Sanjay Aabaji Jadhav, Nashik V. Assistant Commissioner of Income-tax,

ITA 2115/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6899 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-12-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NIRUPAMA KOTRU
• Keywords: Rejection of books of accounts; Business income; Search and seizure
• Section: 133A; 145; 132; 144

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.2115/PUN/2014 / ASSESSMENT YEAR : 2011-12 SHRI SANJAY AABAJI JADHAV, PROP. OF M/S. RUSHABH CONSTRUCTIONS, RITESH APARTMENT, DSOUZA COLONY, COLLEGE ROAD, NASHIK 422005. PAN : ADSPJ1719J. . / APPELLANT V/S ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, NASHIK. . / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI. REVENUE BY : MRS. NIRUPAMA KOTRU. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE U/S 253 OF THE ACT IS EMANATING OUT OF THE CONSOLIDATED ORDER OF COMMISSIONER O F INCOME TAX (A) - I, NASHIK DT. 25.09.2014 FOR THE ASSESSME NT YEARS 2007-08 TO 2011-12. HOWEVER THE ASSESSEE IS ONLY IN APPEAL BEFORE US FOR A.Y. 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- / DATE OF HEARING : 20.12.2017 / DATE OF PRONOUNCEMENT: 29.12.2017 2 2.1 ASSESSEE IS AN INDIVIDUAL AND STATED TO BE PROPRIETOR OF RUSHAB CONSTRUCTIONS. ASSESSEE ELECTRONICALLY FILED HIS RET URN OF INCOME FOR A.Y. 2011-12 ON 30.09.2011 DECLARING TOTAL INCOME OF RS.12,30,760/-. A SEARCH AND SEIZURE ACTION U/S 132 OF T HE ACT WAS CONDUCTED IN ASHOKA GROUP OF CASES ON 20.04.2010. SIMULTANEOUSLY, A SURVEY ACTION U/S 133A OF THE ACT WAS CONDUCTED ON 20.04.2010 IN THE OFFICE PREMISES OF RUSHAB CONSTRUCTIONS. NOTICE U/S 143(2) OF THE ACT WAS ISSUED O N 12.09.2012 AND SERVED ON THE ASSESSEE. NOTICE U/S 142(1 ) OF THE ACT WAS ISSUED ON 14.11.2012 WAS ALSO SERVED ON THE ASSESSEE. A O NOTED THAT DESPITE VARIOUS OPPORTUNITIES, ASSESSEE DID NO T FURNISH THE REQUIRED DETAILS. HE THEREFORE HELD THAT HE HAD NO O THER OPTION BUT TO TAKE RECOURSE TO THE PROVISIONS U/S 144 OF TH E ACT AND COMPLETE THE ASSESSMENT AFTER CONSIDERING THE MATERIAL ON RECORD. AO NOTICED THAT ASSESSEE HAD DECLARED CONTRACT RECEIPT S OF RS.2,43,90,310/- AND DECLARED NET PROFIT OF RS.10,50,907/-. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE BUSINESS ACTIVITY ALONG WITH THE EVIDENCE TO SUPPORT THE FINANCIAL STATEMENTS WITH THE DETAILS OF PARTIES FROM WHOM THE CONTRACT RECEIPTS WERE RECEIVED A ND ALSO FURNISH THE COPY OF LEDGER ACCOUNT OF PURCHASES OF DIESEL A ND OTHER EXPENSES. AO NOTED THAT ASSESSEE DID NOT FURNISH THE R EQUIRED DETAILS DESPITE VARIOUS OPPORTUNITIES GRANTED TO HIM. A O ON PERUSAL OF THE TAX AUDIT REPORT NOTED THAT ASSESSEE HA D NOT PROVIDED THE AUDITOR THE PROPER EVIDENCES SO AS TO EN ABLE THE AUDITOR TO DO A PROPER AUDIT. HE THEREFORE CONCLUDED TH AT THE BOOKS OF ACCOUNTS OF ASSESSEE ARE NOT RELIABLE AND ACCOR DINGLY 3 PROCEEDED TO REJECT THE BOOKS OF ACCOUNTS U/S 145 OF THE ACT. HE THEREAFTER TREATED 50% OF THE PURCHASES TO BE INFLATED A ND DISALLOWED EXPENSES OF RS.48,52,644/-. WITH RESPECT TO TH E DIRECT EXPENSES, OUT OF THE TOTAL EXPENSES OF RS.53,41,573/-, HE CONSIDERED 1/3 RD OF THE EXPENSES TO HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY TREATED RS.37,55,650/ - AS BOGUS EXPENSES. SIMILARLY, FOR INDIRECT EXPENSES OF RS.57,16,218/-, HE DISALLOWED 1/3 RD OF THE EXPENDITURE ON THE GROUND THAT THE SAME WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS AND WERE BOGUS AND MADE A DISALLOWANCE OF RS.19,05,406/-. HE ALSO MADE A DISALLOWANCE OF SUNDRY CREDITORS AT RS.45,71,29 0/-. AO THEREAFTER VIDE ORDER DT.28.03.2013 PASSED U/S 144 R. W.S. 153B DETERMINED THE TOTAL TAXABLE INCOME AT RS.2,31,67,914/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO VIDE ORDER DT.25.09.2014 (IN APPEAL NO. NSK/CIT(A)-I/83 TO 87/2013-14) PASSED A CONSOLIDATED OR DER FOR A.YS. 2007-08 TO 2011-12 AND FOR THE IMPUGNED YEAR GRAN TED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US, AND HAS RAISED THE F OLLOWING GROUNDS : 1. ON THE FACTS AND IN LAW THE LD . CIT(A) HAS E RRED IN HOLDING TH A T THE PROCEEDINGS U/S. 153C A RE VA LID . 2. ON THE FACTS AND IN L A W TH E ID. CIT(A) HAS ERRED IN NOT A PPRECIATING: (I) THAT THE A.O. HAS ISSUED COPIES OF SATISFACTION NOTES TO THE APPELLANT V IDE LETTER DATED 20 / 9 / 2013 WHERE I N THERE I S NO MENTION OF A N Y MAT E RIAL SEI ZE D ON THE BASIS OF WHICH THE NOT IC ES U / S . 153 C WERE ISSUED; (II) THAT TH E SATISFACTION N O TE D A TED 10/7 / 201 2 FURNISHED BY TH E A .O . V ID E L E TT E R D A T E D 2 0 / 9 / 201 3 C L EA RL Y S HO WS TH A T THE A .O. H AS R ECOR D E D 4 S A TI S F A CTI O N ON TH E BA S IS OF POST SURV E Y PROCEEDIN GS U / S . 133A IN TH E C AS E OF TH E A PP E LL AN T ; (III) THAT THE SATISFACTION NOT E C L A IMED TO HAV E B E EN R E C ORD E D B Y TH E A. O. IN TH E C A S E OF TH E SEA RCH E D P E R S ON F URNI S H E D I N TH E A PPELL A TE PR O C EE D I N GS I N A U G U S T , 20 14 IS DIFF E R E NT FROM THE SA TISF A CTION NOTE I S SU E D TO TH E A PP E LL A NT O N 2 0 / 9 / 2013 , THE R EFORE THE S O C ALLED NOTE I S AN AF T E R THOUGHT AS THER E CA NNOT BE TOTALLY DIFFERENT SATISFACTION NOTES RECORDED BY THE SAME A.O . ON THE SAME DATE; (IV) THAT THE DIFFERENT SATI S FACTION NOTE CLAIMED TO HAVE BEEN RECORDED BY THE A.O. IN AUGUST, 2014 I S A N AFTER THOU G HT IN V I E W OF H A PP E NIN G OF E VE NT S MENTIONED IN THE S TATEMENT OF FACTS; (V) TH A T THE CH E QUE IS S UED B Y THE APPEL L ANT A S SECURIT Y IN R E SPECT OF E MD PAID TO ASHOKA BUILDCON LTD , SEI Z ED TO BE L ONG TO THE APPELLANT A ND THE SAME BELONGED TO ASHOKA BUILDCON LTD; (VI) THAT THE A.O . HAS ERRED IN RECORDING INCORRECT SATISFACTION IN SO C A LLED DIFF E RENT SATISFACTION NOTE CLAIMED ON L ATER DATE, THAT THE S AID AC C OUNT PA Y EE CHEQUE ISSUED IN THE NAME OF ASHOKA BUILDCON LTD . IS A KICKBACK GIVEN BY THE APPELLANT SUB-CONTRACTOR TO ASHOKA BUILDCON LTD; ( VII) THAT THE CIT(A) HAS ERRED IN JUSTIFYING THE PR OCEEDINGS U / S.153C BY RECORDING DIFFERENT SATI S FACTION THAT AS H OKA BUI L DCON LTD . I S ENGAGED IN THE UNDIS C LOSED BUSINESS OF MONEY LENDING AND THE SAID SECURITY CHEQUE IS IN RESPECT OF UNRECORDED LOAN GI VEN TO THE APPEL L A N T IN CASH; ( VIII) THAT FOR INVOLVING ACTION U / S.153C THE SATISFACTION IS TO BE RECORDED BY THE A.O. AND NOT BY CIT(A); (IX) THAT IN ENQUIRY MADE BY CIT(A) U/S. 133(6), AS HOKA BUILDCON LTD HAS CONFIRMED THE FACT THAT THE SAID CHEQUE OF RS. 11 LACS WAS OBTAINED FROM THE APPELLANT AS SECURITY AGAINST THE EMD PAID BY ASHOKA BUILDCON AND HENCE THE DIFFERENT SATISFACTIO NS RECORDED BY THE A.O. AND CIT(A) FOR JUSTIFYING THE ACTION U/S. 153C ARE THE WILD AND FALSE IMAGINATION; (X) THAT AS THE SAID ACCOUNT PAYEE CHEQUE DID NOT R EPRESENTED ANY UNDISCLOSED INCOME AND AS THE A.O. HAS THEREFORE NO T MADE ANY ADDITION ON THE BASIS OF THE SAID CHEQUE, THE PROCE EDINGS INITIATED U / S . 153C SHOULD HAVE BEEN DROPPED BY THE A.O.; 3 . ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN RE JECTING BOOK RESULTS AND NOT ACCEPTING INCOME RETURNED AS PER AU DITED BOOKS AND FINAL STATEMENTS OF ACCOUNTS. 4. ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN ES TIMATING NET PROFIT OF SUB-CONTRACTORS BUSINESS AT 10% AND 12% O F THE BUSINESS RECEIPTS . 5 . ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN N OT APPRECIATING THE FACTS: 5 (I) THAT THE REASONS STATED BY HIM FOR ESTIMATING THE IN COME OF THE APPELLANT AT 10% AND 12% ARE FACTUALLY INCORRECT AN D IGNORING THE SUBMISSIONS FILED BY THE APPELLANT WITH THE CIT(A) AND TO THE A.O. IN REMAND PROCEEDINGS; (II) THAT THE ASHOK BUILDING HAS KEPT ITS PROFIT TO THE SUBSTANTIAL EXTENT AND HENCE SUB-CONTRACTOR CANNOT EARN PROFIT @ 10% AND 12% OF THE BUSINESS RECEIPT . 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT HE D OES NOT WISH TO CHALLENGE THE LEGALITY OF THE PROCEEDINGS U/S 153C OF THE ACT RAISED IN GROUND NO.1. WITH RESPECT TO OTHER GROUND S RAISED BY ASSESSEE, LD.A.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLE CONTROVERSY IS WITH RESPEC T TO ESTIMATION OF INCOME. 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ADDITIONS MADE IN THE PRESENT CASE ARE UNCALLED FOR. AS AN ALTERNATE, HE SUBMITTED THAT THE ADDITIONS MADE BY THE AO AND CONFIRMED BY LD.CI T(A) ARE ON HIGHER SIDE. HE SUBMITTED THAT LD.CIT(A) WHILE UPHOLDING T HE ADDITIONS OF THE EXPENDITURE OF 10% OF THE TURNOVER, HAS NOT GRANTED THE CREDIT OF THE NET PROFIT DECLARED BY THE A SSESSEE. HE SUBMITTED THAT THE ASSESSEE HAD DECLARED THE INCOME FRO M BUSINESS AND PROFESSION AT RS.13,32,868/-. HE PLACED ON RE CORD THE COPY OF THE RETURN OF INCOME FOR AY. 2011-12 AND TH E COMPUTATION OF THE TOTAL INCOME. HE THEREFORE SUBMITTED THAT ASSESSEE MAY BE GRANTED THE CREDIT OF THE AMOUNT DEC LARED BY HIM AND THAT IF THE ASSESSEE IS GRANTED THE CREDIT OF NET PR OFIT DECLARED BY ASSESSEE THEN THE ASSESSEE WOULD HAVE NO GRIEVANCE LEFT. THE LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF LD.A.RS SUBMISSIONS, GROUND NO.1 IS DISMISSED AS NOT PRESSED. AS FAR AS OTHER GROUNDS WIT H RESPECT TO ESTIMATION OF INCOME IS CONCERNED, IN THE PRESENT CASE , IT IS AN UNDISPUTED FACT THAT THE ASSESSEE DID NOT PRODUCE THE REQUIRED DETAILS BEFORE AO AND THEREFORE THE AO PASSED AN ORDER U/S 144 R.W.S. 153C OF THE ACT WHEREBY HE MADE AN ESTIMATION OF INC OME BY DISALLOWING THE VARIOUS EXPENSES. WHEN THE MATTER WAS C ARRIED BEFORE LD.CIT(A). LD.CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE WAS OF THE VIEW THAT THE NET PROFIT IF ESTIM ATED AT 10% OF THE GROSS RECEIPTS WOULD BE FAIR IN THE PRESENT CASE AND ACCORDINGLY CONFIRMED THE ADDITION OF RS.24,39,031/- FOR A.Y . 2011-12. AS FAR AS REJECTION OF BOOKS OF ACCOUNTS OF A SSESSEE ARE CONCERNED, WE FIND THAT AO AND LD.CIT(A) HAVE HELD THAT DE SPITE VARIOUS OPPORTUNITIES GRANTED TO ASSESSEE, NO BOOKS WER E PRODUCED BY ASSESSEE. BEFORE US ALSO, ASSESSEE HAS NOT PLACED AN Y MATERIAL TO DEMONSTRATE THAT THE AO HAD FAULTED IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. ONCE THE BOOKS OF ACCOU NTS ARE REJECTED, THE NEXT STEP IS TO ESTIMATE THE INCOME. WE FIND THAT ASSESSEE HAD DECLARED THE NET INCOME OF RS.13,32,868/- FRO M BUSINESS AND PROFESSION IN THE COMPUTATION OF TOTAL INCOME , THE COPY OF WHICH IS PLACED BY ASSESSEE ON RECORD. CONSIDER ING THE TOTALITY OF THE FACTS AND THE SUBMISSIONS OF LD.A.R., WE ARE OF THE VIEW THAT THERE IS FORCE IN THE ARGUMENTS OF THE ASSESSE E IN SEEKING CREDIT OF THE PROFITS DECLARED BY HIM. WE ACCORDINGLY DIRE CT THE AO TO GRANT THE CREDIT OF RS.13,32,868/- BEING THE INCOME FROM 7 PROFESSION AND BUSINESS AS DECLARED BY THE ASSESSEE IN H IS COMPUTATION OF TOTAL INCOME. THUS, THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED ON 29 TH DAY OF DECEMBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 29 TH DECEMBER, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, NASHIK. CIT(CENTRAL), NAGPUR. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.