POONAM BUILDERS, MUMBAI V. DCIT CIR 15, MUMBAI

ITA 3773/MUM/2012

• Counselvise Citation: 377319914 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Business income
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND DR. S. T. M.PAVALAN (JM) ./I.T.A.NO.3773/MUM/2012 ( / ASSESSMENT YEAR: 2007-08) POONAM BU ILDERS , 66 - B, 3 RD FLOOR, PODAR CHAMBERS, MUMBAI SAMACHAR MARG, MUMBAI-400001 / VS. DY. COMMISSIONER OF INCOME TAX, CIR 15(1), ROOM NO.104, 1 ST FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 ( / APPELLANT) ( / RESPONDENT) ./ ./PAN/GIR NO. : AAGFP-9870-P / APPELLANT BY : SHRI ASHOK J PATIL /RESPONDENT BY SHRI RAJESH KUMAR # / DATE OF HEARING : 9.4.2014 # /DATE OF PRONOUNCEMENT : 22.5.2014 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- 26, MUMBAI- DATED 1.3.2012 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ESTIMATION OF ASSESSEES INCOME FROM BUSINESS. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSH IP FIRM WHICH IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER OF RESIDENTIAL AND COMMERCIAL PREMISES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FIL ED BY THE ASSESSEE ON 8.10.2007 DECLARING TOTAL INCOME OF RS.10,20,372/-. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNTS AND RECORD MAINT AINED BY THE ASSESSEE WERE VERIFIED BY AO AND ON SUCH VERIFICATION, HE FOUND THAT THE REGISTER OF MATERIAL PURCHASES AND I.T.A.NO.3773/MUM/2012 2 CONSUMED WAS NOT MAINTAINED BY THE ASSESSEE. HE ALS O FOUND THAT THE MAJORITY OF THE CASH EXPENSES WERE NOT SUPPORTED BY ANY VOUCHERS. HE ALSO NOTED THAT SALARY TO TWO EMPLOYEES AMOUNTING TO RS.99,600/- WAS DEBITED IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE ENTIRELY IN THE MONTH OF MARCH 2007. THE ASSESSEE WAS ALSO FOUND TO HAVE CLAIMED PRIOR PERIOD EXPENSES AND THE PURCHASE ACCO UNT WAS ALSO DEBITED BY THE ASSESSEE ON ACCOUNT OF GOODS WHICH HAD EVEN NOT RE ACHED AT SITE UP TO 31.3.2007. SELLING RATE SHOWN BY THE ASSESSEE FOR DIFFERENT TE NEMENTS OF THE SAME PROJECT ALSO VALUED IN THE RANGE OF RS.651 TO 1200 PER SQ. FT.. KEEPING IN VIEW ALL THESE DEFECTS FOUND IN THE BOOKS OF ACCOUNT AND OTHER RECORD MAIN TAINED BY THE ASSESSEE, THE AO CAME TO THE CONCLUSION THAT THE CONSTRUCTION ACCOU NT OF THE ASSESSEE WAS NOT OPEN FOR VERIFICATION AND THE CORRECT PROFIT OF THE BUSINESS OF THE ASSESSEE COULD NOT BE PROPERLY DEDUCED FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE, THEREFORE, REJECTED THE BOOK RESULTS DECLARED BY THE ASSESSEE BY INVOKING THE P ROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 (THE ACT) AND ESTIMATED THE T OTAL SALES FOR THE YEAR UNDER CONSIDERATION AT RS.3,60,00,000/- AS AGAINST RS.3 ,08,52,131/- DECLARED BY THE ASSESSEE THEREBY MAKING AN ADDITION OF RS.51,47,869/- TO T HE TOTAL INCOME OF THE ASSESSEE. HE ALSO DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSE SSEE TO THE EXTENT OF RS.5,00,000/- FOR THE UNVERIFIABLE ELEMENT INVOLVED IN THE EXPE NSES CLAIMED BY THE ASSESSEE. THUS, THE ADDITION OF RS.56,47,869/- WAS MADE BY THE AO TO THE INCOME RETURNED BY THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3) VID E ORDER DATED 11.12.2009. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), T HE APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERI NG THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, T HE LD. CIT(A) AGREED WITH THE STAND OF THE ASSESSEE THAT IN THE ABSENCE OF ANY MATERIA L DEFECT OR SERIOUS DISCREPANCY FOUND IN THE SALES DISCLOSED BY THE ASSESSEE, THE ESTI MATE OF SALES MADE BY AO AT 3.60 CRORES WITHOUT ANY BASIS WAS NOT JUSTIFIED. THE LD. CIT(A), HOWEVER, UPHELD THE ACTION I.T.A.NO.3773/MUM/2012 3 OF THE AO IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE BASIS OF MATERIAL DEFECTS POINTED OUT THEREIN AND HELD THAT IN THE FA CTS AND CIRCUMSTANCE, IT WAS MORE APPROPRIATE TO APPLY REASONABLE NET PROFIT RATE TO THE SALES DECLARED BY THE ASSESSEE FOR ESTIMATING THE INCOME OF THE ASSESSEE FROM BUSINESS . IN THIS REGARD, HE NOTED THAT THE ASSESSEE ITSELF HAS DISCLOSED NET PROFIT OF ABOUT 13% IN THE SUBSEQUENT YEAR WHEREAS IN THE EARLIER YEAR, THE ASSESSEE HAD DISCLOSED NE T PROFIT OF 3.08 %. ACCORDINGLY, AVERAGE PROFIT RATE WAS ARRIVED BY THE LD. CIT(A) AT 8% AND AO WAS DIRECTED BY HIM TO ESTIMATE THE INCOME OF THE ASSESSEE FROM BUSINES S BY APPLYING 8% NET PROFIT RATE TO THE SALES DECLARED BY THE ASSESSEE. AS REGARD DI SALLOWANCE OF RS.5 LAKHS MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE EXPENSES, THE LD. CI T(A) SOUGHT REMAND REPORT FROM THE AO ON VERIFICATION OF ALL THE EXPENSES CLAIMED BY A SSESSEE AND KEEPING IN VIEW THE REMAND REPORT SUBMITTED BY THE AO, THE DISSONANCE O F RS.5 LAKHS WAS RESTRICTED BY HIM TO RS.21000/- ON ACCOUNT OF BONUS PAYMENT MADE IN CASH AND RS.17,635/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. STILL AGGRIEVED BY THE OR DER OF LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTE D BY THE LD.DR THERE WERE SPECIFIC MATERIAL DEFECTS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND KEEPING IN VIEW THE SAME, THE LD. CIT(A), IN OUR OPINION, WAS FULLY JUSTIFIED IN UPHOLDING THE A CTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT. AS REGARD NET PROFIT RATE OF 8% APPLIED BY THE LD. CIT(A) TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE BUSI NESS, WE FIND THAT THE SAME WAS ARRIVED AT AS PER THE AVERAGE RATE OF NET PR OFIT OF 13% DECLARED BY THE ASSESSEE IN THE SUBSEQUENT YEAR AND 3.8% DECLARED IN THE EARLIER YEAR. IN OUR OPINION, THIS BASIS ADOPTED BY THE LD. CIT(A) TO DETERMINE THE NET PROFIT RATE I.T.A.NO.3773/MUM/2012 4 BE APPLIED IN THE CASE OF ASSESSEE TO ESTIMATE THE BUSINESS INCOME WAS QUITE FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE WARRANTING NO INTERFERENCE. SIMILARLY, VERY FAIR VIEW WAS TAKEN BY THE LD. CIT(A) TO RESTRICT THE DISALLOWANCE OF RS.5 LAKHS MADE BY AO ON ACCOUNT OF UNVERIFIABLE EXPENSES TO RS.38,665/ KEEPING IN VIEW THE REMAND REPORT SUBMI TTED BY THE AO AFTER VERIFICATION OF THE EXPENSES CLAIMED BY THE ASSESSE E. WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE SAME. IT IS PERTINENT TO NOTE HERE THAT THE ADDITION MADE BY THE AO BY ESTIMATING SALES OF THE ASSESSE E AT HIGHER FIGURE WAS DELETED BY THE LD. CIT(A) VIDE HIS IMPUGNED ORDER BY GIVING SUBSTANTIAL RELIEF TO THE ASSESSEE AND NOTHING HAS BEEN BROUGHT ON RECOR D BY THE LD. DR TO SHOW THAT THE REVENUE HAS FILED AN APPEAL BEFORE THE TRI BUNAL DISPUTING THE SAID RELIEF ALLOWED BY THE LD. CIT(A) TO THE ASSESSEE. AS SUC H CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF ESTIMATION OF ASSESSEES INCOME BY APPLYING NET PROFIT RATE OF 8% AND UPHOLDING THE SAME, WE DISMISS THE ASSESSEES APPEAL. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2ND MAY, 2014 ( * + 22ND MAY, 2014 SD SD ( DR. S. T. M.PAVALAN) (P .M.JAGTAP) ( / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 22 ND DAY OF MAY, 2014 . . ./ SRL , SR. PS I.T.A.NO.3773/MUM/2012 5 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT /APPLICANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , # 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) # 3 , /ITAT, MUMBAI