M/s. V.K. Patil, Kolhapur V. Deputy Commissioner of Income-tax, Circle - 2, Kolhapur

ITA 415/PUN/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6866 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P S SHINGTE
• Keywords: Wrong claim; Corroborative evidences
• Section: 234B

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE , BEFORE SHRI VIKAS AWASTHY, JM . / ITA NO . 415 /P U N/201 8 / ASSESSMENT YEAR : 20 10 - 11 M/S. V.K. PATIL, MALATI TOWERS, B - 9, 223/3, E WARD, NR. HANDICAP GAS AGENCY, TARABAI PARK, DISTT. - KOLHAPUR PAN : AABFV0362M ....... / APPELLANT / V/S. THE DY. COMMISSIONER OF INCOME TAX, A AY AKAR BHAVAN, TARABAI PARK, KOLHAPUR / RESPONDENT ASSESSEE BY : SHRI P.S. SHINGTE REVENUE BY : SHRI RAJESH GAWALI / DATE OF HEARING : 1 0 - 01 - 2019 / DATE OF PRONOUNCEMENT : 28 - 0 2 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 2, KOLHAPUR DATED 05 - 02 - 2018 FOR THE ASSESSMENT YEAR 20 10 - 11. 2. THE ASSESSEE IN APPEAL HAS RAISED FOLLOWING GROUNDS : 2 ITA NO . 415/PUN/2018, A.Y. 2010 - 11 1) ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON MERIT IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER, CONFIRMING THE ADDITION OF RS. 2,04,350 / - AS LACK OF EVIDENCE AND EXPENSES NOT INCURRED FOR BUSINESS PURPOSE. 2) ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) HAS ERRED IN DISALLOWING THE MACHINE RENT AMOUNTING TO RS. 1,21,498/ - AS LACK OF SUPPORTING EVIDENCE. WHEN THE ASSESSEE HAS ALL THE EVIDENCE OF PAYMENT OF EXPENDITURE. 3) ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) HAS ERRED LAW AND ON MERIT IN LEVYING INTEREST UNDER SECTION 234A, 234B & 234 C OF THE ACT. 4) THE APPELLANT CRAVES FOR LEAVE TO AMEND, MODIFY OR ADD TO ANY OF THE ABOVE GROUNDS OF APPEAL AND 1 OR TAKE ANY ADDITIONAL GROUND OF APPEAL, IF NECESSA RY. 3. SHRI P.S. SHINGTE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IN SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE AD HOC DISALLOWANCE OF 25% OF THE SALARY PAID TO ITS EMPLOYEES . THE DISALLOWANCES HAS BEEN MADE MERELY ON THE GROUND THAT THE SIGNATURES/INITIALS OF THE FOUR EMPLOYEES I.E. S/SHRI D.Y. SAWANT, R.S. HAREL, ANIL YERUDKAR AND B.R. JADHAV DO NOT MATCH ON THE MONTHLY SALARY SHEETS. THE LD. AR SUBMITTED THAT ALL THE AFORESAID FOUR EMPLOYEES WERE WORKING WITH THE ASSESSEE FOR VERY LONG TIME. THE LD. AR FURNISHED PHOTOCOPIES OF THEIR PAN AND AADHAR CARD. THE LD. AR REFERRED TO THE SALARY SHEET FOR THE MONTH S OF APRIL, 2009 TO MARCH, 2010 AT PAGES 32 TO 43 OF THE PAPER BOOK. THE LD. AR POINTED THAT THE SIGNATURES OF THE AFORESAID PERSONS O N ALL THE SALARY SHEETS ARE ALMOST THE SAME. THE ASSESSING OFFICER WHILE MAKING AD HOC DISALLOWANCE HAS ADMITTED IN PRINCIPLE THAT THEY WERE THE EM PLOYEES OF ASSESSEE . IF THE ASSESSING OFFICER HAD REAL DOUBT OVER THE CLAIM OF ASSESSEE , THE ASSESSING OFFICER SHOULD HAVE DISALLOWED ENTIRE SALARIES PAID TO ALLEGED BOGUS EMPLOYEES. 3 ITA NO . 415/PUN/2018, A.Y. 2010 - 11 3.1 IN RESPECT OF GROUND NO. 2 OF THE APPEAL THE LD. AR SUBMITTED THAT THE MACHINE S WERE HIRED AT THE SITE. THE PAYMENTS WERE MADE BY SUPERVISOR ACCORDING TO THE WORK DONE. HIRE CHARGES FOR USE OF MACHINERY ARE PAID EITHER ON MONTHLY OR HOURLY BASIS. SINCE, THE PAYMENTS WERE MADE AT THE SITE PROPER RECORD OF PAYMENTS WERE NOT MAINTAINED BY THE SUPERVISOR. HOWEVER, THE FACT THAT THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION BUSINESS HAS NOT BEEN DISPUTED BY THE REVENUE. 4. ON THE OTHER HAND SHRI RAJESH GAWALI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITIONS. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE BILLS FOR HIRING MACHINERY. TO THE EXTENT OF BILLS PRODUCED BY THE ASSESSEE , MACHINERY HIRING CHARGES WERE ALLOWED. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. IN GROUND NO. 1 OF APPEAL , THE ASSESSEE HAS ASSAILED DISALLOWANCE ON SALARY EXPENDITURE RS. 2,04,350/ - . THE AFORESAID SALARY EXPENDITURE HAS BEEN DISALLOWED MERELY ON THE GROUND THAT THE SIGNATURES/INITIALS OF FOUR EMPLOYEES NAMELY S/SHRI D.Y. SAWANT, R.S. HAREL, ANIL YERUDKAR AND B.R. JADHAV DO NOT MATCH ON THE MONTHLY SALARY SHEETS. A CURSORY LOOK AT THE SALARY SHEETS PLACED ON RECORD AT PAGES 32 TO 43 OF THE PAPER BOOK REVEAL THAT THE AFORESAID PERSONS HAVE INITIAL ED /SIGNED AGAINST THEIR RESPECTIVE NAMES ON THE REVENUE STAMP ACKNOWLEDGING RECEIPT OF SALARY. THERE ARE 8 EMPLOYEES MENTIONED IN THE SALARY SHEETS FOR EVERY MONTH DURING FINANCIAL YEAR 2009 - 10. THERE ARE MINOR DISCREPANCIES IN THE INITIALS OF THE EMPLOYEES AT THE TIME OF RECEIVING SALARY IN EACH MONTH. THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE OF 25% OF THE TOTAL SALARY PAID . IF THE ASSESSING OFFICER HAD DOUBT ABOUT THE BOGUS CLAIM OF SALARY PAID TO 4 ITA NO . 415/PUN/2018, A.Y. 2010 - 11 AFORESAID PERSONS , HE SHOULD HAVE DISALLOWED ENTIRE SALARY PAYMENTS TO SUCH PERSONS. HOWEVER, THE ASSESSING OFFICER WITHOUT ANY COGENT REASONS AND WITHOUT CONDUCTING FURTHER ENQUIRY MADE AD HOC DISALLOWANCE OF 25%. IN MY CONSIDERED OPINION SUCH DISALLOWANCE I S UNWARRANTED. ACCORDINGLY, THE FINDINGS OF AUTHORITIES BELOW ON THIS ISSUE ARE REVERSED AND GROUND NO. 1 OF THE APPEAL IS ALLOWED. 6. IN GROUND NO. 2 OF THE APPEAL , THE ASSESSEE HAS ASSAILED DISALLOWANCE OF MACHINE RENT RS.1,21,498/ - . A PERUSAL OF BILLS/INVOICES AT PAGES 49 TO 70 OF THE PAPER BOOK REVEAL THAT THE ASSESSEE HAS PAID MACHINE HIRING CHARGES TO VARIOUS PARTIES. AS PER C ONTRACT ACCOUNT AT PAGE 6 OF THE P APER BOOK THE ASSESSEE HAS PAID MACHINE RENT CHARGES AGGREGATING TO RS.3,35,068/ - . THE LD. AR HAS EXPLAINED THAT SOME OF THE BILLS/RECEIPTS WERE NOT MAINTAINED BY THE SUPERVISOR AT THE SITE. HOWEVER, THE VOUCHERS AGAINST WHICH THE PAYMENTS WERE MADE HAVE BEEN DULY SIGNED BY THE RECIPIENTS. IN SO FAR AS THE CONSTRUCTION ACTIVITIES CARRIED OUT BY THE ASSESSEE, THE REVENUE HAS NOT DISPUTED THE SAME. SUBSTANTIAL MACHINE CHARGES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. IT IS APPROXIMATELY 1/3 RD OF THE R ENT CHARGES FOR WHICH THE ASSESSEE COULD NOT PRODUCE BILLS/VOUCHERS THAT HAVE BEEN DISALLOWED BY THE AUTHORITIES BELOW. TAKING INTO CONSIDERATION ENTIRETY OF FACTS , THE ENDS OF JUSTICE WOULD MEET IF 25% OF MACHINE HIRING CHARGES NOT SUPPORTED BY BILLS/INV OICES ARE DISALLOWED. THUS, OUT OF TOTAL DISALLOWANCE OF RS.1,21,498/ - , DISALLOWANCE OF RS.30,375/ - IS CONFIRMED. THE ASSESSEE GETS RELIEF OF REMAINING AMOUNT. ACCORDINGLY, GROUND NO. 2 OF THE APPEAL IS PARTLY ALLOWED IN THE TERMS AFORESAID. 5 ITA NO . 415/PUN/2018, A.Y. 2010 - 11 7. IN GROUND NO. 3 OF THE APPEAL, THE ASSESSEE HAS ASSAILED CHARGING OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. CHARGING OF INTEREST U/S. 234A, 234B AND 234C IS CONSEQUENTIAL AND MANDATORY, HENCE, GROUND NO. 3 RAISED IN APPEAL BY THE ASSESSEE IS DISMIS SED BEING DEVOID OF ANY MERIT. 8. THE GROUND NO. 4 IS GENERAL IN NATURE, HENCE, REQUIRES NO ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 28 TH DAY OF FEBRUARY, 2019 . SD/ - ( / VIKAS AWASTHY) / JUDICIAL MEMBER / PUNE; / DATED : 28 TH FEBRUARY, 2019 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, KOLHAPUR 4. THE PR. COMMISSIONER OF INCOME TAX - 2, KOLHAPUR 5. , , - , / DR, ITAT, SMC BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE