ITO 25(3)(4), MUMBAI V. SQUARE ONE, MUMBAI

ITA 3234/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4527 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Principle of natural justice; Additional evidence
• Section: 143(3); 142(1); 133(6); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER I.T.A. NO. 3235/MUM/2012 (ASSESSMENT YEAR:2008-09) ASSISTANT COMMISSIONER OF INCOME TAX, 25(3) 308, C-11,BANDRA-KURLA COMPLEX, BANDRA(EAST), MUMBAI-400 051. V. SQUARE ONE 101, ADARSH APARTMENT ADARSH DUGDHALAYA , OFF MARVE ROAD, MALAD(W),MUMBAI-400 064 PAN/GIR NO. AAOFM1257E ( APPELLANT ) : ( RESPON DENT ) I.T.A. NO. 3234/MUM/2012 (ASSESSMENT YEAR:2009-10) INCOME TAX OFFICER 25(3)(4) 307,C-10,BANDRA-KURLA COMPLEX, BANDRA(EAST), MUMBAI-400 051. V. SQUARE ONE D/001, SAMARTH NAGAR OPP. POLICE STATION, AKRULI ROAD KANDIVALI(E), MUMBAI-400 101. PAN/GIR NO. AAOFM1257E ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI RAKESH RANJAN, DR RESPONDENT BY : NONE DATE OF HEARING : 09.12.2015 DATE OF PRONOUNCEMENT : 04.01.2016 O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER,: 2 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) I.T.A. NO. 3235/MUM/2012(ASSESSMENT YEAR:2008-09):- THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI (C IT(A) FOR SHORT) DATED 27.02.2012 . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, ENGAGED AS CIVIL CONTRACTORS HAVING BUSINESS INCOME. DURIN G THE PREVIOUS YEAR, THE FIRM HAD UNDERTAKEN CIVIL WORK CONTRACTS FROM SERENE PROPRIE TIES PVT. LTD. AND K RAHEJA IT PARK HYDERABAD PVT. LTD. 3. THERE IS ONLY ONE EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL WITH RESPECT TO RELIEF GIVEN BY THE CIT(A) WITH RESPECT TO DISALLOWANCE OF WAGES OF RS.14,14,705/- TO THE ASSESSEE ON THE GROUND OF AD- HOC DISALLOWANCE OF 15% OF TOTAL WAGES PAID OF RS.94,31,368/-. 4. THE ASSESSEE HAS PAID TOTAL WAGES OF RS.94,31, 368/- DURING THE PREVIOUS YEAR . THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO ) ASKED THE ASSESSEE TO PRODUCE THE WAGES REGISTER. FROM THE WAGES REGISTER IT WAS OBSERVED BY THE AO THAT MOST OF THE PAYMENTS HAVE BEEN ENDORSED BY THE THUMB IMPRES SION AND AT PLACES THERE WERE NO PROPER STAMPS. IT WAS ALSO OBSERVED BY THE AO FR OM THE MONTH WISE SUMMARY OF THE WAGES THAT THERE WAS NO CONSISTENCY IN THE AMOU NT OF THE WAGES BEING PAID AND THERE IS SUDDEN ABRUPT RISE IN THE AMOUNT OF THE WA GES PAID DURING SOME MONTHS LIKE MARCH AND DECEMBER. THE AO OBSERVED THAT THERE WAS NO CO-RELATION BETWEEN THE WAGES PAID AND WORK DONE FOR DIFFERENT MONTHS. THER EFORE, IT WAS OBSERVED BY THE AO THAT THE GROSS PROFIT RATIO OF 19.2% SHOWN BY THE A SSESSEE IS LOW AS COMPARED TO NORMAL GROSS PROFIT RATIO IN THIS LINE OF BUSINESS. THEREFORE, 15% THE TOTAL WAGES PAID 3 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) I.E. RS. 14,14,705/- WAS DIS-ALLOWED BY THE AO FOR WANT OF PROPER CHECK AND VERIFICATION AND ADDED TO THE TOTAL INCOME OF THE A SSESSEE VIDE ASSESSMENT ORDERS DATED 24/12/2010 PASSED U/S 143(3) OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 24/12/2 010 PASSED U/S 143(3) OF THE ACT BY THE AO, THE ASSESSEE FILED THE FIRST APPEAL BEFORE THE CIT(A) AND MADE THE SUBMISSIONS AS UNDER :- YOUR HONOUR WILL APPRECIATE THAT YOUR APPELLANT IS PAYING WAGES TO WORKERS WHO ARE ILLITERATE AND STAYING AT THE SITE OF THE CONSTRUCT ION WITH THEIR FAMILIES UNDER TEMPORARY ACCOMMODATIONS. SINCE THEY ARE ILLITERATE , THEY CANNOT SIGN AND THEREFORE USE THUMB IMPRESSIONS. THIS WAGE REGISTER WAS AUDIT ED AND APPROVED WITHOUT ANY QUALIFICATIONS BY THE AUDITORS. IT IS THEREFORE UNA CCEPTABLE TO STATE THAT AT SOME PLACES THERE WERE NO PROPER STAMPS. THE LEARNED AC HAS FAI LED TO POINT OUT THE EXACT FIGURES WHERE THERE WERE NO PROPER STAMPS. THUS IT IS A VAG UE STATEMENT WITHOUT ANY SUBSTANTIATION AND THEREFORE NEEDS TO BE IGNORED YOUR APPELLANT FURTHER APPRECIATES THAT THE IMPUGNE D PROJECT OF CONSTRUCTING I. T. PARK BUILDINGS AT HYDERABAD WERE SUBJECT TO SO MANY PERMISSIONS, APPROVALS AND INSPECTIONS. ONE CANNOT EXPECT THE REGULARITY AND C ONSISTENCY IN GETTING SUCH PERMISSIONS, APPROVALS ETC. THIS LEADS TO INCONSIST ENCY IN VOLUME OF WORK DONE EVERY MONTH. SOMETIMES IT IS POSSIBLE THAT THE BUILDERS/D EVELOPERS GIVE INSTRUCTION TO YOUR APPELLANT TO SLOW DOWN THE CONSTRUCTION WORK OR INC REASE THE PACE OF WORK DEPENDING UPON THE MARKET CONDITIONS: IN THE CIRCUMSTANCES, NO CONSTRUCTION WORK CAN BE C ARRIED OUT WITH SAME AMOUNT OF CONSISTENCY IN THE WORK THROUGHOUT THE YEAR. THE LEARNED A C FURTHER ERRED TO ESTABLISH CORRELAT ION SHIP BETWEEN THE AMOUNT OF WAGES PAID AND THE AMOUNT OF WORK DONE. IN THE CIVIL CONSTRUCTION LINE, BILLS ARE RAISED BY THE CONTRACTORS ON BUILDERS/DEVELOPERS DEPENDING UPON THE STAGE OF WOR K COMPLETED AND DULY CERTIFIED BY THE ARCHITECTS/ENGINEERS OF THE BUILDERS/DEVELOP ERS. FOLLOWING THIS PRACTICE CONSISTENTLY, YOUR APPELLANT CANNOT RAISE BILLS FOR EVERY WORK DONE AT THE SITE, BUT HE HAS TO WAIT TILL THE PRESCRIBED STAGE OF CONSTRUCTI ON IS COMPLETED TO RAISE THE BILL. HENCE SUCH CORRELATION IS REDUNDANT. 4 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) YOUR APPELLANT HAS DISCLOSED GROSS PROFIT RATIO OF 19.2% (PROFIT & LOSS A/C ATTACHED, ANNEXURE-A). HOWEVER THE LEARNED AC ERRED IN SAYING THAT IT IS LOW AS COMPARED TO THE NORMAL GROSS PROFIT RATIO IN THIS LINE OF BUSIN ESS. IT MAY BE NOTED THAT THIS IS A VAGUE STATEMENT NOT SUBSTANTIATED BY ANY EVIDENCES. THE BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB WITHOUT ANY QUALIFICATIONS BY THE AUDITORS. THE LEARNED AC WAS PROVIDED WITH ALL THE RELEVANT D ETAILS, EXPLANATIONS, INFORMATION AND FROM TIME TO TIME TO SUBSTANTIATE ALL THE FIGUR ES OF PROFIT & LOSS A/C DURING THE ASSESSMENT PROCEEDINGS U/S 143(3). NO IRREGULARITI ES WERE FOUND BY THE LEARNED AC DURING THE VERIFICATION PROCESS. THE AD HOC DISALLOWANCE OF RS. 14,14,705 @ 15% OF T OTAL WAGES OF RS.94,31.368/- IS PURELY BASED ON SURMISES AND CONJECTURE AND NOT SUB STANTIATED BY ANY AUTHENTIC EVIDENCE. TO SUBSTANTIATE THE ABOVE, THE LD. A.R. RELIED UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. APPELLATE ORDER NO. CIT(A)C - 1- AP/411/07-08 DATED 31/12/2008 IN CASE OF M/S RUSHI HOUSECON PVT. LTD. WHICH HAS BEEN UPHELD BY T HE H'BLE ITAT, BENCH D, MUMBAI AS PER ORDER ITA NO. 1153/MUM/2009 DT 25/03/ 2010. UNLESS THERE IS A LIMITATION PUT BY THE LAW ON THE AMOUNT OF ITS EXPENDITURE, A LESSER AMOUNT THAN THE AMOUNT EXPENDED CANNOT BE ALLOWED M ERELY BECAUSE THE ASSESSING AUTHORITY THINKS THAT THE ASSESSEE COULD HAVE MANAG ED BY PAYING LESSER AMOUNT AS A PRUDENT BUSINESSMAN - JAMSHEDPUR MOTOR ACCESSORIES STORES V. CIT (1974) 9 5 TAXMAN 664 (PAT). PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. OSWAL WOOLLEN MILLS LTD., (2007) 289 ITR 266 (P&H) HELD THAT SMALL EXPENDITURE CANNOT BE DISALLOWED ON THE GROUND THAT THEY ARE NOT FULLY VOUCHED. THE INDORE BENCH OF APPELLATE TRIBUNAL IN THE CASE OF BETA NAPHTHOL PVT LTD. V. DCIT (1994) 50TT J 375 (IND) HAS HELD THAT NO DISALLOWANCE SHOULD BE MADE FOR CONVEYANCE EXPENDITURES FOR THE WANT OF EVIDENCES A S IT IS NOT POSSIBLE TO SUPPORT EVERY ITEM OF EXPENDITURE WITH PROOF. SIMILARLY JAIPUR BENCH ITAT IN THE CASE OF RAJ ENTERPRISES V. ITO (1995) 51 TTJ 408 (JP) HAS HELD THAT AD HOC DISALLOWANCE WITHOUT ANY COGE NT REASONS ARE NOT SUSTAINABLE. 5 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) FURTHER AHMEDABAD BENCH IN THE CASE OF MONARCH FOODS PVT LTD. V. ACIT (1996) 54 TTJ 405 (AHD.) HAS REITERATED THAT AD HOC DISALLOWANCE WITHOUT AN Y COGENT REASON SPECIALLY IN THE CASE OF AUDITED ACCOUNTS ARE NOT P ERMITTED. 6. THE CIT(A) THEREFORE, CONSIDERED THE SUBMISSIONS INCLUDING CASE LAWS RELIED UPON BY THE ASSESSEE AND THE ASSESSMENT ORDER AND H ELD THAT THE AO HAS MERELY DISALLOWED WAGES ON AD-HOC BASIS WITHOUT GIVING ANY COGENT REASONS. THE CIT(A) HELD THAT THE SAID DISALLOWANCE BY THE AO CANNOT BE SUSTAINED. THE CIT(A) FURTHER HELD THAT THE AO HAS FAILED TO APPRECIATE THAT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND NO DEFECT IS POINTED BY THE AUDITORS AND HENCE THE CIT(A) DELETED THE AD HOC DISALLOWANCE ON THE BASIS THAT NO COGENT REASONS HA S BEEN STATED BY THE AO FOR DISALLOWANCE VIDE ORDERS DATED 27-02-2012. 7. AGGRIEVED BY THE ORDERS OF THE CIT(A) DATED 27-0 2-2012, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR SUBMITTED BE FORE US THAT THE WAGE REGISTER OF THE ASSESSEE WAS NOT BEING MAINTAINED PROPERLY AND IN THE WAGES REGISTER AT SOME OF THE PLACES , THERE WAS NO PROPER THUMB IMPRESSION A ND IN SOME PLACES , PROPER STAMP HAS NOT BEEN AFFIXED. THE LD. DR SUBMITTED THAT THE RE ARE VAST VARIATIONS IN THE WAGES FOR DIFFERENT MONTHS AND IT WAS NOT POSSIBLE TO CO- RELATE WAGES FOR THE MONTH WITH THE BILLS RAISED BY THE ASSESSEE AND HENCE, THE LD. DR SUBMITTED THAT THE AO HAS RIGHTLY MADE AN ADDITION BY DISALLOWING WAGES @15% , AMOUNT ING TO RS. 14,14,705/- . 8. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN THE APPEAL WAS CALLED FOR HEARING. WE HAVE OBSERVED THAT OPPORTUNITIES WERE EARLIER GI VEN TO THE ASSESSEE SINCE 2013 AND THE ASSESSEE HAS NOT APPEARED DESPITE SERVICE OF NO TICE AND HENCE WE ARE PROCEEDING WITH THE APPEAL ON MERITS AFTER PERUSING THE MATERI AL ON RECORD AND AFTER HEARING LD. DR . 6 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) 9.WE HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AS CIVIL CONTRACTOR. THE ASSESSEE HAS PAID WAGES OF RS.94,31,368/- FOR WHICH THE ASSESSEE HAS PRODUCED THE WAGE REGISTER BEFORE THE AO, IN WHICH IN SOME CASES, THERE WAS NO THUMB IMPRESSION OF THE WORKERS AND IN SOME CASE, THE STAMP HAS NOT BEEN AFFIXED AS PER FINDINGS OF THE AO, THUS IN NUTSHELL THERE WERE SOME DEFICIENCIES IN THE WAGE REGISTER AS NOTED BY THE AO. HOWEVER, THE AO HAS NOT BROUGHT ON RECORD ANY COGENT MATERIAL THAT THESE WAGES ARE BOGUS OR FICTI TIOUS AND ARE NOT PAID BY THE ASSESSEE BUT HAS RATHER BROUGHT OUT SOME GENERALIZE D TECHNICAL DEFICIENCIES IN THE WAGE RECORDS MAINTAINED BY THE ASSESSEE BUT HAS NOT POINTED OUT ANY SPECIFIC DEFECTS . THE AO HAS NOT POINTED OUT SPECIFIC DEFECTS IN THE WAGE REGISTER RATHER HE CHOSE TO MAKE ADHOC DISALLOWANCE BASED ON GENERAL AND TECHNI CAL DEFICIENCIES IN THE WAGE REGISTER . THE BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE DULY AUDITED BY THE AUDITORS AND NO DEFECTS WERE POINTED BY THE AUDITORS. THE AO HAS ALSO NOT REJECTED BOOKS OF ACCOUNTS U/S 145 OF THE ACT. THE ASSESSEE ON THE O THER HAND HAS GIVEN A REASONABLE AND PLAUSIBLE EXPLANATION THAT THE ASSESSEE IS A CI VIL CONTRACTOR AND HIRES WORKER WHO ARE MOSTLY ILLITERATE AND CANNOT SIGN AND INSTEAD U SE THEIR THUMB IMPRESSIONS AND WAGE REGISTER WAS DULY AUDITED BY THE AUDITORS WHO HAVE NOT POINTED OUT ANY DEFECT OR DEFICIENCY IN THE WAGE REGISTER. THE AO HAS ALSO NO T ALSO SPECIFIED ANY AUTHORITY OF LAW WHEREBY IT IS MANDATORY IN INDIA ON THE PART OF THE PAYER TO COMPULSORILY HAVE SIGNATURES OF THE PAYEES IN THE RECEIPTS/ VOUCHER S INSTEAD OF THUMB IMPRESSIONS AND TAKING OF THUMB IMPRESSIONS OF THE PAYEE WILL INVAL IDATE OR LEAD TO IN- ADMISSIBILITY/REJECTION OF THE DOCUMENTS UNDER PREV AILING LAWS IN INDIA NOR THE AO HAS BROUGHT ANY AUTHORITY UNDER ACT THAT IF REVENUE ST AMP IS NOT AFFIXED ON CASH PAYMENTS EXCEEDING THE PRESCRIBED LIMIT UNDER LAW, WILL LEAD TO DISALLOWANCE OF THE SAID EXPENSES UNDER THE ACT. NO DOUBT, THIS COULD B E DEFICIENCY IN THE MAINTENANCE OF RECORDS BUT THAT IS NOT SUFFICIENT TO DISALLOW THE CLAIM OF EXPENSES OF THE ASSESSEE. NOR IS THE CASE OF THE REVENUE THAT THESE EXPENSES ARE BOGUS OR FICTITIOUS AND HAVE NEVER BEEN INCURRED OR PAID BY THE ASSESSEE. THUS, WE ARE OF CONSIDERED VIEW KEEPING IN 7 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, THAT AD-HOC DISALLOWANCE OF RS. 14,14,705/- BEING 15% OF THE WAGES MADE BY THE AO C ANNOT BE SUSTAINED AND WE ARE NOT INCLINED TO INTERFERE WITH THE ORDERS OF THE CI T(A). WE ORDER ACCORDINGLY. I.T.A. NO. 3234/MUM/2012(ASSESSMENT YEAR:2009-10):- 10. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST THE ORDER BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI (C IT(A) FOR SHORT) DATED 27.02.2012 . 11. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL ARE AS UNDER: (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF SUB- CONTRACT CHARGES OF RS.1,37,96,451/-, TRANSPORTATI ON CHARGES OF RS.2,56,297/-, WAGES OF RS.1,53,50,684/- AND RENT OF RS.L,85,500/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT S UBMIT THE DETAILS OF ABOVE EXPENSES DURING ASSESSMENT PROCEEDINGS WITHOUT WHIC H NECESSARY VERIFICATION COULD NOT BE CARRIED OUT IN THE ASSESSEE'S CASE.' (II) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.5,84,752/- MA DE BY THE A.O. OUT OF SALARY AND BONUS EXPENSES WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE DID NOT SUBMIT THE DETAILS OF ABOVE EXPENSES DURING ASSESS MENT PROCEEDINGS WITHOUT WHICH NECESSARY VERIFICATION COULD NOT BE CARRIED OUT IN THE ASSESSEE'S CASE.' (III) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ABOVE ADDITION ON THE BASIS OF FRESH EVIDENCE PRODUCED/SUBMITTED BEFORE HIM AND THEREBY DID NOT FOLLOW THE PROVISIONS OF RULE 46A OF INCOME TAX RULES.' (IV) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT SUBMISSION OF DETAILS OF SUB-CONTRACT CHARGES ALONG WITH THE PHOTOCOPIES OF BILLS OF SUB-CONTRAC TORS AND DEDUCTION OF TDS FROM SUCH SUB-CONTRACT CHARGES ARE SUFFICIENT COMP LIANCE OF QUERY RAISED BY THE A.O. WHEN NO DETAILS AS PER SPECIFIC QUERIES O F THE A.O. (ASKING FOR NAMES, 8 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) ADDRESS, AMOUNT PAID, TDS DEDUCTED ETC. SO THAT VE RIFICATION COULD BE MADE) WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. (V) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT DEDUCTION OF TDS FROM TRANSP ORTATION CHARGES AND SUBMISSION OF PARTY-WISE DETAILS OF TRANSPORTATION CHARGES ARE SUFFICIENT COMPLIANCE OF THE DETAILED QUERY RAISED BY THE A.O . WHEN NO DETAIL AS PER SPECIFIC QUERIES OF THE A.O. (ASKING FOR ADDRESS, TDS DEDUCTION DETAIL ETC. SO THAT VERIFICATION CAN BE MADE) WERE FURNISHED DURI NG THE ASSESSMENT PROCEEDINGS.' (VI) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT FURNISHING OF MONTH-W ISE DETAIL OF WAGES AND MAINTAINING WAGE REGISTER ARE SUFFICIENT COMPLIANC E OF THE DETAILED QUERY RAISED BY THE A.O. WHEN NO DETAILS AS PER SPECIFIC QUERIES OF THE A.O. (ASKING FOR NO. OF WORKERS, PAYMENT DETAIL, WAGE REGISTER, PAYMENT REGISTER ETC.) WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS.' (VII) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT DETAILS OF SALARY AND BONUS WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS AND ALL SALARY PAYMENTS EFFECTED BY CHEQUES WHEN NO SUCH DETAILS WERE ACTUALLY FURNISHED DURING THE ASSESSMENT PROCEEDINGS AND ALL SALARY PAYMENTS EFFECTED BY CHEQUES WHEN NO D ETAILS AS PER SPECIFIC QUERY (ASKING FOR ADDRESS OF EMPLOYEE, PAN, TDS ETC.) WER E FURNISHED DURING THE ASSESSMENT PROCEEDINGS.' (VIII) 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORE D.' (IX) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION BEING CIVIL CONT RACTORS HAVING BUSINESS INCOME. THE ASSESSEE FILED THE RETURN OF INCOME BEYOND THE DUE DATE PRESCRIBED U/S 139(1) OF THE ACT , ON 15-10-2010 . THE CASE WAS SELECTED FOR SCR UTINY UNDER CASS AND NOTICE U/S 143(2) OF THE ACT DATED 24-08-2011 WAS ISSUED AND DULY SERVED ON THE ASSESSEE. SUBSEQUENTLY NOTICE U/S 142(1) OF THE ACT WAS ISSUE D ALONG WITH QUESTIONNAIRE AND 9 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) DULY SERVED ON THE ASSESSEE ON 01-11-2011. THE ASSE SSEE FILED PART DETAILS AND THEREAFTER THE ASSESSEE DID NOT COOPERATED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSMENT WAS GETTING TIME BARRED ON 31.12 .2011, ONE MORE OPPORTUNITY WAS GRANTED BY THE AO TO FILE BALANCE DETAILS BY 16-12- 2011 VIDE SHOW CAUSE NOTICE DATED 12-12-2011. THE ASSESSEE DID NOT FILED FURTHER DESI RED DETAILS BY 16-12-2011 BUT FILED FURTHER REPLIES ON 19-12-2011 AND 20-12-2011. THE A O FRAMED THE BEST JUDGMENT ASSESSMENT U/S. 144 OF THE ACT VIDE ORDERS DATED 16 -12-2011, WHEREBY SEVERAL DISALLOWANCES WERE MADE OF THE EXPENSES AGGREGATING TO RS. 3,27,97,131/- UNDER VARIOUS HEADS BY THE AO VIDE ASSESSMENT ORDERS PASS ED U/S 144 OF THE ACT DATED 16- 12-2011, AS UNDER: (A) THE ASSESSEE CLAIMED FOLLOWING EXPENSES IN THE PROF IT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR 2008-09 I) SUB-CONTRACTOR CHARGES RS.1,37,96,451/- II) TRANSPORTATION CHARGES RS. 2,56,297/- III) WAGES RS.1,53,50,684/- IV) RENT RS. 1,85,500/- --------------------- RS.2,95,88,932/- ---------------------- THE ASSESSEE DID NOT FILED THE BREAK-UP DETAILS OF SUB CONTRACT CHARGES I.E. NAME AND ADDRESS OF THE PERSON, AMOUNT PAID ETC. ,BREAK UP DETAILS OF TRANSPORTATION CHARGES, WAGES AND DETAILS REGARDING TDS DEDUCTED A ND PAID AGAINST THE ABOVE MENTIONED EXPENSES CLAIMED IN P & L A/C WERE NOT FI LED BY THE ASSESSEE AND HENCE RS.2,95,88,932/- WAS TREATED AS UNEXPLAINED E XPENDITURE BY THE AO VIDE ORDERS DATED 16-12-2011 PASSED U/S 144 OF THE ACT. 10 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) (B) THE AO OBSERVED FROM THE PROFIT AND LOSS ACCOUNT F OR THE FINANCIAL YEAR 2008-09 , THE ASSESSEE HAS CLAIMED RS.38,98,350/- U NDER THE HEAD SALARY AND BONUS AND AS NO JUSTIFICATION FOR THE EXPENSES WERE FILED BY THE ASSESSEE AND ALSO CONSIDERING TURNOVER, THESE EXPEN SES CLAIMED APPEARED TO BE UNREASONABLE , A SHOW CAUSE NOTICE DATED 12-12-2 011 WAS ISSUED BY THE AO PROPOSING TO DISALLOW 15% OF THE ABOVE MENTIONED EXPENSES CLAIMED OF RS.38,98,350/- I.E DISALLOWANCE OF RS.5,84,752/- WA S PROPOSED . THE ASSESSEE DID NOT FILED ANY REPLY AND THE AO ,THEREF ORE, TREATED RS.5,84,752/- AS UN-EXPLAINED EXPENDITURE AND ADDED TO TOTAL INCO ME OF THE ASSESSEE. (C) THE AO ISSUED NOTICES U/S 133(6) OF THE ACT TO VER IFY THE PURCHASES AND CONFIRMATIONS HAD BEEN RECEIVED FROM VARIOUS PARTIE S AND FOLLOWING DIFFERENCES WAS OBSERVED BY THE AO: S.NO. NAME OF THE SELLER OF THE GOODS SALES AS PER THE SELLER (IN RS.) PURCHASES AS PER ASSESSEE (IN RS.) DIFFERENCE (IN RS.) 1. SIVAM SHANKARAM CIVIL WORKS 8,67,710/- 9,41,061/- 73,351/- 2. SHIV SHAKTI STEEL TUBES 12,39,774/- 13,74,797/- 1,35,023/- 3. GEETHA TIMBER DEPOT, DINDIGUL 5,81,862/- 29,05,734/- 23,23,872/- TOTAL 25,32,246/- THE AO ISSUED SHOW CAUSE NOTICE DATED 12-12-2011 AN D ASKED THE ASSESSEE TO RECONCILE THE DIFFERENCE OF RS.25,32,246/- , THE A SSESSEE DID NOT FILED ANY REPLY AND THE AO TREATED THE SAID DIFFERENCE AS BOGUS EXP ENSES AND ADDED TO THE 11 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) INCOME OF THE ASSESSEE VIDE ASSESSMENT ORDERS DATED 16-12-2011 U/S 144 OF THE ACT. 13. AGGRIEVED BY THE ASSESSMENT ORDERS U/S 144 OF T HE ACT DATED 16-12-2011 PASSED BY THE AO, THE ASSESSEE FILED THE FIRST APPE AL BEFORE THE CIT(A) . 14. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT T HE ASSESSMENT WAS FRAMED U/S 144 OF THE ACT AND PROPER AND ADEQUATE OPPORTUNITY HAS NOT BEEN GRANTED BY THE AO BEFORE FRAMING THE ASSESSMENT ORDER. THE ASSESSEE S UBMITTED THAT DISALLOWANCE WAS EFFECTED BECAUSE THE ASSESSEE COULD NOT FILE THE RE QUIRED DETAILS ON THE APPOINTED DATE. THE ASSESSEE SUBMITTED THAT ITS BUSINESS ACTIVITIES HAS CLOSED DOWN AND THEREFORE NO REGULAR OFFICE STAFF WAS AVAILABLE. THE ONLY ACCOUN TANT MR. CHIRAG UDANI EXPIRED IN TRAGIC ACCIDENT IN AUGUST 2011 FOR WHICH EVIDENCES WERE FILED. IT WAS REQUESTED BEFORE THE AO TO CO-OPERATE IN COMPLETING THE SCRUTINY ASS ESSMENT DUE TO CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE. THUS, THE ASSES SEE SUBMITTED THAT PROPER AND ADEQUATE OPPORTUNITY WAS NOT PROVIDED BY THE AO TO THE ASSESSEE AND THE ASSESSMENT U/S 144 OF THE ACT WAS FRAMED ON 16-12-2011. IT WAS OBSERVED BY CIT(A) THAT THE ASSESSEE HAS SUBMITTED THE REPLIES BEFORE THE AO IN TAPAL/DAK COUNTERS OF THE REVENUE AND THE AO HAS NOT CONSIDERED THE REPLIES F ILED EVEN TILL 16-12-2011 I.E. DATE OF FRAMING OF ASSESSMENT ORDER U/S 144 OF THE ACT A ND THE CIT(A) DECIDED THE APPEAL ON MERITS AFTER CONSIDERING THE REPLIES OF THE ASSE SSEE FILED TILL 16-12-2011 I.E. THE FRAMING OF ASSESSMENT ORDER U/S 144 OF THE ACT, PAR TLY ALLOWING THE APPEAL OF THE ASSESSEE. THE CIT(A) DID NOT CONSIDERED THE REPLIES FILED ON 19-12-2011 AND 20-12-11 BY THE ASSESSEE IN TAPAL/DAK COUNTER OF THE REVENUE WHICH WAS FILED AFTER COMPLETION OF THE ASSESSMENT U/S 144 OF THE ACT BY THE AO. A) SUB CONTRACT CHARGES RS 1,37,96,451/- :- 12 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) THE CIT(A) OBSERVED THAT THE ASSESSEE FILED LETTER DATED 01/12/2011 WHEREIN MONTH- WISE DETAILS OF SUB CONTRACT CHARGES ALONG WITH PHO TOCOPIES OF BILLS OF SUB CONTRACTORS WERE FURNISHED. THE CIT(A) OBSERVED THA T THE ASSESSEE IS A CIVIL CONTRACTOR. THESE SUB CONTRACT CHARGES WERE SUBJECT TO TDS. THE CIT(A) HELD THAT IT AMOUNTS TO SUFFICIENT COMPLIANCE AND THEREFORE THE IMPUGNED DISALLOWANCE OF RS. 1,37,96,451/- ON ACCOUNT OF SUB CONTRACT CHARGES WA S DELETED BY THE CIT(A) VIDE ORDERS DATED 27.02.2012. B) TRANSPORTATION CHARGES RS. 2,56,297/- THE CIT(A) OBSERVED THAT THE ASSESSEE FILED LETTER DATED 01/12/2011 WHEREIN DETAILS OF TRANSPORTATION CHARGES (PARTYWISE) WERE FURNISHE D. THESE TRANSPORTATION CHARGES WERE ALSO SUBJECT TO TDS. THE CIT(A) OBSERVED THAT IT IS DEEMED TO BE COMPLIANCE OF THE QUERY RAISED BY THE AO .THE CIT(A) THEREFORE DELETED THE IMPUGNED DISALLOWANCE ON ACCOUNT OF TRANSPORTATION CHARGES R S.2,56,297/- VIDE ORDERS DATED 27-02-2012. C) WAGES RS 1,53,50,684/- THE CIT(A) OBSERVED THAT THE ASSESSEE FILED LETTER DATED 01/12/2011 WHEREIN DETAILS OF WAGES (MONTH WISE) WERE FURNISHED. THE C IT(A) OBSERVED THAT THE ASSESSEE HAS ALSO MAINTAINED WAGE REGISTER FOR THE YEAR. THE CIT(A) OBSERVED THAT IT IS TERMED AS SUFFICIENT COMPLIANCE OF THE Q UERY RAISED BY THE A.O. THE CIT(A) THEREFORE DELETED THE IMPUGNED DISALLOWANCE ON ACCOUNT OF WAGES RS 1,53,50,684/- VIDE ORDERS DATED 27-02-2012. D) RENT RS. 1,85,500/- 13 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) THE ASSESSEE FILED COMPLETE DOCUMENTS ON 20-12-2011 I.E. AFTER THE COMPLETION OF ASSESSMENT AND HENCE THE CIT(A) OBSERVED THAT TH E SAME CANNOT BE CONSIDERED AS COMPLIANCE. THUS THE IMPUGNED DISALLO WANCE OF RS. 1,85,500/- ON ACCOUNT OF RENT WAS UPHELD BY THE CIT(A) VIDE OR DERS DATED 27-02-2012. E) SALARY & BONUS RS. 5,84,752/- THE CIT(A) OBSERVED THAT THE ASSESSEE FILED LETTER DATED 22/11/2011 WHEREIN DETAILS OF SALARY & BONUS (EMPLOYEE WISE) WERE FURN ISHED. THE CIT(A) OBSERVED THAT ALL THE SALARY PAYMENTS WERE EFFECTED BY CHEQUES. THE CIT(A) HELD THAT IT IS THEREFORE TERMED AS SUFFICIENT COMP LIANCE OF THE QUERY RAISED BY THE A.O. . THE CIT(A) THEREFORE DELETED THE IMPUGN ED DISALLOWANCE ON ACCOUNT OF SALARY & BONUS OF RS. 5,84,752/- VIDE OR DERS DATED 27-02-2012. 15. AGGRIEVED BY THE ORDERS OF THE CIT(A) DATED 27- 02-2012, THE REVENUE HAS FILED APPEAL WITH THE TRIBUNAL. 16. THE LD. DR SUBMITTED THAT NO EVIDENCE WAS SUBMI TTED BEFORE THE AO AND THE ASSESSMENT WAS FRAMED U/S. 144 OF THE ACT AS THE AS SESSEE HAS NOT CO-OPERATED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS. THE LD. DR SU BMITTED THAT THE CIT(A) HAS NOT COMPLIED WITH RULE 46A OF THE INCOME TAX RULES, 196 2 AND PRINCIPLES OF NATURAL JUSTICE HAS NOT BEEN COMPLIED WITH AS THE DOCUMENTS WERE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) FOR THE FIRST TIME AND THE SAME WAS NOT FORWARDED BY THE CIT(A) TO THE AO FOR REMAND REPORT WHICH WAS REQUIRED UNDER RULE 46A OF THE INCOME TAX RULES,1962 AND THE ORDERS OF THE CIT(A) IS VITIATED AND NEED TO BE SET ASIDE AND THE ORDERS OF THE AO BE RESTORE D . 17. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN TH E APPEAL WAS CALLED FOR HEARING. WE HAVE OBSERVED THAT OPPORTUNITIES WERE EARLIER GI VEN TO THE ASSESSEE SINCE 2013 AND 14 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) THE ASSESSEE HAS NOT APPEARED DESPITE SERVICE OF NO TICE AND HENCE WE ARE PROCEEDING WITH THE APPEAL ON MERITS AFTER PERUSING THE MATERI AL ON RECORD AND AFTER HEARING LD. DR . 18. WE HAVE OBSERVED THAT THE ASSESSMENT WAS FRAMED ON 16.12.2011 BY THE AO VIDE ASSESSMENT ORDER U/S. 144 OF THE ACT, WHEREBY THE A O HAS NOT EVEN CONSIDERED THE REPLIES FILED BY THE ASSESSEE WITH TAPAL/DAK COUNTE RS OF THE REVENUE TILL THE DATE OF FRAMING OF ASSESSMENT U/S 144 OF THE ACT ON 16-12-2 011 WHICH THE AO WAS OBLIGED UNDER LAW TO CONSIDER ON MERITS , AND THE BEST JUDG MENT ASSESSMENT U/S. 144 HAS BEEN FRAMED BY THE AO ON 16-12-2011 WITHOUT CONSIDERING THE REPLIES FILED BY THE ASSESSEE EVEN TILL THE DATE OF FINALIZATION OF THE ASSESSMEN T U/S 144 OF THE ACT ON 16-12-2011 . THE ASSESSEE HAS DULY PRODUCED BEFORE THE CIT(A), T HE EVIDENCE OF FILING OF REPLIES IN THE TAPAL/ DAK COUNTERS OF THE REVENUE WHICH IS ACC EPTED BY THE CIT(A). THUS, THE AO HAS ERRONEOUSLY NOT EVEN CONSIDERED THE REPLIES FILED BY THE ASSESSEE IN TAPAL/DAK COUNTERS OF THE REVENUE BEFORE THE FINALIZATION OF THE ASSESSMENT U/S 144 OF THE ACT ON 16-12-2011. THE CIT(A) HAS ONLY CONSIDERED THE R EPLIES FILED TILL 16-12-2011 I.E. DATE OF FRAMING OF ASSESSMENT U/S 144 OF THE ACT BY THE AO WHILE ADJUDICATING FIRST APPEAL WHILE ESCHEWING THE REPLIES FILED BY THE ASS ESSEE BEFORE THE AO ON 19-12-2011 AND 20-12-2011 I.E. POST FINALIZATION OF THE ASSESS MENT U/S 144 OF THE ACT ON 16-12- 2011 . THUS, CONSIDERATION BY THE CIT(A) OF THE RE PLIES AND EVIDENCES FILED WITH REVENUE WITH TAPAL/DAK COUNTERS OF THE REVENUE TILL 16-12-2011 I.E. DATE OF FINALIZATION OF THE ASSESSMENT ORDERS U/S 144 OF TH E ACT, COULD NOT BE CALLED ADDITIONAL EVIDENCES FILED FOR THE FIRST TIME BEFORE THE CIT(A ) AND HENCE IN OUR CONSIDERED VIEW, THE TAKING OF COGNIZANCE OF SUCH REPLIES AND EVIDEN CES BY THE CIT(A) WHILE ADJUDICATING APPEAL HAS NOT LED TO BREACH OR VIOLAT ION OF RULE 46A OF INCOME TAX RULES, 1962 AND PRINCIPLES OF NATURAL JUSTICE ARE N OT BREACHED BY THE CIT(A) WHEREBY HE DID NOT FORWARDED SUCH EVIDENCES/REPLIES TO AO F OR REMAND REPORT AS THESE ARE NOT ADDITIONAL EVIDENCES AS STIPULATED UNDER RULE 46A O F THE INCOME TAX RULES, 1962. 15 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) THE POWERS OF CIT(A) ARE CO-TERMINUS WITH THAT OF THE AO, AND THE CIT(A) HAS DULY CONSIDERED THE REPLIES SUBMITTED BY THE ASSESSEE IN TAPAL/ DAK COUNTERS OF THE REVENUE TILL 16-12-2011 I.E. DATE OF FINALIZATION OF ASSESS MENT U/S 144 OF THE ACT. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS PRODUCED BEFORE THE CIT(A), FAKE OR FORGED EVIDENCES OR PROOF WITH RESPECT TO FILING OF THE DO CUMENTS IN TAPAL/DAK COUNTERS OF THE REVENUE, FOR WHICH THERE ARE OTHER LEGAL CONSEQUENC ES PROVIDED UNDER THE PREVAILING LAWS IN INDIA APART FROM THE CONSEQUENCES UNDER TH E ACT. IN CASE THE REVENUE HAD CONTENDED THAT FAKE OR FORGED RECEIPTS/ACKNOWLEDGME NT OF FILING REPLIES ARE INTRODUCED BY THE ASSESSEE BEFORE THE CIT(A), THEN OF COURSE T HE ENTIRE PROCEEDINGS BEFORE THE CIT(A) WAS VITIATED AND IN THAT EVENTUALITY THE REV ENUE IS STILL NOT REMEDY-LESS AS IT CAN STILL FILE MISCELLANEOUS APPLICATION FOR RECALL ING THIS APPEAL , APART FROM OTHER ACTIONS WHICH CAN BE INSTITUTED AGAINST THE ASSESSE E UNDER VARIOUS LAWS PREVAILING IN INDIA.HENCE, WE HAVE PROCEEDED TO ADJUDICATE THIS A PPEAL WITH THE HYPOTHESIS/PREMISE THAT THE ASSESSEE HAS INDEED FILED REPLIES IN TAPAL /DAK COUNTERS OF THE REVENUE TILL 16.12.2011 I.E. THE DATE WHEN THE ASSESSMENT ORDE R WAS FRAMED BY THE AO U/S 144 OF THE ACT AND THE AO HAS NOT CONSIDERED THOSE REPLIE S /EVIDENCES WHICH OTHERWISE THE AO WAS DUTY BOUND TO CONSIDER , WHICH REPLIES FILED TILL 16-12-2011 ALONE WERE CONSIDERED BY THE CIT(A) WHILE ADJUDICATING APPEAL AND POWERS OF THE CIT(A) BEING CO-TERMINUS WITH THE POWERS OF THE AO. THUS, IN OUR CONSIDERED VIEW , THE AO ERRED IN NOT CONSIDERING THE REPLIES FILED TILL 16-12-201 1 BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN TAPAL/DAK COUNTERS BEFORE THE FINALIZATION OF THE ASSESSMENT U/S 144 OF THE ACT ON 16-12-2011 WHILE THE CIT(A) H AS RIGHTLY CONSIDERED THE REPLIES FILED BY THE ASSESSEE IN TAPAL/DAK COUNTERS TILL 16 -12-2011 I.E. DATE OF FINALIZATION OF THE ASSESSMENT U/S 144 OF THE ACT BY THE AO. THE CI T(A) HAS ADJUDICATED THE APPEAL OF THE ASSESSEE ON MERITS AFTER CONSIDERING THE REP LIES, DOCUMENTS AND EVIDENCES FURNISHED BY THE ASSESSEE TILL 16-12-2011 . WE FOUN D NO INFIRMITY IN THE ORDERS OF THE CIT(A) WHICH WE UPHOLD. WE ORDER ACCORDINGLY. 16 I.T.A. NO. 3234 & 3235/MUM/2012 (ASSESSMENT YEAR:2009-10 AND 2008-09) 19. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 20. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 1ST, 2016 SD/- SD/- ( SAKTIJIT DEY ) ( RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 01.01.2016 PS:- POOJA K. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI