Chandra Prakash Chaudhary V. Commissioner Of Income Tax Dehradun

ITA/18/2014

AI Insights

This case involves an appeal by Chandra Prakash Chaudhary against the Commissioner of Income Tax concerning the assessment of income for the year 2006-2007. The assessment was based on a search related to other individuals, leading to a re-evaluation of the appellant's declared profit rate from 4.74% to 10%. The first appellate authority later reduced this rate to 8% based on Section 44AD, which applies to businesses in civil construction, among others. The appellant contested this adjustment, arguing that the addition of 8% to his declared profit rate was incorrect. However, the Tribunal and the High Court upheld the reduced rate, finding it a fair estimation given the circumstances of lost records.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 672543 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 16-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: HARI MOHAN BHATIA
• Assessee Lawyers: YOGESH PACHOLIA
• Keywords: Assessment Year; Books of account; Civil construction; Delay condonation; Fire incident; Net Rate of Profit; Unexplained credit
• Section: 44AD; 234A; 271; 153(A)

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 18 of 2014 With Delay Condonation Application No. 3553 of 2014 Chandra Prakash Chaudhary. .………. Appellant Versus Commissioner of Income Tax. ...………. Respondent Mr. Yogesh Pacholia, Advocate for the appellant. Mr. Hari Mohan Bhatia, Advocate for the respondent. JUDGMENT Coram: Hon’ble K.M. Joseph, C.J. Hon’ble V.K. Bist, J. Dated: 16th December, 2014 K.M. JOSEPH, C.J. (Oral) Heard. The Delay Condonation Application is not seriously opposed. In the circumstances, we are inclined to condone the delay in filing the appeal. The Delay Condonation Application is, accordingly, allowed. 2. This appeal relates to Assessment Year 2006-2007. Assessment proceedings were commenced against the appellant under Section 153-A on the basis of a search conducted in respect of certain others. The assessment was completed. On the basis of that, the net rate of profit, which is disclosed by the appellant, who is a builder, at 4.74 per cent, was not accepted and net rate of profit at 10 per cent was applied. In doing so, the Assessing Officer had taken note of the net rate of profit of subsequent years, i.e. for 2007-2008, 2008-2009 and 2009-2010, where the percentage was 12.4, 21.93 and 30.6 respectively. The case of the appellant, of course, was that the documents maintained by him had been lost in a fire. It is, in such circumstances apparently, the assessment was completed as aforesaid. 3. In appeal, the first appellate authority reduced the rate of profit to 8 per cent on the strength of Section 44AD of the Income Tax Act, which 2 provides for determination of profits and gains of business of civil construction, etc. at 8 per cent. We find the following discussion in the order of the Tribunal in relation to the Assessment Year 2006-2007, inter alia: “17. In the assessment year 2005-06 & 2006-07, we observe that during assessment year 2005-06 & 2006-07, the Ld AR did not raise any argument on validity of assessment u/s 153A and submitted that Assessing Officer had estimated the profits of the assessee on the basis of next year’s profits which were not justified. However, we observe that assessee did not produce books of accounts and other material from which the Assessing Officer could have arrived at the correct income of the assessee. The next year’s net profit ratio were 12.40%, 21.93% and 30.06% in respect of assessment year 2007-08 & 2008-09 and 2009-10 respectively which were quite high as compared to 3.98% and 4.74% declared by the assessee. Therefore, the Assessing Officer applied the net profit of 10% which Ld CIT(A) reduced to 8% in view of provisions of section 44AD of the Act which to our mind is quite fair because section 4AD gives a fair idea of estimation of net profit ratio in the case of a person where books of accounts were not maintained. Therefore, we do not see any reason to interfere in the order of Ld CIT(A).” 4. On the said basis, the Tribunal dismissed the appeal. 5. The following substantial questions of law are purported to be raised: “1. Whether the learned CIT(A) as well as learned ITAT is right in upholding the addition of Rs. 10,75,845/- made by the Assessing Officer treating the gifts received by the assessee from various persons as unexplained credit of the assessee? 2. Whether the learned ITAT is right in upholding the judgment of CIT(A) passed in Appeal whereby the CIT(A) fixed the net profit as per section 44AD of Income Tax Act, as per the admitted case of the assessee “he maintained the books of account but due to the caught fire in the office of appellant / assessee in the year 2006 all the books of account have been destroyed?” 6. We have heard the learned counsel for the appellant and the learned counsel for the Revenue. 3 7. The learned counsel for the appellant would submit that the Assessing Officer, in fact, has adopted the rate of profit over 12 per cent, as what he has done is that he has added 8 per cent under Section 44AD of the Income Tax Act to 4.74 per cent rate of net profit, which was returned by him. Thus, the gross rate of 12 and odd per cent was added, which is illegal. 8. This is rebutted by the learned counsel for the Revenue by pointing out that, actually, it has been reduced to 8 per cent under Section 44AD by the first appellate authority and the appellant is assessed only at 8 per cent and not at 12 per cent. 9. We record such submission of the learned counsel for the Revenue. We also think that it is borne out by the order of the Tribunal. The learned counsel for the appellant also made an attempt by referring us to Section 234A of the Income Tax Act in regard to the rate of interest. He also made submission relating to penalty under Section 271 of the Income Tax Act. No question of law, as such, is raised by the appellant and we see no basis at all for these submissions. 10. There is no merit in the appeal. The appeal fails and is dismissed. No order as to costs. (V.K. Bist, J.) (K.M. Joseph, C. J.) 16.12.2014 16.12.2014 G "