BHAGWATI INTERIORS, MUMBAI V. ACIT CIR 15(3), MUMBAI

ITA 4259/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8058 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: S ATISH CHANDAK
• Keywords: Rectification of order; Opportunity of being heard; Revised return
• Section: 40A(3); 143(3); 133(6); 131

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI R.C. SHARMA, AM AND AMIT SHUKLA, J.M. ./ I.T.A. NO.4259 /MUM/2013 ( / ASSESSMENT YEAR : 2009-2010 BHAG WATI INTERIORS, PLOT NO. 55, W.T. PATIL MARG, OPP. AMAR THEATRE, NEAR STAR AUTO GARAGE CHEMBUR (EAST), MUMBAI 400 071. / VS. ACIT, CIRCLE 15(3), MUMBAI. ./ PAN : AAGFB8358N ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI SATISH CHANDAK R E SPONDENT BY : SHRI PREMANAND J. / DATE OF HEARING :11-09-2014 / DATE OF PRONOUNCEMENT :10-10-2014 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS IS AN APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) - 26, MUMBAI DATED 11-03-2003 FOR THE A. Y. 2009-10 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1 961 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE :- 1 . ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF LD. A.O. I N MAKING AN ADDITION RS. 6,63,619!- ON ACCOUNT OF ALLEGED UNACCOUNTED AND IN FLATED PURCHASES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S C ASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING A DISALLOWANCE MADE BY T HE LD. A.O. ON ACCOUNT OF ALLEGED CASH PURCHASES AMOUNTING TO RS. 5,69,479/- U/S SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S C ASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.93,07 6/- MADE BY THE LD. A.O. ITA 4259/M/13 2 ON ACCOUNT OF LIABILITY IN THE NAME OF M/S. LAXMI T RADING COMPANY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT 'S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,34,484/- MADE B Y THE LD.A.O. ON ACCOUNT OF TRANSPORTATION CHARGES U/S SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 5. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT' S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE AD-HOC DISALLOWANCE TO THE EXTENT OF RS. 39,80,000 OUT OF THE DISALLOWANCE OF RS.59,70,000/- MADE BY THE L D.A.O. ON ACCOUNT OF PAYMENT TOWARDS DAILY WAGES. 6. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS C ASE AND IN LAW THE LD. CIT(A) ERRED IN NOT DELETING THE ADDITION MADE BY THE LD. A.O. OF RS. 2 0,00,000/- ON ACCOUNT OF ALLEGED UNACCOUNTED RECEIPTS FROM M/S. MAGHARAM CHE TTARAM KULARIA(M/S. ANJ). 7. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT' S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 92,557/- MADE BY THE LD. A.O. ON ACCOUNT OF ALLEGED UNACCOUNTED RECEIPTS FROM M/S. C ONFIDENT PROJECTS. 8. THE APPELLANT CRAVES LEAVES TO ADD, TO AMEND, AL TER, MODIFY AND / OR WITHDRAW ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, EACH OF WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN INTERIOR DECORA TION WORK. DURING THE YEAR UNDER CONSIDERATION, THE A.O. MADE ADDITION ON ACCO UNT OF ALLEGED UNACCOUNTED PURCHASES/INFLATED PURCHASES. CONTENTIO N OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT AT THE TIME OF ASSES SMENT, PROPER RECONCILIATION COULD NOT BE MADE. A REMAND REPORT WAS CALLED BY TH E LD. CIT(A) WHEREIN HE OBSERVED THAT IN THE CASE OF PURCHASES FROM GOPALDA S AJAYKUMAR VIDE BILL DATED 27-03-2008 OF RS. 2,65,189/- HAS BEEN BOOKED BY THE ASSESSEE AFTER A GAP OF ONE YEAR I.E ON 27-03-2009. IN RESPECT OF MA JICA HARDWARE, IT WAS OBSERVED THAT THE ASSESSEE BOOKED A BILL TWICE AND IN THE CASE OF DILIP VELJI NANDI IT WAS STATED THAT BILLS OF RS. 43,751/- WAS NOT ENTERED IN THE BOOKS. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE AD DITIONS AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE MATERIAL PLACED ON RECORD AND FOUND THAT THE DI SALLOWANCE WAS MADE BY THE A.O. ON THE PLEA THAT BILL DATED 27-03-2008 HAS BEEN BOOKED BY THE ASSESSEE AFTER A GAP OF ONE YEAR I.E ON 27-3-2009 T HEREFORE RECONCILIATION IS ITA 4259/M/13 3 UNACCEPTABLE. WE FIND THAT BILL DATED 27-3-2008 WA S RECEIVED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09 AND THE SAME WAS ACCOUNTED BY THE ASSESSEE IN THE FINANCIAL YEAR 2008-09, THEREFORE, THE CLAIM OF THE ASSESSEE IS REQUIRED TO BE ALLOWED IN SO FAR AS THE GENUINENESS OF EXPENDITURE AND PAYMENTS IS NOT IN DOUBT. SINCE THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR ITSELF, THE ASSESSEE HAD DEBITED THE EXPENDITU RE IN THE YEAR UNDER CONSIDERATION I.E. IN THE YEAR OF CRYSTALLIZATION, THERE IS NO REASON TO DISALLOW THE SAME. ACCORDINGLY WE DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 2,65,189/-. 4. IN RESPECT OF PURCHASES FROM GOPALDAS AJAYKUMAR, WE FIND THAT IN RESPECT OF BILL DATED 29-05-2008 FOR RS. 1,15,310/- , THE CORRECT AMOUNT OF BILL IS RS. 1,36,643/- WHICH INCLUDES VAT OF RS. 14,414/ - AND OTHER EXPENSES OF RS. 6919/-. SINCE THE ASSESSEE HAS SEPARATELY ACCOU NTED FOR VAT AND OTHER EXPENSES, THE FIGURE OF PURCHASES COULD NOT BE MATC HED. IF WE TOTAL UP OF THE THINGS, ALL THE PURCHASES ARE TALLIED AND FOUND TO BE DULY RECORDED IN THE BOOKS OF ACCOUNT. ACCORDINGLY WE DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 1,36,643/-. 5. IN RESPECT OF PURCHASES FROM DILIP VELJI NANDEE, WE FIND THAT THE PURCHASES WAS SHOWN BY THE ASSESSE AT RS. 2,49,028/ - WAS LESS THAN THE PURCHASES OF RS. 2,92,779/- BOOKED BY THE PARTY. TH E DIFFERENCE OF RS. 43,751/- WAS ADDED BACK AS UNACCOUNTED PURCHASES. S INCE THE PURCHASES OF RS. 43,751/- MADE FROM DILIP VELJI NANDI WERE NOT E NTERED IN THE BOOKS OF ACCOUNT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES DISALLOWING SUCH PURCHASES. ACCORDINGLY THE ACTION OF THE A.O. IS CONFIRMED WITH RESPECT TO BILL OF RS. 43,751/-. ITA 4259/M/13 4 6. THE A.O. HAS ALSO DISALLOWED A SUM OF RS. 5,69,4 79/- ON ACCOUNT OF ALLEGED CASH PURCHASES BY INVOKING PROVISIONS OF SE CTION 40A(3) OF THE ACT. IN THIS REGARD, THE A.O. OBSERVED THAT NOTICES ISSUED U/S 133(6) OF THE ACT IN SOME CASES WERE RETURNED BACK UNSERVED. CONTENTI ON OF THE ASSESSEE WAS THAT ALL PURCHASES WERE MADE FROM REGISTERED DEALER S, THEREFORE, THE DEPARTMENT BY EXERCISING THE POWERS U/S 131 OF THE ACT COULD HAVE ENSURES THEIR ATTENDANCE. THE A.O. HAS ALSO VERIFIED THE LE DGER ACCOUNTS SUBMITTED IN RESPECT OF M/S METAL CORPORATION AND M/S JAI AMBE M ETALS WHEREIN IT WAS FOUND THAT CERTAIN CASH PAYMENT WAS MADE AGAINST TH E PURCHASES. THERE WAS PURCHASES OF RS. 4,48,290/- FROM M/S APEX METAL COR PORATION AND RS. 1,21,189/- FROM M/S JAI AMBE METAL CORPORATION. BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT, THE A.O. HAS DISALLOW ED THE CASH PAYMENT WHICH WAS CONFIRMED BY THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT CASH PAYMENTS ON DIFFERENT DATES WERE MADE ALONG WITH TH E CHEQUE PAYMENT. HOWEVER, ON NONE OF THE DATES THE CASH PAYMENT IN E XCESS OF RS. 20,000/- WAS MADE. AS PER SECTION 40A(3), IRRESPECTIVE OF A NY NUMBER OF TRANSACTIONS, WHERE THE AMOUNT DOES NOT EXCEED THE PRESCRIBED AMO UNT IN EACH DAY, THE RIGORS OF SECTION 40A(3) WILL NOT APPLY. THE SAID SECTION READS AS UNDER;- WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPEC T OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACC OUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. 8. WE FIND THAT THE ASSESSEE FIRM WAS ENGAGED TO UN DERTAKE LABOUR CONTRACTS. ON SO MANY OCCASIONS, THE ASSESSEE NEEDS SOME MATERIALS URGENTLY TO COMPLETE THE CONTRACTS ON TIME AND IN SOME OCCAS ION, THE ASSESSEE ALSO SENT HIS LABOURS TO BUY THE MATERIALS AND GIVES CAS H FOR THE SAME UNLESS CASH PAYMENT IS MORE THAN RS. 20,000/- IN ONE DAY, NO DI SALLOWANCE CAN BE MADE U/S 40A(3) OF THE ACT. WE FIND THAT SINCE THE PAYM ENTS MADE WERE LESS THAN ITA 4259/M/13 5 RS. 20,000/- ON A SINGLE DAY, THE SAME DO NOT ATTRA CT PROVISIONS OF SECTION 40A(3) OF THE ACT. ACCORDINGLY THE DISALLOWANCE OF RS. 5,69,479/- MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40A(3) O F THE ACT IS DIRECTED TO BE DELETED. 9. THE ADDITION OF RS. 93,076/- WAS MADE ON ACCOUNT OF LIABILITY IN THE NAME OF LAXMI TRADING CO. P. LTD. THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY RECONCILIATION IN THE MATTER OF O UTSTANDING CREDIT BALANCE OF RS. 93,076/-. WE FIND THAT IN THE REMAND PROCEEDING S, THE ASSESSEE HAS FURNISHED COPY OF BILL FROM LAXMI TRADING CO. P. LT D. IN RESPECT OF PURCHASES MADE IN THE EARLIER YEAR I.E A.Y. 2008-09. HOWEVER, THE A.O. DID NOT AGREE AND MADE THE ADDITION. IN THE INTEREST OF JUSTICE AND F AIR PLAY, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO GIVE ONE MORE OPPO RTUNITY TO RECONCILE IN RESPECT OF PURCHASES MADE FROM LAXMI TRADING CO. P. LTD. WHEREIN THE BALANCE WAS SHOWN AT RS. 93,076/-. THE A.O. HAS TO DECIDE AFRESH AFTER GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. THE A.O. HAS ALSO MADE AN ADDITION OF RS. 1,34, 484/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN RESPE CT OF TRANSPORTATION CHARGES. 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND THAT SINCE THE TRANSPORTATION CHARGES WAS PAID WITHOUT DEDUCTION O F TAX AT SOURCE, THE A.O. WAS JUSTIFIED IN DISALLOWING THE SAME BY INVOKING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. NO INTERFERENCE IS REQUIRED IN THE ORDER OF THE A.O. 12. THE ASSESSEE IS ALSO AGGRIEVED FOR ADHOC DISALL OWANCE OF RS. 30% OUT OF DAILY WAGES PAID BY THE ASSESSEE. BY THE IMPUGNED O RDER, THE LD. CIT(A) HAS REDUCED THE ADHOC DISALLOWANCE FROM 30% TO 20%. TH E ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA 4259/M/13 6 13. WE HAVE CONSIDERED THE RIVAL CONTENTION AND FOU ND THAT THE ASSESSEE IS IN THE BUSINESS OF TAKING CONTRACTS/SUB CONTRACTS U NDERTAKING CARPENTRY/INTERIOR WORK ON A JOB WORK BASIS. THE S AID WORK CAN BE EXECUTED MAINLY THROUGH LABOURERS WHO ARE MOSTLY THE AGRICUL TURAL LABOURERS WHO MIGRATE TO URBAN AREAS FOR WORK DURING THE NON-SEAS ONAL PERIOD. THESE LABOURERS ARE NOT HAVING THEIR PROPER ADDRESS OR PA N. IN THE ASSESSEES CASE, THE LABOUR CHARGES ARE THE CORE EXPENDITURE WHICH I S REQUIRED TO BE INCURRED NECESSARILY FOR THE PURPOSE OF BUSINESS. HOWEVER, THE A.O. DID NOT CHOOSE TO VERIFY DOUBTFUL EXPENDITURE AND RESORTED TO SWEEPY DISALLOWANCE. THERE IS NO DISPUTE TO THE FACT THAT THE ONLY ACTIVITY OF GENER ATION OF PROFIT IS UNDERTAKING JOB WORK FOR THE INTERIOR DECORATION. AS AGAINST T HE TOTAL CONTRACT RECEIPT OF RS. 5.56 CRORES, LABOUR EXPENDITURE OF RS. 1.99 CRO RES WAS INCURRED WHICH AMOUNTS TO 35% OF THE SALES AND 20.51% OF SALES PLU S CLOSING STOCK. KEEPING IN VIEW THE TOTALITY OF THE FACTS VIS--VIS NATURE OF ASSESSEES BUSINESS AND CONSIDERING THE FACT THAT THE LABOUR CONSTITUTES TH E CORE EXPENDITURE OF THE ASSESSEES BUSINESS, WE MODIFY THE ORDER OF THE LOW ER AUTHORITIES AND DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE OF LABOUR CHA RGES TO 5% IN PLACE OF DISALLOWANCE OF 20% CONFIRMED BY THE LD. CIT(A). 14. THE A.O. HAS ALSO MADE AN ADDITION OF RS. 20 LA CS IN RESPECT OF DIFFERENCE IN THE ACCOUNTS OF M/S MANGHARAM CHETARA M KULARIA. THE LD. CIT(A) DIRECTED THE A.O. TO PROVIDE APPROPRIATE REL IEF AS AND WHEN THE ASSESSEE OR M/S MANGHARAM CHETARAM KULARIA FILES RE VISED TDS CERTIFICATE, THE APPROPRIATE RECTIFICATION ORDER SHOULD BE MADE BY DELETING THIS ADDITION. WE FIND THAT THE ASSESSEE HAS FILED COPY OF REVISED RETURN FILED BY M/S MANGHARAM CHETARAM KULARIA ON 12-11-2012. THE ASSE SSEE HAS ALSO FILED REVISED FORM NO. 26E REFLECTING THE EFFECT OF THE R EVISED RETURN FILED BY M/S MANGHARAM CHETARAM KULARIA. AS PER THIS REVISED RET URN, THERE IS NO DISCREPANCY. ACCORDINGLY WE DIRECT THE A.O. TO DELE TE THE ADDITION OF RS. 20 ITA 4259/M/13 7 LACS MADE ON ACCOUNT OF DISCREPANCY IN THE ACCOUNTS OF M/S MANGHARAM CHETARAM KULARIA. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2014. !' # $% &! ' 10-10-2014 ( ) SD/-- SD/- (AMIT SHUKLA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 10-10-2014 [ .;../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. < () / THE CIT(A) 26,, MUMBAI 4. < / CIT 15, MUMBAI 5. ?@( ;;AB , AB , $ 5 / DR, ITAT, MUMBAI B BENCH 6. (DE F / GUARD FILE. ' / BY ORDER, ? ; //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI