The K.M. Communication, Pathankot V. The Additional Commissiner of Income Tax, Pathankot

ITA 232/ASR/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5611 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: J S BHASIN LD
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S.KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NOS.232(ASR)/2015 ASSESSMENT YEAR: 2010-11 K.M. COMMUNICATION, MOHAN MARKET, DALHOUSIE ROAD, PATHANKOT. PAN:AAKFK-2280Q VS. ADDL. CIT, RANGE, VI, PATHANKOT. (APPELLANT) (RESPONDENT) I.T.A. NOS.233(ASR)/2015 ASSESSMENT YEAR: 2010-11 VASHNO MALHOTRA, PROP. MALHOTRA ENTERPRISES, NEAR RAM LILA GROUND, MISSION ROAD, PATHANKOT. PAN:AAWPM-5599G VS. DY. CIT, CIRCLE, VI, PATHANKOT. (APPELLANT) (RESPONDENT) I.T.A. NOS.234(ASR)/2015 ASSESSMENT YEAR: 2010-11 SH. ANIL MALHOTRA, PROP. PRAGATI CONSTRUCTION COMPANY, NEAR RAM LILA GROUND, MISSION ROAD, PATHANKOT. PAN:AAXPM-3879L VS. DY. CIT, CIRCLE, VI, PATHANKOT. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.S. BHASIN (LD. ADV.) RESPONDENT BY: SH. RAHUL DHAWAN (LD. D R.) DATE OF HEARING: 19.03.2017 DATE OF PRONOU NCEMENT:05.05.2017 ORDER PER N. K. CHOUDHRY (JM): ALL THESE THREE APPEALS HAVE BEEN DIRECTED AGAINST THE ORDERS DATED 12.02.2015 PASSED BY THE LD. CIT(A)-2, AMRITSAR. IN ALL THESE ITA NOS .232 TO 234(ASR)/2015 A SST. YEARS: 2010-11 2 APPEALS THE ASSESSEES HAVE RAISED THE COMMON GROUNDS OF AP PEAL, THEREFORE, FOR THE SAKE OF BREVITY THE GROUNDS AND FA CTS OF APPEAL NO.232(ASR)/2015 HAVE BEEN TAKEN FOR CONSIDERATION FOR DISPOSING OF ALL THE APPEALS SIMULTANEOUSLY. (1.) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN CONFIR MING THE ORDER OF LEARNED ASSESSING OFFICER, WHEREBY THE INCOME FROM CONTRACT WORK OF UNDERGROUND LAYING OF OPTICAL FIBER CABLES, WAS ESTIMATED BY AP PLICATION OF FLAT NET PROFIT RATE OF 9% AGAINST, ASSESSEES SUBMISSION TO ASSESS THE SAME BY APPLICATION OF NET PROFIT RATE OF 8%. (2.) THAT THE LEARNED COMMISSIONER IF INCOME TAX (APPEA LS) WAS NOT JUSTIFIED IN DISTINGUISHING THE IDENTICAL CASE OF A SISTER CONCE RN NAMELY M/S EARTH TECH ENGINEERS, PATHANKOT, ALSO ENGAGED IN UNDERGROUND L AYING OF OPTICAL FIBER CABLES, WHEREIN ESTIMATION OF INCOME BY APPLICATION OF 8% NET PROFIT, AS RESTRICTED BY LEARNED COMMISSIONER IF INCOME TAX (A PPEALS) AND UPHELD BY THE HONBLE ITAT AMRITSAR, WAS FURTHER ALSO ENDORSED BY THE HONBLE HIGH COURT, BY DISMISSING THE APPEAL OF REVENUE. (3.) THAT WHILE DENYING THE BENEFIT OF DECISION IN THE C ASE OF M/S EARTH TECH ENGINEER, (SUPRA) THE LEARNED COMMISSIONER IF INCOME TAX (APP EALS) FAILED TO NOTICE THAT IN THE SAID CASE, EVEN THE CLAIM OF DEPRECIATION WAS ALSO ALLOWED, AFTER ESTIMATION OF INCOME, WHEREAS IN THI S CASE, NO SUCH CLAIM WAS MADE BY ASSESSEE BEYOND APPLICATION OF 8% NET P ROFIT RATE ON GROSS RECEIPTS. (4.) THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) OUGHT TO HAVE ALLOWED THE ASSESSEES CLAIM, TAKING COGNIZANCE OF ASSESSEES OWN CASE FOR SUBSEQUENT YEAR I.E. FOR AY 2012-13, WHERE THE LEARN ED ASSESSING OFFICER HIMSELF ACCEPTED NET PROFIT RATE 8% IN REGULAR ASSE SSMENT, WITH FACTS LARGELY REMAINING THE SAME. (5.) THAT THE ORDER UNDER APPEAL, TO THE EXTENT DISPUTED HEREINABOVE, IS WHOLLY AGAINST LAW AND FACTS OF THE CASE. (6.) THAT CHARGING OF INTEREST UNDER SECTIONS 234A & 234 B HAS BEEN WRONGLY CONFIRMED. (7.) THAT INITIATION OF PENALTY UNDER SECTION 271(L)(C) HAS BEEN WRONGLY CONFIRMED. (8.) THAT THE ORDER UNDER APPEAL IS WHOLLY AGAINST LAW A ND FACTS OF THE CASE. 2 . THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A GOVT. CONTRACTOR & GENERAL ORDER SUPPLIER. DURING THE YEAR UNDER CONSIDERATION TOTAL RECEIPT HAVE BEE N DECLARED AT RS.85907541/- ON WHICH NET PROFIT HAS BEEN SHOWN AT RS.2,67,46,10/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HAS COME TO NOTICE THAT THE ITA NOS .232 TO 234(ASR)/2015 A SST. YEARS: 2010-11 3 ASSESSEE HAS CLAIMED LABOUR & WAGES CHARGES TO THE TUNE OF RS.40299813/- WHICH WERE VERY MUCH ON HIGHER SIDE. THE ASSESSEE H AS ALSO CLAIMED LABOUR PAYABLE TO THE TUNE OF RS27242468/- WHICH TOO APPEA R UNREASONABLE. IN THIS CONNECTION, THE ASSESSEE WAS SPECIFICALLY ASKED VID E SERIAL NO. L OF THE ORDER SHEET ENTRY DATED 09.10.2012 TO FURNISH NAME, COMPL ETE ADDRESSES OF ALL & CONFIRMATION OF WAGES PAID ABOVE RS.25000/- & WAGES PAYABLE A/C. THE ASSESSEE WAS ALSO SPECIFICALLY ASKED VIDE SERIAL NO .7 OF THE ORDER SHEET ENTRY DATED 09.10.2012 TO FURNISH COPY OF A/C OF PURCHASE A/C, CONSUMABLE EXPENSES, FREIGHT EXPENSES, LABOUR & WAGES, MESS EX P., RENTS, TELEPHONE & MOBILE, TRAVELLING, VEHICLE EXPENSES AND HOW VEHICL E EXPENSES ALLOWABLE WHEN NO VEHICLE MAINTAINED. DURING THE COURSE OF EXAMINA TION OF BOOKS OF ACCOUNTS SEVERAL OTHER DEFICIENCIES WERE NOTICED. THE FACTS AS EMERGING FROM THE ASSESSMENT ORDER. IT WAS ALSO COME TO NOTICE THAT THE ASSESSEE HAS C LAIMED THE STATUS OF A PARTNERSHIP FIRM BUT AS PER EVIDENCE PLACED ON FILE IT SHOULD BE AOP AND NOT THE PARTNERSHIP FIRM. THE ASSESSEE THROUGH ITS REPRESENTATIVE FILED REPLY AND SUBMITTED EXPLANATION, HOWEVER, THE ASSESSING O FFICER WHILE CONSIDERING THE SUBMISSIONS OF THE ASSESSEE POINTED OUT SEVERAL DEFECTS DURING EXAMINATION OF BOOKS OF ACCOUNT. IN THE INSTANT CAS E, THE ASSESSEE HIMSELF OFFERED NET PROFIT RATE @ 8% OF THE GROSS RECEIPT A ND 5% SALE MAKE TO SISTER CONCERN WHILE RELYING UPON ITS SISTER CONCERN CASE THAT M/S EARTH TECH ENGINEERS. FURTHER, THE ASSESSING OFFICER DETERMINE D THE LIABILITY AS UNDER: KEEPING IN VIEW THE NATURE OF BUSINESS I.E. CONTRAC T BUSINESS, THE NEXT RELEVANT QUESTION IS OF APPLICATION OF APP ROPRIATE NET RATE OF PROFIT OF GROSS TURNOVER TO ARRIVE AT CORRECT INCOME OF TH E ASSESSEE. THE HONBLE ITAT FOLLOWED ITS OWN DECISION IN THE CASE OF M/S E SS ESS BUILDERS (P) LTD. IN ITA NO. 707/ CHANDI / 1997 FOR THE ASSESSMENT YE AR 1993-94 ORDER DATED 16.09.2003 AND IN ITS NO. 490/ CHANDI/2004 & ITA NO. 387/CHANDI/2004 IN THE CASE OF M/S AGGARWAL CONSTRU CTION LUDHIANA ORDER DATED 25.01.2007 FOR DETERMINING THE INCOME @ 12% ON CONTRACT RECEIPT, IT IS WORTHWHILE TO MENTION HERE THAT THE HONBLE PUNJAB & HARYANA HIGH COURT HAS UPHELD THE APPLICATION OF RA TE OF 12% ON THE CONTRACT RECEIPT. AFTER CONSIDERING EACH AND EVERY ASPECT, NET PROFIT RATE AT 9% IS APPLIED ON DECLARED RECEIPT OF RS.85907541/- BY TAKING A ITA NOS .232 TO 234(ASR)/2015 A SST. YEARS: 2010-11 4 COMPREHENSIVE VIEW TAKEN AS PER THE FACTS RELIED UP ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN ITA NO. 167 OF 2007, DATED 07.05.2007 IN THE CASE OF M/S. SHIVAM CONSTRUCTION CO. IN THIS WAY NET INCOME FROM CONTRACT RECEIPT IS TAKEN AT RS.7731678 /- I.E. 9% OF THE DECLARED RECEIPT. AFTER DISCUSSION INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: INCOME FROM CONTRACT RECEIPT DECLARED OF RS.859 07541/- 1. ADDITION ON ACCOUNT OF DISALLOWANCE OF PENALTY FOR LATE COMPLETION OF WORK AS DISCUSSED IN PARA 07. RS.1871802/- TOTAL GROSS RECEIPT RS.87779343/- INCOME FROM CONTRACT OF RS.87779343 @ 9% = RS.7900140/- 3. FEELING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT(A), WH O DELETED THE ADDITION OF RS.18,71,802/- QUA LIQUIDATED DAMAGES FOR DELAY IN COMPLETING THE CONTRACT WORK BY CONSIDERING THE SAME DID NOT FALL IN THE CATEGORY OF PENALTY FOR BREACH OF LAW THEREFORE A LLOWED AS EXPENDITURE. HOWEVER, CONFIRMED THE NET PROFIT @ 9% AS DETERMINED BY ASSESSING OFFICER BY DISTINGUISHING THE CASE OF M/S EARTH TE CH ENGINEERS, PATHANKOT, SISTER CONCERN OF THE ASSESSEE. THE L D. CIT(A) HAD GONE INTO MINUTE DETAILS OF THE CASE ON FACTUAL ASPE CTS. 4. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT (A), THE ASSESSEE PREFERRED THE INSTANT APPEAL. IN SUPPORT OF ITS CASE, THE LD. AR OF THE ASSESSEE SUBMITTED THAT IN THE CASE OF SISTER CONCERN OF THE ASSESSEE M/S EARTH TECH EN GINEERS, PATHANKOT, ITAT AMRITSAR BENCH, AFFIRMED THE ORDER OF THE LD. CIT(A) ITA NOS .232 TO 234(ASR)/2015 A SST. YEARS: 2010-11 5 RESTRICTING THE NET PROFIT RATE TO THE TUNE OF 8% AS A GAINST 12% APPLIED BY THE A.O. IT WAS FURTHER SUBMITTED BY THE LD. AR TH AT EVEN OTHERWISE ON THE APPEAL OF THE REVENUE DEPARTMENT IN THE SAID CASE, THE HONBLE PUNJAB & HARYANA HIGH COURT ALSO AFFIRMED THE ORDER PA SSED BY THE ITAT, IN TOTO. IT WAS FURTHER SUBMITTED EVEN OTHERWISE THE LD. CIT(A) IN THE ASSESSEES CASE RELEVANT TO THE ASST. YEAR:2012-13 ACCE PTED THE NET PROFIT RATE @ 8%. FURTHER, IT WAS SUBMITTED THAT THE LD. CIT(A) FOR THE RELEVANT YEAR UNDER CONSIDERATION HAS NOT PASSED A R EASONED ORDER AND MISDIRECTED HIMSELF BY DISTINGUISHING THE FACTS OF THE ASSESSEES SISTER CONCERN CASE AND ALSO SIDELINED THE DOCUMENTS PRODUCED BEFORE THE LD. CIT(A) WHICH AFFIRMED THE ACTION FOR CONSIDER ATION OF NET PROFIT RATE @ 8%. 5. ON THE OTHER HAND, THE LD. DR STRONGLY OBJECTED T O THE SUBMISSIONS OF THE ASSESSEES AND SUBMITTED THAT ALL CASES ARE ALTOGETHER DIFFERENT ON FACTS. THE LD. CIT(A) RIGHTLY DISTINGUISHED THE CASE OF THE ASSESSEE TO THE CASE OF M/S EARTH TECH ENGINEERS BECAUSE IN THAT CASE WAGES PAID WERE 37% OF ITS GROSS OF CONTRACTUA L RECEIPTS, HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED WAG ES AT RS.4,02,99,813/- WHICH WERE APPROXIMATELY 70%, BUT W AGES PAYABLE RS.2,72,42,468/- THEREFORE THE SAME ARE TOO HIGH UNVE RIFIED AND UNSUBSTANTIATED. 6. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INSTANT CASE, THE ASSESSEE ITSELF VOLUNTARILY OFFERED NET PROFIT RATE @ 9% OF THE GROSS CONTRACT RECEIPTS AND 5% OF THE SALES TO SISTER CONCERN. IT IS TRUE THAT THE ASSESSEE IS ENGAGED IN BU SINESS OF LAYING OF OPTICAL FIBER CABLES/ JELLY FILED CABLES FOR INDIAN ARMY ENGAGED IN COUNTER INSURGENCY OPERATIONS IN REMOTE FOREST AREAS AT TURBULENT BORDERS OF JAMMU & KASHMIR BOARDERS, THEREFORE, THE METICULOUS MAINTENANCE OF BOOKS AND SUPPORTING VOUCHERS, PARTICUL ARLY FOR LABOUR, BRICKS, KASSIERS, GANTRIES AND HANDLES ETC. WAS IMPOSSIBLE AND CLAIMED ITA NOS .232 TO 234(ASR)/2015 A SST. YEARS: 2010-11 6 VARIOUS EXPENSES TO THE LABOUR AND WAGES WHICH WERE BEIN G EXAMINED FROM ALL ANGLES BY THE ASSESSING OFFICER. THE ASESSEES SISTE R CONCERN NAMELY M/S EARTH TECH ENGINEER, PATHANKOT, ALSO ENGAGE D IN UNDERGROUND LAYING OF OPTICAL FIBER FIBERS CABLES, WHER EIN THE ESTIMATION OF INCOME BY APPLICATION OF NET PROFIT @ 8% AS RESTRICTED BY LD. CIT(A) , WAS UPHOLD BY THE HONBLE ITAT, AMRITSAR BENCH AND FURTHER CONFIRMED BY THE HONBLE HIGH COURT BY DISMISS ING THE APPEAL OF THE REVENUE. IF WE INDEPENDENTLY CONSIDER THE SUBJECT MATTER OF THE AFORESAID CASE TO THE INSTANT CASE THEN WE FIND THAT DIRECTLY OR IN DIRECTLY THE ISSUES ALSO REVOLVE AROUND NET PROFIT. AS IN THE INSTANT CASE, THE COMPANIES ALSO INVOLVED FOR THE SAME OBJECT AT THE SAME A REA AS SIMILAR TO THE ASSESSEE'S SISTER CONCERN , THEREFORE, WE ARE HESITANT TO ACCEPT THE OBSERVATIONS OF THE LD. CIT(A) THAT THE CASE R ELIED UPON BY THE ASSESSEE OF ITS SISTER CONCERN IS ALTOGETHER DIFFERENT A ND DISTINGUISHABLE. IN OUR CONSIDERED OPINION, THE CASE MAY BE FACTUAL DISTINCT, HOWEVER, THE OBJECT AND RESULT OF BOTH OF TH E CASES ARE IDENTICAL AND SIMILAR. EVEN OTHERWISE, THE ASSESSING OFFICE R IN THE ASSESSEES OWN CASE FOR SUBSEQUENT YEAR I.E. FOR ASST. YEAR: 2012-13 ACCEPTED THE NET PROFIT RATE OF THE ASSESSEE @ 8% OF REGU LAR ASSESSMENT AND THE LD. CIT(A) FURTHER CONFIRMED THE NET PROFIT RATE TO THE TUNE OF 8%. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ORDERS PASSED IN SISTER CONCERN OF THE ASSESSEE AND OF THE A SSESSMENT ORDER OF A.Y. 2012-13 AND CIT(A) WHEREAS HE CONFIRMED THE NET PROFIT RATE @ 8 , IN CUMULATIVE EFFECT, WE DO NOT HAVE HESITA TION TO SET ASIDE THE NET PROFIT RATE 9% WHICH IS DETERMINED BY THE LD. CIT(A). HENCE, WE CONFIRM THE NET PROFIT RATE @ 8% AS VOLUNTARILY OF FERED BY THE ASSESSEE. ITA NOS .232 TO 234(ASR)/2015 A SST. YEARS: 2010-11 7 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALL OWED AND NET PROFIT RATE @8% IS CONFIRMED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.0 5. 2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 05.05.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER