HANUMANT LAL SHARMA, Jaipur V. ITO, Jaipur

ITA 645/JPR/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2007 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 13-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM ROY DCIT DHK
• Section: 148; 28; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 645/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 HANUMANT LAL SHARMA, PROP.- M/S SURVEY TUBEWELL CONSULTANCY CENTRE, JAITPURA, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD-7(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AHRPS 9707 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ANIL SHARMA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM ROY (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/07/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 12/07/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-3, JAIPUR DATED 14/05/2015 FOR THE A .Y. 2009-10, WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN REJECTING THE OBJECTIONS RAISED TOWARDS VALIDITY OF RELEVANT ASSESSMENT ORDER PASSED U/S 147/147(3) OF IT ACT 1961 AND IN UPHOLDING THE SAME. ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 2 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION O F RS. 5,78,500/- TOWARDS INCREASE IN VALUATION OF WORK IN PROGRESS CLOSING STOCK. 3. UNDER THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 13,95,070/- TOWARDS BELATED DEPOSIT OF TDS U/S 40(A)(IA) OF IT ACT, 1961. 2. THE ASSESSEE DERIVED INCOME FROM EXECUTION OF CON TRACT CIVIL WORK. RETURN OF INCOME WAS FILED ON 30/09/2009 DECLARING TOTAL INCOME OF RS. 3,97,920/-, WHICH WAS PROCESSED U/S 143(1) OF THE IN COME TAX ACT, 1961 (IN SHORT THE ACT) ON 17/03/2011. SUBSEQUENTLY, IT WAS NOTICED THAT THERE WAS A DISCREPANCY IN THE SALES DECLARED IN THE RETUR N OF INCOME AND SALES AS PER THE ITS 26AS. THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT AND CERTAIN ADDITIONS WERE MADE. 3. IN THE GROUND NO. 1 OF THE APPEAL, THE ISSUE INV OLVED IS AGAINST UPHOLDING THE VALIDITY OF THE ASSESSMENT MADE U/S 1 47/143(3) OF THE ACT AFTER REJECTING THE OBJECTIONS RAISED TOWARDS VALID ITY OF ASSESSMENT ORDER. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASS ESSMENT WAS REOPENED ON THE BASIS OF DIFFERENCE IN THE SALES/RE CEIPT FIGURES DECLARED IN THE P&L ACCOUNT AND SALES AS PER FORM 26 AS. THE LD . AR PLEADED THAT NO ADDITION WAS MADE ON THIS ISSUE, ON WHICH THE ASSESS EE IS REOPENED, THEREFORE, WHOLE ORDER OF THE ASSESSING OFFICER BEC OMES NON-SUSTAINABLE. ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 3 HE RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS 331 ITR 236 AND THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LIMITED VS CIT ( 2011) TIOL 356- HON'BLE HIGH COURT-DEL-IT. HE ALSO RELIED ON THE DEC ISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS SHRI RAM SINGH (2008) 306 ITR 343 (RAJ). 4. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT IN ASSESSEES CASE, THE FACTS WERE COMPLETELY AT VARIANCE FROM THE FACTS OF THE CASE ON WHICH THE LD AR HAS RELIED UPON. SHE ALSO SUBMITTED THAT THE ADDITION OF RS. 5,78,500/- WAS MADE ON THE BASIS OF DISCREPANCY NOTE D IN THE FORM 26AS AND RECEIPT DECLARED IN THE BOOKS OF ACCOUNT. FURTH ER SHE ALSO SUBMITTED THAT SUFFICIENCY AND ACCURACY OF THE REASONS RECORD ED ARE NOT NECESSITY AT THE TIME OF REOPENING OF THE ASSESSMENT. PRIMA FACI E, THE ASSESSING OFFICER WAS HAVING SUFFICIENT MATERIAL TO FORM A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. SHE PLEADED TO SUSTAIN THE REOPENING PR OCEEDINGS BEING LEGAL AND VALID. 5. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. I HAV E ALSO PERUSED THE GROUNDS OF VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER. I HAVE ALSO CONSIDERED THE CASE LAWS RELIED UPON BY BOTH THE SI DES. AFTER TAKING ALL THE RELEVANT FACTS UNDER CONSIDERATION, I AM OF THE VIE W THAT THE PLEADINGS OF ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 4 THE LD AR ARE NOT SUPPORTED BY THE FACTS OF THE CAS E. THE DISCREPANCY WAS NOTED BETWEEN THE BOOKS OF ACCOUNT AND FORM 26 AS. O N THAT BASIS, THE ADDITIONS HAVE BEEN MADE. THEREFORE, THE CONTENTION OF THE LD AR THAT NO ADDITION WAS MADE ON THE BASIS ON WHICH THE REOPENING BASED IS COMPLETELY UNJUSTIFIED. I FIND NO LEGAL DISCREPANCY IN INITIATING THE PROCEEDINGS U/S 148 OF THE ACT BY REOPENING THE ASS ESSMENT. IN VIEW OF THESE FACTS, I UPHOLD REOPENING AS VALID AND SUSTAI N THE ORDER OF THE LD. CIT(A) ON THIS GROUND. ACCORDINGLY, GROUND NO. 1 OF THE APPEAL IS DISMISSED. 6. GROUND NO. 2 OF THE APPEAL IS REGARDING SUSTAINI NG THE ADDITION OF RS. 5,78,500/- TOWARDS INCREASE IN VALUATION OF WORK IN PROGRESS OF THE CLOSING STOCK. THE LD. CIT(A) HAS DEALT THE ISSUE IN HIS ORDER AT PARA NO. 6.3 WHICH READ AS UNDER:- 6.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. IT IS A CASE WHERE THE AO HAS POINTED OU T DIFFERENCE IN TOTAL RECEIPTS SHOWN IN THE P&L ACCOUNT AND TOTAL RECEIPT S AS PER FORM NO. 26AS. THE APPELLANTS CASE THAT RS. 1750000 WAS REC EIVED FROM THREE PARTIES AND THAT COMPLETE WORK IN RESPECT OF SUCH R ECEIPTS WAS NOT COMPLETED AND NO BILLS WERE ISSUED BY THE APPELLANT AGAINST SUCH RECEIPTS, THEREFORE SUCH RECEIPT WAS NOT PART OF THE TURNOVER . ON THE OTHER HAND THE AOS CASE WAS THAT THOUGH THE WORK WAS NOT COMPLETE D IN TOTO IN RESPECT OF AMOUNT OF RS. 1750000 BUT THE FACT WAS THAT EVEN IN RESPECT OF PARTLY COMPLETED WORK THE ASSESSEE SHOULD HAVE SHOWN SUCH WORK AS WORK IN PROGRESS TO BE PART OF THE CLOSING STOCK. ACCORDING LY, THE AO ESTIMATED THE ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 5 WORK IN PROGRESS OUT OF SUCH RECEIPTS AT RS. 10 LAK HS AND AS THE ASSESSEE HAS SHOWN THE CLOSING STOCK OF RS. 421500 THEREFORE THE DIFFERENCE OF RS. 578500 WAS ADDED TO BE THE PART OF THE VALUATION OF CLOSING STOCK. THE APPELLANTS CASE IS THAT WHEN THE AO HAS ESTIMATED PROFIT BY APPLYING NP RATE OF 8% THEN NO SEPARATE ADDITION ON ACCOUNT OF CLOSING STOCK CAN BE MADE. ON CAREFUL CONSIDERATION OF THE FACTS OF RECO RD IT IS NOTED THAT THE APPELLANT HAS NOT DISPUTED THE FINDING OF THE AO TH AT PARTLY COMPLETED WORK SHOULD HAVE BEEN REFLECTED AS WORK IN PROGRESS IN THE CLOSING STOCK. THE APPELLANT HAS ALSO NOT DISPUTED THE ESTIMATION OF WORK IN PROGRESS OUT OF RS. 1750000 AT RS. 10 LAKH. THE OBJECTION OF THE APPELLANT THAT WHEN NP RATE OF 8% IS APPLIED THEN NO FURTHER ADDIT ION SHOULD BE MADE CANNOT BE ACCEPTED IN AS MUCH AS THE ACTION OF THE AO FOR APPLICATION OF 145(3) AND ESTIMATION OF PROFIT BY APPLYING NP RATE OF 8% IS NOT SUSTAINED. ACCORDINGLY, THE ACTION OF THE A.O. IN MAKING ADDIT ION OF RS. 578500 IS FOUND TO BE IN ORDER AND THE SAME IS CONFIRMED. 7. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND CONSIDERING ALL RELEVANT ASPECTS OF THE CASE, I AM OF THE VIEW THAT THE LD. CIT(A) IS JUSTIFIED. THE ADDITION MADE ON ESTIMATE BASIS, HAS BEEN DELETED BY THE LD. CIT(A). FURTHER THIS ADDITION HAS BEEN MADE ON SPECI FIC BASIS OF THE FACT THAT THE AMOUNT OF RS. 17,50,000/- RECEIVED BY THE ASSESSEE FROM THE THREE PARTIES WAS NOT DISCLOSED AS A RECEIPT IN THE P&L ACCOUNT FOR THE REASONS THAT THE WORK WAS NOT COMPLETED AND NO BILLS WERE ISSUED. THESE RECEIPTS WERE NOT MADE PART OF THE TURNOVER. BUT THE RE IS NO DENIAL TO THE FACT THAT PART WORK WAS COMPLETE HENCE IT SHOULD HAVE BEEN SHOWN AS WORK IN PROGRESS. IN VIEW OF THIS FACT, I AM OF THE C ONSIDERED VIEW THAT THE ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 6 LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION O F RS. 5,78,500/- OUT OF THE TOTAL RECEIPT OF RS. 17,50,000/- NOT DECLARED I N P&L ACCOUNT. THESE AMOUNTS SHOULD HAVE BEEN SHOWN BY THE ASSESSEE IN TH E WORK IN PROGRESS, WHICH SHALL FORM PART OF THE CLOSING STOCK. THE INCO ME OF THE YEAR SHALL INCREASE BY THAT AMOUNT. THEREFORE, I FIND NO INFIR MITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY AFFIRMED. ACCORDIN GLY, GROUND NO. 2 OF THE ASSESSEES APPEAL STANDS DISMISSED. 8. GROUND NO. 3 OF THE APPEAL IS AGAINST SUSTAINING THE ADDITION OF RS. 13,95,070/- TOWARDS BELATED DEPOSIT OF TDS U/S 40(A)( IA) OF THE ACT. THIS IS THE AMOUNT, WHICH THE ASSESSEE HAS PAID TO THREE DIFFERENT PERSONS, WHICH IS: (I) M/S ANJALI TUBEWELL CO. RS. 325490/- (II) BALAJI CONSTRUCTIONS RS. 150000/- (III) SHYAM EARTH MOVERS RS. 919580/- AND DEDUCTED THE TDS. THE LD. CIT(A) HAS DECIDED THE ISSUE AS UNDER:- 7.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO AN D SUBMISSION OF THE APPELLANT. IT MAY BE NOTED THAT THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE HAS DEDUCTED TDS ON THE CONTRACTUAL PAYMEN T OF RS. 1395070 BUT THE TDS DEDUCTED WAS NOT DEPOSITED IN TIME. THE ONL Y CONTENTION OF THE APPELLANT FOR DELETION OF SUCH ADDITION IS THAT SUC H TDS WHICH WAS TO BE DEPOSITED ON 31.3.2009, HAS BEEN DEPOSITED ON 1.10. 2009 AND THAT THERE WAS NO LOSS TO THE GOVERNMENT AS ALSO THAT WHEN PRO VISIONS OF SEC. 145(3) HAS BEEN APPLIED AND PROFIT HAS BEEN ESTIMATED BY A PPLYING NP RATE OF 8% THEN NO FURTHER ADDITION/ DISALLOWANCE CAN BE MADE. IN THIS CONNECTION IT ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 7 MAY BE NOTED THAT AS THE APPELLANT HAS NOT DEPOSITE D THE TDS DEDUCTED WITHIN PRESCRIBED TIME THEREFORE SUCH PAYMENT OF RS . 1395070 WAS TO BE DISALLOWED AS PER PROVISIONS OF SEC. 40(A)(IA) OF I T ACT. THE FACT THAT SUCH AMOUNT WAS DEPOSITED ON 1.10.2009 AND THAT THERE WA S NO LOSS TO THE GOVERNMENT WILL NOT MAKE ANY DIFFERENCE TO THE MERI T OF SUCH ADDITION. AS REGARDS THE OTHER CONTENTION THAT ON APPLICATION OF PROVISIONS OF SEC. 145(3) AND ESTIMATION OF PROFIT BY APPLYING NP RATE OF 8% NO FURTHER ADDITION CAN BE MADE IT MAY BE MENTIONED THAT THE A CTION OF THE AO FOR APPLICATION OF PROVISIONS OF SEC. 145(3) HAS ALREAD Y BEEN REJECTED AND TRADING ADDITION HAS ALSO BEEN DELETED. THEREFORE E VEN SUCH OBJECTION OF THE APPELLANT CANNOT BE ACCEPTED. THE CASE LAWS REL IED UPON BY THE APPELLANT ARE ALSO NOT FOUND TO BE RELEVANT TO THE FACTS OF THE APPELLANTS CASE INASMUCH AS IT IS NOT A CASE OF REJECTION OF B OOKS OF ACCOUNT. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFF ICER IS CONFIRMED. 9. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS DEDUCTED TDS ON THE CONTRACTUAL PAYMENT OF RS. 13,95,070/- BUT THE TDS WAS NOT DEPOSITED IN TIME. THE LD. AR REL IED ON THE VARIOUS DECISIONS WHEREIN HE HAS TRIED TO ESTABLISH THAT THE TDS WAS ON LABOUR/JOB WORK/MACHINERY HIRE CHARGES, THEREFORE, IT IS NOT CO VERED BY SECTION 30 TO 38 OF THE ACT ON WHICH THE PROVISIONS ARE APPLICABLE . HE PLEADED THAT THESE EXPENSES ARE COVERED BY SECTION 28 OF THE ACT. IN M Y CONSIDERED VIEW, SUCH PLEADINGS ARE COMPLETELY FUTILE AND IRRELEVANT TO THE FACT THAT IT HAS NO LEGAL BASIS. IT WAS MADE CLEAR TO LD. AR THAT SEC TION 28 OF THE ACT PROVIDE ABOUT WHICH INCOME SHALL BE CHARGEABLE TO IN COME TAX UNDER THE HEAD PROFIT AND GAIN OF BUSINESS AND PROFESSION. THE PROVISIONS OF SECTION ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 8 28 OF THE ACT CANNOT BE EXTENDED TO ENCOMPASS EXPEN SES OTHER THAN MENTIONED IN SECTION 30 TO 38 OF THE ACT, SO THAT T HOSE EXPENSES ARE NOT COVERED BY SECTION 40(A)(IA) OF THE ACT. THEREFORE, THE LD A.R.S PLEADINGS WERE COMPLETELY AGAINST THE LEGAL PROVISIONS OF THE ACT. HOWEVER, HIS ALTERNATE PLEA THAT THE PERSON TO WHOM THE PAYMENT WAS MADE HAS FURNISHED THE RETURN OF INCOME U/S 139 OF THE ACT A ND HAS INCLUDED THE SAME IN THEIR RETURN OF INCOME AND DUE TAXES HAVE B EEN PAID. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, I AM OF THE V IEW THAT THIS ASPECT NEEDS VERIFICATION AT THE LEVEL OF THE ASSESSING OF FICER, THEREFORE, I RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 12/07/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 12 TH JULY, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI HANUMANT LAL SHARMA, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-7(3), JAIPUR. 3. VK;DJ VK;QDR @ CIT ITA 645/JP/2015_ HANUMANT LAL SHARMA VS ITO 9 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 645/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR