ACIT, CIR-8, Nagpur V. M/S PHOENIX ENGINEERING, Nagpur

ITA 40/NAG/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4527 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGNES P THOMAS
• Assessee Lawyers: R K GANERIWAL
• Keywords: Rejection of books of accounts
• Section: 133A

Judgement Text

1 ITA NO. 40/NAG/2014 , INCOME TAX APPELLATE TRIBUNAL,NAGPUR BENCH . . , BEFORE S/SH. D T GARASIYA,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ ITA/40/NAG/201 4 , / ASSESSMENT YEAR:2009 - 10. ASSTT. COMMISSIONER OF INCOME - TAX,CIRCLE - 8, NAGPUR. VS. M/S PHOENIX ENGINEERING, K - 35, HINGNA ROAD, MIDC, NAGPUR - 440 016. PAN AABFP5391G ( / APPELLANT) ( / RESPONDENT ) REVENUE BY: S MT. AGNES P. THOMAS. ASSESSEE BY: S HRI R.K. GANERIWAL. / DATE OF HEARING: 30.08.2016 / DATE OF PRONOUNCEMENT: 30.08.2016 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER DTD.26.11.2013 OF CIT(A) - II,NAGPUR,THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL.ASSESSEE - COMPANY,ENGAGED IN THE BUSINESS OF ROAD CONSTRUCTION,MOBILE TOWER CONSTRUCTION AND FABRICATION WORK,FILED ITS RETURN OF INCOME ON 30/09/ 2009,DECLARING TOTAL INCOME AT RS.41.11LAKHS.THE AO COMPLETED THE ASSESSMENT U/S.143 (3) OF THE ACT,ON 30/09/2011, DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1.03 CRORES. 2.FIRST GROUND OF APPEAL IS ABOUT THE GENUINENESS OF THE EXPENSES UNDER THE HEAD SITE EXPENSES. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAS DEBITED SITE EXPENSES, AMOUNTING RS. 2.70CRORES (APPROXIMATELY) IN ITS BOOKS OF ACCOUNTS, THAT IT HAD MADE THE SAID PAYMENT IN CASH. HE HELD THAT SELF - MADE VOUCHERS NEARLY ISSUING DISBURSEMENT OF WAGES WAS NOT SUFFICIENT TO SUPPORT THE CLAIM OF LABOUR CHARGES DEBITED UNDER THE HEAD SITE EXPENSES, THAT THE ASSESSEE HAD FAILED TO MAINTAIN INDIVIDUAL LABOURER ATTENDANCE REGISTER, THAT NO INDEPENDENT VERIFICATION COULD BE CARRIE D OUT ABOUT THE SELF - MADE VOUCHERS. THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND MADE CERTAIN ADDITIONS. 2.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM THE ASSESSEE,SU BMITTED EVIDENCE IN FORM OF LEDGER ACCOUNT, VOUCHERS EVIDENCING THE EXPENDITURE OF RS. 2.76 CORRODES. HE CALLED FOR A REMAND 2 ITA NO. 40/NAG/2014 REPORT FROM THE AO AND ANALYSED THE EVIDENCES PRODUCED BEFORE HIM, INCLUDING THE SITE EXPENSES. HE ALSO TOOK NOTICE OF THE EXPENDIT URE INCURRED FOR THE AY. 2008 09 UNDER THE SAME HEAD AND FOUND THAT QUANTUM IN THE NATURE OF THE SITE EXPENDITURE WAS ALMOST IDENTICAL TO THE CLAIM MADE IN THE AY. UNDER APPEAL. HE FURTHER OBSERVED THAT RETURN FOR THAT YEAR WAS SCRUTINISED AND THE CLAIM OF THE ASSESSEE WAS ACCEPTED. HE HELD THAT THERE WAS NO MATERIAL BASIS ON WHICH THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION COULD BE REJECTED, THAT SUBSTANTIAL PORTION OUT OF THE EXPENDITURE IN QUESTION WAS ON ACCOUNT OF SUBLET EXPENSES, THAT THE PAYMENT WAS MADE BY CHEQUES, THAT CERTAIN PAYMENTS WERE MADE IN CASH, THAT THERE WAS NO BASIS FOR THE AO TO COME TO THE CONCLUSION THAT EXPENSES INCURRED BY THE ASSESSEE UNDER THE HEAD SITE EXPENSES WERE NOT SUPPORTED BY APPROP RIATE EVIDENCES. 2.2. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND ARGUED THAT ASSESSEE HAD MADE PAYMENT IN CASH, THAT IT HAD NOT PRODUCED EVIDENCES IN ITS SUPPORT.THE AUTHORISED REPRESENTATIV E(AR) STATED THAT ASSESSEE HAD MADE THE PAYMENT THROUGH BANKING CHANNELS, THAT ONLY SMALL PORTION OF THE PAYMENT WAS MADE IN CASH, THAT FOR THAT THE ASSESSEE HAD PRODUCE THE VOUCHERS BEFORE THE AO AND THE FAA, HE REFERRED TO THE PAGES 115 AND 116 OF THE PA PER BOOK TO PROVE THAT MOST OF THE PAYMENTS WERE MADE BY WAY OF CHEQUES. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AN ACTION UNDER SECTION 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 14/11 /2008, THAT DURING THE COURSE OF SURVEY THE ASSESSEE HAD OFFERED INCOME OF RUBY 65 LAKHS FOR TAXATION, THAT IT HAD FILED THE DETAILS OF BIFURCATIONS OF THE INCOME OFFERED, THAT AO HAD MADE CERTAIN ADDITIONS TO THE INCOME OF THE ASSESSEE IN ADDITION TO THE INCOME OFFERED BY THE ASSESSEE.IT IS FOUND THAT THAT THE AO HAD MADE THE DISALLOWANCE UNDER THE HEAD SITE EXPENSES ON THE BASIS THAT PAYMENTS WERE MADE IN CASH,THAT THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURC E FOR THE PAYMENTS MADE IN CASH, THAT IT HAD FILED THE VOUCHERS ABOUT THE PAYMENTS MADE, THAT OUT OF THE TOTAL EXPENDITURE OF RS.3,55, 01,276/ - , THE ASSESSEE HAD MADE PAYMENT OF RS. 30.39 LAKHS IN CASH.THE AO HAD NOT FOUND ANY DISCREPANCY IN THE VOUCHERS P RODUCED BY THE ASSESSEE.THEREFORE, HE WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE JUST BECAUSE THE PAYMENTS WERE MADE IN CASH.IT IS ALSO FOUND THAT HE HAD NOT INVOKE THE PROVISIONS OF SECTION 40A(3)OF THE ACT.IN OUR OPINION,THE ORDER OF THE FAA DOES NOT S UFFER FROM ANY LEGAL INFIRMITY. SO,CONFIRMING THE ORDER OF THE FAA,WE DECIDE THE FIRST GROUND OF APPEAL AGAINST THE AO. 3 ITA NO. 40/NAG/2014 3. NEXT GROUND OF APPEAL IS ABOUT LOSS INCURRED ON SALE OF MOBILE TRANSMISSION TOWER. THE AO HELD THAT THE ASSESSEE HAD NOT SUPPORTED IT S CLAIM BY SUBMITTING EVIDENCES OF REASONABLE DEGREE. 3.1. BEFORE THE FAA, THE ASSESSEE CONTENDED THAT IT HAD SUBMITTED PURCHASE ORDER CONTAINING THE TECHNICAL SPECIFICATION,INSPECTION REPORT AND CORRESPONDENCE ENTERED WITH THE PURCHASER I.E. M/S. ALAN DICK & COMPANY (INDIA) PRIVATE LIMITED.DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS ALSO ARGUED THAT EVIDENCES TO ESTABLISH THE SALE OF THE SAID ITEMS AT SCRAP VALUE TO A LOCAL ESTABLISHMENT WAS ALSO PRODUCED. THE FAA CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE REMAND REPORT,THE FAA HELD THAT BECAUSE OF THE DIFFERENCES BETWEEN THE PURCHASER AND THE ASSESSEE IT WAS DIFFICULT FOR THE ASSESSEE TO GET A CONFIRMATION ABOUT THE CANCELLATION, THATIT HAD SUBMI TTED THE SALE DETAILS IN RESPECT OF THE GOODS THAT WERE EVENTUALLY SOLD AT SCRAP VALUE, THAT THE ASSET IN QUESTION WAS DULY REFLECTED IN THE OPENING STOCK OF THE ASSESSEE AS ON 01/04/2008, THAT IT HAD FURNISHED COMPLETE DETAILS, THAT NO CONTRARY EVIDENCE W AS BROUGHT ON RECORD TO DISBELIEVE THE CONTENTION OF THE ASSESSEE THAT IT HAD INCURRED A LOSS IN THE SAID TRANSACTION. 3.3. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO AND THE AR RELIED UPON THE ORDER OF THE FAA. WE FIND THAT THE ASSESSEE HAD FURNISHED A LL THE DETAILS ABOUT THE TRANSACTION INCLUDING THE SALE OF THE GOODS AT A SCRAP VALUE, THAT THERE IS NO DOUBT ABOUT THE DIFFERENCES BETWEEN THE PURCHASER AND THE ASSESSEE,THAT FAA HAD CALLED FOR A REMAND REPORT, THAT AFTER CONSIDERING THE AVAILABLE MATERIA L HE HAD ARRIVED AT THE CONCLUSION THAT TRANSACTION WAS GENUINE AND THE ASSESSEE HAD SUFFERED A LOSS AS A RESULT OF SALE OF THE TRANSMISSION TOWER. CONSIDERING THE FACT THAT HE HAD GIVEN A CATEGORICAL FINDING OF FACT BASED ON THE EVIDENCES, WE ARE OF THE O PINION THAT THERE IS NO NEED TO INTERFERE WITH HIS ORDER.SO,CONFIRMING HIS ORDER,WE DECIDE THE GROUND AGAINST THE AO. 4. LAST GROUND OF APPEAL IS ABOUT UNDERVALUATION OF CLOSING STOCK.DURING THE ASSESSMENT PROCEEDINGS THE AO HAD HELD THAT THE PAYMENT OF RS. 35.37 LAKHS WAS FOR THE WORK DONE DURING THE PERIOD PRIOR 31/03/2009. HE FURTHER HELD THAT A SUM OF RS. 1, 14, 02, 011/ - RECEIVED 4 ITA NO. 40/NAG/2014 FROM MAHARASHTRA STATE ROAD DEVELOPMENT CORPORATION LTD.WAS RECEIVED DURING THE AY. 2009 - 10. 4.1. DURING THE APPELLATE PROCEEDI NGS, THE ASSESSEE CONTENDED THAT THERE WAS NO BASIS FOR THE AO TO HOLD THAT THE ASSESSEE HAD UNDERVALUED ITS CLOSING STOCK, THAT WITHOUT ANY BASIS HE HAD INCLUDED THE ABOVE - MENTIONED TWO AMOUNTS. THE FAA CALLED FOR A REMAND REPORT IN THAT REGARD. AFTER CON SIDERING THE SAME HE HELD THAT THE ASSESSEE HAD FURNISHED A PROPER EXPLANATION WITH REGARD TO THE PAYMENT OF RS. 35.37 LAKHS, THAT THE AO IN ITS REMAND REPORT HAS CLEARLY COME FROM THAT ASSESSEE HAD NOT RECEIVED ANY PAYMENT FROM MSRDCL DURING THE AY. 2009 - 10, THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIONS. 4.2. BEFORE US,THE DR AND THE AR RELIED UPON THE ORDERS OF THE AO AND THE FAA RESPECTIVELY. WE FIND THAT THE AO HIMSELF HAD, DURING THE REMAND PROCEEDINGS, ADMITTED THAT ASSESSEE HAD NOT RECEIVED AN Y PAYMENT FROM MSRDSL, THAT NO EVIDENCE WAS AVAILABLE ABOUT RECEIPT OF RS. 35.37 LAKHS.THEREFORE , IN OUR OPINION,THE ORDER OF THE FAA HAS TO BE ENDORSED CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES.LAST GROUND OF APPEAL IS DECIDED AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH , AUGUST, 2016. , 2016 SD / - SD / - ( . . / D T GARASIYA ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NAGPUR ; DATED :30 . 0 8 . 2016. 5 ITA NO. 40/NAG/2014 / COPY OF THE ORDER FORWARDED TO : 1.APPELLANT / 2. RESPONDENT / 3.THE CONCERNED CIT(A)/ , 4.THE CONCERNED CIT / 5.DR NAGPUR BENCH, ITAT, / , , . . . 6.GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT,NAGPUR.