A.P Associates, Basti V. Astt. Commissioner of Income Tax, GONDA

ITA 258/LKW/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4611 (ITAT-LUCKNOW)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R C JAIN
• Keywords: Depreciation; Principle of natural justice; Rule of consistency; Non compliance
• Section: 142(1); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.240/LKW/2015 ASSESSMENT YEAR 2010-11 M/S A.P. ASSOCIATES, SHIVA COLONY, BASTI (U.P.) 272001 PAN AAMFA 2610 C VS DCIT, CIRCLE-GONDA ITA NO.258/LKW/2015 ASSESSMENT YEAR 2010-11 ACIT, CIRCLE-GONDA VS M/S A.P. ASSOCIATES, SHIVA COLONY, BASTI (U.P.) 272001 PAN AAMFA 2610 C (RESPONDENT) (APPELLANT) SHRI AMIT NIGAM, CIT DR APPELLANT BY SHRI R.C. JAIN, CA RESPONDENT BY 03 / 0 2 /201 6 DATE OF HEARING 15 /0 3 /2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THESE ARE CROSS APPEALS FILED BY THE REVENUE AND TH E ASSESSEE, WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), FAIZABAD DATED 23.01.2015 FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL I.E. 258/LKW/2015 ARE AS UNDER:- 2 1. BECAUSE THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN UPHOLDING THE DECISION OF A.O. OF REJECTION OF BOOK S OF ACCOUNTS AND FRAMING ORDER U/S 144 OF THE INCOME TA X ACT, 1961 2.1 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED A SSESSING OFFICER HAVING APPLIED THE NET PROFIT OF 8% AND THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN UPHOLDIN G IT TO THE EXTENT OF 4%. 2.2 BECAUSE THE LEARNED FIRST APPELLATE AUTHORITY HAD NO WARRANT TO UPHOLD THE NET PROFIT RATE @ 4% OF GROSS RECEIPTS AGAINST 1.84%, RETURNED BY THE ASSESSEE . 3. BECAUSE THE LEARNED FIRST APPELLATE AUTHORITY E RRED IN SEPARATELY ADDING INTEREST ON FDRS TO THE TOTAL INC OME OF THE ASSESSEE. 4. BECAUSE THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN SEPARATELY ADDING TRUCK INCOME TO THE TOTAL INCOME OF THE ASSESSEE. 5. BECAUSE THE LEARNED FIRST APPELLATE AUTHORITY HAD NO WARRANT TO DISALLOW INTEREST OF RS.9,24,238/- TO TH E PARTNERS EVEN THOUGH THE SAME WAS ALLOWED BY THE ASSESSING OFFICER. 6. BECAUSE THE LEARNED FIRST APPELLATE AUTHORITY HAD NO WARRANT TO DISALLOW REMUNERATION OF RS.6,00,000/- T O THE PARTNERS EVEN THOUGH THE SAME WAS ALLOWED BY THE ASSESSING OFFICER. 7. BECAUSE THE DISALLOWANCE OF INTEREST TO PARTNE RS RS. 9,24,238 AND REMUNERATION TO PARTNERS RS. 6,00,000 WITHOUT GIVING NOTICE OF ENHANCEMENT TO THE ASSESSE E - AND WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO PUT UP ITS CASE. 8. BECAUSE THE LEARNED 1ST APPELLATE AUTHORITY O UGHT TO HAVE ALLOWED DEPRECIATION SEPARATELY. 9. BECAUSE THE ORDER APPEALED AGAINST IS CONTRAR Y TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 10. ANY OTHER GROUNDS THAT MAY BE TAKEN AT THE TIM E OF HEARING. 3 3. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL I.E. 240/LKW/2015 ARE AS UNDER:- 1. THE LD. CIT(A), FAIZABAD HAS ERRED IN LAW A ND ON FACTS BY ESTIMATING NET PROFIT OF THE APPELLANT AT RS. 46,75 ,1937- @ 4% AS AGAINST RS. 93,50,3867- @ 8% APPLIED BY THE A O ON THE GROSS RECEIPTS OF RS. 11,68,79,3847- RELYING ON THE PAST HISTORY OF ASSESSEE'S OWN CASE WITHOUT APPRECI ATING THE FACT THAT THE HIMSELF HAS CONFIRMED THE STAND O F THE AO FOR REJECTION OF BOOKS OF ACCOUNT IN TERMS OF PR OVISION OF SECTION 145(3) OF THE I.T. ACT AND THE AO HAD RI GHTY ESTIMATED THE NET PROFIT @ 8% OF THE GROSS RECEIPTS . 2. THE LD. CIT(A), FAIZABAD HAS ERRED IN LAW AND ON FACTS BY ESTIMATING THE NET PROFIT @ 4% AS AGAINST 8% APPLIE D BY AO ON THE GROSS CONTRACT RECEIPTS RELYING ON THE PA ST HISTORY OF ASSESSEE'S OWN CASE WITHOUT APPRECIATING THE FACT THAT THE FACTS OF THE PRESENT CASE ARE TOTALLY DIFFERENT FROM THE FACTS OF ASSESSEE'S CASE IN PRECEDING ASSE SSMENT YEARS AND ALSO PRINCIPLES OF RES-JUDICATA ARE NOT A PPLICABLE UNDER INCOME TAX ACT. 3. THE LD. CIT(A), FAIZABAD HAS ERRED IN LAW AND O N FACTS WHILE COMPARING THE PAST HISTORY OF ASSESSEE'S OWN CASE WITHOUT APPRECIATING THE FACT THAT THE NET PROFIT D ISCLOSED BY THE ASSESSEE WAS ON THE BASIS OF THE BOOKS OF AC COUNT FOR THE YEAR UNDER CONSIDERATION WHICH THE AO HAD REJECTED IN TERMS OF PROVISIONS OF SECTION 145(3) O F I.T. ACT & THE ACTION OF THE AO HAS BEEN CONFIRMED BY LD . CIT(A) HENCE, BUSINESS RESULTS PREPARED ON THE BASI S OF THESE BOOKS HAVE NO LEGS TO STAND. 4. THAT THE APPELLANT ALSO CRAVES TO MODIFY, AMEND, CHANGE AND REVISE THE ABOVE GROUNDS OF APPEAL AND ADD FURT HER GROUNDS OF APPEAL, IF NECESSARY. 4. REGARDING THE ASSESSEES APPEAL, IT WAS SUBMITTE D BY THE LD. AR OF THE ASSESSEE THAT GROUND NO.1 IS NOT PRESSED AND AC CORDINGLY GROUND NO.1 IS REJECTED AS NOT PRESSED. 5. REGARDING GROUND NOS. 2 TO 9, HE SUBMITTED THAT AS PER THE TRIBUNALS ORDER IN THE ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2008-09 IN 4 ITA NO. 622/LKW/2011 DATED 03.08.2012, THE TRIBUNAL CONFIRMED THE ORDER OF LD. CIT(A) IN THAT YEAR AS PER WHICH LD. CIT(A) HAS APPLIED NET PROFIT RATE OF 4% SUBJECT TO DEDUCTION FOR INTEREST AND SA LARY PAID TO PARTNERS. HE SUBMITTED THAT THE PROFIT AND LOSS ACCOUNT FOR ACCO UNTING YEAR ENDING ON 31.03.2008 RELEVANT TO ASSESSMENT YEAR 2008-09 IS A VAILABLE ON PAGE 19 OF THE PAPER BOOK AND FROM THE SAME, IT CAN BE SEEN TH AT THERE IS INCOME ON ACCOUNT OF INTEREST ACCRUED ON FDR OF RS.3,29,551/- . HE FURTHER SUBMITTED THAT ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008- 09 IS AVAILABLE ON PAGES 24 TO 25 OF THE PAPER BOOK AS PER WHICH THE T AXABLE INCOME WAS COMPUTED BY THE ASSESSING OFFICER BY APPLYING NET P ROFIT RATE OF 7% TO THE GROSS RECEIPTS OF RS.7,81,39,170/- AND THE INTEREST INCOME DECLARED BY THE ASSESSEE IN P&L ACCOUNT WAS NOT ADDED SEPARATELY AN D IN THE PRESENT CASE ALSO, EVEN IF RATE OF 4% NET PROFIT IS APPLIED, THE SAME SHOULD NOT BE CONSIDERED AS EXCLUSIVE OF INTEREST AND TRUCK HIRE CHARGES RECEIVED BY THE ASSESSEE IN THE PRESENT YEAR OF RS.8,71,002.26 AND RS.4,87,620/- AS CREDITED IN THE P&L ACCOUNT AVAILABLE ON PAGE 2 OF THE PAPER BOOK. REGARDING NON ALLOWING OF DEDUCTION ON ACCOUNT OF I NTEREST AND REMUNERATION TO PARTNERS BY INVOKING THE PROVISIONS OF SECTION 184(5) OF THE ACT ON THIS BASIS THAT THE ASSESSMENT WAS COMPL ETED U/S 144 OF THE ACT, IT WAS SUBMITTED THAT EVEN IF THE ASSESSMENT I S COMPLETED U/S 144, SECTION 184 (5) IS NOT APPLICABLE IF THE ASSESSEE C AN SOW THAT THERE IS SOME COMPLIANCE OF THE NOTICES ISSUED IN COURSE OF ASSES SMENT PROCEEDINGS. HE PLACED RELIANCE ON THE TRIBUNALS ORDER RENDERED IN THE CASE OF SURENDRA PRASAD MISRA VS. ITO REPORTED IN 104 TTJ (LUCKNOW) 292, COPY AVAILABLE ON PAGES 51 TO 55 OF THE PAPER BOOK. AT THIS JUNCTURE, THE BENCH WANTED TO KNOW AS TO WHETHER ANY EVIDENCE IS AVAILABLE IN THE PAPER BOOK IN SUPPORT OF THIS CONTENTION THAT SUBSTANTIAL COMPLIANCE WAS MADE BY THE ASSESSEE BY SHOWING THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 142(1) AND THE 5 COMPLIANCE MADE BY THE ASSESSEE. IN REPLY, IT WAS S UBMITTED BY LD. AR OF THE ASSESSEE THAT SUCH DOCUMENTS ARE NOT READILY AV AILABLE. 6. LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF TE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT IN ASSESSMENT YEAR 2008-09 ALSO, THE ASSESSING OFFICER APPLIED NET PROFIT RATE OF 7% AS AGAINST 8% IN THE PRESENT YEAR AND WHEN TH E ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), LD. CIT(A) HELD T HAT NET PROFIT RATE OF 4% SHOULD BE APPLIED SUBJECT TO ALLOWING OF DEDUCTION FOR INTEREST AND SALARY PAID TO THE PARTNERS. IN THIS MANNER, LD. CIT(A) RE DUCED THE ASSESSED INCOME TO RS.16,01,949/- AS AGAINST INCOME COMPUTED BY THE ASSESSING OFFICER AT RS.43,31,680/- IN THAT YEAR. HENCE, WE ARE OF THE CONSIDERED OPINION THAT REGARDING APPLICABILITY OF NET PROFIT RATE OF 4%, THE ISSUE IS COVERED BY THE TRIBUNALS ORDER IN ASSESSEE OWN CAS E. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT IN TH E PRESENT YEAR ALSO, NET PROFIT OF THE ASSESSEE SHOULD BE ASSESSED AT 4% OF GROSS RECEIPT OF RS.11,68,,79,834/- AS HAS BEEN HELD BY THE LD. CIT( A) BECAUSE WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRES ENT YEAR. REGARDING THIS CONTENTION OF LD. LD. AR OF THE ASSESSEE THAT SUCH INCOME COMPUTED AT THE RATE OF 4% OF GROSS RECEIPT SHOULD BE INCLUSIVE OF INTEREST INCOME RS.8,71,002/- AND TRUCK INCOME OF RS.4,87,620/-, WE FIND NO MERIT IN THIS CONTENTION ALTHOUGH THIS IS TRUE THAT IN ASSESSMENT YEAR 2008-09 ALSO, THERE WAS INTEREST INCOME OF RS.3,29,551/- BUT IN T HE ASSESSMENT ORDER FOR THAT YEAR AVAILABLE ON PAGES 24 TO 25 OF THE PAPER BOOK, THE ASSESSING OFFICER APPLIED NET PROFIT RATE OF 7% TO THE GROSS RECEIPT IN THAT YEAR OF RS.781.39 LAKH AND COMPUTED THE GROSS BUSINESS INCO ME AT RS.54,69,731/- AND AFTER ALLOWING DEDUCTION ON ACCOUNT OF INTERES T TO PARTNERS AND SALARY TO WORKING PARTNERS, NET INCOME WAS COMPUTED OF RS. 43,31,680/- AND INTEREST INCOME WAS NOT SEPARATELY ADDED BY THE ASS ESSING OFFICER IN THAT 6 YEAR AND ON APPEAL IN THAT YEAR, LD. CIT(A) REDUCED THE NET PROFIT RATE TO 4% AS AGAINST 7% APPLIED BY THE ASSESSING OFFICER A ND THE TRIBUNAL CONFIRMED THE ORDER OF LD. CIT(A) IN THAT YEAR. HEN CE IN THAT YEAR, THE NET PROFIT RATE ULTIMATELY APPLIED AT THE RATE OF 4% WA S INCLUSIVE OF INTEREST INCOME OF THAT YEAR BUT IN OUR CONSIDERED OPINION, THAT IS A MISTAKE COMMITTED IN THE ASSESSMENT ORDER OF THAT YEAR AND IT CANNOT BE SAID THAT APPLICATION OF ANY RATE OF NET PROFIT TO THE GROSS RECEIPT OF BUSINESS CAN BE INCLUSIVE OF INTEREST INCOME OR TRUCK PLYING INCOME ETC. IN THE NAME OF RULE OF CONSISTENCY, MISTAKE CANNOT BE ALLOWED TO BE PER PETUATED AND THEREFORE, WE HOLD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN SEPARATELY ADDING THE INCOME ON ACCOUNT OF INTEREST AND TRUCK INCOME OVER AND ABOVE THE NET PROFIT COMPUTED BY HIM AFTER APPLYING NET PROFIT RA TE OF 8% WHICH HAS BEEN REDUCED BY LD. CIT(A) TO 4%. 8. REGARDING THE DEDUCTION ON ACCOUNT OF INTEREST AND REMUNERATION PAID TO PARTNERS, WE FIND THAT IT IS HELD BY LD. CI T(A) THAT SINCE THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U /S 144, IN VIEW OF THE PROVISIONS OF SECTION 184(5) AND SECTION 185, SUCH DEDUCTION ON ACCOUNT OF INTEREST AND REMUNERATION TO THE PARTNERS IS NOT AL LOWABLE. NOW, WE DEAL WITH THE TRIBUNALS ORDER CITED BY LD. AR OF THE AS SESSEE HAVING BEEN RENDERED IN THE CASE OF SURENDRA PRASAD MISHRA VS. ITO (SUPRA). IN THIS CASE, IT WAS HELD BY THE TRIBUNAL THAT FOR THE PURP OSE OF APPLYING SECTION 184(5) OF THE ACT THERE HAS TO BE COMPLETE FAILURE AS ENVISAGED U/S 144 AND MERE NON COOPERATION OF THE ASSESSEE MAKING IT DIFFICULT TO DETERMINE THE CORRECT INCOME MAY JUSTIFY AN ASSESSMENT U/S 14 4 OF THE ACT BUT THAT BY ITSELF IS NOT SUFFICIENT TO ASSESS THE FIRM AS A N AOP U/S 184(5). IN THE PRESENT CASE, WE FIND THAT INITIALLY THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) OF THE ACT BUT THE SAME WAS NOT COMPLIED WIT H AND THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) AGAIN FO R WHICH PART COMPLIANCE WAS MADE BY THE ASSESSEE BY APPEARING BEFORE THE AS SESSING OFFICER ALONG 7 WITH THE COPY OF CASH BOOK AND AUDIT REPORT OF THE ASSESSEE FIRM BUT THE ASSESSEE FIRM DID NOT COMPLY FULLY TO THE QUESTIONN AIRE ANNEXED TO THE NOTICE U/S 142(1) OF THE ACT. THE ASSESSEE HAS NOT PRODUCED THE COPY OF SUCH QUESTIONNAIRE ATTACHED BY THE ASSESSING OFFICE R ALONG WITH NOTICE ISSUED U/S 142(1) AND THE LETTER SUBMITTED BY THE A SSESSEE BEFORE THE ASSESSING OFFICER IN COMPLIANCE THEREOF. HENCE, IN THE PRESENT CASE, IT CANNOT BE SAID THAT THERE IS SOME NON COOPERATION O F THE ASSESSEE MAKING A DIFFICULT TO DETERMINE THE CORRECT INCOME BUT IN THE PRESENT CASE, THERE IS SUBSTANTIAL NON COMPLIANCE IF NOT FULL NON COMPLIAN CE BY THE ASSESSEE AND THEREFORE, IN THE FACTS OF PRESENT CASE, THIS TRIBU NALS ORDER CITED BY LD. AR OF THE ASSESSEE IS NOT APPLICABLE. THERE IS NO OTHE R ARGUMENT OF THE LD. AR OF THE ASSESSEE AS TO WHY AND HOW DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE IN RESPECT OF INTEREST AND REMUNERATION TO THE PARTNERS. HENCE, ON THIS ISSUE, WE FIND NO REASON TO INTERFERE IN THE O RDER OF LD. CIT(A). 9. IN THE RESULT, APPEALS OF THE REVENUE AND ASSESS EE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GARO DIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15/03/2016 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR