TMI Blog2016 (1) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... t inclined to interfere with the finding of the CIT(A) because only after analyzing the facts of the case he rightly restricted the disallowance to ₹ 42,709/- instead of ₹ 1,14,622/-. Addition on account of labour charges - HELD THAT:- CIT(A) correctly observed that AO has not made any specific observation that labour expenses made by the assessee were not genuine. The labour charges debited are as per the Audit Report under section 44AB submitted before the Assessing Officer along with the return of income. Assessing Officer has not pointed out any specific defect in the details even in respect of a single party. Even the Assessing Officer did not issue any show cause notice to the assessee before making addition to the total income of the assessee. In view of this, Assessing Officer was not justified in disallowing the same by observed that the same were made in cash. In fact, in such business labor expenses are made in cash, Assessing Officer has not made out any case as to whether cash payment were in excess of ₹ 20,000/- and were hit by provisions of section 40(A)(3) of the Act. In case that transaction was found to be genuine and identity of payee was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed factual finding of CIT(A) need no interference from our side. Addition in respect of agricultural income - HELD THAT:- We find that the income the income assessed under the head income from other sources has rightly been deleted by CIT(A) because similar income has been consistently accepted by Assessing Officer in past and there is no change in the facts and circumstances of the case. Even the agricultural holding of the assessee has not been disputed. Under the facts and circumstances, the Assessing Officer was not justified in deviation from the earlier stand of Revenue in this regard without bringing any changed circumstances for this addition. Accordingly, in the aforecited facts and circumstances, CIT(A) has rightly deleted the addition. Unexplained expenditure u/s 69C - Bogus purchases - HELD THAT:- In this case, during the assessment proceedings it came to the notice of the Assessing Officer that in the relevant assessment year the assessee had made certain purchases from some parties, who were not available to cross-examine for the genuineness of the above purchases. It was found by the Assessing Officer that though the purchases were claimed to have been ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -14. This cannot be basis for making any addition or disallowance by the Assessing Officer in AY 2010-11. The authenticity of source of such article has not been independency investigated by the Assessing Officer in the case of proprietorships concern of the assessee namely M/s. Ratansingh Bros. No other reason has been brought on record by the Assessing Officer to substantiate adverse conclusion against the assessee. Assessing Officer has not taken any personal initiative except issuing notices u/s 133(6) of the Act to ascertain the genuineness of the purchases in question. CIT(A) found from the records produced before him by the assessee that the purchases made could not be said to be not genuine. If the Assessing Officer has not made any effort to rebut the assessee's claim about the genuineness of the purchases, the assessee cannot be made for such lapse. Therefore, in our opinion, the CIT(A) was justified in deleting the addition. - ITA Nos. 3717 & 5297/Mum/2013 - - - Dated:- 13-1-2016 - SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri Chandra Vijay For The Respondent : Shri D.C. Sejpal ORDER PER SHAILENDRA KUM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Flats ₹ 3,43,630/- Less 30% Int. u/s 24(a) ₹ 1,03,008/- Deemed let out income ₹ 2,40,352/- Thus the Assessing Officer disallowed ₹ 2,40,352/- on account of deemed let out income and added back the same to the income of the assessee. 4.1 In appeal the CIT(A) observed that this issue also arose in 2008-09 in assessee s on case and part relief was granted by CIT(A) by observing as under: - I. Have considered the submissions of representative and the stand taken by the A.O. The A.O. merely stated in the assessment order that the appellant was confronted on this issue and he agreed for addition. If that is the case the A.O. should have mentioned the letter or order sheet entry by which the appellant was confronted and the manner of agreement by the assessee either in the form of letter or by signing in the order sheet. In the absence of the above, I accept the plea of the representative that the addition was made without giving opportunity to the appellant violating the principles of natural justice. A perusal of the case records submitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 2,22,352/- (₹ 2,40,352 - ₹ 18,000) was directed to be deleted. This reasoned finding of CIT(A), whereby he granted partial relief to the assessee, need no interference from our side. We uphold the same. 5. Next issue is with regard to restricting addition of ₹ 1,14,622/- under section 14A r.w. Rule 8D. The Assessing Officer has disallowed ₹ 1,14,622/- vide para k of the assessment order. While doing so the Assessing Officer relied on the judgement of Chem Investment Ltd. vs. ITO 317 ITR 86 (AT) (Del) and Daga Capital Management Pvt. Ltd. 9TA No. 8057/Mum/2003. The Assessing Officer calculated the disallowance under section 14A which is reproduced as under: - From the record it is seen that the investments which generates exempt income has been made out of his personal account and he has not claimed any expenses on account of interest S.No. Particulrs Amt. (Rs.) Amt. (Rs.) S.No. Particulrs Amt. (Rs.) Amt. (Rs.) 1 Amount of expenses directly related to the income A Amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons discussed above. The same is upheld. 6. Next issue is with regard to addition on account of labour charges. Assessing Officer disallowed ₹ 10,00,000/- under the head Labour Charges vide para (b) of his order. While doing so he observed as under: - Disallowance out of labour charges: The assessee firm has debited ₹ 2,45,55,199/0 under the head labour charges. During the course of assessment proceedings, the assessee was called upon to file details of labour charges claimed along with details of TDS made thereon and justification for allowability of the claim made by the assessee under this head. The assessee firm has filed details of labour charges on verification of which it is noticed that the assessee has claimed to have made payments to number of parties and some of the payments have been made by way of cash. It is not ascertainable from the details filed by the assessee as to for which site how many labourers were employed and apparently, there is no check over the claim made by the assessee for such a huge claim made under this head. The assessee submitted during the hearing that the increase in labour charges as compared to turnover was due to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from our side. We uphold the same. 7. In the result, this appeal of the Revenue is dismissed. ITA No. 5297/Mum/2013 : AY 2010-11 8. In this appeal, the Revenue has raised the following grounds: - (i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 4,90,000/- which was made by invoking the provisions of IT Act by treating the income as ₹ 18,000. (ii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 50,00,000/- which was made by way of reasonable estimation keeping the nature of business in mind. (iii) On the fads and in the circumstances of the case and in law, the ld. CIT(A) erred deleting the addition of ₹ 14,86,000/- which was made by invoking the provisions section 39 of the IT Act by treating penalty payments as not allowable expenses. (iv) On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of ₹ 10,00,000/- which was made by invoking the provisions of section 40A(3) of the I.T. Act by treating the payments was not done in cash. (v) On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- on account of bogus payments to subcontracts allegedly booked by the assessee . Assessee had claimed sub-contract expenses of ₹ 15,68,98,517/-. Assessing Officer found that many of such sub-contractors are having turnover of less than ₹ 40 lakhs and their Income was offered mostly under section 44AD of the Act. Assessing Officer has also observed that large numbers of parties belongs to different group of families as ascertained from residential address and/or surname of the parties. For this reason, Assessing Officer held that the assessee is using the names of members of different families for reducing the assessee s overall tax liabilities. According to the Assessing Officer, the individual members hardly found to pay any actual taxes after claiming deductions and tax benefits. Further, the Assessing Officer observed that the turnover of the individual members are kept below ₹ 40 lakhs for dual purposes - firstly to get rid of statutory audit which would require documentary evidences of any work done and secondly - to have small income in the hands of such individuals. Assessing Officer has held that the assessee was indulging in tax evasion by reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reach of contract is an allowable deduction u/s 37(1) of the Act. Similar view has been taken by Hon'ble Apex Court in the case of CIT Vs Shantilal P. Ltd. 144 ITR 57, wherein it was held that any amount incurred by the assessee on account of non-fulfillment of business contract for reasons beyond his control is incidental to the business and is an allowable deduction. 11.1 Since the issue was covered by the order of the ITAT in assessee s own case in A.Y. 2008-09 and the facts being same, for same reasoning CIT(A) deleted the addition of ₹ 14,86,000/-. Nothing contrary has been brought to our notice by the Revenue. Therefore we are not inclined to interfere with the decision of the CIT(A), who has deleted the disallowance of ₹ 14,86,000/- made on account of penalty payment for delayed execution of contract. The same is upheld. 12. Next issue is with regard to the deletion of addition of ₹ 10,00,000/- which was made by the Assessing Officer u/s 40A(3) of the Act, on account labour charges and transport charges. We have decided this issue for AY 2009-10, in paragraph No.6 of this order. Facts being similar, so following same reasoning, we are not inclined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance was made without any basis hence the same was directed to be deleted. This reasoned factual finding of CIT(A) need no interference from our side. We uphold the same. 14. Next issue is with regard to addition of ₹ 8,62,069/- in respect of agricultural income. Vide para 12 of the assessment order Assessing Officer has treated exempt agricultural income as income from other sources on the ground that source of income has not been explained, which was deleted by the CIT(A). Same has been opposed before us on behalf of the Revenue , inter alia, submitted that CIT(A) erred in deleting addition of ₹ 8,62,069/- which was made for non-furnishing the details relating to agricultural income. On the other hand, the learned A.R. for the assessee supported the order of the CIT(A) and submitted that assessee has been declaring agricultural income since last many years and same has been continuously accepted by Department and same has been erroneously treated by the Assessing Officer as income from other sources without any reason for the same. Since there was no change in assessee s 7/12 Uttara (official record of Agricultural land) in the name of the assessee, indicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 133(6) of the Act to all the parties appeared in the report sent by the Sales Tax Department. It was found by him that the notices in most of the cases were returned unserved with a remark 'left' or not known'. The Assessing Officer thereafter asked the assessee to explain as to why the alleged purchases from the parties reported by the Sales-tax Department should not be treated as unexplained expenditure u/s 69C of the Act and the resultant amount be disallowed and added to the assessee's total Income. In this regard, the assessee has given various explanation, but after rejecting the same, the Assessing Officer disallowed the total amount of ₹ 2,47,01,530/-. Thus, the Assessing Officer has disallowed 13.97% of purchases made by the assessee during the year under consideration. 15.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee. The CIT(A) having considered the submissions of the assessee granted relief to the assessee and the same has been opposed before us on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of ₹ 2,16,32,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all forthwith arrange to supply to the Engineer for approval fresh samples complying with the specifications laid down in the contract. The Engineer shall have full powers to require removal of any or all of the materials brought to site by the Contractor which is not in accordance with the contract specifications or which do not conform in character or quality to the samples approved by him. In case of default on the part of the Contractor in removing the rejected materials, the Engineer shall be at liberty to have them removed by other means. The Engineer shall have full powers to procure other proper materials to be substituted for rejected materials and In the event of the Contractor refusing to comply, he may cause the same to be supplied by other means. All costs, which may attend upon such removal and / or substitution, shall be borne by the Contractor. 15.3 In the present case, the total supply of material is stated to have been obtained from various parties and the Assessing Officer has held an expense of ₹ 2,16,32,610/- as unexplained expenditure/non-genuine expenditure. In the Impugned contract the cost of material is quite high and if the rejection of purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing channels, were received back by the appellant and ultimately there was no purchase of any material. It was not possible because without supply of material, the contract awarded by MCGM cannot be fulfilled by the assessee and consequently, the MCGM would not make any payment' for the same. In fact the entire process is inter connected and the statement of suppliers of raw materials could not be taken and read independently rather it has to be examined In totality. In view of the above, it was apparent that the mere appearance of the name of the parties on the website of sales tax department cannot justify the conclusion that the purchases made by the assessee were not genuine. Thus, the contracts executed by various contractors were subjected to check as regards their specification, workmanship/ quality and quantity of material utilized by the Audit/Vigilance team of the MCGM. The Assessing Officer has not brought out any material on record to suggest that there were any defect or deficiency in the quantity and quality of material supplied and the workmanship of the job performed. 15.5 The assessee has made claim for purchases for which payments have been made by cross-ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r those purchases as income of the assessee. On second appeal, the Tribunal found that there was no evidence anywhere that those concerns gave bogus vouchers to the assessee and further there was nothing to indicate that any part of the fund given by the assessee to those parties came back to the assessee in any form. He, thus, held that the evidence was not adequate to conclude that the purchases made were bogus and, therefore, deleted the aforesaid addition to the income of the assessee. Similar view has been taken by ITAT, Jodhpur Bench in the of ITO v Permanand, reported in 107 TTJ 395, wherein in it was held as under:- In the instant case, the addition rested mainly only on the observation of the Sales-tax Department, The assessee was never associated with the enquiries made by the Sales-tax Department to that extent. The satisfaction of the Assessing Officer itself is of prime Importance while making assessment of an income and these duties cannot be performed by substituting satisfaction of someone else the assessee did pay for the purchases he made from the above two parties through cheque as was evident from the record. The statements or even the affidavits of the sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as If there was no such transaction. 10. The transaction having taken place through payment by account payee cheques, such plea is not tenable and in such circumstances, the Tribunal below erred In law in reversing the finding arrived at by the Commissioner of Income-tax (Appeals) accepting the said transaction as a genuine transaction. Therefore, keeping in view the totality of the facts and circumstances of the case as well as various judicial pronouncements as referred to above, in our opinion, the CIT(A) was rightly deleted the addition of ₹ 2,16,32,610/- made by the Assessing Officer u/s 69C of the Act. Therefore, this reasoned finding of the CIT(A) needs no interference from our side. We uphold the same. 16. Next issue is with regard to the addition of ₹ 4,48,89,991/- on account of unexplained expenditure u/s 69C on account of sub-contract charges. 16.1 The brief facts the case are that the addition to the tune of ₹ 4,48,89,991/- was made u/s 69C of the Act in respect of four parties under the head sub-contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer and in fact addition was based on entries made in those books, it could be said that transaction was genuine. Here in the case on hand, the identity has been established, source of investment and bank payments have been proved and the books of accounts have not been rejected by the Assessing Officer. The unexplained expenditure of ₹ 2,16,32,610/- made by the Assessing Officer by invoking the provisions of section 69C of the Act has been deleted by us, relying on various judicial pronouncements as discussed in paragraph 14 of this order. For the sake of brevity, the same are not reproduced here once again. The Assessing Officer had all the machinery under the IT Act, 1961 to make investigation through the Banks by calling for records and reaching out the parties who were not co-operating with the assessee and bring the actual facts on record. In view of above, the CIT(A) was justified in deleting the addition of ₹ 4,48,89,991/- because the Assessing Officer has also not been able to bring on record the evidences that the amount of the payment for purchases, which were made by the assessee to the respective parties via banking channels. There is nothing on record to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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