ITO WD 21(2)(2), MUMBAI V. SURESH DINANATH VIJAN, MUMBAI

ITA 53/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71423 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANDAL VAIDYA
• Keywords: Additional evidence; Revised return
• Section: 133(6); 139(5); 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI D.K ARUNAKARA RAO , AM AND SHRI AMIT SHUKLA , JM ITA NO. 53 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 200 7 - 200 8 ) ITO WD 21(2)(2), MUMBAI VS. SHRI SURESH DINANATH VIJAN, FLAT NO. 43, BLDG NO.8A, S.S.NAGAR, SION, KOLIWADA - 400 037 PAN/GIR NO . : AA BPV 5276 G ( APPELLANT ) .. ( RESPONDENT ) / REVENUE BY : SMT. JOTHILAKSHMI NAYAK / ASSESSEE BY : MR. MANDAL VAIDYA DATE OF HEARING : 1 ST OCT., 201 3 DATE OF PRO NOUNCEMENT : 18 TH OCT.,201 3 O R D E R PER AMIT SHUKLA , J M : THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 5 - 10 - 2010 , PASSED BY THE CIT(A) - 32 MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143 (3) FO R THE ASSESSMENT YEAR 200 7 - 0 8, INTER ALIA , ON THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF LABOUR CHARGES OF RS. 21,87,956/ - MADE BY THE A.O. U/S.40(A)(IA) OF THE INCOME TAX AC, 1961 TO RS.1,34,400/ - IN DOING SO, THE CIT(A) HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE HAS NOT ESTABLISHED BEFORE THE A.O. THAT OUT OF PAYMENTS ITA NO. 53 /20 1 1 2 OF RS. 21,87,956/ - RS.18,62,196/ - PERTAIN TO PURCHASES AND THAT THESE PURCHASES ARE REFLECTED IN THE SALES OR CLOSING STOCK HAS NOT BEEN VERIFIED BY THE A.O. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 . THE SUCCINCT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S NOVELTY EXPORTS, ENGAGED IN THE BUSINESS OF TRADING OF FABRICS/SAREES, IMITATION, JWELLERY AND ALSO MANUFACTURING OF FABRICS AND DRESSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 21,87,956/ - ON ACCOUNT OF LABOUR CHARGES PAID. THE AO ISSUED A SHOW CAUSE NOTICE REQUIRING THE ASSESSEE TO SUBMIT THE DETAILS OF THE LABOUR CHARGES PAID AND TDS DEDUCTED THEREON. THE ASSESSEE, IN RESPONSE, SUBMITTED T HAT MOST OF THE AMOUNT PERTAIN TO PURCHASE OF RAW MATERIAL BUT WAS WRONGLY GROUPED UNDER THE HEAD LABOUR CHARGES. OUT OF RS. 21,87,956/ - ONLY RS. 3,25,760/ - PERTAIN ED TO LABOUR CHARGES AND BALANCE SUM WAS IN RESPECT OF PURCHASE OF RAW MATERIAL. THE AO DID NO T ACCEPT THE ASSESSEES CONTENTION ON THE GROUND THAT WHILE FURNISHING THE LIST OF PARTIES FORM WHOM PURCHASES OF ABOVE RS. 20000/ - WAS MADE, WERE NOT INCORPORATED IN THE LIST OF LABOUR CHARGES, WHICH ASSESSEE HAS CLAIMED TO BE ON ACCOUNT OF PURCHASE S OF R AW MATERIALS. HE, THEREFORE, CONCLUDED ENTIRE PAYMENT OF RS. 21,87,956/ - IS TO BE DISALLOWED UNDER SECTION 40(A)(IA) ON ACCOUNT OF NON - DEDUCT ION OF TDS. 3 . IN APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT , TO CORROBORATE THE CORRECTNESS O F THE CLAIM THAT THE PAYMENTS ITA NO. 53 /20 1 1 3 RELATE TO PURCHASE OF MATERIAL ONLY , THE ASSESSEE HAD FURNISHED VARIOUS EVIDENCES AND DETAILS BEFORE THE AO VIDE LETTERS DATED 3 - 12 - 2009 AND 9 - 12 - 2009 BUT BY THAT TIME THE AO HAD INFORMED THE ASSESSEE THAT ASSESSMENT ORDER HA D ALREADY BEEN PASSED ON 26 - 11 - 2009. ALL THESE EVIDENCES WERE THEREFORE, FILED AGAIN BEFORE THE CIT(A) , WHO IN TURN FORWARDED THESE EVIDENCES AND SUBMISSIONS TO THE AO TO SUBMIT HIS COMMENTS AND A REMAND REPORT. IN THE REMAND REPORT DATED 6 - 9 - 2010, THE AO STATED THAT DUE TO PRESSURE OF WORK AND ASSESSMENT WAS GETTING TIME BARRED, THEN THE AO MIGHT NOT HAVE BEEN IN A POSITION TO GIVE SUFFICIENT TIME. IN ANY CASE, IF THE THERE WAS SOME MISTAKE IN THE DETAILS OF LABOUR EXPENSES AND IN THE GROUPING OF EXPENSE S , THE ASSESSEE SHOULD HAVE FILED A REVISED RETURN UNDER SECTION 139(5), WHICH HAS NOT BEEN DONE BY THE ASSESSEE. THUS, SUCH A MISTAKE DONE BY THE ASSESSEE WHILE PREPARING DETAILS OF LABOUR EXPENSES, NOW, CANNOT BE RECTIFIED WITHOUT FILING OF REVISED RETUR N IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF GOETZ INDIA PVT. LTD., REPORTED IN 284 ITR 323 (SC) . HE ALSO SUBMITTED THAT ALL THESE EVIDENCES ARE ADDITIONAL EVIDENCE WHICH IS IN CONTRAVENTION OF RULE 46A. HOWEVER, IN THE CONCLUSION PART OF THE REMAND REPORT, THE AO ADMITTED THAT ENQUIRY LETTERS UNDER SECTION 133(6) WERE ISSUED TO FOUR PARTIES, WHO HAVE DULY CONFIRMED THE TRANSACTION OF PURCHASE OF MATERIAL. 3. 1 IN THE REJOINDER TO THE REMAND REPORT, THE ASSESSEE BEFORE THE CIT(A) SU BMITTED THAT THE ASSESSEE HAS RECEIVED THE ASSESSMENT ORDER ONLY ON 12 - 12 - 2009 AND IT IS NOT CORRECT THAT THE ASSESSMENT ORDER WAS ITA NO. 53 /20 1 1 4 FINALIZED ON 26 - 11 - 2009, WHICH IS EVIDENT FROM THE OVERWRITING ON THE DATES IN THE ORDER AS WELL AS IN THE DEMAND NOTICE. WIT HOUT PREJUDICE, IT WAS SUBMITTED THAT THE FOUR PARTIES TO WHOM SUMMONS WERE ISSUED HAVE DULY CONFIRMED THE TRANSACTION FOR THE PURCHASE OF MATERIAL WHICH ITSELF GOES TO SHOW THAT THE ASSESSEES CONTENTION IS CORRECT. AN AFFIDAVIT OF THE ACCOUNTANT WAS ALSO FILED THAT THERE WAS A MISTAKE WHILE PREPARING THE GROUPING OF LABOUR EXPENSES, WHEREIN A SUM OF RS. 18,62,196/ - , WHICH WAS ON ACCOUNT OF PURCHASE OF RAW MATERIAL WERE CLUBBED INTO LABOUR EXPENSES HEAD. THE DETAIL REBUTTAL OF THE ASSESSEE ON THE REMAND RE PORT HAS BEEN INCORPORATED BY THE CIT(A) FROM PAGES 4 TO 6 OF THE APPELLATE ORDER. LEARNED CIT(A) AFTER CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD AND THE SUBMISSIONS OF AO AS WELL AS THE ASSESSEE, OBSERVED THAT MOST OF THE CRUCIAL EVIDENCES AND DETA ILS WITH REGARD TO THE ISSUE INVOLVED, WAS FURNISHED BY THE ASSESSEE BEFORE THE A.O. DURING REMAND PROCEEDINGS OR COLLECTED BY THE AO UNDER SECTION 133(6), EVEN IF IT IS PRESUMED THAT THE AO HAS PASSED THE ASSESSMENT ORDER ON 26 - 11 - 2009 ITSELF. 3. 2 REGAR DING AOS OBJECTION FOR ADMISSION OF ADDITIONAL EVIDENCE, HE HELD THAT OPPORTUNITY WAS GIVEN TO THE AO ON THE DOCUMENTS WHICH WAS FURNISHED BEFORE HIM AFTER PASSING OF THE ASSESSMENT ORDER AND MOST OF THE DOCUMENTS RELATE TO THE CONTENTIONS RAISED BEFORE T HE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ONLY . FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER SUCH CIRCUMSTANCES , HE ALSO RELIED UPON ITA NO. 53 /20 1 1 5 VARIOUS DECISIONS, WHICH HAVE BEEN DISCUSSED BY HIM AT PAGE 7 OF THE APPELLATE ORDER AND ULTIMATELY ADMITTED ALL THE EVIDENCES AFTER DETAILED REASONING. REGARDING AOS OBJECTION THAT SUCH A MISTAKE OF CLUBBING THE PURCHASES OF MATERIAL INTO THE HEAD LABOUR CHARGES CONSTITUTE A MISTAKE WHICH CAN BE ONLY REMOVED THROUGH FILING OF REVISED RETURN , IS WHOLLY INCORRECT IN LAW AS THE SAID EXPENDITURE WAS ALREADY CLAIMED IN THE PROFIT AND LOSS ACCOUNT AND THERE IS NO QUESTION OF CHANGE IN INCOME OR EXPENDITURE, HENCE, THERE IS NO QUESTION OF REVISION OF RETURN. ON THESE ASPECTS ALSO, HE HAS GIVEN A VERY DETAILED REASONING IN PAR A 3.6 AT PAGES 7 & 8 OF THE APPELLATE ORDER. ULTIMATELY, BASED ON FACTS AND MATERIAL ON RECORD, LEARNED CIT(A) PARTLY ALLOWED THE ASSESSEES CLAIM AFTER OBSERVING AND HOLDING A SUNDER : - 3.6 SO FAR AS THE MERITS OF THE DISALLOWANCE UNDER SECTION 40(A)(IA ) IS CONCERNED, THE AO HAS HIMSELF IN THE REMAND REPORT STATED THAT 133(6) LETTER TO 4 PARTIES WERE SENT WHO HAVE CONFIRMED THE TRANSACTION. ONCE IT IS ESTABLISHED THAT THE PAYMENTS OF 18,62,196/ - TO THE PARTIES WERE ON ACCOUNT OF PURCHASES AND NOT FOR LAB OUR CHARGES, NO PROVISIONS OF TDS WOULD BE APPLICABLE ON SUCH AMOUNT. OUT OF THE REMAINING PAYMENT OF RS. 3,25,760/ - WHICH IS MADE FOR LABOUR CHARGES ONLY, IT IS NOTED FROM THE AUDITORS CERTIFICATE (REVISED) THAT THE TDS HAS NOT BEEN MADE ON THE PAYMENT OF RS. 1,34,400/ - . SINCE ON THESE LABOUR PAYMENTS OF RS. 1,34,400/ - THE PROVISIONS OF TDS ARE APPLICABLE BUT NO TDS HAS BEEN MADE THEREFORE, THE SUM OF RS. 1,34,400/ - SHALL BE DISALLOWED 40(A)(IA) . ACCORDINGLY OUT OF THE TOTAL DISALLOWANCE OF RS. 21,87,956/ - , A SUM OF RS. 1,34,400/ - ONLY IS SUSTAINED AND THE BALANCE IS DELETED. 4. BEFORE US, LEARNED DR AFTER REFERRING TO THE BIFURCATION OF EXPENSES GIVEN AT PAGE 145 OF THE PAPER BOOK, SUBMITTED THAT THE ASSESSEE HAS ONLY DEBITED RS. 21,87,956/ - ON ACCOUNT OF LAB OUR CHARGES AND THE MAJOR EXPENSES HAS BEEN DEBITED IN THE MONTH OF JULY . IN ANY ITA NO. 53 /20 1 1 6 CASE, LABOUR EXPENSES WERE WHICH IS IN CONSONANCE WITH THE FIGURES OF OVERALL PURCHASES. IF A SUM OF RS. 18,62,196/ - IS REMOVED, THEN THERE IS ONLY A SMALL COMPONENT OF LABOUR EXPENSES WHICH AGGREGATES TO RS. 3,25,760/ - , WHICH IS ON A MUCH LOWER SIDE , L OOKING TO THE OVERALL AFFAIRS OF THE ASSESSEE, IT CANNOT BE HELD THAT THERE WAS A MISTAKE IN THE GROUPING OF THE LABOUR CHARGES. THE SUBSEQUENT VERSION OF THE ASSESSEE IS MERELY T O GET WRIGGLE OUT OF THE DISALLOWANCE PROPOSED BY THE AO. SHE, THUS, STRONGLY RELIED UPON THE FINDING OF THE AO . 5 . ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ONCE THE BILLS RELATING TO PURCHASE OF MATERIAL ALONG WITH THE DATES AN D INVOICES NUMBERS WERE FURNISHED BEFORE THE AO AND ALSO BEFORE THE CIT(A) , WHICH HAS BEEN SUBJECTED TO REMAND PROCEEDING ALSO, IT CANNOT BE HELD THAT THESE ARE ALL AFTERTHOUGHTS. MOREOVER, THESE BILLS HAVE NOT BEEN FOUND TO BE NON - GENUINE EITHER BY THE AO IN THE REMAND PROCEEDING OR BY THE CIT(A) . IN FACT , THE AO HIMSELF CONDUCTED AN ENQUIRY FROM FOUR PARTIES ON SAMPLE BASIS AND IN SUCH CASE S WITH FOUR PARTIES, HE GOT THE CONFIRMATION DIRECTLY FROM THE PARTIES THAT THE ASSESSEE HAS MADE PURCHASES FROM THEM , WHICH WAS ONLY CLASSIFIED UNDER THE HEAD LABOUR EXPENSES. ONCE THAT IS SO, IT CANNOT BE HELD THAT THE ASSESSEES SUBMISSIONS/EXPLANATION IS NOT CORRECT. HE ALSO REFERRED TO COPIES OF THE BILLS AND THE DETAILS OF PURCHASE, WHICH WERE CLASSIFIED UNDER THE HEAD LABOUR EXPENSES, WHICH HAVE BEEN PLACED IN THE PAPER ITA NO. 53 /20 1 1 7 BOOK FILED BEFORE US. HE, THUS, STRONGLY RELIED UPON THE FINDINGS AND OBSERVATIONS OF THE CIT(A) . 6 . WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS ADVANCED AT THE HANDS OF THE LEAR NED DR AS WELL LEARNED COUNSEL OF THE ASSESSEE AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD AND ALSO THE ORDERS OF THE AO AS WELL AS LEARNED CIT(A) . THE MAIN ISSUE INVOLVED IS TO WHETHER THE LABOUR CHARGES DEBITED IN THE PROFIT AND LOSS ACCOUNT INCLU DES PURCHASES OF MATERIALS OR NOT. IT APPEARS THAT , BEFORE THE AO THE ASSESSEE HAD FURNISHED THE DETAILS OF INVOICES FOR THE PURCHASE S MADE FROM VARIOUS PARTIES. HOWEVER, SUCH EVIDENCES WERE NOT ACCEPTED BY THE AO ON THE GROUND THAT THE ASSESSMENT ORDER HA S ALREADY BEEN PASSED. ALL THESE DETAILS AND EVIDENCES WERE AGAIN SENT BACK TO THE AO DURING THE COURSE OF APPELLATE PROCEEDINGS BY THE LEARNED CIT(A) AND REMAND REPORT WAS CALLED FOR. THUS, ALL THESE EVIDENCES HAVE BEEN DULY CONFRONTED TO THE AO, WHO HAS FAILED TO EXAMINE THE SAME. LEARNED CIT(A) AFTER DULLY VERIFYING THE DETAILS, HAS GIVEN A CLEAR CUT FINDING THAT OUT OF RS. 21,87,956/ - , RS. 18,62,196/ - RELATES TO PURCHASE OF MATERIALS AND THERE IS NO ELEMENT OF LABOUR CHARGES IN SUCH SUMS AND OUT OF THE BA LANCE SUM, RS. 1,34,400/ - A RE DISALLOWABLE EXPENSES, WHICH ARE ON ACCOUNT OF LABOUR PAYMENT ON WHICH TDS WAS APPLICABLE. EVEN THESE EVIDENCES, WHICH HAS BEEN FILED BEFORE US IN THE FORM OF PAPER BOOK GO TO SHOW THAT THE ASSESSEES CONTENTION BEFORE THE AO AS WELL AS THE CIT(A) WAS CORRECT AS ALL THE INVOICES REFLECT THAT THESE RELATE TO ITA NO. 53 /20 1 1 8 PURCHASE OF MATERIAL FROM VARIOUS PERSONS ONLY . IT IS ALSO EVIDENT FROM THE MATERIAL PLACED ON RECORD THAT THE AO HAD ISSUED SUMMONS UNDER SECTION 131 TO VARIOUS PERSONS AS KING THE DETAILS OF SALE MADE TO THE ASSESSEE DURING THE FINANCIAL YEAR 2006 - 07. IN RESPONSE, THESE PERSONS HAVE ALSO CONFIRMED THE SALE MADE TO THE ASSESSEE AND ALSO INFORMED ABOUT THE PAYMENT RECEIVED BY THEM ON SUCH SALE OF MATERIALS. ONCE THESE EVIDENC ES HAVE NOT BEEN REBUTTED, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE ELABORATE FINDINGS RECORDED BY THE LEARNED CIT(A) AND ACCORDINGLY, THE SAME IS HEREBY CONFIRMED. 7 . WE ALSO AGREE WITH THE CONCLUSION DRAWN BY THE CIT(A) THAT THERE IS NO REQUIREME NT FOR FILING OF REVISED RETURN UNDER SECTION 139(5) FOR MISTAKE OF CLUBBING OF THE EXPENSES OF MATERIAL PURCHASE UNDER THE HEAD LABOUR EXPENSES , AS IT DOES NOT RESULT INTO ANY CHANGE OF INCOME OR EXPENDITURE. THUS, WE CONFIRM THE ENTIRE FINDINGS OF THE LE ARNED CIT(A) AND DISMISS THE GROUNDS RAISED BY THE DEPARTMENT. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON THIS 18 TH DAY OF OCTOBER , 201 3 . 18 TH OCTOBER, 201 3 SD/ - SD/ - ( ) ( D. KARUNAKARA RAO ) ( ) ( AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 18/10/2013 /PKM , PS ITA NO. 53 /20 1 1 9 COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR ) / ITAT, MUMBAI