DCIT 20(2), MUMBAI vs. PRUTHVI GAURICHAND SHAH, MUMBAI

Order under section 254(1) of Income Tax Act PER PAWAN SINGH JUDICIAL MEMBER: 1. This appeal under section 253 of the Income Tax Act (‘Act’) is directed by Revenue against the order of Commissioner of Income Tax (Appeals)-29, Mumbai dated 13th October 2014 for Assessment Year(AY) 2010-11. The Revenue has raised following grounds of appeal: (i) Ld. CIT(A) erred in deleting the addition of Rs.49,00,222/- on account of unapproved payment to the subcontractors/ labour charges. (ii) Ld. CIT(A) in restricting the disallowance of Motor car expenses to 5% as against 20%.. (iii) Ld. CIT(A) erred in deleting the addition of Rs. 5,71,3000/- under section 68 of the Act .

2. Brief facts of the case are that assessee is engaged in Civil and Labour contracts from Government and Local Bodies and is proprietor of M/s Pruthvi Construction. The assessee filed his return of income for relevant assessment year on 24 September 2010 declaring total income of Rs.32,73,470/-. The assessment was completed under section 143(3) on 13th March 2013. The Assessing Officer (AO) while passing the assessment 1 order besides the other addition/disallowance, disallowed a sum of Rs. 49,00,222/- on account of payment to subcontractor/labour charges, disallowed a sum of Rs. 82,596/- being 20% of Motor Car expenses and addition of Rs. 5,71,300/- on account of cash loan under section 68 of the Act. Aggrieved by the order of AO the assessee filed appeal before the CIT(A) and succeeded therein. Thus, being aggrieved of the order of ld CIT(A) the revenue has filed present appeal before us.

for our consideration relates with deletion of payments to subcontractor /labour charges. The ld. DR for the Revenue argued that the ld CIT(A) deleted the addition without any basis. It was further argued that the parties to whom the payments were made were not genuine; none of the parties to whom the payments were allegedly made appeared during the assessment. The ld DR prayed that order of AO be restored and that ld CIT(A) be set aside. On the other hand the learned AR for assessee argued that all the payments were made to the genuine parties who had executed the work. The TDS was deducted from the payments made to the subcontractor. No notice for personal appearance was issued by AO at the time of assessment proceeding. All the four parties filed their reply before AO. Before us the ld AR for assessee filed the copies of the reply of all those parties.

4. We have considered the rival contention of the parties and perused the order of authorities below. The AO made the disallowance holding that notices under section 133(6) were issued to the subcontractor which have been returned by the postal authorities as undelivered, thus the parties are not genuine. The AO asked to the assessee to produce the document related with identity of the subcontractor, income tax returns, computation of income, bank statement. The assessee filed his reply dated 6th March 2013 and contended that that all the parties to whom the notices were issued have filed their reply dated 15th Jan 2013. It was further contended that the subcontractor had provided the labour force only and not the building materials. The TDS was deducted as per the Income-tax Act, the certificate of TDS was issued. It was further contended that mare return of notice would not prove that parties are non-existent or not genuine. The sub- contractors (labour contractor) are living in the slum areas and are travelling in search of work. The contention of assessee was not accepted by AO. The AO concluded that parties furnished their reply is factually incorrect. The postal authorities have returned the letters address to those parties as undelivered on account of incomplete address and the assessee must have himself prepared the replies on behalf of parties upon him the notices were not served. The replies were furnished in the receipt counter only. The language used in all reply is and print is apparently the same. The assessee failed to produce all the persons, thus the identity of the parties was not established and hence, the assessee failed to prove the genuineness of the sub-contractor. The ld. CIT(A) while considering this ground concluded that the assessee has produced all relevant details showing the payments made to the contractor in the shape of bills raised for work done, ledger account of these parties, copy of computation of income, ITR returns for AY 2010-11 showing the income received from the assessee, copies of bank statements and confirmation of these parties. Ld. CIT(A) further concluded that merely returned of letter undelivered does not leaves to the conclusion that payments made to these parties are not genuine. The AO has not proved by placing any other evidence that such parties are actually bogus and deleted the disallowances. We have seen that various sub- contractor have filed their reply before the AO along with their copy of ledger account, bank statement, ITR return and nature of payment. The AO merely suspected that the line of reply by all parties is similar. Thus, we do not find any infirmity or illegality in the order of ld. CIT(A). Thus, this ground of appeal is dismissed.

is also dismissed.

6. Ground No.3 raised in the present appeal relates to deletion the addition of Rs. 5,71,300/- made u/s 68 of the I.T. Act. Ld. DR for the Revenue argued that the assessee purchased a Flat in Kandivali on 01.07.2009 and made the payment of Rs. 9,00,000/- in cash, the assessee was asked to prove the source of payment and availability of fund. The assessee furnished the cashbook wherein assessee has shown to have received cash loan from 30 persons. The assessee could not prove those parties to prove the identity, capacity and genuineness of transaction. On the other hand, Ld. AR for assessee argued that assessee availed the loan from 30 persons and filed the copy of PAN Card and ITR filed by the parties for AY 2010-11. Since a very meager amount as a loan was availed, hence, there was no occasion to doubt the capacity of person.

7. We have considered the contention of the parties and perused the record. Out of out of 30 persons, four persons attended the proceeding before AO, but the AO discarded their capacity to pay cash loan to the assessee. The ld. CIT(A) while considering this ground examined the statement of four persons recorded by AO. The ld. CIT(A) concluded that it is not the case of AO that the evidence placed on record shows the same transaction or the parties are not genuine. The essential ingredients to establish a loan transaction as genuine has been furnished by the assessee by filing evidence which consist of confirmation of creditors, identity of creditors, their PAN Number and even by producing them before the AO, thus the assessee has discharged his primary onus that the books of accounts as unsecured loan actually belong to him and no addition u/s 68 can be made against him. The onus shift upon the AO, if he stated that the claim of assessee is false or bogus claim is made. It was finally concluded that that AO without bringing any evidence on record that unsecured loan are bogus or not genuine has treated the loan taken from the parties as unexplained, which is not justified. We have seen that ld. CIT(A) have examined the identity of the parties which was not disputed by AO, creditworthiness of the persons was examined from their statement recorded by AO and genuinenity of transaction against which the AO has not brought any material on record.

Thus, in the peculiarity of the case, we concur with the finding of ld. CIT(A), thus, this ground of appeal is also dismissed.

8. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on this 4th November, 2016. Sd/- Sd/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 04/11/2016 S.K.PS Copy of the Order forwarded to :