Sh. Viney Gupta, Chandigarh vs Assessee

Sh.Viney Gupta, Vs. The D.C.I.T., H.No.163, Sector 38, Ambala. Chandigarh. PAN No. AAWPG7056J (Appellant) (Respondent)

Appellant by : Shri Tej Mohan Singh Respondent by : Shri D.S.Sidhu, DR

Date of hearing : 30.07.2015 Date of Pronouncement : 31.07.2015

PER H.L.KARWA, VP :

This appeal filed by the assessee is directed against

the order of the learned Commissioner of Income Tax

(Appeals), Panchkula dated 30.7.2014 relating to assessment

year 1997-98.

2. In this appeal, the assessee has challenged the

action of learned CIT (Appeals) in confirming the addition of

Rs.5,29,450/- made by the Assessing Officer being the 2

expenses payable. The assessee is a civil contractor.

During the period under consideration, the assessee had

constructed motorable bridge over river Ravi to connect

village Mahila, 20 meters plate gird bridge over Sal nalah on

Sarnam Ram Zhumer road and 50 meters bridge over river

Sahoo. All these work contracts were allotted by HPPWD,

Birmour, Chamba (H.P.). The Assessing Officer has observed

that an amount of Rs.5,29,452/- was shown under the head

'material payable' as on 31.3.1997. The Assessing Officer

asked the assessee to furnish complete names and addresses

of the persons/parties from whom the said purchases were

made. The Assessing Officer also required the assessee to

give reasons for payment being outstanding. The Assessing

Officer also asked to file confirmations from the parties in

respect of outstanding payments. The Assessing Officer has

categorically stated that when the assessee was asked to show

purchase bills, the assessee submitted only the loose sheets

of a notebook with the heading "cash/credit memo

(Nakad/Udhar Patra)". The Assessing Officer also observed

that no serial number is given on these memos. The

Assessing Officer further noticed that all these so-called

purchase bills appeared to have been written by one person

only. The assessee furnished photocopies of many of these

bills running into pages 1 to 137. The Assessing Officer took

the view that the assessee has shown bogus credit of

Rs.5,29,452/- with a view to suppress his income not

disclosed for the purpose of income tax. The Assessing

Officer made the impugned addition holding that the assessee 3

had earned additional income to the tune of Rs.5,29,452/-

during the year under consideration. In this case, the

original assessment was framed on 21.2.2000. When the

matter came up in appeal before the learned CIT (Appeals),

the learned CIT (Appeals) deleted the addition. The Revenue

challenged the order of the learned CIT (Appeals) before the

Tribunal and the Tribunal set aside the order of the learned

CIT (Appeals) and remanded the matter to the Assessing

Officer for fresh decision. In pursuance to the order of the

Tribunal, the Assessing Officer passed a fresh order on

24.3.2006, in which the impugned addition was once again

made. The assessee filed the appeal before the learned CIT

(Appeals) and the learned CIT (Appeals) confirmed the order of

the Assessing Officer.

3. The assessee preferred an appeal against the order

of the learned CIT (Appeals) before the Tribunal and the

Tribunal vide its order dated 29.4.2009 in ITA

No.569/Chd/2007 remanded this issue back to the file of the

Assessing Officer for fresh adjudication. In pursuance to the

order of the Tribunal dated 29.4.2009, the Assessing Officer

passed a fresh order on 31.8.2010, by which he again made

addition of Rs.5,29,450/-. The assessee preferred an appeal

against the order of the Assessing Officer before the learned

CIT (Appeals) and the learned CIT (Appeals) vide impugned

order confirmed the addition and, hence the assessee is in

appeal before the Tribunal.

4

4. I have heard Shri Tej Mohan Singh, learned counsel

for the assessee and Shri D.S.Sidhu, learned D.R. at length

and also perused the materials available on record. I have

carefully gone through the assessment order dated 31.8.2010

passed by the Assessing Officer under section 143(3) of the

Income Tax Act, 1961 (in short 'the Act'). In response to the

notice issued by the Assessing Officer, the assessee filed his

reply on 30.7.2010, wherein the assessee placed the following

contentions before the Assessing Officer :

1. Complete details of material payable, along with the dates on which payments were made were given to the AO in course of original assessment proceedings on 22.1.2000. (-a copy of this along with names of 8 persons from whom material was claimed to be purchased was enclosed)

2. The purchase sand and bajri was made from petty suppliers residing by river beds and have no permanent place of business, no regular books of accounts and no system of issuing credit bills for supply of their goods.

3. After a gap of 12 years, it is not possible to locate such persons and get their confirmations, as expecting the same is unreasonable and impossible.

4. Addition u/s 68 was not justified where the assessee was asked to produce the cash credits more than 10 years after they were introduced in the books of accounts.

5. As the addition was made u/s 68, the purchase was held to be genuine.

Therefore the credit that remained outstanding should not be treated as unexplained.

6. Keeping in view the ground realities and business compulsions, disallowances should not be made merely on suspicion.

7. Alternatively, credit should be given for Rs 3 lakhs declared in VDIS in 1997, Rs 1 lakhs received from encashment of Indira Vikas Patra and Rs 3 Lakhs shown as Income from Other sources in Asstt Year 2001-02 5

which was actually available to the assessee from Asstt Year 1997-98. The assessee filed an affidavit reiterating this claim.

8. As proof of VDIS declaration, the assessee filed a copy of certificate u/s 68(2) bearing no 2083 issued by the worthy Commissioner of Income Tax, Panchkula on 31.03.1998.

9. In support of material payable, the assessee filed affidavits of 3 persons namely Sri Subhash s/o Sri Sohan; Sri Subhash s/o Sri Ram Singh and Sri Kulwinder. He also stated that the affidavit of Dr Kailash of Himachal Stone Crusher, Chamba was awaited, and will be soon submitted.

10. In support of his contentions, the assessee also relied on the following case laws :

a. Pragati Construction Co. Vs ITO 142 taxation 16 b. Jindal Udyog Vs ITO 78 TTJ 9 c. JCIT Vs Mathura Dass Ashok Kumar 101 TTJ 810 d. R-Imbavalla Vs ITO 83 TTJ 352 e. CIT Vs Pancham Das Jain 205 CTR 444 f. ITO Vs Twinle Papers 987 ITD 235 g. CIT Vs Supertech Hospitals 211 CTR 360 h. CIT Vs Leaders Valves Pvt Ltd 206 CTR 463 i. ITO Vs. Chamanlal Nagpal 102 TTJ 890

5. The Assessing Officer has observed that in order to

verify the correctness of assessee's claim, the Inspector Shri

K.C.Malhotra of the Revenue was deputed to make enquiries

about Shri Subhash s/o Shri Sohan Singh and Shri Subhash

s/o Shri Ram Singh. With regard to Shri Kulwinder, the

Assessing Officer observed that the address given by the

assessee was incomplete and, hence summons under section

131 of the Act, were received back with postal authorities'

remarks "Incomplete address". The Assessing Officer after 6

considering the report of the Inspector asked the assessee to

produce Shri Subhash s/o Shri Sohan Singh and Shri

Subhash s/o Shri Ram Singh for examination. The Assessing

Officer recorded the statements of both the persons under

section 131 of the Act on 30.8.2010. Shri Subhash s/o Shri

Ram Singh has categorically stated that he had supplied bajri

to the assessee during the financial year 1996-97 worth

Rs.1300/- and the payment of the same was received in cash

in next year. He has also stated that he alongwith other 4-5

labourers were engaged in the supply of sand and bajri.

Another person, namely Shri Subhash s/o Shri Sohan Singh

has categorically stated in his statement recorded under

section 131 of the Act that during the financial year 1996-97,

he had sold sand and bajri worth Rs.90,000/- to the assessee.

However, in his affidavit, the amount mentioned was

Rs.50,000/- only. In his affidavit Shri Subhash s/o Shri

Sohan Singh has categorically stated that during the

accounting year 1996-97, he had supplied bajri and sand to

the assessee on different dates. However, he has stated that

he did not remember the dates since the matter pertained to

accounting year 1996-97 and on estimated basis, he had

stated that the estimated cost was about Rs.50,000/-.

Admittedly, the affidavit was executed in the year 2010. The

Assessing Officer stated that the amount mentioned in the

statement was different from the one mentioned in the

affidavit. It appears that the Assessing Officer has rejected

the statement of Shri Shri Subhash s/o Shri Sohan Singh on

the grounds that this person is currently employee of 7

assessee's father and he has given wrong address and amount

in his affidavit. The Assessing Officer has also rejected the

affidavit filed by Shri Kulvinder s/o Shri Mangat Ram,

wherein he has stated that during the accounting year 1996-

97, sand and bajri valuing Rs.45,000/- was supplied to the

assessee on trucks hired from local area. He further stated

that the payment of the material supplied was received in

parts on different dates in the next year. It is also stated

that neither any bill, nor any receipt for the amount received

was issued as he had not maintained any books of account.

The Assessing Officer has rejected the affidavit of Shri

Kulvinder /so Shri Mangat Ram on the ground that the name

of this person did not appear anywhere in the original

proceedings. The Assessing Officer further observed that in

the further proceedings, the same list was re-submitted,

wherein the name of Shri Kulvinder was written in pen against

truck No.HP 48-097. He further stated that Shri Kulvinder is

also an employee of Shri J.C.Gupta, assessee's father for the

past many years, as per the list of eight persons filed by the

assessee during the earlier as well as present assessment

proceedings. The Assessing Officer also observed that no

affidavit of Dr.Kailash of Himachal Stone Crusher, Chamba

was ever filed despite a gap of one month from the filing of

initial reply. The assessee claimed that during assessment

year under consideration, it had incurred an expenditure of

Rs.17,37,642/- being material purchased and consumed

during the year in the course of its construction activities.

Out of the total expenditure of Rs.17,37,642/-, a sum of 8

Rs.5,29,492 remained payable as on 31.3.1997, which was

added by the Assessing Officer. It is seen that the details of

'Material Payable' alongwith dates on which the payments

were made in the subsequent year were placed on record

during the original assessment proceedings on 22.1.2000.

The photocopy of the same was again submitted before the

present Assessing Officer. The assessee's contention is that

the persons from whom sand, bajri and other such petty items

were purchased are mostly illiterate persons, who do not

maintain any regular books of account. They sell material on

issue of small chits, which were produced before the

Assessing Officer. It is also stated that such persons are

petty suppliers, who come from faraway places and reside by

river beds and have no permanent place of business, as such,

it is not possible after a gap of about 14 years to locate such

persons and get their confirmations.

6. After considering the entire facts and circumstances

of the present case, I am of the view that the Assessing Officer

has rejected the explanation of the assessee on flimsy

grounds. It is observed that there are minor contradictions

in the affidavits as compared with the statements recorded

under section 131 of the Act of Shri Subhash s/o Shri Ram

Singh and Shri Subhash s/o Shri Sohan Singh. Such minor

contradictions are obvious because there was a gap of about

14 years between the year of supply of materials and the year

of recording of statements. The authorities below have not

correctly appreciated the statements of both the persons in 9

right perspective. It is also relevant to observe here that

after a gap of about 14 years, the assessee could not have

produced evidence of such old transactions. In the instant

case, the Assessing Officer has accepted the trading results.

The total contract work of the assessee has been accepted.

The construction work done by the assessee in this year has

been accepted and construction of bridge cannot be completed

without using sand and bajri. The total expenditure claimed

by the assessee was to the tune of Rs.17,37,642/-, out of

which a sum of Rs.5,29,492/- was shown as payable. Thus,

it is clear that the Assessing Officer has accepted the

expenditure to the extent of more than Rs.12 lacs and the

amount of Rs.5,29,492/- was disallowed merely on the ground

that these expenses are not genuine. Shri Tej Mohan Singh,

learned counsel for the assessee submitted that considering

the sales/turnover of the assessee, there was no justification

in disallowing part of the expenses. According to him, the

entire expenses were incurred for the purpose of business.

In my opinion, the entire claim of the assessee cannot be

accepted. The onus was on the assessee to prove that the

entire expenses claimed were incurred for the purpose of the

business. The defects pointed out by the Assessing Officer in

the books of account have already been mentioned

hereinabove. It is also fact that two persons appeared before

the Assessing Officer and they have categorically stated that

during the financial year 1996-97, they had supplied sand

and bajri to the assessee and they had also received the

payments in cash in the next year. It is also true that the 10

statements of these persons were recorded after a gap of 13-

14 years. It is also true that after a gap of more than 12

years, the assessee could not produce all the persons before

the Assessing Officer for examination. In view of the above

discussion, I am of the considered view that the addition of

Rs.2,50,000/- in this case will meet the ends of justice.

Thus, the assessee gets a relief of Rs.2,79,450/-.

7. In the result, the appeal of the assessee is

allowed partly.

Order pronounced in the open court on this 31st

day of July, 2015.

Sd/-

(H.L.KARWA) VICE PRESIDENT Dated : 31 s t July, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh 11