S.S. Patil Construction Pvt. Ltd., Jalgaon V. Deputy Commissioner of Income-tax,

ITA 204/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6951 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-11-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 10-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Depreciation; Retraction
• Section: 44AD

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.204/PUN/2016 / ASSESSMENT YEAR : 2012-13 S.S. PATIL CONSTRUCTION PVT. LTD., NIRMAL, VIVEKAND NAGAR, PACHORA 425 301 DIST. JALGAON PAN : AAGCS7726N . /APPELLANT VS. DCIT, CIRCLE-2, JALGAON . / RESPONDENT . / ITA NO.586/PUN/2016 / ASSESSMENT YEAR : 2012-13 DCIT, CIRCLE-2, JALGAON . /APPELLANT VS. S.S. PATIL CONSTRUCTION PVT. LTD., NIRMAL, VIVEKAND NAGAR, PACHORA 425 301 DIST. JALGAON PAN : AAGCS7726N . / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : DR. VIVEK AGGARWAL, CIT / DATE OF HEARING : 22.11.2017 / DATE OF PRONOUNCEMENT: 13.12.2017 / ORDER PER D. KARUNAKARA RAO, AM : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE FOR THE ASSESSMENT YEAR 2012-13. THEY ARE FILED AGAINST THE ORDER OF CIT(A)-2, NASHIK DATED 07-01-2016. ITA NOS.204 & 586/PUN/2016 S.S. PATIL CONSTRUCTION PVT. LTD., 2 2. GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE A RE EXTRACTED AS UNDER : GROUNDS BY ASSESSEE : [1] ON THE FACTS AND IN THE PREVAILING CIRCUMSTAN CES OF THE CASE AND IN LAW , THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ESTIMATED ADDITION OF RS.1,74,85,623/- (@10% OF CON TRACT RECEIPT), OUT OF THE ESTIMATED ADDITION MADE BY THE A.O OF RS.2,32,2 ,434/-(@15% OF CONTRACT RECEIPT), WITHOUT CONSIDERING THE NATURE O F BUSINESS AND WITH ANY COMPARABLE CASES IN THE SIMILAR LINE OF BUSINES S OF CONTRACTS. THEREFORE, ESTIMATED ADDITION SUSTAINED AT RS.85,69 ,659/- (1,74,85,623(-)89,15,964) BY CIT(A) MAY PLEASE BE D ELETED. [2] ON THE FACTS AND IN THE PREVAILING CIRCUMSTANC ES OF THE CASE AND IN LAW, IF THE ESTIMATED ADDITION AS PER APPELL ATE ORDER OF CIT(A) IS CONSIDERED, THEN NET PROFIT WOULD BE AT RS. 2,38,99 ,600/- [RS.1,74,85,623/- AS PER CIT(A)+ DEPRECIATION RS. 5 7,22,177/-+ INTEREST.RS.6,91,800/-], WHICH WILL BE RATED AT 13. 66 % [RS . 2,38,99,600/RS.17,48,56,225.X100], AS AGAINST PROFI T SHOWN BY APPELLANT AT RS.1,53,29,941- [RS.89,15,964+ DEPRECI ATION RS. 57,22,177+ /-+ INTEREST.RS.6,91,800/-] WHICH IS RAT ED @ 8.76%% [RS.1,53,29,941./ 17,48,56,225.X100] AS THE APPELLA NT HAS SHOWN REASONABLE PROFIT, FURTHER ESTIMATED ADDITION RETAI NED AT RS.85,69,659/- (1,74,85,623(-)89,15,964) BY THE CIT(A) IS NOT JUST IFIED AND HENCE, ADDITION MAY PLEASE BE DELETED. [3] ON THE FACTS AND IN THE PREVAILING CIRCUMSTANC ES OF THE CASE AND IN LAW AND AS THE APPELLANT HAS SHOWN NET PROFIT @8 .76%,SUBJECT TO INTEREST AND DEPRECIATION IS MORE THAN 8%, NO SEPAR ATE TRADING ADDITION IS REQUIRED TO BE MADE. THEREFORE, ESTIMAT ED ADDITION SUSTAINED AT RS.85,69,659/- (1,74,85,623(-)89,15,96 4) BY CIT(A) MAY PLEASE BE DELETED. GROUNDS BY REVENUE : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN ESTIMATING THE NET INCOME OF THE ASSESSEE @10% AS AGAINST 15% ESTIMATED BY THE ASSESSING OFFI CER WITHOUT APPRECIATING VARIOUS DEFECTS AS POINTED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN NOT CONSIDERING THE INCRIMIN ATING MATERIAL IMPOUNDED DURING THE COURSE OF SURVEY ACTION U/S.13 3A OF THE INCOME TAX ACT, 1961 AND VARIOUS DEFECTS POINTED OU T DURING THE ASSESSMENT PROCEEDINGS. 3. THE ORDER OF THE LD.CIT(A) BE CANCELLED AND THAT OF THE A.O. BE RESTORED. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUD E THAT ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUS INESS OF CONSTRUCTION OF ROADS MAINLY FOR GOVT. OF MAHARASHT RA AND OTHER ITA NOS.204 & 586/PUN/2016 S.S. PATIL CONSTRUCTION PVT. LTD., 3 LOCAL BODIES. A SURVEY ACTION U/S.133A OF THE ACT WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 03-04-2 012 AND ALSO ON THE BUSINESS PREMISES OF THE DIRECTORS OF THE CO MPANY DURING WHICH VARIOUS INCRIMINATING DOCUMENTS WERE SEIZED. STATEMENT OF MR. SANJAY PATIL, DIRECTOR OF THE ASSESSEE WAS RECO RDED. HE STATED THAT CERTAIN EXPENSES WERE REQUIRED TO BE MADE AS P ART OF THE SYSTEM FOR WHICH NO EVIDENCE CAN BE GIVEN. SUCH EX PENSES WERE ADJUSTED UNDER THE HEAD OF EXPENDITURE. EVENTUALLY , MR. SANJAY PATIL SURRENDERED THE INCOME OF THE ASSESSEE FOR A. Y. 2012-13 AT RS.96,04,925/- BEING THE DIFFERENCE IN NET PROFIT A ND RS.40 LAKHS BEING THE INVESTMENT MADE BY MRS. ARCHANA SANJAY PA TIL AND MRS. VAISHALI PATIL OUT OF UNDISCLOSED INCOME OF THE ASS ESSEE. 4. THE ABOVE STATEMENT BY MR. SANJAY PATIL, DIRECTO R RECORDED WAS RETRACTED BY FILING AN AFFIDAVIT ON 30-07-2012 ON THE GROUND THAT DECLARATION WAS OBTAINED UNDER COERCION AND PR ESSURE. HE STATED IN THE SAID AFFIDAVIT THAT HE STUDIED ONLY U PTO XII STANDARD IN MARATHI MEDIUM AND WAS UNABLE TO WRITE AND UNDER STAND THE ENGLISH. THE STATEMENT WAS WRITTEN BY THE OFFICERS AS PER THEIR OWN CHOICE AND CONVENIENCE OBTAINED HIS SIGNATURE O N DOTTED LINES. HE FURTHER SUBMITTED THAT AT THE TIME OF SU RVEY ACTION THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE INCOMPLETE AND HENCE THE GROSS PROFIT WAS ESTIMATED AT RS.13,25,00,000/- WHE REAS AFTER THE AUDITED FINAL ACCOUNTS THE SAME ARE SHOWN AT RS.17, 48,56,225/-. IN VIEW OF VARIOUS DISCREPANCIES IN THE BOOKS OF AC COUNT, AO REJECTED THE SAME U/S.145(3) OF THE ACT AND PROCEED ED TO ESTIMATE THE NET PROFIT @15% OF GROSS PROFITS. EVENTUALLY, AO ASSESSED THE INCOME OF THE ASSESSEE AT RS.3,01,73,942/-. CIT(A) RESTRICTED THE INCOME @10% OF THE GROSS PROFITS. ITA NOS.204 & 586/PUN/2016 S.S. PATIL CONSTRUCTION PVT. LTD., 4 5. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A) I N DETERMINING THE NET PROFIT @10%, THE ASSESSEE IS IN APPEAL BEFO RE US. AGGRIEVED WITH THE RELIEF TO THE TUNE OF 5% ON THE GROSS RECE IPTS, THE REVENUE IS IN APPEAL BEFORE US WITH THE GROUNDS REFERRED AB OVE. 6. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE AS SESSEE BROUGHT OUR ATTENTION TO THE GROUNDS AND MENTIONED THAT THE ISSUE NOW STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS. 2009-10 TO 2011-12 VIDE ITA NOS. 16 13 TO 1615/PUN/2014 & ITA NOS. 1682 TO 1684/PUN/2014 ORDE R DATED 28-07-2017. HE SUBMITTED THAT FACTS RELATING TO NA TURE OF BUSINESS ARE IDENTICAL, THEREFORE, THE DECISION TAK EN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASS ESSMENT YEARS WITH REGARD TO THE EXTENT OF PROFITS OF THE ASSESSE E FROM BUSINESS ARE RELEVANT AND THE ISSUE RAISED BY BOTH THE ASSES SEE AND THE REVENUE NOW STANDS SETTLED BY THE SAID ORDER OF THE TRIBUNAL. 7. ON HEARING BOTH THE PARTIES, WE PERUSED THE SAID ORDER OF THE TRIBUNAL (SUPRA). WE FIND THE NET PROFIT OF THE AS SESSEE WAS ORIGINALLY ESTIMATED APPLYING THE FLAT RATE OF 15% AS IN THE EARLIER A.YRS. 2009-10 TO 2011-12. FURTHER, THE CIT(A) HELD THE NET PROFIT @10% OF THE RECEIPTS IS REASONABLE. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A) BOTH THE REVENUE AND THE ASS ESSEE ARE IN CROSS APPEAL BEFORE US. ON SIMILAR FACTS, WE HAVE ALREADY HELD IN THE ORDER OF THE TRIBUNAL (SUPRA) THAT ESTIMATION O F PROFITS @9% ON THE GROSS RECEIPTS IS REASONABLE. HAVING DECIDED TH E ISSUE AS PER THE DISCUSSION GIVEN IN THE PARA NOS. 13 TO 16 OF T HE ORDER OF THE TRIBUNAL (SUPRA), WE PROCEED TO EXTRACT THE SAID PA RAS FOR THE SAKE OF COMPLETENESS AS UNDER : ITA NOS.204 & 586/PUN/2016 S.S. PATIL CONSTRUCTION PVT. LTD., 5 13. WE HEARD BOTH THE COUNSELS/REPRESENTATIVES ON THE ISSUES RAISED IN THE CROSSS APPEALS FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. WE PERUSED THE PAPER BOOK FILED BEF ORE US. THE ADJUDICATION ON BOTH THE ISSUES, I.E. PROPER NET PR OFIT RATE FOR ALL THREE YEARS, ADDITION OF SUNDRY CREDITORS RAISED IN BOTH THE APPEALS GIVEN AS UNDER. 14. REGARDING THE REASONABLE NET PROFIT RATE IN THI S LINE OF CIVIL CONTRACT BUSINESS FOR ALL THREE YEARS IN THIS CASE OF THE ASSESSEE, WE FIND THE DISPUTE IS THAT WHILE THE ASSESSEE IN RESP ECT OF FAVOUR OF 8% AS OUTLINED IN SECTION 44AD OF THE ACT, THE REVENUE IS IN FAVOUR OF 15% AS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. HOWEV ER, THE AO HAS NOT GIVEN ANY SPECIFIC REASON OR JUSTIFICATION WITH EVI DENCE BY WAY OF ANY INCRIMINATING MATERIAL, IN SUPPORT OF HIS DECISION. THE STATEMENT OF THE ASSESSEE IS THE ONLY AVAILABLE EVIDENCE FOR THE AO. NO SUSTAINABLE REASON IS GIVEN BY THE AO WHY THE RETRACTION IS NOT VALID. 15. FURTHER, WE FIND THAT THE CIT(A) HAS DISAPPROVE D THE NET PROFIT RATE OF 15% ON THE CONTRACT RECEIPTS HOLDING THE SA ME AS ON HIGH SIDE. FURTHER, WITH REFERENCE TO ADDITION ON ACCOUNT OF S UNDRY CREDITORS. CIT(A) HELD NO FURTHER ADDITION ON THIS ACCOUNT IS WARRANTED, WHEN THE PROFITS OF THE BUSINESS IS ESTIMATED AFTER REJECTIN G THE BOOKS OF THE ASSESSEE. IN OUR VIEW, THE CIT(A) HAS FAIRLY DISAP PROVED THE AOS POINT OF VIEW IN THE SAID ISSUE. WE AFFIRM THE SAME. 16. HOWEVER, WHEN IT COMES TO THE PERCENTAGE OF NE T PROFIT RATE OF 10% ADOPTED BY THE CIT(A), WE FIND AGAIN THE SAID R ATE IS NOT BORROWED FROM ANY COMPARABLE CASE. THE CONTENTS OF PARA 6.3 .2 TO 6.3.3 EXTRACTED ABOVE SUPPORTS THE SAME. THEREFORE, NET PROFIT RATE OF 10% ADOPTED BY THE CIT(A) IS NOT SACROSANCT. HENCE, WE PROCEED TO EXAMINE IF THE 8% ADVOCATED BY THE LD. AUTHORISED REPRESENT ATIVE NEEDS TO BE APPROVED IN THIS CASE. BUT THE FACT IS THAT SAID P ROVISIONS OF SECTION 44AD ARE NOT STRICTLY APPLICABLE HERE. TURNOVER AL LEGATION OF SUNDRY CREDITORS ETC. MAKE SOME DIFFERENCE. THEREFORE, WE CANNOT APPROVE THE SAID NET PROFIT RATE OF 8% TO THE FACTS OF THE CASE . HENCE, WE ARE OF THE VIEW THAT, CONSIDERING THE CONCESSION GIVEN BY THE LD. AUTHORISED REPRESENTATIVE, THE ESTIMATION OF PROFIT @9% FOR TH E ASSESSMENT YEARS UNDER CONSIDERATION SHOULD MEET BOTH ENDS OF JUSTIC E. AO IS DIRECTED TO RESTRICT THE ADDITION TO NET PROFIT OF 9% ON THE CO NTRACT RECEIPTS FOR THE A.Y. 2009-10. ACCORDINGLY, THE GROUNDS ON THE RELA TED ISSUES, DISCUSSED IN A COMPOSITE MANNER, SHOULD BE PARTLY A LLOWED. 8. FROM THE ABOVE, IT IS EVIDENT THAT THE TRIBUNAL DID NOT APPROVE THE ESTIMATION OF PROFIT APPLYING THE FLAT RATE OF 15% AS DONE BY THE ASSESSING OFFICER, OR 10% AS DONE BY TH E CIT(A) OR 8% AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE. WE ALREADY HELD THAT THE ESTIMATION OF PROFITS @9% ON THE GROSS PRO FITS SHOULD MEET THE ENDS OF JUSTICE. CONSIDERING THE SAME PARITY O F REASONING, WE ARE OF THE OPINION THAT THE AO SHOULD BE DIRECTED T O FOLLOW OUR RATIO GIVEN FOR THE EARLIER ASSESSMENT YEARS 2009- 10 TO 2011-12 VIDE ORDER DATED 28-07-2017 AND ESTIMATE THE PROFIT S ACCORDINGLY. ITA NOS.204 & 586/PUN/2016 S.S. PATIL CONSTRUCTION PVT. LTD., 6 THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE ARE P ARTLY ALLOWED AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF DECEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 13 TH DECEMBER, 2017. / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) - 2, NASHIK CIT - 2, NASHIK % , , B BENCH PUNE; / GUARD FILE.