DCIT, CC-X, Kolkata, Kolkata V. M/s. Neelambar Catterers Pvt. Ltd., Kolkata

ITA 569/KOL/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9053 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2011
• Court: TRIBUNAL
• Department Lawyers: DIPANKAR MUKHOPADHYAY
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( ) BEFORE , /AND , ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA , AM ] / I.T.A NO. 569 /KOL/201 1 / ASSESSMENT YEAR : 200 6 - 0 7 DEPUTY COMMISSIONER OF INCOME - TAX, VS. M/S. NEELAMBAR CATTERERS PVT. LTD. CENTRAL CIRCLE - X, KOLKATA. (PAN:AABCN1101B) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 0 9 . 01 .201 5 DATE OF PRONOUNCEMENT: 16 . 01 .201 5 FOR THE APPELLANT: SHRI DIPANKAR MUKHOPADHYAY, JCIT, SR. DR FOR THE RESPONDENT: SHRI ANIL KOCHAR, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT (A) , CENTRAL - II , KOLKATA IN APPEAL NO. 216/CC - XVIII/CIT(A)C - II/08 - 09 DATED 0 5 . 0 1 .201 1 . ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE - X, KOLKATA U/S. 1 43(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 6 - 0 7 VIDE HIS ORDER DATED 3 0 . 1 2 .20 0 8 . 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) ACCEPTING THE NET PROFIT DECLARED BY ASSESSEE EVEN THOUGH THE BOOKS OF ACCOUNT WERE REJECTED. FOR THIS, REVENU E HAS RAISED FOLLOWING GROUND NO.1: 1. THIS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.14,24,220/ - MADE ON ACCOUNT OF LOW PROFIT WHILE HOLDING THAT THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE WAS CORRECT IN VIEW OF DEFICIENCIES AS POINTED OUT BY THE AO AND THE MATERIALS AS BROUGHT ON RECORD. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF C ATERING S ERVICES AND R ESTAURANT. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2006 - 07 I.E. THE RELEVANT ASSESSMENT YEAR ON 16.01.2008 AND ASSESSEE S CASE WAS SELECTED FOR BY ISSUING NOTICE U/S. 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO REJECTED T HE BOOK RESULTS AND APPLIED AVERAGE NET PROFIT @ 20.86% BY ESTIMATING THE TURNOVER AT RS.2.10 CR. AS AGAINST THE TURNOVER DECLARED BY ASSESSEE AT RS.2,00,38,155/ - BY OBSERVING AS UNDER: 2 ITA NO. 56 9/K/20 1 1 M/S. NEELAMBAR CATTERERS PVT. LTD. AY 200 6 - 0 7 CONSIDERING THE FACT OF THE CASE AND DEFECTS IN MAINTENANCE OF THE A CCOUNT IN THE FORGOING PARA THE SALES IS ESTIMATED AT RS.2,10,00,000/ - AS AGAINST SALES OF RS.2,00,38,155/ - SHOWN BY THE ASSESSEE. AS IT IS SETTLED THAT ASSESSEE S CASE IS THE BEST COMPARABLE CASE FOR THE APPLICATION OF THE NP RATE. THE ASSESSEE HAS DECL ARED NET PROFIT RATE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2006 - 07 AT 14.75% AND FOR THE PRECEDING YEAR AT 26.98%. THEREFORE BY APPLYING THE AVERAGE NP RATE OF 20.86% (14.75% + 26.98%) ON THE NET TURNOVER SHOWN AT RS.2,10,00,000/ - , NET PROFIT WORKS OUT TO RS.43,80,600/ - . THE ASSESSEE HAS ALREADY SHOWN NET PROFIT OF RS.29,56,380/ - IN THE PROFIT & LOSS ACCOUNT, THEREFORE, THE DIFFERENCE OF RS.14,24,220/ - (RS.43,80,600/ - MINUS RS.29,56,380/ - ) IN NET PROFIT IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIRMED THE ACTION OF AO REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATING THE PROFIT OF THE BUSINESS OF THE ASSESSEE. BUT THE CIT(A) NOTED THA T THE ASSESSEE HAS DECLARED GROSS PROFIT @ 22 % IN THE RELEVANT ASSESSMENT YEAR AND HAS ALSO INCURRED A PARTICULAR EXPENDITURE I.E. RENT PAID FOR HIRING OF CONVENTION CENTRE AND AUDITORIUM IN SCIENCE CITY DURING THE RELEVANT YEAR AND PAID RENT OF RS.38,60 ,352/ - BY VIRTUE OF WHICH NET PROFIT WAS REDUCED AND ACCORDINGLY, NET PROFIT WAS ALSO REDUCED. THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 4.2. THE COMPARATIVE FIGURES OF FINANCIAL ACCOUNT OF APPELLANT FOR ASSESSMENT YEAR 2005 - 06 AND ASSESSMEN T YEAR 2006 - 07, ARE AS UNDER: ASSTT. YEAR CATERING RECEIPTS PROFIT BEFORE DEPRECIATION % ADMINISTRATIVE EXP. HALL MAINTENANCE, LABOUR & SERVICE CHARGE OTHER RECEIPTS 2005 - 06 12645522 3411398 26.98 1608370 4257990 979988 2006 - 07 20038155 2956380 14.75 6873518 3466914 547032 IN THE ABOVE TAB L E , I F T H E A DM I NISTR A TI VE EXPENSES , HAL L M A I N T ENA N CE, L ABOUR AND S ERVICE C H ARGES H A D ALSO I N C R EASE D PR OPO RTI O N ATE TO CATERING R ECE I PTS IN ASSESSMENT YEAR 2 006 - 07 I N CO MP AR I SO N TO ASSESS M E N T YEAR 2005 - 06, THEY S H OULD N OT HAVE BEEN AB O UT R S 8 3 L AK H FOR ASSESS M E N T Y E AR 200 6 - 07. H OW E VER THE A DMINI S TR ATIVE EXPENSES AND LABOUR CHAR G ES AN D SERVICE CH A RGES FOR A S SE SS ME N T YEAR 2006 - 0 7 ARE ABOUT RS. 103 LAKH ( RS 68.5 LAKH + RS 34 . 5 LAKH ) . THEREFORE , IF TH E A DMINISTRATI V E CHARGES H A D N OT GO N E UP ABN O RMA L L Y, TH E ' PBT ' IN ASS ESSMEN T Y E A R 2 006 - 07 WO ULD HA VE B EEN HIG H E R B Y R S 103 LAKH - RS 8 3 LAKH = R S 20 LAKH . IN THAT CASE THE PBD F O R ASSESSMEN T YEAR 2006 - 07 CO ULD BE R S 49 LAKH O N A SALE O F AB O UT RS 2 CRORE , I.E 24 . 5 % OF SALE . M O RE OV ER IF THE ' OTH E R RE C EIPTS ' O F AB O UT RS 9 . 8 LAKH IN ASSESSMENT YEAR 2005 - 06 AND R S. 5. 5 LAKH IN ASSESSMENT YEAR 2006 - 07 ARE EXCLUDED FROM THE PROF I TS , THEN TH E PBD IN RE S P EC T OF CATER I NG BU SI N ESS ON L Y FOR ASSESS M E N T YEAR 2005 - 06 WOULD H AVE BEEN 19 % AND TH E PBO OF ASSESSME N T YEAR 2006 - 07 WO UL D HAVE BEEN ABOUT 22% AFTER E X CLUDIN G ABN O RM A L I N C R EASE IN A D M INI STRATIVE COST OF ABOUT R S 20 LAKH . T H E RE N T OF R S. 3 8 , 60 , 3 5 2 PAID B Y APPEL L ANT FOR ' CO N VE NTI ON CENT RE AND A U DITORI U M ' IN S C I E N CE CIT Y IN ASSESSMENT YEAR 2006 - 07 WAS EXCESSIVE EV E N A FTE R C O N SI D ERING THE SAV IN GS T H AT T HE A P PELLANT MADE ON AC C OUNT OF HALL MAINTENA N CE A N D LABOUR CHARGES IN ASSESSMENT YEAR 2005 - 06 . THE D E CI S I O N OF TA K IN G CO NVENTION CENTRE AND AUDIT O RIUM O N RENT DID N O T PR OVE PR O FI TA BLE A ND A PPELLANT DISC O NTINUED THIS FACI L ITY IN SC I ENCE CIT Y IN SUBSEQUENT Y EAR S. ALL THE SE FA C T S PR O VE T H AT THE EXCESSIVE RENT OF CONVENTION CE N TRE A ND A U DITORIUM IN SCIENCE CIT Y BROUGHT DOWN THE PBD IN ASSESSMENT YEAR 2006 - 07 WRT ASSESSMENT YEAR 2005 - 06 AND T HE REASON 3 ITA NO. 56 9/K/20 1 1 M/S. NEELAMBAR CATTERERS PVT. LTD. AY 200 6 - 0 7 FOR FALL THE PBD IN ASSESSMENT YEAR 2006 - 07 IS NOT THE PURCHASE OF RAW MATERIAL/LABOUR AND SALE OF CATERING MATERIAL/SERVICES. THE PBD ON ACCOUNT OF SALE AND PURCHASE OF CATERING MATERIAL AND SERVICES ONLY, WITHOUT CONSIDERING OTHER RECEIPTS, AN D WITHOUT CONSIDERING ABNORMAL RISE IN ADMINISTRATIVE COST (RS.20 LAKH), IS IN FACT HIGHER AT 22% IN ASSESSMENT YEAR 2006 - 07 THAN 19% IN ASSESSMENT YEAR 2005 - 06 AS MENTIONED ABOVE. THE ABNORMAL RISE IN ADMINISTRATIVE EXPENSES IS WELL EXPLAINED FIRST TIME EXPENDITURE OF RENT OF RS.38,60,352/ - FOR CONVENTION CENTRE AND AUDITORIUM . THEREFORE, A COMPARISON WITH THE PROFITS OF CATERING BUSINESS OF ASSESSMENT YEAR 2005 - 06 WOULD NOT RESULT IN ANY HIGHER ESTIMATION OF PROFIT FOR ASSESSMENT YEAR 2006 - 07. I THER EFORE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.14,24,220/ - MADE BY HIM TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ESTIMATION OF PROFIT AND REDUCE THE TOTAL INCOME ACCORDINGLY. 4. WHEN A QUERY WAS PUT TO LD. SR. DR THAT WHETHER TH E RENT PAID FOR CONVENTION CENTRE AND AUDITORIUM IN SCIENCE CITY FOR A SUM OF RS.38,60,352/ - IS GENUINE OR NOT WHETHER THE SAME WAS DOUBTED BY THE AO OR NOT. THE LD. SR. DR COULD NOT ANSWER. EVEN RECORDS SHOW THAT THIS EXPEN DITURE WAS CONSIDERED BY THE AO AND WAS ALLOWED. IN VIEW OF THIS FACTOR, WE FIND THAT THE CIT(A) HAS RIGHTLY CONSIDERED THE ESTIMATION OF PROFIT AND DELETED THE ADDITION MADE BY AO AT RS.14,24,220/ - . WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS CONFIRMED. APPEAL OF RE VENUE IS DISMISSED. 5 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6 . ORDER IS PRONOUNCED IN THE OPEN COURT 1 6 . 0 1 . 2 0 1 5 S D / - S D / - , , ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 6 T H JANUARY , 201 5 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT DCIT, CENTRAL CIRCLE - X, KOLKATA. 2 / RESPONDENT M/S. NEELAMBAR CATTERERS PVT. LTD., 222, A.J.C. BOSE ROAD, 3 RD FLOOR, KOLKATA - 700 017 . 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .