M/s Happy Construction, Malkanagiri V. ITO, Koraput

ITA 12/CTK/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0810 (ITAT-CUTTACK)
• Duration Of Justice: 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 05-01-2011
• Court: TRIBUNAL
• Department Lawyers: S C MAHANTY
• Assessee Lawyers: P K MISHRAAR
• Keywords: Business income
• Section: 44AD

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, (SMC) CUTTACK BENCH, CUTTACK () BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. / ITA NO.12/CTK/2011 / ASSESSMENT YEAR 2004 - 05 M/S.HAPPY CONSTRUCTION, AT: LACHIPETA, M.V.79, MALKANGIRI, DIST.MALKANGIRI PAN : AAJEH 2122 G - - - VERSUS - INCOME - TAX OFFICER, WARD 2, AT/P.O. JEYPORE, DIST.KORAPUT. ( /APPELLANT ) (/ RESPONDENT ) / FOR THE APPELLANT : / SHRI P.K.MISHRA,AR / FOR THE RESPONDENT: / SHRI S.C.MAHANTY, DR / ORDER (SMC) . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE AGITATES THE ACTI ON OF THE LEARNED CIT(A) IN PARTIALLY CONFIRMING THE ADDITION OF 1,40,000 BEING THE DIFFERENCE ASSESSED BY THE ASSESSING OFFICER AS EXCESS OF LIABILITY OVER ASSETS. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THAT THE ASSESSI NG OFFICER VERIFIED THE RETURN FILED BY THE ASSESSEE DECLARING INCOME OF 14,080 U/S.143(3). THE ASSESSEE RENDERED INCOME FROM CONTRACT WORKS AS A PARTNERSHIP FIRM AND ON THE BASIS OF ENQUIRIES MADE BY THE ASSESSING OFFICER THE ASSESSEE SUBMITTED THAT THE INCOME TAX RETURN HAD BEEN FILED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT,1961 WHEN NET INCOME UNDER THE PROVISIONS OF SECTION 44AD HAS BEEN RENDERED TO TAX ON GROSS CONTRACT RECEIPTS AMOUNTING TO 15,41,575. REMUNERATION AND INTEREST ON THE CAPIT AL OF THE PARTNERS HAD ALREADY BEEN TAKEN CARE OF THERE IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. HOWEVER, THE ASSESSING OFFICER / ITA NO.12/CTK/2011 2 PROCEEDED TO CONSIDER THAT EXCESS REMUNERATION HAS BEEN GIVEN TO THE ASSESSEE BY DISALLOWING 3,150 AND ALSO BRINGING T O TAX AS UNDISCLOSED INCOME AMOUNTING TO 1,40,000 WHICH ACCORDING TO HIM WAS EXCESS OF LIABILITY OVER ASSETS. 3. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CASE OF THE ASSESSEE ON THE BASIS BASIS OF THE DEFEC T MEMO ISSUED UNDER THE PROVISIONS OF SECTION 139(9) WHEN THE ASSESSEE HAD FURNISHED SOME FIGURES WHICH PARTICULARS INDICATED THAT THE ASSESSEE WAS LIABLE TO PAY 70,000 AS LABOUR CHARGES ONLY ALLOWED THE CLAIM OF DEDUCTION OF 70,000 BUT CONFIRMED 1,40,0 00 AS CONSIDERED BY THE ASSESSING OFFICER AS THE DEFECT NOT YET EXPLAINED BY THE ASSESSEE APPELLANT BEFORE HIM GIVING PART RELIEF TO THE ASSESSEE TO CONFIRM THE ADDITION OF BALANCE 70,000. 4. THE LEARNED COUNSEL POINTED OUT THAT IT WAS A MERE CASE OF MI SINTERPRETING THE FACTS ON THE BASIS OF PARTICULARS FURNISHED TO REMOVE DEFECTS IN SO FAR AS THE INFORMATION COULD NOT BE USED AGAINST THE ASSESSEE ON ASSUMPTIONS AND PRESUMPTIONS WHEN THE ASSESSING OFFICER ACCEPTED THE RETURN UNDER THE PROVISIONS OF SECTI ON 44AD. HAVING ACCEPTED THE RETURN U/S.44AD, THE ASSESSING OFFICER OUGHT NOT TO HAVE DRAWN A BALANCE SHEET WHICH ALSO INCLUDES PAYMENTS OF EXPENDITURES WHICH LEAD TO THE ULTIMATE COMPUTING INCOME RENDERED TO TAX WAS ALREADY ACCEPTABLE TO HIM. THE LEARNED CIT(A) THEREFORE, MISDIRECTED HIMSELF TO COMBINE THE LABOUR EXPENSES CLAIMED AS PAYABLE AMOUNTING TO 70,000 AS LABOUR EXPENSES WHICH ALREADY STOOD CLAIMED RESULTING IN DOUBLE CLAIM WHEN THE NET INCOME HAS BEEN ACCEPTED. THE LEARNED ASSESSING OFFICER ALSO COMMITTED THE MISTAKE OF HOLDING THE SALES TAX, TOLL TICKETS AND OTHER EXPENSES AS ASSETS OF THE ASSESSEE TO BRING OUT THE DIFFERENCE OF 1,40,000 WHICH HE HAS TO CONSIDER ON / ITA NO.12/CTK/2011 3 THE BASIS OF EXPENSES CLAIMED AGAINST THE GROSS RECEIPTS AMOUNTING TO 15.41 LAKH S. THESE CLEARLY INDICATE THAT BOTH THE AUTHORITIES MISMATCHED THEIR OWN FINDINGS TO COME TO A CONCLUSION WHICH WAS IMPROPER IN SO FAR AS THE REMUNERATION ALLOWABLE TO THE PARTNERS AND SALES TAX AND TOLL TICKETS ETC., CLAIMED ARE PART OF THE EXPENSES WHEN THE LIABILITY OF LABOUR CHARGES PAYABLE WAS ALSO CONSIDERED AS ALLOWABLE WHEN IT STOOD CLAIMED ALREADY. THIS WOULD LEAVE NO ROOM FOR ANY FURTHER ADDITION WHICH MAY KINDLY BE CONSIDERED IN ITS ENTIRETY. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE LEARNED ASSESSING OFFICER AND LEARNED CIT(A) FOR HIS PART SUBMISSIONS. 6. AFTER PERUSING THE MATERIAL AVAILABLE ON RECORD AND CONSIDERING THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE, PROVISIONS REGARDING COMPUTATION OF BUSINESS INCOME U/S.44AD ARE VERY CLEAR FOR NOT CONSIDERING EXPENSES AS PAID, PAYABLE ETC.. THE ASSESSEE HAD NOT REACHED THE BENCH - MARK FOR MAINTAINING BOOKS OF ACCOUNT ACCORDING TO THE TURNOVER AS DISCLOSED TO THE DEPARTMENT, THEREFORE, WAS WITHIN HIS RIGHT OF CLAIMING EXPENSES U/SS.30 T O 38 AGAINST WHICH THE ASSESSING AUTHORITIES HAVE TRIED TO INCORPORATE AND BURDEN THE ASSESSEE FOR CLAIMING THESE EXPENSES WHEN HE HIMSELF AGREES THAT HIS INCOME IS MORE THAN THE PURPORTED EXPENSES OR LIABILITY THAT COULD BE DISALLOWED. FINDING NO MERIT IN THIS DISALLOWANCE ON THE BASIS OF FACTS BROUGHT ON RECORD, I HAVE NO HESITATION IN HOLDING THAT IT WAS THE ASSESSEES BONAFIDE SUBMISSIONS BEFORE THE AUTHORITIES BELOW HELD AS DEFECT INSOFAR AS THE PURPORTED ADOPTION OF THE INFORMATION WAS TO BE INCORPOR ATED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT AND ON THE BASIS OF FACTS ON RECORD WHICH REMAIN UNDISPUTED BEFORE ME AS WELL. THE INCOME RENDERED TO TAX WAS MORE THAN PURPORTED ALLOWANCES AND DISALLOWANCE MADE / ITA NO.12/CTK/2011 4 BY THE AUTHORITIES BELOW THEREFORE, ABS OLVE THE ASSESSEE TO EXPLAIN THE VARIOUS ITEMS IN THE ASSETS AND LIABILITIES INSOFAR AS THEY ARE NOT MORE THAN THE INCOME GIVING A DOUBLE EFFECT TO BE ASSESSED IN THE HANDS OF THE ASSESSEE. HOWEVER, AS THE LEARNED CIT(A) HAS ONLY GRANTED RELIEF OF 70,000 VIS - - VIS 1,40,000 ADDED ORIGINALLY, I CONSIDER IT AS RELIEF GIVEN TO THE ASSESSEE ON INCOME ON THE BASIS OF FACTS ENUMERATED BEFORE HIM THEREFORE RENDERED THE REMAINING PORTION ALSO TO BE DELETED FROM ADDITION IN ACCORDANCE WITH THE PROVISIONS OF THE I. T.ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 27.01.2011 SD/ - (. . ), , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 27.01.2011 - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : M/S.HAPPY CONSTRUCTION, AT: LAC HIPETA, M.V.79, MALKANGIRI, DIST.MALKANGIRI 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2, AT/P.O. JEYPORE, DIST.KORAPUT. 3. / THE CIT, 4. ()/ THE CIT(A), 5. / DR, CUTTACK BENCH 6. GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.