ACIT, New Delhi V. M/s. VRC Construction India Pvt. Ltd., New Delhi

ITA 5310/DEL/2011

• Counselvise Citation: 531020114 RSA 2011
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 04-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS SUSHMA SINGH
• Assessee Lawyers: SURESH K GUPTA
• Keywords: Cost of acquisition
• Section: 40A(3); 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER ITA NO.5310/DEL/2011 ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-17(1), NEW DELHI. VS. M/S VRC CONSTRUCTION INDIA PVT.LTD., 2 SHIVA TOWER, 100/28, RAJAPUR, SECTOR-9, ROHINI, DELHI 110 085. PAN : AAACV2339J. (APPELLANT) (RESPONDENT) APPELLANT BY : MRS.SUSHMA SINGH, CIT-DR. RESPONDENT BY : SHRI SURESH K.GUPTA, CA. ORDER PER JOGINDER SINGH, JM : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 14 SEPTEMBER, 2011 PASSED BY THE LEARNED FIRST APPELLATE AUTHORI TY, NEW DELHI. THE FIRST GROUND RAISED IS THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITI ON OF RS.26,61,084/- SPECIFICALLY WHEN THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM OF EX PENDITURE 2 ITA-5310/DEL/2011 MADE U/S 40A(3) OF THE INCOME-TAX ACT, 1961. DURING HEARING, WE HAVE HEARD MRS.SUSHMA SINGH, LEARNED CIT-DR AND SHRI SURESH K.GUPTA, L EARNED COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENT ON BEHALF OF THE REVENUE IS THAT THE NECESSARY DETAILS FOR THE CLAIM OF SUCH EXPENDITURE WAS NOT FURNISHE D BY THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER RIGHTLY MADE THE ADDITION. ON THE OTHER HAND, SHRI GUPTA, THE LEARNED COUNSEL FOR THE ASSESSEE D EFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER BY SUBMITTING THAT THE NECES SARY DETAILS FOR MAKING SUCH CLAIM WERE VERY MUCH FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IN NUTSHELL, THE IMPUGNED ORDER ON THE ISSUE UNDE R HAND WAS DEFENDED. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT THE LEARNED ASSESSING OFFICER MADE THE ADDITION ON THE PLEA THAT THE DETAILS OF THE PARTIES WERE NOT FURNISHED BY THE ASSESSEE AND AT THE SAME TIME, THE ASSESSEE FAILE D TO PROVE THAT THE PARTIES TO WHOM CASH PAYMENTS WERE MADE WERE GENUI NE PARTIES AND THE TRANSACTIONS WERE ALSO MADE WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. THE LEARNED CIT(A) DULY CONSIDERED THE WRITTEN SUBMISSI ONS PREFERRED BY THE ASSESSEE AS HAS BEEN REPRODUCED IN PARAGRAPH 5 ONWARDS OF THE IMPUGNED ORDER. THE LEARNED CIT(A) HAS ALSO DULY EXAMINED THE DETAILS OF CASH PAYMENT IN RESPECT OF WHICH PROVISION OF SECTION 40A(3) OF THE ACT WAS INVOKED BY THE LEARNED ASSESSING OFFICER AS IS EVIDENT FROM PARAGRAPH 7 (PAGE 3 ITA-5310/DEL/2011 3) OF THE ORDER UNDER APPEAL. THERE IS A PLEA BEFORE THE LEARN ED CIT(A) AND ALSO BEFORE US THAT THE REMAINING PAYMENTS WERE EITHER MADE T O THE GOVERNMENT OR OTHER GOVERNMENT AGENCIES. CONSEQUENTLY, THESE PAY MENTS ARE NOT COVERED BY THE EXCEPTION PROVIDED UNDER RULE 6DD. WE FURT HER FIND THAT IN THE ASSESSMENT ORDER, THERE IS NO FINDING THAT THESE PAY MENTS WERE NOT MADE TO THE GOVERNMENT/GOVERNMENT AGENCIES. THERE IS A CA TEGORICAL FINDING IN PARAGRAPH 10 OF THE IMPUGNED ORDER THAT THE IMPUGNED PAYM ENTS WERE VERIFIED BY THE LEARNED CIT(A) AND IT WAS FOUND THAT SUCH PAYMENTS WERE MADE TO THE GOVERNMENT DEPARTMENT, THEREFORE, WE ARE CONVINCED THAT THE EXCEPTIONS PROVIDED IN RULE 6DD(B) ARE APPLICABLE. CONSEQUENTLY, WE DO NOT FIND ANY INFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED FIR ST APPELLATE AUTHORITY, THEREFORE, THE STAND OF THE LEARNED CIT(A) IS AFFIRME D. 3. THE NEXT GROUND PERTAINS TO RESTRICTING THE DISALLOWANCE ON A CCOUNT OF PURCHASE OF MATERIAL TO 3% BY THE LEARNED CIT(A). THE CRUX OF ARGUMENT ON BEHALF OF THE REVENUE IS IDENTICAL TO THE GROUND RAISED BY FURTHE R SUBMITTING THAT THE LEARNED ASSESSING OFFICER ESTIMATED AD-HOC DISALLOWANCE TO T HE TUNE OF 15% OF THE EXPENSES CLAIMED IN RESPECT OF PURCHASE OF GRAVEL UNDERSIZED/OVERSIZED, SAND ETC. IT WAS ALSO PLEADED THAT HUGE EXPEN DITURE WAS CLAIMED BY THE ASSESSEE FOR WHICH THE NECESSARY DOCUMENTS FOR INCUR RING SUCH EXPENSES WERE NOT PRODUCED BY THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY DISPUTED THE ASSERTION MADE BY THE LEARNED CI T-DR AND 4 ITA-5310/DEL/2011 INVITED OUR ATTENTION TO THE DETAILED SUBMISSIONS OF THE ASSESSEE SUMM ARIZED IN PARAGRAPH 14 OF THE IMPUGNED ORDER. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ADVANCED FROM BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT DU RING ASSESSMENT PROCEEDINGS, PURSUANCE TO REPLY OF THE ASSESSEE, THE LEARNED ASSESSING OFFIC ER ISSUED NOTICES U/S 133(6) TO NUMBER OF PARTIES. LIST OF SUCH PARTIES HA S BEEN MENTIONED IN PARAGRAPH 4.5 (PAGE 5) OF THE ASSESSMENT ORDER. AS PER THE REVENUE, COMPLIANCE WAS NOT MADE TO SUCH NOTICES BY 37 PARTIES. W E FURTHER FIND THAT THE LEARNED ASSESSING OFFICER DOUBTED THE PURCHASES FROM MA INLY FOUR PARTIES WHICH HAVE BEEN MENTIONED IN PARA 3.8 OF THE IMPUGN ED ORDER AND FOR REMAINING PARTIES, THE ASSESSING OFFICER WAS SATISFIED. THE T OTAL PURCHASES FROM THESE FOUR PARTIES IS TO THE TUNE OF RS.54,02,012/- . THE OBSERVATION MADE FOR REJECTING SUCH CLAIM BY THE ASSESSING OFFICER IS THAT THE BILLS PRODUCED ARE FRESH, CRISP AND CLEAN AND LOOK LIKE NEWLY PRINTED. WE FURTHER FIND THAT THE SUSPICION RAISED BY THE ASSESSING OFFICER HAS BEE N DEALT WITH BY THE LEARNED CIT(A) BUT FACT REMAINS THAT THE GROSS PROFIT RATIO OF THE ASSESSEE WAS IN THE INCREASING TREND OVER THE PRECEDING ASSESSMENT YE ARS AND EVEN OVERALL CONSUMPTION OF MATERIAL HAS COME DOWN FROM 70.73% (A Y 2006- 07) TO 66.77% IN THE YEAR UNDER CONSIDERATION. ANOTHER FACT T O BE NOTED IS THAT THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER ON AD-HOC BASIS. EACH ITEM LIKE SUPPLY OF EARTH, GRAVELS OVERSIZED/UNDERSIZE D HAS BEEN 5 ITA-5310/DEL/2011 DEALT WITH INDEPENDENTLY, THEREFORE, THE OBSERVATION OF INFLAT ED CONSUMPTION OF THE MATERIAL HAS NOT BEEN SUBSTANTIATED BY THE ASSESSING OFFICER BY BRINGING ANY ADVERSE MATERIAL ON RECORD. THE REASON MENTIONED I N THE ASSESSMENT ORDER REJECTING THE PURCHASES ON AD-HOC BASIS IS THOUGH ON VARIOUS COUNTS BUT CASH PAYMENT HAS NOT BEEN SPECIFICALLY PROHIBITED UNDE R THE ACT UNLESS AND UNTIL ANY CONTRARY MATERIAL IS BROUGHT ON R ECORD OR THE LIMIT AS LAID DOWN UNDER THE ACT. THE BREAK-UP OF THE EXPE NDITURE FOR CONSUMPTION OF THE MATERIAL HAS BEEN DEALT WITH AT PAGE 11 OF THE ORDER UNDER APPEAL AND THE TOTAL PURCHASES IN THE BUSINESS OF THE ASSESSEE ARE TO THE TUNE OF RS.93,62,79,794/- WHICH INCLUDES PURCHASE COST OF RS.18,21,27,559/- TOWARDS VARIOUS CONSTRUCTION MATERIAL, THE DETAILS OF WHICH HAVE BEEN PROVIDED AT PAGE 12 OF THE ORDER OF THE LEARNED FIRST A PPELLATE AUTHORITY. THE FACTUM OF PURCHASES FROM FOUR DISPUTED PARTIES HAVE BEE N DEALT WITH INDEPENDENTLY IN PARA 8 ONWARDS OF THE ORDER OF THE LEARNED CIT(A). THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE BILLS AND VOUCHERS WERE GENERATED BY THE ASSESSEE SOLELY TO INFLATE THE EXPENDITURE AN D ALSO TO AVOID PAYMENT OF TAXES. CONSEQUENTLY, THE DISALLOWANCE TO THE EXTEN T OF 15% OF THE AGGREGATE PURCHASES WAS MADE BY THE ASSESSING OFFICER. THE FACT REMAIN S THAT THE BOOKS OF ACCOUNTS ARE AUDITED, THE ASSESSEE IS REGULARLY ASSESS ED TO TAX AND THE WORKS WERE EXECUTED AT VARIOUS SITES BY THE ASSESSE E. THERE IS A FINDING IN PARA 24 OF THE IMPUGNED ORDER THAT THE ASSESSMENT FOR AY 2006-07 WAS COMPLETED ON 28.11.2008, U/S 143(3) OF THE ACT IN WHICH NO DOU BTS WERE 6 ITA-5310/DEL/2011 EXPRESSED ABOUT THE CONSUMPTION OF MATERIAL. FOR ARGUMENTS SAKE, EV EN IF THE ASSESSEE DOES NOT MAINTAIN THE BOOKS OF ACCOUNT, NORMALLY THE NET PROFIT IS CALCULATED AT 8%. HOWEVER, IN THE PRESENT APPEAL, AN AD-H OC DISALLOWANCE OF 15% OF THE AGGREGATE PURCHASES WAS MADE. THE LEARNED CIT(A), K EEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE AND OTHER MATERIAL, RESTRICT ED THE DISALLOWANCE TO 3%. KEEPING IN VIEW THE TOTALITY OF FACTS AND CI RCUMSTANCES, ASSERTION MADE BY THE LEARNED RESPECTIVE COUNSELS AND THE MAT ERIAL AVAILABLE ON RECORD, THE WHOLE DISALLOWANCE IS BASED ON ESTIMATION. TO PUT AN END TO THE LITIGATION, THE DISALLOWANCE IS RESTRICTED TO 6% IN PLACE OF 3% MADE BY THE LEARNED CIT(A) AND 15% ADOPTED BY THE LEARNED ASSESSING OFFICER. WE ARE MAKING IT CLEAR AS EACH YEAR IS INDEPENDENT, THEREFORE, OUR V IEW IS BASED UPON THE PECULIAR FACTS OF THIS CASE ONLY, THEREFORE, THIS GROUND OF THE REVENUE IS ALLOWED IN PART. FINALLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 7 DECEMBER, 2012. SD/- SD/- (B.C.MEENA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 07.12.2012 VK. 7 ITA-5310/DEL/2011 COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-17(1), NEW DELHI. 2. RESPONDENT : M/S VRC CONSTRUCTION INDIA PVT.LTD., 2 SHIVA TOWER, 100/28, RAJAPUR, SECTOR-9, ROHINI, DELHI 110 085. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR