M/s. Jagannath Chaudhury, Bhubaneswar V. DCIT, Bhubaneswar

ITA 66/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3730 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: B K MAHAPATRA
• Keywords: Reopening of assessment; Business income; Depreciation; Reassessment proceedings
• Section: 44AD

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ./ ITA NO. 66 / CTK /20 1 5 ( / ASSESSMENT YEAR : 20 08 - 20 09 ) M/S JAGANATH CHAUDHURY , 98, KHARAVELA NAGAR, BHUBANESWAR - 751001 VS. DCIT, CIRCLE - 1(1), BHUBANESWAR - 751007 ./ ./ PAN/GIR NO. : A ADFJ 8103 A ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI B.K.MAHAPATRA, AR /REVENUE BY : SHRI D.K.PRADHAN, DR / DATE OF HEARING : 27 / 0 6 /201 7 / DATE OF PRONOUNCEMENT 28 / 06 /201 7 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH E ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) , BHUBANESWAR , DATED 5.11.2014 IN I.T. APPEAL NO. 0013 / 1 3 - 1 4 , PASSED U/S.147/144 OF THE ACT. THE ASSESSEE HAS RAISED THREE SUBSTANTIAL GROUNDS I.E. (I) CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT U/S.147; (II) LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION ON INTEREST INCOME OF RS.36,56,283/ - AND (III) LD. CIT(A) ERRED IN ACCEPTING THE MISCELLANEOUS INCOME OF RS.5,95,992/ - PERTAINS TO CESSATION OF LOAN CREDITORS. 2. AT THE TIME OF HEARING, LD. AR HAS NOT PRESSED GROUND NO.1 REGARDING REOPENING OF ASSESSMENT AND MADE ENDORSEMENT TO THE GROUNDS OF APPEAL. ITA NO. 66 /2015 2 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXECUTION OF CONTRACT WORKS OF GOVT. DEPARTMENTS/UNDERTAKINGS/AGENCIES, FILED ITS RETURN OF INCOME OF RS .1,55,53,920/ - AND THE ORIGINAL ASSESSMENT U/S.143(3) WAS COMPLETED ON 31.12.2010 WITH TOTAL INCOME OF RS.2,04,63,138/ - . THE AO FOUND THAT THERE IS INCOME ESCAPING ASSESSMENT IN RESPECT OF INTEREST INCOME AND MISCELLANEOUS INCOME AND ISSUED NOTICE U/S.148. SINCE THERE WAS NO RESPONSE, THE AO HAD NO ALTERNATIVE EXCEPT TO COMPLETE UNDER BEST JUDGMENT ASSESSMENT U/S.144 OF THE ACT. THE AO ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT FOUND THAT THE ASSESSEE HAS INTEREST INCOME OF RS.36,56,283/ - , WHEREAS THE ASSES SEE IN THE ORIGINAL ASSESSMENT ACCEPTED THE INCOME AT 10.5 % AS PROFIT FROM THE GROSS RECEIPTS AND THERE WAS NO DISPUTE AND ALSO MISCELLANEOUS INCOME HAS NOT BEEN OFFERED FOR TAXATION, THEREFORE, NOTICE U/S.142(1) WAS ISSUED. SINCE THERE WAS NO COMPLIANCE B Y THE ASSESSEE AND THE ASSESSMENT BEING TIME BARRED, THE AO MADE ADDITION O F INTEREST INCOME AND MISCELLANEOUS INCOME AND ASSESSED TOTAL INCOME OF RS.2,47,15,420/ - AND PASSED ORDER U/S.147/144, DATED 18.02.2013 . 3 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT(A) . LD. CIT(A) CONSIDERING THE GROUNDS RAISED BY THE ASSESSEE AND RELYING ON THE JUDICIAL DECISIONS, CONFIRMED THE ADDITION OF THE AO AND REASSESSMENT PROCEEDINGS AND DISMISSED THE ASSESSEES APPEAL. ITA NO. 66 /2015 3 4 . AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5 . BEFORE US, LD. AR ARGUED THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) AND THE BOOKS OF ACCOUNTS HAS BEEN REJECTED AND THE AO IN THAT ORDER MADE ADDITION ON THE BASI S OF ESTIMATION AND ACCEPTED THE CONTENTION OF LD. AR THAT THE INTEREST INCOME IS PART OF THE BUSINESS AND THERE IS A NEXUS AND SUPPORTED HIS ARGUMENTS WITH THE PAPER BOOK CONTAINING THE LIST OF FIXED DEPOSITS AND ALSO THE CORRESPONDENCES WERE WITH THE EXE CUTIVE ENGINEERS (WORKS) AND ALSO THE ASSESSEES OWN CASE IN THE TRIBUNAL. 6. CONTRA , LD. DR, EXPLAINED THAT THERE IS NO NEXUS OF INTEREST INCOME WITH THE ASSESSEES BUSINESS AND SHOULD BE OFFERED UNDER INCOME FROM OTHER SOURCES. 7. WE HEARD THE RIVAL SUBM ISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD . THE CONTENTION OF LD. AR OF THE ASSESSEE THAT THE INTEREST INCOME IS PART OF THE BUSINESS INCOME AND ASSESSEE HAS ALREADY ACCEPTED INCOME ON ESTIMATION BASIS, THEREFORE, INTEREST ALSO SHALL BE PART OF T HE RECEIPTS AND W AS OFFERED TAX. SINCE BOOKS OF ACCOUNTS ARE REJECTED THE ADDITION ON LIABILITIES HAS TO BE EXCLUDED. WE ALSO PERUSED THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 511/CTK/2012 FOR ASSESSMENT YEAR 2008 - 09, DATED 4 - 6 - 2013, WHE RE IT WAS OBSERVED AT PARA 5 AS UNDER : - WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO ACCEDE TO THE PRA YER OF THE LEARNED COUNSEL FOR THE ASSESSEE INSOFAR AS THE - ITA NO. 66 /2015 4 ASSESSE HAS CLAIMED THAT ON REJECTION OF BOOKS OF ACCOUNT U/S.145, THE PROVISIONS OF SECTION 44AD WERE TO BE CONSIDERED FOR COMPUTING THE CORRECT, INCOMES PROVIDED UNDER THE I.T.ACT. IT IS NOT THE CASE OF THE ASSESSEE TO NOT HAVE MAINTAINED THE. BOOKS OF ACCOUNT BUT THE ESTIMATION HAS BEEN RESORTED TO BY THE ASSESSING OFFICER ON THE REJECTION OF THE BOOKS RESULT U/S.145 WITHOUT POINTING OUT ANY SPECIFIC DEFECT ON THE MAINTENANCE THEREOF. FURTHERMO RE THE ADOPTION OF 10.5% NET PROFIT RATE WHEN HE AGREED TO ALLOW DEPRECIATION AND INTEREST AND SALARY TO THE PARTNERS THEREAFTER. WE SEE NO INJUSTIFICATION IN THE LEARNED COUNSEL FOR THE ASSESSEE'S SEEKING THE ESTIMATION TO BE CONSIDERED AT 10% INSTEAD OF 1 0.5% INSOFAR AS THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ACCOUNTING STANDARD AND THE REJECTION WAS WITHOUT ANY SPECIFIC DEFECT POINTED OUT EXCEPT NON - PRODUCTION OF THE BOOKS OF ACCOUNT. THE ASSESSEE HAD FILED THE AUDITED B ALANCE SHEET AND FINANCIAL STATEMENTS WHICH WERE CERTIFIED AS WERE IN ACCORDANCE WITH THE BOOKS OF ACCOUNT AUDITED BY THE CHARTERED ACCOUNTANT UNDER THE PROVISIONS OF SECTION 44AB.THEREFORE, WE - ARE INCLINED TO UPHOLD AND DIRECT THE ASSESSING OFFICER TO COM PUTE THE NET PROFIT AT 10% OF THE GROSS RECEIPTS AND THEREAFTER ALLOW DEPRECIATION, INTEREST AND SALARY TO THE PARTNERS FOR THE IMPUGNED ASSESSMENT YEAR. WE ALSO UPHOLD THE ORDER OF THE LEARNED CIT(A) DIRECTING THE ASSESSING OFFICER TO VERI FY THE CREDIT TO BE GIVEN TO THE ASSESSEE ON THE B ASIS OF TDS CERTIFICATES TO BE PRODUCED AND VERIFIED BY HIM IN SUPPORT OF THE INCOME WHICH HAS BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER HEREAFTER. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. WE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA), DIRECT THE AO TO ESTIMATE THE INCOME AT 10% OF INTEREST INCOME WHICH HAS A NEXUS WITH THE ASSESSEES BUSINESS I N OBTAINING THE CONTRACTS. ACCO RDINGLY, 10% OF THE INTEREST INCOME IS TO BE CONSIDERED AS BUSINESS INCOME AND ON THE OTHER DISPUTED ISSUE SINCE THE ASSESSEE HAS ALREADY CLAIMED THE EXPENDITURE ON INCURRING THE LIABILITIES, THEREFORE, THE ADDITION OF RS.5,95,992/ - IN REGARD TO MISCELLANE OUS INCOME IS SUSTAINED. ACCORDINGLY, ASSESSEES APPEAL IS PARTLY ALLOWED. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 28/06 / 201 7 . ITA NO. 66 /2015 5 SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GADAL E ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 28 / 06 /201 7 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S J AGANATH CHAUDHURY, 98, KHARAVELA NAGAR, BHUBANESWAR - 751001 2. / THE RESPONDENT - DCIT, CIRCLE - 1(1), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//