M/s Ravi Kant Bansal, Gwalior V. J.C.I.T., Range-1, Gwalior

ITA 570/AGR/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0644 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 4 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-04-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Depreciation; Bonafide mistake; Set aside
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 570/AGRA/2012 ASSTT. YEAR : 2009-10 M/S. RAVI KANT BANSAL, VS. J.C.I.T., RANGE-1, MOHADJI PARK, GWALIOR. NEAR ACHLESHWAR TEMPLE, GWALIOR. (PAN : ADMPB 3060 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 03.04.2013 DATE OF PRONOUNCEMENT OF ORDER : 04.04.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A), GWALIOR DATED 02.11.2012 FOR THE ASSESSMENT YEAR 20 09-10. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. THE ASSESSEE FILED RETURN OF INCOME AT RS.39,85,400 /- FOR THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE IS DERIVING INCOME FROM CIVIL CONTRACT BUSINESS AS PROPRIETOR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS DECLARED GROSS RECEIPTS OF ITA NO. 570/AGRA/2012 2 RS.10,08,04,549/- YIELDING NET PROFIT OF 2.37%. THE AO AFTER SCRUTINY ASSESSMENT, MADE THREE ADDITIONS, WHICH WERE CHALLENGED BEFORE THE LD. CIT(A) AND APPEAL OF THE ASSESSEE HAS BEEN PARTLY ALLOWED. THE ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL IN THE PRESENT APPEAL AND WE DEAL WITH THE S AME AS UNDER : 3. ON GROUND NO. 1, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.1,00,000/- ON ACCOUNT OF MATERIAL AND LABOUR EXPENSES. THE AO ON VERIFICATION OF PROFIT AND LOSS ACCOUNT FOUND THAT THE ASSESSEE UNDER THE HEAD MAT ERIAL AND LABOUR EXPENSES INCURRED EXPENSES IN A SUM OF RS.6,86,66,825/- AND IT WAS FOUND THAT THE ASSESSEE HAS NOT MAINTAINED BILLS AND VOUCHERS PROPERLY. SOM E PAYMENTS ARE MADE IN CASH ALSO. THE AO ACCORDINGLY DISALLOWED RS.2,00,000/-. THE LD. CIT(A) ON COMPARISON OF THE EXPENSES FROM LAST YEAR FOUND THAT THE PERCE NTAGE OF THE MATERIAL AND LABOUR CHARGES ARE LESSER THAN THE PRECEDING ASSESSMENT YE AR. THEREFORE, THE ADDITION WAS REDUCED TO RS.1,00,000/- AND THIS GROUND WAS PARTLY ALLOWED. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS STILL ON EXCESSIVE SIDE. THE AO NOTED T HAT THE ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS FOR THE MATERIAL AND LAB OUR EXPENSES, BUT NO SPECIFIC DETAILS HAVE BEEN BROUGHT IN THE ASSESSMENT ORDER. IN THE ASSESSMENT YEAR UNDER APPEAL, PERCENTAGE OF THE EXPENSES COMES TO RS.68.1 1%, WHICH IS LESSER AS ITA NO. 570/AGRA/2012 3 COMPARED TO THE EARLIER ASSESSMENT YEAR 2008-09 IN WHICH PERCENTAGE OF THE EXPENSES INCURRED BY THE ASSESSEE TO THE EXTENT OF WORK DONE WAS 82.72%. CONSIDERING THE FACTS OF THE CASE AND IN THE LIGHT OF THE OBJECTIONS OF THE AO AND CONSIDERING THE VOLUME OF WORK COMPLETED BY THE ASS ESSEE, THE ADDITION IS STILL ON EXCESSIVE SIDE. THEREFORE, ADDITION OF RS.1,00,000/ - IS REDUCED TO RS.50,000/- ONLY FOR MEETING OUT THE OBJECTIONS OF THE AO. IN THE RE SULT, THE ASSESSEE WOULD GET RELIEF OF RS.50,000/-. GROUND NO. 1 OF THE APPEAL OF ASSES SEE IS PARTLY ALLOWED. 5. ON GROUND NO. 2, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.3,50,000/- ON ACCOUNT OF TIME EXTENSION CHARGES. THE ASSESSEE DEB ITED / INCURRED AMOUNT OF RS.20,65,785/- IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD TIME EXTENSION CHARGES. THE ASSESSEE STATED THAT DUE TO NON-AVAIL ABILITY OF TIMELY LABOUR / MATERIAL / FINANCE PROBLEMS, THE WORK WAS DELAYED A ND THE WORK COULD NOT BE DONE WITHIN THE STIPULATED TIME. FOR DELAY IN COMPLETION OF WORK, THE CONCERNED DEPARTMENT HAS CHARGED TIME EXTENSION CHARGES AND D EDUCTED THE SAME FROM THE BILLS WHILE MAKING PAYMENT TO THE ASSESSEE. THE AO CALLED FOR INFORMATION FROM THE CONCERNED DEPARTMENT AND IT WAS FOUND THAT RS.6 ,00,000/- WAS WITHHELD AS TIME EXTENSION CHARGES WHILE MAKING PAYMENT TO THE ASSES SEE. THE ASSESSEE HAS CLAIMED TIME EXTENSION CHARGES IN A SUM OF RS.3,50,000/- ON LY. THEREFORE, REPLY OF ASSESSEE WAS CALLED FOR AND THE ASSESSEE IN REPLY, SUBMITTED THAT THE CONCERNED DEPARTMENT ITA NO. 570/AGRA/2012 4 HAS GIVEN DETAILS OF DEDUCTION, BUT IT WAS A SCANTY INFORMATION IN FORM NO. 16A. THE ACCOUNTANT MISUNDERSTOOD THAT OUT OF THE AMOUNT OF RS.6,00,000/- DEDUCTED, AMOUNT OF RS.2,50,000/- WAS ON ACCOUNT OF SECURITY DEPOSIT WHICH IS REFUNDABLE. IT WAS SUBMITTED THAT IT WAS A BONAFIDE MISTAKE. THE A O DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BECAUSE THE STAND OF TH E ASSESSEE WAS NOT UNIFORM AND FURTHER, THE REPLY OF THE ASSESSEE WOULD NOT IMPLY THAT THE AMOUNTS WERE DEDUCTED AS LIQUIDITY DAMAGES BEING COMPENSATORY IN NATURE. THE AMOUNT WITHHELD CAN BE RELEASED LATER ON. THEREFORE, RS.3,50,000/- WAS DIS ALLOWED ON ACCOUNT OF TIME EXTENSION CHARGES. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEFORE THE LD. CIT(A) AND SUBMITTED THAT DUE TO DELAY OF THE WORK, TIME EXTENSION CHARGES WERE DEDUCTED, WHICH IS COMPENSATORY IN NATURE AND CONNE CTED WITH THE CIVIL CONSTRUCTION BUSINESS. THEREFORE, WHEN THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR CARRYING ON THE CIVIL CONSTRUCTION BUSINESS, THE SAME WAS ALLOWABLE AS DEDUCTION U/S. 37 OF THE IT ACT. THE ASSESSEE R ELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RELIABLE WATER SUPPLY SERVICE OF INDIA PVT. LTD., 124 ITR 199, IN WHICH I T WAS HELD THAT WHEN THE AMOUNT PAID TO THE GOVERNMENT AS PENALTY AND DAMAGES FOR D ELAY IN EXECUTION OF CONTRACT, THE DELAY WAS INHERENT IN NATURE OF BUSINESS, IS DE DUCTIBLE EXPENSE. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSES SEE AND NOTED THAT IT WAS ASSET IN NATURE BECAUSE THE AMOUNT HAS BEEN WITHHELD BY THE CONCERNED DEPARTMENT AND ITA NO. 570/AGRA/2012 5 ASSESSEE SHALL RECEIVE THE SAME IN FUTURE AS PER TE RMS AND CONDITIONS. THE ADDITION WAS ACCORDINGLY CONFIRMED. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS WHOLLY UNJUSTIFIED. THE ASSESSEE HAS CL AIMED DEDUCTION OF RS.20,65,785/- UNDER THE HEAD TIME EXTENSION CHARG ES. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, RIGHTLY CONTENDED THAT THE ADD ITION OF RS.3,50,000/- WAS MADE OUT OF THE SAME AMOUNT CLAIMED AS DEDUCTION. THE AS SESSEE IS A CIVIL CONTRACTOR AND TIME EXTENSION FOR COMPLETION AND EXECUTION OF WORK IS NORMAL AND INCIDENTAL TO THE NATURE OF BUSINESS OF ASSESSEE. THE DELAY IN EX ECUTING THE CONTRACTS IS IN THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE AND THE PAYMENTS MADE FOR DELAY ARE INCIDENTAL TO THE BUSINESS AS EXPLAINED IN THE CASE OF ASSESSEE. THEREFORE, THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF RELIABLE WATER SUPPLY SERVICE OF INDIA PVT. LTD. (SUPRA) SQUARELY APPLIES IN FAVOUR OF THE ASSESSEE AND THE ADDITION SHALL HAVE TO BE DELETED. THERE IS NO QUES TION OF TREATING THE SAME AMOUNT CLAIMED AS DEDUCTION, AS AN ASSET MERELY BECAUSE TH E AMOUNT WAS WITHHELD BY THE CONCERNED DEPARTMENT BECAUSE THE LD. COUNSEL FOR TH E ASSESSEE EXPLAINED THAT THE AMOUNT WAS WITHHELD BEING IT WAS DEDUCTED FROM THE PAYMENT MADE TO THE ASSESSEE. THEREFORE, IT WAS EXPENDITURE IN NATURE AND ASSESSEE MADE JUST CLAIM FOR DEDUCTION OF THE EXPENSES U/S. 37 OF THE IT ACT. WE , ACCORDINGLY, SET ASIDE THE ITA NO. 570/AGRA/2012 6 ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDI TION OF RS.3,50,000/-. GROUND NO. 2 OF APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLO WED. 7. ON GROUND NO. 3, THE ASSESSEE CHALLENGED THE ORD ER OF THE LD. CIT(A) IN NOT ALLOWING DEPRECIATION @ 30% ON DUMPERS, EXCAVATORS AND ROAD ROLLER MACHINES. THE ASSESSEE HAS DEBITED DEPRECIATION @ 30% ON DUMB ER, EXCAVATOR AND ROAD ROLLERS. THE AO FOUND THE CLAIM OF DEPRECIATION TO BE EXCESSIVE BECAUSE 15% IS ONLY ALLOWABLE AS DEPRECIATION. SINCE THESE ITEMS A RE USED IN THE BUSINESS OF THE ASSESSEE AS PLANT AND MACHINERY, THEREFORE, THE SAM E COULD NOT BE TREATED AS ROAD TRANSPORT VEHICLES. DEPRECIATION WAS, THEREFORE, AL LOWED @ 15% AND ADDITION WAS MADE IN A SUM OF RS.4,24,852/-. THE LD. CIT(A) ON T HE SAME REASONS CONFIRMED THE ADDITION HOLDING THAT THE ABOVE ITEMS ARE NOT ROAD TRANSPORT VEHICLES, THEREFORE, DEPRECIATION IS ALLOWABLE ONLY AT 15%. 8. THE LD. COUNSEL FOR THE ASSESSEE FILED APPENDIX- I OF INCOME-TAX RULES FOR CLAIMING DEPRECIATION AND REFERRED TO PART (3), I.E ., MACHINERY AND PLANT AND BY REFERRING TO ITEM NO. (III) SUBMITTED THAT SINCE TH ESE ITEMS ARE COMMERCIAL VEHICLES, THEREFORE, DEPRECIATION IS ALLOWABLE @ 40% BUT THE ASSESSEE CLAIMED DEPRECIATION ONLY AT THE RATE OF 30%. HOWEVER, GOING THROUGH THE NOTES TO APPENDIX-I, HE HAS REFERRED TO THE DEFINITION OF COMMERCIAL VEHICLES M EANS HEAVY GOODS VEHICLES, ITA NO. 570/AGRA/2012 7 HEAVY PASSENGER MOTOR VEHICLE, LIGHT MOTOR VEHICLE, MEDIUM GOODS VEHICLES, MEDIUM PASSENGER MOTOR VEHICLE, BUT IT WOULD NOT IN CLUDE MAXI-CAB, MOTOR CAB, TRACTOR AND ROAD ROLLERS. THE LD. COUNSEL FOR THE A SSESSEE, THEREFORE SUBMITTED THAT THE ROAD ROLLER AND EXCAVATOR, ON WHICH HIGHER DEPR ECIATION IS CLAIMED, THE ASSESSEE WOULD NOT BE ENTITLED FOR HIGHER DEPRECIATION, AS T HESE ARE NOT COMMERCIAL VEHICLES. IN VIEW OF THE STATEMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT ROAD ROLLERS AND JCB MACHINE ARE NOT COMMERCIAL VEHICLES AS PER THE IT ACT, THEREFORE, THE ORDERS OF THE AUTHORITIES BELOW ARE CONFIRMED TO THE EXTEN T THAT 15% DEPRECIATION IS CORRECTLY ALLOWED ON THESE ITEMS INSTEAD OF 30% CLA IMED BY THE ASSESSEE. PART OF THIS GROUND IS ACCORDINGLY DISMISSED. 8.1 AS REGARDS THE DUMPER, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE O F CIT VS. GUJRAT TUBE-WELL CO., 288 ITR 301, IN WHICH THE HONBLE HIGH COURT FOLLOW ING ITS EARLIER DECISION IN THE CASE OF SHIV CONSTRUCTION CO. VS. CIT, 165 ITR 160 HELD THAT DEPRECIATION ON DUMPER IS ALLOWABLE @ 30%. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT ON DUMPER, THE ASSESSEE IS ENTITLED FOR DEPREC IATION AT THE RATE OF 30%. THE LD. DR DID NOT DISPUTE THAT THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE. BY FOLLOWING THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CA SE OF GUJRAT TUBE-WELL CO. (SUPRA), WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO ALLOW ITA NO. 570/AGRA/2012 8 DEPRECIATION TO THE ASSESSEE ON DUMPERS @ 30%. PART OF THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. GROUND NO. 3 IS, THEREFORE , PARTLY ALLOWED. NO OTHER POINT IS ARGUED OR PRESSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY