M/s Das & Pradhan Construction, Balasore V. ITO, Balasore

ITA 343/CTK/2011

• Counselvise Citation: 34322114 RSA 2011
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: P K MISHRA
• Section: 144

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 343/CTK/2011 (ASSESSMENT YEAR 2006 - 07) M/S.DAS & PRADHAN CONSTRUCTION, AT: BA HARDA BAZAR,BASTA,DIST.BALASORE PAN: AAEFD 9308 A VERSUS I.T.O., WARD 2, BALASORE. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.K.MISHRA, ADVOCATE FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE AGITATES THE ACTIO N OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER PASSED U/S.144 ESTIMATING THE INCOME ON THE BASIS OF 8% OF THE GROSS RECEIPTS AND CONSEQUENTLY DISALLOWING INTEREST AND REMUNERATION TO THE PARTNERS BY H OLDING THE STATUS OF THE ASSESSEE AS AN AOP. 2. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE FACTS SUBMITTED THAT THE ASSESSING OFFICER PASSED THE ORDER ON THE BASIS OF FINANCIAL STATEMENTS DULY AUDITED AND SUBMITTED ALONG WITH THE RETURN WH EN DUE TO NON - COMPLIANCE OF THE NOTICES AS INSCRIBED IN HIS ORDER, THE ASSESSING OFFICER INFORMED THE ASSESSEE THAT A BEST JUDGMENT ASSESSMENT WOULD BE MADE U/S.144 ESTIMATING THE INCOME @8% OF THE GROSS RECEIPTS. IN PURSUANCE TO THE PROVISIONS OF SECTION 184 AS THE ASSESSMENT HAD BEEN MADE U/S.144 NO INTEREST OR REMUNERATION TO PARTNERS WERE ALLOWED AND THE ASSESSMENT WAS MADE IN THE STATUS OF AOP. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO INCORPORATED THE REASONS AS SUBMITT ED BY THE ASSESSEE APPELLANT BEFORE HIM THAT DUE TO MAJOR ROAD ACCIDENT OF THE MANAGING PARTNER WHO WAS UNDERGOING MEDICAL TREATMENT UP TO JANUARY,2009 AND DUE TO DISPUTES ARISING AMONGST THE PARTNERS , THE NOTICES COULD NOT BE ITA NO.343/CTK/2011 2 COMPLIED WITH THEREFORE PRAYE D FOR VERIFYING THE INFORMATION AVAILABLE IN THE FINANCIAL STATEMENT AS PER THE BOOKS OF ACCOUNT WHICH WAS NOT ADHERED TO BY THE LEARNED CIT(A). HE DID NOT CONSIDER THE ISSUES ON MERIT AND UPHELD THE ESTIMATION BY THE ASSESSING OFFICER @8% OF THE GROSS RE CEIPTS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUDITED ACCOUNTS CLEARLY INDICATE THAT THE AUDITORS HAD VERIFIED ALL BOOKS OF ACCOUNT PRODUCED BEFORE THEM WHICH RESULTED IN DECLAR ING A PROFIT AS WAS ACCEPTABLE UNDER THE PROVISIONS OF THE I.T.ACT AND NOT ON THE BASIS OF NON - MAINTENANCE OF BOOKS OF ACCOUNT TO BE ESTIMATED AT 8% THE ASSESSEE BEING A WORKS CONTRACTOR. NO IOTA OF CONTROVERSY HAS BEEN POINTED OUT EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT(A) TO INVOKE THE PROVISIONS OF SECTION 145(3) IN CONSEQUENT TO PASSING AN ORDER U/S.144 AND THAT TOO ON ESTIMATION FOR NON - MAINTENANCE OF BOOKS OF ACCOUNT BUT FOR NON - PRODUCTION OF BOOKS OF ACCOUNT. HE SUBMITTED THAT THE AUDI TORS HAVE CERTIFIED THAT THE FINANCIAL STATEMENTS ARE ON THE BASIS OF RECORDS MAINTAINED BY THE ASSESSEE WHICH BOOKS OF ACCOUNT CONTROL THE BUSINESS AND THEREFORE ENHANCEMENT OF INCOME COULD ONLY BE MADE ON THE BASIS OF DISALLOWANCE OF EXPENSES WHICH THE T AXING AUTHORITIES HAVE NOT SPELT OUT. CONTRACT BUSINESS DOES NOT REQUIRE MAINTENANCE OF INVENTORY AND STOCK WHICH COULD BE SUBJECTED TO VERIFICATION BY INVOKING THE PROVISIONS OF SECTION 145(3). HAVING ACCEPTED THE FINANCIAL STATEMENTS , THE ASSESSING OFFIC ER WAS TO SPELL OUT THE DISALLOWANCE OF EXPENSES SPECIALLY THE EXPENSES ALLOWABLE U/S.40(B). THE LEARNED CIT(A) HAVING NOT DISCUSSED THE ISSUES ON MERITS THEREFORE REQUIRES CONSIDERATION BY THE ASSESSING OFFICER AFRESH IN THE LIGHT OF THE FACT THAT IT WAS NEVER THE CASE OF THE ASSESSEE TO NOT TO PRODUCE THE BOOKS ACCOUNT WHICH RECORDS ARE ITA NO.343/CTK/2011 3 BASICALLY RELEVANT FOR THE ASSESSEE TO PRODUCE BEFORE THE CHARTERED ACCOUNTANT UNDER THE REQUIREMENTS OF THE PROVISIONS OF SECTION 44AB. 4. THE LEARNED DR OPPOSED THE CONT ENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE BY INDICATING THAT ONLY THE MERIT ADDITION MAY KINDLY BE CONSIDERED FOR RESTORATION TO THE ASSESSING OFFICER BUT NOT THE STATUS IN VIEW OF THE FACT THAT THE LAW PROVIDES WHEN AN ASSESSMENT HAS BEEN PASSED U/S. 144, THE ASSESSING OFFICER IS DUTY BOUND TO TREAT THE STATUS OF THE ASSESSEE AS AOP. THE REMUNERATION AND INTEREST PAID TO PARTNERS ARE, THEREFORE, TO BE DISALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT WAS NEVER THE CASE OF THE ASSESSING OFFICER TO PROCURE BOOKS OF ACCOUNT FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 144 WHICH CONSEQUENTLY RESULTED IN CHANGING THE STATUS OF THE ASSESSEE. THE REMUNERATION AND INTEREST PAYABLE TO THE PARTNERS ON T HE BASIS OF SPECIFIC PROVISIONS OF LAW WHICH CANNOT BE DISTURBED ON ACCOUNT OF THE ASSESSING OFFICER PARTLY RELYING ON THE BOOK RESULTS BUT REFUSING TO HOLD THAT THE CLAIM WAS UNTENABLE IN LAW. THE ASSESSEE HAD INTRODUCED CAPITAL TO EARN INTEREST AND THE WORKING PARTNERS WERE PAID REMUNERATION FOR WORK RENDERED WERE CLAIMED IN THE P & L ACCOUNT WHEN THE ASSESSING OFFICER CHO SE TO ESTIMATE THE NET PROFIT AFTER THE CLAIM OF REMUNERATION AND INTEREST TO PARTNERS @8%. IT WAS ONLY A MATTER OF DISALLOWING THE EX PENSES UP TO 92% OF THE GROSS RECEIPTS WHICH HAS NOT BEEN CONSIDERED BY INVOKING THE PROVISIONS OF SECTION 145(3). THE ASSESSING OFFICER, THEREFORE, CLEARLY HELD THAT THE 8% NET PROFIT WAS ON ACCOUNT OF NON - MAINTENANCE OF BOOKS OF ACCOUNT BUT NOT FOR NON - P RODUCTION OF BOOKS OF ACCOUNT WHEN HE HAD TO PASS THE ORDER U/S.144 BEING BARRED BY LIMITATION. THE LEARNED CIT(A) THEREFORE CONFIRMED THE ISSUE ON MERITS BY ACCEPTING THE ASSESSING OFFICERS VERSION OF PASSING THE ORDER ITA NO.343/CTK/2011 4 U/S.144 ON ACCOUNT OF NON - COMPLIANC E TO THE NOTICES. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRAYED FOR RESTORATION TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN THE LIGHT OF ASSESSEE HOLDING A CERTIFICATE FROM THE CHARTERED ACCOUNTANT THAT THEY HAD VERIFIED THE BOOKS OF ACCOUNT ON THE BASIS OF WHICH THE FINANCIAL STATEMENT WERE DRAWN AND FILED ALONG WITH THE RETURN AND THE ASSESSEE HAD BONAFIDE REASONS FOR NOT COMPLYING TO THE NOTICES AS WAS ALSO BROUGHT TO THE NOTICE OF THE LEARNED CIT(A). WE, THEREFORE, SET ASIDE THE I MPUGNED ORDER OF THE LEARNED CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR CONSIDERATION AFRESH AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE FOR PRODUCTION OF BOOKS OF ACCOUNT. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE ASSESSEE F OR PASSING OF THE ORDER AT THE EARLIEST POSSIBLE TIME. 6. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON DT. 5 TH AUGUST, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT M EMBER DATE: 5 TH AUGUST, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S.DAS & PRADHAN CONSTRUCTION, AT: BAHARDA BAZAR,BASTA,DIST.BALASORE 2. THE RESPONDENT: I.T.O., WARD 2, BALASORE. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.