Construction Engineers, Srinagar V. The Assessing Officer, Srinagar

ITA 495/ASR/2010

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9836 (ITAT-AMRITSAR)
• Duration Of Justice: 9 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-11-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M A MIR L D COST ACCOUNTANT
• Keywords: Depreciation; Revised return; Set aside
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N.K.CHOUDHRY, JUDICIAL MEMBER AND DR. A.L.SAINI, ACCOUNTANT MEMBER ITA NOS. 495/ASR/2010 ASSESSMENT YEAR: 2007-08 M/S. CONSTRUCTION ENGINEERS, 54, INDUSTRIAL ESTATE, BARZULLA, SRINAGAR. VS. ASSESSING OFFICER, CIRCLE, SRINAGAR. [PAN:AABFC 7715P] (APPELLANT) (RESPONDENT) ITA NOS. 382/ASR/2010 ASSESSMENT YEAR: 2007-08 DY. CIT CIRCLE-3, SRINAGAR VS. M/S. CONSTRUCTION ENGINEERS, 54, INDUSTRIAL ESTATE, BARZULLA, SRINAGAR [PAN:AABFC 7715P] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. M.A. MIR ( LD. COST ACCOUNTANT) RESPONDENT BY : SH. CHARAN DASS (LD. DR) DATE OF HEARING: 28.11.2019 DATE OF PRONOUNCEMENT: 30.12.2019 ORDER PER N.K.CHOUDHRY, JM: THESE CROSS APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AS WELL AS REVENUE DEPARTMENT AGAINST THE IMPUGNED ORDE R DATED 28.06.2010 PASSED BY THE LD. CIT(A)-BATHINDA U/S 250(6 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). ITA NOS.495 & 382/ASR/ 2010 (A.Y. 2007 -08) CONSTRUCTION ENGINEERS VS. DCIT 2 2. THE FACTUAL MATRIX OF THE CASE IN HAND IS THAT THE A SSESSEE FOR ASST. YEAR:2007-08 HAD DECLARED AN INCOME OF RS.2,30,64, 265/- BY FILING THE RETURN OF INCOME ON DATED 29/03/2008. THE REAFTER, THE RETURN WAS REVISED ON DATED 31/03/2008 BY DECLARING TH E INCOME OF RS.2,52,17,900/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN GROSS CONTRACT RECEIPTS OF RS.45,32,03,843/- IN T HE ORIGINAL RETURN AND RS.46,23,06,595/- IN THE REVISED RETURN OF INCOME AND TOTAL NET PROFIT OF RS.2,52,17,900/- ON THE BASIS OF N ET PROFIT RATE @ 5.08% AS DECLARED BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT AGREE WITH THE NET PROFIT RATE APPLIED BY THE ASSESSEE AND ULTIMATELY ESTIMATED THE NET PROFIT RATE @ 10.5% WHICH WAS CHALLEN GED BEFORE THE LD. CIT(A) BY THE ASSESSEE. THE ASSESSING OFFICER REDUCED THE NET PROFIT RATE FROM 10.5% TO 10%, AGAINST WHICH, THE ASSESSE E AS WELL AS THE REVENUE DEPARTMENT PREFERRED SEPARATE APPEALS UND ER CONSIDERATION . THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 11.05.2012 DECIDED BOTH THE APPEALS AND APPLIED NET PROFIT RATE @ 7% ON THE GROSS CONTRACT RECEIPTS DECLARED BY THE ASSESSEE MINUS INTEREST ON F IXED DEPOSITS AND OTHER RECEIPTS. THE HON'BLE CO-ORDINATE BEN CH ALSO AFFIRMED THE VIEW OF THE LD. CIT(A) TO THE EFFECT TH AT THE LD. CIT(A) HAS RIGHTLY TREATED THE FIRM AS A AOP AND HAS DISALLOWE D THE INTEREST AND SALARY TO PARTNERS AND THE INTEREST INCOME HAS RIGHT LY BEEN TREATED AS INCOME FROM OTHER SOURCES. THE HONBLE CO-ORD INATE BENCH ALSO HELD THAT AMOUNT OF RS.6,69,340/- HAS BEEN DULY R EFLECTED IN THE BOOKS OF ACCOUNT. ONCE HAVING APPLIED THE NET PROFIT RA TE, NO ADDITION CAN BE MADE ON ACCOUNT OF CREDITORS DECLARED BY THE ASSESSEE. CONSEQUENTLY, THE HONBLE CO-ORDINATE BENCH DELETED TH E ADDITION OF RS.6,69,340/-. ITA NOS.495 & 382/ASR/ 2010 (A.Y. 2007 -08) CONSTRUCTION ENGINEERS VS. DCIT 3 3. THE REVENUE DEPARTMENT PREFERRED THE APPEAL BEFORE HON'BLE HIGH COURT OF JAMMU AND KASHMIR, AGAINST THE ORDER O F THE TRIBUNAL DATED 11.05.2012 PASSED IN ITA NO.495/ASR/2010 & 382/A SR/2010 PERTAINING TO ASST. YEAR: 2007-08. THE HONBLE HIGH C OURT VIDE ORDER DATED 5 TH JUNE, 2017 PASSED IN ITA NO.04/2012 REMITTED THE MAT TER QUA APPLYING OF NET PROFIT RATE, TO THE TRIBUNAL WI TH THE FOLLOWING OBSERVATIONS. 5. THIS IS A CASE WHERE THE ASSESSEES BOOKS WERE REJECTED AND A BEST ASSESSMENT WAS DONE UNDER SECTION 144 OF THE INCOME TAX ACT, 1961. THE ISSUE RELATES TO THE NET PROFIT RATE WHICH HAS TO BE ADOPTED BASED ON THE GROSS CONTRACT RECEIPTS. THE N ET PROFIT RATE WHICH WAS ADOPTED BY THE ASSESSING OFFICER WAS 10.5 % WHICH WAS REDUCED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO 10% AND NO FURTHER APPEAL BY THE ASSESSEE WAS REDUCED TO 7%. T HE REVENUE ON THE OTHER HAND IN ITS APPEAL BEFORE THE TRIBUNAL HA D REQUESTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAD WRONGL Y REDUCED THE RATE OF NET PROFIT FROM 10.5% TO 10%. 6. THE QUESTION THAT HAS BEEN FRAMED CLEARLY INDICA TES THAT THE ASSESSEE HAD PLEADED THAT THE NET PROFIT RATE SHOUL D BE BETWEEN 9% AND 10% AND, IF THAT BE THE CASE, THERE WAS NO GROU ND FOR THE TRIBUNAL TO HAVE ADOPTED THE NET PROFIT RATE OF 7% LOWER THAN WHAT THE ASSESSEE ITSELF HAD PLEADED. 7. THE LEARNED COUNSEL FOR THE REVENUE DREW OUR AT TENTION TO A LETTER DATED 15.12.2009 ADDRESSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX TO THE ASSESSE WHEREIN THE ASSESSE WA S REQUIRED TO EXPLAIN WHY THE TOTAL INCOME IN THE ASSESSES CASE SHOULD NOT BE ESTIMATED @ 12.5% OF THE GROSS CONTRACT RECEIPTS WI THOUT GIVING ANY FURTHER DEDUCTION ON ACCOUNT OF SALARY ETC. IN RESP ONSE BY A LETTER DATED 24.12.2009, THE ASSESSE SUBMITTED THAT THE PR OPOSED RATE OF 12.5% WAS TOO EXCESSIVE IN VIEW OF A NUMBER OF DECI SIONS OF COURTS AND OF THE ITAT. SEVERAL CASES WERE MENTIONED IN TH E SAID LETTER, IN ALL OF WHICH EITHER THE RATE OF 10 OR THE RATE OF 9 % WAS APPLIED. BASED THEREUPON, THE ASSESSE REQUESTED THAT THE RAT E PROPOSED WAS VERY HIGH AND THAT THE RATE OF 9% WITH INTEREST AND SALARY TO PARTNERS AND DEPRECIATION TO BE ALLOWED BE CONSIDER ED. THUS, IT IS EVIDENTLY CLEAR THAT THE ASSESSEE ITSELF HAD REQUES TED FOR A NET PROFIT RATE OF 9%. AS AGAINST THIS, THE TRIBUNAL, WITHOUT CITING AND REASONS, HAS ADOPTED THE NET PROFIT RATE OF 7%. ON THIS GROU ND ALONE, THE APPEAL IS LIABLE TO BE ALLOWED INSOFAR AS THE ISSUE OF NET PROFIT RATE IS CONCERNED. ITA NOS.495 & 382/ASR/ 2010 (A.Y. 2007 -08) CONSTRUCTION ENGINEERS VS. DCIT 4 8. CONSEQUENTLY, WE SET ASIDE THE FINDING OF THE TR IBUNAL TO THE EFFECT THAT THE NET PROFIT RATE SHOULD BE 7%. THE M ATTER IS REMITTED TO THE TRIBUNAL TO ASCERTAIN THE APPROPRIATE NET PROFI T RATE WHICH MUST NOT BE LESS THAN 9% WHICH WAS ADMITTED BY THE ASSES SEE ITSELF. 9. THE APPEALS STANDS ALLOWED AS ABOVE. AT THE TIME OF ARGUMENT BEFORE US, THE LD. COUNSEL OF THE ASSESSEE AND THE LD. DR HAVE AGREED THAT MATTER PERTAIN S TO ASST. YEAR:2007-08 AND REASONABLE TIME HAS ALREADY BEEN ELA PSED, THEREFORE, IN ORDER TO CUT SHORT THE LITIGATION, THE APPEALS OF THE ASSESSEE AND THE REVENUE DEPARTMENT CAN BE DISPOSED OF BY ALLOWING THE NET PROFIT RATE @ 7%, HENCE, CONSIDERING THE SUBMISS IONS OF THE PARTIES AND FOR THE JUST DECISION OF THE CASE AND FOR THE END OF LIS, WE DIRECT THE ASSESSING OFFICER TO APPLY THE NET PROFIT RATE @ 7% ON THE GROSS CONTRACT RECEIPTS DECLARED BY THE ASSESSEE EXCLUDING THE INTEREST ON FIXED DEPOSITS AND OTHER RECEIPTS AND SUBJECT TO NO FURTHER ADDITION . 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED, WHEREAS APPEAL FILED BY THE REVENUE DEPARTM ENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/ 12/2019. SD/- SD/- (DR. A.L.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 30/12/2019. /PK/ PS. COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THEN CIT(APPEALS) TRUE COPY 5. SR DR, I.T.A.T. AMRITSAR 6. GUARD FILE BY ORDER