SH. BALDEV SINGH, PHAGWARA V. INCOME TAX OFFICER, WARD-1, PHAGWARA

ITA 658/ASR/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7123 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEDPAL SINGH
• Assessee Lawyers: Y K SUD
• Keywords: Additional evidence; Tangible material; Revised return
• Section: 69C; 40A(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH SMC AT JALANDHAR BEFORE SH. N. K. SAINI, HONBLE VICE PRESIDENT ITA NO.658/ASR./2017 : ASSTT. YEAR : 2010-11 ITA NO.659/ASR./2017 : ASSTT. YEAR : 2011-12 BALDEV SINGH, VILLAGE-FATEHGARH, P.O.- PANDORI, PHAGWARA VS INCOME TAX OFFICER, WARD-1, PHAGWARA (APPELLANT) (RESPONDENT) PAN NO. AXSPS0236R ASSESSEE BY : SH. Y. K. SUD, CA REVENUE BY : SH. VED PA L SINGH, DR DATE OF HEARING : 08.01.2019 DATE OF PRONOUNCEMENT : 11.01.2019 ORDER THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDER DATED 11.08.2017 AND 14.08.2017 FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVELY PASSED BY THE LD. CIT(A)-2, JALANDHAR. 2. SINCE, THE ISSUES INVOLVED ARE COMMON AND BOTH T HE APPEALS WERE HEARD TOGETHER, SO THESE ARE BEING DISPOSED OF F BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. AT THE FIRST INSTANCE, I WILL DEAL WITH THE APPE AL IN ITA NO. 658/ASR./2017. FOLLOWING GROUNDS HAVE BEEN RAISED I N THIS APPEAL: 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN IN SUSTAIN ING THE ACTION OF AO OF REOPENING THE ASSESSMENT U/S 147/14 8 OF THE INCOME-TAX ACT, 1961. FURTHER CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO TANGIBLE MATERIAL WITH THE AO FOR FORMATION O BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. ITA NOS. 658 & 659/ASR./2017 BALDEV SING H 2 2. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS.62500/- MADE BY THE AO U/S 40A(3 ). 3. THAT BOTH AO AND CIT(A) FAILED TO APPRECIATE THE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE LABOU R PAYMENTS MADE IN CASH. 4. THAT THE ORDER OF AO AND CIT(A) ARE AGAINST THE LAW AND FACTS OF THE CASE. 4. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS.62,500/- MADE BY T HE AO U/S 40A(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT). 5. FACTS OF THE CASE IN BRIEF ARE THAT THE AO ISSUE D THE NOTICE U/S 148 OF THE ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THAT HIS REVISED RETURN FILED ON 10.02.2012 MAY BE TREATED AS FINAL RETURN. IN THE SAID RETURN, THE ASSESSEE DECLARED AN INCOME OF RS. 9,80,450/- PLUS AGRICULTURE INCOME OF RS.10,88,000/-. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAD MADE PAYMENT OF RS.29,500/- ON 05.01.2010 AND RS.33,000/ - ON 22.02.2010 OTHER THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT TO SMT. RENU AND SMT. PARMINDER KAUR RES PECTIVELY. ACCORDING TO HIM, THE AFORESAID PAYMENTS WERE MADE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASS ESSEE SUBMITTED THAT THOSE PAYMENTS WERE MADE IN REMOTE VILLAGE WHE RE HE WAS CARRYING OUT THE CONTRACT WORK AND THOSE PAYMENTS W ERE MADE TO THE LABOUR OF THE SUB CONTRACTOR AND THAT THE PAYME NTS MADE WERE IN AN EMERGENCY TO THE POOR LABOURERS IN ORDER TO ENAB LE THEM TO MEET ITA NOS. 658 & 659/ASR./2017 BALDEV SING H 3 THEIR DAILY EXPENSES. THE AO, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND MADE THE ADDITION O F RS.62,500/-. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO SUSTAINED THE ADDITION BY OBSERVING THAT THE PAYMEN TS EXCEEDING RS.20,000/- WERE MADE TO TWO LABOUR CONTRACTORS IN CONTRAVENTIO N OF PROVISIONS OF SECTION 40A(3) OF THE ACT. ACCORDINGLY, HE CONFIRMED THE DI SALLOWANCE MADE BY THE AO. 7. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT THOSE PAYMENTS WERE MADE TO THE LABOURS AND NO PAYMENT EXCEEDED RS.20,000/-. HE DREW OUR ATTENTION TOWARDS PAGE NOS . 5 TO 25 OF THE ASSESSEES PAPER BOOK WHICH ARE THE COPIES OF THE VOUCHERS SHO WING THE PAYMENTS MADE TO THE DIFFERENT LABOURS. IT WAS STATED THAT THE PAYME NTS WERE MADE TO THE INDIVIDUAL LABOUR THROUGH SUB CONTRACTOR, IN OTHER WORDS, THOSE PAYMENTS WERE NOT MADE TO THE SUB CONTRACTOR RATHER TO DIFFERENT PERSONS AND NONE OF THE PAYMENTS EXCEEDED RS.20,000/-. THEREFORE, THE DISAL LOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 8. IN HIS RIVAL SUBMISSIONS, THE LD. DR SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE PA YMENTS WERE MADE TO THE SUB CONTRACTOR EXCEEDING RS.20,000/- IN VIOLATION OF SE CTION 40A(3) OF THE ACT. THEREFORE, THE DISALLOWANCE MADE BY THE AO WAS RIGH TLY SUSTAINED BY THE LD. CIT(A). 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, IT IS NOTICED THAT THE ASSESSEE MADE THE PAYMENTS TO DIFFERENT LABOURERS W HICH IS EVIDENT FROM PAGE NOS. 5 TO 25 OF THE ASSESSEES PAPER BOOK. THOSE PA YMENTS WERE PETTY PAYMENTS ITA NOS. 658 & 659/ASR./2017 BALDEV SING H 4 MADE TO DIFFERENT PERSONS AND NONE OF THE INDIVIDUA L PAYMENT EXCEEDED RS.20,000/-. THEREFORE, THERE WAS NO VIOLATION OF T HE PROVISIONS OF SECTION 40A(3) OF THE ACT PARTICULARLY WHEN THE PAYMENTS WE RE RECEIVED BY INDIVIDUALS LABOURER, ALTHOUGH THESE WERE MADE THROUGH SUB CONT RACTOR. ACCORDINGLY, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CI T(A) IS DELETED. 10. IN ITA NO. 659/ASR./2017 FOR THE ASSESSMENT YEA R 2011-12, ONE OF THE ISSUES RAISED BY THE ASSESSEE RELATES TO THE SUSTEN ANCE OF DISALLOWANCE OF RS.1,31,900/- MADE BY THE AO U/S 40A(3) OF THE ACT. 11. THE FACTS RELATED TO THIS ISSUE ARE SIMILAR AS WERE INVOLVED IN ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS. 12. THE ANOTHER ISSUE RAISED BY THE ASSESSEE RELATE S TO THE ADDITION OF RS.1,50,000/- MADE BY THE AO BY INVOKING THE PROVIS IONS OF SECTION 69C OF THE ACT. 13. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE AO MADE THE IMPUGNED ADDITION BY OBSERVING THAT A SALARY OF RS.1,50,000/ - WAS PAID TO SH. SUKHJIT SINGH WHICH WAS NOT ENTERED INTO BOOKS OF ACCOUNT A ND THE ASSESSEE WAS CONFRONTED AS TO WHY THE SAID AMOUNT MAY NOT BE TRE ATED AS PAID OUT OF THE BOOKS OF ACCOUNT. IN RESPONSE, THE ASSESSEE SUBMITT ED AS UNDER: THAT WITH REGARDS TO YOUR QUERY REGARDING SALARY O F RS.1,50,000/- PAID TO S. SUKHJIT SINGH I BEG TO STATE IN MY REPLY DURING THE ASSESSMENT PROCEEDINGS OF SAID A.Y. MY COUNSEL MIST AKENLY PRINTED THE NAME IN THE REPLY AS GURJEET SINGH INSTEAD OF S . SUKHJIT SINGH IN THE DETAILS OF SALARY PAID GIVEN IN REPLY. FURTHER I BEG TO STATE THAT IN THE BOOKS OF ACCOUNTS MY ACCOUNTANT WRONGLY POST ED SALARY AMOUNT OF RS.1,20,000/- ONLY INSTEAD OF RS.1,50,000 /- PAID TO SUKHJIT SINGH. ITA NOS. 658 & 659/ASR./2017 BALDEV SING H 5 HOWEVER, THE AO DID NOT FIND MERIT IN THE SUBMISSIO NS OF THE ASSESSEE AND MADE THE ADDITION OF RS.1,50,000/-. 14. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: THE ITO MADE AN ADDITION OF RS. 150000/- ON ACCOU NT OF SALARY PAID TO MR. SUKHJIT SINGH WHICH WAS ALLEGED TO BE O UT OF BOOKS OF ACCOUNTS. THE ADDITION WAS MADE ON THE GROUND THAT IN THE (AX AUDIT REPORT IT WAS MENTIONED THAT SALARY OF RS. 15 0000/- WAS PAID TO MR. SUKHJIT SINGHWHO WAS A SUPERVISOR AND ALSO A SON OF THE ASSESSEE CONTRACTOR. IN THE SALARY DETAILS PROVIDED AT THE TIME OF ASSESSMENT THE NAME OF SUKHJIT SINGH DID NOT FIGURE IN THE DETAILS OF SALARY PAID. IN THIS REGARD IT WAS SUBMITTED BEFORE THE ITO AT THE TIME OF REASSESSMENT THAT NO SALARY WAS PAID TO GUR JIT SINGH BUT BY MISTAKE IN THE DETAILS PROVIDED THE NAME OF GURJIT SINGH WHO IS ALSO THE SON OF THE ASSESSEE WAS PRINTED IN PLACE OF SUK HJIT SINGH. FURTHER THE SALARY PAID TO HIM WAS RECORDED AS RS. 120000/- AND NOT RS. 150000/-. THIS FACT IS VERIFIABLE FROM THE BOOKS OF ACCOUNTS WHICH THE ITO FAILED TO DO SO AND THE COPY OF LEDGE R ACCOUNT OF SALARY FROM THE BOOKS OF ACCOUNT IS ENCLOSED HEREWI TH WHEREIN THE NAME OF SUKHJIT SINGH IS CLEARLY MENTIONED. WHEN TH E SALARY OF RS. 120000/- IS RECORDED IN THE BOOKS OF ACCOUNTS WHICH WAS VERIFIED BY AO NO ADDITION, U/S 69C COULD HAVE BEEN MADE BLINDL Y ON THE BASIS OF TAX AUDIT REPORT. HENCE THE SAME MAY BE DELETED. FURTHER IN THIS REGARD AN AFFIDAVIT OF MR. GURJIT SINGH IS ENCLOSED HEREWITH WHEREIN HE HAS CLEARLY AFFIRMED THAT NO SALARY HAS BEEN DRAWN BY HIM FROM MR. BALDEV SINGH DURING F.Y. 2010-11. THIS AFFIDAVIT MAY BE ADMITTED AS ADDITIONAL EVIDENCE UNDER RULE 46A O F THE INCOME TAX RULES. 15. THE ASSESSEE ALSO FILED THE AFFIDAVIT OF SH. GU RJIT SINGH BEFORE THE LD. CIT(A) TO THE EFFECT THAT NO SALARY PAYMENT HAD BEE N RECEIVED BY HIM FROM THE ASSESSEE. THE LD. CIT(A), HOWEVER, CONFIRMED THE AD DITION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE FAILED TO PRODUCE EVID ENCE BEFORE THE AO WHEN SPECIFIC OPPORTUNITY WAS GIVEN. ITA NOS. 658 & 659/ASR./2017 BALDEV SING H 6 16. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PAID THE SALARY TO SH. SUKHJIT SI NGH AND THE AUDITOR IN AUDIT REPORT BY MISTAKE MENTIONED THE NAME AS SH. GURJIT SINGH AND THAT THE AMOUNT OF SALARY WAS WRONGLY MENTIONED AT RS.1,50,000/- IN STEAD OF 1,20,000/-. HE DREW MY ATTENTION TOWARDS PAGE NOS. 42 & 43 OF THE ASSESSEES PAPER BOOK WHICH IS THE COPY OF SALARY ACCOUNT WHICH REVEALED THAT IN EVERY MONTH A SALARY OF RS.10,000/- HAD BEEN PAID IN CASH. IT WAS ALSO M ENTIONED THAT AN AFFIDAVIT OF SH. GURJIT SINGH WAS FURNISHED BEFORE THE LD. CIT(A ) WHEREIN IT WAS STATED THAT HE HAD NOT RECEIVED ANY SALARY FROM THE ASSESSEE , COPY OF WHICH IS PLACED AT PAGE NO. 40 OF THE ASSESSEES COMPILATION. 17. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY S UPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 18. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, IT APPEARS THAT THE AO MADE THE IMPUGNED ADDITION ON THE BASIS OF THE AUDI T REPORT WHEREIN THE DETAILS OF THE PAYMENT MADE TO THE RELATIVES HAVE B EEN MENTIONED. THE NAME OF THE RELATIVE WAS MENTIONED AS SH. GURJIT SINGH TO W HOM SALARY OF RS.1,50,000/- WAS SHOWN TO BE PAID. DURING THE COURSE OF ASSESSME NT PROCEEDINGS AS WELL AS THE APPELLATE PROCEEDINGS, THE ASSESSEE CLARIFIED T HE POSITION AND STATED THAT THE NAME OF SH. GURJIT SINGH WAS WRONGLY MENTIONED. ACT UALLY THE SALARY WAS PAID TO SH. SUKHJIT SINGH @ RS.10,000/- PER MONTH TOTALI NG TO RS.1,20,000/- IN THE YEAR UNDER CONSIDERATION. THE AFORESAID CONTENTION OF THE ASSESSEE IS ALSO VERIFIABLE FROM THE COPY OF THE SALARY ACCOUNT WHIC H IS PLACED AT PAGE NO.S 42 & 43 OF THE ASSESSEES COMPILATION. IT IS ALSO NOTI CED THAT SH. GURJEET SINGH FURNISHED AN AFFIDAVIT BEFORE THE LD. CIT(A) WHEREI N HE CLEARLY MENTIONED THAT HE HAD NOT RECEIVED ANY SALARY FROM THE ASSESSEE. THE CONTENTS OF THAT AFFIDAVIT DATED ITA NOS. 658 & 659/ASR./2017 BALDEV SING H 7 28.06.2017 WERE NOT REBUTTED. IN MY OPINION, THE DI SALLOWANCE MADE BY THE AO ON THE TECHNICAL GROUND WAS NOT JUSTIFIED AND THE L D. CIT(A) WITHOUT APPRECIATING THE FACTS OF THE PRESENT CASE IN RIGHT PERSPECTIVE WRONGLY CONFIRMED THE ADDITION MERELY ON THIS BASIS THAT TH E ASSESSEE COULD NOT PRODUCE THE EVIDENCES BEFORE THE AO, HOWEVER, HE ADMITTED T HAT THE EVIDENCES WERE FURNISHED BEFORE HIM. I, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, DEEM IT APPROPRIATE TO DELETE THE IMPUGNED ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A). 19. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 11/01/2019) SD/- (N. K. SAINI) VICE PRESIDENT DATED: 11/01/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR