Shri Ashok Kumar Singh, Bhopal V. The ACIT, Bhopal

CO 42/IND/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5113 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-08-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Keywords: Rejection of books of accounts; Depreciation
• Section: 40A(3); 143(3); 234B; 145; 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R. KAUSHIK, ACCOUNTANT MEMBER ITA NO.238/IND/2009 A.YS. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL APPELLANT VS SHRI ASHOK KUMAR SINGH BHOPAL PAN ABQPK-8593-B RESPONDENT C.O. NO. 42/IND/2009 ARISING OUT OF ITA NO. 238/IND/2009 SHRI ASHOK KUMAR SINGH BHOPAL OBJECTOR VS ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL RESPONDENT DEPARTMENT BY : SHRI K.K. SINGH, CIT DR ASSESSEE BY : NONE O R D E R PER JOGINDER SINGH, JM THE APPEAL HAS BEEN FILED BY THE REVENUE AND THE CR OSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CI T(A) DATED 25 TH FEBRUARY, 2009. BEFORE PROCEEDING FURTHER, IT IS SEEN THAT THE REVENUE 2 FILED THIS APPEAL ON 14.5.2009 AS IS EVIDENT FROM E NTRY OF EVEN DATE AND WAS FIXED FOR HEARING FOR 10.5.2010. REGISTERED NOT ICE WAS DULY RECEIVED BY THE ASSESSEE BUT THE ASSESSEE DID NOT APPEAR BEF ORE THE TRIBUNAL, THEREFORE, ONE MORE OPPORTUNITY WAS PROVIDED TO THE ASSESSEE AND AGAIN A REGISTERED NOTICE WAS SENT FOR HEARING FOR 5.8.20 10 WHICH WAS ALSO DULY RECEIVED. THE ASSESSEE DID NOT APPEAR AGAIN, T HEREFORE, WE HAVE NO OPTION BUT TO PROCEED EX-PARTE QUA THE ASSESSEE AND DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON THE FI LE. 2. THE FIRST GROUND RAISED BY THE REVENUE IS THAT O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS.28,99,325/- ON ACCOUNT OF DISALLOWANCE OF FALSE DEBIT FROM OTHER D EDUCTIONS. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT IT IS A CASE OF CONTRACTOR, THE ADDITION WAS RIGHTLY MADE AND GENERAL ENTRY WAS PAS SED ON 23.3.2005 BY WHICH THE WITHHELD AMOUNT OF RS.28,99,325/- WAS TRANSFERRED TO OTHER DEDUCTIONS. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D CIT DEPARTMENTAL REPRESENTATIVES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. AS PER THE LEARNED ASSESSING OFFICER, THE GENERAL ENTRY WAS PASSED ON 23.3.2005 BY WHICH THE WITHHELD AMOUNT OF RS.28,99,325/- WAS TRANSFERRED TO OTHER DEDUCTIONS ACCOUNT AND THE DEBITS WERE MADE OUT OF THE BILLS PAYABLE. AS PER THE REVENUE THE IM PUGNED AMOUNT WAS 3 ACTUALLY RECEIVABLE FROM M.P.G.S.D.A., SAGAR AND IN TENTION OF THE ASSESSEE IS SIMPLY TO EVADE PAYMENT OF TAX. THE TO TAL AMOUNT ALLEGED TO BE WITHHELD FROM R/A BILLS WORKED OUT TO RS.31,1 0,641/- OUT OF WHICH THE ASSESSEE RECEIVED PAYMENT OF RS.92,239/- ON 6.1 2.2004, RS. 50,011/- ON 11.3.2005 AND RS.69,066/- ON 23.3.2005. THE ASSESSEE WAS ASKED BY THE LEARNED ASSESSING OFFICER TO ESTAB LISH THAT THE IMPUGNED AMOUNT WAS NO MORE RECEIVABLE WHEREAS THE CLAIM OF THE ASSESSEE IS THAT AT THE TIME OF PAYMENT FROM THE DE PARTMENT, AS PER R/A BILLS VARIOUS DEDUCTIONS WERE DEDUCTED OUT OF GROSS AMOUNT AND THE NET AMOUNT AFTER MAKING SUCH DEDUCTIONS WAS PAID TO THE ASSESSEE. IT WAS FURTHER CLAIMED THAT IN ITS PROFIT AND LOSS ACCOUNT S, THE CONTRACT PAYMENTS WERE RECEIVED AND THE ONLY AMOUNTS DEBITED WERE THO SE WHICH PERTAINED TO EXPENDITURE INCURRED IN NORMAL COURSE OF BUSINES S AND THE REMAINING DEDUCTIONS LIKE SECURITY DEPOSIT AND INCOME TAX, ET C. WERE DIRECTLY CARRIED TO THE BALANCE-SHEET. THE M.P.G.S.D DEPART MENT MADE OTHER DEDUCTIONS ON ACCOUNT OF TIME EXTENSION AND COMPRES SOR AND VIBRATOR CHARGES AMOUNTING TO RS. 28,93,402/-. THERE IS AN U NCONTROVERTED FINDING IN THE IMPUGNED ORDER THAT THE IMPUGNED DED UCTIONS ARE IN THE NATURE OF LIQUIDATED DAMAGES WHICH CONSTITUTE REVEN UE EXPENSES AND FURTHER EITHER THESE ARE WITHHELD OR RECOVERED BY T HE DEPARTMENT FOR BREACH OR CONTRACT OR TO ENCOURAGE THE CONTRACTOR T O COMPLETE THE WORK ACCORDING TO NORMS WITHIN DUE TIME. THE EXPENDITURE INCURRED WAS 4 INCIDENTAL TO CARRYING ON OF THE BUSINESS WHICH IS AN ALLOWABLE EXPENDITURE UNDER SECTION 37 OF THE ACT. WE ARE OF THE VIEW THAT ONCE NET PROFIT IS TAKEN, THERE IS NO INFIRMITY IN THE S TAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE SAME IS, THEREFORE, CONFIRMED. 4. THE NEXT GROUND PERTAINS TO DELETING THE ADDITIO N OF RS.4,24,320/- MADE U/S 40A(3) OF THE ACT ON ACCOUNT OF MANIPULATION OF ACCOUNTS AND INFLATION OF EXPENSES. THE CRUX OF ARG UMENTS ON BEHALF OF THE REVENUE IS IN SUPPORT TO THE ASSESSMENT ORDER. ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SU BMISSIONS IT IS SEEN THAT THE LEARNED ASSESSING OFFICER MADE THE DI SALLOWANCE ON THE BASIS OF CASH PAYMENT TO SUB CONTRACTOR AND APPLIED THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE DETAILS OF CASH PAYM ENT TO SUB CONTRACTOR SHRI SOHANLAL & SONS HAVE BEEN REPRODUCED AT PAGE 3 TO 5 OF THE ASSESSMENT ORDER. THERE IS A FACTUAL FINDING THAT THERE WAS NO PAYMENT IN EXCESS OF RS.20,000/- IN THE DETAILS. IT IS SEE N THAT EVEN THE LEARNED ASSESSING OFFICER HAS NOTED IN THE ASSESSMENT ORDER (PAGE 5) THAT SHRI SOHAN SINGH IS THE MAIN SUB CONTRACTOR OF THE ASSES SEE AND APPROXIMATELY RS.4.47 CRORES WAS CREDITED TO THE SU B CONTRACTOR. IT WAS CLAIMED BY THE ASSESSEE THAT THE IMPUGNED AMOUNT OF CASH PAYMENT WAS SHOWN AS INCOME IN THE HANDS OF SUB CONTRACTORS WHO WAS 5 ASSESSED UNDER SECTION 143(3) FOR THE SAME YEAR BY THE SAME ASSESSING OFFICER WHEREIN IT HAS BEEN ADMITTED BY T HE LEARNED ASSESSING OFFICER THAT THE IMPUGNED AMOUNT WAS CRED ITED TO THE AFORESAID SUB CONTRACTOR. IN VIEW OF THESE FACTS, W E ARE OF THE CONSIDERED OPINION THAT NO DOUBLE ADDITION IS PERMITTED. THE DECISIONS IN CIT V. DALMIA CEMENT; 254 ITR 337 (DEL), CIT V. BANWARILAL BANSIDHAR; 229 ITR 229 (ALL), AND ENDWELL CONSTRUCTION V. CIT; 232 ITR 776 (AP) SUPPORT OUR VIEW. SECTION 40A(3) REFERS TO EXPENDI TURE INCURRED BY THE ASSESSEE IN RESPECT OF WHICH PAYMENT IS MADE. IT MEANS ALL OUTGOINGS ARE BROUGHT UNDER THE WORD EXPENDITURE FOR THE PU RPOSES OF THE SUB- SECTION. EVEN THE PAYMENT IS MADE BY WAY OF ADVANC E AND WAS ULTIMATELY TREATED AS DISCHARGING THE LIABILITY, TH E PAYMENT SO MADE IS TO BE CONSIDERED TO FALL WITHIN THE EXPRESSION EXPEND ITURE. THE RATIO LAID DOWN IN ATARSINGH GURMUKHSINGH; 199 ITR 667 (SC) AN D KEJRIWAL IRON STORES V. CIT; 169 ITR 12 (RAJ) FURTHER SUPPORTS OU R VIEW. AS FAR AS THE PAYMENT OF MONETARY LIMIT IS CONCERNED, IT APPLIES TO PAYMENT MADE TO A PARTY AT ONE TIME AND NOT TO THE AGGREGATE OF THE P AYMENTS MADE TO A PARTY IN THE COURSE OF THE DAY AS RECORDED IN THE C ASH BOOK. THE WORD SUM IN SECTION 40A(3) IS USED ONLY TO INDICATE AN AMOUNT OF MONEY AND DOES NOT REFER TO THE TOTALITY OF EXPENDITURE. THIS VIEW FINDS SUPPORT FROM CIT V. ALU SUPPLY COMPANY; 121 ITR 680 (ORISSA), H. A. NEK MOHD. & SONS V. CIT; 135 ITR 501 (ALL) AND THE RATIO LAID D OWN IN TRIVENI PRASAD 6 PANNALAL; 94 TAXMAN 381 (MP) AND CIT V. KOTHARI SAN ITATION & TILES PRIVATE LIMITED; 282 ITR 117 (MAD). WHEN THESE PAYM ENTS WERE DULY ENTERED TO HAVE BEEN RECEIVED IN THE BOOKS OF THE S UB CONTRACTOR AND THE SAME WERE ACCEPTED, CONSEQUENTLY, THERE IS NO JUSTI FICATION IN MAKING THE ADDITION, THEREFORE, THE STAND OF THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) IS AFFIRMED. 5. THE LAST GROUND PERTAINS TO DELETING THE ADDITIO N OF RS.20,95,134/- OUT OF THE TOTAL ADDITION OF RS.59,2 1,196/- WHICH IS 6% OF TOTAL CONTRACT RECEIPTS OF RS.9,86,86,602/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 145 OF THE ACT. THE CRUX OF AR GUMENTS ON BEHALF OF THE REVENUE IS THAT IN THE CASE OF SUB CONTRACTOR 7 % NET PROFIT WAS ESTIMATED WHILE COMPUTING THE PROFIT AND EVEN IF 1% OF SUB CONTRACT WORK IS ESTIMATED THEN THE TOTAL NET PROFIT RATE COMES T O 8%. IN VIEW OF THIS FACT, IT WAS ARGUED THAT THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) IS NOT JUSTIFIED IN COMING TO A PARTICULA R CONCLUSION WHILE DELETING THE IMPUGNED ADDITION. 6. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LEARNED CIT DR. IT IS SEEN THAT BEFORE THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) THE ASSESSEE CHALLENGED THE INVOKING OF P ROVISIONS OF SECTION 145 OF THE ACT AND CONSEQUENT REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE AND ESTIMATION OF NET PROFIT AT 6% OF THE TOTAL RECEIPTS. WE FIND 7 THAT SOMEHOW THE LEARNED ASSESSING OFFICER IS INFLU ENCED BY THE TOTAL CONTRACT RECEIPT OF RS.9,86,86,602/- WHICH RESULTED INTO ADDITION OF RS.59,21,196/- OUT OF WHICH RS.20,95,134/- WAS DELE TED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE NET PROF IT DECLARED BY THE ASSESSEE IS ONLY 2.77% WHICH AS PER THE REVENUE IS VERY LOW AND THE NET PROFITABILITY IS ABOUT 8%. ADMITTEDLY, THE ASSESSE E PRODUCED CASH BOOK, COPY OF PAYMENT ACCOUNTS MADE TO SUB-CONTRACTOR AND ADMITTEDLY ONE MAJOR SUB CONTRACTOR IS SOHAN SINGH YADAV WHO WAS A SSESSED BY THE ADDITIONAL COMMISSIONER, RANGE-I, BHOPAL ( THE SAME AUTHORITY) HAVING PAN - AANFS5224P. THE NECESSARY DETAILS OF THE ASSE SSEE WERE FURNISHED WHEREAS THE DETAILS OF THE SUB-CONTRACTOR WERE ALREADY AVAILABLE WITH THE SAME ASSESSING OFFICER WHICH WER E ACCEPTED WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT. EVEN THE DETAILS OF SUB CONTRACTOR WERE FURNISHED BY THE ASSESSEE. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE NET PR OFIT OF VARIOUS ASSESSMENT YEARS :- A.Y. N.P. DECLARED BY THE ASSESSEE N.P. ACCEPTED BY THE DEPARTMENT 2003-04 4.12% 143(3) 2004-05 2.11% 2.48% - 143(3) DURING THE IMPUGNED YEAR, THE ASSESSEE WAS HAVING H UGE TURNOVER OF RS.96,86,86,602/- AGAINST RS.5,15,01,942/- IN THE A SSESSMENT YEAR 8 2003-04. IN ASSESSMENT YEAR 2003-04 THE ASSESSEE DI D NOT SUB LET THE WORK TO OTHER SUB CONTRACTORS WHEREAS DURING THE IM PUGNED YEAR THE ASSESSEE CLAIMED TO HAVE RETAINED THE PROFIT ONLY A T 1%. ADMITTEDLY, NO SPECIFIC DEFECT WAS POINTED OUT BY THE LEARNED ASSE SSING OFFICER IN ESTIMATING THE INCOME AT THE RATE OF 6% OF NET PROF IT ESPECIALLY WHEN THE NET PROFIT WAS ASSESSED AT 4.12% FOR ASSESSMENT YEA R 2003-04 THAT TOO IN THE ORDER U/S 143(3) OF THE ACT. NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER BY MENTIONING COMPA RABLE CASES THAT THE ASSESSEE IN FACT EARNED THE NET PROFIT AT 6%. T HERE MUST BE SOME CORROBORATIVE EVIDENCE WHILE ENHANCING SUCH NET PRO FIT BUT THE SAME IS MISSING IN THE PRESENT APPEAL. THERE IS A POSSIBILI TY THAT IN SOME CASES, THE NET PROFIT MAY BE MORE BUT SUCH MATERIAL HAS NO T BEEN BROUGHT ON RECORD BY THE REVENUE. WE ARE OF THE VIEW THAT PRE SUMPTION CANNOT TAKE THE SHAPE OF EVIDENCE HOWSOEVER STRONG IT MAY BE. AS FAR AS THE CONTENTION OF THE LEARNED CIT DR THAT IN THE CASE O F SUB CONTRACTOR, THE NET PROFIT WAS DECLARED AT 7% BUT THAT IS SUBJECT T O DEDUCTIONS ON ACCOUNT OF DEPRECIATION AND INTEREST, ETC. HOWEVER, IN THE PRESENT CASE THE ASSESSEE HAS ONLY TAKEN 1% PROFIT AND THE REMAI NING WORK WAS SUB LET TO SUB CONTRACTOR. THEREFORE, THERE IS NO EVID ENCE ON RECORD THAT THE ASSESSEE EARNED MORE. EVEN OTHERWISE, WE ARE DECIDI NG THE CASE OF THE ASSESSEE AND NOT OF THE SUB-CONTRACTOR. CONSEQUEN TLY, KEEPING IN VIEW THE NET PROFIT IN EARLIER ASSESSMENT YEARS, THERE I S NO JUSTIFICATION TO TAKE 9 A DIFFERENT STAND IN THE PRESENT ASSESSMENT YEAR ES PECIALLY WHEN NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD. WE, TH EREFORE, ON THIS GROUND ALSO AFFIRM THE STAND OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS). 7. NOW WE SHALL TAKE UP THE CROSS OBJECTION OF THE ASSESSEE WHEREIN THE ENHANCING THE NET PROFIT AT 7% IN PLACE OF 6% OF THE TOTAL RECEIPT AND ESTIMATING THE NET PROFIT AT 1% OF THE GROSS RECEIPTS IN PLACE OF NET RECEIPT AND CHARGING OF INTEREST U/S 234B AN D 234C HAS BEEN OBJECTED BY THE ASSESSEE. WITHOUT COMMENTING UPON T HE MERITS OF THE CROSS OBJECTIONS, WE ARE OF THE VIEW THAT SINCE THE OPPORTUNITY WAS PROVIDED TWICE TO THE ASSESSEE AS ON BOTH THE OCCAS IONS THE REGISTERED NOTICE WAS RECEIVED, IT SEEMS THAT THE ASSESSEE HAS FILED THIS CROSS OBJECTION FOR NAME SAKE AND HAS NOTHING TO SAY. TH EREFORE, THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED. FINALLY, THE APPEAL OF THE REVENUE AND THE CROSS O BJECTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 6 TH AUGUST, 2010. SD SD (B.R. KAUSHIK) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER 6 TH AUGUST,2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE *DN/ 10