M/s. Parishram Builders, Veraval V. The Additional Commissioner of Income Tax, Range-1, JUNAGADH

ITA 26/RJT/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2293 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M J CHARANIA
• Assessee Lawyers: MJ RANPURA
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BEN CH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S. S. GO DARA, J.M.) I.T. A. NO. 26/RJT/2014 (ASSESSMENT YEAR: 2006-07) M/S. PARISHRAM BUILDERS, KUNAL COMPLEX, OPP. IND. RAYON MILL, JUNAGADH ROAD, VERAVAL VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 1, JUNAGADH (APPELLANT) (RESPONDENT) PAN: AACFP5403G APPELLANT BY : SHRI M. J. RANPURA, C.A. RESPONDENT BY : SHRI M. J. CHARANIA, D.R. DATE OF HEARING : 12-01-2016 DATE OF PRONOUNCEMENT : 12-02-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-IV, RAJKOT, DATED 21.11.2013 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF ROAD BUILDING AND CIVIL CONSTRUCTION. ASSESSEE FILED I TS RETURN OF INCOME FOR A.Y. ITA NO 26/RJT/2014 . A.Y. 2006-07 2 2006-07 ON 29.12.2006 DECLARING TOTAL INCOME OF RS. 14,67,539/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 19.12.2008 AND THE TOTAL I NCOME WAS DETERMINED AT RS.24,42,660/-. AGGRIEVED BY THE ORDER OF A.O., ASS ESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 21.11.2013 D ISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS:- 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - IV, RAJKOT (HEREINAFTER REFERRED TO AS THE 'CIT(A)') WAS NOT J USTIFIED IN DISMISSING THE APPEAL EX-PARTE ON THE GROUND OF NON -PROSECUTION. 3.0 THE LD. CIT(A) ERRED ON FACTS AS ALSO IN LAW I N SUMMARILY CONFIRMING THE ADDITIONS AND DISALLOWANCES MADE BY THE AO. 4.0 THE LD. CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING DISALLOWANCE U/S. 40A(2)(B) OF THE ACT OF RS.9,46,920/- BEING 20% OF LABOUR CHARGES PAID TO SUB-CONTRACTOR M/S. SHANTI CONSTRUCTION CO. THE DIS ALLOWANCE MAY KINDLY BE DELETED. 5.0 THE LD. CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING DISALLOWANCE OF RS. 28,140/-MADE FROM TRAVELING EXPENSE, STAFF CONV EYANCE EXPENSE, STAFF WELFARE EXPENSE, TELEPHONE EXPENSE ETC. ON THE ALLE GED GROUND OF PERSONAL USE. THE DISALLOWANCE MAY KINDLY BE DELETE D. 4. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT D UE TO CERTAIN UNAVOIDABLE CIRCUMSTANCES, THE ASSESSEE COULD NOT APPEAR BEFORE LD. CIT(A) ON THE DATE OF HEARING AND THEREFORE LD. CIT(A) HAS DISMISSED T HE APPEAL EX PARTE AND THAT LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER. H E, THEREFORE, SUBMITTED THAT ASSESSEE BE GRANTED ONE MORE OPPORTUNITY TO PR ESENT ITS CASE BEFORE LD. CIT(A) AND ASSURED THAT ASSESSEE WOULD PRESENT BEFO RE LD. CIT(A). ON THE MERITS OF THE ADDITION MADE U/S.40A(2)(B), HE SUBMI TTED THAT ASSESSING ITA NO 26/RJT/2014 . A.Y. 2006-07 3 OFFICER HAS NOT GIVEN ANY FINDING AS TO HOW THE PAY MENT MADE TO M/S. SHANTI CONSTRUCTION CO. IS EXCESSIVE OR UNREASONABLE. HE FURTHER SUBMITTED THAT DISALLOWANCE OF OTHER EXPENSES HAVE BEEN MADE ON AD HOC BASIS OF 20%. HE SUBMITTED THAT THERE IS NO FINDING OF ASSESSING OFF ICER THAT THE EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS. HE, THEREFORE, SUBMITTED THAT THE ADDITION BE DELETED. IN THE ALTERNATE, HE SUBMITTED THAT THE ADDITIONS MADE ARE ON HIGHER SIDE AND ADDITIONS BE RESTRICTED TO REASONABLE AMOUNT AS DEEMED FIT BY THE TRIBUNAL. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDERS OF ASSESSING OFFICER AND LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DISMISSING THE APPEAL OF THE ASSESSEE HAS DECIDED THE ISSUE EX PARTE AND BY CRYPTIC ORDER UPH ELD THE ORDER OF ASSESSING OFFICER WITHOUT GIVING ANY INDEPENDENT FI NDING AS TO HOW THE EXPENSES THAT HAVE BEEN DISALLOWED U/S.40A(2)(B) ARE EXCESSIVE AND ALSO UPHOLDING THE DISALLOWANCE ON 20% WITH RESPECT TO O THER EXPENSES. AT THE SAME TIME, ON PERUSING THE ORDER OF ASSESSING OFFIC ER, WE FIND THAT ASSESSING OFFICER WHILE DISALLOWING THE EXPENSES ON AD HOC BASIS HAS NOT GIVEN ANY FINDING OF THE EXPENSES TO BE NOT FOR THE PURPOSE OF BUSINESS. IN THE PRESENT CASE, SINCE LD. CIT(A) HAS DISMISSED TH E APPEAL ON EX PARTE BASIS, ONE OF THE OPTION TO US WAS TO REMIT THE ISSUE BACK TO THE FILE OF LD. CIT(A) WITH DIRECTION TO PASS A SPEAKING ORDER. BUT CONSI DERING THE FACTS THAT THE ASSESSMENT YEAR INVOLVED IS A.Y. 2006-07, WE ARE OF THE VIEW THAT IF THE MATTER IS REMANDED BACK TO CIT(A) TO ADJUDICATE AFR ESH IT WOULD RESULT INTO PROLONGING THE LITIGATION. IN SUCH A SITUATION, IN VIEW OF THE UNDISPUTED FACT THAT THE NATURE OF ACTIVITY OF THE ASSESSEE BEING I N CIVIL CONSTRUCTION LD. A.RS. SUBMISSION OF RESTRICTING THE DISALLOWANCE T O A REASONABLE AMOUNT, ITA NO 26/RJT/2014 . A.Y. 2006-07 4 AND TAKING SUPPORT OF RATE OF PRESUMPTIVE PROFIT AS STIPULATED UNDER THE PROVISION OF SECTION 44AD AND IN THE OVER ALL INTER EST OF JUSTICE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE ENDS OF JUSTI CE SHALL BE MET IF DISALLOWANCE WITH RESPECT TO PAYMENT TO M/S. SHANT I CONSTRUCTION CO. AND DISALLOWANCE IN RESPECT TO OTHER EXPENSES IS RESTRI CTED TO 10% OF PAYMENTS AND EXPENSES RESPECTIVELY. WE THUS DIRECT ACCORDIN GLY AND THUS PARTLY ALLOW THE GROUND OF ASSESSEE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 12/02/2016 SD/- SD/- (S. S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 12/02/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT