M/s. Harmony Associates, Baroda V. The Dy.CIT.,Circle-2(1), Baroda

ITA 611/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9073 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RICHHA RASTOGI
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 611/AHD/2011 (ASSESSMENT YEAR: 2006-07) M/S. HARMONY ASSOCIATES 416/417, CENTRE POINT, R.C. DUTT ROAD, ALKAPURI, VADODARA V/S DCIT CIRCLE-2(1), BARODA (APPELLANT) (RESPONDENT) PAN: AADFH3680H APPELLANT BY : MS. URVASHI SHODHAN, AR RESPONDENT BY : MS. RICHHA RASTOGI, SR. D.R. ( )/ ORDER DATE OF HEARING : 07 -03-201 7 DATE OF PRONOUNCEMENT : 08 -03-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)- II, BARODA DATED 20.12.2010 PERTAINING TO A.Y. 2006 -07. ITA NO. 611/ AHD/2011 . A.Y. 2006-0 7 2 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READS AS UNDER:- 1. THE LEARNED INCOME TAX OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING CONSULTANC Y CHARGES, DRAWING AND DESIGN EXPENSES RS. 11,49,780/- CONSIDERING THE SAME AS NO T INCURRED FOR BUSINESS PURPOSE AND ADDED TO THE TOTAL INCOME OF THE ASSESS EE. 2. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN CONSIDERING PAYMENT OF RS.6,58,500/- AS BOGUS EXPENSES. 3. THE ASSESSEE IS A REGISTERED FIRM ENGAGED IN PROVID ING CONSULTANCY IN WATER SUPPLY SCHEME. THE RETURN FOR THE YEAR WAS FILED ON 16.10.2006 ON TOTAL INCOME AT RS. 7,21,381/-. THE RETURN WAS SELECTED F OR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND S ERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DONE CONSULTANCY SERVICES ONL Y FOR EXECUTIVE ENGINEER, GUJARAT TUBEWELLS, AHMEDABAD FOR WHICH TH E ASSESSEE HAS RAISED FOLLOWING BILLS DURING THE YEAR:- DATE DESCRIPTION AMOUNT 06.06.2005 CHARGES FOR CONSULTANCY SERVICES FOR WORK OF LIFTING WATER FROM NARMADA MAIN CANAL FROM DIFFERENT CHAINAGE PIPE LINE TO SUJLAM SUFLAM CANAL 3468000 06.07.2005 CHARGES FOR CONSULTANCY SERVICES FOR WORK OF LIFTING WATER FROM NARMADA MAIN CANAL FROM DIFFERENT CHAINAGE PIPE LINE TO SUJLAM SUFLAM CANAL, 693600 ITA NO. 611/ AHD/2011 . A.Y. 2006-0 7 3 20.07.2005 CHARGES FOR CONSULTANCY SERVICES FOR WORK OF LIFTING WATER FROM NARMADA MAIN CANAL (CH 326.4) AT KHORSAM TO SARASWATI MAIN CANAL JUNCTION 84780 05.08.2005 CHARGES FOR CONSULTANCY SERVICES FOR WORK OF LIFTING WATER FROM PIYAJ POND NEAR NARMADA MAIN CANAL AT CHAINAGE 256 KM TO DHAROI DAM IN NORTH GUJARAT REGION 300000 5.9.2005 CHARGES FOR CONSULTANCY SERVICES FOR WORK OF LIFTING WATER FROM ADUNDRA POND NEAR NARMADA MAIN CANAL AT CHAINAGE 278.5 KM TO DHAROI DAM IN NORTH GUJARAT REGION 900000 TOTAL 54,46,380 5. THE A.O. FURTHER FOUND THAT THE ASSESSEE HAS DEBITE D THE FOLLOWING PAYMENTS IN ITS PROFIT AND LOSS ACCOUNT:- DATE NAME OF THE PARTY AMOUNT 05.04.2005 ASSOCIATED ENGINEERS RS. 1,48,770 21.07.2005 -DO- RS. 3,85,700 29.07,.2005 SURESEAL RS. 2,05,000 01.09.2005 -DO- RS. 2,20,400 28.10.2005 SWISH SERVICES PVT. LTD. RS. 1,90,000 TOTAL RS. 11,49,870 6. THE A.O. WAS OF THE OPINION THAT IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR, THE ASSESSEE HAS DEBITED RS. 3,38,943/- AS CO NSULTANCY CHARGES. SINCE THE ASSESSEE COULD NOT OFFER ANY PLAUSIBLE EXPLANAT ION FOR THE DRASTIC ITA NO. 611/ AHD/2011 . A.Y. 2006-0 7 4 INCREASE IN CONSULTANCY CHARGES, THE A.O. DISALLOWE D THE AMOUNT OF RS. 11,49,870/-. 7. PROCEEDING FURTHER, THE A.O. FURTHER NOTICED THAT T HE ASSESSEE HAS PASSED FOUR ENTRIES OF CASH AMOUNTING TO RS. 56,000/- ON 2 2.11.2005 AND ON 31.03.2006 HAS PASSED THE FOLLOWING ENTRIES IN RESP ECT OF VARIOUS PROJECTS:- MODHERA PUMPING STATION PERIOD NOVEMBER TO DECEMBER, 2005 PAID TO SIX PERSONS RS. 1,08,025 ADUNDRA PUMPING STATION NOVEMBER 2005 - FEBRUARY 2006 PAID TO SIX PERSONS RS. 1,04,450 RASULPUR PUMPING STATION OCTOBER DECEMBER, 2005 PAID TO SIX PERSONS RS. 1,04,450 KHOSRAM PUMPING STATION FEBRUARY 2005 PAID TO SIX PERSONS RS. 73,000 FATEPUR PUMPING STATION FEBRUARY, 2005 MARCH 2006 PAID TO SIX PERSONS RS. 95,400 LABHOR PUMPING STATION JANUARY - MARCH, 2006 PAID TO SIX PERSONS RS. 1,08, 150 8. THE A.O. OBSERVED THAT THE PROJECT WAS COMPLETED IN THE MONTH OF SEPTEMBER, 2005 AFTER WHICH NO BILL WAS RAISED AND NO WORK WAS SHOWN IN PROGRESS. THE A.O. WAS OF THE OPINION THAT THE ASSE SSEE HAS NOT BEEN ABLE TO GIVE JUSTIFICATION FOR DEBITING THESE EXPENSES W HEN THE PROJECT WAS ITA NO. 611/ AHD/2011 . A.Y. 2006-0 7 5 COMPLETED AND NO WORK IN PROGRESS WAS ALSO SHOWN. T HE A.O. DISALLOWED RS. 6,58,500/-. 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) W ITH WITHOUT ANY SUCCESS. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE CONSULTANCY CHARGES HAVE BEEN PAID TO THE FIRMS WHO ADVISED THE ASSESSEE DURING THE COURSE OF ITS CONSULTANCY BUSINESS. IT IS THE SAY O F THE LD. COUNSEL THAT ALL THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE ASSESSEE HAS DEDUCTED TAX AT SOURCE AS PER THE PROVISIONS OF THE LAW. THE LD. COUNSEL CONCLUDED BY SAYING THAT BOTH THE REVENUE AUTHORITI ES HAVE ERRED IN NOT POINTING OUT ANY DEFECT IN THE PAYMENTS SO MADE EXC EPT BY COMPARING WITH THE IMMEDIATELY PRECEDING FINANCIAL YEAR. 11. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE LOWER AUTHORITIES. 12. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW AND WITH THE ASSISTANCE OF THE LD. COUNSEL; WE HAVE GONE THR OUGH THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE LIGH T OF RULE 18(6) OF THE ITAT RULES. IT IS NOT IN DISPUTE THAT ALL THE IMPUG NED PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. IT IS ALSO TRUE THAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE AS PER THE PROVISIONS OF THE LAW. IT IS I MPROPER FOR THE REVENUE AUTHORITIES TO DECIDE WHICH EXPENSES THE ASSESSEE S HOULD INCUR FOR CARRYING ON ITS BUSINESS/PROFESSION. IT IS ALSO NOT A CASE O F THE REVENUE THAT THE ITA NO. 611/ AHD/2011 . A.Y. 2006-0 7 6 BOOKS OF ACCOUNTS ARE FOUND TO BE DEFECTIVE AND THE PAYEES ARE NOT IDENTIFIABLE. MERELY BECAUSE IN THE IMMEDIATELY PRE CEDING FINANCIAL YEAR, THE EXPENDITURE UNDER THE HEAD CONSULTANCY CHARGES WAS LESSER THAN THE CONSULTANCY CHARGES DEBITED FOR THE YEAR UNDER CONS IDERATION, THE CONSULTANCY CHARGES CANNOT BE DISALLOWED. WE FURT HER FIND THAT THE REVENUE AUTHORITIES HAVE NOT MADE ANY VERIFICATION FROM THE PAYEES REGARDING THE SERVICES RENDERED BY THEM TO THE ASSE SSEE. 13. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF O UR ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ADDITIONS MADE BY THE A.O . AND SUSTAINED BY THE FIRST APPELLATE AUTHORITY. WE, ACCORDINGLY, SET ASI DE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION O F RS. 11,49,780/-.GROUND NO. 1 IS ACCORDINGLY ALLOWED. 14. COMING TO THE NEXT ADDITION MADE BY THE A.O. AND CO NFIRMED BY THE LD. CIT(A), WE FIND THAT ONCE AGAIN THE A.O. HAS QUESTI ONED THE PAYMENTS MADE BY THE ASSESSEE. AS MENTIONED ELSEWHERE, THE A.O. C ANNOT SIT AT THE DRIVING SEAT AND DIRECT THE ASSESSEE. NO DEFECT HAS BEEN PO INTED OUT SO FAR AS THE PAYMENT OF EXPENDITURES ARE CONCERNED NOR ANY DISCR EPANCY HAS BEEN FOUND IN THE BOOKS OF ACCOUNTS. MERELY, BECAUSE THE PROJECT WAS COMPLETED IN THE MONTH OF SEPTEMBER, 2005 WOULD NOT DISENTITL E THE ASSESSEE TO MAKE PAYMENTS IN RELATION TO THE EXPENDITURES INCURRED E ARLIER. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE IMPUGNED ADDITIONS AND WE DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 6,58,500/-. GROUND NO. 2 IS ALLOWED. ITA NO. 611/ AHD/2011 . A.Y. 2006-0 7 7 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 08- 03- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 08 /03/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD