The Nain Co-op L/C Society, Kaithal V. ACIT, Kurukshetra

ITA 343/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5410 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-05-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PERMIL KUMAR GOYAL
• Keywords: Business income
• Section: 44AD; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.343 /CHD/2011 (ASSESSMENT YEAR : 2008-09) THE NAIN CO-OP L/C SOCIETY, VS. THE A.C.I.T., V & PO NAINA, KAITHAL KURUKSHETRA. PAN: AEABAT0787F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PERMIL KUMAR GOYAL RESPONDENT BY : SMT.SARITA KUMARI, DR O R D E R THE APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 21.2.2011 RELATING TO ASSE SSMENT YEAR 2008-09 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME-T AX ACT. 2. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS DATED 26.5.2001 VIDE WHICH THE GROUND NOS. 3 & 4 RAISED IN THE MEMO OF A PPEAL REGARDING CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT AND COSTS TO BE AWARDED, HAVE BEEN WITHDRAWN. CONSEQUENTLY THE GRO UND NOS.3 & 4 RAISED BY THE ASSESSEE ARE DISMISSED AS WITHDRAWN. 3. THE ASSESSEE VIDE GROUND NO.1 HAS RAISED THE ISS UE OF ALLOWABILITY OF DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(VI) OF THE INCOME-TAX ACT. THE GROUND NO.2 RAISED BY THE ASSESSEE IS IN CONNEC TION WITH THE ESTIMATION OF INCOME BY APPLYING GP RATE OF 12% ON GROSS RECEIPTS INCLUDING THE MATERIAL SUPPLIED BY THE DEPARTMENT A FTER REJECTING THE 2 BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. THE ALTERNATE PLEA OF THE ASSESSEE IN THIS REGARD IS THAT THE ESTIMATION BY THE ASSESSING OFFICER @ 12% WAS VERY HIGH. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY IS COMPRISING OF GROUP OF LABOURERS WHO IN TURN ENTER INTO CONTRACT WITH AGENCIES TO ENSURE WORK/EMPLOYMENT FOR ITS MEMBERS. THE MEMBERS OF THE SOCIETY CARRY OUT THE WORK/LABOUR FOR WHICH THE WORK IS OBTAINED FROM VARIOUS AGENCIES. DURING THE YEAR UNDER CONSI DERATION THE ASSESSEE HAD RECEIVED CONTRACT RECEIPTS FROM CARRYING OUT CI VIL WORKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS A SKED TO PRODUCE THE BOOKS OF ACCOUNT AND VOUCHERS OF EXPENSES. THE ASS ESSEE PRODUCED THE BOOKS OF ACCOUNT BUT NO VOUCHERS WERE PRODUCED AND IT WAS CONTENDED THAT NO SUCH VOUCHERS HAVE BEEN MAINTAINED BY THE A SSESSEE AS THE PAYMENT OF LABOUR HAD BEEN MADE TO ITS MEMBERS ONLY . THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASS ESSEE AND ESTIMATED THE INCOME OF THE ASSESSEE. THE ASSESSEE HAD SHOWN GROSS RECEIPTS OF RS.37,48911/- AND HAD ALSO DEBITED THE EXPENSES INC URRED ON MATERIAL AT RS.3,73,639/- WHICH AS PER THE ASSESSING OFFICER WE RE DEBITED ON ESTIMATE BASIS. THE ASSESSING OFFICER APPLYING TH E NET PROFIT RATE OF 12% ON GROSS RECEIPTS OF RS.37,48,911/-, COMPUTED T HE INCOME OF THE ASSESSEE AT RS.44,98,701/-. THE ASSESSING OFFICER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PRABHAT KUMAR FOR APPLYING THE NET PROFIT OF 12 % ON THE CONTRACT RECEIPTS. FURTHER, THE ASSESSEE IN ITS RETURN OF I NCOME HAD CLAIMED THE DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT WH ICH WAS NOT COMMENTED UPON BY THE ASSESSING OFFICER BUT WAS NOT ALLOWED TO THE ASSESSEE ALSO. 3 5. THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFF ICER IN RESPECT OF REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF NE T PROFIT RATE OF 12% ON THE GROSS PROFIT RECEIPTS AND ALSO DISMISSED THE CLAIM OF THE ASSESSEE VIS--VIS DEDUCTION ON MATERIAL SUPPLIED BY THE DEP ARTMENT. 6. THE SECOND ISSUE RAISED BY THE ASSESSEE BEFORE T HE CIT(A) WAS IN CONNECTION WITH THE ALLOWANCE OF DEDUCTION UNDER SE CTION 80P(2)(A)(VI) OF THE ACT. THE ASSESSING OFFICER IN ITS REMAND RE PORT SUBMITTED THAT AS THE GENUINENESS OF THE SOCIETY WAS NOT PROVED, THE DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT HAS BEEN CORRECTLY NOT ALLOWED TO THE ASSESSEE. IN THE REJOINDER TO THE REMAND REPORT TH E LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT NO QUERY LETTER OR ORDER-SH EET ENTRY AS TO WHY AND HOW THE DEDUCTION UNDER SECTION 80P(2)(A)(VI) O F THE ACT WAS NOT ALLOWABLE TO THE ASSESSEE, WAS RAISED BY THE ASSESS ING OFFICER. IT WAS FURTHER CONTENDED THAT SIMPLY BECAUSE THE VOUCHERS OF LABOUR EXPENSES WERE NOT MAINTAINED, COULD NOT THE REASON FOR THE D ENIAL OF DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. REGARDING THE GENUINENESS OF THE ASSESSEE SOCIETY, THE SUBMISSION OF THE ASSESSE E WAS THAT THE SAME WAS MERE ASSUMPTION OF THE ASSESSING OFFICER, SPECI ALLY WHEN THE ASSESSEE IS REGISTERED UNDER THE COOPERATIVE SOCIET Y ACT, 1954 AND DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT IS BEING ALLOWED FOR THE PAST SEVERAL YEARS. FURTHER PLEA WAS THAT THE ASS ESSING OFFICER HIMSELF HAD PASSED THE ORDER ON THE STATUS OF SOCIETY AND H AD FORGOTTEN TO ALLOW DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT WH ILE PASSING THE ORDER UNDER SECTION 143(3) OF THE ACT. THE CIT(A) IN PAR A 2.4 HELD AS UNDER : 2.04. THE PLEA OF THE APPELLANT IS CONSIDERED. AS DISCUSSED ABOVE THAT THE AO SUBMITTED IN HIS COMMENTS THAT THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF THE SOCIETY. IN SPITE OF THE SPECIFIC COMMENTS OF THE AO, THE 4 APPELLANT HAS NOT BROUGHT ON RECORD ANY EVIDENCE THAT THE ENTIRE LABOUR EXPENSES WERE PAID TO THE MEMBERS OF THE SOCIETY. IT IS WORTH TO MENTION THAT IN THE APPEAL MEMO ADDRESS OF THE COUNSEL HAS BEEN GIVEN, TO WHICH NOTICE MAY BE SENT TO THE APPELLANT. THIS FACT ALSO RAISED DOUBT ABOUT THE GENUINENESS OF THE SOCIETY. IT IS A WELL KNOWN FACT THAT THESE SOCIETIES ARE NORMALLY MADE BY A CONTRACTOR BY SHOWING THE LABOURERS AS MEMBERS FOR TAKING THE BENEFIT OF SECTION 80P OF THE ACT. IN VIEW OF THESE FACTS, IT IS HELD THAT THE APPELLANT FAILED TO ESTABLISH THE GENUINENESS OF THE SOCIETY AND HENCE DEDUCTION U/S 80P(2)(A)(VI) IS NOT AVAILABLE TO THE APPELLANT SOCIETY. 7. THE LEARNED A.R. FOR THE ASSESSEE VIDE WRITTEN S UBMISSIONS POINTED OUT THAT THE CONTRACT WORK CARRIED ON BY THE ASSESS EE WAS FOR SUPPLY OF LABOUR AND AS SUCH THE RATE APPLIED IN THE CASE OF THE CONTRACTOR BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PRABHAT KUMAR (SUPRA) WAS NOT APPLICABLE TO THE FACTS OF TH E PRESENT CASE. IN RESPECT OF THE MATERIAL SUPPLIED IT WAS POINTED OUT THAT THE MATERIAL SUPPLIED BY THE DEPARTMENT AT RS.3,73,639/- WAS VER IFIABLE FROM THE DETAILS AND FORM NO.16A FILED BY THE ASSESSEE DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE ALTERNATE THE LEARN ED A.R. FOR THE ASSESSEE VIDE HIS WRITTEN SUBMISSIONS DATED 26.5.20 01 SUBMITTED THAT WHERE THE BOOKS OF ACCOUNT ARE REJECTED, THE NET PR OFIT IS TO BE ESTIMATED UNDER SECTION 44AD OF THE ACT BY APPLYING THE RATE OF 8% TO THE GROSS RECEIPTS. IN RESPECT OF THE CLAIM OF DEDUCTION UNDE R SECTION 80P(2)(A)(VI) OF THE ACT THE LEARNED A.R. FOR THE ASSESSEE POINTE D OUT THAT NO QUERY LETTER OR ORDER-SHEET ENTRY AS TO WHY AND HOW THE D EDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT WAS NOT ALLOWABLE, WAS EVE R MADE BY THE 5 ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . EVEN DURING THE APPELLATE PROCEEDINGS THE ASSESSING OFFICER HAD DEF ENDED THE ACTION ON ACCOUNT OF VOUCHERS OF LABOUR EXPENSES BEING NOT MA INTAINED, WHICH CANNOT BE THE REASON FOR DENYING THE DEDUCTION UNDE R SECTION 80P(2)(A)(VI) OF THE ACT. REGARDING THE GENUINENES S OF THE SOCIETY SIMILAR CONTENTION AS BEFORE THE CIT(A) WERE MADE B EFORE ME AND ALSO IT WAS POINTED OUT THAT THE ASSESSEE IS REGISTERED UND ER THE COOPERATIVE SOCIETY ACT AND SIMILAR DEDUCTION WAS BEING ALLOWED BOTH IN THE EARLIER AND THE SUBSEQUENT ASSESSMENT YEARS. MY ATTENTION WAS DRAWN TO THE COPY OF THE RETURN OF INCOME FILED IN ITR-V, PLACED AT PAGES 1 TO 3 OF THE PAPER BOOK UNDER WHICH AT PAGE 19 DEDUCTION IS CLAI MED UNDER SECTION 80P(2)(A)(VI) OF THE ACT. FURTHER MY ATTENTION WAS INVITED TO THE COPY OF FORM NO.16A PLACED AT PAGES 31 & 32 OF THE PAPER BO OK UNDER WHICH THE DETAILS OF COST OF MATERIAL SUPPLIED BY THE CONTRAC TOR ARE INCORPORATED WHICH HAVE TO BE EXCLUDED FROM THE GROSS RECEIPTS. 8. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE CIT(A) AND POINTED OUT THAT IN THE ABSENCE OF T HE VOUCHERS BEING MAINTAINED BY THE ASSESSEE THE ASSUMPTION OF INCOME WAS JUSTIFIED AND CONSEQUENTLY THE REJECTION OF DEDUCTION UNDER SECTI ON 80P(2)(A)(VI) OF THE ACT. 9. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE COOPERAT IVE SOCIETY ACT, 1954. THE ASSESSEE COMPRISING OF A GROUP OF LABOURERS, IN TURN HAS FORMED COOPERATIVE SOCIETY, WHICH ENTER INTO CONTRACT WITH VARIOUS AGENCIES, TO CARRY OUT THE LABOUR ORIENTED WORK. THE ASSESSEE SOCIETY IS IN EXISTENCE FOR THE PAST SEVERAL YEARS AND IS BEING ASSESSED TO TAX. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CARRIED OUT THE CONT RACT OF LABOUR FOR INSTALLING UNDERGROUND WATER PIPE LINE. THE CLAIM OF THE ASSESSEE IS 6 THAT CERTAIN MATERIAL IS SUPPLIED BY THE AGENCIES, WHICH IS PART OF ITS GROSS CONTRACT RECEIPTS AND THE ASSESSEE IS CARRYIN G OUT THE LABOUR ORIENTED WORK, IN WHICH THE GROSS PROFIT IS ON LOWE R SIDE AS COMPARED TO THE CIVIL CONSTRUCTION WORK CARRIED OUT BY PERSONS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDING S REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AS THE ASSESSEE HAD FAIL ED TO PRODUCE THE VOUCHERS. THE EXPLANATION OF THE ASSESSEE WAS THAT THE MAJORITY OF THE EXPENDITURE WAS ON ACCOUNT OF LABOUR EXPENSES WHICH IN TURN WERE PAID TO THE MEMBERS OF THE ASSESSEE SOCIETY AND THE PAYM ENT BEING MADE TO ITS MEMBERS, NO VOUCHERS WERE MAINTAINED BY THE ASSESSE E. IN THE ABOVE- SAID FACTS AND CIRCUMSTANCES I UPHOLD THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT AND IN ORDER TO DET ERMINE THE INCOME FOR THE YEAR UNDER APPEAL RESORT IS TO BE MADE TO ESTIM ATION OF PROFIT BY APPLYING GP RATE. THE HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT VS. PRABHAT KUMAR (SUPRA) HAD APPLIED A GP R ATE OF 12% TO GROSS CONTRACT RECEIPTS IN THE CASE OF CIVIL CONTRACTOR. THE PRESENT ASSESSEE IS A LABOUR CONTRACTOR AND THERE IS NO MERIT IN ADOPTI NG THE SAME RATE FOR ESTIMATING THE INCOME OF LABOUR CONTRACTOR. THE AS SESSEE VIDE HIS WRITTEN SUBMISSIONS HAD MADE AN ALTERNATE PLEA THAT IN CASE OF REJECTION OF BOOK RESULTS SHOWN BY THE ASSESSEE, RESORT IS TO BE MADE UNDER SECTION 44AD OF THE ACT, UNDER WHICH GP RATE OF 8% IS PRESC RIBED. ALLOWING THE ALTERNATE PLEA OF THE ASSESSEE I DIRECT THE ASSESSI NG OFFICER TO ADOPT THE GP RATE OF 8% TO COMPUTE THE INCOME OF THE ASSESSEE . THE ASSESSEE HAD FURTHER CLAIMED THAT THE GROSS CONTRACT RECEIPTS RE FLECTED IN THE TDS CERTIFICATE INCLUDED THE COST OF MATERIAL SUPPLIED BY THE AGENCIES, WHICH IS TO BE EXCLUDED WHILE COMPUTING THE INCOME IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER HAD REJECTED THE C LAIM OF THE ASSESSEE BEING PURELY ON ESTIMATE. HOWEVER, ON THE PERUSAL OF FORM NO.16A FILED BY THE ASSESSEE AT PAGES 31 & 32 OF PAPER BOOK, I F IND THAT THE GROSS 7 CONTRACT RECEIPTS INCLUDE BOTH THE AMOUNT OF SECURI TY AND COST OF MATERIAL SUPPLIED BY THE SAID AGENCIES. THE COST O F THE SAID MATERIAL IS TO BE EXCLUDED FROM THE GROSS CONTRACT RECEIPTS BEF ORE APPLYING THE RATE OF 8% FOR COMPUTING THE INCOME OF THE ASSESSEE. 10. THE NEXT ISSUE RAISED IN THE PRESENT APPEAL IS THE DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(VI) OF THE ACT. TH E ASSESSEE IS A SOCIETY AND ITS STATUS OF BEING A SOCIETY IS DECLARED BY TH E ASSESSEE BY WAY OF FILING THE RETURNS OF INCOME IN ITR-V, WHICH ARE TO BE FILED BY THE SOCIETIES. THE ASSESSING OFFICER HAS ALSO ADOPTED THE STATUS OF THE ASSESSEE AS SOCIETY AND COMPLETED THE ASSESSMENT TH EREAFTER. SIMILAR CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF T HE ACT IS BEING ALLOWED TO THE ASSESSEE BOTH FOR THE PRECEDING AND THE SUCCEEDING YEARS THOUGH THE RETURN OF INCOME FILED BY THE ASSESSEE H AS BEEN ACCEPTED VIDE INTIMATION ISSUED UNDER SECTION 143(1) OF THE ACT. THE ASSESSEE HAS PLACED ON RECORD ACKNOWLEDGEMENT OF FILING THE RET URN OF INCOME ALONGWITH THE INTIMATION ISSUED UNDER SECTION 143(1 ) OF THE ACT RELATING TO ASSESSMENT YEARS 2006-07, 2007-08, 2009-10 AND 2 010-2011 AT PAGES 40 TO 45 OF THE PAPER BOOK. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAS NOT ALLOWED THE BENEFIT OF DED UCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT WITHOUT REFERRING OR REJEC TING THE CLAIM OF THE ASSESSEE. HOWEVER, DURING THE APPELLATE PROCEEDING S, THE REMAND REPORT WAS SUBMITTED BY THE ASSESSING OFFICER CLAIMING THE SOCIETY TO BE NON- GENUINE BECAUSE OF NON-MAINTENANCE OF THE VOUCHERS. THE CIT(A) REJECTED THE CLAIM OF THE ASSESSEE HOLDING THE ASSE SSEE TO BE NON- GENUINE. I FIND NO MERIT IN THE ORDERS OF THE AUTH ORITIES BELOW AS IN THE FACTS OF THE PRESENT CASE THE ASSESSEE REGISTERED A S A SOCIETY IN THE EARLIER YEARS AND WAS ALSO ALLOWED BENEFIT OF DEDUC TION UNDER SECTION 80P(2)(A)(VI) OF THE ACT ON ITS INCOME IN THE EARLI ER YEARS. MERELY 8 BECAUSE THE ASSESSEE HAD NOT MAINTAINED THE VOUCHER S AND THE INCOME HAS BEEN ESTIMATED IN THE HANDS OF THE ASSESSEE, DOES D OUBT THE GENUINENESS OF THE SOCIETY. ACCORDINGLY, I DIRECT THE ASSESSIN G OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF THE DEDUCTION C LAIMED UNDER SECTION 80P(2)(A)(VI) OF THE ACT ON THE BUSINESS INCOME EAR NED BY THE ASSESSEE. FROM THE PERUSAL OF THE COMPUTATION OF INCOME FILED FOR THE YEAR UNDER APPEAL I FIND THAT THE ASSESSEE HAS ALSO DECLARED B ANK INTEREST OF RS.3121/-, ON WHICH THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. HENCE THE ASSESS ING OFFICER IS DIRECTED TO RECOMPUTE THE INCOME OF THE ASSESSEE. THUS GROUND NOS.1 & 2 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF MAY, 2011. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 31 ST MAY, 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9