BEEJAY ASSOCIATES CONTRACT P. LTD, PUNE V. ITO 6(1)(3), MUMBAI

ITA 936/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7003 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Depreciation; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.936/MUM/2016 (ASSESSMENT YEAR 2012-13 ) BEEJAY ASSOCIATES CONTRACT P. LTD. TEJ HOUSE, 5 TH FLOOR, 5-MAHATMA GANDHI ROAD, PUNE, MAHARASHTRA-411011. PAN: AAACB5077F VS. ITO -6(1) (3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. APPELLANT RESPONDEN T APPELLANT BY : SHRI M. SUBRAMANIAN (AR) RESPONDENT BY : SHRI SUMAN KUMAR (DR) DATE OF HEARING : 29.05.2018 DATE OF PRONOUNCEMEN T : 13.06.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-12, MUMBAI [LD. CIT(A)] DAT ED 07.12.2015 FOR ASSESSMENT YEAR 2012-13, WHICH ARISES FROM THE ASSE SSMENT ORDER PASSED UNDER SECTION 143(3) DATED 19.12.2015. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN PARTLY SUSTAINING THE ADDITIONS / DISALLOWANCES MADE IN THE ASSESSMENT ORDER THAT TOO WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE FULLY AND PROPERLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.LT. (A) ERRED IN UPHOLDING THE ACTION OF THE A. O . IN DISALLOWING AN AMOUNT OF RS.41,130/- OUT OF SITE EXPENSES AND THAT TOO WI THOUT ASSIGNING ANY PROPER REASON. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.LT (A) ERRED IN UPHOLDING THE ACTION OF THE A. O. IN DISALLOWING AN AMOUNT OF RS.35,19,215/- OUT OF THE LABOUR CHARGES EXPENDI TURE INCURRED OF RS.3,51,92,149/- AND THAT TOO WITHOUT ASSIGNING ANY PROPER REASON. ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 2 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.LT. (A) ERRED IN UPHOLDING THE ACTION OF THE A. O . IN DISALLOWING AN AMOUNT OF RS.11,45,455/ - OUT OF THE TOTAL TRANSPORTATION CHARGES INCURRED OF RS.1,14,54,551/ - AND THAT TOO WITHOUT ASSIGNING AN Y PROPER REASON. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.LT.(A) ERRED IN UPHOLDING THE ACTION OF THE A. O. IN DISALLOWING AN AMOUNT OF RS.14,96,939/ - OUT OF THE CENTERING SCAFFOLDING EXPENDITURE INCURRED OF RS.19,95,985/- BY HOLDING THE SAME AS CAPITAL EXPEN DITURE. 6. WITHOUT PREJUDICE TO GROUND NO.4 AND ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE A. O. TO ALLOW DEPRECIATION @ 100% IN RESPECT OF THE CENTERI NG AND SCAFFOLDING ITEMS. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T.(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. IN MAKING AN ADDITION OF AN AMOUNT OF RS.1,03,963/ - U/S 41(1) OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 27.09.2012 DE CLARING TOTAL INCOME OF RS. 29,82,350/-. THE ASSESSMENT WAS COMPL ETED UNDER SECTION 143(3) ON 19.02.2015 DETERMINING THE TOTAL INCOME O F RS. 95,64,240/-. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R MADE VARIOUS ADDITION/DISALLOWANCE ON ACCOUNT OF SITE EXPENSES, LABOUR CHARGES, TRANSPORTATION CHARGES, DISALLOWING SCAFFOLDING EXP ENDITURE AND ADDITION UNDER SECTION 41(1) OF THE ACT. ON APPEAL BEFORE TH E LD. CIT(A), THE ASSESSEE WAS GIVEN PARTIAL RELIEF ON VARIOUS DISALL OWANCES, THEREFORE, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE A SSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 3 MATERIAL AVAILABLE ON RECORD. GROUND NO.1 IS GENERA L, THEREFORE, NEEDS NO ADJUDICATION. HENCE, DISMISSED. 4. GROUND NO.2 RELATES TO DISALLOWANCE OF RS. 41,130/- ON ACCOUNT OF SITE EXPENSES. THE LD. AR OF THE ASSESSEE SUBMITS THAT T HE LOWER AUTHORITIES DISALLOWED THE EXPENSES WITHOUT ASSIGNING PROPER RE ASONING. THE ASSESSEE HAS DEBITED RS. 8,22,601/- WHICH CONSIST OF RS. 3,4 0,504/- AS MISCELLANEOUS EXPENSES, RS. 2,93,807/- AS SITE TRAN SPORT AND RS. 1,88,290/- ON ACCOUNT OF SITE CONSUMABLES. THE ASSESSING OFFIC ER DISALLOWED 5% OF THE TOTAL EXPENSES ON THE BASIS OF NOTE NO. 26.12 I N AUDITORS REPORT. THE LD. CIT(A) ALSO CONFIRMED THE DISALLOWANCE WITH SIM ILAR OBSERVATION. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTE D THE ORDER OF AUTHORITIES BELOW. THE LD. DR SUBMITS THAT ASSESSEE FAILED TO SUBSTANTIATE THE CLAIM WITH DOCUMENTARY EVIDENCE; THEREFORE, THE REASONABLE DISALLOWANCE WAS MADE BY ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE LOWER AUTHORITY HAS MADE THE DISALLOWANCE ON ADHOC BASIS; NO SPECIFIC REASON FOR ARRIVING AT 5% OF DISALLOWANCE IS MENTIONED. THE AS SESSEE IS ENGAGED IN THE BUSINESS OF CIVIL ENGINEER AND BUILDING CONTRAC TOR. THE LOWER AUTHORITY HAS NOT DISPUTED THE GENUINENITY OF THE E XPENSES. IN OUR VIEW, THE DISALLOWANCE ON ADHOC BASIS IS NOT SUSTAINABLE; THEREFORE, THE SAME IS DELETED. IN THE RESULT THE GROUND NO. 2 OF THE APPE AL IS ALLOWED. ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 4 6. GROUND NO.3 & 4 RELATES TO DISALLOWANCE OF LABOUR C HARGES AND TRANSPORTATION CHARGES. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE INCURRED EXPENDITURE OF RS. 3,51,92,149/- ON ACCOUNT OF LABOUR CHARGES AND RS.114,54,551/- ON TRANSPORTATION CHARG ES. THE ASSESSING OFFICER DISALLOWED 10% OF THE TOTAL EXPENDITURE ON BOTH THE COUNTS, WITHOUT ANY SPECIFIC REASON. THE LD. CIT(A) CONFIRM ED THE DISALLOWANCE ON THE SAME OBSERVATION. THE LD AR SUBMITTED A CHA RT SHOWING THAT THE ASSESSEE INCURRED LABOUR CHARGES OF RS. 1,52,83,838 /- AND RS. 4,12,31,018/- IN EARLIER ASSESSMENT YEARS I.E. IN A Y 2010-11 & 2011-12 RESPECTIVELY, HOWEVER, NO DISALLOWANCE WAS MADE. FU RTHER, IN AY 2013-14 & 2014-15 ONLY 1% OF LABOUR CHARGES WAS DISALLOWED. SIMILARLY DETAILS WERE FURNISHED IN RESPECT OF TRANSPORTATION CHARGES SHOWING THAT IN AY 2010-11 & 2011-12 NO DISALLOWANCE WAS MADE; FURTHER IN AY 2013-14 & 2014-15 ONLY 1% OF TRANSPORTATION CHARGES WAS DISAL LOWED. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDE R OF AUTHORITIES BELOW. THE LD DR SUBMITS THAT EACH YEAR HAS TO BE ASSESSED ON THE BASIS OF NATURE OF EXPENSES AND THAT PRINCIPAL OF RES-JUDICATA IS N OT APPLICABLE IN THE INCOME-TAX CASES. THE LD. DR FOR THE REVENUE SUBMI TS THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE LABOUR EXPENSES. THEREFO RE, THE ASSESSING OFFICER DISALLOWED A REASONABLE EXPENDITURE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT TOTAL TURNOVER ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 5 OF THE ASSESSEE DURING THE YEAR WAS 17,15,70,430/-. THE ASSESSEE HAS DEBITED RS. 3,51,92,149/- ON ACCOUNT OF LABOUR CHAR GES. THE ASSESSING OFFICER DISALLOWED THE 10% OF LABOUR CHARGES WITHOU T ASSIGNING ANY REASON. SIMILARLY, THE ASSESSEE DEBITED RS. 1,14,54 ,551/- ON ACCOUNT OF TRANSPORTATION CHARGES. THE ASSESSING OFFICER ALSO DISALLOWED THE 10% OF TRANSPORTATION CHARGES WITHOUT ASSIGNING ANY REASON . SIMILARLY, THE LD. CIT(A) CONFIRMED BOTH THE ADDITION ON HIS OBSERVATI ON THAT NORMALLY IN LINE OF BUSINESS AS OF ASSESSEE, THE NET PROFIT IS GENERALLY 8% OF THE GROSS RECEIPT. THE CONTRACT RECEIPT OF ASSESSEE IS RS. 17 ,05,38,323/- AND THE ASSESSEE HAS OFFERED INCOME OF RS. 29,82,350/- ONLY . THE CONTENTION OF THE ASSESSEE THAT SIMILAR EXPENSES WERE ALLOWED IN EARL IER YEARS WAS NOT ACCEPTED HOLDING THAT NORMALLY THE PERCENTAGE OF LA BOUR AND TRANSPORT TO THE TURNOVER IS FIXED BY THE DEFENCE PERSONNEL. IT WAS FURTHER OBSERVED THAT THE ASSESSING OFFICER MADE THE DISALLOWANCE IN ABSE NCE OF VERIFICATION DUE TO NON-FILING OF DOCUMENTARY EVIDENCE. THE ADDI TION IS NOT MADE BECAUSE OF HIGH EXPENSES BUT DUE TO THE FACT THAT A SSESSEE IS UNABLE TO PRODUCE PROPER EVIDENCES OF SUCH EXPENSES AND ACCOR DINGLY SUSTAINED THE ADDITION. 8. WE HAVE NOTED THAT IN EARLIER AY 2010-11 & 2011-12, NO DISALLOWANCE WAS MADE ON ACCOUNT OF LABOUR AND TRANSPORTATION CH ARGES, SIMILARLY FOR SUBSEQUENT AY 2013-14 & 2014-15 ONLY DISALLOWANCE O F 1% WAS MADE. WE HAVE FURTHER NOTED THAT THE ASSESSING OFFICER HA S NOT GIVEN ANY ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 6 SPECIFIC REASON FOR ADHOC DISALLOWANCE. THE LD. CIT (A) GAVE HIS FINDING THAT EXPENSES ARE NOT HIGHER BUT THE ASSESSEE IS UN ABLE TO GIVE PROPER EVIDENCE OF SUCH EXPENSES. IN OUR VIEW, THE ADHOC D ISALLOWANCE WITHOUT REJECTING THE BOOKS OF ACCOUNT IS NOT PROPER, THERE FORE, THE DISALLOWANCE OF LABOUR CHARGES AND TRANSPORTATION DELETED. IN THE R ESULT THE GROUND NO.3&4 OF THE APPEAL ARE ALLOWED. 9. GROUND NO. 5 & 6 RELATES TO TREATING THE SCAFFOLDIN G EXPENDITURE AS CAPITAL EXPENDITURE. GROUND NO. 6 RELATES TO DEPRECIATION. THE LD. AR OF THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING THE GROUND NO. 5 & 6. CONSIDERING THE CONTENTION OF LD. AR OF THE ASSESSEE, GROUNDS N O. 5 & 6 ARE DISMISSED. 10. GROUND NO.7 RELATES TO ADDITION UNDER SECTION 41(1) OF THE ACT OF RS. 1,03,963/- THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER DISALLOWED THE LIABILITY OF SUNDRY CREDITORS OF RS. 1,03,693/- IN ABSENCE OF CONFIRMATION FROM FIVE PARTIES. THE LIABILITY OF TH E ASSESSEE HAS NOT CEASED FINALLY DURING THE YEAR. THE LD. CIT(A) ALSO CONFIR MED THE ADDITION WITH THE SIMILAR OBSERVATION. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT DUE TO EXECUTION OF WORK RESULTING IN HIGHER EXPENS ES, THE LIABILITY OF SUNDRY CREDITOR WAS INCREASED. SOME OF THE BILLS WE RE RECEIVED IN THE SUBSEQUENT/NEXT YEAR WHICH RESULTED IN HIGHER EXPEN SES AND SUNDRY CREDITORS. IN SUPPORT OF HIS SUBMISSION, THE LD. AR RELIED UPON THE DECISION OF CCIT VERSUS KASARIA TEA COMPANY LTD. [254 ITR 434 (SC) ], CIT VS ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 7 SUGAULI SUGAR WORKS (P.) LTD. [236 ITR 518 (SC)] AN D CIT VS TAMILNADU TOURISM DEVELOPMENT CORPORATION [288 ITR 146 (MAD)] . ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER MADE DISALLOWANCE ON HIS OBSERVATION THAT AS ON 01.04.20 11 THERE IS NO FURTHER TRANSACTION DURING THE YEAR AND THE LIABILITY REMAI NED TILL 31.03.2012 AND THAT THE REPRESENTATIVE OF ASSESSEE AGREED FOR ADDI TION TO THAT EXTENT. THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF ASSESSING O FFICER WITH SIMILAR OBSERVATION. IN OUR VIEW, THERE IS NO ESTOPPEL AGAI NST THE LAW. IN CASE THE LIABILITY IS NOT CEASED FINALLY, NO DISALLOWANCE ON ACCOUNT OF SUNDRY CREDITOR IS WARRANTED. WE HAVE FURTHER NOTED THAT N O DOCUMENTARY EVIDENCE FURNISHED BEFORE US. THEREFORE, WE DEEM IT APPROPRI ATE TO RESTORE THIS GROUND OF APPEAL TO THE FILE OF ASSESSING OFFICER T O DECIDE IT AFRESH. THE ASSESSEE IS ALSO DIRECTED TO PROVIDE NECESSARY DETA ILS AND EVIDENCES TO THE ASSESSING OFFICER FOR HIS CONSIDERATION. HENCE, THI S GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT, APPEAL FILED BY ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.06.2018. SD/- SD/- RAJESH KUMAR PAWAN SINGH ACCOUNTANT MEMBER JUD ICIAL MEMBER ITA NO. 936 MUM 16-BEEJAY ASSOCIATES CONTRACT P. LTD. 8 MUMBAI, DATE: 13.06.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI