The ACIT, 1 (1), V. Shri Sanjay Palia,

ITA 410/IND/2008

• Counselvise Citation: 41022714 RSA 2008
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Keywords: Depreciation; Retrospective amendment; TDS
• Section: 271(1)(c); 143(3); 234B; 194C; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.383/IND/2008 A.Y. 2005-06 SANJAY PALIA PIPARIYA PAN ABXPP-5864-H APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL APPELLANT ITA NO.410/IND/2008 A.Y. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 1(1), BHOPAL APPELLANT VS. SHRI SANJAY PALIA PIPARIA PAN ABXPP-5864H RESPONDENT DEPARTMENT BY : SHRI P.K. MITRA, SR. DR ASSESSEE BY : SHRI H.P. VERMA ALONGWITH SHRI ASHISH GOYAL O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 27.6.2008. 2 2. IN THE APPEAL OF THE ASSESSEE THE FIRST GROUND I S THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE INVOCA TION OF THE PROVISIONS OF SECTION 145(3) BY REJECTING THE BOOKS OF ACCOUNT S AND ASSESSING THE INCOME IN THE MANNER AS PROVIDED U/S 144 OF THE ACT . DURING HEARING, THE LEARNED REPRESENTATIVES OF BOTH THE SIDES ASSER TED THAT ON THIS ISSUE, THEIR ARGUMENTS ARE IDENTICAL TO THE GROUND RAISED IN GROUP CASE OF R.C. CONSTRUCTION VS. ADDITIONAL CIT (ITA NOS.382 AND 40 9/IND/2008). 3. AFTER HEARING THE RIVAL SUBMISSIONS SINCE IN THE CASE OF R.C. CONSTRUCTION (SUPRA) ON THIS ISSUE, WE HAVE DISMISS ED THE APPEAL OF THE ASSESSEE, THEREFORE, SINCE THE FACTS AND THE ARGUME NTS OF THE LD. COUNSEL FOR THE ASSESSEE IS IDENTICAL, ON THE SAME REASONING, THIS GROUND OF THE ASSESSEE IS ALSO DISMISSED. 4. THE NEXT GROUND PERTAINS TO SUSTAINING THE ADDIT ION OF RS.13,67,908/- BY ESTIMATING THE NET PROFIT RATE AT 5% WITHOUT ACCEPTING THE EXPLANATION GIVEN BY THE ASSESSEE. THE REVENUE IN ITS APPEAL HAS CHALLENGED THE DELETION OF ADDITION OF RS.13,58,580 /- OUT OF THE ADDITION OF RS.27,26,491/- BY TAKING THE NET PROFIT RATE OF 8% BY THE ASSESSING OFFICER ON THE GROSS RECEIPTS AFTER INVOKING THE PR OVISIONS OF SECTION 145(3) OF THE ACT. 5. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THERE IS NO BASIS FOR APPLICATION OF PROFIT RATE AT 8% ESPECIAL LY WHEN DEPRECIATION 3 INCREASED SUBSTANTIALLY FROM RS. 6,58,880/- TO RS. 18,42,865/- WHICH HAS NOT BEEN DISPUTED BY THE DEPARTMENT. A PLEA WAS AL SO RAISED THAT THE PROFIT RATE IS VERY REASONABLE COMPARED TO EARLIER YEARS AND THERE IS THREE TIMES INCREASE IN TURNOVER FROM RS. 1.65 CROR ES TO RS. 4.52 CRORES. IT WAS ALSO SUBMITTED THAT ABOUT 50% OF THE WORK WA S DONE ON SUB- CONTRACT BASIS. BEFORE COMING TO ANY CONCLUSION, W E ARE REPRODUCING HEREUNDER THE PROFIT RATE OF EARLIER YEARS :- A.Y. TURNOVER N.P. BEFORE DEPRECIATION DEPRECIATION NP AFTER DEPRECIATI ON NP RATIO AFTER DEPRECIATION AMOUNT RATE 2003-04 92,47,272 6,07,945 6.57 1,58,943 4,49,002 4 .86% 2004-05 1,64,89,379 11,73,368 7.12% 6,58,880 5,14,488 3.12% 2005-06 (RELEVANT 4,52,86,042 27,89,257 6.16% 18,42,865 9,46,392 2.09% IF THE TOTALITY OF FACTS IS ANALYSED, IT IS SEEN TH AT THOUGH THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THE DISTANCE OF VARIOUS PLACES WHERE THE WORK WAS EXECUTED FROM THE HEAD OFFICE WHICH IS ABOUT 3 TO 40 KMS IN THE CASE OF WORK DONE BY SE LF AND IN THE CASE OF SUB-CONTRACTS IT IS ALSO BETWEEN 3 TO 40 KMS AND AB OUT 50% AND THE ASSESSEE HAS DONE NEARLY 51% OF THE WORK ON SUB-CON TRACT WHERE THE MARGIN OF PROFIT IS BOUND TO DECREASE. AT THE SAME TIME, IT IS ALSO AN ADMITTED POSITION THAT THE ASSESSING OFFICER WAS NO T SATISFIED ABOUT THE CORRECTNESS/COMPLETENESS OF THE ACCOUNTS OF THE ASS ESSEE AND DUE TO 4 THE REASON, THE PROVISIONS OF SECTION 145(3) OF THE ACT WERE RIGHTLY INVOKED. IN THE ABSENCE OF PRODUCTION OF COMPLETE D ETAILS OR MAINTENANCE OF PART REPORT, THE ASSESSING OFFICER A DOPTED THE NET PROFIT RATE AT AGAINST 2.9% SHOWN BY THE ASSESSEE AND REDU CED TO 5% BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). HOWEV ER, THE FACT REMAINS AT BOTH THE STAGES THAT IT WAS BASED ON EST IMATION. THE TOTAL CONTRACT RECEIPT FOR THE IMPUGNED ASSESSMENT YEAR I S TO THE TUNE OF RS.4,52,86,042/-. KEEPING IN VIEW THE TOTALITY OF F ACTS AND THE ASSERTION MADE BY THE LEARNED RESPECTIVE COUNSELS, IT WOULD M EET THE ENDS OF JUSTICE IF THE NET PROFIT RATE IS INCREASED TO 6% I N PLACE OF 5% MAINTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND 8% ADOPTED BY THE LEARNED ASSESSING OFFICER, THEREFORE, THIS G ROUND OF REVENUE IS PARTLY ALLOWED. BY THIS ADOPTION, THE IDENTICAL GRO UND RAISED IN THE APPEAL OF THE REVENUE IS ALSO DISPOSED OF ACCORDINGLY. 6. THE NEXT GROUND PERTAINS TO CHARGING OF INTEREST U/S 234B AND 234D OF THE ACT. BOTH THE LEARNED REPRESENTATIVES CONTENDED THAT THE SAME IS CONSEQUENTIAL IN NATURE. SINCE WE HAVE DIS POSED OF THE ABOVE GROUNDS AS DISCUSSED ABOVE, THEREFORE, CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE. 7. THE NEXT GROUND PERTAINS TO INITIATION OF PENALT Y PROCEEDINGS U/S 271(1)(C) OF THE ACT. UNDER THE FACTS NARRATED ABOV E, SINCE IT IS A 5 QUANTUM APPEAL, THEREFORE, IT IS PRE-MATURE, REQUI RES NO DELIBERATION FROM OUR SIDE. 8. IN THE APPEAL OF THE REVENUE, THE SECOND GROUND PERTAINS TO DELETING THE ADDITION OF RS.56,55,420/- MADE ON ACC OUNT OF DISALLOWANCE OF EXPENSES U/S 40(IA) OF THE ACT FOR NON-DEDUCTION OF TDS ON TRANSPORTATION AND TRACTOR RENT. THE STAND OF THE R EVENUE IS THAT IT MAY BE SENT BACK TO THE ASSESSING OFFICER FOR EXAMINING TH E CLAIM U/S 194C OF THE ACT AND IF THE CONCERNED PERSONS WERE NOT TRACE ABLE, THEY ARE TO BE GOT EXAMINED. ON THE OTHER HAND, THE LD. COUNSEL F OR THE ASSESSEE CONTENDED THAT NECESSARY DETAILS WERE SUBMITTED BEF ORE THE ASSESSING OFFICER FOR WHICH OUR ATTENTION WAS INVITED TO PAGE 6 OF THE ASSESSMENT ORDER. THE DETAILS OF CREDITORS WERE CLAIMED TO BE AVAILABLE AT PAGE 3 OF THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE PRO VISION IS NOT APPLICABLE FOR CURRENT ASSESSMENT YEAR AS SECTION 4 0(A)(IA) PROVIDES FOR DISALLOWANCE OF EXPENDITURE IF TDS IS NOT DEDUCTED IN RESPECT OF RENT AND THE PROVISION BECAME OPERATION FROM 1.4.2006. IT WAS ALSO PLEADED THAT SECTION 194-1 PRESCRIBES THAT TDS SHALL BE DED UCTED IN CASE OF PAYMENT OF RENT AND AMENDMENT WAS WITH EFFECT FROM 13.7.2006. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSING OFFICER DISALLOWED THE EXPENSES OF RS.56,55,420/- U/S 40(IA) OF THE ACT CLAIMED TO BE INCURRED ON TRANSPO RT AND TRACTOR RENT ON 6 THE GROUND THAT THE ASSESSEE DID NOT DEDUCT TDS ON SUCH PAYMENT. IT IS SEEN THAT THE ADDITION OF RS.56,55,420/- WAS DISALL OWED FOR NON- DEDUCTION OF TDS AND THE AMOUNT WAS PAID FOR TRANSP ORTATION AND TRACTOR RENT. THE PROVISIONS OF SECTION 40(IA) WAS INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 2006 WITH RETROSPECTIVE EFFECT FRO M 1.4.2006 WHEREAS THE PRESENT APPEAL BEFORE US PERTAINS TO ASSESSMENT YEAR 2005-06, THEREFORE, THIS PROVISION IS NOT APPLICABLE TO THE INSTANT CASE, CONSEQUENTLY, THIS GROUND OF THE REVENUE IS HAVING NO MERIT, THEREFORE, DISMISSED. 10. THE LAST GROUND PERTAINS TO THE DIRECTION GIVEN BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO ALLOW REBAT E U/S 88 OF THE ACT AMOUNTING TO RS. 8,720/-. 11. THE FACTS, IN BRIEF, ARE THAT DURING THE YEAR, UNDER CONSIDERATION, THE ASSESSEE MADE PAYMENT TOWARDS LIFE INSURANCE PR EMIUM AMOUNTING TO RS.58,136/- AGAINST WHICH THE ASSESSEE CLAIMED REBATE U/S 88 OF THE ACT. THE ASSESSING OFFICER IN THE ASSESS MENT FRAMED U/S 143(1)(A) ACCEPTED THE CLAIM OF THE ASSESSEE. HOWE VER, THE ASSESSING OFFICER IN THE COMPUTATION OF INCOME ATTACHED WITH THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, DISALLOWED THE REBATE OF RS. 8,720/- CLAIMED BY THE ASSESSEE ON THE AMOUNT OF RS. 58,136 /- PAID TOWARDS LIFE INSURANCE PREMIUM. ON APPEAL, THE LEARNED COMM ISSIONER OF 7 INCOME TAX (APPEALS) HELD THAT THE ASSESSEE IS ELIG IBLE FOR REBATE U/S 88 OF THE ACT. 12. AFTER HEARING THE PARTIES, WE ARE OF THE CONSID ERED OPINION THAT SINCE AS PER THE PROVISIONS OF SECTION 88 OF THE AC T, REBATE IS ALLOWED ON THE LIFE INSURANCE PREMIUM PAID BY THE ASSESSEE, TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE SAME. IN THIS VIEW O F THE MATTER, THIS GROUND OF THE REVENUE STAND DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES ON 21ST A PRIL, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST APRIL, 2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/- 8