DCIT CIRCLE-2, Hazaribagh V. Shri Saligram Singh, Hazaribagh

ITA 12/RAN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9707 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 16-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: DINESH CHANDRA AGARWAL
• Keywords: Depreciation; Corroborative evidences
• Section: 44AD; 142(1); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.12 /RAN/201 7 ASSESSMENT YEAR : 2011 - 2012 DCIT, CRICLE - 2, HAZARIBAG VS. SHRI SALIGRAM SINGH, MAHABIR BHAWAN, SURESH COLONY, HAZARIBG PAN/GIR NO. ASBPS 5307 B (APPELLANT ) .. ( RESPONDENT ) C.O.NO.03/RAN/2017 (IN ITA NO.12/RAN/2017) ASSESSMENT YEAR: 2011 - 2012 SHRI SALIGRAM SINGH, MAHABIR BHAWAN, SURESH COLONY, HAZARIBG VS. DCIT, CRICLE - 2, HAZARIBAG PAN/GIR NO. ASBPS 5307 B (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY: SHRI DINESH CHANDRA AGARWAL, ADV REVENUE BY : SHRI K.E.SUNIL BABU, CIT (DR) DATE OF HEARING : 28 /05 / 201 8 DATE OF PRONOUNCEMENT : 29 /05/ 2018 2 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FIELD BY THE ASSESSEE A GAINST THE ORDER OF THE CIT(A) - HAZARIBAG DATED 1.11.2016 FOR THE ASSESSMENT YEAR 2011 - 2012. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO AND ALSO IN THE REMAND REPORT, AO HAS MENTIONED THAT ASSESSEE HAS NOT FURNISHED ANY PAPERS OR DOCUMENTS LIKE BILLS, VOU CHERS, BOOKS OF A/CS AS ASKED FOR IN SUPPORT OF HIS CLAIM. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN ACCEPTING THE PAPERS AND DOCUMENTS PRODUCED BEFORE HIM WHEN THE SAME BOOKS OF A/C PAPERS, DOCUMENTS HAVE NOT BEEN PROD UCED BEFORE THE AO DURING THE COURSE OF SCRUTINY PROCEEDINGS. AFTER SCRUTINY ASSESSMENT, ASSESSEE WAS AGAIN GIVEN OPPORTUNITY TO PRODUCE THE SAME BUT HAS NOT PRODUCED BEFORE AO WHILE SENDING REMAND REPORT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND PLYING TRUCKS & CONTRACT JOBS. THE ASSESSEE FILED THE RETURN OF INCOME ON 30.9.2011 SHOWING TOTAL INCOME OF RS.67,23,157/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND 142(1) WERE ISSUED AND SERVED ON THE ASSESSEE. SINCE, THE ASSESSEE FAILED TO COMPLY WITH THE NOTICES, THE ASSESSING OFFICER MADE ASSESSMENT U/S.144 OF THE ACT. 3 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 4. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DERIVED INCOME FROM BUSINESS ACTIVITIES COMPRISING OF TWO ELEMENTS (I) TRADING AND PLYING OF TRUCKS AND (II) CONTRACT JOBS. THE ASSESSEE INSTEAD OF PREPARING TWO SEPARATE ACCOUNTS, IT PREFERRED MAKING ONE SINGLE ACCOUNT AND BALANCE SHEET. THE ASSESSING OFFICER FOUND THAT OUT OF TOTAL CONTRACT RECEIPTS OF RS.10, 22,93,445/ - , THE ASSESSEE HAS CLAIMED RS.3,35,65,905/ - ON ACCOUNT OF LABOUR CHARGES . SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THE LABOUR CHARGES, THE ASSESSING OFFICER DISALLOWED THE E N TIRE CLAIM OF LABOUR CHARGES OF RS.3,55,65,905/ - . 5. SIMIL ARLY, THE ASSESSEE HAS CLAIMED RS.3,99,24,445/ - UNDER THE HEAD MATERIAL CONSUMED IN CONTRACT WORKS. SINCE THE RELEVANT BILLS AN VOUCHERS AND OTHER SUPPORTING EVIDENCES WERE NOT FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED 10% OF RS.3,99,2 4,445/ - AND ADDED RS.39,92,224/ - TO THE TOTAL INCOME OF THE ASSESSEE. 6. SIMILARLY, THE ASSESSEE HAS CLAIMED RS.4,56,699/ - UNDER THE HEAD OTHER EXPENSES. SINCE NO EVIDENCE WAS FURNISHED TO CLARIFY AS TO WHAT NATURE OF EXPENSES AND ITS RELEVANCE TO ITS B USINESS ACTIVITIES, THE ASSESSING OFFICER DISALLOWED 50% OF THE EXPENSES OF RS.2,28,350/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 7. SIMILARLY, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.89,87,553/ - UNDER THE HEAD CARRIAGE FOR MATERIAL & LABOUR. AS THERE WAS NO 4 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 BIFURCATION, THE ASSESSING OFFICER OBSERVED THAT IT IS DIFFICULT TO ASCERTAIN AS TO THE COST OF MATERIAL PURCHASE FOR THE CONTRACT WORKS AND SUBSEQUENT TRANSPORTATION TO THE SITE ALONGWITH THE LABOURERS. AS THE ASSESSEE FAILED TO COMPLY W ITH THE PROVISIONS OF INCOME TAX ACT, 1961 IT HAS ATTRACTED SECTION 40(A)(IA) OF THE ACT, THE ENTIRE AMOUNT OF RS.89,87,553/ - WAS DISALLOWED U/S.40(A)(IA) OF THE ACT. 8. BEFORE THE CIT(A), THE ASSESSEE SHOWED HIS INABILITY TO PRODUCE THE REQUIRED DETAILS B UT SUBMITTED THAT IN CASE OF ASSESSMENT U/S.144 OF THE ACT, THE ESTIMATE SHOULD BE REASONABLE AND THE DISALLOWANCE SHOULD NOT BE MADE MORE THAN 1.5% TO 2% OF THE DISALLOWANCES MADE. THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT RANCHI IN THE CASE OF AC IT VS. M/S. SUNNY CONSTRUCTION AND COMPANY, AS PER WHICH 5% ESTIMATED PROFIT HAS BEEN CONSIDERED REASONABLE. 9. AFTER CONSIDERING THE ASSESSEES WRITTEN SUBMISSION , THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AFTER EXAMINING THE FOURS ISSUES OF MAJOR DISALLOWANCES MADE IN THE ASSESSMENT ORDER. THE CIT(A) CONSIDERING THE ASSESSEES SUBMISSIONS AND REMAND REPORT OF THE ASSESSING OFFICER, DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER BUT ESTIMATED 10% OF THE GROSS CONTRACT RECEIPTS OF RS.10,22,93,445/ - , WHICH WORKS OUT TO RS.1,02,29,344/ - OBSERVING AS UNDER : 5 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE ARE , FIRST OF ALL, DIFFERENT FR OM THE FACTS AND CIRCUMSTANCES OF THE CITED CASE OF THE ACIT, RAGNE - 2, HAZARIBAG VS M/S. SUNNY CONSTRUCTION AND COMPANY, JHUMRI TELAIYA, KODERMA. IN THE CITED CASE ONLY CERTAIN SHORTCOMINGS WERE NOTICED IN THE BOOKS OF ACCOUNT WHICH WERE NOT EVEN SPECIFIC ALLY POINTED OUT BY THE AO. HENCE, THE ITAT FELT IT PRUDENT TO RESTRICT ESTIMATED INCOME TO 5% BEFORE DEPRECIATION. IN THE APPELLANTS CASE, IT IS NOT A QUESTION OF ANY SHORTCOMINGS OF THE NATURE AS POINTED OUT IN THE CITED CASE, BUT IT IS A CASE WHERE S UBSTANTIAL EXPENSES TOWARDS LABOUR PAYMENT OF RS.3,55,65,905/ - MATERIALS CONSUMED OF RS.3,99,24,445/ - , OTHER EXPENSES OF RS.4,56,699/ - AND CARRIAGE FOR MATERIALS AND LABOUR OF RS.89,87,563/ - HAVE BEEN CLAIMED FOR WHICH NO BILLS/VOUCHERS AND OTHER RELEVANT DETAILS WERE AT ALL PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS IN THE COURSE OF APPELLATE PROCEEDINGS. THIS BEING SO, POSSIBILITY OF CLAIMING INFLATED EXPENSES UNDER THESE HEADS CANNOT BE RULED OUT. THIS HAS TO BE FURTHER SEEN IN THE CON TEXT OF TH E GROSS RECEIPTS FROM CONTRACT WORKS OF RS.10,22,93,445/ - AGAINST WHICH NET INCOME/PROFIT OF RS.54,44,553/ - ONLY HAS BEEN SHOWN WHICH WORKS OUT TO A MEAGRE 5.32%. MOREOVER, THE APPELLANT HIMSELF HAS BROUGHT TO MY NOTICE IN SUPPORT OF HIS CONTENT ION THE ASSESSMENT ORDER IN HIS OWN CASE FOR THE ASSESSMENT YEAR 2010 - 2011, A COPY OF WHICH WAS ENCLOSED WITH THE WRITTEN SUBMISSION. IN THIS ASSESSMENT ORDER OF THE APPELLANT FOR THE ASSESSMENT YEAR 2010 - 2011, THE AO HAS ESTIMATED NET PROFIT @ 8% OF THE TOTAL GROSS RECEIPTS BEFORE DEPRECIATION WITH AN OBSERVATION THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT WERE NOT RELIABLE BY WHICH PROPER INCOME COULD BE CONSTRUED. IN VIEW OF THE ABOVE, IT BECOMES CLEAR THAT THE APPELLANTS BOOKS OF ACCOUNT CAN NOT BE RELIED UPON WHICH NECESSITATES REJECTION OF THE SAME AND ESTIMATION OF THE APPELLANTS PROFIT FROM GROSS CONTRACT RECEIPTS ON AN APPROPRIATE PERCENTAGE COMPARED TO THE LAST YEAR. WHILE KEEPING ALL THE ASPECTS IN VIEW, THEREFORE , I HOLD THAT 10% OF T H E GROSS CONTRACT RECEIPTS OF RS.10,22,93,445/ - WHICH WORKS OUT TO RS.1,02,29,344/ - SHOULD BE ESTIMATED ASSESSABLE PROFIT OF THE APPELLANTS CONTRACT BUSINESS BEFORE DEPRECIATION FOR THE ASSESSMENT YEAR 2011 - 12 AFTER REJECTION OF THE BOOKS OF ACCOUNT IN THIS RESPECT. FURTHER, RELYING ON THE CASE LAW OF THE ITAT, CUTTACK AS CITED BY THE APPELLANT, I HOLD THAT THE ESTIMATED PROFIT AT 10% OF THE GROSS CONTRACT RECEIPTS COVERS STAKE OF REVENUE ARISING OUT OF POSSIBLE DEVIATION FROM COMPLIANCE TO THE PROVISIO NS OF SECTION 40(A)(IA) OF THE I.T.ACT FOR WHICH NO SEPARATE DISALLOWANCES ARE REQUIRED TO BE MADE. THE AO IS, 6 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 THEREFORE, DIRECTED TO DELETE THE ADDITION MADE UNDER DIFFERENT HEADS AS PER PARA B PARA C AND PARA D OF THE ASSESSMENT ORDER AND ASSESS THE APP ELLANTS TOTAL INCOME BY INCLUDING 10% OF THE GROSS CONTRACT RECEIPTS OF RS.10,22,93,445/ - AS NET INCOME FROM CONTRACT BUSINESS BEFORE DEPRECIATION. THE APPELLANTS GROUNDS ARE PARTLY ALLOWED. 10. IN THE CROSS OBJECTION, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) IS NOT JUSTIFIED IN ESTIMATING THE PROFIT @ 10% OF THE GROSS RECEIPTS FROM CONTRACT WORK IN VIEW OF THE FACT THAT AS PER PROVISIONS OF SECTION 44AD, EVEN IN NO ACCOUNT CASE, THE PROFIT IS BEING DETERMINED @ 8%. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.144 OF THE ACT ON THE FAILURE OF THE ASSESSEE FOR THE NON - COMPLIANCE OF NOTICE AT THE ASSESSMEN T STAGE AND MADE ADDITIONS AND ESTIMATED THE DISALLOWANCES. 12. ON APPEAL, THE CIT(A) ALTHOUGH DELETED THE DISALLOWANCES MADE BY THE ASSESSING OFFICER BUT ESTIMATED THE DISALLOWANCES TO 10% OF THE GROSS RECEIPTS FROM CONTRACT WORKS. 13. THE CONTENTION OF LD A.R. OF THE ASSESSEE IS THAT SECTION 44AD PROVIDES THAT IN THE CASE OF AN ELIGIBLE ASSESSEE ENGAGED IN AN ELIGIBLE BUSINESS , A SUM EQUAL TO EIGHT PER CENT OF THE TOTAL TURNOVER OR GROSS RECEIPTS OF THE ASSESSEE IN THE PREVIOUS YEAR ON ACCO UNT OF SUCH BUSINESS OR, AS THE CASE 7 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 MAY BE, A SUM HIGHER THAN THE AFORESAID CLAIMED TO HAVE BEEN EARNED BY THE ELIGIBLE ASSESSEE, SHALL BE DEEMED TO BE THE PROFIT AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS O R PROFESSION . IT IS ALSO THE CONTENTION OF THE ASSESSEE THAT FOR THE ASSESSMENT YEAR 2010 - 2011, THE ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT @ 8% OF THE TOTAL GROSS RECEIPTS BEFORE DEPRECIATION WITH THE OBSERVATION THAT THE BOOKS OF ACCOUNT MAINTAI NED BY THE ASSESSEE WERE NOT RELIABLE BY WHICH PROPER INCOME COULD BE CONSTRUED. IT IS NOT DISPUTED BY LD D.R. THAT THE FA C TS OF THE PRESENT ASSESSMENT YEAR ARE DIFFERENT THAN THE ASSESSMENT YEAR 2010 - 2011. THEREFORE, AS THE DEPARTMENT HAS ACCEPTED THE ESTIMATION OF NET PROFIT @ 8% IN THE PRECEDING YEAR ON SET OF FACTS IN THE ABSENCE OF BOOKS OF ACCOUNT, WE HOLD THAT THE NET PROFIT @ 8% IS REASONABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON THE GROSS CONTRACT RECEIPTS AS AGAINST 10% OF NET PROFITS DETERMINED BY THE CIT(A). 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 /05 /201 8 SD/ - SD/ - (PAVAN KUMAR GADALE) (N.S SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER RANCHI; DATED 29 /05 /201 8 8 ITA NO.12/RAN/2017 C.O.NO.03/RAN/2017 ASSESSMENT YEAR: 2011 - 2012 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PS, ITAT, CAMP AT RANCHI 1. THE APPELLANT : DCIT, CRICLE - 2, HAZARIBAG 2. THE RESPONDENT: SHRI SALIGRAM SINGH, MAHABIR BHAWAN, SURESH COLONY, HAZARIBG 3. THE CIT(A), HAZARIBAG 4. PR. CIT , HAZARIBAG 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//