M.Kolandaisamy, Dharmapuri V. ITO, Krishnagiri

ITA 1963/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8822 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MURUGABHOOPATHY
• Assessee Lawyers: T VASUDEVAN
• Section: 44AD

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL B / SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER !./ ITA NO.1963/MDS/2015 # $%# / ASSESSMENT YEAR : 2010-11 SHRI M. KOLANDAISAMY, PALLIMUTHANOOR VILLAGE, ARRAKKASANAHALLI POST, PENNAGARAM TALUK, DHARMAPURI 636 811. PAN : AJHPK 5398 M V. THE INCOME TAX OFFICER, WARD I(1), 46-I, KRN COMPLEX, EAST PARALLEL ROAD, KRISHNAGIRI. ('(/ APPELLANT) ()*'(/ RESPONDENT) '( + , / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE )*'( + , / RESPONDENT BY : SHRI MURUGABHOOPATHY, ADDL. CIT - $ + ./ / DATE OF HEARING : 14.06.2016 01% + ./ / DATE OF PRONOUNCEMENT : 15.07.2016 / O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM, DATED 31.03.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2 I.T.A.NO.1963/MDS/15 2. SHRI T. VASUDEVAN, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDING, ON E OF THE CONTRACT RECEIPTS TO THE EXTENT OF ` 11,14,400/- WAS OMITTED TO BE INCLUDED IN THE TOTAL CONTRACT RECEIPTS. THE ASSESSING OFFICER FOU ND THAT THE ASSESSEE FAILED TO ACCOUNT FOR THE CONTRACT RECEIPTS AND THE REBY SUPPRESSED THE CONTRACT RECEIPT TO THE EXTENT OF ` 11,14,400/-. ACCORDINGLY, THE ENTIRE AMOUNT OF ` 11,14,400/- WAS ASSESSED AS INCOME OF THE ASSESSEE. ACCORDING TO THE LD. COUNSEL, WHEN THE ASSESSEE OMI TTED TO INCLUDE A PARTICULAR CONTRACT RECEIPT IN THE TOTAL RECEIPT, A T THE BEST, THE PROFIT ON THE CONTRACT RECEIPT, WHICH WAS OMITTED TO BE INCLU DED IN THE TOTAL RECEIPT, ALONE HAS TO BE CONSIDERED FOR ADDITION UN DER SECTION 44AD OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACC ORDING TO THE LD. COUNSEL, THE SO-CALLED CONTRACT RECEIPT CANNOT BE T REATED AS INCOME IN ITS ENTIRETY. REFERRING TO SECTION 44AD OF THE ACT , THE LD. COUNSEL SUBMITTED THAT ONLY 8% OF ` 11,14,400/- COULD AT THE BEST BE ESTIMATED AS PROFIT OF THE ASSESSEE. THEREFORE, THE ADDITION TO THE EXTENT OF ` 11,14,400/- IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI MURUGABHOOPATHY, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE HAS CLA IMED ENTIRE EXPENDITURE FOR CARRYING OUT ALL THE PROJECTS / CON TRACTS. WHEN THE 3 I.T.A.NO.1963/MDS/15 ASSESSEE HAS CLAIMED ALL THE EXPENDITURE FOR CARRYI NG OUT THE PROJECTS, THE CONTRACT RECEIPT, WHICH WAS OMITTED TO BE INCLU DED IN THE TOTAL RECEIPT, HAS TO BE NECESSARILY TAKEN AS INCOME OF T HE ASSESSEE IN ENTIRETY. ACCORDING TO THE LD. D.R., SINCE THE EXP ENDITURE CLAIMED BY THE ASSESSEE FOR ALL THE PROJECTS WAS ALLOWED BY TH E ASSESSING OFFICER, THEREFORE, ESTIMATION OF PROFIT AT 8% UNDER SECTION 44AD OF THE ACT IS NOT JUSTIFIED. THEREFORE, THE PRAYER OF THE ASSESS EE IS THAT EXPENDITURE HAS TO BE ALLOWED FROM THE SUPPRESSED CONTRACT RECE IPT HAS BEEN RIGHTLY REJECTED BY THE ASSESSING OFFICER. THE ASS ESSEE HAS NOT PRODUCED ANY BILLS AND VOUCHERS FOR THE SO-CALLED E XPENDITURE. THEREFORE, THE PRESUMPTION IS THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE, HENCE, THE ASSESSING OFFICER HAS RIGHT LY TREATED THE ENTIRE AMOUNT OF ` 11,14,400/- AS INCOME OF THE ASSESSEE. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE CONTRACT RECEIPT TO THE EXTENT OF ` 11,14,400/- FROM PANCHAYAT UNION WAS OMITTED TO BE INCLUDED IN THE TOTAL CONTRACT RE CEIPTS. FROM THE ORDERS OF THE LOWER AUTHORITIES IT APPEARS THAT THE GROSS BILL AMOUNT WAS ` 16,89,753/-, INCLUDING THE COST OF MATERIAL TO THE EXTENT OF ` 5,75,353/-. THE AMOUNT OF ` 11,14,400/-, EXCLUDING THE COST OF MATERIAL TO THE 4 I.T.A.NO.1963/MDS/15 EXTENT OF ` 5,75,353/-, WAS SAID TO BE RECEIVED ON 13.10.2009 F ROM THE BLOCK DEVELOPMENT OFFICER, PENNAGARAM. IT IS NOT I N DISPUTE THAT THIS AMOUNT OF ` 11,14,400/- SAID TO BE RECEIVED FROM BLOCK DEVELOPM ENT OFFICER, PENNAGARAM WAS NOT INCLUDED IN THE TOTAL C ONTRACT RECEIPTS. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE A SSESSEE HAS NOT INCLUDED A CONTRACT RECEIPT IN THE TOTAL CONTRACT R ECEIPTS, WHETHER THE ENTIRE AMOUNT HAS TO BE TAKEN AS INCOME OF THE ASSE SSEE OR PROFIT EMBEDDED IN THE CONTRACT RECEIPT HAS TO BE TAKEN FO R ADDITION? AS PER SCHEME OF THE INCOME-TAX ACT, TAX HAS TO BE LEVIED ONLY ON PROFIT / INCOME EARNED BY THE ASSESSEE. THE CONTRACT RECEIP T SAID TO BE RECEIVED FROM BLOCK DEVELOPMENT OFFICER, PENNAGARAM WAS FOR EXECUTING THE WORK AS PER CONTRACT. EVEN THOUGH TH E ASSESSEE HAD THREE OTHER PROJECTS, THE WORKS OF PENNAGARAM PANCH AYAT UNION IS A SEPARATE PROJECT. THEREFORE, THE EXPENDITURE CLAIM ED BY THE ASSESSEE FOR OTHER PROJECTS CANNOT BE PRESUMED TO BE INCLUDE D IN THE PROJECT CARRIED ON BY THE ASSESSEE FOR PENNAGARAM PANCHAYAT UNION PROJECT. THE ASSESSEE APPARENTLY RECEIVED ` 11,14,400/- IN CASH AND MATERIAL TO THE EXTENT OF ` 5,75,353/-. THE ASSESSING OFFICER HAS TAKEN THE ENTIRE CASH RECEIPT OF ` 11,14,400/- AS INCOME OF THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSE SSEE WAS EXPECTED 5 I.T.A.NO.1963/MDS/15 TO EXECUTE THE CONTRACT BY INCURRING THE EXPENDITUR E. THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EXECUTING THE CONTRACT HAS TO BE NECESSARILY ALLOWED AS EXPENDITURE. SECTION 44AD O F THE ACT PROVIDES FOR ESTIMATION OF INCOME FROM CONTRACT WHEN THE ASS ESSEE WAS NOT MAINTAINING THE BOOKS OF ACCOUNT. IN THE CASE BEFO RE US, THE ASSESSEE HAS NOT PRODUCED ANY DETAILS OF EXPENDITURE. THERE FORE, NOTHING WRONG IN ESTIMATING THE PROFIT ON THE BASIS OF SECT ION 44AD OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT ONL Y THE PROFIT EMBEDDED IN THE CONTRACT RECEIPT OF ` 11,14,400/- HAS TO BE TAKEN FOR THE PURPOSE OF MAKING ADDITION AND NOT ENTIRE CONTR ACT RECEIPT OF ` 11,14,400/-. THEREFORE, 8% ON ` 11,14,400/- HAS TO BE ESTIMATED AS INCOME IN THE CONTRACT FROM PENNAGARAM PANCHAYAT UN ION. THIS 8% ON ` 11,14,400/- HAS TO BE ADDED AS INCOME TO THE TOTAL INCOME COMPUTED BY THE ASSESSING OFFICER. ACCORDINGLY, TH E ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING O FFICER IS DIRECTED TO ADD ONLY 8% OF ` 11,14,400/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6 I.T.A.NO.1963/MDS/15 ORDER PRONOUNCED ON 15 TH JULY, 2016 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 3! /DATED, THE 15 TH JULY, 2016. KRI. + ).45 65%. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 7. () /CIT(A), SALEM 4. - 7. /CIT, SALEM 5. 5$8 ). /DR 6. 9# : /GF.