ITO, BHILWARA V. Shri Gopal Lal Chechani, BHILWARA

ITA 496/JODH/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4815 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO. 496 /JODH/201 4 ASSESSMENT YEAR:2010 - 11 THE ITO VS. SHRI GOPAL LAL CHECHANI WARD - 2 181, N AI SHAM KI SABJI MANDI BHILWARA BHILWARA PAN NO. AANPC7270M (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. AMIT KOTHARI DEPARTMENT BY : S H . RAVINDER MITTAL DATE OF HEARING : 2 4 /11/2016 DATE OF PRONOUNCEMENT : 28/11/2016 ORDER PER PART HA SAR A THI CHAUDHURY , JM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), AJMER DT. 22/07/2014 ON THE FOLLOWING GROUNDS OF APPEAL: 1. DELETING THE DISALLOWANCES OF SUB - CONTRACT EXPENSES AT RS. 27,19,685/ - , WITHOUT APPRECIATI NG THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE FORM WHICH THE ASSESSEES SUB - CONTRACT WORK ALLOTMENT COULD BE VERIFIED. 2. DELETING THE DISALLOWANCE OF BOULDER TRANSPORTATION EXPENSE S OF RS. 23,03,297/ - WITHOUT APP RECIATING THE FACTS OF THE CASE. 3. DELETING THE DISALLOWANCE OF WAGES & SALARY EXPENSES OF RS. 1,75,210/ - WITHOUT APPRECIATING THE FACTS OF THE CASE. 2 4. DELETING THE DISALLOWANCE OF DIESEL & LUBRICANT EXPENSES OF RS. 9,90,3 13/ - WITHOUT APPRECIATING THE FACTS OF THE CASE. 5. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELETE OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE BRIEF FACTS APPEARING IN THIS CASE ARE THAT THE ASSESSEE IS ENGAGED IN TH E CONTRACT OF MATERIAL AND LABOUR SUPPLY. THE RETURN OF INCOME FOR THE A.Y. 2010 - 11 WAS FILED ON 12/10/2010 DECLARING TOTAL INCOME OF RS. 17,98,610/ - . THE RETURN WAS PROCESSED ON 15/05/2011 . THE ASSESSEE FILED COPIES OF ACCOUNT OF AUDIT REPORT UNDER SECTI ON 44AB IN FORM NO. 3CB AND 3CD DATED 15/09/2010 DURING THE COURSE OF ASSESSMENT PROCEEDING. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 25/08/2011 AND SERVED UPON THE ASSESSEE ON 26/08/2011 FIXING CASE ON 06 /09/2011. EVENTUALLY THE CASE WAS TRANSFERRED FROM INCOME TAX OFFICER, WARD - 1, BHILWARA TO THE INCOME TAX OFFICR WARD - 2 AND ON SUCH CHANGE NOTICE UNDER SECTION 143(2) DATED 02/01/2012 WAS ISSUED FIXING CASE FOR HEARING ON 18/01/2012. THE ASSESSMENT WAS CO MPLETED UNDER SECTION 143(3) OF THE ACT WITH ASSESSED INCOME OF RS. 79,87,120/ - AS AGAINST THE RETURNED INCOME OF RS. 17,98,610/ - . 3. THAT , THE FIRST GROUND OF APPEAL IS WITH REGARD TO DISALLOWANCES OF SUB CONTRACT EXPENSES AT RS. 27,19,685/ - . THE ASSESSE E HAD CLAIMED SUB CONTRACT EXPENSES OF RS. 2,71,96,850/ - BASED ON VERBAL AGREEMENT WITH THE SUB CONTRACTOR. THE AO MENTIONED THAT ASSESSEE HAD NOT PRODUCED ANY AGREEMENT OR MEASUREMENT BOOK REGARDING THE SUB CONTRACT GIVEN. THERE IS NO VOUCHER MENTIONING T HE SUB CONTRACT WORK ALONGWITH THE DATE OF COMMENCEMENT AND 3 ITS COMPLETION. SO THE SUB CONTRACT WORK COULD NOT BE VERIFIED. THE AO MENTIONED THAT ASSESSEE IS PRUDENT CONTRACTOR AND HE COULD COMPLETE THE WORK AWARDED TO HIM AND HE HAS MANIPULATED BY GIVING THE SHAPE OF SUB CONTRACT PAYMENTS. ACCORDINGLY, THE AO APPLIED THE NP RATE OF 8% ON THE SUB CONTRACT PAYMENT OF 2,71,96,850/ - AND THEREBY MADE THE ADDITION OF RS. 27,19,685/ - . 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND OBSERVE D THAT THE ASSESSEE HAS AWARDED THE WORK BY VARIOUS CONTRACTOR OF THE ROADS. THE ASSESSEES CONTRACT RELATED TO MINING, BLASTING, DRILLING THE BOULDERS AND ITS TRANSPORTATION TO THE WORK SITE FOR CONSTRUCTION OF THE ROADS. THE ASSESSEE HAS GIVEN THE DETAIL S OF THE TOTAL CONTRACT RECEIVED BY HIM FOR AN AMOUNT OF RS. 7.39 CRORES. OUT IF IT, ASSESSEE HAS GIVEN THE PART OF THE WORK TO THREE SUB CONTRACTORS FOR THE SUM OF RS. 2.71 CRORES. THE ASSESSEE HAD POINTED OUT COMPLETE DETAILS OF WORK GIVEN TO SUB CONTRAC T AMOUNT PAID, THE CONFIRMATIONS WERE GIVEN TO THE AO. THE LD. CIT IN HIS ORDER FURTHER NOTED THAT ENTIRE PAYMENT WAS MADE BY CHEQUE THROUGH BANK ACCOUNT AND THROUGH THE SUPPLY OF MATERIAL TO THE SUB CONTRACTORS. 5. THAT , EVEN TDS HAS BEEN DEDUCTED ON THE PAYMENT MADE AND THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT WHICH HAS BEEN AUDITED. 6. THAT , IT IS APPARENT THAT THE ASSESSEE HAS GOT PART OF THE WORK EXECUTED ON SOME CONTRACT BASIS. THE DETAILS OF THE SUB CONTRACT ALONGWITH THERE PAN NUMBERS WERE AVAI LABLE BEFORE THE AO. HOWEVER, THE AO HAS NOT MADE ANY DIRECT ENQUIRIES FROM THE PARTIES CONCERNED BEFORE ASSUMING THAT NO SUB 4 CONTRACT WAS GIVEN. THE AO'S CONCLUSION THAT ASSESSEE HIMSELF COULD HAVE EXECUTED THE CONTRACT WORK IS ON PRESUMPTION BASIS. NO PO SITIVE EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT ABOVE PART OF THE WORK WAS NOT GIVEN ON THE SUB CONTRACT BASIS. THE LD CIT(A) FURTHER OBSERVED THAT VERBAL AGREEMENT IS ALSO A VALID CONTRACT WHICH CAN BE INFERRED FROM THE CONDUCT OF THE CONTRACTING PARTIES THEREFORE THE ADDITION OF RS. 27,19,685/ - WAS DELETED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTION S AND PERUSED THE RECORDS OF THE CASE AND WE FIND THAT THE LD. CIT(A) IN HIS ORDER ITSELF HAS STATED WITH REGARD TO THIS GROUND THAT THE A O HAS NOT MADE ANY DIRECT ENQUIRIES FROM THE PARTIES CONCERNED BEFORE ASSUMING THAT NO SUB CONTRACT WAS GIVEN. THE AO'S CONCLUSION THAT ASSESSEE HIMSELF COULD HAVE EXECUTED CONTRACT WORK IS ON PRESUMPTION BASIS AS ASSESSEES TURNOVER HAS INCREASED FROM 1.6 5 CRORES IN LAST YEAR TO RS. 7.42 CRORES IN THE YEAR UNDER CONSIDERATION AND NO POSITIVE EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT ABOVE PART OF WORK WAS NOT GIVEN ON THE SUB CONTRACT BASIS. THEREFORE, IT IS CLEAR THAT THE PROPER INVESTIG ATION WHICH THE AO WAS SUPPOSED TO PERFORM WAS NOT COMPLETED IN THIS CASE TO MEET THE ENDS OF JUSTICE WE DEEM IT FIT AND PROPER TO SEND THIS ISSUE BACK TO THE FILE OF THE AO DIRECTING HIM TO CONDUCT NECESSARY ENQUIRY AND COME TO THE REASONED CONCLUSION HEN CE THIS GROUND IS SET ASIDE TO THE FILE OF THE AO. 8. NEXT GROUND OF APPEAL WITH REGARD TO BOULDER TRANSPORTATION EXPENSES OF RS. 23,03,297/ - THAT AS PER THE ASSESSMENT ORDER BOULDER TRANSPORTATION EXPENSES 5 OF RS 2 ,30,32,965/ - HAVE BEEN CLAIMED. THE AO POI NTED OUT THAT ASSESSEE HAS PRODUCED THE VOUCHERS WHICH ARE WITHOUT DATES. THE BILLS ARE NOT PRINTED AND NO VAT NUMBER WRITTEN ON THEM. THE ASSESSEE HAS NOT MAINTAINED THE STOCK REGISTER OF THE BOULDERS ALONGIWTH THE LOG BOOK FOR TRANSPORTATION OF THE BOULD ERS. THE GENUINENESS OF THE BOLDER CONSUMPTION AND DIESEL PAYMENT CANNOT BE VERIFIED. ACCORDINGLY THE AO DISALLOWED 10% OF THE TOTAL EXPENSES AMOUNTING TO RS. 23,03,297/ - . 9. THE LD. CIT(A) IN HIS ORDER OBSERVED THAT OUT OF THE TOTAL BOULDER TRANSPORTATIO N EXPENSES OF RS. 2,30,32,965/ - ONLY A SUM OF RS. 3,15,775/ - I.E; 1.37% IS BY DIRECT CASH PAYMENT WHILE THE BALANCE EXPENSES ARE INCURRED ON CREDIT BASIS IN WHICH THE CREDITORS HAS ISSUED THE BILLS ON REGULAR INTERVALS AND PAYMENT WAS MADE TO THEM AFTER VE RIFICATION OF THE BILLS. THOUGH THE PAKKA BILLS MAY NOT BE AVAILABLE IN SOME CASES DUE TO NATURE OF WORK, HOWEVER, SUCH PETTY TRANSPORTATION EXPENSES ARE ALSO SUPPORTED BY THE VOUCHERS BEARING THE ASSESSEES SIGNATURE. THE LD. CIT(A) IN HIS ORDER FURTHER S TATED THAT SUCH TRANSPORTATION IS ON PER TON BASIS (WEIGHT BASIS) FROM THE MINES TO THE WORK SITE OF THE CONTRACT AWARDER. THEREFORE THE ASSESSEE WAS NOT REQUIRED TO MAINTAIN ANY STOCK REGISTER AND LOG BOOK FOR TRANSPORTATION OF BOULDER. THE ASSESSEE HAS S HOWN THAT AWARDED HAS MAINTAINED THE DATE AND VEHICLE NUMBER WISE DETAILS OF THE BOULDER WEIGHT RECEIVED ON BASIS OF WHICH BOULDER TRANSPORTATION CAN BE READILY VERIFIED. FURTHER THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS WHICH HAS BEEN DULY AUDITED. TH E PAYMENTS HAVE BEEN MADE AFTER DEDUCTION OF TAX 6 THE AO HAS NOT MADE ANY THIRD PARTY ENQUIRY FROM THE PAYEES IN RESPECT OF THE BOULDER T RANSPORTATION. 10. THAT ON THESE GROUND THE LD. CIT(A) DELETED THE ADDITION. 11. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORDS OF THE CASE AND WE ARRIVE AT OUR CONSIDERED VIEW THAT THE LD. CIT(A) IN HIS ORDER ITSELF REGARDING THIS GROUND HAS STATED THAT THE AO HAS NOT CONDUCTED ANY THIRD PARTY ENQUIRY FROM THE PAYEES IN RESPECT OF BOULDER TRANSPORTATION. THE A O H AS ALSO NOT SHOWN THAT THE EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS THIS ITSELF SIGNIFIES THAT THE ORDER OF THE AO IS NOT BASED ON SPECIFIC REASONING ENQUIRY AND THE ORDER DOES NOT SIGNIFIES AS TO THE WORKING OF THE MIND BASED ON WHICH THE CONCLUSION OR DECISION WAS ARRIVE AT BY THE AO AND THEREFORE SUFFERS FROM JUDICIAL LACUNA AND THEREFORE WE SETASIDE THIS GROUND ALSO BACK TO THE FILE OF THE AO FOR PROPER ENQUIRY AND VERIFICATION REGARDING BOULDER TRANSPORTATION . 1 2 . THE NEX T GROUND OF APPEAL RELATES TO DISALLOWANCE OF WAGES AND SALARY EXPENSES OF RS. 1,75,210/ - AND THEREAFTER THE FOURTH GROUND DEALS WITH DISALLOWANCE OF DIESEL AND LUBRICANT EXPENSES OF RS. 9,90,313/ - . 13 . THAT , IN THE ASSESSMENT ORDER AO MENTIONED THAT ASSE SSEE HAS DEBITED SALARY AND WAGES OF RS. 17,52,100/ - . THE AO MENTIONED THAT ON MANY VOUCHERS SITE ALLOCATION IS NOT MENTIONED AND THERE IS NO VERIFICATION BY THE SURVEY STAFF. THERE IS NO MUSTER ROLL OF ALLOTTED WORK THEREFORE, AO DISALLOWED RS. 1,75,210/ - I.E; 10% OF THE ABOVE EXPENSES. 7 14 . THAT , AS PER ASSESSMENT ORDER AO MENTIONED THAT ASSESSEE HAS DEBITED DIESEL AND LUBRICANT EXPENSES OF RS. 99,03,133/ - THE AO MENTIONED THAT ON MANY VOUCHERS SITE ALLOCATION IS NOT MENTIONED AND THERE IS NO VERIFICATION BY THE SURVEY STAFF. THERE IS NO STOCK REGISTER OF DIESEL AND LUBRICANT. THERE ARE NO JOB CARD MENTIONED THEREFORE THE AO DISALLOWED RS. 9,90,313/ - I.E; 10% OF THE ABOVE EXPENSES. 15 . THE LD. CIT(A) IN HIS ORDER HELD THAT THE ASSESSEE HAS MAINTAINED HIS B OOKS OF ACCOUNT WHICH ARE SUPPORTED BY BILLS AND VOUCHERS. THE LABOUR PAYMENTS ARE SUPPORTED BY ATTENDANCE SHEET AND THE DIESEL AND LUBRICANT EXPENSES ARE ALSO SUPPORTED BY BILLS AND VOUCHERS. THOUGH THEY HAVE NOT BEEN SEGREGATED SITE WISE THE AO HAS NOT P ROVED ANY OF THE EXPENSES TO BE BOGUS. THE LD. CIT(A) THEREFORE DELETED THE ADDITION ON ACCOUNT OF WAGES AND SALARY AND DIESEL AND LUBRICANT EXPENSES. 16 . WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUSED THE RECORDS OF THE CASE AND WE ARRIVE AT OUR CON SIDERED VIEW THAT IN THE ORDER OF THE LD. CIT(A) WITH REGARD TO GROUND NO. 3 & 4 IT IS SPECIFICALLY STATED THAT THE AO HAS NOT PROVED ANY OF THESE EXPENSES TO BE BOGUS. IT HAS NOT BEEN SHOWN BY WAY OF ANY ENQUIRY THAT EXPENSES CLAIMED ARE BOGUS, EXCESSIVE OR UNREASONABLE. THE DECISION OF THE LD. CIT(A) ON THESE TWO GROUNDS ITSELF SHOWS THERE IS A LACUNA WITH REGARD TO THE INVESTIGATION CONDUCTED BY THE AO WHILE ARRIVING AT HIS DECISION AND THAT THERE IS NO SPECIFIC REASONING NOR ANY DIFFERENT ENQUIRY CONDUC TED WHILE DISALLOWING THESE EXPENSES THEREFORE TO MEET THE ENDS OF JUSTICE THESE TWO 8 GROUNDS ARE ALSO SET ASIDE BACK TO THE FILE OF THE AO FOR PROPER ADJUDICATION AND ARRIVING AT A SPEAKING ORDER AFTER CONDUCTING REQUIRED ENQUIRY AND INVESTIGATION. 17 . GRO UND NO. 5 IS GENERAL IN NATURE AND NEED S NO ADJUDICATION. 18 . THAT IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT . SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28/11/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE CIT(A), THE DR