M/s Jeet Construction Co., Meerut V. ACIT, Meerut

ITA 426/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69465 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Presumptive income; Business income
• Section: 44AD; 143(3); 142(1); 131; 68; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D: NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.426/DEL/ 2011 (ASSESSMENT YEAR: 2006-07) M/S. JEET CONSTRUCTION COMPANY, VS. ACIT, CIRCLE 2 , 314, ARVINDPURI, MEERUT. MEERUT CANTT. (PAN : AAAFJ6441J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE RESPONDENT BY : SHRI VIV EK KUMAR, DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS), MEERUT DATED 25.11.2012. 2. THE ASSESSEE IS A FIRM AND ENGAGED IN THE BUSINE SS OF CIVIL CONTRACTOR. THE RETURN OF INCOME WAS FILED ON 29.01 .2007 DECLARING INCOME AT RS.3,30,470/-. THE GROSS TURNOVER DECLARE D FOR THE YEAR WAS RS.1,21,03,459/- AS PER THE RETURN AND CORRESPONDIN G TDS CERTIFICATES WERE FILED. THE ASSESSEE ESTIMATED THE PROFIT @ 8% AVAILING THE BENEFIT OF PRESUMPTIVE TAXATION U/S 44AD. IT IS CLAIMED THAT N O BOOKS OF ACCOUNT WERE MAINTAINED, HENCE AUDIT REPORT UNDER SECTION 4 4AB WAS NOT FILED. ITA NO.426/DEL/2011 2 THE ASSESSING OFFICER DID NOT BELIEVE THE SUBMISSIO NS OF THE ASSESSEE AND OBSERVED THAT THERE WAS NO REASON AND SUFFICIENT CA USE FOR NOT MAINTAINING REGULAR BOOKS OF ACCOUNT EVEN AFTER THE SEARCH OPERATION CARRIED OUT ON THE ASSESSEE GROUP ON 23.12.2002. HE ALSO RECORDED THE STATEMENT UNDER SECTION 131 OF THE INCOME-TAX ACT, 1961 OF ONE SHRI BALJEET SINGH BAKSHI, PARTNER OF THE ASSESSEE FIRM AND THE ASSESSMENT WAS FINALIZED UNDER SECTION 144 OF THE ACT ON 29.12.200 8 BY MAKING THE TWO ADDITIONS, I.E. RS.7,49,145/- WAS ADDED FOR NOT EXP LAINING THE CREDITS IN THE BANK ACCOUNT AND RS.3,07,811/- BEING THE SALARY PAID TO THE PARTNERS. THE CIT (A) HAS CONFIRMED THE ADDITIONS. 3. NOW, THE ASSESSEE IS IN APPEAL BEFORE US BY TAKI NG THE FOLLOWING GROUNDS :- 1. THAT THE LD. CIT (A) IS NOT JUSTIFIED AND HAS E RRED IN UPHOLDING THE ASSESSMENT MADE BY LD. A.O. U/S 144 INSTEAD OF SEC.143(3) OF IT ACT. THE LD. CIT (A) IS NOT CORRECT IN INFERRING THAT T HE ASSESSEE HAS FAILED TO COMPLY WITH ALL THE TERMS OF NOTICES UNDE R SEC. 142(1) AND 143(2) TO THE SATISFACTION OF THE LD. A.O. ALL THE QUERIES RAISED VIDE NOTICES BY THE LD. A.O. WERE DULY COMPLIED WITH BY THE ASSESSEE BY THE LAST DATE OF HEARING. 2. THAT THE LD CIT(A) IS NOT JUSTIFIED AND HAS ERRE D IN LAW AND ON FACTS OF THE CASE IN CONTINUING U/S 69, THE ADDITIO NS MADE BY THE LD AO U/S 68 IN RESPECT OF FOLLOWING CREDIT ENTRIES IN TH E BANK ACCOUNT OF ASSESSEE FIRM IN IT'S TOTAL INCOME AS UNEXPLAINED C ASH CREDIT. THE PROVISION OF SEC 68 AND 69 EVEN IN TERMS DON'T APPL Y TO FACTS OF ASSESSEE'S CASE. THE ASSESSEE FIRM HAD NOT MAINTAIN ED ANY BOOKS OF ACCOUNTS AND THEY DON'T EVEN FORM PART OF AND APPEA R IN PROJECTED STATEMENT OF AFFAIRS FILED BY ASSESSEE :- 06-09-2005 CLG RS.3,00,000/- 30-11-2005 CLG RS.4,49,145/- ITA NO.426/DEL/2011 3 THE IMPUGNED ADDITIONS MAY KINDLY BE DELETED. 3. THAT THE LD CIT(A) IS NOT JUSTIFIED AND HAS ERRE D IN CONFIRMING WITH REFERENCE TO PROVISIONS OF SEC 144 AND 184(V) THE DISALLOWANCE MADE BY LD AO OF A SUM OF RS.3,07,811/- BEING THE A MOUNT OF SALARIES PAID TO PARTNERS BY OBSERVING 'THAT THE SAME IS DIS ALLOW TO COVER UP THE POSSIBLE LEAKAGES OF REVENUE AND FOR VIOLATION OF P ROVISION OF SEC 44AA OF IT ACT'. THE ADDITION / DISALLOWANCE IS BEING ER RONEOUS AND UNTENABLE BE KINDLY DELETED. 4. THAT THE SEVERAL ADDITIONS AS MADE OVER AND ABOV E RETURN INCOME BY THE LD AO AND CONFIRMED BY THE LD CIT(A) ARE UNJUST, UNWARRANTED AND UNTENABLE, WHICH BE KINDLY DELETED. 5. THAT IN ANY CASE BUT WITHOUT PREJUDICE TO PRECED ING GROUNDS THE TOTAL ADDITIONS AS MADE BY THE LD AO AND CONFIRMED BY THE LD CIT(A) ARE ARBITRARY AND VERY EXCESSIVE. 6. THAT THE PENAL INTEREST U/S 234-A/234-B/234-C AN D 234-D HAVE BEEN WRONGLY CHARGED, WHICH BE KINDLY CANCELLED /HE LD AS NOT CHARGEABLE. 7. THAT THE SEVERAL OBSERVATIONS AS MADE AND INFERE NCES AS DRAWN BY THE LD. AO AND THE LD CIT(A) ARE MISCONCEIVED, E RRONEOUS AND UNTENABLE. THE ASSESSEE'S CONTENTIONS AND SUBMISSIO NS HAVE NOT BEEN PROPERLY APPRECIATED BY THEM. 4. IN THE GROUND NO.1, THE ISSUE RAISED IS REGARDIN G SUSTAINING THE ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 144 OF THE INCOME-TAX ACT INSTEAD OF SECTION 143(3) OF THE ACT. 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HA VE ALSO PERUSED THE MATERIAL AVAILABLE RECORD. WE FIND THAT THE ASS ESSEE HAS FAILED TO COMPLY WITH ALL THE TERMS OF THE NOTICE ISSUED U/S 143(1) AND 143(2) OF THE ACT. ALL THE QUERIES RAISED BY THE ASSESSING OF FICER WERE NOT DULY COMPLIED WITH BY THE ASSESSEE TILL THE LAST DATE OF HEARING. THEREFORE, WE HAVE NO HESITATION IN SUSTAINING THE ORDER OF THE L OWER AUTHORITIES FOR MAKING THE ASSESSMENT U/S 144 OF THE ACT. ITA NO.426/DEL/2011 4 6. IN THE GROUND NO.2, THE ISSUE IS REGARDING SUSTA INING THE ADDITION OF RS.7,49,145/-. 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HA VE ALSO PERUSED THE COPY OF THE BANK ACCOUNT OF THE ASSESSEE WHICH IS PLACED AT PAGES 13 TO 17 OF THE PAPER BOOK. THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION WITH REGARD TO THE CREDITS OF RS.3 LACS ON 06.09.2009 AN D RS.4,49,145/- ON 30.11.2005. BEFORE US ALSO, EXCEPT STATING THAT IT MAY BE REFUND OF THE SECURITIES FROM THE MUNICIPAL CORPORATION WITH WHOM THE ASSESSEE WAS WORKING AND THERE WAS NO CONCRETE EXPLANATION IN TH IS REGARD. THE ONLY RELIANCE OF THE LD. AR WAS THAT ONCE PROFIT HAS BEE N ESTIMATED @ 8% ON THE TOTAL SALES OF THE ASSESSEE THEN NO ADDITION CA N BE MADE UNDER SECTION 68 OR 69 OF THE INCOME-TAX ACT. LD. AR ALSO PLEADED THAT THESE MAY BE INCLUDED IN THE TURNOVER OF THE ASSESSEE AND ONLY P ROFIT ELEMENT CAN BE TAXED AS AN INCOME. WE ARE UNABLE TO AGREE WITH THE PLEADINGS OF THE AR. ONCE THESE CREDITS APPEARED IN THE BANK ACCOUNT OF THE ASSESSEE IT WAS ON THE ASSESSEE TO EXPLAIN THE SOURCE OF THESE CREDITS . THE ASSESSEE CANNOT BE GRANTED RELIEF ONLY ON THE BASIS THAT THESE MAY BE REFUND OF THE SECURITIES THAT WERE PLEDGED WITH THE NAGAR NIGAM, MEERUT TIME TO TIME AT THE TIME OF CONTRACTS ASSIGNED TO THE ASSESSEE. SINCE THE AS SESSEE HAS NOT GIVEN ANY REASONABLE EXPLANATION WITH REGARD TO CREDIT ENTRIE S IN ITS BANK ACCOUNT BEFORE NONE OF THE AUTHORITIES BELOW, THEREFORE, WE UPHOLD THE ORDER OF THE ITA NO.426/DEL/2011 5 CIT (A) WITH RESPECT TO THESE TWO CREDIT ENTRIES TR EATING AS UNEXPLAINED AND SUSTAIN THE ADDITION. 8. IN THE GROUND NO.3, THE ISSUE RAISED IS REGARDIN G THE DISALLOWANCE OF RS.3,07,811/- BEING THE AMOUNT OF SALARY PAID TO PA RTNERS. LD. AR PLEADED TO GRANT RELIEF TO ASSESSEE BY ALLOWING SAL ARY TO THE PARTNERS. LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO RELIED ON THE DECISION OF ITAT, AGRA BENCH IN THE CASE OF BHATNAG AR OPTICALS VS. ITO, WARD 2 (1), GWALIOR FOR THE PROPOSITION THAT WHERE THE FIRM HAD BEEN ASSESSED U/S 144 OF THE ACT FOR ANY FAILURE AS MENT IONED IN SECTION 144 OF THE ACT THEN NO DEDUCTION BY WAY OF SALARY OR REMUN ERATION PAID TO THE PARTNERS IS ALLOWABLE AS PER SECTIONS 184 (5) AND 1 85 OF THE ACT. THE ITAT AGRA BENCH IN THE AFORESAID CASE HAS HELD AS U NDER :- CONSIDERING THE FACTS OF THE CASE, IT IS CLEAR THA T THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS OF SE CTION 144. WHATEVER RETURN OF INCOME WAS FILED ORIGINALLY, WAS DECLARED INVALID BECAUSE THE ASSESSEE FAILED TO REM OVE THE DEFICIENCY IN THE RETURN. THE ASSESSEE ALSO FAILED TO FILE THE RETURN OF INCOME AS REQUIRED UNDER SECTION 142(1) A ND ALSO FAILED TO COMPLY WITH THE NOTICE UNDER SECTION 144. THEREFORE, SECTION 144 WAS RIGHTLY INVOKED AGAINST THE ASSESSEE FOR FRAMING THE EX PARTE ASSESSMENT ORDER. SUB- SECTION (5) OF SECTION 184 IS AN EXCEPTION TO RULE AND WOULD CLEARLY DISENTITLE THE ASSESSEE FOR CLAIMING DEDUCT ION BY WAY OF SALARY AND REMUNERATION ETC. IN CASE THE ASSESSE E MADE A FAILURE AS PROVIDED UNDER SECTION 144. SIMILARLY, T HE ASSESSEE ALSO FAILED TO PROVE OTHER INGREDIENTS OF SECTION 1 84 BEFORE THE ASSESSING OFFICER. ITA NO.426/DEL/2011 6 9. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE ASSESSING OFFICER MADE THE ADDITION BY DISALLOWING THE AMOUNT OF SALA RY PAID TO THE PARTNERS TO COVER UP THE POSSIBLE LEAKAGES OF REVEN UE AND FOR VIOLATION OF PROVISIONS OF SECTION 44AA OF THE ACT. THE ASSESSEE S CASE WAS NOT COVERED BY THE PROVISIONS OF SECTION 44AD OF THE AC T, HENCE ASSESSING OFFICER HELD THAT NO DEDUCTION ALLOWED TO PARTNERS SALARY FROM THE ESTIMATED NET PROFIT @ 8% OF THE RECEIPTS. HOWEVER, THE CIT (A) HAS CONFIRMED THE ADDITION OF INVOKING THE PROVISIONS O F SECTION 184 (5) OF THE ACT. THE PROVISIONS OF SECTION 184(5) READ AS U NDER :- (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, WHERE, IN RESPECT OF ANY ASS ESSMENT YEAR, THERE IS ON THE PART OF A FIRM ANY SUCH FAILU RE AS IS MENTIONED IN SECTION 144, THE FIRM SHALL BE SO ASSE SSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SAL ARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE BY SUCH FIRM TO ANY PARTNER OF SUCH FI RM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND SUCH INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE ( V ) OF SECTION 28. AS PER THIS PROVISION, WHERE THE ASSESSMENT HAS BEE N MADE U/S 144 OF THE ACT FOR THE FAILURE MENTIONED WITHOUT SECTION THEN NO DEDUCTION BY WAY OF ANY PAYMENT OF SALARY BY THE FIRM TO ANY PARTNER IS ALLOWABLE IN COMPUTING THE TOTAL INCOME CHARGEABLE UNDER THE HEA D PROFITS AND GAINS OF BUSINESS AND PROFESSION. THIS CLAUSE STARTS WIT H THE NON-OBSTANTE CLAUSE NOTWITHSTANDING ANYTHING CONTAINED IN ANY OT HER PROVISION OF THE ITA NO.426/DEL/2011 7 ACT, THEREFORE, WE FIND NO MERITS IN THIS GROUND O F ASSESSEES APPEAL. THIS GROUND OF ASSESSEES APPEAL STANDS DISMISSED. 10. GROUND NOS.4, 5 & 7 ARE GENERAL IN NATURE AND D O NOT REQUIRE ANY ADJUDICATION. 11. IN THE GROUND NO.6, THE ISSUE RAISED IS REGARDI NG THE INTEREST U/S 234A, 234B, 234C AND 234D OF THE ACT. HONBLE SUPRE ME COURT IN THE CASE OF CIT VS. ANJUM M.H. GHASWALA 252 ITR 1 (SC) HAS HELD THAT THE CHARGING OF INTEREST IS MANDATORY, THEREFORE, THERE IS NO RELIEF GRANTED ON THIS GROUND ALSO. 12. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF OCTOBER, 2013. SD/- SD- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 25 TH DAY OF OCTOBER, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MEERUT. 5.CIT(ITAT), NEW DELHI. AR/ITAT NEW DELHI