DCIT, JHUNJHUNU V. M/S RAJENDRA SINGH BHAMBOO, JHUNJHUNU

ITA 1208/JPR/2010

• Counselvise Citation: 120823114 RSA 2010
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 08-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: DHANKA
• Keywords: Depreciation; Rectification of order
• Section: 154

Judgement Text

1 ITA 1208(2)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 1208/JP/2010 ASSTT. YEAR : 2006-07. THE DCIT, JHUNJHUNU CIRCLE, VS. M/S. RAJENDRA SIN GH BHAMBOO, JHUNJHUNU. D-30, INDRA NAGAR, JHUNJHUNU. (APPELLANT) (RESPONDENT) C.O. NO. 23/JP/2011 ( ARISING OUT OF ITA NO. 1208/JP/2010 ) ASSTT. YEAR : 2006-07. M/S. RAJENDRA SINGH BHAMBOO, VS. THE DCIT, JHUNJHU NU CIRCLE, JHUJHUNU. JHUNJHUNU. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : MS. ROSHANTA MEENA RESPONDENT BY : SHRI M.S.DHANKA ORDER DATED : 22/07/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AND A CROSS OBJECT ION BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 20 06-07. 2. THE DEPARTMENT IS OBJECTING IN ALLOWING INTEREST TO THIRD PARTIES (BANK) OF RS. 28,12,087/-. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION CONTRACT WORKS. THE RETURN DECLARING INCOME OF RS. 1,69,66,600/- WA S FILED ON 5.10.2006. THE AO AFTER REJECTING THE BOOKS OF ACCOUNT ESTIMATED NET PROFIT RATE OF 9% SUBJECT TO ALLOWING 2 DEPRECIATION, REMUNERATION TO PARTNERS AND INTEREST PAID TO PARTNERS/BANK. THE ASSESSEE FILED APPEAL BEFORE LD. CIT (A) WHO FOLLOWING HIS O WN ORDER IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2005-06 ESTIMATED THE NET PROFIT RA TE AT 8.5% SUBJECT TO DEDUCTION FOR DEPRECIATION, INTEREST PAYMENT AND REMUNERATION TO PARTNERS. THE AO ALSO GAVE EFFECT TO THE SAID ORDER OF LD. CIT (A) ON 8.5.2008 AFTER ALL OWING THE DEDUCTION FOR DEPRECIATION, INTEREST PAYMENT TO BANK AND PARTNERS, AND REMUNERA TION TO PARTNERS FROM THE ESTIMATED NET PROFIT OF 8.5% AS DIRECTED BY LD. CIT (A). HO WEVER, SUBSEQUENTLY AO OBSERVED THAT THE LD. CIT (A) HAS ALLOWED ONLY DEPRECIATION, INTE REST AND REMUNERATION TO THE PARTNERS AND HAS NOT ALLOWED INTEREST PAID TO THE THIRD PART Y (BANK) AGAINST THE ESTIMATED NET PROFIT OF 8.5% ON GROSS RECEIPTS. THEREFORE, AO ISSUED NO TICE UNDER SECTION 154 OF THE ACT ON 26.11.2008 PROPOSING TO ADD BACK THE DEDUCTION ALLO WED ON ACCOUNT OF INTEREST PAID TO THIRD PARTY (BANK). IN RESPONSE, THE ASSESSEE HAS FILED REPLY STATING THAT LD. CIT (A) HAS PASSED THE ORDER IN THE CASE OF ASSESSEE FOR THE AS SESSMENT YEAR 2006-07 FOLLOWING THE ORDER PASSED IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2005-06. IT WAS POINTED OUT THAT IN THE SAID ORDER FOR ASSESSMENT YEAR 2006-07 THE LD. CIT (A) HAD ESTIMATED THE NET PROFIT RATE OF 8.5% SUBJECT TO DEPRECIATION, INTERE ST PAYMENTS AND REMUNERATION TO THE PARTNERS WHICH WAS SIMILAR TO THE DECISION OF LD. C IT (A) GIVEN FOR ASSESSMENT YEAR 2005-06. IT WAS FURTHER POINTED OUT THAT AFOREMENT IONED INTEREST PAYMENTS INCLUDED INTEREST PAID TO PARTNERS AND THIRD PARTY (BANK) BE CAUSE THE LD. CIT (A) HAD RECTIFIED HIS ORDER PASSED IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2005-06 DATED 5.2.2008 VIDE HIS ORDER PASSED UNDER SECTION 154 ON 4.7.2008 WHEN IT WAS CLEARLY MENTIONED THAT NET PROFIT RATE WAS ESTIMATED AT 8.5% SUBJECT TO DEPRECIATION, INTEREST PAID TO THIRD PARTY AND INTEREST AND REMUNERATION PAID TO PARTNERS. THEREFORE, IT W AS ARGUED THAT INTEREST PAID TO THIRD 3 PARTY (BANK) CANNOT BE DISALLOWED. HOWEVER, THE AO WAS NOT SATISFIED. THEREFORE, HE WITHDRAWN THE DEDUCTION ALLOWED ON ACCOUNT OF INTER EST PAID TO THIRD PARTY (BANK) AMOUNTING TO RS. 28,12,087/-. THE CONTENTIONS RAIS ED BEFORE AO WERE REITERATED BEFORE LD. CIT (A) DURING APPELLATE PROCEEDINGS. AFTER CO NSIDERING THE ORDER OF AO PASSED UNDER SECTION 154 AND SUBMISSIONS OF THE ASSESSEE, THE LD. CIT (A) FOUND THAT AO WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION. ACCORDI NGLY, HE DELETED THE ADDITION. 4. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. 6. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE P LACED RELIANCE ON THE ORDER OF LD. CIT (A). 7. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. C IT (A), WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). FINDINGS OF LD. CIT (A ) HAVE BEEN RECORDED IN PARA 2.3 OF HIS ORDER ARE AS UNDER :- 2.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF LD. A/R. ON PERUSAL OF THE RELEVANT RECORDS, I FIND SUBSTANCE IN THE SUBMISSIONS OF LD. A/R. IT IS OBSE RVED THAT IN THIS CASE INITIALLY THE AO HAD ESTIMATED THE NP RATE AT 9% ON THE DECLARED GROSS RECEIPTS AND, THEREAFTER, HAD ALLOWED DEDUCTION FOR SALARY/REMUNERATION AND INTEREST PAID TO PARTNERS, DEPRECIATION AS CLAI MED AND THE BANK INTEREST PAID BY THE ASSESSEE. FURTHER, IT IS OBSERVED THAT IN APPEAL, THE CIT (A) HAD SUSTAINED THE ESTIMATION OF THE NP RATE AT 8.5% , SUBJECT TO DEDUCTION OF DEPRECIATION, INTEREST PAYMENTS AND REMUNERATION TO PARTNERS, FOLLOWING HIS ORDER IN THE APPELLANTS OWN CASE FOR A.Y. 2005 -06. IN THIS REGARD, IT IS NOTICED THAT IDENTICAL ISSUES WERE INVOLVED IN THE APPELLANTS APPEAL FOR A.Y. 2005-06 AND, SIMILAR TO HIS DECISION FOR A.Y. 2006-07, THE CIT (A) HAD UPHELD THE ESTIMATION OF THE NP RATE AT 8.5%, S UBJECT TO FURTHER DEDUCTION FOR DEPRECIATION, INTEREST, AND REMUNERAT ION TO THE PARTNERS. 4 FURTHER, IT IS ALSO NOTICED THAT BY HIS RECTIFICATI ON ORDER DATED 4.7.2008, PASSED U/S 154 OF THE I.T. ACT, THE CIT (A) HAD ALL OWED THE ESTIMATION OF THE NP RATE AT 8.5%, SUBJECT TO THE DEPRECIATION, I NTEREST PAID TO THIRD PARTIES AND INTEREST/REMUNERATION PAID TO THE PARTN ERS. THEREFORE, AS THE CIT (A) HAD FOLLOWED HIS ORDER FOR A.Y. 2005-06, WH ILE DECIDING THE APPEAL FOR A.Y. 2006-07 IN THE APPELLANTS CASE AND HAD UPHELD THE ESTIMATION OF THE NP RATE AT 8.5%, SUBJECT TO THE D EDUCTION OF DEPRECIATION, INTEREST PAYMENTS AND REMUNERATION TO THE PARTNERS, IT WAS EVIDENT THAT THE DEDUCTION FOR INTEREST PAYMENTS, MENTIONED THEREI N, INCLUDED THE INTEREST PAID TO THE PARTNERS, AS WELL AS, THE INTEREST PAYM ENT MADE TO THE THIRD PARTIES (BANK). THEREFORE, I FIND THAT THE LD. AO H AD CORRECTLY PASSED HIS ORDER U/S 143(3)/250 OF THE IT ACT ON 8.5.2008, WHI LE GIVING EFFECT TO THE APPELLATE ORDER PASSED BY THE CIT (A) FOR A.Y. 2006 -07, AND IN ASSESSING THE APPELLANTS TOTAL INCOME AT RS. 2,06,67,900/-. HENCE, IT IS SEEN THAT THERE WAS NO MISTAKE APPARENT FROM THE RECORDS IN T HE AFORESAID ORDER DATED 8.5.2008 PASSED BY THE LD. AO U/S 143(3)/250 OF THE I.T. ACT. FURTHER, IT IS OBSERVED THAT THE AFOREMENTIONED APP ELLATE ORDERS FOR A.YS. 2005-06 AND 2006-07 AND THE RECTIFICATION ORDER PAS SED BY THE CIT (A) FOR A.Y. 2005-06 WERE PRODUCED BY THE APPELLANT BEFORE THE LD. AO, AT THE TIME OF 154 PROCEEDINGS, FROM WHICH IT WAS EVIDENT THAT THE ESTIMATION OF THE NET PROFIT AT 8.5% WAS SUBJECT TO DEDUCTION OF DEPRECIATION CLAIMED, INTEREST PAID TO THIRD PARTIES (BANK) AND INTEREST AND REMUNERATION PAID TO THE PARTNERS. THEREFORE, ON THESE FACTS, IT IS HEL D THAT THE LD. AO WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION OF RS. 28 ,12,087/-, VIDE HIS ORDER DATED 27.1.2010 PASSED U/S 143(3)/250/154 OF THE I.T. ACT. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THAT ADDI TION. CONSEQUENTLY, THIS GROUND OF APPEAL IS ALLOWED. 8. THE ABOVE FINDING OF LD. CIT (A) COULD NOT BE CO NTROVERTED NOR ANY MATERIAL BROUGHT ON RECORD TO HOLD OTHERWISE. THE LD. CIT ( A) HAS ASCERTAINED THE FACTUAL ASPECTS OF THE CASE THAT ON SIMILAR CIRCUMSTANCES THE DEDUC TION ON ACCOUNT OF INTEREST PAID TO THIRD 5 PARTY (BANK) WAS ALLOWED IN EARLIER YEAR ALSO AND, THEREFORE, HE HELD THAT THE AO WAS WRONG IN ISSUING NOTICE UNDER SECTION 154. ACCORDI NGLY ADDITION MADE BY AO WAS DELETED. 9. THE ABOVE FINDING OF LD. CIT (A) REMAINED UNCONT ROVERTED, THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A) . ACCORDINGLY WE CONFIRM HIS ORDER. 10. THE CROSS OBJECTION FILED BY ASSESSEE DOES NOT REQUIRE ANY ADJUDICATION UPON AS IT SEEMS THAT THE SAME IS IN SUPPORT OF THE ORDER OF L D. CIT (A). ACCORDINGLY, THE CROSS OBJECTION IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE DEPARTMENT AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 .7.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE DCIT, JHUNJHUNU CIRCLE, JHUNUJHUNU. M/S. RAJENDRA SINGH BHAMBOO, JHUNJHUNU. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1208(2)/JP/2010) BY ORDER, AR ITAT JAIPUR.