Sunita Subudhi, Bhubaneswar V. ITO, Bhubaneswar

ITA 73/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4362 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 17-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2011
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Keywords: Rejection of books of accounts; Wrong claim; Assessment record
• Section: 44AD

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 073/CTK/2011 (ASSESSMENT YEAR 2005 - 06) SMT. SUNITA SUBUDHI, PLOT NO.6/ 301, IRC VILLAGE, BHUBANESWAR 751 015 PAN: ATKPS 2382 N VERSUS INCOME - TAX OFFICER, WARD 2(1), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI NATABAR PANDA, AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR ORDER SHRI K.S.S.PRASAD RAO, JUDIC IAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) DT.22.11.2010 FOR THE ASSESSMENT YEAR 2005 - 06 IN THE CASE OF THE ASSESSEE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. FOR THAT THE ORDERS OF THE FORUMS BELOW ARE ILLEGAL, ARBITRARY, UNJUST AND EXCESSIVE IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE CASE. 2. FOR THAT THE ESTIMATION OF NET PROFIT @8% OF THE GROSS CONTRACT RECEIPTS IS EXCESSIVE AND LIABLE TO BE REDUCED TO THE RETURN FIGURE. 3. FOR THAT NEITHER THE LAO NOR THE LEARNED CIT(A) HAS APPRECIATED THE REASON FOR REJECTION OF BOOKS OF ACCOUNTS BUT ESTIMATED THE INCOME ON GROSS RECEIPTS. HENCE THE REJECTION OF BOOK RESULTS IS ILLEGAL, ARBITRARY AND UNJUS T AND THE RETURN FIGURE OF THE APPELLANT SHOULD BE ACCEPTED IN TOTO. 4. FOR THAT THE ADDITION OF A SUM OF 97,197.00 UNDER THE HEAD UNDISCLOSED TDS, 1,59,318.00 AS UNDISCLOSED SECURITY DEPOSIT, 28,932.00 AS UNDISCLOSED INTEREST INTEREST ACCRUED ON NSC, 16,479.00 AS WRONG CLAIM OF DEDUCTION U/S.80 - L OUT OF INTEREST ACCRUED ON NSC AND 2,125 AS N ON - DISCLOSURE OF INTEREST ON I. T. REFUND TO THE TOTAL INCOME OF THE APPELLANT, ARE ALL ILLEGAL AND ARBITRARY ADDITIONS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, HENCE THE ADDITIONS ARE LIABLE TO BE DELETED. 2 5. FOR THAT THE BOOK RESULT OF THE APPELLANT WAS REJECTED AND THE NET INCOME WAS ESTIMATED TO THE BE ST OF JUDGMENT, HENCE F URTHER ADDITIONS UNDER THE HEADS UNDISCLOSED SOURCES, IS ARBITRARY AND THE SAME AMOUNTS TO DOUBLE ADDITION AND THE SAME IS LIABLE TO BE DELETED. 3. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL, THE UNDISPUTED FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE IS A WORKS CONTRACTOR AND EARNED GROSS RECEIPTS OF 57,26,728 DURING THE PERIOD UNDER CONSIDERATION. THE ASSESSEE HAS FILED THE AUDIT REPORT A S REQUIRED U/S.44AB OF THE I.T.ACT. THE RETURN FILED BY THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER BEING NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE , HE REJECTED THE BOOK RESULT AND ESTIMATED THE NET PROFIT AT 10% OF THE GROSS RECEIPT OF 57,26,928. BESIDES THIS, THE ASSESSING OFFICER HAS ALSO MADE ADDITIONS OF 97,197 UNDER THE HEAD UNDISCLOSED SOURCE, 1,59,318 UNDER THE HEAD UNDISCLOSED SOURCES, 28,932 UNDER THE HEAD UNDISCLOSED SOURCES, 16,479 UNDER THE HEAD INTEREST ON NSCS AND RS.2,125 UNDER THE HEAD INTEREST ON I.T.REFUND. 4. AGGRIEVED WITH THIS ASSESSMENT ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(A), WHO AFTER CONSIDERING THE MATERIAL AVAILABLE IN THE ASSESSMENT RECORD AND THE SUBMISSIONS OF THE LEARNED A R OF THE ASSESSEE REDUCED THE NET PROFIT TO 8% AS AGAINST 10% OF THE GROSS RECEIPTS ADOPTED BY THE ASSESSING OFFICER. BUT HE UPHELD THE OTHER ADDITIONS MADE BY THE ASSESSING OFFICER . IT IS AGAINST SUCH ORDER THAT THE A SSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 5. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE VEHEMENTLY ARGUED CONTENDING INTER ALIA THAT SINCE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE ACCOUNTS MAINTAINED BY THE ASSESSEE, HE HAS TO ESTIMATE THE NET PROFIT TAXABLE IN THE HAN DS OF THE ASSESSEE AS PER THE PROVISIONS CONTAINED IN SECTION 44AD WHICH IS TO BE ESTIMATED AT 8% OF THE GROSS CONTRACT RECEIPT. THE DEPARTMENTAL AUTHORITIES HAVING BEEN RESORTED TO ESTIMATION OF NET INCOME TAXABLE IN THE HANDS OF THE ASSESSEE, THEREFORE, NO OTHER ADDITION IS PERMISSIBLE UNDER THE LAW. THEREFORE, THE ACTION OF THE DEPARTMENTAL AUTHORITIES IN RESORTING TO ESTIMATION AS WELL AS MAKING OTHER ADDITIONS IS NOT SUSTAINABLE FOR LEGAL SCRUTINY. APART FROM THAT IT IS FURTHER 3 CONTENDED BY THE LEARNED AR OF THE ASSESSEE THAT THE DEPARTMENTAL AUTHORITIES HAS TO NECESSARILY TAKEN INTO CONSIDERATION THE PREVIOUS HISTORY OF THE ASSESSEE WHILE ESTIMATING THE BOOK PROFIT. BUT IN THE CASE OF THE ASSESSEE, THE DEPARTMENTAL AUTHORITIES HAS NOT AT ALL CONSIDERED THE PAST HISTORY OF THE ASSESSEE. THE DEPARTMENTAL AUTHORITIES HAS ALSO NOT FOLLOWED THE ORDER OF THE ITAT, CUTTACK BENCH IN WHICH JURISDICTION THEY ARE WORKING. THE LEARNED CIT(A) HAS ALSO NOT PROPERLY APPRECIATED THE CONTENTIONS OF THE ASSESSEE. HENCE, THE REDUCTION OF PERCENTAGE OF PROFIT FROM 10% TO 8% ON THE GROSS RECEIPTS AS NET INCOME TO BE TAXED IN THE HANDS OF THE ASSESSEE IS ALSO UNSUSTAINABLE IN LAW AND REQUIRES TO BE SET ASIDE. 6. CONTRARY TO THIS, THE LEARNED DR HAS VEHEMENTLY ARGUED SUPPORTIN G THE IMPUGNED ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES. 7. ON CAREFUL ANALYSIS OF THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS THE ORDER OF THIS TRIBUNAL IN SIMILAR SUCH MATTER S AND THE PREVIOUS HISTORY OF THE ASSESSEE DEMONSTRATED BEFORE THE TRIBUNAL, IT IS FOUND THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E., 2004 - 05 THE ASSESSEE HAS RETURNED THE NET INCOME AT 1,50,330 WHICH COMES TO 3% OF THE GROSS RECEIPTS OF 50,11,022 WHICH WAS ACCEPTED BY THE DEPARTMENT. IN THE PRESENT PERIOD UNDER CONSIDERATION THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF 57,26,728 AND SHOWN THE NET PROFIT OF 2,43,838 WHICH IS WORKED OUT TO 4.3% ON THE GROSS RECEIPTS. BEING NOT SATISFIED WITH THE MAINTENANCE OF THE BOOKS OF ACCOUNT BY THE ASSESSEE, THE ASSESSING OFFICER RESORTED TO ESTIMATION OF NET PROFIT BY REJECTING THE BOOKS OF ACCOUNT. WHILE DOING SO HE ADOPTED THE PERCENTAGE OF PROFIT AT 10% OF THE GROSS RECEIPT. IN FIRST APPEAL, THE LEARNED CIT(A) HAS REDUCED THIS PERCENTAGE OF PROFIT TO 8%. HOWEVER, THE LEARNED CIT(A) UPHELD THE OTHER ADDITIONS MADE BY THE ASSESSING OFFICER. IN ESTIMATION OF INCOME, THE PREVIOUS HISTORY OF THE ASSESSE E IS MORE IMPORTANT WHICH GOVERNS THAN ANY OTHER BASIS FOLLOWED BY THE DEPARTMENT. AS CAN BE SEEN FROM THE MATERIAL AVAILABLE ON RECORD IN THE PRECEDING ASSESSMENT YEAR 2004 - 05 THE ASSESSEE HAD SHOWN GROSS RECEIPTS AT 50,11,022 AND NET INCOME AT 1,50,330 WHICH COMES TO 3% OF THE GROSS RECEIPTS OF 50,11,022, WHICH WAS ACCEPTED BY THE DEPARTMENT. IN THE PRESENT PERIOD UNDER CONSIDERATION THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF 57,26,728 AND NET PROFIT OF 2,43,838 WHICH IS WORKED OUT TO 4.3% OF THE GROSS RECEIPTS. ON COMPARISON OF THESE TWO AYS MAKES IT CLEAR THAT THE ASSESSEE HAS OFFERED 4 MORE PROFIT THAT WHAT WAS OFFERED IN THE PRECEDING ASSESSMENT YEAR THOUGH THE DEPARTMENTAL AUTHORITIES HAVE FOUND THAT THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT P ROPERLY AND REJECTED THE SAME. THEY OUGHT TO HAVE TAKEN INTO CONSIDERATION THE PREVIOUS HISTORY OF THE ASSESSEE WHICH IS THE FIRST AND FOREMOST THING TO BE TAKEN INTO CONSIDERATION WHILE ESTIMATING THE INCOME TO BE TAXED IN THE HANDS OF THE ASSESSEE. BOTH THE LOWER AUTHORITIES HAVE FAILED TO CONSIDER THIS ASPECT WHILE ESTIMATING THE PROFITS TAXABLE IN THE HANDS OF THE ASSESSEE. THE PREVIOUS HISTORY BEING IMPORTANT AND GOVERNING FACTOR TO ESTIMATE THE NET PROFIT TO BE TAXABLE IN THE HANDS OF THE ASSESSEE, TH E ASSESSEE HAVING RETURNED NET PROFIT @3% ON THE GROSS RECEIPTS FOR THE IMMEDIATELY PRECEDING YEAR I.E., ASSESSMENT YEAR 2004 - 05 WHICH HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT, AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS OFFERED NET IN COME OF 2,43,838 I.E., @4.3% ON THE GROSS RECEIPTS OF 57,26,728 AT BEST THE NET PROFIT TAXABLE IN THE HANDS OF THE ASSESSEE COULD BE 4.3% OF THE GROSS RECEIPTS OR NEARBY BUT NOT SO HIGH AS 10% ADOPTED BY THE ASSESSING OFFICER AND REDUCED BY THE LEARNED CIT(A) TO 8%. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT RESPECTFULLY FOLLOWING THE RULE OF PRECEDENCE BY TAKING INTO CONSIDERATION THE ORDER OF THE ITAT, CUTTACK BENCH IN ITA NO.205/CTK/2010 DT.15.11.2010 IN CASE OF MR.JAMI RAVI SHANKAR V. ACIT, BERHAMPUR, IN ITA NO.12 9 /CTK/2010 DT.25.2.2011 IN CASE OF PARESH KUMAR NAYAK V. ITO, WHEREIN ADOPTION OF NET PROFIT @6% OF THE GROSS CIVIL CONTRACT RECEIPTS HAS BEEN HELD TO BE REASONABLE, WE HOLD IT REASONABLE TO ADOPT THE NE T INCOME @ 5% OF THE GROSS RECEIPTS IN THE CASE OF THE PRESENT ASSESSEE BEFORE US. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE NET INCOME @5% OF THE GROSS RECEIPTS. 8. AS TO T HE OTHER ADDITIONS AS PER THE DEPARTMENTAL AUTHORITIES BEING TDS OF 97,197 RELATING TO THE ASSESSMENT YEAR 2004 - 05, SECURITY DEPOSIT OF 1,59,318 RELATING TO THE ASSESSMENT YEAR 2005 - 06, INTEREST ON NSC NOT SHOWN OF 28,932, INTEREST ON NSC AS SHOWN OF 16,479 AND INTEREST ON I.T.REFUND NOT SHOWN OF 2,125, WE ARE OF THE CONSIDE RED VIEW THAT THE TDS OF 97,197 FOR ASSESSMENT YEAR 20 04 - 05 CANNOT BE CONSID ERED AS INCOME OF THE ASSESSEE AS I T IS ONLY REFUND OF TDS PAID IN EXCESS THAN THE TAX PAYABLE BY THE ASSESSEE. SIMILARLY THE AMOUNT OF 1,59,318 CANNOT BE ADDED AS INCOME THE SAM E BEING SECURITY DEPOSIT FOR THE ASSESSMENT YEAR 2005 - 06 AS SECURITY DEPOSIT IS THE AMOUNT INVESTED BY THE ASSESSEE FOR OBTAINING THE CONTRACTS. 5 THEREFORE, THESE ABOVE TWO AMOUNTS CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE AND HENCE, THE SAID TWO ADDIT IONS ARE DELETED. HOWEVER , IN RESPECT ADDITIONS OF 28,932 BEING INTEREST ACCRUED ON NSC AND 16,479 BEING INTEREST ON NSC RECEIVED, THERE IS NO INFORMATION OR MATERIAL MADE AVAILABLE TO THE TRIBUNAL WHETHER THESE NSCS ARE INVESTED BY THE ASSESSEE SEPARATELY HAVING COMMERCIAL BUSINESS OR NOT. THEREFORE W E FEEL IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE ABOVE ASPECT OF THE CASE AND PASS NECESSARY ORDER IN ACCORDANCE WITH LAW. ALSO WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR REEXAMINATION IN RESPECT OF THE SUM OF 2,125 BEING I.T.REFUND ALLEGED TO HAVE BEEN NOT SHOWN BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - S D/ - (K.K.GUPTA) ACCOUNTANT MEMBER (K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: 2. THE RESPONDENT: 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN D UPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.