M/s D S Builders, Dhuri V. DCIT, Ludhiana

ITA 261/CHANDI/2011

• Counselvise Citation: 26121514 RSA 2011
• Duration Of Justice: 1 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Additional evidence
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1090/CHD/2008 (ASSESSMENT YEAR: 2005-06) THE D.C.I.T., VS. M/S D.S. BUILDERS, CIRCLE-IV, SHERPUR BYE PASS CHOWK, LUDHIANA. DHURI. AND ITA NO.261/CHD/2011 (ASSESSMENT YEAR: 2006-07) M/S D.S. BUILDERS, VS. THE D.C.I.T., SHERPUR BYE PASS CHOWK, CIRCLE-IV, DHURI. LUDHIANA. PAN: AADFD5714B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL DEPARTMENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 23.02.2012 DATE OF PRONOUNCEMENT : 26.03.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THESE CROSS APPEALS FILED BY THE REVENUE AND THE AS SESSEE ARE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA DATED 22.09.2008 AND 28.12.2 010 RELATING TO ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2. BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO.190/CHD/2008 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON FACTS AND IN LAW, THE LD. CIT(A)-II, LUDHIAN A HAS ERRED IN DELETING THE ADDITION OF RS.26,50,000/-. 2. FURTHER, THE LD. CIT(A)-II, LDH. HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. AMOUNTING TO RS.2,50,000/- ON ACCOUNT OF UNVERIFIABLE VOUCHERS WHICH COULD NOT BE PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. THE ISSUE IN GROUND NO.1 RAISED BY THE REVENUE I S AGAINST THE DELETION OF ADDITION OF RS.26,50,000/-. 5. DURING THE ASSESSMENT PROCEEDINGS, FROM THE EXAM INATION OF THE BANK ACCOUNT, THE ASSESSING OFFICER NOTED THAT A SU M OF RS.26,50,000/- WAS DEPOSITED ON 16.7.2004 AND ON THE SAME DATE SIM ILAR AMOUNT WAS WITHDRAWN FROM THE BANK ACCOUNT NO.233 MAINTAINED W ITH INDIAN BANK, SANGRUR. THE SAID SUM OF RS.26,50,000/- WAS RECEIV ED VIDE TWO CHEQUES FROM M/S BANSAL EICHERS, PATIALA ROAD, SUNAM FOR RS .13,50,000/- VIDE CHEQUE NO.7727 DATED 14.7.2004 AND RS.13,00,000/- V IDE CHEQUE NO.7728 DATED 15.7.2004. THE SAID AMOUNTS WERE DEP OSITED IN O.D. ACCOUNT NO.233 WITH INDIAN BANK, SANGRUR ON 16.7.20 04 AND ON THE SAME DATE SUM OF RS.26,50,000/- WAS WITHDRAWN IN CASH FR OM THE SAID ACCOUNT. BEFORE THE ASSESSING OFFICER THE EXPLANATION OF THE ASSESSEE WAS THAT THE AMOUNT HAD BEEN CREDITED IN ITS ACCOUNT WITHOUT ITS KNOWLEDGE AND CONSENT AND WITHOUT ITS AUTHORITY. FURTHER CLAIM O F THE ASSESSEE WAS THAT THE AMOUNTS WERE CREDITED IN THE ACCOUNT OF THE ASS ESSEE AND WERE WITHDRAWN ON THE SAME DATE BY M/S BANSAL EICHERS TO PLAY A FRAUD ON THE ASSESSEE. AS THE ASSESSEE HAD FAILED TO PRODUCE TH E PARTY AND IN THE 3 ABSENCE OF THE ASSESSEE HAVING ESTABLISHED THE IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION, THE SAID AMOUNT S WERE ADDED TO THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECT ION 68 OF THE INCOME TAX ACT. FURTHER THE ASSESSEE HAD EVEN FAILED TO F URNISH ANY DOCUMENTARY EVIDENCE THAT THE FRAUD HAS BEEN COMMIT TED BY THE SAID PARTY. RELIANCE WAS PLACED BY THE ASSESSING OFFICE R IN THE CASE OF ROSHAN DI HATTI [107 ITR 938 (SC)] AND IN THE CASE OF KALEKHAN MOHD. HANIF VS. CIT [50 ITR 1 (SC)]. 6. BEFORE THE CIT (APPEALS) THE ASSESSEE FURNISHED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TAX RULES. THE EVIDENCE WAS IN THE FORM OF COPY OF COU RT CASE FILED BY SHRI ANIK BANSAL AND SHOW CAUSE NOTICE ISSUED TO THE ASS ESSEE FIRM FOR RECOVERY OF AMOUNT OF RS.26,50,000/-. THE CONTENTI ON OF THE ASSESSEE BEFORE THE CIT (APPEALS) WAS THAT DUE TO THE DEMISE OF SHRI DARSHAN SINGH THE ABOVE SAID EVIDENCE COULD NOT BE FURNISHE D BEFORE THE ASSESSING OFFICER. THE CIT (APPEALS) CONFRONTED TH E SAID DOCUMENT TO THE ASSESSING OFFICER, WHO VIDE HIS REMAND REPORT D ATED 28.4.2008 SUBMITTED THAT THE ADDITIONAL EVIDENCE COULD NOT BE ACCEPTED. THE ASSESSING OFFICER ALSO STRESSED IN THE REMAND REPOR T THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITOR AND THE NATURE OF TRANSACTION. THE CIT (APPEALS) HOWEVER, ADMITTE D THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THE CIT (APPEALS) REFERRED TO THE CONTENTS OF THE COMPLAINT FILED BY SHRI ANIK BANSAL , SOLE PROPRIETOR OF M/S BANSAL EICHERS, SUNAM BEFORE ADJM, SUNAM UNDER SECTION 138 OF NEGOTIABLE INSTRUMENT ACT, UNDER WHICH THE ASSESSEE WAS ASKED TO MAKE THE PAYMENT ON ACCOUNT OF LOANS ADVANCED BY SHRI AN IK BANSAL TO THE ASSESSEE. THE CIT (APPEALS) OBSERVED THAT THE SAID AMOUNT HAVING BEEN PAID FROM THE BANK ACCOUNT OF M/S BANSAL EICHERS, S UNAM, THE 4 CREDITWORTHINESS OF THE CREDITOR WAS TAKEN TO HAVE BEEN PROVED. THE OBJECTION OF THE ASSESSING OFFICER VIS--VIS THE FR AUD PLAYED UPON THE ASSESSEE, AS PER THE CIT (APPEALS) STANDS PROVED IN VIEW OF THE ADDITIONAL EVIDENCE FILED. THE CIT (APPEALS) THUS HELD THAT WHERE IDENTITY OF THE CREDITOR AND HIS CREDITWORTHINESS W AS PROVED AND THE CREDITOR HAVING AFFIRMED THE POSITION IN THE AFFIDA VIT FILED BEFORE THE COURT TO PROVE THAT THE AMOUNTS WERE RECEIVED IN TH E BANK ACCOUNT OF THE ASSESSEE FROM SHRI ANIK BANSAL OF M/S BANSAL EICHER S, SUNAM. THE CIT (APPEALS) THUS HELD THAT THE SOURCE OF THE CREDITS WAS EXPLAINED BY THE ASSESSEE AND THERE WAS NO MERIT IN MAKING ADDITION IN THE HANDS OF THE ASSESSEE. 7. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 8. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE PRESENT GROUND OF APPEAL RAISED BY THE REVENUE IS IN RELATION TO THE ADDITION MADE BY THE ASSESSING OFFI CER TOTALING RS.26,50,000/-. THE AFORESAID ADDITION WAS MADE BY THE ASSESSING OFFICER AS THE ASSESSEE HAD FAILED TO EXPLAIN THE I DENTITY OF CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN RELATION OF DEPOSIT OF RS.26,50,000/- IN THE BANK ACCOUNT OF TH E ASSESSEE. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS TH AT THE SAID AMOUNT WAS DEPOSITED BY M/S BANSAL EICHERS, SUNAM IN ITS B ANK ACCOUNT BY PLAYING A FRAUD DUE TO THE DISPUTE WITH ONE OF THE PARTNER I.E. SHRI DARSHAN SINGH, WHO EXPIRED IN THE MONTH OF DECEMBER , 2007. AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.26 ,50,000/-, THE 5 ASSESSEE FILED AN EXPLANATION BEFORE THE CIT (APPEA LS) AND ALSO FURNISHED ADDITIONAL EVIDENCE IN THE FORM OF COURT PROCEEDINGS VIS--VIS RECOVERY OF RS.26,50,000/-. 10. THE EXPLANATION OF THE ASSESSEE BEFORE THE CIT (APPEALS) IN RESPECT OF THE CREDIT OF RS.26,50,000/- WAS AS UNDE R: IN FACT, M/S BANSAL EICHER HAD OPENED A BANK ACCOUNT IN THE SAME BRANCH, WHERE THE ASSESSEE HAD ITS OD ACCOUNT I.E. WITH INDIAN BANK, SANGRUR. THE SAI D PARTY WITHOUT KNOWLEDGE, CONSENT AND AUTHORITY OF T HE ASSESSEE DEPOSITED RS.26,50,000/- THROUGH CHEQUES I N THE ACCOUNT OF THE ASSESSEE AND THE SAME WERE WITHDRAWN BY M/S BANSAL EICHER ON THE SAME DAY. 11. THE ASSESSEE IN ITS PAPER BOOK HAS ENCLOSED THE COPY OF WRITTEN SUBMISSIONS FILED BEFORE THE CIT (APPEALS) AT PAGES 1 TO 12 OF THE PAPER BOOK, ALONGWITH COPY OF STATEMENT OF INDIAN BANK, S ANGRUR BRANCH AT PAGE 15-A OF THE PAPER BOOK. 12. THE FIRST PLEA OF THE ASSESSEE WAS THAT THE SAI D AMOUNT WAS DEPOSITED IN THE SAME BRANCH BY M/S BANSAL EICHERS, SUNAM IN WHICH THE ASSESSEE HAD ITS O.D. ACCOUNT BY OPENING A NEW BANK ACCOUNT. HOWEVER, PERUSAL OF THE ENTRIES AT PAGE 15-A OF THE PAPER BO OK REFLECTS THAT THE AMOUNT WAS DEPOSITED IN A BANK ACCOUNT WHICH HAD OP ENING BALANCE OF RS.20,43,166/-. THERE WAS A DEPOSIT OF RS.26,50,00 0/- ON 13.7.2004 AND THERE WAS SELF WITHDRAWAL OF RS.26,50,000/- ON 16.7 .2004. 13. THE NEXT PIECE OF EVIDENCE RELIED UPON BY THE ASSESSEE BEFORE THE CIT (APPEALS) WAS THE COURT CASE FILED UNDER SECTIO N 138 OF THE NEGOTIABLE INSTRUMENT ACT. IN THE SAID PROCEEDINGS BEFORE THE COURT THE CREDITOR M/S BANSAL EICHERS, SUNAM, THROUGH SOLE PR OPRIETOR SHRI ANIK BANSAL HAD AFFIRMED THE ADVANCEMENT OF LOAN OF RS.2 6,50,000/- TO THE ASSESSEE AND FURTHER ALLEGATION WAS IN RESPECT OF B OUNCING OF CHEQUES PAID BY THE ASSESSEE FOR RE-PAYMENT OF THE SAID AMO UNT. ADMITTEDLY, THE 6 IDENTITY OF THE CREDITOR IN SUCH CIRCUMSTANCES STAN DS PROVED. BUT MERELY BECAUSE THE ENTRY IS THROUGH BANK ACCOUNT OF THE CR EDITOR DOES NOT ESTABLISH THE CREDIT WORTHINESS OF THE CREDITOR. F URTHER THERE IS ANOTHER ANOMALY IN THE STATEMENT OF THE ASSESSEE BEFORE THE CIT (APPEALS) UNDER WHICH IT HAD STRESSED THAT THE AMOUNT IN QUESTION W AS DEPOSITED BY THE CREDITOR IN THE BANK ACCOUNT OF THE ASSESSEE AND WA S ALSO WITHDRAWN BY THE CREDITOR ON THE NEXT DATE, BY PLAYING THE FRAUD UPON THE ASSESSEE. UNDOUBTEDLY, THERE IS CASH WITHDRAWAL OF SAME AMOUN T ON THE NEXT DATE OF OPERATION OF THE BANK ACCOUNT. BUT BY WAY OF SE TTLEMENT OF THE COURT CASE FILED BY THE CREDITOR THE ASSESSEE HAD PAID BA CK THE ENTIRE AMOUNT OF LOAN AS IS EVIDENT FROM THE AFFIDAVIT OF SHRI ANIK BANSAL DATED 24.3.2008 PLACED AT PAGE 23 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO ANNEXED PETITION FILED IN THE COURT OF SDJM, SUNAM FOR THE RECOVERY OF THE SAID AMOUNT, COPY OF WHICH IS PLACED AT PAGES 18 ONWARDS OF THE PAPER BOOK. THE AFFIDAVIT FILED BY THE ASSESSEE FURTHER AFFIRMS THAT THE COURT CASE WAS WITHDRAWN BY SHRI ANIK BANSAL AS THE PAYMENT HAS BE EN MADE BY D.S.BUILDERS. 14. THE PERUSAL OF THE ABOVE SAID DOCUMENTS REVEALE D THAT ALL THE ABOVE SAID EVIDENCE WAS SUBSEQUENT TO THE CLOSE OF THE YEAR I.E. 31.3.2006 AS ON THE DATE OF THE CLOSE OF THE FINANC IAL YEAR, THE ASSESSEE HAD SHOWN AN ENTRY OF AMOUNT RECEIVED FROM M/S BANS AL EICHERS, SUNAM AND HAD FAILED TO FULFILL THE CONDITIONS OF SECTION 68 OF THE INCOME TAX ACT. MERELY BECAUSE THE ASSESSEE HAD ESTABLISHED T HE IDENTITY OF THE CREDITOR AND THE AMOUNT WAS THROUGH BANK ACCOUNT IN NO CASE ESTABLISHES THE CREDITWORTHINESS OF THE CREDITOR. THE FACTUM O F RE-PAYMENT OF THE LOAN IN THE CIRCUMSTANCES AS POINTED OUT HEREINABOV E WHERE FIRST ALLEGATION WAS THAT THE AMOUNT WAS ALREADY COLLECTE D BY THE CREDITOR BY WAY OF CASH WITHDRAWN AND THEREAFTER BY WAY OF PAYM ENT AS EVIDENCED 7 BY THE AFFIDAVIT OF THE CREDITOR, DOES NOT DISCHARG E THE ONUS CAST UPON THE ASSESSEE UNDER SECTION 68 OF THE ACT AND ON THE OTHER HAND, THE ENTRIES AS SUCH SEEM TO BE DUPLICATED. ONCE THE AM OUNT HAD BEEN COLLELCTED BY THE PARTY AS ALLEGED BY WAY OF CASH D EBIT, WHERE WAS THE QUESTION OF RE-PAYMENT OF THE SAID LOAN. WE ARE OF THE VIEW THAT THE ASSESSEE HAD FAILED TO ESTABLISH ITS CASE. IN VIEW OF THE CONFLICTING STANDS AND IN THE INTEREST OF JUSTICE, WE DEEM IT F IT TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE A SSESSEE TO DISCHARGE ITS ONUS UNDER SECTION 68 OF THE ACT. THE ASSESSING OF FICER SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.1 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 15. GROUND NO.2 RAISED BY THE REVENUE IS IN RESPECT OF THE ALLOWANCE OF EXPENDITURE. THE ASSESSING OFFICER MADE DISALLO WANCE OF RS.2 LACS OUT OF EXPENSES ON WORKS AND RS.50,000/- OUT OF OTH ER EXPENSES. THE SAID DISALLOWANCE WAS MADE IN THE ABSENCE OF THE VO UCHERS MAINTAINED BY THE ASSESSEE. THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF EXPENSES ON WORKS WAS RS.4,55,69,494/-. THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE AS IT HAD DECLARE D GP RATE OF 9.18% DURING THE YEAR AS AGAINST GP RATE OF 9.13% SHOWN I N THE PRECEDING YEAR. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WE R EVERSE THE ORDER OF THE CIT (APPEALS) IN ALLOWING THE CLAIM BECAUSE THE ASS ESSEE HAD DECLARED BETTER GP RATE. THE EXPENSES IN QUESTIONS WERE CLA IMED IN THE PROFIT & LOSS ACCOUNT AND EFFECTED THE NP RATE AND NOT GP RA TE. IN THE ABSENCE OF THE ASSESSEE HAVING FILED/PRODUCED THE NECESSARY EVIDENCE IN SUPPORT OF THE EXPENDITURE THOUGH SUCH ESTIMATE SHOULD BE A VOIDED, THE ASSESSING OFFICER IS LEFT WITH NO OPTION BUT TO EST IMATE THE DISALLOWANCE. WE THUS UPHOLD THE DISALLOWANCE OF RS.2 LACS MADE B Y THE ASSESSING OFFICER. FURTHER DISALLOWANCE OF RS.50,000/- OUT O F VARIOUS EXPENSES 8 INCLUDING TELEPHONE AND OTHER EXPENSES ON SIMILAR G ROUNDS IS ALSO UPHELD. GROUND NO.2 RAISED BY THE REVENUE IS ALLOW ED. ITA NO.261/CHD/2011 16. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.5,97,710/- MADE BY ASSESSING OFFICER BY DISALLOWING PART DEDUCTION CLAIMED BY THE APPELLANT IN RESPECT OF RECOVERY MADE BY THE GOVT. DEPARTMENT. 2. THAT WHILE CONFIRMING PART OF ADDITION OF RS.5,97,710/- AS PER PARA 1 ABOVE, THE LD. CIT(A) HAS NOT CONSIDERED THE FACT THAT THE MANNER OF EXECUTION THE CONTRACT IS THAT THE CONTRACT IS CARRIED AFTER THE MATERIAL IS SUPPLIED BY THE VARIOUS GOVT. DEPARTMENT WHICH IS NORMAL MODUS OPERANDI IN THE PAST. 3. THAT THE LD. CIT(A) HAS ALSO ERRED IN CONFIRMING THE PENALTY AMOUNTING TO RS.4,98,080/- LEVIED BY E.E. MALERKOTLA AND RS.4,388/- LEVIED BY SALES TAX. 4. THAT WHILE CONFIRMING PENALTY OF RS.4,98,080/-, THE LD. CIT(A) HAS ERRED TO CONSIDER THAT AMOUNT IN QUESTION WAS PAID FOR DELAY IN EXECUTION OF THE PROJECT DUE TO ILL HEALTH OF THE MAIN PARTNER S.DARSHAN SINGH WHO HAS SINCE EXPIRED ON 28/12/2007 AND AS SUCH, ABOVE SAID AMOUNT PAID WAS NOT IN THE NATURE OF PENALTY UNPAID FOR ANY FRAUD ON INFRINGEMENT OF LAW ON ANY UNSCRUPULOUS BREACH OF CONTRACT. REGARDING THE AMOUNT OF RS.4,388/-, IT IS ROUTINE PAYMENT FOR SALE TAX ASSESSMENT AND NOT IN THE NATURE OF PENALTY. 5. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE FOLLOWING ADDITION MADE BY THE ASSESSING OFFICER:- RS.1,00,000/- OUT OF TOTAL EXPENSES ON WORKS AMOUNTING TO RS.2,89,51,413/- SUCH AS BRICKS, EARTH FILLING, SAND CHIPS ETC. RS.50,000/- OUT OF REPAIR AND MAINTENANCE RS.1,50,000/- OUT OF LABOUR/WAGES PAID TO WORKERS. 6. THAT WHILE CONFIRMING THE ABOVE SAID ADDITION I N PARA 5 ABOVE, THE LD. CIT(A) HAS NOT CONSIDERED 9 THE FACT THAT COMPLETE BOOKS OF ACCOUNT AND OTHER VOUCHERS WERE PRODUCED BEFORE THE AO AND NO DOUBT HAS BEEN CAST UPON THE SAME AND AS SUCH, ABOVE SAID ADHOC DISALLOWANCE WITHOUT PIN POINTING ANY SPECIFIC DEFECT IS UNCALLED FOR. 7. THAT ADDITION IN THE AFORESAID PARAS HAS BEEN MADE AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSION MADE DURING THE COURSE OF HEARING HAS NOT BEEN CONSIDERED. 17. THE ISSUE IN GROUND NOS.1 AND 2 RAISED BY THE A SSESSEE IS AGAINST THE ADDITION OF RS.5,97,710/-. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS GOVERNMENT CONTRACTOR. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO FURNISH DOCUMENTARY EVIDENCE REGARDING THE RECOVERY MADE BY THE GOVERNMENT DEPARTMENT CLAIMED AS DEDUCTION OUT OF GROSS RECEIP TS. THE ASSESSEE FURNISHED THE PROOF OF RECOVERY MADE IN RESPECT OF VARIOUS CONTRACTS UNDERTAKEN BY IT DURING THE YEAR. HOWEVER, IN THE CASE OF E.E. CONST. DIVN.II, PWD, B & R, PATIALA AGAINST THE TOTAL RECO VERY SHOWN AT RS.45,68,993/- THE ASSESSEE HAD FILED DOCUMENTARY E VIDENCE IN THE FORM OF COPIES OF RUNNING BILLS OF THE CONTRACTS AS PER THE FOLLOWING DETAILS: DATE AMOUNT OF RECOVERY 05.05.2005 RS.6,95,669/- 18.052005 RS.20,24,131/- 09.06.2005 RS.12,55,319/- RS.39,75,119/- 18. THE ASSESSEE HAD FAILED TO FURNISH ANY DOCUMENT ARY EVIDENCE REGARDING RECOVERY OF MATERIAL OF RS.5,97,710/- AS ON 1.9.2005 IN THE COPY OF THE ACCOUNT OF THE SAID DEPARTMENT. ACCORD INGLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS.5,97,710/- TO THE RE TURNED INCOME ON ACCOUNT OF SUPPRESSION OF CONTRACT RECEIPTS TO THE AFORESAID EXTENT. 19. BEFORE THE CIT (APPEALS) NO EVIDENCE WAS FURNIS HED AND THE ORDER OF THE ASSESSING OFFICER WAS UPHELD BY THE CIT (APP EALS). 10 20. THE LEARNED A.R. FOR THE ASSESSEE BEFORE US HAS FILED ON RECORD AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WI TH REQUEST TO ADMIT THE DOCUMENTS IN THE FORM OF RUNNING BILLS, UNDER W HICH RECOVERY OF RS.5,97,710/- IS REFLECTED. REQUEST WAS MADE FOR THE ADMISSION OF THE AFORESAID DOCUMENTS TO BE TAKEN ON RECORD FOR ADJUD ICATING THE ISSUE AS THE SAME GOES TO THE ROOT OF THE ISSUE. THE LEARNE D A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT AS THE MAIN PERSON INCHARG E OF THE BUSINESS HAD EXPIRED ON 28.12.2007 AND ASSESSMENT PROCEEDINGS WE RE TAKEN UP LATER ON AFTER HIS DEATH, THE SON OF THE DECEASED PARTNER WAS UNABLE TO FURNISH THE ABOVE SAID DOCUMENTS BEFORE THE LOWER AUTHORITI ES. 21. THE LEARNED D.R. FOR THE REVENUE OPPOSING THE A DMISSION OF THE AFORESAID DOCUMENTS POINTED OUT THAT SUFFICIENT OPP ORTUNITY WAS ALLOWED BY BOTH THE ASSESSING OFFICER AND THE CIT (APPEALS) AND NO DETAILS WERE FURNISHED BEFORE THE LOWER AUTHORITIES. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE APPEAL FILED BY THE ASSESSEE RELATES TO THE FINANCI AL YEAR 2005-06 RELATING TO ASSESSMENT YEAR 2006-07. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS CARRYING OUT THE CONTRACT WORK OF VARI OUS GOVERNMENT DEPARTMENTS. IN THE RETURN OF INCOME THE ASSESSEE HAD REFLECTED THE RECEIPTS, NET OF THE RECOVERY MADE BY THE RESPECTIV E GOVERNMENT DEPARTMENT, OF WHICH THE ASSESSEE WAS AWARDED THE C ONTRACT. THE PARTY- WISE DETAILS OF THE RECONCILIATION OF CONTRACT RECE IPTS SHOWN BY THE ASSESSEE VIS--VIS RECOVERY MADE AND THE AMOUNT REF LECTED IN THE TDS CERTIFICATES IS TABULATED AT PAGE-1 OF THE ASSESSME NT ORDER. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE PROOF OF RECOVERY MADE IN RESPECT OF VARIOUS CONTRACTS UNDERTAKEN BY HIM DURI NG THE YEAR UNDER CONSIDERATION. IN THE CASE OF E.E. CONST. DIVN.II , PWD, B & R, THE ASSESSEE HAS CLAIMED TOTAL RECOVERY OF RS.45,68,993 /-. HOWEVER, DURING 11 THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE F URNISHED THE COPIES OF RUNNING BILLS TOTALING RS.39,75,119/- AS TABULAT ED BY THE ASSESSING OFFICER UNDER PARA 3 OF THE ASSESSMENT ORDER AND AS REFERRED TO BY US IN THE PARAS HEREINABOVE. THE ASSESSEE WAS UNABLE TO FURNISH DOCUMENTARY EVIDENCE IN RELATION TO RECOVERY OF MATERIAL TOTALI NG RS.5,97,710/- AS ON 1.9.2005. 23. THE ASSESSEE BEFORE US HAS MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. THE LEARNED A.R. FOR THE ASSE SSEE HAS PLACED RELIANCE ON THE RATIO LAID DOWN IN CIT VS. MUKTA ME TAL WORKS [336 ITR 551 (P&H)] FOR THE ADMISSION OF THE ADDITIONAL EVID ENCE FURNISHED. THE HON'BLE COURT HELD THAT WHERE THE DOCUMENT HAD DIRECT BEARING ON THE ISSUE, THE SAME MAY BE ADMITTED FOR AS IT IS NECESS ARY FOR ADJUDICATION OF THE ISSUE . AT BEST, THERE COULD BE CROSS EXAMINATION OF THE INFORMATION BY THE REVENUE AUTHORITIES. 24. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE LEARNED A.R. FOR THE ASSESSEE HAS POINTED OUT THAT THE BUSINESS WAS BEIN G CARRIED OUT BY ONE SHRI DARSHAN SINGH ALONGWITH HIS WIFE IN PARTNERSHI P AND SHRI DARSHAN SINGH EXPIRED ON 28.12.2006. THE ASSESSMENT PROCEE DINGS IN THE PRESENT CASE WERE TAKEN UP AFTER HIS DEATH AND HIS SON SHRI AMINDER SINGH WHO WAS ATTENDING THE PROCEEDINGS WAS UNABLE TO FURNISH THE REQUISITE INFORMATION BEFORE THE ASSESSING OFFICER. THE LEAR NED A.R. FOR THE ASSESSEE HAS PLACED ON RECORD A RUNNING BILL OF PWD , RAJPURA IN SUPPORT OF HIS CLAIM OF RECOVERY OF MATERIAL TOTALING RS.5, 97,710/-. THE COPY OF THE BILL IS ENCLOSED ALONGWITH APPLICATION FOR ADMI SSION OF ADDITIONAL EVIDENCE. THE ASSESSEE BEFORE THE ASSESSING OFFICE R HAD FURNISHED THE UNDERMENTIONED INFORMATION IN RESPECT OF THE RECEIP TS: 12 SR.NO. PARTYS NAME AS PER BOOKS GROSS AMT. AS PER TDS CERTIFICATE LESS RECOVERY NET RECEIPTS AS PER BOOKS 2 E.E.CONST.DIVN.II PWD,B&R, PATIALA 10226195 10226195 4568993 5657202 25. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PR OCEEDINGS HAD FURNISHED THE DOCUMENTARY EVIDENCE IN THE FORM OF R UNNING BILLS, UNDER WHICH THE AMOUNT OF RECOVERY WAS MADE AS UNDER: DATE AMOUNT OF RECOVERY 05.05.2005 RS.6,95,669/- 18.052005 RS.20,24,131/- 09.06.2005 RS.12,55,319/- RS.39,75,119/- 26. NOW COMING TO THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE IN THE FORM OF RUNNING BILL WE FIND THAT THE DATE OF B ILL IS 1.9.2005 AND IS ISSUED BY SUB DIVISIONAL ENGINEER, PWD B&R BRANCH, RAJPURA. THE SAID BILL REFLECTS THE TOTAL RECEIPTS AT RS.2,44,60 ,105/- AND THE BALANCE CONTRACT RECEIPTS AT RS.17,35,179/-. THE DATE OF S TART OF THE CONTRACT IS 27.2.2004. HOWEVER, IT IS NOT CLEAR AS TO OUT OF T HE SAID RECEIPTS THE SUM OF THE GROSS RECEIPTS WHICH ARE RELATABLE TO THE YE AR UNDER CONSIDERATION. FURTHER OUT OF THE GROSS RECEIPTS THE COST OF MATER IAL HAS BEEN DEDUCTED TOTALING RS.53,07,499/-, OUT OF WHICH THE AMOUNT AL READY RECOVERED TOTALED TO RS.47,09,789/- AND THE BALANCE TO BE REC OVERED IS RS.5,97,710/-. THE LEARNED A.R. FOR THE ASSESSEE D URING THE COURSE OF ASSESSMENT PROCEEDINGS WAS ASKED TO EXPLAIN AS TO H OW THE RECOVERY OF MATERIAL WAS AT RS.47,09,789/- THOUGH DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED EVIDENCE IN THE FORM OF RUNNING BILLS UNDER WHICH THE AMOUNT OF RECOVERY WAS RS.39, 75,119/- AS AGAINST RS.47,09,789/- REFLECTED IN THE SAID RUNNING BILLS. FURTHER THE EVIDENCE FILED BEFORE THE ASSESSING OFFICER WAS BY WAY OF TH REE DIFFERENT RUNNING BILLS IN WHICH THE RECOVERY HAD BEEN REFLECTED AS O N 5.5.2005, 18.5.2005 13 AND 9.6.2005. THE LEARNED A.R. FOR THE ASSESSEE IN REPLY TO OUR QUERY POINTED OUT THAT THE BILL TO BE ADMITTED IS A RUNNI NG BILL AND CONTENTS OF THE SAME MAY BE VERIFIED BY THE ASSESSING OFFICER. WE FIND NO MERIT IN THE AFORESAID ADDITIONAL EVIDENCE BEING FURNISHED B Y THE ASSESSEE. NO DOUBT IN THE SAID DOCUMENT THE AMOUNT TO BE RECOVER ED IS REFLECTED AT RS.5,97,710/-. HOWEVER, THE SAME DOES NOT TALLY WI TH THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER IN WHICH THE RECOVERY OF MATERIAL IN TOTAL WAS REFLECTED AT RS.4 5,68,993/- FOR THE WHOLE YEAR AND IN THE SAID BILL THE TOTAL RECOVERY HAD BEEN REFLECTED AT RS.53,07,499/-. FURTHER IN RESPECT OF ITS CLAIM OF RECOVERY OF MATERIAL THE ASSESSEE HAD FURNISHED THREE DIFFERENT BILLS AS POINTED OUT BY US IN THE PARAS HEREINABOVE ON THREE DIFFERENT DATES AND BY WAY OF ADDITIONAL EVIDENCE THE ASSESSEE HAD FURNISHED RUNNING BILL UN DER WHICH EVEN THE GROSS RECEIPTS DO NOT MATCH WITH THE RECEIPTS SHOWN BY THE ASSESSEE DURING THE YEAR AND NO EXPLANATION HAS BEEN FURNISH ED IN RESPECT THEREOF. FURTHER NO EVIDENCE HAS BEEN FURNISHED BY THE ASSES SEE TO PROVE ITS CLAIM THAT THE SAME IS A RUNNING BILL AND THE RECOVERY IS RELATABLE TO WHICH PERIOD. ANOTHER ASPECT TO BE CONSIDERED IS THAT TH E PRESENT RUNNING BILL FURNISHED BY THE ASSESSEE HAS BEEN PREPARED BY SHRI SURJIT SINGH, J.E, VIDE M.B.NO.1745 PAGE 50 TO 60 ON 28.3.2005 AND HAS BEEN ISSUED BY THE SUB DIVISIONAL ENGINEER AT RAJPURA, WHEREAS THE CON TRACT IN QUESTION IS OF THE DIVISION OF PATIALA. FROM THE PERUSAL OF DE TAILS UNDER PARA 2 OF THE ASSESSMENT ORDER REFLECTS THE ASSESSEE TO BE CA RRYING ON THE WORKS OF E.E. CONST. DIVN. PWD B&R AT BARNALA, PATIALA, SANG RUR, MALERKOTLA AND OTHER CONCERNS. THE ASSESSEE HAVING NOT DISCHA RGED ITS ONUS OF COMPLETELY ESTABLISHING THE VERACITY OF THE ADDITIO NAL EVIDENCE FILED BY IT IN RESPECT OF ITS CLAIM OF DEDUCTION, WE UPHOLD THE ORDER OF THE AUTHORITIES BELOW IN DISALLOWING THE CLAIM OF THE A SSESSEE RESULTING IN 14 ADDITION OF RS.5,97,710/-. THE GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE ARE DISMISSED. 27. THE ISSUE RAISED BY THE ASSESSEE IN GROUND NOS. 3 AND 4 IS IN RELATION TO THE DISALLOWANCE OF PENALTY LEVIED BY E .E. MALERKOTLA TOTALING RS.4,98,080/- AND RS.4388/- LEVIED BY SALE S TAX. THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE VIOLATED THE TER MS OF ITS CONTRACT ENTERED WITH THE GOVERNMENT AUTHORITY, AGAINST WHIC H PENAL CHARGES @ 7.5% WERE RECOVERED. THE ASSESSING OFFICER OBSERVE D THAT AS THE EXPENSES WERE PURELY IN THE NATURE OF PENALTY FOR B REACH OF CONTRACT, THE SAME WERE NOT ALLOWABLE AS DEDUCTION. THE ASSESSIN G OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE TOTALING RS.4,98,080/- AS NOT ALLOWABLE DEDUCTION. FURTHER IN THE ABSENCE OF ASSESSEE HAVI NG FURNISHED ANY REPLY IN THE CLAIM OF SALES TAX PENALTY OF RS.4388/- THE SAME WAS ALSO DISALLOWED. 28. BEFORE THE CIT (APPEALS) THE LEARNED COUNSEL FO R THE ASSESSEE CONTENDED THAT THERE WAS INFRINGEMENT OF LAW AND PE NAL CHARGES FRAMED WERE PAID BUT THE SAME WAS ROUTINE BUSINESS EXPENDI TURE AND WAS ALLOWABLE AS DEDUCTION. THE CIT (APPEALS) UPHELD T HE ORDER OF THE ASSESSING OFFICER ON BOTH THE ACCOUNTS AND HENCE TH E ASSESSEE IS IN APPEAL BEFORE US. 29. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT A SUM OF RS.1,66,027/- WAS PAID BY THE ASSESSEE FOR EXTENSIO N OF TIME FOR EXECUTING THE CONTRACT AND THE SAME IS NOT PENAL IN NATURE. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT SUM OF RS.3,32,053/- WAS ALSO PAID FOR EXTENSION OF TIME FOR EXECUTION OF TH E CONTRACT OF THE SAME WAS NOT PENAL IN NATURE. IN RESPECT OF THE SALES T AX PENALTY, IT WAS 15 POINTED OUT THAT THE SAME HAS BEEN PAID FOR NON-FUR NISHING OF E-FORMS AND IS NOT PENALTY IN NATURE. 30. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED BY THE ASSESSEE VIDE GROUND NOS. 3 AND 4 IS IN RESPECT OF ALLOWABILITY OF DEDUCTION ON ACCOUNT OF CERTAIN SUM S PAID BY IT TO THE GOVERNMENT AGENCIES, WHICH, AS PER THE AGENCIES IS THE PENALTY LEVIED UPON THE ASSESSEE, AGAINST WHICH THE CLAIM OF THE A SSESSEE IS THAT IT WAS IN THE NATURE OF BUSINESS EXPENDITURE BEING INCURRE D FOR CARRYING ON ITS BUSINESS. CERTAIN FACTS IN RESPECT OF THE SAID CL AIM OF THE ASSESSEE NEED TO BE CONSIDERED IN ORDER TO ADJUDICATE THE ISSUE WHETHER THE AFORESAID CLAIM IS ALLOWABLE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE BEFORE US IS GOVERNMENT CONTRACTOR EXECUTING THE WORKS OF DIF FERENT GOVERNMENT AGENCIES. ONE SUCH CONTRACT AWARDED TO THE ASSESSE E WAS FOR THE IMPROVEMENT OF BYE-PASS SANGRUR ROAD. AS PER THE A WARD OF THE SAID CONTRACT THE ASSESSEE WAS TO COMPLETE THE SAID ROAD IMPROVEMENT WORK WITHIN THE EXTENDED TIME LIMIT I.E. 30.10.2005. TH E EXECUTIVE ENGINEER HAD IMPOSED PENALTY UNDER CLAUSE 2 AND 3 OF THE AGR EEMENT OF CONTRACT, AS AGAINST WHICH AN APPLICATION DATED 28.11.2005 WA S MADE BY THE ASSESSEE REQUESTING THE ARBITRATOR FOR SETTLEMENT O F DISPUTE. BEFORE THE ARBITRATOR ON 28.11.2005 THE ASSESSEE SUBMITTED AN AFFIDAVIT THAT THE WORK WOULD BE COMPLETED ON 15.12.2005 AND PATCH WOR K ON THE ROAD WOULD BE COMPLETED BY 30.11.2005. IN VIEW OF THE A BOVE SAID ASSURANCE OF THE ASSESSEE THE ACTION TAKEN IN THE MATTER WAS KEPT IN ABEYANCE TILL 15.12.2005. THEREAFTER THE CASE WAS HEARD BY THE A RBITRATOR ON VARIOUS DATES AND WAS CLOSED ON 4.9.2006. THE ARBITRATOR V IDE AWARD DATED 28 TH 16 SEPTEMBER, 2006 HELD THE ASSESSEE TO HAVE COMPLETED THE WORK 5 & MONTHS LATE DUE TO HIS ILL HEALTH AND ACCORDINGLY P ENALTY @ 2.5% OF RS.1,66,027/- OF THE CONTRACT AMOUNT. THE ASSESSEE HAS FURNISHED ON RECORD COPY OF THE AWARD DATED 28.8.2006 AND THE AB OVE SAID DETAILS ARE AVAILABLE IN THE SAID AWARD. 32. IN RESPECT OF THE SECOND DISPUTE THE ISSUE WAS IN RELATION TO THE BYE-PASS SANGRUR UNDER NABARD-X-SCHEME. THE ASSESS EE HAS FILED ON RECORD COPY OF PROCEEDINGS BEFORE THE ARBITRATOR UN DER WHICH THE CLAIM OF THE EXECUTIVE ENGINEER WAS THAT THE ASSESSEE HAD FAILED TO COMPLETE THE WORK WITHIN THE EXTENDED TIME LIMIT UP TO 31.10 .2005 AND THE DEPARTMENT HAD TO FACE PUBLIC REDRESS AND AS SUCH, PENALTY OF 2.5% WAS IMPOSED UNDER CLAUSE-3 OF THE AGREEMENT. THE PLEA OF THE ASSESSEE BEFORE THE ARBITRATOR WAS THAT DUE TO HIS ILL HEALT H HE COULD NOT COMPLETE THE WORK IN TIME AND THE SAID WORK WAS COMPLETED ON 15.4.2006. THE ASSESSEE HAS ALSO FILED COPY OF REPLY OF EXECUTIVE ENGINEER, CONST. DIVN. PWD B&R, MALERKOTLA DATED 4.8.2006, UNDER WHICH IT IS POINTED OUT THAT THE SUPERINTENDING ENGINEER HAD ISSUED ORDER DATED 14.6.2006 THAT THE COMPENSATION AMOUNT IS REDUCED TO RS.3000/- FROM RS .3,32,053/-. IN THE SAID COMMUNICATION IT IS POINTED OUT THAT THE ASSES SEE WAS AWARDED EXTENSION OF TIME TO COMPLETE THE WORK UP TO 30..10 .2005 BUT HAD FAILED TO COMPLETE THE WORK AND LEFT THE WORK INCOMPLETE W ITHOUT ANY INTIMATION AND REASON. THE ASSESSEE WAS ISSUED 10 DAYS NOTICE TO COMPLETE THE WORK VIDE LETTER DATED 7.10.2005 AND I N THE ABSENCE OF THE COMPLIANCE PENALTY @ 2.5% UNDER CLAUSE-3 OF THE CON TRACT AGREEMENT WAS LEVIED. BECAUSE OF THE PRESSURE OF THE PUBLIC, THE CONTRACT WAS REALLOCATED TO ANOTHER CONTRACTOR AND THE WORK WAS COMPLETED ON 15.4.2006 I.E. AFTER EIGHT MONTHS. THE ASSESSEE HA S FILED COPY OF THE SAID COMMUNICATION ON RECORD. 17 33. FROM THE PERUSAL OF THE ABOVE SAID DOCUMENTS FI LED IN RESPECT OF THE TWO PENALTIES LEVIED BY THE EXECUTIVE ENGINEER FOR NON-COMPLIANCE TO THE TERMS OF AGREEMENT I.E. IN NON-ADHERING TO T HE TIME LIMIT FIXED IN THE CASE FOR COMPLETING THE WORK OF ROAD IMPROVEMEN T EVEN WITHIN THE EXTENDED TIME AND CAUSING INCONVENIENCE TO PUBLIC A T LARGE, THE ASSESSEE WAS ASKED TO PAY THE ABOVE SAID PENALTY. IN THE FI RST INSTANCE I.E. CONTRACT WORK OF IMPROVEMENT OF SANGRUR BYE-PASS RO AD THE PENALTY WAS IMPOSED UPON THE ASSESSEE ON THE AWARD BEING ISSUED ON 28.9.2006. THE APPEAL IN THE PRESENT CASE RELATES TO THE FINANCIAL YEAR 2005-06 AND AS ON THE CLOSE OF THE ACCOUNTING YEAR I.E. 31.3.2006, TH E ASSESSEE HAD ALREADY FILED ITS CLAIM BEFORE THE ARBITRATOR IN RESPECT OF THE PENALTY IMPOSED BY THE EXECUTIVE ENGINEER, SANGRUR. THE PROCEEDING IN THE CASE WAS KEPT IN ABEYANCE TILL 15.12.2005 AND THE EFFECTIVE HEARING TAKEN PLACED THEREAFTER IN THE CALENDAR YEAR 2006 AND THE CASE W AS CLOSED AND THE AWARD WAS MADE ON 28.9.2006. THE ASSESSEE HAS MAD E THE CLAIM OF THE PENALTY DUE AS ON 31.3.2006 AND ADMITTEDLY ON THAT DATE THE ISSUE WAS PENDING BEFORE THE ARBITRATOR AND THE PENALTY IN TH E CASE HAD NOT CRYSTALLIZED ON THE CLOSE OF THE FINANCIAL YEAR I.E 31.3.2006. BOOKING OF THE SAID DEDUCTION BY THE ASSESSEE IN THE AFORESAID CIRCUMSTANCES IS PREMATURE AND CONSEQUENTLY THE SAID DEDUCTION CLAIM ED ON ACCOUNT OF PENALTY OF RS.1,66,027/-IS PREMATURE. 34. SIMILARLY THE PROCEEDINGS IN CONNECTION WITH TH E PENALTY OF RS.3,32,053/- HAD NOT FINALLY BEEN LEVIED ON THE AS SESSEE AS THE ISSUE WAS PENDING BEFORE THE ARBITRATOR AND HEARING IN TH E MATTER HAD TAKEN PLACED ON 4.9.2006, AS IS APPARENT FROM THE DOCUMEN TS FILED BY THE ASSESSEE. HOWEVER, THE PERUSAL OF THE SAID DOCUMEN TS REVEALED THAT THE SUPERINTENDING ENGINEER HAD REDUCED THE COMPENSATIO N OF RS.3,32,053/- TO RS.3000/- IN HEARING DATED 4.6.2006 ISSUED VIDE NO.2592-93. THE 18 ABOVE SAID PROOFS REFLECT THAT AS ON THE CLOSE OF T HE YEAR I.E. 31.3.2006 THE EXACT PENALTY PAYABLE BY THE ASSESSEE HAD NOT C RYSTALLIZED AND AS AGAINST THE CLAIM OF THE ASSESSEE AT RS.3,32,053/- THE COMPENSATION AMOUNT STANDS REDUCED TO RS.3000/- VIDE THE ORDER I SSUED BY THE SUPERINTENDING ENGINEER VIDE LETTER NO.2592-93 DATE D 14.6.2006. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE AMOUNTING TO RS.4,98,080. AND THE ORDER OF THE CIT (APPEALS) IN THIS REGARD IS UPHELD THOUGH ON OT HER GROUNDS. 35. WE ALSO FIND NO MERIT IN THE PLEA OF THE ASSESS EE RAISED BEFORE THE CIT (APPEALS) THAT THE AMOUNT IN QUESTION WAS PAID BY THE ASSESSEE AND HENCE IS ALLOWABLE AS BUSINESS EXPENDITURE. THE PA YMENT DUE TO THE ASSESSEE BEING WITHHELD BY THE GOVERNMENT AGENCIES PENDING THE DISPOSAL OF THE ARBITRATION PROCEEDINGS, DOES NOT TANTAMOUNT TO PAYMENT. IT IS ONLY WITHHOLDING THE AMOUNT TILL THE DISPOSAL OF TH E ARBITRATION PROCEEDINGS. THE ASSESSEE HIMSELF VIDE SUBMISSIONS MADE BEFORE THE CIT (APPEALS) UNDER PARA 4.2 HAS ACCEPTED THAT THE SAME AMOUNT WAS REFUNDED TO THE ASSESSEE BY THE ARBITRATION BUT THE ASSESSEE FAILED TO POINT OUT THE EXACT AMOUNT REFUNDED AS POINTED OUT BY US IN THE PARAS HEREINABOVE AS AGAINST PENALTY LEVIED BY THE EXECUT IVE ENGINEER AT RS.3,32,053/-, THE SUPERINTENDING ENGINEER HAD REDU CED THE SAME TO RS.3000/- AND THE DISPUTE BEFORE THE ARBITRATION WA S IN RESPECT THEREOF. THE ASSESSEE HAS FAILED TO FILE COPY OF THE ARBITRA TION AWARD IN THE CASE OF BYE-PASS SANGRUR UNDER NABARD-X-SCHEME. HOWEVER , IT IS AN ADMITTED POSITION THAT THE TOTAL PENALTY LEVIABLE E VEN BEFORE THE ARBITRATION AWARD WAS REDUCED TO RS.3000/-. THE CL AIM OF THE ASSESSEE AT RS.3,32,053/- THUS IS NOT ALLOWABLE AS A DEDUCTION DURING THE YEAR UNDER CONSIDERATION. 19 36. THE NEXT AMOUNT IN DISPUTE IS RS.4388/- PAID TO SALES TAX. THE CLAIM OF THE ASSESSEE IS THAT IT IS NOT IN THE NATU RE OF PENALTY. HOWEVER, THE ASSESSEE HAS FAILED TO FILE ANY EVIDENCE TO EST ABLISH ITS CLAIM EITHER BEFORE THE AUTHORITIES BELOW OR BEFORE US AND IN TH E ABSENCE OF ANY EVIDENCE TO THE CONTRARY WE CONFIRM THE ADDITION OF RS.4388/-. THE GROUND NOS.3 AND 4 RAISED BY THE ASSESSEE ARE THUS DISMISSED. 37. THE ISSUE IN GROUND NOS.5 AND 6 IS AGAINST THE ADDITION ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENDITURE. A SUM OF R S.1 LAC WAS DISALLOWED OUT OF TOTAL EXPENDITURE ON WORKS, RS.50 ,000/- OUT OF REPAIR AND MAINTENANCE AND RS.1,50,000/- OUT OF LABOUR/WAG ES PAID TO THE WORKERS. 38. THE ASSESSEE HAD CLAIMED TOTAL EXPENSES ON WORK S AMOUNTING TO RS.2,89,51,413/- WHICH INCLUDED PURCHASE OF MATERIA L I.E. BRICKS FOR RS.5,28,000/-, EARTH/SAND FOR RS.29,58,500/-, CHIPS , MARBLES AND SHEETS FOR RS.5,40,810/-, STONE CRUSHER/BAJRI FOR RS.4,86, 400/- AND STONE CRUSHER FOR RS.2,55,825/-. FROM THE PERUSAL OF THE DETAILS /VOUCHERS FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT THE EXPE NSES WERE MOSTLY IN CASH. FURTHER THE ASSESSEE WAS UNABLE TO PRODUCE C OMPLETE AND AUTHENTIC VOUCHERS OF THE EXPENSES BEFORE THE ASSESSING OFFIC ER. ACCORDINGLY, A SUM OF RS.1 LAC WAS DISALLOWED OUT OF THE TOTAL EXP ENSES. 39. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSES SING OFFICER AS THE ASSESSEE FAILED TO PRODUCE COMPLETE VOUCHERS WITH R EGARD TO THE EXPENSES MADE DURING THE YEAR. 40. THE PLEA OF THE LEARNED A.R. FOR THE ASSESSEE B EFORE US WAS THAT AN ADHOC ADDITION HAS BEEN MADE IN THE HANDS OF THE AS SESSEE. 20 41. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 42. FROM THE PERUSAL OF THE RECORD WE FIND THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DETAILS IN RESPECT OF THE SAID EXPEN SES EXCEPT FOR ITS CLAIM OF THE DISALLOWANCE BEING ADHOC. THE TOTAL EXPENDI TURE CLAIMED BY THE ASSESSEE WAS RS.2.89 CRORES AND A SUM OF RS.1 LAC H AS BEEN DISALLOWED OUT OF THE TOTAL EXPENDITURE. IN THE ABSENCE OF AN Y EVIDENCE BEING FILED BY THE ASSESSEE WE UPHOLD THE DISALLOWANCE OF RS.1 LAC. 43. THE NEXT ITEM OF EXPENDITURE CONSIDERED BY THE ASSESSING OFFICER WAS REPAIRS AND MAINTENANCE TO PROFIT & LOSS ACCOUN T AND IN THE ABSENCE OF THE ASSESSEE HAVING NOT PRODUCED COMPLETE VOUCHE RS DESPITE SEVERAL OPPORTUNITIES, RS.50,000/- WAS DISALLOWED OUT OF TH E SAID EXPENDITURE. THE CIT (APPEALS) UPHELD THE SAID DISALLOWANCE. TH E ASSESSEE HAS CLAIMED THE SAID DISALLOWANCE TO BE ADHOC BUT HAS F AILED TO BRING ON RECORD DETAILS AND COMPLETE VOUCHERS IN RESPECT OF THE REPAIRS AND MAINTENANCE EXPENSES. IN VIEW THEREOF, WE UPHOLD T HE DISALLOWANCE OF RS.50,000/-. 44. THE NEXT ITEM OF DISALLOWANCE OF RS.1,50,000/- OUT OF RS.35,49,650/- INCURRED ON ACCOUNT OF LABOUR/WAGES PAID TO THE WORKERS. THE ASSESSEE HAD FAILED TO PRODUCE COMPLETE VOUCHER S AND EVEN VOUCHERS PREPARED BY HIM WERE FOUND TO BE SELF PREPARED/SELF VOUCHED AND HENCE, SUM OF RS.1,50,000/- WAS DISALLOWED BY THE ASSESSIN G OFFICER BEING INADMISSIBLE. THE CIT (APPEALS) UPHELD THE ORDER O F THE ASSESSING OFFICER. WE ARE IN CONFORMITY WITH THE ORDERS OF T HE AUTHORITIES BELOW IN DISALLOWING SUM OF RS.1,50,000/- IN THE ABSENCE OF THE ASSESSEE PROVING ITS CASE AND FURNISHING THE INCOMPLETE VOUC HERS IN RESPECT OF EXPENDITURE TOTALING RS.35,49,650/-. WE UPHOLD THE DISALLOWANCE OF 21 RS.1,50,000/-. THE GROUND NOS.5 AND 6 RAISED BY TH E ASSESSEE ARE THUS DISMISSED. 45. GROUND NOS.7 AND 8 RAISED BY THE ASSESSEE BEING GENERAL ARE DISMISSED. 46. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF MARCH, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH MARCH, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH