The ITO, Ward-9(1),, Ahmedabad v. Shri Pallav D. Chokhani, Ahmedabad

ITA 2833/AHD/2007 | 2004-2005
Pronouncement Date: 30-04-2010 | Result: Dismissed

Appeal Details

RSA Number 283320514 RSA 2007
Assessee PAN AAHPC3304J
Bench Ahmedabad
Appeal Number ITA 2833/AHD/2007
Duration Of Justice 2 year(s) 10 month(s)
Appellant The ITO, Ward-9(1),, Ahmedabad
Respondent Shri Pallav D. Chokhani, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-04-2010
Date Of Final Hearing 24-03-2010
Next Hearing Date 24-03-2010
Assessment Year 2004-2005
Appeal Filed On 29-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI D T GARASIA JM AND A N PAHUJA AM) ITA NO.2833/AHD/2007 (ASSESSMENT YEAR:-2004-05) THE INCOME-TAX OFFICER WARD-9(1) AHMEDABAD V/S SHRI PALLAV D CHOKHANI PROP. CHOKHANI CONSTRUCTION AHMEDABAD [PAN: AAHPC 3304 J] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI H N SINGH DR ASSESSEE BY:- SHRI PAMIL H SHAH AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 05-04-2007 OF THE LD. CIT(APPEALS)-XV AHMEDABAD R AISES THE FOLLOWING GROUNDS: 1 THE LD. COMMISSIONER OF INCOME-TAX (A)-XV AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11 72 222/- ON ACCOUNT OF BOGUS PURCHASES OF BUILDING MATERIALS. 2 THE LD. COMMISSIONER OF INCOME-TAX (A)-XV AHMEDA BAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.36 000/- ON ACCOUNT OF SALARY TO RELATIVES U/S 40A(2)(B) OF THE I.T. ACT 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XV AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASS ESSING OFFICER 4 IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A)-XV AHMEDABAD MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FAC TS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCO ME OF RS. 7 27 480/- FILED ON 30.10.2004 BY THE ASSESSEE A C IVIL CONTRACTOR MAINLY CONSTRUCTING FACTORY SHEDS AFTER BEING PRO CESSED ON 18.2.2005 U/S 143(1) OF THE INCOME-TAX ACT 1961[HER EINAFTER REFERRED TO AS THE ACT]WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 13.6.2005. DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOT ICED THAT THE ITA NO.2833/AHD/2007 2 ASSESSEE HAD REFLECTED GROSS PROFIT[GP] RATE OF 10 .66% ON TURNOVER OF RS. 3 08 91 252/- AS AGAINST GP RATE OF 19.62 % ON TURNOVER OF RS.1 58 40 583/-IN THE PRECEDING YEAR. ON EXAMINATI ON OF BOOKS OF ACCOUNTS THE AO NOTICED THAT THE ASSESSEE PURCHASE D BUILDING MATERIAL WORTH RS.12 99 500/- COMPRISING CEMENT WO RTH RS. 50 000/- STEEL FOR RS.26 000/- SAND WORTH RS.4 00 000/- RU BBLE FOR RS.4 07 500 AND GRIT/KAPCHI FOR RS.4 16 000/- FROM ONE M/S MAHADEV SALES CORPORATION TIN BHATTI BAHADUR GUNJ PALANP UR DISTT. BANASKANTHA BETWEEN 25.4.2003 TO 4.5.2003.A DETAIL ED BREAKUP OF PURCHASES IS GIVEN IN PARA 4 OF THE ASSESSMENT ORDE R. TO A QUERY BY THE AO THE ASSESSEE SUBMITTED THAT THESE PURCHASES WERE MADE TO EXECUTE CONSTRUCTION OF 100 UNDERGROUND WATER TANKS OF 10000 LITRES CAPACITY EACH FOR SEWA AT VILLAGE DHOKHAWADA BLOCK SANTALPUR PATAN DIST. BANASKANTHA. HOWEVER ON VERIFICATION OF SALES BILLS THE AO NOTICED THAT THE ASSESSEE NEITHER HAD ANY BUILTY FOR TRANSPORTATION OF GOODS FROM PALANPUR TO DHOKHAWADA NOR REGISTRATION NO. OF THE VEHICLE WAS MENTIONED ON TH E SALE BILLS. EVEN DATE AND TIME OF DESPATCH OF GOODS FROM STORAGE PL ACE TO THE SITE WAS NOT MENTIONED AS WAS THE NORMAL PRACTICE NOR EV EN TELEPHONE NUMBER OF THE SAID TRADER WAS MENTIONED ON THE SAID BILLS. SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN RESPECT OF TRANSPORT OF MATERIAL THE AO ASKED THE ITO PALANPUR TO CONDUCT INQUIRIES ABOUT GENUINENESS OF THE AFORESAID PARTY. ITO PLANPUR VI DE HIS LETTER DATED 22.8.2006 COMMUNICATED THAT THERE WAS NO SUCH TRADER AT THE ADDRESS GIVEN BY THE ASSESSEE WHILE THE SALES TAX R EGISTRATION NO. ALLOTTED TO THE SAID PARTY HAD BEEN CANCELLED ON 10 .2.2004.SINCE EVEN THE REGISTERED LETTER SENT TO M/S MAHADEV SA LES CORPORATION WAS ALSO RETURNED BY THE POSTAL AUTHORITIES THE AO ASKED THE ASSESSEE TO ESTABLISH IDENTITY OF THE SAID PARTY AS ALSO GENUINENESS OF THE TRANSACTIONS. HOWEVER THE ASSESSEE INFORM ED THE AO THAT THE SAID PARTY WAS NOT TRACEABLE. SINCE THE ASSESSE E FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES FROM M/S MAHADEV SALES ITA NO.2833/AHD/2007 3 CORPORATION THE AO OBSERVED THAT A MINIMUM OF 4 0 BAGS OF CEMENT AND 240 CFT OF SAND WAS REQUIRED WERE REQUIR ED TO CONSTRUCT A WATER TANK OF 10 000 LITRES CAPACITY WHILE THE AS SESSEE CONSUMED ONLY FOUR BAGS OF CEMENT AND PURCHASED 400 TRUCKS O F SAND. MOREOVER THE PAYMENT FOR THE SAID PURCHASES WAS FO UND TO BE OUTSTANDING AS ON THE CLOSING DATE OF THE F.Y. 2003 -04. IN THESE CIRCUMSTANCES ESPECIALLY WHEN THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE AFORESAID PURCHASES WHILE THE PA RTY WAS NOT AVAILABLE AT THE ADDRESS GIVEN BY THE ASSEESSEE AN D THERE WAS NO EVIDENCE OF TRANSPORTATION OF MATERIAL TO THE SITE RELYING ON THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF N. K. PATEL & CO. THE AO ADDED THE AMOUNT OF RS.12 99 500/- ON ACCOUN T OF BOGUS AND INFLATED PURCHASES. 3. ON APPEAL THE LD. CIT(A) REDUCED THE ADDITI ON TO RS.1 27 278/- HOLDING AS UNDER: 1.2 SHRI G.C. PIPARA C.A. APPEARED ON BEHALF OF THE APPELLANT AND SUBMITTED THAT THE IMPUGNED ADDITION IS BASED ON MERE CONJECTURES AND SURMISES. THE APPELLANT IN HIS LETTER DATED 11/12/2006 SUBMITTED BEFORE THE ASSESSING OFF ICER HAD CLEARLY STATED THAT IN SO FAR AS THE COST OF MATERI AL FOR THE WORK CARRIED OUT AS PER R.A. BILL IS CONCERNED THE APPE LLANT WAS MAKING COMBINED PURCHASES AND NO SPECIFIC PURCHASES WERE MADE IN ORDER TO CARRY OUT ANY SPECIFIC PROJECT. TH E COPY OF ACCOUNT OF ALL THE PERSONS FOR WHOM THE WORK HAS BE EN CARRIED OUT WERE FURNISHED TO THE ASSESSING OFFICER ALONGW ITH THE R.A. BILLS RAISED DURING THE F.Y. 2003-04. WITH SPECIFIC REFERENCE TO THE PURCHASES OF RS.12 99 500/- MADE FROM MAHADEV S ALES CORPORATION IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PURCHASES UNDER CONSIDERATION WERE MADE DURING APRIL AND MAY 2003 WHILE THE INQUIRY REGARDING THE EXISTENCE OF THE SAID PARRY IS BEING CARRIED OUT IN THE MONTH OF AUGUST 2006 I.E. AFTER A LAPSE OF MORE THAN THREE YEARS. MAHADEV SAL ES CORPORATION WAS VERY WELL IN EXISTENCE AT THE TIME WHEN THE APPELLANT HAD MADE THE PURCHASES OF THE BUILDING MA TERIAL DURING APRIL / MAY 2003 A FACT WHICH IS CORROBORA TED BY THE INSPECTOR ALSO IN HIS REPORT. THE ATTENTION OF THE ASSESSING OFFICER WAS DRAWN TO THE RELEVANT PORTION OF THE IN SPECTOR'S REPORT IN WHICH HE AFTER MAKING INQUIRY FROM THE S ALES TAX DEPARTMENT HAD REPORTED THAT MAHADEV SALES CORPORA TION HAD ITA NO.2833/AHD/2007 4 TAKEN CST. NO. GUJ. 99930798 WHICH WAS SUBSEQUENTLY CANCELLED W.E.F. 10/2/2004. THE APPELLANT HAD ALSO DEPUTED HIS OWN ENGINEER MR. SANJAY TRIVEDI TO FIND OUT THE WHE REABOUTS OF MAHADEV SALES CORPORATION FROM OTHER TRADERS DOING BUSINESS IN AND AROUND THE SAME AREA. AS WAS REPORTED BY MR. SANJAY TRIVEDI MAHADEV SALES CORPORATION HAD CLOSED ITS B USINESS SOMEWHERE AROUND AUGUST 2005 DUE TO HEAVY LIABILIT IES OF THE SALES-TAX THRUSTED ON IT. SHRI TRIVEDI HAD ALSO COM E TO KNOW FROM ME NEARBY TRADERS THAT THE OFFICERS OF THE SAL ES TAX DEPARTMENT WERE ALSO FOUND VISITING THE LEFT OUT PREMISES OF MAHADEV SALES CORPORATION IN ORDER TO EFFECT THEIR RECOVERY OF TAXES. ACCORDING TO THE ID. AUTHORIZED REPRESENTATI VE ALL THESE FACTORS WERE SUFFICIENT ENOUGH FOR ANYONE TO BELIEVE THAT MAHADEV SALES CORPORATION WAS A GENUINE PARTY WHICH WAS IN EXISTENCE AT THE TIME WHEN THE PURCHASES UND ER CONSIDERATION WERE MADE BY THE APPELLANT. SINCE THE FIRM HAS CLOSED DOWN ITS BUSINESS AND HAD VACATED THE PREMIS ES WITHOUT ANY FURTHER TRACE IT WAS VIRTUALLY IMPOSS IBLE FOR THE APPELLANT TO PRODUCE SUCH PARTY AS WAS INSISTED UPO N BY THE ID. ASSESSING OFFICER. THE ID. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT THE FACTUM THAT THE APPELLANT HAD CARRIED OUT THE CONST RUCTION WORK OF 100 UNDER GROUND WATER TANKS OF 10 000 LITRES CA PACITY FOR SEWA AT VILLAGE DHOKHAWADA BOLCK SANTANPUT PATAN DIST. BANASKANTHA IS NOT DISPUTED BY THE ID. ASSESSING OF FICER. SEWA HAS ALSO CONFIRMED THAT THE APPELLANT HAD CARR IED OUT THE CONTRACT WORK FOR WHICH THE PAYMENT OF RS.17 00 959/- WAS MADE BY SEWA. THE APPELLANT HAS DULY CREDITED THE I NCOME RECEIVED FROM SEWA AT RS.17 00 959/- IN ITS P&L ACC OUNT WHICH HAS BEEN SUBJECTED TO TAX BY THE ID. ASSESSIN G OFFICER. THE PAYMENT OF RS.11 72 222/- MADE DURING THE F.Y.2 004-05 AGAINST SUCH PURCHASES HAS BEEN THROUGH ACCOUNT PAY EE CHEQUES WHICH IS ALSO NOT CHALLENGED BY THE ID. ASS ESSING OFFICER. THERE IS AN OUTSTANDING BALANCE OF RS.L 27 278/- WHICH IS PAYABLE TO MAHADEV SALES CORPORATION FOR WHICH T HE PARTY IS NOT COMING FORWARD TO COLLECT THE OUTSTANDING AMOUN T. THIS ALSO INDICATES THAT MAHADEV SALES CORPORATION HAVE CLOSED THEIR BUSINESS AND IS NOT TRACEABLE. ACCORDING TO T HE ID. AUTHORIZED REPRESENTATIVE THE GENUINE PURCHASES CA NNOT BE DOUBTED MERELY UNDER THE GUISE THAT THE APPELLANT C OULD NOT PRODUCE THE SAID PARTY OR THE SAID PARTY WAS NOT FO UND AT THE GIVEN ADDRESS AT A TIME WHEN THE ASSESSMENT PROCEED INGS WERE TAKEN UP BY THE LD. ASSESSING OFFICER AFTER A GAP OF THREE YEARS. ITA NO.2833/AHD/2007 5 THE AVERAGE MATERIAL CONSUMPTION TO WORK RATIO AS W ORKED OUT BY THE ID. ASSESSING OFFICER WAS ALSO CHALLENGED BY THE AUTHORIZED REPRESENTATIVE HOLDING THE SAME TO BE BA SED ON INCORRECT FACTS. ACCORDING TO THE ID. AUTHORIZED REPRESENTATIVES THE ASSESSING OFFICER HAS BEEN CARR IED AWAY BY THE FACT THAT BUILDING MATERIAL PURCHASED WORTH RS.12 99 500/- FROM MAHADEV SALES CORPORATION IS TH E ONLY MATERIAL WHICH HAS BEEN USED TO CONSTRUCT 100 RCC W ATER TANKS OF 10 000 LITRES CAPACITY. ACCORDING TO THE I D. AUTHORIZED REPRESENTATIVE THE APPELLANT IS MAKING COMBINED PU RCHASES AND THEREFORE THE COMPARISON OF WORK WISE AVERAGE MATERIAL CONSUMPTION DRAWN BY THE ASSESSING OFFICER IN THE P RESENT CASE HAS SERVED NO PURPOSE EXCEPT TO LEAVE A HIGHLY DISTORTED PICTURE. ACCORDING TO AUTHORIZED REPRESENTATIVE TH E OBSERVATIONS OF THE ID. ASSESSING OFFICER THAT THE RATIO OF CEMENT TO CONCRETE KAPCHI AND STEEL IS NOT MATCHING IN TERMS OF COST OF MATERIAL ARE ALSO MISCONCEIVED AND ARE B ASED ON INCORRECT FIGURES. THE ASSESSING OFFICER HAS NOT BR OUGHT ON RECORD ANY MATERIAL EVIDENCE MUCH LESS A CERTIFICAT E FROM A TECHNICAL PERSON STATING THE AVERAGE CONSUMPTION OF MATERIAL REQUIRED IN THE CASE OF A PROJECT CARRIED OUT BY TH E APPELLANT. IN THE ABSENCE OF SUCH MATERIAL EVIDENCE THE OBSER VATIONS AND ANALYSIS OF THE ASSESSING OFFICER ARE NOTHING M ORE THAN MERE UNSUPPORTED PRESUMPTIONS ON THE BASIS OF WHICH NO ADVERSE INFERENCE REGARDING THE GENUINE PURCHASES W AS WARRANTED. 1.3 IN ORDER TO DECIDE THE ISSUE I HAVE CAREFULLY CONSIDERED THE VARIOUS ARGUMENTS OF THE ID. AUTHORIZED REPRESE NTATIVE AND HAVE ALSO PERUSED THE ASSESSMENT ORDER. THE ID. ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF PU RCHASES WORTH RS.12 99 500/- MADE FROM MAHADEV SALES CORPOR ATION PARTLY BECAUSE THE INSPECTOR WHO WAS DEPUTED TO MAK E 'ON THE SPOT' INQUIRY HAS REPORTED THAT MAHADEV SALES CORP ORATION WAS NOT FOUND TO BE EXISTING AT THE GIVEN ADDRESS A ND PARTLY BECAUSE THE APPELLANT HAS NOT BEEN ABLE TO SATISFY THE AO REGARDING THE MODE OF TRANSPORTATION AND THE EXPEND ITURE INCURRED THEREON REGARDING THE GOODS HAVING BEEN TR ANSPORTED FROM PALANPUR TO DHOKHAWADA. THE ID. ASSESSING OFFI CER HAS ALSO DOUBTED THE GENUINENESS OF THE PURCHASE BILL B ECAUSE THE TELEPHONE NUMBER OF MAHADEV SALES CORPORATION WAS N OT FOUND TO BE PRINTED ON SUCH BILL. THE APPELLANT ON THE OTHER HAND HAS TRIED TO ESTABLISH THAT CONTRACT WORK OF 1 00 R.C.C. WATER TANKS OF 10000 LITRES CAPACITY WAS ACTUALLY C ARRIED OUT FOR WHICH THE PAYMENT OF RS.17 00 959/- WAS RECEIVE D FROM SEWA I.E. THE CONTRACTEE. SEWA HAS NOT ONLY CATEGOR ICALLY CONFIRMED THE ALLOTMENT OF CONTRACT TO THE APPELLAN T BUT HAS ITA NO.2833/AHD/2007 6 ALSO CONFIRMED THE EXECUTION OF THE SAME BY THE APP ELLANT TO ITS SATISFACTION. THE INCOME OF RS.17 00 959/- BOOK ED AGAINST THE SAID CONTRACT HAS BEEN SUBJECTED TO TAX BY THE ID. ASSESSING OFFICER. IT IS TRUE THAT THE APPELLANT HA S NOT BEEN ABLE TO PRODUCE MAHADEV SALES CORPORATION BEFORE TH E ID. ASSESSING OFFICER AT THE TIME OF ASSESSMENT. IT IS ALSO CORRECT ON THE PART OF THE ID. ASSESSING OFFICER TO OBSERVE THAT THE ONUS TO PROVE THAT SUCH PARTY FROM WHOM THE PURCHAS ES UNDER CONSIDERATION WERE MADE ACTUALLY EXISTED INITIALLY RESTED UPON THE APPELLANT. IN SUCH A SITUATION WHERE THE PARTY COULD NOT BE TRACED DUE TO A LONG GAP OF THREE YEARS THE GENUIN ENESS OF PURCHASES CANNOT BE DOUBTED MERELY BECAUSE THE APPE LLANT IS NOT ABLE TO PRODUCE THE SAID PARTY. IN MY CONSIDERE D OPINION WE MAY ALSO HAVE TO WEIGH THE OTHER CIRCUMSTANTIAL EVIDENCE AVAILABLE IN THIS CASE SO AS TO LOGICALLY ARRIVE AT A CONCLUSION WHETHER THE PURCHASES UNDER CONSIDERATION ARE GENUI NE OR NOT. IT IS AN ACCEPTED FACT THAT THE PURCHASES BY THE AP PELLANT WERE MADE IN THE MONTH OF APRIL / MAY 2003. MAHADEV SAL ES CORPORATION WAS REGISTERED WITH THE SALES-TAX DEPAR TMENT OF GUJARAT HAVING CST NO. GUJ. 99930798. AS IS MENTION ED IN PARA 4.1 OF THE ASSESSING OFFICER'S ORDER THE SALE S-TAX NO. ALLOTTED TO MAHADEV SALES CORPORATION WAS CANCELLED W.E.F. 10/2/2004. NOBODY CAN DENY THAT THE SALES-TAX NUMBE R IS ALLOTTED TO A TRADER ONLY AFTER ITS PROPER VERIFICA TION. THE VERY FACT THAT MAHADEV SALES CORPORATION WAS A REGISTERE D DEALER WITH THE SALES TAX DEPARTMENT TILL AS LATE AS 10-02 -2004 GOES TO CONFIRM THAT THE SAID PARTY WAS VERY WELL IN EXI STENCE EARLIER TO THAT PERIOD. ANOTHER IMPORTANT FACTOR IS THE PA YMENT MADE BY THE APPELLANT TO MAHADEV SALES CORPORATION WHICH IS STATEDLY MADE BY CHEQUES ON DIFFERENT DATES DURING THE F.Y. 2004-05. THE FACTUM OF PAYMENT IS NOT DENIED BY THE ID. ASSESSING OFFICER. THE APPELLANT HAS DULY CARRIED O UT THE CONTRACT-WORK AND HAS SHOWN THE INCOME BOOKED AT RS.17 00 959/- OUT OF SUCH CONTRACT IN ITS P&L ACCO UNT. THE CONTRACT RECEIPTS SO SHOWN HAVE BEEN SUBJECTED TO T AX. THE OTHER CONTENTION OF THE ID. AUTHORIZED REPRESENTATI VE THAT IN AN ON GOING PROJECTS THE COMBINED PURCHASES ARE MADE IN ORDER TO EFFECT ECONOMY IS ALSO FOUND TO BE LOGICAL. IT IS ALSO A FACT THAT THE CONTRACT OF CONSTRUCTION OF 100 RCC UNDERG ROUND WATER TANKS IS NOT THE ONLY CONTRACT WHICH THE APPE LLANT HAS CARRIED OUT DURING THE YEAR. THIS IS ALSO A FACT TH AT THE PURCHASES OF RS.12 99 500/- MADE FROM MAHADEV SALES CORPORATION ARE NOT THE ONLY PURCHASES MADE DURING THE CURRENT YEAR. IN THE BACKGROUND OF THESE FACTS THE GENUINENESS OF THE PURCHASES CANNOT BE DOUBTED JUST BECAUSE MAHADEV SALES CORPORATION WAS NOT FOUND TRACEABLE A T THE TIME OF ASSESSMENT PROCEEDINGS. ITA NO.2833/AHD/2007 7 IT IS HOWEVER NOTICED THAT RS.1 27 278/- IS STILL O UTSTANDING AS PAYABLE BY THE APPELLANT TO MAHADEV SALES CORPORATI ON. SINCE MAHADEV SALES CORPORATION HAS DISCONTINUED ITS BUSI NESS AND IS NOT TRACEABLE THERE IS A VERY REMOTE POSSIBILIT Y OF THE APPELLANT MAKING THE BALANCE PAYMENT OF RS.1 27 278 /- TO MAHADEV SALES CORPORATION. IN ALL FAIRNESS THE OUT STANDING BALANCE OF RS.1 27 278/- WHICH FOR ALL PRACTICAL PU RPOSES HAS CEASED TO BE A LIABILITY IS REQUIRED TO BE ADDED T O THE INCOME OF THE APPELLANT. LN OTHER WORDS THE ADDITION TO T HE EXTENT OF RS.1 27 278/- IS CONFIRMED AND THE APPELLANT GETS A RELIEF OF RS.11 72 222/-. 4 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST TH E AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR RELIED ON TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTE D THE FINDINGS OF THE CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. WE FIND THAT THE AO DOUBTED THE GENUINENE SS OF PURCHASES WORTH RS.12 99 500/-FROM M/S MAHADEV SALES CORPORAT ION SINCE THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE SE PURCHASES THE SAID PARTY HAVING NOT BEEN FOUND AT THE GIVEN A DDRESS AND THE ASSESSEE HAVING NOT BEEN ABLE TO SATISFY THE AO REG ARDING THE MODE OF TRANSPORTATION AND THE EXPENDITURE INCURRED THER EON REGARDING THE GOODS HAVING BEEN TRANSPORTED FROM PALANPUR TO DHOK HAWADA NOR THE TELEPHONE NUMBER OF MAHADEV SALES CORPORATION W AS PRINTED ON SALE BILLS. ON THE OTHER HAND THE LD. CIT(A) REDUCED THE DISALLOWANCE ON THE GROUND THAT THE CONSTRUCTION OF 100 R.C.C. WATER TANKS OF 10000 LITRES CAPACITY WAS ACTUALLY C ARRIED OUT FOR WHICH THE PAYMENT OF RS.17 00 959/- WAS RECEIVED FR OM SEWA AND THE PURCHASES WERE MADE IN THE MONTH OF APRIL/MAY 2003 FROM M/S MAHADEV SALES CORPORATION REGISTERED WITH THE SALE S-TAX DEPARTMENT OF GUJARAT HAVING CST NO. GUJ. 99930798 AND THE SAID PARTY WAS IN EXISTENCE AT UNTIL 10.2.2004 WHEN THEI R SALES TAX REGISTRATION WAS CANCELLED WHILE PAYMENTS WERE MADE IN THE FY ITA NO.2833/AHD/2007 8 2004-05 BY CHEQUES ON DIFFERENT DATES. CONSIDERING THE FACT THAT IN THE ON GOING PROJECTS THE COMBINED PURCHASES WERE MADE IN ORDER TO EFFECT ECONOMY THE LD. CIT(A) CONCLUDED THAT GE NUINENESS OF THE PURCHASES CANNOT BE DOUBTED JUST BECAUSE MAHADEV SA LES CORPORATION WAS NOT FOUND TRACEABLE AT THE TIME OF ASSESSMENT PROCEEDINGS. IN THESE CIRCUMSTANCES ESPECIALLY WHE N THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENA BLE US TO TAKE A DIFFERENT VIEW IN THE MATTER WE ARE INCLINED TO AG REE WITH THE FINDINGS OF THE LD. CIT(A) THAT THE GENUINENESS OF PURCHASES COULD NOT BE DOUBTED MERELY BECAUSE THE ASSESSEE WAS NOT ABLE TO PRODUCE THE SAID PARTY DUE TO LONG TIME GAP OF THR EE YEARS ESPECIALLY WHEN THE AO DID NOT DOUBT THE GENUINENES S OF PAYMENTS MADE TO THE SAID PARTY IN THE SUBSEQUENT YEAR. THEREFORE GROUND NO.1 IN THE APPEAL IS DISMISSED. 6 GROUND NO.2 IN THE APPEAL RELATES TO THE ADDITI ON OF RS.36 000/-MADE BY THE AO U/S. 40A(2)(A) OF THE ACT . THE AO NOTICED THAT THE ASSESSEE PAID AN AMOUNT OF RS.78 000/- EACH TO MS. MEENA N. CHOKHANI AND MS. RASHMI P. CHOKHANI W ORKING AS OFFICE SUPERINTENDENT AND COMPUTER OPERATOR RESPECT IVELY. BOTH THESE LADIES ARE STATED TO BE RELATED TO THE ASSESS EE. THE AO IN PARA 5.1 OF THE ASSESSMENT ORDER ALLOWED SALARY AND BONUS PAYMENT OF RS.60 000/- EACH TO THESE LADIES AND DI SALLOWED RS.36 000/- BEING EXCESSIVE OR UNREASONABLE IN TERM S OF SECTION 40A(2)(A) OF THE ACT WITH THE OBSERVATIONS THAT BOT H THESE LADIES WERE NOT TECHNICALLY QUALIFIED WHILE THE PROJECT EN GINEERS AND SITE ENGINEERS WERE PAID SOMEWHERE BETWEEN RS.45 000/- T O RS.65 000/- PER ANNUM. 7 ON APPEAL THE LD. CIT(A) DELETED THE DISALLOWAN CE ON THE GROUND THAT THE AO DID NOT DOUBT THE GENUINENES S OF THE SALARY PAYMENT TO THESE PERSONS NOR RAISED ANY DOUBT ABOU T THE SERVICES ITA NO.2833/AHD/2007 9 BEING RENDERED BY THEM NOR EVEN BROUGHT ANY MATERI AL ON RECORD TO ESTABLISH THAT SALARY PAYMENT TO THESE LADIES WAS E XCESSIVE OR UNREASONABLE KEEPING INTO ACCOUNT THE MARKET VALUE OF THE SERVICES BEING RENDERED BY THEM. 8 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR REL IED ON THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE S UPPORTED THE FINDINGS OF THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH FACTS OF THE CASE. WE FIND THAT THE LD. CIT(A) DELETED THE DISALLOWAN CE ON THE GROUND THAT THE AO HAD NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT NO SERVICES WAS RENDERED BY THE AFORESAID TWO LADIES OR THAT SALARY PAYMENT TO THESE LADIES WAS EXCESSIVE OR UNREASONABLE KEEPING IN VIEW THE MARKE T VALUE OF THE SERVICES RENDERED BY THEM. IT IS WELL SETTLED THAT THE PROVISIONS OF SECTION. 40A(2)(A) OF THE ACT CANNOT HAVE ANY APPLICATION UNLESS IT IS FIRST CON CLUDED THAT THE EXPENDITURE WAS EXCESSIVE OR UNREASONABLE AS H ELD IN THE CASE OF UPPER INDIA STEEL MANUFACTURING AND ENGINEERING CO. PRIVA TE LIMITED 117 ITR 569(SC). IN THE CASE UNDER CONSIDERATION THERE IS NOTHING T O SUGGEST THAT THE AO EVER BROUGHT ANY MATERIAL ON RECORD ON THIS ASPECT NOR EVEN CITED ANY COMPARABLE INSTANCES IN RESPECT OF THE FAIR MARKET VALUE OF TH E SERVICES RENDERED FOR WHICH THE PAYMENT HAD BEEN MADE BEFORE CONCLUDING THAT EXPENDITURE WAS EXCESSIVE OR UNREASONABLE. IN THESE CIRCUMSTANCES WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE GROUND NO.2 IS DISMISSED 10. GROUND NOS. 3 & 4 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISSED. ITA NO.2833/AHD/2007 10 11. IN THE RESULT APPEAL IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 30 -0 4-2010 SD/- SD/- (D T GARASIA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 30 -04-2010 COPY OF THE ORDER FORWARDED TO : 1. SHRI PALLAV D CHOKHANI PROP. CHOKHANI CONSTRUCT ION A-4 VRAJ APARTMENTS OPP. HARI NURSING HOME 103-C SWA STIK SOCIETY NAVRANGPURA AHMEDABAD 2. THE ITO WARD-9(1) AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XV AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD