CHINTAMANI PROJECTS P.LTD, RAIGAD V. JCIT PANVEL, PANVEL

ITA 4166/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7916 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Reasonable cause
• Section: 44AD; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI G S PANNU, AM, & SHRI SAKTIJIT DEY, JM ITA NO. 4166/MUM/2015 ASSESSMENT YEAR 2010-11 CHINTAMANI PROJECTS P LTD MANOHAR SMRUTI ALIBAUG REWAS ROAD, VARSOLI ALIBAG DISTRICT RAIGAD RAIGAD 402 201 PAN AACCC2302C VS. JC IT , PANVEL RANGE, PANVEL (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEVENDRA JAIN RESPONDENT BY : SHRI B S BIST (CIT-DR) DATE OF HEARING : 15.03.2017 DATE OF PRONOUNCEMENT : 24 .03.2017 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 18.03.2015 OF THE LEARNED CIT(A) -2, THANE, FOR ASSESSMENT YEA R 2010-11. 2. THERE IS A DELAY OF 13 DAYS IN FILING THE APPEAL . THE ASSESSEE HAS FILED AN AFFIDAVIT EXPLAINING THE CAUSE OF DELAY AND SEEK ING CONDONATION THEREOF. HAVING HEARD THE PARTIES, WE ARE SATISFIED THAT THE DELAY IN FILING APPEAL WAS DUE TO A REASONABLE CAUSE. HENCE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING ON MERITS. ITA NO 4166/MUM//2015 CHINTAMANI PROJECTS PVT. LTD. 2 3. THE SOLITARY ISSUE ARISING FOR CONSIDERATION IN THE AFORESAID APPEAL IS IN RELATION TO THE DECISION OF THE CIT(A) IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT @8.5% OF THE GROSS TURNOVER. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE - A COMPANY, IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACT WORKS. FOR ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RE TURN OF INCOME ON 15.10.2010, DECLARING TOTAL INCOME OF RS.89,15,250/ - AS ALLEGED BY THE AO, INSPITE OF ISSUANCE OF STATUTORY NOTICES U/S. 142(1 ) AND 143(2), NO ONE APPEARED ON THE DATES FIXED. SUBSEQUENTLY, IN PURS UANCE TO FURTHER NOTICE ISSUED, THOUGH, AUTHORIZED REPRESENTATIVE OF THE AS SESSEE APPEARED HOWEVER NO BOOKS OF ACCOUNT WITH SUPPORTING DETAILS WERE PR ODUCED DESPITE REASONABLE OPPORTUNITY OF BEING GIVEN TO THE ASSESS EE. THE AO THEREFORE, ISSUED A NOTICE DIRECTING THE ASSESSEE TO SHOW CAUS E IN ABSENCE OF BOOKS OF ACCOUNT AND SUPPORTING DETAILS, WHY THE ASSESSMENT SHOULD NOT BE COMPLETED U/S. 144 OF THE ACT BY ESTIMATING THE PROFIT. IN R ESPONSE TO THE SAID SHOW CAUSE NOTICE, AS OBSERVED BY THE AO, THE ASSESSEE E XPRESSED ITS INABILITY TO PRODUCE THE BOOKS OF ACCOUNT AND REQUESTED FOR MORE TIME. THOUGH, THE AO ACCEDING TO THE REQUEST OF THE ASSESSEE GRANTED ONE MORE OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNT, STILL, THE ASSESSEE F AILED TO PRODUCE THE BOOKS OF ACCOUNT WITH SUPPORTING DETAILS. THEREFORE, TH E ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT BY ITA NO 4166/MUM//2015 CHINTAMANI PROJECTS PVT. LTD. 3 ESTIMATING THE PROFIT OF THE ASSESSEE @10% OF THE G ROSS CONTRACT RECEIPTS. BEING AGGRIEVED OF THE ESTIMATION OF PROFIT @10%, T HE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE AND PERUSING THE MATERIALS ON RECORD, THOUGH, WAS S ATISFIED THAT IN ABSENCE OF BOOKS OF ACCOUNT AND SUPPORTING DETAILS THE AO W AS JUSTIFIED IN REJECTING THE BOOK RESULT AND RESORTING TO ESTIMATION OF PROF IT TO THE BEST OF HIS JUDGMENT. HOWEVER, HE WAS OF THE OPINION THAT 10% PROFIT RATE APPLIED BY THE AO IS ON THE HIGHER SIDE. ACCORDINGLY, HE REDU CED THE NET PROFIT RATE TO 8.5% OF THE GROSS RECEIPTS. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THOUGH, THE LEARNED AR ADMITTED BEFORE US THAT THE ASSESSEE WAS UNABLE TO PRODUCE THE BOOKS OF ACCOUNT AND SUPPORTI NG DETAILS, HOWEVER, HE SUBMITTED THAT THE NET PROFIT RATE ADOPTED @8.5% BY THE CIT(A) IS ON THE HIGHER SIDE COMPARED TO THE NET PROFIT RATE SHOWN I N THE PRECEDING AS WELL AS SUBSEQUENT ASSESSMENT YEARS. IN THIS CONTEXT, HE D REW OUR ATTENTION TO THE COMPARATIVE NET PROFIT RATE FOR EARLIER AND SUBSEQU ENT ASSESSMENT YEARS AS REFERRED TO IN PARA 4.1 OF THE ORDER OF THE LEARNED CIT(A). HE THEREFORE, SUBMITTED THAT A NET PROFIT RATE COMPARABLE TO THE NET PROFIT OF THE PRECEDING ASSESSMENT YEARS CAN BE APPLIED, WHICH ACCORDING TO THE LEARNED AR WOULD BE 6.5%. AS COULD BE SEEN FROM THE FACTS ON RECORD , THIS IS A CASE WHERE THE ITA NO 4166/MUM//2015 CHINTAMANI PROJECTS PVT. LTD. 4 ASSESSEE, THOUGH, CLAIMED TO HAVE MAINTAINED BOOKS OF ACCOUNT, HOWEVER, HE HAS FAILED TO PRODUCE THE SAME WITH SUPPORTING DETA ILS EITHER BEFORE THE AO OR BEFORE THE CIT(A). THE LEARNED AR HAS STATED BE FORE US, SINCE THE BOOKS OF ACCOUNT WERE DESTROYED IN A RIOT IT COULD NOT BE PRODUCED. THOUGH, IT MAY BE A FACT THAT ASSESSEES BOOKS OF ACCOUNT MIGHT HA VE BEEN DESTROYED DUE TO SOME UNTOWARD INCIDENT, IT APPEARS SUCH INCIDENT HA PPENED SUBSEQUENT TO THE COMPLETION OF THE ASSESSMENT. THEREFORE, THERE WAS NO REASON FOR THE ASSESSEE NOT TO PRODUCE THE BOOKS OF ACCOUNT AND SU PPORTING DETAILS TO JUSTIFY ITS CLAIM. THAT BEING THE CASE, THERE WAS NO OTHER OPTION BEFORE THE AO BUT TO PROCEED FOR BEST JUDGMENT ASSESSMENT BY R ESORTING TO ESTIMATION OF PROFIT. THUS, THE ONLY ISSUE ARISING FOR CONSID ERATION IS WHAT CAN BE THE REASONABLE PROFIT SAID TO HAVE BEEN EARNED BY THE A SSESSEE FROM EXECUTION OF WORK CONTRACT. IT IS EVIDENT, WHILE THE AO HAS E STIMATED THE PROFIT @10% OF THE GROSS RECEIPTS, THE LEARNED CIT(A) HAS REDUCED IT TO 8.5% HOWEVER, AS CAN BE SEEN FROM THE NET PROFIT RATE OF THE PRECEDI NG AND SUBSEQUENT ASSESSMENT YEARS SHOWN BY THE ASSESSEE, AS REFERRED TO IN PARA 4.1 OF THE CIT(A)S ORDER, IT HOVERS AROUND 4% TO 6.5%. AS PE R THE PROVISIONS OF SECTION 44AD OF THE ACT IN CASE OF NON-MAINTENANCE OF BOOKS OF ACCOUNT, NET PROFIT RATE APPLICABLE IS 8% OF THE GROSS RECEIPTS. IN THE PRESENT CASE, HOWEVER, THE ASSESSEES TURNOVER IS MORE THAN 14 CR ORE THEREFORE, AS PER THE PROVISIONS OF THE ACT ASSESSEE IS REQUIRED TO NOT O NLY MAINTAIN ITS BOOKS OF ACCOUNT BUT ALSO GET IT AUDITED. CONSIDERING THE O VERALL FACTS AND ITA NO 4166/MUM//2015 CHINTAMANI PROJECTS PVT. LTD. 5 CIRCUMSTANCES OF THE CASE AND KEEPING IN VIEW THE N ET PROFIT RATE SHOWN BY THE ASSESSEE IN THE PAST YEARS AS WELL AS THE FACT THAT THE ASSESSEE WAS UNABLE TO JUSTIFY ITS CLAIM BY PRODUCING BOOKS OF A CCOUNT AND SUPPORTING DETAILS, WE CONSIDER IT APPROPRIATE TO FIX THE NET PROFIT @7.5% OF THE GROSS RECEIPTS. THE AO IS DIRECTED TO COMPUTE THE NET PR OFIT @7.5% OF THE GROSS RECEIPTS. AT THIS STAGE WE MUST CLARIFY, THE NET P ROFIT RATE OF 7.5% APPLIED BY US IS PURELY ON THE BASIS OF PECULIAR FACTS INVOLVE D IN THE PRESENT CASE, HENCE SHOULD NOT BE CONSIDERED AS PRECEDENT. ACCORDINGLY, THE GROUNDS ARE PARTLY ALLOWED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF MARCH 2017. SD/- SD/- (G S PANNU) (SAKT IJIT DEY) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI; DATED : 24 TH MARCH, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A),THANE. 4. THE CIT 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI