Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 3106 (ITAT-NAGPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 year(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-04-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
2006-2007
Appeal Filed On
11-04-2011
Judgement Text
, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI RAJENDRA , A M ITA NO. 89 / N AG / 20 1 1 ( ASSESSMENT YEAR : 200 6 - 0 7 ) D CIT, CIR - 8 , NAGPUR - 440 006 VS. M/S SHREERAM CONSTRUCTION, 164, SHIVAJI NAGAR, NAGPUR. PAN/GIR NO. : A A FFS 3701 H ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 74 / NAG /20 11 ( ASSESSMENT YEAR :2006 - 07 ) M/S SHREERAM CONSTRUCTION, C/O M/S LOYA BAGRI & CO., CHARTERED ACCOUNTANTS, GANDHIBAG, NAGPUR. VS. DCIT, CIR - 8, NAGPUR - 440 006 PAN/GIR NO. : A AFFS 3701 H ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. A. K. D A HARIA & DR. M. BHUSARI /ASSESSEE BY : MR. RAJESH V. LOYA DATE OF HEARING : 23/0 1 /13 (IN ITA 89/NAG/11) & 04/02/13(ITA NO. 74/NAG/11) DATE OF PRONOUNCEMENT : 13.02. 201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH E DEPARTMENT & ASSESSEE HA VE PREFERRED TH ESE APPEAL S BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAI NST THE ORDER OF LEANED CIT (A) - I I , NAGPUR (MAHARASHTRA) RELATING TO THE ASSESSMENT YEAR 2006 - 07, WHICH HA VE BEEN HEARD THROUGH E - COURT, MUMBAI . ITA NO S . 89 &74 /2 0 1 1 2 2 . SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE CASES, THEREFORE, FOR THE SAKE OF CONVENIENCE , BOTH THESE CASES HAVE BEEN HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER TOGETHER. 3. FIRST, WE WILL TAKE UP APPEAL OF THE DEPARTMENT I.E ITA NO. 89/NAG/2011 FOR THE ASSESSMENT YEAR 2006 - 07. 3.1 THE DEPARTMENT IS OBJECTING THE DELETING THE ADDITION OF RS. 54,54,740/ - MA DE BY THE AO UNDER SECTION 40(A)(IA) OF THE ACT. 3.2 DURING THE ASSESSMENT PROCEEDING S, THE AO NOTED THAT THE ASSESSEE HAD PAID SUPERVISION CHARGES TO THREE PARTIES FOR EXCAVATION, BACKFILLING, FORMING, CONCRETING ETC. THE AO WAS OF THE VIEW THAT THE ASSE SSEE WAS LIABLE TO DEDUCT TDS IN VIEW OF THE PROVISION OF SECTI O N 194J. SINCE THE ASSESSEE FAILED TO DEDUCT THE TDS, THEREFORE, IN VIEW OF THE PROVISION OF SECTION 40(A)(IA), HE MADE AN ADDITION OF RS. 54,54, 740/ - . 3.3 THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD THAT THE PAYMENT OF SUPERVISION CHARGES ARE ON ACCOUNT OF TECHNICAL SERVICES, THEREFORE, THE PROVISION OF SECTION 194J WAS NOT APPLICABLE. IT WAS ALSO SUBMITTED THAT ON SIMILAR FACTS FOR THE ASSESSMENT YEAR 2005 - 06, THE ADDITION WAS ALSO MADE WHICH HAS BEEN DELETED BY THE CIT(A) WHILE DECIDING THE APPEAL VIDE ORDER NO. CIT(A) - II/301/07.08, DT.02 - 04 - 2009. COPY OF THE SAME WAS ALSO FILED. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION, FOUND TH AT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THAT THE ITA NO S . 89 &74 /2 0 1 1 3 PAYMENTS ARE FOR PROFESSIONAL FOR TECHNICAL SERVICES. LEARNED CIT(A) ALSO NOTED THAT ON SIMILAR FACTS THE ADDITION MADE WAS DELETED BY HIS PREDECESSOR, THEREFORE, HE ALLOWED THE ISSUE I N FAVOUR OF THE ASSESSEE. 3.4 AGGRIEVED THEREBY, THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 3.5 AFTER CONSIDERING THE ORDER OF THE AO AND THE CIT(A) , WE FOUND THAT THE ORDER OF THE LEARNED CIT(A) DOES NOT SUFFER FROM ANY INFIRMITY. WE FURTHER NOTED THAT AGAINST THE ORDER OF THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2005 - 06 , THE DEPARTMENT FILED AN APPEAL BEFORE THE TRIBUNAL, WHICH HAS BEEN DISPOSED IN ITA NO. 159/NAG/2009 VIDE ORDER DATED 29 - 4 - 2011 . SINCE ON SIMILAR FACTS ADDITION MADE IN EARL IER HAS BEEN DELETED BY THE LEARNED CIT(A) , HAS BEEN CONFIRMED BY THE TRIBUNAL, THEREFORE, THE ORDER OF THE LEARNED CIT(A) DOES NOT SUFFER FRO ANY INFIRMITY IN THE YEAR UNDER CONSIDERATION ALSO AS LEARNED CIT(A) HAS DELETED THE ADDITION FOLLOWING THE ORDE R OF HIS PREDECESSOR FOR EARLIER YEAR. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) FOR THE YEAR UNDER CONSIDERATION ALSO. 4 . NOW, WE WILL TAKE UP APPEAL OF THE ASSESSEE I.E. ITA NO. 74/NAG/ 2011 , FOR THE ASSESSMENT YEAR 2006 - 07. 4.1 THE ONLY IS SUE IN APPEAL OF THE ASSESSEE IS AGAINST CONFIRMING THE DISALLOWANCE OF RS. 32,60,892/ - OUT OF LABOUR PAYMENT AND CHARGING INTEREST UNDER SECTION 234 B & D OF THE ACT. ITA NO S . 89 &74 /2 0 1 1 4 4.2 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS A CONTRACTOR CARRYING OUT WORK IN IRRIGATION . THE AO MADE A DISALLOWANCE UNDER SECTION 40A(IA) AT RS. 54,54,740/ - . THE CIT(A) DELETED THIS ADDITION AND THE APPEAL OF THE DEPARTMENT HAS BEEN DISMISSED BY US AS ABOVE. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON ACCOUNT OF LABOUR EXPENSES AT RS. 2,17,39,278/ - , WHICH WAS DEBITED UNDER THE HEAD EXCAVATION AND CONCRETING CHARGES AND SEPARATE MATERIAL EXPENSES HAVE ALSO BEEN BOOKED. THE A .O. TO THE FACT IN RESPECT TO THE SCHEDULE OF RATES OF THE IRRIGATION DEPARTMENT, NAGPUR, GOSIKHURD PROJECT AND PWD DEPARTMENT AND OBSERVED THAT SUPERVISION CHARGES WITHOUT MATERIAL AND LABOUR SHOULD NOT EXCEED 5% OF THE WORK RATES. A.O. ALSO CONSIDERED THE BILLS RAISED BY THESE PARTIES TAKEN IN TO ACCOUNT THE QUANTITY OF WORK SUPERVISED BY THESE PERSONS, THE RATES IN EXCESS OF THE NORMAL RATES AND DISALLOWED AN AMOUNT OF RS. 55,48,093/ - . THE CIT(A) ALLOWED THIS ISSUE IN FAVOUR OF THE ASSESSEE, HOWEVER, NO SECOND APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT. THE AO MADE A FURTHER ADDITION OF RS. 32, 60,892/ - BY OBSERVING THAT LABOUR EXPENSES HAS BEEN DEBITED IN CASH THOUGH ALL THE PAYMENTS ARE BELOW RS.20,000/ - . IN VIEW OF THE AO, THE ASSESSEE COULD NOT EXPLAIN AS TO WHO THE DETAILS OF EACH PAYMENT BELOW RS. 20,000/ - HAS BEEN ARRIVED AT AND TAKEN INTO ACCOUNT NUMBER OF DATES. THE CONTENTION OF THE ASSESSEE THAT THE PAYMENT HAS BEEN MADE THROUGH THE GANG LEADERS, WHO DISTRIBUTE THE WAGES AND VOUCHERS ARE ITA NO S . 89 &74 /2 0 1 1 5 MAINTAINED AND THE PAYMENTS ARE GENUINE, WAS NOT ACCEPTED BY THE AO. THE AO DISALLOWED 20% OF THE CONCRETING AND EXCAVATION CHARGES AMOUNTING TO RS. 32,62,892/ - . 4.3 LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE AO. THE CIT(A) WHILE CONFIRMING THE ORDER OF THE AO, HAS OBSERVED THAT THERE IS NO RECORD OTHER THAN THE VO UCHERS OBTAINED FROM GANG LEADERS. IT IS NOT LIKELY THAT PAYMENT OF THIS MAGNITUDE WOULD BE DISTRIBUTED IN AN UNORGANIZED MANNER. FURTHER CONSIDERING THE ASSESSEES CONTENTION THAT THE GANG LEADER IS RECEIVING THE PAYMENT ON BEHALF OF SUCH PARTIES AND IS T HE ONLY INTERFACE BETWEEN THE LABOURERS AND THE ASSESSEE AND PAYMENTS ARE DISBURSED IN CASH, DOCUMENTS FURNISHED BY THE ASSESSEE IN THIS REGARD IS NOT ADEQUATE. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 4.4 DETAIL ED ARGUMENTS WERE ADVANCE D ON BEHALF OF THE ASSESSEE. THE ATTENTION OF THE BENCH WAS DRAWN ON COMPARATIVE CHART OF LABOUR PAYMENT AND NET PROFIT, COPY OF WHICH IS PLACED AT PAGE 2. RELIANCE WAS ALSO PLACED ON THE WRITTEN SUBMISSION FILED BEFORE THE LEARNED CIT(A) , COPY OF WHICH IS PLACED AT PAGES 3 TO 14. 4.5 ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF AO AS WELL AS LEARNED CIT(A) . 4.6 AFTER CONSIDERING THE ORDER OF THE AO & CIT(A) , WE FOUND THAT THE ASSESSEE DESERVES TO SUCCEED IN ITS APPEAL. WE NOTED THAT FOR ASSESSMENT YEAR 2003 - 04, THE LABOUR EXPENSES OF RS. 2.18 CRORES OR ODD WERE SHOWN AND PERCENTAGE OF LABOUR EXPENSES WAS 35.46%. THE ITA NO S . 89 &74 /2 0 1 1 6 LABOUR EXPENSES FOR THESE YEARS WERE ALLOWED BY THE AO. FOR ASSESSMENTS YEARS 2004 - 05 & 2005 - 06 , IT IS SEEN THAT LABOUR EXPEN SES WHICH WAS 43.46% AND 29.92% OF THE TOTAL GROSS RECEIPTS WERE ALLOWED BY THE AO HIMSELF WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) FOR BOTH OF THESE YEARS. DURING THE YEAR UNDER CONSIDERATION, THE LABOUR EXPENSES ARE 23.09% OF TOTAL GROSS RECE IPTS, OUT OF WHICH 20% HAS BEEN DISALLOWED BY THE AO, WHICH IS CONFIRMED BY THE CIT(A) . WE FURTHER NOT ED THAT FOR ASSESSMENT YEARS 2007 - 08 & 2008 - 09 , THE LABOUR EXPENSES INCURRED IN THE RAT IO OF 20.40% AND 33.84%, HAVE BEEN ALLOWED BY THE AO HIMSELF FOR TH E ASSESSMENT YEAR 2008 - 09 COMPETED UNDER SECTION 143(3) . WE FURTHER NOTED THAT FOR ASSESSMENT YEAR 2003 - 04 , THE NET PROFIT WAS SHOWN AT 41.22%, FOR ASSESSMENT Y EAR 2004 - 05, THE NET PROFIT PERCENTAGE WAS 51.64%, FOR ASSESSMENT YEAR 2005 - 06, THERE WAS PERCE NTAGE OF 32.04% AND DURING THE YEAR UNDER CONSIDERATION, THE NET PROFIT PERCENTAGE IS 20.56 . FOR THESE TWO SUBSEQUENT YEAR, THE NET PROFIT PERCENTAGE SHOWN BY THE ASSESSEE IS 21.37% AND 22.00% RESPECTIVELY, FOR ASSESSMENT YEARS 2007 - 08 & 2008 - 09 . AFTER CON SIDERING THE COMPARATIVE CHART OF LABOUR PAYMENT AND NET PROFIT, WE FIND THAT THE ASSESSEE HAS NOT SHOWN EXCESSIVE LABOUR EXPENSES FOR THE YEAR UNDER CONSIDERATION AS FOR THE YEAR UNDER CONSIDERATION THE LABOUR EXPENSES ARE ONLY 2 3.09 AS COMPARED TO EARLI ER YEAR, WHERE THE HIGHER PERCENTAGE OF LABOUR CHARGES HAS BEEN SHOWN AS MENTIONED ABOVE. THE NET PROFIT SHOWN BY THE ASSESSEE IS 20.56% FOR THE YEAR UNDER CONSIDER ATION. BESIDES THIS, WE FURTHER NOTED ITA NO S . 89 &74 /2 0 1 1 7 THAT THE ASSESSEE MAKES PAYMENT TO GANG LEADER, WHO FU RTHER MAKES PAYMENT TO VARIOUS LABOURERS ENGAGED IN REMOTE AREA I.E IN DENSE FOREST, WHERE THE ROAD WORK IS GOING ON IN RESPECT TO CANAL, DRAIN, ETC. AND OTHER IRRIGATION PROJECTS. THE COMPLETE VOUCHERS HAVE BEEN MAINTAINED DULY SIGNED BY THE GANG LEADER, SUPERVISOR OF THE ASSESSEE COMPANY AND ONE OF THE SIGNATORY OF THE COMPANY, THE BOOKS OF ACCOUNTS ARE AUDITED, COPY OF THE LEDGER ACCOUNT CONTAINING NEW NAME OF GANG LEADER WAS ALSO MAINTAINED, WHICH WAS PRODUCED BEFORE THE AO FOR VERIFICATION. IT IS FURTH ER SEEN THAT THE INSPECTOR VERIFIED THE COPY OF THE LEDGER ACCOUNTS CONTAINING THE NAME OF GANG LEADERS. NO DEFECTS WAS POINTED OUT IN THE BOOKS OF ACCOUNTS AND IN THE VOUCHERS. THE TURN OVER OF THE ASSESSEE IS ALSO HIGH AS COMPARED TO EARLIER YEARS. THE T URN OVER OF THE ASSESSEE IS OF 9.4 CRORES OR ODD AS COMPARED TO TURN OVER OF RS. 3.5 CRORES SHOWN IN THE IMMEDIATELY PRECEDING YEAR. THE LABOUR EXPENSES IN EARLIER YEAR AS STATED ABOVE WAS 29.92% WHEREAS IN THE YEAR UNDER CONSIDERATION THE LABOUR EXPENSES INCURRED ARE ONLY 23.09%. 5 . LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FOUND THAT DISALLOWANCE MADE BY THE AO, WHICH IS CONFIRMED BY THE CIT(A) , IS NOT JUSTIFIED. ONLY REASON FOR NOT PRODUCING VARIOUS WORKERS, IT WAS EXPLAINED THAT THIS IS NO T POSSIBLE TO PRODUCE THE INDIVIDUAL LABOURERS AS THEY WERE HIRED THROUGH GANG LEADER AND GANG LEADER HAS SIGNED ALL THE PAYMENTS. VOUCHERS HAVE BEEN OBTAINED FROM THE GANG LEADER DULLY SIGNED BY HIM. THEREFORE, IN VIEW OF THESE CIRCUMSTANCES, ITA NO S . 89 &74 /2 0 1 1 8 DISALLOWANCE MADE AND CONFIRMED IS LIABLE TO BE DELETED. ACCORDINGLY, WE DELETE THE ENTIRE ADDITION MADE ON ACCOUNT OF LABOUR EXPENSES. 6 . IN THE RESULT , APPEAL OF THE DEPARTMENT IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE E - COURT ON THIS 13 TH DAY OF FEB , 201 3 . - 201 3 SD/ - SD/ - ( ) ( RAJENDRA ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 13 / 02 / 201 3 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLA NT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI
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