The ACIT, 1(2), Indore V. M/s. KARADA CONSTRUCTION COMPANY, Indore

ITA 500/IND/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5856 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R R MEENA
• Assessee Lawyers: S R NAREDI CAS
• Section: 142(1)

Judgement Text

ITA NO.500 OF 2014 KARADA CONSTRUCTION COMPANY 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.500/IND/2014 A.Y. 2010-11 ACIT-1(2), INDORE :: APPELLANT VS M/S. KARADA CONSTRUCTION CO., INDORE PAN AAIFK 3632 L :: RESPONDENT ASSESSEE BY SHRI R.R. MEENA, DR RESPONDENT BY SHRI HIRESH JAIN AND SHRI S.R. NAREDI, CAS DATE OF HEARING 06.1.2016 DATE OF PRONOUNCEMENT 06.1.2016 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL IS FILED BY THE REVENUE CHALLENGING TH E ORDER OF LD. CIT(A)-I, INDORE, DATED 11.4.2014 ON THE GROUND THAT LD. CIT( A) HAS ERRED IN DELETING THE ADDITION OF RS.35,39,978/- ON ACCOUNT OF LABOUR EXP ENSES. 2. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS CARRYI NG OUT THE ACTIVITIES OF CIVIL CONSTRUCTION. A NOTICE U/S 142(1) WAS ISSUED ON 6.1 .12 BY THE AO TO PRODUCE THE DETAILS OF ACTIVITIES AND VARIOUS QUERIES WERE RAISED. ASSESSEE SUBMITTED A REPLY ON 01.2.2013. THE SUBMISSION OF THE ASSESSEE WAS ANALYZED BY THE AO AND NOTICE WAS ISSUED U/S 142(1) AS A SHOW-CAUSE NO TICE. THE ASSESSEE ITA NO.500 OF 2014 KARADA CONSTRUCTION COMPANY 2 COMPLIED WITH THE NOTICE BY FILING CERTAIN DOCUMENT S AS NOTED BY THE REVENUE. FROM PERUSAL OF THE MUSTER ROLL, SUPPLIED BY THE AS SESSEE, THE AO NOTED THAT IT IS NOT POSSIBLE TO TRACE OUT THE LABOUR AS NO IDENT IFICATION IS POSSIBLE. THEREFORE, THE BOGUSNESS OF MUSTER ROLL CAN ONLY BE ASCERTAINED. THE ASSESSEE IS PERFORMING THE CONTRACT OF ROAD CONSTRU CTION. IT HAS CARRIED OUT OTHER EXPENSES AND TDS RULES WERE ALSO COMPLIED. TH EREFORE, IT HAS INCURRED EXPENSES FOR THE PURPOSE OF ROAD CONSTRUCTION. THER EFORE, ENTIRE EXPENDITURE IS NOT BOGUS. HOWEVER, CERTAIN PERCENTAGE NEEDS ONL Y TO BE ALLOWED. ACCORDINGLY, THE AO ALLOWED THE LABOR EXPENDITURE O NLY ON 85%. THE AO, HOWEVER, DISALLOWED 15% OUT OF LABOUR EXPENSES, WHI CH COMES TO RS.41,39,978/- ON ACCOUNT OF DISCREPANCIES IN MUSTE R ROLL AS NOTED IN THE ASSESSMENT ORDER. 3. AGAINST THE ACTION OF THE AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE LD. CIT(A), WHO, DELETED THE ADDITION OF RS.35, 39,978/- OUT OF RS.41,39,978/- STATING THAT IT IS NOT PRACTICALLY P OSSIBLE TO MAINTAIN ADDRESS DETAILS OF LABOUR AS HELD IN THE CASE OF ARJUN BHOW NICK (2013) 55 SOT 82 (KOL). THERE IS NORMALLY ONE ACCOUNTANT ON SITE WHO PREPARES MUSTER ROLL, HENCE SAME WRITING ON ENTIRE MUSTER IS NORMAL PHENO MENA. AO WAS NOT JUSTIFIED IN STATING THAT SAME THUMB IMPRESSION APP EARED FOR 3 PERSONS, AS HE IS NOT A TECHNICAL EXPERT TO COME TO SUCH CONCLUSIO N AS HELD IN THE CASE OF ANAJ KUMAR AGRAWAL (2002) 74 TTJ (GAU.) 573. THE AO HAS, THUS, RAISED ONLY TECHNICAL ISSUES. THE AO DID NOT GO INTO THE FACT T HAT RATE OF N.P. HAS INCREASED FROM 4.18% TO 4.93% IN THE YEAR UNDER CONSIDERATION AND THERE WAS A ITA NO.500 OF 2014 KARADA CONSTRUCTION COMPANY 3 PERCENTAGE FALL IN LABOUR EXPENSES FROM 40.01% TO 3 8.32%. ACCORDINGLY, LD. CIT(A) CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.6 LACS, WHICH RESULTED THE RELIEF TO THE ASSESSEE AT RS.35,39,978. AGGRIEV ED WITH THE ACTION OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR RELIED ON THE ORDER OF THE AO AND SUBMIT TED THAT NO SPECIFIC FINDING WAS GIVEN BY THE LD. CIT(A) ON DETERMINATIO N OF AMOUNT OF RS.6 LACS. THE AO HAS RIGHTLY POINTED OUT CERTAIN DISCREPANCIE S IN MUSTER ROLL AS NOTED IN THE ASSESSMENT ORDER. THE LD. CIT(A), WITHOUT LOOKI NG INTO THE FACT THAT THE N.P. OF THE ASSESSEE HAS INCREASED FROM LAST YEAR, REACH ED TO THE CONCLUSION THAT THE AO RAISED ONLY TECHNICAL ISSUES. THE LD. CIT(A) DID NOT APPRECIATE THE FACT THAT THE AO HIMSELF CONSIDERED THAT THE ENTIRE EXPE NSES WAS NOT BOGUS AND AS SUCH RIGHTLY MADE THE ADDITION BY TAKING 15% OF THE EXPENSES CLAIMED. THEREFORE, THE ORDER OF THE AO SHOULD BE RESTORED. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE FIND THAT CERTAIN DISCREPANCIES IN MUSTE R ROLL WERE NOTED BY THE AO IN THE ASSESSMENT ORDER. RATE OF N.P. HAS INCREASED FROM 4.18% TO 4.93% IN THE YEAR UNDER CONSIDERATION. THERE WAS A PERCENTAG E FALL IN LABOUR EXPENSES FROM 40.01% TO 38.32%, WHICH SUGGESTS THAT THE N.P. MIGHT HAVE MARGINALLY BEEN BETTER THAT 4.93% IN VIEW OF THE DISCREPANCIES NOTED BY THE AO. HOWEVER, WE ALSO FIND THAT THE AO ESTIMATED AT HIGH ER RATE MAKING DISALLOWANCE @15% OF THE EXPENSES CLAIMED. THEREFOR E, ON CONSIDERATION OF ABOVE FACTS AND CIRCUMSTANCES, NATURE OF BUSINESS, SUBMISSIONS AND ITA NO.500 OF 2014 KARADA CONSTRUCTION COMPANY 4 DISCUSSION THEREOF, WE ARE OF THE VIEW THAT ESTIMAT ION SHOULD BE FAIR AND REASONABLE, THUS, IN ORDER TO MEET AN END TO THE JU STICE, IT WOULD BE FAIR AND REASONABLE IF DISALLOWANCE @5% OF THE LABOUR EXPENS ES CLAIMED IS APPLIED IN THE PRESENT CASE. THE AO IS DIRECTED TO WORK OUT AC CORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED PARTLY. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06.1.2016 . SD/- ( D.T. GARASIA) JUDICIAL MEMBER SD/- (B.C. MEENA) ACCOUNTANT MEMBER DATED : 06.1.2016 !VYS! COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR, INDORE