ACIT 25(2), MUMBAI V. HEMANSHU K MODI, MUMBAI

ITA 5018/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83913 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Department
• Bench Allotted: H
• Next Hearing Date: 14-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2012
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Rule of consistency; Question of law; Non compliance; Onus to prove
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; ,OA ,OA ,OA ,OA JH MH D:.KKDJ JKO] YS[KK LNL; JH MH D:.KKDJ JKO] YS[KK LNL; JH MH D:.KKDJ JKO] YS[KK LNL; JH MH D:.KKDJ JKO] YS[KK LNL; DS LE{K DS LE{K DS LE{K DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 ASST. COMMISSIONER OF INCOME TAX 25(2) C-11, PRATYAKSHAKAR BHAVAN, R. NO. 108, BANDRA KURLA COMPLEX, BANDRA (EAST). MUMBAI 400 051. VS.` SHRI HEMANSHU K. MODI PROP. M/S, VITRAJ CONSTRUCTION CO. & M/S VITRAJ ENTERPRISES C-4,406, YOGI NAGAR, BORIVALI (W), MUMBAI 400092. APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 21.5.2012 OF CIT(A) FOR THE A.Y. 2009-10. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF THE RETENTION MON EY OF RS.1, 17,98,002/- TO THE TURNOVER, WITHOUT CONSIDERING THE FACT THAT THE TDS WAS DEDUCTED ON THE GROSS AMOUNT AND SAME HAS BEEN CLAIMED AS CREDIT BY THE ASSESSEE IN RELEVANT ASSESSMENT YEAR. THE ID.CIT(A) ALSO FAILED TO APPRE CIATE THE FACT THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING, A ND AS SUCH THE RETENTION MONEY IN CONSIDERATION HAD ACCRUED DURING THE PERIO D UNDER QUESTION. II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE ON THE GROUND O F LABOUR CHARGES WITHOUT APPRECIATING THE FACT THAT PAYMENTS HAD BEEN MADE B Y CASH AND NOT ALL THE REVENUE BY SHRI N. PADMANABHAN ASSESSEE BY SHRI VIMAL PUNMIYA DATE OF HEARING 14-10-2014 DATE OF PRONOUNCEMENT 21.10.2014 ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 2 | P A G E VOUCHERS WERE PRODUCED FOR VERIFICATION, AND THE FAC T THAT THE ADDITION WAS MADE ON REASONABLE BASIS AS THE EXPENSES WERE ON A H IGHER SIDE. III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE ON THE GROUND O F SITE EXPENSE WITHOUT APPRECIATING THE FACT THAT ASSESSEE DID NOT PROVIDE FOR VERIFICATION THE MODE OF EXPENSES INCURRED FOR THE SITE EXPENSES. IV) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE ON THE GROUND O F PURCHASE EXPENSES OF 3 PARTIES AMOUNTING TO RS. 94,58,077/- WITHOUT CONSIDE RING THE REPORT OF THE INSPECTOR ON THE GENUINENESS OF THE RELEVANT PARTIE S AND THE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH DURING THE ASSESSM ENT PROCEEDINGS THAT THE TRANSACTIONS WERE WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF BUSINESS. V) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF EXPENSES ON ACCOU NT OF PURCHASES FROM THREE PARTIES WITHOUT APPRECIATING THE FACT THAT THE ADDIT IONAL EVIDENCES SUBMITTED DURING THE APPELLATE PROCEEDINGS WERE NOT PROVIDED D URING THE ASSESSMENT PROCEEDINGS. 2. GROUND NO. 1 IS REGARDING DELETION OF ADDITION O F RETENTION MONEY. 2.1 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER NOTED THAT THE ASSESSEE HAS SHOWN TURNOVER IN RESPECT OF MCGM CON TRACT AMOUNTING TO RS. 20,85,90,788/- WHEREAS FROM THE TDS CERTIFICATE TH E GROSS AMOUNT OF TURN OVER IS RS/ 22,0452,020/-. THE ASSESSING OFFICER NOTED THAT THAT THE ASSESSEE HAS SHOWN THIS TURNOVER BY REDUCING THE RETENTION MONEY AMOUNT ING TO RS.1,17,98,002/- AND OTHER TAX OF RS. 63,230/-. ASSESSING OFFICER ASK ED THE ASSESSEE TO EXPLAIN THE ASSESSEE AS TO WHY THE RETENTION MONEY SHOULD NOT B E TREATED AS TURNOVER. THE ASSESSEE EXPLAINED AND CONTENDED THAT THE ASSESSEE IS A CONTRACTOR AND SUB- CONTRACTOR FOR MAKING CONCRETE ROAD ON CONTRACT BA SIS FOR VARIOUS GOVERNMENT AND SEMI-GOVERNMENT AND LOCAL AUTHORITY. THE PAYMENT IS RECEIVED AFTER DEDUCTION OF RETENTION MONEY BEING KEPT TO SECURE VAR IOUS THINGS SUCH AS DEFECTS ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 3 | P A G E IN THE WORK, ANY CLAIM, SOME TECHNICAL PROBLEMS ETC AND AFTER SATISFYING THE AUTHORITY MAY RELEASE THE TOTAL RETENTION MONEY OR MAKE DEDUCTION ON VARIOUS COUNT AND RELEASE BALANCE AMOUNT. THUS THE ASSESSEE CLAIMED THAT SO LONG THE MONEY IS RETAINED BY THE AUTHORITIES TILL THEIR SATI SFACTION AND EXPIRY OF TIME OF MAINTENANCE , THE SAMCE CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE ASSESSEE HAD ACCOUNTED RETENTION MONEY IN THE YEAR IN WHICH IT HAS ACCRUED AND RECEIVED. THE ASSESSING OFFICER DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE AND ADDED RETENTION MONEY TO THE TOTAL TURNOVER OF THE ASS ESSEE AND CONSEQUENTLY, THE SAID AMOUNT WAS ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 2.2 ON APPEAL, THE CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY FOLLOWING THE VARIOUS DECISIONS AS RELIE D UPON BY THE ASSESSEE. 2.3 BEFORE US, THE LD. DR OF THE ASSESSEE HAS SUBMIT TED THAT IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAD SUCCESSFULLY COMPLETED TH E WORK AND THE RETENTION MONEY IS KEPT ON HOLD FOR UNASCERTAINED DEFECT LIABI LITY. THIS IS ONLY THE DEFERRED MONEY WHICH HAS ALREADY ACCRUED TO THE ASSESSEE AND, T HEREFORE, THE SAID AMOUNT RETAINED BY THE AUTHORITIES WAS AFTER DEDUCTION OF TA X AT SOURCE. THOUGH THE PAYMENT WAS DEFERRED, HOWEVER, THE SAID AMOUNT IS PART OF ITS INCOME FOR THE YEAR UNDER CONSIDERATION AS ACCRUED TO THE ASSESSEE. HE HAS RELIED UPON THE ORDER OF ASSESSING OFFICER. 2.4 ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE HAS SUBMITTED THAT AS PER THE TERMS AND CONDITIONS OF THE CONTRACT OF MCGM, 5% AMOUNT WAS DEDUCTED BY MCGM AS RETENTION MONEY FROM T HE CERTIFIED BID AMOUNT ON WHICH NO INTEREST SHALL BE PAID. THE RETEN TION MONEY SHALL BE REFUNDED TO THE ASSESSEE ONLY ON FINALIZATION OF FINA L BILL SETTLEMENT OF ACCOUNTS OF ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 4 | P A G E WORK BY THE ASSESSEE IN ALL RESPECT OR AFTER THE C OMPLETION OF DEFECT LIABILITY PERIOD, WHICHEVER IS LATER. THEREFORE, THE ASSESSEE OFFERED THE RETENTION MONEY IN THE YEAR OF RECEIPT BECAUSE IT HAS ACCRUED ONLY ON SATISFACTION OF STIPULATED CONDITIONS AND FULFILLMENT OF SPECIFIED CRITERIA AND AF TER LAPSE OF STIPULATED TIME. THIS METHOD OF ACCOUNTING HAS BEEN REGULARLY FOLLOW ED BY THE ASSESSEE. HE HAS POINTED OUT THAT FOR ALL THE PREVIOUS YEARS RIGHT F ROM THE A.Y. 2002-03 TO 2008-09, THE ASSESSING OFFICER ACCEPTED THIS METHOD OF ACCOUNT ING AND RETENTION MONEY SHOWN AND OFFERED BY THE ASSESSEE ONLY IN THE YEAR O F RECEIPT AFTER DEDUCTION IF ANY BY THE AUTHORITIES. IN SUPPORT OF HIS CONTENTIO N HE HAS RELIED UPON THE FOLLOWING DECISIONS:- (I) DY. CIT VS. AMARSHIV CONST. (P) LTD. (88 ITD 381) (II) ANUP ENGG. LTD. VS. CIT (247 ITR 457) (III) JANATHA CONRACT CO. VS. CIT (105 ITR 627) (IV) CIT VS. ASSOCIATED CABLES (P) LTD. (286 ITR 596) 2.5 THE LD. AUTHORIZED REPRESENTATIVE HAS FURTHER S UBMITTED THAT THE ISSUE HAS BEEN CONSIDERED IN THE VARIOUS DECISIONS AND IT HAS BE EN HELD THAT AS PER THE CONTRACT CERTAIN AMOUNT WAS TO BE RETAINED BY THE BU YERS AND CONSUMERS WAS TO BE PAID TO THE ASSESSEE ON THE SATISFACTORY COMPLETI ON OF THE CONTRACT. THE RETENTION MONEY DID NOT ACCRUE TO THE ASSESSEE AND C OULD NOT BE CONSIDERED TO BE THE INCOME OF THE ASSESSEE IN THE YEAR IN WHICH THE AMOUNTS WERE RETAINED. 2.6 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S RELEVANT MATERIAL ON RECORD, WE FIND THAT THERE IS NO DISPUTE THAT THE AMOU NT IN QUESTION HAS BEEN RETAINED BY THE AUTHORITIES AS PER THE TERMS OF CONT RACT FOR SATISFACTION OF THE ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 5 | P A G E VARIOUS OBLIGATIONS AND LIABILITIES OF THE ASSESSEE UNDER THE CONTRACT. THE ASSESSEE IS RECOGNIZING THE REVENUE FROM CONTRACT A FTER REDUCING THE AMOUNT RETAINED BY THE AUTHORITIES IN PURSUANT TO THE TERMS OF CONTRACT AND OFFERING THE SAID AMOUNT TO TAX ON FINAL SETTLEMENT OF ACCOUNT OR ON RECEIPT OF THE RETENTION MONEY AFTER DEDUCTION IF ANY BY THE AUTHORITIES. THER E IS ALSO NO DISPUTE THAT THE ASSESSING OFFICER HAD ACCEPTED THIS METHOD OF ACCOUNT ING FOR ALL THE PREVIOUS ASSESSMENT YEARS RIGHT FROM THE A.Y. 2002-03 TO 200 8-09. THEREFORE, WHEN THE ASSESSEE IS FOLLOWING THIS METHOD OF ACCOUNTING REGU LARLY AND CONSISTENTLY AND WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN ALL THE EARLIER YEARS THEN THE ASSESSING OFFICER IS NOT PERMITTED TO TAKE A DIFFERE NT VIEW TO DE HORS THE PRINCIPAL OF CONSISTENCY UNTIL AND UNLESS THE FACTS FOR THE YE AR WARRANTS TO TAKE A DIFFERENT VIEW. THERE IS NOTHING ON RECORD TO SHOW THAT THE FA CTS FOR THE YEAR UNDER CONSIDERATION ARE DIFFERENT FROM THE EARLIER YEARS. T HEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED EVEN ON TH E PRINCIPLE OF CONSISTENCY. FURTHER WE NOTE THAT IN THE SERIES OF DECISIONS, TH IS ISSUE HAS BEEN CONSIDERED BY THE HON'BLE SUPREME COURT AS WELL AS BY THE HON'BL E HIGH COURTS INCLUDING THE HON'BLE JURISDICTIONAL HIGH COURTS. IN THE CASE OF CIT VS. ASSOCIATED CABLES (P) LTD. (SUPRA), THE HON'BLE HIGH COURT HAS HELD AS UNDE R:- THE QUESTION OF LAW SOUGHT TO BE RAISED IN THIS AP PEAL IS AS TO WHETHER THE RETENTION MONEY COULD BE CONSIDERED TO BE THE INCOM E OF THE ASSESSEE IN THE YEAR IN WHICH THE AMOUNT WAS RETAINED. THE INCOME-TAX APPEL LATE TRIBUNAL HAS REFERRED TO A JUDGMENT OF THE TRIBUNAL IN ASSOCIATED CABLES P. LTD. V. DEPUTY CIT [1994] 206 ITR (AT) 48 (BOM). MR. SATHE APPEARING FOR THE RESPONDE NT HAS, HOWEVER, DRAWN OUR ATTENTION TO TWO JUDGMENTS, VIZ., OF THE CALCUTTA H IGH COURT AND THE MADRAS HIGH COURT. THE CALCUTTA HIGH COURT JUDGMENT IS REPORTED IN CIT V. SIMPLEX CONCRETE PILES (INDIA) P. LTD. . A DIVISION BENCH OF THE CAL CUTTA HIGH COURT IN THAT MATTER HAS HELD THAT THE PAYMENT OF RETENTION MONEY IN THE CAS E OF CONTRACT IS DEFERRED AND IS CONTINGENT ON SATISFACTORY COMPLETION OF CONTRACT W ORK. THE RIGHT TO RECEIVE THE RETENTION MONEY IS ACCRUED ONLY AFTER THE OBLIGATIO NS UNDER THE CONTRACT ARE FULFILLED AND, THEREFORE, IT WOULD NOT AMOUNT TO AN INCOME OF THE ASSESSEE IN THE YEAR ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 6 | P A G E IN WHICH THE AMOUNT IS RETAINED. THE OTHER JUDGMENT RELIED UPON IS IN THE CASE OF CIT V. IGNIFLUID BOILERS (I) LTD. REPORTED IN [2006 ] 283 ITR 295 (MAD). IN THAT JUDGMENT ALSO, A DIVISION BENCH OF THE MADRAS HIGH COURT HAS HELD THAT THE AMOUNT RETAINED DOES NOT ACCRUE TO THE ASSESSEE AND, THERE FORE, THE ASSESSEE WOULD NOT BE LIABLE. 2.7 THUS THE HON'BLE HIGH COURT HAS HELD THAT THE TH E RIGHT TO RECEIVE THE RETENTION MONEY IS ACCRUED ONLY AFTER THE OBLIGATION S UNDER THE CONTRACT ARE FULFILLED AND, THEREFORE, IT WOULD NOT AMOUNT TO AN INCOME OF THE ASSESSEE IN THE YEAR IN WHICH THE AMOUNT IS RETAINED. FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY ERROR O R ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 3. GROUND NO. 2 AND 3 IS REGARDING DELETION OF ADDI TION MADE ON ACCOUNT OF LABOUR CHARGES AND SITE EXPENSES. 3.1 THE ASSESSEE HAS CLAIMED RS. 8,05,16,058/- AS L ABOUR CHARGES OUT OF WHICH RS. 58,17,088/- WAS PAID IN CASH. THE ASSESSING OFFI CER MADE AN AD HOC DISALLOWANCE OF RS. 20 LAC. SIMILARLY, THE ASSESSEE CLAIMED RS. 77,97,552/- AS SITE EXPENSES. THE ASSESSING OFFICER DISALLOWED RS. 5,00, 000/- ON AD HOC BASIS ON THE GROUND THAT THE EXPENSES WERE ON THE HIGHER SIDE AND T O JUSTIFY THE CLAIM NO EVIDENCE WAS PRODUCED BY THE ASSESSEE. 3.2 ON APPEAL, THE CIT(A) DELETED THE AD HOC DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT OF LABOUR CHARGES AND SITE EXPENS ES BY ANALYZING THE COMPARATIVE EXPENSES OF THE EARLIER YEARS AND FOUND T HAT THE EXPENSES CLAIMED BY THE ASSESSEE FOR THE A.Y. UNDER CONSIDERATION ARE NOT ON HIGHER SIDE IF THE LABOUR CHARGES AND SITE EXPENSES PUT TOGETHER ARE TAKEN IN TO CONSIDERATION.. ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 7 | P A G E 3.3 BEFORE US, THE LD. DR HAS SUBMITTED THAT THE ASSE SSING OFFICER HAS POINTED OUT IN THE ASSESSMENT ORDER THAT SOME OF THE EXPENDI TURE ARE INCURRED IN CASH AND THE ASSESSEE HAS FAILED TO PRODUCE ALL THE VOUCHE RS FOR VERIFICATION, THEREFORE, IN THE FACTS AND CIRCUMSTANCES WHEN THE ASSESSEE FAI LED TO PROVE ITS CLAIM TO THE SATISFACTION OF THE ASSESSING OFFICER, THE ASSESSIN G OFFICER IS JUSTIFIED IN MAKING THE AD HOC DISALLOWANCE IN RESPECT OF THESE EXPENSES. HE HAS RELIED UPON THE ORDER OF ASSESSING OFFICER. 3.4 ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE HAS SUBMITTED THAT THERE IS NO CASE OF HIGHER LABOUR CHA RGES AND SITE EXPENSES DURING THE YEAR UNDER CONSIDERATION IN COMPARISON TO THE EAR LIER YEARS WHEN THE EXPENDITURES WERE ACCEPTED IN THE EARLIER YEARS THEN THERE WAS NO REASON WITH THE ASSESSING OFFICER TO DISAPPROVE THE CLAIM OF TH E ASSESSEE. EVEN THE CLAIM OF THE ASSESSEE HAS NOT BEEN HELD AS BOGUS BUT THE ASSE SSING OFFICER HAS MADE THE DISALLOWANCE ONLY ON SUSPICION. HE HAS REFERRED THE D ETAILS OF THE COMPARATIVE EXPENDITURE ON ACCOUNT OF LABOUR CHARGES AND SITE EXP ENSES AND SUBMITTED THAT THE EXPENSES FOR THE A.Y. UNDER CONSIDERATION FOR LAB OUR CHARGES AND SITE EXPENSES ARE TOGETHER 13.07% OF TURNOVER WHICH IS L ESS THAN THE EXPENSES FOR THE EARLIER YEARS OF 13.08%. IN THE NATURE OF ASSESSEE S WORK, THE EXPENSES INCURRED IN CASH IS INEVITABLE AS IT IS REQUIRED ON THE SITE FOR PAYMENT TO THE UNSKILLED LABOUR OR DAILY WAGER. THEREFORE, THE CASH PAYMENT TO THE TOTAL LABOUR CHARGES ABOUT 7% IS NOT ABNORMAL BUT IT IS REASONABLE IN TH E LABOUR INCENTIVE WORK CARRIED OUT BY THE ASSESSEE. THE ASSESSEES BOOKS O F ACCOUNTS ARE AUDITED AND, THEREFORE, IN THE ABSENCE OF ANY DEFECT IN THE BOOKS OF ACCOUNTS THE AD HOC DISALLOWANCE IS NOT WARRANTED. ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 8 | P A G E 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE AN AD HOC DISALLOWANCE ON ACCOUNT OF LABOUR CHARGES AND SITE EXPENSES ON THE GROUND THAT SOME OF THE EXPENSES WERE INCURRED IN CASH AND FURTHER ALL THE VOUCHERS WERE NOT PRODUC ED BY THE ASSESSEE FOR VERIFICATION. THE LD. AUTHORIZED REPRESENTATIVE HAS DI SPUTED THE OBSERVATION OF ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE HA S PRODUCED ALL THE VOUCHERS AND BOOKS OF ACCOUNTS ON TEST CHEQUE BASIS. IT WAS N OT ASKED BY THE ASSESSING OFFICER TO PRODUCE ALL THE VOUCHERS. EVEN OTHERWISE , WE NOTE THAT THE EXPENDITURE ON ACCOUNT OF LABOUR CHARGES AND SITE EXPENSES ARE I N THE LINE WITH THE EARLIER YEARS AND IT IS NOT THE CASE OF HIGHER CLAIM OF EXP ENDITURE FOR THE YEAR UNDER CONSIDERATION IN COMPARISON TO OTHER YEARS. THE CIT( A) HAS CONSIDERED THE RELEVANT FACTS AND DECIDED THIS ISSUE IN PARA 8.3 AND 9.3 AS UNDER:- 8.3 I HAVE CONSIDERED THE RELEVANT FACTS AND THE C IRCUMSTANCES AND THE SUBMISSION OF THE APPELLANT. IT HAS BEEN EXPLAINED THAT THE RA TIO OF LABOUR EXPENSES AND SITE EXPENSES TO THE NET CONTRACT FOR THE A.Y.2008-09 IS 13.08%, WHERE AS FOR THE A.Y.2009-10 IS 13.07% WHICH IS ALMOST SIMILAR SO TH E EXPENDITURE IS NOT ON HIGHER SIDE. FURTHER THE CASH ELEMENT OF RS. 58,17,088/- T O TOTAL LABOUR CHARGES IS 7% AND IN RELATION TO NET CONTRACT AMOUNT IT IS JUST 0.9% WHICH CONSIDERING THE NATURE OF BUSINESS & THEIR REQUIREMENT OF UNSKILLED LABOUR AT SITE FOR VARIOUS REASONS IS NORMAL. FURTHER CERTAIN SITE EXPENSES ARE CLUBBED W ITH LABOUR CHARGES KEEPING IN VIEW THE REQUIREMENTS UNDER MVAT ACT, 2002. FURTHER IT WAS POLNTED OUT THAT THE' ASSESSING OFFICER EVEN STATES IN PARA 2 ON PAGE NO. 2 THAT THE APPELLANT HAS ALSO PRODUCED BOOKS OF ACCOUNTS ALONE WITH VOUCHERS WHIC H WERE TEST CHECKED AND IN THE PARA B ON PAGE NO.7, HE SAYS NOT ALL THE VOUCHERS A RE PRODUCED FOR VERIFICATION WHICH IS CONTRADICTORY IN NATURE, STILL THE FACT RE MAINS THE VOUCHERS ARE VOLUMINOUS, SO THE ASSESSING OFFICER HAS NO ALTERNATE THEN TO T EST CHECK. HOWEVER THE BOOKS OF ACCOUNTS ARE AUDITED & THERE IS NO ADVERSE AUDIT RE MARK ON THE ISSUE. UNDER THE GIVEN CIRCUMSTANCES, IT CAN BE STATED THAT FOR DETE RMINING WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF THE BUSINESS REASONABLENESS OF THE EXPENDITURE SHOULD BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESS AND NOT OF THE ASSESSING OFFICER. ONCE IT IS ESTABLISHED TH AT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS THE REV ENUE CAN NOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 9 | P A G E 9.3 I HAVE CONSIDERED THE RELEVANT FACTS AND THE CI RCUMSTANCES AND THE SUBMISSION OF THE APPELLANT. FURTHER I AGREE WITH T HE EXPLANATION THAT FOR DETERMINING WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF THE BUSINESS REASONABLENESS OF THE EXPEN DITURE SHOULD BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESS AND NOT OF THE RE VENUE. ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PUR POSE OF THE BUSINESS THE REVENUE CAN NOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABL E EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. IN VIEW OF THE EX PLANATION GIVEN AND THE SUBMISSION FILED BY THE APPELLANT THE ADDITION IS D ELETED. 3.6 THOUGH THE CLAIM OF THE ASSESSEE IS NOT ON HIGH ER SIDE, HOWEVER, WE NOTE THAT THE ASSESSEE HAS MADE THE EXPENSES OF RS. 58,1 7,088/- IN CASH AND ALL THE VOUCHERS ON THE CASH PAYMENT ARE NOT VERIFIABLE, TH EREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUS TICE, WE FIND THAT THE DISALLOWANCE MADE BY ASSESSING OFFICER ON THESE TWO A CCOUNTS AMOUNTING TO RS. 25,00,000/- IS EXCESSIVE AND VERY HIGH, THEREFORE, WE ARE OF THE VIEW THAT A REASONABLE DISALLOWANCE ON THESE TWO ACCOUNTS WOULD BE RS. 2.50 LACS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO REST RICT THE DISALLOWANCE TO RS. 2,00,000/- ON ACCOUNT OF LABOUR CHARGES AND RS. 50,0 00/- ON ACCOUNT O SITE EXPENSES. 4. GROUND NO. 4 IS REGARDING DELETION OF ADDITION O N ACCOUNT OF PURCHASES EXPENSES. 4.1 IN ORDER TO TEST CHECK THE GENUINENESS OF THE PU RCHASE, NOTICE U/S 136(3) WERE ISSUED BY THE ASSESSING OFFICER TO SOME OF THE PARTIES FROM WHOM THE ASSESSEE MADE THE PURCHASES. THEREAFTER SUMMONS U/S 131 WERE ALSO ISSUED IN SOME OF THE CASES TO ENFORCE THE ATTENDANCE OF THE P ARTIES. THE ASSESSING OFFICER NOTED THAT NON COMPLIANCE OF THE FEW PARTIES RAISES QUESTION ABOUT THEIR ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 10 | P A G E GENUINENESS. THE ASSESSEE WAS ASKED TO SUBMIT FURTHE R DETAILS TO PROVE THEIR GENUINITY. THE ASSESSEE SUBMITTED THE DETAILS. THE A SSESSING OFFICER ALSO ASKED THE INSPECTOR OF INCOME TAX TO ENQUIRE ABOUT THE EX ISTENCE OF THE PARTIES AND ALSO ABOUT THE GENUINITY OF THEIR BUSINESS. AFTER CONSIDE RING THE REPORT OF INSPECTOR OF INCOME TAX, THE ASSESSING OFFICER MADE DISALLOWANCE OF PURCHASES FROM THREE PARTIES NAMELY (I) M/S BHARAT TRADING COMPANY (II) M/S K.P. ENTERPRISES AND (III) M/S SHREEJI ENTERPRISES OF RS. 29,30,450/-, RS. 28 ,89,289/- AND RS. 36,38,338/- RESPECTIVELY. THE DISALLOWANCE WAS MADE BY THE ASSES SING OFFICER ON THE BASIS OF SOME DOUBTS RAISED BY THE INSPECTOR REGARDING THE GEN UINENESS OF BUSINESS OF THESE PARTIES. THE ASSESSEE CHALLENGED THE ACTION O F ASSESSING OFFICER BEFORE CIT(A) AND REFERRED THE VARIOUS DETAILS AND EVIDENCE PR ODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IN RESPECT OF THESE P ARTIES. AFTER CONSIDERING THE VARIOUS DETAILS AND EVIDENCE IN RESPECT OF THESE PART IES FROM WHOM THE ASSESSEE MADE THE PURCHASES, THE CIT(A) HAS HELD THAT THE ASSE SSEE HAS DISCHARGED HIS ONUS TO PROVE THE TRANSACTION BEYOND ANY DOUBT WHILE HOLDING THAT THE ASSESSEE HAS DISCHARGED ITS ONUS, THE CIT(A) HAS CONSIDERED THE EVIDENCE FURNISHED BY THE ASSESSEE REGARDING PAN NO., VAT NO., RETURN OF INCOM E, VAT RETURN CONFIRMATION ETC. PAYMENTS WERE MADE BY THE ASSESSEE THROUGH ACC OUNT PAYEE CHEQUES, THEREFORE, THE CIT(A) HELD THAT THERE WAS NO QUESTIO N OF ANY DOUBT ABOUT THE GENUINENESS OF THE TRANSACTION. 4.2 BEFORE US, THE LD. DR HAS HEAVILY RELIED UPON THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTION, THE ASSESSING OFFICER DEPUTED THE INSPECTOR WHO HAS POIN TED OUT IN THE REPORT THAT THERE WAS NO PROPER PLACE OF BUSINESS OF THESE PART IES AND THE ADDRESS GIVEN WAS FOUND TO BE SMALL ROOM FROM WHERE THE BUSINESS WAS A LLEGEDLY CARRIED OUT. THE INSPECTOR HAS ALSO POINTED OUT THAT THERE WAS NO SIG N BOARD OF THESE PARTIES AT THE ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 11 | P A G E GIVEN ADDRESS, THEREFORE, THE EXISTENCE OF THE PARTIE S AND THE GENUINENESS OF THE BUSINESS TRANSACTION WAS SUSPECTED. 4.3 ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE HAS PRODUCED ALL THE NECESSARY DETAILS AND EVIDENCE TO PROV E THE CLAIM OF GENUINENESS OF PURCHASE FROM THESE PARTIES. HE HAS POINTED OUT THAT THE ASSESSEE HAS PRODUCED THE CONFIRMATION FROM ALL THE PARTIES AS AFFIDAVITS WERE FILED, STATEMENT OF INVOICES AND COPY OF INVOICES SHOWING T HE PURCHASE MADE FROM THESE PARTIES. THE STATEMENT OF PAYMENTS AND RECEIPT BY THE PURCHASER THROUGH BANK WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER ALONG WITH CONFIRMATION OF BANK ACCOUNT. BANK BOOK OF THE PURCHASER AND BANK ST ATEMENT OF THE PURCHASER ALONG WITH VAT RETURN, INCOME TAX RETURN WERE FILED BEFORE THE ASSESSING OFFICER. HE HAS FURTHER SUBMITTED THAT THE COPY OF ELECTRICI TY BILL RAISED AND FINANCIAL STATUS OF THESE PARTIES WERE ALSO PRODUCED IN RESPECT OF THE CLAIM. THE ASSESSEE DISCHARGED ONUS WITHOUT ANY DOUBT BY PRODUCING ALL THE RELEVANT DOCUMENTS. THE PAYMENT IN RESPECT OF M/S BHARAT TRADING WAS FULLY SETTLED, THEREFORE, THE CHEQUE PAYMENT APPEARS ON ALL THE BILLS THROUGH STA MP. THE ASSESSING OFFICER HAS MADE THE ADDITION ON ASSUMPTION AND SURMISES WITHOUT B RINGING ANY RECORD TO DISAPPROVE THE EVIDENCE PRODUCED BY THE ASSESSEE. HE HAS SUPPORTED THE ORDER OF CIT(A) AS WELL AS RELIED UPON A SERIES OF DECISIONS. 4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL ON RECORD. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R ISSUED THE SUMMONS U/S 131 TO THE SUPPLIERS OF THE ASSESSEE FROM WHOM THE ASSESSEE MADE THE PURCHASES. IN SOME OF THE CASES, THERE WAS NO COMPLIANCE, HOWE VER THE ASSESSING OFFICER HAS NOT SPECIFIED THE NAME OF THE PARTIES OF NON COMPLIA NCE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE DETAILS IN RESPECT OF THE GENUINENESS OF THE ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 12 | P A G E PARTIES. THE ASSESSEE SUBMITTED THE DETAILS AS WELL A S THE EVIDENCES BEFORE THE ASSESSING OFFICER. WE FIND THAT WITHOUT DISCUSSING A NYTHING ABOUT THE EVIDENCE PRODUCED BY THE ASSESSEE IN RESPECT OF THE CLAIM EX CEPT POINTING OUT SOME WRONG PAN NO., THE ASSESSING OFFICER HAD MADE THE ADDITION ON THE BASIS OF THE REPORT OF THE INSPECTOR OF INCOME TAX. WE NOTE THAT THE INSPE CTOR OF INCOME HAS NOT DENIED THE ADDRESS AND EXISTENCE OF THE PARTIES AT THE ADDRESS BUT SUSPECTED THE GENUINENESS OF THESE PARTIES. IT IS PERTINENT TO NO TE THAT WHEN THE ASSESSEE HAS PRODUCED INCOME TAX RETURNS, VAT RETURNS AND ALL OTH ER RELEVANT DOCUMENTS AND EVIDENCE TO SHOW THE GENUINENESS OF THE BUSINESS TR ANSACTION AND PURCHASE MADE BY THE ASSESSEE FROM THESE PARTIES THEN THE BURDEN IS SHIFTED ON THE ASSESSING OFFICER TO PROVE THE CONTRARY. ONCE THE ASSESSEE HA S BROUGHT ON RECORD THE ENTIRE EVIDENCE WHICH IS NECESSARY TO PROVE THE CLAIM THEN THE ASSESSING OFFICER IS REQUIRED TO DISAPPROVE THE EVIDENCE PRODUCED BY THE A SSESSEE. THERE IS NO DISPUTE THAT THE RETURN OF INCOME AND CONFIRMATION FI LED BY THE ASSESSEE IN RESPECT OF THE CLAIM WHICH IS NOT FOUND TO BE FALSE . FURTHER THE PAYMENTS WERE MADE THROUGH CHEQUES. THE CIT(A) AFTER NOTING THE FA CT THAT ASSESSEE EXPLAINED VIDE LETTER DATED 2.7.2011 AND FILED THE VARIOUS DETAILS INCLUDING CORRECT VAT NO., PAN NO., CONFIRMATION BY PARTIES, INCOME TAX RETURN , VAT RETURN, P&L A/C B/S , DESCRIPTION OF MATERIAL PURCHASE, LEDGER ACCOUNT OF PARTY IN THE BOOKS OF THE ASSESSEE, PHOTO COPY OF BILLS, PHOTO COPY OF BANK S TATEMENTS. APART FROM THIS, THE ASSESSEE HAS ALSO FILED AFFIDAVITS OF THE PARTIES, BA NK BOOK, BANK STATEMENT, SALES REGISTER ETC., OF THESE PARTIES. WE FIND THAT WHEN THE ASSESSEE HAS PRODUCED ALL RELEVANT EVIDENCE WHICH COULD HAVE BEEN PRODUCED IN R ESPECT OF THE CLAIM OF THE PURCHASES THEN IN THE ABSENCE OF ANY CONTRARY RECOR D OR FINDING TO THE EFFECT THAT THE RECORD PRODUCED BY THE ASSESSEE WAS NOT CORRECT OR GENUINE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MERELY ON THE BASIS OF THE REPORT OF INSPECTOR IS NOT ITA NO.5018/MUM/2012 ASSESSMENT YEAR: - 2009-10 13 | P A G E SUSTAINABLE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 5. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY AL LOWED ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 21 -10 -2014 SD/- SD/- ( D. KARUNAKARA RAO ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 21-10 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI