ITO 9(2)1, MUMBAI V. JOGINDRA EXPAORTS LTD, MUMBAI

ITA 7005/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3750 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure
• Section: 69C; 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . . , , , , BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.7005/MUM/13 ( / ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER 9(2)1 2 ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 / VS. M/S. JOGINDRA EXPORTS LTD. C-101, 1 ST FLOOR, MARATHON NEXTGEN INNOVA, GANPATRAO KADAM MARG, LOWER PAREL (W), MUMBAI - 400013 ./ ./ PAN/GIR NO. : AAACJ2479D ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 09.02.2016 /DATE OF PRONOUNCEMENT: 11.05.2016 / O R D E R PER AMARJIT SINGH, JM: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 04.09.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-20, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2010-11. ASSESSEE BY: SHRI NITESH JOSHI DEPARTMENT BY: SHRI K. MOHANDAS ITA NO.7005/MUM/13 A.Y.2010- 11 2 2. THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 08.10.2010 DECLARING RETURNED INCOME AT RS. NIL. THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE CASE WAS SELECTED FOR SCRUTINY AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.1,28,24,714/-. THE ASSESSEE WAS NOT SATISFIED WITH THE SAID ASSESSMENT THEREFORE THE APPEAL WAS FILED BY THE LEARNED CIT(A) AND THE LEARNED CIT(A) ALLOWED THE EXPENDITURE TO THE TUNE OF RS.77,53,465/- U/S. 40(A)(IA) OF THE ACT AND ALSO ALLOWED THE LABOUR CHARGES OF THREE PARTIES. FEELING AGGRIEVED THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUES:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE OF RS.77,53,465/- MADE U/S.40(A)(IA), WITHOUT APPRECIATING THE FACT THAT THERE IS AN ELEMENT OF CONTRACT IN THE COMPOSITE TRANSACTION OF PROCUREMENT OF PRE-MIXED CONCRETE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION MADE ON ACCOUNT OF DISALLOWANCES OF LABOUR CHARGES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE WORK DONE BY THREE PARTIES? ISSUE NO. 1:- 4. ACCORDING TO ISSUE NO.1, THE REVENUE HAS CHALLENGED THE DELETION OF THE ADDITION ON ACCOUNT OF EXPENDITURE TO THE TUNE OF ITA NO.7005/MUM/13 A.Y.2010- 11 3 RS.77,53,465/- MADE U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). THE ASSESSING OFFICER WAS OF THE VIEW THAT THE APPELLANT INCURRED THIS EXPENDITURE FOR PROCUREMENT OF MATERIAL MADE ON ORDER OF CONTRACTUAL BASIS WHICH FALLS U/S.194C FOR TDS. THE PRE- MIXED CONCRETE IS NOT A READYMADE PRODUCTS HENCE IT IS A CONTRACTUAL IN NATURE WHICH ATTRACTED PROVISION OF U/S. 194C FOR TDS. THE FINDING OF THE ASSESSING OFFICER IS AS UNDER:- 4.3 I HAVE GONE THROUGH THE ASSESSEES SUBMISSIONS AND FIND NO MERIT IN THE SAME. THE SCOPE AND DEFINITION OF WORK HAS BEEN DRASTICALLY EXPANDED UNDER THE PROVISIONS OF SECTION 194C GOVERNING TDS UNDER THE INCOME TAX ACT. THE PREMIX CONCRETE IS NOT A READYMADE PRODUCT AS CLAIMED BY ASSESSEE WHICH COULD BE PURCHASED ACROSS THE COUNTER. IT INVOLVES TIMING, SPECIFICATIONS, TRANSPORTATION AND LABOUR AT THE CLIENTS SITE AND UNTIL THE GOODS ARE UTILIZE AT ASSESSEES SITE THE CONTRACT DOES NOT ENDS. IN THIS COMPLEX SYSTEM OF SUPPLY, THE SAID PURCHASE CLEARLY FALLS IN THE AMBIT OF PROVISIONS OF SECTION 194C AND ASSESSEE IS REQUIRED TO MAKE TDS. THE ASSESSEE HOWEVER FAILED TO MAKE TDS ON THE PAYMENTS MADE OR CREDITED IN ITS BOOKS. ACCORDINGLY THIS AMOUNT OF RS.77,53,465/- IS DISALLOWED FROM THE WIP / PROJECT COST SHOWN BY THE ASSESSEE. ITA NO.7005/MUM/13 A.Y.2010- 11 4 THE ASSESSEE FILED AN APPEAL BEFORE LEARNED CIT(A) AND LEARNED CIT(A) HAS ALLOWED THE APPEAL ON THIS POINT AND WAS OF THE VIEW THAT THE TRANSACTIONS DOES NOT COME WITHIN THE AMBIT OF THE PROVISION U/S. 194C OF THE ACT AND NO T.D.S WAS REQUIRED TO BE DEDUCTED. THE REVENUE HAS CHALLENGED ALLOWANCE OF EXPENDITURE TO THE TUNE OF RS.77,53,465/- U/S. 40(A)(IA) OF THE ACT BUT THE REVENUE DID NOT GIVE ANY DISTINGUISHABLE MATERIAL WHICH HAS NOT BEEN CONSIDERED BY THE LEARNED CIT(A) IN HIS ORDER. THE ASSESSEE PURCHASED THE PREMIXED CONCRETE FROM M/S. RMC READYMIX (INDIA) PVT. LTD. ALL THE INVOICES REVEALS THE FACT OF THE SALE OF GOOD. THE SALES TAX HAS BEEN PAID ON THE MATERIAL SOLD TO THE ASSESSEE. WITHOUT ANY CONTRARY EVIDENCE, IT CAN NOT BE PRESUMED THAT THE EXPENDITURES ARE CONTRACTUAL IN NATURE AND PAYMENT WAS MADE TO THE CONTRACTORS. IN VIEW PROVISION U/S.194C IF ANY SUM WAS PAID FOR CARRYING OUT ANY WORK OF CONTRACT BETWEEN CONTRACTOR AND ASSESSEE. IN THE INSTANT CASE M/S. RMC READYMIX (INDIA) PVT. LTD. SOLD OUT PREMIXED CONCRETE TO APPELLANT THEREFORE THERE IS NO CONTRACT FOR ANY SUCH WORK. NO DOUBT IN THE SAID CIRCUMSTANCES THE LEARNED CIT(A) HAS RIGHTLY ARRIVED AT THIS CONCLUSION THAT THE EXPENDITURE INCURRED TO THE TUNE OF RS.77,53,465/- DOES NOT FALL WITHIN THE PURVIEW OF SECTION 194C OF THE ACT. THEREFORE, IN THE SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DECIDED THIS ISSUE ON MERITS REASONABLY AND JUSTIFIABLY WHICH DOES NOT REQUIRE TO BE INTERFERE WITH AT THIS APPELLATE ITA NO.7005/MUM/13 A.Y.2010- 11 5 STAGE. THEREFORE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ISSUE NO. 2:- 5. UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE DELETION OF LABOUR CHARGES DONE ON BEHALF OF THREE PARTIES. THE ASSESSING OFFICER DISALLOWED THE LABOUR CHARGES OF RS.1,28,24,714/- MADE AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. IT IS OBSERVED BY THE ASSESSING OFFICER THAT THE APPELLANT HAS CLAIMED THE LABOUR CHARGES FOR ESCALATION IN THE NAME OF SAHIL ENTERPRISES, SWAMI SAMARTH ENTERPRISES AND A.M. CONSTRUCTION WHICH IS NOT GENUINE ONE BUT AN ACCOMMODATION ENTRY. THE ASSESSING OFFICER MADE THE ENQUIRY FROM SAHIL ENTERPRISES WHO REPLIED THE SAME BUT DID NOT EXPLAIN THE NATURE OF WORK DONE. WITH REGARD TO THE TWO PARTIES THE NOTICES U/S.133(6) WERE ISSUED WHICH WERE NOT SERVED AND APPELLANT DID NOT OFFERED ANY EXPLANATION, THESE PARTIES HAVE FILED THEIR CONFIRMATIONS OF ACCOUNT IN TAPAL WITHOUT EXPLAINING THE DETAILS. IN VIEW OF THE SAID CIRCUMSTANCES THE ASSESSING OFFICER HAS ARRIVED AT THIS CONCLUSION THAT THE EXPENDITURE TO THE TUNE OF RS.1,28,24,714/- IS UNEXPLAINED EXPENDITURE THEREFORE MADE ADDITION U/S. 69C OF THE ACT. THEREAFTER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A) HAS GIVEN THE GIVEN AS MENTIONED BELOW:- ITA NO.7005/MUM/13 A.Y.2010- 11 6 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, FINDING OF THE ASSESSING OFFICER AND COUNTER REPRESENTATION OF THE APPELLANT, CAREFULLY. I FIND THAT LEARNED ASSESSING OFFICER HAS CONFUSED HERSELF WHILE APPRECIATING THE FACTS. SHE IS NOT CLEAR AS TO WHETHER THIS IS A BOGUS EXPENDITURE TO BE DISALLOWED U/S.28 OR UNDISCLOSED EXPENDITURE TO BE ADDED U/S. 69C OF THE I.T.ACT. THE OBSERVATION OF THE ASSESSING OFFICER IN PARA 4C4 AT PAGE NO.7 IS CONTRADICTORY AND IS IN COMPLETE DISREGARD TO THE FACTS OF THE CASE. WHEN NOTICE WAS ISSUED AND STATEMENT OF MR. SURENDRA D. JAISWAL, PROPRIETOR OF M/S. SALIL ENTERPRISES WAS RECORDED ON 27.08.2010, IT WAS EXPLAINED BY HIM TO THE ASSESSING OFFICER WHILE GIVING ANSWER TO A. NO.2 THAT HE WAS PROPRIETOR OF THIS CONCERN AND WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND EXCAVATION SINCE LAST 10 YEARS. HE WAS ALSO PARTNER OF M/S. AARYAN TRADERS AND WAS SUB-CONTRACTOR OF M/S. RAM ENGINEERING COMPANY LTD. HE HAD ALSO GIVEN REPLY THAT HE WAS FILING RETURN OF INCOME. HE HAS ALSO CONFIRMED IN ANSWER TO Q.NO.4 THAT HE HAD DONE BUSINESS WITH THE APPELLANT, THEREFORE IT IS WRONG ON THE PART OF THE ASSESSING OFFICER TO MENTIONED THAT SAHIL ENTERPRISES HAS GIVEN ACCOMMODATION ENTRY, WITHOUT CONTRARY EVIDENCE IN HER POSSESSION. FURTHER, IT IS VERY BASELESS OBSERVATION OF THE ASSESSING OFFICER THAT ITA NO.7005/MUM/13 A.Y.2010- 11 7 PROPRIETOR DID NOT EXPLAIN THE CRUCIAL QUESTION WITH REGARD TO NATURE OF WORK DONE, SOURCE OF MACHINERY AND MAN POWER CLAIMED TO BE HIRE. ON THE CONTRARY ANSWER TO QUESTION NO.8,9 AND 10, REFUTE THE PRESUMPTION OF THE ASSESSING OFFICER. WHEN PROPRIETOR OF SAHIL ENTERPRISES HAS STATED TO FURNISH ALL THE DETAILS AND EVIDENCES ON 3.9.2012, IT IS NOT KNOWN WHETHER ASSESSING OFFICER HAS FURTHER MADE ANY ENQUIRY OR HAD GIVEN OPPORTUNITY FOR SUBMISSION OF SUCH DETAILS. THUS, IT IS VERY CLEAR THAT LD. ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS AND HAS PROCEEDED FOR DISALLOWANCE OF EXPENDITURE ON FLIMSY GROUND. AS REGARDS, REPLY OF SWAMI SAMARTH ENTERPRISES AND A.M.CONSTRUCTION, ASSESSING OFFICER HAS IGNORED THE CONFIRMATION OF ACCOUNTS FILED BY THEM. IF SHE WANTED TO HAVE FURTHER INFORMATION AND EVIDENCES, SHE COULD HAVE PROCEEDED ACCORDINGLY BUT SHE CHOSE NOT TO PROCEED FOR ENQUIRY, THUS HAD JUMPED TO THE CONCLUSION WITHOUT FOUNDATION OR EVIDENCE. FURTHER, WHEN THERE IS A EXPENDITURE SHOWN IN BOOKS OF ACCOUNTS, NO ADDITION CAN BE MADE U/S.69C OF THE I.T.ACT. UNDER THIS SECTION ADDITION CAN BE MADE ONLY IN A SITUATION WHERE ASSESSEE HAS INCURRED SOME EXPENDITURE AND SOURCE OF THE EXPENDITURE IS NOT EXPLAINED OR SHOWN IN BOOKS OF ACCOUNTS, THEN ONLY ADDITION CAN BE MADE UNDER DEEMING ITA NO.7005/MUM/13 A.Y.2010- 11 8 PROVISION. UNDER THIS SECTION SOURCE OF EXPENDITURE IS THE DECISIVE FACTOR AND NOT AUTHENTICITY OF THE EXPENDITURE ITSELF. APPELLANT GETS SUPPORT FROM THE DECISION OF:- (A) DELHI HIGH COURT IN CASE OF CIT VS. RADHIKA CREATION (2010) 47 DTR 60 (B) ITAT MUMBAI BENCH IN CASE OF DCIT VS. M/S. HAMLET CONSTRUCTION (INDIA) PVT. LTD. (C) ITAT DELHI BENCH IN CASE OF GLORIOUS HOSPITALITY (P) LTD. VS. DCIT(ITA NO. 2124/DEL/2012 PRONOUNCEMENT:31.10.2012) THUS, IN THE LIGHT OF THE ABOVE DISCUSSION, I REACHED TO THE CONCLUSION THAT LD. ASSESSING OFFICER HAS WRONGLY MADE THE ADDITION OF RS.1,28,24,714/- U/S. 69C OF THE I.T.ACT HENCE SUCH ADDITION IS DELETED. WHILE ARGUMENT ADVANCED BY THE LEARNED REPRESENTATIVE OF THE PARTIES NOTHING NEW MATERIAL CAME BEFORE US TO WHICH IT CAN BE ASSUMED THAT ANY SPECIFIC FACTS WERE NOT CONSIDERED BY THE LEARNED CIT(A). THE SAID ISSUE HAS BEEN DECIDED BY THE LEARNED CIT(A) IN VIEW OF THE DECISION PASSED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. RADHIKA CREATION (2010) 47 DTR 60 AND ITAT MUMBAI BENCH IN CASE OF DCIT VS. M/S. HAMLET CONSTRUCTION (INDIA) PVT. LTD. AND ITAT DELHI BENCH IN CASE OF GLORIOUS HOSPITALITY (P) LTD. VS. DCIT. ITA NO.7005/MUM/13 A.Y.2010- 11 9 IN BRIEF LEARNED CIT(A) CONSIDERED THE STATEMENT OF SURENDRA D. JAISWAL PROPRIETOR OF SAHIL ENTERPRISES WHEN HE ADMITTED THE BUSINESS WITH APPELLANT WHEREAS NOTHING CONTRARY EVIDENCE WAS FOUND WITH ASSESSING OFFICER. NO INQUIRY WAS DONE BY THE ASSESSING OFFICER. IN CONNECTION WITH THE TRANSACTION WITH SWAMI SAMARTH ENTERPRISES AND A.M. CONSTRUCTION IS CONCERNED, THEY CONFIRMED THE ACCOUNTS AND ASSESSING OFFICER DID NOT ENQUIRY WITH THESE PARTIES. TRANSACTION HAS BEEN SHOWN IN THE ACCOUNT BOOK WHICH HAS NOT BEEN FALSIFIED BY THE ASSESSING OFFICER BY CONDUCING ANY INQUIRY IF ANY. THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS PASSED THE ORDER ON THIS ISSUE JUDICIOUSLY AND CORRECTLY WHICH DOES NOT REQUIRE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. IN RESULT THE APPEAL FILED BY THE REVENUE IS TREATED AS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MAY , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 11 TH MAY, 2016 MP ITA NO.7005/MUM/13 A.Y.2010- 11 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI