Ram Karan Agarwal, Koraput V. ITO, Jeypore

ITA 272/CTK/2011

• Counselvise Citation: 27222114 RSA 2011
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 25-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: N ANAND RAO
• Section: 44AD

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 272/CTK/2011 STAY PETITION NO.019/CTK/2011 (ASSESSMENT YEAR 2007 - 08) SRI RAM KARAN AGARWAL, AT/P.O.MAIN ROAD, SEMILIGUDA, DI ST.KORAPUT PAN: AATPA 3720 A VERSUS INCOME - TAX OFFICER , WARD 2, JEYPORE. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI N.ANAND RAO, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 25.08.2011 DATE OF PRONOUNCEMENT : 16.09.2011 ORDER SHRI K.K.GUPTA, AM : THE ASSESSEE HAS FILED THIS APPEAL AGAINST ORDER DT.25.3.2011 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE ASSESSEE DERIVES INCOME FROM EXECUTION OF CONTRACT WORKS. HE FILED THE RETURN D ECLARING INCOME OF 4,91,700 WHICH WAS PROCESSED U/S.143(1). SUBSEQUENTLY, IN THE SCRUTINY ASSESSMENT U/S.143(3), THE ASSESSING OFFICER OBSERVED THAT OUT OF THE GROSS CONTRACT RECEIPTS OF 75,71,307 , THE ASSESSEE HAS SHOWN THE NET PROFIT OF 4,97,200 INCLUDING INTEREST ON FDR AT 1,18,370 AFTER DEBITING VARIOUS EXPENSES, WHICH INCLUDES HUGE CLAIM OF EXPENSES LIKE FUEL EXPENSES AT 14,34,464 , SPARES PURCHASE EXPENSES AT 17,55,600 AND LABOUR & WAGES EXPENSES AT 22,32,738 ETC. ON THE PREMISE THAT THE ASSESSEE COULD NOT PRODUCE THE RELEVANT BILLS AND VOUCHERS ETC ., AND THE REMAINING SUBSIDIARY BOOKS OF ACCOUNT LIKE SALARY REGISTER, DAILY WAGES REGISTER, WORKERS REGISTER, FUEL STOCK REGISTER, TELEPHONE & VEHICLE LOG BOOKS ETC IN SUPPORT OF PRIME BOOKS OF ACCOUNT VIZ., CASH BOOK & GENERAL LEDGER DURING THE COURSE OF ENTIRE HEARING, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT NOT ITA NO.272/CTK/2011 STAY PETITION NO.019/CTK/2011 2 AMENABLE FOR VERIFICATION. THEREFORE, HE DID NOT ACCEPT THE BOOK RESULTS AND PROCEEDED TO ESTIM ATE THE NET PROFIT AT 6,05,704 @8% ON GROSS CONTRACT RECEIPTS OF 75,71,307. FURTHER, AFTER OBTAINING INFORMATION U/S.133(6) FROM BANKS AND CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS REFLECTED ON TH E ASSETS SIDE OF BALANCE SHEET UNDER THE HEAD INTEREST ON FDRS AT 1,80,405 AS AGAINST FIGURES OF 14,57,327 (I.E., 13,04,223 AND 1,53,104 COLLECTED FROM THE INDIAN BANK, KORAPUT AND STATE BANK OF INDIA, KORAPUT RESPECTIVELY). HE, THEREFORE, TREATE D THE AMOUNT OF 12,76,922 AS EXCESS OF ASSETS OVER LIABILITIES IN THE BALANCE SHEET AND ADDED THE SAME TO THE TOTAL INCOME. IN APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ESTIMATING THE NET PROFIT @8% OF THE GROSS RECEIPT. HE , HOWEVER, DIRECTED TO EXCLUDE THE VAT COMPONENT OF 1,00,765 IN THE TOTAL TURNOVER. BUT, HE CONFIRMED THE ADDITION OF 1,50,000 OF THE FIXED DEPOSIT WITH ACCRUED INTEREST AMOUNTING TO 3,104 INCLUDED IN 12,76,922 ON ACCOUNT OF FDRS DELETING THE REST . 3 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD . 4. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ESTIMATION OF PROFIT @8% IS UNJUST ON SUPPLY OF MATERIALS AND EXECUTION OF WORKS. ON THE ISSUE IN RESPECT OF F IXED DEPOSITS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME WERE MADE FROM THE SAVINGS OUT OF DRAWINGS FOR EARLIER YEARS AND HENCE, WAS NOT INCLUDED IN THE BALANCE SHEET WAS PURELY ON THE PREMISE THAT THE AMOUNT WAS HELD WITH THE BANK IN TH E FORM OF FIXED DEPOSITS FOR THE PURPOSE OF SECURING TENDERS AT MATURITY AND REINVESTED WHEN THE AMOUNT OF INTEREST THEREIN HAD BEEN RENDERED TO TAX. THE DRAWINGS THEREFORE, CANNOT BE RELATED TO THE RENDERING OF INCOME AS INTEREST ACCRUED BUT NOT DUE TO TH E ASSESSEE HAS BEEN WRONGLY CONSIDERED BY THE TAXING ITA NO.272/CTK/2011 STAY PETITION NO.019/CTK/2011 3 AUTHORITIES AS UNDISCLOSED. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS AS THE INFORMATION WAS CALLED FOR FROM THE BANK AND THE EXACT AMOUNT BEING T HE EXCESS OF ASSETS OVER LIABILITIES WITH RESPECT TO THE FIXED DEPOSITS WAS COMPUTED AND CONSIDERED BY THE ASSESSING OFFICER, WHICH THE LEARNED CIT(A) VERIFIED ON THE BASIS OF ASSESSEE APPELLANT S ENABILITY TO EXPLAIN ITS CONTENTION OF HAVING MADE THE DEPO SITS FROM HIS PERSONAL DRAWINGS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO UPHOLD THE CONFIRMATION OF 8% NET PROFIT ON THE BASIS OF FACTS BROUGHT ON RE CORD BY THE ASSESSING OFFICER AND CONSIDERED BY THE LEARNED CIT(A). THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE LABOUR AND WAGES COULD NOT BE CONSIDERED FOR THE PURPOSE OF DEEMING PROVISION OF SECTION 44AD VIS - - VIS HIS INSISTENCE FOR CONSIDERING SECTION 44AF FOR THE PURPOSE OF TRADING IN CRUSHING THE STONES BEING THE MATERIAL RENDERED FOR EXECUTING THE CONTRACT IS WITHOUT ANY MATERIAL. THE TOTAL CONTRACT WAS 75,71,307 HAS BEEN ESTIMATED AT 8% INCOME THEREFORE CANNOT BE TINKERED WITH FOR THE PURPOSE OF INTERNAL ADJUSTMENT OF AGREEING TO A PROPOSITION THAT THE SUPPLY OF MATERIAL SHOULD BE TAXED AT 5% ONLY. THIS ISSUE AGITATED BY THE ASSESSEE, THEREFORE, HAS BE EN RIGHTLY REJECTED BY THE LEARNED CIT(A). WE UPHOLD THE SAME. 6. ON THE SECOND ISSUE REGARDING INVESTMENT OF FIXED DEPOSITS FROM PERSONAL DRAWINGS , WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HITHERTO RENDERING THE CONTRACT WORK ALONE WAS SUBJECTED TO ASSESSMENT AS A PARTNER OF THE ERSTWHILE FIRM HAD MADE DEPOSITS WITH THE BANK FOR THE PURPOSE OF OBTAINING CONTRACTS WHICH RENDERED INCOME ON ACCOUNT OF INTEREST ACCRUED BUT NOT DUE TO THE ASSESSEE WHEN THE FDS REMAINS LYING WITH THE BANK WHICH WAS CONS IDERED BY THE ASSESSING OFFICER IN THE FORM OF EXCESS OF ASSETS OVER ITA NO.272/CTK/2011 STAY PETITION NO.019/CTK/2011 4 LIABILITIES. THE LEARNED CIT(A) ON HAVING VERIFIED THE CLAIM, DELETED THE ADDITION BUT SUSTAINED A SUM OF 1,50,000 OF THE FIXED DEPOSIT WITH ACCRUED INTEREST AMOUNTING TO 3,104, THEREFO RE, HAS NOT BEEN PROPERLY EXPLAINED BY THE ASSESSEE AS INCOME HAVING BEEN RENDERED AS AND WHEN THE FDS MATURED BUT STOOD REINVESTED IN T HE BANK FOR THE PURPOSE OF FURNISHING SECURITIES FOR OBTAINING CONTRACTS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN BY IDENTIFYING THE AMOUNT AS BROUGHT FORWARD FROM PERSONAL HOLDINGS THEREFORE HAS BEEN TAXED IN THE IMPUGNED ASSESSMENT YEAR ALONG WITH INTEREST. FINDING NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) ON THIS SCORE, WE HAVE NO HESITA TION IN DISMISSING THE CONTENTION OF THE ASSESSEE AS WELL BEFORE US. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. SINCE THE APPEAL OF THE ASSESSEE IS DISPOSED OF, THE STAY PETITION FILED BY THE ASSESSEE IS DISMISSED BEING INFRUCTUOUS. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 16 TH SEPTEMBER, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SRI RAM KARAN AGARWAL, AT/P.O.MAIN ROAD, SEMILIGUDA, DIST.KORAPUT 2. THE RESPONDENT: INCOME - TAX OFFICER , WARD 2, JEYPORE. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVA TE SECRETARY.