Shri Lav Narang, Ujjain V. The DCIT 2(1), Ujjain

ITA 186/IND/2014

• Counselvise Citation: 18622714 RSA 2014
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 186/IND/2014 A.Y. : 2007-08 SHRI LAV NARANG, DY. CIT, 2(1), UJJAIN VS UJJAIN APPELLANT RESPONDENT PAN NO.AAUPN6907H APPELLANT BY : SHRI S.S. DESHPANDE, C. A. RESPONDENT BY : SHRI R. A. VERMA, DR DATE OF HEARING : 16 . 09 .2015 . DATE OF PRONOUNCEMENT : 08 . 1 2 .2015 SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 2 2 O R D E R PER GARASIA, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 29.11.2013, FOR THE ASSESS MENT YEAR 2007-08. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. 3. THE ASSESSEE IS A CIVIL CONTRACTOR. THE GROSS RECEI PT IS RS. 2,20,15,631.60. THESE CONTRACTS INCLUDE RS. 22, 05,000/- IN THE NATURE OF JCB CONTRACT RECEIPTS. THIS IS ALS O IN THE NATURE OF CONTRACT WORK BUT WRONGLY WORDED AS JCB M ACHINE RENT. THE ASSESSEE HAS SHOWN NET PROFIT OF 5.87%. T HE MATTER WAS REOPENED U/S 263 AND THE AO HAS VERIFIED THE JC B RECEIPTS AND CONTRACT PAYMENT AND AFTER CONSIDERING THIS, THE AO HAS DISALLOWED THE CLAIM AND MADE THE ADDITION A ND THE LD. CIT(A) HAS PARTLY ALLOWED THE CLAIM. THE LD. CIT(A) REMARKED THAT THE CLAIM OF THE ASSESSEE BE ALLOWED FOR CONSU MPTION OF DIESEL AT RS. 2 LACS AS A REASONABLE EXPENDITURE ON RECEIPT OF SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 3 3 RS. 22 LACS AND FURTHER ALLOWED THE CLAIM FOR MAINT ENANCE AND REPAIRS. THEREFORE, THE ASSESSEE IS BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE HAS FILED THE WRI TTEN SUBMISSION, WHICH READS AS UNDER :- THE LD CIT TOOK ACTION U/S 263 ON THE GROUND THAT JCB RECEIPTS SHOULD BE VERIFIED AND AFTER MAKING TH E ENQUIRIES THE NATURE OF WORK DONE FROM J CB SHOULD BE ASCERTAINED. THE LD CIT HAS REMARKED IN THE LAST PA RA OF HIS ORDER AS UNDER:- IN VIEW OF THE ABOVE DISCUSSION THE ORD ER OF THE AO IS SET ASIDE TO THE FILE OF THE AO. HE IS DIRECTED TO VERIFY THE EXPLANATION OF THE ASSESSEE THAT JCB RECEIPTS REFLECTED CONTRACT PAYMENTS AND NOT RENT BY MAKING DUE ENQUIRIES WITH THE PARTIES AS TO THE NATURE OF THE WORK DONE. HE IS ALSO DIRECTED TO EXAMINE THE BIFURCATION OF DIESEL EXPENSES WITH REFERENCE TO THE VOUCHERS AND SEE WHETHER THE VOUCHERS RECORD THE FACT THAT THE SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 4 4 PARTICULAR DIESEL PURCHASE FOR JCB WORK. AFTER MAKING NECESSARY ENQUIRY AND INVESTIGATION AND AFTER ASCERTAINING ALL THE FACTS AND AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE APPROPRIATE DECISION AS PER LAW SHOULD BE TAKEN. THE ORDER DATED 11.12.2009 PASSED U/S 143(3) IS THEREFORE SET ASIDE ON THE ABOVE ISSUES WITH THE DIRECTION TO THE AO FOR PASSING A FRESH ORDER TAKING INTO CONSIDERATION THE DIRECTIONS AND OBSERVATIONS NOTED ABOVE AS PER LAW. THUS IT WOULD BE SEEN THAT THE LD CIT HAS DIRECTED ONLY TO VERIFY THE DETAILS OF J CB RECEIPTS AND THE CONSUMPTION OF DIESEL AND AFTER MAKING PROPER ENQUIRIES ASCERTAIN THE INCOME FROM THE J CB. WHILE FRAMING THE ASSESSMENT THE LD AO WENT BEYOND HIS JURISDICTION AND APPLIED 8% PROFIT ON THE TOTAL CONTRACTUAL RECEIPTS AND SEPARATELY ADDED RS 22,05,000/- AS J CB RENT. HE EVEN DID NOT FOLLOW THE SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 5 5 DIRECTIONS GIVEN BY THE LD CIT ABOUT ASCERTAINING T HE NATURE OF J CB RECEIPTS AND BIFURCATING THE DIESEL EXPENSES. WITHOUT REJECTING THE BOOKS OF ACCOUNTS T HE ADDITIONS HAVE BEEN MADE. IN APPEAL THE LD CIT(A) OBSERVED THAT THE APPELLANT HA D FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND THE SUPPORTING DOCUMENTARY EVIDENCE FOR EXPENSES. THE APPLICATION OF 8% OF NET PROFIT IS JUSTIFIED AND TH E RENTAL INCOME FROM JCB TO BE CONSIDERED SEPARATELY BY ALLOWING CERTAIN NOMINAL EXPENSES. IT IS HUMBLY SUBMITTED THAT ORIGINAL ASSESSMENT WAS FRAMED BY ACCEPTING THE NET PROFIT RATE OF 5.88% AN D BY DISALLOWING THE EXPENSES OF RS 2,08,000/-. THE LD CIT GAVE DIRECTION ONLY TO ASCERTAIN THE NATURE OF JCB RECEIPTS. WITHOUT VERIFYING THE DETAILS, MERELY ON THE GROUND OF NON AVAILABILITY OF SOME OF THE DIESEL BI LLS, THE ESTIMATION OF 8% ON THE TOTAL CONTRACTUAL RECEI PTS IS BAD IN LAW. IN CASE OF OPERATION OF JCB MACHINE THE SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 6 6 MAJOR PART OF THE EXPENSES ARE THE DIESEL EXPENSES. THE SAME HAS NOT BEEN CONSIDERED BY THE LD AO. THE LD CIT(A) CONSIDERED ONLY RS 2,00,000/- AS A REASONABLE EXPENDITURE ON THE RECEIPT OF RS 22,00,000/-. COMPLETE DETAILS OF JCB RECEIPTS WERE FILED BEFORE THE LD AO AND THE LD CIT(A) ALONG WITH THE SEPARATE PROFIT AND LOSS ACCOUNT FOR JCB CONTRACT W ORK AND THE OTHER CONTRACT WORK. COMPARATIVE DETAILS SH OW THAT THE NET PROFIT PERCENTAGE IS QUITE REASONABLE. THE DETAILS OF DIESEL PURCHASES WERE FILED. HOWEVER, COMPLETE VOUCHERS HAVE NOT BEEN PRESERVED BECAUSE O F LAPSE OF TIME. IN VIEW OF THE ABOVE IT IS HUMBLY SUBMITTED THAT THE ADDITION MADE MAY PLEASE BE DELETED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN B USINESS OF CIVIL CONTRACTS, SPECIALLY FOR GOVERNMENT CONTRACTS FOR ROAD. SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 7 7 THE ASSESSEE OWNED TWO JCB MACHINES ALONGWITH ROAD ROLLER AND PAVER MACHINE. ONE SECOND HAND MACHINE WAS ADDE D DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE A LSO UNDERTOOK THE WORK OF EXCAVATION FROM OTHER PARTIES IN WHICH THE JCB MACHINE IS USED. THE AMOUNT RECEIVED FOR SU CH JOB IS CREDITED IN PROFIT AND LOSS ACCOUNT UNDER THE HEAD JCB MACHINE RENT. THIS IS NOT A RENT OF JCB MACHINE, B UT IT IS THE CONTRACT RECEIPTS EXCLUSIVELY USING THE JCB MACHINE . WHILE FRAMING THE ASSESSMENT ORDER, THE ASSESSEE HAS ADDE D 8% ON PROFIT OF CONTRACT RECEIPT AND SEPARATELY ADDED RS. 22,05,000/- AS JCB RENT. DURING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE IS A CONTRACTOR AND HE HAS EARNED JCB RENT OF RS. 22 LACS, BUT THE MAJOR EXPENSES IS ON DIESEL EXPENSES AND NO SEPARATE VOUC HERS ARE MAINTAINED. THE DETAILS OF PURCHASE OF DIESEL IS SU BMITTED ON PAGE 49 OF THE PAPER BOOK, BUT THE ASSESSEE DID NOT MAINTAIN THE VOUCHERS. IF RS. 22 LACS IS ADDED, THEN THE ASS ESSEES G.P. WILL BE ABNORMAL. WHATEVER IT MAY BE FACTS OF THE C ASE, WE FIND THAT THE ASSESSEE HAS EARNED RENT INCOME FROM JCB A ND FOR SHRI LAV NARANG, UJJAIN VS. DY. CIT, UJJAIN, I.T.A. NO. 186/IND/2014 A. Y. 2007-08 8 8 WHICH THE ASSESSEE HAS INCURRED THE DIESEL EXPENSES . THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY , WE FIND THAT OUT OF TOTAL DIESEL EXPENSES OF RS. 22,00,000/-, W E SUSTAIN THE ADDITION OF RS. 10 LACS AND WE DELETE THE ADDITION OF RS. 12 LACS AS WE CONSIDER IT AS DIESEL EXPENSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 8 TH DECEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 8 TH DECEMBER, 2015. CPU*