SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS, MUMBAI V. ITO 25(2)(3), MUMBAI

ITA 2580/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0076 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 27-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M C OMININESHEN
• Keywords: Reopening of assessment; Bogus purchase; Unexplained expenditure; Audit objection
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 2580 /MUM/20 15 (ASSESSMENT YEAR 20 07 - 08 ) M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS PLOT NO. 679/806 GAYATRI PLACE, KORA KENDRA BO RIVALI (EAST) MUMBAI - 400 092. VS. ITO 25(2)(3) NEW CHARGE 32(3)(4) MUMBAI ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 2439/MUM/2015 (ASSESSMENT YEAR 2007 - 08) ITO 25(2)(3) NEW CHARGE 32(3)(4) MUMBAI VS. M/S. SHREE GAYATRI CONSTRUCTION & DEVELOPERS PLOT N O. 679/806 GAYATRI PLACE, KORA KENDRA BORIVALI (EAST) MUMBAI - 400 092. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAGFS58495K ASSESSEE BY SHRI NEELKANTH KHANDELWAL DEPARTMENT BY DR. M.C. OMININESHEN DATE OF HEARING 1 7 . 8 . 201 7 DATE OF PRONOUNCEMENT 31 .8 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 24 - 01 - 2015 PASSED BY LD CIT(A) - 44, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN GRANTING RELIEFS TO THE ASSESSEE. THE ASSESSEE IS CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT AS WELL AS THE ADDITIONS SUSTAINED BY LD CIT(A). M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION. THE ASSESSING OFFICER COMPLET ED THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT ON 29 - 12 - 2009. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE LD CIT(A) AND THE AO GAVE EFFECT TO THE ORDER PASSED BY LD CIT(A). SUBSEQUENTLY HE REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT AND COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS. THE ASSESSEE GOT PARTIAL RELIEF BEFORE LD CIT(A). AGGRIEVED BY THE ORDER PASSED BY LD CIT(A), BOTH THE PARTIES HAVE FILED THESE APPEALS BEFORE US. 3. IN THE APPEAL FILED BY THE ASSESSEE, THE VALIDITY OF REOPENING OF ASSESSMENT IS BEING QUESTIONED. THE CASE OF THE ASSESSEE IS THAT THE AO HAD RECEIVED AUDIT OBJECTIONS ON THE VERY SAME POINTS ON WHICH THE REOPENING WAS DONE. HE SUBMITTED THAT THE AO HAD REPLIED TO THE AUDIT PARTIES GIVING SUITABLE REPLY TO THE OBJECTIONS. THE LD D.R SUBMITTED THAT THE AUDIT OBJECTIONS CAN BE A SOURCE OF INFORMATION ABOUT ESCAPEMENT OF INCOME AND HENCE REOPENING IS VALID AS HELD BY HONBLE SUPREME COURT IN THE CASE OF PVS BEEDI (237 ITR 13). 4. THE L D CIT(A) HAS OBSERVED THAT THE AO HAS FOLLOWED THE DUE PROCEDURE AND HAS ALSO EXPLAINED THE REASONS FOR REOPENING. ACCORDINGLY HE HAS HELD THAT THE REOPENING IS VALID IN LAW. WE NOTICE THAT THE AO HAS LISTED OUT VARIOUS POINTS IN THE REASONS FOR REOPENIN G, WHICH SHOW THAT THE ASSESSING OFFICER HAS PRIMA FACIE CASE OF ESCAPEMENT OF INCOME. AS SUBMITTED BY LD D.R, THE AUDIT OBJECTIONS CAN BE THE SOURCE OF INFORMATION. ACCORDINGLY WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE REOPEN ING OF ASSESSMENT. 5. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE AO DISALLOWED A SUM OF RS. 28,52,096/ - U/S 40(A)(IA) OF THE ACT ON THE REASONING THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT S OURCE FROM CERTAIN PAYMENTS. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT THE M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 3 ABOVE SAID PAYMENTS INCLUDES REIMBURSEMENT OF EXPENSES TO THE TUNE OF RS.1,19,329/ - GIVEN TO M/S ISHITA AGENCIES. ACCORDINGLY THE LD CIT(A) DELETED THE ADDITION TO THE EXTENT OF RS.1,19,329/ - AND CONFIRMED THE BALANCE ADDITION OF RS.27,32,767/ - . 6. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN THE LIST OF PAYMENTS, WHICH WOULD ATTRACT THE TDS PROVISIONS, IN THE ASSESSMENT ORDER. THE LD A.R SUBMITTED THAT THE A SSESSEE HAS EXPLAINED THE DETAILS OF EACH AND EVERY PAYMENT IN ITS LETTER DATED 04 - 12 - 2012 AND EXPLAINED AS TO HOW THE TDS PROVISIONS WILL NOT BE ATTRACTED. HE SUBMITTED THAT THE PAYMENT INCLUDES PURCHASES OF GOODS ALSO. HOWEVER, THE TAX AUTHORITIES HAVE SIMPLY MADE THE ADDITION WITHOUT CONSIDERING THE EXPLANATIONS GIVEN BY THE ASSESSEE. 7. WE HAVE HEARD LD D.R ON THIS ISSUE. WE NOTICE THAT COPY OF THE LETTER DATED 04 - 12 - 2012 ADDRESSED TO THE AO IS PLACED AT PAGE 22 OF THE PAPER BOOK. A PERUSAL OF THE SAME WOULD SHOW THAT THE ASSESSEE HAD EXPLAINED THE NATURE OF EVERY PAYMENT. WE NOTICE THAT THE TAX AUTHORITIES HAVE MADE THE ADDITION U/S 40(A)(IA) OF THE ACT WITHOUT CONSIDERING THE REPLY GIVEN BY THE ASSESSEE. IN OUR VIEW, THIS IS NOT JUSTIFIED. 8. WE NOTICE THAT THE ASSESSEE HAS EXPLAINED THAT THE PAYMENT OF RS.3.00 LAKHS MADE TO M/S ESKAY ELEVATORS (INDIA) LTD IS PAYMENT FOR PURCHASE OF MATERIALS AND THE COPY OF BILL IS PLACED AT PAGE 64 OF THE PAPER BOOK. A PERUSAL OF THE SAME WOULD SHO W THAT IT WAS FOR SUPPLY OF MATERIALS AND THE VAT HAS ALSO BEEN COLLECTED AT 8%. HENCE THE SAME WOULD NOT ATTRACT THE PROVISIONS OF TDS. THE PAYMENT MADE TO MR. AJAY MISHRA WAS PERTAINING TO TWO BILLS OF RS.17,000/ - EACH, I.E., EACH PAYMENT DID NOT EXCEE D THE LIMIT OF RS.20,000/ - AND THE AGGREGATE PAYMENT DID NOT EXCEED RS.50,000/ - . HENCE THESE PAYMENTS WOULD ALSO NOT ATTRACT TDS PROVISIONS. ACCORDINGLY WE DIRECT THE AO TO DELETE BOTH M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 4 THESE ADDITIONS. THE ORDER PASSED BY LD CIT(A) ON THESE TWO PAYMENT S STANDS SET ASIDE. 9. WITH REGARD TO THE REMAINING PAYMENTS, THE ASSESSEE HAS OFFERED CERTAIN EXPLANATIONS. IN OUR VIEW THOSE EXPLANATIONS REQUIRE CONSIDERATION OF THE AO. ACCORDINGLY WE RESTORE THE MATTERS RELATING TO OTHER PAYMENTS TO THE FILE OF THE AO FOR EXAMINING THEM AFRESH AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE. THE ORDER OF LD CIT(A) PASSED ON THIS ISSUE STANDS MODIFIED ACCORDINGLY. 10. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO DISALLOWANCE OF PURCHASES. THE SAME ISSU E IS ALSO BEING CONTESTED BY THE REVENUE. THE ASSESSEE HAD CLAIMED A SUM OF RS.2,52,45,182/ - AS PURCHASES. WHILE GIVING THE DETAILS OF PURCHASES, THE ASSESSEE HAD SHOWN A SUM OF RS.11,24,784/ - AS MISCELLANEOUS PURCHASES. THE AO DISALLOWED THE SAME BY OB SERVING THAT THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DETAILS. THE LD CIT(A) SUSTAINED DISALLOWANCE TO THE EXTENT OF 15% AND ALLOWED THE REMAINING AMOUNT. THE ASSESSEE IS CHALLENGING THE ADDITION SUSTAINED BY LD CIT(A) TO THE EXTENT OF 15% AND THE REVE NUE IS CHALLENGING THE RELIEF GRANTED BY LD CIT(A). 11. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAD ASKED THE DETAILS OF PURCHASE UNDER BROAD CATEGORIES AND ACCORDINGLY THE ASSESSEE GROUPED THE PURCHASES AND SHOWN REMAINING AMOUNT AS MISCELLAN EOUS PURCHASES. HE SUBMITTED THAT THE ASSESSEE HAS CLEARLY EXPLAINED THE SAME IN ITS LETTER DATED 04 - 12 - 2012. HE SUBMITTED THAT THE AO DID NOT ASK THE BREAK UP DETAILS OF THE MISCELLANEOUS PURCHASES, BUT THE ASSESSEE EXPLAINED THE SAME TO BE PETTY EXPENS ES OF DAY TO DAY OPERATION DEBITED TO PURCHASES ACCOUNT. HE SUBMITTED THAT THE DETAILS OF MISCELLANEOUS PURCHASES ARE GIVEN AT PAGE 83 OF THE PAPER BOOK. HE SUBMITTED THAT THE SAME CONSISTS OF PURCHASES OF SMALL ITEMS M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 5 AGGREGATING TO RS.1,55,808/ - AND THE REMAINING EXPENSES PERTAIN TO JOB WORK CHARGES PAID. HE SUBMITTED THAT THE DETAILS OF PURCHASES OF RS.1,55,808/ - IS GIVEN IN PAGE 84 - 86 OF PAPER BOOK. HE SUBMITTED THAT THE DETAILS OF JOB WORK CHARGES PAID ON VARIOUS OCCASIONS ARE GIVEN IN PAGES 87 TO 89 OF THE PAPER BOOK. 12. ON THE CONTRARY, THE LD D.R PLACED RELIANCE ON THE ORDER PASSED BY LD CIT(A). 13. WE NOTICE THAT THE ASSESSEE HAS FURNISHED FULL DETAILS OF MISCELLANEOUS PURCHASES AND THE TAX AUTHORITIES HAVE MADE THE ADDITION WITHOUT EXA MINING THE SAME. HENCE WE ARE OF THE VIEW THAT THIS ADDITION HAS BEEN MADE ON SURMISES AND CONJECTURES. ACCORDINGLY WE ARE OF THE VIEW THAT THIS ADDITION NEEDS TO BE DELETED IN ENTIRETY. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE ENTIRE AMOUNT OF ADDITION RELATING TO MISCELLANEOUS PURCHASES. 14. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE. THE FIRST ISSUE CONTESTED BY THE REVENUE RELATES TO THE DISALLOWANCE OF PURCHASES MADE FROM M/S SHRI PARASHP RABHU GRANI MARMO (P) LTD. THE AO NOTICED FROM THE LIST OF SUNDRY CREDITORS THAT A SUM OF RS.3,26,019/ - WAS SHOWN AS PAYABLE TO THE ABOVE SAID PARTY. THE AO OBTAINED CONFIRMATION LETTER FROM THE ABOVE SAID PARTY, WHEREIN IT WAS CONFIRMED THAT IT HAS EFFE CTED SALES OF RS.1,19,562/ - ONLY AND THE PAYMENTS HAS ALSO BEEN RECEIVED. ACCORDINGLY IT WAS SHOWING NIL BALANCE. HENCE THE AO ADDED THE ABOVE SAID SUM OF RS.3,26,019/ - AS BOGUS PURCHASES. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD EXPLAINED THE DIFF ERENCE IN ITS LETTER DATED 31 - 12 - 2012 THAT THE PURCHASES MADE FROM SOME OTHER PARTY WAS WRONGLY CREDITED TO THE ACCOUNT OF M/S PARASPRABHU GRANI MARMO P LTD. IT WAS M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 6 SUBMITTED THAT THE SAME WAS RECTIFIED IN THE SUCCEEDING YEAR. BUT THE AO DID NOT CONSIDER THOSE EXPLANATIONS AND ACCORDINGLY MADE THE ADDITION. 15. BEFORE LD CIT(A), THE ASSESSEE GAVE VERY SAME EXPLANATIONS AND HENCE THE LD CIT(A) DELETED THE SAME. 16. WE HEARD THE PARTIES ON THIS ISSUE. IN ITS LETTER DATED 31 - 12 - 2012, THE ASSESSEE HA S EXPLAINED THAT THE PURCHASES OF RS.3,26,019/ - WAS MADE FROM M/S NEWSPARK TRADING CO. P LTD AND IT WAS WRONGLY CREDITED TO THE ACCOUNT OF M/S PARASPRABHU GRANI MARMO P LTD. IT WAS FURTHER SUBMITTED THAT THE SAID MISTAKE WAS RECTIFIED IN THE SUCCEEDING YE AR. THE ASSESSEE ALSO FURNISHED LEDGER ACCOUNT COPIES OF THE SUCCEEDING YEARS TO SUBSTANTIATE ITS CONTENTIONS. THE LD A.R INVITED OUR ATTENTION TO THE COPY OF LETTER DATED 31.12.2012 AND ALSO THE COPIES OF LEDGER ACCOUNTS. SINCE IT WAS A CASE OF ACCOUNT ING ERROR, WE ARE OF THE VIEW THAT THE ADDITION OF RS.3,26,019/ - IS NOT CALLED FOR. ACCORDINGLY WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. 17. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.1,53,976/ - MADE BY THE AO. THE CREDITOR NAMED M/S SHREE ENTERPRISES FILED CONFIRMATION LETTER STATING THAT THE ASSESSEE HAS MADE PURCHASES TO THE TUNE OF RS.17,41,556/ - . HOWEVER THE LEDGER ACCOUNT OF THE ASSESSEE SHOWED THE PURCHASES FROM THE ABOVE SAID PARTY AT RS.15,87,580/ - . HENCE THE AO TREATED THE DIFFERENCE AMOUNT OF RS.1,53,976/ - AS UNEXPLAINED PURCHASES AND ADDED THE SAME. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT THE BILL OF RS.1,53,976/ - WAS ACCOUNTED IN THE SUCCEEDING YEAR AND HENCE THE LD CIT(A) DELETED THE SA ME. 18. WE HEARD THE PARTIES ON THIS ISSUE. IT IS A FACT THAT THE ASSESSEE HAS ACCOUNTED PURCHASES TO THE TUNE OF RS.15,87,580/ - ONLY, WHILE THE SUPPLIER HAS CONFIRMED PURCHASE TO THE TUNE OF RS.17,41,556/ - . SINCE THE ASSESSEE HAS M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 7 ACCOUNTED LESSER A MOUNT AND DID NOT CLAIM THE DIFFERENCE AS EXPENDITURE, THE QUESTION OF UNEXPLAINED EXPENDITURE DOES NOT ARISE HERE. IN ANY CASE, THE ASSESSEE HAS SHOWN THAT THE DIFFERENCE HAS BEEN ACCOUNTED IN THE SUCCEEDING YEAR. HENCE WE ARE OF THE VIEW THAT THE LD CI T(A) WAS JUSTIFIED IN DELETING THIS ADDITION ALSO. 19. THE NEXT ISSUE CONTESTED BY THE REVENUE RELATES TO THE RELIEF GRANTED BY LD CIT(A) IN RESPECT OF UNEXPLAINED PURCHASES. WE HAVE ALREADY DEALT WITH THE SAME IN THE EARLIER PARAGRAPHS. 20. THE N EXT ISSUE CONTESTED BY THE ASSESSEE RELATES TO THE ADDITION PERTAINING TO UNACCOUNTED SALE OF FLATS. THE AO COMPUTED UNACCOUNTED SALES VALUE ON THE BASIS OF AGREEMENT FOR SALE. BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE REVENUE WOULD NOT ACCRUE TO THE ASSESSEE AT THE TIME OF ENTERING INTO AGREEMENT FOR SALE, BUT IT WOULD ACCRUE ONLY UPON EXECUTION OF SALE DEED. THE LD CIT(A) ALSO AGREED THAT THE RISK AND REWARD OF THE FLAT SHALL BE TRANSFERRED ONLY UPON EXECUTION OF SALE AGREEMENT (SALE DEED). ACCORDINGLY THE LD CIT(A) HELD THAT THE ASSESSEE HAS FOLLOWED CORRECT SYSTEM OF ACCOUNTING. ACCORDINGLY HE DIRECTED THE AO TO DELETE THE ADDITION RELATING TO UNACCOUNTED SALES. 21. WE HEARD THE PARTIES ON THIS ISSUE. WE NOTICE THAT THERE IS NO QUESTI ON OF UNACCOUNTED SALES AS THE DIFFERENCE POINTED OUT BY THE AO REFERS TO THE DIFFERENCE BETWEEN THE AGREEMENT FOR SALE AND THE AMOUNT SHOWN AS ACTUALLY RECEIVED. WE NOTICE THAT THE ASSESSEE HAS BEEN RECEIVING AGREED AMOUNT IN INSTAL L MENTS. AS RIGHTLY POINTED OUT BY LD CIT(A), THE INCOME SHALL ACCRUE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND THE SAME WOULD NOT ACCRUE UPON ENTERING AGREEMENT FOR SALE. ACCORDINGLY WE ARE OF THE VIEW THAT THE DECISION RENDERED BY LD CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. M/S. SHREE GAYATRI CONSTRUCTIONS & DEVELOPERS 8 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 31 . 8 .201 7. SD/ - SD/ - (PAWAN SINGH ) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 31 / 8 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CI T 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI