DCIT, New Delhi V. Sh. Vijay Kumar Kataria, New Delhi

ITA 1372/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74050 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 20-01-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S MEENA
• Keywords: Business income; Search and seizure
• Section: 44AD; 143(3); 153A; 132

Judgement Text

ITA NO. 1372/DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NO. 1372/DEL/2013 A.Y. : 2003-04 DCIT-CC-11, R.NO. 364, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI VS. SH. VIJAY KATARIA, B-14, GF, GEETANJALI ENCLAVE, MALVIYA NAGAR, NEW DELHI 17 (PAN: AAFPK4146G) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. R.S. SINGHVI, CA & SH. SATYAJEET GOEL, CA DEPARTMENT BY : SH. R.S. MEENA, CIT(DR) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-XXXI), NEW DELHI DATED 19.12.2012 PERTAINING TO ASSESSMENT YEAR 2003-04. 2. THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN DE LETING THE DISALLOWANCE OF RS. 13,59,350/-. 3. THE ASSESSEE IN THIS CASE IS A CIVIL CONTRACTOR. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE I.T. ACT WAS CARRIED OUT ON 24.4.2003. SUBSEQUENTLY, NOTICE U/S. 153A WAS IS SUED AND ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE I .T. ACT READ WITH SECTION 153A OF THE I.T. ACT. AO ISSUED A SHOW CAUSE NOTICE DATED 22.12.2009 TO THE ASSESSEE, PROPOSING TO COMP UTE THE TAXABLE INCOME, FROM THE CONTRACT RECEIPTS FOR THE RELEVANT A.YS. @ ITA NO. 1372/DEL/ 2013 2 10% OF THE GROSS RECEIPTS WHERE THE SAME EXCEEDS RS . 40 LAKHS AND @ 8% WHERE THE SAME ARE BELOW RS. 40 LAKHS, IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE COMPUTATIO N OF BUSINESS INCOME AND ALSO FOR THE FACT THAT THE ASSESSEE WA S NOT MAINTAINING CONTRACT WISE BOOKS OF ACCOUNT AND FOR THE USE OF C OMMON STAFF AND COMMON POOL OF FUNDS. ASSESSEE SUBMITTED THAT ASSES SEE WAS BEING AWARDED THE CONTRACT FOR RS.5-10 LAKHS ONLY. ASSESSEE WAS ENGAGED IN INFRASTRUCTURE FACILITIES LIKE SANITATI ON AND SEWAGE SYSTEMS. IT WAS FURTHER SUBMITTED THAT AS PER THE ACCOUNTING STANDARD ASSESSEE WAS NOT REQUIRED TO MAINTAIN CONT RACTS WISE BOOKS OF ACCOUNTS. IN ASSESSEES CASE CONTRACT RE CEIPTS WERE ABOVE RS. 40 LAKHS AND THE CHARTERED ACCOUNTANT HAS AUDIT ED THE BOOKS OF ACCOUNTS. 4. HOWEVER, THE AO WAS NOT SATISFIED. HE REFERRED T O SECTION 44AB OF THE IT ACT AND OPINED THAT ASSESSEE ENGAGED IN C IVIL CONSTRUCTION WORK, SHOULD OFFER 8% OF THE GROSS RECEIPTS AS INC OME. HOWEVER IN THIS CASE, THE ASSESSEE HAS OFFERED 5.35% OF THE T OTAL GROSS RECEIPTS AS INCOME. AO ALSO NOTED THAT IN SOME OF THE YEAR S ASSESSEE HAS SHOWN 24% OF THE GROSS RECEIPTS AS INCOME FROM THE SAME BUSINESS. HENCE, AO REJECTED THE CONTENTION OF THE ASSESSEE AND COMPUTED THE INCOME OF THE ASSESSEE @ 10% OF THE GROSS PROFI T. ACCORDINGLY, AO ADDED RS. 13,59,350/- AS INCOME FROM BUSINESS. 5. UPON ASSESSEES APPEAL LD. CIT(A) NOTED THAT AO HAS REFERRED TO SECTION 44AD OF THE I.T. ACT. HE OBSERVED THAT T HIS SECTION IS NOT APPLICABLE TO THE ASSESSEES CASE AS THE TOTAL RE CEIPTS FROM CIVIL CONTRACTS IN THE YEAR WAS ABOVE RS. 40 LACS I.E. R S. 1,35,93,496/-. LD. CIT(A) NOTED THAT SECTION 44AD APPLIES TO SUCH ASSESSEES WHERE GROSS RECEIPTS DOES NOT EXCEEDS RS. 40 LACS. THAT F URTHER SECTION PROVIDES THAT WHERE THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNTS, THERE IS NO PRESUMPTION ABOUT PROFIT. L D. CIT(A) NOTED IN ITA NO. 1372/DEL/ 2013 3 THIS CASE THAT AO HAS NOT DISPUTED THE FACT THAT AS SESSEE WAS MAINTAINING THE PROPER BOOKS OF ACCOUNTS WHICH WAS ALSO AUDITED UNDER SECTION 44AB OF THE ACT. CONSIDERING THE ABO VE, LD. CIT(A) HELD THAT SECTION 44AD IS NOT APPLICABLE AND THE AO HAS ERRED IN ESTIMATING THE INCOME @10% OF THE GROSS PROFIT. TH ERE IS NO BASIS FOR THE SAME. LD. CIT(A) HELD THAT AO HAD MADE THE ASSESSMENT ONLY ON SUSPICION. ACCORDINGLY, LD. CIT(A) DELETED THE ADDITION OF RS. 13,59,350/-, 6. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT SECTION 44AD PROVIDES FOR COMPUTATION OF PROFIT AND GAINS OF BUSINESS ON PRESUMPTIVE BASIS @8% OF THE TURNOVE R. THE ACT FURTHER PROVIDES THAT WHERE THE ASSESSEES CLAIMS T HAT PROFIT AND GAINS FROM ELIGIBLE BUSINESS ARE LOWER THAN THE PRO FITS AND GAINS AS SPECIFIED ABOVE AND TOTAL INCOME EXCEEDS THE MAXIMU M AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX ASSESSEE SHAL L BE LIABLE TO KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNTS AND ANOTHE R DOCUMENTS AND GET THE SAME AUDITED AND FURNISH A REPORT OF SU CH AUDITED AS REQUIRED UNDER SECTION 44AB. 8. NOW IN THE PRESENT CASE, WE FIND THAT ASSESSEE H AS MAINTAINED BOOKS OF ACCOUNTS AND THE SAME HAS BEEN AUDITED BY THE CHARTERED ACCOUNTANT, THIS IS NOT IN DISPUTE. UNDER SUCH CIRCUMSTANCES, AS PER THE MANDATE OF THE LAW ASSESS EES PROFIT CANNOT BE DEALT ON PRESUMPTIVE BASIS. HENCE, THE P RESUMPTIVE RATE AS ENVISAGED UNDER SECTION 44AD IS NOT AT ALL APPLI CABLE IN THIS CASE. FURTHER, THE FACT THAT ASSESSEE IN EARLIER YEARS HA S RETURNED HIGHER INCOME, CANNOT BE THE BASIS FOR ESTIMATING THE INCO ME IN THE PRESENT YEAR AND THAT ALSO IN A CASE WHERE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED AND THE SAME ARE AUDITED. THE AO HAS NOT ITA NO. 1372/DEL/ 2013 4 POINTED OUT ANY COGENT DEFECT IN THE BOOKS OF ACCO UNTS AND THE VOUCHERS MAINTAINED. UNDER THE CIRCUMSTANCES, WE F IND THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. ACCORDINGLY, WE AFFIRM THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/1/2014. SD/- SD/- [ [[ [A.T. VARKEY A.T. VARKEY A.T. VARKEY A.T. VARKEY] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 24/1/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 1372/DEL/ 2013 5