DY. C.I.T.2(1), RAIPUR (CG) V. SHRI SHYAM INFRATECH, RAIPUR (CG)

ITA 388/BIL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8972 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHABANE PARVEEN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.388/RPR/2014 ASSESSMENT YEAR : 2010-2011 DCIT, 2(1), AAYAKAR BHAVAN, CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPUR VS. SHYAM INFRATECH, 252, 1 ST FLOOR, SAMTA COLONY, RAIPUR PAN/GIR NO.ABKFS 6452 M (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : MRS SHABANE PARVEEN, DR DATE OF HEARING : 17/01/ 2018 DATE OF PRONOUNCEMENT : 18/01/ 2018 O R D E R PER PAVAN KUMAR GADALE, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE O RDER OF THE CIT(A)- RAIPUR, DATED 27.10.2014 FOR THE ASSESSMENT YEAR 201 0-2011. 2. IN GROUND NO.1 OF APPEAL, THE GRIEVANCE OF THE RE VENUE IS THAT THE CIT(A) ERRED IN SUSTAINING THE ADDITION TO RS.6,77,080 /- OUT OF DISALLOWANCE ON ACCOUNT OF EXPENSES CLAIMED IN P&L ACCOUNT. 3. THE RELEVANT FACTS OF THE CASE ARE LIKE THIS. THE ASSE SSEE IS A PARTNER FIRM DERIVING INCOME FROM CIVIL CONTRACT BUSINESS. THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN NET PROFIT BEFORE INTE REST AND 2 REMUNERATION AT 2.39% ON THE TURNOVER OF RS.19.22 CR ORES, WHEREAS ON COMPARABLE CASES, THE NET PROFIT WAS MUCH HIGHER. HE OB SERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNT BUT THE BOOK S HAVE BEEN AUDITED, THEREFORE, THEY ARE NOT REJECTED AND NO NET PROFIT IS ESTIMATED IN VIEW OF COMPARABLE CASES. IN ABSENCE OF BILLS AND VOUCHERS, THE ASSESSING OFFICER ESTIMATED ADHOC DISALLOWANCE RANGING FROM 5 TO 1 0% OF THE TOTAL CLAIM AND DETERMINED THE ADDITION AT RS.53,95,151/-. 4. ON APPEAL, THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS M AINTAINED COMPLETE DAY TO DAY BOOKS OF ACCOUNT, WHICH ARE DULY A UDITED BY THE TAX AUDITOR AND PRODUCED BEFORE THE ASSESSING OFFICER. THE AUDITED BALANCE SHEET AND TAX AUDIT REPORT WERE FURNISHED AT THE TIME OF ASSESSMENT PROCEEDINGS AND NO ADVERSE INFERENCE WAS DRAWN BY THE ASSE SSING OFFICER, THEREFORE, THE ENTIRE ADDITION MADE BY THE ASSESSING OF FICER IS LIABLE TO BE DELETED. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSE SSEE NOTED THAT UNDISPUTEDLY, THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNT BUT THE ASSESSEE HAS CLAIMED TO HAVE AUDITED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS MADE ADHOC ADDITION WITHOUT RECORDING ANY D ISSATISFACTION WITH THE REASONABLENESS OF THE QUANTUM OF DEDUCTION CLAIMED U NDER VARIOUS HEADS. HE ALSO NOTED THAT THERE IS NO FINDING IN THE A SSESSMENT ORDER TO THE EFFECT THAT THE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT O F PURCHASE OF 3 MATERIALS, LABOUR CHARGES OR SALARY WERE DISPROPORTIONAT ELY HIGH WITH REFERENCE TO THE SPECIFIC NATURE OF CIVIL CONSTRUCTION UNDERTAKEN BY THE ASSESSEE. HE ALSO NOTED THAT THE ASSESSED INCOME IS NEARLY 5. 32% OF THE TURNOVER WHICH IS HIGHER THAN THE COMPARABLE INSTANCES RE FERRED BY THE ASSESSING OFFICER. THE CIT(A) RELYING ON VARIOUS JUDGEME NTS HELD THAT THE ACCOUNTS ARE AUDITED TO WHICH, THE ASSESSING OFFICER OUGHT TO HAVE GIVEN DUE CONSIDERATION. HOWEVER, TO MEET THE ENDS OF JUSTICE HE ESTIMATED THE NET PROFIT @ 2.75% OF GROSS CONTRACT RECEIPTS AND SUSTAINED A DDITION OF RS.6,77,080/- AS AGAINST RS.53,95,151/- MADE BY THE ASS ESSING OFFICER. 6. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. LD D.R. SUBMITTED THAT THE ASSESSING OFFICER HAS REFERR ED COMPARABLE CASES AND MADE ADDITION AND THE CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE SAME TO RS.6,77,080/-. 8. WE HAVE HEARD LD D.R. AND PERUSED THE MATERIALS AV AILABLE ON RECORD. BEFORE US, LD D.R. COULD NOT POINT OUT ANY MISTAKE I N THE ORDER OF THE CIT(A). WE FIND THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDI TED AND THE ASSESSEE HAS FURNISHED THE TAX AUDIT REPORT TO WHICH NO AD VERSE INFERENCE WAS DRAWN BY THE ASSESSING OFFICER. WE FIND THAT THE CIT (A) HAS DEALT ON THE ISSUE AND RELIED ON VARIOUS JUDICIAL PRONOUNCEMEN T ON THIS MATTER AND ESTIMATED THE NET PROFIT @ 2.75% OF GROSS CONTRACT RECEIP TS AND SUSTAINED 4 ADDITION OF RS.6,77,080/-. HENCE, WE UPHOLD HIS ORDER AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 9. IN GROUND NO.2 OF APPEAL, THE GRIEVANCE OF THE RE VENUE IS THAT THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OUT OF INTE REST EXPENSES OF RS.2,19,004/- MADE BY THE AO ON ACCOUNT OF INTEREST ON FUND DIVERTED FOR NON-BUSINESS PURPOSES. 10. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PAID IN TEREST OF RS.79,82,325/- ON THE LOAN ACCOUNT AS AGAINST INTEREST PAID OF RS.46,30,267/- IN THE PRECEDING YEAR. THE ASSESSING OFFI CER ALSO NOTICED THAT THE ASSESSEE FIRM HAS ADVANCED VARIOUS AMOUNTS TO DI FFERENT PARTIES, THEREFORE, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE MODE OF ADVANCE. THE ASSESSEE SUBMITTED THAT ALL LOANS ARE IN THE NATURE OF BU SINESS ADVANCES. THE ASSESSING OFFICER VERIFIED THE LEDGER ACCOUNT AND IDEN TIFIED THE TRANSACTIONS WHICH ARE FOR THE BUSINESS PURPOSES. FOR OTH ER ADVANCES WHICH HAVE NO BUSINESS TRANSACTION, THE ASSESSING OFFICER CONSIDERE D FOR DISALLOWANCE OF INTEREST U/S.36(1)(III) AND ADDED RS.2, 19,004/-. 11. BEFORE THE CIT(A), THE ASSESSEE FURNISHED LEDGER ACCOU NTS OF FIVE PARTIES AND SUBMITTED THAT THE ADVANCES WERE MADE FOR NORMAL COURSE OF BUSINESS. 5 12. THE CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO DEMON STRATE NEXUS OF THE ASSESSEE WITH FIVE PARTIES. THE CIT(A) HAS RELIED ON VA RIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF S.A. BUILDERS, 288 ITR 1 (SC), WHEREIN, IT WAS HEL D THAT INTEREST ON BORROWED FUNDS CANNOT BE DISALLOWED IF THE ASSESSEE HAS ADV ANCED INTEREST FREE LOAN TO A SISTER CONCERN AS A MEASURE OF COMMERCIAL EX PEDIENCY. THE ASSESSEE HAS ADOPTED THE ALTERNATIVE OF BORROWING MONEY FROM THE MARKET INSTEAD OF LIQUIDATING ITS OWN ASSETS. 13. AFTER CONSIDERING THE MATERIAL ON RECORD AND THE A RGUMENTS OF LD D.R, WE FIND THAT EXCEPT RELYING ON THE ORDER OF THE ASSESSIN G OFFICER, LD .D.R. COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE CIT(A) AND COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A) BY BRINGING ANY POSITIVE MATERIAL ON RECORD THAT THE ADVANCES WERE NOT MADE TO FIVE PARTIES FOR NORMAL COURSE OF BUSINESS. IN VIEW OF ABOVE, WE CONFIRM THE ORDER OF T HE CIT(A) IN DELETING THE ADDITION OF RS.2,19,004/-. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 18 /01/2018. SD/- SD/- (N.S SAINI) ( PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIALMEMBER RAIPUR; DATED 18 /01/2018 6 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, RAIPUR 1. THE APPELLANT : DCIT, 2(1), AAYAKAR BHAVAN, CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPU 2. THE RESPONDENT. FLOOR, SAMTA COLONY, RAIPUR 3. THE CIT(A)- RAIPUR 4. PR.CIT- RAIPUR 5. DR, ITAT, RAIPUR 6. GUARD FILE. //TRUE COPY//