Ramehbhai Jadhavbhai Patel, V. The Income Tax Officer, Ward-1(3), RAJKOT-GUJARAT

ITA 367/RJT/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2370 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDEY
• Keywords: Business income; Income from undisclosed sources; Bonafide belief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] RAMESHBHAI JADHAVBHAI PATEL, 74, GURUDEV NAGAR, BHILAD, TAL. UMBERGAON PAN: ALYPP1512D (APPELLANT) VS INCOME TAX OFFICER, WARD1(3), RAJKOT (RESPONDENT) REVENUE BY : S H RI YOGESH PANDEY, D . R. ASSESSEE BY: S H RI HARDIK VORA , A.R. DATE OF HEARING : 11 - 01 - 2 016 DATE OF PRONOUNCEMENT : 20 - 01 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSSEE S APPEAL FOR A.Y. 20 08 - 09 , AR ISES FROM ORDER OF THE CIT(A) - 1, AHMEDABAD DATED 10 - 02 - 2015 IN APPEAL NO. CIT(A) - I T A NO . 367 / RJT /20 15 A SSESSMENT YEAR 200 8 - 09 I.T.A NO. 367/RJT /20 15 A.Y. 2008 - 09 PAGE NO RAMESHBHAI JADHAVBHAI PATEL VS. ITO 2 1/RJT/0249/ 10 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 19 61; IN SHORT THE ACT . 2. THE ASSESSEE RAISED TWO SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL FOR CHALLENGING THE CIT(A) S ORDER CONFIRMING ASSESSING OFFICER S ACTION TREATING HIS CONTRACT RECEIPT S OF RS. 7,62,338/ - AS INCOME FROM UNDISCLOSED SOURCES AND ADHOC DISALLOWANCE OF LABOUR CHARGES AMOUNTING TO RS. 20,000/ - MADE IN ASSESSMENT ORDER DATED 21 - 12 - 2010. THE LATTER GROUND IS NOT PRESSED IN THE COURSE OF HEARING IN VIEW OF THE SMALLNESS OF THE AMOUNT IN QUESTION. THE SAME IS ACCORDINGLY DECIDED IN RE VENUE S FAVOUR FOR THE VERY REASON. THIS LEAVES US WITH THE ASSESSEE S FORMER GROUND HEREINABOVE. 3. THE ASSESSEE IS GOVT. CONTRACTOR. HE FILED HIS RETURN ON 24 - 02 - 2009 ADMITTING INCOME OF RS. 2,25,410/ - . THE ASSESSING OFFICER CAME TO KNOW FROM RECORD VERIFICATION THAT THE ASSESSEE S CONTRACT RECEIPT S READ A SUM OF RS. 54,82,110/ - IN HIS BOOKS TOWARDS CONTRACT WORK DONE FOR SURAT AND VALSAD DRAINAGE AND IRRIGATION DIVISIONS; RESPECTIVELY. HE NOTICED THAT NSDL DATA HAD SHOWN CONTACT RECEIPT S FROM M/S. RAJHANS CONSTRUCTION CO. OF RS. 5,12,338/ - AND M/S. A.B. ROLLING COMP ANY AMOUNTING TO RS. 2,50,000/ - ; RESPECTIVELY AGGREGATING TO IMPUGNED SUM OF RS. 7,62,338/ - . THE ASSESSEE HAD NOT RECORDED THE SAME IN HIS BOOKS OF ACCOUNT FOR THE REASON THAT FORM NO. 1 6A HAD NOT BEEN ISSUED FROM THE ABOVE STATED PAYERS. HE FURTHER EXPRESSED HIS BONAFIDE BELIEF THAT SUCH AN INCOME IS NOT TO BE RECOGNIZED TILL FORM 16A IS NOT RECEIVED BECAUSE NO TD S AMOUNT I.T.A NO. 367/RJT /20 15 A.Y. 2008 - 09 PAGE NO RAMESHBHAI JADHAVBHAI PATEL VS. ITO 3 COULD NOT BE CLAIMED. THE ASSESSING OFFICER REJECTED THIS EXPLAN ATION BY TAKING INTO ACCOUNT ASSESSEE S MERCANTILE SYSTEM OF ACCOUNTING AND HELD THAT SINCE THE ABOVE STATED RECEIPT S HAD NOT BEEN RECORDED IN BOOKS, THE ABOVE STAT ED CONTRACTUAL RECEIPTS DESERVE TO BE ASSESSED UNDER THE HEAD INCOME FROM UNDISCLOSED SOURCE S. THE CIT(A) ALSO AFFIRMS THE ASSESSING OFFICER S ACTION. 4. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE S SOLE ARGUMENT RAISED IN THE HEARING IS THAT THE AUTHORITIES BELOW OUGHT NOT TO HAVE ADDED THE ENTIRE AMOUNT AS INCOME FROM UNDISCLOSED SOURCES . HE HIGHLIGHTS THE FACT THE IMPUGNED TDS AS PER NSDL HAS ALSO NOT BEEN CLAIMED. THE ASSESSEE ACCORDINGLY PLEADS THAT HIS IMPUGNED CONTRACTUAL RECEIPTS BE ASSESSED AS BUSINESS INCOME AND ONLY GP ADDITION BE MADE THEREON. THE REVENUE STRONGLY SUPPO RTS AC TION OF THE LOWER AUTHORITI ES IN QUESTION. WE HAVE GIVEN OUR THOUGHTFUL CONS IDERATION TO RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT ASSESSEE S TWO PAYERS (SUPRA) HAVE ALREADY SUBJECTED THE IMPUGNED CONTRACTUAL RECEIPT S TO TDS AMOUNTING TO RS. 10,997/ - . THIS IS NOT TH E REVENUE S CASE THAT THE SAME HAS BEEN DEDUCTED UNDER ANY OTHER HEAD THAN ASSESSEE S BUSINESS ACTIVITIES OF PERFORMING CONTRACTUAL WORK. THIS PROVES THAT THE RECEIPTS IN QUESTION ARE ASSESSEE S BUSINESS RECEIPT S NOT RECOGNIZED AS INCOME IN HIS BOOKS OF ACCOUNT. THIS IS HIS UNRECORDED BUSINESS INCOME IN OTHER WORDS. A CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA 118/AHD/2013 DECIDED ON 05 - 09 - 2013 ACIT VS. J.K. BROTHERS HOLDS THAT ENTIRE AMOUNT OF UNRECORDED SALES IS NOT TO BE TAKEN AS PROFIT CO MPONENT IN THE I.T.A NO. 367/RJT /20 15 A.Y. 2008 - 09 PAGE NO RAMESHBHAI JADHAVBHAI PATEL VS. ITO 4 CONCERNED ASSESSEE S HANDS. THE SAME STANDS UPHELD BEFORE THE HON BLE JURISDICTIONAL HIGH COURT IN TAX APPEAL NO. 406 OF 2014 DECIDED ON 06 - 05 - 2014. THE REVENUE IS UNABLE TO POINT OUT ANY DISTINCTION ON FACTS AND LAW. WE DRAW SUPPORT THER EFROM AND HOLD THAT THE AUTHORITIES BELOW HAVE ERRED IN ASSESSING ASSESSEE S ENTIRE CONTRACT U AL RECEIPT S INSTEAD OF ONLY THE PROFIT COMPONENT THEREIN. WE AGREE WITH THIS FIRST ARGUMENT RAISED AT ASSESSEE S BEHEST. 5. T HIS L E AVES US WITH THE ISSUE OF GP COMPUTATION ON ABOVE STATED CONTRACT UAL RECEIPTS IN QUESTION OF RS. 7,62,338/ - . THE ASSESSEE PLEAD S THAT IT HAS ALREADY SHOWN GROSS PROFIT OF RS. 4,66,615/ - ON RECEIPT S OF RS. 54,82,110/ - @ 8.51%. HE SUBMITS THAT A ROUND FIGURE ESTIMATION @ 9% QUA THE I SSUE INVOLVED WOULD SERVE THE ENDS OF JUSTICE. WE ONLY PARTLY AGREE WITH THIS SUBMISSION AND HOLD IN THE LARGER INTEREST OF JUSTICE THAT GP RATE @ 10% ON ASSESSEE S UNACCOUNTED CONTRACTUAL RECEIPT S OF R S. 7,62,338/ - COMING TO RS. 76,233/ - WOULD BE JUST AN D PROPER. ORDERED ACCORDINGLY. THE ASSESSING OFFICER SHALL PASS A CONSEQUENTIAL ORDER. THIS GROUND IS PARTLY ACCEPTED. 6. THIS ASSESSEE S APPEAL IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 01 - 201 6 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 20 /01/2016 AK I.T.A NO. 367/RJT /20 15 A.Y. 2008 - 09 PAGE NO RAMESHBHAI JADHAVBHAI PATEL VS. ITO 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHME DABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT