The Deputy Commissioner of Income Tax, Corporate Circle 5(2),Chennai v. M/s. R.R. Constructions & Infrastructure India Pvt. Ltd
[Citation -2016-LL-0930-125]

Citation 2016-LL-0930-125
Appellant Name The Deputy Commissioner of Income Tax, Corporate Circle 5(2),Chennai
Respondent Name M/s. R.R. Constructions & Infrastructure India Pvt. Ltd.
Court ITAT-Chennai
Relevant Act Income-tax
Date of Order 30/09/2016
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags infrastructure facility • issue of notice • sub-contractor • bearer cheque • contract work • work contract
Bot Summary: Assessing Officer disbelieving, contract charges paid by the assessee to one M/s. Shakti Projects. Departmental Representative one of the these sub contractors was called M/s.Sakthi Projects and the amount due to Sakthi Projects as per the books of the assessee came to 4,79,20,041/- as on 01.04.2009. Departmental Representative there was nothing on record to show that Shakti projects had done any work for the assessee. Departmental Representative, Shakti projects had no address in Hyderabad but had given the address of the assessee. Assessing Officer considering the payments effected by the assessee to M/s. Sakthi Projects to be bogus, is reproduced hereunder:- On the other hand, AR of the appellant has vehemently argued that statements recorded by the AO have categorically shown that M/s. Shakti Projects was doing of sub contract work and money withdrawn from the bank account of M/s. Shakti Projects is meant for M/s. Shakti Projects only. His objections are not against making of payment by the appellant to the M/s. Shakti Projects but the way the bank account belongs to M/s: Shakti Projects was operated. The above facts are very clear that appellant has got the work done by the sub-contractor M/s. Shakti Projects and payment was made to M/s. Shakti Projects.


IN INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER I.T.A. No.1010/Mds/2016 Assessment year : 2011-2012 Deputy Commissioner Vs. M/s. R.R. Constructions & of Income Tax, Infrastructure India Pvt. Ltd, Corporate Circle 5(2) No.1, Dorai Arasan Street, Chennai 600 034 Saligramam, Chennai 600 093. [PAN AADCR 6735R] ( Appellant) ( Respondent) Appellant by : Shri. Supriyo Pal, IRS, JCIT. Respondent by : None Date of Hearing : 26-09-2016 Date of Pronouncement : 30-09-2016 O R D E R PER SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: This appeal of Revenue is directed against order dated 25.02.2016 of Commissioner of Income-tax (Appeals)-3, Chennai. appeal was first posted for hearing on 22.06.2016. Despite notice being issued, none appeared for assessee on that :- 2 -: ITA No.1010/Mds/2016. date. Hence Bench directed issue of notice through ld. Departmental Representative. Accordingly, today when matter was taken up for hearing, ld. Departmental Representative submitted that notice has been duly served on assessee on 20.07.2016 and date of hearing has been duly intimated. Ld. Departmental Representative placed on record copy of acknowledgment from Ms. P. Prameela who had signed on behalf of assessee. Accordingly, appeal is taken up for hearing today. 2. Ld. Departmental Representative submitted that their were altogether five grounds of which Ground Nos. 1 & 5 are general in nature needing no specific adjudication. 3. Ld. Departmental Representative submitted that through its ground No.2, Revenue is aggrieved on deletion of addition made by ld. Assessing Officer disbelieving, contract charges paid by assessee to one M/s. Shakti Projects. 4. As per ld. Departmental Representative, assessee engaged in business of contractors, builders and civil engineers had filed return of income of 3,80,82,781/-. ld. Departmental Representative submitted that assessee had engaged various sub- :- 3 -: ITA No.1010/Mds/2016. contractors for executing works undertaken by them. As per ld. Departmental Representative one of these sub contractors was called M/s.Sakthi Projects and amount due to Sakthi Projects as per books of assessee came to 4,79,20,041/- as on 01.04.2009. During relevant previous year, as per ld. Departmental Representative assessee had claimed work done by Sakthi Projects at 1,24,74,769/- and payment of 2,36,11,433/-. ld. Departmental Representative submitted that as on 31.03.2011, whole of amount due to Sakthi Projects stood squared up in assessee s accounts. Submissions of ld. Departmental Representative was that notice u/s.133(6) of Income Tax Act, 1961 (herein after referred to as Act ) was issued to Bank where Sakthi Projects was having account. Copy of bank statement was received from Banker, which as per ld. Departmental Representative proved that money transferred by assessee to them was withdrawn in cash through bearer cheques on very same days. As per ld. Departmental Representative money was always withdrawn by bearer cheque either by Shri. Lokeshwara Reddy, Shri. Subhash and or Shri. Kiran Kumar. Submissions of ld. Departmental Representative was that these persons were all employees of assessee, as confirmed by A.Ramkrishnan who was working as Manager (Accounts) of assessee company. Further, as :- 4 -: ITA No.1010/Mds/2016. per ld. Departmental Representative, ld. Assessing Officer had issued summons u/s.131 of Act to these persons of whom Shri. V. Subhash and Shri. Lokeshwara Reddy appeared. As per ld. Departmental Representative Shri. V. Subhash had accepted that withdrawal of amounts in cash from account of Shakti projects. Further, as per ld. Departmental Representative there was nothing on record to show that Shakti projects had done any work for assessee. Submissions of ld. Departmental Representative was that Shakti projects if it had done contract work to tune of 5 Crores for assessee, it would be having infrastructure good enough for withdrawing money from bank account and would not have used employees of assessee for that purpose. Further, as per ld. Departmental Representative, Shakti projects had no address in Hyderabad but had given address of assessee. 5. Continuing his submissions, Ld. Departmental Representative stated that ld. Commissioner of Income Tax (Appeals) had erroneously deleted disallowance made by ld. Assessing Officer. As per ld. Departmental Representative payments claimed to have been effected to Shakti projects were all bogus. According to him, ld. Commissioner of Income Tax (Appeals) had come to wrong conclusion that ld. Assessing Officer had to conclusively prove bogus :- 5 -: ITA No.1010/Mds/2016. nature of M/s. Shakti project. As per ld. Departmental Representative, ld. Commissioner of Income Tax (Appeals) erroneously put onus of enquiry on Assessing Officer, to prove negative. Further, as per ld. Departmental Representative, Sec. 40A(3) of Act was invoked by ld. Assessing Officer only as alternative to disallowance. 6. As mentioned by us, nobody appeared on behalf of assessee. 7. We have perused orders of authorities below. We also heard ld. Departmental Representative carefully. reason why ld. Commissioner of Income Tax (Appeals) deleted disallowance made by ld. Assessing Officer considering payments effected by assessee to M/s. Sakthi Projects to be bogus, is reproduced hereunder:- On other hand, AR of appellant has vehemently argued that statements recorded by AO have categorically shown that M/s. Shakti Projects was doing of sub contract work and money withdrawn from bank account of M/s. Shakti Projects is meant for M/s. Shakti Projects only. It is further stated by AR of appellant, AO has made attempt to disprove claim on mere surmises ignoring replies given by employees in sworn statements. I find force in arguments of AR of appellant. Further, I have found nothing adve.rse. in above statement given by Mr. V.Subhash. money :- 6 -: ITA No.1010/Mds/2016. withdrawn from above mentioned bank account has been given to M/s. Shakti Projects. Moreover, AO has not carried out any enquiry to show M/s. Shakti Projects is bogus entity or it has not done sub contract work. I found that AO has not done any enquiry in this direction. Further, I have found that AO has not made any enquiry in appellant's bank account. He has not questioned payments made by appellant to its sub contractor M/s. Shakti Projects. His entire enquiry has been on operation of bank account belongs to M/s. Shakti Projects. His objections are not against making of payment by appellant to M/s. Shakti Projects but way bank account belongs to M/s: Shakti Projects was operated. It is admitted by AO that M/s. Shakti Projects has been doing sub contract work for A.Y. 2009-10, 10-11 and 2011- 12 and total value of sub contract has been shown at Rs. 6,19,06,317. In para 2.1 and 2.2 of assessment order, AO has stated that appellant company has made payment to Mls, Shakti Projects to tune of Rs. 6,19,06,317 and closing balance was shown at Nil as on 31.03.2011. above facts are very clear that appellant has got work done by sub-contractor M/s. Shakti Projects and payment was made to M/s. Shakti Projects. Therefore, I hold that Aa's findings in para 2.6 of assessment order are found to be on surmises because mere operation of bank account of Shakti Projects by employees of appellant cannot be basis for disallowances without proving sub contract work was not carried out by M/s. Shakti Projects. Therefore, I hold that Aa has not broughtout any cogent and worthwhile material to substantiate for disallowance of Rs. 15,10,507. On other hand I found that appellant has incurred above mentioned expenditure for purpose of sub contract work given to M/s. Shakti Project, which is nothing but ordinary business expenditure. In view of above discussion, I direct AO to delete addition made on account of sub contract work done by M/s. Shakti Projects amounting to Rs.15,10,507/-. :- 7 -: ITA No.1010/Mds/2016. ld. Assessing Officer had given clear finding that M/s. Shakti projects had in its account opening form for its account maintained with Syndicate Bank mentioned name of Shri. C G Rajesh Babu, with business address as RR Constructions, No.101, Meera Mansion, Athati Inn, Ameerpet, Hyderabad. Ld. Assessing Officer had also examined Shri. Subash employee of assessee in relation to withdrawals made by M/s. Sakthi Projects from their bank account and answers to pertinent queries given by Shri. Subash is reproduced hereunder:- Qn.8. I am showing bank statement of Shakti Projects in Syndicate Bank, Ameerpet, Hyderabad for F.Y. 2010-11. It is seen that you have made following cash withdrawals: Date Cheque Withdrawal No. ( ) 3.4.2010 411881 4.00 lacs 6..4.2010 411882 9.00 lacs 8.4.2010 411883 9.00 lacs 13.4.2010 411885 9.00 lacs 15.4.2010 411889 9.00 lacs 16.4.2010 411890 9.00 lacs 174.2010 411892 9.00 lacs 19.4.2010 411894 9.00 lacs 20.4.2010 411895 7.00 lacs 27.4.2010 411896 8.00 lacs 14.5.2010 413401 9.00 lacs 14.6.2010 413402 1.00 lacs 16.6.2010 413404 9.50 lacs 18.6.2010 413409 9.50 lacs 19.6.2010 413411 9.50 lacs 22.6.2010 413413 9.50 lacs 25.6.2010 413414 9.50 lacs 20.7.2010 413415 9.00 lacs 21.7.2010 413417 9.00 lacs :- 8 -: ITA No.1010/Mds/2016. 23.7.2010 413419 9.00 lacs 20.8.2010 413423 8.00 lacs 26.8.2010 413426 2.05 lacs 7.2.2011 413427 9.00 lacs Please verify same with bank statement and confirm. Please also confirm he mode of withdrawal. Ans. I have verified with bank statement and hereby confirm that I have made above withdrawal. All are by self-cheques. Qn.9 Why did you withdraw cash? Ans: We give payments to Shakti projects through RTGC or account payee cheques. Representatives from Shakti Projects will come I will accompany them to Bank and withdraw cash for them. For self-cheques, Bank required some identity proof and hence, I accompanied them. Qn.10 To whom did you give money withdrawn from account of Shakti projects as detailed in Qn.6 above? Ans. Sometimes I will hand over money to Mr. Kiran Kumarm office Assistant of RR Constructions. Rest of all times I will hand over money to representative of Shakti Projects." 8. bank statements of M/s. Sakthi projects, withdrawals from which were made by assessee s employees is reproduced hereunder:- :- 9 -: ITA No.1010/Mds/2016. Sl.No Date Transaction details Debits Credits 1 01.04.2010 B/F 20,25,601.50 2 03.04.2010 Lokesh 8,00,000 3 03.04.2010 Subhash 4,00,000 4 03.04.2010 Kiran Kumar 8,00,000 5 06.04.2010 Subhash 9,00,000 6 06.04.2010 RR Constructions 9,00,000 Infrastructures I- 16193 7 08.04.2010 RR Constructions 18,00,000 Infrastructures I- 05916 8 08.04.2010 Subhash 9,00,000 9 08.04.2010 Kiran Kumar 9,00,000 10 09.04.2010 RR Constructions 18,00,000 Infrastructures I- 01473 11 10.04.2010 Self 9,00,000 13 13.04.2010 RR Constructions 18,00,000 Infrastructures I- 08193 14 13.04.2010 Subhash 9,00,000 15 15.04.2010 RR Constructions 9,00,000 Infrastructures 16 15.04.2010 Lokesh 9,00,000 18 16.04.2010 RR Constructions 27,00,000 Infrastructures I- 00425 19 16.04.2010 Subhash 9,00,000 20 16.04.2010 Lokesh 9,00,000 21 .04.2010 Subhash 9,00,000 22 19.04.2010 RR Constructions 25,00,000 Infrastructures I- 00247 23 19.04.2010 Subhash 9,00,000 24 19.04.2010 Lokesh 9,00,000 25 20.04.2010 Subhash 7,00,000 26 27.04.2010 RR Constructions 16,00,000 Infrastructures I- 08811 27 27.04.2010 Lokesh 8,00,000 28 27.04.2010 Subhash 2,00,000 :- 10 -: ITA No.1010/Mds/2016. 29 27.04.2010 Subhash 2,00,000 30 27.04.2010 Subhash 8,00,000 31 13.05.2010 RR Constructions 9,00,000 Infrastructures I- 0811 32 13.05.2010 Self 9,00,000 33 14.05.2010 RR Constructions 18,00,000 Infrastructures I- 09032 34 14.05.2010 Subhash 9,00,000 35 14.05.2010 Subhashcasa cheq 9,00,000 withdrawal 36 14.06.2010 Subhash 1,00,000 37 14.06.2010 RR Constructions 1,00,000 Infrastructures I 00288 38 15.06.2010 RR Constructions 19,00,000 Infrastructures I 07434 39 15.06.2010 Cash Cheq 9,50,000 Withdrawal 40 16.06.2010 Subhash 9,50,000 41 17.06.2010 RR Constructions 35,00,000 Infrastructures I 5201 42 18.06.2010 Subhash 9,50,000 43 18.06.2010 Lokesh 9,50,000 44 19.06.2010 Subhash 9,50,000 45 19.06.2010 Kiran Kumar 9,50,000 46 22.06.2010 RR Constructions 9,50,000 Infrastructures I 8738 47 22.06.2010 Subhash 9,50,000 48 25.06.2010 Subhash 9,50,000 49 25.06.2010 RR Constructions 9,50,000 Infrastructures I 5448 50 20.07.2010 RR Constructions 18,00,000 Infrastructures I 00195 51 20.07.2010 Subhash 9,00,000 52 20.07.2010 Kiran Kumar 9,00,000 53 21.07.2010 RR Constructions 18,00,000 Infrastructures 06218 :- 11 -: ITA No.1010/Mds/2016. 54 2.07.2010 Kiran Kumar 9,00,000 55 21.07.2010 Kiran Kumar 9,00,000 56 23.07.2010 RR Constructions 32,00,000 Infrastructures I - 4003500 57 23.07.2010 Subhash 9,00,000 58 23.07.2010 Kiran Kumar 9,00,000 59 24.07.2010 Cash Cheq 7,00,000 Withdrawal 60 24.07.2010 Cash Cheq 7,00,000 Withdrawal 61 20.08.2010 RR Constructions 19,50,000 Infrastructures IPVT 5451 62 20.08.2010 Lokesh 8,00,000 63 20.08.2010 Subhash 8,00,000 64 20.08.2010 Kiran Kumar 3,50,000 65 26.08.2010 RR Constructions 2,05,000 Infrastructures I 3248 66 26.08.2010 Subhash 2,05,000 67 07.02.2011 RR Constructions 9,00,000 Infrastructures I 78614 68 07.02.2011 Subhash 9,00,000 69 30.03.2011 RR Constructions 5,39,884 Infrastructures I pvt 9011139 70 30.06.2011 Karimullah 5,39,800 3,67,94,800 3,65,20,485 9. It is manifest from above bank account, that there were immediate cash withdrawals on dates on which money was transferred by assessee to account of Sakthi Projects. withdrawals were on very same day. Claim of assessee is that M/s. Sakthi Projects had done sub contract works to tune of 5 Crores. If so, it is impossible to believe that they had to use assessee s employees for withdrawing their money from their bank :- 12 -: ITA No.1010/Mds/2016. account. It is also difficult to believe that said company did not issue single cheque to any other party except cash withdrawals made through employees of assessee. Assessee did not produce any record before ld. Assessing Officer to show that any regular work done by Sakthi projects for it. In our opinion, on face of above facts there rested heavier onus on assessee to establish that work was indeed done by M/s. Sakthi Projects, so as to justify payments to them. This was never discharged by assessee. In these facts and circumstances, we are of opinion that ld. Assessing Officer took right view in disbelieving payments made to Sakthi projects. reason given by ld. Commissioner of Income Tax (Appeals) to reverse disallowance made by ld. Assessing Officer that ld. Assessing Officer had not done enquiry to prove bogus nature of Sakthi projects is in our opinion incorrect. When records showed that assessee had withdrawn money paid into account of M/s. Sakthi Project, as mentioned by us, there was heavier onus on assessee to show through sufficient evidence that Sakthi Projects had done any work for it, which it failed to do. We therefore, have no hesitation to setaside order of ld. Commissioner of Income Tax (Appeals) and reinstate disallowance made by ld. Assessing Officer. Ground No.2 of Revenue stands allowed. :- 13 -: ITA No.1010/Mds/2016. 10. Vide Ground Nos. 3 & 4, Revenue, grievance of Revenue is on direction of ld. Commissioner of Income Tax (Appeals) to give assessee deduction claimed by it u/s.80IA of Income Tax Act, 1961 (herein after referred to as Act ). 11. We find that ld. Assessing Officer had disallowed claim u/s.80IA of Act for reason that deduction under said section was not available to assessee, since it was doing only work contract awarded by another person. As per ld. Departmental Representative, ld. Assessing Officer had given clear finding that contract entered by assessee was only renovation of existing infrastructure facility and assessee would not qualify as developer. As against this, ld. Commissioner of Income Tax (Appeals) following decision of Co-ordinate Bench in assessee s own case for assessment year 2007-2008 in ITA No.2061/Mds/2010 allowed claim. We are of opinion that decision relied on by ld. Commissioner of Income Tax (Appeals) was for year much prior to impugned assessment year and there was no assimilation of facts by ld. Commissioner of Income Tax (Appeals) to show that situation as it was relevant assessment year 2007-2008 remained same for impugned assessment year also. We are therefore of opinion that this issue needs fresh look by ld. Assessing Officer. :- 14 -: ITA No.1010/Mds/2016. We therefore, setaside order of ld. Commissioner of Income Tax (Appeals) and remit issue regarding claim u/s.80IA of Act back to file of ld. Assessing Officer for consideration afresh in accordance with law. Ground Nos.3 & 4 are allowed for statistical purpose. 12. In result, appeal of Revenue is allowed pro tanto. Order pronounced on Friday, 30th day of September, 2016, at Chennai. Sd/- Sd/- (G. PAVAN KUMAR) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai Dated:30th September, 2016 KV Copy to: 1. Appellant 3. CIT(A) 5. DR 2. Respondent 4. CIT 6. GF Deputy Commissioner of Income Tax, Corporate Circle 5(2),Chennai v. M/s. R.R. Constructions & Infrastructure India Pvt. Ltd
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