The DCIT, Circle-1, Surat V. M/s. Bahubali Print Pvt.Ltd., Surat

ITA 2705/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9800 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 01-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDIP GARG
• Assessee Lawyers: S N SOPARKAR
• Keywords: TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.2705/AHD/2008 A. Y: 2005-06 THE D. C. I. T., CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. BAHUBALI PRINTS PVT. LTD., A-3001 3002, KOHINOOR TEXTILE MARKET, RING ROAD, SURAT PA NO. AABCB 6232 H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SANDIP GARG, DR RESPONDENT BY SHRI S. N. SOPARKAR, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, SURAT DA TED 28-05-2008 FOR ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN NOT APPRECIATING THE FACT THAT BOTH THE CONTRACTORS HAV E FILED THEIR I. T. RETURNS SHOWING ADDRESSES OF THE ASSESS EE COMPANY, WHICH VERY STRONGLY SUGGESTS THAT THE CONTRACTORS HAD VERY LOW MEANS TO CARRY SUCH CONTRA CT WORK AND THEY WERE MERELY NAME-LENDERS FOR THE ASSESSEE WHICH HAD COMPELLED THEM TO GIVE THEIR ACCOMMODATIVE STATEMENTS, EVEN THOUGH THEY HAVE NO EVIDENCES TO OFFER TO SUBSTANTIATE THEIR CLAIM. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN DELET ING ADDITION OF RS.28,08,327/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS CONTRACTOR. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD POINTED OUT BY THE PARTIES. ITA NO.2705/AHD/2008 DCIT, CIR-1, SURAT VS M/S. BAHUBALI PRINTS PVT. LTD . 2 3. THE AO IN THE ASSESSMENT ORDER STATED THAT THE A SSESSEES NATURE OF BUSINESS IS TRADING (MASTER MANUFACTURING) IN TE XTILE. ACCORDING TO THE AO A SURVEY WAS CONDUCTED BY INVESTIGATION WING ON 20-10-2004 AND IT WAS NOTICED THAT THE ASSESSEE HAD MADE PAYMENTS TO THE SUB CONTRACTORS. ONE OF THE SUB CONTRACTORS, SHRI BALRA MSINGH SENGAR HAS FILED HIS RETURN OF INCOME FROM RING ROAD ADDRESS O F THE ASSESSEE COMPANY. THE RETURN OF THE OTHER SUB CONTRACTOR SHR I ARJUNSINGH SENGAR WAS SIGNED BY HIS WIFE. THE ASSESSEE WAS ASKED TO P RODUCE THESE PARTIES. THE ASSESSEE PRODUCED SHRI BALRAMSINGH SENGAR WHOSE STATEMENT WAS RECORDED ON OATH IN WHICH HE EXPLAINED THAT HE WAS LIVING IN RENTED ACCOMMODATION AND HIS BOOKS OF ACCOUNTS WERE DESTRO YED DUE TO FLOOD. THE PURPORTED PAYMENTS TO LADIES WHO DID EMBROIDERY WORK FOR HIM WERE MADE IN CASH. THE OTHER SUB CONTRACTOR WAS HIS LATE BROTHER SHRI ARJUNSINGH SENGAR. IT WAS EXPLAINED THAT HIS RETURN WAS SIGNED BY HIS WIFE BEING LEGAL HEIR. HER PRESENCE WAS REQUESTED N OT TO BE ENFORCED WHICH IS ACCEPTED BY THE AO. THE ASSESSEE MADE PAYM ENT OF RS.13,59,430/- TO SHRI BALRAMSINGH SENGAR AND RS.14 ,48,897/- TO SHRI ARJUNSINGH SENGAR (TOTAL RS.28,08,327/-). FROM THE STATEMENT OF SHRI BALRAMSINGH SENGAR, THE AO POINTED OUT TO THE ASSES SEE THAT THE SUB CONTRACTORS DID NOT HAVE BOOKS OF ACCOUNTS AND BIL LS HAVING DONE EMBROIDERY WORK FOR THE ASSESSEE COMPANY AND THAT T HE SUB CONTRACTORS MADE PAYMENT IN CASH FOR EMBROIDERY WORK AND THAT T HE SUB CONTRACTORS WERE OF SMALL MEANS. THEREFORE, THE AO CONCLUDED TH AT THE PAYMENT IS NOT PROVED. THE ASSESSEE EXPLAINED BEFORE THE AO TH AT USE OF THE ADDRESS OF THE ASSESSEE COMPANY BY THE SUB CONTRACTORS IS W ITHOUT KNOWLEDGE OF THE ASSESSEE. THE ASSESSEE COMPANY MADE THE PAYMENT FOR JOB CHARGES ON THE BASIS OF INVOICES RAISED AND PAYMENTS WERE M ADE THROUGH ACCOUNT PAYEE CHEQUES AFTER DEDUCTING TDS. THEREFORE, PAYME NTS COULD BE VERIFIED FROM THEIR BANK ACCOUNTS. THE SUB CONTRACT OR, SHRI BALRAMSINGH SENGAR ALSO ACKNOWLEDGED PAYMENT TO HIM AND HIS LAT E BROTHER BY THE ASSESSEE COMPANY IN HIS STATEMENT. THE ASSESSEE FIL ED QUANTITATIVE ITA NO.2705/AHD/2008 DCIT, CIR-1, SURAT VS M/S. BAHUBALI PRINTS PVT. LTD . 3 DETAILS AND ALL THE RECORDS BEFORE THE AO AND GROSS PROFIT RATE IS BETTER AS COMPARED TO EARLIER YEAR. THE ASSESSEE COMPANY PROD UCED COPY OF FEW ELABORATIVE BILLS RAISED BY THESE TWO SUB CONTRACTO RS FOR VERIFICATION. IT WAS ALSO EXPLAINED THAT THERE IS NO EVIDENCE THAT P AYMENT MADE TO THE SUB CONTRACTORS WERE WITHDRAWN BY THE ASSESSEE COMP ANY WAS GIVEN BACK TO THE ASSESSEE COMPANY. THE AO HOWEVER, DID N OT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE THE ADDITION IN RESPECT OF PAYMENT MADE TO THE ABOVE SUB CONTRACTORS. THE SAME SUBMISS IONS WERE REITERATED BEFORE THE LEARNED CIT(A) AND DECISION O F THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M. K. BROTHERS 163 ITR 24 9 WAS RELIED UPON IN WHICH IT WAS HELD AS UNDER: ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NO T WAS A QUESTION OF FACT. THE TRIBUNAL HAS ALSO POINTED OUT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE F UND GIVEN BY THE ASSESSEE TO THESE PARTIES CAME BACK TO THE ASSE SSEE IN ANY FORM. IT IS FURTHER OBSERVED BY THE TRIBUNAL TH AT THERE IS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE VOUCHERS TO THE ASSESSEE. EVEN THE TWO STATEMENTS DO NOT IMPLICATE THE TRANSACTIONS WITH THE ASSESSEE IN ANY WAY. WITH THE SE OBSERVATIONS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES WERE BOGUS. IT MAY BE STATED THAT THE ASSESSEE WAS GIVEN CREDIT FACILITIES FOR A SHORT DURATION AN D THE PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT IS SO, IT CANNOT BE SAID THAT THE ENTRIES FOR THE PURCHASES OF THE G OODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRIES. WE, THEREF ORE, DO NOT FIND THAT THE CONCLUSION ARRIVED AT BY THE TRIB UNAL IS AGAINST THE WEIGHT OF EVIDENCE. IT WAS ALSO EXPLAINED THAT SINCE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND THE SUB CONTRACTORS CONFIRMS DOIN G WORK FOR THE ASSESSEE AND RECEIPT OF THE PAYMENTS IS ALSO ACKNOW LEDGED, THEREFORE, ADDITIONS ARE CLEARLY UNJUSTIFIED. IT WAS ALSO EXPL AINED THAT SINCE THE CONTRACTORS FILED RETURN OF INCOME GIVING ADDRESS O F THE ASSESSEE ITA NO.2705/AHD/2008 DCIT, CIR-1, SURAT VS M/S. BAHUBALI PRINTS PVT. LTD . 4 COMPANY IS NO GROUND TO MAKE ADDITION AGAINST THE A SSESSEE. THE AO HAS NOT BROUGHT ANY EVIDENCES ON RECORD TO PROVE TH AT THE BILLS WERE BOGUS AND THE PAYMENTS WERE ALSO BOGUS. IT WAS ALSO EXPLAINED THAT IF THE DISCLOSED AMOUNT DURING THE SURVEY IS EXCLUDED, EVEN THEN GROSS PROFIT RATE OF THE ASSESSEE IS 15.67% IN THE ASSESS MENT YEAR UNDER APPEAL AS COMPARED TO 12% AND 13.19% DISCLOSED IN THE PREC EDING ASSESSMENT YEARS 2004-50 AND 2003-04 RESPECTIVELY. THEREFORE, PROFIT DISCLOSED BY THE ASSESSEE HAS ALSO INCREASED AS COMPARED TO EARL IER YEARS. IT WAS, THEREFORE, PRAYED THAT THE ADDITION MAY BE DELETED. 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE DELETED THE ENTIRE ADDITION. HIS FINDINGS IN PARA 2 .3 AND 3 ARE REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE A. O. THE APPELLAN T HAS ARGUED THAT THE AO HAS SUMMONED THE CONTRACTOR AND HAS TAKEN THE STATEMENT IN HIS OWN OFFICE ON 27.11.2007 . THE CONTRACTORS HAVE REITERATED IN THE STATEMENT THAT T HEY HAD DONE THE WORK FOR THE APPELLANT, THEY HAD RECEIVED THE PAYMENT BY ACCOUNT PAYEE CHEQUES AND THESE CHEQUES WERE DEPOSITED IN THEIR BANK ACCOUNTS. THE PAYMENTS SO R ECEIVED WERE USED FOR MAKING THE PAYMENT TO THE LABORERS BY WITHDRAWING CASH. THE APPELLANT HAS STATED THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE STATEMENT BY SHRI BALRAMSINGH SENGAR WAS FALSE OR THE WORK WA S NEVER DONE OR THE PAYMENT WAS RECEIVED BACK BY THE APPELL ANT IN THE FORM OF CASH. IN VIEW OF THESE FACTS BY RELYING UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF M. K. BROTHERS (SUPRA), THE APPELLANT HAS ARGUED THAT NO ADDITION CAN BE MADE. THE ONLY POINT IS THAT THE CONTRACTOR HAS WRITTEN THE ADDRESS OF THE ASSESSEE COMPANY IN HIS INCOME-T AX RETURN BUT THIS FACT WITHOUT THERE BEING ANY OTHER MATERIA L ON RECORD TO SUPPORT AOS ARGUMENT NO ADVERSE VIEW CAN BE TAK EN SPECIALLY BECAUSE THE AO HIMSELF HAS RECORDED THE S TATEMENT OF THE CONTRACTORS AND THERE IS NOTHING IN THE STAT EMENT WHICH CAN GO AGAINST THE APPELLANT. THIS SHOWS THAT THERE IS NO MATERIAL ON RECORD TO SUPPORT THE CONTENTION OF THE AO. HENCE THE CONTENTION OF THE APPELLANT IS ACCEPTED AND THE ADDITION IS DELETED. THE GROUNDS OF APPEAL ARE ALLOWED. ITA NO.2705/AHD/2008 DCIT, CIR-1, SURAT VS M/S. BAHUBALI PRINTS PVT. LTD . 5 3. IN THE RESULT, THE APPEAL IS ALLOWED. 5. THE LEARNED DR MERELY RELIED UPON THE ORDER OF T HE AO AND HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE LEARN ED CIT(A). ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T BOTH THE SUB CONTRACTORS WERE ASSESSED TO TAX. THEREFORE, PAYMEN TS CANNOT BE TREATED AS BOGUS. 6. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISSI ONS OF THE PARTIES IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT(A), WE DO NOT FIND IT O BE A CASE FOR INTERFERENCE. THE ASSESSEE PRODUCES ONE OF THE SUB CONTRACTORS BEFORE THE AO FOR EXAMINATION ON OATH AND HE HAS IN HIS STATEMENT SUPPORTED THE CASE OF THE ASSESSEE THAT THE SUB CON TRACTOR DID WORK FOR THE ASSESSEE AND RECEIVED PAYMENTS BY ACCOUNT PAYEE CHEQUES WHICH WERE DEPOSITED IN HIS ACCOUNT. THE OTHER SUB CONTRA CTOR HAS EXPIRED WHO WAS REAL BROTHER OF THE OTHER SUB CONTRACTOR WHOSE STATEMENT WAS RECORDED BY THE AO. THE AO DID NOT INSIST FOR PRODU CTION OF HIS WIFE BEING LEGAL HEIR. THE ASSESSEE, THEREFORE, PROVED ON RECO RD THAT THE SUB CONTRACTORS HAD DONE WORK FOR THE BUSINESS OF THE A SSESSEE AND HAVE RECEIVED PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES ON WHICH TDS HAVE BEEN DEDUCTED. PAYMENTS ARE VERIFIABLE FROM THE BAN K ACCOUNTS OF THE SUB CONTRACTORS. IT WOULD SHOW THAT BOTH THE SUB CO NTRACTORS WERE ASSESSED TO TAX AND HAVE ACKNOWLEDGED RECEIPT OF TH E PAYMENTS FROM THE ASSESSEE. THE AO HAS NOT BROUGHT ANY EVIDENCE ON RE CORD THAT THE BILLS RAISED BY THE SUB CONTRACTORS WERE FALSE OR BOGUS. THE GROSS PROFIT RATE IS BETTER AS COMPARED TO THE PRECEDING ASSESSMENT YEAR S. THEREFORE, THERE WAS NO REASON FOR THE ASSESSEE TO INFLATE EXPENSES. MERELY BECAUSE THE SUB CONTRACTOR HAS GIVEN ADDRESS OF THE ASSESSEE IN HIS RETURN OF INCOME WITHOUT KNOWLEDGE OF THE ASSESSEE IS NO GROUND TO T AKE ADVERSE INFERENCE AGAINST THE ASSESSEE. CONSIDERING THE FACTS AND CIR CUMSTANCES OF THE CASE NOTED ABOVE, WE DO NOT FIND ANY MERIT IN THE A PPEAL OF THE REVENUE. ITA NO.2705/AHD/2008 DCIT, CIR-1, SURAT VS M/S. BAHUBALI PRINTS PVT. LTD . 6 THE LEARNED DR COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, WE CONFIRM THE FINDING S OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 24-09-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 24-09-2010 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 DY. REGISTRAR, ITAT, AHMEDABAD