M/s. P.P. Gogad, Nashik V. Assistant Commissioner of Income-tax,

ITA 535/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9301 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANARJI
• Section: 133(6); 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 535/PUN/2015 / ASSESSMENT YEAR : 2010-11 M/S. P.P. GOGAD, SANCHETI APARTMENTS, RACHANA HIGH SCHOOL ROAD, SHARANPUR ROAD, NASHIK 422 002 PAN : AACFP9784C . / APPELLANT V/S ACIT, CIRCL E - 2, NASHIK . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SMT. SUMITRA BANARJI / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-2, NASHIK DATED 03-02-2015 FOR THE ASSESSMENT YEAR 20 10-11. 2. ORIGINALLY, ASSESSEE RAISED 7 GROUNDS AND THE SA ME ARE SUBSEQUENTLY CONCISED TO 1 GROUND AND THE SAID CONCISED GROUND R EADS AS UNDER : ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE B Y THE A.O. OF RS.1,50,57,130/- BEING SUB-CONTRACT EXPENSES PAID TO MR. D.P. BHANSALI, MR. SHRINIWAS MUTHE, MR. PIYUSH GOGAD & MR. R.C. GOGAD BY DISREGARDING APPELLANTS SUBMISSION, STATEMENTS RECORDED ON OATH AND ALSO THE CONFIRMATIONS FILED. THE ACTION OF DISALLOWANCE OF SUB-CONTRACT EXPENSES WITHOUT BRINGING ON RECORD ANY COGENT MATERIAL BY T HE LOWER AUTHORITIES IS / DATE OF HEARING :08.06.2017 / DATE OF PRONOUNCEMENT: 14.06.2017 2 ITA NO.535/PUN/2015 BAD IN LAW AND SAME DESERVES TO BE STRUCK DOWN AND ADDITION MADE TO TOTAL INCOME MAY BE CANCELLED. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSES SEE FIRM NAMED M/S. P.P. GOGAD IS CARRYING OUT THE BUSINESS OF CIVIL CO NTRACTOR. DURING THE YEAR, THE ASSESSEE UNDERTOOK VARIOUS CONTRACT WORKS FOR N ASHIK MUNICIPAL CORPORATION AND TIRUVANANTHAPURAM MUNICIPAL CORPORA TION. GROSS RECEIPTS OF THE ASSESSEE DURING THE YEAR IS RS.20.78 CORES (ROU NDED OFF). GROSS PROFIT WORKS OUT TO RS.2.42 CRORES, I.E. EQUIVALENT OF 11. 66%. SIMILARLY, THE NET PROFIT OF RS.79,12,672/- WORKS OUT TO 3.8% OF THE C ONTRACT RECEIPTS. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.79,23,710/-. IN THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE PAYMENT OF SUB-CONTRACT EXPENSES AMOUNTING TO RS.4,17,19,272/- TO VARIOUS P ARTIES. OUT OF THEM, THE PAYMENTS MADE TO SHRI SRINIWAS MUTHE (RS.38,65,840/ -), D.P. BHANSALI (RS.37,84,430/-), M/S. PUSHKAR BUILDCON (RS.35,16,6 80/-) AND M/S. R.C. ENTERPRISES (RS.38,90,180/-) TOTALING TO RS.1,50,57 ,130/- WAS THE SUBJECT MATTER OF DEEP SCRUTINY BY THE AO. AO INVOKED THE PROVISIONS OF SECTION 133(6) AND 131 OF THE ACT AND ALSO GIVEN CROSS EXAM INATION OF THE PARTIES BEFORE PROCEEDING TO MAKE ADDITION OF THE SAID AMOU NT OF RS.1,50,57,130/- IN THE ASSESSMENT. EVENTUALLY, THE ASSESSEES INCO ME WAS DETERMINED AT RS.2,29,81,053/-. IN THE ASSESSMENT, IT IS THE FIN DING OF THE AO THAT THE ABOVE SAID 4 PARTIES HAVE NOT CARRIED OUT ANY ACTUA L SUB-CONTRACT WORK FOR THE ASSESSEE. THEY MERELY ACCEPTED THAT THEY HAVE CARRIED THE WORK. RELEVANT LINES FROM PARA NO.9 AS HIGHLIGHTED BY THE AO ARE EXTRACTED AS UNDER : THE ISSUE IS NOT THAT THE SUB-CONTRACT WORK SHOWN TO BE ALLOTTED TO THESE PERSONS IS NOT COMPLETED. THE MAIN ISSUE IS WHETHE R THE SUB CONTRACT WORK SHOWN BY THE ASSESSEE HAS ACTUALLY BEEN CARRIED OUT BY THESE SUB CONTRACTORS. IT SEEMS THAT THE ASSESSEE HAS ACTUAL LY CARRIED OUT THE SUB CONTRACT WORK SHOWN TO HAVE ALLOTTED TO THESE PERSO NS. HOWEVER, EXPENDITURE HAS BEEN BOOKED IN THE NAME OF THESE SU B CONTRACTORS. THE CHEQUES WERE ISSUED TO THEM AND SUBSEQUENTLY CASH H AS BEEN WITHDRAWN. THE ASSESSEE HAS THUS, INFLATED ITS EXPENDITURE BY CLAIMING EXPENDITURE IN 3 ITA NO.535/PUN/2015 THE NAME OF SUB CONTRACTORS. THUS, THE SUB CONTRAC T WORK SHOWN IN THE NAME OF ABOVE PERSONS IS BOGUS AND NOT GENUINE. 4. THUS, THE AO CAME TO THE CONCLUSION THAT THE ABO VE SUB-CONTRACT EXPENSES ARE BOGUS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE 5. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE COULD NOT IMPROVE THE CASE AS HELD IN PARA 9 OF THE CIT(A). THE ADDI TIONS MADE BY THE AO ARE EVENTUALLY CONFIRMED. IN EFFECT THE CIT(A) IS OF T HE VIEW THAT ALL THE 4 PERSONS HAVE FAILED TO PRODUCE THE EVIDENCE DEMANDE D BY THE AO. THEREFORE, THE CIT(A) AFFIRMED THE FINDING OF THE A O. RELEVANT OPERATIVE LINES ARE EXTRACTED AS UNDER : 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ALL THE FOUR PERSONS HAVE FAILED TO PRODUCE THE EVIDENCES DEMANDED BY THE AO. THEREFOR E, THE A.O. IS JUSTIFIED TO CONCLUDE THAT THE APPELLANTS CLAIM OF SUB-CONTRACT EXPENSES OF RS.1,50,57,130/- ARE UNSUBSTANTIATED. ACCORDINGLY, THE ADDITION OF RS.1,50,57,130/- IS CONFIRMED. 6. AGGRIEVED WITH THE SAME THE ASSESSEE IS IN APPEA L BEFORE US WITH THE CONCISED GROUND REFERRED ABOVE. 7. LD. COUNSEL FOR THE ASSESSEE EXPLAINED THE ABOVE FACTS OF THE CASE AS WELL AS THE ISSUE LEADING TO THE ADDITION OF RS.1,5 0,57,130/-. FURTHER, HE BROUGHT OUR ATTENTION TO VARIOUS DEVELOPMENTS DURIN G THE ASSESSMENT AND MENTIONED THE FACTS THAT THE SUB-CONTRACTORS HAVE D ULY CONFIRMED THE RECEIPT OF THE PAYMENTS. HE ALSO MENTIONED THAT THE PAYMEN TS ARE MADE THROUGH BANKING CHANNELS WHICH IS UNDISPUTED. THE FACT REL ATING TO FILING OF TAX RETURNS OF THE 4 SUB-CONTRACTORS WERE ALSO DEMONSTR ATED. THE FACT OF MAKING TDS AND THE PAYMENTS MADE BY THE ASSESSEE TO THE SU B-CONTRACTORS IS ALSO UNDISPUTED. BRINGING OUR ATTENTION TO THE CONTENTS OF PARA NO. 6.1.3 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO SUMM ED UP THE REASONS FOR 4 ITA NO.535/PUN/2015 HIS CONCLUSIONS AGAINST THE ASSESSEE IN CASE OF SUB -CONTRACTOR NAMED SHRI SHRINIWAS MUTHE. HE READ OUT THE REASONS GIVEN FRO M SL.NO. 1 TO 11 OF PARA 6.1.3. FOR THE SAKE OF COMPLETENESS THE SAME ARE E XTRACTED AS UNDER : 1. SHRI SHRINIWAS MUTHE WAS EMPLOYED AS TECHNICAL ASSISTANT AT MAHARASHTRA JEEVAN PRADHIKARAN AND NOW HE IS RETIRE D FROM THE SERVICE. 2. HE IS 66 YEARS OLD AND STAYING AT PLOT NO.14, PR ABHAT NAGAR, MHASRUL, NASHIK. 3. HE IS EDUCATED UPTO 10 TH STANDARD ONLY AND KNOWS AND UNDERSTANDS ONLY MARATHI LANGUAGE. 4. HE HAS VISITED TRIVENDRUM ONLY ONCE IN THE YEAR 2009 BEFORE THE START OF ALLEGED WORK DONE BY HIM. IT IS HIS STATEMENT O NLY AND THIS FACT IS NOT VERIFIABLE WHETHER HE HAS ACTUALLY VISITED TRIVENDR UM OR NOT. THERE IS NO EVIDENCE PRODUCED BY HIM TO PROVE THAT HE HAS ACTUA LLY VISITED TRIVENDRUM AT WORK PLACE. 5. HE HAS NOT CARRIED OUT ANY WORK PERSONALLY. AS PER HIS STATEMENT, HE HAS ASSIGNED HIS WORK TO HIS FRIEND SHRI MANGESH RA UT. 6. HE IS NOT HAVING ANY DOCUMENTARY EVIDENCE TO PRO VE THAT HE HAS ACTUALLY CARRIED OUT THE WORK AT TRIVENDRUM THROUGH MANGESH RAUT. 7. HE IS NOT HAVING ANY EVIDENCE TO SHOW THAT HE HA S ACTUALLY ENGAGED LABOURS FOR THE ALLEGED WORK. 8. HE IS NOT HAVING ANY EVIDENCE OF ANY PAYMENT MAD E TO EITHER TO SHRI MANGESH RAUT OR TO THE LABOURS. 9. HE HAS NOT GIVEN ANY DETAILS OF SHRI MANGESH RAU T. HE WAS NOT HAVING ANY MOBILE NO. OR AN CONTACT NUMBER OF SHRI MANGESH RAUT. HE HAS STATED INCOMPLETE ADDRESS OF MANGESH RAUT. 10. IN THE CURRENT ASSESSMENT YEAR UNDER CONSIDERAT ION HE HAS NOT CARRIED OUT ANY OTHER LABOUR WORK. 11. ON VERIFICATION OF INCOME TAX RETURN FILED FOR A.Y. 2010-11 IT IS FOUND THAT, INCOME OF RS.3,09,560/- IS SHOWN AND REFUND O F RS.22,570/- IS CLAIMED ON ACCOUNT OF DEDUCTION OF TDS. THIS FACT SHOWS TH AT, THE RETURN FILED BY HIM ONLY TO CLAIM REFUND OF TDS. 8. BASING ON THE ABOVE, THE AO CAME TO THE CONCLUSI ON THAT THE SUB- CONTRACTOR FAILED TO PRODUCE ANY EVIDENCE OR TO PRO VE THE EXECUTION OF THE WORK DONE BY THE SUB-CONTRACTOR FOR THE ASSESSEE. SIMILAR IS THE PATTERN FOR THE REST OF THE SUB-CONTRACTORS ALSO. EVENTUALLY, IT IS THE ARGUMENT OF THE LD. 5 ITA NO.535/PUN/2015 COUNSEL FOR THE ASSESSEE THAT THE AO IS DRIVEN BY T HE SUSPICION AND DOUBT IN MAKING SUCH ADDITION OF RS. 1,50,57,130/-. 9. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT( A). 10. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AND THE PAPER BOOK FILED BEFORE US. AO MADE THE ABOVE ADDITION IN THE ASSESSMENT FOR WANT OF EVIDENCES IN SUPPORT OF THE EXECUTION OF THE SUB- CONTRACT WORKS BY THE 4 SUB-CONTRACTORS FOR THE ASS ESSEE. OTHERWISE, THERE IS NO DISPUTE ON THE FACT THAT THE PAYMENTS ARE MADE B Y THE ASSESSEE TO THE SUB-CONTRACTORS AFTER MAKING TDS AS PER THE PROVISI ONS OF SECTION 194C OF THE ACT. THERE IS NO EVIDENCE TO DEMONSTRATE THAT THE PAYMENTS MADE TO THE SUB-CONTRACTORS ARE RETURNED TO THE ASSESSEE IN ANY FORM. IN THIS REGARD, NO INCRIMINATING MATERIAL IS BROUGHT TO THE RECORDS ON THIS BY THE AO. ALL THE 4 SUB-CONTRACTORS ARE ASSESSED TO TAX AND FILED THE RETURNS OF INCOME IN ACCORDANCE WITH LAW. NOTHING IS BROUGHT ON RECORDS TO SUGGEST THAT ANY DISALLOWANCE IS MADE IN THE HANDS OF THE SUB-CONTRA CTORS AND THE ASSESSMENTS ARE COMPLETE WHEREIN ALL SUB-CONTRACTS ARE DONE AS PER THE SAID CONTRACT AGREEMENTS. IT IS UNDISPUTED FACT THAT TH E WORK CONTRACTS GIVEN TO SUB-CONTRACTORS ARE COMPLETE IN ALL RESPECTS AND TH ERE IS NO COMPLIANT OF ANY KIND FROM THE MUNICIPAL CORPORATIONS OF NASHIK AND TIRUVANANTHAOPURAM. THERE IS RECORDING OF STATEMENTS U/S.131 OF THE ACT BY THE AO AND PROVIDING OF CROSS EXAMINATION OF THE PARTIES INVOLVED. IN A LL THESE PROCEEDINGS, ALL THE 4 SUB-CONTRACTORS CONFIRMED RENDERING OF SERVICES/E XECUTION OF WORK CONTRACTS TO THE ASSESSEE AND THE SAME GOES IN FAOV UR OF THE ASSESSEES CLAIM. CONSIDERING THE ABOVE FACTUAL MATRIX OF THE CASE, WE ARE OF THE VIEW THAT DENIAL OF DEDUCTION OF RS.1,50,57,130/- IS NOT SUSTAINABLE IN LAW. THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS ALL OWED. 6 ITA NO.535/PUN/2015 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JUNE, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 14 TH JUNE, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE //TRUE COPY// /ASSISTANT REGISTRAR , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - 2, NASHIK 4. CIT - 2, NASHIK 5. DR, ITAT, B BENCH PUNE; 6. / GUARD FILE.