DCIT, Bhubaneswar V. RKD Construction Pvt Ltd, Bhubaneswar

ITA 190/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4424 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2000-2001
• Appeal Filed On: 08-04-2011
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: S C BHADRA
• Keywords: Business income; Business expenditure; Reason to believe; Reassessment proceedings
• Section: 133A; 145

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. 190 AND 191/CTK/2011 (ASSESSMENT YEAR S 2000 - 01 AND 2001 - 02) DY.COMMISSIONER OF INCOME - TAX, CIRCLE 2(2), BHUBANE S WAR. VERSUS RKD CONSTRUCTION PVT. LTD.,B - 3, BARAMUNDA DUPLELX, BHUBANESWAR, PAN: AABCR 1816 R (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SMT. PARAMITA TRIPATHY, DR FOR THE RESPONDENT SHRI S.C.BHADRA, AR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE TWO APPEALS BY THE REVENUE FOR THE AYS 2000 - 01 AND 2001 - 02 AGITATE THE ORDERS OF THE LEARNED CIT(A) RAISING COMMON GROUNDS ON SOLITARY ISSUE WHICH READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD CIT(A) HAS ERRED IN ANNULLING THE REASSESSMENT BY WRONGLY INVOKING THE CONCEPT OF ESTOPPELS FROM THE ITAT ORDER EVEN THOUGH THE ASSESSEE HAD NOT MAINTAINED BOOKS OF ACCOUNTS AND THUS NOT DISCLOSED THE FACTS TRULY AND FAIRLY 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT IT HAD DISCLOSED ALL MATERIAL FACTS BUT SUCH CONTENTION IS NOT BORNE ON FACTS FROM THE FINDINGS OF HONBLE ITAT FOR OTHER YEARS WHERE IT WAS FOUND TH AT NO BOOKS OF ACCOUNTS WERE MAINTAINED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPLYING THE PRINCIPLE OF CONTINUITY OF ACCOUNTS FOR THE RELEVANT YEAR WHERE PROPER BOOKS OF ACCOUNTS WERE NOT MAINTAINED BY THE ASSESSEE BOTH FOR THE PRECEDING AND THE SUCCEEDING YEARS WHICH HAVE A DIRECT BEARING ON THE ACCOUNTS FOR THE INTERVENING YEAR . 2. THE BRIEF FACTS OF THE CASE OF THE ASSESSEE ARE THAT THE ASSESSEE IS CARRYING OUT THE BUSINESS OF EXECUTING CONTRACT WORKS FILED RETURNS FOR THE IMPUGNED AYS DECLARING INCOME OF RS.1,57,04,290 AND RS.92,71,147 RESPECTIVELY. THE ASSESSMENTS WERE COMPLETED BY WAY OF REGULAR ASSESSMENTS WHEN THE ASSESSING ITA NO.190 AND 191/CTK/2011 2 OFFICER ON THE BASIS OF INFORMATION AVAILABLE TO IT SOUGHT TO REOPEN THE AS SESSMENTS ON THE FINDING THAT THE TRIBUNAL HAD CONSIDERED THE APPEALS OF THE ASSESSEE FOR THE AYS 1998 - 99, 19 9 9 - 2000 AND 2002 - 03 HOLDING THAT AS THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT FOR ASSESSMENT, THE ASSESSING OFFICER WAS DIRECTED TO COMPUTE D THE INCOME OF THE ASSESSEE AT 12% OF THE GROSS RECEIPTS. FOR THESE THREE AYS THE ASSESSEE ADOPTED THE RATE AS DIRECTED BY THE TRIBUNAL BUT HE IN THE MEAN WHILE CONSIDERED THE CASE OF THE ASSESSING OFFICER ON THE FACT FINDING THAT THE ASSESSEE HAD BEEN IN DULGING IN TRANSFERRING MONEY AND WITHDRAWING THE SAME IN THE SUBSEQUENT YEAR WAS TO BE SUBJECTED TO THE PROVISIONS OF SECTION 145. THE ASSESSING OFFICER FOR THE IMPUGNED AYS, THEREFORE, ESTIMATED THE PROFITS OF THE BUSINESS AT 12% ARE THE AYS BEFORE US WH ICH WAS NOT THE BASIS FOR COMPARISON BY THE TRIBUNAL THESE AYS BEFORE US WERE CATEGORICALLY IGNORED FOR CONSIDERATION FOR THE BOOK CREDITS FOR SUCH MONEY AND TRANSFERS WAS CONSIDERED ON PROTECTIVE BASIS STOOD DELETED BY THE LEARNED CIT(A) EARLIER . AGGRIEVE D, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE ISSUE OF NOTICE U/S.147 ON THE INFORMATION AVAILABLE TO THE ASSESSING OFFICER TO JUSTIFY AND HELD THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR THE SECOND TIME WAS NOT AVAILABLE. HE NOTED THAT THE ASSESSING OFFICER HAD TAKEN ACTION U/S.147 OF THE ACT BEYOND THE TIME LIMIT PROVIDED AS FOUR YEARS FROM THE END OF THE RELEVANT AYS WITHOUT ESTABLISHING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRU LY ALL MATERIAL EVIDENCE NECESSARY FOR HIS ASSESSMENT FOR THESE TWO YEARS. RELYING ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF COMMERCIAL ENTERPRISE V. STATE OF ORISSA (1981) 81 STC 84 ANNULLED THE ASSESSMENTS SO FARMED U/S.147/148 FOR THE IMPUGNED ASSESSMENT YEARS. 3. THE DEPARTMENT IS IN APPEAL AS PER THE GROUNDS MENTIONED ABOVE. 4. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS BEEN REPEATEDLY NOT COOPERATING WITH THE DEPARTMENT INSOFAR AS HAVING RESORTED TO ESTIMATION THE ASSESSEE HAS BE EN LEFT SCOT - FREE FROM EXPLAINING THE VARIOUS SHORT - COMINGS NOTED BY THE ASSESSING OFFICER IN HIS ORDER. THE ASSESSING OFFICER NOTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT FAIRLY MAINTAINED AND COULD NOT BE RELIED UPON WHEN ON THE SPECIFIC REQU IREMENT OF THE ASSESSING OFFICER THE ASSESSEE COULD NOT ITA NO.190 AND 191/CTK/2011 3 EXPLAIN HOW THE BOOK RESULT AS DECLARED BY THE ASSESSEE COULD BE ACCEPTED. INVOKING THE PROVISIONS OF SECTION 145(3), HE HAD NO ALTERNATIVE BUT TO ESTIMATE THE INCOME AT 12% AS WAS ACCEPTED BY THE ASS ESSEE IN THE EARLIER YEARS AS DIRECTED BY THE TRIBUNAL. THE ASSESSEE WAS TO EXPLAIN THE VARIOUS CASH DEPOSITS AND SUBSEQUENT WITHDRAWALS IN THE NEXT FINANCIAL YEAR, WHICH RESULTED IN INCOME HAVING ESCAPED ASSESSMENT WHICH THE LEARNED CIT(A) HAS HELD INVALI D AS NOTIFIED BEYOND THE STATUTORY TIME LIMIT OF FOUR YEARS. THE LEARNED DR VEHEMENTLY ARGUED THAT THE TRIBUNAL ITSELF HAS APPRECIATED RESORTING TO ESTIMATION WHICH FACT CANNOT NOW BE DENIED BY THE ASSESSEE INSOFAR AS THE BOOKS OF ACCOUNT DID NOT SHOW THE TRUE INCOME OF THE ASSESSEE AND INSPITE OF OPPORTUNITIES GRANTED WAS NOT PROPERLY EXPLAINED AS CAN BE PERUSED IN THE EARLIER ASSESSMENT ORDER S WHICH HA VE BEEN FURNISHED. THE MONEY LAUNDERING BY THE ASSESSEE WAS TO BE EXPLAINED IN THE MANNER AND SATISFACTIO N TO THE ASSESSING OFFICER WAS DUE TO A SURVEY OPERATION CARRIED OUT UNDER THE PROVISIONS OF SECTION 133A ON 29.8.2003 WHICH HAS BEEN WRONGLY CONSTRUED BY THE LEARNED CIT(A) AS BEYOND THE STATUTORY LIMIT OF FOUR YEARS. SHE FULLY RELIED ON THE ORDER OF THE ASSESSING OFFICER AS PART OF HER SUBMISSIONS WHICH SHOULD BE PERUSED ALONG WITH THE ORDER OF THE TRIBUNAL DT.21.4.2006 WHEN THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO COMPUTE THE BUSINESS INCOME AT 12% FOR THE EARLIER AND LATER YEARS. 5. THE LEARNED CO UNSEL FOR THE ASSESSEE OPPOSED THE CONTENTIONS OF THE LEARNED DR. HE HAS SUBMITTED THE ASSESSMENT ORDERS FOR THE IMPUGNED AYS WHEN THE GROSS MARGIN WAS ACCEPTED BY THE ASSESSING OFFICER IN THE FIRST INNINGS PRIOR TO THE TRIBUNAL DISPOSING OF THE ASSESSEES APPEALS DIRECTING THE ASSESSING OFFICER TO ADOPT THE PROFIT AT 12% OF THE GROSS RECEIPTS. THESE TWO YEARS WERE CATEGORICALLY LEFT OUT IN VIEW OF THE LEARNED CIT(A) ACCEPTING THE PERCENTAGE OF GROSS RECEIPTS AT 10.03% AND 8.16% RESPECTIVELY. THE REASON TO BELIEVE THEREFORE OF INCOME HAVING ESCAPED ASSESSMENT WAS NOT ESTIMATION OF INCOME AT 12%. THE ORDERS NOW WHICH MAY BE PERUSED CLEARLY DO NOT INDICATE ANY MATERIAL TO INDICATE THAT 12% INCOME HAS TO BE ADOPTED AS THE FACTS OF THE ASSESSEES CASE DO NOT AT TRACT THE PRINCIPLES OF RESJUDICATA . THE LEARNED CIT(A) WAS CONSTRAINED TO CONSIDER THE PROVISIONS FOR INVOKING SECTION 147/148 WHEN HE HELD THAT THE INFORMATION ITA NO.190 AND 191/CTK/2011 4 AVAILABLE OR THE REASON TO BELIEVE BY THE ASSESSING OFFICER WAS BEYOND THE STATUTORY PERIOD OF FOUR YEARS. IT WAS NOT VALID REASSESSMENT WHEN THE LEARNED CIT(A) IN HIS ORDER PAGE 19 HAS CATEGORICALLY NOTED THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE LOWER RATE OF RETURN ON GROSS MARGIN VARYING BETWEEN 6.5% TO 8.18% FOR THE AYS 2004 - 05 TO 2 007 - 08.THE ASSESSMENTS WERE FRAMED U/S.143(3) DURING WHICH PERIOD THE ASSESSMENTS FOR THE IMPUGNED AYS WERE BEING PASSED U/S.144/147. HAVING NOTED ALL THESE DEFICIENCIES IN THE ORDERS OF THE ASSESSING OFFICER AND RELYING ON THE VARIOUS JUDICIAL PRONOUNCEME NTS, HE HELD THAT THE ASSESSMENT PROCEEDINGS WAS A NULLITY IN THE SENSE THAT THE ASSESSING OFFICER HA S NO JURISDICTION TO PROCEED AND/OR MAKE THE FINAL ORDER OF ASSESSMENT. HE ANNULLED THE IMPUGNED ASSESSMENTS ON FACT AND LAW WHICH THE LEARNED AR OF THE A SSESSEE FULLY SUPPORTED FOR HIS PART SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCE, WE ARE INCLINED TO HOLD THAT THE ASSESSING OFFICER TOOK A CL UE FROM THE ORDER OF THE TRIBUNAL IN ITA NOS.26,27 AND 28/CTK/2006 FOR THE AYS 1998 - 99, 1999 - 2000 AND 2002 - 03 CLEARLY AND CATEGORICALLY IGNORING THE INTERVENING AYS 200 0 - 01 AND 2001 - 02 WHICH ARE ON THE BASIS OF THE SECOND INNINGS BEFORE US. THE FACTS THERE FORE BECOME CRYSTAL CLEAR TO THE EFFECT THAT THE SECOND TIME REASSESSMENT PROCEEDINGS WERE NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW WHEN THE ASSESSING OFFICER SOUGHT TO INCORPORATE THE FINDINGS OF THE SURVEY CARRIED OUT UNDER THE PROVISIONS OF SECTION 133A ON 29.8.2003. THE CASH DEPOSITS AND WITHDRAWALS HAD ALREADY SUFFERED TAX WAS NOT THE CASE OF THE ASSESSING OFFICER. HE WANTED EXPLANATION WHICH COULD DETERMINE THE TAXABILITY THEREOF BUT ULTIMATELY HAD NO BASIS TO ESTIMATE THE INCOME AT 12% WHICH WAS DIRECTED TO BE ADOPTED BY THE ASSESSING OFFICER FOR OTHER YEARS AT 12%. WE ARE APPRISED OF THE ORDERS AND THE DIRECTION OF THE TRIBUNAL BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE APPREHENSION IN THE MIND OF THE ASSESSING OFFICER ON ACCOUNT OF INSUFFI CIENCY OF EVIDENCE IN SUPPORT OF BUSINESS EXPENSES WHETHER WERE CARRIED OUT ON THE BASIS OF RECEIPTS AND PAYMENTS FROM OTHER NON - PERSONAL ACCOUNT AND REDEPOSIT THEREOF WAS THE BASIS ALONE FOR HOLDING THE BOOKS OF ACCOUNT NOT PROPERLY MAINTAINED. ITA NO.190 AND 191/CTK/2011 5 APPRECIATI NG THAT NON - MAINTENANCE OF ACCOUNT IS UNWARRANTED ON ESTIMATION SHOULD NOT BE A GUIDING FACTOR FOR ANY ASSESSMENT YEAR AS EACH YEARS RESULTS ARE DIFFERENT AND INDEPENDENT. THEREFORE, THE TRIBUNAL HAD VERY CATEGORICALLY GIVEN A FINDING THAT THE MONEY TRANS FERRED AND PLOUGHED BACK WAS TO BE SPECIFICALLY CORRELATED TO BOOK THE REAL INCOME AND NOT RESORT TO ESTIMATION. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US HAS SUBMITTED THAT THERE IS NO BASIS FOR IN SQUARING OFF ACCOUNTS AS DISCLOSED BY THE AUDITORS I N THEIR AUDIT REPORT U/S.44AB WHICH OUGHT TO HAVE BEEN VERIFIED BY THE ASSESSING OFFICER WHEN THE INCOME RETURNED AT A PARTICULAR RATE WAS IN ACCORDANCE WITH THE BOOKS OF ACCOUNT ONLY. THE LEARNED CIT(A) THEREFORE, FINDING NO MERIT IN RESORTING TO ESTIMATI ON SOUGHT TO ANNUL THE ASSESSEE AS HAVING BEEN PASSED BEYOND THE STATUTORY TIME LIMIT AS PROVIDED IN SECTION 147/148.THE LEARNED CIT(A) HAS RIGHTLY CORRELATED THE FINDING OF THE TRIBUNAL AND THE MERITS OF THE ADDITION ON ESTIMATION VIS - - VIS THE REASON TO BELIEVE WHETHER WERE JUSTIFIED IN RESORTING TO ESTIMATION WAS PROPERLY CONSIDERED FOR ANNULMENT OF THE ASSESSMENT INSOFAR AS THE LEARNED DR HAS NOT BEEN ABLE TO FURNISH AS TO WHAT INCOME HA D CRYSTALLIZED ON HAVING ESCAPED EARLIER PRIOR TO THE DIRECTION OF THE TRIBUNAL WITH THAT OF THE FINDINGS GIVEN DURING THE COURSE OF THE SURVEY. RESORTING TO ESTIMATI ON INVOKING THE PROVISIONS OF SECTION 145 IS NOT AUTOMATIC. THE ASSESSING OFFICER OUGHT TO HAVE MENTIONED THE SPECIFIC DEFICIENCY, IF ANY, RESULTING IN ANY I NCOME HAVING ESCAPED ASSESSMENT FOR COMPUTING INCOME ON ESTIMATION AT THE UTMOST . NO CONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE . THEREFORE, WE HAVE NO HESITATION TO DISMISS THE APPEAL S FILED BY THE REVENUE. 7. IN THE RESULT, THE APPEA L S OF THE REVENUE ARE DISMISSED. PRONOUNCED IN OPEN COURT ON DT. 20 TH MAY, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 20 TH MAY, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.190 AND 191/CTK/2011 6 COPY OF THE OR DER FORWARDED TO : TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY. 1. THE APPELLANT: DY.COMMISSIONER OF INCOME - TAX, CIRCLE 2(2), BHUBANESWAR. 2. THE RESPONDENT: RKD CONSTRUCTION PVT. LTD.,B - 3, BARAMUNDA DUPLELX, BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICAT E)