ASST CIT 25(2), MUMBAI V. RATANSINGH M,.RATHOD, MUMBAI

ITA 3717/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3547 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Assessee Lawyers: D C SEJPAL
• Keywords: Unexplained expenditure; Deemed owner of house property; Principle of natural justice; Earning of tax free income; Additional evidence
• Section: 44AD; 69C; 40A(3); 143(3); 14A; 133(6); 37(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI RAJESH KUMAR , AM ./ ITA NOS. 3717 & 5297 /MUM/2013 ( / ASSESSMENT YEARS: 2009 - 10 & 2010 - 11 RESPECTIVELY ) A C I T - 25(2) /APPELLANT C - 11, PRATYAKSHAKAR BHAVAN ROOM NO. 108, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400051 / VS. SHRI RATANSINGH M. RATHOD / RESPONDENT B - 1, NEELA APARTMENT S.V.P. ROAD, BORIVALI (W) ./ PAN - AACPR4164L / APPELLANT BY: SHRI CHANDRA VIJAY / RESPONDENT BY : SHRI D.C. SEJPAL / DATE OF HEARING : 28.09.2015 / DATE OF PRONOUNCEMENT : 13 . 01 .2015 / O R D E R PER SHAILENDRA KUMAR YADAV, JM : - BOTH THESE APPEALS FILED BY THE REVENUE PERTAIN TO SAME ASSESSEE. THEREFORE THE Y ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ITA NO. 3717/MUM/2013 : AY 2009 - 10 2 . IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 2,22,352/ - ON ACCOUNT OF DEEMED RENT BY ACCEPTING ADDITIONAL EVIDENCE UNDER RULE 46A WITHOUT G IVING AN OPPORTUNITY TO THE A.O. FOR FRESH VERIFICATION. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 1,14,6632/ - TO ` 43,709/ - WITHOUT APPRECIATING THE FACTS THAT THE PROVISION OF RUL E 8D STATES THAT ALL ASSETS WHICH DO NOT FETCH ANY INCOME OR FETCHES INCOME THAT DOES NOT FORM PART OF THE TOTAL INCOME IS ALSO INCLUDED WHILE CALCULATING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 10,00,000/ - ON ACCOUNT OF LABOUR CHARGES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS MADE PAYMENTS IN CASH AND ITS GENUINENESS AS WELL RELATION OF IT WITH BUSINESS IS NOT PROVED . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF ` 2,39,06,248/ - IN ASSESSMENT YEAR 2009 - 10 . SUBSEQUENTLY, ASSESSING OFFICER SELECTED THE CASE FOR SCRUTINY AND COM PLETED ASSESSMENT UNDER SECTION 143(3) 3 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD OF THE ACT DETERMINING TOTAL INCOME OF ASSESSEE AT ` 2,69,38,090/ - . AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE CONCERNED CIT(A) WHEREIN THE CIT(A) HAS GRANTED SUBSTANTIVE RELIEF, WHICH ARE BEING DISCUSSED BELOW. 4 . FIRST ISSUE IS WITH REGARD TO RENT INCOME FROM THREE PARTIES. THE ASSESSING OFFICER ESTIMATED THE ANNUAL VALUE OF DEEMED LET OUT IN RESPECT OF THREE PARTIES : - I . FLAT AT SUSHILA APT. ` 5,79,600/ - II . FLAT AT TRISHNA TOWER ` 31,59,930/ - III . BUNGLOW AT JALORE ` 3,00,000/ - TOTAL `40 ,39,530/ - ANNUAL VALUE OF THE FLATS ` 3,43,630/ - LESS 30% INT. U/S 24(A) ` 1 ,03,008/ - DEEMED LET OUT INCOME ` 2,40,352 / - THUS THE ASSESSING OFFICER DISALLOWED ` 2,40,352/ - ON ACCOUNT OF DEEMED LET OUT INCOME AND ADDED BACK T HE SAME TO THE INCOME OF THE ASSESSEE. 4 .1 IN APPEAL THE CIT(A) OBSERVED THAT THIS ISSUE ALSO AROSE IN 2008 - 09 IN ASSESSEES ON CASE AND PART RELIEF WAS GRANTED BY CIT(A) BY OBSERVING AS UNDER: - I. HAVE CONSIDERED THE SUBMISSIONS OF REPRESENTATIVE AND THE STAND TAKEN BY THE A.O. THE A.O. MERELY STATED 4 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD IN THE ASSESSMENT ORDER THAT THE APPELLANT WAS CONFRONTED ON THIS ISSUE AND HE AGREED FOR ADDITION. IF THAT IS THE CASE THE A.O. SHOULD HAVE MENTIONED THE LETTER OR ORDER SHEET ENTRY BY WHICH THE APPELLANT WAS CONFRONTED AND THE MANNER OF AGREEMENT BY THE ASSESSEE EITHER IN THE FORM OF LETTER OR BY SIGNING IN THE ORDER SHEET. IN THE ABSENCE OF THE ABOVE, I ACCEPT THE PLEA OF THE REPRESENTATIVE THAT THE ADDITION WAS MADE WITHOUT GIVING OPPORTUNITY TO THE APP ELLANT VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. A PERUSAL OF THE CASE RECORDS SUBMITTED BY THE A.O. REVEALS THAT NO SUCH OPPORTUNITY WAS GIVEN TO THE APPELLANT. IN THE CIRCUMSTANCES, THE ENTIRE ADDITION IS LIABLE TO BE DELETED FOR VIOLATION OF PRINCIPL ES OF NATURAL JUSTICE. HOWEVER CONSIDERING THE ARGUMENT OF THE REPRESENTATIVE THAT THE FLAT AT VAISHALI APA R TMENT WAS NOT GIVEN POSSESSION, I HOLD THAT THE FLAT AT SUSHILA APARTMENT CAN BE TREATED AS SELF OCCUPIED. ACCORDINGLY, ONLY THE BUNGALOW OF JALORE IN THE NATIVE PLACE OF THE APPELLANT IS TO BE CONSIDERED. IN THE ABSENCE OF MUNICIPAL RATABLE VALUE, I DIRECT THE A.O. TO ASSESS RS. 15,000/ - AS DEEMED RENT U/S.23(4) OF THE I.T.ACT AND THE BALANCE ADDITION IS DELETED.' SINCE THE ISSUE IS SAME, THE ANNUAL RATABLE VALUE IN RESPECT OF BUNGALOW AT JALORE IN THE NATIVE PLACE OF THE APPELLANT IS TO BE CONSIDERED. LAST YEAR THE CIT(A) HAD DIRECTED THE AO TO ASSES RATABLE VALUE AT RS.15,000/ - . KEEPING IN VIEW THE INFLATIONARY TE NDENCY IN THE MARKET, THE AMOUNT IS BEING INCREASED BY 20% IN THE PRESENT ASSESSMENT YEAR, WHICH COMES TO RS,18,000/ - . ACCORDINGLY, AO IS DIRECTED TO ASSESS RS.18,000/ - AS DEEMED RENT U/S.23(4) OF THE I.T. ACT,1961 AND THE BALANCE ADDITION OF RS.2,22,352/ - (RS.2,40,352 - RS.2,40,352 - ` 18,000/ - IS DELETED. 5 . IN THE RESULT, THIS GROUND OF THE APPELLANT IS PARTLY ALLOWED. 4 .2 DEPARTMENT DID NOT PREFER ANY APPEAL ON THIS POINT. THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE 5 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD CIT(A) ON THE ISSUE, W HICH WAS OPPOSED BY REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION TO ` 2,22,352/ - ON ACCOUNT OF DEEMED RENT. ACCORDINGLY ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4 .3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE INCLINE TO INTERFERE WITH THE FINDING OF THE CIT(A). WE FIND THAT THE ANNUAL RATABLE VALUE IN RESPECT OF BUNGALOW AT JALORE IN THE NATIVE PLACE OF ASSESSEE IS THE CORE QUESTION BEFORE US. FOLLOWING THE DECISION IN THE EARLIER YEAR CIT(A) DIRECTED THE ASSESSING OFFICER TO ASSESS THE RATABLE VALUE AT ` 15,000/ - KEEPING IN VIEW THE INFLATIONARY TREND IN THE MARKET, THE AMOUNT BEING INCREASED BY 20% IN THE YEAR UNDER CONSIDERATION WHICH COMES TO ` 18,000/ - ACCORDINGLY ASSESSING OFFICER WAS DIRECTED TO ASSESS ` 18,000/ - AS DEEMED RENT UNDER SECTION 23(4) OF THE INCOME TAX ACT AND BALANCE ADDITION OF ` 2,22,352/ - ( ` 2,40,352 - ` 18,000) WAS DIRECTED TO BE DELETED. THIS REASONED FINDING O F CIT(A), WHER EBY H E GRANTED PARTIAL RELIEF TO THE ASSESSEE, NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 5 . NEXT ISSUE IS WITH REGARD TO RESTRICTING ADDITION OF ` 1,14,622/ - UNDER SECTION 14A R.W. RULE 8D. THE ASSESSING OFFICER HAS DISALLOWED ` 1,14,622/ - VIDE PARA K OF THE ASSESSMENT ORDER. WHILE DOING SO THE ASSESSING OFFICER RELIED ON THE JUDGEMENT OF CHEM INVESTMENT LTD. VS. ITO 317 ITR 86 (AT) (DEL) AND DAGA CAPITAL MANAGEMENT PVT. LTD. 9TA NO. 8057/MUM/2003. THE ASSESSING OFFICER CALCULATED T HE DISALLOW ANCE UNDER SECTION 14 A WHICH IS REPRODUCED AS UNDER: - FROM THE RECORD IT IS SEEN THAT THE INVESTMENTS WHICH GENERATES EXEMPT INCOME HAS BEEN MADE OUT OF HIS PERSONAL ACCOUNT AND HE HAS NOT CLAIMED ANY EXPENSES ON ACCOUNT OF INTEREST S.NO. PARTICULRS AMT. (RS.) AMT. (RS.) 1 AMOUNT OF EXPENSES DIRECTLY RELATED TO THE INCOME A AMOUNT OF INTEREST EXPENSES 1A NIL B1 INVESTMENT OF 08 - 09 (THE FIGURES SUPPLIED BY THE AR OF THE ASSESSEE) 2,24,63,898 B2 INVESTMENT OF 09 - 10 2,33,84,938 B AVERAGE VALUE INVESTMENT {B=B1 +B2/2) 2,29,24,418 C1 ASSETS AS ON 08 - 09 NA C2 ASSETS AS ON 09 - 10 NA C AVERAGE OF TOTAL ASSETS {C = (C1 + C2)/2} NA 2 ATTRIBUTABLE INDIRECT INTEREST EXPENSES {A*B/C) NIL 3 % OF THE AVERAGE VALUE OF INVESTMENT 1,14,622 DISALLOWANCE U/S. 14A {1 = 2 = 3} 1,14,622 7 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD IN VIEW OF THIS ` 1,14,622/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. 5 .1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN AFTER CONSIDERING VARIOUS SUBMISSIONS OF THE ASSESSEE AND COMPARATIVE ANALYSIS OF THE FACTS OF THE CASE IT WAS FOUND THE RATIO OF CASE LAW RELIED UPON BY THE ASSESSING OFFICER IS NOT APPLICABLE IN THE PRESENT CASE. THE COMPUTATION MADE BY THE ASSESSEE AND FILED DURING THE COURSE OF APPELLATE PROCEEDINGS WAS F OUND TO BE IN ORDER. ACCORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS RESTRICTED TO ` 42,709/ - AND THE BALANCE OF ` 71,913/ - ( ` 1,14,622 - ` 42,709/ - ) WAS DELETED. THUS CIT(A) GRATED PARTIAL RELIEF IN THIS ISSUE. 5 .2 THE LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO ` 42,709/ - INSTEAD OF ` 1,14,622/ - . ON THE OTHER HAND, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT( A). 5 .3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF 8 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD THE CIT(A) BECAUSE ONLY AFTER ANALYZING THE FACTS OF THE CASE HE RIGHTLY RESTRICTED THE DISALLOWANCE TO ` 42,709/ - INSTEAD OF ` 1,14 ,622/ - FOR REASONS DISCUSSED ABOVE . THE SAME IS UPHELD. 6 . NEXT ISSUE IS WITH REGARD TO ADDITION ON ACCOUNT OF LABOUR CHARGES. ASSESSING OFFICER DISALLOWED ` 10,00,000/ - UNDER THE HEAD LABOUR CHARGES VIDE PARA (B) OF HIS ORDER. WHILE DOING SO HE OBSERVED AS UNDER: - 'DISALLOWANCE OUT OF LABOUR CHARGES: THE ASSESSEE FIRM HAS DEBITED RS.2,45,55,199/0 UNDER THE HEAD LABOUR CHARGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON TO FILE DETAILS OF LABOUR CHARGES CLAIMED ALONG WITH DETA ILS OF TDS MADE THEREON AND JUSTIFICATION FOR ALLOWABILITY OF THE CLAIM MADE BY T HE ASSESSEE UNDER THIS HEAD. THE ASSESSEE FIRM HAS FILED DETAILS OF LABOUR CHARGES ON VERIFICATION OF WHICH IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE PAYMENTS TO NUMBER OF PARTIES AND SOME OF THE PAYMENTS HAVE BEEN MADE BY WAY OF CASH. IT IS NOT ASCERTAINABLE FROM THE DETAILS FILED BY THE ASSESSEE AS TO FOR WHICH SITE HOW MANY LABOURERS WERE EMPLOYED AND APPARENTLY, THERE IS NO CHECK OVER THE CLAIM MADE BY THE ASSESSEE FOR SUCH A HUGE CLAIM MADE UN DER THIS HEAD. THE ASSESSEE SUBMITTED DURING THE HEARING THAT THE INCREASE IN LABOUR CHARGES AS COMPARED TO TURNOVER WAS DUE TO THE LABOUR INTENSIVE NATURE OF THE WORKS UNDERTAKEN THIS YEAR. CONSIDERING THE FACT THAT MANY PAYMENTS HAVE BEEN MADE BY CASH AN D NOT ALL THE VOUCHERS ARE PRODUCED BY THE ASSESSEE FOR VERIFICATION, ON REASONABLE BASIS AN AMOUNT OF 9 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD RS.10,000,000/ - OUT OF TOTAL CLAIM MADE BY THE ASSESSEE IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS THE ASSESSING OFFICER DISALLO WED ` 10,00,000/ - UNDER THE HEAD LABOUR CHARGES BECAUSE ON SCRUTINY OF THE DETAILS FILED BY THE ASSESSEE ASSESSING OFFICER FOUND THAT SOME OF THE PAYMENTS WERE MADE BY WAY OF CASH. ASSESSING OFFICER WAS ALSO OF THE OPINION AS TO HOW MANY LABOURERS WERE EM PLOYED IN VARIOUS SITES. THE STAND OF THE ASSESSEE HAS BEEN THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DISCREPANCY REGARDING UTILIZATION OF LABOURERS IN VARIOUS SITES OF THE ASSESSEE. 6.1 IN APPEAL, CIT(A) OBSERVED THAT ASSESSING OFFICER HAS NOT MADE ANY SPECIFIC OBSERVATION THAT LABOUR EXPENSES MADE BY THE ASSESSEE WERE NOT GENUINE. THE LABOUR CHARGES DEBITED ARE AS PER THE AUDIT REPORT UNDER SECTION 44AB SUBMITTED BEFORE THE ASSESSING OFFICER ALONG WITH THE RETURN OF I NCOME. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE DETAILS EVEN IN RESPECT OF A SINGLE PARTY. EVEN THE ASSESSING OFFICER DID NOT ISSUE ANY SHOW CAUSE NOTICE TO THE ASSESSEE BEFORE MAKING ADDITION TO THE TOTAL INCOME OF THE 10 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ASSESSEE . IN VIEW OF THIS, ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE SAME BY OBSERVED THAT THE SAME WERE MADE IN CASH. IN FACT, IN SUCH BUSINESS LABOR EXPENSES ARE MADE IN CASH, ASSESSING OFFICER HAS NOT MADE OUT ANY CASE AS TO WHETHER CASH PAYMENT WE RE IN EXCESS OF ` 20,000/ - AND WERE HIT BY PROVISIONS OF SECTION 40(A)(3) OF THE ACT. IN CASE THAT TRANSACTION WAS FOUND TO BE GENUINE AND IDENTITY OF PAYEE WAS ESTABLISHED AND THAT PAYMENT WAS NOT EXCEEDING THE PRESCRIBED LIMIT, THEN DISALLOWANCE UNDER SEC TION 40A(3) OF THE ACT CANNOT BE MADE. ASSESSEE HAD MADE THE PAYMENT TO LABOUR CONTRACTOR AND NO SINGLE PAYMENT EXCEEDED RS.10,000/ - . IT IS WELL KNOWN THAT LABOUR NEEDS THE CASH PAYMENT URGENTLY AND CONTRACTOR IS REQUIRED TO PAY THE SAME IN CASH TO AVOID L ABOUR PROBLEMS. 6.2 KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE IN QUESTION. THIS REASONED FINDING OF THE CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 7. IN THE RESULT, THIS APPEAL OF THE REVENUE IS DISMISSED. 11 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ITA NO. 5297/MUM/2013 : AY 2010 - 11 8 . IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - '(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,90,000/ - WHICH WAS MADE BY INVOKING THE PROVISIONS OF IT ACT BY TREATING THE INCOME AS RS 18,000.' (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 0,00,000/ - WHICH WAS MADE BY WAY OF REASONABLE ESTIMATION KEEPING THE NATURE OF BUSINESS IN MIND. (III) ON THE FADS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED DELETING THE ADDITION OF RS. 14,86,000/ - WHICH WAS MADE BY INVOKING THE PROVISIONS SECTION 39 OF THE IT ACT BY TREATING PENALTY PAYMENTS AS NOT ALLOWABLE EXPENSES. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.10,00,000/ - WHICH WAS MADE BY IN VOKING THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT BY TREATING THE PAYMENTS WAS NOT DONE IN CASH. (V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.23,84,864/ - WHICH WAS MADE BY INVOK ING THE PROVISIONS OF SECTION 40A(IA) OF THE I.T. ACT BY TREATING THAT TDS WAS DEDUCTED ON THE TRANSPORT CHARGES PAYMENTS. 12 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD (VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.8,62,069/ - W HICH WAS MADE FOR NOT FURNISHING THE RELATED TO AGRICULTURE INCOME. (VII) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.2,16,32,610/ - WHICH WAS MADE BY INVOKING THE PROVISIONS OF SECTION 69C OF THE I.T. ACT BY TREATING THE PURCHASE ARE GENUINE. (VIII) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,48,89,991/ - WHICH WAS MADE BY INVOKING THE PROVISIONS OF SECTION 69C OF THE I.T. ACT BY TREATING THE SUBCONTRACT CHARGES AS GENUINE. (IX) ON THE FECTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.30,68,920/ - WHICH WAS MADE BY INVOKING THE PROVISIONS OF SECTION 69C OF THE I.T. ACT BY TREATING THE PURCHASE ARE GENUINE EVEN WHEN THE NOTICE U/S 133(6) WAS RETURNED UNSERVED AND ADDRESS WAS NOT AVAILABLE AT THE ADDRESS. (X) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING UPON JUDGMENTS O F THE CIT VS. NIKUNJ EXIMP ENTERPRISES IM. LTD. WITHOUT APPRECIATING THAT THE FACTS INVOLVED IN THE OF THE APPELLANT'S CASE ARE DIFFERENT FROM THE FACTS OF THE ABOVE CASE LAWS.' 9 . THE FIRST ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS AGAINST THE DE LETION OF RS.4,90,000/ - WHICH WAS MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF INCOME - TAX ACT BY TREATING THE INCOME AS RS.18,000/ - . WE HAVE ALREADY DECIDED 13 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD THIS ISSUE FOR AY 2009 - 10 , IN PARAGRAPH NOS.4 TO 4.3 OF THIS ORDER . FACTS BEING SIMILA R, SO FOLLOWING SAME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A) IN THIS YEAR AS WELL WHEREIN CIT(A) HAS GRANTED THE SIMILAR RELIEF ON SAME LINE. WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE IN THIS YEAR AS WELL. 10 . NEXT ISSUE IS WITH REGARD TO BOGUS SUB - CONTRACT EXPENSES OF ` 50,00,000/ - . ASSESSING OFFICER VIDE PARA . 6 & 7 OF HIS ORDER HAS MADE AN ESTIMATED ADDITION OF RS.50,00,000/ - ON ACCOUNT OF BOGUS PAYMENTS TO SUB - CONTRACTS ALLEGEDLY 'BOOKED BY THE ASSESSEE. ASSESSEE HAD CLAIMED SUB - CONTRACT EXPENSES OF RS.15,68,98,517/ - . ASSESSING OFFICER FOUND THAT MANY OF SUCH SUB - CONTRACTORS ARE HAVING TURNOVER OF LESS THAN RS. 40 LAKHS AND THEIR INCOME WAS OFFERED MOSTLY UNDER SECTION 44AD OF THE ACT. ASSESSING OFFICER HAS ALSO OBSERVED THAT LARGE NUMBERS OF PARTIES BELONGS TO DIFFERENT GROUP OF FAMILIES AS ASCERTAINED FROM RESID ENTIAL ADDRESS AND/OR SURNAME OF THE PARTIES. FOR THIS REASON, ASSESSING OFFICER HELD THAT THE ASSESSEE IS USING THE NAMES OF MEMBERS OF DIFFERENT FAMILIES FOR REDUCING THE 14 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ASSESSEES OVERALL TAX LIABILITIES. ACCORDING TO THE ASSESSING OFFICER, THE INDIVID UAL MEMBERS HARDLY FOUND TO PAY ANY ACTUAL TAXES AFTER CLAIMING DEDUCTIONS AND TAX BENEFITS. FURTHER, THE ASSESSING OFFICER OBSERVED THAT THE TURNOVER OF THE INDIVIDUAL MEMBERS ARE KEPT BELOW ` 40 LAKHS FOR DUAL PURPOSES - FIRSTLY TO GET RID OF STATUTORY AUDIT WHICH WOULD REQUIRE DOCUMENTARY EVIDENCES OF ANY WORK DONE AND SECONDLY - TO HAVE SMALL INCOME IN THE HANDS OF SUCH INDIVIDUALS. ASSESSING OFFICER HAS HELD THAT THE ASSESSEE WAS INDULGING IN TAX EVASION BY REDUCING THE TAX LIABILITY BY INFLATING THE EXPENDITURE THROUGH INTRODUCING CERTAIN BOGUS AND NON - VERIFIABLE EXPENDITURE UNDER THE HEAD 'SUB - CONTRACT'. FOR THESE REASONS ASSESSING OFFICER MADE AN ESTIMATED DISALLOWANCE OF ` 50,00,000/ - WHICH ACCORDINGLY TO HIM REPRESE NTS BOGUS AMOUNT OF SUB - CONTRACT BOOKED BY ASSESSEE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME CIT(A) GRANTED RELIEF TO THE ASSESSEE. 15 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 10 .1 THE SAME HAS BEEN OPPOSED BEFORE US, INTER ALIA, STATING THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE CIT(A) ERRED IN DELETING ADDITION OF ` 50,00,000/ - , WHICH WAS MADE BY WAY OF ESTIMATION KEEPING THE NATURE OF BUSINESS IN MIND. ON THE OTHER HAND, TH E LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 10 .2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO VERIFY THE GENUINENESS OF THE PAYMENT. HE HAS NOT MADE ANY EFFORT TO VERIFY WHETHER SUCH EXPENSES WERE INCURRED FOR BUSINESS PURPOSE OR NOT. ONCE THE GENUINENESS OF EXPENDITURE HAS NOT BEEN DISPUTED SUCH ADHOC ADDITION IS NOT JUSTIFIED AND SUCH ADDITION CAN BE MADE ONLY BY BRINGING SOME MATERIAL ON RE CORD TO JUSTIFY THE SAME, WHICH HAS NOT BEEN DONE IN THIS CASE. THEREFORE THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 50,00,000/ - AND THE SAME IS UPHELD. 1 1 . NEXT ISSUE IS WITH REGARD TO ADDITION OF ` 14,86,000/ - MADE BY ASSESSING OFFICER BY TREAT ING PENALTY PAYMENTS AS NOT ALLOWABLE EXPENSES. ASSESSING OFFICER HAS DISALLOWED THIS 16 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD AMOUNT PAID BY ASSESSEE BY WAY OF PENALTY FOR DELAY IN EXECUTION OF CONTRACTS TO THE CONTRACTOR. SIMILAR ISSUE AROSE IN A.Y. 2008 - 09 WHEREIN ITAT D BENCH, MUMBAI, VIDE THEIR ORDER IN ITA NO. 4390/MUM/2011 DATED 04.04.2002 HAVE DECIDED THE ISSUED BY OBSERVING AS UNDER: - THERE IS NO DISPUTE THAT THE SAID AMOUNT OF ` 42,03,426 HAS BEEN PAID BY THE ASSESSEE ON ACCOUNT OF DELAY IN EXECUTION OF CIVIL CONTRACT ENTERED INTO BY THE ASSESSEE WITH MCGM. THEREFORE THE AMOUNT WAS PAID AS DAMAGES ON ACCOUNT OF BREACH OF CONTRACT. IT IS NOT A PENALTY FOR VIOLATION OF ANY STATUTORY PROVISIONS. HON'BLE KERALA HC IN THE CASE OF CIT VS. GRAND CASHEW CORPORATION, 182 ITR 216 HELD THAT T HE LIABILITY TO PAY DAMAGES ON ACCOUNT OF BREACH OF CONTRACT IS AN ALLOWABLE DEDUCTION U/S 37(1) OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE APEX COURT IN THE CASE OF CIT VS SHANTILAL P. LTD. 144 ITR 57, WHEREIN IT WAS HELD THAT ANY AMOUNT INCURRED BY THE ASSESSEE ON ACCOUNT OF NON - FULFILLMENT OF BUSINESS CONTRACT FOR REASONS BEYOND HIS CONTROL IS INCIDENTAL TO THE BUSINESS AND IS AN ALLOWABLE DEDUCTION. 1 1 .1 SINCE THE ISSUE WAS COVERED BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN A.Y. 2008 - 09 AND THE FACTS BEING SAME, FOR SAME REASONING CIT(A) DELETED THE ADDITION OF ` 14,86,000/ - . NOTHING CONTRARY HAS BEEN BROUGHT TO OUR NOTICE BY THE REVENUE. THEREFORE WE ARE NOT INCLINED TO INTERFERE WITH THE DECISION OF THE CIT(A), WHO HAS DELETED THE 17 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD DISALLOWANCE OF ` 14,86,000/ - MADE ON ACCOUNT OF PENALTY PAYMENT FOR DELAYED EXECUTION OF CONTRACT. THE SAME IS UPHELD. 1 2 . NEXT ISSUE IS WITH REGARD TO THE DELETION OF AD DITION OF RS.10,00,000/ - WHICH WAS MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT, ON ACCOUNT LABOUR CHARGES AND TRANSPORT CHARGES. WE HAVE DECIDED THIS ISSUE FOR AY 2009 - 10, IN PARAGRAPH NO.6 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLLOWING SAME RE ASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A) IN THIS YEAR AS WELL WHEREIN CIT(A) HAS GRANTED THE SIMILAR RELIEF ON SAME LINE. WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE IN THIS YEAR AS WELL. 1 3 . NEXT ISSUE IS WITH REGARD TO DISALL OWANCE UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF TRANSPORT CHARGES OF ` 23,84,864/ - . VIDE PARA 11 OF HIS ORDER THE ASSESSING OFFICER HAS DISALLOWED ` 23,86,864/ - BY INVOKING PROVISIONS OF SECTION 40(A)(IA) BY OBSERVING THAT IN MANY CASES ALTHOUGH PAN IS NOT MENTIONED, TDS WAS NOT DEDUCTED. 18 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 1 3 .1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. VARIOUS CONTENTIONS WERE RAISED AS DETAILED IN PARA 9.2 OF CIT(A)S ORDER AND HAVING CONSIDERED THE SAME CIT(A) HAS DELETED THE ADDITION IN QUESTION. SAME HAS BEEN OPPOSED BEFORE US, INTER ALIA, SUBMITTING THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITION OF ` 23,86,864/ - , WHICH WAS MADE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BY TREATING THAT TDS WAS DEDUCTED ON TRANSPORT CHARGES. ON TH E OTHER HAND, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 1 3 . 2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT CIT(A), AFTER ANALYZING THE DETAILS SUBMITTED BY THE ASSESSEE, OBSERVED THAT THE PARTIES MENTIONED BY ASSESSING OFFICER IN HIS ORDER AND THE ACTUAL PARTIES ARE TOTALLY DIFFERENT FOR WHICH HE RELIED ON THE CHART GIVEN ON PAGES 15 TO 17 OF HIS ORDER. IN THIS BACKGROUND THE CIT(A) OBSERVED THAT THE AMOUNT DISALLOWANCE BY ASSESSING OFFICER WAS WITHOUT ANY BASIS AND WITHOUT MAKING ANY ENQUIRIES AT HIS LEVEL. SINCE ALL DETAILS REGARDING TRANSPORT CHARGES, SPECIFYING PAN, RATE OF DEDUCTION OF TDS, DATE OF 19 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD DEPOSIT IN GOVT. ACCOUNT, ETC. WERE ALREADY BEFORE THE ASSESSING OFFICER AND THAT TOO TWICE - ONCE VIDE LETTER DATED 10 TH SEPTEMBER, 2012 AND THE SECOND VIDE LETTER DATED 18 TH FEBRUARY, 2013 - DURING ASSESSMENT PROCEEDINGS , WHICH WAS ALSO CONVEYED TO CIT(A). IN THIS BACKGROUND THE CIT(A) OBSERVED THAT ASSESSING OFFICER HAS NOT APPLIED HIS MIND IN DEALING WITH THE ISSUE AND EVEN THE AMOUNT AND THE NAMES OF CONCERNED PARTIES DID NOT TALLY. THERE WAS ALSO CONTRADICTION IN THE NAME OF PARTIES. O N A COMPARATIVE ANALYSIS OF FACTS , IN THIS BACKGROUND, CIT(A) OBSERVED THAT T HERE SEEMS TO BE WRONG IDENTIFICATION OF FIGURES AND PARTIES. IN VIEW OF THIS THE CIT(A) DELETED THE ADDITION BY OBSERVING TH AT THE DISALLOWANCE WAS MADE WITHOUT ANY BASIS HENCE THE SAME WAS DIRECTED TO BE DELETED. THIS REASONED FACTUAL FINDING OF CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 1 4 . NEXT ISSUE IS WITH REGARD TO ADDITION OF ` 8,62,069/ - IN RESPECT OF AGRICULTURAL INCOME. VIDE PARA 12 OF THE ASSESSMENT ORDER ASSESSING OFFICER HAS TREATED EXEMPT AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES ON THE GROUND THAT SOURCE OF INCOME HAS NOT BEEN EXPLAINED, WHICH 20 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD WAS DELETED BY THE CIT(A). SAME HAS BEEN OPPO SED BEFORE US ON BEHALF OF THE REVENUE , INTER ALIA, SUBMITTED THAT CIT(A) ERRED IN DELETING ADDITION OF ` 8,62,069/ - WHICH WAS MADE FOR NON - FURNISHING THE DETAILS RELATING TO AGRICULTURAL INCOME. ON THE OTHER HAND, THE LEARNED A.R. FOR THE ASSESSEE SUPPORT ED THE ORDER OF THE CIT(A) AND SUBMITTED THAT ASSESSEE HAS BEEN DECLARING AGRICULTURAL INCOME SINCE LAST MANY YEARS AND SAME HAS BEEN CONTINUOUSLY ACCEPTED BY DEPARTMENT AND SAME HAS BEEN ERRONEOUSLY TREATED BY THE ASSESSING OFFICER AS INCOME FROM OTHER SO URCES WITHOUT ANY REASON FOR THE SAME. SINCE THERE WAS NO CHANGE IN ASSESSEES 7/12 UTTARA (OFFICIAL RECORD OF AGRICULTURAL LAND) IN THE NAME OF THE ASSESSEE, INDICATING THAT ASSESSEE OWNS AN AGRICULTURAL LAND AT JALORE. FURTHER, ASSESSEE ALSO SUBMITTED DE TAILS OF THE SALES MADE BY THE ASSESSEE DURING THE YEAR . SR. NO. NAME OF THE CUSTOMER DETAILS OF THE PRODUCT AMOUT (RS.) 1. NUPUR ENTERPRISE MUNG BAJARI 339,300 114,000 2. MOLOTA ENTERPRISE MUNG 364,000 3. NIKITA ENTERPRISE BAJARI 90,000 TOTAL 907,300 21 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 1 4 .1 ASSESSEE ALSO CLAIMED THAT HE INCURRED CASH EXPENSES TO THE TUNE OF ` 45,231/ - AS REFLECTED IN ASSESSEES CAPITAL ACCOUNT TO EARN THE AFORESAID AGRICULTURAL INCOME. IN THIS BACKGROUND THE STAND OF THE ASSESSEE HAS BEEN THAT AGRICULTURAL INCOME AMOUNTING TO ` 8,62,069/ - AS DECLARED BY HIM IS EXEMPT FROM TAXATION AND HENCE REQU ESTED TO UPHOLD THE ORDER OF THE CIT(A). 1 4 .2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT THE INCOME THE INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES HAS RIGHTLY BEEN DELETED BY CIT(A) BECAUSE SIMILAR INCOME HAS BEEN CONSISTENTLY ACCEPTED BY ASSESSING OFFICER IN PAST AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. EVEN THE AGRICULTURAL HOLDING OF THE ASSESSEE HAS NOT BEEN DISPUTED. UNDER THE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DEVIATION FROM THE EARLIER STAND OF REVENUE IN THIS REGARD WITHOUT BRINGING ANY CHANGED CIRCUMSTANCES FOR THIS ADDITION. ACCORDINGLY, IN THE AFORECITED FACTS AND CIRCUMSTANCES, CIT(A) HAS RIGHTLY DELETED THE ADDITION OF 22 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ` 8,62,069/ - . THIS REASONED FINDING OF THE CIT(A) NEED NO INTERFERENCE. WE UPHOLD THE SAME. 1 5 . NEXT ISSUE IS WITH REGARD TO THE DISALLOWANCE OF THE AGGREGATE OF THE PURCHASES AMOUNTING TO ` 2,16,32,610/ - AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT. THE ASSESSEE HAD MADE VARIOUS PURCHASES TO THE TUNE OF ` 2,16,32,610/ - DURING THE RELEVANT ACCOUNTING PERIOD. IN THIS REGARD, THE ASSESSING OFFICER ON THE BASIS OF MATERIALS PROVIDED BY THE SALES - TAX DEPARTMENT DISBELIEVED THE SAID PURCHASES TO THE EXTENT OF ` 2,16,32,610/ - . THE ASSESSING OFFICER ISSUED NOTICE S U/S 133(6) OF THE ACT TO ALL THE PARTIES APPEARED IN THE REPORT SENT BY THE SALES TAX DEPARTMENT. IT WAS FOUND BY HIM THAT THE NOTICES IN MOST OF THE CASES WERE RETURNED UNSERVED WITH A REMARK 'LEFT' OR NOT KNOWN'. THE ASSESSING OFFICER THEREAFTER AS KED THE ASSESSEE TO EXPLAIN AS TO WHY THE ALLEGED PURCHASES FROM THE PARTIES REPORTED BY THE SALES - TAX DEPARTMENT SHOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT AND THE RESULTANT AMOUNT BE DISALLOWED AND ADDED TO THE ASSESSEE 'S TOTAL I NCOME . IN THIS 23 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD REGARD, THE ASSESSEE HAS GIVEN VARIOUS EXPLANATION, BUT AFTER REJECTING THE SAME, THE ASSESSING OFFICER DISALLOWED THE TOTAL AMOUNT OF ` 2,47,01,530/ - . THUS, THE ASSESSING OFFICER HAS DISALLOWED 13.97% OF PURCHASES MADE BY THE ASSESSEE DUR ING THE YEAR UNDER CONSIDERATION. 1 5 .1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE. THE CIT(A) HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE GRANTED RELIEF TO THE ASSES SEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,16,32,610/ - MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 69C OF THE INCOME - TAX ACT ; ACC ORDINGLY, THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE SUP PORTED THE ORDER OF THE CIT(A) ON THIS ISSUE. 1 5 .2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RE CORD, WE FIND THAT THE ASSESSEE 24 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD EXECUTE S THE CONTRACT WORK AWARDED BY MUNICIPAL CORPORATION OF GREATER MUMBAI (HEREINAFTER CALLED MCGM). THE TERMS AND CONDITIONS OF THE CONTRACT AWARDED BY MCGM TOWARDS EXECUTION OF THE WORK DON E BY ANY CONTRACTOR. IT WAS POINTED OUT THAT FOUND THAT EXECUTION OF THE CONTRACT, THE QUALITY AND THE QUAN TITY OF THE MATERIAL SUPPLIED WAS DIRECTLY UNDER THE SUPERVISION OF THE REPRESENTATIVE ENGINEER OF THE MCGM. IN THE BEGINNING, THE ASSESSEE HA D TO FURNISH SAMPLES OF THE MATERIAL TO BE SUPPLIED AND THE MATERIALS WERE LATER ON SUPPLIED ON APPROVAL OF SAMPLES. THIS WAS ON ACCOUNT OF THE CLAUSE 59 OF GENERAL CONDITIONS OF CONTRACT FOR C IVIL WORKS ISS UED B Y THE MCGM WHICH IS APPLICABLE TO ALL THE CONTRACTS AWARDED BY THE MCGM. THESE DETAILS WERE AVAILABLE ON THE WEBSITE OF THE MUNICIP AL CORPORATION OF GREATER MU M BAI, AND THEREFORE IT I S IN PUBLIC DOMAIN - THE RELEVANT EXTRACTS OF SAME ARE REPRODUCED BEL OW: 59(A) MATERIAL TO BE PROVIDED BY THE CONTRACTOR: THE CONTRACTOR SHALL, AT THIS OWN EXPENSE, PROVIDE ALL MATERIALS REQUIRED FOR THE WORKS OTHER THAN THOSE WHICH ARE TO BE SUPPLIED BY THE MUNICIPAL CORPORATION. 25 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD A LL MATERIALS TO BE PROVIDED BY THE CONTRACTOR SHALL BE IN CONFORMITY WITH THE SPECIFICATIONS LAID DOWN IN THE CONTRACT AND T HE CONTRACTOR SHALL, FURNISH PROO F TO THE SATISFACTION OF THE ENG I NEER THAT THE MATERIAL SO COMPLY. CONTRACTOR SHALL PRODUCE P ROOF VIZ, CHALLANS, BILLS, VOUCHERS, ETC SO AS TO ENSURE THAT THE MATERIAL WAS BROUGHT ON SITE AND Q UANTITIES USED AS PER THE NORMS, SPECIFICATIONS, ETC . T HE CONTRACTOR SHALL, AT HIS OWN EXPENSE AND WITHOUT DELAY, S UPPLY TO THE ENGINEER SAMPLES OF MATERIALS PROPOSED TO B E USED I N T HE WORKS. THE ENGINEER SHALL WI THIN SEVEN DAYS OF SUPPLY OF SAMPLES OR WITHIN SUCH FURTHER PERIOD AS HE MAY REQUIRE AND I NTIMATED TO THE CONTRACTOR I N WRITING , IN FORM THE CONTRACTOR WHETHER THE SAMPLES ARE APPROVED BY HIM OR NOT . IF THE SAMPLES A RE NOT APPROVED THE CONTRACTOR SHALL FORTHWITH ARRANGE TO SUPPLY TO THE ENGINEER FOR APPROVAL FRESH SAMPLES COMPLYING WITH THE SPECIFICATIONS LAID DOWN IN THE CONTRACT. THE ENGINEER SHALL HAVE FULL POWERS TO REQUIRE REMOVAL OF AN Y OR A LL OF THE MATERIALS BROUGHT TO SITE BY THE CONTRACTOR WHICH IS NOT IN ACCORDANCE WITH THE CONTRACT SPECIFICATIONS OR WHICH DO NOT CONFORM IN CHARACTER OR QUALITY TO THE SAMPLES APPROVED BY HIM. IN CASE OF DEFAULT ON THE PART OF THE CONTRACTOR IN REMOVING THE REJECTED MATERIALS, THE ENGINEER SHALL BE AT LIBERTY TO HAVE THEM REMOVED BY OTHER MEANS. THE ENGINEER SHALL HAVE FULL POWERS TO PROCURE OTHER PROPER MATERIALS TO BE SUBSTITUTED FOR REJECTED MATERIALS AND IN THE EVENT OF THE CONTRACTOR REFUSING TO COMP LY, HE MAY CAUSE THE SAME TO BE SUPPLIED BY OTHER MEANS. ALL COSTS, WHICH MAY ATTEND UPON SUCH REMOVAL AND / OR SUBSTITUTION, SHALL BE BORNE BY THE CONTRACTOR.' 26 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 1 5 .3 IN THE PRESENT CASE, THE TOTAL SUPPLY OF MATERIAL IS STATED TO HAVE BEEN OBTAINED FROM VARIOUS PARTIES AND THE ASSESSING OFFICER HAS HELD AN EXPENSE OF RS. 2,16,32,61 0 / - AS UNEXPLAINED EXPENDITURE/ NON - GENUINE EXPENDITURE. IN THE IMPUGNED CONTRACT THE COST OF MATER IAL IS QUITE HIGH AND IF THE REJECTION OF PURCHASES FROM SUCH PARTIES, REFLECTED IN THE WEBSITE WWW.MAHAVAT.GOV.IN IS REJECTED TO BE NON - GENUINE THEN PURCHASES OF THE MATERIAL MADE FOR THE EXECUTION OF THE CONTRACT FROM THESE PARTIES, WOULD LEAD TO THE PREPOSTEROUS CONCLUSION OF HAVING EXECUTED CONTRACT INVOLVING MATERIALS WITHOUT THERE BEING ANY CORRESPONDING GENUINE PURCHASE AND RECEIPT OF MATERIAL. IF SUCH DISALLOWANCES ARE TAKE IN TO CONSIDERATION, THE GROSS PRO FIT RATIO AS WELL AS NET PROFIT RATIO WILL SHOOT UP IN A VERY HIGH AND ABNORMAL RATIO AND FOR W HICH ONUS WAS CAST ON THE ASSESSING OFFICER TO BRING ON RECORD ANY SUCH COMPARABLE FIGURES/DATA WHICH COULD SHOW THAT IN THE GOVERNMENT CIVIL CONTRACTS THERE COULD BE A POSSIBILITY OF SUCH ABNORMAL GROSS PROFIT OR NET PROFIT . 27 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 1 5 .4 THE ASSESSEE HAS BEEN ENGAGED IN SUCH ACTIVITY FOR THE L AST SEVERAL YEARS. T HE ASSESSMENT OF I MMEDIATE PRECEDING A.Y. HAVE BEEN COMPLETED UNDER 143(3) AND NO SUCH ADDITIONS WERE MADE. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE RETURNS FILED IN EACH OF THESE YEARS WERE SUPPORTED BY TAX AUDIT REPORT IN FORM 3CB & 3CD . FROM THE ASSESSMENT ORDER, IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS NOT REJECTED THE TAX AUDIT REPORT IN CASE OF THE ASSESSEE . SINCE THE ASSESSEE HAS DONE JOB WORK EXCLUSIVELY FOR GOVERNMENT DEPARTMENTS, IT S RECEIPTS ARE 100% VERIFIABLE . AS PER THE TERMS OF CONTRACTS BY THE MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM), WHICH IS IN PUBLIC DOMAIN AND AVAILABLE ON THE WEBSITE OF MUNICIPAL CORPORATION OF GREATER MUMBAI, THE JOBS EXECUTED BY THE CONTRACTOR/ASSESSEE ALSO REQUIRE QUANTITY AND QUALITY SPECIFICATION OF THE MATERIAL TO BE SUPPLIED/CONSUMED AND THE CONTRACT RECEIPTS IN THE HAN DS OF THE ASSESSEE INVARIABLY PRECEDE SUCH VERIFICATION AND CERTIFICATION BY THE DEPARTMENTAL AUTHORITIES. T HE ONLY GROUND FOR REJECTING THE PURCHASE WAS MENTION OF THE NAMES OF PURCHASE PARTIES ON THE WEBSITE OF SALES TAX DEPARTMENT 28 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD UNDER THE CATEGORY OF SUSPICIOUS DEALERS. THE ASSESSING OFFICER HAS NOT FOUND ANY INFIRMITY WITH RESPECT TO RECEIPT OF PAYMENT FOR EXECUTION OF CONTRACTS FOR WHICH APPELLANT HAS OBTAINED, SUPPLIED AND CONSUMED MATERIALS UNDER THE QUANTITY AND QUALITY SUPER VISION OF THE REPRESENTATIVE ENGINEER . THE ASSESSING OFFICER HAS ALSO NOT BEEN ABLE TO BRING ON RECORD THE EVIDENCES THAT THE AMOUNT OF THE PAYMENT FOR PURCHASES WHICH WERE MADE BY THE ASSESSEE TO THE RESPECTIVE PARTIES VIA BANKING CHANNELS, WERE RECEIVE D BACK BY THE APPELLANT AND ULTIMATE LY THERE WAS NO PURCHASE OF ANY MATERIAL. IT WAS NOT POSSIBLE BECAUSE WITHOUT SUPPLY OF MATERIAL, THE CONTRACT AWARDED BY MCGM CANNOT BE FULFILLED BY THE ASSESSEE AND CONSEQUENTLY, THE MCGM WOULD NOT MAKE ANY PAYMENT' F OR THE SAME. IN FACT THE ENTIRE PROCESS IS INTER CONNECTED AND THE STATEMENT OF SUPPLIERS OF RAW MATERIALS COULD NOT BE TAKEN AND READ INDEPENDENTLY RATHER IT HAS TO BE EXAMINED IN TOTALITY. IN VIEW OF THE ABOVE , IT WAS APPARENT THAT THE ME RE APPEARANCE OF THE NAME OF THE PARTIES ON THE WEBSITE OF SALES TAX DEPARTMENT CANNOT JUSTIFY THE CONCLUSION THAT THE PURCHASES 29 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD MADE BY THE ASSESSEE WERE NOT GENUINE . THUS , THE CONTRACTS EXECUTED BY VARIOUS CONTRACTORS WERE SUBJECTED TO CHECK AS REGARDS THEIR SPECIFICATION, WORKMANSHIP/ QUALITY AND QUANTITY OF MATERIAL UTILIZED BY THE AUDIT/VIGILANCE TEAM OF THE MCGM. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO SUGGEST THAT THERE WERE ANY DEFECT OR DEFICIENCY IN THE QUANTITY AND QU ALITY OF MATERIAL SUPPLIED AND THE WORKMANSHIP OF THE JOB PERFORMED . 1 5 .5 THE ASSESSEE HAS MADE CLAIM FOR PURCHASES FOR WHICH PAYMENTS HAVE BEEN MADE BY CROSS - CHEQUE. WHERE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES NO BODY CAN DENY THE EXISTENCE OF THE PARTIES. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUGGEST THAT THE PAYMENTS MADE TO PURCHASE PARTIES WERE RECEIVED BACK IN CASH BY THE ASSESSEE AND NO FURTHER PAYMENTS WERE MADE BY THE ASSESSEE TOWARDS PURCHASE O F ANY MATERIAL SO AS TO FULFILL THE CONDITIONS OF CONTRACT IMPOSED BY THE MCGM WHICH HAS MADE PAYMENTS TOWARDS CONTRACT AWARDED TO THE ASSESSEE. ONCE THE ASSESSEE ESTABLISHES CONSUMPTION OF IT E M S 30 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD PURCHASED AS WELL NOTHING MORE REMAINS TO BE PROVED BY THE ASSESSEE . THE CIT(A) HIMSELF HAS LOGGED ON TO THE WEBSITE WWW.MAHAVAT.GOV.IN TO KNOW THE ALLEGATION OF ASSESSING OFFICER REGARDING THE SUPPLIERS. HE FOUND THAT THE WEBSITE MERELY MENTIONS LIST OF SUSPICIOUS DEALERS WHO HAS ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS. IT NEITHER GIVES MODUS OPERANDI OF DEALERS NOR MAKES ANY CLAIM REGARDING ANY CORROBORATING EVIDENCES. HE FURTHER OBSERVED THAT THE ADDITION MADE BY THE ASSESSING OFFICER COULD NOT BE ACCEPTED AT THIS STAGE IN VIEW OF FOLLOWING JUDICIAL PR ONOUNCE MENTS: - (I) IN THE CASE OF CIT VS. M.K. BROTHERS, REPORTED IN 163 ITR 249 THE HONBLE GUJARAT HIGH COURT HELD AS UNDER: - IT WAS CLEAR FROM TH E TRIBUNAL'S ORDER THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NOT WAS A QUESTION OF FACT. THE ASSESSEE WAS GIVEN CREDIT FACILITIES FOR A SHORT DURATION AND THE PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT WAS SO, IT COULD NOT BE SAID THAT THE ENTRIES FO R THE PURCHASES OF THE GOODS MADE, IN THE BOOKS OF THE ACCOUNT WERE BOGUS ENTRIES. THUS, THE CONCLUSION ARRIVED AT BY THE TRIBUNAL WAS NOT AGAINST THE WEIGHT OF EVIDENCE. THE TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION TO THE INCOME OF THE ASSESSEE . IN THIS CASE, DURING THE ASSESSMENT PROCEEDINGS I T CAME TO THE N OTICE OF TH E ASSESSING OFFICER THAT IN THE RELEVANT 31 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ASSESSMENT YEAR THE ASSESSEE HAD MADE CERTAIN PURCHASES FROM SOME PARTIES, WHO WERE NOT AVAILABLE TO CROSS - EXAMINE FOR THE GENUINENESS OF THE ABOVE PURCHASES. IT WAS FOUND BY THE ASSESSING OFFICER THAT THOUGH THE PURCHASES WERE CLAIMED TO HAVE BEEN MADE ON CREDIT BASIS, THE PAYMENTS WERE SHOWN TO HAVE BEEN MADE AFTER SUBSTANTIAL LAPSE OF TIME AFTER THE DATE OF PURCHASE. THE ASSESSING OFFICER HELD THAT THE TRANSACTIONS RELATING TO THOSE PURCHASES WERE BOGUS AND, THEREFORE, T REATED THE AMOUNT ALLEGEDLY PAID F OR THOSE PURCHASES AS INCOME OF THE ASS ESSEE . ON SECOND APPEAL, THE TRIBUNAL FOUND THAT THERE WAS NO EVIDENCE ANYWHERE THAT THOSE CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESS EE AND FURTHER THERE WAS NOTHING TO INDICATE THAT ANY PART OF THE FUND GIVEN BY THE ASSESSEE TO THOSE PARTIES CAME BACK TO THE ASSESSEE IN ANY FORM. HE, THUS, HELD THAT THE EVIDENCE WAS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE WERE BOGUS AND, THEREFORE, DELETED THE AFORESAID ADDITION TO THE I NCOME OF THE ASSESSEE. SIMILAR VIEW H AS BEEN TAKEN BY ITAT, J ODHPUR BENCH IN THE OF ITO V PERMANAND , REPORTED IN 107 TTJ 395 , WHEREIN IN IT WAS HELD AS UNDER : - 32 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD IN THE INSTANT CASE, THE ADDITION R ESTED MAINLY ONLY ON THE OBSERVATION OF THE SALES - TAX DEPARTMENT, THE ASSESSEE WAS NEVER ASSOCI ATED WITH THE ENQUIRIES MADE BY THE SALES - TAX DEPARTMENT TO THAT EXTENT. THE SATISFACTION OF THE ASSESSING OFFICER I TSELF I S OF PRIME IMPORTANCE WHILE MAKING ASSESSMENT OF AN INCOME AND THESE DUTIES CANNOT BE PERFORMED BY SUBSTITUTING SATISFACTION OF SOMEO NE ELSE T HE ASSESSEE DID PAY FOR THE PURCHASES HE MADE FROM THE ABOVE TWO PARTIES THROUGH CHEQUE AS WAS EVIDENT FROM THE RECORD. THE STATEMENTS OR EVEN THE AFFIDAVITS OF THE SELLERS COULD NOT BE UTILIZED AGAINST THE ASSESSES, UNLESS AN OPPORTUNITY WAS GIVE N TO HIM TO CONFRONT THE SAID STATEMENT BY WAY OF CROSS - EXAMINATION , ETC. ADMITTEDLY, NO SUCH OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CONFRONT THE ABOVE SELLERS IN THE I NSTANT CASE. FURTHER, THE ASSESSEE HAD ALSO DISCHARGED THE PRIMARY ONUS CAST ON HIM BY SECTION 69 BY SHOWING THE PURCHASES, THEIR ENTRIES IN THE BOOKS OF ACCOUNT, PAYMENTS BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING THE VOUCHERS OF SALES OF THE GOODS. THE ASSESSING OFFICER HAD MISERABLY FAILED TO BRING ON RECORD ANY CLINCHING EVIDENCE TO P ROVE THAT THESE ALLEGED PURCHASES WERE BOGUS AND NOT GENUINE. FURTHER, THE ASSESSING OFFICER DID NOT MAKE REQUISITE INVESTIGATION AGAINST THE TWO SELL ERS. THEREFORE, THE COMMISSIONER (APPEALS) HAD RIGHTLY HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER MERELY ON THE BASIS OF OBSERVATIONS OF SALES - TAX DEPARTMENT, WITHOUT CONDUCTING INDEPENDENT ENQUIRIES WAS NOT JUSTIFIED. SINCE T HE PURCHASE I N QUEST I ON HAD BEEN HELD AS GENUINE PURCHASE, ADDITION OF RS, 55,632 / - COULD NOT BE MADE TO THE I NCOME OF THE ASSESSEE . HENCE, THE REVENUE'S APPEAL WAS LIABLE TO BE DISMISSED' SIMILARLY, THE HON'BLE CALCUTTA HIGH COURT I N THE CASE OF DIAGNOSTICS V CIT REPORTED AT 334 ITR 111 HAS HELD AS UNDER: - 33 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD HOWEVER, AS REGARDS THE PAYMENTS MADE TO M/S. SELVAS PHOTOGRAPHIC ARE CONCERNED AMOUNTING TO RS.3,12,302/ - , WE FIND THAT THOSE HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AND THOSE HAVE B EEN ENCASHED THROUGH THE BANKERS OF M/S . SELVAS PHOTOGRAPHIC . IT APPEARS THAT ACCORDING TO THE APPELLANT, AT THE TIME OF ASSESSMENT, THE APPELLANT HAD NO BUSINESS TRANSACTION WITH M/S, SELVAS PHOTOGRAPHIC AND CONSEQUENTLY, THE SAID PARTY DID NOT CO - OPERATE W ITH THE ASSESSING OFFICER . HOWEVER, THE TRANSACTION HAVING TAKEN PLACE THROUGH ACCOUNT PAYEE CHEQUES, WE ARE UNABLE TO ACCEPT THE CONTENTION OF MR. AGARWAL, THE LEARNED ADVOCATE APPEARING FOR THE REVENUE THAT THE TRANSACTION WAS A NON - EXISTENT ONE. IF AN ASSESSEE TOOK CARE TO PURCHASE MATERIALS FOR HIS BUSINESS BY WAY OF ACCOUNT PAYEE CHEQUES FROM A THIRD PARTY AND SUBSE QUENTLY THREE YEARS AFTER THE PURCHASE, THE SAID THIRD PARTY DOES NOT APPEAR BEFORE THE ASSESSING OFFICER PURSUANT TO THE NOTICE OR EVEN H AS STOPPED THE BUSINESS, THE CLAIM OF THE ASSESSEE ON THAT ACCOUNT CANNOT BE DISCARDED AS NON - EXISTENT. IN THE CASE BEFORE US, THE REVENUE HAS NOT PUT FORWARD ANY OTHER GROUND, SUCH AS, IT WAS NOT A GENUINE TRANSACTION FOR OTHER REASONS BUT HAS SIMPLY REJE CTED THE CLAIM ON THE GROUND AS I F THERE WAS NO SUCH TRANSACTION. 10. THE TRANSACTION HAVING TAKEN PLACE THROUGH PAYMENT BY AC COUNT PAYEE CHE QUES, SUCH PLEA IS NOT TENABLE AND IN SUCH CIR CUMSTANCES, THE TRIBUNAL BELOW ERR ED IN LAW IN REVERSING THE FINDING ARRIVED AT BY T HE COMMISSIONER OF INCOME - TAX ( APPEALS) ACCEPTING THE SAID TRANSACTION AS A GENUINE TRANSACTION . ' THEREFORE, KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS VARIOUS JUDICIAL PRONOUNCEMENTS AS REFERRED TO ABOVE, IN OUR OPINION, THE CIT(A) WAS RIGHTLY DELETED THE ADDITION OF RS.2,16,32,610/ - 34 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD MADE BY THE ASSESSING OFFICE R U/S 69C OF THE ACT. THEREFORE, T HIS REASONED FINDING OF THE CIT(A) NEED S NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 1 6 . NEXT ISSUE IS WITH REGARD TO THE ADDITION OF RS.4,48,89,991/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C ON ACCOUNT OF S UB - CONTRACT CHARGES. 1 6 .1 THE BRIEF FACTS THE CASE ARE THAT THE ADDITION TO THE TUNE OF RS.4,48,89,991/ - WAS MADE U/S 69C OF THE ACT IN RESPECT OF FOUR PARTIES UNDER THE HEAD SUB - CONTRACTORS. THE ASSESSING OFFICER OBSERVED THAT NOTICES ISSUED U/S 133 (6) TO THE FOUR PARTIES WERE RETURNED UNSERVED BY POSTAL AUTHORITIES. THE ASSESSEE HAD FURNISHED TO CONCERNED ASSESSING OFFICER THE ADDRESSES MADE AVAILABLE BY THE SAID PARTIES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO GIVE EXPLANATION AS TO WHY THE SU B - CONTRACT WORK FOR THE SAID AMOUNT OF RS.4,48,89,991/ - SHOULD NOT BE HELD AS BUGS. 16.2 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CI T(A) 35 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD DELETED THE ADDITION IN QUESTION AND THE SAME HAS BEEN OPPOSED BEFORE US BY REVENUE, INTER ALIA , SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETION THE ADDITION OF RS.4,48,89,991/ - MADE BY ASSESSING OFFICER U/S 69C OF THE ACT. THE DEPARTMENTAL REPRESENTATIVE PLEADED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 1 6 . 3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSMENT OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E., 2000 - 10, WAS COMPLETED U/S 143(3) BUT NO SUCH ADDITION WAS MADE THE ASSESSING OFFICER DESPITE THOROUGH SCRUTINY OF THE CASE. THE ASSESSEE HAS COMPLETED ALL GOV ERNMENT JOBS BY PURCHASING MATERIAL, ENGAGING SUB - CONTRACTORS ETC., WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE SUCCESSFULLY RECEIVED THE PAYMENT FROM GOVERNMENT TOWARDS SUCH SPECIFIC CONTRACT. IN FACT, THE ASSESSING OFFICER HAS GIVEN TIME OF TWO DAY S TO PRODUCE THE CONFIRMATION, STATEMENT ON OATH AS MENTIONED IN ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAD GIVEN 36 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD SUB - CONTRACT TO THESE FOUR PARTIES AND LIST WAS GIVEN TO ASSESSING OFFICER ALONGWITH ADDRESS AND PAN. THE ASSESSEE EXPLAIN ED THE PAYMENTS WITH REFERENCE TO COPY OF ACCOUNT WITH CHEQUE PAYMENT DETAILS AND TDS APPLICABLE WHEREVER NECESSARY, WHICH HAS BEEN DETAILED IN THE ORDER OF THE CIT(A) AT PAGE NO.46 AS UNDER: - RATANSINGH & BROS ANNEXURE - B AY 2010 - 2011 ASPER PARA 6.1 OF THE ASSESSMENT ORDER NAME OF THE PARTY : ALPESH MEHTA SR. NO. DATE OF PAYMENT CHEQUE NO. AMOUNT REMARK 1 15.10.2009 98299 300000 PARTYS ACCOUNT SQUARED OFF AS ON 31.03.2010 2 16.10.2009 98459 450000 3 26.10.2009 99060 512844 4 03.11.2009 99351 1134342 5 06.11.2009 99379 1144193 TOTAL RS. 3541379 NAME OF THE PARTY : RANJEETSINGH S. DEORA (HUF) SR.NO DATE OF PAYMENT CHEQUE NO. AMOUNT REMARK 1 28.10.2009 99210 1500000 PARTYS ACCOUNT SQUARED OFF AS ON 31.03.2010 TOTAL RS. 1500000 NAME OF THE PARTY : GAUTAM TRADING CO. SR.NO. DATE OF PAYMENT CHEQUE NO. AMOUNT REMARK 1 06.04.2010 6908 2045643 PARTYS ACCOUNT SQUARED OFF AS ON 06.04.2010 TOTAL RS. 2045643 37 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD \ NAME OF THE PARTY : ROSEMOUNT CONSTRUCITON SR. NO. DATE OF PAYMENT CHEQUE NO. AMOUNT REMARK 1 07.01.2010 496 5000000 PARTYS ACCOUNT SQUARED OFF AS ON 31.03.2010 2 07.01.2010 497 6000000 3 08.01.2010 498 5000000 4 09.01.2010 499 4000000 5 19.01.2010 500 5000000 6 21.01.2010 501 5000000 7 23.02.2010 4232 6830000 TOTAL RS. 36830000 GRAND TOTAL RS. 43917022 SUMMARY AMOUNT AS PER PARA 6.1 44,889,991 LESS: TDS 824,717 44,065,274 LESS: SECURITY DEPOSIT 148,252 TOTAL PAYMENT AS ABOVE 43,917,022 WHERE IDENTITY OF THE PERSON FROM WHOM GOODS HAD BEEN PURCHASED AND SOURCE OF INVESTMENT IN SUCH GOODS HAD BEEN EXPLAINED BY ASSESSEE AND IT WAS ESTABLISHED THAT AMOUNTS PAID BY ASSESSEE BY CHEQUE FOR THOSE GOODS HAD BEEN RECEIVED, AND FURTHER, BOOKS MAINTAINED BY THE ASSESSEE HAD NOT BEEN REJECTED BY ASSESSING OFFICER AND IN F AC T ADDITION WAS BASED ON ENTRIES MADE IN THOSE BOOKS , I T COU LD BE SAID THAT TRANSACTION WAS GENUINE. HERE IN THE CASE ON HAND, THE 38 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD I DENTITY HAS BEEN ESTABLISHED, SOURCE OF INVE STMENT AND BANK PAYMENTS HAVE BEEN PROVED AND THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER. THE UNEXPLAINED EXPENDITURE OF RS.2,16,32,610/ - MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT HAS BEEN DELETED BY US, RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS AS DISCUSSED IN PARAGRAPH 14 OF THIS ORDER. FOR THE SAKE OF BREVITY, THE SAME ARE NOT REPRODUCED HERE ONCE AGAIN. THE A SSESSING O FFICER HAD ALL THE MACHINERY UNDER THE IT A CT , 1 961 TO MAKE I NVESTI GATION THROUGH THE BANKS BY CALLING FOR RECORDS AND REACHING OUT THE PARTIES WHO WERE NOT CO - OPERATING WITH THE ASSESSEE AND BRING THE ACTUAL FACTS ON RECORD. IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.4,48,89,991/ - BECAUSE T HE ASSESSING OFFICER HAS ALSO NOT BEEN ABLE TO BRING ON RECORD THE EVIDENCES THAT THE AMOUNT OF THE PAYMENT FOR PURCHASES , WHICH WERE MADE BY THE ASSESSEE TO THE RES PECTIVE PARTIES VIA BANKING CHANNELS . THERE IS NOTHING ON RECORD TO SUGGEST THAT SAID PAY MENTS WERE RECEIVED BACK BY THE ASSESSEE IN ANY MANNER. T HIS REASONED FINDING OF THE CIT(A) NEEDS NO 39 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD INTERFERENCE FROM OUR SIDE WHEREBY HE HAS RIGHTLY DELETED THIS ADDITION IN QUESTION. WE UPHOLD THE SAME. 1 7 . NEXT ISSUE IS WITH REGARD TO THE DELETION OF ADDITION OF RS.30,68,920/ - MADE BY THE ASSESSING OFFICER U/S 69C OF THE ACT , ON ACCOUNT OF PURCHASE EXPENSES. 1 7 .1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED AN AGGREGATE AMOUNT OF RS. 30,68,920 U/S 69C OF THE ACT ON ACCOUNT U NEXPLAINED EXPENDITURE AS THE ASSESSEE ALLEGEDLY DID NOT PURCHASE ANY GOODS FROM THREE PARTIES AS MENTIONED IN PAGE NO.7 OF ASSESSMENT ORDER. THE ASSESSING OFFICER HIMSELF OBSERVED THAT THE NAME OF THOSE THREE PARTIES WERE NOT APPEARING IN THE LIST OF BOG US PARTIES SENT BY THE SALES TAX DEPARTMENT. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE AMOUNT IN QUESTION BY OBSERVING THAT THE THREE PARTIES WERE BOGUS FOR THE REASON THAT THE NOTICES U/S 133(6) WERE RETURNED UNSERVED. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRANTED RELIEF TO THE 40 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US BY THE REVENUE, INTER ALIA, SUBMITTING T HAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 17 .2 AFTER GOING THROUGH THE RIVAL CONTENTIONS AND MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS MAINLY RELIED UPON AN ARTICLE PUBLISHED IN TIMES OF INDIA WHICH REFERS TO CERTAIN BUSINESS ENTERPRISES. IT WAS FURTHER SEEN THAT THE ARTICLE ITSELF WAS WITH REFERENCE TO CERTAIN WORKS ENTRUSTED TO THEM. THE ARTICLE HAS BEEN PUBLISHED ON 06 - 02 - 2013 AND WHICH FALLS IN FY 2012 - 13 I.E. AY 2013 - 14 . THIS CA NNOT BE BASIS FOR MAKING ANY ADDITION OR DISALLOWANCE BY THE ASSESSING OFFICER IN AY 2010 - 11. THE AUTHENTICITY OF SOURCE OF SUCH ARTICLE HAS NOT BEEN INDEPENDENCY INVESTIGATED BY THE ASSESSING OFFICER IN THE CASE OF PROPRIETORSHIPS CONCERN OF THE ASSESSEE NAMELY M/S. RATANS I NGH & BROS. NO OTHER REASON HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SUBSTANTIATE ADVERSE CONCLUSION AGAINST THE ASSESSEE. THE ASSESSING OFFICER HAS NOT TAKEN ANY PERSONAL INITIATIVE EXCEPT I SSUING NOTICES U/S 41 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD 13 3(6) OF THE ACT TO ASCERTAIN THE GENUINENESS OF THE PURCHASES IN QUESTION. THE CIT(A) FOUND FR OM THE RECORDS PRODUCED BEFORE HIM BY THE ASSESSEE THAT THE PURCHASES MADE COULD NOT BE SAID TO BE NOT GENUINE . IF THE ASSESSING OFFICER HAS NOT MADE ANY EFFORT T O REBUT THE ASSESSEE 'S CLAIM ABOUT THE GENUINENESS OF THE PURCHASES, THE ASSESSEE CANNOT BE MADE FOR SUCH LAPSE. THEREFORE, IN OUR OPINION, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.30,68,920/ - MADE BY THE ASSESSING OFFICER U/S 69C OF THE A CT. WE UPHOLD THE SAME. 18. T HIS APPEAL OF THE REVENUE IS ALSO DISMISSED. 19 . IN THE RESULT, BOTH APPEALS FILED BY THE REVENUE, I.E. FOR AYS 2009 - 10 AND 2010 - 11, ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY , 201 6 . 13.01.2016 SD/ - SD/ - (RAJESH KUMAR) ( SHAILENDRA KUMAR YADAV ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI , DATED 13 TH JANUARY , 201 6 42 ITA NO. 3717 &5298 /MUM/2013 SHRI RATANSINGH M. RATHOD / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / THE CIT 5. , , / DR, D BENCH ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER //TRUE COPY// /ASSTT. REGISTRAR) , /ITAT, MUMBAI N.P.