ITO 22(1)-2, NAVI MUMBAI V. JAYANTILAL BHANJI PATEL (HUF), MUMBAI

ITA 4397/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6398 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 21-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: DINESH RASIKLAL SHAH
• Keywords: Business income; Depreciation; Principle of natural justice
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI PRAMOD KU MAR,(AM) ITA NO.4397/MUM/2009 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER-22(1)-2 4 TH FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI. ..( APPELLANT ) VS. JAYANTILAL BHANJI PATEL (HUF) 3-5, AMRUTABEN CHAWL BEHIND ACP OFFICE, L.B.S. MARG GHATKOPAR (W) MUMBAI-86. ..( RESPONDENT ) P.A. NO. (AADHJ 5139 A) C.O. NO.96/MUM/2010 ARISING OUT OF ITA NO.4397/MUM/2009 ASSESSMENT YEAR : 2006-07 JAYANTILAL BHANJI PATEL (HUF) MUMBAI-86. ..( CROSS OBJECTOR ) VS. INCOME TAX OFFICER-22(1)-2 NAVI MUMBAI. ..( APPELLANT IN APPEAL ) REVENUE BY : SHRI SUMEET KUMAR ASSESSEE BY : SHRI DINESH RASIKLAL SHAH O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 24.4.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2006-07 AGAINST WHICH THE ASSESSEE HAS ALSO FILED CROSS ITA NO.4397 & C.O.96/MUM/ A.Y:06-07 2 OBJECTION. THE APPEAL AND CROSS OBJECTION ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE A N INDIVIDUAL DERIVES INCOME AS CIVIL CONTRACTOR, FILED RETU RN DECLARING TOTAL INCOME OF RS.6,10,580/- . THE ASSESSING OFFICER AFTER SELE CTING THE CASE FOR SCRUTINY ISSUED NOTICES U/S.143(2) OF THE INCOME TAX ACT, 1961 (THE ACT) FOLLOWED BY NOTICES U/S.142(1) AND SUM MONS U/S.131. HOWEVER, THERE WAS NO RESPONSE FROM THE ASSESSEE, THEREFORE , THE ASSESSING OFFICER HAVING NO OTHER ALTERNATIVE COMPLETED T HE EXPARTE ASSESSMENT U/S.144 OF THE ACT DETERMINING THE TOTAL INCOM E AT RS.21,06,270/- VIDE ORDER DATED 8.12.2008 AS UNDER : - I BUSINESS INCOME RS. 654882/- ADD: RENT FOR CENTERING RS. 375691/- ADD: ELECTRICITY CHARGES RS. 64471/- ADD: OUT OF LABOUR CHARGES RS. 994110/- ADD: DEPRECIATION RS. 11684/- ADD: SERVICE TAX PAYABLE RS. 49738/- RS.1495694/- TOTAL RS.2150576/- II INCOME FROM OTHER SOURCES RS. 9462/- GROSS TOTAL INCOME RS.2160038/- LESS: DEDUCTION UNDER CH.VIA RS. 53766/- TOTAL INCOME RS.2106272/- ROUNDED OFF U/S.288A RS.2106270/- ========= 3. ON APPEAL, THE LD. CIT(A) WHILE UPHOLDING THE ACT ION OF THE ASSESSING OFFICER IN PASSING EXPARTE ORDER U/S.144 ON THE ISSUE OF DISALLOWANCE OF EXPENSES VIZ. RENT FOR CATERING RS.3, 75,691/-, ELECTRICITY EXPENSES RS.64,471/-, OUT OF LABOUR CHARGES R S.9,94,110/-, AND DEPRECIATION RS.11,684/- HAS OBSERVED THAT 100% OF DISALLOWANCE OF EXPENSES CLAIMED IS NOT PRACTICABLE OR WIT HIN THE TENETS OF NATURAL JUSTICE AS IT IS LOGICAL TO PRESUME THAT TO EARN A TURNOVER OF RS.66,97,948/-, THERE WOULD HAVE BEEN SOM E EXPENSES ITA NO.4397 & C.O.96/MUM/ A.Y:06-07 3 INCURRED AND ACCORDINGLY HE DIRECTED THE ASSESSING OFFICER TO CALCULATE NET PROFIT RATIO AT 10.50% ON THE SALES DECLARED BY TH E ASSESSEE . WITH REGARD TO THE DISALLOWANCE OF SERVICE TAX PAYABLE RS.49,738/-, THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER SIMPLY ON THE BASIS OF NOTE MADE BY THE AUDITOR CANNOT STAND THE TEST OF TIME AND ACCORDINGLY SHE DELETED THE SAME. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE DE LETION OF ADDITION OF RS.14,95,694/- AND APPLICATION OF NP RATE 10.50% . 5. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JUST IFIED IN ALLOWING RELIEF TO THE ASSESSEE. HE THEREFORE, SUBMITS TH AT THE ADDITION MADE BY THE ASSESSING OFFICER BE RESTORED. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS THAT THE ASSESSING OFFICER HAS ASSESSED THE INCOME OF TH E ASSESSEE AT RS.21,06,270/- WHICH COMES TO 31.45% OF NET CONT RACT RECEIPTS OF RS.66,97,948/-. HE FURTHER SUBMITS THAT THE BEST JUDGMENT SHOULD BE JUST AND FAIR AND SHOULD NOT BE TO PENALISE THE ASSESSEE FOR NON ATTENDANCE. IT SHOULD BE BASED ON PAST RECORDS OF TH E ASSESSEE. THE PROVISIONS OF SEC.44AD SHOULD BE GUIDING PRINCIPLES. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASES:- 1. SHANKAR KHANDSARI SUGAR MILLS VS. CIT (1992) 193 IT R 669 (KARN.), 2. JOT RAM SHER SINGH VS CIT (1934) 2 ITR 129 ( ALL), 3. INCOME TAX OFFICER VS. GIRISH M. MEHTA (2007) 10 5 ITD 585 RAJKOT, 4. ASST. CIT VS. SMT. RENU MUKERJEE 15 DTR (DEL.) TRIB UNAL 205, ITA NO.4397 & C.O.96/MUM/ A.Y:06-07 4 5. BRIJ BHUSHAN LAL PRADUMAN KUMAR VS. CIT (1978) 115 ITR 524(SC), 6. B.T. VORA VS. INCOME TAX OFFICER (1982) 14 TTJ (BOM BAY) 581, 7. ASST. CIT VS. KANHIYALAL CHOUDHARY (2010) 48 DTR (JP) TRIBUNAL 42, 8. STATE OF KERALA VS. C. VELUKUTTY (1960) 60 ITR 239( SC), 9. SAMURAI TECHNO TRADING CO. (P) LTD. VS. CIT (2010) 37 DTR (KERALA)386, 10. MADNANI CONSTRUCTION CORPORATION (P) LTD. VS. CIT ( 2008) 296 ITR 45 (GAU.), 11. NAVNEET R. JHANWAR VS. ITO 1 SOT 541 (JP), 12. GUPTA CONSTRUCTION CO VS. ACIT (2007) 84 TTJ (ALL) 46, 13. ACIT VS. SKYLINE BUILDERS (2009) 4 ITR TRIBUNAL 48 COCHIN, 14. ITO VS. YADHU CONTRACTORS AND BUILDERS (P) LTD. (20 08) 4 DTR (DEL.) TRIBUNAL 619, 15. CBDT CIRCULAR NO.29/D/XIV-14 DT. 31 ST AUGUST 1955- REGARDING DISALLOWANCE OF SERVICE TAX PAYABLE RS.49 ,738/- UNDER SECTION 43B, HE SUBMITS THAT THE SERVICE TAX LIABILITY ARIS ES ONLY WHEN THE AMOUNT IS RECEIVED BY THE SERVICE PROVIDED TILL THAT DATE SAME IS NOT REQUIRED TO BE PAID. SECTION 43B IS APPLICABLE WHEN THE GOVERN MENT LIABILITY IS ACCRUED ARISEN BUT NOT PAID. THE ASSESSEE HAS PROVI DED SERVICES AND THE BILLS WERE RAISED AS UNDER :- NO DATE PARTY BILL NO AMOUNT SERVICE TAX PAYABLE 1. 17.1.2000 NIRMAL LIFE STYLE LTD. 27 6,22,920 63,538 2. 9.2.2006 NIRMAL LIFE STYLE LTD. 28 3,15,353 32,166 THE AMOUNT RECEIVABLE FROM NIRMAL LIFE STYLE AS ON 31.3.2006 IS RS.18,19,811 AND THE SERVICE TAX WAS PAID ON 26.10. 2006 RS.49,738/- .THE RELIANCE WAS ALSO PLACED IN ACIT VS. REAL IMA GE MEDIA TECHNOLOGIES (P.) LTD. (2008) 306 ITR (AT) 106(CHENNAI TRIBUNAL ). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO ITA NO.4397 & C.O.96/MUM/ A.Y:06-07 5 DISPUTE THAT DESPITE OF VARIOUS STATUTORY NOTICES ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE HAS MADE NO COMPLIANCE, THEREFO RE, IN THE ABSENCE OF ANY COMPLIANCE OR ALTERNATIVE, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN COMPLETING EXPARTE ASSESSMENT U/S.144 OF THE ACT AND THE LD. CIT(A) HAS RIGHTLY UPHELD THE SAID ACTION OF THE ASSESSING OFFICER . HOWEVER, IT IS SETTLED LAW THAT IN MAKING AN ESTIMATE ON BEST JUDGMENT, IT IS INEVITABLE THAT THERE IS SOME GUESS WORK . THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUDGMENT ASSE SSMENT, NO DOUBT, SHOULD ARRIVE AT ITS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRI CIOUS. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONAFIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO PRO OF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE , THE ASSESSING AUTHORITY IS THE BEST JUDGE IN THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT OF ANY ONE ELSE. IT HAS ALSO BEEN HELD THAT WHERE BOOKS OF ACCO UNTS ARE REJECTED NET PROFIT RATE SHOULD BE APPLIED ON THE BASI S OF COMPARABLE CASES OR ON THE BASIS OF PAST HISTORY OF THE CASE. 8. KEEPING IN VIEW THE AFORESAID LEGAL POSITION WE FI ND THAT IN THE CASE BEFORE US THE ASSESSING OFFICER WHILE DISALLOWING CERTAI N EXPENSES VIZ., RENT FOR CATERING RS.3,75,691/-, ELECTRICITY EX PENSES RS.64,471/-, OUT OF LABOUR CHARGES RS.9,94,110/-, AND D EPRECIATION RS.11,684/- HAS HELD THAT THERE IS NO PROOF OF SUCH EXP ENSES AND HENCE, HE DISALLOWED THE ABOVE EXPENSES. ON APPEAL, THE LD. CIT(A) OBSERVED THAT 100% DISALLOWANCE OF EXPENSES CLAIMED IS NOT PRACTICABLE AS IT IS LOGICAL TO PRESUME THAT TO EARN A T URNOVER OF RS.66,97,948/- THERE WOULD HAVE BEEN SOME EXPENSES INCUR RED. IN THE ABSENCE OF ANY SUPPORTING MATERIAL PLACED ON RECORD BY THE ASSESSEE THE LD. CIT(A) KEEPING IN VIEW THE PAST RECORDS OF THE CASE ITA NO.4397 & C.O.96/MUM/ A.Y:06-07 6 HAS DIRECTED THE ASSESSING OFFICER TO APPLY A PERCENTAGE O F 10.50% ON THE SALES DECLARED BY THE ASSESSEE AND WORK OUT THE PROFIT . WITH REGARD TO THE DISALLOWANCE OF SERVICE TAX PAYABLE RS.49, 738/- THE LD. CIT(A) WHILE RELYING ON THE ORDER OF THE TRIBUNAL I N THE CASE OF REAL IMAGE MEDIA TECHNOLOGIES PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT : THAT A SERVICE PROVIDER WAS MERELY ACTING AS AN AGE NT OF THE GOVERNMENT AND WAS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE TAX. SINCE SERVICE TAX WAS NOT PAYABLE BY THE ASS ESSEE, THE RIGOUR OF SECTION 43B OF THE ACT COULD NOT BE APPLIED TO THE CASE OF THE ASSESSEE AND THE COMMISSIONER (APPEALS) HAD RIGHTLY DELETED THE ADDITION MADE. , DELETED THE ADDITION MADE BY THE ASSESSING OFFICER . I N THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) AND KEEPING IN VIEW THAT THE NP RATE AT 10.50% ON THE SALES DECLARED BY THE ASSESSEE IS BASED ON TH E PAST RECORDS OF THE CASE, WE ARE OF THE VIEW THAT THE LD. CI T(A) WAS FULLY JUSTIFIED IN APPLYING NP RATE AT 10.50% ON THE SALES D ECLARED BY THE ASSESSEE AND IN DELETING THE ADDITION OF DISALLOWANCE OF ABOVE EXPENSES TOTALLING TO RS.14,95,694/-. THE GROUNDS TAKE N BY THE REVENUE ARE THEREFORE REJECTED. C.O. NO.96/MUM /2010 (ASSESSMENT YEAR 2006-07): 9. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT HE DOES NOT WANT TO PRESS THE GROUNDS TAKEN IN C.O . WHICH WAS NOT OBJECTED TO BY THE LD.DR. 10. THAT BEING SO, AND IN THE ABSENCE OF ANY SUPPORTING MATERIAL PLACED ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE, THE GROUNDS TAKEN BY THE ASSESSEE IN HIS C.O. ARE THEREFORE, REJECTED BEING NOT PRESSED. ITA NO.4397 & C.O.96/MUM/ A.Y:06-07 7 11. IN THE RESULT, THE REVENUES APPEAL AND ASSESSEE'S C.O . STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2010. SD/- SD/- (PRAMOD KUMAR) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.12.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.