ITO, Ward-2, Baripada V. M/s. Santosh Kumar Khandelwal, Mayurbhanj

ITA 287/CTK/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5325 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: D K SHETH
• Section: 44AD; 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ITA NO . 287 /CTK/201 7 ( / ASSESSMENT YEAR : 20 1 2 - 20 1 3 ) ITO, WARD - 2, BARIPADA VS. M/S SANTO SH KUMAR KHANDELWAL, WARD NO. 12, PRAFULLA NAGAR, BARIPADA, MAYURBHANJ ./ ./ PAN/GIR NO. : A A OFS 0967 J ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI D.K.PRADHAN, DR / AS SESSEE BY : SHRI D.K.SHETH , AR / DATE OF HEARING : 10 / 0 5 /201 8 / DATE OF PRONOUNCEMENT 16 / 05 /201 8 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT (A), CUTTACK , DATED 23.3.2017 , PASSED IN I.T.APPEAL NO. 0050/15 - 16 , U/S.143(3)/144/250 OF THE ACT FOR THE ASSESSMENT YEAR 201 2 - 201 3 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS NO T JUSTIFIED IN DIRECTING ESTIMATION OF PROFIT @6% AS AGAINST ESTIMATION MADE BY AO @8% IN COMPLETING ASSESSMENT U/S.144 INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING ALLOWANCE OF INTEREST AND REMUNERATION TO PARTNERS AS THE ASSESSMENT HAS BEE COMPLETED U/S.144 INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN CIVIL CONTRACT BUSINESS AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 22.1.2013 FOR THE ASSESSMENT YEAR 201 2 - 201 3 WITH TOTAL INCOME OF ITA NO. 287 /201 7 2 RS. 32,51,150/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) AND 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN COMPLIANCE THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND THE CASE WAS DISCUSSED. THE AO CALLED FOR THE BOOKS OF ACCOUNTS SUPPORTING THE RETURN OF INCOME. THE ASSESSEE HAS FILED THE EXPLANATION S TO THE SHOW CAUSE NOTICE WHICH WAS DEALT BY THE LD. AO AT PAGE 3 OF THE ASSESSMENT ORDER . SINCE THE AO WAS NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE AND HAS APPL IED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND MADE ASSESSMENT U/S.144 OF THE ACT BY ESTIMATING THE N ET PROFIT FROM CONTRACT WORKS AT 8% OF THE GROSS RECEIPTS AND ASSESSED THE TOTAL INCOME AT RS.1,70,68,870/ - AND PASSED ORDER U/S. 143(3)/144 OF THE ACT, DATED 26.03.2015. 4. ON APPEAL BEFORE THE CIT(A), LD. AR ARGUED THE GROUNDS AND MADE SUBMISSIONS. LD. C IT(A) HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF AO AND JUDICIAL DECISIONS REFERRED AT PARA 3 AND 3.1 OF THE ORDER FOUND THAT THE INCOME ESTIMATED BY THE LD. AO IS ON HIGHER SIDE, THEREFORE, DIRECTED THE AO TO ESTIMATE AT 6% OF THE G ROSS RECEIPTS AND GRANTED RELIEF OF RS.49,45,369/ - AND OBSERVED AS UNDER : - 3.1 I HAVE CONSIDERED THE PLEA OF THE ASSESSEE WITH REFERENCE TO THE FACTS ON R ECORD. IT IS FOUND THAT THE ORDER OF THE TRIBUNAL REFERRED ABOVE DIRECTING FOR ESTIMATION OF PROFIT A T 5% IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE FOR THE AY 2012 - 13 FOR THE SIMPLE REASON THAT IN THE AYS 2008 - 09 & 2009 - 10 THE NET PROFIT SHOWN WAS IN THE VICINITY OF 2 TO 3% AND TAKING THAT INTO CONSIDERATION, THE HON'BLE TRIBUNAL DIRECTED FOR ESTIMATI ON OF PROFIT - AT 5%. IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS ITSELF DISCLOSED A PROFIT RATE OF 5.44%. HENCE, THE PRAYER OF THE ASSESSEE TO ESTIMATE THE PROFIT AT 5% FOR THIS ASSESSMENT YEAR IS TOTALLY UNACCEPTABLE. IN CIVIL CONTRACT BUSINESS, ACCEPTABLE RATE OF PROFIT VARIES FROM 5 TO 8%. SECTION 44AD PROVIDES FOR ESTIMATION OF PROFIT IN CASES OF SMALL CONTRACTORS AT 8%. I ALSO FIND THAT IN THE ASSESSMENT FOR THE AY 1013 - 14, THE AO ITA NO. 287 /201 7 3 HAS ESTIMATED THE PROFIT AT 6% OF THE GROSS RECEIPTS. TAKING AL L THE RELEVANT FACTORS INTO ACCOUNT, ESTIMATION OF PROFIT AT 6% OF THE GROSS RECEIPTS MAY BE CONSIDERED AS REASONABLE FOR THIS ASSESSMENT YEAR. ACCORDINGLY THE AO IS DIRECTED TO ESTIMATE THE PROFIT AT 6% OF THE GROSS RECEIPTS. AS A RESULT OF THIS ESTIMATI ON, THE PROFIT TO BE TAXED IN ASSESSMENT WOULD AMOUNT TO RS.1,48,36,107/ - AS AGAINST RS.1,97,81,4 76/ - ADOPTED BY THE AO. THUS, THE ASSESSEE GETS RELIEF OF RS.49,45,369/ - SIMILARLY, THE CIT(A) ALLOWED THE SALARY INTEREST TO PARTNERS OBSERVING AT PARA 4.2 AS UNDER : - 4.2 I HAVE CONSIDERED THE MATTER AND PERUSED THE ORDERS OF THE HONBLE TRIBUNAL FOR THE AY 2008 - 09 AND 2009 - 10 IN ITA NO.70&71/CTK/2013 DT.22.2.2003 IN ASSESSEES OWN CASE. THE FINDING OF THE TRIBUNAL IN THIS CONSOLIDATED ORDER FOR BOTH THE YEARS IS THAT SALARY AND INTEREST PAYMENT CANNOT BE DENIED TO A FIRM ONLY BECAUSE ITS PROFIT HAS BEEN ESTIMATED IN THE MANNER PROVIDED U/S.144. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS REPRODUCED BELOW : - 6. .. WE DO FIND FAVOUR IN THE CONT ENTIONS OF THE LEARNED COUNSEL OF THE ASSESSEE THAT BEST JUDGMENT ASSESSMENT U/S.144 DOES NOT AUTOMATICALLY LEAD TO INVOKING THE PROVISIONS OF SECTION 184(5) WHEN THE SALARY AND INTEREST TO PARTNERS ARE TO BE DISALLOWED ONLY WHEN THERE IS ON THE PART OF A FIRM SUCH FAILURE AS IS MENTIONED IN SECTION 144, THE FIRM WOULD BE SO ASSESSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST OR SALARY BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE BY SUCH FIRM TO ANY PARTNER OF SUCH FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND SUCH INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME - TAX UNDER CLAUSE (V) OF SECTION 28. (EMPHASIS SUPPLIED) IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, I DIRECT THE AO TO ALLOW SALARY AND INTEREST TO PARTNERS AS PER LAW . 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS FILED APPEAL BEFORE THE TRIBUNAL. 6. LD. DR RELIED ON THE ORDER OF AO . ITA NO. 287 /201 7 4 7. CONTRA, LD. AR SUPPORTED THE ORDER OF CIT(A) 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FOUND THE LD. DR HAS ARGUED ON THE PERCENTAGE RESTRICTED BY THE CIT(A) AS NOT ACCEPTABLE AND ALSO THE LD. DR SUBMITTED THAT REMUNERATION PAID TO THE PARTNERS AND INTEREST ON CAPITAL IS NOT IN ACCORDANCE WITH LAW. WE FOUND THAT THE CIT(A) DEALT ON THE JUDICIAL DECISIONS AND SUBMISSION OF THE ASSESSEE AND HAS RESTRICTED THE ESTIMATION OF INCOME @ 6% AND SIMILARLY I N CASE OF PAYMENT OF SALARY AND INTEREST TO PARTNERS, THE LD. AR REFERRED TO THE ORDER OF THE TRIBUNAL RELIED ON BY CIT(A) WHICH THE LD. DR COULD NOT CONTROVERT WITH ANY NEW FACTS IN THE ORDER OF THE CIT(A) . WE THEREFORE, CONSIDERING THE CIRCUMSTANCES AND FA C TS , ARE OF THE OPINION THAT THE CIT(A) DEALT ON THE SUBMISSION S AND JUDICIAL DECISIONS AND HAS PASSED THE A REASONED ORDER , WHICH WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER . A CCORDINGLY WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS OF APPE AL OF THE REVENUE. 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOU NCED IN THE OPEN COURT ON 16 / 05 / 201 8 . SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUD ICIAL MEMBER CUTTACK ; DATED 16 / 05 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY ITA NO. 287 /201 7 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - ITO, WARD - 2, BARIPADA 2. / THE RESPONDENT - M/S SA NTOSH KUMAR KHANDELWAL, WARD NO.12, PRAFULLA NAGAR, BARIPADA, MAYURBHANJ 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE C OPY//