R.S. PABBLA CONSTRUCTIONS PVT.LTD.,VISAKHAPATNAM vs. THE DY. CIT,, VISAKHAPATNAM
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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER S. BALAKRISHNAN, Accountant Member :
The captioned appeals are filed by the assessee. In the first instance, both the appeals were heard and disposed off vide exparte order dated 23/02/2022 as there was no representation on behalf of the assessee. Thereafter, the assessee filed
2 Miscellaneous Applications with a prayer to recall the order to
provide one more opportunity of being heard to the assessee as
per the principles of natural justice. Considering the assessee’s
request, the appeals were recalled, heard and disposed off in this
consolidated order.
In both the appeals, the assessee has raised identical
issues. Therefore, for the sake of convenience, both these
appeals are clubbed, heard together and disposed off in this
consolidated order. Considering the similarity of the issues, we
shall take up ITA No. 87/Viz/2017 (AY 2013-14) as a lead appeal.
ITA No. 87/Viz/2017 (AY: 2013-14)
This appeal filed by the assessee against the combined order
of the Ld. CIT(A)-2, Visakhapatnam in ITA No. 37 & 39/2016-
17/CIT(A)-2/C-4(1)/VSP/2016-17, dated 18/01/2017 for the AYs
2013-14 & 2014-15 respectively arising out of the order passed
U/s. 143(3) of the Income Tax Act, 1961 [the Act].
The assessee has raised the following grounds of appeal:- 4.
“1. The Order passed by the CIT(A) is arbitrary and unjustifiable. 2 The CIT(A) is not justified in rejecting to admit the additional evidence filed by the assessee company, no opportunity is given at the time of asst. proceedings to prove genuineness of
3 both Labourers and material creditors and hence this is a fit case to remand the same to the file of the AG 3. The CIT(A), is not justified in confirming the addition made by the AG, as the assessee company has returned reasonable profit in the ROT, books of accounts of the assessee were rejected in the past asst. proceedings, assessee company has made a request to the AO to reject books of accounts and to adopt profit @8% hence it is a no books of case, ought to have allowed the appeal of the assessee keeping in view of the facts of the case, hence addition of Rs.2,18,94,300/- towards material creditors and Labour creditors, is liable to be deleted in the hands Of the assessee company.
The CIT(A), is not justified in confirming the addition made by the AO, as the assessee company has returned reasonable profit in the ROI, books of accounts of the assessee were rejected in the past asst. proceedings, assessee company has made a request to the AO to reject books of accounts and to adopt profit @ 8%, hence it is a no books of case, Ought to have allowed the appeal of the assessee keeping in view of the facts of the case, the parties mentioned to whom work on subcontract basis is mentioned were part of groups of Labourers, hence, TDS provisions do not apply, hence addition of Rs. 24,15,012/- u/sec. 40(a)(ia) is liable to be deleted in the hands of the assessee company.
Any other grounds those may be prayed at the time of hearing.”
Brief facts of the case are that assessee namely R.S. Pabbla
Constructions Pvt. Ltd. is engaged in the business of executing contract
work relating to construction of chimneys, overhead reservoirs, cooling
towers, buildings and high rise structures of various plants across the
country. The assessee filed its return of income for the A.Y. 2013-14 on
25/10/2013 declaring total income of Rs. 1,04,86,040/-. The case was
selected for scrutiny. During the pendency of scrutiny proceedings, a
survey u/sec. 133A was conducted in the assessee’s premises on
4 21/09/2015. During the course of survey, the Managing Director of the
company Sri R.S. Pabbla admitted that certain credits outstanding in the
books are bogus and fictitious and offered additional income of Rs. 1.51
crores for the A.Y. 2013-14 and Rs. 3.60 crores for A.Y. 2014-15 in the
sworn deposition given by him on 21/09/2015. During the scrutiny
proceedings, the AO called upon the assessee to substantiate the claim of
sundry creditors to the tune of Rs. 6.46 crores shown as outstanding as
on 31/03/2013 in its balance sheet. After providing various
opportunities by the AO, the assessee filed the break-up in regard to 17
labour groups and the outstanding was given to be Rs. 5,72,13,840/- as
on 31/03/2013 and the balance amount of Rs. 74,37,720/- represent
liabilities towards material purchase. The AO also noted that the
assessee failed to adduce primary evidence in support of the existence of
some of such credit liabilities. As a result, an amount of Rs.
1,61,61,069/- was added to the total income, after excluding the opening
balance and liability claimed towards sub-contractors. The AO also made
an addition of Rs. 24,15,012/- by way of disallowance u/sec. 40(a)(ia)
and thus determined total income of Rs. 3,47,95,350/-. Similarly for the
A.Y. 2014-15 certain additions amounting to Rs. 6,98,71,035/- were
made towards unexplained labour credits. It is also noted that the
assessee failed to produce confirmation letters from both labour and
material contractors.
5 6. Aggrieved by the above additions, the assessee preferred an appeal
before the ld.CIT(A). Before the ld.CIT(A) assessee filed a letter dated
13/12/2016 for admission of additional evidence in the form of
confirmation letters for 8 out of 17 labour creditor groups. It was
submitted by the assessee that there is sufficient and reasonable cause
for not submitting the confirmation letters before the AO and hence,
requested to admit the additional evidence. The ld.CIT(A) forwarded the
same to the AO for his comments and on admissibility. The AO vide his
report dated 15/12/2016 submitted that balance confirmation letters
furnished by the assessee afresh may not be admitted as additional
evidence. Ld.AR pleaded that AO neither insisted for submission of
confirmation letters nor given any opportunity to produce them during
the assessment proceedings, and therefore the assessee company was
prevented by sufficient and reasonable cause in not submitting the
confirmation letters before the AO. On the other hand, the AO in his
remand report has contended that the assessee was afforded sufficient
opportunities and that the assessee failed to produce any evidence in
support of claim of credit liabilities towards labour. The AO in his
remand report has elaborately referred to the opportunities afforded and
the non-compliance of the assessee. The AO has also pointed out that
the assessee failed to produce the original records, the ledger extracts,
the muster rolls etc.
6 7. Considering the submissions made by the AR and the remand
report of the AO, ld.CIT(A) confirmed the additions made by the AO to the
extent of Rs. 1,61,61,069/- for the A.Y. 2013-14 and Rs.6,98,71,035/-
for the A.Y. 2014-15. The ld.CIT(A) also confirmed the disallowance
u/sec. 40(a)(ia) of the Act of Rs. 24,15,012/- for the A.Y. 2013-14 and
Rs. 94,77,602/- for the A.Y. 2014-15.
Aggrieved by the order of the ld.CIT(A), the assessee is in appeal
before this Tribunal.
At the outset, the Ld. AR argued that the Ld. CIT (A) has rejected
the additional evidences filed by the assessee during the First Appellate
Proceedings. The Ld. AR also pleaded that the assessee has produced
confirmation letters from various creditors before the Ld. CIT(A) whereas
no opportunity was provided to the assessee before the Ld. AO. The Ld.
AR further submitted that due to voluminous records, minute details
regarding the labour contractors could not be produced before the Ld.
Revenue Authorities. The Ld. AR also submitted that the Ld. AO has
sent notices U/s. 133(6) of the Act to various parties wherein some of
them have responded as detailed in para 8 of the order of the Ld. AO.
The Ld. AR therefore pleaded that the additions made by the Ld. Revenue
Authorities be deleted.
7 Per contra, the Ld. Departmental Representative (Ld. DR)
submitted that the Ld. CIT(A) in para 6 of his order has discussed about
the admission of the additional evidence and after obtaining a remand
report from the Ld. AO, rejected the additional evidences provided by the
assessee. The Ld. DR further submitted that the assessee has failed to
produce Muster Rolls / Attendance of the 17 labour groups which were
sought by the Ld. AO. The Ld. DR further submitted that the onus is on
the assessee to prove that the labour payments were genuine by
providing the copies of the Attendance Register, Muster Rolls etc. The
Ld. DR further submitted that the assessee has even failed to produce
the samples of the Muster Rolls in case if the assessee considers it as a
voluminous data. He therefore pleaded that the orders of the Ld.
Revenue Authorities be upheld. Countering the arguments of the Ld.
DR, the Ld. AR submitted that various confirmation letters have been
provided in page 45 of the paper book.
We have heard both the parties and perused the material available
on record and the orders of the Ld. Revenue Authorities. Admittedly, in
respect of the opportunities provided by the Ld AO, the assessee has
failed to produce the required evidence in support of the expenditure
claimed by the assessee. Further, the assessee prepared to file
additional evidence before the First Appellate Authorities which was also
8 rejected by the Ld. AO vide his remand report dated 15/12/2016. It is
also found from the remand report of the Ld. AO that the assessee has
produced confirmation letters from Eight Labour Groups out of the 17
Labour Groups. The Ld. AO in his remand report also stated that these
confirmation letters provided before the Ld. CIT(A) as additional evidence
are similar to the one given before the Ld. AO and hence requested the
Ld. CIT(A) to reject the admission of the additional evidence. Further, we
also find that there is no merit in the argument of the Ld. AR that the
assessee was not given adequate opportunity to submit the additional
evidence before the Ld. AO. The Ld. AO has provided various
opportunities to the assessee as detailed in the assessment order. As the
assessee has failed to discharge the onus cast on it by providing material
evidence with respect to labour payments and material payments even
before us, we find that the Ld. CIT(A) has rightly sustained the addition
made by the Ld. AO and therefore we find no infirmity in the order of the
Ld. CIT (A) and hence no interference is required in the order of the Ld.
CIT(A).
Further, with respect to Grounds No. 3 and 4, we find that the Ld.
AO has not rejected the books of accounts and thus has not accepted the
request of the assessee to reject the books of account and estimate the
income. The assessee being a Private Limited Company is necessarily
9 subjected to Audit under Companies Act and was also covered by the
provisions of section 44AB of the Act. In these circumstances, the Ld.
AO has rightly not considered the request of the assessee to estimate the
income by rejecting the books of accounts. Since the books of accounts
have not been rejected and the income is not estimated by the Ld AO,
and therefore the plea of the assessee that the additions made on
account of labour creditors are liable to be deleted could not be accepted.
We therefore dismiss Ground Nos. 3 & 4 raised by the assessee.
Further, with respect to additions made U/s. 40(a)(ia) of the Act, we
find that the assessee has failed to deduct the tax at source and
therefore the Ld. AO has rightly disallowed by invoking the provisions of
section 40(a)(ia) of the Act. We find that it is not in dispute that the
assessee is under obligation to deduct tax at source on various payments
as envisaged in the Act. In the instant case, the assessee has failed to
deduct the tax at source thereby disallowance U/s. 40(a)(ia) is warranted.
We therefore find that the Ld. AO has rightly made disallowance by
invoking the provisions of section 40(a)(ia) of the Act which is confirmed
by the Ld. CIT(A). We therefore find no infirmity in the order of the Ld.
CIT(A) and hence no interference is required in the order of the Ld.
CIT(A).
In the result, appeal of the assessee is dismissed.
ITA No. 88/Viz/2017 (AY: 2014-15)
This appeal filed by the assessee against the combined order 14.
of the Ld. CIT(A)-2, Visakhapatnam in ITA No. 37 & 39/2016-
17/CIT(A)-2/C-4(1)/VSP/2016-17, dated 18/01/2017 for the AYs
2013-14 & 2014-15 respectively arising out of the order passed
U/s. 143(3) of the Income Tax Act, 1961 [the Act].
The assessee has raised the following grounds of appeal:- 15.
“1. The Order passed by the CIT(A) is arbitrary and unjustifiable. 2 The CIT(A) is not justified in rejecting to admit the additional evidence filed by the assessee company, no opportunity is given at the time of asst. proceedings to prove genuineness of both Labourers and material creditors and hence this is a fit case to remand the same to the file of the AO.
The CIT(A), is not justified in confirming the addition made by the AO, as the assessee company has returned reasonable profit in the ROI, books of accounts of the assessee were rejected in the past asst. proceedings, assessee company has made a request to the AO to reject books of accounts and to adopt profit @8% hence it is a no books of case, ought to have allowed the appeal of the assessee keeping in view of the facts of the case, hence addition of Rs.6,98,71,035/- towards material creditors and Labour creditors, is liable to be deleted in the hands Of the assessee company.
The CIT(A), is not justified in confirming the addition made by the AO, as the assessee company has returned reasonable profit in the ROI, books of accounts of the assessee were rejected in the past asst. proceedings, assessee company has made a request to the AO to reject books of accounts and to adopt profit @ 8%, hence it is a no books of case, ought to have allowed the appeal of the assessee keeping in view of the facts of the case, the parties mentioned to whom work on subcontract basis is mentioned were part of groups of Labourers, hence, TDS provisions do not apply, hence
11 addition of Rs. 94,77,602/- u/sec. 40(a)(ia) is liable to be deleted in the hands of the assessee company. 5. Any other grounds those may be prayed at the time of hearing.”
Since there is no change in the facts and circumstances of
the assessee’s cases for the AY 2013-14 and 2014-15, our
decision given while adjudicating the assessee’s appeal for the AY 2013-14 in ITA No. 87/Viz/2017 mutatis mutandis applies to the
assessee’s appeal for the AY 2014-15 in ITA No. 88/Viz/2017
also. Accordingly, the grounds raised by the assessee are
dismissed.
In the result, appeal of the assessee is dismissed.
Ex-consequenti, both the assessee’s appeals are dismissed.
Pronounced in the open Court on 16th October, 2023.
Sd/- Sd/- (दु�वू�आर.एलरे�डी) (एसबालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखासद�य/ACCOUNTANT MEMBER
Dated : 16.10.2023 OKK - SPS
12 आदेशक���त�ल�पअ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee–R.S. Pabbla Constructions Pvt Ltd., Plot 1. No.102, Saikutir Apartments, Beach Road, Visakhapatnam - 530002, Andhra Pradesh. राज�व/The Revenue –The Deputy Commissioner of Income Tax, 2. Circle-4(1), Visakhapatnam, Andhra Pradesh. 3. The Principal Commissioner of Income Tax, आयकरआयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, �वशाखापटणम/ DR,ITAT, 5. Visakhapatnam गाड�फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam
