MURARI RAJDHAR PACKERS (P) LTD., MUMBAI V. ACIT CIRCLE 2, THANE

ITA 6641/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8207 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: SHIVARAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 233/M/09 ASSESSMENT YEAR 2004-05 ITA NO. 6641/M/08 ASSESSMENT YEAR 2005-06 MURARI RAJDHAR PACKERS (P) LTD., C/O. SARA & ASSOCIATES, CHARTERED ACCOUNTANTS, 1 ST FLOOR, PEEKAY MANSION, 470 JSS ROAD, CHIRA BAZAR, MUMBAI 400 002 PAN NO. AADCM 5114 H VS. ACIT, CIRCLE-2 THANE. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHIVARAM & SHRI RAJESH AGARWAL REVENUE BY : SHRI P. C. MAURYA DATE OF HEARING : 19-06-2012 DATE OF PRONOUNCEMENT : 01-08-2012 ORDER PER RAJENDRA, A.M. FOLLOWING GROUNDS OF APPEAL WERE FILED BY THE ASSES SEE-COMPANY AGAINST THE ORDERS DATED 26-11-2007 & 11-08-2008 RESPECTIVELY O F THE CIT (A)-II, THANE FOR THE AY 2004-05 AND 2005-06. ITA 233/M/2009 - AY 2004-05 1. THE LD. CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF PAYMENT MADE TO SUBCONTRACTOR OF RS. 35,92,311/- ON THE GROUND THAT IDENTITY OF THES E SUB-CONTRACTORS WERE NOT PROVED WITHOUT ITA NO. 233/M/09 ITA NO. 6641/M/08 MURARI RAJDHAR PACKERS (P) LTD., 2 PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. THE LD. CIT (A) ERRED IN CONFIRMING ADDITION OF RS.2,03,032/- OF STAFF WELFARE AND RS. 12600/- OF RENT, RATE AND TAXES WITHOUT PROPERL Y APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 3. THE LD. CIT (A) ERRED IN NOT DISPOSING OFF GROUN DS OF APPEAL UNDER WHICH DISALLOWANCE OF FOLLOWING EXPENSES HAS BEEN CHALLENGED. A.TELEPHONE EXPENSES -RS.18,337/- B.TRAVELLING EXPENSES -RS.16,190/- C.LOADING AND UNLOADING -RS.1,90,139/- D.FREIGHT & TRANSPORTATION -RS.1,43,090/- TOTAL RS. 3,67,756/- 4. THE LD. CIT (A) ERRED IN CONFIRMING THE FOLLOWIN G DISALLOWANCE WITHOUT PROPERLY APPRECIATING FACT OF THE CASE AND LAW APPLICABLE TH ERETO. A.TELEPHONE EXPENSES -RS.18,337/- B.TRAVELLING EXPENSES -RS.16,190/- C.LOADING AND UNLOADING -RS.1,90,139/- D.FREIGHT & TRANSPORTATION -RS.1,43,090/- TOTAL RS. 3,67,756/- 5. THE APPELLANT PRAYS THAT THE VARIOUS DISALLOWANC E CONFIRMED BE DELETED. 6. THE APPELLANT CRAVES YOUR HONOURS LEAVE TO ADD, ALTER OR AMEND ANY GROUNDS OF APPEAL AT THE TIME OF HEARING OR BEFORE. ITA 6641/08 AY 2005-06 1. THE LD. CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 47,59,846/- BEING PAYMENT MADE TO THE SUB-CONTRACTORS ON THE GROUND THAT IDENTIFIC ATION OF THESE SUB-CONTRACTORS ARE NOT PROVED WITHOUT PROPERLY APPRECIATING THE FACTS OF T HE CASE AND LAW APPLICABLE THERETO. 2. THE LD. CIT (A) ERRED IN CONFIRMING ADDITION OF RS, 29,710/- BEING DIFFERENCE AS PER INCOME CREDITED IN PROFIT & LOSS ACCOUNT AND INCOME SHOWN IN TDS CERTIFICATES WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 3. THE LD. CIT (A) ERRED IN CONFIRMING DISALLOWANCE RELATING TO TELEPHONE EXPENSES, RENT, RATE AND TAXES ON THE GROUND THAT EXPENDITURES ARE PERSO NAL EXPENSES WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICAB LE THERETO. 4. THE APPELLANT PRAYS THAT THE DISALLOWANCE MADE B E DELETED. 5. THE APPELLANT CRAVES YOUR HONOURS LEAVE TO ADD, , ALTER OR AMEND ANY GROUNDS OF APPEAL AT THE TIME OF HEARING OR BEFORE. 2. THE ASSESSEE COMPANY, A LABOUR CONTRACTOR, ENGAGED IN THE BUSINESS OF JOB ON CONTRACT BASIS FOR VARIOUS TEXTILE ACTIVITIES, FILE D ITS RETURN OF INCOME ON 29.10.2004, DECLARING TOTAL INCOME OF RS. 96,560/-. ASSESSING OFFICER (AO) COMPLETED ASSESSMENT AND 26-12-2006 DETERMINING TOTAL INCOME OF AT RS.50 .79 LAKHS. DURING THE YEAR IN ITA NO. 233/M/09 ITA NO. 6641/M/08 MURARI RAJDHAR PACKERS (P) LTD., 3 QUESTION THE ASSESSEE COMPANY HAD TAKEN CONTRACT FO R CHECKING AND PACKING OF FABRICS FROM DONEAR INDUSTRIES LTD. IN TURN, THE ASSESSEE HAD ENGAGED VARIOUS SUBCONTRACTORS TO COMPLETE THE JOB. DURING THE ASSESSMENT PROCEEDI NGS THE AO HAD MADE CERTAIN DISALLOWANCES THAT CAN BE DIVIDED INTO TWO CATEGORI ES- I) DISALLOWANCES OF SUB CONTRACT AMOUNT IN RS. 35.92 LAKHS II) DISALLOWANC EOF OTHER EXPENSES OF RS. 13.9 LAKHS. 3. FIRST GROUND OF APPEAL FOR THE AY.2004-05 BEFORE US IS ABOUT DISALLOWANCE OF PAYMENT MADE TO THE SUBCONTRACTORS. DURING THE COU RSE OF ASSESSMENT AO HAD ISSUED LETTERS/SUMMONS TO VARIOUS SUB-CONTRACTORS CALLING FOR CERTAIN INFORMATION. A FEW OF THE LETTERS CAME BACK WITH NOTING PERSON NOT FOUND . AO MADE ENQUIRIES THROUGH HIS INSPECTOR ABOUT THE SUBCONTRACTORS. ON THE BASIS OF AVAILABLE MATERIAL AO HELD THAT TWO LABOUR CONTRACTORS NAMELY M/S. SANJAY PACKAGING AND M/S. VANDANA PACKAGING WERE NOT GENUINE. HE MADE DISALLOWANCE AMOUNTING T O RS. 35.92 LAKHS ON ACCOUNT OF PAYMENT TO SUB-CONTRACTORS. ASSESSEE FILED AN A PPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AUTHORISED REPRESENTATIVE (AR) AND THE ASSESSMENT ORDER, FAA U PHELD THE DISALLOWANCE MADE ON ACCOUNT OF PAYMENTS MADE TO THE SUBCONTRACTORS. FA A REFERRED TO THE STATEMENTS OF CHANDRAKANT MISHRA, PROPRIETOR OF VANDANA PACKAGIN G AND SANJAY MISHRA PROPRIETOR OF SANJAY PACKAGING. FAA WAS OF THE OPINION THAT THERE WERE SEVERAL CONTRADICTIONS IN THE STAND TAKEN BY THE ASSESSEE. HE ALSO HELD T HAT PAYMENTS MADE TO SUB- CONTRACTORS WERE NOT GENUINE. 4. BEFORE US, AR SUBMITTED THAT THE CONTRACTORS HAD AD MITTED RENDERING OF SERVICES TO THE ASSESSEE THAT COPIES OF THE RETURNS OF INCOME FILED BY THE SUB- CONTRACTORS WERE FURNISHED BEFORE THE AO, THAT BOTH THE CONTRACTORS WERE ASSESSED TO TAX, THAT PAYMENTS WERE MADE BY A/C PAYEE CHEQUES T O THE SUB-CONTRACTORS, THAT TDS WAS DEDUCTED BY THE ASSESSEE BEFORE MAKING PAYMENTS , THAT SUB-CONTRACTORS HAD CONFIRMED RECEIPTS OF PAYMENT, THAT COPIES OF BANK STATEMENTS OF SUB-CONTRACTORS WERE ALSO FURNISHED DURING ASSESSMENT PROCEEDINGS, THAT DISALLOWANCE WAS MADE ON MERE PRESUMPTIONS ONLY. AR RELIED UPON THE CASE OF HI L UX AUTOMOTIVES ((P) (183 TAXMANN 260). HE STATED THAT THERE WAS ARITHMETICA L MISTAKE IN THE FIGURE MENTIONED BY THE AO WITH REGARD TO THE DISALLOWANCE MADE BY T HE AO, THAT CORRECT FIGURE WAS 34.97 LAKHS. HE FURTHER SUBMITTED THAT IN SUBSEQUE NT ASSESSMENT YEAR, SAME ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A) AND THE ITAT. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SUPERVISOR OF TH E ASSESSEE COMPANY DID NOT MENTION THE NAMES OF THE TWO SUB-CONTRACTORS I.E., VANDANA PACKAGINGS AND SANJAY PACKAGINGS THAT BANK ACCOUNTS OF CONTRACTORS WERE A T NARIMAN POINT WHERE AS PAYMENTS WERE MADE AT UMARGAON (GUJ), THAT GENUINEN ESS OF SUB-CONTRACTORS WAS NOT ESTABLISHED. 4.1 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL AVAILABLE. WE FIND THAT SIMILAR DISALLOWANCE MADE BY THE AO WERE DELET ED BY THE FAA, WHILE DECIDING THE APPEAL FILED BY THE APPELLANT COMPANY FOR THE A SSESSMENT YEAR 2006-07. J BENCH OF ITAT MUMBAI (ITA 6393/MUM/2009 A.Y. 2006-0 7 DT. 20-12-2011) HAD DEALT THE ISSUE UNDER CONSIDERATION AND HAD DISMISS ED THE APPEAL FILED BY THE REVENUE. THE BASIC FACTS FOR REJECTING THE APPEAL OF REVENUE WERE AS UNDER: I) PAYMENTS MADE BY THE ASSESSEE TO THE SUB-CONTRACTOR WERE THROUGH A/C PAYEE CHEQUES; ITA NO. 233/M/09 ITA NO. 6641/M/08 MURARI RAJDHAR PACKERS (P) LTD., 4 II) CHEQUES RECEIVED BY THE SUB-CONTRACTOR WERE REFLECT ING IN HIS BANK A/C; III) TDS WAS DEDUCTED BY THE ASSESSEE; IV) SERVICES WERE RENDERED BY THE SUB-CONTRACTOR; V) RECEIPT OF PAYMENT BY SUB-CONTRACTOR WAS NOT IN DIS PUTE; 5. IF THE ABOVE FACTS ARE COMPARED WITH THE CASE UNDER CONSIDERATION, IT BECOMES CLEAR THAT THEY ARE IDENTICAL. EXCEPT FOR THE NAME S AND AMOUNTS INVOLVED, FACTS ARE SAME. IN THE APPEAL DECIDED BY THE TRIBUNAL, SUB-C ONTRACTOR HAD NOT FILED RETURN OF INCOME, WHEREAS IN THE MATTER UNDER CONSIDERATION, RETURNS WERE FILED BY THE PERSONS RECEIVING THE PAYMENTS. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY THE AO AND UPHELD BY THE FAA C ANNOT BE ENDORSED. ASSESSEE HAD DISCHARGED THE BURDEN CAST ON HIM ABOUT GENUINE NESS OF TRANSACTION. IN THESE CIRCUMSTANCES, GROUND NO.1 IS DECIDED IN F AVOUR OF THE ASSESSEE. 6. WITH REFERENCE TO GROUND NOS. 2,3 AND 4 AR SUBMITTE D THAT THE SAME MAY BE DECIDED ON MERITS. WE FIND THAT THE FAA HAS SUSTAI NED DISALLOWANCE OF RS. 2.03 LAKHS ON ACCOUNT OF STAFF WELFARE EXPENDITURE. FROM HIS ORDER, IT IS CLEAR THAT THE ASSESSEE HAD CLAIMED TO HAVE PAID AN AMOUNT OF RS. 2,55,353/- TO SHRI PURUSHOTTAM UPADHYAYA. FAA FOUND THAT PAYMENT TO SHRI UPADHYAY A WAS MADE BY THE SUB- CONTRACTORS AND NOT BY THE ASSESSEE. IN THESE CIRC UMSTANCES, WE ARE OF THE OPINION THAT DECISION OF THE FAA DOES NOT NEED ANY INTERFERENCE. SIMILARLY, WE FIND THAT ASSESSEE HAD NOT PRODUCED ANY EVIDENCE BEFORE AO/FAA WITH RE GARD TO PAYMENT MADE BY THE ASSESSEE-COMPANY TO ITS SISTER CONCERN. SO, THE DI SALLOWANCE BY THE AO AND UPHELD BY THE FAA ON ACCOUNT OF RENT NEEDS TO BE ENDORSED. THUS, GROUND NO.2 IS DECIDED AGAINST THE ASSESSEE. 7. GROUND NO.3 IS ABOUT NOT DECIDING THE GROUNDS OF AP PEAL BY THE FAA WITH REGARD TO DISALLOWANCE MADE BY THE AO ON ACCOUNT OF TELEPHONE EXPENSES OF (RS. 18,337/-), TRAVELLING EXPENSES (RS. 16,190/-), LOADING AND UN-LOADING EXPENSES (RS. 1,90,139/-) AND FREIGHT AND TRANSPORTATION EXP ENSES (RS. 1,43,090/-). WE FIND THAT ASSESSEE HAD SPECIFICALLY RAISED THE ABOVE GRO UND OF APPEAL BEFORE THE FAA. IN THE FORM NO.35 AS WELL AS IN THE STATEMENT OF FACTS FILED BEFORE THE FAA, THERE IS A MENTION ABOUT ABOVE MENTIONED FOUR DISALLOWANCES. WE FIND THAT SAID GROUND HAS NOT BEEN ADJUDICATED UPON BY THE FAA. MATTER IS RESTOR ED BACK TO FAA FOR THE LIMITED PURPOSE OF DECIDING GROUND NO.3 FILED BEFORE US. H E SHOULD DECIDE THE ISSUE AFTER HEARING THE ASSESSEE. GROUND NO.3 IS PARTLY ALLOWED IN FAVOUR OF THE ASSE SSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 STANDS ALLOWED IN PART. ITA NO. 6641/M/08 8. IN THE APPEAL FOR THE ASSESSMENT YEAR 2005-06, GROU ND NO.1 IS ABOUT DISALLOWANCE OF PAYMENT MADE TO THREE SUB-CONTRACTO RS, INCLUDING THE TWO TO WHOM PAYMENTS WERE MADE BY THE ASSESSEE IN THE LAST ASSE SSMENT YEAR ALSO. ITA NO. 233/M/09 ITA NO. 6641/M/08 MURARI RAJDHAR PACKERS (P) LTD., 5 AS THE FACTS ARE SAME AS OF ASSESSMENT YEAR 2004-05 , WE DECIDED GROUND NO.1 IN FAVOUR OF THE ASSESSEE. 9. GROUND NO.2 IS ABOUT ADDITION OF RS. 29,710/- BEING DIFFERENCE AS PER INCOME CREDITED IN P&L A/C AND INCOME SHOWN IN TDS CERTIFI CATE. DURING THE AO PROCEEDING, AO NOTICED THAT DEONAR INDUSTRIES HAD P AID/CREDITED RS. 1,36,64,975/- TO THE ACCOUNT OF THE ASSESSEE, WHERE AS ASSESSEE HAD RETURNED INCOME OF RS. 1,36,35,265/-. WHEN INQUIRED ABOUT THE DIFFERENCE, ASSESSEE SUBMITTED THAT SAME WAS ON ACCOUNT OF DISCOUNTS AND REBATES. AO REJECTED C LAIM MADE BY THE AO AND FAA UPHELD THE SAME. BEFORE US, AR SUBMITTED THAT ISSUE MAY BE DECIDED ON MERITS. WE FIND THAT NO EVIDENCE OF REBATE OR DISCOUNTS WERE PRODUCED BY TH E ASSESSEE BEFORE ANY OF THE AUTHORITIES. HENCE, DISALLOWANCE UPHELD BY THE FAA HAS TO BE ENDORSED. GROUND NO.2 IS DECIDED AGAINST THE ASSESSEE. 10. GROUND NO.3 IS ABOUT DISALLOWANCE MADE ON ACCOUNT O F TELEPHONE EXPENSES (15% OF THE TOTAL EXPENDITURE I.E., RS. 5752/- AND EXPENSES INCURRED ON ACCOUNT OF RENT, RATES AND TAXES (RS. 12,562/-). WE FIND THAT FAA UPHELD THE ADDITION OF TELEPHONE EXPENDITURE BECAUSE OF NON-MAINTENANCE OF CALL REGISTER. EXPENDITURE UNDER THE HEAD RENT, RATES AND TAXES WAS DISALLOWED /UPHELD BY THE AO/FAA, AS ASSESSEE HAD NOT FURNISHED ANY AGREEMENT IN THIS RE GARD. AR SUBMITTED THAT ISSUE UNDER CONSIDERATION MAY BE DECIDED ON MATERIAL AVAILABLE. DR SUPPORTED ORDER OF THE FAA. WE ARE OF THE OPINION THAT ORDER OF THE FAA DOES NOT NEED ANY INFERENCE. DISALLOWANCE OF R ENT ETC., HAS BEEN UPHELD BY US FOR THE AY 2004-05 ALSO. FOLLOWING HAS BEEN THE SA ME, WE ENDORSE THE DECISION OF THE FAA. SIMILARLY, ACTION OF THE FAA ABOUT TELEPH ONE EXPENSES IS ALSO JUSTIFIED. AS A RESULT, GROUND NO.3 IS DISMISSED. APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YE AR 2005-06 STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST AUGUST, 2012. SD/- SD/- (B.R. MITTAL) (RAJENDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE 1 ST AUGUST, 2012 TNMM ITA NO. 233/M/09 ITA NO. 6641/M/08 MURARI RAJDHAR PACKERS (P) LTD., 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI