I.T.O.-3(2), Gwalior V. M/s Atul Construction Company, Gwalior

ITA 361/AGR/2013

• Counselvise Citation: 36120314 RSA 2013
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-01-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATHESHAM ANSARI
• Assessee Lawyers: ASHOK VIJAYWARGIYA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO.361/AGRA/ 2013 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER-3(2), VS. M/S ATUL CONSTRU CTION COMPANY, GWALIOR. 200 C.P. COLONY, MORAR, GWALIOR, (PAN AABFA 8730 E) C.O. NO.01/AGRA/2014 (IN ITA NO.361/AGRA/ 2013) ASSESSMENT YEAR: 2010-11 M/S ATUL CONSTRUCTION COMPANY, VS. INCOME TAX OFFI CER-3(2), 200 C.P. COLONY, MORAR, GWALIOR. GWALIOR, (PAN AABFA 8730 E) (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI ATHESHAM ANSARI, JR. D.R. ASSESSEE BY : SHRI ASHOK VIJAY WARGIYA, C.A. DATE OF HEARING : 30.01.2014 DATE OF PRONOUNCEMENT : 31.01.2014 ORDER PER PRAMOD KUMAR, ACCOUNTANT MEMBER: THIS APPEAL AND CROSS OBJECTION ARE DIRECTED AGAINS T THE ORDER DATED 25.09.2013 PASSED BY LD. CIT(A) IN THE MATTER OF AS SESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR A.Y. 2010-11. 2. THE GRIEVANCES RAISED IN THE APPEAL AS ALSO IN T HE CROSS OBJECTION, WHICH ARE INTERCONNECTED, AND WHICH WE ARE TAKING UP TOGETHER , ARE AS FOLLOWS :- ITA NO.361/AGRA/2013 & CO NO.01/AGRA/2014 A.Y. 2010-11 2 3. THE GROUND RAISED BY THE A.O. IN APPEAL ARE AS U NDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.30,00,000/- MADE BY THE AO ON ACCOUNT OF VARIOUS EXPENSES. 4. THE GROUND RAISED BY THE ASSESSEE IN CROSS OBJEC TION ARE AS UNDER :- 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW AND IN ANY VIEW OF THE MATTER, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.1,00,000/- IN L UMP SUM ON ADHOC BASIS OF TOTAL DISALLOWANCE OF RS.31,00,000/- FROM VARIOU S EXPENSES, JUST TO MAINTAIN THE CONSISTENCY OF DISALLOWANCES UPHOLD BY HIM DURING PRECEDENT YEAR. 5. THE RELEVANT MATERIAL ARE LIKE THIS, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTED THAT THE ASSESSEE HAS CL AIMED EXPENDITURE OF RS.2,24,62,942/- UNDER VARIOUS HEADS SUCH AS B.T. M ETAL EXPENSES, BOLDER EXPENSES, BRICK EXPENSES, HARDWARE EXPENSES, MORUM EXPENSES, SAND EXPENSES, STONE POWDER EXPENSES, TIPPER REPAIR/MAINTENANCE EX PENSES, APPROVED EARTH EXPENSES, EARTH EXCAVATION EXPENSES, EARTH FILLING EXPENSES, JCB REPAIR/MAINTENANCE EXPENSES, LABOUR WAGES EXPENSES, MACHINERY MAINTENANCE EXPENSES, SHUTTERING EXPENSES, SITE EXPENSES, STEEL FABRICATION AND TRACTOR REPAIR/MAINTENANCE EXPENSES. THE A.O. FURTHER NOTED THAT IN RESPECT OF PART OF SUCH EXPENDITURE ASSESSEE HAS PRODUCED ONLY HAND-MADE VO UCHERS FOR VERIFICATION. THE A.O. WAS OF THE VIEW THAT WHILE MAKING EXPENDITURE UNDER THESE HEADS, THE REVENUE DOUBTED THAT IN THE ABSENCE OF CONVINCING D OCUMENTARY EVIDENCES, THE ENTIRE EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION E ITHER. IT WAS IN THIS BACKDROP THE A.O HAS DISALLOWED RS.31,00,000/- AND ADDED THE SAME BACK TO THE INCOME. ITA NO.361/AGRA/2013 & CO NO.01/AGRA/2014 A.Y. 2010-11 3 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE LD. CIT(A). WHILE THE LD. CIT(A) UPHELD THE GRIEVANCE OF THE AS SESSEE IN PRINCIPLE TO THE EFFECT THAT SUCH ADHOC DISALLOWANCE CANNOT BE MADE ON THE FACTS AND CIRCUMSTANCES OF THE CASE, HE CONFIRMED THE DISALLOWANCE TO THE EXTENT O F RS.1,00,000/- BY INTER ALIA OBSERVING AS UNDER :- I HAVE PERUSED ASSESSMENT ORDER, WRITTEN SUBMISSIO N, ORAL ARGUMENTS PUT FORTH BEFORE ME AND DECISIONS RELIED UPON BY THE LD. AR OF THE APPELLANT AND CAREFULLY CONSIDERED AND FO UND THAT THE ASSESSING OFFICER HAS DISALLOWED RS.31,00,000/- IN LUMP SUM ON ADHOC BASIS OUT OF VARIOUS EXPENSES, WHICH WERE PAR T OF PURCHASE OF MATERIAL CONSUMED DURING COURSE OF BUSINESS AND DEB ITED TO THE TRADING ACCOUNT. THE ASSESSING OFFICER HAS ASSIGNED THE REASON FOR DISALLOWANCE MENTIONING THAT THE APPELLANT COULD PR ODUCE THE BILLS FOR SOME EXPENSES ONLY AND THE SELF MADE VOUCHERS FOR E XPENSES, WHICH WERE NOT SUPPORTED WITH THE BILLS. THE LD. AR OF TH E APPELLANT VEHEMENTLY CONTESTED THAT THE ENTIRE EXPENDITURE WE RE SUPPORTED WITH BILLS AND VOUCHERS. THE APPELLANT IS A CONSTRUCTION CONTRACTOR AND ACCORDING TO THE NATURE OF BUSINESS IT IS NOT POSSI BLE FOR THE APPELLANT OR EVERY ASSESSEE IN THIS LINE OF BUSINESS TO HAVE THE PRINTED VOUCHERS FOR EACH AND EVERY TRANSACTION. ALTHOUGH SOME OF TH E TRANSACTIONS WERE SUPPORTED BY SELF MADE VOUCHERS BUT THEY WERE DULY ACKNOWLEDGED BY THE RECIPIENT. THE ASSESSING OFFICE R COULD NOT POINT OUT ANY SPECIFIC UNVOUCHED EXPENDITURE. HE PLACED R ELIANCE ON THE DECISION IN THE CASE OF LAHOTI MEDICARE PVT. LTD. V S. DY. CIT (2005) 33 ITC 76 (INDORE), IN WHICH THE DISALLOWANCE OF EX PENDITURE WAS DELETED WHERE THE DETAIL OF EXPENDITURE WAS FILED A ND SUPPORTED WITH THE SELF MADE VOUCHERS. THE LD. AR OF THE APPELLANT HAS SUBMITTED A COMPARATIVE CHART OF MATERIAL CONSUMPTION AND GROSS PROFIT WITH REFERENCE TO PRECEDING YEAR. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD UNDERTAKEN THE CONTRACT OF CONSTRUCTI ON WORK IN TWO PLACES NAMELY, GWALIOR AND TALBEHAT. THE PERCENTAGE OF MATERIAL CONSUMPTION TO THE GROSS RECEIPTS WAS 86.57% AS AGA INST 86.76% OF PRECEDING YEAR. SIMULTANEOUSLY, THE GROSS PROFIT RA TIO WAS ALSO INCREASED FOR GWALIOR FROM 13.24% TO 13.43% AND COM BINED GROSS PROFIT RATIO FOR GWALIOR AND TALBEHAT WAS ALSO INCR EASED FROM 13.41% TO 13.43%. IN SUPPORT OF THIS CONTENTION, HE HAS SUBMITTED COPY OF AUDITED CONTRACT AND PROFIT & LOSS ACCOUNT, DETAIL OF PURCHASES AND EXPENSES FOR THE YEAR UNDER CONSIDERA TION AS WELL AS PRECEDING YEAR. HE HAS RELIED UPON THE DECISION IN THE CASE OF ITO VS. ITA NO.361/AGRA/2013 & CO NO.01/AGRA/2014 A.Y. 2010-11 4 HITESH KUMAR PANCHORI (2008) 113 TTJ (JODH.) 357. H E HAS CONTENDED THAT, SINCE THE MATERIAL CONSUMPTION WAS REDUCED AND TRADING RESULTS WAS PROGRESSIVE I.E. BETTER THAN PR ECEDING YEAR, THEN THE FURTHER DISALLOWANCE OF RS.31,00,000/- OUT OF V ARIOUS EXPENSES RELATED TO MATERIAL PURCHASES AND DEBITED UNDER HEA D PURCHASES IN TRADING ACCOUNT AND DUTY CONSIDERED WHILE WORKING O UT THE GROSS PROFIT IS NOT JUSTIFIED. I HAVE DULY CONSIDERED ALL THESE SUBMISSIONS AND CONTENTIONS. IT IS CORRECT THAT THE GROSS PROFIT IN TERMS OF PERCENTAGE WAS INCREASED. BUT, THE ASSESSING OFFICER HAD DISAL LOWED RS.1,50,000/- DURING PRECEDING ASSESSMENT YEAR I.E. 2009-10 ALSO OUT OF VARIOUS EXPENSES DEBITED TO TRADING ACCOUNT AS W ELL AS PROFIT AND LOSS ACCOUNT FOR WANT OF VOUCHERS. THE SAME ISSUE C AME UP IN THE APPEAL BEFORE ME IN ITA NO.508/IT/2011-12/GWL, WHIC H WAS DECIDED VIDE ORDER DATED 25.04.2013 IN WHICH I HAD TAKEN TH E STAND THAT THE POSSIBILITIES OF LEAKAGES CANNOT BE RULED OUT AND U PHELD THE DISALLOWANCE OF RS.75,000/- WAS OUT OF RS.1,50,000/ -. THEREFORE, TO MAINTAIN THE CONSISTENCY, I, HEREBY, RESTRICT THE D ISALLOWANCE TO RS.1,00,000/- FOR THE YEAR UNDER CONSIDERATION. 7. NONE OF THE PARTIES SATISFIED BY THE STAND SO TA KEN BY THE LD. CIT(A). WHILE THE A.O. HAS AGGRIEVED THAT THE CIT(A) OUGHT TO HAV E CONFIRMED THE IMPUGNED DISALLOWANCE, THE ASSESSEE IS AGGRIEVED THAT THE CI T(A) OUGHT TO HAVE DELETED THE DISALLOWANCE IN FULL. THAT IS HOW BOTH THE PARTIES ARE IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE WAS NO MATERIAL OR COGE NT REASON BEFORE THE A.O. TO MAKE THE IMPUGNED DISALLOWANCE. THE MERE FACT THAT SOME OF THE VOUCHERS WERE SELF-MADE CANNOT BE A REASON ENOUGH TO DISALLOW THE EXPENSES ON ADHOC BASIS. IT WAS OPEN TO THE A.O. TO DISALLOW EXPENSES TO THE EX TENT HE IS NOT SATISFIED WITH VOUCHERS. BUT EVEN IN SUCH A CASE HE IS TO SET OUT THE COGENT REASON FOR DOING SO. WE HAVE ALSO NOTED THAT IN THE IMMEDIATELY PRECEDIN G YEAR THIS VERY BENCH OF THE TRIBUNAL HAS DELETED THE SIMILAR DISALLOWANCE IN AS SESSEES OWN CASE BY OBSERVING AS FOLLOWS:- ITA NO.361/AGRA/2013 & CO NO.01/AGRA/2014 A.Y. 2010-11 5 9. THAT TAKES US TO THE GROUND NO.3 IN APPEAL AS AL SO GROUND NO.3 IN CROSS OBJECTION WHICH ARE INTER CONNECTED AND TO BE TAKEN UP TOGETHER. SO FAR AS THESE GRIEVANCES ARE CONCERNED, WE FIND THAT THE ASSESSING OFFICER HAD DISALLOWED RS.1,50,000/-, OUT OF EXPENSES CLAIMED AS DEDUCTION, ON THE GROUND THAT VOUCHERS A ND SUPPORTIVE EVIDENCES ARE NOT AVAILABLE. IN APPEAL, LEARNED CIT (A) TOOK NOTE OF ASSESSEES SUBMISSION THAT AOS REQUISITIONS WERE D ULY COMPLIED WITH AND HELD THAT THE ADHOC DISALLOWANCE OF RS.1,50,00 0/- IS NOT SUSTAINABLE BUT YET RETAINED THE DISALLOWANCE OF R S.75,000/- TO TAKE CASE OF POSSIBILITY OF LEAKAGE IN SELF MADE VOUCHE RS. NONE OF THE PARTIES IS SATISFIED, AND BOTH OF THEM ARE BEFORE U S. 9. WE SEE NO REASON TO TAKE ANY REVIEW OF THE MATTE R THAN THE VIEW TAKEN IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING Y EAR. IN VIEW OF THE ABOVE DISCUSSION AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE CONFIRM THE ORDER OF CIT(A) TO THE EXTENT OF DELETING THE IMPUGNED ADDIT ION OF RS.30,00,000/- AND WE FURTHER DIRECT THE A.O. TO DELETE THE BALANCE RS.1, 00,000/- WHICH HAS BEEN SUSTAINED IN APPEAL BY THE CIT(A). GRIEVANCE OF THE A.O. IS THUS REJECTED AND GRIEVANCE OF THE ASSESSEE IS THUS ALLOWED. 10. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL CROSS OBJECTION BUT IN THE COURSE OF HEARING HE DID NOT PRESS THE SAME. ACCORDINGLY, GR IEVANCES RAISED THEREBY ARE REJECTED IN LIMINI. 11. IN THE RESULT, WHILE APPEAL OF THE REVENUE IS D ISMISSED, CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.2014) SD/- SD/- (BHAVNESH SAINI) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 31.01.2014 PBN/* ITA NO.361/AGRA/2013 & CO NO.01/AGRA/2014 A.Y. 2010-11 6 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY