DCIT, New Delhi V. M/s. Skyline Engineering Contracts (India) Pvt. Ltd., New Delhi

ITA 859/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7042 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Source of fund; Onus to prove
• Section: 44AD; 142(1); 14A; 145; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO.859/DEL/2012 (ASSESSMENT YEAR 2008-09) DCIT, CIRCLE 8(1), VS. SKYLINE ENGINEERING CONTR ACT NEW DELHI (INDIA) PVT. LTD. PLOT NO.4, GROUND FLOOR, KEHAR SINGH ESTATE, SAID UL-AJAB, NEW DELHI. GIR / PAN :AAACS8955P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HEMANT GUPTA, JCIT DR RESPONDENT BY : SHRI ATUL PURI, ADV. DATE OF HEARING: 23.11.2015 DATE OF PRONOUNCEMENT: 29.01.2016 ORDER PER KULDIP SINGH, JM: THE APPELLANT, DCIT, CIRCLE 8(1), NEW DELHI (HEREI NAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 25.11.2011 PASSED BY LD. CIT(A ) XI, NEW DELHI QUA THE ASSESSMENT YEAR 2008-09 ON THE GROUNDS INTE R ALIA THAT: 1. LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN QUASHING THE INVOKING OF SECTION 145 OF THE I. T. A CT AND ALLOWING THE APPEAL OF THE ASSESSEE WITH REGARD TO SECTION 4 4AD. 2 I.T.A.NO.859/DEL/2012 2. LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN RESTRICTING THE DISALLOWANCE U/S 14A FROM RS.1,22,9 56/- TO RS.73,850/-. 3. LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN QUASHING THE REJECTION OF BILLS OF THE SUPPLIERS. 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE: DURI NG THE PROCESSING OF RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSE SSMENT YEAR 2008-09, THE CASE WAS SUBJECTED TO SCRUTINY AND CONSEQUENT U PON THE NOTICES ISSUED U/S 143(2) AND 142(1) ALONG WITH QUESTIONNAIRE, SHR I ATUL PURI, AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PUT IN A PPEARANCE, FILED DETAILS, BUT HAS NOT PRODUCED BOOKS OF ACCOUNTS IN ORIGINAL / COMPLETE SET OF COMPUTERIZED PRINT OUT ON THE GROUND OF BEING VO LUMINOUS WORK. THE ASSESSEE COMPANY LATER ON PRODUCED THE BOOKS OF ACC OUNTS IN SOFT FORM ON LAPTOP BUT STILL NEITHER THE BANK STATEMENTS WERE P RODUCED NOR ANY BILLS AND VOUCHERS PRODUCED IN ORIGINAL. THUS, THE ASSES SEE FAILED TO DISCHARGE ITS ONUS TO PROVE VARIOUS EXPENSES CLAIMED BY IT. PHOTOCOPIES OF SOME OF THE BILLS OF MAJOR EXPENSES EXCEEDING RS.50,00,000/ - FILED BY THE ASSESSEE FOUND TO BE NOT PAID DURING THE ASSESSMENT YEAR UND ER CONSIDERATION AS THE SAME WERE NOT BEARING STAMP NOR DO THEY BEAR CH EQUE NUMBER AND DATE AND AS SUCH, ASSESSING OFFICER CAME TO THE CON CLUSION THAT SINCE SUCH BILLS ARE FOR PAYMENT OF MORE THAN RS.20,000/- EACH , WHICH MIGHT HAVE BEEN PAID IN CASH, THE SAME CANNOT BE ALLOWED. 3. THE ASSESSING OFFICER HAS ALSO REJECTED THE SUB- CONTRACTORS BILLS ON THE GROUND THAT THE SAME DO NOT APPEAR TO BE GENUIN E BEING NOT IN ORIGINAL / TYPED BUT IN KACHHA/ROUGH FORM. THE ASSESSING O FFICER HAS ALSO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE THOU GH THE ASSESSEE HAS 3 I.T.A.NO.859/DEL/2012 FILED AUDITED COPY OF ACCOUNTS BEING NOT RELIABLE A ND BY INVOKING PROVISIONS CONTAINED U/S 44AD OF THE ACT, ESTIMATED GROSS PROFIT (G.P.) @ 8%. THE ASSESSING OFFICER HAS ALSO DISALLOWED THE DIVIDEND INCOME OF RS.73,850/- ON THE GROUND THAT IT DOES NOT MAKE PAR T OF THE TOTAL INCOME AND THEREBY ASSESSED THE NET TAXABLE INCOME AT RS.1 4,52,17,838/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A ) WHO HAS PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY FILING THE PRESENT APPEAL. 5. WE HAVE HEARD BOTH THE AUTHORIZED REPRESENTATIVE S, PERUSED THE MATERIAL PLACED ON RECORD IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE AND ORDERS OF AUTHORITIES BELOW. 6. LD. D.R. CHALLENGING THE IMPUGNED ORDER, CONTEND ED INTER ALIA THAT DISALLOWANCE U/S 14A OF THE ACT OF TRADING ADDITION S HAVE BEEN RIGHTLY MADE BY THE ASSESSING OFFICER BY REJECTING THE BOOK S OF ACCOUNTS WHEREAS LD. CIT(A) HAS ERRED IN OVERTURNING THE ASSESSMENT ORDER; THAT THE BILLS FURNISHED BY THE ASSESSEE HAVE BEEN EXAMINED AND FO UND TO BE BOGUS BY THE ASSESSING OFFICER BUT LD. CIT(A) HAS ERRED IN Q UASHING THE INVOKING OF SECTION 145 OF THE I.T. ACT, 1961 AND RESTRICTIN G THE DISALLOWANCE FROM RS.1,22,956/- TO RS.73,850/- U/S 14A. 7. HOWEVER, ON THE OTHER HAND, LD. A.R. REPELLED TH E ARGUMENTS ADDRESSED BY THE LD. D.R. BY CONTENDING INTER ALIA THAT THE ASSESSEE HAS PRODUCED ALL THE RELEVANT BILLS VIDE LETTER DATED 1 6.09.2010, WHICH HAVE BEEN ARBITRARILY REJECTED BY THE ASSESSING OFFICER; THAT SINCE THE PAYMENT WAS MADE IN ADVANCE SO, CHEQUE NUMBERS WERE NOT MEN TIONED IN THE BILLS; 4 I.T.A.NO.859/DEL/2012 THAT ENTIRE DETAILS OF BILLS OF SUNDRY ACCOUNT HAS BEEN MENTIONED IN THE P & L ACCOUNT; THAT KACHHA BILLS HAVE BEEN PREPARED AT THE SITE AND ORIGINAL BILL IS LYING AT PAGE 94 OF THE PAPER BOOK. 8. NOW, THE FIRST QUESTION ARISES FOR DETERMINATION IN THIS CASE IS, AS TO WHETHER LD. CIT(A) HAS ERRED IN LAW AND FACTS IN QU ASHING THE INVOKING OF SECTION 145 OF THE I.T. ACT, 1961 BY THE ASSESSING OFFICER WHO HAS REJECTED THE BILLS SUBMITTED UNDER VARIOUS HEADS I.E. SHUTTE RING, CEMENT, ALUMINIUM, BRICK, PAINT, STEEL, TIMBER ETC. DESPITE THE COMPREHENSIVE FACTS ELABORATED BY THE ASSESSING OFFICER INTER ALIA THAT THERE IS NO MENTION OF PAYMENT MODE; THAT THE BILLS HAVE NOT BEEN STAMPED AND THERE IS NO MENTION OF MODE OF PAYMENT I.E. DETAILS OF CHEQUE, BANK ACCOUNT AND DATE HAS NOT BEEN MENTIONED; THAT THE AMOUNT OF SAID BIL LS HAVE ALSO NOT BEEN TALLIED WITH THE LISTS OF SUNDRY CREDITORS BUT FOUN D TO BE NOT TALLIED; THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE EXPENSES HAVE ACTUALLY BEEN MADE ON CREATION OF PRODUCTS OF THE BUSINESS OF THE ASSESSE E AND THE SAME WERE PAID OUT OF UNDISCLOSED SOURCES OF INCOME; THAT ROU GH/ KACHA BILLS WERE NOT CORRELATED WITH PACCA BILLS AND BANK STATEMENT. 8.1 THE ASSESSING OFFICER REJECTED THE BOOKS OF ACC OUNTS OF THE ASSESSEE BY DISCUSSING THE PLETHORA OF JUDGEMENT DE LIVERED BY HON'BLE HIGH COURT AND ITAT BUT THE ASSESSMENT ORDER ITSELF LACKS REASONING FOR REJECTION OF BOOKS OF ACCOUNTS EXCEPT MAKING FOLLOW ING OBSERVATIONS: ALTHOUGH THE PRESENT ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION AND WHERE ASSESSEE IS ALLEGEDLY MAINTAINING BOOKS OF AC COUNT AND WHERE THE ASSESSEE HAS FILED AUDITED COPY OF ACCOUN T, THE BOOKS OF ACCOUNTS ARE STILL NOT RELIABLE AND THE SAME ARE RE JECTED AND SECTION 5 I.T.A.NO.859/DEL/2012 44AD OF THE I.T. ACT, 1961 IS INVOKED AND GROSS PRO FIT IS ESTIMATED AT 8%. 9. NOW, ADVERTING TO THE IMPUGNED ORDER, LD. CIT(A) HAS MADE THE FOLLOWING OBSERVATIONS ON THE REJECTION OF BOOKS OF ACCOUNTS, RELIED UPON BY THE ASSESSING OFFICER: IN THIS CASE THE AO HAS MADE ALLEGATIONS FAR IN EX CESS OF THE DISCREPANCIES NOTED. HE HAS STATED THAT THE BOOKS O F ACCOUNT WERE NOT RELIABLE AND MANY DISTURBANCES WERE NOTED IN TH E EXPENSES AND SUCH EXPENSES HAVE BECOME DISALLOWABLE. THE AO STAT ES THAT THESE EXPENSES REPRESENT THE TIP OF THE ICE BERG. THE AO HAS ONLY GIVEN INSTANCES OF A FEW VOUCHERS WHICH HAD SOME DEFECTS. BEYOND THIS THE AO HAS NOT BEEN ABLE TO ESTABLISH THAT THERE WE RE IRREGULARITIES IN THE ACCOUNTS WHICH COULD LEAD TO CONCLUDE THAT T HE BOOKS OF ACCOUNTS WERE UNRELIABLE AND THE CORRECT PROFIT COU LD NOT BE DEDUCTED THEREUPON. IT IS SEEN FROM THE RECORD THAT THE A/C ON COMPUTER WERE PRODUCED BEFORE THE A.O. AS PER THE ORDER IT IS STATED THAT THE COMPLETE PRINT OUTS WERE NOT PRODUCED. THE AO HAS STATED THAT PHOT OCOPIES OF SOME BILLS WERE PRODUCED AND GAVE INSTANCES OF SOME BILLS AMOUNTING TO RS.93,87,310/- WHERE HE HAS STATED THA T THE BILLS WERE NOT PAID BECAUSE IT DOES NOT SHOW STAMP NOR MENTION CHEQUE NO. AND DATE. BEFORE ME THE APPELLANT SUBMIT TED THAT T HE BILLS IN QUESTION WERE THE ONES WHERE ADVANCE PAYMENT HAD BE EN MADE AND INVOICES RECEIVED LATE. THAT WAS THE REASON CHEQUE NOS. WERE NOT MENTIONED. THE APPELLANT PRODUCED THE BILLS WHICH W ERE TEST CHECKED FROM THE ACCOUNTS. 10. FURTHERMORE, WHEN LD. CIT(A) HIMSELF HAS CATEGO RICALLY OBSERVED THAT SUFFICIENT OPPORTUNITY OF BEING HEARD HAS NOT BEEN GIVEN TO THE APPELLANT BEFORE INVOKING THE PROVISIONS CONTAINED U/S 145 OF THE ACT, IT IS SURPRISING AS TO HOW THE LD. CIT(A) HAS PROCEEDED W ITH RESTRICTING DISALLOWANCE U/S 14A FROM RS.1,22,956/- TO RS.73,85 0/-. THE OPERATIVE 6 I.T.A.NO.859/DEL/2012 PART OF THE FINDINGS RETURNED BY LD. CIT(A) IS REPR ODUCED AS UNDER FOR READY REFERENCE: THE MOST IMPORTANT FACT IS THAT SUFFICIENT OPPORTUN ITY HAS NOT BEEN GIVEN TO THE APPELLANT BEFORE INVOKING S.1 45 . THE APPELLANT IS THE BUSINESS FOR LONG AND HAS BEEN CON SISTENTLY FILING ITS RETURN OF INCOME ON THE BASIS OF AUDITED ACCOUNTS. THE APPELLANT HAS BEEN FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNT ING ON THE BASIS OF WHICH PROFITS AND GAINS OF ITS BUSINESS HAVE BEE N DEDUCTED. THE AO HAS NOT GIVEN SUFFICIENT REASON TO SUGGEST THAT THE ACCOUNTS OF THE APPELLANT WERE SUCH THAT CORRECT PROFITS COULD NOT BE DEDUCTED FROM THE ACCOUNTS. THE AO HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLAN T BEFORE INVOKING SECTION 145. THIS IS AN ESSENTIAL P REREQUISITE OF ANY PROCEEDING THAT THE AO CANNOT DRAW AN ADVERSE I NFERENCE AGAINST THE APPELLANT WITHOUT GIVING AN OPPORTUNITY AND A FAIR AND JUST CHANCE TO THE APPELLANT TO GIVE ITS SUBMISSION S. PRINCIPLES OF NATURAL JUSTICE SHOULD HAVE BEEN FOLLOWED. I THEREFORE HOLD THAT THE ACTION OF THE AO TO INVOK E 145(2) IS NOT CORRECT AND IS THEREFORE QUASHED. THE RETURNED INCOME OF THE APPELLANT MAY BE ACCEPTED. THE PROFIT AS DISCLOSED BY THE APPELLANT IN ITS ACCOUNT MAY BE TAKEN AS CORRECT. 11. SO, KEEPING IN VIEW OF THE CRYPTIC FINDINGS RET URNED BY THE ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNTS A ND FINDING RETURNED BY LD. CIT(A) REFERRED TO ABOVE, WE ARE OF THE CONSIDE RED VIEW THAT THE OPPORTUNITY OF BEING HEARD HAS NOT BEEN GRANTED TO THE ASSESSEE BY THE ASSESSING OFFICER BEFORE REJECTING THE BOOKS OF ACC OUNTS. EVEN OTHERWISE, THE BILLS SUBMITTED BY THE ASSESSEE DURING ASSESSME NT PROCEEDINGS HAVE BEEN DECLARED AS BOGUS WITHOUT CALLING THE PARTIES WHO HAVE ISSUED THE BILLS IN QUESTION. MOREOVER, THE ASSESSING OFFICER AT THE ONE HAND HAS ACCEPTED THE P & L ACCOUNT STATEMENT AND ON THE OTH ER HAND, HE HAS REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 7 I.T.A.NO.859/DEL/2012 12. SO, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT( A) HAS ERRED IN QUASHING THE ACTION TAKEN BY THE ASSESSING OFFICER TO INVOKE PROVISIONS CONTAINED U/S 145(2) OF THE ACT WITHOUT TAKING INTO ACCOUNT THE ADMITTED FACT THAT THE ASSESSING OFFICER HAS NOT PROVIDED SU FFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE RATHER REJECTED THE BOO KS OF ACCOUNTS ARBITRARILY AND DECLARED THE BILLS FILED BY THE ASS ESSEE AS BOGUS UNILATERALLY. SO, THE IMPUGNED ORDER PASSED BY LD. CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW AND WITHOUT ENTERING INTO THE MERITS OF THE CASE, THE FILE IS ORDERED TO BE RESTORED TO THE ASS ESSING OFFICER TO DECIDE AFRESH AFTER PROVIDING OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JAN., 2016 SD./- SD./- (N. K. SAINI) (KULDIP S INGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 29.01.2016 SP. COPY FORWARDED TO:- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A)-, NEW DELHI. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) 8 I.T.A.NO.859/DEL/2012 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 19,28,28,29/1, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER