ACIT, Palampur V. Mrs. Madhula Thakur L/H, Kangra

ITA 1028/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68573 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J S NAGAR
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1028/CHD/2012 ASSESSMENT YEAR : 2007-08 THE A.C.I.T., VS MRS. MADHULA THAKUR, CIRCLE, L/H SHRI ASHOK THAKUR, PALAMPUR, GOVT. CONTRACTOR, ( H.P.) C/O EAGLE MOTOR SERVICE STATION, DHARAMSALA, DISTT. KANGRA (HP). PAN : AAVPT-2478G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI J.S.NAGAR DATE OF HEARING : 07.11.2013 DATE OF PRONOUNCEMENT : 22.11.2013 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE CIT(APPEALS) DATED 16.07.2012 RELATING TO ASSESSMEN T YEARS 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL : ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(APPE ALS) HAS ERRED IN DELETING THE ADDITION OF RS. 1,17,21,304/- MADE BY THE ASSESSING OFFICER AND DIRECTING HIM/HER TO ADD THE SECURED ADVANCE IN THE GROSS RECEIPTS AND APPLY NP RATE OF 8% ON TOTAL GROSS RECEIPTS EVEN THOUGH THE ASSESSEE HAS ALREADY CLAIMED/DEBITED ALL THE EXPENSES RELATING T O WORK CONTRACT. 2 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T THE ORDER OF THE CIT(APPEALS) IN DELETING THE ADDITION OF RS. 1,17,2 1,304/- MADE BY THE ASSESSING OFFICER AND DIRECTING THE ASSESSING OFFIC ER TO ADD THE SECURED ADVANCES IN GROSS RECEIPTS AND APPLY THE NP RATE OF 8% TO DETERMINE THE INCOME OF THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNT WERE E XAMINED AND IT WAS NOTED THAT THE ASSESSEE HAD SHOWN BROUGHT FORWARD L IABILITY OF RS. 1,17,21,304/- IN THE ACCOUNT OF EXECUTIVE ENGINEER, IPH DEPTT. SARKAGHAT. THE EXPLANATION OF THE ASSESSEE IN RESP ECT OF THE SAID LIABILITY WAS THAT IT HAD RECEIVED AN ADVANCE FROM THE IPH DEPARTMENT AND THE WORK DONE AGAINST THE SAID ADVANCE WAS REFL ECTED AS WORK IN PROGRESS. THE ASSESSING OFFICER OBTAINED THE INFOR MATION UNDER SECTION 133 OF THE ACT FROM THE EXECUTIVE ENGINEER, IN WHIC H THEY CONFIRMED THAT THE SAID ADVANCE WAS MADE TO THE ASSESSEE FROM WHICH NO INCOME AND SALES TAX WAS DEDUCTED. THE ASSESSEE WAS CONFR ONTED WITH THE LETTER OF EXECUTIVE ENGINEER WHO HAD ISSUED THE CHE QUE ON 28.09.2005 AGAINST WHICH THE FIRST RUNNING BILL WAS SUBMITTED BY THE ASSESSEE AMOUNTING TO RS. 1,61,04,920/- WITH THE DEPARTMENT AND THE SAID ADVANCE HAD BEEN ADJUSTED AGAINST THE SAME AND ON B ALANCE OF RS. 43,19,197/-, TAX WAS DEDUCTED AT SOURCE AND BALANCE PAYMENT WAS MADE ON 28.06.2006. THE EXPLANATION OF THE ASSESSEE BEF ORE THE ASSESSING OFFICER WAS THAT AS NO ADJUSTMENTS WERE MADE IN THE TDS CERTIFICATE OF THE SAID SECURED ADVANCE, THE AMOUNT WAS NOT REFLEC TED IN THE RECEIPTS. THE ASSESSEE VIDE REPLY DATED 24.12.2009 MADE A REQ UEST THAT THE BOOK VERSION OF THE ASSESSEE BE REJECTED AND NET PROFIT RATE BE APPLIED ON THE TOTAL TURNOVER TO DEDUCE THE CORRECT PROFITS. THE ASSESSING OFFICER, 3 REJECTING THE CLAIM OF THE ASSESSEE, MADE AN ADDITI ON OF RS. 1,17,21,304/-. 5. THE CIT(APPEALS) VIDE PARA 4 OBSERVED AS UNDER : 4. THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERE D WITH REFERENCE TO THE FACTS OF THE CASE AND THE AUDITED ACCOUNT STATEMENTS DULY PRODUCED DURING THE COURSE OF APPEL LATE PROCEEDINGS. IT IS NOTED THAT THE EXECUTIVE ENGINEE R, SARKAGHAT HAD NOT MADE A MENTION REGARDING THE ADJU STMENT OF THE GIVEN SECURED ADVANCE IN THY TDS CERTIFICATE . EVEN THE A. O. HAS CLEARLY MENTIONED IN PARA 3 OF ASSESSMENT ORDER THAT THE 'LARGE AMOUNT' OF RS. 1.17 CRORES WAS NOT REFLECTED IN THE TDS CERTIFICATE ISSUED BY THE EXECUTIVE ENGI NEER. IT WAS ON CONDUCTING ENQUIRIES FROM THE EXECUTIVE ENGI NEER THAT THE A.O. GOT THE CONFIRMATION ABOUT THE PAYMENT OF THE SECURED ADVANCE TO THE ASSESSEE AMOUNTING TO RS, 1,17,21,304/- VIDE VOUCHER NO. 91 OF SEPT., 2005. T HROUGH THIS LETTER, THE EXECUTIVE ENGINEER ALSO INFORMED T HAT THE SAID SECURED ADVANCE HAD BEEN DEDUCTED FROM THE FIRST RU NNING ACCOUNT BILL OF THE ASSESSEE. IT HAS ALSO BEEN CLEA RLY MENTIONED BY THE LD. A.O. ON PAGE 2 OF THE ASSESSME NT ORDER THAT THE EXECUTIVE ENGINEER HAD ADJUSTED RS. 1,17,2 1,304/-, AND ON THE BALANCE PAYMENT OF RS.43,19,197/-HAD DED UCTED THE TAX AT SOURCE AND MADE THE PAYMENT OF RS. 36,58 ,896/- ON 28.06.2006 BY WAY OF CHEQUE. THUS IT IS EVIDENT THA T THERE WAS ABSOLUTELY NO INDICATION OF THE ADJUSTMENT OF SECUR ED ADVANCE ON THE TDS CERTIFICATE ISSUED BY THE EXECUTIVE ENGI NEER. NOR HAD THE EXECUTIVE ENGINEER MADE ANY OTHER SEPARATE COMMUNICATION IN THIS REGARD TO THE ASSESSEE. THERE FORE, THERE IS FOUND FORCE IN THE APPELLANT'S CONTENTION THAT THERE WAS NO MALAFIDE INTENTION ON HIS PART TO AVOID THE PAYMENT OF TAX. HAD IT BEEN SO, HE WOULD NOT HAVE REFLECTED TH E AMOUNT OF THE SECURED ADVANCE IN THE NAME OF IPH DEPTT. ON TH E LIABILITY SIDE AND THE CORRESPONDING WORK-IN-PROGRESS/CLOSING STOCK ON THE ASSETS SIDE OF THE BALANCE SHEET. THE APPELLANT 'S ARGUMENT THAT HE SHOULD NOT BE PENALIZED FOR THE FAULT OF HI S ACCOUNTANT WHO HAD WRITTEN THE BOOKS AND HAD MADE A MISTAKE IN NOT MAKING THE PROPER ADJUSTMENT ENTRIES OF SECURED ADV ANCE IN THE BOOKS OF ACCOUNTS ALSO APPEALS TO THE LOGIC ON THE GIVEN FACTS. IT IS FACTUALLY CORRECT THAT THE SECURED ADV ANCE AND THE CORRESPONDING CLOSING STOCK HAVE BEEN DULY RECORDED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS. BUT IT IS ALSO C ORRECT THAT THE SECURED AMOUNT TRUSTED BY THE EXECUTIVE ENGINEE R AGAINST THE RUNNING ACCOUNT BILL OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION NEEDS TO BE ADDED TO THE GROSS CONTRA CT RECEIPTS OF THE ASSESSEE. THE APPELLANT HAS CLAIMED THAT AN AMOUNT OF RS. 18,95,6097- WAS ADJUSTED TOWARDS THE CONTRACT R ECEIPTS DURING THE F. Y. 2007-08. BUT THE SAID CLAIM COULD NOT BE SUPPORTED W.R.T THE BOOKS OF ACCOUNTS OR BY ANY OTH ER DOCUMENTARY EVIDENCE. HOWEVER, THE APPELLANT'S CLAI M THAT THE BALANCE AMOUNT OF RS.98,25,696/-WAS ADDED TO TH E CONTRACT RECEIPTS IN THE F.Y. 2009-10 STANDS DULY V ERIFIED 4 FROM HIS BOOKS OF ACCOUNT AND AUDITED ACCOUNTS STAT EMENTS. BUT THE INCLUSION OF THE SAID AMOUNT IN THE GROSS C ONTRACT RECEIPTS OF THE F.Y.2009-10 DOES NOT PRECLUDE THE A SSESSEE'S LIABILITY OF INCLUDING THE AMOUNT OF SECURED ADVANC E TO HIS GROSS CONTRACT RECEIPTS IN THE GIVEN ASSESSMENT YEA R 2007-08 WHEN THE SAID ADVANCE WAS ACTUALLY ADJUSTED BY THE EXECUTIVE ENGINEER. NOW THE QUESTION THAT REMAINS TO BE DECID ED IS AS TO HOW MUCH OF THE SAID RECEIPTS SHOULD BE TREATED AS THE NET INCOME/PROFIT OF THE ASSESSEE. THERE IS CERTAINLY F ORCE IN THE ASSESSEE'S ARGUMENT THAT THE WHOLE AMOUNT OF THE SE CURED ADVANCE CANNOT REPRESENT HIS NET INCOME AND THAT TH E SAID PRESUMPTION HAS GIVEN RISE TO ABNORMAL BUSINESS RES ULTS WHICH ARE INCONCEIVABLE IN THIS LINE OF BUSINESS. T HE A. O. 'S ARGUMENT THAT THE ASSESSEE HAD 'DEBITED THE CONTRAC T AMOUNT BY WAY OF OPENING STOCK' AND, THEREFORE, THE NET PR OFIT RATE CANNOT BE APPLIED ON THE GROSS RECEIPT OF THE SECUR ED ADVANCE IS DEVOID OF MERIT. THE LD. A. O. HAS OVERLOOKED TH E FACT THAT THE ASSESSEE HAD ALSO CREDITED THE CORRESPONDING CL OSING STOCK TO HIS PROFIT AND LOSS ACCOUNT/ ON A TOTAL CO NSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CA SE, IT CAN BE CONCLUDED THAT THE SECURED ADVANCE OF RS.1,17,21 ,304/- SHOULD BE ADDED TO THE GROSS CONTRACT RECEIPTS OF T HE ASSESSEE SINCE THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE ADMITTEDLY NOT IMPECCABLY ACCURATE, I T IS DIRECTED THAT A NET PROFIT RATE OF 8% BE APPLIED TO HIS TOTAL GROSS RECEIPTS INCLUDING THE RECEIPTS K OF ADJUSTME NT OF THE SAID SECURED ADVANCE. AS PER THE ACCOUNT STATEMENTS PRESENTED DURING THE COURSE OF APPELLATE PROCEEDING S, THE CONTRACT RECEIPTS ARE SHOWN AT RS.2,56, 15, 194/-. WITH THE INCLUSION OF RS.1,17,21,304/- TO THE SAME, THE GROS S CONTRACT RECEIPTS AMOUNT TO RS.3,73,36,498/-. HOWEVER, THE G ROSS CONTRACT RECEIPTS MAY BE CROSS CHECKED AGAIN BY THE LD.A.O. FROM HIS OWN ASSESSMENT RECORDS. FURTHER, AS ALREAD Y MENTIONED, THE ASSESSEE HAS ADDED AN AMOUNT OF RS. 98,25,696/- TO HIS GROSS CONTRACT RECEIPTS IN THE F . Y. 2009-10 AGAINST THE SAID SECURED ADVANCE. THE ASSESSING OFF ICER IS, THEREFORE, DIRECTED TO ALLOW THE BENEFIT OF THE TAX PAID BY THE ASSESSEE ON THE INCOME EARNED FROM THE SAID GROSS R ECEIPTS OF RS.98,25,696/- AFTER VERIFYING THE FACTS FROM HIS R ECORDS. THE TAX THUS PAID BY THE APPELLANT MAY BE ADJUSTED AGAI NST THE TAX LIABILITY WHICH SHALL ARISE IN THE YEAR UNDER CONSI DERATION. NO BENEFIT, HOWEVER, IS ALLOWABLE TO THE APPELLANT ON ACCOUNT OF HIS CLAIM OF ADJUSTMENT OF THE SECURED ADVANCE OF R S. 18,95,609/- IN THE A. Y. 2008-09 IN THE ABSENCE OF ANY COGENT EVIDENCE. 6. THE CIT(APPEALS), ON CONSIDERATION OF THE FACT H ELD THAT, ON A TOTAL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE, IT CAN BE CONCLUDED THAT THE SECURED ADVANCE OF RS. 1,17,21,304/- SHOULD BE ADDED TO THE GROSS CONTRACT RECEIPTS OF T HE ASSESSEE. THE 5 ASSESSEE IS NOT IN APPEAL AGAINST THE SAID FINDING OF THE CIT(APPEALS) AND IN VIEW THEREOF, WE UPHOLD THE ORDER OF CIT(APP EALS) THAT THE SAID SECURED ADVANCE OF RS. 1,17,21,304/-, WHICH HAS BEE N ADJUSTED AGAINST THE PENDING BILLS OF THE ASSESSEE, ARE TO BE ADDED AS GROSS CONTRACT RECEIPTS OF THE CASE. THE CIT(APPEALS) HAD DIRECTE D THE ASSESSING OFFICER TO APPLY NET PROFIT RATE OF 8% TO THE TOTAL GROSS RECEIPTS INCLUDING RECEIPTS BY WAY OF ADJUSTMENT OF THE SAID SECURED ADVANCE. 7. IN VIEW OF REJECTION OF BOOKS OF ACCOUNT AND EST IMATION OF INCOME, WE FIND NO ERROR IN THE ORDER OF CIT(APPEAL S) IN APPLYING THE NET PROFIT RATE AND UPHOLDING THE SAME, WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER,2013. SD/- SD/- ( T.R.SOOD) (SUSHMA C HOWLA) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 22 ND NOVEMBER,2013 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT,CHD.