D.C.I.T Cir - 6,kolkata., Kolkata V. M/s Sikaria Infraprojects (P) Ltd., Kolkata

ITA 296/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4843 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT SUBHRA BISWAS
• Assessee Lawyers: PRAMOD KR HIMMAT SINGHKA
• Keywords: Bogus purchase; Depreciation; Assessment record
• Section: 143(3); 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 296 / KOL / 2013 ASSESSMENT YEAR :2009-10 DCIT, CIRCLE-6, ROOM NO. 17, 6 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQURE, KOLKATA-700 069 V/S . M/S SIKARIA INFRAPROJECTS (P) LTD., 10/1A, KALAKAR STREET, 3 RD FLOOR, KOLKATA-700 007 [ AABCE 4752D ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI RAJAT SUBHRA BISWAS, CIT-DR /BY RESPONDENT SHRI PRAMOD KR. HIMMAT SINGHKA, ADVOCATE /DATE OF HEARING 26-04-2016 /DATE OF PRONOUNCEMENT 18-05-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DATED 09.11.2012. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-6 KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30.1 2.2011 FOR ASSESSMENT YEAR 2009-10. REVENUE RAISED THE FOLLOWING EFFECTIVE GRO UNDS WHICH REPRODUCED BELOW:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(A) ERRED IN DIRECTING THAT PROFIT BE ESTIMATED @ 8% (E IGHT PERCENT) OF GROSS RECEIPTS PARTICULARLY IN VIEW OF THE FACTS THAT: I) THE BOOKS OF A/C WERE NOT REJECTED BY THE AO. ITA NO.296/KOL/2013 A.Y.2009-10 DCIT, CIR-6, KOL. V. M/S SIKARIA INFRAPROJECTS (P) LTD. PA GE 2 II) THAT EXTERNAL VERIFICATION PROVES THAT PURCHASE WERE INFLATED & HENCE THERE IS NO SCOPE OF ESTIMATION. III) THE TURNOVER OF THE ASSESSEE IS MUCH MORE THAN 40 LAKHS AS MANDATED IN 44AD. SHRI PRAMOD KUMAR HIMMAT SINGHKA, LD. AUTHORIZED RE PRESENTATIVE APPEARING ON BEHALF OF ASSESSEE AND SHRI RAJAT SUBH RA BISWAS, LD. DEPARTMENT REPRESENTATIVE APPEARING ON BEHALF OF RE VENUE. 2. COMMON ISSUE RAISED BY ASSESSEE IS THAT LD. CIT (A) ERRED IN TREATING THE PROFIT @ 8% OF GROSS RECEIPTS. 2.1 FACTS IN BRIEF ARE THAT ASSESSEE IS A PRIVATE L IMITED COMPANY AND ENGAGED IN BUSINESS OF CIVIL CONTRACT. DURING THE Y EAR UNDER CONSIDERATION ASSESSEE HAS EXECUTED TWO PROJECTS AS SUB-CONTRACTO R ON BEHALF OF M/S HINDUSTAN STEEL WORKS LTD. AND M/S ENGINEERING PROJ ECTS OF INDIA LTD FOR THE ROAD CONSTRUCTION UNDER PRIME MINISTER GRAMIN SADAK YOJANA AND CONSTRUCTION OF CENTRAL JAIL AT VISHAL GARH, TRIPUR A. DURING THE YEAR ASSESSEE HAS MADE PURCHASES OF RS,13,85,34,422/- FROM VARIOU S PARTIES WHICH WERE CLAIMED AS DEDUCTION IN IS PROFIT AND LOSS ACCOUNT AND THE DETAILS OF THE PARTIES FROM WHOM THE MATERIALS PURCHASED ARE GIVEN BELOW:- S.NO. NAME OF PARTY S.NO. NAME OF PARTY 1 TRIPURA ISPAT LTD 17 CHANDA CARRYING CENTRE 2 MEGHALAYA STEEL LTD 18 S.B.TRADERS 3 GREYSTONE ISPAT LTD. 19 JATIN ENTERPRISE 4 M/S BIVA INTERNATIONAL 20 BINAYAK TRADING CO 5 SHAYAN ENTERPRISE 21 ANIL NAHA 6 EUREKA CEMENT AGENCY 22 S.R.M.B. UDYOG 7 BHARAT TIRTHA DARSHAN 23 SHREE SANYEEJI ISPAT 8 ANKITA STEEL 24 BARAK VALLEY CEMENT LTD. 9 KALIMATA BRICKS CO. 25 JAINSTONE CRUSHING INDUSTR IES 10 M.G. TRADING CO. 26 GAUTAM SAHA ITA NO.296/KOL/2013 A.Y.2009-10 DCIT, CIR-6, KOL. V. M/S SIKARIA INFRAPROJECTS (P) LTD. PA GE 3 11 BINA CARRYING CENTRE 27 MANAVENDRA SARKAR 12 BALAK BRAHMACHARI SUPPLIERS 28 PARIMAL CHANDR SAHA 13 GAURANGA TRADING CO. 29 SUDIP KUMAR BOSE 14 ARVEE ENTERPRISE 30 SHILLONG ISPAT ROLLING MILLS LTD 15 GENERAL SUPPLY AGENCY 31 TRIPURA SMALL ENTERPRIS E 16 TIRUPATI SALES CORPORATION 32 VIVEKANANDA TRADE CENTRE DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICE R ISSUED NOTICES U/S. 133(6) OF THE ACT TO ALL THE AFORESAID PARTIES FOR VERIFYING THE TRANSACTIONS WITH ASSESSEE. THE AO FOUND THAT THERE WAS LOT OF MISMAT CHED IN THE FIGURE OF PURCHASE SHOWN BY ASSESSEE AND THE REPLY RECEIPT FR OM THE PARTIES IN RESPONSE TO U/S 133(6) OF THE ACT. THE DIFFERENCE B ETWEEN CLAIM OF ASSESSEE AND REPLY RECEIPT FROM THE CONCERN PARTY CAN BE SUM MARIZED AS UNDER:- (I) PURCHASE CLAIMED BY ASSESSEE AND SALE DECLARED BY PARTY IN ITS BOOKS OF ACCOUNT; (II) REPLY RECEIPT FROM THE PARTY IN RESPONSE TO NO TICES ISSUED U/S 133(6) OF THE ACT WERE NOT GENUINE SO THE PURCHASE CLAIMED BY THE ASSESSEE WAS NOT GENUINE; (III) IN MANY CASES, NOTICES U/S 133(6) OF THE ACT WERE RETURNED UN- SERVED; (IV) IN MANY CASES, NOTICES U/S 133(6) WERE DELIVER ED TO THE RESPECTIVE PARTIES BUT NO REPLY WAS RECEIVED; BESIDES, AO ALSO OBSERVED ASSESSEE COULD NOT FURNIS H IN MANY CASES, THE STOCK REGISTER, PURCHASE REGISTER, CHALLANS, GATE P ASS RECEIPT NOTE, WEIGHT NOTE, DOCK NO. INSURANCE, DETAILS OF THE TRANSPORT ETC. 2.2 THE AO ALSO OBSERVED THAT MANY PARTIES TO WHOM NOTICE U/S 133(6) OF THE ACT WERE ISSUED DID NOT SUBMIT PAN, RETURN OF I NCOME, AUDITED ACCOUNTS, SALES TAX, VAT, EXCISE UTILIZATION AND TRANSPORT BI LLS WITH INSURANCE DOCUMENTS ITA NO.296/KOL/2013 A.Y.2009-10 DCIT, CIR-6, KOL. V. M/S SIKARIA INFRAPROJECTS (P) LTD. PA GE 4 ETC. IN VIEW OF ABOVE, AO TREATED THE PURCHASE FOR AN AMOUNT OF RS. 9,29,08,757/- AS BOGUS PURCHASE AND DISALLOWED THE SAME BY MAKING AN ADDITION TO THE TOTAL INCOME OF ASSESSEE. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO GAVE PARTLY RELIEF BY OBSERVING AS UNDER:- 22. CONSIDERING ALL, PARTICULARLY CONSIDERING THE FACTS THAT THE APPELLANT FAILED TO FURNISH NECESSARY EVIDENCE, FOR PURCHASE AND OTHER EXPENSES BEFORE THE ASSESSING OFFICER AND ALSO CONSIDERING T HE FACTS THAT THERE ARE MANY DEFECTS IN THE BOOKS OF ACCOUNT AS POINTED OUT BY THE ASSESSING OFFICER AND PURCHASES COULD NOT BE VERIFI ED BUT WITHOUT MATERIAL THE APPELLANT COULD NOT HAVE EXECUTED CIVI L CONTRACT WORKS AND FURTHER CONSIDERING THE FACT THAT THE NET PROFI T OF THE APPELLANTS CONTRACT BUSINESS FOR THE YEAR WAS ONLY 3.8%. I AM OF THE VIEW THAT ESTIMATING THE PROFIT FROM THE CIVIL CONTRACT BUSIN ESS OF THE APPELLANT @ 8% OF THE GROSS CONTRACT RECEIPTS WOULD BE FAIR AND REASONABLE AND THE APPELLANT HAS ALSO ACCEPTED THE SAME TO BE FAIR, RE ASONABLE AND APPROPRIATE. IN THESE FACTS AND CIRCUMSTANCES AFTER REJECTING THE BOOKS OF ACCOUNT DUE TO DEFECTS THE INCOME OF THE APPELLA NT IS ASSESSED TAKING NET PROFIT @ 8% ON CONTRACT RECEIPTS OF RS.22,49,83 ,589/- AMOUNTING TO RS.1,79,98,687/- SUBJECT TO NO DEPRECIATION ALLOWAN CE. THE ASSESSING OFFICER WILL TAKE THAT ALL THE ALLOWANCE, DEDUCTION S, EXEMPTION, IF ANY HA BEEN AVAILED BY THE APPELLANT DURING THE YEAR AND T HEN THE NET PROFIT CHARGEABLE TO TAX IS RS.1,79,98,687/-. THE NET PROF IT IS TO BE ASSESSED AS INCOME AT RS.1,79,98,687/-. GROUND NO. 10 THAT W ITHOUT PREJUDICE THE GROUND OF APPEAL THE ASSESSING OFFICER IGNORED THE FACT PRESUMPTIVE BASIS OF TAXATION I.E. PROFIT OF % OF THE TOTAL TUR NOVER IS ALLOWED BY ACCEPTING NET PROFIT @ 8% AS DISCUSSED (SUPRA). THE OTHER GROUNDS OF APPEAL ARE DECIDED AS DISCUSSED IN THE ORDER. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US LD. DR SUBMITTED THAT LD. CIT(A) HAS W ORKED OUT THE INCOME ON ESTIMATE BASIS @ 8% OF THE GROSS RECEIPT WITHOUT REJECTING THE BOOKS OF ACCOUNT OF ASSESSEE AND VEHEMENTLY RELIED ON THE OR DER OF AO. ON THE OTHER HAND, LD. AR FILED A PAPER BOOK WHICH IS RUNNING FR OM PAGES 1 TO 76 AND SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION THE NAME OF THE ASSESSEE COMPANY WAS CHANGED FROM EVERSHINE EXPORTS & VANIJY A LIMITED TO SIKARIA INFRAPROJECTS (P) LTD. THEREFORE MANY SUPPLIERS COU LD NOT UNDERSTAND THE CASE ITA NO.296/KOL/2013 A.Y.2009-10 DCIT, CIR-6, KOL. V. M/S SIKARIA INFRAPROJECTS (P) LTD. PA GE 5 AND FAILED TO FILE CORRECT REPLY. THE ASSESSEE ALSO SUBMITTED THAT THERE ARE VARIOUS LISTED COMPANIES IN THE IDENTICAL BUSINESS AND THEIR PROFIT FOR THE YEAR UNDER CONSIDERATION DOES NOT EXCEED MORE THAN 8%. T HE SUFFICIENT TIME WAS NOT GIVEN BY THE AO TO THE ASSESSEE FOR MAKING THE REPLY TO THE QUERIES RAISED. THE ASSESSEE RECEIVED THE NOTICE FOR HEARIN G ON DATED 26 TH NOVEMBER FOR THE APPEARANCE ON 27 TH NOVEMBER. AND FINALLY THE AO PASSED THE ORDER ON DATED 30.12.2011. THE LD. AR ALSO SUBMITTED THAT GO VERNMENT OF INDIA ALSO PROVIDES THE ABATEMENT OF 67% FOR THE MATERIAL COMP ONENT FOR CHARGING THE SERVICE TAX IN THE CASE OF CIVIL CONTRACTS. THE ASS ESSEE AGREED FOR THE ADDITION OF INCOME @ 8 % OF THE GROSS TURNOVER TO BUY THE PE ACE OF MIND. THE LD. AR ALSO DREW OUR ATTENTION ON PAGE 1 OF THE PAPER BOOK WHERE THE DETAILS OF THE PROFIT DECLARED BY THE ASSESSEE IN THE EARLIER YEAR S AND SUBSEQUENT YEARS WERE FURNISHED IN TERMS OF PERCENTAGE WHICH IS RANG ING FROM 0.45% TO 3.84% INVOLVING 7 FINANCIAL YEARS. FROM THE AFORESAID DISCUSSION WE FIND THE THE AO HA S DISALLOWED THE VARIOUS EXPENSES AS THESE WERE NOT VERIFIED IN RESPONSE TO THE NOTICE ISSUE UNDER SECTION 133(6) OF THE ACT. BUT THE LD. CIT(A) HAS T REATED THE INCOME OF THE ASSESSEE @ 8% OF THE GROSS RECEIPT. SO THE REVENUE IS IN APPEAL BEFORE US. NOW THE QUESTION BEFORE US ARISES FOR ADJUDICATION IS AS TO WHETHER THE ACTION OF THE LD. CIT(A) IS CORRECT FOR WORKING THE INCOME @ 8% OF THE GROSS RECEIPT. FROM THE FACTS OF THE CASE, WE FIND THAT THE NATURE OF THE WORK OF THE ASSESSEE HAS NOT BEEN DOUBTED AND SO IN THE SIMILAR FACTS AN D CIRCUMSTANCES VARIOUS HONBLE COURTS HAVE HELD THAT A REASONABLE PERCENTA GE OF PROFIT CAN BE WORKED OUT. SOME OF THE SIMILAR CASE LAWS ARE CITED BELOW. 1. IN THE CASE OF M/S TRIVENI ENTERPRISE, HYDERABA D VS THE INCOME-TAX OFFICER WD 6(1) ITA NO. 352/HYD/2011 & 353.HYD/2011 IT HAS BEEN HELD THAT IN THE AY 2006-07 AND 2008-09, THE ASSESS EE WAS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. ASSESSEE FAILS TO PROVE THE EXPENSES WITH DETAILS AO ESTIMATED THE INCOME OF THE ASSESSE E AT 12% OF THE GROSS RECEIPT. ON APPEAL, LEARNED CIT(A) DIRECTED T HE AO TO ESTIMATE THE INCOME AT 8% IN THE CASE OF MAIN CONTRACT RECEI PTS AND AT 6% ON THE SUB CONTRACT RECEIPT. TRIBUNAL DIRECT THE ASSESSING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEE AT 8% ON MAIN CONTRACT R ECEIPTS AND AT 5% OF THE SUB CONTRACT RECEIPTS AS ABOVE SAID. ITA NO.296/KOL/2013 A.Y.2009-10 DCIT, CIR-6, KOL. V. M/S SIKARIA INFRAPROJECTS (P) LTD. PA GE 6 2. IN THE CASE OF SHRI OM PRAKASH TRIPATHI VS ACIT (CONTRACTOR) CIRCLE 2(1), FARRUKHABAD. ITA NO. 330/AGR/2005 IT HAS BEEN HELD THAT IN THE AY 2001-02, THE ASSESSEE WAS ENGAGED IN THE BUSINES S OF CIVIL CONSTRUCTION. NET PROFIT RATE SHOWN BY THE ASSESSEE 5.32%. THE SAME BEING ACCEPTED BY THE AO CIT(A), AGRA. REJECTED THE BOOKS OF ACCOUNT BY APPLYING PROVISIONS OF SECTION 145 AND ESTIMATED THE NET PROFIT AT 7% OF THE GROSS RECEIPTS. TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A) ON THE ISSUE WITH CONCLUSION THAT THE RATE APPLIED HAS BEE N RIGHTLY BASED ON THE NET PROFIT RATE ON DIFFERENT YEARS. 3. IN THE CASE OF METROPOLITAN ENGG. CO. OPT. SOCIE TY LTD. VS. ACIT ITA NO.S 2172 & 2172/KOL/2010 IT HAS BEEN HELD THAT IN THE AY 2001-02, THE ASSESSEE IS ENGAGED IN CIVIL CONTRACT BUSINESS WITH OTHERS BUSINESS SEGMENTS. AO ESTIMATED NET INCOME FROM THE WORK CON TRACT @ 10% ON THE GROSS CONTRACT RECEIPTS. ASSESSEE FAILED TO FUR NISH NECESSARY EVIDENCE FOR PURCHASE AND OTHER EXPENSES. PURCHASE & EXPENSES NOT CONFIRMED ON AN ENQUIRY CONDUCTED BY THE AO U/S. 13 3(6). LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. TRIBU NAL RELIED ON THE DECISION OF HONBLE ORISSA HIGH COURT DECISION IN T HE CASE OF CIT VS NANDARAM HUNDA RAM (1976) 103 ITR 433, WHEREIN IT IS HELD THAT IF THE ASSESSEE FAILED TO PRODUCE ACCEPTABLE ACCOUNTS REVENUE WOULD BE ON THE DECISION OF ROYAL MEDIAL HALL VS. CIT (1962) 46 ITR 748 (AP) WHEREIN IT IS HELD THAT ESTIMATE OF INCOME ON THE BASIS OF MATERIALS AVAILABLE AND THE PAST ASSESSMENT RECORD WAS HELD P ROPER AND TRIBUNAL DIRECTED THE ASSESSING OFFICER TO RECOMPUT ED THE INCOME BY APPLYING 6% OF NET PROFIT ON GROSS CONTRACT RECEIPT S. 4. IN THE CASE OF PRAVIN PANDURANG PATIL, ISLAMPUR IN ITA NO. 850/PN/08 IT HAS BEEN HELD THAT IN THE AY 2005-06, THE ASSESS EE IS ENGAGED IN CIVIL CONTRACT BUSINESS WITH OTHERS BUSINESS SEGMENTS. AO REJECTED THE BOOKS OF ACCOUNT INVOKING THE PROVISIONS OF SECTION 145(3) AND ESTIMATED NET INCOME FROM THE CONTRACT BUSINESS @ 8 %. ASSESSEE FAILED TO PRODUCE THE LABOUR PAYMENT VOUCHERS AND P URCHASE BILLS TO VERIFY THE EXPENSES PURCHASE AND CLOSING STOCK. LD. CIT(A) HAS ESTIMATED THE INCOME FROM REGULAR CONTRACT BUSINESS AT 8% OF THE CONTRACT RECEIPTS AND 4% IN SO FAR SUB-CONTRACTING IS CONCERNED. HONBLE LORDSHIP OF TRIBUNAL, DIRECTED TO ESTIMATE THE INCO ME @ 6% FROM THE CONTRACT BUSINESS SAND SO FAR AS PROFIT ON SUB-CONT RACT BUSINESS AND ROAD ROLLER HIRING IS CONCERNED UPHOLD THE ESTIMATI ON AS ADOPTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO MEET THE EN D OF JUSTICE. 5. IN THE CASE OF THE ACIT GANDHIDHAM CIRCLE VS. M/ S ISHWAR CONSTRUCTION CO. GANDHIDHAM, ITA NO. 1140/RJT/2009 IT HAS BEEN HELD THAT IN THE AY 2005-06, THE ASSESSEE WAS ENGAG ED IN THE BUSINESS OF CIVIL CONSTRUCTION. ASSESSEE FAILS TO PROVIDE PR OPER EVIDENCE IN THE SHAPE OF BILLS, VOUCHERS, UNABLE TO VERIFY PURCHASE S BEFORE THE AO AND ITA NO.296/KOL/2013 A.Y.2009-10 DCIT, CIR-6, KOL. V. M/S SIKARIA INFRAPROJECTS (P) LTD. PA GE 7 AO MADE ADDITION FOR UNEXPLAINED PURCHASE, SUB-CONT RACT EXPENSES AND UNDER VALUATION OF WORK-IN-PROGRESS. THE LD. CI T(A) ESTIMATED THE TOTAL INCOME BY APPLYING NET PROFIT RATE OF 4%. BOT H THE ASSESSEE AND REVENUE HAS CHALLENGED TO THE EXTENT OF ORDER AGAIN ST THEM. THE TRIBUNAL INCLINED UPON THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY CONFIRMED. IN ADDITION TO THE ABOVE WE ALSO FIND THAT THE ASSE SSEE HAS DECLARED THE PROFIT IN ITS OWN CASE FOR THE EARLIER YEARS AND SUBSEQUEN T YEARS, SHOWING VERY LESS AMOUNT OF PROFIT IN TERMS OF PERCENTAGE AND THE SAM E WAS ACCEPTED BY THE REVENUE. THEREFORE IN OUR CONSIDERED VIEW WE FIND N O REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) AND THIS GROUND OF REVENUE S APPEAL IS DISMISSED. 5. IN THE RESULT, REVENUES APPEAL DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 18 /05/2016 SD/- SD/- (S.S.VISHWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 18 / 05 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-6 ROOM.17, 6 TH FLOOR, AAYAKR BHAWAN, P-7, CHOWRINGHEE SQU ARE, KOLKATA-700 069 2. /RESPONDENT-M/S SIKARIA INFRAPROJECTS (P) LTD., 10/ 1A, KALAKRA ST, 3 RD FL, KOL-07 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,