Shri. G. Balraj, Mangalore vs Department Of Income Tax

Asst. Commissioner of Income-tax, Circle 1(1), Mangalore. ... Appellant

Vs.

Shri G.Balraj, PWD Contractor, 6-112-81, Nethravathi Nagar Layout, Naagori, Kankanady, Mangalore-575002. ... Respondent PAN:ABZPB5464B

Appellant by: Dr.K.Shankar Prasad, JCIT. Respondent by: Shri Ramasubramanian, CA.

Date of hearing : 22/06/2015 Date of pronouncement: 30/06/2015

Per Smt. P. MADHAVI DEVI, JM:

This appeal by the revenue is against the order of the

CIT(A), Mysore, dated 12/11/2013 for the assessment year 2010-

11. The revenue has raised the following grounds of appeal:

"1. The order of the learned CIT(A) is opposed to law and facts of the case.

2. The learned CIT(A) ought to have upheld the decision of the Assessing Officer in respect of ITA No.35/Bang/2014 Shri G.Balaraj.

Page 2 of 7 the addition of Rs.20,00,000/- on account of disallowance of URD purchase of granite and jelly as no additional evidence was furnished to prove the identity of parties to whom payments were made.

3. The learned CIT(A) has erred in deleting the addition of Rs.17,45,470/- made on account of disallowance of lorry, road roller, hot mix plant and JCB maintenance as sufficient opportunity has been given to the assessee to produce the necessary evidence and he has not stated any sufficient cause that prevented him from producing the evidence before completion of the assessment.

4. The learned CIT(A) has erred in deleting the addition of Rs.2,43,900/- made on account of disallowance in respect of amount paid for jelly purchase to M/s.Padmambika Granites as the assessee has not furnished evidence supporting the payment and he has not stated any sufficient cause that prevented him from producing the evidence before completion of the assessment.

5. For these and such other grounds it is urged that the order of the CIT(A), on the above points may be set aside and the order of the Assessing Officer be restored.

6. The appellant craves leave to add, alter or amend all or any of the grounds of appeal before or at the time of the hearing of the appeal".

2. Brief facts of the case are that the assessee is an

individual carrying on business as civil contractor. He filed his

return of income for the relevant assessment year on 13/10/2010

declaring a loss of Rs.81,32,085/- after claiming disallowance of

Rs.2,45,94,732/- which was made in the assessment year 2007-

08 u/s 40(a)(ia) of the Income-tax Act, 1961 [hereinafter

referred to as 'the Act' in short]. During the assessment ITA No.35/Bang/2014 Shri G.Balaraj.

Page 3 of 7 proceedings u/s 143(3), the Assessing Officer (AO) perused the

profit and loss account that the assessee and observed that the

assessee has debited a sum of Rs.41,20,782/- as URD purchases

of granite and jelly. The assessee was asked to furnish details of

the expense claimed and on verification of the same, it was

noticed that the assessee had paid a sum of Rs.10,00,000/- each

to S/Shri K.T.Khaleel and K.Rasheed of Medikeri. To verify the

veracity of the transaction, letters were issued to the above

persons and information was called for u/s 133(6). The letters

were returned un-served. Therefore, holding that the assessee

has not been able to prove the identity of the recipients, the AO

disallowed the said expenditure. Further, the AO noticed that the

assessee has debited certain expenses on account of lorry

maintenance, road roller maintenance, hotmix plant maintenance

and JCB maintenance. In order to verify the same, notices were

issued to M/s.Aditya Enterprises, Uppinangady. Since no reply

was received from there, the AO came to the conclusion that the

assessee has not been able to prove the identity of the recipients.

Similarly, the AO called for the details of receipts from

M/s.Padmambika Granites for an amount of Rs.2,46,900/- for

purchase of jelly and since no reply was received in response to

notice issued u/s 133(6) of the Act, he disallowed the same.

3. Aggrieved by the above disallowances, assessee preferred

an appeal before the CIT(A) who allowed the same and the

revenue is in appeal before us.

ITA No.35/Bang/2014

Shri G.Balaraj.

Page 4 of 7

4. We find that ground Nos.1, 5 & 6 are general in nature

and need no adjudication. As regards ground No.2, we find that

the assessee had filed the details of expenses paid to

S/Shri K.T.Khaleel and K.Rasheed and it was also submitted that

since they were not registered dealers, the assessee has made

payments of VAT. A copy of the VAT order was also furnished

before the CIT(A) on the basis of which the CIT(A) has granted

relief to the assessee.

The learned Departmental Representative, relied upon the

order of the AO, while the learned counsel for the assessee placed

reliance upon the order of the CIT(A) and also placed reliance

upon the following judgments in support of his contention that

merely because the person to whom summons were issued did

not respond or that the assessee did not furnish the correct

addresses of those persons to be summoned, it does not lead to

an inference that the identity of the said persons is not proved:

i. Prakash Leasing Ltd. vs. DCIT (2013) 356 ITR 179(Kar),

ii. CIT vs. Punjab Leasing (P) Ltd. (2010) 325 ITR 24(P&H) and

iii. DCIT vs. Rohini Builderls (2002) 256 ITR 360)(Guj.)

5. Having regard to the rival contentions and the material on

record, we find that the notices sent by the AO were returned

unserved. As held by the Hon'ble High Court in the decisions

relied upon by the learned counsel for the assessee, merely ITA No.35/Bang/2014 Shri G.Balaraj.

Page 5 of 7 because the notices have been returned unserved, it cannot be

presumed that such persons were not residing at those places or

that the identity of such persons is not proved. Further, we find

that before the CIT(A), assessee had filed VAT papers and also

that payment was made by cheque and the CIT(A) has accepted

the said contention of the assessee for allowing relief to the

assessee. Except placing reliance upon the order of the AO, the

learned Departmental Representative has not been able to rebut

the finding of fact by the CIT(A) with evidence to the contrary. In

view of the same, we do not see any reason to interfere with the

order of the CIT(A) on this issue.

6. With regard to other disallowances, while the learned

Departmental Representative supported the order of the AO, the

learned counsel for the assessee supported the order of the

CIT(A). We find from the order of the CIT(A) that the recipients

of the payments viz. M/s.Aditya Enterprises and M/s.Padmambika

Granites had sent the confirmation letters directly to the AO

which were received by the AO after completion of the

assessment. On the basis of the said confirmations only, the

CIT(A) had granted relief to the assessee. For ready reference,

paras.4 & 5 of the CIT(A)'s order are reproduced hereunder:

"4. Disallowance of lorry, Road Roller, Hot-mix Plant & JCB maintenance - Rs.17,45,470/-.

During the assessment proceedings, the AO noticed that an amount of Rs.17,45,470/- was paid to M/s.Aditya Enterprises, to whom letters were issued by the AO and there was no ITA No.35/Bang/2014 Shri G.Balaraj.

Page 6 of 7 response. In response to show cause letter dt.21.12.2012, the appellant filed along with letter dt.31.12.2012 enclosing copy of confirmation dt.20.10.2012 enclosing ledger extracts stating the total payments is actually Rs.23,13,047/- while the addition proposed in the show cause notice is Rs.15,45,470/-. This confirmation was received by the AO after the conclusion of assessment on 27.12.2012. The AO added Rs.17,45,470/- based on the appellant's letter dt.18.07.2012. In view of the confirmation, I find that there was no scope for addition. The same is directed to be deleted.

5. Disallowance of amount paid for jelly purchase - Rs.2,43,900 There is another addition of Rs.2,43,900/- being amount paid for jelly purchase to M/s.Padmambika Granites. In this case also AO received directly confirmation dt.23.12.2012 on 28.12.2012 after completion of the assessment from M/s.Padmambika Granites furnishing the ledger extracts of the appellant as appearing in their books. It is argued by the appellant that as could be seen from the ledger extracts all the payments are made through banking channel. In view of the above facts, I find that there is no scope for addition on this issue and accordingly direct the AO to delete the same."

We find that the CIT(A) has applied his mind to the material

furnished by the respective parties before the AO, though after

completion of the assessment, in granting relief to the assessee.

As the relief is given on the basis of material furnished directly to

the AO, we do not see any reason to interfere with the order of

the CIT(A) and the grounds of appeal are rejected.

7. In the result, the revenue's appeal is dismissed.

Pronounced in the open court on 30th June, 2015.

sd/- sd/- (Jason P Boaz) (Smt. P.Madhavi Devi) ACCOUNTANT MEMBER JUDICIAL MEMBER eksrinivasulu ITA No.35/Bang/2014 Shri G.Balaraj.

Page 7 of 7

Copy to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore