Anagha Shirish Jaitpal, Ratnagiri V. Deputy Commissioner of Income-tax,

ITA 1256/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1663 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: P S KULKARNI
• Keywords: Business income; Corroborative evidences

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE ! ' , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM ITA NO.1256/PN/2014 ASSESSMENT YEAR : 2007-08 ANAGHA SHIRISH JAITPAL, SAI SHRI APARTMENT, FLAT NO.2/3, SHIVAJINAGAR, RATNAGIRI. PAN: AFLPJ5228H .. APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, RATNAGIRI CIRCLE, RATNAGIRI. ... RESPONDENT / APPELLANT BY : SHRI P. S. KULKARNI / DEPARTMENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 02.05.2016 / DATE OF PRONOUNCEMENT: 29.06.2016 % / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATE D 03.03.2014 FOR THE ASSESSMENT YEAR 2007-08. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RE CORDS ARE: THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ASSESSEE FILED HER RETU RN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 28.03.2008 DECLARING TOTAL INCOM E OF RS.7,15,864/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES TO THE TOTAL INCOME OF THE ASSESSEE WHICH INTER-ALIA INCLUDE: 2 ITA NO.1256/PN/2014 (I) INCOME FROM HOUSE PROPERTY : RS.7,13,700/- (II) UNVERIFIABLE DIRECT EXPENSES : RS.1,43,180/- (II) UNVERIFIABLE INDIRECT EXPENSES : RS.6,33,78 7/- (IV) UNCONFIRMED LIABILITIES : RS.11,08,175/- AGGRIEVED BY THE ASSESSMENT ORDER DATED 30.12.2009, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE IMPUGNED ORDER UPHELD THE FINDINGS OF THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE THE TRIBUNA L ASSAILING THE FINDINGS OF THE CIT(A) IN UPHOLDING THE ADDITIONS/DISALLOWANCES MAD E BY THE ASSESSING OFFICER. 3. SHRI P. S. KULKARNI APPEARING ON BEHALF OF THE A SSESSEE HAS FILED WRITTEN SUBMISSIONS WHICH ARE AS UNDER :- 1) ANAGHA JAITPAL SUCCEEDED THE CONTRACT BUSINESS OF HER HUSBAND SHIRISH JAITPAL WHO EXPIRED IN MARCH 2004. SHIRISH JAITPAL USED TO FOLLOW PERCENTAGE PROFIT METHOD OF CONTRACT ACCOUNT ING FOR HIS BUSINESS. SAME METHOD IS BEING FOLLOWED BY ANAGHA J AITPAL. UNDER THIS METHOD PROFIT IS PROPORTIONATELY CREDITED TO P ROFIT AND LOSS ACCOUNT IRRESPECTIVE OF RECEIPT OF AMOUNT. ( A NOTE ON THE PERCENTAGE PROFIT METHOD BY THE INS TITUTE OF CHARTERED ACCOUNTANTS OF INDIA IS ENCLOSED) 2) DURING THE YEAR 2006-07 THE ASSESSEE HAD OPENING WORK IN PROGRESS OF RS.51114956.40 SHE EFFECTED PURCHASES AND INCURRED DIRECT EXPENSES OF RS. 143179.50 WHICH WERE FULLY SUPPORTED BY BILLS AND VOUCHERS. RS. 51258135.90 CONSIDERING CLOSING WORK IN PROGRESS OF RS. 518 28656.40 SHE SHOWED GROSS PROFIT OF RS. 570520.50 HOWEVER THE GROSS PROFIT WAS NOT SHOWN AS GROSS PRO FIT BUT WAS SHOWN AS INCOME FROM PROPERTIES RS.713700 AND DIRECT EXPENSES WERE SHOWN AS GROSS LOSS RS. 143179.50 WHICH ALSO COMES TO RS 570520.50 ( 713700-143179.50 = 570520.50) TO THIS GROSS PROFIT SERVICE CHARGES OF RS. 89740.0 0 WERE ADDED FROM THIS INDIRECT EXPENSES OF RS. 633786.88 (ALSO SUPPORTED BY VOUCHERS AND BILLS) WERE DEDUCTED AND NET PROFIT WAS DEDUCED [PAGES 28 TO 67 OF PAPERBOOK] GROSS PROFIT 570520.50 SERVICE CHARGES 89740.00 TOTAL 660260.50 INDIRECT EXPENSES -633786.88 NET PROFIT 26473.62 THIS WAS AS PER ACCOUNT PROCEDURE FOR CONTRACT ACCO UNTING. 3 ITA NO.1256/PN/2014 THE LEARNED DCIT MISCOMPREHENDED THE AMOUNT OF RS. 713700 AS RENT RECEIVED DISALLOWED THE EXPENSES AND ALLOWED EXPENSES UNDER SECTION 24 OF 214110. THUS THE ADDITIONS OF BOTH DIRECT EXPENSES OF RS. 1 43179.50 AND INDIRECT EXPENSES OF RS.633786.88 WERE UNWARRANTED. THE EXPENSES WERE NOT ENCLOSED AT THE TIME OF ASSES SMENT, HOWEVER WHOLE SET OF LEDGER EXTRACTS OF ALL EXPENSE HEADS AND BILLS AND VOUCHER S WERE ENCLOSED WITH THE SUBMISSION DURING TILE FIRST APPEAL. EVEN THE DETAILED PROFIT AND LOSS ACCOUNT WAS ENCLOSED WITH THE SUBMISSION DURING THE FIRST APPEAL. HOWEVER UNFORTU NATELY THE HON CIT APPEALS CONSIDERED IT AS NOT RELIABLE. (WE ENCLOSE HOW THE TWO PROFIT AND LOSS ACCOUNTS ARE SAME AND HOW AND WHY THE PROFIT AND LOSS ACCOUNT WAS PRE SENTED IN DIFFERENT FORMAT FOR BETTER COMPREHENSION) FROM THIS FOLLOWING CONCLUSION EMERGE. 1. THE AMOUNT OF RS. 713700 WAS NOT AT ALL INCOME F ROM PROPERTY ( RENT), BUT WAS THE DIFFERENCE BETWEEN OPENING AND CLOSING WORK IN PROG RESS (51828656.40-51114956.40 =713700.00). THUS IT WAS INCORRECT TO ADD RS. 71370 0 AS INCOME FROM PROPERTY. 2. DIRECT EXPENSES WERE SUPPORTED BY BILLS/VOUCHERS AND WERE PROPERLY INCURRED ON THE PROJECTS UNDERTAKEN BY THE PROPRIETOR AND WERE ELIG IBLE FOR DEDUCTION AGAINST THE DIFFERENCE IN WIP OF RS. 713700. THE DISALLOWANCE O F THESE EXPENSES WAS UNWARRANTED. 3. INDIRECT EXPENSES LIKE ADVERTISEMENT, DEPRECIATI ON, INTEREST, OFFICE EXPENSES, PETROL DIESEL, SALARIES ETC WERE CORRECTLY EXPENDED AGAINS T THE GROSS PROFIT OF RS. 570520.50 AND WERE FULLY SUPPORTED BY VOUCHERS AND BILLS. DIS ALLOWANCE OF THESE EXPENSES WAS INCORRECT. 3) ENCLOSED IS COMPARISON OF SUNDRY CREDITORS OF AN AGHA JAITPAL FOR THREE YEARS. ALL THESE CREDITORS ARE BROUGHT FORWARD FROM THE BUSINESS WHI CH WAS SUCCEEDED BY MRS. ANAGHA JAITPAL FROM HER DECEASED HUSBAND. IT CAN BE SEEN T HAT NO NEW CREDITORS ARE RAISED DURING THE YEAR. RATHER AN AMOUNT OF RS. 490000 WAS REPAID DURING A Y 2006-07 AND AN INCREASE OF RS.880 ONLY WAS THERE DURING A.Y. 2006- 07 . IF AT ALL THESE CREDITORS WERE TO BE ADDED THE CORRECT YEAR WOULD HAVE BEEN THE YEAR WHEN THEY WERE RECEIVED AND NOT DURING AY 2007-08 WE HAVE GIVEN BALANCE SHEETS OF T HE ASSESSEE FOR AY 2006-07 AND AY 2005-06 AND THESE FIGURES DO APPEAR IN THOSE BAL ANCE SHEETS. [PAGES 27A TO 27O OF PAPERBOOK] (ONE OF THESE BALANCE SHEETS HAS ALSO BE EN SUBJECTED TO AUDIT.) 4) MOREOVER THE PROFITS OF THE BUSINESS ARE WORKED OUT ON PERCENTAGE COMPLETION METHOD PROPORTIONATE TO THE PROFITS. THUS THE CREDITORS HA D NO BEARING ON THE PROFITS. THE HON MUMBAI ITAT IN ITA 229/MUM/2010 CONCLUDED WHEN INCO ME IS CALCULATED ON ESTIMATED BASIS THE DELETION OF ADDITION OF CREDITORS ON ACCO UNT OF UNCONFIRMED CREDITORS WAS UPHELD BY THE ITAT. 5) THESE SUBMISSIONS WERE SUBMITTED BEFORE THE HON COMMISSIONER OF INCOME TAX (APPEALS) ON 5/12/2011 AND 14/12/2012 [PAGES 76 TO AND 90 TO 93 OF PAPERBOOK] BUT WERE NOT CONSIDERED BY HIM. ENCLOSURES 1. ACCOUNTING STANDARD AS 7 CONTRACT ACCOUNTING. 2. RECONCILIATION OF PROFIT AND LOSS ACCOUNTS SUBMI TTED WITH RETURNS AND ONE REWORKED DURING THE APPEAL. 3. COMPARISON OF MOVEMENT IN CREDITORS DURING THREE YEARS. 4. COPY OF ORDER OF ITAT MUMBAI IN ITO 25(3)(2) V. SHRI JAIKISHAN ARJUNSING 4. PER CONTRA , SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE CIT(A) IN CONFIRMING THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDI NGS. THE LD. DR SUBMITTED THAT A PERUSAL OF THE RECORDS WOULD CLEARLY SHOW THAT TH E ASSESSEE WAS NOT CO-OPERATIVE DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HA S NOT FURNISHED COMPLETE INFORMATION EVEN DURING THE FIRST APPELLATE PROCEED INGS. ON THE BASIS OF THE 4 ITA NO.1256/PN/2014 DOCUMENTS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.7,13,700/- AS INCOME FROM HOUSE PROPERTY. IN FIRST APPEAL, THE CIT(A) AFTER APPRECIATING THE DOCUMENTS ON RECORD HAS DIRECTED T HE ASSESSING OFFICER TO TREAT THE SAID INCOME AS BUSINESS INCOME. IN SO FAR AS THE ADDITIONS MADE ON ACCOUNT OF DIRECT AND INDIRECT EXPENSES IS CONCERNED, THE A SSESSEE HAS NOT FILED ANY SUPPORTING EVIDENCE BEFORE THE AUTHORITIES BELOW. IN THE ABSENCE OF COGENT EVIDENCE, NO RELIEF COULD BE GRANTED TO THE ASSESSE E. THE LD. DR REFERRED TO THE OBSERVATIONS OF THE CIT(A) IN PARA 8 AND 9 OF THE I MPUGNED ORDER. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. DR AND HAVE PERUSED THE WRITTEN SUBMISSIONS FURNISHED BY THE LD. COUNSEL FO R THE ASSESSEE, AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT DESPITE REPEATED OPPORTUNITIES, THE ASSESSEE OR THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS FAILED TO APPEAR BEFORE THE ASSESS ING OFFICER. AFTER SEVERAL NOTICES, THE ASSESSEE FURNISHED INCOMPLETE INFORMAT ION/DOCUMENTS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS CONST RAINED TO FRAME ASSESSMENT ON THE BASIS OF INFORMATION AVAILABLE ON RECORD. SIMI LAR WAS THE SITUATION DURING THE FIRST APPELLATE PROCEEDINGS. THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE IS THAT ALL THE INFORMATION AND SUPPORTING DOCUMENTS ARE AV AILABLE IN RESPECT OF DIRECT AND INDIRECT EXPENDITURE. IN RESPECT OF ADDITION OF RS .7,13,700/-, THE CONTENTION OF THE ASSESSEE IS THAT THIS AMOUNT HAS ALREADY BEEN DISCL OSED IN BOOKS OF ACCOUNT AND THE AUTHORITIES BELOW HAVE AGAIN MADE THE ADDITIONS ON THE SAID AMOUNT. THEREFORE, THE SAME AMOUNT WOULD BE TAXED TWICE. 6. AFTER EXAMINING THE DOCUMENTS ON RECORD, WE ARE OF CONSIDERED OPINION THAT THE ASSESSEE IS HERSELF RESPONSIBLE FOR THIS AVOIDA BLE LITIGATION. NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE CIT(A), THE ASSESS EE HAS FURNISHED RELEVANT DOCUMENTS/INFORMATION IN SUPPORT OF HER CLAIM. HOW EVER, IN THE INTEREST OF JUSTICE 5 ITA NO.1256/PN/2014 WE DEEM IT APPROPRIATE TO REMIT THESE ISSUES BACK T O THE FILE OF THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION. THE ASSESSEE IS DIRECTED TO PRODUC E ALL THE DOCUMENTS ON RECORD IN SUPPORT OF HER CLAIM. THE A SSESSING OFFICER AFTER CONSIDERING THE DOCUMENTS AND INFORMATION FURNISHED BY THE ASSESSEE SHALL PASS FRESH ORDERS ON THESE ISSUES, IN ACCORDANCE WITH LA W. THUS, THE IMPUGNED ORDER IS SET-ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 29 TH DAY OF JUNE, 2016. SD/- SD/- ( R.K. PANDA ) ( VIKAS AWASTHY ) / ACCOUNTANT MEMBER # / JUDICIAL MEMBER PUNE ; DATED : 29 TH JUNE, 2016. %&'#()!*!+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT-II, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE