M/s A.B Construction, GONDA V. Astt. Commissioner of Income Tax, GONDA

ITA 433/LKW/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1143 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ABHINAV MEHROTRA SHRI RAJIV
• Keywords: Principle of natural justice
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 433/LKW/2015 ASSESSMENT YEAR: 2010 - 11 M/S A.B. CONSTRUCTION NOOR BAGH, FAIZABAD ROA D BYPASS GONDA V. ASSTT. CIT CIRCLE GONDA T AN /PAN : AAKFA3647D (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI ABHINAV MEHROTRA, ADVOCATE RESPONDENT BY: SHRI RAJIV KUMAR, D.R. DATE OF HEARING: 05 02 201 8 DATE OF PRONOUNCEMENT: 08 0 2 201 8 O R D E R P ER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A), FAIZABAD DATED 2/1/2015. 2 . THE BRIEF FACTS OF THE CASE ARE THAT T HIS IS A RECALLED MATTER . THE APPEAL OF THE ASSESSEE WAS INITIALLY DISPOSED OF VIDE ORDER DATED 27/6/2016, BUT THE TRIBUNAL INADVERTENTLY FAILED TO ADJUDICATE GROUND NO.4 RELATING TO DISALLOWANCE OF SALARY AND INTEREST TO PARTNERS, THEREFORE, ASSESSEE FILED A MISCELLANEOUS APPLICATION VIDE M.A. NO.97/LKW/2016, WHICH WAS DISPOSED O F BY THE TRIBUNAL VIDE ORDER DATED 11/12/2017 ALLOWING THE M.A. FILED BY THE ASSESSEE TO ADJUDICATE UPON GROUND NO.4 RAISED BY THE ASSESSEE IN THE ORIGINAL GROUNDS OF APPEAL. ACCORDINGLY, THE APPEAL WAS FIXED FOR HEARING ON 5/2/2018 TO ADJUDICATE GROUND NO.4 WHICH READS AS UNDER: - ITA NO.433/LKW/2015 PAGE 2 OF 5 BECAUSE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHENCE IT IS SPECIFICALLY ACKNOWLEDGE BY THE LD CIT (APPEAL), THAT THE ASSESSEE WAS PREVENTED FROM MAKING COMPLIANCE OF THE NOTICE OF THE HEARING ISSUED BY THE AO DUE TO JUSTIFIABLE REASONS; IT WAS OBLIGATORY FOR THE CIT (A), IN EXERCISE OF THE COTERMINOUS POWERS, TO ALLOW THE CLAIM OF THE ASSESSEE TOWARDS INTEREST AND SALARY PAID TO PARTNERS AS ELIGIBLE DEDUCTIONS, UPON PRODUCING THE RELEVANT EVIDENCE BEFORE THE AUTHOR ITY. 3 . I N THIS CASE THE ASSESSEE E - FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.13,62,050/ - CONSISTING OF INTEREST INCOME OF RS.2,11,675/ - . DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ALLOWED NUMBER OF OPPORTUNITIES TO THE ASSESSEE TO FURNISH THE DETAILS , BUT THERE WAS NO PROPER COMPLIANCE. IN VIEW OF NON - COMPLIANCE OF NOTICE AND NON - PRODUCTION OF THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE DISCLOSED NET PROFIT OF RS.13,62,053/ - @ 2.35% OF THE GROSS TURNOVER OF RS.5,78,15,398/ - . THE ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE HAS DEBITED HUGE EXPENSES OF RS.3.04 CRORES AND RS.1.95 CRORES UNDER THE HEAD MATERIALS INCLUDING E XPENSES AND LABOUR EXPENSES. THE ASSESSING OFFICER ALSO NOTED THAT THE AMOUNT OF RS.1,73,938/ - WAS RECEIVED BY THE ASSESSEE FROM SAR Y U NAHAR KHAND - 4 WHICH IS NOT DISCLOSED IN THE TDS SCHEDULE OF THE INCOME TAX RETURN. THE ASSESSING OFFICER COMPUTED TH E NET PROFIT OF THE ASSESSEE AT RS.46,25,232/ - @ 8% OF THE CONTRACT RECEIPTS OF RS.5,78,15,398/ - . THE ASSESSING OFFICER ALSO STATED THAT NO FURTHER DEDUCTION UNDER SECTIONS 30 TO 38 OF THE ACT SHALL BE ALLOWED. THE ASSESSING OFFICER ALSO DID NOT ALLOW DE DUCTION ON ACCOUNT OF INTEREST AND REMUNERATION PAID TO PARTNERS. ITA NO.433/LKW/2015 PAGE 3 OF 5 4 . THE ASSESSEE HAS FILED VOLUMINOUS PAPER BOOK BEFORE US AND AT THE TIME OF HEARING , THE LD. A.R. OF THE ASSESSEE CONTENDED THAT EVERY DETAILS WERE WITH THE ASSESSING OFFICER AT THE TIME OF AS SESSMENT PROCEEDINGS AND TH E CERTIFIED COP IES OF ORDER SHEETS WERE PLACED IN THE PAPER BOOK FILED BEFORE US WHEREIN COP IES OF CASH BOOK; ADDRESS OF CREDITORS, VOUCHERS FOR EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT; BIFURCATION OF SECURITY DEPOSITS AND DETAILS OF INTEREST ACCRUED ON SELF GIVEN DEPOSIT CERTIFICATES AND TDS CERTI FICATES FOR INTEREST INCOME , WERE SUBMITTED BEFORE THE ASSESSING OFFICER , ARE PLACED . THEREAFTER , ASSESSEE GOT AN ADJOURNMENT TILL 4/2/2013 AND THEREAFTER ON 4/3/2013 ORDER UNDER SECTION 144 WAS PASSED. THE LD. A.R. OF THE ASSESSEE VEHEMENTLY ARGUED THAT WHEN ADJOURNMENT WAS GRANTED UPTO 4/2/2013 AND ORDER UNDER SECTION 144 WAS PASSED ON 4/3/2013, IN BETWEEN ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY BY WAY OF ANY NOTICE THAT ON 4/3/ 2013, BEST JUDGMENT ASSESSMENT ORDER UNDER SECTION 144 OF THE ACT WOULD BE PASSED. THE ASSESSMENT ORDER PASSED UNDER SECTION 144 OF THE ACT W ITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE IS BAD IN LAW. 5 . THE LD. A.R. OF THE ASSESSEE RE LIED UPON THE JUDGMEN T OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VIJAY CONSTRUCTIONS [2007] 213 CTR 105 (ALLD) WHEREIN IT WAS OPIN ED AND HELD THAT WHERE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND BEST JUDGMENT ASSESSMENT HAS BEEN MADE, IT WOULD NOT IN IT SELF BE SUFFICIENT TO HOLD THAT THE STATUTORY DEDUCTIONS WHICH ARE OTHERWISE AVAILABLE TO THE ASSESSEE, WOULD NOT BE AVAILABLE TO THE ASSESSEE , WHO HAS BEEN ASSESSED UNDER BEST JUDGMENT ASSESSMENT BY THE A SSESSING O FFICER, UNLESS, OF COURSE, ANY RULE OR PR OVISION OF THE ACT EXPRESSLY EXCLUDES THE BENEFIT OF STATUTORY DEDUCTIONS TO SUCH AN ASSESSEE . ITA NO.433/LKW/2015 PAGE 4 OF 5 6 . THE LD. A.R. OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SUPREME BUILDERS [2008] 174 TAXM AN 228 (P&H) WHEREIN IT WAS HELD THAT EVEN THOUGH ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNTS ON CASH SYSTEM OF ACCOUNTING, YET DEDUCTION ON ACCOUNT OF SALARY AND INTEREST TO BE PAID TO THE PARTNERS WAS ALLOWABLE AS PER THE PARTNERSHIP DEED. THE LD. A.R. O F THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE HON'BLE ANDHRA PRADESH AND TELENGANA HIGH COURT IN THE CASE OF CIT VS. INTER CONTINENTAL CONSTRUCTIONS [2015] 61 TAXMANN.COM 15. 7 . THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE SUBORDINATE AUTHORITIES. 8 . WE HAVE PERUSED THE CASE RECORDS, HEARD THE RIVAL CONTENTIONS, ANALYSED THE FACTS & CIRCUMSTANCES OF THE CASE. WE OBSERVE FROM THE COPIES OF THE ORDER SHEETS THAT ALL THE REQUISITE DETAILS SOUGHT FOR BY THE ASSESSING OFFICER WERE FURNISHED BY THE ASSESSEE AND THEREAFTER ASSESSEE SOUGHT ADJOURNMENT AND IT WAS GRANTED TILL 4/2/2013 , BUT ON 4/3/2013 ORDER UNDER SECTION 144 OF THE ACT WAS PASSED AND IN BETWEEN NO NOTICE WAS SERVED ON THE ASSESSEE BY WHICH HE COULD KNOW THAT ORDER UNDER SECTION 144 WAS TO BE PASSED. WE , IN THE INTEREST OF NATURAL JUSTICE AND ON THE BASIS OF VARIOUS JUDICIAL PRONOUNCEMENTS PLACED BEFORE US, ARE OF THE VIEW THE ASSESSING OFFICER SHOULD HAVE GIVE N PROPER OPPORTUNITY BY ISSUING NOTICE TO THE ASSESSEE BEFORE RESOR T ING T O THE BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE ACT . W E, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH IN VIEW OF THE JUDICIAL DECISIONS PLACED BEFORE US AFTER PROVIDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, GROUND NO.4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.433/LKW/2015 PAGE 5 OF 5 9 . THIS ORDER WILL BE PART OF THE ORDER OF THE TRIBUNAL DATED 27/6/2018 IN ITA NO.433/ LKW/2015 AND, THEREFORE, THIS ORDER IS TO BE READ ALONG WITH ORDER DATED 27/6/2018. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 / 0 2 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH FEBR UARY , 201 8 JJ: 0502 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR