ACIT, BARMER V. Shri Lal Chand Choudhary, JAISALMER

ITA 527/JODH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74943 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 14-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Business income; Depreciation; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.527/JODH/2013 (A.Y. 2009-10) ACIT, CIRCLE-BMR, VS. SHRI LAL CHAN D CHOUDHARY, BARMER. PROP. M/S. MOHANGARH CONSTRUCTION COMPANY, JAISALMER. PAN NO. AAOPC 6671 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 21/02/2014. DATE OF PRONOUNCEMENT : 27/03/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 26/08/2013 OF LD. CIT(A), BIKANER. THE FOLLOWING G ROUNDS HAVE BEEN RAISED IN THIS APPEAL: IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CI T(A) HAS ERRED IN:- 1. DELETING THE ADDITION OF RS. 27,41,464/- IN MOHA NGARH CONSTRUCTION COMPANY, RS. 31,05,544/- IN M/S. CHOUDHARY STONE & CRUSHING COMPANY. 2 2. DIRECTING THE AO TO CONSIDER INTEREST OF RS. 6,1 4,850/- ON FDR & NSC AS BUSINESS INCOME AND NOT MAKING SEPARATE ADDITION . 3. NOT APPRECIATING THE FACT THAT DP STRUCTURE AND TRANSFORMER ARE SEPARATE PART OF THE WIND MILL IS A CIVIL WORK AND INTERNAL TWISTED CABLE AND 33 KV LINE TRANSFORMER, EVACUATION CHARGE S, LAND ARRANGEMENT CHARGES, POWER PURCHASES AGREEMENT CHAR GES ARE NOT INVOLVED IN PRODUCTION OF POWER ENERGY AND DOES NOT CONSTITUTE THE PART OF WIND MILL MACHINERY AND DOES NOT QUALIFY FO R HIGHER RATE OF DEPRECIATION. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND OR ALTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF THE APPEAL IS FINAL LY HEARD. 2 VIDE GROUND NO.1, THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER BY ADOPTING THE GROSS PROFIT RATE OF 12.5% INSTEAD OF 10.74% SHOWN BY THE ASSESSEE IN THE FIRM M/S. MOHANGARH CONSTRUCTION COMPANY AND BY APPLYING GROSS PROFIT RATE OF 10% INSTEAD OF 7.02% SHOWN BY THE ASSESSEE IN TH E FIRM CHOUDHARY STONE & CRUSHING COMPANY. THE ASSESSEE WAS DOING T HE BUSINESS IN CAPACITY OF THE PROPRIETOR OF THE ABOVE SAID FIRMS. 3. WHEN THE MATTER WAS TAKEN TO THE LD. CIT(A), THE ADDITION WAS DELETED BY FOLLOWING THE DECISION OF THE ITAT IN AS SESSEES OWN CASE FOR THE A.Y. 2008-09, WHEREIN THE GROSS PROFIT RATE OF 10.20% WAS ACCEPTED AND THE ASSESSEE HAD SHOWN BETTER GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION FOR THE BUSINESS CARRIED UNDER THE NA ME AND STYLE OF M/S. MOHANGARH CONSTRUCTION COMPANY AND SIMILARLY, THE A DDITION MADE BY THE 3 ASSESSING OFFICER IN M/S. CHOUDHORY STONE & CRUSHIN G COMPANY WAS DELETED BY FOLLOWING THE AFORESAID REFERRED TO ORDE R OF ITAT IN ASSESSEES OWN CASE. NOW THE DEPARTMENT IS IN APPEAL. 4. LEARNED D.R., ALTHOUGH, SUPPORTED THE ORDER OF TH E ASSESSING OFFICER, BUT COULD NOT REBUT THE FINDINGS GIVEN BY THE LD. CIT(A). 5. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED B Y THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE PRECEDING ASSESSMENT YEAR VIDE ORDER DATED 07/03/2013 IN I.T. A.NO. 191/JU/2012. 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IT IS NOTICED THAT A SIMILAR ISSUE HAS BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDING YEAR WHEREIN T HE RELEVANT FINDINGS HAD BEEN GIVEN IN PARA 8-10 OF THE ORDER DATED 07/0 3/2013 IN I.T.A.NO. 191/JU/2012 WHICH READ AS UNDER:- 8. WE HAVE CAREFULLY PERUSED THE ENTIRE RECORD. WE HAVE ANALYZED THE FACTS OF THIS CASE VIS-A-VIS THE LEGAL POSITION ON THIS I SSUE. IT IS FOUND THAT THE A.O. AFTER REJECTING THE BOOKS OF ACCOUNTS US/ 145(3) AN D BY ADOPTING A N.P. RATE OF 12.5% HAS MADE ADDITIONS IN THE TRADING RESULTS OF ASSESSEES BUSINESSES CARRIED UNDER BOTH THE NAMES I.E., IN M/S. MOHANGAR H CONSTRUCTION COMPANY OF RS. 26,25,393/-. THE LD. CIT(A) HAS ALSO SUSTAINED THESE ADDITIONS. 4 9. AFTER HEARING BOTH SIDES WE HAVE NOTICED THAT G .P. RATE DISCLOSED IN THIS YEAR IS SLIGHTLY LOW AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR BUT N.P. RATE HAS INCREASED. THE COMPARATIVE POSITION OF THE SE RATES CAN BE EASILY CAPTURED FROM THE FOLLOWING CHART :- A.Y. GROSS RECEIPTS G.P. G.P. RATE NET PROFIT N.P. RATE 2005 - 06 146100246.00 14934095.00 10.22% 8610081.00 5.89% 2006 - 07 70388982.00 7521542.00 10.69% 4636778.00 6.59% 2007 - 08 40246198.00 6155118.00 15.00% 2236893.00 5.56% FROM THE ABOVE IT BECOMES EVIDENT THAT THERE IS SLI GHT FALL IN G.P. RATE BUT THERE IS SLIGHT INCREASE IN THE N.P. RATE AS COMPAR ED TO IMMEDIATELY PRECEDING YEARS, WHEREAS THE TURNOVER HAS TREMENDOU S BY INCREASED MANIFOLDS IN THE YEAR AS COMPARED TO THE EARLIER YE AR. IT IS ALSO FOUND THAT NO DEFECT MUCH LESS ANY MATERIAL DEFECT HAS BEEN PO INTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED RE GULARLY DURING THE COURSE OF BUSINESS. NO MATTER WHAT IF THE ASSESSEE HAS NOT CHALLENGED REJECTION OF THE BOOKS OF ACCOUNTS, BUT THE A.O. HA S NOT DISTURBED THE FIGURES OF TURNOVER ETC, WHICH ARE VITAL FOR ARRIVING AT TH E TRADING RESULTS. BUT AFTER REJECTION OF BOOKS IT IS NOT THE WORLD OPEN FOR THE A.O. TO MAKE ANY ILLOGICAL OR AD HOC ADDITION. IF AT ALL ANY SUCH ADDITION HAS TO BE MADE IT SHOULD REST ON SOME VALID BASIS AND IT SHOULD NOT BE ARBITRARY. WHEREFROM THE FIGURE OF N.P. RATE OF 2.5% HAS BEEN BORROWED IS NOT FOUND TO BE A VALID BASIS. AFTER REJECTION OF THE BOOKS OF ACCOUNTS, THE A.O. CAN LO OK TOWARDS THE PAST HISTORY OF THE ASSESSEE OR OF ANY COMPARABLE CASE. HE CANNOT DRAW SUPPORT FROM ANY AND EVERY DECISION WITHOUT COMPARING THE F ACTS OF THAT CASE WITH THAT OF THE ASSESSEE. HE CANNOT TEAR OUT OF CONTEXT BY CHERRY PICKING NO SUCH ADDITION CAN BE ALLOWED TO BE MADE. THE A.O. HAS AD OPTED THE N.P. RATE BUT HAS IGNORED THE N.P. RATE OF THE ASSESSEE DISCLOSED IN THE IMMEDIATELY PRECEDING YEAR. THE N.P. RATE OF THIS YEAR IS BETTE R THAN THE EARLIER YEAR. THEREFORE, NO ADDITION, LIKE ONE MADE BY THE A.O. I S NOT JUSTIFIED. THE LD. CIT(A) HAS ALSO CONFIRMED THE SAME. ON A WRONG PREM ISE BY FOLLOWING THE REASONS GIVEN BY THE A.O. AND BY NOT CONSIDERING TH E CONTENTION OF THE ASSESSEE. IN OUT CONSIDERED OPINION THE FIRST TIME IMPOSITION OF ENTRY TAX OF HUGE AMOUNT OF RS. 9,69,454/- AS PER ASSESSEE PAPER BOOK PAGE 18, WHICH FACT HAS NOT BEEN DENIED OR DISPUTED BY THE REVENUE , IS A GOOD GROUND AND FACTOR TO JUSTIFY SMALL FALL IN THE G.P. RATE. THE DECISIONS ON WHICH THE LD. A.R. HAS RELIED ARE INCORPORATED IN THE EARLIER PAR T OF THIS ORDER. ALL THESE DECISIONS SUPPORT THE CASE OF THE ASSESSEE. ACCORDI NGLY, WE ORDER TO DELETE 5 THE ENTIRE ADDITION OF RS. 26,25,393/- MADE AND ALL OW GROUND NOS. 3 AND 4 OF THIS APPEAL. 10. THE FACTS APROPOS GROUND NO. 5 AND 6 ARE IN RES PECT OF SUSTAINED ADDITION OF RS. 35,36,307/- IN THE TRADING ACCOUNT OF M/S. CHOUDHARY STONE CRUSHING COMPANY. THE FACTS AND ARGUMENTS OF BOTH P ARTIES IN THIS REGARD ARE MORE OR LESS SAME AND SIMILAR. THE COMPARATIVE POSITION OF TRADING RESULTS IN THIS BUSINESS ARE AS UNDER :- A.Y. GROSS RECEIPTS G.P. G.P. RATE NET PROFIT N.P. RATE 2006 - 07 140200 14018 10.0% ( - ) 63042 ( - ) 459% 2007 - 08 54958588 3846518 07.00% 3354497 6.10% 2008 - 09 48870101 3301603 06.75% 2936308 6.01% OUR REASONING GIVEN FOR DELETION OF RS. 26,25,393/- IN RESPECT OF BUSINESS OF MOHANGARH CONSTRUCTION COMPANY WOULD APPLY MUTATIS MUTANDIS IN THE BUSINESS OF CHOUDHARY CRUSHING COMPANY WHICH MAINLY CARRIED ON THE WORK OF FOUNDATION OF THE WIND-MILLS. ITS P & L ACCOUNT OF THE YEAR IS ENCLOSED AT ASSESSEE PAPER BOOK 21. ACCORDINGLY, WE ORDER THE DELETION OF ADDITION OF RS. 35,96,307/- ALSO AND ALLOW GROUND NOS. 5 AND 6 OF ASSESSEES APPEAL. 7 . SINCE THE ASSESSEE IN THE YEAR UNDER CONSIDERATIO N HAD SHOWN BETTER GROSS PROFIT RATE IN COMPARISON TO THE EARLIER YEAR , SO BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 07/ 03/2013 IN ASSESSEES OWN CASE, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 8 . VIDE GROUND NO. 2, THE GRIEVANCE OF THE DEPARTMEN T RELATES TO THE DIRECTION GIVEN TO THE ASSESSING OFFICER TO TREAT T HE INTEREST ON FDR AND NSC AS BUSINESS INCOME. 6 9 . AS REGARDS TO THIS ISSUE, LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT IT IS COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THIS BENCH OF THE TRIBUNAL VIDE ORDER DATED 07/0 3/2013 IN I.T.A.NO. 191/JU/2012 FOR THE A.Y. 2008-09 IN ASSESSEES OWN CASE, WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 12 & 13. THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT CONTROVERTED BY THE LEARNED D.R. 10 . AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PAR TIES, IT IS NOTICED THAT A SIMILAR ISSUE HAS ALREADY BEEN DECIDED IN FA VOUR OF THE ASSESSEE VIDE PARAS 12 & 13 OF THE AFORESAID REFERRED TO ORD ER DATED 07/03/2013. THE FINDINGS GIVEN THEREIN ARE REPRODUCED AS UNDER: - 12. AFTER HEARING BOTH SIDES WE ARE OF THE CONSIDE RED OPINION THAT THE RULE OF CONSISTENCY DEMANDS US TO FOLLOW THE DECISI ON OF THIS VERY BENCH. THE JODHPUR BENCH HAS HELD SO IN THE CASE OF JAIN CONSTRUCTION CO. WE EXTRACT PARAS 13 AND 14 OF THE JAIN CONSTRUC TION COMPANY IN ITA NO. 532/JU/2010 A.Y. 2007-08 (COPY ENCLOSED AT PAGE 29 ONWARDS), IN WHICH HAS BEEN HELD THUS :- WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE ASSESSEE HAS DECLARED INTEREST PAID TO THIRD PARTIES AMOUNTI NG TO RS.35,83.211/-. INTEREST RECEIVED TO THE EXTENT OF RS.3,00,681/- WAS REDUCED FROM THE INTEREST FOR CLAIMING DEDUCTIO N IN RESPECT OF THE INTEREST PAID TO THIRD PARTIES. IN CASE INTE REST IS TO BE TREATED AS INCOME FROM OTHER SOURCES THEN DEDUCTION OUT OF NET PROFIT RATE ON ACCOUNT OF INTEREST TO THIRD PARTIES WILL HAVE TO BE ALLOWED TO THE EXTENT OF RS.35,38,211/-. THUS IT IS ONLY A REVENUE NEUTRAL ISSUE. THE IT AT, JODHPUR BENCH IN THE CASE OF RADHA KRISHAN BENIWAL VS. ACJT (ITA NO. 115/JU/09 D ATED 7 09.07.2009) HELD THAT INTEREST IS TO BE TREATED AS BUSINESS INCOME BECAUSE FDRS AND NSCS WERE PURCHASED IN SUPP ORT OF LENDERS TO BE CONSIDERED FOR ACCEPTANCE. THE A.O. I N HIS ORDER HAS NOWHERE MENTIONED THAT SUCH FDRS AND NSCS WERE NOT PURCHASED FOR SUBMITTING THE TENDERS. HENCE, WE HOL D THAT INTEREST SHOULD BE TREATED AS INCOME FROM BUSINESS IN VIEW OF THE ORDER OF THE JODHPUR TRIBUNAL. 13. SINCE ON IDENTICAL SET OF FACTS, THE I.T.A.T. H AS HELD THAT INTEREST RECEIVED FROM F.D.RS. AND N.S.CS. PLACED WITH GOVER NMENT WHILE OBTAINING CONTRACT FROM GOVERNMENT IS REQUIRED TO B E ASSESSED AS INCOME FROM BUSINESS. SINCE THIS INTEREST INCOME IS BUSINESS INCOME WHICH HAS BEEN CONSIDERED IN ESTIMATION OF INCOME B Y APPLYING N.P. RATE, WE, THEREFORE, ARE OF THE CONSIDERED VIE W THAT NO SEPARATE ADDITION IS WARRANTED. ACCORDINGLY, BY FOL LOWING THE ABOVE JODHPUR BENCH DECISION, WE HAVE TO ALLOW THES E GROUNDS OF APPEAL BECAUSE THE LD. D.R. HAS NOT PRODUCED ANY CO NTRARY DECISION OF ANY HIGH COURT OR OF HONBLE SUPREME COURT. 11 . SO, BY RESPECTFULLY FOLLOWING THE AFORESAID REFER RED TO ORDER IN ASSESSEES OWN CASE, WE DO NOT SEE ANY MERIT IN THI S GROUND OF THE DEPARTMENTAL APPEAL. 12. ANOTHER ISSUE VIDE GROUND NO. 3 RELATES TO THE DELE TION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECI ATION ON DP STRUCTURE, TRANSFORMER, EVACUATION CHARGES, LAND AR RANGEMENTS CHARGES ETC. CLAIMED AS PART OF THE WIND MILL. 13. AS REGARDS TO THIS ISSUE, LEARNED COUNSEL FOR T HE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE 8 ORDER DATED 20/11/2013 IN I.TA.NO. 217/JODH/2012 FO R THE A.Y. 2008-09 IN THE CASE OF ACIT, UDAIPUR VS. M/S. K.K. ENTERPRI SES, COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD. LEA RNED D.R. COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, SUPPORTED THE ORDER OF THE ASSES SING OFFICER. 14. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES, IT IS NOTICED THAT THE PRESENT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE AFORESAID REFERRED TO ORDER DATED 20/11/2013, IN THE CASE OF ACIT, UDAIPUR VS. M/S. K.K. ENTERPRISES WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 19, WHICH READ AS UNDER:- 19. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ES AND THE MATERIAL AVAILABLE ON THE RECORD, IT IS NOTICED THAT AN IDEN TICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08 IN I.T.A.N O. 438/JU/2010 VIDE ORDER DATED 20/09/2012, WHEREIN THE RELEVANT FINDIN GS HAVE BEEN GIVEN IN PARA 24, WHICH READS AS UNDER:- 24. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND MATERIAL AVAILABLE ON RECORD, WE ARE OF THE OPINION THAT THE LD CIT(A) HAS PASSED A JUST ORDER WHICH IS IN CONSONANCE WIT H THE EARLIER ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF DCIT, BHILWARA VS M/S SARVODAYA SUITINGS PVT LTD, BHILWARA (SUPRA). IN TH E INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE INSTALLED A WINDMI LL. FOR INSTALLING A WINDMILL, CIVIL WORK & FOUNDATION WAS DONE BY INCUR RING AN EXPENDITURE OF RS. 34,60,760/-, WITHOUT DOING THE C IVIL CONSTRUCTION WORK INCLUDING FOUNDATION WORK, IT WAS NOT POSSIBLE TO INSTALL THE WINDMILL. SIMILARLY, THE ELECTRIC ITEMS, COMPONENT AND INSTALLATION WERE NECESSARY FOR THE WINDMILL, BECAUSE IN THE ABS ENCE OF THESE 9 COMPONENTS AND ELECTRIC ITEMS IT WAS NOT POSSIBLE F OR THE WINDMILL TO PRODUCE ELECTRICITY. THEREFORE, IT WAS ALSO AN INT EGRAL PART OF THE WINDMILL. IN THE INSTANT CASE, THE ASSESSEE PAID A SUM OF RS. 31,25,000/- TO M/S SUZLON ENERGY LTD THROUGH WHOM T HE WINDMILL WAS INSTALLED. THE SAID PAYMENT WAS NON-REFUNDABLE. THE SAID EXPENDITURE WAS MADE FOR THE INSTALLATION OF THE WINDMILL AND I F THERE WAS NO SUCH WINDMILL INSTALLATION, THE ASSESSEE COULD NOT HAVE INCURRED SUCH EXPENSES, THEREFORE, EXPENDITURE INCURRED ON COMMON POWER EVACUATION WAS DIRECTLY RELATED TO THE WINDMILL AND THE ASSESSEE WAS ENTITLED FOR HIGHER DEPRECIATION. WE, THEREFORE, C ONSIDERING THE TOTALITY OF FACTS DO NOT SEE ANY INFIRMITY IN THE O RDER OF LD CIT(A) ON THIS ISSUE. 15. SO, BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRE D TO ORDER DATED 20/11/2013, WE ARE OF THE VIEW THAT THE LD. CIT(A) RIGHTLY DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSE E ON ACCOUNT OF HIGHER DEPRECIATION. 16. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSE D. (ORDER PRONOUNCED IN THE COURT ON 27 TH MARCH, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH MARCH, 2014. VR/- COPY TO: 1. THE APPELLANT 10 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.