ITO, Keonjhar V. Naresh Kumar Singh, Keonjhar

ITA 410/CTK/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5370 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: G NAIKS K SARANGI
• Keywords: Depreciation
• Section: 68

Judgement Text

1 ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 INCOME TAX OFFICER, KEONJHAR WARD, KEONJHAR VS. NARESH KUMAR SINGH, STATION ROAD, BARBIL, KEONJHAR PAN/GIR NO. BFQPS 0579 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI G.NAIK/S.K,.SARANGI, AR REV ENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 05 /10 / 2017 DATE OF PRONOUNCEMENT : 11 /10 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - CUTTACK, DATED 20.7.2015 FOR THE ASSESSMENT YEAR 2011 - 12. 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ESTIMATE PROFIT @ 8% OF THE GROSS CONTRACT RECEIPTS AFTER DEDUCTING DEPRECIATION FRO M THE GROSS RECEIPTS AS AGAINST THE PROFIT ESTIMATED BY THE ASSESSING OFFICER @ 10%. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM EXECUTION OF CONTRACT WORK. THE ASSESSING OFFICER REQUIRED THE 2 ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 ASSESSEE TO PRODUCT BOOKS OF ACCOU NT AND RELEVANT BILLS AND VOUCHERS FOR VERIFICATION. THE ASSESSEE EXCEPT FURNISHING STATEMENT OF BANK ACCOUNT AND AUDIT REPORT, COULD NOT PRODUCE COPIES OF LEDGER ACCOUNT, ACCOUNT OF ACCOUNTS, SUCH AS CASH BOOK, ETC AND SUPPORTING BILLS AND VOUCHERS BU T COULD PRODUCE ONLY. THEREFORE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT @ 10% OF THE GROSS CONTRACT RECEIPTS AFTER CONSIDERING ALL EXPENSES INCLUDING DEPRECIATION. 4. BEFORE THE CIT(A), THE ASSESSEE ALSO COULD NOT PRO DUCE ANY BOOKS OF ACCOUNT BUT CONTENDED THAT THE ESTIMATION OF PROFIT IS VERY HIGH AND PRAYED FOR REDUCTION OF THE SAME. 5. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO CALCULATE NET PROFIT @ 8% OF THE GROSS RECEIPTS REDUCED BY THE AMOUNT OF DEPRECIATION C LAIMED BY THE ASSESSEE. 6. BEFORE US, LD D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND LD A.R. SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AS THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND OTHER DETAILS REQUIRED BY THE ASSESSING OFFICER. HE, THEREFORE, ESTIMATED THE NET PROFIT @ 10% OF THE GROSS CONTRACT R ECEIPTS AFTER CONSIDERING ALL EXPENSES INCLUDING DEPRECIATION. 3 ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 8. ON APPEAL, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO REDUCE TO ESTIMATE THE NET PROFIT @ 8% AFTER REDUCING THE AMOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE. 9. LD D.R. SUBMITTED THAT TH E DECISION OF THE CIT(A) IN REDUCING THE NET PROFIT TO 8% AND ALLOWING DEPRECIATION FROM THE SAME IS CONTRARY TO THE ORDER PASSED BY THE CUTTACK BENCH OF THE TRIBUNAL IN THE CASE OF GANGADHAR JENA FOR ASSESSMENT YEAR 2009 - 10, WHEREIN, THE ESTIMATION OF PRO FIT @ 8% WAS CONFIRMED WITHOUT REDUCING DEPRECIATION. 10. WE FIND THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS JAIN CONSTRUCTION CO., 156 CTR (RAJ) 290 HAS HELD THAT IN THE CIRCULAR ISSUED BY THE BOARD DT. 31ST AUG., 1965 , IT WAS HELD THAT SUCH BENEFICIAL CIRCULARS ARE BINDING ON THE DEPARTMENTAL AUTHORITIES. IN THE SAID CIRCULAR, IT WAS CLARIFIED THAT IF IT IS PROPOSED TO ESTIMATE THE PROFIT AND THE PRESCRIBED PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE, THE DEPRECIATION ALLOWANCE SHOUL D BE SEPARATELY WORKED OUT. T HE NET PROFIT SHOULD BE ESTIMATED SUBJECT TO ALLOWANCE OF DEPRECIATION AND DEPRECIATION ALLOWANCE SHOULD BE DEDUCTED THEREFROM. HENCE, WE FIND THAT THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE DECISION OF HONBLE RAJASHT AN HIGH COURT IN THE CASE OF JAIN CONSTRUCTION (SUPRA). THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 4 ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 11. IN GROUND NOS.2 & 3 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE U/S. 68 OF THE ACT . 12. THE ASSESSING OFFICER FOUND FROM THE BALANCE SHEET OF THE ASSESSEE THAT SUNDRY CREDITOR OF RS.1,72,81,722/ - WAS OUTSTANDING. THE ASSESSING OFFICER ASKED TO ASSESSEE TO PRODUCE DETAILED LIST OF SUNDRY CREDITORS ALONGWITH THEIR COMPLETE POSTAL ADDRESS FOR CROSS EXAMINATION AND ALSO CONFIRMATION FROM THE CREDITORS IN WHOSE CASE THE CREDIT BALANCE STOOD IN EXCESS OF RS.50,000/ - . AS THE ASSESSEE FAILED TO PRODUCE ANY DETA ILS, THE ASSESSING OFFICER TREATED THE SAME BOGUS AND UNEXPLAINED AND ADDED RS.1,72,81,722/ - FOR THE TOTAL INCOME OF THE ASSESSEE. 13. ON APPEAL, THE ASSESSEE SUBMITTED AS UNDER; 'CLOSING BALANCE OF SUNDRY CREDITORS OFRS.1,72,81,722/ - DISCLOSED IN THE BALA NCE SHEET OF ASST. YEAR 2011 - 12 ARE UNPAID TRADING LIABILITIES TOWARDS MATERIALS AND EXPENSES AND ARE NOT LOAN LIABILITY. THE AUDITOR IN THEIR REPORT IN FORM - 3CD AT CLAUSE 24(A) REPORTED THAT THERE IS NO RECEIPT OF LOAN/DEPOSIT BY THE ASSESSEE IN ASST. YE AR 2011 - 12. CLOSING BALANCE OF SUNDRY CREDITORS OF ASST. YEAR 2010 - 11 IS RS.2,71,43,275/ - . THUS THERE IS A REDUCTION IN SUNDRY CREDITORS BALANCE IN ASST. YEAR 2011 - 12 IN COMPARISON TO SUNDRY CREDITORS BALANCE SHEET OF ASST. YEAR 2010 - 11. IN SUPPORT OF WHIC H COPY OF THE AUDITED BALANCE SHEET FOR THE ASST. YEAR 2010 - 11 IS ENCLOSED ASANNEXURE - 2. THEREFORE ADDITION OF SUNDRY CREDITORS AMOUNTS TO DISALLOWANCE OF EXPENSES. AS RESULT OF ADDITION OF SUNDRY CREDITORS, PROFIT FROM CONTRACT WORK BUSINESS AS CALCULATE D BY THE LD. A.O. IS AS UNDER: GROSS CONTRACT RECEIPT RS.L56.02.980/ - NET PROFIT 10% RS. 15,60,290/ - ADDITION : SUNDRY CREDITORS RS.1.72.81.722/ - NET PROFIT AS PER A. 0. RS. 1,88,42,012/ - 5 ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 AS A RESULT OF ADDITION OF SUNDRY CREDITORS, NET PROFIT IS COMPUTED AT RS.1,88,42,012/ - BY LD. A.O. AGAINST GROSS CONTRACT RECEIPT OF RS. 1,5 6,02,980/ - , WHICH IS IMPOSSIBLE TO ACHIEVE IN THIS LINE OF BUSINESS.' THE APPELLANT FURTHER SUBMITTED THAT IT HAS BEEN HELD BY DIFFERENT LEGAL AUTHORITIES THAT ONCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE REJECTED THE AO CAN NOT DISALLOW ANY OTHER EXPENSES OR AMOUNT FROM THE SAME ACCOUNT. THE APPELLANT SUBMITTE D THE DECISION OF HON'BLE ITAT, CUTTACK IN THE CASE OF GIRISH CHANDRA NAYAK VS. ITO, W - 2(4), CUTTACK ( 2012) 28 TAXMAN.COM 118. IN WHICH THE HON'BLE ITAT, CUTTACK CONFIRMED THE ORDER OF CIT(A) IN DELETING DISALLOWANCE OF S UNDRY CREDITORS AND DIRECTED TO TAX 7% OF THE GROSS CONTRACT RECEIPT AS TAXABLE INCOME OF THE ASSESSEE. 14. THE CIT(A) HELD THAT IN THE CASE OF CIT VS. DULLARAM LABOUR CONTRACTOR, 42 TAXMAN.COM 349 (P&H), IT HAS BEEN HELD THAT WHERE THE BOOKS OF ACCOUNT A R E REJECTED IN THEIR ENTIRETY, THE ASSESSING OFFICER CANNOT RELY ON ANY ENTRY IN THOSE BOOKS OF ACCOUNT FOR MAKING AN ADDITION TO ASSESSEES TAXABLE INCOME UNDER SECTION 68 OF THE ACT. THEREFORE, THE CIT(A) HELD THAT ONCE BOOKS OF ACCOUNT ARE REJECTED, N O SEPARATE ADDITION ON ACCOUNT OF SUNDRY CREDITOR CAN BE MADE NOR CAN ANY EXPENDITURE APPEARING IN P&L ACCOUNT BE DISALLOWED. HENCE, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 15. BEFORE US, LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND LD A.R. SUP PORTED THE ORDER OF THE CIT(A). 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUTHORITIES BELOW, WE FIND THAT IN THE INSTANT CASE, THE ASSESSING OFFICER HAS REJECTED BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT O N THE GROSS CONTRACT RECEIPTS. 6 ITA NO.410/CTK/2015 ASSESSMENT YEAR : 2011 - 2012 17. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF DULLARAM LABOUR CONTRACTOR (SUPRA) DELETED THE ADDITION MADE U/S.68 OF THE ACT OBSERVING THAT WHERE THE BOOKS OF ACCOUNT ARE REJECTED , THE ASSESSING OFFICER CANNOT RELY ON ANY ENTRY IN THOSE BOOKS OF ACCOUNT FOR MAKING ADDITION TO ASSESSEES TOTAL INCOME U/S.68 OF THE ACT. 18. TH E ABOVE FINDINGS OF LD CIT(A) COUL D NOT BE CONTROVERTED BY LD D.R BY CITING ANY CONTRARY DECISIONS OF HONB LE SUPREME COURT OR HONBLE HIGH COURTS. HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) , WHICH IS CONFIRMED AND GROUND OF APPEAL FILED BY THE REVENUE DISMISSED. 19. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER P RONOUN CED IN THE OPEN COURT ON 11 /10 /2017. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 11 /10 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : INCOME TAX OFFICER, KEONJHAR WARD, KEONJHAR 2. THE RESPONDENT. NARESH KUMAR SINGH, STATION ROAD, BARBIL, KEONJHAR 3. THE CIT(A) - CUTTACK 4. PR.CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//