M/S PRANAY INFRABUILD PVT. LTD., JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-3, JAIPUR

ITA 568/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7193 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 22-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Keywords: Bogus
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 568/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2015-16 M/S PRANAY INFRABUILD PVT. LTD., A-134, NH-12, BUNDI ROAD, RIDHI-SIDHI NAGAR, KUNHA, KOTA-324008. CUKE VS. THE DCIT, CENTRAL CIRCLE, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ L-@ PAN/GIR NO.: AAECP 7628 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/10/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 18/10/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-2, UDAIPUR DATED 11.01.2019 FOR THE ASSESSME NT YEAR 2015-16 WHEREIN THE LIMITED ISSUE RELATES TO SUSTENANCE OF DISALLOWANCE OF RS. 8,00,000/- OUT OF VARIOUS EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ITA NO. 568/JP/2019 M/S PRANAY INFRABUILD PVT. LTD. VS. DCIT 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,82,22,960 /- WHICH WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT AT THE ASSESSED INCOME OF RS. 2,90,22,960/-. THE ASSESSING OFFICER MADE A LUMP SUM ADDITION OF RS. 8 LAC TO THE RETURNED INCOME OF THE ASSESSEE. AS PER THE ASSESSING OFFICE R, THE ASSESSEE COMPANY HAS CLAIMED VARIOUS EXPENSES UNDER THE HEAD OTHER EXPENSES AMOUNTING TO RS. 47,62,367/- SOME OF THEM ARE NOT FOUND VERIFIABLE AND SALARY AND WAGES EXPENSES OF RS. 58, 66,979/-. THESE EXPENSES ARE NOT SATISFACTORY EXPLAINED AND THE ASS ESSEE FAILED TO SUBMIT SUPPORTING DOCUMENTS LIKE BILL VOUCHERS TO S UBSTANTIATE ITS CLAIM. EMPLOYEE REGISTER AND WAGES REGISTER ARE NOT PRODUC ED FOR EXAMINATION. CORRECTNESS AND COMPLETENESS OF THE BO OKS OF ACCOUNTS CANNOT BE ACCEPTED IN ABSENCE OF PROPER DOCUMENTATI ON. FURTHER, THE PROBABILITY OF INVOLVEMENT OF PERSONS EXPENSES CANN OT BE RULE OUT IN PERSONAL NATURE EXPENSES. HENCE, THESE EXPENSES CLA IMED BY THE ASSESSEE ARE NOT OPEN FOR VERIFICATION AND ACCORDIN GLY THE ASSESSING OFFICER MADE A LUMP SUM ADDITION OF RS. 8 LAC TO TH E TOTAL INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE SAID ADDITIONS AND HIS FINDINGS ARE REPRODUCED AS UNDER:- 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESS EE AND THE RELEVANT FINDINGS OF THE A.O AS GIVEN IN TH E ORDER UNDER APPEAL. AS REGARDS EXPENSES UNDER THE HEAD OTHER EXPENSES, THE A.O HAS GIVEN NO REASON FO R DISALLOWANCE, BUT AS REGARDS CLAIM OF SALARY AND ITA NO. 568/JP/2019 M/S PRANAY INFRABUILD PVT. LTD. VS. DCIT 3 WAGES, THE A.O HAS SPECIFICALLY NOTED THAT EMPLOYEE REGISTER AND WAGE REGISTER WERE NOT PRODUCED FOR EXAMINATION. THEREFORE A REASONABLE DISALLOWANCE OU T OF SALARIES AND WAGES IS FOUND JUSTIFIED. HOWEVER THE FOLLOWING COMPARATIVE POSITION OF EXPENSE ON ACCOUN T OF SALARIES AND WAGES AS A PERCENTAGE OF REVENUE FR OM OPERATIONS IS SEEN S.NO. Y.E. 31.03.2013 Y.E. 31.03.2014 Y.E. 31.03.2015 1. REVENUE FROM OPERATIONS 11,55,29,280/ - 28, 78,79,915/ - 14,53,29315/ - 2. EXPENSES ON ACCOUNT OF SALARIES AND WAGES 33,43,786/ - 60,70,789/ - 58,66,979/ - 3. SALARIES AND WAGES AS A PERCENTAGE OF REVENUE FROM OPERATIONS. 2.89% 2.11% 4.03% IT IS ALSO A FACT THAT THE ASSESSMENT FOR A.Y 2013- 14 WAS COMPLETED U/S 143(3) AND NO ADVERSE VIEW WAS TAKEN OF THE CLAIM OF SALARIES AND WAGES, WHICH WAS 2.89% OF THE REVENUE FROM OPERATIONS. THEREFORE, SO FAR AS ASSES SMENT YEAR 2014-15, IS CONCERNED, THE CLAIM OF SALARIES A ND WAGES, AT 2.11% OF THE REVENUE FROM OPERATIONS, IS FOUND REASONABLE AND THE DISALLOWANCE OF RS. 8,00,0000/- IS HEREBY DELETED. HOWEVER, IN A.Y 2014-15, THE CLAIM OF SALARIES AND WAGES, AT 4.03% OF THE REVENUE FROM OPERATIONS IS NOT ONLY UNSUPPORTED BY DOCUMENTARY EVIDENCE BUT ALSO EXCESSIVE CONSIDERING THE ASSESSE E'S OWN HISTORY. THE DISALLOWANCE OF RS. 8,00,000/- MAD E BY THE A.O WOULD RESULT IN ALLOWANCE OF SALARIES AND W AGES OF RS.50,66,979/-, (AS AGAINST RS.58,66,979/-CLAIMED B Y THE ITA NO. 568/JP/2019 M/S PRANAY INFRABUILD PVT. LTD. VS. DCIT 4 ASSESSEE), WHICH IS STILL 3.49% OF REVENUE FROM OPE RATIONS. THEREFORE, IN A.Y 2015-16, THE DISALLOWANCE OF RS. 8,00,000/-, MADE BY THE A.O IS FOUND TO BE REASONAB LE AND IS ACCORDINGLY UPHELD. AGAINST THE SAID FINDING, THE ASSESSEE IS NOW IN AP PEAL BEFORE US. 4. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS SU BMITTED THAT BEING A PRIVATE LIMITED COMPANY SUCH DISALLOWANCE FOR THE PERSONAL USE OR FOR NON-BUSINESS PURPOSES CANNOT BE MADE. FURTHER, DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, BOOKS OF ACCOUNTS WERE PROD UCED AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC INSTANCE OF PERSONAL USE OF ANY EXPENSES WHICH WAS INCURRED FOR NON-BUSI NESS PURPOSES AND BY MAKING GENERAL OBSERVATIONS MADE THE DISALLOWANC E OUT OF EXPENSES. IT WAS SUBMITTED THAT THE EXPENDITURE WER E INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IT WA S FURTHER SUBMITTED THAT THE ASSESSEE FOLLOWS THE PERCENTAGE COMPLETIO N METHOD FOR RECOGNIZING REVENUE FROM CONSTRUCTION ACTIVITIES. I N THIS METHOD, THE REVENUE IS RECOGNIZED ON THE BASIS OF PERCENTAGE OF COMPLETED CONSTRUCTION APPLIED TO THE MATRIX OF UNITS ACTUALL Y BOOKED ALONG WITH THE PERCENTAGE OF BOOKING AMOUNT RECEIVED WHEREAS E XPENSES ARE DEBITED ON THE BASIS OF ACTUAL AMOUNT SPENT DURING THE YEAR, OUT OF WHICH THE RESPECTIVE PORTION OF UNSOLD/UN-BOOKED UN ITS FORM PART OF EITHER WIP OR STOCK IN TRADE. IT WAS SUBMITTED THAT VALUE OF WIP HAD INCREASED SUBSTANTIALLY FROM RS. 1,57,45,460/- TO R S. 6,13,67,380/- IN THE YEAR UNDER APPEAL A FACT WHICH HAS BEEN IGNORED BY THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT THE COMPARISON OF PER CENTAGE OF PAST YEARS EXPENDITURE STANDING TO THE DEBIT OF PROFIT A ND LOSS ACCOUNT TO ITA NO. 568/JP/2019 M/S PRANAY INFRABUILD PVT. LTD. VS. DCIT 5 REVENUE BOOKED IN THE EARLIER YEARS CANNOT BE A BAS IS FOR INCOME DETERMINATION FOR THE YEAR UNDER APPEAL, THEREFORE, THE OBSERVATION OF THE LD. CIT(A) FOR UPHOLDING THE ADHOC DISALLOWANCE IS UNJUSTIFIED AND DESERVES TO BE IGNORED. IT WAS ACCORDINGLY SUBMITTE D THAT THE EXPENSES ARE INCURRED PURELY FOR BUSINESS PURPOSES, WHICH HA S NOT BEEN PROVED OTHERWISE BY THE AO AND FURTHER THE SAME BEING QUIT E REASONABLE, THE ENTIRE EXPENSES DESERVE TO BE ALLOWED. 5. THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A CLEAR CAS E OF ADHOC DISALLOWANCE OF EXPENSES. NO SPECIFIC FINDING HAS BEEN RECORDED BY THE ASSESSING OFFICER IN TERMS OF ANY BOGUS EXPENDITURE OR THE EX PENDITURE NOT BEING INCURRED FOR THE PURPOSES OF BUSINESS. IN THE RESU LT, THE ADHOC DISALLOWANCE IS HEREBY DIRECTED TO BE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/10/2019. * SANTOSH ITA NO. 568/JP/2019 M/S PRANAY INFRABUILD PVT. LTD. VS. DCIT 6 VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S PRANAY INFRABUILD PVT. LTD., KOT A. 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE, KOTA. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. XKMZ QKBZY@ GUARD FILE { ITA NO. 568/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR