DCIT, New Delhi V. M/s. Unibild Engineering & Construction Company Pvt. Ltd., New Delhi

ITA 3676/DEL/2013

• Counselvise Citation: 367620114 RSA 2013
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 18-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Assessee Lawyers: RAJESH ARORA
• Keywords: Opportunity of being heard
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH H HH H : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .3676/DEL/2013 3676/DEL/2013 3676/DEL/2013 3676/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -18(1), 18(1), 18(1), 18(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND CONSTRUCTION COMPANY PVT.LTD., CONSTRUCTION COMPANY PVT.LTD., CONSTRUCTION COMPANY PVT.LTD., CONSTRUCTION COMPANY PVT.LTD., A AA A- -- -67, LAJPAT NAGAR 67, LAJPAT NAGAR 67, LAJPAT NAGAR 67, LAJPAT NAGAR- -- -II, II,II, II, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 024. 110 024. 110 024. 110 024. PAN : PAN : PAN : PAN : AAACU0465A. AAACU0465A. AAACU0465A. AAACU0465A. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NO.3577/DEL/2013 .3577/DEL/2013 .3577/DEL/2013 .3577/DEL/2013 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2009 2009 2009 2009- -- -10 1010 10 M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND CONSTRUC CONSTRUC CONSTRUC CONSTRUCTION COMPANY TION COMPANY TION COMPANY TION COMPANY PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., A AA A- -- -67, LAJPAT NAGAR 67, LAJPAT NAGAR 67, LAJPAT NAGAR 67, LAJPAT NAGAR- -- -II, II,II, II, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 024. 110 024. 110 024. 110 024. PAN : AAACU0465A. PAN : AAACU0465A. PAN : AAACU0465A. PAN : AAACU0465A. VS. VS. VS. VS. ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, RANGE RANGE RANGE RANGE- -- -18, 18, 18, 18, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SAMEER SHARMA, SR.DR. ASSESSEE BY : SHRI RAJESH ARORA, CA. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : ITA NO.3577/DEL/2013 ITA NO.3577/DEL/2013 ITA NO.3577/DEL/2013 ITA NO.3577/DEL/2013 ASSESSEES APPEAL : ASSESSEES APPEAL : ASSESSEES APPEAL : ASSESSEES APPEAL :- -- - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXI, NEW DELHI DATED 4 TH MARCH, 2013 FOR THE AY 2009- 10. 2. GROUND NOS.1, 2 & 3 OF THE ASSESSEE APPEAL READ AS UN DER:- ITA-3676 & 3577/D/2013 2 1. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.3,40,619/- U/S 41(1) OF THE INCOME TAX ACT, 1961, IGNORING THE SUBMISSION AND REMA ND REPORT IN RESPECT OF BALANCES OF SUNDRY CREDITORS, ON ACCOUNT OF THE SAME BEING OUTSTANDING FOR MORE THAN ONE YEAR, ALLEGING THE SAME TO BE NOT PAYABLE, WHICH IS H IGHLY UNJUSTIFIED, ARBITRARY, BAD IN LAW AND UNCALLED FOR. 2. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS OF THE C ASE IN CONFIRMING THE ADDITION OF RS.19,38,780/- UNDER SECT ION 41(1) OF THE INCOME TAX ACT, 1961, IN RESPECT OF BAL ANCES OF SUNDRY CREDITORS, ALLEGING THE SAME TO BE DIFFERENT FROM THE CONFIRMATIONS OF THE PARTIES IN QUESTION AND IGNO RING THE EXPLANATION, RECONCILIATION AND SUBMISSION, WHICH IS ARBITRARY, UNJUSTIFIED AND BAD IN LAW. 3. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS OF THE C ASE IN CONFIRMING THE ADDITION OF RS.6,79,87,117/- U/S 41(1) OF THE INCOME TAX ACT, 1961, IGNORING THE DETAILS SUBMITTED AND THE ONUS DISCHARGED BY THE ASSESSEE, IN RESPECT OF BALANCES OF SUNDRY CREDITORS, ON ACCOUNT OF THE PARTIE S IN QUESTION ALLEGEDLY NOT RESPONDING TO THE NOTICES ISSUED U/S 133(6), WHICH IS ARBITRARY, UNJUSTIFIED AND BAD IN L AW. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES IN COME FROM CONSTRUCTION OF CIVIL WORK OF COMMERCIAL AND RESIDENT IAL BUILDINGS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RET URN DECLARING TOTAL INCOME AT ` 5,35,45,570/-. THE TOTAL TURNOVER OF THE ASSESSEE WAS ` 92.89 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THERE ARE SUNDRY CREDITORS A MOUNTING TO ` 25,92,00,075/- AS ON 31 ST MARCH, 2009. ON DETAILED VERIFICATION, HE FOUND THAT IN RESPECT OF FOUR CREDITORS, TO WHOM AMOU NT PAYABLE WAS ` 3,40,619/-, NO TRANSACTION TOOK PLACE SINCE 1.4.2008 TO 31.3.2011. IN RESPECT OF 19 CREDITORS WHOSE TOTAL CREDIT BALANCE AMO UNTED TO ` 6,79,87,117/-, THE NOTICE ISSUED U/S 133(6) WAS RETURNE D BACK UNSERVED. THEREFORE, THE ASSESSING OFFICER PRESUMED THAT THE LIABILITY IN THE NAME OF ABOVE CREDITORS WITH WHOM NO TRANSACT ION TOOK PLACE IN FOUR YEARS AMOUNTING TO ` 3,40,619/- AND THE CREDITORS IN WHOSE CASE ITA-3676 & 3577/D/2013 3 NOTICE UNDER SECTION 133(6) RETURNED BACK UNSERVED A MOUNTING TO 6,79,87,117/- CEASED TO EXIST. ACCORDINGLY, HE APPLI ED THE PROVISIONS OF SECTION 41(1). IN RESPECT OF FOUR CREDITORS, THE REP LY WAS RECEIVED FROM THEM. HOWEVER, THE ASSESSING OFFICER FOUND THAT THERE WAS A DIFFERENCE IN THE BALANCE AS PER ASSESSEES BALANCE SHEET AS WELL AS THE BALANCE CONFIRMED BY THE CONCERNED PARTY. THE ASSESSING OFFICER MADE THE ADDITION FOR THE DIFFERENCE. WHILE TAKING THIS VIEW, THE ASSESSING OFFICER RELIED UPON THE DECISION OF HONBLE AP EX COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS LTD. [1996] 222 ITR 344. THE ADDITION IS SUSTAINED BY THE LEARNED CIT(A). HENCE, THIS APPEAL BY THE ASSESSEE. 4. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTED B Y THE LEARNED COUNSEL THAT THE ASSESSING OFFICER HAS NOT PROPERLY APPRE CIATED THE FACTS AND ALSO NOT PROPERLY APPLIED THE LAW. HE SUBMI TTED THAT THE MAJOR ADDITION IS OF ` 6.79 CRORES ON THE ALLEGED GROUND THAT THE NOTICE ISSUED UNDER SECTION 133(6) IS RETURNED UNSERVED. HE P OINTED OUT THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THOSE PARTIES TOO K PLACE DURING THE FY 2008-09 AND THE ENQUIRY WAS CONDUCTED IN THE YEAR 2011. THE PARTIES MIGHT HAVE CHANGED THE ADDRESS. H E FURTHER SUBMITTED THAT MOST OF THE OUTSTANDING AMOUNT IN THE NAME OF ABOVE CREDITORS HAS BEEN PAID BY THE ASSESSEE DURING THE FY 200 9-10 BY CHEQUE. THAT THE ASSESSING OFFICER MADE THE ADDITION M ERELY ON THE GROUND THAT SUMMONS ISSUED UNDER SECTION 133(6) HAVE B EEN RETURNED UNSERVED WITHOUT ASKING FOR FURTHER EXPLANATION/CLARI FICATION FROM THE ASSESSEE. THAT BEFORE THE CIT(A), THE ASSESSEE FURNISHED TH E EVIDENCE OF PAYMENT MADE TO THOSE PARTIES IN THE SUBSEQUENT YEAR . THE CIT(A) MENTIONS THE SAME AT PAGES 3, 4 AND 5 OF HIS ORDER BUT ULTIMATELY, WHEN HE DECIDED THE APPEAL, HE DID NOT CONSIDER THE SAME AT ALL. WITH REGARD TO FOUR PARTIES, IN WHOSE CASE THERE WAS A DIFFE RENCE IN THE CREDIT BALANCE AS INFORMED BY THE PARTIES AND AS PER A SSESSEES BOOKS ITA-3676 & 3577/D/2013 4 OF ACCOUNT, HE REFERRED TO PAGE 6 OF THE ASSESSMENT ORD ER AND POINTED OUT THAT THE ASSESSING OFFICER COMPARED THE BALANCE IN THE PARTIES ACCOUNT AS ON 31 ST MARCH, 2009 WITH THE BALANCE IN THE ASSESSEES BOOKS OF ACCOUNT AS ON 31 ST MARCH, 2011. IT WOULD BE EVIDENT FROM THE HEADING OF THE COLUMN AT PAGE 6 OF THE ASSESSMENT ORDER . HE STATED THAT THE RECONCILIATION FOR THE DIFFERENCE WAS GIVEN BEFORE THE CIT(A). HOWEVER, THE CIT(A) DID NOT CONSIDER THE SAME AND JUST SUSTAINED THE ADDITION WITHOUT ANY JUSTIFICATION. IN RESPECT OF FO UR PARTIES WITH WHOM NO TRANSACTION TOOK PLACE IN FOUR YEARS, HE SUBMITTED THAT MERELY BECAUSE IN THE FOUR YEARS TIME NO TRANSACTION TOOK PL ACE, IT DOES NOT CONCLUSIVELY PROVE THAT THE LIABILITY HAS CEASED. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE DECISION OF HONBLE A PEX COURT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF T.V. SU NDARAM IYENGAR AND SONS LTD. (SUPRA). HOWEVER, THE FACTS OF THE ASSESSE ES CASE ARE ALTOGETHER DIFFERENT BECAUSE, IN THE SAID CASE, THE ASS ESSEE HAD TRANSFERRED THE CREDIT BALANCE TO THE PROFIT & LOSS AC COUNT, WHILE, IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS NOT TRANSFERRED ANY LI ABILITY TO THE PROFIT & LOSS ACCOUNT. HE, THEREFORE, SUBMITTED THAT THE CONDITIONS OF SECTION 41(1) ARE NOT SATISFIED, THERE WAS NO REMISSI ON OR CESSATION OF LIABILITY ON THE PART OF THE CREDITORS AND THERE CANNOT BE ANY PRESUMPTION OF ANY REMISSION OR CESSATION. HE, THEREFOR E, SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUST AINED BY LEARNED CIT(A) UNDER SECTION 41(1) SHOULD BE DELETED . 5. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW AND HE STATED THAT THE ASSESSING OFFICE R AS WELL AS CIT(A) HAS CONSIDERED ALL THE FACTS. THE CIT(A) HAS DI SCUSSED THE ARGUMENTS WHICH ARE RAISED BEFORE THE ITAT NOW AND, A FTER CONSIDERING ALL THESE ARGUMENTS, HAS ARRIVED AT THE CONCLUSION THA T THE APPLICATION ITA-3676 & 3577/D/2013 5 OF SECTION 41(1) BY THE ASSESSING OFFICER WAS JUSTIFIED. HE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED. HE ALTERNATIVELY REQUESTED THAT IF THE BENCH IS NOT SAT ISFIED WITH THE ORDER OF LEARNED CIT(A), THEN THE MATTER MAY BE SET ASIDE T O THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINING THE ASSESSEES CONTENTION OF THE PAYMENT MADE TO THOSE PARTIES IN THE SUBSEQUENT YEAR AN D ALSO THE VERIFICATION OF THE RECONCILIATION IN THE ACCOUNT O F FOUR CREDITORS. HE, HOWEVER, SUBMITTED THAT IF THE MATTER IS DIRECTED TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER, THE ASSESSEE SHOULD BE FURTH ER DIRECTED TO FURNISH ALL THE NECESSARY DETAILS AND EVIDENCES IN THIS R EGARD BEFORE THE ASSESSING OFFICER INCLUDING THE CHANGED ADDRESS OF T HE CREDITORS, IF ANY. 6. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE ASSESSE E STATED THAT HE HAS NO OBJECTION FOR SETTING ASIDE OF THE MATTER TO THE FILE OF THE ASSESSING OFFICER. HE ALSO ASSURED THAT HE WILL PRODUCE A LL NECESSARY DETAILS AND EVIDENCES AS MAY BE AVAILABLE WITH HIM BEF ORE THE ASSESSING OFFICER. 7. AFTER CONSIDERING THE FACTS OF THE CASE AND THE ARG UMENTS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT THE MATTER NEED S RE-EXAMINATION AT THE END OF THE ASSESSING OFFICER. WE FIND THAT THE ASSESSING OFFICER MADE HUGE ADDITION SIMPLY RELYING UPON THE DECISION O F HONBLE APEX COURT IN THE CASE OF T.V. SUNDARAM IYENGAR AND SONS L TD. (SUPRA), WHEREIN THEIR LORDSHIPS HELD AS UNDER:- HELD, THAT IF A COMMONSENSE VIEW OF THE MATTER WERE TAKEN, THE ASSESSEE, BECAUSE OF THE TRADING OPERATION, H AD BECOME RICHER BY THE AMOUNT WHICH IT TRANSFERRED TO ITS PROFIT AND LOSS ACCOUNT. THE MONEYS HAD ARISEN OUT O F ORDINARY TRADING TRANSACTIONS. ALTHOUGH THE AMOUNTS RECEIVED ORIGINALLY WERE NOT OF INCOME NATURE, THE AMOUNTS REMAINED WITH THE ASSESSEE FOR A LONG PERIOD UNCLAIMED BY ITA-3676 & 3577/D/2013 6 THE TRADE PARTIES. BY LAPSE OF TIME, THE CLAIM OF TH E DEPOSIT BECAME TIME-BARRED AND THE AMOUNT ATTAINED A TOTALLY DIFFERENT QUALITY. IT BECAME A DEFINITE TR ADE SURPLUS. THE ASSESSEE ITSELF HAD TREATED THE MONEY AS ITS OWN MONEY AND TAKEN THE AMOUNT TO ITS PROFIT AND LOSS ACCO UNT. THE AMOUNTS WERE ASSESSABLE IN THE HANDS OF THE ASSESSEE. 8. FROM THE ABOVE, IT IS EVIDENT THAT IN THE SAID CASE , THE AMOUNT HAD BECOME TIME BARRED AND MOREOVER, THE ASSESSEE HAD T RANSFERRED THE AMOUNT TO PROFIT & LOSS ACCOUNT. IN THE CASE OF THE ASSESSEE, ADMITTEDLY, NO AMOUNT IS TRANSFERRED TO THE PROFIT & LOSS ACCOUNT. MOREOVER, IN RESPECT OF MOST OF THE AMOUNTS, THERE IS N O FINDING BY THE ASSESSING OFFICER THAT THE AMOUNT HAS BECOME BARRED BY L IMITATION. ON THE OTHER HAND, IT HAS BEEN POINTED OUT BY THE ASSE SSEE THAT IN RESPECT OF THE MAJOR ADDITIONS MADE BY THE ASSESSING OFFI CER FOR ` 6.79 CRORES BEING CREDIT IN THE ACCOUNT OF 19 PARTIES, THE PAYMENT HAS BEEN MADE IN THE SUBSEQUENT YEARS. IN VIEW OF THE ABOVE, I T IS EVIDENT THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF T.V . SUNDARAM IYENGAR AND SONS LTD. (SUPRA) WAS NOT APPLICABLE TO T HE CASE OF THE ASSESSEE. IN THE CASE OF SUGAULI SUGAR WORKS (P.) LTD. ( SUPRA), HONBLE APEX COURT HELD AS UNDER:- THE FOLLOWING WORDS IN SECTION 41(1) OF THE INCOME-T AX ACT, 1961, ARE IMPORTANT : THE ASSESSEE HAD OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY O F REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM. THE SECTION CONTEMPLATES THE OBTAINING BY THE ASSESSEE OF AN AMOUNT EITHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER OR A BENEFIT BY WAY OF REMISSION OR CESSATION AND IT SHOULD BE OF A PARTICULAR AMOUNT OBTA INED BY HIM. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEF IT BY VIRTUE OF REMISSION OR CESSATION IS THE SINE QUA NON F OR THE APPLICATION OF THIS SECTION. THE MERE FACT THAT THE ASSESSEE HAS MADE AN ENTRY OF TRANSFER IN HIS ACCOUNTS UNILATERALLY WILL NOT ENABLE THE DEPARTMENT TO SAY T HAT ITA-3676 & 3577/D/2013 7 SECTION 41(1) WOULD APPLY AND THE AMOUNT SHOULD BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 9. FROM THE ABOVE, IT IS EVIDENT THAT HONBLE APEX C OURT IN THE ABOVE DECISION WHICH WAS SUBSEQUENT TO THE DECISION OF T .V. SUNDARAM IYENGAR AND SONS LTD. (SUPRA) HELD THAT OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS THE SINE Q UA NON FOR THE APPLICATION OF THIS SECTION. THEREFORE, IN OUR OPIN ION, THE ASSESSING OFFICER NEEDS TO EXAMINE THE CASE OF EACH AND EVERY C REDITOR AND HAS TO ASCERTAIN WHETHER THE ASSESSEE HAS OBTAINED ANY BENEFI T BY VIRTUE OF REMISSION OR CESSATION OF ANY CREDIT LIABILITY IN RE SPECT OF ANY CREDITOR. SECTION 41(1) WOULD BE APPLICABLE ONLY W HERE THERE IS A REMISSION OR CESSATION OF ANY LIABILITY. IN VIEW OF TH E ABOVE, WE DEEM IT PROPER TO SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RE- EXAMINATION OF ALL THE FACTS IN THE LIGHT OF ABOVE D ECISIONS OF HONBLE APEX COURT. NEEDLESS TO MENTION THAT THE ASSESSING OFFIC ER WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEF ORE GIVING EFFECT TO OUR ORDER. 10. GROUND NO.4 OF THE ASSESSEES APPEAL READS AS UNDER:- THE LD.CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS.1,40,557/- INCURRE D IN RESPECT OF POOJA EXPENSES ON WHICH FBT WAS PAID, ALLEGI NG THE SAME AS NON BUSINESS EXPENSE AND IGNORING THE SUBMISSION AND JUSTIFICATION SUBMITTED, WHICH IS ARBITRA RY, UNJUSTIFIED AND BAD IN LAW. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. THE FACTS OF TH E CASE ARE THAT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT Y EAR UNDER ITA-3676 & 3577/D/2013 8 CONSIDERATION, THE ASSESSEE INCURRED EXPENDITURE OF ` 2,81,113/- UNDER THE HEAD POOJA EXPENSES. THE ASSESSING OFFICER DISALLO WED 50% OF THE POOJA EXPENSES HOLDING 50% TO BE NON-BUSINESS EXPEND ITURE. THE ASSESSING OFFICER HIMSELF ADMITTED HOWEVER, KEEPING IN VIEW THE PREVAILING INDIAN CUSTOMS AND TRADITIONS SOME EXPENDITU RE ON POOJA IS NECESSARY FOR SMOOTH BUSINESS OPERATIONS AND MAKING EMPLOY EES HAPPY TO BOOST THEIR PRODUCTIVITY. THAT THE TURNOV ER OF THE ASSESSEE IS MORE THAN ` 92 CRORES AND THE POOJA EXPENSES ARE ONLY ` 2,81,113/-. THE BUSINESS OF THE ASSESSEE IS LABOUR INTENSIVE BECAUSE IT I S IN THE BUSINESS OF CIVIL CONSTRUCTION. CONSIDERING THE FACTS OF THE CASE AND SPECIALLY THE TOTAL TURNOVER, THE EXPENDITURE INCURR ED BY THE ASSESSEE IS QUITE REASONABLE AND, THEREFORE, IN OUR OPINION, T HE DISALLOWANCE OF 50% OF THE EXPENDITURE ON THE PRESUMPTION THAT THE SA ME WAS INCURRED FOR NON-BUSINESS PURPOSES IS NOT JUSTIFIED. THE SAME IS DELETED. 12. GROUND NO.5 OF THE ASSESSEES APPEAL AND GROUND NO. 2 OF THE REVENUES APPEAL ARE AGAINST THE DISALLOWANCE OUT OF BUILDING MATERIAL EXPENSES AND CONSUMABLE EXPENSES. SINCE THESE TWO GROUN DS ARE INTERCONNECTED, THEREFORE, THEY ARE DEALT TOGETHER HEREIN BELOW. 13. THE ASSESSING OFFICER HAS DISALLOWED 3% OF THE BUILD ING MATERIAL EXPENSES AND CONSUMABLE EXPENSES. THE TOTAL DISALLOWANC E MADE WAS ` 1,03,24,302/-. THE DISALLOWANCE WAS MADE MAINLY ON T HE GROUND THAT THE ASSESSEE WAS UNABLE TO PRODUCE SOME OF THE BILLS AND V OUCHERS IN RESPECT OF EXPENSES INCURRED UNDER THESE HEADS. DURING APPELLATE PROCEEDINGS, THE ASSESSEE PRODUCED ALL THE BILLS AND VOU CHERS BEFORE THE CIT(A). HE CALLED FOR THE REMAND REPORT. THE CIT, AFTER CONSIDERING THE REMAND REPORT, REDUCED THE DISALLOWANCE AT 1% OF THE EXPENSES WHICH WORKED OUT TO ` 34,41,434/-. THE ASSESSEE IS IN APPEAL AGAINST ITA-3676 & 3577/D/2013 9 THE ADDITION SUSTAINED WHILE THE REVENUE IS IN APPEAL AGAINST THE RELIEF ALLOWED. 14. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE REFERRED TO THE REMAND REPORT AND POINTED OUT THAT DURING REMAND PROCEEDINGS, ALL BILLS AND VOUCHERS RELATING TO TOTAL EXPENDITURE WERE PRODUCED BEFORE THE ASSESSING OFFICER AND AFTER CONSIDERING THE COMPLETE DETAILS AND EVIDENCES, THE ASSE SSING OFFICER FOUND DISCREPANCY ONLY IN RESPECT OF TWO BILLS, ONE FO R ` 2,93,924/- AND ANOTHER FOR ` 2,23,590/-. HE, THEREFORE, SUBMITTED THAT EVEN THE ABOVE DISCREPANCY IS NEGLIGIBLE CONSIDERING THAT THE TOTAL E XPENSES ARE MORE THAN ` 34 CRORES UNDER THESE TWO HEADS. HE, THEREFORE, SUBMIT TED THAT 1% DISALLOWANCE SUSTAINED BY THE CIT(A) SHOULD BE DELET ED. 15. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND STATED THAT CONSIDERING THE FACTS OF THE CASE, THE DISALLOWANCE OF 3% OF EXPENSES IS QUITE FAIR AND REASONA BLE. THE SAME SHOULD BE SUSTAINED. 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. FROM A PERUSAL OF THE REMAND REPORT, IT IS EVIDENT THAT DURING REMAND PROC EEDINGS, THE ASSESSING OFFICER CONSIDERED ALL THE BILLS AND VOUCHERS AN D THEN HE FOUND ONLY FEW MISTAKES. IT WOULD BE WORTHWHILE TO REPRODUCE THE RELEVANT PORTION OF THE REMAND REPORT:- II DISALLOWANCE OF RS.1,03,24,302/- ON ACCOUNT OF UNVOUCHED EXPENSES (GROUND-4) THE AO HAS MENTIONED 50 BILLS OF BUILDING MATERIAL PURCHASED AND 14 BILLS OF CONSUMABLES AND HAS STATED THAT CORRESPONDING BILLS WERE NOT PRODUCED. ACCORDINGLY, 3% OF TOTAL EXPENSES RS.34,41,43,399/- WORKING OUT TO ITA-3676 & 3577/D/2013 10 RS.1,03,24,302/- HAS BEEN DISALLOWED AS NOT GENUINE EXPENSES. THE ASSESSEES OBJECTIONS TO THE ABOVE ADDITION IS THAT T HE VOUCHERS BILLS WERE ASKED TO PRODUCE ONLY ON 23-12-201 1 AND THERE WAS HARDLY SUFFICIENT TIME BECAUSE IT WAS THE FAG END AND MORE TIME WAS REQUIRED FOR PRODUCING SUCH VOLUMINOUS DATA. THIS FACT IS CONFIRMED FROM ORDER SHE ET ENTRY DATED 23-12-2011 WHICH READS AS UNDER: SH. MANISH KR. SINGH, CA APPEARED. ASKED TO FILE FOLLOWING:- 1) PRODUCE STOCK REGISTER OF MATERIALS FOR ALL SITES. 2) VOUCHERS (IN ORIGINAL) OF CONSUMABLE STORES. 3) LEDGER A/C OF JOB WORK BILLS FOR MAJOR PARTIES & T DS DEDUCTED. 4) BILLS FOR VEHICLE RUNNING & REPAIRS/MAINTENANCE, M ESS EXPENSES, LEGAL EXPENSES, INSURANCE EXPENSES, POSTAGE/TELEPHONE. CASE ADJOURNED TO 26-12-2011. ANOTHER ASPECT THAT NEEDS TO BE BORNE IN MIND WHILE DECIDING THE ABOVE CONTENTION IS THAT IN THE ORDER SH EET NOTING DATED 5-12-2011, THE ASSESSEE WAS DIRECTED TO FURNISH THE BOOKS OF A/CS WITH VOUCHERS ALONG WITH LEDG ER A/C OF BUILDING MATERIAL AND OTHER DETAILS, WHEN THE CASE WAS ADJOURNED TO 12-12-2011. DURING THE REMAND PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THE BILLS OF ALL THE PARTIES FOR BUILDING MA TERIAL PURCHASED AND CONSUMABLES ALONG WITH COPY OF SOME LEDGER A/CS AND BANK STATEMENTS. FINDINGS AFTER EXAMINATION OF THE SUBMISSIONS MADE ARE AS UNDER: * OUT OF THE TOTAL BUILDING MATERIAL EXPENSES OF RS.25,79,26,747/-, A SUM OF RS.40,08,279/- IS LAST YEAR EXPENSES ALSO MENTIONED AS SUCH IN THE ASSESSMENT ORDER AND THIS SUM HAS ALREADY BEEN ADDED BACK TO THE PROFI TS IN THE COMPUTATION OF INCOME, BY THE ASSESSEE ITSELF. * ALL 50 BILLS OF BUILDING MATERIAL & 14 BILLS OF CONSUMABLES, MENTIONED IN THE ASSESSMENT ORDER, ARE PRODUCED & VERIFIED AND ARE KEPT ON RECORD. HOWEVE R FOLLOWING OBSERVATIONS ARE RELEVANT: ITA-3676 & 3577/D/2013 11 I. BILL FOR BUILDING MATERIAL AT SR.NO.42 FROM JK C EMENT WORKS AMOUNTING TO RS.9,49,024/- IS DATED 31-8-2007 A ND THUS PERTAINS TO F.Y. 2007-08 AND IS NOT ALLOWABLE IN A.Y. 2009-10. BUT THIS AMOUNT IS INCLUDED IN THE TOTAL O F RS.40,08,279/- MENTIONED AS LAST YEAR EXPENSES. II. BILL FOR CONSUMABLES AT SR.NO.14 FROM BAHUBALI I RON & STEEL CO. AMOUNTING TO RS.2,93,924/- IS REPRESENTI NG ORIGINAL BILL NO.152 OF 17-12-2007, AS IS OBSERVED FRO M PAGE NO.164 OF THE COMPILATION FILED BEFORE CIT(A). III. BILL FOR CONSUMABLES AT SR.NO.12 FROM HI-REACH CONSTRUCTION EQUIPMENT P.LTD. AMOUNTING TO RS.2,23,5 90/-, IS STATED TO BE OUT OF THE TOTAL BILL OF RS.9,58,080/ - PERTAINING TO F.Y. 2007-08 AND WHICH WAS DISPUTED BY THE ASSESSEE. FURTHER, AS THE DISPUTE WAS SORTED OUT IN F.Y. 2008-09, IT HAS BEEN BOOKED AS EXPENDITURE IN THE CUR RENT YEAR. BUT THE LEDGER A/C OF THE SAID PARTY FOR FY 2 008-09 SHOWS AN OPENING DEBIT BALANCE OF RS.2,31,333.20 AND AGAINST THIS THE SAID SUM OF RS.2,23,590/- HAS BEEN CREDITED BY DEBITING CONSUMABLES A/C ON 6-1-2009. TH US, IT IS EVIDENT THAT THIS AMOUNT ALSO IS A PRIOR PERIOD EXPENSES AND NOT ALLOWABLE IN CURRENT YEAR. * IN VIEW OF THE 3 MISTAKES IN THE EXPENSES RELATING T O BUILDING MATERIALS AND CONSUMABLES, DETECTED IN THE REMAND PROCEEDINGS, WHICH HAS BEEN DONE WITHOUT ANY TIME-CONSTRAINTS, THE ASSESSEE CANNOT BE TOTALLY ABSOLVED OF THE FINDINGS OF THE AO W.R.T. NON-GENUINE OR INFL ATED EXPENSES. HOWEVER, QUANTUM OF DISALLOWANCE WILL HAVE TO BE DECIDED ON MERITS AND IN ANY CASE THE SAME CANNOT B E LESS THAN THE MISTAKES DETECTED IN REMAND PROCEEDINGS. 17. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFF ICER HAS MENTIONED THE ASSESSEE HAS SUBMITTED THE BILLS OF ALL TH E PARTIES FOR BUILDING MATERIAL PURCHASED AND CONSUMABLES ALONG WIT H COPY OF SOME LEDGER ACCOUNTS AND BANK STATEMENTS. AFTER VERIFICA TION OF ALL THE BILLS, HE FOUND THAT THE EXPENSES TO THE EXTENT OF ` 40,08,279/- ARE LAST YEAR EXPENSES BUT THE SAME ARE ALREADY ADDED BACK TO T HE PROFIT IN THE COMPUTATION OF INCOME BY THE ASSESSEE ITSELF. APART FRO M EARLIER YEAR EXPENSES, ONLY TWO DISCREPANCIES WERE NOTED BY HIM, ONE FOR ITA-3676 & 3577/D/2013 12 ` 2,93,924/- AND ANOTHER FOR ` 2,23,590/-. IN OUR OPINION, WHEN DURING REMAND PROCEEDINGS, ALL BILLS AND VOUCHERS HAVE BEEN PRODUCED AND HAVE BEEN EXAMINED BY THE ASSESSING OFFICER AND TOTAL D ISCREPANCY WAS FOUND ONLY IN RESPECT OF TWO BILLS AMOUNTING TO ` 5,17,514/- (2,93,924 + 2,23,590), THERE WAS NO JUSTIFICATION FO R ADHOC DISALLOWANCE AT 1%. IN FACT, IN THE CONCLUDING PARA GRAPH, THE ASSESSING OFFICER HIMSELF HAS WRITTEN TO THE CIT(A) THAT THE QUANTUM OF DISALLOWANCE SHOULD NOT BE LESS THAN THE MISTAKE DETECTE D IN THE REMAND PROCEEDINGS. CONSIDERING THE FACTS STATED IN T HE REMAND REPORT, IN OUR OPINION, IT WOULD BE FAIR AND REASONA BLE TO SUSTAIN THE DISALLOWANCE AT ` 5,17,540/-. WE ORDER ACCORDINGLY. THUS, GROUND NO. 2 OF THE REVENUES APPEAL IS REJECTED AND GROUND NO.5 O F THE ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO.3676/DEL/2013 ITA NO.3676/DEL/2013 ITA NO.3676/DEL/2013 ITA NO.3676/DEL/2013 REVENUES APPEAL : REVENUES APPEAL : REVENUES APPEAL : REVENUES APPEAL :- -- - 18. NOW, THE ONLY GROUND REMAINS FOR ADJUDICATION IN THE REVENUES APPEAL IS GROUND NO.1 WHICH READS AS UNDER:- LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.4,18,360/- MADE BY THE A O BY DISALLOWING THE EXPENSES CLAIMED UNDER THE HEAD VEHIC LE RUNNING & MAINTENANCE. 19. THE ASSESSING OFFICER HAD DISALLOWED ` 4,18,360/- OUT OF EXPENSES CLAIMED UNDER THE HEAD VEHICLE RUNNING & MAINTENAN CE EXPENSES ON THE GROUND OF PERSONAL USE OF EXPENSES. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND NOW IT IS A SETTLED ISSUE THAT THE COMPANY AND THE DIRECTORS ARE SEPARATE LEGAL ENTITIES AND THEREFOR E, EVEN IF THERE IS SOME PERSONAL USE OF VEHICLES BY THE DIRECTORS, IT CANNO T BE SAID AS PERSONAL USE OF VEHICLES BY THE ASSESSEE WHICH IS A COMPANY . IF THERE IS A PERSONAL USE OF THE VEHICLES BY THE DIRECTORS, IT C AN BE TREATED AS A ITA-3676 & 3577/D/2013 13 PERQUISITE IN THEIR HANDS. WHILE TAKING THIS VIEW, WE DERIVE SUPPORT FROM THE FOLLOWING DECISIONS OF THE ITAT:- (I) SEASONS CATERING SERVICES PVT.LTD. VS. DCIT [2010] 13 4 TTJ 554 ITAT, DELHI G BENCH. (II) CIT VS. AMTEK AUTO LTD. [2009] 20 DTR 466 ITAT, DELHI A BENCH. (III) DCIT VS. HARYANA OXYGEN LTD. [2001] 73 TTJ 575 I TAT, DELHI D BENCH. (IV) MIDLAND INTERNATIONAL LTD. VS. DCIT [2007] 112 TTJ 210 ITAT, DELHI E BENCH. (V) PERFECT PAC LTD. VS. ACIT [1993] 46 TTJ 438 ITAT , DELHI E BENCH. 20. IT IS ALSO MENTIONED BY THE LEARNED CIT(A) THAT T O TAKE CARE OF SUCH SITUATIONS, THE GOVERNMENT HAS BROUGHT IN FBT AND ASSESSEE HAS ALREADY PAID TAX UNDER THE FBT WHICH WILL TAKE CARE OF PERSONAL USE OF VEHICLES, IF ANY, BY THE DIRECTORS/EMPLOYEES. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A) IN THIS REGARD. THE SAME IS SUSTAINED AND GROUND NO.1 OF THE REVENUES APPEAL IS REJECTED. 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2014. SD/- SD/- ( (( (H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 27.06.2014 VK. ITA-3676 & 3577/D/2013 14 COPY FORWARDED TO: - 1. REVENUE : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -18(1), NEW DELHI. 18(1), NEW DELHI. 18(1), NEW DELHI. 18(1), NEW DELHI. 2. ASSESSEE : M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND M/S UNIBILD ENGINEERING AND CONSTRUCTION COMPANY PVT.LTD., CONSTRUCTION COMPANY PVT.LTD., CONSTRUCTION COMPANY PVT.LTD., CONSTRUCTION COMPANY PVT.LTD., A AA A- -- -67, LAJPAT NAGAR 67, LAJPAT NAGAR 67, LAJPAT NAGAR 67, LAJPAT NAGAR- -- -II, NEW DELHI II, NEW DELHI II, NEW DELHI II, NEW DELHI 110 024. 110 024. 110 024. 110 024. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR