Appeal Details
Counselvise Citation
13322714 RSA 2011
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-01-2012
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2000-2001
Appeal Filed On
21-06-2011
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS.128 TO 133/IND/2011 A.YS. 2000-01 TO 2005-06 ASSISTANT COMMISSIONER OF INCOME TAX 1(2) BHOPAL :: APPELLANT VS M/S RAM ENTERPRISES BHOPAL PAN AAFFR-1033F :: RESPONDENT ITA NOS.134 TO 139/IND/2011 A.YS. 2000-01 TO 2005-06 M/S RAM ENTERPRISES BHOPAL :: APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX 1(2) BHOPAL :: RESPONDENT 2 DEPARTMENT BY SHRI R.A. VERMA ASSESSEE BY SHRI H.P. VERMA AND SHRI GIRISH AGRAWAL DATE OF HEARING 03.05.2012 DATE OF PRONOUNCEMENT 04.05.2012 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THIS BUNCH OF 12 CROSS-APPEALS FILED BY THE REVEN UE AND THE ASSESSEE ARISES OUT OF THE COMMON ORDER OF THE LEARNED CIT(A) DATED 2.8.2011. WE WOULD LIKE TO DEAL WITH THE APPEALS OF THE REVENUE FIRST (ITA NOS.128 TO 133/IND/2011) WHE REIN THE FOLLOWING COMMON GROUND HAS BEEN RAISED :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (APPEALS) HAS ERRED IN APPLYING GROSS PROFIT OF 12% (A.YS. 2000-01, 2001-02, 2002-03, 2004-05 AND 2005-06) WHEN THE ASSESSEE HIMSELF HAS SHOWN GROSS PROFIT OF 24.14% (A.Y. 2003-04) AND GROSS PROFIT OF 25% AS AGAINST 30% APPLIED BY THE A O FOR THE A.Y. 2003-04 . 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI R.A. VERMA, LEARNED SENIOR DR AND SHRI H.P. VERMA ALONG WITH SHRI GIRISH AGRAWAL, LD. COUNSEL FOR THE ASSESSEE. THE C RUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THERE IS A CONTRADICTORY FINDING IN THE IMPUGNED ORDER FOR WHI CH OUR ATTENTION WAS INVITED TO PARA 5.10 (PAGE 19) BY POI NTING OUT THAT 3 FOR THE ASSESSMENT YEAR 2003-04 THE ASSESSEE ITSELF SHOWED GP @ 24.14% AGAINST WHICH THE LEARNED CIT(A) ADOPTED THE GROSS RATE AT 25%, THEREFORE, IT WAS PLEADED THAT THERE WAS NO JUSTIFICATION FOR APPLYING THE GROSS PROFIT RATE AT 12% FOR ASSES SMENT YEARS 2000-01 TO 2002-03 AND 2004-05 TO 2005-06. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDE D THAT THE ASSESSEE SHOWED THE GROSS PROFIT RATE AT 4.68% (ASS ESSMENT YEAR 2000-01), 8.38% (ASSESSMENT YEAR 2001-02), 10% (ASS ESSMENT YEAR 2002-03), 24.14% (ASSESSMENT YEAR 2003-04), 4. 61% (ASSESSMENT YEAR 2004-05) AND 6.84% (ASSESSMENT YEA R 2005- 06), CONSEQUENTLY IT WAS PLEADED THAT THE LEARNED C IT(A) HAS ADOPTED A HIGHER RATE OF NET PROFIT. THE LEARNED R EPRESENTATIVES FROM BOTH THE SIDES PLEADED THAT A REASONABLE NET P ROFIT RATE MAY BE ADOPTED. ALTERNATIVELY, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IN THE APPEALS OF THE REVENUE FROM T HE ASSESSMENT YEARS 2002-03 TO 2005-06 THE TAX EFFECT IS LESS THAN THE PRESCRIBED LIMIT, THEREFORE, THE REVENUE IS NOT PERMITTED TO FILE THE APPEALS BEFORE THE TRIBUNAL. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE CRUX OF ARGUMENT S ON BEHALF OF THE ASSESSEE IS THAT A HIGHER GP RATE HAS BEEN ADOP TED BY THE 4 LEARNED CIT(A) WHEREAS THE CONTENTION ON BEHALF OF THE REVENUE IS THAT SUCH GROSS PROFIT RATE IS TOWARDS LOWER SIDE. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE ORDER OF THE LEARNED CIT(A) :- 5.7 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE FACTS OF THE CASE. IT IS NOTICED THAT THE ASSESSING OFFICER HAD ISSUED SPECIFIC QUESTIONNAIRE TO THE APPELLANT ALON GWITH THE NOTICE U/S 142(1) TO FURNISH EVIDENCE/DETAIL REGARDING THE ORIGINAL BOOKING OF BUNGALOWS IN ALL PROJECTS AND COMPLETE ADDRESSES OF THE TRANSACTING PARTIES ALONGWITH THEIR CONFIRMATION FR OM WHOM PURCHASE OR SALES EXCEEDING RS. 1,00,000/- WAS MADE . HOWEVER, NO SUCH COMPLETE DETAIL WAS FURNISHED THOUGH IT WAS STATED THAT VERIFICATION CAN BE MADE FROM THE BOOKS OF ACCOUNTS . IT MAY BE STATED THAT THE APPELLANT WAS ENGAGED IN THE BUSINE SS OF PURCHASE AND SALE OF PLOT AS ALSO A BUILDER AND INFORMATION REGARDING THE PURCHASE AND SALE OF THE PLOTS VIZ-A-VIZ THE GENUIN ENESS OF THE PURCHASE AND SALE CONSIDERATION WAS DEFINITELY VITA L INFORMATION OF THE INCOME OF THE APPELLANT. THE PROVISIONS OF SECT ION 145(3) CLEARLY PROVIDES THAT WHERE THE ASSESSING OFFICER IS NOT SA TISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS, THE A SSESSING OFFICER CAN MAKE AN ASSESSMENT IN A MANNER PROVIDED IN SECT ION 144. IN THESE CIRCUMSTANCES, WHEN THE TWO MAIN INGREDIENTS OF THE TOTAL INCOME OF THE APPELLANT I.E. PURCHASE AND SALES CON SIDERATION WERE NOT SUBJECT TO PROPER VERIFICATION, IT CANNOT BE SA ID THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT, WERE COMPLETE AND CORRECT. IT MAY ALSO BE NOTED THAT ONE OF THE PARTNER OF THE FI RM NAMELY SHRI RAM NATH SHARMA ALSO ADMITTED IN STATEMENT RECORDED U/S 132( 4) THAT THE GROUP WAS EARNING UNDISCLOSED MONEY ON PUR CHASE AND SALES OF PROPERTIES BY RECEIVING AND PAYING 'ON MON EY'. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, I AM O F THE OPINION THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING TH E BOOKS OF ACCOUNT BY APPLYING THE PROVISIONS OF SECTION 145(3) OF IT ACT. 5.8 THE ASSESSING OFFICER AFTER REJECTION OF BOOKS OF ACCOUNT HAS APPLIED GP RATE OF 30 % IN ALL THE ASSESSMENT YEARS AS AGAINST GP RATE RANGING FROM 2% TO 24.14 % DIFFERENT GP RATES SHOWN BY THE APPELLANT. IT IS NOTICED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY SPECIFIC REASON FOR APPLYING GP RATE OF 30 %. IT IS A SETTLED LAW THAT WHEN THE BOOKS OF ACCOUNTS ARE REJECTED. THE PROFIT ARE TO BE ASCERTAINED / DETERMINED ON SOME LOGICAL BASIS HAVI NG SOME NEXUS WITH MATERIAL ON RECORD AND THAT ASSESSMENT CANNOT BE MADE ARBITRARILY. THIS OPINION FINDS SUPPORT FROM THE FO LLOWING CASE LAWS:- (I) 288 ITR 10SC [KACHWALA GEMS-VS-.JCIT 5 'IT IS WELL-SETTLED THAT IN A BEST JUDGMENT ASSESSM ENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES CONCERNED SHOULD TRV TO MAKE AN HONEST AND FAIR '- ~. ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSE SSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY, HUT THERE IS NE CESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT AS SESSMENT AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DI D NOT SUBMIT PROPER ACCOUNTS. (II) 8 STC 770SC [RAGHUBAR MANDAI HARIHAR MANDAL] VS.STA TE OF BIHAR 'WHEN THE RETURNS AND THE HOOKS OJ' ACCOUNTS ARE RE JECTED. THE ASSESSING OFFICER MUST MAKE ESTIMATE AND TO THAT EXTENT HE MUST MAKE AN ESTIMATE AND TO THAT EXTENT HE MUST MAKE A GUESS HUT THE ESTIMATE MUST HE RELATED TO SOME EVIDENCE OR MATERI AL AND IT MUST BE SOMETHING MORE THAN MERE SUSPICION. (III) 76 ITR 690 SC [STATE OF ORISSA] VS-MAHARAJA SHRI B. P.SINGH DEO THE MERE FACT THAT THE MATERIAL PLACED HY THE ASSES SEE BEFORE THE ASSESSING AUTHORITIES IS UNRELIABLE DOES NOT EMPOWE R THOSE AUTHORITIES TO MAKE AN ARBITRARY ORDER. THE POWER T O LEVY ASSESSMENT ON THE BASIS OF BEST JUDGMENT IS NOT AN ARBITRARY POWER; IT IS AN ASSESSMENT ON THE BASIS OF BEST JUDGMENT. IN OTHER WORDS THAT ASSESSMENT MUST HE BASED ON SOME RELEVANT MATE RIAL. IT IS NOT A POWER CAN BE EXERCISED UNDER THE SWEET WILL AND P LEASURE E CONCERNED AUTHORITIES. THE SCOPE OF THAT POWER HAS BEEN EXPLAINED OVER AND OVER AGAIN BY THIS COURT. ' 5.9 THE LD. AR IN HIS SUBMISSION CONTENDED THAT THE GP RATE OF THE APPELLANT VARIED FROM 4% TO 25 % DURING THE YEAR UN DER CONSIDERATION AND THAT SUCH MAJOR VARIATION WAS DUE TO THE REASON THAT THE BUSINESS WAS BEING CLOSED DOWN. THE LD. AR ALSO STATED THAT ASSESSING OFFICER HAS NOT CITED ANY REASON WHE RE NP OR GP RATE OF 30 % IS SHOWN BY ANY BUILDER. THE AR ALSO CLAIME D THA. IN THE CASE OF M/S SA V BUILDERS CARRYING ON THE SAME BUSINESS IN SAME LOCALITY, THE HON'BLE ITA T HAS APPLIED NP RATE OF 6 % AS AGAINST THE NP RATE OF 8 % APPLIED BY THE CIT (A). IT WAS ACCOR DINGLY CLAIMED THAT EVEN IF THE BOOKS OF ACCOUNTS ARE REJECTED, TH E NP RATES @6% MAY BE APPLIED. 5.10 IT IS NOTICED THAT THE APPELLANT IS NOT A CONTRACTOR OR SIMPLY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND I N FACT THE APPELLANT IS ENGAGED IN THE BUSINESS OF SALE & PURC HASE OF PLOTS AND CONSTRUCTION OF HOUSES/ SHOPS AND SALE THEREOF. IN THIS BACKGROUND IN SUCH BUSINESS IT IS NOT NECESSARY TO APPLY NP RA TE AND IN SUCH BUSINESS WHERE THE BOOKS OF ACCOUNTS ARE REJECTED A ND FOUND TO BE INCORRECT, GP RATE CAN ALSO BE APPLIED. IN MY OPINI ON, WHAT IS MORE IMPORTANT IS WHAT GP RATE SHOULD BE ADOPTED FOR THE PERIOD UNDER CONSIDERATION. IT IS NOTICED THAT SALES OF THE APPE LLANT WERE ON THE DECREASING TREND. IN A.Y. 2000-01 THE TOTAL SALES W ERE FOR RSA4.80 6 LACS WHEREAS IN A.Y. 2005-06 THE SALES WERE FOR RS. L.40,000/- ONLY. IT IS ALSO NOTICED THAT THE HIGHEST GP RATE IS SHOW N IN A.Y. 2003-04 WHICH WAS 24.14 % HOWEVER, DURING THIS ASSESSMENT Y EAR SALES WERE ONLY FOR RSA,34A80/-. THE LD. AR HAS ALSO FILE D SPECIFIC REASONS FOR HIGHER GP RATE DURING THIS ASSESSMENT Y EAR. IN THIS BACKGROUND THE APPLICATION OF HIGHER GP RATE OF A P ARTICULAR YEAR FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION MAY NO T BE JUSTIFIABLE. IT MAY BE NOTED THAT THE APPELLANT HAS SHOWN FOLLOW ING GP RATE IN VARIOUS ASSESSMENT YEARS UNDER CONSIDERATION: S.NO . A.Y. G.P. RATE 01 2000-01 4.68% 02 2001-02 8.38% 03 2002-03 10% 04 2003-04 24.14% 05 2004-05 4.61% 06 2005-06 6.84% CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, I AM OF THE OPINION THAT IT WOULD BE FAIR AND REASONA BLE IF GP RATE OF 12 % IS APPLIED FOR A.Y. 2000-01, 2001-02,2002-04, 2004-05 & 2005-06. IN A. Y. 2003-04 THE APPELLANT HAS SHOWN G P RATE OF 24.] 4 %, HOWEVER, TO COVER UP POSSIBLE LEAKAGE OF INCOME, I CONSIDER IT APPROPRIATE TO APPLY GP RATE OF 25 %. AFTER APPLYIN G GP RATE AS DISCUSSED ABOVE, THE ESTIMATION OF GROSS PROFIT AND RELIEF ALLOWED TO THE APPELLANT IS WORKS OUT AS UNDER :- S. A. Y. SALES GP G.P. RATE G.P. G.P. TO BE GHP ON RELIEF NO. SHOWN BY RATE ESTIMATED EST I MATED APPLIED AS APPLICATION, GRANTED TO THE SHOWN BY THE AO BY THE AO DISCUSSED OFGP RATE I THE APPELLANT BY THE ABOVE @ 12%/ I APPELLANT APPELLANT 25% , --------- ---- 01 2000-01 4480000 4.68% 30% 1344000 12% 537600 806400 02 2001-02 3485000 8.38% 30 '% 1045000 12% 418200 626800 03 2002 - 03 1886700 10 % 30% 566010 12% 226404 339606 04 2003 - 04 434480 24.14 % 30 % 130344 25 % 108620 21724 - _. 144000 05 2004 - 05 800000 4.61 % 30% 240000 12% 96000 06 2005-06 140000 6.84 % 30 % 32412 12% 16800 15612 ACCORDINGLY, GROUND NOS. 3 % 4 ARE PARTLY ALLOWED. 4. THE FACTS, IN BRIEF, ARE THAT A SEARCH AND SEIZU RE OPERATION U/S 132(1) WAS CARRIED OUT ON 16.9.2005 IN SHARMA GROUP AND 7 AT THEIR PREMISES, CERTAIN DOCUMENTS RELATING TO TH E ASSESSEE WERE FOUND. THE ASSESSEE IS ENGAGED IN THE BUSINES S OF PURCHASE AND SALE OF PLOTS, CONSTRUCTION, DEVELOPER AND ALSO RUNNING A HOTEL. DURING THE ASSESSMENT PROCEEDINGS, IT WAS N OTICED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAS SHO WN LOW GROSS PROFIT. THE ASSESSEE WAS ASKED TO FURNISH DETAILS/ INFORMATION REGARDING BOOKING OF HOUSES IN RESPECT OF ALL PROJE CTS ALONG WITH DETAILS OF PARTIES WITH WHOM SUCH TRANSACTIONS OF P URCHASE AND SALE EXCEEDING RS. 1 LAC WERE MADE. IT WAS FURTHER NOTICED THAT IN THE LEDGER ACCOUNT THE ADDRESSES OF PARTIES WERE NO T MENTIONED. THE STATEMENT OF SHRI RAMNATH SHARMA, ONE OF THE PA RTNERS OF THE MAIN GROUP, WAS RECORDED WHO ADMITTED OF EARNIN G UNACCOUNTED MONEY OUT OF PURCHASE AND SALE OF PROPE RTIES AND ALSO HAVING MADE UNACCOUNTED INVESTMENT IN LAND AND BUILDING. HE OFFERED RS.1.83 CRORES AS UNDISCLOSED INCOME OUT OF SUCH BUSINESS TRANSACTIONS. IN THE ABSENCE OF RELIABILI TY OF BOOKS OF ACCOUNTS, THE LEARNED ASSESSING OFFICER APPLIED GRO SS PROFIT RATE AT 30% ON THE TURNOVER RESULTING INTO ADDITION AS H AS BEEN MENTIONED IN THE ASSESSMENT ORDER. ON APPEAL, THE L EARNED CIT(A) ADOPTED THE GROSS PROFIT RATE AT 12% AGAINST WHICH THE ASSESSEE AS WELL AS THE REVENUE ARE AGGRIEVED. HOWE VER, FOR THE 8 ASSESSMENT YEAR 2003-04, AGAINST THE CLAIMED GROSS PROFIT OF 24.14% (BY THE ASSESSEE) THE LEARNED CIT(A) ADOPTED THE SAME AT 25%. ADMITTEDLY, THE ASSESSEE IS NOT MERELY A CONT RACTOR OR ENGAGED IN CIVIL CONSTRUCTION RATHER THE ASSESSEE I S ALSO ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF PLOTS, CONS TRUCTION OF SHOPS, HOUSES AND SALE THEREOF, THEREFORE, THE RATE OF 8% CANNOT BE APPLIED. THE BOOKS OF ACCOUNTS OF THE ASSESSEE W ERE ALSO NOT FOUND RELIABLE AND THE SAME WERE RIGHTLY REJECTED U /S 145(3) OF THE ACT. TO PUT AN END TO THE LITIGATION, THE ONLY OPTION WITH THE REVENUE AUTHORITIES AND ALSO WITH US REMAINS ADOPTI ON OF GROSS PROFIT RATE. SO FAR AS THE ASSESSMENT YEAR 2003-04 IS CONCERNED, THE ASSESSEE HAS SHOWN THE GROSS PROFIT RATE 24.14% , THEREFORE, IT CANNOT BE DISTURBED, CONSEQUENTLY, THE GROSS PROFIT RATE IS RETAINED AT 24.14% IN PLACE OF 25% ADOPTED BY THE L EARNED CIT(A). FOR THE REMAINING ASSESSMENT YEARS, THE GR OSS PROFIT RATE HAS BEEN SHOWN BY THE ASSESSEE AT 4.61% TO 10% AGAI NST WHICH THE LEARNED CIT(A) APPLIED THE RATE OF 12%. KEEPI NG IN VIEW THE TOTALITY OF FACTS, ASSERTION MADE BY THE LEARNED RE SPECTIVE COUNSEL AND THE BUSINESS ACTIVITIES OF THE ASSESSEE, WE DEE M IT APPROPRIATE TO APPLY THE GROSS PROFIT RATE AT 10% I N PLACE OF 12% 9 (ADOPTED BY THE LEARNED CIT(A)) FOR THE REMAINING A SSESSMENT YEARS, THEREFORE, THE APPEALS OF THE REVENUE ARE PA RTLY ALLOWED. 5. SINCE IDENTICAL ISSUE IS INVOLVED IN THE APPEALS OF THE ASSESSEE, IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE APPEALS OF THE ASSESSEE ARE DISPOSED OF ACCORDINGLY. 5.1 SINCE THE TAX EFFECT INVOLVED IN THE APPEALS O F THE REVENUE FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06 IS BELO W THE PRESCRIBED MONETARY LIMIT, THEREFORE, THE APPEALS O F THE REVENUE ARE DISMISSED BEING NOT MAINTAINABLE. HOWEVER, IT I S MADE CLEAR THAT SINCE WE HAVE DISPOSED OF THE APPEALS OF THE R EVENUE ON MERIT, THEREFORE, OUR AFORESAID FINDING WILL REMAIN IN OPERATION. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED W HEREAS THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 4 TH JULY, 2012. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 4 TH JULY, 2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE 10 DN/-33
