The ACIT, Circle-5, Surat V. Shri Durlabhbhai G.Patel, Surat

ITA 303/AHD/2009

• Counselvise Citation: 30320514 RSA 2009
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 30-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Fair market value
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) ITA NO. 303/AHD/2009 A. Y.: 2005-06 THE A. C. I. T., CIRCLE-5, ROOM NO.309, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS SHRI DURLABHBHAI G. PATEL, POST- BHATGAM, TAL OLPAD, SURAT PA NO. ABLPP 5283 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. L. YADAV, DR RESPONDENT BY NONE DATE OF HEARING: 13-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II I, SURAT DATED 03 RD NOVEMBER, 2008 FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. NONE APPEARED ON BEHALF OF THE A SSESSEE DESPITE SERVICE OF THE NOTICE THROUGH REVENUE DEPARTMENT. S ERVICE REPORT IS AVAILABLE ON RECORD. THE ASSESSEE IS, THEREFORE, PR OCEEDED EX-PARTE. 3. ON GROUND NO.1, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.11,06,767/- OUT OF ADDITION OF RS.11 ,87,312/- MADE BY THE AO ON ACCOUNT OF EXCESS SUB-CONTRACT CHARGES. T HE AO OBSERVED ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 2 THAT THE SUB CONTRACT EXPENSES WERE PAID TO THE SEV EN DIFFERENT PARTIES AND IN FOUR OUT OF THESE CASES; THERE WAS A DIFFERENCE IN THE ASSESSEES ACCOUNT AND PARTIES ACCOUNT. IN THE CASE OF DHARMESH PATEL THE DIFFERENCE WAS RS.10,75,000/-, IN CASE OF MEERA ENTERPRISE RS.33,827/-, IN CASE OF SURESHBHAI PATEL RS.31,767/ - AND IN THE CASE OF SAGE INFRASTRUCTURE PVT. LTD. RS.46,618/-. THE A SSESSEE ADMITTED THAT DIFFERENCES IN THE CASE OF MEERA ENTERPRISE AN D SAGE INFRASTRUCTURE COULD NOT BE EXPLAINED BUT IN CASE O F DHARMESH PATEL AND SURESHBHAI PATEL, THERE WAS NO DIFFERENCE. THE AO REJECTED THE EXPLANATION AND MADE AN ADDITION OF RS.11,87,212/- ON THIS ACCOUNT. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT SHR I DHARMESH PATEL WAS THE SON OF THE ASSESSEE AND THE AO MADE AN ADDI TION IN HIS ACCOUNTS REJECTING THE RECONCILIATION SUBMITTED BY THE ASSESSEE. THE ASSESSEE DID NOT HAVE BOOKS OF ACCOUNTS SINCE THESE WERE DESTROYED DURING FLOODS AND AT THE TIME OF ASSESSMENT PROCEED INGS, FOUND THAT THE TOTAL CREDITS IN THE ACCOUNT OF THE SAID PARTY WAS RS.35,75,000/- BUT SUBSEQUENTLY ON MAKING REFERENCE TO THE AUDIT R EPORTS, THE ASSESSEE FOUND THAT OUT OF THE TOTAL CREDITS, A SUM OF RS.10,75,000/- WAS CREDITED ON ACCOUNT OF LOAN RECEIVED FROM SHRI DHARMESH PATEL. THE PAYMENT OF SUB CONTRACT CHARGES TO THE SAID PAR TY WAS ONLY RS.25 LACS AND THEREFORE, THERE WAS NO DIFFERENCE I N THE ACCOUNTS OF THE ASSESSEE AND THAT OF THE PARTY. IN CASE OF SURE SHBHAI PATEL ALSO THE ASSESSEE SUBSEQUENTLY VERIFIED THE INFORMATION FROM THE BANK STATEMENTS AND TDS RECORDS FILED A RE-CONCILIATION BEFORE THE AO WHICH WAS REJECTED BY THE AO ON THE GROUND THAT THE ASSESSEE HAD SUBMITTED DIFFERENT FIGURES OF CONTRACT CHARGES BEF ORE T4HE AO INITIALLY. IN RESPECT OF SAGE INFRASTRUCTURE AND ME ERA ENTERPRISES, IT ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 3 WAS SUBMITTED THAT SINCE RECORDS WERE NOT AVAILABLE , THE DIFFERENCE COULD NOT BE RECONCILED. 4. THE LEARNED CIT(A) CONSIDERING THE RECONCILIATI ON STATEMENT DELETED THE ADDITION. HIS FINDINGS ARE REPRODUCED A S UNDER: I HAVE GONE THROUGH THE DETAILS AND FIND THAT THE APPELLANTS CONTENTION IN RESPECT OF DHARMESH PATEL AND SURESH PATEL IS IN ORDER. THE RECONCILIATION STATEMENT FIL ED SUBSEQUENTLY ON THE BASIS OF AUDITED ACCOUNTS CLEAR LY SHOWS THAT THE APPELLANTS VERSION IS CORRECT. THE AO HAS REJECTED THE RE-CONCILIATION STATEMENT NOT ON THE GROUND THAT IT WAS NOT CORRECT BUT ONLY ON THE GROUND THAT INITIALLY THE F IGURES PROVIDED BY THE APPELLANT WERE DIFFERENT FROM THE FIGURES FI LED SUBSEQUENTLY. I AM INCLINED TO AGREE WITH THE APPEL LANT THAT THE INITIAL FIGURES WERE PROVIDED BY HIM ON THE BASIS O F INFORMATION WITHOUT THE BOOKS OF ACCOUNTS BUT THE SAME WAS RECO NCILED SUBSEQUENTLY BY REFERRING TO THE AUDIT REPORT. THE AO HAS NOT POINTED OUT ANY DEFECTS IN THERE-CONCILIATION AND T HEREFORE ADDITION MADE ON THIS ACCOUNT IS DIRECTED TO BE DEL ETED. HOWEVER, ADDITION OF RS.33827/- IN CASE OF MEERA EN TERPRISES AND RS.46618/- IN CASE OF SAGE INFRASTRUCTURE WHERE THE DIFFERENCE COULD NOT BE RECONCILED IS HEREBY CONFIR MED. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT INITIALLY THE ASSESSEE DID NOT FILE PROPER REC ONCILIATION BEFORE THE AO; THEREFORE, ADDITION SHOULD NOT HAVE BEEN DELETE D. 6. ON CONSIDERATION OF THE FACTS AND SUBMISSION OF THE LEARNED DR, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPE AL OF THE REVENUE. THE ASSESSEE FILED DETAILS BEFORE THE LEARNED CIT(A ) IN RESPECT OF SOME OF THE PARTIES ALONG WITH RECONCILIATION STATE MENT ON THE BASIS OF AUDITED ACCOUNTS AND ON VERIFICATION OF THE AUDITED ACCOUNTS THE CLAIM OF THE ASSESSEE WAS FOUND CORRECT. THE AO DID NOT A CCEPT THE ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 4 SUBSEQUENT RECONCILIATION STATEMENT ON THE GROUND T HAT THE ASSESSEE DID NOT FILE THESE DETAILS INITIALLY. IT WOULD, THE REFORE, SUGGEST THAT THE AO DID NOT WANT TO VERIFY THE DETAILS SUBMITTED BY THE ASSESSEE RECONCILING THE STATEMENTS OF THE PARTIES. NO ADVER SE COMMENTS HAVE BEEN GIVEN ON THE SUBSEQUENT RECONCILIATION STATEME NT. THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS AND MATE RIAL ON RECORDS RIGHTLY DELETED PART OF THE ADDITION. SINCE, THE RE VENUE IS IN APPEAL AND NO MATERIAL IS BROUGHT ON RECORD TO REBUT THE F INDINGS OF THE LEARNED CIT(A), WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. ON GROUND NO.2, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.33,98,658/- MADE BY THE AO ON ACCOUN T OF BOGUS/NON- GENUINE EXPENSES. THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED TOTAL EXPENSES OF RS.33,98,658/- UNDER TWO HEADS FR OM FIVE DIFFERENT PARTIES. NAMES AND ADDRESSES OF ALL THE PARTIES OTH ER THAN FIVE PARTIES WERE NOT PROVIDED BY THE ASSESSEE NOR WERE BILLS ET C. PRODUCED IN SUPPORT OF THE CLAIM ON THE GROUND THAT THE BOOKS A ND DOCUMENTS WERE LOST DURING THE FLOODS. THE AO HELD THAT THE E NTIRE EXPENDITURE CLAIMED WAS NON GENUINE AND MAKE AN ADDITION ON THI S ACCOUNT. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT DUR ING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED COMP LETE DETAILS OF ALL THE PARTIES FROM WHOM ROAD MATERIAL WAS PURCHAS ED, EXCEPT THE ABOVE MENTIONED FIVE PARTIES SINCE THE RECORDS WERE DESTROYED. IN CASE OF OTHER PARTIES THE ASSESSEE COULD SUBMIT DET AILS IMMEDIATELY SINCE HE HAD FREQUENT DEALING WITH THOSE PARTIES IN SUBSEQUENT YEARS ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 5 ALSO. AT THE APPELLATE STAGE, THE LEARNED COUNSEL F OR THE ASSESSEE FILED ADDRESSES AND CONFIRMATIONS FROM THE SAID PAR TIES IN RESPECT OF SALES MADE BY THEM. THIS WAS NEW EVIDENCE WHICH COU LD NOT BE FURNISHED AT THE TIME OF ASSESSMENT PROCEEDINGS AND SINCE THE LEARNED CIT(A) WAS SATISFIED THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CASE, THE FRESH EVIDENCE WAS ADMITTED. H OWEVER, IN TERMS OF RULE 46A OF THE IT RULES, THE ISSUE WAS REMANDED TO THE AO WITH THE PAPER BOOK FILED BY THE ASSESSEE FOR HIS COMMEN TS. THE AO VIDE LETTER DATED 21-08-2008 REPORTED THAT NOTICES U/S 1 33(6) OF THE IT ACT ISSUED TO THE FIVE PARTIES WERE RETURNED BACK UN-SE RVED AND THEREFORE, NO VERIFICATION COULD BE DONE. HOWEVER, HE HAS NOT OFFERED HIS COMMENTS ON THE SUBMISSIONS MADE BY THE ASSESSEE IN THE PAPER BOOK. THEREFORE, THE ISSUE WAS BEING DECIDED ON MER ITS. A COPY OF THE REPORT WAS FURNISHED TO THE APPELLANT AND VIDE LETTER DATED 26-09-2008 THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN THE CASE OF SHAKTI TAR PRODUCTS PVT. LTD., THE DIRE CTOR OF THE COMPANY HAD EXPIRED LEAVING HIS MINOR SON AND THE BUSINESS OF THE PARTY HAD CLOSED FOR QUITE SOME TIME. HOWEVER, CONFIRMATION D ULY SIGNED BY THE PARTY WAS SUBMITTED AT THE APPELLATE STAGE AS ALSO THE BANK STATEMENT INDICATING PAYMENT TO THE PARTY THROUGH A CCOUNT PAYEE CHEQUES. IN THE CASE OF SHEEL TRADER, CONFIRMATION WAS FILED IN THE PAPER BOOK AND THE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. IN THE CASE OF TIKI TAR INDUSTRIES ALSO CO NFIRMATION WAS FILED AND THE PAYMENT WAS ALSO MADE THROUGH ACCOUNT PAYEE CHEQUES. IN THE CASE OF HINDUSTAN COLAR LTD., THE ASSESSEE REQU ESTED THE COMPANY WHICH WAS A SUBSIDIARY OF HPCL, A PUBLIC SE CTOR UNDERTAKING TO ISSUE A CONFIRMATION BUT THE COMPANY DID NOT ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 6 RESPOND. HOWEVER, THE PAYMENT WAS MADE BY ACCOUNT P AYEE BANK DRAFT. IN THE CASE OF SHREEJI CORPORATION ALSO CONF IRMATION WAS FILED AND THE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUES. IT WAS SUBMITTED THAT NON RESPONSE TO NOTICE U/S 133(6) OF THE IT ACT WOULD NOT PROVE THAT THE EXPENDITURE INCURRED BY THE ASSE SSEE WAS NON GENUINE. 8. THE LEARNED CIT(A) CONSIDERING THE MATERIAL BEF ORE HIM DELETED THE ADDITION. HIS FINDINGS ARE REPRODUCED A S UNDER: I HAVE GONE THROUGH THE SUBMISSION AND THE DETAILE D FILED IN THE PAPER BOOK. IT IS SEEN THAT DURING REMAND PR OCEEDINGS THE AO APPARENTLY HAS MADE ONLY HALF HEARTED EFFORT BY ISSUING NOTICE U/S 133(6) OF THE IT ACT AND NOT COMMENTING ON THE CONTENTS OF THE SUBMISSION FILED BY THE APPELLANT. THE PARTIES TO WHOM NOTICES WERE ISSUED WOULD LOOSE NOTHING BY NOT RESPONDING TO NOTICES ISSUED BY THE AO. THE LD. AR ALSO RELIED ON THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF M. K. BROS. 163 ITR 249 WHEREIN IT WAS HELD THAT EVEN IF THE SELLERS WERE HELD TO BE BOGUS BY SALES-TAX AUTHORITY, IF TH E PAYMENTS WERE MADE BY THE ASSESSEE BY CHEQUES, ADDITION COUL D NOT BE MADE ON THIS ACCOUNT IN THE HANDS OF THE APPELLANT. IT IS ALSO SEEN THAT THE APPELLANT HAS FURNISHED CONFIRMATIONS FROM ALL THE PARTIES EXCEPT HINDUSTAN COLAR LTD. WHICH IS A PUBL IC SECTOR UNDERTAKING AND MAY NOT RESPOND TO THE REQUEST MADE BY THE APPELLANT FOR CONFIRMATION OF TRANSACTION. HOWEVER, IN ALL THESE CASES THE PAYMENTS HAVE BEEN MADE A/C PAYEE CHEQUES OR DRAFTS AND THEREFORE I AM OF THE CONSIDERED VIEW TH AT THE APPELLANT HAS ESTABLISHED THE GENUINENESS OF THE TR ANSACTIONS. IF THE PARTIES HAVE NOT COME FORWARD, THE APPELLANT SHOULD NOT SUFFER ON THIS ACCOUNT SINCE DETAILED INQUIRIES AT THE TIME OF ASSESSMENT OR DURING REMAND PROCEEDINGS WERE NOT MA DE BY THE AO TO REACH THE CONCLUSION THAT THE EXPENDITURE WAS BOGUS. THERE IS NOTHING ON RECORD TO INDICATE THAT ANY PAR T OF THE PAYMENT EVEN BY THE APPELLANT TO THESE PARTIES CAME BACK TO ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 7 HIM IN ANY FORM. THEREFORE, THE DISALLOWANCE ON THI S ACCOUNT IS DIRECTED TO BE DELETED. 9. ON CONSIDERATION OF THE SUBMISSION OF THE LEARNE D DR, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE OR DER OF THE LEARNED CIT(A). THE LEARNED CIT(A) ADMITTED ADDITIONAL EVID ENCE AS PER RULE 46A OF THE IT RULES BY HOLDING THAT THE ASSESSEE WA S PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE DETAILS BEFORE THE AO. AT THE APPELLATE STAGE THE ASSESSEE HAS FILED CONFIRMATION OF THE PARTIES AND ALSO BANK STATEMENTS INDICATING THAT PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE AO IN THE REMAND REPORT HAS NOT MADE ANY ADVERSE COMMENTS ON THE DOCUMENTS FILED BY THE ASSESSEE. NOTING WAS PROVED ON RECORD TO PROVE THAT PART OF T HE PAYMENTS RETURNED BACK TO THE ASSESSEE. THE LEARNED CIT(A) O N PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTL Y DELETED THE ADDITION. FURTHER, NOTHING IS BROUGHT ON RECORD TO CONTRADICT THE FINDINGS OF THE LEARNED CIT(A). WE, THEREFORE, DO N OT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A) IN DELETING THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE HAS NO MERIT AND IS ACCORDINGLY DISMISSED. 10. ON GROUND NO.3, THE REVENUE CHALLENGED THE ORDE R OF THE LEARNED CIT(A) IN RESTRICTING THE ADDITION OF RS.6, 63,292/- TO RS.2,00,000/- ON ACCOUNT OF LABOUR CHARGES. THE AO OBSERVED THAT PAYMENT WAS MADE IN CASH BUT NAMES AND ADDRESSES OF THE PARTIES TO WHOM PAYMENT WAS MADE WERE NOT FURNISHED. HE THE REFORE HELD THAT THE CLAIM COULD NOT BE VERIFIED AND MADE AN AD DITION ON THIS ACCOUNT. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT THE ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 8 ASSESSEE WAS IN THE JOB OF CONSTRUCTION OF NEW ROAD S WHICH WAS LABOR ORIENTED AND A LARGE NUMBER OF RURAL LABORERS WERE EMPLOYED WHO WOULD SHIFT FROM ONE PALACE TO ANOTHER AND DID NOT HAVE ANY PERMANENT ADDRESSES. THEY HAD TO BE PAID IN CASH TH EREFORE ADDRESSES OF THESE LABORERS WOULD NOT BE FURNISHED. 11. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE RESTRICTED THE ADDITION TO RS.2,00,000/-. HIS FINDINGS ARE REPRODUCED AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS AND I AM INCLINE D TO AGREE WITH THE APPELLANT ON THIS ACCOUNT. THE CONTR ACTOR EMPLOYS CASUAL LABORERS WHO ARE GENERALLY DAILY WAG ES AND WOULD MOVE AWAY IN SEARCH OF NEW JOBS ONCE THE CONT RACT WORK IS COMPLETE AND WOULD NOT HAVE ANY PERMANENT ADDRES S. THE APPELLANT HAS TO MAKE PAYMENT IN CASH TO THESE LABO RERS. BUT IT IS ALSO LIKELY THAT SUCH CASH PAYMENTS COULD BE INF LATED IN ABSENCE OF VERIFICATION AND THEREFORE I AM OF THE V IEW THAT A TOKEN LUMP SUM DISALLOWANCE OF RS.2 LACS IS REQUIRE D TO BE MADE IN THIS CASE. THE APPELLANT GETS A RELIEF OF R S.4,63,292/- ON THIS ACCOUNT. 12. ON CONSIDERATION OF THE SUBMISSION OF THE LEARN ED DR, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE OR DER OF THE LEARNED CIT(A). THE LEARNED CIT(A) HAS RIGHTLY CONSIDERED T HE NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE BEING THE CONSTRU CTION ACTIVITY IN RURAL AREA FOR THE PURPOSE OF REDUCING THE ADDITIO N. THIS GROUND HAS NO MERIT AND IS ACCORDINGLY DISMISSED. 13. ON GROUND NO.4, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.2,46,125/- MADE ON ACCOUNT OF SALARY EXPENSES. THE AO OBSERVED THAT THE ASSESSEE MADE CLAIM OF SALARY TO DRIVERS, ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 9 OPERATORS AND SUPERVISORS BUT NO DETAILS LIKE ADDRE SS OR IDENTIFICATION OF SUCH PERSONS WERE FURNISHED. 25% OF THE CLAIM WA S ACCORDINGLY DISALLOWED. THE ASSESSEE SIMILARLY SUBMITTED THAT H E CARRIED OUT ROAD CONSTRUCTION WORK AT VARIOUS SITES AND DRIVERS AND OPERATORS WERE EMPLOYED OUT OF RURAL PEOPLE AVAILABLE LOCALLY AND THEY LEFT THEIR JOB ON COMPLETION OF PARTICULAR JOB AT THE SITE. IT WAS SUBMITTED THAT THE ASSESSEE HAS SHOWN BETTER RESULT DURING THE YEAR WH EN GROSS PROFIT WAS 8.86% COMPARED TO 7.78% OF THE LAST YEAR. THE L EARNED CI(A) FOLLOWING HIS APPELLATE ORDER FOR THE PRECEDING ASS ESSMENT YEAR 2004- 05 DELETED THE ADDITION IN WHICH HE HAS HELD THAT N O ADVERSE VIEW SHOULD BE TAKEN FOR PAYMENTS MADE TO TEMPORARY WORK FORCE. IT, THEREFORE, APPEARS THAT THE LEARNED CIT(A) CONSIDER ING THE HISTORY OF THE ASSESSEE AND CONSIDERING THE APPELLATE ORDER IN THE EARLIER YEAR DELETED THE ADDITION. THEREFORE, WE ARE NOT INCLINE D TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THIS GROUND OF APP EAL IS ACCORDINGLY DISMISSED. 14. ON GROUND NO.5, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.8,16,250/- MADE ON ACCOUNT OF SUB CO NTRACT CHARGES. THE AO OBSERVED THAT THE ASSESSEE HAS MADE PAYMENTS SUB CONTRACT PAYMENT OF RS.37,75,000/- TO DHARMESH PATE L AND RS.7,65,000/- TO JAYANT PATEL WHO WERE THE SONS OF THE ASSESSEE AND COVERED BY THE PROVISIONS OF SAID SECTION. THER E WAS NO AGREEMENT FOR THE SAID SUB CONTRACT AND THE ASSESSE E ONLY FURNISHED BANK STATEMENT OF THE TWO PERSONS IN WHICH CHEQUES ISSUED BY THE ASSESSEE WERE CREDITED. THE AO WAS OF THE VIEW THAT POSSIBILITY OF EXCESSIVE PAYMENT HAVING REGARD TO SERVICES RENDERE D BY THEM COULD ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 10 NOT BE RULED OUT AND THEREFORE DISALLOWED 25% OF TH E TOTAL CLAIM. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT THE AO REQUIRED THE ASSESSEE TO PRODUCE DETAILS OF WORK DONE BY THESE T WO PERSONS BUT BOOKS OF ACCOUNTS OF THE ASSESSEE AS WELL AS OF HIS TWO SONS WERE DESTROYED IN FLOODS AND THEREFORE DETAILS LIKE MEAS UREMENT ETC. COULD NOT BE FURNISHED. THESE TWO PERSONS WERE ASSESSED T OT AX AT THE SAME RATE AND THEREFORE THERE WOULD BE NO BENEFIT T O THE ASSESSEE BY MAKING EXCESSIVE PAYMENT TO THE TWO SONS. THE LEARN ED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MEGABHAI KISANBHAI PATEL & CO., 108 ITR 54 WHEREIN IT WAS HELD THAT NO DISALLOWANCE U/S 40A (2) (B) OF TH E IT ACT WOULD BE MADE IF THE TRANSACTIONS WERE NOT SHAM TRANSACTION S. THE AO HAD ALSO NOT BROUGHT ON RECORD ANY COMPARABLE CASE WHIC H COULD SHOW THAT THE PAYMENTS MADE WERE EXCESSIVE HAVING REGARD TO MARKET VALUE OF SIMILAR SERVICE. 15. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED THE ENTIRE ADDITION. HIS FINDINGS ARE REPRODUCES AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS AND FIND THAT TH E AO HAS MADE THE DISALLOWANCE WITHOUT BRINGING ANY MATE RIAL ON RECORD TO INDICATE THAT THE PAYMENT WAS IN ANY WAY EXCESSIVE OR UNREASONABLE HAVING REGARD TO MARKET VALUE FOR S IMILAR SERVICES AT THE RELEVANT TIME. IT IS ALSO SEEN THAT THE AO HAD NOT DOUBTED THE GENUINENESS OF TRANSACTIONS AND IT WAS NOT THE CASE WHERE THE PAYMENTS WERE NOT MADE TO THE SAID T WO PARTIES. IT IS ALSO A FACT THAT THE TWO PERSONS WER E ASSESSED AT THE HIGHEST SLAB OF TAXATION AS IS THE ASSESSEE AND THEREFORE THE APPELLANT WOULD HAVE NOT BENEFIT IN MAKING ANY EXCESS PAYMENT OR REDUCING HIS INCOME. THE AO HAS MADE THE ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 11 DISALLOWANCE ON THE SOLE GROUND THAT THE TWO PERSON S TO WHOM THE PAYMENT WAS MADE WERE THE SONS OF THE APPELLANT WHICH CANNOT BE A GROUND FOR INVOKING THE PROVISIONS OF S ECTION 40A(2)(B) OF THE ACT IN ABSENCE OF A COMPARISON FOR MARKET VALUE FOR SIMILAR SERVICES RENDERED BY ANY OTHER PA RTY. THEREFORE, DISALLOWANCE OF THIS ACCOUNT IS WITHOUT ANY BASIS AND IS DIRECTED TO BE DELETED. 16. ON CONSIDERATION OF THE SUBMISSION OF THE LEARN ED DR IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT(A), WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LEARNED D R MAINLY CONTENDED THAT PAYMENTS WERE MADE TO THE SONS OF TH E ASSESSEE. HOWEVER, THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT EXPENDITURE IS EXCESSIVE OR UNREASONABLE WITH REGAR D TO FAIR MARKET VALUE OF THE SERVICES PROVIDED BY SONS OF THE ASSES SEE. IN THE ABSENCE OF ANY MATERIAL ON RECORD, THE LEARNED CIT( A) RIGHTLY HELD THAT PROVISIONS OF SECTION 40A (2) (B) OF THE IT AC T CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE. WE ACCORDINGLY, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS A CCORDINGLY DISMISSED. 17. NO OTHER POINT IS ARGUED OR PRESSED. 18. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- ITA NO.303/AHD/2009 THE ACIT, CIRCLE-5, SURAT VS SHRI DURLABHBHAI G. PA TEL 12 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 D Y. REGISTRAR, ITAT, AHMEDABAD