Nirmal kr. Gupta, V. I.T.O.,

ITA 194/PAT/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7768 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 27-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BABU
• Assessee Lawyers: SANJEEV KR ANWAR
• Keywords: Depreciation; Corroborative evidences
• Section: 44AD; 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA BEFORE SHRI SAND E EP GOSAIN (JM) & SHRI M BALAGNESH ( AM) I T A NO. 194 / PAT /20 1 4 ASSESSMENT YEAR S : 200 9 - 10 SA LAUDDIN , VS. ACIT, CHHATRADHARI BAZAR , CIRCLE - 2 , CHHAPRA, SARAN . MUZAFFARPUR . ( APPELLANT) (RESPONDENT) PAN - A DOPR5235P DEPARTMENT BY : S HRI RAM BABU , DR . ASSESSEE BY : SHRI SANJEEV KR. ANWAR , A DV . DATE OF HEARING: - 09 /1 0 /201 7 DATE OF PRONOUNCEMENT: - 13 / 1 0 /201 7 ORDER PER BENCH: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT (A) - 1 DATED - 27.08 .201 4 AND PERTAINS TO ASSESSMENT YEAR 20 10 - 11 . 2. THE EFFECTIVE ISSUE S RAISED IN GROUND S OF APPEAL READ AS UNDER: 1. FOR THAT THE ORDER OF THE AUTHORITIES BELOW ARE BAD IN LAW AND FCTS . 2. FOR THAT THE LEARNED CIT (A) HAS GROSSLY ERRED IN CONFIRMNG THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER. 3. FOR THAT AFTER THE CONFIRMATION OF ADDITIONS BY LEARNED CIT (A) THE NET PROFIT OF THE CONTR ACT BUSINESS REACHES TO 10.18%, WHICH BY ANY MEANS IS VERY HIGH, CONSIDERING THE NATURE OF BUSINESS AND THE PAST RECORDS OF THE APPELLANT. I TA NO. - 194 / PAT /20 1 4 2 4. FOR THAT UNDER THE SIMILAR CIRCUMSTANCES, IN THE IMMEDIATELY PRECEDING YEAR, THE LEARNED CIT(A) HAS CHOSEN T O ESTIMATE THE NET PROFIT AND THIS FACT HAS BEEN SPECIFICALLY BROUGHT TO THE KNOWLEDGE OF THE LEARNED CIT (A), BUT NO FINGING, WHATSOEVER, HAS BEEN GIVEN BY HIM. 5. FOR THAT IT HAS BEEN INVARIABLY HELD THAT IN CASE OF CONTRACT BUSINESS, NET PROFIT SHOULD BE ESTIMATED, IN ABSENCE OF VOUCHERS ETC. AND THE PAST RECORDS FORM A SOUND BASIS FOR THE SAME. 6. FOR THAT IN APPELLANTS OWN CASE, THE HONBLE PATNA BENCH OF ITAT HAS CONSIDERED 6% OF THE GROSS RECEIPTS AS REASONABLE ESTIMATE AND INTEREST AND SALARY TO THE PARTNERS AND DEPRECIATION IS ALLLOWED THEREON. 7. FOR THAT THE LEARNED CIT (A) IS NOT CORRECT IN STATING THAT THE ESTIMATION OF INCOME WILL VARY FROM YEAR TO YEAR, PARTICULARLY WHEN THE SIMILAR WORK IS BEING CARRIED OUT IN THE ASSESSMENT YEAR UNDER CO NSIDERATION. 8. FOR THAT IN ANY VIEW THE DISALLOWANCE MADE ARE VERY HIGH AND EXCESSIVE AND CONSIDERING THAT A REASONABLE PROFIT OF CONTRACT BUSINESS HAS BEEN RETURNED IT SHOULD HAVE BEEN ACCEPTED. 9. FOR THAT OTHER GROUNDS, IF ANY, WILL BE URGED AT THE TIME OF HEARING. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS A CONTRACTOR AND DERIVES I NCOME FROM CONTRACT WORK WITH VARIOUS GOVERNMENT DEPARTMENT. THE RETURN OF INCOME WAS FILED ON 29.05.2011 DISCLOSING INCOME OF RS.2,37,86,501/ - . THEREAFTE R, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND SEEKING REPLY OF THE ASSESSEE; THE ORDER OF ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT, 1961 WAS PASSED BY THE AO. 4 . AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRED AN AP PEAL BEFORE LD. CIT(A) AND THE LD. CIT(A) A LSO UPHELD THE ORDER OF THE AO . I TA NO. - 194 / PAT /20 1 4 3 5 . AGGRIEVED BY THE ORDER OF LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US ON THE GROUND MENTIONED HEREINABOVE. 6 . GROUND NOS. 1,2 & 9 ARE GENERAL IN NATURE PREFERRED NO ADJUDIC ATION. 7 . GROUND NO S . 3 TO 8 ARE INTERRELATED AND INTERCONNECTED AND RELATES TO CHALLENGING THE ORDER OF THE LD. CIT(A) IN UPHELDING THE ESTIMATION OF NET PROFIT. 8 . AT THE VERY OUTSET, THE AR APPEAR IN G ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE IDENTI CAL ISSUES HAVE ALREADY BEEN DECIDED BY THE CO - ORDINATE BENCHES OF THE ITAT FOR ASSESSMENT YEARS 2004 - 05, 2006 - 07,2007 - 08 & 2008 - 09 AND EVEN IN ITA NO.43/PAT/2013 RESPECTIVELY THE RELEVENT PORTION OF THE ORDR IN ITA NO.43/PAT/2013 AND ASSESSMENT YEAR 2009 - 10 ARE REPRODUCED BELOW: 3. SOLITARY INTER - CONNECTED ISSUE RAISED BY ASSESSEE IS THAT LD. CIT(A) ERRED IN ESTIMATING THE PROFIT @ 8% OF THE TOTAL TURNOVER BY REJECTING THE BOOKS OF ACCOUNT. 4. THE FACT IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A P ARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS FIL E D ITS RETURN ON 31.03.2009 DECLARING TOTAL INCOME OF RS.1,51,43,900/ - . SUBSEQUENTLY, THE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND ACCORDINGLY, NOTICE U/S. 143(2)/142(1) OF THE ACT WAS ISSUED UPON ASSESSEE. THE ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT AT A TOTAL INCOME OF RS.1,89,35,818/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT ASSESSEE IS NO T MAINTAINING PROPER BOOKS OF ACCOUNT ALONG WITH SUPPORTING EVIDENCE. ACCORDINGLY, AO REJECTED THE BOOKS OF ACCOUNT OF ASSESSEE AND ESTIMATED THE PROFIT @ 8% OF THE TURNOVER AFTER HAVING RELIANCE OF ITAT ORDER I TA NO. - 194 / PAT /20 1 4 4 IN THE OWN CASE OF THE ASSESSEE FOR THE AY 200 6 - 07 WHEREIN THE PROFIT @8% WAS ESTIMATED. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF AO BY OBSERVING AS UNDER: - FURTHER, I DO NOT AGREE WITH THE APPELLANTS ARGUMENT THAT IN THE PAST, INVARIABLY, THE PATNA BENCH OF ITAT HAVE APPLIED THE NET PROFIT RATE OF THE TOTAL CONTRACT VALUE @ 6% SHOULD BE MAINTAINED. THE HON'BLE ITA PATNA BENCH HAS IN AY 2006 - 07 TAKEN THE ESTIMATED PROFIT @ 8%. THE ESTIMATION OF INCOME IS BASED ON FACTS AND WILL VARY FROM YEAR TO YEAR DEPEN DING ON THE BUSINESS CONDITIONS. THOUGH VARIOUS COURTS HAVE GIVEN JUDGMENTS THAT PROVISIONS OF SECTION 44AD IS NOT APPLICABLE WHERE GROSS RECEIPTS OF THE ASSESSEE FROM ITS BUSINESS OF CIVIL CONSTRUCTION EXCEEDS RS.40 LAKHS, YET IT CAN FORM A SOUND BASIS FO R ESTIMATION OF PROFIT IN CIVIL CONTRACT CASES WHERE ASSESSEES BOOKS OF ACCOUNTS ARE INCOMPLETE, INCORRECT AND TRANSACTIONS ARE NOT SUPPORTED BY EVIDENCES. THE BENEFIT OF HIGH ECONOMICS ACCRUE TO THE APPELLANT AS WITH INCREASE IN RECEIPTS THERE IS NOT COR RESPONDING INCREASE IN OVERHEAD EXPENSES UNDER MANY HEADS AND LOGISTICS REMAINING THE SAME, THE HIGHER RECEIPTS ACCRUE WITH NOT CORRESPONDING ENHANCED EXPENSES. CONSIDERING THE FACTS OF THE CASE THE ESTIMATION IS CONFIRMED @ 8% OF THE GROSS CONTRACT RECEIP T, KEEPING THE FACT IN MIND THAT SALARY AND INTEREST TO PARTNERS AS WELL AS DEPRECIATION IS BEING ALLOWED TO THE APPELLANT. IN THE LIGHT OF BINDING JUDGMENT OF HON'BLE PATNA HIGH COURT IN THE CASE OF M/S SHYAM BIHAR VS. CIT, DEPRECIATION IS TO BE SEPARAT ELY WORKED OUT AND DEDUCTED FROM THE ESTIMATED NET PROFIT. THE AO IS FURTHER DIRECTED TO ALLOW DEDUCTION OF ALLOWABLE DEPRECIATION FROM THE INCOME ESTIMATED AS ABOVE. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSEE CAME IN SECOND APPEAL BEFORE US. 6. BEFORE US LD. AR FOR THE ASSESSEE FILED PAPER BOOK WHICH IS RUNNING PAGES FROM 1 TO 37 AND SUBMITTED THAT THE CO - ORDINATE BENCH IN ASSESSEES OWN CASES FOR AYS 2003 - 04, 2004 - 05, 2005 - 06 & 2007 - 08 HAS CONFIRMED THE ESTIMATED PROFIT @ 8% EXCEPT FOR THE AY 2006 - 07 WHEREIN THE ESTIMATED PROFIT @ 8% WAS DETERMINED. IT WAS BECAUSE OF FAILURE OF TDS DEDUCTION UNDER THE CHAPTER XVII OF THE ACT VIS - A - VIS SEC. 40(A)(IA) OF THE ACT. THEREFORE, IN THIS YEAR ALONE THE PROFIT WAS ESTIMATED @ 8%. ON THE OTHER HAND, LD . DR FOR THE REVENUE SUBMITTED THAT THE ORDER OF ITAT FOR AY 2006 - 07 IS THE LATEST ORDER SO THE PROFIT SHOULD BE ESTIMATED @ 8%. HE VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. I TA NO. - 194 / PAT /20 1 4 5 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE HAS UPHELD THE ORDER OF ITAT IN ITS MISCELLANEOUS APPEAL NO. 77 OF 2010 DATED 11.04.2012 BY ESTIMATING @ 6% OF THE TURNOVER. THE RELEVA NT EXTRACT OF THE ORDER IS RE PRODUCED BELOW: - THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH SHOULD HAVE ALLOWED THE CASE OF THE APPELLANT THAT NET PROFIT SHOULD BE APPLIED AT THE RATE OF 8% AFTER TAKING INTO ACCO UNT ALL THE EXPENSES, INSTEAD OF AT THE RATE OF 6%. DETERMINATION OF NET PROFIT FOR ANY BUSINESS SIS SON THE BASIS OF ALL THE RELEVANT FACTS AND CIRCUMSTANCES AND HENCE, IT IS ONLY AN ISSUE OF FACT. IN THE FACTS OF THE CASE, NO SUBSTANTIAL QUESTION OF LA W ARISES FOR DETERMINATION BY THIS COURT. THE APPEAL IS, THEREFORE, DISMISSED. WE ALSO FIND THAT CO - ORDINATE BENCH HAS BEEN CONSISTENTLY ESTIMATING THE PROFIT OF ASSESSEE @ 6% IN ITS OWN CASE. THEREFORE WE ALSO RELY IN THE O RDER OF ITAT IN ITA NO.144//PA T/2012 FOR AY 2008 - 09 DATED 10 - 07 - 2014. THE RELEVANT OPERATIVE PORTION OF THIS ORDER IS REPRODUCED BELOW: - 8. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF SPECIAL BENCH IN THE CASE OF DCIT VS. ALLIED CONSTRUCTION REPORTED IN105 ITD 1 (DEL ) AND OTHERS INSTANCES WHERE A NET PROFIT RATE OF 6% HAS BEEN APPLIED AND NECESSARY DOCUMENTS HAS BEEN PLACED ON RECORD. KEEPING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DIRECT THE LD. ASSESSING OFFICER TO APPLY THE NET PROFIT RATE OF 6% AND THEREAFTER ALLOW THE INTEREST AND SALARY TO THE PARTNERS AS WELL AS DEPRECIATION SUBJECT TO THE INCOME DOES NOT GO BELOW. THE TAXABLE INCOME AS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FROM CONTRACT BUSINESS, IT IS ORDERED ACCORDING LY. THUS G R OUND NO.3 TO 6 OF THE ASSESSEE ARE PARTLY ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF THIS CO - ORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA), THEREFORE, THE NET PROFIT MADE BY ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS HEREBY DELE TED. WE DIRECT THE AO TO ESTIMATE THE NET PROFIT @ 6% ACCORDINGLY. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. I TA NO. - 194 / PAT /20 1 4 6 9 . AFTER ANALYSING THE AFOREMENTIONED ORDERS AND THE DOCUMENT PLACED ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND HAVING HEARD THE COUNSEL FOR BOTH THE PARTIES AT LENGTH, WE FIND THAT THE CO - ORDINATE BENCHES HAD BEEN CONSISTENTLY ESTIMA TING THE PROFIT OF HE ASSESSEE @ 6% IN ASSESSEES OWN CASE. 1 0 . THEREFORE, WE SET ASIDE THE ORDER OF AO AS WELL AS CIT (A) IN SUSTA INING THE ESTIMATION OF NET PROFIT AND DIRECT THE AO TO ESTIMATE THE NET PROFIT @ 6% ACCORDINGLY THESE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 11 . I N THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. O RDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH OCTOBER , 201 7 . SD/ - SD/ - ( M BALAGANESH ) ( SANDEEP GOSAIN ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE OF ORDER: 13 TH OCTOBER , 201 7 . S . S INH A (PS) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT . 2. THE RESPONDENT.: 3. THE CIT(A) - PATNA 4. CIT , PATNA 5. INCOME TAX APPELLATE TRIBUNAL,PATNA 6. GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY