SHRI ANIL LAKHANLAL MALVIYA, Nagpur V. DY.CIT- 1, Nagpur

ITA 54/NAG/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7697 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Principle of natural justice
• Section: 234B; 133(6)

Judgement Text

1 ITA NO. 54/NAG/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 54/NAG/2015 ASSESSMENT YEAR : 2010 - 11. SHRI ANIL LAKHANLAL MALVIYA, DY. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CIRCLE - 1, NAGPUR. PAN ABWPM4662P. APPELLANT. RESPONDENT. APPELLAN T BY : SHRI KAPIL HIRANI. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 25 - 11 - 2016 DATE OF PRONOUNCEMENT : 9 TH JANUARY, 2017. O R D E R. PER SHAMIM YAHYA, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 22 - 12 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. THE GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A) GROSSLY ERRED IN SUSTAINING THE ADDITION OF R S.20,29,338/ - REPRESENTING JOB WORK CHARGES PAID DISREGARDING THE SUPPORTING MOUS AND OTHER DOCUMENTS ON RECORD AND THE FACT THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AND STATUTORY TDS HAVING BEEN DEDUCTED. THE ADDITION THUS SUSTAINED IS I LLEGAL, INVALID AND DESERVES TO BE DELETED ACCORDING TO LAW. 2. THE HONBLE CIT(A) GROSSLY ERRED IN HOLDING THAT THE APPELLANT HAS FAILED TO DEMONSTRATE THE NATURE OF JOB WORK UNDERTAKEN FOR WHICH PAYMENT HAS BEEN MADE IGNORING THE MOU WHICH ELABORATELY EXPL AINED THE NATURE AND SCOPE OF WORK MAKING THE ADDITION BAD IN LAW AND LIABLE TO BE DELETED. 2 ITA NO. 54/NAG/2015. 3. THE HONBLE CIT(A) FURTHER ERRED IN SUSTAINING THE ADDITION ON ACCOUNT OF JOB WORK CHARGES RELYING ON THE FACT THAT THE NAME OF ONE OF THE ENTITY TO WHOM JOB WORK C HARGES HAVE BEEN PAID WAS APPEARING IN THE LIST OF SUSPICIOUS DEALERS PUBLISHED BY THE SALES TAX DEPARTMENT WITHOUT APPRECIATING THE FACT THAT THE SO CALLED LIST WAS FOR DEALERS ENGAGED IN PURCHASE AND SALE OF GOODS AND NOT JOB WORK AND AS SUCH IS NOT RE LEVANT TO THE FACTS OF THE CASE. UNDER ANY CASE THE LIST MERELY STATES A SUSPICION AND DOES NOT IN ANY WAY CONCLUDE THE PARTIES MENTIONED THEREIN AS BOGUS. THE ADDITION THUS SUSTAINED PLACING RELIANCE ON THE SAID L IST IS ILLEGAL AND LIABLE TO BE DELETD I N THE INTEREST OF NATURAL JUSTICE. 4. THE JOB WORK CHARGES PAID BEING WHOLLY AND EXCLUSIVELY FOR HE BUSINESS OF THE APPELLANT DESERVED TO BE ALLOWED AS PER LAW. UNDER ANY CASE THE ADDITION SUSTAINED IS HIGHLY EXCESSIVE AND DESERVES TO BE CONSIDERABLY REDUCED IN THE INTEREST OF NATURAL JUSTICE. 5. THE HONBLE CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.2,24,398/ - REPRESENTING 10% OF THE ADMINISTRATIVE EXPENSES IGNORING THE FACT THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE DULY AUDITED AND THE ENTIRE EXPENSE HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE APPELLANT. THE ADDITION MADE BY THE AO AND SUSTAINED BY THE HONBLE CIT(A) BEING BASED ON MERE ASSUMPTION AND PRESUMPTION DESERVE TO BE DELETED IN THE INTEREST OF NATURAL JUSTICE. 6. UNDER AN Y CASE, THE ADDITION OF RS.2,24,398/ - OUT OF ADMINISTRATIVE EXPENSES BEING HIGHLY EXCESSIVE DESERVE TO BE CONSIDERABLY REDUCED ON THE INTEREST OF NATURAL JUSTICE. 7. THE APPELLANT DENIES LIABILITY TO BE ASSESSED TO INTEREST U/S 234B AND 234C OF THE INCOME TAX ACT, 1961. WITHOUT PREJUDICE THE LEVY OF INTEREST IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 2. FIRST ISSUE OF DISALLOWANCE OF RS.20,29,338/ - - JOB WORK CHARGES PAID. BRIEF FACTS OF THE CASE ARE AS UNDER : THE APPELLANT IS AN INDIVIDUAL, ENGAGED IN T HE BUSINESS OF MARKETING AND SERVICING OF INDUSTRIAL PRODUCTS UNDER THE NAME AND STYLE OF M/S S.R.S. ENGINEERS. THE APPELLANT DURING THE YEAR HAS CLAIMED THE JOB WORK CHARGES OF RS.29.14 LAKHS OUT OF WHICH THE JOB WORK CHARGES TO THE TUNE OF RS.20,29,338/ - ARE CLAIMED TO HAVE BEEN PAID TO FOUR ENTITIES AS UNDER : 3 ITA NO. 54/NAG/2015. (I) M/S R J METAL INDUSTRIES RS. 4,85,859/ - (II) M/S RELIABLE METAL WORKS RS. 5,46,788/ - (III) M/S RAJLAKSHMI CORPORATION RS. 4,97,701/ - (IV) M/S RESHAM STEEL ALLOYS RS. 4,98,990/ - RS.20,29,338/ - FROM THE ABOVE THE AO OBSERVED THAT THE ASSESSEE IN AGGREGATE HAS CLAIMED TO HAVE PAID JOB - WORK CHARGES OF RS. 20,29,338/ - TO ALL THE FOUR MUMBAI BASED PARTIES. ON VERIFICATION OF THE TDS CERTIFICATES, THE AO FOUND THAT THE ASSESSEE HAS PAID THE JOB - WORK CHARGES TO THE ABOVE FOUR MUMBAI BASED PARTIES. THE AO FURTHER OBSERVED THAT THE PAN OF ALL THE PARTIES IS COMMON I.E. AJH PD1658D WH ICH BELONG TO ONE SHRI ASHWIN KUMAR DIKOLE. THE ADDRESSEES OF ALL THE THREE ENTITIES IS ALSO THE SAME I.E. 108, RAVINDRA VILLA, ADESHWAR, DADI STREET, GIRGAUM, MUMBAI WHEREAS THE ADDRESS GIVEN IN RESPECT OF RESHAM STEEL ALLOYS IS WORLI, MUMBAI. THE AO HAS ISSUED NOTICES U/S 133(6) TO ALL THE FOUR CONCERNS AND THE SAME RETURNED BACK UNDELIVERED WITH THE POSTAL AUTHORITIES REMA R KS AS NOT CLAIMED RETURNED TO SENDER. THE AO IN PARA 4 OF HIS ORDER HAS RECORDED A FINDING THAT THE SALES TAX DEPARTMENT OF GOVT. OF MAHARASHTRA HAD PUBLISHED A LIST OF SUSPICIOUS DEALERS WHO HAVE ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS. IT IS SEEN FROM THE LI ST THAT THE NAME OF M/S R.J. METAL INDUSTRIES HAVING TIN NO. 27890544744V APPEARED AT SL. NO. 253. THE AO CONFRONTED THIS FACT TO THE AR OF THE APPELLANT ASKING WHETHER M/S R J METAL INDUSTRIES IS THE SAME PERSON TO WHOM COMMISSION HAS BEEN PAID BY THE AS SESSEE AND CALLED FOR THE BILLS RAISED BY THE SAID PARTY ON THE ASSESSEE INCLUDING THE DETAILED NOTE ON SERVICES RENDERED BY THE PARTY TO THE ASSESSEE. THE AO IN PARA 6 OF THE ASSESSMENT ORDER HAS RECORDED A FINDING THAT THE ASSESSEE NEITHER PRODUCED ANY B ILLS NOR ANY CONFIRMATION FROM THE SAID PARTY, M/S R J METALS. THE ASSESSEE, HOWEVER, SUBMITTED A COPY OF BANK CERTIFICATE GIVING DETAILS OF PAYMENTS MADE TO THE SAID FOUR CONCERNS ALONG WITH THE MOU SIGNED WITH SHRI ASHWIN KUMAR DIKOLE, 108, ADESHWAR DADI STREET, GIRGAUM, MUMBAI. THE MOU IS REGARDING PROVIDING TRAINED MAN - POWER ALONG WITH 4 ITA NO. 54/NAG/2015. QUALIFIED ENGINEERS FOR TECHNICAL SUPPORT FOR POWER STATIONS IN CHATTISGARH, WEST BENGAL, ORISSA, SARNI & BIRSINGHPUR. THE AO, THUS, NOTICED THAT NO OTHER EVIDENCE O R COR RESPONDENCE REGARDING THE WORK DONE OR TECHNICAL SUPPORT PROVIDED BY SHRI ASHWIN KUMAR DIKOLE WAS FILED. THUS, ACCORDING TO THE AO, NO DETAILS OR EVIDENCES AS REGARDS THE SERVICES CLAIMED TO HAVE BEEN RENDERED BY THE SAID FOUR CONCERNS TO THE ASSESSEE HAVE BEEN PROVIDED. 4. THE AO PROCEEDED TO DISALLOW THE ENTIRE EXPENDITURE CLAIMED. 5 . AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(APPEALS. THE LEARNED CIT(APPEALS) CONFIRMED THE AOS ACTION CONCLUDING AS UNDER : THE AO CONTENDS THAT AN MOU WAS FILED BEFORE THE AO WHICH SPELL OUT THE SCOPE OF WORK. IT, HOWEVER, IS SEEN FROM RECORDS THAT NO MOU HAS BEEN FILED EXCEPT A LETTER DATED 11 TH APRIL, 2009. THE CONTENTS OF THE LETTER AS REGARDS TO THE SCOPE OF WORK AND THE TERMS OF PAYMENT ARE QUITE VAGUE. FURTHER THAT THE APPELLANT COULD NOT DEMONSTRATE THAT THE WORK ASSIGNED BY HIM TO THE CONTRACTOR ON THE LINES OF TERMS OF THE CONTRACT (LETTER) AS MENTIONED IN THE REFERRED LETTER DATED 11 TH APRIL, 2009 WAS EVEN EXECUTED BY THE SAID CONTRACTO R. IT IS AN UNDISPUTED FACT THAT THE POWER STATIONS WERE NOT AWARE OF THE EXISTENCE OF INDEPENDENT CONTRACTORS. THE AO HAS GIVEN A CLEAR FINDING THAT NO EVIDENCE AS REGARDS TO THE WORK ASSIGNED BY THE APPELLANT, WHICH IS CLAIMED TO HAVE BEEN CARRIED OUT B Y THE SAID CONTRACTOR, SHRI DIKOLE, IN LIEU OF WHICH THE JOB WORK CHARGES HAVE BEEN PAID IS FILED BY THE ASSESSEE. THEREFORE, UNDER THESE FACTS AND CIRCUMSTANCES, I DECLINE TO INTERFERE WITH THE ORDER OF THE AO. SINCE THE APPELLANT COULD NOT EXPLAIN THE GE NUINENESS OF THE JOB WORK CHARGES PAID, THE ADDITION MADE BY THE AO OF RS.20,29,388 / - IS UPHELD. THIS GROUND IS DISMISSED. 6 . AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 7 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ADVERSE INFERENCE IN THIS CASE HAS BEEN DRAWN BY THE AUTHORITIES BELOW ON THE GROUND THAT LETTERS ISSUED U/S 133(6) TO THE CONCERNED PARTIES HAVE RETURNED UNSERVED. THAT S A ME PERSON WAS CARRYING ON THE WORK IN THE NAME OF FOUR DIFFERENT FIRMS. ONE FI RM AND THE PROPITIATOR WERE APPEARING IN THE LIST OF 5 ITA NO. 54/NAG/2015. SUSPICIOUS DEALERS OF THE SALES TAX DEPARTMENT. THE EVIDENCE SUBMITTED REGARDING THE WORK DONE HAS BEEN REJECTED BY THE AO HOLDING THAT THE SAME WAS A SIMPLE LETTER AND ALSO THAT THE ASSESSEE FAILED TO PRESENT SHRI ASHWIN KUMAR DIKOLE OR SUBMIT HIS CONFIRMATION OR BILLS RAISED BY HIM. 8 . UPON CAREFUL CONSIDERATION WE FIND THAT IT IS NOT IN DISPUTE THAT BILLS FROM RESPECTIVE FIRMS WHO HAVE DONE THE WORK ARE AVAILABLE ON RECORD. THE PAYMENTS HAVE BEEN MAD E TO THEM AND TDS DEDUCTED. THERE IS NO LAW THAT A PERSON CANNOT DO BUSINESS IN FOUR DIFFERENT BUSINESS CONCERNS. REGARDING THE SCOPE OF W ORK , ADVERSE INFERENCE CANNOT BE DRAWN THAT THE SAME IS NOT REGISTERED. THERE IS NO LAW WHICH REQUIRES THAT UNLESS THE RE IS A REGISTERED SCOPE OF WORK, THE PAYMENT MADE THERE - UNDER WILL NOT BE ALLOWED. ANOTHER ADVERSE INFERENCE HAS BEEN DRAWN ON THE GROUND THAT THE PROPRIETOR AND ONE OF HIS CONCERN WERE IN THE LIST OF SUSPICIOUS DE ALERS. THIS AGAIN CANNOT BE A REASON TO D ISALLOW EXPENDITURE INCURRED UNLESS A FINDING HAS BEEN GIVEN THAT THE BILLS SUBMITTED IN THE PRESENT CASE ARE SUSPICIOUS. AGAIN ADVERSE INFERENCE HAS BEEN DRAWN THAT NOTICES U/S 133(6) HAVE RETURNED UNSERVED. THIS AGAIN CANNOT BE A REASON TO REJECT THE AS SESSEES CLAIM WITHOUT FURTHER VERIFICATION . THIS IS SUPPORTED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. ORISSA CORPORATION P. LTD. 159 ITR 78. NO CASE HAS BEEN MADE OUT THAT SIMILAR WORK WAS DONE FOR THE FI R ST TIME OR THAT THE RECEIPT S AGAINST THE WORK DONE HAVE BEEN FOUND TO BE BOGUS. IN SUCH CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE INFERENCE DRAWN BY THE AO AND THE LEARNED CIT(APPEALS) IS MERELY BASED UPON SUSPICION AND SURMISES. IT IS SETTLED LAW THAT ANY ADDITION BASED ON SUS PICION AND SURMISES IS NOT SUSTAINABLE. EVEN THE AO IN HIS CONCLUDING REMARK HAS HELD THAT THE JOB WORK CHARGES DOES NOT APPEAR TO BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HENCE THE ADDITION IS FULLY BASED UPON SURMISES AND CONJECTURE. HENCE WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION. 6 ITA NO. 54/NAG/2015. 9 . ADDITION OF RS.2,24,398/ - BEING 10% OF ADMINISTRATIVE EXPENSES: ON THIS ISSUE THE AO MADE THE ADDITION BY OBSERVING THAT DURING THE YEAR THE ASSESSEE HAS CLAIMED ADMINISTRATIVE EXPENSES OF RS.22,43,983/ - FOR THE THREE OFFICES LOCATED AT BHOPAL, JABALPUR & KORBA . IT IS SEEN THAT MAJORITY OF THESE EXPENSES ARE IN CASH AND THE ASSESSEE COULD ONLY PRODUCE SELF MADE VOUCHERS. LOOKING INTO FACTS AND CIRCUMSTANCES OF THE CASE, 10% OF T HE ABOVE EXPENSES ARE DISALLOWED WHICH COMES TO RS.2,24,398/ - AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961 INITIATE SEPARATELY. 10 . UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) AFFIRMED THE AO S ACTION. 11 . AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 1 2 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THIS ADDITION HAS BEEN MADE SOLELY ON THE GROUND THAT THE EXPENSES ARE PAID IN CASH AND SELF MADE VOUCHERS WERE PRODUCED. NO SPECIFIC DETAILS OF THE EXPENDITURE WHICH WERE TO BE DISALLOWED ON ACCOUNT OF THESE FACTS HAV E B E EN BROUGHT ON RECORD. WHILE THE AO HAS MENTIONED T HAT THE EXPENDITURE W E RE SUPPORTED BY SELF MADE VOUCHERS, LEARNED CIT(APPEALS) OBSERVED THAT EVE N THE SAME WERE NOT MAINTA INED. WE FIND THAT THIS ACTION OF A DISALLOWANCE IS BASED ON SURMISES AND CONJECTURE WITHOUT BRINGING ON RECORD COGENT REASONS FOR DISALLOWANCE . HENCE WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION. 1 3 . IN TH E RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF JANUARY, 2017. SD/ - SD/ - (RAM LAL NEGI) ( SHAMIM YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 9/1/2017. 7 ITA NO. 54/NAG/2015. COPY FORWARDED TO : 1. SHRI ANIL LAKHANLAL MALVIYA, PROP. M/S SRS ENGINEERS, G - 14, GANESH APARTMENTS, NORTH AMBAZARI ROAD, NAGPUR - 440 010. 2. D .C.I.T., CIRCLE - 1 , NAGPUR. 3. C.I.T. - I , NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.