The ITO, Ward-9(1), Ahmedabad V. M/s. Samrajya Engineers & Constractor, Ahmedabad

ITA 2967/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60274 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: J P SHAH
• Section: 143(3); 194C

Judgement Text

ITA NO.2 967 & 3043/AHD/2009 ASSESSME NT YEAR 2006- 07 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO. 2967/AHD/2009 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER, WARD 9(1), KENDRIYA PRATYAKSHA BHAVAN, NEAR PANJARA POLE, AMBAWADI, AHMEDABAD. (APPELLANT) VS. M/S. SAMRAJYA ENGINEERS & CONTRACTORS, 108 MALAYTENEMENT, NEAR VASNA BARRAGE GARDEN, VASNA, AHMEDABAD. (RESPONDENT) I.T.A. NO. 3043/AHD/2009 (ASSESSMENT YEAR: 2006-07 ) M/S. SAMRAJYA ENGINEERS & CONTRACTORS, 108 MALAYTENEMENT, NEAR VASNA BARRAGE GARDEN, VASNA, AHMEDABAD. (APPELLANT) VS. INCOME TAX OFFICER, WARD 9(1), KENDRIYA PRATYAKSHA BHAVAN, NEAR PANJARA POLE, AMBAWADI, AHMEDABAD. (RESPONDENT) PAN: AARFS 2237C BY DEPARTMENT : SHRI RAHUL KUMAR, SR. D.R . BY ASSESSEE : SHRI J. P. SHAH. ITA NO.2 967 & 3043/AHD/2009 ASSESSME NT YEAR 2006- 07 . 2 ( )/ ORDER DATE OF HEARING : 15-3-2012. DATE OF PRONOUNCEMENT : 20/04/2012 PER: SHRI ANIL CHATURVEDI,A.M. THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF CIT (A)- XV, AHMEDABADS ORDER DATED 11-9-2009 FOR THE ASSES SMENT YEAR 2006-07. AS THE ISSUE INVOLVED IS A COMMON THEREFOR E THE APPEALS ARE DISPOSED OF BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IS AS UNDER:- THE LD. CIT (A)-XV, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN ALLOWING RS.13,08,103/- CONSIDERING THE SA ME AS GENUINE PAYMENTS TO LABOURERS. 3. THE GROUND RAISED BY THE ASSESSEE IS AS UNDER:- 1. THE CIT (APPEALS) ERRED IN DISALLOWING RS.39,24 ,039/- FROM THE PAYMENT TO THE LABOURERS OF RS.52,32,052/- AS B OGUS WHEN IN FACT THE ASSESSING OFFICER HAD ACCEPTED THE SAID PA YMENT TO BE GENUINE AND THE CIT (APPEALS) FURTHER ERRED WHEN HE MADE THE DISALLOWANCE WITHOUT GIVING ANY NOTICE TO THE ASSES SEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED RETURN OF INCOME ON 30-12-2006 DECLARING TOTAL INCOME OF RS. 15,470/- AND THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND A SSESSMENT WAS FINALIZED U/S. 143(3) VIDE ORDER DATED 1-12-2008. T HE ASSESSEE FIRM IS ITA NO.2 967 & 3043/AHD/2009 ASSESSME NT YEAR 2006- 07 . 3 ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION WORK OF BUILDING AND DURING PUBLIC HEALTH CENTER OF GUJARAT GOVERNMENT H AD GIVEN CONTRACT TO M/S. BUILD QUICK CONSTRUCTION COMPANY, AHMEDABAD AND THE ASSESSEE HAD TAKEN SUB-CONTRACT FROM THIS CONCE RN FOR CONSTRUCTION OF BUILDING OF PUBLIC HEALTH CENTERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. OBSERVED THAT THE A SSESSEE HAD MADE PAYMENT TO VARIOUS PERSONS AND ON WHICH TDS U/ S. 194C WAS NOT DEDUCTED. THE A.O. WAS THUS OF THE VIEW THAT SI NCE THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 194 C AS A RESULT OF WHICH RELATED EXPENSES CANNOT BE ALLOWED AS EXPENSE S AS PER SECTION 40(A)(IA). ACCORDINGLY OUT OF THE TOTAL EXPENSES CL AIMED UNDER THE HEAD LABOUR EXPENSES, A.O. MADE DISALLOWANCE OF RS. 55,65,714/- U/S. 40(A)(IA) AND ADDED TO THE TOTAL INCOME. 5. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A) IT WA S SUBMITTED THAT THE NATURE OF EXPENDITURE WHICH HAS BEEN DISALLOWED WAS NOT IN THE NATURE OF CONTRACT PAYMENT BUT WAS LABOUR CHARGES F OR THE LABOUR WORK CARRIED OUT BY DIFFERENT PERSONS. 6. BEFORE CIT (A), THE ASSESSEE ALSO PRODUCED 15 AT TENDANCE REGISTERS FOR VERIFICATION. BEFORE CIT(A), ASSESSEE ACCEPTED THAT PROVISIONS WERE VIOLATED WITH RESPECT TO 8 PERSONS AND THE TOTAL OF THE AMOUNT PAID BY THEM WAS RS.3,33,662/-. CIT(A) CONFI RMED THE ADDITION OF RS.3,33,662/- OUT OF THE DISALLOWANCE OF RS.55,6 5,714/- MADE BY THE A.O. FROM, THE ATTENDANCE REGISTER CONTAINING LIST OF 131 NAMES ITA NO.2 967 & 3043/AHD/2009 ASSESSME NT YEAR 2006- 07 . 4 PRODUCED BEFORE CIT (A), 3 NAMES WERE PICKED UP BY CIT (A) AND THE A.O. WAS DIRECTED TO VERIFY THE SAME. DURING THE CO URSE OF REMAND BEFORE THE A.O. ASSESSEE COULD NOT PRODUCE THE PERS ONS FOR VERIFICATION AND ACCORDINGLY IT WAS OPINED THAT THE CREDITWORTHINESS WAS NOT PROVED EITHER BEFORE THE A.O. OR BEFORE THE CIT(A). CIT(A) WAS OF THE VIEW THAT THE ASSESSEE COULD NOT EXPLAIN HOW PETTY LABOURERS COULD KEEP AMOUNTS OUTSTANDING BECAUSE THOSE WHO AP PEARED BEFORE THE A.O. ALSO NEVER CONFIRMED THE AMOUNTS DEBITED I N THE PROFIT AND LOSS ACCOUNT AND OR SHOWN OUTSTANDING IN THEIR NAME . CIT (A) THEREFORE, ALLOWED 25% OF BALANCE AMOUNT OF RS.52,3 2,052/- (55,65,714 3,33,662) AS LABOUR EXPENSES AND THE REMAINING 75 % AMOUNTING TO RS. 39,24,039/- WAS DISALLOWED AS BOGUS EXPENSES. A GAINST THIS ADDITION OF RS.39,24,039/-, ASSESSEE IS NOW IN APPE AL BEFORE US. 7. THE LD. A.R. OF THE ASSESSEE STATED BEFORE US TH AT THE ASSESSEE IS A SUB-CONTRACTOR OF THE CONTRACTOR. IT WAS STAT ED BY THE LD. A.R. THAT THE ASSESSEE WAS UNABLE TO PRODUCE THE PERSONS FOR VERIFICATION BECAUSE THE PERSONS WERE SCATTERED OVER VARIOUS SIT ES AND THE MATTER WAS ALSO OLD. 8. THE LD. D.R. ON THE OTHER HAND VEHEMENTLY ARGUED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE A.O. WAS R IGHT IN MAKING THE DISALLOWANCE AND THE LD. CIT(A) SHOULD HAVE UPHELD THE ORDER OF THE A.O. HE THEREFORE URGED THAT THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE UPHELD. ITA NO.2 967 & 3043/AHD/2009 ASSESSME NT YEAR 2006- 07 . 5 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE DOCUMENTS AND RECORDS PRODUCED BEFORE US. IT IS A FACT THAT T HE ASSESSEE IS A CONTRACTOR ENGAGED IN THE BUSINESS OF CIVIL CONSTRU CTION. THE FACT THAT THE ASSESSEE IS SUBCONTRACTORS CONTRACTOR HAS NOT BEEN DISPUTED BY THE REVENUE. IT IS ALSO A FACT THAT DURING THE YEAR THE ASSESSEE HAS UNDERTAKEN THE CIVIL WORK AT DIFFERENT SITES WHICH HAS NOT BEEN DISPUTED BY THE REVENUE. IT IS ALSO A FACT THAT THE MARGIN OF PROFIT IN THE CASE OF SUB-CONTRACTOR IS LESS THAN THAT OF A C ONTRACTOR AND ACCORDINGLY THE MARGIN OF PROFIT OF THE SUB-CONTRAC TORS SUB- CONTRACTOR CANNOT BE SIMILAR TO THAT OF A SUBCONTRA CTOR. IT IS UNDISPUTED FACT THAT THE ASSESSEE COULD NOT PRODUCE THE LABOURERS BEFORE THE A.O. NOR BEFORE THE CIT (A). THE ASSESSE E HAS FURNISHED ITS PROFIT AND LOSS ACCOUNT WHICH SHOWS AN INCOME OF RS .1,33,70,926/- AND SHOWN GROSS PROFIT OF RS.13,45,907/-. THE NATUR E OF WORK UNDERTAKEN BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE D.R. NOR AS HE BROUGHT ANYTHING CONTRARY TO THE FACT. IN SUCH C IRCUMSTANCES, THE ACTION OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF THE LABOUR EXPENSES TO THE EXTENT OF RS. 39,24,039 (BEING 75% OF TOTAL LABOUR EXPENSES AMOUNTING TO RS 52,32,052) BY CONSIDERING IT TO BE BOGUS IS EXCESSIVE AND FAR FROM GROUND REALITY. IN THESE CIR CUMSTANCES WE HOLD THAT IT SHALL BE REASONABLE IN THE FACTS OF THE CAS E IF THE DISALLOWANCE IS RESTRICTED TO RS. 10,00,000 WHICH SHALL MEET END S OF JUSTICE FOR BOTH SIDES. ACCORDINGLY, THE GROUND IS PARTLY ALLOWED. ITA NO.2 967 & 3043/AHD/2009 ASSESSME NT YEAR 2006- 07 . 6 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 20- 4 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)XV, AHMERDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD 1.DATE OF DICTATION 15 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10 / 4 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 13 - 4 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 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..