DCIT, SRIGANGANAGAR V. Shri Devki Nandan Golyan, JAIPUR

ITA 112/JODH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9659 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 15-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER ITA NO. 112/JODHPUR/2016 ASSESSMENT YEAR: 2012 - 13 THE DCIT VS. SHRI DEVKI NANDAN GOLYAN CIRCLE 204 - KAMAL APARTMENT SRIGANGANAGAR C - 6 SAWAI JAI SINGH HIGHWAY ROAD BANI PARK JAIPUR PAN NO. AAZPG6122A (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. RAJENDRA JAIN R EVENUE BY : SMT. RUNI PAL DATE OF HEARING : 10/01/2017 DATE OF PRONOUNCEMENT : 12/01/2017 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), BIKANER DT. 30/12/2015 ON THE FOLLOWING GROUNDS OF APPEAL: I) WHETHER ON THE ASSESSEE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING LUMP SUM ADDITION OF RS. 6,00,000/ - DIRECTING THE AO TO APPLY N.P. RATE @ 9.99% AS AGAINST @ 9.98% DECLARED BY THE ASSESSEE. 2 II) WHETHER THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT IN SIMILAR CIRCUMSTANCES A LUMP SUM ADDITION WAS MADE BY THE AO IN A.Y. 2011 - 12 AND NO APPEAL WAS FILED BY ASSESSEE. III) WHETHER THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 84,53,465/ - MADE ON ACCOUNT OF INTEREST PAID TO THIRD PART IES. 2. BRIEF FACTS APPEARING IN THIS CASE ARE THAT THE ASSESSEE IS CIVIL CONTRACTOR ENGAGED IN THE EXECUTION OF THE CIVIL WORK FOR THE GOVERNMENT DEPARTMENT. THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 23/09/2012 FOR A.Y. 2012 - 13 DECLARING TOTAL INCOME OF RS. 30,72,030/ - . THE CASE WAS SELECTED FOR SCRUTINY AND FIRST NOTICE UNDER SECTION 143(2) WAS ISSUED ON 08/08/2013. THEREAFTER, A FRESH NOTICE UNDER SECTION 143(2) WAS ISSUED ON 12/11/2014 DUE TO CHANGE OF INCUMBENT. IN RESPONSE TO STATUTO RY NOTICES THE AR OF THE ASSESSEE ATTENDED PROCEEDING FROM TIME TO TIME AND PROVIDED INFORMATION AS ASKED FOR BY THE AO, PRODUCED BOOKS OF ACCOUNT WHICH WERE EXAMINED AND TEST CHECKED. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT WITH ASSES SED INCOME AT RS. 1,21,25,500/ - . 3. THAT, THE GROUND NO. 1 & 2 RELATES TO DELETION OF LUMP SUM OF RS. 6,00,000/ - DIRECTING THE AO TO APPLY NP RATE @ 9.99% AS AGAINST 9.98% DECLARED BY THE ASSESSEE. IN THIS CASE THE AO HAD REJECTED THE BOOKS OF ACCOUNT OF T HE ASSESSEE FOR REASONS AS APPEARING IN HIS ORDER. THE AO FURTHER RELIED ON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF SETH NATHURAM MUNALAL VS. CIT(25 ITR 216) WHEREIN IT WAS HELD IF THE ASSESSEE FAILS TO SATISFY THE ITO TO TAKE A HIGHER PERC ENTAGE CONSISTENT WITH THE STATE OF TRADE IN THE LOCALITY OF WITH ANY SPECIAL CIRCUMSTANCES OF THE ASSESSEE WHICH WARRANT HIGHER RATE OF PROFITS. AO FURTHER 3 HELD THAT THE BIG CONTRACTORS LIKE ASSESSEE HAVING BETTER INFRASTRUCTURE AND ADMINISTRATIVE CONTR OL, EARN MORE PROFIT IN COMPARISON TO OTHER CONTRACTORS. CONSIDERING THE OVERALL FACTS OF THE INSTANT CASE, MATERIAL PLACED ON RECORD THE AO FOUND IT REASONABLE TO ADD RS. 6,00,000/ - TO THE TOTAL INCOME OF THE ASSESSEE TO COVER UP POSSIBLE LEAKAGE OF REVEN UE AND HENCE THE ADDITION. 4. THE LD. CIT(A) IN HIS ORDER HELD THAT THIS ACTION OF THE AO WAS NOT BASED ON PROPER APPRECIATION OF THE FACTS OF THE CASE. THE LD. CIT(A) FURTHER STATED IN HIS ORDER ON RECORD THAT AFTER REJECTING THE BOOKS OF ACCOUNT SHOULD H AVE CONSIDERED THE PAST HISTORY OF THE CASE AND ACCORDINGLY APPLY A REASONABLE NET PROFIT RATE. IN SO FAR AS APPLICATION OF NP RATE, IT IS OBSERVED THAT IN A.Y. 2009 - 10, THE ASSESSEE WAS ASSESSED AT NP RATE OF 9.99% BEING RATE FOUND TO BE FAIR AND REASONAB LE BY THE LD. PREDECESSOR, WHICH WAS FURTHER AFFIRMED BY THE HONBLE ITAT. IN IMMEDIATE PRECEDING YEAR I.E. A.Y. 2011 - 12 THE ASSESSEE HAD DECLARED NP RATE OF 9.99% AS AGAINST NP RATE OF 9.98% DECLARED IN THE YEAR UNDER CONSIDERATION. INSTEAD OF TAKING ASSI STANCE FROM THE PAST HISTORY, THE AO MADE THE LUMP SUM ADDITION OF RS. 6,00,000/ - AT HIS CONVENIENCE. IN THE LIGHT OF THE ABOVE ESTABLISHED HISTORY OF THE ASSESSEE WHICH IS FURTHER CONFIRMED BY THE HONBLE ITAT THE LD. CIT(A) HELD ON THE GIVEN FACTS OF THE CASE IT WOULD BE JUSTIFIED TO APPLY NP RATE OF 9.99% AS AGAINST NP RATE OF 9.98% DECLARED BY THE ASSESSEE INSTEAD OF MAKING LUMP SUM ADDITION OF RS. 6,00,000/ - AS DONE BY THE AO, THE LUMP SUM ADDITION OF RS. 6,00,000/ - WAS DELETED. 4 5. WE HAVE PERUSED THE CASE RECORDS, FACTS AND CIRCUMSTANCES OF THE CASE AND HEARD THE RIVAL CONTENTION. 6. THAT ON PERUSAL OF THE CASE RECORDS SPECIALLY ORDER OF THE AO WE FIND THAT THE AO HAS NOT GIVEN ANY SPECIFIC REASON FOR THE LUMP SUM ADDITION OF RS. 6,00,000/ - AS TO COV ER UP THE LEAKAGE IN REVENUE. THAT THE AO UNDER THESE CIRCUMSTANCES SHOULD HAVE DONE A COMPARISON OF THE ASSESSEES BUSINESS IN THE PAST YEAR OR COULD HAVE DONE A COMPARATIVE ANALYSIS WITH SIMILAR BUSINESS. THESE EXERCISE IS NOT DONE BY THE AO AND WITHOUT ANY REASONING THE AO HAS PROCEEDED TO MAKE THE LUMP SUM ADDITION OF RS. 6,00,000/ - . THAT IS ON RECORD THE LD. CIT(A) HAS BROUGHT OUT THAT IN THE PAST HISTORY OF THE ASSESSEE AS IN A.Y. 2009 - 10 THE NP RATE OF 9.99% WAS ACCEPTED BY THE LD. PREDECESSOR WHICH WAS FURTHER AFFIRMED BY THE COORDINATE BENCH OF ITAT. THAT EVEN IN THE IMMEDIATE PRECEDING YEAR ALSO I.E A.Y. 2011 - 12 THE ASSESSEE HAD DECLARED NP RATE OF 9.99% AS AGAINST NP RATE OF 9.98%. AFTER TAKING THE TOTALITY INTO CONSIDERATION THE ANALYSIS PUT FO RWARDED BY FIRST APPELLATE AUTHORITY SEEMS TO BE REASONABLE AND CORRECT AND WE FIND NO INFIRMITY WITH THE FINDINGS OF THE LD. CIT(A) AND THEREBY IT WOULD BE JUSTIFIED TO APPLY THE NP RATE OF 9.99% AS AGAINST NP RATE OF 9.98% AND THE DELETION OF ADDITION OF RS. 6,00,000/ - IS ALSO SUSTAINED. THAT WE FURTHER OBSERVE AND ARRIVE AT OUR CONSIDERED VIEW THAT AN EXTENSION TO THIS GROUND NUMBER 2 STATES THAT THE LUMP SUM ADDITION IN A SIMILAR MANNER WAS ALS O MADE BY THE AO IN A.Y. 2011 - 12 AND NO APPEAL WAS FILED BY THE ASSESSEE, TO THIS WE OBSERVE AND STATE THAT EVERY A.Y. IS SEPARATE AS PER THE INCOME TAX LAWS AND THE 5 CORRESPONDING RIGHTS AND LIABILITIES OF THE ASSESSEE ARE TO BE DETERMINED ACCORDINGLY. TH AT IN ONE PARTICULAR A.Y. THE ASSESSEE HAS EXERCISED HIS RIGHTS SHOULD NOT PREVENT HIM JUST BECAUSE HE HAS NOT EXERCISED THE SIMILAR RIGHTS IN SOME PREVIOUS ASSESSMENT YEARS. THAT BOTH GROUND NO. 1 & 2 ARE DECIDED IN FAVOUR OF THE ASSESSEE AND THESE GROUND S OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 7. THE NEXT GROUND OF APPEAL RELATES TO DELETION OF ADDITION OF RS. 84,53,465/ - MADE ON ACCOUNT OF INTEREST PAID TO THIRD PARTIES. 8. THE AO NOTED THAT THE ASSESSEE HAS MADE PAYMENT OF INTEREST TO PARTIES M ENTIONED IN THE CHART BELOW: S.NO. NAME ADDRESS PAN NO. INTEREST 1 . M/S ARUN KUMAR LILA & CO. MUMBAI AADPR8965B 442250 2. SH. GOPI RAM JI AGGARWAL UDAIPUR AAUPA0093P 3904 3. SH. RAHUL SINGHAL UDAIPUR AAVPA4760E 11712 4. SMT. SHASHI RAJWANSHI SGNR AATPR1558H 90936 5. N1MISH ENTERPRISES AHMEDABAD AALHR1881B 392679 6. SH. PANKAJ SARAF SGNR AEMPS9079R 44997 7. SH. BHIKHAN CHAND SGNR ABAPG1743R 46800 8. DR. ANITA MITTAL SGNR ABBPM9371J 96154 9. SMT. NEERU MITTAL SGNR ABBPM9372M 98799 10. SMT. RITU MITTAL W/O VINOD KUMAR SGNR AKQPM7973G 62234 11. SMT. NEERU SHARMA SGNR ADPPS1990P 37880 12. SMT. MANJU SHARMA SGNR AFEPS4729P 101029 13. RAM KISHAN VINOD KUMAR HUF SGNR AABHR8348P 103591 14. M/S SHIV NARAYAN MOOL CHAND SGNR AACHR5917F 61800 15. SMT. ISHA GUPTA SGNR AAZPG6100G 132960 16. SMT. SHARDA DEVI LILA SGNR AALPL3248G 15513 17. SMT. SUSHILA DEVI MITTAL SGNR AHAPM4067C 220921 18. SH. VINOD KUMAR LILA SGNR AALPL3246J 235317 19. SMT. MEENA LILA SGNR AAGPL7002F 410016 20. VINOD KUMAR LILA HUF SGNR AADHV2961C 73096 21. MAYANK LILA SGNR AHGPL5730P 104537 22. SMT. VIMLA DEVI GOLYAN SGNR AAZPG6127F 783352 6 23. SMT. SUSHILA DEVI GOLYAN ABOHAR ABHPG0827F 241757 24. M/S GOLYAN & CO. ABOHAR AHLPG1371L 276866 25. SATISH KUMAR MITTAL SGNR ABBPM9373L 52159 26. M/S BAL KISHAN OM PRAKASH SGNR AAJFB8842H 27469 27. DR. TARU MITTAL SGNR AKCPM8150D 30960 28. DR. MANOJ MITTAL SGNR AFKPM5038H 72102 29. SHRIMAN NARAYAN ROLLER FLOUR MILL SGNR AAACG8951H 2532877 30. MANGILAL NAGARMAL AGGARWAL AHMEDABAD AAYPA1160B 2795 31. NAGARMAL ROOPRAM AGGARWAL AHMEDABAD AAOPA8363J 8384 32. SH. BALAJIINTT UDYOG SGNR ABUPM1883A 658 33. UMA SHANKAR PAWAN KUMAR SGNR AAZPM7617A 1151 34. SH. RAVI KUMAR GOLYAN SGNR AAZPG6129M 1383163 35. SMT. MADHU GOLYAN SGNR AGCPG7271K 250671 36. SHIVA INVESTMENT SGNR 1973 TOTAL 8453465 THE AO RELIED ON DECISION OF HONBLE ITAT, JODHPUR BENCH IN THE CASE OF M/S MOHTA CONSTRUCTION CO. (ITA NO. 127/JU/2008), HELD THAT THE INTEREST PAID TO THIRD PARTIES IS NOT ALLOWABLE DEDUCTION TO THE ASSESSEE. WHILE DOING SO, HE ALSO REFERRED THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF RAM JHANWAR LAL. ACCORDINGLY, THE AO DID NOT ACCEPT THE ASSESSEES CLAIM OF ALLOWING INTEREST PAID TO THIRD PARTIES. HENCE, AN ADDITION OF RS. 84,53,465/ - WAS MADE TO THE TOTAL INCOME OF THE ASSESSE. THAT AT THE FIRST APPELLATE STAGE IT WAS STATED BY THE ASSESSEE THAT THE DECISION RELIED IN THE CASE OF M/S MOHTA CONSTRUCTION CO.(SUPRA) BY THE AO WHILE DISALLOWING THE CLAIM OF THE ASSESSEE IS MISPLACED. IN FACT THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN TH E CASE OF CIT VS. BHAWAN VA PATH NIRMA(BOHRA) AND CO. REPORTED IN 258 ITR 431 (RAJ) DULY DEALT WITH THE ISSUE OF ALLOWANCE OF DEDUCTION OF INTEREST TO THIRD PARTIES AFTER APPLYING SPECIFIC NP RATE. FURTHER IT WAS SUBMITTED THAT THE FACTS OF THE CASE REFERR ED BY THE AO IN THE CASE OF RAM JHANWAR LAL(SUPRA) ARE NOT APPLICABLE TO 7 THE FACTS OF THE PRESENT CASE AS THE ISSUE BEFORE THE HONBLE RAJASTHAN HIGH COURT WAS WHETHER AFTER APPLYING SPECIFIC RATE OF PROFIT, DEPRECIATION CAN BE ALLOWED OR NOT. WHETHER THE INTEREST PAID TO THIRD PARTIES CAN BE ALLOWED SPECIFICALLY OR NOT, WAS NEITHER THE ISSUE BEFORE THE HONBLE RAJASTHAN HIGH COURT NOR THERE WAS ANY FINDING REGARDING NON ALLOWABILITY OF INTEREST PAID TO THIRD PARTIES. THEREFORE THE ASSESSEE PLEADED THE CLAI M OF INTEREST PAID TO THIRD PARTIES MAY BE ALLOWED AND ADDITION MADE ON THIS ACCOUNT BE DELETED. 9. THE LD. CIT(A) IN HIS ORDER ON RECORD OBSERVED THAT DECISION RELIED ON BY THE AO IN RAM JHANWAR LAL(SUPRA) AND MOHTA CONSTRUCTION CO. (SUPRA) ARE NOT APPLIC ABLE TO THE FACTS OF THE PRESENT CASE AS IN THOSE CASES ISSUE OF INTEREST TO THIRD PARTIES WAS NOT SPECIFICALLY CONSIDERED. THE LD. CIT(A) WAS OF THE OPINION THAT AFTER APPLYING A PARTICULAR NP RATE, DEPRECIATION & INTEREST REQUIRES TO BE DEDUCTED SEPARATE LY. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. BHAWAN VA PATH NIRMAN(BOHRA) (SUPRA) IS MORE APPLICABLE TO THE FACTS OF THE PRESENT CASE WHEREIN THE HONBLE COURT REFUSED TO INTERFERE WITH THE ORDER OF THE HONBLE TRIBUNAL IN WHICH PROFIT RATE WAS ESTIMATED ON THE BASIS OF PAST HISTORY SUBJECT TO DEDUCTION ON ACCOUNT OF DEPRECIATION, INTEREST TO THIRD PARTIES AND BANK, AND SALARY TO PARTNERS. SIMILAR DECISION WAS PROVIDED IN THE CASE OF M/S GYANARAM CONTRACTOR VS. ITO(XXXII) TAXWORLD03). IN THE CASE OF M/S. GUPTA CONSTRUCTION COMPANY VS. ACIT REPORTED IN 84 TTJ 46 IT HAS BEEN HELD THAT WHEN NP RATE IS APPLIED DEPRECIATION AND INTEREST TO THIRD PARTIES IS FURTHER ALLOWABLE. SIMILAR VIEW WAS AGAIN EXPRESSED BY THE HONBLE RAJASTHAN HIGH COURT IN TH E 8 CASE OF CIT VS. AMAR SINGH KISHAN CHAND - 132 TAXMANN 684. SIMILAR DECISION EXISTED IN THE CASES OF ITO VS. KHOSLA CONSTRUCTION COMPANY (75 TTJ 515); CIT VS. AMRITLAL KHATRI (123 TAXMANN 475); CHOPRA BROTHERS(I) LIMITED VS. ITO (202 ITR 40). THE LD. CIT(A ) FURTHER HELD THAT THE CLAIM OF INTEREST TO THIRD PARTIES HAVE BEEN ALLOWED TO THE ASSESSEE IN PAST. THERE ARE NO NEW FACTS BROUGHT ON RECORD TO PROMPT ANY DIVERSION FROM THIS STAND. FURTHERMORE, IN THE A.Y. 2009 - 10, THE ISSUE OF ALLOWANCE OF DEDUCTION OF INTEREST TO THIRD PARTIES WAS DECIDED IN FAVOUR OF THE ASSESSEE BY PREDECESSOR OF THE LD. CIT(A) AND THIS ORDER WAS CONFIRMED BY THE HONBLE ITAT AFTER FINDING NO INFIRMITY IN IT THEREFORE RESPECTFULLY FOLLOWING THE ABOVE DECISION THE LD. CIT(A) DIRECTED AO TO ALLOW DEDUCTION OF INTEREST PAYMENT TO THIRD PARTIES AFTER APPLYING THE NP RATE OF 9.99%. THE ASSESSEE GOT RELIEF ON THIS ACCOUNT. 10. WE HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES AND PERUSED THE RECORDS OF THE CASE IN ITS ENTIRETY. THE ORDER OF THE LD. CIT(A) ON RECORD PUTS FORTH VARIOUS JUDICIAL DECISIONS IN FAVOUR OF THE ASSESSEE ON THIS ISSUE AND WE ALSO FIND FOR THE A.Y. 2009 - 10 T HE ISSUE OF ALLOWANCE OF DEDUCTION OF INTEREST TO THIRD PARTIES WAS DECIDED IN FAVOUR OF THE ASSESSEE AT THE FIRST APPELLATE STAGE AND EVEN CONFIRMED BY THE COORDINATE BENCH OF ITAT. THAT ON THESE FINDINGS WE FIND NO INFIRMITY WITH THE ORDER OF THE LD. C IT(A) WHICH IS THEREBY UPHELD. THE RELIEF HAS EVEN BEEN GIVEN TO THE ASSESSEE DURING A.Y. 2009 - 10 BY THE COORDINATE BENCH OF ITAT AND HENCE FOR THIS YEAR ALSO THE RELIEF CONTINUES SINCE THERE IS NO NEW 9 FACTS BROUGHT ON RECORD TO PROMPT ANY DIVERSION FROM T HIS STAND. THIS GROUND OF APPEAL BY THE REVENUE IS THEREFORE DISMISSED. 11. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12/01/2017 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR