Sh Sidh nath Mishra, Delhi V. ITO, New Delhi

ITA 1532/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6695 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-11-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P SINGH
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH :G : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1532/DEL/2010 ASSESSMENT YEAR : 2007-08 SHRI SIDH NATH MISHRA, RZ-10, SHANKER PARK, WEST SAGARPUR, DELHI. PAN : ACAPM4354P VS. ITO, WARD 38 (3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI R.P. SINGH, DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 8 TH FEBRUARY, 2010 FOR ASSESSMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER :- 1. THAT THE HONBLE COMMISSIONER OF INCOME-TAX (APPEA LS)- XXVIII, NEW DELHI HAS ERRED IN LAW AS MUCH AS ON THE FACTS OF THE CASE IN UPHOLDING THE DISALLOWANCE OF RS.2,00, 000/- WHICH THE LEARNED INCOME TAX OFFICER HAS ARBITRARILY MADE OUT OF LABOUR CHARGES OF RS.1,28,58,518/- CLAIMED BY THE APPELLANT. 2. THAT THE HONBLE COMMISSIONER OF INCOME TAX (APPE ALS) WHILE UPHOLDING THE AFORESAID DISALLOWANCE HAS FAILE D TO APPRECIATE THAT:- A) THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE EXAMINE D BY THE LEARNED ASSESSING OFFICER AND NO ADVERSE FINDING S HAVE BEEN RECORDED BY HIM ON HIS EXAMINATION OF BOOK. B) IN THE ABSENCE OF SUCH A FIND REC ORDED BY THE AUTHORITY BELOW AS TO THE UNACCEPTABILITY OF THE METHOD AND ITA NO.1532/DEL/2010 2 BELOW AS TO THE UNACCEPTABILITY OF THE METHOD AND IRREGULARITY OF THE ACCOUNTS KEPT BY THE ASSESSEE, IT IS WELL SETTLED LAW THAT THE BOOK RESULTS CANNOT BE IGNORED OR BRUSHED ASIDE. 3. THAT SINCE THE TRADING RESULT OF THE APPELLANT DURIN G THE YEAR UNDER APPEAL ARE BETTER THAN IMMEDIATE PREVIOUS YE AR THEN THE DISALLOWANCE OF RS.2,00,000/- OUT OF TRADING RESULTS IS TOTALLY UNLAWFUL AND UNWARRANTED. IT IS, THEREFORE, KINDLY PRAYED THAT THE UNWARRANTED DISALLOWANCE OF RS.2,00,000/- AS MADE BY THE LEARNED ASSESSING OFFICER AND ERRONEOUSLY UPHELD BY THE HON BLE COMMISSIONER OF INCOME TAX (APPEALS) MAY KINDLY BE DELETED AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 2. THE ASSESSEE IS A CIVIL CONTRACTOR AND HAS UNDERTAKEN THE WORK OF SITAPUR DISTRICT OF UP. THE GROSS RECEIPTS OF THE ASSESSEE ARE ` 5,89,97,192/- ON WHICH THE NET PROFIT OF ` 15,19,13 0/- WAS SHOWN AND WHICH IS @ 2.57% AS AGAINST 2.94% SHOWN IN THE IMMEDIAT E PRECEDING YEAR AND 3.48% SHOWN IN THE ASSESSMENT YEAR 2005-06. TH E ASSESSING OFFICER HAS ACCEPTED THE DECLINING TREND IN TH E NET PROFIT RATIO OF THE ASSESSEE FOR THE REASON OF STIFF COMPETITION . HOWEVER, CONSIDERING THE LOW PROFIT SHOWN FOR THE YEAR AND THE EXPLANATION OF THE ASSESSEE AND ALSO KEEPING IN VIEW THE LABOUR EXPENSES CLAIMED AT ` 1,28,58,518/-, WHICH, ACCORDING TO THE ASSESSING OFFI CER WERE NOT COMPLETELY SUPPORTED BY PROPER VOUCHERS, THE ASSESSING OF FICER HAS DISALLOWED A SUM OF ` 2 LAC WHICH HAS BEEN ADDED TO NE T PROFIT DECLARED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED A N APPEAL BEFORE THE CIT(A) AGAINST THE SAID ADDITION OF ` 2 LA C. IT WAS SUBMITTED BEFORE THE CIT (A) THAT THE ASSESSEE HAS MAINTAINED PROP ER BOOKS OF ACCOUNT IN THE REGULAR COURSE OF BUSINESS AND THOSE BOOK S ARE AUDITED BY THE CA. ALL THE DETAILS WERE FILED WITH THE RETU RN OF INCOME. THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER ON DIFFERENT DATES OF HEARING AND ALL THE RECORDS MAINTAINED WERE ALSO PROD UCED. IT WAS SUBMITTED THAT THE OBSERVATIONS OF THE ASSESSING OFFICER THAT LABOUR ITA NO.1532/DEL/2010 3 EXPENSES INCURRED BY THE ASSESSEE ARE NOT COMPLETELY SUPPO RTED BY PROPER VOUCHER IS NOT CORRECT. THE LABOUR EXPENSES MA INTAINED BY THE ASSESSEE IS AS PER ACCOUNTING PRINCIPLES AND THE ADDITION OF ` 2 LAC IS MADE ONLY ON ESTIMATE BASIS. NO DEFECT WHATSOEVER WAS P OINTED OUT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. COPIES OF MUSTER ROLLS WERE FILED WITH THE ITO VIDE LETTER DATED 9 TH NOVEMBER, 2009. COPY OF THE SAID LETTER WAS FILED WITH THE CIT (A). IT WAS SUBMITTED THAT THE REASON FOR DECLINE IN MARGINAL RATE OF PROFIT WA S ONLY DUE TO THE REASON THAT THE CONTRACT RECEIPT OF THE ASSESSEE HAD ROSE TO ` 5,89,97,192/- FROM ` 1,91,39,003/- AND HIGH TURNOVE R COULD BE ACHIEVED BY SOME SACRIFICE IN PROFIT RATE ONLY. TH E ASSESSING OFFICER SHOULD HAVE ACCEPTED THE PROFIT AS DECLARED BY THE ASSE SSEE AS THE PROFIT DECLARED WERE BASED ON THE BOOKS OF ACCOUNT WH ICH ARE AUDITED BY THE CHARTERED ACCOUNTANT. ACCORDING TO THE LD. CIT (A) THAT NET PROFIT SHOWN BY THE ASSESSEE WAS EXTRAORDINARILY LOW FOR THE LINE OF BUSINESS WHICH IS CARRIED OUT BY THE ASSESSEE. A HEAVY BUR DEN OF PROOF LIE ON THE ASSESSEE TO JUSTIFY SUCH A LOW RATE OF PROFIT. THE EXPENSES ARE IN CASH AND SOME EXPENSES ARE NOT PROPERLY VOUCHED. THERE IS NO INDEPENDENT EVIDENCE SUCH AS PAYMENT OF CHEQUE OR PRO VIDENT FUND RECORDS AND IN SUCH A SITUATION THERE WAS NO ALTERNATIV E OTHER THAN ALLOWING THE EXPENSES ON ESTIMATE AND DISALLOWING THE R EST AND, IN THESE CIRCUMSTANCES, LD. CIT (A) HAS UPHELD THE ADDITIO N MADE BY THE ASSESSING OFFICER. 3. NOTICE OF HEARING WAS SENT TO THE ASSESSEE. HOWEVER, N ONE WAS PRESENT ON BEHALF OF THE ASSESSEE. AS THE ISSUE IS SMALL, WE PROCEEDED TO DECIDE THE PRESENT APPEAL EX PARTE QUA THE ASSESSEE A FTER HEARING LD. DR. 4. LD. DR, AFTER NARRATING THE FACTS AND RELYING UPO N THE ORDER OF ASSESSING OFFICER AND CIT (A) HAS SUBMITTED THAT THE ADD ITION AS ITA NO.1532/DEL/2010 4 UPHELD BY THE CIT (A) SHOULD BE SUSTAINED AND THE APPE AL FILED BY THE ASSESSEE SHOULD BE DISMISSED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. D R. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CIT (A). THE MARGINAL FALL IN NET PROFIT RA TE CANNOT BE THE REASON TO UPHOLD THE ADDITION IN THE CASE OF THE ASSESSEE BY TH E CIT (A), AS, FOR MAKING THE ADDITION OF ` 2 LAC, IT WAS NOT EVEN THE CASE OF ASSESSING OFFICER THAT THE SAME WAS DUE TO THE LOW PROFIT RATE SHOWN BY THE ASSESSEE. THE REASON ASSIGNED BY THE ASSESSING OFFICER TO MAK E SUCH ADDITION IS THAT THE ASSESSEE DID NOT MAINTAIN PROPER VO UCHERS FOR THE LABOUR EXPENSES. THE ADDITION IS NOT SPECIFIC. NEITHE R THE ASSESSING OFFICER HAS BROUGHT ON RECORD ANY PARTICULAR MISTAKE IN NON- MAINTENANCE OF VOUCHERS REGARDING LABOUR EXPENSES NOR THE CIT (A) HAS BROUGHT ANY SUCH DEFECT. AS AGAINST THAT IT HAS BE EN THE CASE OF THE ASSESSEE THAT HE IS MAINTAINING PROPER RECORDS FOR AL L THESE EXPENSES AND ALL THOSE RECORDS WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER IS ALSO NOT STATING IN THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT PRODUCE ANY OF SUCH RECO RDS. IF IT IS SO, THEN, THE ADDITION COULD BE MADE ONLY WITH RESPECT T O THE SPECIFIC EXPENSES WHICH ARE SHOWN TO BE NOT SUPPORTED BY PROPER VOUCHERS. THIS HAVING NOT BEEN BROUGHT ON RECORD, WE ARE OF TH E OPINION THAT ADDITION SHOULD NOT HAVE BEEN SUSTAINED BY THE CIT (A) . WE DELETE THE SAME AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.11.20 10. SD/- SD/- [B.C. MEENA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 19.11.2010. ITA NO.1532/DEL/2010 5 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES