ACIT CIRCLE-2, GWALIOR vs. SHARMA & ASSOCIATES FIRETECH PVT LTD, GWALIOR

In the Income-Tax Appellate Tribunal, Agra Bench, Agra Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member

ITA No. 352/Agra/2015 Assessment Year: 2010-11

ACIT, Circle-2, vs. M/s Sharma & Associates Gwalior Firetech Pvt. Ltd. 78, Silver Estate, City Center, Gwalior PAN AAICS 2402H (Appellant) (Respondent) CO No. 08/Agr/2017 [ITA No. 352/Agra/2015] Assessment Year: 2010-11 M/s Sharma & Associates Firetech vs. ACIT, Circle-2, Pvt. Ltd. 78, Silver Estate, City Gwalior Center, Gwalior PAN AAICS 2402H (Appellant) (Respondent)

Appellant by Shri Waseem Arashad, Sr. DR Respondent by Shri Deependra Mohan, CA

Date of Hearing 01.08.2019 Date of Pronouncement 19 .08.2019

ORDER Per Laliet Kumar, J.M.:

This appeal is filed by the Revenue and the CO filed by the assessee against the

order dated 29.05.2015 passed by the ld.CIT(A), Gwalior for the assessment year 2010-11. The grounds raised by the Revenue are as under:

ITA No.352/Agr/2015 2 CO No.08/Agr/2017 “1. Whether on facts and in circumstances of the case, the Ld. CIT(A) was justified in deleting addition of Rs.1,62,67,144/- on account of expenses on account of expenses on contracts, even though, the assessee has failed to produce sufficient details to prove the genuineness of transaction. 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) was justified in deleting addition of Rs.1,00,000/- ignoring the findings of the AO.”

Amount Sr. Name of Contractor No.

13.28,630/- 1 Mohit Gautam

2 Arvind Rawat 14,19,440/-

Deepak Gautam 12,81,600/- 3.

Total 40,29,670/-

Sr. Name of Contractor Amount No.

1 Manish Enterprises 24,59,9 15/-

Total 24,59,915/-

ITA No.352/Agr/2015 3 CO No.08/Agr/2017 Brief facts

including supply and installation of firefighting equipment and job work. In the

assessment year under consideration, in this group the assessment, the

assessing officer on parallel of the balance sheet has found that the assessee has

shown sundry creditors of Rupees 4,84,94,262/-. The assessing officer had

asked the assessee to furnish the details of sundry creditors indicating the

name, address, PAN No., the amount of credit/liability, duration of

credit/liability, nature of transaction given rise to credit/liability et cetera. 3.1 In response to the question I raised by the assessing officer the assessee had

filed various replies including their reply dated 14/12/2012 and 21/12/2012.

The assessee had also filed the submission on 29th/01/2013 furnishing the

confirmation of the creditors on account of contractual is liability and other

sundry creditors are without spending liability of rupees more than 10 lakhs

as on 31st/03/2010. It was noticed by the assessing officer that many

confirmation given by the assessee there was no mention of address and PAN

No. of the creditors. On account of these discrepancies the assessing officer has

doubted the genuineness of these creditors. 3.2 The AO has asked the assessee to produce the above noted contractors for

verification but the assessee has neither produced contract creditors, namely,

ITA No.352/Agr/2015 4 CO No.08/Agr/2017 Mohit Gautam, Arvind Rawat and Deepak Gautam for verification nor

produced supporting bills/work order/work specification in respect to Brij

Kishore Das, Adityan Developers and Eng. Pvt. Ltd., Dharmendra Kumar Jatav,

Veerendra Pathak, Mohit Gautam, Arvind Rawat and Deepak Gautam. In view

of above, the AO had made the addition of Rs.65,45,445/-. 3.3 As the assessing officer was not convinced with these explanation given by the

assessee and also with the confirmation letter furnished in the office of the

assessing officer, therefore the assessing officer (paragraph 2.5.3 of the

assessment order) had disallowed the expenses of Rs.65,45,445/- in respect

to ‘petty contract paid’ under the head contract expenditure to the following 6-

7 persons:

S.No. Particulars of the Contractor Amounl Paid During the Year (in Rs.) 5,38,774 Brij Kishore Das 1. 2 Adityan Developers and Eng. Pvt. Ltd. 2,34,411 I 3. DharmenclraKuinarJatav 1,33,350 4. Veerendra Pathak 16,09,240 5. Mohit Gautam 13,28,630 6. Arvind Rawat 14,19,440 7. 12,81,600 Deepak Gautam 65,45,445

ITA No.352/Agr/2015 5 CO No.08/Agr/2017 4. Feeling aggrieved by the above said addition the assessee filed an appeal before

the CIT(A). The ld. CIT(A) in his order vide para 6.4.2 had dealt with above said

addition made by the ld. AO. Ld. CIT(A) had deleted the additions made in

respect of Brij Kishore Das, Adityan Developers and Enginners Pvt. Ltd.,

Dharmendra Kumar Jatav, Veerendra Pathak for the reasons mentioned in Para

6.2.4 of the CIT(A). However, the ld. CIT(A) had sustained the addition in

respect to Mohit Gautam, Arvind Rawat and Deepak Gautam totling to amount

to Rs.40,29,670/- as the ld. CIT(A) recorded that the fresh evidence was filed

before him which the assessee had not filed before the AO and hence, therefore,

he allowed the additional evidence and eventually confirm the addition made

by the AO.

for an amount of Rs.40,29,670/- and the Revenue is in appeal in respect of

deletion made for an amount of Rs.25,15,775/-.( The revenue had challenged

the total deletion of amount of ₹ 1 6267144 by the ld. the CIT(A) as mentioned

in paragraph 6.2.4(Rs.25,15,775/-.) And Rs.131,91,325/-,{ page 65 para 6.3.4 of

CIT(A)} order)

had submitted that the order passed by the ld. CIT(A) is nonspeaking and

cryptic order, as the ld. CIT(A) had failed to deal with the submissions of the

ITA No.352/Agr/2015 6 CO No.08/Agr/2017 AO. It was submitted that the assessee has failed to provide all the bills,

contract or any other evidence supporting the payment of amount paid to these

persons.

6.1 Per contra Ld. AR for the assessee had submitted that the assessee has given all

the details of the bills raised by them, copy of account and had also given the

TDS return filed by the assessee after deducting the TDS at the time of making

the payment to these persons. It was submitted once the TDS has been

deducted, the name, address and PAN number of these persons are very much

available with the AO and therefore, the disallowance made by the AO and was

incorrect and the order of the ld. CIT(A) in respect of these four persons namely

Brij Kishore Das, Adityan Developers, Dharmendra Kumar Jatav and Veerendra

Pathak was in accordance with law.

record. The ld CIT A at page 30 of his order mentioned that that the assessee

had provided details i.e. bills, copy of account, TDS in relation to the payment to

all parties. Further it was mentioned relevant details on the transaction are

verifiable with the books of account of the assessee and assessee had produced

the invoices of transactions and TDS return in respect of the transactions

entered between the parties. The assessing officer has failed to produce any

contradictory evidence on record to disbelieve the evidence filed by the

ITA No.352/Agr/2015 7 CO No.08/Agr/2017 assessee before the AO or before CIT(A). In our considered opinion the

additions made by the AO on the premises that the letter issued to these

persons have not been delivered unreturned is unsustainable in the eyes of law.

The fact that the service has been effected on these person shows clearly the

existence of these persons. The existence of the creditors on the given address

and nonappearance by these persons or nonparticipation of these persons in

the assessment proceedings would not make the case of the AO, as it is for the

assessing officer to ensure the presence of these persons and bring the

contradictory statement on record this proving the existence of these creditors.

In our view once the assessee has asked the assessing officer to use the coercive

measure to ensure the presence of these creditors in the assessment

proceedings than it is for the assessing officer to use the official mention the

two ensure the presence of these creditors. However despite the request of the

assessee, the AO failed to use official channel and power confer on him to

ensure the presence of these persons for the purposes of answering the query

of the AO. In our view, failure on the part of the AO to use the official machinery

to enforce the attendance of these persons cannot prove the case of the AO or in

other words the AO has failed to discharge his onus to prove otherwise once the

assessee has discharge is primary onus.. It is for the AO to bring on record any

cogent evidence contradicting the bills, invoices, TDS returns and other

ITA No.352/Agr/2015 8 CO No.08/Agr/2017 contemporousness documents filed by the assessee to prove the genuineness of

the creditors in the assessment proceeding. Since needful was not been by the

AO in our opinion the deletion made by the ld. CIT(A) was in accordance with

law. In the result, the ground raised by the revenue challenging the deletion of

ofRs.25,15,775/- is dismissed.

Rs.40,29,670/- by the CIT(A). It was submitted by the ld. AR that the assessee

had filed the document before the ld. CIT(A). However, the ld. CIT(A) has not

considered the application of the assessee filed for taking on record the

additional documents under Rule 46A of the Act. The CIT(A) has not considered

the evidence filed by the assessee which were in the nature of confirmation

letter invoices ledger account etc of three persons namely, Mohit Gautam,

Arvind Rawat and Deepak Gautam. The ld. AR had submitted that these

document filed by the assessee before the CIT(A) should be considered by the

tribunal and thereafter the appeal of the assessee be allowed.

stage and oppose the ground of the CO.

record.

ITA No.352/Agr/2015 9 CO No.08/Agr/2017 11. Undoubtedly, the ld. CIT(A) had rejected the addition u/s 46A application of the

assessee on the pretext that the documents filed by the assessee were in the

nature of the additional ground / evidence filed by the assessee at the appellate

stage hence these document cannot be considered. Ordinarily we would have

allowed the consideration of the additional evidence by the ld. CIT(A).

However, in the present case, if we look into the ground raised by the assessee

in the cross objection filed before us (reproduced elsewhere) , it is amply clear

that assessee has not challenged rejection of Rule 46A application for

considering evidence filed by the assessee before the CIT(A). In our considered

opinion, it is for the assessee to urge his grievance by way of specific ground

challenging the action of the CIT(A) of rejecting the application u/s 46A. Since

there is no ground raised before us whereby the assessee has challenged the

order of the ld. CIT(A) for rejecting the application for filing the additional

document/evidence, in our view the assessee does not deserve any indulgence

from this Tribunal. Accordingly, the Ground No.1 of cross objection is

dismissed. Besides the above, we are of the opinionthat the assessee had failed

to substantiate the payment of Rs.40,29,670/- before the AO and also before

the CIT(A), no interference is called for at this stage.

of deletion of Rs.1,31,91,325/- pertaining to five creditors namely Gautam

ITA No.352/Agr/2015 10 CO No.08/Agr/2017 Associate, Mannilal and Sons, Ram Kumar and Sons, Kamal Sales Corporation

and Aporva Traders, in this regard, the ld. DR had drawn our attention to Para

2.6.1., 2.6.2, 2.6.3, 2.6.4 of the assessment order with the following effect

produce the creditors vide order sheet entry dated 25.02.2013. However, the

assessee failed to produce these creditors for verification and further it was the

case of the AO that all the invoices were raised between 04.01.2010 to

16.03.2010 pertaining to Gautam Associate, Mannilal and Sons, Ram Kumar

Sons and one of the bill was rasied by Mannilal on 26.01.2010(National

Holiday). It was submitted that the invoices raised did not have the proper PAN

and TAN number and invoice number. On the basis of the above said reasons

and also for the reason mentioned in the above mentioned in para 2.6.1 to 2.6.3

of the assessment order, the AO has made the addition of Rs.1,56,51,240/-.

and the ld. CIT(A) had deleted the additions of Rs.1,31,91,325/-. The CIT(A) has

observed as under :

“I have gone through the submission of the appellant as well as assessment order and I find that the appellant had furnished all the relevant details i.e. bills / invoces, confirmation, copy of account of all the six parties along with all the books of account. After filing the relevant information, the AO had issued letters u/s 133(6) to all the six parties. In response to letters issued u/s 133(6), the AO had received back one letter undelivered with the postal remark "Is naam ka koi nhihai” which was sent to M/s Manish Enterprises. The AO had not received any reply from remaining five parties namely M/s

ITA No.352/Agr/2015 11 CO No.08/Agr/2017 Gautam Associates/ Manilal& Sons, Ram Kumar & Sons, Kamal Sales Corporation and Apoorva Traders. The AO has made the addition of Rs. 1,56,51,240/- because the appellant could not produce the suppliers and letters issued u/s 133(6) remain uncomplied in case of five suppliers. Except this, the AO could not place any material on record to establish that the purchases were not genuine. The AO has also accepted the sales, which were effected only out of purchases. After considering of all these facts I am of the considered opinion that the addition of Rs. 1,31,91,325/- (Rs.22,26,724/-, 21,71,453/-, 28,06,810/- ,10,68,594/-and 49,17,744/- of purchases from Gautam Associates, Manilal& Sons, Ram Kumar & Sons, Kamal Sales Corporation and Apoorva Traders respectively) is not sustainable because the appellant had furnished all the relevant details i.e. bills, books of account and the letters issued u/s 133(6) of the Act not returned undelivered. So far the addition of Rs. 24,59,915/- of purchases from M/s Manish Enterprises is concerned, although the appellant had submitted all the relevant details i.e. bills, books of account etc. But, after filing all these details, the letter issued u/s 133(6) returned undelivered. Meaning thereby, the existence of M/s Manish Enterprises could not be established. Accordingly, the addition of Rs. 24, 59,915/- is hereby confirmed.”

14.1 The ld. CIT(A) has confirmed the addition in respect to Manish Enterprises for

an amount of Rs.24,59,915/-.

(part of Ground No.1) and the assessee is in appeal( ground no2 ) in respect of

amount of Rs.24,59,915/- sustained by the ld. CIT(A).

Ground of revenue

15.1 The ld. DR had submitted in written submission that at page 64, the ld. CIT(A)

has mentioned that“ the dispatch of goods, date of receipt of goods, gate entry

number, verification are concerned and related to case laws for excisable

goods”.

ITA No.352/Agr/2015 12 CO No.08/Agr/2017 15.2 It was submitted that unless the assessee proves the receipt of goods, the

payment cannot be made for such receipt of good and further since the assessee

unitis excisable therefore, all these records are required to be maintained and

produced by the assessee for the purposes of proving the purchase of these

articles.

15.3 The ld. DR further submitted that the assessee has not produced these persons

in the assessment proceeding and therefore, the deletion made by the ld. CIT(A)

was without any basis.

15.4 In rebuttal ld. AR submitted that the as per the assessment order, assessee is a

contractor and is in the service of providing firefighting service including

supply of firefighting equipment and job works. Therefore, the rules of excise

Act are not applicable as contended by the DR.

15.5 In this regard, the ld. AR submitted that once the assessee has given all the

relevant information along with address and confirmation to the AO and the AO

had issued the notice u/s 133(6) and the notice of the AO enable then it is for

the AO to take coercive action to ensure the presence of these persons.

15.6 The ld. AR had submitted that the assessee in the proceeding before the lower

authorities has submitted that the confirmations were produced before the

lower authorities, giving the date of confirmation and address of the creditors.

ITA No.352/Agr/2015 13 CO No.08/Agr/2017 Further, it was the case of the AR that the AO has not brought on record that the

confirmation letter given by the assessee was forged and fabricated.

The assessment order clearly shows that the nature of the business of the

assessee which mention that the assessee is in the firefighting service including

supply and installation of firefighting equipment and job work. If we look into

the invoices scan and reproduced by the AO in the assessment order (Pgs. 9 to

12), it is clear that these were the goods purchased by the assessee namely

butterfly area tank, Hydrant Valve, House Pipe Red Color, Sprinkler Head, MSC

Glass Pipe which clearly shows that these are the articles which were required

to be used for the purposes of firefighting service including supply and

installation of firefighting equipment and job work. Prime facie the activities of

the assessee do not attract payment of excise duties as they are primarily in the

nature of rendition of services/installation of firefighting equipment at site and

hence do not required excise registration. Further the assessing officer has not

brought on record in the form of some evidence that shows the activities of the

assessee comes within the purview of excise laws and therefore the adverse

inferences required to be drawn in favour of the assessee and against the

revenue. Further in our view the opinion of the AO that merely because the

excise No., TIN no etc were not mentioned would not make the expenditure

ITA No.352/Agr/2015 14 CO No.08/Agr/2017 disallowable. The test for allowing the expenditure is laid down in section 37 of

the income tax Act which provides that the expenditure should have been

incurred wholly and exclusively for the purpose of business . No finding of fact

has been given by the assessing officer, stating therein that the expenditure

were not incurred for the purpose of business.The assessee, undoubtedly is in

the activity of rendering the services and installation of firefighting equipment.

This firefighting equipment are required to be installed at the premises of

clients of the assessee. In view of the above we do not find any merit in the

conclusion of the assessing officer for disallowing the expenditure incurred by

the assessee and further we found no error in the conclusion drawn by the CIT

A whereby he had disallowed the disallowance made by the assessing officer

for than amount of Rs.131,91,325/-.

that the notices issued under section 133(6) were duly received by the five

persons namely Gautam Associate, Ram Kumar and Sons, Aporva Traders.

However, the reply to this said notices had not been filed by the said persons

nor they have attended hearing. In our view, the logical andconsequential steps

were required to be taken by the AO to ensure the presence of these persons by

invoking his power bestowed on him under section 272 A of the Act. Needful

was not done by the AO to enforce the presence of these persons. Therefore,

ITA No.352/Agr/2015 15 CO No.08/Agr/2017 AO failed to discharge his onus hence the detailed furnished by assessee in the

form of name and address invoices purchase of order bank account goes

unrebutted.It is for the AO to bring on record the evidence falsify the

confirmation and the invoices issued by these persons ,were not genuine . The

genuineness of the invoices and confirmation cannot be doubted merely on the

assumption that these 5 persons have not responded to the notices of the AO

despite the receiving the notice u/s 133(6), cannot be of ground to made the

addition. In our humble understanding, the coercive action has not been taken

by the AO to ensure the presence and attendance of these persons. AO take the

benefit of his own lapsesby not completeness the provisions of law. In view of

above, we do not find any error in the order passed by the CIT(A) and

accordingly appeal of the Revenue is dismissed.

GROUND NO.2 OF CO OF ASSESSEE

sustained the addition of Rs.24,59,915/- and in this regard it was submitted by

the ld. AR that the assessee had filed the confirmation of account of M/s Manish

Enterprises before this Tribunal (Pages 13 to 18) and had also filled same bills

and ledger. It was submitted that the ld. CIT(A) has not considered these

documents filed by the assessee before the ld. CIT(A).

ITA No.352/Agr/2015 16 CO No.08/Agr/2017 19. Per contra, the ld. DR had submitted that notice u/s 133(6) of the Act the M/s

Manish Enterprises return back showing that no such person lives at that

address (Iss Naam Ka Koi Nahi Hai). It was submitted that once the assessee

failed to furnish the complete address of Manish Enterprises , the notice sent to

this person returned back to AO as undelivered then the order passed by the

CIT(A) cannot be faulted with, as the assessing officer has no means to verify

and confirm the transaction.

record. In the written submission of the assessee, reproduced by the ld. CIT(A)

in respect to Manish Enterprises at Pages 48 to 52, the assessee was not able to

answer as to why the letter sent to Manish Enterprises came back undelivered

with the postal remark Iss Naam Ka Koi NahiHai.. The confirmation placed on

the record in respect of Manish Enterprises at Page 15 of the paper book, given

the date of confirmation as 01.04.2011 whereas the assessment order was

passed by the AO on 22.03.2013 and the notice u/s 143(2) was signed on the

assessee 27.09.2011 if it is presume that the confirmation was in existence at

the time of issuance of the notice then this confirmation should have been filed

before the authorities below at the appropriate stage. The said confirmations

were not filed before the lower authorities and therefore, the same cannot be

ITA No.352/Agr/2015 17 CO No.08/Agr/2017 considered at this stage in the absence of any application for considering the

additional document.

identity of the creditors by furnishing the correct address and PAN number.

Hence, the ground raised by the assessee in the CO is dismissed.

regard the ld. AR has not oppose the ground of the revenue and has submitted

that the matter may be decided in accordance with law.

learned DR had not made any submissions in this regard and has merely relied

upon the order passed by the lower authorities. On the contrary there was no

objection by the assessee for allowing this ground of the revenue. In the result

the ground raised by the revenue is allowed on account of the concession given

by the assessee.

assessee is dismissed

(Order pronounced in the open court on 19/08/2019

Sd/- Sd/- (Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member Dated: 19/08/2019 Aks Tour

ITA No.352/Agr/2015 18 CO No.08/Agr/2017

Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order

Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra