M/s Kewal Krishan Sanjeev Kumar, Jammu & Kashmir V. The Income Tax Officer, Jammu

ITA 346/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8892 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 29-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V K SINGH
• Assessee Lawyers: P N ARORA
• Keywords: Unexplained investment; Depreciation
• Section: 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) (JAMMU CAMP) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.346(ASR)/2015 ASSESSMENT YEAR:2008-09 PAN: AAIFK2066J M/S. KEWAL KRISHAN SANJEEV KUMAR VS. INCOME TAX OFF ICER, CONTRACTOR, RAJOURI ( J & K ). WARD 2(2), JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA, ADVOCATE RESPONDENT BY: SH. K.V.K. SINGH DATE OF HEARING: 02/12/2015 DATE OF PRONOUNCEMENT: 01/02/2016 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2008-09, AGAINST THE ORDER DATED 16.12.2013, PASSED BY THE L D. CIT(A), JAMMU. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE ASSESSMENT ORDER AS WELL AS ORDER OF T HE LD. CIT(A) ARE BOTH AGAINST THE FACTS OF THE CASE AND ARE UNTE NABLE IN LAW. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRM ING THE ORDER OF THE AO PASSED U/S 144 OF THE ACT. 3. THAT THE WORTHY CIT(A) HAS FAILED TO APPRECIATE THAT THERE WAS REASONABLE AND SUFFICIENT CAUSE FOR NON-COMPLIA NCE AND AS SUCH THE ORDER PASSED BY THE AO U/S 144 WAS NOT A CORRECT ORDER AND THE LD. CIT(A) SHOULD HAVE CANCEL LED THE ASSESSMENT ORDER. 4. THAT THE LD. CIT(A) DID NOT APPRECIATE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND THE WORTHY CIT(A) HAS CONFIRM ED THE RATE OF 10% APPLIED ON THE TOTAL RECEIPTS OF RS.88 ,60,889/-. AS SUCH, THE CIT(A) HAS GROSSLY ERRED IN CONFIRMI NG THE ADDITION OF RS.6,09,333/- AGAINST THE RETURNED INCO ME OF RS.2,76,640/-. THE AUTHORITIES BELOW DID NOT APPREC IATE THAT ITA NO.346(ASR)/2015 AY:2008-09 2 THIS WAS A TAX AUDIT CASE AND THE RETURNED INCOME A S SHOWN SHOULD HAVE BEEN ACCEPTED. ALTERNATIVELY, THE RATE APPLIED IS VERY HIGH & EXCESSIVE. THE AUTHORITIES BELOW DID N OT APPRECIATE THAT AFTER CONFIRMING THE ADDITION THE RATE OF PROFIT WILL SHOOT UP TO AN UNEXCEPTIONAL FIGURE WH ICH IS NOT POSSIBLE IN THIS LINE OF BUSINESS. AS SUCH, THE RAT E APPLIED AND CONFIRMED @ 10% IS VERY HIGH & EXCESSIVE. ALTER NATIVELY, THE ADDITION MADE IS INCORRECT/WRONG AND THE ADDITI ON MADE MAY BE DELETED. 5. THAT THE WORTHY CIT(A) HAS GROSSLY ERRED IN CONF IRMING THE DISALLOWANCE ON ACCOUNT OF INTEREST AND SALARY PAID TO PARTNER. THE INTEREST AND SALARY WAS PAID TO THE PA RTNERS IN ACCORDANCE WITH PARTNERSHIP DEED AND THERE WAS NO JUSTIFICATION FOR NOT ALLOWING THE SAME. 6. FURTHER, THE LD. CIT(A) HAS GROSSLY ERRED IN CON FIRMING THE ADDITION OF RS.3,90,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT/ THE AUTHO RITIES BELOW CAME TO THE ERRONEOUS CONCLUSION THAT THIS AM OUNT NEITHER APPEARED IN THE BOOKS OF ACCOUNTS NOR APPEA RED IN THE BANK ACCOUNT. IN THIS CONNECTION, IT MAY BE POI NTED OUT THAT THE SAID AMOUNT WAS DULY APPEARING IN THE BALA NCE SHEET ON ACCOUNT OF CAR LOAN FROM J & K BANK AND IT IS ALSO EVIDENT FROM THE BANK STATEMENT. FURTHERMORE, IT MA Y BE POINTED OUT THAT THE INTEREST WAS ALSO PAID ON THE SAID CAR LOAN WHICH WAS ALLOWED BY THE DEPARTMENT. A LETTER WAS ADDRESSED TO THE ITO ON 04/10/2010 IN WHICH IT WAS SPECIFICALLY POINTED OUT THAT THERE WAS AN ACCOUNT OF THE ASSESSEE WITH J & K BANK AS CAR LOAN A/C. AS SUCH, THE ADDITION TO THE TUNE OF RS.3,90,000/- IS NOT AT ALL CALLED FOR AS THE SAME IS BASED ON CONJECTURES, SURMISES AND SUPPOSITIONS. IT IS, THEREFORE, VERY RESPECTFULLY P RAYED THAT THE ADDITION CONFIRMED MAY KINDLY BE DELETED. 2. GROUND NOS. 1 TO 3 ARE GENERAL. 3. THE LD. COUNSEL FOR THE ASSESSEE STATED AT THE B AR THAT HE DOES NOT WISH TO PRESS GROUND NO.5. REJECTED AS NOT PRESSED. 4. APROPOS GROUND NO.4, THE FACTS AS AVAILABLE FROM THE RECORD ARE THAT THE ASSESSEE IS A CONTRACTOR. DURING THE YEAR UNDER CONSIDERATION, TOTAL RECEIPTS OF RS.88,60,889/- WERE CREDITED TO T HE PROFIT & LOSS ACCOUNT REPRESENTING CONTRACT RECEIPTS ON WHICH, AFTER DEBI T OF EXPENSES INCLUDING ITA NO.346(ASR)/2015 AY:2008-09 3 SALARY AND INTEREST TO THE PARTNERS, THE NET PROFIT HAD BEEN DECLARED AT RS.2,76,455/-. AS PER THE ASSESSMENT ORDER, THE ASS ESSEE FAILED TO PRODUCE ITS BOOKS OF ACCOUNT OR VOUCHERS FOR VERIFI CATION. FINDING THAT AS SUCH, THE NET PROFIT SHOWN BY THE ASSESSEE COULD NO T BE RELIED ON, THE AO APPLIED THE RATE OF 10% OF THE GROSS RECEIPTS, RELY ING ON THE DECISION OF THE ITAT, AMRITSAR BENCH, IN THE CASE OF POOJA CON STRUCTION CO., V. ITO, 69 ITD 147 (ASR). THE NET PROFIT FROM THE ASSESSEE S CONTRACT BUSINESS WAS THUS ESTIMATED AT RS.8,86,889/-. AN ADDITION OF RS.6,09,633/- WAS THUS MADE TO THE INCOME OF THE ASSESSEE. THE ASSESS MENT ORDER WAS PASSED U/S 144 OF THE ACT. THE ASSESSEE WAS HELD NO T TO BE ELIGIBLE TO THE CLAIM OF DEPRECIATION, SINCE NO BOOKS OF ACCOUN T HAD BEEN PRODUCED. 5. THE LD. CIT(A) CONFIRMED THE ADDITION BY HOLDING AS FOLLOWS: FROM THE CHART ON PREPAGE IT IS QUITE CLEAR THAT DE SPITE THE ASSESSEE WAS AFFORDED REASONABLE OPPORTUNITIES OF BEING HEAR D HE DID NOT FURNISH ANY MATERIAL EVIDENCE OR EXPLANATION OR ARG UMENTS TO CONTROVERT THE FINDINGS OF THE AO. IT APPEARS THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING THE APPEAL. THE AO HAS TAKE N THE STATUS OF THE ASSESSEE AS TRUST WHICH IN MY OPINION IS NOT CO RRECT. THE ASSESSEE IS A CONTRACTOR EARNING INCOME FROM CONTRA CT RECEIPTS. THE AO HAS HIMSELF INVOKED THE PROVISION U/S 184(5) IN PARA 2.3 OF THE ASSESSMENT ORDER, THEREFORE, IT IS NOT PROPER TO DE NY THE STATUS AS FIRM. THUS, THE STATUS OF THE ASSESSEE IS RESTORE D AS BEING THAT OF FIRM INSTEAD OF TRUST. IN ABSENCE OF ANY EVIDENCE T O THE CONTRARY THERE IS NO GROUND TO INTERFERE WITH THE ADDITIONS MADE AND HENCE CONFIRMED. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF CIVIL CONTR ACTOR OF VARIOUS GOVERNMENT DEPARTMENTS. IT HAS BEEN CONTENDED THAT THE AO COMPLETED ASSESSMENT U/S 144 OF THE ACT WITHOUT INVOKING THE PROVISIONS OF SECTION ITA NO.346(ASR)/2015 AY:2008-09 4 145 OF THE ACT AND WITHOUT REJECTING THE ASSESSEE S BOOKS OF ACCOUNT; THAT THE AUTHORITIES BELOW ERRED IN FOLLOWING POOJ A CONSTRUCTION CO. (SUPRA) WHILE MAKING AND MAINTAINING THE ADDITION O F RS.6,09,633/-; THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REGULARLY MAINTAINED AND THE ACCOUNTS WERE DULY AUDITED. REGARDING THE CONTENTIO N THAT THE AO ERRED IN COMPLETING THE ASSESSMENT U/S 144 OF THE ACT WIT HOUT REJECTING THE ASSESSEES BOOKS OF ACCOUNT, RELIANCE HAS BEEN PLAC ED ON THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CASE OF DCIT VS. HARPR EET SINGH GULATI, DATED 28.02.2014, FOR THE AY 2009-10, IN ITA NO.317 (ASR)/2013. IT HAS FURTHER BEEN CONTENDED THAT THE LD. CIT(A) HAS ERRE D IN APPLYING DIFFERENT RATES AT DIFFERENT TIMES; THAT FOR THE AY 2009-10 I N THE ASSESSEES CASE, THE LD. CIT(A) APPLIED A RATE OF 7%, WHERAS IN ANO THER CASE, THE RATE OF 5% WAS ACCEPTED AND DEPRECIATION WAS ALSO ALLOWED; THAT IN THE PRESENT YEAR, DEPRECIATION HAS BEEN CLAIMED AT RS.34,131/-; THAT VIDE CBDT CIRCULAR NO.29D(XIX-14), IT HAS BEEN DIRECTED TO A LLOW DEPRECIATION IN THE CASE OF ESTIMATION. FURTHER, RELIANCE IN THIS REGAR D HAS BEEN PLACED ON LALI CONSTRUCTION CO. VS. ACIT, 54 TAXMAN.COM 68 (P&H), AS PER WHICH, DEPRECIATION HAS TO BE ALLOWED IN A CASE OF ESTIM ATION OF INCOME. IT HAS FURTHER BEEN CONTENDED THAT FOR THE ASSESSMENT YEARS 2008-09 & 2009- 10, THE RATE TAKEN BY THE ASSESSEE HAS BEEN ACCEPTE D BY THE DEPARTMENT; THAT IN THE CASE OF ANOTHER CONTRACTOR, THE RATE OF 5% HAS BEEN APPLIED BY THE ITAT, AMRITSAR BENCH. RELIANCE IN THIS REGARD H AS BEEN PLACED ON THE FOLLOWING CASE LAWS: ITA NO.346(ASR)/2015 AY:2008-09 5 I) ITAT AMRITSAR BENCH, IN THE CASE OF SH. MOHAN S INGH CONTRACTOR VS. ITO, IN ITA NO.59(ASR)/2012, ORDER DATED 05/06/2012 FOR THE AY 2008-09. II) ITAT AMRITSAR BENCH IN THE CASE OF ITO VS. M/S . SUIRNDER PAL NAYYAR, CONTRACTORS, IN ITA NO.366(ASR)/2014, ORDER DATED 30.04.2012 FOR THE AY 2006-07. III) ITAT AMRITSAR BENCH IN THE CASE OF ABDUL SALAM MIR VS. DCIT, IN ITA NO.115(ASR)/2013, DATED 06/08/2014 FO R THE AT 2009-10. IV) ITAT AMRITSAR BENCH, IN THE CASE OF M/S. MATTEWAL CO- OPERATIVE L/C SOCIETY LTD. VS. ACIT, IN ITA NO.450(ASR)/2012, ORDER DATED 27.12.2012 FOR THE AT 2008- 09. V) ITAT AMRITSAR BENCH, IN THE CASE OF M/S. BAHU FORT CONSTRUCTION (P) LTD., JAMMU VS. DCIT, IN ITA NO.254(ASR)/2013, ORDER DATED 14.02.2014 FOR THE AY 2009- 10. COPIES OF THESE DECISIONS HAVE BEEN PLACED ON RECOR D. 7. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT IN THE C ASE OF POOJA CONSTRUCTION CO. (SUPRA), WHICH HAS BEEN FOLLOWED IN THE CASE OF ABDUL SALAM MIR (SUPRA), VIDE ORDER DATED 06/08/2014, IN ITA NO. 115(ASR)/2013, FOR THE AY 2009-10, THE RATE OF 10% OF NET PROFIT WAS RIGHTLY APPLIED BY THE TAXING AUTHORITIES. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS IN THE L IGHT OF THE MATERIAL PLACED ON RECORD. THE ASSESSMENT ORDER WAS PASSED U /S 144 OF THE ACT FOR NON-COMPLIANCE ON THE PART OF THE ASSESSEE. BEF ORE THE LD. CIT(A) ALSO, THE ASSESSEE DID NOT APPEAR. APROPOS APPLICATION OF NET PROFIT RATE, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF T ELELINKS VS. CIT, BATHINDA, HAS LAID DOWN THE FOLLOWING CRITERIA IN THE CASE OF CIVIL GOVT. CONTRACTORS, TO BE CONSIDERED WHILE ESTIMATING THE INCOME: ITA NO.346(ASR)/2015 AY:2008-09 6 (I) PAST TAX HISTORY OF THE ASSESSEE. (II) ASSESSMENT ORDERS PASSED BY AND ACCEPTED BY TH E DEPARTMENT. (III) THE NATURE OF ASSESSEES BUSINESS. (IV) AN APPRAISAL OF THE VALUE OF THE CONTRACT. (V) PREVAILING ECONOMIC CONDITIONS VIS-A VIS THE AS SESSEES BUSINESS, (VI) THE PRICE OF RAW MATERIAL AND LABOURS ETC. (VII) THE RISE IN PRICE INDEX AS NOTIFIED BY THE CE NTRAL GOVERNMENT FROM TIME TO TIME., (VIII) ASSESSMENTS OF OTHER ASESSEES ENGAGED IN SIM ILAR BUSINESS. IN THE PRESENT CASE, THE MATERIAL PRESENT BEFORE ME IS TOO SCANTY TO MAKE IT POSSIBLE TO APPLY IT FOR MEETING THE ABOVE CRITE RIA LAID DOWN BY THE HONBLE HIGH COURT. ACCORDINGLY, THE MATTER IS REMI TTED TO THE FILE OF THE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, PAR TICULARLY IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF TELELINKS VS. CIT, BATHIDNA (SUPRA). THE ASSESSEE SHALL BE A FFORDED ADEQUATE OPPORTUNITY TO SUPPORT ITS CASE AND THE ASSESSEE SH ALL, NO DOUBT, COOPERATE IN THE FRESH PROCEEDINGS BEFORE THE AO. I T NEEDS TO BE REMARKED HERE THAT THE ISSUE OF DEPRECIATION STANDS COVERED IN FAVOUR OF THE ASSESSEE IN THE CASE OF LALI CONSTRUCTION CO. (S UPRA), RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE AO SHALL COMPLY BY THE SAME JUDGMENT. FOR STATISTICAL PURPOSES, THEREFORE, GROU ND NO.4 IS TREATED AS ACCEPTED. ITA NO.346(ASR)/2015 AY:2008-09 7 9. APROPOS GROUND NO.6, THE AO EXAMINED THE COPY OF BANK ACCOUNT OF THE ASSESSEE WITH J & K BANK, RAJOURI. IT WAS OB SERVED THAT AS PER COPY OF ACCOUNT SUPPLIED BY THE BANK AS ON 22/02/20 10, THERE WAS A CREDIT OF RS.3,90,000/-. THE ASSESSEE FILED COPY OF THIS ACCOUNT IN ITS BOOKS OF ACCOUNT. ON VERIFYING THE SAME WITH THE SA ID ACCOUNT, THE AO OBSERVED THAT THIS CREDIT HAD NOT BEEN REFLECTED IN THE COPY OF ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. AS SUCH, THE ASSESSEE HAD NOT ACCOUNTED FOR THIS CREDIT ENTRY IN THE BOOKS MAINTA INED BY IT. ON QUERY, THE ASSESSEE DID NOT FURNISH ALL THE INFORMATION AS REQUIRED BY THE AO VIDE NOTICE DATED 07/09/2010. THE AO, HENCE, ADDED THE AMOUNT OF RS.3,90,000/- TO THE INCOME OF THE ASSESSEE U/S 69 OF THE ACT AS UNEXPLAINED INVESTMENT. THE LD. CIT(A) CONFIRMED TH E SAME. 10. ON BEHALF OF THE ASSESSEE, IT HAS BEEN CONTENDE D THAT THOUGH THE COPY OF ACCOUNT HAD BEEN FILED BY THE ASSESSEE BEFO RE THE AO, THE AO ONLY MENTIONED IT AS HAVING NOT BEEN REFLECTED IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE. IT HAS BEEN SUBMITTED THAT THE COPY O F BALANCE SHEET WAS ALSO FILED, AS PER WHICH, THE CREDIT SIDE SHOWED A CAR LOAN FROM J & K BANK, WHEREAS ON THE DEBIT SIDE, CAR ACCOUNT DULY A PPEARED. A COPY OF THE AFORESAID BANK STATEMENT HAS BEEN PLACED BEFORE ME ALSO AND IT HAS BEEN POINTED OUT THAT THEREIN, THE DEBIT IN CAR ACC OUNT STANDS AT RS.3,93,066/- AND THE BALANCE APPEARED IN THE BANK AT RS. 2,96,561/-. ON THE BASIS OF THIS, IT HAS BEEN SUBMITTED THAT TH E PROVISIONS OF SECTION 69 OF THE ACT OUGHT NOT TO HAVE BEEN INVOKED, WHEN ALL THE ITA NO.346(ASR)/2015 AY:2008-09 8 ENTRIES/TRANSACTIONS DULY APPEARED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 11. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER IN THIS REGARD. 12. HERE, IT IS SEEN THAT AS PER ASSESSEES BALANCE SHEET (APB-3) AS ON 31.03.2008, THE ASSETS SIDE SHOWS THE FOLLOWING NARRATION: CAR 2/08 RS.3,90,066/- ON THE LIABILITY SIDE, ON THE OTHER HAND, SECURED LOAN SHOWS J & K BANK (CAR LOAN) RS.2,93,561.42. FURTHER, AS PER TH E STATEMENT OF ACCOUNT OF J & K BANK (APB-6), THE RELEVANT ENTRY R EADS : 22.02.2008 DISBURSEMENT RS.3,90,066/ - BOTH THESE DOCUMENTS HAVE BEEN CERTIFIED TO HAVE B EEN FILED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A). THUS, AS PER T HESE DOCUMENTS, THERE WAS A DEBIT IN THE CAR A/C AT RS.3,93,066/- AND THE BALANCE DULY APPEARED IN THE BANK AT RS.2,96,561/-. THAT BEING S O, THE AO ERRED IN OBSERVING THAT THIS CREDIT WAS NOT REFLECTED IN THE COPY OF THE BANK ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. T HIS FINDING OF THE AO IS A RESULT OF MIS-READING AND NON-READING MATERIAL EVIDENCE BROUGHT ON THE RECORD IN THE SHAPE OF THE ASSESSEES BALANCE S HEET AND THE BANK STATEMENT. ACCORDINGLY, THE ASSESSEE IS CORRECT IN CONTENDING THAT THE PROVISIONS OF SECTION 69 OF THE ACT OUGHT NOT TO HA VE BEEN INVOKED. THE LD. CIT(A) ALSO DID NOT LOOK INTO THIS MATTER AND M ERELY CONFIRMED THE ITA NO.346(ASR)/2015 AY:2008-09 9 ADDITION. HENCE, THIS ADDITION OF RS.3,90,000/- IS NOT SUSTAINABLE IN LAW. THE SAME IS DELETED. GROUND. NO.6 IS ACCEPTED. 13. IN THE RESULT, THE APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01/02/2016 SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 01/02/2016 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. KEWAL KRISHAN SANJEEV KUMAR CO NTRACTOR, RAJOURI 2. THE ITO, WARD 2(2), JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.