IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER ITA No.608/Ahd/2013 A.Y.2008-09 M/s. Akta Associates Ajari, Modasar Chowkdi, Bodeli, Dist. Baroda. PAN : AAHFA 5713F Vs ACIT, Range-5, Baroda. (Appellant) (Respondent) Revenue by : Assessee(s) by : Shri M.K. Singh, Sr.D.R.. Shri Tushar Hemani, A.R. सुनवाई क तार ख/ Date of Hea ring : घोषणा क तार ख /Date of P ronouncement: 10/03/2015 13/03/2015 आदेश /O R D E R PER: MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER This is an Appeal filed by the Assessee arising from the order of learned CIT(A)-V, Baroda dated 05.12.2012 and the only ground raised before us is reproduced below:“1. The ld. CIT(A) has erred both in law and on the facts of the case in confirming the disallowance of Rs.9,45,762/- made out of sub-contract expenses which is not permissible and tenable in law.” 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 28.12.2010 were that the Assessee firm is in the business as a civil contractor. The Assessee was engaged during the year in the construction of a road being the Government registered contractor for road construction for the R&B Department of Government. The AO has also noted that the Assessee was having a hot and mix plant. The ITA No.608/Ahd/2013 M/s. Akta Associates Vs. ACIT, Range-5, Baroda. For A.Y.2008-09 -2total receipts of the Assessee were to the tune of Rs.16,25,17,941/- and the net profit @ 9.11 % was declared at Rs.1,48,11,605/- and the return was filed on an income of Rs.79,06,800/-. The AO has perused the details of payment to sub-contractor. It was found that a sum of Rs.9,45,762/- was paid to a sub-contractor, namely, Sri Prateek J. Shah. The return of Shri Prateek J. Shah was examined by the AO and noted that he has earned salary from HBL Global Pvt. Ltd., therefore, the AO had doubted the said payment on the ground that Mr. Shah being an employee might not have actually done any sub-contract work. However, statement of Mr. Shah was recorded u/s.131 of IT Act. Although, the AO has noted that Mr. Prateek Shah in his statement has stated about the subcontract work of road construction was done by him for the Assessee at Chotta Udepur, but according to AO other factors in his statement have proved that actually no work could have been done by Mr. Shah as subcontractor. According to AO, he was working at Baroda, therefore, it was not possible for him to execute any sub-contract work. After narrating few other reasons, the AO has disallowed the claim and made the addition. 3. When the matter was carried before the First Appellate Authority, learned CIT(A) has reproduced the assessment order and the contention of the Assessee and thereafter passed the following order: “4.2 I have given my careful consideration to the facts of the case as also the observation of the AO and the arguments put forth by the AR. Looking to the fact that Shri Pratik J. Shah was a full-time employee of a private limited company called HBL Global Pvt. Ltd. and was working six days a week and he had no experience in road construction and also looking to the fact that he was related to one of the partners in the appellant firm and he has not been able to furnish any evidence regarding expenditure made for completion of the work claimed to be done by him, I'm of the opinion that the AO was fully justified in disallowing the sub contract expenses amounting to Rs.9,45,762/debited against the name of Shri Pratik J.Shah. Entry in the books of the ITA No.608/Ahd/2013 M/s. Akta Associates Vs. ACIT, Range-5, Baroda. For A.Y.2008-09 -3appellant reproduced by the AO in the assessment order also shows that something was not right about this expenditure. Disallowance of Rs.9,45,762/-made by the AO is hereby confirmed.” 4. From the side of the Assessee, learned AR, Mr. Tushar Hemani appeared and pleaded that certain facts were not correctly appreciated by the Revenue Authorities, as listed below: “1. Pratik Shah has carried out sub-contract work for appellant at Chhota Udepur in lieu of which sub-contract charges of Rs.9.45,762/- have been paid to him. 2. AO and CIT(A) disallowed the said expenses broadly because Pratik Shah was full time employee of a private company and was working for six days a week at Baroda owing to which he couldn't have carried out the work at Chhota Udepur. 3. AO and CIT(A) ought to have appreciated that Pratik Shah was not given work on regular/daily basis but he was given patch of road construction work in February/March of the year under consideration which was to be completed within 20/25 days. 4. Pratik Shah has, in his statement, stated that he has done such work for the appellant. He has stated that he was working with a finance company and his job was such that he was not to go office in the evening. He further clarified that he used to visit Chhota Udepur at night to supervise the work and used to get work done through mukkadams. 5. Chhota Udepur is situated at around 100 kms from Baroda. AO and CIT(A) ought to have appreciated that to manage both the responsibilities for 20/25 days in an year in not at all a difficult task. 6. Also, Pratik Shah was an employee of the appellant during 2000 to 2003 and he was supervising such road construction work during his tenure. Thus, Pratik Shah already had the exposure of the kind of work done by him during the year under consideration for the appellant. 7. Further, Pratik Shah has disclosed such income u/s 44AD in his returned income. 8. Such payment has been made by cheque after deducting tax at source.” 5. On the other hand, from the side of the Revenue-Department, learned Sr.D.R. has vehemently supported the order of the authorities below. He has contested that a payment merely made by cheque does not prove the genuineness as held by various Courts especially when all other circumstantial evidences were against the claim of the Assessee. Learned Sr.D.R. has pleaded that there were several circumstantial factors ITA No.608/Ahd/2013 M/s. Akta Associates Vs. ACIT, Range-5, Baroda. For A.Y.2008-09 -4discussed by the AO should not be ignored. He has finally argued before us that the addition should be confirmed. 6. We have heard both the sides at some length. We have carefully perused the orders of the authorities below in the light of the compilation filed before us. The compilation contains written submission as well as income tax returns of sub-contractor, Shri Prateek Shah for A.Y.2008-09 along with the copy of bill raised by him. Our attention has been drawn on the income declared by Sri Prateek J. Shah which contained the gross receipts claimed to have been received as sub-contractor by the Assessee. There was no denial of the fact that the Assessee was an employee of an another company but the Assessee has simultaneously also listed several circumstantial evidences such as payments through cheque, TDS deducted, bill raised, etc. Rather, it has also been argued that without the help of the said sub-contractor, the Assessee was not in a position to complete the construction of the road within a short span, the period given by the Department to complete the construction of road. There is no denial of this fact, as well as, that the said sub-contractor had appeared before the AO and accepted the payment received as a sub-contractor. Therefore, we are of the view that the documentary evidences which were placed before us in support of the payment made to the said subcontractor, it is difficult for us to ignore those evidences and approve the finding of the AO based upon the presumption that the said subcontractor might not have executed a work being an employee of an another company. Such an assumption cannot be sustained in the eyes of law. We, therefore, reverse this finding of Revenue Authorities and direct to delete the addition. Resultantly, the ground is allowed. ITA No.608/Ahd/2013 M/s. Akta Associates Vs. ACIT, Range-5, Baroda. For A.Y.2008-09 -57. In the result, the Appeal of the Assessee is allowed. Sd/- Sd/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (MUKUL Kr. SHRAWAT) JUDICIAL MEMBER Ahmedabad; Dated 13/03/2015 Prabhat Kr. Kesarwani, Sr. P.S.s आदेश क 1. 2. 3. 4. 5. 6. त ल प अ े षत/Copy of the Order forwarded to : अपीलाथ / The Appellant यथ / The Respondent. संबं धत आयकर आयु त / Concerned CIT आयकर आयु त(अपील) / The CIT(A)-III, Ahmedabad वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड फाईल / Guard file. आदेशानुस ार / BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad