SUNIL SRIVASTAVA,HALDWANI vs. THE INCOME TAX OFFICER, WARD-2(1)(3), HALDWANI

PER M.BALAGANESH, AM: This appeal by the Assessee arises out of the order of the

Learned Commissioner of Income Tax (Appeals), National Faceless

Appeal Centre (NFAC), Delhi, [hereinafter referred to as ‘Ld. CIT(A)’,

in short] in DIN & Order No. ITBA/NFAC/S/250/2020-

21/1031577557(1) dated 18/03/2021 against the order of

2 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

assessment passed u/s 143(3) of the Income-tax Act, 1961

(hereinafter referred to as ‘the Act’) dated 19/12/2018 by the

Income Tax Officer, Ward-2(1)(3), Haldwani, (hereinafter referred to

as ‘Ld. AO’).

ld. CIT(A) NFAC was justified in confirming the addition of Rs

48,55,140/- in the facts and circumstances of the case.

materials available on record. The assessee is an individual and had

filed his return of income for the Asst Year 2016-17 on 17.10.2016

declaring total income of Rs 2,65,473/-. The assessee earns income

from salary, income from capital gains income from share business,

income from contract business and share of profit from Association

of Persons (AOP). In the scrutiny assessment proceedings, the ld.

AO observed in the assessment order that assessee and his

authorized representative appeared before him from time to time

and filed various repies, produced books of accounts copies of bank

account and other details which were examined on test check basis.

The ld. AO observed that during the year under consideration, the

3 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

assessee has done trading of shares as NSC derivatives , MCX

commodities through M/s Sushil Financial Services Limited. For

this business, the assessee had got his accounts audited u/s 44AB

of the Act. The ld. AO observed that in the said business, the

expenses debited were audit fee, accounting charges office

expenses, books and periodicals, bank charges and interest. The

investment in this business has been made through assessee’s

bank account with ICICI Bank. The ld. AO observed that

assessee’s Future & Options (F&O) Profit was Rs 3,39,49,438/- ;

F&O Loss was Rs 3,86,42,089/- resulting in net loss of Rs

47,81,382/-. On sale of shares, the assessee had earned short

term capital gain at Rs 1,59,183/- and long term capital gain of Rs

12,61,857/-, which has been claimed as exempt u/s 10(38) of the

Act. The assessee also furnished the ledger account of the assessee

as appearing in the books of M/s Sushil Financial Services P Ltd,

Mumbai for trading of shares and commodities, which was accepted

by the ld. AO.

source u/s 206CA of the Act by M/s Rajasthan State Beverages

4 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

Corporation Limited showing total purchase of Rs 2,52,68,805/-

and tax collected at source of Rs 2,52,688/- . The assessee was

asked to furnish the details of the same, which were duly furnished.

It was submitted that the assessee is a member of AOP of M/s

Bodega Sales and income and claim of TCS of such income has

been made by the AOP and as such the same cannot be included in

the income of the assessee. The assessee also enclosed the return

of income of the AOP for the Asst Year 2016-17, wherein the

turnover and TCS was duly reflected thereon by AOP. The assessee

also furnished profit and loss account of AOP, copy of ITR of AOP

together with its computation of income, copy of bank statement of

AOP and copy of deed of admission of member / retirement of AOP

M/s Bodega Sales showing assessee as a member of AOP having

share of 0.25% in profit and loss of the AOP. The assessee also filed

an affidavit confirming the fact that though the shop was allotted in

his name, but the income earned from liquor business and TCS

thereon were duly reflected in the hands of AOP. This explanation of

the assessee was accepted by the ld. AO.

5 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

disclosed income of Rs 29,58,690/- from contract business. For

contract business, the assessee filed a separate profit and loss

account showing net contract receipt at Rs 48,55,140/- from M/s

Parvatiya Mines, Haripur Motia, Haldwani. After claiming labour

and wages of Rs 18,14,150/- and salary expenses of Rs 82,300/-,

net profit was shown at Rs 29,58,690/-. The ld. AO observed that

the assessee did not furnish any balance sheet for this business

and also observed that the assessee is bound to get his accounts

audited u/s 44AB of the Act for this contract business also and

accordingly initiated penalty proceedings u/s 271B of the Act. The

assessee filed the muster roll and salary and wages register before

the ld. AO for this contract business. The ld. AO observed that on

perusal of the wages register, the assessee had paid wages of Rs

500 to Rs 800 per day when the minimum wages for unskilled

labourers was Rs 300 to Rs 350 per day. The ld. AO directed the

assessee to produce 11 labourers which were identified by the ld.

AO. The assessee submitted that he had received contract from

M/s Parvatiya mines for labour supply, all the funds infused into

6 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

the business of assessee and in Bodega Sales were from regular

transactions of share trading and from various concerns. It was

further stated that the work done for M/s Parvatiya Mines was of

production of soap stone lumps of 7469.45 tons @ Rs 650 per ton,

the labour employed was not on permanent basis and was only for

limited period of contract. Therefore, he did not maintain any

details of such employees and as such many of them were from

outstation, however, some of the labours could be contacted and

identity of them is produced. The ld. AO observed that in support of

payment, the assessee filed a photo copy of a page of so called

attendance register. Regarding excessive payment made to the

labours for per day work, it was stated that wages are paid for per

day wages and for overtime worked by them. The ld. AO however

did not heed to these submissions of the assessee and observed

that from the perusal of the bank statements, there were no

sufficient withdrawals to meet the labour charges and wages of Rs

18,14,150/- during the period 01.02.2016 to 31.03.2016. The ld.

AO also observed that assessee was not able to produce any original

documents, books of accounts, receipt of payment of Rs

7 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

48,55,140/- , withdrawals for payment of labout and wages through

any bank statement or otherwise. The ld. AO also observed that

assessee had not filed any details of withdrawals of cash for

payment of labour and wages from any of the account either

maintained with banks or with any AOP. The assessee filed copy of

his account with M/s Parvatiya mines showing details as under:-

Date Particulars Vch type Debit Credit. To 554 –KNS Bank 25-08-2015 Payment 10,00,000-00 Hld. To 554-KNSbank 12-01-2016 Payment 5,00,000-00 Hld. By labour charges. 31-03-2016 48,55,140.00 TDS payable Journal 48,551.00 15,48,551.00 48,55,140-00 33,06,589.00 To closing balance.

made by the assessee to M/s Parvatiya Mines on 02.11.2015.

Accordingly, the ld. AO confronted the assessee that the balance

outstanding in the account with M/s Parvatiya Mines should be Rs

43,06,589/- as against Rs 33,06,589/- stated by the assessee as

above. The assessee filed a written reply dated 30.11.2018 that the

8 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

debit entry of Rs 10 lakhs on 02.11.2015 was against the payment

made by the assessee on request of and on behalf of M/s Bodega

Alcobebv and Mr Vijayant Jaiswal to M/s Parvatiya Mines. In

support of his contention, the assessee filed copies of his accounts

with M/s Bodega Sales, M/s Shakti Traders, New Delhi9 and M/s

Bodega Alcobev which was held by the ld. AO as not verifiable as

there was no signature, seal or supporting evidence such as cash

book, etc of the concerned identity. The ld. AO further observed that

the assessee had not furnished any documentary evidence

regarding instruction issued by M/s Bodega Alcobev and Mr

Vijayant Jaiswal to make payment on their behalf. Accordingly, the

ld. AO dismissed the contention of the assessee to be an

afterthought and concocted story and to mitigate the entry of Rs 10

lakhs on 02.11.2015.

23.11.2018 of M/s Parvatiya Mines have been signed by Shri

Vijayant Jaiswal and Smt Sunita Jaiswal respectively. These two

parties are among the owners of the firms/ AOPs from which

assessee is getting salary or having substantial benefits in them.

9 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

There are several bank transactions with them as appearing in

ICICI Bank account of the assessee. They are closely connected

through business transactions with each other. The ld. AO

noticed that assessee has shown contract with Parvatiya Mines

on 15.01.2016 and completed with work till 31.03.2016 but no

payment has been made to him by M/s Parvatiya Mines till

31.03.2016, but M/s Parvatiya Mines has shown TDS amount of

Rs 48,551/- on 31.03.2016. On plain reading of Form 26AS

filed by the assessee, it is seen that the TDS was deposited by

M/s Parvatiya Mines (TAN – MRTPO3223D) only on

13.12.2016 and had revised Form 26Q in December 2016,

which is after the date of filing of ITR by the assessee. The

account of assessee with M/s Parvatiya Mines was also not true

by missing a bank entry of Rs 10 lakhs on 02.11.2015. It

means that neither there was any payment made to the

assessee till 31.03.2016 nor any TDS was made upto

31.03.2016 which must have been deposited by specified date

i.e. 30.04.2016. All the details regarding contract receipts

furnished by assessee are false and appears to be made to

10 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

mislead the department. Neither there was any work done done

by the assessee nor any payments of contract work was made

by M/s Parvatiya Mines to the assessee. With these

observations, the ld. AO proceeded to treat the amount credited by

assessee in the sum of Rs 48,55,140/- in his profit and loss

account as income from undisclosed sources taxable u/s 68 read

with section 115BBE of the Act. This action of the ld. AO was

upheld by the ld. CIT(A). (emphasis supplied by us) 8. At the outset, we find that the ld. AO accepts the fact that

assessee did not do any work to M/s Parvatiya Mines and that no

payments were made by M/s Parvatiya Mines to the assessee.

Hence according to ld. AO , there was no sum of money to the

extent of Rs 48,55,140/- credited in the books of assessee from M/s

Parvatiya Mines. Once it is concluded by the ld. AO that no sum of

money is credited for Rs 48,55,140/- in the books, then the

provisions of section 68 of the Act itself would not come into

operation. On this limited count itself, the addition made u/s 68 of

the Act deserves to be deleted.

11 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

were available with him to prove that he had procured a contract to

supply man power to M/s Parvatiya Mines and had accordingly

supplied labour on a daily basis from January to March 2016. We

find that the ld. AO before leveling lot of allegations on the assessee

could have cross verified the entire facts from M/s Parvatiya Mines

which could have cleared all his doubts beyond reasonable doubt.

The ld. AO had all the powers in the statute to summon M/s

Parvatiya Mines and record a statement to understand the entire

facts. From the side of the assessee, we find that the assessee had

furnished a confirmation from M/s Parvatiya Mines dated

23.11.2018 wherein it was certified that during the financial year

2015-16, total production of Soap Stone Lumps was 19530 Tonnes,

out of which 7469.45 tonnes excavation of Soap Stone Lumps was

done through labour supplied under contract by Mr Sunil

Srivastava (i.e assessee herein before us). It was further certified

that the contract for supply of labour was executed in writing

between Sunil Srivastava and the firm on 15.01.2016, and the

services were provided during the period starting from January

12 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

2016 to March 2016. The said certificate also confirmed that M/s

Parvatiya Mines had received amount of Rs 10 lakhs on 02.11.2015

vide Instrument No. 37913 on behalf of Mr Vijayant Jaiswal. This

confirmation is signed by Smt Sunita Jaiswal in the capacity of

partner of M/s Parvatiya Mines, which is enclosed in page 56 of the

Paper Book. Further , we find that M/s Bodega Alcobev had also

issued a confirmation dated 26.11.2018 confirming the fact that

they had instructed Mr Sunil Srivastava to make payment of Rs 10

lakhs on their behalf to Mr Vijayant Jaiswal and as per instructions

of Mr Vijayant Jaiswal, Mr Sunil Srivastava had made payment of

Rs 10 lakhs on 02.11.2015 to M/s. Parvatiya Mines. This

confirmation is enclosed in Page 55 of the Paper Book. Further a

confirmation dated 26.11.2018 was also issued by Mr Vijayant

Jaiswal certifying that he had instructed Mr Sunil Srivastava to

make payment of Rs 10 lakhs to M/s Parvatiya Mines on his behalf

on 02.11.2015. This confirmation is enclosed in Page 54 of the

Paper Book. Further, we find that M/s Parvatiya Mines having

deducted tax at source on transactions carried out with the

assessee is also reflected in Form 26AS which is a document

13 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

downloaded from the portal of the Income Tax Department and

hence the said document cannot be simply brushed aside as was

done by the ld. AO in the instant case.

contract receipts of Rs 48,55,140/- from M/s Parvatiya Mines out of

supply of man power pursuant to contract entered into on

15.01.2016. We find that the assessee had furnished the copy of

contract dated 15.01.2016 entered into with M/s Parvatiya Mines

before the ld. AO. As stated supra, this fact could have been cross

verified by the ld. AO with M/s Parvatiya Mines. Further we find

that the ld. AO had accepted the payment of Rs 10 lakhs made by

the assessee to M/s Parvatiya Mines on 02.11.2015 to be genuine

though the purpose of payment was disputed by the ld. AO. This

fact also goes to prove that assessee and M/s Parvatiya Mines had

some transactions to be carried out. If there is no linkage between

assessee and M/s Parvatiya Mines, why would assessee even come

forward to make payment of Rs 10 lakhs on 02.11.2015 (which fact

is accepted by the ld. AO) to M/s Parvatiya Mines. Since the

assessee claimed that this payment of Rs 10 lakhs was made to

14 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

M/s Parvatiya Mines on behalf of Mr Vijayant Jaiswal, obviously the

said transaction would not be reflected in the ledger account of the

assessee as maintained with M/s Parvatiya Mines and that the said

transaction would only be reflected in the ledger account of Mr

Vijayant Jaiswal in the books of M/s Parvatiya Mines. This

accounting concept is not appreciated by the lower authorities in

the instant case.

deducted tax at source of Rs 48,551/- on the contract charges

incurred with assessee and the fact that this TDS was deposited by

them as late as 13.12.2016 is absolutely an irrelevant consideration

as far as the assessee is concerned. If the revenue has any

grievance over this, then suitable action should have been taken on

M/s Parvatiya Mines instead of disbelieving the transactions of the

assessee.

shown in the sum of Rs 48,55,140/- is to be treated as contract

receipts from supply of manpower to be taxed under the head

income from business only. Once it is held that the assessee had

15 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

derived gross contract receipts of Rs 48,55,140/-, obviously he

should have incurred expenses towards labour and wages in cash

as these wages are paid to the labourers on daily basis and they

would prefer to have it received only in cash. Hence it is the duty of

the assessee to prove the existence of cash in his hand to make the

said disbursements of Rs 18,14,150/- towards labour and wages

and Rs 82,300/- towards salary. We find that the ld. AR in this

regard furnished the details of cash withdrawals made in the sum

of Rs 49,00,000/- as under:-

30.11.2015 10,00,000 Prior to signing the contract 28.01.2016 22,00,000 After signing the contract on 15.01.2016 26.02.2016 9,00,000 During execution of the contract 31.03.2016 8,00,000 At the conclusion of the contract 12.1. Hence these withdrawals are very much available to

explain the source of making payment of wages and salary. Apart

from this, the assessee had also furnished the muster roll

containing attendance register of each labourer and cash payment

register before the lower authorities. Some of the labourers

identities in the form of their aadhar cards were even produced by

the assessee before the ld. AO. Hence there is no case for

16 ITA No.10/Ddn/2021 Sunil Srivastava vs. ITO

disbelieving the contentions of the assessee in the instant case.

Accordingly, the grounds raised by the assessee are allowed.

Order pronounced in the open court on 15th September, 2023.

Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 15/09/2023 PK/Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT NEW DELHI (Dehradun Circuit Bench, Dehradun)