Sushl Kumar Swain, Cuttack V. ACIT, Circle-2(2), Cuttack, Cuttack

ITA 452/CTK/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86431 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL SHARMA L D
• Keywords: Depreciation
• Section: 44AD; 142(1); 145; 28; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH ES , CUTTACK BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 452 / CTK /201 4 : (ASST. YEAR : 20 10 - 11 ) S USHIL KUMAR SWAIN , KALYANI NAGAR, MADHUPATNA, CUTTACK 753012. PAN : AGLPS3388J . (APPELLANT) VS. ASST. COMMISSIONER OF INCOME TAX , CIRCLE - 2(2) , CUTTACK . (RESPONDENT) A PPELLANT BY : SHRI SUNIL MISHRA , A .R . RE SPONDENT BY : SHRI ANIL SHARMA , L D. D.R. DATE OF HEARING : 04 / 0 2 /201 5 DATE OF PRONOUNCEMENT : 04 / 03 /201 5 O R D E R PER P.K. BANSAL THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , CUTTACK DT D . 25 .0 8 .201 4 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - 1 . FOR THAT THE ORDER OF ASSESSMENT IS ILLEGAL, ARBITRARY AND EXCESSIVE JURISDICTION OF AUTHORITY AND AS SUCH LIABLE TO BE QUASHED IN ITS ENTIRETY. 2. FOR THAT THE ESTIMATION OF THE NET PROFIT @ 8% OF THE CONTRACT RECEIPT AS AGAINST DISCLOSED RATE OF PROFIT MORE THAN 4.5% IN VIEW OF THE SETTLED PROFIT RATE OF THIS HONBLE TRIBUNAL OF 4% IN CASE OF SIMILAR SUB - CONTRACTOR EVEN ALSO IN CASE OF APPELLANT IN PREVIOUS YEAR. 3. FOR THAT, ESTIMATION OF PROFIT IS EQUALLY EXCESSIVE AND ARBITRARY IN VIEW OF THE DISCLOSURE OF MORE THAN 10% PROFIT BY THE MAIN CONTRACTOR. 4. FOR THAT THE FORUM BELOW ARE GROSSLY IN ERROR TO ESTIMATE PROFIT @8% TREATING THE APPELLANT AS MAIN CONTRACTOR IN VIEW OF FURNISHING TDS CERTIF ICATE WHERE THE STATUS CLEARLY MENTIONED AS SUB - CONTRACTOR WITH THE DEDUCTION OF TAX @ 1%. 5. FOR THAT, DISALLOWANCE OF DEDUCTION UNDER CHAPTER VI - A OF THE INCOME TAX ACT IS OUT AND OUT ILLEGAL WITHOUT AFFORDING SUFFICIENT OPPORTUNITY 2 ITA NO. 452 / CTK /201 4 (ASST. YEAR : 20 10 - 11 ) AND WITHOUT DOING A NY FURTHER INQUIRY, AND AS SUCH LIABLE TO BE ALLOWED FOR THE INTEREST OF JUSTICE. 2. THE GROUND NO.1 AND 6 ARE GENERAL AND DOES NOT REQUIRE ANY ADJUDICATION . 3. GROUND NO. 2 TO 4 RELATES TO THE ESTIMATION OF THE PROFIT. THE ASSESSEE FILED THE RETURN SHOWING AN INCOME OF RS.23,95,175/ - . THE ASSESSEE IS A CIVIL CONTRACTOR. THE ASSESSING OFFICER COMPARED RETURN OF INCOME WITH 26 A.S. STATEMENT DETAILS WHERE THE A.O FOUND TOTAL CONTRACT RECEIPT AT RS.6,19,43,230/ - AND ASSESSEE DISCLOSED NET PROFIT AT RS. 25,08,233/ - AFTER DEPRECIATION WHICH GIVES NET PROFIT RATE @ 4.05%. THE ASSESSEE SINCE DID NOT PRODUCE THE BOOKS OF ACCOUNTS , THE BOOKS WERE REJECTED. THE ASSESSING O FFICER ESTIMATED THE PROFIT @ 8% AMOUNTING TO RS.49,55,458/ - . WHEN THE ASSESSEE WENT IN A PPEAL BEFORE THE CIT(A). THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE PROFIT @ 8% OF THE GROSS TURNOVER LESS DEPRECIATION. 4. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF THE TAX AUTHORITIES BEL OW. WE NOTED THAT IN THIS CASE, THE ASSESSEE DID NOT COMPLY WITH THE NOTICE ISSUED U/S 142(1) AND THEREFORE THE ASSESSMENT WAS MADE U/S 144. THE ASSESSEE SINCE DID NOT PRODUCE THE BOOKS OF ACCOUNTS THE PROVISIONS OF SECTION 145(3) WERE APPLIED AND BOOKS WERE REJECTED. THE ASSESSEE HAS NOT COME IN APPEAL AGAINST THE REJECTION OF THE BOOKS OF ACCOUNTS. THE ISSUE INVOLVED IS APPARENTLY COVERED BY OUR DECISION IN ITA NO.437/CTK/2014 IN THE CASE OF SHRI LAXMIDHAR MOHANTY VS ACIT IN WHICH THIS TRIBUNAL VIDE ORDER DATED 0 4. 0 3.2015 HAS HELD AS UNDER : - 7. W E HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND FROM THE ORDER OF LD. CIT(A) THAT DURING THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER, THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS, BI LLS AND VOUCHERS IN SUPPORT OF P & L ACCOUNT. THE ASSESSEE DID NOT PRODUCE THE BOOKS BEFORE THE LD. CIT(A), THEREFORE LD. CIT(A) FOUND NO INFIRMITY IN THE 3 ITA NO. 452 / CTK /201 4 (ASST. YEAR : 20 10 - 11 ) ACTION OF ASSESSING OFFICER IN REJECTING THE BOOK RESULTS AND ESTIMATING THE PROFIT WHEN THE NOTICE U/S. 142(1) OF THE ACT CALLING FOR THE BOOKS WAS NOT COMPLIED WITH. WE FIND THAT AS PER SEC. 44AD OF THE ACT, THE PERSONS ENGAGED IN THE BUSINESS OF CIVIL CONTRACT WORK, WHO DO NOT MAINTAIN BOOKS NET PROFIT SHALL BE ASSESSABLE @ 8% OF THEIR GROSS TURNOVE R IF SUCH TUNE DOES NOT EXCEEDS RS. 1 CRORE. WE FIND THAT THE REASONABLENESS OF THE RATE HAS BEEN ACCEPTED BY VARIOUS TRIBUNALS. SEC. 44 AD OF THE ACT WHICH READS AS UNDER: - 44AD. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43C , IN THE CASE OF AN ELIGIBLE ASSESSEE ENGAGED IN AN ELIGIBLE BUSINESS, A SUM EQUAL TO EIGHT PER CENT OF THE TOTAL TURNOVER OR GROSS RECEIPTS OF THE ASSESSEE IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR, AS THE CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SUM CLAIMED TO HAVE BEEN EARNED BY THE ELIGIBL E ASSESSEE, SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' . (2) ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTIONS 30 TO 38 SHALL, FOR THE PURPOSES OF SUB - SECTION (1), BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO F URTHER DEDUCTION UNDER THOSE SECTIONS SHALL BE ALLOWED : PROVIDED THAT WHERE THE ELIGIBLE ASSESSEE IS A FIRM, THE SALARY AND INTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FROM THE INCOME COMPUTED UNDER SUB - SECTION (1) SUBJECT TO THE CONDITIONS AND LIMITS SPECIFIED IN CLAUSE (B) OF SECTION 40 . (3) THE WRITTEN DOWN VALUE OF ANY ASSET OF AN ELIGIBLE BUSINESS SHALL BE DEEMED TO HAVE BEEN CALCULATED AS IF THE ELIGIBLE A SSESSEE HAD CLAIMED AND HAD BEEN ACTUALLY ALLOWED THE DEDUCTION IN RESPECT OF THE DEPRECIATION FOR EACH OF THE RELEVANT ASSESSMENT YEARS. (4) THE PROVISIONS OF CHAPTER XVII - C SHALL NOT APPLY TO AN ELIGIBLE ASSESSEE IN SO FAR AS THEY RELATE TO THE ELIGIBLE BUSINESS. (5) NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS SECTION, AN ELIGIBLE ASSESSEE WHO CLAIMS THAT HIS PROFITS AND GAINS FROM THE ELIGIBLE BUSINESS ARE LOWER THAN THE PROFITS AND GAINS SPECIFIED IN SUB - SECTION (1) AND WHOSE TOTAL INCOME EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME - TAX, SHALL BE REQUIRED TO KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB - SECTION (2) OF SECTION 44AA AND GET THEM AUDITED AND FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB . [(6) THE PROVISIONS OF THIS SE CTION, NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREGOING PROVISIONS, SHALL NOT APPLY TO (I) A PERSON CARRYING ON PROFESSION AS REFERRED TO IN SUB - SECTION (1) OF SECTION 44AA ; (II) A PERSON EARNING INCOME IN THE NATURE OF COMMISSION OR BROKERAGE; OR (III) A PERSON CARRYING ON ANY AGENCY BUSINESS.] 4 ITA NO. 452 / CTK /201 4 (ASST. YEAR : 20 10 - 11 ) 8. FROM THE ABOVE SECTION, IT CLARIFIES THAT IF THE ASSESSEES GROSS RECEIPTS ARE NOT MORE THAN RS. 1 CRORE AND IF THE ASSESSEE DID NOT MAINTAIN THE BOOKS OF ACCOUNTS, THEN HIS PROFIT HAS TO BE ESTIMATED @ 8% AND DEPRECIATION SHOULD NOT BE ALLOWED. IN THE INSTANT CASE, THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS, THEREFORE, ASSESSING OFFICER WAS NOT ABL E TO VERIFY THE CLAIM MADE IN P & L ACCOUNT. IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER HAS NO ALTERNATIVE EXCEPT TO REJECT THE BOOKS AND TO ESTIMATE THE PROFIT @ 8% ON THE TOTAL TURNOVER. AS PER SEC. 144 OF THE ACT, IF THE ASSESSEE FAILS TO COMPLY WIT H THE TERMS OF A NOTICE ISSUED UNDER SUB - SEC. (1) OF SEC. 142 AND IF THE ASSESSEE FAILS TO PROVIDE THE NECESSARY INFORMATION, THE ASSESSING OFFICER HAD LIBERTY TO PASS THE ORDER ON THE BEST JUDGMENT ASSESSMENT. SECONDLY, IF THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDE STANDARDS AS NOTIFIED UNDER SUB - SEC. (2), HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASS ESSEE, THE ASSESSING OFFICER MAY MAKE THE ASSESSMENT IN THE MANNER PROVIDE IN SEC. 145 OF THE ACT. WE FIND THAT THE BEST ASSESSMENT CAN BE MADE U/S. 142 & 144 OF THE ACT AFTER REJECTING THE BOOK RESULTS U/S. 145(3) OF THE ACT. IN THE CASE OF CIT VS. JAIN CONSTRUCTION COMPANY REPORTED IN (2000) 245 ITR 527 (RAJ.) WHERE THE HONBLE RAJASTHAN HIGH COURT HAS CONFIRMED THE ORDER OF TRIBUNAL BY OBSERVING THAT WHILE ALLOWING THE APPEAL, THE TRIBUNAL HAS DIRECTED THE ASSESSING AUTHORITY TO RECOMPUTE THE TOTAL INC OME AS ESTIMATE BY HIM AND ALLOW RELIEF ON ACCOUNT OF PAYMENT OF INTEREST AND CLAIM OF DEPRECIATION. THE FINDING RECORDED BY THE TRIBUNAL IS PURELY A FINDING OF FACT, BASED ON PROPER APPRECIATION OF MATERIAL ON RECORD AND THE EVIDENCE PRODUCED BY THE ASS ESSEE. IN OUR OPINION, IN THAT JUDGMENT, THE ASSESSEE HAS PRODUCED THE RELEVANT MATERIALS BEFORE THE ASSESSING OFFICER, THEREFORE TRIBUNAL HAS VERIFIED ALL THE DOCUMENTS ON RECORD AND COME TO A PARTICULAR CONCLUSION. WE FIND THAT THE ASSESSEE HAS NOT PRO DUCED ANY EVIDENCE BEFORE THE ASSESSING OFFICER, THEREFORE ASSESSING OFFICER IS JUSTIFIED IN ESTIMATING THE PROFIT AT 8% AND OUR INTERFERENCE IS NOT REQUIRED. THIS GROUND OF APPEAL IS DISMISSED. 5. BUT IN THE CASE OF THE ASSESSEE , WE NOTED THAT THE TURNOVER EXCEEDS ONE CRORE AND THEREFORE TECHNICALLY THE PROVISIONS OF SECTION 44AD ARE NOT APPLICABLE. THE CIT(A) AND ASSESSING OFFICER HAS ALLOWED DEPRECIATION OUT OF THE ESTIMATION OF THE PROFIT @ 8%. THE LD. A.R SUBMITTED BEFORE US THE DECISION OF THIS TRIBUNAL DATED 22.10.2014 FOR THE ASST. YEAR 2009 - 10 IN WHICH THIS TRIBUNAL VIDE ORDER DATED 22.10.2014 HELD AS UNDER : - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF PARTIES AND PERUSED THE RECORD OF THE CASE. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF SANTAN PARIDA (SUPRA), WHEREIN, UNDER SIMILAR FACTS, THE TRIBUNAL HAS DIRECTED THE AO TO ADOPT 4% OF NET PROFIT ON GROSS 5 ITA NO. 452 / CTK /201 4 (ASST. YEAR : 20 10 - 11 ) RECEIPTS ON ACCOUNT OF SUB - CONTRACT WORKS. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO ADOPT 4% NET PROFIT AS AGAINST 5%. WE ORDER ACCORDINGLY. 6. WE THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT @4% IN THE CASE OF GROSS RECEIPTS FROM SUB CONTRACT. BUT , WE SUSTAINED THE ESTIMATION OF THE PROFIT ON THE GROSS RECEIPTS AS MAIN CONTRACTOR. THUS THESE GROUNDS ARE PARTLY ALLOWED. 7. THE GROUND NO.5 RELATES TO THE CLAIM OF THE DEDUCTION UNDER CHAPTER VIA. AFTER HEARING THE RIVAL SUBMISSIONS , WE RESTORE TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER, SETTING ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RE - DECIDE THIS ISSUE AFRESH AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE NECESSARY EVID ENCE FOR THE ILLEGIBILITY OF THE CLAIM. IN CASE ASSESSEE FAILS TO SUBMIT THE EVIDENCES THE DISALLOWANCE BE SUSTAINED. 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 9 . ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON THE NOTICE BOARD OF THE BENCH AT CUTTACK ON 04.03.2015. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI - GOA DATED : 04 / 03 /201 5 * A * COPY TO : (1) APPELLANT (2) RESPONDENT 6 ITA NO. 452 / CTK /201 4 (ASST. YEAR : 20 10 - 11 ) (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, CUTTACK BENCH, CUTTACK