DCIT CIRCLE-3, Bokaro V. YAVVARI NARAYAN RAO, Bokaro

ITA 246/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9643 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MOHANTY
• Section: 143(3); 142(1); 144

Judgement Text

1 ITA NO. 246 /RAN/ 201 6 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO. 246 /RAN/201 6 A.Y. : 2010 - 2011 DCIT, CIRCLE - 3, BOKARO V S SHRI YAVVARI NARAYAN RAO, A - 1, SECTOR MARKET - 1, RAM MANDIR, SEC - 1, B.S.CITY - 827001 P AN NO. : A A JCS 7786 F (APPELLANT ) . RESPONDENT REVENUE BY :SHRI A.K.MOHANTY, JCIT ASSESSEE BY : NONE DATE OF HEARING : 2 8 . 05 .201 8 DATE OF PRONOUNCEMENT : 30 . 05 .2 01 8 O R D E R PER PAVAN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT ( A ) , HAZARIBAG , DATED 04.05.2016 , FOR THE ASSESSMENT YEAR 2010 - 2011 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE MATTER WAS CALLED FOR HEA RING, HOWEVER, THE ASSESSEE HAS FILED WRITTEN SUBMISSION IN THE MATTER, THEREFORE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER CONSIDERING THE SUBMISSIONS OF LD. DR AND THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE O N RECORD. 3. T HE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.68,68,370/ - SHOWN UNDER THE HEAD RETRENCHMENT COMPENSATION AND OTHER BE NEFITS AS OUTSTANDING LIABILITY . 2 ITA NO. 246 /RAN/ 201 6 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND FILED THE RETURN OF INCOME ELECTRONICALLY FOR THE ASSESSMENT YEAR 2010 - 2011 ON 31.03.2011 WITH TOTAL INCOME OF RS. 30,80,120/ - AND THE RETURN OF IN COME WAS DULY PROCESSED U/S.143(1) OF THE ACT AND THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS . SUBSEQUENTLY, NOTICE U/S.143(2) & 142(1) OF THE ACT WERE ISSUED TO THE ASSESSEE. IN COMPLIANCE, THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND CASE WAS DISCUSSED . THEREAFTER THE AO COMPLETED THE ASS ESSMENT AND MADE VARIOUS ADDITION S AND ASSESSED TOTAL INCOME AT RS. 1,00,98,490/ - AND PASSED ORDER U/S.14 4 OF THE ACT, DATED 30.03.2013. 5 . AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE HAS FILED AN APPEAL W ITH THE CIT(A). IN THE APPELLATE PROCEEDINGS THE ASSESSEE ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND THE FINDINGS OF AO, ALLOWED THE APPEAL OF THE ASSESSEE. 6 . AGGRIEV ED BY THE ORDER OF CIT(A), THE REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 7 . LD. DR BEFORE US SUBMITTED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.68,68,370/ - SHOWN UNDER THE HEAD RETRENCHMENT C OMPENSATION AND OTHER BENEFITS AS OUTSTAN DING LIABILITY AND SUPPORTED THE ORDER OF AO. 8 . WE HEARD THE SUBMISSIONS OF LD. DR AND THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE, THE 3 ITA NO. 246 /RAN/ 201 6 ONLY DISPUTED ISSUE THAT RAISED BY THE REVENUE IS WITH RESPECT TO DEL ETING THE ADDITION ON ACCOUNT OF RETRENCHMENT COMPENSATION AND OTHER BENEFITS AS OUTSTANDING LIABILITY. WE FOUND THAT THE CIT(A) HAS DEALT ON THIS ISSUE AFTER CONSIDERING THE SUBMISSION AT PARA 3 ONWARDS. THE OBSERVATIONS OF THE CIT(A) IN THIS REGARD ARE AS UNDER : - 3.0 IN T HIS CASE, ONLY TWO SUBSTANTIVE GROUNDS HAVE BEEN RAISED BY THE APPELLANT, (A) AGAINST THE ADDITION OF CURRENT LIABILITY OF RS.68,68,370/ - ON ACCOUNT OF WORKER'S RETRENCHMENT COMPENSATION AND OTHER BENEFITS AND (B) AGAINST THE PASSING OF THE ORDER U/S!44 OF THE IT. ACT. 3.1 AS REGARDS THE FIRST ISSUE, THE ASSESSING OFFICER HAS HELD THAT RS.68,68,370/ - IS A FIX ITIOUS LIABILITY CREATED BY T HE APPELLANT ON ACCOUNT OF RETRENCHMENT COMPENSATION AND OILIER BENEFITS OUTSTANDING. THE ASSESSING OFFICER HAS FRAMED THIS VIEW MAINLY ON TWO COUNTS (A) THAT THE LIABILITY WAS OUTSTANDING AT THE YEAR END AND IN THE SUBSEQUENT YEAR ONLY A SUM OF RS.32,91.117/ - WAS PAID, AND (B) BECAUSE AS PER LABOUR LAW, RETRENCHMENT COMPENSATION IS REQUIRED TO BE PAID ON (HE VERY DATE OF RETRENCHMENT. THE ASSESSING OFFICER ALSO OBSERVED THAT COMPLETE DETAILS OF (LIE NAMES OF THE LABOUR AND T HE DATES OF THE PAYMENT OF COMPENSATION WERE NOT FURNISHED TO THE ASSESSING OFFICER. 3.2 IN T HE COURSE OF APPELLATE PROCEEDINGS, T HE APPELLANT WAS REQUESTED TO FURNISH COMPLETE DET AILS OF (HE RETRENCHMENT COMPENSATION AND THE ACCOUNTING METHOD ADOPTED FOR THE SAME AS WELL AS THE NATURE OF (HE RETRENCHMENT COMPENSATION. IN RESPONSE, (HE APPELLANT HAS MADE A WRITTEN SUBMISSION WHICH IS REPROD UCED AS UNDER ON 04/05/2016: 'THE APPELLANT IS A LABOUR SUB - CONTRACTOR UNDER PRINCIPAL CONTRACTOR LARSEN SC LOUBRO LTD. AND DOING WORKS IN DIFFERENT SITES. IN THE RELEVANT YEAR THE WORKS SITES ARE IN ANG U L (ODISHA) AND VISHAKAPATNAM (AP) THIS YEAR THE TOTAL TURNOVER IS RS. 6,81,55,270/ - AND THE ACCOUNTS HAVE BEEN AUDITED AS PER THE PROVISION U/S 44 A B OF THE ACT. THE A.O. IS WRONG IN PASSING THE ORDER U/S 144 (EXPARTE) BECAUSE THE ASSESSEE WADE COMPLIANCE DAY TO DAY QUERIES IN COURSE OF HEARING. ALTHOUGH THE A. O. HAS OBSERVED (HE ASSESSEE FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING BUT IT STATES THAT NO BOOKS OF ACCOUNTS WERE PRODUCED WHICH IS A CONTRADICTORY STATEMENT. THE 4 ITA NO. 246 /RAN/ 201 6 STATEMENT OFA/C WITH COPIES OF LEDGER ETC WERE SUBMITTED IN COURSE OF HE ARING BUT THE LEARNED A. O. WILLFULLY AVOIDED THE EXAMINATION OF THE BOOKS OF A/C 'S ALTHOUGH IT WAS PRODUCED. THE APPELLANT ENCLOSED THE ORDER OF PENALTY U/S 271H WHICH SHOWS THAT THE BOOKS OF ACCOUNTS WERE PRODUCED AND TEST CHECKED. BUT THE A.O. ALTHOUG H HE BASICALLY DISCARDED THE ACCOUNTS BUT KEEPING OFF THE PERCENTAGE BASIS HE DISALLOWED THE TOTAL LIABILITY OF RETRENCHMENT BENEFIT OF RS. 68,68,370/ - EVEN PERFORMING SEVERAL QUERIES ON THAT POINT AND THE ORDER IS IN (HE LINE OF 143 (3) OF THE ACT. IN (HI S SITUATION THE APPELLANT SUBMITS (HAT BEING A LABOUR CONTRACTOR THE INCREASING AND REDUCING THE LOAD OF WORKERS IS BEING DONE REGULARLY ACCORDING THE WORK LOAD WITH THE MAIN WORK. AS PER (HE TERMS WITH (HE. PRINCIPAL CONTRACTOR L & T WHEREVER (HE SERVICE OF THE WORKERS IS RETRENCHED HE IS ENTITLED (O THE BENEFITS AS PRESCRIBED IN SECTION 25 F OF INDUSTRIAL DISPUTE ACT 1947. THIS SYSTEM OF RETRENCHMENT BENEFIT (OR COMPENSATION WHATSOEVER CALLED) IS BEING FOLLOWED AS PER (HE PRACTICE OF THE PRINCIPAL CONTR ACTOR LARSEN & TOUBRO LTD. SINCE EARLIER YEARS. THE PRINCIPAL CONTRACTOR L & T DEDUCT CERTAIN PERCENTAGE OF AMOUNT TOWARDS RETRENCHMENT COMPENSATION FROM (HE RUNNING BILLS AS PER THE RULES TO BE FOLLOWED. THE DEDUCTED AMOUNT IS ACCOUNTED FOR IN THE BALANC E SHEET AS RETENTION MONEY. WHICH IS TO BE RELEASED FOR PAYMENT OF RETRENCHMENT BENEFIT. DURING (HE SCRUTINY ASSESSMENT (OF A/Y - 2005 - 06) (HE MATTER OF RETRENCHMENT BENEFIT HAS BEEN DISCUSSED AND AFTER EXPLAINING THE SAME THE MATTER WAS ALLOWED WITHOUT AN Y ADVERSE INFERENCE. SIMILARLY IN THIS YEAR I.E. A/Y - 2010 - 11 (HE CASE OF BALAJI CONSTRUCTION (A SISTER CONCERN OF (HE ASSESSEE) THIS POINT OF RETRENCHMENT BENEFIT WAS RAISED BUT NO ADVERSE INFERENCE IS DRAWN. (A COPY OF ORDER ENCLOSED) THE LEARNED A.O. SHOULD HAVE TAKEN NOTE OF THE ORDER OF EARLIER YEAR IN (HIS ISSUE. IT EVERY YEAR IT IS THE SYSTEM FOLLOWED AS (HE RETRE NCHMENT BENEFIT OUTSTANDING OF T HE PREVIOUS YEAR HAS BEEN PAID IN THE CURRENT YEAR. IN THE INSTANT CASE (HE LIABILITY OF RETRENCHMENT BE NEFIT OF RS: 42,75,756/ - OF T HE PREVIOUS YEAR I.E. A/Y - 2009 - 10 IS PAID DURING (HIS YEAR A/Y - 2010 - 11. 5 ITA NO. 246 /RAN/ 201 6 HOWEVER (HIS YEAR'S LIABILITY OF RS. 68, 68,370/ - COULD NOT BEEN PAID FULLY BUT A SU M OF RS. 35,77,253/ - HAS BEEN PAID IN F/Y - 2010 - 11 AGAIN A SUM OF RS . 32,91,117/ - HAS BEEN PAID IN F/Y - 2011 - 12. THE PRACTICAL DIFFICULTY TO DEFER THE PAYMENT IS DUE TO NON RELEASE OF THE RETENTION MONEY OF RS. 41,74,148/ - BY THE PRINCIPAL CONTRACTOR LARSEN & TOU B RO LTD. (A CHART IS ENCLOSED SHOWING THE PAYMENT OF RETRENCH MENT BENEFIT OF LAST 3 YEARS AND THE MONEY DUE FROM LARSEN & TOUBRO LTD.) THE APPELLANT FILES THE CHART SHOWING THE DETAILS OF WORKERS WITH THEIR ADDRESS AND OTHER PARTICULARS OF THE PAYMENT MADE IN F/Y - 2010 - 11. TOWARDS PART PAYMENT OF RETRENCHMENT BENEF IT. THIS CHART IS FILED DURING THE ASSESSMENT PROCEEDINGS. NOW THE APPELLANT EXPLAIN THE OBLIGATION OF PAYMENT OF RETRENCHMENT BENEFIT (OR COMPENSATION). AS PER SECTION 25 F OF THE INDUSTRIAL DISPUTE. ACT EVERY RETRENCHED WORKER IS TO BE PAID (I) ONE MONT H NOTICE PAY (II) LEAVE WAGES (HI) OTHER BENEFIT AND AS PER THE PRACTICE THE BONUS IS ALSO PAID TO THE WORKERS AT THE TIME OF HIS RETRENCHMENT. THIS OBLIGATION IS BEING FOLLOWED AS PER THE INSTRUCTION OF THE PRINCIPAL CONTRACTOR LARSEN TOUBRO LTD. IN TERM S OF THE RETENTION OF RETRENCHMENT COMPENSATION OUT OF THE BILL. THE PRINCIPAL CONTRACTOR SUPERVISES THE PAYMENT TIME TO TIME. THE LEARNED A.O. IN COURSE OF HEARING RAISED THE POINT IN THE. ORDER THAT THE ASSESSEE ALTHOUGH SUBMITTED (HE CHART SHOWING NAME AND ADDRESS OF THE LABOURS BUT DID NOT SHOW THEIR DATE OF THEIR RETRENCHMENT. BUT THE SAME WAS NOT INTIMATED TO THE A/R OF THE ASSESSEE. THIS MAY BE SEEN IN THE ORDER SHEET DATED 30/01/2013. (CERTIFIED COPY OF THE ORDER SHEET IS ENCLOSED) IT MAY BE MEN TIONED THAT THE DUES OF THE EACH WORKERS IS CALCULATED ON THE. BASIS OF THE. ATTENDANCE OF THE WORKERS AS PER MUSTER ROLL MAINTAINED BY THE ASSESSEE. THE LEARNED A.O. HAS MENTIONED IN THE ORDER SHEET DATED 30/01/2013 BUT THERE IS NO INTIMATION TO THE A/R O F THE ASSESSEE. THE. APPELLANT PRODUCED THE MUSTER ROLL. WHENEVER AN ORDER IS PASSED U/S 144 THE A.O. DISCARD THE ACCOUNTS SUBMITTED BY THE ASSESSEE AND THE ORDER IS PASSED ON ESTIMATION BASIS BY TAKING THE NET PROFIT AT HIGHER THAN THE NET PROFIT SHOWN B Y THE ASSESSEE. THIS BE THE SYSTEM FOLLOWED THE LEARNED A.O. SHOULD HAVE ENHANCED THE NET PROFIT AS PER ESTIMATION AS AGAINST (HE 3.68 % OF 6 ITA NO. 246 /RAN/ 201 6 THE NET PROFIT DECLARED BY THE ASSESSEE. THEREFORE THE FRAMING OF ORDER IS NOT AS PER PRACTICE OR PROCEDURE. ALTER NATELY THE APPELLANT URGE THAT THE MATTER MAY BE CONSIDERED IN THIS LINE AND A RELIEF MAY KINDLY BE GIVEN IT MAY NOT BE OUT OF PLACE TO SUBMIT THAT BY ADDING THE ENTIRE AMOUNT OF RETRENCHMENT BENEFIT OF RS. 68,68,370/ - THE NET PROFIT HAS GONE TO 13.76% WH ICH IS IMPOSSIBLE FOR A LABOUR CONTRACTOR. IN A CASE WHERE THERE IS CLEAR DISCLOSURE OF THE GROSS TURNOVER THEN THIS ABSURD ADDITION IS BEYOND (HE PRINCIPLE OF EQUITY. SO THE APPELLANT EARNESTLY PRAY THAT RELIEF EITHER OF THE SITUATION AS STALED ABOVE MAY KINDLY BE CONSIDERED. 3.3 IN ADDITION TO THE ABOVE, THE APPELLANT SHOWED LEDGER ACCOUNTS AND OTHER DOCUMENTS J MAINTAINED WITH REGARD TO THE RETRENCHMENT COMPENSATION AS ACCOUNTED ON YEAR TO YEAR BASIS. 3.4 THE FACT WHICH BECOMES CLEAR FROM THE SUBMISSI ON OF THE APPELLANT IS THAT THE APPELLANT IS BASICALLY A LABOUR SUB - CONTRACTOR UNDER LARSEN & TOUBRO LTD., WHICH IS THE PRINCIPAL CONTRACTOR. THE APPELLANT HAS UNDERTAKEN LABOURS WORK CONTRACT FROM LARSEN & TOUBRO LTD. FOR VARIOUS SITES IN ORISSA AND ANDHR A PRADESH. THE RETRENCHMENT COMPENSATION IS ADMISSIBLE AS PER LABOUR LAW AND HAS BEEN SO DEBITED IN THE ACCOUNTS ON ACCRUAL BASIS BUT DISBURSED TO THE LABOURS ONLY ON RECEIPT OF FUNDS FROM LARSEN & TOUBRO LTD. ON VARIOUS DATES FOR WHICH NECESSARY DOCUMENTS WERE PRODUCED WITH THE NAME OF LABOURS, DATES OF RETRENCHMENT AND AMOUNTS CALCULATED UNDER 1 VARIOUS HEADS INCLUDING BONUS. THE LEDGER ACCOUNT OF THE RETRENCHMENT COMPENSATION SHOWS THE J!', OPENING BALANCE FROM THE LAST YEAR, PAYMENT MADE IN THIS YEAR AN D BALANCE CARRIED FORWARD TO (LIE ! NEXT YEAR. ON THE BASIS OF THE ACCOUNTS MAINTAINED AS SUCH I FIND NO INFIRMITY IN T HE APPELLANTS CLAIM OF RETRENCHMENT COMPENSATION DEBITED IN THE ACCOUNT OF RS.68,68,370/ - . THEREFORE, IN MY J CONSIDERED OPINION, NO ADD ITION IS REQUIRED ON THIS ISSUE. RELIANCE IS PLACED ON THE JUDGMENT OF HON 'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS. C1T (245 ITR, 428). THE APPELLANT SUCCEEDS ON THIS GROUND OF APPEAL. THE ASSESSING OFFICER IS. HOWEVER, FREE TO INVOKE THE PROVISIONS OF SE CTION 41(1) OF THE I.T. A CT IN CASE THIS LIABILITY CEASES TO EXIST IN FUTURE EITHER IN PART OR FULL. 3.5 AS REGARDS THE SECOND ISSUE WITH REGARD TO ORDER PASSED U/S .1 44 OF T HE I.T. AC T , THE APPELLANT HAS SUBMITTED THAT WHEN THE COPIES OF L EDGER ACCOUNTS, ETC. WERE SUBMITTED IN THE COURSE OF HEARING AS WELL AS BOOKS OF ACCOUNTS WERE PRODUCED AND THE SAME WERE TEST CHECKED, THE ORDER IS IN THE LINE OF SECTION 143(3) OF THE I.T. ACT AND, THEREFORE, THE ASSESSING OFFICER SHOULD NOT HAVE PASSED THE ORDER U/S 144 OF THE I.T. ACT. THE APPELLANT HAS ALSO 7 ITA NO. 246 /RAN/ 201 6 PRODUCED A COPY OF THE NOTE - SHEET WHICH HAS SHOWN THAT DURING ASSESSMENT PROCEEDINGS BOOKS OF ACCOUNTS, ETC. WERE PRODUCED BEFORE THE ASSESSING OFFICER AND THE SAME WERE TEST CHECKED. 3.6 I AM CONV INCED WITH THE ABOVE SUBMISSION OF THE APPELLANT AND HOLD THAT THE ORDER PASSED U/SL44 OF THE I.T. ACT IS ERRONEOUS. THE APPELLANT SUCCEEDS ON THIS GROUND OF APPEAL. 3.7 IN THE RESULT, THE APPEAL IS ALLOWED. BEFORE US LD. DR COULD NOT BRING ANY NEW MATE RIAL FACT TO CONTROVERT THE ABOVE FINDINGS OF THE CIT(A). ACCORDINGLY, WE ARE IN THE CONFORMITY WITH THE ORDER OF CIT(A) AND THE SAME IS UPHELD AND THE GROUND OF APPEAL OF REVENUE IS DISMISSED. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . OR DER PRONOUNCED IN THE OPEN COURT ON 30 / 05 /201 8 SD/ - SD/ - ( N.S.SAINI ) ( PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI, DATED 30 / 05 /201 8 PRAKASH KUMAR MISHRA , SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, //TRUE COPY// SR.PS, ITAT, RANCHI 1. THE APPELLANT DCIT, CIRCLE - 3, BOKARO 2. THE RESPONDE NT SHRI YAVVARI NARAYAN RAO, A - 1, SECTOR MARKET - 1, RAM MANDIR, SEC - 1, B.S.CITY - 827001 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE.