Income Tax Appellate Tribunal - Agra
Katyane Construction Pvt. Ltd., ... vs Department Of Income Tax on 13 May, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 474 Agra/ 2012
Assessment Year 2009-10
Asstt. Commissioner of Income Tax Vs. M/s Katyane Construction Pvt. Ltd.
Cirlce-2, Kushwah Colony, Etawah Road,
Gwalior. Bhind.
(PAN -AADCK3101A)
(Appellant) (Respondent)
Appellant by : Shri K.K. Mishra Jr. D.R.
Respondent by : None
Date of hearing : 13.05.2013
Date of pronouncement : 17.05.2013
ORDER
PER BHAVNESH SAINI, JUDICIAL MEMBER
This appeal by the Revenue is directed against the order of learned CIT(A), Gwalior dated 05.07.2012 for A.Y. 2009-10.
2. We have heard learned D.R. and perused the findings of authorities below. This appeal was fixed for hearing on 25.03.2013 and on that date it was adjourned to 13.05.2013, on the request of learned Counsel for the assessee. 2 ITA No.474/Agra/2012
A.Y.2009-10 However, on the date of hearing on 13.05.2013, none appeared on behalf of the assessee, therefore, the assessee is proceeded ex-parte.
3. The Revenue on Ground No.1, challenged the order of learned CIT(A) in deleting the addition on account to estimating net profit @ 5% of the total turnover and on Ground no.2 the order of learned CIT(A) has been challenged in deleting the addition of Rs.8,03,040/- made by A.O. under Section 40A(3) of the Income Tax Act.
4. Briefly the facts of the case are that the assessee company is a civil contractor and shown total receipts at Rs.1.96 crore. Audit report was filed along with return of income. The A.O. on going through the Bank account found that there are several payments from the bank with notation 'cas , Cash cheque'. The auditor did not clarify this position in the audit report, therefore, the Manager of the SBI, Bhind was summoned who has clarified that the above term used means payment through bearer cheque. This fact was confronted to the assessee. The A.O. further found that total payments of Rs.11,40,458/- have been made through bearer cheques contravening the provisions of Section 40A(3) of the Act. It was also found that various expenses are not verifiable. Therefore, the result of books of accounts is rejected under Section 145 of I.T. Act and profit at 5% was applied 3 ITA No.474/Agra/2012 A.Y.2009-10 against the turnover and income was estimated at Rs.9,80,000/-. The A.O. further disallowed Rs.11,40,458/- under Section 40A(3) of the Act. Both the addition were challenged before learned CIT(A) and it was submitted that result of books of account have been rejected without any reasons. No details have been given by A.O. as to which of the expenses are not verifiable. No material has been brought on record if assessee has not actually incurred the expenses or the expenses were incurred out side the books of account. It was further submitted that payments were made to several parties for purchasing of blanketing material, diesel expenses, truck hire charges, payment made on behalf of sub contractor and transportation etc. and all the expenses are fully vouched and incurred for business purposes through bearer cheque not by cash. All payment through banking channel were made through bearer cheque and the same have been genuinely received by the parties having their signature on reverse of cheque. These expenses are incurred at Agra where the site of work carried. The assessee's office and directors residence are in Bhind. As the assessee's company wants to run their site of construction at Agra then they have to pay as bearer cheque because the third parties are reluctant to accept cheque and insist on cash payments. This is exceptional or unavoidable circumstances because payees are insist for cash payment as the party is new in the area of Agra. If those payments 4 ITA No.474/Agra/2012 A.Y.2009-10 were made for bank draft or issue of cheque would have resulted in a missed opportunity or failure of work to be carried to execute as per the contract.
5. It was submitted that assessee incurred legitimate and genuine business expenditure, therefore, addition is wholly justified. The learned CIT(A) accepted the contention of the assessee because there was no basis for rejecting the books of account without bringing any supporting material on record. The A.O. has not brought anything on record to justify the rejection of the books of account, therefore, profit rate of 5% estimated by the A.O. was found unjustified and addition of Rs.9,80,000/- was accordingly deleted.
6. As regards the addition of Rs.11,40,458/- is concerned, learned CIT(A) found that it was first year of operational business of the assessee's company and the assessee's company and its Director are based at Bhind, M.P., whereas most of the contract work and payments were made in pursuance thereof pertained to parties based at Agra and Etawah except the amount of Rs.2,12,160/-,Rs.60,458/- and Rs.64,800/- totaling Rs.3,37,418/- for parties based at Gwalior/Bhind. The learned CIT(A) applied proviso to Section 40A(3) of the Act in favour of the assessee which provides the exception to the Rule having regard to the nature and 5 ITA No.474/Agra/2012 A.Y.2009-10 extent of business facilities available, consideration of business expediency and other relevant factors.
7. The learned CIT(A) on perusal of the bills pertaining to cash payments found that they have been made to petrol pumps, retail outlets in respect of various vehicles used for transportation, for earth work at various construction sites on different dates during the year. Since it was first year of its business towards outstation parties, therefore, business expediency was considered in favour of the assessee. The learned CIT(A) accordingly found that except the payment of Rs.3,37,418/- remaining payments have been made for business expediency and accordingly addition of Rs.3,37,418/- was confirmed and the rest of the addition was deleted.
8. Learned D.R. relied upon the order of the A.O. and the decision of the Hon'ble Andhra Pradesh High Court in the case of Late Smt. Jyothi Chellaram Vs. Commissioner of Income-Tax (1988) 173 ITR 358 in which issue was decided in favour of the Revenue because the assessee could not produce corroborative evidences and the assessee was also found to have maintained bank account at Madras where business operations were going on and the recipients were also having bank account at Madras. It was also found that assessee was not 6 ITA No.474/Agra/2012 A.Y.2009-10 new either to the business or to the provisions of the Income Tax Act. Therefore, it was held that Tribunal was justified in confirming the disallowance of such payments made by the assessee to third parties. He has also relied upon the decision of the Hon'ble Gauhati High Court in the case of Commissioner of Income Tax Vs. Assam Tribune (1996) 221 ITR 488 in which it was held that it is also necessary to enquire whether there existed exceptional and unavoidable circumstances for making payment under Section 40A(3) of the Act.
9. We have considered the submission of learned D.R. and perused the findings of authorities below and do not find any justification to interfere with the order of learned CIT(A) in deleting both the additions.
10. The A.O. for the purpose of rejection of the books of account considered cash payment made through bearer cheques under Section 40A(3) of the Act but did not point out whether those payments were not genuine and were not made for the purpose of business of the assessee. The A.O. has very vaguely observed that various expenses are not verifiable. The A.O. has not pointed out any specific defect in maintaining of the books of account by the assessee. The assessee has maintained complete records which are audited also, therefore, in the absence of any specific point found against the assessee, A.O. was not 7 ITA No.474/Agra/2012 A.Y.2009-10 justified in rejecting the book result of the assessee. Ground No.1 of departmental appeal is accordingly dismissed.
11. On second ground of appeal with regard to payments made through bearer cheques, it was found that the expenses were incurred wholly and exclusively for the purpose of business. It was also found that it was a first year of operational business of the assessee. It was also found that assessee company and its Directors are based at Bhind, M.P. whereas most of the contracts and payments were made to the parties based at Agra and Etawah. The learned CIT(A) confirmed the disallowance of payment under Section 40A(3) of the Act in respect of the payment made to the parties based at Gwalior/Bhind. The A.O. has not brought any material on record to prove that the recipient were having Bank account at Bhind/M.P. where assessee maintained bank account. It was also found that assessee was new to business and was also new to parties/recipient of the amount in question. No evidence was also found, if assessee maintained any bank account at Agra and Eawah where payments have been made at the construction work. The work is to be carried at remote places and according to assessee since the parties insists for payment in cash, therefore, bearer cheques 8 ITA No.474/Agra/2012 A.Y.2009-10 were given to them. The assessee filed compete details of the payments made to various parties through bearer cheques for blanketing material, diesel expense and transportation expenses etc.
12. The assessee, therefore, submitted that it is a case of exceptional and unavoidable circumstances for making such payments through bearer cheques. Learned CIT(A), therefore, on proper appreciation of facts and available material on record and considering nature of business of assessee and that assessee was new to the business at remote places, rightly allowed benefit in favour of the assessee as per proviso to Section 40A(3) of the Act for payments made at Agra and Etawah. The assessee was, therefore, able to prove business expediency and relevant factors as mentioned above, the assessee had exceptional and unavoidable circumstances for making such payments at Agra and Etawah through bearer cheques. It is a departmental appeal and no adverse material produced on record to rebut the findings of learned CIT(A). We, therefore, do not find any justification to interfere with the order of learned CIT(A) in deleting the addition. Ground No.2 of appeal of the Revenue is also dismissed. 9 ITA No.474/Agra/2012
A.Y.2009-10
13. In the result, the appeal of the Revenue is dismissed.
(Order pronounced in the open Court)
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
Amit/
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File. By Order
Sr. Private Secretary
Income Tax Appellate Tribunal, Agra
True Copy