Adhir Kumar Sahoo, Bhubaneswar V. ITO, Bhubaneswar

ITA 193/CTK/2011

• Counselvise Citation: 19322114 RSA 2011
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 20-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-04-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: M K KARNA
• Section: 44AD

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 193/CTK/2011 (ASSESSMENT YEAR 2006 - 07) SRI ADHIR KUMAR SAHOO, PLOT NO.N - 6/269, IRC VILLAGE, NAYAPALLI,BHUBANESWAR PAN: ANKP S 8564 N VERSUS INCOME - TAX OFFICER, WARD 2(1), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI M.K.KARNA, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 20.09.2011 DATE OF PRONOUNCEMENT : 23.09.2011 ORD ER SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE COMPUTATION OF INCOME BY THE ASSESSING OFFICER WHEN THE LEARNED CIT(A) DISMISSED THE APPEAL IN LIMINE FOR WANT OF PROSECUTION BEFORE IT. 2. THE LEARNED AR OF THE ASSESSEE SUBMITTED THE BRIEF FACTS OF THE CASE NAMELY THAT THE ASSESSEE DERIVES INCOME FROM EXECUTION OF SUB - CONTRACT AS A FABRICATOR AND INSPITE OF THE TURNOVER BEING LESS THAN 40 LAKHS MAINTAINED BOOKS OF ACCOUNT AND FILED THE RETURN OF INCOME OF 1,22,300 ALONG WITH THE AUDITED FINANCIAL STATEMENTS AND AUDIT REPORT IN FORM 3CD AND 3CB. THE ASSESSING OFFICER WITHIN A SHORT SPAN OF TIME PROCEEDED TO PASS THE ORDER ON 31.12.2008 U/S.144 WHEN HE CONSIDERED THAT THE ASSESSEE HAD RETURNED NET INCOME OF 1,41,279 ON THE GROSS BILLS RECEIVED BY IT AMOUNTING TO 35,31,985. HE RECOMPUTED THE NET PROFIT AT 3,53,200 @10% OF THE GROSS RECEIPTS. HE ALSO VERIFIED THE LEDGER COPY OF THE STAT E BANK OF INDIA A/C. NO.2001100 AND OBSERVED THAT THERE WAS A CLOSING BALANCE OF 4,61,781 WHICH HE CONSIDERED AS NOT HAVING BEEN SHOWN IN THE AUDITED BALANCE SHEET AS ON 31.3.2006. HE ADDED BOTH THESE INCOMES FOR TAXATION BY RAISING A DEMAND OF 1,98,277. AGGRIEVED THE ASSESSEE APPE ALED BEFORE THE FIRST ITA NO.193/CTK/2011 2 APPELLATE AUTHORITY AND WAS SUBJECTED TO DISMISSAL OF THE APPEAL FOR WANT OF PROSECUTION AS MENTIONED ABOVE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US HAS SUBMITTED THAT THE BANK ACCOUNT WHICH WAS A VAILABLE TO THE ASSESSING OFFICER HAD NO REASON TO CONSIDER THE INTERVENING ENTRIES IN THE BANK ACCOUNT WHICH WAS OPERATED BY THE ASSESSEE WAS THE SAVINGS BANK ACCOUNT. THE ASSESSEES BUSINESS TRANSACTIONS WERE IN DIFFERENT ACCOUNT WHICH BALANCE WAS SHOWN CORRECTLY THEREFORE COULD NOT BE SUBJECTED TO TAXATION WHEN THE ENTRIES THEREIN STOOD REFLECTED FROM THE RECEIPTS ON WHICH THE ASSESSING OFFICER HAS COMPUTED 10% INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THERE WAS NO OCCASION TO P ASS THE ORDER U/S.144 WHEN THE BOOKS OF ACCOUNT WERE MAINTAINED AND AUDITED AND WERE RELIED U PON BY THE ASSESSING OFFICER. THE BOOKS OF ACCOUNT INDICATED THAT THE BANK BALANCE IN THE CURRENT ACCOUNT OF THE ASSESSEE WAS AS DECLARED IN THE BALANCE SHEET THER EFORE COULD NOT BE SUBJECTED TO TAXATION BY WAY OF A SEPARATE ADD ITION WHEN HE HA D ALREADY CONSIDERED THAT THE NET PROFIT ARRIVED AT BY THE ASSESSEE AT 4% OUGHT TO BE ENHANCED TO 10%. HE SUBMITTED THAT THE ASSESSEE IS GOVERNED BY THE PROVISIONS OF SECTION 44AD WHICH INSCRIBES 8% INCOME FROM CONTRACTUAL TRANSACTIONS THEREFORE COULD NOT BE ASSESSED AT 10% WHEN THE ASSESSEES MAINTAINING BOOKS OF ACCOUNT WAS TO DECLARE MARGIN OF LESS THAN 8% AS PER THE REQUIREMENTS OF LAW. THE ASSESSING AUTHORITIES THEREFORE P ROCEEDING TO ENHANCE THE NET RETURN ON GROSS RECEIPTS WAS BEYOND THE PROVISIONS OF THE I.T.ACT. HE PRAYED THAT ON THE FACTS AND CIRCUMSTANCES, THE ASSESSMENT U/ S.144 COULD ONLY LEAD TO A FINDING THAT ONLY 8% ON THE GROSS RECEIPTS C OULD BE TAXED AS BEST JUD GMENT. THE AMOUNT OF 4,61,781 COULD NOT BE TAXED AS IT WOULD LEAD TO DOUBLE TAXATION. FOR THIS PROPOSITION, HE SUBMITTED A PAPER BOOK WHICH INTERALIA INDICATES THE ITEMS OF CREDITS IN THE INTERVENING SAVING ITA NO.193/CTK/2011 3 BANK ACCOUNT DULY ACCOUNTED FOR AND RECORDED IN THE BOOKS OF ACCOUNT AND ALSO THE FACT THAT THE ENHANCEMENT AS A SUB - CONTRACTOR ASSESSEE CANNOT BE MORE THAN 8% IS TO BE ESTABLISHED ON THE BASIS OF GROSS RECEIPTS, WHEN THE TDS CERTIFICATES HAVE BEEN PERUSED BY THE ASSESSING OFFICER. 4. THE LEARNED DR INSI STED THAT THE LEARN ED CIT(A) HAD GIVEN SUFFICIENT TIME TO THE ASSESSEE TO PRESENT HIS CASE WHEN HE CHOSE NOT TO , THEREFORE WAS FULLY JUSTIFIED IN DISMISSING THE APPEAL. FURTHER ON MERITS, HE SUBMI TTED THAT THE ASSESSMENT U/S.1 44 WAS MADE ON ACCOUNT OF ASSESSEE NOT COMPLYING TO THE REQUIREMENTS THEREFORE LED TO PASSING THE ORDER ON 31.12.2008 BEING A TIME BARRING ASSESSMENT. HE SUPPORTED THE ORDER OF THE ASSESSING OFFICER FOR HIS PART OF SUBMISSIONS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO HOLD THAT THE ADDITION ON ACCOUNT OF INTERVENING ENTRIES IN THE SAVINGS BANK A/C OF THE ASSESSEE WERE ROUTED THROUGH THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE AND WERE VERIFIED BY THE ASSESSING OFFICER. THE INTERVENING ENTRIES REFLECTED THE RECEIPTS WHICH HAVE BEEN WITHDRAWN FOR ASSESSEES BUSINESS LED TO THE FINDING THAT ONLY 10% THEREOF COULD BE TAXED WHICH THE ASSESSEE HAD ALREADY RETURNED IN HIS INCOME O N THE BASIS OF BOOKS OF ACCOUNT MAINTAINED BY IT BUT AT 4% . IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO ESTIMATE THE INCOME AND ENHANCE IT TO 10% FOR VERIFYING THE INTERVENING ENTRIES IN THE BANK ACCOUNT AS SHOULD HAVE BEEN EXPLAINED BY THE ASSESSEE UNDER THE PROVISIONS OF SE CTION 144. THE DEEMING PROVISIONS OF SECTION 44AD HAVE BEEN APPLIED BY THE ASSESSING OFFICER WHICH ALLOW 8% AS NET INCOME ON THE GROSS RECEIPTS WITH A RIDER THAT ALL THE EXPENSES CLAIMED BY THE ASSESSEE ARE DEEMED TO BE ALLOWED THERE FROM. THE LEARNED COUN SEL FOR THE ASSESSEE H AS AGREED TO THE PROPOSITION THAT IN VIEW OF THE ENHANCEMENT ITA NO.193/CTK/2011 4 IN THE LIGHT OF RETURN, THE RETURN OF 8% OF THE GROSS RECEIPTS IS ACCEPTABLE IN VIEW OF THE FACT THAT NO DISALLOWANCE ON ANY EXPENSES HAS BEEN MADE AND NEITHER HAVE BEEN GROSS RECEIPTS HAVE BEEN ENHANCED. IN THIS VIEW OF THE MATTER, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME AT 8% OF 35,31,985. THIS GROUND THEREFORE , STANDS PARTLY ALLOWED AND THE GROUND RELATING TO THE ADDITION OF 4,61,781 IS DIRECTED TO BE DELETED AS IT HAS NO BASIS . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 23 RD SEPTEMBER, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SRI ADHIR KUMAR SAHOO, PLOT NO.N - 6/269, IRC VILLAGE, NAYAPALLI,BHUBANESWAR 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(1), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.