DINESHBHAI MOHANBHAI PATEL,SURAT V. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE1(2) , SURAT

MA 17/SRT/2024

AI Insights

The case revolves around a Miscellaneous Application (MA) filed by the assessee, Dineshbhai Mohanbhai Patel, seeking rectification and recall of an earlier Tribunal order concerning the assessment year 2014-15. The Tribunal had previously made additions to the assessee's income based on the gross receipts and disallowed certain payments made to a proprietary concern of the assessee's son. The assessee argued that there were mistakes in the Tribunal's recording of facts and submissions, particularly regarding the application of Section 44AD and the treatment of certain payments as disallowable under Section 40A(2)(a). The Tribunal acknowledged a typographical error in the recording of the addition amount but upheld the overall decision, denying the recall of the order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33950 (ITAT-SURAT)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Other Referred Cases: Apex Therm Packaging (P.) Ltd. vs. ITO, PCIT vs. Chartered Logistics Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: RASESH SHAH; TAKING BENEFITS OF CERTAIN TYPING MISTAKE
• Keywords: Bogus
• Section: 254(2); 44AD

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ͪवͪवध आवेदन/M.A.No.17/SRT/2024 (Arising out of ITA No.407/SRT/2023) (AY 2014-15) (Physical court hearing) Dineshbhai Mohanbhai Patel Shop NO.7, 3rd Floor, Meghna Complex, Udhna Magdalla Road, Bhatar Char Rasta, Surat-395007 [PAN: ABTPP 8286 F] बनाम Vs Assistant Commissioner of Income Tax, Circle-1(2), Surat, Aayakar Bhavan, Near Majura Gate, Surat-395001 Applicant Respondent िनधाŊįरती की ओर से /Assessee by Shri Rasesh Shah, CA राजˢ की ओर से /Revenue by Shri Mukesh Jain – Sr. DR सुनवाई की तारीख/Date of hearing 22.11.2024 उद ्घोषणा की तारीख/Date of pronouncement 09.01.2025 Order under section 254(2) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This Miscellaneous Application (MA) under section 254(2) of the Income Tax Act, 1961 filed by the assessee for seeking rectification / re-calling the order dated 11.12.2023 passed in ITA No.407/SRT/2023 for assessment year 2014- 15. 2. The Ld. Authorized Representative (Ld.AR) for the applicant submits that there are mistake apparent in the order of Tribunal on facts as well as on law. In para-11 in the order of Tribunal, it is recorded that assesse has filed his return of income under section 44AD. The assessee never stated such fact before Tribunal. The turnover of assessee is more than threshold limit of Rs.1.00 crore as prescribed under section 44AD of the Act. So such fact is wrongly recorded by the Tribunal. It is also recorded that Assessing Officer made 100% addition MA No. 17/Srt/2024 in ITA. 407/Srt/2023 Dineshbhai M Patel 2 of Rs.9.90 crore, which was reduced by Ld.CIT(A) @ 8% of Rs.9.90 crore which comes to Rs.79.24 lakh. The ld AR of the assessee submits that the Assessing Officer not made disallowance @ 100% of Rs.9.90 crore, which is gross receipt of the assessee. In fact, the Assessing Officer doubted the payment of Rs.98.03 lakh which was paid to Sengani Buildcon, a proprietory concern of Pranay D Patel, who is son of assessee. The payment of Rs.98.03 lacs was paid on account of labour contract and this payment was disallowed @ 100% under section 40A(2)(a) of the Act. So there is wrong appreciation of fact. In para- 11, this bench recorded that Ld. AR of the assesse contended that addition of Rs.9.90 crore should have made @5% thereof. There was no such submission made by Ld. AR of the assesse. The Ld. CIT(A) has already sustained addition @8% of gross receipt. So he made the addition of 5% after considering assessee’s declaration of net profit @ 3%. In fact, the Ld. AR of the assessee argued that 5% of additional / disallowance of Rs.98.03 lakh being labour payment may be sustained, if the payment made to Pranay Patel is considered as unreasonable or bogus. However, the Tribunal wrongly constituted such figure of Rs.98,90,53,830/ instead of Rs.98,03,030/-. So by considering the wrong figure, in adopting at Rs.9.90 crore instead of Rs.98.03. lakh. The Tribunal restricted addition @ 5% of total contract receipt and indirectly confirmed the order of Ld.CIT(A). It was brought in the notice of Tribunal that percentage of labour component is 46.59%, in case of construction as per Government Department estimate which comes to 25% as per the Public Works Department norms. Thus, labour component being 24.14% was most reasonable. The Tribunal in para-14 of the order has given wrong finding that MA No. 17/Srt/2024 in ITA. 407/Srt/2023 Dineshbhai M Patel 3 books of account are liable to be rejected. The assessee has furnished complete details in support of labour payment, the books of account cannot be rejected. When payments are unreasonable under section 40A(2)(a). Thus, from the above position, the Tribunal intended to disallow 5.00% of labour payment of Rs.98.03 lakh and not 5.00% of gross receipt, which is in fact mistake apparent on record. Thus, considering the fact that Tribunal proceeding on wrong, therefore order may be recalled and for adjudicating appeal afresh. To support his submission, Ld. AR of the assessee relied upon the decision of Hon’ble jurisdictional High Court in the case of Apex Therm Packaging (P.) Ltd. vs. ITO (2014) 42 taxmann.com 98 (Guj) and PCIT vs. Chartered Logistics Ltd. (2017) 85 taxmann.com 258 (Guj). 3. On the other hand, Ld. Senior Departmental-Representative (Ld. Sr-DR) for the Revenue submits that there is no mistake apparent in the order passed by Tribunal. The Ld. Sr DR for the revenue submits that ld AR of the assessee argued his case by raising new fact in the MA, which was not raise at the time of making submission before Tribunal. The fact pleaded in the MA and the prayer made herein is beyond the scope of Section 254(2) of the Act. The Ld. Sr-DR for the Revenue submits that while adjudicating the appeal of assessee, Tribunal in para-14 and 15 has given well and reasoned order. The rejection of books of account by Assessing Office is upheld. Moreover, order is restored back to the file of Assessing Office to examine the fact whether assessee had added 3.00 % of Rs.9.90 crore and paid tax thereon and if the assessee has already paid then estimation of 5% of total turnover is most reasonable order. The assessee seeking revue of the order passed by, which is permissible. MA No. 17/Srt/2024 in ITA. 407/Srt/2023 Dineshbhai M Patel 4 4. We have considered the rival submissions of both the parties and have gone through the content of Miscellaneous Application carefully. On perusal of case record and log book maintained by the Members constituting the Bench, we find that in recording the submissions of ld AR of the assessee there are certain typographical mistake in first sentence of para-11 of the order, which we rectify by substituting first sentence. Thus, first sentence of para-11 of the Tribunal shall be read as; “11. Learned Counsel for the assessee submits that Assessing Officer made addition at Rs. 98,03,030/- after rejection of books of account. The assessee pleaded that before the Assessing Officer that son of assessee had filed return of income u/s 44AD of the Act and declared income @ 8%, therefore, a suitable addition may be made in the hand of assessee. The Assessing Officer rejected the plea of assessee and made 100% addition of disputed amount of Rs. 98,03,030/-.” 5. Rest of the submissions of AR of the assessee are correctly recorded as compared with the log book. On considering the factual submissions, we find that bench has passed a well-reasoned order, relevant part of the order is extracted below, 14. We have heard both the parties and perused the materials available on record. We note that assessee has not submitted the required details of labour charges or expenses in spite of various notices issued by the Assessing Officer. No labour charges details were submitted before the Assessing Officer. The assessee had not proved the expenses, as genuine. The assessee has not brought on record anything to prove that the amount paid was reasonable and paid wholly and exclusively for the purpose of assessee’s business. Therefore, the book results were rejected by the Assessing Officer. Hence, we confirm the action of the Assessing Officer as well as NFAC/Ld. CIT(A) to reject the books of accounts. Hence, this ground of assesee’s appeal is dismissed. 15. However, so far estimation of profit, by following the provisions of Section 44AD of the Act is concerned, we note that Section 44AD of the Act prescribes the rate of 8%, of the total turnover/gross receipts of the assessee. The ld Counsel stated that the assessee has already declared @ 3% profit on the turnover / gross receipts, therefore, ld CIT(A) should sustained addition @ 5% MA No. 17/Srt/2024 in ITA. 407/Srt/2023 Dineshbhai M Patel 5 only. If 8% addition is to be sustained on Rs.9,90,53,830/- (turnover), then ld CIT(A) would have made addition @ 5% on Rs.9,90,53,830/-, so that total addition should not go beyond 8% (5% + 3%). After sustaining the addition by ld CIT(A) at the rate of 8%, the total tax liability on the assessee comes at the rate of 11% (8% + 3%), which is higher than 8% (as per Sec. 44AD of the Act). Therefore, we are of the view that assessee`s lis should be remitted back to the file of the Assessing Officer to examine the fact that whether assessee had added 3% on Rs.9,90,53,830/- (turnover), and paid the taxes thereon. That is, addition on Rs.9,90,53,830/- should be made @ 5% on Rs.9,90,53,830/-, so as to achieve the total addition at the rate of 8% as per the provisions of Section 44AD of the Act. We note that whether assessee had added 3% on Rs.9,90,53,830/- (turnover), and paid the taxes thereon, has not been examined by the lower authorities. Therefore, we remit this issue back to the file of the Assessing Officer to examine whether assessee had added 3% on Rs.9,90,53,830/- (turnover), and paid the taxes thereon, and if the Assessing Officer finds that assessee had already offered 3% on Rs.9,90,53,830/- (turnover), then in that situation, the Assessing Officer should make estimated addition @ 5% on Rs.9,90,53,830/- (turnover). Therefore, assessee`s appeal is allowed for statistical purposes in above terms.” 6. We further find that the assessee by taking benefits of certain typing mistake in the order seeking review of the order, which is beyond of the scope of application under section 254(2) of Income Tax Act. Thus, we are not inclined to recall the order, except making suitable correction in first sentence of para- 11 of the order. In the result, the application is partly allowed. 7. In the result, MA filed by the assessee is partly allowed. Order pronounced on 09/01/2025 in the open court. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER सूरत / Surat Dated: 09/01/2025 Dkp Outsourcing Sr.P.S* MA No. 17/Srt/2024 in ITA. 407/Srt/2023 Dineshbhai M Patel 6 आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File By order/आदेश से, // True Copy // सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "