Dharam Nath, Yamunanagar V. ITO, W-1, Yamunanagar

ITA 297/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0559 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AAKARSHAN SINGH SR DR
• Keywords: Tax effect; TDS; Set aside
• Section: 142(1); 143(2); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH SMC CHANDIGARH !', # BEFORE: SMT. DIVA SINGH, JM ./ ITA NO. 297/CHD/2019 / ASSESSMENT YEAR : 2010-11 SHRI DHARAM NATH, C/O RAJIV GOEL & ASSOCIATES, 179, BANK ROAD, AMBALA CANTT. VS THE ITO, WARD 1, YAMUNA NAGAR. ./ PAN NO: AEMPN9817Q / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : NONE # ! ' / REVENUE BY : SHRI AAKARSHAN SINGH SR. DR $ % ! &/ DATE OF HEARING : 03.09.2019 '()* ! &/ D ATE OF PRONOUNCEMENT : 16.09.2019 $%/ ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE WHEREIN THE CORRECTNESS OF THE ORDER DATED 22.12.2018 OF CI T(A)-3, LUDHIANA PERTAINING TO 2010-11 ASSESSMENT YEAR IS A SSAILED ON THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ONS OF THE LEARNED AO IN REOPENING ASSESSMENT PROCEEDINGS U/S 147 OF THE INC OME TAX ACT, 1961. 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTIONS OF THE LEARNED AO IN ESTIMATING INCOME OF THE ASSES SEE BY APPLYING NET PROFIT RATE OF 12.375% ON GROSS LABOUR RECEIPTS OF RS. 79,45,50 7/-. (TAX EFFECT=RS. 2,06,057 /-) 3. THAT APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF CASE. 2. AT THE TIME OF HEARING, NO ONE WAS PRESENT ON BE HALF OF THE ASSESSEE. AN ADJOURNMENT APPLICATION WAS MOVED BY T HE COUNSEL ITA 297/CHD/2019 A.Y. 2010-11 PAGE 2 OF 7 REQUESTING FOR TIME. HOWEVER, ON A PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, IT WAS NOTICED THAT THE ASSESS EE FOR ONE REASON OR THE OTHER HAS BEEN SEEKING TIME AND HAS F AILED TO REPRESENT ITS CASE. IT IS SEEN THAT THE APPEAL HAS BEEN FILED ON 14.03.2019 AND HAS COME UP FOR HEARING ON 16.07.201 9 AND YET AGAIN ON 17.07.2019. ON BOTH THE DATES, THE ASSESSEE REMAINED UNREPRESENTED. ON THE FIRST DATE, NO ONE APPEARED AND ON THE SECOND DATE, TIME WAS ORALLY SOUGHT. ACCORDINGLY, IT IS DEEMED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX-P ARTE QUA THE ASSESSEE APPELLANT ON MERITS AFTER HEARING THE LD. SR.DR. 3. A PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE CHALLENGING THE ADDITIONS MADE BY THE AO BY AN ORDER U/S 144/14 7 PLEADS BEFORE THE CIT(A) THAT HE WAS AN ILLITERATE LABOURE R WHO WAS NOT AWARE OF THE FACT THAT HIS BANK ACCOUNT HAD BEEN US ED FOR THE DEPOSITS OF THE AMOUNT FROM HARYANA DISTILLERY. A P ERUSAL OF THE RECORD SHOWS THAT THE REVENUE AUTHORITIES WERE FLAG GED THAT AN AMOUNT OF RS. 79,40,537/- HAD BEEN RECEIVED BY THE ASSESSEE AS CONTRACT RECEIPTS FROM HARYANA DISTILLERY, YAMUNA N AGAR DURING THE PERIOD 01.04.2009 TO 31.03.2010. THE ASSESSEE W AS PUT TO NOTICE OF THIS FACT BY ISSUANCE OF NOTICE U/S 148 O F THE ACT. IT HAD BEEN NOTED THAT THE ASSESSEE HAD NOT FILED ANY RETU RN PRIOR TO THIS. IN RESPONSE TO THE NOTICE U/S 148, THE ASSESSEE FIL ED HIS RETURN. HE IS ALSO FOUND TO HAVE MADE THE FOLLOWING REPLY, AS EVIDENT FROM PARA 2 OF THE ASSESSMENT ORDER, AS UNDER : ITA 297/CHD/2019 A.Y. 2010-11 PAGE 3 OF 7 2. IN RESPONSE TO THE NOTICE U/S 148 OF THE IT ACT. 1961, ASSESSEE FILED RETURN OF INCOME DECLARING GROSS RECEIPTS OF RS. 16.00.000/- FROM THE CONTRACT RECEIPTS ON ACCOUNT OF SUPPLY OF LABOUR TO COMPANY AND A NET PR OFIT OF RS.1,98,000/- IS DECLARED. IN RESPONSE TO THE RETURN OF INCOME FILED, A NOTICE U/ S I 13(2) OF THE IT ACT, 1961 AND 142(1) ALONGWITH A DETAILED QUESTIONNAIRE WAS ISSUE D ON 19.05,2017 FOR COMPLIANCE ON 31,05.2017 AND THE NOTICES WERE DULY SERVED UPON TH E ASSESSEE. IN RESPONSE TO THE NOTICES, PART INFORMATION WAS FILED BY THE ASSESSEE ON 31.05.2017. IN THE SUBMISSIONS FILED ON 07.06.2017 ARID 19.06.2017, ASSESSEE STATED THAT HE WAS PAID COMMISSION OF RS. 3,78,281/- AND AFTER MEETING OUT THE OFFICE EXPENSES NET INCOME OF RS. 1,98,000/- HAS BE EN DECLARED. 3.1 SINCE THE SAID CLAIM WAS NOT SUPPORTED BY ANY E VIDENCE DESPITE OPPORTUNITY, ADDITION OF RS. 7,88,845/- WAS MADE BY THE AO IN THE FOLLOWING MANNER : 8. IN THE ITS DETAILS OF THE DEPARTMENT, GROSS CO NTRACT RECEIPTS OF RS. 79,74,507/-HAVE BEEN PAID BY HARYANA DISTILLERY LTD TO THE ASSESSEE WHEREAS IN THE RETURN OF INCOME FILED BY THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE IT ACT. 1961. GROSS RECEIPTS OF RS. 16,00,000/- HAVE BEEN D ECLARED AND N T PROFIT OF RS. 1.98.000/- IS COMPUTED BY THE ASSESSEE GIVING NET PROFIT RATIO IS 12.375%. SINCE, THE ASSESSEE HAS HIMSELF D ECLARED THEY PROFIT OF 12.375% ON THE GROSS RECEIPTS OF RS. 16,00,000/- AN D HAS SUPPRESSED, THE RECEIPTS O F RS. 63,74,507/- (7974507-1600000) AND DESPITE ISSUE OF SHOW CAUSE NOTICE TO RECONCILE THE DISCREPANCY NEITHER ANY BOO KS OF ACCOUNTS ARE PRODUCED NOR ANY PLAUSIBLE EXPLANATION IN THIS REGA RD IS FILED, AS PER THE FORM NO. 16A ISSUED BY HARYANA DISTILLERY LTD, YAMUNA NA GAR TO THE ASSESSEE, COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF A CCOUNT OF THE HARYANA DISTILLERY LTD AS WELL AS TDS OF RS. 88,742/- DEPOS ITED IN THE GOVT, ACCOUNT AS DEDUCTED FROM THE PAYMENTS CREDITED TO THE ASSESSEE S ACCOUNT WHICH ARE DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE AND I N VIEW OF THE WITHDRAWALS MADE THROUGH CHEQUE FROM THE BANK ACCOUNT BY THE AS SESSEE ESTABLISH THAT THE ASSESSES HAS RECEIVED THE PAYMENTS OF RS. 79,74,507 /- FROM M/S HARYANA DISTILLERY LTD ON ACCOUNT OF LABOUR RECEIPTS. SINCE , THE ASSESSEE HAS HIMSELF DECLARED PROFIT AT THE RATE OF 12.375/ ON THE GROS S RECEIPTS IN THE RETURN OF INCOME FILED THEREFORE, THE SAME RATE IS APPLIED ON THE GROSS RECEIPTS OF RS. 79,74,507/- AND INCOME OF THE ASSESSEE IS WORKED OU T AT RS. 9,86,845/- AND ADDITION OF RS. 7,88,845/- (986845-198000 ) IS MADE TO THE RETURNED INCOME OF THE ASSESSEE. (ADDITION OF RS. 7,88,845/- ) ITA 297/CHD/2019 A.Y. 2010-11 PAGE 4 OF 7 4. THE ASSESSEE CARRIED THE ISSUES IN APPEAL BEFO RE THE CIT(A) WHEREIN AS PER LETTER DATED 19.12.2018 TAKEN NOTE O F IN PARA 4 OF THE CIT(A)S ORDER, THE FOLLOWING FACTS WERE CANVAS SED ON BEHALF OF THE ASSESSEE : 4. IN SUPPORT OF GROUND OF APPEAL NO. 2 THE APPE LLANT VIDE HIS LETTER DATED 19.12.2018 HAS SUBMITTED AS UNDER: - KINDLY REFER TO YOUR LETTER UNDER REFERENCE AND I BEG TO STATE AS BELOW. 1. I WAS WORKING AS A LABOUR CONTRACTOR / LABOUR SUPPL IER TO SUPPLY THE REQUIRED LABOURS ON PAYMENT OF 5% COMMISSION IN TOT ALITY FOR THE ARRANGEMENT DONE BY ME FOR THE PERIOD 1ST JULY 2009 TO 31 MARCH 2010 TO THE FACTORY HARYANA DISTILLERY. TOTAL AMOUNT OF COM MISSION OF 5% WHICH COMES TO RS. 3,78,281 AFTER MEETING NECESSARY EXPEN DITURE FOR ARRANGING LABOUR COMES TO RS. 1,98,200. THIS IS THE NET INCOM E TO ME WHICH I HAVE EARNED / SHOWN IN MY INCOME TAX RETURN (ANNEXURE - A). 2. THE AMOUNT OF WAGES OF RS. 75,72,819/- ACCRUED ON A CCOUNT OF LABOUR SUPPLIED TO THE FACTORY FOR ASSIGNING THE WORK ON D AY TO DAY BASIS WAS PAID TO MANAGEMENT TO INDIVIDUAL WORKMEN IN PHYSICAL PRE SENCE, EYE WITNESS TO THE ENTIRE SATISFACTION OF MANAGEMENT AND WORKMEN C ONCERNED AS SHOWN IN COLUMN 2 A ANNEXURE A ENCLOSED. 3. FURTHER INCOME TAX OFFICER YAMUNA NAGAR VIDE LETTER NO. ITO/W-1 YAMUNA NAGAR/2017-18 DATED 7.2.2018 HAS ALSO WRITTEN/RECOM MENDED THAT THE AMOUNT IS PAYABLE BY THE PRINCIPAL OFFICE M/S. HARY ANA DISTILLERY INDUSTRIAL AREA, YAMUNA NAGAR U/S 226 (3) OF THE INCOME TAX AC T 1961 UPTO AMOUNT OF ARREARS SHOWN (COPY ENCLOSED). ALSO COMPANY HAS PA ID RS. 88,742 AS TDS. THIS ALL RECEIPTS/PAYMENTS ETC. WAS DONE BY THE COM PANY MANAGEMENT ACCOUNTS WERE OPENED/OPERATED WITHOUT MY KNOWLEDGE AND CONSENT. (ANNEXURE-B). 4. LASTLY I HAVE NO WORK WITH ME. I AM A POOR MAN. MOS TLY I HAVE TO WORK AS LABOUR ON DAILY WAGE BASIS. I DONOT KNOW RULES AND REGULATIONS. MY WIFE HAS ALSO EXPIRED DURING THIS PERIOD. DUE TO UNEMPLO YMENT MY CONDITION IS DEPLORABLE/WORST. KEEPING IN VIEW THE ABOVE FACTS A S EXPLAINED IN THE PARA 1, 2 AND 3. I HUMBLY REQUEST / APPEAL, SIR THAT PENALTY OF INCO ME TAX IMPOSED UPON ME U/S 271A AND 271B MAY BE WAIVED OFF AS RECOMMENCED/WRITTEN BY INCOME TAX OFFICER YNR VIDE LETTER NO. ITO/W-1 YNR/2017-18 DATED 7/2/ 2018. SECONDLY STATEMENT IND ICATING THE AMOUNT OF MONTHLY WAGES/ COMMISSIONS, BILLS PAID TO ME BY HARYANA DIS TILLERY LIMITED DATED 25/07/ 2017 MANAGEMENT WHICH CLEARLY SHOWS THAT I WAS ONLY PAID THE COMMISSION & NOTHING ELSE. FURTHER I HAVE ALSO DEPOSITED RS. 5000/- AS PENALTY DUE TO LATE FILLING OF INCOME TAX RETURN WHICH SHOULD BE REFUNDED TO ME AS I AM AN ILLITERATE LABOURER & DON OT KNOW RULES AND REGULATIONS. (ANNEXURE B AND C). ITA 297/CHD/2019 A.Y. 2010-11 PAGE 5 OF 7 5. IT IS EVIDENT ON THE READING OF THE ORDER THAT T HE EXPLANATION OFFERED WAS NOT ACCEPTED AND THE ADDITION MADE WAS SUSTAINED BY THE CIT(A). 6. IN THE SAID BACKGROUND, LD. SR.DR WAS REQUIRED T O ADDRESS THE JUSTIFICATION OF THE APPLICATION OF NP RATE OF 12.375%. THE MERE FACT THAT AS PER RETURNED INCOME, THE NP RATE DISCLOSED BY THE ASSESSEE WORKED OUT TO THE SAID EXTENT CANNOT B E A VALID GROUND TO APPLY THE SAID N.P. RATE ESPECIALLY WHERE THE TAXPAYER PLEADS IGNORANCE OF FACT BY WAY OF PLEADING ILLITER ACY. THE CONSEQUENT LEGAL ADVICE AVAILABLE TO THE ASSESSEE M AY HAVE REMAINED DEFICIENT. HOWEVER, THAT IMPEDIMENT IS NO T AVAILABLE FOR THE TAX AUTHORITIES. THE LAW ON ESTIMATION IS FAIRL Y SETTLED. EITHER COMPARE THE PAST HISTORY OF THE ASSESSEE FROM THE S TATED ACTIVITY OR ALTERNATIVELY CONSIDER THE NET PROFIT RATE FROM THE STATED ACTIVITY WITH SIMILARLY SITUATED ASSESSEES. THE PAS T HISTORY OF THE ASSESSEE FROM THE STATED ACTIVITY IT IS SEEN IS NOT BROUGHT OUT IN THE ORDER. THE LD. SR.DR WAS REQUIRED TO ADDRESS TH E NP RATE ACCEPTED BY THE REVENUE FROM THE STATED ACTIVITY IN THE CASE OF OTHER IDENTICALLY SITUATED ASSESSEES. IN THE ABSEN CE OF ANY RELEVANT DISCUSSION ON THE ISSUES, THE LD. SR.DR CO ULD NOT MAKE ANY MEANINGFUL SUBMISSIONS THEREON. HOWEVER, HE SU BMITTED THAT THE NET PROFIT RATE WHICH HAS BEEN APPLIED IS AS PE R ASSESSEE'S VERSION. AS NOTED, IN THE FACTS OF THE PRESENT CAS E, IT IS SEEN THAT ITA 297/CHD/2019 A.Y. 2010-11 PAGE 6 OF 7 THE ASSESSEE HAS CANVASSED THAT HE IS AN ILLITERATE LABOURER. NO DOUBT THE ARGUMENT ADVANCED IN PARA 3 OF THE LETTER DATED 19.12.2018 THAT THE COMPANY MANAGEMENT OPENED THE A CCOUNTS WITHOUT HIS KNOWLEDGE AND CONSENT, CANNOT BE ACCEPT ED. THE FACT REMAINS THAT THE STATED PERSON MAY HAVE BEEN USED F OR MAKING THE LABOUR PAYMENTS. BE THAT AS IT MAY, THE FACT ALSO REMAINS THAT THE SPECIFIC AMOUNT OF RS. 79,74,507/- HAVE BEEN DEPOSI TED IN THE ASSESSEE'S BANK ACCOUNT ON WHICH PROFIT HAS ACCRUED TO THE ASSESSEE. THIS PROFIT HAS TO BE BROUGHT TO TAX. CO NSIDERING THE OVERALL FACTS AND CIRCUMSTANCES IN THE LIGHT OF THE FACT THAT THE ASSESSEE IS CLAIMING TO BE AN ILLITERATE LABOURER O N WHICH NO FINDING OF FACT HAS BEEN RECORDED BY THE LD. CIT(A) . IN THE CIRCUMSTANCES IT IS DEEMED APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER BACK TO THE FILE OF THE LD. CIT(A) WITH A DIR ECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW EITHER APPLYI NG THE PROFIT RATE OF THE ASSESSEE FROM THE STATED ACTIVITY AS PE R ITS PAST HISTORY, ALTERNATELY APPLY THE PROFIT RATE FROM THI S ACTIVITY FROM SIMILARLY SITUATED ASSESSEES. NEEDLESS TO SAY THAT ON THE APPLICATION OF THE PROFIT RATE, THE ASSESSEE SHALL BE HEARD. ACCORDINGLY, IMPUGNED ORDER IS SET ASIDE BACK TO TH E FILE OF THE CIT(A) WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. 7. ON THE JURISDICTION ISSUE, IT IS SEEN THAT THOUG H A GROUND HAS BEEN RAISED BEFORE THE ITAT, IT IS SEEN THAT THE AS SESSEE HAD GIVEN ITA 297/CHD/2019 A.Y. 2010-11 PAGE 7 OF 7 UP THIS ISSUE BEFORE THE CIT(A) AS IS EVIDENT FROM PARA 6 AND 6.1 OF THE IMPUGNED ORDER. FOR READY REFERENCE, SAME IS R EPRODUCED HEREUNDER : GROUND NO. 3 :- VIDE THIS GROUND OF APPEAL THE APPELLANT HAS CHA LLENGED THE SERVICE OF NOTICES U/S 143(2) AND 148 OF THE ACT. 6.1 AT THE TIME OF APPELLATE PROCEEDING THE APPELLA NT HAS NOT PRESSED THIS GROUND OF APPEAL AS SUCH, THIS GROUND OF APPEAL IS DISMISSED. 7.1 THUS, IN THE ABSENCE OF ANY CONTRARY FACT OR A RGUMENT PLEADED ON RECORD AGITATING THAT THE FINDING IN PAR A 6.1 WAS PERVERSE, GROUND NO. 1 RAISED IN THE PRESENT PROCEE DINGS IS HELD TO BE NOT MAINTAINABLE. 8. ACCORDINGLY, IN TERMS OF THE ABOVE DIRECTIONS, A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPT.,2019. SD/- ( !' ) (DIVA SINGH) # / JUDICIAL MEMBER POONAM (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ( )/ THE CIT(A) 5. -01 2 , & 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7% / GUARD FILE (+ $ / BY ORDER, 8 # / ASSISTANT REGISTRAR