DCIT, Sambalpur V. Bipin Kumar Agarwal, Sambalpur

ITA 188/CTK/2011

• Counselvise Citation: 18822114 RSA 2011
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 05-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: S RAYS DEY ARS
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation
• Section: 147; 68; 143(3)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO.188/CTK/2011 (ASSESSMENT YEAR 2006 - 07) ITA NO.199/CTK/2011 (ASSESSMENT YEAR 20 06 - 07) DCIT, CIRCLE 1(1), SAMBALPUR. .. APPELLANT - VERSUS - BIPIN KUMAR AGARWAL, M/S.SHANTI CONSTRUCTION, BARBAZAR, SAMBALPUR PAN : ABWPA 9233 E .. RESPONDENT BIPIN KUMAR AGARWAL, M/S.SHANTI CONSTRUCTION, BARBAZAR, SAMBALPUR PAN : ABWPA 9233 E .. APPELLANT - VERSUS - DCIT, CIRCLE 1(1), SAMBALPUR. .. RESPONDENT FOR THE ASSESSEE: SHRI S.RAY/S.DEY, ARS FOR THE DEPARTMENT : SHRI A. BHATTACHARJEE. ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE APPEALS BY THE REVENUE AS WELL THE ASSESSEE ARISE OUT OF A COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.31.1.2011. 2. ISSUES HAVE BEEN RAISED WHICH ARE PARTLY INTER - CO NNECTED THEREFORE ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THEIR APPEAL. 1. THAT, IN FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) IS WRONG IN ADOPTING AND DIRECTING THE LEARNED ASSESSING OFFICER TO APPLY NET PROF IT @ 10% ON GROSS RECEIPT OF 2,48,57,273 BY IGNORING DEPRECIATION AND INTEREST PARTICULARLY WHEN IN THE SAME ORDER HE HIMSELF AFTER BEING SATISFIED WITH THE FACTS AND LAW HAS DELETED ALL THE ILLEGAL ADDI TION AMOUNTING TO 43,58,385 MADE BY THE LEARNED ASSESSING OFFICER. 2. THAT, I N THE FACTS AND CIRCUMSTANCE OF THE CASE THE LEARNED FIRST APPELLATE AUTHORITIES IS WRONG IN UPHOLDING THE APPLICATION OF PROVISION OF SECTION 147 OF THE INCOME TAX ACT FOR VERIFICATION OF SUNDRY CREDITORS AND OTHER EXPENSES PARTICULARLY WHEN SAME HAVE ALR EADY BEEN VERIFIED BY THE SAME ASSESSING OFFICER WHILE COMP L ETING THE ASSESSMENT OF THE APPELLANT U/S 143(3) OF THE INCOME TAX ACT. ITA NO.188/CTK/2011 AND ITA NO.199/CTK/2011 (CROSS APPEALS) 2 4. THE REVENUE IS IN APPEAL AGITATING THE PART DELETION OF THE ADDITIONS SO MADE BY THE ASSESSING OFFICER, WHICH GROUNDS R EAD AS UNDER : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING ADDITION MADE TO THE EXTENT OF 11,04,955 ON ACCOUNT OF UNDISCLOSED CONTRACT RECEIPT. 2. IN THE FACT AND CIRCUMSTANCE OF THE CASE, LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PURCHASE OF SOIL VITRO MAX ROLLER AMOUNTING TO 15,60,000 . 5. THE BRIEF FACTS AS EMANATE FROM THE ORDERS OF THE AUTHORITIES BELOW ARE THAT THE ASSESSEE SRI BIPIN KUMAR AGRAWAL IS A CIVIL CONTRACTOR AND FILED ITS RETURN HAVING GROSS RECEIPTS OF 2.48 CRORES DECLARING NET PROFIT OF 10,88,696 AND TAXABLE INCOME OF 9,88,700. THE ASSESSEE HAD FILED ITS FINANCIAL STATEMENTS DULY AUDITED U/S.44AB.THE ASSESSEE WAS SUBJECTED T O ASSESSMENT UNDER THE PROVISIONS OF SECTION 143(3)/147 WHEN A SURVEY U/S.133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 3.2.2009. THE ASSESSING OFFICER TOOK COGNIZANCE OF THE P & L ACCOUNT AND BALANCE SHEET FOUND DURING THE SURVEY U/S.133A WHEREIN HE NOTED THAT THE GROSS CONTRACT RECEIPTS WERE INSCRIBED THEREIN AT 3.55 CRORES VIS - - VIS THE ONE DISCLOSED IN THE RETURN FILED WERE 2.48 CRORES. HAVING NOTED THAT THE CONTRACT RECEIPTS WERE NOT SHOWN AMOUNTING TO 1.07 CRORES, THE ASSESSING OFFICER PROPOSED TO DETERMINE THE GROSS MARGIN DECLARED IN THE RETURN AT 10.30% WHICH HE USED FOR COMPUTING GROSS INCOME NOT DECLARED IN THE RETURN AT 10.30% OF 1.07 CRORES. DURING SURVEY HE FURTHER CONSI DERED THE PURCHASE OF ONE SOIL VITRO MAX ROLLER AT THE COST OF 15,60,000 ON 19.9.2005 FROM LAKHINA ROLLER COMPANY, NEW DELHI BUT N OT DISCLOSED IN THE RETURN. IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT PURCHASED ANY SOIL VITRO MAX ROLLER BUT IT WAS THE PROFORMA INVOICE FOR PRODUCING THE SAME BEFORE THE STATEMENT GOVERNMENT AUTHORITIES ITA NO.188/CTK/2011 AND ITA NO.199/CTK/2011 (CROSS APPEALS) 3 FOR THE PURPOSE OF OBTAINING A TENDER. NEGATING TH E CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER COMPUTED THE INCOME OF THE ASSESSEE INCLUDING 15,60,000 AND FURTHER VERIF IED THE SUNDRY CREDITORS . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DECLARED OUTSTANDING LIABILITIES AMOUNTING TO 39,25,400 WH EN THE VARIOUS CREDITORS FOR EXPENSES WERE REQUIRED TO BE EXPLAINED. WHEN THE CREDITORS FAILED TO RESPOND SUMMONS AND FURTHER MORE THE AR OF THE ASSESSEE WAS UNABLE TO PRODUCE THESE CREDITORS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD NOT PRODUCED A SINGLE CREDITOR FOR PERSONAL EXAMINATION LEADING TO HIS FINDING THAT HE CREDITORS SHOWN IN THE BALANCE SHEET ARE FALSE AND FABRICATED. HE CONSIDERED UNEXPLAINED CREDITORS TO THE EXTENT OF 16,45,430 FOR TAXATION UNDER THE PROVISIONS OF SECTION 68. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE INDIVIDUAL ADDITIONS AND DISALL OWANCES BY DELETING THE ADDITION WITH RESPECT TO THE ADDITION OF 11,04,955 ON HIS FINDING THAT THE PROFORMA BALANCE SHEET FOUND AT THE TIME OF SURVEY PERTAIN ED TO THE ASSESSMENT YEAR 2006 - 07 COULD NOT BE CONSIDERED FOR ADDITION INSOFAR AS THE SAME WAS PRO VISIONAL AND PROJECTED BALANCE SHEET WHEN THE COMPARISON OF THE ACTUAL FINANCIAL STATEMENTS AS FILED BY THE ASSESSEE ALONG WITH ITS RETURN NOT A SINGLE FIGURE TALLIED. THE LEARNED CIT(A) HELD THAT THE ASSESSING OFFICER SHOULD HAVE TRACED THE ORIGIN AND TH E MOVEMENT OF THE RECEIPTS THROUGH BANK ACCOUNT WHEN HE HIMSELF ACCEPTED THAT ONLY THE GROSS MARGIN IN THE DIFFERENCE OF GROSS RECEIPT COULD BE TAXED. THE LEARNED CIT(A) FURTHER DELETED THE ADDITION OF 15,60,000 BY GIVING A FINDING THAT THE BILL SOUGHT TO BE CONSIDERED DURING THE COURSE OF SURVEY U/S.133A WAS MERELY A PROFORMA INVOICE WHEN THE ASSESSEE WAS REQUIRED TO FURNISH EVIDENCE OF HAVING PURCHASED THE SAME. WITHIN A GAP O F THREE TO FOUR YEARS THE INVOICE COULD NOT BE TRACED TO THE IMPUGNED ITA NO.188/CTK/2011 AND ITA NO.199/CTK/2011 (CROSS APPEALS) 4 ASSESSMENT YEAR THEREFORE WAS HELD AS NOT JUSTIFIABLE FOR ADDITION IN THE IMPUGNED ASSESSMENT YEAR WITHOUT ANY CORROBORATIVE EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER. THE LEA RNED CIT(A) HOWEVER, CONSIDERED THE CASE OF ADDITION U/S.68 WHEN THE TOTAL SUNDRY CREDITORS SHOWN BY THE ASSESSEE AT 39,25,400 WERE TO BE VERIFIED BY THE ASSESSING OFFICER ON PERSONAL INTERVIEW WHEN THE ASSESSEE HAD PRAYED FOR SUMMONING THEM U/S.133(6). THE LEARNED CIT(A) OBTAINED CONFIRMATIONS FROM A FEW OF THE SUNDRY CREDITORS BUT RELYING ON THE DECISION OF ITAT IN TH E CASE OF ASSESSING OFFICER V. ,POOJA CONSTRUCTION CO (69 ITD147) WHICH ISSUE WAS WITH RESPECT TO THE ESTIMATION OF INCOME ON GROSS RECEIPTS WHEN THE PROPER BOOKS OF ACCOUNT ARE NO T MAINTAINED CONSEQUENT THERETO THE ADDITION OF 16,45,450 WASD DELETED. HOW EVER, IT ONLY LED TO CONCLUDE THAT THE ASSESSING OFFICER OUGHT TO APPLY NET PROFIT RATE OF 10% ON GROSS RECEIPTS OF 2,48,57,273 BY IGNORING DEPRECIATION AND INTEREST WHICH WAS NOT APPEALED AGAINST BY THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. BOTH THE PARTIES HAVE SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES ON THE ISSUES RAISED BY THEM WHICH WE HAVE CAREFULLY PERUSED. 7. THE ASSESSEE IS IN APPEAL AGITATING THE OBSERVATION OF THE LEARNED CIT(A) I N DIRECTING THE ASSESSING OFFICER TO BRING TO TAX THE NET INCOME @10% OF THE GROSS RECEIPTS OF 2 . 48 CRORES BY IGNORING DEPRECIATION AND INTEREST WHEN IN THE SAME ORDER ITSELF AFTER HAVING SATISFIED ON FACTS AND LAW DELETED THE REMAINING ADDITIONS AMOUNTING TO 43,48,385. WE ARE INCLINED TO AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT THE ASSESSING OFFICER HAD HIMSELF COMPUTED THE GROSS MARGIN IN THE IMPUGNED ASSESSMENT YEAR ON THE BASIS OF AUDITED FINANCIAL STATEMENTS FILED BY THE ITA NO.188/CTK/2011 AND ITA NO.199/CTK/2011 (CROSS APPEALS) 5 ASSESSEE AT 10.30% AND THEREFORE THE EXERCISE UNDERTAKEN BY THE LEARNED CIT(A) TO TAKE THE NE T PROFIT AT 10% IGNORING THE INTEREST AND DEPRECIATION ALLOWABLE TO THE ASSESSEE WAS WITHOUT ANY BASIS, UNJUSTIFIED AND HAD NO LEGS TO STAND ON. INTEREST AND DEPRECIATION DO NOT FORM PART OF THE GROSS MARGIN IN THE CASE OF A CONTRACT BUSINESS. THE ASSESS ING OFFICER HAD SCRUPULOUSLY VERIFIED THE COMPUTATION OF GROSS MARGIN WHEN HE SOUGHT TO APPLY THE SAME RATE ON THE MISSING CONTRACT RECEIPTS AMOUNTING TO 1.07 CRORES WHICH THE LEARNED CIT(A) AGREED FOR NON - CONSIDERATION IN THE CASE OF THE ASSESSEE ON THE FACTS AND CIRCUMSTANCES CLARIFIED BY THE ASSESSEE APPELLANT BEFORE HIM. WE HAVE OBSERVED THAT THE LEARNED CIT(A) RIGHTLY CONSIDERED THAT IN CONSEQUENCE THERETO THE UNEXPLAINED SUNDRY CREDITORS COULD NOT BE BROUGHT TO TAX WHEN THE INCOME HAD BEEN SPECIFICAL LY RETURNED BY THE ASSESSEE AS THERE WAS NO REQUIREMENT FOR ESTIMATING THE INCOME WHICH CAN BE FURTHER SUBJECTED TO ADDITION UNDER THE PROVISIONS OF SECTIONS 68 OR 69. THE ASSESSING OFFICER HAD NOTED THAT THE GROSS RECEIPTS AT A CERTAIN PERCENTAGE WAS TO B E COMPUTED INSOFAR AS THE PURCHASE OF ASSE T S AND THE NON - PRODUCTION OF CREDITORS FOR PERSONAL INTERVIEW LED TO THE ADDITION WHICH WERE DELETED BY THE LEARNED CIT(A) THEREFORE CANNOT BE CONTRADICTED BY THE LEARNED CIT(A) HIMSELF FOR HOLDING A VIEW THAT IN G IVING LIBERAL APPROACH TO DELETION VIS - - VIS THERE SOME INCOME TO BE HELD BACK FOR TAXATION WHICH HAD MISSED THE EYES OF THE ASSESSING OFFICER. WITHOUT ADOPTING A PROPER PROCEDURE , THE LEARNED CIT(A) COULD NOT CONTRADICT HIS OWN FINDING OF FACTS WHICH TH E ASSESSING OFFICER HAD MISDIRECTED HIMSELF LEAD ING TO DOUBLE TAXATION OF INCOMES WHEN THERE WAS NO EVIDENCE ON RECORD TO CONSIDER THE SAME FOR DELETION OF THE ADDITION OF 11,04,955 ON ACCOUNT OF UNDISCLOSED CONTRACT RECEIPTS AND ALSO ON ACCOUNT OF INVOI CE / PURCHASE OF SOIL VITRO MAX ROLLER AMOUNTING TO ITA NO.188/CTK/2011 AND ITA NO.199/CTK/2011 (CROSS APPEALS) 6 15,60,000. THE LEARNED CIT(A) RIGHTLY DELETED THESE ADDITIONS FOR THE SIMPLE REASON THAT THEY DID NOT PERTAIN TO THE IMPUGNED ASSESSMENT YEAR BUT WERE BROUGHT TO TAX BY THE ASSESSING OFFICER ON ACCOUNT OF A SURVEY CARRIED OUT WHICH DOCUMENT DID NOT PERTAIN TO THE ACTUAL TRANSACTION AS INCORPORATED IN THE FINANCIAL STATEMENTS DULY AUDITED AND FILED WITH THE RETURN OF INCOME BY THE ASSESSEE. WHEN ACTUALLY THE ASSESSING AUTHORITIES HAD DISCOVERED THAT THE INCO MES CANNOT BE BROUGHT TO TAX ON ASSUMPTION AND PRESUMPTION THERE WAS NO BASIS FOR THE AUTHORITIES TO STRENGTHEN THEIR CLAIM FOR ESTIMATION OF INCOME UNLESS PROPER CORROBORATIVE EVIDENCE IS BROUGHT ON RECORD OF THE FIRM , THE ASSESSEE AS PARTICULAR INCOME N OT DISCLOSED TO THE DEPARTMENT. WE UPHOLD THE DELETION OF THE ADDITIONS BY THE LEARNED CIT(A) AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US INSOFAR AS BOTH THE ADDITIONS WERE MADE ON PRESUMPTION AND ASSUMPTIONS WITHOUT BRING ING ON RECORD SPECIFIC INSTAN CE OF CONCEALMENT AND NON - DISCLOSURE IN THE HANDS OF THE ASSESSEE. THE REVENUES APPEAL IS THEREFORE BOUND TO BE DISMISSED AS NO CONTROVERTING MATERIAL HAS BEEN SUBMITTED BY THE LEARNED DR ON THE ISSUES RAISED BY THE REVENUE. 8. INSOFAR AS THE ASSESSEES A PPEAL IS CONCERNED, WE ARE INCLINED TO UPHOLD THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DIRECTION FOR APPLYING RATE OF NET PROFIT @10% ON THE GROSS RECEIPTS OF 2.48 CRORES BY IGNORING DEPRECIATION AND INTEREST WAS NOT JUSTIFIABLE BY WAY OF A DIRECTION TO THE ASSESSING OFFICER WHEN HE WAS HIMSELF SATISFIED THAT THE ASSESSEE COULD NOT BE BURDENED WITH THE TAXATION ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS , UNEXPLAINED PURCHASE OF ASSETS AND UNEXPLAINED GROSS RECEIPTS THAT ARE SAID TO HAVE MISSED APPEARING IN THE FINANCIAL STATEMENTS RETURNED BY THE ASSESSEE. HAVING RETURNED GROSS MARGIN @10.30% AS COMPUTED BY THE ASSESSING OFFICER, A NET PROFIT COULD NOT BE DETERMINED AT ITA NO.188/CTK/2011 AND ITA NO.199/CTK/2011 (CROSS APPEALS) 7 10%. LEARNED CIT(A)S DIRECTION, THEREFORE, IS BOUND TO BE DISMIS SED AT THE THRESHOLD. HAVING NOT ADOPTED THE PROPER PROCEDURE AND HAVING CONTRADICTED HIS OWN FINDINGS, WE HEREBY SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. 9. IN THE RESULT, THE ASSESSEES APPEAL IS AL LOWED AND THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN OPEN COURT ON DT. 12.08.2011 SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 12.08.2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY O F THE ORDER FORWARDED TO : 1. THE A SSESSEE : BIPIN KUMAR AGARWAL, M/S.SHANTI CONSTRUCTION, BARBAZAR, SAMBALPUR 2. THE DEPARTMENT : DCIT, CIRCLE 1(1), SAMBALPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.