Usha Tubes and Pipes Private Limited, , Visakhapatnam V. The Assistant Commissioner of Income Tax, Central Circle-2, , Visakhapatnam

ITA 520/VIZ/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9804 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Depreciation; Search and seizure; Reassessment proceedings; TDS; Set aside
• Section: 147; 148; 132; 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 520/VIZ/2018 ( / ASSESSMENT YEAR: 2009 - 10 ) M/S USHA TUBES AND PIPES(P)LTD D.NO.11 - 8 - 34 DASAPALLA HILLS VISAKHAPATNAM [PAN :A AACU7175R ] VS. ASST.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 2 VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : S HRI G.V.N.HARI, AR / RESPONDENT BY : SMT.SUMAN MALIK, DR / DATE OF HEARING : 21 . 0 3 . 201 9 / DATE OF PRONOUNCEMENT : 05 .0 4 . 201 9 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 12, HYDERABAD VIDE APPEAL NO.10186/2017 - 18 DATED 20.08.2018 FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10. 2 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM 2. GROUND NO.1 AND 4 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 3. GROUND NO.2 IS RELATED TO THE VALIDITY OF ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). THE ASSESSEE CHALLENGED THE NOTICE ISSUED U/S 148 STATING THAT THE REASSESSMENT PROCEEDINGS ARE VOID - AB - INITIO. DURING THE APPEAL HEARING, THE LD.AR RELIED ON THE GROUNDS OF APPEAL. 3.1 . WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE LD.CIT(A)S ORDER. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER (AO) CLEARLY BROUGHT OUT THE FACTS AND CIRCUMSTANCES LEADING TO ESCAPEMENT OF INCOME. THE AO HAS RECORDED A STATEMENT U/S 131(1A) FROM SRI SEETA RAMA SWAMY WHO WAS WORKING AS A PART TIME ACCOUNTANT FOR ATR GROUPS ON 04.12.2015 AND FURNISHED THE DETAILS REGARDING THE WORK DONE BY HIS SON SRI KRISHNA KISHORE FOR USHA TUBES & PIPES PVT. LTD., AND THE RECEIPT OF THE PAYMENTS FOR GODOWN MAINTENANCE FROM THE ASSESSEE. BUT HE FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO SUPPORT THE CLAIM THAT HE HAD EXECUTED THE WORK. THEREFORE, THE AO BELIEVED THAT THE ASSESSEE HAD INFLATED ITS EXPENDITURE TO THE EX TENT OF GODOWN MAINTENANCE UNDER THE SUB CONTRACT PAYMENTS. 3 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM ACCORDINGLY, RECORDED THE REASONS U/S 147 AND HAD ISSUED THE NOTICE U/S 148. THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO AND UPHELD THE VALIDITY OF ISSUE OF NOTICE U/S 148 AS DISCUSSED IN PARA NO.6.3 OF THE ORDER OF THE LD.CIT(A) WHICH IS REPRODUCED HEREUNDER. 6 3 . IT IS SEEN F ROM THE ASSESSMENT ORDER REPRODUCED IN PAR A 6. 1 ABOVE THAT THE REASONS RECORDED ARE PERFECTLY COGENT AND VALID, AND ALL THE FACTS AVAILABLE WITH THE ASSESSING OFFICER, WHICH LED TO T HE REOPENING OF THE ASSESSMENT, ARE CLEARLY ENUMERATED, THE REASON S RECORDED ARE NOT BASED ON MERE THIRD - PARTY - EVIDENCE. A SWORN STATEMENT U/S 131(1A) OF THE INC O ME TAX ACT , 19 6 1 WAS RECORDED FROM HIS FATHER SRI SE ETA RA MA SWAMY (WHO IS WORK ING AS A PART T IME ACCOUNTANT FOR ATR GROUP S ) ON 04 - 12 - 2015 WHEREI N HE WAS ASKED REGARDING THE PAY MENT RECEIVED BY HIS SON SRI B.KRISHNA KISHORE WHEREIN, HE REPLIED THAT HE HAS DONE THE WORK IN THE NAME OF HIS SON FOR M/S USH A T U BES & PIPES P VT LTD DURING F Y.2008 - 09 AND RECEIVED THE PAYMENT OF RS.28.62 LAKHS. WHEN H E WAS FURTHER ASKED REGARDING THE NATURE OF WORK DONE BY HIM FOR M/S USHA TUBES & PIPES PVT. LTD., HE REPLIED THAT HE HAD DONE GODOWN MAINTENANCE WORK WITHOUT GIVING ANY SPECIFI C , DETAILS OF THE WORK. FURTHER WHEN HE W AS ASKED TO S U BMIT THE COPY OF WORK ORDER OR COPY OF AGREEMENT TO EXECUTE WORK OR ANY O THER DOCUMENTARY EVIDENCE, IN SUPPORT OF HIS CLAIM THAT HE, HAS EXECUTED WORK FOR M / S USHA TUBES & PIPES PVT . LTD, HE REPLIED THAT HE HAD NO E VIDENC E EXCEPT COPY OF BILLS RAISED BY HIM AND HE FURTHER STATED THAT H E HAD EXECUTED W ORK ON ORAL INSTRUCTION ONLY. TH E ASSESSING OFFICER, THEREFO RE H AD SUFFICIENT REASONS FOR REOPE N ING THE CASE . FURTHER, THE ASSESSE E , OR HIS AR HAVE NOT RAISED ANY OBJECTIONS AGAINST REOPENING DU RIN G SCRUTINY ASSESSMENT PROCEEDINGS. THIS ONLY SHOWS THAT THE GROUNDS RA ISED DURING APPELLATE PROCEEDINGS ARE AN AFTER - THOUGHT, AND INFACT, AN ATTEMPT TO DIVERT THE ATTENTION FROM THE MAIN ISSUE. I FIND THE NOTICE U/S 148 HAS BEEN ISSUED ON PERFECTLY VALID GROUNDS AND FIND NO INFIRMITY IN THE COURSE OF ACTION TAKEN BY THE ASSESSING OFFICER. THE GROUND RAISED BY THE APPELLANT IN THIS REGARD IS THEREFORE, DISMISSED . ON GOING THROUGH THE ORDER OF THE AO AS WELL AS THE LD.CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, WE DECLINE 4 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE ON THIS GROUND. 4. GROUND NO.3 IS RELATED TO THE ADDITION OF RS.28,62,0 00/ - FOR GODOWN MAINTENANCE. THE AO OBSERVED THAT THE ASSESSEE IS DERIVING INCOME FROM BUSINESS OF CONSTRUCTION OF INDUSTRIAL GODOWNS AND LETTING THEM OUT. SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED U/S 132 OF THE ACT IN THE ATR GROUP OF CONCERNS ON 1 4.10.2015. DURING THE POST SEARCH ENQUIRIES , IT WAS FOUND THAT M/S USHA TUBES & PIPES PVT. LTD. HAS CLAIMED THE SUB CONTRACT PAYMENT OF RS.28,62,000/ - IN THE FINANCIAL YEAR 2008 - 09 TO SRI B.KRISHNA KISHORE . O N 03.12.2015 A STATEMENT U/S 131(1A) OF THE ACT WAS RECORDED FROM SRI B.KRISHNA KISHORE (SUB CONTRACTOR) AND CALLED UP ON TO EXPLAIN THE NATURE OF WORK DONE FOR THE ASSESSEE , WHEREIN HE DENIED HAVING DONE ANY WORK TO THE ASSESSEE. HOWEVER HE ACCEPTED THAT HE HAD SIGNED THE BILLS RAISED BY HIS FATHER SRI SEETA RAMA SWAMY. A SWORN STATEMENT WAS ALSO RECORDED FROM SRI B. SEETA RAMA SWAMY , FATHER OF SRI B.KRISHNA KISHORE U/S 131(1A) OF THE ACT ON 04.12.2015, WHEREIN, HE HAS CONFIRMED THAT HE HAS DONE THE WORK IN THE NAME O F HIS SON SRI B.KRISHNA KISHORE AND RECEIVED THE PAYMENT OF RS.28.62 LAKHS, BUT FAILED TO FURNISH ANY SPECIFIC DETAILS OF THE WORK DONE, AND SUBMIT THE COPY OF THE WORK ORDER OR COPY OF 5 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM AGREEMENT EXECUTING THE WORK OR ANY OTHER DOCUMENTARY EVIDENCE TO SUP PORT HIS CLAIM THAT HE HAS EXECUTED THE WORK OF THE ASSESSEE. THEREFORE, THE AO REOPENED THE ASSESSMENT BELIEVING THAT THE ASSESSEE HAD INFLATED THE EXPENDITURE ON GODOWN MAINTENANCE AND ACCORDINGLY ISSUED SHOW CAUSE NOTICE ON 02.11.2016. THE ASSESSEE CO MPANY SUBMITTED ITS EXPLANATION STATING THAT SRI B.KRISHNA KISHORE, S/O SRI B.SEETA RAMA SWAMY HAS CARRIED THE GODOWN MAINTENANCE WORK IN THEIR GODOWNS AT MINDI, VISAKHAPATNAM AND THE MAINTENANCE CHARGES @RS.1/ - PER SQ.FT. PER MONTH WAS PAID AND DEDUCTED T HE TDS. THE ASSESSEE FURTHER SUBMITTED THAT THE SUB - CONTRACTOR SRI B.KRISHNA KUMAR IS INCOME TAX ASSESSEE, FILED HIS RETURN OF INCOME SHOWING INCOME FROM THE ABOVE STATED WORKS FOR THE A.Y. 2009 - 10. HENCE, ARGUED THAT THE EXPENDITURE IS GENUINE AND NOT B OGUS. THE AO CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND IN THE ABSENCE OF EVIDENCE TO ESTABLISH THAT SRI B.KRISHNA KUMAR HAS DONE THE MAINTENANCE WORK, DISBELIEV ED THE EXPLANATION OF THE ASSESSEE, MADE THE ADDITION AS BOGUS EXPENDITURE. 5. AGGRI EVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) AGREED WITH THE FINDING OF THE AO AND 6 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM CONFIRMED THE ADDITION MADE BY THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE, HENCE, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 5.1. DURING THE APPEAL HEARING, THE LD.AR SUBMITTED THAT THE ASSESSEE IS HAVING HUGE GODOWNS WHICH REQUIRE REGULAR MAINTENANCE AND UPKEEP OF THE PREMISES FOR WHICH THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SRI B.KRISHNA KISHORE FOR MAINTE NANCE OF GODOWNS @RS.1/ - PER SQ.FT. ACCORDINGLY, SRI B.KRISHNA KISHORE HAS EXECUTED ALL THE MAINTENANCE AND UPKEEP OF GODOWNS AND PAYMENT WAS MADE BY CHEQUE AND DEDUCTED THE TDS. THE LD.AR FURTHER STATED THAT THE ASSESSEE IS RECEIVING THE GODOWN RENT OF RS.3,06,76,907/ - AND THERE WAS NO ADMINISTRATIVE EXPENSES EXCEPT GODOWN MAINTENANCE AND SMALL AMOUNTS OF LICENCE FEE, AUDIT FEE ETC. HE FURTHER ARGUED THAT THERE IS NO OTHER EXPENDITURE INCURRED BY THE ASSESSEE EXCEPT ON SALARIES , WAGES, INTEREST, FINANCE CHARGES AND DEPRECIATION. LOOKING AT THE AREA OF GODOWN AND THE QUANTUM OF MAINTENANCE CHARGES INCURRED BY THE ASSESSEE, THE SAME IS FAIRLY REASONABLE AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE TO DISPUTE THE GODOWN MAINTENANCE, ACCORDINGLY , THE LD.AR ARGUED THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND ALLOW THE APPEAL OF THE ASSESSEE. 7 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM 6. ON THE OTHER HAND, THE LD.DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THE INSTANT CASE, A STATEMENT WAS RECORDED FROM SRI B.KRISHNA KISHORE U/S 131(1A) OF THE ACT, BY INVESTIGATION WING, WHEREIN, HE HAS STATED THAT HE HAS NOT DONE ANY GODOWN MAINTENANCE WORK FOR THE ASSESSEE COMPANY. HOWEVER, HIS FATHER SRI SEETA RAMA SW AMY HAS CONFIRMED THAT HE HAS DONE GODOWN MAINTENANCE WORK ON BEHALF OF HIS SON AND ADMITTED THE INCOME AND FILED THE RETURN OF INCOME IN THE HANDS OF HIS SON. THERE IS NO DISPUTE THAT THE RECIPIENT SRI B.KRISHNA KISHORE HAS ADMITTED THE RECEIPT AND FILE D THE RETURN OF INCOME. THE ASSESSEE IS HAVING HUGE GODOWNS AND HAS GIVEN SUB CONTRACT FOR MAINTENANCE. EVEN IF IT IS PRESUMED THAT SRI KRISHNA KISHORE HAS NOT DONE THE WORK, THE ASSESSEE WOULD INCUR THE MAINTENANCE EXPENDITURE TO MAINTAIN THE VAST AREA OF GODOWN S . THE ASSESSEE HAS GIVEN CONTRACTS FOR MAINTENANCE OF THE GODOWN AT RS.1/ - PER SQ.FT PER MONTH AND THE SAME IS REASONABLE. THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE AGREEMENT WAS BOGUS. MERELY BECAUSE OF CERTAIN DETAILS WER E NOT FURNISHED, THE PAYMENT CANNOT BE HELD TO BE BOGUS. IN THE INSTANT CASE, EVEN IF SRI KRISHNA KISHORE HAS NOT THE GODOWN MAINTENANCE WORK, 8 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM SOME OTHER CONTRACTOR HAS TO CONTINUOUSLY ATTEND THE GODOWN MAINTENANCE WORK AND THE ASSESSEE IS IN OBLIGATION T O MEET THE EXPENDITURE. THE ONLY EXPENDITURE DEBITED BY THE ASSESSEE TO THE PROFIT & LOSS ACCOUNT IS GODOWN MAINTENANCE EXPENDITURE UNDER THE HEAD ADMINISTRATIVE EXPENSES OTHER THAN THE AMOUNTS SUCH AS ELECTRICITY CHARGES, LICENCE AND RENEWAL FEE, PROF ESSIONAL CHARGES AND AUDIT FEE. LOOKING AT THE QUANTUM OF EXPENDITURE DEBITED BY THE ASSESSEE TO THE PROFIT & LOSS ACCOUNT, WE HOLD THAT THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT IS REASONABLE. SINCE THE ASSESSEES FATHER HAS AGREED THAT HE HAD INCURRED THE EXPENDITURE AND CARRIED THE WORKS ON BEHALF OF HIS SON, THERE IS NO REASON TO DISBELIEVE THE EXPLANATION OF HIS FATHER, HENCE WE HOLD THAT THE EXPENDITURE DEBITED TO PROF IT & LOSS ACCOUNT AS REASONABLE AND ALLOWABLE. SINCE SRI KRISHNA KISHO RE HAS ADMITTED THE RECEIPT AND FILED THE RETURN OF INCOME, WE HAVE NO REASON TO DISBELIEVE THE GENUINENESS OF PAYMENT. HENCE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE ON THIS GROUND. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 9 I.T.A. NO .520/VIZ/2018 M/S USHA TUBES AND PIPES PRIVATE LIMITED., VISAKHAPATNAM ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL, 2019. S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 05 .04.2019 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - M/S USHA TUBES AND PIPES(P)LTD, D.NO.11 - 8 - 34 , DASAPALLA HILLS, VISAKHAPATNAM 2. / THE REVENUE THE ASST.COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE - 2 , VISAKHAPATNAM 3. THE PR. COMMISSIONER OF INCOME TAX (CENTRAL) , VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 1 2 , HYDERABAD 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM