Shri Dinesh Kumar Sharma, Ujjain V. The Addl. CIT Range-1, Ujjain

ITA 60/IND/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82664 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Rejection of books of accounts; Business income; Depreciation
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI MUKU L KR. SHRAWAT, JUDICIAL MEMBER PAN NO. AGDPS8579F ITA NO. 60/IND/2014 A.Y. : 2010-11. SHRI DINESH KUMAR SHARMA, 65, SUDAMA NAGAR, UJJAIN VS. ADDL. CIT, RANGE I, UJJAIN (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.S.DESHPANDE, C.A . REVENUE BY : SHRI R.A.VERMA, SR. DR / // / DATE OF HEARING :15.09.2014 /DATE OF PRONOUNCEMENT: 19.09.2014 / O R D E R PER P.K.BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), UJJAIN DATED 31.10.2013 BY TAKING THE FO LLOWING EFFECTIVE GROUNDS OF APPEAL :- 1. THE LD. CIT(A), UJJAIN, HAS ERRED IN ESTIMATING INCOME OF THE ASSESSEE @ 22% IGNORING THE VERDICT OF HON'B LE I.T.A.T. GIVEN IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 @ 8%. SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 2 2. THE LD. CIT(A), UJJAIN HAS TOTALLY MISCALCULATED THE INDIRECT INCOME AND CALCULATED THE PERCENTAGE. THE HON'BLE TRIBUNAL HAS GIVEN DIRECTION TO TAKE 8 % OF THE GROSS RECEIPTS AND AS SUCH THE ADDITIONS SUSTAINED BY THE LD. CIT(A), UJJAIN, IS TOTALLY BAD IN LAW. 3. THE ADDITION SUSTAINED BY THE LD. CIT(A), UJJAI N, AT RS. 1,16,50,375/- BE DELETED. 4. THE LD. CIT(A), UJJAIN HAS ERRED IN CONFIRMING T HE ADDITION OF RS. 1,74,892/- MADE BY THE ASSESSING OFFICER LD. ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE ON INTEREST FREE ADVANCE. 2. GROUND NOS. 1 TO 3 RELATE TO THE SAME ISSUE REGARDI NG THE ESTIMATION OF THE INCOME. 3. THE FACTS RELATING TO THESE GROUNDS ARE THAT THE AS SESSING OFFICER NOTED DURING THE COURSE OF ASSESSMENT THAT THERE HAD BEEN INCREASE IN THE LABOUR PAYMENTS DURING THE YEA R IGNORING THE FACT THAT IN PERCENTAGE-WISE THERE WAS FALL IN THE RATIO OF THE LABOUR EXPENSES AS COMPARED TO EARLIER YEARS AND TH E ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSES SEE AS WAS IN THE EARLIER YEARS. AFTER REJECTING THE HE MADE FOL LOWING ADDITIONS IN THE INCOME OF THE ASSESSEE :- SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 3 1. LABOUR EXPENSES RS. 76,76,232/ - 2. INTEREST AND INTEREST FREE ADVANCES RS. 1,74,892/ - 3. VEHICLE MAINTENANCE AND REPAIR RS. 60,850/ - 4. BITUMEN EMULSION & OIL RS.1,50,206/ - 5. SALARY RS.1,50,000/ - 6. TRANSPORT CHARGES RS.1,51,190/ - 4. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) WORKED OUT THE AVERAGE RATE OF COMBINED PROFIT FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10, WHICH COMES TO 22 % ON THE TOTAL TURNOVER AND, ACCORDINGLY, HE DIRECTED TH E ASSESSING OFFICER TO CALCULATE PROFIT AT 1,16,50,375/- @ 22% OF RS. 5,29,56,250/- AS THE PROFIT OF THE BUSINESS AS AGAI NST RS. 1,25,34,315/- TAKEN BY THE ASSESSING OFFICER AFTER MAKING THE VARIOUS ADDITIONS AND, THUS, DELETED THE EXCESS LAB OUR AND OTHER EXPENSES. THUS, THE GROUND OF THE ASSESSEE WAS PART LY ALLOWED. 5. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE VEHEM ENTLY CONTENDED THAT THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 AND IN THIS REGARD, OUR ATTENTION WAS DRAWN TOWARDS PAGE 72 OF THE PAPER BOOK IN WHICH THIS TRI BUNAL VIDE ORDER DATED 10.4.2013 HELD THAT IN CASE OF CIVIL CO NTRACTOR SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 4 CONTRACTOR, EVEN IF THE ASSESSEE DID NOT MAINTAIN P ROPER BOOKS OF ACCOUNTS, THE RETURN CAN BE FILED BY TAKING NET PRO FIT RATE AT 8 % ON THE CONTRACT RECEIPTS, WHERE SUCH CONTRACT RECEI PTS DO NOT EXCEED THE LIMITS SPECIFIED U/S 44AD OF THE INCOME- TAX ACT, 1961. THE TRIBUNAL IN THIS ORDER, ACCORDINGLY, DIRECTED T HE ASSESSING OFFICER TO COMPUTE THE NET PROFIT FROM CIVIL CONTRA CT AT 8 % OF THE GROSS RECEIPTS. THE TRIBUNAL ALSO OBSERVED THAT, HO WEVER, NO SEPARATE ADDITION OR DISALLOWANCE IS WARRANTED AND, THEREFORE, SET-ASIDE THE ADDITION/DISALLOWANCE ON ACCOUNT OF T HE LABOUR PAYMENTS, VEHICLE RUNNING EXPENSES, EXPENSES ON BIT UMEN, OIL ETC. HE CONTENDED THAT THE LD. CIT(A) WAS NOT CORRE CT IN APPRECIATING THE FINDING OF THE TRIBUNAL. THE TRIBU NAL IN THE PRECEDING YEAR HAS CLEARLY DIRECTED TO COMPUTE THE NET PROFIT @ 8 % OF THE GROSS RECEIPTS. THE LD. CIT(A) HAS APPLIED 8 % OF THE RECEIPTS FROM CIVIL CONTACT AND ADDED THEREON. THE INDIRECT INCOME OF THE ASSESSEE AND ON THAT BASIS, HE ANALYZ ED THE DATA FOR THE ASSESSMENT YEAR 2008-09. HE TOOK THE VIEW T HAT DURING THE ASSESSMENT YEAR 2008-09 BY APPLYING 8 % ON TOTA L TURNOVER OF RS. 2.22 CRORES, THE NET PROFIT ON WHICH IS WORK ED OUT AT RS. 17.78 LAKHS AND SINCE THE ASSESSEE HAS INDIRECT INC OME OF RS. 35,98,970/-, THE TOTAL INCOME FROM THE OTHER BUSINE SS COULD BE SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 5 RS. 53,77,279/-. THIS WILL GIVE THE COMBINED PROFIT TOT TOTAL TURNOVER OF 24 %. SIMILARLY, THE LD. CIT(A) WORKED OUT THE COMBINED PROFIT TO THE TOTAL TURNOVER FOR THE ASSES SMENT YEAR 2007-09 AND 2009-10 AS WELL AS FOR THE RELEVANT YEA R AND TOOK THE AVERAGE OF THE PERCENTAGE OF THE COMBINED PROFI T TO TURNOVER FOR ALL THE FOUR YEARS I.E. FOR ASSESSMENT YEAR 200 7-08 TO 2010-11, THE AVERAGE WAS WORKED OUT BY HIM @ 22 %. THIS, HE APPLIED TO THE TOTAL TURNOVER OF RS. 5,29,56,250/-. HE REFERRE D TO THE INDIRECT INCOME DURING THE YEAR AMOUNTING TO ONLY RS. 11,25, 187/-, WHICH INCLUDES DISCOUNT OF RS. 2.30 LAKHS, INTEREST ON FDR AT RS. 7.9 LAKHS AND ROLLER RENT AT RS. 1.01 LAKHS. HE CON TENDED THAT IN CASE THE ROLLER RENT IS BEING ASSESSED SEPARATELY, THE ASSESSEE IS ENTITLED FOR THE DEPRECIATION THEREON. THE ROLLER R ENT IS THE INCOME WHICH IS FROM THE BUSINESS OF CIVIL CONSTRUCTION WH EN THE ROLLER IS FREE WITH THE ASSESSEE, IT IS LYING IDLE, THE ASSES SEE LET IT OUT. IT HAS NO SEPARATE BUSINESS FOR SEPARATE SOURCE OF INC OME. 6. SO FAR AS THE INTEREST ON FDR IS CONCERNED, THE FDR HAS BEEN HAS BEEN MADE BY THE ASSESSEE ONLY TO PROVIDE THE BANK GUARANTEE TO THE CONTRACTOR IN ORDER TO ACQUIRE THE CONTRACT WORK. THE INTEREST INCOME HAS BEEN ASSESSED AS BUSINESS I NCOME AND THIS IS THE SETTLED LAW THAT THE INTEREST INCOME SO EARNED IS THE SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 6 BUSINESS INCOME IN VIEW OF THE SETTLED LAW OF THE H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. GOVINDA CHOUDH ARY & SONS, (1993) 203 ITR 881. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS :- (I) CIT VS. CHINA NACHIMUTHU CONSTRUCTIONS, (2008) 297 ITR 70 (KAR). (II) SHRI RAM JHANWAR LAL VS. ITO, (2010) 321 ITR 400 (RAJ). (III) SHYAM BIHARI VS. CIT, (2012) 345 ITR 283 (P AT). (IV) CIT VS. J.V.L. BUILDERS PRIVATE LIMITED, 323 CTR (MAD.) 303. 7. IN VIEW OF THE AFORESAID DECISIONS, IT WAS CONTENDE D THAT WHILE ESTIMATING THE PROFIT U/S 44AD, THESE INTERES TS SHOULD FORM PART OF THE RECEIPTS FROM THE CIVIL CONSTRUCTION AN D THE 8 % PROFIT SHOULD BE ESTIMATED ON THESE AMOUNTS ALSO. 8. THE LD. SENIOR DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A) AND CONTENDED THAT THE LD. LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) WAS FAIR ENOUG H TO COMPUTE THE COMBINED PROFIT AND ESTIMATE THE PROFIT BY TAKING THE AVERAGE OF THE COMBINED PROFIT. OUR ATTENTION W AS DRAWN TOWARDS PARA 3.5 OF THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH ORDERS OF THE TAX AUT HORITIES BELOW. WE NOTED THAT THIS TRIBUNAL IN THE ASSESSMEN T YEAR 2008- SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 7 09 HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE NE T PROFIT FROM THE CIVIL CONTRACT @ 8% VIDE ITS ORDER DATED 10 TH APRIL, 2013. THE RELEVANT FINDING OF THE TRIBUNAL ARE GIVEN AS UNDER :- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEE IS A CIVIL CONT RACTOR. BY FINDING DEFECTS IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER HAS MADE VARIOUS DISALLOWANCE. IN CASE OF CIVIL CONTRACTOR EVEN IF THE ASSESSEE DID N OT MAINTAIN PROPER BOOKS OF ACCOUNTS, THE RETURN CAN B E FILED BY TAKING NET PROFIT RATE AT 8% ON THE GROSS CONTRACT RECEIPTS, WHERE SUCH CONTRACT RECEIPTS DO NOT EXCEE D THE LIMITS SPECIFIED U/S 44AD OF INCOME-TAX ACT, 1961. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COM PUTE NET PROFIT FROM CIVIL CONTRACT AT 8 % OF GROSS RECE IPTS. HOWEVER, NO SEPARATE ADDITION OR DISALLOWANCE IS WARRANTED. ACCORDINGLY, THE ADDITION/DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LABOUR PAYMENTS, VEHICLE RUNNING EXPENSES, EXPENSES ON BITUMEN, OIL ETC. ARE SET-ASIDE. 10. ON THE BASIS OF THESE FINDINGS OF THE TRIBUNAL, IT IS APPARENT THAT THE NET PROFIT HAVE TO BE ESTIMATED @ 8% ON THE GROSS CONTRACT RECEIPTS. THE DECISION OF THE TRIBUN AL IN THE CASE OF THE ASSESSEE IS BINDING ON US. THERE IS NO DISPU TE THAT THE RECEIPT FROM THE CONTRACT BUSINESS WAS RS. 5,39,01, 543/-. THE DISPUTE RELATES ONLY TO THE ESTIMATION OF THE PROFI T IN RESPECT OF INDIRECT INCOME. THE INDIRECT INCOME IS RS. 11,25,1 87/-. THIS INCLUDES AS PER PAGE 36 OF THE PAPER BOOK DISCOUNT IS RS. 2,30,230/-, INTEREST ON FDR IS RS. 793657/-, ROLLER RENT IS RS. SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 8 1,01,300/-. DISCOUNT SINCE RELATES TO THE PURCHASE OF THE ITEM, WHICH HAS BEEN CONSUMED IN THE CONTRACT BUSINESS, T HEREFORE, IN OUR OPINION, THIS WILL FORM PART OF THE CONTRACT RE CEIPTS. SO FAR AS THE INTEREST RECEIVED ON FDR IS CONCERNED, WE NOTED THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE LATEST DECIS ION OF HON'BLE PATNA HIGH COURT IN THE CASE OF SHAYM BIHARI, (2012 ) 345 ITR 283 (PATNA), IN WHICH UNDER PARAS, THE HON'BLE HIGH COURT FOLLOWING THE DECISION OF HON'BLE KARNATAKA HIGH CO URT IN THE CASE OF CIT VS. CHINNA NACHIMUTHU CONSTRUCTION, (20 08) 297 ITR 70, TOOK THE VIEW THAT THE INTEREST ACCRUED ON SECU RITY DEPOSIT FOR THE PURPOSE SECURING THE CONTRACT WORK WILL BE PART OF THE BUSINESS INCOME OF THE CIVIL CONTRACTOR. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT ON THESE T WO ITEMS ALSO @ 8% ALONGWITH THE CONTRACT RECEIPTS OF RS. 5,39,01,5 43/-. ALTHOUGH THE LD. AR VEHEMENTLY CLAIMED BEFORE US TH AT THE ROLLER RENT AMOUNTING TO RS. 1,01,300/- IS ALSO INCIDENTAL TO THE BUSINESS INCOME EARNED BY HIM AS A CIVIL CONTRACTOR , BUT WE DO NOT AGREE WITH THE LD. AR AND WE, ACCORDINGLY, DIR ECT THE ASSESSING OFFICER TO MAKE THE ADDITION OF THE SAID INCOME SEPARATELY AFTER ESTIMATING THE NET PROFIT @ 8% ON THE CONTRACT RECEIPT OF RS. 5,39,01,543/- AND ON DISCOUNT AS WEL L AS INTEREST SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 9 RECEIPT ON FDR. TO THAT EXTENT, THE ADDITION IS SUS TAINED. THUS, THESE GROUND NOS 1 TO 3 TAKEN BY THE ASSESSEE ARE P ARTLY ALLOWED. 11. GROUND NO.4 RELATES TO THE ADDITION OF RS. 1,74,894 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE DIS ALLOWANCE ON INTEREST FREE ADVANCES. 12. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING TH E MATERIAL ON RECORD WITH THE ORDERS OF THE TAX AUTHO RITIES BELOW, WE NOTED THAT THIS DISALLOWANCE WAS MADE BY THE ASS ESSING OFFICER UNDER PARA 2 TO 2.4 AMOUNTING TO RS. 174892 /- AND FORMS PART OF THE ASSESSED INCOME AT RS. 1,25,34,315/-. T HE CIT(A) WHILE ESTIMATING THE INCOME OF THE ASSESSEE @ 22 % OF RS. 5,29,56,250/- SUBSTITUTED THIS INCOME AGAINST THE A SSESSED INCOME OF RS. 1,25,34,315/- WHICH INCLUDES THE ADDI TION OF RS. 1,74,892/-, BUT AGAIN HE CONFIRMED THE SAID ADDITIO N UNDER PARA 4 IGNORING THE FACT THAT THE FINDING GIVEN BY HIM U NDER PARA 3.8 OF ITS ORDER HAS ALREADY CONSIDERED THE IMPACT OF T HIS ADDITION OF RS. 1,74,892/- MADE BY THE ASSESSING OFFICER. SINCE THIS ADDITION HAS ALREADY BEEN CONSIDERED WHILE ESTIMATING THE PR OFIT OF THE CIT(A) @ 22 % AND REDUCED BY US @ 8% IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 44AD AND THE ORDER OF THIS TR IBUNAL FOR THE ASSESSMENT YEAR 2008-09, THE FINDING OF WHICH ARE G IVEN WHILE SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 10 DISPOSING OF GROUND NOS. 1 TO 3 IN THE PRECEDING PA RAGRAPHS, WE DELETE THIS DISALLOWANCE AS, IN OUR OPINION, THIS D ISALLOWANCE CANNOT BE SEPARATELY MADE. THUS, THIS GROUND IS ALL OWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (MUKUL KR. SHRAWAT) (P. K. BANSAL) JUDICIAL MEMBER ACCOUNTANT M EMBER INDORE; DATED : 19/09/2014 CPU*SPS / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' # # ( / CONCERNED CIT 4. # # ( ( ) / THE CIT(A), INDORE 5. +,# &' , # # &' , -.% / DR, ITAT, INDORE 6. ,/0 1 / GUARD FILE. / BY ORDER, -# -# -# -# $2 $2 $2 $2 (ASSTT.REGISTRAR) ITAT, IN DORE SHRI DINESH KUMAR SHARMA, UJJAIN I.T.A.NO. 60/IND/2013 A.Y.2010-11 11 1. DATE OF DICTATION- 19.09.2014 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19..09.2014 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 D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.0 9.2014 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER