Kamal Kumar Singh, Rayagada V. ITO, Rayagada

ITA 245/CTK/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0747 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2010
• Court: TRIBUNAL
• Department Lawyers: J KHANRADR
• Keywords: Rejection of books of accounts; Principle of natural justice

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. 245 AND 246/CTK/2010 / ASSESSMENT YEAR S 2006 - 07 AND 2007 - 08 KAMAL KUMAR SINGH, LABOUR CONTRACTOR , QR.NO. ND 8/7,AT/P.O. JAYKAYAPUR 865 017 DIST. RAYAGADA. PAN: BCVPS 3352 P - - - VERSUS - INCOME - TAX OFFICER, RAYAGADA. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SETH/M.SETH/S.C.CHAOUDHURY,ARS / FOR THE RESPONDENT: / SHRI J.KHANRA,DR / ORDE R . . . , , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THESE TWO APPEALS ARE FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE RESPECTIVE ORDERS OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE AYS 200 6 - 07 AND 20 0 7 - 08 IN THE CASE OF THE ASSESSEE. 2. THE GROUNDS OF APPEAL PLEADED BY THE ASSESSEE IN THESE TWO APPEALS ARE SIMILAR AND THE ASSESSEE BEING THE SAME THEY WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVI TY. 3. THE COMMON GROUND PLEADED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE AS FOLLOWS : 1. THAT THE ESTIMATION OF NET PROFIT RATIO AT 8% BY THE LEARNED CIT (APPEALS) IS HIGH EXCESSIVE AND BAD IN LAW . IN FACT THE SAME CIT(APPE ALS) FOR AY 2005 - 06 HAS ESTIMATED NET PROFIT AT 5% OF GROSS CONTRACT RECEIPT IN THE APPELLANTS OWN CASE ,SUCH DISCRETION IS NOT SYNONYMOUS WITH CAPRICE AND DISCRETION SHALL I.T.A.NO. 245 AND 246/CTK/2010 2 BE EXERCISED REGARDS BEING HAD TO THE PROVISION OF LAW AND PRINCIPAL OF NATURAL JUS TICES. 2. THAT THE SAME ASSESSING OFFICER FOR THE AY 2005 - 06 HAS ESTIMATED PROFIT AT 5% OF GROSS CONTRACT RE CEIPT IN THE APPELLANT OWN CASE , WHEREAS THE SAME ASSESSING OFFICER HAS ESTIMATED PROFIT AT 8% WHICH IS AGAINST THE PRINCIPAL OF NATURAL JUSTICES A ND BAD IN LAW. 3. THAT THE CIT (APPEALS) AS WELL AS THE ASSESSING OFFICE HAS NOT CONSIDERED THE ORDERS OF ITAT, CUTTACK BENCH ,CUTTACK WHERE IN SO MANY CASES IT HELD NET PROFIT AT 5% ON CONTRACT RECEIPTS. 4. THAT END OF JUSTICES REQUIRED THE ASSESSEE SHA LL NOT PENALIZE FOR SUCH CHANGE OF BEHAVIOR OR IRREGULAR STYLE OF FUNCTION BY THE LEARNED CIT( APPEALS) AS WELL AS ASSESSING OFFICER. 5. THAT THE NATURE OF WORK UNDERTAKEN BY THE ASSESSEE FOR THE AY 2006 - 07 IS SAME TO THAT OF AY 2005 - 06 AS SUCH ESTIMATION OF PROFIT FOR THE SAME NATURE OF WORK AT DIFFERENT RATIO IS BAD IN LAW. 6. THAT IN THE FACT OF THE CASE IT IS PRAYED THE BEFORE THE HONORABLE COURT TO RESTRICT THE NET PROFIT AT 5% OF GROSS CONTRACT RECEIPT AS HELD BY THE CIT (APPEALS) IN THE EARLIER YEA R OR THE RETURNED INCOME WHICH IS HIGHER. AS CAN BE SEEN, THE ONLY DISPUTE RAISED IN THE ABOVE GROUNDS OF APPEAL IS REGARDING ESTIMATION OF NET PROFIT ON GROSS CONTRACT RECEIPTS. 4. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE ISSUE IN THE LIGHT OF SUBMISSIONS OF THE REPRESENTATIVES OF BOTH THE PARTIES AND PERUSING THE IMPUGNED ORDERS AND MATERIAL AVAILABLE ON RECORD. 5. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL, THE UNDISPUTED FACTS RELATING TO THE ISSUES IN BOTH THE YE ARS ARE THAT THE ASSESSEE IS A WORKS CONTRACTOR. ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUNT; NON - MAINTENANCE OF LABOUR I.T.A.NO. 245 AND 246/CTK/2010 3 REGISTER AND WORK STATEMENTS, BILLS AND VOUCHERS IN RESPECT OF EXPENSES LIKE LABOUR PAYMENT, EXTRA LABOU R PAYMENTS, HIRE CHARGES & MAINTENANCE, OIL & LUBRICANTS, BONUS, STORE DEBIT AND HUTMENT EXPENSES, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS U/S.145(3) AND RESORTED TO ESTIMATION OF INCOME. WHILE DOING SO, THE ASSESSING OFFICER ESTIMATED THE NET PROFIT @8% IN THE ASSESSMENT YEAR 2007 - 08 AND @7% IN THE ASSESSMENT YEAR 2008 - 09 ON THE GROSS CONTRACT RECEIPTS. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS), WHO CONFIRMED THE RATE OF PROFIT AND HENCE, THE ASS ESSEE IS IN PRESENT APPEALS HERE BEFORE THE TRIBUNAL. 6. THE LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT THE ASSESSEE DRIVES INCOME FOR WORKS CONTRACTS ONLY AND HAS DISCLOSED NET PROFIT AT 5.01% AND 4.07% ON GROSS CONTRACT RECEIPTS , WHEREAS THE ASS ESSING OFFICER ADOPTED THE NET PROFIT @8% AND 7% ON THE GROSS CONTRACT RECEIPTS IN THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 RESPECTIVELY, IGNORING THE FACT THAT HE HIMSELF ESTIMATED THE NET PROFIT @5% ON THE GROSS RECEIPTS IN THE ASSESSMENT YEAR 2005 - 06 , T HE NATURE OF WORK IN ALL THESE YEARS BEING SAME. HE FURTHER SUBMITTED THAT THE ITAT, CUTTACK BENCH ALSO IN SO MANY OTHER CASES HAVING SIMILAR LINE OF BUSINESS CARRIED ON BY THE ASSESSEE, HAS ADOPTED 5% NET PROFIT ON THE GROSS CONTRACT RECEIPTS. THEREFORE, HE ARGUED THAT THE NET PROFIT ADOPTED BY THE ASSESSING OFFICER IN BOTH THE AYS UNDER CONSIDERATION IS HIGH, WITHOUT ANY BASIS AND ACCORDINGLY, HE PRAYED TO ADOPT NET PROFIT @5% AS ADOPTED IN THE EARLIER YEAR I.E., ASSESSMENT YEAR 2005 - 06 AS WELL AS BY THE ITAT, CUTTACK BENCH IN OTHER SIMILAR CASES. 7. CONTRARY TO THIS, THE LEARNED DR SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND CONTENDED THAT THE PRINCIPLES OF RES JUDICATA IS NOT I.T.A.NO. 245 AND 246/CTK/2010 4 APPLICABLE TO THE PHYSICAL STATUTES AS E ACH ASSESSMENT YEAR IS DISTINCT AND SEPARATE. HE, THEREFORE, PRAYED TO DISMISS THE APPEALS OF THE ASSESSEE. 8. ON CAREFUL ANALYSIS OF THE FACTUAL ASPECTS AND MATERIAL MADE AVAILABLE TO THE TRIBUNAL IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS THE LEGAL ASPECTS INVOLVED THEREIN, IT IS FOUND THAT UNDISPUTEDLY THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE AND RESORTED TO SECTION 145(3) AND ESTIMATED THE PROFIT TO BE TAXABLE IN THE HANDS OF THE ASSESSEE. WHILE DOING SO, THE ASSESSING OFFICER HAS TO FOLLOW THE PREVIOUS HISTORY OF THE ASSESSEE WHEN IT IS AVAILABLE. NET PROFIT RETURNED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2006 - 07 IS 5.01% AND THAT IN THE ASSESSMENT YEAR 2007 - 08 IS 4.07% OF THE GROSS CONTRACT RECEIPTS . THE ASS ESSING OFFICER HAS ESTIMATED THE NET PROFIT @ 8% IN THE ASSESSMENT YEAR 2006 - 07 AND THAT @ 7% IN THE ASSESSMENT YEAR 2007 - 08. AT THE SAME TIME, THE ASSESSING OFFICER HAS FORGOT THE PERCENTAGE OF NET PROFIT HIMSELF ESTIMATED IN THE EARLIER YEAR I.E., ASSESS MENT YEAR 2005 - 06 @ 5% OF THE GROSS CONTRACT RECEIPTS, AND SIMILAR RATE OF NET PROFIT ADOPTED IN CASE OF SOME OTHER ASSESSEES CARRYING ON SIMILAR BUSINESS WITHIN THE SAME VICINITY AS ENUMERATED IN THE IMPUGNED ORDERS. SIMILAR CONTENTION WAS ALSO RAISED BEF ORE THE LEARNED CIT(A), WHICH WAS NOT ACCEPTED. WE FIND THAT THE REASON GIVEN BY THE LEARNED CIT(A) TO DEVIATE THOSE ORDERS IN CASE OF OTHER ASSESSEES AND ALSO THE ORDER IN CASE OF THE ASSESSEE FOR THE AY 2005 - 06, WHEREIN 5% NET PROFIT HAS BEEN ADOPTED TO DETERMINE THE INCOME, IS NOT TENABLE UNDER LAW. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITS ENTIRETY, WE ARE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE HAS DECLARED NET PROFIT OF 5.1% ON THE GROSS RECEIPTS IN THE ASSESSMENT YE AR 2006 - 07, WHICH IS MORE THAN 5% ON THE GROSS RECEIPTS, IS TO BE ACCEPTED. HOWEVER, IN THE AY 2007 - 08 , ADMITTEDLY THE ASSESSEE HAS DISCLOSED NET PROFIT I.T.A.NO. 245 AND 246/CTK/2010 5 OF 4.07% ON THE GROSS RECEIPTS , THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ADOPT NET PROFIT OF 5% ON THE GROSS RECEIPTS AND COMPUTE THE INCOME ACCORDINGLY. 9. IN THE RESULT, THE BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 14 TH MARCH , 2011 S D/ - S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER. ( ) DAT E: 14 TH MARCH, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : KAMAL KUMAR SINGH, LABOUR CONTRACTOR , QR.NO. ND 8/7,AT/P.O. JAYKAYAPUR 865 017 DIST. RAYAGADA. 2 / THE RESPONDENT: INCOME - TAX OFFICER, RAYAGADA. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.