ACIT, CHENNAI V. M/s. Powerline Matrix Engineering Pvt. Ltd., CHENNAI

ITA 2218/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5035 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 31-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Set aside
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 2217 & 2218/MDS/2010 ASSESSMENT YEARS : 2006-07 & 2007-08 THE ACIT COMPANY CIRCLE V(2) CHENNAI VS M/S POWERLINE MATRIX ENGINEERING PVT. LTD 25, SOUTH WEST BOAG ROAD T. NAGAR CHENNAI 600 017 [PAN AADCP0099G] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI RESPONDENT BY : SHRI T. BANUSEKAR O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE APPEALS OF THE REVENUE, FOR ASSESSMENT YE ARS 2006-07 AND 2007-08, ARE DIRECTED AGAINST THE SEPARATE ORDE RS OF THE LD. CIT(A), DATED 28.9.2010. FOR THE SAKE OF CONVENIEN CE AND BREVITY, WE PROCEED TO DECIDE THEM BY A COMMON ORDER. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF ELECTRICAL AND INTERIOR CONTRACTS SINCE 1 ST AUGUST 2003 AND HAD BEEN FILING THE RETURN OF INCO ME REGULARLY. FOR ASSESSMENT YEAR 2006-07, THE COMPANY HAD FILED ITS RETURN OF INCOME ITA 2217 & 2218/10 :- 2 -: DECLARING A TOTAL INCOME OF ` 7,21,420/-. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 19 .2.2008 WHEREIN CERTAIN DISCREPANCIES IN THE RETURNED INCOME AND TH E INCOME SHOWN IN THE COMPUTER SYSTEM WERE NOTICED. ON THE BASIS OF THE DATA STORED IN THE COMPUTER, THE ASSESSING OFFICER MADE ADDITIONS. THE DIFFERENCE BETWEEN THE INCOME RETURNED AND AS PER THE DATA AVA ILABLE IN THE COMPUTER WERE MAINLY DUE TO THE FOLLOWING: (I) THE AMOUNT ADVANCED TO THE EMPLOYEE-IN-CHARGE F THE SITES AND BRANCHES ON VARIOUS DATES TO THE EXTE NT OF ` 65,63,921/- TOWARDS PURCHASES AND EXPENSES FOR THE SITES WHICH WERE NOT UPDATED IN THE COMPUTER. THE DETAILED BREAK-UPS OF THE EXPENSES RECORDED AT THE TIME OF FINALIZATION OF THE ACCOUNTS WERE SUBSEQUENTLY EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER; (II) UNDER INDIRECT EXPENSES, THE FOLLOWING EXPEN SES WERE NOT ACCOUNTED FOR IN THE COMPUTER: DEPRECIATION - ` 1,42,405/- DIRECTORS SALARY - ` 3,39,600/- RENT - ` 2,79,013/- 3. AS PER THE ASSESSEE, ALL THE ABOVE DIFFERENCES WERE RECONCILED IN THE PRINT OUTS TAKEN FROM THE DATA AVAILABLE WITH T HE I.T DEPARTMENT AND FINALIZED DATA FROM THE AUDITOR. THE ASSESSING OFFICER WAS NOT AGREEABLE WITH THE ASSESSEE AND MADE VARIOUS ADDITI ONS. THE LD. CIT(A) HAS AGREED WITH THE SUBMISSION OF THE ASSESS EE THAT THE ANALYSIS OF INCOME RETURNED, INFORMATION OF FINAL D ATES WITH RATIOS AND THE TOTAL TAX PAID SINCE ASSESSMENT YEAR 2004-05, GP RATE AND NET PROFIT RATES FOR ASSESSMENT YEARS 2004-05, 2005-06, 2006-07 AND ITA 2217 & 2218/10 :- 3 -: 2007-08 AND 2008-09. AS PER THE ASSESSEE, LABOUR C HARGES WERE INCLUDED IN WORK-IN-PROGRESS, I.E AS PER RETURN OF INCOME ` 61,33,829/- AND AS PER PC RS17,89,984/-. THE NET PROFITS RETUR NED AS PER RETURN OF INCOME WERE AS FOLLOWS: 2004-05 ` 1,26,137 2005-06 ` 3,52,442 2006-07 ` 7,04,750 2007-08 ` 16,83,521 2008-09 ` 31,40,404 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS AGAINS T THE RELIEF GRANTED BY THE LD. CIT(A) TO THE ASSESSEE: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1. THE CIT (A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE AGAINST AN ADDITION OF ` 56,18,670/- ON ACCOUNT OF DISCREPANCY IN THE DECLARED INCOME AND INCOME AS PE R ACCOUNTS MAINTAINED IN THE COMPUTER OF THE ASSESSEE . 2.2 THE CIT (A) HAS FAILED TO NOTE THAT THE ABOV E FINDINGS OF THE A.O. IS BASED ON THE RESULT OF THE SURVEY COND UCTED BY THE DEPT. 2.3 IT IS SUBMITTED THAT IN THIS CONNECTION IN THE CASE OF KAPURCHAND SHRIMAL VS COMMISSIONER OF INCOME TAX(AN DHRA PRADESH) IN ITR 131 PAGE 451 SUPREME COURT IT WAS H ELD AS FOLLOWS: 'IT IS WELL KNOWN THAT AN APPELLATE AUTHORITY HAS T HE JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEEDINGS UNDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE. THE STATUTE DOES NOT SAY THAT SUCH A DIRECTION CANNOT BE ISSUED BY THE APPELLATE AUTHORITY IN A CASE OF THIS NATURE'. ITA 2217 & 2218/10 :- 4 -: 2.4 THE CIT(A) SHOULD HAVE EITHER GIVEN OPPORTUN ITY OR CALLED FOR REMAND REPORT IN CONNECTION WITH THE ASS ESSEE'S APPEAL IN THIS CASE FROM THE ASSESSING OFFICER, WHI CH HE HAS FAILED TO DO. BESIDES THIS, RULE 46A (1) OF IT RULE SAYS THAT THE AO SHOULD HAVE GIVEN OPPORTUNITY BEFORE ALLOWING SU CH A HUGE AMOUNT. 2.5 THE CIT(A) HAS FAILED TO NOTE THAT THE ASSES SEE HAS PURPOSEFULLY SUPPRESS THE SALES AS WELL AS INFLATE THE PURCHASE TO REDUCE THE PROFIT CONSIDERABLY. THE ASSESSEE HAS ALSO INFLATED THE LABOUR CHARGES AND INDIRECT EXPENSES I N THE RETURN OF INCOME. (PAGE NO.2 OF THE APPEAL ORDER IN ITA N0 .461/2009- 10) 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER RESTORED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING HEARING, IT WAS NOTICED THAT THE LD. CIT(A) HAS RELIED ON CERTAIN DOCUMENTS/EVID ENCE(S) WHICH WERE PRODUCED BEFORE HIM FOR THE FIRST TIME. IT WAS ALS O NOTICED THAT THE NET PROFIT RATE HAS FLUCTUATED TO A LEVEL WHICH CANNOT BE TAKEN AS CONDUCIVE IN ANY LINE OF BUSINESS. WHEN THE ZIGZAG NET PROFIT RATE WAS NOTICED, IT WAS DEEMED FIT TO RESTORE THE ENTIRE IS SUE TO THE FILE OF THE ASSESSING OFFICER SO THAT JUSTICE CAN BE DONE TO BO TH THE PARTIES. WE, THEREFORE, RESTORE THE ENTIRE ISSUES TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH. 6. IN ASSESSMENT YEAR 2007-08, THE FACTS AND GROUNDS R AISED ARE MUTATIS MUTANDIS IDENTICAL, HENCE THIS YEARS GROUN DS OF APPEAL ARE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH. ITA 2217 & 2218/10 :- 5 -: NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHAL L GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.5.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 24 TH MAY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR