SHYAM ENTERPRISES, Jaipur V. ADDL. CIT, Jaipur

ITA 93/JPR/2013

• Counselvise Citation: 9323114 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRAVAN KR GUPTA
• Keywords: Depreciation; Corroborative evidences
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 93/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 M/S SHYAM ENTERPRISES 1- SETHI MARKET, KISHANGARH RENWAL, JAIPUR. CUKE VS. THE ADDL. CIT, RANGE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAOFS 0153 L VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI SHRAVAN KR. GUPTA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI KAILASH MANGAL (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 13/02/2015 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 04/03/2015 VKNS'K @ ORDER PER: R.P. TOLANI, J.M. THIS IS AN ASSESSEES APPEAL CHALLENGING THE ORDER OF THE LEARNED CIT(A)-III, JAIPUR DATED 05 TH OCTOBER, 2012 FOR A.Y.2008-09 CLAIMING THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS : I IN CONFIRMING THE DISALLOWANCE OF RS. 7,00,000/- OUT OF RS. 2,90,25,951/- ON ACCOUNT OF LABOUR CHARGES, BAZRI, GRIT AND ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 2 MORAM EXPENSES MADE BY THE A.O. WITHOUT INVOKING PROVISIONS OF SEC. 145(3) OF THE ACT. II. IN CONFIRMING THE DISALLOWANCE OF RS. 17,239/- O N ACCOUNT OF DEPRECIATION ON JCB MACHINE. III. IN CHARGING OF INTEREST U/S 234B, 234C AND 234 D AS CONSEQUENTIAL IN NATURE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND DECLARED G.P. @ 11.41% ON TOTAL TURNOVER OF RS. 7,27,75,185/- AND N.P. 8.00% BEFORE, SALARY, INTEREST AS AGAINST G.P. RATE OF 11.00%. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE ACCEPTED BY TH E ASSESSING OFFICER, HOWEVER, THE ABOVE OBSERVATIONS WERE MADE ON THE GROUND THAT: (I) WAGES HAVE BEEN PAID IN CASH WITHOUT ANY SUPPOR TING EVIDENCE. (II) MUSTER ROLL HAS NOT BEEN PROPERLY MAINTAINED GIVING FULL DETAILS OF LABORERS AND PAYMENTS IN RESPECT OF BAZR I, GRIT AND MORAM EXPENSES WERE MADE IN CASH BY SELF MADE VOUCHERS. THE LEARNED ASSESSING OFFICER DISALLOWED THE AMOUNT GIVEN BELOW O N THE FOLLOWING OBSERVATIONS:- ON GOING THROUGH THE DETAILS FILED BY THE ASSESSEE, IT IS NOTICED THAT A SUM OF RS. 2,90,25,951/- HAS BEEN DEBITED UNDER THE FOLLOWING HEADS:- ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 3 LABOUR CHARGES RS. 1,04,19,950/- BAZRI RS. 24,96,000/- GRIT RS. 93,27,151/-. MORAM RS. 67,82,850/- TOTAL RS. 2,90,25,951/- ON EXAMINATION OF THE BOOKS AND SUPPORTING DOCUMEN TS, IT IS SEEN THAT THE WAGES HAVE BEEN PAID IN CASH FOR WHICH NO SUPPORTING EVIDENCE IS AVAILABLE. THE MUSTER ROLL ALSO HAS NOT BEEN PROPERLY MAINTAINED AS FULL NAME AND ADDRESSES OF THE LABOUR ERS ARE NOT AVAILABLE. IN RESPECT OF PAYMENTS ON ACCOUNT OF BAZ ARI, GRIT AND MORAM, IT IS SEEN THAT THE PAYMENTS HAVE BEEN MADE IN CASH ON SELF MADE VOUCHERS FOR WHICH NO SUPPORTING EVIDENCE IS AVAILA BLE. CONSIDERING THE FACTS OF THE CASE, WHEREIN THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE EXPENSES DEBITED IN ITS P&L ACCOUN T UNDER THIS HEAD, A LUMP SUM DISALLOWANCE OF RS. 700000/- UNDER THESE HE ADS IS MADE. THUS, RS. 7,00,000/- IS ADDED TO THE TOTAL INCOME O F THE ASSESSEE. THE DEPRECIATION WAS DISALLOWED BY THE LEARNED ASSESSI NG OFFICER BY GIVING FOLLOWING OBSERVATIONS:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERU SAL OF THE FIXED ASSETS CHART IT WAS FOUND THAT THE ASSESSEE HA S PURCHASED JCB MACHINE FOR RS. 20,88,727/-. HOWEVER, DOCUMENTARY EV IDENCE PRODUCED REFLECTS INVESTMENT OF RS. 19,73,800/- ONLY. THUS, T HERE IS A DIFFERENCE OF RS. 1,14,927/- IN COST. IN VIEW OF THIS FACT DEPR ECIATION ON DIFFERENCE AMOUNT @ 15% I.E. 17,239/- IS DISALLOWED AND ADDED BA CK TO THE TOTAL INCOME OF THE ASSESSEE. ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 4 3. AGGRIEVED ASSESSEE PREFERRED 1 ST APPEAL WHERE THE LEARNED CIT(A) HAS HELD AS UNDER:- ON DUE CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD, I AM NOT CONVINCED WITH THE ARGUMENTS OF THE APPELLANT. TH E DEFECTS POINTED OUT BY THE A.O. HAS NOT BEEN CONTROVERTED B Y THE APPELLANT DURING THE APPEAL PROCEEDINGS. THE EXPENSE S HAVE BEEN MADE IN CASH AND ARE SUPPORTED BY SELF MADE VO UCHERS. HENCE THE SAME ARE NOT VERIFIABLE. THE DISALLOWANCE OF RS. 7,00,000/- OUT OF THE TOTAL EXPENSE OF RS. 2,90,25, 951/- IS VERY REASONABLE, BEING ONLY 2.41% OF THE TOTAL EXPENSES. THE SAME ASSESSEE THEREFORE UPHELD. 4. NOW THE ASSESSEE IS BEFORE US. THE COUNSEL FOR TH E ASSESSEE CONTENDS THAT THOUGH THE GROUND ABOUT DEPRECIATION WAS CHALLENGED BEFORE THE LEARNED CIT(A) AND ARGUED BUT NO DECISIO N HAS BEEN RENDERED IN THIS BEHALF. 4.1 APROPOS THE LUMP SUM ADDITION IS MADE BY THE AS SESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGU ED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE, WHICH ASSESSEE DULY AUDI TED AND REGULARLY MAINTAINED, HAVE NOT BEEN CHALLENGED AND REMAINED A CCEPTED. THUS NO DEFECT WHATSOEVER REGARDING THE STOCK DETAILS, WORK I N PROGRESS ETC. WAS FOUND. THE DISALLOWANCE HAS BEEN MADE ON AD HOC BA SIS BY THE ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 5 ASSESSING OFFICER, WHICH HAS BEEN CONFIRMED BY THE L EARNED CIT(A) THAT THE DISALLOWANCE BEING ONLY 2.41% OF THE TOTAL EXPEN SES IS JUSTIFIED. THE LEARNED CIT(A) HAS FAILED TO GO INTO THE DETAILS AND SUBMISSIONS MADE BEFORE HIM ABOUT THE MERITS OF THE CASE, WHICH ARE AS UNDER:- THE ASSESSEE HAS DECLARED ACCEPTABLE BETTER G.P. RAT E ON 11.41% AND NET PROFIT IN THIS YEAR 58,23,973/- GIVING N.P. RATE OF 8% AS AGAINST G.P. RATE OF 11% AND NET PROFIT OF RS. 52,02,138/- GIVING N.P. RATE OF 8.16% IN LAST YEAR. IN THE YEAR UNDER CONSIDERATION , THE TURNOVER AS WELL AS G.P. RATE HAS INCREASED AND ALSO NET PROFIT HAS INCREASED AND PAID MORE TAX THAN TO LAST YEAR. THE RESULT DECLARED IN THE EARLIER YEAR FOR A.Y. 2007-08 AND 2006-07 HAS BEEN ACCEPTED IN T HE SCRUTINY ASSESSMENT U/S 143(3) AND ON PERUSAL OF THE CHART, IT IS CLEAR THAT THE ASSESSEE HAS DECLARED BETTER RESULT IN THIS YEAR HE NCE THERE SHOULD NO FURTHER DISALLOWANCE AS PER SETTLED LEGAL POSITION. THE EXPENDITURES CLAIMED IN ABOVE HEAD ARE LESS THAN PRECEDING A.Y. 2007-08, WHICH HAVE BEEN ACCEPTED UNDER SECTION 143 (3). NAME OF HEAD A.Y. 2007-08 A.Y. 2008-09 LABOUR 1,09,27,823/- 1,04,19,950/- BAZARI 23,16,800/- 24,96,000/- GRIT 90,76,202/- 93,27,151/- MORUM 71,82,545/- 67,82,850/- TOTAL 2,95,03,370/- 2,90,25,951/- TURNOVER 6,37,07,167/- 7,27,75,185/- % OF EXPENSES 46.31% 39.88% HE RELIED ON THE DECISION IN THE CASE OF PADAMPATH RAMGOPAL 76 ITR 719 (SC) HOLDING THAT - MINOR IRREGULARITIES, EVEN ASSUMING WERE THERE, ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 6 CANNOT BE MADE BASIS FOR TRADING ADDITIONS WHERE NO BOOKS ARE REJECTED OR EVEN THE BOOKS OF ACCOUNT ARE REJECTED. THE LEARNED A.O. HAS ADOPTED WRONG BASIS AND PROCEDU RE FOR MAKING THE ADDITIONS OR DISALLOWANCE, IF ANY DEFECT IS FOUND IN THE BOOKS OF ACCOUNTS THEN SAME SHOULD BE REJECTED BY INVOKIN G THE PROVISIONS OF SECTION 145(3). AFTER THEN ONLY COURSE IS LEFT WITH THE A.O. TO ESTIMATE THE INCOME OR APPLYING THE N.P. RATE BY TAKING INTO CONSIDERATIONS THE PAST HISTORY OF THE ASSESSEE IN PLACE OF MAKING VAR IOUS SEPARATE DISALLOWANCE OF EXPENSES WHICH RESULTANT IN HIGHER N. P. RATE. HENCE THE A.O. MADE DISALLOWANCE OF RS. 7.00 LACS OUT OF EXPEN SES OF RS. 2,90,25,951/-. THUS LD. AO INCREASED THE N.P. FROM R S. 58,23,973/- TO RS. 65,23,973/- I.E. INCREASED N.P. RATE FROM 8% TO 8.96% FOR NO JUSTIFIABLE REASON. FURTHER, IT IS CLARIFIED THAT T HE A.O. APPLIED 8.96% N.P. RATE ON THE TOTAL RECEIPTS OF RS. 7,27,75,185/ - I.E. SHE HAS ESTIMATED HIGH N.P. RATE INDIRECTLY I.E. IN THE FOR M OF VARIOUS SEPARATE DISALLOWANCE AND AFTER APPLYING N.P. RATE, SHE HAS N OT ALLOWED FURTHER STATUTORY DEDUCTION ON ACCOUNT OF INTEREST, SALARY, DEPRECIATION, WHICH IS ALLOWABLE AS PER LAW, MORE SO WHEN IN THE PAST THE N.P . RATE HAS BEEN ACCEPTED TO 8.00%. HENCE THERE SHOULD BE NO QUESTIO N TO ESTIMATE THE SAME AT 8.96%, BESIDES, IN THE PAST ALSO NO DISALLO WANCES HAVE BEEN ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 7 MADE OF THE TYPE ONLY N.P. RATE HAS BEEN APPLIED. H ENCE THE DISALLOWANCE DESERVES TO BE DELETED IN FULL. RELIANCE IS P[LACED ON THE CASE IN THE CASE OF BRI J BHUSHAN LAL PARDUMAN KUMAR VS. CIT 115 ITR 524 (SC), JOTRAM SHERS HING VS. CIT 2 ITR 119 (ALL) AND SHREE SHANKAR KHANDSARI SUGAR MILL S V. CIT 193 ITR 669 (KAR.) 4.2 APROPOS, DEPRECATION, THE LEARNED COUNSEL FOR T HE ASSESSEE CONTENDS THAT THE COST ON WHICH DEPRECIATION IS CLAI MED BY THE ASSESSEE IS AS PER BOOKS OF ACCOUNT, WHICH WILL INCLUDE FREIGH T, PRE OPERATE COMMISSIONING EXPENSES ETC., THE SAME IS ALLOWABLE O N THE COST AS DECLARED IN THE BOOKS AND NOT THE INVOICES, THEREFO RE, THE CLAIM OF THE ASSESSEE IS VALID. VARIOUS CASE LAWS ARE RELIED BY THE LEARNED COUNSEL OF THE ASSESSEE, WHICH ARE MENTIONED IN THE WRITTEN SUBM ISSION. 5. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, AND FIND MERIT IN THE ARGUMENT OF THE ASSESSEE. THE BOOKS OF ACCOUNT WHICH ARE REGULARLY AND PROPERLY MA INTAINED ARE AUDITED U/S 44AB; SAME ARE UPHELD BY LOWER AUTHORITI ES ALSO. THE BOOK RESULTS, G.P., N.P. ARE BETTER THAN THE PRECEDING A .Y. 2007-08, WHICH ALSO IS FRAMED U/S 143(3). IF CERTAIN EXPENSES ARE FOUND TO BE ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 8 UNVOUCHED AND DISALLOWABLE, THE SPECIFIC ITEMS MUST BE SPELLED OUT BY AO, EXPLANATION CALLED AND IF IT IS UNSATISFACTORY A QUESTION ABOUT ALLOWABILITY MAY BE RAISED. THE SAME CANNOT BE DONE A ND DISALLOWED BY GENERAL OR SWIPING OBSERVATIONS; THEY CANNOT JUSTIFY AD HOC DISALLOWANCE OF EXPENDITURE, MORE SO WHEN THE EXPENDITURE INCURRE D AS COMPARED TO EARLIER YEAR IS LESS. IN VIEW THEREOF, WE SEE NO JUST IFICATION IN THE ADDITION OF RS. 7 LACS, WHICH IS DELETED. OUR VIEW IS FORTIFIED BY THE CATENA OF JUDGMENTS CITED BY THE ASSESSEE. APROPOS, THE DEPRECATION ALSO, IT HAS NOT BEEN DIS PUTED THAT THE DEPRECIATION WAS CLAIMED ON THE COST AS DECLARED IN THE BOOKS OF THE ASSESSEE. IN THIS EVENTUALITY, THERE IS NO JUSTIFIC ATION IN PARTIAL DISALLOWANCES OF DEPRECATION, WHICH IS DELETED. 7. IN THE RESULT, THE ASSESSEE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 04 TH MARCH, 2015 *RANJAN ITA 93/JP/2012_ SHYAM ENTERPRISES VS. ADDL. CIT 9 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S SHYAM ENTERPRISES, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ADDL. CIT, RANGE-7, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDR @ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 93/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR