DCIT 11(2)(1), MUMBAI V. SIMPLEX CASTINGS LTD, MUMBAI

ITA 2473/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9919 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 30-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRUSETH
• Assessee Lawyers: S C TIWARI WITH RUTUJA PAWAR
• Keywords: Principle of natural justice
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH D, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2473/MUM/2015 (ASSESSMENT YEAR- 2011-12) DCIT- 11(2)(1), ROOM NO. 477A, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. VS. M/S SIMPLEX CASTINGS LTD. 601/602A, FAIRLINK CENTRE, OFF ANDHERI LINK ROAD, ANDHERI (W), MUMBAI-400053. PAN: AABCS4650E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI PRUSETH (DR) ASSESSEE BY : SHRI S. C. TIWARI WITH RUTUJA PAWAR (AR) DATE OF HEARING : 13.06.2017 DATE OF PRONOUNCEMENT : 14.07.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE U/S. 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, [THE CIT(A)], MUMBAI DATED 30.01.2015 FOR THE ASSESSMENT YEAR 201 1-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 9,39,6 1,580/- ON ACCOUNT OF OFF- LOADING / CONTRACT CHARGES WITHOUT APPRECIATING THA T THE ASSESSEE COMPANY HAD INDULGED IN DEBITING FICTITIOUS EXPENSES AND WA S THEREBY GENERATING UNACCOUNTED MONEY.?' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN IGNORING THE STATEMENT RECORD ED ON OATH OF THE LABOUR CONTRACTORS WHEREIN THEY HAD STATED UNDER OATH THAT EXCESS OF THE ACTUAL 'SALARY' PAYABLE TO THE CONTRACTORS WERE INDEED DEP OSITED TO THE CONTRACTORS ACCOUNT AND THEY HAD BEEN DIRECTED BY THE ASSESSEE TO WITHDRAW EXCESS ITA NO.2473/M /2015- M/S SIMPLEX CASTINGS LTD. 2 MONEY CREDITED TO THEIR ACCOUNT IN CASH AND HAND IT OVER TO THE ASSESSEE COMPANY.?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN IGNORING THE STATEMENT RECORD ED ON OATH OF THE LABOUR CONTRACTORS WHEREIN THEY HAD STATED UNDER OATH THAT THEY HAD NO CONTROL OVER THE BANK ACCOUNTS MAINTAINED IN THEIR NAMES AND THA T THE ASSESSEE COMPANY HAD OBTAINED THEIR SIGNATURE ON CHEQUES AND THEY WE RE NOT AWARE OF ITS USE.?' 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) O N THE ABOVE GROUNDS BE SET-ASIDE AND THAT OF THE A.O. BE RESTORED.? 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF MANUFACTURER & SUPPLY OF IRON & STEEL CASTINGS, FIL ED ITS RETURN OF INCOME FOR RELEVANT AY ON 28.09.2011 DECLARING TOTAL INCOME OF RS. 16,47,50,412/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 2 8.02.2014. THE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESSMENT BESIDES T HE OTHER ADDITION DISALLOWED 60% OF EXPENDITURE CLAIMED FOR OFF LOADING/CONTRACT LABOUR CHARGES, THEREBY MADE THE ADDITION OF RS. 9,39,61,580/-. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS DELETED. THUS, AGGRIEVED BY THE OR DER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE ARGUED THAT T HOUGH THE REVENUE HAS RAISED AS MANY AS FIVE GROUNDS OF APPEAL, THE SUBSTANTIAL GROUND OF APPEAL IS THE DELETION OF ADDITION OF RS. 9,39,61,580/- ON ACCOUNT OF OFF LOADING/CONTRACT LABOUR CHARGES. THE LD. DR FOR THE REVENUE BESIDES RELYING UPON THE ORDER OF AO ARGUED THAT THE BILLS WHICH WERE PRODUCED BY THE ASSESSEE DURING TH E ASSESSMENT PROCEEDING WERE NOT PRINTED BILLS, NO NUMBER OF SUCH BILLS WERE MEN TIONED. THUS, BILLS WERE NOT ISSUED IN THE NORMAL COURSE OF BUSINESS. THE CERTAI N BILLS WERE COMPUTER GENERATED ITA NO.2473/M /2015- M/S SIMPLEX CASTINGS LTD. 3 WITHOUT ANY REGULAR BILL-BOOKS WHICH ARE USED ON US UAL COURSE OF BUSINESS IN SMALL PLACE LIKE BHILAI, URLA, TEDASARA. THE BILL DOES NO T BEAR THE LANDLINE TELEPHONE NUMBER. MOREOVER, THE BILLS WERE USED IN THE NAME O F INDIVIDUAL. DURING THE ASSESSMENT, THE ASSESSEE WAS ASKED TO EXPLAIN THE G ENUINENESS OF LABOUR EXPENSES. THE ASSESSEE FAILED TO FILE SPECIFIC REPLY. THE AO TO VERIFY THE GENUINENESS OF THE CLAIM ISSUED NOTICE U/S 133(6) TO TEN PARTIES WHICH WERE CLAIMED AS LABOUR CONTRACTOR BY ASSESSEE, ASKING THEM TO FURNISH THE DETAILED REGARDING THE NATURE OF SERVICES RENDERED, COPY OF ITR AND THE LEDGER ACCOU NT OF ASSESSEE. IN RESPONSE TO THE SAID NOTICE ONLY THREE PARTIES REPLIED NOTICE T O ONE SHRI RAM SINGH TO WHOM A PAYMENT OF RS. 15,82,598/- WERE MADE WAS NOT SERVED AND NOTICE RETURNED BACK WITH THE REMARK NOT KNOWN. THE EXAMINATION OF THE REPLY FILED BY SHRI MANSA RAM KRIPAL AND SHRI ATMA RAM YADAV, THE ADDRESS OF SENDER ARE IN THE SAME HANDWRITING HAVING SIMILAR ENVELOP. THUS, IT CAN EA SILY BE INFERRED THAT THE REPLY WAS SEND BY THE SAME PERSON. WHEN THE ASSESSEE WAS CONFRONTED WITH THE PROGRESS OF INQUIRY THAT OUT OF TEN NOTICES ONLY THREE PERSO N REPLIED AND NE NOTICE WAS RETURNED BACK UNSERVED. THE ASSESSEE IN RESPONSE OF THE SHOW CAUSE NOTICE PRODUCED SEVEN PARTIES FOR VERIFICATION OF LABOUR E XPENSES. THE AO EXAMINED SEVER PARTIES PRODUCED BY ASSESSEE AND THEY COULD N OT PRODUCE ANY WRITTEN CONTRACT WITH THE ASSESSEE ABOUT THE LABOUR CONTRACTOR. NO B OOKS OF ACCOUNT WERE MAINTAINED BY THOSE SEVEN PERSONS FOR THE TRANSACTI ON BETWEEN THE ASSESSEE AND THEM. ALL THE PERSON ADMITTED THAT THEY HAVE SIGNED ONLY BILLS PREPARED BY THE ASSESSEE-COMPANY. THE BANK STATEMENT OF THOSE PARTI ES REVEALS THAT LARGER AMOUNT OF CASH WAS WITHDRAWN WITHIN 2-4 DAYS OF CREDIT IN THE BANK AND VERY SMALL ITA NO.2473/M /2015- M/S SIMPLEX CASTINGS LTD. 4 AMOUNT WAS WITHDRAWN DURING THE MONTH. IT WAS FURTH ER ARGUED THAT THE DECISION RELIED BY LD. CIT(A) IN CASE OF STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627 ARE FACTUALLY DEFERRED IN THE FACT S OF THE PRESENT CASE. THE SEVEN PARTIES PRODUCED BY ASSESSEE WERE THEIR OWN W ITNESS, WHICH WERE PRODUCED TO SUBSTANTIATE ASSESSEES CLAIM FOR LABOUR EXPENSE S. THUS, THE WITNESSES AND THE ASSESSEES RIGHT FOR NATURAL JUSTICE WAS NOT AFFECT ED. IN ALTERNATIVE, IT WAS ARGUED THAT THE ASSESSEE NEVER ASKED FOR OPPORTUNITY FOR C ROSS-EXAMINATION. HOWEVER, IN CASE OF STATE OF KERALA VS. K.T. SHADULI GROCERY DE ALER (SUPRA), WHERE THE OPPORTUNITY WAS NOT GIVEN DESPITE SEEKING THE OPPOR TUNITY TO CROSS-EXAMINE THE WITNESSES. THE SECOND DECISION IN CASE OF MAHENDRA MANILAL NANAVATI VS. SUSHILA MAHENDRA NANAVATI AIR 1965 SC 364, IT WAS ARGUED TH AT THE RATIO OF THE DECISION IS NOT APPLICABLE AS THE PROVISIONS OF EVIDENCE ACT ARE NOT STRICTLY APPLICABLE TO THE PROCEEDING UNDER INCOME-TAX ACT. THE LD. DR FOR THE REVENUE PRAYED TO SET-ASIDE THE ORDER OF LD. CIT(A) AND FOR RESTORING THE ORDER OF AO. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. C IT(A). IT WAS ARGUED THAT ASSESSEE PURCHASED SEVEN PARTIES TO WHOM THE LABOUR PAYMENT ON ACCOUNT OF OFFLOADING/CONTRACT LABOUR CHARGES WERE PAID. THE S TATEMENTS OF THOSE PARTIES WERE NOT RECORDED IN PRESENCE OF ASSESSEE. THEIR STATEME NTS WERE RECORDED IN ENGLISH LANGUAGE, WHICH WAS NOT KNOWN TO THEM. THE AO MADE THE DISALLOWANCE OF 60% OF LABOUR CHARGES WITHOUT ANY BASIS. NO REASON IN A RRIVING AT THE FIGURE OF 60% WAS RECORDED BY AO. IT WAS FURTHER ARGUED THAT THE ASSESSEE FURNISHED DETAILS AND EVIDENCE REGARDING THE PAYMENT FOR THE LABOUR CONTR ACT. THE PERSONS WHO APPEARED BEFORE THE AO CONFIRMED IN THEIR STATEMENT THAT THE Y HAVE SUPPLIED LABOURER TO THE ITA NO.2473/M /2015- M/S SIMPLEX CASTINGS LTD. 5 ASSESSEE. SHRI MANSA RAM IN HIS STATEMENT STATED TH AT HE ENGAGED 15 LABOUR. SHRI BASUDEO STATED THAT 23 LABOURER WERE SUPPLIED BY HI M. SHRI R.K. MAITY SUPPLIED 9 LABOURER, SHRI BHARAT LAL DHIWAR SUPPLIED 23 LABOUR , SHRI RAM KUMAR SINGH SUPPLIED 10 LABOURER AND SHRI HARBANS SINGH SUPPLIE D 18 LABOURER. ALL PAYMENTS AS PER PRACTICE OF THE ASSESSEE WERE MADE IN THE AC COUNT OF LABOUR CONTRACTOR, WHO IN TERM DISBURSED THE PAYMENT TO THEIR RESPECTIVE L ABOURER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. THE AO MADE THE DIS ALLOWANCE OF 60% OF LABOUR CHARGES. THE AO HAS NOT GIVEN SPECIFIC REASON IN AR RIVING AT THE FIGURE OF 60% FOR DISALLOWANCE. IN RESPONSE TO THE NOTICE, THE ASSESS EE PRODUCED SEVEN PARTIES THROUGH WHOM THE LABOUR PAYMENTS WERE MADE. THE AO RECORDED THE STATEMENT OF ALL THE SEVEN PERSONS IN ABSENCE OF REPRESENTATIVE OF ASSESSEE. THE LD. DR FOR THE REVENUE NOT DISPUTED THAT THE STATEMENT OF ALL LABO UR CONTRACTOR WERE RECORDED IN ABSENCE OF REPRESENTATIVE OF ASSESSEE. ADMITTEDLY, NO OPPORTUNITY OF CROSS- EXAMINATION WAS GIVEN TO THE ASSESSEE. THE AO RELIE D UPON ONLY OF THOSE ANSWER WHICH WERE ACCORDING THE ASSESSING OFFICES WAS HAVI NG SOME INCONSISTENCY. IN OUR CONSIDERED VIEW IN THE ORAL TESTIMONY OF THE WITNES S, THE ENTIRE STATEMENT OF THE WITNESS HAS TO BE CONSIDERED AND NOT ONE OR TWO SEN TENCE IN ISOLATION. THE LD. CIT(A) AFTER APPRECIATING THE FACT, STATEMENT OF TH E LABOUR CONTRACTOR PRODUCED BY ASSESSEE AND CONSIDERED THE EVIDENCE AND THE STATE MENT MADE BY CONTRACTOR AND CAME TO THE CONCLUSION THAT ADHOC DISALLOWANCE OF 6 0% OF CONTRACT LABOUR CHARGES IS DEVOID OF MERIT AND DELETED THE DISALLOWANCE. WE HAVE OBSERVED THAT THE ORDER OF LD. CIT(A) IS REASONED ONE BASED ON THE FACTS AN D THE MATERIAL AVAILABLE ON ITA NO.2473/M /2015- M/S SIMPLEX CASTINGS LTD. 6 RECORD. THUS, WE DO NOT FIND ANY ILLEGALITY OR INFI RMITY IN THE ORDER PASSED BY LD. CIT(A). 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF JULY 2017. SD/- SD/-/- (P.K. BANSAL) (PAWAN SINGH) (VICE-PRESIDENT) JUDICIAL MEMBER MUMBAI; DATED 14/07/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/