M/s. Pepsu Construction Co, Bathinda V. The Joint Commissioner of Income-tax, Bathinda

ITA 394/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0482 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.394(ASR)/2014 ASSESSMENT YEAR: 2010-11 M/S PEPSU CONSTRUCTION CO. PHASE-1, URBAN ESTATE, BATHINDA PAN:AAEF13540C VS. JCIT, RANGE-1, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N.ARORA (ADV.) RESPONDENT BY: SH. UMESH TAKYAR (DR.) DATE OF HEARING: 31.05.2016 DATE OF PRONO UNCEMENT: 25.07.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LEARNED CIT(A). BATHINDA, DATED 31.03.2014, FOR ASST.YEAR:2 010-11. 2. THE ASSESSEE HAD TAKEN VARIOUS GROUNDS OF APPEAL , HOWEVER, THE CRUX OF GRIEVANCE OF ASSESSEE IS THE ACTION OF LEAR NED CIT(A), BY WHICH HE HAD PARTLY ALLOWED THE RELIEF BY HOLDING THE APPLIC ATION OF NET PROFIT RATE TO GROSS RECEIPTS AT 4.5% INSTEAD OF 5% MADE BY ASS ESSING OFFICER. THE ASSESSEE IS ALSO AGGRIEVED WITH THE ACTION OF LEARN ED CIT(A), BY WHICH HE HAD NOT ALLOWED INTEREST AND SALARY PAID TO PARTNER S. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN ASSESSME NT ORDER ARE THAT ASSESSEE IS A CIVIL CONTRACTOR AND DURING THE YEAR HAD DECLARED GROSS TURN OVER OF RS.10,99,84,755/- AGAINST WHICH THE MA TERIAL RECEIVED FROM DEPARTMENT WAS REDUCED BY RS.3,51,77,092/-. THE NET PROFIT DECLARED BY ITA NO.394 (ASR)/2014 ASST. YEAR : 2010-11 2 ASSESSEE BEFORE DEBITING INTEREST AND SALARY TO PAR TNERS WAS DECLARED AT RS.10,57,957/- WHICH WORKS TO BE 1.4% ON THE NET RE CEIPTS OF RS.7,48,07,663/-. THE ASSESSING OFFICER HELD THAT N ET PROFIT DECLARED BY ASSESSEE WAS VERY LOW AND FURTHER OBSERVED THAT FOR DEBIT OF MATERIAL RECEIVED FROM DEPARTMENT AMOUNTING TO RS.3,51,77,09 2/-, THE ASSESSEE HAD NOT FILED ANY EVIDENCE, THEREFORE, HE DISALLOWE D THE CLAIM OF ASSESSEE REGARDING DEBIT IN RESPECT OF MATERIAL RECEIVED FRO M DEPARTMENT AND ESTIMATED THE INCOME OF ASSESSEE @ 5% ON GROSS RECE IPTS OF RS.10,99,84,755/-. WHILE ESTIMATING THE NET PROFIT OF ASSESSEE, THE ASSESSING OFFICER ALSO DID NOT ALLOW CREDIT FOR SAL ARY AND INTEREST PAID TO PARTNERS. 4. AGGRIEVED WITH THE ORDER THE ASSESSEE FILED APPE AL BEFORE LEARNED CIT(A). THE LEARNED CIT(A) ACCEPTED THE CLAIM OF AS SESSEE REGARDING RECEIPT OF MATERIAL AMOUNTING TO RS.3,51,77,099/- F ROM THE DEPARTMENT AND TREATED THE GROSS RECEIPTS AT RS.7,48,07,663/-. HE FURTHER REDUCED THE RATE FROM 5% TO 4.5%. THE LEARNED CIT(A) ALSO A LLOWED CLAIM OF DEPRECATION AMOUNTING TO RS.1,38,378/-, HOWEVER, TH E LEARNED CIT(A) DID NOT DEAL WITH THE ISSUE OF ALLOWANCE OF SALARY AND INTEREST PAID TO PARTNERS AS ASSESSEE DID NOT RAISE ANY GROUND OF AP PEAL BEFORE HIM. HOWEVER, BEFORE US, THE ASSESSEE HAS RAISED SPECIFI C GROUNDS OF APPEAL REGARDING NON ALLOWANCE OF INTEREST/ SALARY PAID TO PARTNERS. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.394 (ASR)/2014 ASST. YEAR : 2010-11 3 6. AT THE OUTSET, THE LEARNED AR SUBMITTED WHILE AL LOWING PART RELIEF TO THE ASSESSEE, THE LEARNED CIT(A) DID NOT CONSIDER T HE PAST HISTORY OF THE ASSESSEE AND AS PER COMPARATIVE CHART OF EARLIER YE ARS, THE LEARNED AR SUBMITTED THAT THE NET PROFIT AFTER TAKING INTO ACC OUNT ADDITIONS MADE U/S 143(3) IN EARLIER YEARS RANGED FROM 1.58 TO 2.6 6% AND THEREFORE, THE APPLICATION RATE OF 4.5% IS TO HIGH AND IT WAS NOT IN ACCORDANCE WITH PAST HISTORY OF THE ASSESSEE, THEREFORE, IT WAS PRA YED THAT A RATE IN COMPARISON TO EARLIER ACCEPTED RATE OF NET PROFIT B E APPLIED. SIMILARLY, HE SUBMITTED THAT CLAIM OF ASSESSEE REGARDING ALLOWANC E OF SALARY AND INTEREST PAID TO PARTNERS IS A STATUTORY DEDUCTION AVAILABLE UNDER THE ACT AND THE ASSESSEE SHOULD HAVE BEEN ALLOWED THE BENEF IT. 7. THE LEARNED DR, ON OTHER HAND, HEAVILY PLACED HI S RELIANCE ON THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE BOOKS O F ACCOUNT OF THE ASSESSEE WERE REJECTED DUE TO CERTAIN DISCREPANCIES AND ASSESSING OFFICER APPLIED 5% RATE WITHOUT GOING INTO THE PAST HISTORY OF THE ASSESSEE. THE LEARNED CIT(A) REDUCED THE SAME TO 4.5%. WE FIND TH AT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF TELELIN KS VS. CIT, BATHINDA (ITA 269 OF 2014) HAS LAID DOWN THE FOLLOWING PARA METERS FOR ESTIMATION OF INCOME IN THE CASE OF CIVIL CONTRACTORS, IN CASE S WHERE BOOKS OF ACCOUNT ARE REJECTED. (I) PAST TAX HISTORY OF THE ASSESSEE. ITA NO.394 (ASR)/2014 ASST. YEAR : 2010-11 4 (II) ASSESSMENT ORDERS PASSED BY AND ACCEPTE D BY THE DEPARTMENT. (III) THE NATURE OF ASSESSEES BUSINESS. (IV) AN APPRAISAL OF THE VALUE OF THE CONTRA CT. (V) PREVAILING ECONOMIC CONDITIONS VIS--VIS THE ASSESSEES BUSINESS. (VI) THE PRICE OF RAW MATERIAL AND LABOURS E TC. (VII) THE RISE IN PRICE INDEX AS NOTIFIED BY THE CENTRAL GOVERNMENT FROM TIME TO TIME. THE ABOVE PARATMERS HAS NOT BEEN CONSIDERED WHILE U PHOLDING THE RATE OF 4.5% CONFIRMED BY LEARNED CIT(A), THEREFORE, WE DEE M IT APPROPRIATE TO REMIT THE CASE TO THE OFFICE OF ASSESSING OFFICER, WHO AFTER CONSIDERING THE ABOVE PARAMETERS SHOULD APPLY A RATE APPLICABL E TO THE ASSESSEE. AS REGARDS CLAIM OF SALARY AND INTEREST PAYABLE TO PAR TNERS, THE ASSESSING OFFICER SHOULD ALLOW THE SAME IN ACCORDANCE WITH LA W. NEEDLESS TO SAY THAT ASSESSEE WILL BE PROVIDED SUFFICIENT OPPORTUNI TY OF BEING HEARD. 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY ASSESS EE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 .07.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:25.07.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER