ACIT, Vellore V. Shri M.N.Balasundaram, CHENNAI

ITA 1830/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52110 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Assessee Lawyers: V D GOPAL
• Keywords: Unexplained cash credit; Gift; Depreciation; Income from undisclosed sources; Wrong claim; Corroborative evidences; Retraction
• Section: 142(1); 68; 144

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI B BENCH, CHENNAI. BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER I.T.A. NO. 1830/MDS/2010 ASSESSMENT YEAR: 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, VELLORE. VS. M/S. M N BALASUNDARAM, NO. 72, MAIN ROAD, MANGADU, CHENNAI - 602 101 [PAN:AAFPB9440C] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R.B. NAIK, CIT DR ASSESSEE BY : SHRI V.D. GOPAL, ADVOCATE DATE OF HEARING : 24.11.2011 DATE OF PRONOUNCEMENT 30.11.2011 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL OF THE REVENUE, FOR THE ASSESSMENT YEAR 2006-07, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) IX, CH ENNAI, DATED 30.07.2010. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE, AS INDIVIDUAL DERIVED INCOME FROM RUNNING A BUSINESS OF PETROL BU NK IN THE NAME AND STYLE OF M/S. THILLAI NATARAJA AGENCIES AND ALSO DE RIVED INCOME FROM CIVIL CONTRACT WORKS. FOR THE ASSESSMENT YEAR 2006-07, HE FILED THE RETURN OF INCOME ON 31.10.2006 DECLARING TAXABLE INCOME OF ` .19,92,380/- AND ALSO SHOWED NET AGRICULTURAL INCOME OF ` .1,50,000/-. THIS RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 15.03. 2007 BY AC CIRCLE-I, VELLORE. THEREAFTER, ON 15.03.2007 A NOTICE UNDER S ECTION 143(2) OF THE ACT I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 2 WAS SENT TO THE ASSESSEE. WHEN THERE WAS NO RESPONS E, AGAIN NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED TO HIM ON 22.07.2008. THE ASSESSEE WAS REQUIRED TO PRODUCE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS IN SUPPORT OF THE RETURN OF INCOME FILED BY HIM. DESPI TE VARIOUS SUBSEQUENT REMINDERS AS MENTIONED IN PARA 1 AND 2 OF THE ASSES SMENT ORDER, NOTICES WERE NOT COMPLIED WITH. THEREFORE, THE ASSESSING OF FICER PROCEEDED TO COMPLETE THE ASSESSMENT EX-PARTE QUA THE ASSESSEE U NDER THE PROVISIONS OF SECTION 144 OF THE ACT BASED ON THE MATERIALS AVAIL ABLE ON RECORD. 3. AS PER THE ASSESSING OFFICER, THE ASSESSEE IS D OING THE BUSINESS OF CIVIL CONTRACT IN THE NAME OF M/S M N BALASUNDARAM. HE WAS ALSO RUNNING A PETROL BUNK BY THE NAME M/S. THILLAI NATARAJA AGENC IES. THE ASSESSEE HAD ENCLOSED SEPARATE TRADING AND PROFIT AND LOSS ACCOU NT AND BALANCE SHEET FOR THESE TWO BUSINESS CONCERNS. AS PER TRADING, PR OFIT AND LOSS ACCOUNT PERTAINING TO THE BUSINESS OF CIVIL CONTRACT, THE A SSESSEE HAS CLAIMED VARIOUS EXPENSES LIKE, PURCHASE OF MATERIALS, WAGES, VEHICL E MAINTENANCE, ETC. IN THE TRADING AND PROFIT AND LOSS ACCOUNT PERTAINING TO THE PETROL BUNK BUSINESS, THE ASSESSEE HAS CLAIMED EXPENSES LIKE PU RCHASES, TRANSPORT, SALARY, MAINTENANCE, ETC. THE ASSESSING OFFICER HAS DISALLOWED 25% OF THE EXPENSES CLAIMED PERTAINING TO THE BUSINESS OF CONT RACT BY TREATING THEM ON HIGHER SIDE, WHICH COMES TO ` .66,14,513/-. THE FOLLOWING CHART DEPICTS THE EXPENSES CLAIMED, IN THIS BUSINESS: I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 3 S.NO. HEAD OF EXPENSES AMOUNT IN RUPEES 1. PURCHASES ` . 1,18,76,727.00 2. WAGES `. 57,74,800.00 3. DIESEL & OIL `. 62,96,847.00 4. CRUSHER MAINTENANCE `. 12,55,947.00 5. VEHICLE MAINTENANCE `. 7,45,417.00 6. REPAIRS & MAINTENANCE `. 5,08,314.00 TOTAL `. 2,64,58,052.00 LIKEWISE, FROM THE BUSINESS OF PETROL BUNK, THE ASS ESSEE HAS CLAIMED THE FOLLOWING EXPENSES: S.NO. HEAD OF EXPENSES AMOUNT IN RUPEES 1. DRIVER SALARY & BATA ` . 1,58,920.00 2. VEHICLE MAINTENANCE `. 87,684.00 3. REPAIRS & MAINTENANCE `. 1,03,601.00 4. SALARY & WAGES `. 2,89,412.00 5. STAFF WELFARE `. 73,939.00 TOTAL `. 7,13,556.00 IN THE SAME WAY, THE ASSESSING OFFICER HAS DISALLO WED A SUM OF ` .1,78389.00 BEING 25% OF THE TOTAL EXPENSES CLAIMED IN THIS BUSINESS ALSO. AN AMOUNT OF ` .15,00,000/-, WHICH HAS BEEN SHOWN AS LOAN FROM OUT SIDER, HAS BEEN TREATED AS UNEXPLAINED CASH CREDITS AND HA S BEEN ADDED UNDER SECTION 68 OF THE ACT. THE CLAIM OF AGRICULTURAL IN COME OF ` .1,50,000/- HAS BEEN TOTALLY REJECTED AND HAS BEEN ADDED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE COMPUTATION OF INCOME FOR THIS YEAR O N THE ABOVE LINES WAS SEND TO THE ASSESSEE VIDE LETTER DATED 17.12.2008 C ALLING FOR ASSESSEES OBJECTION, IF ANY, BUT WHEN THERE WAS NO RESPONSE F ROM HIM, AFTER PRESUMING THAT THE ASSESSEE HAS GOT NO EVIDENCE/DOCUMENT IN P ROOF OF HIS CLAIM, THE I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 4 ASSESSING OFFICER HAS COMPLETED EX-PARTE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AS DISCUSSED ABOVE. 4. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO HAS GIVEN RELIEF OF ` .76,30,514/- AND HAS SUSTAINED ADDITION OF ` .8,12,388/- ( ` .7,43,154 + 69,234). 5. NOW THE REVENUE IS AGGRIEVED AND HAS RAISED THE FOLLOWING GROUNDS IN SECOND APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN DELETION OF ` .18,86,687/ - OUT OF THE ADDITION SUGGESTED IN THE REMAND REPORT BY THE ASSE SSING OFFICER AMOUNTING ` .25,60,607/- TOWARDS THE DISALLOWANCE OF EXPENDITUR E FOR NON PRODUCTION OF BILLS, VOUCHERS ETC ON CONTRACT WORKS. 2.1 IT IS SUBMITTED THAT THE VIDE LETTER DT.15/10/09 ADDITIONAL INCOME OF ` .25,60,607/ - ON CONTRACT WORKS WAS VOLUNTARILY ADMITTED BY THE ASSESSEE SINCE HE DID NOT HAVE EVIDENCES FOR THE EX PENSES CLAIMED IN HIS TRADING AND PROFIT AND LOSS ACCOUNT. 2.2 THE LD CIT(A) ERRED IN FIXING THE INCOME FROM C ONTRACT BUSINESS AT 8% ON THE GROSS RECEIPTS WITHOUT ASSIGNING ANY R EASON. 2.3 THE LD CIT(A) OUGHT HAVE SEEN WHEN THE ASSESSEE HIMSELF HAD ADMITTED ` .25,60,607/- AS UNACCOUNTED INCOME UNDER CONTRACT W ORKS, THERE IS NO NEED TO RESTRICT THE ADDITION INTO ` .7,43,154/- @ 8% OF GROSS CONTRACT RECEIPTS. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORD AVAILABLE BEFORE US. IT IS EVIDENT FR OM THE RECORD THAT DURING THE I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 5 COURSE OF FIRST APPELLATE PROCEEDINGS, THE ASSESSEE FILED HIS WRITTEN SUBMISSIONS, WHICH WERE FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS VIDE OFFICE LETTER DATED 19.05.2009. IN RE SPONSE TO THIS LETTER, THE ASSESSING OFFICER FILED HIS REPLY ON 20.10.2009 AS UNDER: 4.1 IN RESPECT OF CONTRACT BUSINESS : IT IS SEEN THAT IN SPITE OF GIVING SEVERAL OPPORT UNITIES, THE ASSESSEE COULD NOT PRODUCE SUPPORTING EVIDENCES FOR INCURRING THE EXPENSES TOTALING ` .25,60,607/- IN RESPECT OF CONTRACT BUSINESS. UNDER THE CIRCUMSTANCES, IT IS SUBMITTED THAT THE SAME MA Y BE DISALLOWED AND ADDED BACK TO THE TAXABLE INCOME. 4.2 IN RESPECT OF PETROL BUNK: IT IS SEEN THAT IN SPITE OF GIVING SEVERAL OPPORT UNITIES, THE ASSESSEE COULD NOT PRODUCE SUPPORTING EVIDENCES FOR INCURRING THE EXPENSES TOTALING ` .69,234/- IN RESPECT OF BUSINESS OF PETROL BUNK. UNDER THE CIRCUMSTANCES, IT IS SUBMITTED THAT THE S AME MAY BE DISALLOWED AND ADDED BACK TO THE TAXABLE INCOME. THE ASSESSEE HAS AGREED FOR THE DISALLOWANCE OF ` .26,29,841/- IN TOTAL IN RESPECT OF THE ABOVE TWO BUSINESSES AND AGREED FOR THE ADDING BACK OF THE ABOVE AMOUNT TO THE TAXABLE INCO ME. THE ASSESSEE HAS SUBMITTED A LETTER TO THIS EFFECT TO T HE HONBLE COMMISSIONER OF INCOME TAX (APPEAL) WITH A COPY TO THE UNDERSIGNED ON 15.10.2009 AND A COPY OF THE SAME IS SUBMITTED F OR COMMISSIONER OF INCOME TAX KIND PERUSAL. 7. IN RELATION TO CIVIL CONTRACT RECEIPTS, THE ASS ESSEE FILED WRITTEN SUBMISSIONS STATING THEREIN THAT IN THE ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER HIMSELF HAD ACCEPTED THE GROSS PR OFIT RATE OF 5.22%. I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 6 WHEREAS IN THE YEAR OF 2006-07, HE HAS TAKEN A DIFF ERENT STAND AND HAS DISALLOWED ` .25,60,607/- AND HAS ADDED TO THE INCOME OF THE ASS ESSEE FOR THE YEAR. THIS WRITTEN SUBMISSION WAS ALSO FORWARDE D TO THE ASSESSING OFFICER VIDE LETTER DATED 21.07.2010. THE ASSESSING OFFICER HAS REPLIED ON 29.07.2010 AS UNDER: THE ASSESSEE HAS IN HIS LETTER DATED 19.7.2010 SUB MITTED THAT THE TOTAL INCOME ASSESSED FOR THE ASSESSMENT YEAR 2007- 08 WAS ONLY 5.22% OF THE GROSS CONTRACT RECEIPTS, WHEREAS THAT NOW ESTIMATED IS 13.75% OF THE GROSS CONTRACT RECEIPTS. IN THIS CONN ECTION, IT IS SUBMITTED THAT THE ADDITIONAL INCOME OF ` .26,29,841/- WAS VOLUNTARILY ADMITTED BY THE ASSESSEE, SINCE HE DID NOT HAVE EVI DENCES FOR THE EXPENSES CLAIMED IN HIS TRADING AND PROFIT AND LOSS ACCOUNT. 8. MEANWHILE, THE ASSESSEE HAS FILED ANOTHER LETTE R DATED 30.07.2010, WHEREIN HE HAS OFFERED TO WITHDRAW THE LETTER DATED 19.07.2010, WHICH WERE ADDRESSED TO THE COMMISSIONER OF INCOME TAX (APPEAL S) AND THE RELEVANT PORTION READS AS UNDER: SUB: APPEAL NO. ITA-159/08-09 FOR THE A.Y. 2006-07 . REF: REPORT OF THE ASSISTANT COMMISSIONER TO JOINT COMMISSIONER DT. 20.10.2009 WITHDRAWAL OF MY PREVIOUS LETTER DATED 1 9.07.2010 AS PER THE ADVICE OF THE ASSESSING OFFICER AND THE CIT APPEAL REG. WITH REFERENCE TO THE ABOVE, I AM REQUESTING FOR TH E WITHDRAWAL OF THE ABOVE REFERRED LETTER SUBMITTED ON 19.07.2010 BY ME ADDRESSING THE COMMISSIONER OF INCOME-TAX, APPEAL IX, AND TO GIVE EFFECT FOR THE FOLLOWING EXPECTING JUSTICE AND RELIEF FROM THE DEP ARTMENT. I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 7 9. AFTER THAT THE LD. CIT(A), WITH REFERENCE TO TH E FACT THAT THE ASSESSEE IS A SMALL TRADER IN CIVIL CONTRACT WORK AND HAS TOTAL TURNOVER OF THE YEAR AS ` .3,16,07,685/- AND HAS SHOWN BUSINESS NET PROFIT OF ` .17,85,460/- WHICH GIVES NET PROFIT RATE OF 5.64%. WHEREAS, IN THIS LI NE OF BUSINESS, HE HAS FOUND THIS PROFIT RATE TO BE FAIR AND REASONABLE, BUT CON SIDERING NON-PRODUCTION OF BILLS, VOUCHER, ETC. ON THE EXPENSES CLAIMED AT ` .25,60,607/-, HE HAS INVOKED MAXIMUM PROFIT RATIO IN SIMILAR TRADERS CASE, WHIC H IS 8% ON THE TOTAL CONTRACT RECEIPTS, WHICH WORKS OUT TAXABLE INCOME O F ` .25,28,614/-. ACCORDINGLY, THE DIFFERENCE OF ` .7,43,154/- HAS BEEN SUSTAINED IN ADDITION TO ALREADY DECLARED NET PROFIT OF ` .17,85,460/-. 10. THE GRIEVANCE OF THE REVENUE IS THAT THE ASSES SEE HAD HIMSELF AGREED FOR THE ADDITION OF ` .25,60,607/- BECAUSE HE COULD NOT PROVE THIS EXPENDITURE WITH THE HELP OF BILLS AND VOUCHERS, SO , THIS VOLUNTARILY ADMITTED ADDITIONAL INCOME HAS TO BE ADDED APART FROM THE DE CLARED NET PROFIT. THE LD. DR HAS ALSO DISPUTED THE APPLICATION OF THE GROSS P ROFIT RATE OF 8% OF GROSS CONTRACT RECEIPTS. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HA VE FOUND THAT IN SO FAR AS ANY CIVIL CONTRACT BUSINESS IS CONCERNED, THE CA SE CAN AT BEST BE TREATED AS A CASE OF NON-MAINTENANCE OF BOOKS OF ACCOUNTS, AS NO RESPONSE WAS GIVEN BY THE ASSESSEE. WE MAY HASTILY ADD HERE THAT THE LD. CIT(A) HAS MISCONCEIVED THE FACTS BY STATING IN PARA 3.1 OF HI S ORDER, THAT THE ASSESSEE I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 8 HAD APPEARED ON VARIOUS DATES AND HAD PRODUCED BOOK S OF ACCOUNTS, BILLS AND VOUCHERS BEFORE THE ASSESSING OFFICER, RATHER T HIS IS A CASE OF NON- PRODUCTION OF ANY EVIDENCE DESPITE REPEATED REMINDE RS HAVING BEEN SENT TO HIM. IN ANY CASE, WE ARE BOUND TO DO JUSTICE TO BOT H THE PARTIES. IN THE CASE OF CIVIL CONTRACTEE, WHEN THE ASSESSEE IS NOT MAINT AINING ANY BOOKS OF ACCOUNTS AND AT THE SAME TIME THE CONTRACT RECEIPTS HAVE NOT BEEN DISTURBED OR DISPUTED BUT HAVE BEEN RATHER ACCEPTED AS SUCH B Y THE ASSESSING OFFICER, THE BEST COURSE TO ARRIVE THE TAXABLE INCOME IS TO ESTIMATE THE SAME EITHER WITH REFERENCE TO THE GP RATE BY COMPARING THE SAME WITH COMPARABLES, OR TO ADOPT WITH ASSESSEES OWN PAST HISTORY, WHICH ON E OF THESE TWO SEEMS TO BE ON BETTER FOOTING (PREFERABLY THE PAST HISTORY O F THE ASSESSEE IS MORE RELEVANT FOR THE PURPOSE). AS HAS BEEN DISCUSSED AB OVE, THE ISSUE ALSO STANDS SUPPORTED BY THE DECISION RENDERED IN THE CA SE OF ACIT V. PRABHU DAYAL KANOJIYA [2011] 8 ITR (TRIB) 45 (JAIPUR), WHI CH IS PARA-MATERIA WITH THIS CASE. IN THIS DECISION, IT HAS BEEN HELD THUS: THE ASSESSEE, A CIVIL CONTRACTOR, WAS ENGAGED IN C IVIL CONSTRUCTION WORK WITH THE GOVERNMENT. DURING SURVEY, THE ASSESSEE ADMITTE D THAT HE HAD GIFTED SUMS ON DIFFERENT DATES TO HIS SON AND DAUGHTER OUT OF UNDISCLOSED INCOME AND SURRENDERED THE CASH FOUND DURING SURVEY FOR THE PU RPOSE OF TAXATION. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT ON THE GROUND THAT THE BOOKS OF ACCOUNT WERE DEFECTIVE, ESTIMATED THE NET PROFIT RATE AT 8 PER CENT., MAKING ADDITIONS TO THE INCOME OF THE ASSESSEE TREA TING INTEREST INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND ON ACCOUNT OF UNEXPLAINED INVEST- I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 9 MENT IN THE FORM OF LOANS, GIFTS AND CASH FOUND. TH E ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAD NOT CONSIDERED THE RETRAC TION STATEMENT AND THAT THE CASH BALANCE COULD BE VERIFIED FROM THE BOOKS O F ACCOUNT. THE COMMISSIONER (APPEALS) UPHELD THE REJECTION OF BOOK S OF ACCOUNT, DIRECTED THE ASSESSING OFFICER TO APPLY A NET PROFIT RATE OF 8 PER CENT. SUBJECT TO DEPRECIATION AND INTEREST THEREBY RESTRICTING THE T RADING ADDITION TO ` . 3 LAKHS AND DELETED THE ADDITION MADE IN RESPECT OF U NEXPLAINED INVESTMENT IN GIFTS, LOAN AND CASH FOUND. ON APPEAL BY THE DEPART MENT AND CROSS-OBJECTION BY THE ASSESSEE: HELD, (I) THAT CONSIDERING THE DECISION OF THE TRIBUNAL I N THE ASSESSEE'S CASE FOR THE ASSESSMENT YEAR 2006-07, THE COMMISSIONER ( APPEALS) WAS JUSTIFIED IN HOLDING THAT THE NET PROFIT RATE SHOULD BE ALLOWED SUBJECT TO DEPRECIATION AND INTEREST. SINCE THE NET PROFIT RATE SUBJECT TO DEPR ECIATION WAS MORE THAN 8 PER CENT. THE RESTRICTION OF THE TRADING ADDITION T O ` . 3 LAKHS WAS WRONG. (II) THAT THE TRIBUNAL IN THE ASSESSEE'S CASE FOR T HE ASSESSMENT YEAR 2006-07 HELD THAT ONCE INTEREST INCOME WAS TAXABLE UNDER TH E HEAD 'INCOME FROM OTHER SOURCES' IT WAS TO BE EXCLUDED WHILE GIVING DEDUCTION IN RESPECT OF INTEREST FROM THE NET PROFIT RATE APPLIED AND IT WO ULD NOT AFFECT THE TAXABLE INCOME OF THE ASSESSEE, EVEN IF THE RATE OF 8 PER CENT. WAS APPLIED SUBJECT TO DEPRECIATION AND INTEREST. HENCE THE COMMISSIONER ( APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION ON THE GROUND THAT NO SEPARAT E ADDITION WAS REQUIRED TO BE MADE IN RESPECT OF BANK FIXED DEPOSIT RECEIPTS A ND NSC INTEREST INCOME. (III) THAT REGARDING DELETION OF ADDITION ON UNEXPL AINED INVESTMENT IN RESPECT OF GIFTS, LOAN AND CASH FOUND DURING SURVEY, THE AS SESSING OFFICER HAD TO RECONSIDER THE ISSUE IN RESPECT OF RETRACTION OF TH E STATEMENT. THE MATTER WAS RESTORED TO THE ASSESSING OFFICER. 12. IN THE CASE OF ITO VS. ZUBERI ENGINEERING CO. [ 2011] 128 ITD 375 I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 10 (JP.), A SIMILAR DECISION HAS BEEN TAKEN AND THE FA CTS AND FINDINGS OF THE TRIBUNAL ARE BEING EXTRACTED BELOW: THE ASSESSEE WAS A CONTRACTOR ENGAGED IN THE WORK OF ERECTION AND FABRICATION. THE BOOKS OF ACCOUNT AND SUPPORTING VO UCHERS WERE NOT PRODUCED FOR VERIFICATION. THE ASSESSING OFFICER OB SERVED THAT THE RETURN OF INCOME WAS FILED LATE AND AUDIT REPORT IN PRESCR IBED FORM WAS ALSO NOT ENCLOSED. THE ASSESSING OFFICER ALSO NOTICED THAT S URVEY UNDER SECTION 133A, WAS CONDUCTED AT BUSINESS PREMISES OF THE ASS ESSEE. DURING SURVEY, IT WAS FOUND THAT REGULAR BOOKS OF ACCOUNT WERE NOT MAINTAINED EITHER FOR EARLIER YEAR OR FOR THE YEAR UNDER CONSIDERATIO N. STATEMENT OF ONE OF THE PARTNERS WAS RECORDED DURING SURVEY IN WHICH HE ADMITTED THAT FIRM WOULD DECLARE EIGHT PER CENT NET PROFIT AND NO OTHE R EXPENSES WOULD BE CLAIMED. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE SUBMITTED THAT DUE TO WRONG NOTION, ONE OF THE PART NERS HAD ADMITTED THAT IT WOULD DECLARE EIGHT PER CENT NET PROFIT AND NO OTHER EXPENSES WOULD BE CLAIMED. IT WAS ALSO SUBMITTED THAT EIGHT PER CENT NET PROFIT RATE MIGHT BE APPLIED, HOWEVER, THE DEDUCTION ON AC COUNT OF DEPRECIATION, INTEREST AND SALARY PAID TO PARTNERS SHOULD BE ALLOWED. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE RETUR NED INCOME DECLARED BY THE ASSESSEE AND AS PER ADMISSION OF THE ASSESSE E DURING THE COURSE OF SURVEY, THE ASSESSING OFFICER APPLIED NET PROFIT ON THE GROSS RECEIPT OF ` . 22,77,28,588 WHICH RESULTED INTO PROFIT OF ` .L,82,18,287. THE COMMISSIONER (APPEALS) NOTED THAT BOOKS OF ACCOUNT WERE NOT FOUND DURING THE COURSE OF SURVEY AND THE ASSESSEE ITSELF HAD ADMITTED FOR APPLICATION OF NET PROFIT RATE OF EIGHT PER CENT. T HEREFORE, HE UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND ALSO APPLICATION OF NET PROFIT RATE OF EIGHT PER CENT. HOWEVER, THE COMMISSIONER (APPEALS) HAD ACCEPTED THIS CONTENTION OF THE ASSESSEE THAT DUE TO WRONG NOTION , ONE OF THE PARTNERS HAD ADMITTED FOR APPLYING NET PROFIT RATE OF EIGHT PER CENT SUBJECT TO NON-ALLOWANCE OF EXPENDITURES. HE, THEREFORE, DIREC TED THE ASSESSING OFFICER TO ALLOW DEPRECIATION, INTEREST AND SALARY PAID TO PARTNERS AFTER VERIFYING THE SAME FROM THE PROFIT & LOSS ACCOUNT. I. I.I. I.T.A. T.A. T.A. T.A. NO. NO. NO. NO.1830 1830 1830 1830/ // /MDS/ MDS/ MDS/ MDS/10 1010 10 11 13. THEREFORE, IN OUR CONSIDERED OPINION, WHEN THE ASSESSMENT IS DONE BY ADOPTING THE GP RATE NO OTHER SEPARATE ADDITION ON ACCOUNT OF EXPENSES CANNOT BE MADE. IN A CASE WHEN THE ASSESSEE MAKES A WRONG CLAIM, WHICH IS NOT AS PER THE PROVISIONS OF THE ACT, AND EVEN A DMITS ANY INCOME, WHICH IS BASED ON MISCONCEPTION OR WRONG ADVICE, CANNOT BE S USTAINED IN THE EYES OF THE LAW. IN FACT, THIS INCOME HAS TO BE CONSIDERED IN TOTO TOWARDS THE INCOME FROM THE BUSINESS OF CONTRACT. ACCORDINGLY, WE UPHO LD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (HARI OM MARATHA) JUDICIAL MEMBER CHENNAI, DATED, THE 30.11.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.