Shri. K. Radhakrishna Naik, Dakshina Kannada V. CIT, Karnataka Central, Mangalore

ITA 403/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9546 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 29-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATHI S PATIL
• Assessee Lawyers: S VENKATESAN
• Keywords: Search and seizure; Assessment record

Judgement Text

ITA.403/B/09 PAGE - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B' BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT AND SHRI. K. K. GUPTA, ACCOUNTANT MEMBER I.T.A.NO.403/BANG/2009 (ASSESSMENT YEAR : 2001-02 ) SHRI. K. RADHA KRISHNA NAIK, PWD CONTRACTOR, UPPINNANGADY, PUTTUR TALUK, D.K .. APPELLANT V. COMMISSIONER OF INCOME TAX, KARNATAKA (CENTRAL), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. S. VENKATESAN RESPONDENT BY : SMT. SWATHI S. PATIL O R D E R PER K. P. T. THANGAL, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS FOR THE ASSESSMENT YEAR 2001- 02. IT IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX PASSED U/S.263 OF THE ACT, SETTING ASIDE THE ASSESSMENT PR OCEEDINGS AND DIRECTING THE ASSESSING OFFICER TO MAKE A FRESH ASS ESSMENT. ACCORDING TO THE ASSESSEE, THE DIRECTION TO MAKE A FRESH ASSESSMENT, IN FACT, AMOUNTS TO MAKING A FISHING AND ROVING ENQ UIRY IN SUPPORT THEREOF. CONSEQUENTIALLY, THE ORDER PASSED IS BAD IN LAW AND LIABLE TO BE CANCELLED. ITA.403/B/09 PAGE - 2 2. THE ASSESSEE IS A CIVIL CONTRACTOR. THERE WAS A SEARCH AND SEIZURE ACTION U/S.132 ON 16.2.2005. THE ASSESSMEN T WAS COMPLETED U/S.143(3) R.W.S.153A ON 27.12.06 FIXING THE INCOME AT RS.35,43,430/-, IN ADDITION TO AGRICULTURAL INCOME OF RS.1,50,000/-. ON PERUSAL OF THE ASSESSMENT RECORDS IN PURSUANCE T O THE POWERS U/S.263 INVESTED WITH HIM, THE COMMISSIONER OF INCO ME-TAX NOTICED THAT THE ASSESSMENT FOR THE ASSESSMENT YEARS 1999-0 0 TO 2000-01 IS COMPLETED ON THE VERY SAME DAY ALONG WITH THE ASSES SMENT FOR ASSESSMENT YEAR 2001-02. THE ASSESSING OFFICER RES TRICTED THE DIRECT COST TO 77% OF THE CONTRACT RECEIPT FOR THE ASSESSMENT YEARS 1999-00 TO 2000-01, SINCE ACCORDING TO THE ASSESSIN G OFFICER THE ASSESSEE WAS INDULGING IN INFLATION OF EXPENSES AND WAS NOT REGULAR IN KEEPING THE ACCOUNT BOOKS. HOWEVER, FOR THE ASSESS MENT YEAR 2001- 02, HE ALLOWED THE DIRECT COST AT 87% OF THE CONTRA CT RECEIPT THOUGH THE FACT REMAINED THE SAME FOR EARLIER YEARS. IN V IEW OF THE ABOVE, THE COMMISSIONER OF INCOME-TAX FORMED THE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF REVENUE AND PROCEEDED U/S.263 BY ISSUING NOTICE ON 16.10.08. 3. THE ASSESSEE FILED THE WRITTEN SUBMISSION. ACCO RDING TO THE ASSESSEE THE ESTIMATION OF EXPENSES AT 77% FOR THE PRECEDING TWO YEARS WAS ARBITRARY AND WITHOUT ANY BASIS. HE HAD NOT EVEN CITED ITA.403/B/09 PAGE - 3 COMPARATIVE CASE SO AS TO ESTIMATE EXPENSES AT 77% AS AGAINST 78.95 AVERAGE. IN THE LATER YEARS THERE WAS INCREASE IN THE TURNOVER COMPARED TO ASSESSMENT YEARS 1999-00 AND 2000-01 AN D ONLY THE DIRECT COST HAS COME DOWN DUE TO EFFICIENT AND ECON OMY PRACTICED. THE ASSESSING OFFICER SHOULD HAVE TAKEN AND IF THE ASSESSING OFFICER HAD TAKEN THE AVERAGE FOR ASSESSMENT YEARS 1999-00 AND 2000-01, THE AVERAGE WOULD HAVE BEEN GREATER THAN 77%. IT W AS FURTHER SUBMITTED THAT ON THE VERY SAME ISSUE ASSESSEE WAS IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(A). IN THE ORDER, T HE COMMISSIONER OF INCOME-TAX NOTICED THAT IN MOST OF THE YEARS THE VOUCHERS PRODUCED BEFORE THE ASSESSING OFFICER AS SELF-MADE, WHICH CO ULD NOT BE VERIFIED. THEREFORE, HE HELD THAT THE ASSESSING OF FICER HAD RIGHTLY REJECTED THE BOOK RESULTS AND RESORTED TO ESTIMATIO N. THE COMMISSIONER OF INCOME-TAX(A) HELD THAT THE ASSESSI NG OFFICER HAD ARRIVED AT AN AVERAGE FIGURE OF 70.95% WHEREAS THE AVERAGE CLAIMED BY THE ASSESSEE FOR 1999-00 WAS 82.13% AND FOR 2000 -01, IT WAS 80.15%. HE HELD THAT A CAREFUL CONSIDERATION OF TH E ASSESSMENT ORDERS FOR THE ABOVE YEARS, WOULD SHOW THAT THE ASSESSING OFFICER ADOPTED A PERCENTAGE BETWEEN THE AVERAGE PERCENTAGE AND THE P ERCENTAGE CLAIMED BY THE ASSESSEE FOR THESE YEARS. THE FIGUR E, THEREFORE, HE HELD COULD NOT BE TREATED AS ARBITRARY. HE FURTHER HELD THAT THE ASSESSING OFFICER WAS ALSO NOT JUDICIOUS IN RESORTING TO 70.9 5%, BUT SHOULD HAVE ITA.403/B/09 PAGE - 4 GIVEN SOME HIGHER BENEFIT BY ESTIMATING THE PERCENT AGE AT A FIGURE OF 77%. ON THE SAME LOGIC, HE HELD THAT THE ASSESSING OFFICER SHOULD HAVE TAKEN 77% FOR THE YEAR UNDER CONSIDERATION AS WELL SIMILAR TO EARLIER YEARS SINCE FOR THE YEAR UNDER CONSIDERATIO N, HE HAD TAKEN 70.95% ON THE AVERAGE IGNORING THE EARLIER YEAR'S 7 7%. HE HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND, THEREFORE, HE DIRE CTED THE ASSESSING OFFICER TO ADOPT THE DIRECT COST AT 77% OF THE CONT RACT RECEIPT INSTEAD OF RS.2,23,18,242/- CLAIMED BY THE ASSESSEE. AGGRI EVED BY THE ABOVE ORDER THE ASSESSEE IS IN APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE ORDER OF THE COMMISSIONER OF INCOME-TAX. FROM THE WRITTEN SUBMISSIONS OF THE ASSESSEE AT PAGE 9 OF THE PAPER BOOK DT.28.11.08, IT IS EVIDENT THAT THE ASSESSEE HAD CHALLENGED THE ADD ITION MADE BY THE ASSESSING OFFICER BEFORE THE COMMISSIONER OF INCOME -TAX(A). IT IS ONE OF THE CONTENTIONS OF THE ASSESSEE THAT IF THE ASSESSING OFFICER HAD IN FACT TAKEN THE AVERAGE OF THE ENTIRE PERIOD OF 1999-00 AND 2000-01, EVEN THE AVERAGE NOW TAKEN FOR THE EARLIER TWO YEARS WOULD BE MORE THAN 77% WHEREAS THE ASSESSING OFFICER ESTI MATED AT ONLY 77%. ITA.403/B/09 PAGE - 5 5. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE O RDER OF THE COMMISSIONER OF INCOME-TAX AND SUBMITTED THAT FROM ASSESSMENT YEAR 2002-03 ONWARDS THE ESTIMATED EXPENSES HAS COM E DOWN WHEREAS FOR THE YEARS 1999-99, 2000-01 AND 2001-02, IT WAS 82.13%, 80.15% AND 87.36% RESPECTIVELY. THE ASSESSING OFFI CER HAS TAKEN ONLY 77% FOR THE FIRST TWO YEARS AND FOR THE THIRD YEAR I.E., 2001-02 HE HAD TAKEN THE AVERAGE OF THE SUBSEQUENT YEARS. THE DR SUBMITTED THAT HE SHOULD HAVE TAKEN AT LEAST THREE YEARS SINC E THE EXPENDITURE CLAIMED BY THE ASSESSEE ARE COMPARATIVELY CLOSER TO ONE ANOTHER. 6. CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE APPEAL BY THE ASSESSEE IS TO BE ALLOWED. ONE OF TH E CONTENTIONS OF THE ASSESSEE IS THAT IF THE ASSESSING OFFICER HAD TAKEN THE AVERAGE OF THREE YEARS FOR 1999-00 TO 2001-02, THE AVERAGE WOULD HAV E BEEN MORE THAN 77% WHICH SHOW THAT THE ORDER PASSED BY THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F REVENUE, ONLY ON ACCOUNT OF THE FACT THAT FOR THE THIRD YEAR I.E., 2 001-02, HE HAD TAKEN THE AVERAGE FOR THE PERIOD 2001-02 TO 2005-06. THE ASSESSING OFFICER HAS ACCEPTED A RECOGNIZED METHOD OF TREATIN G THE EXPENSES IN THE ABSENCE OF ANY CLINCHING EVIDENCE. THE COMMISS IONER OF INCOME-TAX WAS NOT JUSTIFIED IN HOLDING THAT THE OR DER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS WHICH MAY BE PREJUDI CIAL TO THE ITA.403/B/09 PAGE - 6 INTERESTS OF REVENUE IF TAKEN FOR THAT ONE YEAR. U NLESS THE ORDER IS ERRONEOUS, THE COMMISSIONER OF INCOME-TAX CANNOT IN VOKE THE JURISDICTION INVESTED IN HIM. IN VIEW OF THE ABOVE , WE ALLOW THE APPEAL BY THE ASSESSEE. 7. ORDER PRONOUNCED IN OPEN COURT ON 21ST DAY OF AU GUST, 2009. SD/- SD/- (K. K. GUPTA) (K. P. T. THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 21ST AUGUST, 2009 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE