Kumar & Kumar Enterprises, Ara V. ITO, Ward-1(4), Ara

ITA 231/PAT/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8057 (ITAT-PATNA)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 07-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S BISWAS
• Assessee Lawyers: MANISH RASTOGI
• Keywords: Depreciation
• Section: 144

Judgement Text

P A G E 1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 231 /PAT /2018 ASSESSMENT YEAR : 2008 - 09 KUMAR & KUMAR ENTERPRISES, BANGALI HATA, JAWAHAR TOLA, ARA. VS. ITO, WARD - 1, ARA PAN/GIR NO. AAFFK 2378 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI MANISH RASTOGI , AR REVENUE BY : SHRI S.BISWAS , DR DATE OF HEARING : 26 /06/ 2019 DATE OF PRONOUNCEMENT : 26 /06/ 2019 O R D E R PER BENCH THIS I S AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, PATNA DATED 18.6 .2018 FOR THE ASSESSMENT YEAR 20 08 - 09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. FOR THAT THE ORDER OF THE LE ARNED C.I.T.(APPEAL) IS ARBITRARY AND UNJUSTIFIED. 2. FOR THAT C.I.T.(APPEAL) NOTICE WAS ISSUED FOR HEARING ON 26 - 03 - 2018 AS SUCH IT WAS NOT POSSIBLE TO ATTEND THE COURT. THE APPELLANT FILED A TIME PETITION AND PRAY ING I HAVE TO SUBMIT HUMBLY THAT THIS IS LAST WEEK OF THE ASSESSMENT YEAR 20017 - 18 AS SUCH I AM VERY BUSY IN DOING INCOME - TAX ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 2 | 8 RETURN MATTER. IT IS VERY HUM B LY TO SAY THAT NO INFORMATION WAS GIVEN TO THE APPELLANT AS FURTHER THAT OF HEARING. AS A SEQUEL TO IT I COULD NOT APPEAR ON THE NEXT DATE OF HEARING FOR NO FAULT OF MINE AFTER ALONG WAITING. I WANT TO THE COURT OF C.I.T.(APPEAL) TO KNOW AS TO WHAT HAPPENED OF MY THE PETITION. THERE I COME TO KNOW THAT THE APPEAL HAD ALREADY BEEN DECIDED WRITTEN SUBMISSI ON. 3 FOR THAT THERE IS NO JUSTIFICATION FOR TAKING UP THE CASE AT THE FAG END OF THE FINANCIAL YEAR. 4. FOR THAT THE ESTIMATE OF NET - INCOME @08% ON TOTAL PAYMENT OF RS. 1,18,85,839/ - IS ALSO UNJUSTIFIED AND ARBITRARY AND EXCESSIVE AS AGAINST BOOK PROFIT OF RS. 6,68,622/ - W H ICH WORKS OUT TO 5.63%. THE NET PROFIT OF RS. 2,17,670/ - WAS SHOWN AFTER DEDUCTING RS. 2,28,951/ - INTEREST ON PARTNERS CAPITAL AND RS. 2,22,000/ - REMUNERATION TO PARTNERS ON THE BASIS OF BOOK OF ACCOUNTS MAINTAINED IN REGULAR COURSE OF BUSINESS WHICH WAS DULY AUDITED. 5. THE C.I.T.(APPEAL) FOR NO VALID REASONS COMPLETED ASSESSMENT AND DID NOT ALLOW INTEREST FOR RS. 2,28,951/ - AND REMUNERATION FOR RS. 2,22,000/ - PAID TO THE PARTNERS. REFERENCE IS INVITED TOWARDS THE JUDGEMRNT OF HON'BLE HIGH COURT PATNA BENCH. 6. FOR THAT THE FIRM ENJOYED BENEFIT OF PARTNERSHIP SINCE LONG PAST. THE BENEFIT OF PARTNERSHIP SHOULD HAVE BEEN ALLOWED TO THE FIRM AND THE INTEREST AND REMUNERATION PAID TO T HE PARTNERS SHOULD HAVE BEEN ALLOWED. 3. GROUND NOS.1 TO 3 OF APPEAL ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION. 4. APROPOS GROUND NO S.4 TO 6, THE FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS. THE ASSESSEE HAS SHOWN GROSS RECEIPTS FOR THE YEAR UNDER CONSIDERATION AT RS.1,18,85,839/ - AS AGAINST RETURNED INCOME OF ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 3 | 8 RS.2,17,670/ - AND CLAIMED PARTNER SALARY OF RS.2,22,000/ - AND INTEREST ON PARTNERS CAPITAL ACCOUNT AT RS.2,17,671/ - . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSE E HAS SHOWN NET PROFIT @ 1.83% , WHICH APPEARS TO LOW. HE OBSERVED THAT IN SIMILAR LINE OF WORK, THE NET PROFIT WORKS OUT TO 8% TO 10% OF THE GROSS RECEIPTS. BEFORE THE ASSESSING OFFICER, THE ASSESSEE COULD NOT FURNISH BOOKS OF ACCOUNT, BILLS AND VOUCHER S ETC, THEREFORE, THE INCOME SHOWN BY THE ASSESSEE COULD NOT BE VERIFIED. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S.144 AFTER ESTIMATING THE PROFIT @ 8% OF GROSS RECEIPTS AT RS.9,50,867/ - . AS THE ASSESSMENT HAS BEEN MADE U/S.144 OF THE ACT AND THE FIRM IS ASSESSED AS FIRM U/S.184(5)/185 OF THE ACT, THE ASSESSING OFFICER DID NOT ALLOW ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION TO THE PARTERNS. 5. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE RELIED ON T HE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF SHYAM BIHAR I VS CIT IN MISC. APPEAL NO.808 OF 2011 ORDER DATED 7 TH MAY, 2012, WHEREIN, HONBLE HIGH COURT HAS UPHELD THE NET PROFIT OF 6% IN CONTRACTOR CASE. 6. THE CIT(A) OBSERVED THAT CONSIDERING THE FACT THAT THE VARIOUS HONBLE HIGH COURTS AND HONBLE SUPREME COURT AND THE ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 4 | 8 TRIBUNAL HAS UPHELD THE ESTIMATION OF NET PROFIT FROM 6% TO 12% IN THE CONTRACTORS CASE, THE ESTIMATION OF PROFIT @ 8% OF THE GROSS CONTRACT RECEIPT BY THE AO IS JUSTIFIED. HE ALSO RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF PRASAD CONSTRUCTION & CO IN ITA NO.9/PAT/2008 DATED 17.11.2008, WHEREIN, THE NET PROFIT RATE AT 8% IS UPHELD. 7. LEARNED A.R. OF THE ASSESSEE PRODUCED A COPY OF THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PRASAD CONSTRUCTION & CO. VS ACIT IN ITA NO.09/PAT/2008 FOR A.Y. 2004 - 05 ORDER DATED 8.3.2018, WHEREIN, THE NET PROFIT RATE OF 6.45% DECLARED BY THE ASSESSEE WAS UPHELD. HE ALSO RELIED ON THE DECISIONS OF HONBLE JURISDICT IONAL HIGH COURT AND THIS BENCH OF THE TRIBUNAL , WHEREIN, NET PROFIT RATE OF 6% HAS BEEN UPHELD AS UNDER: I) SHYAM BIHARI VS CIT, 345 ITR 283 (PAT) II) ACIT VS. SALAUDDIN, 414 ITR 335 (PAT) III) DCIT VS. RISHI BUILDERS INDIA PVT LTD., (M.A. NO.694 OF 201 0 IV) RAJAN CONSTRUCTION VS ITO IN ITA NO.51/PAT/2018 ORDER DATED 14.9.2018 HE SUBMITTED THAT SINCE THE ASSESSEES CASE IS SIMILAR TO THAT OF PRASAD CONSTRUCTION & CO. (SUPRA), THE NET PROFIT RATE AT 6% MAY BE ADOP TED IN THE CASE OF THE ASSESSEE AND DEDUCTION OF SALARY ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 5 | 8 ALONGWITH INTEREST TO PARTNERS MAY KINDLY BE ALLOWED FROM THE INCOME ESTIMATED @ 6%. 8. ON THE OTHER HAND, LEARNED D.R. SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE NET PROFIT RATE DETERMINED BY THE CIT(A) AT 8% IS QUITE JUSTIFIED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS PLACED ON THE RECORD OF THE TRIBUNAL AS WELL AS GONE THROUGH THE VARIOUS DECISIONS RELIED ON BY LEARNED A.R. OF THE ASSESSEE IN THE PAPER BOOK FILED BEFORE THE TRIBUNAL. IN THIS CASE, WE FIND THE ASSESSEE HAS SHOWN NET PROFIT RATE AT 1.83% AS AGAINST THE TURNOVE R OF RS.1,18,85,839/ - . THE ASSESSING OFFICER OBSERVED THAT THE NET PROFIT SHOWN BY THE ASSESSEE @ 1.83% APPEARS TO BE VERY LOW. HE OBSERVED THAT IN SIMILAR LINE OF WORK, GENERALLY THE NET PROFIT WORKS OUT TO 8% TO 10% OF THE GROSS RECEIPTS. WE HAVE PER USED THE DECISION OF THIS TRIBUNAL IN THE CASE OF PRASAD CONSTRUCTION & CO. (SUPRA), WHEREIN, THE TRIBUNAL CONSIDERING THE NET PROFIT RATE OF THE PRECEDING ASSESSMENT YEARS AND SUCCEEDING ASSESSMENT YEARS , UPHELD THE NET PROFIT AT 6.45% OF THE GROSS CONTR ACT RECEIPTS AS AGAINST NET PROFIT @ 10% DETERMINED BY THE LOWER AUTHORITIES. WE FIND THAT THE CIT(A) HAS CITED THE DECISION OF THE TRIBUNAL IN THE CASE OF PRASAD ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 6 | 8 CONSTRUCTION & CO. (SUPRA) IN ADOPTING THE NET PROFIT AT 8%. IN THE CASE OF PRASAD CONSTRU CTION & CO. (SUPRA), THE MATTER WAS TRAVELLED UPTO THE LEVEL OF HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE HIGH COURTED DIRECTED THE TRIBUNAL VIDE ORDER DATED 28.4.2016 TO RE - DECIDE THE ISSUE AFRESH. PURSUANT TO THE DIRECTION OF HONBLE HIGH COURT , THE TRIBUNAL AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT MATERIAL FACTS, RESTRICTED THE NET PROFIT AT 6.45% SUBJECT TO DEDUCTION OF DEPRECIATION, SALARY AND INTEREST TO THE PARTNERS. IN THE PRESENT CASE ALSO, THE ASSESSING OFFICER REJECTED BOOK RES ULTS U/S.145(3) AND FRAMED ASSESSMENT U/S.144 OF THE ACT DETER MINING THE NET PROFIT RATE AT 8%, WHICH WAS UPHELD BY THE CIT(A). WE ALSO PERUSED THE VARIOUS DECISIONS RELIED ON BY LEARNED A.R. OF THE ASSESSEE, WHEREIN, THE NET PROFIT RATE AT 6% HAS BEEN UP HELD BY THE HONBLE HIGH COURT IN THE CIVIL CONSTRUCTION WORK. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. PRASAD CONSTRUCTION & CO (SUPRA), WE ARE OF THE VIEW THA T IT WOULD BE FAIR AND REASONABLE IF THE NET PROFIT RATE IS DETERMINED AT 6% AS AGAINST 8% DETERMINED BY THE CIT(A). WE ORDER ACCORDINGLY. 10. AS REGARDS TO THE CLAIM OF INTEREST AND REMUNERATION TO THE PARTNERS , WE FIND THAT UNDISPUTEDLY THE ASSESSING OFFICER HAS ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 7 | 8 AFFORDED VARIOUS OPPORTUNITIES TO THE ASSESSEE TO PRODUCE COMPLETE BOOKS OF ACCOUNT, BILLS AND VOUCHERS, ETC. FOR VERIFICATION. BUT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT AND RELEVANT EVIDENCE TO JUSTIFY THE CLAIM OF EXPENDITURE, ETC. IN THE ABSENCE OF COMPLETE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAD NO OPTION BUT TO PROCEED UNDER SECTION 144 OF THE ACT FOR BEST JUDGMENT ASSESSMENT. THE DIS PUTE IS RAISED WITH REGARD TO FURTHER DEDUCTION OF INTEREST AND SALARY PAID TO FROM THE NET PROFIT ESTIMATED BY THE ASSESSING OFFICER. THE PROVISIONS OF SECTION 184(5) OF THE ACT IS VERY CLEAR AND ACCOR DING TO WHICH NO FURTHER DEDUCTION CAN BE ALLOWED BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE TO ANY PARTNER OF SUCH FIRM. THEREFORE, WE UPHOLD THE FINDINGS OF THE LOWER AUTHORITIES IN NOT A LLOWING SALARY AND INTEREST TO PARTNERS AND DISMISS THIS PART OF GROUND OF APPEAL. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 26 /0 6 /2019. S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG ) ACCOUNTANT MEMBER JUDICIALMEMBER PATNA ; DATED 26 /0 6 /209 B.K.PARIDA, SPS ITA NO231/PAT/2018 ASSESSMENT YEAR : 2008 - 09 P A G E 8 | 8 COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. S ECRETARY ITAT, PATNA DATE INITIAL 1. DRAFT DICTATED ON 26 .6.19 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26 .6 .19 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE OS 9. DATE ON WHICH FILE GOES TO THE SPS 10. DATE OF DISPATCH OF ORDER. 1. THE APPELLANT : KUMAR & KUMAR ENTERPRISES, BANGALI HATA, JAWAHAR TOLA, ARA. 2. THE RESPONDENT. ITO, WARD - 1, ARA 3. THE CIT(A) - 1, PATNA 4. PR.CIT - 1, PATNA 5. DR, ITAT, PATNA 6. GUARD FILE. //TRUE COPY//