THE LABOURERS WERE CARRYING OUT THE WORK AT DIFFERENT SITES AND THE PA YMENT IS MADE TO THEM ON INDIVIDUAL BASIS. FURTHER, THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE IT ACT ARE ATTRACTED IN RESPECT OF NON DEDUCTION OF AMOUNT WHI CH REMAINS PAYABLE TO A RESIDENT IN RESPECT OF INTEREST, COMMISSION, BROKER AGE, RENT, ROYAL, FEES FOR PROFESSIONAL SERVICES. IT IS NOT APPLICABLE WHERE E XPENDITURE IS PAID. THE ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 7 PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IF THE PAYMENTS ARE OUTSTANDING DURING THE YEAR. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE LABOU RERS WERE UNPAID CREDITORS FOR A LONG PERIOD, BECAUSE LABOURERS CANNOT WAIT FO R THE PAYMENT OF THEIR WAGES FOR A LONG PERIOD OF 12 MONTHS OR SO IT IS CL ARIFIED THAT THE PAYMENT TO THE ASSESSEE IS DELAYED FROM MAIN CONTRACTOR. THE P AYMENT TO MAIN CONTRACTORS IS DELAYED FROM GOVERNMENT AGENCIES LIKE POWER GRID . GETCO ETC. THE PAYMENT TO THE LABOURERS IS MADE ON RECEIPT BY THE ASSESSEE FROM THE MAIN CONTRACTORS. 1.4 THE APPELLANT RELIES UPON THE DECISION IN THE C ASE OF SHRI MAHESH SAVJIBHAI KATARIYA WHEREBY THE ID. CIT(A)-I, RAJ HOT IN APPEA L NO. CIT(A)-I/RJT/0124/11- 12 DATED 27-06-2012 ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE. THE ASSESSING OFFICER HAD MADE ADDITION OF (HE SAME ISS UE. THE GIST OF FINDINGS GIVEN BY THE ID. C!T(A) IS REPRODUCED HEREUNDER: '4.2 1 HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. IT HAS B EEN HELD BY THE HON'BLE ITAT, AHMEDABAD IN THE CASE OF LCTXMI PROTEIN PRODUCTS P. LTD. (3 1TR 768)(2010) THAT WHEN THE PAYMENTS MADE TO LABOURERS THROUGH TH EIR REPRESENTATIVE AND SINGLE PAYMENT DOES NOT EXCEED RS.20,000/-, TAX NEE D NOT BE DEDUCTED AT SOURCE. IN THE INSTANT CASE, THE PAYMENTS WERE MADE TO LABOURERS THROUGH MUKADAM WHICH IS EVIDENT FROM THE LEDGER ACCOUNT OF LABOUR EXPENSE AND SINGLE PAYMENT DOES NOT EXCEED RS. 20,0001-. MOREOV ER THE PROVISIONS OF S. 40(A)(IA) ARE NOT APPLICABLE IF THE PAYMENT OF EXPE NDITURE HAS ALREADY BEEN MADE OR THE EXPENDITURE IS NOT OUTSTANDING AT THE E ND OF THE FINANCIAL YEAR. RELIANCE CAN ALSO BE PLACED ON THE DECISION OF MERI LYNE SHIPPING & TRANSPORT VS. ACIT (2012) 136 ITD 23 (VISHAKHAPATNAM) (SBJ/20 TAXMAN 244. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE APPELLANT'S CASE AND THE LEGAL POSITION IN THE CASES OF LAXMI PROTEIN PR ODUCTS P. LTD. (SUPRA) & MERILYNE SHIPPING & TRANSPORT (SUPRA) THE DISALLOWA NCE OFRS. 2,10,94,2431- IS HEREBY DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ALLOWED. ' 1.5 AGGRIEVED WITH ORDER OF ID. ICT(A), THE DEPARTM ENT PREFERRED APPEAL BEFORE THE HON 'BLE ITAT, RAJKOT BENCH, RAJKOT. THE HON 'B LE ITAT DISMISSED THE APPEAL OF THE REVENUE IN ITA NO. 493/RJT/2012 DATED ] 2-07 -2013. THE GIST OF FINDINGS GIVEN BY THE HON'BLE ITAT IS REPRODUCED HEREINIDER; '6. . . HAVING HEARD BOTH SIDES, WE HOVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, AS PER LATEST JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDARKHAN N. ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 8 TUNVAR (2013) 33 TAXMANN.CO. 133 (GUJJ. LLIE VI EW TAKEN BY THE ITAT, VISHAKHAPATNAM (SB) THAT . SEC. 40(A)(IA) WOULD C OVER ONLY AMOUNTS WHICH ARE PAYABLE AS ON 31 S! MARCH OF '. A PARTICULAR YEAR IS NO! MORE A GOOD. LAW. HOWEVER, IN OUR CONSIDERED OPINION, THE VIEW TAKEN BY THE CIT (A) DELETING DISALLOWANCE MADE U/S. 40(A)(IA) DESER VES ' TO BE UPHELD BECAUSE THE ASSESSEE HAS MADE THE PAYMENT TO THE LA BOURERS THROUGH THEIR REPRESENTATIVES AND SINGLE PAYMENT DOES NOT EXCEED RS. 20.000/-. THE REVENUE HAS NOT PRODUCED ANY EVIDENCE TO DISPROVE T HIS FINDING OF FACT REPORTED BY ID. CIT (A) IN I HE' IMPUGNED ORDER. WE THEREFORE, INCLINED TO UPHELD THE ORDER OF ID. CIT (A) KEEPING IN VIEW THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF LAXMI PROTEIN PRODUCTS P. LTD. (SUPRA), RESULTANTLY, THE APPEAL OF THE .. REVENUE IS DISMIS SED. ' (COPY OF APPELLATE ORDER OF HON'BLE C1T(A) & HON'BL E IT AT IS ENCLOSED HEREWITH FOR KIND PERUSAL), THE FACTS OF THE CASE OF SHRI MAHESH SAVJIBHAI KATA RIYA IS SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT AND HENCE IT IS A COVE RED MATTER. 1.6 THE APPELLANT RELIES UPON THE FOLLOWING DECISIONS: (1) LAXMI PROTEIN PRODUCTS P. LTD. (3ITR 768) (2010) 1TAT, AHMEDABAD (2) JAIPUR VIDYUT NIGAM LTD. VS. SCIT- 123 TT J 8889 JPO (3) TEJA CONSTRUCTION VS. AC1T - IT A NO. 30 8/HYD/2009 (4) CIT VS. DEWAN CHAND- 178 TAXMAN 173 (DEL HI HIGH COURT) (5) SAMANWAYA VS. A C1T (2009) 34 A OT 332 (K OIKATA) (6) A CIT VS. KALINDI AGRO BIOTECH - ITR 249 (DEL) (7) CIT VS. RATHINAM - 241 CTR (MAD) 476 (20 1J) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, YOUR HONOUR IS. REQUESTED TO DROP THE PROCEEDINGS U/S. 263 OF THE IT ACT AND OBLIGE. ' 6. ON PERUSAL OF THE SUBMISSIONS OF ASSESSEE LD. CO MMISSIONER OF INCOME TAX AFFIRMED THE FACT THAT BOOKS OF ACCOUNT S WERE PRODUCED BEFORE THE LD. ASSESSING OFFICER ON 12.11.2011. HOW EVER, HE WAS NOT CONVINCED WITH THE ORDER OF LD. ASSESSING OFFICER W HO HAS ONLY DISALLOWED 15% OF SITE EXPENSES, MATIKAM, EXPENSES, WATER EXPENSES AND TRANSPORT EXPENSES AND THERE WAS NO WH ISPER ON LABOUR EXPENSES INCURRED DURING THE YEAR. HE ACCORD INGLY INVOKED POWER U/S 263 OF THE ACT AND TREATED THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATED 14.11.2011 AS ERRONEOU S AND PREJUDICIAL ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 9 TO THE INTEREST OF REVENUE AND SET ASIDE THE SAME A ND ORDERED FOR ASSESSING IT AFRESH BY OBSERVING AS FOLLOWS :- 4.2 THE CONTENTION, THAT THE APPELLANT HAS DIRECTLY MADE PAYMENT TO THE LABOURERS AND NOT THROUGH MUKADAM AND THAT THE LABO UR PAYMENT DOES NOT EXCEED RS. 20,000/- IN EACH CASE, IS NOT SUPPORTED BY RELEVANT EVIDENCES AVAILABLE IN RECORDS. AT THE TIME OF PRESENTREVISI ONARY PROCEEDINGS, ASSESSEE DID NOT PRODUCE THE EVIDENCE OF IDENTITY OF LABOURE RS TO PROVE THE ABOVE CONTENTION. THE IDENTITY IS NORMALLY PROVED BY NAME AND ADDRESS OF A PERSON WITH RELEVANT PROOF OF IDENTITY SUCH AS VOTER CARD, PAN, AADHAR ETC. THE ASSESSEE SUBMITTED ONLY THE REFERENCE TO THE NOTES FORMING PART OF AUDITED ACCOUNTS DURING THE REVISIONARY PROCEEDINGS, WHERE IT IS MENTIONED THAT THE OUTSTANDING CREDITORS WERE LABOUR SUPPLIERS WHO HAD SUPPLIED LABOUR, THOUGH THE PAYMENTS WERE MADE DIRECTLY TO THE LABOURERS NO T THROUGH OR TO THE LABOUR SUPPLIERS. AUDITOR MADE ANOTHER REMARK THAT THE IND IVIDUAL PAYMENTS WERE BELOW THE LIMIT PRESCRIBED FOR DEDUCTING ANY TDS. T HE INVESTIGATION DURING ASSESSMENT AND AUDIT ARE TWO DIFFERENT MODES OF VER IFICATION. THE AUDIT REQUIRES ONLY TEST CHECKS OF ALL ACCOUNTS WHEREAS THE INVEST IGATION AT THE TIME OF ASSESSMENT REQUIRES THOROUGH CHECK OF SELECTED ACCO UNTS. THE ACCOUNTS FOR THOROUGH INVESTIGATION UNDER ASSESSMENT ARE THE 'LA BOUR PAYMENT ACCOUNT' AND CORRESPONDING 'CREDITOR' ACCOUNTS. THE RECORDS DO N OT GIVE ANY INDICATION OF ANY INVESTIGATION OF THESE ACCOUNTS BY THE ASSESSIN G OFFICER. MOREOVER, THE ASSESSEE ALSO DID NOT PRODUCE THE IDENTITY OF THE L ABOURS ETC. AT THE TIME OF REVISIONARY PROCEEDINGS TO PROVE HIS POINT. THEREFO RE, ASSESSEE HAS FAILED TO PROVE THAT THE ERROR COMMITTED BY THE ASSESSING OFF ICER OF NOT EXAMINING THE CLAIM OF ASSESSEE OF MAKING PAYMENT TO INDIVIDUAL L ABOURS, IS NOT PREJUDICIAL TO REVENUE. ASSESSEE HAS RELIED ON THE DECISION OF H'B LE ITAT-RAJKOT IN CASE OF SHRI MAHESH SAVJIBHAI KATARIYA. IN ITA 493/RJT/2012 DATED 12-07-2013. H'BLE 1TAT HAD ALLOWED THE DEDUCTION ON LABOUR PAYMENTS W ITHOUT ANY DEDUCTION OF TDS BECAUSE THAT ASSESSEE HAD MADE THE PAYMENT TO T HE LABOURERS AND SINGLE PAYMENT DID NOT EXCEED RS. 20,000/- AND THE REVENUE DID NOT PRODUCE ANY EVIDENCE TO DISPROVE THIS FINDING OF FACT. SECONDLY , IN THE ABOVE CASE, ALL THE LABOURERS WERE PAID IMMEDIATELY FOR THE WORK DURING THE YEAR. IN PRESENT CASE LABOURERS WERE KEPT UNPAID EVEN AFTER THE YEAR END FOR LONG DURATION WHICH IS HIGHLY UNLIKELY IN CASE OF A LABOURER. ASSESSEE HAS SUBMITTED THAT THE MAIN CONTRACTOR RECEIVED PAYMENT FROM THE GOVERNMENT QUI TE LATE AND THEREFORE ASSESSEE ALSO RECEIVED THE PAYMENT FROM THE MAIN CO NTRACTOR QUITE LATE AND THEREFORE MADE THE PAYMENTS TO THE LABOURERS QUITE LATE. THE EXPLANATION OF ASSESSEE AND THE NORMAL TREND IN MARKET THAT THE WA GES OF A LABOUR ARE PAID IMMEDIATELY SHOWS THE POSSIBILITY OF UNACCOUNTED MO NEY BEING PAID TO THESE ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 10 WORKERS BY THE ASSESSEE BEFORE HE RECEIVED THE CHEQ UE FROM THE MAIN CONTRACTOR. THIS ISSUE IS ALSO REQUIRED TO BE EXAMI NED. 4.3 ASSESSING OFFICER HAS ALLOWED THE CLAIM OF DEDU CTION OF LABOUR EXPENSE WITHOUT EXAMINING THE FACT REGARDING THE ACTUAL REC IPIENT OF LABOUR CHARGES. THE INVESTIGATION WOULD REQUIRE EXAMINATION OF MUKADAMS AS WELL AS THE IDENTITY AND EXAMINATION OF LABOURERS TO ESTABLISH THE FACT WHETHER THE PAYMENT OF LABOUR CHARGES WAS MADE TO THE MUKADAMS OR DIRECTLY TO THE LABOURERS. THE INVESTIGATION WOULD ALSO REQUIRE EXAMINATION OF THE SE PERSONS TO ESTABLISH WHETHER PAYMENTS TO LABOURERS WAS MADE EARLIER THAN WHAT IS SHOWN IN BOOKS OF ACCOUNT THROUGH UNACCOUNTED MONEY. IN CASE IHE P AYMENT IS MADE TO THE MUKADAMS, THE PROVISIONS OF SEC. 40(A)(IA) OF THE A CT UOULD APPLY FOR DISALLOWANCE OF LABOUR EXPENSES FOR MAKING SUCH PAY MENT WITHOUT MAKING TDS. IN CASE THE PAYMENT WAS MADE THROUGH UNACCOUNT ED MONEY TO THE LABOURERS AT AN EARLIER DATE, THE SAME WOULD CONSTI TUTE UNEXPLAINED EXPENDITURE U/S 69C OF THE L.T.ACT. IN VIEW OF THE ABOVE DISCUS SED FACTS, IT IS CLEAR THAT THE ASSESSMENT ORDER PASSED U/S. 143(3) ON 14-11-2011 F OR ASSESSMENT YEAR 2009- 10 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. BY THE POWERS VESTED IN CIT-1, RAJKOT U/S. 263 OF THE I T ACT, THIS ORDE R OF THE ASSESSING OFFICER IS SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO REA SSESS THE ALLOWABILITY OF DEDUCTION FOR LABOUR EXPENSES U/S. 40(A)(IA) OF THE ACT OR UNEXPLAINED LABOUR EXPENDITURE U/S 69C ON THE POINTS DISCUSSED ABOVE A ND COMPLETE THE ASSESSMENT AFRESH AS PER LAW. 7. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 8. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE DIRECTIONS GIVEN BY LD. COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT TO COMPLETE ASSESSMENT AFRESH IS BAD IN LAW AND AMOUNT S TO CHANGE IN OPINION SINCE ASSESSING OFFICER HAD FRAMED ASSESSME NT AFTER ADEQUATE/PROPER ENQUIRY ABOUT THE ISSUES ON WHICH P ROCEEDINGS U/S 263 HAVE BEEN INITIATED. FURTHER SPECIFIC ENQUIRIES , REPLIES AND EVIDENCES WERE PLACED EFORE LD. ASSESSING OFFICER A ND, THEREFORE, ORDER PASSED BY ASSESSING OFFICER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. LD. AUT HORISED REPRESENTATIVE FURTHER SUBMITTED THAT THE ISSUES RA ISED IN THIS APPEAL ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 11 ARE SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE D ECISION OF THE TRIBUNAL IN THE CASE OF SHRI INDRAJITSINH DABHI VS. ITO (SUPRA) WHEREIN THE SAME LD. COMMISSIONER OF INCOME TAX PASSED THE ORDER U/S 263 OF THE ACT DATED 19.3.2014 RAISING SIMILAR ISSUES R ELATING TO LABOUR CONTRACT CHARGES AND SUNDRY CREDITORS PAYABLE. LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT ADJUDICATING SIM ILAR ISSUE THE TRIBUNAL HAS QUASHED THE ORDER OF LD. COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT AND RESTORED THE ORDER OF LD. AS SESSING OFFICER U/S 143(3) OF THE ACT. 9. RELIANCE WAS ALSO PLACED ON ANOTHER DECISION OF CO-ORDINATE BENCH IN THE CASE OF SHRI SIDDHARTH SURESHBHAI DOSH I VS. COMMISSIONER OF INCOME TAX IN ITA NO.530/RJT/2014. 10. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE VEHEMENTLY ARGUED SUPPORTING THE ORDER OF LD. COMMI SSIONER OF INCOME TAX AND ALSO RELIED ON THE JUDGMENT OF HON. APEX COURT IN THE CASE OF AMITABH BACHCHAN (2016) 384 ITR 0200(SC ). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD AND ALSO GONE THROUGH THE DECISIONS RELIED ON BY TH E LD. REPRESENTATIVES. ASSESSEES ONLY GRIEVANCE IS AGAIN ST LD. COMMISSIONER OF INCOME TAXS ORDER U/S 263 OF THE A CT HOLDING THE ORDER PASSED U/S 143(3) OF THE ACT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE OBSERVE THAT IN THE CASE OF ASSESSEE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 1 4.11.11 AFTER MAKING A MINOR DISALLOWANCE @15% FO SITE EXPENSES, MATIKUM ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 12 EXPENSES, WATER EXPENSES AND TRANSPORT EXPENSES TOT ALING TO RS.79,480/-. ON PERUSAL OF ASSESSMENT RECORDS, LD. COMMISSIONER OF INCOME TAX OBSERVED THAT ASSESSEE HAS CLAIMED LABOU R CHARGES OF RS.6,53,06,032/- AND IN THE AUDITED BALANCE SHEET S UNDRY CREDITORS PERTAINING TO LABOUR EXPENSES PAYABLE WAS SHOWN AT RS.8,94,69,871/- WHICH MEANT THAT LABOUR EXPENSES P AYABLE AT THE END OF THE YEAR WERE MUCH MORE THAN THE ENTIRE SUM OF LABOUR EXPENSES CLAIMED DURING THE YEAR. IT IS ALSO OBSERV ED BY LD. COMMISSIONER OF INCOME TAX THAT THERE WAS NO LIST O F NAMES OF THE LABOURERS TO WHOM HUGE AMOUNT WAS PAYABLE AND NOR T HERE WAS ANY TAX DEDUCTED AT SOURCE WHICH WAS UNVERIFIABLE DUE TO LACK OF PROPER DETAILS. FURTHER PAYMENT TO LABOURERS IN CASH WAS M ADE AFTER LAPSE OF LONG PERIOD WHICH AS PER LD. COMMISSIONER OF INCOME TAX WAS UNBELIEVABLE AS TO WHY A LABOURER WILL STAY WITHOUT BEING PAID FOR SUCH LONG TIME. ANOTHER REASON FOR SETTING ASIDE THE ORD ER OF LD. ASSESSING OFFICER WAS THAT IN THE IMPUGNED ASSESSMENT ORDER T HERE WAS NO DISCUSSION ABOUT LABOUR CHARGES WHICH WERE OF A MAG NITUDE OF RS.6.53 CRORES WITHOUT HAVING ANY PROPER SUPPORTING EVIDENCES WHEREAS DISALLOWANCE OF MINOR AMOUNT OF DISALLOWANC E OF RS.79,480/- ON ACCOUNT OF SITE EXPENSES, MATIKAM EX PENSES , WATER EXPENSES AND TRANSPORT EXPENSES WAS MADE. 11.1 FURTHER DURING THE COURSE OF PROCEEDINGS LD. A UTHORISED REPRESENTATIVE HAS HEAVILY RELIED ON THE DECISION O F CO-ORDINATE BENCH IN THE CASE OF INDRAJITSINH B. DABHI (SUPRA) AND ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATIVE HAS BEEN UNABL E TO PROVE THAT ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 13 THE FACTS OF THE CASE WERE SIMILAR TO THAT ADJUDICA TED BY HON. SUPREME COURT IN THE CASE OF AMITABH BACHCHAN (SUPR A). 11.2 FURTHER ANALYZING THE SUBMISSIONS OF LD. AUTHO RISED REPRESENTATIVE WE EXAMINED THE FACTS OF THE APPEAL BEFORE US WITH THAT BEING DEALT BY THE CO-ORDINATE BENCH IN THE CA SE OF INDRAJITSINH B. DABHI (SUPRA) AND OBSERVE THAT THEY ARE VERBATIM SIMILAR EXCEPT FOR THE AMOUNT OF LABOUR CHARGES AND SUNDRY CREDITORS PAYABLE. APART FROM THAT ASSESSMENT ORDER AND ORDER OF LD. COMMIS SIONER OF INCOME TAX ARE OF SIMILAR DATES AND LANGUAGE OF NOTICE ISS UED ITS CONTENTS AND THE REPLY SUBMITTED WERE ALSO ALMOST SIMILAR. W E FURTHER OBSERVE THAT CO-ORDINATE BENCH ADJUDICATING THE CASE OF IND RAJITSINH B. DABHI (SUPRA) HAS QUASHED THE ORDER U/S 263 OF THE ACT AN D RESTORED THE ORDER U/S 143(3) OF THE ACT OF ASSESSING OFFICER BY OBSERVING AS FOLLOWS :- 5. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. IN HIS SHOW CAUSE NOTICE U/S. 263 OF THE ACT , THE COMMISSIONER OBSERVES AS UNDER:- 2. IT IS FOUND THAT DURING THE PREVIOUS YEAR RELEVA NT TO THE ABOVE A, Y,, YOU DERIVED INCOME FROM LABOUR JOB- WORK AS OBSERVED FR OM THE CONTRACT ACCOUNT, WHERE TOTAL RECEIPTS OF RS, 4,76,14,0517/- HAVE BEE N SHOWN. DURING THE RELEVANT PERIOD, YOU HAVE ALSO CLAIMED DEDUCTION FO R LABOUR CHARGES OF RS, 3,89,14,880/- 3. PERUSAL JF YOUR BALANCE SHEET AS ON 31-03-2009 S HOWS THAT THERE WERE A LIABILITY OF RS. 5,57,67,111/- FOR SUNDRY' CREDITOR S. THE DETAIL OF SUNDRY CREDITORS SHOWS THAT SUNDRY CREDITORS OF RS, 5,53,5 0.045/- WERE PERTAINING TO LABOUR EXPENSE PAYABLE, HO-'EVER, NO DETAILS O< C THE PERSONS HAVE BEEN GIVEN IN THE BALANCE SHEET, TO 'HORN YOU WERE LIABL E TO MAKE PAYMENT ON ACCOUNT OF LABOUR CHARGES. ON ANALYSIS OF THE LABOU R EXPENSE CLAIMED IN CONTRACT ACCOUNT AND LABOUR EXPENSE PAYABLE AS SHOW N IN THE BALANCE SHEET, IT IS FOUND THAT LABOUR EXPENSE PAYABLE AS ON 31 ST MARCH WAS MORE THAN THE ENTIRE SUM OF LABOUR EXPENSE CLAIMED DURING THE REL EVANT PERIOD. ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 14 4.. 5.. 6.. 7. THE ASSESSING OFFICER HAS NOT VERIFIED THE GENUI NENESS OF LABOUR CHARGES PAID TO INDIVIDUAL LABOUR BY EXAMINING SUCH LABOURE RS. THIS EXAMINATION WAS NECESSARY ON ACCOUNT OF THE CLAIM OF THE ASSESSES THAT THE LABOURERS WERE UNPAID CREDITORS FOR A LONG PERIOD, BECAUSE LABOURS CANNOT WAIT FOR THE PAYMENT OF THEIR WAGES FOR A LONG PERIOD OF 12 MONT HS OR SO. THIS EXAMINATION WAS ALSO NECESSARY ON ACCOUNT OF THE CL AIM OF THE ASSESSEE THAT BY MAKING PAYMENTS INDIVIDUALLY TO EACH LABOUR, THE LIABILITY TO DEDUCT TAX FROM THE COMBINED LIABILITIES OF SUCH LABOURERS STA NDING IN THE NAMES OF THEIR SUPPLIERS WAS NOT THERE. THIS INACTION ON THE PART OF A.O IS ERRONEOUS AND IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. THE ABOVE FACTS SHOW THAT THE ASSESSMENT ORDER P ASSED BY THE ASSESSING OFFICER IN RESPECT OF A.Y, 2009- 1 0 APPEARS TO BE ERRONEOUS BECAUSE THE AO DID NOT APPLY HIS MIND ON THE LABOUR EXPENSE AND LA BOUR EXPENSES PAYABLE AS APPEARING THE FINAL ACCOUNTS VIS-A-VIS FACTS MEN TIONED IN THE FAX AUDIT REPORT AND PREJUDICIAL TO THE INTEREST OF THE REVEN UE BECAUSE THE ASSESSEE WAS ALLOWED THE CLAIM OF DEDUCTION OF LABOUR EXPENS E WITHOUT MAKING NECESSARY VERIFICATION FOR APPLICATION OF SEC, 194C R.W.S. 40(A)(IA) OF THE ACT. THEREFORE, I INTEND TO INITIATE PROCEEDINGS U/S : 253 OF THE ACT AND PASS A SUITABLE ORDER BEFORE PASSING SUCH ORDER, YOU ARE H EREBY GIVEN AN OPPORTUNITY OF BEING HEARD IN THE MATTER, PLEASE STATE AS TO W/?Y THE ORDER PASSED BY THE ASSESSING OFFICER IN YOUR CASE SHOULD NOT BE 'EVISED AFTER MAKING NECESSARY INQUIRY. IN THIS CONNECTION, YOU A RE REQUESTED TO ATTEND THIS OFFICE ON 05.12,2013 AT 4.30 PM. 6. TO THE SPECIFIC QUERIES RAISED BY THE ID, COMMIS SIONER LET US SEE THE QUERIES RAISED DURING THE COURSE OF THE ASSESSMENT PROCEEDI NGS BY THE A.O VIDE NOTICE DATED 05.08.2011 WHICH IS PLACED AT PAGE 7 OF THE P APER BOOK. THE RELEVANT QUERIES RAISED THEREIN:- Q3. PLEASE, RECONCILE YOUR INCOME DECLARED WITH THE TDS DEDUCTED/CLAIMED. ALSO, SUBMIT SECTION WISE DETAIL' S OF TAX DEDUCTED ARID PAID BY YOU. Q5. PLEASE, SUBMIT COPY OF LEDGER ACCOUNT OF EXPENS ES EXCEEDING RS, 1LAC FOR THE YEAR. Q6. PLEASE, SUBMIT COPY OF ACCOUNT WITH COMPLETE PO STAL ADDRESS AND PAN OF THE SUNDRY CREDITORS (ABOVE RS, 1 LAC). Q9. PLEASE, SUBMIT COPY OF TDS RETURNS AND SALES TA X RETURNS FILED FOR THE YEAR. ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 15 7. TO THE SPECIFIC QUERIES, THE REPLY OF THE ASSESSEE DATED 05.09.2011 CAN BE FOUND AT PAGE 8 OF THE PAPER BOOK IN WHICH Q3. HAS BEEN ANSWERED AS NOT APPLICABLE FOR 05. LEDGER COPY OF ACCOUNT OF EXPENSES EXCEEDING RS . 1 LAC WERE FILED IN ESPONSE TO Q6.COPY OF ACCOUNT WITH COMPLETE POSTAL ADDRESS AND PAN OF THE SUNDRY CREDITOR WERE ENCLOSED AND FOR Q9. COPY OF TDS RETURNS AND SALES TAX RETURNS FILED FOR THE YEAR WERE ENCLOSED-. 8. AFTER CONSIDERING THE DETAILED REPLY ALONG WITH DOCUMENTARY EVIDENCES, THE A.O IN HIS ASSESSMENT ORDER OBSERVES AS UNDER:- 2. SUBSEQUENTLY, A NOTICE U/S 142 (1) ALONG WITH QU ESTIONER LETTER WAS ISSUED ON 05-08-2011 AND SERVED, REQUESTING TO SUBMIT DETA ILS & PRODUCE BOOKS OF ACCOUNTS ON 17-08-2011. IN RESPONSE TO NOTICES ISSU ED U/S. 143(2) AND 142(1) OF THE ACT, SHRI DHIREN H. LOTIA, ADVOCATE A ND AUTHORIZED REPRESENTATIVE OF THE ASSESSES HAS ATTENDED THE CASE FROM TIME TO TIME AND SUBMITTED THE DETAILS AS CALLED FOR AND PRODUCED BO OKS OF ACCOUNTS. THE DETAILS SUBMITTED WERE PLACED ON RECORD AND BOOKS O F ACCOUNTS WERE TEST CHECKED. THE CASE WAS DISCUSSED WITH HIM. 9. A PERUSAL OF THE AFOREMENTIONED FACTUAL MATRIX S HOWS THAT THE A.O NAS THOROUGHLY EXAMINED THE CONTENTIOUS ISSUES RAISED BY THE ID. C OMMISSIONER. THE HON'BIE BOMBAY HIGH COURT IN THE CASE OF GABRIAL INDIA LTD. 203 ITR 108 HAS HELD THAT 'THE DECISION OF THE INCOME TAX OFFICER COULD NOT BE HEL D TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER, HE DID NOT MAKE AN ELABORATE DISCUSSI ON IN THAT REGARD'. 10. THE HON'BIE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOWN THE FOLLOWING RATIO:- 'A BARE READING OF SECTION. 263 OF THE INCOME-TAX A CT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICT ION BY THE COMMISSIONER SUO MOTU UNDER II. IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS T O BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE OR DER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRON EOUS: AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF ONE OF THEM IS ABSENTIF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS HUT IS PREJUDICIA L TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PRO VISION CANNOT BE INVOKED ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 16 TO CORRECT EACH AND EVERY TYPE RF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN A/- ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT AP PLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS' 11. THE AO HAS TAKEN A VIEW WHICH MAY BE DIFFERENT FROM THE VIEW OF THE LD. COMMISSIONER AND ASSUMING THAT THE VIEW TAKEN BY TH E ASSESSING OFFICER IS A LOSS TO THE REVENUE BUT THE HON'BLE SUPREME COURT IN MAL ABAR INDUSTRIAL CO. LTD. (SUPRA) HAS HELD THAT ' EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE RE VENUE FOR E.G. WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INC OME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE LD. COMMISSIONER DOES NOT AGRE E, IT CANNOT BE TREATED AS AN ORDER WHICH IS ERRONEOUS OR PREJUDICIAL TO THE INT EREST OF REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE I N LAW. 12. THE BOMBAY HIGH COURT IN CIT VS GABRIAL INDIA L TD., (1993) 203 ITR 108 HAS HELD THAT 'THE DECISION OF THE INCOME TAX OFFICER COULD NOT B E HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER, HE DID NOT MAKE AN ELA BORATE DISCUSSION IN THAT REGARD'. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF T HE JUDICIAL DECISIONS DISCUSSED HEREINABOVE... IN OUR UNDERSTANDING OF LAW, THE ASS ESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. W% THEREFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER U/S. 263 AND RESTORE THAT OF THE ASSESSING OFFICER PASSED U/S. 143(3) OF THE ACT. 13. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE AFORE-STATED JUDICIAL DECISIONS, IN OUR CONSIDERED OPINION, THERE IS NO ERROR IN THE ASSESSMENT ORDER MADE U/S. 143(3) OF THE ACT WHICH CAN BU SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE, THEREFORE SET ASIDE THE ORDER OF T HE ID. CIT AND RESTORE THAT O< THE A.O, APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY AL LOWED. 12. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIN ATE BENCH IN THE CASE OF INDRAJITSINH B. DABHI (SUPRA) WE FIND THAT THE DECISION OF CO- ORDINATE BENCH IS SQUARELY APPLICABLE ON THE FACTS OF THE CASE WE ARE DEALING WITH IN THIS APPEAL AND, THEREFORE, FOLLOWI NG THE SAME WE SET ASIDE THE ORDER OF LD. COMMISSIONER OF INCOME TAX U /S 263 OF THE ACT AND RESTORE THE ORDER U/S 143(3) OF THE ACT PASSED BY LD. ASSESSING OFFICER AS THE SAME WAS NEITHER ERRONEOUS NOR PREJU DICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, WE ALLOW THE APPE AL OF THE ASSESSEE. ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 17 13. NOW WE TAKE UP ITA NO.270/RJT/2014 WHEREIN FOLL OWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE :- (3) THE LEARNED COMMISSIONER OF INCOME TAX RAJKOT - I, RAJKOT HAS ERRED IN PASSING ORDER U/S. 263 OF THE ACT WHEREBY SETTING A SIDE THE ORDER PASSED BY THE ASSESSING OFFICER IS UNWARRANTED, UNJUSTIFIED A ND BAD IN LAW. THE COMMISSIONER OF INCOME TAX ALLEGED THAT THE ORDER P ASSED U/S. 143(3) ON 14.11.2011 FOR THE YEAR UNDER CONSIDERATION IS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. (4) THE LEARNED COMMISSIONER OF INCOME TAX RAJKOT - I, RAJKOT HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO REASSESS THE ALL OWABILITY OF DEDUCTION FOR LABOUR EXPENSES U/S. 40(A)(IA) OF THE ACT OR UNEXPL AINED LABOUR EXPENSES U/S. 69C AND COMPLETE THE ASSESSMENT AFRESH IS UNWARRANT ED, UNJUSTIFIED AND BAD IN LAW. YOUR APPLICANT RESERVES THE RIGHT IN ADDITION OR AL TERATION IN THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 14. WE OBSERVE THAT THE ISSUES RAISED IN THIS AP PEAL ARE SIMILAR TO THOSE ADJUDICATED BY US IN ITA NO.244/RJT/2014 WHER EIN WE HAVE RELIED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF INDRAJITSINH B. DABHI (SUPRA) AND APPLYING THE SAME DECISION, WE SET ASIDE THE ORDER U/S 263 OF THE ACT BY LD. COMMISSIONER OF INC OME TAX AND FIND THAT ORDER U/S 143(3) OF THE ACT DATED 14.11.2011 WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E AND, WE THEREFORE, RESTORE THE SAME. ACCORDINGLY, THIS APPE AL OF ASSESSEE IS ALSO ALLOWED. ITA NO. 270 & 244/RJT/2014 ASST. YEAR 2009-10 18 15. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2017 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 22/02/2017 MAHATA/- 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, RAJKOT 1. DATE OF DICTATION:20/02/2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 22/02/2017 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: 22/2/17 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: