Smt. RAJENDRA KHANDELWAL, Ujjain V. The ITO 1(1), Ujjain

ITA 249/IND/2014

• Counselvise Citation: 24922714 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: NITIN GARUD; AMIT CHOUDHARY CAS
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 265/IND/2014 A.Y. : 2010-11 ITO, 1(1), SHRI RAJENDRA KHANDELWAL, UJJAIN VS UJJAIN APPELLANT RESPONDENT PAN NO. AFCPK5359P C.O.NO. 38/IND/2014 (ARISING OUT OF I.T.A.NO. 265/IND/2014) A.Y. : 2010-11 SHRI RAJENDRA KHANDELWAL, ITO, 1(1), UJJAIN VS UJJAIN CROSS OBJECTOR RESPONDENT RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 2 2 I.T.A.NO. 249/IND/2014 A.Y. : 2010-11 SHRI RAJENDRA KHANDELWAL, ITO, 1(1), UJJAIN VS UJJAIN APPELLANT RESPONDENT DEPARTMENT BY : SHRI R. A. VERMA, DR ASSESSEE BY : SHRI NITIN GARUD AND SHRI AMIT CHOUDHARY, CAS O R D E R PER GARASIA, J.M. THESE CROSS APPEALS AND CROSS OBJECTION ARE DIRECTE D AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 29.01.20 14 FOR THE ASSESSMENT YEAR 2010-11. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. DATE OF HEARING : 30 .09.2015 DATE OF PRONOUNCEMENT : 30 . 09 .2015 RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 3 3 3. THE ASSESSEE IS A PROPRIETOR OF M/S. DURGA EICHER, WHEREIN HE IS WORKING AS AUTHORIZED DEALER OF EICHE R TRACTORS FOR UJJAIN DISTRICT. DURING THE YEAR THE ASSESSEE H AS TAKEN THE CONTRACT OF WATER DISTRIBUTION OF PHE, UJJAIN. THE ASSESSEE HAS TAKEN THE CONTRACT FROM UJJAIN MUNICIPAL CORPORATIO N FOR SUPPLY OF WATER DURING THE SCARCITY OF WATER IN THE CITY. THE ASSESSEE HAS TAKEN CONTRACT FOR AVAILABILITY OF TRA CTOR AND TANKERS WHEREIN THE WATER HAVE BEEN PROVIDED BY THE MUNICIPAL CORPORATION. ACCORDING TO THE INSTRUCTION S OF MUNICIPALITY OFFICIALS, WATER TANKERS ARE DISTRIBUT ED IN ALL AREAS OF UJJAIN CITY. THE ASSESSEE USED FOR MORE TH AN 100 TRACTORS FOR DISTRIBUTION OF WATER WHICH WERE TAKEN ON RENT ALONGWITH WATER TANKERS FOR TIMELY DISTRIBUTION. TH E AO HAS MADE INDEPENDENT ENQUIRIES AND TAKEN THE STATEMENT ON OATH OF ALL THE RELATED PARTIES FOR THE REGULAR ASSESSME NT. THE DETAILS OF THE SAME AS KNOWN TO THE ASSESSEE ARE AS UNDER :- (I) INFORMATION FROM MUNICIPAL CORPORATION FOR CONTRACT RECEIPT AND VEHICLE NOS. (II) INFORMATION FROM RTO FOR VERIFICATION OF VEHICLES. RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 4 4 (III) STATEMENT OF TRACTORS OWNERS. (IV) STATEMENT OF EE,PHE. (V) ENQUIRY FROM SUPPLIER OF FUEL M/S. FUEL CENTER. (VI) STATEMENT OF EMPLOYEES ENGAGED IN TRACTOR BUSINESS. (VII) VERIFICATION FROM SUPPLIER OF TRACTOR IMPLEMENTS. (VIII) STATEMENT OF ASSESSEE ETC. 4. ON THE BASIS OF ENQUIRY AND STATEMENT, THE AO HAS ISSUED SHOW CAUSE NOTICE AND HE FOUND VARIOUS DISCR EPANCIES IN CONTRACT BUSINESS AND HE PROPOSED TO DISALLOW TH E AMOUNT UNDER THE HEAD :- S.NO. PARTICULARS AMOUNT RS. 1. DIFFERENCE IN PAYMENTS IN TRACTORS AND TANKER RENT 7,23,607/ - 2. DIFFERENCE IN SALARY TO DRIVERS 39,91,200/ - 3. DIFFERENCE IN SALARY OF HELPERS 32,55,000/ - 4. DIFFERENCE IN FUEL EXPENSES 36,14,715/ - 5. DIFFERENCE IN SALARY TO SUPERVISORS 1,68,000/ - 6. DIFFERENCE IN CONTRACT RECEIPTS 7,68,550/ - 7. DIFFERENCE IN PLUMBING EXPENSES 62,759/ - 8. DISALLOWANCE OF EXPENDITURE U/S 40A(3) OF THE INCOME-TAX ACT, 1961. 4,55,336/ - TOTAL RS. 1,30,39,167/ - RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 5 5 5. AFTER CONSIDERING THE REPLY, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS HIRED VEHICLES, BUT FROM THE INFOR MATION OF RTO, 21 TRACTORS WERE NOT AVAILABLE FOR TRACTORS AN D EITHER OTHER VEHICLES WERE APPEARING AGAINST THESE NOS. OR THE VEHICLE NO. WAS INCORRECT. THE AO BASED ON UNAVAILABILITY OF THESE VEHICLES FOR DISTRIBUTION OF WATER, HE CUT SHORT TH E EXPENSES CLAIMED BY THE ASSESSEE ON THE BASIS OF NON-PLYING OF THESE VEHICLES. THE ASSESSEE HAS CONTENDED THAT THE PROP OSED DISALLOWANCE IS WITHOUT PROOF AND CORRECTNESS OF TH E EXPENSES OF THE CONTRACT BUSINESS AND AFTER CONSIDERING THE REPLY, THE AO HAS CALCULATED THE EXPENSES, WHICH WERE DISALLOW ED, WHICH ARE SHOWN AS UNDER:- S .NO. PARTICULARS AMOUNT RS. 1. DIFFERENCE IN PAYMENTS IN TRACTORS AND TANKER RENT 4,33,120/ - 2. DIFFERENCE IN SALARY TO DRIVERS 3 7 , 14,400 / - 3. DIFFERENCE IN SALARY OF HELPERS 25,97,875 / - 4. DIFFERENCE IN FUEL EXPENSES 3 2,60,652/ - 5. DIFFERENCE IN SALARY TO SUPERVISORS 1,68,000/ - 6. DIFFERENCE IN CONTRACT RECEIPTS 7,68,550/ - 7. DIFFERENCE IN PLUMBING EXPENSES 62,759/ - TOTAL RS. 1, 02,36,806/ - RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 6 6 6. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS ALLOWED THE CLAIM OF RS. 87,75,891/- AND SUSTA INED THE ADDITION OF RS. 14,60,915/- BY OBSERVING AS UNDER :- 6. GROUND.NO.2 IS REGARDING MAKING VARIOUS ADDITION TO INCOME FROM WORK OF CONTRACTORSHIP OF DISTRIBUTION OF WATER IN UJJAIN CITY, A JOB WHICH WAS GIVEN TO THEM BY PHE DEPARTMENT. THE AO HAS MADE PARTIAL DISALLOWANCES OUT OF VARIOUS EXPENSES NAMELY TRACTOR & TANKER RENT ( RS. 4,33,120/-), SALARY TO DRIVERS ( RS. 13,14,400/-, SALARY TO HELPERS ( RS. 25,97,875/-), FUEL EXPENSES (RS. 32,60,652/-), SALARY TO SUPERVISOR( RS. 1,68,000/-) AND DISALLOWED ENTIRE OF THE PLUMBING EXPENSES OF RS. 62,759/-. TOTAL DISALLOWANCE THUS CAME TO RS. 1,02,36,806/-. AS A RESULT OF THIS ADDITION THE TOTAL INCOME OF APPELLANT FROM CONTRACT RECEIPT BECAME RS.1,04,77,587/- OUT OF TOTAL CONTRACT RECEIPT OF RS.2,12,71,200/- WHICH IS PROFIT OF 49.25 % RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 7 7 OF TURNOVER. IN ANY LABOUR BASED CONTRACT, EARNING SUCH A PROFIT MARGIN OF 49.25 % IS UNTHINKABLE. THE AO MADE ELABORATE EFFORTS & EXAMINED THE APPELLANT AS WELL AS ENGINEERS OF PHE & FROM SUCH EXAMINATION IT BECAME CLEAR THAT THERE WAS HUGE SHORTAGE OF WATER IN UJJAIN & SUCH CONTRACT WORK WAS ACTUALLY EXECUTED. EVEN AO HELD IT TO BE A GENUINE CONTRACT. THE ONLY THING OBJECTED BY AO WAS CLAIM OF HIGHER EXPENSES. EVEN THERE AO WENT ON MAKING ADDITION LARGELY ON THE BASIS OF ASSUMPTION AND TO SOME EXTENT ON THE BASIS OF DELIBERATION OF FACTS GATHERED. I FIND THAT BOTH THE AO & APPELLANT WERE NOT CORRECT IN SO FOR AS WHILE APPELLANT OFFERED INCOME OF ONLY RS.2,40,781/- FROM TOTAL CONTRACT RECEIPTS OF RS.2,12,71,200/- WHICH IS ONLY 1.13 % NET PROFIT AND ON THE OTHER HAND AO RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 8 8 ESTIMATED A MUCH HIGHER NET INCOME FROM CONTRACT AT RS.1,04,77,587/- WHICH COMES TO A WHOPPING 49.25 % OF NET PROFIT FROM CONTRACT. CONSIDERING BOTH OF THE NET PROFIT AS UNJUSTIFIED AND INCORRECT, I THINK IT PROPER TO ESTIMATE THE NET PROFIT OF THE APPELLANT AT 8 % OF THE CONTRACT RECEIPTS I.E. 2,12,71,200/- WHICH COMES TO RS.17,01,696/-. AS A RESULT OUT OF TOTAL ADDITION OF RS.1,02,36,806/- IN VARIOUS HEADS UNDER THIS CONTRACT AS DISCUSSED ABOVE, AN ADDITION OF RS.14,60,915 (17,01,696 -2,40,781) IS SUSTAINED AND APPELLANT GETS A RELIEF OF RS.87,75,891/ - IN THE VARIOUS DISALLOWANCES OF EXPENSES MADE BY AO FROM THE CONTRACT ACCOUNT. ON THIS ISSUE RELIANCE IS PLACED ON THE DECISION IN CASE OF SHYAM BIRI WORKS LTD (2013) 38 TAXMEN 228 (ALLAHABAD) AND SURESH CHAND RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 9 9 TALERA (2005) 152 TAXMEN 348 (MP). IN CASE OF JOGENDER SINGH & CO. ETAH, ITAT AGRA BENCH, AGRA IN ITA NO.213/AGRA/2012 IN ORDER DATED 26-07- 2013 HELD IN SIMILAR SITUATION THAT CIT(A) WAS CORRECT IN APPLYING SUITABLE NP RATE INSTEAD OF DISALLOWANCES OF 50 % OF EXPENSES. IN CASE OF M/S CHOUDHARY AND BROTHERS, JAIPUR, ITAT BENCH A, JAIPUR IN ITA NO.879/JP/2011 VIDE ORDER DATED 25- 05-2012 HELD THAT AO WAS NOT JUSTIFIED IN MAKING SEPARATE ADDITIONS ON DIFFERENT HEADS, UNDER DEEMED REJECTION OF BOOKS OF A/C U/S 145(3). IT IS RATHER FELT THAT HE SHOULD HAVE MADE A COMPOSITE/COMMON ADDITION TOWARDS THE LOWER NET PROFIT SHOWN BY THE APPELLANT. AS A RESULT GR. NO.2 OF APPEAL IS PARTLY ALLOWED AS OUT OF TOTAL ADDITION OF RS. 1,02,36,806/-, ADDITION OF RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 10 10 RS. 14,60,915/- IS SUSTAINED AND BALANCE ADDITION OF RS. 87,75,891/- IS DELETED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT(A) HAS MAINLY ESTIMATED TH E NET PROFIT AT 8% OF THE CONTRACT RECEIPTS AND HE HAS ESTIMATED THE NET PROFIT AT 8% AND HE HAS GRANTED THE RELIEF BY RELYI NG UPON THE DECISION OF SHYAM BIRI WORKS LTD (2013) 38 TAXMEN 228 (ALLAHABAD) AND SURESH CHAND TALERA (2005) 152 TAXM EN 348 (MP). 8. WE FIND THAT THE DEPARTMENT HAS OBJECTION ON THE GROUND THAT THE ADDITION ON ACCOUNT OF TRACTOR AND TANKER RATE HAVE BEEN IGNORED BY THE LD. CIT(A). THE AO HA S RECORDED THE STATEMENT ON OATH AND TOTAL PAYMENT MA DE TO TRACTOR AND TANKERS WERE CALCULATED AND THIS PAY MENT IS TOWARDS THE TRACTOR AND TANKER AND THIS RESULTED TO DIFFERENCE OF RS. 4,33,120/-, WHICH SHOULD HAVE BEE N SUSTAINED BY THE LD. CIT(A). THE ASSESSEE HAS ALSO PAID THE RENT TO TANKERS, WHICH WAS CONTRARY TO THE BILL S RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 11 11 PRESENTED BY THE ASSESSEE. THEREFORE, THE LD. CIT(A )S ORDER IS PERVERSE. THE DEPARTMENT HAS OBJECTION THA T 8 % IS NOT TO BE APPLIED BECAUSE THIS IS A RATE PRESCRI BED FOR ENGAGING ANY BUSINESS OF CIVIL OR SUPPLY OF LABOURS FOR CIVIL CONTRACTS. THEREFORE, THIS SHOULD NOT HAVE BE EN CONSIDERED. THE LD. DR SUBMITTED THAT SURESH CHAND TALERAS JUDGMENT IS IN RESPECT OF CARRYING ON BUSI NESS OF PURCHASE AND SALE OF SERVICE AND THERE WAS NO FINDI NG THAT THE ASSESSEE HAS FOUND SALES OUTSIDE THE BOOKS OF ACCOUNT. THEREFORE, 8 % RATE WAS APPLICABLE. IN THE CASE OF JOGENDER SINGH & COMPANY, IT WAS A CIVIL CONTRAC T AND M/S. CHOUDHARY & BROTHERS ARE ALSO CIVIL CONTRACTOR S. THEREFORE, THE CIT(A)S ORDER SHOULD HAVE BEEN PERV ERSE. WE FIND THAT THE LD. CIT(A) HAS APPLIED 8% ON THE G ROSS RECEIPTS AND WE ARE CONFIRMING 8% AND 8% IS REASONA BLE. THEREFORE, WE DISMISS THE DEPARTMENTS APPEAL AS WE LL AS ASSESSEES APPEAL AND ALSO DISMISS THE CROSS OBJEC TION. RAJENDRA KHANDELWAL, UJJAIN VS. ITO,UJJAIN I.T.A. NOS. 249, 265 & C.O.NO.38/IND/2014. 12 12 9. IN THE RESULT, BOTH THE APPEALS OF THE DEPARTMENT AS WELL AS ASSESSEE AND CROSS OBJECTION ARE DISMISSED. 10. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 30 TH SEPTEMBER, 2015. CPU*