LARK CONSTRUCTION PVT. LTD., MUMBAI V. ADDL. CIT, PANVEL

ITA 683/MUM/2011

• Counselvise Citation: 68319914 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 03-04-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: M A GOHEL
• Keywords: Reasonable cause; Corroborative evidences; Ignorance of law
• Section: 145; 144

Judgement Text

, VKBZ VKBZ VKBZ VKBZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL M EMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.683/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2005-06 LARK CONSTRUCTION PVT. LTD. RUNANUBANDH, ROAD NO.1, SECTOR 19, NEW PANVEL, MUMBAI-410217 VS ADDL. CIT, PANVEL RANGE, 3 RD FLOOR, TRIFED TOWER, KHANDA COLONY, KHANDESHWAR, PANVEL-410206 PAN: AAACL4197N ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI M.A.GOHEL + * / REVENUE BY : SHRI PITAMBER DAS ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 03-04-2014 -.# + ), / DATE OF PRONOUNCEMENT : 03-04-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT. 31.08.2010 OF THE CIT(A)- I, MUMBAI, ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL : I. ESTIMATION OF INCOME AT 7% OF TURN OVER: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (CIT (A)) ERRED IN CONFIRMING ESTIMAT ION OF INCOME AT 7% OF TURNOVER OF THE APPELLANT. 1.2 IT IS SUBMITTED THAT THE RELEVANT RECORD CONSIS TING OF BILLS, VOUCHERS ETC. WAS LOST DURING THE FL OODS IN JULY, 2005. THUS, NON PRODUCTION OF SUCH SUPPORT ING DOCUMENTS WAS NEITHER INTENTIONAL NOR DELIBERATE AND HENCE, THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. 1.3 IT IS SUBMITTED THAT EVEN IF THE BOOK RESULTS A RE REJECTED AND INCOME IS ESTIMATED, ONE CANNOT LOO SE SIGHT OF THE PAST RECORD AND HISTORY OF THE ASSESSE E TO ARRIVE AT THE % OF INCOME TO BE ESTIMATED. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT THE ESTIMATION OF INCOME @ 7% OF TURNOVER IS EXCESSIVE, UNREASONABLE AND UNWARRANTED AND ACCORDI NGLY, THE SAME BE REDUCED CONSIDERABLY KEEPING IN MIND THE PAST RESULTS OF THE APPELLANT. II. ENHANCEMENT OF INCOME VIS-A-VIS DISALLOWANCE UN DER SECTION 40(A)(IA) RS. 13,95,442: 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTIN G THE ENHANCEMENT OF INCOME BY RS.13,95,442 APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. 2.2 IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DO NOT GET ATTRACTED WHEN THE BOOK RESULTS ARE REJECTED AND TOTAL INCOME IS ESTIMATED AS A % OF TOTAL INCOME. IT IS SUBMITTED THAT THE CONCESSION MADE BY THE AUT HORIZED REPRESENTATIVE DUE TO IGNORANCE OF LAW DOES NOT CONFER ANY JURISDICTION ON THE REVENUE TO ASSESS AN AMOUNT. 2 ITA NO.683/MUM/2011 LARK CONSTRUCTION PVT. LTD. IN VIEW OF THE ABOVE, THE APPELLANT PRAYS THAT THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT RESULTING INTO ENHANCEMENT OF INCOME MAY KINDLY BE DELETED. THE APPELLANT HEREBY RESERVES THE RIGHT TO ADD TO, ALTER OR AMPLIFY, THE ABOVE GROUNDS OF APPEAL. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF CIVIL C ONSTRUCTION,FILED ITS RETURN OF INCOME ON 31. 10.2005 DECLARING TOTAL INCOME OF RS.26.21 LAKHS.AS SESSING OFFICER(AO) FINALISED THE ASSESSMENT ON 27.12.2007,DETERMINING THE TOTAL INCOME OF THE A SSESSEE AT RS. 42.17 LACS. APPEAL FILED BY THE ASSESSEE IS DELAYED BY 71 DAYS. MANAGING DIRECTOR OF THE COMPANY VIDE HIS AFFIDAVIT,DATED 02.04.2014,SUBMITTED THAT DUE TO PR EOCCUPATION WITH OTHER OFFICE WORK AND FREQUE -NT TRAVELLING TO JOB-SITES AT NASIK AND CHHINDWARA APPEAL COULD NOT BE FILED IN TIME, THAT DURING THE FIRST WEEK OF JANUARY 2011,HE REALISED THE LAPS E, THAT ON 07.01.2011 HE FORWARDED THE ORDER OF THE FIRST APPELLATE AUTHORITY(FAA)TO HIS CHARTERED ACCOUNTANT(C.A),THAT THE C.A. IN TURN CONSULT -ED M/S. AMJ & COMPANY WHO FILED THE APPEAL BEFORE THE TRIBUNAL,THAT DELAY WAS NEITHER INTENTIONAL NOR DELIBERATE,THAT IT WAS BECAUSE OF O VER SITE AND INADVERTENCE, THAT DELAY SHOULD BE CONDONED.BEFORE US,AUTHORISED REPRESENTATIVE (AR) O F THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE M.D. HE FURTHER STATED THAT AT THAT TIM E M.D. WAS OUT OF MUMBAI REGULARLY,THAT NO OTHER RESPONSIBLE PERSON WAS PRESENT IN THE OFFICE AT THAT TIME.HE RELIED UPON THE ORDER OF SHRI Y.P.TRIVEDI(ITA/5994/MUM/2010-DT.11 TH JULY 2012.)DEPARTMENTAL REPRESENTATIVE(DR)STATED T HAT APPLICATION FILED BY THE ASSESSEE SHOULD NOT BE ENT ERTAINED AND DELAY SHOULD NOT BE CONDONED.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL BEFORE US.WE ARE OF THE OPINION THAT THERE WAS A REASONABLE CAUSE FOR NOT FILING THE APP EAL IN TIME.CONSIDERING THE CASE RELIED UPON BY THE AR AND THE FACTS OF THE CASE,WE ARE OF THE OPIN ION THAT MATTER UNDER CONSIDERATION IS A FIT CASE FOR CONDONING THE DELAY.THEREFORE,PRAYER FILED BY T HE ASSESSEE IN THIS REGARD IS ACCEPTED. 3 .DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT AS SESSEE HAD DEBITED AN AMOUNT OF RS.2.55 CRORES ON MATERIAL AND STORES OF RS.73.36 LACS ON T RANSPORT-CHARGES.ASSESSEE DID NOT PRODUCE SUPPORTING BILLS AND VOUCHERS IN RESPECT OF THESE E XPENSES.INVOKING THE PROVISIONS OF SECTION 145 (3) OF THE ACT,AO HELD THAT BOOKS OF ACCOUNTS OF TH E ASSESSEE WERE NOT COMPLETE, THAT SAME WERE NOT SUPPORTED BY BILLS AND VOUCHERS, THAT THE EXPEN SES INCURRED IN CASH WERE NOT VERIFIABLE, THAT ASSESSEE HAD NOT PRODUCED ANY PRIMARY DOCUMENT TO S UPPORT THE EXPENSES.HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT SHOULD NOT BE C OMPLETED AS PER THE PROVISIONS OF SECTION 144 OF THE ACT AND INCOME SHOULD NOT BE ASSESSED AT 8% OF THE GROSS RECEIPTS.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE INCOMPLETE BECAUSE OF NON-AVAILABILITY OF BILLS AND VOUCHERS. CONSIDERING THE DISCREPANCIES OF THE BOOKS OF ACCOUNT, HE HELD THAT NET PROFIT RATE OF 7% OF THE TURNOVER (RS.6.02 CRORES) WOULD BE REASONABLE INCOME TO BE TAXED FOR THE YEAR UNDER APPEAL. ACCOR DINGLY, HE ASSESSED THE INCOME OF RS.42,17, 941/-. 3.1 .AGGRIEVED BY THE ORDER OF THE AO,ASSESSEE PREFERRE D AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT IN ABSENCE OF SUPPORTING DOCUMENTS OF EXPENSES THERE WAS NO OTHER ALTERNATIVE LEFT TO THE AO TO ESTIMATE THE INCOME AFTER REJECTING THE BOOKS RESULTS,THAT THERE WAS NO INFIRMITY IN THE OR DER OF THE AO.FINALLY,HE CONFIRMED THE ACTION OF THE AO ABOUT REJECTING THE BOOKS RESULTS AND ESTIMA TING THE INCOME AT RATE OF 7% OF THE TURNOVER. 3.2. BEFORE US,AR SUBMITTED THAT ASSESSEE-COMPANY HAD SH OWN THE PROFIT @4.6% OF THE TURNOVER, THAT SUPPORTING EVIDENCES COULD NOT BE PRODUCED BEC AUSE OF UNAVOIDABLE CIRCUMSTANCES, THAT IN EARLIER YEARS NET PROFIT WAS LESS THAN THE ESTIMATE MADE BY THE AO.DR SUBMITTED THAT ESTIMATE MADE BY THE AO WAS REASONABLE,THAT PROFIT ON EARLIE R OR SUBSEQUENT YEARS COULD BE COMPARED WITH THE PROFIT FOR THE YEAR UNDER CONSIDERATION WITHOUT BRINGING THE FACTS OF THOSE YEARS. HE REFERRED TO PAGE 18 OF THE PAPER BOOK. 3.3 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT ASSESSEE HAD NOT PRODUCED SUPPORTING DOCUMENTARY EVIDENCES D URING THE ASSESSMENT PROCEEDINGS.IN THESE 3 ITA NO.683/MUM/2011 LARK CONSTRUCTION PVT. LTD. CIRCUMSTANCES,AO HAD TO ESTIMATE THE TAXABLE INCOME .WE FIND THAT AFTER ISSUING A SHOW-CAUSE NOTICE AND CONSIDERING THE SUBMISSIONS OF THE ASSES SEE,HE ESTIMATED THE INCOME @ 7% OF THE TURNOVER.WE FURTHER FIND THAT DURING THE YEAR, ASSE SSEE HAD RECEIVED RS. 14.18 LAKHS ON SETTLEMENT OF EARLIER YEARSCLAIMS.IN THE MATTER BEFORE US, AO HAS ESTIMATED THE PROFIT @ 7% ON TURNOVER. IN OUR OPINION HIS ORDER AND ORDER OF THE FAA, WHO UPH ELD THE ACTION OF THE AO, DO NOT SUFFER FROM ANY INFIRMITY CONSIDERING THE PECULIAR FACTS OF THE CASE UNDER APPEAL.IN THIS CASE THE ASSESSEE HAD NOT PRODUCED THE SUPPORTING EVIDENCE,SO,THE AO HAD TO ADOPT SOME ESTIMATE.IN OUR OPINION,HIS ESTIMATION WAS REASONABLE.THEREFORE,CONFIRMING THE ORDER OF THE FAA,WE DECIDE GROUND NO.1 AGAINST THE ASSESSEE. 4. GROUND NO.2 IS ABOUT ENHANCEMENT OF INCOME FOR VIOL ATION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT.DURING THE APPELLATE PROCEEDINGS, FAA FOUND THAT ASSESSEE HAD FAILED TO DEDUCT TDS ON THE PAYMENT OF TRANSPORT CHARGES OF RS. 12,64,942/- AND PROFESSIONAL AND LEGAL CHARGES OF RS. 1.31 LACS, THAT THE AO HAD OMITTED TO DISALLOW THE EXPEN DITURE AND TO ADD IT TO THE RETURNED INCOME. IT WAS ARGUED BEFORE THE FAA THAT INCOME OF THE ASSESS EE SHOULD BE ENHANCED BY RS. 13.95 LACS. AS PER THE FAA,AR OF THE ASSESSEE SIGNED AN ORDER-SHEE T AGREEING FOR THE SAID DISALLOWANCE. ACCORDINGLY,HE DIRECTED THE AO TO MAKE AN ADDITION OF RS.13.95 LACS TO THE INCOME OF THE ASSESSEE. 4.1 BEFORE US, AR SUBMITTED THAT IN THE CASE OF ESTIMA TED ADDITION, NO FURTHER DISALLOWANCE U/S.40 A (IA) OF THE ACT COULD BE MADE. HE REFERRED TO THE ORDER OF TEJA CONSTRUCTIONS DELIVERED BY THE HYDERABAD BENCH OF THE TRIBUNAL (36 DTR 220). HE AL SO RELIED UPON THE ORDERS OF BANWARI LAL BANSHIDHAR (229 ITR 229 ALL HC),INDWELL CONSTRUCTIO NS (232 ITR 776 A.P. HC) & KENARAM SAHA & SUBHASH SAHA (116 TTJ (KOL) (SB) 289/8 DTR ( KOL) (SB) (TRIB) 124. DR SUBMITTED THAT DEDUCTION OF TAX WAS LEGAL LIABILITY OF THE ASSESSE E,PROVISIONS OF SECTION 40A(IA) WERE DEEMING PROVISIONS, THAT IF THE TDS WAS PAID IN SUBSEQUENT YEARS SAME HAD TO BE ALLOWED. IN THE REJOINDER AR SUBMITTED THAT ASSESSEE HAD NOT CLAIMED THE TDS IN SUBSEQUENT YEARS. 4.2.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT HYDERABAD BENCH OF THE TRIBUNAL TEJA CONSTRUCTIONS HAS DECIDED THE ISSUE OF NON-DEDUCTION OF TDS VIS-A-VIS REJECTION OF BOOKS U/S.145(3) OF THE ACT,IN CASE OF A CONTRACTOR,AS UNDER : THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS NOT RELIE D,IT WAS REJECTED BY THE AO AND THE SAME WAS CONFIRMED.NOW,BASED ON THE RELIANCE ON THE SAME BOO KS, FOR THE PURPOSE OF INVOKING THE PROVISIONS OF S.40(A)(IA) IS IMPROPER.THE ESTIMATIO N OF INCOME TAKES CARE OF THE IRREGULARITIES COMMITTED BY THE ASSESSEE.FURTHER ADDITION BY INVOK ING S.40(A)(IA) AMOUNTS TO PUNISHING THE ASSESSEE FOR A SAME OFFENCE ON DOUBLE OCCASIONS,WHI CH IS NOT PERMITTED BY LAW IF THE ASSESSEE HAS PAID IMPUGNED AMOUNT AND NOT PAYABLE AT THE END OF THE YEAR ON THE DATE OF BALANCE SHEET TEHN THE PROVISIONS OF S.40(A)(IA)ARE NOT APPLICABLE. IT IS ONLY APPLICABLE IN RESPECT OF PAYABLE AMOUNT SHOWN IN THE BALANCE SHEET AS OUTSTANDING E XPENSES ON WHICH TDS HAS NOT BEEN MADE.FURTHER, TAX IS DEDUCTIBLE UNDER SS. 193, 194A , 194G, 194H AND 194J EITHER AT THE TIME OF PAYMENT OR AT THE TIME OF GIVING CREDIT TO THE RECI PIENT. HOWEVER, S.40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF TDS DEFAULTS WHEN AMOUNT IS PAYABLE.IF AMOUNT IS ACTUALLY PAID AND TAX IS NOT DEDUCTED UNDER THE ABOVE SECTION, S.40(A)(IA) IS NO T APPLICABLE. THERE IS DIFFERENCE BETWEEN THE WORD PAID OR PAYABLE THE LEGISLATURE USED THE WORD VERY CAREFULLY IN S. 40(A)(IA) AND IN ALL ITS WISDOM AT THE TIME OF INCORPORATING THE SECTION BY WAY OF FINANCE (NO.2) BILL,2004.SEC.40(A)(A) HAS TO BE SUBJECTED TO STRICT INTERPRETATION. GOING BY THE RULE OF STRICT INTERPRETATION THE DEFAULT WITH REFERENCE TO ACTUAL PAYMENT OF EXPENDITURE W OULD NOT ENTAIL DISALLOWANCE.THIS IS BECAUSE, THE LANGUAGE USED IN THE S.40(A)(IA) IS VERY SIMPLE , CLEAR AND UNAMBIGUOUS. RESPECTFULLY,FOLLOWING THE SAME, WE DECIDE GROUND N O.2 IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. 1)2 '() + 0 3 4 + ) 56. 4 ITA NO.683/MUM/2011 LARK CONSTRUCTION PVT. LTD. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD APRIL,2014 . 0 + -.# 7 8' 3 &6 ,201 4 . + / 9 SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8' /DATE: 03.04 . 2014. SK 0 0 0 0 + ++ + &): &): &): &): ; :#) ; :#) ; :#) ; :#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR I BENCH, ITAT, MUMBAI / :>/ &)' , . . . 6. GUARD FILE/ / 1 ':) ':) ':) ':) &) &)&) &) //TRUE COPY// 0' / BY ORDER, ? / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI