M/s Prabhat construction company, V. C.I.T. -1,

ITA 31/PAT/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1058 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARCHANA SINHA SR S C
• Assessee Lawyers: SUBHASH CHANDRA
• Keywords: Business income; Depreciation; Opportunity of being heard; Principle of natural justice; Onus to prove
• Section: 194C; 68; 263

Judgement Text

, PATNA IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA . . , , BEFORE SHRI A.D. JAIN (JM) AND SHRI SANJAY ARORA (AM) ./ I.T. A. NO.31 / PAT/201 3 ( / ASSESSMENT YEARS: 2008 - 0 9 ) M/S . PRABHAT CONSTRUCTION COMPANY , KAIMUR , BIHAR. / VS. CIT - 1, PATNA. ./ ./ PAN/GIR NO. :AAJF P1871F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUBHASH CHANDRA , / RESPONDENT BY : SMT. ARCHANA SINHA , SR.S.C. / DATE OF HEARING : 2 1/4/2015 / DATE OF PRONOUNCEMENT : 17 / 7 /2015 / O R D E R PER SANJAY ARORA, AM: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) BY THE COMMISSIONER OF INCOME TAX - I , PATNA (CIT FOR SHORT) DATED 30.11.2012 QUA THE A SSESSEES A SSESSMENT FOR THE ASSESSMENT YEAR (A.Y.) 2008 - 09 . 2. THE APPEAL RAISES THE ISSUE OF MAINTAINABILITY OR OTHERWISE IN LAW OF THE REVISION U/S. 263 OF THE ACT OF THE ASSESSMENT UNDER REFERENCE ON THE FOLLOWING GROUNDS: A) N ON - CONSIDERATION OF DISALLOWANCE U /S.40(A)(IA) OF HIRE CHARGES FOR JCB MACHINES, BEING SUBJECT TO TDS @ 10%, DEBITED IN ACCOUNTS AND 2 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT CLAIMED IN THE SUM OF RS.9,97,637/ - , I.E., IN VIEW OF THE ADMITTED NON - DEDUCTION OF TAX AT SOURCE; B) N ON - CONSIDERATION, SIMILARLY , OF LABOUR CHARGES PAID TO LABOUR CONTRACTORS , IN THE AGGREGATE OF RS.35,30,828/ - , U/S.40(A)(IA) IN - AS - MUCH AS THE SAME IS LIABLE TO TDS @ 1% , AND WHICH HA S ADMITTED LY NOT BEEN DEDUCTED OR DEPOSITED TO THE CREDIT OF THE C ENTRAL G OVERNMENT ; AND C) N ON - CONSIDERATION F OR A SSESSMENT AS INCOME U/S. 68 OF CASH CREDITS BY WAY OF UNSECURED LOANS FROM TWO PARTIES , FOR A TOTAL OF RS.25,35,500/ - . THE LD. CIT HELD THE ASSESSEE TO HAVE VIOLATED THE PROVISIONS OF SECTION 194C OR, AS THE CASE MAY BE, SECTION 194I , SO THAT THE DISALLOWANCE U/S . 40(A)(IA) WAS EXIGIBLE, WHILE NO ENQUIRY WAS MADE BY THE ASSESSING OFFICER (A.O.) IN RESPECT OF THE COMPLIANCE OF THE TDS PROVISION /S AND IN RESPECT OF THE TWO CASH CREDITS. 3. BEFORE US, THE ASSESSEES ARGUMENT WAS T W O - F OLD, ONE , LEGAL , AND THE OTHER FACTUAL. ON FACTS, IT WAS STATED THAT THE PAYMENT FOR HIRE CHARGES S TANDS MADE TO TWENTY PARTIES AND, SIMILARLY, FOR LABOUR CHARGES TO 100 CONTRACTORS ( AND NOT 10, AS SHOWN, WHICH IS THUS WRONGLY SO ) AND, THEREFORE, THE TAX DEDUCTION PROVISION SHALL NOT AP PLY. ON THE LEGAL ASPECT, THE ASSESSEE , RELYING ON CIT VS. BANWARI LAL BANSIDHAR [1998] 229 ITR 229 (ALL), SUBMITTED THAT THE ASSESSEES INCOME FOR THE YEAR BEING ASSESSED INVOKING SECTION 145(3) BY THE A.O., NO DEDUCTION QUA THE IMPUGNED SUM S ON ACCOUNT O F HIRE CHARGES A S WELL AS LABOUR CHARGES HAS BEEN ALLOWED AND, ACCORDINGLY, NO QUESTION OF DISALLOWANCE IN THEIR RESPECT ARISES . THERE IS, ACCORDINGLY, NO SCOPE FOR DISALLOWANCE EITHER U/S.40(A)(IA) ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE, OR ANY OTHE R PROVISION FOR THAT MATTER . AS REGARDS CASH CREDIT/S, THE CREDITOR/S HAD FURNISHED CONFIRMATION LETTER/S , CONSIDERING WHICH , THE SAME HA VE BEEN ACCEPTED BY THE A.O. THERE WAS, THUS, NO QUESTION OF REVISITING THE MATTER AGAIN. IN FACT, THE TOTAL INCOME ASS ESSED P URSUANT TO THE REVISION ORDER IS AT RS.74.57 LACS, ON A GROSS RECEIPT OF RS.106.29 LACS, W HICH WORKS OUT TO AN UNIMAGINABL Y HIGH ( NET ) PROFIT RATE OF 70.16%. THE REVENUE, ON THE OTHER HAND, WOULD RELY ON THE IMPUGNED ORDER. 3 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT 4. WE HAVE HEARD THE PAR TIES, AND PERUSED THE MATERIAL ON RECORD. 4.1 OUR FIRST OBSERVATION IS THAT THE P RINCIPAL BASIS FOR THE LD. CIT IN ASSUMING JURISDICTION U/S. 263 IS LACK OF ENQUIRY OR DUE APPLICATION OF MIND BY THE ASSESSING AUTHORITY. THE SAME, WHERE SO, CONSTITUTE S A V ALID BASIS FOR REVISION U/S. 263. THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) LAID DOWN A FOUR - WAY TEST FOR THE INVOCATION OF THE PROVISION. SUCCINCTLY PUT, THESE ARE; INCORRECT ASSUMPTION OF FACTS; INCORRECT AP PLICATION OF LAW; WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE; AND WITHOUT APPLICATION OF MIND. IT IS THE LAST CATEGORY, IF NOT THE SECOND ONE AS WELL, WHICH ARISE S IN THE INSTANT CASE, AND WHICH, THEREFORE, WE ARE CONCERNED WITH. T HE SAME IN FACT REPRESENT TRITE LAW, TOWARD WHICH WE MAY CITE SOM E DECISIONS, VIZ. CIT V. MCMILLAN & CO . [ 1958 ] 33 ITR 182 (SC); RAMPYARI DEVI SARAOGI VS. CIT [ 1968 ] 6 7 ITR 84 (SC); SMT. TARA DEVI AGARWAL VS. CIT [1973] 88 ITR 323 (SC); JAI BHARAT TANNERS V. CIT , 264 ITR 673 (MAD.); ASHOK LEYLAND LTD. V. CIT , 260 ITR 599 (MAD.); SWARUP VEGETABLE PRODUCTS V. CIT , 187 ITR 412 (ALL.) ; THALIBAI F. JAIN V. ITO , 101 ITR 1 (KAR.) ; GEE VEE ENTERPRISES V. CIT (ADDL.) , 99 ITR 375 (DEL.) . HIS ORDER, REQUIRING THE A.O. TO FRAME THE AS SESSMENT A FRESH AFTER MAKING NECESSARY ENQUIRY IN ACCORDANCE WITH LAW, IS THUS CONSISTENT WITH HIS OBJECTION FOR ASSUMING REVISION, AND IT WOULD BE WRONG TO SAY THAT HE HAS PRE - DECIDED THE ISSUE. IN FACT, IF AND TO THE EXTENT HE SO DOES, HE, WE MAY CLARIFY , EXCEEDS HIS JURISDICTION IN - AS - MUCH AS THE VERY BASIS FOR THE INVOCATION OF SECTION 263 IN THE PRESENT CASE IS THE ABSENCE OF PROPER ENQUIRY AND DUE APPLICATION OF MIND BY THE A.O., MAKING HIS ORDER LEGALLY INFIRM, SO THAT THE MATTER SHALL NORMALLY REQUI RE BEING CONSIDERED BY HIM , ALLOWING PROPER OPPORTUNITY FOR STATING ITS CASE TO THE ASSESSEE. W E SHALL BE EQUALLY AT FAULT, IF WE WERE TO DISCUSS THE MERITS OF THE CASE. 4.2 THIS LEAVES US WITH THE ASPECT OF WHETHER THERE HAS INDEED BEEN, I.E., ON FACTS, LACK OF PROPER ENQUIRY OR DUE OF APPLICATION OF MIND BY THE A.O. WHILE FRAMING THE ASSESSMENT, FOR HIS ORDER TO BE CONSIDERED AS BEING PER SE ERRONEOUS IN - SO - FAR AS IT IS 4 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT PREJUDICIAL TO THE INTEREST OF THE REVENUE, I.E., ON THAT COUNT ALONE. THERE IS NOTH ING ON RECORD TO SUGGEST THAT THE ISSUE OF DEDUCTION OR, AS THE CASE MAY BE, NON - DEDUCTION OF TAX AT SOURCE AND, THUS, OF DISALLOWANCE U/S.40(A)(IA), IF ANY, WAS CONSIDERED OR EXAMINED BY THE A.O. WHILE FRAMING THE ASSESSMENT. IN FACT, EVEN THE ASSESSEE DO ES NOT SO CONTEND, WITH THERE NOT BEING EVEN ANY ENQUIRY IN THE MATTER. ITS OBJECTION ON FACTS, I.E., OF THE PAYMENT F O R THE JCB MACHINES AS BEING TO 20 PAYEES , OR THAT QUA LABOUR CHARGES TO 100 CONTRACTORS, ARE AGAIN MATTERS O F VERIFICATION AND DETERMINAT ION AT THE A.O.S END , WITH THERE BEING NOTHING TO SHOW THAT THIS ASPECT OF THE MATTER WAS CONSIDERED ; RATHER, BEING CONTENTIONS RAISED BY THE ASSESSEE ONLY DURING THE REVISION PROCEEDINGS , EXHIBIT ING , ONCE AGAIN, THAT THE ISSUE QUA APPLICATION OF S. 40(A) (IA) STOOD OMITTED TO BE CONSIDERED BY THE ASSESSING AUTHORITY IN ASSESSMENT . 4.3 AGAIN, EVEN GRANTING (WITHOUT ADMITTING THOUGH) THAT NO SUCH SEPARATE DISALLOWANCE COULD BE MADE WHILE FRAMING THE BUSINESS INCOME U/S.145, WHAT IS THERE TO SHOW THAT THE A PPLICABILITY OF THE TDS PROVISION AND DISALLOWANCE OF SECTION 40(A)(IA) WAS EFFECTED TO BY HIM, IN ARRIVING AT HIS ESTIMATION OF INCOME. THE SAID ESTIMATION WOULD DEEM A PRESUMPTIVE ALLOWANCE OF ALL PERMISSIBLE DEDUCTION S , I.E., FROM SECTIONS 30 TO 38. HOW EVER, WHERE A PARTICULAR DEDUCTION IS SUBJECT TO A PRECONDITION FOR ITS ALLOWANCE, AS IS THE DEDUCTION AND DEPOSIT OF TAX DEDUCTIBLE AT SOURCE WITHIN THE PRESCRIBED TIME QUA THE SUMS SPECIFIED IN OR THE SUBJECT MATTER OF S. 40(A)(IA), WHICH IS OSTENSIBLY N OT MET , IT CANNOT BE SAID THAT THE ESTIMATION OF INCOME IS UPON CONSIDERING ALL THE RELEVANT PROVISIONS IN - AS - MUCH AS IT SUFFERS FROM NO N - CONSIDERATION OF THAT ASPECT OF THE MATTER. THE ESTIMATION OF INCOME IN SUCH A CASE IS TO BE MADE IN TWO PARTS, I.E., FIRST , ON A GLOBAL BASIS, PRESUMING AN ALLOWANCE O F ALL DEDUCTIONS AND , SECOND , THE ADJUSTMENT /S , IF ANY, ON ACCOUNT OF A P A R TICULAR SUM /S, ON THE BASIS OF THE SATISFACTION OR OTHERWISE, AS THE CASE MAY BE , OF THE SPECIFIC CONDITION FOR ITS ALLOWANCE , WHIC H IS PRESUMED IN THE GLOBAL ESTIMATION . THIS ALONE WOULD MEET THE PRESUMPTION IN LAW THAT THE ASSESSMENT HAS BEEN CORRECTLY MADE, SO THAT ALL THE ALLOWANCE S OR, AS THE CASE MAY BE , DISALLOWANCE S , STAND 5 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT MADE. THE ESTIMATION, IT MAY BE NOTED, IS OF TOTAL INC OME UNDER THE ACT AND NOT OF COMMERCIAL PROFIT ALONE. REFERENCE, IN THIS CONTEXT, DRAWING SUPPORT THERE - FROM, IS MADE TO THE VARIOUS DECISIONS BY THE HONBLE JURISDICTIONAL H IGH C OURT , AS IN THE CASE OF SHYAM BIHARI VS. CIT [2012] 345 ITR 283 (PATNA) , ADVO CATING A SEPARATE ALLOWANCE OF DEPRECIATION U/S.32(1) IN - AS - MUCH AS THE SAID ALLOWANCE, A STATUTORY ALLOWANCE , IS SUBJECT TO VA R I ATION FROM YEAR TO YEAR . THIS IS ALSO THE RATION ALE OR THE UNDERSTANDING OF THE T RIBUNAL OF THE SAID DECISION, AS EXPRESSED IN THE CASE OF SHASHI BUILDERS (INDIA) (P.) LTD. V. ITO (IN ITA NOS. 155 & 163/PAT/2012 DATED 06.05.2015). THERE BEING NOTHING ON RECORD TO SUGGEST OF IT BEING SEPARATELY CONSIDERED OR TAKEN INTO ACCOUNT WHILE ESTIMATING THE INCOME, THE SAME CANNOT BE PRESUME D TO HAVE BEEN ALLOWED AND, THUS, WOULD REQUIRE BEING ALLOWED SEPARATELY. THE DECISION IN THE CASE OF SHRI RAM JHANWAR LAL VS. ITO [2010] 321 ITR 400 (RAJ) IS ALSO ON THE SAME LINES ; THE H ONBLE C OURT IN FACT ALSO HOLDING FOR THE ALLOWANCE OF INTEREST AND REMUNERATION TO PARTNERS SEPARATELY, I.E., AFTER THE ESTIMATION OF THE INCOME OF AN ASSESSEE FIRM, EVEN AS BOTH THE DEDUCTIONS FALL U/SS. 30 TO 38, OF COURSE R/W S. 40(B). CONTINUING FURTHER , T HE DISALLOWANCE U/S.40(A)(IA), A NON OBSTANTE PROVISION, IS A STATUTORY DISALLOWANCE. THE SAME IS NOT AN ABSOLUTE DISALLOWANCE, AND HAS NOTHING TO DO WITH ADMISSIBILITY OF THE DEDUCTION PER SE , I.E., AS BEING NOT FOR BUSINESS PURPOSES , OR ON ANY OTHER GROUND. THE DISALLOWANCE IS ATTRACTED FOR WANT OF DEDUCTION OF TAX AT SOURCE TO THE ACCOUNT OF THE PAYEE, SO THAT IT IS , IN THAT SENSE , A TECHNICAL OR ARTIFICIAL DISALLOWANCE, STATUTORILY PROVIDED. THE ALLOWANCE IS DEFERRED TO THE YEAR OF DEDUCTION AND DEPOSIT O F THE TAX AT SOURCE. THE SAME, THUS, ONLY INTRODUCES A TIMIN G DIFFERENCE. THE ASSESSEE WOULD, THUS, BE WELL WITHIN HIS RIGHT TO CLAIM THE DEDUCTION IN ITS RESPECT UPON DEDUCTION AND DEPOSIT OF TAX AT SOURCE ON THE SAME SUM IN A SUBSEQUENT YEAR. AS SUCH, WHETHER ASSESSED BY WAY OF A NORMATIVE ASSESSMENT, I.E., RELYI NG ON THE ACCOUNTS, OR ESTIMATING THE INCOME ON GLOBAL BASIS, REJECT ING THE SAME, THE NORMAL PRESUMPTION WOULD ONLY BE OF THE ASSESSEE HAVING NOT BEEN, ON ACCOUNT OF SECTION 40(A)(IA) , ALLOWED DEDUCTION FOR THE RELEVANT YEAR FOR NON SATISFACTION OF ITS PRE SCRIPTION. THE REVENUE CANNOT FOR THE SUBSEQUENT YEAR , ON A 6 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT CLAIM FOR DEDUCTION ON PAYMENT OF TDS, BE COUNTENANCE D TO SAY THAT IN - AS - MUCH AS THE INCOME WAS ASSESSED ON A GLOBAL OR ESTIMAT E BASIS, SECTION 40(A)(IA) WOULD HAVE NO APPLICATION AND, ACCORDINGLY , NO DI ALLOWANCE O F THE IMPUGNED SUM IS DEEMED TO HAVE BEEN MADE. THERE WOULD THUS BE A DOUBLE J EOPAR D Y . THERE BEING NOTHING TO S HOW THAT THE DISALLOWANCE OF THE IMPUGNED SUM/S U/S.40(A)(IA) WAS F A CT OR ED INTO WHILE ESTIMATING THE INCOME ON GLOBAL BASIS, WH ICH EXERCISE IS THUS ESSENTIALLY TOWARD ASCERTAINING COMMERCIAL PROFIT ON NORMATIVE BASIS/CONDITIONS , I T CANNOT AT ALL BE CONSIDERED, ON FACTS, THAT DEDUCTION U/S.40(A)(IA) STOOD ALREADY EFFECTED. IT WOULD BE EQUALLY INCORRECT TO SAY THAT SECTION 40(A)(IA) IS NOT ATTRACTED MERELY BECAUSE THE INCOME STANDS ESTIMATED, THE SAME BEING ONLY ON A SUMMARY BASIS, TO BE MADE, TAKING INTO ACCOUNT ALL THE RELEVANT FACTS AND CIRCUMSTANCES, CONSISTENT WITH THE RELEVANT PROVISIONS OF LAW. THE PROVISION IS TECHNICAL ; AND HARSH, IF NOT ALSO INEQUITABLE, RESULTING IN EFFECT (BY WAY OF DISALLOWANCE) OF ASSESSMENT O F ANOTHER S INCOME ON ACCOUNT OF NON - DEDUCTION (DEPOSIT) OF TDS. THE PROVISION, YET, HAS BEEN HELD AS CONSTITUTIONAL, AND SHALL ACCORDINGLY APPLY. THE ESTIMATION OF INCOME, TO THE BEST OF HIS JUDGMENT, IS TO BE MADE BY THE ASSESSING AUTHORITY OF TOTAL INCOME UNDER THE ACT AND NOT O F THE COMMERCIAL PROFIT ALONE. THE SAME WOULD THOUGH HAVE TO BE EXHIBITED IN - AS - MUCH AS TRANSPARENCY, SO THAT WHAT STANDS CONSIDERED OR NO T, AND THE MANNER OF ITS CONSIDERATION, IS AN ESSENTIAL PRE - REQUISITE OF A JUDICIAL ORDER. THIS WOULD ALSO MEET THE ASSESSEES ARGUMENT OF THE PROFIT RATE, RECKONED WITH REFERENCE TO TURNOVER, COMES TO AN ABNORMALLY HIGH RATE. THE ARGUMENT PRESUMES THAT WHAT IS BEING ASSESSED IS THE BUSINESS PROFIT, UNDERLINING ITS FALLACY. WHY, A SIMILAR RATIO OF INCOME COULD ARISE EVEN UNDER THE CONDITION OF A NORMATIVE ASSESSMENT. FURTHER, RELIANCE IS ALSO PLACED ON THE DECISIONS BY THE APEX COURT IN CIT VS. DEVI PRA SAD VISHWANATH [1969] 72 ITR 194 (SC) AND CIT VS. MANICK SONS [1969] 74 ITR 1 (SC), TO REB U T THE PROPOSITION THAT WHEN BOOKS OF ACCOUNT ARE REJECTED, THE SAME CANNOT BE AGAIN RELIED UPON FOR THE PURPOSE OF MAKING ANY OTHER ADDITION/DISALLOWANCE, ALSO DISCU SSED BY THE TRIBUNAL IN MUNI RAI (SUPRA). 7 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT 4.4 THERE IS, HOWEVER, A CAVEAT TO WHAT STANDS STATED BY US. THE ESTIMATION OF INCOME HAVING BEEN MADE AT A INCOME HIGHER THAN THAT DISCLOSED BY THE ASSESSEES ACCOUNTS, THE ASSESSEE CAN VALIDLY STATE OF HAVING NO T BEEN ALLOWED A PARTICULAR EXPENDITURE IN FULL, I.E., TO THE EXTENT OF THE DIFFERENCE. THIS ASPECT OF THE MATTER STANDS ALSO DISCUSSED BY THE TRIBUNAL IN MUNI RAI V. ACIT (IN ITA NOS. 29 & 30/PAT/2012 DATED 28/5/2015). WHERE SO CLAIMED, THE A.O. SHALL CON SIDER THE ASSESSEES ARGUMENT ON MERITS. IT MAY WELL BE THAT HE HAS WHILE ESTIMATING THE INCOME MADE NO DISALLOWANCE OF THE RELEVANT EXPENDITURE, I.E., QUA WHICH DISALLOWANCE (AS U/S.40(A)(IA) ) IS BEING RECKONED, WHILE IT COULD ALSO BE THAT HE HAS, TO WHAT EVER EXTENT. THIS, IN FACT, FURTHER ENDORSES OUR VIEW THAT THE ESTIMATION OF INCOME UPON REJECTION OF THE ASSESSEES ACCOUNTS AS NOT RELIABLE FOR ASSESSMENT OF INCOME U/S.145(3) IS TO BE MADE TRANSPARENTLY, IN TWO STEPS. THE FIRST BEING TOWARD ASSESSMENT O F COMMERCIAL PROFITS, AND THEN AGAIN THE SPECIFIC ALLOWANCES OR DISALLOWANCE S THAT STAND TO BE EFFECTED, AS U/S.40(A)(IA) , AN ARTIFICIAL, STATUTORY DISALLOWANCE . IT SHALL ALSO BE IN SUCH A CASE INCUMBENT ON THE A.O. TO JUSTIFY THE TOTAL DISALLOWANCE(S), I. E., OF THE EXPENDITURE CLAIMED U/S. 40(A)(IA) , IN - AS - MUCH AS THE SAME ITSELF IMPLIES ITS TOTAL ALLOWANCE IN THE ESTIMATION OF INCOME ON SUMMARY/GLOBAL BASIS IN THE FIRST PLACE. THE AFORE - SAID, AGAIN, EMPHASIZES THE NEED FOR MAINTAINING TOTAL TRANSPARENCY I N THE ESTIMATION OF INCOME, SO THAT WHATEVER CONSIDERATIONS OR FACTS STAND CONSIDERED OR FACTORED INTO ARE MADE EXPLICIT AND KNOWN. THIS WOULD, BESIDES MAKING THE EXERCISE OBJECTIVE, ALSO PROVIDE AND MAKE KNOWN THE BASIS OF THE ESTIMATION OF INCOME, BEING A RESULT OF A QUASI JUDICIAL FUNCTION OF THE A.O., WHICH IS SUBJECT TO JUDICIAL REVIEW. CASE LAW 4.5 THE DECISION IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT [1998] 232 ITR 776 (AP) , RELIED UPON BY THE ASSESSEE, IN FACT, SUPPORTS THE VIEW EXPRESSED IN THIS ORDER. CONTRARY TO WHAT STANDS STATED IN BANWARI LAL BANSHIDAR (SUPRA) , THE PRESUMPTION IN LAW IS NOT THAT NO DEDUCTION HAS AT ALL BEEN CLAIMED, BUT WOULD ONLY BE OF THE BUSINESS INCOME AS HAVING BEEN DETERMINED U/S.28, I.E., BY FOLLOWING THE MANDATE OF SECTION 29, WHICH 8 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT PROVIDES FOR COMPUTING THE SAME IN ACCORDANCE WITH THE PROVISIONS OF SS.30 TO 43D. ALL THE ALLOWANCES UNDER CHAPTER IV - D, AS WELL AS DISALLOWANCES THERE - UNDER, AS EXPLAINED IN INDWELL CONSTRUCTIONS (SUPRA), WOULD BE ASSUMED TO HAVE BE EN ALLOWED OR, AS THE CASE MAY BE, DISALLOWED. IT IS PRECISELY ON ACCOUNT OF THIS POSITION IN LAW , AGREED TO IN PRINCIPLE, THAT WHERE IT IS SHOWN THAT THE A.O. HAD NOT APPLIED HIS MIND TO AN ASPECT OF THE MATTER, AND PROCEEDED TO ESTIMATE THE INCOME WITHOU T GIVING EFFECT TO A STATUTORY DISALLOWANCE / S, EITHER OUT OF IGNORANC E, ASSUMING THE PROVISION A S NOT APPLICABLE, OR THROUGH OVERSIGHT, THAT THE LD. CIT , AS THE COMPETENT AUT HORITY , WOULD STAND TO ASSUME JURISDICTION U/S.263. LACK OF APPLICATION OF MIND EX TEND S NOT ONLY TO MATTERS WHICH THE A.O. HAS DONE, BUT ALSO TO WHAT HE OUGHT TO HAVE, THOUGH HAS FAILED OR OMITTED TO. THE DISALLOWANCE U/S. 40(A)(IA) IS NOT OCCASIONED BY THE FACT OF IT BEING NOT ADMI SSIBLE PER SE , BUT FOR HAVING NOT DEDUCTED TAX AT SOURC E ON THE IMPUGNED SUM , FORMING PART OF THE PAYEES - TO WHOM IT IS ALLOWED, INCOME, I.E., TOWARD HIS TAX. NOT THEREFORE ADJUSTING THE ASSESSEES INCOME FOR THE SAME WOULD TRANSLATE INTO A DOUBLE WHAMMY FOR THE ASSESSEE IN - AS - MUCH AS THE PRESUMPTION IN LAW BEING OF ALL ALLOWANCES AND DISALLOWANCES HAVING BEEN EFFECTED, THE SAME COULD IN LAW VALIDLY BE CLAIMED AND ALLOWED ON PAYMENT OF TAX AT SOURCE IN A SUBSEQUENT YEAR AND, CORRESPONDINGLY , AS ALSO AFORE - STATED, A DOU BLE JEOPARDY FOR THE REVENUE. T HE SAID DE CISION, LAYING THE CORRECT PRINCIPLES, THOUGH FOUND D ISTINGUISHABLE ON FACTS, WOULD THUS BE OF NOT MUCH ASSISTANCE TO THE ASSESSEE. THE LEGAL PR O POSITION THAT NO ADDITION/DISALLOWANCE COULD BE MADE RELYING ON THE BOOK WHICH STAND REJECTED, WHICH FOUND FAVO UR WITH AND FORMS THE BASIS OF THE SAID DECISION, STANDS ALREADY CLARIFIED AS NOT VALID , WITH REFERENCE TO THE DECISIONS BY THE APEX COURT IN DEVI PRASAD VISHWANATH PRASAD (SUPRA) AND MANICK SONS (SUPRA ). THE OTHER DECISIONS RELIED BY THE ASSESSEE VIDE ITS PAPER BOOK - II, ALL OF WHICH WERE GONE THROUGH, HAVE BEEN FOUND INAPPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE OR OTHERWISE AS IRRELEVANT. OUR DECISION IS IN ANY CASE SUPPORTED BY AND IN CONSONANCE WITH THE DECISION IN THE CASE OF SHYAM BIHARI (SU PRA) BY THE HONBLE JU RISDICTIONAL HIGH COURT, WHICH HA S A BINDING PRECEDENT VALUE. 9 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT CONCLUSION 4.6 THE ASSESSING AUTHORITY, WHERE MAKING A REGULAR ASSESSMENT UNDER THE ACT, WHETHER FOLLOWING THE VERIFICATION PROCEDURE OR TO THE BEST OF HIS JUDGMENT, IS ONLY THAT OF THE TOTAL INCOME UNDER THE ACT. THE PRESUMPTION IN LAW IS THUS OF HAVING CONSIDERED ALL THE ALLOWANCES OR, AS THE CASE MAY BE, DISALLOWANCES, AS EXIGIBLE UNDER LAW IN - AS - MUCH AS HE CAN ONLY BE PRESUMED TO HAVE MADE AN ASSESSMENT IN ACCORDANCE WITH THE LAW. THE PRESUMPTION, H OWEVER, IS REBUTTABLE. W HETHER THE ASSESSMENT IS MADE U/S.143(3) OR U/S.144, WHERE THEREFORE IT IS SHOWN THAT A PARTICULAR ASPECT OF ASSESSMENT HAS ESCAPED HIS ATTENTION OR CONSIDERATION, THE MATTER CAN BE REQUIRED TO BE EX AMINED BY HIM IN ACCORDANCE WITH THE LAW AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BY THE CIT AS THE REVISIONARY AUTHORITY IN EXCERCISE OF HIS REVISIONARY POWER U/S.263 OF THE ACT. IN THE FACTS OF THE PRESENT CASE T HIS ASPECT OF T HE MATTER, I.E., THE EXIGIBILITY OF THE IMPUGNED SUMS TO TAX DEDUCTION AT SOURCE AND, CONSEQUENTLY, DISALLOWANCE U/S. 40(A)(IA) ON THE FAILURE TO DO SO, WAS NOT AT ALL CONSIDERED DURING THE ASSESSMENT PROCEEDINGS. WITH REGARD TO THE DISALLOWANCE U/S.40(A)( IA) BEING NOT PERMISSIBLE, EVEN WHERE APPLICABLE, I.E., WHERE THE ASSESSMENT IS FRAMED ON ESTIMATION BASIS, WE HAVE FOUND THE ARGUMENT AS NOT LEGALLY TENABLE. THIS IS AS THE ASSESSMENT OF INCOME EVEN UNDER THE ESTIMATION REGIME IS OF THE TOTAL INCOME UNDER THE ACT AND NOT OF THE BUSINESS PROFIT ALONE, AND WHICH COULD ONLY BE UPON CONSIDERING THE APPLICABILITY OR OTHERWISE IN THE FACTS OF THE CASE OF ALL THE RELEVANT PROVISIONS OF LAW, TO WHICH SECTION 40(A)(IA) IS OR CANNOT BE ANY EXCEPTION. THE SAME IN FAC T IS A STATUTORY DISALLOWANCE, ARTIFICIALLY INFLATING THE ASSESSEE - PAYERS INCOME FOR THE TIME BEING, WHICH IS LIABLE TO BE ALLOWED AS DEDUCTION UPON COMPLYING WITH THE CONDITION PRESCRIBED FOR ITS NON APPLICABILITY, I.E., OF THE DEPOSIT OF TDS TO THE CRED IT OF THE PAYEE, IN THE YEAR IN WHICH IT STANDS COMPLIED WITH, INTRODUCING THUS A TIMING EFFECT. NOT SO CONSIDERING; RATHER, LEADS TO AN ANOMALOUS , UNACCEPTABLE SITUATION. OUR REASONS IN SUPPORT OF OUR DECISION STAND LISTED IN THE FOREGOING PARAGRAPHS OF T HIS ORDER. OUR DECISION, BASED ON FIRST LEGAL PRINCIPLES, IS 10 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT SUPPORTED BY THE DECISIONS IN THE CASE OF SHYAM BIHARI (SUPRA) BY THE HONBLE JURISDICTION HIGH COURT AND SHRI RAM JHANWAR LAL (SUPRA). IN BOTH THESE DECISIONS, THE HONBLE HIGH COURTS HAVE HELD IN FAVOUR OF DEDUCTION OF STATUTORY ALLOWANCES EVEN WHERE THE INCOME IS ESTIMATED ON GLOBAL BASIS, WHICH HAS BEEN UNDERSTOOD BY THE TRIBUNAL TO IMPLY THAT IN - AS - MUCH AS THE SAID ALLOWANCES HAVE NOT BEEN CONSIDERED OR FACTORED INTO BY THE A.O. IN ARRIVI NG A T HIS ESTIMATION, THE SAME BEING OTHERWISE DEDUCTIBLE, WITH HIS PURVIEW BEING TO ASSESS THE TOTAL (ASSESSABLE) INCOME UNDER THE ACT, WOULD HAVE TO BE GIVEN EFFECT TO. TRUE, THERE IS REFERENCE TO THE CIRCULAR BY THE BOARD, OF WHICH SUPPORT IS DRAWN BY THE H ONBLE COURTS. HOWEVER, THE SAID CIRCULAR DOES NOT AND CANNOT OVERRIDE THE LAW, NOR IS THE SAME BINDING ON APPELLATE AUTHORITIES. THE PREMISE, OR THE UNDERLYING CONCERN, IT NEEDS TO BE APPRECIATED, IS TO ARRIVE AT THE BEST ESTIMATE OF THE TOTAL INCOME AFTE R CONSIDERING ALL THE RELEVANT PROVISIONS OF LAW, BE IT QUA A N ALLOWANCE OR DISALLOWANCE IN - AS - MUCH AS THE ASSESSMENT IS TO BE ONLY IN ACCORDANCE WITH THE LAW. THE ASSESSEES ARGUMENT THUS IS NOT VALID AND, ACCORDINGLY, WE FIND NO INFIRMITY IN THE DIRECTIO N OF THE LD. CIT IN RESTORING THE ASSESSMENT FOR THE CONSIDERATION OF THE RELEVANT ISSUES TO THE FILE OF THE ASSESSING AUTHORITY . WE DECIDE ACCORDINGLY . 5. COMING, NEXT , TO THE CASH CREDITS , T HE ASSESSEE STATES OF HAVING FILED CONFIRMATION S FRO M TH E CREDITORS. THE SAME WOULD AT BEST GO TO ESTABLISH THE IDENTITY OF THE CREDITORS, AND WOULD NOT ESTABLISH THEIR CAPACITY OR THE GENUINENESS OF THE CREDIT TRANSACTIONS. CONFIRMATIONS, I T IS TRITE LAW , ARE NOT DETERMINATIVE OF THE MA TTER , WITH THE APEX COUR T LAYING DOWN THREE PARAMETERS ON WHICH THE OBLIGATION CAST U/S. 68 IS TO BE DISCHARGED, I.E., BY PROVING THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE CREDIT . THE CONFIRMATION, IF AT ALL, ONLY ESTABLISHES THE IDENTITY OF THE CREDITOR. THE LD. CIT HAS IN FACT ALSO STATED THAT THE CONFIRMATIONS DO NOT BEAR THE PARTICULARS OF THE TRANSACTIONS, I.E., THE DATE AND THE MODE OF THE PAYMENT, AND EVEN AS MUCH AS THE PAN OF THE CREDITOR/S, SO THAT THE SAME CANNOT BE REGARDED AS COMPLET E. HOW, WE WONDER, COULD HIS INFERENCE OF THE A.O.S ACCEPTANCE OF THE CASH CREDIT AS PROVEN, OR OF THE ASSESSEE 11 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT HAVING DISCHARGED THE BURDEN OF PROOF U/S. 68, AS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE , BE CONTESTED UNDER SUCH CIRCUMSTANC ES. THIS IS IN VIEW OF A CLEAR LACK OF I NQUIRY AND APPLICATION OF MIND BY THE ASSESSING AUTHORITY WHILE FRAMING THE ASSESSMENT QUA THIS ASPECT THEREOF (REFER PARA 4.1 OF THIS ORDER). THE ASSESSEE HAS RELIED ON CASE LAW, AS IN THE CASE OF CIT VS. JAISWAL MO TORS FINANCE [1983] 141 ITR 706 (ALL); INDIA RICE MILLS VS. CIT [1996] 218 ITR 508 (ALL) , HOLDING THAT A CREDIT TO THE ACCOUNT OF THE PARTNERS IN A FIRM COULD ONLY BE ADDED U/S. 68 IN THEIR HANDS. THERE IS NOTHING TO SHOW THAT THE CREDIT IS FROM THE PARTNE RS. THE MATTER , IN OUR VIEW , IS FACTUAL , WITH THE DECISIONS BEING RENDERED WITH REFERENCE TO THE FACTS OF THE CASE, AS BY A PARTNER ON HIS INTRODUCTION AS SUCH IN A FIRM, OR BY THE PARTNERS ON THE COMMENCEMENT OF THE BUSINESS BY THE FIRM, ETC. ON THE LEGAL ASP ECT, H OW ONE WONDERS WOULD S. 68 NOT APPLY IN - AS - MUCH AS THE FIRM AND PARTNER ARE DIFFERENT PERSONS UNDER THE ACT, WITH THE CREDIT/S APPEARING IN THE BOOKS OF THE FIRM? REFERENCE IN THIS CONTEXT BE MADE TO THE DECISION IN THE CASE OF CIT VS. KISHO RI L AL SANTOSHI L AL [1995] 216 ITR 9 (RAJ.) , EXPLAINING THE LAW IN THE MATTER, B ASED ON FIRST LEGAL PRINCIPLES. WE, ACCORDINGLY, UPHOLD THE IMPUGNED ORDER ON THIS GROUND/S (2). 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED BY LISTI NG THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963 ON JULY 17, 2015 . SD/ - SD/ - ( A. D. JAIN ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER DATED : 17.07.2015 . . ./ ROSHANI , SR. PS 12 ITA NO. 31/PAT/2013 (A.Y. 2008 - 09) PRABHAT CONSTRUCTION COMPANY VS. CIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT 4. / CIT CONCERNED 5. , , / DR, ITAT, PATNA 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , ITAT, PATNA