Essbee Supply Syndicate, Kolkata V. ITO, Ward - 28(3), Kolkata, Kolkata

ITA 174/KOL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9252 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2011
• Court: TRIBUNAL
• Department Lawyers: P P SARKAR
• Assessee Lawyers: N O N E
• Keywords: Business income
• Section: 271(1)(c); 44AD; 143(3); 40(b); 143(1); 147; 148; 144

Judgement Text

, SMC(C) , , IN THE INCOME TAX APPELLATE TRIBUNAL SMC(C) BENCH : KOLKATA () BEFORE , ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM] / I.T.A NOS. 174 & 175/KOL/2011 !' !' !' !'/ // / ASSESSMENT YEAR : 2005-06 ESSBEE SUPPLY SYNDICATE VS INCOME-TAX OFFICER, W D-28(3), KOLKATA (PAN-AAAFE 6877 B) ( $% /APPELLANT ) (&'$%/ RESPONDENT ) FOR THE APPELLANT: N O N E FOR THE RESPONDENT: SHRI P. P. SARKAR () / ORDER THESE TWO APPEALS BY ASSESSEE ARE ARISING OUT OF OR DERS OF CIT(A)-XIV, KOLKATA IN APPEAL NOS.233 & 238/CIT(A)-XIV/08-09 VIDE DATED 11.08.2010. THE ASSESSMENT WAS FRAMED BY ITO, WARD-28(3), KOLKATA U/S 144/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2005-06 VIDE HIS ORDER DATED 10.04.2008. THE PENALTY WAS LEVIED U/S. 271(1)(C) OF THE ACT BY ITO, WD-28(3), KOLKATA VIDE ORDER DATED 31.10.2008. 2. BOTH THESE APPEALS ARE TIME BARRED BY 102 DAYS A ND THIS IS AN ADMITTED POSITION. THE ASSESSEE HAS FILED CONDONATION PETITIONS STATIN G THE REASON THAT DUE TO LONG STANDING SERIOUS ILLNESS ON ACCOUNT OF CEREBRAL ATTACK FOR A COUPLE OF TIMES IN RECENT PAST TO THE WORKING PARTNER, WHO IS 65 YEARS OLD AND FIGHTING F OR HIS LIFE COULD NOT FILE APPEALS BEFORE TRIBUNAL IN TIME. ACCORDING TO ASSESSEE, SU CH DELAY WAS NOT INTENTIONAL OR DUE TO NEGLIGENCE ON THE PART OF THE ASSESSEE AND CONSIDER ING THE CASE OF THE ASSESSEE, THE DELAY BE CONDONED. THE ASSESSEE ALSO FILED COPY OF CERTIF ICATE FROM DR. CHANDRA SEKHAR SAPHUI DATED 15.1.2011. THE LD. DR HAS STATED THAT THE DELAY IS OF 102 DAYS AND BENCH CAN TAKE A DECISION. CONSIDERING THE FACTS AND CIRC UMSTANCES AND CONSIDERING THE MERITS OF THE CASE, I AM OF THE VIEW THAT DELAY BE CONDONE D AND ACCORDINGLY, THE SAME IS CONDONED. 2 3. THE ASSESSEE RAISED THE INTER-CONNECTED GROUNDS REGARDING REOPENING U/S. 147 AS WELL AS ON MERITS REGARDING ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 44AD OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOL LOWING FOUR GROUNDS: 1. THAT THE ASSESSMENT IS BAD IN LAW AS WELL ON FACTS . 2. THAT THE LEARNED ASSESSING OFFICER HAS ERRED TO SELECT THIS CASE FOR RE-OPEN U/S. 147 ON HIS MISBELIEVE THAT APPELLANT WAS A CONTRAC TOR ENGAGED IN CIVIL CONSTRUCTION JOB WHILE IN FACT THE APPELLANT WAS CONTRACTOR ENGAGED IN LABOUR JOB FOR MAKING FOAM BAG. 3. THAT THE LEARNED ASSESSING OFFICER HAS ERRED TO REOPEN THE CASE ON MERE SUSPICION THAT APPELLANT IS A CIVIL CONTRACTOR WHIC H NEITHER ON THE BASIS OF ANY MATERIAL IN HIS RECORD NOR ON THE BASIS OF ANY OTHE R DIRECT OR CIRCUMSTANTIAL EVIDENCE. 4. THAT THE LEARNED ASSESSING OFFICER HAS ERRED FOR TR EATING THE APPELLANT AS CONTRACTOR ENGAGED IN CIVIL CONSTRUCTION THUS ESTIMATED THE T AXABLE INCOME @ 8% ON GROSS BUSINESS RECEIPTS IN TERMS OF SECTION 44AD OF THE INCOME TA X ACT, 1961 WHILE IN FACT THE APPELLANT HAS NO HISTORY TO EARN 8% PROFIT IN THE PRECEDING YEARS. 4. THE BRIEF FACTS LEADING TO ABOVE ISSUE ARE THAT FOR ASSESSMENT YEAR 2005-06 I.E. ASSESSMENT YEAR UNDER CONSIDERATION, THE ORIGINAL R ETURN FILED WAS PROCESSED U/S. 143(1) ON 24.3.2006. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED CONTRACTUAL JOB CHARGES OF RS.24,88,836/-, ON WHICH IT HAD DISCLOSED NET PROFIT AT RS.1,18,354/- AND ACCORDING TO HIM, THIS WAS LES S THAN 8% OF THE GROSS PROFIT. ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEES AC COUNTS ARE NOT AUDITED AS REQUIRED U/S. 44AB OF THE ACT. THEREFORE, ACCORDING TO HIM, PROV ISIONS OF SECTION 44AD OF THE ACT ARE APPLICABLE. ACCORDINGLY, HE ISSUED NOTICE U/S. 148 READ WITH SECTION 147 OF THE ACT ON 29.6.2007 I.E. WELL WITHIN FOUR YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR. IN THIS CASE, NO ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT. HENCE, I AM OF THE VIEW THAT THE REOPENING IS MADE AFTER RECORDING OF REASONS AN D AS PER THE PROVISIONS OF THE ACT. 5. NOW, I AM GOING THROUGH THE FACTS ON MERITS OF T HE CASE. IT IS FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF JOB WORK FOR MAKING FOAM BAGS AND THE ASSESSEE IS NOT ENGAGED IN CIVIL CONSTRUCTION BUSINESS AS ALLEG ED BY THE ASSESSING OFFICER. BEFORE ASSESSING OFFICER, THE ASSESSEES MAIN PARTNER FILE D NO OBJECTION FOR REJECTION OF BOOKS RESULTS AND THE ASSESSING OFFICER HAS RECORDED THE FOLLOWING FINDINGS: 3 THE PARTNER OF THE ASSESSEE FIRM ALSO EXPRESSED TH E NO OBJECTION IF THE SAID P&L A/C. & BALANCE SHEET (ALONGWITH THE BOOKS OF A/ C. DEPENDING ON WHICH THE SAID FINANCIAL STATEMENTS WERE PREPARED) WERE REJEC TED U/S. 145(3) OF I. T. ACT AND THE ASSESSMENT BE COMPLETED WITH THE NET PROFIT OF THE FIRM BE ESTIMATED @ 8% OF THE GROSS RECEIPTS, WHICH COMES TO RS.1,99,107/-, ( THE FIRM BEING ENGAGED IN THE CONTRACTUAL JOB) CONSIDERING THE MATERIALS AVAILABL E ON RECORD IN THE MANNER PROVIDED IN SECTION 144. 6. ACCORDINGLY, ASSESSING OFFICER ASSESSED THE ASSE SSEE U/S. 44AD BY APPLYING NET PROFIT @ 8% WITHOUT ALLOWING REMUNERATION AND INTER EST TO PARTNERS U/S. 40(B) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE C IT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON MERITS BUT A LLOWED REMUNERATION AND INTEREST TO PARTNERS U/S. 40(B) OF THE ACT. AGGRIEVED, ASSESSE E PREFERRED APPEAL BEFORE THE TRIBUNAL IN RESPECT TO CONFIRMATION OF APPLICATION OF NET PR OFIT @ 8% APPLYING SECTION 44AD OF THE ACT. 7. I HAVE HEARD SUBMISSIONS OF THE LD. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ASSESSE E ADMITTEDLY IS IN THE BUSINESS OF MAKING OF FOAM BAGS ON CONTRACTUAL BASIS AND NOT EN GAGED IN CIVIL CONSTRUCTION WORK. ONCE IT IS AN ADMITTED FACT THAT ASSESSEE IS NOT EN GAGED IN CIVIL CONSTRUCTION WORK, THE PROVISIONS OF SECTION 44AD CANNOT BE APPLIED. SINC E THE ASSESSEES TURNOVER IS AT RS.24,88,836/- AND ASSESSEE IS ENGAGED IN THE BUSIN ESS OF FOAM BAGS ON CONTRACTUAL BASIS, THE PROVISIONS OF SECTION 44AF WILL APPLY TO THE PRESENT CASE. IN MY VIEW, THE NET PROFIT IN TERMS OF SECTION 44AF SHOULD HAVE BEEN AP PLIED AT 5% AND I ORDER ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS IND ICATED ABOVE. 8. NOW, COMING TO ITA NO.175/K/2011, ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE CONFIRMATION OF PENALTY LEVIED BY ASSES SING OFFICER U/S. 271(1)(C) OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWI NG TWO EFFECTIVE GROUNDS: 2. THAT THE ASSESSING OFFICER HAD ACTED WITHOUT J URISDICTION AT THE TIME OF MAKING THE IMPUGNED ASSESSMENT U/S. 147 FOLLOWED BY IMPOSITION OF THIS PENALTY, AS THE REASON FOR HIS BELIEF OF RE-OPENING THE CASE THAT THE APPELLANT IS CIVIL CONTRACTOR IS NOT TRUE AT ALL. 3. THAT THE LEARNED ASSESSING OFFICER HAS ERRED TO IMPOSE PENALTY FOR CONCEALMENT OF INCOME, WHILE ASSESSMENT HAS BEEN CO MPLETED UNDER SECTION 144 BY ESTIMATING THE INCOME PURELY ON PRESUMPTION BASIS AND WITHOUT HAVING ANY SINGLE EVIDENCE THAT THE IMPUGNED ADDITION REPR ESENT THE APPELLANTS CONCEALED INCOME. 4 9. AT THE OUTSET, IT IS TO BE STATED THAT THE ENTIR E FACTS ARE DISCUSSED IN THE ABOVE APPEAL, NOW THE QUESTION ARISES WHETHER IN THE ABOV E CIRCUMSTANCES AND INCOME ESTIMATED U/S. 44AF OF THE ACT, WHETHER THE ASSESSE E IS LIABLE FOR PENALTY U/S. 271(1)(C) OF THE ACT OR NOT. I AM OF THE VIEW THAT ONCE THE INCOME IS ASSESSED U/S. 44AF AND NO OTHER ADDITION IS MADE OR CONFIRMED, PENALTY U/S. 2 71(1)(C) CANNOT BE LEVIED AS THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF ANY INACC URATE PARTICULARS OF INCOME BY THE ASSESSEE. THIS BEING THE CASE, I DELETE THE PENALT Y AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE VIZ. ITA NO.174/K/2011 IS ALLOWED IN PART AND ITA NO.175/K/2011 IS ALLOWED. 11. ORDER PRONOUNCED IN OPEN COURT ON 16 TH DAY OF MARCH, 2011. SD/- , (MAHAVIR SINGH) JUDIC IAL MEMBER ( *+ *+ *+ *+) )) ) DATED 16 TH DAY OF MARCH, 2011 ,- ./ 0 JD.(SR.P.S.) () 1 &2 3(2!4- COPY OF THE ORDER FORWARDED TO: 1 . $% / APPELLANT ESSBEE SUPPLY SYNDICATE, 190, RAJA RAMMOHAN ROY ROAD, KOLKATA-700 008. 2 &'$% / RESPONDENT, ITO, WARD-28(3), KOLKATA. 3 . ) / THE CIT(A), KOLKATA 4. ) ( )/ CIT, KOLKATA 5 . ;< & / DR, KOLKATA BENCHES, KOLKATA '2 &/ TRUE COPY, ()=/ BY ORDER, / /ASSTT. REGISTRAR .