ADDL CIT 9(1), MUMBAI V. CHAWLA INTERBILD CONSTRUCTION CO. P. LTD, MUMBAI

ITA 7026/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9311 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: SUBHADH S SETTY
• Keywords: Rejection of books of accounts; Additional evidence; Assessment record; Onus to prove; Revised return

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA/7026/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 ACIT RANGE 9(1), R. NO. 223, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS M/S CHAWLA INTERBILD CONSTRUCTION CO. P. LTD.,3,HOMELANDS, 55 HILL ROAD, BANDRA(W), MUMBAI-400050 PAN: AAACC2963K ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY :SHRI SUBHADH S. SETTY + * / REVENUE BY :SHRI PREMANAND J. ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 11.03.2015 -.# + ), / DATE OF PRONOUNCEMENT : 11.03.2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.17.09.2012 OF CIT (A)-19,M UMBAI THE ASSESSING OFFICER(AO)HAD FILED FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) WAS CORRECT IN DELETING THE ADDITION OF RS. 4,88,77,8621- ON ACCOU NT OF DISALLOWANCE @ 40% OF THE CONTRACT PAYMENTS AS THE ASSESSEE FAILED TO PRODUCE ALL THE 13 PARTIES EVEN AFTER ISSUE OF NOTICE U/S.133(6). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) WAS CORRECT IN DELETING THE ADDITION OF RS. 61,65,706/ - ON ACCOUN T OF EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT WITHOUT CONSIDERING THE FACT, THAT THE ASSESSEE FAI LED TO SUBSTANTIATE ITS CLAIM OR SUBMIT NECESSARY DOCUMENTARY EVIDENCE THAT THE SAID EXPENSES WERE WH OLLY AND EXCLUSIVELY RELATED TO THE PURPOSE OF ITS BUSINESS. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF CIVIL E NGINEERING AND CONTRACTORS,FILED ITS RETURN OF INCOME ON 30.09.2009,DECLARING TOTAL INCOME OF RS.1 ,54,22,603 /-.LATER ON REVISED RETURNS OF INCOME WERE FILED ON 25.06.2010,26.11.2010 AND 02.1 2.2010.THE AO FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT,ON 08.12.2011,DETERMINING THE TOTAL INCOME AT RS.8.51CRORES. 2. EFFECTIVE GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF 40% OF THE CONTRACT PAYMENT,AMOUNTING TO RS.4.88 CRORES.DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICE U/S.133(6) WERE ISSUED TO 13 PARTIES WHICH WERE RETURNED BY POSTAL AUTHORITIES.T HEREFORE,THE AO DISALLOWED THE 40% OF THE TOTAL PAYMENT OF RS.12,21,94,656/- AMOUNTING TO RS 4,88,77,862/- AND ADDED TO THE TOTAL INCOME. IN APPEAL THE ASSESSEE FURNISHED THE DETAILS REGARD ING THE PAYMENT MADE TO THE 13 PARTIES ALONG - WITH PAN,THEIR ADDRESS, THE TDS DEDUCTED ON THOSE P AYMENTS & THEIR SUBSEQUENT PAYMENT TO GOVERNMENT TREASURY. THE ADDITIONAL EVIDENCE FILED BY THE APPELLANT WERE ADMITTED BY THE FIRST APPELLATE AUTHORITY(FAA) AS SAME WAS IN SUPPORT OF THE CLAIM MADE BY THE ASSESSEE IN APPEAL. SHE REMANDED THE MATTER TO THE AO FOR EXAMINATION A ND REPORT. THE AO VIDE LETTER DTD.02.08.2012 SUBMITTED THE REMAND REPORT AND STATED THAT IN RESP ECT TO SUMMON U/S.131, THE FOLLOWING PARTIES 2 ITA NO.7206/MUM/2012-AY.2009-10/CICPL 2 APPEARED AND SATISFACTORILY EXPLAINED THE PAYMENTS RECEIVED BY IT FROM THE ASSESSEE COMPANY IN LIEU OF SERVICE PROVIDED TO IT,NAMELY(I) DIVYA ENTE RPRISES ,(II) M/S. RISHAB ASSOCIATES,(III) SHRI RAM DULARE(IV) SHRI DILIP RAJESH BISWAS (V) SHRI SU DHANYA BISWAS (VI) SHRI MANIK PATHRA (VII) SHRI MANOJ PANDIT(VIII) SHRI SHANKAR NARAYAN PANDEY .IN RESPONSE TO THE REMAND REPORT FILED BY THE AO,THE ASSESSEE MADE ELABORATE SUBMISSION BEFO RE THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,R EMAND REPORT AND THE ASSESSMENT ORDER THE FAA HELD THAT THE AO IN RESPECT OF 8 PARTIES HAD ST ATED THAT THE DOCUMENT FURNISHED WERE VERIFIED AND SAME WERE IN ORDE,THAT IN RESPECT TO THE 5 PART IES WHICH DID NOT APPEAR IN RESPONSE TO THE SUMMON ISSUED U/S.131,THE SUBMISSION OF THE ASSESSE E HAD BEEN CONSIDERED,THAT THE HAD GIVEN THE COMPLETE DETAILS IN RESPONSE TO THE FIVE PARTIES,TH AT TDS WAS DEDUCTED AND PAID TO THE GOVT. TREASURY,THAT THE AO APART FROM ISSUING THE SUMMON HAD NOT TAKEN ANY OTHER FURTHER ACTION TO VERIFY THE DETAIL,THAT IN REMAND REPORT THE AO HAD NOT STATED WHEN THE PARTIES DID NOT APPEAR IN RESPONSE TO HIS SUMMON WHAT FURTHER ACTION HE HAD T AKEN, I.E., DID HE LEVY ANY PENALTY AGAINST THE PERSON WHO HAVE NOT APPEARED IN RESPONSE TO THE SUM MON U/S.131? OR DID HE TAKE ANY EFFORT TO VERIFY THE DETAILS FROM THE ASSESSMENT RECORDS OF T HE PARTIES WHOSE PANS ARE FURNISHED?THE FAA FURTHER HELD THAT THE ASSESSEE COULD NOT BE HELD RE SPONSIBLE IF THE PARTIES DID NOT APPEAR IN RESPONSE TO THE SUMMON ISSUED BY THE AO,THAT THE AS SESSEE HAD FURNISHED WHATEVER DETAIL WAS AVAILABLE ITS POSSESSION, THAT IT HAD FURNISHED THE PAN OF THE PARTIES, THE DETAILS OF THE TDS DEDUCTED AND PAID, TO THE GOVERNMENT TREASURY, THAT IT HAD FURNISHED-IN RESPECT TO ONE PARTY, I.E., M/S. SWASTIK CONTRACTOR AND CO.-THAT BOTH THE PARTI ES WERE HAVING DISPUTE BETWEEN THEMSELVES. FINALLY,THE FAA HELD THAT IN VIEW OF THE DETAILS FU RNISHED AND DISCUSSION HELD DURING THE COURSE OF APPELLATE PROCEEDINGS, SHE WAS OF THE OPINION THAT THE PAYMENT MADE BY THE ASSESSEE WAS GENUINE IN RESPECT TO THOSE PARTIES,THAT THE AO HAD NOT BRO UGHT OUT ANYTHING ON RECORD TO SHOW THAT THE PAYMENT MADE TO THESE PARTIES WERE NOT FOR BUSINESS PURPOSES AND WERE BOGUS AND WERE NOT FOR BUSINESS PURPOSES. 3. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) ARGUED T HAT THE ASSESSEE HAD NOT PRODUCED THE PARTIES BEFORE THE AO FOR VERIFICATION,THAT SUMMONS ISSUED TO THEM WERE SERVED,THAT FAA HAD DELETED THE ADDITION WITHOUT CONSIDERING HE MATERIA L GATHERED BY THE AO.AUTHORISED REPRESEN - TATIVE(AR) STATED THAT THE ASSESSEE HAD FILED DETAI LS OF PAYMENTS BEFORE THE AO/FAA,THAT ALL THE PARTIES WERE EXISTING ,THAT DETAILS OF THEIR PAN AN D TAX DEDUCTED WERE MADE AVAILABLE TO THE AO,THAT HE DID NOT MAKE FURTHER INQUIRIES AND JUST MADE THE ADDITION,THAT FAILURE OF PARTIES TO APPEAR BEFORE THE AO AFTER RECEIVING SUMMONS SHOULD NOT RESULT IN MAKING ADDITIONS TO THE INCOME OF THE ASSESSEE . 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT OUT OF THE 13 PARTIES ABOUT WHOM INQUIRIES WERE MADE BY THE AO ,FIVE PARTIES HAD NOT APPEARED BEFORE THE AO IN PURSUANCE OF THE SUMMONS ISSUED TO THEM,THAT THE ASSESSEE PROVIDED THE COMPLETE DETAILS ABOUT THE FIVE PARTIES,THAT IT ASSESSEE HAD NOT ON LY DEDUCTED THE TAX AT SOURCE AS PER THE PROVISIONS OF LAW BUT HAD ALSO DEPOSITED THE DEDUCTED TAX IN G OVERNMENT ACCOUTNT.WE HAVE GONE THROUGH THE DETAILS FILED BY THE ASSESSEE BEFORE THE FAA IN RE SPONSE TO THE REMAND REPORT OF THE AO.IN THE DETAILS,DATES OF PAYMENTS,NET AMOUNTS PAID,CHEQUE N OS.,DETAILS OF THE BANK BRANCHES,AMOUNT OF TDS MADE,DETAILS OF TOTAL AMOUNTS OF THE BILL AND D ETAILS OF TDS MADE,HAVE BEEN FURNISHED IN TABULAR FORM.THUS, THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS CAST UPON IT ABOUT THE PAYMENTS MADE TO THE FIVE PARTIES.IT IS FOUND THAT THE AO DI D NOT MAKE INQUIRY IN THAT REGARD.HE HAD DETAILS OF THE PARTIES AND TDS MADE BY THE ASSESSEE .IF HE HAD ANY DOUBT ABOUT THE GENUINENESS OF THE PAYMENTS MADE BY THE ASSESSEE HE SHOULD HAVE MADE FURTHER INQUIRIES.IT IS A FACT THAT PARTIES DID NOT APPEAR BEFORE THE AO,BUT THEIR NON APPEARANCE C ANNOT BE THE SOLE BASIS FOR MAKING SUCH A HUGE ADDITION TO THE INCOME OF THE ASSESSEE .WE AGR EE WITH THE FAA THAT THE ASSESSEE CANNOT COMPEL THE PARTIES TO APPEAR BEFORE THE AO.ALL THE DOCUMENTARY EVIDENCES WERE MADE AVAILABLE TO THE AO,INCLUDING THE BANK DETAILS.HE DECIDED NOT TO MAKE INQUIRIES EVEN THOUGH THE PAN OF THE 3 ITA NO.7206/MUM/2012-AY.2009-10/CICPL 3 PARTIES WERE AVAILABLE TO HIM.THE ASSESSEE CLAIMED THAT IT WAS HAVING DISPUTE WITH ONE OF THE PARTIES AND THAT PARTY WAS NOT EXTENDING COOPERATIO N.THE AO HAD NOT BROUGHT ON RECORD ANYTHING TO PROVE NON-GENUINENESS OF THE TRANSACTIONS IN QUE STION.IT IS NOT THE CASE OF THE AO THAT THE EXPENDITURE INCURRED WAS BOGUS OR WAS NOT FOR WHOLL Y OR EXCLUSIVELY FOR THE BUSINESS PURPOSES.CONSIDERING THE AVAILABLE DOCUMENTARY EVID ENCES PRODUCED BY THE ASSESSEE DURING REMAND PROCEEDINGS AND BEFORE THE FAA,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY,THEREFOR E,CONFIRMING HER ORDER,WE DECIDE FIRST GROUND OF APPEAL AGAINST THE AO. 5. NEXT GROUND OF APPEAL PERTAINS TO DELETING THE ADDI TION OF RS.61.65 LAKHS ON ACCOUNT OF EXPENSES DEBITED TO P&L ACCOUNT.DURING THE ASSESSME NT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD DEBITED VARIOUS EXPENSES UNDER THE DIFFERENT HE ADS OF EXPENDITURES, WHICH ARE AS UNDER: I) OPERATIONAL EXPENSES OF RS. 14,80,71,550/- (INCLUDES AN AMOUNT OF RS. 12,21,94,656/-, WHICH HAD ALREADY BEEN DISALLOWED. RS. 2,58,76, 904/- II) UNDER THE HEADS SALARIES, WAGES AND BENEFITS TO EMPLOYEES RS. 2,28,92,639 /- III) ADMINISTRATIVE OVERHEADS RS. 1,24,77,698/ - IV) INTEREST AND GURANTEE CHARGES RS. 4,09, 819/- TOTAL EXPENSES RS. 6,16,57,060/- THE ASSESSEE WAS ASKED TO SUBMIT NECESSARY SUBMISSI ON AND DOCUMENTARY EVIDENCES TO PROVE THAT SUCH EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS.AS PER THE AO,THE ASSESSEE DID NOT SUBSTANTIATE ITS CLAIM OF V ARIOUS EXPENSES AND DID NOT DISCHARGE ITS ONUS TO PROVE THE VARIOUS EXPENSES WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS.HE HELD THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , 10% (RS.61.65 LAKHS)OF THE TOTAL EXPENDITURE CLAIMED IN THE PROFIT & LOSS ACCOUNT UNDER THE ABOV E SAID HEADS WAS TO BE DISALLOWED FOR WANT OF SUBMISSIONS AND DOCUMENTARY EVIDENCES. 6. AGAINST THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA HELD THAT THE AO HAD MADE ADDITION ON ESTIMATION,THAT HE HAD NOT BROUGHT OUT ANY EVIDENCE ON RECORD TO SHOW THAT 10% OF THE PAYMENTS WERE FOR NON BUSINESS PURPOSES,THAT THE AS SESSEE HAD FURNISHED COMPLETE DETAILS IN RESPECT OF SALARY,WAGES AN BENEFITS TO THE EMPLOYEE S ALONG WITH PANS,DESIGNATIONS AND ADDRESSES,THAT THERE WAS NO JUSTIFICATION FOR MAKIN G ESTIMATED 10% DISALLOWANCE,THAT DETAILS OF OPERATIONAL EXPENSES WAS ALSO EXPLAINED SATISFACTOR ILY,THAT ADMINISTRATIVE EXPENSES WERE ALSO EXPLAINED BY FURNISHING DETAILS.IT WAS FURTHER HELD THAT EXPENSES INCURRED UNDER THE HEADS MOTOR CAR EXPENSES(RS.9.06 LAKHS),TELEPHONE EXPENSES(RS.6 .15 LAKHS),TRAVELLING EXPENSES(RS.3.03 LAKHS) AND BUSINESS PROMOTION EXPENSES(RS.2.01 LAKHS)WERE VOUCHER BASED AND WERE NOT COMPLETELY VERIFIABLE.THE FAA DISALLOWED 10% (RS. 2.02 LAKHS)O F SAID EXPENSES. 7.BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO.TH E AR ARGUED THAT THE ASSESSEE FILED COMPLETE DETAILS BEFORE THE AO OF INCURRING OF EXPE NDITURE EVEN THEN HE MADE ADDITION WITHOUT ANY BASIS,THAT DETAILS OF ADMINISTRATIVE AND OTHER EXPENSES WERE SUBJECT TO AUDIT,THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD NOT GIVEN ANY COGENT REASON FOR MAKING AD HOC D ISALLOWANCE OF 10% EXPENSES CLAIMED BY THE ASSESSEE UNDER VARIOUS HEADS.HE HAD NOT GIVEN ANY REASONS FOR MAKING DISALLOWANCE.WE ARE UNABLE TO UNDERSTAND AS TO HOW THERE CAN BE DISALLO WANCE THAT ALSO ON AN ESTIMATED BASIS FOR THE SALARIES AND WAGES PAID TO THE EMPLOYEES OF A CORPO RATE ENTITY WITHOUT BRINGING OUT DISCREPANCY 4 ITA NO.7206/MUM/2012-AY.2009-10/CICPL 4 ON RECORD IN THE BOOKS OF ACCOUNTS.SIMILARLY,THERE WAS NO JUSTIFICATION FOR DISALLOWING PART OF OPERATIONAL EXPENDITURE.WE FIND THAT THE FAA HAD MA DE A DISALLOWANCE OF CERTAIN EXPENSES THAT WERE VOUCHER BASED AND WERE NOT VERIFIABLE.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA IS JUSTIFIABLE AND DOES NOT NEED A NY INTERFERENCE FROM US.SO,UPHOLDING HER ORDER, GROUND NO.2 IS DECIDED AGAINST THE AO. AS A RESULT,APP EAL FILED BY THE AO STANDS DISMISSED. ( 9 '() + : + ) ;<. ORDER PRONOUNCE D IN THE OPEN COURT ON 11 TH , MARCH,2015 . 8 + -.# > ?' 11 @ , 201 5 . + 7 A SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ?' /DATE:11.03 . 2015. SK 8 8 8 8 + ++ + &) &) &) &) B #) B #) B #) B #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR C BENCH, ITAT, MUMBAI / E7 &)' , . . . 6. GUARD FILE/ 7 F ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, G / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI