ACIT, Thanjavur V. M/s. Marimuthu Gounder & Sons, Vedaranyam

ITA 1805/CHNY/2010

• Counselvise Citation: 180521714 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMETH JCIT SR
• Assessee Lawyers: K SOUNDARARAJAN
• Keywords: Depreciation
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1805/MDS/2010 ASST. YEAR : 2007-08 AND C.O. NO.162/MDS/2010 IN (I.T.A. NO. 1805/MDS/2010 ASST. YEAR : 2007-08 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE I, THANJAVUR (APPELLANT) V. M/S. MARIMUTHU GOUNDER & SONS, NO.3/33, NADUKKADU, KURAVAPULAM, VEDARANYAM TK. PAN AAOFM0505 A (RESPONDENT/CROSS OBJECTOR) DEPARTMENT BY : SHRI YOGESH KAMETH, JCIT, SR.AR ASSESSEE BY : SHRI K. SOUNDARARAJAN, ADVOCA TE DATE OF HEARING : 05 JULY 2012 DATE OF PRONOUNCEMENT : 13 TH JULY 2012 O R D E R PER S.S. GODARA, JUDICIAL MEMBER : THIS REVENUES APPEAL AS WELL AS ASSESSEES CROSS OBJECTION ARISE FROM THE ORDER OF THE CIT(APPEALS), TIRUCHIRAPALLY, DATED 26.8.2010 PASSED IN I.T.A. NO. 1805, CO 162/MDS/10 2 ITA NO.210/09-10 FOR THE ASSESSMENT YEAR 2007-08. THE RELEVANT PROCEEDINGS ARE UNDER SEC.143(3) OF THE I.T. ACT (IN SHORT ACT) . 2. THE BRIEF FACTS OF THE CASE MAY BE NOTICED. TH E ASSESSEE FIRM IS A CIVIL CONTRACTOR WHO FILED ITS RETURN OF INCOME F OR THE ASSESSMENT YEAR 2007-08 DECLARING ITS INCOME AT ` 10,01,090/-. IN SCRUTINY PROCEEDINGS IT PRODUCED I TS LEDGER IN THE ABSENCE OF CASH BOOK OR DAY BOOK. TH E ASSESSING OFFICER ASKED THE ASSESSEE TO FILE BILLS AND VOUCHERS IN RESPECT OF T HE EXPENDITURE CLAIMED WHICH WERE PRODUCED ONLY IN PART. THE ASSESSING OFFICER FOUND ALL OF THEM TO BE SELF- CREATED AND TREATED THEM AS UNVERIFIED. 3. REGARDING TURNOVER AND ASSESSEES NET PROFIT, T HE ASSESSING OFFICER HELD AFTER PERUSING PROFIT AND LOSS ACCOUNT IT WAS FOUND THAT THE TURNOVER WAS `. 603.36 LAKHS, AND THE ASSESSEE HAD ADMITTED A NET P ROFIT OF ` .9,64,928/- AFTER CLAIMING SALARY AND INTEREST PAID TO THE PARTNERS. THE ASSESSING OFFICER FURTHER CONCLUDED THAT THE EXPENSES IN THE SHAPE OF MATERIA L, LABOUR, WAGES ETC., WERE CLAIMED AT ` .571.59 LAKHS WHICH WERE ON THE HIGHER SIDE AT THE RATE OF 94.73%. ACCORDINGLY, AFTER REJECTING THE ASSESSEES LEDGER ACCOUNT, THE ASSESSING OFFICER COMPUTED INCOME AT THE RATE OF 8% OF THE TURNOVER IE ., ` .48,26,920/-, AFTER INCLUDING DEPRECIATION, INTEREST AND SALARY PAID TO THE PARTNERS. AS PER ASSESSING OFFICERS ORDER, THE ASSESSEES NET INCOME WORKED O UT TO BE ` .48,63,070/-. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE CIT(APPEALS). THE SAME HAS BEEN PARTLY ACCEPTED AS FOLLOWS:- FROM THE SUBMISSION OF THE AR, IT IS CLEAR THAT EV EN THOUGH THE CASE IS AUDITED UNDER SECTION 44AB OF THE INCOME TA X ACT, THE I.T.A. NO. 1805, CO 162/MDS/10 3 ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT ESTI MATING PROFIT AT 8%, WHICH IS APPLICABLE ONLY FOR SMALL CONTRACTS AND NOT FOR STATUTORY AUDIT CASES. THE APPELLANTS AR ARGUED T HAT AS PER DECISION OF THE HON,BLE RAJASTHAN HIGH COURT IN TH E CASE OF SHRI RAM JHANWAR LAL V. ITO, BIKANER [321 ITR 400], THE ASSESSING OFFICER SHOULD NOT HAVE ESTIMATED THE PROFIT UNDER SECTION 44AD OF THE INCOME TAX ACT. THE APPELLANTS AR FURTHER ARG UED THAT IN THE APPELLANTS CASE FOR THE ASSESSMENT YEARS 2005-06 & 2006-07, THE A.O (JCIT) HAS FIXED PROFIT AT 5% ON THE CONTRACT RE CEIPTS. CAREFULLY CONSIDERING THE SUBMISSIONS OF THE APPELL ANT AND OTHER MATERIALS ON RECORD, THE ASSESSING OFFICER IS DIREC TED TO FIX NET PROFIT OF THE APPELLANT AT 5% REASONABLY AND ALLOW SALARY AND INTEREST TO THE PARTNERS AS PER LAW. 5. IT IS IN THIS BACKGROUND THAT ON THE ONE HAND T HE REVENUE HAS CHALLENGED THE CIT(APPEALS)S ORDER IN ESTIMATING T HE ASSESSEES PROFITS AT THE RATE OF 5% INSTEAD OF 8% AS DETERMINED BY THE ASSESSI NG OFFICER. ON THE OTHER HAND, THE ASSESSEE HAS ARGUED THAT AS THE TURNOVER OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS MORE THAN ` .40 LAKHS, SEC.44AD WAS NOT APPLICABLE TO THE ASSESSEE AND, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE PROFITS OF THE ASSESSEE AT 8%. HE FURTHER ARGUE D THAT THE CIT(APPEALS) HAS RIGHTLY ESTIMATED THE PROFIT OF THE ASSESSEE AT 5% B ASED ON THE PAST ACCEPTED POSITION OF THE ASSESSEE IN ASSESSMENTS MADE UNDER SEC.143(3) IN THE ASSESSMENT YEARS 2005-06 AND 2006-07. I.T.A. NO. 1805, CO 162/MDS/10 4 6. BEFORE US, THE D.R., HAS STRONGLY SUPPORTED VA RIOUS PLEAS RAISED IN THE GROUNDS OF APPEAL. THE SAME HAS BEEN OPPOSED B Y THE A.R., BY RELYING ON THE FINDINGS OF CIT(APPEALS). 7. WE HAVE HEARD RIVAL CONTENTIONS OF THE PARTIES. UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS REJECTE D THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND COMPUTED THE PROFIT OF THE ASSESSEE AT THE RATE OF 8% OF THE TOTAL TURNOVER. THEREAFTER THE CIT(APPEALS) HAS REDUCED THE ASSESSEES PROFIT MARGIN AT THE RATE OF 5% BY DIRECTING THE ASSESSING OFFICE R TO ALLOW SALARY AND INTEREST TO THE PARTNERS AS PER LAW (SUPRA). WE FIND THAT W HILE REACHING THE CONCLUSION, THE CIT(APPEALS) HAS RELIED ON THE PAST ACCEPTED PO SITION IN ESTIMATING THE PROFIT @ 5% IN ASSESSMENT YEARS IE.,. 2005-06 AND 2006-07 . WE FIND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR ADOPT ING THE RATE OF 8% IN DETERMINING THE PROFIT OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEA LS). C.O. NO.162/MDS/2010 : 8. SINCE WE HAVE ALREADY DISMISSED THE APPEAL ON M ERITS, IN OUR OPINION, THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAS BECOME ACADEMIC IN NATURE AND HENCE DISMISSED. HENCE THE SAME ARE NO T DECIDED HEREWITH. 9. IN THE RESULT, THE APPEAL IF THE REVENUE AND TH E CROSS OBJECTIONS OF THE ASSESSEE BOTH ARE DISMISSED. I.T.A. NO. 1805, CO 162/MDS/10 5 9. ORDER PRONOUNCED ON FRIDAY, THE 13 TH DAY OF JULY 2012 AT CHENNAI. SD/- SD/- ( N.S. SAINI) ( S.S. GODARA ) ACCOUNTAT MEMBER JUDICIAL MEMBER CHENNAI, DATED : 13 TH JULY 2012 JLS. COPY TO: - (1) APPELLANT, (2) RESPONDENT, (3) CIT(A)-II, COIMBATORE , (4) CIT-III, COIMBATORE , (5) DR, (6) GUARD FILE.