The ACIT.Circle-3, Surat V. Shri Vijaybhai Chhanabhai Rathod, Surat

ITA 2543/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6637 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 20-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: S N DIVETIA
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.2543/AHD/2010 A. Y.: 2007-08 THE A. C. I. T., CIRCLE-3, ROOM N0.213, 2 ND FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS SHRI VIJAYBHAI CHHANABHAI RATHOD, PROP. NAVSARJAN ENGINEERING, 98, RADHA KRISHNA SOCIETY, RANDER ROAD, PALANOPUR PATIA, SURAT PA NO. ADMPR 3767 N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. P. TALATI, SR. DR RESPONDENT BY SHRI S. N. DIVETIA, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II , SURAT DATED 26 TH MAY, 2010 FOR ASSESSMENT YEAR 2007-08, CHALLENGING THE DELETION OF ESTIMATED DISALLOWANCE OF 10% OF THE LABOUR EXPENSE S OF RS.26,17,853/- 2. THE ASSESSEE IS A LABOUR CONTRACTOR WORKING WITH COMPANIES LIKE GSPC GAS LTD., ADANY ENERGY, GUJARAT GAS CO. L TD. DURING THE YEAR THE ASSESSEE HAD CLAIMED LABOUR EXPENSES TO TH E EXTENT OF RS.2,61,78,534/-. THE AO ASKED THE ASSESSEE TO FURN ISH RELEVANT EVIDENCES IN SUPPORT OF THE CLAIM AND TO PRODUCE BO OKS OF ACCOUNTS, BILLS AND VOUCHERS AND OTHER DOCUMENTS. THE AO ON E XAMINING THE ITA NO.2543/AHD/2010 ACIT, CIRCLE-3, SURAT VS SHRI VIJAYBHAI CHHANABHAI RATHOD 2 DETAILS FOUND THAT THE ASSESSEE DID NOT PRODUCE ATT ENDANCE REGISTER OR JOB CARD, THE INK USED FOR TAKING THUMB IMPRESSI ON IS QUITE FRESH AND ALMOST CASH PAYMENTS WERE MADE, IDENTICAL THUMB IMPRESSIONS WERE PRESENT ON VOUCHERS OF DIFFERENT PERSONS, SALA RY/WAGE REGISTER PRODUCED BY THE ASSESSEE CONTAINED THE NAME OF RECI PIENTS, COMMON HANDWRITING HAS BEEN USED FOR PUTTING SIGNATURES AN D THAT HUGE AMOUNTS OF PAYABLE WAGES HAS BEEN SHOWN. THE AO, TH EREFORE, ASKED THE ASSESSEE WHY THE AMOUNT SHOULD NOT BE DIS ALLOWED. THE ASSESSEE SUBMITTED THAT WHATEVER EVIDENCES HAD BEEN FURNISHED IN SUPPORT OF THE LABOUR EXPENSES WERE FINAL EVIDENCES . THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWE D 10% OUT OF THE LABOUR EXPENSES. SAME SUBMISSIONS WERE REITERATED B EFORE THE LEARNED CIT(A) AND IT WAS SUBMITTED THAT DURING THE YEAR THE ASSESSEE HAS DISCLOSED CONTRACT INCOME OF RS.4.67 C RORES AS AGAINST RS.1.21 CRORES IN THE IMMEDIATELY PRECEDING ASSESS MENT YEAR AND RS.63.78 LACS IN THE YEAR BEFORE. IT WAS, THEREFORE , SUBMITTED THAT TURNOVER OF THE ASSESSEE HAS INCREASED FOUR TIMES A ND THE NET PROFIT REMAINED THE SAME. THEREFORE, BOOK RESULTS ARE REAS ONABLE AND HAVE TO BE ACCEPTED. IT WAS FURTHER SUBMITTED THAT COMPL ETE BOOKS OF ACCOUNTS, BILLS, VOUCHERS AND BANK STATEMENTS WERE FILED BEFORE THE AO TO PROVE GENUINE PAYMENT, THEREFORE, MINOR DISCR EPANCY CREPT IN THE RECORD SHOULD NOT BE TAKEN AGAINST THE ASSESSEE TO DISALLOW HUGE AMOUNT. EVEN, THE ASSESSEE OFFERED TO PRODUCE THE L ABOURERS IN PERSON BEFORE THE AO BECAUSE THERE WERE LARGE NUMBE RS OF LABOURERS WORKING FOR THE ASSESSEE AT DIFFERENT SITES. THE AS SESSEE ALSO REQUESTED THE AO TO DEPUTE INSPECTOR TO VISIT SITE AND EXAMINE THE LABOURERS PERSONALLY. BUT THE AO FAILED TO DO SO. I T WAS FURTHER ITA NO.2543/AHD/2010 ACIT, CIRCLE-3, SURAT VS SHRI VIJAYBHAI CHHANABHAI RATHOD 3 EXPLAINED BEFORE THE LEARNED CIT(A) THAT PAYMENTS A RE MADE REGULARLY TO THE LABOURERS WHO COLLECTED THE AMOUNT THROUGH THE CONTRACTORS AND PAYMENTS WERE MADE TO THEM WHENEVER REQUIRED BY THEM. GENUINENESS OF THE PAYMENT HAS NOT BEEN DOUBT ED AND EVEN FOR NON-MAINTENANCE OF ATTENDANCE REGISTER IS NO GR OUND TO REJECT THE CLAIM OF THE ASSESSEE. THE ASSESSEE ALSO EXPLAINED THAT NO RECORDS HAVE BEEN MANIPULATED AND THUMB IMPRESSIONS OF THE LABOURERS WERE TAKEN AGAINST RECEIPT OF PAYMENT. ATTENDANCE RECORD S ARE GENERALLY MAINTAINED ON CARDS ON THE BASIS OF WHICH PAYMENTS ARE DISBURSED. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF T HE ASSESSEE NOTED THAT THERE IS NO BASIS FOR THE AO TO GIVE FIN DING THAT VOUCHERS WERE HAVING FRESH THUMB IMPRESSIONS AND ALSO THERE WAS NO REASON TO GIVE FINDING THAT THUMB IMPRESSIONS WERE IDENTIC AL BECAUSE THE AO IS NOT TECHNICALLY COMPETENT TO DO SO AND THE MATTE R IS NOT SENT TO ANY FORENSIC SCIENCE LABORATORY. ALL THE FINDINGS OF TH E AO ARE BASED ON ASSUMPTION AND PRESUMPTION. THE LEARNED CIT(A) ALS O NOTED THAT THE FINDINGS OF THE AO HAVE NOT BEEN SUPPORTED BY ANY C ORROBORATIVE EVIDENCE AND THAT THE ASSESSEE HAD FOUND DIFFICULTY TO CALL 350 LABOURERS FROM 5/6 DIFFERENT SITES TO SURAT. THEREF ORE, THE ASSESSEE REQUESTED THE AO TO DEPUTE INSPECTOR PERSONALLY TO EXAMINE THE LABOURERS, BUT THIS FACT IS NOT BROUGHT ON RECORD B Y THE AO. THE LEARNED CIT(A), THEREFORE, NOTED THAT IN CASE THE A O WANTED TO EXAMINE SOME OF THEM, HE COULD HAVE EXAMINED THROU GH THE INSPECTOR. THE LEARNED CIT(A), THEREFORE, NOTED THA T MERELY BECAUSE OF NON-MAINTENANCE OF ATTENDANCE REGISTER ADDITION SHOULD NOT HAVE BEEN MADE ON MERE ASSUMPTION AND PRESUMPTION. THE L EARNED CIT(A) ALSO NOTED THAT MERELY BECAUSE CERTAIN WAGES WERE ITA NO.2543/AHD/2010 ACIT, CIRCLE-3, SURAT VS SHRI VIJAYBHAI CHHANABHAI RATHOD 4 OUTSTANDING IS NO GROUND TO MAKE DISALLOWANCE BECAU SE OUTSTANDING PAYMENTS HAVE BEEN MADE IN SUBSEQUENT MONTHS WHICH IS NOT CONSIDERED BY THE AO. THE LEARNED CIT(A) CONSIDERIN G THE TOTALITY OF THE FACTS AND CIRCUMSTANCES DELETED THE ADDITION. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO P B-14 TO SHOW THAT THE NET PROFIT RATE OF THE ASSESSEE IN THE ASSESSME NT YEAR UNDER APPEAL IS 5.01% AS AGAINST NET PROFIT RATE OF THE P RECEDING ASSESSMENT YEAR AT 5.33% AND 4.71% IN THE ASSESSMEN T YEARS 2006- 07 AND 2005-06 RESPECTIVELY. HE ALSO REFERRED TO PB -15 TO SHOW THE COMPARATIVE STATEMENT OF CONTRACT INCOME, TOTAL LAB OUR EXPENSES AND PERCENTAGE OF EXPENSES AGAINST CONTRACT INCOME TO S HOW THAT THE EXPENSES IN PERCENTAGE AS AGAINST CONTRACT INCOME I S STATIC, THEREFORE, THERE WAS NO REASON FOR THE ASSESSEE TO HAVE CLAIMED EXORBITANT LABOUR EXPENSES. HE HAS RELIED UPON THE ORDER OF THE ITAT DELHI BENCH IN THE CASE OF ACIT VS ALLIED CONSTRUCT ION 106 TTJ 616 IN WHICH IT WAS HELD AS UNDER: CONCLUSION: AD HOC DISALLOWANCE OF LABOUR EXPENSES COULD NOT BE MADE SIMPLY ON THE BASIS THAT THE VOUCHERS WERE SEL F- MADE AND NOT RELIABLE WITHOUT MAKING ANY TEST CHECK AND PINPOINTING WHICH ITEM OF EXPENDITURE IS NOT VERIFIABLE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD AND DO NOT FIND ANY MERIT IN TH E APPEAL OF THE ITA NO.2543/AHD/2010 ACIT, CIRCLE-3, SURAT VS SHRI VIJAYBHAI CHHANABHAI RATHOD 5 REVENUE. THE ASSESSEE HAS FIELD THE COMPARATIVE CHA RT OF THE CONTRACT INCOME, TOTAL LABOUR EXPENDITURE AND PERCE NTAGE OF THE CONTRACT INCOME IN HT4E ASSESSMENT YEAR UNDER APPEA L AS WELL AS IN THE PRECEDING ASSESSMENT YEAR AT PAGE 15 OF THE PAP ER BOOK WHICH READS AS UNDER: A.Y. CONTRACT INCOME RS. TOTAL LABOUR EXPENSES RS. (%) OF EXPENSES AGAINST CONTRACT INCOME 2005-06 63,78,388 43,40,734 68.05 2006-07 1,20,98,965 86,19,118 71.24 2007-08 4,66,84,566 3,09,26,978 66.25 2008-09 7,59,49,162 5,21,13,441 68.62 2009-2010 12,64,07,561 8,00,04,174 63.29 SIMILARLY, AT PAGE 14 OF THE PAPER BOOK THE NET PRO FIT RATE IN THE ASSESSMENT YEAR UNDER APPEAL IS SHOWN AT 5.01% AND IN THE PRECEDING ASSESSMENT YEARS 2005-06 HAVE BEEN SHOWN AT 5.33% AND 4.71% RESPECTIVELY. THESE FIGURES OF THE ASSESS EE WOULD SHOW THAT THE NET PROFIT RATE OF THE ASSESSEE IS ALMOST SAME IN THE ASSESSMENT YEAR UNDER APPEAL AND THE PRECEDING ASSE SSMENT YEAR. THE PERCENTAGE OF THE EXPENSES AGAINST CONTRACT INC OME IS ALSO STATIC AND NO UNREASONABLE OR EXORBITANT EXPENSES H AVE BEEN CLAIMED AGAINST THE CONTRACT INCOME. CONSIDERING TH E HISTORY OF THE ASSESSEE NOTED ABOVE IN THE LIGHT OF THE FINDINGS O F THE LEARNED CIT(A), WE DO NOT FIND ANY JUSTIFICATION FOR DISALL OWING THE EXPENDITURE. IT APPEARS THAT THE ASSESSEE HAS CLAIM ED REASONABLE EXPENSES OUT OF THE CONTRACT INCOME. NO CASE IS MAD E OUT OF INFLATING ITA NO.2543/AHD/2010 ACIT, CIRCLE-3, SURAT VS SHRI VIJAYBHAI CHHANABHAI RATHOD 6 EXPENSES OR MAKING BOGUS CLAIM. BECAUSE OF MINOR DI SCREPANCY IN THE VOUCHERS ETC. IS NOT GROUND TO REJECT THE CLAIM OF THE ASSESSEE. FURTHER, NO REASONS HAVE BEEN GIVEN AS TO WHY 10% O F THE EXPENDITURE HAS BEEN DISALLOWED. CONSIDERING THE TO TALITY OF THE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). WE CONFIRM HIS FINDING S AND DISMISS THE DEPARTMENTAL APPEAL. 5. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 13-05-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 13-05-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD