ITO, Gurgaon V. Sh. Satish Kumar, Gurgaon

ITA 3149/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58693 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 13-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS S MOHANTHY
• Assessee Lawyers: A K SRIVASTAVA
• Section: 44AD; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G: NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T. A. NO.3149/DEL/2011 ASSESSMENT YEAR : 2007-08 INCOME-TAX OFFICER, SHRI SATISH KUMAR, WARD-1(2), GURGAON. VS. H.NO.130, OPPO. SEC.5, GALI NO.7B, SHEETLA COLONY, GURGAON. PAN NO. AJBPK9859P I.T. A. NO.2550/DEL/2011 ASSESSMENT YEAR : 2007-08 SHRI SATISH KUMAR, INCOME-TAX OFFICER, H.NO.130, OPP. SECTOR-5, VS. WARD-2, GURGAON. GALI NO.7B, SHEETLA COLONY, GURGAON-122001, HARYANA. (APPELLANTS) (RESPONDE NTS) DEPARTMENT BY : MRS. S. MOHANTHY, SR. DR. ASSESSEE BY : SHRI A.K. S RIVASTAVA, CA. O R D E R PER K.D. RANJAN, ACCOUNTAT MEMBER: THESE CROSS APPEALS BY THE REVENUE AND ASSESSEE FOR ASSESSMENT YEAR 2007-08 ARISE OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), PANCHKULA. THESE APPEALS WERE HEARD TOG ETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2 2. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS A S UNDER:- THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN ESTIMA TING THE INCOME OF APPELLANT ASSESSEE @ 12% OF GROSS RECEIPT S AGAINST THE DECLARED INCOME OF 3.72% OF GROSS RECEIPTS WITH OUT ANY BASIS. 3. THE ONLY ISSUE FOR CONSIDERATION IN ASSESSEES A PPEAL RELATES TO ESTIMATION OF NET PROFIT FROM CIVIL CONTRACT WORK @ 12% AS AGAINST 3.72% ADMITTED BY THE ASSESSEE. THE FACTS OF THE CASE ST ATED IN BRIEF ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR. THE ASSESSEE ADMIT TED INCOME OF RS.5,98,173/- FROM GROSS CONTRACT RECEIPTS OF RS.1,73,47,193/-. THE ASSESSEE WAS ASKED TO FURNISH DETAILS AND INFORMATION WITH REGARD TO EXPE NSES INCURRED ALONG WITH THEIR COPY OF ACCOUNT, BILLS AND VOUCHERS. HOWEVER , DESPITE SEVERAL OPPORTUNITIES, THE ASSESSEE NEITHER FURNISHED ANY I NFORMATION NOR PRODUCED BOOKS OF ACCOUNT AND BILLS/VOUCHERS IN SUPPORT OF E XPENSES CLAIMED IN THE RETURN. THE ASSESSING OFFICER FOLLOWING THE DECISI ON OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. PRABHAT KUMA R CONTRACTOR, SIRSA IN ITA NO.293 OF 2008 DATED 14.11.2008, ESTIMATED THE NET PROFIT BY APPLYING 12% OF THE GROSS CONTRACTUAL RECEIPTS WHICH RESULTE D IN ADDITION OF RS.14,36,467/-. 4. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE HAD DECLARED NET PROFIT OF 3.72% WHICH WAS QUITE REASONABLE KEEPING IN VIEW THE GROSS RECEIPTS OF THE ASSESSEE. THE ASSESSING OFFICER WH ILE MAKING BEST JUDGMENT 3 ASSESSMENT SHOULD NOT ACT DISHONESTLY, VINDICTIVELY AND CAPRICIOUSLY AND HIS JUDGMENT AND THE ESTIMATION OF INCOME SHOULD BE PRO PER AND SHOULD BE DETERMINED BY APPLYING LAWFUL METHOD. IT WAS FURTH ER CONTENDED THAT UNDER SEC. 144, ASSESSMENT MAY BE A GUESS WORK BUT IT MUS T BE GENUINE AND HONEST GUESS WORK. IT WAS ALSO PLEADED THAT IN CASE OF A SMALL CONTRACTOR UNDER SEC. 44AD, THE NET PROFIT IS TO BE DETERMINED AT 8%. IT WAS FURTHER CONTENDED THAT AS THE TURNOVER GOES UP THE NET PROFIT RATIO TENDS TO GO DOWN. IT WAS THEREFORE, PLEADED THAT NET PROFIT RATE SHOULD BE R ESTRICTED TO 8%. THE LEARNED CIT(A) HOWEVER, NOTED THAT THE ASSESSEE HAD NOT COM PLIED WITH ANY OF THE NOTICES ISSUED BY THE ASSESSING OFFICER FOR WHICH T HE BLAME WAS BEING SHIFTED TO THE ACCOUNTANT OF THE ASSESSEE. SUCH CL AIM WAS NOT VERIFIABLE. THE LEARNED CIT(A) FURTHER NOTED THAT THE AO HAD AP PLIED NET PROFIT RATE OF 12% RELYING ON THE DECISION OF HONBLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF M/S. PRABHAT KUMAR CONTRACTOR (SUPRA). THE LEARNED CIT(A) THEREFORE, UPHELD THE ESTIMATION OF PROFIT @ 12%. 5. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ADMITTED THAT BOOKS OF ACCOUNTS WERE NOT PRODUCED. IT WAS ALSO ADMITTED THAT THE ASSESSEE WILL NOT BE ABLE TO PRODUCE BOOKS OF ACCOUNTS. REFERRING TO SEC. 44AD OF THE ACT, IT WAS SUBMITTED BY HIM THAT IN CASE OF A SMALL CONTRACTOR, THE LAW PROVIDES THE ESTIMATION OF NET PROFIT @ 8%. HE THEREFORE, 4 SUBMITTED THAT AT THE BEST IN THE ABSENCE OF BOOKS OF ACCOUNTS, NET PROFIT CAN BE ESTIMATED AT 8%. THE LEARNED AR OF THE ASSESSEE RELIED ON THE DECISION OF ITAT IN THE CASE OF RAM PHAL KHASA VS. ITO DATED 12 TH AUGUST, 2011 IN ITA NO.3401/DEL/2010 FOR THE ASSESSMENT YEAR 2007-08 WH EREIN ON IDENTICAL FACTS THE ESTIMATION OF NET PROFIT AT 8% HAS BEEN A PPROVED. ON THE OTHER HAND, THE LEARNED SR. DEPARTMENTAL REPRESENTATIVE S TRONGLY SUPPORTED THE ORDER OF THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACTS THAT THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNTS AND BILLS & VOUCHERS ETC. BEFORE THE AO. THE LEARNED AR OF THE ASSESSEE HAS ALSO EXPRESSED H IS INABILITY TO PRODUCE BOOKS OF ACCOUNTS AND RELEVANT BILLS & VOUCHERS FOR THE VERIFICATION OF EXPENSES. IN THE ABSENCE OF BOOKS OF ACCOUNTS AND BILLS & VOUCHERS ETC, THE ESTIMATION OF INCOME HAS TO BE MADE. UNDER SEC. 44 AD WHERE BOOKS OF ACCOUNTS ARE NOT MAINTAINED, THE LEGISLATURE PROVID ES THE ESTIMATION OF NET INCOME @ 8%. SINCE THE ASSESSEE HAD NOT PRODUCED B ILLS & VOUCHERS AND BOOKS OF ACCOUNTS AND IS NOT WILLING TO PRODUCE THE SAME, IN OUR CONSIDERED OPINION, ESTIMATION OF NET PROFIT @ 8% WILL BE APPR OPRIATE. WE ALSO FIND THAT ITAT DELHI `BENCH F IN THE CASE OF RAM PHAL K HASA IN ITA NO.3401/DEL/2010 VIDE ORDER DATED 12-08-2011 ON IDE NTICAL FACTS ESTIMATED 5 NET PROFIT @ 8% AS AGAINST 2.47% ADMITTED BY THE AS SESSEE. RESPECTFULLY FOLLOWING THE PRECEDENT IN THE CASE OF RAM PHAL KHA SA (SUPRA), WE DIRECT THE ASSESSING OFFICER TO APPLY NET PROFIT RATE OF 8% ON GROSS RECEIPTS OF RS.1,73,47,193/-. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 8. NOW COMING TO APPEAL FILED BY THE REVENUE, THE F IRST ISSUE FOR CONSIDERATION RELATES TO DELETION OF THE ADDITION O F RS.54,48,372/- MADE UNDER SEC. 68 OF THE ACT. THE RELEVANT GROUND OF A PPEAL IS REPRODUCED AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS.54,48,372/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF BOGUS/NON-GENUINE LIABILITY SHOWN BY THE ASSESSEE I GNORING THE FACT THAT THE GENUINENESS OF THE SUNDRY CREDITORS R EMAINS UNVERIFIED AS THE ASSESSEE FAILED TO PROVE THE GENU INENESS AND CREDITWORTHINESS OF SUNDRY CREDITORS AND OTHER LIAB ILITIES. 9. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE AO WHILE COMPLETING ASSESSMENT UNDER SEC. 144 ADDED THE AMOUNT OF RS.54 ,48,372/- ON ACCOUNT OF SUNDRY CREDITORS. 10. BEFORE THE CIT(A) IT WAS CONTENDED THAT DISALLO WANCE OF SUNDRY CREDITORS TANTAMOUNTS TO A TRADING ADDITION THEREBY INCREASING THE NET PROFIT RATIO TO 43.98% WHICH IS NOT JUSTIFIED IN A CASE OF CIVIL CONTRACTOR. THE LEARNED CIT(A) HOWEVER, HELD THAT THE AO HAS ALREAD Y REJECTED THE BOOKS OF 6 ACCOUNTS OF THE ASSESSEE AND HAS ESTIMATED NET PROF IT RATE OF 12% WHICH HAS BEEN UPHELD BY HER. THEREFORE, NO FURTHER ADDITION WAS REQUIRED. THE LEARNED CIT(A) THEREFORE, DELETED THE ADDITION OF R S.54,48,372/-. 11. BEFORE US THE LEARNED SR. DR SUBMITTED THAT THE ASSESSEE HAD NOT FILED CONFIRMATIONS FROM THE PARTIES AND THEREFORE, ADDIT ION CANNOT BE DELETED. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSEE SUBM ITTED THAT ADDITION MADE BY THE AO IS ON ACCOUNT OF SUNDRY CREDITORS. SINCE INCOME HAS BEEN ESTIMATED, NO FURTHER ADDITION IS REQUIRED TO BE MA DE. HE ACCORDINGLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. UNDER SEC.44AD IN THE CASE OF CIVIL CONTRACTOR HAVING GROSS RECEIPTS LESS THAN RS.40 LAKHS, THE INCOME HA S TO BE ESTIMATED @ 8%. SUB-SEC.(2) OF SEC. 44AD PROVIDES THAT ANY DEDUCTIO N ALLOWABLE UNDER SECTIONS30 TO 38 SHALL FOR THE PURPOSES OF SUB-SEC. (1), BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DE DUCTION UNDER THOSE SECTIONS SHALL BE ALLOWED. THEREFORE, WHEN INCOME IS ESTIMATED U/S 44AD THE EXPENSES ALLOWABLE UNDER SECTION 30 TO 43D ARE TO BE CONSIDERED. THE PROVISIONS OF SEC. 68 ARE OUTSIDE THE PURVIEW OF SE CTION 44AD UNDER WHICH INCOME IS ESTIMATED. THE ASSESSEE HAD NOT FILED CO NFIRMATIONS FROM THE TRADE CREDITORS. WE, THEREFORE, SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING 7 OFFICER WITH THE DIRECTIONS TO EXAMINE THE CASE OF TRADE CREDITORS WHETHER SEPARATE ADDITION IS REQUIRED TO BE MADE. THE ASSE SSEE IS DIRECTED TO PRODUCE THE CONFIRMATIONS FROM THE TRADE CREDITORS. IF THE ASSESSEE IS NOT ABLE TO FILE THE CONFIRMATIONS FROM THE CREDITORS, THE AO WILL B E FREE TO DECIDE THE ISSUE ON MERITS. WE ORDER ACCORDINGLY. 13. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION OF RS.2,76,540/- MADE ON ACCOUNT OF UNEXPLAINED INVEST MENT IN PURCHASE OF ASSETS. THE RELEVANT GROUND OF APPEAL IS REPRODUCE D AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION MADE BY AO OF RS.2,76,540/- ON ACCOUNT OF UNEXPLAIN ED INVESTMENT IN PURCHASE OF ASSETS, IGNORING THE FACT THAT THE SOURCES OF INVESTMENT FOR PURCHASE OF THESE ASSETS WERE NOT EXPLAINED. 14. THE ASSESSING OFFICER WHILE COMPLETING ASSESSME NT HAS ADDED THE AMOUNT OF RS.2,76,540/- ON ACCOUNT OF ASSETS WORTH RS.2,76,540/- ACQUIRED DURING THE YEAR. THE LEARNED CIT(A) HAS DELETED TH E ADDITION ON THE GROUND THAT SHE HAD UPHELD THE ESTIMATION OF PROFIT AT 12% AS AGAINST 3.72% SHOWN BY THE ASSESSEE. SINCE WE HAVE UPHELD THE ESTIMATI ON OF NET PROFIT @ 8%, IN OUR CONSIDERED OPINION, THE ADDITION OF RS.2,76,540 /- WILL BE COVERED BY THE HIGHER RATE OF PROFIT UPHELD BY US. THEREFORE, NO SEPARATE ADDITION IS REQUIRED ON THIS COUNT. WE THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. 8 ITA NOS.3149 & 2550/DEL/2011 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. TO SUM UP, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPO SES. 17. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 17 TH FEBRUARY, 2012. SD/- SD/- (I.P. BANSAL) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH FEBRUARY, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.