GANRAJ DEVELOPERS, BHIWANDI V. ASST CIT CIR 1, KALYAN

ITA 4048/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5693 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Business income; Set aside
• Section: 234B; 44AB; 13; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 4048/MUM/2017 ASSESSMENT Y EAR: 2012 - 13 M/S GANRAJ DEVELOPERS, OPP. PRAGATI QUARY, JAYRAJ TEXTILES PARK, KALWAR VILLAGE, BHIW ANDI, THANE - 421302 PAN: AAHFG9354J VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1, 2 ND FLOOR, RANI MANSION, ABOVE CANARA BANK, MURBAD ROAD, KALYAN, MAHARASHTRA - 421301 (APPELLANT) (RESPONDENT) AASSESSEE BY : VIMAL PUNMIYA ( CA ) REVENUE BY : BHARTI SINGH ( DR ) DATE OF HEARING: 18 /12 /201 9 DATE OF PRONOUNCEMENT: 28 / 02 /2020 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 27.02.201 7 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 (FOR SHORT THE CIT(A) AURANGABAD FOR THE ASSESSMENT YEAR 2012 - 13 WHEREBY THE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE IN COME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 99,82,35 8/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY, THE AO ISSUED NOTICE U/S 143 (2) AND 142 (1) OF THE ACT. IN RESPONSE THEREOF, THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE APPEARED BEFORE THE AO AND SUBMITTED DETAILS. IT WAS NOTICED THAT THE APPELLANT HAD SHOWN NET PROFIT OF 5.48% ON TOTAL TURNOVER/RECEIPTS. IT WAS FURTHER NOTICED THAT THE RECEIPTS OF APPELLANT ALSO INCLUDE GODOWN RENT OF RS. 4,59,15,773/ - 2 ITA NO. 4048 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 GODOWN REPAIRS AND MAINTENANCE RECEIPT AMOUNTING TO RS. 17,90,129/ - . THE AO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT ON AN AMOUNT OF R S. 2,17,49,192/ - WHICH IS 12% OF THE TOTAL SALES GENERATED DURING THE YEAR. SINCE THE ASSESSEE HAD OFFERED N.P. OF 99,31,357 AND MADE ADDITION OF RS. 1,18,17,835/ - I.E. DIFFERENCE BETWEEN ESTIMATED NP AND DECLARED NP . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE MODIFIED THE ADDITION AND ESTIMATED THE NP ON GROSS CONTRACT RECEIPTS @ 8%. STILL A GGRIEVED , THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. 3 . THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING REVISED GROUND S : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,04, 69,427/ - OUT OF TOTAL ADDITION OF RS. 1,18,17,835/ - BY ESTIMATING THE NET PROFIT @ 8% ON TOTAL CONTRACT RECEIPTS OF RS. 13,08,67,844/ - WITHOUT CONSIDERING THE ACTUAL PROFIT OF RS. 99,31,357/ - AS SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF INVOKING THE PROVISIONS OF SECTION 145 (3) OF THE ACT BY REJECTING THE BOOKS OF ACCOUNT WITHOUT ACCEPTING THE EXPLANATION OFFER ED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT THE REGULAR AND PROPER BOOKS OF ACCOUNT ARE MAINTAINED AND THE SAME ARE AUDITED U/S 44AB OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN CHARGING INTEREST U/S 234B OF INCOME TAX ACT, 1961. 3 ITA NO. 4048 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 4. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND THE EXISTING GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM IS A ENGA GED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT . SINCE, THE RECEIPT FROM RENT OF GODOWN IS INCIDENTAL TO THE MAIN BUSINESS, THE RENT WAS SHOWN AS PER ACTUAL RENT RECEIVED . SINCE, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE DULY AUDITED BY THE CA , AO HAS WRONGLY REJECTED THE SAME . THE LD . COUNSEL F URTHER POINTED OUT THAT SINCE THE ASSESSEE HAD DECLARED NET PROFIT @ 4.1% IN THE AY 2010 - 11, 6.11% IN THE AY 2011 - 12, THE LD CIT(A) HAS WRONGLY MADE THE ESTIMATION OF NET PROFIT @ 8% ON THE CONTRACT RECEIPTS ON AD - HOC BASIS. THE LD. COUNSEL FURTHER POINTED OUT THAT THE ASSESSEES CASE FALLS U/S 44AB OF THE ACT AND THE RETURN OF INCOME WAS FILED WITHIN DUE DATE. SINCE THE LD. CIT(A) HAS ACCEPTED THE CONTRACT RECEIPTS AS PER BOOKS OF ACCOUNT AND NOT POINTED OUT A NY SPECIFIC DEFECTS IN EXPENSES CLAIMED IN P & L ACCOUNT, THE LD. CIT (A) HAS WRONGLY REJECTED THE DECLARED NP OF 5.48%. SO FAR AS REJECTION OF BOOKS OF ACCOUNT IS CONCERNED, T HE LD. COUNSEL POINTED OUT THAT PROVISIONS OF SECTION 145 (3) CANNOT BE INVOKED WHERE COMPLETE BOOKS OF ACCOUNT ARE MAINTAINED AND THE SAME ARE AUDITED U/S 44AB OF THE ACT. THE LD. COUNSEL RELIED ON THE DECISION OF THE JAIPUR BENCH OF THE ITAT IN THE CASE OF TRIVENI PHARMA (2004) 85 TTJ 950 WHEREIN IT WAS HELD THAT WHERE VERIFIABLE RE CORDS OF OPENING STOCK PURCHASE AND CLOSING STOCK ARE AVAILABLE, THERE IS NO JUSTIFICATION OF REJECTING BOOKS AND APPLY SECTION 155(3). THE LD. COUNSEL FURTHER RELIED ON THE VARIOUS JUDGMENTS OF THE DIFFERENT HIGH COURTS AND THE DECISIONS OF THE TRIBUNAL T O SUBSTANTIATE THE CONTENTION THAT THE CORRECTNESS OF BOOK RESULTS CANNOT BE CHALLENGED WITHOUT POINTING OUT ANY SPECIFIC MISTAKE OR DISCREPANC Y . IN THE LIGHT OF THE AFORESAID ARGUMENTS, THE LD. COUNSEL SUBMITTED THAT THE IMPUGNED ORDER PASSED BY THE LD. C IT (A) IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE FINDINGS OF THE LD. CIT(A), SUBMITTED THAT SINCE THE ASSESSEE HAS NOT MAINTAINED SEPARATE ACCOUNT FOR DIFFERENT ACTIVITIES, THE LD. CIT (A) HA S RIGHTLY 4 ITA NO. 4048 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 CONFIRMED THE ACTION OF THE AO IN REJECTING THE DECLARED NP OF 5.48% AND ESTIMATED THE NP @8% ON THE TOTAL CONTRACT RECEIPTS. THE LD. DR FURTHER SUBMITTED THAT THERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIO NS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE LD. COUNSEL. WE NOTICE THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT MERELY ON THE GROUND THAT THE ASSESSEE HAS SHOWN LOW NP AND CLAIMED UNSUSTAINABLE EXPENSES, WHI CH RESULTED IN REDUCTION OF TAXABLE INCOME OF THE ASSESSEE . UNDER SECTION 145 (3) THE AO MAY MAKE AN ASSESSMENT U/S 144 OF THE ACT , WHERE HE/SHE IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB SECTION (1) HAS NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE OR THE INCOME HAS NOT BEEN COMPUTED IN ACCORDANCE WITH THE STANDARDS NOTIFIED UNDER SUB SECTION (2). HOWEVER, IN THE PRESENT CASE, THE AO HAS NOT POINTED OUT ANY OF THE CONDITIONS FOR REJECTING THE BOOKS OF THE ASSESSEE. FURTHER, AS POINTED OUT BY THE LD. COUNSEL, THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT REGULARLY WHICH ARE DULY AUDITED U/S 44AB OF THE ACT . WE FURTHER NOTICE THAT EVEN AFTER THE REJECTING OF BOOKS, THE LD. CIT (A) HAS ESTIMATED THE NET PROFIT ON THE BASIS OF CONTRACT RECEIPTS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. 7. AS POINTED OUT BY THE LD. COUNSEL, THE ASSESSEE HAD SHOWN NET PROFIT OF 4.01% IN THE ASSESSMENT YEAR 2010 - 11, 6.11% IN THE ASSESS MENT YEAR 2011 - 12. W HILE ESTIMATING THE INCOME OF THE ASSESSEE , THE LD. CIT (A) HAS NOT CONSIDERED THE PERCENTAGE OF NET PROFIT DECLARED BY THE ASSESSEE IN EARLIER ASSESSMENT YEARS. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED THE NET PROFIT @ 5.48% . I N OUR CONSIDERED VIEW , THE NET PROFIT DECLARED BY THE ASSESSEE IS REASONABLE AND JUSTIFIED IN VIEW OF THE NET PROFIT DECLARED DURING THE EARLIER ASSESSMENT YEARS. W E FURTHER NOTICE THAT THE LD. CIT (A) HAS CONFIRMED THE ACTION OF THE A O IN REJECTION BOOKS OF ACCOUNT INTER ALIA ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED THE QUANTITY WISE DETAILS. AS POINTED OUT BY T HE LD. COUNSEL, SINCE THE CIT (A) HAS ACCEPTED THE PURCHASES OF RAW MATERIAL, CONSTRUCTION EXPENSES, LABOUR CHARGES AND CONTRACT 5 ITA NO. 4048 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 RECEIPTS, THE BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY FOR THE REASON THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER ON DAY - TO - DAY BASIS. HENCE, IN OUR CONSIDERED VIEW, THERE IS NO LEGAL BASIS FOR REJECTING THE BOOKS OF ACCOUNT OF THE A SSESSEE AND ESTIMATING THE NET PROFIT ON AD - HOC BASIS. WE THEREFORE, FIND MERIT IN THE ARGUMENTS OF THE LD . COUNSEL THAT THE ADDITION MADE BY THE AUTHORITIES BELOW ARE NOT SUSTAINABLE IN LAW. HENCE, WE ALLOW THE APPEAL FILED BY THE ASSESSEE SET ASIDE THE I MPUGNED ORDER PASSED BY THE LD. CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION. I N THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2012 - 2013 IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY , 2020 . S D/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 28 / 0 2 / 2020 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI