M/s. Royal Tech. Enterprises, Meerut V. JCIT, Meerut

ITA 4370/DEL/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 8830 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence
• Section: 143(3); 143(2); 68

Judgement Text

1 ITA NOS.4369 & 4370/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F N EW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER I.T.A. NOS. 4369 & 437 0/DEL/2014 (ASSESSMENT YEARS : 2009-10 & 2010-11) M/S. ROYAL TECH. ENTERPRISES, J-127, PANDAV NAGAR, MEERUT. (PAN : AAJFR 1410 L) (APPELLANT) VS INCOME TAX OFFICER, WARD 2, MEERUT. ( RESPONDENT) APPELLANT BY SHRI PREMJIT KASHYAP, C.A. RESPONDENT BY SHRI S. N. MEENA, SR. D.R. ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER DATED 11.03.2014 AND 28.03.2014 PASSED BY THE COMMISSIONE R OF INCOME TAX [APPEALS] - MEERUT FOR ASSESSMENT YEARS 2009-10 & 2010-11 RESPECTIVELY. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 4369/DEL/2014 (1) THAT THE ADDITION OF RS. 35 LACS AS MADE BY THE AO AND SUSTAINED BY CIT (A) OUT OF THE SUNDRY CREDITORS IS ARBITRARY, U NJUST AND ANY RATE VERY EXCESSIVE. (2) THAT THE ADDITIONAL EVIDENCE AS COLLECTED AND FURNI SHED BY THE AO IN DATE OF HEARING 20.11.2019 DATE OF PRONOUNCEMENT 22.11.2019 2 ITA NOS.4369 & 4370/DEL/2014 REMAND PROCEEDINGS ON THE INSTRUCTION OF CIT (A) VI DE LETTER DATED 22/02/2013 U/S 250(4) OUGHT NOT TO HAVE REJECTED BY THE INCUMBENT CIT (A) IN TERMS OF RULE 46(A) NOT INVOKED BY ASSES EE AND ACCORDINGLY THE SUSTENANCE OF SUCH ADDITION OF RS 35 LACS WITHO UT APPRECIATING THE EVIDENCE AVAILABLE ON RECORD BY CIT (A) IS ARBITRAR Y UNJUST AND UNTENABLE UNDER THE LAW. (3) THAT THE ASSESSEE DENIES HIS LIABILITY TO PAY INTER EST CHARGED U/S 234A, U/S 234B, AND U/S 234C. (4) THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WIT HOUT PREJUDICE TO ONE ANOTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. ITA NO. 4370/DEL/2014 (1) THAT THE ADDITION OF RS. 65,27,016/- BEING THE SU NDRY CREDITORS U/S 68 BY THE AO AND SUSTAINED BY CIT(A) IS ARBITRARY, UNJUST AND ANY RATE VERY EXCESSIVE. (2) THAT WITHOUT PREJUDICE TO GROUND NO 1 ABOVE THE CIT (A) AS ERRED ON FACTS AND UNDER THE LAW SUSTAINING THE ADDITION OF RS.63,90,5 68/- BEING THE OPENING BALANCE OF SUCH SUNDRY CREDITORS BROUGHT FORWARD FR OM EARLIER YEAR. (3) THAT THE AO AND CIT (A) OUGHT NOT TO HAVE MADE ADDI TION IN RESPECT OF SUCH SUNDRY CREDITORS WHICH WERE CONSIDERED AND MAKE PAR T OF ADDITION IN A.Y 2009-10 AS FORMING PART OF THE OPENING BALANCE OF S UCH SUNDRY CREDITORS AND ACCORDINGLY THE ADDITION OF SUCH SUNDRY CREDITORS A GAIN UNDER APPEAL IS ARBITRARY, UNJUST AND AMOUNTS TO DOUBLE ADDITION. (4) THAT THE ASSESSEE DENIES HIS LIABILITY TO PAY INTER EST CHARGED U/S 234A, U/S 234B, AND U/S 234C. (5) THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E CONTRACT BUSINESS FOR VARIOUS TELECOM COMPANIES. THE MAIN WORK UNDERTAKEN BY THE FIRM WAS CIVIL WORK, DIGGING OF TRENCHES AND LAYING OF CABLE UNIT. DUE TO NATURE OF WORK CARRIED OUT BY THE ASSESSEE THE WORK WAS DONE EXCLU SIVELY THROUGH SUB- CONTRACTORS, LABOURES, ETC. THE ASSESSEE FILED INCO ME TAX RETURN ON 30.09.2009 3 ITA NOS.4369 & 4370/DEL/2014 SHOWING INCOME AT NIL WHICH WAS DULY PROCESSED. THE CASE WAS SELECTED FOR SCRUTINY AND SUBSEQUENTLY A NOTICE U/S 143(2) WAS I SSUED ON 19.08.2010 IN RESPONSE THE ASSESSEE FILED REPLY AND DOCUMENTARY E VIDENCES. DURING THE COURSE OF PROCEEDINGS, ALONG WITH OTHER QUERIES THE ASSESSEE WAS ASKED TO FILE THE COMPLETE DETAILS IN RESPECT OF SUNDRY CREDITORS . BUT THE ASSESSEE COULD NOT FILE THE REQUISITE INFORMATION ABOUT THE SUNDRY CRE DITORS EVEN AFTER AVAILING SEVERAL OPPORTUNITY. THE ASSESSING OFFICER FURTHER ASKED AS TO WHY THE TOTAL AMOUNT OF RS.2,22,08,770/- SHOWN AS SUNDRY CREDITOR S IN HIS BALANCE SHEET SHOULD NOT BE ADDED IN THE INCOME OF THE ASSESSEE I N ABSENCE OF ANY EVIDENCES. IN RESPONSE, THE COUNSEL OF THE ASSESSEE PRODUCED T HE COPY OF BANK ACCOUNTS OF THE NEXT YEAR OF THE ASSESSEE AND EXPLAINED THAT THE PAYMENTS TO THE SUNDRY CREDITORS HAVE BEEN MADE IN THE NEXT YEAR WHICH MAY BE VERIFIED FOR THE SAME. THE ASSESSING OFFICER MADE ADDITION OF RS.35,00,000 /- WHICH COULD NOT BE VERIFIED FROM THE BALANCE SHEET. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASSE SSEE FILED AN APPEAL BEFORE THE CIT(A) THE CIT(A) DISMISSED THE APPEAL O F THE ASSESSEE WITHOUT ACCEPTING DETAILS IN RESPECT OF CREDITORS FILED BEF ORE THE CIT(A) UNDER RULE 46A OF THE INCOME TAX RULES, 1962. 5. THE LD. AR SUBMITTED THAT KEEPING IN VIEW OF THE BUSINESS OF THE ASSESSEE WHERE THE DIRECT WORK HAS BEEN DONE ON DIF FERENT LOCATIONS AND LOCATING PETTY CONTRACTORS, AFTER A GAP OF THREE YE ARS FROM, IS DIFFICULT TO LOCATE THE CONTRACTORS. THE CONTRACTORS KEPT ON CHANGING T HEIR LOCATION DUE TO WHICH SOME NOTICES U/S 133(3) WERE NOT SERVED. THE LD. AR FURTHER SUBMITTED THAT IF SUM OF RS.35,00,000/- IS ADDED ALONG WITH INCOME OF FERED FOR TAX OF RS.9,20,780/- THE NET PROFIT RATE ON GROSS RECEIPTS OF RS.2,16,65,407/- WILL COME TO 20.40%. THE NET PROFIT RATE IN ASSESSEES O WN CASE WHICH HAVE BEEN COMPLETED U/S 143(3) OF THE ACT FOR A.Y. 2008-09 WA S 3.08%, IN A.Y. 2010-11 WAS 5.80%, IN A.Y. 2011-12 WAS 4.47%, IN A.Y. 2012- 13 WAS 5.02%. THE LD AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER AS WEL L AS CIT(A) SHOULD HAVE 4 ITA NOS.4369 & 4370/DEL/2014 APPLIED REASONABLE NP RATE ON THE GROSS RECEIPTS OF RS.2,16,65,407/- OF 4% OR SO BUT I.E. NOT THE CASE. THEREFORE, THE LD. AR REQ UESTED THAT THIS ISSUE MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO WORK OUT INCOME AFRESH AFTER CONSIDERING THE NET PROFIT RATE IN BOTH THE Y EARS. THE LD. AR FOR A.Y. 2010- 11 SUBMITTED THAT THE ASSESSING OFFICER ALREADY WOR KED OUT THE INCOME AFTER APPLYING THE NET PROFIT RATE OF 8% THEN NO ADDITION CAN BE MADE U/S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CREDITORS. IN RESPECT OF THIS CONTENTION, THE LD. AR RELIED UPON THE DECISION OF THE HONBLE JURISDIC TIONAL HIGH COURT IN CASE OF CIT VS. BANWARI LAL BANSHIDHAR (1998) 229 ITR 229 W HEREIN IT WAS HELD THAT WHEN THE GROSS PROFIT RATE IS APPLIED, THAT WOULD T AKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES MADE BY THE ASSESSEE. 6. THE LD. DR SUBMITTED THAT THE CIT(A) AS WELL AS THE ASSESSING OFFICER WAS RIGHT IN APPLYING THE NP RATE AT 8% OF GROSS RE CEIPTS. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT( A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE ASSESSE E BEFORE THE CIT(A) SUBMITTED CERTAIN EVIDENCES / DETAILS WHICH WAS NOT EARLIER B ROUGHT ON RECORD BY THE ASSESSEE. THE CIT(A) WITHOUT GOING INTO THE SAID DE TAILS HAS REJECTED THE SAME. BESIDES THAT THE ASSESSEE ALSO IS REQUESTING THAT T HE REASONABLE NP RATE HAS NOT BEEN TAKEN INTO ACCOUNT FOR SUBSEQUENT AS WELL AS PREVIOUS ASSESSMENT YEARS BY THE ASSESSING OFFICER. THEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE CIT(A) TO APPLY THE R EASONABLE RATE AFTER VERIFYING ALL THE ASPECTS REGARDING THIS CONTENTION OF THE ASSESS EE. NEEDLESS TO SAY THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWI NG PRINCIPLE OF NATURAL JUSTICE. THUS, THE APPEAL BEING ITA NO.4369/DEL/201 4 FOR A.Y. 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. AS REGARDS APPEAL BEING ITA NO.4370/DEL/2014 FOR A.Y. 2010-11, THE SAME IS HAVING IDENTICAL ISSUE AND THEREFORE SAME R EASONING WILL BE APPLICABLE 5 ITA NOS.4369 & 4370/DEL/2014 IN THIS CASE AS WELL WHICH WAS GIVEN HEREINABOVE FO R A.Y. 2009-10. THEREFORE, THE APPEAL BEING ITA NO.4370/DEL/2014 IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 9. IN RESULT, BOTH THE APPEALS FILED BY THE ASSESSE E ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF NOVEMBER, 2019 . SD/- SD/- (O. P. MEENA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 22/11/2019 PRITI YADAV, SR. PS * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI