The Deputy Commissioner of Income tax, Pathankot V. Smt. Satish Bala (Alias San geeta), Pathankot

ITA 483/ASR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8882 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Question of law
• Section: 143(3); 147; 263

Judgement Text

ITA NO.483 (ASR)/2013 ASST. YEARS 2009-10 2 WAS APPLIED BY ASSESSING OFFICER. THE CIT(A) WHILE CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT APPLIED THE PROFIT RA TIO OF 8% TO GROSS RECEIPTS. 3. AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), BOTH PARTIES HAD FILED APPEAL BEFORE THE HONBLE TRIBUNAL AND THE HONBLE TRIBUNAL VIDE ITS CONSOLIDATED ORDER DATED 26.08.2013 DISMISSED THE A PPEAL OF REVENUE WHEREAS PARTLY ALLOWED THE APPEAL OF ASSESSEE AND I T REDUCED THE NET PROFIT RATE FROM 8% TO 5%. 4. AGGRIEVED WITH THE ORDER OF TRIBUNAL THE REVENUE FILED APPEAL BEFORE THE PUNJAB & HARYANA HIGH COURT AND HONBLE PUNJAB & HARYNA HIGH COURT VIDE ITS ORDER DATED 22.12.2014 HAS REMI TTED BACK FILE TO TRIBUNAL BY RECORDING THE FOLLOWING FINDINGS. WE HAVE HEARD COUNSEL FOR THE PARTIES, PERUSED THE IMPUGNED ORDER AND ARE INCLINED TO ANSWER THE QUESTION OF LAW IN FAVOU R OF THE REVENUE. THE QUESTION OF PRINCIPLES TO BE APPLIED FOR DETER MINING A NET PROFIT RATE CAME UP FOR CONSIDERATION BEFORE A DIVISION BE NCH OF THIS COURT IN TELELINKS V. COMMISSIONER OF INCOME TAX, BATHINDA (SUPRA). AFTER CONSIDERING THE MATTER IN ITS ENTIRETY, IT WAS HELD AS FOLLOWS:- THE SECOND QUESTION OF LAW NAMELY FACTORS REQUIRED TO BE TAKEN INTO CONSIDERATION WHILE APPLYING A NET PROFI T RATE HAS COME UP FOR CONSIDERATION, AS ON THE SAME SET OF FA CTS THE ASSESSING OFFICER, THE COMMISSIONER OF INCOME TAX A ND INCOME TAX APPELLATE TRIBUNAL HAVE APPLIED DIFFEREN T RATES OF NET PROFIT. THE DISCRETION TO DETERMINE AN ADEQUATE NET PROFIT RATE UNDOUBTEDLY VESTS WITH AUTHORITIES UNDER THE A CT BUT THE DISCRETION SO VESTED IS NEITHER UNBRIDLE NOT UNGUID ED AS IT MUST BE GUIDED BY REASON I.E. SHOULD BE PRECEDED BY REASONS WHICH, IN TURN, SHOULD BE PRECEDED BY A PERCEPTIBLE PROCESS ITA NO.483 (ASR)/2013 ASST. YEARS 2009-10 4 PROFIT RATE OF 10%, THE COMMISSIONER OF INCOME TAX (A) @ 8% AND THE TRIBUNAL @ 5%. THE LEARNED TRIBUNAL WAS, THEREFORE, REQUIRED TO RECORD REASONS BY REFERRED TO RELEVANT FACTS BEFORE DETERM INING THE NET PROFIT RATE OF 5%. CONSEQUENTLY, WITHOUT EXPRESSING ANY OPINION ON TH E MERITS OF THE CONTROVERSY AND WHILE AFFIRMING THE REJECTION OF AC COUNT BOOKS, THE MATTER IS RESTORED TO THE INCOME TAX APPELLATE TRIBUNAL, A MRITSAR BENCH, AMRITSAR, FOR DETERMINING NET PROFIT RATE IN TERMS OF THE RAT IO IN TELEINKS VS. COMMISSIONER OF INCOME TAX, BATHINDA (SUPRA). PARTIES ARE DIRECTED TO APPEAR BEFORE THE INCOME T AX APPELLATE TRIBUNA, AMRITSAR BENCH, AMRITSAR, ON 05.02.2015. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES BOTH P ARTIES ARE AGAIN BEFORE US. 5. THE LEARNED AR, AT THE OUTSET, SUBMITTED TH AT THE HONBLE HIGH COURT HAS REMITTED BACK THE CASE TO THE TRIBUNAL FO R PASSING AN EXHAUSTIVE ORDER KEEPING IN VIEW SIGNIFICANT FACTOR S AS NOTED BY HONBLE COURT IN THE CASE LAW OF TELELINKS VS. COMMISSIONER OF INCOME TAX, BATHINDA IN ITA NO.269 OF 2014. THE LEARNED AR SUBM ITTED THAT THE HONBLE COURT HAS REPRODUCED SUCH SIGNIFICANT FACTO RS IN ITS ORDER AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAGE 4 OF THE HONBLE HIGH COURTS ORDER. INVITING OUR ATTENTION TO THE FACTOR S NOTED BY HONBLE COURT, THE LEARNED AR SUBMITTED THAT AS REGARDS PAS T TAX HISTORY OF THE ASSESSEE THE ASSESSEE HAD DECLARED NET PROFIT RATIO RANGING FROM 3.3% TO 5.1% IN ASST. YEARS 2002-03 TO 2009-10 AND IN THIS RESPECT HE INVITED OUR ATTENTION TO PAPER BOOK PAGE 7 WHERE A CHART SH OWING GROSS PROFITS RATIOS IN THESE YEARS WAS PLACED. THE LEARNED AR SU BMITTED THAT DURING ITA NO.483 (ASR)/2013 ASST. YEARS 2009-10 6 BUILDERS IN THIS CATEGORY IS VERY LARGE WHICH RESUL TS IN SQUEEZING OF MARGINS AND THEREFORE, ALSO THE NET PROFIT RATIO OF ASSESSEE CANNOT BE COMPARED WITH LARGE BUILDERS. 8. AS REGARDS OTHER FACTOR OF PRICE OF RAW MATER IAL AND LABOUR ETC, THE LEARNED AR SUBMITTED THAT THE PRICES OF RAW MATERIA L HAD INCREASED OVER THE YEARS DUE TO CONTINUOUS INFLATION AND MOREOVER THE LABOUR CHARGES HAS INCREASED DUE TO NON AVAILABILITY OF LABOUR FRO M BIHAR AND U.P BECAUSE OF THE FACT THAT THE LABOURS WERE GETTING G OOD REMUNERATION IN THEIR HOME STATES IN VIEW OF THE VARIOUS GOVT. SCHE MES. AS REGARDS THE RELIANCE PLACED BY AO ON INCOMES OF OTHER ASSESSEES THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MADE A NY ATTEMPT TO POINT OUT SIMILARITIES OF THE ASSESSEE CASE WITH THE FACT S IN ABOVE DECISIONS. HIGHLIGHTING THE FACTS OF SHIVAM CONSTRUCTION CO. A S RELIED UPON BY THE ASSESSING OFFICER THE LEARNED AR SUBMITTED THAT IN THAT CASE THE ASSESSEE WAS NOT MAINTAINING THE BOOKS OF ACCOUNTS AND HAD F ILED RETURN OF INCOME BY ESTIMATING NET INCOME AT 10%. HE SUBMITTE D THAT IN THE PRESENT CASE THE ASSESSEE WAS MAINTAINING THE BOOKS OF ACCOUNTS AND THEREFORE, THE ASSESSEES CASE WAS NOT COMPARABLE W ITH THE CASE OF SHIVAM CONSTRUCTION CO.. IN VIEW OF THE ABOVE SUBMI SSIONS THE LEARNED AR SUBMITTED THAT THE HONBLE TRIBUNAL HAD ARRIVED AT THE 5% RATE KEEPING IN VIEW ALL THESE FACTORS AND CONDITIONS TH OUGH IT MAY NOT HAVE REDUCED THE SAME INTO WRITING. ITA NO.483 (ASR)/2013 ASST. YEARS 2009-10 8 (I) PAST TAX HISTORY OF THE ASSESSEE. (II) ASSESSMENT ORDERS PASSED BY AND ACCEPTED BY TH E DEPARTMENT. (III) THE NATURE OF ASSESSEES BUSINESS. (IV) AN APPRAISAL OF THE VALUE OF THE CONTRACT. (V) PREVAILING ECONOMIC CONDITIONS VIS-A VIS THE AS SESSEES BUSINESS, (VI) THE PRICE OF RAW MATERIAL AND LABOURS ETC. (VII) THE RISE IN PRICE INDEX AS NOTIFIED BY THE CE NTRAL GOVERNMENT FROM TIME TO TIME., (VIII) ASSESSMENTS OF OTHER ASESSEES ENGAGED IN SIM ILAR BUSINESS. IN THE PRESENT CASE, WE FIND THAT FROM 2002-03 ONWA RDS UP TO ASST. YEAR 2012-13, THE NET PROFIT RATIO DECLARED BY ASSESSEE RANGED FROM 3.32. TO 5.14 % EXCEPT IN ASST. YEAR 2008-09 WHEREIN BY INCL USION OF SURRENDERED INCOME THE NET PROFIT RATIO WOULD INCREASE SIGNIFIC ANTLY FROM 3.38% HOWEVER, THIS YEARS PERCENTAGE CANNOT BE CONSIDERE D AS THIS WAS AN EXCEPTIONAL YEAR WHERE ASSESSEE HAD SURRENDERED SOM E INCOME. OUT OF ABOVE YEARS ASSESSMENTS WERE COMPLETED U/S 143(3) I N FIVE YEARS AND IN REST OF THE YEARS THE ASSESSMENTS WAS COMPLETED U/S 143(3)(1) AND THESE ASSESSMENTS STAND ACCEPTED BY DEPARTMENT AS THE CAS ES WERE NOT REOPENED EITHER U/S 147 OR U/S 263 OF THE ACT. THER EFORE, THE FIRST TWO PARA METERS LAID BY THE HONBLE HIGH COURT GOES IN FAVOUR OF THE ASSESSEE. AS REGARDS NATURE OF BUSINESS THE ASSESSE E IS CONTINUOUSLY ENGAGED IN THE SAME ACTIVITIES OF ROAD CONSTRUCTION IN ALL THESE YEARS AND THEREFORE, THE PROFIT MARGINS EARNED IN EACH YEAR A RE NOT EXPECTED TO FLUCTUATE SIGNIFICANTLY AND THEREFORE ALSO PROFIT M ARGINS DECLARED BY ASSESSEE IN EARLIER AND SUBSEQUENT YEARS AND ACCEPT ED BY DEPARTMENT IS ITA NO.483 (ASR)/2013 ASST. YEARS 2009-10 10 12. AS DEMONSTRATED BY LEARNED AR THE PAST AND SUBS EQUENT PROFIT MARGINS REMAINED LESS THAN 5% AND THE ACTIVITIES OF THE ASSESSEE REMAINED SAME, THEREFORE, WE UPHOLD THE APPLICATION OF 5% NET PROFIT RATE. 13. IN VIEW OF THE ABOVE, THE APPEAL FILED BY TH E REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED:21.01.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.