M/s. L. M. hati & Co., Jagatsinghpur V. ACIT, Cuttack

ITA 159/CTK/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4182 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 11-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2009
• Court: TRIBUNAL
• Department Lawyers: A S MONDAL
• Assessee Lawyers: P R MOHANTY
• Keywords: Rejection of books of accounts; Business income; Depreciation; Set aside
• Section: 44AD; 251; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE HONBLE SHRI D.K.TYAGI, JUDICIAL MEMBER. /AND HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER . / I.TA.NO . 159/CTK/2010 / ASSESSMENT YEAR 2005 - 06 M/S. L.M.HATI AND CO., 59, MADHUBAN MARKET COMPLEX, PARADEEP, JAGATSINGHPUR, PAN AAIPH 3843 A - - - VERSUS - . ASST. COMMISSIONER OF I NCOME - TAX,CIRCLE 1(1), CUTTACK. / A PPELLANT RESPONDENT FOR THE APPELLANT : SHRI P.R.MOHANTY, AR FOR THE RESPONDENT : SHRI A.S.MONDAL, DR / ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL. 1. FOR THAT THE ORDER OF THE FORUM BELOW IS ILLEGAL, ARBITRARY, EXCESSIVE AND IS BASED ON INCORRECT APPRECIATION OF FACTS AND CIRCUMSTANCES OF THE CASE , THUS DESERVES TO BE DELETED. 2. FOR THAT THE ESTIMATION OF PROFIT @ 7% OF THE GROSS RECEIPT, BEFORE DEPRECIATION, INTEREST AND SALARY PAID TO PARTNERS AND SUBSEQUENT SUSTENANCE OF THE SAME BY THE LD. CIT(A) IS UNDER COMPLETE MISINTERPRETATION OF FACTS ON RECORD, SELF CONTRADICTORY, THEREFORE, THE SAME IS ILLEGAL. 3. FOR THAT THE LD. CIT(A) IS EQUALLY UNJUSTIFIED, IN MAKING ENHANCEMENT OF INCOME BY TREATING THE INTEREST ON FD, AS INCOME FROM OTHER SOURCES, COMPLETELY VIOLATING THE PROVISIONS OF SECTION 251 (2). 4. FOR THAT THE OTHER GROUNDS OF APPEAL, IF ANY SHALL BE URGED AT THE TIME OF HEARING. 2. THE BRIEF FACTS AS ARE AVAILABL E TO THE AUTHORITIES BELOW ARE THAT THE ASSESSEE HAPPENS TO BE A PARTNERSHIP FIRM, DERIVING INCOME FROM STEVEDORING, TRANSPORTAT ION, HIRE CHARGES ETC. AND THE RETURN OF INCOME WAS FILED ON 05.01.2006, BEFORE THE ACIT, CIRCLE - 1(I), CUTTACK, DISCLOSING TOTAL INCOME OF RS.95,59,640 AND TAXES OF RS.35,29,530 WAS PAID, ON THE RETURNED INCOME AND THE SAME WAS ACCEPTED U/S.143(1) 2 OF THE I NCOME TAX ACT. THE CASE WAS SELECTED FOR SCRUTINY. FOR THE REASONS DISCUSSED IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME @7 % OF THE TURNOVER (INCLUDING INTEREST ON FD). 3. IN APPEAL, THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO COMPUTE THE PROFIT @7% OF THE GROSS RECEIPTS (EXCLUDING INTEREST ON FDS) AND THEREAFTER TO ALLOW INTEREST, REMUNERATION & DEPRECIATION ON THE SAME. 3. WE HAVE HEARD THE R IVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY CONTENTION THAT HAS BEEN RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT HAVING RENDERED GROSS RECEIPTS WHICH INCLUDED INTEREST ACCRUED ON FIXED DEPOSITS WAS ALSO CONSIDERED BY THE ASSESSING AUTHORITIES RENDERING INCOME AT 7% WHICH BECOMES IMPROPER IN VIEW OF SPECIFIC RATES OF INTEREST TO BE GIVEN ON FIXED DEPOSITS HELD AS MARGIN BY THE GOVERNMENT AUTHORITIES. HE ALSO POINTED OUT THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE ASSESSING OFFICER HAD ASSESSED UNDER SECTION 144 DETERMINING THE INCOME AT 6% OF THE TURNOVER, THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE, WHEN THE BOOK RESULT S HAV E BEEN REJECTED, THE ASSESSEE SHOULD HAVE BEEN ALLOWED TO HOLD N ET INCOME ON THE TURNOVER EXCLUDING INTEREST ON FIXED DEPOSITS AT 6% AS LAST YEAR . 4. THE LEARNED DR HAS OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL ON THE PREMISES THAT THE AUTHORITIES BELOW ON THE BASIS OF REJECTION OF BOOKS OF ACCOUNT AND ON THE BASI S OF FRAMING ASSESSMENT U/S.144 WERE WITHIN THEIR JURISDICTION TO ADOPT THE PROVISIONS OF SECTION 44AD WHICH APPLIES TO CONTRACTORS WHEN THEIR INCOME IS TO BE TAXED @8% OF THE TURNOVER. HE POINTED OUT THAT THE ACCRUED INTEREST WHICH THE LEARNED COUNSEL PRO POSES TO BE EXCLUDED FROM THE GROSS RECEIPTS AMOUNTING TO RS.3.66 LAKHS ONLY THEREFORE BECOMES IMMATERIAL IN THE LIGHT OF THE ASSESSING OFFICER RENDERING THE ASSESSMENT AT 7% OF THE TURNOVER VIS - - VIS 8% AS PER THE PROVISIONS OF SECTION 44AD. 5. AFTER HEAR ING THE RIVAL PARTIES AND ON PERUSAL OF THE MATERIAL AVAILABLE ON RECORD , WE FIND THAT THE ASSESSING OFFICER ON THE BASIS OF VERIFYING THE PROFIT & LOSS ACCOUNT AND LEDGER COPIES UNDER VARIOUS HEADS FROM WHICH THE INCOME HAS BEEN GEN ERATED RIGHTLY BROUGHT TO TAX @7 % WHEREAFTER SHE ALLOWED DEDUCTION OF INTEREST AND REMUNERATION TO THE PARTNERS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, WHICH 3 THE LEARNED CIT(A) IN HIS BRIEF ORDER HAS CONSIDERED THAT IN THE ABSENCE OF PROPER BOOKS OF ACCOUNT, THE ASSESSEES PAST RECORD CANNOT BE RELIED UPON. HE CONFIRMED AND DIRECTED THE ASSESSING OFFICER TO COMPUTE THE PROFIT AT 7% OF THE GROSS RE CEIPT S (EXCLUDING INTEREST ON FDS ) AND THEREAFTER ALLOW INTEREST REMUNERATION TO PARTNERS & DEPRECIATION , WHICH , IN OUR CONSIDERE D VIEW, IS PROPER. HOWEVER, HE DISMISSED THE ASSESSEES APPEAL WHICH ORDER WE SET ASIDE AND RESTORE THAT OF THE ASSESSING OFFICER, AS INTEREST INCOME ON FIXED DEPOSIT IS BUSINESS RECEIPTS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS CONSIDERED PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 27.07.2010 SD/ - SD/ - ( ), D.K.TYAGI JUDICIAL MEMBER (K.K.GUPTA), ACCOUNTANT MEMBER. DATE: 27.07.2010 - COPY OF THE ORDER FORWARDED TO : / THE APPELLANT : / THE RESPONDENT : THE CIT, THE CIT(A), DR, CUTTACK BENCH GUARD FILE TRUE COPY , BY ORDER , [ ] SENIOR PRIVATE SECRETAR Y ( /) H.K.PADHEE SENIOR.PRIVATE SECRETARY.