ACIT, V. M/s Shashi Builders India Pvt Ltd,

ITA 163/PAT/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93629 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KR ANWAR
• Assessee Lawyers: RISHI RAJ SINHA SR S C
• Keywords: Business income; Depreciation; Source of fund
• Section: 234B; 145

Judgement Text

, PATNA IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA . . . , , BEFORE SHRI A.D. JAIN (JM) AND SHRI SANJAY ARORA (AM) ./ I.T.A. NO S . 155 /PAT/20 12 ( / ASSESSMENT YEAR: 2005 - 06 ) SHASHI BUILDERS INDIA PVT. LTD., NOW KNOWN AS SHASHI C ONSTRUCTION & SUPPLIERS PVT. LTD., KALAMBAGH ROAD. MUZAFFARPUR. / VS. ITO, WARD - 2(1), MUZAFFARPUR. ./ ./ PAN/GIR NO. : AAICS4977P ./ I.T.A. NOS.163/PAT/2012 ( / ASSESSMENT YEAR: 2005 - 06) ACIT, CIRCLE - 2, MUZAFFARPUR. / VS. M/S SHASHI BUILDERS INDIA PVT. LTD., KALAMBAGH ROAD. MUZAFFARPUR. ./ ./ PAN/GIR NO. : AAICS4977P ./ I.T.A. NOS.156/PAT/2012 ( / ASSESSMENT YEAR: 2006 - 07) SHASHI C ONSTRUCTION & SUPPLIERS PVT. LTD., KALAMBAGH ROAD. MUZAFFARPUR. / VS. DCIT, CIRCLE - 2, MUZAFFARPUR. ./ ./ PAN/GIR N O. : AAICS4977D ( / APPELLANT ) .. ( / RESPONDENT ) 2 ITA NOS. 155, 163 & 156/PAT/2012 (A.YS. 2005 - 06 & 2006 - 07 ) SHASHI BUILDERS INDIA PVT. LTD . & SHASHI CONSTRUCTION & SUPPLIERS PVT. LTD., / APPELLANT BY : SHRI SANJEEV KR. ANWAR, ADV. / RESPONDENT BY : SHRI RISHI RAJ SINHA, SR. S.C. / DATE OF H EARING : 22 /4/2015 / DATE OF PRONOUNCEMENT : 06/5 /2015 / O R D E R PER SANJAY ARORA, AM: THIS IS A SET OF TWO A PPEALS BY THE A SSESSEE I . E . , FOR TWO CONSE C UTIVE YEARS , BEING ASSESSMENT YEARS 2005 - 06 & 2006 - 07 , CONTESTING THE PART ALLOWANCE OF ITS APPEALS AGAINST ITS ASSESSMENT S U / S . 143 ( 3 ) OF THE INCOME TAX ACT , 1961 ( ' THE ACT ' HEREINAFTER ) FOR THE RELEVANT YEARS BY THE COMMISSIONER OF INCOME TAX ( A PPEALS ) - 1 , PATNA ( CIT ( A ) FOR SHORT ). THE R EVENUE IS ALSO I N APPEAL FOR THE FIRST YEAR . 2 . THE BRIEF FACTS ARE THAT THE ASSESSEE IS A COMPANY IN CONSTRUCTION BUSINESS , DERIVING INCOME FROM CIVIL CONSTRUCTION WORK . ITS INCOME FROM THE SAID BUSINESS WAS ASSESSED BY THE ASSESSING OFFICER (A O ) AT 8 % OF THE CONTRACT R ECEIPT , I . E . , SUBSEQUENT TO REJECTION OF ITS B OO K S OF ACCOUN T , INVO KING SECTION 145 ( 3 ) OF THE ACT , TO WHICH THERE IS NO CHALLENGE . THE SAME FINDING CONFIRMATION BY THE L D. CIT(A) IN APPEAL , THE ASSESSEE IS IN SECOND APPEAL . 3. B EFORE US, THE ASSESSEE S S OLE CONTENTION WAS THAT ITS INCOME FOR ASSESSMENT YEAR ( A.Y. ) 2003 - 04 HAD BEEN ACCEPTED BY THE TRIBUNAL AT 6% OF THE CONTRACT RECEIPT AND, ACCORDINGLY , THE SAME BE FOLLOWED FOR THE CURRENT YEAR AS WELL , SO AS TO MAINTAIN CONSISTENCY. THE R EVENUE S STAND , ON THE OTHER HAND , WAS THAT EACH YEAR IS AN INDEPENDENT UNIT OF ASSESSMENT AND THE PRINCIPLE OF RES JUDICATA IS NOT APPL ICABLE TO THE PROCEEDING S UNDER THE ACT. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. WITHOUT D OUBT , THE PRINCIPL E OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT (REFER, INTER ALIA , NEW JEHANGIR VAKIL MILLS CO. LTD VS. CIT [1963] 49 ITR 137 3 ITA NOS. 155, 163 & 156/PAT/2012 (A.YS. 2005 - 06 & 2006 - 07 ) SHASHI BUILDERS INDIA PVT. LTD . & SHASHI CONSTRUCTION & SUPPLIERS PVT. LTD., (SC) AND M. M. IPOH VS. CIT [1968] 67 ITR 106 (SC)) AND, ACCORDINGLY, NO ASSISTANCE COULD BE DRAWN FROM THE MANNER IN WHICH THE ASSESSMENT FOR A PARTICULAR YEAR HAS BEEN FRAMED OR CAME TO BE FINALIZED , AND IS IN ANY CASE, NOT BINDING . EACH YEAR IS A SEPARATE AND INDEPENDENT UNIT OF ASSESSMENT. IN FACT , THE TRIBUNAL IN THE ASSESSEES CASE FOR A.Y 2003 - 04 , VIDE TH E OPERATING PART (PARA 6) OF ITS ORDER , ITSELF STATES THAT ITS DECISION STANDS MADE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE (ITA NO. 59 AND 1091/PAT/ 2007 DATED 10.06.2009/COPY ON RECORD) , WHICH ITSELF INDICATES THAT ITS ORDER IS ONLY QUA THE ASSESSMENT UNDER REFERENCE . THE L D. CIT(A), THEREFORE, ON THE SA ME BEING CITED BEFORE HIM , WAS NOT INCORRECT IN DIS REGARD ING THE PROFIT AS CAME TO BE ASSESSED BY THE TRIBUNAL , STATING THAT THE PROFIT WOULD VARY FROM YEAR TO YEAR DEPENDING ON BUSINESS C ONDITIONS. THE SAME, THUS, RATHER THAN A DISREGARD, IS A REGARD OF THE ORDER BY THE TRIBUNAL, AND VALID IN LAW. THE L D. C OUNSEL FOR THE ASSESSEE, ON THE FOREGOING BEING OBSERVED BY THE BENCH DURING HEARING , WOULD SUBMIT THAT THE WORK - IN - PROGRESS FOR THE CU RRENT YEAR /S IS THE SAME AS FOR A.Y.2003 - 04, I.E., FOR WHICH THE PROFIT STOOD FINALLY ASSESSED AT 6% , I.E., PLEADS FOR IDENTITY OF THE FACTS AND CIRCUMSTANCES. THIS FACT , I.E., ASSUMING SO, IS NOWHERE BORNE OUT FROM THE RECORD , I.E., FROM THE ORDERS BY THE REVENUE AUTHORITIES . THERE IS NO MENTION OF THE DIFFERENT PROJECTS ON WHICH THE PROFIT STANDS RETURNED, OR EVEN THAT ARE UNDERWAY AS AT THE YEAR - END, IN THE ORDER OF THE TRIBUNAL FOR AY 2003 - 04 , N OR ITS CONSIDERATION COULD BE SHOWN TO US WITH REFERENCE TO ANY MATERIAL ON RECORD . SO , HOWEVER , RATHER THAN DISMISSING IT AS A BALD CLAIM, IN OUR VIEW, IF THE PROJECTS ON WHICH PROFIT STANDS ASSESSED FOR AY 2003 - 04, ARE THE SAME FOR WHICH IT IS FOR THE CURRENT YEAR, THE ASSESSEE IS ENTITLED TO CLAIM A REVIEW OF ITS PROFIT IN LIGHT OF ITS ASSESSMENT FOR THAT YEAR. THE WORK - IN - PROGRESS (WIP) FOR THE CURRENT YEAR WOULD IN THAT CASE BE ONLY A CONTINUATION OF THE WIP FOR THAT YEAR. THE ONUS TO ESTABLISH THE FACTS IS ONLY ON THE ASSESSEE . T HE MATTER IS ACCORDINGLY SET ASIDE TO THE FILE OF THE FIRST APPELLATE AUTHORITY TO EXAMINE THE ASSESSEES CONTENTION AS TO PARITY OF FACTS. THE D EPARTMENT, ON ITS PART, HOWEVER , CANNOT ACT DE HORS , OR INCONSISTENT WITH, THE MATERIAL ON RECORD, AND A SIMILARITY OF BUSINESS CONDITIONS IS A RELEVANT FACTOR IN ESTIMATION OF INCOME. THE SAME , HOWEVER, SHALL NOT B I ND THE R EVENUE 4 ITA NOS. 155, 163 & 156/PAT/2012 (A.YS. 2005 - 06 & 2006 - 07 ) SHASHI BUILDERS INDIA PVT. LTD . & SHASHI CONSTRUCTION & SUPPLIERS PVT. LTD., AUTHORITIES , W HO ARE ENTITLED TO EXAMINE OTHER ASPECT S OF THE MATTER AS WELL , VIZ., THE INPUT COSTS, CONTRACT RATE/S, ETC. THE MATTER, WE MAY EMPHASIZE, IS WHOLLY F ACTUAL, WITH IT BEING PERMISSIBLE FOR THE REVENUE TO SHOW THAT, DESPITE PARITY OF FACTS, THE SAID RATE DOES NOT REPRESENT OR YIELD THE CORRECT INCOME EARNED OR ASSESSABLE FOR THE CURRENT YEAR, IN WHICH CASE THEREFORE THE ONUS WOULD SHIFT TO THE REVENUE . WE DECIDE ACCORDINGLY . T HE MATTER HAVING BEE N SET ASIDE BACK TO THE LD. CIT (A), WHO MAY AT HIS DISCRETION CALL FOR THE AOS COMMENTS , THROUGH A REMAND OR OTHERWISE , OR OTHERWISE GIVE OPPORTUNITY OF HEARING TO HIM , WHICH WOULD ALSO DEPEND ON THE MATERIALS FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIMS, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE THE R EVENUES APPEAL SEPARATELY, WHICH RAISE S ANOTHER ASPECT OF THE MATTER, I.E., ALLOWANCE ON DEPRECIATION. IN THIS REGARD, WE MAY CLARIFY THAT ALLOWANCE OF DEPRECIATION, WHERE AND TO THE EXTENT EXIGIBLE, IS A STATUTORY ALLOWANCE. THE ONUS, THEREFORE, TO EXHIBIT THAT ITS ALLOWANCE STANDS MADE IN ASSESSING THE NET PROFIT AT THE RATE ESTIMATED, WHICH IS PURELY A MATTER OF FACT , IS ON THE REVENUE . DEPRECIATION, B ESIDES BEING VARIABLE, IS A S TATUTORY ALLOWANCE, WHICH HAS TO BE GIVEN EFFECT TO IR RESPECTIVE OF THE INCOME FOR THE YEAR . IT IS THEREFORE, I.E., EVEN FROM A PRACTICAL STAND POINT, PREFERABLE THAT THE SAME IS ALLOWED SEPARATELY, I.E., AFT ER AN INDEPENDENT A SSESSMENT OF NET PROFIT PRIOR TO THE CLAIM FOR DEPRECIATION. IN THE FACTS OF THE CASE, IT IS NOT CLEAR IF THE PROFIT RATE FOR A. Y. 2003 - 04, ON WHICH THE ASSESSEE RELIES, STANDS ASSESSED AT NET OR GROSS OF DEPRECIATION, INFORMATION QUA WHICH COULD NOT BE S UPPLIED BY THE PARTIES ON BEING ENQUIRED BY THE BENCH DURING HEARING. RATHER, INASMUCH AS NO ALLOWANCE FOR DEPRECIATION, OTHERWISE MANDATORY, STANDS MADE SEPARATELY, THE PRESUMPTION (ON FACTS) WOULD ONLY BE THAT THE PROFIT RATE STANDS ASSESSED TAKING INTO ACCOUNT ALL THE CLAIMS, INCLUDING DEPRECIATION , BEING, IN FACT, PATENT . WE, THEREFORE , RATHER THAN GIVING ANY SPECIFIC DIRECTION ON QUANTUM, DIRECT THAT THE PROFIT FOR THE CURRENT YEAR BE FIRST ESTIMATED BEFORE D EPRECIATION, AND DEPRECIATION AS EXIGIBLE AL LOW ED S EPARATELY , PER A SPEAKING ORDER, AFTER CONSIDERING ALL THE RELEVANT MATERIALS, AND AFTER HEARING BOTH THE PARTIES. WE DECIDE ACCORDINGLY. 5 ITA NOS. 155, 163 & 156/PAT/2012 (A.YS. 2005 - 06 & 2006 - 07 ) SHASHI BUILDERS INDIA PVT. LTD . & SHASHI CONSTRUCTION & SUPPLIERS PVT. LTD., 5 . THE ONLY OTHER ISSUE RAISED BY THE ASSESSEE PER ITS INSTANT APPEAL IS FOR THE ISSUANCE OF A DIRECTION FOR ALLOWANCE OF INTEREST PAID TO B ANK AGAINST THE INCOME FROM FDR S IN - AS - MUCH AS THE LATTER STANDS ASSESSED AS BUSINESS INCOME. WE FIND LITTLE SCOPE FOR INFERENCE IN - AS - MUCH AS THE L D . CIT (A) HAS ALREADY DI RECTED THE AO TO ALLOW EXPENDITURE FOR THE PURPOSE O F EARNING THE SAID INTEREST INCOME. THE ARGUMENT THEREFORE THAT THE FDRS HAVE BEEN MADE FOR THE PURPOSE OF ISSU ING BANK GUARANTEE /S TO SECURE CONTRACT WORK WOULD BE OF NO MOMENT ; T HE MATTER BOIL ING DO W N TO THE ASSESSEE PROVING ITS CLAIMS. RATHER, AS FAR AS WE SEE IT, THE ASSESSEES ARGUMENT, INSTEAD OF PROMOTING ITS CASE, GOES AGAINST IT. THIS IS AS THE SUMS ARE STATED TO HAVE BEEN PLACED UNDER DEPOSIT WITH THE BANK BY WAY OF MARGIN, I.E., TO ENABLE AVAILING NON - FUND CREDIT FROM IT BY WAY OF BANK GUARANTEE/ S. THE MARGIN MONEY, BY NECESSARY IMPLICATION, WOULD REPRESENT THE ASSESSEES CAPITAL /QUASI CAPITAL . WOULD, ONE MAY ASK, THE BANK EXTEND FUND BASED CREDIT TO A BORROWER TO ENABLE IT TO AVAIL NON - FUND CREDIT (FROM THE BANK) , FURTHER JEOPARDIZING , RATHER THA N SECURING, ITSELF ? THAT THE IMMEDIATE OR APPARENT SOURCE OF FDRS IS THE CASH CREDIT ACCOUNT IS OF LITTLE CONSEQUENCE; THE SAME REPRESENTING A COMMON POOL OF FUNDS, THROUGH WHICH FUNDS FOR ITS DIFFERENT PURPOSES ARE CHANNELIZED BY THE ASSESSEE . THE SAME TH US IS OF LITTLE ASSISTANCE IN IDENTIFYING THE ACTUAL SOURCE OF FUNDS , WHICH MAY REQUIRE ANALYSIS OF THE ASSESSEES FINANCIAL POSITION WITH FURTHER REFERENCE TO ITS CONTRACTUAL OBLIGATIONS . THE MATTER S TANDS ALREADY REMANDED TO THE FILE OF THE ASSESSING AUT HORITY ON TERMS WHICH CAN N OT BE REGARDED AS EITHER INAPPOSITE UNDER THE CIRCUMSTANCES OR PREJUDICIAL TO THE ASSESSEE . WE ACCORDINGLY FIND NO REASON TO MODIFY THE SAME, AS SOUGHT BY THE ASSESSEE PER ITS APPEAL, EVEN AS IN OUR VIEW I T S ARGUMENT , ON THE BASIS OF WHICH A DIRECTION TO FACTUALLY DETERMINE THE MATTER HAS BEEN MADE , IS , ON ITS FACE , WITHOUT MERIT. THE AO SHALL ACCORDINGLY OBSERVE THE DIRECTIONS BY THE LD. CIT(A) , AND DECIDE PER A SPEAKING ORDER, I.E., WHERE THE ASSESSEE FURNISHES ANY MATERIALS , ETC . TO SUBSTANTIATE ITS CASE . WE DECIDE ACCORDINGLY. 6 ITA NOS. 155, 163 & 156/PAT/2012 (A.YS. 2005 - 06 & 2006 - 07 ) SHASHI BUILDERS INDIA PVT. LTD . & SHASHI CONSTRUCTION & SUPPLIERS PVT. LTD., 6 . NO OT HER GROUND WAS ARGUED OR ISSUE URGED BEFORE US BY EITHER PARTY AND, CONSEQUENTLY, NOT RESPONDED TO BY THE OTHER , WITH THE BENCH SPECIFICALLY INQUIRING DURING HEARING AS TO WHETHER ANY OTHER ISSUE STANDS TO BE AGITATED BY THE PARTIES PER THEIR INSTANT APPEALS. WE CLARIFY THIS AS WE OBSERVE THE ASSESSEE S APPEAL TO HAVE RAISED SOME OTHER ISSUES PER ITS GROUNDS, VIZ. THE ADJUSTMENT OF THE INTEREST PAID AGAINST INTEREST RECEIPTS ON DIRECTOR LOANS ( G R D . # 8 FOR A.Y. 2005 - 06) AND PROFIT RATE ON SUB - CONTRACT WORK ( G D . # 7 FOR A.Y. 2006 - 07) . THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED, EVEN AS WE ALSO OBSERVE CERTAIN DISCREPANCIES I N THE ASSESSEES GROUNDS, AS WELL AS GROUNDS WHICH ARE GENERAL IN NATUR E, WARRANTING NO ADJUDICATION , AS ALSO THOSE RAISING ISSUES WHICH ARE INCIDENTAL AND CONSEQUENTIAL, AS QUA S. 234B . 7. IN THE RESULT, THE A SSESSEES APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES , WHILE THE R EVENUES APPEAL IS ALLOWED FOR STATISTICA L PURPOSES . ORDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34 OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - SD/ - ( A.D. J AIN ) (SANJAY A RORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATED : 06 / 05 /2015 . ./ S,SINHA , PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT: 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - PATNA 4. / CIT , PATNA 5. , , PATNA 6. / GUARD FILE. / BY ORDER, 7 ITA NOS. 155, 163 & 156/PAT/2012 (A.YS. 2005 - 06 & 2006 - 07 ) SHASHI BUILDERS INDIA PVT. LTD . & SHASHI CONSTRUCTION & SUPPLIERS PVT. LTD., PS/SR. PRIVA TE SECRETARY ITAT, PATNA