M/s Rajendra Constructions, Panchkula V. CIT, Panchkula

ITA 582/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68421 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Gross profit estimation; Revision of order; Opportunity of being heard; Initiation of penalty proceedings; Assessment record
• Section: 40A(3); 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.582/CHD/2013 ASSESSMENT YEAR: 2008-09 M/S RAJENDRA CONSTRUCTIONS, VS THE CIT PANCHKULA PANCHKULA PAN NO. AAHFR4435M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 14.08.2013 DATE OF PRONOUNCEMENT : 23.08.2013 ORDER PER T.R. SOOD, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A), PANCHKULA DATED 25.3.2013. 2. IN THIS APPEAL, VARIOUS GROUNDS HAVE BEEN RAISED BUT AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ONLY DISPUTE IS REGARDING ORDER PASSED U/S 263 AGAINST T HE ASSESSMENT 2 ORDER WHICH CANNOT BE CALLED ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT LD. COMMISSIONER CALLED FOR ASSESSMENT RECORD AND WAS OF THE VIEW TH AT ASSESSMENT ORDER IS ERRONEOUS AND PRE-JUDICIAL TO THE INTEREST OF REVENUE. SHE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE IN WHICH FOLLOWING POINTS WERE MENTIONED:- I) THE ASSESSING OFFICER HAS FAILED TO VERIFY THE REAS ONS FOR REDUCTION IN NET PROFIT RATE FROM 5.29% TO 5.06%. II) THE ASSESSING OFFICER HAS NOT EXAMINED THE PURPOSE OF SECURED LOANS TAKEN FROM A BANK AMOUNTING TO RS. 21 .92 LAKHS PARTICULARLY WHEN THE CASH IN HAND SHOWN BY T HE ASSESSEE IS RAISED TO RS. 25.85 LAKHS. NO DETAILS OF THE SECURITY OF LOANS WERE FURNISHED. III) THE ASSESSING OFFICER HAS NOT VERIFIED THE FACT THA T LOAN FROM HDFC WAS TAKEN AGAINST A CAR AND THE LOAN WAS IN THE NAME OF PARTNER. HOWEVER, ON THE EXPLANATION GIVEN BY THE ASSESSEE THE LD. COUNSEL WAS SATISFIED ON THIS POIN T AND THIS WAS NOT MADE PART OF THE ORDER. IV) THE ASSESSING OFFICER HAS NOT EXAMINED THE DETAILS OF UNSECURED LOANS. 3 V) THE ASSESSING OFFICER HAS NOT EXAMINED THE SUNDRY CREDITORS IN THE NAME OF M/S GARG SALES. VI) THE ASSESSING OFFICER HAS NOT EXAMINED THE FACT THA T NO STOCK REGISTER WAS MAINTAINED. VII) IT WAS NOTED THAT ASSESSEE IN RESPONSE TO THE QUEST IONNAIRE ISSUED BY ASSESSING OFFICER HAD GIVEN DETAILS OF CH EQUE AND CASH PAYMENTS BUT ASSESSING OFFICER FAILED TO EXAMI NE THE PAYMENT EXCEEDING LIMIT U/S 40A(3) OF THE ACT. VIII) THOUGH ASSESSING OFFICER HAS MADE QUANTUM ADDITION OF RS. 1,15,000/- OUT OF THE BUSINESS PROMOTION EXPENSES F OR AN ITEM OF JEWELLERY GOT BY THE ASSESSEE BUT PENALTY PROCEEDINGS U/S 271(1)(C) WERE NOT INITIATED. THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE NATURE AND OTHER EXPENSES. THE ASSESSEE FILED DETAILED EXPLAN ATION IN RESPECT OF ABOVE ITEMS BUT THE LD. COMMISSIONER WAS NOT SATISFIED. HE DISCUSSED VARIOUS CASE LAWS AND WAS OF THE VIEW THAT ASSESSING OFFICER HAS FAILED TO MAKE ANY ENQUIRY AND, THEREFORE, ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, THE SAME WAS SET ASIDE WITH THE FOLLOWING DIRECTIONS. KEEPING IN VIEW THE FACTS MENTIONED ABOVE AND THE PROVISIONS OF LAW, IT IS HELD THAT THE ASSESSME NT 4 ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN AS MUCH AS THAT UNPROVED UNSECURED LOANS, SUNDRY CREDITORS, EXPENSES HAVE BEEN ACCEPTED AND INCOME HAS BEEN UNDER ASSESSED TO THAT EXTENT. ACCORDINGLY THE ASSESSMENT ORDER DATED 16.8.2010 IS CANCELLED U/S 263(1) WITH THE DIRECTION TO THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT AFRESH IN ACCORDANCE WITH LAW KEEPING IN VIEW THE DISCUSSION MADE IN THE PRECEDING PARAS AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT ASSESSING OFFICER HAS CALLED FOR VARIOUS DETAILS AN D HAVE ALSO EXAMINED THE BOOKS OF ACCOUNT IN DETAIL. THEREAFTE R, THE ASSESSMENT ORDER WAS FRAMED U/S 143(3) IN WHICH VARIOUS ADDITI ONS HAVE ALSO BEEN MADE, THEREFORE, THE ASSESSMENT ORDER CANNOT B E CALLED ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE . HE FURTHER EXPLAINED EACH OF THE ITEM AND QUERY WHICH WAS MADE BY ASSESSING OFFICER AND REPLY GIVEN BY THE ASSESSEE AND REFERRE D TO VARIOUS DOCUMENTS IN THE PAPER BOOK IN THIS RESPECT. 5. ON THE OTHER HAND LD. DR MAINLY RELIED ON THE OR DER OF COMMISSIONER. HE PARTICULARLY REFERRED TO THE ITEM REGARDING UNSECURED LOANS. HE REFERRED TO THE CONFIRMATION F ILED BY THE ASSESSEE AT PAGES 99 TO 110 OF THE PAPER BOOK AND P OINTED OUT THAT THESE CONFIRMATIONS DO NOT CONTAIN ANY PAN NUMBERS WHICH ITSELF 5 SHOWS THAT ASSESSING OFFICER HAS NOT EXAMINED THE I SSUE IN DETAIL. FOR OTHER ITEMS, HE STRONGLY SUPPORTED THE ORDER OF COMMISSIONER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE SHALL DEAL WITH EACH OF THE ITEM POINTED OUT BY THE LD. C OMMISSIONER SEPARATELY. 7. THE FIRST OBJECTION RAISED IS THAT ASSESSING OFF ICER HAS NOT EXAMINED THE FALL IN NET PROFIT RATE FROM 5.29% TOT AL INCOME 5.06%. IT WAS EXPLAINED BEFORE LD. COMMISSIONER THAT IT IS NOT POSSIBLE THAT RATE OF PROFIT WOULD REMAIN THE SAME IN EVERY YEAR UNLESS THE PROFIT IS RETURNED ON ESTIMATE BASIS. IN ANY CASE, THE LD. COMMISSIONER HAS HERSELF OBSERVED THAT ASSESSEE WAS MAINTAINING REGU LAR BOOKS OF ACCOUNT AND TRADING RESULTS CANNOT BE QUESTIONED SI MPLY ON ACCOUNT OF LOW GP. WE FIND FORCE IN THESE SUBMISSIONS. TH E OBSERVATION OF THE LD. COMMISSIONER READS AS UNDER:- THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED. AS THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUN TS THE TRADING RESULTS CANNOT BE QUESTIONED SIMPLY ON ACCOUNT OF LOW GP UNLESS SOME DEFECT IS POINTED O UT IN THE BOOKS OF ACCOUNTS 8. THIS OBSERVATION CLEARLY SHOWS THAT LD. COMMISSI ONER IS DOUBTFUL WHETHER LOW GP CAN BE CONSIDERED WHEN REGU LAR BOOKS OF ACCOUNT ARE MAINTAINED WE FURTHER FIND THAT FALL IN GP WAS EXAMINED BY THE ASSESSING OFFICER BECAUSE OF THE RE PLY BY ASSESSEE 6 BY STATING THAT RATE OF GP DEPENDS UPON THE NATURE OF WORK. SINCE THE VOLUME OF WORK ITSELF HAS FALLEN DURING THE YEA R, THEREFORE, PROFIT HAS FALLEN. IT IS ALSO TO BE NOTED THAT PROF IT HAS FALLEN BY LESS THAN A QUARTER PERCENTAGE AND SUCH INSIGNIFICANT FA LL IN GP CANNOT LEAD TO A CONCLUSION THAT ASSESSMENT ORDER IS ERRON EOUS. 9. IN RESPECT OF SECOND POINT, LOAN AND ITS SECURIT IES, IT WAS POINTED OUT THAT CERTIFICATE REGARDING THIS LOAN WA S GIVEN TO THE ASSESSING OFFICER, A COPY OF THE SAME IS AVAILABLE AT PAPER BOOK AT PAGE 88. IT WAS EXPLAINED BY LD. COUNSEL FOR THE A SSESSEE THAT COPY OF THE BANK STATEMENT WAS ALSO PRODUCED BY THE ASSE SSEE BEFORE ASSESSING OFFICER AND COMMISSIONER, THE COPY OF WHI CH IS AVAILABLE AT PAGES 92 TO 96 OF THE PAPER BOOK. THE SECURITY OF LOAN WILL HAVE NO IMPACT ON THE ASSESSMENT OF THE FIRM, SO EVEN IF THIS QUESTION WAS NOT RAISED, THIS WOULD HAVE NO MATERIAL EFFECT ON T HE ASSESSMENT. WE ARE OF THE OPINION THAT THIS IS CORRECT. FURTHE R, WE ARE SATISFIED BY THE EXPLANATION GIVEN BY THE ASSESSEE THAT CASH POSITION DEPENDS UPON DAY TO DAY AND THERE MAY BE MORE CASH ON ONE P ARTICULAR DAY WHICH DOES NOT MEAN THAT ASSESSEE CANNOT RAISE THE BANK LOAN. IN ANY CASE THESE ARE BUSINESS DECISIONS IN WHICH REVE NUE IS NOT SUPPOSED TO INTERFERE. 10. AS FAR AS OBJECTION REGARDING THE NON MAINTENAN CE OF STOCK REGISTER IS CONCERNED, WE ARE SATISFIED WITH THE SU BMISSIONS THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION IN WHICH 7 PRACTICALLY IT IS NOT POSSIBLE TO MAINTAIN ANY STOC K REGISTER. DETAILS REGARDING PURCHASES ETC. WERE DULY FILED. THEREFOR E, NO FAULT CAN BE FOUND WITH THE ASSESSMENT ORDER. 11. AS FAR AS THE ISSUE OF UNSECURED LOAN IS CONCER NED, WE FIND THAT IN RESPECT TO A QUERY IT WAS CLEARLY STATED BE FORE THE ASSESSING OFFICER VIDE LETTER DATED 13.7.2010 THROUGH WHICH V ARIOUS INFORMATIONS WERE GIVEN, COPY OF WHICH IS AVAILABLE AT PAGES 66 TO 87 OF THE PAPER BOOK. NO UNSECURED LOANS HAS BEEN TAKEN DURING THE ASSESSMENT YEAR 2007-08. EVEN CONFIRMATIONS FROM VARIOUS PARTIES WERE FILED ALONG WITH THIS LETTER. WHEN NO LOANS W ERE TAKEN DURING THE YEAR, NO FURTHER ENQUIRY WAS REQUIRED TO BE MAD E AND, THEREFORE, NO FAULT CANNOT BE FOUND WITH THE ASSESSMENT ORDER. 12. IN RESPECT OF SUNDRY CREDITORS M/S GARG SALES I S CONCERNED, WE FIND THAT DETAILS WERE FILED BEFORE THE ASSESSING O FFICER, COPY OF WHICH IS AVAILABLE AT PAGES 111 TO 112 OF THE PAPER BOOK. THIS IS COPY OF THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S GARG SALES. IT CLEARLY SHOWS THAT INITIALLY THERE WAS A CREDIT BALANCE, WHICH MEANS ASSESSEE HAS PAID THE ADVANCE OR MONEY WAS LY ING IN THE CREDIT OF THE ASSESSEE WITH M/S GARG SALES. THE OP ENING CREDIT AVAILABLE IS RS. 466420.92. M/S GARG SALES HAVE SO LD GOODS WORTH RS. 7,45,920/- DURING THE YEAR. NO DOUBT THE ASSES SEE HAS NOT PAID ANY AMOUNT DURING THE YEAR BUT THIS FACT HAS TO BE UNDERSTOOD IN THE 8 BACKGROUND THAT THERE WAS OPENING CREDIT BALANCE OF THE ASSESSEE. THEREFORE, NO ADVERSE INFERENCE CAN BE TAKEN ON THI S ACCOUNT. 13. AS FAR AS THE ISSUE REGARDING APPLICATION OF SE CTION 40A(3) IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT BEFORE US THAT THOUGH CASH PAYMENTS HAVE BEEN STATED IN EXCES S OF RS. 20,000/- BUT THESE CASH PAYMENTS WERE FOR WHOLE OF THE YEAR. THIS DETAIL WAS IN RESPECT OF FULL YEARS. INDIVIDUAL CA SH PAYMENTS NEVER EXCEED A SUM OF RS. 20,000/- AND THE COPY OF THE I NDIVIDUAL ACCOUNT WERE EXAMINED BY THE ASSESSING OFFICER DURING HE AS SESSMENT PROCEEDINGS. IT HAS NOT BEEN DENIED THAT BOOKS HAV E BEEN EXAMINED BY ASSESSING OFFICER, THEREFORE, IT CANNOT BE PRESU MED THAT ASSESSING OFFICER HAS NOT CHECKED THE INDIVIDUAL CA SH PAYMENT AND WE ARE OF THE VIEW THAT WITHOUT ANY FINDING BROUGHT ON RECORD REGARDING ANY PARTICULAR CASH PAYMENT IN EXCESS OF RS. 20,000/-, IT CAN NOT BE SAID THAT ASSESSING OFFICER HAS NOT EXAM INED THE APPLICATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. 14. THE NEXT ISSUE IS REGARDING LEVY OF PENALTY. W E FIND FORCE IN THE SUBMISSIONS OF LD COUNSEL FOR THE ASSESSEE THAT SECTION 271(1)(C) ITSELF USES THE EXPRESSION MAY WHICH MEANS PENALT Y IS NOT MANDATORY LIKE LEVY OF INTEREST U/S 234A, 234B, 234 C ETC. THE ASSESSING OFFICER MAY CONSIDER TOTAL CIRCUMSTANCES TO INITIATE THE PENALTY PROCEEDINGS IF HE IS SATISFIED THAT ASSESSE E HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. 9 IN ANY CASE, AS POINTED OUT BY LD. COUNSEL FOR THE ASSESSEE IT HAS BEEN HELD BY HON'BLE DELHI HIGH COURT IN THE CASE O F CIT V NIHAL CHAND REKYAN 242 ITR 45 (DEL) THAT WHILE EXAMINING THE RECORDS IN EXERCISE OF REVISION POWERS U/S 263, COMMISSIONER C ANNOT DIRECT INITIATION OF PENALTY PROCEEDINGS BECAUSE THEY ARE NOT A PART OF THE ASSESSMENT PROCEEDINGS. SIMILAR VIEW WAS TAKEN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SUBHAM KR. JAI N V ACIT 88 ITD 272 THE HEAD NOTE IN THIS CASE READS AS UNDER:- SECTION 262, READ WITH SECTION 271(1) (C), OF THE INCOME-TAX ACT, 1961 REVISION OF ORDERS PREJUDICIAL TO THE INTEREST OF REVENUE ASSESSMENT YEAR 1994-95 WHETHER WHERE PENALTY PROCEEDINGS AR E NOT INITIATED BEFORE OR AT THE TIME OF MAKING ASSESSMENT, COMMISSIONER CANNOT INVOKE POWERS UNDER SECTION 263(1) SO AS TO SET ASIDE THE ASSESSMENT OR DER FOR LIMITED PURPOSE OF PASSING A FRESH ORDER AFTER TAKING INTO CONSIDERATION PROVISIONS OF SECTION 271(1)(C) , BECAUSE PENALTY PROCEEDINGS ARE NOT A P ART OF ASSESSMENT PROCEEDINGS HELD, YES 15. THEREFORE, FOLLOWING THE ABOVE, WE FIND THAT AS SESSMENT ORDER CANNOT BE CALLED ERRONEOUS SIMPLY BECAUSE ASSESSING OFFICER HAS FAILED TO INITIATE PENALTY PROCEEDINGS. 16. THE LAST ISSUE IS REGARDING EXAMINATION OF GENE RAL EXPENSES. WE FIND FORCE IN THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT IT WAS POINTED OUT THROUGH A REPLY THAT MISC. EXPEN SES ARE ONLY RS. 10 5,903/-, COPY OF THIS REPLY IS AVAILABLE AT PAGE 64 OF THE PAPER BOOK. IN ANY CASE, THE ASSESSEE HAS AGREED TO CERTAIN ADD ITIONS AND COPY OF THE LETTER IS AVAILABLE AT PAGES 86 & 87 OF THE PAP ER BOOK. SINCE DETAILS OF THE MISC. EXPENSES INCLUDED IT THE GENER AL EXPENSES WERE FURNISHED BEFORE THE ASSESSING OFFICER, THEREFORE, IT CANNOT BE SAID THAT NO ENQUIRY WAS MADE. IN VIEW OF THE ABOVE DIS CUSSION, WE ARE OF THE OPINION THAT ASSESSMENT ORDER IN THIS CASE C ANNOT BE CALLED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E BECAUSE DETAILED ENQUIRES HAVE BEEN MADE BY THE ASSESSING O FFICER, COPY OF WHICH IS AVAILABLE AT PAGES 50 TO 57 ON THE PAPER B OOK AND REPLIES HAVE ALSO BEEN FURNISHED WHICH WE HAVE DISCUSSED AB OVE. IN THESE CIRCUMSTANCES, WE QUASH THE REVISION ORDER PASSED U /S 263. 17. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2013. SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 23 RD AUGUST, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR 11