M/s. Percept Engineers P.Ltd, Cochin V. The JCIT(OSD), Cochin

ITA 249/COCH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7520 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 03-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: C B M WARRIER
• Keywords: Opportunity of being heard; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO.249/COCH/2015 ASSESSMENT YEAR : 2009-10 M/S. PERCEPT ENGINEERS (P) LTD., 2 ND FLOOR, PARACKAL BUILDING, VIVEKANANDA LANE, VENNALA, KOCHI-682 028. [PAN: AACCP 1678E] VS. THE JOINT COMMISSIONER OF INCOME TAX(OSD), CIRCLE-4(1), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI C.B.M. WARRIER, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 03/02/2016 DATE OF PRONOUNCEMENT 05/02/2016 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE ARISES FROM THE OR DER OF THE LD. CIT(A)-I, KOCHI DATED 06/02/2015 FOR THE ASSESSMENT YEAR 2009 -10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THE COMMISSIONER OF INCOME TAX(APPEALS) COCHIN H AS GONE WRONG IN CONFIRMING THE ADDITION OF INCOME OF RS.2120759.00 TOWARDS THE DIFFERENCE IN INCOME BETWEEN 26AS AND FORM 16A. 2. THE COMMISSIONER OF INCOME TAX(APPEALS) COCHIN H AS GONE WRONG IN CONFIRMING THE ADDITION OF INCOME OF RS.73575/- TOW ARDS THE DIFFERENCE IN INCOME BETWEEN 26AS AND FORM 16A. I.T.A. NO.249/COCH/2015 2 3. THE COMMISSIONER OF INCOME TAX(APPEALS) HAS GONE WRONG IN DISALLOWING THE INTEREST RS.100000. 4. THE COMMISSIONER OF INCOME TAX(APPEALS) HAS GONE WRONG IN MAKING AN ADDITION OF RS.193900/- U/S. 40A(2) OF THE ACT. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSE T STATED THAT HE HAS NOT PRESSED GROUND NO. 3 AND ACCORDINGLY, THE SAME IS D ISMISSED AS NOT PRESSED. 4. AS REGARDS GROUND NOS. 1, THE BRIEF FACTS OF TH E CASE ARE THAT THE RECONCILIATION OF GROSS RECEIPTS AS PER THE 26AS ST ATEMENT AND THE INCOME CREDITED IN THE BOOKS OF THE COMPANY WERE CALLED FO R BY THE ASSESSING OFFICER. LEDGERS AND WORK CONTRACTS WERE PRODUCED F OR VERIFICATION. THE ASSESSEE WAS UNABLE TO RECONCILE THE SHORTFALL IN I NCOME CREDITED IN ITS BOOKS IN RESPECT OF THE FOLLOWING PARTIES: NAME OF THE PARTY RECEIPT AS PER 26AS AMOUNT CREDITED IN THE BOOKS SHORTFALL IN INCOME ACCOUNTED ISLAND STAR MALL DEVELOPERS 1,54,35,759 1,54,13,264 22,495 ALLIED INVESTMENTS AND HOUSING 82,26,822 61,06,063 21,20,759 SREEKURUMBA TRUST 7,86,022 NIL 7,86,02 2 IBS SOFTWARE SERVICE V64,919 63,447 1,472 INSPITE OF SEVERAL OPPORTUNITIES GIVEN TO THE ASSES SEE, IT HAS NOT RECONCILED THE DIFFERENCES AS NOTED ABOVE. ACCORDINGLY, THE AS SESSING OFFICER HELD THAT I.T.A. NO.249/COCH/2015 3 THE ASSESSEE HAS NOT DISCHARGED ITS ONUS OF PROVING THAT THE INCOME WHICH HAS NOT BEEN ACCOUNTED FOR IN ITS BOOKS HAS NOT ACC RUED OR NOT BEEN RECEIVED BY IT IN THE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER ASSESSED THE DIFFERENCE OF RS.29,30,748/- AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10. 5. BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED THE 26AS STATEMENT AND FORM 16A ALONGWITH THE CERTIFICATE ISSUED FROM M/S. ALLIED INVESTMENT & HOUSING (P) LTD. FOR THE FINAL PAYMENTS GIVEN TO TH E ASSESSEE. ON COMPARISON OF THE CERTIFICATES SUBMITTED BY THE ASS ESSEE, THE LD. CIT(A) EMERGED THE POSITION AS UNDER: (A) THE AMOUNT RECEIVED FROM M/S. ALLIED INVESTMENT & HOUSING (P) LTD. (AS PER THE CERTIFICATE ISSUED BY THEM DATED 30.10. 2014) RS.51,03,339/-. (B) THE AMOUNT AS PER TDS CERTIFICATE VIDE FORM NO. 16A RS.62,03,339/-. (C) THE AMOUNT RECEIVED AS PER 26AS STATEMENT IS R S.82,26,822/-. (D) THE AMOUNT AS PER THE LEDGER ACCOUNT OF THE AP PELLANT RS.61,07,063/- 6. THE LD. CIT(A) ULTIMATELY WORKED OUT THAT THE SUM OF RS.20,23,483/- APPEARING IN THE 26AS STATEMENT IS STATED TO BE A C LEAR MISMATCH AND THE RECONCILIATION STILL REMAINS PENDING AND ACCORDINGL Y, HE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE E XTENT OF RS.20,23,483/-. I.T.A. NO.249/COCH/2015 4 7. AS REGARDS GROUND NO. 2, THE BRIEF FACTS OF THE CASE ARE THAT WITH REFERENCE TO PAYMENTS RECEIVED FROM SHRI KURUMBA TR UST, IT HAS BEEN ACCOUNTED UNDER VARIOUS PROJECTS OF SHRI KURUMBA TR UST SUCH AS SHOBHA ADAT, SHOBHA HERMITAGE, SHOBHA ACADEMY AND SHOBHA D EVELOPERS. THE AMOUNT UNDER THESE HEADS IS RS.7,12,447/-. THE 26A S STATEMENT HAS SHOWN THE AMOUNT AT RS.7,86,022/- WHEREAS THE 16A C ERTIFICATE ISSUED BY SHRI KURUMBA TRUST SHOWS THE AMOUNT AT RS.7,12,447/ -. THE ASSESSING OFFICER HAS ADDED THE ENTIRE AMOUNT OF RS.7,86,022/ -. AFTER ANALYZING THE FACTS IN ITS OWN CONTEXTS, THE ASSESSING OFFICER HE LD THAT THE ADDITION IS TO BE RESTRICTED TO THE EXTENT OF THE AMOUNT WHICH STA NDS UNRECONCILED BETWEEN 26AS AND 16A AND THIS DIFFERENCE WORKS OUT TO RS.73,575/-. THE ADDITION MADE BY THE ASSESSING OFFICER WAS THUS RES TRICTED TO RS.73,575/- BY THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE TDS CERTIFICATE, AS PER THE ORIGINAL 26AS STATEMENT APPEARING AT PB PG. 12, THE TDS IS AT RS.82,26,822/ - WHEREAS THE RECTIFICATION HAS BEEN MADE BY THE PARTY, M/S. ALLI ED INVESTMENT & HOUSING (P) LTD. IN THE 26AS STATEMENT AT RS.51,03,339/- AV AILABLE AT PB 30. ACCORDINGLY, THE NECESSARY RECTIFICATION HAS TO BE MADE BY THE ASSESSING OFFICER AFTER VERIFYING THE SAID RECTIFIED 26AS STA TEMENT SUBMITTED BY THE PARTY, M/S. ALLIED INVESTMENT & HOUSING (P) LTD. T HE ASSESSING OFFICER IS I.T.A. NO.249/COCH/2015 5 DIRECTED TO DO THE NEEDFUL AND RECTIFY THE 26AS STA TEMENT AFTER VERIFYING THE SAID 26AS RETURNS SUBMITTED BY THE ASSESSEE. THE AS SESSING OFFICER IS FURTHER DIRECTED TO AFFORD ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THIS RESPECT AND DECIDE THE ISSUE ACCOR DINGLY. 9. THE ASSESSING OFFICER IS DIRECTED TO VERIFY T HE 26AS STATEMENT IN RESPECT OF SRI KURUMBA TRUST WITH REGARD TO VARIOUS PROJECTS AND DECIDE THE ISSUE ACCORDINGLY AFTER AFFORDING ADEQUATE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NOS. 1 & 2 ARE ALLOWED FOR S TATISTICAL PURPOSES. 10. AS REGARDS GROUND NO. 4, THE BRIEF FACTS OF T HE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER AT PGS. 3 & 4 ARE REPRODUCED HEREINBELOW: 4. THE ASSESSEE HAD MADE PURCHASES OF 4MM POLYPLUS POLYSTER (MF) FROM TWO PARTIES DURING THE YEAR, SREENADH AGENCIES AND BITUPLUS INDUSTRIES PVT. LTD. THE PURCHASE PRICE OF THE MATE RIAL PURCHASED FROM SREENADH AGENCIES WAS MUCH HIGHER THAN THE PRICE AT WHICH IT WAS PROCURED FROM BITUPLUS INDUSTRIES PVT. LTD. SREENA DH AGENCIES IS A CONCERN IN WHICH THE DIRECTOR OF THE ASSESSEE IS SU BSTANTIALLY INTERESTED. THE PRICE AT WHICH THE MATERIAL WAS OBTAINED FROM T HE FIRM IS MOSTLY AT THE RATE OF RS.129/- PER UNIT, WHILE THE PRICE AT W HICH IT WAS PURCHASED FROM UNRELATED PARTY WAS @ RS.100/-. IT WAS PROPOSE D TO THE ASSESSEE TO MAKE AN ADDITION U/S. 40A(2) OF AN AMOUNT OF RS. 1,93,900/-, THE DETAILED CALCULATION OF WHICH WAS INCLUDED IN THE N OTICE U/S. 143(2) ISSUED ON 16/12/2011. THE ASSESSEE IN ITS REPLY DATED 23/12/2011 STATES A S FOLLOWS: I.T.A. NO.249/COCH/2015 6 BITUPLUS INDUSTRIES (P) LTD. IS LOCATED AT VISAKHA PATNAM. SREENADH AGENCIES IS LOCATED AT BANGALORE. THE COMPANY HAS T O PAY FOR TRANSPORTATION CHARGES IN ADDITION TO THE PURCHASE PRICE WHEN GOODS ARE BOUGHT FROM BITUPLUS INDUSTRIES. THIS IS THE RE ASON WHY IT WAS THE PRICE DIFFERENCE IN THE GOODS PURCHASED FROM BITUPL US INDUSTRIES AND SREENADH AGENCIES. MOREOVER OUR WORK IS SUCH THAT S OMETIMES HUGE ORDERS MAY BE PENDING AT BITUPLUS INDUSTRIES AND TH ERE MAY BE SUDDEN DEMAND. IN SUCH CASES THE COMPANY RESORTS T O PURCHASE FROM SREENADH AGENCIES. THIS IS ALSO TO BRING TO YOUR NO TICE THAT PERCEPT ENGINEERS (P) LTD. IS NOT THE SOLE BUYER FROM SREENA DH AGENCIES. THE PRICE AT WHICH THE COMMODITY IS BILLED TO PERCEPT EN GINEERS IS THE SAME PRICE AT WHICH SREENADH AGENCIES BILLS TO ITS OTHER CUSTOMERS. THE CONTENTIONS OF THE ASSESSEE ARE REJECTED. NO SU PPORTING EVIDENCE IS ADDUCED IN ITS FAVOUR. THE INVOICE COPIES OF BITUP LUS INDUSTRIES DO NOT INDICATE ADDITIONAL PRICE CHARGED FOR TRANSPORTATIO N. EVEN IN THE ASSESSEES REPLY ON THIS POINT IT IS SELF-CONTRADIC TORY. IT CLAIMS THAT HIGHER PRICES WERE PAID TO SREENADH AGENCIES WHEN THERE IS A HUGE DEMAND AND BITUPLUS INDUSTRIES IS UNABLE TO PROVIDE THE MA TERIAL. THIS INDICATES THAT TRANSPORTATION CHARGES ARE NOT A RELEVANT FACT OR. THE ASSESSEE HAS PROCURED MATERIAL FROM A RELATED PARTY WHICH WAS LO CATED AT BANGALORE ITSELF, WHEN SIMILAR MATERIAL WAS AVAILABLE TO IT A T A MUCH LOWER PRICE, EVEN THOUGH THE UNRELATED PARTY IS LOCATED AT VISAK HAPATNAM. THE COST OF TRANSPORT IS ALREADY FACTORED IN THE PRICES CHAR GED BY THE UNRELATED PARTY. THEREFORE THE ASSESSEE HAS PROCURED GOODS F ROM ITS RELATED PARTY AT A PRICE THAT IS EXCESSIVE AND UNREASONABLE WITH REGARD TO THE FAIR MARKET VALUE OF THE GOODS. IT IS NOT RELEVANT WHETH ER SREENATH AGENCIES HAS SOLD THE MATERIAL AT THE SAME PRICES TO OTHER P ARTIES. A BUSINESSMAN OF PRUDENCE WOULD TRY TO REDUCE ITS PURCHASE COSTS. IT IS SEEN THAT THE ASSESSEE HAS MADE SUBSTANTIAL PURCHASES FROM BITUPL US INDUSTRIES AND SO THERE EXISTS AN ON GOING BUSINESS RELATIONSHIP W ITH THIS COMPANY. STILL, THE ASSESSEE HAS PAID MORE THAN WHAT WAS NEC ESSARY IN ITS PURCHASES FROM RELATED PARTIES. THEREFORE, ADDITIO N U/S. 40A(2) AMOUNTING TO RS.1,93,900/- IS MADE. 11. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESS ING OFFICER VIDE PARA 3.3 OF HIS ORDER WHICH IS REPRODUCED HEREINBELOW: I.T.A. NO.249/COCH/2015 7 3.3 IT IS SEEN THAT THE ASSESSING OFFICER HAS MADE ELABORATE COMPARISON FOR THE PURCHASE OF MATERIAL FROM SREENADH AGENCIES WHICH WAS MUCH HIGHER THAN THE PRICES AT WHICH IT WAS PROCURED FRO M BITUPLUS INDUSTRIES PVT. LTD. SREENADH AGENCIES, BEING A CONCERN IN WHI CH THE DIRECTOR OF THE APPELLANT HAS SUBSTANTIAL INTEREST, THE COMPARA TIVE DIFFERENCE IN THE PURCHASE PRICE FOR THE SAME COMMODITY, PURCHASED FR OM THE OWN CONCERN VIS--VIS PURCHASED FROM THE OUTSIDE FIRM, THE PROVISION OF SECTION 40A(2) IS APPLICABLE, WHERE DIFFERENCE IN S UCH PRICES IS EXCESSIVE AND, WITHOUT ANY REASON WHICH COULD HAVE SUBSTANTIA TED THE CAUSE FOR SUCH DIFFERENCE IN THE PRICES. THE APPELLANTS EXPLANATION THAT THE PRICES QUOTED BY THE BITUPLUS INDUSTRIES (P) LTD. IS THE X-FACTORY PRICES WHICH D OES NOT INCLUDE THE COST OF TRANSPORTATION IS NOT SUBSTANTIATED BY ANY FURTH ER DETAILS OTHER THAN REITERATING THAT SUCH TRANSPORTATION COST HAS BEEN DEBITED SEPARATELY TO THE PROFIT AND LOSS ACCOUNT. IN VIEW OF THIS, THER E IS NO APPARENT REASON FOR DEVIATING FROM THE FINDINGS OF THE ASSESSING OF FICER AND HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD AN D THE APPEAL ON THIS GROUND IS DISMISSED. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSES SEE THAT THE PRICE QUOTED BY THE BITUPLUS INDUSTRIES (P) LTD. IS THE X-FACTORY PRICE WHICH IS NOT SUBSTANTIATED BY ANY DETAILS OTHER THAN REITERATING THAT SUCH TRANSPORTATION COST HAS BEEN DEBITED SEPARATELY TO THE PROFIT & LO SS ACCOUNT. THEREFORE, THE ASSESSING OFFICER HAS MADE A CLEAR FINDING THAT BY MAKING ELABORATE COMPARISON FOR THE PURCHASE OF MATERIAL FROM SREENA DH AGENCIES WHICH WAS MUCH HIGHER THAN THE PRICE AT WHICH IT WAS PROCURED FROM M/S. BITUPLUS INDUSTRIES (P) LTD. AND SREENADH AGENCIES IS A CONC ERN IN WHICH THE DIRECTOR OF THE ASSESSEE HAS SUBSTANTIAL INTEREST, THE COMPA RATIVE DIFFERENCE IN THE PURCHASE PRICE FOR THE SAME COMMODITY PURCHASED FRO M OWN CONCERN VIS-- VIS FROM THE OUTSIDE FIRM, THE PROVISION OF SECTION 40A(2) IS APPLICABLE WHERE I.T.A. NO.249/COCH/2015 8 THE DIFFERENCE IN SUCH PRICES IS EXCESSIVE AND WITH OUT ANY REASON. IN SUCH CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFIC ER. THUS GROUND NO. 4 OF THE ASSESSEE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 249/COCH/2015 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 05-02-2016. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 05TH FEBRUARY, 2016 GJ COPY TO: 1. M/S. PERCEPT ENGINEERS (P) LTD., 2 ND FLOOR, PARACKAL BUILDING, VIVEKANANDA LANE, VENNALA, KOCHI-682 028. 2. THE JOINT COMMISSIONER OF INCOME-TAX(OSD), CIRCL E-4(1), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN