PRAYER FINANCE AND INVESTMENTS P.LTD, MUMBAI V. ITO 8(2)(4), MUMBAI

ITA 6905/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4240 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 08-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2012
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI AMARJIT SINGH , J M ./ ITA NO. 6905 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 0 6 - 0 7 ) PRAYER FINANCE AND INVESTMENT PVT. LTD., ABHIJIT PLOT NO.B - 9, 1 ST FLOOR, KAPOLE CHS LTD., JUNCTION OF V.M. & 11 TH ROAD, J.V.P.D. SCHEME, JUHU, MUMBAI - 400049 VS. ITO - 8(2)(4), MUMBAI ./ ./ PAN/GIR NO. : A A CCP 1239 K ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI D.V.LAKHANI /REVENUE BY : SHRI GANESH BARE / DATE OF HEARING : 1 1/ 12 /201 5 / DATE OF PRONOUNCEMENT : 10/02 /2016 / O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), MUMBAI, DATED 31 - 7 - 2012, FOR THE ASSESSMENT YEAR 20 0 6 - 0 7 . 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF WAGES PAYME NT OF RS.9,99,000/ - . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD ACQUIRED THE RIGHTS FOR DEVELOPMENT OF THE BANDUP PROPERTY VIDE AGREEMENT DATED 18 - 3 - 2006. THE AO ADDED THE LABOUR CHARGES SO IN CURRED IN THE INCOME OF ASSESSEE. IT WAS CONTENDED BY LD. AR THAT A FTER ACQUIRING THE SAID DEVELOPMENT RIGHTS, THE PLOT WAS CLEANED AND LEVELED AND OFFICIAL SURVEY WAS CARRIED OUT. S ECURITY ITA NO. 6905/12 2 GUARDS WERE HIRED TO SAFEGUARD THE PROPERTY. THE ASSESSEE FILED DE TAILS OF PAYMENT MADE TO LABOURERS, ALONG WITH MONTH WISE BREAK - UP AND ATTENDANCE REGISTERS WERE GIVEN BEFORE THE AO DURING THE COURSE OF REMAND PROCEEDINGS. AS THE LABOURERS DO NOT HAVE ANY PERMANENT ADDRESS THE SAME COULD NOT BE PROVIDED TO THE AO. NOT A GREEING WITH ASSESSEES CONTENTION, THE AO DISALLOWED THE SAME AND ADDED BACK TO THE ASSESSEES INCOME. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ADDITION AFTER HAVING FOLLOWING OBSERVATIONS : - 4.3 I HAVE EXAMINED THE FACTS AND IN THIS CASE. THERE IS NO DISPUTE ON THE FACT THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAS ASKED THE APPELLANT TO FILE NECESSARY BILLS/VOUCHERS, WITH REGARD TO THE WORK IN PROGRESS OF THE BHANDUP PROJECT. THERE IS ALSO NO DOUBT THAT THE APPELLANT HAD FAILED TO F ILE NECESSARY EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ONLY DURING THE COURSE OF APPELLATE PROCEEDINGS, THAT THE APPELLANT SUBMITTED THAT, NECESSARY EVIDENCE WAS AVAILABLE. ACCORDINGLY THE MATTER WAS REMANDED TO THE AO FOR VERIFICATION. THE AO HAS NOW OBJECTED THAT, THE EVIDENCE BEING FILED BY THE APPELLANT IS INSUFFICIENT TO ESTABLISH THE BONAFIDES OF THE EXPENDITURE. 4.4 I HAVE EXAMINED THE EVIDENCE WHICH THE APPELLANT HAS SOUGHT TO FILE DURING THE COURSE OF APPELLATE PROCEEDINGS. IT IS THE APPELLANT'S CONTENTION THAT THE ENTIRE EXPENDITURE OF RS.9,99,000/ - , WAS INCURRED FOR LEVELING OF THE PROJECT SITE AT BHANDUP. IT IS ALSO THE APPELLANT'S CONTENTION THAT, OTHER THAN CASUAL TEMPORARY LABOUR, NO MACHINERY / EQUIPMENT WAS USED TO LEVEL THE SITE. ON EXAMINATION OF THE LEDGER ACCOUNT, IT IS SEEN THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED IN CASH BETWEEN THE PERIOD 30.6.2005 AND 31.3.2006. FURTHER, IT IS SEEN THAT ROUGHLY 12 TO 15 LABOURERS WERE EMPLOYED TO UNDERTAKE THE TASK OF LEVELIN G THE LAND. NO EXPENDITURE HAS BEEN INCURRED ON HIRING OF MACHINERY OR EVEN FOR THE PURCHASE OF EQUIPMENT; SUCH AS SPADES AND BUCKETS, WHICH ARE ESSENTIAL FOR LEVELING THE LAND EVEN IF THE SAME WAS TO BE DONE MANUALLY. FURTHER, ON PERUSAL OF THE DEVELOPMEN T AGREEMENT, DATED 18.3.2006, (BETWEEN ONE MR. ABDUL KADER MOHD. HUSSAIN PITALWALA, OWNER OF THE PROPERTY, AND MR. JASPAL SINGH DEWAN SINGH CHUG, THE CONFIRMING PARTY AND THE APPELLANT), IT IS NOTED THAT, THE APPELLANT HAS AGREED TO DEVELOP THE SAID PROPER TY, WHICH WAS IN EXCLUSIVE USE, OCCUPATION AND POSSESSION OF THE CONFIRMING PARTY. CLAUSE 3(IV) OF THE AGREEMENT READS AS FOLLOWS : ITA NO. 6905/12 3 'THE CONFIRMING PARTY SHALL HAND OVER TO THE DEVELOPERS ON EXECUTION OF THESE PRESENTS THE VACANT AND PEACEFUL POSSESSION OF THE SAID PROPERTY FEE 'FROM ALL ENCUMBRANCES, LITIGATION AND WITH MARKETABLE TITLE AND S HALL SIGN THE LETTER OF POSSESSION IN FAVOUR OF THE DEVELOPERS OR ITS ASSIGNS OR NOMINEE/S AND THE OWNER SHALL CONFIRM THE SAME IN FAVOUR OF THE DEVELOPERS. ' FURT HER, AS PER THE TERMS OF THE AGREEMENT, THE DEVELOPERS WERE LIABLE TO PAY TO THE CONFIRMING PARTY A REFUNDABLE SECURITY DEPOSIT OF RS.50 LACS, WHICH HAS PAID AS FOLLOWS : - RS.5,01,000/ - ON 11.5.2005 RS.25,00,000/ - ON 1.2.2006 RS.5,00,000/ - ON 18.3.2006 4.5 FROM THE ABOVE FACTS, I AM NOT CONVINCED WITH THE GENUINENESS OF THE PAYMENT OF RS. 9,99,000 / - . FIRSTLY, THE ENTIRE PAYMENT HAS BEEN MADE IN CASH TO LABOURERS, WHOSE IDENTITY CANNOT BE VERIFIED. SECONDLY, THE APPELLANT HAS STATED THAT THE EXPENDITURE W AS FOR LEVELING OF TH E LAND, WHOSE POSSESSION WAS NOT WITH THE APPELLANT AT LEAST TILL 18.3.2006. ON THE OTHER HAND, THE ENTIRE EXPENDITURE OF RS. 9,99,000 / - HAS BEEN INCURRED BEFORE THAT DATE. THIRDLY, THE AO HAS RIGHTLY POINTED OUT THAT NO EXPENDITURE HA S BEEN SHOWN ON MACHINERY OR EQUIPMENT. AS SUBMITTED EARLIER, EVEN FOR MANUAL LEVELING SOME AMOUNT OF EXPENDITURE ON PURCHASE OF EQUIPMENT IS NECESSARY. IN THE CIRCUMSTANCES, I AGREE WITH THE AO THAT THE EXPENDITURE OF RS.9,99,000 / - , BEING REVENUE WORK IN PROGRESS, IS UNVOUCHED AND THEREFORE, CANNOT BE ALLOWED TO BE CARRIED FORWARD FOR FUTURE ADJUSTMENT AGAINST THE COST OF THE PROJECT. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. AGAINST THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEF ORE US. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND CONSTRUCTION OF BUILDING. DURING THE YEAR UNDER CONSIDERATION ASSESSEE INCURRED EXPENDITURE OF LEVELING OF LAND. THE EXPENDI TURE SO INCURRED WAS ADDED IN THE COST OF WORK IN PROGRESS. THE AO DECLINED THE SAME ON THE PLEA THAT NECESSARY VOUCHERS OF LABOUR EXPENSES WERE NOT PRODUCED. DURING THE REMAND PROCEEDING THE ASSESSEE FILED SUPPORTING VOUCHERS. HOWEVER, THE AO DID NOT AGRE E WITH THE SAME AND CONFIRMED THE ADDITION. ITA NO. 6905/12 4 THE CIT(A) ALSO DID NOT ALLOW ASSESSEES CLAIM ON THE PLEA THAT NO MACHINERY WAS EMPLOYED FOR LEVELING, THEREFORE, GENUINENESS OF THE LABOUR CHARGES CANNOT BE ACCEPTED IN THE ABSENCE OF NECESSARY VOUCHERS. FROM T HE RECORD WE FOUND THAT ASSESSEE HAS FURNISHED DETAILS OF PAYMENT MADE TO LABOURERS ALONG WITH MONTHWISE BREAKUP OF ATTENDANCE REGISTER. SINCE THE LABOURERS WERE NOT HAVING PERMANENT ADDRESS, THE SAME COULD NOT BE FURNISHED. BOTH THE LOWER AUTHORITIES HAVE NOT BROUGHT ON RECORD ANY ADVERSE MATERIAL TO HOLD THAT EXPENDITURE WAS NOT ACTUALLY INCURRED. ABSENCE OF SOME OF THE VOUCHERS CANNOT BE MADE THE BASIS FOR DISALLOWING ENTIRE EXPENDITURE SO INCURRED. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES , WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF 25% OF THE EXPENDITURE SO INCURRED ON ACCOUNT OF LABOUR PAYMENT. WE DIRECT ACCORDINGLY. 5 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10/02 /2016 SD/ - SD/ - ( AMARJIT SINGH ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10/02 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//