M/s Agarwal Constructions, Etawah V. I.T.O., Etawah

ITA 21/AGR/2014

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1843 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA SRIVASTAVA
• Assessee Lawyers: NAVIN GARGH
• Keywords: Business income; Depreciation; Opportunity of being heard
• Section: 44AD; 143(3); 40(b); 143(1); 32; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI LALIET KUMAR, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 ASSESSMENT YEARS: 2009-10 AND 2010-11 AGRAWAL CONSTRUCTIONS, 64, KATRA SEWA KALI, ETAWAH. PAN: AALFA9188L (APPELLANT) VS. INCOME - TAX OFFICER, ETAWH. (RESPONDENT) APPELLANT BY SH. NAVIN GARGH, ADVOCATE RESPONDENT BY SMT. SITA SRIVASTAVA, SR. DR ORDER PER LALIET KUMAR, J.M.: THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEAR S 2009-10 AND 2011-12 ARE DIRECTED AGAINST THE ORDERS DATED 30.10.2013 AN D 29.01.2016 PASSED BY LEARNED CIT(A)-2, AGRA. THE GROUNDS RAISED IN THE RESPECTI VE APPEALS ARE AS UNDER : ITA NO. 21/AGRA/2014 1. THAT THE APPELLANT IS A CIVIL CONTRACTOR AND REC EIVED PAYMENTS AMOUNTING TO RS. 3,75,60,924/- AND DISCLOSED N.P. RATE AT 4.0 5% BEFORE DEDUCTION U/S 40(B) AND DEPRECIATION. THE LEARNED I.T.O APPLIED N.P. RAT E AT 8% BEFORE THE SAID DEDUCTION. THE LEARNED C.I.T. (A) CONFIRMED N.P. RATE AT 8% AND ALLOWED DEDUCTION U/S 40(B) & DEPRECIATION. 2. THAT FIRST APPEAL WAS LASTLY FIXED ON 25/10/2013 AND WRITTEN ARGUMENTS WERE SENT BY REGISTERED POST ON 22/10/2013 AND REFERENCE OF PREVIOUS FIXATION OF APPEAL ON 11/04/2013 AND 21/05/2013 WAS MADE AND IT WAS SUBMITTED THAT DATE OF HEARING 08.03.2021 DATE OF PRONOUNCEMENT 09 .03.2021 ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 2 WRITTEN SUBMISSIONS WERE SENT ON 06/04/2013 AND 16/ 05/2013 BY REGISTERED SPEED POST. THE LEARNED C.LT.(A) HAS ONLY CONSIDERED THE SUBMISSIONS SENT ON 22/10/2013 AND NO REFERENCE OF SUBMISSIONS MADE ON THE PREVIOUS TWO OCCASIONS WERE MADE. 3. THAT THE LEARNED C.I.T.(A) DID NOT CONSIDER THE IM PROVED BUSINESS AS COMPARED TO PRECEDING YEARS. THIS IS COMMON KNOWLEDGE THAT WH EN EXTENT OF BUSINESS INCREASES THE PROFIT GOES DOWN. 4. THAT PARALLEL CASE OF BUDDHA ENTERPRISES ETAWAH F OR THE SAME YEAR I.E. A.Y. 2009-10 WAS CITED BEFORE THE LEARNED C.LT.(A) WHERE THE PAYMENTS WERE TO THE TUNE OF RS. 2,71,38,166/- AND N.P. RATE DISCLOSED W AS 5.98% IN THAT CASE 8% N.P. RATE WAS APPLIED BY THE ASSESSING AUTHORITY AND LEA RNED C.LT.(A) REDUCED IT TO 6% ON TOTAL CONTRACT RECEIPTS SUBJECT TO DEDUCTION U/S 40(B) OF THE ACT AND DEPRECATION. FACTS ARE ALL IDENTICAL SEVERAL DECISI ONS OF ASSESSING AUTHORITY, C.LT. (A) AND HON'BLE I.T.A.T. AGRA BENCH AGRA WERE REFERRE D TO. 5. THAT THE LEARNED I.T.O. APPLIED N.P. RATE WITHOUT GIVING ANY NOTICE TO SHOW CAUSE AS TO WHY N.P. RATE DISCLOSED BY THE APPELLAN T BE NOT ACCEPTED AND 8% N.P. RATE BE APPLIED. THIS IS AGAINST THE PRINCIPLE OF NA TURAL JUSTICE. 6. THAT THE LEARNED C.I.T.(A) HAS CITED THE CASES WHI CH DO NOT APPLY TO THE FACTS OF THE PRESENT CASE AND MOSTLY ARE OF DIFFERENT OTHER STATES. THE POSITION OF CONTRACTORS PROFIT VARIES FROM PLACE TO PLACE & STA TE TO STATE AND ALSO ON VOLUME OF BUSINESS. 7. THAT INTEREST INCOME OF RS. 1,55,600/- ON SECURIT Y DEPOSITS WAS SHOWN AND BEFORE THE LEARNED C.I.T.(A) IN SUBMISSIONS DATED 06 .04.2013, IT WAS MADE CLEAR THAT INTEREST INCOME IS BUSINESS INCOME AND, THUS, IT WAS NOT TO BE ADDED SEPARATELY. REFERENCE OF HON'BLE TRIBUNAL DECISION I N THE CASE OF MAHESH CHANDRA CONTRACTOR IN I.T.A. NO. 382/2012 WAS GIVEN AND PHOTO COPY OF THE ORDER WAS FILLED. THE LEARNED C.I.T.(A) DID NOT DISCU SS THIS POINT AT ALL. 8. THAT THE LEARNED C.LT.(A) WAS WRONGLY INFLUENCED B Y THE1 PROVISIONS OF SECTION 44 AD FOR FIXING OF N.P. RATE AT 8%. HON'BLE I.T.A.T AGRA BENCH AGRA IN APPEAL NO. 519 DT. 12.11.2008 HELD, 'SECTION 44AD OF THE ACT I S NOT APPLICABLE TO THE CASE WHERE TOTAL TURNOVER EXCEEDS RS. 40 LACS HON'BLE I. T.A.T. AGRA OBSERVED THAT RAJASTHAN HIGH COURT OF JUDICATURE AT JODHPUR HAS T AKEN SERIOUS OBJECTIONS TO THE APPLICATION OF PROVISIONS OF SECTION 44AD TO EV EN THOSE CASES TO WHICH THIS PROVISION OF LAW DOES NOT APPLY. ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 3 9. THAT IN ANY VIEW OF THE MATTER THE ASSESSMENT ORD ER IS EXCESSIVE AND IS LIABLE TO BE MODIFIED. ITA NO. 158/AGRA/2016 1. THAT THE APPELLANT DISCLOSED N.P. RATE AT .92% AF TER DEDUCTING DEDUCTION U/S. 40 (B) AND DEPRECIATION. THE LOWER AUTHORITIES FOLLO WING THE DECISION OF GOYAL CONSTRUCTION CO. APPLIED N.P. RATE AT 11%. THE SAID DECISION RELATES TO G.P. RATE AND NOT N.P. RATE. 2. THAT THE APPELLANT CITED THE CASE OF DEVENDRA KUM AR TIWARI, ETAWAH WHERE IN THE LEARNED ASSESSING AUTHORITY HIMSELF APPLIED 6% N.P. RATE AND ALLOWED DEPRECIATION U/S 32 OF THE I.T. ACT, 1961 IN THE SAM E TYPE OF CASE AND FOR THE SAME ASSESSMENT YEAR. 3. THAT BEFORE THE LEARNED CIT(A) M.P. SINGH CONTRACT OR, ETAWAH CASE WAS CITED WHERE IN THE HON'BLE ITAT AGRA BENCH, AGRA FIXED N.P . RATE AT 4.7% AND ALLOWED DEDUCTION U/S 40(B) AND DEPRECIATION. 4. THAT DEPRECIATION IS A STATUTORY ALLOWANCE. SECTI ON 32 EXPLANATION 5 GOES TO THE EXTENT OF SAYING THAT DEPRECIATION HAS TO BE GI VEN EVEN IF IT WAS NOT CLAIMED BY THE APPELLANT. 5. THAT IN DIE INSTANT CASE DEPRECIATION WAS CLAIMED BEFORE THE LEARNED ASSESSING OFFICER WHO KEPT SILENCE ON THE POINT OF DEPRECIATI ON. 6. THAT THE LEARNED CIT (A) DID NOT ALLOW THE CLAIM O F DEPRECIATION ON THE WRONG UNDERSTANDING THAT WHEN N.P. RATE IS APPLIED THEN D EPRECIATION IS NOT ALLOWABLE. 7. THAT IN THE CASES CITED BEFORE THE LEARNED CIT (A) AND ALSO IN SEVERAL OTHER CASES N.P. RATE WAS APPLIED AND DEPRECIATION WAS AL LOWED. 8. THAT IN ANY VIEW OF THE MATTER THE APPEAL IS LIAB LE TO BE ALLOWED. ITA NO. 166/AGRA/2016 1. THAT GROSS RECEIPTS FROM CIVIL CONSTRUCTION WAS D ISCLOSED AT RS. 3,75,60,924 ON WHICH N.P. RATE WAS DISCLOSED AT 4.05% AND 8% WAS A PPLIED BY THE LEARNED ASSESSING AUTHORITY. ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 4 2. THAT VIDE ASSESSMENT ORDER DATED 27/06/2011 DEPRE CIATION AMOUNTING TO RS. 425000 WAS ALLOWED BY THE LEARNED I.T.O. AFTER EXAMI NING THE BOOKS OF ACCOUNTS AND AUDIT REPORT. 3. THAT IN FIRST APPEAL ON 30/10/2013 N.P. RATE AT 8 % WAS CONFIRMED BUT DEPRECIATION REMAINED ALLOWED AS PER THE ASSESSMENT ORDER DATED 27/06/2011. ONLY ON POINT OF N.P. RATE IIND APPEAL WAS FILED BE FORE HON'BLE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA WHICH IS STILL P ENDING. 4. THAT ON 27/09/2013 ANOTHER ASSESSING AUTHORITY IS SUED NOTICE U/S 148 ON THE GROUND THAT DEPRECIATION WAS WRONGLY ALLOWED AND PA SSED ASSESSMENT ORDER DATED 21/03/2014 DISALLOWING THE CLAIM OF DEPRECIAT ION NEGLECTING THE ORDER OF LEARNED C.I.T.(A) DATED 30/10/2013, WHEREIN LEARNED C.I.T.(A) ALSO DID NOT DISTURB THE CLAIM OF DEPRECIATION. HENCE ACTION U/S 148 IS ILLEGAL. 5. THAT AGAINST THE ORDER DATED 21/03/2014 APPEAL BE FORE THE LEARNED CI.T.(A) WAS FILLED WHO VIDE ORDER DATED 29/01/2016, DISMISS ED THE APPEAL TAKING THE SHELTER OF SEC. 44AD WHICH DOES NOT APPLY TO THE FA CTS AND CIRCUMSTANCES OF THE CASE. 6. THAT IN ANY VIEW OF THE MATTER THE ORDER OF LEARN ED C.I.T.(A) DATED 29/01/2016 BE MODIFIED AND THE ORDER OF LEARNED ASS ESSING OFFICER DATED 21/03/2014 IS LIABLE TO BE ANNULLED. 2. IN THIS CASE (ITA NO. 21/AGRA/2014), THE SOLE IS SUE BEFORE US RAISED BY ASSESSEE IS THAT THE LD. CIT(A) HAD APPLIED NP RATE OF 8% BY INVOKING THE PROVISIONS OF SECTION 44AD AS MENTIONED IN PARA 4.2 OF THE CIT (A) ORDER. IT WAS THE CONTENTION OF THE LD. AR THAT THE CIT(A) HAS APPLIED THE NP RA TE OF 8% BEFORE PROVIDING DEDUCTION U/S. 40(B) AND DEPRECIATION ON ASSETS. OU R ATTENTION WAS DRAWN TO THE ASSESSMENT ORDER WHERE THE DEPRECIATION CLAIMED WAS TREATED AT RS.4,25,000/-. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD COMPUT ED THE NP RATE OF 8% AFTER GIVING DEDUCTION U/S. 40(B) OF THE ACT AS WELL AS D EPRECIATION FOR THE AMOUNT OF ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 5 RS.4,25,000/-. LD. AR HAD SUBMITTED THAT THE NP RAT E FOR THE EARLIER ASSESSMENT YEAR WAS 6% AND IT WAS ALSO SUBMITTED THAT FOR THE ASSES SMENT YEAR 2010-11 THE DECLARED PROFIT RATE WAS ACCEPTED BY THE ASSESSING OFFICER U/S. 143(1) OF THE ACT. THE LD. AR ALSO RELIED UPON THE ORDER OF LD. CIT(A) DAT ED 06.02.2015 IN THE CASE OF BUDHA ENTERPRISES AND IT WAS SUBMITTED THAT THE LD. CIT(A ) IN THE ABOVE SAID MATTER HAD APPLIED THE PROFIT RATE OF 6%. 3. IN RESPECT OF APPEAL FOR ASSESSMENT YEAR 2009-10 , IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON TH E PREMISE THAT THE AUDIT PARTY HAD OBSERVED THAT DEPRECIATION AMOUNT CLAIMED BY TH E ASSESSEE FOR RS.4,25,000/- WAS ON WOODEN STRUCTURES, WHICH WAS NOT ALLOWABLE, AS THAT STRUCTURE WAS USED FOR THE BUSINESS PURPOSE AND FURTHER NO SUPPORTING PURC HASE VOUCHERS OF WOOD AND COST OF CONSTRUCTION WAS PRODUCED DURING THE ASSESS MENT PROCEEDINGS. THE ASSESSING OFFICER HAD DISALLOWED THE DEPRECIATION O F RS.4,25,000/- AND HAD COMPUTED THE INCOME OF THE ASSESSEE BY REDUCING THE DEPRECIATION TO A FIGURE OF RS.22,02,420/-. FEELING AGGRIEVED, THE ASSESSEE FIL ED APPEAL BEFORE THE LD. CIT(A) AND THE CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER IN 147 PROCEEDINGS. 4. THE CONTENTION BEFORE US IN BOTH THE CASES WAS T HAT ONCE THE ASSESSING OFFICER HAD CONSIDERED THE ALLOWABILITY OF DEPRECIATION IN THE ASSESSMENT ORDER, WHICH ATTAINED FINALITY, AS ALSO EXAMINED BY THE LD.CIT(A ), IT WAS NOT OPEN FOR THE ASSESSING OFFICER TO REOPEN THE CASE U/S. 147 ON THE SAME GRO UND. ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 6 5. PER CONTRA, LD. DR SUBMITTED THAT THE ISSUE OF A LLOWABILITY OF DEPRECIATION WAS NOT CONSIDERED BY THE ASSESSING OFFICER/CIT(A) IN T HE ASSESSMENT PROCEEDINGS U/S. 143(3) AND MERE COMPUTATION U/S. 44AD WAS RELIED UP ON. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF MATERIAL A VAILABLE ON RECORD AND THE ASSESSMENT ORDER IN APPEAL NO. 21/AGRA/2014, IT IS CLEAR THAT THE ASSESSEE HAD NOT PRODUCED THE DOCUMENTS SUBSTANTIATING THE CLAIM OF DEPRECIATION FOR RS.4,25,000/-. THE ABOVE SAID ASPECT HAD NOT BEEN EXAMINED BY THE ASSESSING OFFICER OR BY THE CIT(A) IN APPEAL NO. 21/AGRA/2014 BEFORE US. THEREF ORE, IN OUR OPINION, THERE IS NO BAR FOR THE ASSESSING OFFICER TO ISSUE NOTICE U/S. 148 FOR REOPENING THE ASSESSEE, AS THE ASSESSEE CANNOT BE PERMITTED TO TAKE THE BENEFI T OF THE MISTAKE OF ASSESSING OFFICER AT THE FIRST INSTANCE. THE FUNDAMENTAL PRIN CIPLE, IN OUR VIEW IS THAT THE ASSESSEE IS REQUIRED TO DISCHARGE ITS ONUS BY PROVI NG THE ALLOWABILITY OF DEPRECIATION BY COGENT AND RELIABLE DOCUMENTS TO THE SATISFACTIO N OF THE ASSESSING OFFICER, ENABLING THE ASSESSEE TO CLAIM DEPRECIATION. 7. IN THE LIGHT OF THE ABOVE, WE DEEM IT APPROPRIAT E TO REMAND BACK BOTH THE APPEALS NO. 21/AGRA/2014 AND 166/AGRA/2016 TO THE F ILE OF LD. CIT(A) WITH THE DIRECTION TO EXAMINE AFRESH THE ALLOWABILITY OF DEP RECIATION IN ACCORDANCE WITH LAW. THE ASSESSEE IS DIRECTED TO PRODUCE THE DOCUMENTS/V OUCHERS WHICH ENTITLED HIM TO CLAIM DEPRECIATION WITHIN THE FOUR CORNERS OF LAW. ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 7 8. WITH RESPECT TO DETERMINATION OF THE NP RATE, WE KEEP THAT ISSUE OPEN AS THE DETERMINATION OF DEPRECIATION ISSUE WILL HAVE BEARI NG ON THE DETERMINATION OF NP RATE. LD. CIT(A) AFTER CONSIDERING THE JUDGMENTS CI TED BY THE ASSESSEE BEFORE US IN THE CASES OF AWASTHI TRADERS VS. CIT (CIVIL APPEAL NO. 8481 OF 2016)(SC) AND SHEO NARAIN JAISWAL VS. ITO, 45 TAXMAN 213 (PATNA HC), W ILL DECIDE THE ISSUE IN ACCORDANCE WITH LAW. THE LD. CIT(A) IS ALSO DIRECTE D TO CONSIDER ANY OTHER BINDING JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASES OF CIVIL CONTRACTORS OR THAT OF THE TRIBUNAL. WITH THE ABOVE SAID OBSERVATIONS, BOTH TH E APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. ADVERTING TO APPEAL NO. 158/AGRA/2016, IN THIS C ASE ALSO, THE CORE ISSUE BEFORE US IS THE APPLICATION OF NP RATE OF 11% AS A PPLIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) BY RELYING UPON THE JUDGMEN T IN THE CASE OF GOEL CONSTRUCTION COMPANY, 127 TAXMAN 46 (AGRA BENCH). A S WE HAVE REMANDED BACK THE CASES FOR ASSESSMENT YEAR 2009-10 TO THE FILE O F LD. CIT(A), WE DEEM IT APPROPRIATE TO REMAND BACK THIS CASE ALSO FOR A.Y. 2011-12 TO THE FILE OF LD. CIT(A) TO TAKE A CONSISTENT AND HOLISTIC VIEW IN THE PRESENT APPEAL ALSO. IT IS EXPECTED FROM THE CIT(A) THAT CONSISTENT VIEW SHOULD BE TAKEN BY HIM FOR BOTH THE ASSESSMENT YEARS ON NP RATE. FURTHER, IF THE CIT(A) TAKES DEVIATE V IEW, THEN ELABORATE REASONS SHALL BE GIVEN FOR TAKING SUCH A VIEW HAVING REGARD TO THE T URNOVER AND CHANGE IN THE NATURE ITA NO. 21/AGRA/2014, 166 & 158/AGRA/2016 8 OF BUSINESS ETC. NEEDLESS TO SAY, THE ASSESSEE SHAL L BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09/03/2021. SD/- SD/- (DR. MITHA LAL MEENA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: MARCH, 2021 *AKS*