The Income Tax Officer, Ward 6(1 v. Dhirubhai Vallabhbhai Vashi....opponent(S

O/TAXAP/1342/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1342 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ THE INCOME TAX OFFICER, WARD 6(1)....Appellant(s) Versus DHIRUBHAI VALLABHBHAI VASHI....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 26/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.This Tax Appeal u/s.260A of the Income-tax Act, 1961 is filed against the judgment and order dated 12.01.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No.1058/AHD/2006 for the A.Y. 2000-01 whereby, the appeal preferred by the Revenue was dismissed. However, the present appeal has not been admitted by this Court till date even after a period of about seven years. Today, we decide the appeal finally. 2.Briefly stated, the facts are that the respondent herein is an individual engaged in the work of road contract. The respondent-assessee filed his return of income on 23.10.2000. Assessmentscrutinywasundertakenand thereafter, the Assessing Officer passed the order u/s.143(3) of the Act dated 29.11.2002 determining the total income of the assessee at Rs.41,61,580/-. While passing the order, the A.O disallowed expenses in the sum of Rs.24.29 Lacs claimed by the assessee as unpaid labour charges and also a sum of Rs.13.08 Lacs on account of bogus purchases. 3.Being aggrieved by the aforesaid order dated 29.11.2002, the assessee preferred appeal before the CIT(A). The CIT(A) decided the appeal vide order dated 09.12.2003 whereby, most of the additions made by the A.O in the Assessment Order were confirmed. 4.Against the aforesaid order of the CIT(A), the assessee preferred appeal before the Appellate Tribunal, Ahmedabad Bench. The Appellate Tribunal deleted both the additions and directed the Assessing Officer to recompute the income of the assessee from civil work at the net profit rate at 12% on net payment after excluding the cost of material supplied. 5.Against the aforesaid order, the Revenue filed an appeal before this Court being Tax Appeal No.785/2006. In the meanwhile, Notice was issued to the assessee in pursuance of the order passed by the A.O for imposing penalty u/s.271(1)(c) of the Act. However, the assessee did not file any reply to the said notice. After considering the material before him, the A.O imposed penalty of Rs.12,34,997/- u/s.271(1)(c) of the Act, vide order dated 17.03.2005. 6.Against the above order of penalty, the assessee filed an appeal before the CIT(A). Vide order dated 17.02.2006, the CIT(A) allowed the appeal filed by the assessee and deleted the 5.Against the aforesaid order, the Revenue filed an appeal before this Court being Tax Appeal No.785/2006. In the meanwhile, Notice was issued to the assessee in pursuance of the order passed by the A.O for imposing penalty u/s.271(1)(c) of the Act. However, the assessee did not file any reply to the said notice. After considering the material before him, the A.O imposed penalty of Rs.12,34,997/- u/s.271(1)(c) of the Act, vide order dated 17.03.2005. 6.Against the above order of penalty, the assessee filed an appeal before the CIT(A). Vide order dated 17.02.2006, the CIT(A) allowed the appeal filed by the assessee and deleted the penalty imposed by the A.O on the ground that the Appellate Tribunal has deleted additions in the quantum appeal. Being dissatisfied with the order of CIT(A), the Revenue filed appeal before the Appellate Tribunal. After hearing both the sides, the Appellate Tribunal dismissed the appeal filed by the Revenue vide judgment and order dated 12.01.2007. It is against this order of the Appellate Tribunal that the present appeal has been filed. 7.We have heard learned Standing Counsel appearing for the Revenue. The appeal being Tax Appeal No.785/2006 preferred by the Revenue against the earlier order of the Income Tax Appellate Tribunal was decided by the coordinate Bench of this Court vide order dated 26.08.2008. Paras – 9 & 10 of the said order are relevant, which reads as under; “9.Having heard learned Standing Counsel appearing for the revenue and having considered all the three orders passed by the authorities below, we are of the view that the Tribunal has considered all the relevant aspects of the matter and at length discussed the issues arose before it. So far as disallowance of labour charges is concerned, the Tribunal has observed that the assessee having followed the same system of accounting year after year and the same having been accepted by the department, outstanding labour charges being only for the later part of the year, i.e. a period of 2 to 3 months, the assessee having cheques worth Rs.37,93,466/- on account of contract receipts in hand as on “9.Having heard learned Standing Counsel appearing for the revenue and having considered all the three orders passed by the authorities below, we are of the view that the Tribunal has considered all the relevant aspects of the matter and at length discussed the issues arose before it. So far as disallowance of labour charges is concerned, the Tribunal has observed that the assessee having followed the same system of accounting year after year and the same having been accepted by the department, outstanding labour charges being only for the later part of the year, i.e. a period of 2 to 3 months, the assessee having cheques worth Rs.37,93,466/- on account of contract receipts in hand as on 31.03.2000 and revenue having not brought any material that the assessee had not carried out any work in the later part of the year i.e. the period of 2 to 3 months, there was no reason to doubt the genuineness of the expenditure. Simply because the payments happened to be on account to the labourers, cannot be a reason to doubt the genuineness of the same. The Tribunal has further observed that even in earlier year also, substantial amount was received by the assessee in the later part of the year and it has not been doubted or disputed. There is no dispute about the receipt nor there is any dispute about work done by the assessee. Only because the receipt was made at later part of the year, it cannot be said that the labour charges paid by the assessee were not genuine and in that context, the Tribunal has observed that the revenue should have brought some material on record to point out that the assessee had not carried out any work. When the payment is received, the normal presumption is that it is in lieu of the work being done by the assessee. When carrying out the work is doubted or disputed or genuineness of payment is not accepted by the revenue, in that case, some material should have been brought on record to justify that doubt. In that context, the observation of the Tribunal is required to be viewed. It cannot be said that by observing this, the Tribunal has shifted the burden on the revenue. The Tribunal has also discussed one more aspect of the matter and observed that during the year under consideration, outstanding charges were only to the tune of 31.16% of the total expenditure on this account, whereas in the immediate previous year in assessee's own case, the outstanding charges were to the extent of 40.18% of the total expenditure and if the revenue had accepted the same in previous year, then not to accept the same in this year without there being any change in facts and circumstances and without there being any cogent material, was not justified. The Tribunal has also found force in the submissions of the assessee that the labour being brought by the Mukadams, it was quite usual and possible that the Mukadams might have paid some advances to labourers and that might be the reason that the labourers could not demand the payment for 2 to 3 months and survive. The Tribunal upheld ITO's action of invoking Section 145 of the Act. However, on question of estimate, the Tribunal had adopted the rate which is normally prevailing in construction business and hence, instead of 8%, the Tribunal has determined 12% on the net payment after excluding the cost of material supplied by the revenue. In this view of the matter, we are of the view that the Tribunal has considered all the aspects of the matter and arrived at the correct conclusion. Even otherwise, these are all findings of facts and the Tribunal being the final fact finding authority, there is no reason for us to disturb the said findings and hence, in our opinion, it does not give rise to any substantial question of law. 10.So far as the issue regarding bogus purchases is concerned, the Tribunal has dealt with the said issue in paragraph 14 of its judgment. Before discussing this issue, the Tribunal has referred to and relied upon the judgment of this Court in the case of Commissioner of Income-tax V/s. M. K. Brothers, (1987) 163 ITR 249. This decision deals with the bogus purchases. In this case, during the accounting year relating to A.Y. 1971-72, the assessee had made purchases of the total value of Rs.52,254/- from certain parties. The Income-tax Officer required the assessee to produce evidence regarding the purchases. In the meantime, the said parties had admitted to the sales tax authorities that they had issued bogus vouchers. The Income-tax Officer held that the purchases were not genuine and assessed the amount of Rs.52,254/- as income of the assessee from undisclosed sources. The Tribunal found that there was no evidence to show that bogus vouchers had been issued to the assessee, that nothing had been shown to indicate that any part of the funds given by the assessee to these parties came back to the assessee in any form, and that the assessee had made its payments by cheque. The Tribunal, therefore, deleted the addition. On a reference, this Court took the view that the conclusion arrived at by the Tribunal was supported by the evidence on record. The amount of Rs.52,254/- was not assessable as income from undisclosed sources and the Tribunal was justified in deleting the addition. On the basis of this judgment, the Tribunal has observed that the purchases made from Shri Champak Patel & Mohanbhai Vanmalibhai Prajapati cannot be disallowed. So far as purchases from Shri Rasikbhai Nagjibhai and Mavjibhai Jerambhai are concerned, the Tribunal has observed that Shri Rasikbhai Nagjibhai had expired and Mavjibhai Jerambhai changed the address. It appears that no further inquiry was made by the Assessing Officer thereafter and hence, the Tribunal has rightly come to the conclusion that the revenue should have made further inquiries. Non-carrying of proper inquiries by the revenue cannot be a reason for considering the purchases from these two parties as bogus one. So far as the purchases from Shri Natubhai Prabhatbhai Odd are concerned, the assessee having credited the carting expenses in purchase account, there was no question of considering the expenditure incurred on such purchases as bogus. Similar reason is given with regard to the purchases from other parties and the Tribunal was of the view that simply because certain requirements of the Assessing Officer were not complied with by those parties, the assessee could not be penalized so as to consider the purchases from them as bogus. Thus, the Tribunal has treated with the purchases made from these parties as genuine. All these things are in the realm of evidence and factual findings given by the Tribunal do not give rise to any substantial questions of law.” 8.In view of the aforesaid order, this appeal will not survive as it does not give rise to any substantial question of law. The appeal stands disposed of accordingly. (K.S.JHAVERI, J.) Pravin/* O/TAXAP/1342/2007 JUDGMENT (K.J.THAKER, J)