Janta Construction, Bahraich V. ITO, Bahraich

ITA 515/LKW/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7586 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-01-2012
• Assessment Year: misc
• Appeal Filed On: 06-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: V B BHARGAVA
• Keywords: Corroborative evidences
• Section: 44AD; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW SMC BENCH, LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER ITA NO. 515/LKW/2011 ASSESSMENT YEAR: 2004 - 05 JANTA CONSTRUCTION V & P MEERPURKONIA DISTT. BAHRAICH V. INCOME TAX OFFICER - II BAHRAICH PAN: AAEFJ5820D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. V. B. BHARGAVA, C.A. RESPONDENT BY: SHRI. P. K. BAJAJ, D.R. DATE OF HEARING: 11.01.2012 DATE OF PRONOUNCEMENT: 13.01.2012 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE OR DER OF THE LD. CIT(A) MAINLY ON TWO GROUNDS WHICH ARE AS UNDER: - 1 . BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CONFIRMING THE D ISALLOWANCES: NATURE OF EXPENSE EXPENSES INCURRED EXPENSES DISALLOWED BY AS SESSING OFFICER AND CONFIRMED BY CIT( APPEALS) EXTENT AMOUNT LABOUR CHARGES 13 , 56,832 20% 2 , 71,366 PURCHASES 2,02, 332 20% 40,466 : - 2 - : 2 . BECAUSE THE LOWER AUTHORITIES HAVE ERRED AND IGNORED THE APPLICABILITY OF RULE 6DD READ WITH SECTION 40A(3) OF THE INCOME TAX ACT, 1961 WHEREBY ADHOC DISALLOWANCE OF 20% OF PURCHASE OF MATERIAL RS. 2 , 02 , 332/ - AMOUNTING TO RS.40 , 466/ - HAS BEEN MADE. 2 . THE FACTS IN BRIEF BORNE OUT FROM THE ORDERS OF THE AUTHORITIES BELOW ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR A ND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROADS AND FILED ITS RETURN OF INCOME ALONG WITH COPY OF THE AUDITED ACCOUNTS ON 30.10.2004 SHOWING TOTAL INCOME AT ` 1,01,120. ON SCRUTINY, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS DEBITED EXPEN SES TO THE TUNE OF ` 13,56,832 UNDER THE HEAD LABOUR CHARGES TO THE PROFIT AND LOSS ACCOUNT. WHEN ASKED TO PRODUCE THE VOUCHERS, ETC FOR VERIFICATION OF THE EXPENSES, THE ASSESSEE COULD NOT PRODUCE THE SAME EXCEPT GIVING IN WRITING THAT THESE EXPENSES AR E ACTUAL ONES AND ENTRIES TO THIS EFFECT HAVE BEEN MADE IN CASH BOOK. THE ASSESSEE WAS CONFRONTED WITH THE FACT THAT MERE ENTRIES IN CASH BOOK ARE NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE EXPENSES AND FOR WANT OF VOUCHERS , VERIFICATION OF THE SAME I S NOT POSSIBLE , AND THE ASSESSEE HIMSELF AGREED FOR ADDITION OF ` 30,000 TO ITS TOTAL INCOME. THE OFFER MADE BY THE ASSESSEE WAS CONSIDERED TO BE VERY LOW AND THE ASSESSING OFFICER ACCORDINGLY DISALLOWED 20% OF THE LABOUR CHARGES AND WORKED OUT THE ADDITIO N OF ` 2,71,366. THE ASSESSING OFFICER HAS ALSO NOTICED THAT THE ASSESSEE HAS MADE CASH PAYMENTS EXCEEDING ` 20,000 TOTALING TO ` 2,02,332 TOWARDS PURCHASE OF MATERIALS IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. SINCE THE ASSESSEE COULD NO T FURNISH THE REASONS FOR MAKING PAYMENT IN CASH, THE ASSESSING OFFICER HAS DISALLOWED 20% OF SUCH EXPENDITURES AND MADE THE ADDITION OF ` 40,446. : - 3 - : 3 . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) BUT COULD NOT IMPROVE UPON ITS CASE. THE LD. CIT(A), H OWEVER, EXAMINED THE ASSESSMENT ORDER AND F INDING NO INFIRMITY THEREIN, HE CONFIRMED THE SAME. 4 . NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WHEN THE ASSESSE E C OULD NOT PRODUCE THE SUPPORTING EVIDENCE IN SUPPORT OF ITS CLAIM, THE BOOKS OF ACCOUNT OF THE ASSESSEE COULD HAVE BEEN REJECTED AND INCOME SHOULD HAVE BEEN ESTIMATED AS PER PROVISIONS OF SECTION 44AD OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IN THE INTEREST OF JUSTICE, THE INCOME OF THE ASSESSEE BE ESTIMATED IN THE LIGHT OF PROVISIONS OF SECTION 44AD OF THE ACT. 5 . THE LD. D.R., ON THE OTHER HAND, HAS STRONGLY OPPOSED THE CONTENTION OF THE ASSESSEE WITH THE SUBMISSION THAT THE ASS ESSEE HAS FILED THE RETURN OF INCOME ALONG WITH THE COPIES OF AUDITED ACCOUNTS. WHEN THE ASSESSEE HAS GOT ITS ACCOUNTS AUDITED, THE ASSESSEE IS SUPPOSED TO MAINTAIN ALL THE NECESSARY RECORDS IN SUPPORT OF ITS CLAIM. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE THE SUPPORTING EVIDENCE OF ITS CLAIM OF EXPENSES. WHEN HE FAILED TO PRODUCE THE SAME, THE ASSESSING OFFICER HAS MADE AD - HOC DISALLOWANCES INSTEAD OF REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE OPTION LIES WITH THE ASSESSING OFFICER EITHER TO REJECT THE BOOKS OF ACCOUNT OR TO EXAMINE INDIVIDUAL CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER CANNOT BE FORCED TO REJECT THE BOOKS OF ACCOUNT IN SUCH TYPE OF CASES. 6 . HAVING GONE THROUGH THE MATERIALS AVAILABLE ON RECORD AND IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT THE ASSESSEE HAS FILED RETURN OF : - 4 - : INCOME ALONG WITH AUDITED ACCOUNTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE T HE VOUCHERS IN SUPPORT OF EXPENSES AMOUNTING TO ` 13,56,832 DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD LABOUR CHARGES , B UT THE ASSESSEE COULD NOT PRODUCE EVIDENCE BEFORE THE ASSESSING OFFICER. NO DOUBT , IN SUCH CIRCUMSTANCES THE BOOKS OF ACCOU NT OF THE ASSESSEE CAN BE REJECTED BUT INSTEAD OF REJECTING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 20% OF LABOUR CHARGES CLAIMED BY THE ASSESSEE. THE OPTION IS WITH THE ASSESSING OFFICER EITHER TO REJECT THE BOOKS OF ACCOUNT OR TO EXAMINE INDIVIDUAL CLAIM OF THE ASSESSEE UNDER DIFFERENT HEADS IN SUCH TYPE OF SITUATION. IF HE ADOPT S ONE OF THE MODE S OF COMPUTATION OF INCOME OF THE ASSESSEE, HIS ACTION CANNOT BE HELD TO BE ILLEGAL BECAUSE IT DOES NOT SUIT THE ASSESSEE. WHEN TH E ASSESSEE HAS RAISED A PARTICULAR CLAIM, THE ONUS IS UPON IT TO PROVE THE SAME BY PRODUCING NECESSARY EVIDENCE. IF HE FAILS TO DO SO, THE ASSESSING OFFICER IS AT LIBERTY TO MAKE NECESSARY DISALLOWANCES. IN THIS CASE ALSO, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 20% OF THE TOTAL CLAIM OF THE ASSESSEE WHICH I CONSIDER TO BE ON HIGHER SIDE. TO MEET THE ENDS OF JUSTICE, I REDUCE THE SAME TO 15% OF THE TOTAL CLAIM. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE DISALLOWANCE UNDER THI S HEAD. 7 . SO FAR AS CASH PAYMENT MADE IN CONTRAVENTION TO PROVISIONS OF SECTION 40A(3) OF THE ACT IS CONCERNED, I AM OF THE VIEW THAT IT IS FOR THE ASSESSEE TO FURNISH NECESSARY EVIDENCE TO STATE THAT CASH PAYMENTS WERE MADE UNDER THE EXCEPTION GIVEN IN RULE 6DD OF THE INCOME - TAX RULES. IF THE ASSESSEE FAILS TO PRODUCE THE SAME, THE ASSESSING OFFICER IS AT LIBERTY TO ACT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND TO MAKE NECESSARY DISALLOWANCE. I, THEREFORE, FIND NO : - 5 - : INFIRMITY IN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT ON NON - PRODUCTION OF THE RELEVANT EVIDENCE BY THE ASSESSEE TO PROVE THAT ITS CASE FALLS WITHIN THE FOUR CORNER S OF THE EXCEPTION ENVISAGED UNDER RULE 6DD OF THE INCOME - TAX RULES. A CCORDINGLY, I CONFIRM THIS ADDITION. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.1.2012. SD/ - [ S UNIL KUMAR Y ADAV ] JUDICIAL MEMBER DATED: 13.1.2012 JJ: 1101 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPO NDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR