ITO, Paradeep V. M/s RK Das & Partner, Jagatsinghpur

ITA 6/CTK/2012

• Counselvise Citation: 622114 RSA 2012
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 21-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2012
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 006/CTK/2012 C.O.NO.008/CTK/2012 (C.O.FILED BY ASSESSEE) / ASSESSMENT YEAR 2008 - 09 INCOME - TAX OFFICER, WARD 1, PARADEEP. - - - VERSUS - M/S.R.K.DAS & PARTNER, QR.NO.C/17, B ADAPADIA, PARADEEP, J.S.PUR PAN: AAHFR 7411 F ( /APPELLANT ) ( / RESPONDENT ) / I.T.A.NO. 97/CTK/2012 / ASSESSMENT YEAR 2008 - 09 M/S.R.K.DAS & PARTNER, QR.NO.C/17, BADAPADIA, PARADEEP, J.S.PUR PAN: AAHFR 741 1 F - - - VERSUS - INCOME - TAX OFFICER, WARD 1, PARADEEP. ( /APPELLANT ) ( / RESPONDENT ) FOR THE ASSESSEE : S.MISHRA, AR FOR THE DEPARTMENT: SHRI A.BHATTACHARJEE, DR / DATE OF HEARING: 21.08.2012 / DAT E OF PRONOUNCEMENT: 31.08.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THE REVENUE AS WELL AS THE ASSESSEE HAVE FILED APPEALS AGAINST THE ORDER DT. 24.10. 2011 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEA R 2008 - 09. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION ON THE APPEAL OF THE REVENUE. 2. THE ASSESSEE IS A CIVIL CONTRACTOR. IN THE ASSESSMENT MADE U/S.143(3), THE ASSESSING OFFICER MADE ADDITION OF 35,94,110 U/S.40 ( A)(IA) AND U/S.40A(3) ON THE FINDING THA T THE ASSESSEE HAS NOT DEDUCTED TDS ON THE LABOR PAYMENT AS REQUIRED U/S.194C OF THE I.T.ACT,1961 AND ALSO THE I.T.A.NO. 006/CTK/2012 C.O.NO.008/CTK/2012 I.T.A.NO. 97/CTK/2012 2 ASSESSEE HAVING BEEN CONTRAVENED THE PROVISIONS OF SECTION 40A(3) MAKING CASH PAYMENTS EXCEEDING 20,000. HE FURTHER MADE ADDITION OF 28,78,085 U/S.40A(3), CLAIMED IN THE P & L ACCOUNT ON ACCOUNT OF PURCHASE OF MATERIALS ON THE GROUND THAT NO EVIDENCE COULD BE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE MODES OF PAYMENTS I.E., BY CASH OR BY ACCOUNT PAYEE CHEQUE SINCE THE INDIVIDUAL PURCHASE BILLS E XCEED 20,000 EACH. HE ALSO DISALLOWED THE HIRE CHARGES OF 98,235 U/S.40(A)(IA) THE ASSESSEE HAVING NOT DEDUCTED TAX AT SOURCE AS REQUIRED U/S.194C. THE ASSESSING OFFICER FURTHER MADE ADDITION OF 2,00,000 U/S.68 AND 13,737 WAS ADDED OUT OF CURRENT LIABILITIE S. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO HOWEVER ESTIMATED THE NET INCOME AT 10% OF THE GROSS CONTRACT RECEIPT NET OF DEPRECIATION AND RELYING ON THE DECISION IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT (232 ITR 776), HE HELD WHEN SUCH AN ESTIMATED IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U/S.29 AND IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO U/S.29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. ACCORDI NGLY, HE DELETED THE OTHER ADDITIONS/DISALLOWANCE MADE U/S.40(A)(IA) AND 40A(3) AND THE DIFFERENTIAL CURRENT LIABILITY. HE HOWEVER, CONFIRMED THE ADDITION OF 2 LAKHS MADE U/S.68. 4. T HE REVENUE IN ITS APPEAL HAS DISPUTED THE DELETION OF THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER DIFFERENT HEADS AS STATED EARLIER AND ALSO DISPUTED THE DIRECTION OF THE LEARNED CIT(A) FOR ESTIMATING THE NET PROFIT @10% OF THE GROSS CONTRACT RECEIPT, NET OF DEPRECIATION. WHEREAS IN THE APPEAL FILED BY THE ASSESSEE, THE LEARNED COUNSEL HAS DISPUTED THE DETERMINATION OF PROFIT @10% OF THE GROSS RECEIPT, WHICH ACCORDING TO HIM, IS EXCESSIVE THE ASSESSEE BEING A CIVIL CONTRACTOR. THE ASSESSEE ALSO AGITATES I.T.A.NO. 006/CTK/2012 C.O.NO.008/CTK/2012 I.T.A.NO. 97/CTK/2012 3 THE CONFIRMATION OF THE ADDITION MADE U/S.68 . IN THE CROSS OBJECTION, THE ASSESSEE HAS SU PPORTED THE DELETION OF ADDITIONS MADE BY THE AO BUT DISPUTED ON OTHER ISSUE S ON ESTIMATION @10% AND CONFIRMATION OF THE ADDITION OF 2 LAKHS U/S.68 AS AS HAS BEEN RAISED IN ITS APPEAL . 5. THE LEARNED DR SUPPORTED THE IMPUGNED ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE FINANCIAL STATEMENTS WERE PERUSED BY THE ASSESSING OFFICER AND THERE WAS NO REASON FOR HIM TO ISOLATE THE DISALLOWANCE OF EXPENDITURES CLAIMED AS LA BOUR PAYMENT AND PURCHASE OF MATERIAL ON BEHALF OF THE CONTRACTEE . THE LEARNED CIT(A) THEREFORE RIGHTLY RESORTED TO ESTIMATION OF INCOME FOLLOWING THE VARIOUS JUDICIAL PRONOUNCEMENTS IN HIS ORDERS. HE ALSO RELIED ON THE DECIS IO N OF THIS TRIBUNAL IN THE CAS E OF INCOME - TAX OFFICER V. NITYANANDA SWAIN FOR THE ASSESSMENT YEAR 2008 - 09 IN ITA NOS.491/CTK/2011, C.O.NO.35/CTK/2011 AND ITA NO.529/CTK/2011 DISPOSED OF VIDE CONSOLIDATED ORDER DT.22.3.2012 WHEN THE REVENUE WAS ALSO IN APPEAL FOR THE ASSESSMENT YEAR 200 8 - 09 WHICH WAS RIGHTLY CONSIDERED THAT THE EXPENSES DISALLOWED U/S.40(A)(IA) AND 40A(3) COULD NOT BE CONSIDERED SIMULTANEOUSLY INSOFAR AS THE FACTS OF THE ASSESSEES CASE RESULTED IN TAXATION OF INCOME ON THE BASIS OF GROSS RECEIPTS. HOWEVER, HE PRAYED THA T THE ESTIMATION OF PROFIT AT 10% OF THE GROSS RECEIPTS NET OF DEPRECIATION WAS UNHEARD OF IN CASE OF CIVIL CONTRACTOR WHO SUPPLIES MATERIALS ALSO COULD NOT MAKE PROFIT ON SUPPLY OF MATERIAL HIGHER THAN CONTRACTED. HE PRAYED THAT 8% OF THE GROSS RECEIPTS N ET DEPRECIATION MAY KINDLY BE DIRECTED TO BE ADOPTED FOR THE PURPOSE OF ESTIMATION OF INCOME OF THE ASSESSEE ON THE LEARNED CIT(A) RIGHTLY DELETING THE ADDITIONS MADE SEPARATELY BEING DISALLOWANCE U/S.40(A)(IA) AND 40A(3) AND OUT OF CURRENT LIABILITIES. HO WEVER, HE PRAYED THAT THE CAPITAL CONTRIBUTED BY THE PARTNERS I.T.A.NO. 006/CTK/2012 C.O.NO.008/CTK/2012 I.T.A.NO. 97/CTK/2012 4 DURING THE YEAR COULD NOT BE DISALLOWED U/S.68 IN VIEW OF THE DECISION IN THE CASE OF CIT V . LOVELY EXPORTS P LTD [216 CTR (SC) 195] . HE THEREFORE, PRAYED TO ALLOW THE APPEAL AS WELL AS THE CROS S OBJECTION FILED BY THE ASSESSEE AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL. THERE IS NO DISPUTE TO THE FACT THAT TH E ASSESSEE PRODUCED BANK STATEMENTS, LEDGER AND SOME OTHER DETAILS AS CALLED FOR BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSEE DID NOT PRODUCE THE CASH BOOK. THE ASSESSEE DOES NOT MAINTAIN CASH BOOK WHICH IS EVIDENT FROM PARA 9(B) OF THE STATEMENT OF PAR TICULARS FURNISHED BY THE ASSESSEE U/S.44AB I.E., FORM 3CD, AS OBSERVED BY THE LEARNED CIT(A) IN HIS ORDER. THE LEARNED CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED MUSTER ROLL FOR PAYMENT OF LABOUR CHARGES. IT ALSO COULD NOT PRODUCE BEFORE THE ASSESSING OFFICER BILLS, VOUCHERS AND LEDGER TOWARDS PURCHASE OF MATERIALS AND ALSO COULD NOT PRODUCE BEFORE THE ASSESSING OFFICER REGISTRATION NUMBERS OF VEHICLES ENGAGED. IN SUCH A SITUATION, WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY RESORTED TO ESTIMATION OF INCOME AND O NCE THE PROFIT IS ESTIMATED AT A CERTAIN PERCENTAGE THEREBY ALLOWING THE BALANCE AS EXPENSES, FURTHER DISALLOWANCE OF EXPENSES IS NOT JUSTIFIED IN VIEW OF THE DECISION RENDERED IN THE CASE OF T .O.ABRAHAM & CO. V. DY.CIT [2010)325 ITR 201], REFERRED TO BY THE LEARNED CIT(A) IN THE INSTANT CASE . IN VIEW THEREOF, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITIONS AS STATED ABOVE EXCEPT THE ADDITION MADE U/S.68. FOR THE REASO NS STATED ABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND AS SUCH, WE DISMISS THE SAME. I.T.A.NO. 006/CTK/2012 C.O.NO.008/CTK/2012 I.T.A.NO. 97/CTK/2012 5 7 . NOW ADVERTING TO THE APPEAL AND ALSO THE CROSS OBJECTION FILED BY THE ASSESSEE, THE FIRST DISPUTE IS REGARDING ESTIMATION OF PROFIT BY THE LEARNED CIT(A) @10% OF THE GROSS RECEIPTS. THE LEARNED CIT(A) HAS HELD SO, AS IT APPEARS, IN THE LIGHT OF THE DECISION OF HONBLE KERALA HIGH COURT REFERRED TO BY HIM IN HIS ORDER. BUT WE FIND THAT IN THAT CASE, THE ASSESSEE WAS ENGAGED AS A CONTRACTOR IN THE CONS TRUCTION OF DAMS AND LAYING OF PIPE LINES, ETC., AND AS SUCH, ESTIMATION OF PROFIT @10% NET DEPRECIATION IN THE CASE ON HAND , IN OUR CONSIDERED VIEW, APPEARS TO BE HIGH AS RIGHTLY CONTENDED BY THE LEARNED AR OF THE ASSESSEE , WHICH WE REASONABLY REDUCE TO 8 % (EIGHT PER CENT) NET DEPRECIATION. ON IDENTICAL FACTS, A SIMILAR VIEW HAS ALSO BEEN TAKEN BY THIS TRIBUNAL IN THE CASE OF NITYANANDA SWAIN (SUPRA), RELIED ON BY THE LEARNED AR OF THE ASSESSEE. IN VIEW OF THE ABOVE, BY MODIFYING THE IMPUGNED ORDER OF THE LEARNED CIT(A) WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEE BY ADOPTING 8%(EIGHT PER CENT) NET DEPRECIATION. 8 . AS TO THE CONFIRMATION OF ADDITION OF 2 LAKHS MADE BY THE ASSESSING OFFICER U/S.68, WE UPHOLD THE SAME BECAUSE THE ASSESSEE WHILE DISCLOSING THE NAME OF FRIENDS AND RELATIVES OF THE PARTNERS AS CASH CREDITORS, THE ASSESSEE ITSELF DID NOT KNOW WHETHER THE CASH WAS CONTRIBUTED BY THE PARTNERS T HEMSELVES OR BY THE FRIENDS AND RELATIVES AS DISCLOSED TO THE AO . FURTHER THE PARTNERS DID NOT APPEAR WHEN THEY WERE SPECIFICALLY CALLED FOR TAKING THEIR STATEMENTS BY THE ASSESSING OFFICER. NOTHING COULD BE PRODUCED BY THE LEARNED AR OF THE ASSESSEE EITHE R BEFORE THE LEARNED CIT(A) OR BEFORE US SUBSTANTIATING THE CLAIM OF THE ASSESSEE IN THIS REGARD. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE NO HESITATION TO UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) CONFIRMING THE ADDITI ON OF 2 LAKHS MADE U/S.68 AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL AS WELL AS THE CROSS OBJECTION IN THIS REGARD. I.T.A.NO. 006/CTK/2012 C.O.NO.008/CTK/2012 I.T.A.NO. 97/CTK/2012 6 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE AND ALSO THE CROSS OBJECTION FILE D BY IT ARE PARTLY ALLOWED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 31.08.2012 - COPY OF THE ORDER FORWARDED TO: 1 . THE ASSESSEE : M/S.R.K.DAS & PARTNER, QR.NO.C/17, BADAPADIA, PARADEEP, J.S.PUR PAN: AAHFR 7411 F 2 THE DEPARTMENT : INCOME - TAX OFFICER, WARD 1, P ARADEEP. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 27.08.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.08.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 31.08.2012 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.08.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FI LE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENI OR.PRIVATE SECRETARY.