DCIT 10(2), MUMBAI v. ALFA BETA ENGINEERING, MUMBAI

ITA 4753/MUM/2011 | 2004-2005
Pronouncement Date: 09-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 475319914 RSA 2011
Assessee PAN AAACA6004F
Bench Mumbai
Appeal Number ITA 4753/MUM/2011
Duration Of Justice 2 year(s) 3 month(s) 26 day(s)
Appellant DCIT 10(2), MUMBAI
Respondent ALFA BETA ENGINEERING, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 09-10-2013
Date Of Final Hearing 03-10-2013
Next Hearing Date 03-10-2013
Assessment Year 2004-2005
Appeal Filed On 13-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL A AA A BENCH BENCH BENCH BENCH MUMBAI MUMBAI MUMBAI MUMBAI !' !' !' !' $ $ $ $ . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI SANJAY ARORA SANJAY ARORA SANJAY ARORA SANJAY ARORA AM AM AM AM & & & & SHRI SHRI SHRI SHRI VIJAY VIJAY VIJAY VIJAY PAL RAO JM PAL RAO JM PAL RAO JM PAL RAO JM ./ I.T. I.T. I.T. I.T.A. NO. A. NO. A. NO. A. NO.4753/MUM/2011 4753/MUM/2011 4753/MUM/2011 4753/MUM/2011 ( %& %& %& %& ' ' ' ' / ASSESSMENT YEAR :2004-05) THE DY. COMMISSIONER OF INCOME TAX-10(2) ROOM NO. 432 4 TH FLOOR AAYAKAR BHAVAN M. K. ROAD MUMBAI-400020 & & & & / VS. M/S ALFA BETA ENGINEERING CONST. PVT. LTD. 222 SWASTIK CHAMBER CST ROAD CHEMBUR MUMBAI-400071 '( ./ ) ./ PAN/GIR NO. : AAACA6004F ( (* / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( + (* / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) (* (* (* (* - - - - / APPELLANT BY : SHRI G. N. MAKWANA + (* + (* + (* + (* . .. . - - - - /RESPONDENT BY : SHRI V. C. SHAH & & & & . .. . / / / / / DATE OF HEARING : 3 RD OCTOBER 2013 0' 0' 0' 0' . .. ./ / / / /DATE OF PRONOUNCEMENT: 9 TH OCTOBER 2013 !1 / O R D E R PER : $ . . / VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23.3.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2004-05. 2. THE BRIEF FACTS EMERGING FROM THE RECORD ARE THA T THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF ` 57 76 989. T HE RETURN WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ON 18 .4.2005. IN RESPONSE TO NOTICE AND QUESTIONNAIRE THE ASSESSEE SUBMITTED CE RTAIN DETAILS VIDE LETTER DATED 1.6.2005 FURTHER VIDE LETTER DATED 11 .6.2005. THEREAFTER THE JURISDICTION OF THE ASSESSEES CASE WAS TRANSFERRED TO ACIT (HQ)-VI ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 2 MUMBAI WHO HAD ALSO ISSUED NOTICE AND QUESTIONNAIR E ON 27.6.2006. THE ASSESSEE VIDE LETTER DATED 27.7.2006 SOUGHT AN ADJO URNMENT. THEREAFTER THE JURISDICTION OF THE ASSESSEES CASE WAS AGAIN T RANSFERRED TO THE CHARGE OF ACIT-10(2) MUMBAI. IT APPEARS THAT THE REPRESEN TATIVE OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS TILL 20.9.2006 WHEN THE CASE WAS ADJOURNED TO 28.9.2006 ON THE REQUEST OF THE ASSESS EE FOR FILING FURTHER DETAILS. THE AO MENTIONED IN THE ASSESSMENT ORDER T HAT NEITHER ANYBODY ATTENDED NOR SUBMISSIONS WERE SUBMITTED BY THE ASSE SSEE DESPITE THE FINAL SHOW CASE NOTICE ISSUED BY THE AO ON 13.12.20 06 FOR FILING VARIOUS DETAILS ETC. FINALLY FOR WANT OF DETAILS SOUGHT BY THE AO THE ASSESSMENT WAS COMPLETED EX-PARTE U/S 144 OF THE INCOME TAX AC T. THE AO MADE VARIOUS ADDITION AND COMPUTED THE TOTAL INCOME OF T HE ASSESSEE AT ` 4 09 73 220/-. ON APPEAL BEFORE CIT(A) THE ASSESSE E FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 46 A. THE CIT(A) ISSUED A REMAND ORDER AND AFTER CONSIDERING THE REMAND REPOR T PASSED THE IMPUGNED ORDER WHEREBY SUBSTANTIAL RELIEF WAS GRANT ED TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HA S FILED THE PRESENT APPEAL AND RAISED THE FOLLOWING GROUNDS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE DI SALLOWANCE OF SUM OF ` 63 69 540/- OUT OF SUB-CONTRACT CHARGES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE DI SALLOWANCE OF ` 82 89 125/- OUT OF PURCHASE AND OF ` 54 00 168/- AD DED ON ACCOUNT OF UNEXPLAINED OUTSTANDING EXPENSES. ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 3 3. GROUND NO. 1 REGARDING DELETION OF DISALLOWANCE OF ` 63 69 540/- OUT OF SUB-CONTRACT CHARGES. THE ASSESSEE DEBITED SUB-C ONTRACT EXPENSES OF ` 2 19 02 968/- TO THE PROFIT AND LOSS ACCOUNT. THE A O NOTED FROM THE LEDGER ACCOUNT THAT CASH PAYMENTS OF ` 13 69 540/- WERE MA DE TO SEVERAL PERSONS WHICH INDIVIDUALS PAYMENTS WERE MORE THAN ` 10 000/-. BESIDES THERE WAS ONE ENTRY SHOWING CASH PAYMENT OF ` 50 00 000/- WITH NARRATION CPCL PARAMOUNT CASH PAYMENT-HEAD OFFICE. ACCORDIN GLY THE AO MADE AN ADDITION OF ` 63 69 540/- BY TREATING THE SAID E XPENDITURE AS NON- GENUINE. IN THE REMAND REPORT THE AO SUBMITTED THAT DURING THE REMAND PROCEEDINGS THE ASSESSEE HAD NOT FURNISHED ANY DETA IL EXCEPT LEDGER EXTRACT OF SUCH EXPENDITURE INCURRED IN CASH. THERE FORE THE AO COMMENTED THE GENUINENESS OF THE CLAIM WAS NOT ACCE PTABLE. ACCORDINGLY THE AO PROPOSE FOR SUSTAINABILITY OF D ISALLOWANCE. HOWEVER THE CIT(A) DELETED THE ADDITION ON ACCOUNT OF THE C ASH PAYMENT OF ` 50 00 000/- BY NOTING THE FACT THAT THE SAID AMOUNT REPRESENTS THE AMOUNTS SENT/REMITTED BY THE ASSESSEE ITSELF TO ITS BRANCH OFFICE AT CHENNAI. AS REGARDS THE CASH PAYMENT OF ` 13 69 540 /- THE CIT(A) THOUGH AGREED WITH THE REMAND REPORT THAT THE ASSESSEE FAI LED TO PRODUCE NECESSARY BILL/VOUCHERS HOWEVER IT NOTED THAT THE ASSESSEE CLAIMED THAT TDS WAS DULY DEDUCTED ON THESE PAYMENTS AND THE CAS H PAYMENTS WERE ON ACCOUNT OF BUSINESS NECESSITIES. ACCORDINGLY TH E CIT(A) RESTRICTED THE DISALLOWANCE TO 10% OF CASH PAYMENT OF ` 13 69 540/ - AMOUNTING TO ` 1 36 954/-. ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 4 4. BEFORE US THE LD. DR HAS HEAVILY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS REMAND REPORT AND SUBM ITTED THAT THE ASSESSEE FAILED TO PRODUCE THE NECESSARY EVIDENCE I N SUPPORT OF THE PAYMENT MADE IN CASH. THE LD. DR HAS POINTED OUT TH AT EXCEPT THE LEDGER EXTRACT OF SOME EXPENDITURE INCURRED IN CASH THE AS SESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM. 5. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE HA S SUBMITTED THAT THE ASSESSEE HAS INCURRED TOTAL SUB-CONTRACT PAYMEN TS OF ` 2 19 02 968/- OUT OF WHICH ` 2 06 96 216/- WAS MADE BY CHEQUE ONL Y. THE LD. AR HAS FURTHER SUBMITTED THAT THE NECESSARY DETAILS OF PAY MENTS THROUGH TDS WERE FILED BEFORE THE CIT(A) AS WELL AS BEFORE THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS. HE HAS REFERRED THE PAYMENT DETAILS AT PAGE NO. 33 TO 40 OF THE PAPER BOOK AND SUBMITTED THAT 95% O F THE PAYMENTS WERE MADE BY CHEQUE AND ONLY 5% OF THE PAYMENTS TO THE E XTENT OF ` 12 06 000/- WERE MADE IN CASH. EVEN THE PAYMENTS MA DE IN CASH WERE ALSO SUBJECTED TO TDS TO THE EXTENT OF ` 9 00 000/- . THE LD. AR HAS SUBMITTED THAT THE ASSESSEE WAS HAVING ABOUT 80 WOR KING SITES AND THE PAYMENTS IN CASH WERE MADE OUT OF NECESSITIES AND U RGENCY OF WORK AS THE ASSESSEE HAD NO BANK ACCOUNT ON THESE SITES. TH US THE PAYMENTS IN CASH ARE COVERED IN THE EXCEPTIONS AS PROVIDED UNDE R THE PROVISIONS OF THE ACT. THE LD. AR HAS FURTHER SUBMITTED THAT THER E IS NO CASH PAYMENTS OF ` 50 00 000/- AS ALLEGED BY THE AO. THE SAID AMO UNT REPRESENTS VARIOUS SUMS REMITTED TO COMPANYS ACCOUNT WITH STATE BANK OF INDIA CHENNAI BRACH. HE HAS REFERRED THE BANK STATEMENT OF THE SA ID ACCOUNT AND ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 5 SUBMITTED THAT THERE WAS NO SUCH SINGLE PAYMENT OF ` 50 00 000/- AS ALLEGED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO MADE DISALLOWANCE OF ` 6 3 69 540/- BY CONSIDERING THE CASH PAYMENT OF ` 50 00 000/- WITH NARRATION CPCL PARAMOUNT CASH PAYMENT-HEAD OFFICE AND THE CASH PA YMENT OF ` 13 69 540/- TO VARIOUS PERSONS. AS IT IS APPARENT F ROM THE RECORD THAT THE CASH PAYMENTS OF ` 50 00 000/- IS NOT A PAYMENT MAD E BY THE ASSESSEE TO THE PARTIES ON ACCOUNT OF SUB-CONTRACT PAYMENTS BUT THE SAID AMOUNT REPRESENTS THE REMITTANCE OF VARIOUS AMOUNTS MADE B Y THE ASSESSEE TO ITS BRANCH OFFICE AT CHENNAI FOR THE PURPOSE OF WORK CA RRIED OUT AT VARIOUS SITES. THEREFORE WE DO NOT FIND ANY ERROR IN THE O RDER OF THE CIT(A) IN DELETING THE SAID ADDITION OF ` 50 00 000/- BECAUSE IT WAS NOT A PAYMENT TO THE THIRD PARTY BUT ONLY A REMITTANCE BY THE HEA D OFFICE TO THE BRANCH OFFICE. AS REGARDS THE DISALLOWANCE OF CASH PAYMENT S OF ` 13 69 540/- THERE IS NO DISPUTE THAT THE WORK WAS BEING CARRIED OUT AT ABOUT 80 SITES AND DETAILS OF WHICH HAVE BEEN GIVEN BY THE ASSESSE E AT PAGE NO. 10 AND 11 OF THE PAPER BOOK. WE FURTHER NOTE THAT OUT OF T HE TOTAL PAYMENTS OF ` 2 19 02 968/- THE PAYMENT OF ` 2 06 96 216/- WAS MA DE THROUGH CHEQUES THEREFORE ABOUT 95% OF THE PAYMENTS ON ACCOUNT OF EXPENDITURE AT THE CONTRACT SITES WERE MADE THROUGH CHEQUES AND ONLY 5 % OF THE PAYMENTS WAS MADE IN CASH. KEEPING IN VIEW OF THE NUMBER OF SITES AND THE LOCATIONS OF THE SITES AS WELL AS NATURE OF WORK IT CANNOT BE RULED OUT THAT THE CASH PAYMENT WAS INEVITABLE IN SUCH CIRCUMSTANC ES. THEREFORE THE ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 6 DISALLOWANCE OF THE TOTAL PAYMENT OF ` 13 69 540/- BY THE AO IS NOT JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CAS E WHEN THE MAJORITY OF PAYMENTS WERE SUBJECTED TO TDS. SINCE THE ASSESSEE FAILED TO FURNISH NECESSARY BILLS/VOUCHERS THEREFORE THE CIT(A) HAS RESTRICTED THE ADDITION TO 10% OF THE SAID AMOUNT OF ` 13 69 540/- WHICH IN OUR VIEW IS JUST AND PROPER. ACCORDINGLY WE DO NOT FIND ANY ERROR OR IL LEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) QUA THIS ISSUE. 7. GROUND NO. 2 REGARDING DELETION OF DISALLOWANCE ON ACCOUNT OF CASH PURCHASES AND UNEXPLAINED OUTSTANDING EXPENSES. THE AO NOTED FROM THE DETAILS OF PURCHASE THAT AN AMOUNT OF ` 82 89 125/- HAD BEEN SHOWN WITH THE NARRATION CASH PURCHASES AT VARIOUS SITES. SIMI LARLY ` 54 00 168/- HAD BEEN SHOWN WITH THE NARRATION OUTSTANDING EXPENSES. IN THE ABSENCE OF BILLS/VOUCHERS THE AO DISALLOWED THESE AMOUNTS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE REMAND PROCEEDIN G THE ASSESSEE SUBMITTED THAT THERE IS DOUBLE ADDITION AS REGARD T HE OUTSTANDING EXPENSES OF ` 54 00 168/- BECAUSE THE SAME WAS ALRE ADY PART OF THE TOTAL PURCHASE OF ` 82 89 125/-. IN THE REMAND REPORT THE ASSESSING OFFICER AFTER CONSIDERING THE DETAILS FURNISH BY THE ASSESSEE STA TED THAT THE SAID EXPENSES INCURRED IN CASH THEREFORE INFLATION OF S UCH EXPENSES CANNOT BE RULED OUT. ACCORDINGLY THE AO PROPOSE TO DISALLOW 20% OF CASH PURCHASES AND THEREBY RESTRICTING THE ADDITION OF ` 16 57 825 /- BEING 20% OF ` 82 89 125/-. THE CIT(A) AFTER CONSIDERING THE REMAN D REPORT AND THE REPLY OF THE ASSESSEE FURTHER REDUCE THE DISALLOWANCE TO ` 2 00 000/-. ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 7 8. BEFORE US THE LD. DR HAS SUBMITTED THAT THERE IS NO FINDING REGARDING THE DOUBLE ADDITION OF ` 54 00 168/- BY T HE CIT(A). HE HAS FURTHER SUBMITTED THAT IN THE REMAND REPORT THE ASS ESSING OFFICER HAS PROPOSED 20% OF DISALLOWANCE ONLY IN RESPECT OF ` 8 2 89 125/-. THUS THE LD. DR HAS SUBMITTED THAT THE ASSESSEE CLAIMED THE OUTSTANDING EXPENSES OF ` 54 00 168/- WHICH CANNOT BE PART OF THE CASH P URCHASES OF ` 82 89 125/-. ON THE OTHER HAND THE LD. AR OF THE A SSESSEE HAS SUBMITTED THAT THE TOTAL PURCHASE DURING THE YEAR WAS ` 1 07 16 481/-. THE ASSESSEE FILED THE FULL DETAILS OF PURCHASE AT PAGE NO. 43 T O 45 OF THE PAPER BOOK. THE LD. AR HAS FURTHER SUBMITTED THAT THE ASSESSEE HAD MORE THAN 80 SITES AND THE EXPENDITURE IN CASH PER SITE WAS ABOU T ` 1 00 000/-. HE HAS FURTHER SUBMITTED THAT NO SINGLE PAYMENT WAS MORE T HAN ` 20 000/- HENCE NO DISALLOWANCE IS CALLED FOR ON THIS ACCOUNT. FURT HER THE DISALLOWANCE WAS NOT MADE U/S 40A(3) BUT THE AO PROPOSE THE DISALLOW ANCE BY SUSPECTING THE INFLATED EXPENDITURE. HE HAS FURTHER SUBMITTED THAT THE AO HAS CONSIDERED THE FACTS OF ` 54 00 168/- WAS PART OF T HE TOTAL CASH PURCHASE OF ` 82 89 125/- AND ACCORDINGLY NO DISALLOWANCE IS CALLED FOR AS REGARDS ` 54 00 168/-. 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE RELEVANT RECORD WE FIND THAT THE ASSESSEE TOOK STAN D IN THE REMAND PROCEEDINGS THAT THE OUTSTANDING EXPENSES OF ` 54 0 0 168/- IS PART OF ` 82 89 125/- AND THEREFORE THERE WAS DOUBLE ADDITIO N OF THIS AMOUNT. HOWEVER NEITHER THE AO HAS COMMENTED IN THE REMAND REPORT NOR THE CIT(A) HAS GIVEN SPECIFIC FINDING ON THIS FACT. THI S IS A FACTUAL ASPECT WHICH ITA NO.4753/M/2011 ALFA BETA ENGINEERING CONST. PVT. LTD. 8 REQUIRES TO BE VERIFIED BEFORE GIVING SPECIFIC FIND ING ON THIS ISSUE. SINCE THE RELEVANT DETAILS HAVE NOT BEEN PRODUCED BEFORE US TO SHOW THAT THE OUTSTANDING EXPENSES OF ` 54 00 168/- ARE PART OF P URCHASE OF ` 82 89 125/- THEREFORE IT IS NOT POSSIBLE TO GIVE C ONCLUSIVE FINDING ON THIS ISSUE. ACCORDING IN THE INTEREST OF JUSTICE WE REM IT THIS ISSUE TO THE RECORD OF THE CIT(A) FOR GIVING DEFINITE FINDING AFTER VER IFICATION OF THE RELEVANT NECESSARY FACTS WHETHER THE AMOUNT OF ` 54 00 168/- SHOWN AS OUTSTANDING EXPENSES IS PART OF ` 82 89 125/- OR NO T. AS REGARDS THE DISALLOWANCE RESTRICTED TO ` 2 00 000/- BY THE CIT( A) WE FIND THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS JUST AND PROPER. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF OCTOBER 2013 SD/- SD/- ( ) !' (SANJAY ARORA) ACCOUNTANT MEMBER ( $ ) % !' (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 9 TH OCTOBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI