INCOME TAX OFFICER 20(2)(3), MUMBAI V. KIRPALSINGH GULABSINGH RAWAT, MUMBAI

ITA 4863/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2887 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 12-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income; TDS; Set aside
• Section: 142(1); 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE S HRI RAJESH KUMAR ( AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 4863/MUM/2017 ASSESSMENT Y EAR: 2011 - 12 THE ITO 20(2)(2), 2 ND FLOOR, R. NO. 212, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI VS. S H RI KRIPALSINGH GULABSINGH RAWAT, A - 506, 5 TH FLOOR, VITHAL VINAYAK SADARI, T.I ROAD, OPP. SWAN MILLS, SEWREE, MUMBAI - 400015 PAN: ABBPR0245C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MAHAVIR SINGH ( DR ) ASSESSEE BY : SHRI SATISH R. MODY ( AR ) DATE OF HEARING: 09/01 /201 9 DATE OF PRONOUNCEMENT: 05 / 04 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 23.03.2017 PASSED B Y THE COMMIS SIONER OF INCOME TAX (APPEALS) - 32 (FOR SHORT THE CIT (A)) , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 144 OF THE INCOM E TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT SINCE THE ASSESSEE HAD NOT FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AO ISSUED NOTICE U/S 143 (2) AND 142 (1). HOWEVER, THE NOTICES WERE RECEIVED BACK UN - SERVED WITH THE REMARKS LEFT. NOTICE U/S 142 (1) WAS AGAIN ISSUED IN RESPONSE TO WHICH THE ASSESSEE SOUGHT ADJOURNMENT. THEREAFTER, NOTICES WERE ISSUED TWO/THREE TIMES, HOWEVER NO RESPONSE WAS RECEIVED FROM THE ASSESSEE. 2 ITA NO. 4863/MUM/2017 ASSESSMENT YEAR: 2011 - 12 ACCORDINGLY, A S HOW CAUS E NOTICE WAS ISSUED ON 07.03.2014 ALONG WITH NOTICE UNDER SECTION 142(1) OF THE ACT, AGAIN THE ASSESSEE DID NOT RESPOND. ACCORDINGLY, THE AO PASSED ASSESSMENT ORDER U/S 144 OF THE ACT AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 2,03,91,680/ - . 3 . IT WAS NOTICED FROM THE AIR INFORMATION THAT ASSESSEE HAD PURCHASED IMMOVABLE PROPERTIES FOR RS. 50 LACS IN THE MONTH OF OCTOBER, 2010. SINCE, NO EXPLANATION WAS RECEIVED ABOUT THE NATURE OF SOURCE OF INVESTMENT, AO TREATED THE SAID AMOUNT AS UN DISCLOSED INVESTMENT THE ASSESSEE U/S 69 OF THE ACT . A S PER 26AS DETAILS ASSESSEE HAD RECEIVED INCOME OF RS. 1,56,27,118.58 ON ACCOUNT OF INTEREST , CONTRACT RECEIPTS AND RENT ETC. SINCE, THE ASSESSEE HAD NOT FURNISHED ANY DETAIL REGARDING THE INCOME RECEIVED BY WAY OF UNACCOUNTED CONTRACTUAL RECEIPTS AMOUNTING TO RS. 1,48,19,078.58 , T HE AO TREATED THE SAID AMOUNT AS BUSINESS INCOME OF THE ASSESSEE. SIMILARLY, AS PER 26AS, THE ASSESSEE HAD RECEIVED INCOME FROM RENT AMOUNTING TO RS. 7,84,800/ - AND HAD NOT PRODUCED ANY EVIDENCE, THE AO TREATED THE SAID AMOUNT AS INCOME FROM HOUSE PROPERTY. FURTHER SINCE THE ASSESSEE HAD RECEIVED AN INCOME OF RS. 23,240/ - AS INTEREST, THE AO ALSO TREATED THE SAID AMOUNT AS INCOME OF THE ASSESSEE FROM OTHER SOURCES . THE ASSESSEE CHALLENGE D THE ASSESSMENT ORDER BEFORE THE LD. CIT (A) INTER ALIA ON THE GROUND THAT THE ASSESSMENT ORDER PASSED U/S 144 OF THE ACT IS BAD IN LAW AND THE AO HAS WRONGLY TREATED THE ENTIRE RECEIPT OF RS. 1,48,19,079/ - AS BUSINESS INCOME AND THE ACTION OF AO IN TREAT ING RS. 50 LACS AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. THE LD.CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, HOWEVER CONFIRMED THE ADDITION OF RS. 4,39,931/ - I.E. 3.83% OF THE TOTAL AMOUNT OF CONTRACTUAL RECEIPTS HOLDING THAT THE GP OF 3.83% IS MORE THAN THE GP SHOWN BY THE ASSESSEE IN THE LAST YEAR. THE REVENUE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT(A) 4 . THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD.CIT (A) BY RAISING THE FOLLOWING EFFECTIVE GROUND : 3 ITA NO. 4863/MUM/2017 ASSESSMENT YEAR: 2011 - 12 ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AD IN LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE ADDITION MADE ON THE RECEIPT OF CONTRACT RECEIPTS TO RS. 4,39,931/ - TO THE EXTENT OF G.P 3.83% AS AGAINST RS. 1,48,19,079/ - WITHOUT APPRECIATING THE FACT THAT ASSESS EE DID NOT SUBMIT DOCUMENTARY EVIDENCES THE REGARDS TO EXPENSES RELATED TO THE CONTRACT RECEIPTS AND FURTHER, AUDITED BOOKS OF ACCOUNT WAS ALSO NOT SUBMITTED BEFORE THE ASSESSING OFFICER. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTE D THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO 3.83% OF GP SHOWN BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE TO ESTABLISH THE EXPENSES RELATED TO THE CONTRACT RECEIPTS AND THAT THE ASSESSEE DID NOT SUBMIT THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. THE LD. DR FURTHER SUBMITTED THAT SINCE THE ORDER PASSED BY THE LD. CIT (A) IS NOT BASED ON ANY EVIDENCE ON RECORD, THE SAME IS LIABLE TO BE SET ASIDE. 6. ON THE OTHER HAND, THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT SINCE THE LD. CIT (A) HAS CONFIRMED THE ADDITION OF RS. 4,39,931/ - WHICH IS 3.83% AS AGAINST THE ENTIRE AMOUNT OF RECEIPT, THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). THE LD. COUNSEL FURTHER POINTED OUT THE G P IN THE CASE OF ASSESSEE FO R THE PREVIOUS YEAR WAS 0.21% IN THE BOOKS OF ACCOUNT AS AGAINST THE GP SHOWN IN THE ASSESSMENT YEAR UNDER CONSIDERATION . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE R USE D THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL C ONTENTION OF THE PARTIES . THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT (A) HAS WRONGLY RESTRICTED THE ADDITION TO THE EXTENT OF GP OF 3.83% SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. WE NOTICE THAT THE AO HAS MADE THE ADDITION OF ENTIRE RECEIP T AS BUSINESS INCOME OF THE ASSESSEE. ALTHOUGH THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE TO PROVE THE EXPENDITURE IN THE BUSINESS YET 100% ADDITION IS NOT JUSTIF IED AS THE ENTIRE RECEIPTS CANNOT BE THE TAXABLE INCOME OF THE ASSESSEE . THEREFORE, THE AO SHOU LD HAVE FOLLOWED CERTAIN PARAMETERS TO ASCERTAIN PROFIT IN ORDER TO MAKE 4 ITA NO. 4863/MUM/2017 ASSESSMENT YEAR: 2011 - 12 ADDITION TO THE INCOME OF THE ASSESSEE . ON THE OTHER HAND, THE LD. CIT (A) HAS RESTRICTED THE ADDITION TO 3.83% HOLDING THAT THE GP SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS MUCH HIGHER THAN THE GP OF 0.21 % SHOWN BY THE ASSESSEE IN PREVIOUS ASSESSMENT YEAR . THE FINDINGS OF THE LD CIT (A) ARE AS UNDER: - 5.2 GROUND NO. 2: THIS GROUND OF APPEAL IS AGAINST THE ADDITION OF ENTIRE CONTRACTUAL RECEIPTS OF RS. 1,48 ,19,079/ - . THE APPELLANT IS A LABOUR CONTRACTOR AND RECEIVED CONTRACTUAL RECEIPT DURING THE YEAR UNDER CONSIDERATION. THE ENTIRE RECEIPTS HAVE BEEN TREATED AS UNACCOUNTED RECEIPTS UNDER THE HEAD CONSIDERATION. THE ENTIRE RECEIPTS HAVE BEEN TREATED AS UNCON TROLLED RECEIPTS UNDER THE HEAD BUSINES INCOME BY THE A.O. HOWEVER, OUT OF THE TOTAL RECEIPTS OF RS. 1,48,19,079/ - , CONTRACTUAL RECEIPT FROM CALAX CHEMICALS & PHARMACEUTICALS LTD. OF RS. 31,32,127/ - , IS INADVERTENTLY FILED IN THE TDS RETURN WITH THE PAN NU MBER OF THE APPELLANT INSTEAD OF ANOTHER PARTY HAVING SAME NAME I.E. S.S. ENTERPRISES HAVING PAN NUMBER AHWPK3832H AND I FOUND THAT THE APPELLANT HAD APPROACHED THE DEDUCTOR I.E. CALAX CHEMICALS & PHARMACEUTICALS LTD. FOR RECTIFICATION IN TDS RETURN THE CO PY OF THE SAID LETTER ALSO IS PRODUCED BEFORE ME. FEW COPIES OF THE BILL OF THE ACTUAL CONTRACTOR IS ALSO OBTAINED FROM THE DEDUCTOR IN SUPPORT OF APPELLANTS CONTENTION WHICH ARE PLACED ON RECORD. AS THIS IS AN OBVIOUS INADVERTENT MISTAKE, THE A.O. CAN GIV E CREDIT TO THE SAME. FURTHER, THE AO HAD CONSIDERED SERVICE TAX AMOUNT OF RS. 3,09,739/ - IN THE TOTAL TURNOVER, HOWEVER ASSESSEE HAS ACCOUNTED THIS AMOUNT UNDER THE DUTIES & TAXES WHICH IS NOT HIS GROSS TURNOVER, THEREFORE, THE ACTUAL CONTRACTUAL BUSINESS RECEIPTS AS PER APPELLANTS BOOKS OF ACCOUNT IS RS. 1,14,82,503/ - . BEFORE ME THE APPELLANT HAD FURNISHED COPY OF PREVIOUS ASSESSMENT ORDER PASSED BY THE A.O. IN WHICH GP IS SHOWN AT 0.21% IN HIS AUDITED BOOKS OF ACCOUNT. FOR THE F.Y. UNDER CONSIDERATION THE GP IS SHOWN 3.83% WHICH IS MORE THAN THE PREVIOUS A.Y. THE A.O. HAD CONSIDERED THE ENTIRE CONTRACT RECEIPTS AS INCOME OF THE APPELLANT FOR THIS A.Y. WITHOUT 5 ITA NO. 4863/MUM/2017 ASSESSMENT YEAR: 2011 - 12 CONSIDERING THE EXPENDITURE INCURRED BY THE APPELLANT. THEREFORE, I RESTRICT THIS TO RS. 43,993 1/ - OFFERED BY APPELLANT IN HIS COMPUTATION OF INCOME FILED BEFORE ME WHICH COMES TO AT 3.83% OF THE GROSS RECEIPTS, FOLLOWING PREVIOUS YEARS RETURN OF INCOME FILED BEFORE THE DEPARTMENT. THIS GROUND IS PARTLY ALLOWED. 8. WE NOTICE THAT THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE GP SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. WE FURTHER NOTICE THAT IN THE PREVIOUS ASSESSMENT ORDER, THE AO HAS ADMITTED GP AT 0.21% SHOWN BY THE ASSESSEE IN AUDITED BOOKS OF ACCOUNT AND IN THE ASSE SSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN HIGHER GP AT 3.83%. UNDER THESE CIRCUMSTANCES, THE ACTION OF THE LD. CIT(A) APPEARS TO BE MORE LOGICAL . HOWEVER, S INCE THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDENCE TO JUSTIFY THE BUSINESS EXPENDITUR E IN THE ASSESSMENT YEAR UNDER CONSIDERATION , EITHER DURING ASSESSMENT PROCEEDINGS OR EVEN DURING APPELLATE PROCEEDINGS, WE CONSIDER IT APPROPRIATE CONFIRM THE ADDITION TO EXTENT OF 6% OF THE TOTAL RECEIPTS IN QUESTION. HENCE, IN THE INTEREST OF JUSTICE WE MODIFY THE ORDER PASSED BY THE LD. CIT(A) AND CONFIRM THE ADDITION TO THE EXTENT OF 6% OF THE TOTAL AMOUNT OF CONTRACTUAL RECEIPTS . ACCORDINGLY, WE DIRECT THE AO TO MAKE ADDITION OF 6% OF THE TOTAL AMOUNT RECEIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2011 - 12 IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL , 2019 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 05 / 0 4 / 201 9 ALINDRA, PS 6 ITA NO. 4863/MUM/2017 ASSESSMENT YEAR: 2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A ) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI