Ashirwad Developers, Ahmedabad V. The DCIT, Circle-4(2), Ahmedabad

ITA 298/AHD/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9540 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Corroborative evidences; TDS; Set aside
• Section: 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER 1. ./ITA NO.1012/AHD/2015 2. ./ITA NO. 298/AHD/2019 ( / ASSESSMENT YEAR : 2011-12 ) ASHIRWAD DEVELOPERS DEV RESIDENCY OPP. NIRMAN HOUSE NEW S.G. ROAD, GOTA AHMEDABAD 382 481` / VS. THE DCIT CIRCLE-9 AHMEDABAD- 380 015 ./ ./ PAN/GIR NO. : AAQFA 3704 M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MANISH J. SHAH, AR / RESPONDENT BY : SHRI VEDANSHU TRIPATHI, SR.DR / DATE OF HEARING 03/12/2020 !'# / DATE OF PRONOUNCEMENT 04/01/2021 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEALS FILED AT THE INSTANCE OF THE ASSESSEE ARE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS)-4, [CIT(A) IN SHORT] DATED 03/03/2015 & 19/12/2018 I N THE MATTER OF ASSESSMENT ORDER UNDER S.143(3) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 11/03/2014 IN QUANTUM APPEAL AND PENALTY ORDER UNDER S.271(1)(C) OF THE ACT DATED 27/02/2017 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 2 - 2. AT THE TIME OF HEARING, IT WAS INFORMED TO THE B ENCH THAT THE APPEAL OF THE ASSESSEE IN ITA NO.1012/AHD/2015 FOR AY 2011-12 CONCERNS ADDITIONS/DISALLOWANCES IN QUANTUM PROCEED INGS, WHEREAS THE OTHER APPEAL OF THE ASSESSEE IN ITA NO.298/AHD/2019 FOR AY 2011-12 CONCERNS IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT ON THE ADDITIONS/DISALLOWANCES MADE IN THE QUANTUM PROCEED INGS. IT WAS THUS INFORMED THAT BOTH THE APPEALS BEING INTER-CONNECTE D AND INTEGRAL TO EACH OTHER ON FACTS, IT WILL BE EXPEDIENT TO HEAR BOTH T HE APPEALS TOGETHER FOR THEIR SIMULTANEOUS DISPOSALS. CONSEQUENTLY, BOTH T HE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. ITA NO.1012/AHD/2015 AY 2011-12 (QUANTUM APPEAL) : 3. AS PER THE GROUNDS OF APPEAL, THE ASSESSEE HAS C HALLENGED THE ACTION OF THE CIT(A) IN SUSTAINING THE DISALLOWANCE S OF RS.46,44,514/- INCURRED TOWARDS JOB-WORK/LABOUR WORK EXPENSES. 4. BRIEFLY STATED, THE ASSESSEE IS A BUILDER AND RE AL ESTATE DEVELOPERS. THE ASSESSEE FILED RETURN OF INCOME D ECLARING TOTAL INCOME OF RS.1,12,04,240/- FOR THE AY 2011-12 WHICH WAS SU BJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF THE ASSESSMENT PROCEE DINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAS INTER ALIA CLAIMED EXPENSES OF RS.46,44,518/- ON ACCOUNT OF JOB-WORK/LABOUR WORK P AID TO ONE SHRI KAILASH SUKHLAL MANDAL. TO VERIFY THE GENUINENESS OF THE AFORESAID EXPENSES, NOTICE UNDER S.133(6) OF THE ACT WAS ISSU ED TO BE AFORESAID PARTY SEEKING DETAILS IN RELATION TO THE AFORESAID WORK AND PAYMENTS ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 3 - RECEIVED BY HIM. NOTICE UNDER S.133(6) OF THE ACT WAS RETURNED UNSERVED AND INCOMPLETE REPLY WAS FILED THEREAFTER. TO SUPP ORT THE EXPENSES CLAIMED, THE ASSESSEE, ON ITS PART, FILED A COPY OF LEDGER ACCOUNT OF CONTRACTOR SHRI KAILASH SUKHLAL MANDAL. CERTAIN R EPLY OF THE CONTRACTOR WAS ALSO STATED TO HAVE BEEN RECEIVED BY THE ASSES SING OFFICER IN THE COURSE OF PROCEEDINGS. THE ASSESSING OFFICER OBSER VED THAT THE CONTRACTOR (SHRI KAILASH SUKHLAL MANDAL) HAS COMMIT TED DEFAULT AND NOT FILED RETURN OF INCOME FOR AY 2011-12. THE RETURN FOR AY 2012-13 WAS ALSO FILED BY THE CONTRACTOR AFTER THE ISSUANCE OF NOTICE TO THE CONTRACTOR. THE ASSESSING OFFICER OBSERVED THAT WHILE THE ASSES SEE HAS SUBMITTED COPY OF BILLS, COPY OF LEDGER ACCOUNT OF THE CONTRA CTOR, IT HAS FAILED TO PROVE THE GENUINENESS OF THE EXPENSES AND THUS FAI LED TO SUBSTANTIATE THE CLAIM MADE. 5. THE ASSESSING OFFICER THUS REJECTED THE CLAIM OF THE JOB-WORK EXPENSES PRIMARILY ON THE GROUND THAT COMPLETE REPL Y WAS NOT FILED BY THE CONTRACTOR AND THE ASSESSEE COULD NOT PRODUCE THE P ARTY FOR VERIFICATION FOR GENUINENESS OF EXPENSES. THE BILLS PRODUCED WE RE FOUND TO BE DATED FOR THE LAST DAY OF THE YEAR. ADVERSE INFERENCE WA S ALSO DRAWN ON THE PREMISE THAT THE CONTRACTOR WAS NOT A TAX ASSESSEE . THE ASSESSING OFFICER WAS CONSEQUENTLY OF THE VIEW THAT ONUS CAST UPON THE ASSESSEE TO ESTABLISH AND SUBSTANTIATE THE CLAIM HAS NOT BEEN D ISCHARGED. AS A RESULT, A SUM OF RS.46,44,518/- INCURRED FOR JOB-WORK/LABO UR WORK WAS INTER ALIA DISALLOWED AND ADDED TO THE TOTAL INCOME. THE ASS ESSING OFFICER ALSO IMPOSED PENALTY ON THE AFORESAID ADDITIONS IN TERMS OF S.271(1)(C) ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 4 - OF THE ACT WHICH IS ALSO SUBJECT MATTER OF APPEAL IN ITA NO.298/AHD/2019 FOR AY 2011-12 (SUPRA). 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) FOR REVERSAL OF THE ACTION OF THE ASSESSING OFFICER. T HE CIT(A), HOWEVER, FOUND LITTLE MERIT IN THE PLEA OF THE ASSESSEE FOR NULLIFYING THE ADDITIONS. THE CIT(A) THUS SUSTAINED THE ADDITIONS SO MADE B Y THE ASSESSING OFFICER ON FOLLOWING TERMS: 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT AND THE ASSESSMENT ORDER PASSED BY THE ASSESSING OF FICER. 3.3.1. APPELLANT HAS CLAIMED PAYMENT OF RS.46,44,51 8/- TO SHRI KAILASH SUKHLAL MANDAL FOR LABOUR WORK IN ITS PROJECT. IN S UPPORT OF ITS CLAIM, COPIES OF BILLS RAISED BY KAILASH SUKHLAL MANDAL HA VE BEEN SUBMITTED ALONG WITH HIS BANK ACCOUNT STATEMENT. IT IS SEEN T HAT THERE ARE MANY CASH WITHDRAWALS FROM THIS ACCOUNT. I HAVE ALSO EXA MINED THE COPIES OF BILLS / RA BILLS GIVEN BY THIS PARTY. ON MOST OF TH E BILLS/ RA BILLS THERE IS NO DATE. THE BILL HAS BEEN RAISED ON THE LAST DAY O F THE FINANCIAL YEAR ON 31/03/2012. MANY OF THE BILLS ARE UNSIGNED. NORMALL Y RA BILLS ARE GIVEN ON MONTHLY BASIS. IN CASE OF APPELLANT THERE ARE TO TAL 14 RA BILLS RAISED DURING THE YEAR. APPELLANT HAS SHOWN PAYMENT TO TH IS PARTY IN TWO YEARS AND IN BOTH THE YEARS THE AMOUNTS HAVE BEEN CREDITED ON THE LAST DAY OF THE FINANCIAL YEAR. EVEN ON FORM 16A SUBMIT TED BY THE APPELLANT, ADDRESS OF SHRI KAILASH SUKHLAL MANDAL I S NOT MENTIONED. AS STATED IN THE ASSESSMENT ORDER, THE NOTICES ISSUED TO THIS PARTY WERE RETURNED UNSERVED AND APPELLANT COULD NOT PRODUCE T HE PARTY BEFORE THE AO FOR VERIFICATION. IMPORTANTLY, THE PARTY HAS NO T FILED RETURN OF INCOME AND ONLY AFTER RECEIPT OF NOTICE FROM THE AO RETURN OF INCOME WAS FILED. APPELLANT HAS SUBMITTED COPY OF LEDGER A CCOUNT OF THE PARTY IN ITS BOOKS. AS PER LEDGER ACCOUNT, THE PAYMENTS W ERE MADE UNDER DIFFERENT HEADS LIKE WOOD, SECURITY, ELECTRICAL. NA MES OF MANY PERSONS ARE APPEARING AND CUMULATIVE PAYMENTS HAVE BEEN CLA IMED TO BE MADE TO SHRI KAILASH SUKHLAL MANDAL. INTERESTINGLY, NO SUCH DETAILS ARE AVAILABLE ON THE BILLS RAISED BY THIS PARTY. IT IS NOT CLEAR WHEN THESE DETAILS ARE NOT AVAILABLE ON THE BILLS OF THE PARTY , HOW APPELLANT HAS ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 5 - GIVEN SUCH DETAILS IN THE LEDGER ACCOUNT OF THIS PA RTY IN ITS ACCOUNTS. IN VIEW OF ALL THE ABOVE REASONS, IT IS HELD THAT APPE LLANT COULD NOT PROVE THAT SHRI KAILASH SUKHLAL MANDAL HAS DONE LABOUR WO RK ON THE SITES CONSTRUCTED BY THE APPELLANT. GENUINENESS OF PAYMEN T OF RS.46,44,518/- TO SHRI KAILASH SUKHLAL MANDAL COULD NOT BE PROVED WITH .CORROBORATIVE EVIDENCES. DEDUCTION OF ONLY THOSE EXPENSES IS ALLO WABLE AGAINST BUSINESS INCOME WHICH CAN BE PROVED TO HAVE BEEN IN CURRED FOR THE PURPOSE OF BUSINESS. THEREFORE, IT IS HELD THAT AO WAS JUSTIFIED IN DISALLOWING RS. 46,44,518/-. 7. FURTHER, AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE CAREFULLY CONSIDERED THE RESPECTIVE SUBM ISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS DEFENSE PROPAGATE D ON BEHALF OF THE REVENUE. 9. THE SOLITARY CONTROVERSY IN HAND IS LEGITIMACY O F DISALLOWANCE OF EXPENSES CLAIMED RS.46,44,518/- FOR JOB-WORK/LABOUR WORK UTILIZED FOR REAL ESTATE BUSINESS. AS POINTED OUT ON BEHALF OF THE ASSESSEE, WE NOTICE THAT ASSESSEE HAS PROVIDED (I) COPY OF INVOICES RAI SED BY THE CONTRACTOR FOR IMPUGNED JOB-WORK (II) EVIDENCES TOWARDS DEDUCT ION OF TAX AT SOURCE ON PAYMENTS/CREDITS (III) PAYMENT MADE THROUGH BANK ING CHANNEL IN CONSONANCE WITH THE PROVISIONS OF SECTION 40A(3) OF THE ACT (VI) NAME AND ADDRESS OF THE CONTRACTOR PROVIDED. ALONG WITH THE AFORESAID EVIDENCES, THE LEDGER ACCOUNT OF THE CONTRACTOR IN THE BOOKS OF THE ASSESSEE AS WELL AS BANK STATEMENT SHOWING PAYMENT MADE TO THE CONTRACTOR WAS ALSO PLACED. IT IS CONTENDED THAT T HE ACCOUNTS OF THE ASSESSEE HAS BEEN DULY AUDITED WITHOUT ANY ADVERSE COMMENTS. IN THE ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 6 - COURSE OF HEARING BEFORE THE TRIBUNAL, A REFERENCE WAS MADE TO THE LEDGER ACCOUNT WHICH DEPICTS ADHOC PAYMENTS MADE TO VARIOU S PARTIES INCLUDING SHRI KAILASH SUKHLAL MANDAL AND TDS WAS ALSO DULY DEDUCTED THEREUPON AS MANDATED IN LAW. WITH REFERENCE TO DETAILS OF JOB-WORK/LABOUR CHARGES PERFORMED BY VARIOUS PARTIES AS APPEARING A T PAGE NOS.186 AND 187 OF THE PAPER-BOOK, IT WAS ASSERTED THAT SHRI KAILASH SUKHLAL MANDAL WAS RESPONSIBLE FOR RCC WORK FOR BLOCK NOS. A, B, C , D & E OF THE CONSTRUCTION WORK. IT IS CONTENDED THAT JOB-WORK C HARGES WERE PAID TO THE CONTRACTOR FOR RCC WORK OF THESE BLOCKS FOR WHICH E XPENSES HAVE NOT BEEN INCURRED AND PAID TO ANY OTHER PARTY. IN THIS BACKGROUND, IT IS THE CONTENTION OF THE ASSESSEE THAT NOTWITHSTANDING TH E NON-APPEARANCE OF THE PARTY BEFORE THE ASSESSING OFFICER, THE FACT RE MAINS INTACT THAT THE CONSTRUCTION CANNOT BE COMPLETED WITHOUT THE RCC WO RK BEING CARRIED OUT BY SOMEONE. IT WAS FURTHER SUPPORTED THAT CASH WITHDRAWN BY THE CONTRACTOR IS ONLY NATURAL TO MEET THE DAY-TO-DAY BASIS AND OTHER EXPENSES BY HIM. THE RUNNING BILLS DRAWN BY THE CO NTRACTOR ON THE LAST DAY OF THE YEAR WAS JUSTIFIED ON THE GROUND THAT TH ESE CONTRACTORS ARE NOT PROFESSIONALLY EQUIPPED AND DO NOT ADHERE TO THE BE ST ACCOUNTING PRACTICES AS EXPECTED. IT IS ALSO CONTENDED THAT W HERE THE CONTRACTOR HAS NOT FILED THE RETURN OF INCOME AT ALL, HIS NON-ATTE NDANCE BEFORE THE ASSESSING OFFICER IS QUITE PLAUSIBLE AND ADVERSE IN FERENCE CANNOT BE DRAWN AGAINST THE ASSESSEE FOR SUCH NON-APPEARANCE FOR THE SUPPLIER/CONTRACTOR. 10. WE FIND CONSIDERABLE MERITS IN THE CASE OF THE ASSESSEE IN THE LIGHT OF TELL-TALE EVIDENCES. THE ASSESSEE HAS FILED THE RELEVANT DOCUMENTARY ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 7 - EVIDENCES TO SUPPORT ITS CLAIM. THE PLEA OF THE AS SESSEE THAT WITHOUT THE RCC WORK FOR BLOCK NUMBERS A TO E OF THE PROJECT, T HE BUILDING CONSTRUCTION WORK CANNOT BE COMPLETED AND BUILDING CANNOT BE SOLD, APPEARS TO BE QUITE COMPELLING TO SUPPORT THE FACT UM OF RENDERING OF JOB- WORK/LABOUR WORK. 11. NOTICEABLY, IT IS NOT THE CASE OF ALTOGETHER NO N-COMPLIANCE OF THE NOTICE UNDER S.133(6) OF THE ACT. THE ASSESSING OF FICER HIMSELF HAS MADE AN AVERMENT TO THE EFFECT THAT PARTIAL/INCOMPL ETE REPLY WAS RECEIVED FROM THE CONTRACTOR. HOWEVER, IT IS NOT KNOWN AS T O ON WHAT ASPECTS, REPLY WAS NOT ADEQUATELY RECEIVED. THUS, IN TOTALI TY OF THE CIRCUMSTANCES, THE ASSESSEE, IN OUR VIEW, HAS PROVED OVERALL BONA FIDES OF THE EXPENSES ACTUALLY INCURRED IN RELATION TO CONSTRUCTION OF PR OJECT. GIVEN THE EVIDENCES PLACED, THE ASSESSING OFFICER COULD NOT H AVE DRAWN AN INFERENCE AGAINST THE ASSESSEE IN WHOLESALE. THE A CTION OF THE REVENUE AUTHORITIES IS ACCORDINGLY SET ASIDE AND THE ADDITI ONS MADE IN QUESTION IS DIRECTED TO BE DELETED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .1012/AHD/2015 FOR AY 2011-12 IS ALLOWED. ITA NO.298/AHD/2019 FOR AY 2011-12 (PENALTY APPEAL) : 13. THE SUBJECT MATTER OF THIS APPEAL CONCERNS IMPO SITION OF PENALTY ON THE ADDITIONS MADE IN QUANTUM PROCEEDINGS. ITA NO.1012/AHD/2015 & ITA NO.298/AHD/2019 ASHIRWAD DEVELOPERS VS.DCIT ASST .YEAR - 2011-12 - 8 - 14. IN VIEW OF THE REVERSAL OF THE ADDITIONS/DISALL OWANCES MADE IN THE QUANTUM APPEAL IN ITA NO.1012/AHD/2015 (SUPRA), THE CONSEQUENTIAL PENALTY UNDER S.271(1)(C) OF THE ACT AUTOMATICALLY GETS OBLITERATED. THE PENALTY IMPOSED UNDER S.271(1)(C) OF THE ACT THUS S TANDS DELETED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.298/AHD/2019 FOR AY 2011-12 IS ALLOWED. 16. IN THE COMBINED RESULT, BOTH THE CAPTIONED APPE ALS OF THE ASSESSEE ARE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 04/01/ 2021 SD/- SD/- (MS. MADHUMITA ROY) ( PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 04/01/2021 &.., .(.. / T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-4, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 21.12.2020(DICTATION PAD 16 -PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21.12.2020/22.12.2020 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.04/01/2021 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 04/01/2021 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER