Shri Rameshchandra Varma, Surat v. The Income tax Officer,Ward-8(4),, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 1007/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI VIJAY PAL SINGH SURAT -VS.- INCOME TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 889/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI RAMESH CHANDRA VERMA SURAT -VS.- INCOM E TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 890/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI ROSHANLAL JAIN SURAT -VS.- INCOME TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 1006/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI VIKASH CHANDRA SHARMA SURAT -V S.- INCOME TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 892/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI SURAJ JYOT DAS SURAT -VS.- INCOME TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 1005/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI SHYAM SUNDER SHARMA SURAT -VS. - INCOME TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 891/AHD./2008 ASSESSMENT YEAR : 2002-2003 SHRI SANKET KUMAR SURAT -VS.- IN COME TAX OFFICER WARD-8(4) SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : N O N E RESPONDENT BY : SMT. JYOTI LAXMI SR . D.R. 2 ITA NO. 889-892 & 1005-1007/AHD/2008 O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : ALL THESE APPEALS BELONGED TO DIFFERENT ASSESSES INVOLVED COMMON ISSUE THESE WERE ARGUED BY COMMON LD. REPRESENTATIVE THEREFORE THE SE ARE DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE INVOLVED IN THESE APPEALS IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF A.O. IN MAKING THE ADDITION OF UNEXPLAINE D EXPENDITURE OF LABOUR PAYMENT IN RESPECT OF FOLLOWING ASSESSES AS UNDER :- NAME OF ASSESSEE AMOUNT ASSESSMENT YEAR SHRI VIJAY PAL SINGH RS.34 63 044/- 2002-03 SHRI RAMESHCHANDRA VARMA RS.36 94 925/- 2002-03 SHRI ROSHANLAL JAIN RS.35 97 867/- 2002-03 SHRI VIKASH CHANDRA SHARMA RS.35 09 857/- 2002-03 SHRI SURAJ JYOT DAS RS.35 11 573/- 2002-03 SHRI SHYAM SUNDAR SHARMA RS.38 23 661/- 2002-03 SHRI SANKET KUMAR RS.35 96 722/- 2002-03 3. BRIEFLY STATED THE FACTS ARE THAT ALL THE ASSESS EES FILED THE RETURN OF INCOME WHEREIN THEY HAVE DECLARED THE TOTAL INCOME CLAIMED THE REFUND OF T.D.S. NAME OF ASSESSEE INCOME DECLARED REFUND GRANTED U/S . 143(1) SHRI VIJAY PAL SINGH RS.59 740/- RS.74 690/- SHRI RAMESHCHANDRA VARMA RS.56 790/- RS.78 786/- SHRI ROSHANLAL JAIN RS.57 810/- RS.77 565/- SHRI VIKASH CHANDRA SHARMA RS.57 246/- RS.76 145/- SHRI SURAJ JYOT DAS RS.57 310/- RS.76 100/- SHRI SHYAM SUNDAR SHARMA RS.58 790/- RS.79 820/- SHRI SANKET KUMAR RS.58 714/- RS.77 795/- 3 ITA NO. 889-892 & 1005-1007/AHD/2008 4. THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143 (1) AND GRANTED THE REFUND AS CLAIMED BY VARIOUS ASSESSES IN THEIR RETURN OF INCOME WHIC H INCLUDES INTEREST GRANTED UNDER SECTION 244A OF THE INCOME TAX ACT 1961. SUBSEQUENTLY THE A.O. REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 AND RE-FRAMED THE ASSESSMENT UNDE R SECTION 143(3) READ WITH SECTION 147 WHEREIN HE DISALLOWED THE LABOUR PAYMENTS AND OTHER EXPENSES DEBITED IN THE PROFIT & LOSS A/C. AS STATED IN PARA 9 OF HIS ORDER DATED 29.12.2006 ( SUPRA). 5. ON APPEAL IN THE IMPUGNED ORDERS THE LD. CIT(A) UPHELD THE ACTION OF A.O. AGGRIEVED BY THE ORDER OF LD. CIT(A) ALL THE ASSESSES ARE IN AP PEALS BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US ONE SHRI P.M. JAGASHETH APPEARED CLAIMING TO BE LD. AUTHORIZED REPRESENTATIVE ON BEHALF OF ALL ASSESSES . HE SUBMITTED THAT THE ADDITION UNDER SECTION 69C HAS BEEN MADE WITHOUT APPRECIATING THE ENTIRE E XPENDITURE OR ENTIRE RECEIPT WHICH CANNOT BECOME INCOME OF THE ASSESSEE. ALL OF THE ASSESEES ARE RECEIVING MONEY ON ONE SIDE AND MAKING PAYMENT ON OTHER SIDE TO THE LABOURERS AND THEREFO RE AT BEST THEY COULD BE ASSESSED ONLY ON PROFIT ELEMENT. THE TRIBUNAL HAS IN THE PAST CONS IDERED 3% AS THEIR INCOME. THE LD. A.R. ON AN ALTERNATIVE ARGUMENT SUBMITTED THAT NO VERIFICATION OF EXPENDITURE HAS BEEN DONE AND ADDITION HAS BEEN MADE WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEES. THEREFORE THE MATTER MAY BE RESTORED BACK TO THE FILE EITHER TO T HE LD. CIT(A) OR TO THE ASSESSING OFFICER. 7. ON THE OTHER HAND ON BEHALF OF REVENUE SMT. JYO TI LAXMI SR. D.R. APPEARED AND NARRATED THE FACTS AS UNDER :- (1) THE FACTS OF THE CASE AND GROUNDS OF APPEAL IN THE CASE OF ALL THE SEVEN APPELLANTS ARE COMMON. (2) THE RETURNS OF INCOME WERE FILED BY THE APPELLA NTS CLAIMING REFUND OUT OF TDS CERTIFICATES PURPORTEDLY ISSUED BY M/S. HIGH GRADE INDUSTRIES MUMBAI WHICH WERE DULY PROCESSED AND REFUNDS WERE ISSUED. NO SCR UTINY ASSESSMENT ORDERS WERE PASSED. (3) LATER ON THE TAN NUMBER FOUND MENTIONED IN THE TDS CERTIFICATES WAS FOUND TO BE FICTITIOUS SINCE THE CHARACTER REPRESENTING T HE STATUS OF THE DEDUCTOR WAS FOUND MENTIONED AS I WHICH WAS NON-EXISTENT LEAD ING TO THE RE-OPENING OF THE ASSESSMENTS IN THE APPELLANTS CASES. 4 ITA NO. 889-892 & 1005-1007/AHD/2008 (4) IT WAS ALSO FOUND THAT THE NO TDS AMOUNT HAD BE EN REMITTED TO THE GOVERNMENT ACCOUNT BY THE PURPORTED DEDUCTOR. (5) ON FURTHER ENQUIRY AT THE ADDRESS OF THE DEDUCT OR AS PER THE TDS CERTIFICATES M/S. HIGH GRADE INDUSTRIES MUMBAI IT WAS DENIED B Y THEM THAT THEY HAD ANY KNOWLEDGE ABOUT THE APPELLANTS OR THAT THEY EVER UT ILIZED THE SERVICES OF THE ABOVE APPELLANTS; IT WAS FURTHER SUBMITTED THAT THEY HAVE NOT ISSUED ANY SUCH TDS CERTIFICATES AND IT WAS ALSO POINTED OUT THAT THEIR TAN IS DIFFERENT FROM THE ONE QUOTED IN THE TDS CERTIFICATES IN QUESTION. (6) WHEN THIS WAS BROUGHT TO THE NOTICE OF THE THEN AR OF THE APPELLANTS SHRI J.C. SOMANI CA WHO APPEARED ON THEIR BEHALF BEFORE THE AO A NEW ADDRESS PURPORTED TO BE THAT OF ANOTHER ENTITY CLAIMED TO BE THE DEDUCTOR BUT BEARING THE SAME NAME AS THE FIRST M/S. HIGH GRADE INDUSTRIES W AS FURNISHED AND IN RESPONSE TO THE NOTICE OF THE AO SENT TO THE NEW ADDRESS A CONFIRMATION LETTER WAS ALSO RECEIVED BY POST STATING THAT THE SERVICES OF THE A PPELLANTS WERE INDEED TAKEN AND THAT THE TDS CERTIFICATES WERE ISSUED TO THEM FOR T HE LABOUR SUPPLY. (7) REGARDING THE VARIOUS EXPENDITURE CLAIMS AGAINS T THE PURPORTED INCOME IT WAS SUBMITTED BY THE AR THAT THE PAYMENTS HAD BEEN DIRECTLY MADE BY THE SAID CONCERN M/S. HIGH GRADE INDUSTRIES (2) AND THAT T HE APPELLANTS ONLY ARRANGED FOR SUPPLY OF LABOUR TO THE SAID CONCERN AT VARIOUS SITES. (8) IT WAS SUBMITTED THAT THE APPELLANTS NEITHER RE CEIVED ANY MONEY FROM THE DEDUCTOR NOR MADE ANY PAYMENTS DIRECTLY TO THE LABO URERS BUT ONLY RENDERED THE SERVICES OF ARRANGING FOR SUCH LABOURERS. (9) NO PROOF OF HAVING INCURRED ANY EXPENDITURE WAS EVER PRODUCED AND DETAILS OF LABOURERS SUPPLIED TO THE SAID M/S. HIGH GRADE INDU STRIES (2) WERE ALSO NOT FURNISHED. (10) SINCE THE EXPENDITURE CLAIMS WERE NOT SUBSTANT IATED THE ENTIRE RECEIPTS IN THE HANDS OF THE APPELLANTS AS EVIDENCED BY THE TDS CE RTIFICATES WERE ASSESSED AS INCOME IN THEIR HANDS AND SUBSTANTIAL TAX DEMANDS W ERE RAISED. (11) PENALTY PROCEEDINGS WERE ALSO INITIATED U/S. 2 71 RESULTING IN LEVY OF PENALTY. 7.1. AFTER NARRATING THE AFORESAID FACTS THE LD. D .R. MADE THE FOLLOWING SUBMISSIONS :- (1) DURING THE COURSE OF REOPENED ASSESSMENT PROCEE DINGS NONE OF THE APPELLANTS EVER APPEARED IN PERSON BEFORE THE AO AND EVEN THE SUMMONS ISSUED TO THEM AT THE ADDRESSES GIVEN IN THE RETURNS WERE RETURNED UN SERVED. (2) ON FURTHER SPOT VERIFICATION THROUGH THE ITI I T WAS FOUND THAT EVEN THOUGH THE NAME OF THE PREMISES WAS FOUND TO BE GENUINE THE S TATED FLAT NUMBERS WERE FOUND 5 ITA NO. 889-892 & 1005-1007/AHD/2008 TO BE NON-EXISTENT AND HENCE NONE OF THE APPELLANTS COULD BE TRACED OUT AT THE GIVEN ADDRESS. (3) HUGE DEMANDS RAISED ON ACCOUNT OF TAXES AND ALS O LEVY OF PENALTY REMAIN DIFFICULT TO RECOVER TILL DATE. (4) NOW IN THE PRESENT APPEAL ANOTHER AR SHRI PRA GNESH JAGASETH CA IS REPRESENTING THE APPELLANTS AND IS CONTESTING THE A DDITIONS MADE IN THEIR HANDS. (5) IN ORDER TO SEEK RELIEF ON THE DISALLOWANCE OF ENTIRE EXPENDITURE CLAIMS IN THE APPELLANTS CASE IT IS FOR THE APPELLANTS AR TO PROVE THAT THE APPELLANTS HAD IN FACT CARRIED OUT THE STATED LABOUR CONTRACT WORK WITH M/S. HIGH GRADE INDUSTRIES (2) WITH SUP PORTING DOCUMENTARY EVIDENCES OTHER THAN THE TDS CERTIFICATES AND PROVE THAT THE EXPENDITURES IN QUESTION WERE ACTUA LLY INCURRED WITH SUPPORTING EVIDENCES AS TO THE DETAILS OF SUPPLY OF LABOUR TO THE PRINCIPAL AND THE SITES WHERE THEY WERE SUPPLIED AND THE PAYMENT DETA ILS WITH PROOF. (6) FURTHER IN THE LIGHT OF THE FINDINGS DURING TH E COURSE OF ASSESSMENT PROCEEDINGS WHICH HAVE SERIOUS IMPACT ON THE GENUIN ENESS OF THE TRANSACTIONS IN QUESTION IT IS FOR THE APPELLANTS AR TO PRODUCE THE APPELLANTS IN PERSON BEFORE THE HONBL E TRIBUNAL FOR THEIR PERSONAL HEARING SINCE HE IS THE ONLY PERSON HAVING THE KNOWLEDGE ABOUT THE WHEREABOUTS OF THESE APPELLANTS WHOM HE IS REPRESE NTING AND ALSO TO PROVE THAT THE CLAIMS OF THE APPELLANTS ARE GENUIN E AS TO THE NATURE OF TRANSACTIONS AND ALSO THE PARTIES THERETO. (7) IN THE EVENT OF HIS FAILURE TO DO SO CONSIDERI NG THE BACK GROUND OF THE CASE IT IS PRAYED THAT THE HONBLE TRIBUNAL MAY KINDLY EXER CISE ITS POWER OF SUMMONS TO ENSURE THAT THESE APPELLANTS DO APPEAR BEFORE THE H ONBLE BENCH AND DEPOSE ON THE ISSUES AS SUBMITTED ABOVE. 8. IN BRIEF THE ARGUMENT OF LD. D.R. IS THAT IT IS NOT A CASE OF SIMPLE ADDITION UNDER SECTION 69C BUT A CASE OF FRAUD PLAYED UPON THE REVENUE. T HESE PERSONS IF THEY ACTUALLY EXISTED FILED BOGUS TDS CERTIFICATES CLAIMED THE REFUND FROM THE DEPARTMENT. IN ORDER TO VERIFY THE CLAIM OF EXPENDITURE IF AT ALL IT WAS INCURRED IT IS NECES SARY THAT BOOKS OF ACCOUNTS AND ALL THE BILLS AND VOUCHERS SHOULD HAVE BEEN PRODUCED. IF AT ALL TRANS ACTIONS ARE GENUINE THEN THE EXPENDITURE HAS TO BE PROVED BY THE ASSESSEE. BEFORE THE AO NO EVI DENCE WAS FURNISHED EITHER AS TO THE CLAIM OF RECEIPT OR TO THE CLAIM OF EXPENDITURE. THE AO HAD CARRIED OUT ENQUIRIES FROM THE ALLEGED PAYER 6 ITA NO. 889-892 & 1005-1007/AHD/2008 OF MONEY TO THESE PERSONS I.E. THE PERSON WHO HAS ISSUED THE TDS CERTIFICATES AND FOUND THAT NO SUCH PERSON WHO IS CLAIMED TO HAVE DEDUCTED THE TAX AND ISSUED TDS CERTIFICATES WAS EXISTED. SUBSEQUENTLY WHEN AO ASKED THE LD. COUNSEL APPEARI NG ON BEHALF OF THESE PERSONS TO SUBMIT THE ADDRESS OF THE DEDUCTOR THEN THAT LD. COUNSEL APPE ARING ON BEHALF OF THE ASSESSES SUBMITTED A NEW ADDRESS OF THE DEDUCTOR AND REQUESTED THE AO TO MAK E VERIFICATION. A LETTER WAS RECEIVED WHICH STATED THAT ALL THE EXPENDITURES WERE DIRECTLY MADE TO THE LABOURERS AND AS SUCH NO SUCH PAYMENT WAS DIRECTLY MADE TO THE ASSESSES. HOWEVER ISSUANC E OF TDS CERTIFICATES TO THE ASSESSES WAS CONFIRMED. ON FURTHER VERIFICATION BY THE AO IT WA S FOUND THAT NO PAYMENT OF TDS AS CLAIMED IN THE TDS CERTIFICATES HAS BEEN MADE TO THE GOVERNMEN T TREASURY. THUS ENTIRE CLAIM OF REFUND THROUGH THESE TDS CERTIFICATES IS NOT GENUINE. THER EFORE THE QUESTION OF ALLOWING CLAIM OF EXPENDITURE SHOULD NOT HAVE RISEN AND ACCORDINGLY T HE AO WAS JUSTIFIED IN TREATING THE ENTIRE SUM AS ASSESSEES DEEMED INCOME UNDER SECTION 69C OF TH E INCOME TAX ACT. 9. AT THE REQUEST OF LD. A.R. THE CASES WERE ADJOU RNED FOR THE NEXT DATE SO AS TO FIND OUT THE IDENTITY OF THE PERSONS WHO HAVE CLAIMED THE REFUN D. THE NEXT DATE I.E. ON 25.05.2010 THE LD. AR FOR THE ASSESSES SUBMITTED THAT A LETTER OF AUTH ORITY PURPORTED TO BE SIGNED BY ONE SHRI VIJAY PAL SINGH CLAIMED TO BE ONE OF THE ABOVE ASSESSES. THIS LETTER OF AUTHORITY WAS UNDATED BUT WAS IN THE NAME OF P. JAGASHETH CA BEING THE REPRESENT ATIVE ARGUING ON BEHALF OF ALL THE ABOVE ASSESSES. THE LD. D.R. THEN EXAMINED THE LETTER OF AUTHORITY AND POINTED OUT THAT SIGNATURE ON LETTER OF AUTHORITY PURPORTED TO BE THAT OF SHRI VI JAY SINGH ONE OF THE ASSESSES AND THE SIGNATURE ON FORM NO. 36 PURPORTED TO BE SIGNED BY SHRI VIJAY PAL SINGH WAS ENTIRELY DIFFERENT AND THEREFORE SHE SUBMITTED THAT IDENTITY OF THESE PER SONS IS NOT ESTABLISHED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW THESE ASSESSES IF THEY ACTUALLY EXIST HAVE NOT PROVED EITHER BEFORE THE AO OR CIT(A) BY PRODUCING NECESSARY DOCU MENTS AND VOUCHERS FOR VERIFYING THE CLAIM OF EXPENSES INCURRED. THERE IS MATERIAL ON RE CORD AS POINTED OUT BY THE LD. D.R. THAT THE ALLEGED DEDUCTOR OF TAX NAMELY M/S/ HIGH GRADE IND USTRIES HAS NOT ACTUALLY PAID ANY TDS ALLEGED TO BE DEDUCTED TO THE ACCOUNT OF THE CENTR AL GOVERNMENT. THIS INDICATES THAT TDS CERTIFICATES SO PRODUCED BY THESE PERSONS ON WHICH REFUND WAS CLAIMED IS NOT GENUINE. THEREFORE 7 ITA NO. 889-892 & 1005-1007/AHD/2008 IT BECOMES NECESSARY THAT ALL THESE PERSONS SHOULD APPEAR BEFORE THE LD. CIT(A) PERSONALLY AND EXPLAINED THE RECEIPTS AND EXPENDITURE WITH NECESSA RY BOOKS OF ACCOUNTS BILLS AND VOUCHERS. 10.1. SHRI P. JAGASHETH LD. COUNSEL SUBMITTED THAT WHATEVER REFUND OBTAINED BY THE ABOVE PERSONS HAS BEEN RE-DEPOSITED BACK TO THE GOVERNMEN T TREASURY AS TAXES. THEREFORE CLAIM OF ANY ALLEGED TAX REFUND AGAINST THEM SHOULD NOT BE ANY M ORE MADE AND THE MATTER SHOULD BE DECIDED ON THE GROUNDS RAISED BY ALL OF ASSESSES IN ACCORDA NCE WITH LAW. 11. LOOKING TO THE PECULIAR FACTS IN OUR OPINION IT WILL MEET THE END OF JUSTICE IF THE IMPUGNED ORDER OF LD. CIT(A) IN RESPECT OF ALL THES E ASSESSES IS SET ASIDE AND THE MATTER IS REMANDED TO HIM AFRESH WITH THE DIRECTION THAT ALL THESE ASSESSES WILL PERSONALLY APPEAR BEFORE THE LD. CIT(A) EXPLAIN THEIR CASE WITH NECESSARY E VIDENCES. THE LD. CIT(A) WILL DECIDE ALL THE APPEALS AFRESH IN ACCORDANCE WITH LAW. 12. AS A RESULT FOR STATISTICAL PURPOSES ALL THE APPEALS FILED BY THE ASSESSEES ARE TREATED AS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 28.05.2010 . SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 / 05 /2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.