M/s Sheetla Const. Co., Sunder Nagar V. ITO, Mandi

ITA 320/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5446 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: S S GULERIA
• Keywords: Presumptive income
• Section: 44AD; 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS. 320 & 321/CHD/2011 ASSESSMENT YEARS: 2005-06 & 2006-07 M/S SHEETLA CONSTRUCTION COMPANY, VS. THE ITO, SUNDERNAGAR, SUNDERNAGAR, HIMACHAL PRADESH PAN NO. AAZFS7309H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.S.GULERIA RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM BOTH THE APPEALS BY THE ASSESSEE ARE AGAINST THE OR DER OF CIT(A), SHIMLA DATED 10.1.2011 RELATING TO ASSESSMENT YEARS 2005-06 & 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 144 / 143(3) OF THE I.T. ACT, 1961. 2. THE COMMON GROUNDS OF APPEAL RAISED BY THE ASSE SSEE IN BOTH THE ASSESSMENT YEARS ARE AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND FACTS IN NOT DIRECTING THE LD. ASSESSING OFFICER TO ALLOW TH E INTEREST AND SALARY PAID TO THE PARTNERS AND AS CLA IMED IN THE RETURN OF INCOME, AS PER SECTION 40(B) OF TH E INCOME TAX ACT. 2. THAT THE LD. CIT(A) HAS ALSO ERRED IN NOT ENTERTAIN ING THE PLEA OF THE APPELLANT THAT THE LD. ASSESSING OF FICER HAS NOT AT ALL DISCUSSED THE DISALLOWANCE OF INTERE ST AND SALARY PAID TO THE PARTNERS IN THE ASSESSMENT O RDER AND HENCE THE DISALLOWANCE IS NOT MAINTAINABLE ON T HIS ACCOUNT. 2 3. THE ASSESSEE IN ITA NO. 320/CHD/2011 HAS ALSO RA ISED ANOTHER GROUND OF APPEAL BY WAY OF GROUND NO.1 WHICH IS AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE PLEA OF THE ASSESSEE-APPELLANT THAT THE ORDER O F ASSESSMENT OUGHT TO HAVE BEEN PASSED U/S 144 AND NO T 143(3) AS DONE BY THE LD. ASSESSING OFFICER . 4. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE O N IDENTICAL ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 5. THE ISSUE ARISING IN THE PRESENT APPEALS ARE AGA INST THE NON ALLOWANCE OF INTEREST AND SALARY PAID TO THE PARTNE RS AFTER ESTIMATION OF INCOME IN THE HANDS OF THE ASSESSEE. 6. THE BRIEF FACTS OF THE CASE ARE THAT BECAUSE OF THE NON COOPERATION OF THE ASSESSEE AND NON PRODUCTION OF THE VOUCHERS TO VERIFY THE ENTRIES IN THE BOOKS OF ACCOUNT PRODUCED, THE ASSESSING OFFICE R REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND ESTIMATED THE INCOME BY APPLYING NET PROFIT RATE OF 8% ON GROSS CONTRACT RECEIPTS AT RS. 60,39,463/-. FURTHER, THE ASSESSEE HAD ALSO SHOWN TRANSPORTATION RECEIPTS OF RS. 8,23,265/- ON WHICH INCOME WAS ESTIMATED BY INVOKING THE PROVISIO NS OF SECTION 44AE OF THE INCOME TAX ACT AND A SUM OF RS. 87,500/- WAS HELD TO BE DEEMED PROFIT EARNED BY THE ASSESSEE FROM PLYING HEAVY GOO DS VEHICLES FOR THE YEAR UNDER CONSIDERATION. BEFORE THE CIT(A), THOUG H THE ASSESSEE HAD RAISED ISSUE AGAINST THE ASSESSMENT BEING COMPLETED BY REJECTING BOOKS OF ACCOUNT, BUT THE ISSUE WAS ALSO IN CONNECTION WITH THE DISALLOWANCE OF INTEREST AND SALARY PAID TO THE PARTNERS. THE ASSE SSEE HAD PAID INTEREST OF RS. 52,839/- AND RS. 1,25,745/- AND SALARY OF RS. 1 ,51,702/- AND RS. 3 6,40,575/- FOR THE ASSESSMENT YEARS 2005-06 AND 200 6-07 RESPECTIVELY AND THE SAME WAS CLAIMED AS DEDUCTION UNDER THE PROFIT AND LOSS ACCOUNT. THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE CIT(A ) OBSERVING THAT AS THE BOOKS OF ACCOUNT HAD BEEN REJECTED, NO SEPARATE ALLOWANCE / DISALLOWANCE OR ADDITION COULD BE MADE AS ALL THE A LLOWANCES WERE DEEMED TO HAVE BEEN ALLOWED. THE ASSESSEE IS IN APPEAL AGA INST THE SAID ORDER OF CIT(A). 7. ON THE PERUSAL OF RECORD, WE FIND THAT DURING TH E CAPTIONED ASSESSMENT YEARS 2005-06 AND 2006-07, AFTER REJECTI ON OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, RECOURSE WAS MADE TO TH E PROVISIONS OF SECTION 145(3) OF THE ACT AND THE INCOME FROM CONT RACT BUSINESS WAS ESTIMATED IN THE HANDS OF THE ASSESSEE. THE ASSESS ING OFFICER HAD COMPUTED THE INCOME FOR THE YEAR UNDER APPEAL BY AP PLYING NET PROFIT RATE OF 8% ON THE GROSS CONTRACT RECEIPTS DECLARED BY TH E ASSESSEE IN BOTH THE CAPTIONED YEARS. THE ABOVE SAID ESTABLISHES THAT AS FAR AS THE RECEIPTS DECLARED BY THE ASSESSEE, THE SAME WERE FOUND IN OR DER AND AS THE ASSESSEE HAD NOT ABLE TO JUSTIFY THE CLAIM OF EXPENDITURE AG AINST THE SAID RECEIPTS EARNED BY THE ASSESSEE, THE INCOME WAS ESTIMATED IN THE HANDS OF THE ASSESSEE. THE NEXT ASPECT OF THE ISSUE WAS THAT A FTER SUCH ESTIMATION OF INCOME IN THE HANDS OF THE ASSESSEE WHETHER THE ASS ESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST AND SALAR Y PAID TO THE PARTNERS. WE FIND THAT UNDER PRESUMPTIVE TAXATION OF INCOME F ROM CONTRACT BUSINESS AS LAID DOWN IN SECTION 44AD OF THE ACT, IT IS PROV IDED THAT ONCE AN ESTIMATION OF INCOME IS MADE FOR THE FINANCIAL YEAR , IT IS PRESUMED THAT ALL THE EXPENSES U/S 30 TO 42 OF THE ACT ARE DEEMED TO HAVE BEEN ALLOWED. FURTHER, THE INTEREST AND SALARY PAID TO THE PARTNE RS IS DIRECTED TO BE ALLOWED AGAINST SUCH INCOME ESTIMATED IN ACCORDANCE WITH THE PROVISIONS 4 OF THE ACT. FOLLOWING THE PARITY OF REASONING LAID DOWN BY THE PROVISIONS OF THE ACT IN RESPECT OF THE PRESUMPTIVE TAXATION O F INCOME FROM CONTRACT BUSINESS, WE ARE OF THE VIEW THAT ONCE THE INCOME F ROM CONTRACT BUSINESS HAS BEEN ESTIMATED IN THE HANDS OF THE ASSESSEE, TH E ASSESSEE IS ENTITLED TO CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST AND SALAR Y PAID TO THE PARTNERS, IN ACCORDANCE WITH LAW. ACCORDINGLY, WE SET ASIDE T HE ORDER OF CIT(A) IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF THE ASSESSEE IN RESPECT OF SALARY AND INTEREST PAID TO THE PARTNERS IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT FO R BOTH THE CAPTIONED YEARS. THUS, THE GROUND NO.2 RAISED BY THE ASSESSE E IN BOTH THE APPEALS ARE ALLOWED. 8. HOWEVER, THE GROUND OF APPEAL RAISED IN BOTH THE APPEALS WITH REGARD TO THE ESTIMATION OF INCOME IS REJECTED IN T HE ABSENCE OF ASSESSEE MAKING ANY SUBMISSION AGAINST THE ESTIMATION OF INC OME AND ACCEPTING THE APPLICATION OF NP RATE OF 8% OF THE GROSS RECEIPTS IN ITS WRITTEN SUBMISSIONS. 9. WE FIND NO MERIT IN THE GROUND NO.1 RAISED IN IT A NO. 320/CHD/2011 AND THE SAME IS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF MAY, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MAY, 2011 RKK 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH