ACIT, UDAIPUR V. M/s. Wagad Construction Company, BANSWARA

ITA 337/JODH/2009

• Counselvise Citation: 33723314 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R H GOHET
• Keywords: Additional evidence
• Section: 194C

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH , JODHPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 337/ JU/2009 ASSESSMENT YEAR : 2005-06 PAN: AAAFW 2213 M THE ACIT VS. M/S. WAGAD CONSTRUCTION COMPANY CIRCLE- 2 P.NO. 18M, GOVIND NAGAR, SECTOR-13 UDAIPUR SHIV MARG, UDAIPUR ROAD, BANSWARA (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA JAIN DEPARTMENT BY : SHRI R.H. GOHET DATE OF HEARING: 07-12-2011 DATE OF PRONOUNCEMENT: 19-01-2012 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT (A), DATED 20- 03-2009 FOR THE ASSESSMENT YEAR 2005-06. 2.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) HAS ERRED IN DELETING THE LUMPSUM ADDITION OF RS. 1.00 LAC MADE BY THE AO. 2.2 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXEC UTING CONTRACTS. THE AO REQUIRED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS, BILL S AND VOUCHERS FOR EXAMINATION AND THE ASSESSEE ON THE DATE OF HEARING SENT A LETTER IN WH ICH IT WAS STATED THAT BOOKS OF ACCOUNTS HAVE BEEN LOST ON 5-11-2007. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM OF LOSS OF BOOKS O F ACCOUNTS OR TO FILE THE COPY OF THE FIR IF ANY. THE AO IN HIS LETTER HAS MENTIONED THAT THE ASSESSEE HAS NOT FILED THE COPY OF THE FIR AND THEREFORE, IT CANNOT BE ACCEPTED THAT B OOKS OF ACCOUNTS HAVE BEEN LOST JUST 2 BEFORE ONE DAY OF HEARING. THE HEARING WAS FIXED ON 13-11-2007 AND THE ASSESSEE SOUGHT ADJOURNMENT. THE ASSESSEE WAS GIVEN OPPORTUNITY ON 22-11-2007 AND 12-12-2007 BUT THE BOOKS OF ACCOUNTS WERE NOT PRODUCED. THE ASSESSEE W AS FULLY AWARE THAT THE CASE WAS GOING TO BE BARRED BY LIMITATION AND STILL THE ASS ESSEE SOUGHT ADJOURNMENT TILL THE END OF DECEMBER. THE NET PROFIT RATE BEFORE REMUNERATION A ND INTEREST TO PARTNER IS 5.97% AS AGAINST 5.35% IN THE IMMEDIATELY PRECEDING YEAR. S INCE THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS, THEREFORE, THE AO MADE THE L UMPSUM ADDITION OF RS. 1.00 LAC. 2.3 THE LD. CIT(A) NOTICED THAT DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE HAS DECLARED BETTER RESULTS AS COMPARED TO PRECEDING YE AR. THE LD. AR FURNISHED THE LEDGER ACCOUNT OF EXPENSES. THE ASSESSEE HAS FURNISHED THE AUDITED ACCOUNTS ALONGWITH RETURN OF INCOME. THE LD. CIT(A) THEREFORE, DELETED THE ADDIT ION. 2.4 WE HAVE HEARD BOTH THE PARTIES. IT IS TRUE THAT IT IS A CASE WHERE BOOKS OF ACCOUNTS ARE TO BE REJECTED. WHEN THE BOOKS OF ACCOUNTS ARE TO BE REJECTED THEN ASSESSMENT IS TO BE MADE ON THE BASIS OF MATERIALS ON RECORD. THE BEST JUDGMENT ASSESSMENT SHOULD BE BASED ON THE BASIS OF CERTAIN RELEVANT MATERIAL AND ASSES SMENT SHOULD NOT BE MADE ARBITRARILY. THE AO IN HIS ORDER HAS MADE THE ADDITION OF RS. 1. 00 LAC FOR PLUGGING THE LOOPHOLES AND INFLATION OF EXPENSES FOR WANT OF VERIFICATION. THE ASSESSEE HAS FILED THE AUDITED ACCOUNTS. THE AO HAS NOT POINTED OUT ANY DEFECTS OF THE AUDIT ED ACCOUNTS. THE NET PROFIT RATE DURING IS BETTER AS COMPARED TO PRECEDING YEAR. WE THEREFORE, FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 1.00 LAC. 3.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 43,18,515/- MADE U /S 40A(IA) OF THE I.T. ACT. 3 3.2 THE AO NOTICED THAT4 THE ASSESSEE HAS DEBITED R S. 43,18,515/- AS TRANSPORTATION EXPENSES IN THE PROFIT AND LOSS ACCOUNT. ACCORDING TO THE AO , THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX AT SOURCE ON TRANSPORT CONTRACT I F THE SINGLE PAYMENT EXCEEDS RS. 20,000/- OR EXCEEDS RS. 50,000/- IN AGGREGATE DURIN G THE YEAR. THE ASSESSEE WAS CONFRONTED WITH THE SHOW CAUSE LETTER DATED 12-12-2 007 TO EXPLAIN AS TO WHY SUCH EXPENSES BE NOT DISALLOWED U/S 40A(IA). THE ASSESSE E HAS NOT CONTROVERTED THE FINDINGS AND THEREFORE, THE AO MADE THE ADDITION OF RS. 43,1 8,515/-. 3.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E EXPENDITURE DEBITED UNDER THE HEAD TRANSPORTATION RELATING TO PURCHASE OF SPARE PARTS FOR ASSESSEE'S OWN VEHICLES AND MACHINERIES. SUCH SPARE PARTS WERE FOR TRANSPORT VE HICLES AND MACHINERIES AND WERE THEREFORE, DEBITED UNDER THE HEAD TRANSPORTATION E XPENSES. THE ASSESSEE ALSO OBTAINED BILLS FROM THE PARTIES. IT WAS THEREFORE, SUBMITTED THAT THERE WAS NO CASE OF MAKING ANY DEDUCTION OF TAX AT SOURCE. BEFORE THE LD. CIT(A) , THE ASSESSEE FILED THE DETAILS. 3.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DELETED THE ADDITION AFTER OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMI SSION OF HE LD. A/R AND FOUND THAT THE AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) ON THE GROUND THAT THE APPELLANT DEBITED THE AMOUNT OF RS.43,18,515/- UNDER THE HEAD TRANSPORTATION. THE AO ASSUMED THAT THE PA YMENT CAME UNDER THE PURVIEW OF CONTRACTUAL PAYMENT, ENC ETH PROVISIONS OF SECTION 194C IS APPLICABLE BUT FAILED TO DO SO. THE AO, THEREFORE, DISALLOWED THE CLAIM OF RS.43,18,515/- U/S 40(A)(IA) AND ADDED TO THE TOTAL INCOME. THE LD. A/R SUBMITTED THAT THE CLAIM OF RS.43,18,515/- IS IN RE SPECT OF PURCHASE OF SPARE PARTS ONLY FROM VARIOUS PARTIES, WHICH IS EVI DENT FROM THE DETAILS AND COPY OF PARTY-WISE BILLS SUBMITTED. THE A/R FURTHER SUBMITTED THE 4 PROVISIONS OF THE SECTION 194-C IS NOT APPLICABLE T O THE PAYMENT MADE/ DEBITED IN RESPECT OF PURCHASE OF MATERIAL. THE DET AILS WHICH WERE CALLED FOR WERE ALSO FURNISHED BEFORE THE AO. ON GOING THR OUGH THE FACTS OF THE CASE IT IS NOTICED THAT THE AO DISALLOWED THE CLAIM OF DEDUCTION ON THE GROUND THAT THE APPELLANT DEBITED RS. 43,18,515/- U NDER THE HEAD TRANSPORTATION. ON VERIFICATION OF BILLS AND VOUCHE RS FURNISHED IN RESPECT OF THE ABOVE PARTIES, IT IS NOTICED THAT THE AMOUNT OF RS.43,18,515/- PERTAINS PURELY TO PURCHASE AND NOT PAYMENT ON TRANSPORTATIO N CONTRACT. THE A/R ALSO SUBMITTED DETAILS I.E. DATE BILL NO. AND AMOUN T OF MONTH-WISE AND DATE-WISE PURCHASE OF VARIOUS ITEMS AS UNDER:- DATE BILL NO. AMOUNT 11-4-2004 2,727 7,020 3-4-04 34 20,040 12-4-04 78 15,453 5-5-04 88 9,820 29-04-04 104 19,825 8-5-04 130 13,679 2-06-04 17,420 16-05-04 148 935 12-05-04 193 428 17-06-04 296 11,955 18-06-04 301 26,720 24-06-04 242 4,994 11-08-04 369 41,120 12-08-04 405 38,060 18-08-04 450 8,590 22-08-04 465 7,790 27-08-04 523 28,885 31-08-04 569 16,250 6-09-04 654 4,390 13-09-04 685 4,865 7-10-04 725 3,625 12-010-04 785 10,050 TOTAL 311,954 FROM THE INDIVIDUAL BILLS IT IS NOTICED THA THE APP ELLANT PURCHASE VARIOUS ITEMS OF SPARE PARTS OF VEHICLE AN D MACHINERIES 5 RANGING FROM RS. 600/- TO RS/ 2760/-. SUCH DETAILS FURNISHED IN RESPECT OF HINDUSTAN AUTOMOBILE, JHANSI, EKTA ENGIN EERING WORKS, JHANSI, NEW GUJRAT AUTOMOBILE, JHANSI CHOUDHARI AUT O PART, BANSWARA, BHAWANI SALES, KANPUR, SHREE MAHAVEER AUT OMOBILE, BANSWAR, M/S J.J. EARTH MOVERS, KOTA, MAYANK ENGINE ERING WORKS, JHALWAR. THE BILL AMOUNT RANGES FROM RS. 428 /- TO RS. 86,500/- . THE TOTAL OF THE COPY OF THE BILLS SUBMI TTED COMES TO RS.43,18,515/-. FROM THE COPY OF BILLS IT IS ALSO R EVEALED THAT THE TRANSACTION PERTAINS TO PURCHASE AND NOT OF TRANSPO RTATION PAYMENT. ON PURCHASE THEREFORE, THE PROVISIONS OF SECTION 40 (A)(IA) IS NOT APPLICABLE TO THE FACTS OF EH CASE. THE DISALLOWANC E IS DELETED THE APPEAL IS ALLOWED ON THIS GROUND. 3.5 WE HAVE HEARD BOTH THE PARTIES. IT IS CLEAR FRO M THE ASSESSMENT ORDER THAT THE AO PROVIDED THE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN AS TO WHY THE SUM OF RS. 43,18,515/- DEBITED UNDER THE HEAD TRANSPORTATION EXPENSES BE NOT DISALLOWED U/S 40A(IA) OF THE ACT. WE HAVE GONE THROUGH THE LETTER DATED 16-03-2009 A DDRESSED TO THE LD. CIT(A) AND THE COPY OF WHICH IS AVAILABLE AT PAGES 1 TO 8 OF THE P APER BOOK FILED BY THE LD. AR. ALONGWITH LETTER, THE ASSESSEE ENCLOSED THE FOLLOWI NG. 1. COPY OF LIST SHOWING THE DATE OF BILL, BILL NO., AMOUNT OF BILL ETC. AS OBTAINED FROM THIRD PARTY 2. COPY OF LEDGER ACCOUNT OF THE ASSESSEE WITH 09 T HIRD PARTIES REFERRED IN THE ABOVE LETTER. 3. LEDGER ACCOUNT OF THESE 09 PARTIES HAVE ALSO BEE N FILED BEFORE THE AO. THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCO UNTS. 3.6 BEFORE THE LD. CIT(A), THE ASSESSEE HAS FILED T HE LEDGER ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF 09 PARTIES. THE LEDGER AC COUNT DEFINITELY SHOWS THAT THOSE 6 PARTIES HAVE CREDITED THE ACCOUNT OF THE ASSESSEE I N RESPECT OF SALES. THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO SUCH PARTIES IN CASH. THE DETAILS SO FILED ARE DEFINITELY ADDITIONAL EVIDENCES. WE THEREFORE, FEEL THAT THE A O WILL LOOK INTO THE LEDGER ACCOUNT FILED BEFORE THE LD. CIT(A) AND IN CASE THE CLOSING BALANCE OF SUCH PARTIES ARE VERIFIABLE FROM THE OPENING BALANCE OF THE SUBSEQUENT YEAR THE N SUCH ACCOUNTS ARE TO BE TREATED AS CORRECT UNLESS THERE IS ANY ADVERSE MATERIAL. SINCE THE PAYMENTS ARE NOT RELATED TO ANY TRANSPORTATION, HENCE THERE WAS NO CASE OF MAKING A NY DISALLOWANCE U/S 40A(IA) OF THE ACT IN ` CASE THE AO VERIFIES THAT ASSESSEE HAS PURCHAS ED SPARE PARTS FROM THE PARTIES AND CLOSING BALANCE IN THE NAME OF ASSESSEE FOR THE ASS ESSMENT YEAR 2005-06 ARE VERIFIABLE FROM THE OPENING BALANCE OF SUCH PARTIES IN THE BOO KS OF ASSESSEE FOR THE SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2006-07 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER IS PRONOUNCED ON 19-01-2012. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 19/01/2012 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 2, UDIAPUR 2. M/S. WAGAD CONSTRUCTION COMPANY, UDAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT (A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO. 337/JU /09) A.R, ITAT, JAIPUR 7 8