INCOME TAX OFFICER, WARD 3(3), SRINAGAR V. M/S S.L ROAD CONSTRUCTION CO., KASHMIR

ITA 425/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5746 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-02-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S NEGI
• Keywords: Unexplained investment; Depreciation; Corroborative evidences
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. R.S.SYAL, VICE PRESIDENT AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.425(ASR)/2017 ASSESSMENT YEAR:2012-13 INCOME TAX OFFICER WARD-3(3), SRINAGAR VS. M/S S.L ROAD CONSTRUCTION CO., KASHMIR SHALINA SUMERBUGH CHADOORA KASHMIR PAN:ABOFS4352G (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.S. NEGI (DR) RESPONDENT BY: NONE DATE OF HEARING: 20.02.2018 DATE OF PRONOUNCEMENT: 22.02.2018 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE REVENUE DEPARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 02.02.2017 PASSED BY THE LD. CIT(A), J&K, JAMMU, IN A PPEAL NO.131/15-16, BY RAISING THE FOLLOWING GROUNDS OF APP EAL. 1. THE LD. CIT(A) ACCEPTED THAT ESTIMATION OF INCO ME WAS CORRECT AND THIS BEING THE CASE THESE WERE NO REASO N FOR DISTURBING THE RATE OF PROFIT ESTIMATED BY THE AO A ND IN DOING SO THE CIT(A) ORDER IS ENORMOUS. 2. THE LD. CIT(A) HAS ERROR IN DELETING ADDITION OF RS.53,22,625/- MADE BY THE AO ON ACCOUNT OF SUPPRES SION OF RECEIPTS BY THE ASSESSEE DESPITE THE ASSESSEE BEING UNABLE TO ITA NO.425 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. S.L. ROAD CO NSTRUCTIONS, KASHMIR 2 PROVIDE ANY EXPLANATION DESPITE BEING GIVEN OPPORTU NITY TO DO SO. 3. THE LD. CIT(A) IS IN ERROR IN FAILING TO APPREC IATE THAT SUPPRESSION OF RECEIPTS IS AN INFRACTION OF THE LAW THAT CAN BE PENALIZED AND AS SUCH CANNOT BE CLUBBED WITH ANY OT HER ISSUE AS DONE BY HIM. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CONTRACTOR AND HAS DECLARED GROSS CONTRACT RECEIPTS AT RS.8,37,13,833/- WHICH IS EQUAL 3.81% OF THE TOTAL TU RNOVER AFTER ACCOUNTING FOR APPROPRIATION OF SALARY AND INTER EST TO PARTNERS. THE NET PROFIT RATE OVER THE LAST THREE ASSES SMENT YEARS HAS HOVERED BETWEEN 1.93% FOR 2010-11, TO 4.91% FOR THE ASSESSMENT YEAR 2011-12 AND 3.81% FOR THE RELEVANT YEAR, THUS SHOWING SIGNIFICANT DEVIATION BUT COULD NOT BE EX AMINED IN THE ABSENCE OF BOOKS OF ACCOUNT, HOWEVER, ON VERIFICATION OF TDS CERTIFICATE ISSUED BY THE EXEN, PMGSY (JKRRDA) DIVISION , PULWAMA, IT WAS FOUND THAT THE GROSS CONTRACT RECEIPTS PAI D TO THE ASSESSEE ARE TO THE TUNE OF RS.5,13,99,460/- AGAINST THE DECLARED RECEIPTS OF RS.4,56,13,998/- THUS SUPPRESSING THE RECEIPTS BY AN AMOUNT OF RS.57,85,462/- WHICH WERE NOT EXPLAINED BY THE ASSESSEE ON THE GROUND THAT THE BOOKS O F ACCOUNT HAVE BEEN DESTROYED IN THE FLOODS OF SEPTEMBER, 2014. HOWEVER, THE ASSESSEE INSISTED THAT THE REJECTION OF BOOKS VERSION MAY BE LOOKED INTO FROM THE CBDTS INSTRUCTION F.NO.225/303/2014/ITA-II DATED 30.12.2014 ISSUED IN T HIS REGARD. HOWEVER, THE ASSESSING OFFICER WHILE RELIED UPON JUDICIAL PRECEDENT COMES FROM SHIVAM CONSTRUCTIONS CO. VS. ACIT REPORTED IN ITA NOS.383 & 384/2004, 622/2005, 385 & ITA NO.425 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. S.L. ROAD CO NSTRUCTIONS, KASHMIR 3 386/2004 AND 728/2005 OF THE HONBLE ITAT CHANDIGARH BENCH A, AT CHANDIGARH IN WHICH THE NET RATE OF 10% ON GRO SS RECEIPTS WAS FOUND TO BE A FAIR ESTIMATE OF INCOME FROM CONTRACTO R IN THE EVENTUALITY OF FAILURE TO PRODUCE THE BOOKS OF ACCOUNT AND FINALLY THE ASSESSING OFFICER WORKED OUT 8% AS AGAINST CONTRACT R ECEIPT. 3. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) APPLIED THE NET PROFIT RATE @ 7% SUBJECT TO NO FURTHER ALLOWANCES INCLUDING THAT OF DEPRECIATION AND FURTHER HOLD THAT NO SEPARATE ADD ITION IS CALLED FOR ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 O F THE I.T. ACT IN THE CONTRACT RECEIPTS OF 57,85,462/- WHICH WA S NOT DISCLOSED BY THE ASSESSEE, HOWEVER, DETECTED BY THE AO. FU RTHER DELETING THE ADDITION OF INTEREST INCOME TO THE TUNE OF RS.1,75,704/-. 4. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE L D. CIT(A), THE REVENUE AUTHORITY PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE, THE LD. DR SUBMITTED THAT THERE WAS NO REASON BEFORE THE LD. CIT(A) FOR ACCEPTING THE ESTIMATI ON OF INCOME AND DISTURBING THE RATE OF PROFIT OF ESTIMATED BY THE AO. FURTHER, THE LD. CIT(A) COMMITTED ERROR IN DELETING THE ADDITION OF RS.53,22,625/- MADE BY THE AO ON ACCOUNT OF SUPPRESSIO N OF RECEIPTS BY THE ASSESSEE BECAUSE THE ASSESSEE WAS UNABLE TO PROVIDE ANY EXPLANATION DESPITE BEING GIVEN OPPORTU NITY TO DO SO. FURTHER THE LD. CIT(A) HAS ERRED IN FAILING TO AP PRECIATE THAT SUPPRESSION OF RECEIPTS IS A INFRACTION OF LAW THAT CAN BE ITA NO.425 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. S.L. ROAD CO NSTRUCTIONS, KASHMIR 4 PENALIZED AND AS SUCH CANNOT BE CLUBBED WITH ANY OTHER I SSUE AS DONE BY HIM. 5. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AND SPECIFICALLY THE ORDER IMPUGNED HEREIN AS IT IS NOT IN DOUBT THAT THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT OR OTHER SUPPORTING EVIDENCE ON RECORD. THE SAME WAS DESTROYED IN THE FLOODS OF SEPTEMBER,2014 IN SRINAGAR AND FIR TO THIS EFFECT WAS ALSO PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, HOWEVER, THE AO FINDING NO ALTERNATIV E, INVOKED THE PROVISIONS OF SEC.145(3) OF THE ACT FOR RE JECTION OF BOOKS OF ACCOUNT AND PROCEEDED FOR BEST JUDGMENT ASSESSMENT OR NON SATISFYING ABOUT THE COMPLETENESS AND CORRECTNESS OF ACCOUNTS. THE ASSESSING OFFICER FOLLOWED THE CASE OF SHIVAM CONSTRUCTIONS DECIDED BY THE HONBLE ITAT, CHANDIGARH ( SUPRA) AND APPLIED A NET RATE OF 8% SUBJECT NO DEDUCTION OF SA LARY AND INTEREST. BY CONSIDERING THE FACT THAT THE ASSESSEE IS ALSO ENGAGED IN CIVIL CONSTRUCTION BUSINESS, HOWEVER THE ASSESSIN G OFFICER HAS NOT CONSIDERED THAT THE ASSESSEE IS OPERATING I N REMOTE AREAS OF SRINAGAR WHERE THE PROFIT MARGINS ARE VERY LOW DUE TO HARD WEATHER CONDITIONS AND INTERMITTENT STOPPA GE OF WORK DUE TO ONE OR OTHER REASONS, LEADING TO THE HIGH ER COST OF INPUT AND LABOUR. THE ASSESSING OFFICER WAS UNDER OBLIGAT ION TO APPLY THE COMPARATIVE CASES OF THE SIMILAR OTHER ASESSEES IN SIMILAR BUSINESS ON THE SIMILAR LOCATION, THEREFORE, THE LD. CIT(A) HAS CONSIDERED THE CASE OF M/S SHIVAM CONSTRUCTIONS ENGINEER S, ITA NO.425 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. S.L. ROAD CO NSTRUCTIONS, KASHMIR 5 SRINAGAR (ITA NO.493(ASR)/2010 DATED 01.05.2012) DECI DED BY JURISDICTIONAL HONBLE ITAT BENCH AT AMRITSAR, IN WHICH, THE NET PROFIT RATE WAS DIRECTED TO BE APPLIED @7% SUBJECTED TO NO FURTHER ALLOWANCES. THEREFORE, IN OUR CONSIDERED OPINIO N, THE LD. CIT(A) IS RIGHT IN GRANTING RELIEF TO THE ASSESSEE, HEN CE, GROUND NO.1 OF THE REVENUE DEPARTMENT IS LIABLE TO BE DISMI SSED. NOW COMING TO THE GROUND NO.2 & 3 WITH REGARD TO TH E DELETION OF ADDITION OF RS.53,22,625/- MADE BY THE A O ON ACCOUNT OF SUPPRESSION OF RECEIPTS BY THE ASSESSEE. THE LD. CIT(A) RIGHTLY HELD THAT NO SEPARATE ADDITION IS CALL ED FOR AS THE NET PROFIT RATE @ 7% HAS ALREADY BEEN TAKEN INTO CONSI DERATION UNDISCLOSED RECEIPT FOR THE PURPOSE OF COMPUTING THE TOT AL INCOME, HENCE, FOR GROUND NOS.2 & 3 ALSO STAND DISMISSED. ON THE AFORESAID CONSIDERATION AND ANALYZATION, WE AR E OF THE CONSIDERED VIEW THAT THE ORDER PASSED BY THE LD. CI T(A) IS BASED ON THE LOGICAL REASONING AND DOES NOT SUFFER FROM ANY ILLEGALITY, PERVERSITY AND IMPROPRIETY, THEREFORE, DOES NOT REQUIRE TO BE ANY INTERFERENCE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPA RTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.02.2018. SD/- SD/- (R.S.SYAL) (N.K.CHOUDHRY) VICE PRESIDENT JUDICIAL MEMBER DATED:22.02.2018 /PK/ PS. ITA NO.425 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. S.L. ROAD CO NSTRUCTIONS, KASHMIR 6 COPY OF THE ORDER FORWARDED TO: (1) M/S. S.L. ROAD CONSTRUCTION CO., KASHMIR (2) THE ITO, WARD,3(3), SRINAGAR (3) THE CIT(A) J&K, JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER