J.M. MHATRE, PANVEL V. JT CIT PANVEL RG PANVEL, PANVEL

ITA 3655/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8141 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 08-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3655/MUM/2015 ASSESSMENT YEAR: 2010 - 11 M/S J.M. MHATRE, PLOT NO. 57/58, MARKET YARD, SAHAKAR NAGAR, PANVEL - 410206 VS. JOINT COMMISSIONER OF INCOME TAX RANGE, PANVEL TRIFED TOWER, 3 RD FLOOR, OPP. KHANDA COLONY, NEW PANVEL - 410206 PAN NO. AA BFJ9979N APPELLANT RESPONDENT ASSESSEE BY : MR. PRAYAG JHA , AR REVENUE BY : MR. SAURABH KUMAR RAI, DR DATE OF HEARING : 31/10 /2017 DATE OF PRONOUNCEMENT : 21/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 2 , THANE AND ARISES OUT OF THE ASSESSMENT ORDER U/S 143(3) R.W.S. 144 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST T HE ORDER OF THE LD. CIT(A) CONFIRMING THE ESTIMATION OF NET PROFIT @ 10% ON DIRECT CONTRACT RECEIPTS AND @ 5% ON SUB - CONTRACT RECEIPTS. ALSO IT IS RAISED THAT THE LD. CIT(A) ERRED IN NOT ALLOWING REMUNERATION PAID TO PARTNERS OF RS.21,00,000/ - FROM THE INC OME ESTIMATED DURING THE YEAR M/S J.M. MATRE ITA NO. 3655/MUM/2015 2 WHICH WAS SPECIFICALLY ALLOWED BY THE EARLIER CIT(A) AS WELL AS ITAT WHILE ADJUDICATING THE APPEAL OF THE ASSESSEE FOR THE AY 2005 - 06 THE AY 2007 - 08. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUND AGAINST THE REJECTION OF BOOKS OF ACCOUNT BY THE AO. AS IT IS LINKED WITH THE ORIGINAL GROUND OF APPEAL, WE ADMIT THE SAME FOR ADJUDICATION. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A GOVERNMENT REGISTERED CONTRACTOR. IT FILED ITS RETURN OF INCOME FOR THE AY 2010 - 11 ON 15.10.2010 DECLARING TOTAL INCOME OF RS.11,20,92,460/ - . THE ASSESSING OFFICER (AO) VERIFIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE EXPENSES UNDER THE HEAD LABOUR CHARGES AND EXPENSES OF FUEL AND LUBRICANT. IN THE CASE OF LABOUR CHARGES THE AO NOTICED THAT IN MANY CASES EVEN THE BASIC DETAILS LIKE NAME AND ADDRESS OF THE LABOURER WAS NOT MENTIONED. IN THE CASE OF EXPENSES OF FUEL AND LUBRICANT, THOUGH PURCHASE HAS BEEN MADE THROUGH CHEQUE, NO DISBURSEMENT REGISTER OR STOCK REGI STER WAS MAINTAINED BY THE ASSESSEE. IN VIEW OF THE ABOVE THE AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) AND ESTIMATED THE GROSS PROFIT @ 10% ON THE GROSS CONTRACT RECEIPT OF RS.1,67,70,23,091/ - . THUS HE ARRIVED AT RS.16,77,02,309/ - AS THE INCOME OF TH E ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A), CONSIDERING THE COMPARABLE CASES ESTIMATED THE NET PROFIT @ 10% ON DIRECT CONTRACT RECEIPTS AND @ 5% ON INDIRECT CONTRACT RECEI PTS . M/S J.M. MATRE ITA NO. 3655/MUM/2015 3 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE LD. CIT(A) SHOULD NOT HAVE APPLIED NET PROFIT @ 10% ON DIRECT CONTRACT RECEIPTS AND @ 5% ON SUB - CONTRACT RECEIPTS BY RELYING UPON THE ORDER OF THE CIT(A) FOR THE AY 2008 - 09, WHICH WAS REN DERED IN THE CONTEXT OF PECULIAR CIRCUMSTANCES PREVALENT IN THAT ASSESSMENT YEAR. 6. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE FIND THAT THE AO HAS FOUND THAT THE DETAILS IN RESPECT OF LABOUR CHARGES AND EXPENSES OF FUEL AND LUBRICANT WERE INCOMPLETE. HE WAS NOT IN A POSITION TO VERIFY THE SAID EXPENSES. WE THUS FIND THAT THE AO HAS RIGHTLY R EJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE PROFIT. BUT WHAT SHOULD BE THE PROFIT PERCENTAGE? IN THE ASSESSMENT YEAR 2008 - 09, THE ITAT I BENCH IN ASSESSEES OWN CASE (ITA NO. 1846/MUM/2011) VIDE ORDER DATED 30.07.2014 HAS CONFIRMED THE ORDER OF THE LD. CIT(A) ESTIMATING @ 10% THE CONTRACT RECEIPTS AND @ 5% THE SUB - CONTRACT RECEIPTS. IT ALSO HELD THAT SALARY AND INTEREST PAID TO THE PARTNERS IS AN ALLOWABLE DEDUCTION FROM THE NET INCOME ESTIMATED U/S 144. IN VIEW OF THE SIMILAR FACTS, WE UPHOLD THE ORDER OF THE LD. CIT(A) ESTIMATING @ 10% THE CONTRACT RECEIPTS AND @ 5% THE SUB - CONTRACT RECEIPTS FOR THE IMPUGNED ASSESSMENT YEAR. HOWEVER, WE DIRECT THE AO TO ALLOW THE DEDUCTION OF SALARY AND INTEREST PAID TO THE PARTNERS, AFTER DUE VERIFICATION. M/S J.M. MATRE ITA NO. 3655/MUM/2015 4 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/12/2017. SD/ - SD/ - (C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 21/12/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI