Tara Chand Jain, Kolkata V. ITO, Ward-45(1), Kolkata, Kolkata

ITA 2283/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4668 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2014
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE
• Assessee Lawyers: K M ROY
• Section: 143(3)

Judgement Text

I.T.A. NO. 2283/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 2283 /KOL/ 2014 ASSESSMENT YEAR: 2007-2008 SHRI TARA CHAND JAIN,.............................. .............................APPELLANT 24/25, UPPER CHITPUR ROAD, KOLKATA-700 007 [PAN : ACKPJ 1876 H] -VS.- INCOME TAX OFFICER,................................ .............................RESPONDENT WARD-45(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI K.M. ROY, FCA, FOR THE ASSESSEE SHRI PINAKI MUKHERJEE, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JUNE 13, 2016 DATE OF PRONOUNCING THE ORDER : AUGUST 10, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKA TA DATED 31.10.2014 AND THE ONLY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE BY ESTIMATING HIS INCOME BY APPLYING NET PROFIT RATE OF 5%. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION UNDER THE NAME A ND STYLE OF HIS PROPRIETARY CONCERN M/S. JAIN CONSTRUCTION COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y HIM ON 29.10.2007 DECLARING TOTAL INCOME OF RS.1,50,920/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER WITH THE CONCERNED PARTIES IN ORDER TO VERIFY THE CORRECTNES S OF CONTRACT RECEIPTS SHOWN BY THE ASSESSEE. THE SAID ENQUIRY REVEALED TH E FOLLOWING DIFFERENCE I.T.A. NO. 2283/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 5 IN RESPECT OF CONTRACT RECEIPTS DECLARED BY THE ASS ESSEE FROM ONE PARTY, NAMELY M/S. BENGAL AMBUJA HOUSING DEVELOPMENT LIMIT ED:- SR. NO . BILL NO. DATE AMOUNT OF BILL RAISED BY THE ASSESSEE BILL PASSED SHOWN AS SALE BY THE ASSESSEE 1. B097/ 02 22.08.2006 RS.1730,920/- VIDE BILL DATED 03.06.2006 RS.17,30,920 RS.1730,920 2. B097/ 03 & FINAL 16.11.2006 RS.22,39,690/- VIDE BILL DATED 03.10.2006 RS.22,39,690 RS.2239,690 3. SP- 010/0 1 06.03.2007 RS.19,50,858.92 VIDE BILL DATED 22.12.2006 RS.16,44,664 SP- 010/0 1/A 06.03.2007 RS.16,44,664 RS.44,664/- TOTAL RS.72,59,938 RS.4015,274 TOTAL BILLS PASSED BY M/S. BENGAL AMBUJA.......... .RS.72,59,938/- TOTAL AMOUNT SHOWN AS SALE BY ASSESSEE............ ..RS.40,15,274/- ____________________ SALE VALUE NOT OFFERED FOR TAX................. RS.32,44,664/- _____________________ WHEN THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OFFICER TO EXPLAIN THE AFORESAID DIFFERENCE, IT WAS SUBMITTED BY THE ASSES SEE THAT THE BILL DATED 06.03.2007 AMOUNTING TO RS.16,44,664/- WAS WRONGLY ENTERED IN ITS BOOKS OF ACCOUNT BY M/S. BENGAL AMBUJA HOUSING DEVE LOPMENT LIMITED TWICE. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOU ND ACCEPTABLE BY THE ASSESSING OFFICER FOR THE REASONS GIVEN IN THE ASSE SSMENT ORDER AND HE PROCEEDED TO ADD THE DIFFERENCE OF RS.32,44,664/- I N THE CONTRACT RECEIPTS FROM M/S. BENGAL AMBUJA HOUSING DEVELOPMENT LIMITED TO THE TOTAL INCOME OF THE ASSESSEE. HE ALSO MADE A FURTHER DISA LLOWANCE OF RS.1,20,800/- ON ACCOUNT OF UNVERIFIABLE ELEMENT IN VOLVED IN THE LABOUR CHARGES CLAIMED BY THE ASSESSEE. THE TOTAL INCOME O F THE ASSESSEE THUS WAS DETERMINED BY THE ASSESSING OFFICER AT RS.35,16 ,390/- IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN O RDER DATED 31.12.2009. I.T.A. NO. 2283/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 5 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) DISPUTING THE ADDITION MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF DIFFERENCE IN CONTRACT RECEIPTS AS WELL AS DISALLOWANCE OF LABOUR CHARGES. AFTER CONSIDERING THE SUBMISSIONS M ADE BY THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A PPEALS) FOUND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE BILL OF RS. 16,44,664/- RAISED ON 06.03.2007 WAS WRONGLY ENTERED TWICE BY M/S. BENGAL AMBUJA HOUSING DEVELOPMENT LIMITED. HE ACCORDINGLY HELD THAT THE A DDITION MADE BY THE ASSESSING OFFICER TO THAT EXTENT WAS NOT SUSTAINABL E. HE ALSO FOUND FROM THE RELEVANT MATERIAL PLACED ON RECORD BY THE ASSES SEE THAT THE BALANCE AMOUNT OF RS.16,00,000/- RECEIVED FROM M/S. BENGAL AMBUJA HOUSING DEVELOPMENT LIMITED AS ADVANCE IN THE EARLIER YEARS WAS DULY DECLARED BY THE ASSESSEE IN THE SAID YEARS. HE, THEREFORE, HELD THAT THE SAID AMOUNT AGAIN COULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. HE, HOWEVER, FOUND THAT THE RE LEVANT WORK WAS COMPLETED BY THE ASSESSEE IN THE YEAR UNDER CONSIDE RATION AS THE BILL FOR THE SAME WAS RAISED ONLY ON 06.03.2007. HE HELD THA T THE EXPENSES INCURRED BY THE ASSESSEE FOR THE SAID WORK THAT WAS CLAIMED IN THE YEAR UNDER CONSIDERATION WHILE THE CORRESPONDING INCOME WAS SHOWN IN THE EARLIER YEARS AND THERE WAS THUS A VIOLATION OF MAT CHING PRINCIPLE. HE HELD THAT THE PROFIT DECLARED BY THE ASSESSEE FOR T HE YEAR UNDER CONSIDERATION WAS NOT TRUE AND CORRECT AND REJECTIN G THE SAME, HE PROCEEDED TO DETERMINE THE INCOME OF THE ASSESSEE F ROM THE BUSINESS OF CONSTRUCTION BY APPLYING THE NET PROFIT RATE OF 5%. HAVING ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING THE NET PROFIT R ATE OF 5%, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF L ABOUR CHARGES WAS DELETED BY THE LD. CIT(APPEALS) HOLDING THAT NO SUC H DISALLOWANCE COULD SEPARATELY BE MADE WHEN THE INCOME OF THE ASSESSEE WAS DETERMINED ON ESTIMATED BASIS. STILL AGGRIEVED BY THE ORDER OF TH E LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. I.T.A. NO. 2283/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 4 OF 5 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FIRST CO NTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE BOOKS OF A CCOUNT OF THE ASSESSEE HAVING BEEN NOT REJECTED BY THE AUTHORITIES BELOW, HIS INCOME CANNOT BE DETERMINED ON ESTIMATED BASIS BY APPLYING NET PROFI T RATE. IN SUPPORT OF THIS CONTENTION, HE, INTER ALIA, HAS RELIED ON THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. PREM ENT ERPRISES VS.- ITO (ITA NO. 4189/M/2008 AND ITA NO. 5678/M/2009 DATED 25.07 .2012) AND THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MA KHAN BHOGH FOOD PRODUCTS PVT. LIMITED VS.- ACIT (ITA NOS. 996/KOL/ 2011 & 943/KOL/2011 DATED 20.01.2016). HOWEVER, AS RIGHTLY POINTED OUT BY THE LD. D.R., THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN SPECIFICALLY REJECTED BY THE LD. CIT(APPEALS) AFTER RECORDING SP ECIFIC ADVERSE FINDINGS AS IS EVIDENT FROM PARAGRAPH NO. 4.8 OF HIS IMPUGNE D ORDER. IT IS SETTLED POSITION THAT THE POWERS OF THE LD. CIT(APPEALS) AR E CO-TERMINUS WITH THAT OF THE ASSESSING OFFICER AND HE CAN DO WHAT THE ASS ESSING OFFICER CAN AND HE CAN ALSO DO WHAT THE ASSESSING OFFICER HAS FAILE D TO DO. THERE WAS THUS REJECTION OF BOOK RESULTS DECLARED BY THE ASSESSEE BY THE LD. CIT(APPEALS) IN THE PRESENT CASE AND THE ACTION OF THE LD. CIT(A PPEALS) IN DETERMINING THE INCOME OF THE ASSESSEE ON ESTIMATED BASIS BY AP PLYING THE NET PROFIT RATE, IN MY OPINION, IS CORRECT IN LAW AS WELL AS I N THE FACTS OF THE CASE. 5. THE SECOND CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE NET PROFIT RATE OF 5% APPLIED BY THE LD. C IT(APPEALS) IS EXCESSIVE AND UNREASONABLE KEEPING IN VIEW THAT THE NET PROFI T RATE OF 3% DECLARED BY THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR WAS ACCEPTED BY THE DEPARTMENT. IN THIS REGARD, THE LD. D.R. HAS POINTE D OUT THAT EVEN THE NET PROFIT RATE DECLARED BY THE ASSESSEE IN THE IMMEDIA TELY PRECEDING YEAR WAS NOT RELIABLE AS POINTED OUT BY THE LD. CIT(APPE ALS) IN HIS IMPUGNED ORDER. NO DOUBT, THERE WAS A SPECIFIC DEFECT POINTE D OUT BY THE LD. CIT(APPEALS) IN SO FAR AS THE BOOK RESULTS OF THE A SSESSEE FOR THE IMMEDIATELY PRECEDING YEAR ARE CONCERNED IN DECLARI NG THE ADVANCE RECEIVED AS INCOME WHEN THE CORRESPONDING EXPENSES WERE CLAIMED IN THE I.T.A. NO. 2283/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 5 OF 5 YEAR UNDER CONSIDERATION. HOWEVER, THIS DEFECT POIN TED OUT BY THE LD. CIT(APPEALS) CLEARLY SHOWS THAT THE NET PROFIT DECL ARED BY THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR WAS HIGHER THAN THE NORMAL PROFIT. IN MY OPINION, THE NET PROFIT RATE OF 3% DECLARED BY T HE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR, THEREFORE, CAN BE TAKEN AS THE BASIS FOR ESTIMATING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. I, THEREFORE, MODIFY THE IMPUGNED ORDER OF THE LD. CIT (APPEALS) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RE-COMPUT E THE INCOME OF THE ASSESSEE FROM CONSTRUCTION BUSINESS BY APPLYING THE NET PROFIT RATE OF 3% TO THE CONTRACT RECEIPTS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 10, 20 16. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 10 TH DAY OF AUGUST, 2016 COPIES TO : (1) SHRI TARA CHAND JAIN, 24/25, UPPER CHITPUR ROAD, KOLKATA-700 007 (2) INCOME TAX OFFICER, WARD-45(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLK ATA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.