M/s. K.K. & Sons, Bolangir V. ACIT, Circle-2(1), Sambalpur

ITA 515/CTK/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5632 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 20-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: J M PATTNAIK
• Keywords: Assessment record
• Section: 142(1); 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ITA NO . 515 /CTK/201 7 ( / ASSESSMENT YEAR : 20 10 - 20 11 ) M/S K.K. & SONS, AT - MAIN ROAD BELGA ON, DIST - BOLANGIR VS. ACIT, CIRCLE - 2(1), SAMBALPUR ./ ./ PAN/GIR NO. : A A GFK 1517 J ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI J.M.PATTNAIK , AR /REVENUE BY : SHR I D.K.PRADHAN , DR / DATE OF HEARING : 17 / 0 5 /201 8 / DATE OF PRONOUNCEMENT 17 / 05 /201 8 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH E ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A), SAMBALPUR , DAT ED 12.09.2017 , PASSED IN I.T.APPEAL NO. 0510 / 13 - 14 , U/S. 143(3)/250 OF THE I.T.ACT FOR THE ASSESSMENT YEAR 20 10 - 20 11 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ADDITION OF RS.31,00,000/ - FOR THAT, THE AFORESAID ADDITION WILL NOT SUS TAIN AS ALL THE UNSECURED CREDITORS ARE INCOME TAX ASSESSEEES DISCLOSING THOSE ADVANCES IN THEIR RESPECTIVE IT RETURNS. 2.DISALLOWANCE OF PURCHASE OF MATERIALS AT RS.7,29,098/ - FOR THAT, THE AFORESAID DISALLOWANCE WILL NOT SUSTAIN AS THE SAME HAS MADE ON ADHOC BASIS @1% OF TOTAL PURCHASES OF MATERIALS WITHOUT BRINGING ANY ADVERSE MATERIALS INTO THE ASSESSMENT RECORD. 3.DISALLOWANCE OF CONTRACT EXPENSES AT RS.11.62.911/ - FOR THAT, THE AFORESAID DISALLOWANCE WILL NOT SUSTAIN AS THE SAID DISALLOWANCE H AS BEEN MADE ON ADHOC BASIS 2% OF THE TOTAL EXPENSES CLAIMED WITHOUT BRINGING ANY ADVERSE MATERIALS INTO RECORD. ITA NO. 5 15 /201 7 2 4.ADDITION OF RS.4,00,000/ - FOR THAT, THE AFORESAID CONDITION WILL NOT SUSTAIN AS SUPPORTED BY THE BANK ENTRY ON DATED 28/01/2010 IN AXIS BANK ACCOUNT NO - 909020032766729. 5. FOR THAT ANY OTHER GROUND INCIDENTAL TO THE GROUNDS OF THIS CASE MAY KINDLY BE PERMITTED TO URGE AT THE TIME OF HEARING OF THE CASE. 6. FOR THAT ANY OTHER EVIDENCES INCIDENTAL TO THE GROUNDS OF THIS CASE MAY KINDLY B E PERMITTED ADDUCE AT THE TIME OF HEARING OF THE CASE . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXECUTION OF CONTRACT WORK AND FILED THE RETURN OF INCOME ON 27.09.2010 FOR ASSESSMENT YEAR 2010 - 11 DECLARING TOTAL INC OME OF RS. 74 ,01,850/ - . SUBSEQUENTLY, THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. IN COMPLIANCE THE LD. AR OF THE ASSE SSEE APPEARED AND SUBMITTED THE RELEVANT DETAILS. THE AO CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL PLACED ON RECORD COMPLETED THE ASSESSMENT MAKING ADDITIONS U/S.68 AND 69 OF THE ACT AND ALSO MADE DISALLOWANCE OF CONTRACT EXPENSES AND ASSESS ED THE TOTAL INCOME OF RS.1,27,93,859/ - AND PASSED ORDER U/S.143(3) OF THE ACT, DATED 14.03.2013. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6. BEFORE US, LD. AR SUBMITTED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF UNSECURED CREDITORS U/S.68 OF THE ACT IRRESPECTIVE OF THE ITA NO. 5 15 /201 7 3 FACT THAT THE ASSESSEE HAS FILED INFORMATION OF INCOME TAX PARTICULARS AND STATEMENTS OF LOAN CONFI RMATION AND ALSO SUBMITTED THE PAPER BOOK SUPPORTING THE UNSECURED LOAN OBTAINED. IN RESPECT OF SECOND DISPUTED ISSUE OF DISALLOWANCE OF PURCHASE OF MATERIAL THE LD. AR SUBMITTED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF AO IN DISALLOWING 1% OF PURCHASE IRRESPECTIVE OF THE FACT THAT BOOKS OF ACCOUNTS ARE AUDITED AND THE AO HAS NOT PIN POINTED THE PARTICULAR EXPENDITURE. SIMILARLY, THE AO HAS ESTIMATED WORK EXPENSES WHICH IS CLAIMED IN PROFIT AND LOSS ACCOUNT AT 2% IR RESPECTIVE OF THE FACT THAT THE ASSESSEE HAS PRODUCED THE DETAILS AND ALSO BOOKS OF ACCOUNTS ARE AUDITED. IN RESPECT OF LAST GROUND THE AO MADE ADDITION OF RS.4 LAKHS IN RESPECT OF PARTY TO WHOM THE PAYMENT HAS BEEN MADE AND THE BANK STATEMENT ALSO REFLEC TS THE PAYMENT MADE FOR STEEL PURCHASE, WHEREAS THE TRANSACTION WAS ISSUED IN THE NAME OF DEEP STEEL AND THIS FACT HAS BEEN REFLECTED IN THE BANK STATEMENT AND, THEREFORE, PRAYED FOR ALLOWING THE APPEAL. 7. CONTRA, LD. DR RELIED ON THE ORDERS OF LOWER AUT HORITIES. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON THE FIRST DISPUTED ISSUE U/S.68 OF THE ACT, THE LD. AR SUBMITTED THAT THE CIT(A) HAS ERRED IN NOT CONSIDERING THE MAJOR FACTS AND ALSO THE ASSESSEE HAS FILED LO AN CONFIRMATION AND LEDGER ACCOUNT STATEMENT WHEREAS THE LD. DR SUBMITTED THAT THE LENDER OF MONEY HAS MADE DEPOSITS IN THE BANK PRIOR TO MAKING THE LOAN TRANSACTION WITH THE ASSESSEE. LD. AR REFERRED TO THE PAPER BOOK EVIDENCE IN THE AUDIT REPORT AT PAGE 1 TO 11 AND ALSO THE STATEMENT OF LOAN CREDITORS ALONG WITH INCOME ITA NO. 5 15 /201 7 4 TAX DETAILS FROM PAGE 12 TO 30 DISCLOSED IN THE INCOME TAX RETURNS AND COMPUTATION OF INCOME AND THEIR FINANCIAL STATEMENTS. LD. AR EMPHASIZED THAT THE CREDITORS ARE GENUINE AND CRE DITWORTHINESS OF THE TRANSACTION AND IDENTITY OF THE PARTIES CAN BE PROVED. THE AO HAS OVERLOOKED THESE FACTS. WE CONSIDERING THE OVERALL ASPECTS AND CIRCUMSTANCES AND THE EVIDENCES DEMONSTRATED BEFORE US ARE OF THE OPINION THAT THE ASSESSEE SHOULD BE PROV IDED AN OPPORTUNITY OF EXPLAIN THIS LOAN CREDITORS ALONG WITH DOCUMENTARY EVIDENCE, FILED BEFORE US AND BEFORE THE AO. HENCE, WE RESTORE THIS ISSUE TO THE FILE OF AO, WHO SHALL VERIFY AND EXAMINE THE GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION AND IDENTITY OF THE PARTIES AND PASS THE ORDER ACCORDINGLY AND THE ASSESSEE SHALL COOPERATE IN SUBMITTING THE INFORMATION FOR EARLY DISPOSAL OF THE CASE. THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. ON THE SECOND DISPUTED ISSUE OF DISALLOWA NCE OF 1% OF PURCHASE MATERIAL MADE BY THE AO, WE FOUND THAT THE ASSESSEE HAS CLAIMED CERTAIN EXPENDITURE IN RESPECT OF MATERIAL PURCHASE BUT FAILED TO SUPPORT WITH EVIDENCE BEFORE THE ASSESSING AUTHORITY, THEREFORE, THE AO HAS NO ALTERNATIVE BUT TO MAKE T HE DISALLOWANCE ON THE BASIS OF ESTIMATED PERCENTAGE. EVEN BEFORE US, THE A R COULD NOT SUBMIT THE DETAILS IN RESPECT OF PURCHASES WHICH HAS BEEN CALLED FOR THE LOWER AUTHORITIES. ACCORDINGLY, WE ARE OF THE OPINION THAT THE CIT(A) HAVING CONSIDERED THESE FACTS AND TH E FINDINGS OF AO HAS CONFIRMED THE ACTION OF AO WHICH IS IN ACCORDANCE WITH LAW AND WE UPHOLD THE SAME AND DISMISS THE GROUND OF APPEAL OF ASSESSEE . ITA NO. 5 15 /201 7 5 10. ON THIRD DISPUTED ISSUE WITH RESPECT TO CONTRACT EXPENSES. THE ASSESSEE IN THE COURSE OF ASSESSMENT PROC EEDINGS MENTIONED THAT THE ASSESSEE HAS CLAIMED WORK EXPENSES WHICH HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT. BECAUSE THE ASSESSEE COULD NOT GET THE INFORMATION THE AO HAS DISALLOWED 1% OF TOTAL PURCHASES OF MATERIALS AND ALSO DISALLOWED CONTRACT EXPENSES ON ADHOC BASIS @2% OF THE TOTAL EXPENSES. ON APPEAL, THE CIT(A) CONFIRMED THE SAME. THE CONTENTION OF LD. AR IS THAT TDS HAS BEEN DEDUCTED AND THE AO HAS DEALT ONLY ON THE ISSUE THAT EXPENSES COULD NOT BE VERIFIED BUT THE LD. AR SUBMITTED THAT ASSESSEES BOO KS OF ACCOUNTS ARE AUDITED AND ALSO WORK EXPENSES CANNOT BE DISPROVED. AS THE ASSESSEE IS A GOING CONCERN AND HAS BEEN CLAIMING FROM THE EARLIER YEARS, THEREFORE, CONSIDERING THE OVERALL ASPECTS AND CIRCUMSTANCES AND THE TRADE PRACTICES FOLLOWED BY THE AS SESSEE, WE ARE OF THE OPINION THAT THE DISALLOWANCE OF 2 % OF WORK EXPENSES WHERE ARS SUBMISSION IS THAT WORK EXPENSES ARE SUBJECT TO THE PROVISIONS OF TDS AND HAS BEEN DEDUCTED, ARE ON HIGHER SIDE . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTRICT THE ADDITION TO THE EXTENT OF 1% O F WORK EXPENSES AND ORDER ACCORDINGLY. 11. ON THE LAST DISPUTED ISSUE WITH RESPECT TO PAYMENT OF RS.4 LAKHS MADE TO M/S DEEPAK STEEL, THE CONTENTION OF LD. AR THAT THE AO ON PERUSAL OF THE LEDGER ACCOUNT FOUND THAT THE ASSESSE E HAS ISSUED THE CHEQUE ON 28.01.2010 THROUGH AXIS BANK ACCOUNT TO M/S DEEPAK STEEL AND THE AO COULD NOT VERIFY THIS AMOUNT AND MADE THE ADDITION. LD. AR SUBMITTED THE COPIES OF BANK ACCOUNT BEFORE US AND REFERRED TO THE ITA NO. 5 15 /201 7 6 TRANSACTION ON 28.1.2010 AND CLEA RANCE OF THE CHEQUE FROM THE AXIS BANK. THE AO HAS DOUBTED THE ISSUE OF CHEQUE AND THEREFORE MADE THE ADDITION. THE CIT(A) HAS CONFIRMED THE ACTION OF AO. LD. AR FURTHER SUBMITTED THAT THE MATTER MAY BE VERIFIED AND EXAMINED. ON THE QUERY FROM THE BENCH WH ETHER THE CONFIRMATION IS OBTAINED FROM DEEPAK STEEL, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS INVOICES COPY AND ALSO BANK STATEMENT REFERRED AT PAPER BOOK PAGE 34 WHERE THE DATE OF CHEQUE AND CLEARANCE HAS BEEN REFLECTED AND PRAYED FOR AN OPPORTUNITY TO SUBSTANTIATE BEFORE THE AO. WE CONSIDERING THE MATERIAL FACTS AND SUBMISSIONS OF THE ASSESSEE ARE OF THE OPINION THAT THE ASSESSEE HAS ISSUED THE CHEQUE IN FAVOUR OF THE CREDITOR WHICH IS NOT IN DISPUTE. THEREFORE, WE ARE OF THE OPINION THAT THE MATTER HA S TO BE EXAMINED BY THE AO AND ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF AO TO VERIFY THE TRANSACTION AND ALSO THE ASSESSEE SHALL FILE THE DETAILS IN SUPPORTING THE CLAIM AND COOPERATE IN THE ASSESSMENT PROCEEDINGS. WE ORDER ACCORDINGLY. 11 . IN THE R ESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . O RDER PRONOU NCED IN THE OPEN COURT ON 17 / 05 / 201 8 . SD/ - ( N. S. SAINI ) S D/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 17 / 05 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY ITA NO. 5 15 /201 7 7 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S K.K. & SONS, AT - MAIN ROAD BELGAON, DIST - BOLANGIR 2. / THE RESPONDENT - ACIT, CIRCLE - 2(1), SAMBALPUR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//