VAB INDUSTRIES LLP,HYDERABAD vs. INCOME TAX OFFICE, WARD-12(1), HYDERABAD

The assessee raised the following grounds: “

At the time of hearing, neither AR of the assessee appeared on behalf of the assessee nor any application for adjournment was filed by the assessee. Therefore, we are constrained to take up the appeal in the absence of any assistance of the learned AR for the assessee. It is a matter of fact that on three occasions, the assessee was duly represented and later dates today none appeared on behalf of the assessee. Therefore, we have taken the appeal as heard.

The next ground No.4 pertains to the addition of Rs.43,69,520/-. In this regard, the learned CIT (A) after relying upon the order of the Assessing Officer mentioned in para 8.1 had confirmed the addition. The reasonings given by the learned CIT (A) is that the assessee before the Assessing Officer has failed to substantiate that the actual work was carried out by the sub- contractors and they were rendering services.

No details were filed by the assessee substantiating the rendering of services by the sub-contractors before us. No application for additional evidence was filed by the assessee.

We have heard the learned DR for the Revenue and gone through the orders passed by the lower authorities. In the present case, the Assessing Officer has called upon the assessee to provide the details of the payments made to the contracts/sub- contractors as mentioned in para 7 of the assessment order which is to the following effect:

Similarly, the Assessing Officer also issued notice to various sub-contractors and persons and called for various details as mentioned in Para 7.1 of the assessment order:

The Assessing Officer had issued notice u/s 133(6) to all the 12 persons and out of 12 only 3 persons have responded which are mentioned in para 7.3 of the assessment order:

Thereafter the Assessing Officer had also requested for the physical verification of the persons whose PAN has no email address. In response thereto, the report was submitted by the Physical Verification Unit. Considering the totality of the facts of the case and the documents available before the Assessing Officer, the Assessing Officer in para 8 had noted down that the entities mentioned/sub-contractors is merely paper entities and the assessee has taken the help of the persons/entities to reduce Page 7 of 9 the tax liability. It was the case of the Assessing Officer that these persons were not showing receipt/sale despite the receipt of huge amount as sub-contractor fees and were not filing the return of income or in some case filing the meagre return of income. In the light of the above, the Assessing Officer taking a lenient view had only disallowed 25% of the total sub-contractor fee restricting the addition to Rs.43,69,520/-. As no one appeared before us nor any proof of rendering of services were filed before the lower authorities and before us, we are left with no option but to confirm the order passed by the lower authorities. In fact, initially we were of the opinion that the matter can be sent to the Assessing Officer for fresh adjudication of the contractor/sub-contract fees of Rs.1,74,78,077/- but there was inherent risk in that if we remand back the entire issue to the file of the Assessing Officer, then the assessee would be deprived from the benefit already granted to the Assessing Officer there may enhancement of disallowance. In the light of the above, we do not find any merit in remanding back this ground to the file of the Assessing Officer as the assessee cannot be worsened off. In the light of the above, we are of the opinion that the learned CIT (A)/Assessing Officer were justified in restricting the disallowance to 25% of contractor/sub-contractor charges.