The Assistant Commissioner of Income Tax, Pathankot V. M/s Walia Construction Co., Pathankot

ITA 499/ASR/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3275 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-02-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 08-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAWANI SHANKAR
• Keywords: Depreciation; Rule of consistency; Revised return
• Section: 143(3); 133A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMR ITSAR BEFORE SH. N.S.SAINI, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.499(ASR)/2015 ASSESSMENT YEAR:2010- 11 ASST. CIT, CIRCLE-VI, PATHANKOT. VS. M/S. WALIA CONSTRUCTION CO., 1-R, ABROL NAGAR, GURDASPUR ROAD, PATHANKOT. [PAN:AAAFW 1495R] (APPELLANT) (RESPONDENT) APPELLANT BY: SH. ASHWANI KALIA (LD. CA) RESPONDENT BY: SH. BHAWAN I SHANKAR (LD. DR) DATE OF HEARING: 14.02.2019 DATE OF PRONOUNCEMENT: 14.02.2019 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE REVENU E DEPARTMENT AGAINST THE ORDER DATED 30.06.2015 PASSED BY THE LD. CIT(A)-2, AMRITSAR, U/S 250(6) OF THE I.T. ACT, 1961 (HEREINAFTER CALLED A S THE ACT). 2. THE REVENUE DEPARTMENT HAS RAISED THE FOLLOWING GROUN DS OF APPEAL. I) ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A)-2, AMRITSAR HAS ERRED IN APPLYING RATE OF 5% OF NET PROFIT AND ALLOWING FURTHER DEDUCTION OF DEPRECIATION AND SALARY/INTEREST, AGAINST 9% APPLIED BY THE ASSESSIN G OFFICER MERELY BY HOLING THAT WORKING RESULT ARE BETTER THA N EARLIER YEARS AND ITAT, AMRITSAR IN OWN CASE OF THE ASSESSEE FOR THE A.Y.2009- 10 APPLIED RATE OF 5% WHEN RATE OF 9% REASONABLY AP PLIED BY THE ITA NO.499 /ASR/2015 (A.Y.2010-11) ACIT VS. MS. WALIA CON STRUCTION CO., PATHANKOT 2 ASSESSING OFFICER BY REJECTING THE ACCOUNTS ON VARI OUS COGENT REASONS. II) THE LD. CIT(A)-2, AMRITSAR IS NOT RIGH T IN DELETING THE ABOVE ADDITION WHEN AS PER THE SETTLED LAW INCLUDIN G THE JUDGMENT OF THE SC KANCHWALA GEMS VS JCIT 288 ITR 1 0(SC) HOLDING THAT SINCE COGENT REASONS WERE GIVEN BY THE A.O. FOR REJECTING THE ACCOUNTS THERE WAS NO REASONS TO TAKE A DIFFERENT VIEW AND WELL SETTLED THAT IN A BEST JUDGMENT ASSES SMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESSWORK AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. III) THE LD. CIT(A)-2, AMRITSAR ERRED IN DELETI NG THE DISALLOWANCES OF RS.11,25,110/- ON ACCOUNT OF INTER EST FREE LOAN WHEN ASSESSEE HAS PAID INTEREST TO BANK AMOUNTING T O RS.93,42,170/- ON RS.8,96,06,639/- OR SECURED LOAN AND OTHER HAND ASSESSEE HAS OBLIGED ITS SISTER CONCERNS BY GI VING INTEREST FREE LOANS TO THEM WITH WHOM THE ASSESSEE FIRM HAD NO BUSINESS EXIGENCY AND NO PURCHASE/SALE WITH THEM. IV) THE LD. CIT(A)-2, AMRITSAR ERRED IN DELETING THE ADDITION OF RS.7,17,640/- WHEN SALARY PAID TO LADY PARTNER N OT ACTIVITY INVOLVED IN THE BUSINESS AS ASSESSEE COULD NOT PROD UCE EVIDENCE REGARDING THEIR QUALIFICATION AT THE TIME OF ASSESS MENT PROCEEDINGS. 3. THE REVENUE DEPARTMENT IS AGGRIEVED AGAINST THE ACTION OF THE LD. CIT(A) WHEREBY THE LD. CIT(A) DIRECTED TO APPLY NET PROFIT RATE @ 5% AS AGAINST 9% APPLIED BY THE ASSESSING OFFICER, DELETED THE DISALLOWANCES OF RS.11,25,110/- ON ACCOUNT OF INTEREST FREE LOAN AND RS.7 ,17,640/- CLAIMED AS SALARY PAID TO THE LADY PARTNER. THE LD. DR RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND WHILE RELYING THEREUPON SUBM ITTED THAT THE ASSESSING OFFICER HAS RIGHTLY PASSED THE ASSESSMENT ORDER AND M ADE THE ADDITIONS IN ACCORDANCE WITH LAW, HOWEVER, THE ORDER IM PUGNED HEREIN BASED ON THE CONJECTURES AND SURMISES AND THEREFORE SUFFER S FROM ILLEGALITY, IMPROPRIETY AND PERVERSITY. 4. HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL AVAI LABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER MADE VARIOUS ADD ITIONS I.E. ITA NO.499 /ASR/2015 (A.Y.2010-11) ACIT VS. MS. WALIA CON STRUCTION CO., PATHANKOT 3 RS.11,25,110/- ON ACCOUNT OF DISALLOWANCE OF INTEREST, RS. 49,80,000/- ON ACCOUNT OF SURRENDERED AMOUNT, RS.4,64,711/- ON ACCOUNT O F INTEREST ON FDR, RS.14,080/- ON ACCOUNT OF INCENTIVE FROM INDIAN OI L CORPORATION AND AMOUNT OF RS.825/- ON ACCOUNT OF DISCOUNT. ON APPEAL, T HE LD. CIT(A) REDUCED THE NET PROFIT RATE @ 5% AS AGAINST 9% APPLIE D BY THE ASSESSING OFFICER AND FURTHER DELETED THE DISALLOWANCE OF RS.11,2 5,110/- WHICH WAS MADE BY THE ASSESSING OFFICER WHILE RELYING UPON THE JUD GMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRY, 286 ITR 1 (P&H) AND THE ADDITION OF RS.7,17,640/- WHICH WAS ADDED IN THE INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER QUA SALARY PAID TO THE LADY PARTNERS. 5. IN THE INSTANT CASE, APPEAL EFFECT OF THE IMPUGNED ORD ER, HAS ALREADY BEEN GIVEN VIDE ORDER DATED 12.08.2015 BY THE ASSESSING OFFICER, RELEVANT PART OF THE SAME IS REPRODUCED HEREIN BELOW. APPEAL EFFECT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, AMRITSAR APPEAL NO.130/13-14 DATED 30/06/2015:- ASSESSEE FILED RETURN OF INCOME DECLARING INCOME O F RS.72,09,430/- ON 15/10/2010. THE ASSESSEE ALSO FILED REVISED RETURN ON 23/04/2011 AT AN INCOME OF RS.72,09,430/-.THE CASE WAS PROCESSED UNDER SECTION 143(1) ON 23/02/2012 AT THE RETURNED INCOME OF RS.72,09,430/-. IN THIS CASE SURVEY UNDER SECTION 133A WAS CONDUCTED ON 10/03/201.0 AND THE ASSESSEE HAS SURRE NDERED AN AMOUNT OF RS.50 LAKHS WHICH HAS DULY BEEN REFLECTED IN THE PROFIT & LOSS ACCOUNTS. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. THE ASSESSEES FIRM IS A GOVT. CONTRACTOR ENGAGED IN CIVIL CONSTRUCTION. THE ASSESSING OFFICER COMPLETED THE A SSESSMENT U/S 143(3) OF THE INCOME TAX ACT,1961 ON 19/03/2013 AT TOTAL INCO ME OF RS.2,31,90,370/- BY APPLYING THE NET PROFIT RATE OF 9% ON GROSS TURNOVER OF RS.21,62,19,467/- AFTER DISALLOWANCE OF SALARY PAID TO LADY PARTNERS AMOUNTING TO RS.7,17,640/- AND ALSO MADE ADDITION OF RS.LL,25,110/-ON ACCOUNT OF INTEREST FREE LOANS TO ITS SISTER CONCERNS. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. COMMISS IONER OF INCOME TAX (APPEALS), AMRITSAR AGAINST THE ORDER U/S 143(3) OF THE ASSESS ING OFFICER. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, AMRITSAR VIDE ORDER NO.130/13-14 DATED 30/06/2015 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION OR RS.1,08,26,112/- ITA NO.499 /ASR/2015 (A.Y.2010-11) ACIT VS. MS. WALIA CON STRUCTION CO., PATHANKOT 4 BY APPLYING NET PROFIT RATE OF 5% ON GROSS TURNOVER OF RS.17,26,72,757.73 AS AGAINST APPLIED NET PROFIT RA TE OF 9% ON GROSS TURNOVER 21,62,19,467/- BY THE ASSESSING OFFICER AND FURTHER TWO MORE ADDITIONS OF RS.11,25,110/- ON ACCOUNT OF INTEREST FREE LOAN AND RS.7,17,640/-ON ACCOUNT OF SALARY PAID TO LADY PARTNER DELETED. TOTAL ADDITION OF RS.1,26,68,862/- HAS BEEN DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, AMRITSAR. [CHARAN DASS] ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-VI, PATHANKOT 6. COMING TO THE APPLYING NET PROFIT RATE OF 5%, THE LD. CIT(A) OBSERVED THAT SINCE THE WORKING RESULTS OF THE APPELLANT FOR TH E YEAR UNDER APPEAL ARE MUCH BETTER THEN THE EARLIER ASSESSMENT YEARS AND MOREOVE R KEEPING IN VIEW THE DECISION OF HONBLE ITAT AMRITSAR BENCH IN ASSES SEES OWN CASE FOR A.Y.2009-10 VIDE ORDER DATED 26.03.2014 IN ITA NO. 361(ASR)/2013 , WHEREBY THE NET PROFIT RATE OF 9% ON THE DECLARED T URN OVER ESTIMATED BY THE AO WAS REDUCED TO 5% OF THE CONTRACT RECEIPTS DECLAR ED BY THE APPELLANT. THE LD. CIT(A) WHILE HOLDING THAT SINCE RE JECTION OF BOOKS OF ACCOUNT OF THE APPELLANT U/S 145/3 OF THE ACT HAS BEEN U PHELD AS ABOVE FOR BEING UNRELIABLE AND NET PROFIT DIRECTED TO BE DETER MINED BY THE APPLYING NET PROFIT RATE OF 5% OF ITS TURN OVER, ACCORDINGLY NO FU RTHER DISALLOWANCE OF ANY ITEM OF EXPENDITURE CLAIMED IN THE P & L ACCOUNT CAN B E MADE, DELETED THE DISALLOWANCE UNDER HAND. WE FIND THE REASONING GIVEN B Y THE LD. CIT(A) IS JUSTIFIABLE, BASED ON RULE OF CONSISTENCY AS WELL AS ON P RECEDENT OF CO- ORDINATE BENCH, THEREFORE IN OUR CONSIDERED VIEW, THE LD. CIT(A) HAS RIGHTLY APPLIED THE NET PROFIT RATE @ 5% HENCE WE ARE NOT I NCLINED TO INTERFERE IN THIS ISSUE. 7. COMING TO DELETION OF DISALLOWANCE OF INTEREST AMOUNT ING TO RS. 11,25,110/-, WE OBSERVE THAT THE ASSESSING OFFICER WHILE MAKING THE SAID ADDITION RELIED UPON THE DECISION OF THE JURISDICTI ONAL HIGH COURT IN THE CASE ITA NO.499 /ASR/2015 (A.Y.2010-11) ACIT VS. MS. WALIA CON STRUCTION CO., PATHANKOT 5 OF CIT VS. ABHISHEK INDUSTRIES (SUPRA). ALTHOUGH THE LD . CIT ALSO FOLLOWED THE SAID DECISION AND JUSTIFIED THE ACTION OF A.O., HO WEVER WHILE TAKING INTO CONSIDERATION THE FACT THAT SINCE THE REJECTION OF BOOKS OF ACCOUNT OF THE APPELLANT U/S 145(3) OF THE ACT HAS BEEN UPHELD BEING UNVERIFIABLE AND NET PROFIT RATE OF 5% TURNOVER DIRECTED TO BE DETERMINED , ACCORDINGLY NO FURTHER DISALLOWANCE OF ANY ITEM OF EXPENDITURE CLAIMED IN P&L ACCOUNT CAN BE MADE, DELETED THE ADDITION UNDER HAND. IN FACT THE DECISION IN CIT VS. ABHISHEK INDUSTRIES (SUPRA) OF THE JURISDICTIONAL HIGH CO URT HAS ALREADY BEEN OVER RULED BY THE APEX COURT IN THE CASE OF M/S. HERO CYCLE LTD. VS. CIT [2015] 379 ITR 347 (SC), HENCE IN OUR CONSIDERED VIEW, THE LD CIT(A) RIGHTLY DELETED THE DISALLOWANCE UNDER CONSIDERATION I .E. INTEREST AMOUNT OF RS. 11,25,110/- AND THEREFORE WE SUSTAIN DELETION. 8. NOW COMING TO THE DELETION OF ADDITION OF RS.7,17,64 0/- THE LD. CIT(A) WHILE TAKING INTO CONSIDERATION THE FACTS THAT BOTH THE LADY PARTNERS WERE ACTIVELY INVOLVED IN DAY TO DAY RUNNING OF BUSINESS AS T HEY WERE HANDLING THE OFFICE WORK AND SUPERVISION OF THE OFFICE STAFF AND OT HER MATTERS RELATING TO THE ADMINISTRATION OF BUSINESS AND THEY WERE PAID SALARY BEING THE WORKING PARTNERS AND THE EARLIER YEAR, THE SAME WAS ALLOWED AN D FURTHER THEY HAVE DULY DISCLOSED THE AMOUNT OF SALARY RECEIVED IN THEIR RE TURNS OF INCOME AND DULY PAID THE RELEVANT TAXES THEREON AND FILED THE CO PIES OF THEIR RETURNS AND COMPUTATION OF INCOME IN SUPPORT OF THEIR CONTENTION. FURTHER IT WAS ALSO OBSERVED BY THE LD. CIT(A) THAT THE ASSESSING OFFICER MA DE THE DISALLOWANCE OF RS.7,17,640/- PURELY ON GUESS WORK FAILING TO EXAMI NE THE RECORD AND THE STATEMENTS OF TWO LADY PARTNERS. IN OUR CONSIDERED VIEW THAT THE LD. CIT(A) WHILE DELETING THE SAID ADDITION, TAKEN INTO PECULIAR FACTS AND CIRCUMSTANCES AND ACCEPTANCE OF THE SAID DISALLOWANCE IN THE PREVIOUS Y EAR BY THE DEPARTMENT AND THEREFORE MADE THE JUSTIFIABLE DECISI ON BASED ON THE LOGICAL REASONING, HENCE DO NOT REQUIRE ANY INTERFERENCE. ITA NO.499 /ASR/2015 (A.Y.2010-11) ACIT VS. MS. WALIA CON STRUCTION CO., PATHANKOT 6 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPA RTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2019. SD/- SD/- (N.S.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED:14.02.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S. M/S. WALIA CONSTRUCTION CO., 1-R, ABR OL NAGAR, GURDASPUR ROAD, PATHANKOT (2) THE ACIT, CIRCLE-VI, PATHANKOT (3) THE CIT(A)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER FILENAME: WALIA CONSTRUCTION CO., PATHANKOT 499-15 DIRECTORY: G: TEMPLATE: C:\USERS\ETC PARMOD\APPDATA\ROAMING\MICROSOFT\TEMPLATES\NORMAL.D OT TITLE: IN THE INCOME TAX APPELLATE TRIBU NAL SUBJECT: AUTHOR: RAHUL PRABHAKAR KEYWORDS: COMMENTS: CREATION DATE: 2/14/2019 2:07:00 PM CHANGE NUMBER: 137 LAST SAVED ON: 2/26/2019 11:50:00 AM LAST SAVED BY: ETC PARMOD TOTAL EDITING TIME: 241 MINUTES LAST PRINTED ON: 2/26/2019 11:51:00 AM AS OF LAST COMPLETE PRINTING NUMBER OF PAGES: 7 (APPROX.) NUMBER OF WORDS: 1,741 (APPROX.) NUMBER OF CHARACTERS: 9,924 (APPROX.)