A.C.I.T.-9(3), MUMBAI V. R.P. INFRASTRUCTURE PVT. LTD., MUMBAI

ITA 2541/MUM/2011

• Counselvise Citation: 254119914 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Assessee Lawyers: DR K SHIVARAM
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 2541/MUM/2011 ASSESSMENT YEAR 2007-08 ASST. COMMISSIONER OF INCOME TAX 9(3), 2 ND FLOOR, ROOM NO. 229, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. R.P. INFRASTRUCTURE PVT. LTD., C-116, MAYUR APARTMENT, SODAWALA X LANE, BORIVALI (E), MUMBAI 400 092 PAN: AACCR 5405P (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RUPINDER BRAR (CIT-DR) RESPONDENT BY : SHRI DR. K. SHIVARAM DATE OF HEARING : 16-04-2012 DATE OF PRONOUNCEMENT : 02-05-2012 ORDER PER RAJENDRA, A.M. IN THE APPEAL FILED BY THE ASSESSING OFFICER (AO), THE FOLLOWING 02 (TWO) GROUNDS OF APPEAL HAVE BEEN RAISED AGAINST TH E ORDER OF CIT(A)- 20, MUMBAI DT. 28-01-2011 I.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE T O THE EXTENT OF ` 2,29,25,361/- MADE BY THE ASSESSING OFFICER U/S. 4 0(A)(IA) OF THE I.T. ACT, 1961, INSPITE OF THE FACT THAT THE AS SESSEE HAS NOT JUSTIFIED WHY THE DISALLOWANCE SHOULD NOT BE MADE F OR NON- COMPLIANCE WITH THE STATUTORY PROVISIONS, THOUGH SU FFICIENT OPPORTUNITIES WERE GIVEN. ITA NO. 2541/MUM/2011 R.P. INFRASTRUCTURE PVT. LTD., 2 II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 9,06,935/- WHICH REPRESENTS DISALLOWANCE OF 10% OF LABOUR EXPENSES I NCURRED IN CASH, IGNORING THE FACT THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE EXCEPT SELF-MADE VOUCHERS IN SUPPORT OF IT S CLAIM THAT THE EXPENDITURE IS DEDUCTIBLE U/S. 37(1) OF THE I.T .ACT, 1961. 2. AO, IN PARA 4 PG.2 OF HIS ORDER HAS DISCUSSED TH E ISSUE REGARDING 40(A)(I) AS UNDER: THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE WAS ASKED TO FILE DETAILS TDS DEDUCTED ON EXPENSES AND DISALL OWANCE U/S. 40(A)(IA) OF THE I.T.ACT. IN RESPONSE TO THE SAME, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED DETAIL S OF TDS DEDUCTED ON CONTRACTOR PAYMENTS AND TRANSPORT CHARG ES. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE VIDE SUBM ISSION DATED 21-12-2009 HAS ALSO SUBMITTED THAT THE DISALLOWANCE U/S. 40(A)(IA) OF THE INCOME TAX ACT COMES OUT TO ` 2,73,14,577/- VIDE THE SAME ORDER SHEET ENTRY THE AUTHORISED REPRESENT ATIVE OF THE ASSESSEE WAS ASKED AS TO WHETHER THE EXPENSES ON WH ICH TDS WAS DEDUCTED AND PAID INTO GOVT. ACCOUNT ON 27-10-2 007, WERE INCURRED IN THE MONTH OF MARCH, 2007 OR UPTO FEB 20 07 DURING THE SAME FINANCIAL YEAR. IN REPLY TO THE SAME THE AUTH ORISED PRESENTATIVE OF THE ASSESSEE SUBMITTED A REVISED WO RKING INCORPORATING THE DISALLOWANCE AS PER AMENDED PROVI SIONS OF SEC. 40(A)(IA) OF THE I.T.ACT, 1961. ACCORDING TO THE S UBMISSION THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WORKS OUT TO ` 3,56,60,900/-. ACCORDINGLY, A SUM OF ` 3,56,60,900/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)( C ) ARE INITIATED SEPARATELY. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PASSED THE FOLLOWING ORDER: I HAVE CONSIDERED THE ISSUE. THERE IS NO DISPUTE ON DISALLOWANCE OF EXPENSES TO THE EXTENT OF ` 1,37,45,539 (3,56,60,900-2, 19, 15, 361) AND I CONFIRM ADDITION OF THIS AMOUNT OUT OF IMPUGNED SUM OF ` 3,56,60,900/-. AS REGARDS THE BALANCE SUM, IT IS SEEN FROM THE DETAILS FILED VIDE LETTER DT. 30-12-2009, BEFORE THE AO THAT THE APPELLANT PURCHASED CEMENT, SAND RUBBLE AGGREGATING TO ` 1,73,12,876/- FROM TWO PARTIES, M/S. KUMAWAT CONSTRUCTION ( ` 91,45,613) AND M/S. VRINDA STONES ( ` 81,67,263). IT FURNISHED CONFIRMATION OF ACCOUNTS OF BOTH THE P ARTIES ALONG WITH BILLS/INVOICES OF PURCHASES BEFORE THE AO THRO UGH THE SAID LETTER. FURTHER, IT PURCHASED DIESEL WORTH ` 46,02,485/- FROM M/S. JAGAT SERVICE STATION. THE CONFIRMATION OF AC COUNT OF THIS ITA NO. 2541/MUM/2011 R.P. INFRASTRUCTURE PVT. LTD., 3 PARTY WAS ALSO FILED BEFORE THE AO ALONG WITH SUPPO RTING BILLS/INVOICES VIDE THE LETTER REFERRED SUPRA. SEC TION 40(A)(IA) BARS DEDUCTION OF INTEREST, COMMISSION OR BROKERAGE, REN T ROYALTY, FEES FOR PROFESSIONAL OR TECHNICAL SERVICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR B EING RESIDENT, FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOU R FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE A ND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BE EN PAID WITHIN THE TIME PROVIDED THEREIN. THUS, AMOUNTS PA YABLE FOR PURCHASE OF BUILDING MATERIALS AND CEMENT DOES NOT ATTRACT THE RIGOURS OF PROVISIONS UNDER SECTION 40(A)(IA). THE RE IS NO DISPUTE ON THE GENUINENESS OF THESE EXPENSES. THEY CANNOT BE DISALLOWED UNDER SECTION 40(A)(IA) EVEN THOUGH THE APPELLANT HAD DEDUCTED TAX AT SOURCE AND FAILED TO PAY THE SAME. HOWEVER, THE MATERIALS RELIED UPON BY THE APPELLANT AS REFERRED EARLIER COULD NOT BE CONSIDERED BY THE AO. THEY ARE HOWEVER, AVA ILABLE ON RECORD. I DIRECT THE AO TO LOOK AT THEM AND SATISF Y HIMSELF AND ALLOW DEDUCTION OF THE BALANCE SUM OF ` 2,19,15,361/- COVERED BY AMOUNTS PAYABLE TO THE THREE AFORESAID PARTIES. IN RESULT, ADDITION TO THE EXTENT OF ` 1,37,45,539/- IS CONFIRMED AND THAT OF THE BALANCE SUM OF ` 2,29,25,361/- IS DIRECTED TO BE DELETED BY THE AO AFTER VERIFICATION AS DIRECTED. 3. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT CI T(A) HAD ALREADY CONFIRMED SOME PORTION OF DISALLOWED EXPENS ES, THAT GOODS PURCHASED BY THE ASSESSEE DID NOT ATTRACT THE PROVI SIONS OF THE SEC. 40(A)(IA), THAT CIT(A) HAD DIRECTED THE AO TO VERIF Y THE DETAILS OF BALANCE EXPENSES AND THEN TAKE A DECISION. DR RELI ED UPON THE ORDER OF THE AO. 4. AFTER HEARING BOTH THE SIDES, WE FIND THAT CIT(A ) IN HIS ORDER CONFIRMED DISALLOWANCE AMOUNTING TO ` 1.37 CRORES FOR VIOLATION OF PROVISIONS OF SEC. 40(A)(IA). HE HAS GIVEN A CATEG ORICAL FINDING ABOUT PURCHASES MADE BY THE ASSESSEE DURING THE PERIOD UN DER CONSIDERATION. NON-APPLICABILITY OF SEC. 40(A)(IA) TO SUCH PURCHASES NEED NOT BE EMPHASISED. FOR THE BALANCE AMOUNT, HE HAD DIRECTED THE AO TO MAKE VERIFICATION. HIS CLEAR INSTRUCTION IS LO DELETE ADDITIONS AFTER CARRYING OUT VERIFICATION. WE AR E OF THE OPINION THAT ORDER OF THE CIT(A) IS JUST, REASONABLE AND BALANCE D. AO HAS BEEN GIVEN A CHANCE TO VERIFY THE CLAIMS MADE BY THE ASS ESSEE AND THEN ONLY DECIDE THE ISSUE. WE DO NOT INTEND TO DISTURB THE ORDER OF THE CIT(A). 5. GROUND NO.2 IS ABOUT DISALLOWANCE OF LABOUR CHAR GES. ISSUE HAS BEEN DISCUSSED BY THE AO IN THESE WORDS: ITA NO. 2541/MUM/2011 R.P. INFRASTRUCTURE PVT. LTD., 4 THE ASSESSEE HAS DEBITED ` 90,69,350/- AS LABOUR CHARGES TO THE PROFIT AND LOSS ACCOUNT. IT IS SEEN THAT MAJOR PORTION OF THE SAME IS INCURRED IN CASH BY THE ASSESSEE AND THROUGH SELF M ADE VOUCHERS. THEREBY FOR THE WANT FOR VERIFICATION 10% OF THE SA ME IS DISALLOWED. ACCORDINGLY, A SUM OF ` 9,06,935/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. CIT(A) IN HIS ORDER DECIDED THE ISSUE AS UNDER: I HAVE CONSIDERED THE ISSUE. SIMPLY BECAUSE EXPEN SES WERE INCURRED IN CASH THAT WOULD NOT MAKE THE APPELLANT DISENTITLED TO DEDUCTION. THE AO HAS NOT CITED SOLITARY INSTANCE WHERE HE FOUND SUCH EXPENSES UNVERIFIABLE OR NOT GENUINE. HE HAS ACTED ON ASSUMPTION AND PRESUMPTION. I, THEREFORE, DELETE THE ADDITION MAD E OF ` 9,06,935/-. 6. AR RELIED UPON THE ORDER OF THE CIT(A) WHERE AS DR RELIED UPON THE ORDER OF THE AO. THOUGH THE AO HAS MADE AN ADD ITION OF ` 9.06 LAKHS, YET HE HAS NOT GIVEN ANY INSTANCE OF UNVERIF IABLE VOUCHERS. HE HAS NEITHER TAKEN INTO CONSIDERATION THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE NOR HAS TRIED TO GIVE ANY PLAUS IBLE REASON FOR DISALLOWING THE CLAIM MADE BY THE ASSESSEE. 7. WE FAIL TO UNDERSTAND AS HOW AUTHORIZATION FOR F ILING SECOND APPEAL WITH REGARD TO SO CALLED DISALLOWANCE OF LAB OUR CHARGES WAS SANCTIONED. CIT(A) HAD PASSED A REASONED ORDER AND IT COULD HAVE BEEN ACCEPTED WITH GRACE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION. WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE G ROUND OF APPEAL NO.2 ALSO. APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MAY, 2012. SD/- SD/- (D.K. AGARWAL) (RAJENDRA ) JUDICIAL MEMBER AC COUNTANT MEMBER MUMBAI, DATE: 2 ND MAY 2012 ITA NO. 2541/MUM/2011 R.P. INFRASTRUCTURE PVT. LTD., 5 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR D BENCH, ITAT, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI