Sh Janak Raj Govt. Contractor, Pathankot V. The DY.Commissioner of Incomet-ax, Pathankot

CO 8/ASR/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7334 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDERSHAN KAPOOR
• Keywords: Unexplained investment; Additional evidence
• Section: 44AD; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.161(ASR)/2011 ASSESSMENT YEAR:2007-08 PAN :AASPA1670N THE DY. COMMR. OF INCOME TAX VS. SH. JANAK RAJ, CIRCLE-IV, PATHANKOT. GOVT. CONTRACTOR, PATHANKOT . (APPELLANT) (RESPONDENT) C.O. NO.08(ASR)/2011 (ARISING OUT OF ITA NO.I.T.A. NO.161(ASR)/2011) ASSESSMENT YEAR:2007-08 PAN :AASPA1670N SH. JANAK RAJ VS. THE D.C.I.T. GOVT. CONTRACTOR, PATHANKOT. CIR.IV, PATHANKOT. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. TARSEM LAL, DR ASSESSEE BY: SH. SUDERSHAN KAPOOR, ADV. DATE OF HEARING:04/06/2012 DATE OF PRONOUNCEMENT:08/06/2012 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), AMRITSAR, DATED 16.12.2010 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS ALSO FILED C.O. ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 2 2. IN THE APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A), AMRITSAR HAS ERRED IN DELETING THE ADDITION OF RS.5,14,727/- (559485-44758) WHICH WAS A PART OF CO NCEALED CONTRACT RECEIPTS I.E. RS.5,59,485/- NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND WAS DETECTED BY THE AO THROUGH THOROUGH INVESTIGATION. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), AMRITSAR HAS ERRED IN DELETING THE ADDITION OF RS.5,14,727/- AND RS.1825400/- FOR ALLEGED UNEXPLAI NED INVESTMENT UTILIZED BY THE ASSESSE TO PAY WAGES TO WORKERS/LABOURERS WITHOUT APPRECIATING THE FACTS TH AT THESE ADDITIONS WERE MADE BY THE AO FOR UNEXPLAINED EXPE NDITURE U/S 69B OF THE INCOME TAX ACT, 1961 AS THE ASSESSE COULD NOT EXPLAIN THE SOURCE OF THIS EXPENDITURE AND THE ADDI TIONS WERE RIGHTLY MADE. III) THE APPELLANT CRAVES LEAVE TO AMEND OR ADD ANY OR M ORE GROUNDS OF APPEAL 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR. IN LIEU OF VARIOUS NOTICES SENT, NONE ATTENDED AND TH E ASSESSMENT WAS COMPLETED UNDER SECTION 144 OF THE ACT. THE AO COLL ECTED THE INFORMATION FROM THE DEPARTMENT IN WHICH THE ASSESSEE HAD EXECU TED THE WORK-CONTRACT. ONE OF THE DEPARTMENTS I.E. PWD (B&R), PATHANKOT GA VE DETAILS OF WORK WHICH HAD BEEN EXECUTED BY THE ASSESSEE BEFORE 31.0 3.2007 BUT THE PAYMENTS HAVE NOT BEEN DECLARED RECEIVABLE IN THE B OOKS OF ACCOUNT. A SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE IN THIS REGA RD. AS PER INFORMATION GATHERED FROM THE SDO PATHANKOT, PAYMENTS WHICH WER E RECEIVABLE AS AT ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 3 31.03.2007 WERE AT RS.5,59,485/- AND THE SAME WERE NOT REFLECTED AS PAYABLE IN THE BALANCE SHEET FILED WITH THE RETURN OF INCOM E. IN THE SAID SHOW CAUSE, A SUM OF RS.21,25,400/- WAS DECLARED AS PAYABLE ON AC COUNT OF MUSTER ROLL ( WAGES PAYABLE). SINCE THERE IS NO EVIDENCE WITH REG ARD TO THE SAID CLAIM OF RS.21,25,400/- DECLARED AS PAYABLE AS AT 31.03.2007 AND THE ASSESSEE WAS ALLOWED THE WAGES PAYABLE FOR ONE MONTH WHICH COME S TO RS.3,00,000/-. THEREFORE, THE AO PROPOSED TO MAKE THE ADDITION OF RS.18,25,000/- ON ACCOUNT OF UNEXPLAINED LIABILITY DECLARED IN THE B ALANCE SHEET. SINCE NO ONE ATTENDED ON THE ADJOURNED DATE AND THE AO MADE EX- PARTE ASSESSMENT. VIDE PARA 6, THE AO OBSERVED THAT KEEPING IN VIEW THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE RATE OF 8% IS APPLIED ON THE TOTAL RE CEIPTS OF RS.1,07,19,909/-, WORKING OUT THE NET PROFIT AT RS.8,57,592/-. IN PAR A 7, THE AO WORKED OUT 8% OF THE NET PROFIT RATE OF RS.5,59,485/- AS DISCU SSED HEREINABOVE, WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT ON ACCOUNT OF CONTRACT WORK. ACCORDINGLY, HE MADE AN ADDITION OF RS. 44,758/- IN PARA 7 OF HIS ORDER. 3.1. IN PARA 7.1, THE AO MADE THE BALANCE ADDITION OF RS.5,14,727/- ON ACCOUNT OF UNEXPLAINED INVESTMENT BEING BALANCE OF RS.5,59,485 44,758/- AS UNEXPLAINED INVESTMENT UNDER SECTION 69B OF THE ACT. VIDE PARA 8, THE AO MADE THE ADDITION OF RS.18,25,400/- UNDER SECTI ON 69B OF THE ACT, ON ACCOUNT OF UNEXPLAINED INVESTMENT UTILIZED BY THE ASSESSEE TO PAY WAGES TO ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 4 THE WORKERS/LABOURERS WITHOUT RECORDING IN THE BOO KS OF ACCOUNT AND CLAIMED AS LIABILITY IN THE BALANCE SHEET. 4. BEFORE THE LD. CIT(A), THE ASSESSEE HAS CHALLEN GED THE ADDITIONS OF RS.44,758/-, RS.5,14,727/- AND RS.18,25,400/- ALONG WITH OTHER ADDITIONS. THE LD. CIT(A) VIDE PARA 5 OF HIS ORDER OBSERVED TH AT THE AO HAS APPLIED NET PROFIT RATE OF 8%, APART FROM OTHER ADDITIONS M ADE BY THE A.O. THE LD. CIT(A) FOLLOWED THE DECISION IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (JAL) REPORTED IN 302 ITR 246 (P&H), WHERE IT HAS B EEN HELD THAT WHEN THE GROSS PROFIT RATE IS APPLIED THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE AO TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSEE. THE LD. CIT(A) ALSO RELI ED UPON THE DECISIONS OF OTHER COURTS OF LAW ON THE SAID ISSUE. THE LD. CIT( A) ALSO OBSERVED THAT UNDER SECTION 44AD OF THE ACT, WHERE THE BOOKS OF ACCOUNT WERE NOT MAINTAINED, THE INCOME HAD TO BE ESTIMATED ONLY AT 8%. KEEPING IN VIEW THE DECISION OF VARIOUS COURTS OF LAW, THE ACTION OF TH E AO WAS NOT SUSTAINABLE IN THE EYES OF LAW. THEREFORE, ANY ADDITION OVER AND ABOVE 8% WAS DIRECTED TO BE DELETED. 5. BEFORE US, THE REVENUE HAS FILED TWO GROUNDS OF APPEAL I.E. AGAINST DELETION OF ADDITION OF RS.5,14,727/- AND RS.18,25, 400/-. ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 5 6. THE LD. DR APPEARING FOR THE REVENUE ARGUED THA T THE DECISION IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (JAL) REPORT ED IN 302 ITR 246 (P&H), IS NOT APPLICABLE IN THE PRESENT FACTS AND C IRCUMSTANCES OF THE CASE AND EACH CASE HAS TO BE SEEN IN ITS OWN FACTS AND C IRCUMSTANCES. 7. THE LD. COUNSEL FOR THE ASSESSEE, SH. SUDERSHAN KAPOOR, ADVOCATE SUPPORTED THE ORDER OF THE LD. CIT(A) AND ARGUED TH AT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED, WHICH IS A MATTER OF RECORD. THE AO HAD APPLIED NET PROFIT RATE OF 8%. ONCE NET PROFIT RATE HAVING BEEN APPLIED NO OTHER ADDITION IN THE PROFIT & LOSS ACCOUNT CAN BE MADE AND HE REL IED UPON THE DECISION OF THE LD. CIT(A) GIVEN VIDE PARA 5 OF HIS ORDER. AS R EGARDS THE WORKS AMOUNTING TO RS.5,59,485/-, THE ASSESSEE HAD RECEIV ED THE PAYMENT ON 03.12.2007 AT RS.5,35,418/- AFTER DEDUCTION OF TAX AT SOURCE AT RS.12868/- IS A MATTER OF RECORD. THE SAID RECEIPT OF RS.5,59,485 /- WAS CREDITED IN THE FOLLOWING YEAR WHEN THE AMOUNT HAD BEEN RECEIVED. A S REGARDS THE WAGES PAYABLE, THE ASSESSEE HAD DECLARED THE TOTAL WAGES AMOUNTING TO RS.93,30,400/- AND MONTHLY WAGES COMES TO RS. 8 LAC S APPROXIMATELY WHICH THE AO HAD CALCULATED AT RS. 3 LACS PER MONTH. THE WAGES PAYABLE IS A CONTINUOUS PROCESS AND THE ASSESSEE HAVING OPENING BALANCE OF WAGES PAYABLE OF APPROXIMATELY AT RS.11 LACS. THE AO HAS MADE WILD ESTIMATE EVEN IN THE EX-PARTE ASSESSMENT AND IT HAS TO BE BA SED ON THE MATERIAL ON ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 6 RECORD. THE BOOKS OF ACCOUNT ARE AUDITED AND THERE FORE, THE PROVISION OF WAGES PAYABLE IS A ROUTINE MANNER AND AS PER ACCOUN TING PRINCIPLES WHICH HAVE BEEN PAID IN THE FOLLOWING YEAR. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE AO VIDE PA RA 6 HAD ESTIMATED THE NET PROFIT RATE OF 8% ON THE GROSS RECEIPTS OF RS.1,07, 19,909/-. THE SAID NET PROFIT HAS BEEN WORKED OUT AT RS.8,57,592/-. BUT AT THE SAME TIME, THE AO HAS NOT TAKEN INTO ACCOUNT THE SAID APPLICATION OF NET PROFIT RATE OF 8% IN THE COMPUTATION IN PARA 11 OF HIS ORDER AT PAGE 9. HE H AS STARTED THE COMPUTATION AS THE INCOME OF RS.5,60,040/- DECLARED BY THE ASS ESSEE IN ITS RETURN OF INCOME AND HAS PROCEEDED TO MAKE ADDITION OF RS.44, 758/-, RS.5,14,727/- AND RS.18,25,400/- MADE IN PARAS 7, 7.1 AND 8 RESP ECTIVELY. FROM THE SAID ORDER OF THE AO, IT APPEARS THAT THE AO HAD IGNORED THE APPLICATION OF NET PROFIT RATE OF 8% VIDE PARA 6 FOR TAKING IN PARA 11 , THE COMPUTATIONAL PART. THOUGH IT IS A MISTAKE ON THE PART OF THE AO BUT TH E FACT REMAINS THAT THE AO HAD APPLIED THE NP RATE OF 8% ON THE GROSS RECEI PTS OF RS.107,19,909/- BY THE ASSESSEE. THE ARGUMENTS MADE BY THE LD. COU NSEL FOR THE ASSESSEE, MR. SUDERSHAN KAPOOR, APPEARS TO BE CONVINCING WITH REGARD TO THE ADDITION OF RS.5,14,727/- THAT THE SAID AMOUNT HAD BEEN REC EIVED IN THE FOLLOWING YEAR AFTER DEDUCTION OF TAX AT SOURCE. THE TOTAL A MOUNT IN DISPUTE WAS ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 7 RS.5,59,485/-AND AFTER DEDUCTION OF TAX AT SOURCE A MOUNT RECEIVED WAS RS.5,35,418/- AND CREDITED IN THE BANK ON 03.12.200 7 THOUGH COLLECTED ON 02.01.2008. THE BANK STATEMENT AND TDS CERTIFICATE HAS BEEN PLACED ON RECORD. THEREFORE, THE AO IS DIRECTED TO ACCEPT THE GROSS CONTRACT RECEIPTS AS DECLARED BY THE ASSESSEE. 8.1. AS REGARDS THE ADDITION OF RS.18,25,400/- BEIN G WAGES PAYABLE, THE SAME CAN NOT BE AN INVESTMENT UNDER SECTION 69B OF THE ACT WHEN WAGES PAYABLE HAVE BEEN REFLECTED IN THE AUDITED ACCOUNTS OF THE ASSESSEE AND THE SAID ACCOUNTS WERE ON RECORD IS NOT IN DISPUTE. THO UGH THE ADDITIONAL EVIDENCES WITH REGARD TO THE SAID AMOUNT OF RS.5,59 ,485/- CANNOT BE TAKEN ON RECORD SINCE THEY WERE NOT REQUIRED BY THE BENCH . BUT AT THE SAME TIME, THE FACT REMAINS THAT ONCE THE NP RATE HAVING BEEN APPLIED NO OTHER ADDITION ON ACCOUNT OF WAGES OR CONTRACT RECEIPTS AS MENTION ED HEREINABOVE CAN BE A SUBJECT MATTER OF ADDITION. THE ORDER OF THE LD. CI T(A) IS, THEREFORE, A REASONED ORDER AND WE FIND NO INFIRMITY IN HIS ORDE R. THUS, BOTH THE GROUNDS OF THE REVENUE ARE DISMISSED. 9. AS REGARDS C.O. NO.08(ASR)/2011 OF THE ASSESSEE, THE LD. COUNSEL HAD ARGUED THAT THE LD. CIT(A) HAS NOT REDUCED THE AMOU NT OF RS.5,59,485/- FROM THE INCOME OF THIS YEAR, SINCE THE ASSESSEE HA D DECLARED THE SAME IN THE SUCCEEDING YEAR AND THE TAX HAS ALREADY BEEN PAID. ITA NO.161(ASR)/2011 CO NO.08(ASR)/2011 8 10. IN THIS REGARD, AS OBSERVED HEREINABOVE, THE AO ONCE HAVING BEEN APPLIED NP RATE ON THE RECEIPTS DECLARED BY THE ASS ESSEE, NO OTHER ADDITION CAN BE MADE. THEREFORE, IN THE FACTS AND CIRCUMSTAN CES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN INCLUDING THE AMOUNT OF RS.5,59,485/- IN THE SAID CONTRACT RECEIPTS. THE AO IS DIRECTED TO EXCLUDE TH E SAID AMOUNT OF RS.5,59,485/-. THUS, THE C.O. OF THE ASSESSEE IS AL LOWED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.161(ASR)/2011 IS DISMISSED AND C.O. NO.08(ASR)/2011 OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH JUNE, 2012 SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8TH JUNE, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. JANAK RAJ GOVT. CONTRACTOR, PATHAN KOT. 2. THE DCIT, CIR.VI, PATHANKOT, 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.