Laxminarayan Mallick, Cuttack V. CIT, Cuttack

ITA 283/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65096 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2012
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: A P MOHANTY
• Keywords: Rejection of books of accounts
• Section: 44AD

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. 283/CTK/2012 / ASSESSMENT YEAR 2007 - 08 SHRI LAXMIN A RAYAN M A LLICK, C/O. RABI PHARMACEUTICALS, AT: MOHANTYPARA, TULSIPUR, CUTTACK 8 PAN: AFCPM 7300 Q - - - VERSUS - INCOME - TA X OFFICER, WARD 2(4), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.P.MOHANTY, AR / FOR THE RESPONDENT: / SHRI A.BHATTACHARJEE, DR / DATE OF HEARING: 22 .08.2012 / DATE OF PRONOUNCEMENT: 31.08.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST ORDER DT.22.2.2012 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE RELATES TO ESTIMATION OF NET PROFIT @8% OF THE GROSS RECEIPTS THE ASSESSEE BEING A WORKS CONTRACTOR. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE IS WORKS CONTRACTOR . IT FILED RETURN OF INCOME ON 31.10.2007 SHOWING TOTAL INCOME OF 8,40,140. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S.143(3), THE ASSESSEE PRODUCED THE AUDITED ACCOUNTS DULY AUDITED U/S.44AB. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DOES NOT MAINTAIN PROPER CASH - BOOK AND LEDGER. NO BILLS AND VOUCHERS COU LD BE PRODUCED BARRING A FEW FOR VERIFICATION. ONLY STATEMENT OF MATERIALS PURCHASED, DETAILS OF BILLS RECEIVABLE, DETAILS OF MACHINE HIRE CHARGES PAYABLE AND DETAILS OF CERTAIN EXPENDITURES ARE I.T.A.NO. 283/CTK/2012 2 FURNISHED BUT NO OTHER REQUIRED DETAILS AS ASKED FOR VIDE NO TICE U/S.142(1) COULD BE PRODUCED BY THE ASSESSEE. THEREFORE, IN ABSENCE OF PROPER BOOKS OF ACCOUNT, THE ASSESSING OFFICER ESTIMATED NET PROFIT 8% OF THE GROSS RECEIPTS. 4. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO BY PLACI NG RELIANCE ON THE DECISION OF THE ITAT, CUTTACK BENCH IN THE CASE OF M/S.S.N.KANUNGO & ASSOCIATES V. ASST.COMMISSIONER OF INCOME - TAX IN ITA NO.090/CTK/2011 FOR THE ASSESSMENT YEAR 2006 - 07, CONFIRMED THE ASSESSMENT MADE BY THE ASSESSING OFFICER. 5. THE LE ARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN CASE OF ESTIMATION, LAW IS WELL SETTLED THAT IT SHOULD NOT BE ARBITRARY AND ESTIMATION MUST NOT BE ARBITRARY, VAGUE OR FANCIFUL BUT MUST BE LEGAL AND REGULAR. HE FURTHER CONTENDED THAT ADDITIONS MADE STRAIGH T AWAY ON GROUNDS OF LOW PROFIT/LESS PROFIT RATE CANNOT BE SUSTAINED. FOR THIS PROPOSITION, HE PLACED RELIANCE ON THE DECISIONS IN THE CASE OF MYSORE FERTILISER CO. V. CIT [59 ITR 268 (MAD)] AND ALUMINIUM INDUSTRIES P LTD V. CIT [80 TAXMANN 184 (GAUHATI)]. HE FURTHER CONTENDED THAT THE RATE OF NET PROFIT ADOPTED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) IS EXCESSIVE. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CO NTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE FINANCIAL STATEMENTS DULY AUDITED FILED BY THE ASSESSEE INCLUDES EXPENSES CLAIMED FOR RENDERING THE CONTRACT OF 2.12 CRORES. 50% THE REOF HAS BEEN SPENT ON MATERIAL ON WHICH THE ASSESSEE COULD NOT BE SAID TO HAVE MADE PROFIT @8%. SIMILARLY EXPENSES WHICH HAVE BEEN DIRECTLY INCURRED FOR THE PURPOSE OF EXECUTING THE CONTRACT CANNOT BE SAID TO BE INFLATED IN VIEW OF THE RECIPIENTS BEING PA RTICULAR ABOUT THE RECEIVING THE SAME AND NOT INFLATED. I.T.A.NO. 283/CTK/2012 3 THE REJECTION OF BOOKS OF ACCOUNTS, THEREFORE, HAD TO BE SPECIFIC TO THE EXTENT THAT 92% EXPENSES CANNOT BE CLAIMED WHEN THE ASSESSEE HAS RETURNED 4.11% AS NET PROFIT ON THE GROSS TOTAL RECEIPTS. THE CASE LAWS CITED BY THE LEARNED CIT(A) AND THOSE CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE BECOME FUTILE TO THE EXTENT THAT THE ESTIMATION COULD NEVER BE FOLLOWED TO THE HILT AS A GUIDANCE PROVIDED IN SECTION 44AD. RATHER SECTION 44AD LEANS IN FAVOUR O F THE ASSESSEE WHO IS MAINTAINING BOOKS OF ACCOUNT TO DECLARE PROFIT LESS THAN 8%. THE REJECTION OF BOOKS OF ACCOUNT WITHOUT FINDING SPECIFIC DEFECTS BECOMES AN UNILATERAL ACT ON THE PART OF THE ASSESSING OFFICER TO ENHANCE INCOME UP TO 8%. AT THE SAME TIM E, IN VIEW OF THE FACT FINDING OF THE ASSESSING OFFICER AS TO NON - MAINTENANCE OF PROPER BOOKS OF ACCOUNT, WHICH HAS NOT BEEN CONTROVERTED BY THE ASSESSEE EITHER BEFORE THE LEARNED CIT(A) OR BEFORE THIS FORUM, THE BOOK RESULT CANNOT BE ACCEPTED AND THEREFOR E, THE ESTIMATION OF PROFIT IN THE INSTANT CASE IS JUSTIFIED. IN VIEW OF THE ABOVE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ESTIMATION OF NET PROFIT AT 8% AS ADOPTED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) IN OUR CONSI DERED VIEW IS EXCESSIVE, WHICH WE REASONABLY HOLD AT 6% OF THE GROSS RECEIPT. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE INCOME AT 6% (SIX PERCENT) OF THE GROSS RECEIPT INSTEAD OF 8% AS CONFIRMED BY THE LEARNED CIT(A). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 31.08.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 283/CTK/2012 4 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SHRI LAXMINRAYAN MLLICK, C/O. RABI PHARMACEUTICALS, AT: MOHANTYPARA, TULSIPUR, CUTTACK 8. 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(4), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE 1. DATE OF DICTATION 28.08.2012 . 2. DATE ON WHICH THE T YPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29.08.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEME NT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 31.08.2012 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.08.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..