Artech Technocrate P.Ltd, Ahmedabad V. Income Tax Officer-Ward-1(3), Ahmedabad

ITA 3386/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1488 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 24-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADIP KUMAR MAJUMDER DR
• Assessee Lawyers: K B SONI AR
• Keywords: Bonafide belief; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 44AD; 143(3); 148; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , ! BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.3386/AHD/2015 ( / ASSESSMENT YEAR : 2008-09) ARTECH TECHNOCRATE PVT.LTD. 1, SAMARTH APPT. NR.GHADIALI COMPLEX MANINAGAR, AHMEDABAD / VS. THE ITO WARD-1(3) AHMEDABAD & ./ ./ PAN/GIR NO. : AADCA 8826 E ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &), / APPELLANT BY : SHRI K.B. SONI, AR *+&) -, / RESPONDENT BY : SHRI PRADIP KUMAR MAJUMDER, DR . - / DATE OF HEARING 24/05/2016 /012 - / DATE OF PRONOUNCEMENT 31/05/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, AHMEDABAD DATED 28/09/2015 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 2 - 2.1. ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF CIVIL ENGINEERING CONSULTANCY AND CONSTRUCTION ACTIVITIES . ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2008-09 ON 27.9.2008 DECLAR ING TOTAL LOSS OF RS.1,33,970/-. THE CASE WAS SELECTED FOR SCRUTINY A ND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 2 5.8.2010 AND THE TOTAL LOSS AS FURNISHED IN THE RETURN OF INCOME WAS ACCEPTED AT RS.(-)1,33,970/-. SUBSEQUENTLY, ASSESSING OFFICER ( AO) NOTICED THAT THOUGH ASSESSEE HAD GROSS RECEIPTS OF RS.5,54,103/- FROM CONSTRUCTION ACTIVITIES, ASSESSEE HAD DECLARED NET LOSS OF RS 1, 33,970/- AS PER THE PROVISIONS OF SECTION 44AD OF THE I.T.ACT,1961, ASS ESSEE SHOULD HAVE DECLARED INCOME ATLEAST AT THE RATE OF 8% OF THE RE CEIPTS AND IN CASE THE INCOME IS DECLARED AT LESS THAN 8% OF THE RECEIPTS, ASSESSEE WAS REQUIRED TO GET ITS ACCOUNTS AUDITED U/S 44AB OF THE ACT. A O NOTICED THAT IN THE CASE OF ASSESSEE SINCE THE ASSESSEE HAD DECLARED LO SS FROM CONSTRUCTION ACTIVITIES IT SHOULD HAVE GOT THE ACCOUNTS AUDITED U/S 44AB OF THE ACT WHICH WAS MANDATORILY REQUIRED U/S.44AD OF THE ACT AND FAILURE OF THE ASSESSEE TO GET THE ACCOUNTS AUDITED U/S.44AB OF TH E ACT HAD RESULTED INTO ESCAPEMENT OF INCOME TO THE EXTENT OF 8% OF RECEIPT S. AO ACCORDINGLY REOPENED THE ASSESSMENT U/S.147 OF THE ACT BY ISSUI NG NOTICE DATED 31/1/2014 U/S. 148 OF THE ACT. THEREAFTER, THE ASSE SSMENT WAS REFRAMED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 8 /5/2014 AND THE TOTAL INCOME WAS DETERMINED AT RS. 43,295/-. AGGRIEVED B Y THE ORDER OF AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD.CIT (A) WHO VIDE ORDER ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 3 - DATED 28/9/2015 [IN APPEAL NO.CIT(A)-VI/ITO.WD-1(3) /226/2014-15 - NOW 502/CIT(A)-] DISMISSED THE APPEAL OF THE ASSES SEE BY HOLDING AS UNDER: 2.3. / HAVE GONE THROUGH THE FACTS AND THE SUBMISSION OF T HE APPELLANT CAREFULLY. IN THE ASSESSMENT ORDER A.O HA S OBSERVED THAT THE APPELLANT AS PER THE PROVISIONS OF SECTION 44AD , THE PERSON ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND W HOSE RECEIPTS FROM THE SAID BUSINESS DOES NOT EXCEED RS.40 LACS, EITHER HAS TO DECLARE PROFIT @8% OF GROSS RECEIPTS FROM CIVIL CON STRUCTION ACTIVITY OR IN CASE IF LOWER PROFIT IS DECLARED, HA S TO GOT ITS ACCOUNTS AUDITED AND HAS TO FURNISH AN AUDIT REPORT U/S.44AB OF THE ACT AS PER SUB-SECTION 6 OF SECTION 44AD. THE AO HAS HELD THAT SINCE THE ASSESSEE HAS DECLARED LOSS OF RS.1,3 3,970/- ON TOTAL RECEIPTS OF RS.5,41,193/- FROM THE BUSINESS OF CIVI L CONSTRUCTION AND HAS FAILED TO GOT ITS ACCOUNT AUDITED U/S.44AB OF THE ACT, ASSESSEE'S TOTAL INCOME IS COMPUTED @8% OF GROSS RE CEIPTS OF RS.5,41,193/-, WHICH COMES TO RS.43,295/- IS TAKEN AS TAXABLE INCOME OF THE APPELLANT. THE APPELLANT HAS STATED T HAT AS PER SECTION 44AD (5), THE ASSESSING OFFICER CANNOT MAKE SECTION 44AD(1) APPLICABLE TO THE ASSESSEE, WHEN THE ASSESS EE DECLARES LOWER PROFIT. THE APPELLANT HAS FURTHER STATED THAT THE ASSESSING OFFICER HAS NO POWER TO ASSESS THE INCOME U/S 44AD( 1) WHEN SECTION 44AD(5) IS APPLICABLE. THUS SECTION 44AD(1) IS NOT APPLICABLE TO THE ASSESSEE. IN VIEW OF ABOVE SUBMIS SION, IT IS PRAYED BY THE APPELLANT THAT THE REOPENING OF THE A SSESSMENT U/S 147 BE QUASHED AND THE ASSESSMENT ORDER U/S 143 (3) R.W.S 147 OF THE ACT BE ANNULLED. THE APPELLANT HAS FURTHER STAT ED THAT ASSESSEE COULD NOT PRODUCE AUDIT REPORT U/S 44AB ON ACCOUNT OF A BONAFIDE BELIEF THAT SECTION 44AD IS NOT APPLICABLE TO THE A SSESSEE AS HE HAS INCURRED LOSS IN THE PREVIOUS YEAR. ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 4 - IT IS SEEN FROM THE FACTS OF THE CASE THAT APPELLAN T'S CONTENTION THAT REGULAR ASSESSMENT U/S.143(3) OF THE ACT HAS BEEN C OMPLETED ASSESSING LOSS OF RS.133970/-AND NOW DUE TO CHANGE OF THE OPINION OF THE ITO ASSESSMENT IS RE-OPENED, IS NOT TENABLE. IT IS SEEN FROM THE RECORDS THAT DURING THE COURSE OF ASSESSMENT U/ S. 143(3) IT WAS NO WHERE DISCUSSED WHETHER A PROVISION OF SECTION 44AD ARE APPLICABLE IN ASSESSEE'S CASE OR NOT. SINCE THE ISS UE OF APPLICABILITY OF SECTION 44AD HAS NOT BEEN ADJUDICATED DURING THE COURSE OF ASSESSMENT U/S.143(3), ASSESSEE'S CONTENTION ON CHA NGE OF OPINION HAS NO FORCE. THERE IS SUFFICIENT REASON FOR THE AO TO REOPEN THE CASE AS THE APPELLANT HAS NEITHER DECLARED THE PROF IT @8%OF THE TOTAL TURNOVER NOR GOT HIS BOOKS OF ACCOUNTS AUDITE D AS PER THE PROVISIONS OF THE 44AD OF THE ACT. I HOLD THAT THE ACTION OF THE AO IS VALID AND THE GROUND APPEAL IS DISMISSED. FURTHER, APPELLANT'S CONTENTION THAT APPLICABILITY OF SECTION 44AD IS OPTIONAL IS NOT TENABLE. SECTION 44AD(5) STATES AS UNDER: 'NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREGOIN G PROVISIONS OF THIS SECTION, AN ASSESSEE MAY CLAIM L OWER PROFITS AND GAINS THAN THE PROFITS AND GAINS SPECIF IED IN SUB SECTION (1), IF HE KEEPS AND MAINTAINS SUCH BOOKS O F ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB SECTION ( 2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURN ISHES A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB .' THE APPELLANT'S TURNOVER IN THE BUSINESS OF CIVIL C ONSTRUCTION IS LESS THAN 40 LACS. IT IS NOT NEGATED BY THE APPELLANT TH AT THE BOOKS OF ACCOUNT ARE NOT AUDITED U/S.44AB OF THE I. T. ACT. IF AN ASSESSEE CLAIMS LOWER PROFITS AND GAINS THAN THE PROFITS AND GAINS SPECIFIED IN SUB SECTION (1), HE HAS TO KEEP AND MAINTAIN SUC H BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB S ECTION (2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURN ISHES A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB. IN TH IS CASE THE PROVISION OF SECTION 44AD IS APPLICABLE WHERE THE N ET PROFIT @8% ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 5 - OF GROSS PROFIT IS TO BE OFFERED TO TAX WHICH IS NO T DONE BY THE APPELLANT IN THE CASE. THE A.O. HAS APPLIED SECTION 44AB AND THE NET PROFIT @8% OF GROSS RECEIPT OF RS.541193/- IS T AKEN AT RS.43295/- . IN VIEW OF ABOVE DISCUSSION AND ON THE. FACTS, THE ACTION OF THE A.O. IN THIS CASE IS JUSTIFIED AND TH EREFORE ADDITION OF RS.43295/- IS CONFIRMED. THE APPEAL IS DISMISSED ON THIS ISSUE . 2.2. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW B Y CALCULATING TOTAL INCOME OF ASSESSEE COMPANY AT RS. 43,295/- (8% OF RS. 5,41,193/-) AS PER SUB SECTION 6 OF SECTION U/S 44AD AS THERE I S LOSS OF RS (-)1,33,970/- IN THE YEAR AND SECTION 44AD IS VO LUNTARY AND NOT MANDATORY. 2. THE ASSESSEE HAS DECLARED NET LOSS OF RS. (-)1,3 3,970/- AND THEREFORE, THE QUESTIONS OF LOWER PROFIT OR GAIN DO ES NOT ARISE AND THEREFORE THE ASSESSEE IS NOT REQUIRED TO GET HIS A CCOUNTS AUDITED U/S 44AB OF THE IT ACT. 3. THE ASSESSEE'S REGULAR ASSESSMENT U/S 143(3) OF IT ACT, WAS COMPLETED AND THE ASSESSMENT ORDER DATED 25-08-2010 ASSESSING LOSS OF RS. (-) 1,33,970/- WAS ISSUED. NOW WITH THE CHAN GE OF ITO THE OPINION IS CHANGED AND THE CASE IS RE-OPENED ISSUIN G NOTICE U/S 148 OF IT ACT WHICH IS AGAIN THE LAW. 4. IT IS THEREFORE PRAYED THAT:- (I) THE ADDITIONS MADE BY ASSESSING OFFICER OF R S. 43,295/- BE DELETED. (II) THE APPELLANT MAY BE ALLOWED TO ADD, AMEND, ALTER OR RAISE ADDITIONAL GROUNDS OF APPEAL TILL FINALIZATION OF A PPEAL ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 6 - (III) THE ASSESSMENT ORDER OF THE LEARNED ASSESS ING OFFICER MAY BE SET ASIDE AND THE REPRESENTATION MADE BY THE APPELL ANT BE CONSIDERED. 3. BEFORE US, LD.AR HAS CHALLENGED THE VALIDITY OF REASSESSMENT FRAMED BY THE AO. BEFORE US, LD AR REITERATED THE SUBMISS IONS MADE BEFORE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT IN THE ORIGINAL ORDER FRAMED U/S 143(3), AO HAD ACCEPTED THE LOSS OF RS.1,33,970 /- AND SUBSEQUENTLY ONLY ON ACCOUNT OF CHANGE OF OPINION HELD THAT ASSE SSEE WAS REQUIRED TO GET THE ACCOUNTS AUDITED U/S.44AB FOR BEING ELIGIBL E TO CLAIM LOSS. HE SUBMITTED THAT THIS CHANGE OF OPINION WAS NOT PERMI SSIBLE AND THEREFORE REOPENING SHOULD BE DECLARED TO BE INVALID. HE ALSO PLACED RELIANCE ON THE DECISION OF INDORE TRIBUNAL IN THE CASE OF ITO VS. PROJECT INDIA (2007) 109 ITD 87. LD. DR ON THE OTHER HAND SUPPORTED THE ORDER OF AO AND LD.CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS AN UNDISPUTED FA CT THAT ASSESSEE IS ENGAGED IN THE CONSTRUCTION ACTIVITIES AND FOR AY 2 008-09, IT HAD EARNED RECEIPTS OF RS.5,54,103/- AND FROM WHICH ASSESSEE H AD DECLARED LOSS OF RS.1,33,970/- AND THE LOSS DECLARED BY THE ASSESSEE WAS ACCEPTED WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT. IT IS ALSO A FACT THAT NOTICE U/S 148 OF THE ACT WAS ISSUED ON 31/1/2014 WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE LAW ON RE-OPENING OF ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 7 - AN ASSESSMENT UNDER THE ACT, IS FAIRLY SETTLED. AN ASSESSMENT ONCE MADE, IS FINAL. THE ASSESSING OFFICER CAN RE-OPEN AN ASSE SSMENT ONLY IN ACCORDANCE WITH THE EXPRESS PROVISIONS PROVIDED IN SECTION 147/148 OF THE ACT. IT IS ONLY ON THE ASSESSING OFFICER STRICT LY SATISFYING THE PROVISIONS OF SECTION 147 OF THE ACT, THAT IT ACQUI RES JURISDICTION TO RE- OPEN AN ASSESSMENT. SECTION 147 OF THE ACT, CLOTHES THE ASSESSING OFFICER WITH JURISDICTION TO REOPEN AN ASSESSMENT ON SATISF ACTION OF THE FOLLOWING:- (A) THE ASSESSING OFFICER MUST HAVE REASON TO BELIE VE THAT (B) INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT AND (C ) IN CASES WHERE THE ASSESSMENT SOUGHT TO BE REOPENED IS BEYOND THE PERI OD OF SOME FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THEN AN ADDITIONAL CONDITION IS TO BE SATISFIED VIZ. THERE MUST BE FAI LURE ON THE PART OF ASSESSEE TO FULLY AND TRULY DISCLOSE ALL THE MATERI AL FACTS NECESSARY FOR ASSESSMENT. IN THE PRESENT CASE, SINCE INITIATION O F REASSESSMENT PROCEEDINGS IS BEYOND 4 YEARS FROM THE ASSESSMENT Y EAR, THEREFORE UNLESS AND UNTIL IT IS OBSERVED AND FOUND THAT THE INCOME HAS ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE TRULY AND FULLY ALL MATERIAL FACTS FOR THE ASSESSMENT, THE AO IS NOT AU THORIZED TO MAKE REASSESSMENT. IN THE PRESENT CASE, IT IS A FACT THA T ASSESSEE HAS CLAIMED LOSS OF RS. 1,33,970/- ON THE GROSS RECEIPTS OF RS. 5,54,103/- FROM CONSTRUCTION ACTIVITIES. AS PER THE PROVISIONS OF S . 44AD OF THE ACT, AN ASSESSEE CAN CLAIM LOWER PROFITS AND GAINS (I.E LES S THAN 8% OF THE GROSS ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 8 - RECEIPTS) ONLY IF HE KEEPS AND MAINTAINS SUCH BOOK S OF ACCOUNTS AND OTHER DOCUMENTS AS REQUIRED U/S 44AA(2) OF THE ACT AND GETS HIS ACCOUNTS AUDITED AND FURNISHES A REPORT OF SUCH AUD IT AS REQUIRED UNDER S. 44AB OF THE ACT. IN THE PRESENT CASE, THOUGH THE AS SESSEE HAS MAINTAINED BOOKS OF ACCOUNTS ARE REQUIRED U/S 44AA(2) BUT HAD NOT GOT THE ACCOUNTS AUDITED AS REQUIRED U/S 44AB OF THE ACT, WHICH ACCO RDING TO US WAS A FAILURE ON THE PART OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT OF SECTION 44AD OF THE ACT AND THEREBY CLAIM LOSS. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT NO INTERFERENCE TO THE ORDER O F THE LD.CIT(A) IN CONFIRMING THE ACTION OF REOPENING THE ASSESSMENT O N THE PART OF AO IS CALLED FOR. FURTHER, THE DECISION RELIED UPON BY A SSESSEE ARE ON DIFFERENT FACTS AND ARE THEREFORE NOT APPLICABLE TO THE PRESE NT CASE. THUS, THIS GROUND OF ASSESSEE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2016 SD/- SD/- ( ) () (SHAILENDRA KUMAR YADAV) ( ANIL CHATUR VEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/ 05 /2016 5..,.../ T.C. NAIR, SR. PS ITA NO.3386/AHD /2015 ARTECH TECHNOCRATE PVT.LTD. VS. ITO ASST.YEAR 2008-09 - 9 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. 678 9 / CONCERNED CIT 4. 9 ( ) / THE CIT(A)-1, AHMEDABAD 5. :;<*78 , 78 2 , 6 / DR, ITAT, AHMEDABAD 6. <>?. / GUARD FILE. / BY ORDER, +:* //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. AS PER DRAFT GIVEN BY HMEMBE R 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30/5/2016 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.5.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER