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Facts
The assessee, Mayur Vasant Patel, appealed against the order of the Ld. CIT(A) for AY 2015-16. The appeal raised several grounds, including gross errors in law and facts by the lower authorities, violation of natural justice, confirmation of additions and disallowances without proper appreciation of facts and evidence, and incorrect disallowance of labour expenditure and supervisory charges.
Held
The Tribunal found that the Ld. CIT(A) should have directed the assessee to file applications for new evidence rather than dismissing the appeal outright. The Tribunal restored the issues concerning subcontractor expenses, supervisory charges, other expenses, difference in net profit, and refund interest back to the file of the Ld. CIT(A) with directions to allow the assessee to file necessary applications and supporting documents.
Key Issues
Whether the disallowances made by the Assessing Officer and confirmed by the CIT(A) for subcontractor expenses, supervisory charges, other expenses, and interest were justified, especially concerning the rejection of additional evidence and opportunity for the assessee to represent their case.
Sections Cited
40(a)(ia), 194C, 234A, 234B, 234C
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 15.04.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2015-16, raising following grounds:
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Both the lower authorities have passed the orders without properly 1. Both the lower authorities have passed the orders without properly 1. Both the lower authorities have passed the orders without properly appreciating the facts, without understanding the appreciating the facts, without understanding the law, without proper law, without proper application of mind and they have further erred in grossly ignoring application of mind and they have further erred in grossly ignoring application of mind and they have further erred in grossly ignoring submissions, explanations and information submitted by the appellant submissions, explanations and information submitted by the appellant submissions, explanations and information submitted by the appellant which ought to have been considered before passing the impugned which ought to have been considered before passing the impugned which ought to have been considered before passing the impugned order. This action of the lower aut order. This action of the lower authorities is in clear breach of law and horities is in clear breach of law and principles of natural justice and therefore deserves to be quashed. principles of natural justice and therefore deserves to be quashed. principles of natural justice and therefore deserves to be quashed. 2. The learned CIT(A) has grossly erred in law and on facts and in The learned CIT(A) has grossly erred in law and on facts and in The learned CIT(A) has grossly erred in law and on facts and in circumstances of the case and violated the principals of natural justice circumstances of the case and violated the principals of natural justice circumstances of the case and violated the principals of natural justice by disregarding the evidences submitted before CIT(A) merely on the arding the evidences submitted before CIT(A) merely on the arding the evidences submitted before CIT(A) merely on the ground of not filing application under rule 46A of the Act and passed ground of not filing application under rule 46A of the Act and passed ground of not filing application under rule 46A of the Act and passed the order without giving any proper opportunity to the appellant to the order without giving any proper opportunity to the appellant to the order without giving any proper opportunity to the appellant to represent the case. represent the case. 3. The learned CIT(A) has grossly erred 3. The learned CIT(A) has grossly erred in law and on facts and in in law and on facts and in circumstances of the case in confirming the addition of Rs. circumstances of the case in confirming the addition of Rs. circumstances of the case in confirming the addition of Rs. 3,64,20,500/- (Rs. 3,62,76,500/ (Rs. 3,62,76,500/- plus Rs. 1,44,000/-) without verifying ) without verifying the facts available on record. the facts available on record. 4. The learned CIT(A) has erred in law and on facts and in 4. The learned CIT(A) has erred in law and on facts and in 4. The learned CIT(A) has erred in law and on facts and in circumstances by confirming the disallowance of genuine labour stances by confirming the disallowance of genuine labour stances by confirming the disallowance of genuine labour expenditure paid to labourers through 'Mukadums' amounting to Rs. expenditure paid to labourers through 'Mukadums' amounting to Rs. expenditure paid to labourers through 'Mukadums' amounting to Rs. 2,36,97,500/- during the year under consideration. during the year under consideration. 5. The learned CIT(A) has erred in law and on facts and in The learned CIT(A) has erred in law and on facts and in The learned CIT(A) has erred in law and on facts and in circumstances by confir circumstances by confirming the disallowance of genuine labour ming the disallowance of genuine labour expenditure paid to genuine subcontractors' as expenditure (subject to expenditure paid to genuine subcontractors' as expenditure (subject to expenditure paid to genuine subcontractors' as expenditure (subject to TDS) amounting to Rs. 1,25,79,000/ TDS) amounting to Rs. 1,25,79,000/-thereby ignoring the fact that TDS thereby ignoring the fact that TDS has already been deducted on the said expenditure and accordingly has already been deducted on the said expenditure and accordingly has already been deducted on the said expenditure and accordingly failed to consider that AO's contention of bogus expenditure merely on consider that AO's contention of bogus expenditure merely on consider that AO's contention of bogus expenditure merely on the allegation of non the allegation of non-deduction of TDS is incorrect. 6. The learned AO and CIT (A) has erred in law and facts of the case by 6. The learned AO and CIT (A) has erred in law and facts of the case by 6. The learned AO and CIT (A) has erred in law and facts of the case by wrongly presuming that the appellant is liable for deduction of TDS o wrongly presuming that the appellant is liable for deduction of TDS o wrongly presuming that the appellant is liable for deduction of TDS on supervisory charges (paid as contractual Salary) amounting to Rs. supervisory charges (paid as contractual Salary) amounting to Rs. supervisory charges (paid as contractual Salary) amounting to Rs. 4,80,000/- and thereby making disallowance of 30% of supervisory and thereby making disallowance of 30% of supervisory and thereby making disallowance of 30% of supervisory charges amounting to Rs 1,44,000/ charges amounting to Rs 1,44,000/- under section 40(a)(ia) of the Act. under section 40(a)(ia) of the Act. 7. Without prejudice to the above, the learned CIT ( 7. Without prejudice to the above, the learned CIT (A) has grossly erred A) has grossly erred in law and facts by confirming addition made by the learned AO in law and facts by confirming addition made by the learned AO in law and facts by confirming addition made by the learned AO without providing "Virtual hearing" even though the appellant has timely without providing "Virtual hearing" even though the appellant has timely without providing "Virtual hearing" even though the appellant has timely responded to notice of opportunity of virtual hearing issued by the responded to notice of opportunity of virtual hearing issued by the responded to notice of opportunity of virtual hearing issued by the Learned CIT (A). Hence, it is c Learned CIT (A). Hence, it is clear breach of principal of Natural Justice lear breach of principal of Natural Justice and therefore deserves to be quashed. and therefore deserves to be quashed. 8 The AO has erred in law and on facts and in circumstances of the The AO has erred in law and on facts and in circumstances of the The AO has erred in law and on facts and in circumstances of the case by levying interest u/s. 234A, 234B and 234C. case by levying interest u/s. 234A, 234B and 234C. 9. On the facts and merits of the case, the appellant cr 9. On the facts and merits of the case, the appellant cr 9. On the facts and merits of the case, the appellant craves for admission of additional evidences in the interest of natural justice and admission of additional evidences in the interest of natural justice and admission of additional evidences in the interest of natural justice and equity.
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We have heard rival submissions and perused the relevant We have heard rival submissions and perused the relevant We have heard rival submissions and perused the relevant material on record. The ground No. 2 of the appeal relates to material on record. The ground No. 2 of the appeal relates to material on record. The ground No. 2 of the appeal relates to sustaining of disallowance sustaining of disallowance by the Ld. CIT(A) for non-filing application under Rule 4 application under Rule 46A of the Income-tax Rules, 1962 (in short tax Rules, 1962 (in short ‘the Rules’). In view of the same ‘the Rules’). In view of the same, the adjournment application filed the adjournment application filed by the assessee was rejected. We find that the assessee is a by the assessee was rejected. We find that the assessee is a by the assessee was rejected. We find that the assessee is a contractor and during the course of the assessment proceedings, contractor and during the course of the assessment proceedings, contractor and during the course of the assessment proceedings, the the the Assessing Assessing Assessing Officer Officer Officer made made made following following following disallowance disallowance disallowance (i) (i) (i) Rs.3,62,76,500/- out of sub out of sub-contractor for the reason that no the reason that no documentary evidence in support of claim were filed and also TDS documentary evidence in support of claim were filed and also TDS documentary evidence in support of claim were filed and also TDS was not deducted u/s 194C of the Act, (ii) an amount of was not deducted u/s 194C of the Act, (ii) an amount of was not deducted u/s 194C of the Act, (ii) an amount of Rs.1,44,000/ out of Rs.1,44,000/ out of Rs.4,80,000/- under the head ‘supervisory under the head ‘supervisory charges’ for the reason that no tax was deducted at source and charges’ for the reason that no tax was deducted at s charges’ for the reason that no tax was deducted at s therefore, 30% of the corresponding expenditure amounting to therefore, 30% of the corresponding expenditure amounting to therefore, 30% of the corresponding expenditure amounting to Rs.1,44,000/- was disallowed invoking section 40(a)(ia) of the Act disallowed invoking section 40(a)(ia) of the Act disallowed invoking section 40(a)(ia) of the Act. (iii) Rs.4,00,000/- out of the sundry expenses of Rs.4,99 out of the sundry expenses of Rs.4,99 out of the sundry expenses of Rs.4,99,277/- claimed by the assessee for the reason that claimed by the assessee for the reason that in profit in profit and loss account account only only Rs.99,277/ Rs.99,277/- were debited. . (iv) (iv) difference difference of of Rs.2,61,384/- in net profit shown in a in net profit shown in audit report and and computation of the income (v) interest on income interest on income-tax refund amounting to tax refund amounting to Rs.4,092/- was not declared was not declared in return of income.
2.1 On further appeal, the assessee challenged the disallowance her appeal, the assessee challenged the disallowance her appeal, the assessee challenged the disallowance made out of the sub made out of the sub-contractor expenses, supervisory charges, contractor expenses, supervisory charges, difference in expenditure payment, difference in net profit as per the difference in expenditure payment, difference in net profit as per the difference in expenditure payment, difference in net profit as per the
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profit and loss account and computation profit and loss account and computation and refund and refund interest. Regarding the sub-contractor expenses contractor expenses, it was submitted by the it was submitted by the assessee that out of total expenditure of Rs.3,62,76,500/- expenses assessee that out of total expenditure of Rs.3,62,76,500/ assessee that out of total expenditure of Rs.3,62,76,500/ of Rs.46,49,000/- were paid to M/s Abhishek Enterprises and were paid to M/s Abhishek Enterprises and were paid to M/s Abhishek Enterprises and Rs.79,30,000/- paid to Masoom Enterprises paid to Masoom Enterprises and TDS was deducted and TDS was deducted as per provisions of the Act and the balance payment of isions of the Act and the balance payment of isions of the Act and the balance payment of Rs.2,36,97,500/- was a was a composite cash payment to labourers composite cash payment to labourers which was paid through their manager i.e. “Madkums/Sardars” paid through their manager i.e. “Madkums/Sardars” paid through their manager i.e. “Madkums/Sardars” and therefore, same was not liable for the TDS. The assessee filed and therefore, same was not liable for the TDS. The assessee filed and therefore, same was not liable for the TDS. The assessee filed additional evidence in s additional evidence in support of its claim before the Ld. CIT(A) upport of its claim before the Ld. CIT(A) however, same was rejected in absence of any application filed by however, same was rejected in absence of any application filed by however, same was rejected in absence of any application filed by the Ld. CIT(A) under Rule 46A the Ld. CIT(A) under Rule 46A of the Rules. The relevant finding of of the Rules. The relevant finding of the Ld. CIT(A) is reproduced as under: the Ld. CIT(A) is reproduced as under:
“e. The onus is on the appellant assessee The onus is on the appellant assessee to prove the creditworthiness to prove the creditworthiness and genuineness of the transactions, which is a legal stand taken and and genuineness of the transactions, which is a legal stand taken and and genuineness of the transactions, which is a legal stand taken and In In case case of of : : Chuharmal Chuharmal S/O S/O upheld upheld by by various various courts. courts. TakarmalMohnanivs Commissioner Of Income TakarmalMohnanivs Commissioner Of Income-Tax on 2 May 1988 Tax on 2 May 1988 the Hon. Supreme Court has held that: the Hon. Supreme Court has held that: “In that view of the matter and in view of the principles behind In that view of the matter and in view of the principles behind In that view of the matter and in view of the principles behind the purpose of Explanation, the assessee in the instant case, has the purpose of Explanation, the assessee in the instant case, has the purpose of Explanation, the assessee in the instant case, has failed to discharge his onus of proof. failed to discharge his onus of proof. The aforesaid Explanation was The aforesaid Explanation was amended by Finance Act, 1964 with effect from 1 amended by Finance Act, 1964 with effect from 1st April, April, 1964. The amendment was prospective in effect and in the year under reference the amendment was prospective in effect and in the year under reference the amendment was prospective in effect and in the year under reference the amendment was in force. Though the penalty proceedings are penal in amendment was in force. Though the penalty proceedings are penal in amendment was in force. Though the penalty proceedings are penal in nature but in the facts of this case the onus on revenue has been duly nature but in the facts of this case the onus on revenue has been duly nature but in the facts of this case the onus on revenue has been duly discharged. In the aforesaid view o In the aforesaid view of the matter, there is no merit in this application for f the matter, there is no merit in this application for leave to appeal and it is accordingly dismissed leave to appeal and it is accordingly dismissed” According to the Supreme Court Judgment the onus is on the According to the Supreme Court Judgment the onus is on the According to the Supreme Court Judgment the onus is on the Appellant assessee to prove the genuineness and creditworthiness Appellant assessee to prove the genuineness and creditworthiness Appellant assessee to prove the genuineness and creditworthiness of the transaction but in t of the transaction but in the present case the appellant assessee he present case the appellant assessee has grossly failed to do so. It is the assessee who has to provide has grossly failed to do so. It is the assessee who has to provide has grossly failed to do so. It is the assessee who has to provide the documentary evidences in support of its claim but the the documentary evidences in support of its claim but the the documentary evidences in support of its claim but the
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appellant assessee has not provided relevant documentary appellant assessee has not provided relevant documentary appellant assessee has not provided relevant documentary evidences with its submissions. evidences with its submissions. f. Moreover the appellant assessee has submitted the documents like Moreover the appellant assessee has submitted the documents like Moreover the appellant assessee has submitted the documents like subcontractor bills etc. to this Appellate authority. These documents were subcontractor bills etc. to this Appellate authority. These documents were subcontractor bills etc. to this Appellate authority. These documents were not not not submitted submitted submitted before before before the the the Assessing Assessing Assessing officer officer officer during during during assessment assessment assessment proceedings. But while submitting fresh/new documents w proceedings. But while submitting fresh/new documents w proceedings. But while submitting fresh/new documents with this appellate authority the appellant assessee has not filed any application appellate authority the appellant assessee has not filed any application appellate authority the appellant assessee has not filed any application under Rule 46A for this purpose. under Rule 46A for this purpose.” 2.1 In our opinion, the Ld. CIT(A) should have directed the In our opinion, the Ld. CIT(A) should have directed the In our opinion, the Ld. CIT(A) should have directed the assessee to file said application assessee to file said application rather than dismissing the ground rather than dismissing the ground of appeal of assessee. H f assessee. He should not have dismissed dismissed the appeal without providing opportunity to opportunity to the assessee for filing such an for filing such an application. In the circumstances, we feel it appropriate to restore application. In the circumstances, we feel it appropriate to restore application. In the circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) this issue back to the file of the Ld. CIT(A) with the direction to th with the direction to the assessee to file such an application assessee to file such an application before the ld CIT(A) before the ld CIT(A) and then ld CIT(A) shall decide the issue in accordance with law. The assessee decide the issue in accordance with law. The assessee decide the issue in accordance with law. The assessee is it liberty to file all necessary document in support of its claim of all necessary document in support of its claim of all necessary document in support of its claim of the expenditure.
2.2 The other grounds The other grounds including in respect of supervisory charges in respect of supervisory charges also the assessee did not provide necessary explanation as why the also the assessee did not provide necessary explanation as why the also the assessee did not provide necessary explanation as why the TDS was not applicable. In the interest of justice we feel it TDS was not applicable. In the interest of justice we feel it TDS was not applicable. In the interest of justice we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) to appropriate to restore this issue back to the file of the Ld. CIT(A) to appropriate to restore this issue back to the file of the Ld. CIT(A) to direction to the assessee filed necessary documents in support of assessee filed necessary documents in support of assessee filed necessary documents in support of claim.
2.3 Similarly, regarding regarding the difference in other expenses payment the difference in other expenses payment of Rs.4,00,000/-; difference in net profit as per profit and loss difference in net profit as per profit and loss difference in net profit as per profit and loss account and computation of income of Rs.2,61,384/- and refund account and computation of income of Rs.2,61,384/ account and computation of income of Rs.2,61,384/
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interest of Rs.4,092/ interest of Rs.4,092/-, the Ld. CIT(A) has mentioned that no he Ld. CIT(A) has mentioned that no submissions or documentary evidence in support of its claim were submissions or documentary evidence in support of its claim submissions or documentary evidence in support of its claim filed by the assessee and therefore, he rejected the grounds of the filed by the assessee and therefore, he rejected the grounds of the filed by the assessee and therefore, he rejected the grounds of the assessee. In the interest of justice, we feel it appropriate to provide assessee. In the interest of justice, we feel it appropriate t assessee. In the interest of justice, we feel it appropriate t one more opportunity to the assessee to file documentary evidence one more opportunity to the assessee to file documentary evidence one more opportunity to the assessee to file documentary evidence in support his claim of the expenses claimed. in support his claim of the expenses claimed.
2.4 The relevant grounds of appeal are accordingly allowed for The relevant grounds of appeal are accordingly allowed for The relevant grounds of appeal are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee i In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee i statistical purposes.
Order pronounced in the open Court on nounced in the open Court on 19/08/2024. /08/2024. Sd/- - Sd/- (SUNIL KUMAR SINGH (SUNIL KUMAR SINGH) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 19/08/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai