Shri Pramod Kumar Gupta, Bhopal V. The ACIT 3(1), Bhopal

ITA 455/IND/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1533 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Business income; Depreciation
• Section: 44AD; 40A(3); 28; 144

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 455/IND/2012 A.Y. 2009-10 PRAMOD KUMAR GUPTA BHOPAL PAN ACDPG 3156A :: APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 3(1) BHOPAL :: RESPONDENT APPELLANT BY SHRI H.P. VERMA ALONG WITH SHRI N.D. PATWA RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 17.06.2013 DATE OF PRONOUNCEMENT 17.06.2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE ORDER OF CIT(A) DATED 8 TH JUNE, 2012 ON THE GROUND THAT THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN CONFIRMING THE ASSESSM ENT 2 ORDER WITHOUT CONSIDERING THE TRUE FACTS AS THE ASS ESSEE ATTACHED THE AUDITED ACCOUNT ALONG WITH THE RETURN, THUS, ERRED IN GRANTING RELIEF OF RS. 56,76,627/- O UT OF THE TOTAL ADDITION OF RS. 70,30,138/- BY ESTIMATING THE PROFIT AT 8% OF THE TOTAL TURNOVER WHICH IS HIGHLY EXCESSIVE AND FURTHER ERRED IN GRANTING DIRECTION T O ADD INTEREST INCOME OF RS.1,65,114/- SEPARATELY. 2. DURING THE COURSE OF HEARING, THE BENCH RAISED A QUERY WHETHER ANY APPEAL HAS BEEN FILED BY THE DEPARTMENT CHALLENGING THE PART RELIEF GRANTED BY T HE CIT(A). THE LEARNED SENIOR DR AS WELL AS THE LEARNE D COUNSEL FOR THE ASSESSEE CONTENDED THAT NO APPEAL H AS BEEN FILED BY THE DEPARTMENT, THEREFORE, ON THE BAS IS OF THE ASSURANCE FROM BOTH THE SIDES, WE PROCEED TO DI SPOSE OF THIS APPEAL OF THE ASSESSEE. 3. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I H.P. VERMA ALONG WITH SHRI N.D. PATWA, LEARNED COUN SEL FOR THE ASSESSEE AND SHRI R.A. VERMA, LEARNED SENIO R DR. 3 THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTIN G THAT THE LEARNED FIRST APPELLATE AUTHORITY APPLIED NET P ROFIT RATE OF 8% OF THE RECEIPT WITHOUT CONSIDERING THE EXPLANATION ADDUCED BY THE ASSESSEE AND WITHOUT CONSIDERING THE COMPARATIVE FIGURES OF EARLIER YEAR S WHEREIN THE ASSESSING OFFICER APPLIED NET PROFIT RA TE OF 6% OF RECEIPTS. ON THE OTHER HAND, LEARNED SENIOR DR SHRI R.A. VERMA STRONGLY DEFENDED THE IMPUGNED ORDE R BY POINTING OUT THAT VARIOUS NOTICES WERE SERVED ON THE ASSESSEE ALONG WITH QUESTIONNAIRE FOR WHICH OUR ATTENTION WAS INVITED TO VARIOUS PAGES OF THE ASSES SMENT ORDER. IT WAS SUBMITTED THAT THE NECESSARY DETAILS , AS REQUIRED BY THE ASSESSING OFFICER, WERE NEVER FURNI SHED BY THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE C OMING 4 TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE CONCLUSION DRAWN BY LD. CIT (A) :- 2.3 I HAVE EXAMINED THE MATTER. IT IS UNDISPUTED THAT THE APPELLANT COULD NOT PRODUCE A SUBSTANTIVE NUMBER OF BILLS AND VOUCHERS FOR PURCHASES AND EXPENSES. HENCE THE A.O. WAS JUSTIFIED IN REJECTIN G THE BOOKS OF ACCOUNT U/S 145(3) AND DOING THE BEST JUDGMENT ASSESSMENT. IN VIEW OF THIS FACT IT IS HE LD THAT REJECTION OF BOOK RESULT IS VALID IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. NEVERTHELES S IT IS FOUND THAT THE AMOUNT OF DISALLOWANCES MADE BY T HE A.O. IS NOT FAIR AND REASONABLE. IT IS WELL SETTLE D THAT IN CASES WHERE BOOKS OF ACCOUNTS ARE REJECTED THE ESTIMATION OF PROFIT SHOULD BE MADE ON FAIR AND REASONABLE BASIS. THE APPELLANT HAS EXECUTED CONTR ACT FOR GOVT. DEPARTMENTS. IN CASE OF EXECUTION OF WORK ORDER FOR THE GOVT. DEPARTMENTS THE BILLS OF CONTRA CTORS ARE CLEARED AFTER CERTIFICATION OF WORK EXECUTED. SINCE THE WORK HAS BEEN EXECUTED IT LOGICALLY FOLLOWS THA T PURCHASES HAD BEEN DONE AND OPERATIONAL AND EXPENSES LIKE WAGES, SALARY, INSURANCE AND OTHER EXPENSES ARE INDEED INCURRED. IT IS WELL SETTLED TH AT IN CASE OF REJECTION OF BOOKS OF ACCOUNT PROFIT SHOULD BE ESTIMATED ON THE BASIS OF MATERIAL AVAILABLE ON REC ORD AND SPECIFIC DISALLOWANCES SHOULD NOT BE MADE WHEN PROFIT IS ESTIMATED. IN THE APPELLANT CASE THERE I S NO MATERIAL TO SHOW THAT ANY PAYMENT IS MADE IN CONTRAVENTION TO SECTION 40A(3). THE A.O. HAS NOT POINTED OUT ANY PAYMENT WHICH IS MADE IN CONTRAVENTION TO SECTION 40A(3). THE FACTS AND CIRCUMSTANCES OF THE CASE SHOW THAT ESTIMATION OF N ET PROFIT IS ONLY REASONABLE METHOD TO WORK OUT THE BUSINESS PROFIT EARNED BY THE APPELLANT. IN THE CA SE OF CIT VS. PADAM CHAND BHANSALI (2004) 85 TTJ (JODH) 215 THE HONBLE ITAT HAS HELD THAT NO ADDITION UNDE R SECTION 40A(3) CAN BE MADE WHERE INCOME HAS BEEN COMPUTED BY APPLYING NET PROFIT RATE. 5 2.4 AFTER CONSIDERING THE NATURE OF BUSINESS AND PAST PERFORMANCE OF THE APPELLANT, THE NET PROFIT A FTER DEPRECIATION IS ESTIMATED AT 8% OF TOTAL TURNOVER O F RS. 4,03,47,460/- HENCE ADDITION ON ACCOUNT OF BUSINESS INCOME IS REDUCED TO RS. 13,53,511/- (RS. 32,27,797 RS. 18,74,286). IN VIEW OF THE ABOVE THE ADDITIONS ON ACCOUNT OF BUSINESS INCOME AFTER REJECTION OF BOOK RESULT ARE REDUCED FROM RS. 70,30,138/- TO RS. 13,53,511/-. THE DEPRECIATIONS CLAIMED IN THE RETU RN ARE DEEMED TO BE ALLOWED AND NO FURTHER DEDUCTION I S TO BE GIVEN ON ACCOUNT OF DEPRECIATION. THE INTERE ST INCOME OF RS. 165114/- IS ALSO ASSESSABLE AT THE SA ME AMOUNT IN ADDITION TO BUSINESS INCOME. THIS GROUND OF APPEAL IS PARTLY ALLOWED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE, AN INDI VIDUAL, ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS, DECLA RED INCOME OF RS.19,39,400/-. THE ASSESSMENT WAS COMPLETED AT THE INCOME OF RS.89,69,540/- AND THUS ADDITION OF RS.70,30,140/- WAS MADE WHICH IS SUMMARISED AS UNDER :- S.NO. PARTICULARS AMOUNT RS. 1 DISALLOWANCE 20% OUT OF TOTAL PURCHASES OF RS. 2,12,62,026/- 42,52,405 2 DISALLOWANCE 50% OUT OF SALARY OFRS. 4,95,600 2,47,800/- 3 DISALLOWANCE @ 100% OUT OF INSURANCE OFRS. 32,385/- 32,385/- 4 DISALLOWANCE @ 20% OUT OF OTHER EXPENSES OF RS.1,24,87,743/- 24,97,548/- TOTAL 70,30,138/- 6 THE CONTROVERSY IN BRIEF IS THAT DURING THE YEAR UN DER CONSIDERATION THE ASSESSEE SHOWED TOTAL TURNOVER OF RS.4,03,47,460/- RESULTING INTO GROSS PROFIT OF RS.46,87,520/- WHICH IS 11.37% OF THE TURNOVER WHER EAS THE ASSESSEE SHOWED NET PROFIT OF RS.18,74,286/- WH ICH COMES TO 4.65% OF THE TURNOVER. THE ASSESSEE ALSO SHOWED INTEREST INCOME OF RS. 1,65,114/- THUS THE T OTAL PROFIT SHOWN BY THE ASSESSEE COMES TO RS.20,39,400/ - WHICH IS 5.05% OF THE TOTAL TURNOVER. THE LEARNED ASSESSING OFFICER ISSUED VARIOUS NOTICES/QUESTIONNA IRE, ETC. TO THE ASSESSEE BUT THE NECESSARY DETAILS COUL D NOT BE FILED BY THE ASSESSEE AND THUS THE ASSESSING OFF ICER MADE VARIOUS DISALLOWANCES/ADDITIONS. THE AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) WHEREIN THE EXPLANATION/SUBMISSIONS OF THE ASSESSEE ALONG WITH CASE LAWS WERE CONSIDERED AT LENGTH. TH E LEARNED CIT(A) UPHELD THE REJECTION OF BOOKS OF ACC OUNTS U/S 145(3) AND SINCE THE ASSESSEE COULD NOT PRODUCE SUBSTANTIVE NUMBER OF BILLS AND VOUCHERS OF PURCHAS ES 7 AND EXPENSES, ESTIMATED THE NET PROFIT RATE AT 8% O F THE TOTAL TURNOVER AND GAVE PART RELIEF TO THE ASSESSEE . WE FIND THAT THE LEARNED ASSESSING OFFICER RIGHT FROM 23.8.2010 TO 29.11.2011 SENT VARIOUS NOTICES/QUESTIONNAIRE TO THE ASSESSEE MEANING THERE BY SUFFICIENT OPPORTUNITY WAS PROVIDED AND FINALLY VID E PROCEEDINGS U/S 144 OF THE ACT ANOTHER OPPORTUNITY WAS PROVIDED TO PRODUCE BOOKS OF ACCOUNTS BUT THE REQUI RED DETAILS COULD NOT BE FURNISHED, THUS 20% OF THE PURCHASES WERE TREATED AS UNVERIFIABLE. LIKEWISE T HE ASSESSEE DID NOT PRODUCE NECESSARY DETAILS REGARDIN G SALARY AND WAGES OUT OF WHICH 50% OF THE CLAIMED EXPENSES WERE DISALLOWED. THE DETAILS OF INSURANCE EXPENSES AND OTHER EXPENSES WERE ALSO NOT PRODUCED AND THUS THE ADDITIONS WERE MADE. AS MENTIONED EARLIER, THE ASSESSEE IS A CIVIL CONTRACTOR AND NORMALLY IN THE ABSENCE OF BOOKS OF ACCOUNTS, EVEN AS PER THE PROVISIONS OF SECTION 44AD OF THE ACT, NOTWITHSTANDING ANYTHING T O THE CONTRARY, CONTAINED IN SECTIONS 28 TO 43C OF THE AC T, 8% 8 OF THE TOTAL TURNOVER OR GROSS RECEIPTS OF THE ASSE SSEE SHALL BE DEEMED TO BE PROFITS AND GAINS OF SUCH BUS INESS. ADMITTEDLY, THE ASSESSEE DID NOT PRODUCE THE NECESS ARY DETAILS BEFORE THE ASSESSING OFFICER, THEREFORE, APPLICATION OF 8% OF NET PROFIT OF THE TOTAL TURNOV ER IS QUITE JUSTIFIED. SO FAR AS THE CONTENTION OF THE L EARNED COUNSEL FOR THE ASSESSEE THAT FOR THE A.Y. 2008-09 ALSO THE ASSESSEE DID NOT PRODUCE THE NECESSARY DETAILS AND THE ASSESSING OFFICER APPLIED NET PROFIT OF 5.44% O F THE GROSS RECEIPTS IS CONCERNED, WE FIND THAT THE ASSES SING OFFICER APPLIED NET PROFIT RATE AS FROM EARLIER YEA R THERE WAS INCREASE IN THE NET PROFIT. WE ARE NOT CONVINC ED WITH THIS SUBMISSION BECAUSE AS PER THE PROVISIONS OF SE CTION 44AD OF THE ACT, SPECIAL PROVISION HAS BEEN MADE FO R SUCH CASES. IF THE ASSESSEE WANTS TO CHALLENGE THE SAME, IT IS HIS DUTY TO PRODUCE NECESSARY DETAILS SO THAT THE ASSESSING OFFICER MAY SATISFY HIMSELF ABOUT THE CREDIBILITY OF SUCH DETAILS, THEREFORE, WE SUSTAIN THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. 9 3.1 SO FAR AS THE CONTENTION OF THE LEARNED COUNSE L FOR THE ASSESSEE THAT NO SEPARATE ADDITION IS REQUI RED TO BE MADE ON ACCOUNT OF INTEREST INCOME OF RS.1,65,11 4/- IS CONCERNED, WE ARE OF THE VIEW THAT THE IMPUGNED AMOUNT IS NOT OUT OF CONTRACT RECEIPTS OF THE ASSES SEE, THUS WE FIND NO MERIT IN THIS GROUND ALSO, THEREFOR E, ON THIS COUNT ALSO WE FIND NO JUSTIFICATION TO INTERFE RE WITH THE CONCLUSION DRAWN IN THE IMPUGNED ORDER AND AFFI RM THE SAME. FINALLY, THE APPEAL OF THE ASSESSEE IS HAVING NO MERIT, THEREFORE, DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17.6.2013. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18.6.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-1717 10