The DCITPanchmahal Circle, Godhra V. R.K. Construction Co., Godhra

ITA 557/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60557 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: S N SOPARKAR
• Section: 44AD; 143(3); 131; 263

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , ! '#, $% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.557/AHD/2010 ( ! ) ! ) ! ) ! ) / / / / ASSESSMENT YEAR : 2006-07) DY.CIT PANCHMAHAL CIRCLE GODHRA ! ! ! ! / VS. M/S.R.K.CONSTRUCTION CO. MEZZANINE FLOOR, DOLLOAR AVENUE OPP.OCTROI NAKA PRABHA ROAD, GODHRA * $% ./+, ./ PAN/GIR NO. : AADRF 3583 J ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 $ / APPELLANT BY : SHRI B.L.YADAV, SR.D.R. ./*- 1 0 $ / RESPONDENT BY : SHRI S.N.SOPARKAR, SR.ADV. !2 1 % / / / / DATE OF HEARING : 19.6.2012 34) 1 % / DATE OF PRONOUNCEMENT : 25/06/2012 $5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FR OM THE ORDER OF LEARNED CIT(APPEALS)-VI, BARODA DATED 26.11.2009 A ND THE GROUNDS RAISED ARE REPRODUCED BELOW:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.1,8 0,35,977/- BEING SUB-CONTRACTOR PAYMENT FOUND TO BE NOT GENUIN E AND NOT LEGITIMATE FOR THE BUSINESS OF THE ASSESSEE. ITA NO.557/AHD/ 2010 DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ASST.YEAR 2006-07 - 2 - 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH E FACT THAT THE ASSESSEES CLAIM FOR PAYMENT MADE FOR WORK GIVEN ON SUB-CONTRACT BASIS WAS APPEARED AN UNREALISTIC AFFAIR BECAUSE TH E ASSESSEE ITSELF WAS A FULL FLEDGED CONTRACTOR. FURTHER, EARLIER IN THE CASE OF THE ASSESSEE, INQUIRIES WERE CARRIED OUT FOR PAYMENT IN RESPECT OF SUBLET WORKS AWARDED BY IT FOR A.Y. 200-02 AND 2003 -04 AND IT WAS FOUND THAT THE ASSESSEES CLAIM FOR SUBLET WORK/PAY MENT IN RESPECT OF 17 PERSONS WAS FOUND TO BE NOT GENUINE. DURING THE YEAR ALSO, IT WAS FOUND THAT 10 SUB-CONTRACTORS WERE THE SAME WHO WERE HELD TO BE NON-GENUINE IN A.Y. 2001-02 AND 2002-03 AND I N RESPONSE TO INFORMATION CALLED FOR U/S.133(6) DURING THE YEAR U NDER CONSIDERATION ALSO, IN RESPECT OF THE SAID 10 SUB-C ONTRACTORS, THE COMPLIANCE RECEIVED WAS INCOMPLETE AND ALSO ALL OF THEM HAVE FILED COMMON SUBMISSIONS. IN THE CIRCUMSTANCES, TH E ASSESSING OFFICER HAS RIGHTLY MADE THE DISALLOWANCE OF RS.1,8 0,977/- BEING SUB-CONTRACTOR PAYMENT MADE TO THE SAID 10 SUB-CONT RACTORS. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 31/1 2/2008WERE THAT THE ASSESSEE-FIRM IS STATED TO BE A GOVERNMENT CONTRACT OR ENGAGED IN THE CONSTRUCTION AND MAINTENANCE OF ROAD AS WELL AS OTH ER CIVIL WORKS. VIDE PARAGRAPH NO.4.1, IT WAS NOTED BY THE ASSESSIN G OFFICER THAT THE GENUINENESS OF 10 SUB-CONTRACTORS WAS DOUBTED IN AS SESSEES OWN CASE IN AYS 2001-02 & 2003-04. THE ASSESSING OFFICER HAS R EPRODUCED THE NAMES OF THOSE 10 SUB-CONTRACTORS. THE AMOUNT DISP UTED FOR THE YEAR UNDER CONSIDERATION IS RS.12,84,057/-. THEREAFTER, THE NOTICES U/S.133(6) WERE ISSUED TO VERIFY THE GENUINENESS OF THE CLAIM IN RESPECT OF THOSE 10 PERSONS. THE ASSESSING OFFICER HAS AGAIN REPEATED THAT IN AYS 2001-02 & 2003-04 THOSE CONTRACTORS WERE HELD NON-GENUINE, HENCE FOLLOWING THE SAME RECOURSE AFTER DISCUSSING PARTY-WISE FACTS, HE HAS CONCLUDED THAT FOR THE YEAR UNDER CONSIDERATION, THERE WAS NO MATERIAL CHANGE IN THE FACTS ITA NO.557/AHD/ 2010 DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ASST.YEAR 2006-07 - 3 - AND CIRCUMSTANCES WHICH WERE PREVALENT IN THE PAST YEARS, THEREFORE IN THE IDENTICAL MANNER, DISALLOWANCE WAS MADE. EVEN THEN THOSE FACTS WERE CONTESTED BEFORE THE LEARNED CIT(APPEALS), IT WAS NOTICED THAT THIS VERY ISSUE HAD ALREADY BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE TRIBUNAL AND THEREAFTER HELD AS UNDER:- 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD.A R AND FACTS OF THE CASE AND THE ORDER UNDER SECTION 263 PASSED BY THE CIT-III, BARODA FOR A.Y. 2001-02 AND THE DECISION OF ITAT, A HMEDABAD. FOR A.Y. 2001-02 HONBLE ITAT HAD CATEGORICALLY HEL D THAT ALL THE 17 SUBCONTRACTORS (INCLUDING PRESENT 13) ARE GENUIN E. AS THE FACTS OF PRESENT CASE ARE IDENTICAL TO THOSE BEFORE ITAT AND NOTING THAT THE ISSUES RAISED BY THE ASSESSING OFFICER HAVE BEE N DEALT WITH IN THE ORDER OF HON'BLE ITAT, THE DECISION OF HON'BLE ITAT FOR A.Y. 2001-02 IS RELIED UPON AND THE ADDITION OF RS.18,80 ,35,977/- IS DIRECTED TO BE DELETED. 3. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE HAVE FOUND THAT THIS VERY ISSUE NOW STOOD SETTLED NOT ONLY BY THE RESPECTED CO- ORDINATE BENCHES OF THE TRIBUNAL BUT ALSO BY THE HO N'BLE HIGH COURT AND FINALLY BY THE HON'BLE SUPREME COURT. REFERENCE OF THOSE PRECEDENTS ARE AS UNDER:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN/ITA NO(S). 1. R.K.CONSTRUCTION CO. VS. CIT ITA NO.1033/AHD/2006, A.Y. 2001-02 ITAT D BENCH AHMEDABAD ORDER DATED 17/11/2006 2. ACIT VS. M/S.R.K.CONSTRUCTION CO. ITA NOS.479 & 480/AHD/2008, A.YS. 2004-05 & 2005-06 ITAT D ITA NO.557/AHD/ 2010 DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ASST.YEAR 2006-07 - 4 - BENCH AHMEDABAD ORDER DATED 30/05/2008 3. DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ITA NO.1364/AHD/2007, A.Y. 2003-04 ITAT D BENCH AHMEDABAD ORDER DATED 11/03/2010 4. CIT VS. R.K.CONSTRUCTION CO. HIGH COURT OF GUJARAT TAX APPEAL NO.845 OF 2007 ORDER DATED 30/07/2008 5. ASST.CIT VS. R.K.CONSTRUCTION CO. HIGH COURT OF GUJARAT TAX APPEAL NOS.136 & 137 OF 2009 ORDER DATED 16/02/2010 6. CIT VS. R.K.CONSTRUCITONS SUPREME COURT OF INDIA PETITION FOR SPECIAL LEAVE TO APPEAL (CIVIL) CC 3886/2009 ORDER DATED 30/07/2008 IN TA NO.845/2007 OF GUJ.HC. 3.1. THE HON'BLE HIGH COURT IN TAX APPEAL NO.845 OF 2007 VIDE ORDER DATED 30/07/2008 IN THE APPEAL TITLED AS CIT VS. R. K.CONSTRUCTION CO. HAS VIDE PARAGRAPH NO.15 CONSIDERED THE MERITS AS WELL AS FACTUAL ASPECT OF THE ISSUE AS UNDER:- 15. WE HAVE HEARD LEARNED STANDING COUNSEL APPEARI NG FOR THE REVENUE AS WELL AS LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE. WE HAVE PERUSED THE ORDERS PASSED BY THE AO UNDER S. 143(3) OF THE ACT AND ALSO THE ORDER PASSED BY THE CIT UNDER S. ITA NO.557/AHD/ 2010 DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ASST.YEAR 2006-07 - 5 - 263 OF THE ACT. WE HAVE ALSO GONE THROUGH THE ORDER PASSED BY THE TRIBUNAL. WE HAVE ALSO PERUSED THE RECORDS PRODUCED BEFORE THE CIT AS WELL AS THE TRIBUNAL AND DETAILED CHART GIVI NG PARTICULARS OF SUB-CONTRACTORS EXAMINED BY THE AO AS PER THE DI RECTIONS OF CIT IN REVISION PROCEEDINGS AND ALSO SUMMARY OF DET AILS RELATING TO VARIOUS SUB-CONTRACTORS. THE DETAILS OF SUB-CONT RACTORS EXAMINED BY THE AO AS PER THE DIRECTIONS OF CIT IN REVISION PROCEEDINGS, INTER ALIA, INCLUDE THE NAMES OF THESE SUB- CONTRACTORS, THEIR PERMANENT ACCOUNT NUMBERS, THEIR PERMANENT ADDRESSES, AMOUNT GIVEN TO THEM, NAME OF WORK ENTRU STED TO THEM, NATURE OF SUCH WORK AND STATEMENTS RECORDED BY THE AO, ETC. THESE DETAILS REVEAL THAT DURING THE COURSE OF EXAMINATIO N UNDER S. 131, NO QUESTION WAS PUT TO MANY OF THESE SUB- CONTRACTO RS AS TO THE VARIATION IN THEIR SIGNATURES. SIMILARLY, NO QUESTI ON WAS PUT TO THEM FOR THE REASONS OF DISCOUNTING WITH THE SHROFF . IT IS THE STAND OF THE ASSESSEE RIGHT FROM THE BEGINNING THAT ALL T HESE SUB- CONTRACTORS WERE MAINLY WORKING FOR THE ASSESSEE AN D THEY DID NOT HAVE ANY OFFICE SET UP AND SINCE THEY WERE WORKING FOR THE ASSESSEE, THEY HAVE USED ASSESSEE S ADDRESS FOR C ORRESPONDENCE, ESPECIALLY WITH THE GOVERNMENT FOR TIMELY COMMUNICA TION. THESE PERSONS ARE ELIGIBLE UNDER S. 44AD TO FILE THEIR RE TURNS UNDER PRESUMPTIVE SCHEME OF TAXATION. ALL THESE PERSONS W ERE PRODUCED BEFORE THE AO IN REVISION PROCEEDINGS AND NO QUESTI ON WAS PUT TO THEM THOUGH THEIR STATEMENT ON OATH WAS RECORDED. A LL THESE PERSONS HAVE CONFIRMED IN REVISION PROCEEDINGS THAT THE MONEY WAS NOT RETURNED BY THEM TO ANY PERSON AND HAVE BEE N USED FOR THEIR PERSONAL BENEFIT. THE PAYMENTS WERE MADE TO T HESE PERSONS BY BANKING CHALLANS (CHANNELS) AND TAX WAS DEDUCTED AT SOURCE IN ACCORDANCE WITH LAW. THE ASSESSEE HAS ALSO GIVEN CO MPLETE DETAILS WITH RESPECT TO LABOUR EXPENSES CALLED FOR IN ASSES SMENT PROCEEDINGS. THESE DETAILS WERE DULY VERIFIED BY TH E AO WITH THE BOOKS AND RECORDS. NO ADVERSE OBSERVATION WAS MADE BY THE AO AND HENCE, NO ADDITION WAS MADE IN THE REGULAR ASSE SSMENT. THE AO HAS ALSO RANDOMLY SELECTED TWO LABOURERS AND EXA MINED THEM AND THEIR STATEMENTS WERE RECORDED UNDER S. 131 OF THE ACT. SINCE ALL NECESSARY DETAILS WERE FURNISHED BY THE AO (ASS ESSEE), THERE WAS NO REASON FOR THE CIT TO INVOKE THE REVISIONAL JURISDICTION UNDER S. 263 OF THE ACT. THE CIT HAS NOT STOPPED ME RELY BY ISSUANCE OF NOTICE UNDER S. 263. ONCE COMPLIANCE IS MADE, HE WENT ITA NO.557/AHD/ 2010 DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ASST.YEAR 2006-07 - 6 - ON ISSUING NOTICE AFTER NOTICE AND CERTAIN ADVERSE INFERENCES WERE DRAWN BY HIM FROM THE DETAILS COLLECTED BY HIM DURI NG THE REVISIONAL PROCEEDINGS. THOSE DETAILS WERE THOROUGH LY CHECKED AND EXAMINED BY THE TRIBUNAL AND ARRIVED AT A FACTU AL FINDING THAT THERE WAS NO ILLEGALITY COMMITTED BY THE ASSESSEE I N ENTRUSTING THE WORK TO SUB- CONTRACTORS NOR THERE WAS ANY ILLEGALI TY IN MAKING ALL DUE PAYMENTS TO THEM. THE TRIBUNAL HAS ALSO GIVEN S PECIFIC FINDING TO THE EFFECT THAT THERE WAS NO EVIDENCE ON RECORD THAT THESE CONTRACTORS WERE RELATED TO THE ASSESSEE OR WERE AS SOCIATES OR SISTER CONCERN OF THE ASSESSEE. THE TRIBUNAL HAS AL SO GIVEN FINDING THAT THE REVENUE HAS NOT DISCHARGED THE ONUS THAT T HE PAYMENT TO SUB- CONTRACTORS WERE NOT GENUINE. THUS THE TRIBUNA L HAS COME TO THE CONCLUSION THAT NO DISALLOWANCES CAN BE MADE ME RELY ON THE BASIS OF SUSPICION, HOWSOEVER STRONG MAY IT BE, AND THE SUSPICION CANNOT TAKE THE PLACE OF ACTUALITY. 4. IN THE LIGHT OF THE ABOVE DISCUSSION, WE HEREBY FOLLOW THE VIEW EXPRESSED BY THE HON'BLE COURTS IN THE ABOVE REFERR ED PRECEDENTS AND CONFIRMED THE VIEW EXPRESSED BY LD.CIT(A). REVENUE S GROUNDS ARE DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- ( ! '# ) ( ) $% ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 25/06/2012 6..!, .!../ T.C. NAIR, SR. PS ITA NO.557/AHD/ 2010 DY.CIT VS. M/S.R.K.CONSTRUCTION CO. ASST.YEAR 2006-07 - 7 - $5 1 .7 8$7) $5 1 .7 8$7) $5 1 .7 8$7) $5 1 .7 8$7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-VI, BARODA 5. 7<= .! , , / DR, ITAT, AHMEDABAD 6. = >2 / GUARD FILE. $5! $5! $5! $5! / BY ORDER, /7 . //TRUE COPY// ? ?? ?/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATIONON 19.6.12 (DICTATION-PAD PAGES 4 ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.6.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S26.6.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.6.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER