Manoj Kumar Gupta, Kanpur V. Income Tax Officer-2(2), Lucknow

ITA 557/LKW/2012

• Counselvise Citation: 55723714 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y P S SRIVASTAVA
• Assessee Lawyers: P K KAPOOR

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.557/LKW/2012 A.Y.:2008 - 2009 SHRI MANOJ KUMAR GUPTA, FLAT NO. 505, 7/85, TILAK NAGAR, KANPUR VS. INCOME TAX OFFICER - 2(2), LUCKNOW. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. K. KAPOOR, C.A. RESPONDENT BY SHRI Y. P. S. SRIVASTAVA, D.R. DATE OF HEARING 20/12/2013 DATE OF PRONOUNCEMENT 3 0 /01/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT ( A) - I, LUCKNOW DATED 16/07/2012 FOR ASSESSMENT YEAR 2008 - 2009. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE LEARNED CIT ( A) - I, LUCKNOW ERRED IN LAW AS WELL AS IN FACTS IN DECIDING THE APPEAL THROUGH AN EX - PARTE ORDER AS NONE OF THE NOTICE AS SENT FROM THE OFFICE OF CIT ( A) - I, LUCKNOW WAS SERVED ON THE ASSESSEE EXCEPT THE COPY OF LAST NOTICE WHICH WAS SERVED ON THE ASSESSEE'S COUNSEL WHO COULD NOT INFORM TO THE ASSESSEE. THE APPELLANT ASSESSEE WAS PREVENTED BY SUFFICIENT REASON IN NOT APPEARING BEFORE LEARNED CIT ( A) - I, LUCKNOW. 2. BECAUSE WITHOUT PREJUDICE TO THE ABOVE FACTS THE CONTRACT RECEIPTS OF RS.7,23,285 / - WHICH WERE LEFT UNDISCLOSED WERE A LREADY INCLUDED IN THE G ROSS CONTRACT RECEIPTS FOR THE 2 ASSESSMENT YEAR 2009 - 2010 AS SUCH THESE CONTRACT RECEIPTS SHOULD HAVE NOT BEEN ACCOUNTED FOR IN THIS ASSESSMENT YEAR FOR TAX PURPOSES. 3. BECAUSE THE APPLICATION OF NET RATE OF PROFIT AT 8% ON THE GROS S RECEIPTS AS SHOWN BY THE ASSESSEE AND THE APPLICATION OF NET RATE OF PROFIT BY APPLYING THE SAME PERCENTAGE OF PROFIT ON THE ALLEGED UNDISCLOSED RECEIPTS IS UNJUST APPROACH OF THE ASSESSING OFFICER AS WELL AS OF THE LEARNED CIT(A) - I, LUCKNOW ALSO. THE AS SESSEE'S DISCLOSED NET RATE OF PROFIT AT 5.2% WAS QUITE REASONABLE A N D ACCEPTABLE. 4. BECAUSE THIS HON'BLE BENCH HAS ACCEPTED THE NET RATE OF PROFIT AT 5% IN FEW CASES OF THE CONTRACTORS ON THE CONTRACT RECEIPTS WHETHER DISCLOSED OR UNDISCLOSED IN THE PRO FIT & LOSS ACCOUNT. THE LISTS OF SUCH DECIDED CASE SHALL BE PROVIDED AT THE TIME OF HEARING OF THE APPEAL. 5. BECAUSE THE APPELLANT RESERVES HIS RIGHT TO ADD, DELETE OR ALTER ANY OTHER GROUND OR GROUNDS OF APPEAL WITH THE PERMISSION OF THE CHAIR BEFORE HE RRING OF THE APPEAL OR AT THE TIME OF HEARING OF THE APPEAL. 6. BECAUSE THE ORDER PASSED BY THE AUTHORITIES BELOW ARE UNJUST, UNREASONABLE AND ALSO BAD IN LAW. 3. REGARDING GROUND NO. 1, NO ARGUMENT WAS MADE BY LEARNED A.R. OF THE ASSESSEE AND HE MADE ARGUMENTS ON MERIT ONLY AND, THEREFORE, GROUND NO. 1 IS REJECTED. 4. REGARDING MERIT OF THE ISSUE, LEARNED A.R. OF THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (I) I.T.A.T. LUCKNOW BENCH DECISION IN THE CASE OF ARVIND KUMAR CHAUDHARY VS. DCIT IN I.T.A. NO.172/LKW/2010 (II) CIT VS. GOTAN LIME KHANIJ UDHYOG [2002] 256 ITR 243 (RAJ.) (III) SHANKAR KHANDSARI SUGAR MILLS VS. CIT [1992] 193 ITR 669 (KAR.) 3 (IV) HON'BLE ALLAHABAD HIGH COURT JUDGMENT IN CIT VS. J.P. YADAV IN INCOME - TAX APPEAL NO. 252 OF 2013 4.1 LEARNED A.R. OF THE ASSESSEE ALSO SUBMITTED THAT ON PAGE NO. 25 OF THE PAPER BOOK IS A COMPARATIVE CHART OF THE NET PROFIT FOR PRESENT YEAR AND PRECEDING THREE YEARS. 5. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) AS PER PARA 2 AND 3 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FO R THE SAKE OF READY REFERENCE: 2. IN THE ASSESSMENT MADE THE AO FOUND THAT THE ASSESSEE HAD NOT ACCOUNTED FOR CONTRACT RECEIPTS TO THE EXTENT OF RS.7,23,285/ - WHICH WERE CLAIMED TO HAVE BEEN ACCOUNTED FOR THE A.Y. 2009 - 10 ON RECEIPT BASIS. THE AO OBSERVED THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANCY AND, THEREFORE, THE ADMISSION OF CONTRACT RECEIPTS AMOUNTING TO RS.7,23,285/ - COULD NOT BE DEFERRED TO BE SHOWN IN THE NEXT ACCOUNTING YEAR ON RECEIPT BASIS. THE AO, THEREFORE, REJEC TED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) AND ESTIMATED THE PROFIT BY APPLYING THE NET PROFIT RATE OF 8% ON GROSS CONTRACTUAL RECEIPTS. THIS RESULTED IN COMPUTATION OF NET PROFIT AT RS.5,73,383/ - . 3. THOUGH THE APPELLANT DISPU TES THE ACTION OF THE AO IN ESTIMATING THE NET PROFIT AT THE RATE OF 8% HE HAS NOT BEEN ABLE TO EXPLAIN AS TO HOW THE ADMISSION OF PART OF THE CONTRACTUAL RECEIPTS COULD BE DEFERRED TO NEXT YEAR AND AS TO HOW THE RATE OF NET PROFIT APPLIED BY THE AO WAS UN JUSTIFIED. HAVING REGARD TO FACTS AND CIRCUMSTANCES OF THE CASE I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AO WHICH IS UPHELD. 4 7. WE FIND THAT A CLEAR FINDING IS GIVEN BY THE ASSESSING OFFICER AS WELL AS BY LEARNED CIT(A) THAT THE ASSESSEE IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING AND IT IS NOT DISPUTED BY LEARNED A.R. OF THE ASSESSEE BEFORE US. THE BOOKS OF ACCOUNT ARE GOT AUDITED BY THE ASSESSEE UNDER SECTION 44AB AND ONLY ONE PAGE OF THE TAX AUDIT REPORT HAS BEEN SUBMITTED BY THE ASSESSEE ON P AGE NO. 24 OF THE PAPER BOOK. IF THE ASSESSEE WAS NOT FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN THE ASSESSEE COULD HAVE PRODUCED THE RELEVANT PORTION OF TAX AUDIT REPORT WHERE THE AUDITORS CERTIFIED REGARDING THE METHOD OF ACCOUNTING BEING FOLLOWED B Y THE ASSESSEE. HENCE, IN THE ABSENCE OF ANY SUCH EVIDENCE THAT THE ASSESSEE IS NOT FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, IT HAS TO BE HELD THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IF IT IS SO , THEN THE RECEIPT NOT ACCOUNTED FOR BY THE ASSESSEE IN THE PRESENT YEAR OF RS.7,23,285/ - , WHICH WAS CLAIMED TO HAVE BEEN ACCOUNTED FOR IN ASSESSMENT YEAR 2009 - 2010 ON RECEIPT BASIS, CANNOT BE PERMITTED. ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). 7.1 NOW THE SECOND ASPECT IS REGARDING ADOPTION OF NET PROFIT RATE OF 8%. ON THIS ASPECT, THE LEARNED A.R. OF THE ASSESSEE HAS PLACED RELIANCE ON FOUR JUDICIAL PRONOUNCEMENTS. FIRST IS THE TRIBUNAL DECISION RENDERED IN THE CASE OF ARVIND KUMAR CHAUDHARY VS. DCIT IN I.T.A. NO.172/LKW/2010 (SUPRA). IN THAT CASE , THE ASSESSING OFFICER HAD ADOPTED NET PROFIT OF 7% ON GROSS RECEIPT. IN THAT CASE, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSING OFFICER APPLIED NET PROFIT OF 7% ON THE BASIS OF TRIBUNA L DECISION IN THE CASE OF GUPTA CONTRACTOR, BASTI VS. ITO WHEREIN THE EARLIER ORDER OF THE ITAT, ALLAHABAD BENCH IN THE CASE OF GANGA PRASAD TRIPATHI VS. ITO WAS FOLLOWED. THEREAFTER, IT IS OBSERVED BY THE TRIBUNAL THAT WHILE APPLYING THE AFORESAID DECIS ION, THE ASSESSING OFFICER HAS NOT CONSIDERED THIS VITAL FACT THAT THE ASSESSEE IS A 5 PROPRIETOR AND DOING THE BUSINESS IN HIS INDIVIDUAL CAPACITY WHILE THE COMPARABLE CASES WERE OF THE FIRM WHEREIN THE INTEREST TO THE PARTNERS ON CAPITAL AND THE SALARY OF THE PARTNERS HAVE BEEN ALLOWED OUT OF THE NET PROFIT. IN THAT CASE, THE TRIBUNAL HELD THAT 5% NET PROFIT IS REASONABLE BECAUSE THE NET PROFIT DECLARED BY THE ASSESSEE IN ASSESSMENT YEAR 2004 - 05 WAS AT 1.5% AND IN SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2006 - 07 IT WAS 2.45% ON TURNOVER OF RS.319.78 LACS. UNDER THESE FACTS IN THAT CASE, THE TRIBUNAL UPHELD NET PROFIT OF 5%. IF WE CONSIDER THE AVERAGE PROFIT RATE OF PRECEDING YEAR AND THE SUCCEEDING YEAR IT COMES TO AROUND 2% AND UNDER THESE FACTS, THE TRIBUNA L UPHELD NET PROFIT OF 5% IN THAT CASE. IN THE PRESENT CASE, THE NET PROFIT RATE OF EARLIER THREE YEARS IS MORE THAN 5% IN EACH YEAR AND, THEREFORE, IF 3% IS ADDED TO THE AVERAGE NET PROFIT RATE THEN ADOPTING 8% IN THE PRESENT YEAR IS JUSTIFIED AS PER THI S TRIBUNAL DECISION. 7.2 THE SECOND JUDGMENT, ON WHICH RELIANCE HAS BEEN PLACED BY LEARNED A.R. OF THE ASSESSEE, IS THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT VS. GOTAN LIME KHANIJ UDHYOG [2002] 256 ITR 243 (RAJ.) . IN THIS CASE , IT WAS HELD BY HON'BLE RAJASTHAN HIGH COURT THAT MERE REJECTION OF BOOKS OF ACCOUNT BY RESORTING TO 145 NEED NOT NECESSARILY LEAD TO ADDITIONS TO THE RETURNED INCOME. IT WAS FURTHER HELD THAT FINDING OF THE TRIBUNAL DELETING THE ENTIRE ADDITIONS WAS A FINDING OF FACTS AND SAME COULD NOT BE SAID TO BE ERRONEOUS. THERE IS NO QUARREL ON THIS ASPECT BECAUSE IT MAY BE THAT IN THAT CASE , NO ADDITION IS JUSTIFIED EVEN AFTER REJECTION OF BOOKS OF ACCOUNT BUT IT DOES NOT MEAN THAT NO SUCH ADDITION CAN BE MAD E IN ANY CASE. IN THE PRESENT CASE, THE ASSESSEE IS NOT REPORTING CORRECT TURNOVER AND IT IS SEEN THAT SOME TURNOVER RELATED TO THE PRESENT YEAR HAS BEEN REPORTED BY THE ASSESSEE IN THE NEXT YEAR. IT IS ALSO SEEN THAT IN THE ASSESSMENT PROCEEDINGS , THE A SSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE 6 COMPLETE BILLS AND VOUCHERS ALONG WITH LABOUR REGISTER/MUSTER ROLL BUT THE SAME WAS NOT PRODUCED AND THE BILLS WERE NOT PROPER. HENCE, IN THE FACTS OF THE CASE, IT CANNOT BE SAID THAT NO ADDITION IS CALLED FO R. IN OUR CONSIDERED OPINION, THIS JUDGMENT DOES NOT RENDER ANY HELP TO THE ASSESSEE. 7.3 THE THIRD DECISION ON WHICH RELIANCE HAS BEEN PLACED BY LEARNED A.R. OF ASSESSEE IS A JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF SHANKAR KHAND SARI SUGAR MILLS VS. CIT [1992] 193 ITR 669 (KAR.) . I N THIS CASE, I T WAS HELD THAT THE BEST JUDGMENT ASSESSMENT IS NOT TO PENALIZE THE ASSESSEE BUT TO ARRIVE AT A FAIR AND REASONABLE ESTIMATE. THERE IS NO QUARREL ON THIS ASPECT ALSO AND THEREFORE, IT HAS TO BE SEEN IN THE PRESENT CASE AS TO WHETHER THE INCOME ASSESSED BY THE ASSESSING OFFICER IS REASONABLE OR NOT. WE HAVE ALREADY SEEN THAT AS PER THE TRIBUNAL DECISION, ON WHICH RELIANCE HAS BEEN PLACED BY LEARNED A.R. OF THE ASSESSEE, HAVING BEEN RENDERE D IN THE CASE OF ARVIND KUMAR CHAUDHARY (SUPRA), ESTIMATION OF INCOME AT 3% HIGHER THAN THE AVERAGE PROFIT DECLARED BY THE ASSESSEE IN THE PRECEDING AND SUCCEEDING YEAR IS REASONABLE. IN THE PRESENT CASE, THE PROFIT DECLARED BY THE ASSESSEE IS MORE THAN 5 % IN EACH OF THE PRECEDING THREE YEARS AND THEREFORE, ESTIMATION OF INCOME AT 8% IS REASONABLE AS PER THIS TRIBUNAL DECISION. HENCE, IN THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THIS JUDGMENT IS ALSO NOT RENDERING ANY HELP TO TH E ASSESSEE. 7.4 THE FORTH JUDGMENT ON WHICH RELIANCE HAS BEEN PLACED BY LEARNED A.R. OF THE ASSESSEE, IS A JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. J.P. YADAV IN INCOME - TAX APPEAL NO. 252 OF 2013 . AS PER THE FACT NOTED BY HON'BLE HIGH COURT IN THAT CASE , THE TRIBUNAL FOUND THAT FOR LAST 7 YEARS , THE ACCOUNTS WERE ACCEPTED BY THE DEPARTMENT AND THERE WAS NO ERROR IN THE SYSTEM OF ACCOUNT ADOPTED BY THE ASSESSEE. IN THE PRESENT CASE, 7 THE FACTS ARE DIFFERENT. IT IS SEEN THAT THE ASSESSEE HIMSELF DECLARED 8% PROFIT IN ASSESSMENT YEAR 2006 - 07 ALTHOUGH ON PRESUMPTIVE BASIS. THERE IS NO EVIDENCE BROUGHT ON RECORD BEFORE US THAT THE BOOKS OF ACCOUNT WERE ACCEPTED IN ALL EARLIER YEARS BECAUSE NO COPY OF ANY SCRUTINY ASSESSMENT ORDER HAS BEEN PLACED BEFORE US. IT IS ALSO NOT SHOWN TO US AS TO WHETHER ANY SCRUTINY WAS DONE AND AFTER SCRUTINY , BOOKS WERE ACCEPTED IN EARLIER YEARS WHEREAS IN THE CASE ON WHICH RELIANCE HAS BEEN PLACED, THIS FIND ING WAS GIVEN BY THE TRIBUNAL AND NOTED BY HON'BLE HIGH COURT THAT FOR LAST 7 YEARS , THE ACCOUNTS WERE ACCEPTED BY THE DEPARTMENT AND THERE WAS NO ERROR IN THE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE. IN THE PRESENT CASE, WE FIND THAT THERE IS ERROR IN THE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE BECAUSE S O ME TURNOVER OF RS.7,23,285/ - WAS RELATED TO THIS YEAR BUT WAS REPORTED BY THE ASSESSEE IN THE NEXT YEAR ALTHOUGH THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. HENCE, FOR TH ESE DIFFERENCE IN FAC TS, THIS JUDGMENT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. IT IS ALSO WORTH MENTIONING THAT IN THE CASE OF CIT VS. J. P. YADAV (SUPRA), THE ACTION OF THE ASSESSING OFFICER OF REJECTING THE BOOKS OF ACCOUNT ITSELF WAS SET ASIDE BY THE TRIBUNAL A ND THAT ORDER OF THE TRIBUNAL WAS UPHELD BY HON'BLE ALLAHABAD HIGH COURT IN THE FACTS OF THAT CASE WHEREAS IN THE PRESENT CASE, THE ASSESSEE IS NOT CHALLENGING THE REJECTION OF BOOKS OF ACCOUNT AS CAN BE SEEN FROM THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE AND THEREFORE, THIS JUDGMENT IS NOT RENDERING ANY HELP TO THE ASSESSEE FOR THIS REASON ALSO. 8. AS PER ABOVE DISCUSSION, WE HAVE SEEN THAT THE JUDGMENT S CITED BY LEARNED A.R. OF THE ASSESSEE ARE NOT RENDERING ANY HELP TO THE ASSESSEE. WE FIND THAT RAT HER THE TRIBUNAL DECISION RENDERED IN THE CASE OF ARVIND KUMAR CHAUDHURY (SUPRA) CITED BY LEARNED A.R. OF THE ASSESSEE IS COVERING THE CASE AGAINST THE ASSESSEE BECAUSE IT WAS APPROVED BY THE TRIBUNAL IN THAT CASE 8 THAT 3% PROFIT OVER AND ABOVE THE AVERAGE NET PROFIT REPORTED BY THE ASSESSEE FOR PRECEDING AND SUCCEEDING YEAR IS REASONABLE. AS PER THIS PRINCIPLE, THE NET PROFIT RATE ADOPTED BY THE ASSESSING OFFICER AT 8% IS HELD TO BE REASONABLE BECAUSE IN ALL THE PRECEDING YEARS, THE ASSESSEE HAS ALREADY SH OWN MORE THAN 5% IN EACH YEAR. RESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION, WE DECLINE TO INTERFERE IN THE ORDER OF LEARNED CIT(A). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H JANUARY, 2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR