ACIT RG 25(3), MUMBAI V. VIMAL CONSTRUCTION, MUMBAI

ITA 5082/MUM/2010

• Counselvise Citation: 508219914 RSA 2010
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 25-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BABAN PATIL
• Assessee Lawyers: DR P DANIEL
• Section: 44AD

Judgement Text

ITA NO.5082 OF 2010 VIMAL CONSTRUCTIONS MUMBAI F BE NCH PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO.5082/MUM/2010 (ASSESSMENT YEAR: 2007-08) ACIT 25(3) C-11 ROOM NO.308 PRATYAKSH KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (EAST) MUMBAI 400051 (APPELLANT) VS. M/S. VIMAL CONSTRUCTION, B- 502 NAGWEKAR APARTMENT, AKURLI ROAD, KANDIVALI (EAST) MUMBAI 400001 PAN: AAAFV 2913 M (RESPONDENT) DEPARTMENT BY: SHRI BABAN PATIL, DR ASSESSEE BY: DR. P. DANIEL DATE OF HEARING: 25/06/2012 DATE OF PRONOUNCEMENT: 29/06/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS REVENUE APPEAL AGAINST THE ORDERS OF THE C IT (A)-35 MUMBAI ON THE ISSUE OF DELETION OF AMOUNTS PAID TO LABOUR CONTRACTORS. 2. BRIEFLY STATED, AO NOTICED THAT ASSESSEE PAID AN AM OUNT TO THE EXTENT OF ` 45.00 LAKHS TO LABOUR CONTRACTORS BY NAME CREATIVE CONSTRUCTION AND SHRUSHTI CONSTRUCTION. SINCE THE A MOUNTS WERE PAID AFTER CONSIDERABLE TIME AFTER THE END OF THE A SSESSMENT YEAR, AO WAS OF THE OPINION THAT THESE CONCERNS HAVE NOT RENDERED ANY SERVICES AND THE CLAIM MADE BY ASSESSEE IS NOT GENU INE. IN ARRIVING AT THAT CONCLUSION AO ALSO NOTICED THAT THERE WERE NO PAYMENTS TO THE CONTRACTORS FOR A CONSIDERABLE TIME AND ASSESSE E COULD NOT EXPLAIN WHY THE LABOURERS WERE NOT PAID. IN THE ABS ENCE OF ANY EXPLANATION, HE CONSIDERED THAT THE PAYMENTS ARE NO T GENUINE AND ACCORDINGLY DISALLOWED THE AMOUNT. AO IN THE COURSE OF SCRUTINY ASSESSMENT EXAMINED ONE MR. DINESH SHAH WHO IS FATH ER OF PROPRIETER OF SHRUSHTI CONSTRUCTION (MR. BHAVIN SHA H), HUSBAND OF ITA NO.5082 OF 2010 VIMAL CONSTRUCTIONS MUMBAI F BE NCH PAGE 2 OF 4 PROPRIETAR OF CREATIVE CONSTRUCTION (MRS. CHANDRIKA SHAH). EVEN THOUGH THE SAID SHRI DINESH SHAH ACCEPTED UNDERTAKI NG THE CONSTRUCTION WORK IN THE NAME OF TWO PROPRIETARY CO NCERNS, AFTER GIVING AN OPPORTUNITY TO ASSESSEE, REJECTED THE CLA IM. 3. BEFORE THE CIT (A), IT WAS SUBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF INDUSTRIAL PROJE CTS. FOR THIS PURPOSE, ASSESSEE HAS TO ENGAGE SUB-CONTRACTORS. IT WAS SUBMITTED THAT THE LABOURERS DID NOT ACCEPT THE WAGES ON A MO NTHLY BASIS AS THEY ARE MIGRANTS FROM OTHER PLACES, TAKES LUMP SUM AMOUNT AT THE END OF THE PERIOD BEFORE THEY GO TO THEIR RESPECTIV E PLACES. IT WAS FURTHER SUBMITTED THAT THE CHEQUES WERE ISSUED IN T HE NAME OF SUB CONTRACTORS AND TDS WAS ALSO MADE. IT WAS FURTHER C ONTENDED THAT SHRI DINESH SHAH CONFIRMED THE WORK UNDERTAKEN AND ALSO DETAILS OF HAVING FILED THE RETURNS OF INCOME UNDER SECTION 44AD OF THE I.T. ACT ADMITTING A NET PROFIT AT 8% OF THE ENTIRE CONT RACT RECEIPTS. FOR THE DELAY IN PAYMENTS TO SUB CONTRACTORS, IT WAS AT TRIBUTED TO THE DELAY MEASUREMENTS BEING TAKEN AND CHECKING, AFTER WHICH FINAL BILLS WERE PAID. AFTER CONSIDERING ASSESSEES SUBMI SSIONS THE CIT (A) DELETED THE ADDITION BY STATING AS UNDER: 3.3 I NAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE AND THE STAND TAKEN BY THE AO. THE ADMITTED FACTS ARE AS UNDER: 1. THE APPELLANT CLAIMED SUB CONTRACT PAYMENTS TO M/S.SHRUSHTI CONSTRUCTION AND M/S.CREATIVE CONSTRUCTIONS TOTALING TO RS.45LACS. 2. THE PAYMENTS WERE MADE IN THE NEXT YEAR EVEN THOUGH THE WORK WAS CLAIMED TO HAVE BEEN COMPLETED IN THIS YEAR AND THE APPELLANT DEDUCTED TAX AT SOURCE AT THE APPLICABLE RATE END PAID THE SAME INTO GOVERNMENT ACCOUNT WITHIN DUE DATE. 3. BOTH THE SUB CONTRACTORS FILED THEIR RETURNS OF INCOME U/S.44AD ADMITTING NET PROFIT @8%. AO DID NOT ACCEPT THE CONTENTION OF THE APPELLANT THAT THE WORKERS DID NOT REQUIRE THE SUB CONTRACTORS TO PAY THE WAGES ON DAILY OR WEEKLY BASIS AS THERE WAS NO SAFE PLACE TO KEEP THE CASH AND ONLY WHEN THE WORK WAS OVER AND THEY LEFT FOR NATIVE PLACE, THEY NEEDED MONEY AND AT THAT TIME THE PAYMENTS WERE MADE TO THE SUB CONTRACTORS ITA NO.5082 OF 2010 VIMAL CONSTRUCTIONS MUMBAI F BE NCH PAGE 3 OF 4 WHO IN TURN PAID TO THE LABOURERS. AO FURTHER DID NOT ACCEPT THE CLAIM OF THE APPELLANT THAT ARRANGEMENTS WERE MADE THROUGH LOCAL KIRANA MERCHANT FOR SUPPLY OF RATION FOR WHICH THE APPELLANT GUARANTEED PAYMENT TO KIRANA MERCHANT. AO EXAMINED MR.DINESH SHAH WHO DE POSED THAT THE WORK WAS DONE AND PAYMENTS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES IN THE NEXT YEAR AND RETURNS WERE FILED BY THEM UNDER SECTION 44AD. AO COULD NOT BELIEVE THAT THE AMOUNTS COULD BE WITHHELD FOR 6-9 MONTHS BY THE APPELLANT. IN THE LIGHT OF THE ABOVE FACTS, I FIND THAT AO DISALLOWED THE PAYMENTS TO THE LABOUR CONTRACTORS BASED ON SUSPICION AND ASSUMPTION WITHOUT BELIEVING THE VERSION OF THE APPELLANT. THE FACT REMAINS THAT THE PAYMENTS WERE MADE BY, ACCOUNT PAYEE CHEQUES IN THE NEXT YEAR AND SHRI DINESH SHAH CONFIRMED THE SUPPLY OF LABOUR. MERELY BECAUSE THE PAYMENTS WERE MADE IN THE NEXT YEAR, THERE IS NO REASON TO DOUBT THE GENUINENESS OF PAYMENTS ESPECIALLY WHEN THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND AS HELD BY THE HON'BLE JABALPUR TRIBUNAL IN THE CASE OF ADDL. CIT VS. RAM MANOHAR SINGH (178 TAXMAN 47) (MAG.) UNLESS IT IS PROVED THAT THE PAYMENTS MADE BY ACCOUNT PAYEE CHEQUES CAME BACK TO THE APPELLANT, NO ADDITION COULD BE MADE. IT IS FURTHER SEEN THAT THE APPELLAN T HAS ADMITTED NET PROFIT OF RS. 58,70,261/- BEFOR E CLAIMING REMUNERATION TO PARTNERS AS PER THE INCOME ON CONTRACT RECEIPTS OF ` .6,38,56,274/- AND THE NET PROFIT ADMITTED BY THE APPELLANT WORKS OUT TO 9.19% WHICH CANNOT BE SAID TO BE UNREASONABLE. I FIND THAT THE APPELLANT HAS GIVEN REASONABLE AND SATISFACTORY EXPLANATION BEFORE AO FOR BELATED PAYMENT TO SUB CONTRACTORS BUT AO DID NOT BELIEVE THE SAME AND MADE ADDITION. AO HAS NOT BROUGHT ON RECORD ADEQUATE MATERIALS TO DISBELIEVE THE CLAIM OF THE APPELLANT BUT SUCH DISBELIEF WAS BASED ON HIS OWN ASSUMPTION AND SUSPICION. IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT THE ADDITION IS NOT JUSTIFIED AND THE SAME IS DELETED. 4. WE HAVE HEARD THE LEARNED DR AND THE LEARNED COUNSE L IN DETAIL. AS SEEN FROM THE CLAIMS ASSESSEE HAS PAID T OTAL AMOUNT OF ` 2.67 CRORES AS PAYMENT TO SUB CONTRACTORS. IT SEEMS AO EXAMINED ALL OF THEM, BUT SHORTLISTED ONLY TWO FOR DISALLOWI NG CLAIM. IT WAS THE SUBMISSION THAT ASSESSEE REGULARLY PAID THE AMOUNTS WITH CONSIDERABLE DELAY, DUE TO VERIFICATION OF THE MEAS UREMENTS AND ITA NO.5082 OF 2010 VIMAL CONSTRUCTIONS MUMBAI F BE NCH PAGE 4 OF 4 CHECKING OF THE FINAL BILLS. THE DETAILS WERE FILED BEFORE AO ITSELF, WHICH WAS EXTRACTED IN PARA 1.6 IN SUBMISSIONS EXTR ACTED BY AO IN THE ASSESSMENT ORDER. AS SEEN FROM THE DETAILS, ASS ESSEE IS CONSISTENTLY PAYING THE AMOUNT TO LABOR CONTRACTORS WITH CONSIDERABLE DELAY RANGING FROM 2 TO 11 MONTHS. IN VIEW OF THIS IT CANNOT BE STATED THAT IN THESE TWO CASES, WHICH ARE DISALLOWED BY AO, ASSESSEES EXPLANATION IS NOT GENUINE. AO HIMSE LF ACCEPTED THE DELAY IN PAYMENTS TO OTHER LABOUR CONTRACTORS. CONS IDERING THAT THE AMOUNTS ARE PAID BY WAY OF CHEQUES AND TDS WAS MADE , WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE C IT (A) WHO CONSIDERED THE FACTS AS WELL AS LAW. THEREFORE, THE REVENUE GROUND IS DISMISSED. 5. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2012. SD/- SD/- (VIVEK VARMA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 29 TH JUNE, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI