ITO WARD-1(40, JSR vs. M/S ANAND VIHAR CONSTRUCTION PVT LTD, JSR

1 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.335/Ran/2017 Assessment Year : 2014-2015 ITO, Ward-1(4), Jamshedpur vs M/s Anand Vihar Construction Pvt. Ltd., 12A, Rajendra Nagar, Near Durga Puja Maidan, Sakchi, Jamshedpur- 831001 PAN No. : AAACC 7476 R Respondent (Appellant) .. AND CO No.02/Ran/2018 Assessment Year : 2014-2015 M/s Anand Vihar Construction vs ITO, Ward-1(4), Pvt. Ltd., Jamshedpur 12A, Rajendra Nagar, Near Durga Puja Maidan, Sakchi, Jamshedpur-831001 PAN No. : AAACC 7476 R Respondent (Appellant) .. Revenue by Shri A.K.Mohanty,JCIT(Jr. DR) Assessee by Shri Devesh Poddar, Adv. Date of Hearing : 27.11.2018 Date of Pronouncement : 28.11.2018

O R D E R Per Pavan Kumar Gadale, JM:

The Revenue has filed this appeal against the order of CIT(A),

Jamshedpur, dated 12.09.2017 for the assessment year 2014-2015.

The assessee has also filed cross objection.

2 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018

(1) On the facts and in the circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 15,76,180/- in which the Assessing Officer did not find as to whether the remuneration paid is bogus.

(2) The Ld. CIT(A) erred in deleting the addition of Rs.2,15,01,768/- on account of disallowance u/s 40(a)(ia) i.e labour payment without making TDS on the ground that AO did not find whether the payment been made to any contractors or to supervisor monitoring the work and making labour payment.

(3) The Ld. CIT(A) erred in deleting additions made under the head material purchase amounting Rs.6,89,541/- without any reason and verification of facts.

(4) The Ld. CIT(A) erred in law & in fact has given relief of Rs. 71,128/- out of addition of Rs.6,10,411/- on the basis that the same is not proper.

(5) On the facts and in the circumstances of the case, Ld. CIT(A) erred in deleting the addition on account of Architect & MAP approval on the ground that the AO has not brought any cogent material to show that the expenses are either not accidental to business or bogus expenses and disallowance made on adhoc basis by the AO is not proper.

(6) Any other ground that may arise at the time of hearing.

builder/developer and filed return of income on 29.11.2014 for the A.Y.

2014-2015 declaring total income of Rs.7,54,980/-. Subsequently, the

case was selected for scrutiny and notice u/s.143(2) & 142(1) were

issued to the assessee. In compliance to the notice, the AR of the

assessee appeared and case was discussed. Accordingly, the AO

completed the assessment assessing total income of Rs.2,56,65,240/-

and made various additions and passed order u/s.143(3) of the Act,

dated 30.12.2016.

3 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018

before the CIT(A). In the appellate proceedings, the AR of the assessee

appeared and argued the grounds and reiterated the submissions

made before the AO. The CIT(A) after considering the submissions of

the assessee and the findings of AO, partly allowed the appeal of the

assessee.

both appeals before the Tribunal.

of Rs.15,76,180/- by the CIT(A), submitted that the remuneration is paid in

excess and also the CIT(A) has overlooked the findings of AO and granted

the relief. In respect of second ground the ld. DR submitted that the CIT(A)

has deleted the disallowance u/s.40(a)(ia) of the Act as the payment was

made to contractors or to the supervisors without deduction of TDS and

similarly ld. DR argued that the CIT(A) has granted relief of material

purchased without any basis and relief granted in respect of Rs.71,128/-

out of the addition of Rs.6,10,411/-. Ld. DR further supported the order of

AO and prayed for allowing the appeal of the Revenue.

drew our attention to the observation of CIT(A) at page 29 of the order and

similar in respect of deletion of addition by the CIT(A) on the labour

payments made to supervisor and the CIT(A) observed that the provisions

4 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 of Section 40(a)(ia) of the Act are not attracted and also supported with

other vital observations.

record. On the first issue, the contention of ld. DR is that the remuneration

is paid in excess and also the CIT(A) has overlooked the findings of AO.

We find that the CIT(A) while dealing with the disputed issue has observed

that even if income has not been shown by the Directors is considered, the

addition should have been resorted in respective hands of Directors and

not in the hands of assessee's company and deleted the addition. The

observations of the CIT(A) in this regard are as under :-

“4.3. I have gone through the order of the learned AO as well as the remand report and the written submission made by the appellant. The AO asserted that no remuneration has been paid to the Directors as Directors have not shown income under the head salary whereas the assessee has submitted that the Directors have shown remuneration as income from other sources. The Directors in his return of income have claimed certain expenses out of remuneration which was a factor to conclude the AO as such. So far section 40(a)(ia) is concerned, the same is not applicable. Hence the assessee's explanation on the line of section 40(a)(ia) is not proper. The AO did not find as to whether the remuneration paid is bogus. Even if income has not been shown by the Directors is considered, the addition should have been resorted in respective hands of Directors and not in the hands of assessee's company. Further the appellant also stated the revised section 40(a)(ia) of the IT Act amended vide Finance Act, 2014 which is applicable in A.Y. 2015-16 onwards. Based on above, the addition made of Rs. 15,76,180/- on account of section 40(a)(ia) of the IT Act is hereby deleted.” The CIT(A) in respect of second ground of addition of Rs.2,15,01,768/-

made on account of payment made to labour without deducting TDS, has

deleted the addition and observed as under :-

5 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 5. Ground no. 2 relates to addition of Rs. 2,15,01,768/-.

5.1 I have gone through the order of the learned AO, remand report as well as the written submission and counter comments on the remand report made by the appellant. The AO in his order has tried to infer that Shri Arun Kumar, Shri Suresh Prasad and Shri Utam Kumar are not Supervisor but contractor of the assessee. Whereas the assessee stated that they worked as their Supervisor and deeming them as contractor would be unjustified.

The appellant produced before me the salary attendance register for the F.Y. 2013-14, Bank statement of the supervisor shri Suresh Prasad Gupta and Arun Prasad Chaudhary and latest from the above two employees, wages sheet for the period 2013-14 relevant to A.Y. 2014-15, complete wage sheet, bank statement of company, address of Utam Kumar, Ledger of labour expenses with explanation and reason for none filing of Return by Suresh Prasad Gupta and Arun Kumar.

On going through the Remand report it has been stated that there were differences between the ledgers of the supervisors and the monthly statement as submitted during the assessment hearing but the appellant stated that may be due to programming/technical error, however total of the debit and credit entries over the year are in conformity with the ledger of the supervisors. Before the Ld. AO Shri Arun has accepted that he was working as supervisor for the company. Shri Suresh Prasad was present for statement on 30.08.2017 but it was already very late by the time statement of Arun Kumar was recorded. The appellant stated that Shri Utam Thakur had already left the company due to some differences with the company.

The Ld. AO at furnished in the tabular form the wage sheet and ledger of the three supervisor and compare the same with the wages payable ledger and worked out some differences for this the appellant stated that during the course of assessment proceeding this issue was raised as it was evident from point no. 2 page of the assessment order to which the assessee submitted that the labour charges in advertently included supply made by the Natraj Construction, Palak Construction and Vishwakarma Engg. Works. Thus it is seen that all the above three persons were working as supervisor in the said company for the relevant year. Based on above, I do not find in disallowance made by the AO as the payment has not been made to any contractors but to Supervisor to monitor the work and to make labour payment. Hence section 194C does not attract in this case and therefore consequential disallowance u/s 40(a)(ia) is also not attracted.

6 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 Therefore disallowance made for Rs. 2,15,01,768/- is not proper and is hereby deleted. Further the CIT(A) in respect of third ground, has granted relief of

Rs.71,128/- out of the total addition of Rs.6,10,411/- and has observed as

under :-

of appeal only and supported the order of Assessing Officer and could not

bring any new cogent evidence to controvert the above findings of the

CIT(A). Accordingly, we are of the opinion that the CIT(A) has passed a

reasoned order, which we uphold the same and dismiss the grounds of

appeal of Revenue.

7 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 40a(ia), disallowance out of material purchased and estimated disallowance out of expenses claimed. 2. For that Ld. CIT(A) was not justify in confirming addition of s. 5,98,282/- correct figure 5,39,282/- being payment to MNAC for Map approval which is fully verifiable. There is mistake for the figures referred in assessment order to the extent that the figure of Rs.3,38,000/- has been referred as 3,80,000/- for making addition. The addition sustained by Ld. CIT(A) is fit to be deleted. 3. For that Ld. CIT(A) was not justified in charging interest at assessed income following the decision of Hon'ble Jharkhand High Court which is binding on the authorities below for the state of Jharkhand. Interest can only be charged on the return income not on the assessed income

the order of CIT(A) and expressed that the order of CIT(A) is a speaking

and detailed order.

in the addition made by the AO which the CIT(A) has overlooked the same

and sustained the addition. We find that the AO while making disallowance

under the head Architect Drawing & MAP Approval has found that the

same are contradictory to each other therefore, the AO disallowed 10% of

the same. The observations of the AO are as under :-

On perusal of details of expenditure under the head Architect Drawing & MAP Approval & ledger copy of expenditure & ledger shows that both are different. Details of expenditure shows name wise payment & other shows date of payment. Ledger shows that on 18.11.2013, assessee had made payment of Rs.3,80,000/-, whereas perusal of MNAC Passing charges shows that on 30.06.2013 assessee had made payment of Rs.3,80,000/- through IDBI bank. Thus same amount of payment was included in both the ledger i.e. Architect Drawing 8s MAP Approval & under the head MNAC Passing Charges. Thus it is proved that one of them is bogus. Accordingly Rs.3,80,000/- debited under the head Architect

8 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 Drawing & MAP approval, is disallowed is added to the total income. Further details of payment under this head shows Rs.2,01,282/- was paid to Shrithee Designer 8s no TDS was deducted over it. No reply for the above was furnished by the assessee. Hence, the same is disallowed because as the provisions of section 40(a)(ai) of the I.T.Act,1961 same is disallowable expenditure. Further as the details & ledger furnished by the assessee under the head Architect Drawing & MAP Approval are contradictory to each other, 10% of Rs.7,11,280/- (12,50,562 - 2011282 - 3,38,000) is disallowed & to total income of the assessee. Thus total of expenditure disallowed under this head comes to Rs.6,10,410/-(Rs.2,01,282/- +Rs.3,38,000/- +RS.71,128/-). Whereas on perusal of the CIT(A) order, we find that the CIT(A) while

dealing with the disputed issue has observed that “So far disallowance of

Rs.3,80,000/- and Rs.2,01,282/- is concerned, the AO has inferred is

correct.” We find that the AO has observed that Rs.3,80,000/- has been

debited by the assessee under the head Architect Drawing & MAP

approval, and disallowed same, however, on calculation of 10%

disallowance of the total expenditure of Rs.6,10,410/-, the AO has wrongly

mentioned as Rs.3,38,000/- instead of Rs.3,80,000/-. The CIT(A) has also

overlooked the same. Therefore, we restore this disputed issue to the file

of Assessing Officer for a limited purpose and direct the Assessing Officer

to consider the actual expenses. This ground of Cross Objection of the

assessee is allowed for statistical purposes.

CIT(A) for charging of interest u/s.234B of the Act. The ld.AR submitted

that this issue is covered in favour of the assessee on the decision of

9 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 jurisdictional High Court in case of Ajay Prakash Verma in ITA No.38 of

2010 reported in 2013(1) TMI 140, wherein the hon’ble High Court has held

that interest u/s.234B can be levied only on the returned income and not on

the assessed income.

of AO and supported his orders.

record. Prima facie the disputed issue, being charging of interest u/s.234A

& 234B as envisaged by ld. AR, is covered by the decision of Hob’ble

jurisdictional High Court in the case of Ajay Prakash Verma in ITA No.38 of

2010 reported in 2013(1) TMI 140. The Hon’ble Court in Para23&24 held

as under :-

"23. Learned counsel for the appellant submitted that it has been ordered by the AO that interest be charged as per rule. Interest can be levied under Section 234A and 234B of the Act. It is submitted that in view of the judgment of Full Bench of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari Vrs. Commissioner of Income-tax reported in [2001] the interest cannot be levied over the assessed income and it can be levied only on the income declared in the return. The revenue preferred SLP before Hon'ble Supreme Court against the said judgment of the Full Bench of Patna High Court, which was dismissed by the Hon'ble Supreme Court on merits vide order dated 01.08.2000 by saying that there is no merit in the appeal. 24. Learned counsel for the revenue could not dispute this legal position. Therefore, so far as question of law involved in this appeal that whether the interest could have been levied against the assessed income of the assessee under Sections 234A and 234B is concerned, in view of the Full Bench judgment of Ranchi Bench of Patna High Court delivered in the case of Smt.

10 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018 Tej. Kumari, the revenue can levy the interest only on the total income declared in the returns and not on the income assessed and determined by the AO to that extent. The orders passed by the authorities below are accordingly modified and interest shall be chargeable in the light of the Full Bench judgment, referred above." 17. Ld. AR also placed reliance on the decision of coordinate bench of

the Tribunal in the case of Shri Girdhari Lal Sharma vs. ITO, Ward-1(4),

Jamshedpur in ITA No. 31/Ran/2013 by an order dated 07.05.2012 in para

No. 6 relying upon the above decision of the Hon'ble Jharkhand High Court

held :-

"We accordingly following the above decision, direct the Assessing Officer to re-compute the interest under section 2348 on the basis of the total income declared by the assessee in the return filed." 18. We respectfully following the decision of the jurisdictional High Court

and the decision of coordinate bench of the Tribunal direct the AO to

recomputed the interest u/s.234B on the basis of total income declared by

the assessee in the return filed. This ground of Cross Objection of the

assessee is allowed.

objection of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 28/11 /2018 Sd/- Sd/- (N.S.SAINI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ranchi, Dated 28/11/2018 Prakash Kumar Mishra , Sr. Ps

11 ITA Nos.335/Ran/2017 And CO No.02/Ran/2018

Copy of the Order forwarded to : 1. The Appellant –