R.S. Pabbla Constructions Pvt.Ltd., Visakhapatnam V. The Dy. CIT, Visakhapatnam

ITA 87/VIZ/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8275 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 22-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; TDS
• Section: 133A; 40(a)(ia); 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM (Through web-based video conferencing platform) BEFORE SHRI DUVVURU R L REDDY, HON’BLE JUDICIAL MEMBER & SHRI S. BALAKRISHNAN, HON'BLE ACCOUNTANT MEMBER I.T.A. Nos. 87 & 88/VIZ/2017 (Asst. Years : 2013-14 & 2014-15) R.S.Pabbla Constructions Pvt. Ltd., Plot No.102, Sai Kutir Apartments, Beach Road, Visakhapatnam. Vs. DCIT, Circle-4(1), Visakhapatnam. PAN No. AACCR 6632 C (Appellant) (Respondent) Assessee by : None. Department by : Shri M.N.Murthy Naik, CIT-DR & Shri S.P.G. Mudaliar, Sr.DR Date of hearing : 08/02/2022. Date of pronouncement : 23/02/2022. O R D E R PER S. BALAKRISHNAN, ACCOUNTANT MEMBER: These appeals are filed by the assessee against the common order of Commissioner of Income Tax (Appeals)-2 [for short, “CIT(A)”], Visakhapatnam in ITA No.37 & 39/2016-17/CIT(A)-2/ C-4(1)/VSP/2016-17, dated 18/01/2017 for the A.Ys. 2013-14 & 2014-15. Since facts and issues are common in both the appeals, clubbed and heard together and disposed of by way of this consolidated order. 2 ITA Nos. 87 & 88/VIZ/2017 (R.S. Pabbla Constructions Pvt. Ltd.) ITA No.87/VIZ/2017 2. The assessee has raised the following grounds of appeal:- “1. The Order passed by the CIT(A) is arbitrary and unjustifiable. 2 The CIT(A) is not justified in rejecting to admit the additional evidence filed by the assessee company, no opportunity is given at the time of asst. proceedings to prove genuineness of both Labourers and material creditors and hence this is a fit case to remand the same to the file of the AG 3. The CIT(A), is not justified in confirming the addition made by the AG, as the assessee company has returned reasonable profit in the ROT, books of accounts of the assessee were rejected in the past asst. proceedings, assessee company has made a request to the AO to reject books of accounts and to adopt profit @8% hence it is a no books of case, ought to have allowed the appeal of the assessee keeping in view of the facts of the case, hence addition of Rs.2,18,94,300/- towards material creditors and Labour creditors, is liable to be deleted in the hands Of the assessee company. 4. The CIT(A), is not justified in confirming the addition made by the AO, as the assessee company has returned reasonable profit in the ROI, books of accounts of the assessee were rejected in the past asst. proceedings, assessee company has made a request to the AO to reject books of accounts and to adopt profit @ 8%, hence it is a no books of case, Ought to have allowed the appeal of the assessee keeping in view of the facts of the case, the parties mentioned to whom work on sub- contract basis is mentioned were part of groups of Labourers, hence, TDS provisions do not apply, hence addition of Rs. 24,15,012/- u/sec. 40(a)(ia) is liable to be deleted in the hands of the assessee company. 5. Any other grounds those may be prayed at the time of hearing.” 3. Brief facts of the case are that assessee namely R.S. Pabbla Constructions Pvt. Ltd. is engaged in the business of executing 3 ITA Nos. 87 & 88/VIZ/2017 (R.S. Pabbla Constructions Pvt. Ltd.) contract work relating to construction of chimneys, overhead reservoirs, cooling towers, buildings and high rise structures of various plants across the country. The assessee filed its return of income for the A.Y. 2013-14 on 25/10/2013 declaring total income of Rs. 1,04,86,040/-. The case was selected for scrutiny. During the pendency of scrutiny proceedings, a survey u/sec. 133A was conducted in the assessee’s premises on 21/09/2015. During the course of survey, the Managing Director of the company Sri R.S. Pabbla admitted that certain credits outstanding in the books are bogus and fictitious and offered additional income of Rs. 1.51 crores for the A.Y. 2013-14 and Rs. 3.60 crores for A.Y. 2014-15 in the sworn deposition given by him on 21/09/2015. During the scrutiny proceedings, the AO called upon the assessee to substantiate the claim of sundry creditors to the tune of Rs. 6.46 crores shown as outstanding as on 31/03/2013 in its balance sheet. After providing various opportunities by the AO, the assessee filed the break-up in regard to 17 labour groups and the outstanding was given to be Rs. 5,72,13,840/- as on 31/03/2013 and the balance amount of Rs. 74,37,720/- represent liabilities towards material purchase. The AO also noted that the assessee failed to adduce primary evidence in support of the existence of some of such credit liabilities. As a result, an amount of Rs. 1,61,61,069/- was added to the total income, after excluding the opening balance and liability claimed towards sub-contractors. The AO also made an addition of Rs. 24,15,012/- by way of disallowance u/sec. 40(a)(ia) and thus determined total income of Rs. 3,47,95,350/-. Similarly for the A.Y. 2014-15 certain additions amounting to Rs. 6,98,71,035/- were made towards unexplained labour credits. It is also noted that the 4 ITA Nos. 87 & 88/VIZ/2017 (R.S. Pabbla Constructions Pvt. Ltd.) assessee failed to produce confirmation letters from both labour and material contractors. 4. Aggrieved by the above additions, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A) assessee filed a letter dated 13/12/2016 for admission of additional evidence in the form of confirmation letters for 8 out of 17 labour creditor groups. It was submitted by the assessee that sufficient and reasonable cause for not submitting the confirmation letters was given before the AO and hence, requested to admit the additional evidence. The ld.CIT(A) forwarded the same to the AO for his comments and on admissibility. The AO vide his report dated 15/12/2016 submitted that balance confirmation letters furnished by the assessee afresh may not be admitted as additional evidence. Ld.AR pleaded that AO neither insisted for submission of confirmation letters nor given any opportunity to produce them during the assessment proceedings, and therefore the assessee company was prevented by sufficient and reasonable cause in not submitting the confirmation letters before the AO. On the other hand, the AO in his remand report has contended that the assessee was afforded sufficient opportunities and that the assessee failed to produce any evidence in support of claim of credit liabilities towards labour. The AO in his remand report has elaborately referred to the opportunities afforded and the non-compliance of the assessee. The AO has also pointed out that the assessee failed to produce the original records, the ledger extracts, the muster rolls etc. 5. Considering the submissions made by the AR and the remand report of the AO, ld.CIT(A) confirmed the additions made by the AO 5 ITA Nos. 87 & 88/VIZ/2017 (R.S. Pabbla Constructions Pvt. Ltd.) to the extent of Rs. 1,61,61,069/- for the A.Y. 2013-14 and Rs.6,98,71,035/- for the A.Y. 2014-15. The ld.CIT(A) also confirmed the disallowance u/sec. 40(a)(ia) of the Act of Rs. 24,15,012/- for the A.Y. 2013-14 and Rs. 94,77,602/- for the A.Y. 2014-15. 6. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before this Tribunal. 7. Ld.AR argued that the AO has rejected the books of account for the earlier years and has adopted the profit of 8% treating the assessee as not maintaining the books of account. He reiterated that keeping in view of the facts of the case, same 8% ought to have been estimated. Ld.AR also argued that since the assessee is a sub-contractor and the work has executed on sub-contract basis, TDS provisions do not apply as per the provisions of section 40(a)(ia) of the Act. 8. Ld.DR argued that the assessee is a private limited company and it is supposed to maintain the books of accounts as per the Companies Act. Ld.DR also argued that since the assessments for the earlier years were completed on the basis of estimating the profit at 8%, cannot be a ground for these assessment years. Ld.DR also relied on the following paragraph of the order of the ld.CIT(A) which is extracted below:- “However, it was stated that the income declared was 8% of net bills of Rs. 24,83,10,491/-. It is noted that the assessee had filed copies of audit report u/sec. 44AB and of independent Auditor report as required under the Companies. In both these reports it was mentioned that audit was done as per books of accounts maintained. It was also certified in the report as required u/sec. 227(3) of the Companies Act, that proper books of accounts as required by law have been kept by the company so far as it appears 6 ITA Nos. 87 & 88/VIZ/2017 (R.S. Pabbla Constructions Pvt. Ltd.) from our examination of those books of account and that the balance sheet, the statement of profit and low, the cash flow statement are in agreement with the books of account and comply with the Accounting Standards referred to in section 211(3C) of the Act.” 9. We have heard both the parties and perused the material available on record. We note from the order of the AO that several opportunity were given to the assessee for adducing evidences with respect to labour creditors and material creditors. It is seen from the orders of the authorities below, the assessee has not provided sufficient evidence before the AO nor before the ld.CIT(A). The assessee company was also subjected to audit under the Companies Act, and has also filed report u/s 44AB of the Act. Hence the ground taken by the assessee that no books of account maintained by them and requiring to assess the profits on estimate basis at 8% based on earlier years cannot be accepted by us. Therefore, considering the overall facts of the case and the failure on the part of the assessee to produce any evidence to substantiate the claim of impugned outstanding liabilities without valid reasons, we find no infirmity in the order passed by the ld.CIT(A) and uphold the order of the ld.CIT(A). Thus, this appeal filed by the assessee is dismissed. ITA No.88/VIZ/2017 10. The facts of this case are similar to the facts of ITA No.87/VIZ/2017 except the difference in figures. Therefore, our decision in ITA No.87/VIZ/2017 shall apply mutatis mutandis to this appeal also. 7 ITA Nos. 87 & 88/VIZ/2017 (R.S. Pabbla Constructions Pvt. Ltd.) 11. In the result, both the appeals filed by the assessee are dismissed. Order Pronounced in open Court on this 23 rd day of Feb., 2022. Sd/- sd/- (DUVVURU R L REDDY) (S. BALAKRISHNAN) Judicial Member Accountant Member Dated: 23 rd Feb., 2022. vr/- Copy to: 1. The Assessee - R.S.Pabbla Constructions Pvt. Ltd., Plot No.102, Sai Kutir Apartments, Beach Road, Visakhapatnam. 2. The Revenue – DCIT, Circle-4(1), Visakhapatnam. 3. The CIT-2, Visakhapatnam. 4. The CIT(A)-2, Visakhapatnam. 5. The D.R., Visakhapatnam. 6. Guard file. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.