M/s. Narayan Builders, Ahmedabad V. The Income tax Officer,Ward-9(1), Ahmedabad

ITA 2599/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6898 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS R K TOPIWALA
• Assessee Lawyers: N C AMIN
• Keywords: Bogus purchase; Unexplained expenditure; Depreciation
• Section: 234B

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND D.C.AGRAWAL, AM M/S NARAYAN BUILDERS, 43 SHANKAR SOCIETY, NR. AMIKUNJ BUS STOP, NARANPURA, AHMEDABAD. VS. INCOME-TAX OFFICER, WARD 9(1), AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI N. C. AMIN, AR RESPONDENT BY:- MRS. R. K. TOPIWALA, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) THAT THE LD. CIT(A) HAS GRIEVOUSLY ERRED BOTH IN LA W AND ON THE FACTS OF THE CASE BY UPHOLDING ADDITION OF EXPENDIT URE OF RS.44,45,798/- BY APPLYING SECTION 40(A)(IA) OF THE IT ACT, 1961. (2) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FA CTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT BEFORE C ONFIRMING DISALLOWANCE OF RS.34,76,738/- BY APPLYING SEC.40(A )(IA) OF THE IT ACT, 1961. (3) THAT THE LD. CIT(A) HAS IGNORED THE FUNDAMENTAL THA T RIGHT TO RECEIVE THE WORK AMOUNT OF RS.34,76,738/- WILL ARIS E ON THE LAST DAY OF THE ACCOUNTING YEAR AFTER CERTIFICATION FROM SITE ENGINEER/SUPERVISOR AND HENCE DISALLOWANCE OF RS.34 ,76,738/- MADE BY THE LD. AO AND CONFIRMED BY CIT(A) IS WHOLL Y UNJUSTIFIED. ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 2 (4) THAT THE PRINCIPLES LAID DOWN BY THE HON. SUPREME C OURT AND VARIOUS HIGH COURTS ARE SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND AFTE R PROPERLY APPRECIATING THE SAME, DISALLOWANCE OF RS.34,76,738 /- CONFIRMED BY THE LD. CIT(A) BE ALLOWED ON MERITS. (5) ON THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE PAYMENT MADE TO THE TRANSPORTERS WAS NEITHER ANY CONTRACT AMOUNT AS CONTENDED BY THE APPELLANT BEFOR E LD. AO AS WELL AS CIT(A), HOWEVER, THE DISALLOWANCE OF RS.9,6 9,060/- CONFIRMED BY THE LD. CIT(A) BY APPLYING SEC.40(A)(I A) IS WHOLLY UNJUSTIFIED. (6) THAT THE APPELLANT HAS SUBMITTED WRITTEN SUBMISSION AT LENGTH BEFORE LD. A.O. AS WELL AS CIT(A), HOWEVER, WITHOUT PROPERLY APPRECIATING THE SAME DISALLOWANCE OF RS.9,69,060/- CONFIRMED BY CIT(A) BE DELETED ON MERITS AND JUSTICE BE DONE TO THE APPELLANT. (7) THAT THE LD. CIT(A) HAS FURTHER GRIEVOUSLY ERRED IN DISALLOWANCE OF RS.2,44,640/- HOLDING IT AS ALLEGED NON-GENUINE PURCHASES BE ALLOWED ON MERITS ON THE CASE OF THE APPELLANT. (8) THAT THE ADDITIONS OF RS.2,44,640/- MADE BY THE LD. AO ON ONE SIDED BASIS, WITHOUT ANY PROPER OPPORTUNITY AND RIG HT TO CROSS EXAMINATION AND THEREFORE THE SAME DESERVES TO BE D ELETED ON MERITS. (9) THAT THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRMING AN ADDITION OF RS.7,550/- HOLDING IT AS UNEXPLAINED EXPENDITURE . (10) ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE A PPELLANT, BOTH THE ADDITIONS OF RS.2,44,640/- AND RS.7,550/- CONFI RMED BY CIT(A) IS IN GROSS VIOLATIONS OF PRINCIPLES OF NATU RAL JUSTICE BE ALLOWED ON MERITS. ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 3 (11) OUT OF PETROL EXPENDITURE, DEPRECIATION AND TELEPHO NE EXPENDITURE, THE DISALLOWANCE WAS RETAINED @ 10% IS ON VERY HIGHER SIDE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT. (12) THAT THE APPELLANT HAS NOT COMMITTED THE DEFAULT OF SEC.210 TO 219 OF THE IT ACT, 1961 AND HENCE INTEREST CHARGED U/S 234B DESERVES TO BE DELETED. (13) THAT THE APPELLANT HAS NOT COMMITTED THE DEFAULT OF SECTION 271(1)(C) AND MOREOVER PROCEEDINGS INITIATED IS ALS O NOT LEGAL AND VALID IN LAW WHICH DESERVES TO BE STRUCK OUT. (14) THAT YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR A MEND ANY OF THE GROUNDS TILL THE APPEAL IS FINALLY HEARD AND DE CIDED. 2. THOUGH THE GROUNDS RAISED BY THE ASSESSEE ARE LE NGTHY BUT THEY GENERALLY RELATE TO TWO ISSUES. 3. THE ASSESSEE IS A CONTRACTOR AND DEVELOPER. THE AO DISALLOWED A SUM OF RS.44,45,798/- U/S 40(A)(IA) OF THE ACT. THI S AMOUNT CONSISTED OF TWO FIGURES ONE IS OF RS.34,76,738/- AND THE OTHER IS OF RS.9,69,060/-. 4. GROUND NO.1 RELATES TO OVER ALL SUM OF RS.44,45, 798/- WHEREAS GROUND NOS.2,3 & 4 RELATE TO SUM OF RS.34,76,738/- AND GROUND NOS.5 & 6 RELATE TO SUM OF RS.9,69,060/-. 5. REGARDING SUM OF RS.34,76,738/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAS MADE THE PAYMENT OF THIS SUM TO FOLLOW ING SIX PARTIES: SL. NO. NAME OF THE PARTY DATE OF AMOUNT PAID BEFORE 31/03/2005 DUE DATE OF DEPOSITING TDS DATE OF TDS DEPOSITED 1 PATEL LABOUR CONTRACTOR 9,09,874/- 31.3.2005 2 PATEL BUILDERS 13,17,520/- 31.3.2005 3 PATEL CORPORATION 9,98,997/- 31.3.2005 RS.68,528/- ON 30.05.2005; RS.4,532/- ON ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 4 4 PRUTIV CONSTRUCTION CO. 1,57,000/- 31,3,2005 5 DEVIBHAI SOLANKI 15,000/- 31.3.2005 6 SHANKERBHAI B.PANCHAL 78,338/- 31.3.2005 TOTAL 34,76,738/- 31.5.2005 & RS.1,569/- ON 23.8.2005 ACCORDING TO THE AO AS TDS DEDUCTED ON THE PAYMENTS OF THESE PARTIES WAS NOT PAID BY 31.3.2005 BUT WAS PAID SUBSEQUENTLY IN THE NEXT F.Y. IT IS HIT BY SECTION 40(A)(IA). THEREFORE, DEDUCTION CANN OT BE ALLOWED TO THE ASSESSEE. 6. THE LD. CIT(A) CONFIRMED THE ADDITION ON THE GRO UND THAT PAYMENT IS LATE AND NOT MADE BEFORE THE END OF THE F.Y. 7. BEFORE US, THE LD. AR SUBMITTED THAT BY VIRTUE O F PROVISO TO SECTION 40(A)(IA) BY FINANCE ACT, 2008 INTRODUCED WITH RETR OSPECTIVE EFFECT FROM 1.4.2005, IF PAYMENT IS MADE ON OR BEFORE THE DATE SPECIFIED IN SUB- SECTION (1) OF SECTION 139, THEN NO SUCH DISALLOWAN CE CAN BE MADE. HE SUBMITTED THAT THIS AMENDMENT COULD NOT BE BROUGHT TO THE NOTICE OF LD. AO AS IT HAD NOT BECOME LAW WHEN THE AO PASSED THE ORDER. 8. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ALLO W THE CLAIM OF ASSESSEE AS IT IS MENTIONED BY THE AO AND LD. CIT(A ) THAT PAYMENTS HAVE BEEN MADE OF THE TDS SO MADE BY 23.8.2005 WHEREAS L AST DATE OF FILING OF RETURN WAS 31.10.2005 FOR ASST. YEAR 2005-06. SI NCE PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY FINANCE ACT WITH RE TROSPECTIVE EFFECT 1.4.2005 ARE COMPLIED WITH NO DISALLOWANCE IS CALLE D FOR. GROUND NOS.2,3 & 4 ARE, THEREFORE, ALLOWED. ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 5 10. GROUND NOS.5 & 6 RELATE TO PAYMENT MADE TO CERT AIN TRANSPORTER WITHOUT MAKING TDS AS UNDER :- SL.NO. NAME AMOUNT (RS.) 1 BHAVANI TRANSPORT 3,77,520/- 2 VIPUL TRANSPORT 3,90,390/- 3 GANESH TRANSPORT 2,01,150/- TOTAL 9,69,060/- THE AO OBSERVED THAT ALL THESE PARTIES ARE CONTRACT ORS AND WORK HAS BEEN GIVEN TO THEM AND, THEREFORE, ASSESSEE WAS REQUIRED TO MAKE TDS WHICH HAS NOT BEEN DONE. ACCORDING TO HIM THE CASE OF THE ASSESSEE IS SQUARELY COVERED UNDER SECTION 194C. 11. THE LD. CIT(A) ALSO CONFIRMED THE DISALLOWANCE OF THIS SUM FOR THE SAME REASON. 12. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT THE OFFICE OF THE BHAVANI TRANSPORT TO WHOM PAYMENT OF RS.3,77,52 0/- IS MADE, IS SITUATED AT A DISTANCE OF 20-25 KMS. FROM ASSESSEE S WORK SITE. HE IS DOING WORK ON RETAIL BASIS, KEEPING HIS TRUCKS ON T HE ROAD SIDE. ANY BODY WHO WANTS TO ENGAGE THE TRUCKS CAN BOOK THEM AND GE T THE WORK DONE. THE SAID PARTY IS NOT CONTINUOUSLY AND REGULARLY DO ING CARTING WORK. THE WORK IS ON PIECE-MEAL AND SMALL SCALE BASIS. THE WO RK CAN BE DISCONTINUED WITHOUT GIVING ANY NOTICE. HE IS ALSO DOING CARTING WORK FOR OTHERS. THE PAYMENT MADE TO THEM FOR EACH TRIP IS L ESS THAN RS.20,000/-. SIMILAR IS THE POSITION WITH RESPECT TO OTHER TWO T RANSPORTERS. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R CONSIDERED VIEW THE ASSESSEE HAS NOT BEEN ABLE TO SUBMIT EVIDENCE I N SUPPORT OF THE CLAIM MADE BY IT THAT WORK IS DONE ON PIECE-MEAL BASIS; O R EACH PAYMENT IS LESS THAN RS.20,000/- OR THERE WAS NO WORK CONTRACT. THU S THERE IS NO DISPUTE ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 6 THAT ASSESSEE HAS GOT THE WORK DONE FROM THESE THRE E PARTIES AND THE WORK RELATED TO EARTH FILLING AND TRANSPORTATION. WHETHE R THESE THREE PARTIES DO THE WORK FOR OTHER IS IMMATERIAL SO LONG AS THESE T HREE PARTIES CARRY ON THE WORK FOR THE ASSESSEE AND GET PAYMENT THEREAFTER. W ITH THIS PARTY AND THE THREE PARTIES, THE CONTRACT WILL REMAIN A WORK CONT RACT AS WORK IS ASSIGNED AND PAYMENT FOR THAT WORK IS MADE. NO CASE IS MADE OUT THAT IT FALLS WITHIN THE EXCEPTION THAT PAYMENT IS MADE ONE TIME FOR LESS THAN RS.20,000/-. ACCORDINGLY, WE UPHOLD THIS DISALLOWAN CE MADE BY AO AND CONFIRMED BY LD. CIT(A). ACCORDINGLY, GROUNDS NO.5 & 6 OF THE ASSESSEE ARE REJECTED. 14. GROUND NOS.7 & 8 RELATE TO BOGUS PURCHASES OF R S.2,44,640/-. THE AO FOUND THAT ASSESSEE HAS BEEN MAKING PURCHASE FRO M M/S REGENT GRANITE INDIA. IT HAS SHOWN TOTAL PURCHASE OF RS.4, 80,831/-. BUT WHEN COPY OF ACCOUNTS OF THE ASSESSEE FROM THE BOOKS OF THAT PARTY IS CALLED BY THE AO, IT WAS FOUND THAT ASSESSEE HAS MADE PURCHAS ES OF RS.2,44,640/-. FINDING NO EXPLANATION FROM THE ASSESSEE, THE AO MA DE THE ADDITION WHICH WAS ALSO CONFIRMED BY LD. CIT(A) AS NO EXPLAN ATION BEFORE HIM WAS GIVEN EXCEPT SAYING THAT OPPORTUNITY OF CROSS-E XAMINATION OF THAT PARTY WAS NOT GIVEN. LD. CIT(A) REJECTED THIS ARGUM ENT BY HOLDING THAT SUCH OPPORTUNITY WAS NEVER ASKED BY THE ASSESSEE BE FORE THE AO. 15. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFEREN CE IN THE ORDER OF LD. CIT(A). LD. AR COULD NOT POINT OUT AS TO FROM WHERE HE HAD MADE PURCHASES IF NOT MADE FROM M/S REGENT GRANITE INDIA AND HE COULD NOT POINT OUT HOW THE ACCOUNT SUBMITTED BY REGENT GRANI TE INDIA IS NOT CORRECT. NO RECONCILIATION WAS FILED. IT WAS ALSO N OT SHOWN THAT ALL THE PURCHASES AS RECORDED BY THE ASSESSEE IN HIS BOOK W ERE IN FACT NOT MATE ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 7 BY M/S REGENT GRANITE INDIA. IN VIEW OF THIS, WE CO NFIRM THE ADDITION. THEREFORE, GROUNDS NO.7 & 8 OF ASSESSEES APPEAL AR E REJECTED. 16. GROUND NO.9 & 10 RELATE TO DISALLOWANCE OUT OF UNEXPLAINED EXPENDITURE AT RS.7,550/-. THIS GROUND IS NOT SERIO USLY ARGUED BY LD. AR. IT RELATED TO PAYMENT IN CASH TO M/S NIRAV SALES CO RPORATION. WHEN AO HAD CALLED FOR COPY OF ACCOUNT FROM THAT PARTY NO S UCH PAYMENT AS CLAIMED BY THE ASSESSEE WAS FOUND. NO RECONCILIATIO N OF SUCH DISCREPANCY WAS GIVEN. WE ACCORDINGLY, CONFIRM THE ADDITION. TH EREFORE, GROUND NOS.9 & 10 ARE ALSO REJECTED. 17. GROUND NO.11 RELATES TO DISALLOWANCE OF PETROL EXPENDITURE, DEPRECIATION AND TELEPHONE EXPENDITURE AT 10% OF TH E TOTAL EXPENSES CLAIMED. 18. WE HAVE HEARD THE PARTIES AND AFTER CAREFUL CON SIDERATION WE ARE OF THE VIEW THAT ADDITIONS MADE BY THE AUTHORITIES ARE REASONABLE. ASSESSEE WAS NOT ABLE TO PROVE THAT ENTIRE EXPENDITURE SO CL AIMED WAS INCURRED FOR BUSINESS PURPOSES. THIS GROUND OF ASSESSEE IS ALSO REJECTED. 19. GROUND NOS.12,13 & 14 ARE GENERAL IN NATURE AND ARE PREMATURE. INTEREST WOULD BE LEVIED ON THE BASIS OF ASSESSED I NCOME AND IS CONSEQUENTIAL. ISSUE OF PENALTY U/S 271(1)(C) IS PR EMATURE AT THIS STAGE. AS A RESULT, GROUND NOS.12,13 & 14 ARE REJECTED. ITA NO.2599/AHD/2008 ASST. YEAR 2005-06 8 20. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 8/4/11. SD/- SD/- (D. K. TYAGI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 8/4/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 31/3/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 5/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..