POWER LINERS, Jaipur V. ACIT, Jaipur

ITA 194/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2212 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DHK
• Keywords: Rejection of books of accounts; Business income; Depreciation; Retrospective amendment; Question of law
• Section: 43B; 143(3); 37; 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA MKW0 VTQZU YKY LSU H] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & DR. ARJUN LAL SAI NI, AM VK;DJ VIHY LA-@ ITA NO. 194/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 M/S POWER LINERS, 205, UPASANA APARTMENT, BIHARI MARG, BANIPARK, JAIPUR. CUKE VS. A.C.I.T., CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AALFP 2459 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ROHAN SOGANI (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.P. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08/11/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 08/01/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29/12/2016 OF LD. CIT(A)-I, JAIPUR FOR THE A.Y. 2012 -13. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ID. AO IN REJ ECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961. THE ACT ION OF THE CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAIN ST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE REJECTION OF BOOKS OF ACCOUNTS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE ID. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ID. AO IN DISALLOWING A SUM OF RS. 16,17,487/- UNDER SECTION 40(A)(IA) OF T HE INCOME TAX ITA 194/JP/2017_ POWER LINERS VS ACIT 2 ACT, 1961. THE ACTION OF ID. CIT (A) IS ILLEGAL, UN JUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEAS E BE GRANTED BY QUASHING OF THE SAID DISALLOWANCE OF RS. 16,17,487/ -. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE ID. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ID. AO IN DISALLOWING A SUM OF RS. 14,30,423/- OF SERVICE TAX UNDER SECTION 43B OF THE INCOME TAX ACT, 1961. THE ACTION OF THE CIT(A) IS I LLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 14,30,423/-. 2. AT THE TIME OF HEARING, THE LD AR OF THE ASSESSE E HAS STATED THAT THE ASSESSEE DOES WANT TO PRESS GROUND NO. 1 AND THE SAM E MAY BE DISMISSED AS NOT PRESSED. THE LD DR HAS RAISED NO OBJECTION IF GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. A CCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT P RESSED. 3. GROUND NO. 2 OF THE ASSESSEES APPEAL IS REGARDI NG DISALLOWANCE MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT). THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING N.P. RATE, THEREFORE, ONCE THE INCOME OF THE ASSESSEE IS ESTIMATED BY APPLYING THE N.P. RATE THEN NO FURT HER DISALLOWANCE IS CALLED FOR U/S 40(A)(IA) OF THE ACT. IN SUPPORT OF HIS CON TENTION HE HAS RELIED UPON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RAKESH CONSTRUCTION CO. VS ACIT IN ITA NO. 274/JP/2014 ORDE R DATED 23/09/2016. ITA 194/JP/2017_ POWER LINERS VS ACIT 3 THUS, THE LD AR HAS SUBMITTED THAT ONCE THE INCOME O F THE ASSESSEE IS ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNT, NO D ISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. ALTERNATIVELY, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT AS PER THE AMENDMENT IN SECTION 40(A )(IA) OF THE ACT ONLY 30% OF THE SUM PAYABLE TO A RESIDENT SHALL BE DISAL LOWANCE IF THE TAX IS NOT DEDUCTED AT SOURCE. THE SAID AMENDMENT IS EXPLANATOR Y IN NATURE AND THEREFORE, IT IS APPLICABLE RETROSPECTIVELY. THE LD AR OF THE ASSESSEE HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS VATIKA TOWNSHIP PVT. LTD. 109 DTR 33 AND SUBMITTED TH AT THE HONBLE APEX COURT HAS OBSERVED THAT IF LEGISLATION CONFERS A BE NEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY, THEN THE PRESUMPTION WOULD BE THAT SUCH LEGISLATION GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT. THE LD AR HAS CONTENDED THAT E VEN IN A CASE IT IS HELD THAT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS WAR RANTED, THE SAME WILL BE RESTRICTED ONLY 30% OF THE AMOUNT PAYABLE OR PAI D. 4. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIALS AVAILABLE ON THE RECORD. THERE IS NO DISPU TE THAT THE INCOME OF ITA 194/JP/2017_ POWER LINERS VS ACIT 4 THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER ON THE BASIS OF THE ESTIMATION AND BEST JUDGMENT AFTER REJECTING THE BO OKS OF ACCOUNT U/S 145(3) OF THE ACT. THE ASSESSING OFFICER HAS APPLIE D N.P. RATE OF 8% ON THE TOTAL RECEIPTS OF RS. 1,53,44,942/- AND ACCORDINGLY , THE ADDITION OF RS. 2,18,277/- WAS MADE BY THE ASSESSING OFFICER. THE LD CIT(A) HAS CONFIRMED THE ADDITION OF THE ASSESSING OFFICER BY REJECTING THE CONTENTION OF THE ASSESSEE. THE AMOUNT WAS ALREADY PAID DURING THE PRE VIOUS YEAR AND NOT PAYABLE AT THE END OF THE YEAR. THUS, IT IS CLEAR TH AT THE CONTENTION RAISED BY THE ASSESSEE BEFORE US THAT AFTER REJECTION OF B OOKS OF ACCOUNT AND ESTIMATION OF INCOME OF THE ASSESSEE, NO FURTHER AD DITION CAN BE MADE BY THE ASSESSING OFFICER, HAS NOT BEEN CONSIDERED OR D ECIDED BY THE LD. CIT(A). WE FIND THAT THE COORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF RAKESH CONSTRUCTION CO. VS. ACIT (SUPRA) WHILE DEALIN G WITH THE IDENTICAL ISSUE HAS HELD IN PARA 2.4 AS UNDER: 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE BOOKS OF ACCOUNTS WERE REJECTED U/S 145(3) OF THE ACT AND THEREAFTER THE AO HAS ESTIMATED NET PROFIT @ 5.05% ON CONTRACT RECEIPT AFTER DEDUCTION OF DEPRECIATION, I NTEREST AND REMUNERATION PAID TO PARTNERS AS AGAINST NET PROFIT OF 2.39% DEC LARED BY THE ASSESSEE. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS NOT ED THAT THERE HAVE BEEN DISCUSSIONS BETWEEN THE AO AND THE ASSESSEE IN TERM S OF ESTIMATING THE NET PROFIT RATE ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED. AS PART OF ITA 194/JP/2017_ POWER LINERS VS ACIT 5 THAT DISCUSSION, IT IS NOTED THAT IN RESPONSE TO AO 'S SHOW-CAUSE AS TO WHY 8.5% NET PROFIT RATE SHOULD NOT BE ALLOWED, THE ID. AR HAS SUBMITTED THAT IF THE NET PROFIT AT THE RATE OF 8.5% IS APPLIED, THEN THE DEDUCTION ON ACCOUNT OF PAYMENT OF HIRING CHARGES FOR MACHINERY TAKEN ON RENT AMOUNTING TO RS. 22,41,600/- AND RS. 21,60,000/- ARE ALSO TO BE ALLO WED. THE LD. AO FINALLY DECIDED TO APPLY NET PROFIT OF 5.05% WHICH HAS BEEN AGREED UPON BY THE ASSESSEE. IT IS THEREFORE SEEN THAT ISSUE OF ALLOWA NCE OF PAYMENTS OF MACHINERY HIRE CHARGES HAS BEEN DULY TAKEN INTO CON SIDERATION BY THE AO WHILE ESTIMATING THE N.P. RATE OF 5.05% FURTHER, IT IS NOTED THAT THE DECISION OF HON'BLE KOLKATTA HIGH COURT IN THE CASE OF ARJUN BHOWMICK (SUPRA) DIRECTLY SUPPORT THE CASE OF THE ASSESSEE. IN THAT CASE, THE VIEW TAKEN BY THE KOLKOTTA BENCH OF THE ITAT HAS BEEN CO NFIRMED BY THE HONBLE HIGH COURT WHEREIN IT HAS HELD THAT 'ONCE THE N.P. RATE IS ESTIMATED, THE AO CANNOT BASED THIS DISALLOWANCE ON THE SAME BOOKS OF ACCOUNTS FOR THE PURPOSE OF DISALLOWANCE BY INVOKING PROVISIONS OF S ECTION 40(A)(IA) OF THE ACT OR GENERAL DISALLOWANCE U/S 37 OF THE ACT. THE ESTIMATION MADE BY THE AO OF NET PROFIT WILL TAKE CARE OF EVERY ADDITION R ELATED TO BUSINESS INCOME OR BUSINESS RECEIPTS AND NO FURTHER DISALLOWANCE CA N BE MADE.' IT IS ALSO NOTED THAT JAIPUR BENCH OF ITAT IN THE CASE OF BANA S SAND TOLL TAX COLLECTION (SUPRA) HAS TAKEN A SIMILAR VIEW IN THE MATTER FOLLOWING THE DECISION IN CASE OF HON'BLE ANDHRA PRADESH HIGH COU RT IN THE CASE OF INDWELL CONSTRUCTION (232 ITR 776). IN LIGHT OF ABO VE, WE SEE NO REASON FOR AO TO INVOKE PROVISIONS OF SECTION 154 OF THE ACT. HENCE, THE ORDER PASSED BY THE AO U/S 154 IS QUASHED AND THE ORIGINAL ORDER PASSED U/S 143(3) OF THE ACT IS SUSTAINED. FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL (SUPRA) WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER O N THIS ACCOUNT. ITA 194/JP/2017_ POWER LINERS VS ACIT 6 6. GROUND NO.3 OF THE ASSESSEES APPEAL IS REGARDIN G DISALLOWANCE MADE U/S 43B OF THE ACT. THE LD AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSING OFFICER HAS MADE AN ADDITION ON ACCOUNT O F SERVICE TAX U/S 43B OF THE ACT. HE HAS FURTHER SUBMITTED THAT THE ASSES SEE HAS NOT MADE ANY CLAIM OF EXPENDITURE IN THE P&L ACCOUNT OR IN COMPU TATION OF INCOME ON ACCOUNT OF SERVICE TAX PAYABLE, THEREFORE, NO DISAL LOWANCE IS CALLED FOR U/S 43B OF THE ACT. IN SUPPORT OF HIS CONTENTION, HE H AS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS KNIGHT FRANK (INDIA) PVT. LTD. 242 TAXMAN 313 (BOM) AND SUBMITTED THAT THE HON'BLE HIGH COURT HAS HELD THAT THE ASSESSEE HAD NOT CLAIM ED ANY DEDUCTION ON ACCOUNT OF THE SERVICE TAX PAYABLE IN ORDER TO DETE RMINE ITS TAXABLE INCOME, THERE CAN NO OCCASION TO INVOKE SECTION 43B OF THE ACT. 7. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS RELEVANT MATERIALS AVAILABLE ON THE RECORD. THER E IS NO QUARREL ON THE POINT THAT IF THE ASSESSEE HAS NOT CLAIMED A DEDUCT ION ON ACCOUNT OF SERVICE TAX PAYABLE THEN THE PROVISIONS OF SECTION 43B OF T HE ACT CANNOT BE INVOKED. HOWEVER, AT THE SAME TIME, IT IS ALSO TO BE KEPT IN MIND THAT WHEN THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION FOR THE YEAR UNDER ITA 194/JP/2017_ POWER LINERS VS ACIT 7 CONSIDERATION AND WHICH HAS NOT BEEN DISALLOWED U/S 43B OF THE ACT THEN THE ASSESSEE CANNOT TAKE THE BENEFIT OF SECTION 43B IN FUTURE WHEN THE SAID SERVICE TAX IS PAID BECAUSE THE ASSESSEE HAS NOT IN CLUDED THIS AMOUNT AS PART OF TURNOVER. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS KNIGHT FRANK (INDIA) PVT. LTD.(SUPRA) HAS HELD IN P ARA 7 AS UNDER: 7. REGARDING QUESTION (II): (A) IT IS AN ADMITTED POSITION BEFORE US THAT THE R ESPONDENT ASSESSEE HAD NOT CLAIMED ANY DEDUCTION ON ACCOUNT OF THE SER VICE TAX PAYABLE IN ORDER TO DETERMINE ITS TAXABLE INCOME. I N THE ABOVE VIEW, THERE CAN BE NO OCCASION TO INVOKE SECTION 43 B OF THE ACT. (B) MR. SURESH KUMAR, LEARNED COUNSEL FOR THE REVEN UE FAIRLY STATES THAT THE ISSUE STANDS CONCLUDED AGAINST THE REVENUE BY THE DECISION OF THIS COURT IN COMMISSIONER OF INCOME TA X VS OVIRA LOGISTICS PVT. LTD. 377 ITR 129 AND COMMISSIONER OF INCOME TAX VS CALIBRE PERSONNEL SERVICE PVT. LTD. (INCOME TAX APPEAL NO. 158 OF 2013) RENDERED ON 2 ND FEBRUARY, 2015. (C) IN VIEW OF THE ABOVE, THE QUESTION (II) AS PROP OSED IS COVERED BY THE DECISION OF THIS COURT. THEREFORE, IT DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED. FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH CO URT CITED ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT SU STAINABLE. HOWEVER, SUBJECT TO THE VERIFICATION OF THE FACT THAT THE AS SESSEE HAS NOT MADE ANY CLAIM WHILE COMPUTING ITS TAXABLE INCOME. ACCORDINGL Y, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THIS FACT THEN ALLOW T HE CLAIM OF THE ASSESSEE. ITA 194/JP/2017_ POWER LINERS VS ACIT 8 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/2018. SD/- SD/- MKW0 VTQZU YKY LSUH FOT; IKY JKO (DR. ARJUN LAL SAINI) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08 TH JANUARY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S POWER LINERS, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-3, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 194/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR