ITO, Guna V. M/s R.R.M Contractor, Ashok Nagar

ITA 388/AGR/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2427 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 22-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Keywords: Unexplained cash credit
• Section: 44AD; 142(1); 143(1); 143(2); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 388/AGR/2009 ASST. YEAR: 2006-07 INCOME TAX OFFICER, VS. M/S. R.R.M. CONTRACTOR , GUNA (M.P.). MELA GROUND, CHANDERI, DISTT. ASHOKNAGAR (M.P.) (PAN : AAIFR 4956 M). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA, JR. D.R. RESPONDENT BY : SHRI RAJENDRA SHARMA, ADVOCATE, ORDER PER H.S. SIDHU, J.M. : THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E ORDER DATED 29.06.2009 PASSED BY THE LD. CIT(A), GWALIOR ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(APPEALS) HAS ERRED IN LAW AND FACT DIRECTING TO ADOPT NET PROFIT RATE @ 4% ON GROSS RECEIPTS OF CONTRACT INSTEAD OF 8% APPLIED BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (APPEALS) HAS ERRED IN LAW AND FACT DIRECTING THE A SSESSING OFFICER TO ALLOW EXPENDITURE U/S. 28(V) IN RESPECT OF SALARY A ND INTEREST PAID TO 2 THE PARTNERS OUT OF THE PROFIT SO ARRIVED ON APPLYI NG THE NET PROFIT RATE 4% ON GROSS CONTRACT RECEIPTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT (APPEALS) HAS ERRED IN LAW AND FACT IN DELETING AN AMOUNT OF ` 5,35,000/- OUT OF ADDITION MADE BY ASSESSING OFFICE R AT ` 10,98,200/- U/S.68 OF THE I.T. ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT (APPEALS) HAS ERRED IN LAW IN DELETING AN AMOUNT OF ` 15,00,000/- ADDED BY THE ASSESSING OFFICER U/S. 68 OF THE I.T . ACT AS UNEXPLAINED CAPITAL INTRODUCED BY THE PARTNERS. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE, THE APPEAL IS FINALLY HEARD FOR DISPOSAL. CERTIFIED THAT THE COPY OF THE CIT(A)S ORDER FOR T HE A.Y. 2006-07 IN THE CASE OF ABOVE MENTIONED ASSESSEE WAS COMMUNICAT ED TO ME ON 29- 07-2009. 2. THE ASSESSEE IS A FIRM FILED ITS RETURN OF INCOM E ON 30.10.2006 DECLARING A TOTAL INCOME OF ` 60,639/- WHICH WAS PROCESSED BY THE ASSESSING OFFI CER UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (THE AC T HEREINAFTER) ON 28.03.2007 AND REFUND OF ` 86,090/- WAS ALSO ISSUED TO THE ASSESSEE. BUT, TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ISSUED NOTIC E UNDER SECTION 143(2) ON 25.07.2007 WHICH WAS DULY SERVED ON THE ASSESSEE. THE ASSESSING OFFICER FIXED THE CASE OF THE ASSESSEE FOR 13.08.2007 AND THE LD. A.R. OF THE ASSESSEE APPEARED AND REQUESTED FOR ADJOURNMENT. THE CASE WAS ADJOUR NED FOR 21.01.2008 ON THE FRESH NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 143(2) AND 142(1) ALONG 3 WITH QUESTIONNAIRE ISSUED ON 03.01.2008 FIXING THE CASE OF THE ASSESSEE FOR 21.01.2008. THE LD. A.R. OF THE ASSESSEE AGAIN REQ UESTED FOR ADJOURNMENT AND THE ASSESSING OFFICER FINALLY ADJOURNED THE CASE FOR 15 .12.2008. ON 15.12.2008, THE ASSESSEE NOR HIS LD. A.R. APPEARED. ACCORDING TO T HE ASSESSMENT ORDER, THE ASSESSEE HAS ALSO NOT FILED ANY BOOKS OF ACCOUNTS A LONG WITH BILLS AND VOUCHERS OF THE EXPENSES AND OTHER NECESSARY DOCUMENTARY EVIDEN CES IN SUPPORT OF EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT AND FINALLY TH E ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 144 OF THE ACT BY ADDI NG THE ADDITION IN DISPUTE TO THE TOTAL INCOME OF THE ASSESSEE VIDE HIS ORDER DATED 2 4.12.2008. AGGRIEVED BY THE SAME, THE ASSESSEE FILED APPEAL BEFORE THE LD. FIRS T APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 29.06.2009 DELETED THE ADDITIO N IN DISPUTE BY PARTLY ALLOWING THE APPEAL FILED BY THE ASSESSEE. HENCE, THE DEPAR TMENT FILED THE PRESENT APPEAL. 3. AT THE TIME OF HEARING THE LD. D.R. RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND, ON THE CONTRARY, THE LD. COU NSEL FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORI TY. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US. WE ARE OF THE CONSIDERED OPINION THAT AS REGARDS TO THE ADOPTION OF NET PROFIT RATE @ 4% ON GROSS RECEIPT CONTRACT INSTEAD OF 8% APPLIED BY THE ASSESSING 4 OFFICER, THE LD. FIRST APPELLATE AUTHORITY HAS HELD THAT THE ASSESSING OFFICER HAS APPLIED THE PROVISIONS OF SECTION 44AD OF THE ACT A ND THE ASSESSEES CLAIM OF EXPENDITURE REMAINED UNVERIFIABLE. THE ASSESSEE HA S MAINTAINED THE BOOKS OF ACCOUNTS WHICH WERE AUDITED BY THE CHARTERED ACCOUN TANTS AND THE SAME CANNOT BE REJECTED. THE LD. FIRST APPELLATE AUTHORITY HAS AL SO FELT IN THE IMPUGNED ORDER THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 144 OF THE ACT EX-PARTE AND HE HAS NOT TAKEN COGNIZANCE OF THE FAC T THAT THE ASSESSEE WORKED ONLY AS A SUB-CONTRACTOR AFTER GETTING THE SUB-CONTRACT FROM A PRIVATE FIRM AND IT WOULD BE REASONABLE TO APPLY A NET PROFIT RATE OF 4% INST EAD OF 8% APPLIED BY THE ASSESSING OFFICER AS PER THE PROVISIONS OF SECTION 44AD OF THE ACT. WE AGREE WITH THE REASONING MENTIONED BY THE LD. FIRST APPELLATE AUTHORITY IN APPLYING THE RATE OF NET PROFIT @ 4% INSTEAD OF 8% APPLIED BY THE ASSESS ING OFFICER. THEREFORE, THE ISSUE INVOLVED IN GROUND NOS.1 & 2 ARE REJECTED BY UPHOLDING THE IMPUGNED ORDER ON THIS ISSUE. 5. AS REGARDS TO THE DELETION OF ` 5,35,000/- OUT OF THE ADDITION MADE BY THE ASSESSING OFFICER AT ` 10,98,200/- UNDER SECTION 68 OF THE ACT, THE ASSES SING OFFICER MADE THE ADDITION IN DISPUTE BY APPLYING SE CTION 144 OF THE ACT BY HOLDING THAT THE ASSESSEE HAS SHOWN UNSECURED LOANS OF RS.1 0,98,200/- FROM 48 PERSONS. THE AMOUNT OF LOAN DEPOSITS FROM ALL THE CREDITORS WERE BELOW ` 20,000/- FOR 5 WHICH THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION WI TH PROOF OF IDENTITY WITH THEIR INDIVIDUAL SOURCE OF INCOME AND PERMANENT ACCOUNT N UMBER, IF ANY, ALONG WITH THE CONFIRMATION LETTERS. BUT, THE LD. FIRST APPEL LATE AUTHORITY HAS DELETED THE AMOUNT OF ` 5,35,000/- OUT OF ` 10,98,200/- BY HOLDING THAT THE LOANS IN RESPECT O F 29 PERSONS INVOLVING AN AMOUNT OF ` 5,35,000/- WERE OLD WHICH HAVE BEEN REPAID IN THE NEXT YEAR. AS REGARDS TO REMAINING LOANS, T HE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY HELD THAT THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AS WELL AS THE GENUINENESS, IN ABS ENCE OF THE SAME, THE ASSESSING OFFICER IS JUSTIFIED IN TREATING THE SAME AS UNEXPL AINED UNDER SECTION 68 OF THE ACT AND FINALLY THE LD. FIRST APPELLATE AUTHORITY DELET ED THE SUM OF ` 5,35,000/- FROM THE ADDITION OF ` 10,98,200/- AND THE BALANCE AMOUNT ` 5,63,200/- HAS BEEN CONFIRMED IN THE IMPUGNED ORDER. WE UPHOLD THE IMP UGNED ORDER ON THIS ISSUE BY FULLY AGREEING WITH THE REASONING MENTIONED BY THE LD. FIRST APPELLATE AUTHORITY ON THE ISSUE IN DISPUTE AND DISMISS THE ISSUE INVOLVED IN GROUND NO.3. 6. AS REGARDS TO THE DELETION OF ` 15,00,000/- ADDED BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT AS UNEXPLAINED CAPITAL INTRODUCED BY THE PARTNERS, THE ASSESSING OFFICER HELD THAT ALL THE THREE PARTNERS HAVE INTRODUCED FRESH CAPITAL OF ` 5,00,000/- IN THEIR CAPITAL ACCOUNT AND THE ASSESSE E REMAINED NON CO-OPERATIVE IN THE ASSESSMENT PROCEEDINGS AND HAS ALSO NOT FURNISH ED ANY DETAIL OF THE FRESH 6 CAPITAL INTRODUCED IN THEIR CAPITAL ACCOUNTS AND AD DED ` 15,00,000/- IN THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT. BUT, THE LD. FIRST APPELLATE AUTHORITY HAD DELETED THE SAME BY HOLDING THAT THE ASSESSING OFFICER HAS MADE THE ADDITION IN DISPUTE ONLY ON TH E GROUND THAT THE ASSESSEE REMAINED NON CO-OPERATIVE IN THE ASSESSMENT PROCEED INGS BUT ALL THE PARTNERS WERE DULY ASSESSED TO TAX, THEIR ASSESSMENT DETAILS WERE ALSO AVAILABLE ON RECORD WHICH EVIDENT THAT THE PARTNERS ARE SEPARATELY ASSESSED T O TAX WHO HAVE OWNED THE AMOUNTS INVESTED IN THE ASSESSEE FIRM. THEREFORE, THE ADDITION IN DISPUTE COULD NOT BE MADE IN THE HANDS OF THE FIRM WHILE PARTNERS ARE OWNING THE INVESTMENT AND THEY ARE ASSESSED TO TAX AS PER THE MATERIAL AVAILABLE O N RECORDS. THE LD. FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION IN DISPUTE BY PA SSING A WELL REASONED ORDER. WE FULLY AGREE WITH THE SAME AND UPHOLD THE IMPUGNED O RDER BY DISMISSING THE ISSUE INVOLVED IN GROUND NO.4. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.2011). SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 31 ST MARCH, 2011 7 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRI BUNAL, AGRA TRUE COPY