ITO, Bhubaneswar V. Subhendu Kumar Mohanty, Bhubaneswar

ITA 235/CTK/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0800 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2010
• Court: TRIBUNAL
• Department Lawyers: SUPPORTING
• Keywords: Non-deduction of tax; TDS; Set aside
• Section: 44AD; 40A(3); 40(a)(ia); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 235/CTK/2010 C.O.NO.3/CTK/2011 (FILED BY ASSESSEE) / ASSESSMENT YEAR 2005 - 06 INCOME - TAX OFFICER, WARD 2(2), BHUBANESWAR. - - - VERSUS - SRI SUBGHENDU KUMAR MOHANTY, PLOT NO .124, SATYA NAGAR,BHUBANESWAR PAN: ADDPM 1015 B ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.C.MOHANTY, DR / FOR THE RESPONDENT: / SHRI P.ROY,AR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THE REVENUE IS IN APPEAL AGITATING THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITION/DISALLOWANCE ASSESSED U/S.144 OF THE INCOME - TAX ACT,1961 NAMELY, DISALLOWANCE OF RS.4,14,720 U/S.40A(3) AND DISA LLOWANCE OF RS.10,34,114 UNDER THE PROVISIONS OF SECTION 40(A)(IA). A CROSS OBJECTION HAS BEEN PREFERRED BY THE ASSESSEE RESPONDENT SUPPORTING THE ORDER OF THE LEARNED CIT(A) AND ALSO AGITATING THE LEARNED CIT(A)S UPHOLDING THE AOS ADOPTION OF NET PROFI T AT 12% OF THE GROSS RECEIPTS INDICATING THAT THE PROVISIONS OF SECTION 44AD PROVIDE FOR 8% INCOME TO BE CONSIDERED ON THE GROSS RECEIPTS IN CASE OF CONTRACTORS. 2. THE ASSESSEE IS AN INDIVIDUAL AND FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT RS.2,54,918.THE ASSESSING OFFICER ISSUED NOTICE FOR CARRYING OUT SCRUTINY OF THE RETURN BUT TILL THE DATE OF PASSING OF THE ORDER WAS NOT ABLE TO GET ANY RESPONSE. CONSTRAINT TO PASS AN ORDER U/S.144 I.T.A.NO. 235/CTK/2010 C.O.NO.3/CTK/2011 2 ON THE BASIS OF GROSS RECEIPTS SHOWN IN THE PROFIT & LOSS ACCOUNT ESTIMATED INCOME AT12% OF THE SAME AND CONSIDERED THE AMOUNTS PAID TO LABOUR CONTRACTORS THROUGH VARIOUS PERSONS WHICH HE CONSIDERED INDIVIDUALLY WERE IN EXCESS OF RS.20,000 EACH WERE SUBJECTED TO DISALLOWANCE UNDER THE PROVISIONS OF SECTION 4 0A(3).REDUCING THE AMOUNT OF EXPENSES CLAIMED IN THE PREVIOUS YEAR BUT PAID IN THE IMPUGNED ASSESSMENT YEAR HE DISALLOWED A SUM OF RS.20,76,300 U/S.40A(3) THEREBY MAKING ADDITION OF RS.4,14,720. HE ALSO PERUSED THE BALANCE SHEET WHEN THE EXPENSES PAYABLE A MOUNTING TO RS.10,34,114 WERE TO BE CONSIDERED UNDER THE PROVISIONS OF TAX DEDUCTION AT SOURCE IN CHAPTER XVIIB. HE OBSERVED THAT AS THE AMOUNTS ARE PAYABLE AND HAVE BEEN CLAIMED IN THE P & L ACCOUNT, AND NO TAX DEDUCTION AT SOURCE HAS BEEN MADE THEREFORE WAS TO BE DISALLOWED. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(A), WHO ON THE BASIS OF CASE LAWS NAMELY CIT V. BANWARI LAL BANSHIDHAR (229 ITR 229) AND IN THE CASE OF CIT V. AGARWAL ENGINEERING CO., (206 CTR 640(P & H) AND ANOTHER DECISION IN THE CASE OF CIT V. PURUSHOTTAM LAL TAMRAKAR (270 ITR 314)(MP), HELD THAT DISALLOWANCE U/S.40A(3) IS UNTENABLE WHEN THE ASSESSING OFFICER HIMSELF HAS MADE THE BEST JUDGMENT OF ASSESSING INCOME ESTIMATING 12% OF THE GROSS RECEIPTS AS TAXABLE. WITH RESPECT T O DISALLOWANCE U/S.40A)(IA) , HE CANDIDLY HELD THAT DISALLOWANCE OF EXPENSES FOR WANT OF TDS WAS THE SUBJECT MATTER OF VERIFICATION WHICH THE ASSESSING OFFICER HIMSELF OBSERVED HAD NOT BEEN CARRIED OUT WHEN THE AMOUNT OF TAX COULD BE DEPOSITED BEFORE THE D UE DATE OF FILING OF RETURN, THEREFORE, PREMATURE DECISION. TAKING SUPPORT FROM THE FACT THAT THE INCOME HAD BEEN ESTIMATED, THE DISALLOWANCE OF EXPENSES WHICH WAS AKIN TO HAVING A BELIEF THAT THE CREDIT REMAINED UNEXPLAINED UNDER THE PROVISIONS OF SECTION 68 WERE , THEREFORE, NOT JUSTIFIED. 3. THE LEARNED DR HAS POINTED OUT THAT THE LEARNED CIT(A) ERRED IN I.T.A.NO. 235/CTK/2010 C.O.NO.3/CTK/2011 3 DELETING THE ADDITION AND DISALLOWANCE BY TAKING THE TOTALITY OF SPECIFIC ITEMS DISALLOWED UNDER THE GARB OF ESTIMATION OF INCOME BY THE ASSESSING OFFIC ER U/S.144. HE POINTED OUT THAT COMPUTATION OF INCOME HAS NO BEARING FOR CLAIMING OF EXPENSES INSOFAR AS THE PROVISIONS OF SECTIONS 40A(3) AND 40(A)(IA) ARE PART AND PARCEL OF THE ASSESSMENT PROCEDURE WHICH WERE RIGHTLY INVOKED BY THE LEARNED ASSESSING OFF ICER. HE, THEREFORE, PRAYED THAT THE ORDER OF THE LEARNED CIT(A) ON THIS SCORE BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. IN THE CROSS OBJECTION AS PREFERRED BY THE ASSESSEE RESPONDENT, THE LEARNED DR OBJECTED TO ASSESSEES CONTENTION T HAT THE ESTIMATION AT 12% OF THE GROSS RECEIPTS WAS HIGH WAS NOT CONSIDERED BY THE LEARNED CIT(A) IN THE LIGHT OF THE FACTS ONCE THE LEARNED CIT(A) CHOSE TO ALLOW THE DELETION OF DISALLOWANCE BY THE ASSESSING OFFICER COULD NOT HAVE TINKERED WITH THE ESTIMA TION MADE BY THE ASSESSING OFFICER U/S.144 WAS CONFIRMED AS NO BOOKS OF ACCOUNT WERE PRODUCED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUPPORTED THE ORDER OF THE LEARNED CIT(A) FOR THE SIMPLE REASON THAT THE DISALLOWANCE U/S.40A)(IA) AND 40A(3) WERE IMPROPERLY MADE U/S.144 THAT REQUIRED SUFFICIENT REBUTTAL BY THE ASSESSEE WHO WAS NOT AVAILABLE TO THE ASSESSING OFFICER FOR WANT OF TIME. THUS, THE ASSESSING OFFICER APPEARED TO BE IN A HURRY TO PASS THE ORDER WHEN VARIOUS QUERIES AS RAISED BY HIM WERE TO BE REPLIED REQUIRING THE PRODUCTION OF BOOKS OF ACCOUNT TO THE EXTENT THAT THE INDIVIDUAL CONTRACTORS WHO WERE PAID WERE NOT EMPLOYEES OF THE ASSESSEE BUT WERE THE HEAD OF THE GROUP OF INDIVIDUAL LABOURERS THAT DISTRIBUTED THE INDIVIDUAL LABOURERS AMOUN TS LESS THAN RS.20,000, THEREFORE, COULD BE BY NO STRETCH OF IMAGINATION BE DISALLOWABLE U/S.40A(3).SIMILARLY THE DISALLOWANCE U/S.40(A)(IA) WAS WITHOUT VERIFICATION WHETHER THE LIABILITY HAD BEEN CREATED BY IDENTIFYING THE CREDITORS I.T.A.NO. 235/CTK/2010 C.O.NO.3/CTK/2011 4 WHETHER COULD ATTRACT THE PROVISIONS OF CHAPTER XVIIB OF THE I.T.ACT. THE VERY NAMES SUGGEST THAT THE PROVISIONS ARE NON - PERSONAL WITHOUT IDENTIFYING A CREDIT TO BE GIVEN FOR THE TAX SO DEDUCTED. 6. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ESTIMATION OF 12% OF THE GROSS RECEIPTS WAS CONFIRMED BY THE LEARNED CIT(A) WITHOUT CONSIDERING THE FACTS OF THE ASSESSEES CASE INSOFAR AS THE INCOME - TAX ACT PROVIDES FOR TAXATION OF LABOUR CONTRACT RECEIPTS AT 8% WHEN NO BOOKS OF ACCOUNT ARE MAINTAINED. HE PRAYED THA T A SUITABLE DIRECTION MAY BE GIVEN FOR CONSIDERING THE SAME. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CASE LAWS CITED BY THE LEARNED CIT(A) WHICH COMPILATION OF DECISIONS HAS BEEN FURNISHED BY THE LEARNED CO UNSEL BEFORE US INDICATE THAT ONCE ESTIMATION OF INCOME ON THE BASIS OF SOURCE OF INCOME HAS BEEN RESORTED TO BY THE ASSESSING AUTHORITY, THEN, FURTHER PROBING INTO INDIVIDUAL ITEMS OF EXPENSES HAS NO MEANING INSOFAR AS ALL THE EXPENSES ARE INCIDENTAL TO T HE BUSINESS WHICH INCOME HAS ALREADY BEEN RENDERED THEREFORE WOULD BE CONTROVERTING THE ASSESSING OFFICERS OWN RESORTING TO ESTIMATION OF INCOME. FINDING NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A), RELYING ON THE CASE LAWS NOTED BY HIM IN HIS ORDER O N THE FACTS AND CIRCUMSTANCE AS HAVE BEEN BROUGHT ON RECORD, WE HAVE NO HESITATION IN DISMISSING THE APPEAL FILED BY THE REVENUE. HOWEVER, ON THE BASIS OF THE LEARNED CIT(A) GIVING A FINDING AND UPHOLDING THE 12% ESTIMATION OF INCOME CANNOT BE FURTHER TINK ERED WITH AS PER THE OBJECTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT WOULD ITSELF INDICATE THAT THE EXPENSES SO DISALLOWED WERE NOT IN ACCORDANCE WITH LAW OR ON THE BASIS OF ESTIMATION HAD NO SUPPORTING DOCUMENTS THAT COULD BE FURNISHED BY THE ASSES SEE IN SUPPORT OF THE CASE LAWS. THE DELETION THEREOF BY THE LEARNED CIT(A) WHETHER WOULD CIRCUMVENT THE ESTIMATION WOULD BE A FUTILE I.T.A.NO. 235/CTK/2010 C.O.NO.3/CTK/2011 5 EXERCISE AND THEREFORE WOULD HAVE NO BEARING ON THE FACTS APPROPRIATELY CONSIDERED BY THE LEARNED CIT(A) FOR DELETING THE ADDITION AND DISALLOWANCES BUT CONFIRMING THE ESTIMATION OF PROFIT AT 12% OF THE GROSS RECEIPTS. THE ORDER OF THE LEARNED CIT(A) IS UPHELD ON THIS SCORE AND THE GROUND IN THE CROSS OBJECTION RAISED BY THE ASSESSEE IS BOUND TO BE DISMISSED. 8. IN THE RESULT , THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED TO THE EXTENT THAT SUPPORTS THE ORDER OF THE LEARNED CIT(A). THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 18 TH FEBRUARY, 2011 S D/ - SD/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DAT E: 18 TH FEBRUARY, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : INCOME - TAX OFFICER, WARD 2(2), BHUBANESWAR. 2 / THE RESPONDENT: SRI SUBGHENDU KUMAR MOHANTY, PLOT NO.124, SATYA NAGAR,BHUBANESWAR 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / T RUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.