Noble Cast Comp Pvt. Ltd., Pune V. Deputy Commisisoner of Income-tax,

ITA 746/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9464 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAVAN
• Assessee Lawyers: NANDKISHOR SONAWANE
• Keywords: Business expenditure; Additional evidence
• Section: 40A(3); 143(3); 133(6); 37(1)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.746/PUN/2015 / ASSESSMENT YEAR : 2010-11 NOBLE CAST COMP . PVT. LTD., S-93, MIDC, BHOSARI, PUNE -411026. PAN : AACCN1064E. . / APPELLANT V/S DY. COMMISSIONER OF I NCOME TAX , CIRCLE-10, PRATYAKSHKAR BHAVAN, DR. AMBEDKAR MARG, AKURDI, PUNE - 44. . / RESPONDENT / APPELLANT BY : SHRI NANDKISHOR SONAWANE / RESPONDENT BY : SHRI B.Y. CHAVAN / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE ORDE R OF COMMISSIONER OF INCOME TAX (A) PUNE, 6, DATED 26.02.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS AND MANUFACTURING OF ALUMINIUM CASTING AND DIES. ASSESSEE ELECTR ONICALLY / DATE OF HEARING : 04.04.2017 / DATE OF PRONOUNCEMENT: 19.05.2017 2 ITA NO.746/PUN/2015 AY.NO.2010-11 FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 02.10.2010 DEC LARING TOTAL INCOME OF RS.38,00,290/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) OF T HE ACT VIDE ORDER DT.18.03.2013 AND THE TOTAL INCOME WAS DETERMINE D AT RS.53,65,880/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE ORDER DT.26.02.2015 GRAN TED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT (A), ASSESSEE IS NOW IN APPEAL BEFORE US. BEFORE US AND HAS RAISED THE FOLLO WING GROUNDS : 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS), PUNE-6 ERRED IN LAW AS WELL AS ON THE FACTS WHILE CONFIRMI NG DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE EXPENSES (SERVICES AVAILE D AS LABOUR CONTRACTOR FROM M/S. SOHAM MANAGEMENT SERVICES) AMO UNTING TO RS.520955/-. 2. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS), PUNE-6 ERRED IN LAW AS WELL AS ON THE FACTS WHILE DISALLOW ING BUSINESS EXPENDITURE U/S 40A (3) OF EX-GRATIA PAYMENT TO 29 PERSONS OF RS.55,140/- ON ONE DAY. 3. BECAUSE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS), PUNE-6 ERRED IN LAW AS WELL AS ON THE FACTS NOT CONSIDERIN G EX-GRATIA PAYMENT OF RS.55,140/- AS ALLOWABLE EXPENDITURE U/S 37(1). 3. FIRST GROUND IS WITH RESPECT TO DISALLOWANCE ON ACCOUN T OF UNVERIFIABLE EXPENSES: 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR VERIFIC ATION OF THE CREDITORS, INFORMATION WAS SOUGHT BY AO U/S 133(6) OF THE ACT. IN CASE OF SOHAM MANAGEMENT SERVICES (RS.5,20,955/-). AO HAS NOTED THAT THERE WAS NO COMPLIANCE OF THE NOTICE U/S 133(6) OF THE ACT. AO NOTED THAT THE ASSESSEE WAS ASKED TO FILE THE CORRECT ADDRESS OF THE CREDITOR AND EITHER PRODUCE THE PARTIES OR FILE THE RELEV ANT DETAILS CALLED FOR BY HIM. AO NOTED THAT DESPITE SEVERAL OPPORTUN ITIES GRANTED, THE DETAILS WERE NOT FURNISHED BY THE ASSESSEE. AO AT P ARA 4.3 OF THE ORDER HAS STATED THAT ASSESSEE ACCEPTED FOR THE ADDIT ION OF 3 ITA NO.746/PUN/2015 AY.NO.2010-11 RS.5,20,955/- AND ACCORDINGLY THE EXPENSES OF RS.5,20,955/- WAS ADDED TO THE INCOME. AGGRIEVED BY THE ADDITION MADE BY THE AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO CONFIRMED THE ADDITION BY HOLDING AS UNDER : 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AS WELL AS REPLY OF THE APPELLANT. CONSIDERING THE CIRCUMSTAN CES IN WHICH THE APPELLANT COULD NOT PRODUCE THE PARTIES I.E., A -ONE ALLOYES, ADDITIONAL EVIDENCE IS ADMITTED. SINCE, THE ASSESI NG OFFICER HAS VERIFIED THE PURCHASES PERTAINING TO A-ONE ALLOYES AS DISCUSSED ABOVE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.9,89,492/-, WHILE THE AMOUNT OF RS.5,20,955/- PE RTAINING TO SOHAM MANAGEMENT SERVICES IS CONFIRMED. THUS, GROU ND NO.1 AND 2 ARE PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A). LD.D.R. ON THE OTHER HAND, SUBMITTED THAT D ESPITE VARIOUS OPPORTUNITIES, NO DETAILS WERE FURNISHED BY THE ASS ESSEE EITHER BEFORE AO OR LD.CIT(A) AND FURTHER BEFORE AO ASSESSEE HAD AGREED FOR THE ADDITION. HE THEREFORE SUBMITTED THAT IN SUCH A SITUA TION, NO INTERFERENCE TO THE ORDER OF LD.CIT(A) IS CALLED FOR. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. WE FIND THAT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, ASSESSEE WAS ASKED TO FURNISH THE REQUIRED DETAILS, FURNISH ADDRESS OF THE CREDITOR AND PRODUCE HIM BEFORE AO BUT ASSESSEE FAILE D TO COMPLY WITH THE DIRECTIONS OF AO. WE FURTHER FIND THAT AO WHILE MA KING THE ADDITION HAS NOTED THAT THE ASSESSEE HAS AGREED FOR DIS ALLOWING THE EXPENSES AND MAKING THE ADDITION. WE FIND THAT BEFORE US ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF AO. 4 ITA NO.746/PUN/2015 AY.NO.2010-11 IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH T HE ORDER OF LD.CIT(A) AND THUS, THE GROUND NO.1 OF THE ASSESSEE IS DISMISSED. 7. GROUND NOS.2 AND 3 BEING INTER-CONNECTED CONSIDERED TOGETHE R. 7.1 AO NOTED THAT ASSESSEE HAD PAID AGGREGATE CASH OF RS.55,140/- TO M/S. HANUMAN ENTERPRISES. IT WAS SUBMITTED THAT THE PAYMENT WAS TOWARDS BONUS TO VARIOUS LABOURERS CONTRACTED THR OUGH HANUMAN ENTERPRISES AND ENGAGED FOR ASSESSEES BUSINESS. THE S UBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO. HE A CCORDINGLY DISALLOWED THE PAYMENT U/S 40A(3) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO CONFIRMED THE ADDITION BY HOLDING AS UNDER : 7. THIS GROUND PERTAINS TO APPELLANTS GRIEVANCE I N RESPECT OF DISALLOWANCE OF RS.55,140/- U/S.40A(3) OF INCOME-TA X ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER VERIFIED THE LEDGER EXTRACT OF M/S. HANUMAN ENTERPRISES AND IT W AS NOTICED THAT ON A SINGLE DAY I.E 02.11.2009 AGGREGATE AMOUNT OF CASH AMOUNTING TO RS.55,140/- WAS PAID. THE ASSESSING OFFICER CONFRO NTED THE APPELLANT ON THIS ISSUE AND THE APPELLANT SUBMITTED THAT THE SAME REPRESENTS BONUS PAYMENTS MADE TO VARIOUS LABOURERS SUPPLIED B Y M/S.HANUMAN ENTERPRISES. THE ASSESSING OFFICER HELD THAT THE P LEA OF THE APPELLANT IS NOT TENABLE AS THE AS THE APPELLANT WAS NOT REQUIRE D TO PAY BONUS TO THE LABOURERS SUPPLIED BY THE CONTRACTOR AS THE APPELLA NT WAS NOT IN OBLIGATION TO PAY THE ABOVE AMOUNT. ACCORDINGLY, T HE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.55,140/- U/S. 40A(3) OF INCOME-TAX ACT AND ADDED BACK TO THE TOTAL INCOME OF THE APPELLANT . 8. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED FOLLOWING SUBMISSIONS IN THIS REGARD: THE ASSESSEE HAS PAID AN AGGREGATE AMOUNT OF RS.55 ,140/- ON A SINGLE DAY. IT IS SUBMITTED IN OUR EARLIER SUBMI SSION DATED 11/09/2014 THAT THE PAYMENT IS MADE TO THE 29 PERSO NS I.E. THE WORKERS OF CONTRACTOR AND IT RANGES FROM RS.500/- T O RS.4910/-. THE ACCOUNTING ENTRY IS ROUTED THROUGH THE CONTRACT ORS ACCOUNT. YOUR HONOUR, THERE ARE TWO TYPES OF WORKERS, ONE IS THE WORKERS WHO ARE ON THE ROLL OF THE COMPANY CAN BE SAID AS D IRECT WORKERS OF THE COMPANY AND THE OTHER ARE PROVIDED B Y THE CONTRACTORS, WORKING UNDER THE COMPANY, CAN BE SAID AS INDIRECT WORKERS, I.E. CONTRACT WORKERS ARE INDIRECTLY SUPER VISED BY THE COMPANY THROUGH THE CONTRACTOR AND THE COMPANY SUPE RVISOR. AS SUCH THE CONTRACT WORKERS ARE THE WORKERS WHO WO RK FOR THE COMPANY ONLY. 5 ITA NO.746/PUN/2015 AY.NO.2010-11 THE COMPANY HAS MADE EX-GRATIA PAYMENT, AS A SOCIAL RESPONSIBILITY AND NOT AS AN OBLIGATION UNDER ANY S TATUS. THE PAYMENT OF EX-GRATIA ON A SINGLE DAY RANGES FRO M RS.500/ TO RS.4910/- TO 29 PARTIES AMOUNTING AND AGGREGATING T O RS.55140/-. THE PAYMENT MADE IS NOT COVERED UNDER SUB SECTION ( 3) OF SECTION 40A. THE EXPENSES ARE WHOLLY INCURRED FOR THE PURPOSE OF BUSINESS UNDER SECTION (1) OF SECTION 37. 9. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE I DO NOT FIND ANY M ERIT IN THE SUBMISSIONS OF THE APPELLANT. SINCE, THE LABOURERS TO WHOM THE PAYMENT WAS MADE, WERE EMPLOYEES OF M/S. HANUMAN ENTERPRISES, THE APP ELLANT WAS NOT OBLIGED TO PAY THEM BONUS. FURTHER, THESE PAYMENTS HAVE NOT BEEN MADE DIRECTLY BY THE APPELLANT BUT THROUGH HANUMAN ENTERPRISES AND THEREFORE PROVISION OF SEC. 40A(3) OF INCOME-TAX AC T ARE CLEARLY APPLICABLE. ACCORDINGLY, ACTION OF THE ASSESSING O FFICER IN DISALLOWING THE SAME U/S. 40A(3) OF INCOME-TAX ACT IS UPHELD AN D THE GROUND IS DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 8. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BY A O AND FURTHER SUBMITTED THAT BEFORE LD.CIT(A) ASSESSEE HAD MADE AN ALTERNATE CLAIM FOR ALLOWING THE EXPENSES U/S 37(1) OF THE AC T AND HE FURTHER SUBMITTED THAT ASSESSEE EMPLOYS WORKERS CONTRA CTED THROUGH HANUMAN ENTERPRISES FOR THE MANUFACTURING ACTIVITIES BY TH E ASSESSEE AND THE PAYMENT WERE MADE RANGING FROM RS.500/- TO RS .4,910/- WAS MADE TO INDIVIDUAL WORKERS AND IT WAS ON ACCOUNT OF BONUS PAYMENT AT THE TIME OF DIWALI. HE FURTHER SUBMITTED THAT PAYMEN T WAS NORMAL BUSINESS EXPENDITURE. HE SUBMITTED THAT THOUGH ASSESSE E WAS NOT OBLIGED TO MAKE THE PAYMENT UNDER STATUTE, BUT SUBMITTE D THAT THE EXPENSES WERE INCURRED FOR THE BUSINESS PURPOSE AND WA S THEREFORE ALLOWABLE U/S 37(1) OF THE ACT. LD.D.R. ON THE OTHER HAND, S UPPORTED THE ORDER OF AO AND LD.CIT(A). 6 ITA NO.746/PUN/2015 AY.NO.2010-11 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. BEFORE US, LD.A.R. HAS SUBMITTED THAT THE PAYMENT WAS MADE TOWARDS THE BONUS TO VARIOUS WORKERS ON ACCOUNT OF D IWALI. THE PAYMENT WAS FOR THE PURPOSE OF BUSINESS. THE AFORESAID S UBMISSION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE REVEN UE. FURTHER SEC.37(1) OF THE ACT DOES NOT CURTAIL OR PREVENT AN ASSES SEE FROM INCURRING AN EXPENDITURE WHICH HE FEELS AND WANTS TO INCUR FOR THE PURPOSE OF BUSINESS. EXPENDITURE INCURRED MAY BE DIRECTL Y OR EVEN INDIRECTLY BENEFITTING THE BUSINESS IN THE FORM OF INCREASED TURNOVER, BETTER PROFIT, GROWTH ETC. AS LONG AS THE EXPENDITURE INCURRED IS WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE EXPENDITURE CANN OT BE DISALLOWED. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES IS NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE OR THE EXPENDITURE IS CAPITAL IN NATURE OR IS OF PERSONAL IN NATUR E. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE AFORESAID EXPENDITURE IS ALLOWABLE U/S 37(1) OF THE ACT AND THEREFORE THE SAME NEEDS TO BE ALLOWED. WE ACCORDINGLY, DIRECT THE DELETION OF ADDITION MADE BY AO. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THE 19 TH DAY OF MAY, 2017. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; ! DATED : 19 TH DAY OF MAY, 2017. YAMINI 7 ITA NO.746/PUN/2015 AY.NO.2010-11 '#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5 6. CIT(A)-6, PUNE PRL.CIT-5, PUNE. #$% &&'(,* '(, / DR, ITAT, B PUNE; %+,-/ GUARD FILE. / BY ORDER, // TRUE COPY // // TRUE COPY // // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '(, / ITAT, PUNE.