M.Radhakrishnan, Erode V. ACIT, Erode

CO 153/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8461 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-04-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: SHAJI P JACOB IRS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A.NO.1551/MDS/2012 AND C.O.NO.153/MDS/2012 ASSESSMENT YEAR : 2009-10 THE ASSISTANT REGISTRAR, CIRCLE-II, ERODE. VS. SHRI M. RADHAKRISHNAN NO.63, PERIAMANIAMPALAYAM KANDIKATTUVALASU (PO) AVALPOONDURAI (VIA) RODE-638 115. PAN AJLPR2812D (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI SHAJI P. JACOB, IRS, ADDL. CIT RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 15 TH APRIL, 2013 DATE OF PRONOUNCEMENT : 15 TH APRIL, 2013 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OB JECTION BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2 009-10. THE APPEAL AND THE CROSS OBJECTION ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I AT COIMBA TORE, DATED ITA 1551 & CO 153/12 :- 2 -: 15.5.2012. THEY ARISE OUT OF THE ASSESSMENT COMPL ETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1961. 2. AS PER THE RECORDS, THE BUSINESS CARRIED ON BY T HE ASSESSEE WAS CABLE LAYING. BUT THE ASSESSING OFFICER OBSERV ED THAT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS CHANGED HIS BUSINESS TO THE WORK RELAT ING TO CELL TOWER ERECTION. THE ASSESSING OFFICER FURTHER FOUN D THAT THE TOTAL INCOME OF ` 8,31,838/- RETURNED BY THE ASSESSEE IS VERY LOW AN D UNACCEPTABLE IN THE LIGHT OF THE REPORTED TURNOVER OF ` 23,21,91,214/-. 3. THE ASSESSING OFFICER OBSERVED THAT FOR THE ASSE SSMENT YEAR 2008-09, THE GROSS PROFIT OF THE ASSESSEE WAS 9.95%, WHEREAS THE GROSS PROFIT FOR THE IMPUGNED ASSESSMEN T YEAR IS 1.91%. HE FURTHER OBSERVED THAT THE NET PROFIT OF 5.73% FOR THE ASSESSMENT YEAR 2008-09 HAS FALLEN TO 0.40% FOR THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER FOUND THAT THE TURNOVER FOR THE ASSESSMENT YEAR 2008-09 WAS ` 13,90,593/-, WHEREAS THE TURNOVER FOR THE IMPUGNED ASSESSMENT YEAR IS ` 23,21,91,214/-. ITA 1551 & CO 153/12 :- 3 -: 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT FOR THE ACTIVIT IES CARRIED ON BY HIM. THE ASSESSING OFFICER HAD MADE ATTEMPTS TO COLLECT THE DETAILS FROM THE PARTIES, WHO HAD ENTRUSTED CONTRAC T WORKS TO THE ASSESSEE. BUT THOSE EFFORTS WERE IN VAIN. CERTAI N NOTICES WERE RETURNED UNSERVED AND CERTAIN OTHER NOTICES REMAINE D UNREPLIED. 5. IN THE ABOVE CIRCUMSTANCES, THE ASSESSING OFFICE R FOUND THAT AN ADDITION IS CALLED FOR. HE ESTIMATED THE A DDITION AT 30% OF THE TURNOVER, WHICH AMOUNTED TO ` 6,96,57,364/-. WITH THIS ADDITION, THE ASSESSING OFFICER DETERMINED THE ASSE SSABLE INCOME AT ` 7,04,89,202/- AS AGAINST AN INCOME OF ` 8,31,838/-, RETURNED BY THE ASSESSEE. 6. IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX( APPEALS) FOUND THAT THE PROFIT RETURNED BY THE ASSESSEE CANN OT BE ACCEPTED AS SUCH, IN VIEW OF THE FALL IN THE RATE OF PROFIT AS AGAINST THE INCREASE IN THE TURNOVER. BUT HE FOUND THAT THE ES TIMATED ADDITION OF 30% MADE BY THE ASSESSING OFFICER IS ON THE HIGH ER SIDE. THE ASSESSING OFFICER HAS IN FACT OBSERVED IN HIS ASSES SMENT ORDER THAT THE ESTIMATION WAS ARRIVED AT AFTER MAKING LOC AL ENQUIRY, ITA 1551 & CO 153/12 :- 4 -: INTERNET SEARCHES WITH SIMILAR COMPANIES. BUT THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT THE DETAILS OF SUCH ENQUIRIES WERE NOT BROUGHT ON RECORDS BY THE ASSESS ING OFFICER. TAKING INTO ACCOUNT AN OVERALL VIEW OF THE CIRCUMST ANCES, THE COMMISSIONER OF INCOME-TAX(APPEALS) DIRECTED THE AS SESSING OFFICER TO ESTIMATE THE INCOME AT 6% OF THE GROSS R ECEIPTS. 7. THE REVENUE IS AGGRIEVED AND THEREFORE, THIS APP EAL BEFORE THE TRIBUNAL. 8. THE GROUNDS RAISED BY THE REVENUE IN THE PRESENT APPEAL READ AS BELOW : 2. THE LEARNED CIT(A) HAS ERRED IN REDUCING THE ADDITION MADE ON ESTIMATION OF GROSS PROFIT BY THE A.O. 3. THE LEARNED CIT(A) HAS NOT TAKEN INTO CONSIDERATION THAT IT IS FOR THE ASSESSEE TO CONSID ER THE FALL IN THE G.P. AND N.P. AND TO SUBSTANTIATE HIS REASONS. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT WH EN NO BOOKS OF ACCOUNTS ARE MAINTAINED PROPERLY AND AL SO NO RECORDS SUCH AS SITE NOTES, MEASUREMENT NOTE ITA 1551 & CO 153/12 :- 5 -: MAINTAINED, THE A.O. HAS NO CHOICE BUT TO ESTIMATE THE INCOME ON G.P. 5. THE LEARNED CIT(A) SHOULD HAVE OBSERVED THAT TH E GROSS PROFIT DEPENDS ON MANY FACTORS AND THE ESTIMATION OF PROFIT AT 6% OF GROSS RECEIPTS IS TOO LOW IN COMPARISON WITH PROFIT OF SIMILAR COMPANIES DOING W ORK FOR TELECOMMUNICATION COMPANIES. 9. WE HEARD SHRI SHAJI P. JACOB, THE LEARNED COMMIS SIONER OF INCOME-TAX APPEARING FOR THE REVENUE AND SHRI S. SR IDHAR, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE. 10. WE AGREE WITH THE BASIC PROPOSITION OF THE LOWE R AUTHORITIES THAT A REASONABLE ADDITION IS CALLED FOR IN THE PRE SENT CASE, AS THE ASSESSEE HAS NO PROPER ACCOUNTS TO SUPPORT THE BUSI NESS RESULTS DISCLOSED BY HIM. IN THE ABSENCE OF THE BOOKS OF A CCOUNT, IT IS NOT POSSIBLE TO ACCEPT THE INCOME RETURNED BY THE ASSES SEE AS SUCH. 11. BUT WHILE COMING TO THE QUANTUM OF ADDITION, WE FIND THAT THE ASSESSING OFFICER HAS GONE HIGHLY ARBITRARY. 3 0% OF THE TURNOVER TREATED AS ADDITION IN THE HANDS OF THE AS SESSEE ITSELF IS ITA 1551 & CO 153/12 :- 6 -: QUIET EXCESSIVE. IT IS NOT THE CASE THAT THE ASSES SING AUTHORITY HAS ESTIMATED THE INCOME OF THE ASSESSEE AT 30% OF THE TOTAL RECEIPTS. ON THE OTHER HAND, 30% OF THE TOTAL RECE IPTS HAS BEEN ADDED BY THE ASSESSING OFFICER TO THE RETURNED INCO ME OF THE ASSESSEE. IN THAT WAY, THE ASSESSING OFFICER HAS E STIMATED THE INCOME WITHOUT EXCLUDING THE INCOME ALREADY RETURNE D BY THE ASSESSEE. IT IS A CASE OF DOUBLE JEOPARDY. 12. THIS LACUNA IN THE INCOME DETERMINED BY THE ASS ESSING OFFICER HAS BEEN CORRECTED BY THE COMMISSIONER OF I NCOME- TAX(APPEALS) BY ESTIMATING THE INCOME AT 6% OF THE GROSS RECEIPTS. THE ESTIMATE AS SUCH HAS BEEN TREATED AS INCOME OF THE ASSESSEE. THE NEXT QUESTION TO BE EXAMINED, IS WHE THER THE ESTIMATE OF INCOME AT 6%, ADOPTED BY THE COMMISSION ER OF INCOME-TAX(APPEALS) IS JUSTIFIED OR NOT. IT IS TO BE SEEN THAT FOR THE EARLIER ASSESSMENT YEARS 2007-08 AND 2008-09, THE I NCOME HAS BEEN AT THE RATE OF 5.73% AND 0.57%. WHEN COMPARED TO THESE FIGURES, THE ESTIMATE OF 6% DIRECTED BY THE COMMISS IONER OF INCOME-TAX(APPEALS) FOR THE IMPUGNED ASSESSMENT YEA R IS VERY MUCH REASONABLE. WHEN THE ACCEPTED INCOME FOR THE ASSESSMENT YEAR 2007-08 IS 5.73%, THE INCOME CANNOT BE ITA 1551 & CO 153/12 :- 7 -: ADOPTED ALL OF A SUDDEN TO THE EXTENT OF 30% OF THE GROSS RECEIPTS. IN THAT WAY, THE COMMISSIONER OF INCOME-TAX(APPEALS ) HAS ADOPTED A REASONABLE APPROACH. IT IS TO BE FURTHER OBSERVED THAT AS NOTED BY THE ASSESSING OFFICER, EARLIER THE ASSE SSEE WAS CARRYING ON THE BUSINESS OF CABLE LAYING, WHEREAS I N THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE WAS CARRYING ON THE WORK OF CELL TOWER ERECTION. I T IS TO BE SEEN THEREFORE THAT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE FOR EARLIER ASSESSMENT YEARS AND THE BUSINESS CARRI ED ON IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL ARE DIFFERENT. THEREFORE, THE PROFIT FOR THE EARLIER A SSESSMENT YEARS CANNOT BE A SURE GUIDE OF COMPARISON FOR THE IMPUGN ED ASSESSMENT YEAR. 13. IN THESE CIRCUMSTANCES, WE FIND THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ESTIMATING THE INCOME AT 6% OF THE GROSS RECEIPTS IS REASONABLE AND JUSTIFIE D. HIS ORDER IS THEREFORE, UPHELD. 14. THE CROSS OBJECTION FILED BY THE ASSESSEE IS TO SUPPORT THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). THE APPEAL ITA 1551 & CO 153/12 :- 8 -: FILED BY THE REVENUE BEING LIABLE TO BE DISMISSED, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTU OUS. 15. IN RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDERS PRONOUNCED ON MONDAY, THE 15 TH OF APRIL, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 15 TH APRIL, 2013 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A.NO.1551/MDS/2012 AND C.O.NO.153/MDS/2012 ASSESSMENT YEAR : 2009-10 ITA 1551 & CO 153/12 :- 9 -: THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-II, ERODE. VS. SHRI M. RADHAKRISHNAN NO.63, PERIAMANIAMPALAYAM KANDIKATTUVALASU (PO) AVALPOONDURAI (VIA) RODE-638 115. PAN AJLPR2812D (APPELLANT) (RESPONDENT/CROSS OBJECTOR) CORRIGENDUM IN OUR ORDER DATED 15 TH APRIL, 2013, IN THE ABOVE APPEAL, THE APPELLANTS NAME MENTIONED IN THE CAUSE TITLE IS TO BE READ AS THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-I I, ERODE, INSTEAD OF THE ASSISTANT REGISTRAR, CIRCLE-II, ERODE. SD/- SD/- (S.S.GODARA) ( DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 4 TH JUNE, 2013 MPO* COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR/GF.