The ACIT, 1(2), V. M/s A.R.K. Electricals (JV),

ITA 405/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2765 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.405/IND/2008 A.YS. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 1(2) BHOPAL APPELLANT VS M/S. ARK ELECTRICALS (J.V.) BHOPAL PAN AAHFA-4620R RESPONDENT APPELLANT BY : SHRI K.K. SINGH, CIT DR RESPONDENT BY : SHRI B.C. JAIN ALONG WITH SHRI AMIT JAIN, CAS O R D E R PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 6.6.2008. THE FIRST GROUND RAISED IS T HAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSI ONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS.1,4 7,05,603/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABIL ITY U/S 41(1)(A) OF THE ACT. DURING HEARING OF THIS APPEAL, WE HAVE HEARD S HRI K.K. SINGH, 2 LEARNED CIT DR AND SHRI B.C. JAIN ALONG WITH SHRI A MIT JAIN, LD. COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF O F THE REVENUE IS IN SUPPORT TO THE ASSESSMENT ORDER WHEREAS THE LD. COU NSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE IS A PAR TNERSHIP FIRM, REGISTERED AS ELECTRICAL CONTRACTOR, ENGAGED IN EXTERNAL ELECT RIFICATION WORK, CARRIED OUT FOR NARMADA VALLEY DEVELOPMENT AUTHORITY, BARWA NI. THE WORKS CONTRACT ALLOTTED TO THE ASSESSEE INVOLVES ERECTION OF POLES AND INSTALLATION OF TRANSFORMERS, ETC. THE WORK CONTRAC T WAS EXECUTED BY THE ASSESSEE. THE LEARNED ASSESSING OFFICER FOUND THAT THE AMOUNT OF RS.1,47,05,603/- APPEARING IN THE NAME OF PARTIES, NAMELY, M/S GAY & ELECTRICALS PRIVATE LIMITED (RS.1,42,968/-), M/S GO YAL STEELS (RS.40,10,210/-), M/S GOENKA ELECTRICALS (RS.26,20, 865/-), M/S KAMAL TRADERS (RS.23,27,380/-), LABOUR CONTRACTORS (RS.52 ,57,218/-) AND M/S UMED CEMENT UDHYOG (RS.3,46,962/-) IS BOGUS AND NON -EXISTENT LIABILITY. HE FURTHER OBSERVED THAT THE ASSESSEE HA S ALREADY CLAIMED BENEFIT IN TERMS OF PURCHASE EXPENDITURE CLAIMED IN PROFIT AND LOSS ACCOUNT IN THE PAST. IN THE ASSESSMENT ORDER IT WAS ALSO OBSERVED THAT SURVEY U/S 133A OF THE ACT WAS CARRIED OUT IN MARCH , 2007 WHEREIN THE ASSESSEE ADMITTED NON-EXISTENCE/BOGUS NATURE OF SUC H LIABILITY AND 3 OFFERED THE SAME FOR TAXATION AS UNDISCLOSED INCOME , THEREFORE, HE TREATED THE SAME AS INCOME OF THE ASSESSEE AS CESSA TION OF LIABILITY UNDER SECTION 41(1) OF THE ACT. THE SUBMISSION ON B EHALF OF THE ASSESSEE IS THAT DURING SURVEY PROCEEDINGS THE ASSE SSEE WAS FORCED TO SURRENDER THE BALANCE APPEARING IN THE BOOKS WHICH WAS BEING BROUGHT FORWARD IN THE BOOKS ON ACCOUNT OF UNPAID CREDITORS . THE TOTAL CONTRACT OF RS. 791 LACS WAS EXECUTED BY THE ASSESSEE FROM T HE YEAR 2002-03 TO 2005-06 OUT OF WHICH THE WORK OF RS.50 LACS WAS PEN DING/DELAYED DUE TO DISPUTE CREATED BY LOCAL RESIDENCE AND THE PAYMENT WAS TO BE RECEIVED AGAINST THE WORK DELAYED. UNDISPUTEDLY, THE IMPUGNE D LIABILITIES WERE NOT DISPUTED IN THE RELEVANT ASSESSMENT YEAR 2005-06 AS THE ASSESSEE HAS ALREADY TRANSACTED WITH THE CREDITORS. THE PROVISI ONS OF SECTION 41(1) COULD BE INVOKED ONLY WHEN IT IS ESTABLISHED THAT T HE CREDITORS HAD GIVEN UP THEIR CLAIM/LIABILITY CEASED TO EXIST BY OPERATI ON OF LAW. NO CONTRARY FACTS OR EVIDENCE WERE BROUGHT ON RECORD BY THE ASS ESSING OFFICER CONTROVERTING THE CLAIM OF THE ASSESSEE, THEREFORE, THERE IS NO INFIRMITY IN THE STAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 4. AS FAR AS DELETING THE ADDITION OF RS.1,23,163/ - (WRONGLY MENTIONED AS RS.6,15,819/- IN THE GROUND OF APPEAL) MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF LABOUR WELFARE PAYMEN T, IS CONCERNED, THE CONTENTION RAISED ON BEHALF OF THE REVENUE IS THAT IN THE ASSESSMENT YEAR 2006-07 IDENTICALLY THE ISSUE WAS EXAMINED WHE REIN 10% 4 DISALLOWANCE WAS SUSTAINED, THEREFORE, IT CAN BE SU STAINED UPTO THIS EXTENT IN THE PRESENT ASSESSMENT YEAR ALSO. ON THE OTHER HAND, THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IS THAT FOR THE ASSESSMENT YEAR 2006-07 THE FACTS COULD NOT BE EXPLAINED BY TH E ASSESSEE WHEREAS THE IMPUGNED AMOUNT IS LABOUR WELFARE CESS AND THE GOVERNMENT DEPARTMENT HAS DEDUCTED THE SAME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE AMOUNT OF RS.6,15,819/- WAS DISALLOWED BY THE AO ON THE GROUND THAT THE AMOUNTS ARE SUPPORTED BY SELF VOUCH ERS FOR WHICH NO BILL OR PROOF OF PAYMENT WAS AVAILABLE, THEREFORE, 1/5 TH OF THESE EXPENSES WAS DISALLOWED. THE AMOUNT OFRS.6,15,819/- WAS DED UCTED BY NARMADA VALLEY DEVELOPMENT AUTHORITY AS LABOUR WELFARE CHAR GES AS PER THE SCHEME OF THE M.P. GOVERNMENT AS THE PAYMENT ON ACC OUNT OF LABOUR WELFARE IS TO BE DEDUCTED FROM THE CONTRACT PAYMEN TS AS SUCH DEDUCTION IS TO BE USED AGAINST CASUALTIES OR FOR THE WELFARE OF LABOUR AT THE GOVERNMENT BASED SITES. ADMITTEDLY, THE ASSESSEE F URNISHED THE COPY OF LEDGER ACCOUNT AND SUPPORTING SHEETS EVIDENCING SUCH DEDUCTION BY NVDA BEFORE THE AUTHORITIES. THE IMPUGNED AMOUNT W AS A CONTRACTUAL AS WELL AS LEGAL LIABILITY AND EVIDENCE OF SUCH DED UCTION WAS PRODUCED BY THE ASSESSEE. SINCE NOTHING CONTRARY TO THE ABO VE POSITION WAS 5 BROUGHT TO OUR NOTICE, THEREFORE, THERE IS NO INFIR MITY IN THE IMPUGNED ORDER ON THIS ISSUE ALSO. 6. THE THIRD GROUND TAKEN BY THE REVENUE RELATES TO ADMISSION OF FRESH EVIDENCE IN VIOLATION OF RULE 46A OF IT RU LES, 1962 IN RESPECT OF TRADE LIABILITY AND EXPENSES. THIS GROUND WAS NOT A RGUED BY THE LEARNED CIT DR, THEREFORE, DISMISSED AS SUCH. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 TH JUNE, 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER JUNE 30 , 2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE *DN/