M/s. M.B. Construction, Paschim Midnapur V. DCIT, Range - 1, Midnapur, Midnapur

ITA 1346/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1175 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C MONDAL
• Assessee Lawyers: S N GANGULI
• Keywords: Peak credit
• Section: 44AD; 143(3); 131; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE HONBLE SHRI P.M. JAGTAP] I.T.A. NO. 1346/KOL/2017 ASSESSMENT YEAR : 2011-12 M/S. M.B. CONSTRUCTION.............................APPELLANT CHHOTOA BARUA, ABASH, MIDNAPUR PASCHIM MEDINIPUR - 721103 [PAN : AAALM0522D] JCIT, RANGE - 1.................................RESPONDENT MEDINIPUR APPEARANCES BY: SHRI S.N. GANGULI, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI D.C. MONDAL, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : OCTOBER 26, 2017 DATE OF PRONOUNCING THE ORDER : OCTOBER 31, 2017 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS) 11, KOLKATA DATED 28.02.2017. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION ON CONTRACT BASIS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 05.12.2011 DECLARING A TOTAL INCOME OF 50,516/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON BY THE A.O. TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS. THE ASSESSEE HOWEVER FAILED TO COMPLY WITH THESE REQUIREMENTS. IN HIS STATEMENT RECORDED BY THE A.O. UNDER SECTION 131 OF THE ACT, SHRI HIMADRI SEKHAR BARMA, PARTNER OF THE ASSESSEE FIRM ADMITTED THAT NO PROPER BOOKS OF ACCOUNTS WERE 2 I.T.A. NO. 1346/KOL/2017 A.Y. 2011-12 M.B. CONSTRUCTION MAINTAINED BY THE ASSESSEE. THE A.O., THEREFORE, REJECTED THE BOOK RESULTS DECLARED BY THE ASSESSEE AND PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE FROM CONTRACTING BUSINESS TO THE BEST OF HIS JUDGEMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. IN THIS REGARD, HE FOUND FROM THE DETAILS FURNISHED BY THE ASSESSEE IN FORM NO. 26AS THAT THE GROSS RECEIPTS FROM CONTRACTING BUSINESS OF ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION WERE ACTUALLY RS. 2,07,52,710/- AS AGAINST RS. 39,74,928/- DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME. HE ALSO FOUND THAT THE NET PROFIT RATE FROM THE CONTRACTING BUSINESS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME WAS 14.4% AND APPLYING THE SAME TO THE GROSS RECEIPTS OF RS. 2,07,52,710/-, THE INCOME OF THE ASSESSEE FROM CONTRACTING BUSINESS WAS DETERMINED BY THE A.O. AT RS. 29,88,390/-. FROM THE INCOME SO ESTIMATED, HE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PARTNERS REMUNERATION AND INTEREST PAID ON PARTNERS CAPITAL. HE ALSO MADE FURTHER ADDITION OF RS. 15,03,026/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF PEAK CREDIT BALANCE APPEARING IN THE TWO UNDISCLOSED BANK ACCOUNTS OF THE OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE A.O. AT RS. 44,91,416/- IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 28.03.2014. 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT (A) UPHELD THE ACTION OF THE A.O. IN ESTIMATING THE INCOME OF THE ASSESSEE FROM THE CONTRACTING 3 I.T.A. NO. 1346/KOL/2017 A.Y. 2011-12 M.B. CONSTRUCTION BUSINESS AT RS. 29,88,390/-. HE HOWEVER DELETED THE ADDITION OF RS. 15,03,026/- MADE BY THE A.O. ON ACCOUNT OF PEAK CREDIT APPEARING IN TWO UNDISCLOSED BANK ACCOUNTS OF THE ASSESSEE BY GIVING THE BENEFIT OF TELESCOPING. THE APPEAL OF THE ASSESSEE THUS WAS PARTLY ALLOWED BY THE LD. CIT (A) VIDE HIS APPELLATE ORDER DATED 28.02.2017 AND STILL AGGRIEVED BY THE SAME, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL READ AS UNDER: 1. FOR THAT THE APPELLATE ORDER U/S 250 OF THE ACT DATED 28.02.2017 PASSED BY THE LD. CIT (APPEALS) 11, KOLKATA, IS ARBITRARY, ERRONEOUS, AND IS NOT TENABLE IN LAW. 2. FOR THAT THE LD. CIT (APPEALS) 11, KOLKATA IS NOT JUSTIFIED IN NOT ACCEPTING THE CLAIM OF DETERMINATION OF PROFIT @ 8% AS LAID DOWN IN SECTION 44AD AS CONSIDERED REASONABLE AND RATIONAL BY THE BOARD, TO DETERMINE NET PROFIT FOR NON-MAINTENANCE OF PROPER BOOKS OF ACCOUNTS AGAINST THE TURNOVER OF GROSS RECEIPTS OF RS. 2,07,52,710/-. GROSS PROFIT HAS BEEN ASSESSED AT @ 14.4% OF THE GROSS RECEIPT. 3. FOR THAT THE LD. CIT (APPEALS) 11, KOLKATA IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF RS. 3,47,000.00 ON ACCOUNT OF REMUNERATION. FOR RS. 2,40,000.00 AND INTEREST ON CAPITAL OF RS. 1,07,000.00 CREDITED TO PARTNERS ACCOUNT WHICH SHOULD HAVE BEEN CONSIDERED AND ALLOWED AS DEDUCTION TO ARRIVE AT THE TAXABLE INCOME. 4. FOR THAT THE LD. CIT (APPEALS) 11, KOLKATA IS NOT JUSTIFIED IN NOT CONSIDERING AND NOT ALLOWING CREDIT OF TDS FOR RS. 16,572.00 ARISING OUT OF RECEIPTS OF RS. 7,39,696.00 THOUGH COVERED BY THE DETERMINATION OF GROSS RECEIPT. THEREFORE, TDS FOR RS. 16,572.00 SHOULD BE CONSIDERED AND ALLOWED AS CREDIT. THE TOTAL ALLOWABLE CLAIM OF TDS SHOULD BE RS. 4,11,878.00 (RS. 3,95,306.00 ALLOWED IN ASSESSMENT + RS. 16,572.00 AS DISALLOWED). 5. THAT YOUR PETITIONER CRAVES LEAVE OF YOU TO FILE ADDITIONAL GROUND/GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 4 I.T.A. NO. 1346/KOL/2017 A.Y. 2011-12 M.B. CONSTRUCTION 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, GROUND NO 1 AND 5 RAISED BY THE ASSESSEE IN THIS APPEAL ARE GENERAL WHICH DO NOT CALL FOR ANY SPECIFIC ADJUDICATION. 6. AS REGARDS THE ISSUE RAISED IN GROUND NO 2 RELATING TO THE ESTIMATION OF THE INCOME OF THE ASSESSEE FROM THE CONTRACTING BUSINESS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT DISPUTED THE ACTION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS ALSO NOT DISPUTED THE GROSS RECEIPTS OF RS. 2,07,52,710/- TAKEN BY THE A.O. ON THE BASIS OF INFORMATION CONTAINED IN FORM NO. 26AS. HE HAS ONLY DISPUTED THE NET PROFIT RATE OF 14.4% ADOPTED BY THE AUTHORITIES BELOW TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE CONTRACTING BUSINESS. IN THIS REGARD, HE HAS RELIED ON THE PROVISIONS OF SECTION 44AD TO CONTEND THAT THE NET PROFIT RATE OF 8% MAY JUSTIFIABLY BE APPLIED TO ESTIMATE THE INCOME OF THE ASSESSEE. HOWEVER, AS RIGHTLY CONTENDED BY THE LEARNED DR, THE PROVISIONS OF SECTION 44AD ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE HAVING TURNOVER OF MORETHAN RS. 2 CRORES FROM THE CONTRACTING BUSINESS. MOREOVER THE NET PROFIT RATE OF 10% WAS DECLARED BY THE ASSESSEE HIMSELF IN THE IMMEDIATELY PRECEDING TWO YEARS I.E. A.Y. 2009-10 AND 2010-11. AS REGARDS THE NET PROFIT RATE OF 14.4% APPLIED BY THE A.O., IT IS OBSERVED THAT THE SAME WAS ADOPTED BY HIM ON THE BASIS OF BOOK RESULTS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHEN THE BOOK RESULTS WERE REJECTED BY THE A.O., THERE WAS NO JUSTIFICATION IN 5 I.T.A. NO. 1346/KOL/2017 A.Y. 2011-12 M.B. CONSTRUCTION ADOPTING THE NET PROFIT RATE OF 14.4% DECLARED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. HAVING REGARD TO ALL THESE FACTS OF THE CASE, I AM OF THE VIEW THAT IT WOULD BE FAIR AND REASONABLE TO APPLY THE NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS OF RS. 2,07,52,710/- TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE CONTRACTING BUSINESS FOR THE YEAR UNDER CONSIDERATION. I ACCORDINGLY MODIFY THE IMPUGNED ORDER OF THE LD. CIT (A) ON THIS ISSUE AND DIRECT THE A.O. TO RECOMPUTE THE INCOME OF THE ASSESSEE FROM CONTRACTING BUSINESS BY APPLYING A NET PROFIT RATE OF 10%. GROUND NO 2 OF THE ASSESSEES APPEAL IS THUS PARTLY ALLOWED. 7. AS REGARDS THE ISSUES RAISED BY THE ASSESSEE IN GROUND NO 3 AND 4 RELATING TO ITS CLAIM FOR DEDUCTION ON ACCOUNT OF PARTNERS REMUNERATION AND INTEREST AND CREDIT OF TDS, IT IS OBSERVED THAT THESE ISSUES WERE NOT PRESSED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT (A) AND AFTER TAKING NOTE OF THE SAME, THE RELEVANT GROUNDS WERE DISMISSED BY THE LD. CIT (A). IN THESE CIRCUMSTANCES, I AM OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO HAVE ANY GRIEVANCE ON THESE ISSUES AND UPHOLDING THE IMPUGNED ORDER OF THE LD. CIT (A) ON THESE ISSUES, I DISMISS GROUND NO 3 AND 4 OF THE ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER 6 I.T.A. NO. 1346/KOL/2017 A.Y. 2011-12 M.B. CONSTRUCTION DATED: 31/10/2017 BISWAJIT, SR. P.S. COPY OF ORDER FORWARDED TO: 1. M/S. M.B. CONSTRUCTION, CHHOTO BARUA, ABASH, MIDNAPUR, PASCHIM MEDINIPUR 721103. 2. JCIT, RANGE 1, MEDINIPUR. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA