The Asstt. Commissioner of Income-tax, Srinagar V. M/s. Mohammad Akram Sheikh & Co, Srinagar

ITA 599/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0489 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation; Opportunity of being heard
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.558(ASR)/2014 ASSESSMENT YEAR: 2010-11 M/S MOHAMMAD AKRAM SHEIKH AND CO., CHECKPORA CHADOORA BUDGAM KASHMIR. PAN: AAIFM-5459P VS. ITO, WARD-3(1), SRINAGAR. (APPELLANT) (RESPONDENT) I.T.A NO.599(ASR)/201 4 ASSESSMENT YEAR: 2010-11 ITO, WARD-3(1), SRINAGAR. VS. M/S MOHAMMAD AKRAM SHEIKH AND CO., CHECKPORA CHADOORA BUDGAM KASHMIR. PAN: AAIFM-5459P (APPELLANT) (RESPONDENT) APPELLANT BY: WRITTEN SUBMISSIONS. RESPONDENT BY: SH. UMESH TAKYAR (DR) DATE OF HEARING: 19.05.2016 DATE OF PRONO UNCEMENT: 25.07.2016 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 0 7.07.2014 FOR ASST. YEAR: 2010-11. 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE AS WELL AS BY REVENUE ARE REPRODUCED BELOW. ITA NOS.5 58 & 599 (ASR)/2014 ASST. YEAR: 2010-11 2 THE FOLLOWING GROUNDS TAKEN BY ASSESSEE 1). THAT THE LD. CIT(A) JAMMU HAS ERRED IN BOTH FA CTS & LAWS BY UPHOLDING THE NET PROFIT RATE OF 10% ON GROSS REVEN UE WITHOUT ANY LOGICAL BASIS, WHEN THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNTS. 2) THAT THE LD. CIT(A) JAMMU HAS ERRED IN BOTH FACT S & LAWS BY DEEMING THE GROSS RECEIPTS OF THE ASSESSEE AS RS.2,58,38,77 8.00 AGAINST THE DECLARED RECEIPTS OF RS.190,05,939.00 WITHOUT CONSI DERING ASSESSEE EXPLANATIONS. 3) THE UPHOLDING OF THE ADDITIONS ARE ILLEGAL & ARB ITRARY. WHEREAS THE FOLLOWING GROUNDS HAS BEEN TAKEN BY REV ENUE. 1) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT AS THE ASSESSING OFFICER HAS MADE ADDITI ON ON THE GROUND THAT EXTRA CREDIT HAS BEEN FOUND IN THE BANK ACCOUNT OF THE ASSESSEE. 2) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT IN ALLOWING THE SALARY AND INTEREST TO PARTNERS WHEN T HE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY THE ASSESSING OFFICER. 3) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT IN ALLOWING A STATUTORY OF DEPRECIATION FROM THE ESTIM ATED INCOME WHEN THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY THE ASSESSI NG OFFICER . 3. THE BRIEF FACTS OF THE CASE AS NOTED IN ASSESSME NT ORDER ARE THAT ASSESSEE IS A CIVIL CONTRACTOR AND HE FILED HIS RET URN OF INCOME DECLARING NET TAXABLE INCOME OF RS.95,144/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD DECLARED GROSS RECEIPTS OF RS.1,90,05,939/-. THE ASSESSING OFFICER FURTHER NOTED THAT ASSESSEE H AD DEBITED HUGE AMOUNT UNDER THE HEADS PURCHASE OF MATERIAL AND WAGES. THE ASSESSEE WAS REQUIRED TO PRODUCE THE BOOKS OF ACCOU NT IN RESPECT OF THE EXPENSES CLAIM BUT THE ASSESSEE DID NOT PRODUCE BOO KS OF ACCOUNT. ON PERUSAL OF BANK STATEMENTS OF THE ASSESSEE, THE ASS ESSING OFFICER FURTHER OBSERVED THAT THERE WERE CREDITS IN THE BANK ACCOUN T TO THE TUNE OF ITA NOS.5 58 & 599 (ASR)/2014 ASST. YEAR: 2010-11 3 RS.80,98,238/- AND THE ASSESSEE WAS DIRECTED TO EXP LAIN THE SOURCES. IN RESPECT OF WHICH THE ASSESSEE FILED EXPLANATIONS FO R CERTAIN DEPOSITS, HOWEVER, ASSESSING OFFICER ON THE BASIS OF A NOTICE ISSUED U/S 133(6) OF THE ACT TO THE BANK OBTAINED THE NARRATION OF ALL C REDIT ENTRIES AND HELD THAT THERE WAS EXCESS CREDITS TO THE TUNE OF RS.68, 32,839/- WHICH WAS ON ACCOUNT OF RECEIPTS FROM VARIOUS DEPARTMENTS. THE A SSESSING OFFICER HELD THAT ASSESSEE HAD NOT DECLARED THESE RECEIPTS AS PA RT OF GROSS RECEIPTS AND THEREFORE, HE ENHANCED THE GROSS RECEIPTS BY TH IS AMOUNT BUT SINCE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNT AND RELE VANT VOUCHERS, THE ASSESSING OFFICER ESTIMATED THE INCOME OF ASSESSEE @10% ON ENHANCED GROSS RECEIPTS AFTER REJECTING THE BOOKS OF ACCOUNT . 4. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED APP EAL BEFORE LEARNED CIT(A) AND LEARNED CIT(A) UPHELD THE APPLICATION OF RATE OF 10% OF NET PROFIT ON GROSS RECEIPTS AND ALSO UPHELD THE ADDITI ON ON ACCOUNT OF ENHANCED GROSS RECEIPTS, HOWEVER, HE DIRECTED THE A SSESSING OFFICER TO ALLOW RELIEF ON ACCOUNT OF SALARY AND INTEREST TO P ARTNERS AND ALSO DIRECTED THE ASSESSING OFFICER TO ALLOW CLAIM OF DE PRECATION. 5. AGGRIEVED WITH THE ORDERS, THE BOTH PARTIES ARE IN APPEAL BEFORE US. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE, HOWEVER , ASSESSEE HAD FILED WRITTEN SUBMISSIONS AND HAD REQUESTED THE BEN CH TO DECIDE THE ISSUE ON THE BASIS OF WRITTEN SUBMISSIONS. THEREFOR E, WRITTEN SUBMISSION OF ASSESSEE WERE GONE THROUGH AND LEARNED DR WAS AS KED TO PROCEED WITH HIS ARGUMENTS. ITA NOS.5 58 & 599 (ASR)/2014 ASST. YEAR: 2010-11 4 7. THE LEARNED DR, SUBMITTED THAT SINCE ASSESSEE DI D NOT COOPERATE WITH THE ASSESSING OFFICER, THEREFORE, ASSESSING OF FICER RIGHTLY REJECTED THE BOOKS OF ACCOUNT AND ON THE BASIS OF VARIOUS JU DGMENTS APPLIED NET PROFIT RATE OF 10% OF GROSS RECEIPTS. SIMILARLY, HE ARGUED THAT SINCE THE UNEXPLAINED CREDITS IN THE BANK ACCOUNT WAS RECEIVE D FROM GOVT. DEPARTMENTS, THEREFORE, ASSESSING OFFICER HAD RIGHT LY TREATED THE SAME AS PART OF GROSS RECEIPTS. 8. AS REGARDS THE REVENUES APPEAL, THE LEARNED DR SUBMITTED THAT SINCE THE ASSESSEE DID NOT COOPERATE WITH THE ASSES SING OFFICER AND THE ASSESSMENT WAS COMPLETED U/S 144, THEREFORE, THE LE ARNED CIT(A) SHOULD NOT HAVE ALLOWED RELIEF ON ACCOUNT OF SALARY INTERE ST TO PARTNERS AND DEPRECATION FROM THE ESTIMATED INCOME. 9. IN THE WRITTEN STATEMENTS OF THE ASSESSEE, THE L EARNED AR ARGUED THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTI NG THE BOOKS OF ACCOUNT OF THE ASSESSEE WITHOUT DETECTING MATERIAL DEFECTS IN SUCH BOOKS OF ACCOUNT. IT WAS ALSO PLEADED THAT THE CREDITS IN BA NK ACCOUNT REPRESENTED INTER TRANSFERS AND RECEIPTS RELATING T O EARLIER YEARS, WHICH THE AUTHORITIES BELOW HAS WRONGLY CONSIDERED AS PAR T OF GROSS RECEIPTS. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS NOT PROVIDE D SUFFICIENT OPPORTUNITY TO CLARIFY THE VARIOUS DISCREPANCIES. 10. WE HAVE HEARD THE LEARNED DR AND HAVE GONE THR OUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT WITH RESPEC T TO ENHANCED GROSS RECEIPTS THE ASSESSEE HAD SUBMITTED THAT THESE RECE IPTS WERE RECEIVED ITA NOS.5 58 & 599 (ASR)/2014 ASST. YEAR: 2010-11 5 FROM GOVT. DEPARTMENTS BUT THESE RELATED TO EARLIER YEARS AND THEREFORE, SHOULD NOT HAVE BEEN INCLUDED IN GROSS RECEIPTS. WE FURTHER FIND THAT ASSESSING OFFICER HAD VERIFIED ABOUT THESE CREDITS BY OBTAINING EXPLANATION FOR THESE CREDITS FROM THE BANK. THE BA NK IN HIS STATEMENT HAD SUBMITTED THAT THESE CREDITS RELATED TO RECEIPT S FROM GOVT. DEPARTMENT BUT THE CONTENTION OF ASSESSEE THAT THES E BELONGED TO EARLIER YEARS HAS NOT BEEN FULLY VERIFIED, THEREFORE, WE DE EM IT APPROPRIATE TO REMIT THE ISSUE BACK TO THE OFFICE OF ASSESSING OFF ICER, WHO ON THE BASIS OF RECONCILIATION TO BE FURNISHED BY ASSESSEE SHOUL D EXAMINE THE NATURE OF THESE CREDITS AND IF THE RECEIPTS BELONG TO EARL IER YEARS SHOULD DELETE THE SAME AND IF FOUND OTHERWISE HE SHOULD TREAT THE SAME AS PER LAW. 11. AS REGARDS THE ISSUE OF APPLICATION OF 10% RATE TO GROSS RECEIPTS, WE FIND THAT THE AUTHORITIES BELOW HAS APPLIED FLAT RA TE OF 10% WITHOUT EXAMINING PAST HISTORY OF THE ASSESSEE AND WITHOUT EXAMINING THE VARIOUS PARAMETERS SET OUT BY HONBLE PUNJAB & HARY ANA HIGH COURT IN THE CASE OF TELELINKS VS. CIT, BATHINDA (ITA NO.2 69 OF 2014). THE HONBLE COURT HAS LAID DOWN THE FOLLOWING PARAMETER S FOR ESTIMATION OF INCOME OF ASSESSEE IN THE CASE OF REJECTION OF BOOK S OF ACCOUNT. (I) PAST TAX HISTORY OF THE ASSESSEE. (II) ASSESSMENT ORDERS PASSED BY AND ACCEPTE D BY THE DEPARTMENT. (III) THE NATURE OF ASSESSEES BUSINESS. (IV) AN APPRAISAL OF THE VALUE OF THE CONTRA CT. (V) PREVAILING ECONOMIC CONDITIONS VIS--VIS THE ASSESSEES BUSINESS. (VI) THE PRICE OF RAW MATERIAL AND LABOURS E TC. ITA NOS.5 58 & 599 (ASR)/2014 ASST. YEAR: 2010-11 6 (VII) THE RISE IN PRICE INDEX AS NOTIFIED BY THE CENTRAL GOVERNMENT FROM TIME TO TIME. (VIII) ASSESSMENTS OF OTHER ASSESSEES ENGAGE D IN SIMILAR BUSINESS. THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THIS ISS UE TO THE OFFICE OF ASSESSING OFFICER WHO SHOULD DECIDE THE APPLICATION OF RATE KEEPING IN THE VIEW THE ABOVE FACTORS. 12. AS REGARDS THE APPEAL FILED BY REVENUE, SINCE T HE MATTER IS INTERCONNECTED THE APPEAL OF REVENUE IS ALSO REMITT ED BACK TO THE OFFICE OF ASSESSING OFFICER WHO SHOULD DECIDE THE ISSUE AF RESH KEEPING IN VIEW THE VARIOUS PROVISIONS OF ACT. NEEDLESS TO SAY THAT ASSESSEE WILL BE PROVIDED SUFFICIENT OPPORTUNITY OF BEING HEARD. 13. IN VIEW OF THE ABOVE, THE APPEALS FIELD BY ASSE SSEE AS WELL AS BY REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 .07.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED:25.07.2016. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER