Durga Krishna Store, Siliguri V. ACIT, Circle - 1, Siliguri, Siliguri

CO 100/KOL/2008

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0245 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 5 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 19-08-2008
• Court: TRIBUNAL
• Department Lawyers: AMITABH CHAU DHURY
• Keywords: Assessment record
• Section: 68; 69; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA AM ] I.T.A NO.1348/KOL/2008 ASSESSMENT YEAR: 2003 - 04 A.C.I.T., CIRCLE - 1 , VS. M/S. DURGA KRISHNA STORE SILIGURI SILIGURI (APPELLANT) ( RESPONDENT) (PAN: AADFD 9986 H) C.O.NO.100/KOL/2008 (A/O. I.T.A NO.1348/KOL/2008 ) ASSESSMENT YEAR : 2003 - 04 M/S. DURGA KRISHNA STORE . VS. A.C.I.T., CIRCLE - 1, SILIGURI SILIGURI ( CROSS OBJECTOR) ( RESPONDENT) (PAN: AADFD 9986 H) FOR THE DEPARTMENT : SHRI AMITABH CHAU DHURY, JCIT, SR.DR FOR THE ASSESSEE : SHRI SUBASH AGARWAL, ADVOCATE DATE OF HEARING : 27.01.2015 DATE OF PRONOUNCEMENT: 27.01.2015. ORDER PER SHRI SHAMIM YAHYA, AM : THESE APPEAL S BY THE REVENUE AND C ROSS OB JECTION BY THE ASSESSEE EMANATE OUT OF THE ORDER S OF LD. CIT(A) - SILIGURI DATED 31.03.2008 AND PERTAIN TO A.YR.2003 - 04. 2. AT THE THRESHOLD IT IS NOTED THAT THERE IS A DELAY OF 13 DAYS IN FILING OF APPEAL BY THE REVENUE. THE REVENUE HAS FILED A COND ONATION PETITION FOR THE DELAY . UPON CAREFUL CONSIDERATION OF THE CONDONATION PETITION AND AFTER HEARING BOTH THE COUNSEL WE CONDONE THE DELAY. 3 . THE GROUNDS RAISED IN REVENUE S APPEAL READ AS UNDER : - (I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A), SILIGURI ERRED IN GRANTING THE RELIEF OF RS.1,47,54,222/ - WITHOUT CONSIDERING THE FACT THAT A.O. ITA NO.1348/ K/2008 & CO.100/K/2008 M/S. DURGA KRISHNA STORE A.YR . 2003 - 04 2 HAD MADE THE ADDITIONS U/S 68 OF THE I.T.ACT ON THE BASIS OF BOOKS OF ACCOUNT AVAILABLE BEFORE HIM. (II) THAT ON THE FACTS AND CIRC UMSTANCES OF THE CASE, THE LD. CIT(A), SILIGURI ERRED IN GRANTING RELIEF OF RS.33,08,848/ - WITHOUT CONSIDERING THE FACT THAT THE A.O. HAD MADE THE ADDITIONS U/S 69 OF THE I.T.ACT, 1961 ON THE BASIS OF BOOKS OF ACCOUNT AVAILABLE BEFORE HIM. (III) THAT THE L D. CIT(A), SILIGURI WAS NOT JUSTIFIED IN HOLDING THAT THE AO SHOULD HAVE INVOKED THE PROVISION OF SECTION 145(3) TO REJECT THE BOOKS OF ACCOUNT AND ESTIMATE THE PROFIT @ 5%. (IV) THAT THE LD. CIT(A), SILIGURI ERRED IN DIRECTING THE AO TO ESTIMATE THE PROFI T @ 5% ALTHOUGH THE AO HAD FOUND SPECIFIC FAULTS ON THE PART OF THE ASSESSEE TO SHOW BOGUS SUNDRY CREDITORS AND SECURITY DEPOSITS. 3.1. THE GROUNDS RAISED IN CROSS OBJECTION OF THE ASSESSEE READ AS UNDER : - 1. THE LD.CIT(APPEALS), SILIGURI HAS NOT BEEN JUSTIFIED IN DIRECTING THE LEARNED ASSESSING OFFICER TO ESTIMATE THE PROFIT @5% IN PLACE OF 2% TO 3%. 2. THE LD. CIT(APPEALS), SILIGURI OUGHT TO HAVE ALLOWED THE INTEREST PAID TO PARTNERS ON THEIR CAPITAL AMOUNTING TO RS.2,78,563/ - FROM THE ESTIMATED PROF IT. 3. THE LD. CIT(APPEALS), SILIGURI OUGHT TO HAVE ALLOWED THE REMUNERATION PAID TO PARTNERS AMOUNTING TO RS.1,50,000/ - FROM THE ESTIMATED PROFIT. 4. IN THIS CASE THE AO FOUND THAT THE ASSESSEE IS A CIVIL CONTRACTOR. THE TOTAL TURN OVER OF THE ASSESSEE WAS RS . 12,06,81, 735/ - AND GROSS PROFIT WAS RS.77 ,13,029/ - . ON EXAMINATION OF THE BOOKS OF ACCOUNT AO FOUND THAT THE ASSESSEE WAS NOT MAINTAINING PROPER BOOKS WHICH WERE MOSTLY SUPPORTED BY SELF MADE VOUCHERS. THE ASSESSEE ALSO SHOWED SUNDRY CREDITORS OF R S.1,47,54,422/ - IN THE NAME OF THREE PERSONS WHO HAPPENED TO BE THE EMPLOYEES OF THE ASSESSEE. THE ASSESSEE HAD EXPLAINED THAT THESE PERSONS WERE EMPLOYEES OF THE ASSESSEE FIRM AND MONEY WAS TRANSFERRED TO THEM TO MAKE PAYMENTS ON ACCOUNT OF EXPENSES INCUR RED IN DIFFERENT WORK SITES. AO WAS NOT SATISFIED BY THE EXPLANATION SUBMITTED IN THIS REGARD. AO FOUND THAT THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY AND AO ADDED AN AMOUNT OF RS.1,47,54,222/ - . HE ALSO NOTED THAT THE ASSESSEE HAS MADE SECURITY D EPOSIT OF RS.33,08,848/ - WHICH WERE NOT REFLECTED. HE ALSO ADDED THE SAME. 4.1. UPON ASSESSEE S APPEAL IN THIS REGARD THE LD. CIT(A) FOUND IN THE ASSESSEE S SUBMISSION THAT BY MAKING THE ABOVE ADDITION OF RS.1,47,54,422/ - AND RS33,08,848/ - THE INCOME COMPU TED BY THE AO WAS 16% OF THE GROSS RECEIPTS WHICH WAS E XCESSIVE ITA NO.1348/ K/2008 & CO.100/K/2008 M/S. DURGA KRISHNA STORE A.YR . 2003 - 04 3 AND UNREASONABLE. AS REGARDS ADDITION ON ACCOUNT OF SECURITY DEPOSIT LD. CIT(A) HELD AS UNDER : - I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR AND ALSO GONE THROUGH THE ASSESSMENT ORDER. IT APPEARS THAT THE LD. AO HAS MADE THIS ADDITION ON THE GROUND WITHOUT APPRECIATING THE FACTS OF THE CASE. ON GOING THROUGH THE ASSESSMENT RECORDS, IT APPEARS THAT NO CLARIFICATION WAS ASKED, SO FAR AS THE MODE OF MAKING THE SECURITY DEPOSITS AND I TS ACCOUNTING PROCEDURE. IT IS CLEAR THAT THE DEPOSIT WAS NOT MADE BY THE ASSESSEE, NEITHER IT WAS GIVEN BY THE SUB - CONTRACTORS. ONE PART OF THE PAYMENT TO THE ASSESSEE WAS DEDUCTED BY THE CONTRACTEE AND KEPT AS SECURITY DEPOSITS. FOR COMPLETION OF THE WOR K, THE AMOUNT WAS RETURNED TO THE ASSESSEE WHICH, IN TURN, WAS ADJUSTED WITH THE SUB - CONTRACTOR. HOWEVER, THE SAME WAS NOT PROPERLY REFLECTED IN THE BOOKS OF A/CS OF THE ASSESSEE. FOR THAT REASON, THE PROPER COURSE WOULD HAVE BEEN TO INVOKE THE PROVISIONS OF SEC.145(3) OF THE ACT. WITHOUT DOING SO, THE AO HAS MADE THE ADDITION U/S 69 OF THE ACT. THIS ADDITION CANNOT BE SUSTAINED SUBJECT TO THE OBSERVATION GIVEN SUBSEQUENTLY AGAINST THE ADDITIONAL GROUNDS TAKEN BY THE ASSESSEE. 4.2. FURTHER TH E LD. CIT(A) WAS OF THE OPINION THAT WHEN THE AO FOUND THAT BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED HE SHOULD HAVE REJECTED THE SAME AND ESTIMATED THE NET PROFIT. THE LD. CIT(A) PROCEEDED TO HOLD THAT IN ASSESSEE S CASE THE PROFIT SHOULD HAVE BEEN ESTIMATED AT 5% OF THE TOTAL RECEIPTS. ACCORDINGLY THE LD. CIT(A) DIRECTED THE AO THAT THE ADDITION IN THIS CASE BE RESTRICTED TO 5% OF THE TOTAL RECEIPTS AS TAXABLE INCOME OF THE ASSESSEE. AGAINST THE ABOVE ORDER THE REVENUE AND ASSESSEE ARE IN CROSS APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN ANALOGICAL SITUATION IN ASSESSEE S OWN CASE THE TRIBUNAL VIDE ITA NO.704/KOL/2009 FOR A.YR.2004 - 05 VIDE ORDER DATED 28.08.2009 HAS CONS IDERED SIMILAR ADDITIONS. IN THAT CASE THE ASSESSE HAD SIMILARLY NOT MAINTAINED PROPER BOOKS OF ACCOUNT ON A TOTAL TURN OVER OF RS.18,73,50,356/ - AND THE INCOME WAS SHOWN AT RS.50,09,320/ - . THE ASSESSEE HAD ALSO SHOWN FIVE SUNDRY CREDITORS FOR RS.1,62,87, 188/ - . THE AO HAD REJECTED THE BOOKS OF ACCOUNT U/S 145 OF THE IT ACT AND ESTIMATED THE NET PROFIT AT 5% OF THE GROSS RECEIPTS. THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) AND ITAT HELD THAT ESTIMATION OF NET PROFIT AT 5% WAS JUSTIFIED. IN VIEW OF THE ABOV E ORDER IN ASSESSEE S OWN CASE THE LD. COUNSEL OF THE ASSESSEE PLEADED THAT ESTIMATION OF 5% OF THE GROSS RECEIPT SHOULD BE DONE FOR ITA NO.1348/ K/2008 & CO.100/K/2008 M/S. DURGA KRISHNA STORE A.YR . 2003 - 04 4 A.YR.2004 - 05. HE ALSO FAIRLY CONCEDED THAT IN VIEW OF THE ORDER OF THE TRIBUNAL ASSESSEE S CLAIM IN CROSS OBJECTION FOR ALL OWANCE OF INTEREST AND PARTNERS REMUNERATION ALSO NEED TO BE DISMISSED AS THESE PLEAS WERE NOT ENTERTAINED BY THE TRIBUNAL IN THE ABOVE ORDER. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5.1. WE HAVE CAREFULLY CONSIDE RED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE AO IN THIS CASE HAS FOUND VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. ON SIMILAR FACTS FOR A.YR.2004 - 05 THE BOOKS OF ACCOUNT WERE REJECTED AND THE NET PROFIT WAS ES TIMATED AT 5% OF THE GROSS RECEIPT BY THE REVENUE. THE ABOVE ORDER WAS UPHELD BY ITAT. NO INFORMATION HAS BEEN BROUGHT BEFORE US THAT THE ABOVE ORDER OF ITAT HAS BEEN REVERSED BY THE HON BLE JURISDICTIONAL HIGH COURT. WE FIND THE FACTS IN THE PRESENT ASSE SSMENT YEAR ARE ANALOGICAL . NO CONVINCING REASON HAS BEEN POINTED OUT BEFORE US TO DEVIATE FROM THE ORDER OF ITAT. IN THIS CASE THE AO HAD FOUND THAT THE BOOKS OF ACCOUNT AND VOUCHERS ARE NOT PROPER. AS RIGHTLY FOUND BY THE LD. CIT(A) THE BEST COURSE AVAI LABLE FOR THE AO TO REJECT THE BOOKS OF ACCOUNT AND MAKING AN ESTIMATION OF PROFIT AO CANNOT PICK UP SUNDRY CREDITORS AND DEPOSIT FIGURES OUT OF THE SAME ACCOUNTS WHICH WERE LIABLE TO BE REJECTED AND MAKE ADDITIONS ON THIS ACCOUNT. HENCE WE FIND THAT THE L D. CIT(A) IS CORRECT IN HOLDING THAT AO SHOULD HAVE INVOKED THE PROVISION OF SECTION 145(3) OF THE ACT TO REJECT THE BOOKS OF ACCOUNT AND ESTIMATE THE PROFIT OF 5% IN ASSESSEE S OWN CASE THIS APPROACH JUSTIFIED. ACCORDINGLY WE NOTE THAT THE LD. CIT(A) HAS PASSED A REASONABLE ORDER. HE HAS ELABORATELY DEALT WITH THE ISSUES AND FOUND THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AO SHOULD HAVE REJEC6TED THE BOOKS OF ACCOUNT AND REJECTED THE ADDITIONS AND ADDED PROFIT @5% OF THE NET PROFIT. THIS ESTIMATION O F PROFIT HAS ALSO BEEN ACCEPTED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR ANOTHER ORDER IN SIMILAR SITUATIONS. IN THIS VIEW OF THE MATTER RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGL Y WE UPHOLD THE SAME. ITA NO.1348/ K/2008 & CO.100/K/2008 M/S. DURGA KRISHNA STORE A.YR . 2003 - 04 5 6. IN THE RESULT THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDE R PRONOUNCED IN THE OPEN COURT ON 27.01.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27. 01.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . M/S.DURGA KRISHNA STORE, NAYA BAZAR, SILIGURI 2 A.C.I.T., CIRCLE - 1, SILIGURI. 3 . CIT(A) - SILIGURI. 4. CIT - KOLKATA. 5. CIT - DR, KOLKATA BENCHES, KO LKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES