Assistant Commissioner of Income-Tax -2(1), RAIPUR V. M/s. Mangilal Pagaria, RAIPUR

ITA 54/BIL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85367 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: G S AGRAWAL
• Keywords: Competent authority

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,BENCH -RAIPUR . .. . . .. . , ,, , ! ! ! !, ,, , . .. . . .. . BEFORE S/SH.H.L.KARWA,PRESIDENT AN D RAJENDRA,ACCOUNTANT MEMBER ./ ITA NO.54/BLPR/2011- # # # # / // / ASSESSMENT YEAR -2007-08 ASSTT. COMMISSIONER OF INCOME TAX, 2(1), RAIPUR PAN:AAJFM 2786 N V/S. M/S. MANGILAL PAGARIA SHOP NO. A-1, PANDRI, RAIPUR. ( ) / // / APPELLANT ) ( *+) / RESPONDENT ) REVENUE BY : SH.D.K. JAIN, SR. DR ASSESSEE BY : SH. G.S. AGRAWAL, C.A. - /DATE OF HEARING : 16-12-2014 - /DATE OF PRONOUNCEMENT : 16-12-2014 # # # # , 1961 1961 1961 1961- - - - 254 254254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM < << < = = = =, ,, , ! ! ! ! : CHALLENGING THE ORDER DT. 22.11.2010 OF THE CIT(APP EALS), RAIPUR, THE ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.5,00,000/- MADE BY THE AO OUT OF MATERIAL EXPENSES CLAIMED BY THE ASSESSEE. 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.10,00,000/- MADE BY THE AO OUT OF LABOUR & CONTINGENCY EXPENSES CLAIMED BY THE ASSESSEE. ASSESSEE-FIRM IS A CIVIL CONTRACTOR AND BUILDERS. I T FILED ITS RETURN OF INCOME ON 29.10.2007 DECLARING TOTAL INCOME OF RS.32,34,121/-. THE AO CO MPLETED THE ASSESSMENT ON 29.05.2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS.49,61, 402/-. 2. FIRST GROUND IS ABOUT DELETING DISALLOWANCE OF RS.5 ,00,000/- MADE BY AO OUT OF MATERIAL EXPENSES CLAIMED BY THE ASSESSEE.DURING THE ASSESSM ENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD SHOWN CONTRACT EXPENSES OF RS.10.36 CR ORES. HE FOUND THAT THE ASSESSEE WAS MAINTAINING SITE-WISE LEDGER ACCOUNT.ON VERIFICATIO N OF THE SAME HE OBSERVED THAT IT HAD MAINTAINED ONLY SINGLE ACCOUNTS FOR ALL THE EXPENSE S OF THE SITES CONCERNED, THAT THE EXPENSES WERE IN RESPECT OF PURCHASE OF BUILDING MATERIAL,ELECTRI CAL ITEMS, OTHER MISCELLANEOUS ITEMS, TRANSPORTA - TION, LABOUR EXPENSES AND FOR THE MATERIAL SUPPLIED BY THE CONTRACTEES. HE DIRECTED THE ASSESSEE TO GIVE BIFURCATION OF THE TOTAL EXPENSES.AFTER VERIFY ING THE SAME, HE HELD THAT THE EXPENSES ON ACCOUNT OF STEEL,CEMENT, GLASS, ALUMINUM ETC. WERE SUPPORTED BY THE PURCHASE BILLS, THAT THE EXPENSES CLAIMED IN RESPECT OF BRICKS, SAND, EARTH ETC. WERE NOT FULLY SUPPORTED BY PROPER BILLS, THAT MANY OF THE EXPENSES REGARDING THOSE ITEMS WER E CLAIMED ON THE BASIS OF SELF MADE CASH VOUCHERS AND WERE NOT SUPPORTED BY PUCCA BILLS OF P URCHASE, THAT SAME WERE NOT FULLY VERIFIABLE. IT WAS CLAIMED BEFORE HIM THAT QUANTITY OF MATERIAL US ED AND LABOUR CHARGES INCURRED WERE CERTIFIED FROM TIME TO TIME FROM THE COMPETENT AUTHORITY OF T HE CONTRACTEE COMPANY. THE AO HELD THAT THE EXPENSES WERE NOT FULLY SUPPORTED BY THE PROPER BIL LS. FINALLY, AN AMOUNT OF RS.5,00,000/- WAS DISALLOWED OUT OF THOSE EXPENSES FOR WANT OF COMPLE TE VERIFICATION. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).IT WAS ARGUED BEFORE HIM THAT ALL T HE EXPENSES WERE FULLY VERIFIABLE, THAT DETAILS WERE PRODUCED BEFORE THE AO,THAT HE HAS NOT DETECTE D ANY PARTICULAR DEFECT IN ANY OF THE RECORDS 2 ITA NO. 54/BLPR/2011 M/S. MANGILAL PAGARIA MAINTAINED BY THE ASSESSEE,THAT ADHOC DISALLOWANCE OF RS.5,00,000/- WAS NOT JUSTIFIABLE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE AO HAD NOT BROUGHT ANY MATERIAL ON RECORD BEFORE MAKIN G THE DISALLOWANCE,THAT IDEAL WAY TO MAKE DISALLOWANCE WAS TO DO SO AFTER GIVING OPPORTUNITY TO THE ASSESSEE ON A PARTICULAR ISSUE, THAT WITHOUT GIVING ANY REASON THE AO HAD MADE A LUMP SU M DISALLOWANCE OF RS.5,00,000/- ON JUST ESTIMATE BASIS,THAT THE ACT DID NOT CONFER SUCH POW ERS TO THE AO TO MAKE ANY DISALLOWANCE WITHOUT ASSIGNING PROPER REASONS.THE FAA FURTHER FO UND THAT WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2000-01 ON 11.11.2005 (ITA 45/NAG/2 004-AY.2000-01),THE TRIBUNAL HAD DELETED SIMILAR TYPE OF DISALLOWANCE. FINALLY HE HELD THAT THERE WAS NO MATERIAL ON RECORD AND THE AO HAD NOT MADE ANY DISCUSSION BEFORE MAKING THE DISALLOWA NCE. AS A RESULT, HE DELETED THE DISALLOWANCE OF RS.5,00,000/-. 4. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) STA TED THAT THE ASSESSEE HAD NOT PRODUCED ALL THE BILLS.THE AUTHORISED REPRESENTATIVE (AR) OF THE ASS ESSEE SUPPORTED THE ORDER OF THE FAA AND STATED THAT ALL THE BILLS WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS, THAT THE AO HAD NOT INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT ,THAT THE BOOKS OF ACCOUNT WERE AUDITED, THAT THE AO HAD NOT GIVEN ANY BASIS FOR MAKING ADHOC DIS ALLOWANCE. HE RELIED UPON THE CASES OF ARORA ALLOYS LTD. (17 ITR-TRIB.-133 OF CHANDIGARH BENCH), TATA COFFEE LTD. (ITA NO. 1108-1113- BANGALORE BENCH) IN HIS SUPPORT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. IT IS FOUND THAT THE AO HAD CALLED FOR THE DETAILS OF VARIOUS EXPENSES INCU RRED BY THE ASSESSEE,THAT IT HAD FURNISHED ALL THE NECESSARY DETAILS DURING THE ASSESSMENT PROCEEDINGS ,THAT THE AO MADE A DISALLOWANCE OF RS.5,00,000/- ON ESTIMATE BASIS, THAT THE AUDITED A CCOUNTS OF THE ASSESSEE WERE AVAILABLE TO THE AO AND IN THE AUDIT REPORT THERE WAS NOTHING THAT COUL D LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD NOT INCURRED EXPENDITURE CLAIMED IN THE BOOKS OF AC COUNT, THAT SIMILAR KIND OF EXPENSES WERE DISALLOWED IN THE EARLIER YEARS BY THE AO WERE DELE TED BY THE TRIBUNAL. WE ARE OF THE OPINION THAT THE AO CANNOT MAKE ANY ADDITION/DISALLOWANCE WITHOU T GIVING PROPER REASONS. AS A REPRESENTATIVE OF THE STATE,HE IS DUTY BOUND TO PASS A REASONED OR DER.A REASONED ORDER NEEDS BASIC FACTS THEIR ANALYSIS AND CONCLUSION.IN THE CASE UNDER CONSIDERA TION, ESTIMATED DISALLOWANCE HAS BEEN MADE WITHOUT ASSIGNING PROPER REASONS.THE AO HAS NOT REJ ECTED THE BOOKS OF ACCOUNT AND HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS.IN THESE CIRCU MSTANCES, IN OUR OPINION, HE WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE.THEREFORE, CONFIRMING THE O RDER OF THE FAA, WE DECIDE THE FIRST GROUND OF APPEAL AGAINST THE AO. 6. THE NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF RS.10 LACS OUT OF LABOUR AND CONTINGENCY EXPENSES OF RS.4.31 CORES.DURING THE ASSESSMENT PRO CEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD CLAIMED LABOUR AND CONTINGENCY EXPENSES OF RS.4,31, 82,632/-, THAT IT HAD FURTHER CLAIMED PAYMENTS TO SUB-CONTRACTORS OF RS.11,16,54,605/-. A FTER VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE AND THE RECORD MAINTAINED BY IT FOR LABOUR EXPENSES, THE AO FOUND THAT IT HAD MAINTAINED MUSTER ROLLS FOR PART OF LABOUR CHARGES AND ALSO MA INTAINED WAGES SHEETS FOR OTHER LABOURERS CONTAINING ATTENDANCE OF LABOUR, AMOUNT, OF LABOUR CHARGES AND PAYMENT THEREOF. HE ALSO FOUND THAT IN MOST OF THE EXPENSES, SIGNATURES/THUMB IMPR ESSIONS OF THE LABOURERS WERE OBTAINED, THAT IN OTHER CASE ATTENDANCE WAS MARKED BY THE EMPLOYEES O F THE ASSESSEE, THAT PAYMENTS WERE MADE TO THE SINGLE PERSON FOR THE ENTIRE GROUP OF LABOURERS . CONSIDERING THESE FACTS, THE AO HELD THAT THE CLAIM OF THE ASSESSEE REGARDING LABOUR AND CONTINGE NCY EXPENSES WAS NOT FULLY AND COMPLETELY VERIFIABLE,THAT IT HAD NOT SATISFACTORILY EXPLAINED THE DIFFERENT SYSTEM OF PAYMENT OF LABOUR. FINALLY, THE AO DISALLOWED RS.10,00,000/- OUT OF TH E LABOUR AND CONTINGENCY EXPENSES, AS STATED EARLIER. 7. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE ARGU ED THAT IT HAD MAINTAINED MUSTER ROLLS AND WAGES SHEETS,THAT THESE DOCUMENTS CONTAINED ATTENDA NCE OF LABOURERS AND SIGNATURES/THUMB IMPRESSIONS IN RESPECT OF PAYMENTS,THAT THESE BOOKS WERE PRODUCED BEFORE THE AO FOR VERIFICATION, 3 ITA NO. 54/BLPR/2011 M/S. MANGILAL PAGARIA THAT HE HAD NOT POINTED OUT ANY SPECIFIC REASON TO DISALLOW THE LABOUR EXPENSES.AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASS ESSEE,THE FAA HELD THAT THE ASSESSEE WAS RUNNING REGULAR BOOKS OF ACCOUNT AND SAME WERE DULY AUDITED, THAT THE AO HAS NOT FOUND ANY DEFECT IN THE ACCOUNTS OR METHOD OF ACCOUNTS FOLLOW ED BY IT, THAT HE HAD NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, THAT NO ADDITION COULD BE MADE ON THE BASIS OF ESTIMATION. RELYING UPON THE ORDER OF THE NAGPUR BENCH OF TRIBUNAL PRONOUNCED IN THE CASE OF ANANT RICE INDUSTRIES (ITA NO. 280/NAG/ 2008 DATED 26.08.2008), HE HELD THAT LUMP SUM DISALLOWANCE COULD NOT BE MADE WITHOUT COLLECTI NG SOME EVIDENCES. 8. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO. THE AR OF THE ASSESSEE STATED THAT THE BUSINESS OF THE ASSESSEE WAS WIDELY SPREAD,THAT IT HAD INCUR RED IMPUGNED EXPENDITURE FOR ABSOLUTE BUSINESS INTEREST, THAT WITHOUT FINDING ANY DEFECT IN THE BO OKS OF ACCOUNT, NO DISALLOWANCE COULD BE MADE ON ESTIMATE BASIS, THAT THE ASSESSEE HAD FURNISHED BOOKS OF ACCOUNT AS DIRECTED BY THE AO. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE-FIRM HAD FURNISHED BOOKS OF ACCOUNT AND AU DITED STATEMENT OF ACCOUNTS AND THE AO WAS NOT ABLE TO PIN-POINT THE DEFECTS IN SUCH DOCUMENTS , THAT THE QUANTITY OF MATERIAL USED IN LABOUR CHARGES INCURRED WERE CERTIFIED FROM TIME TO TIME B Y THE COMPETENT AUTHORITIES AND THE AO WAS NOT ABLE TO NEGATE THE CLAIM MADE BY THE ASSESSEE. IT IS ALSO FOUND THAT THE AO HAD NOT DISPUTED ABOUT THE LABOUR AND CONTINGENCY PAYMENT THOUGH HE HAD MADE AN ADHOC DISALLOWANCE. WE ARE OF THE OPINION THAT THE TAX LIABILITY CANNOT BE FASTEN ED TO THE ASSESSEE BY THE AO WITHOUT BRINGING SOME POSITIVE EVIDENCE AGAINST THE ASSESSEE ON RECO RD,THAT THE DISALLOWANCE OR ADDITION HAS TO BE BACKED BY SOME DOCUMENTARY/ORAL EVIDENCE WHICH COUL D PROVE THAT THE CLAIM MADE BY IT OF AN EXPENDITURE WAS NOT GENUINE.IN THE CASE UNDER CONSI DERATION,THE AO HAS MADE A LUMP SUM DISALLOWANCE,BUT SAME IS NOT BACKED BY ANY EVIDENCE .CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, WE A RE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY .THEREFORE,CONFIRMING HIS ORDER,WE DECIDE GROUND NO. 2 AGAINST THE AO. AS A RESULT, THE APPEAL FILED BY THE AO STANDS DI SMISSED. #@ A B - - . ORDER PRONOUNCED IN THE OPE N COURT ON 16 TH DECEMBER,2014. - F 16 G ,2014 - . SD/- SD/- (H.L.KARWA/ . .. . . .. . ) ( ! ! ! ! / RAJENDRA) PRESIDENT/ = = = = /ACCOUNTANT MEMBER /RAIPUR. G DATE:16.12.2014 - -- - *#HI *#HI *#HI *#HI JI JI JI JI / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / ) 2. RESPONDENT / *+) 3. THE CONCERNED CIT(A)/ K L , 4. THE CONCERNED CIT / K L 5. DR ITAT,RAIPUR BENCH/ I *## , . . . , 6. GUARD FILE/ . +I *# //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, RAIPUR.