ACIT 25(3), MUMBAI v. SHARAD S. PALANDE, MUMBAI

ITA 6426/MUM/2009 | 2006-2007
Pronouncement Date: 16-09-2011 | Result: Allowed

Appeal Details

RSA Number 642619914 RSA 2009
Assessee PAN AHKPP8699F
Bench Mumbai
Appeal Number ITA 6426/MUM/2009
Duration Of Justice 1 year(s) 9 month(s) 2 day(s)
Appellant ACIT 25(3), MUMBAI
Respondent SHARAD S. PALANDE, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted H
Tribunal Order Date 16-09-2011
Date Of Final Hearing 08-09-2011
Next Hearing Date 08-09-2011
Assessment Year 2006-2007
Appeal Filed On 14-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI P.M. JAGTAP ACCOUNTANT MEMBER I.T.A. NO. 6426/MUM/2009. ASSESSMENT YEAR : 2006-07. ASSTT. COMMISSIONER OF INCOME-TAX SHARAD S. PALANDE 25(3) MUMBAI. VS. 2 MISHRA CHAWL GAONDEVI RD KANDIVALI (EAST) MUMBAI 400101. PAN AHKPP 8699F. APPELLANT. RESPONDENT. APPELLANT BY : SHRI V.V. SHASTRI. RESPONDENT BY : SHRI MANDAR VAIDYA. DATE OF HEARING : 08-09-2011 DATE OF PRONOUNCEMENT :16-09-2011. O R D E R. PER P.M. JAGTAP A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-35 MUMBAI DATED 30-09-2009 WHEREBY HE DELETED THE ADDITION OF RS.86 03 241/- BY WAY OF DISALLOWANCE MADE OUT OF L ABOUR CHARGES U/S 40A(3). 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS CARRYING ON THE BUSINESS AS A LABOUR CONTRACTOR UNDER THE NAME AND STYLE OF HIS FOUR PROPRIETARY CONCERNS M/S SHREE SIDDESHWAR ENTERPRISES M/S SHRE E SIDDHI VINAYAK ENTERPRISES M/S SAI SAGAR ENTERPRISES AND M/S SHR EE MAHALAXMI ENTERPRISES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY HIM ON 31-10-2006 DECLARING TOTAL INCOME OF RS.17 91 870/-. AS NOTED BY THE AO IN THE ASSESSMENT 2 ITA NO.6426/MUM/2009 ASSESSMENT YEAR : 2006-07. ORDER THE AO FOUND ON VERIFICATION OF PROFIT & LOS S ACCOUNT OF ALL HIS PROPRIETARY CONCERNS FILED ALONG WITH THE RETURN OF INCOME THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS.4 30 16 207/- TOWARDS LABOUR CHARGES. ON PER USAL OF THE DETAILS OF THE SAID LABOUR CHARGES FURNISHED BY THE ASSESSEE THE AO FO UND INTER ALIA THAT THE LABOUR CHARGES WERE PAID BY THE ASSESSEE IN CASH IN THE SU MS EXCEEDING RS.20 000/-. HE THEREFORE INVOKED THE PROVISIONS OF SECTION 40A(3) AND MADE A DISALLOWANCE OF RS.86 03 241/- BEING 20% OF THE TOTAL PAYMENT MADE BY THE ASSESSEE ON ACCOUNT OF LABOUR CHARGES IN CASH IN THE SUMS EXCEEDING RS.20 000/-. 3. THE DISALLOWANCE MADE BY THE AO U/S 40A(3) WAS C HALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT( APPEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(APPEAL S) IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE AMOUNT OF RS.4 30 16 207/- ACTUALLY REPRESENTED LABOUR CHARGES RECEIVED BY THE ASSESSEE AND IT WAS NOT THE AMOUNT OF LABOUR CHARGES PAID AS MISTAKEN BY THE AO. IT WAS ALSO SUBMITTED THAT E XPENDITURE AGAINST THE SAID INCOME RECEIVED IN THE FORM OF LABOUR CHARGES WAS A CTUALLY INCURRED BY THE ASSESSEE IN THE FORM OF SALARY PAID TO THE LABOURS/ WORKERS EMPLOYED BY HIM AND THE PAYMENT MADE TO THE SAID LABOURS/WORKERS IN CASH NE VER EXCEEDED RS.20 000/- AT A TIME. THE SALARY/WAGES REGISTER MAINTAINED BY THE A SSESSEE WAS ALSO PRODUCED BEFORE THE LEARNED CIT(APPEALS) TO SUPPORT AND SUBS TANTIATE THE SAID STAND. 4. THE LEARNED CIT(APPEALS) FOUND MERIT IN THE SUBM ISSION OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF LABOUR CHARGES U/S 40A(3) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 3. 2 OF HIS IMPUGNED ORDER : I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESEN TATIVE STAND TAKEN BY THE A.O. AND THE CASE RECORDS. ADMITTEDLY THE AP PELLANT MAINTAINED REGULAR BOOKS OF ACCOUNTS FOR ALL THE FOUR PROPRIET ARY CONCERNS AND FILED TAX AUDIT REPORTS ALONGWITH RETURN OF INCOME AS PER WHI CH COLUMN NO. 17(H)(B) OF FORM 3CD SHOWS THAT NO DISALLOWANCE WAS LIABLE T O BE MADE U/S.40A(3) 3 ITA NO.6426/MUM/2009 ASSESSMENT YEAR : 2006-07. OF THE I.T. ACT. FURTHER AS SEEN FROM THE RECORDS T HE A.O. NEVER PROPOSED TO INVOKE SECTION 40A(3) AND THERE IS NO INDICATION TO SHOW THAT THE A.O. ISSUED SHOW CAUSE NOTICE ON THIS POINT. IT IS ALSO SEEN FR OM THE ORDER SHEET ENTRY DATED 10-11-2008 THAT HE HAS REQUIRED THE APPELLANT TO FILE CERTAIN OTHER DETAILS BUT THERE IS NO MENTION OF DISALLOWANCE U/S 40A(3). THUS I ACCEPT THE PLEA OF THE REPRESENTATIVE THAT THE A.O. BASED ON T HE LEDGER ACCOUNT ON HIS OWN ASSUMPTION MADE ADDITION U/S 40A(3) WITHOUT EVE N INFORMING THE APPELLANT. FURTHER AS CONTENDED BY THE REPRESENTATI VE THE APPELLANT HAS CREDITED THE LABOUR CHARGES RECEIVED FROM M/S INTER GOLD M/S INTER DIAMOND INTERNATIONAL GOLD LUCKY & SUNFLOWER UNDE R THE HEAD LABOUR CHARGES WHEREAS THE PAYMENTS MADE ARE BOOKED UNDER THE HEAD DIRECT EXPENSES WITH THE SUBTITLE SALARY AND WAGES. THE APPELLANT HAS NOWHERE USED THE WORD LABOUR CHARGES SOS FAR AS PAYMENTS AR E CONCERNED. HOWEVER THE A.O. HAS CLEARLY MENTIONED IN THE ASSESSMENT OR DER THAT THE APPELLANT PAID LABOUR CHARGES WHICH ITSELF SHOWS THAT THE A.O . DID NOT EXAMINE THE BOOKS OF ACCOUNTS AND OTHER DETAILS FILED BY THE AP PELLANT CAREFULLY BUT MADE ADDITION IN THE LAST MINUTE BASED ON HIS OWN ASSUMP TION SURMISES AND CONJECTURES. FURTHER AS CONTENDED BY THE REPRESENTA TIVE THE AMOUNT DEBITED UNDER THE HEAD SALARY AND WAGES IN THE LEDGER REP RESENTS PAYMENT OF SALARY FOR THE ENTIRE MONTH TO ALL THE EMPLOYEES WHICH EXC EEDED RS.20 000/- BUT A PERUSAL OF SALARY/WAGES REGISTER INDICATES THAT THE PAYMENT MADE TO EACH EMPLOYEE WAS LESS THAN RS.20 000/- IN A PARTICULAR MONTH. THE A.O. HIMSELF HAS RECORDED THAT AS SEEN FROM THE LEDGER COPY OF L ABOUR CHARGES THE PAYMENT WAS MORE THAN 20 000/-. HE OMITTED NTO CONS IDER THE FACT THAT WHAT WAS DEBITED UNDER THE HEAD SALARY AND WAGES IN TH E LEDGER WAS THE TOTAL PAYMENT FOR THE WHOLE MONTH IN RESPECT OF ALL THE E MPLOYEES. AS PER DETAILS IN THE SALARY AND WAGES REGISTER THE PAYMENT TO A PARTICULAR EMPLOYEE DID NOT EXCEED RS.20 000/- AND THEREFORE THERE IS NO CASE FOR ADDITION U/S. 40A(3). THE A.O. HAS FURTHER REMARKED THAT THE NAME AND ADDRESS OF THE PERSON TO WHOM THE PAYMENT MADE WAS NOT FURNISHED B UT THE FACT REMAINS THAT THE APPELLANT HAS MAINTAINED SALARY/WAGES REGI STER AND PAID ALL THE STATUTORY DUES LIKE PF ESIC PT WHICH FORMS PART O F THE REGULAR BOOKS OF ACCOUNT AND AUDITED U/S 44AB AND THERE IS NO SPECIF IC QUERY RAISED BY THE A.O. REQUIRING THE APPELLANT TO FURNISH NAME AND AD DRESS OF THE EMPLOYEES EVEN AS PER ORDER SHEET DATED 10-11-2008. THUS I F IND THAT THE A.O. FOR THE SAKE OF MAKING ADDITION MADE THIS OBSERVATION IN TH E ASSESSMENT ORDER. WHEN THE APPELLANT RECEIVED LABOUR CHARGES IT IS N ECESSARY THAT HE HAS TO EXECUTE THE WORK BY EMPLOYING DIFFERENT PERSONS TO WHOM SALARY AND WAGES HAVE BEEN PAID AND NECESSARY REGISTERS HAVE BEEN MA INTAINED AND THE A.O. 4 ITA NO.6426/MUM/2009 ASSESSMENT YEAR : 2006-07. WITHOUT EXAMINING THEM MADE THIS ADDITION IN AN ARB ITRARY MANNER VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. IN THE CIRCUMSTA NCES I HOLD THAT THERE IS NO JUSTIFICATION FOR ADDITION U/S 40A(3) OR OTHERWISE AND DELETE THE SAME. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE AS ABOVE THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A SPECIFIC FINDING WAS RECORDED BY THE AO IN THE ASSESSMENT ORDER ON VERIFICATION OF THE PROFIT & LOSS ACCOUNT AS WELL AS OTHER DETAILS FILED BY THE ASSESSEE THAT LABOUR CHARGES A MOUNTING TO RS.4 30 16 207/- WERE INCURRED BY THE ASSESSEE AND PAYMENTS THEREOF WERE MADE IN CASH IN THE SUMS EXCEEDING RS.20 000/-. ON THE BASIS OF THESE FINDIN GS A DISALLOWANCE OF RS.86 03 241/- BEING 20% OF THE TOTAL LABOUR CHARGE S PAID BY THE ASSESSEE IN CASH WAS MADE BY THE AO BY INVOKING THE PROVISIONS OF SE CTION 40A(3). BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE DISPUTED THESE F INDINGS RECORDED BY THE AO BY SUBMITTING THAT THE AMOUNT OF RS.4 30 16 207/- REPR ESENTED LABOUR CHARGES RECEIVED BY HIM AND IT WAS NOT THE PAYMENT OF LABOUR CHARGES AS STATED BY THE AO IN THE ASSESSMENT ORDER. IT APPEARS THAT THIS STAND OF THE ASSESSEE HAS BEEN ACCEPTED BY THE LEARNED CIT(APPEALS) WITHOUT GIVING ANY OPPORTUNITY TO THE AO TO VERIFY THE SAME ESPECIALLY WHEN THE FINDING SPECIFICALLY RECORDED B Y THE AO IN THE ASSESSMENT ORDER WERE CONTRARY TO THE SAID STAND. AS PER THE D IRECTION GIVEN BY US THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED BEFORE US THE EX TRACTS OF LEDGER ACCOUNTS OF LABOUR CHARGES WHICH SHOWS THAT THE TOTAL LABOUR CH ARGES RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ARE RS.4 55 09 857/- WHEREAS THE AMOUNT OF LABOUR CHARGES TAKEN BY THE AO IN THE ASSESSMENT OR DER IS RS.4 30 16 207/-. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO OFFER ANY SATISFACTORY EXPLANATION IN RESPECT OF THIS DIFFERENCE. EVEN THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AS WEL L AS BEFORE US TO THE EFFECT THAT 5 ITA NO.6426/MUM/2009 ASSESSMENT YEAR : 2006-07. NONE OF THE CASH PAYMENTS MADE ON ACCOUNT OF LABOUR CHARGES TO THE LABOURS /WORKERS EXCEEDED A SUM OF RS.20 000/- AT A TIME IN OUR OPINION NEEDS VERIFICATION BY THE AO AS THE RELEVANT EVIDENCE IN THE FORM OF SALARY/WAGES REGISTER WAS PRODUCED BY THE ASSESSEE BEFORE THE LEARNED CI T(APPEALS) FOR THE FIRST TIME. THE LEGAL POSITION ON THIS ISSUE RELATING TO DISALL OWANCE U/S 40A(3) MAY BE WELL SETTLED AS SOUGHT TO BE CONTENDED BY THE LEARNED CO UNSEL FOR THE ASSESSEE RELYING ON THE VARIOUS JUDICIAL PRONOUNCEMENTS. HOWEVER IN OR DER TO CORRECTLY APPLY THE SAID LEGAL POSITION IN THE ASSESSEES CASE THE MATERIAL FACTS ARE REQUIRED TO BE VERIFIED FROM THE RELEVANT RECORD. WE THEREFORE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER VERIFYI NG THE RELEVANT FACTS FROM RECORD AND APPLYING THE LEGAL POSITION EMANATING FROM THE RELEVANT JUDICIAL PRONOUNCEMENTS ON THE ISSUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED ON THIS 16 TH DAY OF SEPT. 2011. SD/- SD/- (R.V. EASWAR) (P.M. J AGTAP) PRESIDENT. ACC OUNTANT MEMBER MUMBAI DATED: 16 TH SEPT. 2011. 6 ITA NO.6426/MUM/2009 ASSESSMENT YEAR : 2006-07. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR H-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. WAKODE