Shri Vishwanath Parida, Surat V. The Income tax Officer,Ward-2(4), Surat

ITA 787/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9362 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 09-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH HARDIK VORA
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 13/08/09 DRAFTED ON: 18/08/09 ITA NO.787/AHD/2009 ASSESSMENT YEAR : 2005-06 SHRI VISHWANATH PARIDA 2/3228, HIRA MODI STREET SAGRAMPURA SURAT VS. THE ITO WARD-2(4) SURAT PAN/GIR NO. : AGUPP 1840 L (APPELLANT) .. (RESPONDENT) APPELLANT BY : S/SHRI RASESH SHAH/ HARDIK VORA RESPONDENT BY: SHRI C.K. MISHRA, LD.DEPARTMENTAL REPRESENTATIVE O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-II, SURAT, DATED 31/12/2008 PASSED FOR ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION O THE ASSESSING OFFICER IN ITA NO .787/AHD/2009 SHRI VISHWANATH PARIDA VS. ITO ASST.YEAR - 2005-06 - 2 - PASSING THE ORDER U/S.144 OF THE I.T.ACT AS NO NOTI CE U/S.143(2) WAS SERVED TO ASSESSEE OR HIS AUTHORIZED REPRESENTA TIVE. 3. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSE E DID NOT PRESS THE ABOVE GROUND AND, HENCE, THE SAME IS DISMISSED. 4. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN MAKING ADDITION BY ESTIMATING THE NET PR OFIT RATIO AT 8% ON CONTRACT RECEIPTS AS AGAINST 10% TAKEN BY THE ASSESSING OFFICER. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT THE ASSESSEE WAS A LABOUR CONTRACTOR AND HAD P ROVIDED SERVICES TO M/S.LARSEN & TOUBRO THIS YEAR. THE JOB WORK RECEI PT WAS RS.1,04,98,093/-. SINCE, THE ASSESSEE WAS UNABLE T O PRODUCE THE BOOKS, THE ACCOUNTING RESULTS WERE REJECTED BY THE ASSESSI NG OFFICER. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE PROVISI ONS OF SECTION 44AD OF THE I.T. ACT, 1961 IS APPLICABLE TO A LABOUR CON TRACTOR WHERE THE GROSS RECEIPT DOES NOT EXCEED RS.40 LAKHS. GIVEN THE TO TAL QUANTUM OF RECEIPT DISCLOSED BY THE ASSESSEE, THE PROVISIONS O F SECTION 44AB WAS NOT APPLICABLE TO HIS CASE. SINCE THERE WAS NO POS SIBILITY OF VERIFYING THE EXPENSES CLAIMED BY THE ASSESSEE, EVENTHOUGH THE BO OKS OF ACCOUNT WERE ITA NO .787/AHD/2009 SHRI VISHWANATH PARIDA VS. ITO ASST.YEAR - 2005-06 - 3 - AUDITED, THE ASSESSING OFFICER TOOK THE VIEW THAT T HE ASSESSEE HAD SHOWN A LOWER NET PROFIT RATE AT 1.03%, WHICH OUGHT TO HA VE BEEN MUCH HIGHER. HE THEREFORE ESTIMATED THE NET PROFIT AT 10% OF THE TOTAL RECEIPT AND MADE THE ADDITION OF RS.10,49,809/. 6. IN APPEAL BEFORE THE LD.CIT(APPEALS), THE LD. AU THORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED BY WAY OF WRITTEN SUBMISSIONS DATED 28/12/2008, COPY OF WHICH PLACED AT PAGE NOS. 1 TO 4 OF THE PAPER- BOOK AS UNDER: EVEN WITHOUT PREJUDICE, U/S.44AD IF THE GROSS RECE IPTS ARE LESS THAN RS.40 LAKHS AND NO BOOKS OF ACCOUNT ARE MAINTA INED BY THE ASSESSEE THE MAXIMUM RATE AT WHICH THE INCOME CAN B E ESTIMATED IS 8% OF THE GROSS RECEIPTS PAID OR PAYABLE TO AN A SSESSEE. THE RATE OF 8% PRESCRIBED UNDER THE ACT IS COMPREHENSIV E I.E. AFTER TAKING INTO CONSIDERATION ALL DEDUCTIONS U/S.30 TO 38. SO EVEN IF THE GROSS RECEIPTS EXCEED RS.40 LAKHS THE MAXIMUM R ATE AT WHICH THE INCOME CAN BE ESTIMATED SHOULD BE 8% OF THE GRO SS RECEIPTS PAID OR PAYABLE TO THE ASSESSEE. MOREOVER, UNDER BUSINESS ENTERPRISES IN ORDER TO INCREASE THE GROSS RECEIPTS THE NET PROFIT MARGIN HAVE TO BE REDUCED TO A CERTAIN EXTENT. TH US TAKING INTO CONSIDERATION THIS FACT THE RATE IF INCOME SHOULD N OT BE MORE THAN 8% OF THE GROSS RECEIPTS PAID OR PAYABLE TO THE ASS ESSEE. HENCE AS AN ALTERNATE PLEA THE MAXIMUM RATE AT WHICH THE INC OME OF THE ITA NO .787/AHD/2009 SHRI VISHWANATH PARIDA VS. ITO ASST.YEAR - 2005-06 - 4 - ASSESSEE SHOULD BE ESTIMATED BY THE LD. A.O. SHOULD BE 8% INSTEAD OF 10% OF THE GROSS RECEIPTS PAID OR PAYABLE TO THE ASSESSEE. 7. IN APPEAL, THE LD.CIT(APPEALS)S OBSERVATION REA DS AS UNDER:- 4.2. I FIND MERIT IN THE SUBMISSION OF THE AR. TH E ASSESSEE HAD SHOWN A NET PROFIT (NP) RATE OF 1.03%, WHICH WAS NO T VERIFIABLE IN THE ABSENCE OF THE BOOKS OF ACCOUNT. NO ONE HAD AP PEARED ON BEHALF OF THE ASSESSEE THROUGH OUT THE ASSESSMENT PROCEEDINGS, NOR WAS ANY WRITTEN SUBMISSION FILED. THEREFORE, THERE WAS A SOLID CASE FOR ESTIMATING THE ASSESSEES INCOME AFTER REJ ECTING THE BOOK RESULTS. HOWEVER, I AM OF THE VIEW THAT THE ESTIM ATION OF THE NP RATIO AT 10% MADE BY THE AO WAS SLIGHTLY ON THE HI GHER SIDE. EVEN THOUGH, THE PROVISIONS OF SECTION 44AD OF THE ACT MAY NOT HAVE BEEN TECHNICALLY APPLICABLE TO THE ASSESSEES CASE YET, IT PROVIDES AN INDICATION OF THE EXTENT TO WHICH PROFI TS CAN BE EARNED FROM SUCH BUSINESS. I WOULD THEREFORE DIRECT THE A O TO ESTIMATE THE NP RATE OF THE ASSESSEE AT 8% OF THE GROSS REC EIPT. 8. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSE E SUBMITTED THAT THE LD.CIT(APPEALS) WAS NOT JUSTIFIED IN ESTIMATING THE INCOME OF THE ASSESSEE AT 8% OF THE GROSS RECEIPTS OF THE ASSESSE E BY TAKING CUE FROM SECTION 44AD OF THE I.T. ACT, 1961 WHEN THE NET PRO FIT OF THE ASSESSEE ITA NO .787/AHD/2009 SHRI VISHWANATH PARIDA VS. ITO ASST.YEAR - 2005-06 - 5 - SHOWN AT 2.44% IN ASSESSMENT YEAR 2003-04 AND AT 0.89% IN ASSESSMENT YEAR 2004-05 WAS ACCEPTED BY THE DEPARTM ENT. 9. THE LD.DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, HAS SUPPORTED THE ORDER OF THE LD.CIT(APPEALS) AND ARG UED THAT THE ASSESSEE ITSELF HAD SUBMITTED BEFORE THE LD.CIT(APPEALS) TH AT NET PROFIT RATE SHOULD NOT BE IN EXCESS OF 8% OF THE GROSS RECEIPTS AS PROVIDED IN SECTION 44AD OF THE I.T. ACT, 1961. THEREFORE, THE ASSESS EE CANNOT AGITATE THE ISSUE OF NET PROFIT RATE APPLIED BY THE LD.CIT(APPE ALS). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE ASSESSEE IS A LABOUR CONTRACTOR WHOSE IN COME WAS ASSESSED U/S.144 OF THE I.T. ACT, 1961 FOR FAILURE TO PRODUC E THE BOOKS OF ACCOUNT IN THE COURSE OF ASSESSMENT HEARING. THE ASSESSI NG OFFICER ESTIMATED NET PROFIT OF THE ASSESSEE AT THE RATE OF 10% OF T HE GROSS RECEIPTS OF RS.1,04,98,093/- AT RS.10,54,228/- IN PLACE OF NET PROFIT OF RS.1,12,769/- DISCLOSED BY THE ASSESSEE IN THE RETURN FILED. ON APPEAL, THE LD.CIT(APPEALS) TAKING A CUE FROM THE PROVISIONS OF SECTION 44AD OF THE I.T. ACT, 1961, REDUCED THE NET PROFIT RATE AT 8% O F THE TURNOVER. THE ITA NO .787/AHD/2009 SHRI VISHWANATH PARIDA VS. ITO ASST.YEAR - 2005-06 - 6 - ASSESSEE SUBMITTED BEFORE US THAT THE PROVISIONS OF SECTION 44AD OF THE I.T. ACT, 1961 IS NOT APPLICABLE IN ITS CASE AS H IS TURNOVER IS MUCH MORE THAN RS.40 LAKHS. HE SUBMITTED THAT THE ASSESSEE F OR OBTAINING MORE BUSINESS TOOK THE CONTRACT IN COMPETITIVE RATE AND THEREBY REDUCING ITS PROFIT PERCENTAGE. THE ASSESSEE ALSO POINTED OU T THAT IN PAST THE ACCEPTED RATE OF NET PROFIT IN ITS CASE WORKS OUT T O 2.44% IN ASSESSMENT YEAR 2003-04 AND 0.89% IN ASSESSMENT YEAR 2004-05. IN VIEW OF THIS, THE ASSESSEE SUBMITTED THAT 8% OF NET PROFIT ACCEPT ED IN ITS CASE BY THE LD.CIT(APPEALS) WAS QUITE EXCESSIVE AND UNJUSTIFIED . WE FIND THAT, IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE PRO VISIONS OF SECTION 44AD OF THE I.T. ACT, 1961 IS NOT APPLICABLE AS THE ASSESSE ES TURNOVER IS RS.1,04,98,093/- WHICH IS MORE THAN RS.40 LAKHS. KEEPING IN VIEW THE PAST ACCEPTED RATE OF PROFIT IN THE CASE OF THE ASS ESSEE ITSELF, IN OUR CONSIDERED VIEW, IT WILL BE JUST AND FAIR ON THE FA CTS OF THE CASE TO ESTIMATE THE NET PROFIT OF THE ASSESSEE AT THE RATE OF 5% OF HIS GROSS TURNOVER TO MEET THE ENDS OF JUSTICE. WE, THEREFO RE, MODIFY THE ORDER OF THE LD.CIT(APPEALS) TO THE ABOVE EXTENT. THUS, TH IS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. GROUND NOS.3 & 4 OF THE APPEAL READ AS UNDER:- ITA NO .787/AHD/2009 SHRI VISHWANATH PARIDA VS. ITO ASST.YEAR - 2005-06 - 7 - 3. IT IS THEREFORE PRAYED THAT THE ADDITION/DISALLOWAN CE MADE BY ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME- TAX(APPEALS) MAY PLEASE BE DELETED. 4. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE AP PEAL. 12. THE ABOVE GROUNDS ARE GENERAL IN NATURE REQUIRE NO ADJUDICATION BY US. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 21/08/2009. SD/- SD/- ( T.K. SHARMA ) ( N.S. SAIN I ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 21/08/2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPO NDENT 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-II, SURAT 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD