Susil Kumar Swain, Cuttack V. ITO, Cuttack

ITA 193/CTK/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4350 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 29-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2009
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: SUNIL MISHRAAR
• Keywords: Rejection of books of accounts

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. 193/CTK/2009 (ASSESSMENT YEAR 2005 - 06) SRI SUSIL KUMAR SWAIN, S/O. GOLAKH CHA NDRASWAIN, KALYANINAGAR,CUTTACK. PAN: AGLPS 3388 J VERSUS INCOME - TAX OFFICER, WARD 2(1), CUTTACK. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SUNIL MISHRA,AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THI S APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN PARTLY CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ESTIMATING THE RATE OF RETURN ON THE BASIS OF GROSS RECEIPTS UNDER SUB - CONTRACT/MAIN CONTRACT AND H IRE CHARGES WHICH WERE RETURNED BY THE ASSESSEE DULY SUPPORTED BY AUDITED FINANCIAL STATEMENTS U/S.44AB. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1 ) FOR THAT ESTIMATION OF PROFIT @ 8 % ON DIRECT CONTRACT WORK OF 50,11,988 IS ILLEGAL AND EXCESSIVE WHICH VIOLATES THE CBDT GUIDELINES PRESCRIBING THAT NET PROFIT RATE OF 5 % FOR WORKS CONTRACTOR AS REASONABLE IN AS MUCH AS IT GOES TO SAY THAT THE CASE OF WORKS CONTRACTORS ADMITTING NET PROFIT RATE OF BELOW 5 % IS SC RUTINIZABLE. 2) FOR THAT, ESTIMATION OF PROFIT ON CONTRACT WORK EXECUTED AS LABOUR CONTRACTOR & TRANSPORTER @ 8% IS ILLEGAL AND EXCESSIVE AS THE PROFIT RATE @ 3% IS HELD TO BE REASONABLE BY THE APPELLATE AUTHORITIES IN SIMILAR CASES. 4) FOR THAT ESTIMATI ON OF PROFIT U/S 44 AE OF THE INCOME TAX ACT AT 37,800 ON TAXI PLYING IS ILLEGAL AS MUCH AS THE TAXI IS BEING USED IN THE BUSINESS OF THE APPELLANT WITHOUT BEING GIVEN ON HIRE. 5) FOR THAT THE ADDITION OF 92,357 ON THE GROUND OF UNEXPLAINED LIABILITY IS NOT SUSTAINABLE AS IN ONE HAND THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE PROFIT AND ON THE OTHER HAND REFERENCE HAS BEEN MADE ON THE BALANCE SHEET AND CONSEQUENTIAL BOOK RESULT. 6) FOR THAT TREATING THE AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES AND CHARGING TAX AT NORMAL RATE INSTEAD OF SPECIAL RATE WITHOUT ANY ADVERSE FINDING IS ILLEGAL AND ARBITRARY. ITA NO. 193/CTK/2009 2 7) FOR THAT, NON - DEDUCTION OF ENTIRE AMOUNT OF SALES TAX TDS OF 76,684 IS ILLEGAL IN AS MUCH AS THE SAME BEARS NO ELEMENT OF PROFIT. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING INCOME OF 4,69,190 WHICH INCLUDED AGRICULTURAL INCOME OF 20,000. CASE WAS TAKEN FOR SCRUTINY BY ISSUING NOTICE U/S.143(2) WHEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER COULD NOT SATISFY HIMSELF WITH THE CORRECTNESS OF THE BOOKS OF ACCOUNT ON INVOKING THE PROVISIONS OF SECTION 145(3). HE THEREFORE, PROCEEDED TO ESTIMATE INCOME FOR THE SEPARATE NATURE OF BUSINESS OF THE ASSESSEE COPMPUTED UNDER THE PROVISIONS OF SECTION 144. HE ALSO HELD AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES AND THE AMOUNT OF LIABILITIES TO BE TAXED U/S.68 AMOUNTING TO 92,357. 4. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO IN HIS BRIEF ORDER DISMISSED THE ASSESSEE - APPELLANTS APPEAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US SUBMITTED THAT THE LEARNED CIT(A) HERSELF ACCEPTED THE F ACT THAT THE ESTIMATION UNDER THE DIFFERENT NATURE OF BUSINESS CONDUCTED BY THE ASSESSEE WAS TO BE ESTIMATED IN ACCORDANCE WITH THE VARIOUS APPELLATE AUTHORITIES DECISIONS INSOFAR AS THE INCOME GENERATED ON ESTIMATION COULD NOT BE MORE THAN AS PROVIDED BY LAW. HOWEVER, SHE CHOSE TO DISMISS THE ASSESSEES APPEAL EVEN AFTER CONSIDERING THE UNDISPUTED FACTS AS NOTED BY THE ASSESSING OFFICER IN HIS ORDER. HE RELIED ON THE GROUNDS AS NOTED ABOVE. 6. ON A SPECIFIC Q UERY BY THE BENCH WHETHER THE BOOKS OF ACCOUNT AS CERTIFIED BY THE AUDITORS WERE SPECIFICALLY PRODUCED FOR VERIFICATION TO THE ASSESSING OFFICER TO INVOKE THE PROVISIONS OF SECTION 145(3), THE LEARNED COUNSEL FOR THE ASSESSEE AGREED TO THE PROPOSITION THAT HE HAS INCORRECTLY OBSERVED THAT THE TRUE INCO ME STOOD DECREASED IN THE BOOKS OF ACCOUNT HAD ITA NO. 193/CTK/2009 3 NOT BEEN INDICATED WHICH ONLY LED HIM TO MAKE BEST JUDGMENT ASSESSMENT U/S.1 44 BY ESTIMATING INCOMES WHICH MAY OR MAY NOT HAVE BEEN EARNED BY THE ASSESSEE. 7. THE LEARNED DR SUBMITTED THAT THE BOOKS OF ACCOUNT WERE NOT P RODUCED AT ALL THAT IS WHY THE AO HAD TO RESORT TO ESTIMATION ON THE BASIS OF AUDITED FINANCIAL STATEMENTS. HE POINTED OUT THAT THE ESTIMATION OF INCOME AT A LOWER RATE WOULD RESULT IN DECREASING THE INCOME VIS - - VIS WHAT HAS BEEN RETURNED BY TH E AS SESSEE W AS THEREFORE RIGHTLY CONFIRMED BY THE LEARNED CIT(A) WHICH ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD . ON CONSIDERATION OF FACTS AND CIRCUMSTANCES, WE ARE INCLINED TO HOLD THAT T HE ASSESSING OFFICER AFTER INVOKING THE PROVISIONS OF SECTION 145(3) MUST HAVE CARRIED OUT VERIFICATION OF THE BOOKS AND THEREFORE, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LEARNED DR THAT THE BOOKS OF ACCOUNT WERE NOT PRODUCED AT ALL. ONCE THE BO OKS OF ACCOUNT ARE PRODUCED , DULY AUDITED , WHICH AUDIT REPORT HAS BEEN SUBMITTED BY THE ASSESSEE ALONG WITH THE RETURN HAS TO BE RELIED ON IN ITS ENTIRETY. THE LACUNA, IF ANY , U/S.1 45(3) HAS TO BE SPECIFIED. THE ASSESSING OFFICER THEREFORE WAS NOT TO MAKE ESTIMATION IN RESPECT OF THE CONTRACT INCOME GENERATED INSOFAR AS HE HAS SOUGHT TO HOLD THAT AGRICULTURAL INCOME I S INCOME FROM OTHER SOURCE AND DISALLOWED LIABILITIES PAYABLE BY THE ASSESSEE WHICH EXPENSES HAVE BEEN CLAIMED AND HAVE BEEN GIVEN ALLOWANCE O N THE BASIS OF ESTIMATING INCOME ON THE GROSS RECEIPTS ONLY. IN OTHER WORDS, THE ASSESSING OFFICER ERRED IN MAKING DOUBLE ADDITION WHEN HE SOUGHT TO TAX RETURNED INCOME OF 4,69,010 AT 10,55,150. WITHOUT SPECIFYING THE AMOUNT OF DOUBLE TAXATION, THE LEARNED COUNSEL FOR THE ASSESSEE AGREED TO THE PROPOSITION THAT IF AN OPPORTUNITY IS GIVEN , THE ASSESSEE WILL EXPLAIN THE NATURE OF EXPENSES WHICH ITA NO. 193/CTK/2009 4 HAS BEEN ALLOWED BY HIM IN ESTIMATING ON GROSS RECEIPTS, CANNOT BE TAXED AS OUTSTANDING U/S.68. THE ISSUES ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER IN VIEW OF THE FACT THAT THE RESORTING TO ESTIMATE FOR NON - PRODUCTION OF BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECT ION 145(3), THE ASSESSING OFFICER HAS TO MAKE DISALLOWANCE OR ADDITION I N SPECIFIC ITEMS OF TRANSACTIONS LEADING TO FINDING OF UNDISCLOSED INCOME TO BE TAXED U/S.143(3). NEEDLESS TO SAY, AN OPPORTUNITY BE GIVEN TO THE ASSESSEE TO EXPLAIN THE FINANCIAL STAT EMENT S IN ACCORDANCE WITH THE BOOKS OF ACCOUNT WHEN HE IND ICATES THAT THE LABOUR CONTRACT COULD NOT GENERATE INCOME @8%. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - S D/ - (K.S.S.P RASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SRI SUSIL KUMAR SWAIN, S/O. GOLAK H CHANDRASWAIN, KALYANINAGAR,CUTTACK. 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(1), CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, S ENIOR PRIVATE SECRETARY.