The DCIT, Circle-8, Surat V. M/s. Maruti Construction, Surat

ITA 3054/AHD/2010

• Counselvise Citation: 305420514 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH BAINS
• Assessee Lawyers: MEHUL R SHAH
• Keywords: Corroborative evidences
• Section: 144

Judgement Text

ITA NO.3054/AHD/2010 -1- , , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , ! ! ! !, , , , '# $% '# $% '# $% '# $% , , , , %& ' %& ' %& ' %& ' % ! ( % ! ( % ! ( % ! ( BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND TEJ RAM MEENA, ACCOUNTANT MEMBER) ITA NO.3054/AHD/2010 [ASSTT.YEAR : 2007-2008] THE DCIT, CIR.8 SURAT. /VS. M/S.MARUTI CONSTRUCTION 407, KRISHNA APARTMENT AMBIKA NAGAR-2 KATARGAM ROAD, SURAT. PAN : AAHFM 9988 J ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ' . / %/ REVENUE BY : SHRI SUBHASH BAINS 1$ . / %/ ASSESSEE BY : SHRI MEHUL R. SHAH 2 . $3&/ DATE OF HEARING : 16 TH JANUARY, 2014. 456 . $3&/ DATE OF PRONOUNCEMENT : 03-03-2014 %7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THIS APPEAL OF THE REVENUE FOR THE A.Y.2007-2008 IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, SURAT DATED 23.08.2010. ITA NO.3054/AHD/2010 -2- 2. THE GROUND NO.1 OF THE REVENUES APPEAL IS AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MA DE ON ACCOUNT OF DISALLOWANCE OF LABOUR CHARGES TO THE EXTENT OF RS. 2,88,34,000/- EVEN AFTER RECORDING THE FINDING THAT THE LABOUR REGISTE R WAS INCOMPLETE AND HAD CERTAIN INHERENT DEFECTS. 3. THE LEARNED DR SUBMITTED THAT THE LABOUR REGISTE R PRODUCED BY THE ASSESSEE WAS NOT COMPLETE, AND THERE WERE NUMBER OF DEFECTS THEREIN, AND THEREFORE, THE AO WAS JUSTIFIED IN MAKING THE DISAL LOWANCE OUT OF THE LABOUR EXPENSES CLAIMED BY THE ASSESSEE. HE SUBMITTED THA T THE ASSESSEE FAILED TO PRODUCE THE ADDRESSES OF THE PAYEES OF THE LABOUR C HARGES AND COULD NOT SUBSTANTIATE THE LABOUR CHARGE PAYMENTS AND THE CAS H PAYMENTS OUT OF THE LABOUR CHARGES TO THE EXTENT OF RS.2.94 CRORES WAS DISALLOWED BY THE AO. HE SUBMITTED THAT THE CIT(A) HAS WRONGLY RESTRICTED TH E DISALLOWANCE OUT OF THE LABOUR CHARGES TO MERELY 2% THEREOF I.E. RS.6 LAKHS OUT OF THE TOTAL ADDITION OF RS.2,94,34,800/- ON THIS COUNT. HE SUBMITTED TH AT THE ASSESSEE WAS COMPLETELY NON-COOPERATIVE WITH THE AO, AND THEREFO RE, THE ASSESSMENT HAS TO BE FRAMED EX PARTE UNDER SECTION 144 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS MERELY A SUB-CONTRACTOR WHEREIN THE PROFIT MARGIN IS VERY LESS. HE SUBMITTED THAT THE ASSESSEE HAS DECLARED GP RATE OF 4.85% ON SALES OF RS.22.83 CRORES DURING THE YEAR, AS AGAINST THE GP RATE OF 3.82% ON LESSER SALE OF RS.19.36 CRORES DURING THE IMMEDIATELY PRECEDING YEAR. HE SUBMITTED THAT THE DEPARTMENT H AS ACCEPTED THE ACCOUNTS OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESS MENT YEAR 2006-07. HE SUBMITTED THAT THE NET PROFIT RATE COMES TO NEARLY 2.5% OF THE TURNOVER OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE ITAT, A HMEDABAD IN THE CASE OF ITA NO.3054/AHD/2010 -3- BHIKHABHAI RAJABHAI DHAMELIYA VS. DEPARTMENT OF INC OME TAX, ITA NO.2586/AHD/2009 ORDER DATED 8.1.2010. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND ALSO COPIES OF VARIOUS DETAIL S FILED IN THE COMPILATION BY THE ASSESSEE. WE FIND THAT THE ASSE SSEE HAS EFFECTED TURNOVER OF RS.22.83 CRORES DURING THE YEAR AND HAS DECLARED A GP RATE OF 4.85% AS AGAINST THE TURNOVER OF RS.19.36 CRORES WITH GP RAT E OF 3.82% IN THE IMMEDIATELY PRECEDING YEAR. THE PERCENTAGE OF LAB OUR EXPENSES VIS--VIS THE SALES DURING THE RELEVANT YEAR HAS COME DOWN TO 49.37% AS AGAINST 54.13% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS CLAIMED THAT THE RETURN OF INCOME OF T HE ASSESSEE IN THE EARLIER ASSESSMENT YEAR 2006-07 WAS ACCEPTED IN SCRUTINY AS SESSMENT AND ONLY 1/5 TH OUT OF SOME EXPENSES AMOUNTING TO RS.1,97,874/- WER E DISALLOWED BY THE AO. THE ASSESSEE IS A SUB-CONTRACTOR. HOWEVER, WE FIND THAT THE ASSESSEE WAS NOT COOPERATIVE IN THE MATTER OF ITS ASSESSMENT BEFORE THE AO AND THE EX PARTE ASSESSMENT WAS FRAMED BY THE AO UNDER SECTION 144 OF THE ACT. THE ASSESSEE DID FILE CERTAIN DETAILS OF EXPENSES CLAIM ED, BUT COULD NOT FILE THE COMPLETE ADDRESS OF THE PERSONS TO WHOM THE PAYMENT S OF LABOUR CHARGES WERE MADE. IN REPLY TO A SPECIFIC QUERY FROM THE B ENCH, THE ASSESSEE PRODUCED LOOSE SHEETS HAVING THE DETAILS OF THE P AYEES OF THE LABOUR CHARGES WITH THEIR NAMES AND AMOUNT PAID, BUT IT WA S IN THE FORM OF LOOSE SHEETS AND NO REGISTER AS SUCH WAS MAINTAINED BY TH E ASSESSEE. THE LOOSE SHEETS OF LABOUR PAYMENTS DID NOT HAVE THE ADDRESS OF THE PAYEES THEREOF. THE PAYMENTS WERE MADE IN CASH TO THE EXTENT OF RS. 2,94,34,800/- DURING THE YEAR. THESE CASH PAYMENTS MADE TO VARIOUS PERSONS WITHOUT HAVING PROPER RECORD OF THEIR ADDRESSES ETC., COULD NOT POSSIBLY BE VERIFIED BY THE ITA NO.3054/AHD/2010 -4- DEPARTMENT. THE ONUS IS ON THE ASSESSEE TO PROVE T HE GENUINENESS OF THE LABOUR PAYMENTS CLAIMED AS DEDUCTION BY THE ASSESSE E. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE FACT THAT THE ASSESSEE HAS DECLARED BETTER TURNOVER WITH BETTER G P RATE AND THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE LESSER G P RATE WITH MORE LABOUR PAYMENTS IN PERCENTAGE WAS ACCEPTED BY THE DEPART MENT IN THE SCRUTINY ASSESSMENT, AND THAT THE ASSESSEE COULD NOT SUBSTAN TIATE WITH CORROBORATIVE EVIDENCES THE GENUINENESS OF THE CASH COMPONENTS OF THE LABOUR CHARGES TO THE TUNE OF RS.2,94,34,800/-, WE HOLD THAT THE ENDS OF THE JUSTICE SHALL BE MET, IF THE DISALLOWANCE AT 10% OF THE CASH COMPONE NTS OF THE LABOUR CHARGES OF RS.2.94 CRORES, WHICH COMES TO RS.29.5 L AKHS IS MADE AS AGAINST THE DISALLOWANCE RESTRICTED TO RS.6 LAKHS BY THE CI T(A), AND THE GROUND NO.1 OF THE REVENUE IS PARTLY ALLOWED. 5. THE GROUND NO.2 OF THE REVENUES APPEAL IS AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MA DE ON ACCOUNT OF DISALLOWANCE OF SERVICE TAX PAYMENT OF RS.68,18,444 /- FOUND TO BE NOT RECORDED IN THE BOOKS OF ACCOUNT CONSIDERING THAT T HE ASSESSEE HAS NOT FURNISHED DETAILS OF SERVICE TAX PAYABLE AND SERVIC E TAX PAID. 6. THE LEARNED DR HAS RELIED ON THE ORDER OF THE AO AND THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE CIT (A) HAS OBSERVED THAT THE AO HAS PASSED THE ORDER WITHOUT VERIFYING THE RECOR DS ON THE FILE. THE AUDIT REPORT MENTIONS THE AMOUNT OF PROVISION OF SERVICE TAX PAYABLE WHICH REQUIRED NO FURTHER EVIDENCE. THE CIT(A) WAS OF TH E OPINION THAT THE ASSESSEE HAS DULY ACCOUNTED FOR THE OUTSTANDING SER VICE TAX PAYABLE IN HIS BOOKS OF ACCOUNTS. THE PAYMENT OF SERVICE TAX WAS MADE BY THE ASSESSEE ITA NO.3054/AHD/2010 -5- THROUGH BANK ACCOUNT OF THE ASSESSEE DULY ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS AND THE COPIES OF THE CHALLAN AND SERVICE TAX RETURN WERE ALSO SUBMITTED BY THE ASSESSEE BEFORE THE REVENUE AUTHOR ITIES. THE CIT(A) HAS FURTHER OBSERVED THAT THERE IS NO HARM IN FOLLOWING EXCLUSIVE METHOD BECAUSE IN NO WAY THE PICTURE OF STATE OF AFFAIRS W AS GETTING DISTORTED. IN THE ABSENCE OF ANY MATERIAL TO SUGGEST THAT THE SERVICE TAX WAS PAID OUTSIDE THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE, AND IN VIEW OF THE FACT THAT THE AMOUNT WAS PAID AND RECORDED IN THE BOOKS OF THE ACCOUNTS AND IS DULY MENTIONED IN THE AUDIT REPORT, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ISSUE, WHICH IS CONFIRMED AND THE GROUND NO .2 OF THE REVENUE IS DISMISSED. 7. THE GROUND NO.3 OF THE REVENUES APPEAL IS AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN CALLING FOR AN EXAMINING EVIDENCE ON BOTH THE ABOVE ISSUES AND THEREAFTER DECIDING THE MATER IN VIOLATION OF RULE 46A OF THE IT RULE 1962 WITHOUT CALLING FOR A REMAN D REPORT. 8. THE LEARNED DR SUBMITTED THAT THE CIT(A) HAS ERR ED IN ACCEPTING THE EVIDENCE IN VIOLATION OF RULE 46A OF THE IT RULES W ITHOUT CALLING FOR REMAND REPORT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAS FILED ALL THE RELEVANT DETAILS BEFORE THE AO AND ME RE MENTION OF SECTION 144 IN THE ASSESSMENT ORDER IS NOT DECISIVE OF THE ISSU E. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT IT COULD NOT BE PO INTED OUT BY THE REVENUE THAT WHAT EVIDENCES THE CIT(A) HAS ACCEPTED DURING THE COURSE OF APPELLATE PROCEEDINGS WITHOUT CONFRONTING THE SAME TO THE AO. WE FIND THAT THE ASSESSEE HAS FILED DETAILS ASKED FOR BY THE AO, BUT CERTAIN FURTHER QUERIES BY THE AO REQUIRING MORE DETAILS, WERE NOT SUBMITTED B Y THE ASSESSEE BEFORE THE ITA NO.3054/AHD/2010 -6- AO. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN THE ABSENCE OF ANY DETAILS OF SPECIFIC EVIDENCE WHICH MAY HAVE BEEN AC CEPTED BY THE CIT(A), WITHOUT CONFRONTING TO THE AO, WE HOLD THAT THE VIO LATION OF RULE 46A COULD NOT BE ESTABLISHED IN THIS CASE, AND ACCORDINGLY, T HE GROUND NO.3 OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( $% $% $% $% /T.R. MEENA) %& ' /ACCOUNTANT MEMBER ( .. /G.C. GUPTA ) ! ! ! ! /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD