M/s Nagesh Construction (P) Ltd., New Delhi V. ITO, New Delhi

ITA 5961/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4144 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: DHARMENDRA KUMAR
• Section: 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.5961/DEL/2010 ASSESSMENT YEAR : 2005-06 M/S NAGESH CONSTRUCTION (P) LTD., 329, 3 RD FLOOR, VARDHMAN GRAND PLAZA, SECTOR-3, ROHINI, NEW DELHI. PAN : AACCN 2757J VS. ITO, WARD 13 (1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DHARMENDRA KUMAR, CA REVENUE BY : SHRI A.K. MONGA, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 30 TH SEPTEMBER, 2010 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE ORDER OF THE LD. CIT (APPEALS) CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IS ARBITRARY, B IASED AND BAD BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT (APPEALS) HAS GROSSLY ERRED IN L AW AND FATS OF THE CASE IN HOLDING THAT THE ACTION OF THE ASSESSI NG OFFICER IN PASSING THE EX PARTE ASSESSMENT ORDER U/S 1 44 OF THE ACT WAS IN ORDER. 3. THAT THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AND FACTS OF THE CASE IN DISBELIEVING THE CONTENTION OF THE ASSESSEE THAT A SUM OF RS.38,12,587/- WAS THE AMOUNT OF EXPENDITURE INCURRED AT VARIOUS SITES FOR DAILY WAGES OF CASUAL W ORKERS, MATERIAL PURCHASE AND OTHER INCIDENTAL EXPENSES WHICH WAS NOT SUBJECT TO THE PROVISIONS OF SECTION 40A(IA) OF THE A CT, AND IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER O N THE ITA NO.5961/DEL/2010 2 AND IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER O N THE ISSUE. 4. THAT THE LD. CIT (A) HAS GROSSLY ERRED IN NOT APPR ECIATING THE SUBMISSION OF THE APPELLANT DATED 23.10.07 FILED BE FORE THE ASSESSING OFFICER WHEREIN, IT WAS CLARIFIED THAT THE NOMENCLATURE OUTSIDE JOB WORK CHARGES MENTIONED IN SCHEDULE 10 OF FINAL ACCOUNTS AMOUNTING TO RS.38,12,58 7/- WAS FOR EXPENDITURE INCURRED ON CASUAL DAILY WORKERS AND MATERIAL AT VARIOUS SITES AND IN CONFIRMING ACTION OF TH E ASSESSING OFFICER WITHOUT APPRECIATING THAT THE PROVISION S OF SECTION 40A (IA) WERE NOT APPLICABLE TO THE FACTS OF THE CASE. 5. THAT THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AND ON FATS OF THE CASE IN CONFIRMING THE ACTION OF THE ASSESSING O FFICER IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145 OF THE ACT ON THE CONTENTION THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS, BILLS, VOUCHERS DURING THE ASSESSMENT STAGE. 6. WITHOUT PREJUDICE TO THE FACT THAT ESTIMATION OF PROFIT @ 8% IS NOT IN ORDER, IN CASE THE SAME IS HELD TO BE PRO PER THEN NO SEPARATE ADDITION UNDER PROVISIONS OF SECTION 4 0A (IA) DESERVES TO BE UPHELD. 7. THAT THE LD. CIT (A) HAS GROSSLY ERRED IN CONFIRM ING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLA IM OF BROUGHT FORWARD LOSSES. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE IMPUGNED ASSESSMENT IS PASSED U/S 144 OF THE ACT AS T HE ASSESSEE DID NOT APPEAR IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER. FROM THE ACCOUNTS, THE ASSESSING OFFICER NOTED THAT AGAINST THE RECEIPTS OF ` 40,23,657/-, THE ASSESSEE HAD C LAIMED ADMINISTRATION EXPENSES OF ` 39,31,851/- AND THOSE ADMI NISTRATIVE EXPENSES INCLUDES OUTSIDE JOB WORK CHARGES OF ` 38,12, 587/-. ACCORDING TO THE ASSESSING OFFICER, THE AUDIT REPORT AT TACHED WITH THE RETURN OF INCOME SPECIFICALLY POINTED OUT THAT THESE EXPENSES ARE OUTSIDE JOB WORK CHARGES. THEREFORE, THE ASSESSING OFF ICER OBSERVED THAT THE PROVISIONS OF SECTION 40 (A) (IA) WILL BE AP PLICABLE AND AS THE TAX HAS NOT BEEN DEDUCTED THEREON THE SAID AMOUNT WAS LIABLE TO BE ITA NO.5961/DEL/2010 3 ADDED TO THE INCOME OF THE ASSESSEE. HE REJECTED THE B OOKS OF ACCOUNT AND TAKING ANALOGY FROM SECTION 44AD, HE ASSE SSED THE INCOME @ 8% OF 40.08 LAC. HE ALSO DISALLOWED A SUM OF ` 36,87,447/- ON ACCOUNT OF APPLICATION OF SECTION 40(A)(IA) BY R ESTRICTING THE GROSS CONTRACTUAL RECEIPT LESS PROFIT PRESUMED AND, IN THIS M ANNER, TAXABLE INCOME HAS BEEN COMPUTED AT ` 40,23,657/- WHICH INCL UDE INTEREST INCOME OF ` 15,570/-. IN THIS MANNER, THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT A SUM OF ` 40,23,657/- AGAINST RETURNED INCOME OF ` 29,425/-. THE ASSESSEE, APART FROM CONTESTING THE OTHER ADDITIONS ALSO CONTESTED THE ADDITION MADE ON ACCOUNT OF APPLICATIO N OF SECTION 40(A) (IA). BEFORE CIT (A), IT WAS THE CASE OF THE ASSESSEE TH AT THROUGH REGISTERED POST CERTAIN PART DETAILS WERE FILED ON THE LETTER HEAD OF V. RAWAL & CO., CAS AND THE COUNSEL OF THE ASSESSEE HAS ALSO FILED DETAILS WITH THE ASSESSING OFFICER ON VARIOUS DATES. THE NOTICES WERE NOT DULY SERVED ON THE ASSESSEE AND, IN THIS MANNER, IT WAS CONTEND ED THAT THE ASSESSMENT HAS BEEN FRAMED BY THE ASSESSING OFFICER U/S 144 W ITHOUT CONSIDERING THOSE EVIDENCES. LEARNED CIT (A) HAS CALLE D FOR A REMAND REPORT FROM THE ASSESSING OFFICER WHICH WAS SUBMITTED ON 15 TH MARCH, 2010. THE ASSESSING OFFICER ADMITTED IN THE REMAND REP ORT THAT CERTAIN REPLIES WERE GIVEN BY THE COUNSEL OF THE ASSESSEE , BUT THE ASSESSEE DID NOT FURNISH COMPLETE DETAILS. OBSERVING FROM THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER, LEARNED CIT ( A) HAS RETURNED A FINDING THAT THE ASSESSING OFFICER WAS JUSTIFIED IN FRA MING EX PARTE ASSESSMENT U/S 144. 3. ON MERITS OF THE ADDITION OF ` 36,87,447/- ON ACC OUNT OF APPLICATION OF SECTION 40(A)(IA), IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE DETAILED CONTRACTUAL RECEIPT OF THE ASSESSEE A RE ` 40,08,087/- FOR EARNING OF WHICH THE ASSESSEE HAD CLAIMED OUTSIDE J OB WORK OF ` 38,12,587/-. IT WAS SUBMITTED THAT OUTSIDE JOB WORK OF ` 38,12,587/- IS THE TOTAL OF ALL THE EXPENSES OF VARIOUS SITES FROM WHER E THE ASSESSEE ITA NO.5961/DEL/2010 4 COMPANY HAD EARNED THE CONTRACTUAL RECEIPT THE DETA ILS OF WHICH WERE BEING FURNISHED TO THE CIT (A) FOR HIS PERUSAL AND REC ORDS. IT WAS SUBMITTED THAT THE EXPENSES ARE IN THE NATURE OF CASUAL /DAILY WAGES AND ALSO DAILY EXPENSES WHICH ARE NOT COVERED U/S 192 O F THE ACT, THEREFORE, TDS WAS NOT DEDUCTIBLE. AGAINST THESE SUBMI SSIONS, LEARNED CIT (A) HAS RETURNED A FINDING THAT AS PER SCHEDULE 1 0 OF THE FINAL ACCOUNTS, ADMINISTRATIVE EXPENSES INCLUDE OUTSIDE JOB W ORK CHARGES FOR AN AMOUNT OF ` 38,12,587/- AND THE VERY NOMENCL ATURE OF THE SAID EXPENDITURE CONNOTES THAT JOB WORK WAS GOT DONE BY TH E ASSESSEE FROM OUTSIDE AND, THUS, THE ASSESSEE WAS REQUIRED TO DEDUCT TDS FROM THE SAID AMOUNT. HE REFERRED TO COLUMN 27 (A) OF THE TA X AUDIT REPORT AND OBSERVED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE. THE DETAILS REGARDING OUTSIDE JOB WORK WERE CALLED FOR BY THE ASSESSING OFFICER WHICH WERE NOT FURNISHED, HENCE, THE PROVISIONS OF SEC TION 40(A) (IA) WERE APPLICABLE. HE REPRODUCED THE SUBMISSIONS OF THE ASSESSING OFFICER MADE IN THE REMAND REPORT AND OBSERVED THAT THE CASE OF THE ASSESSEE THAT OUTSIDE JOB WORK WAS ACTUALLY THE WORK DO NE BY THE ASSESSEE ITSELF CANNOT BE ACCEPTED. THE ATTITUDE OF THE ASSESSEE HAS BEEN NON-COOPERATIVE. THE ASSESSEE DID NOT SUBMIT DETAI LS EITHER AT THE ASSESSMENT STAGE OR AT THE STAGE WHEN THE MATTER WAS R EMANDED BACK TO THE ASSESSING OFFICER AND, IN THIS MANNER, HE HA S REJECTED THE CLAIM OF THE ASSESSEE THAT THE ENTIRE PAYMENTS MADE BY T HE ASSESSEE WERE NOT LIABLE FOR DEDUCTION OF TAX. 4. AS IT CAN BE SEEN FROM THE AFOREMENTIONED GROUNDS O F APPEAL, IT IS THE CASE OF THE ASSESSEE THAT THE EXPENSES OF ` 38,12,58 7/- IS ON ACCOUNT OF EXPENDITURE INCURRED AT VARIOUS SITES FOR DAILY WAGES OF CASUAL WORKERS, MATERIAL PURCHASED AND OTHER INCIDENTA L EXPENSES WHICH ARE NOT SUBJECT TO THE PROVISIONS OF SECTION 40( A) (IA). THE BOOKS OF ACCOUNT HAVE WRONGLY BEEN REJECTED ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT, BILLS, VOUCHER S AT THE STAGE ITA NO.5961/DEL/2010 5 OF ASSESSMENT AND THE ASSESSEE IS ALSO CHALLENGING THE APPLIC ATION OF ESTIMATION OF RATE @ 8%. 5. THE PRESENT APPEAL WAS FIXED FOR HEARING ON 21 ST APRIL, 2011 AND IT WAS FELT NECESSARY THAT THE CONTENTS OF AUDIT REPORT , RELYING UPON WHICH IT HAS BEEN HELD THAT THE PAYMENTS MADE BY THE ASSESSEE WERE LIABLE FOR DEDUCTION OF TAX, WERE REQUIRED TO BE PL ACED ON FILE. THE MATTER WAS ADJOURNED TO 25 TH APRIL, 2011. LEARNED AR OF THE ASSESSEE HAS PRODUCED BEFORE US COMPLETE COPY OF AUDIT REPORT. HE DREW OUR ATTENTION TOWARDS COLUMN NO. 17 (F) IN FORM NO.3CD W HICH READ AS UNDER:- 17 (F) AMOUNTS INADMISSIBLE UNDER SECTION 40 (A) N IL 6. HE FURTHER INVITED OUR ATTENTION TOWARDS COLUMN 2 7 (A) AND (B) WHICH READ AS UNDER:- 27 (A) WHETHER THE ASSESSEE HAS DEDUCTED TAX AT SOURCE AND PAID THE AMOUNT TO THE CREDIT OF THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROVISION OF CHAPTER XVIIB : NIL (B) IF THE ANSWER TO (A) ABOVE IS IN NEGATIVE, THEN GIVE THE FOLLOWING DETAILS : N.A. 7. REFERRING TO ABOVE PARTS OF THE AUDIT REPORT, HE SUBMITTED THAT FROM THE AUDIT REPORT IT CANNOT BE SAID THAT THE ASSESSE E WAS IN ANY MANNER LIABLE FOR DEDUCTION OF TAX. HE SUBMITTED THA T THE DETAILS OF COMPLETE PROJECT-WISE EXPENSES WERE FURNISHED AS PER PAG ES 1 246 OF THE PAPER BOOK. SIMILARLY, HE PLEADED THAT DETAILS INVOICES RAISED BY THE ASSESSEE ALONG WITH PHOTO COPY OF BILLS AND AGREEMEN T/CONTRACT FILED BEFORE THE ASSESSING OFFICER DURING THE REMAND PR OCEEDINGS AND BEFORE THE CIT (A) ARE FURNISHED AT PAGE 247-343 OF THE PAPER BOOK. THUS, HE SUBMITTED THAT ALL THE DETAILS WERE FILED BEF ORE THE CIT (A) ITA NO.5961/DEL/2010 6 WHICH HAVE BEEN MADE SUBJECT TO REMAND REPORT BY THE ASSESSING OFFICER. HE SUBMITTED THAT IT HAS BEEN THE CASE OF TH E ASSESSEE THAT NONE OF THE PAYMENTS MADE BY IT ON ACCOUNT OF OUTSID E JOB WORK CHARGES RELATES TO PAYMENTS LIABLE FOR DEDUCTION OF T AX. HE SUBMITTED THAT THE NATURE OF THE CONTRACT OF THE ASSESSEE INVOLV ES LABOUR WORK WHICH HAS TO BE GOT DONE BY THE ASSESSEE ITSELF. HE SUBMI TTED THAT IN VIEW OF THE VARIOUS DETAILS FILED BY THE ASSESSEE, IT COU LD BE ASCERTAINED THAT NONE OF THE PAYMENTS MADE BY THE ASSE SSEE WAS LIABLE FOR DEDUCTION OF TAX. HE SUBMITTED THAT NEIT HER THE ASSESSING OFFICER NOR THE CIT (A) HAS PROPERLY APPRECIATED THE POSITION AND HAVE WRONGLY HELD THAT THE PAYMENTS MADE BY THE ASSESSEE ARE LIABLE FOR DEDUCTION OF TAX AND, IN THIS MANNER, HE CONTESTED TH E ACTION OF THE CIT (A) IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF APPLICATION OF SECTION 40(A)(IA) AS WELL AS THE EST IMATION MADE BY THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT . 8. ON THE OTHER HAND, RELYING UPON THE ORDER OF ASSESSI NG OFFICER AND CIT (A), IT WAS PLEADED BY LEARNED DR THAT THE A DDITIONS HAVE RIGHTLY BEEN UPHELD AND THE ORDER OF THE CIT (A) SHO ULD BE CONFIRMED. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. FROM THE AUDIT REPOR T, IT CANNOT BE CONCLUSIVELY SAID THAT THE EXPENSES SHOWN TO BE INCURRED IN RESPECT OF OUTSIDE JOB WORK CHARGES ACTUALLY RELATES TO THE WOR K GOT DONE BY THE ASSESSEE FROM OUTSIDE PARTIES. RATHER, THE DETAILS WOULD INDICATE THAT THE PAYMENTS MADE BY THE ASSESSEE IS ON ACCOUNT OF WAGES, SITE EXPENSES, ETC., WHICH CANNOT BE IN THE NATURE OF OUT SIDE JOB WORK GOT DONE BY THE ASSESSEE. HOWEVER, AS THE ASSESSEE WAS NOT PROPE RLY REPRESENTED BEFORE THE ASSESSING OFFICER DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AND DURING THE COURSE OF REMAND PR OCEEDINGS ALSO PROPER OPPORTUNITY IS NOT MADE AVAILABLE TO THE ASSESSEE, WE ARE ITA NO.5961/DEL/2010 7 OF THE OPINION THAT IT WOULD MEET THE INTEREST OF JU STICE IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO ASCERTA IN WHETHER OR NOT THE ASSESSEE IN ANY CASE WAS LIABLE FOR DEDUCTION OF TAX ON THOSE PAYMENTS. THEREFORE, WE SET ASIDE THE ORDER OF CIT (A ) AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FRAMIN G DENOVO ASSESSMENT AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNIT Y OF HEARING. AS WE ARE DIRECTING THE ASSESSING OFFICER TO F RAME DENOVO ASSESSMENT, WE DO NOT EXPRESS ANY OPINION ON MERITS. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 29.04.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES