M/s. Jivan Construction Company, Ahmedabad V. The ACIT., Circle-9, Ahmedabad

ITA 1168/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8647 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-03-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 16-03-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: N C AMIN
• Keywords: Depreciation
• Section: 44AD; 28; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.1168/AHD/2007 A. Y.: 1995-96 M/S. JIVAN CONSTRUCTION CO., G-1, MALAK COMPLEX, NR. HIGH COURT, OPP. LAHA BHAVAN, ASHRAM ROAD, AHMEDABAD PA NO. AACFJ 9445A VS THE A. C. I. T., CIRCLE-9, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI N. C. AMIN, AR RESPONDENT BY SHRI C. K. MISHRA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE CIT(A)-XV, AHMEDABAD DATED 06 -03-2007 FOR ASSESSMENT YEAR 1995-96. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND P ERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. EARLIER THIS APPEAL WAS DISMISSED IN DEFAULT. TH E SAME WAS RESTORED WHILE ALLOWING THE MISC. APPLICATION OF TH E ASSESSEE. THE APPEAL WAS ACCORDINGLY RE-FIXED FOR HEARING ON MERIT. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE DECLARED LOSS OF RS.2,63,170/- IN THE RETURN OF INCOME. ASSESSMENT W AS COMPLETED U/S 144 OF THE IT ACT AND INCOME WAS ESTIMATED BY INVOK ING PROVISIONS U/S 44AD OF THE IT ACT @8% OF THE GROSS RECEIPT AND INC OME WAS DETERMINED AT RS.3,04,753/-, (PB-48). THE LEARNED CIT(A) DELET ED THE ADDITION. HOWEVER, THE TRIBUNAL SET ASIDE THE ORDER OF THE CI T(A) AND RESTORED THE ITA NO.1168/AHD/2007 M/S. JIVAN CONSTRUCTION COMPANY 2 MATTER TO THE FILE OF THE AO TO PASS FRESH ASSESSME NT ORDER. THE ASSESSEE AT THE SET ASIDE PROCEEDINGS BEFORE THE AO SUBMITTE D THAT BOOKS OF ACCOUNTS IS NOT TRACEABLE. ULTIMATELY, THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE AO AND REQUESTED TO EST IMATE THE INCOME OF THE ASSESSEE ON THE BASIS OF THE MATERIAL SUPPLIED BY THE ASSESSEE. THE AO CONSIDERING THE FACT THAT NO BOOKS OF ACCOUNT WA S PRODUCED ALONG WITH OTHER SUPPORTING BILLS AND VOUCHERS, ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING 5% OF THE GROSS RECEIPT OF THE ASSESSEE OF RS.38,09,415/- AND ESTIMATED THE INCOME AT RS.1,90, 470/-. THIS ADDITION WAS CHALLENGED BEFORE THE LEARNED CIT(A) A ND THE ASSESSEE SUBMITTED THAT NET PROFIT RATE OF 5% IS UNJUSTIFIED AND DEDUCTION OF DEPRECIATION AND INTEREST PAYABLE SHOULD ALSO BE AL LOWED. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE NOTED THAT THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND REL EVANT MATERIAL BEFORE HIM AND THAT GROSS RECEIPTS OF THE ASSESSEE ARE BEL OW RS.40,00,000/-. THEREFORE, PROVISIONS OF SECTION 44AD WOULD APPLY A ND IN THIS CASE THE NET PROFIT RATE RIGHTLY HAS BEEN APPLIED AT 8% IN T HE ORIGINAL ASSESSMENT ORDER. THEREFORE, REDUCTION OF NET PROFIT RATE NOW FROM 8% TO 5% WOULD SUGGEST THAT INTEREST AND DEPRECIATION IS DEEMED TO BE ALLOWED. THE LEARNED CIT(A) ALSO NOTED THAT AS PER SECTION 44AD (2) AND (3) OF THE IT ACT SUCH CLAIM OF THE ASSESSEE SHALL BE DEEMED TO B E ALLOWED. LEARNED CIT(A) ALSO NOTED ASSESSEE DID NOT PRODUCE BANK STA TEMENT AND BORROWED FUNDS ARE DIVERTED, THEREFORE, INTEREST CANNOT BE A LLOWED. LEARNED CIT(A) ACCORDINGLY CONFIRMED THE ADDITION AND DISMISSED TH E APPEAL OF THE ASSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE AO HAS NOT APPLIED THE PROVISIONS OF SECTION 44AD IN THE M ATTER. THEREFORE, DEPRECIATION AND INTEREST PAID TO THE BANK IN A SUM OF RS.5,96,273/- SHOULD BE ALLOWED SEPARATELY AS DEDUCTION. ON THE O THER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIE S BELOW. ITA NO.1168/AHD/2007 M/S. JIVAN CONSTRUCTION COMPANY 3 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT, BANK STATEMENT AND RELEVA NT MATERIALS BEFORE THE AO FOR COMPUTATION OF INCOME. THE ASSESSEE PLEA DED BEFORE THE AO THAT INCOME MAY BE ESTIMATED ON THE BASIS OF THE MA TERIAL SUPPLIED BY THE ASSESSEE. IN THE EARLIER PROCEEDINGS THE AO COM PUTED THE INCOME OF THE ASSESSEE U/S 44AD OF THE IT ACT BY APPLYING NET PROFIT RATE OF 8% ON THE GROSS RECEIPTS. HOWEVER, IN THE SET ASIDE PROCE EDINGS THE AO HAS APPLIED NET PROFIT RATE OF 5%. THE LEARNED CIT(A) C ATEGORICALLY NOTED THAT THE GROSS RECEIPTS OF THE ASSESSEE ARE BELOW RS.40, 00,000/-. SECTION 44AD (1), (2), (3) AND (5) OF THE IT ACT READS AS U NDER: 44AD. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43C , IN THE CASE OF AN ASSESSEE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION OR SU PPLY OF LABOUR FOR CIVIL CONSTRUCTION, A SUM EQUAL TO EIGHT PER CENT OF THE GROSS RECEIPTS PAID OR PAYABLE TO THE ASSESSEE IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR, AS TH E CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SUM AS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME, SHALL BE DEEMED T O BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY IN CASE THE AFORESAID GROSS RECEIPTS PAID OR PAYABLE EXCEED AN AMOUNT OF FORTY LAKH RUPEES. (2) ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTIONS 30 TO 38 SHALL, FOR THE PURPOSES OF SUB-SECTION (1), BE DEE MED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FU RTHER DEDUCTION UNDER THOSE SECTIONS SHALL BE ALLOWED: [ PROVIDED THAT WHERE THE ASSESSEE IS A FIRM, THE SALARY AND INTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FRO M THE INCOME COMPUTED UNDER SUB-SECTION (1) SUBJECT TO THE CONDI TIONS AND LIMITS SPECIFIED IN CLAUSE (B) OF SECTION 40 .] ITA NO.1168/AHD/2007 M/S. JIVAN CONSTRUCTION COMPANY 4 (3) THE WRITTEN DOWN VALUE OF ANY ASSET USED FOR TH E PURPOSE OF THE BUSINESS REFERRED TO IN SUB-SECTION (1) SHAL L BE DEEMED TO HAVE BEEN CALCULATED AS IF THE ASSESSEE HAD CLAI MED AND HAD BEEN ACTUALLY ALLOWED THE DEDUCTION IN RESPECT OF THE DEPRECIATION FOR EACH OF THE RELEVANT ASSESSMENT YE ARS. [(5) NOTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS SECTION SHALL APPLY, WHERE THE ASSESSEE CLAIMS AND PRODUCES EVIDENCE TO PROVE THAT THE PROFITS AND GAINS FROM T HE AFORESAID BUSINESS DURING THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1997 OR AN Y EARLIER ASSESSMENT YEAR, ARE LOWER THAN THE PROFITS AND GAI NS SPECIFIED IN SUB-SECTION (1), AND THEREUPON THE ASS ESSING OFFICER SHALL PROCEED TO MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE AND DETERMINE THE SU M PAYABLE BY THE ASSESSEE ON THE BASIS OF ASSESSMENT MADE UNDER SUB-SECTION (3) OF SECTION 143.] IT IS DEEMING MANDATORY PROVISION AND APPLIES TO TH E CASE OF THE ASSESSEE BEING THE ASSESSEE IN CONSTRUCTION WORK AND ASSESSE E FAILED TO MAKE OUT CASE U/S 44AD(5) OF THE IT ACT. THEREFORE, PROVISIO NS OF SECTION 44AD WOULD APPLY IN THE CASE OF THE ASSESSEE. ACCORDING TO SECTION 44AD THE DEPRECIATION AND INTEREST PAYABLE ETC. SHALL BE DEE MED TO HAVE BEEN TAKEN INTO CONSIDERATION WHILE APPLYING NET PROFIT RATE IN THE MATTER. IT IS SETTLED LAW THAT LEARNED CIT(A) HAS CO-TERMINUS POW ER TO THAT OF THE AO. WHAT THE AO CAN DO, CAN ALSO BE DONE BY THE LEARNED CIT(A) - (KANPUR COAL SYNDICATE 53 ITR 225(SC). THE LEARNED CIT(A), THEREFORE, RIGHTLY NOTED THAT IN THE EARLIER PROCEEDINGS THE AO APPLIE D PROVISIONS OF SECTION 44AD AND APPLIED NET PROFIT OF 8%. THE REDUCTION OF NET PROFIT RATE FROM 8% TO 5% IN THE SET ASIDE PROCEEDINGS WOULD SHOW TH AT THE AO HAS TAKEN INTO SUCH FACT OF DEPRECIATION AND INTEREST PAYABLE BY THE ASSESSEE. RATHER CIT(A) SHOULD HAVE ENHANCED THE NET PROFIT R ATE FROM 5% TO 8% AS PER SECTION 44AD OF THE IT ACT. NO FAULT COULD BE F OUND WITH THE FINDINGS OF THE LEARNED CIT(A) IN DISMISSING APPEAL OF THE A SSESSEE. ITA NO.1168/AHD/2007 M/S. JIVAN CONSTRUCTION COMPANY 5 6.1 WE MAY ALSO NOTE HERE THAT THOUGH THE LEARNED C IT(A) DISCUSSED THE ISSUE OF DEPRECIATION AND INTEREST DEDUCTION IN THE IMPUGNED ORDER BUT THE ASSESSEE HAS NOT TAKEN ANY SPECIFIC GROUND BEFORE THE LEARNED CIT(A) IN THE GROUNDS OF APPEAL. THE LEARNED COUNSE L FOR THE ASSESSEE ALSO CONCEDED ON GOING THROUGH THE GROUNDS OF APPEA L RAISED BEFORE THE LEARNED CIT(A) THAT NO SUCH SPECIFIC GROUND IS TAKE N IN THE GROUNDS OF APPEAL. WHEN NO SUCH GROUND IS TAKEN BEFORE THE LEA RNED CIT(A), THERE WAS NO REASON TO RAISE SUCH PLEA IN THE GROUND OF A PPEAL BEFORE THE TRIBUNAL. AGAIN, IT MAY ALSO BE MENTIONED THAT THE ASSESSEE HAS NOT RAISED ANY GROUND OF APPEAL WITH REGARD TO DEPRECIA TION IN THE GROUNDS OF APPEAL BEFORE THE TRIBUNAL. ASSESSEE HAS ALSO NOT C LAIMED ANY SUCH DEDUCTION BEFORE THE AO AT SET ASIDE PROCEEDINGS. R ATHER ASSESSEE PLEADED BEFORE AO THAT INCOME MAY BE ESTIMATED IN A BSENCE OF BOOKS OF ACCOUNT. 6.2 IT MAY ALSO BE NOTED HERE THAT THE ASSESSEE NOW WANTS TO CLAIM DEDUCTION OF DEPRECIATION AND INTEREST PAYMENT IN A SUM OF RS.5,96,273/-. IF SUCH CLAIM IS ALLOWED, IT WOULD R EDUCE THE RETURNED LOSS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME AT RS.2,63,170/-. THE ASSESSEE CANNOT REDUCE THE RETURNED LOSS OR I NCOME BY TAKING SUCH A PLEA BEFORE THE TRIBUNAL. WHEN SUCH POINT WA S BROUGHT TO NOTICE OF THE LEARNED COUNSEL FOR THE ASSESSEE, HE COULD NOT CONT RIBUTE MUCH ON THIS ISSUE AS TO HOW THE ASSESSEE NOW CAN REDUCE THE RET URNED LOSS BY SUBSTANTIAL AMOUNT BY CLAIMING DEDUCTION OF DEPRECI ATION AND INTEREST SEPARATELY. 6.3 CONSIDERING THE FACTS OF THE CASE AND THE FACT THAT NO BOOKS OF ACCOUNT HAS BEEN PRODUCED BEFORE THE AUTHORITIES BE LOW ALONG WITH DETAILS OF EXPENDITURE ETC., THE AO WAS LEFT WITH N O ALTERNATIVE EXCEPT TO ESTIMATE THE INCOME OF THE ASSESSEE. THE AO HAS RIG HTLY ESTIMATED THE INCOME OF THE ASSESSEE CONSIDERING THE ENTIRE HISTO RY OF THE CASE. WE, ITA NO.1168/AHD/2007 M/S. JIVAN CONSTRUCTION COMPANY 6 THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF T HE ASSESSEE. SAME IS ACCORDINGLY DISMISSED 7. AS A RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED ON12-03-2010 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 12-03-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD