Income Tax Appellate Tribunal - Ahmedabad
Parmar Builders & Devlopers,, Vapi vs Department Of Income Tax on 11 July, 2014
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'डȣ
डȣ',
डȣ , अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D " BENCH, AHMEDABAD
सम¢ ौी एन.एस.सैनी, लेखा सदःय एवं ौी कुल भारत, Ûयाियक सदःय ।
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.3802/Ahd/2007
( िनधा[रण वष[ / Assessment Year : 2003-04)
The Assistant बनाम/ Parmar Builders &
Commissioner of Vs. Developers
Income-tax Gurudev Complex
Vapi Circle, Vapi 5, Delkar Marg
Silvassa
ःथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AADFP 1938 K
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
And
CO No.372/Ahd/2007 - A.Y. 2003-04
(in ITA No.3802/Ahd/2007 - AY 2003-04)
Parmar Builders & Developers vs. The ACIT
Silvassa .. Vapi Circle, Vapi
(Cross Objector) (Respondent)
Revenue by : Shri K.C. Mathews, Sr.DR
Assessee by : Shri J.P. Shah, AR
सुनवाई कȧ तारȣख / Date of Hearing 04/06/2014
घोषणा कȧ तारȣख /Date of Pronouncement 11/07/2014
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-II, Ahmedabad ('CIT(A)' in short) dated 27/07/2007 pertaining to Assessment Year (AY) 2003-04 and the Assessee is in cross-objection thereof.
ITA No.3802/Ahd/2007 (By Revenue)and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -2-
2. First, we take up the Revenue's appeal in ITA No.3802/Ahd/2007 for AY 2003-04. The Revenue has raised the following grounds of appeal:-
1. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition made on account of Falandi Project of Rs.5,39,083/- out of total addition of Rs.6,90,273/-.
2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition made of Rs.6,65,176/-
U/s.40A(2)(b) of the Act.
3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs.6,00,000/- made as W.I.P.of Casetrol.
4. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs.1,24,800/- made out of various expenses.
5. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition U/s.40A(2)(b) of Rs.4,26,843/- and Rs.3,91,712/-.
6. It is therefore, prayed that the decision of the learned CIT(A) may be set aside and the order of the AO may be restored.
The appellant craves to add, alter or amend any grounds of appeal.
3. Briefly stated facts are that the assessee filed its return of income declaring income of Rs.6,35,770/-. The case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 27/03/2006, thereby the Assessing Officer (AO in short) made disallowances of expenses related to Falandi Project of Rs.6,90,273/-, expenses u/s.40A(2)(b) of Rs.6,65,176/-, expenses treated ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -3- as work-in-progress of Rs.6,00,000/-, expenses related to castrol of Rs.8,18,555/-, expenses claimed as reimbursement to M/s.Parmar Construction, Silvassa of Rs.4,21,645/- and expenses related to self paid expenses of Rs.3,24,236/-. Thus, the AO made addition of Rs.35,21,236/- and assessed the income at Rs.41,57,608/- against the return of income of Rs.6,35,770/-. Against this, assessee filed an appeal before the ld.CIT(A), who after considering the submissions and examining the details placed before him, partly allowed the appeal.
4. First ground of Revenue's appeal is against the deletion of addition on account of Falandi project of Rs.5,39,083/- out of total addition of Rs.6,90,273/-. The ld.Sr.DR adopted the facts as stated in the statement of facts and submitted that the ld.CIT(A) was not justified in deleting the addition. On the contrary, ld.counsel for the assessee Shri J.P.Shah submitted that the order of the ld.CIT(A) is justified.
5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact that the expenses of Rs.5,50,000/- represent reimbursement of expenses to Parmar Builders and Developers of Vapi. So far as the amount of Rs.3,07,070/- included therein is concerned, the bills are actually produced and hence there is no justification for the addition. The ld.CIT(A) has also given a finding on fact in para-3.2 of his order, which reads as under:-
"3.2. I have considered the assessment order and the above submissions. On consideration of the same I find that the expenses ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -4- of Rs.5,50,000/- represent reimbursement of expenses to Parmar Builders and Developers of Vapi. So far as the amount of Rs.3,07,070/- included therein is concerned, the bills are actually produced and hence there is no justification for the addition. In respect of the suggestion that there is excess bill of Rs.22,930/-, I find that the aggregate amount of Rs.5,50,000/-does not include Rs.3,30,000/- but itinclduesRs.3,07,070/-. Hence this observation of the A.O. in remand report are not correct. Considering the above aspects the addition is deleted to the extent of Rs.3,30,000/- made by the assessing officer.
In respect of disallowance of metal expenses, as rightly pointed out by the A.O.the bills are available only for Rs.45,219/- and hence the assessing officer had rightly made the addition for the differential amount of Rs.1,54,781/-. In respect of the miscellaneous items, the appellant has produced copies of vouchers and hence the addition of Rs.46,530/-is directed to be deleted.
In so far as the addition of Rs.1,40,264/- made out of the expenses incurred by the appellant himself is concerned, it is supported by various vouchers and hence the A.O. was not justified in making the disallowance for the same. The addition of Rs.1,40,264/- is deleted."
5.1. This finding on fact is not controverted by the Revenue by placing any other contrary material on record, therefore, we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of revenue is rejected.
6. Ground No.2 is against the deletion of addition of Rs.6,65,176/- u/s.40A(2)(b) of the Act. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the addition. He supported the order of the AO. On the contrary, ld.counsel for the assessee supported the order of ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -5- the ld.CIT(A) and submitted that ld.AO was not justified in making the addition.
7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The ld.CIT(A) has decided this issue in paras-4.1 & 4.2 of his order, which are in the following terms:-
"4.1. The appellant in this connection submitted that the appellant as well as the Parmar Construction, Vapi, both are engaged in the business of construction and the payment is made on sub-contract given to them. It is submitted that Parmar Construction, Vapi had thus not supplied only material but had undertaken the execution work applying their labour on different types of work like flooring, water proofing, plumbing, drainage, masonry, excavation, etc. The break-up of Rs.28.84 lakh is given on page 8 of the submissions of the appellant. It is submitted that for such services they have to be paid. It is also submitted that section 40A(2)(b) can be invoked in respect of payment of expenditure to related parties if in the opinion of the A.O. it is excessive or unreasonable compared to the fair market value of the goods and services, legitimate business needs and benefit derived by the appellant. It is for the A.O. to establish that payment is excessive looking to the above angle before he concludes that the payment is excessive. Merely because the payment is made to related concern, section 40A(2)(b) cannot be applied. He has to consider the above criterias before invoking section 40A(2) of I.T.Act, 1961. The A.O. has in the remand report stated that as the sister concern earned profit from the payment made by the appellant, such excess payment is to be disallowed.
4.2. I have considered the assessment order and the above submissions. The assessing officer has made addition for the excess payment on the ground that the assessee has made payment of Rs.35 lakh to the Parmar Construction, Vapi whereas the expenses incurred by them for the appellant's work are of Rs.28,84,423/-. I appreciate the argument that it is for the ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -6- assessing officer to establish that the fair market value of the goods and services was less than what is paid by the appellant. In the appellant's case it is not established by the A.O. He has made the addition only for the differential amount which represent the payment made by the appellant and the corresponding cost as per the books of the payee. The payee has accounted for the receipts and expenses in their books. Thus merely because the payment is more than their cost it cannot be concluded that the payment is excessive than the fair market value. The addition made at Rs.6,65,176 by invoking section 40A(2) of I.T.Act, 1961 is, therefore, directed to be deleted."
7.1. As per the provisions of section 40A(2) of the I.T.Act, the AO is required to demonstrate as to how the payment made to sister-concern is excessive and what is the fair market value of the goods, services or facilities for which the payment has been made by the assessee. Undisputedly, the AO has not demonstrated this fact, therefore we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue's appeal is rejected.
8. Ground No.3 is against the deletion of addition of Rs.6 lacs made as work-in-progress in respect of Castrol project. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the order of the ld.CIT(A) is justified and is based on facts. The ld.CIT(A) has given a finding on fact in para-5.2 of his order which reads as under:-
"5.2. I have considered the assessment order and the above submissions. The A.O. has made the addition by referring the expenses incurred by Parmar Construction, Vapi and stating that it includes bills relating to subsequent period. It does not establish that the bills are ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -7- incurred by the appellant. It may be for any other work and not related to appellant's site. It is further seen the bills are accounted as expenses in the books of Parmar Construction, Vapi and as such these expenses are not claimed in the books of appellant. Hence in my view on facts of the appellant's case, the addition is unjustified and the same is deleted."
8.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The Revenue has not placed any material on record to rebut the finding of ld.CIT(A), therefore, we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue's appeal is rejected.
9. Ground No.4 is against the deletion of addition of Rs.1,24,800/- made out of various expenses. The ld.Sr.DR supported the order of the AO. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that so far as this deletion of addition is concerned, the ld.CIT(A) has given a finding on fact and this finding is not rebutted by the Revenue by placing any contrary material on record. 9.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact that he had gone through the copies of bills furnished in the paper-book by the assessee and the bills which are claimed to have been attached to the submissions are not tallied except the amount of Rs.1,24,800/- paid to electricity department and the printing expenses of Rs.32,800/-. Accordingly, ld.CIT(A) deleted the addition. This finding on fact of the ld.CIT(A) is not controverted by the Revenue by placing any material on record. Thus, this ground of Revenue's appeal is rejected.
ITA No.3802/Ahd/2007 (By Revenue)and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -8-
10. Ground No.5 is against the deletion of addition made u/s.40A(2)(b) of the Act. of Rs.4,26,843/- and Rs.3,91,712/-. The ld.Sr.DR supported the order of the AO, whereas the ld.counsel for the assessee supported the order of the ld.CIT(A). 10.1. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue in para-6.2 of his order by observing as under:-
"6.2. I have considered the assessment order and the above submissions. In so far as the addition of Rs.3,91,712/- is concerned in the case of Parmar Builders and Developers of Vapi, I have already held that it relates to their project. Hence disallowance of such expenses is not justified. So far as the addition of Rs.4,26,843/- is concerned, the assessee has claimed that it has incurred expenses of Rs.45.99 lakh. In the Remand Report it is stated by the A.O. that bills for Rs.3,22,970/- are not available which includes salary of miscellaneous expenses. Hence he has reported that the same are not properly supported by the vouchers. In my view the issue involved is that the expenditure paid by the appellant is not excessive, if we consider the expenses of Rs.45.99 lakh referred to by the appellant. Hence question of applying section 40A(2)(b) does not arise. In so far as the remand report is concerned, the allegation that bills are not available is contradictory to the next observation that it represent salary payment. Further, bills are stated to be self made but the said bills are for miscellaneous expenses and hence the observation of the A.O. in remand report are not accepted. Both the additions are deleted."
10.2. Moreover, the AO has not demonstrated how these expenses are excessive and what is the fair market value of such expenses. The Revenue could not point out anything on the finding of the ld.CIT(A) by ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04 -9- placing contrary material on record. Thus, this ground of Revenue's appeal is rejected.
11. Ground No.6 is general in nature require no independent adjudication.
12. In the result, Revenue's appeal is dismissed.
13. Now,we take up the Assessee's Cross-Objection No.372/Ahd/2007 for AY 2003-04 (in ITA No.3802/Ahd/2007 for AY 2003-04). The Assessee has raised the following grounds in its cross-objection:-
I. Disallowance out of Falandi Project:
On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in sustaining disallowance of Rs.1,54,781/- in respect of metal expenditure.
II. Disallowance of Rs.4,21,645/- in respect of payment to Parmar Construction, Silvassa:
On the facts and circumstances of the disallowance u/s.40A(2)(b) has been wrongly sustained.
III. Disallowance out of expenses:
On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in sustaining disallowance of Rs.1,66,636/- out of Rs.3,24,236/-.
IV. Miscellaneous:
(1) The learned Commissioner of Income-tax (Appeals) erred in considering ground regarding interest u/s.234B of the Act. (2) The appellant craves leave to add, alter or vary any of the grounds of cross objection.
13.1. Ground No.I is against in sustaining disallowance of Rs.1,54,781/- in respect of metal expenditure. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining the addition.
ITA No.3802/Ahd/2007 (By Revenue)and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04
- 10 -
On the contrary, Sr.DR supported the order of the ld.CIT(A) on this issue.
14. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact that the bills are available only for Rs.45,219/- and differential amount of Rs.1,54,781/- was sustained. The assessee has not produced any contrary material, therefore we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of assessee's cross-objection is rejected.
15. Ground No.II is against the disallowance of Rs.4,21,645/- made u/s.40A(2)(b) of the Act in respect of payment to Parmar Construction, Silvassa. The ld.counsel for the assessee submitted that the order of the ld.CIT(A) is not justified in disallowing the claim and sustaining the addition.
16. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact in para-7.2 of his order by observing as under:-
"7.2. I have considered the assessment order and the above submissions. I find that though the assessee has claimed to have submitted along with details, copies of bills, the figures of the bills attached do not tally with the chart of bills given by them. I therefore, do not appreciate the submissions of the appellant in ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04
- 11 -
this behalf and hold that the assessing officer had justifiably made the addition for unverifiable expenses. The addition of Rs.4,21,645/- is sustained.
16.1. This finding of the ld.CIT(A) is not controverted by the ld.counsel for the assessee by placing any contrary material on record. Therefore, we do not find any infirmity in the order of the ld.CIT(A), same is upheld. Thus, this ground of assessee's cross-objection is rejected.
17. Ground No.III is against in sustaining the disallowance of Rs.1,66,636/- out of Rs.3,24,236/-. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining the addition and submitted that the assessee has produced all the relevant material. On the contrary, ld.Sr.DR has supported the orders of the authorities below.
18. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact in para8.2 of his order by observing as under:-
"8.2. I have considered the assessment order and the above submissions. I have also gone through the copies of bills furnished in the paper-book. It is seen that the bills which are claimed to have been attached to the submissions are not tallied except the amount of Rs.1,24,800/- paid to electricity department and the printing expenses of Rs.32,800. For the balance amount the assessee has not been able to give supporting evidence/receipts/proper vouchers. It is claimed to be the masonry work. But is it not signed nor acknowledged the payments made. No details of the payee are mentioned on such sheets. It is also seen that page 42 and 43 are the assessee's ledger record and not supporting bills. Therefore, on consideration of the facts, I delete the addition of Rs.1,24,800/- on account of electricity expenses and of ITA No.3802/Ahd/2007 (By Revenue) and CO No.372/Ahd/2007 (By Assessee) ACIT vs. Parmar Builders & Developers Asst.Year - 2003-04
- 12 -
Rs.32,800/- in account of painting expenses and balance addition made by the A.O. is upheld. The appellant gets part relief on this account."
18.1. This finding of the ld.CIT(A) has not been controverted by the ld.counsel for the assessee by placing any material on record. Therefore, this ground of assessee's cross-objection is rejected.
19. Ground No.IV is against levy of interest u/s.234B of the Act which is consequential in nature and the same is rejected as such.
20. In the combined result, Revenue's appeal as well as cross- objection filed by the assessee both are dismissed.
Order pronounced in Court on the date mentioned hereinabove at caption page Sd/- Sd/-
(एन.एस.सैनी) (कुल भारत)
लेखा सदःय Ûयाियक सदःय
( N.S. SAINI ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 11/07/2014
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-II, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER,
स×याǒपत ूित //True Copy//
उप/ ीकार (Dy./Asstt.Registrar)
उप/सहायक पंजीकार
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद / ITAT, Ahmedabad