VIJAY RAMCHANDRA SHRISTH, Pune V. ACIT, Cir.-2, Nashik

ITA 185/PUN/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1013 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: NILESH KHANDELWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 185/PN/2010 $& ' !(' / ASSESSMENT YEAR : 2006-07 MR. VIJAY RAMCHANDRA SHIRSTH, C/O SHAH KHANDELWAL JAIN & ASSOCIATES, CHARTERED ACCOUNTANTS, 1 ST FLOOR, ALANKAR CINEMA BUILDING, PUNE 411001 PAN : ACAPS3712R ....... / APPELLANT )& / V/S. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE II, NASHIK / RESPONDENT ASSESSEE BY : SHRI NILESH KHANDELWAL REVENUE BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 18-08-2015 / DATE OF PRONOUNCEMENT : 09-10-2015 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, NASHIK DATED 13-1 1-2009 FOR THE ASSESSMENT YEAR 2006-07. 2 ITA NO. 185/PN/2010, A.Y. 2006-07 2. THIS APPEAL OF THE ASSESSEE WAS DECIDED BY THE TRIB UNAL ON 29-09-2011. HOWEVER, AT THAT TIME GROUND NO. 3 RAISED IN THE APPEAL WAS INADVERTENTLY LEFT TO BE ADJUDICATED. THE ASSESSEE FILED MISCELLANEOUS APPLICATION I.E. M.A. NO. 04/PN/2015 SEEKING RECTIFICATION OF THE ORDER DATED 29-09-2011. THE TRIBUNAL VIDE ORDER DATED 18-03-2015 RECALLED THE ORDER SOUGHT TO BE RECT IFIED FOR THE LIMITED PURPOSE TO ADJUDICATE GROUND NO. 3 RAISED IN THE A PPEAL. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL DATED 18-03-20 15 READS AS UNDER: 3. IN THE AFORESAID LIGHT, WE THEREFORE DEEM IT FI T AND PROPER TO RE-CALL THE ORDER OF THE TRIBUNAL DATED 29.09.2011 (SUPRA) PERTAINING TO ASSESSMENT YEAR 2006-07 FOR THE LIMITED PURPOSE OF A DJUDICATING GROUND OF APPEAL NO.3 REPRODUCED ABOVE WHICH WAS INADVERTE NTLY NOT ADJUDICATED AT THE TIME OF DETERMINATION OF APPEAL O RIGINALLY VIDE ORDER DATED 29.09.2011 (SUPRA). ACCORDINGLY, THE REGISTR Y IS DIRECTED TO POST THE APPEAL OF THE ASSESSEE BEFORE THE REGULAR BENCH ON 22.06.2015 IN ORDER TO HEAR THE PARTIES AND THEREAFTER ADJUDICATE THE AFORESTATED GROUND OF APPEAL NO.3. SINCE THE AFORESAID DATE OF HEARING WAS ANNOUNCED IN THE OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES, THE REQUIREMENT OF ISSUANCE OF A FORMAL NOTICE OF HEARI NG IS HEREBY DISPENSED WITH. 3. IN THE BACKDROP OF THESE FACTS, THE APPEAL IS LISTED BE FORE US FOR ADJUDICATING GROUND NO. 3 OF APPEAL, ALONE. THE GROUND NO. 3 OF THE APPEAL READS AS UNDER: 3. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CA SE AND AS PER PROVISIONS OF LAW, IT BE HELD THAT THE ESTIMATION O F INCOME FROM COMMISSION FROM SO CALLED SUB-CONTRACTORS WORKED OU T BY THE A.O. IS CONTRARY TO THE PROVISIONS AND SCHEME OF THE ACT AN D BEING BASED ON SURMISES AND GUESSWORK AND WITHOUT ANY EVIDENCE IS UNJUSTIFIED, UNWARRANTED AND IMPROPER. THE ADDITIONS SO MADE BE DELETED. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 3 ITA NO. 185/PN/2010, A.Y. 2006-07 4. THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE IS A CIV IL CONTRACTOR. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2006-07 DECLARING TOTAL INCOME OF RS.13,40,550/-. DURING T HE PERIOD RELEVANT TO THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD ASSIGNED SOME OF THE CONTRACTS ALLOTTED TO HIM TO OTHER CONTRACT ORS. THE TOTAL VALUE OF WORK ALLOTTED TO THE SUB-CONTRACTORS BY ASSESS EE WAS TO THE TUNE OF RS.1,50,47,046/-. AS PER THE CONTENTIONS OF THE AS SESSEE, THE ASSESSEE HAS NOT EARNED ANY PROFIT OR GAIN FROM THE SU B-CONTRACTS. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTIONS OF THE A SSESSEE AND ESTIMATED NET INCOME FROM SUB-CONTRACT RECEIPTS @ 3% I.E. RS.4,51,411/-. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TA X (APPEALS) UPHELD THE FINDINGS OF THE ASSESSING OFFICER ON THIS ISSUE. IN APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE HAS ASSAILED THE FINDINGS OF AUTHORITIES BELOW IN ESTIMATING THE PROFITS FROM SUB -CONTRACT @ 3%. 5. SHRI NILESH KHANDELWAL APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT, DURING THE YEAR UNDER CONSIDERATION DUE TO SHORTAGE OF CAPITAL AND MAN POWER SOME OF THE CONTRACTS ALLOTTED TO THE ASSESSEE WERE ASSIGNED TO OTHER CONTRACTORS ON PRINCIPAL TO PRINC IPAL BASIS FOR WHICH AGREEMENTS WERE EXECUTED. THE ENTIRE RISK AND RE WARD IN RESPECT OF THOSE CONTRACTS WERE TRANSFERRED TO THE CONTRACTOR S WHO HAVE EXECUTED THE WORK. THE ASSESSEE HAS NOT EARNED ANY PROFIT FROM THE SUB-CONTRACTS. ALL THE PAYMENTS ARE MADE AND ARE RECE IVED BY CHEQUE. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE SUBJECT TO A UDIT AND NO DEFECT HAS BEEN POINTED OUT EITHER BY THE AUDITORS OR THE ASS ESSING OFFICER DURING THE COURSE OF SCRUTINY ASSESSMENT. THEREFORE, THE AUTHORITIES 4 ITA NO. 185/PN/2010, A.Y. 2006-07 BELOW HAVE ERRED IN ESTIMATING THE PROFIT FROM SUCH SUB-C ONTRACTS @ 3% OF THE SUB-CONTRACT RECEIPTS. 6. SHRI DHEERAJ KUMAR JAIN REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOM E TAX (APPEALS). THE LD. DR SUBMITTED THAT, IT IS HIGHLY IMPROBAB LE THAT THE ASSESSEE WOULD GRANT SUB-CONTRACT TO THE TUNE OF RS.1.5 0 CRORES WITHOUT ANY CONSIDERATION. THE ASSESSEE HAS DELIBERATELY SUPPRESSED THE PROFIT EARNED FROM THE SUB-CONTRACTS. THE ASSESSEE HAS TAKEN CREDIT FOR THE TDS ON THE SUB-CONTRACT RECEIPTS. THE LD . DR FURTHER SUBMITTED THAT THE AUTHORITIES BELOW HAVE MADE A VERY R EASONABLE ESTIMATE @ 3% OF THE CONTRACT RECEIPTS WHICH COMES TO R S.4,51,411. THE LD. DR PRAYED THAT NO INTERFERENCE IN THE FINDINGS OF THE AUTHORITIES BELOW IS CALLED FOR AND FURTHER PRAYED FOR DISMISSING THIS GR OUND OF APPEAL OF THE ASSESSEE. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS ALLOCATED CONT RACTS TO THE TUNE OF RS.1,50,47,046/- TO THE SUB-CONTRACTORS. IT IS A LSO AN ADMITTED FACT THAT THE ASSESSEE HAS TAKEN CREDIT FOR THE TDS ON THE SAID PROCEEDS. THE CONTENTION OF THE ASSESSEE IS THAT ON TH E SUB-CONTRACT RECEIPTS, THE ASSESSEE HAS NOT EARNED AN Y PROFIT. THE AUTHORITIES BELOW HAVE REJECTED THE CONTENTION OF THE AS SESSEE AND HAVE ESTIMATED THE INCOME FROM SUB-CONTRACT RECEIPTS @ 3% I.E. RS.4,51,411/-. 8. WE FIND MERIT IN THE CONTENTIONS OF THE LD. DR, THAT ON S UB- CONTRACT RECEIPTS OF MORE THAN RS.1.50 CRORES, THE ASSES SEE MUST HAVE 5 ITA NO. 185/PN/2010, A.Y. 2006-07 EARNED SOME PROFIT. THE AUTHORITIES BELOW HAVE ESTIMATED THE PROFIT @ 3% ON THE INTEREST OF JUSTICE. WE ARE OF CONSIDERED VIEW THAT TO MEET THE ENDS OF JUSTICE IT WOULD BE FAIR AND REASONABLE IF THE A DDITION IS RESTRICTED TO 2% OF THE SUB-CONTRACT RECEIPTS I.E. RS.3,00,940/-. 9. THE GROUND NO. 3 RAISED BY THE ASSESSEE IN APPEAL IS PARTLY ACCEPTED. ORDER PRONOUNCED ON FRIDAY, THE 09 TH DAY OF OCTOBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 09 TH OCTOBER, 2015 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, NASHIK 4. ' / THE CIT-I, NASHIK 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE