ITO, New Delhi V. M/s. Madhav Propcon Pvt. Ltd., New Delhi

ITA 6011/DEL/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8918 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P DAM KANUNJNA
• Keywords: Rejection of books of accounts; Additional evidence; Accommodation entries
• Section: 44AD; 143(3)

Judgement Text

ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ENEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 6011/DEL/2012 ASSTT.YEAR: 2008-09 INCOME TAX OFFICER, VS MADHAV PROPCON P VT. LTD. WARD-6(1), H-54, 2 ND FLOOR, DDA FLATS, NEW DELHI. ASHOK VIHAR, PHASE-I, NEW DELHI-110052 (PAN: AAFCM5920R) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJIV SAXENA, ADV. MISS SUMANGLA SAXENA, ADV. RESPONDENT BY: SHRI P. DAM KANUNJNA , SR.DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THE ABOVE APPEAL HAS BEEN FILED BY THE REVENUE AGAI NST THE ORDER OF CIT(A)-IX, NEW DELHI DATED 8.8.2012 IN APPEAL NO. 151/10-11 FOR AY 2008- 09. THE SOLE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTI NG THE A.O. TO ADOPT THE INCOME OF ASSESSEE AT 2.24% OF GR OSS RECEIPTS BY ADMITTING ADDITIONAL EVIDENCES IN THE F ORM OF DETAILS OF COMPARABLE CASES WITHOUT PROVIDING ANY O PPORTUNITY OF REBUTTAL TO THE A.O. UNDER RULE 46A? ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 2 2. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT WORK DU RING THE YEAR UNDER CONSIDERATION. THE ASSESSEE COMPANY FILED RETURN O F INCOME ON 25.09.2008 DECLARING AN INCOME OF RS.1211/- AND THE SAME WAS P ROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUT INY AND STATUTORY NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND DULY SERVED UPON T HE ASSESSEE. THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND COMPLETED ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 15.12.2010 AT AN INCOME OF RS.3,74,17,210 MAKING AN ADDITION OF RS.3,74,16,000 DISALLOWING 75 % OF THE LAND DEVELOPMENT EXPENSES CLAIMED BY THE ASSESSEE AS PER PROFIT AND LOSS ACCOUNT. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED BY PASSING THE IMPUGNED ORDER. THE CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT BUT THE ESTIMATED ADDITION OF 75% OF EXPENSES WAS DISMISSED AND THE AO WAS DIRECT ED TO ADOPT THE INCOME OF THE ASSESSEE AT 2.24% OF THE TOTAL GROSS RECEIPTS D URING THE YEAR UNDER CONSIDERATION. NOW, THE AGGRIEVED REVENUE IS BEFOR E THIS TRIBUNAL WITH THE SOLE GROUND AS REPRODUCED HEREINABOVE. 3. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. 4. ON THE ISSUE OF VIOLATION OF RULE 46A OF THE INC OME TAX RULES 1962, FROM VIGILANT PERUSAL OF THE ASSESSMENT ORDER, WE N OTE THAT THE ASSESSEE HAS NOT FILED ANY ADDITIONAL EVIDENCE DURING THE FIRST APPE LLATE PROCEEDINGS AND WE ARE ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 3 UNABLE TO SEE THAT THE CIT(A) HAS ADMITTED ANY ADDI TIONAL EVIDENCE IN CONTRAVENTION TO PROVISIONS OF RULE 46A OF INCOME T AX RULES, 1962. THEREFORE, LEGAL OBJECTION OF THE REVENUE IS NOT FO UND TO BE SUSTAINABLE. 5. LD. DR SUBMITTED THAT THE CIT(A) WAS NOT CORRECT IN DIRECTING THE AO TO ADOPT THE INCOME OF THE ASSESSEE AT 2.24% OF GROSS RECEIPTS BY ADMITTING ADDITIONAL EVIDENCE IN THE FORM OF DETAILS OF COMPA RABLE CASES. LD. DR FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE CONSIDERED OTHER BETTER COMPARABLE CASES ON THE ISSUE OF ESTIMATION OF NET PROFIT. LD . DR HAS PLACED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF PUNJAB & HARYANA DATED 20.11. 2014 IN ITA NO. 269 AND 225 OF 2014 IN THE CASE OF TELELINK S VS CIT, BATHINDA AND CIT VS MATTEWAL COOOP L/C SOCIETY, DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT DATED 5.2.2013 IN ITA NO. 825/20 10 IN THE CASE OF CIT VS SMT. KAMLESH & OTHER CASES AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI DATED 9.12.2014 IN ITA NO. 80/2014 CIT VS SUBODH GUPTA AND SUBMITTED THAT EVEN IF RULE 44AB OF THE ACT IS NOT APPLICABLE, THEN ALSO 8% OF GROSS RECEIPTS OF THE A SSESSEE SHOULD BE ADOPTED FOR ESTIMATION OF NET PROFIT RATE. 6. LD. COUNSEL OF THE ASSESSEE REPLIED THAT THE CA SE OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY VARIO US DECISIONS OF THE TRIBUNAL ON THE SIMILAR SET OF FACTS AND CIRCUMSTANCES INCLU DING DECISION OF ITAT DELHI F BENCH IN ITA NO.2044/DEL/2011 FOR AY 2008-09 IN THE CASE OF ITO VS RADHA BALLABH NEST BUILD PVT. LTD. WHEREIN NET PROF IT @2.24% HAS BEEN UPHELD ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 4 BY THE TRIBUNAL DISMISSING THE APPEAL OF THE REVENU E. LD. COUNSEL FURTHER CONTENDED THAT THE RATIO OF THE CASE LAWS RELIED UP ON BY THE LD. DR ARE NOT APPLICABLE TO THE PRESENT CASE. 7. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, A T THE VERY OUTSET, WE NOTE THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTA NCES IN THE CASE OF ITO VS RADHA BALLABH NEST BUILD PVT. LTD. (SUPRA) DISMISSI NG THE APPEAL OF THE REVENUE, THE COORDINATE BENCH OF THIS TRIBUNAL HAS UPHELD THE ESTIMATION OF NET PROFIT @2.24% OF THE GROSS RECEIPTS FROM M/S PACL I NDIA LTD. THE OPERATIVE PART OF THIS ORDER OF THE TRIBUNAL READS AS UNDER:- 6. SINCE, THE ISSUES RAISED IN THE GROUNDS ARE COV ERED BY EARLIER DECISION OF THE TRIBUNAL IN THE GROUP CASE OF THE ASSESSEE AS WELL AS THE RECENT ORDER OF THE TRIBUNA L FOR THE SIMILAR ASSESSMENT YEAR 2008-09 IN ITA NO. 2042 AND 2043/D/2011 (SUPRA) WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER. IN THAT CASE ALSO THE TRIBUNAL HAS UPHELD THE FIRST APPELLATE ORDER ON IDENTICAL ISSUES. ADDITION MADE BY THE AO ON ACCOUNT OF TDS TREATING THE AMOUNT CLAIMED FR OM PACL INDIA LTD. AND PGF INDIA LTD. AS REAL INCOME OF THE ASSESSEE DELETED BY THE LD. CIT(A) HAS BEEN UPHELD. THE TRIB UNAL HAS ALSO UPHELD THE ACTION OF THE 1ST APPELLATE AUTHORI TY IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF 4% COMM ISSION ON DEBIT AND CREDIT ENTRIES ITA NO. 2044/D/2011 5 REGA RDING PROVIDING OF ACCOMMODATION ENTRIES TO THE SAID COMP ANIES TO 2.4% OF THE GROSS RECEIPT SHOWN IN THE PROFIT AND L OSS ACCOUNT FROM THE ABOVE COMPANIES. 7. UNDER THE ABOVE BACKGROUND, WE DO NOT FIND REASO N TO INTERFERE TO THE FIRST APPELLATE ORDER IN THIS REGA RD. THE SAME IS UPHELD. THE GROUNDS ARE ACCORDINGLY REJECTED. 8. FIRST OF ALL, IT WOULD BE JUST AND PROPER TO CON SIDER THE APPLICABILITY OF THE DECISIONS RELIED BY THE LD. DR APPEARING FOR THE RE VENUE. IN THE CASE OF ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 5 TELELINK (SUPRA), THE AO ESTIMATED NET PROFIT @12% AND THE CIT(A) REDUCED THE SAME @6%. THE TRIBUNAL, ALLOWING THE APPEAL BY THE REVENUE, SET ASIDE THE ORDER OF THE CIT(A) BY RESTORING THAT OF THE AO AFF IRMING THE NET PROFIT RATE AT 12%. THE HONBLE HIGH COURT HELD THAT IF NET PROFI T RATE IS PERVERSE AND ARBITRARY, THE FINDINGS SO RENDERED SHALL BE ILLEGA L AND RESTORED THE MATTER TO THE FILE OF THE AO FOR RE-DETERMINATION OF NET PROFIT B Y REFERENCE TO AND AFTER DUE CONSIDERATION OF RELEVANT FACTORS. HENCE IN OUR HU MBLE UNDERSTANDING, HONBLE HIGH COURT HELD THAT IF NET PROFIT RATE IS PERVERSE AND ARBITRARY, THEN THE FINDINGS SO RENDERED SHALL BE ILLEGAL AND WITH THIS PROPOSIT ION, THE MATTER IS RESTORED TO THE FILE OF THE AO FOR RE-DETERMINATION OF NET PROF IT. WE ALSO RESPECTFULLY NOTE THAT HONBLE HIGH COURT DID NOT DETERMINE ANY NET P ROFIT RATE, HENCE, THERE IS NO GUIDELINE ABOUT SUITABLE AND APPROPRIATE PERCENTAGE OF PROFIT. 9. WE FURTHER NOTE THAT THE HONBLE PUNJAB & HARYAN A HIGH COURT IN THE CASE OF CIT VS KAMLESH & OTHER CASES (SUPRA), THEIR LORDSHIPS IN THE CASES OF INDIVIDUALS HELD THAT THE INCOME DISCLOSED BY THE A SSESSEE AS THEIR INCOME HAS BEEN ASSESSED TO TAX AS INCOME IN TERMS OF SECTION 44AD OF THE ACT, THEN IT WAS HELD TO BE SUSTAINABLE. LD. COUNSEL OF THE ASSESSE E SUBMITTED THAT THE PRESENT CASE IS RELATED TO A COMPANY HAVING TURNOVER OF ABO UT RS.5,00 CRORES, HENCE, THE NET PROFIT RATE ADMITTED BY INDIVIDUAL ASSESSEE U/S 44AD OF THE ACT IS NOT APPLICABLE AND THE CASES OF CIT VS KAMLESH (SUPRA) IS RELATED TO INDIVIDUAL ASSESSEE WHO DO NOT MAINTAIN BOOKS OF ACCOUNTS AND SURRENDER THEMSELVES TO PROVISIONS OF SECTION 44AD OF THE ACT. LD. DR COUL D NOT LEAD US TO HOLD THAT ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 6 FACTS OF THESE CASES ARE SIMILAR TO THE PRESENT CAS E. THUS, WE AGREE WITH THESE CONTENTIONS OF THE LD. COUNSEL AS THE FACTS OF THE EXTANT CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASE OF CIT V S KAMLESH ETC. (SUPRA). 10. IN THE CASE OF CIT VS SUBODH GUPTA, THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI HELD THAT THE APPELLATE AUTHORITIES HAVE NOT APPLIED SECTION 44AD OF THE ACT BUT WHERE DIFFICULTY AROSE AS THEY HAD T O ESTIMATE REASONABLE RATE OF NET PROFIT, HENCE IN ABSENCE OF ANY DATA AND DETAIL S, THEY APPLIED NET PROFIT RATE AS MENTIONED IN SECTION 44AD OF THE ACT. IN THAT C ASE, THEIR LORDSHIPS FURTHER ALSO NOTED THAT THE AO IN THE SUBSEQUENT YEARS ACCE PTED THE FIGURE OF 8% OF NET PROFIT. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THE CASE OF SUBODH GUPTA (SUPRA), NO INSTANCE WAS QUOTED BY THE REVENUE ABOU T ANY HIGHER PROFIT RATE AND IN ABSENCE OF ANY CONTRARY DATA AND DETAILS THE NET PROFIT RATE OF 8% WAS APPROVED BY HONBLE HIGH COURT BUT IN THE PRESENT C ASE, THERE WERE NUMBER OF CASES WHEREIN IN THE SIMILAR SET OF FACTS AND CIRCU MSTANCES, NET PROFIT RATE OF 2.24% WAS ACCEPTED BY THE DEPARTMENT IN SEVERAL SUI TABLY COMPARABLE CASES INCLUDING ORDER IN THE CASE OF RADHA BALLABH NEST B UILD PVT. LTD. (SUPRA), THEREFORE, THE RATIO OF THE DECISION OF SUBODH GUPT A (SUPRA) DOES NOT SUPPORT THE CASE OF THE REVENUE IN THE PRESENT APPEAL. 11. ON CAREFUL CONSIDERATION OF ABOVE CONTENTIONS O F BOTH THE SIDES, FIRST OF ALL, WE NOTED THAT ON OUR SPECIFIC QUERY FROM LD. D R, WE HAVE BEEN INFORMED BY THE LD. DR THAT THE DECISIONS OF THE TRIBUNAL (SUPR A) AS RELIED BY THE ASSESSEE AND ACCEPTED BY THE CIT(A) AS SUITABLE COMPARABLES HAVE NOT BEEN SET ASIDE OR ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 7 MODIFIED OR DISTURBED BY THE TRIBUNAL ITSELF OR BY HONBLE HIGH COURT. HENCE, IN ABSENCE OF ANY OTHER ORDER, WHICH MAY LEAD US TO TAKE A DIFFERENT VIEW OR OPINION, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS QUITE JUSTIFIED IN CONSIDERING THE SUITABLE COMPARABLE CASES FOR DETER MINATION OF NET PROFIT RATE OF 2.24% OF GROSS RECEIPTS OF THE ASSESSEE. 12. ON CAREFUL CONSIDERATION OF THE ORDER OF THE CO ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RADHA BALLABH NEST BUILD PV T. LTD.(SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED BY THE REV ENUE IN THE SOLE GROUND IS COVERED BY THE DECISION OF THE TRIBUNAL FOR SIMILAR AY 2008-09 PASSED IN ITA NO.2044/DEL/2011 (SUPRA). WE ARE UNABLE TO SEE ANY AMBIGUITY, INFIRMITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED O RDER OF THE FIRST APPELLATE AUTHORITY. IN THE CASE OF ITO VS RADHA BALLABH NES T BUILD PVT. LTD.(SUPRA), THE TRIBUNAL, ON IDENTICAL SET OF FACTS AND CIRCUMSTANC ES, HAS UPHELD THE ORDER OF THE CIT(A) AND THE ADDITION MADE BY THE AO HAS BEEN DEL ETED BY UPHOLDING THE ORDER OF THE CIT(A) WHICH ADOPTED RATE OF 2.24% OF THE GROSS RECEIPTS FROM M/S PACL INDIA LTD. FOR ESTIMATION OF NET PROFIT IN A P ECULIAR SITUATION WHEN THE CONCLUSION OF REJECTION OF BOOKS OF ACCOUNTS BY THE AO HAS BEEN UPHELD BY THE CIT(A). THE TRIBUNAL HAS ALSO UPHELD THE CONCLUSIO N OF THE CIT(A) IN THIS REGARD AND WE ARE UNABLE TO SEE ANY VALID REASON TO TAKE A DIFFERENT VIEW ON THE SIMILAR ISSUE. WE ALSO RESPECTFULLY HOLD THAT THE BENEFIT OF THE RATIO OF THE DECISIONS RELIED BY THE REVENUE IS NOT AVAILABLE FO R THE REVENUE AS THE FACTS AND CIRCUMSTANCES OF THESE CASES ARE CLEARLY DISTINGUIS HABLE FROM THE FACTUAL MATRIX ITA NO.6011/DEL/2012 ASSTT.YEAR: 2008-09 8 OF THE PRESENT CASE. THEREFORE, WE HOLD THAT THE P RESENT CASE OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL IN THE CASE OF RADHA BALLABH NEST BUILD PVT. LTD. (SUPRA). ACCORDINGLY, SOLE GROUND OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.3.2015. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GA RG) VICE PRESIDENT JUDICIAL MEMBER DT. 12TH MARCH 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER AS STT. REGISTRAR