The ITO, 2(1), V. M/s Chamuna Construction l,

ITA 439/IND/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8012 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-03-2010
• Assessment Year: misc
• Appeal Filed On: 20-06-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESH
• Section: 148

Judgement Text

PAGE 1 OF 6 - I.T.A.NO. 437/IND/2006 CHAMUNDA CONSTRUCTION, UJJAIN IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NOS. 437 & 439/IND/2006 A.YS. : 2000-01 & 2002-03 INCOME-TAX OFFICER, M/S. CHAMUNDA CONSTRUCTION, 2(1), VS MAXI ROAD, UJJAIN UJJAIN APPELLANT RESPONDENT APPELLANT BY : SMT.APARNA KARAN, SR. DR RESPONDENT BY : SHRI S. S. DESHPANDE, C.A. DATE OF HEARING : 09.03.2010 O R D E R PER V.K. GUPTA, A.M. THESE APPEALS FILED BY THE REVENUE BELONG TO THE SA ME ASSESSEE AND INVOLVE COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORD ER FOR THE SAKE OF CONVENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP THE REVENUES APPEAL IN I.T .A.NO. 437/IND/2006, WHEREIN THE GROUND RAISED BY THE REVE NUE READS AS UNDER :- PAGE 2 OF 6 - I.T.A.NO. 437/IND/2006 CHAMUNDA CONSTRUCTION, UJJAIN ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ADOPT NET PROFIT RATE OF @ 6% ON TOTAL CONTRACTUAL RECEIPTS O F RS. 64,27,346/-, DELETING THE TOTAL ADDITION OF RS. 8,13,220/- MADE ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE FILED I TS RETURN OF INCOME IN THE STATUS OF PARTNERSHIP FIRM, WHICH WAS ACCEPTED ORIGINALLY, HOWEVER, SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED. I N THE COURSE OF SUCH PROCEEDINGS, THE A.O. REQUIRED THE ASSESSEE TO PROD UCE BOOKS OF ACCOUNT SO AS TO VERIFY VARIOUS CLAIMS/EXPENSES OF THE ASSE SSEE. THE ASSESSEE, HOWEVER, DID NOT FURNISH MAJORITY OF THE DETAILS AS REQUIRED BY THE ASSESSING OFFICER. THEREFORE, THE A.O. MADE DISALLO WANCES OUT OF MATERIAL COST AND LABOUR EXPENSES @ 10% THEREOF. TH E A.O. MADE AN AD HOC DISALLOWANCE OF RS. 50,000/- OUT OF OTHER EXPEN SES. THE A.O., THEREAFTER, REQUIRED THE ASSESSEE TO PROVE THE CORR ECT STATUS OF THE ASSESSEE BY PRODUCING THE PARTNERS. THE ASSESSEE, HOWEVER, O NLY SUBMITTED AFFIDAVIT AND COULD NOT PRODUCE ALL THE PARTNERS, W HICH RESULTED INTO AN ADVERSE INFERENCE AND CHANGE OF STATUS OF ASSESSEE BY THE A.O. TO A.O.P. FROM THAT OF PARTNERSHIP FIRM. THE A.O., THEREAFTER , DISALLOWED REMUNERATION AND INTEREST IN SHARE PROFIT ALSO. AGG RIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN DETAILED SUBMISSIONS WERE MADE. THE LD. CIT(A) ALSO CALLED THE REMAND PAGE 3 OF 6 - I.T.A.NO. 437/IND/2006 CHAMUNDA CONSTRUCTION, UJJAIN REPORT FORM THE A.O., WHEREIN THE A.O. SUBMITTED TH AT BOOKS OF ACCOUNT WERE NOT PRODUCED. ONLY ONE OF THE REMAINING THREE PARTNERS WAS PRODUCED. THE A.O. HAD ALSO DOUBTED SOURCE OF CAPIT AL INTRODUCED BY THE PARTNERS. THE LD. CIT(A) AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE AND FINDINGS OF THE A.O. CONFIRMED THE ACT ION OF THE AS REGARD TO THE STATUS OF THE ASSESSEE AS A.O.P. THE LD. CIT(A) ALSO UPHELD THE ACTION OF REJECTION OF THE BOOKS OF ACCOUNT AND THEREAFTER ADOPTED A RATE OF 6 % OF THE GROSS RECEIPT TO COMPUTE THE NET PROFIT OF T HE ASSESSEE FROM SUCH BUSINESS. IN DOING SO, THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE A.O. IN ASSESSMENT YEAR 2001-02 HAD ACCEPTED THE RATE OF 8 % INCLUDING THE AMOUNT OF INTEREST AND REMUNERATION PAID TO PARTNER S. THE LD. CIT(A) ALSO TOOK NOTE OF THE FACT THAT WHEN IN THESE TWO A SSESSMENT YEARS, INCOME OFFERED WAS LESS THAN 8 %, THE A.O. HAD MADE AN AD HOC DISALLOWANCE. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. THE SR. A. R. REPRESENTING DEPARTMENT NARRATED THE FACTS AND TOOK US THROUGH THE FINDINGS OF THE A.O. AND LD. CI T(A) AND PLACED STRONG RELIANCE ON THE ORDER OF A.O. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD DECLARED INCOME @ 4.3 %, WHICH REACHED 12.73 % AFTER CONSIDERING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER AND THE LD. CIT(A) HAVING REGARD TO THE NATURE OF BUSINESS ACTI VITIES AND THE TURNOVER PAGE 4 OF 6 - I.T.A.NO. 437/IND/2006 CHAMUNDA CONSTRUCTION, UJJAIN OF THE ASSESSEE RIGHTLY ADOPTED A RATE OF 6 %. HENC E, THE ORDER OF LD. CIT(A) WAS LIABLE TO BE CONFIRMED. 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT IT IS A CASE OF ESTIMATE OF PROFIT DUE TO NON PRODUCTION OF BOOKS OF ACCOUNT AND OTHER DETAILS. H OWEVER, THE OTHER FACT IS THAT THE ASSESSEE IS A CONTRACTOR AND THE TURNOV ER IS APPROXIMATELY RS. 64.27 LAKHS. HENCE, IN OUR VIEW, THE RATE OF 6% ADO PTED BY THE LD. CIT(A) APPEARS TO BE A LITTLE UNJUSTIFIED FOR THE R EASON THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS VARIOUS CLAIM S OF EXPENSES BY ADDUCING NECESSARY EVIDENCES. THUS, IN OUR VIEW, TH E INTEREST OF JUSTICE WOULD BE MET IF A RATE OF 8 % IS ADOPTED TO COMPUTE THE NET PROFIT OF THE ASSESSEE FROM THE IMPUGNED BUSINESS. WE ORDER ACCOR DINGLY AND DIRECT THE A.O. TO TAKE RATE OF 8 % TO COMPUTE NET PROFIT ON GROSS TURNOVER OF THE ASSESSEE, WHEREFROM NO OTHER DEDUCTION WOULD BE GIVEN. ACCORDINGLY, THIS GROUND OF THE REVENUE STANDS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STA NDS PARTLY ALLOWED. 10. NOW, WE SHALL TAKE UP THE REVENUES APPEAL IN I.T.A .NO. 439/IND/2006, WHEREIN THE IDENTICAL ISSUE IS INVOLV ED EXCEPT THE DIFFERENCE IN QUANTUM OF GROSS RECEIPTS AND RATE OF NET PROFIT DISCLOSED BY PAGE 5 OF 6 - I.T.A.NO. 437/IND/2006 CHAMUNDA CONSTRUCTION, UJJAIN THE ASSESSEE AND DETERMINED BY THE LD. CIT(A) FINA LLY. BOTH THE PARTIES REITERATED THE SAME CONTENTIONS. 11. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 12. IT IS NOTED THAT IN THE YEAR UNDER CONSIDERATION , THE ASSESSEES TURNOVER IS APPROXIMATELY RS. 98 LAKHS WHEREAS IT H AS SHOWN A NET PROFIT RATE OF 4.16 %, WHICH BECAME 13 % (APPROX), AFTER T HE VARIOUS DISALLOWANCES MADE BY THE ASSESSING OFFICER. THE LD . CIT(A) HAS REDUCED THE SAME TO 4.5 %, THUS, IT IS ALSO A CASE OF ESTIMATION AND AFTER TAKING INTO CONSIDERATION THE OVER ALL FACTS AND RE ASONS GIVEN BY US IN THE EARLIER YEAR, IN OUR VIEW, RATE OF 6% SHOULD BE AD OPTED TO COMPUTE THE NET PROFIT FROM SUCH ACTIVITY OF THE ASSESSEE. WE O RDER ACCORDINGLY AND DIRECT THE A.O. TO COMPUTE THE INCOME FROM SUCH BUS INESS ACCORDINGLY AND NO OTHER DEDUCTION SHALL BE GIVEN THEREFROM. TH US, THIS GROUND OF THE REVENUE IS ALSO PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PAR TLY ALLOWED. 14. TO SUM UP, BOTH THE APPEALS OF THE REVENUE STANDS P ARTLY ALLOWED. PAGE 6 OF 6 - I.T.A.NO. 437/IND/2006 CHAMUNDA CONSTRUCTION, UJJAIN THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 09 TH MARCH,2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH MARCH, 2010. CPU* 9103