Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 6701 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 3 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-07-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
28-07-2016
Assessment Year
2009-2010
Appeal Filed On
11-04-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA NO.2187/DEL/2014 ASSESSMENT YEAR : 2009-10 ITO, WARD-33(2), NEW DELHI. VS. BRIJ SATVINDER PAL SINGH AHLUWALIA, 2117, BANK STREET, KAROL BAGH, NEW DELHI. PAN: AHCPA5548A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BRIJ SATVINDER PAL SINGH, ASSESS EE DEPARTMENT BY : SHRI S.K. JAIN, DR DATE OF HEARING : 28.07.2016 DATE OF PRONOUNCEMENT : 29.07.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 20.01.2014 IN RELATION TO THE ASSESSM ENT YEAR 2009-10. 2. THE REVENUE IS AGGRIEVED AGAINST REDUCING THE TO TAL ADDITIONS MADE BY THE AO FROM RS.88,25,556/- TO RS.5,21,692/- . ITA NO.2187/DEL/2014 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CARRIED ON THE BUSINESS OF PROVIDING EARTH MOVING MACHINES. NE T PROFIT OF RS.8,02,345/- WAS DECLARED ON TOTAL RECEIPTS OF RS. 1,65,50,462/-, GIVING NP RATE OF 4.84%. ON PERUSAL OF THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE, THE AO FOUND THAT JOB CHARGES AMOUNTING T O RS.62,78,646/- AND HIRE CHARGES OF RS.22,61,875/-, TOTALING TO RS. 85,40,521/- WERE CLAIMED BY THE ASSESSEE AS DEDUCTION. ON BEING CALL ED UPON TO EXPLAIN AS TO WHY NO DEDUCTION OF TAX AT SOURCE WAS MADE U/S 1 94C ON PAYMENT OF JOB WORK AND HIRE CHARGES, THE ASSESSEE CONTENDED T HAT THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE. THE AO FURTHER FOUND THAT THE ASSESSEE MADE PAYMENTS TO VARIOUS PERSONS AT MARGIN ALLY LESS THAN RS.20,000/- TO AVOID THE ATTRACTABILITY OF THE PROV ISIONS OF SECTION 40A(3) OF THE ACT. THUS, IT WAS INFERRED THAT THE ASSESSEE MANIPULATED ITS ACCOUNTS, SO THAT PAYMENT OF JOB WORK CHARGES A ND HIRE CHARGES DID NOT EXCEED THE SPECIFIED LIMITS ATTRACTING THE PROV ISIONS OF SECTION 194C AND 40A(3). AS THE ASSESSEE FAILED TO PRODUCE COMP LETE BOOKS OF ACCOUNT ALONG WITH SUPPORTING VOUCHERS, THE AO REJE CTED THE BOOKS AND MADE ADDITION OF RS.85,40,521/- BY DISALLOWING THE ENTIRE AMOUNT OF JOB ITA NO.2187/DEL/2014 3 CHARGES AND HIRE CHARGES. APART FROM THAT, THE AO ALSO MADE DISALLOWANCE @ 10% FROM SALARIES PAID AND 10% FROM MOBILE AND TELEPHONE EXPENSES. THIS RESULTED INTO COMPLETING THE ASSESSMENT AT RS.95.27 LAC AS AGAINST RS.7.02 LAC DECLARED BY THE ASSESSEE. THE LD. CIT(A) NOTICED THAT THE PROVISIONS OF SECTION 40A(3 ) AND 40(A)(IA) WERE ADMITTEDLY NOT ATTRACTED. HE DID NOT ACCEPT THE AO S VERSION OF MAKING TOTAL DISALLOWANCE OF JOB WORK CHARGES AND HIRE CHA RGES, WHICH, IF ACCEPTED, WOULD INCREASE THE NET PROFIT RATE TO 57 .57%. IN VIEW OF THE FACT THAT THE ASSESSEE DID NOT PRODUCE COMPLETE BOO KS OF ACCOUNT, THE LD. CIT(A) HELD THAT THE DECLARED PROFIT WAS NOT CAPABL E OF ACCEPTANCE. TAKING A CLUE FROM SECTION 44AD, WHICH WAS ADMITTED LY NOT APPLICABLE, THE LD. CIT(A) APPLIED NET PROFIT RATE OF 8% ON THE GROSS RECEIPTS AND WORKED OUT BUSINESS INCOME AT RS.13,24,037/-. AS T HE ASSESSEE HAD DECLARED BUSINESS PROFIT AT RS.8.02 LAC, THE LD. CI T(A) SUSTAINED ADDITION OF A FURTHER SUM OF RS.5,21,962/-. THE REVENUE IS AGGRIEVED AGAINST THE REDUCTION IN ADDITION. ITA NO.2187/DEL/2014 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE D ID NOT PRODUCE COMPLETE BOOKS OF ACCOUNT WITH SUPPORTING VOUCHERS BEFORE TH E AO. IN SUCH CIRCUMSTANCES, THE LD. CIT(A) WAS JUSTIFIED IN UPHO LDING THE REJECTION OF BOOKS OF ACCOUNT BY THE AO. AFTER REJECTING THE BO OKS OF ACCOUNT, THE NEXT PERTINENT THING IS TO ESTIMATE THE INCOME. SU CH ESTIMATION OF INCOME HAS NECESSARILY TO BE BASED ON SOME LOGIC AN D CANNOT BE DETERMINED ARBITRARILY. THE AO IN THE INSTANT CASE DISALLOWED THE ENTIRE AMOUNT PAID OF JOB WORK CHARGES AND ALSO HIRE CHAR GES, WHICH, IN OUR CONSIDERED OPINION, WAS NOT JUSTIFIED BY ANY STANDA RD. AS REGARDS THE ESTIMATE OF INCOME MADE BY THE LD. CIT(A) AT 8% OF GROSS RECEIPTS, WE ARE SATISFIED THAT SUCH AN ESTIMATE OF NET PROFIT I S QUITE REASONABLE AND DOES NOT REQUIRE ANY INTERFERENCE. IT IS MORE SO IN VIEW OF THE FACT THAT THE ASSESSEE DECLARED NET PROFIT RATE OF 4.84% FOR THE YEAR IN QUESTION AND 3.65% FOR THE PRECEDING YEAR, AS HAS BEEN RECOR DED ON PAGE 2 OF THE ASSESSMENT ORDER. WE, THUS, UPHOLD THE ESTIMATE OF NET PROFIT AT 8% BY THE LD. CIT(A). IT IS FURTHER NOTICED THAT THE LD. CIT(A) DID NOT APPLY THE PROVISIONS OF SECTION 44AD AS HAS BEEN ALLEGED IN THE GROUND OF ITA NO.2187/DEL/2014 5 APPEAL. HE CLEARLY MENTIONED IN THE IMPUGNED ORDER THAT SUCH A SECTION WAS NOT APPLICABLE, BUT HE WAS TAKING A CLUE FROM THIS SECTION FOR ESTIMATING THE INCOME. ONCE INCOME IS ESTIMATED AT A PARTICULAR RATE OF NET PROFIT, THEN THERE CAN BE NO QUESTION OF MAKING FURTHER DISALLOWANCES FROM EXPENSES. WE, THEREFORE, AFFIRM THE VIEW TAKE N BY THE LD. CIT(A). 5. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.07.201 6. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 29 TH JULY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.
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