M/s. M.R. Mutha, Ahmednagar V. ACIT, A'Nagar Circle, Ahmednagar

ITA 836/PUN/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76190 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 15-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI; S P WALIMBE
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Corroborative evidences; Agreed addition
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 836 /PN/20 1 1 ASSESSMENT YEAR : 200 3 - 04 M/S. M.R. MUTHA, SECTOR NO. 1A, M.R . TRADE CENTRE, WADIA PARK, AHMEDNAGAR VS. THE ASSTT. COMMISSIONER OF INCOME TAX, A NAGAR CIRCLE , AHMEDNAGAR (APPELLANT) (RESPONDENT) PAN NO. AADFM8557B APPELLANT BY: SHRI SUNIL PATHAK RESPONDENT BY: SHRI A.K. MODI & SHRI S.P. WALIMBE DAT E OF HEARING : 17 - 02 - 2014 DATE OF PRONOUNCEMENT : 27 - 0 2 - 2014 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL , THE ASSESSEE HAS CHALLENGED T HE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 09 - 11 - 2010 FOR THE A.Y. 200 3 - 04. THE ASSESSEE HAS TAKEN THE MU LTIPLE GROUND S BUT THE SOLITARY ISSUE WHICH ARISES FOR OUR CONSIDERATION ON THE FACTS AND CIRCUMSTANCES OF THE CASE IS WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING THE PENALTY OF RS.16,93,381/ - U/S. 271(1)(C) OF THE INCOME - TAX ACT. 2. THE FACTS W HICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS A CIVIL CONTRACTOR AND UNDERTAKES THE CONTRACT OF THE GOVERNMENT. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2003 - 04 DECLARING TOTAL INCOME OF RS.14,10,740/ - . SUBSEQUENTLY THE ASSESSE E REVISED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.17,92,085/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. THE ASSESSING OFFICER MADE THE THREE ADDITIONS AS UNDER: 2 ITA NO. 836/PN/2011, M/S. M.R. MUTHA, AHMEDNAGAR (I). ADD ITION ON ACCOUNT OF DISALLOWANCE OF E XPENSES : RS.18,94,800/ - (II). ADDITION ON ACCOUNT OF DISALLOWANCE OF PAYMENT TO SUB - C ONTRACTOR S : RS.25,00,000/ - (III). ADDITION ON ACCOUNT OF HIGHER GP : RS.7,41,618/ - TOTAL : RS.51,36,418/ - 3. THE ASSE SSEE CHALLENGED THE ADDITIONS BEFORE THE LD. CIT(A) AND THEREAFTER TO THE TRIBUNAL, THE TRIBUNAL DELETED THE ADDITION IN RESPECT OF THE HIGHER GP I.E. RS.7,41,618/ - BUT CONFIRMED THE REMAINING TWO ADDITIONS I.E. ADDITION ON DISALLOWANCE OF EXPENSES AND DIS ALLOWANCE OF PAYMENT TO S UB - CONTRACTORS. THE ASSESSING OFFICER LEVIED THE PENALTY U/S. 271(1)(C) ON THE ABOVE TWO SUMS WHICH REACHED THE FINALITY AT THE TRIBUNAL LEVEL. SO FAR AS THE FIRST ADDITION IS CONCERNED THAT IS DISALLOWANCE OF EXPENSES OF RS.18,9 4,800/ - , T HE ASSESSEE HAS UNDERTAKEN A CONTRACT WORK WITH THE EXECUTIVE ENGINEER, CHAS KAMAN PROJECT DIVISION, PUNE FOR WHICH THE TOTAL RECEIPTS WERE SHOWN AT RS. 89,99,523/ - . ON THE SAID RECEIPTS THE ASSESSEE HAS DECLARED THE GP OF RS.25,41,523/ - AFTER DE BITING EXPENDITURE OF RS.64.58 LAKHS INCLUDING THE OPENING WORK - IN - PROGRESS (WIP) . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , AS NOTED BY THE ASSESSING OFFICER , THE EXPENDITURE TO THE EXTENT OF RS.31,58,000/ - WAS NOT FULLY SUPPORTED BY PROPER EVIDENCES. IT APPEARS THAT THE ASSESSEES A.R. WAS CONFRONTED ON THE ISSUE OF THE EXPENDITURE AND ASSESSING OFFICER MADE THE DISALLOWANCE AT 60% OF THE SAID EXPENDITURE AND ALLOWED ONLY THE 40% OF THE EXPENDITURE. WHEN THE MATTER REACHED BEFORE THE TRIBUNAL, THE T RIBUNAL WAS OF THE OPINION THAT IT IS AGREED ADDITION AS THE ASSESSEE HAS AGREED FOR THE SAID ADDITIONS FOR WANT OF VOUCHERS. THE TRIBUNAL ALSO OBSERVED THAT IT IS A N ESTABLISH ED PROPO SITION OF LAW THAT ONUS ALWAYS LIES UPON THE CLAIMANT TO ESTABLISH THE GENUINENESS OF ITS CLAIM. ON THE SAID PREMISES THE 3 ITA NO. 836/PN/2011, M/S. M.R. MUTHA, AHMEDNAGAR TRIBUNAL UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER AND CLAIMED BY THE LD. CIT(A). 4. THE LD. COUNSEL SUBMITS THAT SO FAR AS THE DISALLOWANCE OF EXPENDITURE IS CONCERNED THOUGH IT IS CONFIRMED BY THE TRIBUNAL IN THE QUANTUM APPEAL THE SAID CANNOT BE TREATED AS CONCEALMENT OF INCOME O R FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE SUBMITS THAT THE PROJECT WAS UNDERTAKEN IN A REMOTE AREA AND IT WAS NOT POSSIBLE FOR THE ASSESSEE TO GET THE PREC ISE PR I NTED VOUCHERS IN RESPECT OF EACH AND EVERY EXPENDITURE. HE SUBMITS THAT ON PAGE NO. 8 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS REPRODUCED THE NOTINGS ON THE ORDER SHEET DATED 13 - 03 - 2006 FROM WHICH IT GIVES IMPRESSION THAT THE ASSESSEE HAS AGREED FOR 21.18% GP WHICH IS VERY MUCH IMPOSSIBLE IN THE LINE OF ASSESSEE BUSINESS . HE SUBMITS THAT THERE ARE MANY REASONS FOR WHICH AGREED ADDITIONS ARE MADE. HE FINALLY SUBMITS THAT THERE IS NO CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE PLEADED FOR DELETING THE PENALTY ON THE SAID AMOUNT. 5. WE HAVE ALSO HEARD THE LD. DR. THE LD. CIT(A) DID NOT AGREE TO THE SUBMISSIONS MADE BY THE ASSESSEE . FOR THE BENEFIT OF GETTING THE CLARITY OF THE ISSUE , W E ARE REPRODUCING THE RELEVANT PART OF T HE DISCUSSION BY THE LD. CIT(A) AS UNDER: 6. I HAVE CONSIDERED THE GROUNDS OF THE APPELLANT ALONG WITH THEIR S UBMISSIONS AND THE ARGUMENTS OF THE ASSESSING OFF ICER AND FIND THAT THE APPELLANT IS A CIVIL CONTRACTOR AND IS ASSESSED TO TAX IN THE S T ATUS OF R EGISTERED FIRM. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS FI L ED ITS RETURN OF INCOME ON 28.10.2003 SHOWING A TOTAL INCOME O F RS.14,10,740. THIS RETURN WAS SUBSEQUENTLY REVISED ON 9.3.2004 ON A TOTA L INCOME OF RS.17,92 ,085/ - B Y DECLARING ADDITI ONAL INCOME OF RS.3,81,345 AS NOTIONAL I N T ERE ST FROM THE S I STER CONCER N. AS PER RECORD, BOTH THESE RETURNS WERE INITIALLY ACCEPTED U/S 143(1). HOWEVER, THE CASE WAS PICKED UP FOR SCRUTINY AS PER BOARD'S INSTRUCTION AND THE ASSESSING OFFICER DURING THE COU RSE OF SCRUTINY FOUND THAT THE BOOKS MAINTAINED BY THE APPELLANT ARE DEFECTIVE AND THEREFORE, HE REJECTED THE BOOK RESULTS AND INVOKED THE PROVISIONS OF SEC. 145. THE APPELLANT WAS FOUND TO HAVE EXECUTED THE CONTRACT WORK OF CHAS KAMAN POJECT AND THEREFOR E, THE ASSESSING OFFICER CALLED FOR VARIOUS INFORMATION U/S 133(6) OF THE I.T. ACT. THIS INFORMATION WAS ALSO CALLED FROM EXECUTIVE ENGINEER, CHAS 4 ITA NO. 836/PN/2011, M/S. M.R. MUTHA, AHMEDNAGAR KAMAN PROJECT DIVISION, PUNE. AS THE INFORMATION RECEIVED FROM THE EXECUTIVE ENGINEER SHOWED THAT CERTAIN BI LLS RECEIVED BY THE APPELLANT DURING THE YEAR WERE RELATING TO MEASUREMENTS MADE IN EARLIER YEARS AND BECAUSE THE APPELLANT WAS MAINTAINING THE BOOKS ON MERCANTILE SYSTEM THE ASSESSING OFFICER ISSUED SHOW CAUSE TO THE ASSESSEE IN RESPECT OF THE ABOVE ACCOU NTING DISCREPANCY. THE REPLY SUBMITTED BY THE ASSESSEE WAS EXAMINED AND THE MATTER WAS FURTHER INVESTIGATED. THE ASSESSING OFFICER EXAMINED THE ENTIRE ISSUE IN DETAIL AS PER THE ASSESSMENT ORDER AVAILABLE ON RECORD AND CAME TO THE CONCLUSION THAT THE APPEL LANT ONLY HAD SUPPORTING VOUCHERS IN RESPECT OF 40% OF THE EXPENSES CLAIMED. THEREFORE, THE APPELLANT FORMED THE VIEW THAT 60% EXPENSES HAVE BEEN INFLATED. THE APPELLANT AGREED TO THE ABOVE FINDING OF THE ASSESSING OFFICER AND ACCEPTED THE ADDITION OF RS. 18,94,800 OUT OF THE EXPENSE OF RS.31,58,000. THE ABOVE ADMISSION WAS RECORDED IN THE ORDER SHEET AND THE SAME HAS ALSO BEEN QUOTED IN THE ASSESSMENT ORDER. 6. IN SUM AND SUBSTANCE THE CIT(A) WAS OF THE OPINION THAT THE ARGUMENT OF THE GP IS NOT ACCEPTABL E AS IN THE LINE OF THE ASSESSEE S BUSINESS , T HERE CAN BE MORE GP ALSO. WE ARE EXAMINING THE ISSUE FROM THE DIFFERENT ANGEL. WE HAVE ALSO TO TAKE INTO CONSIDERATION THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WHICH WAS FINALLY CONFIRMED BY THE TRIBUNA L AS PER THE DISCUSSION WHICH ARE AVAILABLE IN THE ASSESSMENT ORDER. IT APPEARS THAT THE ASSESSEE COULD NOT FILE PROPER EVIDENCE IN RESPECT OF THE LABOUR PAYMENT S TO THE EXTENT OF 60% OF THE EXPENDITURE CLAIMED . N OTHING IS DISCUSSED IN THE ASSESSMENT ORD ER WHAT SORT OF EVIDENCE WAS DESIRED BY THE ASSESSING OFFICER. IT IS TRUE THAT THE ASSESSEE HAS ACCEPTED THE ADDITIONS BY WAY OF CERTAIN PERCENTAGE OF THE GROSS PROFIT . MERE NON - SUBSTANTIATING THE CLAIM WITH EVIDENCE AS DESIRED BY THE ASSESSING OFFICER B Y THE ASSESSEE CAN ATTRACT THE PANEL CONSEQUENCES U/S. 271(1)(C) ? THE LAW IS WELL SETTLED ON THIS ISSUE THAT MERELY BECAUSE THE EXPENDITURE CLAIMED BY THE ASSESSEE IS DISALLOWED FOR THE WANT OF SUPPORTING EVIDENCE AS DESIRED BY THE ASSESSING OFFICER , THE QUANTUM MAY BE SUSTAINED BUT THERE IS NO JUSTIFICATION TO LEVY THE PENALTY U/S. 271(1)(C) OF THE ACT. MOREOVER , WE FIND THAT THE ASSESSING OFFICER HAS MADE THE PROPORTIONATE ALLOCATION I.E. THE 40% EXPENSES AS SUPPORTED BY EVIDENCE AND 60% EXPENDITURE AS NONE SUPPORTED BY THE EVIDENCE BUT THERE IS NO PRECISE INFORMATION IN RESPECT OF WHAT SORT OF EVIDENCE THE ASSESSING OFFICER WAS EXPECTING FROM THE ASSESSEE IN 5 ITA NO. 836/PN/2011, M/S. M.R. MUTHA, AHMEDNAGAR SUPPORT OF CLAIM OF THE LABOUR PAYMENT S . THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS WHICH A RE ON THE RECORD. IN OUR OPINION TO THE EXTENT OF DISALLOWANCE OF 60% OF THE LABOUR PAYMENT THE SAID ADDITION CANNOT BE TREATED AS A CONCEALMENT OF THE INCOME BY THE ASSESSEE OR FILING OF INACCURATE PARTICULARS OF INCOME. WE, THEREFORE, DELETE THE PENALT Y LEVIED ON THE DISALLOWANCE OF RS.18,94,800/ - . 7. THE SECOND ADDITION WHICH IS SUBJECTED TO THE PENALTY I.E. DISALLOWANCE OF PAYMENT TO SUB - CONTRACTORS OF RS.25,00,000/ - . IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD CLAIM ED THE EXPENDITURE OF RS.25,00,000/ - ON ACCOUNT OF SUB - CONTRACTS PAYMENT. HE OBSERVED THAT THE WORK CLAIMED TO HAVE BEEN CARRIED OUT THROUGH SUB - CONTRACTORS WAS REPORTED TO BE COMPLETED BEFORE 15 - 05 - 2002 WITH THE DATE OF MEASUREMENT HAVING BEEN ADOPTED ON 30 - 04 - 2002. HOWEVER, THE AGREEMENTS ENTERED WITH THE SUB - CONTRACTOR SHOWED THE COMMENCEMENT OF WORK FROM 10 - 10 - 2002 AND 06 - 03 - 2003. AS THE AGREEMENTS WERE OF THE LATTER DATE, THE ASSESSING OFFICER HELD THAT CLAIMED SUB - CONTRACT WORK AND ITS CONSEQUENTIA L PAYMENT OF RS.25,00,000/ - TO SUB - CONTRACTOR DID NOT RELATE WITH THE CONTRACT WORK WHICH WAS COMPLETED BEFORE 15 - 05 - 2002, FOR WHICH DATE OF MEASUREMENT WAS 30 - 04 - 2002. THE ASSESSING OFFICER, THEREFORE, MADE THE ENTIRE DISALLOWANCE OF RS.25,00,000/ - AND M ADE ADDITION TO THE TOTAL INCOME. THE SAID ADDITION HAS BEEN CONFIRMED BY THE TRIBUNAL IN THE QUANTUM APPEAL BY UPHOLDING THE ORDER OF THE LD. CIT(A) . 8. IN SUM AND SUBSTANCE , THE CASE OF THE ASSESSING OFFICER THAT THERE WAS SERIOUS DISCREPANCIES ON T HE FACTS NARRATED BY THE ASSESSEE AND EVIDENCES IN RESPECT OF THE PAYMENT S MADE TO THE SUB - CONTRACTOR S AND THE ASSESSEE COULD NOT EXPLAIN THE SAID DISCREPANCIES. IN SUM AND SUBSTANCE IT IS THE CASE OF THE ASSESSING OFFICER THAT THE CLAIM MADE BY THE ASSES SEE WAS NOT GENUINE CLAIM EVEN IN RESPECT OF CONTRACT WITH SHRI TAPAN PATHAK , T HE ASSESSING OFFICER HAS NOT ACCEPTED THE SAME AS IT IS 6 ITA NO. 836/PN/2011, M/S. M.R. MUTHA, AHMEDNAGAR PURELY ON THE LETTER HEAD BUT IN RESPECT OF OTHER TWO CONTRACTORS I.E. ANIL K. GANDHI AND PRAVIN H. AVSARKAR , T HE ASSESSE E HAS EXECUTED THE AGREEMENT S ON STAMP PAPER . THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE OF RS.25,00,000/ - IN RESPECT OF THE CLAIM OF THE PAYMENT TO SUB - CONTRACTORS . NOW QUESTION BEFORE US IS CAN SAID ADDITION BE SUBJECTED TO PENALTY? OUR ANSWER IS YES. THE TRIBUNAL HAS CONFIRMED THE ADDITION IMPLIEDLY HOLDING THAT THE CLAIM WAS NOT GENUINE AND THERE ARE CONTRADICTIONS IN RESPECT OF THE DIFFERENT DATES OF MEASUREMENT AND DATES SHOWN IN THE COMMENCEMENT OF WORK AND DATE OF AGREEMENT. M OREOVER , THE TRIBU NAL HAS ALSO UPHELD THE FINDING OF THE ASSESSING OFFICER THAT THE AGREEMENT FILED BY THE ASSESSEE ARE NOT CREDIBLE. THE LAW IS WELL SETTLED THAT IF THE ASSESSEE DELIBERATELY MAKE THE NON - GENUINE CLAIM THEN IT HAS TO SUFFER THE PENALTY U/S. 271(1)(C). WE, THEREFORE, CONFIRM THE PENALTY TO THE EXTENT O N RS.25,00,000/ - WHICH WAS ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING THE EXPENDITURE CLAIM BY THE ASSESSEE TOWARDS THE SUB - CONTRACT S. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. PR ONOUNCED IN THE OPEN COURT ON 27 - 0 2 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 27 TH FEBRUARY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE