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Income Tax Appellate Tribunal, DELHI BENCH : A : NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI R.K. PANDA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessment Year: 2012-13 ACIT, Vs Bhagwati Contractor, Circle-62(1), G-195-196, Prashant Vihar, New Delhi. New Delhi. PAN: AAEFB0648K (Appellant) (Respondent) Assessee by : Shri S.K. Bajpayee, CA & Shri Amit Kumar, CA Revenue by : Shri S.L. Anuragi, Sr. DR Date of Hearing : 05.02.2020 Date of Pronouncement : 19.02.2020 ORDER
PER R.K. PANDA, AM:
This appeal filed by the Revenue is directed against the order dated 28th February, 2017 of the CIT(A)-20, New Delhi, relating to assessment year 2012-13.
Facts of the case, in brief, are that the assessee is a joint venture engaged in the business of road under bridges by box pushing technique with two partners, namely, Shri Ravi Kant Singhal and Shri J.P. Singhal having profit ratio of 30% and 70% respectively. It filed its return of income on 30th September, 2012 declaring the income at Rs.1,58,13,780/-. During the course of assessment proceedings, the AO noted that as against the total gross receipts of Rs.22,89,71,802/- shown by the assessee in the Profit & Loss Account, the Form No.26AS shown such receipt at Rs.23,33,93,490/-. Since the assessee could not reconcile the difference, the AO made addition of Rs.44,21,680/- to the total income of the assessee. Similarly, the AO made an addition of Rs.1,02,99,973/- being 15% of the purchases shown by the assessee at Rs.6,86,66,489/- on the ground that the assessee could not furnish the details of bills and vouchers which are missing and was unable to give complete details in the required format. The AO further made addition of Rs.77,79,975/- being 15% of the labour and wages expenses declared at Rs.5,18,66,504/- on the ground that the assessee could not give the details of labour and wages expenses as appearing in the books of account. The AO, similarly, made addition of Rs.1,889/- being interest on TDS debited by the assessee. He also made various other additions which are not subject matter of appeal and which we are not dealing with. The AO accordingly completed the assessment u/s 143(3) determining the total income at Rs.3,84,93,850/-.
In appeal, the ld.CIT(A) deleted the addition of Rs.1,02,99,973/- towards unverifiable purchases, Rs.77,79,975/- towards labour charges and Rs.1,889/- towards payment of interest on TDS. So far as the addition of Rs.44,21,688/- towards undisclosed gross receipt is concerned, he directed the AO to reduce the same to Rs.4,94,250/-.
Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:- “(I) In the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the addition of Rs. 1,02,99,973/- towards unverifiable purchase. (II) In the fact and circumstances of the case, the Ld. CIT(A) has erred in allowing the addition of Rs.77,79,975/- towards labor purchase. (III) In the fact and circumstances of the case, the Ld. CIT(A) has erred in allowing the addition of Rs.1889 /- towards payment of interest on TDS. (IV) In the fact and circumstances of the case, the Ld. CIT(A) has erred in reducing the addition of Rs.44,21,688/- towards undisclosed gross receipts to Rs. 4,94,250/-. (V) That the appellant craves, leave to add, amend or modify the ground(s) of appeal at any time.”
We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered various decisions cited by both the sides. So far as the first ground of appeal by the Revenue relating to deletion of Rs.1,02,99,973/- is concerned, we find the ld.CIT(A) deleted the addition by observing as under:- “{5.3} Decision: - The Assessing Officer has made the disallowance of Rs.1,02,99,973/- on the ground that most of the bills & voucher were missing and some were self generated. However, no specific instance of missing bills or self made voucher was mentioned by the Assessing Officer. During the course of appellate proceedings, in exercise of my powers under section 250(4) of the Act, vide order sheet entry dated 05.10.2016 the appellant was asked to produce all the bills & vouchers of purchase, ledger account and labour payment muster roll which was produced by the appellant vide letter dated 24.11.2016. Further, I find merit in the contention of the appellant that there is a decrease in the purchase in the current A.Y. which is 32.94% against the claim of purchase in A.Y. 2011- 12 of 35.93% and there is an increase in the gross profit ratio from 11.60% in A.Y. 2011- 12 to 10.90% in A.Y. 2012-13. Further, the net profit of the appellant is shown @7.33% which is reasonable in the case of the contractor. This clearly indicates that the ad-hoc addition made by the Assessing Officer without pointing out any specific defect cannot be sustained, hence deleted.”
Similarly, he deleted the disallowance of labour and wages expenses of Rs.77,79,975/- as per ground of appeal No.2 by the Revenue by observing as under:- “{6.3} Decision: - The Assessing Officer has made the addition of Rs.77,79,975/- under this head on the ground that the appellant has not produced the details of labour and wages. During the course of appellate proceedings, in exercise of my powers under section 250(4) of the Act, vide order sheet entry dated 05.10.2016 the appellant was asked to produce all the major bills & vouchers relating to labour payment and muster roll which was produced by the appellant vide letter dated 24.11.2016. Further, I find merit in the contention of the appellant that the labour and wages payment is 22.65% of the gross receipt which is similar in previous A.Y. and there is an increase in the gross profit ratio from 11.60% in A.Y. 2011-12 to 10.90% in A.Y. 2012-13. Further, the net profit of the appellant is shown @7.33% which is reasonable in the case of the contractor. In this light, the addition made under this head is deleted.”
7. So far as the order of the CIT(A) deleting the above two additions are concerned, we find the assessee has not given the requisite details before the AO for which he made ad hoc disallowances. The ld. CIT(A), while deleting the above two additions have neither called for a remand report nor given an opportunity to the AO. The Hon’ble Delhi High Court in the case of CIT vs. Jansampark Advertising & Marketing (P) Ltd., 375 ITR 373, has held that although it is the obligation of the AO to conduct proper scrutiny of material, in event of AO failing to discharge his functions properly, obligation to conduct proper enquiry shifts to Commissioner (Appeals) and Tribunal and they cannot simply delete addition made by AO on ground of lack of inquiry. Similarly, the Hon’ble Delhi High Court in the case of CIT vs. Manish Build Well (P) Ltd. reported in 245 CTR 397, has held that where additional evidence was admitted and accepted as genuine at first appellate stage without Assessing Officer furnishing his comments and without verification, requirement of Rule 46A(3) were not satisfied. Since, in the instant case, the ld.CIT(A) has deleted the addition basically on the ground that no specific instance of missing bills or self-made vouchers was mentioned by the AO and going by the general principles, he deleted the addition, therefore, the same, in our opinion, is not proper. For claiming any expenditure as allowable business expenditure, the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the genuineness of such expenditure incurred wholly and exclusively for the business. Since the assessee, in the instant case, has failed to discharge the onus cast on it before the AO and the ld.CIT(A) has deleted the addition merely on the basis of the statements made by the assessee without giving any opportunity to the AO for his comments, therefore, considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT(A) with a direction to grant an opportunity to the AO to go through the various details filed by the assessee and offer his comments and the CIT(A) shall decide the issue thereafter as per fact and law, after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds No.1 and 2 are accordingly allowed for statistical purposes.
8. So far as the ground No.3 relating to the deletion of addition of Rs.1,889/- made on account of interest on TDS is concerned, we find, the ld.CIT(A), following the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Oriental Insurance Company Ltd., reported in 183 Taxman 186, deleted the addition. The ld. DR could not controvert with any evidence so as to take a contrary view than the view taken by the ld.CIT(A). Since the ld.CIT(A) has deleted the addition basing on the decision of the Hon’ble Karnataka High Court, therefore, we do not find any infirmity in the order of the CIT(A) on this issue. Therefore, the same is upheld. Ground No.3 is accordingly dismissed.
9. So far as the reduction of the addition of Rs.44,21,688/- towards undisclosed gross receipt to Rs.4,94,250/- as per Ground No.4 is concerned, we find the ld.CIT(A) at para 4.4 of the order has discussed the issue and observed as under:- “{4} Decision: - The submission of the appellant has been considered and verified from the accounts of the appellant as well as from 26AS statement. From this, it is gathered that out of the total amount of gross receipt of Rs.23,33,93,490/- the interest income is of Rs.32,18,001/-. This interest income has already been shown by the appellant in the P&L account in the following manner: - Particulars As per 26AS As per P&L account Remarks Interest from Dena 1727620 1833081 The appellant has Bank shown excess income of Rs.105461 Interest from PNB 1490381 996131 The appellant has shown less income by Rs.494250
During the course of appellate proceedings the appellant was asked to explain the same and in response it is explained that this income of A.Y. 2012-13 has already been shown by the appellant in A.Y. 2015-16 in the following manner:- A.Y. 2012-13 Particulars Amount Interest Income (PNB) as Profit & loss A/c for the F.Y. 2011-12 996131 Interest Income (PNB) as per 26AS for the F.Y. 2011-12 1490381 Difference In interest Income -494250
Particulars Amount Interest Income as Profit & loss A/c for the F.Y. 2014-15 1200715 Interest Income as per 26AS for the F.Y. 2014-15 1490381 Excess Income booked 571647 The submission of the appellant has been considered and it is found that regarding Dena Bank the appellant has shown excess income of Rs.1,05,461/- in this year, hence, no disallowance is called for on this account. But regarding interest income relating to PNB the appellant has shown less income of Rs.4,94,250/- as per chart above. As the appellant is maintaining mercantile system of accounting and income has accrued in the current year only, there is no logic in the submission of the appellant that this income has been shown in A.Y. 2015-16. Hence, the difference of interest income of PNB is liable to be added in this year and addition of Rs.4,94,250/- on this account is confirmed. However, as the appellant has claimed that this amount of Rs.4,94,250/- has already been shown and offered as income in A.Y. 2015-16 and this will amount to double addition, the appellant is free to move a 154 petition before Assessing Officer for the same. Regarding the balance difference of Rs.12,03,687/- i.e. the difference of the gross receipt as per 26AS of Rs.23,01,75,489/- and as per P&L account of Rs. 22,89,71,802/- the appellant has submitted the above mentioned chart with the copy of ledger account of A.Y. 2010-11, 2011-12 and 2012-13. This fact is verified from the ledger and account of the appellant that the difference is due to the system of accounting and regarding the OFFICE OF EXECUTIVE ENGINEER BED VI JAISALMER the difference is arising as appellant has already shown the amount of Rs.27,10,369/- in A.Y. 2011-12 under gross receipt. Further, the difference of Rs.1,27,399/- in relation to EXECUTIVE ENGINEER BORDER FENCING DIV-IV. CPWD THARAD has already been shown in. A.Y. 2011-12 under gross receipt. Besides this, the difference in relation to JAISALMER CENTRAL DIVISION and EXECUTIVE ENGINEER BORDER FENCING DIV-V, SECTOR H 0 BSF CAMPUS BARMER of Rs.7,23,701/- and Rs.95,430/- respectively is excess income shown in the gross receipt as per P&L account. The remarks column of the 7 above mentioned chart 'shown in next year’ and 'shown in A.Y. 2013-14' indicates about the income shown as per 26AS in subsequent years and the remarks ‘shown in previous year dated 26.03.2011' and 'shown in previous year dated 15.05.2011’ indicates the income shown by the appellant in the P&L account. After verification, I have come to the conclusion that the Assessing Officer has wrongly added the difference in the gross receipt. Form 26AS is a statement generated at the end of the year, and the appellant cannot be in any manner held responsible for such discrepancy. In case of doubt, the matter is to be investigated by the Assessing Officer in the light of system of accounting, which the Assessing Officer has failed to do in the present case. The Assessing Officer have also failed to see that interest income from Dena Bank and PNB has separately been shown in the P&L account. In this light, the additions of Rs.39,27,438/- (4421688 -494250) on account of difference in the gross receipt is deleted and the amount of Rs.4,94,250/- the difference in the interest income from PNB is confirmed.”
After going through the above, we find, the ld.CIT(A), while reducing the addition from Rs.44,21,688/- to Rs.4,94,250/-, has verified each and every entry and has given a factual finding which could not be controverted by the ld. DR. Since the order of the CIT(A) is based on factual aspect which remains uncontroverted by the Revenue, therefore, we find no infirmity in the order of the CIT(A) reducing the addition to Rs.4,94,250/- from Rs.44,21,688/- made by the AO. Accordingly, the order of the CIT(A) on this issue is upheld and the ground raised
by the Revenue is dismissed.