Manoj Kumar, Gurgaon v. ACIT, New Delhi

ITA 3546/DEL/2017 | 2012-2013
Pronouncement Date: 12-03-2021 | Result: Allowed

Appeal Details

RSA Number 354620114 RSA 2017
Assessee PAN AGQPK1786P
Bench Delhi
Appeal Number ITA 3546/DEL/2017
Duration Of Justice 3 year(s) 9 month(s) 7 day(s)
Appellant Manoj Kumar, Gurgaon
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 12-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 12-03-2021
Assessment Year 2012-2013
Appeal Filed On 05-06-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI AMIT SHUKLA JUDICIAL MEMBER AND SHRI O.P. KANT ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.3546/DEL./2017 ASSESSMENT YEAR: 2012-13 SHRI MANOJ KUMAR PROP. BALAJI ENGINEERS & CONSULTANTS 547/1 BHIM PALACE NEAR UNION BANK OF INDIA NEW RAILWAY ROAD GURGAON VS. ACIT CIRCLE-62(1) NEW DELHI PAN :AGQPK1786P (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 14/03/2017 PASSED BY THE LEARNED CIT(APPEALS)-20 N EW DELHI [IN SHORT THE LEARNED CIT(A)] FOR ASSESSMENT YEAR 2012-13 RAISING SOLE GROUND AS FOLLOWS: 1. THAT THE LEARNED CIT(A) ERRED IN PARTLY SUSTAINI NG THE ADDITION OF RS.12 65 641/- TO THE EXTENT OF 0.5% OF THE AGGREGA TE DIRECT EXPENSES (WHICH INTER ALIA INCLUDED EXPENDITURE O N SALARIES WAGES ESI PROVIDENT FUND AND LABOUR WELFARE FUND) ON A APPELLANT BY SHRI J.S. KOCHAR ADV. RESPONDENT BY MS. RINKU SINGH SR.DR DATE OF HEARING 02.03.2021 DATE OF PRONOUNCEMENT 12.03.2021 2 ITA NO.3546/DEL./2017 PRESUMPTIVE BASIS WITHOUT FINDING ANY SPECIFIC PAY MENT TO BE NON GENUINE OR NOT FOR THE PURPOSE OF BUSINESS OF THE A SSESSEE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF SUPPLY OF MANPOWER TO VA RIOUS COMPANIES UNDER THE NAME OF HIS PROPRIETARY CONCERN M/S BALAJI ENGINEERS AND CONSULTANT. FOR THE YEAR UNDER CONSID ERATION THE ASSESSEE FILED RETURN OF INCOME ON 29/09/2012 DECL ARING TOTAL INCOME OF 27 48 190/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND VARIOUS DISA LLOWANCES WERE MADE IN ASSESSMENT ORDER PASSED ON 11/03/2015 UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (IN SHORT THE A CT). ON FURTHER APPEAL THE LD. CIT(A) ALLOWED PART RELIEF TO THE A SSESSEE. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS R EPRODUCED ABOVE. 3. BEFORE US THE PARTIES APPEARED THROUGH VIDEO CONF ERENCING FACILITY. 4. AT THE OUTSET THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE OF SUSTAINING 0.5% OF DIRECT E XPENSES BY THE LD. CIT(A) AGAINST DISALLOWANCE OF 1% OF THE DIRECT EXPENSES BY THE ASSESSING OFFICER HAS BEEN ADJUDICATED BY THE T RIBUNAL IN ASSESSMENT YEAR 2014-15 IN THE CASE OF THE ASSESSEE HIMSELF AND DELETED THE ADDITION BEING ON THE AD-HOC BASIS WITH OUT POINTING OUT SPECIFIC DEFECT OF BILLS OR VOUCHERS. 5. THE LEARNED DR ON THE OTHER HAND RELIED ON THE O RDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. WE FIND 3 ITA NO.3546/DEL./2017 THAT THE LEARNED ASSESSING OFFICER IN PARA 3.1 TO 3 .3 OF THE ASSESSMENT ORDER HAS MADE THE ADDITION OF 25 31 282/- BEING 1% OF THE DIRECT EXPENSES ON THE GROUND OF DISPROPO RTIONATE INCREASE IN EXPENSES AS COMPARED TO EARLIER YEAR WI THOUT POINTING OUT ANY SPECIFIC DEFECTS. THE FINDING OF THE ASSESS ING OFFICER IN PARA 3.3 TO 3.4 IS REPRODUCED AS UNDER: 3.3 UNDISPUTEDLY THERE IS SUDDEN RISE IN % OF TOTA L DIRECT EXPENSES (ON ACCOUNT OF LABOUR CHARGES AND RELATED EXPENSES) AS PROPORTION OF THE TURNOVER FOR THE YEAR AS COMPARED TO THE RESULT S FOR THE EARLIER PERIOD AND NO JUSTIFIABLE REASON OR SUPPORTING EVID ENCE HAS BEEN FURNISHED IN SUPPORT OF THE CONTENTIONS OF THE ASSE SSEE. IN VIEW OF THE UNVERIFIABLE NATURE OF RECORDS MAINTAINED BY TH E ASSESSEE IN RESPECT OF WAGES PAYMENTS AND THE LACK OF IDENTITIE S OF THE LABOURES THE GENUINENESS OF EXPENDITURE ON ACCOUNT OF TOTAL DIRECT EXPENSES CANNOT BE ACCEPTED COMPLETELY. BESIDES THE OTHER C ONTRACTORS IN THE SIMILAR BUSINESS OF MANPOWER AND LABOUR SUPPLY ARE SHOWING A NET PROFIT OF 3-5%. WHEN THE LABOUR MATERIAL COST ARE UNIVERSAL FOR ALL THE CONTRACTORS CLAIM OF THE ASSESSEE IS NOT ACCEPT ABLE. 3.4 CONSIDERING ALL THE ABOVE DISCREPANCIES 1% OF T HE TOTAL DIRECT EXPENSES CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 2 5 31 282/- IS BEING DISALLOWED. 6.1 ON FURTHER APPEAL THE LD. CIT(A) HOWEVER REDUCE D THE DISALLOWANCE FROM 1% TO 0.5 PERCENT AND SUSTAINED D ISALLOWANCE OF 12 65 641/- OBSERVING AS UNDER: {6} DECISION: - THERE IS ONLY ONE EFFECTIVE GROUND OF APPEAL IN THI S CASE IN GROUND NO. 2 REGARDING DISALLOWANCE OF RS. 2531282/- THAT IS 1% OF THE TOTAL DIRECT EXPENSES. THE AO HAS MADE THIS ADDITION ON T HE BASIS OF THE FACT THAT THERE IS NO DIRECT NEXUS BETWEEN INCREASE IN THE TURNOVER AND VIS-A-VIS IN EXPENSES UNDER THE HEAD SALARY & W AGES. THE CHART GIVEN BY THE AO IN PARA 3.1 OF THE ASSESSMENT ORDER MENTIONED (SUPRA) IN PARA 4 MAKES IT CLEAR THAT THERE IS A FA LL IN GP FROM 6.23% IN A.Y. 2010-11 AND 6.16% IN A.Y. 2011-12 TO 5.04% IN A.Y. 2012- 13. THE REASON OF THIS FALL IS APPARENT DUE TO THE INCREASE OF WAGES & SALARY TO THE TURN OVER WHICH HAS INCREASED FROM 93.7% IN A.Y. 2010-11 AND 93.84% IN A.Y. 2011-12 TO 94.94% IN A.Y . 2012-13. THE AO HAS MENTIONED MANY DEFECTS IN THE PAYMENT-S HEET AND 4 ITA NO.3546/DEL./2017 MUSTER-ROLL IN PARA 3.2 OF THE ASSESSMENT ORDER AND ALSO OBSERVED THAT FROM F.Y. 2009-10 TO F.Y. 2011-12 NO PROOF OF ANY REVISION OF WAGES RATE HAS BEEN FURNISHED BY THE APPELLANT AND COPY OF CONTRACT AGREEMENT COULD NOT BE PRODUCED. HENCE AS THE RISE IN THE EXPENSES UNDER THESE HEADS COULD NOT BE SUBSTANTIAT ED ADDITION OF 1% OF THE TOTAL DIRECT EXPENSES OF RS.25 31 282/- W AS MADE BY THE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APP ELLANT HAS CLAIMED THAT THE REASONING GIVEN BY AO FOR DISALLOW ANCE IS NOT CORRECT AND POINT-WISE REPLY WAS GIVEN WHICH IS REP RODUCED IN PARA 5 SUPRA. ON THE GROUND OF INCREASE IN WAGES AND SAL ARY EXPENSES THE APPELLANT EXPLAINED THAT THE SERVICE CHARGES WH ICH IS IN THE NORMAL BASIS VARIES FROM THE RANGE OF 5% TO 7% BUT FOR OVER-TIME IT IS IN THE RANGE OF 2.77% TO 4%. HOWEVER NO CALCULATIO N THAT WHAT IS THE AMOUNT OF WAGE CHARGES RELATING TO OVER-TIME CO ULD BE PRODUCED BY THE APPELLANT FURTHER IT IS DIFFICULT TO BELIEV E THAT OVER-TIME CHARGES HAS ANY SUBSTANTIAL IMPACT ON THE EXPENSES AS IT IS DONE USUALLY IN VERY FEW CASES AND IT IS TRUE FOR ALL TH E YEARS AND NOT ONLY FOR THIS YEAR. HENCE THIS EXPLANATION IS WITHOUT A NY SUPPORTING CALCULATION AND HAS NO BASIS AND IS MERE A STATEME NT. FURTHER AS THE APPELLANT HAS ALSO CLAIMED THAT THE HIKE IN WAGES EXPENSES IS DUE TO THE WAGE REVISION THE APPELLANT WAS ASKED TO PRODUCE THE RELEVANT CIRCULARS REGARDING THIS. IN R ESPONSE THE APPELLANT HAS FURNISHED THE LETTER NO. 28647-474 DA TED 05.09.2011 WHERE THE WAGES WERE RAISED BY LABOUR COMMISSIONER HARYANA W.E.F 01.07.2011 AND FURTHER VIDE LETTER NO. 8273-3 97 DATED 02.02.2012 BY WHICH MINIMUM WAGES HAVE AGAIN BEEN I NCREASED W.E.F 01.01.2012. HOWEVER THE APPELLANT HAS NOT PR ODUCED ANY CALCULATION WHAT IS THE IMPACT OF THIS WAGE HIKE ON THE TOTAL LABOUR COST AS THE APPELLANT HAS SHOWN SALARY AND WAGES UN DER THE SAME HEAD. SIMILAR ADDITION HAS BEEN MADE BY THE AO IN A.Y. 20 11-12 ON IDENTICAL GROUNDS WHERE THE AO HAS ADDED 1% OF THE TOTAL DIRECT EXPENSES CLAIMED BY THE APPELLANT AMOUNTING TO RS.2 2 35 928/-. THE LD. PREDECESSOR CIT(A) HAS CONFIRMED THIS ADDIT ION IN APPEAL NO.45/2014-15 DATED 03.03.2016 AND OBSERVED IN PARA 5.3 AS UNDER: 'I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE ASSESSMENT ORDER. EVEN WITHOUT GOING INTO THE COMPA RISON OF THE EXPENSES AS COMPARED TO PRECEDING YEARS THERE IS N O DOUBT THAT IN ORDER TO CLAIM ANY EXPENDITURE THE INITIAL BURDEN LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF SUCH EXPENDITU RE AND WHAT THE EXPENDITURE MUST BE INCURRED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS/PROFESSION. IN THE PRESENT CASE THE AO HAS 5 ITA NO.3546/DEL./2017 MENTIONED CATEGORICALLY AS REPRODUCED IN PARA (5.1) ABOVE THAT THE APPELLANT HAS NOT BEEN ABLE TO PROVIDE ADEQUATE EVI DENCES IN SUPPORT OF HIS CLAIMS. CONSIDERING THAT FACT THAT M OST OF SUCH EXPENSES WERE INCURRED IN CASH APPELLANT'S ONUS TO PROVE THE GENUINENESS HAS BECOME EVEN MORE PERTINENT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND TAKINA THE OVERA LL FACTS AS MENTIONED IN PARA (5.1) ABOVE IT IS MY CONSIDERED VIEW THAT THE AO IS REASONABLE IN DISALLOWING 1% OF DIRECT EXPENSES (ON ACCOUNT OF LABOUR CHARGES AND RELATED EXPENSES1 AMOUNTING TO R S. 22 35 928/- ACCORDINGLY APPELLANT'S GROUND OF APPEAL ON THIS I SSUE IS DISMISSED. THE APPELLANT HAS MENTIONED THAT THIS ORDER HAS BEE N CHALLENGED BY HIM BEFORE HONBLE ITAT WHICH IS PENDING. CONSIDERI NG THE FACT THAT THERE ARE MANY DISCREPANCIES POINTED OUT BY THE AO REGARDING THE GENUINENESS OF EXPENSES WHICH IS COMMON IN THIS YEA R AS WELL AS IN A.Y. 2011-12 AND LD. CIT(A) IN A.Y. 2011-12 CONFIRM ED THIS ADDITION AND THE FACT THAT NO PLAUSIBLE EXPLANATION COULD BE GIVEN BY THE APPELLANT FOR SUCH HIKE IN EXPENSES THE AO IS JUSTI FIED IN MAKING ADDITION UNDER THIS HEAD. HOWEVER CONSIDERING THE FACT THAT IN THIS YEAR THE WAGES ARE REVISED IN THE STATE OF HARYANA FROM 01.07.2011 WHICH FACTOR WAS ABSENT IN A.Y. 2011-12 THE APPELL ANT DESERVES A CREDIT OF SUCH HIKE IN THE EXPENSES CLAIMED UNDER L ABOUR COST. DURING THE COURSE OF HEARING THE APPELLANT COULD NO T DO ANY QUANTIFICATION WHAT IS THE EXACT AMOUNT OF HIKE IN THE EXPENSES ON THIS ACCOUNT OF WAGE REVISION AS THIS EXPENSE IS I NCLUSIVE OF SALARY AS WELL. FURTHER THE CASE LAWS RELIED UPON BY THE APPELLANT ARE DIFFERENT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AS IN THE CASE OF THE APPELLANT THE ASSESSING OFFICER HAS PROVED THAT THERE IS NO NEXUS OF THE EXPENSES UNDER LABOUR AND SALARY HEAD VIS-A-VIS TURNOVER. ON THE BASIS OF THE ABOVE THE DISALLOWAN CE OF RS.25 31 282/- @1% OF THE TOTAL DIRECT EXPENDITURE OF RS.25 31 28 276/- IS RESTRICTED TO 0.5% WHICH COMES TO RS.12 65 641/- AND THE APPELLANT WILL GET RELIEF AC CORDINGLY. 6.2 WE FIND THAT IDENTICAL GROUND HAS BEEN ADJUDICATED BY THE TRIBUNAL IN ASSESSMENT YEAR 2014-15 IN ITA NO. 978/ DEL./2018 (ORDER DATED: 02.03.2021) OBSERVING THAT NO AD-HOC ADDITION CAN BE MADE WITHOUT POINTING OUT THE SPECIFIC DEFECTS O F BILLS OR VOUCHERS. THE FINDING OF THE TRIBUNAL (SUPRA) IS RE PRODUCED AS UNDER: 4.4 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON TH E ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON 6 ITA NO.3546/DEL./2017 RECORD. WE FIND THAT THE HONBLE DELHI HIGH COURT I N THE CASE OF FRIENDS CLEARING AGENCY (P) LTD. (SUPRA) HAS HELD AS UNDER: 10. HAVING PERUSED THE REASONING OF THE CIT (APPEA LS) AS EXTRACTED ABOVE AND THAT OF ITAT WE ARE OF THE VIE W THAT THE SAID REASONING CANNOT BE SUSTAINED. THERE IS NO BAS IS FOR AN AD-HOC DIS-ALLOWANCE OF RS.50 000/-. EITHER IT WAS CASE THAT EVIDENCE WAS PRODUCED OR THE EVIDENCE WAS NOT PRODU CED. THE BASIS FOR DEDUCTION OF RS.50 000/- OUT OF A TOT AL SUM CLAIMED AMOUNTING TO RS.1 48 782/- IS NOT CLEAR. MR.SABHARWAL HAS FAIRLY POINTED OUT THE DECISION IN THE ASSESSEE S CASE BY THE ITAT FOR THE ASSESSMENT YEAR 1989- 1990 WHEREIN THE ITAT HAS ALLOWED SIMILAR EXPENSES IN TOTALITY. AS A MATTER OF FACT THE ITAT HAS ACCEPTE D THE CASE OF THE ASSESSEE THAT FOR MINOR AMOUNTS RELATING TO CON VEYANCE ETC. AND OTHER BUSINESS EXPENSES IT IS IMPRACTICAL TO HAVE VOUCHERS AND THAT INTERNAL VOUCHERS OF THE STAFF/EM PLOYEES OF AN ORGANIZATION WILL SUFFICE. FOR THE SAID ASSESSME NT YEAR THE AMOUNT CLAIMED TOWARDS EXPENSES WAS UNDER THE SIMIL AR HEADS THAT IS CARTAGE LABOUR AND SEALING EXPENSE S. 4.5 FURTHER THE TRIBUNAL THE CASE OF GANPATI ENTERPRISES LTD. (SUPRA) HAS AS UNDER: 7. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS THE F ACTS EMERGE AO IN HIS ORDER HAS MERELY REFERRED TO EXCESSIVENES S OF EXPENDITURE; SELF MADE VOUCHERS AND WITHOUT ASSIGNI NG ANY REASONS AD HOC DISALLOWANCES HAVE BEEN MADE WHICH IN A.Y. 2003-04 HAVE BEEN UPHELD BY CIT(A) AND IN A.Y. 2005 -06 & 2006-07 HAVE BEEN PARTLY CONFIRMED. IN OUR VIEW IF THE BOOKS OF ASSESSEE ARE PROPERLY MAINTAINED AND PRODUCED BE FORE AO THE DISALLOWANCE SHALL PROCEED ON ITEMS OF EXPENDIT URE WHICH ARE NOT PROVED BY THE ASSESSEE. AD HOC DISALLOWANCE IN EVERY YEAR WITHOUT ASSIGNING ANY REASONS IS NOT JUSTIFIAB LE. IN VIEW THEREOF WE ARE INCLINED TO DELETE THE AD HOC DISAL LOWANCE AS UPHELD BY CIT(A). ASSESSEE'S GROUNDS IN THIS BEHALF ARE ALLOWED. 4.6 WE FIND THAT THE LEARNED CIT(A) HERSELF HAS ACCEPT ED THAT THERE IS INCREASE IN PROFIT DURING THE YEAR AS COMPARED TO PRECEDING YEAR AND ALSO THE ASSESSING OFFICER HA S NOT POINTED OUT ANY SPECIFIC INSTANCE OF THE DEFECT. SH E ALSO TAKEN NOTE OF THE DECISIONS CITED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. IN SUCH CIRCUMSTANC ES 7 ITA NO.3546/DEL./2017 WHEN NO SPECIFIC DEFECT IN BILLS OR VOUCHER HAS BEE N POINTED OF BY THE ASSESSING OFFICER NO ADDITION ON AD-HOC BASIS CAN BE SUSTAINED IN VIEW OF THE DECISIONS ABO VE. ACCORDINGLY WE DELETE THE ADDITION OF 5 LAKH WHICH WAS SUSTAINED BY THE LEARNED CIT(A). THE GROUND NO. 1 O F THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 6.3 RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNA L THE ADDITION-IN-DISPUTE IN THE YEAR UNDER CONSIDERATION IS ALSO DELETED. THE SOLE GROUND OF THE APPEAL OF THE ASSES SEE IS ACCORDINGLY ALLOWED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH 2021 SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12 TH MARCH 2021. RK/- (DTDS) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI