ITO,Ward-9(1), Kolkata, Kolkata V. M/s Apex Goods Pvt. Ltd., Kolkata

ITA 504/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92036 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 44AD; 142(1); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI P.K.BANSAL , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO. 504 /KOL/ 2012 ASSESSMENT YEAR: 2008 - 09 ITO, WARD - 9(1), KOLKATA / V/S . M/S APEX GOODS, PVT. LTD, 12, MAYFAIR ROAD, KOLKATA - 700 019 [ PAN NO.AAFCA 6917J ] / APPELLANT .. / RESPONDENT / / BY APPELLANT SHRI KANHIYA LAL KANAK, SR - DR / BY RESPONDENT NONE / DATE OF HEARING 22 - 05 - 2015 / DATE OF PRONOUNCEMENT 01 - 0 7 - 2015 / O R D E R PER MAHAVIR SINGH , JUDICIAL M EMBER : - THIS APPEAL BY R EVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - VIII, KOLKATA IN APPEAL NO.138/CIT(A) - VIII/KOL/10 - 11 DATED 10 - 02 - 2012. ASSESSMENT WAS FRAMED BY ITO, WARD - 9(2) KOLKATA U/S 144 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 30 - 12 - 2010 FOR THE ASSESSMENT Y EAR 2008 - 09. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN APPLYING NET PROFIT @ 5% OF THE GROSS CIVIL CONTRACTUAL RECEI PT AS AGAINST APPLIED BY ASSESSING OFFICER @ 8%. ITA NO.504/KOL/2012 A.Y. 2008 - 09 ITO WD.9(1), KOL V. M/S. APEX GOODS PVT. LTD. PAGE 2 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE - COMPANY IS A CIVIL CONTRACTOR AS WELL AS TRADING IN SAREE S AND FABRICS FOR THE RELEVANT AY 2008 - 09. THE ASSESSEE - COMPANY FILED ITS RETURN OF INCOME ON 28 - 09 - 2008 DECLARING TOTAL INCOME AT RS.3,07,285/ - . ASSESSEE S CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY NOTICE S U/S. 143(2), 142(1) AND 142(2) OF THE ACT W ERE ISSUED AND SERVED UPON ASSESSEE. LD. COUNSEL FOR THE ASSESSEE APPEARED BEFORE THE AO FROM - TIME - TO - TIME AND FILED DETAILS, AS NOTED BY THE AO B UT COULD NOT PRODUCE THE BOOKS OF ACCOUNT AND SUPPORTING BILLS AND VOUCHERS. THEREFORE, THE AO ISSUED SHOW CAUSE NOTICE AS TO WHY THE PROVISIONS OF SEC. 145(3) OF THE ACT BE NOT APPLIED AND BOOK RESULTS DECLARED BY ASSESSEE BE NOT REJECTED. THE AO ACCORDIN GLY RESORTED TO SEC. 144 OF THE ACT AND IN RESPONSE TO SHOW CAUSE NOTICE U/S. 145(3) OF THE ACT REJECTED THE BOOK RESULTS BY GIVING FOLLOWING FINDINGS: - THE FACTS HAD BEEN INFORMED TO THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE - 9 AS THE CASE IS TO CO MPLETE UNDER HIS MONITORING AND DIRECTION U/S 144A WAS SOUGHT (1) WHETHER THE CONTRACTUAL INCOME WOULD BE CONSIDERED AS CONCEALED INCOME AS THE ASSESSEE COULD NOT GIVE ANY EVIDENCE THAT THE RECEIPT WAS REALLY CONTRACT RECEIPT BY WAY THE CONFIRMING THE CONT RACTUAL EXPENSES OR (2) WHETHER INCOME OF SO - CALLED CONTRACT WILL BE ESTIMATED AS NO EVIDENCES COULD BE PRODUCED BY THE ASSESSEE AFTER REJECTION THE BOOKS OF ACCOUNTS, IN RESPONSE, THE LD. ADDL. CIT, RANGE - 9, VIDE HIS LETTER DATED 29.12.10, DIRECTED TO EST IMATE THE CONTRACTUAL INCOME AFTER REJECTION THE ACCOUNTS. (A) THE AUDITOR SPEAKS THAT THE NATURE OF BUSINESS OF THE ASSESSEE COMPANY IS DEALING IN SHARES & SECURITIES AS PER THREE YEARS AUDIT NOTE FOR A.Y 2008 - 09, A.Y 2009 - 10, A.Y 2010 - 11, BUT THE LD. A/R SUBMITTED THAT THE NATURE OF BUSINESS OF THE ASSESSEE COMPANY IS DEALING IN SAREE & FABRICS . (B) THE CONTRACTUAL RECEIPT AND EXPENDITURE WERE NOT INCORPORATED IN THE P/L ACCOUNTS THAT ARE CONTRARY TO ACCOUNTING STANDARD. (C) NO BOOKS AND PROOF COULD BE PRODUCED NEITHER FOR CONTRACTUAL EXPENSES, SHARES AND SECURITIES NOR SAREE & SECURITIES. (D) RS,7,50,000 WAS AGAIN DEBITED IN THE P/L ACCOUNTS; ALTHOUGH NET PROFIT WAS TAKEN IN THE P/L A/C. (E) THE INTEREST INCOME OF RS.12,68,286 WAS REFLECTED IN P/L A/C; BUT AS PER TDS D ETAILS THE GROSS INTEREST IS REFLECTED AS RS.12,89,095. THE LD. A/R COULD NOT EXPLAIN THE SAME. ITA NO.504/KOL/2012 A.Y. 2008 - 09 ITO WD.9(1), KOL V. M/S. APEX GOODS PVT. LTD. PAGE 3 IN RESPONSE TO NOTICE U/S. 145(3) OF THE I.T. ACT 1961, THE ASSESSEE COMPANY SUBMITTED ON 30.12.10 THAT BOOKS OF ACCOUNTS WERE PROPERLY AUDITED. SO IT WILL BE INJUSTICE TO REJECT THE BOOKS OF ACCOUNTS. THE SUBMISSION OF THE ASSESSEE IS NOT TENABLE AS DEFINED AS ABOVE AND THEREFORE THE BOOKS OF ACCOUNTS ARE REJECTED AS PER SECTION 145(3) OF THE I.T. ACT 1961 THE AO ASSESSED THE INCOME FROM CIVIL CONSTRUCTION BY ESTIMATED NET PROFIT @ 8% ON THE TOTAL TURNOVER OF .3,43,20,000/ - AT 27,45,600/ - . THE AO ALSO APPLIED THE PROVISIONS OF SEC. 44A F OF THE ACT ON THE TRADING BUSINESS OF SAREE S AND FABRICS BY ESTIMATIN G N P RATE @ 2% OF THE TURNOVER OF RS.9,75,15,575/ - . AGGRIEVED AGAINST THE ESTIMATION OF N P ON CIVIL CONTRACTS RECEIPTS @ 8%, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE ASSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOK RESULTS U/S 145 OF THE ACT WHICH WAS CONFIRMED BY CIT(A). THE CIT(A) RESTRICTED THE NET PROFIT @ 5% OF THE GROSS CIVIL CONTRACTS RECEIPTS BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE ARGUMENTS AND MATERIAL PLACED ON RECORD. THE CONTENTION OF THE APPELLANT THAT DEEMING PROVISIONS OF SECTION 44AD SHOULD NOT HAVE APPLIED WHEN THE RECEIPTS ARE MORE THAN 40 LAKHS CANNOT BE ACCEPTED. IN ASTT.CIT VS. SAMARIYA & ASSOCIATES (2006) 5 ITJ 496 (TRIBUNAL - INDORE), THE INDORE BENCH OF THE TRIBUNAL HAS HELD THAT DEPARTMENT CAN ASSESS PROFIT ON PRESUMPTIVE BASIS. BUT, AT THE SAME TIME, BEST JUDGMENT ASSESSMENT SHOULD BE BASED ON COMPARABLE CASE [(2007 ) 288 ITR 10 (SC)]. NO DOUBT, THE APPELLANT S OWN CASE FOR THE PRECEDING YEAR IS THE BEST GUIDE AND BEST COMPARABLE CASE TO MAKE A FAIR AND REASONABLE ESTIMATE. HOWEVER, THE RETURN OF INCOME FOR THAT ASSESSMENT YEAR HAS APPARENTLY BEEN ACCEPTED UNDER SEC. 143(1) AND NOT UNDER SCRUTINY, AND THAT BEING SO, MUCH STRESS COULD NOT BE GIVEN ON THE ACCEPTANCE OF PROFIT MARGIN OF 3.3%. I T MAY ALSO BE NOTED HERE THAT INCR EASE IN QUANTUM OF CONTRACT RECEIPTS WOULD BRING DOWN THE MARGIN OF PROFIT BECAUSE THE MARGIN OF PROFIT IN CIVIL CONTRACT IS DEPENDENT UPON VARIOUS FACTORS OF RATE ACCEPTED IN THE BIDS, ABRUPT INCREA S E IN COST OF MATERIAL OR OLD CONTRACTS CONTINUING IN SUB SEQUENT YEARS WITHOUT INCREASE IN RATES FOR COST ESCALAT IO N. INCREA S E IN RECEIPTS BY ITSELF CANNOT BE A VALID GROUND FOR THE LOW MARGIN OF PROFIT AND THAT TOO TO SUCH LOW LEVEL OF 0.93% ON THE RECEIPTS. ON THE OTHER GROUND, THE CASE OF M/S DURGA KRISHNA ST ORES DECIDED BY THE KOLKATA BENCH OF THE ITAT WH E RE THE DEPARTMENT HAS ACCEPTED MARGIN OF NET PROFIT OF 5% COULD BE CON SI DERED ITA NO.504/KOL/2012 A.Y. 2008 - 09 ITO WD.9(1), KOL V. M/S. APEX GOODS PVT. LTD. PAGE 4 AS A COMPARABLE CASE. HAVING RE G ARD TO THE FACTS AND CIRCUMSTANCES OF THE CA S E, I CONSIDER IT REASONABLE TO ADOP T NET PROFIT RATE OF 5% ON THE GROSS RECEIPTS OF RS.17,16,000/ - AS AGAINST NET PROFIT ESTIMATED BY THE ASSESSING OFFICER AT RS. 27,45,600/ - . THE RESULTANT DIFFERENCE OF RS.10,29,600/ - IS ALLOWED AS RELIEF TO THE APPELLANT ON THIS GROUND. AGGRIEVED, REVENUE IS IN APPEAL BE FORE US. 4. WE HAVE HEARD LD. DR AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE BASIS GIVEN BY CIT(A) IS THAT IMMEDIATELY PRECEDING YEAR, ASSESSEE S NET PROFIT WAS @ 3.3% OF THE TOTAL RECEIPTS FROM CIVIL CONTRACT. WE FIND THAT T HE CIVIL CONTRACT RECEIPTS IN THAT YEAR WAS VERY LOW AT 1,40,64,999/ - AS AGAINST RECEIPTS IN THIS YEAR AT 3,43,20,000/ - . IN ALL FAIRNESS, WE ARE OF THE VIEW THAT THE NET PROFIT @ 5% IS TOO LOW AND EVEN THE REASON STATED BY THE CIT(A) THAT THERE IS INCR EASE IN RATE AND FOR THAT COST HAS ESCALATED AND NO EVIDENCE QUA THE SAME WAS FILED BY THE ASSESSEE BEFORE THE CIT(A) OR AO. EVEN BOOKS OF ACCOUNTS ARE NOT MAINTAINED AND NO OTHER SUPPORTING VOUCHERS ARE AVAILABLE WITH THE ASSESSEE. THERE IS NO N P RATE OF PRECEDING YEARS OR SUBSEQUENT YEAR WHICH CAN BE COMPARED. EVEN THE ASSESSEE COULD NOT PRODUCE THE COMPARATIVE CASES IN SAME LINE OF BUSINESS AND SAME AREA WHERE THERE IS CIVIL CONSTRUCTION WAS CARRIED OUT BY OTHER ASSESSEE S . IN TERMS OF THE ABOVE , WE ARE OF VIEW THAT A REASONABLE ESTIMATE OF NET PROFIT WILL BE @ 6%. THE AO WILL RE - COMPUTE THE INCOME ACCORDINGLY. WE ORDER ACCORDINGLY. 5. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 01 / 0 7 /201 5 SD/ - SD/ - ( P.K.BANSAL ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEM BER KOLKATA, *DKP - 01 / 0 7 /201 5 ITA NO.504/KOL/2012 A.Y. 2008 - 09 ITO WD.9(1), KOL V. M/S. APEX GOODS PVT. LTD. PAGE 5 / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT ITO, WARD - 9(1), P - 7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, 5 TH FLOOR, ROOM - 14, KOL - 69 2 . / RESPONDENT M/S APEX GOODS PVT. LTD., 12, MAYFIR ROAD, KOLKATA - 19 3 . / CONCERNED CIT 4 . - / CIT (A) 5 . , / DR, ITAT, KOLKATA 6 . / GUARD FILE. BY ORDER/ , /TRUE COPY/ / ,