M/s Newtime Engineers and Builders Pvt. Ltd., Chandigarh V. DCIT, Chandigarh

ITA 628/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0103 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N K SHAHI
• Keywords: Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER& MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.592/CHD/2015 ASSESSMENT YEAR: 2011-12 THE ACIT, VS. M/S NEWTIME ENGINEERS AND BUILDERS CIRCLE 4(1), LTD., CHANDIGARH CHANDIGARH PAN NO. AABCN5345D & ITA NO. 628/CHD/2015 ASSESSMENT YEAR: 2011-12 M/S NEWTIME ENGINEERS AND BUILDERS VS. THE DCIT, LTD., CHANDIGARH CHANDIGARH PAN NO. AABCN5345D (APPELLANT) (RESPONDENT) APPELLANT BY : SH. N.K. SHAHI RESPONDENT BY : SH. MANOJ MISHRA DATE OF HEARING : 13.04.2016 DATE OF PRONOUNCEMENT : 13.04.2016 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS, ONE BY THE REVENUE AND OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)], CHANDIGARH DATED 12.03.2015. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS ACTIVITY OF CIVIL CONTRACTOR. A SURVEY ACTION U/S 1 33A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') WAS CARRIED OUT AT THE PR EMISES OF THE ASSESSEE ON 11.2.2011. DURING THE COURSE OF SURVEY ACTION, CERT AIN INCRIMINATING DOCUMENTS WERE FOUND IN PURSUANT TO WHICH THE ASSESSEE OFFERE D AN ADDITIONAL INCOME OF RS. 1,18,15,200/- FOR TAXATION. IN THE RETURN OF IN COME, THE ASSESSEE CREDITED THE AMOUNT OF RS. 79,90,200/- TO THE PROFIT AND LOSS AC COUNT AND FURTHER ADDED REMAINING AMOUNT OF RS. 28,25,000/- AS DISALLOWANCE . THE ASSESSING OFFICER HOWEVER, NOTED THAT THE ASSESSEE HAD OFFERED THE NE T PROFITS @ 4.41% OF GROSS WORK DONE, WHICH WAS QUITE LOW AS COMPARED TO THE N ET PROFIT RATE DECLARED OF 5.03% AND 8.63% IN ASSESSMENT YEAR 2010-11 AND ASSE SSMENT YEAR 2009-10 RESPECTIVELY. THE ASSESSING OFFICER ALSO FOUND THAT ASSESSEE HAD NOT PROPERLY MAINTAINED THE ACCOUNT BOOKS. FINDING DISCREPANCIES IN THE ACCOUNTS MAINTAINED, HE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME OF THE ASSESSEE US/ 145(3) OF THE ACT ON NET PROFIT RATE OF 8%. 3. BEING AGGRIEVED THE ABOVE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) U PHELD THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT . HE, HOWEVER, ESTIMATED THE INCOME OF THE ASSESSEE BY TAKING AVERAGE OF THE NET PROFIT RATE OF IMMEDIATE EARLIER TWO YEARS AND ARRIVED AVERAGE RATE OF NET P ROFIT OF 6.83% ON THE TOTAL WORK DONE OF RS. 7,62,04,260/- AND OTHER BUSINESS R ELATED INCOME OF RS.7,78,747/-. HE ALSO HELD THAT THE INTEREST ON F DRS OF RS. 46,712/- HAS TO BE SEPARATELY TAKEN INTO ACCOUNT. SO FAR AS THE CONTEN TION OF THE ASSESSEE THAT INCOME OFFERED DURING THE SURVEY ACTION AT RS . 1,08,15,200/- SHOULD ALSO BE TAKEN INTO CONSIDERATION WHILE ESTIMATING THE NET I NCOME OF THE ASSESSEE, THE LD. CIT(A) REJECTED THE SAID CONTENTION. THE LD. CIT(A) , THEREFORE, THOUGH GAVE 3 RELIEF TO THE ASSESSEE ON ACCOUNT OF ESTIMATION OF INCOME AT THE NET PROFIT RATE OF 6.83% AS AGAINST OF 8% DONE BY THE ASSESSING OFFICE R, HOWEVER, REJECTED THE OTHER CONTENTIONS OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS COME IN APPEAL BEFORE US AGITATING THE ACTION OF THE CIT(A) IN REDUCING THE NET PROFIT TO 6.83% AS AGAINST 8% ADOPTED BY THE ASSESSING OFFICE R. ON THE OTHER HAND, THE ASSESSEE HAS COME IN APPEAL AGAINST THE NON ADJUSTM ENT OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE OF RS. 1,08,15,200/- AS PAR T OF BUSINESS INCOME OF THE ASSESSEE. FIRST, WE TAKE UP THE REVENUES APPEAL I N ITA NO. 592/CHD/2015. 5. THE REVENUE IN ITS APPEAL HAS RAISED FIVE GROUND S OF APPEAL. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE. VIDE GROUND NO S. 2, 3, 4 5, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN ADOPTING THE N ET PROFIT RATE @ 6.83% AS AGAINST 8% APPLIED BY THE ASSESSING OFFICER. THE R EVENUE HAS ALSO AGITATED THE ACTION OF THE CIT(A) IN REDUCING THE WORK DONE FROM RS. 8,16,83,456/- TO RS.7,62,04,260/-. WE HAVE GONE THROUGH THE RECORD. THE BIFURCATION OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE DURING TH E SURVEY ACTION IS AS UNDER:- S.NO. ISSUES AMOUNT 1 EXPENSES OFFERED 35,50,000/- 2 ADVANCE FOR LAND NIANA 10,00,000/- 3 OTHER EXPENSES 20,000/- 4 EXCESS CASH FOUND 9,20,200/- 5 CASH ADVANCED TO SH. TIARA FOR A PLOT ON 27.01.2011 25,00,000/- 6 INTEREST OFFERED FOR ON ACCOUNT OF ADVANCE TO SH. ANKUSH FOR THE AMOUNT OF RS. 1,73,39,700/- 20,75,000/- 7 OTHER EXPENSES DISALLWOED. 7,50,000/- 4 TOTAL 1,08,15,200/- 6. ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT I TEM NO.6 AND ITEM NO. 7 WERE RELATING TO THE BUSINESS TRANSACTIONS OF THE A SSESSEE. SINCE THE ASSESSEE HAD ALREADY INCLUDED THE SAID AMOUNT IN THE ADDITIONAL INCOME, HENCE, INCLUDING THE SAME WHILE DETERMINING THE NET PROFIT RATE WOULD RE SULT INTO DOUBLE ADDITION. THE LD. CIT(A), HOWEVER, OBSERVED THAT THE ASSESSE E IN THE COMPUTATION OF INCOME HAD CLAIMED WORK DONE AT RS.7,62,04,260/- AN D FURTHER OTHER BUSINESS RELATED INCOME OF RS.4,78,747/-. HE ACCORDINGLY, D IRECTED THE ASSESSING OFFICER TO APPLY NET PROFIT RATE OF 6.83% TO THE WORK DONE AT 7,62,042,60/- AND FURTHER ON BUSINESS RELATED INCOME OF RS. 4,78,747/-. HE AL SO DIRECTED THAT INTEREST ON FDRS AMOUNTING TO RS. 46,712/- HAS TO BE SEPARATELY TAKEN INTO ACCOUNT. THE LD. CIT(A) HAS FURTHER CONFIRMED ADDITION OF RS. 1, 08,15,200/- WHICH WAS OFFERED BY THE ASSESSEE AS ADDITIONAL INCOME. 7. AFTER CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSING OFFICER HAD ARRIVED AT THE TOTAL WORK DONE AT RS. 8,16,83,456/- UPON WHICH HE HAD APPLIED NET PROFIT RATE OF 8%. TH E LD. CIT(A) HAS NOT GIVEN ANY JUSTIFICATION FOR REDUCING THE SAID WORK DONE W HILE APPLYING THE NET PROFIT RATE AT 6.83%. HOWEVER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WITH REGARD TO THE ADOPTING OF NET PROFIT RATE ON THE BASIS OF AVE RAGE OF THE IMMEDIATE EARLIER TWO ASSESSMENT YEARS. WE THEREFORE, DIRECT THE ASS ESSING OFFICER TO APPLY THE NET PROFIT RATE OF 6.83% ON THE TOTAL WORK DONE OF RS. 8,16,83,456/-. WE, HOWEVER, FIND MERIT IN THE CONTENTION OF THE AS SESSEE THAT THE ADDITIONAL INCOME RELATING TO THE ITEMS WHICH FORM PART OF THE BUSINESS TRANSACTIONS OF THE ASSESSEE SHOULD BE EXCLUDED FROM THE TOTAL ADDITION AL INCOME OFFERED AS THE ASSESSEE HAD ALREADY OFFERED THE SAME IN THE COMPUT ATION OF INCOME, THEREFORE, TAXING THE ADDITIONAL INCOME AGAIN WOULD AMOUNT TO DOUBLE TAXATION. WE FIND 5 FROM THE DETAILS OF ADDITIONAL INCOME OFFERED AS GI VEN IN ABOVE REPRODUCED TABLE, ITEM AT SR. NO.1 I.E. EXPENSES OFFERED AT RS . 35,50,000/-, ITEM NO. 6 I.E. RS. 20,75,000/- ON ACCOUNT TO ADVANCE TO SHRI ANKUS H AND OTHER EXPENSES DISALLOWED (CONSTRUCTION EXPENSES) OF RS. 7,50,000/ - ARE REQUIRED TO BE REDUCED FROM THE TOTAL ADDITIONAL INCOME OFFERED OF RS. 1,0 8,15,199/- AS THE SAID ITEMS BEING RELATING TO THE BUSINESS ACTIVITY OF THE ASSE SSEE ARE SUPPOSED TO BE TAKEN CARE OF WHILE ESTIMATING THE INCOME OF THE ASSESSEE ON AVERAGE NET PROFIT BASIS. WE ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO RED UCE THE ABOVE AMOUNTS FROM THE ADDITIONAL INCOME OFFERED. THUS, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. 8. NOW COMING TO THE ASSESSEES APPEAL IN ITA NO. 6 28/CHD/2015 RELATING TO ASSESSMENT YEAR 2011-12,, THE ASSESSEE IN ITS APPEA L HAS AGITATED THE ADDITION OF RS. 3,1,47,087- ON ACCOUNT OF ESTIMATION OF THE INC OME AND FURTHER AGAINST THE NON-CONSIDERATION OF THE ADDITIONAL INCOME OF RS. 1 0,81,15,200/- AS BUSINESS INCOME OF THE ASSESSEE. 9. THE LD. AR OF THE ASSESSEE STATED THAT HE DOES N OT PRESS GROUND NO. 2 RELATING TO THE ADDITION OF RS. 31,47,087/-. THE SA ID GROUND IS, THEREFORE, DISMISSED AS NOT PRESSED. 10. SO FAR AS THE SECOND ISSUE IN RELATION TO THE A DDITION OF RS.1,08,15,200/-, WHETHER IS TO BE TREATED AS BUSINESS INCOME IS CONC ERNED, IN VIEW OF THE OBSERVATION MADE ABOVE, WE HAVE ALREADY NOTED THAT OUT OF THE TOTAL SURRENDERED INCOME OF RS. 1,08,15,200/-; THE THREE ITEMS OF INC OME I.E. EXPENSES OFFERED OF RS. 35,50,000/, INTEREST OFFERED OF RS. 20,75,000/- AND OTHER CONSTRUCTION EXPENSES OF RS. 7,50,000/- ARE TO BE EXCLUDED. WE A CCORDINGLY, DIRECT THE 6 ASSESSING OFFICER TO REDUCE THE ABOVE AMOUNTS FROM THE ADDITIONAL INCOME OFFERED. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.04.2016 SD/- SD/- (RANO JAIN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :13 TH APRIL, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR