Shri Padma Charan Patro, Cuttack V. ACIT,Berhampur Circle, Berhampur

ITA 432/CTK/2012

• Counselvise Citation: 43222114 RSA 2012
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: P K MISHRA
• Section: 145; 44AD

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 432/CTK/2012 / ASSESSMENT YEAR 2009 - 10 SRI PADMA CHARAN PATRO, BAIDYANATH NAGAR, 2 ND LANE, BERHAMPUR, GANJAM 760 010 PAN: ABMPP 6369 A - - - VERSUS - ASST.COMMISSIONER OF I NCOME - TAX, BERHAMPUR CIRCLE, BERHAMPUR GANJAM 760 010. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI P.K.MISHRA, AR / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DAT E OF HEARING: 28.08.2012 / DATE OF PRONOUNCEMENT: 31.08.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY ISSUE OF ESTIMATING THE INCOME ON THE BUSINESS OF CIVIL CONS TRUCTION WORK RENDERED BY THE ASSESSEE AT 5.82% BUT ESTIMATED AT 8% BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 145 OF THE I.T.ACT,1961. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD THAT THE ASSESSEE IS A WORKS CONTACTOR AND FILED R ETURN OF 41,35,100 WHICH WAS SUBJECTED TO SCRUTINY UNDER THE PROVISIONS OF SECTION 143(3). THE ASSESSEE FILED LEDGER ACCOUNT COPIES OF DIFFERENT EXPENSES BUT NOT PRODUCED THE BOOKS OF ACCOUNT. NO CASH BOOK AND WAGE REGISTER WERE PRODUCED FOR VERIFICATION. THE PAYM ENTS WERE NOT VERIFIED IN ABSENCE OF THE CASH BOOK. NO BILLS AND VOUCHERS FOR EXPENSES WERE PRODUCED WHEN THE ASSESSING OFFICER PASSED THE I.T.A.NO. 432/CTK/2012 2 ORDER U/S.143(3) ON 14.12.2011 ESTIMATING 8% OF THE GROSS CONTRACT RECEIPTS AMOUNTING TO 6.46 CRORES. 3. AGGRIEVED T HE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONSIDERED THE CASE OF THE ASSESSEE RETURNING NET PROFIT BETWEEN 5% TO 6% IN THE IMMEDIATELY PRECEDING THREE AYS, WHEN THE GROSS RECEIPTS WERE RANGING BETWEEN 2 TO 5 CRORES. HE HELD A VIEW TH AT SECTION 44AD OF THE I.T.ACT IS THE GUIDING LAW FOR ESTIMATING THE PROFIT AT 8% WHEN THE BOOKS OF ACCOUNT ARE NOT PRODUCED WHICH SPECIFICALLY PROVIDES FOR CLAIMING LOWER RATE OF INCOME EVEN IF NO AUDIT IS CONDUCTED. HE HELD THE ESTIMATION OF PROFIT @8% REASONABLE AND SO, CONFIRMED THE ASSESSMENT ORDER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER AFTER HAVING PERUSED THE AUDITED FINANCIAL STATEMENTS AVAILABLE TO IT ALONG WITH THE RETURN FILED HAD HAVE VERIFIED THAT THE AS SESSEE HAD EXECUTED GOVERNMENT CONTRACTS BEING BHANJANAGAR IRRIGATION BRANCH, EXECUTIVE ENGINEER, BERHAMPUR AND RURAL WORKS DIVISION II, WHEN THE ROYALTY FOR REMOVAL OF SAND AND SALES TAX LEVIED ON MATERIAL WERE REDUCED FROM THE GROSS RECEIPTS WERE CLAIME D AS EXPENDITURE WERE NOT IN THE NATURE OF DISALLOWABLE EXPENSES BY ESTIMATING THE INCOME OF 8% OF THE GROSS RECEIPTS. HE SUBMITTED THAT THE DIRECT EXPENDITURE ALONE ARE TO BE CONSIDERED FOR THE PURPOSE OF ESTIMATING 8% INCOME FROM GROSS RECEIPTS WHEN THE INDIRECT EXPENSES WHICH COULD NOT BE B ILLED OR REDUCED FROM THE BILLS RAISED BY THE ASSESSEE HAD TO BE SYNCHRONIZED TO THE EXTENT THAT 8% HAS TO BE BALANCED WHEN THE AUTHORITIES BELOW MISDIRECTED THEMSELVES TO HOLD THAT A CONTRACT WAS RENDERING NET PROFIT ONLY. HE ARGUED THAT THE VERY GROSS RECEIPTS DO NOT INCLUDES EXPENDITURE WHICH HAVE BEEN CLAIMED BY THE ASSESSEE ARE DULY ACKNOWLEDGED BY THE CNTRACTEES COULD NOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 44AD BY INVOKING THE PROVISIONS OF SECTION 145 INSOFAR I.T.A.NO. 432/CTK/2012 3 AS THE AUDITORS HAVE CERTIFIED THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND HAVE MAINTAINED CASH BOOK, CONTRACT RECEIPTS, GENERAL REGISTER ON THE COMPUTER WHICH COULD BE PRODUCED AS WHEN THE ASSESSING OFFICER ALREADY STA RTED FOR CALLING FOR THE DETAILS OF THE EXPENSS CLAIMED IN P & L ACCOUNT. THE LEARNED CIT(A) THEREFORE ERRED IN FOLLOWING THE GUIDANCE OF THE PROVISIONS OF SECTION 44AD TO THE EXTENT THAT THE LAW PROVIDES THAT IN ORDER TO CLAIM LOWER MARGIN THAN 8% AS PRE SCRIBED THEREIN HAS TO GET THE ACCOUNTS AUDITED OF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH THE ASSESSING OFFICER HAS HELD A VIEW IMPROPER FOR INVOKING THE PROVISIONS OF SECTION 145 AND NOT BECAUSE THE TURNOVER EXCEEDED THE LIMITS PRESCRIBED . HE POINTED OUT THAT THE ASSESSING AUTHORITIES HAVE NOT FOUND ANY CONTROVERTING MATERIAL WHEN THE EXPENDITURE CLAIMED BEING ROYALTY AND SALES TAX WERE NOT REIMBURSED BY THE CONTRACTEES. HE SUBMITTED THAT THE SUM OF 19,81,384 ROYALTY WAS BORNE BY THE ASSESSEE ON BEHALF OF THE CONTRACTEES AND THE SALES TAX AMOUNTING TO 26,00,280 WAS PAID FOR BY THE ASSESSEE WAS NOT REIMBURSED THEREFORE RENDERED THE INCOME BY THE ASSESSEE AT 5.82% WAS IN ACCORDANCE WITH THE BOOKS OF ACCOUNT WHICH DEFECT HAS BEEN FOUND BY THE ASSESSING AUTHORITIES TO ESTIMATE THE PROFIT AT 8% AND CONCLUDING THE SAME ALLOWABLE AT 92%. THE INCOME OF THE GOVT. AUTHORITIES HAS BEEN INCLUDED IN THE 8% ESTIMATION. HE PRAYED FOR A SUITABLE ESTIMATION TO BE MA DE INSOFAR AS THE LEARNED CIT(A) HAS NOT RELATED TO THE MATTER AS WAS CONSIDERED BY THE ASSESSING OFFICER. 5. THE LEARNED DR SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION OF ITAT , CU TTACK IN THE CASE OF M/S.JUDHISTIR SAMANTRAY IN ITA NO.332/CTK/2008 DT.11.9.2008 WHEN ESTIMATION OF PROFIT AT 8% HAS BEEN HELD PROPER. I.T.A.NO. 432/CTK/2012 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABL E ON RECORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND THAT THE FACTS OF EACH CASE ON ESTIMATION HAS TO BE CONSIDERED AT LENGTH INSOFAR AS ESTIMATION ALONE DOES NOT SUFFICE WHEN NO CONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE RESPECTIVE AUTHORITIES U/S.145 . FINANCIAL STATEMENTS ARE PREPARED BY THE CAS ON THE BASIS OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEES. NON - PRODUCTION OF BOOKS OF ACCOUNT BEFORE THE ASSESSING AUTHORITIES THEREFORE CANNOT BELIE T HE FACT THAT THE CAS HAVE SUBMITTED THE IR AUDIT REPORT ON PRODUCTION OF BOOKS OF ACCOUNT BEFORE THEM. IN ANY CASE, THE END RESULT OF THE FINANCIAL STATEMENTS PARTLY IS ACCEPTED BY THE ASSESSING AUTHORITIES TO ESTIMATE WITHOUT BRINGING ON RECORD ANY CORRES PONDING DEVIATION FROM THE GUIDANCE AS PROVIDED IN SECTION 44AD HAS TO BE BROUGHT ON RECORD IN VIEW OF THE INVOKING THE PROVISIONS OF SECTION 145. PART ACCEPTANCE OF THE BOOK RESULTS AND THEN ESTIMATING ITSELF LEADS TO WRONG ASSUMPTION AND PRESUMPTION FOR INVOKING THE PROVISIONS OF SECTION 145(3) INSOFAR AS THE ASSESSING AUTHORITIES CANNOT BE SAID TO HAVE COMPUTED THE CORRECT INCOME AS PROVIDED BY LAW. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US HAS CATEGORICALLY RAISED THE ISSUE THAT OVER THE PAST THREE YEARS, THE ASSESSEE HAS BEEN DECLARING NET PROFIT BETWEEN 5% TO 6% WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. 8% PROFIT HAS BEEN ESTIMATED THEREFORE ON PURE ASSUMPTION THAT IN CASE THE BOOKS OF ACCOUNT ARE NOT MAINTAINED THE GROSS RECEIPTS HAVE TO BE TAX ED @8% . WE FIND JUSTIFICATION IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ROYALTY AND SALES TAX BEING PECULIAR TO A PART ICULAR BUSINESS WHICH MAKE THE MAJOR CHUNK OF EXPENDITURE INSOFAR AS THE GROSS RECEIPTS DO NOT INCLUDE THESE EXPENDITURES AS CONTRACTED. THEREFORE DEVIATION FROM THE ESTIMATION AT 8% HAD TO BE MADE I.T.A.NO. 432/CTK/2012 5 WHEN THE INFORMATION WAS AVAILABLE TO THE ASSESSING OFFICER ON THE BASIS OF HIS PASSING THE ORDER U/S.143(3). IN THIS VIEW OF THE MATTER, WE HOLD THAT AFTER ALLOWING THE EXTRAORDINARY EXPENDITURE INCURRED IN THE IMPUGNED ASSESSMENT YEAR, ESTIMATION AT 6% (SIX PERCENT) OF THE GROSS RECEIPTS WOULD BE REASONABLE. THE ASSESSING OFFICER I S DIRECTED TO COMPUTE THE INCOME ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTAN T MEMBER. ( ) DATE: 31.08.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI PADMA CHARAN PATRO, BAIDYANATH NAGAR, 2 ND LANE, BERHAMPUR, GANJAM 760 010 2 / THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, BERHAMPUR CIRCLE, BERHAMPUR GANJAM 760 010 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 31.08.2012 . 6. DATE ON WHICH THE FILE GOES T O THE BENCH CLERK 31.08.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.