INCOME TAX OFFICEER, WARD - 2(2), JAMMU V. M/S NIKHIL INFRA - TECH LTD., DELHI

ITA 373/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5686 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-03-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R L GUPTA
• Keywords: Depreciation; Non compliance; Onus to prove
• Section: 142(1); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 373/(ASR)/2017 AS SESSMENT YEAR: 2009-10 INCOME TAX OFFICER WARD-2(2), JAMMU VS. NIKHIL INFRA-TECH LTD., F-101, ASHOK VIHAR, PHASE-1, WAZIRPUR, DELHI-110052 [PAN: AACCN 8664L] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. CHARAN DASS (D .R.) RESPONDENT BY: SH. R. L. GUPTA (ADV.) DATE OF HEARING: 27.03.2018 DATE OF PRONOUNCEMENT: 28.03.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU ('CIT(A )', FOR SHORT) DATED 31.03.2017, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING ITS ASSESSMENT U/S. 147 R.W.S. 144 OF THE INCOME TAX ACT, 1961 ('THE ACT' H EREINAFTER) DATED 27.03.2015 FOR ASSESSMENT YEAR (AY) 2009-10. 2. THE REVENUES APPEAL RAISES THE FOLLOWING GROUND S: 1. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FAC T IN ACCEPTING THE EXPLANATION OF THE ASSESSEE WITHOUT EVIDENCE OR RECORDS DESPITE THE FA CT THAT NUMEROUS OPPORTUNITIES OF BEING HEARD WERE GRANTED TO THE ASSESSEE. ITA NO. 373 (ASR)/2017 (AY 2009-10) ITO V. NIKHIL INFRA-TECH LTD. 2 2. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN REDUCING THE NET PROFIT RATE OF THE ASSESSEE TO 3.5% BY RELYING ON THE ORDER OF ITAT AM RITSAR IN CASE OF M/S. CONSTRUCTION ENGINEERS WHERE THE NET PROFIT WAS HELD AT 7%. 3. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN ALLOWING THE APPEAL OF THE ASSESSEE DESPITE THE FACT THAT NO BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 3. THE BRIEF FACTS OF THE CASE ARE THAT AN ASSESSME NT U/S. 144 OF THE ACT WAS FRAMED BY THE ASSESSING OFFICER (AO) IN VIEW OF THE CONTINUOUS NON-COMPLIANCES OF THE ASSESSEE TO THE VARIOUS NOTICES U/S. 142(1), BEGINNING DATED 09.10.2013, TO 19.12.2014, I.E., ISSUED PURSUANT TO ISSUE OF NOTIC E U/S. 148 ON 03.04.2013. THE NON COMPLIANCE, WHICH WAS TOTAL, WAS DELIBERATE IN-AS-M UCH AS ALL THE NOTICES, SENT PER SPEED POST, WERE CONFIRMED AS SERVED BY THE AO BY V ERIFICATION OF THEIR STATUS ONLINE FROM THE SITE OF THE INDIAN POSTS AND TELEGR APHS. THE ASSESSMENT BY HIM WAS ALSO PRECEDED BY A FINAL SHOW CAUSE NOTICE U/S. 144, IN RESPONSE TO WHICH THE DIRECTORS OF THE ASSESSEE-COMPANY, NAMELY, SHRI NIK HIL JAIN AND SHRI NAVIN JAIN, ATTENDED ON 24.03.2015 , AND REQUESTED FOR FURTHER TIME AS THE THIRD DIREC TOR, SHRI R. K. GOYAL, WHO WAS STATED TO BE HANDLING THE ACCOUNT ING AND TAX MATTERS OF THE COMPANY, HAD EXPIRED ON 17.04.2012 . THE AO PROCEEDED TO FRAME THE ASSESSMENT, THE TIME LIMIT FOR WHICH WOULD EXPIRE ON 31.03.2015 . THE ASSESSEES A CIVIL CONTRACTOR, PROFIT WAS ASSESSED BY HIM AT 10%, I.E. , AS AGAINST THE DISCLOSED PROFIT RATE OF 1.39% (OF THE TURNOVER, I.E., RS.167.29 LAC S), FOLLOWING THE DECISION IN ASSESSING OFFICER V . POOJA CONSTRUCTION COMPANY [1999] 69 ITD 147 (ASR). THAT APART, DISALLOWANCES TOWARD DEPRECIATION ALLOWANCE (RS.3.18 LACS) AND INTEREST U/S. 361(III) (AT RS.9.46 LACS), AS WELL AS ADDITION U/S . 68 QUA A SECURED LOAN (RS.97.01 LACS), WERE EFFECTED. IN FIRST APPEAL, THE LD. CIT( A) CALLED FOR A REMAND REPORT FROM THE AO IN PURSUANCE TO THE ASSESSEES GROUND 2 BEFO RE HIM CHALLENGING THE ASSESSMENT U/S. 144 IN VIEW OF THE ATTENDANCE OF TH E TWO DIRECTORS ON 24.03.2015, INDICATING THE ASSESSEES WILLINGNESS TO COOPERATE IN THE ASSESSMENT PROCEEDINGS. ITA NO. 373 (ASR)/2017 (AY 2009-10) ITO V. NIKHIL INFRA-TECH LTD. 3 PER HIS REMAND REPORT DATED 21.03.2017, THE AO REIT ERATED HIS EARLIER FINDINGS, FURTHER INDICATING THAT NO IMPROVEMENT IN ITS CASE HAD BEEN MADE BY THE ASSESSEE BEFORE HIM. THE LD. CIT(A), HOWEVER, WAS OF THE VIE W THAT THE AO OUGHT TO HAVE EXAMINED THE BOOKS OF ACCOUNT OF THE ASSESSEE IN TH E REMAND PROCEEDINGS, AND ISSUED HIS FINDING AFRESH, I.E., RATHER THAN (ALMOS T) REPEATING WHAT HE HAD ALREADY STATED EARLIER IN THE ASSESSMENT ORDER. THE PROFIT RATE OF 10% WAS CERTAINLY IN EXCESS AS THE AO HAD OVERLOOKED THE FACT THAT THE A SSESSEE WAS DURING THE RELEVANT YEAR A SUB-CONTRACTOR (OF M/S. SATISH AGGARWAL AND CO.), UNDERTAKING THE CONTRACT WORK (OF BLACK TOPPING ROADS FOR BORDER ROADS ORGAN IZATION (BRO) - A GOVERNMENT OF INDIA UNDERTAKING) IN A REMOTE PART O F THE RAJOURI DISTRICT OF J&K. A RATE OF 7%, AS DECIDED BY HIM IN SEVERAL OTHER CA SES OF CONTRACTORS OPERATING IN THE REGION, WAS CONSIDERED REASONABLE BY HIM, AND W HICH WAS FURTHER REDUCED TO 3.5% AS THE ASSESSEE WAS WORKING AS A SUB-CONTRACTO R. THE OTHER ADDITION/ DISALLOWANCES WOULD NOT SURVIVE AS THE NET PROFIT R ATE HAD BEEN ESTIMATED, IMPLYING THAT ALL THE EXPENSES HAD BEEN ALLOWED FOR THE BALA NCE AMOUNT. AGGRIEVED, THE REVENUE IS IN APPEAL, RAISING THE GROUNDS NOTED SUP RA. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE FIRST ISSUE THAT CONFRONTS US IS IF THE LD. CIT (A) HAS, IN MODIFYING THE ASSESSMENT, I.E., THE NET PROFIT RATE AS ASSESSED B Y THE AO, RELIED UPON ANY MATERIAL. THIS AS HE COULD NOT DO SO WITHOUT FIRST ASSAILING THE INVOCATION OF SECTION 144 BY THE AO. THIS IS AS IT IS HIS BEST JUDGMENT ASSESSME NT, AND NOT OF ANYONE ELSE, EVEN AS CLARIFIED BY THE HON'BLE COURT IN CIT VS. RAYALA CORPORATION PVT. LTD . [1995] 215 ITR 883 (MAD). THE PURVIEW OF AN APPELLATE AUTH ORITY, AS FURTHER EXPLAINED BY IT, IS ONLY TO REAPPRAISE THE EVIDENCE RELIED UPON BY THE AO. OF COURSE, THE SAME HAS TO BE RELIABLE, I.E., COULD BE RELIED UPON. THE LD. CIT(A) HAS IN THE PRESENT CASE NOT IMPUGNED THE FRAMING OF ASSESSMENT U/S. 144. HE , THOUGH CALLED FOR THE REMAND ITA NO. 373 (ASR)/2017 (AY 2009-10) ITO V. NIKHIL INFRA-TECH LTD. 4 REPORT, MODIFIED, AS WE OBSERVE, THE AOS ESTIMATIO N OF THE NET PROFIT NOT ON THE BASIS OF ANY MATERIAL, BUT BY RELYING ON THE DECISI ON BY THE AMRITSAR BENCH OF THE TRIBUNAL IN CONSTRUCTION ENGINEERS, SRINAGAR (IN ITA NO. 493/ASR/2010, DATED 11.05.2012). AND, TWO, REDUCED IT UPON CONSIDERING THE ASSESSEE TO BE NOT A CONTRACTOR BUT A SUB-CONTRACTOR. IN OUR CONSIDERED VIEW, A DIFFICULT TERRAIN MAY NOT NECESSARILY IMPLY A LOWER PROFIT. RATHER, ECONOMIC THEORY WOULD SUGGEST THE P ROFIT TO MATCH THE RISK INVOLVED, SO THAT A HIGHER RISK WOULD ENTAIL A HIGH ER RATE OF PROFIT. FURTHER, AGAIN, THE ASSESSEE AS THE PERSON UNDERTAKING THE WORK WOU LD, BOTH IN THEORY AND IN PRACTICE, BE ENTITLED TO A LARGER SHARE OF THE PROF IT, I.E., EVEN IF THE SAME IS TO BE CONSIDERED AS IN THE RANGE OF 7% TO 8%. CONSIDERING THESE FACTS, WE MODIFY THE ESTIMATION OF THE ASSESSEES NET PROFIT RATE TO, EV EN AS CONCEDED TO BY THE LD. AR, THE ASSESSEES COUNSEL, DURING HEARING, 5% OF THE T URNOVER. THE DISALLOWANCE ON ACCOUNT OF DEPRECIATION (U/S. 32(1)) AND INTEREST ( U/S. 361(III)) SHALL NOT SURVIVE IN VIEW OF THE ESTIMATION OF THE NET PROFIT RATE. THAT LEAVES US WITH THE ADDITION U/S. 68 QUA A SECURED LOAN/S. THOUGH THE SAME COULD BE MADE IN PRINCIPAL, AND WE DO NOT AGRE E WITH THE LD. CIT(A) THAT THE SAME COULD NOT BE IN VIEW OF THE ASSESSEES PROFIT RATE BEING ESTIMATED ( CIT V. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194 (SC)), WE FIND NO BASIS FOR THE SAID ADDITION IN THE FACTS AND CIRCUMSTANCES OF THE CASE . TRUE, THE BURDEN OF PROOF U/S. 68 IS ON THE ASSESSEE, WHICH HAS NOT FURNISHED ANY MATERIAL IN THE ASSESSMENT PROCEEDINGS. HOWEVER, IT IS NOT CLEAR IF THE AO HAD IN ANY OF THE NOTICES U/S. 142(1) REQUIRED THE ASSESSEE TO SUPPORT ITS CLAIM QUA THE SAID LOAN WITH ANY MATERIAL/ EVIDENCE. THIS DOES NOT APPEAR TO BE THE CASE AS TH ERE IS NO REFERENCE THERETO BY HIM EITHER IN THE ASSESSMENT ORDER OR IN THE REMAND REPORT. THE ADDITION UNDER THE CIRCUMSTANCES COULD ONLY BE ON THE BASIS OF SOME AD VERSE MATERIAL BROUGHT ON ITA NO. 373 (ASR)/2017 (AY 2009-10) ITO V. NIKHIL INFRA-TECH LTD. 5 RECORD BY THE ASSESSING OFFICER. THE ADDITION, IN F ACT, HAS NOT EVEN BEEN IMPUGNED BY THE REVENUE. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 28, 201 8 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 28.03.2018 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) APPELLANT: THE ITO WARD-2(2), JAMMU (2) RESPONDENT: NIKHIL INFRA-TECH LTD., F-101, ASHO K VIHAR, PHASE-1, WAZIRPUR, DELHI-110052 (3) THE CIT(APPEALS), JAMMU (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER