M/s. Buildwell Construction Co., Amritsar. V. The Additional Commissioner of Income Tax, Amritsar.

ITA 563/ASR/2013

• Counselvise Citation: 56320914 RSA 2013
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 29-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: PADAM BAHL
• Keywords: Business income; Depreciation; Condonation of delay
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 PAN: AADFB5794P M/S BUILDWELL CONSTRUCTION VS. ADDITIONAL C OMMISSIONER CO., 392, GREEN AVENUE, OF INCOME TAX, RANGE -V, AMRITSAR AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. PADAM BAHL, CA RESPONDENT BY: SH. AMRIK CHAND, DR DATE OF HEARING: 24.03.2014 DATE OF PRONOUNCEMENT: 26.03.2014 ORDER PER BENCH 1) THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 17.04.2013 PASSED BY LEARNED CIT(A), AM RITSAR, FOR THE ASSESSMENT YEAR 2005-06. 2) THE PRESENT APPEAL IS BARRED BY 56 DAYS AND THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY IN WH ICH THE ASSESSEE HAS STATED THAT THE DELAY IN DISPUTE OCCURRED DUE TO TH E CHANGE OF COUNSEL WHICH RESULTED INTO THE CONFUSION ABOUT THE FILING OF THE PRESENT APPEAL. 2 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 THE DELAY IN DISPUTE OCCURRED FOR COLLECTING THE PA PERS FROM PREVIOUS COUNSEL AND HANDING OVER TO THE NEW COUNSEL. THEREF ORE, THE ASSESSEE REQUESTED THAT THE DELAY IS BONA FIDE AND THE SAME MAY BE CONDONED. 3) LEARNED DR HAS NOT RAISED ANY OBJECTION ON THE R EQUEST OF THE ASSESSEE. 4) AFTER HEARING BOTH THE PARTIES, ESPECIALLY ON TH E DELAY IN DISPUTE, WE ARE OF THE VIEW THAT THE REASONS MENTIO NED BY THE ASSESSEE IN THE DELAY APPLICATION ARE REASONABLE AND PLAUSIBLE TO CONDONE THE DELAY IN DISPUTE. THEREFORE, WE CONDONE THE DELAY IN DISPUTE AND ADMIT THE APPEAL FILED BY THE ASSESSEE. 5) THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSE E-FIRM DERIVES BUSINESS INCOME BY CARRYING OUT CIVIL CONTRACT OF R OAD CONSTRUCTION WORK FOR GOVERNMENT DEPARTMENTS LIKE PUNJAB MANDI BOARD, JALANDHAR X. EN, NAGAR PANCHAYAT, BEGOWAL, PWD (B&R), AMRITSAR, MUNI CIPAL CORPORATION, JALANDHAR, AND MUNICIPAL COUNCIL, KAPU RTHALA, ETC. BESIDES FOR PRIVATE PARTIES, NAMELY, NATASHA CONSTRUCTION, CHANDIGARH, HAVING ITS OWN HOTMIX PLANT. DURING THE YEAR, IT HAS DECLARED INCOME OF RS. 6,50,004/- OUT OF NET CONTRACT RECEIPTS OF RS. 3,71 ,85,454/- [AFTER EXCLUDING COST OF MATERIAL SUPPLIED BY GOVT. AT RS. 94,51,272/- OUT OF 3 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 GROSS CONTRACT RECEIPTS OF RS. 4,66,36,726/-] IN IT S RETURN FILED ON 24.10.2005, THEREBY DECLARING NET PROFIT RATE OF 01 .74% ONLY. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER ISSUED STATUTORY NOTICE TO THE ASSESSEE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) DATED 02.03.2006 ALONG WITH QUESTIONNAI RE DATED 18.04.2007. SUBSEQUENTLY, FRESH NOTICES UNDER SECTION 143(2)/14 2(1) OF THE ACT WERE ISSUED TO THE ASSESSEE. IN RESPONSE THERETO, THE AU DITED BOOKS OF ACCOUNT WERE PRODUCED AND THE ASSESSING OFFICER HAVING BEEN EXAMINED THE BOOKS OF ACCOUNT, NOTICED THAT ALMOST ALL THE EXPEN SES HAVE BEEN ON CASH BASIS ONLY. IN RESPECT OF ITS CLAIM OF LABOUR EXPEN SES MADE AT RS. 53,54,133/-, NO ADDRESS EVEN OF A SINGLE PARTY WAS GIVEN. AS PER ORDER ENTRY DATED 26.11.2007, EXCEPT PAYMENT UNDER THE HE AD BITUMEN PURCHASES FROM IOCL AND HPCL, THE ASSESSEE ADMITTED THAT 90% OF EXPENSES ARE CLAIMED ON THE BASIS OF CASH PAYMENT/S ELF-MADE VOUCHERS WHICH REMAINED UNVERIFIABLE, AS THERE ARE NO ADDRES S AVAILABLE WITH THE ASSESSEE. DESPITE VARIOUS OPPORTUNITIES ALLOWED, TH E ASSESSEE FAILED TO PRODUCE THE BILLS REGARDING PURCHASES FROM ABOVE ME NTIONED PARTIES. FOR THE APPELLANTS UTTER FAILURE TO FURNISH THE REQUIS ITE INFORMATION, PROVISIONS OF SECTION 144 WERE ALSO INVOKED. AND LA STLY, THE ASSESSING 4 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 OFFICER PROCEEDED TO REJECT THE BOOKS OF ACCOUNTS B EING NOT RELIABLE BY RESORTING TO THE PROVISIONS OF SECTION 143(3) READ WITH SECTION 144 OF THE ACT AS ACCORDING TO HIM, FROM THE PRESENT STATE OF AFFAIRS OF APPELLANTS BOOKS OF ACCOUNT, IT IS NOT FEASIBLE TO DEDUCE TRUE AND EXACT BUSINESS PROFITS DERIVED FROM THE BUSINESS, AND ACCORDINGLY TO DETERMINE NET TAXABLE INCOME OF THE APPELLANT FIRM BY APPLYING NE T PROFIT RATE OF 12% ON THE NET CONTRACT RECEIPTS, AS THE BOOKS OF ACCOU NTS PRODUCED WERE FOUND TO BE BASED ON CLAIMS WITHOUT ANY BILLS & UNV ERIFIABLE CASH VOUCHERS, THUS HE FRAMED THE ASSESSMENT AT NET ASSE SSABLE INCOME OF RS. 27,34,507/- INCLUDING INTEREST INCOME AS SHOWN AT R S. 19,427/- AND COMPLETED THE ASSESSMENT VIDE ORDER DATED 17 TH DECEMBER, 2007 PASSED UNDER SECTION 143(3) READ WITH SECTION 145(3) & 144 OF THE ACT. 6) AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSESSE E FILED AN APPEAL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY , WHO VIDE IMPUGNED ORDER DATED 17.04.2013 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND APPLIED NET PROFIT @ 10% ON THE NET CONTRACT RECEIP TS/TURNOVER DECLARED AT RS. 3,71,85,454/-, TOTAL CONTRACT BUSINESS INCOME C OMES TO RS. 37,18,545/-, AND AFTER REDUCING THEREFROM DEPRECIAT ION, PARTNERS SALARY AND INTEREST AS ALLOWED BY THE A.O. AT RS. 17,47,17 4/-, AND HE HAS 5 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 DETERMINED THE NET BUSINESS INCOME AT RS. 19,71,371 /- AND BY ADDING THEREIN THE DECLARED INTEREST INCOME FALLING UNDER THE HEAD INCOME FROM OTHER SOURCES AT RS. 19,427/-, THE TOTAL NET ASSES SABLE WOULD WORK OUT TO RS. 19,90,798/- AND HAS GIVEN TOTAL NET RELIEF OF R S. 7,43,704/-. NOW, THE ASSESSEE BEING AGGRIEVED WITH THE IMPUGNED ORDER FI LED THE PRESENT APPEAL. 7) WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE SMALL PAPER BOOK FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE, CONTAINING PAGES FROM 1 T O 38, IN WHICH HE HAS ATTACHED COPY OF AUDITED STATEMENTS OF ACCOUNT FOR A/YEAR 2005-06; COPY OF I.T.A.T., AMRITSAR BENCH ORDER DATED 14.11. 2002 IN CASE OF DALJIT SINGH & BROS. PATHANKOT FOR A/YEAR 1998-99; COPY OF I.T.A.T., AMRITSAR BENCH ORDER DATED 23.12.2010 IN CASE OF DA LJIT SINGH & BROS. FOR A/YEAR 2006-07; AND COPY OF I.T.A.T., AMRITSAR BENCH ORDER DATED 31.10.2006 IN CASE OF JASWANT SINGH & CO., FOR A/YE AR 1998-99. HE HAS ALSO ATTACHED SOME ADDITIONAL ASSESSMENT ORDERS PAS SED IN THE ASSESSEES CASE I.E. FOR THE A.Y. 2006-07, DATED 29.12.2008 PA SSED UNDER SECTION 144 READ WITH SECTION 145(3) OF THE ACT; FOR THE A .Y. 2008-09, DATED 15.12.2010 PASSED UNDER SECTION 143(3) OF THE ACT; AND FOR THE A.Y. 6 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 2010-11, DATED 11.03.2013 PASSED UNDER SECTION 143( 3) OF THE ACT. THE ASSESSEES COUNSEL HAS ALSO FILED A CHART SHOWING T HE NET PROFIT DECLARED BY THE ASSESSEE AND ASSESSED BY THE REVENUE AUTHORI TY FOR THE ASSESSMENT YEARS 2006-07 TO 2011-12. FOR THE SAKE OF CONVENIEN CE, THE SAID CHART IS REPRODUCED AS UNDER: BUILDWELL CONSTRUCTION CO. 392-A, GREEN AVENUE, AMRITSAR. PAN NO. AADFB5794P ASSESSMENT YEAR 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 GROSS RECEIPT 266,402,234 312,678,903 136,600,489 185,143,454, 17 2,364,861 66,400,607 NET PROFIT DECLARED % 18,467,093 6.93 19,575,290 6.26 8,246,276 6.04 11,150,462 6.02 11,733,211 6.81 3,571,772 5.38 NET PROFIT BEFORE PARTNERS INTT. & SALARY % 21,830,088 8.19 22,687,269 7.26 11,182,107 8.19 13,169,675 7.11 13,163,761 7.64 4,520,544 6.81 NET PROFIT AS ASSURED % 19,585,430 6.26 12,987,268 7.01 4,363,280 6.57 NET PROFIT AS ASSESSED BEFORE PARTNERS INTT & SALARY % 22,687,269 7.26 14,817,453 8.00 5,312,048 8.00 SINGED BY ASSESSEE COUNSEL. 8) WE ARE OF THE VIEW THAT THE ASSESSING OFFICER AS WELL AS THE LEARNED FIRST APPELLATE AUTHORITY HAS ESTIMATED THE NET PROFIT @ 10% IN THE CASE OF ASSESSEE. NO DOUBT THE ASSESSEE HAS ALSO FI LED THE CHART BEFORE THE 7 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 LEARNED FIRST APPELLATE AUTHORITY AS WELL AS BEFORE THE ASSESSING OFFICER SHOWING ITS NET PROFIT RATE NOT MORE THAN 8% EXCEPT FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE AUTHORITY HAS APPLIED THE NET PROFIT @ 10% IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR IN DISPUTE. WE HAVE ALSO PERUSED THE CHART GIVEN BY THE LEARNED COUNSEL FOR THE ASSESSEE, IN WHICH THE REVENUE HAS ASSESSED THE NET PROFIT RATE FROM T HE SUBSEQUENT YEARS TO THE ASSESSMENT YEAR IN DISPUTE ABOUT 8% BUT WE HAVE SEEN THAT NO LOGIC HAS BEEN GIVEN BY THE REVENUE AUTHORITY TO DETERMIN E THE NET PROFIT @ 10 IN THE ASSESSMENT YEAR IN DISPUTE, IN SPITE OF THE FACT THAT THE ASSESSEE DECLARED ITS INCOME FROM BUSINESS BY CARRYING OUT C IVIL CONTRACT OF ROAD CONSTRUCTION WORK FOR MOST OF THE GOVERNMENT DEPART MENTS. NO DOUBT, THE REVENUE AUTHORITY HAS RIGHTLY APPLIED SECTIONS 144 AND 145(3) OF THE ACT IN THE ASSESSEES CASE DUE TO UNVERIFIABLE EVIDENCE S PRODUCED BY THE ASSESSEE. BUT, IN THE INTEREST OF JUSTICE, THE NET PROFIT SHOULD BE APPLIED VERY FAIRLY AND REASONABLY ON THE BASIS OF PREVIOUS AND SUBSEQUENT NET PROFIT DECLARED BY THE ASSESSEE AND DETERMINED BY T HE REVENUE AUTHORITY. IN THE INTEREST OF JUSTICE, IT WOULD BE VERY FAIR A ND REASONABLE IF WE APPLY NET PROFIT @ 8% ON THE NET CONTRACT RECEIPT/TURNOVE R DECLARED AT RS. 37,18,545/-, AFTER REDUCING THEREFROM DEPRECIATION, PARTNERS SALARY AND 8 I.T.A. NO. 563(ASR)/2013 ASSESSMENT YEAR: 2005-06 INTEREST AS ALLOWED BY THE A.O. AT RS. 17,47,174/- AND BY ADDING THEREIN THE DECLARED INTEREST INCOME FALLING UNDER THE HEAD INCOME FROM OTHER SOURCES AT RS. 19,427/-. ACCORDINGLY, THE APPEAL O F THE ASSESSEE IS PARTLY ALLOWED. 9) IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MARCH, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH MARCH, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S BUILDWELL CONSTRUCTION CO., 392, GREEN AVENUE, AMRITSAR 2. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-V , AMRITSAR 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.