DCIT, Cir. 3(2), Ahmedabad V. M/s. Siddhi Construction, Ahmedabad

ITA 2513/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4461 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 14-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: B T THAKKAR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NO. 2513/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) THE DCIT CIRCLE-3(2) AHMEDABAD / VS. M/S.SIDDHI CONSTRUCTION RAJPUR, DHOKLA AHMEDABAD 387 810 ./ ./ PAN/GIR NO. : ABKFS 4522 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S.K. DEV, SR.DR / RESPONDENT BY : SHRI B.T. THAKKAR, AR / DATE OF HEARING 13/05/2019 !'# / DATE OF PRONOUNCEMENT 31/05/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)3, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-3 /CIR.3(2)/673/16- 17 DATED 05/05/2017 ARISING IN THE ASSESSMENT ORD ER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 31/03/2016 RELEVANT TO ASSESSMENT YEA R (AY) 2013-14. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN EST IMATING PROFIT RATIO @ 5% BEFORE ALLOWING INTEREST AND REMUNERATION TO THE PARTNERS INSTEAD OF PROFIT ASSESSED @8% WHICH IS REASONABLE FOR TAXATIO N PURPOSE FOR ASSESSEE ENGAGED IN THE BUSINESS OF CONSTRUCTION AC TIVITIES. ITA NO.2513/AHD/2017 DCIT VS. SIDDHI CONSTRUCTION ASS T.YEAR 2013-14 - 2 - 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN GRAN TING RELIEF ON POINT OF DISCREPANCY IN RECEIPTS BY ONLY TAKING CONSIDERATIO N OF THE PLEA OF THE ASSESSEE THAT THE ITS DATABASE FIGURES OF CONTRACT RECEIPTS WERE INCLUSIVE OF SERVICE TAX, ALTHOUGH THERE WAS HUGE DIFFERENCE IN TERMS OF PARTY WISE CONTRACT RECEIPTS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF ABOVE ISSUES. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C OMMISSIONER OF INCOME- TAX(A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. THE FIRST ISSUE RAISED BY THE REVENUE IS THAT THE L D. CIT (A) HAS ERRED IN ESTIMATING THE PROFIT AT THE RATE OF 5% INSTEAD OF 8% IN THE BUSINESS OF THE CONSTRUCTION ACTIVITIES. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF CONTRACTING WORK OF EART H EXCAVATION. THE AO IN THE YEAR UNDER CONSIDERATION WAS NOT SATISFIED W ITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE HE REJECTED THE SAME AND ESTIMATED THE PROFIT OF THE ASSESSEE AT THE RATE OF 8% OF THE GROSS RECEIPTS AS PER THE PROVISIONS OF SECTION 44 AD OF THE ACT. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO HAS RESTRICTED THE PROFIT OF THE ASSESSEE AT THE RA TE OF 5% OF THE GROSS RECEIPTS BEFORE THE INTEREST AND REMUNERATION TO TH E PARTNERS. THUS THE APPEAL FILED BY THE ASSESSEE WAS ALLOWED BY THE LEA RNED CIT-A IN PART. ITA NO.2513/AHD/2017 DCIT VS. SIDDHI CONSTRUCTION ASS T.YEAR 2013-14 - 3 - BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE REVENUE IS IN APPEAL BEFORE US. 3. BOTH THE PARTIES BEFORE US RELIED ON THE ORD ER OF THE AUTHORITIES BELOW AS FAVORABLE TO THEM. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOT H THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, W E NOTE THAT THE ASSESSEE HAS DECLARED ITS TURNOVER IN THE SUBSEQUENT ASSESSM ENT YEAR 2014-15 AT RUPEES 13.87 CRORES. THE AO DETERMINED THE INCOME I N THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT FOR THE SUBS EQUENT ASSESSMENT YEAR AT THE RATE OF 5.70% OF THE GROSS RECEIPTS BEF ORE THE INTEREST AND REMUNERATION TO THE PARTNERS. THE ASSESSEE ACCEPTE D SUCH PROFIT DETERMINED BY THE AO. NOW, THE ISSUE ARISES FOR THE YEAR UNDER CONSIDERA TION WHAT SHOULD BE THE REASONABLE RATE OF PROFIT IN THE EVENT OF THE REJEC TION OF THE BOOKS OF ACCOUNTS UNDER THE PROVISIONS OF SECTION 145(3) OF THE ACT. IT IS A SETTLED LAW THAT ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJEC TED, THE ONLY OPTION AVAILABLE TO THE REVENUE IS TO ESTIMATE THE PROFIT OF THE ASSESSEE BASED ON SOME SCIENTIFIC BASIS. AS THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION VIS-A -VIS TO THE FACTS AND CIRCUMSTANCES OF THE SUBSEQUENT ASSESSMENT YEAR EXC EPT THE AMOUNT OF THE TURNOVER, THEREFORE WE ARE OF THE VIEW THAT THE GUIDANCE CAN BE TAKEN FROM SUCH AY. ITA NO.2513/AHD/2017 DCIT VS. SIDDHI CONSTRUCTION ASS T.YEAR 2013-14 - 4 - AS SUCH, WE NOTE THAT THE TURNOVER OF THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR HAS INCREASED BY THE AMOUNT OF RS. 2 CRORES IN COMPARISON TO THE YEAR UNDER CONSIDERATION. GENERAL LY, WHEN THE TURNOVER OF THE ASSESSEE INCREASES THAN THE MARGIN DECREASES , IT IS BECAUSE IT IS ASSUMED THAT THE ASSESSEE TO ACHIEVE A HIGHER AMOUN T OF TURNOVER HAS COMPROMISED WITH HIS PROFIT MARGIN. BUT IN THE CASE ON HAND, WE FIND THAT THE TURNOVER OF THE ASSESSEE HAS INCREASED IN THE SUBSEQUENT YEAR ALONG WITH THE HIGHER PROFIT MARGIN. THEREFORE IN S UCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE HIGHER MARGIN DECLARED BY THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR SHOULD BE USED AS GUIDAN CE FOR DETERMINING THE RATE OF PROFIT FOR THE YEAR UNDER CONSIDERATION . IT IS BECAUSE THE FACTS FOR BOTH THE YEARS ARE COMMON SUBJECT TO THE DIFFER ENCE IN THE MINOR TURNOVER. ACCORDINGLY, CONSIDERING THE FACTS AND CI RCUMSTANCES, WE ARE INCLINED TO ESTIMATE THE NET PROFIT OF THE ASSESSEE AT THE RATE OF 5.75% OF THE GROSS RECEIPTS BEFORE THE AMOUNT OF REMUNERATIO N AND INTEREST TO THE PARTNERS IN THE INTEREST OF JUSTICE AND FAIR PLAY. HENCE THE GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED. 5. THE 2 ND ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CI T (A) ERRED IN DELETING THE ADDITION MADE BY THE AO BY OBSERVIN G THAT TURNOVER OF THE ASSESSEE IS INCLUSIVE OF THE SERVICE TAX. AT THE OUTSET, THE LEARNED DR HAS NOT SUBSTANTIATE D THE GROUNDS OF APPEAL RAISED BY THE REVENUE. THEREFORE, WE DISMISS THE SA ME AS INFRUCTUOUS. ITA NO.2513/AHD/2017 DCIT VS. SIDDHI CONSTRUCTION ASS T.YEAR 2013-14 - 5 - 7. IN THE RESULT, THE APPEAL OF THE REVENUE I S PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2019 SD/- SD/- (MS. MADHUMITA ROY) (WASEEM A HMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2019 &.., .(.. / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-3, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD 1. DATE OF DICTATION 28.5.17(WORD PROCESSED BY HON BLE AM IN HIS COMPUTER BY DRAGON) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.5.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.5.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER