SHRI KRISHNA KUMAR AGRAWAL, BILASPUR(CG) V. THE INCOME TAX OFFICER, WARD-1(1), BILASPUR(CG)

ITA 338/BIL/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0244 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Deemed to accrue or arise in india; TDS
• Section: 44AD; 143(3)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.338/RPR/2016 Ǔनधा[रण वष[ / Assessment Year : 2009-10 Shri Krishna Kumar Agrawal Main Road, Sarkanda, Bilaspur (C.G.)-495 001 PAN : ACLPA7562Q .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-1(1), Bilaspur (C.G.) ......Ĥ×यथȸ / Respondent Assessee by : None Revenue by : Shri G. N Singh, DR स ु नवाई कȧ तारȣख / Date of Hearing : 20.07.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 22.07.2022 2 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), Raipur, dated 28.03.2016, which in turn arises from the order passed by the A.O under Sec 143(3) of the Income- tax Act, 1961 (in short ‘the Act’) dated 26.12.2011 for assessment year 2009-10. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.2,72,157/- towards loss from other source and set off u/s.71 of IT Act, 1961. Prayed to allow the loss of Rs.2,72,157/- to bet set under the head income from business as per section 71 of IT Act, 1961. 2. That under the facts and laws, the learned CIT(A) further erred in confirming the addition of Rs.23,21,099/- by wrongly estimating accrued interest on loan. The bank guarantee invoked by the bank Rs.12,75,000/- has not been considered by the learned CIT(A) while deciding the case. It was also ignored by the learned CIT(A), that the return of income were filed u/s.44AD of the Income Tax Act. Where all expenses within section 29 to 43C are deemed to already allowed. Prayed to delete the addition made u/s.43-B towards accrued interest of Rs.23,21,099/- ( actual interest is only 1046099/- as per bank account and balance Rs.12,75,000 is bank guarantee invoked amount. 3. That bank interest of Rs.25914/- received on FDR were already claimed against the interest account and TDS has been claimed in the return of income. Prayed to delete the addition made on account of FDR interest of Rs.25,914/-.” 3 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 2. Succinctly stated, the assessee who is engaged in the business of a civil contractor had e-filed his return of income for the assessment year 2009-10 on 23.11.2009 declaring an income of Rs.3,45,800/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. 3. Assessment was thereafter framed by the A.O vide his order passed u/s.143(3) of the Act, dated 26.12.2011 determining the income of the assessee at Rs.36,58,460/- a/w. agriculture income of Rs.50,000/- after, inter alia, making the following additions/disallowances: 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success. 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. As the assessee appellant despite Sl. No. Particulars Amount 1. Disallowance of the assessee’s claim for set-off of loss (wrongly shown as interest) Rs.2,72,157/- 2. Addition u/s.43B(e) of the interest on capital borrowed from Bank of India Rs.23,21,099/- 3. Addition of interest on FDR/deposits held by the assessee with Bank of India Rs.25,914/- 4 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 having been intimated about the hearing of appeal had failed to put up an appearance before us, therefore, we are constrained to proceed with and dispose off the appeal as per Rule 24 of the Appellate Tribunal Rules, 1963, i.e, after hearing the respondent revenue and perusing the orders of the lower authorities. 6. We have heard the Ld. Departmental Representative (for short ‘DR), perused the orders of the lower authorities and the material available on record. Controversy involved in the present appeal hinges around three issues, viz. (i) disallowance of the assessee’s claim for set-off of business loss : Rs.2,72,157/-; (ii) estimation of assessee’s income from business as that of civil contractor a/w. a consequential disallowance of interest on loans raised from bank u/s.43B(e) of the Act : Rs.23,21,099/-; and (iii) addition of interest on FDR/deposits held by the assessee with bank : Rs.25,914/-. 7. On a perusal of the record it transpires that the assessee who is carrying on the business of a civil contractor under the name and style of M/s. Samridhi Construction had disclosed his income from the said stream of business u/s.44AD of the Act at Rs.2,32,393/- (8.11% of its turnover/gross receipts of Rs.28,65,782/-). Although the assessee had opted for the deeming provision contemplated u/s.44AD of the Act but had 5 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 separately raised a claim for deduction of certain business expenses amounting to Rs.2,72,157/-, as under: Observing, that now when the assessee had disclosed his income u/s.44AD of the Act, therefore, it was to be presumed that all the expenses mentioned in Sec. 29 to 43C of the Act were to be deemed to have been already given full effect, the A.O declined the assessee’s claim for set-off of the aforesaid amount of business expenditure against his deemed income disclosed u/s.44AD of the Act. 8. After having given a thoughtful consideration to the aforesaid issue, we find substance in the view taken by the A.O that now when the 1. Rs.210 Advertisement Expenses 2. Rs.13501/- Bank commission & Charges a/c. 3. Rs.135796/- Bank interest a/c. vehicle loan-SBI 4. Rs.6899/- Insurance a/c. 5. Rs.5500/- Office expenses a/c. 6. Rs.30000 Salary a/c. 7. Rs.13200/- Security expenses a/c. 8. Rs.14044/- Telephone a/c. 9. Rs.8007/- Traveling expenses a/c. 10. Rs.45,000/- Arbitration and court fees Total Rs.2,72,157/- 6 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 assessee had opted to disclose his income under the deeming provisions of section 44AD of the Act, then, it was not permissible on his part to have separately claimed set-off of the aforesaid expenses as the same were to be deemed to have been already given full effect while computing his income under the aforesaid deeming provision. The mandate of law to the said effect can safely be gathered from a perusal of sub-section (2) of Section 44AD of the Act, which reads as under: “(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. We, thus, in terms of our aforesaid observations uphold the view taken by the CIT(Appeals) who had rightly sustained the disallowance of Rs.2,72,157/- made by the A.O. Thus, the Ground of appeal No.1 raised by the assessee is dismissed in terms of our aforesaid observations. 9. Adverting to the addition of Rs.25,914/- made by the A.O qua the interest on FDR/deposits that were held by the assessee with Bank of India, it transpires from a perusal of the records that the assessee had sought to telescope/include the same in his deemed income that was disclosed u/s.44AD of the Act. As the aforesaid interest income by no means would fall within the domain of the deemed income of the assessee worked out under Section 44AD of the Act, therefore, we concur with the view taken by the A.O who had separately made an addition of 7 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 Rs.25,914/- under the head “Other sources” in the hands of the assessee. We, thus, in terms of our aforesaid observations uphold the aforesaid addition of Rs.25,914/- made by the A.O. Thus, the Ground of appeal No.3 raised by the assessee is dismissed in terms of our aforesaid observations. 10. We shall now take up the grievance of the assesee that both the lower authorities had erred in making/sustaining the addition of Rs.23,21,099/- u/s.43B(e) of the Act. Controversy qua the issue in hand lies in a narrow compass. During the assessment proceedings it was observed by the A.O that the assessee had incurred interest expenditure on the secured loans raised from Bank of India, as under: Description of bank a.y.09-10 a.y.08-09 Increment (Interest) BOI c/c a/c 30340003 Rs.1,12,77,208/- Rs.94,53,284/- Rs.18,23,924/- BOI T/L A/c. No.70230038 Rs.48,60,849/- Rs.45,28,830/- Rs.3,32,019/- BOI T/L A/c No.9470626100000001 Rs.37,69,519/- Rs.36,04,363/- Rs.1,65,156/- Total Rs.23,21,009/- Observing, that neither the assessee had acquired any depreciable asset nor there was any change in his stock during the year under consideration i.e. 31.03.2008 to 01.04.2009, the A.O was of the view that the aforesaid 8 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 facts would result to incongruous results qua the cost that was claimed by the assessee to have been incurred towards construction i.e Rs.1,08,969/- ( 3.8% of his gross receipts), as under: Expenses Amount Income Amount Int. Exp. Rs.23,21,099/- Gross Rec. Rs.28,65,782/- Dep. Rs.2,03,321/- Net profit Rs.2,32,393/- Total Rs.27,56,813/- Cost. Const. Rs.1,08,969/- (3.8%) Unable to comprehend that the assessee had only executed work of Rs.28,65,782/- (gross value), the A.O backed by a strong conviction that the assessee had suppressed his civil construction business by not disclosing the correct receipts, thus, rejected his books of account u/s.145(3) of the Act. After rejection of the books of accounts the A.O adopting the duly audited financial results of the assessee for the immediately preceding year i.e. A.Y.2008-09 as a yardstick, therein, worked out his turnover/gross receipts from the business of a civil contractor at Rs.1,15,73,522/- and estimated his income at Rs.9,25,881/- (i.e. @ 8% of Rs.1,15,73,522/-), observing as under: “................To estimate the receipt the earlier year contract account of the assessee’s has to be taken for base of estimation of gross 9 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 receipt. In the a.y.08-09, the assessee submitted audit report and therein it is noted that net profit is shown at Rs.3,73,385/- out of total contract receipt of Rs.1,88,96,707/- and out of this amount the assessee paid interest of Rs.36,28,649/-, claimed depreciation of Rs.5,00,054/-. Hence for a.y.08-09 the proportionate expenses against the total receipt is 23.82%. Therefore, for a.y.09-10, proportionate contract receipt against the amount of Rs.27,56,813/- [Interest Rs.23,21,099/-+ depreciation Rs.2,03,321/-+ income Rs.2,32,393/-] will be Rs.1,15,73,522/-. Against this receipt, I estimate an amount of Rs.9,25,881/- @8% on the total civil contract turnover of Rs.1,15,73,522/-............” After recasting the financial results of the assessee it was concluded by the A.O that as the assessee had claimed as an expenditure bank interest of Rs.23,21,099/- but had not paid the same before the “due date” of filing of his return of income, thus, the same was liable to be disallowed under Section 43B(e) of the Act. 11. After having given a thoughtful consideration to the aforesaid observations of the A.O, we are unable to comprehend the basis for making the aforesaid addition/disallowance by the A.O. In our considered view, the very presumption of the A.O that as the increase in the interest liability of the assessee was neither accompanied with any corresponding acquisition of depreciable assets or change in closing stock during the year under consideration, therefore, it was to be presumed that the assessee had executed undisclosed contract works is absolutely misconceived and baseless. It is the claim of the assessee that the fact that the bank had invoked a bank guarantee of Rs.12.75 lacs had been absolutely lost sight 10 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 of by both the lower authorities. Be that as it may, the CIT(Appeals) had rightly concluded that now when the A.O had not placed on record any material which would substantiate his conviction that the assessee had generated contract receipts of Rs.1,15,73,522/-, therefore, there was no justification on his part in estimating the income of the assessee at Rs.6,93,488/- i.e. @8% of the said impugned receipts. At this stage, we may herein observe that the Department had accepted the aforesaid view of the CIT(Appeals) and had not carried the matter any further in appeal before us. In so far sustainability of the impugned disallowance of bank interest of Rs.23,21,099/-u/s.43B(e) of the Act is concerned, we are unable to find favour with the same. In our considered view, now when the assessee had disclosed his income u/s.44AD of the Act, therefore, no disallowance of the aforesaid amount was called for in his hands. As the disallowance u/s.43B presupposes raising of a claim for deduction, therefore, now when in the case before us the assessee had not sought any deduction of bank interest of Rs.23,21,099/-, there could have been no justification in disallowing the same. We, thus, in terms of our aforesaid observations are unable to sustain the disallowance of bank interest of Rs.23,21,099/- made by the A.O u/s.43B(e) of the Act. Accordingly, the order of the CIT(Appeals) qua the aforesaid issue in hand is set-aside with a direction to the A.O to vacate the disallowance of Rs.23,21,099/- made 11 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 by him u/s.43B(e) of the Act. Thus, the Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations. 12. In the result, appeal of the assessee is partly allowed in terms of our aforesaid observations. Order pronounced in open court on 22 nd day of July, 2022. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 22 nd July, 2022 SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals), Raipur (C.G) 4. The CIT, Bilaspur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 12 Shri Krishna Kumar Agrawal Vs. ITO-1(1) ITA No. 338/RPR/2016 Date 1 Draft dictated on 20.07.2022 Sr.PS/PS 2 Draft placed before author 20.07.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order