Mallikarjunaiah Shankar, Bangalore V. Asst, CIT, Bangalore

ITA 975/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95268 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 24-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NAGINCHAND KHINCHA

Judgement Text

ITA.975/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.975/BANG/2014 (ASSESSMENT YEAR : 2008-09) SHRI. MALLIKARJUNAIAH UDAYSHANKAR, NO.148, 6 TH MAIN, 2 ND PHASE, 2 ND STAGE, MAHALAKSHMIPURAM, WEST OF CHORD ROAD, BANGALORE 560 083 ..APPELLANT PAN : AACPU0412C V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -8(1), BANGALORE ..RESPONDENT ASSESSEE BY : SHRI. NAGINCHAND KHINCHA, CA REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 21.09.2015 PRONOUNCED ON : 30.09.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE ITS GRIEVANCE RUNNING THROUGH GROUNDS 1 TO 6 RAISED ARE TWO. 02. FIRST IS THAT AN ADDITION OF RS.88,50,000/- MAD E ON ADVERTISEMENT EXPENDITURE PAID BY IT TO ONE M/S. ORANGE PROPERTIE S WAS CONFIRMED BY THE CIT ITA.975/BANG/2014 PAGE - 2 (A). SECOND IS THAT THE CIT (A) PARTIALLY SUSTAINE D DISALLOWANCE MADE BY THE AO ON UNREGISTERED DEALER (URD) PURCHASES AND LAB OUR CHARGES. 03. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN A BU SINESS AS CONTRACTOR AND SELLER OF FLATS HAD FILED HIS RETURN OF INCOME DECL ARING INCOME OF RS.31,17,740/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE AO THAT ASSESSEE HAD PAID A SUM OF RS.92,62,100/- AS ADVERT ISEMENT CHARGES. OUT OF THE SAID AMOUNT, A SUM OF RS.88,50,000/- WAS PAYMENTS T O M/S. ORANGE PROPERTIES LOCATED AT 114/1, OUTER RING ROAD, DODDA BANASWADI, VIJAYABANK COLONY, BANGALORE. AO REQUIRED THE ASSESSEE TO PRODUCE DET AILS FOR CLAIM OF EXPENDITURE AND ALSO ISSUED SUMMONS U/S.131 OF THE ACT, TO THE MANAGING PARTNER OF M/S. ORANGE PROPERTIES. SUMMONS COULD N OT BE SERVED PERSONALLY BUT WAS SERVED BY AFFIXTURE. HOWEVER, NO REPLY WAS REC EIVED TO THE SUMMONS. ASSESSEE WAS REQUIRED TO PRODUCE THE MANAGING PARTN ER OF M/S. ORANGE PROPERTIES. ASSESSEE EXPRESSED ITS INABILITY TO PR ODUCE THE SAID PERSON. AO DEPUTED HIS INSPECTOR TO THE PREMISES OF M/S. ORANG E PROPERTIES AND THE INSPECTOR REPORTED THAT THE SAID FIRM WAS IN THE BU SINESS OF PROVIDING ADVERTISEMENT SERVICES AND HAD FAILED TO CREDIT THE SERVICE TAXES COLLECTED BY THEM FROM ITS CLIENTS TO THE GOVERNMENT ACCOUNT. A CCORDING TO THE INSPECTOR, PARTNERS OF M/S. ORANGE PROPERTIES HAD COLLECTED HU GE ADVANCES FROM PUBLIC FOR ALLOTMENT OF SITES BUT HAD NOT ALLOTTED THE SITES AS PROMISED. PARTNERS OF THE FIRM WERE ABSCONDING. ITA.975/BANG/2014 PAGE - 3 04. AS PER THE INSPECTOR, POLICE WERE IN SEARCH OF THE PARTNERS. AO WAS OF THE OPINION THAT IN VIEW OF THE CIRCUMSTANCES IN WH ICH M/S. ORANGE PROPERTIES WAS PLACED, THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS ADVERTISEMENT COULD NOT BE CONSIDERED AS GENUINE. AS PER THE AO, SUMMONS ISSUED TO THE SAID FIRM WAS RETURNED AND THERE WAS NO CONFIRMATION FRO M THEM. HE DISALLOWED THE SUM OF RS.88,50,000/- CLAIMED AS ADVERTISEMENT EXPE NDITURE PAID TO M/S. ORANGE PROPERTIES. 05. IN ITS APPEAL BEFORE THE CIT (A) ARGUMENT OF TH E ASSESSEE WAS THAT THE PAYMENTS TO M/S. ORANGE PROPERTIES WERE ALL THROUGH BANKING CHANNELS AFTER DUE DEDUCTION OF TAX AT SOURCE. AS PER THE ASSESSEE JU ST BECAUSE CRIMINAL PROCEEDINGS WERE INITIATED AGAINST M/S. ORANGE PROP ERTIES, A CLAIM OF ALLOWANCE COULD NOT BE DENIED. ASSESSEE PLACED BEFORE THE CI T (A) STATEMENT SHOWING YEAR WISE DETAILS OF BUSINESS CANVASSED BY M/S. ORA NGE PROPERTIES FOR THE ASSESSEE AND COPY OF ADVERTISEMENT PUBLISHED IN NEW SPAPER AND COPY OF CONFIRMATION LETTER DT.16.01.2011 FROM THE SAID PAR TY. CIT (A) WAS HOWEVER OF THE OPINION THAT ASSESSEE COULD NOT GIVE REASONS WH Y THESE RECORDS COULD NOT BE PRODUCED BEFORE THE AO. FURTHER AS PER THE CIT (A) , THOUGH ASSESSEE WAS HAVING A BILL DT.16.01.2008 OF M/S. ORANGE PROPERT IES, IT COULD NOT BE CORRELATED TO PAYMENTS MADE BY THE ASSESSEE TO THE SAID PARTY AS REFLECTED IN ITS LEDGER. FURTHER AS PER THE CIT (A), CORRESPONDENCE BETWEEN M/S. ORANGE PROPERTIES AND THE ASSESSEE THROUGH WHICH THE SAID M/S. ORANGE PRO PERTIES HAD FORWARDED CHEQUES RECEIVED BY IT FROM VARIOUS PARTIES FOR FLA TS ALSO COULD NOT BE CORRECTLY ITA.975/BANG/2014 PAGE - 4 CORRELATED WITH THE SALE OF FLATS EFFECTED BY THE A SSESSEE. IN VIEW OF THESE CONTRADICTIONS, CIT (A) UPHELD THE DISALLOWANCE. 06. NOW BEFORE US, LD. AR ASSAILING THE ORDERS OF LOWER AUTHORITIES SUBMITTED THAT ASSESSEE HAD EFFECTED ALL PAYMENTS O NLY THROUGH BANKING CHANNELS. ASSESSEE HAD PRODUCED INVOICES. ASSESSE E HAD PRODUCED LEDGER PAGE IN ITS BOOKS WHICH REFLECTED EACH AND EVERY PAYMENT TO M/S. ORANGE PROPERTIES. ASSESSEE COULD NOT BE BLAMED OR PUT IN PERIL FOR M/ S. ORANGE PROPERTIES BECOMING INSOLVENT OR ITS PARTNERS BECOMING UNTRAC EABLE. JUST BECAUSE ASSESSEE COULD NOT PRODUCE MANAGING PARTNER OF THE SAID FIRM , A DISALLOWANCE OUGHT NOT TO HAVE BEEN MADE. 07. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWE R AUTHORITIES. 08. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IT IS NOT DISPUTED THAT ASSESSEE HAD MADE PAYMENTS TO M/S. OR ANGE PROPERTIES THROUGH BANKING CHANNELS. ASSESSEE NO DOUBT HAD PRODUCED A N INVOICE FROM M/S. ORANGE PROPERTIES BEFORE THE CIT (A). ONE OF THE R EASONS CITED BY THE CIT (A) TO CONFIRM THE DISALLOWANCE IS THAT BILL DT.16.01.2 008 OF M/S. ORANGE PROPERTIES COULD NOT BE CORRELATED WITH PAYMENTS REFLECTED IN THE LEDGER OF THE ASSESSEE. ASSESSEE HAD PRODUCED COPIES OF ADVERTISEMENT PLACE D IN NEWSPAPER BY M/S. ORANGE PROPERTIES. IN OUR OPINION, THE EVIDENCE P RODUCED BY THE ASSESSEE REQUIRED MORE DETAILED EXAMINATION AT THE LEVEL OF THE AO. EVEN THOUGH THE CONCERNED M/S. ORANGE PROPERTIES IS UNTRACEABLE, TH ERE ARE WAYS AND MEANS AVAILABLE WITH THE AO TO VERIFY THE AUTHENTICITY AN D CORRECTNESS OF THE CLAIM ITA.975/BANG/2014 PAGE - 5 PREFERRED BY THE ASSESSEE. WE ARE OF THE OPINION T HAT THE ISSUE REQUIRES A FRESH LOOK BY THE AO. WE SET ASIDE THE ORDERS OF THE LOW ER AUTHORITIES ON THIS ISSUE AND REMIT IT BACK TO THE FILE OF THE AO FOR FRESH C ONSIDERATION IN ACCORDANCE WITH LAW. 08. ONLY OTHER ISSUE RAISED BY THE ASSESSEE IS THAT THE CIT (A) PARTIALLY SUSTAINED DISALLOWANCE MADE BY THE AO ON PURCHASES FROM UNREGISTERED DEALERS AND LABOUR CHARGES TOTALLING TO RS.9,91,165/-. WE FIND THAT AO HAD MADE DISALLOWANCE OF 10% FOR A REASON THAT THE PAYMENTS WERE EFFECTED BY CHEQUES IN THE ABSENCE OF BILLS. CIT (A) HAD REDUCED THE DIS ALLOWANCE TO 5% OF THE TOTAL EXPENDITURE. IN THE NATURE OF WORK OF THE ASSESSEE , IT MAY NOT BE ALWAYS BE POSSIBLE TO PRODUCE BILLS AND VOUCHERS FOR PURCHASE OF SAND, JELLY AND LABOUR CHARGES. IN THE FITNESS OF THINGS WE ARE OF THE OP INION THAT DISALLOWANCE OF 4% OF THE TOTAL OUTGO WOULD SUFFICE. ORDERED ACCORDIN GLY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D PROTANTO. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF S EPTEMBER, 2015. SD/- SD/- (N. V. VASUDEVAN) (ABRAHAM P GEORGE ) JUDICIAL MEMBER ACCOUNT ANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. ITAT, BANGALORE BY ORDER