Siba Prasad Mishra, V. ITO, Phulbani

ITA 436/CTK/2013

• Counselvise Citation: 43622114 RSA 2013
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: P K MISHRA
• Keywords: Unexplained cash credit; Depreciation
• Section: 143(3); 145

Judgement Text

1 , CUTTACK IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( )BEFORE . . , , HONBLE SHRI P.K.BANSAL, ACCOUNTANT MEMBER. /AND . . , HONBLE SHRI D.T.GARASIA, JUDICIAL MEMBER / I.T.A.NO.436 /CTC/ /2013 / ASSESSMENT YEAR: 2009-2010 SIBA PRASAD MISHRA, BOUDH PA NO.ADFPM 2721 A - - - VERSUS- ITO, PHULBANI WARD ( /APPELLANT ) ( /RESPONDENT) / FOR THE APPELLANT: /SHRI P.K.MISHRA /FOR THE RESPONDENT: /SHRI S.C.MOHANTY / DATE OF HEARING: 24.4.2014 / DATE OF PRONOUNCEMENT: 2 7 . 6 .2014 / ORDER PER BENCH THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.6.2013 OF LD CIT(A), BERHAMPUR FOR THE ASSESSMENT YEAR 2009-2010 ON THE FOLLOWING GROUNDS; 1. FOR THAT THE IMPUGNED ORDERS PASSED BY THE FORUM BELOW ARE NOT JUST AND PROPER UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , AND SUCH THE ADDITION MADE THEREIN BY WAY OF ESTIMATION ARE LIABLE TO BE REDUCED TO THE FIGURE RETURNED IN THE INTEREST OF JUSTICE. 2. FOR THAT THE LEARNED C.I.T (A) HAS COMMITTED GROSS ERROR OF FACT AND LAW IN CONFIRMING THE ESTIMATION MADE BY THE LEARNED A.O. AT A HIGHER RATE IGNORING THE FACT EXPLAINED BY THE ASSESSEE FOR LOWER PROFIT PERCENTAGE. 2 3.FOR THAT, THE ESTIMATION OF NET PROFIT @ 6% BY BOTH THE AUTHORITIES ARE WITHOUT ANY BASIS, EXCESSIVE, ARBITRARY AND CONTRARY TO THE BOOKS OF ACCOUNT MAINTAINED ON DAY TODAY REGULAR COURSE OF BUSINESS, AS SUCH THE IMPUGNED ESTIMATION @ 6 % IS LIABLE TO BE REDUCED TO THE FIGURE RETURNED. 4. FOR THAT THE LEARNED A. 0. AS WELL AS THE LEARNED C.I.T.(A) SHOULD NOT HAVE IGNORED THE CLAIM OF DEPRECIATION AND BANK INTEREST PAID AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT, WHILE ESTIMATING THE NET PROFIT AT A HIGHER RATE. 5. FOR THAT THE LEARNED A. 0. AS WELL AS THE LEARNED C.I.T.(A) SHOULD NOT HAVE ESTIMATED THE NET PROFIT ON AN EXCESSIVE HIGHER SIDE I.E. @ 6% OF THE GROSS RECEIPT FROM CIVIL CONTRACT, AGAINST THE DISCLOSED THE NET PROFIT @ 3.30% BY THE ASSESSEE. 6. FOR THAT WHILE PASSING THE IMPUGNED ORDERS, THE LEARNED FORUM BELOW SHOULD NOT HAVE IGNORED THE FACTUAL ASPECTS THAT IN THE CASE OF CIVIL CONSTRUCTION WORKS, THE ASSESSEE IS A SUB CONTRACTOR AND IN CASE OF SUB CONTRACT THE PROFIT PERCENTAGE REMAINS NORMALLY VERY LOW. 2. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF TRADING IN TRACTOR AND SPARE PARTS, TRANSPORT AND WORKS CONTRACT. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN SHOWING THE TOTAL INCOME OF RS.8,74,540/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EXECUTED CONTRACT WORK TO THE TUNE OF RS.2,39,07,064/- AND HAS DISCLOSED A PROFIT OF RS.7,25,136/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH ALL THE BILLS AND VOUCHERS IN RESPECT OF THE RECEIPTS, TO WHICH, ASSESSEE FAILED TO COMPLY. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER REJECTED THE BOOK RESULTS RELATING TO THE CONTRACT BUSINESS. THE AO ALSO NOTICED THAT THE ASESSEE IS ENGAGED IN SUB-CONTRACT WORK. THEREFORE, THE AO ESTIMATED THE PROFIT @ 6% AND DETERMINED THE INCOME FROM CONTRACT BUSINESS AT RS.14,34,423/-. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) IN THE IMPUGNED ORDER ALSO CONSIDERED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09, WHEREIN, THE TRIBUNAL DIRECTED TO ACCEPT THE BOOK RESULTS OF 3.1% PROFIT AS DISCLOSED BY THE ASSESSEE. THE CIT(A) WAS OF THE VIEW THAT IF A PROFIT RATE OF 8% IS APPLIED FOR NORMAL CONTRACT RECEIPT OF RS.1,39,07,064/- AND A RATE OF 3.1% IS APPLIED FOR REMAINING AMOUNT FOLLOWING THE ORDER OF THE ITAT (SUPRA) FOR THE IMMEDIATELY PRECEDING YEAR, THE TOTAL INCOME OF THE ASSESSEE FROM THE CONTRACT BUSINESS SHALL BE AROUND 3 THE INCOME ESTIMATED BY THE AO AT RS.14,34,423/-. IN VIEW OF THIS, THE CIT(A) CONFIRMED THE ESTIMATION OF INCOME ON THE RESPECTIVE NATURE OF BUSINESS. HENCE, THIS APPEAL BY THE ASSESSEE. 4. BEFORE US, LD A.R. PRODUCED THE COPY OF THE DECISION OF THE TRIBUNAL FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IN ITA NO.384/CTK/2012 ORDER DATED 14.8.2012, WHICH HAS BEEN DISCUSSED BY THE CIT(A) IN THE IMPUGNED ORDER AND CONTENDED THAT THE CIT(A) SHOULD NOT HAVE CONFIRMED THE ESTIMATION OF NET PROFIT @ 6% OF THE GROSS RECEIPTS AGAINST THE DISCLOSED NET PROFIT OF 3.03%. HE CONTENDED THAT THE ASSESSEE IS ALSO A SUB- CONTRACTOR, PART OF CONTRACT RECEIPT IS FROM SUB-CONTRACT. HE DREW OUR ATTENTION TO THE AUDIT REPORT. HE CONTENDED THAT THE NET PROFIT HAS NOT BEEN REDUCED BECAUSE OF THE CLAIM OF EXCESS EXPENDITURE RATHER THE CLAIM OF DEPRECIATION AND INTEREST PAID ON LOAN IS THE CAUSE FOR REDUCTION OF PROFIT. HE ALSO CONTENDED THAT FOR THE PREVIOUS ASSESSMENT YEAR, THIS TRIBUNAL AFTER CONSIDERING THE CLAIM OF DEPRECIATION AND BANK INTEREST, HAS DIRECTED THE AO TO ACCEPT THE BOOK RESULTS. THE CIT(A) WHILE ADMITTING THAT THE FACTS ARE IDENTICAL SHOULD NOT HAVE DISOBEYED THE ORDER OF THE TRIBUNAL, WHICH IS BINDING ON HIM. IF THE CLAIM OF DEPRECIATION AND BANK INTEREST ARE ADDED TO THE NET PROFIT DISCLOSED, THEN THE ACTUAL PROFIT OF THE ASSESSEE IS MUCH MORE THAN ESTIMATION MADE BY THE AO. THEREFORE, THE ASSESSEE HAS NOT REDUCED HIS PROFIT INTENTIONALLY BY CLAIMING EXCESS OF EXPENDITURE. NON CONSIDERATION OF CLAIM OF DEPRECIATION AND BANK INTEREST WHILE ESTIMATING THE PROFIT IS AGAINST THE CIRCULAR OF CBDT. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT. IN FACT THE AO VERIFIED THE BOOKS BUT BECAUSE OF SOME SELF MADE VOUCHERS PRODUCED BEFORE HIM, REJECTED THE SAME ON THE GROUND THAT THE SAME WERE NOT VERIFIABLE. THE AO HAS NOT POINTED OUT THAT WHICH BILLS ARE NOT VERIFIABLE. MERE ON THE BASIS OF A GENERAL STATEMENT, THE BOOK RESULTS OF THE ASSESSEE CANNOT BE DISTURBED. IN VIEW OF THIS, LD A.R. URGED BEFORE US TO ACCEPT THE BOOK RESULTS DISCLOSED BY THE ASSESSEE. 4 5. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF LD CIT (A) AND CONTENDED THAT THE CIT(A) HAS ALREADY DISTINGUISHED THE DECISION OF THE TRIBUNAL AND SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER IN APPLYING THE NET PROFIT @ 6%. HE URGED TO UPHOLD THE DECISION OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE CASE. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT FOR THE YEAR UNDER CONSIDERATION, THE AO HAS MADE THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED THE CASH BOOK, LEDGER AND OTHER DETAILS, ALL BILLS AND VOUCHERS IN RESPECT OF THE BUSINESS ARE PRODUCED ALONGWITH COPIES OF BANK ACCOUNTS AND WRITTEN EXPLANATIONS WHICH ARE VERIFIED AND EXAMINED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SHOWN RS.2,80,000/- AS UNSECURED LOAN IN THE NAME OF SRI NIRANJAN NAYAK, WHO IS IN THE BUSINESS OF CIVIL CONTRACT AND THE AO HAS VERIFIED THE BALANCE SHEET OF SRI NAYAK AND IN THE BALANCE SHEET, NO SUCH LOAN OR ADVANCES HAVE BEEN SHOWN BY HIM IN THE ASSET SIDE OF THE BALANCE SHEET. SRI NAYAK ALSO REFUSED TO HAVE ANY SUCH LOAN. THEREFORE, THE AO TREATED SAID AMOUNT AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE. ASSESSEE HAS EXEXUCTED CIVIL CONTRACT WORK AT A TUNE OF RS.2,39,07,064/- AND DISCLOSED PROFIT OF RS.7,25,136/- AFTER DEBITING HUGE EXPENSES UNDER DIFFERENT HEADS. ASSESSEE HAS PRODUCED CASH BOOK, LEDGER AND OTHER DETAILS. ALL BILLS AND VOUCHERS IN RESPECT OF CONTRACT RECEIPT ARE NOT PRODUCED FOR VERIFICATION. THEREFORE, THE AO HAS REJECTED THE BOOK PROFITS AND HE HAS ESTIMATED THE NET PROFIT AT 6% OF GROSS CONTRACT. WE FIND THAT THE CIT(A) HAS DELETED THE ADDITION OF RS.2,80,000/- BUT IN RESPECT OF NET PROFIT @ 6%, THE CIT(A) HAS DISMISSED. WE FIND THAT LD A.R. HAS RELIED UPON THE DECISION OF ITAT, CUTTACK IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09, WHEREIN THE PROFIT WAS ESTIMATED AT 3.1%. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09(SUPRA), WHEREIN, THE FACTS OF THE 5 ASSESSEE ARE THAT THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT FOR VERIFICATION AND THE BOOK RESULTS WERE REJECTED UNDER SECTION 145 OF THE ACT AND THEREAFTER THE TRIBUNAL HAS TAKEN THE PROFIT AT 3.1%. FOR THE YEAR UNDER CONSIDERATION, ASSESSEE HAS NOT PRODUCED ALL CONTRACT BILLS AND VOUCHERS IN RESPECT OF CONTRACT RECEIPTS FOR VERIFICATION. THEREFORE, WE ARE OF THE VIEW THAT THE FACTS OF THE ASSESSEE IN ASSESSEES CASE FOR THE YEAR UNDER CONSIDERATION IS DIFFERENT THAT OF ASSESSMENT YEAR 2008-09. THEREFORE, WE DO NOT FOLLOW THE TRIBUNALS DECISION. WE FIND THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT FOR VERIFICATION. THEREFORE, IN THE INTEREST OF JUSTICE, WE REVERSE THE FINDINGS OF LD CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO AND ASSESSEE IS DIRECTED TO PRODUCE BOOKS OF ACCOUNT AS REQUIRED BY THE AO AND IF THE AO IS SATISFIED THAT ASSESSEES NET PROFIT IS BELOW 6%, THEN THE AO MAY PASS THE ORDER AS PER LAW AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WE ALSO OBSERVE THAT IF THE ASSESSEE FAILS TO PRODUCE BOOKS OF ACCOUNT AS REQUIRED BY THE AO, THEN THE AO IS FREE TO DECIDE THE MATTER AS PER LAW. 7 IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.6.2014) SD/- SD/- ( . . ) , (P.K.BANSAL), ACCOUNTANT MEMBER ( . . ), (D.T.GARASIA) JUDICIAL MEMBER ( )DATE. 27.6.2014 PLACE: PANAJI (B.K.PARIDA) SENIOR.PRIVATE SECRETARY. 6 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SIBA PRASAD MISHRA, NEAR TOWN HALL,BOUDH. 2 / THE RESPONDENT: ITO, PHULBANI WARD, PHULBANI 3 . /THE CIT,BHUBANESWAR 4 . ( )/THE CIT(A),BERHAMPUR 5 . /DR, CUTTACK BENCH 6 . GUARD FILE . /TRUE COPY, / BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK