SHRI MOHIT SHARMA, BATHINDA V. INCOME TAX OFFICER, WARD 1 (1), BATHINDA

ITA 370/ASR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2747 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-08-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 01-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL MEENA
• Section: 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR SMC BENCH, AMRITSAR BEFORE SH. B. R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NOS. 360 & 361/ASR/2018 ASSES SMENT YEARS: 2008-09 & 2009-10 SHRI LASHMAN DASS S/O SURAJ BHAN INCHARGE, COMPUTER STUDY CENTRE TALWANTI SABO, DISTT. BATHINDA [PAN: AHBPD 6470D] VS. INCOME TAX OFFICER, WARD1(1) BATHINDA (APPELLANT) (RESPONDENT) I.T.A. NOS. 365 & 366/ASR/2018 ASS ESSMENT YEARS: 2008-09 & 2009-10 TEJA SINGH BHULLAR S/O NIDHAN SINGH INCHARGE PRINCIPAL COMPUTER STUDY CENTRE KALAJHRANI, TEHSIL DISTT. BATHINDA [PAN: BEJPS 9011K] VS. INCOME TAX OFFICER, WARD 2(1) BATHINDA (APPELLANT) (RESPONDENT) I.T.A. NOS. 367 & 368/ASR/2018 ASSE SSMENT YEARS: 2008-09 & 2009-10 TARSEM LAL DHINGRA S/O SH. JAGDISH RAI DHINGRA W-15, OLD POWER HOUSE, GURU NANAK PURA MOHALLA, RAMPURA PHUL, DISTT. BATHINDA [PAN: ADMPL 1047M] VS. INCOME TAX OFFICER, WARD 1(3) BATHINDA (APPELLANT) (RESPONDENT) 2 I.T.A. NOS. 369 & 370/ASR/2018 ASSE SSMENT YEARS: 2008-09 & 2009-10 SHRI MOHIT SHARMA 21393, POWER HOUSE ROAD, BATHINDA [PAN: BCOPS 4102A] VS. INCOME TAX OFFICER, WARD 1(1) BATHINDA (APPELLANT) (RESPONDENT) I.T.A. NOS. 393 & 394/ASR/2018 ASSE SSMENT YEARS: 2008-09 & 2009-10 SHRI IQBAL SINGH S/O SH. JANG SINGH (TARA INFOTECH COMPUTERS), BHAGTA BHAI KA, R/O NEAR GOVT. SCHOOL, VILL. KOTHA GURU TEHSIL RAMPURA PHUL [PAN: BOMPS 0967K] VS. INCOME TAX OFFICER, WARD 1(3) BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI KALIA (C. A.) RESPONDENT BY: SH. AMAR PAL MEENA (D.R.) DATE OF HEARING: 29.08.2019 DATE OF PRONOUNCEMENT: 30.08.2019 ORDER PER B. R. BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE RESPECTIVE ASSESSEE S ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A), BATHINDA IN THEIR RESPE CTIVE HANDS FOR ASSESSMENT YEARS 2008-09 AND 2009-10. SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN 3 NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. ALL THE ASSESSEES ARE AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY CONFIRMING THE INCOME ESTIMATED BY THE ASSESSING OF FICER IN THEIR HANDS FOR THE ABOVE SAID ASSESSMENT YEARS. 3. SINCE THE FACTS ARE IDENTICAL IN ALL THE CA SES, THE FACT RELATING TO SHRI LASHMANDASS, AS NARRATED BY THE LD A.R, IS BEING DI SCUSSED HERE. ALL THESE ASSESSEES WERE RUNNING COMPUTER STUDY CENTERS. THE SAID COMPUTER CENTERS WERE OPENED UNDER THE CHIEF MINISTER SELF EMPLOYMENT SC HEME INITIATED BY THE GOVERNMENT OF PUNJAB FOR GENERATION OF EMPLOYMENT I N THE STATE. THE COMPUTER CENTERS OPENED IN BATHINDA DISTRICT WERE AFFILIATED WITH PUNJAB TECHNICAL UNIVERSITY, JALANDHAR. THE FEE STRUCTURE IS DESIG NED BY THE UNIVERSITY AND THE ASSESSEE IS REQUIRED TO COLLECT THE FEES AS PER THE SAID SCHEME ONLY. FURTHER, THE ASSESSEE IS ALSO REQUIRED TO SHARE A PART OF FEES W ITH THE UNIVERSITY AND DRDO. THE FEE FOR COLLECTED FROM STUDENTS AS EXAMINATION FEES IS REQUIRED TO BE REMITTED TO THE UNIVERSITY. 4. ALL THESE ASSESSEES HAD FILED THEIR RETUR N OF INCOME FOR BOTH THE YEARS UNDER CONSIDERATION. THE AO COLLECTED INFORMATION FROM P UNJAB TECHNICAL UNIVERSITY AND NOTICED THAT THE GROSS RECEIPTS DECLARED BY THE SE ASSESSEES WERE LESSER THAN THE AMOUNT MENTIONED IN THE SAID INFORMATION. ACCORDIN GLY, THE AO REOPENED THE ASSESSMENTS OF ASSESSMENT YEARS 2008-09 AND 2009-10 IN THE HANDS OF ALL THE ASSESSEES HEREIN BY SERVING NOTICE U/S 148 OF THE A CT IN MARCH, 2015. SINCE THERE WAS NO CO-OPERATION FROM THE ASSESSEES, THE AO COMP LETED THE ASSESSMENTS OF BOTH 4 THE YEARS TO THE BEST OF HIS JUDGMENT IN THE HANDS OF ALL THE ASSESSEES. THE AO DETERMINED THE INCOME OF THE ASSESSEES AS UNDER:- (A) FROM THE DETAILS COLLECTED FROM THE UNIVERSITY, THE AO COLLATED THE GROSS FEES COLLECTIONS. (B) THE AO ALLOWED DEDUCTION TOWARDS AMOUNT PAYABL E TO UNIVERSITY, DRDO AND EXAM FEE. (C) THE AO ALSO ALLOWED DEDUCTION TOWARDS EXPENSES FOR RUNNING THE INSTITUTE ON ESTIMATED BASIS. (D) THE NET PROFIT SO ARRIVED BY HIM UNDER THE AB OVE SAID METHODOLOGY IN BOTH THE YEARS WAS ASSESSED IN THE HANDS OF RESPECT IVEASSESSEES IN THE RESPECTIVE YEARS. 5. THEASSESSEES HEREIN CHALLENGED THE ASSESSMEN T ORDERS SO PASSED BY THE AO BY FILING APPEALS BEFORE LD CIT(A). THE FIRST APPELL ATE AUTHORITY NOTICED THAT THE RATE OF NET PROFIT WORKED OUT BY THE AO IN BOTH THE YEAR S IN THE HANDS OF ALL THE ASSESSEES WAS VERY MUCH HIGHER. FOR EXAMPLE, THE N ET PROFIT RATE WORKED OUT TO 42.46% AND 52.75% IN AY 2008-09 AND 2009-10 RESPECT IVELY IN THE CASE OF SHRI LASHMAN DAS. THE LD CIT(A) TOOK THE VIEW THAT THE NET PROFIT RATE SHOULD BE REASONABLE. ACCORDINGLY HE DETERMINED THE NET PROF IT RATE AT 25% AND APPLIED THE SAME ON THE GROSS RECEIPTS WORKED OUT BY THE AO. A CCORDINGLY HE GRANTED PARTIAL RELIEF TO ALL THE ASSESSEES IN BOTH THE YEARS UNDER CONSIDERATION. STILL AGGRIEVED, THE ASSESSEES HAVE FILED THESE APPEALS. 6. THE LD A.R SUBMITTED THAT COMPUTER CENTERS R UN BY THESE ASSESSEES WERE RUN AS PER THE DIRECTIONS, RULES AND REGULATIONS OF PUN JAB TECHNICAL UNIVERSITY WITH REGARD TO COLLECTION OF FEES, SHARING OF FEES ETC. HE SUBMITTED THAT THE RETURN OF INCOME FILED BY THESE ASSESSEES HAVE BEEN ACCEPTED IN PAST AND ALSO IN SUCCEEDING 5 YEARS. THE COMPUTER CENTERS HAVE SINCE BEEN CLOSED FROM 2012 ONWARDS. HOWEVER, THE AO WAS SENDING NOTICES TO THE ADDRESSE S OF THE COMPUTER CENTERS, WHICH WERE LYING CLOSED AND ACCORDINGLY, THESE ASSE SSEES WERE NOT AWARE OF THE NOTICES ISSUED BY THE AO. HENCE THEY COULD NOT APP EAR BEFORE HIM AND HENCE THE AO WAS CONSTRAINED TO MAKE THE ASSESSMENTS TO THE B EST OF HIS JUDGEMENT. 7. THE LD A.R SUBMITTED THAT THE AO HAS COLLEC TED THE DETAILS OF FEE COLLECTIONS FROM THE UNIVERSITY AND ACCORDINGLY COLLATED THE GR OSS FEES COLLECTIONS. HOWEVER, THE GROSS FEE COLLECTIONS DETERMINED BY THE AO SUFF ERS FROM FOLLOWING PERTINENT MISTAKES, VIZ., (A) THE ASSESSEES HAVE BEEN DIRECTED TO GIVE A DI SCOUNT OF 15% TO THE STUDENTS AND HENCE THE GROSS COLLECTION WAS ONLY 85 % OF THE PRESCRIBED FEES. THIS FACT IS EVIDENT FROM THE TABLE EXTRACTED BY TH E AO IN THE ASSESSMENT ORDER. HOWEVER, THE AO HAS COMPUTED THE GROSS COL LECTIONS @ 100% OF PRESCRIBED FEE, INSTEAD OF 85% OF THE PRESCRIBED FE E. (B) THE COMPUTER TRAINING IS RUN IN TWO SEMESTE RS, VIZ., SEPTEMBER AND MARCH. THE ENROLMENT FOR MARCH SEMESTER WOULD STAR T IN APRIL ONLY. HENCE THE FEE COLLECTION OF MARCH 2008 SEMESTER WOULD STA RT FROM APRIL, 2008 ONWARDS. SIMILARLY, THE FEE COLLECTION FOR MARCH, 2009 WOULD COMMENCE FROM APRIL, 2009 ONWARDS, I.E., THE FEE FOR MARCH S EMESTER WOULD SPILL OVER TO THE SUCCEEDING YEAR. THE ASSESSEES HAVE ACCOUNT ED THE MARCH SEMESTER FEES IN THE SUCCEEDING YEAR, WHEN THEY ACTUALLY STA RT ENROLLING AND COLLECTING FEES. HOWEVER, THE AO HAS INCLUDED THE MARCH, 2008 FEES IN AY 2008-09 ITSELF AND MARCH, 2009 FEES IN AY 2009-10. ON THE OTHER HAND, THE ASSESSEE HAS COLLECTED FEES PERTAINING TO MARCH, 2007 SEMEST ER IN AY 2008-09 AND THE FEES PERTAINING TO MARCH, 2008 IN AY 2009-10. 6 THE LD A.R FURTHER SUBMITTED THAT THE AO HAS ESTIMA TED THE EXPENSES FOR RUNNING THE COMPUTER CENTERS AND ALLOWED THE DEDUCTION. HO WEVER, THE ESTIMATE SO MADE BY THE AO WAS VERY LOW. HE SUBMITTED THAT THESE AS SESSEES HAVE MAINTAINED BOOKS OF ACCOUNTS AND ALSO FILED RETURNS OF INCOME, WHERE IN THE DETAILS OF EXPENSES WERE ALSO GIVEN. HOWEVER, THE AO DID NOT REFER TO THE O RIGINAL RETURNS OF INCOME FOR DETERMINING THE EXPENSES, WHICH WAS NOT JUSTIFIED. 8. THE LD A.R FURTHER SUBMITTED THAT THE ASSE SSEE HAS BROUGHT OUT ALL THESE MISTAKES AND DEFICIENCIES BEFORE LD CIT(A) AND THE FIRST APPELLATE AUTHORITY ALSO CALLED FOR A REMAND REPORT FROM THE AO. HOWEVER, T HE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE STUDENT WISE DETAILS WAS NOT FURNISHED BY THE ASSESSEE. THE LD A.R SUBMITTED TH AT THE SUBMISSIONS OF THE ASSESSEE COULD BE CORROBORATED WITH THE INFORMATION COLLECTED BY THE AO FROM THE UNIVERSITY AND HENCE THERE IS NO REASON TO REJECT T HE SUBMISSIONS OF THE ASSESSEE. 9. THE LD A.R SUBMITTED THAT THE LD CIT(A), HOW EVER, PROCEEDED TO ESTIMATE THE NET INCOME OF THE ASSESSEES BY REJECTING THE ME THODOLOGY ADOPTED BY THE AO. HE SUBMITTED THAT THE AO HAS ESTIMATED THE NET PROF IT BY ADOPTING THE RATE OF 25% WITHOUT CITING ANY COMPARABLE CASE OR WITHOUT MAKIN G REFERENCE TO THE ASSESSEES OWN CASE. HE SUBMITTED THAT THE RATE OF NET PROFI T DECLARED BY THESE ASSESSEES WAS IN THE RANGE OF 8.74% TO 14.50% IN THE PAST AND SUC CEEDING YEARS. ACCORDINGLY HE SUBMITTED THAT THE RATE OF 25% ADOPTED BY THE LD CI T(A) WAS VERY MUCH DISPROPORTIONATE TO THE RATE DECLARED BY THE ASSESS EES. 10. ON THE CONTRARY, THE LD D.R SUPPORTED THE O RDERS PASSED BY LD CIT(A). 7 11. I HEARD THE PARTIES AND PERUSED THE RECORD . I NOTICE THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENTS TO THE BEST OF HIS JU DGEMENT U/S 144 OF THE ACT BY ESTIMATING THE INCOME OF BOTH THE YEARS IN THEIR HA NDS. THE LD CIT(A) HAS, HOWEVER, MODIFIED THE METHODOLOGY AND ESTIMATED THE NET PROFT @ 25% OF GROSS COLLECTIONS COMPUTED BY THE AO. 12. THE LD A.R HAS POINTED OUT THAT THERE ARE ERRORS IN COMPUTING THE GROSS COLLECTIONS. FROM THE INFORMATION COLLECTED BY THE AO FROM THE UNIVERSITY, IT IS CLEAR THAT THE ASSESSEES ARE REQUIRED TO GIVE DISCO UNT OF 15% TO THE STUDENTS AND ACCORDINGLY, IT IS THE SUBMISSION OF THE ASSESSEES THAT THEY HAVE COLLECTED ONLY 85% OF THE PRESCRIBED FEES AFTER ALLOWING DISCOUNT TO T HE STUDENTS. HOWEVER, THE AO HAS TAKEN 100% OF THE PRESCRIBED FEES FOR COMPUTING GROSS FEE COLLECTIONS. IT IS AN ADMITTED FACT THAT THE ASSESSEES ARE REQUIRED TO SH ARE 20% OF ACTUAL FEE COLLECTION WITH THE UNIVERSITY. FROM THE TABLE EXTRACTED BY T HE AO, IT IS NOTICED THAT THE 20% IS COMPUTED ON THE 85% OF THE FEES. HENCE THERE IS MERIT IN THE SUBMISSION OF THE ASSESSEES THAT THE GROSS FEE COLLECTIONS SHOULD BE COMPUTED BY ADOPTING 85% OF THE PRESCRIBED FEES. 13. IT IS ALSO THE SUBMISSION OF THE ASSESSEES THAT THE FEE FOR MARCH SEMESTER SHALL BE COLLECTED IN THE SUCCEEDING YEARS. THERE I S MERIT IN THIS SUBMISSION ALSO, SINCE THE FEES SHALL BE PAID BY THE STUDENTS ONLY W HEN THEY ENROL. HOWEVER, THE AO HAS INCLUDED MARCH SEMESTER FEES IN THE SAME YEA R, WHICH IS APPARENTLY A MISTAKE. ACCORDINGLY, I AM OF THE VIEW THAT THE GR OSS COLLECTIONS COMPUTED BY THE AO SUFFERS FROM THE ABOVE SAID ERRORS AND HENCE THE SAME IS REQUIRED TO BE COMPUTED AFRESH. 8 14. THE LD A.R PLEADED THAT THE MATTERS MAY BE RESTORED TO THE FILE OF THE AO FOR DETERMINING INCOME ON THE BASIS OF BOOKS OF ACC OUNTS. HOWEVER, I NOTICE THAT THE ASSESSEES HEREIN HAVE NOT PRODUCED THE BOOKS BE FORE THE AO AND HENCE BOTH THE TAX AUTHORITIES HAVE PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE. SINCE THE ISSUE BEFORE ME IS WITH REGARD TO THE ESTIMATIO N OF INCOME, I DO NOT FIND IT NECESSARY TO ACCEPT THE REQUEST OF THE LD A.R AT TH IS STAGE. WHEN THIS OPINION WAS PUT BEFORE LD A.R, HE SUBMITTED THAT THE RATE OF NE T PROFIT OF 25% ESTIMATED BY THE LD CIT(A) WAS VERY MUCH HIGHER. HE SUBMITTED THAT THE RATE OF NET PROFIT DECLARED BY THE ASSESEES DURING THE TWO YEARS UNDER CONSIDER ATION WAS AROUND 8% ONLY. ACCORDINGLY HE PLEADED THAT THE RATE OF NET PROFIT MAY BE DETERMINED AT AROUND 12% AND THE SAME MAY BE APPLIED ON THE CORRECTED AM OUNT OF GROSS COLLECTIONS. 15. I HAVE CONSIDERED THE ABOVE SAID SUBMISSIO NS OF LD A.R. I HAVE ALREADY HELD THAT THE GROSS COLLECTIONS COMPUTED BY THE AO SUFFERS FROM PERTINENT MISTAKES AND THE SAME NEEDS TO BE COMPUTED AFRESH. WITH REG ARD TO THE RATE OF NET PROFIT, I NOTICE THAT THE RATE OF NET PROFIT DECLARED BY THE ASSESSEES WAS IN THE RANGE OF 8% TO 14.50% IN THE PAST AND SUCCEEDING YEARS. HOWEVER, THE LD CIT(A) HAS ADOPTED A RATE OF 25% WITHOUT GIVING ANY BASIS. THERE IS MER IT IN THE CONTENTION OF THE LD A.R THAT THE LD CIT(A) SHOULD HAVE FURNISHED ANY CO MPARABLE CASES OR THE INTERNAL RESULTS IN SUPPORT OF HIS DETERMINATION OF NET PROF IT @ 25%. ACCORDINGLY, I AM OF THE VIEW THAT THE RATE OF NET PROFIT ESTIMATED BY L D CIT(A) IS VERY MUCH ON THE HIGHER SIDE. CONSIDERING THE BOOK RESULTS OF VARIO US YEARS, I AM OF THE VIEW THAT THE RATE OF NET PROFIT MAY BE DETERMINED AT 15%. W HEN THIS WAS POINTED OUT TO LD A.R, HE ALSO AGREED TO THE SAME. 16. ACCORDINGLY, I MODIFY THE ORDERS PASSED BY LD CIT(A) IN BOTH THE YEARS IN THE HANDS OF ALL THE ASSESSEES AND DIRECT THE AO TO RECOMPUTE THE TOTAL INCOME BY 9 RECOMPUTING THE GROSS FEE COLLECTIONS AS PER THE DI SCUSSIONS MADE SUPRA AND BY ADOPTING THE RATE OF NET PROFIT @ 15%. I ORDER ACC ORDINGLY. 17. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 30, 20 19 SD/- (B. R. BASKARAN) ACCOUNTANT MEMBER DATE: 30.08.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: (2) THE RESPONDENT: (3) THE CIT(APPEALS) (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER