M/s. B.M. Patel & Brothers, Baroda V. The DCIT, Circle-1(2), Vadodara

ITA 1001/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3642 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-03-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K GOELLD
• Assessee Lawyers: URVASHI SHODHAN LD
• Section: 143(3); 13; 263; 154

Judgement Text

ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE HONBLE SHRI MAHAVIR PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1001/AHD/2018 ( / ASSESSMENT YEAR: 2006-07) & ./ I.T.A. NO.292/AHD/2018 ( / ASSESSMENT YEAR: 2007-08) M/S. B M PATEL & BROTHERS A-1, KRISHNADHAM DUPLEX NEAR ISKON TEMPLE, GOTRI ROAD VADODARA-390 021. / VS. DCIT, CIRCLE - 1(2), BARODA ./ ./PAN/GIR NO. AACFB-5678-H ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : MS. URVASHI SHODHAN- LD. AR REVENUE BY : SHRI N. K. GOEL-LD. DR / DATE OF HEARING : 03/03/2020 / DATE OF PRONOUNCEMENT : 04/03/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEA RS [IN SHORT REFERRED TO AS AY] 2006-07 & 2007-08 CONTEST SEPA RATE ORDERS OF LD. FIRST APPELLATE AUTHORITY ON CERTAIN COMMON GROUNDS OF APPEAL. SINCE ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 2 FACTS ARE PARI-MATERIA THE SAME, THE APPEALS WERE H EARD TOGETHER AND NOW BEING DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO.1001/AHD/2018, AY 2006-07 2. THIS APPEAL ASSAILS THE ORDER OF LD. COMMISSIONE R OF INCOME-TAX (APPEALS)-5, VADODARA, [IN SHORT REFERRED TO AS CI T(A)], APPEAL NO. CIT(A)/VADODARA-5/10822/17-18 DATED 26/03/2018 ON FOLLOWING GROUNDS:- 1. LD. CIT(A) ERRED IN LAW AND ON FACTS DIRECTING A O TO ASSESSEE TOTAL INCOME AT RETURNED INCOME OF RS.11,35,605/- DESPITE NOTING THAT AS OPER THE DIRECTIONS OF HONBLE ITAT WAS BOUND TO ASSESS INCO ME AT RS.1,87,524/- ONLY. 2. LD. CIT(A) OUGHT TO HAVE DIRECTED AO TO ASSESS I NCOME OF RS.5,093/- AFTER REDUCING AMOUNT OF RS.20,00,000/- AS PER DIRE CTIONS GIVEN IN HONBLE ITAT ORDER. 3. LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTIN G AO TO MODIFY ORDER GIVING EFFECT TO THE ORDER OF HONBLE ITAT BY MAKIN G ADDITION OF RS.5,94,107/- INCOME FROM OTHER SOURCES THAT WAS NEVER SUBJECT MA TTER OF RECTIFICATION APPLICATION FILED BY THE APPLICANT. 4. LD. CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN DIRECTING AO TO ONCE AGAIN ADD INCOME OF RS.5,94,107/- ALREADY REDUCED B Y AO FROM COMPUTATION WHILE MAKING EFFECT TO THE ORDER OF HONBLE ITAT. 5. LD. CIT(A) ERRED IN LAW AND ON FACTS IN ENHANCIN G INCOME COMPUTED BY AO WHILE GIVING EFFECT TO THE ORDER OF HONBLE ITAT THAT IS BEYOND SCOPE OF PROCEEDINGS U/S 154 OF THE ACT. 6. LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTIN G AO TO CONSIDER FILING MISCELLANEOUS APPLICATION BEFORE HONBLE ITAT FOR C ORRECTING PRIMA FACIE MISTAKE IN THE ORDER TOTALLY OUTSIDE THE PURVIEW OF APPELLATE JURISDICTION. 3.1 TO RESOLVE THE CONTROVERSY, IT WOULD BE VITAL TO BRING ON RECORD THE SEQUENCE OF EVENTS WHICH HAVE TAKEN PLACE IN THE CA SE SO FAR. THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED A S CONTRACTOR FILED ITS ORIGINAL RETURN OF INCOME ON 31/12/2006 AT RS.11.35 LACS. THIS WAS AFTER ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 3 WHEN THE ASSESSEE WAS SUBJECTED TO SURVEY ACTION ON 06/10/2006 WHEREIN ONE OF THE PARTNER SHRI B.M.PATEL, IN RECOR DED STATEMENT, MADE ADMISSION OF RS.20 LACS. IN TERMS OF THE SAID STATE MENT, THE AMOUNT OF RS.20 LACS WAS CREDITED TO THE PROFIT & LOSS ACCOUN T FOR THE YEAR UNDER CONSIDERATION AND AFTER CONSIDERING THE SAME, THE A SSESSEE REFLECTED PROFIT OF RS.9.34 LACS WHICH WAS OFFERED TO TAX AFT ER STATUTORY ADJUSTMENTS. 3.2 AN ASSESSMENT WAS FRAMED U/S 143(3) ON 26/12/20 08 DETERMINING THE INCOME AT RS.15.93 LACS. DURING ASSESSMENT PROC EEDINGS, ASSESSEES BOOKS OF ACCOUNTS WERE REJECTED U/S 145( 3) AND PROFIT WAS ESTIMATED @3% OF TOTAL TURNOVER WHICH YIELDED ESTIM ATED PROFIT OF RS.5.79 LACS WHICH WAS HELD TO BE OVER AND ABOVE DE CLARED INCOME OF RS.20 LACS. THE SAME WAS NOT ONLY CONFIRMED BY LD. CIT(A) VIDE APPELLATE ORDER DATED 21/10/2010 BUT LD.CIT(A) ENHA NCED THE INCOME BY RS.11.33 LACS. THE ENHANCEMENT COMPRISED-OFF OF TWO COMPONENTS VIZ. (I) OTHER INCOME OF RS.5.94 LACS; (II) BUSINESS INC OME OF RS.5.79 LACS. THESE ITEMS, IN THE OPINION OF LD. CIT(A), WERE TO BE ADDED BACK OVER AND ABOVE THE ASSESSED INCOME SINCE THESE REMAINED TO BE ADDED BACK. 3.3 WE FIND THAT OBSERVATION WITH RESPECT TO FIRST ITEM I.E. OTHER INCOME OF RS.5.94 LACS WAS NOT ADDED BACK BY LD.AO, WAS CO RRECT BUT THE OBSERVATION WITH RESPECT TO SECOND ITEM OF RS.5.79 LACS WAS NOT CORRECT SINCE THIS AMOUNT WAS, IN FACT, ADDED BY LD.AO WHIL E COMPUTING ASSESSEES INCOME. ANOTHER MISTAKE NOTED BY US IS T HAT THE TOTAL OF THESE ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 4 TWO ITEMS WOULD BE RS.11.73 LACS AND NOT RS.11.33 L ACS AS COMPUTED BY LD. CIT(A). 3.4 CONSEQUENTLY, THE ASSESSEE SOUGHT RECTIFICATION OF APPELLATE ORDER DATED 21/10/2010 BY WAY OF RECTIFICATION APPLICATIO N U/S 154 ON 17/01/2011. THE ATTENTION WAS DRAWN TO ERRONEOUS OB SERVATION WITH RESPECT TO ITEM NO. (II) FOR RS.5.79 LACS. 3.5 MEANWHILE, THE ORDER GIVING EFFECT WAS PASSED B Y LD. AO VIDE ORDER DATED 20/12/2010 WHEREIN THE INCOME WAS RE-DE TERMINED AT RS.27.27 LACS AFTER ADDING AN AMOUNT OF RS.11.33 LA CS AS PER APPELLATE ORDER DATED 21/10/2010. 3.6 THE MATTER REACHED UP-TO THE LEVEL OF THIS TRIB UNAL VIDE ITA NOS.91 & 92/AHD/2011 ORDER DATED 18/09/2015 WHICH IS COMMO N ORDER FOR AYS 2006-07 & 2007-08. THE TRIBUNAL, VIDE PARA-9 OF THE ORDER, HELD THAT WHEN PROFITS WERE ESTIMATED, FURTHER ADDITION OF IN COME DECLARED DURING SURVEY WAS NOT CALLED FOR. IN OTHER WORDS, IT WAS H ELD THAT WHEN THE INCOME WAS ESTIMATED @3% OF TURNOVER, SEPARATE ADDI TION OF RS.20 LACS ON ACCOUNT OF ADMISSION, WAS UNCALLED FOR. 3.7 IN THE MEANTIME, THE QUANTUM ORDER DATED 26/12/ 2008 PASSED BY LD.AO WAS SUBJECTED TO REVISIONAL JURISDICTION U/S 263 BY LD. CIT-1, BARODA VIDE ORDER DATED 30/03/2011 TO RESTRICT THE PARTNERS REMUNERATION TO RS.0.50 LACS. THE ORDER GIVING EFFE CT WAS PASSED U/S 143(3) R.W.S. 263 ON 15/04/2011. THE ORDER PASSED B Y LD.AO ON ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 5 20/12/2010 WAS MODIFIED AS PER THE DIRECTIONS GIVEN U/S 263 AND THE INCOME WAS REDETERMINED AT RS.31.78 LACS. 3.8 KEEPING IN VIEW ASSESSEES RECTIFICATION APPLIC ATION U/S 154 DATED 17/01/2011 AND ANOTHER RECTIFICATION APPLICATION DA TED 4/10/2013, THE ORDER DATED 15/04/2011 WAS RECTIFIED BY LD.AO ON 15 /11/2013 REVISING THE INCOME TO RS.25.99 LACS. IN OTHER WORDS, THE AD JUSTMENT OF RS.5.79 LACS WAS DELETED. 3.9 THE ASSESSEE CHALLENGED EXERCISE OF REVISIONAL JURISDICTION U/S 263 BEFORE THIS TRIBUNAL VIDE ITA NO.1507/AHD/2011 ORDE R DATED 28/11/2014 WHEREIN THE REVISIONAL ORDER WAS CANCELED ON THE PR INCIPLE OF MERGER. 3.10 CONSEQUENT TO CANCELLING OF ORDER U/S 263 BY T RIBUNAL, THE ORDER DATED 15/11/2013 WAS MODIFIED ON 02/06/2015 RE-DETE RMINING THE INCOME AT RS.21.47 LACS SO AS TO NULLIFY THE EFFECT OF DIRECTIONS GIVEN U/S 263. THIS WAS THE LATEST ORDER QUANTIFYING ASSESSEE S INCOME BEFORE PASSING OF THE ORDER BY TRIBUNAL ON 18/09/2015. 3.11 THE ORDER GIVING EFFECT TO THE ORDER DATED 18/ 09/2015 PASSED BY TRIBUNAL, WAS PASSED BY LD. AO ON 25/02/2016. THE L D. AO DETERMINED THE INCOME AT RS.20.05 LACS. THE PERUSAL OF ORDER W OULD SHOW THAT LD.AO MADE TWO MISTAKES IN THE ORDER. FIRSTLY, THE TOTAL INCOME HAS BEEN PICKED AS RS.25.99 LACS AS PER ORDER DATED 15/11/20 13 WHEREAS THE SAID ORDER WAS ALREADY MODIFIED ON 02/06/2015 RE-DE TERMINING THE INCOME AT RS.21.47 LACS. THE SECOND MISTAKE WAS THA T LD.AO REDUCED THE INCOME BY RS.5.94 LACS FOR WHICH NO DIRECTION W AS ISSUED BY THE ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 6 TRIBUNAL. AS RECAPITULATED BY US IN PARA 3.6, THE T RIBUNAL, VIDE PARA-9 OF THE ORDER, HAD HELD THAT WHEN PROFITS WERE ESTIMATE D, FURTHER ADDITION OF INCOME DECLARED DURING SURVEY WAS NOT CALLED FOR. I N OTHER WORDS, IT WAS HELD THAT WHEN THE INCOME WAS ESTIMATED @3% OF TURN OVER, SEPARATE ADDITION OF RS.20 LACS ON ACCOUNT OF ADMISSION, WAS UNCALLED FOR. 3.12 AGGRIEVED, THE ASSESSEE PREFERRED RECTIFICATIO N U/S 154 WHICH WAS REJECTED BY LD.AO VIDE ORDER DATED 18/05/2016. UPON FURTHER APPEAL, THE LD. CIT(A), AT PARA 4.1 OF THE IMPUGNED ORDER, AGRE ED THAT THE CORRECT INCOME AS PER TRIBUNAL ORDER SHOULD HAVE BEEN COMPU TED AT RS.1.87 LACS. BUT HE OBSERVED THAT THE ASSESSED INCOME WOUL D BE REDUCED BELOW RETURNED INCOME OF RS.11.35 LACS AND THEREFOR E, HE CHOSE TO ASSESS THE SAME AT RS.11.35 LACS IN VIEW OF THE FAC T THAT THE ASSESSEE FURNISHED NO OBJECTION AGAINST THE SAME. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 4. UPON CAREFUL CONSIDERATION OF FACTUAL MATRIX AS ENUMERATED HEREINABOVE, WE FIND THAT COORDINATE BENCH HAD ALRE ADY ADJUDICATED THE MATTER OF QUANTUM ADDITIONS VIDE ORDER DATED 18/09/ 2015 AND THE SAME WAS TO BE FOLLOWED IN SPIRIT. AS PER THIS ORDER, SI NCE THE INCOME WERE ASSESSED ON ESTIMATED BASIS, SEPARATE ADDITIONS OF RS.20 LACS OVER AND ABOVE THE ASSESSED INCOME WAS UNCALLED FOR. BOTH TH E LOWER AUTHORITIES WERE BOUND TO FOLLOW THE SAME. WE FIND THAT LD.CIT( A), AT PARA 4.1 OF THE IMPUGNED ORDER, HAS CORRECTLY ASCERTAINED ASSESSEE S INCOME AT RS.1,87,524/- WHICH WAS IN CONSONANCE WITH THE DIRE CTIONS OF TRIBUNAL ORDER DATED 18/09/2015. THE SAID COMPUTATION COMPRI SED-OFF OF ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 7 ESTIMATED INCOME @3%, OTHER INCOME AS PER FINANCIAL STATEMENTS AND DISALLOWANCE U/S 40A(3). AGAINST THE SAME, DEDUCTIO N OF INTEREST AND REMUNERATION TO PARTNERS HAVE BEEN ALLOWED. THE SA ME IS IN CONSONANCE WITH THE CASE HISTORY. THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT LD. AO TO ADOP T THE INCOME AT RS.1,87,524/- AND RECOMPUTE ASSESSEES TAX LIABILIT Y. THE APPEAL STANDS PARTLY ALLOWED. ITA NO. 292/MUM/2018, AY 2007-08 5. FACTS ARE PARI-MATERIA THE SAME IN THIS YEAR EXC EPT FOR THE FACT THAT THERE WAS NO REVISION U/S 263. THE TRIBUNAL ORDER D ATED 18/09/2015 IS COMMON ORDER FOR BOTH THE YEARS. IN THIS YEAR, THE ASSESSEE REFLECTED NIL INCOME AFTER CONSIDERING DISCLOSURE OF RS.25 LACS. THE LD. AO ESTIMATED THE INCOME @8% OF TURNOVER WHICH WAS CONS IDERED TO BE OVER AND ABOVE DECLARED INCOME OF RS.25 LACS. THEREFORE, THE INCOME WAS DETERMINED U/S 143(3) ON 24/12/2009 AT RS.29.06 LAC S. THE LD.CIT(A), VIDE APPELLATE ORDER DATED 21/10/2010 REDUCED THE E STIMATION TO 3% AND AT THE SAME TIME, DIRECTED LD. AO TO ADD OTHER INCO ME OF RS.8.91 LACS TO THE INCOME OF THE ASSESSEE. THE APPELLATE ORDER MODIFIED THE INCOME TO RS.32,11,694/-. THE SAME WAS TO BE MODIFIED AS P ER DECISION OF TRIBUNAL DATED 18/09/2015. HOWEVER, LD. AO, MAKING SIMILAR MISTAKE, ERRONEOUSLY PROVIDED RELIEF OF RS.8.91 LACS WHICH W AS NOTHING BUT OTHER INCOME. THE INCOME WAS DETERMINED AT RS.23.19 LACS VIDE ORDER DATED 25/02/2016. THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE WAS REJECTED VIDE ORDER DATED 18/05/2016. THE LD.CIT(A) , VIDE APPELLATE ORDER DATED 28/12/2017, DIRECTED LD.AO TO PROVIDE R ELIEF OF RS.25 LACS ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 8 AS PER THE DIRECTIONS OF THE TRIBUNAL. HOWEVER, REG ARDING DEDUCTION OF RS.5 LACS REPRESENTING INTEREST ON CAPITAL, IT WAS OBSERVED THAT ASSESSEE DID NOT CLAIM ANY DEDUCTION AND THEREFORE, LD. AO WAS DIRECTED TO WITHDRAW THE SAME IF CONSEQUENTIAL INTE REST WAS NOT SHOWN BY THE PARTNERS IN THEIR RESPECTIVE RETURNS OF INCOME. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 6. UPON DUE CONSIDERATION, WE FIND THAT THE APPROAC H OF LD.CIT(A), IN THIS YEAR, WAS SUBSTANTIALLY CORRECT. AS PER THE TR IBUNALS ORDER DATED 18/09/2015, THE INCOME WAS TO BE REDUCED BY RS.25 L ACS. HOWEVER, THE OBSERVATION THAT DEDUCTION OF INTEREST OF RS.5 LACS WAS NOT CLAIMED BY THE ASSESSEE IS NOT CORRECT SINCE UPON PERUSAL OF F INANCIAL STATEMENTS AS PLACED ON RECORD, IT IS QUITE DISCERNIBLE THAT THAT ASSESSEE HAS CLAIMED DEDUCTION OF INTEREST OF RS.5 LACS. THEREFORE, THER E WOULD BE NO OCCASION TO ISSUE THE STATED DIRECTIONS TO LD. AO. IN NUTSHELL, THE ASSESSEES INCOME WOULD BE TAKEN AS RS.7,11,694/- B EING DIFFERENTIAL OF RS.32,11,694/- AND RS.25,00,000/-. THE APPEAL STAND S PARTLY ALLOWED. CONCLUSION 7. BOTH THE APPEALS STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2020 SD/- SD /- (MAHAVIR PRASAD) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER ! MUMBAI; '# DATED : 04/03/2020 SS,PS ITA.292 & 1001/AHD/2018 M/S. B M PATEL & BROTHERS ASSESSMENT YEARS :2006-07 & 2007-08 9 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ ( ) / THE CIT(A) 4. $ / CIT CONCERNED 5. %& '(()* , )* , ! / DR, ITAT, AHMEDABAD 6. ' +,- / GUARD FILE / BY ORDER, // TRUE COPY // / ! (DY./ASSTT.REGISTRAR) !'# , ! / ITAT, AHMEDABAD.