Shri Kailash Chand Khatri, JODHPUR V. Addl. CIT, BARMER

ITA 173/JODH/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54407 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Assessee Lawyers: U C JAIN
• Keywords: Depreciation
• Section: 194C

Judgement Text

1 ITA 173-11 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 173/JODH/2011 ASSTT. YEAR : 2007-08. SHRI KAILASH CHAND KHATRI, VS. THE ADDL. CIT, CI RCLE, PROP. M/S. SATYA CONSTRUCTION CO., BARMER. JAISALMER. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI U.C. JAIN RESPONDENT BY : SHRI R.H. GOHEL DATE OF HEARING : 08.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. THOUGH AS MANY AS TEN GROUNDS HAVE BEEN TAKEN BY ASSESSEE BY FILING APPEAL IN FORM NO. 36, HOWEVER, ISSUES INVOLVED IN THE APPEAL ARE ONLY TWO. 3. FIRST ISSUE IS AGAINST SUSTAINING THE ADDITION O F RS. 21,68,493/- MADE BY ASSESSING OFFICER IN CONTRACT ACCOUNT BY APPLYING NP RATE AT 7.5% AND THEREAFTER FURTHER ENHANCING THE ADDITION BY A SUM OF RS. 9,05,649/- AT THE END OF LD. CIT (A). 4. THE LD. COUNSEL OF THE ASSESSEE FILED WRITTEN SU BMISSIONS IN THIS REGARD. 2 5. ON THE OTHER HAND, THE LD. D/R HAS PLACED RELIAN CE ON THE ORDERS OF THE ASSESSING OFFICER AND LD. CIT (A). 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN PART ON THIS I SSUE. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSES SEE HAS DISCLOSED GROSS CONTRACT RECEIPT OF RS. 6,05,79,784/- AND NET PROFIT HAS BEE N SHOWN AT 3.92% AGAINST NP RATE OF 5.5% SHOWN IN LAST YEAR. AFTER EXAMINING THE BOOK S OF ACCOUNT AND OTHER RECORD, THE ASSESSING OFFICER FOUND THAT THERE ARE VARIOUS DEFE CTS IN THE BOOKS OF ACCOUNT AND PROFIT SHOWN BY ASSESSEE IS ON LOWER SIDE. ACCORDINGLY HE REJECTED THE BOOKS OF ACCOUNT AND APPLIED NP RATE OF 7.5% WHICH RESULTED IN TRADING A DDITION OF RS. 21,68,493/-. DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT (A) WHO AFTER EXAMINING THE DETAILS AND PERUSING THE MATERIAL ON RECORD FOUND THAT IN EARLIER YEARS THE GP RATE SHOWN BY ASSESSEE IS ABOUT 12.5% AND, THEREFORE, ASSESSING OFFICER WAS NOT COR RECT IN APPLYING NP RATE OF 7.5%. BY GIVING HIS OWN WORKING, THE LD. CIT (A) ENHANCED TH E ADDITION TO RS. 30,74,142/- INSTEAD OF RS. 21,68,493/-. THE LD. CIT (A) HAS DIRECTED T HE ASSESSING OFFICER APPLY 12.5% RATE SUBJECT TO DEPRECIATION, NET INTEREST AND SUBLETTIN G COMMISSION. 7. WE HAVE CONSIDERED THE WRITTEN SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD AND WE FIND THAT FOR ASSESSMENT YEAR 2005-06 ON CON TRACT RECEIPTS OF RS. 2.2 CRORE OR ODD NP RATE WAS SHOWN AT 9.14%. THE ASSESSING OFFICER APPLIED 10% WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3). FOR ASSESSMENT YE AR 2006-07, ON CONTRACT RECEIPT OF RS. 3.30 CRORES, THE ASSESSEE HAS SHOWN NP RATE OF 8.88 % AND THE ASSESSING OFFICER MADE ADDITION OF RS. 85,000/- UNDER SECTION 143(3). IN THE YEAR UNDER CONSIDERATION, ASSESSEE HAS SHOWN CONTRACT RECEIPT OF RS. 6.36 CRORES AND H AVE SHOWN NP RATE OF 5.7%. IN OUR 3 VIEW, THE ASSESSING OFFICER AND LD. CIT (A) SHOULD HAVE TAKEN INTO CONSIDERATION THE PAST HISTORY WHICH IS MORE RELIABLE. THE HONBLE HIGH C OURT HAS ALSO HELD THAT THE PAST HISTORY IS THE BEST GUIDE TO DEDUCE THE CORRECT PRO FIT AFTER REJECTING THE BOOKS OF ACCOUNT. IT IS ALSO SEEN THAT WHILE DISPOSING THE APPEAL FOR ASSESSMENT YEAR 1998-99, THE TRIBUNAL IN CASE OF ASSESSEE HIMSELF HAS HELD THAT NP RATE S HOULD BE APPLIED ON THE BASIS OF PAST YEAR. FACTS AND CIRCUMSTANCES OF THE CASE IN HAND ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF ASSESSMENT YEARS 2005-06 AND 06-07 . THE NP RATE AFTER VARIOUS DEDUCTIONS COMES TO 9.1% AFTER MAKING ADDITION OF R S. 85,000/- FOR ASSESSMENT YEAR 2006-07. FOR ASSESSMENT YEAR 2005-06 THE NP RATE W AS 10% AFTER MAKING ADDITION BY THE ASSESSING OFFICER. KEEPING IN MIND THE PAST HISTOR Y AND TAKING INTO CONSIDERATION THE SUBSTANTIAL INCREASE IN THE CONTRACT RECEIPTS, WE A RE OF THE VIEW THAT IF A NP RATE OF 9% IS APPLIED FOR THE YEAR UNDER CONSIDERATION, THAT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO REVENUE-COMPUTE THE INCOME BY APPLYING 9% NP ON THE TOTAL RECEIPTS BEFORE DEDUCTION OF STATUTORY AL LOWANCES AND STATUTORY ALLOWANCES ARE ALSO TO BE ALLOWED, AS ALLOWED IN PAST. WE ORDER AC CORDINGLY. 8. REMAINING ISSUE IS AGAINST MAKING ADDITION OF RS . 16,00,000/- BY ASSESSING OFFICER UNDER SECTION 40(A)(IA). 9. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PAID HIRE CHARGES ON ACCOUNT OF MACHINES AND HAS NOT DEDUCTED TDS. THEREFORE, HE M ADE ADDITION OF RS. 16,00,000/- IN VIEW OF PROVISIONS OF SECTION 40(A)(IA). THE LD. C IT (A) HELD THAT PROVISIONS OF SECTION 194-I ARE APPLICABLE AND ASSESSEE FAILED TO DEDUCT TDS. ACCORDINGLY, HE CONFIRMED THE ORDER OF ASSESSING OFFICER. 10. THE LD. A/R INVITED ATTENTION OF THE BENCH ON T HE WRITTEN SUBMISSIONS. 4 11. ON THE OTHER HAND, THE LD. D/R PLACED RELIANCE ON THE ORDERS OF THE ASSESSING OFFICER AND LD. CIT (A). 12. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT ASSESSEE DESERVES TO SUCCEED ON THIS ISSUE ALSO. THE LD. CIT (A) HAS CLEARLY HELD THAT PROVISIONS OF SECTION 194-I ARE APPLICABLE AND, THEREFORE, TDS HAS TO BE DEDUCTED. IT IS SEEN THAT PROVISIONS OF SECTION 194-I CAME ON STATUTE WITH EFFECT FROM 1.6.2007 AND THE ACCOUNTING YEAR OF THE ASSESSEE ENDED ON 31.3.2007. THEREFORE, PROVISIONS OF SECTIO N 194-I WERE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. // THE HONBLE MADRAS HIG H COURT IN CASE OF CIT VS. D. RATHINAM, 55 DTR 382 HAVE HELD SO, COPY OF THE ORDE R OF HONBLE MADRAS HIGH COURT IS PLACED IN THE PAPER BOOK AT PAGES 18 TO 22. THE FINDING OF HONBLE HIGH COURT HAS BEEN GIVEN IN PARA 7 WHERE THEY HAVE NOTED THAT // THE CONCLUSION OF THE TRIBUNAL, IN HAVING HELD THAT THE RELEVANT SECTION WHICH WAS APPLICABLE TO THE CASE ON HAND, IN RELATION TO THE SUM OF RS. 52,22,500 INCURRED BY THE RESPONDENT-ASS ESSEE BY WAY OF HIRE CHARGES, WOULD FALL UNDER S. 194-I OF THE IT ACT, IS UNASSAILABLE. THEREFORE, WHEN INDISPUTABLY S. 194-I OF THE IT ACT CAME TO PROVIDE FOR MAKING THE TDS IN RE SPECT OF MACHINERIES/EQUIPMENTS ONLY W.E.F. 1 ST JUNE, 2007 AND THE RELEVANT ASSESSMENT YEAR IS 200 5-06, THERE WAS NO SCOPE AT ALL TO FIND FAULT WITH THE RESPONDENT-ASSESSEE F OR ANY VIOLATION OF S. 40(A)(IA) OF THE IT ACT. // APART FROM THIS, THE HONBLE HIGH COURT HA S ALSO HELD THAT THERE WAS NO CONTRACT BY THE ASSESSEE AND, THEREFORE, EVEN PROVISIONS OF SECTION 194C ARE NOT APPLICABLE AND, THEREFORE, NO ADDITION COULD HAVE BEEN MADE UNDER S ECTION 40(A)(IA). THE FACTS OF THE CASE IN HAND ARE EXACTLY THE SAME. NEITHER THERE I S ANY CONTRACT FOR HIRING OF MACHINERY NOR THE PROVISIONS OF SECTION 194-I ARE APPLICABLE FOR THE YEAR UNDER CONSIDERATION AS THE YEAR UNDER CONSIDERATION IS ASSESSMENT YEAR 2007-08 WHEREAS THE PROVISIONS OF SECTION 5 194-I ARE APPLICABLE FOR SUBSEQUENT YEAR I.E. ASSES SMENT YEAR 2008-09. THEREFORE, IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DECISION OF HONBLE MADRAS HIGH COURT (SUPRA), WE HOLD THAT ADDITION MADE UNDER SEC TION 40(A)(IA) WAS NOT CORRECT AND ACCORDINGLY WE DELETE THE SAME. 13. NEXT ISSUE IS AGAINST INITIATION OF PROCEEDINGS UNDER SECTION 271(1)(C) IS IMMATURE. THEREFORE, THE SAME IS REJECTED AT THIS P OINT OF TIME. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 15. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- SHRI KAILASH CHAND KHATRI, JAISALMER. THE ADDL. CIT, CIRCLE BARMER. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 173/JODH/2011) BY ORDER, AR ITAT JODHPUR.