M/S. SOHANLAL JAMANLAL, Nagpur V. THE CIT-IV, Nagpur

ITA 5/NAG/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1555 (ITAT-NAGPUR)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R MEENA
• Keywords: Rejection of books of accounts; Business income; Revision of order; Non compliance
• Section: 43B; 143(3); 145; 263

Judgement Text

1 ITA NO. 05/NAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.05/NAG/2015 ASSESSMENT YEAR : 2009 - 10 M/S SOHANLAL JAMANLAL, COMMISSIONER OF INCOME - TAX - IV, NAGPUR. VS. NAGPUR. PAN AAEFS9043H APPELLANT. RESPONDENT. APPELLANT BY : SHRI RAJESH LOYA. RESPONDENT BY : SHRI A.R. MEENA. DATE OF HEARING : 07 - 12 - 2015 DATE OF PRONOUNCEMENT : 18 TH DEC., 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED C.I.T. - IV , NAGPUR PASSED U/S 263 OF THE I.T. ACT DATED 13 - 03 - 2014 . THE GROUNDS RAISED ARE REPRODUCED BELOW: (1) THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX - IV PASSED U/S .263 OF THE INCOME TAX ACT IS BAD IN LAW AND WRONG ON FACTS . (2) THAT THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER OF THE ASSTT . COMMISSIONER OF INCOME TAX , CIRCLE 8, NAGPUR , DATED 26 - 12 - 2011 PASSED U/ S.143(3) WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AN D DESERVES REVISION. ON THE FACTS OF THE CASE THE PROCEEDINGS AND DIRECTIONS OF THE CIT U/ S.263 ARISING MERELY OUT OF AN AUDIT PARTY OBJECTION ARE ILLEGAL AND LIABLE TO BE SET ASIDE. (3) THAT THE LEARNED CIT ERRED IN LAW AND ON FACTS IN HOLDING THAT T HE AMOUNT OF RS .4, 17,910/ - SHOULD BE CHARGED AS 'INCOME FROM OTHER SOURCES' INSTEAD OF BUSINESS INCOME AND FURTHER ERRED IN ISSUING DIRECTIONS TO THE AO TO MAKE SEPARATE ADDITION OF SAME AS 'OTHER INCOME' TO THE INCOME PREVIOUSLY ASSESSED IS] S.143(3) AFT ER REJECTION OF 2 ITA NO. 05/NAG/2015 BOOKS OF ACCOUNTS. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT IS HIGHLY UNJUSTIFIED IN DISREGARDING THE EXPLANATION MADE THAT THE IMPUGNED INCOME IS ARISING OUT OF AND PART OF THE BUSINESS OF THE ASSESSEE AND HENCE IS NOT S EPARATELY ASSESSABLE. THE ACTION OF THE CIT IS LIABLE TO BE SET ASIDE . (4) THAT THE LEARNED CIT ERRED IN LAW AND ON FACTS IN ISSUING DIRECTIONS TO THE AO U/S.263 FOR MAKING ADDITION OF RS.14,17,308/ - ON NON COMPLIANCE U/S 40 (A)(IA). ON THE FACTS AND CI RCUMSTANCES OF THE CASE THE CIT GROSSLY ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE TO THE ASSESSEE IRRESPECTIVE OF THE FACT THAT BOOKS HAVE BEEN REJECTED U/ S . 145(3). (5) THAT THE LEARNED CIT ERRED IN LAW AND ON FACTS IN I SSUING DIRECTIONS TO THE AO U/S.263 FOR MAKING ADDITION OF RS.2,48,855/ - U/S 43B ON ACCOUNT OF NON PAYMENT OF SALES TAX DUES. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT GROSSLY ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 43B ARE APPLICABLE TO THE ASSESSEE IRRESPECTIVE OF THE FACT THAT BOOKS HAVE BEEN REJECTED U/ S.145(3). 2. AS PER THE RECORDS AVAILABLE BEFORE US, AN ASSESSMENT WAS MADE U/S 143(3) DATED 26 - 12 - 2011. A RETURN OF INCOME WAS FILED AT RS.29,18,890/ - , HOWEVER, THE ASSESSMENT WAS FINALISED ON THE ASSESSED INCOME AT RS.41,21,1673/ - . WHILE INVOKING THE REVISIONAL JURISDICTION U/S 263 OF I.T. ACT, LEARNED COMMISSIONER HAS NOTED THAT THE AO HAS ASSESSED THE INCOME BY ESTIMATING THE NET PROFIT AT THE RATE OF 6% ON THE GROSS RECEIPTS OF THE ASSESSEE. ACCORDING TO THE LEARNED COMMISSIONER, THERE WERE CERTAIN INCOME WHICH WERE NOT TAXED BY THE AO. HENCE THE ORDER PASSED U/S 143(3) WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. VIDE PARA 2, LEARNED COMMISSIONER HAS INVOKED THE REVISIONAL J URISDICTION IN RESPECT OF THE FOLLOWING INCOME, REPRODUCED BELOW : ON VERIFICATION OF THE CASE RECORDS, IT IS SEEN THAT THE OTHER INCOME OF RS.4,17,910/ - (INTEREST FROM FDR, TAXABLE DIVIDEND, MISCELLANEOUS INCOME ETC.) WAS NOT TAKEN INTO ACCOUNT WHILE DETERMINING THE TAXABLE INCOME. FURTHER, IT IS ALSO NOTICED FROM FO RM 3 CD FILED ALONG WITH RETURN OF INCOME THAT THE AO HAS FAILED TO DISALLOW AN AMOUNT OF RS.14,17,308/ - U/S 40(A)(IA) OF THE I.T. ACT, 1961 ON ACCOUNT OF NON - PAYMENT 3 ITA NO. 05/NAG/2015 AND LATE PAYMENT OF TDS AND AN AMOUNT OF RS.2,48,856/ - ON ACCOUNT OF SERVICE TAX NOT PAI D BEFORE DUE DATE AT THE TIME OF DETERMINING THE TAXABLE INCOME. 3. THE EXPLANATION OF THE ASSESSEE WAS THAT THE FIRM WAS IN CIVIL CONSTRUCTION WORK AND FUNCTIONED AS A GOVERNMENT CONTRACTOR. THE ASSESSEE HAD FURNISHED THE BOOKS OF ACCOUNTS WITH DOCUMENTS AND VOUCHERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO WAS NOT SATISFIED, HENCE INVOKED THE PROVISIONS OF SECTION 14 5 , AS A RESULT, BOOKS WERE REJECTED. THE AO HAS COMPARED THE BUSINESS ACTIVITY WITH OTHER SIMILAR TYPE OF TAX PAYERS AND AFTER DU E EXAMINATION CAME TO KNOW THAT AN AVERAGE 6% PROFIT WAS DISCLOSED BY SIMILAR TYPE OF TAX PAYERS. BASED UPON THE COMPARABLE CASES THE AO HAS THEREAFTER APPLIED THE NET PROFIT AT 6% ON THE GROSS RECEIPTS OF THE ASSESSEE. HOWEVER, LEARNED CIT WAS NOT CONVIN CED AND HELD THAT THE AO WAS REQUIRED TO BRING TO TAX THE OTHER INCOME OF RS.4,17,910/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. LIKEWISE THE AO WAS REQUIRED TO DISALLOW THE EXPENDITURE BY INVOKING SECTION 40(A)(IA) OF I.T. ACT. THE AO WAS ALSO REQUIRED TO INVOKE THE PROVISIONS OF SECTION 43B. IN HIS OPINION EVEN BY REJECTING THE BOOKS OF ACCOUNTS THE PROVISIONS OF SECTION 145(3) HAVE NOT EFFECTED THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) AND THE PROVISIONS OF SECTION 43B OF I.T. ACT. LEARNED COMMISSIONER HAS DIRECTED THE AO TO RECOMPUT E THE TAXABLE INCOME AS UNDER : IN VIEW OF THE ABOVE DISCUSSIONS AND THE CONCLUSION REACHED IN PARAGRAPH 5.1.4 AND 5.2.3 ABOVE, I AM OF THE OPINION THAT THE ORDER PASSED BY THE ACIT, CIRCLE - 8, NAGPUR ON 26.12.2011 IS ERRONEOUS INSOFAR AS IT IS PREJUDI CIAL TO THE INTEREST OF REVENUE. BY VIRTUE OF POWERS VESTED IN ME U/S 263 OF THE I.T. ACT, I DIRECT THE AO TO BRING TO TAX THE OTHER INCOME OF RS.4,17,910/ - UNDER THE HEAD OF INCOME FROM OTHER SOURCES AND ALSO DISALLOW AND ADD TO THE ASSESSEES TOTAL INC OME THE AMOUNT OF RS.14,17,308/ - U/S 40(A)(IA) AND RS.2,48,855/ - U/S 4 ITA NO. 05/NAG/2015 43B. THE AO IS DIRECTED TO ALLOW DEDUCTION OF RS.1,24,504/ - FROM THE AMOUNT BEING ADDED U/S 40(A)(IA) IN CASE THE SAME WAS DISALLOWED IN EARLIER U/S 40(A)(IA) AS CLAIMED BY THE ASSESSEE. THE AO IS DIRECTED TO MODIFY THE ASSESSMENT ORDER U/S 143(3) DATED 26.12.2011 ACCORDINGLY. 4 . FROM THE SIDE OF THE APPELLANT, LEARNED A.R., MR. RAJESH LOYA APPEARED AND AT THE OUTSET INFORMED THAT A DETAILED ENQUIRY WAS MADE BY THE AO AND THEREAFTER HE HA S DECIDED TO COMPUTE THE ASSESSMENT BY ADOPTING THE NET PROFIT RATE AT 6% ON THE GROSS RECEIPTS OF THE ASSESSEE. OTHERWISE ALSO THE ASSESSEE HAS NOT INFRINGED ANY OF THE PROVISIONS AS NOTICED BY THE LEARNED COMMISSIONER. HE HAS ALSO DRAWN OUR ATTENTION ON THE SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER WHEREIN IT WAS PLEADED THAT THE IMPUGNED INCOME WERE DULY REFLECTED AS BUSINESS INCOME, HENCE THERE WAS NO REASON TO TAX THE IMPUGNED AMOUNT OVER AND ABOVE THE AMOUNT ALREADY TAXED IN THE HANDS OF THE AS SESSEE. FOR THIS LEGAL PROPOSITION, RELIANCE WAS PLACED ON THE DECISION OF CIT VS. MAX INDIA LTD. 295 ITR 282 (SC), INDWELL CONSTRUCTIONS VS. CIT 232 ITR 776, VODAFONE ASSAR SOUTH LTD. VS. CIT 141 TTJ 84 (ITAT DELHI). 5 . ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LEARNED D.R., MR. A.R. MEENA APPEARED AND SUPPORTED THE VIEW TAKEN BY THE LEARNED COMMISSIONER. LEARNED D.R. HAS PLEADED THAT THE PROVISIONS OF SECTION 43B AND THE PROVISIONS OF SECTION 40(A)(IA) ARE ALTOGETHER DIFFERENT FROM THE DETERMINATIO N OF NET PROFIT OF THE ASSESSEE. IF THERE WAS INFRINGEMENT OF THE PROVISIONS OF THE ACT THEN THE LEARNED COMMISSIONER WAS JUSTIFIED IN DIRECTING THE AO TO RECOMPUTE THE ASSESSMENT. 5 ITA NO. 05/NAG/2015 6 . WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERUSED THE COMPILATION FILED BEFORE US IN THE LIGHT OF THE RECORDS AVAILABLE AND THE CASE LAWS CITED. AT THE OUTSET WE HAVE NOTED THAT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT 232 ITR 776, THE HONBLE ANDHRA PRADESH HIGH COURT HAS OPINED THAT IN A SITUATION WHEN THERE WAS R EJECTION OF BOOKS OF ACCOUNTS THEN THERE WAS NO LEGAL REQUIREMENT TO MAKE SEPARATE ADDITIONS IN RESPECT OF ITEMS FALLING U/S 40(B), AS SUGGESTED IN THAT CASE. ACCORDING TO HONBLE COURT, AFTER REJECTION OF BOOKS OF ACCOUNTS OF SUCH DISALLOWANCES DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING ESTIMATE OF PROFIT. AS PER THE HONBLE COURT THERE WAS NO LOGICAL REASON TO MAKE SEPARATE ADDITION. IN THE LIGHT OF THIS O F THIS ORDER, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER WAS NOT JUSTIFIED IN INVOKING THE REVISIONAL JURISDICTION . AS FAR AS THE ENQUIRY CONDUCTED BY THE AO IS CONCERNED, THERE WAS NO ALLEGATION OF THE LEARNED COMMISSIONER THAT THERE WAS NO PROPER ENQUIRY OR LACK OF ENQUIRY. IT IS ALSO NOT AN ALLEGATION OF THE LEARNED COMMISSIONER THAT THE AO HAD TAKEN AN ERRONEOUS VIEW. THEREFORE, THE ARGUMENT BEFORE US IS THAT IF A VIEW HAS BEEN TAKEN BY THE AO AND THAT VIEW WAS POSSIBLE AS PER LAW, THEN LEARNED COMMISSIONER IS NOT ENTITLED TO INVOKE THE PROVISIONS OF SECTION 263 BY STATING THAT HE IS NOT IN AGREEMENT WITH THE SAID POSSIBLE VIEW OF THE AO. OTHERWISE ALSO IT IS ALSO NOT THE CASE THAT THE VIEW TAKEN BY THE AO WAS UNSUSTAINABLE IN LAW. IN SUCH CIRCUMSTANCES, WE HEREBY HOLD THAT THE LEARNED COMMISSIONER HAS WRONGLY INVOKED THE PROVISIONS OF SE CTION 263 OF I.T. ACT. HENCE THE ORDER PASSED BY THE LEARNED COMMISSIONER U/S 263 OF THE I.T. ACT IS HEREBY QUASHED. THE GROUND IS ALLOWED. 6 ITA NO. 05/NAG/2015 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DEC., 2015. SD/ - SD/ - ( SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 18 TH DEC., 2015. COPY FORWARDED TO : 1. M/S SOHANLAL JAMANLAL C/O M/S LOYA BAGRI & CO., C.AS. GANDHIBAGH, NAGPUR. 2. A.C.I.T., CIRCLE - 8 , NAGPUR. 3. C.I.T. - IV , NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTR AR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR.