Ram Prasad Bhatta, Koraput V. ITO, Jeypore

ITA 44/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4404 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2011
• Court: TRIBUNAL
• Department Lawyers: M R
• Assessee Lawyers: K C PANIGRAHI
• Keywords: Depreciation; Reasonable cause
• Section: 44AD; 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 44, 45 AND 46/CTK/2011 / ASSESSMENT YEAR 2006 - 07 SRI RAM PRASAD BHATTA, PROP. R.R.R.PRESTROIKA, SANTOSHI NAGAR,SEMILIGUDA,DIST.KORAPUT. PAN: ACRPB 3621 M - - - VERSUS - INC OME - TAX OFFICER, WARD 2, JEYPORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI K.C.PANIGRAHI, AR / FOR THE RESPONDENT: / SHRI M.R.PANIGRAHI, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THESE APPEALS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.44/CTK/2011 : 2. THE ASSESSEE DERIVES INCOME FROM CONTRACT WORKS AND FILED RETURN OF INCOME DISCLOSING TOTAL INCOME OF 3,42,980. IN THE ASSESSMENT ORDER PASSED U/S.144 THE ASSESSING OFFICER DISALLOWED 6,091,219 OUT OF MATERIAL PURCHASE ACCOUNT, TRAVELLING CHARGES, LABOUR CHARGES, TRANSPORTATION CHARGES, SHED & BORE WELL, FOOD AT SITE, MISC .EXPENSES, 9,350 ON PUJA EXPENSES, 1,040 AND 10,000 ON TELEPHONE EXPENSES. THAT APART, HE ADDED PROVISIONS FOR EXPENSES OF 4,29,871, 16,500 ON ACCOUNT OF DIFFERENCE IN WDV OF JIPSY AND 61,456 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN SEC URITY DEPOSIT. ON APPEAL, IT WAS CONTENDED BEFORE THE LEARNED CIT(A) THAT THE NET PROFIT @19.5% ON THE NATURE OF BUSINESS DONE BY THE ASSESSEE IS NOT POSSIBLE AND THEREFORE, PLEADED THE ALTERNATIVE METHOD OF ADOPTING NET PROFIT RATE OF 8% OF THE GROSS I.T.A.NO. 44, 45 AND 46/CTK/2011 2 TURN OVER AFTER DEPRECIATION AS LAID DOWN IN SECTION 44AD OF THE ACT. THE LEARNED CIT(A) HELD THAT SECTION 44AD IS NOT APPLICABLE SINCE THE GROSS RECEIPTS IN THE CASE OF THE ASSESSEE IS 75,47,634 WHICH EXCEEDS 40 LAKHS. HE ESTIMATED THE INCOME OF THE ASSESSEE BY ADOPTING 10% OF THE GROSS RECEIPT WITHOUT FURTHER DEDUCTION ON DEPRECIATION. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED AR OF THE ASSESSEE CONTEN DED THE ASSESSEE HAS DECLARED THE INCOME OF 3,86,439 WHICH IS 5.12% OF THE GROSS RECEIPTS OF 75,46,634. ITAT, CUTTACK BENCH, IN MANY CASES HAS ADOPTED THE NET PROFIT RANGING FROM 4.5% TO 5%. THEREFORE, THE ESTIMATION OF INCOME @10% IN CASE OF THE ASSESSE E AS ADOPTED BY THE LEARNED CIT(A) IS ON HIGHER SIDE. HE PRAYED FOR ACCEPTANCE OF INCOME AS DECLARED BY THE ASSESSEE. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A). 4. HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED O RDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN ABSENCE OF PRODUCTION OF BOOKS OF ACCOUNTS, THE ASSESSING OFFICER IN THE ASSESSMENT MADE U/S.144, RESORTED TO DISALLOWANCE OUT OF EXPENDITURES AND ALSO MADE CERTAIN ADDITIONS, WHICH INCLUDES THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF SUNDRY CREDITS. IN ABSENCE OF ACCOUNTS PRODUCED BY THE ASSESSEE, THE LEARNED CIT(A) IN OUR CONSIDERED VIEW, IS JUSTIFIED IN RESORTING TO ESTIMATION OF PROFIT ON THE GROSS RECEIPTS AS AGAINST THE DISALLOWANCE OUT OF EXPENDITUR ES AND MAKING ADDITIONS AS MADE BY THE ASSESSING OFFICER. THE LEARNED CIT(A) CONSIDERING SUCH DISALLOWANCE AND ADDITIONS MADE BY THE ASSESSING OFFICER, HAS ESTIMATED THE INCOME BY ADOPTING THE NET PROFIT AT 10% ON THE GROSS RECEIPTS WITHOUT FURTHER DEDUCTI ON ON DEPRECIATION. BUT CONSIDERING THE FACT THAT THE ASSESSING OFFICER HAD MADE ADDITION U/S.68 WHICH CANNOT BE PART AND PARCEL OF ESTIMATED AS RESORTED TO BY THE LEARNED CIT(A). THEREFORE, WE REASONABLY I.T.A.NO. 44, 45 AND 46/CTK/2011 3 ALLOW RELIEF OF 2,50 ,000 ON ADHOC BASIS FROM THE I NCOME ESTIMATED BY THE LEARNED CIT(A). THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. 5. IN THE RESULT, ITA NO.44/CTK/2011 IS PARTLY ALLOWED. ITA NO.45/CTK/2011: 6. IN THIS APPEAL, THE ASSESSEE AGITATES THE PENALTY OF 25,000 LEVIED U/S.271A OF THE INCOME - TAX ACT,1961. 7. HEARD BOTH THE PARTIES AND GOING THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED CASH BOOK, THE ASSESSING OFFICER LEVIED PENALTY OF 25,000 U/S.271A. IT IS NOT DISPUTED BY THE REVENUE THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT WHICH WERE DULY AUDITED BY THE CHARTERED ACCOUNTANT AND THE AUDIT REPORT WAS SUBMITTED ALONG WITH THE RETURN AND THUS IT WAS AVAILABLE TO THE AO. HOWEVER , FOR THE REASONS BEST KNOWN TO THE ASSESSEE, HE DID NOT PUT IN APPEARANCE AT THE TIME OF HEARING AND CONSEQUENTLY THE ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS BEEN COMPLETED U/S.144 OF THE ACT. THE LEARNED CIT(A) HAS CONFIRMED THE LEVY O F PENALTY BASED ON PASSING OF THE ASSESSMENT U/S.144. BUT IN OUR CONSIDERED VIEW, WHEN THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT, WHICH WERE DULY AUDITED, LEVY OF PENALTY U/S.271A IS NOT JUSTIFIED. THEREFORE, WE CANCEL THE SAID PENALTY AND ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, ITA NO.45/CTK/2011 IS ALLOWED. ITA NO.46/CTK/2011 : 9. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST PENALTY OF 10,000 LEVIED U/S.271(1)(B) OF THE I.T.ACT,1961. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ON THE ALLEGATION OF NON - COMPLIANCE TO THE I.T.A.NO. 44, 45 AND 46/CTK/2011 4 NOTICES U/S.143(2) AND 142(1) ISSUED ON 8.1.2008, 14.8.2008, 27.10.2008 , THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S.271(1)(B). IN RESPONSE TO SHOW CAUSE, THE ASS ESSEE EXPLAINED THAT THE ASSESSEE IS EXECUTING WORKS CONTRACTS IN REMOTE PLACES OF MALKANGIRI, KORAPUT DISTRICT WHICH ARE NAXAL AREAS. BECAUSE OF TIME BOUND WORKS THE ASSESSEE IS BUSY IN COMPLETING THE WORKS. OTHERWISE THE ASSESSEE HAS TO FACE THREATS AND PROBLEMS FROM THE NAXLITIES IN EXECUTING THE WORKS IN THEIR LOCALITY. THE ASSESSEE HAD NO MALAFIDE INTENTION OR DISREGARD TOWARDS THE NOTICES ISSUED BUT FOR TIME BOUND WORKS. THE ASSESSING OFFICER DID NOT ACCEPT SUCH EXPLANATION TO BE A REASONABLE CAUSE AN D THEREFORE, LEVIED PENALTY OF 10,000 U/S.271(1)(B). ON APPEAL, THE ASSESSEE REITERATED THE ABOVE EXPLANATION BEFORE THE LEARNED CIT(A), WHO HAD NOT CONSIDERED SUCH EXPLANATION BUT UPHELD THE LEVY OF PENALTY U/S.271(1)(B). NONE OF THE AUTHORITIES BELOW H AVE CONSIDERED THE ABOVE EXPLANATION OF THE ASSESSEE IN ITS PROPER PERCEPTIVE. IT IS NOT IMPROBABLE THAT FOR FAILURE ON THE PART OF THE PART OF THE ASSESSEE TO COMPLETE THE CONTRACT WORKS IN TIME IN A NAXALITES PRONE AREA WILL HAVE TO FACE THREATS AND PROB LEMS FROM THE NAXALITES . THEREFORE, NON - COMPLIANCE TO THE NOTICES ISSUED BY THE ASSESSING OFFICER CANNOT BE HELD TO BE INTENTIONAL OR DISREGARD TOWARDS THE NOTICES ISSUED. WE CONSIDER THE ABOVE EXPLANATION TO BE REASONABLE. IN VIEW OF THE ABOVE, WE SET AS IDE THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY OF 10,000 LEVIED U/S.271(1)(B). 11. IN THE RESULT, ITA NO.46/CTK/2011 IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 13 TH MAY, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 13 TH MAY, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 44, 45 AND 46/CTK/2011 5 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : 2 / THE RESPONDENT: 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY