ACIT, New Delhi V. Sh Nagender SIngh, New Delhi

ITA 3942/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3934 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 22-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 44AD; 143(2)

Judgement Text

ITA NO. 3942/DEL/2009 A.Y. 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3942/DEL/2009 ASSTT. COMMISSIONER OF INCOME TAX, VS. SH. NAGENDER SINGH, CIRCLE-27(1), ROOM NO. 218, RZ-B-14, GURDWAR ROAD, AAYAKAR BHAVAN, MAHAVIR ENCLAVE, D-BLOCK, VIKAS BHAVAN, NEW DELHI NEW DELHI [APPELLANT] (RESPONDENT) ASSESSEE BY : SH. RAJESH MAHNA, ADV. & SH. RAMANAND ROY, ADV. DEPARTMENT BY : SH. H.K. LAL, SR. DR. PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 12.1.200 9 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER. 3. THE ASSESSEE IN THIS CASE IS RUNNING A MANPOWE R SUPPLY AGENCY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE VOUCHERS FOR PAYMENT OF CERTAIN EXPENDITURE AS ITA NO. 3942/DEL/2009 A.Y. 2006-07 2 WELL AS EXPLAIN THE BUSINESS EXPEDIENCY THEREOF. THE ASSESSEE EXPLAINED THAT THE VOUCHERS WERE LOST AND AN FIR IN THIS REG ARD WAS ALSO FILED. THE ASSESSING OFFICER THEN PROCEEDED TO REFER THE PROV ISION OF SECTION 145(3) AND HOLD THAT THE PRESENT CASE WAS A FIT CASE OF RE JECTION OF BOOKS OF ACCOUNTS. HENCE HE PROCEEDED TO MAKE AN ESTIMATE T O THE PROFITS AND THE BUSINESS. THE ASSESSING OFFICER FURTHER REFERRED TO THE PROVISIONS OF SECTION 44AD. HE NOTED THAT THOUGH THE ASSESSEE WAS NOT A CIVIL CONTRACTOR, STILL HE FOUND ANALOGY OF THE SAME WITH THE BUSINESS OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE SAME IS NOT APPLICABLE TO ASSESS EE CASE AND IN THIS REGARD THE ASSESSEE SUBMITTED THE PHOTOCOPY OF THE SALARY SHEET, BONUS SHEET, ESI, PF CHALLANS ETC. HOWEVER, THE ASSESSING OFFICER RE JECTED THESE SUBMISSIONS HOLDING THAT THE BOOKS WERE INCOMPLETE. HE PROCEEDE D TO ESTIMATE THE PROFITS OF THE ASSESSEE @8% OF THE GROSS RECEIPTS. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOM E TAX (APPEALS) NOTED THAT THE ASSESSEE HAS LOST BOOKS OF ACCOUNTS, BILLS AND VOUCHERS FOR THE PREVIOUS FIVE YEARS INCLUDING THE YEAR UNDER CONSID ERATION. AN FIR IN THIS REGARD WAS DULY REGISTERED ON 12.9.2007. LD. COMMIS SIONER OF INCOME TAX (APPEALS) FURTHER HELD THAT THE ASSESSEE SUPPLIES M ANPOWER TO OFFICE JOB AND FIELD WORK OF SECURITY AND CLEANING. HENCE THE ASSESSEE DOES NOT COME UNDER THE PURVIEW OF SECTION 44AD OF THE ACT. HE F URTHER HELD THAT THE ITA NO. 3942/DEL/2009 A.Y. 2006-07 3 ASSESSING OFFICER ERRED IN REJECTING THE BOOKS OF A CCOUNTS OF THE ASSESSEE WITHOUT ANY CONCRETE BASIS AND WITHOUT PINPOINTING ANY MATERIAL. LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. 6. LD. DEPARTMENTAL REPRESENTATIVE OF THE DEPARTMEN T ARGUED THAT THE ASSESSEE HAS NOT PRODUCED THE NECESSARY BOOKS OF AC COUNTS AND THE VOUCHERS. HENCE, THE ASSESSING OFFICER WAS LEFT WITH NO OTHER ALTERNATIVE, BUT TO REJECT THE BOOKS OF ACCOUNTS AND MAKE AN ESTIMATE OF THE P ROFITS. LD. DEPARTMENTAL REPRESENTATIVE CLAIMED THAT THE ASSES SING OFFICER HAS MADE A REASONABLE ESTIMATE AND HIS ORDER SHOULD BE RESTORE D. 6.1 LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT THE ASSESSEE HAS LOST ITS BOOKS OF ACCOUNTS, BILLS AND VOUCHERS AND FOR THIS PURPOSE AN FIR WAS DULY REGISTERED ON 12.9.2007. HE SUBMITTED THAT THE ASSESSING OFFICER ISSUED NOTICE U/S 143(2) IN THIS REGARD ON 19.9.2007. HENCE HE CLAIMED THAT IT CANNOT BE SAID THAT AFTER THE INITIATION OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS COOKED UP A STORY OF L OST BOOKS. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED A COMPAR ATIVE CHART OF PROFITS AND EXPENDITURE OF THE ASSESSEE OF 4 YEARS FROM THE F INANCIAL YEAR 2005-06 TO FINANCIAL YEAR 2008-09. LD. COUNSEL CLAIMED THAT THERE IS NO ABNORMAL INCREASE IN THE EXPENDITURE OR ABNORMAL FALL IN PRO FITABILITY. HENCE, HE CLAIMED THAT AO HAS TOTALLY ERRED IN ESTIMATING THE PROFIT @8% AS APPLICABLE TO CIVIL CONTRACTORS. HE CLAIMED THAT ASSESSEES LINE OF BUSINESS WAS TOTALLY ITA NO. 3942/DEL/2009 A.Y. 2006-07 4 DIFFERENT AND DISTINCT FROM CIVIL CONTRACTOR. HENC E HE CLAIMED THAT ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BE SUS TAINED. 7. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN THE BUSINES S OF MANPOWER SUPPLY. THIS BUSINESS IS TOTALLY SEPARATE AND DISTINCT FROM THE BUSINESS OF CIVIL CONTRACTOR. HENCE, ASSESSING OFFICERS SOLE RELIA NCE ON THE RATIO APPLICABLE IN SECTION 44AD OF THE ACT WHICH IS APPLICABLE FOR CIVIL CONTRACTOR IS NOT SUSTAINABLE ON THIS ACCOUNT. HOWEVER, AS REGARD S THE REASON OF THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNTS, WE NOTE THAT IT IS UNDISPUTED THAT ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS OR VOUCHERS ETC. BEFORE HIM WHATEVER MAY BE THE REASON IN NON- PRODUCTION. IN SUCH CIRCUMSTANCES, IN OUR OPINION THE ASSESSING OFFICE R WAS LEFT WITH NO ALTERNATIVE, BUT TO MAKE AN ESTIMATE. HOWEVER IT I S SETTLED LAW THAT ESTIMATE HAS TO BE A FAIR AND REASONABLE. 7.1 WE ALSO NOTE THAT IT IS NOT THE CASE OF THE ASS ESSING OFFICER THAT THERE HAS BEEN UNREASONABLE INCREASE IN THE RATE OF THE E XPENDITURE. ASSESSEE HAS PRODUCED SUBSTANTIAL DETAILS WITH RESPECT TO PAYMEN T ON ACCOUNT OF SALARY, BONUS, PF ETC. WHICH ACCOUNT FOR ABOUT 85% OF THE TOTAL CLAIM OF EXPENDITURE. THE RATIO OF NET PROFIT AS PRODUCED BY THE ASSESSEE IS AS FOLLOWS:- 2005-06 : 5.14% 2006-07 : 5.1% 2007-08 : 3.91% 2008-09 : 3.78% 8. IN OUR CONSIDERED OPINION, THE ABOVE CHART ALSO DOES NOT SHOW ANY ABNORMALITY IN PROFIT DISCLOSED FOR THE IMPUGNED AS SESSMENT YEAR. UNDER ITA NO. 3942/DEL/2009 A.Y. 2006-07 5 THESE CIRCUMSTANCES, WE FIND THAT ASSESSING OFFICER S ACTION OF IMPORTING THE RATIO APPLICABLE OF CIVIL CONTRACTORS U/S 44AD I.E. 8% IS NOT AT ALL SUSTAINABLE ON THE FACTS OF THE PRESENT CASE. THE RATIO OF P ROFIT RETURNED BY THE ASSESSEE DOES NOT CONTAIN ANY ABNORMAL VARIANCE, WHICH WARR ANT INFERENCE. UNDER THE CIRCUMSTANCES, WE HOLD THAT THERE IS NO NECESSI TY TO INTERFERE WITH THE RESULTS DECLARED BY THE ASSESSEE BY SUBSTITUTING TH E SAME WITH THE RATE OF 8%. 9. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/05/2010. SD/- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 14/05/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES