Suresh Chandra Sahu, V. ITO, Jeypore

ITA 296/CTK/2011

• Counselvise Citation: 29622114 RSA 2011
• Duration Of Justice: 3 month(s) 24 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: 2006-2007
• Appeal Filed On: 23-05-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: N ANAND RAO
• Keywords: Depreciation; Additional evidence
• Section: 144; 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. 296/CTK/2011 STAY PETITION NO.21/CTK/2011 (ASSESSMENT YEAR SRI SURESH CHANDRA SAHU, NANDPUR ROAD, SEM ILIGUDA, DIST. KORAPUT , ODISHA PAN AGVPS 3393 P. VERSUS INCOME - TAX OFFICER, WARD II, 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 : THIS APPEAL BY THE ASSESSEE AGITATES THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THE FOLLOWING GROUNDS. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS UNJUST AND NOT IN REFERENC E TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE APPELLANT MAINTAINS REGULAR BOOKS OF ACCOUNT WHICH ARE AUDITED. 3. THAT THE ESTIMATION OF PROFIT IS UNJUST, HIGH AND ARBITRARY. 4. THAT THE ADDITION OF 3,74,766 ON ACCOUNT OF DEPOSIT IN THE BANK IS UNJUST AS THE BOOKS OF ACCOUNT WERE NOT VERIFIED. IT IS ALSO UNJUST WHEN THE BOOKS OF ACCOUNT WERE REJECTED. 5. THAT THE INTEREST ON F. D. R. 20,000 IS THE OPENING BALANCE AND HENCE THE ADDITION IS UNJUST. 6. THAT THE APPELLANT HAS PAID TO H.D.F.C. BANK THROUGH ACCOUNT OF SMT. SRIKANTAMANI SAHU AND THE SAME IS PAID. HENCE, IT IS NOT SHOWN AS DEBTOR OR CREDITOR. HENCE THE ADDITION OF 87,099 IS UNJUST. 7. FOR THESE AND OTHER REASONS TO BE ADDUCED AT THE T IME OF HEARING, THE APPELLANT PRAYS YOUR HONOUR TO REDUCE THE ASSESSMENT TO THE RETURNED FIGURES. 8. THAT THE ESTIMATION OF PROFIT AS WORK IN PROGRESS IS UNJUST SINCE THE WORK IS NOT MEASURED. ITA NO.296/CTK/2011 STAY PETITION NO.21/CTK/2011 2 3. THE BRIEF FACTS RELATING TO THE DISPUTES ARE THAT THE ASSESSEE IS A CONTRACTOR FILED RETURN OF INCOME ALONG WITH AUDIT REPORT DECLARING INCOME OF 4,69,660., THE ASSESSING OFFICER CALLED FOR EXPLANATION RELATING TO THE RETURN WHICH REMAINED UN - COMPLIED RENDERING THE ASSESSMENT TO BE PASSED BY THE ASSESSING OFFICER ON 31.12.2008 UNDER THE PROVISIONS OF SECTION 144 INCOME - TAX ACT,1961. THE ASSESSING O FFICER CONSIDERED THE EXPENSES CLAIMED FOR EARNING THE CONTRACT RECEIPTS WHEN HE DISALLOWED PART EXPENSES. HE ALSO DISALLOWED PART ASSETS AND LIABILITIES . ON CALLING FOR INFORMATIONS UNDER THE PROVISIONS OF SECTION 133(6), HE DISALLOWED ON ADDITION TO THE CAPITAL AMOUNTING TO 3 LAKHS. HE ALSO CO NSIDERED CASH DEPOSITED IN THE BANK IN THE FIRST WEEK OF THE FY AS FROM UNDISCLOSED SOURCES MAKING AN ADDITION OF 3,74,766. HE ALSO CONSIDERED THE LOAN ACCOUNT OF HDFC BANK BY ADDING A SUM OF 87,099 AS HAVING BEEN REPAID AGAINST L OAN FROM UNDISCLOSED SOURCES. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CASE OF THE ASSESSEE APPELLANT IN DETAIL AND CONSIDERED THE ALTERNATE PLEA OF THE ASSESSEE THAT THE ADDITION S SO MADE BY THE ASSESSING OFF ICER WOULD RESULT IN INCOME FROM CONTRACT RECEIPTS AT MORE THAN 2 0% WHICH IN ANY CASE SHOULD NOT EXCEED 8% TO 9% EVEN UNDER THE PROVISIONS OF SECTION 144 R.W.S. 145. THE LEARNED CIT(A) ESTIMATED THE INCOME AT 9% AND DIRECTED THE ASSESSING OFFICER TO CONSI DER THE INCOME FROM FIXED DEPOSITS SEPARATELY WHEN HE HELD THAT THE WORK - IN - PROGRESS COULD NOT BE TAXED FOR THE PURPOSE OF CONTRACT RECEIPTS RECOGNIZING THE REVENUE AS PER THE AS - 7. HOWEVER, HE CONFIRMED THE ADDITION WITH RESPECT TO CASH DEPOSITS IN BANK A ND ALSO THE LOAN REPAID TO HDFC BANK AS FROM UNDISCLOSED SOURCES. 4. THE ASSESSEES COUNSEL SUBMITTED THAT THE ASSESSING AUTHORITIES HAVE RENDERED THE ASSESSMENT U/S.144 IS UNJUSTIFIABLE TO THE EXTENT THAT THE ADDITIONS AND DISALLOWANCES HAVE BEEN MADE BY HIM WHEN NO BOOKS OF ITA NO.296/CTK/2011 STAY PETITION NO.21/CTK/2011 3 ACCOUNT PURPORTEDLY SEEM S TO HAVE BEEN PRODUCED BUT WERE AVAILABLE AS PER THE CERTIFICATION OF THE CHARTERED ACCOUNTANT UNDER THE PROVISIONS OF SECTION 44AB. THE LEARNED CIT(A) INSTEAD OF CONSIDERING THE CASE OF THE ASSESSEE APPELLANT IN ITS ENTIRETY SOUGHT TO ACCEPT THE CONTENTION THAT THE DISALLOWANCE AND ADDITIONS WOULD HAVE RENDERED THE INCOME AT MORE THAN 12% WAS IN ITSELF IS NOT A BEST JUDGMENT ASSESSMENT INSOFAR AS THE LAW PROVIDES FOR TAXATION OF CONTRACT RECEIPTS UNDER THE PROV ISIONS OF SECTION 44AD AT 8% WHEN DEPRECIATION AND REMUNERATION TO PARTNERS HAVE BEEN CONSIDERED AS ALREADY ALLOWABLE THEREIN. HE POINTED OUT THAT ONCE THE ESTIMATION HAS BEEN RESORTED TO, FURTHER ADDITION CANNOT BE SUSTAINED ON ACCOUNT OF CASH CREDIT AND UNACCOUNTED PURCHASES AS WAS CONSIDERED BY HON BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. DINESH MILLS LTD. [2008] 302 ITR 164 (GUJ) INS O FAR AS THE LEARNED CIT(A) HAS RIGHTLY CONSIDERED THAT THE 8% ESTIMATION OF INCOME WAS NOT TO B E FURTHER AVAILABLE FOR DEDUCTION ON ACCOUNT OF DEPRECIATION. HE POINTED OUT THAT HAVING DONE SO, THE LEARNED CIT(A) ERRED IN UPHOLDING IT AT 9% MAY KINDLY BE CONSIDERED INSOFAR AS HE HAS ALSO CONFIRMED THE ADDITION WITH RESPECT TO THE CASH DEPOSITS IN THE BANK IN THE FIRST WEEK OF THE FY WHICH WERE AVAILABLE TO THE ASSESSEE FROM SUB - CONTRACT OR S FOR THE PURPOSE OF EXECUTING THE CONTRACTS FOR HIM. FOR THIS PURPOSE HE SUBMITTED A COPY OF THE BANK ACCOUNT AND THE CASH BOOK WHEN THE AMOUNTS AVAILABLE WERE SOUGH T TO BE USED BY THE BANK FOR ISSUING OF CHEQUES WHICH REMAINS UNDISPUTED . T HE LEARNED CIT (A) THEREFORE ERRED I N ACCEPTING THE CONTENTION OF THE ASSESSING OFFICER THAT ONCE INCOME FROM THE CONTRACT RECEIPTS ARE ESTIMATED THESE DEPOSITS WHICH ARE LESS THAN T HE INCOME RENDERED CAN BE SEPARATELY TAXED. WITH RESPECT TO THE ISSUE REGARDING LOAN REPAYMENT TO THE HDFC BANK IT WAS EXPL AINED THAT THE TWO PARTIES WHO HAD SEPARATELY PAID THE LOAN HDFC WERE REIMBURSED BY THE ITA NO.296/CTK/2011 STAY PETITION NO.21/CTK/2011 4 ASSESSEE AND THEREFORE, THE BALANCE W AS RIGHT LY SHOWN AS NOTIFIED BY THE BANK UNDER THE PROVISIONS OF SECTION 133(6). THE ASSESSING OFFICER AND THE LEARNED CIT(A) THEREFORE FAILED TO OBSERVE THAT THE AMOUNT WAS PAID BACK AS WAS NOT SHOWN AS OWED TO THE BANK WHEN THE ASSESSEE WAS ABLE TO REIMBURSE TH E ACTUAL PAYEES CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. HE ALSO FURNISHED THE BALANCE SHEET OF TWO YEARS I.E, ASSESSMENT YEAR 2005 - 06 AND 2006 - 07 WHICH INDICATE D THAT THE AMOUNT OF INTEREST ON FD HAS BEEN RENDERED TO TAX AS THE INTEREST HAD ACCRUED W AS PAID ALONG WITH THE FD. 5. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT A DDITIONAL EVIDENCE HAS BEEN SUBMITTED BY THE ASSESSEE APPELLANT DURING HEARING ON 9.8.2011 IN VIOLATION OF THE PROVISIONS OF R U LE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES. IT INCLUDES ( I ) AN EXTRACT OF THE CASH BOOK FOR THE PREVIOUS YEAR INVOLVED IN APPEAL; (II) H.D.F.C. LOAN A/C AND (III) INTEREST ON FDR A/C. IN SUPPORT OF THE CONTENTION T HAT THE SAME WERE NOT PRODUCED BEF ORE THE ASSESSING AUTHORITIES, THE LEARNED DR DREW OUR ATTENTION TO VARIOUS OBSERVATIONS OF THE LEARNED CIT(A) IN HIS ORDER IN PARAGRAPH 1, PARAGRAPH 2.2 AT PAGE 5, PARAGRAPH 2.4 OF THE SAME PAGE, PARAGRAPH 15 AT PAGE 5 OF THE ASSESSMENT ORDER ON THE ADDIT ION REPRESENTING CASH DEPOSIT IN THE BANK ACCOUNT. HE FURTHER CONTENDED THAT THE TRIBUNAL HAS NOT REQUIRED THESE DOCUMENTS TO BE PRODUCED. THE INCOME TAX AUTHORITIES HAVE NOT DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE BY NOTICES DULY SERVED ON HIM. THEREFORE, THESE EVIDENCES NOW PRODUCED SHOULD NOT BE TAKEN INTO CONSIDERATION. FOR THE REMAINING GROUNDS, HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO UPHOLD THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE ITA NO.296/CTK/2011 STAY PETITION NO.21/CTK/2011 5 SIMPLE REASON THAT THE ASSESSING OFFICER HAS MADE SPECIFIC DISALLOWANCE AND ADDITIONS WITHOUT THE PRODUCTION OF BOOKS OF ACCOUNT BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 144. HE HAS ALSO RELIED ON THE FINANCIAL STATEMENTS SUBMITTED BY THE ASSESSEE ALONG WITH THE RETURN WHICH WERE DULY AUDITED AND THE REPORT SUBMITTED UNDER THE PROVISIONS OF SECTION 44AB. THE LEARN ED CIT(A) AGREED TO THE PROPOSITION OF THE ASSESSEE APPELLANT BEFORE HIM THAT THE ADDITIONS AND DISALLOWANCE WOULD RENDER THE INCOME OF THE ASSESSEE BEING A CONTRACTOR AT MORE THAN 18% CONSIDERED THE CASE OF THE ASSESSEE APPELLANT BY AGREEING TO THE PROPOS ITION FOR 9% PROFIT BUT FURTHER CONFIRMED THE ADDITION ON ACCOUNT OF CASH DEPOSITED AND THE REPAYMENT OF LOANS TO HDFC BANK AND ALSO THE INTEREST ACCRUED RENDERED TO TAX BY THE ASSESSEE WHEN THE AMOUNT SHOWN IN THE BALANCE SHEET TALLIED THE INCOME WHICH RE LATED TO TWO AYS. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, IT WAS NOT THE CASE OF THE ASSESSEE TO PRODUCE ADDITIONAL EVIDENCE BEFORE THE LEARNED CIT(A) BUT THE FACT THAT THE LEARNED CIT(A) WAS GUIDED BY THE PROVISIONS OF SECTION 44AD WHICH HAS TO BE CONSIDERED ON NON - PRODUCTION OF BOOKS OF ACCOUNT . H E CATEGORICALLY MENTION ED THAT NO DEPRECIATION WAS TO BE ALLOWED AND INCOME FROM FD WAS TO BE TAXED AS INCOME FROM OTHER SOURCES AND NOT TO BE CONSIDERED FOR TAXATION @9%. IN THIS VIEW OF THE MATTER, TH EREFORE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTING THAT THE ESTIMATION CAN AT BEST BE MADE HAS TO BE ACCEPTED IN VIEW OF THE FACT THAT NO CONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD ON THE FINDINGS OF THE LEARNED CIT(A) WHEN THE ASSESSING OFFIC ER HAS MADE SPECIFIC DISALLOWANCE AND ADDITIONS AFTER PERUSING THE FINANCIAL STATEMENTS WHICH WERE CERTIFIED TO BE AS INSCRIBED IN THE BOOKS OF ACCOU NT. THE ESTIMATION, THEREFORE, I S CONFIRMED AT 8% OF THE GROSS RECEIPTS OF 77,99,917. THE RELIANCE PLACED BY LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ITA NO.296/CTK/2011 STAY PETITION NO.21/CTK/2011 6 COMMISSIONER OF INCOME - TAX V. DINESH MILLS LTD (SUPRA) , THEREFORE, SQUARELY APPLIES TO THE ASSESSEES CASE INSOFAR AS THE AMOUN TS SOUGHT TO BE BROUGHT TO TAX AS CASH DEPOSIT AND ALSO REPAYMENT OF HDFC LOAN WERE ON THE BASIS OF INCOME GENERATED WHICH FACTS CAN BE VERIFIED AS PER THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO AMOUNTS WERE SHOWN AS PAYABLE OR OUTSTAND ING ON THE CLOSE OF THE YEAR WHEN THE TWO YEARS COMBINED INCOME ADJUSTS TO THE SQUARED UP LOAN CREDITORS NAMELY THE CASH DEPOSITS RECEIVED FROM THE SUB - CONTRACTOR WAS UTILISED FOR THE PURPOSE OF BUSINESS AND ALSO THE LOAN REPAYMENT TO HDFC BANK WAS THROUGH THE ACCOUNT OF SMT. SRIKANTAMANI SAHOO STOOD ADJUSTED. THE LEARNED CIT(A) THEREFORE ERRED IN MISINTERPRETING THE FACTS BY CITING CAS E LAWS WHICH WERE NOT IN THE LIEN OF THE F ACTUAL MATRIX BROUGHT ON RECORD WAS ONLY AN OPINION FOR CONSIDERATION TO THE VIOL ATION OF THE PROVISIONS OF SECTION 40(A)(IA). THE ADDITION OF 3,74,766 BEING THE CASH DEPOSIT IN BANK UTILISED BY THE ASSESSEE FOR ITS BUSINESS THEREFORE, CANNOT BE TAXED EITHER U/S.68 OR U/S.69. SIMILARLY, THE LOAN FROM, HDFC BANK HAD BEEN PAID FOR BY THE OTHER LOAN CREDITORS WHICH WERE SQUARED OFF THEREFORE, CANN OT BE TAXED IN THE IMPUGNED ASSESSMENT YEAR UNDER THE PROVISIONS OF SECTION 144. WE HAVE ALSO PERUSED THE BALANCE SHEETS OF THE TWO AYS WHEN THE AMOUNT OF 20,000 INCOME ON ACCOUNT OF INTEREST FROM BANK HAVE BEEN DULY REFLECTED IN THE ASSET SIDE OF BALANCE SHEET WAS THEREFORE NOT TO BE CONSIDERED AS TO BE TAXED IN THE IMPUGNED ASSESSMENT YEAR WHEN THE ASSESSEE DECLARED 22,000 INCOME IN ASSESSMENT YEAR 2005 - 06 HAD INTEREST ACCRUED BUT WAS NOT DUE TILL THE MATURITY OF THE FD IN THE ASSESSMENT YEAR 2006 - 07. T HE ADDITION OF 20,000 AND 87,099 IS THEREFORE, DIRECTED TO BE DELETED. 7. SINCE, THE APPEAL FILED BY THE ASSESSEE IS DISPOSED OF AS ABOVE, THE STAY PETITION FILED BY HIM BECOMES INFRUCTUOUS AND THEREFORE, THE SAME IS ITA NO.296/CTK/2011 STAY PETITION NO.21/CTK/2011 7 REJECTED AS SUCH. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND STAY PETITION IS REJECTED. 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 SURESH CHANDRA SAHU, NANDPUR ROAD, SEMILIGUDA, DIST. KORAPUT, ODISHA. 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD II, JEYPORE. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUP LICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.