Shri Suresh Ratilal Sheth, Bhavnagar V. The Jt.CIT.,Range-2, Bhavnagar

ITA 3246/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9815 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Business income; TDS
• Section: 271(1)(c); 143(3); 144

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM SURESH RATILAL SHETH, PROP. OF SHETH CONSTRUCTION CO., KUMER KRUPA, MANIYAR STREET, VORA BAZAR, BHAVNAGAR-1. VS. ASSTT. CIT, CIR-2, ITO, NAKU BAUG, BHAVNAGAR. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI TUSHAR P. HEMANI, AR RESPONDENT BY:- SHRI R. K. DHANESTA, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) THE HON. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NO T APPRECIATING THAT THE IMPUGNED ASSESSMENT ORDER WAS PASSED WITHOUT ISSUING SHOW CAUSE NOTICE AND THUS IGNORING THE RATIO LAID DOWN BY HON. GUJARAT HIGH COURT IN THE CASE OF ZENITH PROCESSING MILLS VS. CIT (1996) 219 ITR 721. (2) THE HON. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ACTION OF LD. AO IN ESTIMATING THE INCOME OF TH E APPELLANT WITHOUT REJECTING THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. (3) THE HON. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ES TIMATING THE INCOME OF THE APPELLANT WITHOUT FINDING ANY DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT AND FURTHER ESTIMATING THE SAME AT 5% OF GROSS PAYMENT AS BUSINESS INCOME FROM ITA NO.3246/AHD/2008 ASST. YEAR :2005-06 ITA NO.3246/AHD/2008 ASST. YEAR 2005-06 2 CONSTRUCTION WORK AND FURTHER ERRED IN MISCALCULATI NG THE SAME AT RS.1797536/-. (4) THE HON. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT T HE ORDER PASSED U/S 143(3) OF THE ACT CAN DEEMED TO HAVE BEE N PASSED U/S 144 R.W.S. 145A OF THE ACT. (5) THE HON. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT T HE BOOKS OF ACCOUNTS IMPLIED TO HAVE BEEN REJECTED EVEN WITHOUT RECORDING SUCH FINDING AND WITHOUT MENTIONING SPECIFIC DEFECT REGARDING CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS IN THE ASSESSMENT ORDER. (6) LEVY OF INTEREST U/S 234A/B/C/D OF THE ACT IS NOT J USTIFIED. (7) INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT IS N OT AS PER THE LAW. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF CONSTRUCTION WORK TAKEN ON CONTRACT. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT DURING THE YEAR THE N ET PROFIT IS RS.10,51,269/- ON A TURNOVER OF RS.3,59,50,726/- WH ICH COMES TO 2.92%. BUT IN THE PREVIOUS YEAR NET PROFIT OF RS.4,44,558/ - HAS BEEN SHOWN ON A TURNOVER OF RS.1,8,34,001/- WHICH COMES TO 3.76%. THE AO FURTHER NOTICED THAT ASSESSEE HAS PAID LABOUR CHARGES OF RS .71,42,724/- OUT OF WHICH PAYMENT THROUGH CHEQUES WAS RS.30,33,773/- WH EREAS CASH PAYMENT OF RS.40,41,458/-. THE CASH VOUCHERS WERE F OUND SELF-MADE WITHOUT VOUCHER NUMBER OR DETAILS OF THE SITE AT WH ICH WORK WAS DONE. FROM THIS THE AO INFERRED THAT LABOUR CHARGES ARE N OT VERIFIABLE AND IT DOES NOT ENABLE HIM TO KNOW THE NATURE OF WORK DONE AND THE RATE AT WHICH PAYMENT WAS MADE. HE ACCORDINGLY APPLIED NET PROFIT RATE OF 5% ON THE GROSS PAYMENT RESULTING IN AN ADDITION OF RS .17,97,536/-. 3. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO ON THIS ISSUE BY HOLDING THAT REJECTION OF THE BOOKS IS IMPLIEDLY CL EAR AS MAJOR PORTION OF ITA NO.3246/AHD/2008 ASST. YEAR 2005-06 3 PAYMENT IS IN CASH AND IS NOT VERIFIABLE AT ALL. TH E BOOK RESULTS DID NOT DEPICT CORRECT AND FAIR PICTURE OF THE PROFITS DECL ARED BY THE ASSESS. 4. BEFORE, US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT WITHOUT POINTING OUT ANY DEFECT IN THE BOOK THE AO COULD NO T RESORT TO ESTIMATION. FURTHER PAYMENT OF CASH HAS BEEN MADE TO THE SAME P ARTIES TO WHOM PAYMENTS BY CHEQUES WERE MADE. THEREFORE, THE PARTI ES ARE IDENTIFIABLE. ALL THE PARTIES HAVE PAN AND TDS HAS BEEN MADE THER EON. ONCE TDS IS MADE THERE IS NO REASON TO HOLD THAT RESULTS ARE NO T VERIFIABLE. FURTHER ASSESSEE IS NOT RESPONSIBLE WHETHER THE PAYEES HAVE CLAIMED THE EFFECT OF TDS BY FILING RETURN. IN THE ALTERNATIVE THE LD. AR SUBMITTED THAT EVEN THOUGH BOOKS ARE REJECTED THE ESTIMATION SO MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS VERY HIGH. LAST YEAR NET PROFIT RATE WAS 3.76% WHEREAS THIS YEAR IT IS 2.92%, THEREFORE, ADD ITION AT BEST COULD BE MADE TO THE EXTENT OF 0.84%. 5. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORDE RS OF AUTHORITIES BELOW. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT AUTHORITIES BELOW WERE JUSTIFIED IN NOT RELYING ON THE BOOK RESULTS AND RESORTING TO ESTIMATION OF PROFITS. EVEN WHERE CASH PAYMENT IS MADE AND CLAIMED TO THE SAME PARTIES IT WAS NECESSARY TO SHO W THAT CASH PAYMENT HAS ACTUALLY GONE TO THEM BY SUBMITTING ACKNOWLEDGM ENT FROM THESE PARTIES. CHEQUE PAYMENT NECESSARILY CONFIRMS THAT I T HAS GONE TO THIRD PARTIES BUT NOT THE CASH PAYMENT, UNLESS THERE IS D IRECT ACKNOWLEDGMENT FROM THEM. FURTHER IF PAYMENT BY CHEQUE CAN GO TO T HOSE PARTIES THEN THERE IS NO REASON WHY FURTHER PAYMENT BY CHEQUE SH OULD NOT GO TO THEM AND WHY MAJOR PORTION OF PAYMENT IS MADE BY CASH. A CCORDINGLY, WE DECLINE TO INTERFERE IN REJECTING THE BOOKS BY THE AUTHORITIES AND IN ITA NO.3246/AHD/2008 ASST. YEAR 2005-06 4 ESTIMATING THE INCOME. HOWEVER, ESTIMATE MADE BY TH E AUTHORITIES BELOW IS NOT SOUND. IF PROFIT IN THE EARLIER YEAR WAS 3.7 6% THEN THERE IS NO REASON TO SAY THAT PROFIT THIS YEAR SHOULD BE HIGHER. NO C OMPARATIVE WORK FOR THE TWO YEARS IS DONE BY THE AO SO AS TO SHOW THAT CASH OUTFLOW THIS YEAR IS MUCH HIGHER AS COMPARED TO EARLIER YEAR AND, THEREF ORE, THERE IS HIGHER PILFERAGE THIS YEAR. ONCE CONDITION OF BUSINESS REM AINS THE SAME THEN RATE OF PROFIT TO BE ADOPTED SHOULD NOT VARY DRASTICALLY , AS COMPARED TO PREVIOUS YEAR. ACCORDINGLY, WE DIRECT TO APPLY NET PROFIT RATE OF 3.76% AS AGAINST 5% CONFIRMED BY THE LD. CIT(A). THE AO WILL ACCORDINGLY CALCULATE THE ADDITION. THE ASSESSEE, THEREFORE, GE TS PART RELIEF. 7. GROUND NO.6 REGARDING LEVY OF INTEREST IS CONSEQ UENTIAL AND, THEREFORE, REJECTED. 8. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED I N PART. ORDER WAS PRONOUNCED IN OPEN COURT ON 24/9/2010. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 24/9/2010. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.3246/AHD/2008 ASST. YEAR 2005-06 5 1.DATE OF DICTATION 21/9/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 23/9/2010. MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..