M/s A.K. Builders & Transporter, Ranchi V. DCIT, Ranchi

ITA 307/RAN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2184 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PARTHA SARATHI CHAUDHURY (JM) I.T.A. NO.307/RAN/2014 ASSESSMENT YEAR :2007-08 M/S. A.K.BUILDERS & TRANSPORTER,DAYAL NAGAR, RATU ROAD, RANCHI V S DCIT, CIRCLE-1, RANCHI PAN/GIR NO. : AAHFA 0273 E (APPELLANT ) .. RESPONDENT APPELLANT BY : SHRI DEVESH PODDAR, ADV RESPONDENT BY : SHRI ARVIND KUMAR, DR DATE OF HEARING : 03-03-2016 DATE OF PRONOUNCEMENT : 04 - 3-2016 O R D E R PER PARTHASARATHI CHAUDHURY, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF THE LD CIT(A), RANCHI DATED 21.8.2014 AND PERTAINS TO ASSESSMENT Y EAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. FOR THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CON FIRMING AN ADDITION OF RS.5,24,410/- DISALLOWED OUT OF MATERIAL HANDLING C HARGES, STONE QUARRY CHARGES AND LABOUR WAGES. THERE WAS NO SPECIFIC RE ASON OR GROUND FOR MAKING THE DISALLOWANCE. LD CIT(A) CONFIRMED THE D ISALLOWANCE IN A SUMMARY MANNER SUGGESTING THAT THE EXPENSES WERE VE RIFIABLE THROUGH INTERNAL VOUCHERS AND THIRD PARTY VOUCHERS WERE NOT AVAILABLE IN TOTALITY, AS SUCH, ADDITION MADE IS JUSTIFIED AND EXPENSES WERE RIGHTLY DISALLOWED. 2. FOR THAT THE APPELLANT DISCLOSED 6.23% NET PROFI T AFTER CONSIDERING DEPRECIATION. PROFIT DISCLOSED BEING REASONABLE, AS SESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE AND LD CIT(A) FURTHER ERRED IN CONFIRMING DISALLOWANCE. 3. FOR THAT THE ENTIRE INCOME OF THE APPELLANT WAS SUBJECT TO TDS, AS SUCH, APPELLANT WAS NOT LIABLE FOR PAYMENT OF ADVANCE TAX . THEREFORE, LD 2 I.T.A. NO.307/RAN/2014 ASSESSMENT YEAR :2007-08 A.K.BUILDERS. ASSESSING OFFICER WAS NOT JUSTIFIED IN CHARGING INT EREST U/S.234B AND 234C, IF ANY, PAYABLE BY THE APPELLANT. 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER U/S.143(3) OF THE I.T.ACT DATED 14.12.2009 WERE TH AT THE ASSESSEE DERIVES INCOME FROM BUSINESS OF CIVIL CONTRACTS. THE RETURN OF IN COME WAS FILED ON 21.3.2008 DECLARING TOTAL INCOME OF RS.73,27,626/-. THE RETU RN WAS PROCESSED U/S.143(1) OF THE I.T.ACT, 1961. THE CASE WAS SELECTED FOR SCRUT INY UNDER CASS. ACCORDINGLY, NOTICE UNDER SECTION 143(2) WAS ISSUED ON 18.9.2008 AND DULY SERVED UPON THE ASSESSEE ON 20.9.2008. THE ASSESSING OFFICER COMPL ETED THE ASSESSMENT UNDER SECTION 143(3) ON 14.12.2009, DETERMINING THE TOTAL INCOME AT RS.78,48,036/-, INTER ALIA, MAKING VARIOUS ADDITIONS/DISALLOWANCES. IN T HE FIRST APPEAL, LD CIT(A)ALLOWED THE APPEAL OF THE ASSESSEE IN PART. HENCE, THE ASS ESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. 4. THE FIRST AND SECOND GROUNDS TAKEN BY THE ASSESS EE ARE INTER-RELATED, HENCE, THEY ARE ADJUDICATED TOGETHER. 5. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT TH E PAYMENTS IN RESPECT OF MATERIAL HANDLING CHARGES, STONE QUARRY EXPENSES AN D LABOUR WAGES HAVE BEEN MADE BY CASH. THESE EXPENSES WERE ONLY SUPPORTED B Y INTERNAL VOUCHERS, WHICH WERE NOT VERIFIABLE BY THIRD PARTY. ACCORDINGLY, T HE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY 4% OF EXPENSES UND ER THE ABOVE HEADS SHOULD NOT BE DISALLOWED AS THESE HAVE BEEN PAID IN CASH A ND NOT VERIFIABLE BY THIRD PARTY. BEFORE THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THE LABOUR WAGES WERE MADE IN CASH BECAUSE THESE PAYMENTS ARE MADE TO DAILY WAGER S MOSTLY, WHO GENERALLY ARE 3 I.T.A. NO.307/RAN/2014 ASSESSMENT YEAR :2007-08 A.K.BUILDERS. NOT HAVING ANY BANK ACCOUNTS. IN THIS RESPECT, THE ASSESSEE HAS ALSO SUBMITTED WAGE SHEETS FOR THE PERUSAL OF THE ASSESSING OFFICE R. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE REPLY OF THE ASS ESSEE AND DISALLOWED 4% OF THE EXPENSES UNDER THE HEAD I.E. MATERIAL HANDLING CHAR GES, STONE QUARRY EXPENSES AND LABOUR WAGES, WHICH COMES TO RS.5,20,410/-, AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. 6. BEFORE THE LD CIT(A), THE ASSESSEE STATED THAT T HE PAYMENTS IN RESPECT OF MATERIAL HANDLING CHARGES, STONE QUARRY EXPENSES AN D LABOUR CHARGES WERE SUPPORTED BY INTERNAL VOUCHERS WHICH WERE NOT VERIF IABLE BY THIRD PARTY. IT WAS SUBMITTED THAT THE NET PROFIT DISCLOSED AFTER DEPRE CIATION BEING 6.32% WAS CONSIDERED BY THE VARIOUS APPELLATE AUTHORITIES TO BE REASONABLE AND AS SUCH, NO DISALLOWANCE IS CALLED FOR. IT WAS ALSO SUBMITTED THAT THE EXPENSES UNDER THE ABOVE HEADS ARE NOT VERIFIABLE AS SUCH NO DISALLOWANCE IS CALLED FOR CONSIDERING THE NET PROFIT DISCLOSED. UPON CONSIDERING THE SUBMISSION OF THE ASSESSEE, LD CIT(A) OBSERVED THAT NO DOUBT, THE ASSESSEE MAINTAINS BOOK S OF ACCOUNT I.E. CASH BOOK, LEDGER, BILLS AND VOUCHERS AND THE SAME WERE PRODUC ED BEFORE THE ASSESSING OFFICER BUT THE SAME WERE NOT AMENABLE FOR VERIFICATION, HE NCE , LD CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. BEING AGGRIEVED, THE ASS ESSEE IS IN FURTHER APPEAL BEFORE US. 7. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE HAS DISCLOSED NET PROFIT AFTER DEPRECIATIO N WHICH IS 6.08% AND NET PROFIT BEFORE DEPRECIATION IS 9.88%, WHICH IS QUITE REASON ABLE AND WHICH HAS BEEN CONSIDERED BY VARIOUS APPELLATE AUTHORITIES AND, TH EREFORE, NO DISALLOWANCE WAS 4 I.T.A. NO.307/RAN/2014 ASSESSMENT YEAR :2007-08 A.K.BUILDERS. CALLED FOR. HE SUBMITTED THAT SIMILARLY IN THE B USINESS OF CIVIL CONSTRUCTION, THE EXPENSES INCURRED UNDER THE HEAD MATERIAL HANDLING, STONE QUARRY CHARGES AND LABOUR WAGES, IN ALL PRACTICALLY, CANNOT BE VERIFIE D FROM THIRD PARTY VOUCHERS. BUT NEVERTHELESS, THE ASSESSEE HAS SUBMITTED THE AUDITE D ACCOUNTS WHICH IS ON RECORD, THE WAGE RESISTERS AND BILLS AND VOUCHERS FOR VARIO US MATERIAL HANDLING CHARGES AND STONE QUARRY CHARGES WERE BEFORE THE ASSESSING OFFI CER. 8. ON THE OTHER HAND, LD D.R. RELIED ON ORDERS OF A UTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RECORD OF THE CASE. WE FIND THAT THE ASSESSEE HAS DISCLOSED NET PROFIT OF 6.08% AFTER DEPRECIATION. WE HAVE ALSO NOTICED THAT THE PRACTICALITY OF CONDUCTI NG SUCH BUSINESS SHOULD BE TAKEN INTO CONSIDERATION FOR PROPER APPRAISAL OF THE SITU ATION AND FOR NATURAL JUSTICE. IN THAT REGARD, IN OUR CONSIDERED VIEW, THE LABOUR WAGES CA NNOT BE PUTFORTH THROUGH BANKING CHANNEL, WHICH WOULD NOT BE PRACTICALLY POSSIBLE. IT IS A USUAL PRACTICE FOR PAYMENT BEING MADE IN CASH AND THE ASSESSEE HAS ALREADY SUB MITTED THE WAGES REGISTER BEFORE THE ASSESSING OFFICER. THERE CANNOT BE A TH IRD PARTY VOUCHERS AVAILABLE IN THIS REGARD AS DEMANDED BY THE AUTHORITIES BELOW. SIMILARLY, THE MATERIAL HANDLING CHARGES AND STONE QUARRY CHARGES ARE SUPPORTED BY V OUCHERS WHICH THE ASSESSEE HAS MAINTAINED AS PER ITS RECORD AND THAT WAS PRODU CED BEFORE THE AUTHORITIES BELOW. THE ASSESSING OFFICER AS WELL AS LD CIT(A) HAVE NOT BROUGHT OUT ANY SPECIFIC AND COGENT REASON FOR DISALLOWING 4% OF SUCH EXPENDITUR ES. IT IS INDEED THAT ESTIMATION HAS BEEN MADE ON GUESS AND SURMISES. THE PRACTICAL ITY OF THE BUSINESS WAS OVERLOOKED IN THIS CASE. THE DEPARTMENT HAS NOT AL SO DOUBTED THE GENUINENESS OF THE BUSINESS ACTIVITIES OF THE ASSESSEE. WE ALSO O BSERVE THAT THERE WAS NO SUCH 5 I.T.A. NO.307/RAN/2014 ASSESSMENT YEAR :2007-08 A.K.BUILDERS. DISALLOWANCE IN THE PREVIOUS YEARS UNDER THESE HEAD S. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTE REST OF JUSTICE AND IN ALL FAIRNESS, IT WOULD BE PROBABLE TO GO TO DELETE THE ENTIRE ADDITI ON OF RS.5,24,410/- ON THIS GROUND AND WE ORDER ACCORDINGLY. 10. THE NEXT GROUND RELATES TO CHARGING OF INTEREST UNDER SECTION 234B AND 234C OF THE I.T.ACT, 1961. 11. WE OBSERVE THAT THE LD CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO VERIFY WHETHER THE TDS CREDIT HAS BEEN GIVEN TO THE ASSESS EE OR NOT AND IF THE SAME HAS NOT BEEN GIVEN, AFTER VERIFICATION OF THE TDS CERTI FICATES, THE DUE CREDIT IS TO BE GIVEN TO THE ASSESSEE AND IT IS DIRECTED THAT INTEREST U/ S.2345B AND 234C SHOULD BE CHARGED AFTER TAKING INTO CONSIDERATION OF TDS CRED IT AS WELL AS THE RECENT JUDGMENT OF HON'BLE JHARKHAND HIGH COURT IN THE CASE OF SHRI AJAY PRAKAS VERMA VS ITO, RANGE-1, DHANBAD IN TAX APPEAL NO.38 OF 2010. ACCO RDINGLY, WE SET ASIDE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER VERIFICATION WHETHER INTEREST WOULD BE CHARGED UNDER SECTION 234B & 234C OF THE A CT OR NOT. THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 04/3/201 6 . SD/- SD/- (SHAMIM YAHYA) (PARTHASARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI , DATED 04 / 03/2016 6 I.T.A. NO.307/RAN/2014 ASSESSMENT YEAR :2007-08 A.K.BUILDERS. PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : M/S. A.K.BUILDERS & TRANSPORTER,DAYAL NAGAR, RATU ROAD, RANCHI 2. THE RESPONDENT: DCIT, CIRCLE-1,RANCHI 3. THE CIT(A)-RANCHI 4. CIT, RANCHI 5. DR, ITAT, RANCHI 6. GUARD FILE. BY ORDER, //TRUE COPY// SR.PRIVATE SECRETARY ITAT, RANCHI