Uma Shankar Contractor Pvt.Ltd.,, Delhi v. ITO, New Delhi

ITA 4805/DEL/2009 | 2006-2007
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 480520114 RSA 2009
Bench Delhi
Appeal Number ITA 4805/DEL/2009
Duration Of Justice 2 month(s) 5 day(s)
Appellant Uma Shankar Contractor Pvt.Ltd.,, Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 26-02-2010
Date Of Final Hearing 22-02-2010
Next Hearing Date 22-02-2010
Assessment Year 2006-2007
Appeal Filed On 21-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHAN ITA NO. 4805(DEL)/2009 ASSESSMENT YEAR: 2006-07 M/S UMA SHANKAR CONTRACTORS I NCOME-TAX OFFICER (P) LTD. 98-A FIRST FLOOR VS. WARD 18(1) NEW DELHI. GEETA BHAWAN KAMLA NAGAR DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MUKESH GUPTA C.A. RESPONDENT BY : SHRI N.K. CHAND S R. DR ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT(APPEALS)-XXI NEW DELHI PASSED ON 15.10 .20 09 IN APPEAL NO. 83/2008-09 AND IT PERTAINS TO ASSESSMENT YEAR 2006-07. THE CORRESPONDING ORDER OF ASSESSMENT WAS FRAMED B Y THE INCOME-TAX OFFICER WARD 18(1) NEW DELHI ON 28.11.2008 UNDER THE PROVISIONS OF SECTION 143(3) OF THE INCOME-TAX ACT 1961. THE ASSESSEE HAS TAKEN UP TWO GROUNDS IN THE APPEAL THE SUM AND SUBSTANCE OF WHICH IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AO GROSSLY ERRED IN HOLDING THAT HIRE CHARGES AMOUNTING TO RS. 26.25 LAKH WERE DISALLOWABLE U/S 40A(3) WITHOUT ISSUING ANY SH OW CAUSE NOTICE IN THIS ITA NO. 4805(DEL)/2009 2 REGARD AND (II) THE LD. CIT(APPEALS) ALSO ERR ED IN CONFIRMING THE ADDITION MADE BY THE AO. 2. BEFORE US THE LD. COUNSEL FOR THE ASSESSE E NARRATED THE BRIEF BACKGROUND OF THE CASE. IT WAS SUBMITTED THA T THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROADS. FOR THIS PURPOSE HE TOOK MACHINERY ON HIRE FROM SISTER CONCERNS. THE AO DISALLOWED THE HIRE CHARGES BY HOLDING THAT TAX WAS NOT DEDUCTED F ROM PAYMENTS MADE IN RESPECT OF HIRE CHARGES. HOWEVER THE LD. C IT(APPEALS) CAME TO THE CONCLUSION THAT THE PROVISION CONTAINED IN SECTIO N 40(A) WAS NOT APPLICABLE IN THIS YEAR. THEREFORE HE DELETED THE ADDITION MADE BY THE AO. HOWEVER THE AO HAD ALSO MENTIONED THAT THE PAYMENTS WERE MADE IN CASH. THE LD. CIT(APPEALS) CONSIDERED THIS I SSUE BEFORE WHOM THE DETAILS OF PAYMENTS TO THE TWO PARTIES NAMELY SHIV SHAKTI INTERNATIONAL AND UMA SHANKAR CONSTRUCTIONS WERE FILED. THES E DETAILS ARE PLACED IN THE PAPER BOOK ON PAGES 24 TO 28. THE LD. CIT(A PPEALS) HELD THAT THE PAYMENTS WERE CAUGHT WITHIN THE MISCHIEF OF S ECTION 40A(3). IN DOING SO IT WAS HELD BY HIM THAT THE LEDGER ACCOUN TS OF THE TWO PARTIES WERE UNRELIABLE AND WERE SO MADE UP AS TO SHOW EAC H PAYMENT AT LESS THAN RS. 20 000/-. THEREFORE THE ADDITION MADE B Y THE AO WAS UPHELD ON THIS GROUND. ITA NO. 4805(DEL)/2009 3 2.1 THE CASE OF THE LD. COUNSEL WAS THAT EACH PAYMENT MADE BY THE ASSESSEE WAS OF AN AMOUNT LESSER THAN RS. 20 000/-. THERE WAS AN ERROR IN MENTIONING VOUCHER NUMBER IN RESPECT O F PAYMENT OF RS. 646.97 BY WAY OF CHEQUE DRAWN ON PUNJAB NATION AL BANK. THAT FACT BY ITSELF COULD NOT HAVE LED TO A CONCLUSI ON THAT THE LEDGER ACCOUNT WAS NOT BELIEVABLE AND THAT PAYMENT OF AN AMOUNT OF RS. 20 000/- OR MORE WAS MADE BY THE ASSESSEE TO THESE PARTIES. N OTWITHSTANDING THE AFORESAID ARGUMENT IT WAS ALSO SUBMITTED T HAT ONLY 20% OF THE PAYMENT COULD HAVE BEEN DISALLOWED U/S 40A(3 ) AND NOT THE WHOLE OF THE AMOUNT AS HELD BY THE LD. CIT(A). 2.2 IN REPLY THE LD. DR SUBMITTED THAT THE PAYMENTS WERE MADE TO THE SISTER CONCERNS IN RESPECT OF HIRE OF MAC HINERY USED FOR EARTH- MOVING. HE DREW OUR ATTENTION TO PAGE 2 OF THE ASSESSMENT ORDER WHICH FURNISHES THE DETAILS OF THE PAYMENTS IN A TABULAR FORM ON A MONTHLY BASIS. THE TABLE IS REPRODUCED AS UNDE R:- SL. NO. MONTH AMOUNT (RS.) 1. APRIL 2 50 000/- 2. MAY 2 50 000/- 3. JUNE 2 50 000/- 4. JULY 2 50 000/- 5. AUGUST 2 50 000/- ITA NO. 4805(DEL)/2009 4 6. SEPTEMBER 2 50 000/- 7. OCTOBER 2 50 000/- 8. NOVEMBER 2 50 000/- 9. DECEMBER 2 50 000/- 10. JANUARY 2 50 000/- 11. FEBRUARY 1 25 000/- 12. MARCH 2 50 000/- GRAND TOTAL 26 25 000 2.3 FURTHER HE DREW OUR ATTENTION TO THE LEDG ER ACCOUNTS WHICH SHOW THAT THE PAYMENTS IN CASH WERE SPREAD IN A MANNER THAT PAYMENT ON ANY SINGLE DAY WAS LESS THAN RS. 20 000/-. THE TABLE DRAWN BY THE AO THE LEDGER ACCOUNTS AND THE ERROR IN ONE OF THE VOUCHER NUMBER SHOW THAT THE LEDGER ACCOUNT WAS NOT RELIABLE. IN THIS CONTEXT RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT (1975) 98 ITR 16 7 IN WHICH IT WAS HELD THAT IN CASE MONIES BORROWED BY A NEW COMPAN Y WHICH IS IN THE PROCESS OF ERECTION OF ITS PLANT THE INTEREST EXPENDITURE INCURRED BEFORE THE COMMENCEMENT OF PRODUCTION WILL HAVE TO BE CAP ITALIZED TOWARDS THE COST OF FIXED ASSETS. HIS CASE WAS THAT E NTRIES IN THE BOOKS OF ACCOUNT ARE NOT CONCLUSIVE OF THE MATTER AND THEREFORE SINCE PAYMENTS WERE MADE ON A MONTHLY BASIS THESE WERE CAUGHT WIT HIN THE MISCHIEF OF SECTION 40A(3). ITA NO. 4805(DEL)/2009 5 2.4 IN THE REJOINDER THE LD. DR SUBMITTED THA T THE TRUTHFULNESS OR OTHERWISE OF THE LEDGER ACCOUNT HAS NOT BEEN TESTED BY BRINGING ANY EVIDENCE ON RECORD OR BY MAKING ANY FURTHER ENQ UIRY. THEREFORE THE WHOLE ISSUE IN THIS MATTER IS BASED ONLY ON SUS PICION. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE RIVAL SUBMISSIONS. THE FACTS OF THE CASE ARE THA T THE ASSESSEE HAD FILED LEDGER ACCOUNTS OF SHIV SHAKTI INTERNATIONAL AND UMA SHANKAR CONSTRUCTIONS. THESE LEDGER ACCOUNTS SHOW THAT T HE PAYMENT ON A SINGLE DAY WAS OF LESSER AMOUNT THAN RS. 20 000/-. TH ERE IS NO EVIDENCE ON RECORD TO DISPROVE THE LEDGER ACCOUNT OR TO S HOW THAT PAYMENT OF RS. 20 000/- OR MORE WAS MADE ON ANY SINGLE DAY. SECTION 40A(3) PROVIDES THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING RS. 20 00 0/- OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSS ED BANK DRAFT 20% OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS DED UCTION. IT IS CLEAR FROM THE LANGUAGE OF THE SECTION THAT IT IS APPLICAB LE IN RESPECT OF A PAYMENT OF AN EXPENDITURE. THE LEDGER ACCOUNT OF THE ASSESSEE SHOWS THAT EACH PAYMENT ON A SINGLE DAY WAS OF AN AMOUNT LESSER THAN RS.20 000/-. THEREFORE IT ALSO BECOMES CLEAR THAT THE PROV ISION CONTAINED IN SECTION ITA NO. 4805(DEL)/2009 6 40A(3) IS NOT APPLICABLE TO THE FACTS OF THE CASE. THE DECISION IN THE CASE OF CHALLAPALLI SUGARS LTD. (SUPRA) WAS DEC IDED IN A TOTALLY DIFFERENT CONTEXT AND THE QUESTION BEFORE THE COURT WAS W HETHER THE INTEREST PAYMENT OF RS. 2 38 614/- REPRESENTS AN ELEMENT OF ACTUAL COST OF THE MACHINERY PLANT ETC. TO THE ASSESSEE AND AS SUCH DEPRECIATION AND DEVELOPMENT REBATE ARE ADMISSIBLE WITH REFERE NCE TO THIS AMOUNT ALSO? THE HONBLE COURT CAME TO THE CONCLUSION THAT INTEREST PAID ON BORROWED CAPITAL FOR THE PURPOSE OF MACHINERY PLANT ET C. WAS CAPITAL EXPENDITURE TILL THE PRODUCTION WAS STARTED. THEREFORE EV EN IF THE AMOUNT IS SHOWN IN THE BOOKS AS REVENUE EXPENDITURE THE COR RECT POSITION OF LAW WILL BE TO TAKE IT AS CAPITAL EXPENDITURE. THE INST ANT CASE DOES NOT REQUIRE DECISION ON ANY POINT OF LAW. WHAT IS TO BE D ETERMINED IS WHETHER THE PAYMENT WAS OF AN AMOUNT OF LESS THAN RS. 2 0 000/- WHICH IS PURELY A QUESTION OF FACT. THIS QUESTION HAS TO BE DECI DED ON THE BASIS OF EVIDENCE ON RECORD. THE ASSESSEE HAS FILED THE LEDGER ACCOUNTS OF THE TWO PARTIES THE TRUTHFULNESS OF WHICH HAS NOT BEEN DISPLACED BY THE LOWER AUTHORITIES BY MAKING FURTHER ENQUIRIES WITH T HE PAYEES. THE ACCOUNT HAS BEEN REJECTED JUST BECAUSE VOUCHER NUMBER IN RESPECT OF A PAYMENT BY CHEQUE OF A NOMINAL AMOUNT OF RS. 646.97 WAS STATED INCORRECTLY IN THE ACCOUNT OF UMA SHANKAR CONSTRUCTION. ACCORD ING TO US THIS ERROR ITA NO. 4805(DEL)/2009 7 BY ITSELF COULD NOT HAVE BEEN THE BASIS OF C OMING TO THE CONCLUSION THAT THE ACCOUNT WAS NOT RELIABLE. THEREFORE W E ARE OF THE VIEW THAT THE PROVISION CONTAINED IN SECTION 40A(3) IS NOT APPLICABLE ON THE FACTS OF THE CASE AS PAYMENT ON EACH DAY IS OF AN AMOUNT LESSER THAN RS. 20 000/-. WE MAY ADD THAT SECTION 40A(3) DIS ALLOWS A PART OF THE EXPENDITURE EVEN IF IT IS INCURRED FOR THE PURP OSE OF BUSINESS IF THE PAYMENT IS MADE OTHERWISE THAN BY CROSS BANK DRAFT OR CROSSED CHEQUE. SUCH A PROVISION HAS TO BE CONSTRUED S TRICTLY AND IT IS FOR THE REVENUE TO SHOW THAT CLEAR AND COGENT EVIDENCE EXISTS AND THE PROVISION IS APPLICABLE ON THE FACTS OF THE CASE. 4. IN THE RESULT THE APPEAL IS ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26T H FEBRUARY 2010. SD/- SD/- (GEORGE MATHAN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 26TH FEBRUARY 2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- 1. M/S UMA SHANKAR CONTRACTOR PVT. LTD. NEW DE LHI. 2. ITO WARD 35(4) DELHI. 3. CIT(A) 4. CIT 5. DR ITAT NEW DELHI. ASSISTANT REGISTRA R.