M/s. Devendra Kumar Contractor, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 3388/DEL/2014

• Counselvise Citation: 338820114 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 06-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Assessee Lawyers: PREM PRAKASH
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH SMC - 2 : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3 388 /DEL/201 4 A.Y. : 20 10 - 1 1 M/S DEVENDRA KUMAR CONTRACTOR, VS. INCOME TAX OFFICER, C/O PREM PRAKASH ADVOCATE, WARD - 1(2), 183/2, NORTH CIVIL LINES, MUZAFFARNAGAR MUZAFFARNAGAR - 251001 (PAN : AADFD8020A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PREM PRAKASH, ADVOCATE & SH. ASHISH AGGARWAL, ADV. DEPARTMENT BY : SH. ROBIN RAWAL, SR. DR . DATE OF HEARING : 0 6 - 7 - 2015 DATE OF ORDER : 09 - 7 - 2015 PER H.S. SIDHU, JM O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS), MUZAFFARNAGAR DATED 29 . 1 .201 4 PERTAINING TO ASSESSMENT YEAR 20 10 - 11 . 2. T HE GROUNDS OF APPEAL READ AS UNDER: - I) THAT THE ORDER IS AGAINST LAW AND FACTS ON RECORD. (II) THAT LD. CIT(A) WAS WRONG IN CONFIRMING DISALLOWANCE OF EXPENSE OF RS. 3,68,280/ - WITHOUT ANY BASE. 2 (III) THE LD. CIT(A) WAS NOT ALLOWING REMUNERATION TO PARTNERS AS PER DEED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM CIVIL CONTRACT WORK. RETURN DECLARING INCOME OF RS. 1,16,900/ - WAS FILED ON 14.10.2010. D URING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS GATHERED BY THE AO THAT THE ASSESSEE HAD DEBITED VARIOUS EXPENSES UNDER DIFFERENCE HEADS TO THE TRADING AND PROFIT AND LOSS ACCOUNT AS UNDER: - A) WAGES RS. 16,78,500/ - B) FREIGHT RS. 50,400/ - C) TRAVELLING & CONVEYANCE RS. 12,500/ - D) MISC. EXPENSES RS. 1,00,000/ - 3.1 ON VERIFICATION OF VARIOUS EXPENSES IT WAS GATHERED BY THE AO THAT MOST OF THE EXPENSES DEBITED TO THE TRADING AND PROFIT AND LOSS ACCOUNT WERE NOT SUPPORTED BY BILLS / VOUCHERS. FURTHER THE ASSESSEE ALSO ACCEPTED THAT BILLS AND VOUCHERS IN RESPECT OF THE AFORESAID EXPENSES WERE NOT MAINTAINED. BASED ON SUCH INFERENCE THE AO DISALLOWED 20% OF SUCH EXPENSES TOTALING TO RS. 3,68,280/ - WHICH WAS ADDED TO THE INCOME O F THE ASSESSEE VIDE ASSESSMENT ORDER DATED 12.3.2013 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 4. AGGRIEVED WITH THE ASSESSMENT ORDER DATED 12.3.2013, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 29.1.2014 HAS DISMISSED THE AP PEAL BY UPHOLDING THE ACTION OF THE ASSESSING OFFICER. 5. AGAINST THE AFORESAID ORDER THE ASSESSEE IS IN APPEAL BEFORE ME. 3 6. AT THE THRESHOLD, THE LD. COUNSEL OF THE ASSESSEE STATED THAT THE ASSESSEE HAS SHOWN PROFIT OF 7.4% (BEFORE INTEREST AND SALA RY TO PARTNERS). IF THE AMOUNT OF RS. 3,68,280/ - IS ADDED TO THE SHOWN PROFIT OF RS. 6,69,305/ - , THE PROFIT WILL BE RS. 10,37,585/ - AND WILL BE @11.4%. THE ASSESSEE S COUNSEL FURTHER SUBMITTED THAT AFTER REJECTION OF A/C BOOKS, PROFIT IS TO BE ESTIMATED AND FOR THE SAME HE IS RELYING UPON THE CASE LAW TITLE CIT VS. SURJIT SINGH MAHESH KUMAR 210 ITR 82 (ALL.) WHEREIN IT HAS BEEN HELD THAT AS THE SALES OF THE ASSESSEE WERE NOT CAPABLE OF VERIFICATION, IN THE OPINION OF THE INCOME TAX APPELLATE TRIBUNAL, IT CALLED FOR AN ESTIMATE OF SALES AND THE RATE OF PROFIT TO BE APPLIED THEREON IN ORDER TO WORK OUT THE TAXABLE INCOME. HE FURTHER STATED THAT THE AS REGARDS CIVIL CONTRACT, THE ITAT HAS APPLIED 8% OR LESS NET PROFIT. HE FURTHER SUBMITTED THAT THE AO WAS WRONG IN NOT RELYING ON ASSESSMENT ORDER FOR AY 2008 - 09 IN THE CASE OF THE ASSESSEE WHEN PROFIT RATE OF 8.01% HAS BEEN APPLIED BY THE AO IN ORDER U/S. 143(3) OF THE I.T. ACT. HE FURTHER DRAW OUR ATTENTION TO THE ITAT, DELHI C BENCH VIDE ORDER DATED 26.3.2006 OF ASSESSEE S OWN CASE WHEREIN THE TRIBUNAL IN ITA NO. 2467/DEL/2005 (AY 2001 - 02) HAS ALLOWED THE NET PROFIT RATE @8%. 7. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. I HAVE HEARD BOTH THE PARTIES AND PERUS ED THE RECORDS AVAILABLE WITH ME, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AND THE CITATIONS RELIED UPON THE BY THE LD. COUNSEL OF THE ASSESSEE. I FIND FORCE IN THE ASSESSEE S COUNSEL SUBMISSION THAT THE AO WAS WRONG IN NOT RELYING ON ASSES SMENT ORDER FOR AY 2008 - 09 IN THE CASE OF THE 4 ASSESSEE WHEN PROFIT RATE OF 8.01% HAS BEEN APPLIED BY THE AO IN ORDER U/S. 143(3) OF THE I.T. ACT . I FURTHER FIND THAT THE ITAT, DELHI C BENCH VIDE ITS ORDER DATED 26.3.2006 IN ASSESSEE S OWN CASE IN ITA NO. 2467/DEL/2005 (AY 2001 - 02) HAS HELD AS UNDER: - 6. ON A CONSIDERATION OF THE ARGUMENTS RAISED BY BOTH THE PARTIES AND THE MATERIAL PLACED ON RECORD BEFORE US, WE ARE OF THE OPINION THAT THE ASSESSEE NEEDS TO SUCCEED HERE FOR THE SOLE GROUND THAT IN CASES WHERE THE ASSESSEE S BOOKS OF ACCOUNT HAVE BEEN REJECTED AND THE ASSESSEE IS A CIVIL CONTRACTOR, THE JUDICIAL DECISIONS LIKE THE ONES QUOTED BY THE ASSESSEE, HAVE HELD THAT THE REASONABLE NET PROFIT RATE APPLICABLE IS 8%. THERE IS NO DENI AL TO THIS ON BEHALF OF THE DEPARTMENT, THOUGH IT HAS BEEN CONTENDED THAT EACH CASE HAS TO BE CONSIDERED ON ITS OWN PECULIAR FACTS AND THAT THERE IS NO RATIO TO BE FOLLOWED HERE. THEREFORE, WE HOLD THAT THE ESTIMATION OF THE LD. CIT(A) AT 10% NET PROFI T RATE WAS NOT PROPER. THIS IS HEREBY REDUCED TO 8%. GROUND NO. 2 IS THUS ACCEPTED. 9. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS RESPECTFULLY FOLLOWING THE PRECEDENT AS AFORESAID, I DIRECT THE AO TO ADOPT PROFIT RATE @ 8 % ON GROSS RECEIPTS AND RE - C OMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY . 10. WITH REGARD TO GROUND NO. 3 RELATING TO ALLOWING OF REMUNERATION TO PARTNERS AS PER DEED IS CONCERNED, I FIND THAT AO NOT ALLOWED THE REMUNERATION TO PARTNERS AND SIMILARLY, LD. CIT(A) HAS UPHELD THE ACTION OF THE AO ONLY DUE TO NON FURNISHING OF SUBMISSIONS, DETAILS AND EVIDENCES IN SUPPORT OF ITS CLAIM. IN THE INTEREST OF JUSTICE, I AM OF THE 5 VIEW THAT THIS ISSUE RE QUIRES FRESH ADJUDICATION AT THE LEVEL OF THE AO. ACCORDINGLY, THE ISSUE IN DISPUTE IS SET ASIDE TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH, UNDER THE LAW, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DI RECTED TO FURNISH THE SUBMISSIONS, DETAILS AND EVIDENCES IN SUPPORT OF ITS CLAIM FOR THE ISSUE IN DISPUTE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 /7/201 5 . SD/ - [ H.S. SIDHU ] JUDICIAL MEMBER DATE: 9 /7/201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 6