DCIT, Jaipur V. KANHIYA LAL CHOUDHARY, TONK

ITA 233/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2131 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELENDRA SHARMAADDL
• Assessee Lawyers: K L MULCHANDANI DHK
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 233/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. DY. COMMISSIONER OF INCOME - TAX, CIRCLE- 7, JAIPUR. CUKE VS. SH. KANHIYA LAL CHAUDHARY, NEAR BUS STAND TODARAISINGH, DISTT- TONK (RAJ) LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABAPC 0831 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 18/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 233/JP/2016 ) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. SH. KANHIYA LAL CHAUDHARY, NEAR BUS STAND TODARAISINGH, DISTT- TONK (RAJ) CUKE VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE- 7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABAPC 0831 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 234/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. DY. COMMISSIONER OF INCOME - TAX, CIRCLE- 7, JAIPUR. CUKE VS. SH. KANHIYA LAL CHAUDHARY, NEAR BUS STAND TODARAISINGH, DISTT- TONK (RAJ) LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABAPC 0831 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 19/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 234/JP/2016 ) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. SH. KANHIYA LAL CHAUDHARY, NEAR BUS STAND TODARAISINGH, DISTT- TONK (RAJ) CUKE VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE- 7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABAPC 0831 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT 2 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. JKTLO DH VKSJ LS@ REVENUE BY : SHRI SHELENDRA SHARMA(ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI K.L. MULCHANDANI(ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.04.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 21/04/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE BUNCH OF TWO APPEALS AND CROSS OBJECTIONS FIL ED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY TWO DIFFERENT ORDER OF THE LD . COMMISSIONER OF INCOME TAX (APPEAL)-3, JAIPUR, RAJASTHAN DATED 01/12/2015 AND 29/12/2015, PERTAINING TO THE ASSESSMENT YEAR 2011-12 AND 2012-13. SINCE COMMON ISSUES ARE INVOLVED. THE TWO APPEALS AND CROSS OBJECTIONS WERE TAKEN UP TOGE THER FOR HEARING AND ARE BEING DECIDED BY WAY OF CONSOLIDATED ORDER FOR THE SAKE O F CONVENIENCE AND BREVITY. FIRST WE TAKE UP REVENUES APPEAL IN ITA NO. 233/JP/2016 AND CROSS OBJECTION 18/JP/2016 PERTAINING TO THE ASSESSMENT Y EAR 2011-12. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL. I. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E, THE CIT(A) HAS ERRED IN REDUCING NP RATE APPLIED BY AO FROM 11.50% TO 11 % WITHOUT ANY BASIS, THOUGH THE CIT(A) HAS UPHELD REJECTION OF BO OKS OF ACCOUNTS U/S 145(3) OF THE IT ACT, 1961. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN DIRECTING TO INCLUDE INCOME FROM FDRS AND OTHER INTEREST INCOME TO THE TURNOVER OF THE ASSESSEE FOR CALCULAT ING NET PROFIT THOUGH THIS INCOME WAS CORRECTLY ASSESSED BY THE AO UNDER THE HEAD INCOME FROM OTHER SOURCES. III. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DIRECTING TO ALLOW INTEREST EXPENSES FROM THE NET P ROFIT UPHELD BY THE CIT(A). 3 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. IV. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , WITHDRAW OR INSERT ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TI ME OF HEARING OF THE APPEAL. 2. BRIEFLY, STATED THE FACTS ARE THAT THE CASE OF T HE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE ACT, 1961(HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 12/03/2014. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER HAS MADE REJECTION OF BOOKS OF ACCOUNT AND REMITTED THE PROFIT. THE ASSESSING OFF ICER APPLIED 11.5% OF NET PROFIT SUBJECT TO DEPRECIATION ALSO MADE ADDITION ON ACCOU NT OF INCOME FROM OTHER SOURCES I.E. INTEREST EARNED ON FDR. 3. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL B EFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS AND FOLLOWING THE DECIS ION OF THE TRIBUNAL APPLIED NET PROFIT OF THE RATE OF 11%. THE LD. CIT(A), ALSO DE LETED THE ADDITION MADE ON ACCOUNT OF INTEREST ON FDR. 4. FIRST GROUND IS AGAINST OF APPLYING THE NET PROF IT AT THE RATE OF 11%. THE LD. DEPARTMENTAL REPRESENTATIVES SUBMITTED THAT LD. CIT (A) WAS NOT JUSTIFIED IN REDUCING THE RATE APPLIED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER HAS POINTED OUT DEFECTS INTO THE BOOKS OF A CCOUNTS. ONCE THE LD. CIT(A) HAS ACCEPTED THE BOOKS OF ACCOUNTS, IT WAS INCUMBENT UP ON THE LD. CIT(A) TO EXAMINE THE ESTIMATION OF THE PROFIT. 4.1 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF AND SUBMITTED THAT CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL. HE FURTHER SUBMITTED THAT BOTH THE AUTHO RITIES FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE. 4 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT LD. CIT(A) HAD EXAMINED THE ISSUE BY OBSERVING AS UNDER :- SO FAR AS APPLICATION OF NP RATE OF 11.5% BY AO IS CONCERN, THE SAME IS EXCESSIVE. CONSIDERING THE PAST HISTORY OF THE ASS ESSEE AS IS EVIDENT FROM THE FOLLOWING TABLE:- FY GROSS GP% NP% NP AO ACTION CIT(A) ITAT 2005 - 06 107106511 11.465 5.77056 7.52668 10% 8% 8% 2006 - 07 141429430 11.305 6.37235 8.21193 9% 2007 - 08 334243802 9.8703 6.46642 7.42083 9% 8% 9% 2008 - 09 246795867 12.785 6.56283 8.43537 11.37% 10% ON OWN WORK AND 5% ON SUBCONTRACT 2009 - 10 264466804 11.838 6.66478 8.41429 11% 2010 - 11 113714822 10.818 5.91223 10.4854 11.50% FROM THE ABOVE TABLE IT CAN BE NOTED THAT IN THE PA ST, CIT(A)/ITAT APPLIED NP RATE OF @ 8%/9% /10% CONSIDERING THE RESULT DECLARE D BY THE ASSESSEE. THE RESULT DECLARED DURING THE YEAR @ 10% 10.48 SUB JECT TO DEPRECIATION AND INTEREST IS BETTER THAN PAST YEARS. HOWEVER, CONSID ERING THE VARIOUS DEFECTS IN THE BOOKS OF ACCOUNTS, THE SAME CAN NOT BE ACCEPTED AS IT IS. THEREFORE TO MEET THE ENDS OF JUSTICE NP RATE OF 11% AS AGAINST 11.5% APPLIED BY AO IS UPHELD. 4.3 AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(A) IS REASONABLE, AND IS BASED UPON THE PAST HISTORY OF THE ASSESSEE. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN TO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND OF THE REVENU ES APPEAL IS REJECTED. 5 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. 5. APROPOS TO GROUND NO. 2, THE LD. DEPARTMENTAL RE PRESENTATIVES SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 5.1 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. 5.2 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . THE LD. CIT(A) HAS GIVEN A FINDING ON FACT AS UNDER:- IT IS SEEN THAT THE AO HIMSELF TREATED THE SAME AS PART OF TURNOVER. IN THE PAST ALSO, WHILE APPLYING NP RATE, INTEREST INCOME WAS TREATED AS PART OF THE TOTAL TURNOVER BY CIT(A)/ITAT JAIPUR FOR THE REASON THAT THIS INTEREST IS INTRINSICALLY LINKED WITH THE BUSINESS. 5.3 THIS FINDING OF FACT IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE, THIS GROUN D OF THE REVENUES APPEAL IS DISMISSED. 6. APROPOS TO GROUND NO. 3 IS AGAINST DIRECTING TO ALLOW INTEREST EXPENSES FROM THE NET PROFIT. LD. DEPARTMENTAL REPRESENTATIVES S UPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) WAS NOT JUSTIF IED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE INTEREST ON DEDUCTION. 6.1 WE FIND THAT, LD. CIT(A) HAS GIVEN FINDING THAT , INTEREST INCOME HAS BEEN TREATED AS PART OF THE TURN OVER BY THE ASSESSING O FFICER. MOREOVER, IN PAST SUCH EXPENSES WERE ALLOWED. THEREFORE, WE DO NOT SEE AN Y REASON TO INTERFERE INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. T HUS, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. APPEAL OF THE REVENUE IS DISM ISSED. 6 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. 7. NOW, COMING TO THE CROSS OBJECTION OF THE ASSESSEE I.E. 18/JP/2016, PERTAINING TO THE ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF CROSS OBJECTION. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS LEGALLY AND FACTUALLY ERRED IN CONFIRMING THE ADDITION OF RS. 8,18,763/- BY APPLYING CONSOLIDATED NP RATE OF 9.5% (AFTER CONSIDERING THE INTEREST EXPENSES, DEPRECIATING AND THE INTEREST INCOME RECE IVED ON FDRS AS BUSINESS INCOME) ON THE ENTIRE CONTRACT RECEIPTS DE SPITE OF THE FACT THAT THE NP/GP RESULTS SHOWN DURING THE YEAR WERE F AR BETTER AS COMPARED TO THE RESULTS SHOWN IN THE IMMEDIATE PREC EDING YEAR I.E. IN THE A.Y. 2010-11 WHICH WERE DULY UPHELD BY THE H ONBLE ITT, JAIPUR BENCH, JAIPUR. THE RESPONDENT CONTINUED TO FUNCTION IN THE SAME MANNER AND STYLE AS IN THE A.Y. 2010-11. IN T HE CIRCUMSTANCES, THE LD. CIT(A) HAD NO REASON TO DEVI ATE FROM THE PAST HISTORY OF THE CASE AND SUSTAIN FURTHER ADDITI ON OF RS. 8,18,763/- WHEN THE RESULTS SHOWN DURING THE YEAR W ERE FAR BETTER THAN THE RESULTS UPHELD BY THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN A.Y. 2010-11. THUS THE ADDITION OF RS. 8,18,763/- SUSTAINED BY THE LD. CIT(A) IS WITHOUT ANY BASIS THE SAME DESERVED TO BE DELETED. 7.1 THE LD. COUNSEL FOR THE ASSESSEE ADOPTED THE SA ME ARGUMENT IN REVENUES APPEAL IN ITA NO. 233/JP/2016. HOWEVER, HE SUBMITT ED THAT LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 8,18,76 3/-. 7.2 ON THE CONTRARY, THE LD. DEPARTMENTAL REPRESENT ATIVES OPPOSED THE SUBMISSIONS. 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD IN REVENUES APPEAL IN ITA NO. 233/JP/2016. WE HAV E AFFIRMED THE VIEW OF THE LD. CIT(A) ON THIS ISSUE BY OBSERVING AS UNDER. 4. FIRST GROUND IS AGAINST OF APPLYING THE NET PROF IT AT THE RATE OF 11%. THE LD. DEPARTMENTAL REPRESENTATIVES SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN REDUCING THE RATE APPLIED BY THE ASSES SING OFFICER. HE SUBMITTED 7 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. THAT THE ASSESSING OFFICER HAS POINTED OUT DEFECTS INTO THE BOOKS OF ACCOUNTS. ONCE THE LD. CIT(A) HAS ACCEPTED THE BOOKS OF ACCOU NTS, IT WAS INCUMBENT UPON THE LD. CIT(A) TO EXAMINE THE ESTIMATION OF TH E PROFIT. 4.1 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF AND SUBMIT TED THAT CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL. HE FURTHER SUBMITTED THAT BOTH THE AUTHORITIES FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE. 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT LD. CIT(A) HAD EXAMINED THE ISSUE BY OBSERVING AS U NDER:- SO FAR AS APPLICATION OF NP RATE OF 11.5% BY AO IS CONCERN, THE SAME IS EXCESSIVE. CONSIDERING THE PAST HISTORY OF THE ASS ESSEE AS IS EVIDENT FROM THE FOLLOWING TABLE:- FY GROSS GP% NP% NP AO ACTION CIT(A) ITAT 2005 - 06 107106511 11.465 5.77056 7.52668 10% 8% 8% 2006 - 07 141429430 11.305 6.37235 8.21193 9% 2007 - 08 334243802 9.8703 6.46642 7.42083 9% 8% 9% 2008 - 09 246795867 12.785 6.56283 8.43537 11.37% 10% ON OWN WORK AND 5% ON SUBCONTRACT 2009 - 10 264466804 11.838 6.66478 8.41429 11% 2010 - 11 113714822 10.818 5.91223 10.4854 11.50% FROM THE ABOVE TABLE IT CAN BE NOTED THAT IN THE PA ST, CIT(A)/ITAT APPLIED NP RATE OF @ 8%/9% /10% CONSIDERING THE RESULT DECLARE D BY THE ASSESSEE. THE RESULT DECLARED DURING THE YEAR @ 10% 10.48 SUB JECT TO DEPRECIATION AND INTEREST IS BETTER THAN PAST YEARS. HOWEVER, CONSID ERING THE VARIOUS DEFECTS IN THE BOOKS OF ACCOUNTS, THE SAME CAN NOT BE ACCEPTED AS IT IS. THEREFORE TO 8 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. MEET THE ENDS OF JUSTICE NP RATE OF 11% AS AGAINST 11.5% APPLIED BY AO IS UPHELD. 4.3 AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(A) IS REASONABLE, AND IS BAS ED UPON THE PAST HISTORY OF THE ASSESSEE. THEREFORE, WE DO NOT SEE ANY REASON T O INTERFERE INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS G ROUND OF THE REVENUES APPEAL IS REJECTED. 7.4 THEREFORE, WE DO NOT SEE ANY REASON TO INTERFER E INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED, THIS GROUND OF THE CROSS OBJECTION IS DISMISSED. 8. NOW, WE TAKE UP THE REVENUES APPEAL IN ITA NO. 234/JP/2016, PERTAINING TO THE ASSESSMENT YEAR 2012-13 AND THE C ROSS OBJECTION OF THE ASSESSEE IN NO. 19/JP/2016. 8.1 AT THE TIME OF HEARING, BOTH THE PARTIES HAVE ADOPTED THE SAME ARGUMENT AS WERE ADDRESSED IN REVENUES APPEAL IN ITA NO. 233/JP/2016 PERTAINING TO THE ASSESSMENT YEAR 2011-12 AND CROSS OBJECTION OF THE ASSESSEE IN NO. 18/JP/2016 , NO CHANGED INTO THE FACTS AND CIRCUMSTANCE HAVE B EEN POINTED OUT. THEREFORE, OUR FINDING IN ASSESSMENT YEAR 2011-12 W ILL ALSO APPLY TO THE APPEAL AND CROSS OBJECTION PERTAINING TO THE ASSESSMENT YEAR 2 012-13 MUTANDIS. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE I.E. IN ITA NO. 233/JP/2016 & 234/JP/2016 AND CROSS OBJECTIONS OF THE ASSESSEE IN NO. 18/JP/2016 AND 19/JP/2016 ARE DISMISSED. 9 ITA NO. 233 &234/JP/2016 AND C.O. NO. 18 &19/JP/2016 SH. KANHIYA LAL CHOUDHARY. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 21ST DAY OF APRIL 2017 . SD/- SD/- HKKXPUN ( DQY HKKJR ) ( BHAGCHAND ) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 21/04/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- DY. COMMISSIONER OF INCOME-TAX, CIRCLE-7, JAIPUR. 2. THE RESPONDENT- SH. KANHIYA LAL CHOUDHARY, DISTT -TONK (RAJ). 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 233 & C.O. NO. 18/JP/2016 AN D ITA NO. 234 & C.O. NO.19/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR