M/s Pato Builders Pvt Ltd., V. ACIT,

ITA 65/RAN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0019 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2014
• Court: TRIBUNAL
• Department Lawyers: CHOUDHURY ORAON
• Assessee Lawyers: DEVESHPODDER; S K PODDER
• Section: 143(3); 133A; 234B

Judgement Text

1 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL: RANCHI BENCH, RANCHI [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGANESH, AM] I.T.A NO. 65/RAN/2014 ASSESSMENT YEAR: 2007-08 PATO BUILDERS PVT. LTD. VS. ASSTT COMMISSIONER OF INCOME-TAX, M.P. COMPLEX, MAIN ROAD CENTRAL CIRCLE-II, JAMSHEDPUR ADITYAPUR, JAMSHEDPUR (PAN:AABCP7453N) (APPELLANT) (RESPONDENT) DATE OF HEARING: 06.09.2016 DATE OF PRONOUNCEMENT: 12.09.2016 FOR THE APPELLANT: S/SHRI S. K. PODDER & DEVESH PODDER, ADVOCATES FOR THE RESPONDENT: SHRI CHOUDHURY ORAON, DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), JAMS HEDPUR VIDE APPEAL NO. 254/JSR/2009-10 DATED 29.11.2013. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-2, JAMSHEDPUR U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT) FOR AY 2007-08 VIDE HIS ORDER DATED 31.12.2009. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHE R IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CITA IS JUSTIFIED IN UPHOLDING THE ADDITIONS MADE BY THE LD AO BASED ON SECOND BALANCE SHEET SUBMITTED BY THE A SSESSEE TO THE BANK SHOWING BETTER FINANCIALS FOR THE PURPOSE OF OBTAINING HIGHER CREDIT LIMITS. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS A CIVIL CONTRACTOR DOING CIVIL CONTRACT JOB WITH THE GOVERNMENT DEPARTMENTS LIKE CPWD RANCHI , CPWD PATNA, PATNA CENTRAL DIVISION, CPWD NEW DELHI ETC. APART FROM THIS , THE ASSESSEE IS ALSO ENGAGED IN PROMOTING AND DEVELOPING BUSINESS IN DIFFERENT AREAS OF JAMSHEDPUR AND THE PROJECTS COMPLETED / UNDER CONSTRUCTIONS WERE MP TOWER I, MP TOWER II, MP COMPLEX, MP NIWAS AND MP NAGINA ETC. AND RETURN OF INCOME FOR THE ASST YEAR 2007-08 WAS FILED BY IT ON 30.10.2007 SHOWING TOTAL INCOME OF RS. 2 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. 19,35,088/-. PURSUANT TO THE SURVEY CONDUCTED U/S 133A OF THE ACT IN THE BUSINE SS PREMISES AS WELL AS DIFFERENT SITES OF THE ASSESSEE ON 18.8.2008, SEVERAL DOCUMENTS AND MATERIALS WERE IMPOUNDED. THE SURVEY TEAM COULD NOT FIND ANY BOOKS OF ACCOUNTS ON THE DATE OF SURVEY AND ULTIMATELY THE BOOKS WERE PRODUCED BEF ORE THE LD AO BY THE ASSESSEE ON 11.9.2008 AFTER REPEATED REMINDERS. THE LD AO OBSERVED THAT SINCE BOOKS OF ACCOUNTS WERE NOT FOUND AT THE TIME OF SURVEY AND THERE AFTER GIVING AMPLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE SUCH BOOKS OF ACCOUNTS, T HE LEDGERS SO PRODUCED WERE TREATED AS AFTER THOUGHT AND MANUFACTURED / FABRICATED AFTER THE SURVEY OPERATION U/S 133A OF THE ACT. ACCORDINGLY PENALTY U/S 271A OF THE ACT WAS INITIATED FOR NON-MAINTENANCE OF BOOKS OF ACCOUNTS. THE LD AO FOUND FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT IT HAD SHOW N TOTAL RECEIPTS OF RS. 5,89,79,780/- FROM SALE OF FLATS AND RECEIPT FROM CIVIL CONTRACT W ORK FROM VARIOUS GOVERNMENT DEPARTMENTS. THE BREAK UP OF THE SAME IS AS UNDER:- CONTRACT WORK - RS. 4,07,50,945 SALE OF FLATS - RS. 1,81,50,897 OTHER CONSTRUCTION WORK - RS. 77,938 ----------------------- RS. 5,89,79,780 THE ASSESSEE ALSO FILED SECOND BALANCE SHEET BY GETTING IT SIGN ED FROM ANOTHER CHARTERED ACCOUNTANT M/S P.S.R AND ASSOCIATES, WHICH WAS SUBMITTED TO THE B ANK OF INDIA IN ORDER TO OBTAIN HIGHER CREDIT LIMITS FROM THE BANK FOR THE PURPOS E OF BUSINESS. THE LD AO PLACED RELIANCE ON THE SECOND BALANCE SHEET SUBM ITTED TO THE BANK AND COMPLETED THE ASSESSMENT ACCORDINGLY WHICH WAS ALSO C ONFIRMED BY THE LD CITA IN FIRST APPEAL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 4. THE LD AR ARGUED THAT THE STATUTORY AUDITOR WHO HAD BEEN APPOINTED BY THE SHAREHOLDERS OF THE COMPANY IN THE GENERAL BODY MEETING AND WHO HAD C ERTIFIED THE FIRST BALANCE SHEET WHICH HAS BEEN FILED ALONG WITH THE RETURN OF INCOME, WERE REAPPOINTED AS STATUTORY AUDITORS OF THE COMPANY IN THE SUBSEQUENT YE ARS ALSO AND HAD CERTIFIED THE ACCOUNTS ACCORDINGLY. HE STATED THAT THIS FAC T IS VERY MUCH AVAILABLE IN THE PUBLIC DOMAIN AND IN THE MINISTRY OF CORPORATE AFFAIR S WEBSITE. 3 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. HE FURTHER STATED THAT THE FIGURES CERTIFIED BY THE SAID STAT UTORY AUDITOR I.E M/S PRASAD KUMAR & CO WERE ACCEPTED BY THE REVENUE IN THE SUBSEQUE NT YEARS AND ASSESSMENTS FRAMED ACCORDINGLY. IN RESPONSE TO THIS, THE LD DR A RGUED THAT THE SECOND SET OF BALANCE SHEET CANNOT BE IGNORED BY THE LD AO AS THE SAM E HAD BEEN DULY SIGNED BY THE DIRECTORS OF THE COMPANY AND ALSO BY ONE CHARTER ED ACCOUNTANT. HENCE THE RELIANCE PLACED BY THE LD AO ON THE SAME FOR THE PURPOSE OF INCOME TAX ASSESSMENT CANNOT BE FAULTED WITH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL S AVAILABLE ON RECORD. WE FIND THAT THE LD AO HAD MERELY RELIED ON THE SECOND BALANCE SHEET SUBMITTED BY THE ASSESSEE TO BANK OF INDIA SHOWING HIGHER CONTRACT RECEIPTS BY RS 2 CRORES AND INCREASED SHARE CAPITAL BY RS 49 LACS AND THEREBY DETERMINING EXCESS NET PROFIT @ 8% . WE ALSO FIND THAT THE LD AO HAD ALSO SOUGHT TO ESTIMAT E THE NET PROFITS ON CERTAIN UNDISCLOSED SALE OF FLATS FROM MP TOWER II (RS. 76,57,071/-) ; MP NAGINA (RS. 26,06,192/-) AND SUPPRESSED SALES ON ACCOUNT OF M/S SIDDHES H SWASTHYA SEWA SHALYA PVT LTD (RS. 2,55,018/- ) BASED ON LOOSE SHEETS FOUND DURING THE COURSE OF SURVEY CONDUCTED ON 18.8.2008. 5.1. WE FIND THAT THE ENTIRE RECEIPTS FOR THE ASSESSEE WERE RECEIVED ONLY FROM THE GOVERNMENT DEPARTMENTS AS IT IS NOT IN DISPUTE THAT THE ASSESSE E IS ENGAGED IN DOING CONTRACT WORK WITH GOVERNMENT DEPARTMENTS. IN THIS SCENARIO, IT IS VERY UNLIKELY THAT THE ASSESSEE WOULD HAVE RECEIVED THE EXTRA RS 2 CRORES CONTR ACT RECEIPTS AS STATED IN THE SECOND BALANCE SHEET SUBMITTED TO BANK OF INDIA. THIS I TSELF GOES TO PROVE THAT THE SECOND BALANCE SHEET SUBMITTED TO THE BANK IS ONLY F OR THE LIMITED PURPOSE OF OBTAINING HIGHER CREDIT LIMITS THEREON AND DOES NOT HAVE ANY EVIDE NTIARY VALUE MUCH LESS FOR DETERMINATION OF REAL INCOME OF THE ASSESSEE. 5.2. WE FIND THAT THE FOLLOWING CIRCUMSTANCES GO IN FAVOUR OF THE CONTENTIONS OF THE ASSESSEE :- 4 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. (I). THE BROUGHT FORWARD OPENING BALANCE FIGURES FROM PREVIOUS YEAR ADDED WITH THE MOVEMENT OF TRANSACTIONS DURING THE YEAR THEREBY LEADING TO THE CLOSING BALANCE FIGURE OF THE CURRENT YEAR. SIMILARLY, THE CLOSI NG BALANCE FIGURE HAS BEEN CARRIED FORWARD TO THE NEXT FINANCIAL YEAR AS OPENI NG BALANCE. BOTH THE WORKS WERE CARRIED OUT BY M/S PRASAD KUMAR & CO., CHA RTERED ACCOUNTANTS, THE ORIGINAL STATUTORY AUDITOR APPOINTED BY THE SHAREHOLDERS IN THE GENERAL MEETING. ON THIS POINT, THERE IS ABSOLUTELY NO DISPUTE. (II). TURNOVER HAS BEEN INCREASED ON AN AD HOC BASIS BY RS 2 CRORE S FOR WHICH CORRESPONDINGLY SUNDRY DEBTORS HAD INCREASED ONLY BY RS. 36,50,415/- ( 1,03,92,134 67,41,719 ) . SIMILARLY PURCHASES WERE ALSO DISTURBED IN THE SECOND BALANCE SHEET BUT STRANGELY THE CURRENT LIABILITIES FIGUR E REMAIN STATIC AT RS. 1,69,92,518/- WHICH IS NOT POSSIBLE. THIS IS MORE SO BECAUSE OF THE FACT THAT THE CASH AND BANK BALANCE ALSO REMAIN STATIC AT RS. 61, 08,570/-. UNDER THESE CIRCUMSTANCES, A SERIOUS DOUBT ARISES AS TO HOW THE I NCREASED PURCHASES FOR THE INCREASED TURNOVER OF RS 2 CRORES WERE MET BY T HE ASSESSEE. HENCE IT COULD BE SAFELY CONCLUDED THAT THE TURNOVER FIGURE IS INCRE ASED BY RS 2 CRORES IN THE SECOND BALANCE SHEET ONLY TO SHOW IMPROVED PROFITA BILITY IN THE COMPANY SO AS TO JUSTIFY THE CASH GENERATIONS TO PROVE THE R EPAYMENT CAPACITY FOR THE PROPOSED ENHANCED BANK LOAN FACILITIES. (III). SHARE CAPITAL IS INCREASED BEYOND THE AUTHORIZED CAPITAL OF THE COMPANY. THE AUTHORIZED CAPITAL OF THE COMPANY WAS RS 70,00,000/- WHEREAS THE PAID UP CAPITAL INCLUDING THE SHARE APPLICATION MONEY WAS RS. 95,00,000/- AS AGAINST THAT IN THE BOOKS OF ACCOUNTS OF RS 46,00,000/- THEREBY LEADING TO A N ADDITION OF RS 49,00,000/-. (IV). THE BALANCE SHEET OF A LIMITED COMPANY COULD BE AUDITED BY A CHARTERED ACCOUNTANT WHO HAS BEEN DULY APPOINTED BY THE SHAREHOLDERS IN THE GENERAL BODY MEETING AS MANDATED IN THE PROVISIONS OF THE COMPANIES ACT, 1956. ADMITTEDLY, ONLY PRASAD KUMAR & CO, CHARTERED ACCOUNTANTS HAVE BE EN 5 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. APPOINTED AS STATUTORY AUDITORS OF THE ASSESSEE COMPANY BY THE SHAR EHOLDERS OF THE ASSESSEE COMPANY IN THE GENERAL BODY MEETING AND HE CONTIN UES TO BE SO EVEN IN THE FUTURE ASSESSMENT YEARS ACCORDING TO THE LD AR. N O EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO PROVE THAT P.S.R. & ASSOCIAT ES, CHARTERED ACCOUNTANTS WERE APPOINTED AS STATUTORY AUDITORS OF THE A SSESSEE COMPANY IN PLACE OF PRASAD KUMAR & CO, CHARTERED ACCOUNTANTS IN THE GENERAL BODY MEETING OF THE SHAREHOLDERS OF THE ASSESSEE COMPANY. EXCEPT FILING THE BALANCE SHEET DULY SIGNED BY THE SECOND AUDITOR I.E P.S.R & ASSOCIATES, WHICH WERE ADMITTEDLY SUBMITTED ONLY TO BANK OF INDIA FOR AVAILING HIGHER CREDIT LIMITS FOR THE PURPOSE OF BUSINESS , NO OTHER E VIDENCES WERE BROUGHT ON RECORD BY THE REVENUE. IT IS WELL SETTLED THA T THE APPOINTMENT OF STATUTORY AUDITORS HAVE TO BE NOTIFIED WITH THE REGIST RAR OF COMPANIES BY FILING STATUTORY FORM IN THAT REGARD AS MANDATED B Y THE PROVISIONS OF COMPANIES ACT, 1956. 5.3. WE HOLD THAT THE AFORESAID FINDINGS CLEARLY GO TO PROVE THAT THE SECOND BALANCE SHEET IS MEANT ONLY FOR SUBMISSION TO THE BANKERS FOR THE PURPOSE OF OBTAINING HIGHER CREDIT LIMITS FROM THE BANK FOR THE PURPOSE OF BUSINESS AND THE LD AR ALSO INFORMED THAT THE HIGHER CREDIT LIMITS WERE ALSO NOT SANCTIONED BY THE BANK TO THE ASSESSEE BY PLACING RELIANCE ON THE SECOND BALANCE SHEET. HENCE IN ANY CASE, THE FILING OF SECOND BALANCE SHEET BY THE ASSESSEE HAD NOT CONFERRED A NY BENEFIT TO THE ASSESSEE BY WAY OF INCREASED SANCTION OF LOAN. WE HOLD THAT IN E ITHER CASE, IT DOES NOT ADVANCE THE CASE OF THE REVENUE TO FRAME THE ASSESSMENT ON THE ASSESSEE AT A MUCH HIGHER FIGURE WHICH HE HAD NOT REALLY EARNED. IT IS WELL SE TTLED THAT ONLY THE REAL INCOME IS TO BE BROUGHT TO TAX. RELIANCE IN THIS REGARD IS PLA CED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS A.RAMAN & CO REPORTE D IN (1968) 67 ITR 11 (SC) . THERE IS ABSOLUTELY NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE TO PROVE THAT THE ASSESSEE HAD DERIVED THE ADDITIONAL INCOME OF RS 2 C RORES TOWARDS ADDITIONAL CONTRACT RECEIPTS FROM A SOURCE OTHER THAN FROM GOVERNM ENT AND ALSO INFUSE RS 49 LACS ADDITIONAL CAPITAL OUT OF SUCH RECEIPTS. IT CANNOT BE BRUSHED ASIDE THAT THE ASSESSEE HAD SHOWN SHAREHOLDERS FUNDS OF RS 95 LACS WHICH IS MUCH MORE 6 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. THAN THE AUTHORIZED CAPITAL WHICH IS NOT POSSIBLE AT ALL AS ASS ESSEE IS ALSO ANSWERABLE TO ANOTHER REGULATORY BODY I.E REGISTRAR OF COMPANIES. IT IS A FA CT THAT NO COMPANY COULD INCREASE ITS AUTHORIZED CAPITAL WITHOUT MAKING PAYMENT OF NECE SSARY FILING FEES AND SUBMISSION OF STATUTORY FORMS WITH REGISTRAR OF COMPANIE S AND OTHER CONNECTED COMPANY LAW FORMALITIES TO BE COMPLIED WITH LIKE OBTA INING THE PERMISSION OF THE SHAREHOLDERS IN THE GENERAL BODY MEETING AND PASS ING RESOLUTIONS TO THAT EFFECT FOR INCREASING THE AUTHORIZED CAPITAL. MOREOVER, NO EVI DENCE IS ALSO BROUGHT ON RECORD TO PROVE AS TO IN WHOSE NAME THE ALLEGED INCREASED SHAR E CAPITAL OF RS 44 LACS HAVE BEEN ALLOTTED BY THE ASSESSEE COMPANY AND FR OM WHOM A SUM OF RS 5 LACS WAS RECEIVED TOWARDS SHARE APPLICATION MONEY BY THE ASSESSEE. THIS ALSO GOES TO PROVE THAT THERE WAS NO INFUSION OF ADDITIONAL CAPITAL OF RS 49 LA CS BY THE ASSESSEE AS STATED IN THE SECOND BALANCE SHEET WARRANTING ANY ADDITION IN T HAT REGARD. 5.4. IN THESE CIRCUMSTANCES, WE HOLD THAT THE ADDITION MADE TOWARDS SHA RE CAPITAL OF RS 49 LACS AND DETERMINATION OF NET PROFIT AT 8% ON INCREASED TUR NOVER OF RS 2 CRORES STANDS ON A VERY WEAK FOOTING IN THE EYES OF LAW. HENCE THE ADDITIONS MADE THEREON ARE HEREBY DIRECTED TO BE DELETED. ACCORDINGLY, THE GR OUND NOS. 1 TO 8 RAISED BY THE ASSESSEE ARE ALLOWED. 6. UNDISCLOSED SALE OF FLATS AND SUPPRESSION OF SALES DURING THE COURSE OF SURVEY ON 18.8.2008 , CERTAIN LOOSE SHEETS WERE IMPOUNDED AND THE LD AO HAD SUMMARIZED THE DISCREPANCIES NOTICED BY THE SURVEY TEAM WITH REGARD TO UNDISCLOSED SALE OF FLATS AND SUPPRESSION OF SALES AS BELOW:- UNDISCLOSED SALE OF FLATS FROM MP TOWER II VIDE IMPOUNDED DOCUMENTS HAVING IDENTIFICATION MARK CD -12 (PAGE 98) 76,57,071 UNDISCLOSED SALE OF FLATS FROM MP NAGINA VIDE IMPOUNDED DOCUMENTS HAVING IDENTFICATION MARKS CD-12 (PAGE 20) 26,06,192 SUPPRESSED SALES ON ACCOUNT OF M/S SIDDHESH SWASTHYA SEWA SHALYA PVT LTD VIDE IMPOUNDED DOCUMENTS IDENTIFICATION MARK CD-21 (PAGE 88) 2,55,018 7 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. ---------------- 1,05,18,281 ---------------- THE LD AO TREATED THE SAME AS THE TURNOVER OF THE ASSESSEE A ND ESTIMATED NET PROFIT AT THE RATE OF 8% ON THE SAME AND DETERMINED THE TAXABLE INCOME W HICH WAS SUSTAINED BY THE LD CITA ON FIRST APPEAL. AGGRIEVED, THE ASSESSEE I S IN APPEAL BEFORE US VIDE GROUND NOS. 9 & 10. 6.1. THE LD AR ARGUED THAT THE AFORESAID SALES MENTIONED IN THE LOOS E SHEETS WERE DULY REFLECTED IN THE BOOKS OF ACCOUNTS AS SALES IN DIFFERENT YE ARS AS ADMITTEDLY THE SALES OF THESE FLATS RELATES TO TWO TO THREE YEARS. WITH R EGARD TO THE SUPPRESSION OF SALES OF RS. 2,55,018/- IS CONCERNED, HE ARGUED THAT IN THE IMPOUNDED DOCUMENT S, THE BILL WAS MADE OUT FOR RS. 38,80,018/- WHEREAS IN THE BOOKS OF ACCOUNTS, IT WAS MENTIONED AT RS. 36,25,000/- BASED ON THE FINAL CERTIFICATION OF THE BILL MADE BY THE SITE ENGINEER. HE STATED THAT THIS FACT MAY BE RE-VERIFIED FROM THE RECORDS OF THE ASSESSEE AND ACCORDINGLY PRAYED FOR SET ASIDE. IN RESPONSE TO THIS, THE LD DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT IN THE FAC TS AND CIRCUMSTANCES OF THE CASE, THIS ISSUE REQUIRES TO BE RE-EXAMINE D BY THE LD AO WITH SPECIFIC REFERENCE TO THE IMPOUNDED DOCUMENTS VIS-A-VIS THE BOOKS OF ACCOUNTS OF THE ASSESSEE TO ASCERTAIN THE FACT AS TO WHETHER THE SAME W ERE INCLUDED IN THE TURNOVER / CONTRACT RECEIPTS IN THE RESPECTIVE YEARS. ACCORDINGL Y WE DEEM IT FIT AND APPROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE LD AO TO DECIDE THIS ISSUE AFRESH, IN ACCORDANCE WITH LAW , SUBJECT TO THE DIRECTIONS CONTAINED HEREI NABOVE. ACCORDINGLY, THE GROUNDS 9 & 10 RAISED BY THE ASSESSEE IN THIS R EGARD ARE ALLOWED FOR STATISTICAL PURPOSES. 7. DETERMINATION OF NET PROFIT 8 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. WITH REGARD TO THE DETERMINATION OF NET PROFIT OF THE ASSESSEE AT THE RATE OF 8% ON AN ESTIMATED BASIS IS CONCERNED, THE LD AR FILED A COMPARATIVE CHAR T OF PROFITABILITY STATEMENT AS BELOW:- ASST YEAR CONTRACT /SALES RECEIPT NET PROFIT 2003-04 1,94,76,739 5,11,577 ( 2.62%) 2004-05 1,95,44,411 6,19,738 ( 3.17%) 2005-06 4,45,24,159 13,60,814 ( 3.05%) 2006-07 6,07,76,007 17,08,317 ( 2.81%) 2007-08 5,89,79,780 18,35,948 ( 3.11%) THE LD AR FURTHER STATED THAT FOR THE ASST YEAR 2006-07, THE NET PROFIT WAS ESTIMAT ED AT 5% OF THE CONTRACT RECEIPTS BY THE LD AO THEREBY MAKING AN A DDITION OF RS. 9,51,535/- IN THE ASSESSMENT. THIS WAS SUBSEQUENTLY REDUCED TO RS. 1,00,000/- BY THE LD CITA. THE LD AR FURTHER STATED THAT FOR THE ASST Y EAR 2005-06, ADHOC ADDITION OF RS. 2,00,000/- WAS MADE BY THE LD AO WHICH WAS SUSTAINED BY THE LD CITA IN FIRST APPEAL. ACCORDINGLY HE PRAYED FOR FAIR ESTIMATI ON OF NET PROFIT FOR THE YEAR UNDER APPEAL TAKING INTO ACCOUNT THE PAST HISTORY AND THE INCOME TAX BEHAVIOUR OF THE ASSESSEE. THE LD DR VEHEMENTLY SUPPORTED FOR ADOPTION OF 8% AS NET PROFIT OF THE ASSESSEE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CONDUCT OF THE ASSESSEE BY FILING TWO BALANCE SHEETS. 7.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ISSUE INVOLVED IS ONLY WITH REGARD TO FAIR ESTIMATION OF NET PROFIT OF THE ASSESSEE AS THE BOOKS OF A CCOUNTS PRODUCED BY THE ASSESSEE DURING THE COURSE OF PROCEEDINGS WERE REJECTED BY T HE LD AO AND PENALTY PROCEEDINGS U/S 271 A OF THE ACT WERE ALSO INITIATED ON THE ASSESSEE FOR THE SAME. WE FIND THAT GOING BY THE PAST HISTORY AND INCOME TAX BEHA VIOUR OF THE ASSESSEE, WE DEEM IT FIT AND APPROPRIATE, TO ESTIMATE THE NET PR OFIT OF THE ASSESSEE FOR THE ASST YEAR 2007-08 ( I.E THE YEAR UNDER APPEAL) AT 4% OF CONTRAC T RECEIPTS AND AT 5% OF SALE VALUE OF FLATS , WHICH WOULD MEET THE ENDS OF JUSTICE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD AO IS DIRECTED TO DETERMI NE THE NET PROFIT FROM 9 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. BUSINESS ACCORDINGLY AND BRING TO TAX THE INTEREST INCOME ON FD AND I NTEREST ON IT REFUND OF RS. 1,84,798/- AS INCOME FROM OTHER SOURCES. WE DIRECT ACCORDINGLY. 8. CHARGEABILITY OF INTEREST U/S 234B OF THE ACT THE LD AR ARGUED THAT THE RECEIPTS OF THE ASSESSEE WOULD BE DULY S UBJECTED TO DEDUCTION OF TAXES AT SOURCE AND HENCE THERE WOULD BE NO OBLIGATION TO M AKE PAYMENT OF ADVANCE TAX AND ACCORDINGLY THE INTEREST U/S 234B OF THE A CT SHALL NOT BE MADE APPLICABLE TO THE ASSESSEE. WE HAVE HEARD THE RIVAL SUBMI SSIONS. WE FIND THAT THE ARGUMENT OF THE LD AR IS FAR FETCHED AND IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT THE ENTIRE TAX LIABILITY IS COVERED BY THE DEDUCTION OF TAX AT SOURCE S O AS TO REACH TO A SITUATION THAT NO ADVANCE TAX IS PAYABLE BY THE ASSESS EE. THAT SITUATION IS CONSPICUOUSLY ABSENT IN THE ASSESSEES CASE. HOWEVER, IN VIEW OF THE DECISION OF THE HONBLE JHARKAND HIGH COURT IN THE CASE OF AJAY PRAKASH VERMA V S. ITO IN TA NO. 38 OF 2010 DATED 25.07.2012, WE DIRECT THE LD AO TO CHARGE INTEREST U/S 234B OF THE ACT ON THE RETURNED INCOME AND NOT ON THE ASSESSED INCOME BY RESPECTFULLY FOLLOWING THE VERDICT OF THE JURISDICTIONAL HIGH COURT SUPRA. ACCORDINGL Y, THE GROUND NO. 12 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 9. THE GROUND NOS. 11 & 13 ARE GENERAL IN NATURE AND DOES NOT REQUIRE A NY ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12.09.2016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12 TH SEPTEMBER, 2016 JD.(SR.P.S.) 10 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT - M/S. PATO BUILODERS PVT. LTD., JAMSHEDPUR 2 RESPONDENT - ACIT, CENTRAL CIRCLE-II, JASMSHEDPUR 3 . THE CIT(A), 4. 5. CIT DR, ITAT, RANCHI / TRUE COPY, BY ORDER, ASSTT. REGISTRAR . 11 ITA NO.65/RAN/2014, AY 2007-08 PATO BUILDERS PVT. LTD. 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 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 DICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6. DATE ON WHICH THE FILES FOES TO THE HEAD CLERK 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 8. DATE OF DISPATCH OF THE ORDER.