ITO 9(2)1, MUMBAI vs. JOGINDRA EXPAORTS LTD, MUMBAI

Assessee by: Shri Nitesh Joshi Department by: Shri K. Mohandas सुनवाई की तारीख / Date of Hearing: 09.02.2016 घोषणा की तारीख /Date of Pronouncement: 11.05.2016 आदेश / O R D E R

PER AMARJIT SINGH, JM:

1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition on account of disallowance of expenditure of Rs.77,53,465/- made u/s.40(a)(ia), without appreciating the fact that there is an element of contract in the composite transaction of procurement of pre-mixed concrete? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition made on account of disallowances of labour charges without appreciating the fact that the assessee failed to establish the genuineness of the work done by three parties? ISSUE NO. 1:- 4. According to issue no.1, the revenue has challenged the deletion of the addition on account of expenditure to the tune of A.Y.2010-11 Rs.77,53,465/- made u/s. 40(a)(ia) of the Income Tax Act, 1961( in short “the Act”). The Assessing Officer was of the view that the appellant incurred this expenditure for procurement of material made on order of contractual basis which falls u/s.194C for TDS. The pre- mixed concrete is not a readymade products hence it is a contractual in nature which attracted provision of u/s. 194C for TDS. The finding of the Assessing Officer is as under:- 4.3 “I have gone through the assessee’s submissions and find no merit in the same. The scope and definition of work has been drastically expanded under the provisions of section 194C governing TDS under the Income Tax Act. The premix concrete is not a readymade product as claimed by assessee which could be purchased across the counter. It involves timing, specifications, transportation and labour at the client’s site and until the goods are utilize at assessee’s site the contract does not ends. In this complex system of supply, the said purchase clearly falls in the ambit of provisions of section 194C and assessee is required to make TDS. The assessee however failed to make TDS on the payments made or credited in its books. Accordingly this amount of Rs.77,53,465/- is disallowed from the WIP / Project cost shown by the assessee.” A.Y.2010-11 The assessee filed an appeal before learned CIT(A) and learned CIT(A) has allowed the appeal on this point and was of the view that the transactions does not come within the ambit of the provision u/s. 194C of the Act and no T.D.S was required to be deducted. The revenue has challenged allowance of expenditure to the tune of Rs.77,53,465/- u/s. 40(a)(ia) of the Act but the revenue did not give any distinguishable material which has not been considered by the learned CIT(A) in his order. The assessee purchased the premixed concrete from M/s. RMC Readymix (India) Pvt. Ltd. All the invoices reveals the fact of the sale of good. The sales tax has been paid on the material sold to the assessee. Without any contrary evidence, it can not be presumed that the expenditures are contractual in nature and payment was made to the Contractors. In view provision u/s.194C if any sum was paid for carrying out any work of contract between Contractor and assessee. In the instant case M/s. RMC Readymix (India) Pvt. Ltd. sold out premixed concrete to appellant therefore there is no contract for any such work. No doubt in the said circumstances the learned CIT(A) has rightly arrived at this conclusion that the expenditure incurred to the tune of Rs.77,53,465/- does not fall within the purview of section 194C of the Act. Therefore, in the said circumstances we are of the view that the learned CIT(A) has rightly decided this issue on merits reasonably and justifiably which does not require to be interfere with at this appellate A.Y.2010-11 stage. Therefore this issue is decided in favour of the assessee and against the revenue. ISSUE NO. 2:- 5. Under this issue the revenue has challenged the deletion of labour charges done on behalf of three parties. The Assessing Officer disallowed the labour charges of Rs.1,28,24,714/- made as unexplained expenditure u/s. 69C of the Act. It is observed by the Assessing Officer that the appellant has claimed the labour charges for escalation in the name of Sahil Enterprises, Swami Samarth Enterprises and A.M. Construction which is not genuine one but an accommodation entry. The Assessing Officer made the enquiry from Sahil Enterprises who replied the same but did not explain the nature of work done. With regard to the two parties the notices u/s.133(6) were issued which were not served and appellant did not offered any explanation, these parties have filed their confirmations of account in tapal without explaining the details. In view of the said circumstances the Assessing Officer has arrived at this conclusion that the expenditure to the tune of Rs.1,28,24,714/- is unexplained expenditure therefore made addition u/s. 69C of the Act. Thereafter the assessee preferred an appeal before the learned CIT(A) and the learned CIT(A) has given the given as mentioned below:- A.Y.2010-11 5.3 I have considered the facts of the case, finding of the Assessing Officer and counter representation of the appellant, carefully. I find that learned Assessing Officer has confused herself while appreciating the facts. She is not clear as to whether this is a bogus expenditure to be disallowed u/s.28 or undisclosed expenditure to be added u/s. 69C of the I.T.Act. The observation of the Assessing Officer in Para 4C4 at Page No.7 is contradictory and is in complete disregard to the facts of the case. When notice was issued and statement of Mr. Surendra D. Jaiswal, Proprietor of M/s. Salil Enterprises was recorded on 27.08.2010, it was explained by him to the Assessing Officer while giving answer to A. No.2 that he was proprietor of this concern and was engaged in the business of transportation and excavation since last 10 years. He was also partner of M/s. Aaryan Traders and was sub-contractor of M/s. Ram Engineering Company Ltd. He had also given reply that he was filing return of income. He has also confirmed in answer to Q.No.4 that he had done business with the appellant, therefore it is wrong on the part of the Assessing Officer to mentioned that Sahil Enterprises has given accommodation entry, without contrary evidence in her possession. Further, it is very baseless observation of the Assessing Officer that A.Y.2010-11 proprietor did not explain the crucial question with regard to nature of work done, source of machinery and man power claimed to be hire. On the contrary answer to question No.8,9 and 10, refute the presumption of the Assessing Officer. When proprietor of Sahil Enterprises has stated to furnish all the details and evidences on 3.9.2012, it is not known whether Assessing Officer has further made any enquiry or had given opportunity for submission of such details. Thus, it is very clear that Ld. Assessing Officer has not properly appreciated the facts and has proceeded for disallowance of expenditure on flimsy ground. As regards, reply of Swami Samarth Enterprises and A.M.Construction, Assessing Officer has ignored the confirmation of accounts filed by them. If she wanted to have further information and evidences, she could have proceeded accordingly but she chose not to proceed for enquiry, thus had jumped to the conclusion without foundation or evidence. Further, when there is a expenditure shown in books of accounts, no addition can be made u/s.69C of the I.T.Act. Under this Section addition can be made only in a situation where assessee has incurred some expenditure and “source of the expenditure” is not explained or shown in books of accounts, then only addition can be made under deeming A.Y.2010-11