Pawar Patkar Construction Private Ltd., Nashik V. Joint Commissioner of Income-tax,

ITA 858/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1800 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HALDAR
• Keywords: Onus to prove
• Section: 40A(3); 143(3); 194C; 131

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.858/PN/2014 ASSESSMENT YEAR : 2009-10 PAWAR PATKAR CONSTRUCTION PVT. LTD., SHIVNERI, PLOT NO.43/A, MAHATMA NAGAR, ROAD A, OFF. TRIMBAK ROAD, NASHIK 422 007. PAN : AAIFP9352Q . APPELLANT VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE -2, NASHIK. . RESPONDENT / APPELLANT BY : SHRI C. H. NANIWADEKAR / RESPONDENT BY : SHRI ABHIJIT HALDAR / DATE OF HEARING : 18.05.2016 / DATE OF PRONOUNCEMENT: 27.05.2016 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE ASSESSEE IS AGAIN ST THE ORDER OF CIT(A)-2, NASHIK DATED 17.02.2014 RELATING TO ASSES SMENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. BY WAY OF THE PRESENT APPEAL, THE ASSESSEE HAS C HALLENGED THE ACTION OF THE CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER MAKING DISALLOWANCE OF RS.23,93,862/- TOWARDS LABOUR CHARG ES ETC. PAID IN CASH. 3. BRIEFLY STATED, THE RELEVANT FACTS CONCERNING TH E ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN EXECUTING CERTAIN TYPES OF C ONTRACTS SUCH AS PIPELINE LAYING, DAM, ROADS, BUILDING STAFF QUARTERS AND OTH ER FACTORY BUILDINGS, ETC.. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER INTER-ALIA NOTICED 2 ITA NO.858/PN/2014 THAT THE ASSESSEE HAS INCURRED EXPENSES TOWARDS LAB OUR CHARGES TO THE TUNE OF RS.23,93,862/- PAID IN CASH INVOLVING FIVE PARTIES LISTED AS UNDER :- SR.NO. NAME OF THE PARTY AMOUNT DISALLOWED (RS.) 1 RAMESH JADHAV 2,54,129.00 2 GANESH TAJANE 4,81,586.00 3 GULAB SHAH 6,18,147.00 4 JALARAM STONE CRUSHER 4,35,000.00 5 JAMUNA STONE CRUSHER 6,05,000.00 TOTAL 23,93,862.00 4. THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OF FICER TO PRODUCE THE ACCOUNT EXTRACT OF THE ABOVE MENTIONED PARTIES. TH E ASSESSING OFFICER ALSO CONSIDERED IT EXPEDIENT TO VERIFY THE CLAIM AND THE NATURE OF SERVICES RENDERED BY THESE FIVE PARTIES SUCH AS SITE FOR WHICH WORK W AS DONE, SPECIFICATION OF WORK, RATE, THE NUMBER OF LABOURERS SUPPLIED, NATUR E OF GOODS PURCHASED IF ANY, ETC.. THE ASSESSEE WAS REQUESTED TO PRODUCE THESE PARTIES FOR CROSS-VERIFICATION OF CLAIM AND GOODS/SERVICES STATED TO BE RECEIVED F ROM THESE PARTIES. THE ASSESSEE, HOWEVER, COULD NOT FURNISH ANY DETAILS AN D THUS FAILED TO SUBSTANTIATE THE CLAIM. THE PARTIES WERE ALSO NOT PRODUCED. AC CORDINGLY, THE PAYMENTS STATED TO HAVE BEEN MADE TO THESE PARTIES TOWARDS L ABOUR CHARGES STATED TO BE SETTLED IN CASH WERE DISALLOWED BY THE ASSESSING OF FICER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY I.E. CI T(A). IN THE COURSE OF APPELLATE PROCEEDINGS, A REMAND REPORT WAS CALLED F OR BY THE CIT(A). IN THE REMAND PROCEEDINGS, SUMMONS WERE ISSUED UNDER SECTI ON 131 OF THE ACT TO THESE FIVE SUB-CONTRACTORS BY THE ASSESSING OFFICER FOR EXAMINATION PURPOSES. IT WAS NOTED BY THE ASSESSING OFFICER IN THE REMAND REPORT THAT EXCEPT SUMMON TO SUB-CONTRACTOR NAMELY JALARAM STONE CRUSHER, S UMMONS TO ALL OTHER FOUR PARTIES WERE DELIVERED. HOWEVER, ONLY TWO PARTIES NAMELY JAMUNA STONE 3 ITA NO.858/PN/2014 CRUSHER AND GULAB SHAH ATTENDED BEFORE THE ASSES SING OFFICER. THE ASSESSING OFFICER FURTHER NOTED IN THE REMAND REPOR T THAT SHRI ANIL PATEL (PROPRIETOR OF JAMUNA STONE CRUSHER) WHO APPEARED I N RESPONSE TO SUMMONS UNDER SECTION 131 OF THE ACT CONFIRMED BEFORE HIM T HAT HE HAS DONE WORK OF RS.11 LAKH FOR THE ASSESSEE IN THE FINANCIAL YEAR 2 008-09 RELEVANT TO ASSESSMENT YEAR 2009-10. HOWEVER, SHRI ANIL PATEL COULD NOT P RODUCE THE BILLS/VOUCHERS FOR THE ALLEGED WORK DONE AGAINST THE WORK DONE. S HRI ANIL PATEL STATED THAT HE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AND ALSO DO ES NOT HAVE ANY DOCUMENTARY EVIDENCE TO SUPPORT HIS CLAIM. THE ASS ESSING OFFICER, THEREFORE, NOTED THAT THE AVERMENTS MADE BEFORE HIM ARE BALD A ND COULD NOT BE SUPPORTED BY THE DOCUMENTARY EVIDENCES. SIMILAR STATEMENTS W ERE RECORDED IN THE CASE OF SHRI GULAB SHAH. SHRI GULAB SHAH ALSO CONFIRMED HAVING DONE WORK OF RS.6.18 LAKH FOR THE ASSESSEE BUT HE ALSO FAILED TO SUBSTANTIATE THE ASSERTIONS MADE BY ANY DOCUMENTARY EVIDENCE. 6. IT WAS ALSO ASSERTED IN THE REMAND REPORT THAT T HE IMPUGNED PAYMENTS WERE MADE IN CASH AND NO TDS WAS DEDUCTED THEREON. THE ASSESSING OFFICER, THUS, OBSERVED THAT THE GENUINENESS OF THE SUB-CONT RACT EXPENSES IS NOT PROVED. THE ONLY TWO SUB-CONTRACTORS OUT OF FIVE SUB-CONTRA CTORS APPEARED FOR THE EXAMINATION BUT EXCEPT FOR ORAL ASSERTIONS, WERE UN ABLE TO PRODUCE ANY DOCUMENTARY EVIDENCE TO ESTABLISH THAT THEY HAVE EX TENDED SERVICES FOR THE CONTRACT ASSIGNED OR EXTENDED LABOUR WORK FOR THE A SSESSEE. THE CIT(A) HAVING REGARD TO THE REMAND REPORT AND MATERIAL PLA CED BEFORE HIM OBSERVED THAT INSPITE OF AMPLE OPPORTUNITIES, THE GENUINENES S OF EXPENSES INCURRED IN RELATION TO THESE FIVE CONTRACTORS COULD NOT BE EST ABLISHED BY DOCUMENTARY EVIDENCES. THE CIT(A) ALSO OBSERVED THAT THE ASSES SEE HAS FAILED TO DISCHARGE THE PRIMARY ONUS TO PROVE ITS CLAIM. HE, ACCORDING LY, CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 7. AGGRIEVED THERETO, THE ASSESSEE IS IN SECOND APP EAL BEFORE US. 4 ITA NO.858/PN/2014 8. THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE A SSESSEE SHRI C.H. NANIWADEKAR ADVERTED OUR ATTENTION TO THE LEDGER AC COUNT OF THE PARTIES MAINTAINED IN THE BOOKS OF THE ASSESSEE AT PAGE NO. 21 25 OF THE PAPER BOOK WHICH IS STATED TO BE DULY AUTHENTICATED BY THE RES PECTIVE PARTIES. HE SUBMITTED THAT THESE ARE SMALL CASH PAYMENTS FOR OB TAINING SERVICES FROM THESE PARTIES WHERE THE PAYMENTS MADE ARE TRUNCATED AND H AVE BEEN MADE OVER A PERIOD OF TIME. THE ASSESSEE WAS NOT LIABLE TO DED UCT ANY TDS THEREON IN TERMS OF THE PROVISION OF LAW. HE NEXT SUBMITTED T HAT EXCEPT FOR ONE PARTY, SUMMONS WERE ADMITTEDLY DELIVERED TO ALL OTHER FOUR PARTIES. THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN BECAUSE OF THE NON-C OMPLIANCE OF THE STATUTORY SUMMONS ISSUED UNDER SECTION 131 OF THE ACT. THE L D. AR EXHORTED THAT THESE TWO PARTIES WHO ATTENDED IN RESPONSE TO THE SUMMONS ASSERTED THAT THEY HAVE RECEIVED THE PAYMENTS FROM THE ASSESSEE IN CONSIDER ATION OF SERVICES RENDERED. THE LD. AR VEHEMENTLY ASSERTED THAT ASSESSEE CANNOT BE HELD RESPONSIBLE FOR NON-APPEARANCE OF PARTIES SUMMONED. HE RELIED UPON THE DECISION OF AGRA BENCH OF ITAT IN THE CASE OF ITO VS. MAYUR AGARWAL, (2011) 128 ITD 55 (TM) AND THE DECISION OF AHMEDABAD BENCH OF ITAT IN THE CASE OF SUNIJ PHARMA P. LTD. VS. DCIT, (2014) 42 CCH 59 (AHD-TRIB .) (COPY PLACED IN FILE) FOR THE AFORESAID PROPOSITION. 9. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS NOT DIS CHARGED THE PRIMARY ONUS OF SUBSTANTIATING THE CLAIM BY DOCUMENTARY EVIDENCES. HE RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT NO INTE RFERENCE IS CALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, MATERIAL PLACED ON RECORD AND THE CASE LAW CITED. THE ASSESSING OFFICE R HAS IMPUGNED THE ALLEGED LABOUR EXPENSES INCURRED WHERE PAYMENTS WERE STATED TO BE MADE IN CASH TO CERTAIN PARTIES. ACCORDING TO THE ASSESSING OFFICE R, THE BONAFIDES OF SUCH EXPENSES COULD NOT BE PROVED BY THE ASSESSEE. SUMMO NS UNDER S. 131 WERE ALSO ISSUED TO PROBE THE EXPENSES CLAIMED. SUMMONS SO ISSUED COULD BE DELIVERED TO FOUR PARTIES OUT OF FIVE PARTIES INVOL VED HEREIN. THUS, SUMMON TO 5 ITA NO.858/PN/2014 ONE PARTY REMAINED UNDELIVERED. IN THIS BACKGROUND, WE TAKE NOTICE OF THE CONTENTIONS OF THE REVENUE THAT THE IMPUGNED PAYMEN TS OF RS. 23.93 LACS IN AGGREGATE WERE MADE IN CASH TO THESE PARTIES. THE P AYMENTS MADE HAVE NOT BEEN SUBJECTED TO ANY TDS UNDER APPLICABLE PROVISIO NS OF THE ACT. WE ALSO NOTICE THE CONTENTIONS OF THE REVENUE THAT THE ASSE SSEE COULD NOT FURNISH THE PRIMARY DETAILS ABOUT THE NATURE OF SERVICES RENDER ED BY THESE PARTIES SUCH AS SITE WHERE WORK WAS PURPORTEDLY PERFORMED, HOURS SP ENT, RATE CHARGED ETC. TOWARDS ALLEGED WORK DONE. THEREFORE, THE ASSESSEE ON PART HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE TO ANCHOR SUCH CLAIM. ON A CLOSER STUDY OF THE ACCOUNT EXTRACT OF THE PARTIES MAINTAINED BY THE ASSESSEE IN ITS BOOKS, WE ALSO NOTICE THAT THE ASSESSEE HAS MADE NUMEROUS TRU NCATED PAYMENTS OF SMALL AMOUNTS RANGING UPTO RS.20,000/- AT ONE INSTANCE. HOWEVER, AT THE SAME TIME, THE SAID ACCOUNT EXTRACT ALSO REVEALS THAT IN ALL T HESE FIVE PARTIES, THERE ARE SEVERAL INSTANCES WHERE SEVERAL PAYMENTS HAVE BEEN SHOWN TO BE MADE IN CASH ON THE SAME DATE WHICH IF CLUBBED TOGETHER WILL BRE ACH THE THRESHOLD LIMIT SET UNDER S. 40A(3) OF THE ACT. SECTION 40A(3) OBLIGES THE ASSESSEE TO SHUN SETTLEMENT OF PAYMENTS TOWARDS EXPENDITURE IN CASH AND AVAIL BANKING CHANNEL FOR MAKING PAYMENTS ABOVE THRESHOLD LIMIT OF RS. 20 000/-. S. 194C ALSO CASTS OBLIGATIONS TO DEDUCT TDS ON PAYMENTS MADE TOWARDS CARRYING OUT ANY WORK AND DEPOSIT THE SAME TO THE GOVT. TREASURY AS PER S TATUTORY FRAMEWORK PROVIDED UNDER THE ACT. THUS, SERIES OF CASH PAYMENTS RUNNIN G FOR DAYS AND MONTHS TO THE SAME PARTY WHICH HOVERS AROUND THRESHOLD LIMIT IS UNCHARACTERISTIC OF A BONAFIDE COMMERCIAL TRANSACTION, UNLESS PROVED OTHE RWISE. THERE ARE AS MANY AS FIVE PARTIES WHERE THE PATTERN OF PAYMENT IS SIM ILAR AS NOTED ABOVE. THIS GIVES AN UNMISTAKABLE IMPRESSION THAT THE EXPENSES HAVE BEEN BOOKED IN CASH IN SUCH A MANNER WHICH ENABLES THE ASSESSEE TO BYPA SS THE STATUTORY BURDEN AND OBLIGATIONS CAST UNDER THE PROVISIONS OF THE ACT WH ILE CLAIMING THE EXPENSES. IN THE CASE OF ONE OF THE PARTIES NAMELY JALARAM S TONE CRUSHER, THE EXPENSES ARE STATED TO BE INCURRED ON SITE DEVELOPMENT EXPE NSES. THE EXPENSES HAVE BEEN BOOKED ON 21 ST MARCH, 2009 BY ONE ENTRY AS AGAINST MULTIPLE PAYME NTS MADE COMMENCING IN SMALL TRANCHES FROM 28 TH NOVEMBER, 2008 UPTO 21 ST MARCH, 2009. NO SUPPORTING DOCUMENT HAS BEEN ADDUC ED TO DEPICT WHAT 6 ITA NO.858/PN/2014 NECESSITATED SUCH TRUNCATED PAYMENT OVER A PERIOD O F TIME WITHOUT ANY PROPER DOCUMENTATION. IN SHORT, EXCEPT FOR ENTRIES OF CASH PAYMENT IN BOOK, NO DOCUMENTARY EVIDENCES SUCH AS BILL/INVOICE, DETAILS OF WORK CARRIED OUT ETC. ARE ADDUCED TO PROVE THE BONAFIDES OF EXPENSES. NO INVO ICE FOR SITE DEVELOPMENT EXPENSES ARE ON RECORD. IN RESPECT OF PARTY NAMELY JAMUNA STONE CRUSHER, IT IS OBSERVED FROM ACCOUNT EXTRACT THAT IT IS NOT A C ASE OF LABOUR EXPENSES. THE ASSESSEE HAS BOOKED SOME CORRESPONDING PURCHASE A GAINST THE PAYMENT MADE. HOWEVER, THE PURCHASE BILLS OR ANY OTHER SUP PORTING ARE NOT PLACED ON RECORD. THE TRUNCATED CASH PAYMENTS ONE AFTER ANOT HER ON ALMOST DAILY BASIS AND SOMETIMES MULTIPLE TIMES ON THE SAME DAY IS INC OMPREHENSIBLE. THE PAYMENT OF SUCH LARGE AMOUNT IN CASH WITHOUT MEETIN G OBLIGATIONS UNDER S. 40A(3) AND/OR TO DEDUCT TDS CLEARLY CASTS ASPERSION S ON THE CONDUCT OF THE ASSESSEE. TWO OF THE PARTIES WHO ATTENDED IN RESPON SE TO THE SUMMONS IN THE REMAND PROCEEDINGS ALSO COULD NOT FURNISH ANY WORTH WHILE EVIDENCE TO SUPPORT THEIR ASSERTIONS OF RECEIPT OF MONEY. THUS, SUCH AV ERMENT IS NOT OF EVIDENTIARY VALUE. THUS, WHEN THE FACTS AND CIRCUMSTANCES ARE I NTEGRATED, IT IS EVIDENT THAT THE ASSESSEE COULD NOT DISCHARGE ONUS WHICH LAY UPO N IT BY ADDUCING ANY COGENT EVIDENCE TO SUPPORT THE BONAFIDES OF THE CLA IM AS A FIRST STEP DE HORS THE APPEARANCE OR OTHERWISE OF THE PARTIES SUMMONED. T HUS, ON THIS SCORE ALONE, THE CLAIM OF EXPENSES ARE LIABLE TO BE DISCREDITED. AS NOTED EARLIER, THE WITNESSES WHO ATTENDED PURSUANT TO SUMMONS ALSO COU LD NOT IMPART ANY CREDIBLE BASIS TO SUPPORT THEIR ASSERTIONS. THUS, IN THE GIVEN FACTUAL MATRIX WHERE THE ACCOUNT EXTRACT GIVES A DISQUIETING IMPRE SSION THAT ASSESSEE HAS CIRCUMVENTED THE MANDATE OF PAYMENT BY BANKING CHAN NEL COUPLED WITH THE FACT THAT PRIMARY FACTS TO CORROBORATE THE CLAIM AR E NOT FORTHCOMING, INFERENCE THAT ENTRIES OF SIZABLE AMOUNT OF CASH DO NOT REPRE SENT BONAFIDE EXPENSES IS PLAUSIBLE. THUS, WE FIND THAT THE IMPUGNED CLAIM TO WARDS EXPENSES IS NOT SUBSTANTIATED BY COGENT EVIDENCE. WHEN THESE FACTO RS ARE TESTED ON THE TOUCHSTONE OF PREPONDERANCE OF PROBABILITIES, THE C LAIM APPEARS UNFOUNDED. IT IS TRUE THAT ONCE THE SUMMONS UNDER SECTION 131 OF THE ACT HAS BEEN SERVED ON THE PARTIES CONCERNED, ADVERSE INFERENCE CANNOT BE DRAWN AGAINST THE ASSESSEE MERELY OWING TO NON-COMPLIANCE OF THE SUMMONS. HOW EVER, IN THE INSTANT 7 ITA NO.858/PN/2014 CASE, THE DISALLOWANCE MADE IS SUSTAINABLE PRIMARIL Y ON ACCOUNT OF NON- AVAILABILITY OF DOCUMENTARY EVIDENCES ON THE PART O F THE ASSESSEE AND NOT FOR THE REASONS OF NON-APPEARANCE OF THE PARTIES SUMMON ED. THEREFORE, CASE LAWS CITED BY THE ASSESSEE ARE OF NO ASSISTANCE TO THE A SSESSEE. NEEDLESS TO SAY, THE PRIMARY ONUS TO ESTABLISH THE BONAFIDES OF THE TRAN SACTIONS ALWAYS LIES WITH THE ASSESSEE, WHICH HAS NOT BEEN DISCHARGED IN THE INST ANT CASE. IN THE TOTALITY OF CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF MAY, 2016. SD/- SD/- ( VIKAS AWASTHY ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 27 TH MAY, 2016. & ' () *+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-2, NASHIK; 4) THE CIT-2, NASHIK; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE