Coastal Infra, Kolkata V. JCIT, Range-34, Kolkata, Kolkata

ITA 2246/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1347 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHERJEE
• Assessee Lawyers: P K AGRAWALLA
• Keywords: Rejection of books of accounts; Depreciation; Business expenditure
• Section: 143(3); 145

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2246/KOL/2016 ASSESSMENT YEAR:2012-13 COASTAL INFRA BLOCK-AC 148, GROUND FLOOR, SECTOR-1, SALT LAKE CITY, KOLKATA-64 [ PAN NO.AACFC 5877 F ] / V/S . JCIT, CIRCLE-34, AAYAKAR BHAVAN, POORVA, 7 TH FLOOR, 110, SHANTI PALLY, KOLKATA-107 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI P.K. AGRAWALLA, FCA /BY RESPONDENT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT-DR /DATE OF HEARING 01-02-2018 /DATE OF PRONOUNCEMENT 16-03-2018 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DATED 06.09.2016. ASSESSMENT WAS FRAMED BY JCIT, RANGE-34, KOLKATA U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 23.03.2015 FO R ASSESSMENT YEAR 2012-013.THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE A S UNDER:- 1) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN LAW AS WELL AS FACTS IN SUSTAINING ADDITION OF RS.2945490/ - OUT OF ADDITION OF RS.5610944/- MADE BY ASSESSING OFFICER. ITA NO.2246/KOL/2016 A.Y. 2012- 13 COASTAL IINFRA VS. JCIT, RG-34 KOL. PAGE 2 2) THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AS WE LL AS FACTS IN KEEPING PROFIT PERCENTAGE AT 6% INSTEAD OF 5.48% AS DISCLOSED BY T HE APPELLANT. 3) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE LOOKING TO FALL IN TURNOVER AND IMPROVEMENT IN PROFIT PERCENTAGE, 5.48% PROFIT AS DECLARED BY APPELLANT SHOULD BE ACCEPTED AND ADDITION SUSTAINED BY CIT(AP PEALS) OF RS.2945490/- SHOULD BE DELETED. 4) THAT APPELLANT CRAVES TO ADD, ALTER OR SUBSTITUT E FURTHER GROUND OF APPEAL AT THE TIME OF HEARING. SHRI P.K. AGRAWALLA, LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE AND SHRI ARINDAM BHATTACHARJEE, LD. DEPARTMENTAL RE PRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. GROUND NO. 1 TO 3 ARE INTER RELATED AND THEREFOR E BEING TAKEN UP TOGETHER. THE ONLY ISSUE RAISED BEFORE US BY ASSESSEE IS THAT THE LD. CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS. 29,45,490/- MADE BY THE ASSESSING O FFICER . 3. BRIEF STATED FACTS OF THE ISSUE ARE THAT ASSESSE E IS A PARTNERSHIP FIRM AND ENGAGED IN CIVIL CONSTRUCTION SERVICES. DURING THE ASSESSME NT PROCEEDINGS, THE AO FOUND THAT THE MOST OF THE BUSINESS EXPENSES WERE SUPPORTED WI TH THE SELF-MADE VOUCHERS AND NO DAY-TO-DAY STOCK REGISTER WAS MAINTAINED. THE AO ALSO ASKED THE ASSESSEE TO PRODUCE CERTAIN D OCUMENTS BUT THE ASSESSEE FAILED TO FILE THE SAME. THEREFORE, THE BUSINESS EXPENSES CLAIMED BY THE ASSESSEE WERE NOT SUBSTANTIATED ON THE BASIS OF LACK OF THE DOCUMENTA RY EVIDENCES. ACCORDINGLY AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) AND ESTIM ATED THE PROFIT @ 6.5% OF THE GROSS TURNOVER AND HENCE THE ADDITION WAS MADE AMOUNTING TO RS.56,10,944/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD . CIT(A) AGAINST THE DISALLOWANCE MADE BY THE AO. DURING THE APPELLATE P ROCEEDINGS, ASSESSEE SUBMITTED THAT ITS REVENUE HAS REDUCED SUBSTANTIALLY IN LAST TWO YEARS. BUT THE NET PROFIT PERCENTAGE WAS MORE OR LESS SAME AS SHOWN IN THE LA ST YEAR. FURTHER ASSESSEE SUBMITTED THAT IN THE LAST TWO A.Y . I.E. 2010-11 & 2011-12, ASSESSMENT WAS FRAMED U/S 143(3) AND ADDITION OF RS . 33,46,155/- AND RS.32,40,028/- WERE MADE BY THE AO AFTER REJECTING THE BOOKS OF AC COUNT CONSIDERING THE PROFIT @ 5.13% AND 5.77% RESPECTIVELY. ITA NO.2246/KOL/2016 A.Y. 2012- 13 COASTAL IINFRA VS. JCIT, RG-34 KOL. PAGE 3 HOWEVER, THE AO HAD MADE ESTIMATION OF PROFIT @ 6.5 % WITHOUT CONSIDERING THE COMPARABLE CASES WHICH ARE ENGAGED IN THE SAME LINE OF BUSINESS. HOWEVER THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND MATERIAL AVAILABLE ON RECORD PARTLY ALLOWED RELIEF TO THE ASSESSEE BY OBSERVING AS UNDE R:- 5. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD . AO IN REJECTING THE BOOK OF THE APPELLANT-ASSESSEE ON ACCOUNT OF THE INABILITY TO F URNISH DOCUMENTS AS CALLED FOR. I FIND THAT THE REJECTION OF BOOKS HAS NOT BEEN CHALL ENGED BY THE ASSESSEE, AND THAT THE MAIN POINT THAT THE APPELLANT HAS CHALLENGED IS THA T FROM ITS OWN CASE IN EARLIER YEARS, THE ESTIMATION @ 6.5% WAS EXCESSIVE AND WITHOUT ANY JUSTIFICATION. THE APPELLANT HAS ALSO SUBMITTED FIGURES FOR THE IMMEDIATE TWO PRECED ING ASSESSMENT YEARS, NAMELY 2010-11 & 2011-12, WHICH HAD ALSO BEEN SUBJECT TO S CRUTINY, AND ADDITIONS HAD BEEN MADE IN SIMILAR CIRCUMSTANCES. IT APPEARS THAT THE ASSESSEE HAD NOT PREFERRED APPEAL FOR THOSE YEARS, WHEREAS IT HAD PREFERRED APPEAL FO R THE SUBJECT ASSESSMENT YEAR. IT HAVE A CLOSER LOOK AT THE ARGUMENTS OF THE APPELLAN T-ASSESSEE, IT IS WORTHWHILE TO LOOK CLOSELY AND COMPARE THE FIGURES FOR THE THREE YEARS UNDER CONSIDERATION: A. FOR THE A.V 2010-11, THE SCRUTINY ASSESSMENT HAS BEEN COMPLETED ON 30.03.2013, AFTER THE REJECTION OF BOOKS. FOR THAT YEAR THE LD.AO HAD A COMPARED THE RESULTS OF THE ASSESSEE WITH ANOTHER C ASE, NAMELY M/S VALECHA ENGINEERING, WHICH WAS A PUBLIC LISTED COMPANY IN T HE SAME LINE OF BUSINESS. THE LD, AO HAS RECKONED THAT THE PROFITS BEFORE INT EREST AND DEPRECIATION WAS TO BE ESTIMATED AT 7.5% OF THE TURNOVER. IN EFFECT, AFTER INTEREST AND DEPRECIATION, THE FINAL RESULT WAS THAT AFTER ADDIT IONS, THE PERCENTAGE OF PROFIT WORKED OUT TO BE 5.13% OF THE TOTAL TURNOVER, WHERE AS THE ASSESSEE HAD DISCLOSED A PERCENTAGE OF 4.84%. THE ASSESSEE HAD N OT PREFERRED APPEAL AGAINST SUCH ADDITION. B. FOR THE A.Y 2011-12, THE SCRUTINY ASSESSMENT HAD BEEN COMPLETED ON 30.03.2014. IN THAT YEAR, THE LD. AO AFTER THE REJE CTION OF THE BOOKS HAD ADOPTED THE SAME PERCENTAGE OF 5.15% OF THE TURNOVE R TO BE THE ESTIMATED PROFIT, AND HAD MADE AN ADDITION ACCORDINGLY. AS FU RTHER ADDITIONS / DISALLOWANCES HAD ALSO BEEN MADE, IN EFFECT THE ASS ESSEE WAS ASSESSED AT 5.77% OF THE TOTAL TURNOVER IN THIS YEAR, THE ASSES SEE HAD DISCLOSED A PERCENTAGE OF PROFIT OF 5.44% AS PER THE BOOK PROFI TS. IN THIS YEAR ALSO THE ASSESSEE HAS NOT PREFERRED ANY APPEAL. C. FROM THE AFORESAID IT IS SEEN THAT THE LD AOS HA VE ADOPTED A BENCHMARK OF 5.15% APPROXIMATELY FOR THE TWO IMMEDIATELY PRECEDI NG YEARS, AND HAVE COMPLETED THE ASSESSMENT, AFTER MAKING CERTAIN OTHE R ADDITIONS ON ACCOUNT OF DISALLOWABLE SUCH AS INCORRECT CLAIM OF SEC 80G. AT ANY RATE, IT IS OBSERVED THAT THE ESTIMATED PERCENTAGE OF PROFITS ON THE TOT AL TURNOVER HAVE BEEN KEPT AT 5.77%. D. FOR THE YEAR UNDER CONSIDERATION, IT IS OBSERVED THAT THE TURNOVER OF THE ASSESSEE-FIRM HAS COME DOWN DRASTICALLY FROM RS.97. 30 CRORES IN THE IMMEDIATE PRECEDING A.Y2011-12 TO RS.57.11.CRORES F OR THE SUBJECT ASSESSMENT YEAR 2012-13. HOWEVER, SIMULTANEOUSLY, T HE DISCLOSED PROFITS AS A PERCENTAGE OF TURNOVER IS 5.48 % AS AGAINST 5.44% F OR THE IMMEDIATE PRECEDING A.Y, WHICH HAD ALMOST 80% MORE TURNOVER. IN THE CIR CUMSTANCES, IN MY CONSIDERED OPINION, WHILE THE LD AO WAS CORRECT IN REJECTING THE BOOKS OF ACCOUNTS, THE ESTIMATION OF 6.50% AS NET PROFIT OVE R THE TURNOVER APPEARS TO BE ITA NO.2246/KOL/2016 A.Y. 2012- 13 COASTAL IINFRA VS. JCIT, RG-34 KOL. PAGE 4 HIGH WHEN COMPARED TO THE FIGURES AND METHOD ADOPTE D BY THE LD.AO IN THE IMMEDIATE TWO PRECEDING YEARS WHICH HAD BEEN SUBJEC T TO SCRUTINY, AND THERE APPEARS TO BE MERIT IN THE ARGUMENTS ADVANCED BY TH E LD A.R FOR THE APPELLANT. THE LD AO HAS ALSO NOT ELABORATED ON THE REASONS AS TO WHY HE HAS ADOPTED A HIGHER FIGURE FOR THE SUBJECT ASSESSMENT YEAR WHEN THE FIGURES ADOPTED IN THE EARLIER YEARS, MORE SPECIFICALLY A.Y 2010-11 WAS BASED ON A COMPARABLE CASE OF A LISTED COMPANY EXECUTING SIMIL AR WORK AS THE ASSESSEE- APPELLANT. HAVING PERUSED CAREFULLY THE ASSESSMENT ORDERS OF THE EARLIER YEARS, WHICH HAD NOT BEEN APPEALED AGAINST BY THE ASSESSEE , I FIND THAT THERE IS NO MATERIAL DIFFERENCE IN THE FACTUAL MATRIX, AS ELABO RATED BY THE LD. AO FOR THOSE YEARS COMPARED WITH THE SUBJECT ASSESSMENT YEAR UND ER CONSIDERATION. I FIND THAT THE ASSESSEE HAS DISCLOSED A FAIR RATE OF PROF IT VIS-A-VIS THE EARLIER YEARS IN WHICH THE ADDITIONS HAD BEEN MADE BY THE LD.AO, MOR E SO IN A SITUATION WHERE THE TURNOVER OF THE ASSESSEE-FIRM HAD GONE DO WN EXPONENTIALLY. THE LD. AO HAS ALSO NOT MADE OUT ANY COMPARABLE CASES, AS H AD BEEN DONE FOR THE A.Y 2010-11, AND FOLLOWED FOR THE A.Y 2011-12. THAT ALS O, IN MY CONSIDERED OPINION IN THE MATTER MAY NOT BE JUSTIFIED WHEN THE ASSESSEE'S PAST HISTORY WAS A PART OF THE RECORDS AVAILABLE WITH THE LD.AO. IN THE CASE OF COMMISSIONER OF INCOME TAX, BIKANER VS M/S ASHOK BEHI BHARAT SETHY &. PARTY, DATE OF ORDER BEING 15.01.2013, REPORTED IN [2013] 35 TAXMANN.COM 214 (RAJASTHAN), THE HON'BLE HIGH COURT AS HELD AS UNDER: IT: ADDITION IN GROSS PROFIT RATE OF ASSESSEE WITH REFERENCE TO CASE OF ANOTHER ASSESSEE WAS NOT JUSTIFIED, WHEN ASSESSEE'S PAST HISTORY WAS AVAILABLE AND THERE WAS NO MATERIAL DIFFERENCE IN F ACTS PERTAINING TO RELEVANT ASSESSMENT YEAR AND PAST HISTORY YEAR SECTION 145 OF THE INCOME-TAX ACT, 1961 - METHOD OF ACCOUNTING - ESTIMATION OF PROFIT [GROSS PROFIT, RATE] - ASSESSM ENT YEAR 1994-95 - WHETHER ADDITION IN GROSS PROFIT RATE OF ASSESSEE W ITH REFERENCE TO CASE OF ANOTHER ASSESSEE WAS JUSTIFIED WHEN ASSESSEE'S P AST HISTORY WAS AVAILABLE AND THERE WAS NO MATERIAL DIFFERENCE IN F ACTS PERTAINING TO RELEVANT ASSESSMENT YEAR AND PAST HISTORY YEAR - HE LD, NO [PARA7] [ IN FAVOUR OF ASSESSEE ] 6. HAVING CONSIDERED THE ENTIRELY OF THE SITUATION, I FIND THAT IT WOULD BE ADEQUATE AND FAIR IS THE PROFIT PERCENTAGE IS KEPT AT 6% NEARER TO THE P ERCENTAGE ADOPTED IN THE EARLIER YEARS BY THE LD AO. 6% OF THE TURNOVER WOULD WORK OUT TO RS. 3,42,65,420 (6% OF RS.57,LO,90,332/- ) AND THE DIFFERENCE WOULD WORK OUT TO RS.29,45,490/- . THIS PORTION OF THE ADDITION MADE BY THE LD AO OUT OF RS.56,10,944/- IS THEREFORE SUSTAINED, AND THE BALANCE IS DIRECTED TO BE DELETED. IN EFFECT, THE GROUND OF APPEAL IS PARTLY ALLOWED T O THE EXTENT INDICATED ABOVE. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 5. LD. AR BEFORE US FILED PAPER BOOK AS WELL AS WRI TTEN SUBMISSIONS CONSISTING PAGES FROM 1 TO 5 AND FINANCIAL DATA (COPY FILED) R EPRESENTING THE PROFITABILITY OF THE ASSESSEE IN THE LAST TWO ASSESSMENT YEARS AS DETAIL ED UNDER : ITA NO.2246/KOL/2016 A.Y. 2012- 13 COASTAL IINFRA VS. JCIT, RG-34 KOL. PAGE 5 COASTAL INFRA ASSTT. YEAR 2012-13 [FIGURES IN CRORES IN RUPEES] ASST. YEAR TURNOVER RETURNED INCOME PERCENTAGE ASSESSED PERCEN TAGE CIT(A) PERCENTAGE 2010-12 115.12 5.57 4.84% 5.13% NO APPEAL 2011-12 97.30 5.29 5.44% 5.77% NO APPEAL 2012-13 57.11 3.13 5.48% 6.50% 6% (IN APPEAL BEFOR E ITAT) SUBMISSION BEFORE HON'BLE INCO ME TAX APPELLATE TRIBUNAL (I) CONTINUOUS FALL IN TURNOVER FROM 115.12 CRORE TO 57 .11 CRORE ALMOST HALF DURING THE YEAR UNDER APPEAL. (II) RETURNED INCOME PERCENTAGE IMPROVED FROM 4.84% TO 5 .48% DURING THE YEAR UNDER APPEAL. (III) CIT(APPEALS)ADOPTING 6% ESTIMATED INCOME ON TURNOVE R AND THEREBY SUSTAINING ADDITION OF RS.29,45,490/- MERELY ON SUR MISES AND GUESSES WITHOUT ANY COMPARATIVE CASE AND IGNORING STEEP FAL L IN TURNOVER AND IGNORING STILL IMPROVEMENT IN INCOME PERCENTAGE. THE LD. AR BEFORE PRAYED THAT THE ADDITION CONFIRME D BY THE LD. CIT-A SHOULD BE REDUCED FROM 6% TO 5.48% AS DECLARED BY THE ASSESSE E. ON THE OTHER HAND THE LD. DR VEHEMENTLY RELIED ON T HE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS & PERUSED TH E MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE REJE CTION OF BOOKS OF ACCOUNTS. THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES AS COMPARE D TO LAST ASSESSMENT YEAR AS OBSERVED FROM THE ASSESSMENT ORDER OF EARLIER YEAR( S). HOWEVER, WE NOTE THAT AO HAS NOT ELABORATED THE REA SONS FOR ADOPTING THE HIGHER PROFIT AS COMPARE TO THE EARLIER YEAR(S). WE ALSO NOTE THAT ASSESSEE HAS DISCLOSED THE FAIR R ATE OF PROFIT IN COMPARISON TO THE EARLIER YEARS IN WHICH ADDITION WAS MADE THOUGH THE TURNOVER HAD GONE DOWN EXPONENTIALLY. WE ALSO FIND THAT NO COMPARABLE CASE S WERE BROUGHT ON RECORD BY THE AO FOR DETERMINING THE PROFIT ON ESTIMATED BASIS. T HUS, THE LIMITED ISSUE BEFORE US RELATES TO THE ESTIMATION OF PROFIT IN THE EVENT OF REJECTION OF BOOKS OF ACCOUNTS. THE AO ESTIMATED THE PROFIT @ 6.50% OF THE GROSS TURNOV ER WHICH WAS REDUCED BY THE LD. CIT(A) TO 6% OF THE GROSS TURNOVER. IT WAS OBSERVED THAT THE PROFIT OF THE ASSESSEE WAS ESTIMATED BY THE AO @5.77% OF THE GROSS TURNOVER IN THE IMMEDIATE PRECEDING AY ITA NO.2246/KOL/2016 A.Y. 2012- 13 COASTAL IINFRA VS. JCIT, RG-34 KOL. PAGE 6 2011-12 WHICH WAS NOT CHALLENGED BY THE ASSESSEE BE FORE THE LD. CIT(A). AS ALL OTHER FACTS OF THE ASSESSEE ARE SAME AS OF THE IMMEDIATE PRECEDING YEAR, THEREFORE IN OUR CONSIDERED OPINION, IT WOULD SERVE THE END OF JUSTI CE TO THE ASSESSEE IF THE ESTIMATE IS SCALED DOWN TO THE PROFIT @ 5.77% OF THE GROSS TURN OVER. THE GRIEVANCE OF THE ASSESSEE IS, AS SUCH, PARTLY ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED PAR TLY IN TERMS OF ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 16/03/2018 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 16/03/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-COASTAL INFRA, BLOCK-AC 148, GROUND FLOO R. SECTOR-1, SALT LAKE CITY, KOLKATA-64 2. /RESPONDENT-JCIT, RANGE-34, AAYKAR BHAVAN POORVA, 7 TH FLOOR, 110, SHANTI PALLY, KOLKATA-107 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,