FINEFAB ENGINEERS P. LTD, MUMBAI V. ITO 9(1)(4), MUMBAI

ITA 807/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55077 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 09-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI T.R. SOOD, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 807/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S FINEFAB ENGINEERS PVT. LTD., APPELLANT 23, VIKAS CENTRE, SV ROAD, SANTACRUZ (W), MUMBAI 400 054 VS. INCOME-TAX OFFICER 9(1)(4), RESPONDENT ROOM NO. 224, AAYAKAR BHAVAN, MARINE LINES, MUMBAI 400 020 APPELLANT BY : MR. K. SHIVRAM RESPONDENT BY : MR. AJAY SINGH DATE OF HEARING : 28/07/2011 DATE OF PRONOUNCEMENT: 30/08/2 011 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-19, MUMBAI, PASSED ON 16/11/2009 FOR THE ASS ESSMENT YEAR 2006-07. 2. GROUND NO.1 READS AS UNDER:- THE LEARNED CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS. 3,90,752/- WITHOUT APPRECIATING THAT IN RESPECT OF RS. 1,96,000/- THE CUSTOMER HAD DEDUCTED TAX AT THE TIME OF MAKING THE PAYMENT AND IN RESPECT OF RS. 1,94,752/- IT WAS CREDITED IN THE NEXT YEAR. 3. THE AO ON VERIFICATION OF SALES BY EXAMINING THI RD PARTY ACCOUNTS, OBSERVED THAT WITH REGARD TO M/S HOLIDAY INN, THE ASSESSEE HAD RECORDED SALES OF RS. 18,30,971/- AS AGAINST RS . 26,02,996/- BY THE THIRD PARTY. THE EXPLANATION OF THE ASSESSEE WA S THAT AS AND WHEN ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 2 AMOUNTS WERE RECEIVED AND THE SAME WERE CREDITED. T HE AO REJECTED THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT SINCE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE RECE IPTS ON WHICH TAX HAD BEEN DEDUCTED OUGHT TO HAVE BEEN OFFERED TO TAX ON ACCRUAL BASIS. THEREFORE, THE AO MADE THE ADDITION OF RS. 7,72,025 /- (2602996- 1830971). AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE LEARNED AR OF THE ASSESSE E SUBMITTED THAT THERE WAS NO SUPPRESSION SINCE ALL THE SALES HAD BE EN DULY RECORDED. ACCORDING TO LEARNED AR, M/S HOLIDAY INN IS A MULTI NATIONAL GLOBAL COMPANY WITH A CHAIN OF FIVE STAR HOTELS AND SINCE THE WORK UNDERTAKEN IS SUBJECT TO STRICT QUALITY CONTROL, A BILL RAISED IS TREATED AS SALE ONLY WHEN THE BILL IS APPROVED FOR PAYMENT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD TH AT I AM UNABLE TO AGREE WITH THE SUBMISSION OF THE ASSESEE THAT THE R IGHT TO RECEIVE ACCRUES ONLY ON APPROVAL OF THE SALE BILL BY THE TE CHNICAL WING OF THE CLIENT PARTY AS IT IS SEEN THAT ALL THE SALE BILLS HAVE BEEN ACCEPTED BY THE THIRD PARTY IN THAT THE BILLS HAVE BEEN PASSED FOR PAYMENT AND HAS BEEN SUBJECT TO TDS. HE FURTHER HELD THAT SINCE THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, UNDE R THE MATCHING PRINCIPLE, THE SALES WHICH HAD BEEN SUBJECT TO TDS OUGHT TO HAVE BEEN RECORDED AS SALES DURING THE CURRENT YEAR. THE CIT(A) HELD THAT THE ASSESSEE MADE AN ALTERNATE PLEA HAS BEEN RAISED THAT THE DIFFERENCE UN-RECONCILED IS ONLY RS. 7,72,025/-, WH ICH HAVE BEEN CREDITED AS SALES AND THE PARTICULARS OF THE SAID S ALES HAVE BEEN FURNISHED. THEREFORE, HE FOUND THAT SALES OF RS. 30 ,069/-AND RS. 65,221/- HAD ALREADY BEEN CREDITED IN THE ACCOUNTS OF CURRENT YEAR WHILE THE BALANCE SUMS HAD BEEN RECORDED UNDER SALE S IN THE NEXT YEAR, AND HENCE, HE HELD THAT THERE IS NO SALES SUP PRESSION PER-SE BUT THERE IS SHIFTING OF REVENUE FROM THE CURRENT YEAR TO THE NEXT YEAR. THE CIT(A) FINALLY CONCLUDED THAT THE UNRECONCILED BALA NCE IS ONLY RS. 7,72,025/- AND OUT OF THE SAID SUM RS. 95,290/- HAS BEEN ACCOUNTED ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 3 DURING THE CURRENT YEAR. THEREFORE, HE SUSTAINED TH E ADDITION OF RS. 6,76,735/- BY GIVING RELIEF OF RS. 95,290/-. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CIT(A) WRONGLY SUSTAINED THE ADDITION WITHOUT APPRE CIATING THE FACT THAT THE CUSTOMER HAD DEDUCTED TAX AT THE TIME OF M AKING PAYMENT. TO THIS EFFECT, HE INVITED OUR ATTENTION TO PAGES 1 03 TO 106 OF PAPER BOOK, WHICH ARE FORM 16A, LEDGER ACCOUNT OF HOLIDAY INN TO ESTABLISH THAT THE TAX HAS BEEN DEDUCTED BY THE CUSTOMER WHIL E MAKING PAYMENT. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE RECORD AND GONE THROUGH THE ORDERS OF THE REVENUE AUTHORIT IES. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE REVENUE AUTHORITIES HAVE NOT APPRECIATED THE FACT THAT THE CUSTOMER HAD DEDUCTED THE TAX AT THE TIME OF MAKING PAYMENT, FOR WHICH HE HAS FILED THE EVIDENCE ON RECORD. AFTER CONSIDERING THE FACTS OF THE CASE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE RELEVANT MATERIAL AT PAGES 103 TO 1 06 OF THE PAPER BOOK-II FILED BY THE ASSESSEE AFTER PROVIDING AN OP PORTUNITY OF HEARING TO THE ASSESSEE. 8. GROUND NO. 2 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN SUSTAINING THE ADDITION OF RS. 1,92,772/- IN RESPEC T OF YES BANK LTD. 9. THE AO MADE AN ADDITION OF RS. 8,18,776/- ON ACC OUNT OF DISCREPANCIES IN BALANCES NOTICED WHEN THIRD PARTY ACCOUNTS WERE SUBJECT TO VERIFICATION. THE DETAILS OF DIFFERENCES APPEARING IN ITS DATA ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 4 AND ASSESSEES LEDGER WAS TABULATED BY THE AO A PAG E 4 TO 5 OF HIS ORDER. THE ASSESSEE CHALLENGED THE SAID ADDITION BE FORE THE CIT(A) ON THE GROUND THAT NEITHER COPY OF ACCOUNTS WERE GIVEN TO THE ASSESSEE NOR ANY OPPORTUNITY FOR RECONCILIATION GIVEN NOR AN Y SHOW CAUSE ISSUED. 10. BEFORE THE CIT(A), THE AR OF THE ASSESSEE CONTE NDED THAT SINCE NO OPPORTUNITY WAS GIVEN TO RECONCILE HE DISCREPANC IES AND THAT THE ADDITION HAS BEEN MADE WITHOUT CALLING FOR ANY EXPL ANATION SO AS TO CLARIFY THE DISCREPANCY, THE ADDITION HAS TO BE DEL ETED IN TO TO. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) HELD AS UNDER:- 4.1 AFTER CONSIDERING THE SUBMISSION DURING THE COU RSE OF APPELLATE PROCEEDINGS, THE APPELLANT WAS GRANTED SI MPLE OPPORTUNITY TO RECONCILE THE DISCREPANCIES AS NOTIC ED ON EXAMINATION OF THIRD PARTY ACCOUNTS. THE LEDGER ACC OUNTS OF ENERCON (INDIA) [1,18,058], YES BANK LTD. [1,92,772 /-] NITCO TILES LTD. [57,73], MOTIMAHAL RESTAURANT & BAR [2,52,646] , VIKAS BUSINESS CENTRE ASSOCIATE OF MERCHANT BANKER OF IND IA [24,301] WERE PRODUCED. FROM THE SAID LEDGER ACCOUNTS, IT IS SEEN THAT THE DISCREPANCIES IN RESPECT OF M/S ENERCON INDIA (P) L TD., MOTIMAHAL RESTAURANT AND ASSOCIATE OF MERCHANT BANKS STAND FU LLY RECONCILED AND HENCE NO ADDITION IS REQUIRED IN RES PECT OF THESE THREE ACCOUNTS. HENCE ADDITION TO THE EXTENT OF RS. 3,96,005/- IS DELETED. WITH REGARD TO YES BANK LTD AND NITCO TIL ES LTD., THE BALANCES REMAIN UNRECONCILED AND THE ADDITION MADE TO THE SAID EXTENT IS SUSTAINED. AS REGARD ML GUPTA AND GUPTA M ADAN LAL, THE APPELLANT HAS PRODUCED THE LEDGER ACCOUNT OF TH E PARTY VIKAS BUSINESS CENTRE. THE AO IS DIRECTED TO VERIFY WHETH ER THE THIRD PARTY ACCOUNT OF VIKAS BUSINESS CENTRE IS INDEED TH AT OF M.L. GUPTA AS STATED IN THE ASSESSMENT ORDER, AND ALLOW THE SAME SUBJECT TO VERIFICATION AND TALLYING OF THE BALANCE S. THIS GROUND IS ALLOWED IN PART. 11. AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 12. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE OF COPY OF CONFIRMATION OF ACCO UNTS RECEIVED FROM M/S YES BANK LTD., DATED 01/04/2006 ALONG WITH APPL ICATION REQUESTING TO ADMIT THE SAME AS THE SAME HAS GOT A DIRECT BEARING ON ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 5 THE ISSUE IN DISPUTE, AS THE ASSESSEE FAILED TO PRO DUCE THE SAID EVIDENCE BEFORE THE CIT(A) AS THE ASSESSEE COULD NO T OBTAIN THE SAID CONFIRMATION FROM THE BANK. HOWEVER, IT IS SUBMITTE D THAT THE ASSESSEE HAD FILED ITS LEDGER COPY AND EXPLANATION BEFORE AO AS WELL AS THE CIT(A) AND THE PRESENT CONFIRMATION IS ONLY IN SUPPORT OF ITS EARLIER SUBMISSION. SINCE THE ADDITIONAL EVIDENCE H AS GOT A DIRECTING BEARING TO DECIDE THE ISSUE, WE ADMIT THE SAME AFTE R HEARING THE PARTIES. 13. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES. 14. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RECORD AS WELL AS GOING THROUGH THE OR DERS OF THE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT THE ADDI TIONAL EVIDENCE SUBMITTED BY THE ASSESSEE FOR THE FIRST TIME BEFORE US AND THERE WAS NO OCCASION TO EXAMINE THE SAME BY THE AO, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE TH E ISSUE AFRESH AFTER EXAMINING THE ADDITIONAL EVIDENCE IN THE FORM OF CO NFIRMATION OF ACCOUNT OF M/S YES BANK LTD. SUBMITTED BY THE ASSES SEE BEFORE US AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE IN THE MATTER. THUS, THIS GROUND OF APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. 15. GROUND NO. 3 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 2,50,000/- AS SALES ESTIMATE ON AD HOC BASIS. 16. THE AO MADE THE SAID ADDITION ON THE GROUND THA T THE ASSESSEE HAD NOT PRODUCED ORIGINAL SALE BILLS ISSUED, THEREF ORE, HE WAS OF THE VIEW THAT AN ESTIMATED AMOUNT OF RS. 5,00,000/-WOUL D HAVE ESCAPED TAX DURING THE YEAR UNDER CONSIDERATION. ON APPEAL, BEFORE THE CIT(A) THE ASSESSEE VEHEMENTLY OPPOSED THE ADDITION AS MAD E STATING THAT IT ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 6 WAS BASED ON CONJECTURES AND SURMISES. IT WAS THE S UBMISSION OF THE ASSESSEE THAT THE AOS ASSUMPTION THAT IT WOULD HAV E ISSUED SALE BILLS TO THE EXTENT OF RS. 5,00,000/- IS WITHOUT ANY BASI S AND HENCE TO BE DELETED. AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE, THE CIT(A) HELD THAT THE ADDITION MADE BY THE AO ON ESTIMATE B ASIS AND THERE IS AN ELEMENT OF GUESS WORK WHILE THERE IS THE FINDING OF THE AO THAT ORIGINAL SALE BILL OF ANNUAL MAINTENANCE CONTRACTS WERE NOT PRODUCED. THE CIT(A) AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FACTORS, RESTRICTED THE ADDITION TO RS. 2,50,000/-. AGGRIEVE D BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 17. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) WITHOUT APPRECIATING THE FACT THAT THE E NTIRE SALES HAVE BEEN DULY RECORDED ALONG WITH DETAILS OF OPENING ST OCK AND CLOSING STOCK, WHICH WERE PRODUCED BEFORE THE AO, SUSTAINED THE ADDITION TO THE EXTENT OF RS. 2,50,000/-. 18. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT THE AO MADE THE ADDITION ON THE GROUND THAT ORIGINAL SA LE BILLS ISSUED HAVE NOT BEEN PRODUCED, THEREFORE, HE ESTIMATED AN AMOUNT OF RS. 5,00,000/-, WHICH WOULD HAVE ESCAPED TAX DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) GAVE A FINDING THAT THE A O MADE THE ADDITION ON ESTIMATE BASIS AND ELEMENT OF GUESSWORK , HOWEVER, HE APPROVED THE FINDING OF THE AO THAT ORIGINAL SALE B ILL OF ANNUAL MAINTENANCE CONTRACTS WERE NOT PRODUCED AND RESTRIC TED THE ADDITION TO THE EXTENT OF RS. 2,50,000/-. THE CONTENTION OF THE ASSESSEE IS THAT THE ENTIRE SALES HAVE BEEN DULY RECORDED ALONG WITH DETAILS OF OPENING STOCK AND CLOSING STOCK, WHICH WERE PRODUCED BEFORE THE AO. WE FIND THAT THE ADDITION MADE BY THE AO ON ESTIMATE BASED ON GUESS WORK ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 7 WITHOUT BRING ANY MATERIAL ON RECORD THAT AN AMOUNT OF RS. 5,00,000/- HAVE BEEN ESCAPED TAX DURING THE YEAR UN DER CONSIDERATION. WITHOUT APPRECIATING THE DETAILS OF SALES RECORDED BY THE ASSESSEE MAKING ADDITION ON THE GROUND THAT THE ORIGINAL SALE BILLS HAVE BEEN NOT PRODUCED IS NOT PROPER. THEREFO RE, WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS. 2,50 ,000/- SUSTAINED BY THE CIT(A) AND ALLOW THIS GROUND OF APPEAL OF THE A SSESSEE. 20. GROUND NO. 4 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 1 LAKH BEING SALARY AND WAGES. 21. OUT OF THE CLAIM OF RS. 50,93,580/-, THE AO HAD DISALLOWED 15% OF THE SAME ON THE GROUND THAT GENUINENESS OF THE C LAIM WAS NOT FULLY ASCERTAINABLE AS THE DETAILS OF CONTRACT-WISE LABOU R PAYMENTS SUPPORTED BY AGREEMENTS WERE NOT FURNISHED, CASH PA YMENTS ON SELF- MADE VOUCHERS HAD BEEN MADE AND THAT PAYMENTS ON AC COUNT OF ESIC WAS NOT MADE THOUGH MANDATORY. BEFORE THE CIT(A), T HE AO HAD ERRED IN ADDING 15% OF SALARIES AND WAGES OF RS. 50,93,58 0/- ON PRESUMPTION. ON BEING ASKED BY THE CIT(A) TO SUBMIT THE DETAILS OF SALARIES AND WAGES FOR THE MONTHS OF JUNE, 2005, SE PT.05 AND DEC.05, THE ASSESSEE SUBMITTED THE COMPLETE DETAILS OF SALA RY TO THE STAFF AND WAGES TO THE WORKERS WITH VOUCHERS. THE CIT(A) MENT IONED THE BREAK- UP THE SAID DETAILS IN A TABULAR FORM AT PAGE 10 OF HIS ORDER. AFTER GOING THROUGH THE SUBMISSIONS AND DETAILS OF THE AS SESSEE, THE CIT(A) HELD THAT THE ADDITION MADE IS EXCESSIVE GIVING THE FACTS OF THE CASE. HOWEVER, TAKING INTO ACCOUNT THE DEFICIENCIES AS PO INTED OUT BY THE AO, THE CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS. 1,00,000/-. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 22. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES, PERUSING THE RECORD AS WELL AS GOING THROUGH THE OR DERS OF THE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT TO MEET THE ENDS OF JUSTICE, ITA NO. 807/MUM/2010 M/S FINEFAB ENGINEERS PVT. LTD. 8 THE ADDITION SUSTAINED BY THE CIT(A) IS TO BE RESTR ICTED TO RS.50,000/-. WE DO SO. THUS, THIS GROUND IS PARTLY ALLOWED. 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2011. SD/- SD/- (T.R. SOOD) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 30 TH AUGUST, 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, F BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.