Sheth & Sura Engineers Pvt. Ltd., Pune V. Deputy Commissioner of Income tax, Pune

ITA 382/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6761 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D R BARVE
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI P.S. CHAUDHURY, J.M. . / ITA NO.382/PUN/2017 / ASSESSMENT YEAR : 2012-13 SHETH & SURA ENGINEERS PVT. LTD., AQUA HOUSE, 263/1, SINHAGAD ROAD, NEAR PARVATI OVERBRIDGE, PUNE 411 030. PAN : AAECSI737P. . / APPELLANT V/S THE. DY.COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE. . / RESPONDENT ASSESSEE BY : SHRI D.R. BARVE. REVENUE BY : SHRI SUDHENDU DAS. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 4, PUNE DT.28.10.2016 FOR T HE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A PRIVATE LIMITED CO., STATED TO BE A GOVERN MENT CONTRACTOR FOR WATER SUPPLY PROJECTS. ASSESSEE ELECTR ONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 28.09.2012 DECLARING T OTAL INCOME / DATE OF HEARING : 08.01.2019 / DATE OF PRONOUNCEMENT: 22.01.2019 2 ITA NO.382/PUN/2017 OF RS.2,45,25,322/-. THE CASE WAS SELECTED FOR SCRUTINY A ND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.27.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.9,68,89,480/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.28.10.2016 (IN APPEAL NO.PN/CIT(A)-4/DCIT, CIR CLE-6, PUNE/25/2015-16) / GRANTED SUBSTANTIAL RELIEF TO THE ASSE SSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED AO RELATED TO PAYMENT OF LABOUR CHARGES . THE DISALLOWANCE OF LABOUR CHARGES WERE MADE MERELY ON AD HOC / ESTI MATED BASIS TO THE TUNE OF RS.27,89,884/- IGNORING THE FACTS SUBMITTED . THIS AMOUNT WAS WORKED OUT BEING 5% OF THE TOTAL LABOUR CHARGES OF RS.5,48,14,324/-. 2. THE LEARNED CIT (A) ERRED IN NOT FOLLOWING THE R ATIO OF THE HIGH COURT/ ITAT DECISION(S) IN THE CASE OF: A) NISAR BIRI SIKKA NO.1 VS CIT [174 TAXMANN 51 J B) M/S SHAFEEQ SHAMEEL & CO. VS ACIT ITA [LOSS/MADILL J C) YASHWANT M. MAHAJAN -ITAT, PUNE BENCH, PUNE 3. THE LEARNED CIT(A) HAS FOLLOWED THE PREVIOUS APP EAL ORDERS AND RELIED ON THE ASSESSMENT ORDER OF THE AO. IN THE ASSESSMEN T ORDER FOR THE Y EA R UNDER CONSIDERATION, THE AO HAS NOT STATED A SINGLE INSTANCE OF DEFICIENCY IN LABOUR CHARGES BUT BLINDLY MADE ADDITION ON 'PRO BABILITY' AND 'ASSUMPTIONS' BASED ON PREVIOUS ORD E RS 4. THE LEARNED CIT (A) ERRED IN NOT FOLLOWING THE R ATIO OF THE APEX COURT/ ITAT DECISION(S) IN THE CASE OF : A) DHAKESWARI COTTON MILLS LTD., VS. COMMISSIONER OF I NCOME TAX, [26 ITR 775 (SC)] B) TRIPAT KAUR VS. ACIT, CIR 22(1), NEW DELHI, [ITA NO .3244/DEL/2012]. C) ITO VS. LAKE PALACE HOTELS AND MOTELS (P.) LTD. [13 TTJ (JP) 216] D) STATE OF ORISSA VS. MAHARAJA SHRI B.P. SINGH DEO [1 970] [76 ITR 690 (SC)] 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETH ER. 4. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THE ON LY EFFECTIVE GROUND IS WITH RESPECT TO DISALLOWANCE OF LABOUR CHARGES A ND HE FURTHER 3 ITA NO.382/PUN/2017 SUBMITTED THAT IN THE GROUND THE AMOUNT WAS ERRONEOU SLY STATED AS RS.27,40,716/- AND IT SHOULD BE READ AS RS.27,89,884/-. 5. AO NOTED THAT IN THE CASE OF ASSESSEE IN A.YS. 2010-11 & 2011-12, DISALLOWANCE ON ACCOUNT OF LABOUR EXPENSES WAS MADE AT 5 %. HE NOTED THAT THE PROBABILITY OF SIMILAR DISCREPANCIES AS IN A.YS 2010- 11 AND 2011-12 CANNOT BE RULED OUT IN THE PRESENT CASE. HE T HEREFORE FOLLOWING THE DECISION OF HIS PREDECESSOR, OUT OF THE TOTAL LABOUR E XPENSES OF RS.55,797,661/- WORKED OUT THE DISALLOWANCE AT 5% AND D ISALLOWED RS.27,89,884/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY OBS ERVING AS UNDER : 7.3 DECISION:- I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT AS ABOVE CAREFULLY . I FIND THAT LD. CIT (A)-2, PUNE, VIDE ORDER IN APPEAL NO. PN/CIT (A )-2/JCIT RAGE- 6/PN/311/2014-15 AND APPEAL NO. PN/CIT(A)-2/JCIT RA GE- 6/PN/116/2013-14 DATED 05/01/2016, FOR AY. 2010-11, HAD ALLOWED THE LABOUR EXPENSES PARTLY AFTER A DETAILED DISCUSSION VIDE PARA 9 TO 9.2 OF THE APPELLATE ORDER AND THE DISALL OWANCE WAS RESTRICTED TO RS.25,14,015/- I.E. 5% OF RS.5,02,80,288/- AND HAD GIVEN RELIEF OF RS. 2,71,05,131/- AND VIDE ORDER NO. APPE AL NO. PN/CIT (A)- 2/JCIT RAGE-6/PN/267/2014-15 AND APPEAL NO. PN/CIT( A)-2/JCIT RAGE- 6/PN/181/2014-15 DATED 05/01/2016, FOR A.Y. 2011-12 HAD CONFIRMED THE ADDITION ON ACCOUNT OF DISALLOWANCE O F RS.27,40,716/-, BEING 5% OF RS.5,48,14,324/ - VIDE PARA 7 TO 7.2 OF THE APPELLANT ORDER. WHILE CONFIRMING THE SAID ADDITION ON ACCOUN T OF DISALLOWANCE OF LABOUR EXPENSES, THE LD. CITCA) AFTER DISCUSSING THE FACTS ELABORATELY IN A.Y.2011-12 HELD IN PARA 7.2 AS BELO W : 7.2. I HAVE CONSIDERED THE FACTS OF THE ISSUE AS ME NTIONED IN THE ASSESSMENT ORDER. IT IS SEEN THAT THE ASSESSING OFF ICER HAS DISCUSS ABOUT THE DEFICIENCIES IN THE BOOKS OF ACCO UNT AS REGARDS CLAIM UNDER LABOUR EXPENSES. THE MAJOR DEFI CIENCY WAS THAT THE MOST OF THE CLAIM HAS BEEN MADE BY WAY OF SELF MADE VOUCHERS. IT WAS ALSO NOTICED THAT DETAILS OF RECIP IENTS ARE NOT MENTIONED ON THE VOUCHERS. FURTHERMORE, WRITING ON THE VOUCHERS APPEARS TO BE OF THE SAME PERSONS. THE APP ELLANT: HAS ALSO NOT MAINTAINED ANY MUSTER ROLL OR WAGE REGISTE R. NO AMOUNT HAS BEEN DEDUCTED ON ACCOUNT OF EPF OR ESIC. ALSO THE PAYEES ARE NON VERIFIABLE. THESE FACTS HAVE NOT BEE N DISPUTED BY THE APPELLANT ALSO. I THEREFORE, FEEL T HAT THE ASSESSING OFFICER WAS JUSTIFY IN MAKING DISALLOWANC E AT 5% OF THE TOTAL CLAIM UNDER THE HEAD 'LABOUR EXPENSES', W HICH IS MOST REASONABLE. CONSIDERING THE OVERALL FACTUAL POSITIO N, I CONFIRM 4 ITA NO.382/PUN/2017 THE DISALLOWANCE ON ACCOUNT OF LABOUR CHARGES TO TH E EXTENT OF 5% OF RS.5,48,14,324/- I.E. RS.27,40,716/-. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED.' 7 .3.1 I FIND FROM THE ASSESSMENT ORDER THAT THE AO W H ILE DISALLO WE D TH E L A B OUR E X PENSES HAD ALSO QUOTED THE RE L E V ANT PORTIO N OF THE AO' S FINDINGS FOR A . Y. 2011-12 W HEREIN V ARIOUS DISCREPANCIES W ERE NOTED B Y THE SAID AO IN PA Y MENTS OF LABOUR CHARGES. PHOTO COP I ES OF VOUCHERS POINTING OUT SUC H DISCREPANCIES WERE ALSO PASTED IN THE ASSESSMENT ORDER . S INCE T HE AO DUR I NG TH I S RELE V ANT A SSESSMENT Y EAR H AD A L SO NO TICE D TH E ID E NTI CAL N A T URE O F V OUCHERS AND CLAIM OF LABOUR EXPENSES B Y THE APPE LL A NT AS I N A . YS. 2 0 1 0 - 11 AND 2011-12, ON THE BASIS OF WHICH THE L D . CI T( A) HAD C ONFIR M ED ' TH E DISALLOWANCE TO THE EXTENT OF 5~ OF SUCH EXPENSES' I INCLINED TO UPH O LD TH E FINDINGS OF THE AO OF DISALLO W ING OF RS . 2 7, 89 , 884/-, BEING 5 % O F THE L A BOU R EX PENSES OF RS.5,57 , 97 , 661/-, AS ALLEGEDL Y CL AI M B Y T H E A PPEL L ANT. ACCORDINGLY, SUCH ADDITION IS CONFIRMED . GROUND 3 RAISED B Y THE A PPELLANT IS ACCORDINGLY DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 6. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT WITHOUT POINTING OUT ANY EXPENDITURE WHICH WAS BOGUS OR NOT ALLOWABLE, AO HAS SIMPLY FOLLOWED THE ASSESSMENT ORDER FOR A.Y.S 2010-11 AND 2011- 12 AND HAS DISALLOWED THE LABOUR CHARGES AND THE SAME HAS BEEN CO NFIRMED BY LD.CIT(A). HE SUBMITTED THAT AGAINST THE APPEAL IN A.YS. 2 010-11 AND 2011-12 WHEN THE MATTER WAS CARRIED BEFORE THE TRIBUNA L, THE TRIBUNAL VIDE ORDER DT.15.12.2017 IN APPEAL NOS.457 & 458/PUN/2016 HAS RESTRICTED THE DISALLOWANCE TO 3% OF LABOUR CHARGES. HE FURTHER SUBMITTED THAT THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS. HE THEREFORE SUBMITTED THAT IN SUCH CIRCUMSTANCES, THE DISALLOWANCE OF EXPENSES ON 5% IS UNCA LLED FOR. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MA TERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF LABOUR CHARGES. W E FIND THAT 5 ITA NO.382/PUN/2017 AO, FOLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN CASE IN A.YS. 2010-11 AND 2011-12 HAS DISALLOWED, 10% OF LABOUR CHA RGES BY NOTING THAT THE FACTS IN THE YEAR UNDER APPEAL ARE IDENT ICAL TO THAT OF EARLIER YEARS AND THE ORDER OF AO WAS ALSO CONFIRMED BY L D.CIT(A). WE FIND THAT AGAINST THE ORDER OF LD.CIT(A) IN A.YS.2010-11 AND 2011-12, WHEN THE MATTER WAS CARRIED BY THE ASSESSEE BEFORE TH E TRIBUNAL, THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS RESTRICTED THE DISA LLOWANCE TO THE EXTENT OF 3% OF LABOUR CHARGES BY OBSERVING AS UNDER : 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE HAD INCURRED LABOUR EXPENSES AT VARIOUS SI TES TOTALING RS.5.02 CRORES. THE REVENUE HAS NOT CONTROVERTED THE FINDIN GS OF CIT(A) IN THIS REGARD. NOW, THE QUESTION WHICH ARISES IN THE PRESE NT APPEAL IS DISALLOWANCE MADE OUT OF SAID LABOUR CHARGES BY THE AUTHORITIES BELOW. THE REASON FOR DISALLOWANCE IS DISCREPANCIES NOTED IN THE VOUCHERS MAINTAINED, WHEREIN WRITING ON THE VOUCHERS APPEARE D TO BE THE SAME PERSON. FURTHER, THE ASSESSEE HAD FAILED TO MAINTAI N ANY MUSTER ROLL OR WAGE REGISTER. ALSO, NO AMOUNT WAS DEDUCTED ON ACCO UNT OF PROVIDENT FUND AND ESIC. THE PAYEES WERE ALSO NOT VERIFIABLE. THE CASE OF ASSESSEE WAS THAT MAJORLY PAYMENT WAS MADE THROUGH C HEQUE. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE AFORESAID DISALLOWANCE MADE BY THE AUTHORITIES BELO W. HOWEVER, WE RESTRICT THE SAME TO 3% OF LABOUR CHARGES. THE GROU NDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 12. THE FACTS AND ISSUES IN ITA NO.458/PUN/2016 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO.457/PUN/2016 AND OUR DEC ISION IN ITA NO.457/PUN/2016 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.458/PUN/2016. BEFORE US, REVENUE HAS NOT POINTED OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION AND THAT OF EARLIER YEARS. WE THEREFORE, FOLLOWING THE ORDER OF CO-ORDIN ATE BENCH OF THE TRIBUNAL FOR A.YS. 2010-11 AND 2011-12 AND FOR SIMILAR REASONS, RESTRICT THE DISALLOWANCE TO 3% AS AGAINST THE DISALLOWANCE OF 5% MADE BY THE AO. THUS, THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWE D. 6 ITA NO.382/PUN/2017 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED ON 22 ND DAY OF JANUARY, 2019. SD/- SD/- ( P.S. CHAUDHURY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 22 ND JANUARY, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-PUNE-4, PUNE. PR.CIT-3, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.