The ITO, Ward-2(3), RAJKOT-GUJARAT V. M/s. Odedara Construction,

ITA 1344/RJT/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2272 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT C SHINGALA
• Assessee Lawyers: C S ANJARIA
• Keywords: Business income; Question of law
• Section: 44AD; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NOS: 1320 & 1344/RJT/2010 (ASSESSMENT YEAR: 2007-08) M/S. ODEDARA CONSTRUCTION, JAMDADAR, TAL:JAMKANDORNA, RAJKOT INCOME TAX OFFICER, WARD- 2 (3), RAJKOT V/S V/S INCOME TAX OFFICER, WARD- 2 (3), RAJKOT M/S. ODEDARA CONSTRUCTION, JAMDADAR, TAL:JAMKANDORNA, RAJKOT (APPELLANT) (RESPONDENT) PAN: AAIFM7136P APPELLANT BY : SHRI SUMIT C. SHINGALA, C. A. RESPONDENT BY : SHRI C. S. ANJARIA, SR. D.R. ( )/ ORDER DATE OF HEARING : 02 -03-201 6 DATE OF PRONOUNCEMENT : 02 -03-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 1320 & 1344/RJT/2010 . A.Y. 2007-08 2 1. ITA NOS. 1320 & 1344/RJT/2010 ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-III , RAJKOT DATED 29.09.2010 PERTAINING TO A.Y. 2007-08. 2. IN THE FIRST ROUND OF LITIGATION, THE MATTER TRAVEL LED UP TO THE HONBLE HIGH COURT IN TAX APPEAL NO. 51 OF 2013 WHICH WAS F ILED BY THE REVENUE AND THE HONBLE HIGH COURT HAD THE OCCASION TO CONSIDER THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT WHICH W AS DELETED BY THE TRIBUNAL BECAUSE THE AMOUNTS WERE ALREADY PAID BEFO RE THE END OF THE ACCOUNTING PERIOD. THE HONBLE HIGH COURT HAD REVER SED THE DECISION OF THE TRIBUNAL BY THEIR JUDGMENT DATED 02.05.2013 FOR EXAMINATION OF OTHER RELATED ASPECTS, THE MATTER WAS REMANDED BACK TO THE FILES OF THE TRIBUNAL. THE ASSESSEE HAD ALSO PREFERRED CROSS OBJECTION CLAIMING THAT EVEN OTHERWISE THE DISALLOWANCE COULD NOT HAVE BEEN MADE SINCE THE CASE WAS GOVERNED BY SECTION 44AD OF THE ACT. T HE HONBLE HIGH COURT DECLINED TO ENTERTAIN THE CROSS OBJECTION OF THE ASSESSEE STATING THAT SINCE THE MATTER IS ALREADY REMANDED FOR FRESH CONSIDERATION. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT IN THIS CASE, THE ASSESSEE HAS FILED THE RETURN DECLARING ITS INCOME U/S. 44AD OF THE ACT WHICH IS A PRESUMPTIVE TAX PROVISION, THEREFORE, NO FURTHER DISALLOWANCE IS CALLED FOR BY INVOKING THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT. IN SUPPORT OF HIS CLAIM, THE LD. COUNSEL RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF SHRI AUJUN BHOWMICK IN ITAT NO. 134 OF 2014. RELIANCE WA S ALSO PLACED ON THE DECISION OF THE TRIBUNAL KOLKATA BENCH IN THE C ASE OF JAHARLAL MUKHERJEE IN ITA NO. 73/KOL/2014. PER CONTRA, THE L D. D.R. COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. ITA NO. 1320 & 1344/RJT/2010 . A.Y. 2007-08 3 3. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC TS IN ISSUES BEFORE US THERE IS NO DISPUTE THAT ASSESSEES RETURN OF IN COME HAS BEEN ASSESSED ON PRESUMPTIVE TAX BASIS U/S. 44AD OF THE ACT. IT WOULD BE PERTINENT TO REFER TO THE DECISION OF THE HONBLE H IGH COURT OF CALCUTTA IN THE CASE OF SHRI ARJUN BHOWMICK (SUPRA) READ AS UNDER:- WE FIND THAT THE LEARNED TRIBUNAL WHILE ALLOWING T HE APPEAL OF THE ASSESSEE HAD HELD AS UNDER; 'WE FIND THAT THERE IS NO DISPUTE THAT THERE ARE NO BOOKS OF ACCOUNT AS THE ASSESSEE FAILED TO PRODUCE THE SAME. IT IS ALSO AN ADMITTED POSITION THAT ASSESSEE HAS ACCEPTED THE APPLICATION OF NET PROFIT RATE @ 8 % ON THE GROSS RECEIPTS. THE DISPUTE ONLY IS AS REGARDS TO DISALLOWANCE ON ACCOU NT OF HIRE CHARGES, TRANSPORTATION CHARGES AND SLURRY REMOVABLE CHARGES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, FURTHER, DISALLOWA NCE OF SUPERVISION CHARGES, LABOUR CHARGES, SITE EXPENSES, LOAD TESTING EXPENSE S AT 50%. WHETHER THE AO CAN DISALLOW THE EXPENSES WHICH ARE DIRECTLY RELATED TO GROSS RECEIPT OF THE ASSESSEE ON WHICH THE AO HAS ESTIMATED NET PROFIT BY APPLYIN G THE RATE OF 8%. IT IS A FACT THAT THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNT , IT MEANS THAT THE AO HAS NOT RELIED ON BOOKS OF ACCOUNT FOR ESTIMATION OF PROFIT S. THIS FACT IS ACCEPTED BY ASSESSEE AS WELL AS BY REVENUE. WE ARE OF THE VIEW THAT ONCE THE NET PROFIT RATE IS ESTIMATED THE AO CANNOT BASE HIS DISALLOWANCE ON TH E SAME BOOKS OF ACCOUNT FOR THE PURPOSE OF DISALLOWANCE BY INVOKING THE PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT OR GENERAL DISALLOWANCE U/S 37 OF THE ACT. THE ESTIMATION MADE BY AO OF NET PROFIT WILL TAKE CARE OF EVERY ADDITION RELATED TO BUSINESS INCOME OR BUSINESS RECEIPTS AND NO FURTHER DISALLOWANCE CAN BE MADE. W E SEE FORCE IN THE ARGUMENT OF THE ASSESSEE THAT WHEN THE INCOME OF THE ASSESSE E WAS COMPUTED APPLYING GROSS PROFIT RATE AND NO DEDUCTION WAS ALLOWED IN REGARD TO THE EXPENSES CLAIMED BY THE ASSESSEE, THERE WAS NO NEED TO LOOK INTO THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT OR SECTION 37 OF THE ACT. ACCORDINGLY, NO DISAL LOWANCE COULD HAVE BEEN MADE IN VIEW OF THE ABOVE FACTS THAT ONCE THE PROFIT IS ESTIMATED BY APPLYING NET PROFIT RATE. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE O THER DISALLOWANCES AND RESTRICT THE ADDITION BY APPLYING NET PROFIT RATE @8% OF GRO SS RECEIPTS.' ITA NO. 1320 & 1344/RJT/2010 . A.Y. 2007-08 4 WE FIND VALID REASONS GIVEN BY THE TRIBUNAL IN SUPPORT OF THIS ORDER. THEREFORE, NO SUBSTANTIAL QUESTION OF LAW ARISES. HENCE, THE APPL ICATION AND APPEAL ARE DISMISSED. 4. A SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BE NCH IN THE CASE OF JAHALAL MUKHERJEE (SUPRA) AND ALSO BY THE TRIBUNAL VISAKHAPATNAM BENCH IN THE CASE OF K. VENKATARAJU VEMAGIRI RANG E RAJAHMUNDRY IN ITA NO. 312/VIZ/2008. 5. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT (SUPRA), WE DIRECT THE A.O TO DELETE THE IMPUGNED A DDITIONS MADE U/S. 40(A)(IA) OF THE ACT. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. ITA NO. 1344/RJT/2010 REVENUES APPEAL FOR A.Y. 200 7-08 6. SINCE THE ISSUES RAISED BY THE REVENUE HAVE ATTAINE D FINALITY IN THE FIRST ROUND OF LITIGATION, THEREFORE, THE APPEAL OF THE R EVENUE BECOMES OTIOSE. HENCE, DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 02 - 03 - 201 6. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)