M/s Sai Traders, Cuttack V. ACIT, Cuttack

ITA 287/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77503 (ITAT-CUTTACK)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: B V R SWAMY
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3); 133(6)

Judgement Text

1 , CUTTACK IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUT TACK ( ) BEFORE . . , , HONBLE SHRI P.K.BANSAL, ACCOUNTANT MEMBER. /AND . . , HONBLE SHRI D.T.GARASIA, JUDICIAL MEMBER / I.T.A.NO S.287 & 28 8 /CTC/ /201 3 ! ' / ASSESSMENT YEAR S 2007 - 08 & 2008 - 09 M/S. SAI TRADERS, CUTACK PA NO..AANFS 6343 P - - - VERSUS- ACIT, C - 2(1), CUTTACK ( $% /APPELLANT ) ( &'$% / RESPONDENT ) $% ) / FOR THE APPELLANT: / SHRI B.V.R.SWAMY &'$% ) /FOR THE RESPONDENT: / SHRI S.C.MOHANTY * + , / DATE OF HEARING: 22.4.2014 -.' , / DATE OF PRONOUNCEMENT: 22.4.14 / 0 / ORDER PER BENCH BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST SEPARATE ORDERS DATED 18.3.2013 AND 25.3.2013 OF LD CIT(A) FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, RESPECTIVELY. 2. IN BOTH THE APPEALS, ASSESSEE HAS TAKEN COMMON G ROUNDS, SAVE AND EXCEPT THE ESTIMATION OF 7% AND 8% ON CONTRACT RECEIPTS FOR AS SESSMENT YEAR 2007-08 AND 2008- 09. I.T.A. NO.287/CTK/2013: 2 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM DERIVES INCOME FROM EXECUTION OF CONTRACT WORKS. THE RETURN FOR THE IM PUGNED ASSESSMENT YEAR WAS FILED ON 31.10.2007. THE RETURN WAS PROCESSED UNDER SECT ION 143(1) OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAS VERIFIED THE PROFIT AND LOSS ACCOUNT STATEMENT AND NOTICED THAT ASSESSEE HAS SHOWN GROSS RECEIPTS FROM THE CONTRACT WORK AT RS.4,08,91,838/-. ASSESSEE HAS ALSO RECEIVED IN TEREST FROM INCOME TAX AT RS.7754/-. DURING THE COURSE OF VERIFICATION, ASSESSEE WAS ASK ED TO FURNISH THE CASH BOOKS, LEDGER, VOUCHERS IN SUPPORT OF EXPENSES CLAIMED UNDER THE H EAD COST OF MATERIALS, LABOUR CHARGES, COST OF BALLAST, DETAILS OF WORK SITE EXPE NSE, MACHINE HIRE CHARGES, REPAIR & MAINTENANCE, ETC, WHICH FORMS A MAJOR PART OF EXPEN DITURE. IN COMPLIANCE TO ABOVE, ASSESSEE HAS FURNISHED ONLY LEDGER COPIES AND MUSTE R ROLL REGISTER REGARDING WAGE PAYMENT ALONGWITH DETAILS OF COST OF MATERIALS PURC HASED. HOWEVER, THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNT FOR VERIFICATION AND SUPPORTING VOUCHERS IN SUPPORT OF EVIDENCE OF PAYMENT TOWARDS EXPENSES MADE IN THE P/L ACCOUNT. THE LEDGER COPIES SUBMITTED BEFORE THE AO WERE NOT VERIFIABLE. THE ASSESSEE ALSO FURNISHED INCOMPLETE DATA AND UNVERIFIABLE INFORMATION WHICH WERE ALSO RECEIVED L ATE. BESIDES THAT, THE ASSESSEE COULD NOT PRODUCE DETAILS OF PURCHASES REGARDING CO ST OF BALAST TO THE TUNE OF RS. 68,46,253/- . ASSESSEE COULD PRODUCE BILLS/DOCU MENTS AGAINST THE PAYMENTS ARE MADE. THUS, ASSESSEES INCOME WAS DETERMINED BY IN VOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T.ACT, 1961 AND ALSO DETERMINED THE NET PROFIT AT 7% OF GROSS BILL RECEIVED BEFORE INTEREST AND SALARY TO PARTNERS. I N THE FIRST APPEAL, LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HENCE, THE AS SESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. LD A.R. SUBMITTED THAT ASSESSEE HAS PRODUCED LED GER COPIES AND MUSTER ROLL REGISTER REGARDING WAGE PAYMENT ALONGWITH DETAILS O F COST OF MATERIAL PURCHASED. ASSESSEE HAS PRODUCED THE LEDGER COPY OF TRUCKS AND DATE OF PAYMENTS. ASSESSEE HAS PRODUCED THE EVIDENCE WHICH IS AVAILABLE BEFORE THE AO. LD A.R. SUBMITTED THAT LD CIT(A) IS NOT JUSTIFIED IN TAKING THE GROSS PROFIT @ 7% ON GROSS CONTRACT RECEIPT OF 3 RS.4,08,91,838/-. THE ESTIMATION MADE BY THE AO IS AGAINST PRINCIPLE OF NATURAL JUSTICE, WHICH MAY BE MODIFIED. 5. LD D.R. RELIED UPON THE ORDERS OF AUTHORITIES BE LOW. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD OF THE CASE. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND TH AT ASSESSEE DERIVES INCOME FROM EXECUTION OF CONTRACT WORK. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH CASH BOOK, , LEDGER, VOUCHERS IN SUPPORT OF EXPENSES CLAIMED UNDER THE HEAD COST OF MATERIALS, LABOUR CH ARGES, COST OF BALLAST, DETAILS OF WORK SITE EXPENSE, MACHINE HIRE CHARGES, REPAIR & M AINTENANCE, ETC UNDER DIFFERENT HEADS. ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNT FOR VERIFICATION AND SUPPORTING VOUCHERS IN SUPPORT OF PAYMENTS TOWARDS EXPENSES MA DE IN THE PROFIT AND LOSS ACCOUNT. ASSESSEE ALSO FAILED TO PRODUCE THE DETAI LS OF PURCHASES REGARDING COST OF BALLAST OF RS.68,46,253/-. THEREFORE, IN OUR OPINI ON, LD CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. MOREOVER, LD CIT(A) HAS ALSO RELIED UPON THE DECISION OF CUTTACK BENCH IN THE CASE OF PHULCHAND AGARWAL & CO. ANGUL (I.T.A. NO.182/CTK/2005 FOR A.Y. 2001-02), WHEREIN, IT IS H ELD AS UNDER: THE CASH BOOK IS THE PRIMARY BOOK WHICH IS RECORDI NG THE EXPENDITURE MADE BY THE ASSESSEE ON VARIOUS ACCOUNTS, CAPITAL AS WELL AS RE VENUE. SO ALSO IT ACCOUNTS FOR THE RECEIPTS BY THE ASSESSEE ON EVERY ACCOUNT SUCH AS CAPITAL AND REVENUE. FORM THIS CASH BOOK ONLY LEDGER OF THE CONCERN WILL BE R ECORDED DISCLOSING WHAT IS THE AMOUNT EARNED ON DIFFERENT ACCOUNTS AS WELL AS WHAT IS THE AMOUNT SPENT ON DIFFERENT ACCOUNTS. FROM THESE DETAILS ONLY THE EXA CT PROFIT WHAT WAS EARNED BY THE ASSESSEE CAN BE DEDUCTED IN A CORRECT WAY. WHEN THE ASSESSEE MAINTAINS CASH BOOK ONLY IT CAN BE SEEN WHETHER THE ASSESSEE HAS S UFFICIENT RECEIPTS TO MEET THE EXPENDITURE RECORDED ON A PARTICULAR DAY AS WELL AS PAYMENTS MADE ON ACCOUNT OF CERTAIN ACCOUNTS TO THIRD PARTIES. SO ALSO THE AMOU NT THAT WAS RECEIVED BY THE ASSESSEE UNDER VARIOUS HEADS CAN BE REFERRED ONLY W HEN THE ASSESSEE MAINTAINS A CASH BOOK. WITHOUT THE CASH BOOK IT IS NOT POSSIBLE TO ACCEPT THE CORRECTNESS OF THE INCOME EARNED AS WELL AS THE EXPENDITURE MADE BY T HE ASSESSEE THOUGH IT HAS GOT THE LEDGER ACCOUNT AS WELL AS VOUCHERS SUPPORTI NG THE EXPENDITURE. BUT IT IS NOT VERIFIABLE AS TO WHETHER THE EXPENDITURE AS WEL L AS THE RECEIPT MADE BY THE ASSESSEE IS CORRECTLY ACCOUNTED FOR. THEREFORE, UND ER THESE FACTS AND CIRCUMSTANCES OF THE CASE THE REJECTION OF ACCOUNT BOOKS BY THE AO IS CORRECT EVEN THOUGH THE ASESSEE HAS FILED AUDIT REPORT AS REQUIRED U/S.44AB IN FORM NO.3CD AS IN TH E AUDIT 4 REPORT IT IS NOT CATEGORICALLY MENTIONED THAT THE A SSESSEE HAS NOT MAINTAINED CASH BOOK. IN COLUMN NO.9(B) OF FORM NO.3CD IT WAS NOTED BY THE LD. AUDITOR THAT THE ASS ESSEE HAS MAINTAINED WORK REGISTER, GENERAL LEDGER AND BILLS REGISTER ONLY. IT IS STATED TO HAVE BEEN EXAMINED BY THE AUD ITOR ALL THOSE BOOKS AND THE ASSESSEE HAS SUBMITTED THE REQU IRED INFORMATION IN SUPPORT OF THOSE BOOKS ONLY. BUT NO- WHERE IN THE AUDIT REPORT IT WAS STATED BY THE LD. CERTIF YING AUDITOR THAT WITHOUT CASH BOOK THESE BOOKS WERE PROPERLY SA ID TO HAVE BEEN MAINTAINED AND VOUCHERS ARE PROPERLY RECO RDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE HAS NECESS ARY FUNDS TO MEET THE EXPENDITURE STATED TO HAVE BEEN S PENT ON THE RESPECTIVE DATES SO ALSO THE RESPECTIVE RECEIPT S ACCOUNTED FOR ON THE RESPECTIVE DATES UNDER VARIOUS HEADS OF ACCOUNTS. THEREFORE, THE ASSESSEE CANNOT TAKE SU PPORT OF SUCH AUDIT REPORT TO SUPPORT ITS CLAIM OF CORRECTNESS IN RETURNING THE I NCOME. HENCE, IT IS CLEAR FROM THE FACTS AND CIRCUMSTANCES OF THE CASE THAT IN A WAY OF REJECTION OF THE BOOKS OF ACCOUNT MADE BY THE AO IS CORRECT. 7. IN VIEW OF THIS, WE ARE OF THE VIEW THAT AO IS C ORRECT IN REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145(3) AND MADE THE ASSESSME NT UNDER SECTION 143(3) OF THE ACT AND, CONSEQUENTLY AFFIRMED BY THE CIT(A). 8. WE ALSO NOTICED THAT LD CIT(A) HAS REFERRED DIFF ERENT JUDICIAL PRONOUNCEMENTS OF CUTTACK BENCH IN THE CASE OF CIVIL CONTRACTORS I.E. M/S. S.N.KANUNGO AND ASSOCIATES, VS ACIT, ITA NO.90/CTK/2011, M/S. R.K.DAS & PARTNERS I ITA NO.006/CTK/12) AND NITYANANDA SWAIN (ITA NO.491/CTK/2011), WHEREIN, THE AO IS DIR ECTED TO ESTIMATE THE INCOME OF THE ASSESSEE BY ADOPTING 8% OF GROSS RECEIPTS NET DEPRE CIATION. LD CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE KERALA HIGH COURT IN T HE CASE OF T.O.ABRAHAM & CO. VS DCIT, 325 ITR 201, WHEREIN, THE HONBLE HIGH COURT HELD T O ADOPT 10% OF GROSS RECEIPTS NET DEPRECIATION. RESPECTFULLY FOLLOWING THE ABOVE DEC ISIONS, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD CIT(A ). ACCORDINGLY, WE DISMISS THE APPEAL OF THE ASSESSEE. ITA NO.288/CTK/2013: 9. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE FI LED E-RETURN ON 27.9.2008 FOR THE ASSESSMENT YEAR 2008-09 DECLARING INCOME OF RS.1,31 ,176/- WITH A CLAIM OF REFUND FOR 5 RS.2,94,326/-. ASSESSEE DERIVES INCOME FROM EXECUT ION OF CIVIL CONTRACT WORKS MOSTLY FOR THE PORT RAILWAY DIVISION, PARADIP PORT TRUST. AS PER DETAILS PROVIDED IN THE RETURN OF INCOME, THERE WERE SEVEN PARTNERS AND BESIDES SRI S ANATAN ROUT WHO WAS HAVING 40% SHARE IN PROFIT OR LOSS OF THE FIRM AND ALL OTHER S IX PARTNERS WERE HAVING 10% SHARE IN THE PROFIT AND LOSS OF THE FIRM. THE GROSS RECEIPT WAS RS.1,51,08,690/- FOR ACCOUNTING PERIOD 2007-08, THE BOOKS OF THE ASSESSEE HAVE GOT AUDITED UNDER SECTION 44AB OF THE I.T.ACT ON 16.9.2008 BY THE CHARTERED ACCOUNTANT. ASSESSEE HA S NOT PRODUCED BOOKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO CASH BOOK WAS ADMITTED TO HAVE BEEN MAINTAINED. THE INFORMATION WAS CALLED FROM THE PARADIP PORT TR UST AND ALLAHABAD BANK, PARADIP UNDER SECTION 133(6) OF THE ACT. THE ACCOUNTS OFFI CER, PPT CONFIRMED THAT THE WORKS HAD BEEN ALLOTTED TO SRI SANATAN ROUT AND AS PER THE RE CORD OF PARADIP PORT TRUST, M/S. TRADER HAD NOT BEEN AWARDED ANY CONTRACT WORK. BILLS WERE ALSO FOUND TO HAVE BEEN SUBMITTED BY SRI SANATAN ROUT AND HE HAD BEEN ALLOWED PAYMEN TS ALSO AGAINST THE BILLS. THE INFORMATION WAS ALSO CALLED FROM THE ALLAHABAD BANK AND BANK INFORMED THAT SAID TRADERS DID NOT HAVE ANY BANK ACCOUNT. THE AUDITED CONTRAC T, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2008 SUBMITTED BY MR SANATAN ROUT TO TH E BANK IN CONNECTION WITH THE CONTINUANCE OF THE CASH CREDIT LIMIT ALLOWED TO HIM BY THE BANK, IT WAS NOTICED THAT THE SAME RECEIPT AS DECLARED BY THE FIRM M/S. SAI TRADE RS AND SAME ACCOUNT HAS BEEN SIGNED BY SHRI B.SAHOO. THE AO HAVING GOT THIS INFORMATIO N, ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE DIRECTING HIM TO PRODUCE ALL THE BOOKS OF ACCOUNT ALONGWITH SUPPORTING VOUCHERS IN RESPECT OF WORK ALLOTTED TO SRI S.ROUT AND DOCUM ENTS IN SUPPORT OF BALANCE SHEET SUBMITTED TO ALLAHABAD BANK. BEFORE THE AO, ASSESS EE HAS PRODUCED THE BOOKS OF ACCOUNT, WHICH WAS NOT VERIFIABLE. THEREFORE, BOOK S OF ACCOUNT WERE REJECTED UNDER SECTION 145(3) AND THE AO MADE THE ADDITION OF NET PROFIT @ 8% ON GROSS RECEIPTS. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHO CONFIRMED THE ACTION OF THE AO. 10. HAVING HEARD BOTH THE SIDES, WE FIND THAT SIMIL AR ISSUE WAS DISCUSSED IN THE ASSESSMENT YEAR 2007-08 IN THE CASE OF ASSESSEE OF OUR ORDER IN EVEN DATE AND IN PARAGRAPHS 6 TO 8 ABOVE, WE HAVE CONFIRMED THE ACTI ON OF THE CIT(A) IN CONFIRMING THE 6 ESTIMATION OF 7% MADE BY THE AO. THEREFORE, IN CON SISTENT OF OUR DECISION ABOVE, WE UPHOLD THE ORDER OF LD CIT(A) BY REJECTING THE GROU ND TAKEN BY THE ASSESSEE. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 /4/2014 SD/-SD/- (D.T.GARASIA( JUDICIAL MEMBER 0 &, 2',3 - COPY OF THE ORDER FORWARDED TO: 1 . $% / THE APPELLANT : M/S. SAI TRADERS, BADHEI SAHI, BUXI BAZAR, CUTTACK. 2 &'$% / THE RESPONDENT: ITO WARD 2(3), CUTTACK 3 . 0 / THE CIT, CUTTACK 4 . 0 ( )/ THE CIT(A), CUTTACK 5 . 4 &, / DR, CUTTACK BENCH 6 . GUARD FILE . ' , &, /TRUE COPY, 0 * / BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK ( . . 5 , (P.K.BANSAL),ACCOUNTANT MEMBER ( . . ), 7 1. DATE OF DICTATION 22.4.14. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 23.4.14OTHER 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 TH E DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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 DISPATCH OF THE ORDER ..