Bhupendrer Pal Singh and Sons, Guwahati V. Assistant Commissioner of Income Tax, Circle-4, Guwahati

ITA 71/GTY/2020

• Counselvise Citation: [2022] 100 COUNSELVISE.COM (IT) 0462 (ITAT-GUWAHATI)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 15-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 44AD; 143(3); 142(1); 250; 143(2); 208; 73

Judgement Text

आयकर अपीलीय अधिकरण ग ु वाहाटी 'डीबी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI ‘DB’ BENCH AT KOLKATA [वर् ु ु अल कोट ु ] [Virtual Court] डॉ. मनीष बोरड, ल े खा सदस्य एवं श्री संजय शमा ु , न्याधयक सदस्य क े समक्ष Before DR. MANISH BORAD, ACCOUNTANT MEMBER & SRI SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons.................................Appellant [PAN: AAEHB 6463 J] Vs. ACIT, Circle-4, Guwahati.......................................Respondent Appearances by: Sh. Babu Lal Jain, FCA, appeared on behalf of the Assessee. Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue. Date of concluding the hearing : October 18 th , 2022 Date of pronouncing the order : December 21 st , 2022 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2015-16 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Guwahati-2, I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons. Page 2 of 6 Guwahati [in short ld. “CIT(A)”] dated 23.01.2020 arising out of the assessment order framed u/s 143(3) of the Act dated 17.11.2017. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1) For that the learned CIT(A) has erred in law / facts (a) while rejecting the explanation submitted vide Letter No CIT (A): 01 dated 24/07/2019 (Para: 1.01 to 1.05) as to scope of the enquiries to be made while completing assessment of “LIMITED SCRUTINY” case. (b) while expanding the scope of “LIMITED SCRUTINY” even after apprising the contents of Notice dated 04/07/2017 (U/s 143 (2) j_but approving A.O’s action by observing: “Whether or not the purported income embodied in these purported contractual receipt is also sufficient / proper” 2) For that the learned CIT (A) has erred in law / facts while confirming AO’s NP Estimate (i.e. 8% of Contract Receipts provided in section 44 AD of LT Act) after. (a) Ignoring / not apprising the submission made vide Letter No: CIT (A): 01 dated 24/07/2019 (Page 86 - 90 of P.Book ) - Para 3.01 / 3.02/3.03 = Letter No 03 dated 06/11/2017 (Page: 95 /96 of P.Book) - Explanation as to Non maintenance of Accounts = Letter No: 04 dated 07/11/2017 (Pages 97 - 99 of P.Book ) Explanations as to reasonability of N.P of Contract Receipts & its acceptance by ITAT in other comparable cases. PARA: 1 : Gross Profit Rate i.e. 9.09 % of Contract Receipts or 10% of the cost incurred by the contractor, provided by the State PWD on Civil contract & Administrative Expenses etc. incurred by the Contractor normally varied between 3% to 4% As such I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons. Page 3 of 6 N.P comes 5% to 6% of Contract Receipts only PARA: 2 : Comparable cases of civil contract quoted where in N.P% accepted by ITAT varied between 4.031% to 5.094% of Contract Receipts PARA: 3 : Peculiarities attached to the contract woks handled by A PARA: 4 : Capital Invested / Turnover / Profit Rate earned * Return on Capital 20.40% PARA: 5 : Request made to A O to provide details of similar Cases showing N.P 8% for rebuttal / complying rules of natural justice PARA: 6 : Non Applicability of Section 44AD of IT Act * Avasthi Traders v. CIT (2016) 73 / taxman. Com. 208 / SC HELD: “AO can not apply the provisions of presumptive taxation, if the TURN OVER of GROSS RECIEPTS of the A exceeds the prescribed limit.” 3) For that other grounds of law / facts may kindly be permitted at the time of hearing the appeal” 3. Brief facts of the case as culled out from the records are that the assessee is a HUF engaged in the business of event management under the name of Bhupinder Pal Singh and Sons. Income of Rs. 50 lakh declared in the e-return filed on 23.05.2016 for AY 2015-16. Case selected for limited scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO called for the details and noticed that the turnover of the assessee is Rs. 6,99,83,611/- but the assessee did not maintain books of account and the profits were declared on estimate basis @ 7.14%. However, due to absence of regular books of account and no sufficient details to verify the correctness of profits declared by the assessee, ld. AO estimated the profit at 8% and made the addition of Rs. 5,98,689/- and assessed the income at Rs. 55,98,689/-. I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons. Page 4 of 6 4. Aggrieved, the assessee preferred appeal before ld. CIT(A) but failed to succeed. 5. Aggrieved, the assessee is now in appeal before this Tribunal raising the legal issue of limited scrutiny as well as challenging the estimation of net profit @ 8%. Ld. Counsel for the assessee vehemently argued referring to the written submissions before the lower authorities. 6. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities. 7. We have heard rival contentions and perused the records placed before us. As regards the first ground that the assessment order is bad in law as ld. AO exceeded the scope of limited scrutiny without taking any permission, we note that the case of the assessee regarding limited scrutiny for the following two reasons: “a) Whether or not the contractual receipts appearing as per various sources (such as AIR, Form 26AS, Bank Statement etc.) have been offered for taxation or not and b) Whether or not the purported income embodied in these purported contractual receipts is also sufficient/proper?” 8. Further, we notice that ld. AO in order to examine these two issues asked the assessee to file various details including the books of account which the assessee failed to provide. Ld. AO has only estimated the profits on the turnover disclosed by the assessee and such action of ld. AO is well covered under the second reason mentioned above. Thus, ground no. 1 raised by the assessee has no merit and the same is dismissed. I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons. Page 5 of 6 9. Ground no. 2 relates to the estimation of net profit. The assessee has offered the income @ 7.14% of the gross turnover. In absence of proper books of account being maintained by the assessee, ld. AO estimated the net profit rate of 8%. It is contended by the ld. Counsel for the assessee that in the comparable cases of the contract being awarded by Public Works Department. This Tribunal in similar other cases has accepted the net profit rate of 5 to 6%. Further, it was submitted that normally the gross profit of the contractors is of 10% of the turnover and thereafter 3 to 4% is incurred on administrative expenses and the net profits normally range between 5 to 6%. To certain extent, we find merit in the contention of ld. Counsel for the assessee and therefore, in order to bring an end to this litigation, direct ld. AO to estimate the net profit @ 7.5% as against 8%. Thus, the addition of Rs. 2,48,771/- is sustained. The assessee gets relief of Rs. 3,49,918/- . Thus, ground no. 2 raised by the assessee is partly allowed. 10. Ground no. 3 is general in nature which needs no adjudication. 11. In the result, the appeal filed by the assessee is partly allowed. Kolkata, the 21 st December, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 21.12.2022 Bidhan (P.S.) I.T.A. No.: 71/Gty/2020 Assessment Year: 2015-16 Bhupinder Pal Singh and Sons. Page 6 of 6 Copy of the order forwarded to: 1. Bhupinder Pal Singh and Sons, Opportunity. T.B. Hospital, Manjit Niwas, Bye Lane No. 1, Birubari, Guwahati-781 016. 2. ACIT, Circle-4, Guwahati. 3. CIT(A)- Guwahati-2, Guwahati. 4. CIT- 5. CIT(DR), Guwahati Bench, Guwahati. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata