KRISHNA ENTERPRISES, MUMBAI V. DCIT 24(2), MUMBAI

ITA 6283/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9688 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Maximum Marginal Rate; Deemed to accrue or arise in india
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 6283 / MUM/ 20 1 4 ( / ASSESSMENT YEAR: 20 0 9 - 10 ) M/S. KRISHNA ENTERPRISES C/O. BHARAT K. PATEL & CO. 402, R ISHIKESH APT. OPP. N.L. HIGH SCHOOL, S.V. ROAD, MALAD (WEST) MUMBAI - 400064 / VS. DCIT - 24(2), C - 13 PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLES, MUMBAI. PIN:400051 ./ ./ PAN/GIR NO. : AAEFK 6063 H ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 09 .0 2 .201 8 / DATE OF PRONOUNCEMENT : 28.03 . 2018 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 30 . 07 .201 4 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 34 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2009 - 10 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - ASSESSEE BY : SHRI BHARAT K. PATEL (AR) REVENUE BY: SHRI SAURABH DESHPANDE ( DR ) ITA. NO.6283 /M/201 4 A.Y. 2009 - 10 2 1. ADDITIONS U/S 41(1) FOR NON PAYMENT OF CRDITORS RS.3,01,212/ - 2. ADDITIONS OF RS.2,70,000/ - (BEING 3% OF TOTAL PAYMENTS) U/S 40A(2)(B) FOR PAYMENT OF SUB CONTRACT CHARGES TO SISTER CONCERNS AGGREGATIN G TO RS.90 LACS 3. THE HONBLE TRIBUNAL BE PLEASED TO VACATE THE ABOVE ADDITIONS/DISALLOWANCES. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR WITHDRAW ANY OF THE GROUNDS OF APPEAL. 3 . THE BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE A.Y. 2009 - 10 ON 28 .0 9.2009 DECLARING TOTAL INCOME TO THE TUNE OF RS.40,85,145/ - . T HE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE I.T. ACT, 1961 WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS. DURING THE YEAR , THE ASSESSEE HAS DECLARED NET PROFIT OF RS. 41,62,583/ - @7.62% ON GROSS TURNOVER OF RS.5,45,97,222/ - . THE AUDIT REPORT U/S 44AB OF THE ACT IN FORM NO. 3CB & 3CD ALONG WITH AUDITED BALANCE - SHEET AND PROFIT & LOSS ACCOUNT WAS ALSO FILED. APART FROM THE SAID BUSINESS INCOME , ASSESSEE DECLARED THE INCOME FROM THE HOUSE PROPERTY OF RS.10,20,235/ - . THE ASSESSEE SUBMITTED THE LIST OF CREDITORS OF M/S. GIRIRAJ SAND SUPPLIER, M/S. SAI ENTERPRISE, M/S. RAMANI ENTERPRISE, M/S. BALAJI TRANSPORT (EXCAVATION DIVN) . SINCE THE PAYMENT DETAIL WAS NOT FILED AND THE ACCOUNT WAS NOT RUNNING ACCOUNT, THEREFORE, THE CREDIT TO THE TUNE OF RS.3,01,212/ - WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. IT WAS ALSO OBSERVED THAT THE ASSESSEE MADE THE PAYMENT TO THE SUB - CONTRACT (SISTER CONCERNS) TOTAL AMOUNT TO THE TUNE OF RS.90,00,000/ - WHICH WAS FOUND IN EXCESS . ITA. NO.6283 /M/201 4 A.Y. 2009 - 10 3 THEREFORE 3% OF THE SAID PAYMENT TO THE TUNE OF RS.2,70,000/ - WA S DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE AND TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.47,40,370/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE SAID ADDITION , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1: - 4. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF THE AMOUNT PAYABLE TO THE CREDITORS TO THE TUNE OF RS.3,01,212/ - . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HA S FILED THE CONFIRMATION OF ALL THE FOUR PARTIES AND ALSO EXPLAIN ED THE MATTER BEFORE THE AO BY VIRTUE OF LETTER DATED 15.12.2011 AND THE AMOUNT WAS NOT FALL WITHIN THE PURVIEW OF SECTION 41A OF THE ACT, T HEREFORE, THE S AI D CREDIT WAS NOT REQUIRED TO BE D ISALLOWED IN THE INTEREST OF JUSTICE . IN SUPPORT OF HIS CONTENTION, T HE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN ACIT VS. SUPERB AGROVET INDUSTRIES (P.) LTD. (2015 ) 61 TAXMANN.COM 3 69 ( CHANDIGARH - TRIB.) & ACIT CIRCLE (1)BANGALORE V/S ALVARES & THOMAS VS. ACIT (2015) 62 TAXMANN.COM 2 86 ( BANGALORE TRIBUNAL ). HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. W E NOTICED THAT ITA. NO.6283 /M/201 4 A.Y. 2009 - 10 4 THE CLAIM OF THE NON - PAYMENT OF SUNDRY CREDITORS TO THE TUNE OF RS.3,01,212/ - HAS BEEN DECLINED BEING NOT PROVED BUT THE ASSESSING OFFICER DECLINED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF NON - CONFIRMATION. THE CONFIRMATION OF BOTH T HE PARTIES IS ON THE RECORD WHICH LIES AT PAGE NO. 5 TO 9 OF THE PAPER BOOK. THE ASSESSEE ALSO RENDERED THE EXPLANATION ON ACCOUNT OF NON - PAYMENT OF THE OUTSTANDING AMOUNT BY VIRTUE OF LETT ER DATED 15.11.2012. THE AO AS WELL AS CIT(A) NOWHERE DISCUSSED THE CONFIRMATION OF THE PARTIES . N O CONTRARY EVIDENCE WAS PRODUCED ON RECORD. ANYHOW THE EVIDENCE ADDUCED BY THE ASSESSEE NOWHERE CONSIDERED AND DISCUSSED. THE APPLICABILITY OF THE PROVISION OF SECTION 41A DOES NOT ALSO SEEMS TO BE JUSTIFIABLE BE CAUSE NOTHING CAME INTO NOTICE THAT THE ASSESSEES CLAIM ON ACCOUNT OF THE REMISSION AND CESSATION OF LIABILITY LEADS TO DEEMED INCOME U/S 41(1). TAKING INTO ACCOUNT OF ALL THE FACTS AND CIRCUMSTANC ES, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND REMAND THIS ISSUE BEFORE THE AO TO DECIDE THE MATTER AFRESH IN VIEW OF THE CONFIRMATION /EVIDENCE ADDUCED BY THE ASSESSEE. . NEEDLESS TO SAY THAT THE ASSESSING OFFICER WOULD PROVIDE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, THIS ISSUE IS BEING DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO. 2 : - 5 . ISSUE NO. 2 IS IN CONNECTION WITH THE ADDITION OF RS. 2,70,000/ - (BEING 3% OF TOTAL PAYMENTS) TO THE SISTER CONCERNS U/S 40A(2)(B) OF ITA. NO.6283 /M/201 4 A.Y. 2009 - 10 5 THE ACT. THE ASSESSEE FIRM ASSIGNED THE SUB - CONTRACT TO SISTER CONCERNS AND PAID AN AMOUNT TO 90,00,000/ - TO THE FIVE PARITIES NAMELY M/S. CONSTRUCTION CO., M/S. RAMANI CONSTRUCTION CO., M/S. R.S. ENTERPRISE, M/S. SHIV RAM ENTERPRISE AND M/S SHIVOM ENTERPRISE. THE ASSESSEE COMPANY PAID THE TOTAL AMOUNT TO THE TUNE OF RS.90,00,000/ - . T HE ASSESSING OFFICER AD HOC DISALLOW ED 3% OF THE SAID PAYMENT I.E., TO THE TUNE OF RS.2,70,000/ - . THE ASSESSEE COMPANY PRODUCED THE PAYMEN T BILL VIDE LETTER DATED 24.11.2012 WHICH LIES AT PAGE NO. 7 OF THE PAPER BOOK. THE ASSESSEE COMPANY AS WELL AS THE SISTE R CONCERNS WERE PAYING THE TAX AT MAXIMUM MARGINAL RATE . THE ASSESSING OFFICER NOWHERE BRING ANY MATERIAL ON RECORD TO ARRIVE AT THIS C ONCLUSION THAT THE PAYMENT WAS EXCESSIVE SPECIFICALLY THE CIRCUMSTANCES WHEN THE ASSESSEE HAS TAKEN THE PLEA OF SPECIAL SERVICES WHICH CAN ONLY BE DONE BY THE SKILL ED LABOURS . THE VERY BASE TO DISALLOW THE CLAIM IS OT ON RECORD. THE BOOK S OF ACCOUNT HAVE NOT BEEN REJECTED . A UDIT ED REPORT U/S 40A(2)(B) OF THE ACT ALONG WITH AUDIT BALANCE - SHEET AND PROFIT AND LOSS ACCOUNT WERE ON RECORD WHICH NOWHERE IN DOUBT . T HE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS QUITE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE CASE TITLE AS PRINCIPAL COMMISSIONER OF INCOME - TAX - 2 VS. GUJARAT GAS FINANCIAL SERVICES LTD., (2015) 60 TAXMANN.COM 483 AND DECISION OF HONBLE CHANDIGARH BENCH IN THE CASE OF ACIT VS. SUPERB AGROVET INDUSTRIES (P.) LTD., (2015) 171 TTJ 475 DATED 19.05 .2015. TAKEN INTO CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND LAW DISCUSSED ABOVE, WE ARE ITA. NO.6283 /M/201 4 A.Y. 2009 - 10 6 OF THE VIEW THAT THE ADHOC DISALLOWANCE IS NOT JUSTIFIABLE, THEREFORE, WE DELETE THE SAME AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGA INST THE REVENUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE A LLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 . 0 3 . 201 8 . SD/ - SD/ - ( G.S. PANNU ) ( AMARJIT SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 28.03. 201 8 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUAR D FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI