NITIN CHANDRAKANT DESAI, MUMBAI V. ACIT 11(1), MUMBAI

ITA 8447/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8245 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-10-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C N VAZE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , . . , ! BEFORE SHRI JOGINDER SINGH, JM AND SHRI N. K. BILL AIYA, AM ' #$ ./ I.T.A. NOS. 8447 TO 8450/MUM/2010 ( / ASSESSMENT YEAR: 2002-03 TO 2005-06) SHRI NITIN CHANDRAKANT DESAI 1501, DAFFODILS SAINATH GARDENS, NAVGHAR ROAD, TATA COLONY, MULUND (E), MUMBAI-400 081 / VS. ACIT-11(1), MUMBAI & ./''' ./PAN/GIR NO. AAFPD 8678 Q ( ()* + / ASSESSEE ) : ( , / REVENUE ) & ' #$ ./ I.T.A. NOS. 8365 & 8366/MUM/2010 ( / ASSESSMENT YEAR: 2003-04 & 2004-05) ACIT-11(1), MUMBAI / VS. SHRI NITIN CHANDRAKANT DESAI 1501, DAFFODILS SAINATH GARDENS, NAVGHAR ROAD, TATA COLONY, MULUND (E), MUMBAI-400 081 & ./''' ./PAN/GIR NO. AAFPD 8678 Q ( , / REVENUE ) : ( ()* + / ASSESSEE ) ()* + - . / ASSESSEE BY : SHRI C. N. VAZE , - . / REVENUE BY : SHRI VIVEK BATRA / ,0 - + 1 / DATE OF HEARING : 30.10.2014 234 - + 1 / DATE OF PRONOUNCEMENT : 31.10.2014 '5 / O R D E R PER BENCH: THESE ARE APPEALS BY THE ASSESSEE FOR A.YS. 2002-0 3, 2003-04, 2004-05 AND 2005- 06 AND ITA NOS. 8365 & 8366/MUM/2010 ARE CROSS APPE ALS OF THE REVENUE FOR 2 ITA NOS. 8447 TO 8450/M/10 & 8365 & 8366/M/10 SHRI NITIN CHANDRAKANT DESAI ASSESSMENT YEARS (A.Y.) 2003-04 AND 2004-05. ALL TH ESE APPEALS HAVE COMMON ISSUES ON SAME SET OF FACTS, THEREFORE, THEY WERE HEARD TO GETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE LD. CIT(A)-3, MUMBAI VIDE ORDER DATED 01.09. 2010 HAS DECIDED ALL THESE APPEALS BY A CONSOLIDATED ORDER AGAINST WHICH BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL AS MENTIONED HEREINABOVE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF ASSESSMENT FOR A.Y. 2006-07, THERE WAS A DISALLOWANCE OF RS.2,16,8 1,087/- OF LABOUR CHARGES PAYABLE AS ON 31.03.2006. TO VERIFY WHETHER SIMILAR ISSUE EXIS TS IN EARLIER ASSESSMENT YEARS, THE COMPLETED ASSESSMENTS WERE REOPENED. THE REOPENED A SSESSMENTS WERE COMPLETED BY ADDING THE LABOUR CHARGES OUTSTANDING AS AT THE END OF THE RELEVANT YEARS. 4. WE FIND THAT THE TRIBUNAL IN ITA NO. 3298/MUM/20 10 A.Y. 2006-07 HAS DELETED THE ENTIRE ADDITION ON ACCOUNT OF OUTSTANDING LIABI LITY OF LABOUR CHARGES. THE FINDINGS OF THE TRIBUNAL READ AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND EX AMINED THE DETAILS AVAILABLE ON RECORD. WE ARE UNABLE TO UNDERSTAND HO W THE OUTSTANDING CREDIT OF LABOUR CHARGES CAN DISALLOWED ON THE REAS ON THAT ASSESSEE COULD HAVE PAID THE AMOUNT OUTSTANDING IN THE BOOKS OF AC COUNT, WITHOUT ESTABLISHING OR MAKING INQUIRIES ABOUT THEIR SOURCE OF FINANCE. IT IS ALSO NOT EVEN ESTABLISHED BY A.O. WHETHER ASSESSEE PAID THE AMOUNTS TO THE UNION OR TO THEIR MEMBERS OUTSIDE THE BOOKS OF ACCOUNT. I T WAS THE CONTENTION OF ASSESSEE THAT DUE TO FINANCIAL CONSTRAINTS THE OUTS TANDING AMOUNT COULD NOT BE PAID BUT HIS REPUTATION WAS SO THAT THE UNION WA S NOT DEMANDING IMMEDIATELY EXCEPT IN FEW CASES, THE CORRESPONDENCE S WHICH WAS FURNISHED TO AO. AS SEEN FROM THE ASSESSMENT ORDER AO HAD EXA MINED THE LABOUR CHARGES AND PARTICULARLY UNDER THE PROVISIONS OF SE CTION 40 (A)(IA) AND AFTER SATISFYING HIMSELF ABOUT THE GENUINENESS OF THE CLA IM, RECORDED SO THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. WHILE AO ALLOWED THE EXPENDITURE CLAIM IN THE PROFIT & LOSS A/C AS GENUI NE, WE ARE UNABLE TO UNDERSTAND HOW THE OUTSTANDING AMOUNT AVAILABLE IN THE BALANCE SHEET COULD BE BROUGHT TO TAX. WE ARE ALSO UNABLE TO UNDERSTAND ON WHAT BASIS THE CIT (A) CONFIRMED THE AMOUNT. THE SO CALLED GAPS IN THE EXPLANATION WERE NOT CLARIFIED OR EXPLAINED BY THE CIT (A). IN FACT WHIL E AO ACCEPTED THAT AN 3 ITA NOS. 8447 TO 8450/M/10 & 8365 & 8366/M/10 SHRI NITIN CHANDRAKANT DESAI AMOUNT OF RS.1.02 CRORES AS THE OUTSTANDING AMOUNT IN THE REMAND REPORT, CIT (A) CONFIRMED THE SAME THAT ASSESSEE HAS NOT AB LE TO ESTABLISH COMPLETE IDENTIFICATION OF THE PARTIES, PARTY-WISE AMOUNT PA YABLE AND THE BASIS THEREOF. THE ISSUE IS NOT WITH REFERENCE TO THE CAS H CREDITS RECEIVED BY ASSESSEE BUT ONE OF THE AMOUNTS PAYABLE, WHICH WERE ALLOWED IN THE PROFIT & LOSS A/C BY THE SAME AO. AN AMOUNT OF RS.1.02 CRO RES WAS ALLOWED AS EXPENDITURE IN EARLIER YEAR AND THE BALANCE AMOUNT PERTAIN TO THIS YEAR'S OUTSTANDING AMOUNT, OUT OF THE LABOUR CHARGE S PAYABLE AND CLAIMED IN THE PROFIT & LOSS A/C. ONCE THE EXPENDITURE WAS ALL OWED AS GENUINE, IT IS VERY DIFFICULT TO UNDERSTAND THE LOGIC OF AO/CIT (A ) THAT THE AMOUNTS HAVE BEEN PAID OUTSIDE THE BOOKS OF ACCOUNT, SO THE SAME CAN BE BROUGHT TO TAX. IN FACT AS AO EXAMINED THE FALL IN THE NET PROFIT F ROM EARLIER YEARS TO THIS YEAR AND IT WAS EXPLAINED AS INTEREST LIABILITY ON THE BORROWED FUNDS, WHICH EXPLANATION WAS ALSO ACCEPTED. THEREFORE, THERE IS NO DISPUTE WITH REFERENCE TO THE FINANCIAL CONSTRAINTS OF ASSESSEE AND ALSO T HE FACT THAT THESE AMOUNTS WERE PAID IN LATER YEARS AND NECESSARY ENTRIES HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. FOR THESE REASONS, WE HOLD THAT THERE I S NO BASIS FOR DISALLOWANCE OF THE ENTIRE OUTSTANDING LABOUR CHARG ES AND BRINGING INTO TAX, WITHOUT DISCHARGING THE ONUS OF ESTABLISHING THAT THE AMOUNTS ARE PAID OR EXPLAINING UNDER WHAT PROVISION S OF IT ACT THIS CAN BE CONSIDERED AS INCOME. THERE IS NO EVIDENCE BROUGHT ON RECORD WHATSOEVER TO ACCEPT AOS CONTENTION THAT ASSESSEE MUST HAVE E ARNED UNACCOUNTED REVENUE FROM UNDISCLOSED SOURCES SO AS TO PAY THE A MOUNTS OUTSIDE THE BOOKS OF ACCOUNT. THESE OBSERVATIONS OF AO ARE DEVO ID OF ANY MERIT. PRESUMPTIONS AND ASSUMPTIONS CANNOT BE A BASIS FOR DISALLOWING THE AMOUNT, THAT TOO OUTSTANDING AMOUNT AT THE END OF Y EAR, WHILE ALLOWING THE SAME AS LABOUR CHARGES OF THE YEAR(S). WE HAVE NO H ESITATION IN DELETING THE ADDITION SO MADE BY AO. ASSESSEES GROUNDS ARE ALLO WED. 7. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWE D. AS THE VERY BASIS FOR REOPENING THE ASSESSMENTS OF ALL THESE YEARS UNDER APPEAL HAVE BEEN DISMISSED BY THE TRIBUNAL IN A.Y. 2006-07 (SUPRA), IN OUR CONSIDERED OPINION, THE ENTIRE ISSUE HAS TO BE RELOOKED AT THE ASSESSMENT STAGE. W E, THEREFORE, RESTORE ALL THESE APPEALS TO THE FILES OF THE A.O. FOR DE NOVO ASSESSMENT. THE A.O. IS DIRECTED TO DECIDE THE ISS UE AFRESH IN LIGHT OF THE DECISION OF THE TRIBUNAL IN ITA NO. 3298/MUM/2011 FOR A.Y. 2006- 07. AS THE ENTIRE ISSUE HAS BEEN RESTORED TO THE FI LES OF THE A.O., WE DO NOT FIND IT NECESSARY TO CONSIDER THE GRIEVANCE OF THE ASSESSEE BY WHICH IT HAS CHALLENGED THE REOPENING OF THE ASSESSMENTS. 4 ITA NOS. 8447 TO 8450/M/10 & 8365 & 8366/M/10 SHRI NITIN CHANDRAKANT DESAI 5. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSE SSEE AND THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31 ST , 2014 SD/- SD/- (JOGINDER SINGH) (N. K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / 0 MUMBAI; 6 DATED : 31.10.2014 ,.. ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #$&7 / THE APPELLANT 2. 89&7 / THE RESPONDENT 3. ' ' / :+ ( #$ ) / THE CIT(A) 4. ' ' / :+ / CIT - CONCERNED 5. =,> 8+( , ' #$1 #( 4 , / 0 / DR, ITAT, MUMBAI 6. ?) @0 / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , / 0 / ITAT, MUMBAI