MAYUR VASANT PATEL, MUMBAI V. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 27(2), MUMBAI

ITA 3136/MUM/2024

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 5565 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 06-08-2024
• Assessment Year: misc
• Appeal Filed On: 10-06-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MADHAVI PANCHAL
• Keywords: Principle of natural justice; Additional evidence; TDS; Bogus
• Section: 234B; 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SUNIL KUMAR SINGH (JUDICIAL MEMBER) ITA No. 3136/MUM/2024 Assessment Year: 2015-16 Mayur Vasant Patel, 11, Gangotri CHS Ltd., Near Maneklal Estate, Ghatkopar (W), Mumbai-400086. Vs. The ACIT Circle (27)(2), IT-Office, Vashi Railway Station Commercial Complex, Navi Mumbai-400703. PAN NO. AZCPP 4925 A Appellant Respondent Assessee by : Ms. Madhavi Panchal Revenue by : Mrs. Mahita Nair, Sr. DR Date of Hearing : 07/08/2024 Date of pronouncement : 19/08/2024 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 15.04.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2015-16, raising following grounds: 1. Both the lower authorities have passed the orders without properly appreciating the facts, without understanding the application of mind and they have further erred in grossly ignoring submissions, explanations and information submitted by the appellant which ought to have been considered before passing the impugned order. This action of the lower aut principles of natural justice and therefore deserves to be quashed. 2. The learned CIT(A) has grossly erred in law and on facts and in circumstances of the case and violated the principals of natural justice by disregarding the evidences submitted before CIT(A) merely on the ground of not filing application under rule 46A of the Act and passed the order without giving any proper opportunity to the appellant to represent the case. 3. The learned CIT(A) has grossly erred circumstances of the case in confirming the addition of Rs. 3,64,20,500/- (Rs. 3,62,76,500/ the facts available on record. 4. The learned CIT(A) has erred in law and on facts and in circumstances by confirming the disallowance of genuine labour expenditure paid to labourers through 'Mukadums' amounting to Rs. 2,36,97,500/- during the year under consideration. 5. The learned CIT(A) has erred in law and on facts and in circumstances by confir expenditure paid to genuine subcontractors' as expenditure (subject to TDS) amounting to Rs. 1,25,79,000/ has already been deducted on the said expenditure and accordingly failed to consider that AO's contention of bogus expenditure merely on the allegation of non 6. The learned AO and CIT (A) has erred in law and facts of the case by wrongly presuming that the appellant is liable for deduction of TDS o supervisory charges (paid as contractual Salary) amounting to Rs. 4,80,000/- and thereby making disallowance of 30% of supervisory charges amounting to Rs 1,44,000/ 7. Without prejudice to the above, the learned CIT ( in law and facts by confirming addition made by the learned AO without providing "Virtual hearing" even though the appellant has timely responded to notice of opportunity of virtual hearing issued by the Learned CIT (A). Hence, it is c and therefore deserves to be quashed. 8 The AO has erred in law and on facts and in circumstances of the case by levying interest u/s. 234A, 234B and 234C. 9. On the facts and merits of the case, the appellant cr admission of additional evidences in the interest of natural justice and equity. 1. Both the lower authorities have passed the orders without properly appreciating the facts, without understanding the law, without proper application of mind and they have further erred in grossly ignoring submissions, explanations and information submitted by the appellant which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and principles of natural justice and therefore deserves to be quashed. The learned CIT(A) has grossly erred in law and on facts and in circumstances of the case and violated the principals of natural justice arding the evidences submitted before CIT(A) merely on the ground of not filing application under rule 46A of the Act and passed the order without giving any proper opportunity to the appellant to represent the case. 3. The learned CIT(A) has grossly erred in law and on facts and in circumstances of the case in confirming the addition of Rs. (Rs. 3,62,76,500/- plus Rs. 1,44,000/-) without verifying the facts available on record. 4. The learned CIT(A) has erred in law and on facts and in stances by confirming the disallowance of genuine labour expenditure paid to labourers through 'Mukadums' amounting to Rs. during the year under consideration. The learned CIT(A) has erred in law and on facts and in circumstances by confirming the disallowance of genuine labour expenditure paid to genuine subcontractors' as expenditure (subject to TDS) amounting to Rs. 1,25,79,000/-thereby ignoring the fact that TDS has already been deducted on the said expenditure and accordingly consider that AO's contention of bogus expenditure merely on the allegation of non-deduction of TDS is incorrect. 6. The learned AO and CIT (A) has erred in law and facts of the case by wrongly presuming that the appellant is liable for deduction of TDS o supervisory charges (paid as contractual Salary) amounting to Rs. and thereby making disallowance of 30% of supervisory charges amounting to Rs 1,44,000/- under section 40(a)(ia) of the Act. 7. Without prejudice to the above, the learned CIT (A) has grossly erred in law and facts by confirming addition made by the learned AO without providing "Virtual hearing" even though the appellant has timely responded to notice of opportunity of virtual hearing issued by the Learned CIT (A). Hence, it is clear breach of principal of Natural Justice and therefore deserves to be quashed. The AO has erred in law and on facts and in circumstances of the case by levying interest u/s. 234A, 234B and 234C. 9. On the facts and merits of the case, the appellant cr admission of additional evidences in the interest of natural justice and Mayur Vasant Patel 2 ITA No. 3136/MUM/2024 1. Both the lower authorities have passed the orders without properly law, without proper application of mind and they have further erred in grossly ignoring submissions, explanations and information submitted by the appellant which ought to have been considered before passing the impugned horities is in clear breach of law and principles of natural justice and therefore deserves to be quashed. The learned CIT(A) has grossly erred in law and on facts and in circumstances of the case and violated the principals of natural justice arding the evidences submitted before CIT(A) merely on the ground of not filing application under rule 46A of the Act and passed the order without giving any proper opportunity to the appellant to in law and on facts and in circumstances of the case in confirming the addition of Rs. ) without verifying 4. The learned CIT(A) has erred in law and on facts and in stances by confirming the disallowance of genuine labour expenditure paid to labourers through 'Mukadums' amounting to Rs. The learned CIT(A) has erred in law and on facts and in ming the disallowance of genuine labour expenditure paid to genuine subcontractors' as expenditure (subject to thereby ignoring the fact that TDS has already been deducted on the said expenditure and accordingly consider that AO's contention of bogus expenditure merely on 6. The learned AO and CIT (A) has erred in law and facts of the case by wrongly presuming that the appellant is liable for deduction of TDS on supervisory charges (paid as contractual Salary) amounting to Rs. and thereby making disallowance of 30% of supervisory under section 40(a)(ia) of the Act. A) has grossly erred in law and facts by confirming addition made by the learned AO without providing "Virtual hearing" even though the appellant has timely responded to notice of opportunity of virtual hearing issued by the lear breach of principal of Natural Justice The AO has erred in law and on facts and in circumstances of the 9. On the facts and merits of the case, the appellant craves for admission of additional evidences in the interest of natural justice and 2. We have heard rival submissions and perused the relevant material on record. The ground No. 2 of the appeal relates to sustaining of disallowance application under Rule 4 ‘the Rules’). In view of the same by the assessee was rejected. We find that the assessee is a contractor and during the course of the assessment proceedings, the Assessing Officer made following disallowance (i) Rs.3,62,76,500/- out of sub documentary evidence in support of claim were filed and also TDS was not deducted u/s 194C of the Act, (ii) an amount of Rs.1,44,000/ out of charges’ for the reason that no tax was deducted at s therefore, 30% of the corresponding expenditure amounting to Rs.1,44,000/- was disallowed invoking section 40(a)(ia) of the Act (iii) Rs.4,00,000/- out of the sundry expenses of Rs.4,99 claimed by the assessee for the reason that account only Rs.99,277/ Rs.2,61,384/- in net profit shown in a of the income (v) interest on income Rs.4,092/- was not declared 2.1 On further appeal, the assessee challenged the disallowance made out of the sub difference in expenditure payment, difference in net profit as per the We have heard rival submissions and perused the relevant material on record. The ground No. 2 of the appeal relates to sustaining of disallowance by the Ld. CIT(A) application under Rule 46A of the Income-tax Rules, 1962 (in short ‘the Rules’). In view of the same, the adjournment application filed by the assessee was rejected. We find that the assessee is a contractor and during the course of the assessment proceedings, the Assessing Officer made following disallowance (i) out of sub-contractor for the reason that no documentary evidence in support of claim were filed and also TDS was not deducted u/s 194C of the Act, (ii) an amount of Rs.1,44,000/ out of Rs.4,80,000/- under the head ‘supervisory charges’ for the reason that no tax was deducted at s therefore, 30% of the corresponding expenditure amounting to disallowed invoking section 40(a)(ia) of the Act out of the sundry expenses of Rs.4,99 claimed by the assessee for the reason that in profit account only Rs.99,277/- were debited. (iv) difference of in net profit shown in audit report and interest on income-tax refund amounting to was not declared in return of income. her appeal, the assessee challenged the disallowance made out of the sub-contractor expenses, supervisory charges, difference in expenditure payment, difference in net profit as per the Mayur Vasant Patel 3 ITA No. 3136/MUM/2024 We have heard rival submissions and perused the relevant material on record. The ground No. 2 of the appeal relates to for non-filing tax Rules, 1962 (in short the adjournment application filed by the assessee was rejected. We find that the assessee is a contractor and during the course of the assessment proceedings, the Assessing Officer made following disallowance (i) the reason that no documentary evidence in support of claim were filed and also TDS was not deducted u/s 194C of the Act, (ii) an amount of under the head ‘supervisory charges’ for the reason that no tax was deducted at source and therefore, 30% of the corresponding expenditure amounting to disallowed invoking section 40(a)(ia) of the Act. out of the sundry expenses of Rs.4,99,277/- in profit and loss . (iv) difference of and computation tax refund amounting to her appeal, the assessee challenged the disallowance contractor expenses, supervisory charges, difference in expenditure payment, difference in net profit as per the profit and loss account and computation Regarding the sub-contractor expenses assessee that out of total expenditure of Rs.3,62,76,500/ of Rs.46,49,000/- were paid to M/s Abhishek Enterprises and Rs.79,30,000/- paid to Masoom Enterprises as per provisions of the Act and the balance payment of Rs.2,36,97,500/- was a which was paid through their manager i.e. “Madkums/Sardars” and therefore, same was not liable for the TDS. The assessee filed additional evidence in s however, same was rejected in absence of any application filed by the Ld. CIT(A) under Rule 46A the Ld. CIT(A) is reproduced as under: “e. The onus is on the appellant assessee and genuineness of the transactions, which is a legal stand taken and upheld by various courts. TakarmalMohnanivs Commissioner Of Income the Hon. Supreme Court has held that: “In that view of the matter and in view of the principles behind the purpose of Explanation, the assessee in the instant case, has failed to discharge his onus of proof. amended by Finance Act, 1964 with effect from 1 amendment was prospective in effect and in the year under reference the amendment was in force. Though the penalty proceedings are penal in nature but in the facts of this case the onus on revenue has been duly discharged. In the aforesaid view o leave to appeal and it is accordingly dismissed According to the Supreme Court Judgment the onus is on the Appellant assessee to prove the genuineness and creditworthiness of the transaction but in t has grossly failed to do so. It is the assessee who has to provide the documentary evidences in support of its claim but the profit and loss account and computation and refund contractor expenses, it was submitted by the assessee that out of total expenditure of Rs.3,62,76,500/ were paid to M/s Abhishek Enterprises and paid to Masoom Enterprises and TDS was deducted isions of the Act and the balance payment of was a composite cash payment to labourers paid through their manager i.e. “Madkums/Sardars” and therefore, same was not liable for the TDS. The assessee filed additional evidence in support of its claim before the Ld. CIT(A) however, same was rejected in absence of any application filed by the Ld. CIT(A) under Rule 46A of the Rules. The relevant finding of the Ld. CIT(A) is reproduced as under: The onus is on the appellant assessee to prove the creditworthiness and genuineness of the transactions, which is a legal stand taken and upheld by various courts. In case of : Chuharmal S/O TakarmalMohnanivs Commissioner Of Income-Tax on 2 May 1988 the Hon. Supreme Court has held that: In that view of the matter and in view of the principles behind the purpose of Explanation, the assessee in the instant case, has failed to discharge his onus of proof. The aforesaid Explanation was amended by Finance Act, 1964 with effect from 1 st April, amendment was prospective in effect and in the year under reference the amendment was in force. Though the penalty proceedings are penal in nature but in the facts of this case the onus on revenue has been duly In the aforesaid view of the matter, there is no merit in this application for leave to appeal and it is accordingly dismissed” According to the Supreme Court Judgment the onus is on the Appellant assessee to prove the genuineness and creditworthiness of the transaction but in the present case the appellant assessee has grossly failed to do so. It is the assessee who has to provide the documentary evidences in support of its claim but the Mayur Vasant Patel 4 ITA No. 3136/MUM/2024 and refund interest. it was submitted by the assessee that out of total expenditure of Rs.3,62,76,500/- expenses were paid to M/s Abhishek Enterprises and and TDS was deducted isions of the Act and the balance payment of composite cash payment to labourers paid through their manager i.e. “Madkums/Sardars” and therefore, same was not liable for the TDS. The assessee filed upport of its claim before the Ld. CIT(A) however, same was rejected in absence of any application filed by of the Rules. The relevant finding of to prove the creditworthiness and genuineness of the transactions, which is a legal stand taken and In case of : Chuharmal S/O Tax on 2 May 1988 In that view of the matter and in view of the principles behind the purpose of Explanation, the assessee in the instant case, has The aforesaid Explanation was April, 1964. The amendment was prospective in effect and in the year under reference the amendment was in force. Though the penalty proceedings are penal in nature but in the facts of this case the onus on revenue has been duly f the matter, there is no merit in this application for According to the Supreme Court Judgment the onus is on the Appellant assessee to prove the genuineness and creditworthiness he present case the appellant assessee has grossly failed to do so. It is the assessee who has to provide the documentary evidences in support of its claim but the appellant assessee has not provided relevant documentary evidences with its submissions. f. Moreover the appellant assessee has submitted the documents like subcontractor bills etc. to this Appellate authority. These documents were not submitted before the Assessing officer during assessment proceedings. But while submitting fresh/new documents w appellate authority the appellant assessee has not filed any application under Rule 46A for this purpose. 2.1 In our opinion, the Ld. CIT(A) should have directed the assessee to file said application of appeal of assessee. H without providing opportunity to application. In the circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) assessee to file such an application CIT(A) shall decide the issue in accordance with law. The assessee is it liberty to file all necessary document in support of its claim of the expenditure. 2.2 The other grounds also the assessee did not provide necessary explanation as why the TDS was not applicable. In the interest of justice we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) to direction to the assessee filed necessary documents in support of claim. 2.3 Similarly, regarding of Rs.4,00,000/-; difference in net profit as per profit and loss account and computation of income of Rs.2,61,384/ appellant assessee has not provided relevant documentary evidences with its submissions. Moreover the appellant assessee has submitted the documents like subcontractor bills etc. to this Appellate authority. These documents were not submitted before the Assessing officer during assessment proceedings. But while submitting fresh/new documents w appellate authority the appellant assessee has not filed any application under Rule 46A for this purpose.” In our opinion, the Ld. CIT(A) should have directed the assessee to file said application rather than dismissing the ground f assessee. He should not have dismissed opportunity to the assessee for filing such an application. In the circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) with the direction to th assessee to file such an application before the ld CIT(A) decide the issue in accordance with law. The assessee all necessary document in support of its claim of The other grounds including in respect of supervisory charges also the assessee did not provide necessary explanation as why the TDS was not applicable. In the interest of justice we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) to assessee filed necessary documents in support of regarding the difference in other expenses payment difference in net profit as per profit and loss account and computation of income of Rs.2,61,384/ Mayur Vasant Patel 5 ITA No. 3136/MUM/2024 appellant assessee has not provided relevant documentary Moreover the appellant assessee has submitted the documents like subcontractor bills etc. to this Appellate authority. These documents were not submitted before the Assessing officer during assessment proceedings. But while submitting fresh/new documents with this appellate authority the appellant assessee has not filed any application In our opinion, the Ld. CIT(A) should have directed the rather than dismissing the ground dismissed the appeal for filing such an application. In the circumstances, we feel it appropriate to restore with the direction to the before the ld CIT(A) and then ld decide the issue in accordance with law. The assessee all necessary document in support of its claim of in respect of supervisory charges also the assessee did not provide necessary explanation as why the TDS was not applicable. In the interest of justice we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) to assessee filed necessary documents in support of the difference in other expenses payment difference in net profit as per profit and loss account and computation of income of Rs.2,61,384/- and refund interest of Rs.4,092/ submissions or documentary evidence in support of its claim filed by the assessee and therefore, he rejected the grounds of the assessee. In the interest of justice, we feel it appropriate t one more opportunity to the assessee to file documentary evidence in support his claim of the expenses claimed. 2.4 The relevant grounds of appeal are accordingly allowed for statistical purposes. 3. In the result, the appeal of the assessee i statistical purposes. Order pronounced in the open Court on Sd/- (SUNIL KUMAR SINGH JUDICIAL MEMBER Mumbai; Dated: 19/08/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// interest of Rs.4,092/-, the Ld. CIT(A) has mentioned that no submissions or documentary evidence in support of its claim filed by the assessee and therefore, he rejected the grounds of the assessee. In the interest of justice, we feel it appropriate t one more opportunity to the assessee to file documentary evidence in support his claim of the expenses claimed. The relevant grounds of appeal are accordingly allowed for In the result, the appeal of the assessee i nounced in the open Court on 19/08/2024. - (SUNIL KUMAR SINGH) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Mayur Vasant Patel 6 ITA No. 3136/MUM/2024 he Ld. CIT(A) has mentioned that no submissions or documentary evidence in support of its claim were filed by the assessee and therefore, he rejected the grounds of the assessee. In the interest of justice, we feel it appropriate to provide one more opportunity to the assessee to file documentary evidence The relevant grounds of appeal are accordingly allowed for In the result, the appeal of the assessee is allowed for /08/2024. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai