Safal Engineer & Associates, Ahmedabad vs Department Of Income Tax

Addl. CIT, Range-9, Ahmedabad Respondent I . T. A . N o s . 1 48 8 & 16 05/ A h d/ 11 f o r A. Y. 0 7- 08 (AC I T (OS D) v s . M / s . Saf al E n g i ne e rs & A s s o c iat e s ) Page 2

राजःव क ओर से / By Revenue :Shri Roopchand, Sr. D.R. आवेदक क ओर से / By Assessee : Shri P. M. Mehta, A.R. सुनवाई क तार ख/Date of Hearing :28.01.2015 घोषणा क तार ख/Date of Pronouncement : 30.01.2015

ORDER

PER SHAILENDRA KUMAR YADAV, J.M:

These appeals of assessee and Revenue are arising out form the orders of CIT(A)-XV, Ahmedabad, dated 28.01.2010 for the assessment year 2007-08. So, they are being disposed of by way of this common order for the sake of convenience.

2. In ITA No. 1488/Ahd/2011, Revenue has filed the appeal on the following ground:

"1) The ld. Commissioner of Income-tax (A)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs.7,00,000/- made by the Assessing officer regarding pending expenditure of PV sets/PV sheets."

2.1 In ITA No. 1605/Ahd/2011, assessee has filed the appeal on the following ground:

"1. On the facts and in the circumstances of the appellant's case, the Departmental Authorities have erred in considering it a fit case for disallowance of apart of labour expenses and the Commissioner of Income Tax (Appeals) has further erred in confirming such disallowance of a sum of Rs.5,67,614 out of I . T. A . N o s . 1 48 8 & 16 05/ A h d/ 11 f o r A. Y. 0 7- 08 (AC I T (OS D) v s . M / s . Saf al E n g i ne e rs & A s s o c iat e s ) Page 3

disallowance of Rs.8,51,420 which was made by the Assessing Officer."

3. First we take Revenue's appeal in ITA No. 1488/Ahd/2011.

3.1 In this case, the revenue has come in appeal on account of addition deleted by CIT(A) and made by the Assessing Officer. The Assessment Year in the appeal is 2007-08. The tax effect on the deleted additions is less than the threshold limit, i.e. Rs.4 lacs. The appeal has been filed on 26.05.2011.

4. We find that the tax effect in this case is less than Rs.4 lacs. As per the recent CBDT Instruction No.5/2014 dated 10.07.2014, the revenue is not permitted to file appeal before the Tribunal if the tax effect is less than Rs. 4 lavd. We find support from the decision of Hon'ble Supreme Court dated 25.03.2011 in ITA Nos. 3 to 5/2010. Ld. Departmental Representative for the revenue submitted that Instruction no. 5/2014 is not applicable for the appeals filed prior to issue of the said instructions. It is also submitted that the Full Bench of Punjab & Haryana High Court in the case of CIT Vs. Virendra Construction Co., 239 CTR 1, held that revised monetary limits are not applicable to the pending appeals, and it is in favour of the revenue.

4.1 We have heard both the sides and gone through the material available on record. Instruction No.5/2014 dated 10.07.2014 has revised the monetary limit for filing the I . T. A . N o s . 1 48 8 & 16 05/ A h d/ 11 f o r A. Y. 0 7- 08 (AC I T (OS D) v s . M / s . Saf al E n g i ne e rs & A s s o c iat e s ) Page 4

appeal by the department before Income-tax Appellate Tribunal, Hon'ble High Courts and Hon'ble Supreme Court. Monetary limit for filing the appeal before the Tribunal is Rs. 4 lacs; before Hon'ble High Court Rs. 10 lacs and before Hon'ble Supreme Court Rs. 25 lacs. Hon'ble Supreme Court in the order dated 25.03.2011 referred to above has held as under:-

"It is stated that the tax impact in the present cases is less than Rs. 10.00 lacs. The Department has recently issued an instruction bearing no. 3/2011 dated 09.02.2011, which is identical to its earlier instruction bearing no. 5/2008 dated 15.05.2008 except that in so far as the High Court is concerned, the monetary limit in respect of appeals where the questions of law raised need not to be answered, has been raised from Rs. 4.00 lacs to Rs. 10.00 lacs. The Division Bench of this Court in ITA No. 89/1999 decided on 28.01.2011 has already held that the instruction bearing no. 5/2008 dated 15.05.2008 would apply even to the old pending references and appeals. This principle would thus naturally equally apply to the instant instruction bearing no.3/2011 dated 09.02.2011, as well. The tax effect being less than Rs. 10.00 lacs, the question of law does not require to be answered. The appeals are disposed of accordingly."

4.2 Hon'ble Delhi High Court in the case of CIT Vs. Delhi Race Club Ltd. in ITA No. 128/2008 dated 03.03.2011 has held as under:-

"The tax effect involved in the present appeal is Rs. 4,65,860/-. As per the recent guidelines of the CBDT, appeal in those cases where the tax effect is less than Rs. 10.00 lacs, are not to be entertained.

This court in the case of CIT, Delhi-III Vs. M/s P.S. Jain & Co., being ITA No. 179/1991 decided on 2nd August, I . T. A . N o s . 1 48 8 & 16 05/ A h d/ 11 f o r A. Y. 0 7- 08 (AC I T (OS D) v s . M / s . Saf al E n g i ne e rs & A s s o c iat e s ) Page 5

2010 has taken a view that such circular would also apply to pending cases."

4.3 In view of the above, Instruction no. 5/2014 dated 10.07.2014 will apply to all pending appeals. Respectfully following the precedent, it is held that the appeal is not maintainable in the instant case as the tax effect is less than Rs.4 lacs. Accordingly, it is held that appeal filed by the revenue is not maintainable.

5. As a result, appeal filed by Revenue is dismissed. Since we dismiss Revenue's appeal on technical point, so we are refraining ourselves to comment on the merit of issue at hand.

6. Now we take assessee's appeal in ITA No. 1605/Ahd/2011.

6.1 Assessee firm is in business of project development etc. for immovable property. Assessing Officer observed that labour cost was proportionately higher as compared to usual rate in real estate business. He has shown higher labour payments in comparison to the payment for materials. The entire labour expenditure of Rs.38,48,068/- with regard to Saket-II Project plus Rs.18,28,063/- with regards to Saket-III Project were claimed to be incurred by assessee. The same could not be verified because all payments were not through cheques and cash payments have also been made. Accordingly, disallowance was made on this account. In appeal, CIT(A) restricted the disallowance to 10% of labour expenses of I . T. A . N o s . 1 48 8 & 16 05/ A h d/ 11 f o r A. Y. 0 7- 08 (AC I T (OS D) v s . M / s . Saf al E n g i ne e rs & A s s o c iat e s ) Page 6

Rs.56,76,131/-. Taking all facts and circumstances, disallowance is restricted to 5% instead of 10% done by CIT(A). Assessing Officer is directed accordingly.

7. As a result, Revenue's appeal is dismissed while assessee's appeal is partly allowed.

Pronounced in the open Court on this the 30th day of January, 2015.

Sd/- Sd/- (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER True Copy S.K.SINHA

आदे श क ूितिल&प अमे&षत / Copy of Order Forwarded to:-

1. राजःव / Revenue

2. आवेदक / Assessee

3. संबिं धत आयकर आयु- / Concerned CIT

4. आयकर आयु-- अपील / CIT (A)

5. &वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड6 फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।