ACIT, BHARATPUR V. M/S RAMESHWAR PRASAD SHARMA, BHARATPUR

ITA 25/JPR/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7194 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 06-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Reasonable cause
• Section: 40A(3); 37(1)

Judgement Text

1 ITA 25(3)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 25/JP/2011 ASSTT. YEAR : 1999-2000. THE ACIT, CIRCLE, VS. M/S. RAMESHWAR PRASAD SHAR MA, BHARATPUR. CONT., 316, KRISHNA NAGAR,BHARATPUR (APPELLANT) (RESPONDENT) C.O. NOS. 54 & 14/JP/2011 ( ARISING OUT OF ITA NO. 25/JP/2011 ) ASSTT. YEAR : 1999-2000. M/S. RAMESHWAR PRASAD SHARMA, VS. THE ACIT, CIRCLE , BHARATPUR. BHARATPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI D.K. MEENA RESPONDENT BY : NONE ORDER DATE OF ORDER : 12/08/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AND TWO CROSS OBJE CTIONS BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 19 99-2000. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. 3. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF AO. THE APPEAL IS BEING DISPOSED OFF AFTER CONSIDERING THE ORDERS OF AO AND LD. CIT (A) AND MATERIAL ON RECORD. 4. IN APPEAL, THE DEPARTMENT IS OBJECTING IN ALLOWI NG DISALLOWANCE OF RS. 1,31,640/- DISALLOWED UNDER SECTION 40A(3) BY THE AO. 2 5. THE ASSESSEE IS A CIVIL CONTRACTOR. ITS BOOKS OF ACCOUNT AND OTHER ITEMS WERE IMPOUNDED DURING THE COURSE OF SURVEY. THE RECEIPT S SHOWN BY ASSESSEE ARE OF RS. 1,66,17,655/- ON WHICH NET PROFIT HAS BEEN DECLARED AT RS. 14,31,635/- GIVING A NET PROFIT RATE OF 8.6%. THE AO NOTICED THAT ASSESSEE HAS MAD E PAYMENT IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AND SECTION 37(1) AND THE BOOKS OF ACCOUNT IMPOUNDED UNDER SURVEY REGARDING PAYMENT IN VIOLATION OF PROVISIONS OF SEC TION 40A(3), IT WAS SUBMITTED THAT A SUM OF RS. 1,28,800/- WAS MADE ON SUNDAY. THE AO W AS NOT SATISFIED WITH THE EXPLANATION. THEREFORE, HE REJECTED THE CONTENTION AND MADE A DISALLOWANCE. IT WAS CONTENDED BEFORE LD. CIT (A) THAT SUM OF RS. 1,31,6 40/- WAS MADE NOT TO ONE PARTY ONLY IN A DAY, ALMOST ALL THE PAYMENTS WERE MADE EITHER THROUGH EMPLOYEE OF THE FIRM OR THROUGH BUSINESS ASSOCIATES FOR ONWARD PAYMENT TO L ABOURERS / COTTAGE /VILLAGE RAW MATERIAL PRODUCERS AT SITES WHICH ARE NOT SERVED BY THE BANKS ALSO. IT WAS FURTHER SUBMITTED THAT THESE PAYMENTS WERE MADE TO SMALL LA BOURERS WHO DO NOT HAVE BANK ACCOUNTS. THEREFORE, IN VIEW OF RULE 6DD(F), (G) A ND (J) OF I.T. RULES, PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE. THE LD. CIT (A) WAS SATISFIED WITH THE CONTENTION OF THE ASSESSEE. ACCORDINGLY, BY OBSERVING THAT THERE WAS A REASONABLE CAUSE IN MAKING THE PAYMENT UNDER SECTION 40A(3). THE LD. CIT (A) OBSER VED FURTHER THAT HE HAS DIRECTED THE AO TO APPLY NET PROFIT RATE @ 9.5%. WHEN NET PROFIT IS APPLIED, NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(3) AS HELD BY VARIOUS BENCH ES. ACCORDINGLY DISALLOWANCE MADE BY AO UNDER SECTION 40A(3) WAS DELETED. 6. REGARDING DELETION OF ADDITION OF RS. 5,28,200/- , THE BRIEF FACTS OF THE CASE ARE THAT THE AO TAKING INTO CONSIDERATION VARIOUS ASPECTS OF THE PROFIT & LOSS ACCOUNT, HE MADE AN ADDITION OF RS. 5,28,200/- ON ACCOUNT OF VARIOUS EXPENSES CLAIMED IN THE PROFIT & LOSS 3 ACCOUNT. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT NET PROFIT RATE SHOWN BY ASSESSEE IS BETTER AGAINST NET PROFIT RATE APPLIED IN THE EARLI ER YEAR. IT WAS SUBMITTED THAT ASSESSEE HAS DECLARED NET PROFIT RATE OF 7.6% IN ASSESSMENT YEAR . THE NET PROFIT RATE WAS ENHANCED BY THE AO. THE LD. CIT (A) RESTRICTED THE NET PROFIT RATE @ 8% AND THE ORDER OF LD. CIT (A) HAS BEEN CONFIRMED BY THE TRIBUNAL FOR ASSESSMENT Y EAR 1998-99. IT WAS FURTHER SUBMITTED THAT METHOD OF ACCOUNTING AND NATURE OF B USINESS ADOPTED BY THE AO IS THE SAME AND NO MAJOR DEFECT WERE POINTED OUT BY THE AO . THEREFORE, DISALLOWANCE OF EXPENSES UNDER SECTION 37(1) IS NOT JUSTIFIED. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD WAS OF THE VIEW THAT ON THE FACTS OF THE PRESENT CASE NET PROFIT @ 9.5% SHOULD BE APPLIED A GAINST NET PROFIT RATE OF 8.6% SHOWN BY ASSESSEE. THEREFORE, THE DISALLOWANCE MADE UNDE R SECTION 37(1) WAS DELETED AND THE AO WAS DIRECTED TO COMPUTE THE NET PROFIT RATE OF 9 .5%. 7. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. C IT (A), WE FIND THAT THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF R S. 1,31,640/- MADE BY AO UNDER SECTION 40A(3) ON THE FACT THAT SOME OF THE PAYMENT S WERE MADE ON SUNDAY, AND THEY WERE MADE THROUGH EMPLOYEE OF THE ASSESSEE OR THROU GH BUSINESS ASSOCIATES OF ASSESSEE CONCERN TO THE LABOURERS AT SITE. THE LABOURERS WER E NOT HAVING ANY BANK ACCOUNT AT SITE. THE PAYMENTS WERE MADE NOT ONLY TO ONE PARTY AS THE SAME WERE MADE TO VARIOUS PARTIES/LABOURERS. THE PAYMENTS MADE IN CASH ARE I N VIEW OF RULE 6DD(F), (G) AND (J). THERE WAS REASONABLE IN MAKING PETTY CASH PAYMENT T O VARIOUS LABOURERS. THEREFORE, WE HOLD THAT AO WAS NOT JUSTIFIED IN MAKING THE DISALL OWANCE. ACCORDINGLY WE CONFIRM THE DELETION OF DISALLOWANCE. 4 8. REGARDING DELETING ADDITION MADE UNDER SECTION 3 7(1), WE FIND THAT WITHOUT BRINGING ANY COGENT MATERIAL, THE AO MADE DISALLOWA NCE UNDER SECTION 37(1). NATURE OF BUSINESS OF THE ASSESSEE AS WELL AS METHOD OF ACCOU NTING REMAINED THE SAME. HOWEVER, THE FACTS REMAINED THAT CERTAIN VOUCHERS WERE SELF MADE VOUCHERS AND THERE WERE MANY DEFECTS IN THE BOOKS OF ACCOUNT. THEREFORE, CERTAI N DISALLOWANCES REMAINED UNVERIFIED. THEREFORE, WE ARE OF THE VIEW THAT IF AN ADDITION O F RS. 1,00,000/- IS SUSTAINED OUT OF TOTAL ADDITION OF RS. 5,28,200/-, THAT WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 9. IN CROSS OBJECTION, ASSESSEE HAS OBJECTED IN DIR ECTING TO APPLY 9.5% INSTEAD OF 8.6% AS DECLARED BY ASSESSEE. NET PROFIT RATE DECLA RED BY ASSESSEE IS BETTER AS COMPARED TO EARLIER YEAR. IN THE EARLIER YEAR NET PROFIT SH OWN BY ASSESSEE WAS 7.6%. NET PROFIT RATE WAS DISTURBED BY THE AO AND NET PROFIT RATE OF 8% W AS APPLIED WHICH WAS CONFIRMED BY THE TRIBUNAL. THIS YEAR NET PROFIT RATE IS BETTER I.E. AT 8.6%. WE HAVE ALREADY SUSTAINED AN ADDITION OF RS. 1,00,000/-ON ACCOUNT OF VARIOUS EXP ENSES, THEREFORE, WE FEEL THAT THERE IS NO JUSTIFICATION IN DIRECTING TO APPLY NET PROFIT R ATE OF 9.5% AGAINST 8.6%. ACCORDINGLY, WE DIRECT THE AO TO APPLY NET PROFIT RATE DECLARED BY ASSESSEE. 10. THERE IS ONE MORE CROSS OBJECTION FILED BY ASSE SSEE WHICH IS ALSO AGAINST APPLYING NET PROFIT RATE OF 9.5% AGAINST 8.6%. PERHAPS TWO CROSS OBJECTIONS WERE FILED INADVERTENTLY BY THE ASSESSEE. THEREFORE, THE CROS S OBJECTION FILED AND LISTED AS C.O. NO. 54/JP/2011 IS TREATED AS INFRACTUOUS IN NATURE AS C ROSS OBJECTION LISTED AS C.O. NO. 14/JP/2011 HAS BEEN ALLOWED BY US AS ABOVE. 11. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS ALLOWED IN PART AND C.O. NO. 14/JP/2011 IS ALLOWED AND C.O. NO. 54/JP/2011 IS DI SMISSED. 5 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 12 .8.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ACIT, CIRCLE, BHARATPUR. M/S. RAMESHWAR PRASAD SHARMA, CONTRACTOR, BHARATPUR . THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 25(3)/JP/2011) BY ORDER, AR ITAT JAIPUR.