ASST CIT 25(2), MUMBAI vs. RATANSINGH M,.RATHOD, MUMBAI

आदेश / O R D E R

PER SHAILENDRA KUMAR YADAV, JM :- Both these appeals filed by the Revenue pertain to same assessee. Therefore they are being disposed of by this common order for the sake of convenience.

`2,69,38,090/-. Aggrieved, assessee filed appeal before the concerned CIT(A) wherein the CIT(A) has granted substantive relief, which are being discussed below.

i. Flat at Sushila Apt. `5,79,600/- ii. Flat at Trishna Tower `31,59,930/- iii. Bunglow at Jalore `3,00,000/-

`40,39,530/- Total ` 3,43,630/- Annual value of the Flats Less 30% Int. u/s 24(a) ` 1,03,008/- Deemed let out income ` 2,40,352/-

Thus the Assessing Officer disallowed `2,40,352/- on account of deemed let out income and added back the same to the income of the assessee.

4.1 In appeal the CIT(A) observed that this issue also arose in 2008-09 in assessee’s on case and part relief was granted by CIT(A) by observing as under: -

“I. Have considered the submissions of representative and the stand taken by the A.O. The A.O. merely stated 4 Shri Ratansingh M. Rathod in the assessment order that the appellant was confronted on this issue and he agreed for addition. If that is the case the A.O. should have mentioned the letter or order sheet entry by which the appellant was confronted and the manner of agreement by the assessee either in the form of letter or by signing in the order sheet. In the absence of the above, I accept the plea of the representative that the addition was made without giving opportunity to the appellant violating the principles of natural justice. A perusal of the case records submitted by the A.O. reveals that no such opportunity was given to the appellant. In the circumstances, the entire addition is liable to be deleted for violation of principles of natural justice. However considering the argument of the representative that the flat at Vaishali Apartment was not given possession, I hold that the flat at Sushila Apartment can be treated as self occupied. Accordingly, only the bungalow of Jalore in the native place of the appellant is to be considered. In the absence of municipal ratable value, I direct the A.O. to assess Rs. 15,000/- as deemed rent u/s.23(4) of the I.T.Act and the balance addition is deleted." Since the issue is same, the annual ratable value in respect of bungalow at Jalore in the native place of the appellant is to be considered. Last year the CIT(A) had directed the AO to asses ratable value at Rs.15,000/-. Keeping in view the inflationary tendency in the market, the amount is being increased by 20% in the present assessment year, which comes to Rs,18,000/-. Accordingly, AO is directed to assess Rs.18,000/- as deemed rent u/s.23(4) of the I.T. Act,1961 and the balance addition of Rs.2,22,352/- (Rs.2,40,352 - Rs.2,40,352 - `18,000/- is deleted.

Accordingly order of the CIT(A) be set aside and that of the Assessing Officer be restored.

4.3 After going through the rival submissions and material on record we incline to interfere with the finding of the CIT(A). We find that the annual ratable value in respect of bungalow at Jalore in the native place of assessee is the core question before us. Following the decision in the earlier year CIT(A) directed the Assessing Officer to assess the ratable value at `15,000/- keeping in view the inflationary trend in the market, the amount being increased by 20% in the year under consideration which comes to `18,000/- Accordingly Assessing Officer was directed to assess `18,000/- as deemed rent under section 23(4) of the Income Tax Act and balance addition of `2,22,352/- (`2,40,352 - `18,000) was directed to be deleted. This reasoned finding of CIT(A), whereby he granted partial relief to the assessee, need no interference from our side. We uphold the same.

`1,14,622/- under section 14A r.w. Rule 8D. The Assessing Officer has disallowed `1,14,622/- vide para ‘k’ of the assessment order. While doing so the Assessing Officer relied on the judgement of Chem Investment Ltd. vs. ITO 317 ITR 86 (AT) (Del) and Daga Capital Management Pvt. Ltd. 9TA No. 8057/Mum/2003. The Assessing Officer calculated the disallowance under section 14A which is reproduced as under: -

“From the record it is seen that the investments which generates exempt income has been made out of his personal account and he has not claimed any expenses on account of interest S.No. Particulrs Amt. (Rs.) Amt. (Rs.) 1 Amount of expenses directly related to the income A Amount of interest expenses 1A NIL B1 Investment of 08-09 (the figures 2,24,63,898 supplied by the AR of the assessee) B2 Investment of 09-10 2,33,84,938 B Average value investment {B=B1 2,29,24,418 +B2/2) C1 Assets as on 08-09 NA C2 Assets as on 09-10 NA C Average of total assets {C = (C1 + NA C2)/2} 2 Attributable indirect interest NIL expenses {A*B/C) 3 ½% of the average value of 1,14,622 investment Disallowance u/s. 14A {1 = 2 = 3} 1,14,622 Authority wherein after considering various submissions of the assessee and comparative analysis of the facts of the case it was found the ratio of case law relied upon by the Assessing Officer is not applicable in the present case. The computation made by the assessee and filed during the course of appellate proceedings was found to be in order.

Accordingly, the disallowance made by the Assessing Officer was restricted to `42,709/- and the balance of `71,913/- (`1,14,622 - `42,709/-) was deleted. Thus CIT(A) grated partial relief in this issue.

5.2 The learned D.R. supported the order of the Assessing Officer and submitted that CIT(A) was not justified in restricting the addition to `42,709/- instead of `1,14,622/-.

On the other hand, the learned A.R. for the assessee supported the order of the CIT(A).

5.3 After going through the rival submissions and material on record we are not inclined to interfere with the finding of he rightly restricted the disallowance to `42,709/- instead of `1,14,622/- for reasons discussed above. The same is upheld.

While doing so he observed as under: -

"Disallowance out of labour charges: The assessee firm has debited Rs.2,45,55,199/0 under the head labour charges. During the course of assessment proceedings, the assessee was called upon to file details of labour charges claimed along with details of TDS made thereon and justification for allowability of the claim made by the assessee under this head. The assessee firm has filed details of labour charges on verification of which it is noticed that the assessee has claimed to have made payments to number of parties and some of the payments have been made by way of cash. It is not ascertainable from the details filed by the assessee as to for which site how many labourers were employed and apparently, there is no check over the claim made by the assessee for such a huge claim made under this head. The assessee submitted during the hearing that the increase in labour charges as compared to turnover was due to the labour intensive nature of the works undertaken this year. Considering the fact that many payments have been made by cash and not all the vouchers are produced by the assessee for verification, on reasonable basis an amount of 9 Shri Ratansingh M. Rathod Rs.10,000,000/- out of total claim made by the assessee is disallowed and added to the total income of the assessee.” Thus the Assessing Officer disallowed `10,00,000/- under the head ‘Labour Charges’ because on scrutiny of the details filed by the assessee Assessing Officer found that some of the payments were made by way of cash. Assessing Officer was also of the opinion as to how many labourers were employed in various sites. The stand of the assessee has been that the Assessing Officer has not pointed out any specific discrepancy regarding utilization of labourers in various sites of the assessee.

6.1 In appeal, CIT(A) observed that Assessing Officer has not made any specific observation that labour expenses made by the assessee were not genuine. The labour charges debited are as per the Audit Report under section 44AB submitted before the Assessing Officer along with the return of income.

The Assessing Officer has not pointed out any specific defect in the details even in respect of a single party. Even the Assessing Officer did not issue any show cause notice to the assessee before making addition to the total income of the in disallowing the same by observed that the same were made in cash. In fact, in such business labor expenses are made in cash, Assessing Officer has not made out any case as to whether cash payment were in excess of `20,000/- and were hit by provisions of section 40(A)(3) of the Act. In case that transaction was found to be genuine and identity of payee was established and that payment was not exceeding the prescribed limit, then disallowance under section 40A(3) of the Act cannot be made. Assessee had made the payment to labour contractor and no single payment exceeded Rs.10,000/-. It is well known that labour needs the cash payment urgently and contractor is required to pay the same in cash to avoid labour problems.

6.2 Keeping in view the totality of the facts and circumstances of the case, CIT(A) was justified in upholding the disallowance in question. This reasoned finding of the CIT(A) need no interference from our side. We uphold the same.

ITA No. 5297/Mum/2013 : AY 2010-11

"(i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.4,90,000/- which was made by invoking the provisions of IT Act by treating the income as Rs 18,000." (ii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs. 50,00,000/- which was made by way of reasonable estimation keeping the nature of business in mind. (iii) On the fads and in the circumstances of the case and in law, the ld. CIT(A) erred deleting the addition of Rs. 14,86,000/- which was made by invoking the provisions section 39 of the IT Act by treating penalty payments as not allowable expenses. (iv) On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of Rs.10,00,000/- which was made by invoking the provisions of section 40A(3) of the I.T. Act by treating the payments was not done in cash. (v) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.23,84,864/- which was made by invoking the provisions of section 40a(ia) of the I.T. Act by treating that TDS was deducted on the transport charges payments.

12 Shri Ratansingh M. Rathod (vi) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.8,62,069/- which was made for not furnishing the related to agriculture income. (vii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.2,16,32,610/- which was made by invoking the provisions of section 69C of the I.T. Act by treating the purchase are genuine. (viii) On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of Rs.4,48,89,991/- which was made by invoking the provisions of section 69C of the I.T. Act by treating the subcontract charges as genuine. (ix) On the fects and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.30,68,920/- which was made by invoking the provisions of section 69C of the I.T. Act by treating the purchase are genuine even when the notice u/s 133(6) was returned unserved and address was not available at the address. (x) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in relying upon judgments of the CIT vs. Nikunj Eximp Enterprises IM. Ltd. without appreciating that the facts involved in the of the appellant's case are different from the facts of the above case laws."

10. Next issue is with regard to bogus sub-contract expenses of `50,00,000/-. Assessing Officer vide para. 6 &7 of his order has made an estimated addition of Rs.50,00,000/- on account of bogus payments to sub- contracts allegedly "booked by the assessee”. Assessee had claimed sub-contract expenses of Rs.15,68,98,517/-.

Assessing Officer found that many of such sub-contractors are having turnover of less than Rs. 40 lakhs and their Income was offered mostly under section 44AD of the Act.

Assessing Officer has also observed that large numbers of parties belongs to different group of families as ascertained from residential address and/or surname of the parties. For this reason, Assessing Officer held that the assessee is using the names of members of different families for reducing the Officer, the individual members hardly found to pay any actual taxes after claiming deductions and tax benefits.

Further, the Assessing Officer observed that the turnover of the individual members are kept below `40 lakhs for dual purposes - firstly to get rid of statutory audit which would require documentary evidences of any work done and secondly - to have small income in the hands of such individuals. Assessing Officer has held that the assessee was indulging in tax evasion by reducing the tax liability by inflating the expenditure through introducing certain bogus and non-verifiable expenditure under the head "sub- contract". For these reasons Assessing Officer made an estimated disallowance of `50,00,000/- which accordingly to him represents bogus amount of sub-contract booked by assessee. The matter was carried before the first Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same CIT(A) granted relief to the assessee. that under the facts and circumstances of the case CIT(A) erred in deleting addition of `50,00,000/-, which was made by way of estimation keeping the nature of business in mind.

On the other hand, the learned A.R. for the assessee supported the order of the CIT(A).

10.2 After going through the rival submissions and material on record we find that the Assessing Officer has not brought anything on record to verify the genuineness of the payment.

He has not made any effort to verify whether such expenses were incurred for business purpose or not. Once the genuineness of expenditure has not been disputed such adhoc addition is not justified and such addition can be made only by bringing some material on record to justify the same, which has not been done in this case. Therefore the CIT(A) was justified in deleting the addition of `50,00,000/- and the same is upheld.

“…… There is no dispute that the said amount of `42,03,426 has been paid by the assessee on account of delay in execution of civil contract entered into by the assessee with MCGM. Therefore the amount was paid as damages on account of breach of contract. It is not a penalty for violation of any statutory provisions. Hon'ble Kerala HC in the case of CIT Vs. Grand Cashew Corporation, 182 ITR 216 held that the liability to pay damages on account of breach of contract is an allowable deduction u/s 37(1) of the Act. Similar view has been taken by Hon'ble Apex Court in the case of CIT Vs Shantilal P. Ltd. 144 ITR 57, wherein it was held that any amount incurred by the assessee on account of non-fulfillment of business contract for reasons beyond his control is incidental to the business and is an allowable deduction.

11.1 Since the issue was covered by the order of the ITAT in assessee’s own case in A.Y. 2008-09 and the facts being same, for same reasoning CIT(A) deleted the addition of `14,86,000/-. Nothing contrary has been brought to our notice by the Revenue. Therefore we are not inclined to interfere with the decision of the CIT(A), who has deleted the payment for delayed execution of contract. The same is upheld.

Authority. Various contentions were raised as detailed in para 9.2 of CIT(A)’s order and having considered the same CIT(A) has deleted the addition in question. Same has been opposed before us, inter alia, submitting that the CIT(A) was erred in deleting the addition of `23,86,864/-, which was made by invoking provisions of section 40(a)(ia) of the Act by treating that TDS was deducted on transport charges. On the other hand, the learned A.R. for the assessee supported the order of the CIT(A).

13.2 After going through the rival submissions and material on record we find that CIT(A), after analyzing the details submitted by the assessee, observed that the parties mentioned by Assessing Officer in his order and the actual parties are totally different for which he relied on the chart given on pages 15 to 17 of his order. In this background the CIT(A) observed that the amount disallowance by Assessing Officer was without any basis and without making any enquiries at his level. Since all details regarding transport charges, specifying PAN, rate of deduction of TDS, date of Assessing Officer and that too twice - once vide letter dated 10th September, 2012 and the second vide letter dated 18th February, 2013 - during assessment proceedings, which was also conveyed to CIT(A). In this background the CIT(A) observed that Assessing Officer has not applied his mind in dealing with the issue and even the amount and the names of concerned parties did not tally. There was also contradiction in the name of parties. On a comparative analysis of facts, in this background, CIT(A) observed that there seems to be wrong identification of figures and parties. In view of this the CIT(A) deleted the addition by observing that the disallowance was made without any basis hence the same was directed to be deleted. This reasoned factual finding of CIT(A) need no interference from our side. We uphold the same.

Sr. Name of the Details of Amout (Rs.) No. Customer the Product 1. Nupur Enterprise Mung 339,300 Bajari 114,000 2. Molota Enterprise Mung 364,000 3. Nikita Enterprise Bajari 90,000 Total 907,300 the tune of `45,231/- as reflected in assessee’s capital account to earn the aforesaid agricultural income. In this background the stand of the assessee has been that agricultural income amounting to `8,62,069/- as declared by him is exempt from taxation and hence requested to uphold the order of the CIT(A).

14.2 After going through the rival submissions and material on record we find that the income the income assessed under the head ‘income from other sources’ has rightly been deleted by CIT(A) because similar income has been consistently accepted by Assessing Officer in past and there is no change in the facts and circumstances of the case. Even the agricultural holding of the assessee has not been disputed.

Under the facts and circumstances, the Assessing Officer was not justified in deviation from the earlier stand of Revenue in this regard without bringing any changed circumstances for this addition. Accordingly, in the aforecited facts and circumstances, CIT(A) has rightly deleted the addition of interference. We uphold the same.

15.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee. The CIT(A) having considered the submissions of the assessee granted relief to the assessee and the same has been opposed before us on behalf of the Revenue inter alia submitting that the CIT(A) has erred in deleting the addition of Rs.2,16,32,610/- made by the Assessing Officer by invoking provisions of section 69C of the Income-tax Act; accordingly, the Departmental Representative submitted that the order of the CIT(A) be set aside and that of Assessing Officer be restored. On the other hand, the Authorized Representative supported the order of the CIT(A) on this issue.

15.2 After going through the rival submissions and perusing the material available on record, we find that the assessee Corporation of Greater Mumbai (hereinafter called “MCGM”).

The terms and conditions of the contract awarded by MCGM towards execution of the work done by any contractor. It was pointed out that found that execution of the contract, the quality and the quantity of the material supplied was directly under the supervision of the representative engineer of the MCGM. In the beginning, the assessee had to furnish samples of the material to be supplied and the materials were later on supplied on approval of samples. This was on account of the clause 59 of General Conditions of Contract for Civil Works issued by the MCGM which is applicable to all the contracts awarded by the MCGM. These details were available on the website of the Municipal Corporation of Greater Mumbai, and therefore it is in public domain- the relevant extracts of same are reproduced below:

59(a) Material to be provided by the Contractor: The Contractor shall, at this own expense, provide all materials required for the works other than those which are to be supplied by the Municipal Corporation.

25 Shri Ratansingh M. Rathod All materials to be provided by the Contractor shall be in conformity with the specifications laid down in the contract and the Contractor shall, furnish proof to the satisfaction of the Engineer that the material so comply. Contractor shall produce proof viz, challans, bills, vouchers, etc so as to ensure that the material was brought on site and quantities used as per the norms, specifications, etc.

The Contractor shall, at his own expense and without delay, supply to the Engineer samples of materials proposed to be used in the Works. The Engineer shall within seven days of supply of samples or within such further period as he may require and intimated to the contractor in writing, inform the contractor whether the samples are approved by him or not. If the samples are not approved the contractor shall forthwith arrange to supply to the Engineer for approval fresh samples complying with the specifications laid down in the contract.

The Engineer shall have full powers to require removal of any or all of the materials brought to site by the Contractor which is not in accordance with the contract specifications or which do not conform in character or quality to the samples approved by him. In case of default on the part of the Contractor in removing the rejected materials, the Engineer shall be at liberty to have them removed by other means. The Engineer shall have full powers to procure other proper materials to be substituted for rejected materials and In the event of the Contractor refusing to comply, he may cause the same to be supplied by other means. All costs, which may attend upon such removal and / or substitution, shall be borne by the Contractor." to have been obtained from various parties and the Assessing Officer has held an expense of Rs.2,16,32,610/- as unexplained expenditure/non-genuine expenditure. In the Impugned contract the cost of material is quite high and if the rejection of purchases from such parties, reflected In the website www.mahavat.gov.in is rejected to be non-genuine then purchases of the material made for the execution of the contract from these parties, would lead to the preposterous conclusion of having executed contract involving materials without there being any corresponding genuine purchase and receipt of material. If such disallowances are take in to consideration, the Gross Profit Ratio as well as Net Profit Ratio will shoot up in a very high and abnormal ratio and for which onus was cast on the Assessing Officer to bring on record any such comparable figures/data which could show that in the Government Civil Contracts there could be a possibility of such abnormal Gross profit or Net Profit. last several years. The assessment of immediate preceding A.Y. have been completed under 143(3) and no such additions were made. The books of accounts of the assessee are audited and the returns filed in each of these years were supported by tax audit report in form 3CB & 3CD. From the Assessment Order, it is also seen that the Assessing Officer has not rejected the Tax Audit Report in case of the assessee.

Since the assessee has done job work exclusively for Government Departments, its receipts are 100% verifiable.

As per the terms of contracts by the Municipal Corporation of Greater Mumbai (MCGM), which is in public domain and available on the website of Municipal Corporation of Greater Mumbai, the jobs executed by the contractor/assessee also require quantity and quality specification of the material to be supplied/consumed and the contract receipts in the hands of the assessee invariably precede such verification and certification by the departmental authorities. The only ground for rejecting the purchase was mention of the names of purchase parties on the website of sales tax department Officer has not found any infirmity with respect to receipt of payment for execution of contracts for which appellant has obtained, supplied and consumed materials under the quantity and quality supervision of the representative engineer. The Assessing Officer has also not been able to bring on record the evidences that the amount of the payment for purchases which were made by the assessee to the respective parties via banking channels, were received back by the appellant and ultimately there was no purchase of any material. It was not possible because without supply of material, the contract awarded by MCGM cannot be fulfilled by the assessee and consequently, the MCGM would not make any payment' for the same. In fact the entire process is inter connected and the statement of suppliers of raw materials could not be taken and read independently rather it has to be examined In totality. In view of the above, it was apparent that the mere appearance of the name of the parties on the website of sales tax department cannot justify the conclusion that the purchases executed by various contractors were subjected to check as regards their specification, workmanship/ quality and quantity of material utilized by the Audit/Vigilance team of the MCGM. The Assessing Officer has not brought out any material on record to suggest that there were any defect or deficiency in the quantity and quality of material supplied and the workmanship of the job performed.

15.5 The assessee has made claim for purchases for which payments have been made by cross-cheque. Where payments are made by account payee cheques nobody can deny the existence of the parties. The Assessing Officer has not brought any material on record to suggest that the payments made to purchase parties were received back in cash by the assessee and no further payments were made by the assessee towards purchase of any material so as to fulfill the conditions of contract imposed by the MCGM which has made payments towards contract awarded to the assessee.

Once the assessee establishes consumption of items assessee. The CIT(A) himself has logged onto the website www.mahavat.gov.in to know the allegation of Assessing Officer regarding the suppliers. He found that the website merely mentions list of suspicious dealers who has issued false bills without delivery of goods. It neither gives modus operandi of dealers nor makes any claim regarding any corroborating evidences. He further observed that the addition made by the Assessing Officer could not be accepted at this stage in view of following judicial pronouncements:-

(i) In the case of CIT vs. M.K. Brothers, reported in 163 ITR 249 the Hon’ble Gujarat High Court held as under:-

It was clear from the Tribunal's order that whether the said transactions were bogus or not was a question of fact. The assessee was given credit facilities for a short duration and the payments were given by cheques. When that was so, it could not be said that the entries for the purchases of the goods made, in the books of the account were bogus entries. Thus, the conclusion arrived at by the Tribunal was not against the weight of evidence. The Tribunal was, therefore, justified in deleting the addition to the income of the assessee.

In this case, during the assessment proceedings it came to the notice of the Assessing Officer that in the relevant from some parties, who were not available to cross-examine for the genuineness of the above purchases. It was found by the Assessing Officer that though the purchases were claimed to have been made on credit basis, the payments were shown to have been made after substantial lapse of time after the date of purchase. The Assessing Officer held that the transactions relating to those purchases were bogus and, therefore, treated the amount allegedly paid for those purchases as income of the assessee. On second appeal, the Tribunal found that there was no evidence anywhere that those concerns gave bogus vouchers to the assessee and further there was nothing to indicate that any part of the fund given by the assessee to those parties came back to the assessee in any form. He, thus, held that the evidence was not adequate to conclude that the purchases made were bogus and, therefore, deleted the aforesaid addition to the income of the assessee. Similar view has been taken by ITAT, Jodhpur Bench in the of ITO v Permanand, reported in 107 TTJ 395, wherein in it was held as under:-

32 Shri Ratansingh M. Rathod “In the instant case, the addition rested mainly only on the observation of the Sales-tax Department, The assessee was never associated with the enquiries made by the Sales-tax Department to that extent. The satisfaction of the Assessing Officer itself is of prime Importance while making assessment of an income and these duties cannot be performed by substituting satisfaction of someone else the assessee did pay for the purchases he made from the above two parties through cheque as was evident from the record. The statements or even the affidavits of the sellers could not be utilized against the assesses, unless an opportunity was given to him to confront the said statement by way of cross- examination, etc. Admittedly, no such opportunity was given to the assessee to confront the above sellers in the instant case. Further, the assessee had also discharged the primary onus cast on him by section 69 by showing the purchases, their entries in the books of account, payments by way of account payee cheque and producing the vouchers of sales of the goods. The Assessing officer had miserably failed to bring on record any clinching evidence to prove that these alleged purchases were bogus and not genuine. Further, the Assessing Officer did not make requisite investigation against the two sellers. Therefore, the Commissioner (Appeals) had rightly held that the addition made by the Assessing Officer merely on the basis of observations of sales-tax department, without conducting independent enquiries was not justified. Since the purchase in question had been held as genuine purchase, addition of Rs, 55,632/- could not be made to the income of the assessee. Hence, the revenue's appeal was liable to be dismissed"

Similarly, the Hon'ble Calcutta High Court in the case of Diagnostics v CIT reported at 334 ITR 111 has held as under:-

33 Shri Ratansingh M. Rathod “However, as regards the payments made to M/s. Selvas Photographic are concerned amounting to Rs.3,12,302/-, we find that those have been made by account payee cheques and those have been encashed through the bankers of M/s. Selvas Photographic. It appears that according to the appellant, at the time of assessment, the appellant had no business transaction with M/s, Selvas Photographic and consequently, the said party did not co-operate with the Assessing Officer. However,the transaction having taken place through account payee cheques, we are unable to accept the contention of Mr. Agarwal, the learned advocate appearing for the Revenue that the transaction was a non-existent one. If an assessee took care to purchase materials for his business by way of account payee cheques from a third party and subsequently three years after the purchase, the said third party does not appear before the Assessing Officer pursuant to the notice or even has stopped the business, the claim of the assessee on that account cannot be discarded as non-existent. In the case before us, the Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as If there was no such transaction.

Therefore, keeping in view the totality of the facts and circumstances of the case as well as various judicial pronouncements as referred to above, in our opinion, the CIT(A) was rightly deleted the addition of Rs.2,16,32,610/- this reasoned finding of the CIT(A) needs no interference from our side. We uphold the same.

16.1 The brief facts the case are that the addition to the tune of Rs.4,48,89,991/- was made u/s 69C of the Act in respect of four parties under the head sub-contractors. The Assessing Officer observed that notices issued u/s 133(6) to the four parties were returned unserved by Postal Authorities.

The assessee had furnished to concerned Assessing Officer the addresses made available by the said parties. The Assessing Officer asked the assessee to give explanation as to why the sub-contract work for the said amount of Rs.4,48,89,991/- should not be held as bugs.

16.2 The matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) opposed before us by Revenue, inter alia, submitting that the CIT(A) has erred in deletion the addition of Rs.4,48,89,991/- made by Assessing Officer u/s 69C of the Act. The Departmental Representative pleaded that the order of the CIT(A) be set aside and that of Assessing Officer be restored.

On the other hand, the Authorized Representative for the assessee supported the order of the CIT(A).

16.3 After going through the rival submissions and material on record, we find that the assessment of the assessee in the immediately preceding assessment year i.e., 2000-10, was completed u/s 143(3) but no such addition was made the Assessing Officer despite thorough scrutiny of the case. The assessee has completed all government jobs by purchasing material, engaging sub-contractors etc., which is evident from the fact that the assessee successfully received the payment from Government towards such specific contract. In fact, the Assessing Officer has given time of two days to produce the confirmation, statement on oath as mentioned in assessment order. The assessee explained that the assessee had given Assessing Officer alongwith address and PAN. The assessee explained the payments with reference to copy of account with cheque payment details and TDS applicable wherever necessary, which has been detailed in the order of the CIT(A) at page No.46 as under:-

RATANSINGH & BROS ANNEXURE-B AY 2010-2011 ASPER PARA 6.1 OF THE ASSESSMENT ORDER NAME OF THE PARTY : ALPESH MEHTA Sr. No. Date of Payment Cheque No. Amount Remark 1 15.10.2009 98299 300000 Party’s account 2 16.10.2009 98459 450000 squared off as 3 26.10.2009 99060 512844 on 31.03.2010 4 03.11.2009 99351 1134342 5 06.11.2009 99379 1144193 Total Rs. 3541379

NAME OF THE PARTY : RANJEETSINGH S. DEORA (HUF) Sr.No Date of Payment Cheque No. Amount Remark 1 28.10.2009 99210 1500000 Party’s account squared off as on 31.03.2010 Total Rs. 1500000

NAME OF THE PARTY : GAUTAM TRADING CO. Sr.No. Date of Payment Cheque No. Amount Remark Party’s account 1 06.04.2010 6908 2045643 squared off as on 06.04.2010 Total Rs. 2045643

Sr. Date of Payment Cheque No. Amount Remark No. 1 07.01.2010 496 5000000 Party’s account 2 07.01.2010 497 6000000 squared off as 3 08.01.2010 498 5000000 on 31.03.2010 4 09.01.2010 499 4000000 5 19.01.2010 500 5000000 6 21.01.2010 501 5000000 7 23.02.2010 4232 6830000 Total Rs. 36830000

Grand total Rs. 43917022

SUMMARY AMOUNT AS PER PARA 6.1 44,889,991 LESS: TDS 824,717 44,065,274 Less: Security Deposit 148,252 TOTAL PAYMENT AS ABOVE 43,917,022

Where identity of the person from whom goods had been purchased and source of investment in such goods had been explained by assessee and it was established that amounts paid by assessee by cheque for those goods had been received, and further, books maintained by the assessee had not been rejected by Assessing officer and in fact addition was based on entries made in those books, it could be said that transaction was genuine. Here in the case on hand, the payments have been proved and the books of accounts have not been rejected by the Assessing Officer. The unexplained expenditure of Rs.2,16,32,610/- made by the Assessing Officer by invoking the provisions of section 69C of the Act has been deleted by us, relying on various judicial pronouncements as discussed in paragraph 14 of this order.

For the sake of brevity, the same are not reproduced here once again. The Assessing Officer had all the machinery under the IT Act, 1961 to make investigation through the Banks by calling for records and reaching out the parties who were not co-operating with the assessee and bring the actual facts on record. In view of above, the CIT(A) was justified in deleting the addition of Rs.4,48,89,991/- because the Assessing Officer has also not been able to bring on record the evidences that the amount of the payment for purchases, which were made by the assessee to the respective parties via banking channels. There is nothing on record to suggest that said payments were received back by the assessee in any manner. This reasoned finding of the CIT(A) needs no addition in question. We uphold the same.

17.1 The brief facts of the case are that the Assessing Officer disallowed an aggregate amount of Rs.30,68,920 u/s 69C of the Act on account unexplained expenditure as the assessee allegedly did not purchase any goods from three parties as mentioned in page no.7 of assessment order. The Assessing Officer himself observed that the name of those three parties were not appearing in the list of bogus parties sent by the Sales Tax Department. However, the Assessing Officer disallowed the amount in question by observing that the three parties were bogus for the reason that the notices u/s 133(6) were returned unserved. The matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) has granted relief to the Revenue, inter alia, submitting that the order of the CIT(A) be set aside and that of Assessing Officer be restored.

17.2 After going through the rival contentions and material available on record, we find that The Assessing Officer has mainly relied upon an article published in Times Of India which refers to certain business enterprises. It was further seen that the article itself was with reference to certain works entrusted to them. The article has been published on 06-02- 2013 and which falls in FY 2012-13 i.e. AY 2013-14. This cannot be basis for making any addition or disallowance by the Assessing Officer in AY 2010-11. The authenticity of source of such article has not been independency investigated by the Assessing Officer in the case of proprietorships concern of the assessee namely M/s.

Ratansingh & Bros. No other reason has been brought on record by the Assessing Officer to substantiate adverse conclusion against the assessee. The Assessing Officer has not taken any personal initiative except issuing notices u/s purchases in question. The CIT(A) found from the records produced before him by the assessee that the purchases made could not be said to be not genuine. If the Assessing Officer has not made any effort to rebut the assessee's claim about the genuineness of the purchases, the assessee cannot be made for such lapse. Therefore, in our opinion, the CIT(A) was justified in deleting the addition of Rs.30,68,920/- made by the Assessing Officer u/s 69C of the Act. We uphold the same.