Smt. Kamla Sharma L/H. of Late Krishna Bihari Sharma, Nagpur V. Income tax Officer,Ward 8(1), Nagpur

ITA 299/NAG/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2189 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 12-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D RAVI KUMAR
• Keywords: Presumptive income; Business income; Corroborative evidences
• Section: 44AD

Judgement Text

S.T.WAKODE/ AM IN TH E INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH: NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 2 9 9 /NAG/20 1 2 ASSESSMENT YEAR: 200 7 - 200 8 KAMLA SHARMA L/H. OF LATE KRISHNA BIHARI SHARMA, 19 VE RMA LAYOUT , NAGPUR - 10 PAN:A PZPS7399C VS INCOME TAX OFFICER WARD 8 (1), MECL BUILDINGS, DR. AMBEDKAR BHAWAN, SEMINARY HILLS, NAGPUR - 44000 6 (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K.P. DEWANI, A . R . RESPONDENT BY SHRI D. RAVIKUMAR, D . R . DATE OF HE ARING: 04 - 0 5 - 201 6 DATE OF PRONOUNCEMENT: - 31 / 05 /2016 O R D E R PER SHAMIM YAHYA , A .M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRE CTED AGAINST THE ORDER OF LD. CIT (APPEALS) DATED 05.0 3 .201 2 AND PERTAINS TO ASSESSMENT YEAR 200 7 - 0 8 . THE GROUND S OF AP PEAL RAISED BY THE ASSESSEE IN THIS APPEAL ARE AS UNDER : - 1. THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.10 , 1 7, 885 / - TO THE INCOME AS SHOWN IN BOOKS OF ACCOUNT. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF A.O. MAKING ADDITION OF RS.10 , 1 7, 885 / - ON E STIMATED BASIS IN RESPECT OF BUSINESS INCOME SHOWN IN THE RETURN OF INCOME. 3. THE ADDITION MADE BY A.O. AT RS.10 , 1 7, 885 / - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 4. THE ASSESSEE DENIES LIABILITY TO BE ASSESSED TO INTEREST U/S.234B AND 234C OF I.T. ACT 1961. WITHOUT PREJUDICE THE LEVY OF INTEREST IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 2 ITA NO. 29 9 /NAG/201 2 2. THE ASSESSEE IS A SUB - CONTRACTOR OF BHANGADIYA GROUP OF CASES WHO UNDERTAKE CONTRACT WORK RELATING TO IRRIGATION DEPARTMENT. IN THIS CASE THE AO NOTED THAT THE ASSESSEES COUNSEL WAS REPEATEDLY ASKED TO PRODUCE BOOKS OF ACCOUNTS ALONG WITH BILLS, VOUCHERS AND SUPPORTING EVIDENCES TO SUBSTANTIATE THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. THEREAFTER THE AO NOTED THAT HE HAS VERIFIED THE COMPUTERIZED BOOKS OF ACCOU NT AND DOCUMENTS/MATERIAL PRODUCED BEFORE HIM. THE AO OBSERVED FOLLOWING PROMINENT DEFECTS AND INFIRMITIES IN THE BOOKS OF ACCOUNTS: (I) BILLS AND VOUCHERS IN RESPECT OF LABOUR CHARGES, MACHINE HIRE CHARGES, SITE EXPENSES, OIL & LUBRICANTS, WATER CHARGES, WERE NOT PRODUCED. (II) THE LABOUR CHARGES & SALARY ACCOUNT HAS NOT BEEN EXPLAINED WITH PROPER BILLS AND VOUCHES. FURTHER, THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE RELEVANT ATTENDANCE REGISTER IN SUPPORT OF THE LABOUR PAYMENT EXPENSES DEBITED TO THE P &L ACCOUNT. (III) DURING THE COURSE OF SURVEY IN THE BHANGADIYA GROUP, THE ASSESSEE HAD DENIED OF CARRYING OUT ANY CONTRACT WORK FOR BHANGADIYA GROUP AND HAD ALSO STATED THAT THE BOOKS OF ACCOUNT WERE NOT MAINTAINED BY HIM. THE VARIOUS DISCREPANCIES FOUND IN THE CASE OF THE ASSESSEE ARE HIGHLIGHTED IN THE STATEMENT DATED 17/02/2009 WHICH ARE BEEN GIVEN IN THE PRECEDING PARAS OF THE ORDER. THE AO OBSERVED THAT THE ABOVE FINDING IS A GOOD BASIS AND REASON FOR REJECTING BOOKS OF ACCOUNTS U/S 143(3). THE ASSES SEE EXPLAINED AS UNDER: THE COMPUTERIZED BOOKS OF ACCOUNT ARE PRODUCED DURING THE COURSE OF HEARING. THE ASSESSEE HAD OBTAINED BILLS & VOUCHERS IN RESPECT OF EXPENSES INCURRED AT THE TIME, WHEN PAYMENTS WERE MADE. HOWEVER, SOME OF THE RECORDS, VOUCHERS A ND FILES GOT MISPLACED AND AS THERE WAS NO EFFECTIVE SYSTEM OF FILING PAPERS MAJORITY OF VOUCHERS ARE NOT TRACEABLE. THE ASSESSEE IS TRYING TO CONTACT PERSONS TO WHOM PAYMENTS HAVE BEEN MADE FOR OBTAINING THEIR CONFIRMATIONS. THE ASSESSEE UNDERSTANDS THAT MANY PEOPLE LEFT THE PLACE AND THEIR PRESENT ADDRESSES ARE NOT FORTH COMING. IT IS POSSIBLE THAT THE ASSESSEE COULD TRACE OUT THESE PERSONS AND OBTAIN CONFIRMATION OF THE PAYMENT, BUT THAT IS LIKELY TO TAKE SUBSTANTIAL TIME. THE CONTRACT EXECUTED IS LABOUR CONTRACT. THE MARGIN OF PROFIT IN THESE CONTRACTS IS VERY MINIMUM UNLIKE A MATERIAL CONTRACT WHERE PROFIT MARGIN IS HIGH. 3 ITA NO. 29 9 /NAG/201 2 HOWEVER, THE AO WAS NOT CONVINCED. HE PROCEEDED TO REJECT THE BOOKS OF ACCOUNT. HE NOTICED THAT ASSESSEES NET PROFIT RATIO IN THE L AST TWO ASSESSMENT YEARS WAS AS FOLLOWS: - ASSTT. YEAR GROSS RECEIPTS NET PROFIT NET PROFIT RATIO. 2006 - 0 7 20 ,1 5, 8 37 98 ,25 0 4 .8 7 % 20 07 - 08 1 ,1 5,23 , 059 2 , 40 ,5 95 2 .08 % THEREAFTER THE AO HELD AS UNDER: - THE AFORESAID NET PROFIT RATIO SHOWN BY THE ASSESSEE IS DEFINITELY LOW AND CANNOT BE ACCEPTED TO BE TRUE AND CORRECT, CONSIDERING THE DISCREPANCIES AND ANOMALIES NOTICED DURING THE EXAMINATION OF THE BOOKS OF ACCOU NT AND BILLS/VOUCHERS IN THIS CASE. THE ATTEMPT WAS ALSO MADE TO FIND OUT COMPARABLE NET PROFIT RATIO IN SIMILAR NATURE OF BUSINESS. IT IS FOUND THAT OTHER CONTRACTORS ENGAGED IN CIVIL CONSTRUCTION HAVE DECLARED NET PROFIT RATIO OF 8.74% IN ASSTT. YEAR 200 7 - 08 IN THE CASE OF M/S.SADIQ & CO., NAGPUR. IN VIEW OF THE ABOVE FINDINGS, IT WOULD BE REASONABLE TO ADOPT THE NET PROFIT OF 10% OF THE GROSS RECEIPT FOR THE CURRENT YEAR AS TRUE AND CORRECT PROFIT. THIS ESTIMATION OF NET PROFIT OF 10% IS SUFFICIENT AND R EASONABLE TO COVER UP ALL THE DISCREPANCIES AND INFIRMITIES FOUND IN THE BOOKS OF ACCOUNT IN THIS CASE. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) IN HIS ORDER REFERRED TO THE FACT THAT THERE ARE LARGE NUMBER OF PERSONS ACTING AS SUB CONTRACTORS IN T HE BHANGADIYA GROUP. HE MENTIONED THAT SOME OF THESE SUB CONTRACTORS HAD EARLIER GIVEN A STATEMENT THAT THEY HAD NOT DONE ANY WORK BUT WERE MERELY NAME LENDERS. THEREAFTER THEY HAD RETRACTED THESE STATEMENTS. LEARNED CIT(APPEALS) UPHELD THE ORDER OF THE A O BY CONCLUDING AS UNDER: - ONLY SUBMISSION BEFORE ME IN APPEAL AS GIVEN ABOVE IS ONE PAGE SUBMISSIONS, WHICH IS DEVOID OF ANY FACTUAL DETAILS AS TO PROVE THE GENUINENESS OF EXPENSES SO BLATANTLY DOUBTED BY A.O. I, THEREFORE, HOLD THAT ESTIMATION OF INCOM E DONE BY A.O. IN CASE OF SUB CONTRACTORS FOR BOTH THE YEARS IS UPHELD. HOWEVER, A.O. HAS ESTIMATED 10% IN A.YR. 2007 - 08 AND 8% IN A.Y. 2008 - 09 TAKING INTO ACCOUNT THE FACT THAT WORK ALLEGEDLY UNDERTAKEN BY THESE SUB CONTRACTORS AND OWNED UP BY THEM IN RET URN OF INCOME IS OF CIVIL CONTRACT, HENCE I RESTRICT THE ESTIMATION OF A.O. TO ONLY 4 ITA NO. 29 9 /NAG/201 2 8% IN THE YEAR 2007 - 08 AND FOR A.YR. 2008 - 09 ESTIMATED BY A.O. IS UPHELD. AS NO EVIDENCE OF EXPENSES CLAIMED FOR THESE SUB CONTRACTORS WAS PRODUCED BEFORE A.O. OR BEFORE ME AND HENCE REASONABLE ESTIMATION KEEPING IN MIND THE PROVISIONS FOR NO ACCOUNT CASES I.E. WHEN NO BOOKS OF ACCOUNT ETC. ARE MAINTAINED, 8% IS A REASONABLE ESTIMATE FOR CONTRACTUAL WORK FOR SMALL CONTRACTOR AND IF ANYBODY WANTS LOWER ASSESSMENT, HE HAS TO PRODUCE DOCUMENTARY EVIDENCE FOR SUCH CLAIM AND SO CALLED AUDIT REPORT IS OF NO HELP IN ABSENCE OF SUPPORTING BILLS, VOUCHERS AND PROOF OF PAYMENT, WHICH IS MISSING IN ALL THESE CASES. AS NOT EVEN IOTA OF EVIDENCE IS BROUGHT BEFORE ME TO SUPPORT THE CL AIM. HENCE, THE APPEAL IS DISMISSED ON THIS ISSUE. 4. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A SUB CONTRACTOR OF BHANGADIYA GROUP. HE SUBMITTED THAT IN THE CASE OF BHANGADIYA GROUP THEY HAVE DISCLOSED SUBSTANTIAL AMOUNT OF INCOME WHICH WAS AS HIGH AS 12% GROSS PROFIT. HE SUBMITTED THAT THE HUGE AMOUNT OFFERED / ACCEPTED FOR TAXATION BY BHANGADIYA GROUP WAS ALSO ON T HE PREMISE THAT TAXES WERE BEING PAID EVEN IN CASE OF SUB CONTRACTOR PAYMENTS. HENCE LEARNED COUNSEL SUBMITTED THAT THIS ASSESSEE BEING A SUB CONTRACTOR SHOULD NOT BE FURTHER PENALISED MERELY BECAUSE SOME VOUCHERS WERE NOT AVAILABLE. LEARNED COUNSEL SUBMIT TED THAT AS EVIDENT FROM THE AOS ORDER IT IS CLEAR THAT BOOKS OF ACCOUNTS AND VOUCHERS HAVE BEEN PRODUCED. HE SUBMITTED THAT THE AO HAS FOUND ONLY SOME SHORT COMINGS. HE SUBMITTED THAT THE AO HAS NOT EVEN BOTHERED TO QUANTIFY THE DISCREPANCIES FOUND. HENC E LEARNED COUNSEL PLEADED THAT SOME DISALLOWANCES CAN BE MADE FOR SOME MISSING VOUCHERS BUT BY NO MEANS AN EXCESSIVE ESTIMATE OF 8% OF GROSS PROFIT SHOULD BE DONE. 6. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CARE FULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT BOOKS OF ACCOUNTS AND VOUCHERS HAVE BEEN PRODUCED BEFORE THE AO. THE AO HAS NOTICED THAT SEVERAL VOUCHERS WERE NOT AVAILABLE AND IN SOME CASES SELF MADE VOUCHERS WERE PROVIDED. NO QUANT IFICATION OF THE AMOUNT INVOLVED IN THESE VOUCHERS HAS BEEN DONE. THE AO HAS FURTHER NOTED THAT THE ASSESSEE IN THE CASE OF 5 ITA NO. 29 9 /NAG/201 2 SURVEY IN THE CASE OF BHANGADIYA GROUP HAS ADMITTED THE DISCREPANCIES AND INFIRMITIES IN ITS BOOKS OF ACCOUNTS. THE AO HAS FOUND THE ABOVE AS GOOD REASON FOR REJECTING THE BOOKS OF ACCOUNTS. WE FURTHER NOTE THAT THE LEARNED CIT(APPEALS) ALSO HAS NOT SPECIFICALLY DEALT WITH THE CASE OF THE ASSESSEE. HIS ORDER IS TOTALLY DEVOID OF THE SPECIFIC FACTS AND THE AOS ORDER IN THIS CASE. RATHE R HE HAS PASSED AN ORDER AS IF HE IS DEALING WITH SCORES OF SUB CONTRACTORS OF BHANGADIYA GROUP. 8. BE THAT AS IT MAY, WE FIND THAT THE PROFIT DISCLOSED BY THE ASSESSEE IS EXTREMELY LOW. WHEN THIS IS COUPLED WITH THE FACT THAT PROPER SUPPORTING VOUCHERS AR E NOT AVAILABLE, WE ARE CONSTRAINED TO OBSERVE THAT AN ESTIMATE OF INCOME IS CALLED FOR. HOWEVER, WE NOTE THAT THE AO HAS NOT GIVEN ANY COGENT BASIS FOR MAKING AN ESTIMATE OF PROFIT OF 10 %. LEARNED CIT(APPEALS) HAS ALSO AFFIRMED THE ESTIMATE OF 8% WHICH TO SOME EXTENT DRAWS SUPPORT FROM PROVISIONS OF SECTION 44AD WHICH PROVIDES THAT PRESUMPTIVE TAXATION AT THE RATE OF 8% OF BUSINESS IS GENERAL. HOWEVER, SINCE IN THE PRESENT CASE THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS AND SOME VOUCHERS, IN OUR CONSI DERED OPINION, ESTIMATE OF 5% OF THE TOTAL TURNOVER AS PROFIT OF THE YEAR WILL SERVE THE ENDS OF JUSTICE. ACCORDINGLY WE MODIFY THE ORDERS OF AUTHORITIES BELOW AND HOLD THAT 5% ESTIMATE OF PROFIT SHOULD BE MADE IN THIS CASE. 9. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY , 2016 SD/ - SD/ - (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER NAGPUR, DATED: - 31 / 05 /2016 M.B.B.ODKHE / SR. P.S. 6 ITA NO. 29 9 /NAG/201 2 COPY FORWARDED TO : 1. SMT. KAMLA SHARMA L/H. OF LATE KRISHNA BIHARI SHARMA, 19, VERMA LAYOUT , NAGPUR - 4400 10 1. ITO, WARD 8(1),MECL BUILDINGS, DR. AMBEDKAR BHAWAN, SEMINARY HILLS, NAGPUR - 440006 2. C.I.T. - IV, NAGPUR. 3. CIT (APPEALS) - I I , NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR M.B.B.ODKHE/SR. P.S.