M/s. Laxminath Infrastructure Pvt. Ltd., JODHPUR V. ITO, CHURU

ITA 34/JODH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5278 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 23-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L MOURYA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A.NO.34/JODH/2015 ASSESSMENT YEAR: 2011-12 M/S. LAXMINATH INFRASTRUCTURE PVT. LTD. C/O. U. C. JAIN, ADVOCATE, SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR PAN :AABCL3531B VS. THE INCOME TAX OFFICER, WARD -1, CHURU APPELLANT RESPONDENT I.T.A.NO.66/JODH/2015 ASSESSMENT YEAR: 2011-12 THE INCOME TAX OFFICER, WARD -1, CHURU VS. M/S. LAXMINATH INFRASTRUCTURE PVT. LTD. C/O. U. C. JAIN, ADVOCATE, SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR PAN :AABCL3531B APPELLANT RESPONDENT ASSESSEE BY SHRI RAJENDRA JAIN, AR DEPARTMENT BY SHRI S. L. MOURYA, DR DATE OF HEARING: 14.03.2016 DATE OF PRONOUNCEMENT: 14.03.16 O R D E R PER: GEORGE MATHAN, J.M. : ITA NO.34/JODH/2015 IS AN APPEAL FILED BY THE ASSE SSEE AND ITA NO.66/JODH/2015 IS AN APPEAL FILED BY THE REVENUE A GAINST THE ORDER OF THE LEARNED CIT (A)-3, JAIPUR PASSED IN APPEAL NO.633/J PR/13-14 DATED 19 TH DECEMBER, 2014 FOR ASSESSMENT YEAR 2011-12. 2 ITA NO.34 & 66/JODH/2015 2. SHRI RAJENDRA JAIN, ADVOCATE REPRESENTED ON BEHA LF OF THE ASSESSEE AND SHRI S. L. MOURYA, LEARNED DR REPRESENTED ON BE HALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AR THAT GROUNDS NO. 1 TO 3 IN THE ASSESSEES APPEAL AND GROUND NO.1 BEING THE ONLY GR OUND IN REVENUES APPEAL WAS INTER CONNECTED. IT WAS A SUBMISSION THA T THE ASSESSEE IS DOING CIVIL CONTRACT WORKS. IT WAS A SUBMISSION THAT DURI NG THE RELEVANT ASSESSMENT YEAR AFTER REJECTING THE ASSESSEES BOOKS THE AO ES TIMATED THE NET PROFIT OF THE ASSESSEE AT 8.5% OF THE GROSS CONTRACT RECEIPT. IT WAS A SUBMISSION THAT ON APPEAL THE LEARNED CIT (A) HAD REDUCED THE SAME TO 2.33%. IT WAS A SUBMISSION THAT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD DISCLOSED A NET PROFIT RATE OF 0.71%. IT WAS A SUBM ISSION THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR BEING ASSESSM ENT YEAR 2010-11 THE NET PROFIT OF THE ASSESSEE WAS AT 1.82% AND FOR THE ASSESSMENT YEAR BEFORE THAT THE NET PROFIT RATE WAS 0.06%, FOR ASSESSMENT YEAR 2010-11 THE TURNOVER HAD COME DOWN TO RS.6.9 CRORES AND THE NET PROFIT R ATE HAD BEEN FIXED AT 1.62%. IT WAS A SUBMISSION THAT THE GROSS PROFIT RA TE HAD ALSO GONE UP FROM 2.88% IN 2009-10 TO 5.35% IN 2010-11. IT WAS A SUBM ISSION THAT FOR THE ASSESSMENT YEAR 2011-12 THE TURNOVER OF THE ASSESSE E HAS SHOT UP TO RS.23.56 CRORES AND THE ASSESSEE HAD DECLARED GROSS PROFIT RATE OF 4.5% AND NET PROFIT RATE OF 0.71%. IT WAS A SUBMISSION T HAT THE FALL IN NET PROFIT WAS ON ACCOUNT OF VARIOUS EXPENSES WHICH HAD TO BE INCU RRED ON ACCOUNT OF 3 ITA NO.34 & 66/JODH/2015 INCREASE IN THE TURNOVER. IT WAS A SUBMISSION THAT AGAINST THE ACTION OF THE LEARNED CIT (A) IN REDUCING THE NET PROFIT RATE FRO M 8.5% TO 2.33%, THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE LEARNED CIT (A) IN FIXING THE NET PROFIT RATE AT 2. 33%. IT WAS A SUBMISSION THAT THE TURNOVER OF THE ASSESSEE GONE UP NEARLY 400% CO MPARING TO PRECEDING ASSESSMENT YEAR AND ON ACCOUNT OF INCREASE IN THE T URNOVER THE ASSESSEE HAD TO INCUR SUBSTANTIAL EXPENDITURE ON ACCOUNT OF FINANCING AND TRAVEL AND OTHER EMPLOYEES COST. IT WAS A SUBMISSION THAT THE NET PROFIT AS DECLARED BY THE ASSESSEE MAY BE ACCEPTED. 4. IN REPLY, THE LEARNED DR SUBMITTED THAT THE TURN OVER HAVING GONE UP THE ASSESSEE SHOULD HAVE MADE HIGHER PROFIT. IT WAS A SUBMISSION THAT THE NET PROFIT RATE OF 8.5% MADE BY THE AO WAS REASONAB LE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITT EDLY, A PERUSAL OF THE GROSS PROFIT RATES SHOWN BY THE ASSESSEE SHOWS THAT THE GROSS PROFIT RATES ARE SUBSTANTIALLY RUNNING CONSTANTLY EXCEPT FOR ASS ESSMENT YEAR 2010-11 WHEN THE TURNOVER WAS VERY LOW. FOR ASSESSMENT YEAR 2011-12 BEING THE ASSESSMENT YEAR UNDER APPEAL, THE GROSS PROFIT RATE IS ALSO 4.51%. ADMITTEDLY, WHEN THE TURNOVER GOES UP SUDDENLY, THE RE WOULD BE INCREASE IN VARIOUS EXPENDITURES WHICH AFFECT THE NET PROFIT OF THE ASSESSEE. CONSIDERING THE FACT THAT THE ASSESSEE HAS DISCLOSED NET PROFIT RATE OF 0.06% FOR 4 ITA NO.34 & 66/JODH/2015 ASSESSMENT YEAR 2009-10 AND THE TRIBUNAL HAS FIXED THE NET PROFIT RATE OF 1.82% FOR ASSESSMENT YEAR 2010-11 AND COMPARING TO ASSESSMENT YEAR 2010-11, THE TURNOVER OF THE ASSESSEE HAS GONE UP B Y MORE THAN 400% IN THE RELEVANT ASSESSMENT YEAR BEING ASSESSMENT YEAR 2011-12, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, PEGGING THE N ET PROFIT RATE AT 1% WOULD BE REASONABLE. IN THE CIRCUMSTANCES, THE A O IS DIRECT ED TO ADOPT THE NET PROFIT RATE OF 1% AS AGAINST 0.71% DISCLOSED BY THE ASSESS EE. 6. IN THE RESULT, GROUNDS NO.1 TO 3 OF THE ASSESSEE S APPEAL IS PARTLY ALLOWED AND THE REVENUES APPEAL STANDS DISMISSED. 7. IN RESPECT OF GROUND NO.4 OF THE ASSESSEES APPE AL IT WAS SUBMITTED THAT THE LEARNED CIT (A) HAS ERRED IN HOLDING THE I NCOME FROM INTEREST AS BEING LIABLE TO BE ASSESSED SEPARATELY UNDER THE HE AD INCOME FROM OTHER SOURCES, WHEN THE SAME WAS LIABLE TO BE ASSESSED O NLY AS BUSINESS INCOME AS HAS BEEN HELD BY THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11. 8. THE LEARNED A R DREW OUR ATTENTION TO PAGE 7 TO 15 OF THE PAPER BOOK WHICH IS ORDER OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN ASSESSEES OWN CASE IN ITA NO.582/JODH/2013 DATED 03-04-2013 FOR A SSESSMENT YEAR 2010- 11 WHEREIN IT HAS BEEN HELD AS FOLLOWS:- 5 ITA NO.34 & 66/JODH/2015 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT ADDITION HAS BEEN MADE BECAUSE THE ASSESSEE HAS SH OWN INTEREST INCOME ON FDRS IN ITS PROFIT AND LOSS ACCOUNT AND ON THAT BASIS ALONE, THE A.O. PERSUADED HIMSELF TO TREAT THIS INTEREST INCOME AS INCOME FROM OTHER SOURCES. HOWEVER, THE A. O. HAS IGNORED THE CONTENTION OF THE ASSESSEE THAT FDRS WERE PURCHASED FOR TAKING C ONTRACT WORK AND THEREFORE, THE INTEREST ACCRUING ON THESE FDRS WOU LD BECOME ITS BUSINESS INCOME. THE ASSESSEE FILED COPIES OF FDRS , WHICH WERE PLEDGED WITH VARIOUS GOVERNMENT DEPARTMENTS. THE A .O. OR THE LD. CIT (A) HAS NOT DISPUTED THE ABOVE MENTIONED FACTS. IN OUR CONSIDERED OPINION HIS INTEREST INCOME WOULD PARTAKE THE CHAR ACTER OF BUSINESS INCOME ONLY. IN SUCH LIKE CASES, WE HAVE TAKEN NUM EROUS DECISIONS IN THE SAME LINES. ACCORDINGLY, AFTER CONSIDERING THI S INTEREST INCOME AS PART OF BUSINESS INCOME AS HAS BEEN CLAIMED BY THE ASSESSEE, WE ALLOW GROUNDNO.2 OF THIS APPEAL AS IT HAS BEEN PRA YED FOR. 9. IN REPLY THE LEARNED D R VEHEMENTLY SUPPORTED TH E ORDER OF THE A O AND THE LEARNED CIT (A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS THIS IS SUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 AS EXTRACTED (SUPRA), RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE, THE A O IS DIRECTED TO ASSESS THE INTEREST INCOME UNDER THE HEAD BUSINESS INCOME AS HAS BEEN CLAIME D BY THE ASSESSEE. AS A RESULT, GROUND NO.4 OF THE ASSESSEES APPEAL STAN DS ALLOWED. 6 ITA NO.34 & 66/JODH/2015 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2016. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, DATED: 14 TH MARCH, 2016 LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA DEKA/ DEKA/ DEKA/ DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. CIT CONCERNED 4. CIT (A) CONCERNED 5. DR, ITAT, JODHPUR 6. GUARD FILE BY ORDER, SR. PRIVATE SECRETARY DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 14.03.16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 15.03.16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SE COND MEMBER 15 .03.16 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 15.03. 16 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 15 .03.16 SR.PS 6. DATE OF PRONOUNCEMENT 14.03.16 SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER