The DCIT, Circle-2, Surat V. M/s. Shree Ram Construction Company, Surat

ITA 452/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73046 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAH
• Assessee Lawyers: K C MATHEWS
• Keywords: Unexplained cash credit; Onus to prove
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NOS. 452 & 580 /AHD/2010 (ASSESSMENT YEAR: 2006-07) DCIT, CIRCLE-2, SURAT V/S M/S. RAM CONSTRUCTION COMPANY 202, KINJAL APARTMENTS, SANGRAMPURA, SURAT (APPELLANT) (RESPONDENT) M/S. RAM CONSTRUCTION COMPANY 202, KINJAL APARTMENTS, SANGRAMPURA, SURAT V/S DCIT, CIRCLE-2, SURAT (APPELLANT) (RESPONDENT) PAN: AAHFR9233K APPELLANT BY : SHRI M.R. SHAH. A.R. RESPONDENT BY : SHRI K.C. MATHEWS, SR. D.R. ( )/ ORDER DATE OF HEARING : 31-01-2014 DATE OF PRONOUNCEMENT : 07 -03-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS, ONE FILED BY THE ASSESSEE AND THE OTHER FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A)-II, SURAT D ATED 30.11.2009 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 2 3. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF CO NSTRUCTION. IT FILED ITS RETURN OF INCOME FOR A.Y. 06-07 ON 28.03.2007 DECLARING TO TAL INCOME AT RS. 12,66,701/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 29 .12.2008 AND THE TOTAL INCOME WAS ASSESSED AT RS. 2,09,42,370/-. AGGRIEVE D BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) V IDE ORDER DATED 30.11.2009 PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), ASSESSEE AS WELL AS REVE NUE BOTH ARE NOW IN APPEAL BEFORE US. THE GROUNDS RAISED BY THE REVENUE READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS. 2,50,000/- ON ACCO UNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF LABOUR CHARGES MADE BY THE A.O. OF RS. 27,74,439/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS. 99,86,407/- ON ACC OUNT OF MATERIAL RECOVERY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE 50% DISALLOWANCE MADE BY THE A.O. OF RS. 37,61,619/ - ON ACCOUNT OF CARTING EXPENSES TO 25% OF TOTAL EXPENDITURE CLAIMED I.E. TO RS. 18,80,810/-. 4. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE REA DS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER M AKING ADDITION OF RS. 16,05,932/- ON ACCOUNT OF VALUATION OF CLOSING WIP. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER M AKING DISALLOWANCE OF RS. 4,60,746/- ON ACCOUNT OF DIFFERENCE IN SALES TAX PAYMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN PARTLY CONFIRMING THE DISALLOWANCE OUT OF CARTIN G EXPENSES TO THE EXTENT OF RS. 18,80,810/- @ 25% AS AGAINST DISALLOWANCE OF RS. 37,61,619/- MADE BY ASSESSING OFFICER @ 50% OF THE SAID EXPENSE. 5. WE FIRST TAKE UP REVENUES APPEAL (IN ITA NO 452 /AHD/2010) 1 ST GROUND IS WITH RESPECT TO DELETION OF ADDITION OF RS. 2,50,000/- MADE UNDER SECTION 68 OF THE ACT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE CASH BOOK A.O. NOTICED THAT CASH WAS INTRODUCED BY THE P ARTNERS BUT WAS NOT FOUND ACCOUNTED IN THEIR OWN LEDGER/CAPITAL ACCOUNT FILED IN THE AUDIT REPORT, THE ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 3 DETAILS OF WHICH ARE LISTED AT PAGE 2 OF THE ASSESS MENT ORDER. A.O. NOTED THAT SINCE THE ASSESSEE FAILED TO GIVE ANY CONVINCING RE PLY A.O. CONCLUDED THAT THE AMOUNTS INTRODUCED BY THE ASSESSEE IN CASH REPR ESENTED THE UNACCOUNTED OF THE FIRM AND THEREFORE TREATED THE S AME AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND MADE ADDITIO N OF RS. 2,50,000/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). BEFORE CIT(A) ASSESSEE INTERALIA SUBMITTED THAT THE RE WAS ONLY TYPOGRAPHICAL MISTAKE IN THE DATES MENTIONED IN THE PARTNERS CAPI TAL ACCOUNT FILED WITH THE AUDIT REPORT. IT WAS FURTHER SUBMITTED THAT ALL THE PARTNERS OF THE FIRM WERE ASSESSED TO TAX AND THE COPIES OF THEIR INCOME TAX RETURN WERE ALSO FILED. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE FINDING AND CONC LUSION OF AO AS ALSO THE WRITTEN SUBMISSION OF AR, AFTER CAREFULLY GOING THROUGH THE FACTS OF THE CASE , I FIND THAT THE AO MADE THE ADDITION BASICALLY ON THE GROUND THAT THE DATES ON WHICH CAPITAL INTRODUC TION WAS SHOWN IN THE CAPITAL A/CS FILED WITH THE AUDIT REPORT DID NOT TALLY WITH THE CORRESPONDING D ATES IN THE CASH BOOK. AS AGAINST THIS, THE A.R HAS CONTENDED THAT WAS ONLY A DIFFERENCE IN THE DATES A ND IT WAS NOT THE CASE WHERE CASH INTRODUCED AS PER THE CAPITAL A/CS FILED IN THE AUDIT REPORT WAS NOT ACCOUNTED FOR IN THE CASH BOOK, OR THE CAPITAL A/C' S APPEARING THE LEDGER. 6.1THE FACT REMAINS THAT THE INDIVIDUAL CAPITAL ACC OUNTS OF THE PARTNERS SHOWED TRANSFER OF CAPITAL IN TO THE ASSESSEE FIRM AND AT THE SAME TIME, THE ASSESSE E'S BOOKS SHOWED THE RECEIPT OF CAPITAL OF IDENTICA L AMOUNTS.. THE ONLY DIFFERENCE WAS IN THE DATES. A S IMPLE DIFFERENCE IN THE DATES OF ENTRY COULD NOT BE TAKEN AS A GROUND TO TREAT SUCH CAPITAL AS THE UNEX PLAINED INCOME OF THE ASSESSEE FIRM. IT MUST BE NOTED THAT NO ONE WOULD TRANSFER DULY ACCOUNTED FOR FUNDS FOR UNACCOUNTED AND UNDISCLOSED INVESTMENTS. 6.2 EVEN IF IT WAS TO BE ACCEPTED THAT THE CAPITA! INTRODUCED IN THE NAMES OF THE FOUR PARTNERS WERE NOT FULLY EXPLAINABLE FROM THEIR INDIVIDUAL BOOKS OF AC COUNT YET, SUCH CAPITAL COULD NOT BE ASSESSED IN T HE HANDS OF THE FIRM U/S 68 OF THE ACT. IT HAS TO BE A CCEPTED AND UNDERSTOOD THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE FIRM, OF THE SUMS INTRODUC ED BY THE PARTNERS, AS UNEXPLAINED CASH CREDITS. IF AT ALL ANY ADDITION WAS TO BE MADE, IT COULD ONLY B E MADE IN THE HANDS OF THE INDIVIDUAL PARTNERS, WHERE THEY COULD BE CALLED UPON TO EXPLAIN TH E SOURCE OF SUCH FUNDS, AND ACTION COU LD BE TAKEN ACCORDINGLY, UNDER THE ACT. IN THE CASE OF TH E ASSESSEE, THE AO ONLY OBSERVED THAT THE DATE OF T HE DEPOSITS IN CASH WAS NOT TALLYING, AND NOTING MORE. IT HAS BEEN HELD BY VARIOUS COURTS AND TRIBUNALS THAT WHEN CASH IS INTRODUCED INTO A PARTNERSHIP FIR M, AND IF THE PARTNERS ARE UNABLE TO EXPLAIN THE SOURCE OF SUCH FUNDS IN ASSESSMENT PROCEEDINGS OF T HE FIRM, NO ADDITION CAN BE MADE OF SUCH SUMS AS UNEXPLAINED CASH CREDITS UNDER THE PROVISIONS OF SE CTION 68 OF THE IT ACT IN THE HANDS OF THE FIRM. TH E ADDITION OF THE SUM OF .RS.8,78,900/- WILL THEREFOR E, STAND DELETED. IN THIS CONTEXT, RELIANCE IS PLAC ED ON THE FOLLOWING CASE-LAWS: (I) CIT V/S METACHEM INDUSTRIES 245 ITR 160 (MP) (II) CIT V/S TAJ BOREWELLS 291 ITR 232 (MAD) (III) CIT V/S UNIQUE BUILDERS 140 TAXMAN 121 (KOLKATTA) (IV) CIT V/S BURMA ELECTRO CORPORATION 126 TAXMAN 533 (P & H) (V) DHIMAN SYSTEMS 100 TTJ 466 (AST) (VI) RAMESHWAR DASS SURESH PAL CHEEKA 208 CTR 457 (P & H ) (VII) METAL & METALS OF INDIA 208 CTR 457 (P & H) (VIII) SHYAM JEWELLERS ITA NO. 1826/AHD/2005. ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 4 7. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 8. BEFORE US, THE LD. D.R. SUBMITTED THAT THE ASSES SEE HAD FAILED TO PROVE THAT THE CREDITS SHOWN IN THE BOOKS WERE THE AMOUNT INTR ODUCED BY THE PARTNERS OF THE FIRM AS THEIR CAPITAL. FURTHER DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT FURNISH ANY SATIS FACTORY EXPLANATION. IT WAS FURTHER SUBMITTED THAT THE EXPLANATION ABOUT TH E TYPOGRAPHICAL ERROR CANNOT BE ACCEPTED AS THE ONUS TO PROVE THE GENUINE NESS OF THE CREDIT ENTRIES SHOWN IN THE BOOKS WAS ON THE ASSESSEE BUT THE ASSE SSEE HAS FAILED TO DO SO. HE THUS SUPPORTED THE ORDER OF A.O. 9. THE LD. A.R. ON THE OTHER HAND REITERATED THE SU BMISSIONS MADE BEFORE CIT(A) AND FURTHER PLACED RELIANCE ON THE DECISION OF GUJA RAT HIGH COURT IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES DATED 06.07.2 005 IN IT REFERENCE NO. 241/1999, FOR THE PROPOSITION THAT THE AMOUNT INTRO DUCED BY THE PARTNERS IN ITS CAPITAL ACCOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FIRM IT CAN AT THE BEST BE CONSIDERED IN THE HANDS OF THE PARTNERS IF HE IS NOT ABLE TO SATISFY ABOVE THE SOURCE OF INVESTMENT OF CASH CREDIT IN HI S ACCOUNT. HE THUS SUPPORTED THE ORDER OF CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT T HE INDIVIDUAL CAPITAL ACCOUNTS OF THE PARTNERS SHOWED TRANSFER OF CAPITAL INTO THE ASSESSEE FIRM AND AT THE SAME TIME THE ASSESSEES BOOKS SHOWED THE RE CEIPT OF CAPITAL ON IDENTICAL AMOUNTS THE ONLY DIFFERENCE WAS IN DATES. HE FURTHER RELYING ON THE VARIOUS DECISION CITED IN HIS ORDER HAS NOTED THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE FIRM OF THE SUMS INTRODUCED BY THE PARTNERS AS UNEXPLAINED CASH CREDIT AND IF AT ALL ANY ADDITION WAS TO BE MA DE, IT COULD ONLY BE MADE IN THE HANDS OF INDIVIDUAL PARTNERS FOR WHICH HE ALSO PLACED RELIANCE ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF PANKA J DYESTUFF (SUPRA). BEFORE ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 5 US, THE REVENUE HAS NOT BROUGHT ANY MATERIAL TO CON TROVERT THE FINDINGS OF CIT(A) NOR HAS BROUGHT TO OUR NOTICE ANY CONTRARY D ECISION OF JURISDICTION HIGH COURT OR APEX COURT TO SHOW THAT THE DECISION IN TH E CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA) HAS BEEN OVERRULED. IN VIEW OF T HE AFORESAID FACTS AND RELYING ON THE AFORESAID DECISION OF HON. GUJARAT H IGH COURT, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND TH US THIS GROUND OF REVENUE IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO DELETION OF DISALLOWANCE OF LABOUR CHARGES AMOUNTING TO RS. 27,74,439/-. 11. DURING THE COURSE ASSESSMENT PROCEEDINGS, A.O. NOTICED THAT ASSESSEE WAS A SUB-CONTRACTOR APPOINTED BY RANJIT CONSTRUCTION F OR CARRYING OUT THE PROJECT OF SURAT MUNICIPAL CORPORATION. ON VERIFICATION OF THE MONTH-WISE LABOUR EXPENSE VIZ-A-VIZ MONTH-WISE INCOME, A.O. NOTICED T HAT DURING THE YEAR, PERCENTAGE OF LABOUR PAYMENTS PER MONTH VARIED FROM 6.89% TO 25.4%. ACCORDING TO THE A.O. THE VARIATION IMPLIED EXCESS CLAIM OF LABOUR PAYMENTS IN CERTAIN MONTHS. THE ASSESSEE WAS ASKED TO JUSTI FY ITS CLAIM OF EXPENSES. ASSESSEE INTERALIA SUBMITTED THAT IT CARRIED OUT PR OJECT WORK WHICH IS CERTIFIED ON RUNNING BILL BASIS AND NOT ON MONTH TO MONTH BAS IS. IT WAS FURTHER SUBMITTED THAT R.A. BILLS (RUNNING ACCOUNT BILLS) W ERE SUBMITTED BY THE ASSESSEE AFTER CERTAIN PORTION OF THE WORK WAS COMP LETED AND THE SAME WAS APPROVED FOR PAYMENT AFTER APPROVAL OF SMC AUTHORIT Y. IT WAS FURTHER SUBMITTED THAT THE SCRUTINY OF THE BILLS TOOK SOMET IME AND THEREFORE IT WAS NOT POSSIBLE TO COMPARE LABOUR EXPENSE TO LABOUR INCOME ON MONTH TO MONTH BASIS. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. INQUIRIES WERE FLOATED BY A.O. UNDER SECTION 133(6) OF THE ACT AND IN MOST OF THE CASES A.O. HAS NOTED THAT THE LETTERS WERE RETU RNED UNSERVED. ONLY ONE CONFIRMATION WAS RECEIVED FROM MUKHTAR FOUNDATION B UT THERE WAS A DIFFERENCE OF RS. 7,01,575/- WHICH ACCORDING TO A.O ., THE ASSESSEE FAILED TO EXPLAIN. A.O. FURTHER NOTED THAT ASSESSEE HAD INCL UDED THE FIGURES OF MATERIAL ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 6 RECOVERY FROM SMC AND RANJIT CONSTRUCTION IN THE GR OSS FIGURES AND AFTER EXCLUDING MATERIAL RECOVERY AS WELL AS BUILDING MAT ERIAL WHICH WERE PURCHASED BY THE ASSESSEE, THE PERCENTAGE OF LABOUR EXPENDITURE OVER THE INCOME WORKED OUT TO 46.54%. HE THEREFORE HELD THA T THE AUTHENTICITY AND THE GENUINENESS OF THE PAYMENT REMAINS TO BE ESTABLISHE D. HE ACCORDINGLY DISALLOWED 20% OF RS. 1,38,87,196 AMOUNTING TO RS. 27,74,439 AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O., ASSESSE E CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 10. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. TO MY MIND, THE AO BASICALLY MISUNDERSTOOD OR WRONGLY APPRECIATED THE NATURE OF THE ASSESSEE'S BUSINESS. DURING THE YEAR, THE ASSESSEE ACTED AS A SUB-CONTRACTOR OF M/S RANJIT CONSTRUCTION WHO HAD BEEN GIVEN THE CONTRACT OF UDHNA MAJURA FLYOVER BY THE SMC. IT IS A WELL KNOWN AND ESTABLISHED FACT THAT IN SUCH CASES, PAYMENTS ARE M ADE BY THE CONTRACTEE IN STAGES I.E. AFTER A PARTICULAR WORK IS COMPLETED AND THE S AME IS INSPECTED AND VERIFIED. THE PAYMENTS ARE THUS MADE ON A RUNNING ACCOUNT (RA) BAS IS, FOR WHICH BILLS ARE RAISED FROM TIME TO TIME. IT IS ALSO A KNOWN FACT THAT ORG ANIZATIONS SUCH AS THE SMC TAKE SOME TIME IN PASSING SUCH BILLS AND MAKING PAYMENTS . THEREFORE, THERE IS ALWAYS A TIME GAP BETWEEN THE RAISING OF A RA BILL AND THE ACT UAL RECEIPT OF THE PAYMENT. ON THE OTHER HAND, FOR THE PURPOSE OF COMPLETING A PARTICU LAR STAGE OF WORK THE LABOUR EXPENSES WOULD HAVE ALREADY BEEN INCURRED BEFORE TH E RA BILL WAS RAISED. THEREFORE, THERE COULD BE ANY ONE-TO-ONE CORRELATION BETWEEN T HE PAYMENT OF LABOUR EXPENSES AND THE RAISING OF THE RA BILLS, AND THE RECEIPT OF PAYMENT FROM THE CONTRACTEE. THIS THE AO FAILED TO APPRECIATE, HENCE, THE COMPARISON MADE BY HER BETWEEN THE LABOUR EXPENSES AND THE RA BILLS ON A MONTHLY BASIS, WAS ERR ONEOUS. 10.1 THE AO NEXT RAISED THE ISSUE CONCERNING THE HIG H PERCENTAGE OF LABOUR EXPENDITURE INCURRED BY THE ASSESSEE AS COMPARED TO THE GROSS RECEIPT. WHILE THE ASSESSEE HAD CLAIMED THAT SUCH EXPENDITURE REPRESENT ED ONLY 13.80% OF THE GROSS RECEIPT/ THE AO REDUCED THE MATERIAL RECOVERY FROM THE SMC AND FROM M/S RANJIT CONSTRUCTION FROM THE GROSS RECEIPT OF RS 10.05 CROR ES AND ALSO REDUCED THE VALUE OF THE BUILDING MATERIAL PURCHASED BY THE ASSESSEE ON I TS OWN, TO SUBSTANTIALLY REDUCE SUCH RECEIPTS, SO THAT THE PERCENTAGE OF LABOUR EXP ENDITURE TO SUCH RECEIPTS CLIMBED UP TO RS 46.54%. I AM OF THE VIEW THAT THE AO COULD NOT HAVE ARTIFICIALLY RAISED THE RATIO OF THE LABOUR EXPENSES TO THE TOTAL RECEIPTS. PLAYI NG AROUND OR MANIPULATING PERCENTAGES CANNOT BE A GROUND TO HOLD THAT THE LAB OUR EXPENSES WERE EXCESSIVE. THE ASSESSEE HAD FURNISHED COPIES OF AGREEMENTS BETWEEN M/S RANJIT CONSTRUCTION AND SMC, AS ALSO BETWEEN M/S RANJIT CONSTRUCTION AND TH E ASSESSEE. AS PER THESE AGREEMENTS, THE BASIC MATERIALS I.E. STEEL AND CEME NT WERE TO BE PROVIDED BY THE SMC. THESE MATERIALS WERE RECEIVED BY M/S RANJIT CONSTRU CTION BEING THE MAIN CONTRACTOR AND THEN WERE PASSED ON TO SUB-CONTRACTOR I.E. TO T HE ASSESSEE, SUBSEQUENTLY, TOWARDS THE LATER PART OF THE YEAR, SINCE THE SMC W AS UNABLE TO PROVIDE SUCH MATERIALS THEY WERE PROVIDED BY M/S RANJIT CONSTR UCTION WHILE SOME OF THE SMALLER ITEMS WERE PURCHASED BY THE ASSESSEE ITSELF. THESE S UMS COULD NOT BE SIMPLY REDUCED FROM THE TOTAL RECEIPT. THIS IS BECAUSE, THE MATERI ALS SUPPLIED BY THE SMC AND M/S RANJIT CONSTRUCTION WERE IN THE NATURE OF REIMBURSE MENT OF EXPENSES, NORMALLY, THE ASSESSEE WOULD HAVE HAD TO PURCHASE SUCH MATERIALS T O EXECUTE THE PROJECT. SINCE THE ASSESSEE DID NOT TO DO SO, THE MATERIALS PROVIDED BY THE CONTRACTEE WOULD NECESSARILY ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 7 TO BE CREDITED TO THE ACCOUNTS AND THE LABOUR EXPEN SES WOULD HAVE TO BE PARED THE TOTAL OF SUCH RECEIPTS. 10.2 IT HAS BEEN ARGUED IN THE ALTERNATIVE BY THE AR THAT, EVEN IF THE AO WAS TO REDUCE THE GROSS RECEIPT BY THE VALUE OF THE MATERI ALS RECEIVED FROM THE SMC AND M/S RANJIT CONSTRUCTION, SHE WAS NOT JUSTIFIE D IN REDUCING THE PURCHASES MADE BY THE ASSESSEE AS WELL. AFTER REDUCING THE MATERIALS RECEIVED FROM THE SMC AND M/S RANJIT CONSTRUCTION, THE PERCENTAGE OF LABOUR E XPENSES TO SUCH NET RECEIPT WORKED OUT TO 30.81%, WHICH WAS A QUITE REASON ABLE. I ALSO ACCEPT THE SUBMISSION OF THE AR THAT THE DIFFERENCE OF RS 7,01,575/- IN THE ACCOUNT OF M/S MUKTAR FOUNDATION WAS BECAUSE THE SUM HAD NOT BEEN SHOWN B Y THE SAID PARTY IN ITS BOOKS SINCE, THE ASSESSEE HAD MADE THE PAYMENT BY DEMAND D RAFT ON THE LAST DAY OF THE FINANCIAL YEAR I.E. ON 31-03-2006. M/S MUKTAR FOUND ATION WOULD HAVE CREDITED SUCH AMOUNT IN ITS BOOKS ONLY AFTER THE DRAFT WOULD HAVE BEEN ENCASHED, WHICH WOULD HAVE BEEN IN THE NEXT YEAR. IN ANY CA SE, THE ALLEGED DIFFERENCE WAS FULLY EXPLAINABLE FROM THE BOOKS OF THE ASSESSEE AND ITS B ANK ACCOUNT. THEREFORE, NO ADVERSE INFERENCE COULD BE DRAWN. 10.3 GIVEN SUCH FACTS OF THE CASE, IT IS HELD THAT THERE WAS NO JUSTIFICATION IN MAKING A PERCENTAGE DISALLOWANCE OUT OF THE LABOUR EXPENSES CLAIMED. THE ADDITION OF RS 27,74,439/- WILL THEREFORE STAND DELETED. 12. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE I S NOW IN APPEAL BEFORE US. 13. BEFORE US, THE LD. D.R. TOOK US THROUGH THE FIN DINGS AND OBSERVATIONS OF A.O. AND THUS SUPPORTED HIS ORDER. THE LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE CIT(A). HE FURTHER SUBMITT ED THAT THERE WAS NO DIRECT CO-RELATION BETWEEN THE LABOUR EXPENSES CLAI MED AND THE BILLS AMOUNT RAISED AS THE ASSESSEE RECORDED THE RECEIPTS ONLY O N THE BASIS OF R.A. BILLS APPROVED BY SMC. HE ALSO PLACED ON RECORD THE COPY OF YEAR-WISE PROFIT AND LOSS ANALYSIS AND FROM IT, HE POINTED THAT THE GROS S RECEIPTS WAS TO THE EXTENT OF RS. 10.05 CRORES AGAINST WHICH THE LABOUR EXPENS ES WAS TO THE EXTENT OF RS. 1.39 CRORES WHICH AMOUNTED TO ALMOST 10% AND T HEREFORE THE LABOUR EXPENSES CANNOT BE CONSIDERED EXCESSIVE. WITH RESP ECT TO THE NOTICES WHICH WERE RETURNED UNSERVED, IT WAS SUBMITTED THAT ALL T HE PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE AND TAX WAS DEDUC TED AT SOURCE. WITH RESPECT TO THE DIFFERENCE OF RS. 7,01,575/- IN THE ACCOUNT OF MUKTAR FOUNDATION, IT WAS SUBMITTED THAT THE PARTY WAS PAI D THROUGH A DEMAND DRAFT ON 31.03.2006 FOR WHICH THE ENTRY WAS PASSED IN THE BOOKS OF THE ASSESSEE ON 31.03.2006 BUT THE RECIPIENT HAD PASSED THE ENTR Y IN SUBSEQUENT YEARS ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 8 AND THEREFORE THERE WAS A DIFFERENCE. HE THEREFORE SUBMITTED THAT CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION. HE THUS SUPPORTED THE ORDER OF CIT(A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE DELETING THE ADDITION HAS GIVEN A FIND ING THAT ASSESSEE HAS ACTED AS A SUB-CONTRACTOR OF RANJIT CONSTRUCTION WH O HAD BEEN GIVEN THE CONTRACT OF CONSTRUCTION OF FLY OVER BY SMC. HE HAS FURTHER NOTED THAT THE PAYMENTS ARE MADE TO ASSESSEE ON RUNNING ACCOUNT BA SIS FOR WHICH BILLS ARE RAISED FROM TIME TO TIME AND THERE WAS ALWAYS A TIM E GAP BETWEEN THE RAISING OF A BILL AND THE ACTUAL RECEIPT OF PAYMENT. HE HA S FURTHER NOTED THAT THERE CANNOT BE A ONE TO ONE CO-RELATION BETWEEN THE PAYM ENT OF LABOUR EXPENSES AND THE RAISING OF R.A. BILLS AND THE RECEIPT OF PA YMENT FROM THE CONTRACTEE. WITH RESPECT TO THE SUPPLY OF MATERIAL BY RANJEET C ONSTRUCTION AND SMC, CIT(A) AFTER PERUSING THE AGREEMENT HAS NOTED THAT THE MATERIAL SUPPLIED BY SMC AND RANJIT CONSTRUCTION WERE IN THE NATURE OF R EIMBURSEMENT OF EXPENSES AND THEREFORE MATERIAL PROVIDED WOULD NECE SSARILY HAVE TO BE CREDITED TO THE ACCOUNTS AND THE LABOUR EXPENSES WO ULD HAVE TO BE COMPARED WITH THE TOTAL OF RECEIPTS. HE HAS FURTHER GIVEN A FINDING THAT IF THE MATERIALS RECEIVED FROM SMC AND RANJIT CONSTRUCTION WERE REDU CED FROM THE GROSS RECEIPTS, THE PERCENTAGE OF LABOUR EXPENSES TO SUCH NET RECEIPTS WORKED OUT TO 30.81% WHICH WAS QUITE REASONABLE. WITH RESPECT TO DIFFERENCE OF RS. 7 LAC IN THE ACCOUNT OF MUKHTAR FOUNDATION, CIT(A) HAS HE LD THE DIFFERENCE AS FULLY EXPLAINED. BEFORE US, THE REVENUE COULD NOT CONTRO VERT THE FINDINGS OF CIT(A) NOR HAS BROUGHT ANY CONTRARY MATERIAL ON RECORD IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). THUS THIS GROUND OF REVENUE IS DISMISSED. 3 RD GROUND IS WITH RESPECT TO DELETION OF ADDITION OF RS. 99,86,407/- MADE ON ACCOUNT OF MATERIAL RECOVERY. ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 9 15. A.O. NOTICED THAT ASSESSEE HAD DEBITED RS. 2,21 ,61,849/- TOWARDS MATERIAL RECOVERY FROM RANJIT CONSTRUCTION. THE ASSESSEE WAS ASKED TO FURNISH THE COPIES OF PURCHASE BILLS, LR, OCTROI RECEIPTS EVIDE NCING THE TRANSPORTATION AND RECEIPT OF MATERIAL AT SITE. A.O. NOTICED THAT NO MATERIAL WERE RECEIVED IN THE MONTH OF MAY, JUNE, JULY, SEPTEMBER AND NOVEMBER. IN RESPONSE TO THE QUERY OF A.O, ASSESSEE SUBMITTED THAT THE MATERIAL WAS NOT PROCURED BY THE ASSESSEE BUT WAS RECEIVED FROM THE MAIN CONTRACTOR M/S RANJIT CONSTRUCTION AND IT ALSO FILED COPIES OF THE PURCHASE BILLS BUT HOWEVER COULD NOT FILE COPIES OF L.R, OCTROI RECEIPTS OR REGISTER IN SUPPORT OF R ECEIPT OF GOODS. A.O. WAS THEREFORE OF THE VIEW THAT THE COMPLETE AUTHENTICIT Y OF THE CLAIM OF MATERIAL RECOVERY WAS NOT PROVED BEYOND DOUBT IN THE ABSENCE OF TRANSPORTATION AS ACCORDING TO HIM LR, OCTROI ETC PROVE ACTUAL RECEIP T AND CONSUMPTION OF MATERIAL OTHER THAN CEMENT AND STEEL. A.O. ALSO NO TED THAT THE MAJOR ITEMS/INGREDIENT REQUIRED IN THE CONSTRUCTION OF A FLYOVER IS PROVIDED BY SMC. HE ALSO NOTED THAT OTHER SUPPORTING MATERIALS SUCH AS RETI (SAND) AND KAPCHI (QUARRY) WERE PRODUCED BY THE ASSESSEE AND CLAIMED SEPARATELY. A.O. ALSO NOTED THAT THE TOTAL VALUE OF CEMENT AND STEEL PROV IDED BY SMC WAS TO THE TUNE OF RS. 3,33,98,000/- AND THE CONSTRUCTION MATE RIAL PURCHASED BY THE ASSESSEE WAS TO THE TUNE OF RS. 77,74,664/-. HE ALS O NOTED THAT THE PURCHASE BILLS FURNISHED BY THE ASSESSEE WERE ISSUED IN THE NAME OF RANJIT CONSTRUCTION AND SHOWN AS DELIVERED TO RANJIT CONST RUCTION. A.O. FURTHER NOTED THAT DURING THE PERIOD SMC HAD PROVIDED STEEL VALUE AT RS. 1,81,50,000/- WHILE THE ASSESSEE HAD CLAIMED COST O F WIRE PURCHASE AND SUPPLIED BY RANJIT CONSTRUCTION AT RS. 1,27,01,141 /-. A.O. WAS THUS OF THE VIEW THAT THE AMOUNT CLAIMED AS CONSUMPTION OF WIRE WAS IMBALANCED AND THEREFORE NOT FULLY ACCEPTABLE. HE THEREFORE CONSID ERED THE CEMENT AND STEEL AMOUNTING TO RS. 57,52,694/- AND 1/3 OF THE VALUE O F PURCHASE OF WIRE AMOUNTING TO RS. 42,33,713/- TO BE EXCESSIVE AND AC CORDINGLY MADE AN ADDITION OF RS. 99,86,407/-. AGGRIEVED BY THE ORDE R OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITI ON BY HOLDING AS UNDER:- 14. I HAVE CAREFULLY CONSIDERED THE DETAILED FINDINGS A ND CONCLUSION OF THE A.O. AS ALSO THE EQUALLY DETAILED SUBMISSIONS OF THE A.R. I AM OF THE VIEW T HAT THE A.O. MADE A LOT OF ASSUMPTIONS AND ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 10 PRESUMPTIONS WHILE MAKING THE DISALLOWANCES TOTALIN G RS. 99,86,407/-. HER FIRST PRESUMPTION WAS THAT, SINCE THERE WAS NO MATERIAL RECEIVED FROM EITHER TH E SMC OR M/S. RANJIT CONSTRUCTION DURING THE MONTHS OF MAY, JUNE, JULY, SEPTEMBER AND NOVEMBER, THE CLAIM OF MATERIAL RECEIVED WAS DOUBTFUL. SHE ALSO PRESUMED THAT SINCE THE SUPPOSED TO HAVE COMMENCED WITH EFFECT FROM 09-10-2004, THE ENTIRE PRELIMINARY PREPARATORY WORK OF THE PROJECT I.E. DIGGING ETC WOULD HAVE BEEN COMPLETED IN THE PRECEDING YEAR ITSELF. BOTH THESE ASSUMPTIONS WERE NOT BASED ON FACTS ASSOCIATED WITH SUCH A TYPE OF BUSINESS, FIRSTLY, SIMPLY BECAUSE NO MATERIAL WAS R ECEIVED FROM EITHER FROM THE SMC OR THE MAIN CONTRACTOR, IT DID NOT MEANT THAT THE MATERIALS REC OVERED DURING THE REMAINING MONTHS OF THE YEAR WERE NOT GENUINE. SECONDLY, WHETHER OR NOT THE PREPARATO RY WORK OF THE PROJECT HAD BEEN COMPLETED DURING THE PRECEDING YEAR OR HAD CONTINUED DURING THE YEAR UNDER CONSIDERATION WAS NOT OF ANY RELEVANCE SINCE, THE ISSUE WAS THE GENUINENESS OF THE MATERIA LS SUPPLIED BY THE SMC AND M/S, RANJ'IT CONSTRUCTION AND ITS FURTHER USE IN THE CONSTRUCTIO N PROCESS. 14.1 THE AO HAD BEFORE HER COPIES OF AGREEMENTS BET WEEN THE SMC AND M/S. RANJIT CONSTRUCTION, AND ALSO BETWEEN M/S. RANJIT CONSTRUCTION AND THE ASSES SEE. THESE TWO AGREEMENTS CLEARLY REFLECTED THE ARRANGEMENT ENTERED INTO BETWEEN THE THREE PARTIES. IN ANY CASE, IF THE AO HAD ANY DOUBT ABOUT THE CLAIM MADE BY THE ASSESSEE, SHE COULD HAVE EASILY V ERIFIED THE FACTS FROM BOTH THE SMC AND M/S. RANJIT CONSTRUCTION WHICH IS ALSO A TAX-PAYER. IF IS IMPOR TANT TO NOTE THAT THE AO NEVER DENIED THE FACT THAT THE UDHNA MAJURA FLYOVER WAS ACTUALLY CONSTRUCTED A ND THAT, THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTION AS A SUB-CONTRACTOR. THE FLYOVER IS TH ERE FOR ALL TO SEE, VERY CLOSE TO THE AAYAKAR BHAWA N IN SURAT, THEREFORE, THERE COULD NOT BE ANY QUESTIO N RAISED REGARDING THE SUPPLY OF MATERIALS SUCH AS CEMENT AND STEEL BY THE SMC AND M/S. RANJIT CONSTRU CTION TO THE ASSESSEE, ESPECIALLY WHEN THE ASSESSEE HAD NOT SHOWN ANY PURCHASE OF ITS OWN, AT LEAST IN THE INITIAL PERIOD OF THE PROJECT. 14.2 THE AO RAISED THE QUESTION OF THE PURCHASE BIL LS BEING IN THE NAME OF M/S. RANJIT CONSTRUCTION AND THE DELIVERY OF THE MATERIALS AS HAVING BEEN MA DE TO THE SAID PARTY. SHE THUS QUESTIONED THE UTILISATION OF SUCH MATERIALS IN THE UDHNA MAJURA F LYOVER PROJECT (PARA-6.3). ONCE AGAIN, AS PER THE TWO AGREEMENTS ENTERED .INTO BY THE THREE PARTIES, THE MATERIALS WERE EITHER TO BE SUPPLIES BY THE SMC OR TO BE PROVIDED BY M/S. RANJIT CONSTRUCTION, AT L EAST UNTIL THE TIME THE SMC GAVE PERMISSION TO M/S. RANJIT CONSTRUCTION TO PROCEED THE PURCHASE OF CEME NT AND STEEL W.E.F FROM 14-10-2005 BECAUSE OF ITS INABILITY OF PROCURE THE SAME. THEREFORE; THE PURCH ASE BILLS NECESSARILY HAD TO BE IN THE NAME OF M/S. RANJIT CONSTRUCTION AND THE SELLER OR THE SUPPLIER WOULD HAVE CONSEQUENTLY DELIVERED THE SAME TO THE BUYER. HOWEVER, THE ASSESSEE BEING THE SUB-CONT RACTOR, WOULD NECESSARILY HAVE HAD TO RECEIVE SUCH MATERIALS ONLY AT THE SITE ON BEHALF OF THE BUYER I.E. M/S. RANJIT CONSTRUCTION. THERE WAS NOTHING UNUSUAL IN SUCH AN ARRANGEMENT. IN ANY CASE , UNLESS THE AO WAS IN A POSITION TO SHOW THAT THE PURCHASES MADE BY AND IN THE NAME OF' M/S, RANJIT CONSTRUCTION HAD BEEN UTILISED ELSE WHERE, SHE COULD NOT TAKE THE VIEW THAT SUCH MATERIALS WERE NO T UTILISED FOR THE PROJECT IN QUESTION. IN ORDER TO TAKE SUCH A VIEW, SHE WOULD HAVE HAD TO ALSO PROVE THAT THE PROJECT WAS COMPLETED BY THE ASSESSEE WITH MATERIALS PURCHASED OUTSIDE ITS BOOKS. SINCE, NEITH ER OF THESE TWO PROPOSITIONS COULD BE ESTABLISHED, IT WAS NECESSARILY TO BE ACCEPTED THAT THE PURCHASES SHOWN IN THE NAME OF M/ S. RANJIT CONSTRUCTION HAD BEEN UTILISED FOR THE SAID PROJECT. THE AO OBSERV ED (PARA-6.4) THAT AS PER THE AGREEMENTS, THE ASSESSEE WAS NOT TO PURCHASE CEMENT AND STEEL OTHER THAN WHAT WAS TO BE PROVIDED BY THE SMC. EVIDENTLY, THE AO FAILED TO TAKE INTO CONSIDERATI ON THE FACT THAT THE SMC HAD PERMITTE D M/S. RANJIT' CONSTRUCTION AND THE ASSESSEE TO PURCHASE C EMENT AND STEEL ON ITS OWN, AND HENCE IN ORDER TO .COMPLETE THE PROJECT, THESE TWO PARTIES HAD TO PRO CEED WITH THE PURCHASES. THEREFORE, THERE WAS NO MERIT IN MAKING ANY DISALLOWANCE OUT OF THE MATERIA LS RECOVERED FROM EITHER THE SMC OR M/S. RANJIT CONSTRUCTION. 14.3 COMING TO THE DISALLOWANCE OUT OF THE PURCHASE VALUE OF WIRE, THERE WAS NO BASIS FOR THE AO TO OBSERVE THAT THE PURCHASE OF WIRE WAS DISPROPORTION ATE TO THE QUANTITY OF STEEL PROVIDED BY THE SMC. THE AO SIMPLY DID NOT HAVE THE EXPERTISE TO MAKE SU CH AN EVALUATION, AND HENCE, HER OBSERVATION WAS TOTALLY OFF THE MARK. IT HAS BEEN ARGUED BY THE AR THAT THE QUANTITY OF THE WIRE PURCHASED SHOWN IN TH E PURCHASE BILLS TALLIED WITH THE QUANTITY SHOWN IN T HE RA BILL NO 16, WHICH WAS THE LAST BILL FOR THE Y EAR UNDER CONSIDERATION. IN ANY CASE, THERE WAS SIMPLY NO BASIS OR ANY FACTUAL INFORMATION OR ANALYSIS FOR THE AO TO TAKE THE VIEW THAT THE CLAIM OF PURCHASE OF WIRE WAS IN EXCESS OF WHAT WOULD HAVE BEEN REQUIRED TO CONSTRUCT TIE FLYOVER. WHAT THE AO FAIL ED TO TAKE NOTE OF WAS THAT, THE ASSESSEE HAD EXECUTED THE PROJECT FOR THE SMC, WHO HAD NOT ONLY PROVIDED THE BASIC MATERIALS FOR THE PROJECT, AT LEAST FOR MOST PART OF THE PROJECT, BUT HAD ALSO SU PERVISED THE CONSTRUCTION AND EXECUTION OF THE PROJ ECT. THE SMC HAD MADE PAYMENTS ON THE BASIS OF SUPERVISI ON, EXECUTION AND VERIFICATION ON A CONTINUOUS ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 11 OR RUNNING ACCOUNT BASIS. IF THE SMC HAD NOT DRAWN ANY ADVERSE INFERENCE OR HAD NOT LEVIED ANY PENALTY FOR OVER BILLING OR OVER UTILIZATION OF MAT ERIALS, THE A.O. WAS SIMPLY NOT IN A POSITION TO DR AW ANY ADVERSE INFERENCE IN THIS REGARD. THE TOTAL ADD ITION OF RS. 99,86,407/- WILL STAND DELETED. 16. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE I S NOW IN APPEAL BEFORE US. 17. BEFORE US, THE LD. D.R. TOOK US THROUGH THE FIN DINGS OF A.O. AND SUPPORTED THE ORDER OF A.O. HE FURTHER SUBMITTED THAT THE PURCHAS E BILLS FURNISHED BY THE ASSESSEE SHOWED THAT ALL THE BILLS WERE ISSUED IN T HE NAME OF RANJIT CONSTRUCTION AND SHOWED AS MATERIAL DELIVERED TO IT . THE ASSESSEE HAD ALSO FAILED TO FURNISH ANY EVIDENCE REGARDING RECEIPT OF MATERIAL AND UTILIZATION OF THE SAME IN THE PROJECT WORK OF UDHANA MAJURA FLY O VER. HE FURTHER SUBMITTED THAT AS PER THE AGREEMENT BETWEEN RAJIT C ONSTRUCTION AND AS PER THE TERMS OF TENDER DRAWN BETWEEN SMC AND RANJIT CO NSTRUCTION, THE ASSESSEE WAS NOT ALLOWED TO PURCHASE ANY CEMENT OR STEEL OTHER THAN PROVIDED BY SMC. SINCE THE ASSESSEE HAD FAILED TO P ROVE THAT THE PURCHASE BILLS IN THE NAME OF RANJIT CONSTRUCTION HAVE BEEN FULLY AND EXCLUSIVELY UTILIZED IN THE FLYOVER PROJECT, THE DISALLOWANCE M ADE BY THE A.O. WAS FULLY JUSTIFIED. 18. THE LD. A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND ALSO SUBMITTED THAT SMC HAD GRANTED PERM ISSION FOR THE PURCHASE OF CEMENT AND STEEL AND THEREFORE THE PURCHASE OF M ATERIALS COULD NOT BE CONSIDERED AS NON GENUINE. HE FURTHER SUBMITTED THA T CIT(A) AFTER CONSIDERING ALL FACTS HAS RIGHTLY DELETED THE ADDITION AND HE T HUS SUPPORTED THE ORDER OF CIT(A). 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE ADDITION MADE B Y THE A.O. HAS NOTED THAT A.O. MADE LOT OF ASSUMPTION AND PRESUMPTION WHILE M AKING THE DISALLOWANCE AND FURTHER THE ASSUMPTIONS WERE NOT BASED ON FACTS ASSOCIATED WITH THE TYPE OF BUSINESS OF THE ASSESSEE. CIT(A) HAS ALSO NOTED THAT THE A.O. WAS NOT IN ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 12 A POSITION TO SHOW THAT THE PURCHASES MADE BY THE A SSESSEE AND IN THE NAME OF RANJIT CONSTRUCTION HAS BEEN UTILIZED ELSEWHERE, NOR THE A.O. WAS IN A POSITION TO PROVE THAT THE PROJECT WAS COMPLETED BY THE ASSESSEE WITH MATERIALS PURCHASED FROM OUT SIDE ITS BOOKS. CIT(A) HAS ALSO GIVEN A FINDING THAT SMC HAD PERMITTED RANJIT CONSTRUCTION AND THE ASSESSEE TO PURCHASE CEMENT AND STEEL ON ITS OWN AND HENCE IN ORDER TO C OMPLETE THE PROJECT, THE TWO PARTIES HAD TO PROCEED WITH THE PURCHASES. WIT H RESPECT TO THE DISALLOWANCE OF PURCHASE VALUE OF WIRE, CIT(A) HAS NOTED THAT THERE WAS NO BASIS FOR THE A.O. TO OBSERVE THAT THE PURCHASE OF WIRE WAS DISPROPORTIONATE TO THE QUANTITY OF STEEL PROVIDED BY SMC. HE HAS AL SO NOTED THAT THE QUANTITY OF WIRE PURCHASED SHOWN IN THE PURCHASE BILLS TALLI ED WITH THE QUANTITY SHOWN IN R.A. BILLS. BEFORE US, NO MATERIAL HAS BEEN BROU GHT ON RECORD BY REVENUE TO CONTROVERT THE FINDING OF CIT(A) AND THEREFORE W E FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF RE VENUE IS DISMISSED . 4 TH GROUND OF REVENUE AND GROUND NO. 3 OF ASSESSEE IS WITH RESPECT TO RESTRICTING THE DISALLOWANCE OF CARTING EXPENSES TO RS. 18,80,810/-. 20. DURING THE COURSE OF ASSESSMENT, ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT, A.O NOTICED THAT ASSESSEE HAD DEBITED CARTING EXPEN SE OF RS. 75,23,238/- IN ITS PROFIT AND LOSS ACCOUNT. HE ALSO NOTICED THAT A SSESSEE HAD CLAIMED PURCHASE OF RETI AND KHAPACHI AGGREGATING TO RS. 54 ,49,182/- AND ALSO PURCHASE OF PETTY PURCHASE OF BUILDING MATERIAL ETC , WHERE ACCORDING TO A.O., ELEMENT OF CARTING WAS NOT REQUIRED AND THEREFORE A CCORDING TO A.O, THE CARTING EXPENSES WAS FAR IN EXCESS OF PURCHASE OF M ATERIALS. THE A.O. THEREFORE ASKED THE ASSESSEE TO JUSTIFY AND SUBSTAN TIATE THE EXPENSES BY FURNISHING THE BILLS OF MATERIAL PURCHASE AND CARTI NG BILLS. A.O NOTED THAT ASSESSEE DID NOT FURNISH THE BILLS OF MATERIALS. HE ALSO NOTED THAT IN RESPECT OF CARTING EXPENSES, NO PAN NUMBERS, COMPLETE NAMES AN D ADDRESSES WERE FURNISHED BY ASSESSEE, AND EVEN THE NOTICES SERVED U/S. 133(6) WERE RETURNED UNSERVED WITH REMARKS NO PERSONS FOUND. HE ALSO NOTICED THAT IN ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 13 THE TDS RETURN FILED BY THE ASSESSEE DID NOT REFLEC T PAN NUMBERS IN MANY OF THE CASES. A.O. THEREFORE CONCLUDED THAT ASSESSEE HAD FAILED TO PROVE THE GENUINENESS AND REASONABLENESS OF CARTING EXPENSES AND THEREFORE DISALLOWED 50% OF CARTING EXPENSES AMOUNTING TO RS. 37,61,619/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER B EFORE CIT(A). CIT(A) GRANTED PARTIAL RELIEF BY HOLDING AS UNDER:- 26 I FIND THAT THE A.R. HAS MISSED THE POINT MADE B Y THE A.O. IT WAS NOT THE ASSESSING OFFICERS CASE THAT THE SUPPLIERS OF RETI AND KAPACHI AS ALSO THE PERSONS WHO HAD PROVIDED THE SERVICE OF CARTING OR TRANSPORTATION WERE THE SAME. IT WAS NOT THE AO'S C ASE THAT THE PURCHASES OF RETI AND KAPACHI WERE UNVERIFIABLE, HER CASE WAS THAT, IN THE ABSENCE OF COMPLETE BILLS, THE CARTING EXPENSES HAD REMAINED UNVERIFIABLE. THE AO MADE A DETAILED SCRUTINY AND F OUND THAT THE ASSESSEE WOULD HAVE INCURRED CARTING EXPENSES ONLY ON THE PURCHASES MADE BY IT W HICH INCLUDED RETI AND KAPACHI, THE TOTAL VALUE OF WHICH WAS RS 54.49 LAKHS. THIS WAS APART FROM THE P ETTY OTHER PURCHASES WHICH WOULD NOT HAVE REQUIRED CARTING AND TRANSPORTATION. AGAINST THE PU RCHASES OF RS.54,49 LAKHS, THE CARTING EXPENSES OF RS 75.23 LAKHS WAS MUCH IN EXCESS (OF THE COST OF T NE MATERIALS PURCHASED). THE AR HAS NOT RESPONDED TO THIS FINDING OF THE AO, APART FROM SIMPLY SAYING THAT THE COST OF RETI AND KAPACHI WOULD HAVE IN AN Y CASE BEEN LOWER THAN, THE COST OF TRANSPORTATION OF SUCH ITEMS. 26.1 THE NEXT FINDING OF THE AO WAS THAT, THE CARTI NG BILLS FURNISHED BY THE ASSESSEE SHOWED PAYMENTS MADE TO INDIVIDUALS WHO DID NOT HAVE PAN AND WERE N OT TAX PAYERS, EVEN THOUGH PAYMENTS IN EXCESS OF RS 5 LAKHS WERE MADE TO THEM. THE RESPONSE OF THE A R IS THAT, SUCH A FINDING COULD NOT LEAD TO ANY ADVERSE INFERENCE, ESPECIALLY WHEN THE ASSESSEE HAD ALREADY DEDUCTED TAX ON SUCH PAYMENTS AND HAD DEPOSITED SUCH TAX INTO THE GOVERNMENT ACCOUNT. THE FACT REMAINS THAT, THE DEDUCTION OF TAX AT SOURCE AND THE FILING OF THE TDS RETURN DID NOT FULLY VALI DATE THE EXPENDITURE CLAIMED BY THE ASSESSEE ESPECIALLY WHEN VIEWED IN THE CONTEXT OF THE OTHER FACTS BROUGHT ON RECORD BY THE A.O. 26.2 NEXT, THE A.O. ISSUED NOTICES U/S. 133(6) TO A LL THE PARTIES TO WHOM THE CARTING EXPENSES WERE ALLEGEDLY PAID. ALL THE NOTICES WERE RETURNED UNSER VED BY THE POSTAL AUTHORITIES. THE A.RS EXPLANATIO N IS THAT, THERE ARE MANY PARTIES WHO ARE ENGAGED IN CARTING AND TRANSPORTING GOODS, AND IT IS VERY DIFFICULT TO OBTAIN THERE WHEREABOUTS AFTER BUSINES S TRANSACTION WITH THEM IS OVER. THIS IS A VERY SIMPLISTIC EXPLANATION. IT IS A VERIFIABLE FACT TH AT EACH BUILDER HAS HIS FIXED TRANSPORTER(S). IN AN Y BUSINESS, WHEN DEALING THOUGH A PERIOD OF TIME, THE PARTIES CONCERNED DEVELOP AN UNDERSTANDING AND TRUST, AND THEREFORE, THEY CONTINUE TO DEAL WITH EA CH OTHER OVER THE YEAR UNTIL AND UNLESS SOME EVENT OR SOME CIRCUMSTANCES LEAD TO THE BREAK -UP OF THE BUSINESS RELATIONSHIP. THIS WOU LD APPLY MORE COMMONLY TO THE BUILDER OR THE CONTRACTOR. EVERY BUILDER HAS HIS OWN FIXED SUPPLIERS FOR VARIOUS MATERIALS OR ITEMS REQUIRED F OR HIS BUILDING ACTIVITY. THIS WOULD ALSO INCLUDE TRANSPORTERS AND, DEPENDING ON, THE CREDIT PERIOD A LLOWED BY THE SERVICE PROVIDER, AND THE SINCERITY O F THE RECIPIENTS OF SUCH SERVICE IN MAKING THE PAYMEN TS THE LENGTH OF SUCH RELATIONSHIP WOULD BE DETERMINED. THEREFORE I DO NOT FIND ANY MERIT IN TH E CLAIM OF THE AR THAT THE ASSESSEE WAS UNABLE TO PROVIDE THE LATEST ADDRESSES OF THE TRANSPORTERS OR TO EVEN FURNISH INFORMATION ABOUT THEIR WHEREABOUTS, ESPECIALLY WHEN THEY OPERATE IN A VERY CLOSELY KNIT MARKET WHERE EVERYONE IS KNOWN TO OTHER. 26.3 GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CAS E, I HAVE COME TO THE CONCLUSION THAT THE AO WAS FULLY JUSTIFIED IN TREATING THE CARTING EXPENSES AS NOT FULLY VERIFIABLE. AS A RESULT, SOME DISALLOWAN CE WAS IN ORDER. HOWEVER, I AM OF THE VIEW THAT IT WOU LD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO 25% OF THE CARTING EXPENSES CLAIMED A GAINST THE DISALLOWANCE @ 50% MADE BY THE AO. THE ADDITION THEREFORE WILL BE RESTRICTED TO RS. 18 ,80,810. THE ASSESSEE WOULD GET RELIEF OF AN EQUIVALENT AMOUNT. 21. AGGRIEVED BY THE ORDER OF CIT(A), BOTH THE PART IES ARE BEFORE US. ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 14 22. BEFORE US, THE LD. D.R. TOOK US THROUGH THE FIN DINGS OF A.O. HE FURTHER SUBMITTED THAT THOUGH CIT(A) AGREED WITH THE FINDIN GS OF A.O, HE HAS REDUCED THE DISALLOWANCE WITHOUT ANY REASON. HE THEREFORE S UBMITTED THAT IN SUCH CIRCUMSTANCES, THE ORDER OF THE A.O. NEEDS TO BE UP HELD. HE FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS. CIT VS. M.N. DASTUR AND CO (2009) 316 ITR 442 UNITED FILM EXHIBITORS VS. CIT (2009) 316 ITR 432 EMMPAC HOLDING (P) LTD. VS. CIT (2009) 319 ITR 379 ACIT VS. AMAR MINING CO. (2009) 123 TTJ (AHD) 473 23. THE LD. A.R. ON THE OTHER HAND REITERATED THE S UBMISSIONS MADE BEFORE A.O. AND CIT(A). HE FURTHER SUBMITTED THAT ASSESSEE HAD DEDUCTED TDS BEFORE MAKING THE PAYMENTS. HE FURTHER SUBMITTED THAT IF T HE ADDITION AS MADE BY THE A.O. IS SUSTAINED THE NET PROFIT RATIO ON THE BASIS OF GROSS RECEIPTS WOULD WORK OUT TO 20.82% WHICH IS ABNORMALLY HIGH. HE FURTHER SUBMITTED THAT IN THE CASE OF RAVINDRA SHAH VS. ACIT (ITA NO. 761/AHD/2008), T HE HONBLE HAS HELD THE DISALLOWANCE @ 1%. HE FURTHER SUBMITTED THAT THE P RESENT DISALLOWANCE OF 25% OF CARTING EXPENSE WHICH HAS BEEN SUSTAINED BY CIT(A) IS ALSO ON A HIGHER SIDE. IN THE ALTERNATE, HE SUBMITTED THAT TH E DISALLOWANCE MAY BE RESTRICTED TO A REASONABLE FIGURE. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO CART ING EXPENSES WHICH ACCORDING TO A.O., THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF EXPENSES. IT IS AN UNDISPUTED FACT THAT THE NATURE OF ACTIVITY IN WHICH THE ASSESSEE IS ENGAGED, THE MATERIAL LIKE RETI, KAPACH I ETC ARE REQUIRED TO COMPLETE THE CONTRACT AND FOR WHICH THE CARTING EXP ENSES ARE ALSO REQUIRED TO BE IN CARRIED. IT IS ASSESSEES SUBMISSION THAT AS SESSEE HAD DEDUCTED THE TDS BEFORE MAKING THE PAYMENT OF CARTING EXPENSES B UT AT THE SAME TIME THE ASSESSEE COULD NOT FURNISH THE PAN NUMBER AND COMPL ETE DETAILS OF ADDRESSES AND THE NOTICES ISSUED BY A.O. U/S. 133(6 ) ALSO RETURNED UNSERVED. ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 15 BEFORE US, IT IS SUBMITTED THAT IF THE DISALLOWANCE AS MADE BY A.O IS UPHELD, IT WILL RESULT INTO NET PROFIT ON THE BASIS OF GROSS R ECEIPTS TO 20.82% WHICH IS ON THE HIGHER SIDE. IT IS ALSO A FACT THAT CIT(A) HAD RESTRICTED THE DISALLOWANCE TO 25% INSTEAD OF 50% OF THE EXPENSES. FROM THE LIST O F PARTIES FROM WHOM THE TDS HAS BEEN DEDUCTED AND WHICH IS PLACED ON PAGE 5 9 OF THE PAPER BOOK, IT IS SEEN THAT IN A FEW CASES THOUGH ASSESSEE HAS STA TED IT HAD DEDUCTED TDS BUT IN THE LIST NO PAN NUMBERS OF SOME OF THE PARTI ES HAVE BEEN INDICATED. CONSIDERING THE TOTALITY OF FACTS AND PECULIAR CIRC UMSTANCES OF THE CASE AND NATURE OF THE BUSINESS AND ACTIVITY CARRIED OUT BY ASSESSEE, WE ARE OF THE VIEW THAT TO BE FAIR TO BOTH SIDE AND THAT ENDS OF JUSTICE SHALL BE MET IF DISALLOWANCE IS RESTRICTED TO RS. 10 LACS AS AGAINS T RS. 18,80,810/- SUSTAINED BY CIT(A). WE THUS DIRECT ACCORDINGLY. THUS THIS GR OUND OF REVENUE IS DISMISSED AND ASSESSEES GROUND NO. 3 IS PARTLY ALL OWED. 25. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. NOW WE TAKE UP ASSESSEES APPEAL ITA NO. 580/AHD/20 10. 1 ST GROUND IS WITH RESPECT TO ADDITION OF RS. 16,05,93 2/- MADE ON ACCOUNT OF VALUATION OF CLOSING WORK IN PROGRESS (W IP). 26. A.O NOTICED THAT ASSESSEE HAD SHOWN CLOSING STO CK AT RS. 4,74,008/-. HE ALSO NOTICED THAT THOUGH ASSESSEE HAD PURCHASED MAT ERIALS AGGREGATING TO RS. 20,79,940/- ON THE LAST 2 DAYS OF THE YEAR (LI STED AT PAGE 11 OF ORDER) AND WHICH WAS NOT USED IN THE PROJECT, HAD NOT BEEN INC LUDED IN CLOSING STOCK. HE ACCORDINGLY TREATED THE DIFFERENCE BETWEEN THE PURC HASES MADE ON LAST DAY OF THE YEAR AND THE VALUE OF STOCK SHOWN BY ASSESSEE A MOUNTING TO RS. 16,05,932/- AS DIFFERENCE IN VALUATION OF CLOSING S TOCK AND ADDED TO THE INCOME. CIT(A) UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER:- 18. I HAVE CAREFULLY CONSIDERED THE MATTER. I AM OF THE FIRM BELIEF THAT NO ONE CAN BE ASKED TO PROVE A NEGATIVE SINCE IT IS NOT POSSIBLE TO DO SO. THEREFO RE, THE AO COULD NOT BE ASKED TO PROVE THAT THE MATERIALS PURCHASED ON 30 TH AND 31 ST MARCH, 2006 WERE NOT CONSUMED PRIOR TO THE PURCHAS ES. THEREFORE, THE AR'S ARGUMENT IN THIS REGARD IS NOT RELEVANT. THE CLAIM THAT THE MATERIALS WERE RECEIVE D ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 16 AND CONSUMED PRIOR TO THE RAISING OF INVOICES AS AL SO THE BILLS, HAS BEEN MADE BY THE AR AND HENCE, TH E ONUS IS ENTIRELY ON THE AR TO PROVE SUCH A CLAIM WI TH RELEVANT EVIDENCE. THIS HOWEVER, HE HAS FAILED T O DO. IT IS A COMMON PRACTICE THAT, WHENEVER A MATERI AL/GOOD IS SUPPLIED, THE SAME IS ACCOMPANIED BY THE INVOICE. THE BILL MAY FOLLOW LATER. THEREFORE, THE CLAIM OF THE AR THAT EVEN THE INVOICES WERE RAI SED AFTER THE DELIVERY OF MATERIALS IS RATHER FARFETCHE D AND UNREAL. THE APPLICATION OF THE MIND ON THE PA RT OF THE AO AND THE SCRUTINY OF THE DETAILS FURNISHED BY THE ASSESSEE RESULTED IN THE DETECTION OF THE PURCHASES MADE ON THE LAST TWO DAYS OF THE FINANCIA L YEAR. THERE WAS THUS SUFFICIENT AND REASONABLE GROUND TO BELIEVE THAT THE MATERIALS SO PURCHASED W OULD HAVE BEEN IN HAND AND INCLUDED IN THE CLOSING STOCK AT THE END OF THE YEAR. SINCE THIS WAS NOT DO NE, AND EVEN THOUGH IT MAY BE ARGUED THAT ANY ADDITION TO THE CLOSING STOCK WOULD BE OF NO BENEFI T TO THE REVENUE SINCE THE SAME WOULD HAVE TO BE TREATED AS THE OPENING STOCK OF THE SUBSEQUENT YEA R, I AM CONSTRAINED TO SUSTAIN THE FINDINGS AND CONCLUSION OF THE AO. CONSEQUENTLY, THE ADDITION OF THE SUM OF RS 16,05,932/- WILL STAND CONFIRMED. 27. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US, THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O. AND CIT(A). HE FURTHER SUBMITTED THAT IF THE VALUE OF GOODS IS CONSIDERED TO BE IN STOCK AS ON THE LAST DAY THEN THE A.O. BE DIRECTED TO CONSIDER THE SAME AS OPENING STOCK IN SUBSEQUENT YEAR. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A). 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE MATERIAL WORTH RS. 16,0 5,932/- WERE PURCHASED ON THE LAST 2 DAYS OF THE YEAR AND THE ASSESSEE COULD NOT PROVE THAT THE SAME WAS CONSUMED AND WAS NOT IN THE STOCK AT THE END OF THE YEAR AND IN SUCH CIRCUMSTANCES, THE ACTION OF A.O IN CONSIDERING THE SAME AS PART OF CLOSING STOCK CANNOT BE FAULTED. BUT AT THE SAME TIME, IT IS ALSO AN ACCEPTED PRINCIPLE OF ACCOUNTANCY, THAT CLOSING STOCK AT THE END OF TH E YEAR BECOMES OPENING STOCK OF THE NEXT YEAR. IN SUCH CIRCUMSTANCES, WE ARE IN AGREEMENT WITH THE SUBMISSION OF LD. A.R. THAT THE AMOUNT WHICH IS CON SIDERED AS CLOSING STOCK IN THE RELEVANT ASSESSMENT YEAR BE CONSIDERED AS OPENI NG STOCK OF SUBSEQUENT YEAR. WE ACCORDINGLY DIRECT THE A.O. TO GIVE CREDI T OF THE ADDITION MADE TO THE CLOSING STOCK AT THE YEAR END AS OPENING STOCK IN T HE IMMEDIATE SUCCEEDING YEAR. WE THUS DIRECT ACCORDINGLY. IN THE RESULT, T HIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 2 ND GROUND IS WITH RESPECT TO PAYMENT OF SALES TAX;- ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 17 29. ON PERUSING THE SALES TAX ASSESSMENT ORDER OF A SSESSEE, A.O NOTICED THAT THE SALES TAX PAID REFLECTED THEREIN WAS RS. 15,94, 952/- BUT HOWEVER IN THE PROFIT AND LOSS ACCOUNT, ASSESSEE HAD DEBITED SALE S TAX OF RS. 20,55,428/-. SINCE THE ASSESSEE COULD NOT GIVE ANY PLAUSIBLE EXP LANATION FOR THE DIFFERENCE, A.O. CONSIDERED THE EXCESS CLAIM OF RS. 4,60,476/- (RS. 20,55,428/- LESS 15,94,952/-) AS BOGUS AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER B EFORE CIT(A). CIT(A) UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER:- 22. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. FIRST OF ALL, I DO NOT ACCEPT THE CLAIM OF THE AR THAT THE AO HAD NOT CALLED FOR THE RELEVANT CHALLANS IN SUPPORT OF THE DETAILS ALLEGEDLY FURNISHED BY THE ASSESSEE IN COURSE OF THE ASSESSMENT PROCEEDINGS. I T HAS BEEN CLAIMED BY THE AR THAT THE ASSESSEE WAS NOT LIABLE TO ANY SALES-TAX PAYMENT AND THAT, IT WA S THE LIABILITY OF M/S. RANJIT CONSTRUCTION WHICH T HE ASSESSEE HAD TO DISCHARGE FOR UTILISING THEIR MATER IALS. IT HAS BEEN FURTHER SUBMITTED THAT A SUM OF R S 4,03,568 PERTAINED TO THE YEAR 2005-06 AND RS 55,90 8 TO THE YEAR 2004-05. BOTH THESE LIABILITIES WERE DISCHARGED BY M/S. RANJIT CONSTRUCTION. IF THAT WAS SO, THEN THE ASSESSEE COULD NOT HAVE CLAIMED DEDUCTION OF THESE SUMS, FIRSTLY BECAUSE, THEY DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, AND SI NCE THE LIABILITY HAD ARISEN IN THE EARLIER YEARS AND T HE ASSESSEE FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING, SUCH LIABILITY OUGHT TO HAVE BEEN ACCOU NTED FOR AND CLAIMED IN THOSE YEARS. SECONDLY, THE LIABILITIES PERTAINED TO M/S. RANJIT CONSTRUCTION A ND THEY HAD DULY DISCHARGED SUCH LIABILITIES. THEREFORE, THE ASSESSEE COULD NOT CLAIM DEDUCTION O F THE SAME SUMS. AS REGARDS THE ALLEGED PAYMENT OF REGISTRATION FEES OF RS 1,000, NO EVIDENCE HAS BEEN FURNISHED. GIVEN SUCH FACTS OF THE CASE, IT IS HEL D THAT THE A.O WAS FULLY JUSTIFIED IN REJECTING THE A SSESSEES CLAIM AND MAKING THE ADDITION OF RS. 4,60,476/- WHICH WILL STAND CONFIRMED. 30. BEFORE US, THE LD. A.R. SUBMITTED THAT ON THE M ATERIAL RECEIVED FROM RANJIT CONSTRUCTION, ASSESSEE WAS REQUIRED TO PAY SALES TA X WHICH WAS DEDUCTED BY RANJIT CONSTRUCTION AND PAID ON BEHALF OF ASSESSEE. HE POINTED TO THE COPY OF CHALLAN FOR RS. 4,03,568/- PLACED AT PAGE 5 AND 8 OF THE PAPER BOOK. HE THEREFORE SUBMITTED THAT THE SALES TAX PAID ON BEHA LF OF ASSESSEE BY RANJIT CONSTRUCTION SHOULD THEREFORE BE ALLOWED. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A). 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE BEFORE US IS WITH RESPECT TO SALES TAX PAYMEN T. BEFORE US, LD. A.R. HAS SUBMITTED THAT SALES TAX WAS PAID BY RANJIT CONSTRU CTION ON BEHALF OF ASSESSEE. HOWEVER WE FIND THAT THERE IS NO FINDING ON THIS FACTUAL ASPECT BY THE A.O. WE THEREFORE FEEL THAT THIS ASPECT NEEDS V ERIFICATION AT THE END OF ITA NOS. 452 & 580/AHD/2010 . A.Y. 2006- 07 18 A.O. AND THEREFORE REMIT THE ISSUE TO THE FILE OF A .O. FOR VERIFICATION AND THEREAFTER DECIDE THE ISSUE AS PER LAW. THUS THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 IS WITH RESPECT TO DISALLOWANCE OF CAR TING EXPENSES. 32. THIS GROUND HAS ALREADY BEEN PARTLY ALLOWED BY US, WHILE DECIDING GROUND NO. 4 OF REVENUES APPEAL. THUS THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 33. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 07 -03 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD