M/s. Patel Engineers, Baroda V. The ACIT.,Circle-3, Baroda

ITA 2822/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72965 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-10-2010
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: M K PATEL
• Keywords: Deemed to accrue or arise in india

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . .. . . . . . , , , , !' !' !' !' # $% # $% # $% # $%, ,, , & & & & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SH. KUL BHARAT, JUDICIAL MEMBER ' ' ' './ ././ ./ ITA NO. 2822/AHD/2010 ( !)( ( !)( ( !)( ( !)( / // / ASSESSMENT YEAR 2007-08 PATEL ENGINEERS, BARODA. PAN: AAFFP1311E VS ACIT, CIRCLE-3, BARODA. *+/ APPELLANT ,-*+ / RESPONDENT REVENUE BY : SH. K.C. MATHEWS, SR. D.R. ASSESSEE(S) BY : SH. M.K. PATEL, AR #!. / %/ // / DATE OF HEARING : 19/02/2014 01) / % / DATE OF PRONOUNCEMENT: 25/02/2014 2 2 2 2/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-III, BARODA DATED 09.03.2010. 2. IN GROUND NO. 1 AND 2 OF THE APPEAL, THE GRIEVAN CE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER O F THE ASSESSING OFFICER MAKING ADDITION OF OUTSTANDING LIABILITY FOR LABOUR CHARGES OF RS 1,89,854/- AS BOGUS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER OBSERVED THAT AS ON 01.04.2006, THERE WAS OPENING BALANCE OF RS 1 ,89,854/- ON ACCOUNT OF LABOUR CHARGES. THE ASSESSING OFFICER FURTHER OBSE RVED THAT THE LABOUR CHARGES WHICH WERE INCURRED IN EARLIER YEARS WERE S TILL UNPAID TILL 01.03.2007. SHE SUMMONED SH. KALAM, ONE OF THE LAB OURERS AND RECORDED ITA NO.2822/AHD/2010 PATEL ENGINEERS, BARODA VS. ACIT, CIRCLE-3, BARODA FOR A.Y. 2007-08 - 2 - HIS STATEMENT. FROM THE STATEMENT OF SH. KALAM, SH E FOUND THAT HE WAS NOT A MAN OF MEANS AND ENTIRE FAMILY INCLUDING HIS WIFE , SISTER, BROTHER WORKED AS LABOURERS. SHE ALSO FOUND THAT SH. KALAM WAS AN ILLITERATE PERSON HAVING NO BANK ACCOUNT AND NO SAVINGS. DURING THE COURSE OF HIS STATEMENT, HE ADMITTED THAT WHATEVER HE EARNED WAS SPENT AND HE D ID NOT EARN ENOUGH TO SAVE. THEREFORE, THE ASSESSING OFFICER OBSERVED TH AT IT WAS AGAINST HUMAN PROBABILITY THAT A LABOURER WOULD ALLOW VIRTUALLY H IS WHOLE YEARS EARNINGS TO BE RETAINED BY THE EMPLOYER FOR SO LONG. ACCORDING LY, THE ASSESSING OFFICER HELD THAT THERE WAS NO SUCH LIABILITY AND MADE THE ADDITION. 4. ON APPEAL, THE LD. CIT(A) HELD THAT THE ASSESSIN G OFFICER WAS JUSTIFIED IN TREATING THE OUTSTANDING LABOUR CHARGES AS BOGUS BECAUSE THE ASSESSING OFFICER AFTER EXAMINING ONE OF THE LABOURERS FOUND THAT THE LABOURERS WERE TOTALLY DEPENDENT ON THE PERSONS WHO GAVE THEM THE TEMPORARY JOB. FURTHER, THE ASSESSEE HAS CONTENDED THAT THE PAYMEN TS WERE MADE BETWEEN MAY 2007 TO JUNE 2008 IN CASH AND WERE SUPPORTED BY SELF-MADE VOUCHERS. THE LD. CIT(A) HELD THAT THIS WAS A SELF-SERVING DO CUMENT AND THEREFORE, CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE LA BOURERS WERE PRODUCED BEFORE THE ASSESSING OFFICER WHO ADMITTED OF THE FACT THAT THE AMOUNT WAS DUE TO HIM FOR PAYMENT. THUS, IT WAS ES TABLISHED THAT THE LIABILITY OF LABOUR CHARGES SHOWN BY THE ASSESSEE I N THE BALANCE SHEET WAS GENUINE LIABILITY. HE RELIED ON THE DECISION OF TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA, TA X APPEAL NO. 588 OF 2013 ORDER DATED 04.02.1014 AND SUBMITTED THAT THE HONB LE GUJARAT HIGH COURT HAS HELD THAT FOR INVOKING THE PROVISIONS OF SECTIO N 41(1), THERE HAS TO BE CESSATION OR REMISSION OF LIABILITY DURING PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE HIGH COUR T OBSERVED THAT IN THE PRESENT CASE, BOTH THE ELEMENTS ARE MISSING AND THE REFORE, NO ADDITION COULD BE MADE TO THE INCOME OF THE ASSESSEE. THE HIGH CO URT HAS FURTHER HELD ITA NO.2822/AHD/2010 PATEL ENGINEERS, BARODA VS. ACIT, CIRCLE-3, BARODA FOR A.Y. 2007-08 - 3 - THAT WHERE THE LIABILITY ITSELF SEEMS TO BE UNDER S ERIOUS DOUBT, THE LIABILITY AS IT STANDS, PERHAPS HOLDS THAT THERE WAS NO CESSATIO N OR REMISSION OR LIABILITY AND THEREFORE THE AMOUNT IN QUESTION CANNOT BE ADDE D BACK AS DEEMED INCOME U/S 41(1) OF THE ACT. 6. THE LD. DR VERY FAIRLY CONCEDED THAT IN VIEW OF THE ABOVE CITED DECISION OF THE HONBLE GUJARAT HIGH COURT BY THE A SSESSEE, THE ADDITION MADE CANNOT SURVIVE. 7. WE FIND THAT OUTSTANDING LABOUR CHARGE OF RS 1,8 9,854/- WHICH WAS ADDED BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE WAS THE BROUGHT-FORWARD OPENING BALANCE OF EARLIER YEARS. NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT EITHER THE SA ID LIABILITY WAS ACTUALLY DISCHARGED BY THE ASSESSEE DURING THE YEAR FROM SOM E UNDISCLOSED SOURCE OR THE LIABILITY CEASED TO EXIST OR REMITTED DURING TH E YEAR UNDER CONSIDERATION. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATA RA (SUPRA) SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE ADDITION OF RS 1,89,854/- 8. GROUND NO. 3 OF THE APPEAL IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A) CONFIRMING ADDITION OF RS 7,67,566/- OUR OF LABOUR CHARGES. 9. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER OBSERVED THAT THE ASSESSEE HAS PAID VARIOUS AMOUNTS TO LABOURERS/ SUB-CONTRACTORS WITHOUT DEDUCTION OF TDS. THE ASSESSEE COULD NOT ESTABLISH THE IDENTITY NOR THE GENUINENESS OF THE LABOURERS IN RESPECT OF THE SAID AMOUNT. HE THEREFORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ITA NO.2822/AHD/2010 PATEL ENGINEERS, BARODA VS. ACIT, CIRCLE-3, BARODA FOR A.Y. 2007-08 - 4 - 10. ON APPEAL, THE LD. CIT(A) OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE PRODUCED LABOU R CONTRACTORS WHO WERE PAID IN EXCESS OF RS 50,000/-. HOWEVER, THOSE LABOURERS WHO WERE PAID LESS THAN RS 50,000/- WERE NOT PRODUCED ON THE GROUND THAT THEY WERE NOT PERMANENT LABOURERS. THE ASSESSING OFFICER NOT ED THAT 23 SUCH LABOURERS WERE PAID BETWEEN RS 47,000/- AND RS 49,0 00/- DURING THE YEAR AND IN WHOSE CASE THE AMOUNT REMAINED OUTSTANDING. THE ASSESSING OFFICER WAS OF THE VIEW THAT IT WAS UNACCEPTABLE THAT THE L ABOURERS WHO WOULD NOT RECEIVE THEIR DAILY WAGES FOR MONTHS TOGETHER. IN ABSENCE OF ANY FURTHER EVIDENCE, SHE DISALLOWED RS 11,17,056/- WHICH WAS R EDUCED TO RS 7,67,566/-. BY THE LD. CIT(A) ON THE GROUND THAT W AGES FOR THE MONTH OF MARCH WAS PAID IN APRIL WAS UNDERSTANDABLE, BUT IT WAS NOT PROBABLE THAT WAGES IN THE MONTH JANUARY TO FEBRUARY WERE PAID IN THE MONTH OF MAY AND JUNE OF THE NEXT YEAR. HE, THEREFORE, ALLOWED PART IAL RELIEF T THE EXTENT OF RS 3,49,490/- AND RESTRICTED THE DISALLOWANCE TO RS 7, 67,566/-. 11. THE LD. AR OF THE ASSESSEE RELIED ON THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA (SUPRA) AND SUBMITTED THAT THE DISALLOWANCE IS SIMILAR TO T HAT RAISED BY THE ASSESSEE IN GROUND NO. 1 AND 2 OF THE APPEAL. HE SUBMITTED THAT THE DISALLOWANCE WAS MADE ONLY ON PROBABILITY AND WITHOUT DOUBTING T HE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE, HENCE IT WAS HIS SUBMISSION THAT THE ADDITION MADE WAS UNJUSTIFIED AND SHOULD BE DELETED . THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDERS OF LOWER AUTHORITI ES. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSING OFFICER DISALLOWED LABOUR CHARGES RS 11,1 7,056/- OUTSTANDING AS ON 31.03.2007 ON THE GROUND THAT THE LABOURERS WERE PERSONS OF NO MEANS AND IT WAS NOT PROBABLE THAT THEY WILL NOT RECEIVE THEIR PAYMENTS FOR MORE ITA NO.2822/AHD/2010 PATEL ENGINEERS, BARODA VS. ACIT, CIRCLE-3, BARODA FOR A.Y. 2007-08 - 5 - THAN 3 MONTHS. THEREFORE, THE ASSESSING OFFICER HE LD THAT THE LIABILITY WAS BOGUS. 13. ON APPEAL, THE LD. CIT(A) WAS OF THE VIEW THAT IT WAS PROBABLE THAT WAGES FOR THE MONTH OF MARCH, WERE PAID BY THE ASSE SSEE IN THE MONTH OF APRIL IN THE FOLLOWING YEAR BUT IT WAS NOT PROBABLE THAT WAGES FOR THE MONTH OF JANUARY AND FEBRUARY WAS PAID BY THE ASSESSEE IN THE MONTH OF MAY AND JUNE OF THE FOLLOWING YEAR. HE, THEREFORE, DELETED THE DISALLOWANCE TO THE EXTENT OF RS 3,49,490/- AND SUSTAINED DISALLOWANCE TO THE EXTENT OF RS 7,67,566/-. THE CONTENTION OF THE ASSESSEE IS THAT THERE IS NO FINDING BY BOTH THE LOWER AUTHORITIES THAT THE LIABILITY WAS N OT GENUINE. HE SUBMITTED THAT THE DISALLOWANCE HAS BEEN MADE ONLY ON THE GRO UND OF PROBABILITY AND DOUBTING THAT THE PAYMENTS TO LABOURERS COULD NOT B E OUTSTANDING FOR MORE THAN 3 MONTHS. BESIDES THAT, NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER OR THE LD. CIT(A) FOR MAKING THE DISALLOWANCE. HE FURTHER SUBMITTED THAT THE LIABILITIES HAVE BEEN SHOWN BY T HE ASSESSEE SIMILARLY IN EARLIER YEARS ALSO WHERE NO DISALLOWANCE WAS MADE B Y THE ASSESSING OFFICER. WE FIND THAT THE BOTH THE LOWER AUTHORITIES HAVE DO UBTED THAT THE LIABILITY FOR LABOUR CHARGES OF RS 7,67,566/- WAS BOGUS AS THE SA ME WAS OUTSTANDING FOR MORE THAN ONE MONTH. BESIDES, THE SUSPICION, THEY HAVE BROUGHT NO MATERIAL ON RECORD AFTER EXAMINATION THAT THE LIABI LITY WAS NOT GENUINE OR THAT THE ASSESSEE DID NOT MAKE THE PAYMENTS FOR THE SAME IN THE SUBSEQUENT YEARS. IT IS SETTLED POSITION OF LAW TH AT SUSPICION HOWSOEVER GRAVE, CANNOT TAKE PLACE OF PROOF. FURTHER, IT IS OBSERVED THAT THE PAYMENT OUTSTANDING WAS OF LABOUR CONTRACTOR AND NOT LABOUR . IT CANNOT BE HELD THAT THERE CANNOT REMAIN OUTSTANDING LIABILITY TO LABOUR CONTRACTOR FOR MORE THAN ONE MONTH. FURTHER, IT IS NOT THE CASE OF THE REVEN UE THAT THE ASSESSEE HAS NOT FURNISHED THE NAME AND ADDRESS OF LABOUR CONTRA CTOR TO WHOM LIABILITY EXISTED SO THAT THE DEPARTMENT WAS PREVENTED FROM M AKING THE VERIFICATION FROM THE SAID LABOUR CONTRACTOR. THEREFORE, IN OUR CONSIDERED VIEW, DISALLOWANCE OF RS 7,67,566/- SUSTAINED BY THE LD. CIT(A) OUT OF LABOUR ITA NO.2822/AHD/2010 PATEL ENGINEERS, BARODA VS. ACIT, CIRCLE-3, BARODA FOR A.Y. 2007-08 - 6 - CHARGES CANNOT BE SUSTAINED IN LAW. WE, THEREFORE, DELETE THE ADDITION OF RS 7,69,566/- AND ALLOW THIS GROUND OF APPEAL. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON TUESDAY, THE 25 TH OF FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 25/02/2014 GHANSHYAM MAURYA, SR. P.S.