Deputy Commissioner of Income-tax, V. M/s. Maharashtra Erectors Pvt. Ltd., Pune

ITA 1972/PUN/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9128 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BENARJI
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 1972 /P U N/201 3 / ASSESSMENT YEAR : 20 07 - 08 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE ....... / APPELLANT / V/S. MAHARASHTRA ERECTORS PVT. LTD., S. NO. 92, TATHAWADE, PUNE 411033 PAN : AABCM1972R / RESPONDENT ASSESSEE BY : S HRI C.H. NANIWADEKAR REVENUE BY : S MT. SUMITRA BENARJI / DATE OF HEARING : 08 - 06 - 2017 / DATE OF PRONOUNCEMENT : 28 - 0 7 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - V, PUNE DATED 27 - 08 - 2013 FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE GROUNDS RAISED BY THE REVENUE IN APPEAL ARE AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION OF ONLY 15% I.E. 2 ITA NO . 1972/PUN/2013, A.Y. 2007 - 08 RS.33,04,356/ - OF THE RETURNED INCOME OF RS.2,20,29,038/ - , WITHOUT THOROUGHLY EXAMINING THE FACTS, RECORDS AND SUPPORTING E VIDENCES AVAILABLE WITH AO AND ONLY ON THE BASIS OF VARIATION OF 8.62% SHOWN IN FINANCIAL STATEMENT BY ASSESSEE DURING APPEAL, WHEN BEFORE THE AO EACH DETAIL WAS BEING CONTESTED BY THE RIVAL DIRECTORS TO BE INCORRECT AND CONCOCTED? 2. WHETHER ON THE FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ADMITTING THE CORRECTNESS AND COMPLETENESS OF VARIOUS DETAILS AND EVIDENCES WHICH WERE EITHER NOT FILED BEFORE THE AO OR CONTESTED TO BE UNTRUE BY RIVAL DIRECTORS IN CONTRAVENTION OF R ULE 46A, EVEN WITHOUT GRANTING OPPORTUNITY TO THE ASSESSING OFFICER? 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 3. SMT. SUMITRA BENARJI REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE IS ENGAGED I N THE BUSINESS OF GENERATION AND SALE OF ELECTRICITY, HIRING OF CRANES AND TRAILERS. THE ASSESSEE IS ALSO HAVING INCOME FROM WEIGHBRIDGE. THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR TILL 16 - 10 - 2009 , WHEREAS , THE ASSESSEE W AS REQUIRED TO FILE RETURN OF INCOME BY 31 - 10 - 2007. ACCORDINGLY, NOTICE U/S. 148 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE AFORESAID NOTICE, THE ASSESSEE FILED RETURN OF INCOME ON 21 - 11 - 2009 DECLARING TOTAL INCOME OF RS.2,20,29,039/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND CONTRADICTIONS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT NO T AX A UDIT AS MANDATED U/S. 44AB OF THE ACT WAS DONE. THE ASSESSEE FILED TAX AUDIT REPORT ON 28 - 12 - 2010 I.E. JUST 3 DAYS BEFORE THE TIME BARRING OF THE ASSESSMENT. THE TAX AUDIT REPORT FILED AT BELATED STAGE WAS SUBJECT TO LOT OF QUALIFICATION. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, SHRI CHANDRAKANT SANGHAVI AND SHRI ANIL SANGHVI, DIRECTORS OF THE COMPANY ATTENDED THE PROCEEDINGS SEPARATELY. THE ASSESSING OFFICER OBSERVED THAT THERE WERE SERIOUS 3 ITA NO . 1972/PUN/2013, A.Y. 2007 - 08 DIFFERENCES BETWEEN THE DIRECTORS WITH RESPECT TO MANAGIN G THE AFFAIRS OF THE COMPANY. THE TAX AUDIT REPORT FURNISHED BY SHRI CHANDRAKANT SANGHAVI WAS NOT ACCEPTED BY SHRI ANIL SANGHAVI. SHRI ANIL SANGHAVI FILED SEPARATE FINANCIAL STATEMENT OF ACCOUNTS OF THE COMPANY WHICH WAS OBJECTED TO BY SHRI CHANDRAKANT S ANGHAVI. IN VIEW OF CLAIMS AND COUNTER CLAIMS BY WARRING DIRECTORS OF THE ASSESSEE COMPANY T HE ASSESSING OFFICER REJECTED THE BOOKS OF ASSESSEE COMPANY. THE ASSESSING OFFICER ESTIMATED THE INCOME OF ASSESSEE AT THREE TIMES OF THE INCOME RETURNED. THE AS SESSING OFFICER MADE ADDITION OF RS.4,40,58,0778/ - ON ACCOUNT OF ESTIMATION OF PROFITS AND THUS COMPLETED THE ASSESSMENT BY DETERMINING THE TOTAL INCOME OF ASSESSEE AS RS.6,60,87,117/ - . 3.1 THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEA LS) UPHELD THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE ADDITION TO 15% OF THE RETURNED INCOME I.E. RS.33,04,356/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) MADE FURTHER ADDITION OF RS.4,42,675/ - U/S . 94(7) OF THE ACT. THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE RESTRICTING THE ADDITION HAS FAILED TO CONSIDER THE FACT THAT THE ASSESSEE SUBMITTED AUDITED FINANCIAL STATEMENTS AT THE FAG END OF THE ASSESSMENT PROCEEDINGS. D URING THE ASSESSMENT PROCEEDINGS, NO CO - OPERATION OR ASSISTANCE WAS EXTENDED BY THE ASSESSEE . THE ASSESSEE DELIBERATELY REFRAINED FROM FILING THE DETAILS AS CALLED FOR BY THE ASSESSING OFFICER. UNDER SUCH CIRCUMSTANCES, THE ASSESSING OFFICER COULD NOT EX AMINE THE DETAILS MENTIONED IN THE FINANCIAL STATEMENTS WHETHER AUDITED OR UNAUDITED. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS MERELY EXAMINED THE ISSUE OF DIVIDEND STRIPPING WITHOUT TOUCHING THE OTHER ISSUES AND CLAIMS MADE BY THE ASSESSEE IN THE FIN ANCIAL STATEMENTS. FURTHER, THE COMMISSIONER OF 4 ITA NO . 1972/PUN/2013, A.Y. 2007 - 08 INCOME TAX (APPEALS) HAS NOT AFFORDED ANY OPPORTUNITY TO THE ASSESSING OFFICER TO CARRY OUT NECESSARY VERIFICATION OR EXAMINE THE DOCUMENTS FURNISHED BY ASSESSEE. THUS, THE PROVISIONS OF RULE 46A HAVE BEEN VIOLATED. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS WORKED OUT VARIATION IN THE AUDITED AND UNAUDITED ACCOUNTS AT 8.62% ON THE BASIS OF DETAILS SUBMITTED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THESE DETAILS WERE NOT FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE LD. DR PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER AND RESTORING THE ADDITION S MADE IN THE ASSESSMENT ORDER. 4. ON THE OTHER HAND SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF THE ASSESSEE STATED AT THE B AR THAT NO NEW PAPERS OR DOCUMENTS WERE FILED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, THERE HAS BEEN NO VIOLATION OF PROVISIONS OF RULE 46A. THE LD. AR VEHEMENTLY SUPPORTING THE ORDER OF COMMISSIONER OF INCOME TAX (APP EALS) SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS APPRECIATED THE FACTS OF THE CASE IN RIGHT P ERSPECTIVE AND HAS MADE REASONABLE ADDITION. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS ESTIMATED THE INCOME OF THE ASSESSEE THREE TIMES WITHOUT ANY BASIS , IN AN ARBITRARY AND UNJUSTIFIED MANNER. THE LD. AR REFERRING TO THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 8 OF THE ORDER CONTENDED THAT THE VARIATION OF 8.62% HAS BEEN WORKED OUT BY THE COMMISSIONER OF INCOME TAX (APP EALS) ON THE BASIS OF DOCUMENTS ALREADY ON RECORD. THE ASSESSEE COULD NOT EXPLAIN THE VARIATION BEFORE THE ASSESSING OFFICER ON ACCOUNT OF PAUCITY OF TIME. THE LD. AR PRAYED FOR SUSTAINING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSI NG THE APPEAL OF THE REVENUE. 5 ITA NO . 1972/PUN/2013, A.Y. 2007 - 08 5. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . IT IS AN ADMITTED FACT THAT THE BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER AS THERE WERE CONTRADICTIONS IN THE UNAUDITED FINANCIAL STATEMENTS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE FILED TAX AUDI T REPORT AS MANDATED U/S. 44AB OF THE ACT AT THE FAG END OF THE ASSESSMENT PROCEEDINGS. AS FAR AS REASONS FOR REJECTION OF BOOKS OF ACCOUNT ARE CONCERNED , THE COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD THE SAME . A GAINST WHICH THE ASSESSEE IS NOT IN APPEAL. IN THE ABSENCE OF COMPLETE AND RELIABLE FINANCIAL STATEMENTS , THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ESTIMATING THE INCOME OF THE ASSESSEE THREE TIMES OF THE INCOME DECLARED IN THE RETURN OF INCOME. THE ADDITION MADE BY THE ASSESSING O FFICER WAS WITHOUT ANY BASIS AND WAS APPARENTLY HIGH PITCHED. IN FIRST APPELLATE PROCEEDINGS, THE ASSESSEE CHALLENGED THE HIGH PITCHED ADDITION. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE DOCUMENTS ON RECORD CONCLUDED AS UNDER : 9 THIS VARIATION COULD NOT BE EXPLAINED BEFORE THE ASSESSING OFFICER AS REQUIRED BY HIM. THE APPELLANT CLAIMED THAT PROPER OPPORTUNITY WAS NOT PROVIDED TO THE COMPANY BUT THE FACT IS THAT THE ASSESSING OFFICER WAS HAVING VERY LITTLE TIME TO VERIFY THE S AME AS AUDITED ACCOUNTS WERE FILED AS LATE' AS 28.10.2012. WITH THIS TYPE OF VARIATION IN DRAFT FINANCIAL STATEMENT AND AUDITED STATEMENTS WITH RESPECT TO THE QUANTUM OF TAXABLE INCOME, THE ASSESSING OFFICER WAS WELL JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF INCOME - TAX ACT. THEREFORE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF INCOME - TAX ACT IS UPHELD. AS FAR AS QUANTIFICATION IS CONCERNED, I FIND SUFFICIENT FORCE IN THE ARGUMENTS OF THE LEARNED CO UNSEL OF THE APPELLANT THAT THE ASSESSING OFFICER HAS ERRED IN ESTIMATING THE INCOME THREE TIMES OF THE RETURNED INCOME. AFTER REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF INCOME - TAX ACT, THE ASSESSING OFFICER IS REQUIRED TO PASS THE ORDER TO THE BEST OF HIS JUDGMENT FOR WHICH THERE HAS TO BE SOME BASIS. IN THIS CASE, THERE IS NO BASIS FOR ESTIMATING THE INCOME AT THREE TIMES OF THE RETURNED INCOME. THEREFORE, THE ESTIMATION IS HELD TO BE QUITE HIGH PITCHED. IT IS SEEN THAT 6 ITA NO . 1972/PUN/2013, A.Y. 2007 - 08 THE VARIATION IN FINANCIA L STATEMENT AS WELL AS AUDITED ACCOUNT IS AROUND 8.62%. THEREFORE, IN MY OPINION END OF JUSTICE WILL MEET IF THE VARIATION IS A DOPTED @ 15% OF RETURNED INCOME I.E. RS. 2,20,29,038/ - . IF THE RETURNED INCOME IS INCREASED BY 15%, THE AMOUNT COMES TO RS. 2,53, 33,394/ - . ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE ADDITION TO RS. 33,04,356/ - I.E . (25333394 - 2,20,29,038). IN THE ASSESSMENT ORDER IT IS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS MADE REMARK REGARDING ADDITION U/S. 94(7) ON AC COUNT OF DIVIDEND AND BONUS STRIPPING. HOWEVER, THE AMOUNT WAS NOT QUANTIFIED. APART FROM ADDITION OF 15% ON RETURNED INCOME, THE COMMISSIONER OF INCOME TAX (APPEALS) MADE FURTHER ADDITION OF RS.4,42,675/ - U/S. 94(7) OF THE ACT ON THE BASIS OF WORKING OF DIVIDEND AND BONUS STRIPPING FURNISHED BY THE ASSESSEE. 6. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) WARRANTING OUR INTERFERENCE. THE IMPUGNED ORDER IS WELL REASONED AND BALANCED , THEREFORE, WE CONCUR WITH THE SAME. ACCORDINGLY, GROUND NO. 1 RAISED IN THE APPEAL BY THE REVENUE IS DISMISSED. 7. IN GROUND NO. 2, THE REVENUE HAS CONTENDED THAT THERE HAS BEEN CONTRAVENTION OF THE RULE 46A. THE LD. AR OF THE ASSESSEE HAS STATED AT THE BAR THAT NO FRESH DOCUMENTS WERE FURNISHED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DRAWN CONCLUSION ON THE BASIS OF DOCUMENTS ALREADY ON RECORD AND APPARENTLY NO FRESH DOCUMENTS WERE CO NSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR HAS ALSO FAILED TO SPECIFY THE FRESH DOCUMENTS ALLEGEDLY PLACED ON RECORD BY THE ASSESSEE DURING FIRST APPELLATE PROCEEDINGS. IN VIEW OF THE ABOVE FACTS , GROUND NO. 2 RAISED IN THE APPEAL B Y REVENUE IS DISMISSED. 7 ITA NO . 1972/PUN/2013, A.Y. 2007 - 08 ACCORDINGLY, THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ARE UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERITS. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 28 TH DAY OF JULY, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 28 TH JULY, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - V, PUNE 4. / THE CIT - V, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE