DCIT, Parwanoo V. M/s Him Builders Pvt. Ltd., Baddi

ITA 622/CHANDI/2014

• Counselvise Citation: 62221514 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-09-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 12-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Condonation of delay
• Section: 147; 144; 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.622/CHD/2014 ASSESSMENT YEAR:2004-05 THE DCIT, VS. HIM BUILDERS PVT. LTD. CIRCLE SAI ROAD PARWANOO BADDI PAN NO. AAACH3634E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : NONE DATE OF HEARING : 23/09/2015 DATE OF PRONOUNCEMENT : 20/11/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A), SHIMLA DATED 25.02.2014. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT (A) HAS ERRED IN RESTRICTING THE NET PROFIT RATE AT 5% AS AGAINST 8% ADOPTED BY THE A.O. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T ASIDE AND THAT OF THE A.O. RESTORED. 3. AT THE OUTSET IT IS STATED THAT THE THERE WAS DE LAY OF SIX DAYS IN THE FILING OF THE APPEAL BY THE REVENUE FOR WHICH AN APPLICATION FOR CONDONATION OF DELAY WAS FILED STATING THAT THE DELAY WAS DUE TO DEPARTM ENTAL EXAMINATION OF STAFF DEPLOYED WITH THE CONCERNED OFFICER. THE LD. AR ST ATED THAT HE HAD OBJECTION TO THE DELAY. IN VIEW OF THE SAME WE CONDONE THE DE LAY IN FILING OF APPEAL BY THE REVENUE. 4. WE SHALL NOW PROCEED TO DISPOSE-OFF THE APPEAL. 2 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME DECLARING AN INCOME OF RS 12,51,751/- ON 01.11.2004 . THEREAFTER PROCEEDING U/S 147 WERE INITIATED AND INCOME ASSESSED U/S 147 / 14 4 OF THE ACT, AT RS. 48,59,514/- AFTER APPLYING NET PROFIT RATE OF 8%, A S PER THE PROVISION OF SECTION 44AD, ON GROSS RECEIPTS OF THE ASSESSEE OF RS. 6,07 ,43,931/-. DURING APPELLATE PROCEEDING THE ASSESSEE SUBMITTED THAT DUE TO THE P ROLONGED ILLNESS OF THE PRINCIPAL OFFICER OF THE ASSESSEE COMPANY AND DUE T O THE ACCIDENT OF THE SENIOR ACCOUNTANT, SH. MULAKH RAJ, OF THE COMPANY ON 08.11 .2011, THE ASESSEE COULD NOT ATTEND THE ASSESSMENT PROCEEDINGS AND EXPLAIN T HE DIFFERENCE IN THE GROSS CONTRACT RECEIPTS SHOWN IN THE TDS CERTIFICATE AND AS PER THE RETURN. THE ASSESSEE, PLACING RELIANCE ON THE DECISION OF THE I TAT CHANDIGARH BENCH IN THE CASE OF ITO VS. MODERN CONSTRUCTION CO. (SUPRA) 134 TTJ 89 AND THE CASE OF CIT BIKANER VS. JAIMAL RAM KASTRURI (HC RAJ.) STATED THAT THE 8% PROFIT RATE APPLIED BY THE A.O. TO ESTIMATE THE ASSESSEE INCOME WAS UNJ USTIFIED. LD. CIT(A), AFTER CONSIDERING THE ASSESSEES SUBMISSIONS HELD THAT THE PRESUMPTIVE BASIS OF CALCULATING THE NET PROFIT, AS PER SECTION 44AD, CO ULD NOT BE APPLIED IN THE ASSESSEE CASE, SINCE THE GROSS RECEIPTS OF THE ASES SEE WERE MUCH HIGHER THAN THAT SPECIFIED U/S 44AD. LD. CIT(A) HELD THAT THE A SSESSEES BUSINESS COULD NOT BE CONSIDERED AS ELIGIBLE BUSINESS U/S 44AD OF THE ACT . LD. CIT(A), FURTHER HELD THAT, FOLLOWING THE DECISION IN THE CASE OF MODERN CONSTR UCTION CO. (SUPRA), THE APPLICATION OF NET PROFIT RATE OF 5% ON THE GROSS C ONTRACTUAL RECEIPT WOULD BE FAIR AND REASONABLE ESTIMATE OF THE INCOME OF THE A SSESSEE. 6. AGGRIEVED BY THE SAME, THE REVENUE FILED THE PRE SENT APPEAL BEFORE US. 7. BEFORE US THE LD. DR ARGUED THAT THE APPLICATION OF 8% PROFIT RATE ON THE GROSS TURNOVER OF THE ASSESSEE FOR ESTIMATING TAXAB LE INCOME WAS JUSTIFIED SINCE EVEN THE LEGISLATURE IN ITS WISDOM HAD FIXED THIS R ATE FOR ALL BUSINESSES EXCEPT THAT SPECIFIED UNDER THE PROVISIONS OF SECTION 44AD. LD. DR STATED THAT IN THE ABSENCE 3 OF ANY EVIDENCE OR MATERIAL GIVEN BY THE ASSESSEE T O JUSTIFY THE APPLICATION OF A LESSER PRESUMPTIVE RATE THE APPLICATION OF 8% RATE WAS JUSTIFIED. 8. WE HAVE HEARD THE SUBMISSION AND PERUSED THE ORD ER OF THE AUTHORITIES BELOW. 9. THE FACTS EMERGING IN THE PRESENT CASE ARE THAT THERE WAS A DIFFERENCE IN THE GROSS RECEIPT OF THE BUSINESS OF THE ASSESSEE A S PER THE TDS CERTIFICATES AND THAT DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INC OME. WHILE THE TDS CERTIFICATES SHOWED THE GROSS RECEIPTS OF RS. 6,07,43,931/-, THE ASSESSEE HAD SHOWN GROSS RECEIPTS TO THE TUNE OF RS. 4,19,96,208/-. UNDENIAB LY THE ASSESSEE HAD FAILED TO RECONCILE THE DIFFERENCE BETWEEN THE TWO AND AS A C ONSEQUENCE THE BOOKS OF THE ASSESSEE WERE REJECTED BY THE A.O. IN ASSESSMEN T PROCEEDINGS. THE ONLY DISPUTE IN THE PRESENT CASE IS REGARDING THE NET PR OFIT RATE TO BE APPLIED TO THE TURNOVER OF THE ASSESSEE, TO ESTIMATE ITS TAXABLE I NCOME. WHILE THE A.O., HAS APPLIED A NET PROFIT RATE OF 8% BASED ON UPON THE R ATE SPECIFIED U/S 44AD OF THE ACT. LD. CIT(A) HAS APPLIED A RATE OF 5% BASED UPON THE REASONING GIVEN IN THE CASE OF MODERN CONSTRUCTION CO. (SUPRA) BY THE ITAT CHANDIGARH. 10. A BARE PERUSAL OF THE PROVISIONS OF SECTION 44A D REVEALS THAT THE SAME IS APPLIED FOR ESTIMATION OF PROFITS OF ELIGIBLE BUSI NESS ONLY, WHICH HAVE BEEN DEFINED IN THE SECTION TO MEAN ANY BUSINESS EXCEPT THE BUSINESS LYING HIRING, LEASING GOODS, CARRIAGES REFER TO IN SECTION 44AE A ND WHOSE TURNOVER DOES NOT EXCEED AN AMOUNT OF RS. 40,00,000/-. SINCE THE ASSE SSEES TURNOVER IN THE IMPUGNED ASSESSMENT YEAR IS RS. 4,19,96,208/-, IT I S FAR IN EXCESS OF THE AMOUNT SPECIFIED IN SECTION 44AD AND HENCE THE ASSESSEES BUSINESS CANNOT BE TREATED TO BE ELIGIBLE BUSINESS IN TERMS OF SECTION 44AD. THE APPLICATION OF 8% PROFIT RATE AS PER SECTION 44AD IS THEREFORE NOT JUSTIFIED . HAVING REJECTED THE 8% PROFIT RATE APPLIED BY THE A.O. IT NOW REMAINS TO BE DECID ED AS TO WHAT WOULD BE A JUST AND REASONABLE PROFIT RATE TO ARRIVE AT THE T AXABLE INCOME OF THE ASSESSEE. 4 LOGICALLY A FAIR AND REASONABLE ESTIMATE OF THE APP LICABLE NET PROFIT RATE CAN BE DETERMINED ON THE BASIS OF EITHER THE PAST HISTORY OF THE ASSESSEE OR ON THE BASIS OF PROFIT RATES FOUND IN CASE OF COMPARABLE INSTANC ES. IN THE PRESENT CASE, WE FIND THERE IS NOTHING ON RECORD, FURNISHED EITHER B Y THE ASSESSEE OR BY THE REVENUE IN THIS RESPECT, TO LEAD US TO ARRIVE AT A FAIR AND REASONABLE NET PROFIT RATE IN THE ASSESSEES LINE OF BUSINESS. IN THE ABS ENCE OF THE SAME WE FIND THAT THE DECISION RENDERED BY THE ITAT CHANDIGARH BENCH IN THE CASE OF MODERN CONSTRUCTION CO. (SUPRA) SQUARELY APPLIES TO THE AS SESSEE CASE WHEREIN UNDER IDENTICAL CIRCUMSTANCES THE HONBLE ITAT HAD HELD 5 % NET PROFIT RATE TO BE JUST AND REASONABLE PROFIT RATE FOR ESTIMATION OF THE PR OFITS OF THE ASSESSEE. THE HONBLE ITAT IN THE AFORESAID CASE HAS HELD AS UNDE R: ON THE FACTS OF THE CASE, THERE WAS NO MERIT IN AD OPTION OF RATE OF 8 PERCENT TO THE BOOK RESULTS FOR WORKING OUT THE INCOME FOR THE RELEVANT ASSESSMENT YEAR. HOWEVER, AS THE ASSESSEE HAD FAILED TO FILE EVIDENC E IN RESPECT OF THE MATERIAL PURCHASED AND CERTAIN EXPENSES AND IN THE ABSENCE O F THE ASSESSEE FILING THE SAME ON RECORD, THE ORDER OF COMMISSIONER(APPEALS) ADOPTING RATE OF 5 PERCENT TO THE GROSS RECEIPTS FOR WORKING OUT THE INCOME OF THE ASSESSEE WAS TO BE UPHELD. IN VIEW OF THE SAME WAS UPHOLD THE APPLICATION OF N ET PROFIT RATE OF 5% TO THE GROSS RECEIPT OF THE ASSESSEE FOR ESTIMATING ITS TA XABLE INCOME. 11. THE APPEAL OF THE REVENUE IS THEREFORE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20/11/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR