Shri Prakashchandra A Pillai, RAJKOT-GUJARAT V. The Income Tax Officer, Ward 4, Surendranagar

ITA 24/RJT/2011

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1589 (ITAT-RAJKOT)
• Duration Of Justice: 7 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT . . [ , . . , BEFORE SHRI C. M.GARG , JUDICIAL MEMBER AND SHRI O.P.MEENA , ACCOUNTANT MEMBER . . ./ I.T . A . NO. 24 / RJT / 201 1 [[ / ASSESSMENT YEAR : 20 0 7 - 08 PRAKASHCHANDRA A. PILLAI, C/O. VAMAN PRESTRESSING CO. PVT. LTD., NR. DIGSAR RAILWAY STATION, VILL. GODAVARI, TAL. MULI, SURENDRANAGAR. [PAN: AHEPP 8539 J ] VS. THE INCOME TAX OFFICER, WARD - 4, SURENDRANAGAR. APPELLANT / RESPONDENT [ /ASSESSEE BY WRITTEN SUBMISSION /REVENUE BY SHRI PRAVEEN VERMA SR. D.R. / DATE OF HEARING: 2 2 .11. 2018 /P RONOUNCEMENT ON 26 . 1 1 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME T AX (APPEALS) - XVI , AHMEDABAD (IN SHORT THE CIT (A)) DATED 06.12.2010 PERTAINING TO ASSESSMENT YEAR 2007 - 08 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE INCOME TAX OFFICER , WARD - 4 , PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 2 OF 8 SURENDRANAGAR (IN SHORT THE AO) DATED 31.12.2009 UNDER SECTION 143(3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. GROUND NO.1 .1 TO 1.6 RELATES TO CONFIRMING ADDITION OF RS.10,58,063/ - BEING DIFFERENCE IN CONTRACT RECEIPTS. THE AO FOUND THAT THE ASSESSEE HAS SHOWN CONTRACT RECEIPTS OF RS.80,90,655 / - AS AGAINST CONTRACT RECEIPTS OF 91,48,7818/ - SHOWN IN THE FORM - 16A (TDS CERTIFICATE). THUS, THERE WAS DIFFERENCE AN AMOUNT OF RS.10,58,063/ - IT WAS EXPLAINED THAT TDS CERTIFICATE RECEIPTS ARE SHOWN ON PAYMENT BASIS, THEREFORE IT ALSO INCLUDED TDS OF AD VANCE PAYMENT WHEREAS THE ASSESSEE A CC OUNTS THE CONTRACT RECEIPT ON RECEIPT BASIS. THE ASSESSEE HAS FILED RECEIPTS ACCOUNT ALONG WITH CONTRA ACCOUNT OF VAMAN PRESTRESSING CO. PVT. LTD., ON WHICH CONFIRMATION AND BANK ACCOUNT WERE ALSO FILED. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE FOLLOWS MERCANTILE METHOD OF ACCOUNTING, ACCORDINGLY ALL RECEIPTS AND PAYMENTS SHOULD BE ACCOUNTED FOR, HENCE BEING NOT CONVINCED WITH THE REPLY MADE ADDITION OF RS. 10,58,063/ - DIFFERENCE OF THE ABOVE AM OUNT. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHEREIN THE CIT(A) OBSERVED THAT HE IS AGREED WITH THE APPELLANT THAT PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 3 OF 8 ADVANCES CANNOT BE TAXED, IN THE PRESENT CASE THE PERUSAL OF ACCOUNTS SHOWS THAT THESE ARE NOT ADVANCES BY ANY STRETCH OF IMAGINATION . T HE APPELLANT HAS ALSO NOT LED ANY EVIDENCE TO SHOW THAT THESE ARE ADVANCES WHICH HAVE BEEN OFFERED IN SUBSEQUENT YEAR. PERUSAL OF LEDGER ACCOUNT OF VAMAN PRESTRESSING CO. PVT. LTD., SHOWS THAT THE ENTRIES WHERE THE APPELLANT HAS MARKED AS A DVANCE OF PAYMENT DOES NOT APPEARS TO BE ADVANCE PAYMENT AS THE AMOUNT MENTIONED ON VARIOUS DATES ARE NOT IN ROUND FIGURE AND APPEARS ACTUAL FIGURES, ACCORDINGLY, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 4. BEING AGGRIEVED, THE ASSESSEE FILED THIS A PPEAL BEFORE THIS TRIBUNAL . B Y WAY OF WRITTEN SUBMISSION, THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE RELIED ON THE EXPLANATION FURNISHED BEFORE THE AO AND CIT(A) . I T HAS BEEN REPRODUCED IN THE RESPECTIVE ORDERS. WITHO UT PREJUDICE, IT WAS CLAIMED THAT DIFFERENCE PERTAINS TO CONTRACT RECEIPTS FOR WHICH 100% CANNOT BE ADDED AS HELD BY GUJARAT HIGH COURT IN THE CASE OF PRESIDENT INDUSTRIES 258 ITR 654, AND BALCHAND AJITKUMAR 263 ITR 610 (MP). THEREFORE, THE ONLY PROFIT EL EMENT TO BE TAXED AND ON THE GROSS RECEIPTS. THE ASSESSEE HAS PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 4 OF 8 CITED VARIOUS DECISION OF COORDINATE BENCHES WHEREIN THEY HAVE TAXED THE GROSS PROFIT 4 TO 8% OF SUCH CONTRACT RECEIPTS. 5. PER CONTRA, THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE (SR.DR) PERUSED THE WRITTEN SUBMISSIONS FILED BY THE AR OF THE ASSESSEE AND SUBMITTED THAT I T IS AN UNDISPUTED FACT THAT THE ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THE RECEIPTS SHOWN IN TDS CERTIFICATE IN FORM 16A SHOULD HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. THEREFORE, THE DIFFERENCE AMOUNT OF RS.10,58,063/ - HAS RIGHTLY BEEN TAXED BY THE AO. 6. WE HAVE HEARD LD.SENIOR DEPARTMENTAL REPRESENTATIVE WE FIND THAT THE TOTAL RECEIPTS ARE NOT TAXABLE AS ONLY PROFIT ELEMENT IS REQUIRED TO BE TAXED. THEREFO RE CONSIDERING THE VARIOUS DECISIONS OF COORDINATE BENCHES WE CONSIDER 10% NET PROFIT OF THE AMOUNT OFRS.10,58,063/ - AS PROFIT EARNED BY THE ASSESSEE IN RESPECT OF THESE GROSS RECEIPTS AS PER CONTRACT. THE AO DIRECTED TO WORK OUT THE NET PROFIT ACCORDINGL Y AND THE BALANCE ADDITION IS THEREFORE DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 5 OF 8 7. GROUND NO.2.1 TO 2.6 STATES THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5,29,746/ - TREATING THE SAME AS CONTRACT RECEIPTS. 8. FACTS APROPOS OF THIS GROUNDS ARE THAT THE PERUSAL OF LEDGER ACCOUNT IN THE ASSESSEES BOOKS OF ACCOUNTS OF VAMAN PRESTRESSING CO. PVT. LTD., THE OPENING BALANCE FOUND OF RS.3,13,646/ - ON THE OTHER HAND OPENING BALANCE AS PER THE BOOKS OF THE ASSESSEE OF VAMAN PRESTRESSING CO. PVT. LTD., IS FOUND OF RS.8,43,392/ - AS SUCH THERE IS DIFFERENCE IN OPENING BALANCE OF RS.5,29,746/ - . THE AO, THEREFORE, ADDED THE SAME AS UNEXPLAINED INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A), HOWEVER, THE CIT(A) OBSERVED THAT SIMPLY MENTIONI A STATEMENT THAT PROVISION BEING MADE BY VAMAN PRESTRESSING CO. PVT. LTD., IN THEIR BOOKS OF ACCOUNTS IN THE YEAR 2005 - 06 WAS NOT MADE BY THE ASSESSEE IN ITS OWN BOOKS OF ACCOUNTS AND THEREFORE THE PRECEDENT IS RELIED WILL NOT S OLVE T HE PROBLEM. THE APPELLANT IS REQUIRED TO SHOW AS TO WHY THE PROVISION WAS MADE BY THE PARTY AND NOT BY THE ASSESSEE AND HOW THE SAME DOES NOT AFFECT THE INCOME OF THE ASSESSEE. THEREFORE, THE ACCOUNT BEING DISALLOWED DULY FOR THE YEAR 2006 - 07 IS ON PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 6 OF 8 ACCOU NT OF ACTUAL BILL AND NOT PROVISION ACCORDINGLY THIS ADDITION WAS CAME TO BE CONFIRMED. 9. BEING AGGRIEVED, THE ASSESSEE FILES THIS APPEAL BEFORE US . T HE LD.AR VIDE WRITTEN SUBMISSION CONTENDED THAT THE ADMISSION BY HE AO THAT THE OPENING BALANCE FOUND OF RS.3,13,646/ - RELATES TO OPENING BALANCE, THUS, WHEN THERE IS A DIFFERENCE IN CLOSING BALANCE WHICH IS NOT REFLECTED AS OPENING BALANCE THEN ONLY THE QUESTION OF ADDITIONS REMAINS. THE AO HAS NOT MADE OUT A CASE THAT THE CLOSING BALANCE HAS NOT BEEN BROUGHT AS OPENING BALANCE BY ASSESSEE AND THEREFORE THE ADDITION BEING BASELESS NEEDS TO BE DELETED. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT 100% OF THE DIFFERENCE CANNOT BE TAXED AS SUBMITTED IN RESPECT OF GROUND 1, THE REFORE ONLY NET PROFIT RATE CAN BE APPLIED TO SUCH DIFFERENCE. 10. PER CONTRA, THE LD.SR.DR RELIED ON THE ORDERS OF THE LOWER AUTHORITES. 11. WE HAVE HEARD THE PARTIES AND FIND THAT THERE IS A DIFFERENCE ON ACCOUNT OF OPENING BALANCE IN RESPECT OF LEDGER ACCENTS W ITH THE ASSESSEE AND LEDGER ACCOUNTS OF VAMAN PRESTRESSING CO. PVT. LTD., HENCE THE AMOUNT OF RS.5,29,764/ - HAS BEEN RIGHTLY ADDED BY THE AO AND CONFIRMED BY THE CIT(A). THE CONTENTION OF THE AR THAT ONLY NET PROFIT IS TO BE TAXED IS WITHOUT PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 7 OF 8 ANY BASIS AS THIS DIFFERENCE IS ON ACCOUNT OF ACTUAL RECEIPTS, HENCE, THE SAID INCOME REMAINED TO BE TAXED, ACCORDINGLY THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 12. GROUND NO.3.1 TO 3.2 RELATES CONFIRMATION OF ADDITION OF RS.60 , 000/ - MADE TOWARDS KITCHEN EXPEN SES. 13. WE HAVE HEARD THE PARTIES AND FIND THAT THE AO HAS DISALLOWED RS.60,000/ - OUT OF KITCHEN EXPENSES WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE VOUCHERS MADE BY THE AO. THEREFORE, WE DO NOT FIND ANY MERIT IN CONFIRMATION OF SUCH ADDITION, ACCORDIN GLY SAME IS DIRECTED TO BE DELETED, THIS GROUND OF APPEAL OF ASSESSEE IS THEREFORE ALLOWED. 14. GROUND N O .4.1 TO 4.2 RELATES TO CONFIRMING ADDITION OF RS.75 , 000/ - MADE TOWARDS LABOUR EXPENSE. 15. WE HAVE HEARD THE PARTIES AND FIND THAT THE AO HAS MADE DISALLOWANCE OF 75 , 000/ - PERTAINING TO LABOUR EXPENSES OUT OF TOTAL EXPENSES OF RS.57,05,271/ - . HOWEVER, WE FIND THAT DISALLOWANCE MADE WITHOUT ANY SPECIFIC DEFECT POINTING OUT BY THE AO, THEREFORE SUCH DISALLOWANCE OF RS.75,000/ - ARE DIRECTED TO BE DELETED. 16. GROUND NO.5.1 TO 5.2 RELATES TO CONFIRMING THE ADDITION OF RS.20 , 000/ - MADE TOWARDS TRAVELLING EXPENSES. PRAKASHCHANDRA A.PILLAI VS. TIO, WARD - 4, SURENDRANAGAR / ITA NO .24/RJT/2011/ A . Y. 2007 - 08 PAGE 8 OF 8 17. WE HAVE HEARD THE PARTIES AND FIND THAT THE AO MADE DISALLOWANCE OF 20% CONSIDERING THE SAME AS PERSONAL IN NATURE, HENCE , THE ELEMENT OF PERSONAL USE OF TRAV ELLING DOES NOT DENIED. W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), ACCORDINGLY THE SAME IS CONFIRMED. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 18. GROUND NO.6.1 TO 6.2 RELATES TO CONFIRMING ADDITION OF RS.10 , 000/ - MADE TOWARDS VEHICLE EXPENSE S. 19. WE HAVE HEARD THE PARTIES AND FIND THAT THE AO HAS MADE DISALLOWANCE @10% CONSIDERING THE PERSONAL ELEMENT IN RESPECT OF USE OF VEHICLES THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), ACCORDINGLY THE SAME IS UPHELD. THEREFORE, THIS GROUN D OF APPEAL IS DISMISSED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 21. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26 .11.2018 . SD/ - SD/ - ( . . /C.M. GARG) ( . . / O.P.MEENA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / RAJKOT , DATED : 26 TH NOVEMBER , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO - ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT