S.Ravi, Cuddalore V. ACIT Central Circle 2(1), CHENNAI

ITA 1027/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9507 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 11-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SALENDRA MAMMIDI
• Assessee Lawyers: BHARATH R.SRINIVAS; A ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNTS; ALSO KEPT
• Keywords: Rejection of books of accounts
• Section: 144; 44AD; 153A; 201; 274; 145(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.1021 TO 1027/CHNY/2019 /ASSESSMENT YEAR: 2009-10 TO 2015-16 SHRI S.RAVI , 22,BEACH ROAD,SEETHARAM NAGAR, CUDDALORE. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE2(1), CHENNAI. [ PAN: AFKPR 8737 A ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.BHARATH R.SRINIVAS, ADVOCATE *+) , /RESPONDENT BY : MR.SALENDRA MAMMIDI, PCIT,D.R , /DATE OF HEARING : 24.09.2019 , /DATE OF PRONOUNCEMENT : 24.09.2019 / O R D E R PER BENCH : THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST TH E COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 8, CHENNAI, IN ITA NOS.41,42,69,70,71,43 & 72/18-19 DATED 09.01. 2019 FOR THE ASSESSMENT YEARS 2009-10 TO 2015-16. ITA NO.1021 TO 1027/CHNY/2019 :- 2 -: 2. MR.BHARATH R.SRINIVAS REPRESENTED ON BEHALF OF T HE ASSESSEE, AND MR.SALENDRA MAMMIDI REPRESENTED ON BEHALF OF TH E REVENUE. 3. SINCE THE ISSUE ARISING OUT OF PENALTY LEVIED U/ S.271A R.W.S 274 OF THE ACT IS COMMON IN ALL THESE APPEALS, WE H EARD THESE APPEALS TOGETHER AND DISPOSE OF THE SAME BY THIS CO MMON ORDER. 4. THE ASSESSEE HAS FILED CONCISE GROUNDS OF APPEA L AS FOLLOWS:- 1. ASSESSMENT ORDER PASSED BY THE AO IS WITHOUT JU RISDICTION FOR THE FOLLOWING REASONS: (A) THE ASSESSMENT ORDERS WERE PASSED BY THE AO IN RESPECT OF AYS 2009-10, 2010-11, 2011-12, 2013-14 AND 2014-15 WITH OUT PRIOR APPROVAL OF JOINT COMMISSIONER OF INCOME TAX (JCIT) AS PER SEC. 153D OF THE ACT. THE APPROVAL DATED 27.12.2016 IN R ESPECT OF AYS 2012-13 AND 2015-16 U/S 153D(PROVIDED TO THE COUNSE L FOR APPELLANT DURING HEARING DATED 11TH JUNE 2019 BEFOR E THIS HON 'BLE TRIBUNAL) FAILS TO CONFORM TO PROCEDURE PRESCRIBED UNDER CLAUSE 9 OF MANUAL OF OFFICE PROCEDURE, VOLUME II(TECHNICAL) IS SUED BY THE DIRECTORATE OF INCOME TAX, CBDT. (B) THERE WERE NO INCRIMINATING MATERIALS UNEARTHED DURING THE ASSESSMENT PROCEEDINGS TO WARRANT INVOCATION OF SEC . 153A OF ACT. (C) IN VIEW OF CIT(A)'S ORDER, ASSESSMENT UNDER SEC . 144 IS NOT CORRECT, THEREFORE THE ENTIRE ASSESSMENT IS VOID-AB -INITIO. 2. INFIRMITIES IN THE ORDER OF CIT(A): (A) THE CIT(A) OUGHT NOT TO HAVE HELD ASSESSMENT U/ S 153A TO BE VALID WHILE OBSERVING THAT ASSESSMENT ORDERS CANNOT BE CO NSTRUED AS BEST JUDGED ORDER PASSED U/S 144. ITA NO.1021 TO 1027/CHNY/2019 :- 3 -: (B) THE CIT(A) ON ONE HAND OBSERVES THAT ADOPTION O F 6% OF THE TURNOVER WILL MEET THE ENDS OF JUSTICE, BUT PASSES ITS ORDER BY DIRECTING AO TO ADOPT 7% INSTEAD OF 9%. (C) THE CIT(A) OUGHT TO HAVE CONSIDERED THAT THE EN TIRE ASSESSMENT WAS MADE ON BASIS OF ASSUMPTION TO INVOKE SEC.153A, AS THE AO STATES ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT S BUT INVOKES SEC.145(3) TO REJECT THE BOOKS WHICH ACCORDING TO A O DOES NOT EXIST. 3. THE REVISED DEMAND OF THE AO SOUGHT TO BE RECOVE RED PURSUANT TO CIT(A)'S ORDER VIDE LETTER DATED 27.02.2019 IS INCO RRECT AND INCONSISTENT WITH THE ORDER OF CIT(A). 4. IN ORDER DATED 09.10.2019 PASSED BY CIT(A) IN RE SPECT OF PENALTY PROCEEDINGS IMPOSED BY AO UNDER SECTION 271A RWS 27 4 OF THE ACT, THE FOLLOWING WERE OBSERVED WHILE ALLOWING THE APPEALS OF THE APPELLANT BY DROPPING PENALTY PROCEEDINGS FOR AYS 2009-10 TO 201 5-16: (A) ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNTS AND ALSO KEPT VOUCHERS FOR EXPENDITURES. (B) NO SPECIFIC BOOKS OF ACCOUNTS HAVE BEEN PRESCRI BED FOR BUSINESS OF A CIVIL CONTRACTOR AND THUS RIGOR OF PENALTY U/S 27 1A IS NOT APPLICABLE. (C) REFERENCE WAS MADE TO SUB SECTION (2) OF SEC. 4 4AA OF THE ACT, TO INDICATE THAT THE APPELLANT HAD MAINTAINED BOOKS OF ACCOUNTS AND OTHER DOCUMENTS THAT COULD HAVE ENABLED AO TO COMPUTE ASS ESSEE'S TOTAL INCOME IN ACCORDANCE WITH THE ACT. 5. THE REVENUE DEPARTMENT WAS AWARE ABOUT THE INCOM E DECLARED BY THE ASSESSEE IN RETURNS FOR THE SUBJECT ASSESSMENT YEAR S. 6. THE AO / CIT(A) WERE NOT HAVING ANY ISSUE WITH T HE TURNOVERS DECLARED BY THE ASSESSEE DURING THE SUBJECT ASSESSMENT YEARS . THIS INDICATES THAT THERE WAS NO UNDISCLOSED INCOME OR ANY ULTERIOR MOT IVE ON PART OF THE ASSESSEE IN RESPECT OF DECLARING PROFITS FOR THE SU BJECT ASSESSMENT YEARS. ITA NO.1021 TO 1027/CHNY/2019 :- 4 -: 5. IT WAS SUBMITTED BY LD.AR THAT THE ASSESSEE IS A SOLE PROPRIETOR OF BUSINESS UNDER THE NAME OF M/S.SAI CONSTRUCTION, WHICH IS DOING THE BUSINESS OF CIVIL CONSTRUCTION. ON ACCOUNT OF SEARCH ON THE GROUP OF JSTV TRUST, CONSEQUENTIAL SEARCH U/S.132 OF THE ACT HAD TAKEN P LACE ON THE ASSESSEES PREMISES ON 10.11.2014. IT WAS SUBMI TTED THAT NOTICE U/S.153A CAME TO BE ISSUED ON THE ASSES SEE ON 16.06.2015. IN RESPONSE TO NOTICE U/S.153A, THE RET URN CAME TO BE FILED ON 16.07.2015. THE ASSESSMENT CAME TO BE COMPLETED U/S.153A OF THE ACT R.W.S.144 ON 29.12.20 16 WHEREIN THE ASSESSING OFFICER HAD INVOKED THE PROVI SIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS OF ACCOUNTS AS MAINTAINED BY THE ASSESSEE AND ESTIMATED THE INC OME OF ASSESSEE AT 9% OF THE GROSS RECEIPTS BY APPLYING TH E PRINCIPLES OF SECTION 44AD OF THE ACT. IT WAS SUBM ITTED THAT IN THE COURSE OF SEARCH, NO BOOKS OF ACCOUNTS WERE FOU ND AT THE BUSINESS PREMISES, ONLY CASH VOUCHERS WERE FOUND AN D SEIZED. THE ASSESSEE HAD CLAIMED THAT BOOKS OF ACCOUNTS ARE MAINTAINED BY HIS AUDITOR AND THE ASSESSEE WAS ONLY SUBMITTING HIS RECEIPTS, BANK STATEMENTS AND BILLS PERTAINING TO EXPENDITURE, ETC., TO HIS AUDITOR. THE ASSESSEE HAD CATEGORICALLY MENTIONED THAT HE WAS NOT AWARE OF TH E CASH ITA NO.1021 TO 1027/CHNY/2019 :- 5 -: BOOK, BANK BOOK, INDIVIDUAL LEDGER ACCOUNTS FOR EXP ENSES, TRIAL BALANCE, ETC. IT WAS SUBMITTED THAT AUDITOR HAD A LSO BEEN CALLED AND STATEMENTS RECORDED U/S.131 OF THE ACT. THE AUDITOR HAD APPEARED AND HAD STATED THAT HE WAS NOT IN POSSESSION OF ANY OF THE BOOKS OF ACCOUNT EXCEPT TA LLY BACK UP ACCOUNTS BASED ON THE DATA PROVIDED BY THE ASSESSEE . IT WAS SUBMITTED THAT ON ACCOUNT OF NON-MAINTENANCE OF BOO KS OF ACCOUNTS, PENALTY PROCEEDINGS U/S.271A OF THE ACT H AS ALSO BEEN LEVIED ON THE ASSESSEE. IT WAS A FURTHER SUBMI SSION THAT AGAINST THE LEVY OF PENALTY U/S.271A OF THE ACT, TH E ASSESSEE HAD FILED AN APPEAL BEFORE THE LD.CIT(A). IT WAS SU BMITTED THAT LD.CIT(A) HAD IN HIS IMPUGNED ORDER UNDER APPE AL REDUCED THE ESTIMATION OF INCOME TO 7% FROM 9% AS ESTIMATED BY THE ASSESSING OFFICER. IT WAS SUBMITTE D THAT NO ESTIMATION WAS LIABLE TO BE MADE. IT WAS SUBMITTED THAT IN RESPECT OF PENALTY LEVIED U/S.271A OF THE ACT, LD.C IT(A) HAD ALLOWED THE ASSESSEES CLAIM BY HOLDING THAT: THE ASSESSEE IS A CIVIL CONTRACTOR AND IS NOT IN VOLVED IN A SPECIFIED BUSINESS FOR WHICH SPECIFIC BOOKS OF ACCO UNT AND DOCUMENTS ARE STATUTORILY REQUIRED TO BE MAINTAINED IN TERMS OF SECTION 44AA READ WITH RULE 6F(1) OF THE I NCOME TAX RULES, 1962. IT IS A FACT THAT BOOKS OF ACCOUN T AS CONTEMPLATED IN SEC.44AA ARE NOT MAINTAINED BY THE ASSESSEE. THIS BEING THE CASE, EVEN THOUGH SPECIFI ED ITA NO.1021 TO 1027/CHNY/2019 :- 6 -: BOOKS OF ACCOUNT AS PER THE ACT ARE NOT MAINTAINED, ASSESSEE WAS MAINTAINING BANK ACCOUNTS, KEEPING VOUCHERS FOR EXPENDITURE. THE PROVISIONS WHICH THE ASSESSING OFFICER COULD RELY UPON IS SUB-SECTION(2) OF SECTION 44AA OF THE ACT WHICH ENJOINS UPON THE APPE LLANT TO KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHE R DOCUMENTS AS MAY ENABLE THE ASSESSING OFFICER TO CO MPUTE APPELLANTS TOTAL INCOME IN ACCORDANCE WITH THE PRO VISIONS OF THE ACT. NO SPECIFIC BOOKS HAVE BEEN PRESCRIBED FOR BUSINESS OF A CIVIL CONTRACTOR CARRIED ON BY THE AS SESSEE AND THUS THE RIGOUR OF LEVY OF PENALTY U/S.271A IS NOT APPLICABLE IN THE APPELLANTS CASE. IT WAS THUS A SUBMISSION THAT THERE WAS NO REQUIREM ENT OF MAINTAINING OF BOOKS OF ACCOUNTS AND CONSEQUENTLY, REJECTION OF ASSESSEES BOOKS, AND ESTIMATION OF THE INCOME OF ASSESSEE WAS NOT PERMISSIBLE. IT WAS SUBMITTED THAT ESTIMATION AS DONE BY THE ASSESSING OFFICER AND AS REDUCED BY THE LD.CIT(A) A T 7%, WAS LIABLE TO BE DELETED AND RETURNED INCOME ACCEPTED. 6. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE OR DERS OF THE ASSESSING OFFICER AND THE LD.CIT(A). IT WAS SUBMITT ED THAT IN COURSE OF SEARCH ON THE ASSESSEE, INCRIMINATING MATERIALS HAVE BEEN FOUND AND AS THE ASSESSEE WAS UNABLE TO SUBSTANTIATE THE EXPENDITURE CLAIMED, THE ASSESSING OFFICER HAD REJECTED THE ASS ESSEES BOOKS OF ACCOUNTS MAINTAINED ON TALLY BACK UP ACCOUNTS BY TH E AUDITOR. IT WAS ITA NO.1021 TO 1027/CHNY/2019 :- 7 -: SUBMITTED THAT THE ASSESSEE WAS ALSO NOT MAINTAININ G ANY BOOKS FROM WHICH THE TRUE AND CORRECT INCOME OF ASSESSEE COULD BE DETERMINED PROPERLY. IT WAS SUBMITTED THAT THE EST IMATION DONE BY THE LD.CIT(A) WAS LIABLE TO BE UPHELD. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN REPLY TO VERY SPECIFIC QUER Y AS TO WHETHER THE ASSESSEES TURNOVER EXCEEDED THE AMOUNT PRESCRIBED FOR APPLICABILITY OF PROVISIONS OF SECTION 44AD OF THE ACT, IT WAS SUBMITTED BY THE LD.PCIT D.R THAT THE TURNOVER OF T HE ASSESSEE FOR EACH OF THE ASSESSMENT YEAR FAR EXCEEDED THE LIMIT FOR APPLYING THE PROVISIONS OF SECTION 44AD OF THE ACT. 8. A PERUSAL OF FACTS IN THE PRESENT CASE CLEARLY SHOWS THAT THERE IS A SEARCH IN THE CASE OF ASSESSEE, AND NO REGULAR BOOKS OF ACCOUNTS REQUIRED FOR DETERMINATION OF THE INCOME OF ASSESSE E WAS FOUND AVAILABLE. THE ASSESSEE AS WELL AS HIS AUDITOR HAS CATEGORICALLY ADMITTED THAT THE BOOKS ARE PREPARED ON TALLY SOFTW ARE ON THE BASIS OF THE VOUCHERS AND DETAILS SUBMITTED BY THE ASSESS EE. IT IS ALSO AN ADMITTED FACT THAT THE REVENUE HAS NOT FILED ANY AP PEAL AGAINST THE ORDER OF THE LD. CIT(A) IN RESPECT OF DELETION OF P ENALTY LEVIED U/S.271A OF THE ACT. A PERUSAL OF THE ORDER OF LD. CIT(A) IN PARA 5.5. OF HIS ORDER IN RESPECT OF PENALTY LEVIED U/S.271A OF THE ACT CLEARLY ITA NO.1021 TO 1027/CHNY/2019 :- 8 -: SHOWS THAT THE LD.CIT(A) HAS GONE ON RECORD WITH A FINDING THAT THE ASSESSEE BEING A CIVIL CONTRACTOR, IS NOT INVOLVED IN A SPECIFIED BUSINESS FOR WHICH SPECIFIC BOOKS OF ACCOUNT AND DO CUMENTS ARE STATUTORILY REQUIRED TO BE MAINTAINED IN TERMS OF S ECTION 44AA READ WITH RULE 6F(1) OF INCOME TAX RULES, 1962. A PERUSA L OF PRA 5.4 OF LD.CIT(A)S ORDER CANCELLING THE PENALTY LEVIED U/S .271A OF THE ACT SHOWS THAT: THE APPELLANTS EXPLANATION THAT THE PROFITS COULD BE WORKED OUT BY PREPARING INCOME AND EXPENDITURE STATEMENT, IS PLAUSIBLE. IN FACT, THE ASSESSING OFFICER COULD DISALLOW SUCH EXP ENDITURES IG HE COMES TO A CONCLUSION THAT THEY ARE NOT SUBSTANTIAT ED OR ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE APPELLANTS BUSINESS. IN FACT, I HAVE IN THE QUANTUM APPEALS V IDE ORDER IN ITA NOS.279 TO 285/18-19 DATED 09.01.2019. I HAVE GIVEN PARTIAL RELIEF TO THE APPELLANT BY HOLDING THAT 7% OF THE TURNOVER AS INCOME FROM CONTRACT BUSINESS WOULD MEET THE ENDS OF JUSTICE. LD.CIT(A) HAS CATEGORICALLY GIVEN A FINDING THAT TH E ASSESSING OFFICER COULD DISALLOW SUCH EXPENDITURE, IF HE COMES TO A C ONCLUSION THAT THEY ARE NOT SUBSTANTIATED OR ARE NOT INCURRED WHOL LY AND EXCLUSIVELY FOR THE BUSINESS OF ASSESSEE. IN THE PRESENT CASE, ADMITTEDLY THERE ARE INCRIMINATING MATERIALS ALLEGED TO HAVE BEEN FO UND IN THE COURSE OF SEARCH. THERE IS NOTHING TALKED ABOUT THE INCRIM INATING MATERIALS IN THE ASSESSMENT ORDER. HOW THE INCRIMINATING MATE RIALS HAVE BEEN USED FOR THE PURPOSE OF DETERMINING THE INCOME OF A SSESSEE, IS NOT COMING OUT. WHEN THE TURNOVER OF ASSESSEE EXCEEDS T HE LIMIT PRESCRIBED FOR THE APPLICABILITY OF PROVISIONS OF S ECTION 44AD OF THE ITA NO.1021 TO 1027/CHNY/2019 :- 9 -: ACT, THEN OBVIOUSLY PROVISIONS OF SECTION 44AD CANN OT BE APPLIED. IN FACT, A PERUSAL OF THE PROVISIONS OF SECTION 44AD O F THE ACT ALSO CLEARLY SHOWS THAT THE ASSESSEE COULD DISCLOSE A LO WER INCOME, IF HE MAINTAINS BOOKS OF ACCOUNTS AND IS ABLE TO SUBSTANT IATE THE CLAIM OF LOWER INCOME. IN THE PRESENT CASE, THERE ARE RECOR DS AVAILABLE FROM WHICH THE INCOME OF ASSESSEE COULD BE REASONABLY DE TERMINED. IN ANY CASE EVEN THE AUDIT OF ACCOUNT U/S.44AB OF THE A CT BEING THE AUDIT REPORT SUBMITTED BY THE AUDITOR ARE ON THE BA SIS OF THE TALLY ACCOUNTS MAINTAINED, AND CASH VOUCHERS HAVE BEEN FO UND IN THE COURSE OF SEARCH. TRUE, THE SUBSTANTIAL EFFORT WOUL D BE REQUIRED FOR DETERMINING THE CORRECT INCOME, BUT THAT WOULD NOT BE GROUND ENOUGH FOR REJECTING THE BOOKS OF ACCOUNTS OF THE A SSESSEE AND ESTIMATING THE INCOME DIRECTLY. EVEN IF ESTIMATION WAS TO BE ADOPTED, THEN COMPARATIVE STUDY WOULD HAVE TO HAVE BEEN DONE. THIS IS NOT DONE IN THE PRESENT CASE. OBVIOUSLY, TH E ASSESSEES ACCOUNTS FOR THE EARLIER AND SUBSEQUENT YEARS COULD BE BASED AS COMPARATIVE STUDY. THIS BEING SO, AS THE ASSESSMENT HAS BEEN DONE FOR ESTIMATING THE INCOME AND LD.CIT(A) HAS REDUCE D THE SAID ESTIMATE. THE ESTIMATION ITSELF IS IMPERMISSIBLE UN DER LAW, ESPECIALLY IN VIEW OF THE FACT THAT INCRIMINATING MATERIALS HA VE BEEN FOUND IN THE COURSE OF SEARCH. CONSEQUENTLY, THE ASSESSMENT ORDER AND THE IMPUGNED ORDER OF LD.CIT(A) IN RESPECT OF PRESENT A PPEALS ARE SET- ITA NO.1021 TO 1027/CHNY/2019 :- 10 -: ASIDE AND THE ISSUES IN THE APPEALS ARE RESTORED TO THE FILE OF ASSESSING OFFICER FOR RE-ADJUDICATION AND FOR DETE RMINATION OF THE CORRECT INCOME OF ASSESSEE ON THE BASIS OF THE MATE RIALS AVAILABLE AND FOUND THE COURSE OF SEARCH. THE ASSESSING OFFIC ER SHALL NOT RESORT TO SHORT CUT METHOD OF APPLYING PROVISIONS O F SECTION 44AD OF THE ACT, WHEN THE TURNOVER OF ASSESSEE EXCEEDS THE PRESCRIBED LIMIT U/S.44AD OF THE ACT. 9. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSIO N OF HEARING ON THE 24 TH SEPTEMBER, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 24 TH SEPTEMBER, 2019. K S SUNDARAM , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF