DCIT CIR 4(2), MUMBAI V. JAGDISH CONSTRUCTIONS LTD, MUMBAI

ITA 9077/MUM/2010

• Counselvise Citation: 907719914 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 05-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Depreciation
• Section: 143(3); 194C

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 9077/MUM./2010 ( &) * !+* / ASSESSMENT YEAR : 200607 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE4(2), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. ,- / APPELLANT ) V/S M/S. JAGDISH CONSTRUCTIONS LTD. 5, MANGALDAS MARKET 365, KITCHEN GARDEN LANE MUMBAI .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AABCJ0294K ./' . / C.O. NO. 31/MUM./2013 ( . 9077 /MUM./2013 12# 3 ) (ARISING OUT OF ITA NO. 9077/MUM./2013 ( &) * !+* / ASSESSMENT YEAR : 200607 ) M/S. JAGDISH CONSTRUCTIONS LTD. 5, MANGALDAS MARKET 365, KITCHEN GARDEN LANE MUMBAI .. ./' / CROSS OBJECTOR ) V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE4(2), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AABCJ0294K &) *4# 5 6 / REVENUE BY : MR. O.P. SINGH 7! 5 6 / ASSESSEE BY : MR. NISHIT GANDHI M/S. JAGDISH CONSTRUCTIONS LTD. 2 )! 5 # / DATE OF HEARING 05.08.2013 $ 8+ 5 # / DATE OF ORDER 06.09.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 9 9 9 9 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AND THE CROSS OBJECTION BY THE ASSESSEE, CHALLENGING THE IMPUGNED ORDER DATED 21 ST OCTOBER 2010, PASSED BY THE LEARNED COMMISSIONER (A PPEALS)VIII, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). WE FIRST TAKE UP REVENUES APPEAL, WHEREIN, FOLLOWING GROUNDS HAVE BEEN RAISED: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN OVERLOOKING THE FACT THAT MERE PROD UCTION OF VOUCHERS IN SUPPORT OF THE CLAIM FOR DEDUCTION OF THE EXPENDITU RE WOULD NOT PROVE THE PAYMENT, ESPECIALLY WHEN THE A.O. DOUBTS ITS GENUIN ENESS. 2. FACTS IN BRIEF : THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXCAV ATION, MINING, TRANSPORTATION AND MANUFACTURE OF CEMENT AN D CONSTRUCTION. DURING THE YEAR, THE ASSESSEE HAS SHOWN TOTAL TURNOVER OF ` 21,83,26,680 AND MISCELLANEOUS INCOME OF ` 3,61,951. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF MATE RIAL CONSUMED, POWER AND FUEL CHARGES, DIRECT EXPENDITURE, EMPLOYEES COS T, OPERATING EXPENDITURE, INTEREST AND DEPRECIATION. OUT OF THESE HEADS, THE ASSESSEE, UNDER THE HEAD DIRECT EXPENDITURE , CLAIMED A SUM OF ` 15,68,94,550, OUT OF WHICH THE MAJOR RELEVANT ITEMS WERE AS UNDER: REPAIR & MAINTENANCE ` 43,17,169 TRANSPORTATION CHARGES ` 2,31,00,241 WAGES ` 2,92,23,701 - ` 5,66,41,111 ========= M/S. JAGDISH CONSTRUCTIONS LTD. 3 3. THE ASSESSEE WAS REQUIRED TO PRODUCE THE DETAILS AN D VOUCHERS RELATING TO THE ABOVE EXPENDITURE. ON VERIFICATION OF TRANSPORTERS BILLS, HE OBSERVED THAT MOST OF THEM HAVE BEEN MADE IN CASH. IN THE EXPLANATION BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTE D THAT THESE PAYMENTS HAVE TO BE MADE ON CASH FIRSTLY, THIS ACTIVITY IS C ARRIED ON IN AN UNORGANIZED SECTOR AND SECONDLY, THE TRANSPORT VEHICLE CARRYING MATERIALS, ETC., REACH THE DESTINATION IN ODD HOURS. THE ASSESSING OFFICER NOT ED THAT THE VOUCHERS SUBMITTED BEFORE HIM WERE EITHER SELF MADE VOUCHERS OR WERE UNSIGNED. HE ALSO OBSERVED THAT THE SIGNATURE OF THE DRIVERS WAS IN ENGLISH WHEREAS IT IS WELL KNOWN THAT MOST OF THE PERSONS IN THIS BUSINES S ARE ILLITERATE. ON THESE COUNTS, HE HELD THAT POSSIBLE LEAKAGES IN THIS ACCO UNT CANNOT BE RULED OUT. SIMILARLY, HE NOTED THAT THE VOUCHERS RELATING TO R EPAIRS AND MAINTENANCE, THE SAME WERE NOT COMPLETELY VOUCHED, THEREFORE, TH E LEAKAGES CANNOT BE RULED OUT. ON VERIFICATION OF WAGE REGISTER, HE NOT ED THAT ONE PIRARAM HAS BEEN GIVEN PAYMENT FOR A PERIOD OF MONTHS AND HIS S IGNATURE IS NOT CONSISTENT, THEREFORE, THERE IS A POSSIBILITY OF LE AKAGES IN THE WAGES ACCOUNT ALSO. THUS, BASED ON THIS, HE HELD THAT 2% OF THE A FORESAID EXPENDITURE IS TO BE DISALLOWED. ACCORDINGLY, HE WORKED OUT THE DISAL LOWANCE OF ` 11,32,822, I.E., 2% OF ` 5,66,41,111. 4. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE SUB MITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS PURELY BA SED ON THE PRESUMPTION AND SURMISES. MOREOVER, THE VOUCHERS WHICH WERE SEL FMADE WERE SUPPORTED BY THIRD PARTY BILLS AND RECEIPTS. NO SPE CIFIC DISCREPANCY HAS BEEN POINTED OUT BY THE ASSESSING OFFICER AND THE REASON ING GIVEN BY HIM IS FAR FETCHED. THE COMMISSIONER (APPEALS), AFTER VERIFYIN G OF THE DETAILS FURNISHED BEFORE HIM, DELETED THE SAID ADDITION AFTER OBSERVI NG AND HOLDING AS UNDER: UPON CONSIDERATION OF RELEVANT FACTS, THE REASONS S TATED BY THE ASSESSING OFFICER FOR MAKING THE DISALLOWANCE AND APPELLANTS SUBMISSION, 1 FIND THAT THERE IS NO REASONABLE BASIS FOR DETERMINING THE QU ANTUM OF DISALLOWANCE AT 2 % OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER HAS FAILED TO POINTED OUT ANY BASIS FOR ADOPTING THE PE RCENTAGE. EVEN IF THE ASSESSING OFFICER S CONTENTION THAT THE PAYMENTS HA S BEEN MADE IN CASH AND ON THE BASIS OF INTERNAL VOUCHER IS FOUND TO BE COR RECT, THESE FACTS ARE NOT SUFFICIENT TO MAKE THE DISALLOWANCE AT 2% OF THE TO TAL EXPENDITURE AS THESE FACTS DO NOT ESTABLISH THAT THE ASSESSEES CLAIM TO THE EXTENT OF 2% OF THE M/S. JAGDISH CONSTRUCTIONS LTD. 4 TOTAL AMOUNT OF EXPENDITURE WAS NOT CORRECT. THE AS SESSING OFFICER HAS NOT BEEN ABLE TO FIND ANY FACT TO ESTABLISH THAT THE EX PENDITURE TO THE EXTENT CONSIDERED DISALLOWABLE HAD NOT BEEN INCURRED OR IF INCURRED, THE SAME WAS NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. NO DISALLOWANCE OUT OF ASSESSEES CLAIM OF EXPENDITURE IS JUSTIFIABLE IN A BSENCE OF ANY FACT ESTABLISHING THAT SUCH EXPENDITURE HAD EITHER NOT B EEN INCURRED OR IF INCURRED, WAS NOT FOR THE PURPOSE OF BUSINESS. PAYMENT IN CAS H OR PAYMENT ON THE BASIS OF SELF MADE VOUCHERS OR VOUCHERS BEING UNSIGNED IS NOT, IN ITSELF SUFFICIENT TO ENABLE A LEGITIMATE INFERENCE THAT THE EXPENSES CLA IMED BY THE ASSESSEE ARE NOT GENUINE. FROM THE ASSESSMENT ORDER, I DO NOT FI ND ANY BASIS THAT COULD JUSTIFIED A FINDING THAT THE EXPENDITURE CONSIDERED DISALLOWABLE BY THE ASSESSING OFFICER HAD NOT BEEN INCURRED OR IF INCUR RED, THE SAME WAS NOT FOR THE BUSINESS PURPOSE OF THE ASSESSEE. FURTHER, I DO NOT FIND ANY BASIS WHATSOEVER FOR DETERMINING THE AMOUNT OF DISALLOWAN CE AT 2% OF THE CLAIM OF EXPENDITURE. I THEREFORE HOLD THAT THE DISALLOWANCE OF RS.11,32,822/- IS NOT JUSTIFIED. THE ADDITION OF RS.11,32,822/- IS DELETE D. THE APPEAL ON THIS GROUND IS ALLOWED . 5. BEFORE US, BOTH THE PARTIES RELIED UPON THE RESPECT IVE ORDERS. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ONCE CERTAIN DISCREPANCIES IN THE FORM OF SELFMADE VOUCHERS HAV E BEEN POINTED OUT THEN 2% OF THE ADHOC DISALLOWANCE CANNOT BE SAID TO BE EXCESSIVE. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE REASONS GIVEN BY THE ASSESSING OFFICER ARE ABSOLUTELY UNTENABLE AND THEY ARE BASICALLY BASED ON ADHOC BASIS. 7. AFTER CAREFULLY CONSIDERING THE SUBMISSIONS MADE BY THE PARTIES AND ALSO ON PERUSAL OF THE RELEVANT FINDINGS OF THE ASS ESSING OFFICER AND THE COMMISSIONER (APPEALS), WE FIND THAT THE ASSESSING OFFICER HAS GIVEN VERY VAGUE REASONS FOR MAKING THE ADHOC DISALLOWANCE. I NCONSISTENCY IN SIGNATURE AND SIGNATURE MADE BY THE DRIVERS IN ENGL ISH CANNOT BE A REASON FOR DRAWING ANY ADVERSE INFERENCE. THE POSSIBLE LEA KAGES FOR THE PURPOSE OF DISALLOWANCE HAVE TO BE BASED ON SOME MATERIAL OR C RITERIA, WHICH HAVE NOT BEEN POINTED OUT BY THE ASSESSING OFFICER. ON THESE FACTS, THE FINDING RECORDED BY THE COMMISSIONER (APPEALS) AS ABOVE, IS JUSTIFIED ON FACTS. THEREFORE, WE DO NOT WISH TO DEVIATE FROM SUCH FIND INGS RECORDED BY THE COMMISSIONER (APPEALS). ACCORDINGLY, THE GROUND RAI SED BY THE REVENUE IS DISMISSED. M/S. JAGDISH CONSTRUCTIONS LTD. 5 8. 4 #: 7! 5 47 ) 7# ;< = 8. IN THE RESULT, REVENUES APPEAL IS TREATED AS DI SMISSED. 9. THE ASSESSEE, IN ITS CROSS OBJECTION, HAS CHALLENGE D THE DISALLOWANCE OF ` 3,31,267, ON ACCOUNT OF NON DEDUCTION OF TDS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE, ON THE FOLLOWING AMOUNTS, HAS NO T DEDUCTED TDS UNDER SECTION 194C AND, HENCE, DISALLOWANCE UNDER SECTION 40(A)(IA) IS TO BE MADE. S.N. NAME OF THE PARTY DATE OF PAYMENT AMOUNT PAID ( ` ) 1. MAHESH MOTOR BODY, NEEMUCH 21.08.2005 51,200 2. MAHESH MOTOR BODY, NEEMUCH 31.12.2005 52,500 3. INDORE MOTOR BODY, NEEMUCH 01.09.2005 26,200 4. MR. ENGINEERING WORKS, KOTA 29.09.2005 41,050 5. RAJ TRADERS, BILASPUR 27.01.2006 61,450 6. RAJ TRADERS, BILASPUR 31.12.2005 39,878 7. RAJ TRADERS, BILASPUR 28.02.2006 37,183 8. RAJ TRADERS, BILASPUR 30.09.2005 21,806 TOTAL 3,31,267 9. BEFORE THE COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THERE WAS NO COMPOSITE CONTRACT FOR SUPPLY OF LABOUR AND MATE RIAL AND ALL THE LABOUR CHARGES EXCEPT ONE WERE LESS THAN ` 20,000 AND THE MATERIAL PURCHASED BY THE COMPANY WERE DIRECTLY FROM THE SUPPLIER FOR WHI CH THE PAYMENT HAS BEEN MADE BY THE ASSESSEE DIRECTLY TO THE SUPPLIER FOR W HICH NO TAX IS TO BE DEDUCTED. THE COMMISSIONER (APPEALS) REJECTED THE A SSESSEES CONTENTION ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE E VIDENCE THAT THE PAYMENT OF MATERIAL HAS BEEN MADE DIRECTLY TO THE S UPPLIERS AND THE PAYMENT MADE TO THE LABOURS AND MATERIAL CANNOT SEG REGATED. HE, THUS, CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. M/S. JAGDISH CONSTRUCTIONS LTD. 6 10. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT BEFORE THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER ( APPEALS), THE DETAILS OF BREAKUP OF EXPENDITURE WAS GIVEN WHICH SHOWS THAT MOST OF THE PAYMENTS TO VARIOUS LABOURS WERE BELOW ` 20,000. THESE BILLS HAVE BEEN PLACED AT PAGES41 TO 93 OF THE PAPER BOOK, FILED BEFORE US. HE POINTED OUT THAT EXCEPT FOR ONE PAYMENT OF ` 36,000, THE PROOF OF WHICH IS GIVEN AT PAGE105 OF THE PAPER BOOK, OTHER PAYMENTS TO VARIOUS PARTIE S ARE LESS THAN ` 20,000 AND, THEREFORE, PROVISIONS OF SECTION 194C CANNOT B E APPLIED. HE ALSO DREW OUR ATTENTION TO THE BILLS OF MATERIAL SUPPLIED WHI CH WERE MADE BY THE ASSESSEE DIRECTLY TO THE SUPPLIERS. 11. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AS W ELL AS THE COMMISSIONER (APPEALS). 12. WE HAVE HEARD THE RIVAL CONTENTIONS. ON A PERUSED O F THE DETAILS AS FURNISHED BY THE LEARNED COUNSEL BEFORE US, IT IS S EEN THAT THE DETAILED BREAKUP HAS BEEN FURNISHED, GIVING PARTYWISE, DAT EWISE PAYMENT DETAILSAND PAYMENT FOR THE PURCHASE OF MATERIALS AN D FOR THE LABOURS. ALONG WITH THE SAID DETAILS, BILLS HAVE ALSO BEEN PRODUCE D BEFORE US. IF THE ASSESSEE HAD MADE PAYMENTS TO THE THIRD PARTY, DIRECTLY WITH OUT ANY PRIVITY OF CONTRACT, SUCH PAYMENTS CANNOT ATTRACT THE PROVISIO NS OF WITHHOLDING OF TAX UNDER SECTION 194C. SIMILARLY, IN CASE OF LABOURS, IF THE PAYMENT IS LESS THAN ` 20,000 TO EACH CONTRACTOR, THEN ALSO, THE PROVISION S OF TDS CANNOT BE APPLIED. IT IS SEEN THAT NONE OF THE AUTHORITIES HA VE VERIFIED THIS CONTENTION FROM THE RECORDS SUBMITTED BEFORE THEM. WE ARE, THU S, OF THE OPINION THAT THIS MATTER REQUIRES VERIFICATION OF THE FACTS, WHE THER THE PAYMENT MADE TO THE LABOUR / CONTRACTORS IS LESS THAN ` 20,000 AND THE MATERIALS HAVE BEEN PURCHASED DIRECTLY FROM THE SUPPLIERS WITHOUT ANY C ONTRACT. THUS, ONLY FOR THE PURPOSE OF VERIFICATION, THIS MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE WILL ALSO BE GIVEN OPPORTUNIT Y TO EXPLAIN THE SAME. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. M/S. JAGDISH CONSTRUCTIONS LTD. 7 13. 4 #: ./' 5 ./' >5 1?@ ' '$ !# A ) 7# ;<= 13. IN THE RESULT, ASSESSEES CROSS OBJECTION IS TR EATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. &) *B $!C , 7! 5 47 ) 7# ;< ! ./' 5 ./' >5 1?@ ' '$ !# A ) 7# ;< = 14. TO SUM UP, REVENUES APPEAL IS TREATED AS DISMI SSED AND ASSESSEES CROSS OBJECTION IS TREATED AS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. $ 5 8+ D E): 6 TH SEPTEMBER 2013 5 F = ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPTEMBER 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, E) E) E) E) DATED : 6 TH SEPTEMBER 2013 $ 5 .&#'G HG+# / COPY OF THE ORDER FORWARDED TO : (1) &) *4# / THE ASSESSEE; (2) 7! / THE REVENUE; (3) I () / THE CIT(A); (4) I / THE CIT, MUMBAI CITY CONCERNED; (5) G!LF .&#&) , , / THE DR, ITAT, MUMBAI; (6) FM* N / GUARD FILE. /G# .&# / TRUE COPY $) / BY ORDER . 7. OP / PRADEEP J. CHOWDHURY !4Q &)7 O! / SR. PRIVATE SECRETARY 1 / ; 7 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI