Laxmi Tibrewal, New Delhi vs Department Of Income Tax

PER I.C. SUDHIR: JUDICIAL MEMBER The Revenue has questioned First Appellate Order on the following

grounds:

"1. The Learned CIT(Appeals) has erred in deleting the addition of Rs.5,59,864 made by the A.O. on account of works tax payment on the ground that there was no liability u/s. 43B as on 31.3.2008, whereas the above addition was made on account of non-production of details.

2. The Learned CIT(Appeals) erred in deleting the addition of Rs.46,665 (25% of the expenses, erroneously mentioned as Rs.1,86,658 in the assessment order) and Rs.3,74,818 (25% of labour expenses) without any reason.

2 3. The Learned CIT(Appeals) erred in deleting the addition of Rs.23,37,282 (erroneously mentioned as Rs.18,37,856 in the assessment order) on account of unexplained opening capital account balance.

4. The Learned CIT(Appeals) admitted additional evidences without providing any opportunity of examining them as per provision of Rule 46A of the I.T. Rules."

2. Heard and considered the arguments advanced by the parties in view

of orders of the authorities below, material available on record and the

decisions relied upon.

3. The facts in brief are that the assessee is a civil contractor registered

with Municipal Corporation of Delhi. During the year, the assessee has

declared net profit of Rs.3,05,021 on a turnover of Rs.54,12,030. Her return

for the earlier years were filed under sec. 44AD on the presumptive basis @

8% of her turnover. This year, accounts were audited showing net profit of

5.64%. The Assessing Officer made addition of Rs.5,59,864 on account of

works tax payment, Rs.1,86,658 on account of disallowance of other

expenses and Rs.3,74,818 towards disallowance out of labour charges @

25% of the claimed amount on ad hoc basis. These additions have been

deleted by the Learned CIT(Appeals) against which Revenue is in appeal. 3

4. In support of the grounds, the Sr.DR has basically placed reliance on

the assessment order, whereas First Appellate Order has been relied upon by

the Learned AR.

5. Since in ground No.4, the Revenue has objected the action of the

Learned CIT(Appeals) in violation of the provisions of Rule 46A of the I.T.

Rules, hence, we preferred it to adjudicate first.

6. Having gone through the First Appellate Order, we find that the

Learned CIT(Appeals) has decided the issues raised before him after calling

for remand report from the Assessing Officer, hence, we do not agree that

the Learned CIT(Appeals) while admitting additional evidences, if any, or

accepting the submissions of the assessee has violated the provisions of Rule

46A of the I.T. Rules. The ground No.4 is accordingly rejected.

7. Ground No.1, the Revenue has questioned First Appellate Order in

deleting the addition of Rs.5,59,864 made by the Assessing Officer on the

basis that the assessee has not explained its nature and that the same is

deductible from the gross receipts. The contention of the assessee remained

that works tax is in the nature of VAT. In support, reference of Form 16A 4

(TDS certificate) filed by the assessee along with return was referred. It was

further submitted that during the course of assessment proceedings, the

assessee had also filed purchase bill in terms of order sheet entry dated

19.8.2010 mentioning works tax. Thus, the nature and contents of works tax

claimed by the assessee was on record during the course of assessment

proceedings. There was no tax payable at the end of the financial year, thus,

there was no question of addition under sec. 43B of the Act. The Learned

CIT(Appeals) called for the remand report from the Assessing Officer

wherein the Assessing Officer without commenting upon the submissions of

the assessee has simply objected the submissions made by the assessee

before the Learned CIT(Appeals).

8. Under the above facts and circumstances, the Learned CIT(Appeals)

came to the conclusion that works tax is in the nature of VAT. Amount is the

sum either deducted by MCD out of the payment or debited out of the

purchase made by the assessee. Copies of return were submitted. There was

no liability as on 31.3.2008 which would have called for addition under sec.

43B of the Act. In absence of rebuttal of these facts noted by the Learned

CIT(Appeals), we are of the view that the Learned CIT(Appeals) was 5

justified in deleting the disallowance of Rs.5,59,864 made by the Assessing

Officer. The ground No.1 is accordingly rejected.

9. Ground No.2:The Assessing Officer made addition of Rs.1,86,658

being 25% of total expenditure on the basis that the assessee failed to

produce books of account and vouchers.

10. Before the Learned CIT(Appeals), the assessee objected the finding of

the Assessing Officer that the assessee had not furnished books of account

and vouchers during the course of assessment proceedings. It was submitted

that it is evident from the record that the assessee was cooperative

throughout the assessment proceedings and had filed the various details

including the profit and loss account and copies of bills time to time during

the assessment proceedings. Disallowance made is on ad hoc basis @ 25%

of the entire administrative expenditure against turnover of Rs.59.72 lacs

was unjustified. Administrative expenses of Rs.1,86,658 for the year

includes salary components of Rs.1,14,000. It was submitted that in hurry to

rush through the assessment, the entire administrative expenditure of

Rs.1,85,658 which is 100% were disallowed by the Assessing Officer 6

though the disallowance was meant to be 25% of the administrative

expenditure.

11. The Learned CIT(Appeals) called for the remand report from the

Assessing Officer on the above submissions of the assessee wherein the

Assessing Officer admitted the mistake pointed out by the assessee,

discussed hereinabove, that the amount of addition should have been

Rs.48,685 instead of Rs.1,86,658.

12. The Learned CIT(Appeals) has deleted the addition discussing the

remand report and on the basis that there was no justification given by the

Assessing Officer for making the disallowance of 25% of the entire

expenditure debited to profit and loss account. Since the Revenue has failed

to improve its case even before the ITAT, we do not find any reason to

interfere with the First Appellate Order in this regard as the Learned

CIT(Appeals) has rightly deleted the ad hoc disallowance made by the

Assessing Officer.

12.1. In this part of ground, the Revenue has also questioned deletion of

Rs.3,74,818 i.e. 25% of labour expenses by the Learned CIT(Appeals). The 7

Assessing Officer made this disallowance on the basis that the assessee had

failed to produce books of account and supporting details to prove the

genuineness of the claim. The contention of the assessee before the Learned

CIT(Appeals) remained that the DVAT has permitted 25% of the total

turnover for labour components as evident from the return filed by the

assessee to the DVAT Department in form DVAT-16. It was submitted that

in the return filled in Form-DVAT-16, the gross receipts has been shown on

which 25% have been claimed by the assessee for labour components and

then the balance have been taken as the turnover of the assessee. It was

submitted that during the year, gross receipt of the assessee was

Rs.59,71,894 of which 25% is Rs.14,92,973 against labour charges claimed

at Rs.14,99,270. The copy of return of DVAT for the year was furnished by

the assessee during the course of assessment proceedings. The Assessing

Officer was thus not justified in making the disallowance without reference

to the documents filed and admissible deduction in DVAT Act.

13. The Learned CIT(Appeals) after discussing the submissions of the

assessee, did not find the action of the Assessing Officer in making the

disallowance of 25% of the entire expenditure on ad hoc basis. The Learned

CIT(Appeals) on the contrary keeping in view the past assessment record 8

found it justified to assess the income of the assessee at 8%, as assessed in

the preceding years.

14. We do not find infirmity in the First Appellate Order deleting the

addition of Rs.3.74,818 made by the Assessing Officer on ad hoc basis. The

same is upheld. The ground 2 is accordingly rejected.

15. Ground No.3 :The Assessing Officer made addition of Rs.18,37,856

on the basis that in absence of the capital account for the earlier years, the

opening balance shown at Rs.18,37,856 cannot be verified. The assessee

objected the addition before the Learned CIT(Appeals) on the basis that the

Assessing Officer was in hurry and thus without referring to the records of

the assessee has made the addition. It was submitted that the appellant is an

old assessee filing her return since assessment year 1989-90 which is more

than 20 years. The assessment framed was also having mistake on record as

Rs.18,37,856 is the closing balance of capital account and not the opening

balance of capital account as mentioned in the order. It was submitted that

the net profit of the assessee was Rs.3,05,021 during the year in terms of

profit and loss account on record. The profit for the assessment years 2007-

08 and 2006-07 was Rs.2,92,272 and Rs.2,26,750 respectively. 9

16. The Learned CIT(Appeals) called for the remand report from the

Assessing Officer on the above submission wherein the Assessing Officer

admitted that the said amount of Rs.18,37,856 was closing balance and had

been written wrongly as opening balance in the assessment framed.

17. In view of the above remand report and submissions of the assessee,

the Learned CIT(Appeals) has deleted the addition with this finding that the

Assessing Officer had added the entire capital of Rs.18,37,856 termed as

unapproved opening capital balance, whereas it was created by the assessee

over the years since assessment year 1989-90 and that the balance added by

the Assessing Officer was closing capital balance.

18. In absence of rebuttal of above factual finding of the Learned

CIT(Appeals) before the ITAT by the Revenue, we are not inclined to

interfere with the finding of the Learned CIT(Appeals) on the issue. The

same is upheld. The ground No.3 is accordingly rejected.

19. In result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 31 /03/2015.

Sd/- Sd/- ( PRAMOD KUMAR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 31/03/2015 Mohan Lal 10

Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT(Appeals) 5) DR:ITAT ASSISTANT REGISTRAR

Date Draft dictated on computer 17.03.2015 Draft placed before author 17.03.2015 Draft proposed & placed before the second member

Draft discussed/approved by Second Member. 27.03.2015 Approved Draft comes to the Sr.PS/PS 31.03.2015 Kept for pronouncement on 31.03.2015 File sent to the Bench Clerk 31.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk.

Date of dispatch of Order.