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

ITA 13/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4426 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 25-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2011
• Court: TRIBUNAL
• Department Lawyers: J KHNRADR
• Assessee Lawyers: P K MISHRAAR
• Section: 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, (SMC) CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. / ITA NO. 013/CTK/2011 / ASSESSMENT YEAR 2005 - 06 M/S.HAPPY CON STRUCTION S , AT: LACHIPETA, M.V.79,MALKANGIRI, DISTRICT . MALKANGIRI PAN : AASEH 2122 G - - - VERSUS - INCOME - TAX OFFICER, WARD - 23, AT/P.O.JEPORE, DIST. KORAPUT. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI P.K.MISHRA,AR / FOR THE RESPONDENT: / SHRI J.KHNRA,DR / ORDER (SMC) . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE AGITATES THE ACT ION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN PARTLY CONFIRMING THE ASSESSING OFFICERS BRINGING TO TAX AN AMOUNT OF 2,25,227 UNDER THE PREMISE OF ENHANCING THE INCOME RETURNED BY THE ASSESSEE AMOUNTING TO 38,350 UNDER THE PROVISIONS OF SEC TION 44AD. 2. THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE DERIVES INCOME FROM CONTRACT WORK AND HAD FILED ITS RETURN DECLARING INCOME OF 38,350 AFTER CLAIMING REMUNERATION TO ITS PARTNERS AMOUNTING TO 1,32,000. DURING THE COURS E OF SCRUTINY U/S.143(3), THE ASSESSING OFFICER VERIFIED THE BANK ACCOUNT OF THE ASSESSEE WHERE BALANCE OF 2,25,227 APPEARED IN THE BANK ACCOUNT ON 31 ST MARCH, WHICH HAD NOT BEEN CONSIDERED BY THE ASSESSEE FOR DECLARING 8% PROFIT ON GROSS RECEIPTS AMOUN TING TO 24,94,367 U/S.44AD. HE NOTED THAT THE ASSESSEE HAD CLAIMED REMUNERATION OF 1,32,000 TO PARTNERS DECLARING INCOME OF 38,350 THEREFORE CLEARLY VIOLATES THE PRINCIPLES OF LAW WHEN THE AMOUNT IN THE BANK HAS NOT RENDERED ITA NO.013/CTK/2011 2 TO TAX. AGGRIEVED, THE ASS ESSE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED VARIOUS ASPECTS INCLUDING INFORMATION AVAILABLE TO THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 133(6) WHEN THE BALANCE IN THE BANK ACCOUNT OF THE ASSESSEE IN UTKAL GRAMYA BANK STOO D AT 2,25,277 ON 31 ST MARCH, 2005 . THE LEARNED CIT(A) PROCEEDED A STEP FURTHER BY HOLDING THAT THE TOTAL CREDITS IN THE PURPORTED BANK AC COUNT COULD RESULT IN RENDERING INCOME AT 8% OF 6,60,487 AS AGAINST 2,25,277 AS PROPOSED BY THE ASSESSING OFFICER. THE ASSESSEE WAS GIVEN A RELIEF OF 1,72,439 BY CONFIRMING 52,838 INCOME . 3. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE BASIS OF THE ABOVE MENTIONED FACTS PLEADED THAT ONCE HAVING GIVEN RELIEF BY RESTRICTING THE INCOME TO BE COMPUTED U/S.44AD AT 8%, THE INCOME WHICH HAS BEEN COMPUTED BY THE ASSESSING OFFICER ONLY REQUIRES A FINE TUNING TO THE EXTENT THAT THE DISALLOWANCE OF CLAIM OF EXCESS REMUNERATION AMOUNTING TO 11,360 WOULD BE APPROXIMATELY NEAR ABOUT 52,838 AND WOULD QUALIFY FOR THE PROVISIONS OF S ECTION 40(B)(V) AND B E EXACTLY AS DIRECTED BY THE LEARNED CIT(A) WHICH MAY BE ADOPTED BY THE ASSESSING OFFICER. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW FOR HIS PART SUBMISSIONS. 5. I HAVE CONSIDERED THE RIVA L SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CLOSING BALANCE IN A BANK CANNOT BE SEPARATELY TAXED REQUIRING PROOF OF INCOME EMBEDDED THEREIN THAT MAY NOT HAVE BEEN RETURNED. HAVING ACCEPTED THE RETURN FILED BY THE ASSESSEE U/S.44AD IT WA S SUBMITTED TO THE ASSESSING OFFICER TO VERIFY THE GROSS CONTRACT RECEIPTS WHICH ACCORDING TO HIM WAS RENDERED FOR TAXATION THEREFORE, THE RESIDUAL BALANCE COULD NOT BE FURTHER TAXED SEPARATELY. THIS FACT WAS APPRECIATED BY THE LEARNED CIT(A) WHO HAS TAKEN NOTE THERE OF BUT HAVING GRANTED THE RELIEF ITA NO.013/CTK/2011 3 OF 1,72,3439, THE LEARNED CIT(A) HAS NOT ENHANCED THE GROSS RECEIPTS AS HAVE BEEN COMPUTED BY THE ASSESSING OFFICER INCLUD ING 6,60,487 AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE HIM . HE COMBIN ED THE ADDITION OF RS.2,25,277 TO GRANT RELIEF OF 1,72,439 THEREFORE , DO ES NOT CONFORM TO THE FACTS AS HAVE BEEN BROUGHT O N RECORD. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RIGHTLY AGREED TO THE PROPOSITION THAT THE NET INCOME DECLARED BY THE AS SESSEE AFTER REMUNERATION OF 1,32,000 TO THE PARTNERS MAY BE CONSIDERED AT 52,838 AS AGAINST 38,350 RETURNED BEFORE THE ASSESSING OFFICER AS BY GIVING CONSEQUENTIAL RELIEF ON ACCOUNT OF EXCESS REMUNERATION MEETS THE REQUIREMENT OF THE PROVISIONS OF SECT ION 40(B)(V) APPROPRIATE FOR TAXATION. 6. KEEPING IN VIEW THE ABOVE , THE ASSESSING OFFICER IS DIRECTED TO ASSESS THE INCOME AT 52,838 AND THE DISALLOWANCE OF REMUNERATION OF 11,360 AND ADDITION OF THE CLOSING BALANCE OF 2,25,277 IN THE BANK ARE DIRECTED TO BE DELETED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 26 TH APRIL, 2011 S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DA TE: 26 TH APRIL, 2011 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. ITA NO.013/CTK/2011 4 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.HAPPY CONSTRUCTION S , AT: LACHIPE TA, M.V.79,MALKANGIRI, DISTRICT . MALKANGIRI 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD - 23, AT/P.O.JEPORE, DIST. KORAPUT. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY