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2015 (9) TMI 135 - ITAT AHMEDABAD

2015 (9) TMI 135 - ITAT AHMEDABAD - TMI - Undisclosed turnover difference in Gross Receipts - CIT(A) deleted part addition - Held that:- CIT(A) after considering the submissions of the assessee and the remand report, restricted the addition to the extent of ₹ 9,68,951/-. During the assessment proceedings, the AO admittedly not called for the veracity of the letter of M/s. Ankur Textiles, however, on the basis of conjectures & surmises, submitted the remand report. Therefore, the Revenue ha .....

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the basis of estimation to the extent of 20% of the expenditure. The AO has not given any basis on which he has based his finding to disallow at 20% of the expenditure on estimate basis. In our considered view, if the payment is bogus, it would be 100%. The ld.CIT(A) has given his finding on the fact that the PAN furnished during the appellate proceedings was found to be correct. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A) since the Revenue has not pl .....

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f Books of Account - Held that:- CIT(A) has not decided the ground while passing appellate order. The ld.CIT(A) has held that the ground would be covered in subsequent grounds while deciding the merits of the addition because of the appellant stated that the book results were rejected. Under these facts, we are of the considered view that the ld.CIT(A) ought to have given a speaking order.

Addition of alleged bogus labour payments - Held that:- The contention of the assessee is that .....

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rvision charges - Held that:- The authorities below have disallowed the expenditure on the basis that vouchers are self-made and unverifiable. However, there is no finding from both the authorities as to what efforts were made for verifying the same and whether the payments made to the persons were called for examination is not clear from the order. Therefore, we hereby direct the AO to delete both the disallowances. - Decided in favour of assessee. - I.T.A. No.2648/Ahd/2011, I.T.A. No.2490/Ahd/ .....

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disposed of by way of this consolidated order for the sake of convenience. 2. First, we take up the Revenue s appeal in ITA No.2648/Ahd/2011 for AY 2008-09. The Revenue has raised the following grounds of appeal:- 1) The Ld.Commissioner of Income-tax(Appeals)-XV, Ahmedabad has erred in law and on facts in restricting the addition to the extent of ₹ 9,68,951/- and granting relief of ₹ 27,43,711/- on account of undisclosed turnover difference in Gross Receipts. 2) The Ld.Commissioner o .....

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ficer. 5) It is therefore, prayed that the order of the Ld.Commissioner of Income-Tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored. 2.1. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 27/12/2010, thereby the Assessing Officer (AO in short) made addition on accou8nt of difference in gross .....

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and deleted the balance amount. Further, the ld.CIT(A) upheld the disallowance of labour payments of ₹ 11,50,254/- and deleted the disallowance of labour payments of ₹ 15,52,560/- and confirmed the addition(s) of ₹ 5,000/- and ₹ 20,000/- made on account of adhoc disallowance of expenditure. Against the order of the ld.CIT(A), now the Revenue and the Assessee both are in cross-appeals before us. 3. First ground of Revenue s appeal is against restricting the addition of &# .....

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t the assessee carried out construction work of M/s. Ankur Textiles (a division of Arvind Textiles), which was doing for last several years. It was submitted before the authorities below that the difference occurred because of the contra entries passed by M/s. Ankur Textiles. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact by observing as under:- 4. Ground .....

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nd stated the difference occurred because of the contra entries of ₹ 28,87,363 passed by Ankur Textiles. The AO objected to the submission stating that the contra entries plea taken by the appellant is not proved. When this objection was made available to the appellant it furnished a certificate from Ankur Textiles dated 30.06.2011 in which Ankur Textiles confirmed that gross receipts of ₹ 1,80,14,905 were credited to the account of the appellant which included service tax and actual .....

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al submissions it is seen that gross receipts credited to the appellant as per certificate of Ankur Textiles come to ₹ 1,80,14,905 whereas the appellant is showing ₹ 1,70,45,954, difference of ₹ 9,68,951 is not satisfactorily explained therefore the addition is retricted to ₹ 9,68,951 (Rs.1,80,14,905 - ₹ 1,70,45,954). 4.1. During the appellate proceedings, the assessee filed a letter from M/s. Ankur Textiles dated 30/06/2011 (Annexure-I to the appellate order). This .....

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l receipts of ₹ 2,07,58,616/- contractee has passed contra entry of ₹ 28,87,363/- which is impossible as Arvind Textile is a big and old Group who has appointed good accountant who cannot make such type of mistakes i.e. huge amount of ₹ 28,87,363/- for which he has passed contra entries. These contra entries are contract receipts but nothing else. The certificate now produced before your honour is only to accommodate the assessee. Further, during the course of assessment procee .....

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entries and reconciliation vide order sheet date 7/12/2010. Till the date of assessment order the assessee had not come forward with the explanation. Before your honour the assessee has furnished same copy of ledger account which is submitted at the time of assessment proceedings. Thus, the AO had made addition on this point after thorough investigation. The assessee has also failed now to narrate the particulars of contra entry. 4.2. The ld.CIT(A) after considering the submissions of the assess .....

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e absence of such finding by the AO, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue s appeal is rejected. 5. Ground No.2 of Revenue s appeal is against deletion of disallowance of ₹ 15,52,560/- made by the AO on account of bogus labour payments. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the addition. He placed reliance on the order of the AO. 5.1. On the contrary, the ld.counsel for th .....

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given a finding on fact by observing as under:- Ground No.4 is that the ld. AO erred in making the addition of ₹ 15,52,560 as alleged bogus labour payments. The addition has been made as per narration given in para 3.7.4 of the assessment order on the ground that PAN given for some labour payments are not reliable as according to the AO wrong PAN was furnished for one Contractor & Sons. The AO disallowed 20% of ₹ 79,77,371 (Rs.91,27,625 (total labour payment) - ₹ 11,50,254 .....

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as R Contractor which is enclosed as Annexure-2 of this order. In the remand report the AO reiterated the stand taken in the assessment order. As the PA furnished during appellate proceedings is found correct in my view there is no justification for disallowing 20% of labour payments with PAN merely on a presumption which is found wrong. 6.1 The AO had made disallowance of labour payments on the basis of estimation to the extent of 20% of the expenditure. The AO has not given any basis on which .....

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f Revenue s appeal is against admitting the additional evidences in violation of Rules 46A of the IT Rules, 1962. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the additional evidences. 7.1. On the contrary, ld.counsel for the assessee submitted that assessee has explained before the ld.CIT(A) in respect of filing the letter dated 30/06/2011. He submitted that under these facts, there is no violation of Rules 46A. 8. We have heard the rival submissions, perused the mate .....

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is dismissed. 11. Now, we take up the assessee s appeal in ITA No.2490/Ahd/2011, for AY 2008-09, wherein the following grounds have been raised:- 1. Rejection of Books of Account: 1.1. The learned CIT(A) has erred in law and on facts in upholding the rejection of audited books of accounts by invoking provisions of section 145(3) of the Income tax Act, 1961. 1.2. The learned CIT(A) has erred in not appreciating the fact that in absence of any fault with books of accounts or the method of account .....

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lant. The learned CIT(A) omitted to consider the Service tax receipts of ₹ 966237/- and thereby erred in sustaining the impugned addition. 2.3. The learned CIT(A) erred in sustaining the impugned addition without appreciating the fact that the receipts of Ankur Textiles re fully reconciled and tallied. 3. Addition of ₹ 1150254/- as alleged bogus labour payments: 3.1. The ld.CIT(A) ha erred in law and on facts in confirming the addition of ₹ 1150254/- as alleged bogus labour pay .....

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g full particulars of work done and the rate of payment. The labour payments are fully vouched. The identity of labourors is proved. Under the circumstances the addition cannot be made. 3.4. Both the lower authorities overlooked the fact that in most of the cases labour payments are made by account payee cheques but exceptionally in few cases payment is made by bearer cheques. As a result the impugned addition is wholly unjustified. 4. Adhoc disallowance of ₹ 5000/- out of Machine Repairs: .....

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the appellant has already furnished the proofs of the expenses in the paperbook. PRAYER The Appellant respectfully prays that: 1. The books of accounts be accepted. 2. The addition of ₹ 968951/- as unaccounted work receipt of Ankur Textiles be deleted. 3. The addition of ₹ 1150254/- as bogus labour payments be deleted. 4. The adhoc disallowance of ₹ 5000/- out of Machine Repairs be deleted. 5. The adhoc disallowance of ₹ 20000/- out of Supervision Charges be deleted. 6. .....

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As a result the additions which have been made to the returned income must be held no nest in law. The book result therefore be accepted. 1.2 The learned A.O. erred in law and on facts in making various additions purely on conjectures and surmises without any material or basis and as such the said additions are required to be deleted. 11.2. However, the ld.CIT(A) has not decided the ground while passing appellate order. The ld.CIT(A) has held that the ground would be covered in subsequent ground .....

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he ld.counsel for the assessee, ground Nos.2 to 2.3 are dismissed as not pressed. 13. Ground Nos.3.1 to 3.3 are against confirmation of addition of alleged bogus labour payments. The ld.counsel for the assessee submitted that the authorities below have grossly erred in making the impugned addition as there are no evidences to show that the payments to labourers having no PAN are bogus. Nothing was brought on record to show that any part of the amount given by the appellant to such labourers came .....

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bour payment with no PAN shows that cash had been withdrawn by persons other than the persons in whose name expenses had been debited. The AO has stated in para 3.7.2 that the existence of labour - Rameshbhai Rupabhai, Dilipbhai Devjibhai and Laxmanbhai Bhurabhai could not be proved by the assessee. He submitted that in these circumstances, the authorities below were justified in making the addition and confirming the same. 14. We have heard the rival submissions, perused the material available .....

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e are as under:- Submissions: 3.1 With a view to verify the labour payments the learned A.O. called upon the appellant to furnish complete details of the labour payments which were examined with the Cash book, Bank book, Labour vouchers and Bank statements. 3.2 While examining the labour vouchers the learned A.O. observed that in some of the cases where payments are made by bearer cheques there is no PAN or address of the labourer. The learned A.O. therefore obtained photocopies of seven voucher .....

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r and the rate of payment. The labour payments are fully vouched and are audited. Regarding signature of the labourer the appellant furnished its explanation vide letter dated 23-12-2010. Kindly refer page no. 302. (b) The appellant further explained that it is customary and normal trade practice to issue bearer cheques to the labourers and it is not within the. power of appellant to enforce that the labourer himself must encash the cheque. It is also not within the power of appellant to find ou .....

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d jumped to the following assumptions: (a) It is very clear that labour payments to those not having PAN are drawn by the person other than drawee's name. (b) Labour payments having no PAN and no address are completely unverifiable. (c) The assessee has not furnished any evidence or detail to establish the existence of Rameshbhai, Rupabhai, Dilipbhai Devjibhai and Laxmanbhai Bhurabhai. (d) It can safely be concluded that labour payments to payees not having PAN are unverifiable and definitel .....

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673425 Payment through "self cheque 31807 705232 Net payment 1348967 TDS 15858 Gross payment 1364825 Kindly refer page nos. 90 to 94. Annexure-4 Correct Total 1122579 Payment with PAN 3025 Payment through a/c. payee cheques 655557 Payment though bearer cheques 447442 Payment through self cheques 16555 1122579 Kindly refer page nos. 98 to 101. 3.7 The appellant respectfully submits that there are no evidences to show that the payments to labourers having no PAN number are bogus. Nothing was .....

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s: (a) That all the labour payments are fully supported by the bills certified by the site engineer / supervisor showing foil particulars of work done by the labourer and the rate of payment. The labour payments are fully vouched and are audited. (b) That in the construction work there is involvement of labourers who are illiterate, casual or migratory. In such cases there may not be PAN or address of the labourers. (c) That in most of the cases labour payments are made by account payee cheques .....

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appellant had shown bogus labour payments of ₹ 1150254/-. Under these circumstances the learned A.O. is not justified in doubting the genuineness of the labour payments made by the appellant merely on the basis that the labourers do not have PAN. 3.10 The appellant respectfully relies on the following direct decisions in support of the contention that the impugned addition is wholly unjustified. (a) COMMISSIONER OF INCOME TAX vs. M. K. BROTHERS [In the Gujarat High Court] 163 ITR 249 (Guj) .....

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the ld. AO erred in making the addition of ₹ 11,50,254 as alleged bogus labour payments. The addition has been made as per para 3.7.3 of the assessment order. The AO has stated that the list furnished in support of labour payment with no PAN shows that cash had been withdrawn by persons other than the persons in whose name expenses had been debited. The AO has stated in para 3.7.2 that the existence of labour - Rameshbhai Rupabhai, Dilipbhai Devjibhai and Laxmanbhai Bhurabhai - could not b .....

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45,425 by account payee cheuqes, but then why should not the appellant be in a position to furnish the address of this person at least. Despite opportunities addresses of persons were not furnished to whom labour payments totalling to ₹ 11,50,254 (lists enclosed with the assessment order) had been made during the year on the pretext that labour keep changing. In this background the disallowance made by the AO of cash labour payments not proved out of ₹ 91,27,625 labour expenses clai .....

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