M/s OSHO ASSOCIATES, Gwalior V. DCIT CIRCLE-3, Gwalior

ITA 213/AGR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9980 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Depreciation
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBE R AND MRS. ANNAPURNA MEHROTRA, ACCOUNT ANT MEMBER ITA NO. 213/AGRA/2014 ASSTT. YEAR : 2010-11 OSHO ASSOCIATES, VS. D.C.I.T., CIRCLE-3, 30 SATYADEV NAGAR, GWALIOR. GWALIOR. [PAN: AABFO 4964 C] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAJENDRA SHARMA, ADVOCATE RESPONDENT BY : SH. WASEEM ARSHAD, SR. DR DATE OF HEARING : 03.02.2016 DATE OF PRONOUNCEMENT : 08.02.2016 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED A GAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 16.07.2014 FOR THE ASSESSMENT YEAR 2010-11, CHALLENGING THE ORDERS OF THE AUTHORITIES BELOW IN MAKING AND CONFIRMING THE ADDITION OF RS.1,64,46,783/- UNDER DIFFERENT HEADS. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A CIVIL CONTRACTOR AND DECLARED INCOME OF RS.35,87,780/-. THE AO ISSUED SE VERAL STATUTORY NOTICES ASKING THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT ALONG WITH BILLS AND ITA NO.213/AGRA/2014 2 VOUCHERS OF THE EXPENDITURE. THE ASSESSEE PRODUCED THE CASH BOOK AND LEDGER ONLY, BUT DID NOT PRODUCE ANY BILLS/VOUCHERS OF EXP ENSES DEBITED TO PROFIT AND LOSS ACCOUNT. FURTHER, NO DETAILS OF THE SUNDRY CRE DITORS WERE PRODUCED. THE AO IN ABSENCE OF ANY COOPERATION FROM THE SIDE OF A SSESSEE PASSED EXPARTE ASSESSMENT ORDER U/S. 144 AND MADE FOLLOWING DISALL OWANCES : (I). ON ACCOUNT OF SUNDRY CREDITORS FOR GOODS RS. 32,73,524/- (II). PROVISION OF EXPENSES BEING SALARY & WAGES R S.29,60,560/- (III). PURCHASE OF FIXED ASSETS U/S. 68 RS.25,29 ,893/- (IV). OUT OF PURCHASES OF RS.40.09 CRORES RS.40, 92,568/- (V). 10% DISALLOWANCE OUT OF SALARY & WAGES RS.29 ,72,852/- (VI). 25% OUT OF EXPENSES DEBITED TO P&L A/C. RS. 6,17,386/- TOTAL DISALLOWANCES/ADDITIONS RS.1,64,46,783/- 3. THE ASSESSEE CHALLENGED THESE ADDITIONS BEFORE T HE LD. CIT(A) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT THE ABOVE ADDITIONS/DISALLOWANCES HAVE BEEN MADE WITHOUT CONSIDERING THE PAST HISTORY AND THE DECISIONS OF APPELLATE AUTHORITY IN ASSESSEES OWN CASES. THE AS SESSEE DECLARED NET PROFIT AT 5.6% AND AFTER MAKING THESE ADDITIONS, SAME WOUL D BE AT 22.56% OF THE GROSS CONTRACT RECEIPTS. IT WAS SUBMITTED THAT THE BEST JUDGMENT ASSESSMENT MUST BE COMPLETED HONESTLY AND JUDICIOUSLY ON THE M ATERIAL AVAILABLE ON RECORD. THE AO MADE ESTIMATED DISALLOWANCES/ADDITIO NS. IN THE ASSESSMENT YEAR 2009-10, ITAT, AGRA BENCH ACCEPTED THE NET PRO FIT RATE OF 4.16% SHOWN BY THE ASSESSEE AND MADE ADDITION OF RS.2,50,000/- FOR NON-AVAILABILITY OF ITA NO.213/AGRA/2014 3 VOUCHERS/BILLS ETC. THE ASSESSEE ALSO RELIED UPON S EVERAL DECISIONS THAT ON SAME SET OF FACTS, ADDITIONS ARE WHOLLY UNJUSTIFIED AND PRINCIPLES OF CONSISTENCY SHOULD HAVE BEEN ADOPTED BY THE AUTHORI TIES BELOW. IT WAS FURTHER EXPLAINED THAT IN PRECEDING ASSESSMENT YEARS 2002-0 3 TO ASSESSMENT YEAR 2006-07, ONLY PART ADDITIONS HAVE BEEN MAINTAINED I N A SUM OF RS. 1,00,000/- EACH. 4. THE LEARNED CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND NOTED THAT DESPITE GIVING OPPORTUNITY TO THE ASSESSEE, HE FAILED TO PRODUCE NECESSARY EVIDENCES TO SUBSTANTIATE THE CLA IM MADE AND ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT IN EARLIER YEARS 2002-03 TO 2006-07 ON THE SAME SET OF FACTS, THE LD. CIT(A) MA INTAINED LUMP SUM ADDITION OF RS.1 LAC ONLY AND IN ASSESSMENT YEAR 2009-10, TH E TRIBUNAL FOLLOWING ITS EARLIER YEARS DECISION IN THE CASE OF SAME ASSESSEE RESTRICTED THE ADDITION TO RS. 2,50,000/- VIDE ORDER DATED 29.01.2013. HE HAS SUBMITTED THAT SINCE THE ASSESSEE IS HAVING THE SAME BUSINESS, THEREFORE, TH E HISTORY OF THE ASSESSEE SHOULD BE CONSIDERED BEFORE MAKING THE ADDITION IN QUESTION. HE HAS RELIED ITA NO.213/AGRA/2014 4 UPON THE DECISION OF JURISDICTIONAL M.P. HIGH COURT IN THE CASE OF DEENA NATH DUBEY VS. CIT, 160 ITR 1. HE HAS ALSO SUBMITTED THA T THE SUNDRY CREDITORS HAVE REDUCED FROM THE ASSESSMENT YEAR 2008-09. THEREFORE , NO ADDITION COULD BE MADE AND FURTHER THE PURCHASES AND FIXED ASSETS IN A SUM OF RS.25,29,893/- HAVE BEEN SHOWN IN THE AUDITED BALANCE SHEET, WHICH WAS PURCHASED OUT OF BOOKS OF ACCOUNT AND THEREFORE, COULD NOT BE TREATE D AS UNEXPLAINED PURCHASE OF ASSETS. HE HAS SUBMITTED THAT IF THE REMAINING 4 ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENSES ARE CONSIDERED, IT WOULD G IVE NET PROFIT RATE OF 16%, WHICH IS UNREASONABLE, EXORBITANT AND WITHOUT ANY B ASIS. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS PRODUCED ONLY CASH BOOK AND LEDGER AND DID NOT PRODUCE COMPLETE BILLS AND VOUCH ERS OF THE EXPENDITURE AND ALSO DID NOT PRODUCE THE DETAILS OF SUNDRY CRED ITORS. THEREFORE, ALL THE ADDITIONS HAVE BEEN CORRECTLY MADE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. ITA NO.213/AGRA/2014 5 8. THE FIRST ADDITION IS ON ACCOUNT OF SUNDRY CREDI TORS IN A SUM OF RS.32,73,524/-. THE ASSESSEE DID NOT PRODUCE COMPLE TE DETAILS OF THE SUNDRY CREDITORS FROM WHOM PURCHASES HAVE BEEN MADE FOR CO MPLETING THE CONTRACT BUSINESS. THE AO IN THE ABSENCE OF COMPLETE DETAILS MADE THE ADDITION, WHICH WAS CONFIRMED BY THE LD. CIT(A). THE LD. COUNSEL FO R THE ASSESSEE CONTENDED THAT SINCE NP RATE IS APPLIED AS WAS ALSO APPLIED I N EARLIER YEARS, THEREFORE, THIS ADDITION SHOULD NOT BE MADE. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS DEVOID OF MERIT. IT IS WELL SETTLED LAW THAT ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT SHALL HAVE TO BE SEPARATELY MADE EVEN IF PROFIT RATE HAS BEEN APPLIED FOR COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. WE RELY ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF KALE KHAN MOHD. HANIF VS. CIT, 50 ITR 1 AND CIT VS. DEVI PRASD VISH WANATH PRASAD, 72 ITR 194. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS ACCORDINGLY REJECTED. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THE DET AILS OF SUNDRY CREDITORS IN THE PAPER BOOK AT PAGE 1 TO SHOW THAT IN ASSESSMENT YEAR 2008-09, SUNDRY CREDITORS WERE OF RS.90.28 LACS WHICH IS REDUCED TO RS.29.34 LACS IN THE ASSESSMENT YEAR 2009-10 AND IN ASSESSMENT YEAR 2010 -11, THE SUNDRY CREDITORS ARE OF RS.32,73,524/-. HE HAS, THEREFORE, SUBMITTED THAT SUNDRY CREDITORS HAVE REDUCED FROM ASSESSMENT YEAR 2008-09 AND THIS FACT HAS NOT BEEN EXAMINED BY THE AO. THEREFORE, THE ENTIRE ADDI TION IS WHOLLY UNJUSTIFIED. ITA NO.213/AGRA/2014 6 THE LD. DR ALSO CONTENDED THAT THIS FACT CAN BE EXA MINED AT THE STAGE OF AO. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE A UTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF AO WITH DIRECTION TO RE-D ECIDE THIS ISSUE BY GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. THE AO SHALL VERIFY THIS FACT WHETHER SAME SUNDRY CREDITOR S HAVE REDUCED FROM THE EARLIER YEARS AND SHALL TAKE APPROPRIATE STEP IN TH E MATTER. THE ASSESSEE IS ALSO AT LIBERTY TO ADDUCE SUFFICIENT EVIDENCE BEFOR E THE AO FOR FINALIZATION OF THE ISSUE. THE ASSESSEE SHALL COOPERATE WITH THE AO ON THE MATTER IN ISSUE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ACCORDINGL Y ALLOWED FOR STATISTICAL PURPOSES. 9. THE OTHER ISSUE IS REGARDING ADDITION OF PURCHAS E OF FIXED ASSET U/S. 68 OF THE ACT IN A SUM OF RS.25,29,893/-. THE AO ON PE RUSAL OF THE AUDITED ACCOUNTS FOUND THAT THE ASSESSEE HAS MADE ADDITION IN FIXED ASSETS TO THE TUNE OF RS.25,29,893/- (PB-2). THE ASSESSEE WAS ASKED TO PRODUCE THE LEDGER, BILLS OF PURCHASES MADE. THE ASSESSEE EXPLAINED THAT FOR THE COMPUTATION OF DEPRECIATION, DETAILS HAVE ALSO BEEN GIVEN IN THE A UDIT REPORT. THE AO IN THE ABSENCE OF PRODUCTION OF BILLS FOUND THE SAME AS UN EXPLAINED INVESTMENT UNDER FIXED ASSET AND ADDED THE SAME U/S. 68 OF THE ACT. ITA NO.213/AGRA/2014 7 10. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY JUSTIFICATION TO SUSTAIN THIS ADDITION. THE ASSESSE E PRODUCED ANNEXURE TO THE AUDITED ACCOUNTS IN RESPECT OF THE ABOVE ADDITIONS MADE TO THE FIXED ASSETS ON WHICH DEPRECIATION HAS BEEN CLAIMED. THE AUDITED AC COUNT SHOWS THAT THE ASSESSEE MADE ADDITION OF RS.25,29,893/- TO THE FIX ED ASSETS. IT WOULD, THEREFORE, SHOW THAT THESE PURCHASES HAVE BEEN SHOW N IN THE BOOKS OF ACCOUNT AND HAVE SPECIFICALLY SHOWN IN THE AUDITED ACCOUNTS . THEREFORE, THE NATURE AND SOURCE OF THE SAME HAVE BEEN EXPLAINED BY THE ASSES SEE AND AS SUCH COULD NOT BE TREATED AS UNEXPLAINED INVESTMENT MADE IN THE PU RCHASE OF FIXED ASSETS. THEREFORE, NO ADDITION COULD BE MADE U/S. 68 OF THE ACT. MAY BE, FOR NON- PRODUCTION OF BILLS FOR ASSETS PURCHASED, THE AO CO ULD HAVE DISALLOWED THE DEPRECIATION BUT SUCH AN ISSUE IS NOT RELEVANT TO T HE ADDITION MADE U/S. 68 OF THE ACT. WE, ACCORDINGLY SET ASIDE THE ORDERS OF TH E AUTHORITIES BELOW AND DELETE THE ADDITION OF RS.25,29,893/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. ON THE REMAINING ADDITIONS ON ACCOUNT OF DISALL OWANCE OF PROVISION OF EXPENDITURE MADE, SALARY AND WAGES, PURCHASE AND OT HER MISC. EXPENSES, NOTED ABOVE, ON THE FOUR HEADS, ON WHICH DISALLOWAN CE HAVE BEEN MADE BY THE AO MAINLY ON ACCOUNT OF NON-PRODUCTION OF BILLS AND VOUCHERS FOR PAYMENT OF ITA NO.213/AGRA/2014 8 THESE EXPENDITURE. THE ASSESSEE HAS FILED COMPARATI VE CHART OF HISTORY OF THE ASSESSEE TO SHOW THAT PERCENTAGE OF PURCHASE WITH G ROSS RECEIPTS OF THE CONTRACT ARE LESSER IN THE ASSESSMENT YEAR UNDER AP PEAL AS COMPARED TO THE PRECEDING ASSESSMENT YEAR 2009-10. IN ASSESSMENT YE AR 2009-10, THE AO REJECTED BOOKS OF ACCOUNTS OF THE ASSESSEE AND APPL IED NET PROFIT RATE OF 12.5% WHICH HAVE BEEN REDUCED BY THE LD. CIT(A) TO 6%. TH E ITAT, AGRA BENCH IN THE CASE OF SAME ASSESSEE FOR THE ASSESSMENT YEAR 2009- 10, IN ITA NO. 359/AGRA/2012 AND 389/AGRA/2012 VIDE ORDER DATED 29 .01.2013 DIRECTED TO MAKE ADDITION OF RS.2,50,000/- IN ALL CONSIDERING T HE HISTORY OF THE ASSESSEE AND FOLLOWING EARLIER YEARS ORDER OF THE TRIBUNAL I N THE CASE OF SAME ASSESSEE. PARA 4 OF THE ORDER OF THE TRIBUNAL IS REPRODUCED A S UNDER : 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT, AGRA BENCH IN THE CASE OF THE SAME ASSESSEE IN PRECEDING ASSESSME NT YEARS REFERRED TO ABOVE. THE ASSESSEE IS DOING THE SAME BUSINESS AS WA S DOING IN THE EARLIER YEARS. THE ASSESSEE HAS SHOWN PROFIT RATE OF 4.16% I N ASSESSMENT YEAR UNDER APPEAL, WHICH IS ALREADY EXCESSIVE AS COMPARE D TO THE PRECEDING ASSESSMENT YEARS 2007-08 AND 2008-09, IN WHICH THE ASSESSEE HAS SHOWN PROFIT RATE OF 2.02% AND 2.28%. THE HISTORY OF THE A SSESSEE IN EARLIER YEARS IS ALSO QUOTED AT PAGE 2 OF THE APPELLATE ORDER, IN WHICH IN EARLIER YEARS, THE LD. CIT(A) MAINTAINED ADDITION OF RS.1,00,000/- ONLY ON THE SAME ISSUE AND THE TRIBUNAL DISMISSED THE DEPARTMENT APPEAL VI DE ORDER DATED 17.09.2010. SINCE THE ASSESSEE HAS SHOWN BETTER RES ULTS IN THE ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO THE EARLIER YEARS AND HAS MAINTAINED THE SAME NATURE OF BUSINESS, THEREFORE, IT WOULD NO T BE APPROPRIATE TO APPLY THE PROFIT RATE OF 6% IN ORDER TO MAKE ADDITI ON AGAINST THE ASSESSEE. CONSIDERING THE EARLIER HISTORY OF THE ASSESSEE AND ORDERS OF THE TRIBUNAL IN THE CASE OF SAME ASSESSEE, IT WOULD BE REASONABL E AND APPROPRIATE TO MAINTAIN ADDITION OF RS.2,50,000/- IN ALL ON THIS I SSUE INSTEAD OF DIRECTING ITA NO.213/AGRA/2014 9 TO APPLY PROFIT RATE OF 6%. THE ORDERS OF THE AUTHOR ITIES BELOW ARE, THEREFORE, MODIFIED TO THE ABOVE EXTENT. ACCORDINGL Y, THE DEPARTMENTAL APPEAL IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 12. IT IS ADMITTED FACT THAT THE ASSESSEE IS DOING THE SAME BUSINESS AS IN EARLIER YEARS AND THE PROFIT RATE SHOWN BY THE ASSE SSEE IN THE ASSESSMENT YEAR UNDER APPEAL IS BETTER AS SHOWN AT 5.43% AS COMPARE D TO THE PRECEDING ASSESSMENT YEARS. IN OTHER ASSESSMENT YERARS ALSO T HE LD. CIT(A) MAINTAINED ADDITION OF RS.100000/- ONLY. THE FACTS AND CIRCUMS TANCES ARE SAME AS HAVE BEEN CONSIDERED IN EARLIER ASSESSMENT YEARS, THEREF ORE, THE LD. COUNSEL FOR THE ASSESSEE RIGHTLY CONTENDED THAT IF THESE FOUR ADDIT IONS ARE TAKEN INTO CONSIDERATION TO THE PROFIT OF ASSESSEE, IT WOULD G IVE NET PROFIT RATE APPROXIMATELY OF 16% WHICH IN OUR VIEW IS HIGHLY UN REASONABLE, EXCESSIVE AND EXORBITANT. THEREFORE, CONSIDERING THE HISTORY OF THE ASSESSEE AND SAME SET OF FACTS AND THAT TOTAL GROSS CONTRACT RECEIPTS OF THE ASSESSEE ARE OF RS.9.75 CRORES, EVEN IF 1% NET PROFIT IS ENHANCED, IT WOULD RESULT IN ADDITION OF RS.9,75,000/- ONLY. THEREFORE, CONSIDERING THE TOTA LITY OF FACTS AND CIRCUMSTANCES AND THE HISTORY OF THE ASSESSEE, INST EAD OF MAKING HUGE ADDITIONS ON ACCOUNT OF DISALLOWANCE, OUT OF VARIOU S EXPENSES UNDER THE FOUR HEADS AS ABOVE, IT WOULD BE REASONABLE AND APPROPRI ATE TO MAKE ADDITION OF RS.10,00,000/- IN ALL TO THE INCOME OF THE ASSESSEE TO MEET OUT THE ENDS OF JUSTICE AND OBJECTIONS OF THE AUTHORITIES BELOW. IN VIEW OF THE ABOVE ITA NO.213/AGRA/2014 10 DISCUSSION, WE MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND INSTEAD OF MAKING ADDITION ON ACCOUNT OF DISALLOWANCE OF VARIO US EXPENSES IN A SUM OF RS.29,60,560/-, RS.40,92,568/-, RS.29,72,852/- AND RS.6,17,389/-, THE AUTHORITIES BELOW SHALL RESTRICT THE ADDITION TO RS .10,00,000/- IN ALL IN RESPECT OF THESE ADDITIONS. WE ACCORDINGLY, SET ASIDE THE O RDERS OF THE AUTHORITIES BELOW AND RESTRICT THE ADDITION TO RS.10,00,000/- O NLY UNDER THE DISALLOWANCE OF ABOVE EXPENDITURE UNDER FOUR HEADS. THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AS INDICTED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.02.16 *AKS/- COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR