M/s M B Patel, RAJKOT-GUJARAT V. The Income Tax Officer, Ward 3 (1), RAJKOT-GUJARAT

ITA 1318/RJT/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4364 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N R SONI R E
• Assessee Lawyers: D R ADHIA I R
• Keywords: Source of fund
• Section: 44AD; 143(3)

Judgement Text

E C, IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. H.. L, F . . , BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 1 318 /RJT/20 1 0 . I I / ASSESSMENT YEAR 20 0 7 - 08 M/S M.B.PATEL, THAKAR CHAMBER, NEW GHEE KANTA ROAD, RAJKOT C/O D R ADHAIA, M PATMALAYA BESIDES TRIKAMRAIJI HAVELI, OPP.HOTEL IMPERIAL PALACE, 16, JAGNATH PLOT , DR.YAGNIK ROAD, RAJKOT PAN: AAKFM01 07A ( 0 / APPELLANT) VS. THE INCOME TAX OFFICER WARD 3(1), RAJKOT . 0 / RESPONDENT IR / ASSESSEE BY SHRI D.R.ADHIA I R / REVENUE BY SHRI N R SONI R E /DATE OF HEARING 1 2 .4.2013 R E / DATE OF PRONOUNCEMENT 18. 4.2013 / ORDER H.. L, F / T. K. SHARMA, J. M. TH IS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 14.9.2010 OF CIT(A) - I, RAJKOT FOR THE ASSESSMENT YEAR 20 0 7 - 08 . 2 . FACTS RELATING TO CONTROVERSY INVOL VED IN THIS APPEAL IS THAT THE ASSESSEE FIRM IS ENGAGED IN THE FIELD OF CIVIL CONSTRUCTION . FOR THE ASSESSMENT YEAR UNDER APPEAL, THE RETURN OF INCOME DECLARING TOTAL INCOME AT NIL WAS FILED. THE AO FRAMED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 11.11.2009 WHEREIN HE ESTIMATED THE PROFIT AT THE RATE OF 8% OF THE GROSS RECEIPT OF CIVIL CONSTRUCTION BY INVOKING THE PROVISIONS OF SECTION 44AD OF THE ACT AS THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS. THE GROSS RE CEIPT OF THE ASSESSEE ARE RS.13,73,671/ - , 8% OF WHICH WORKS OUT TO RS.1,09,894/ - . ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THIS ADDITION. ITA NO.1318/RJT/2010. 2 3 . THE AO ALSO MADE AN ADDITION OF RS.39,34,358/ - IN RESPECT OF INTRODUCTION OF ASSETS AS DISC USSED IN PARAGRAPH 3 OF THE ASSESSMENT ORDER, CREDIT IN BANK ACCOUNT AND INTRODUCTION OF CAPITAL BY PARTNERS OF RS.7,60,000/ - AS THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNTS . ON APPEAL, IN THE IMPUGNED ORDER THE LD. CIT(A) CONFIRMED THE AFORESAID A DDITIONS. AGGRIEVED WITH THIS THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL WITH THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION MADE BY THE AO IN RESPECT OF THE FOLLOWING ITEMS WHICH NEED DELETION : A. RS.1,0 9,894/ - TOWARDS ESTIMATION ON GROSS RECEIPTS @8% B. RS.39,34,358/ - IN RESPECT OF 2 JCB MACHINES PURCHASED OF RS.19,85,410/ - AND RS.19,48,948/ - C. RS.24.98,000/ - AMOUNT CREDITED IN THE BANK ACCOUNT D. RS.7,60,000/ - CAPITAL INTRODUCED BY PARTNERS 2. TH E LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ABOVE ADDITION MADE BY THE LD.AO WHO MADE ADDITION BY GIVING VAGUE AND IRRELEVANT REASONS. THE ADDITION NEEDS DELETION. 3. THE LD./ CIT(A) HAS ERRED IN LAW AND FACTS IN NOT CONSIDERING THAT NO PROPER OPPORTUNITY WAS PROVIDED TO THE APPELLANT AND THEREFORE, THE ASSESSMENT IS BAD IN LAW. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN NOT CONSIDERING THAT ALTHOUGH ALMOST ALL DETAILS WERE PROVIDED, WITHOUT PROPERLY CONSIDERING THE SAME, THE DISALLOWAN CE IS CONFIRMED BY THE LD. CIT(A) WHICH NEEDS DELETION IN FULL. 5. WITHOUT PREJUDICE THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN NOT CONSIDERING THAT THE DELETION BEING ON HIGHER SIDE NEEDS SUITABLE REDUCTION 6. THE LD. CIT(A) HAS ERRED IN LAW AND F ACTS IN PASSING THE ORDER EX - PARTE WITHOUT GIVING ADEQUATE AND REASONABLE OPPORTUNITY AND IN VIOLATION OF CBDTS INSTRUCTIONS TO PASS THE ORDER WITHIN THE SPECIFIC TIME LIMIT AS FIXED. 4. AT THE TIME OF HEARING BEFORE US, SHRI D.R.ADHIA, THE LD.AR AP PEARED AND WITH REGARD TO THE ESTIMATION OF PROFIT AT 8% OF THE RECEIPTS FAIRLY CONCEDED THAT SINCE THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT, HE HAS NO GRIEVANCE AGAINST THE ESTIMATION OF PROFIT AT THE RATE OF 8% OF THE GROSS RECEIPT AS PER TH E PROVISIONS OF SECTION 44AD OF THE ACT. THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. ITA NO.1318/RJT/2010. 3 5. WITH REGARD TO THE ADDITION OF RS.39,34,358/ - IN RESPECT OF 2 JCB MACHINES, THE LD. C OUNSEL OF THE ASSESSEE EXPLAINED THAT THE ASSESSEE PURCHASED TWO JCB MACHIN ES FOR RS.19,85,410/ - AND RS.19,48,948/ - FROM YANTRAMAN AUTOMAC PVT.LTD., BARODA DURING THE YEAR. BOTH THESE JCB MACHINES WERE PURCHASED WITH HYPOTHECATION WITH CENTURION BANK OF PUNJAB. A COPY OF PURCHASE BILL AND REPAYMENT SCHEDULE WITH CENTURION BANK OF PUNJAB WERE PLACED BEFORE THE AO. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT IN BOTH PURCHASE BILLS, IT IS CLEARLY MENTIONED THAT BOTH THE MACHINES ARE UNDER HYPOTHECATION WITH CENTURION BANK OF PUNJAB. HE SUBMITTED THAT THIS IS A WELL - KNOWN BANK. IN CASE THE AO WAS HAVING ANY DOUBT HE COULD HAVE MADE THOROUGH INQUIRY FROM THE BANK. FINALLY, HE SUBMITTED THAT SINCE PURCHASES IS MADE FROM A WELL KNOWN COMPANY ESTABLISHED SINCE 1998 AND THE ARRANGEMENTS OF PAYMENT IS MADE AS HYPOTHECATION FROM WELL KNOWN BANK , CENTURION BANK OF PUNJAB WHICH IS NOW MERGED WITH HDFC BANK, THE ADDITION MADE ON DOUBT AND SUSPICION BE DELETED. ON THE OTHER HAND, THE LD. DR POINTED OUT THAT SINCE NO BOOKS OF ACCOUNT WERE PRODUCED , THE ADDI TION OF RS.39,34,358/ - HAS RIGHTLY BEEN MADE. IN COUNTER, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE BOOKS OF ACCOUNTS WERE AUDITED U/S 44AB, TAX AUDIT REPORT U/S 44AB WAS DULY FURNISHED BEFORE THE AO WHICH IS EVIDENT FROM THE ASSESSMENT OR DER, THEREFORE, THE ADDITION OF RS.39,34,358/ - WHICH WAS MADE BY T HE AO ON DOUBT AND SUSPICION BE DELETED . 6 . AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AU DITED U/S 44AB OF T HE ACT. THE SOURCE OF FUNDS AND APPLICATIONS OF FUNDS IS DULY REFLECTED IN THE BALANCE SHEET FILED AS ON 31.3.2007 . NO DISCREPANCY IS POINTED OUT BY THE TAX AUDITOR IN THE TAX AUDIT REPORT U/S 44AB OF THE ACT. BOTH THE JCB MACHINER IES IN QUESTIONS WERE HYPOTHECATED WITH CENTURION BANK OF PUNJAB. THIS FACT IS EVIDENT FROM THE COPY OF PURCHASE BILL FILED BY THE ASSESSEE BEFORE THE AO. THE ITA NO.1318/RJT/2010. 4 REPAYMENT SCHEDULE WAS ALSO FURNISHED BEFORE THE AO. THE AO WITHOUT MAKING THE CROSS - VE RIFICATION ON DOUBT AND SUSPICION MADE AN ADDITION OF RS.39,34,358/ - . WE, THEREFORE, DELETE THE ADDITION OF RS.39,34,358/ - . THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED . 7 . THE AO MADE ANOTHER ADDITION OF RS.24,98,000/ - . THE DETAILED REASONS IN RESPEC T OF ANOTHER ADDITION OF RS.24,98,000/ - MADE BY THE AO ARE MENTIONED AT PARAGRAPH 4 OF PAGE OF HIS ASSESSMENT ORDER. BEFORE THE AO, THE ASSESSEE HAS EXPLAINED THE SOURCE OF THIS RECEIPT AS UNDER : A. RS.13,73,671/ - TOTAL RECEIPT OF CONTRACT WORK AS SHOW N B. RS. 8,90,000/ - RECEIVED ON 1.4.206 AS CAPITAL FROM PARTNERS C. RS. 2,34,329/ - OUT OF OPENING BALANCE OF RS.10,64,074/ - FROM LAST YEAR CLOSING BALANCE (BALANCE OF LAST YEAR AND CASH BOOK OF THIS Y E AR ARE FURNISHED HERE WITH ------------------------- TOTAL RS.24,98,000/ - THE AO MADE THE ABOVE ADDITION BECAUSE NO BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO. APART FROM THIS THE AO ALSO MADE ADDITION OF RS.7,60,000/ - IN RESPECT OF CAPITAL INTRODUCED BY THE PARTNERS. THE CAPITAL INTRODUCED BE THE PARTNERS IS AS UNDER : A. RS. 3,50,000 / - PARTNER BACHUBHAI B PATEL. B. RS. 1,80,000/ - PARTNER JADAVJIBHAI M PATEL C. RS. 1,80,000/ - PARTNER KISHOR B PATEL D. RS. 1,80,000/ - PARTNER MEGHJIBHAI B PATEL ------------------------- TOTAL RS.8,90,000/ - THE ADDITION OF RS.7,60,000/ - WAS ALSO MADE BY THE AO BECAUSE NO BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM. 8 . IN T HE IMPUGNED ORDER, THE LD. CIT(A) ALSO CONFIRMED THE AFORESAID ADDITION ON THE GROUND THAT BEFORE THE LD. CIT(A) ALSO THE ASSESSEE FAILED TO FURNISH THE EVIDENCE/ EXPLANATION TO REBUT THE FINDING GIVEN BY T HE AO. 9 . IN RESPECT OF THE AFORESAID BOTH THE ADDITIONS, THE LD. COUNSEL FOR THE ASSESSEE HAS EXPLAINED THE SOURCE OF RS.24,98,000/ - WHICH IS EVIDENT FROM THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. WITH REGARD ITA NO.1318/RJT/2010. 5 TO THE CAPITAL INTRODUCED BY THE PARTNERS RS.7,60,000/ - , THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE AO HAS HIMSELF MENTIONED THAT THE ASSESSEE HAS FURNISHED THE NECESSARY EVIDENCE AND THEREFORE KEEPING IN VIEW THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S PANKAJ DYESTUFF INDUSTRIES IN INC OME TAX REFERENCE NO.241 OF 1993 DELIVERED ON 6.7.2005, THE ADDITION MADE BY THE AO BE DELETED . 10. AS AGAINST THIS, SHRI N R SONI, THE LD. DR POINTED OUT THAT SINCE NO BOOKS OF ACCOUNTS WERE PRODUCED, THE AO RIGHTLY MADE THE AFORESAID ADDITIONS. 11 . HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN RESPECT OF CAPITAL INTRODUCE D BY THE PARTNERS AMOUNTING TO RS.7,60,000/ - , THE ASSESSEE HAS FURNISHED THE NECESSARY EVIDENC E WHICH IS EVIDENT FROM THE WRITTEN SUBMISSIONS DATED 6.11.2009 WHICH IS REPRODUCED BY THE AO IN THE ASSESSMENT OR D ER . THEREFORE, KEEPING IN VIEW THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA), THE AO OUGHT TO HAVE ACCEPTED THE CAPITAL AMOUNTING TO RS.8,90,000/ - INTRODUCED BY THE PARTNERS AS EXPLAINED. WE, THEREFORE, DELETE THE ADDITION OF RS.8,90,000/ - MADE BY THE AO. 12. IN THE ASSESSMENT ORDER THE AO MADE ADDITION OF RS. 24,98,000/ - WHICH IS S USTAINED BY THE LD. CIT(A) IN THE IMPUGNED ORDER . IN RESPECT OF THIS ADDITION, WE HAVE HEARD BOTH THE SIDES. THE COUNSEL OF THE ASSESSEE POINTED OUT THAT THIS ADDITION HAS BEEN MADE ON DOUBT AND SUSPICION . AS AGAINST THIS THE LD. DR RELIED ON THE REASONI NG GIVEN BY THE AO. 12.1 I T IS PERTINENT TO NOTE THAT THE DEPOSIT IN BANK ACCOUNT OF RS. 8,90,000/ - STOOD EXPLAINED AS CAPITAL INTRODUCED BY THE PARTNERS. THE RECEIPT OF CONTRACT WORK AMOUNTING TO RS.13,73,671/ - IS ALSO STOOD EXPLAINED AS AO HIMSELF ESTIMATED THE PROFIT AT THE RATE OF 8% ON THIS CIVIL CONTRACT RECEIPT OF RS.13,73,671/ - . THE LD. COUNSEL OF THE ASSESSEE EXPLAINED THAT RS.2,34,329/ - IS OUT OF OPENING BALANCE OF RS.10,64,074/ - . ITA NO.1318/RJT/2010. 6 IT IS PERTINENT TO NOTE THAT BOOKS OF ACCOUNTS ARE AUDI TED. UNDER THESE CIRCUMSTANCES, WE ARE CONVINCED THAT THE DEPOSIT OF RS.24,98,000/ - IS STOOD FULLY EXPLAINED. WE, THEREFORE, DELETE THE ADDITION OF RS.24,98,000/ - . THIS GROUND OF APPEAL IS ALLOWED . 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD SD ( .. I / D. K. SRIVASTAVA) ( E.. I / T. K. SHARMA) AT0 / ACCOUNTANT MEMBER I / JUDICIAL MEMBER N/ ORDER DATE 18. 4. . 201 3 . /RAJKOT SRL FJO O / COPY OF ORDER FORWARDED TO: - 1. 0 / APPELLANT - 2. 0 / RESPONDENT - 3. C O / CONCERNED CIT , 4. O - / CIT (A) , 5. C, E C, / DR, ITAT, RAJKOT 6. I / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.