DY CIT - 26(1), MUMBAI V. M/S. SHAHEEN ENTERPRISES , MUMBAI

ITA 467/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2429 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM, & SHRI AMARJIT SINGH, AM आयकरअपीलसं./ I.T.A. No. 467/Mum/2021 (निर्धारणवर्ा / Assessment Year: 2012-13) DCIT – 26(1), R. No. 623, 6 th Floor, Kautilya Bhavan, BKC, Bandra East, Mumbai-400051 बिधम/ Vs. M/s Shaheen Enterprises, Flat No. 102, Bldg. No. 4, Sultanbad Behram Building, S. V. Road, Jogeshwari West, Mumbai-400 051 स्थायीलेखासं./जीआइआरसं./PAN No. ABMFS7145R (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Shri C. T. Mathews, Ld. DR प्रत्यथीकीओरसे/Respondent by : None सुनवाईकीतारीख/ Date of Hearing : 12.05.2022 घोषणाकीतारीख / Date of Pronouncement : 12.05.2022 आदेश / O R D E R Per Amit Shukla, Judicial Member: The aforesaid appeal has been filed by the revenue against the impugned order dated 27.01.2020, passed by Ld. CIT(A)-42, 2 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises Mumbai for the quantum appeal of assessment passed u/s 143(3) for AY 2012-13. The revenue has taken the following grounds of appeal:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting 95% of the labour expenses amounting to Rs. 2,34,44,898/- as against 100% of the disallowance made by the AO. 2. The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored since the assessee has not furnished any substantiating evidence before the ld. CIT(A) which were not examined by the AO to enable him to interfare with this finding. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. The facts in brief qua the issue are that, the assessee is a partnership firm carrying on civil engineering construction work for Govt. /semi Govt. departments as main contractor or sub contractor. Ld. AO required assessee to file Form 16 along with TDS challan of sub contractor and labour contractor and also asked for labour registration alongwith supporting bills, etc. for the details at 3 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises which work is carrying on during the AY 2011-12 and 2012-13. In response, assessee has furnished various details and explanation which has been incorporated in the assessment year. Assessee has furnished the details of sub contractor labour; the contract work carried out alongwith details as to work done by sub contractor, labourers from whom TDS has been deducted, and other petty labourers on whom no TDS was deducted alongwith the list of labourers and details of each and every apyments. The books of accounts and the labour register were also filed as required by the AO. However, Ld. AO rejected the assessee’s contention and disallowed the expenses to the tune of Rs. 2,34,44,895/- which is almost 95% of the labour payments holding that assessee could not substantiate the genuineness of the claim of the labour expenses and most of the expenses made in cash. 3. Ld. CIT (A) after incorporating the entire details and claim made by the assessee and ITAT order for AY 2012-13 wherein exactly the same facts were permeating, held that the Tribunal has restricted the disallowance to 5%. The relevant observation of Ld. CIT(A) are held as under:- 4 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises 7.2.1 On being asked about the applicability of decisions of Hon'ble ITAT in appellant own case for A.Y 2011-12, the appellant stated that as far as the total process / progress of assessment proceedings of the A.Y. 2002-13 is concerned, the same has been absolutely identical to that of A.Y. 2011- 12 in all respect........ i.e. details called in the initial stage /thereafter during the subsequent discussion, information / explanation vis-a-vis the submissions made by us, the huge uncalled for disallowance out of the expenses / final addition .... All are done in a very similar manner, finally resulting into an impossible unachievable profitability. 7.2.2 I have gone through the submission made by the appellant and the facts of A.Y. 2011-12 and A.Y. 2012-13 and the decision of Hon'ble ITAT Mumbai (Supra) and find that the facts and issues related to present appeal are identical to that of A.Y. 2011-12. Thus respectfully relying on the decision of Hon'ble ITAT in assessee's own case for A.Y. 2011-12, the disallowance is restricted to 5% of the total disallowance of Rs. 2,34,44,898/-. Therefore, the appellant gets relief of Rs. 2,22,72,653/- (Rs. 2,34,44,898/- minus Rs. 11,72,245/-). 4. None appeared on behalf of the assessee. Ld. DR strongly relied on the order passed by AO. 5 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises 5. From the perusal of assessment order as well as the documents submitted before the authorities below, we find that assessee had filed all the requisite details as required by the AO and also the list of 2388 labourers. We find that this Tribunal in assessee’s own case for AY 2011-12 passed in ITA No. 6566/Mum/2016 have decided this issue in favour of the assessee which has been filed by the Ld. CIT(A) also. The relevant observation and finding are as under:- 9. It is submitted that during the assessment the Id. AO called for the details of sundry creditors with their names and address and their balances for the. last three years and various other details. A statement showing the names & balance payable to each of such creditors as on 31/03/10 & 31/03/11 was submitted during the assessment proceedings. The AO noted that the addresses of the parties was not mentioned. in the details. Similarly, a statement showing the expenses, alongwith the names of the payee for each of the expenses for the year was submitted during the assessment proceedings. The AO noted that the addresses of the parties was not mentioned in the details. It is submitted that during the assessment that the majority of the laborers are from the. Local area & surroundings of the site & their address is our site address only. However, the addresses in 6 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises case of parties with PAN were submitted. It was also explained to the AO that the site(s) at which, such work(s) have been carried out are located into a interiors i.e. away from not only a city/town but even from a village in a jungle like areas where even routine necessities are not available. Here, the labourers are picked up/gathered from the local areas, surroundings thereof and even some times as may be available from Andhra Pradesh and other tribal places. Such labourers are directly employed and the payment is made accordingly. The facilities like residence, ration, sundry provisions are also arranged/provided. As far as the location/address of such, labourers is the concerned, is the site(s) itself only, i.e. the respective site(s) at 'which such labourer(s) work and stay till their continuation with the Assessee The typical feature is of their working/continuity with the Assesse is the. irregularity of attendance continuity and sudden leaving the work without any proper notice, particularly our clients have to endeavor at their best to continue them on. work by providing them shelter, ration, provisions, medical needs, including that to the family members. The position of payment is also maintained in such a way that they don’t run away or sleep drunk if paid fully vis-a-vis without any dissatisfaction as regards their basic needs. In other words, at any point of time, the payment to them is always pending making them to continue with the assessee. 7 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises 10. It is submitted that under such circumstances the address that may be applicable in case of such laborers would be that of the respective site(s) only. Also due to uncertainty about their continuation and the basic nature being piece 'meal laborers, their confirmations are difficult to obtain at this juncture, i.e. after a period of around 3 years. Further it is submitted that, it was explained to Assessing Officer that factually the work is carried out, labour expenses are incurred, sales bills are raised, the payment to the laborers is made vis-a-vis the payment of the sale proceeds is received & all the transactions related to income & expenditure are recorded in the books of accounts maintained & accordingly the Net Profit is arrived at. It may be emphasized here that without such expenses neither the concurrent Sale Bills could have been raised nor the profit be made nor the tax would be paid. As far as the duration of the credit balance is concerned the same is said to be less than 3 years. In case of the continuing laborers, their accounts are running accounts whereas in case of the labourers who have left there are no dues payable to them. The AO added the entire amount spent on labour. charges i.e Rs. 16,06,00,655/- on account of not submitting complete details and documentary evidence He has allowed only the expenditure where the payees PAN was submitted by the Assessee. Learned Counsel submit that the civil work and other construction activity carried out by the AO is not disputed by the Id. Assessing Officer It is submitted 8 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises that the revenue from the operations is accepted. Learned Counsel submits that the Learned AO. has disallowed more than 90% of the expenses claimed by the Assessee resulting in the absurd situation of impossibility or earning the income without expenditure. Counsel submits that the AO has ignored the ground realities on the site, which has led to the huge number of creditors, who has only the site address as address and unavailability of PAN etc, as explained by the Assessee, and arbitrarily disallowed almost all the Expenses. Counsel submits that the books of the Accounts of the Assessee are Audited, and the AO did not reject the books of Accounts, he has arbitrarily accepted the books as it suits him with regard to the income. 11. The Ld. DR vehemently supported the orders of the Authorities below. He also submits that the assessee has not furnished the complete details as called for by the Assessing Officer in the absence of the complete details of incurred expenditure it was submitted that the lower authorities are justified in making the disallowance/addition. 12. We have heard the rival contentions perused the orders of the authorities below. Assessee is engaged in the business of civil construction and has expertise and specialization in irrigation work. Assessee has undertaken sub contract work of construction of Sonegaon Shivani Larger M.I. Tank in Amaravathi District. The main contract was awarded to JAF 9 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises Enterprises from whom assessee took job work for a cost ofRs.19.50 Crores. During the Assessment Year under consideration the assessee has declared sub contract receipts of Rs.18.55 crores and has claimed expenditure of Rs. 17.57 crores. In the course of the Assessment Proceedings the Assessing Officer requested the assessee to furnish the details in respect of the direct expenses of Rs.17.57 Crores. Assessee seems to have produced only partial information. Assessee also filed party wise details of expenses claimed in the Profit and Loss Account. Assessee also furnished the details of parties with addressees, PAN Numbers in respect of some of the expenses incurred. It appears that assessee could not furnish the vouchers and bills for the direct expenses as they were lying in the site office. A detailed note was also furnished by the assessee explaining how the expenses were incurred in the site locally and it was explained that the addresses of the local labourers which was shown as site office. It was also explained by the assessee the sites at which work was carried out is in a jungle like area where even routine necessities are not available. The laborers are picked up from the local area and surrounding areas and even from far of places and they are all employed directly at the site and payment is made accordingly. It was submitted that, facilities like residence, ration, sundry provisions are also arranged/provided at the site. The addressees of such laborers is the site itself where the laborers work and stay till 10 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises their continuation with the assessee. The assessee also contend that the typical features of their working/continuity with the assessee is the irregularity of attendance, continuity and sudden leaving the work without any proper notice. Therefore, the assessee has to endeavor their best to continue the laborers on work by providing them shelter, ration provisions, medical needs including that to the family members. It was further contended that the positon of payment to the laborers is also maintained in such a way that they do not leave work site or sleep drunk if paid fully and at the same time there should not be any dissatisfaction as regards their basic needs. In other words, at any point of time the payment to them is always pending making them to continue with the assessee. It was contended and submitted before the lower authorities that due to uncertain about their continuation and the basic nature being piece meal laborers their confirmations are difficult to obtain at this juncture after a period of three years. It was further contended that the work was actually carried, labor expenses are incurred, sale bills are raised, the payments to the laborers is made the payment of sale proceeds is received and all the transactions related to the income and expenditure are recorded in the Books of Accounts maintained and accordingly net profit is arrived at. It was also further submitted by the assessee that in case of continuation of the laborers their accounts are 11 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises running accounts whereas in case of the laborers who have left the work sites are continually payable to them. 13. Finally, it was contended that without such expenses neither the assessee could complete the project nor could rise the bills and also could not have paid tax. It was contended that the completion of project is not in doubt. Therefore, it cannot be said that the assessee is not incurred any expenditure at all for constructing the said project. All these contentions of the assessee cannot be brushed aside. Assessee is following the mercantile system of accounts. Assessee has shown the income from the project during the year and also booked the expenditure on accrual basis. Simply because the assessee could not furnish the complete information but only partial information is furnished regarding the expenses and also could not produce the confirmations from laborers the entire expenditure of Rs.16.06 Crores cannot be treated as expenditure not incurred and wholly and exclusively for the purpose of business. It is not in dispute of assessee carrying out the project work. The said amount cannot also be treated as bogus cash credits for the reason explained above. No corroborative evidence is brought on record to say that the assessee has paid to the creditors from the cash generated outside the books of accounts. The observations and conclusion of the Ld.CIT(A) in this regard is baseless. However, in the absence of the verification of the bills, vouchers of these expenses by the Assessing Officer the 12 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises correctness of the said expenditure could not be verified. The possibility of assessee inflating the expenditure cannot be ruled out in the absence of verification. In the circumstances we are of the view that to cover up all the deficiencies it would be appropriate to restrict the disallowance to 5% of the expenses. Thus we direct the Assessing Officer to restricting the disallowance of expenditure to 5% of 16.06 crores amounting to Rs.80,30,032/- and compute the income accordingly. 6. Thus, we do not find any infirmity in the order of Ld. CIT(A) following the earlier order on similar set of findings and identical facts. Accordingly, the grounds of appeal raised by revenue are dismissed. 7. In the result, the appeal filed by the revenue stands dismissed. Orders pronounced in the open court on 12 th May, 2002. Sd/- Sd/- (Amarjit Singh) (Amit Shukla) Accountant Member Judicial Member मुंबई Mumbai;ददनांक Dated : 12/05/2022 Sr.PS. Dhananjay आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent 13 I . T . A . N o . 467/ M u m / 2 0 2 1 M/s Shaheen Enterprises 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned 5. दवभागीयप्रदतदनदध, आयकरअपीलीयअदधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई/ ITAT, Mumbai