M/s Ardhendu Mondal., Burdwan V. I.T.O Wd - 1(1),Burdwan, Burdwan

ITA 1167/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4599 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: PALAS CHATTOP ADHYAY
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM] I.T.A NO. 1167/KOL/20 13 ASSESSMENT YEAR : 2008-0 9 M/S. ARDHENDU MONDAL -VS.- I.T.O., WARD-1 (1), BURDWAN BURDWAN [PAN : AAFFA 0353 H] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI PALAS CHATTOP ADHYAY, FCA FOR THE RESPONDENT : SHRI RAJAT KUMAR KUREEL , JCIT.SR.DR DATE OF HEARING : 11.08.2016. DATE OF PRONOUNCEMENT : 02.09.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11.02.2013 OF CIT(A)- DURGAPUR RELATING TO AY 2008-09. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE IS AS TO WHETHER THE CIT(A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF AO DISALLOWING A SUM OF RS.11,87,154/- WHICH IS 20% OF THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT AND ADDING THE SAID SUM OF RS.11,87,154/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ASSESSEE IS A PARTNERSHIP FIRM. IT DERIVES I NCOME FROM EXECUTION OF CONSTRUCTION CONTRACTS FOR GOVERNMENT AND PUBLIC ENTERPRISES. FO R A.Y.2008-09 THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.30,00 0/-. IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (ACT), THE ASSESSEE PRODUCED AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT O F THE PREVIOUS YEAR RELATING TO A.Y.2008-09. PHOTO COPIES OF THE LEDGER OF LABOUR C HARGES AND MATERIAL PURCHASED WERE 2 ITA NO.1167/KOL/2013 M/S. ARDHENDU MONDAL. A.YR.2008-09 2 ALSO PRODUCED. HOWEVER, NO BILLS, VOUCHERS IN SUPPO RT OF THE BOOKS OF ACCOUNTS WERE PRODUCED. THE ASSESSEE SUBMITTED BEFORE THE AO THAT NO VOUCHERS FOR LABOUR CHARGES WERE MAINTAINED AND BILLS FOR PURCHASE OF MATERIALS WERE NOT PROVIDED BY THE SELLERS. THE AO WAS OF THE VIEW THAT NON PRODUCTION OF VOUCH ERS OF EXPENSES AND BILLS FOR PURCHASE OF MATERIALS COULD ONLY LEAD TO AN INFEREN CE THAT THE ASSESEE HAD INFLATED EXPENSES TO REDUCE ITS INCOME AND TAX LIABILITY. TH E AO THEREAFTER CONCLUDED THAT IT WAS REASONABLE TO ASSUME THAT 20% OF THE EXPENSES WERE INFLATED. THE TOTAL EXPENSES DEBITED BY THE ASSESSEE IN PROFIT AND LOSS ACCOUNT WAS RS.59,35,772/- AND 20% OF THE EXPENSES WAS RS.11,87,154/-. THE SAME WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT IN THE CASE OF THE ASSESSEE INCOME WAS ALWAYS ASSESSED AT 8% OF THE GROSS RECEIPTS AND ACC ORDINGLY IN THE PRESENT ASSESSMENT YEAR ALSO 8% OF THE GROSS RECEIPTS MAY BE ACCEPTED AS INCOME OF THE ASSESSEE. CIT(A) HOWEVER DID NOT AGREE WITH THE CLAIM OF THE ASSESSE E AND HE HELD AS FOLLOWS :- IN COURSE OF APPELLATE PROCEEDINGS THE APPELLANT H AS CONTENDED THAT THE A.O. HAS ALWAYS ASSESSED HIS INCOME AT 8% OF GROSS RECEIPTS IN PREVIOUS YEARS AND, THAT, HIS METHOD OF ACCOUNTING HAD ALSO BEEN ACCEPTED BY THE A.O. IN MY OPINION, THE APPELLANT'S SUBMISSION HAS GLOSSED OVER THE NON- PR ODUCTION OF BILLS & VOUCHERS. IT APPEARS FROM THE SUBMISSION MADE THAT THE APPELLANT WANTS NET PROFIT TO BE ADJUDICATED AT A FIGURE OF 8% OF RECEIPTS. BUT THA T, IN MY OPINION, WOULD BE TANTAMOUNT TO ACCEPTING THAT THE APPELLANT IS NOT M AINTAINING ANY BOOKS OF ACCOUNTS AND, THEREFORE, SHOULD BE ASSESSED U/S.44AD. THIS H OWEVER GOES AGAINST THE APPELLANT'S EARLIER DISCLOSURE OF HIS NET PROFIT AT 5.6% WHICH THE APPELLANT ITSELF HAS SOUGHT TO JUSTIFY WITH THE CLAIM THAT HIS WORKS CON TRACT WAS GIVEN UNDER OLD RATES. INHERENT IN SUCH DISCLOSURE IS A CLAIM THAT HE IS M AINTAINING BOOKS OF ACCOUNTS. IN FACT, HIS SUBMISSIONS MADE BEFORE THE A.O. WOULD LE AD TO A BELIEF THAT SUCH CLAIM IS TRUE. HOWEVER, SUCH CLAIM IS NOT BACKED BY EVIDENCE THAT HE IS ACTUALLY DOING SO. I THEREFORE FIND THE SITUATION TO BE CONTRADICTORY. I DO NOT SEE IT TO BE THE APPELLANT'S CASE THAT HE IS IN A POSITION TO PRODUCE BIILS & VO UCHERS EVEN NOW. UNDER THE CIRCUMSTANCES, THOUGH THIS IS AN ESTIMATED ADDITION I DO NOT WANT TO INTERFERE WITH THE A.A'S DECISION IN THIS REGARD. THE DISALLOWANCE MADE IS THEREFORE CONFIRMED. 3 ITA NO.1167/KOL/2013 M/S. ARDHENDU MONDAL. A.YR.2008-09 3 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE GROS S CONTRACT RECEIPT BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS A SUM OF RS.62,98,412/ -. ON THE ABOVE GROSS CONTRACT RECEIPT THE ASSESSEE HAD SHOWN PROFIT OF RS.3,26,64 0/- IN THE PROFIT AND LOSS ACCOUNT. THE EXPENSES DEBITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AND THE AMOUNT DISALLOWED BY THE AO IS GIVEN IN THE FOLLOWING CHAR T: HEAD OF ACCOUNTS AMOUNT OF EXPENDITURE DISALLOWANC EOF EXPENSES LABOUR PAYMENT RS.28,55,800/- RS.5,71,160/- PURCHASE OF MATERIALS RS.30,10,600/- RS.6,02,120/ - CASUAL SUPERVISION STAFF RS. 30,000/- RS. 6,000/- FOODING TO STAFF & LABOUR RS. 21,170/- RS. 4,234/- OFFICE & ESTABLISHMENT RS. 18,202/- RS. 3,640/- TOTAL RS.59,35,772/- RS.11,87,154/- THE PAST HISTORY OF ASSESSEES GROSS CONTRCT VALUE AND BOOK PROFIT ALONG WITH RATIO OF BOOK PROFIT ON GROSS RECEIPTS FOR THE FINANCILA YEA R 2006-07, 2008-09 AND 2009-10 IS AS FOLLOWS:. F.Y. GROSS RECEIPTS BOOK PROFIT % ON GR 2006-07 46,64,794 3,95,494 8.48%(APROX) 2007-08 62,98,412 3,62,640 5.760%(APPROX) 2008-09 1,82,79,542 6,98,405 3.82%(APPROX) 2009-10 1,81,53,500 14,52,280 8.01%(APPROX) IT CAN BE SEEN FROM THE ABOVE FIGURES THAT THE PROF IT DECLARED BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO AY 2008-09 WAS COMPARATIV ELY HIGHER. IF THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS SUSTAINED, I.E., IF 20% OF TOTAL EXPENDTIRUE OF RS.59,35,772/- IS DISALLOWED RESULTING IN AN ADDITI ON OF RS. 11,87,154/- TO THE PROFITS SHOWN BY THE ASSESSEE THEN THE PROFIT OF THE ASSESS EE FOR AY 2008-09 WOULD BE 4 ITA NO.1167/KOL/2013 M/S. ARDHENDU MONDAL. A.YR.2008-09 4 RS.15,49,794/- WHICH WOULD RESULT IN 24.61% (APPRO X) GROSS PROFIT, WHICH IS NOT IN KEEPING WITH THE PAST HISTORY OF PROFITS IN ASSESSE ES CASE. 7. WE ARE OF THE VIEW THAT THE ABSENCE OF BILLS AND VOUCHERS IN SUPPORT OF THE EXPENSES CAN NO DOUBT LEAD TO AN ADVERSE INFERENCE, BUT THE DISALLOWANCE TO BE MADE OF EXPENSES ON THIS COUNT CANNOT BE UNREASONABLE. IT C AN BE SEEN FROM THE ABOVE CHART THAT THE GROSS PROFIT OF THE ASSESSEE WOULD BE 24.61% WH EREAS THE AVERAGE OF FOUR ASSESSMENT YEARS REFERRED TO ABOVE WOULD BE AROUND 6.5%. IT HAS BEEN HELD BY ITAT KOLKATA BENCH IN THE CASE OF M/S. SHREE VENKATESH A GRO FOOD PVT. LTD VS DCIT VIDE IT(SS)A.54-56/KOL/2011 THAT DISALLOWANCE PURELY RES ORTING TO ADHOC METHOD CANNOT BE MADE WHEN THE EXPENSES CLAIMED IN THE PROFIT AND LO SS ACCOUNT ARE FOUND TO HAVE RELEVANCE WITH THE BUSINESS OF THE ASSESSEE. DISAL LOWANCE CANNOT BE MADE ON ADHOC SUM WITHOUT ASSIGNING COGENT REASON. IN THE PRESENT CASE THE ABOVE RATIO LAID DOWN WOULD SQUARELY APPLY. THE DISALLOWANCE IN THE PRESE NT CASE MADE BY THE AO AND SUSTAINED BY CIT(A) WAS ARBITRARY. THE EXPENSES TH AT WERE DISALLOWED WERE IN CONNECTION WITH THE BUSINESS AND THEREFORE IT HAS T O BE SEEN WHETHER BUT FOR INCURRING THESE EXPENSES THE ASSESSEE COULD HAVE EXECUTED CON TRACTS WORTH RS. 62,98,412. KEEPING IN MIND ALL FACTORS, PAST HISTORY OF PROFIT S IN ASSESSEES CASE, THE NATURE OF EXPENSES DISALLOWED, THE TURNOVER OF THE ASSESSEE A ND THE CORRESPONDING EXPENSES CLAIMED BY THE ASSESSEE, COMPARATIVE FIGURES OF GR OSS RECEIPTS AND BOOK PROFITS AND PERCENTAGE OF INCOME DECLARED BY THE ASSESSEE IN TH E PAST, WE ARE OF THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO SUSTAIN THE DISALL OWANCE OF 3% OF THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT INSTEAD OF 20% MADE BY AO AND SUSTAINED BY CIT(A). THIS WOULD MEAN THAT THE GROSS PROFIT PERCENTAGE OF THE ASSESSEE WOULD BE SLIGHTLY ABOVE 8% OF THE CONTRACT RECEIPTS. WE MAKE IT CLEA R THAT THIS SHOULD BE CONSIDERED AS THE PERCENTAGE TO THE APPLIED IN ALL THE FUTURE ASS ESSMENTS, WHICH WILL BE DONE KEEPING IN MIND FACTS AND CIRCUMSTANCES PREVAILING IN EACH AY. WE HOLD AND DIRECT ACCORDINGLY. 5 ITA NO.1167/KOL/2013 M/S. ARDHENDU MONDAL. A.YR.2008-09 5 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 02.09.2016. SD/- SD/- [DR.ARJUN LAL SAINI] [ N.V.VASUDEVA N ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02.09.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. ARDHENDU MONDAL, KALI BAZAR, P.O. & DIST. : - BURDWAN, PIN:713101. 2. I.T.O., WARD-1(1), BURDWAN. 3. CIT(A)-DURGAPUR 4. CIT-BURDWAN.. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES