DY. CIT- 2(1), BILASPUR(CG) V. M/S. RAM NIWAS AGRAWAL, JANJGIR CHAMPA

ITA 38/BIL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6581 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: G S AGARWAL
• Keywords: Business income; Depreciation; Tax effect
• Section: 142(1); 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHU RY , JM . / I TA NO .38 /RPR /20 1 5 / ASSESSMENT YEAR : 20 10 - 11 DY. COMMISSIONER OF INCOME TAX, MAHIMA COMMERCIAL COMPLEX, VYAPAR VIHAR, BILASPUR, C.G.) ....... / APPELLANT / V/S. M/S. RAM NIWAS AGRAWAL, MAIN ROAD, WARD NO. 2, NAILA, JANJGIR - CHAMPA, (C.G.) PAN : AAHFR6554K / RESPONDENT . / ITA NO . 4 1/RPR/2015 / ASSESSMENT YEAR : 2010 - 11 M/S. RAM NIWAS AGRAWAL, MAIN ROAD, WARD NO. 2, NAILA, JANJGIR - CHAMPA, (C.G.) PAN : AAHFR6554K ....... / APPELLANT / V/S. JOINT COMMISSIONER OF INCOME TAX, RANGE 2, BILASPUR / RESPONDENT 2 ITA NO S. 38 & 41 /RPR /20 1 5 A SSESSEE BY : SHRI G.S. AGARWAL REVENUE BY : S HRI D.K. JAIN / DATE OF HEARING : 1 5 .01.2019 / DATE OF PRONOUNCEMENT : 17 .01.2019 / ORDER PER ANIL CHATURVEDI, AM : THESE CROSS - APPEALS FILED BY REVENUE AND ASSESSEE EMANATE OUT OF THE ORDER OF COMMISSIONER OF INCOME - TAX (A) , BILASPUR DATED 07 - 11 - 2014 FOR A.Y. 2010 - 11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER : - ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN EXECUTION OF CIVIL CONSTRUCTION WORKS. ASSESSEE ELECTRONICALLY FILED RETURN OF INCOME FOR A.Y. 20 10 - 11 ON 1 1 - 10 - 2010 DECLARING TOTAL INCOME OF RS. 81,85,080/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143( 3 ) VIDE ORDER DATED 28 - 03 - 2013 AND THE TOTAL INCOME WAS DETERMINED AT RS. 1,60,11,303/ - . AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE ORDER DATED 07 - 11 - 2014 (IN A PPEAL NO. CIT(A)/BSP/A.NO. 107/2013 - 14 ) GRANTED PARTIAL RELIEF TO THE 3 ITA NO S. 38 & 41 /RPR /20 1 5 ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 3. THE GRO UNDS RAISED BY THE REVENUE IN ITA NO. 38/RPR/2015 FOR A.Y. 2010 - 11 READS AS UNDER : 1. WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WAS JUSTIFIED WHILE AFFIRMING ALL THE FINDINGS OF THE ASSESSING OFFICER AND WITHOUT BRINGING ANY FAVOURABLE MATERIAL AND ANY SPECIFIC REASON IN REDUCING NET PROFIT RATE AT 9% AGAINST 10% APPLIED BY THE ASSESSING OFFICER. 2. WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS JUSTIFIED IN ALLOWING 91% DEDUCTION ON INTEREST EARNED FROM FDRS BY THE ASSESSEE BY TREATING I NTEREST INCOME AS BUSINESS INCOME. 3. THE APPELLANT CRAVES FOR LEAVE TO RAISE THE GROUNDS OF APPEAL. . 4. ON THE OTHER HAND, THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO. 41/RPR/2015 FOR A.Y. 2010 - 11 READS AS UNDER : 1) THAT THE ORDER OF THE LEARNED CIT (APPEALS) IS BAD IN LAW AND FACTS, AND IS ARBITRARY, PRAYED THAT ADDITIONS BE DELETED. 2) THAT THE LEARNED CIT (APPEALS) ERRED IN ASSESSMENT OF INCOME AT NET PROFIT RATE AT 9%, WHICH IS UNJUSTIFIED WHEREAS NET PROFIT BEFORE INTEREST AND REMUNERATION DE CLARED BY THE ASSESSEE IS AT 7.71% WHICH SHOULD BE ACCEPTED. 3) THAT THE LEARNED CIT (APPEALS) FURTHER ERRED IN NOT ALLOWING DEPRECIATION ON APPLIED NET PROFIT RATE, WHICH IS BAD IN LAW. PRAYED TO DELETE THE HEAVY ADDITIONS MADE. 4) THAT THE LEARNED CIT (APPEALS) FURTHER ERRED IN ASSESSING NET PROFIT RATE OF 9% OF INTEREST INCOME AS INCOME FROM BUSINESS. 4 ITA NO S. 38 & 41 /RPR /20 1 5 5. WE FIRST TAKE UP REVENUE S APPEAL IN ITA NO. 38/RPR/2015 . 6. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT THE APPEAL OF THE REVENUE NEEDS TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT . LD. D.R. DID NOT OBJECT TO THE AFORESAID CONTENTION MADE BY THE LD. A.R. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON PERUSING THE GROUNDS OF APPEAL RAISED BY THE REVENUE, WE FIND THAT REVENUE IS AGGRIEVED BY THE ORDER OF LD. CIT(A) IN RESPECT OF THE RELIEF GIVEN BY HIM. AS PER THE RECENT ANNOUNCEMENT OF CENTRAL BOARD OF DIRECT TAXES (CBDT) DATED 11.07.2018 (CIRCULAR NO. 3 OF 2018), NO DEPARTMENT APPEALS ARE TO BE FILED AGAINST RELIEF GIVEN BY LD. CIT(A) BEFORE THE INCOME TAX APPELLATE TRIBUNAL UNLESS THE TAX EFFECT, EXCLUDING INTEREST, EX CEEDS RS.20 LAKHS . THE CIRCULAR FURTHER STATES THAT THE INSTRUCTIONS WILL APPLY RETROSPECTIVELY TO THE PENDING APPEALS ALSO. IN THE PRESENT CASE, IT IS AN UNDISPUTED FACT THAT ON THE ADDITIONS WHICH ARE IN DISPUTE, THE TAX EFFECT IS LESS THAN RS.20 LAKHS . IN THE ABSENCE OF ANY MATERIAL PLACED ON RECORD BY THE REVENUE TO DEMONSTRATE THAT THE ISSUE IN THE PRESENT APPEAL IS COVERED BY EXCEPTIONS PROVIDED IN PARA 10 OF THE AFORESAID CBDT CIRCULAR, WE ARE OF THE VIEW THAT THE MONETARY LIMIT PRESCRIBED BY THE I NSTRUCTIONS OF THE AFORESAID CBDT CIRCULAR WOULD BE APPLICABLE TO THE PRESENT APPEAL OF THE DEPARTMENT. WE THEREFORE HOLD THE PRESENT APPEAL OF REVENUE TO BE NOT MAINTAINABLE ON ACCOUNT OF LOW TAX 5 ITA NO S. 38 & 41 /RPR /20 1 5 EFFECT AND ACCORDINGLY DISMISS THE APPEAL OF REVENUE WITHOU T EXPRESSING ANY OPINION ON MERITS OF THE CASE. HOWEVER, IN CASE THERE IS ANY ERROR IN THE COMPUTATION OF THE TAX EFFECT INVOLVED OR IF FOR ANY REASON, THE AFORESAID CBDT CIRCULAR IS NOT APPLICABLE, IT WOULD BE OPEN TO THE REVENUE TO SEEK REVIVAL OF THE AP PEAL. THUS, THE GROUNDS OF THE REVENUE ARE DISMISSED. 8 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. 9 . NOW, WE TAKE UP ASSESSEE S APPEAL IN ITA NO. 41/RPR/2015 . 1 0 . BEFORE US, AT THE OUTSET THAT THE LD . AR SUBMITTED THAT ALL THE GROUNDS ARE INTERCONNECTED . I N VIEW OF THE AFORESAID SUBMISSIONS ALL THE GROUNDS CONSIDERED TOGETHER. 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN TOTAL GROSS REC EIPTS FROM THE CIVIL CON TRACTS AT RS.20,56,44,835/ - AND NET PROFIT WORKED OUT T O 2.44%. HE WAS ON THE VIEW THAT THE NET PROFIT SHOWN BY THE ASSESSEE WAS ON LOWER SI D E. HE THEREAFTER SCRUTINIZED THE DETAILS FURNISHED BY THE ASSESSEE. ON PERUSING THE DETAILS , ASSESSING OFFICER N OTED THAT ASSESSEE HAS DEBITED LABOUR CHARGES OF RS.2,03,03,368/ - UNDER VARIOUS COUNTS (THE DETAILS OF WHICH ARE LISTED IN PARA 5 AT PAGE 2 OF THE ASSESSMENT ORDER ) . HE NOTED THAT MOST OF THE PAYMENTS ARE MADE IN CASH. IN ORDER TO VERIFY THE 6 ITA NO S. 38 & 41 /RPR /20 1 5 GENUINENESS OF THESE EXPENSES , NOTICE U/S. 142(1)/131 WERE SENT TO VARIOUS PERSONS. THE ASSESSING OFFICER NOTED THAT MOST OF THE NOTICES WERE RETURNED BACK AND THERE WAS NO COMPLIANCE F ROM THE PERSONS TO WHOM THE NOTICES WERE SERVED. THE ASSESSING OFFICER THEREAFTER ASKED THE ASSESSEE EITHER TO PRODUCE THE PERSONS OR EXPLAIN AS TO WHY THE EXPENSES SHOULD NOT BE CONSIDERED AS BOGUS. THE ASSESSEE MADE THE SUBMISSIONS WHICH WERE NOT FOUND ACCEPTABLE TO ASSESSING OFFICER. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBM ISSIONS OF ASSESSEE AND ON EXAMINATION OF DETAILS CAME TO THE CONCLUSION THAT THE PERSONS IN WHOSE NAMES THE BILLS WERE PRODUCED WERE FOUND TO BE NON - EXISTING AND FURTHER ASSESSE COULD NOT PRODUCE THE PARTIES TO PROVE THAT THE EXPENSES ARE GENUINE. THE AS SESSING OFFICER ALSO NOTED THAT ASSESSEE HAD CLAIMED PURCHASE S OF MATERIALS UNDER THE HEAD OF SITE MATERIAL, MOORUM AND SAND, BOLDER AND SOIL . T O VERIFY THE GENUINENESS OF THE EXPENSES , N OTICES U/S. 142(1) AND 131(1) OF THE ACT WERE ISSUED TO SOME OF THE PERSONS. THE NOTICES WERE RETURNED EXCEPT THE NOTICE ISSUED TO SHRI RAKESH KUMAR BAISWAR. SHRI RAKESH BAISWAR APPEARED BEFORE THE ASSESSING OFFICER ALONG WITH THE BOOKS OF ACCOUNT. ON T HE BASIS OF THE EXAMINATION OF BOOKS OF ACCOUNT THE ASSESSING OFFICER CONCLUDED THAT THE BOOKS OF ACCOUNT OF ASSESSEE DID NOT DID NOT REPRESENT CORRECT TRANSACTION. ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD INCURRED FREIGHT CHARGES, MESS EXPENSES, OFFICE EXPENSES ETC. AS THE ASSESSEE COULD NOT PRODUCE ANY BILLS/CASH MEMO AND THE VOUCHERS PRODUCED BY THE ASSESSEE WERE SELF - MADE THEREFORE ACCORDING TO THE 7 ITA NO S. 38 & 41 /RPR /20 1 5 ASSESSING OFFICER THEY WERE NOT RELIABLE. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE H AD MADE PAYMENTS TO VARIOUS PARTIES IN CONTRAVENTION OF PROVISION OF SECTION 40A(IA) OF THE ACT. CONSIDERING THE TOTALITY OF THE FACTS THE ASSESSING OFFICER CONCLUDED THAT THE BOOKS RESULT SHOWN BY THE ASSESSEE WERE INCOMPLETE. HE ACCORDINGLY REJECTED TH E BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT ON THE GROUND OF INCORRECTNESS AND INCOMPLETENESS OF THE ACCOUNTS AND THERE AFTER, HE PROCEEDED TO ESTIMATE THE NET INCOME OF ASSESSEE FROM CONTRACTUAL BUSINESS AT 10% OF GROSS RECEIPTS ( AFTER ALLOWING PARTNERS SAL ARY AND INTEREST ) . HE, THUS, MADE ADDITION OF RS.2,05,64,484/ - AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE GRANTED PART RELIEF TO THE ASSESSEE B Y DIRECTING THE ASSESSING OFFICER TO ESTIMATE THE INCOME FROM CIVIL CONSTRUCTION WORKS AT 5.02% OF THE TURNOVER AFTER CONSIDERING INTEREST AND REMUNERATION PAID TO THE PARTNERS . AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL. 12. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER POINTED TO THE CHART OF TURNOVER AND PROFITS EARNED BY THE ASSESSEE FOR A.YS. 2007 - 08 TO 2010 - 11 AND FROM THE AFORESAID CHART HE POINTED THAT THE PERCENTAGE OF NET PROFIT TO GROSS TURNOVER WAS IN THE RANGE OF 7.54% TO 7.71%. HE SUBMITTED THAT AFTER RELIEF GRANTED BY THE CIT(A) THE PERCENTAGE OF NET PROFIT TO GROSS 8 ITA NO S. 38 & 41 /RPR /20 1 5 TURNOVER WORK S OUT TO 9.19% WHICH IS TOO HIGH. HE THEREAFTER ALSO PLACED ON RECORD THE PERCENTA GE OF NET PROFIT FOR SUBSEQUENT YEARS AND POINTED THAT THE PERCENTAGE OF NET PROFIT TO BE IN THE RANGE OF 7.5 2 % TO 7.55% IN A.YS. 2012 - 13 TO 2014 - 15. HE THEREFORE, SUBMITTED THAT CONSIDERING THE AFORESAID FACTS THE ADDITIONS UPHELD BY THE CIT(A) WAS ON HI GHER SI D E. HE THEREFORE, SUBMITTED THAT ADDITION BE DELETED. IN THE ALTERNATE HE SUBMITTED THAT REASONABLE ADDITION AS DEEM ED FIT BE CONSIDERED IN THE PRESENT CASE. 13. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ESTIMATION OF INCOME OF THE CONTRACT BUSINESS. WE FIND FROM THE CHART FURNISHED BY THE ASSESSEE THAT AGAINST THE NET PROFIT RATE OF 7.71% AS SHOWN BY A SSESSEE, THE NET PROFIT RATE AFTER RELIEF GRANTED BY THE CIT (A) WORKS OUT TO 9.19%. FURTHER, THE CHART OF NET PROFITS EARNED BY THE ASSESSEE FROM A.YS. 2007 - 08 TO 2014 - 15 REVEALS THAT THE NET PROFIT OF THE ASSESSEE IS BETWEEN THE RANGE OF 7% TO 8%. CONS IDERING THE TOTALITY OF AFORESAID FACTS AND IN VIEW OF THE ALTERNATE SUBMISSIONS MADE BY THE LD. A.R. WE ARE OF VIEW THAT IN THE PRESENT CASE THE INTEREST OF JUSTICE SHALL BE MET IF THE ADDITION IS RESTRICTED TO 9 ITA NO S. 38 & 41 /RPR /20 1 5 RS.8,00,000/ - . WE THUS, DIRECT ACCORDINGLY. TH US, TH E GROUNDS OF APPEAL ARE PARTLY ALLOWED. 15. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSED AND THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 17 TH DAY OF JANUARY, 2019. SD/ - SD/ - PARTHA SARATHI CHAUDHURY ANIL CHATURVEDI JUDICIAL MEMBER ACCOUNTANT MEMBER / RAIPUR ; / DATED : 17 TH JANUARY, 2019 . RK / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, I.T.A.T., RAIPUR //TRUE COPY// / BY ORDER, / PRIVATE SECRETARY , / ITAT, RAIPUR . 10 ITA NO S. 38 & 41 /RPR /20 1 5 DATE 1 DRAFT DICTATED ON 1 5 .01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 1 6 .01 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER