The ITO, Ward5(3), Baroda V. Shri Jagdish K.Patadia, Baroda

ITA 2323/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57268 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMARSR
• Assessee Lawyers: SUREDSH THAKKAR
• Keywords: Rejection of books of accounts
• Section: 145

Judgement Text

ITA NO.2323/AHD/2009 ASSESSMENT YEAR 2006-07.. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI A.M.) I.T.A. NO. 2323 /AHD/2009 (ASSESSMENT YEAR: 2006- 07 ) INCOME TAX OFFICER, WARD 5(3), AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. (APPELLANT) VS. SHRI JAGDISH K. PATADIA, PROP. OF PATADIA CONSTRUCTION, 3 JAWAHAR SOCIETY, BAKRAWADI, BARODA. (RESPONDENT) PAN: AEIPP 4749 K APPELLANT BY : SHRI RAHUL KUMAR,SR.D.R. RESPONDENT BY : SHRI SUREDSH THAKKAR. ( )/ ORDER DATE OF HEARING : 6-3-2012 DATE OF PRONOUNCEMENT :16-3-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT(A)-V, BARODA PASSED IN APPEAL NO. CAB/(A)-V/136/07-08 DAT ED 6-5-2009 FOR THE ASSESSMENT YEAR 2006-07 RAISING THE FOLLOWING GROU NDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN DIRECTING TO ESTIMATE THE INCOME AT 8 % OF GROSS TOTAL RECEIPT OF RS.59,29,377/- WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD. ITA NO.2323/AHD/2009 ASSESSMENT YEAR 2006-07.. 2 2. THE LD. CIT (A) HAS ALSO ERRED IN DELETING THE A DDITIONS OF RS.21,974/- OUT OF LABOUR CHARGES AND RS.22,009/- O UT OF OTHER EXPENSES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CONTRACTOR MOSTLY UNDERTAKING DRAINAGE LINE CONTRACT WORK OF MUNICIPA L CORPORATION AND NAGAR PALIKAS. THE ASSESSEE FILED THE RETURN OF INC OME ON 26-3-2007 DECLARING TOTAL INCOME AT RS. 2,79,004/- AND THE RETURN WAS P ROCESSED U/S. 143(1) OF THE I.T. ACT ON 31-3-2007. LATER ON THE CASE WAS SELECT ED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) AND DETERMINED THE TOTAL INCOME AT RS.25,23,855/- T HEREBY MAKING ADDITION OF RS.22,44,855/- TO THE RETURNED INCOME. 3. THE ASSESSING OFFICER NOTICED DURING THE ASSESSM ENT PROCEEDINGS THAT AS PER TDS CERTIFICATE ATTACHED WITH THE RETURN OF INC OME, THE TOTAL RECEIPT AMOUNTS TO RS.59,29,377/- WHEREAS, THE CONTRACT REC EIPTS CREDITED TO P& L ACCOUNT IS RS. 37,28,325/- ONLY, THEREBY THE CONTRA CT RECEIPT WAS UNDERSTATED BY RS.22,01,052/-.THE ASSESSEES EXPLANATION FOR NO N-INCLUSION OF RS.22,01,052/- IN THE INCOME WAS THAT THE AMOUNT WA S NOT RECEIVED FROM JAMBUSAR NAGAR PALIKA DUE TO SOME DISPUTE WITH REGA RD TO THE CONTRACT WORK DONE BY THE ASSESSEE. DUE TO THE DISPUTE, THE ASSES SEE DID NOT ACCOUNT FOR THE DISPUTED AMOUNT IN THE YEAR UNDER CONSIDERATION. TH E ASSESSEE FURTHER STATED THAT THE DISPUTED AMOUNT WAS SHOWN AS INCOME IN SUB SEQUENT FINANCIAL YEAR (2006-07) IT WAS RECEIVED IN F.Y. 2006-07 AFTER TH E DISPUTE WAS RESOLVED. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLAN ATION OFFERED BY THE ASSESSEE. HE REJECTED THE BOOKS OF ACCOUNTS AND PRO CEEDED TO MAKE ASSESSMENT UNDER SECTION. 145(3) AND ACCORDINGLY ADDED THE REC EIPT OF RS. 22,01,052/- AND ITA NO.2323/AHD/2009 ASSESSMENT YEAR 2006-07.. 3 DISALLOWED LABOUR EXPENSES OF RS.21,974/- AND TRAVE L, TELEPHONE AND MOTOR CAR EXPENSES OF RS.22,009/-. 4. AGGRIEVED BY ADDITION MADE BY ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). CIT (A) CO NFIRMED THE ACTION OF ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT S BUT DID NOT AGREE WITH THE ACTION OF THE ASSESSING OFFICER OF ADDITION OF ENTI RE AMOUNT OF RS.22,01,052/-. HE DIRECTED THAT THE ESTIMATE OF INCOME OF 8% OF TO TAL GROSS RECEIPTS BE MADE. FURTHER AS THE ESTIMATION TO TOTAL INCOME WAS MADE, HE DELETED THE ADDITION MADE TO LABOUR EXPENSES, TRAVEL, TELEPHONE AND MOTO R CAR EXPENSES. THE CIT (A) OBSERVED AS UNDER:- 4.5 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ARG UMENTS MADE BY THE AR OF THE APPELLANT AS WELL AS CASE LAWS CITED BY THE AR. IT IS A FACT THAT THE APPELLANT HAS NOT INCLUDED RECEIPTS OF RS. 22,0-1,052/- RECEIVABLE FROM JAMBUSAR NAGAR PALIKA IN THE YEAR UNDER CONSID ERATION ON ACCRUAL BASIS. THUS, THE APPELLANT HAS FOLLOWED HYBRID SYST EM OF ACCOUNTING WHICH IS NOT ACCEPTABLE AFTER AMENDMENT OF SECTION 145 WI TH EFFECT FROM A.Y. 1997-98. THEREFORE, THE ACTION OF THE ASSESSING OFF ICER IN REJECTING THE BOOKS OF ACCOUNT IS UPHELD. HOWEVER, I DO NOT AGREE WITH THE ASSESSING OFFICER TO ADD ENTIRE GROSS RECEIPTS OF RS.22,01,05 2/- AS INCOME OF THE APPELLANT. THE ASSESSING OFFICER ACCORDING TO ME, H AVING REJECTED THE BOOKS OF ACCOUNT WAS LEFT WITH NO CHOICE BUT TO MAK E BEST JUDGMENT ASSESSMENT AS PER PROVISION OF SEC. 144. HE SHOULD HAVE NOT HAVE DISALLOWED LABOUR EXPENSES AND TRAVEL, TELEPHONE AN D MOTOR CAR EXPENSES. HE SHOULD HAVE ESTIMATED NET FAIR INCOME AT CERTAIN PERCENTAGE OF GROSS RECEIPT OF RS.59,29,377/-. THUS, THE ASSESSING OFFI CER HAS NOT FOLLOWED CORRECTLY THE PROVISIONS OF SEC. 145(3) R.W.S. 144. CONSIDERING THE FACTS OF THE APPELLANT, I UPHELD REJECTION OF BOOKS OF ACCOU NT BUT HOWEVER, I DO NOT AGREE WITH THE ASSESSING OFFICERS ACTION IN MAKING ADDITION OF RS.22,01,052/-, BEING THE GROSS RECEIPT NOT INCLUDE D IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER IS DIRECTED TO ESTIM ATE THE INCOME OF THE APPELLANT AT 8% OF GROSS TOTAL; RECEIPT OF RS.59,29 ,377/-. ITA NO.2323/AHD/2009 ASSESSMENT YEAR 2006-07.. 4 5. AGGRIEVED BY THE ORDER OF CIT (A), THE REVENUE I S IN APPEAL BEFORE US. SINCE BOTH THE GROUNDS OF THE REVENUE ARE CONNECTED THE SAME ARE TAKEN TOGETHER FOR ADJUDICATION. THE LD. D.R. STRONGLY AR GUED AND URGED THAT THE ASSESSING OFFICERS ORDER SHOULD BE UPHELD. THE LD. A.R. ON THE OTHER HAND RELIES ON THE FINDING AND CONCLUSION OF THE LD. CIT (A). HE HAS ALSO FILED WRITTEN SUBMISSIONS. LD. A.R. HAS STATED THAT THE D ECISION OF CIT (A) HAS BEEN FOLLOWED BY THE ASSESSING OFFICER IN THE IMMEDIATE LY FOLLOWING ASSESSMENT YEAR I.E. 2007-08 AND HAS ESTIMATED NET INCOME OF THE ASSESSEE AT 8% OF GROSS RECEIPTS. HE FURTHER STATED THAT WHEN THE BOOKS OF ACCOUNTS HAS BEEN REJECTED AND THE INCOME HAS BEEN ESTIMATED BY APPLYING A PER CENTAGE TO IT, THERE CAN BE NO DISALLOWANCE OF EXPENSES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL ON RECORD, WRITTEN SUBMISSIONS MADE AND GO NE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. IT IS AN UNDISPUTED FACT THA T THE ASSESSEE HAD NOT INCLUDED RS.22,01,052/- IN THE TOTAL INCOME FOR A.Y . 2006-07 AND ACCORDINGLY THE BOOKS OF ACCOUNTS WERE REJECTED BY ASSESSING OF FICER. ONCE THE BOOK RESULTS ARE DECIDED TO BE REJECTED AND PROVISIONS O F SECTION 145 (3) ARE MADE APPLICABLE, THE ASSESSING OFFICER NEEDS TO ESTIMATE NET FAIR INCOME. THE CIT (A) HAS DIRECTED THAT THE INCOME SHOULD BE ESTIMATE D @ 8% OF GROSS TOTAL RECEIPTS OF RS. 59,29,377/-. THIS RATE OF ESTIMATIO N OF 8% IN OUR VIEW IS VERY REASONABLE MORE SO IN VIEW OF THE FACT THAT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. A.Y. 2007-08 THE A.O. HAS HIMSELF ESTIMATED TH E INCOME AT 8% OF GROSS RECEIPTS. FURTHER, AS THE INCOME HAS BEEN ESTIMATED NO FURTHER ADDITION WITH REFERENCE TO VARIOUS EXPENSES CAN BE MADE. IN VIEW OF THE TOTALITY OF FACTS WE ITA NO.2323/AHD/2009 ASSESSMENT YEAR 2006-07.. 5 FIND NO INFIRMITY IN THE ORDER OF CIT (A) AND THERE FORE, UPHOLD THE ORDER OF CIT (A). 9. IN THE RESULT APPEAL BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 16 - 3 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-V, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 6 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 9 / 3 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 10 - 3 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 16 - 3 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 16 -3 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 16 - 3 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..