Gyanendra Kumar Routray, Cuttack V. ITO, Cuttack

ITA 34/CTK/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7188 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 07-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: R P MOHAPATRA
• Keywords: Presumptive income; Business income
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 SRI GYANENDRA KUMAR ROUTRAY, PRATIVA NIWAS, ARUNODAYA NAGAR, LINK ROAD, CUTTACK. VS. ITO, WARD 2(1), CUTTACK PAN/GIR NO. AGHPR 4933 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI R.P.MOHAPATRA, REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 07 /03 / 2017 DATE OF PRONOUNCEMENT : 07/03 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSES SEE AGAINST THE ORDER OF CIT(A), BERHAMPUR , CAMP: BHUBANESWAR DATED 7.12.2014, FOR THE ASSESSMENT YEAR 2010 - 2011. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. FOR THAT THE ORDER PASSED BY THE LD. CIT (APPEALS) IS ILLEGAL, ARBITRARY AND BEREFT OF ANY MERIT AND THUS, DESERVES TO BE QUASHED IN LIMINE. 2. FOR THAT THE LD. CIT (APPEALS) WAS NOT AT ALL JUSTIFIED IN SUSTAINING THE ASSESSMENT ORDER DUE TO NON - COMPLIANCE IS NOT SUSTAINABLE IN THE EYE OF LAW AND AS SUCH THE SAME IS LIABLE TO BE SET ASIDE. 3. FOR THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ESTIMATED PROFIT @8% WITHOUT GOING DEEP INTO THE MATTER, AS THE APPELLANT IS PURELY A SUB - CONTRACTOR AND EX ECUTING SUB - CONTRACT WORK. 2 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 4. FOR THAT THE LD. CIT(A) HAS WRONGLY REFERRED TO SECTION 44AD AND OTHER JUDGMENTS, IGNORING THE PAST HISTORY OF THE PRESENT APPELLANT. 5. FOR THAT THE C.I.T(A) WAS NOT AT ALL JUSTIFIED IN TAKING MOBILIZATION ADVANCE OF RS.3 ,00,000/ - AS GROSS RECEIPT OF THE APPELLANT IS NOT SUSTAINABLE IN THE EYE OF LAW. 6. FOR THAT INTEREST ON FIXED DEPOSIT WHICH IS USED AS SECURITY WAS NOT THE SURPLUS MONEY AVAILABLE TO THE APPELLANT. THEREFORE, TREATING THE DEPOSIT MONEY AS SURPLUS INVEST ED FOR THE PURPOSE OF EARNING INTEREST IS COMPLETELY ERRONEOUS AND ILLOGICAL. 3. THE A.R. OF THE ASSESSEE , SHRI R.P.MOHAPATRA FILED AN APPLICATION FOR ADJOURNMENT OF HEARING DULY SIGNED BY SHRI SASWAT ACHARYA, SR. A.R. OF THE ASSESSEE ON THE GROUND THAT HE IS UNWELL. IT IS OBSERVED FROM THE RECORDS THAT THIS APPEAL WAS ADJOURNED ON VARIOUS DATES ON ONE GROUND OR THE OTHER AT THE REQUEST OF THE A.R. OF THE ASSESSEE I.E. ON 7.11.2016, 4.1.2017 AND 5.1.2017. THEREFORE, THE ADJOURNMENT A PPLICATION FILED BY THE A.R. OF THE ASSESSEE ON THE GROUND THAT HE WAS SICK WHICH WAS NOT SUPPORTED BY DOCTORS CERTIFICATE WAS REJECTED BY THE BENCH AS THE REASONS SEEKING FOR ADJOURNMENT WAS FO UND TO BE NOT A PLAUSIBLE ONE K EEPING IN VIEW THE OBSERVATION OF THE THEN CHIEF JUSTICE OF INDIA, HONBLE H.L.DATTU THAT THE PREVALENT ADJOURNMENT CULTURE IS ONE OF THE MAIN REASONS FOR THE HUGE PENDENCY IN THE COURTS . FURTHER, IN JANUARY, 2008, JUSTICE SWATANTER KUMAR, THE THEN CHIEF JUSTICE OF THE BOMBAY HIGH COURT HAD REMARKED THIS IS AN UNHAPPY STATE OF AFFAIRS AS THE DAY PROGRESSED AND MORE REQUESTS FOR ADJOURNMENT CAME IN, WITH MOST OF THEM BEING SOUGHT DUE TO 3 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 THE ABSENCE OF COUNSELS OR LACK OF PREPARATION BY LAWYERS. STILL FURTHER, THE SAME SENTIMENT WAS ALSO EXPRESSED BY JUSTICE R M LODHA, THE FORMER CHIEF JUSTICE OF INDIA. ON HIS VERY FIRST DAY IN OFFICE AS CHIEF JUSTICE OF INDIA, THE LEARNED JUDGE STRONGLY CONVEYED THAT HEARING IN CASES WOULD NOT BE AD JOURNED ON THE MERE ASKING OF LAWYERS. THE CULTURE OF ADJOURNMENT HAS TO GO. SEEKING ADJOURNMENT OF SCHEDULED HEARING OF CASES AT THE DROP OF A HAT MUST GO. UNLESS A LAWYER FALLS VERY ILL, REQUESTS FOR ADJOURNMENT MUST NOT BE MADE . FURTHER, SHRI R.P.MOHA PATRA APPEARED BEFORE ME AND WAS AUTHORIZED BY VAKALATANAMA TO APPEAR AND ARGUE THE APPEAL, DID NOT MAKE ANY ARGUMENT THEREFORE, THE APPEAL WAS HEARD EXPARTE QUA THE ASSESSEE AND DISPOSED OF CONSIDERING THE SUBMISSION OF LD D.R. AND MATERIALS AVAILABLE ON RECORD. 4. THE FIRST ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ESTIMATED PROFIT @ 8% AS THE ASSESSEE IS PURELY A SUB - CONTRACTOR AND EXECUTING SUB - CONTRACT WORK. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CONTRACTOR. THE APPELLANT DERIVES INCOME FROM EXECUTION FROM CONTRACT WORK. THE ASSESSEE FILED RETURN FOR THE ASSESSMENT YEAR SHOWING TOTAL INCOME OF RS. 12,65,081/ - . THE ASSESSING OFFICER ALLOWED S EVERAL OPPORTUNITIES TO THE ASSESSEE BUT THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT LIKE CASH BOOK AND LEDGER FOR VER IFICATION. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DISCLOSED A LOWER PROFIT RATE OF 3.99% AS AGAINST 4.85% SHOWN IN T HE IMMEDIATELY PRECEDING YEAR. HE ALSO OBSERVED THAT THE GROSS RECEIPT 4 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 AS PER 26AS STATEMENTS WAS RS.2, 81,05,645/ - AS AGAI NST RS.2,78,05,645/ - SHOWN IN THE P&L ACCOUNT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED HUGE EXPENSES AND AS T HE BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE HIM, THEREFORE, HE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT BY APPLYING THE RATE OF 8% ON THE GROSS RECEIPTS AS PER 26AS STATEMENT. 6. IN THE FIRST APPEAL, THE CIT(A) FIXED FOR HEARING ON 14.2.201 4, 5.6.2014, 26.6.2014 AND 24.90.2014 BUT THERE WAS NO COMPLIANCE FROM THE ASSESSEE AND NO ADJOURNMENT PETITION WAS ALSO FILED BEFORE HIM. THEREFORE, THE APPEAL WAS DISPOSED OF BY THE CIT(A) ON MERITS AS PER THE MATERIALS AVAILABLE ON RECORD. 7. THE CIT( A) OBSERVED THAT THE PRIMARY BOOKS OF ACCOUNTS LIKE CASH BOOK & LEDGER WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER OR BEFORE HIM EVEN THOU GH THE ACCOUNTS OF THE ASSESSEE WE RE STATED TO BE AUDITED. FURTHER, IN THE P&L ACCOUNT , THE ASSESSEE HAS DISCLOSED TURNOVER WHICH WAS LESS THAN THE TURNOVER IN THE 26AS STATEMENT AND THE ASSESSEE FILED NO EVIDENCE BEFORE THE ASSESSING OFFICER TO RECONCILE THE DIFFERENCE. NO EVIDENCE WAS ALSO FILED BEFORE HIM IN SUPPORT OF THE CONTENTIONS TAKEN IN THE GROUNDS THAT THE A MOUNT REPRESENTS AN ADVANCE. THEREFORE, HE HELD THAT HE FOU ND NO REASON TO INT ERFERE WITH THE ACTION OF THE ASSESSING OFFICER 5 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 IN REJECTING THE BOOKS AND ESTIMATING PROFIT ON THE TURNOVER AS PER 26AS STATEMENT. 8. THE CIT(A) ALSO OBSERVED THAT SO FAR AS THE NET PROFIT RATE WAS CONCERNED, THE ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT RATE @ 8%, WHICH I S THE RATE PRESCRIBED U/S.44AD OF THE ACT. EVEN THOUGH THE TURNOVER OF THE ASSESSEE WA S MORE THAN THAT PRESCRIBED U/S.44AD OF RS.40 LAKHS ENHANCED TO RS. 60 LAKHS NOW ENHANCED TO RS.1 CRORE , THE RATE OF PROFIT STIPULATED IN THAT SECTION DOES NOT LOSE ITS GUIDING VALUE. THE CIT(A) OBSERVED THAT THE HON'BLE DELHI BENCH OF THE TRIBUNAL H IN ECOASFALT V S . ADIT, INTERNATIONAL TAX (2012) 24 TAXMANN.COM 349 (DELHI ITAT) HAS HELD AS UNDER: 8.1 SINCE THE BOOKS OF ACCOUNT ARE NOT RELIABLE, THEY DESERVE TO BE REJECTED AND IN THAT CASE A REASONABLE ESTIMATE OF INCOME HAS TO BE MADE. LEGISLATURE HAS PROVIDED ALTERNATE METHOD OF PRESUMPTIVE RATE U/S 44AD IN RESPECT OF CONTRACTS AT 8%. THOUGH THESE PRESUMPTIVE RATES ARE NOT TECHNICALLY APPLICABLE TO ASSESSEE AS ITS TURN OVER EXCEEDS RS. 40 LACS, NEVERTHELESS THESE PROVISIONS CAN THROW SOME LIGHT ON THE ESTIMATE TO BE MADE IN THIS EVENTUALITY. 8.2...INCOME IS ESTIMATED AT THE RATE PRESCRIBED BY PRESUMPTIVE TAXATION 8% LESS PROFIT ATTRIBUTABLE TO THE HELP OF SUBLETTING, IF ANY, BY RSGIPL @ 2%= 6% TO THE TURNOVER IS APPLIED. IN OUR VIEW ENDS OF JUSTICE WILL BE MET IF NET PROFIT OF 6% IS APPLIED TO ASSESSEE'S TURNOVER OF RS. 1,53,48,608/ - WHICH COMES TO AROUND RS. 9,21,000/ - IN PLACE OF LOSS OF RS. 4,10,539/ - RETURNED BY THE ASSESSEE' (EMPHAS IS SUPPLIED). 9. FURTHER, THE CIT(A) RELIED ON THE DECISION OF THIS BENCH OF THE TRIBUNAL, WHEREIN THE PROFIT WAS ESTIMATED AT 8% OR EVEN MORE THAN 8% IN FEW CASES. HE HELD THAT IN CASE OF M/S. JUDHISTIR SAMANTRAY, THE ACTION OF 6 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 HIS PREDECESSOR IN CONFIRMING NET PROFIT RA TE OF 8% WAS AFFIRMED BY THE TRIBUNAL VIDE ORDER DATED 11 - 09 - 2008 IN ITA NO.332/CTK/2008. HE ALSO NOTED THAT IN CASE OF SHRI RAM KARAN AGRAWAL IN ITA NO.272/CTK/2011, THE TRIBUNAL VIDE THEIR ORDER DATED 16 - 09 - 2011 CONFIRMED A NET PROFIT RATE OF 8%. HE ALSO NOTED THAT IN CASE OF SHRI DURGA PRASAD TRIPATHY IN ITA NO.42 & 43/CTK ORDER DATED 13 - 05 - 2011 AND IN THE CASE OF SHRI PRADIPTA KR. ROUT IN ITA NO.L67/CTK/2011 ORDER DATED 16 - 09 - 2011, THE TRIBUNAL ACCEPTED A PROFIT RATE OF 9%. THEREFORE, HE OBSERVED THAT I N THE INSTANT CASE, NOT HING HAS BEEN PRODUCED BEFORE HIM IN SUPPORT OF THE CONTENTION TAKEN IN THE GROUNDS OF APPEAL T HAT THE RECEIPT OF THE ASSESSEE IS FROM SUB - CONTRACT. THEREFORE, HE HELD THAT THE ESTIMA TED RATE OF 8% ADOPTED BY THE ASSESSING OFFICER IS QUITE REASONABLE AND DO ES NOT REQUIRE ANY INTERFERENCE AND DISMISSED THE GROUNDS OF APPEAL OF THE ASSESSEE. 10. SIMILARLY, BEFORE ME, NO EVIDENCE HAS BEEN FILED TO SHOW THAT THE ASSESSEES RECEI PTS WERE FROM SUB - CONTRACTS. FURTHER, NO EVIDENCE HAS BEEN PLACED BEFORE ME TO SHOW THAT THE ESTIMATION OF INCOME BY APPLYING THE RATE OF 8% ON THE RECEIPTS SHOWN IN FORM NO.26AS IS EXCESSIVE BUT ON THE OTHER HAND, I FIND THAT THE CIT(A) HAS RELIED ON THE DECISIONS OF THIS BENCH OF THE TRIBUNAL QUOTED IN HIS ORDER, WHEREIN, THE RATE OF PROFIT OF 8% AND EVEN 9% HAS TO BE HELD TO BE REASONABLE BY THE TRIBUNAL. THEREFORE, I FIND NO GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE 7 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 CIT(A), WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 11. THE SECOND ISSUE IN THIS APPEAL IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TAKING MOBILISATION ADVANCE OF RS.3,00,000/ - AS GROSS RECEIPT OF THE ASSESSEE. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE GROSS RECEIPTS AS PER 26AS STATEMENT WAS RS.2,81,05,645/ - AS AGAINST RS.2,78,05,645/ - DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. THE CONTENTION OF THE A SSESSEE IS THAT THE DIFFERENCE IS ON ACCOUNT OF MOBILISATION ADVANCE OF RS.3,00,000/ - RECEIVED FROM THE PRINCIPAL. AS THE BOOKS OF ACCOUNT AND EVIDENCES WERE NOT FILED BEFORE THE ASSESSING OFFICER, THE ASSESSING OFFICER ESTIMATED THE PROFIT ON THE RECEIP TS DISCLOSED IN FORM NO.26AS. 13. ON APPEAL, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AS THERE WAS NO COMPLIANCE WITH THE NOTICES OF THE CIT(A) BY THE ASSESSEE AND NO EVIDENCE WAS FILED BEFORE HIM IN SUPPORT OF THE CLAIM THAT RS.3,00,000/ - WAS MOBI LISATION ADVANCE RECEIVED BY THE ASSESSEE FROM ITS PRINCIPAL AND, THEREFORE, WAS NOT ASSESSABLE TO TAX AS INCOME IN THE PRESENT YEAR. 14. SIMILARLY BEFORE ME ALSO, THERE IS NO COMPLIANCE TO THE NOTICES OF HEARING AND NO EVIDENCE BY WAY OF PAPER BOOK HAS BE EN FILED BEFORE ME TO DEMONSTRATE THAT RS.3,00,000/ - WAS RECEIVED BY THE ASSESSEE FROM ITS 8 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 PRINCIPAL AS MOBILISATION ADVANCE AND, THEREFORE THE SAME WAS NOT TAXABLE AS INCOME OF THE ASSESSEE IN THE YEAR UNDER APPEAL. IN ABSENCE OF ANY MATERIAL BEING BROUG HT ON RECORD, I DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 15. THE LAST ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INTEREST RECEIVED ON SECURITY DEPOSIT UNDER THE HEAD NCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME OF THE ASSESSEE. 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT IN THE ASSET SIDE OF THE BALANCE SHEET AS ON 31.3.2010, THE ASSESSEE HAS DISCLOSED FIXED DEPOSIT OF RS.15 LAKHS. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY AGGRE GATE INTEREST @ 10% SHALL NOT BE ADDED BACK TO THE INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION AND HENCE, RS.15 LAKHS WAS ADDED BACK TO THE INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. 17. BEFORE THE CIT(A), THERE WAS NO COMPLIANCE TO TH E NOTICES OF HEARING OF THE CIT (A) AND, THEREFORE, THE CIT(A) OBSERVED THAT ADMITTEDLY THE FIXED DEPOSIT STANDS IN THE NAME OF THE ASSESSEE AND INTEREST ON THE FIXED DEPOSIT SHOULD HAVE BEEN DISCLOSED IN THE BOOKS, WHICH HAS NOT BEEN DONE AND, 9 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN BRIN GING TO TAX INTEREST ON THE FIXED DEPOSIT AT A REASONABLE RATE OF 10% AND DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE. 18. SIMILARLY BEFORE ME ALSO, NO MATERIAL H AS BEEN PLACED TO CONTROVERT THE FINDINGS OF THE LOWER AUTHORITIES. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE THAT THE FIXED DEPOSIT OF RS.15 LAKHS WAS UTILIZED BY THE ASSESSEE AS SECURITY DEPOSIT FOR THE BUSINESS OF THE ASSESSEE AND, THEREFOR E, THE INTEREST EARNED ON THE FIXED DEPOSIT WAS LIABLE TO BE TAXED UNDER THE HEAD NCOME FROM BUSINESS AND PROFESSION AND NOT NCOME FROM OTHER SOURCES. IN ABSENCE OF ANY MATERIAL BEING BROUGHT ON RECORD TO SHOW THE NEXUS BETWEEN INTEREST INCOME EARNED AND THE UTILIZATION OF FIXED DEPOSIT FOR THE BUSINESS PURPOSES, I AM OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES WERE JUSTIFIED IN ASSESSING THE INCOME EARNED ON FIXED DEPOSIT UNDER THE HEAD NCOME FROM OTHER SOURCES AND NOT NCOME FROM BUSINESS OF THE ASSESSEE. THEREFORE, I DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE AS WELL. 19. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRO NOUNCED IN THE COURT ON 07/03 /2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 07/03 /2017 B.K.PARIDA, SPS 10 ITA NO. 34/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SRI GYANENDRA KUMAR ROUTRAY, PRATIVA NIWAS, ARUNODAYA NAGAR, LINK ROAD, CUTTACK. 2. THE RESPONDENT. ITO, WARD 2(1), CUTTACK 3. THE CIT(A) , BERHAMPUR, CAMP: BHUBANESWAR. 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//