M/s. Mehar Enterprises, Jammu ( J&k) V. The Dy. Commissioner of Income-tax, Jammu

ITA 427/ASR/2012

• Counselvise Citation: 42720914 RSA 2012
• Duration Of Justice: 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 12-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K BANSAL
• Keywords: Opportunity of being heard; Question of law; Revised return
• Section: 44AD; 244A; 142(1); 234B; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.404(ASR)/2012 ASSESSMENT YEAR:2008-09 PAN :AAOFM8168M DY. COMMR. OF INCOME-TAX, VS. M/S. MEHAR ENTERPRISE S, CIRCLE-1, JAMMU. JAMMU. (APPELLANT) (RESPONDENT) ITA. NO.427(ASR)/2012 ASSESSMENT YEAR: 2008-09 M/S. MEHAR ENTERPRISES, VS. DY. COMMR. OF INCOME-T AX, JAMMU. CIRCLE-1, JAMMU. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. TARSEM LAL, DR ASSESSEE BY:SH. S.K. BANSAL, ADV DATE OF HEARING: 04 /12/2012 DATE OF PRONOUNCEMENT:10/12/2012 ORDER PER BENCH ; THESE CROSS APPEALS ONE BY THE REVENUE AND ANOTH ER BY THE ASSESSEE ARE AGAINST THE IMPUGNED ORDER OF CIT(A), JAMMU, DA TED 23.08.2012 FOR THE ASSESSMENT YEAR 2008-09. ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 2 2. IN ITA NO.404(ASR)/2012, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 12% APPLIED BY THE AO WHE N THE BOOKS OF ACCOUNT WERE NOT PRODUCED AND REJECTED U/S 145(3 ) OF THE I.T.ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 12% APPLIED BY THE AO IN VIEW OF THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PRABHAT KUMAR CONTRACTOR REPORTED IN ITA NO.293 OF 2008. 3. THE APPLICANT CRAVES TO AMEND OR ADD ANY ONE MOR E GROUNDS OF APPEAL. 3. IN ITA NO.427(ASR)/2012, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER UNDER APPEAL IS AGAINST LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED IN LA W IN NOT ACCEPTING THE BOOK RESULTS OF THE APPELLANT WHEN AU DIT REPORT, CASH BOOK, LEDGER AND OTHER RECORDS WERE DULY PRODU CED BEFORE HIM. 3. THAT BOTH THE LD. CIT(A) AND AO HAVE FAILED TO T AKE NOTE OF THE ADMITTED FACT THAT NATURAL CALAMITY TOOK PLACE AT L EH AND BASIC RECORDS WERE WASHED AWAY HENCE PRODUCTION OF SUPPOR TING EVIDENCE WAS BEYOND THE POWERS OF THE APPELLANT AND UNDER THESE CIRCUMSTANCES, THE NON-PRODUCTION OF SUPPORTI NG EVIDENCE SHOULD HAVE BEEN IGNORED AND BOOK RESULTS ACCEPTED. 4. THAT THE LD. CIT(A) HAS ALSO ERRED IN LAW IN IGN ORING THE SUBMISSION OF THE APPELLANT THAT ON THE FACTS AND C IRCUMSTANCES OF THE CASE, THE DEDUCTION U/S 40(B) OF THE ACT ON ACCOUNT OF SALARY AND INTEREST PAID TO PARTNERS IS LEGALLY ALL OWABLE TO THE APPELLANT AND ALLOWED & AO HAS ERRED IN LAW IN NOT ALLOWING THE DEDUCTION U/S 40(B) OF THE ACT AND THE SAME BE ALLOWED. ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 3 5. THAT THE LD. CIT(A) HAS ALSO ERRED IN LAW IN NOT DELETING THE INTEREST OF RS.22490/- CHARGED BY AO U/S 244A W/D WHEN THERE IS NO SUCH SECTION UNDER THE ACT. 6. THAT THE LD. CIT(A) HAS ALSO ERRED IN LAW IN NOT DELETING THE INTEREST OF RS.40553/- CHARGED U/S 234-D OF THE ACT . 7. THAT THE LD. CIT(A) HAS ERRED IN NOT DELETING TH E INTEREST CHARGED U/S 234B. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED THE RETURN ELECTRONICALLY ON 21.11.2008 DECLARING AN INCOME OF RS.4,67,329/-. THE ASSESSEE IS A CONTRACTOR. IN THE COURSE OF ASSESSM ENT PROCEEDINGS, AO ASKED THE ASSESSEE TO PRODUCE COMPLETE BOOKS OF ACCOUNT, MUSTER ROLLS, BILLS AND VOUCHERS ETC. BUT THE ASSESSEE FAILED TO PRODUCE T HE SAME DESPITE AFFORDING NUMBER OF OPPORTUNITIES BY THE AO. ASSESSEE SUBMITT ED A REPLY THROUGH HIS COUNSEL IN WHICH IT WAS MENTIONED THAT DUE TO CALA MITY IN THE LEH REGION ON THE NIGHT OF 06.08.2010, ASSESSEE INCURRED LOSS AND ALMOST ALL HIS RECORD GOT LOST. THE AO OBSERVED THAT THE ASSESSEE HAS NEITHER MAINTAINED NOR PRODUCED ANY RECORDS WITH REGARD TO BOOKS OF ACCOUNT, BILLS AND VOUCHERS. THE AO FURTHER OBSERVED THAT NO ORIGINAL RECORD WITH REGAR D TO THE EXPENSES IN THE TRADING AND PROFIT & LOSS ACCOUNT OF WAGES TO THE TUNE OF RS.1,82,89,632/- WAS PRODUCED AND IN THE ABSENCE OF THE SAME GENUIN ENESS OF THE SAME CANNOT BE VERIFIED. ACCORDINGLY, THE AO INVOKED TH E PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961, AS HE WAS NOT S ATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. THE AO APPLIED ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 4 NET PROFIT RATE ON THE GROSS RECEIPTS IN THE LIGHT OF THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PRABHAT KUMAR CONTRACTOR WHEREIN NET PROFIT RATE OF 12% HAS BEEN HELD TO BE JUSTIFIED. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE ITS IMPUGNED ORDER DATED 2 3.08.2010 HELD THAT IT WOULD BE MOST FAIR AND REASONABLE, IF A PROFIT RATE OF 7% IS APPLIED. NOW THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS B ENCH. 6. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED UPON THE ORDER OF THE LD. CIT(A) AND REITERATED THE SUBMISSI ONS MADE BEFORE HIM. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE WITH US, ESPECIALLY THE ORDER PASSED BY T HE LD. FIRST APPELLATE AUTHORITY. WE FIND THAT THE LD. FIRST APPELLATE AUT HORITY HAS PASSED A WELL REASONED ORDER TAKING INTO CONSIDERATION ALL THE AS PECTS OF THE CASE. THE RELEVANT FINDINGS GIVEN BY THE LD. FIRST APPELLATE AUTHORITY IN HIS ORDER IN PARA 4 TO 4.3. ARE REPRODUCED HEREUNDER FOR THE SAK E OF CONVENIENCE: 4. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R, THE SUBMISSIONS OF ASSESSEE AND ALSO GONE THROUGH THE C ASE RECORDS. AS PER THE CASE RECORDS, ORDER SHEET NOTING DATED 27.1 2.2010 IT IS MENTIONED THAT NO BOOKS PRODUCED. IT IS TRUE THAT THE BOOKS OF ACCOUNTS WERE DULY AUDITED, YET THE PRIMARY EVIDENC E WHICH SUPPORT THE BOOK RESULTS ARE ABSENT IN THIS CASE. THE COMPU TERIZED SHEETS OF MUSTER ROLL, COPIES OF ACCOUNT AND COPY OF BANK ACC OUNT ETC. WERE SUBMITTED BEFORE THE AO. NO EVIDENCE IS FILED TO SH OW THE EXACT ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 5 NATURE AND EXTENT OF DAMAGES TO ASSESSEES RECORDS AT LEH IN THE CLOUDBURST. IN VIEW OF THE UNDISPUTED FACT FACT THA T A PARTIAL COMPLIANCE WAS MADE BEFORE A.O. I DONT FIND ANY FA ULT WITH THE ACTION OF THE A.O. IN REJECTING THE BOOK RESULTS AN D ASSESSING THE INCOME IN THE MANNER PROVIDED IN SECTION 144 OF THE I.T. ACT, EVEN THOUGH THE ASSESSEE CLAIMED THAT SUBSTANTIAL COMPLI ANCE IS MADE. THE SECTION 144 OF I.T.ACT IS REPRODUCED FOR SAKE OF RE FERENCE. 144. [(1)] IF ANY PERSON ( A ) FAILS TO MAKE THE RETURN REQUIRED [UNDER SUB-SECT ION (1) OF SECTION 139 ] AND HAS NOT MADE A RETURN OR A REVISED RETURN UND ER SUB-SECTION (4) OR SUB-SECTION (5) OF THAT SECTION, OR ( B ) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE IS SUED UNDER SUB- SECTION (1) OF SECTION 142 33 [OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION], OR ( C ) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL TH E TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143 , THE [ASSESSING] OFFICER, AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH THE [ASSESSING] OFFICER HAS GATHERED , [SHALL, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE TH E ASSESSMENT] OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AN D DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSES SMENT ; 4.1. IT IS CLEAR FROM THE LANGUAGE OF SECTION 14 4(1)(B) OF THE I.T. ACT THAT IF THE ASSESSEE FAILS TO COMPLY WITH ALL THE TERMS OF NOTICE UNDER SECTION 142(1) OF I.T.ACT, THE ASSESSMENT IN THE MA NNER PROVIDED IN SECTION 144 OF THE I.T. ACT IS JUSTIFIED. 4.2. IN VIEW OF THE ABOVE, THE ACTION OF AO IN REJ ECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF I.T. ACT IS UPHELD. 4.3. NOW THE LIMITED QUESTION OF APPLYING A FAIR AN D REASONABLE NET PROFIT PERCENTAGE REMAINS TO BE DECIDED. I AM NOT I NCLINED TO SUBSCRIBE TO THE RELIANCE OF A.O. ON THE CASE OF PRABHAT KUMA R CONTRACTOR (SUPRA) AS THE APPLICATION OF 12% NET PROFIT WAS MADE ON SP ECIFIC FACTS OF THAT CASE. IN THAT CASE CERTAIN ADDITIONS ON ACCOUNT OF UNVERIFIABLE PURCHASES WERE MADE BY AO WHICH WERE ENHANCED BY CIT(A) AND H ONBLE ITAT AFTER CONSIDERING THE TOTALITY OF CIRCUMSTANCES HEL D THAT 12% NP ATE ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 6 WAS REASONABLE WHICH WAS UPHELD BY THE HONBLE HIGH COURT ON THE GROUND THAT NO QUESTION OF LAW WAS INVOLVED. IN THI S CASE FACTS ARE OTHERWISE AND THE BOOKS RESULTS ARE REJECTED FOR NO T FURNISHING COMPLETE DETAILS AND BOOKS OF ACCOUNTS. IN A CASE HONBLE IT AT, AMRITSAR, REPORTED AT INDIAN TAXATION REPORT (1998) PAGE 498 ( AS QUOTED IN THE DECISION OF HONBLE ITAT, AMRITSAR IN CASE OF MANGA T RAM CONTRACTOR, SUPRA) HAS HELD THAT THE PAST HISTORY O F THE CASE COULD BE THE BEST GUIDE FOR ESTIMATING THE INCOME, IN COMPARISON TO OTHER COMPARABLE CASES. IN THE PRESENT CASE, SUCH HISTORY IS AVAILABLE INN THE SUBMITTED DOCUMENTS BY THE ASSESSEE AS UNDER: FINANCIAL YEAR G.P.% NET PROFIT% (BEFORE SALARY & INTT.TO PARTNERS) 2004-05 --- 10.43 2005-06 8.48 5.05 2006-07 9.73 6.85 2007-08 9.58 5.48 IN THE YEAR UNDER CONSIDERATION, THE NET PROFIT BEFORE AND AFTER SALARY AND INTEREST IS ALSO LOWER THAN PREVIOUS YEARS AT 5 .49% AS COMPARED TO 6.93% IN IMMEDIATELY PRECEDING YEAR AND AT 2.28% AS COMPARED TO 5.13% IN PRECEDING YEAR. THE TURNOVER IS RS.2,05,06 ,774/-. AS PER SECTION 44AD OF I.T.ACT, A PRESUMPTIVE RATE OF 8% I S APPLICABLE. CONSIDERING THIS, COUPLED WITH THE FACTS OF FALL IN PROFIT IN THIS YEAR AND THE GENERAL MAXIM THAT HIGHER THE TURNOVER LOWER TH E PROFIT, I FEEL IT WOULD BE MOST FAIR AND REASONABLE, IF A PROFIT RATE OF 7% IS APPLIED IN THIS CASE. SINCE THERE IS A DEFAULT U/S 184(5) OF I .T. ACT, NO SALARY AND INTEREST RATE ARE ALSO ALLOWABLE. 8.1. WE HAVE GONE THROUGH THE AFORESAID ORDER PASSE D BY THE LD. FIRST APPELLATE AUTHORITY AND FOUND THAT THE LD. FIRST AP PELLATE AUTHORITY HAS PASSED A WELL REASONED ORDER ON THE BASIS OF RELEVANT PROV ISIONS OF LAW AS WELL AS THE DECISION OF THE ITAT AMRITSAR BENCH, IN THE CAS E OF M/S. MANGAT RAM ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 7 CONTRACTOR IN ITA NO.389/ASR/2003 AND ESPECIALLY BY GIVING NET PROFIT RATE FOR THE PREVIOUS YEARS OF THE ASSESSEE BEFORE ADJU STING SALARY AND INTEREST TO THE PARTNERS. THEREFORE, NO INTERFERENCE IS REQUIRE D IN THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. ACCORD INGLY, WE UPHOLD THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY BY DISMISSING THE APPEAL FILED BY THE REVENUE. 9. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE IN IT A NO.427(ASR)/2012. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUI RE ANY ADJUDICATION. AS REGARDS GROUNDS NO. 2 & 3, REGARDING ACCEPTANCE OF BOOKS RESULTS, THE SAME ARE ALSO DISMISSED SINCE WE HAVE UPHELD THE ORDER O F LD. FIRST APPELLATE AUTHORITY IN REJECTING THE BOOKS OF ACCOUNT UNDER S ECTION 145(3) OF THE I.T. ACT, AS REPRODUCED ABOVE. 9.1. GROUND NO.4 RELATES TO IGNORING THE SUBMISSION OF THE ASSESSEE BY THE LD. CIT(A) REGARDING DEDUCTION U/S 40(B) OF THE ACT ON ACCOUNT OF SALARY AND INTEREST PAID TO PARTNERS. THIS ISSUE HAS BEEN DISCUSSED BY THE LD. CIT(A) IN PARA 4.3 OF HIS ORDER AND HAS HELD THAT SINCE THERE IS A DEFAULT U/S 184(5) OF THE I.T.ACT, NO SALARY AND INTEREST ARE A LLOWABLE. ACCORDINGLY, WE CONCUR WITH THE FINDINGS OF THE LD. CIT(A) AND DISM ISS THIS GROUND OF THE ASSESSEE. ITA NO.404(ASR)/2012 ITA NO.427(ASR)/2012 8 9.2. GROUNDS NO.5, 6 & 7 ARE REGARDING CHARGING OF INTEREST UNDER SECTIONS 234A, 234B AND 234D OF THE I.T.ACT. THESE GROUNDS A RE CONSEQUENTIAL IN NATURE AND THE AO IS DIRECTED TO ALLOW CONSEQUENTIA L RELIEF, IF ANY, AT THE TIME OF GIVING EFFECT TO THE ORDER. THESE GROUNDS O F APPEAL ARE DISPOSED OF IN THESE TERMS. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AS WE LL AS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH DECEMBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10TH DECEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S.MEHAR ENTERPRISES, JAMMU. 2. THE DCIT,CIRCLE-1, JAMMU. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.