Smt. Kusum Lata, Panchkula V. DCIT, Panchkula

ITA 803/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81048 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 17-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Rejection of books of accounts; Business income; Income from undisclosed sources
• Section: 44AD; 68; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 803/CHD/2014 ASSESSMENT YEARS : 2010-11 SMT. KUSUM LATA V D.C.I.T. CIRCLE H NO. 750, SECTOR 2 PANCHKULA PANCHKULA ABWPL 3948 H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUDHIR SEHGAL RESPONDENT BY: SHRI S.K. MITT AL DATE OF HEARING 20.11.2014 DATE OF PRONOUNCEMENT 27.11 .2014 O R D E R PER T.R. SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD CIT (A), PANCHKULA DATED 31.7.2014. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT THE LD. CIT(A) HAS ERRED IN HOLDING THE ACT ION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT S UNDER THE PROVISIONS OF SECTION 145(3) AND MAKING BEST JUDGM ENT ASSESSMENT U/S 144 OF THE IT ACT, 1961 ASPER PARA 6 OF THE ORDER. 2 THAT NOTWITHSTANDING THE ABOVE GROUND OF APPEAL, THE LD. CIT(A) HAS ALSO ERRED IN HOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING ESTIMATION OF NET PROFIT BY APPLYING RATE OF 8% ON THE GROSS RECEIPT AS LAID DOWN IN SEC 44AD OF THE IT AC T AS PER PARA 6.3 OF HIS ORDER. THEREFORE THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 25,30,582/- MADE BY THE ASSESSING OFFICER BY APPLYING THE NET PROFIT IS UN CALLED FOR . 3 THAT THE LD. CIT(A) HAS ALSO ERRED: A) IN CONFIRMING THE ADDITION TO THE TUNE OF RS. 5, 10,000 IN THE CAPITAL ACCOUNT BY TREATING THE SAME AS UNEXPLAINE D CASH CREDIT AS PER PARA 7.3 OF HIS ORDER. B) THAT NOTWITHSTANDING THE GROUND OF APPEAL NO. 3, THE ASSESSING OFFICER HAS ERRED IN NOT CONSIDERING THAT ADDITION OF RS.5,10,00 MADE IN RESPECT OF CASH CREDIT STANDS C OVERED IN THE ADDITION MADE BY APPLING NET PROFIT RATE OF 8% ON GROSS RECEIPTS. 2 3 GROUNDS NO. 1 & 2 - AFTER HEARING BOTH THE PARTIE S WE FIND THAT THE ASSESSEE IS DOING TWO TYPES OF BUSINESS CO NSISTING OF JOB WORK FOR PREPARATION AND INSTALLATION OF SIGN B OARDS IN THE PREMISES OF VARIOUS DEALERS AND ALSO TO ARRANGE PLA CES ON RENTAL BASIS AND INSTALLATION OF HOARDINGS AT SUCH PLACES. SECOND BUSINESS RELATE TO SUPPLY OF SOIL, SAND, BRI CKS AND JOB WORK OF CONSTRUCTION OF RESIDENTIAL BUILDINGS. FOR THESE TWO BUSINESSES THE ASSESSEE WAS HAVING TWO PROPRIETARY CONCERNS I.E. M/S AAKRITI ENTERPRISES (CONSTRUCTION DIVISION ) AND M/S AAKRITI ENTERPRISES. THE TURN OVER OF THESE TWO CO NCERNS WAS RS. 1,94,69,474/- AND RS. 2,92,90,352/- RESPECTIVEL Y. FROM FIRST CONCERN LOSS AMOUNTING TO RS. 1,25,670/- WAS CLAIMED AND IN THE SECOND CONCERN THE PROFIT OF RS. 13,70,273/- WAS DECLARED. DURING ASSESSMENT PROCEEDINGS THE ASSESS EE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNTS, DETAIL OF E XPENSE ETC. HOWEVER, ONLY LEDGER COPIES OF SOME OF THE EXPENSE WERE PRODUCED. BILL AND VOUCHERS WERE NOT PRODUCED AND EVEN FULL SET OF BOOKS OF ACCOUNTS CONSISTING OF LEDGER AND C ASH BOOKS WERE NOT PRODUCED. VARIOUS OPPORTUNITIES WERE GIVEN BUT THESE DOCUMENTS WERE NOT PRODUCED. A SHOW CAUSE NOTICE WA S GIVEN THAT WHY PROFIT SHOULD NOT BE ESTIMATED. EVEN THEN COMPLETE BOOKS, BILLS AND VOUCHERS WERE NOT PRODUCED. THERE FORE THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AN D OBSERVED THAT THE HON'BLE HIGH COURT OF PUNJAB & HARYANA HAS HELD PROFIT RATE OF 12% TO BE REASONABLE IN CASE OF CIT V. PRAB HAT KUMAR, 323 ITR 675. IN ANOTHER JUDGMENT IN CASE OF RAJA R AM CONTRACTOR V CIT, ITA NO. 689 OF 2009, THE HONBLE COURT HELD 10% PROFIT TO BE REASONABLE. THEN HE CITED A FEW D ECISIONS OF THE TRIBUNAL WHERE PROFIT OF 12% AND 6% WAS HELD TO BE 3 REASONABLE. IN THESE CIRCUMSTANCES HE ESTIMATED TH E PROFIT AT 8%. 4 BEFORE THE LD. CIT(A), IT WAS MAINLY SUBMITTED TH AT THE ASSESSEE ATTENDED VARIOUS HEARINGS FROM TIME TO TIM E AND REPLY TO ALL THE QUESTIONNAIRES. THEREFORE NET PROFIT RAT E OF 8% WAS NOT JUSTIFIED. RELIANCE WAS ALSO PLACED ON CERTAIN DECISIONS OF THE TRIBUNAL WHERE 6% PROFIT WAS HELD TO BE REASON ABLE. 5 BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT A CIVIL CONTRACTOR AND PART OF THE BUSINESS CONSIST OF INSTALLATION OF HOARDINGS, THEREFORE 8% PROFIT WAS NOT JUSTIFIED. HE AGAIN REITERATED THE SUBMISSIONS MAD E BEFORE THE LOWER AUTHORITIES THAT IN CERTAIN DECISIONS 6% PROF IT WAS HELD TO BE REASONABLE. 6 ON THE OTHER HAND, LD. D.R FOR THE REVENUE STRONG LY SUPPORTED THE ORDER OF THE LD. CIT(A). 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND T HAT ADMITTEDLY THE ASSESSEE HAS NOT PRODUCED COMPLETE B OOKS OF ACCOUNTS BEFORE THE ASSESSING OFFICER OR THE LD. CI T(A). EVEN BILLS AND VOUCHERS FOR VARIOUS EXPENSES FOR WHICH L EDGER SHEETS WERE PRODUCED, WERE NOT PRODUCED FOR VERIFICATION. THEREFORE IN OUR OPINION, THE ASSESSING OFFICER HAS CORRECTLY REJECTED THE BOOKS OF ACCOUNTS PARTICULARLY BECAUSE VARIOUS OPPO RTUNITIES WERE GIVEN BY THE ASSESSING OFFICER TO PRODUCE SUCH BOOKS OF ACCOUNTS. AS FAR AS ESTIMATION OF RATE OF PROFIT IS CONCERNED, IT IS TO BE NOTED THAT THE ASSESSEE IS NOT ONLY ENGAGE D IN THE BUSINESS OF INSTALLATION OF HOARDINGS BUT IS ALSO D OING THE BUSINESS OF CONSTRUCTION OR RESIDENTIAL BUILDINGS. THE HON'BLE COURT HAS POINTED OUT WHY THE ASSESSING OFFICER HAS HELD PROFIT OF 12% REASONABLE IN CASE OF CIT V. PRABHAT KUMAR (SUPRA). NO 4 DOUBT THE TRIBUNAL HAD ALSO HELD 6% PROFIT AS REASO NABLE IN SOME CASES BUT IT WOULD DEPEND ON FACTS OF EACH CASE. IN OUR OPINION, THE LD. CIT(A) IS REASONABLE IN ADOPTING PROFIT RAT E OF 8% WHICH DOES NOT REQUIRE ANY INTERFERENCE. THEREFORE GROUN DS NO. 1 & 2 ARE REJECTED. 8 GROUND NO. 3 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THERE IS A CREDIT IN THE CAPITAL ACCOUNT AMOU NTING TO RS. 5,10,000/-. DESPITE VARIOUS ENQUIRIES NO EVIDENCE WAS FILED TO EXPLAIN THE SOURCE OF THIS CREDIT. IN THE ABSENCE OF EXPLANATION THE ASSESSING OFFICER ADDED THIS AMOUNT U/S 68 TO T HE INCOME OF THE ASSESSEE. 9 ON APPEAL THE LD. CIT(A) REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN CASE OF KALE KHAN MOHAMMAD HANIF CIT, 50 ITR 1 AND CIT V. DEVI PRASAD VISHWANATH PRA SAD, 72 ITR 194. IN THESE DECISIONS IT WAS HELD THAT IF IN COME IS ESTIMATED EVEN THEN SEPARATE ADDITION CAN BE MADE F OR DEPOSITS U/S 68. THEREFORE FOLLOWING THIS DECISION HE CONFIR MED THE ADDITION. 10 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ONCE INCOME HAS BEEN ESTIMATED THERE WAS NO SC OPE FOR MAINTAINING SEPARATE ADDITION U/S 68. IN THIS REGA RD HE RELIED ON THE DECISION OF HON'BLE HIGH COURT OF PUNJAB & H ARYANA IN CASE OF CIT V. AGGARWAL ENGG. COMPANY., 302 ITR 246 . 11 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE ST RONGLY SUPPORTED THE ORDER OF LD. CIT(A) AND FURTHER RELIE D ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF ANANTH ARAM VEERASINGHAIAH & COMPANY V. CIT, 123 ITR 457. 5 12 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. THE ASSESSEE HAS FAILED TO GIVE ANY EXPLANATION REGARDI NG SOURCE OF CAPITAL INTRODUCED. IN OUR OPINION, THE LD. CIT (A) HAS CORRECTLY CONFIRMED THE ADDITION BECAUSE THE HON'BL E SUPREME COURT IN CASE OF KALE KHAN MOHAMMAD HANIF V CIT (SU PRA) HAS CLEARLY HELD AS UNDER: THAT THE AMOUNTS OF THE CASH CREDITS COULD BE ASSE SSED TO TAX AS INCOME FROM UNDISCLOSED SOURCES IN ADDITION TO THE BUSINESS INCOME COMPUTED BY ESTIMATE. THE TAXING AUTHORITIE S WERE NOT PRECLUDED FROM TREATING THE AMOUNTS OF THE CREDIT E NTRIES AS INCOME FROM UNDISCLOSED SOURCES SIMPLY BECAUSE THE ENTRIES APPEARED IN THE BOOKS OF A BUSINESS WHOSE INCOME TH EY HAD PREVIOUSLY COMPUTED ON A PERCENTAGE BASIS. THUS IT IS CLEARLY SHOWN THAT EVEN IF INCOME IS ASS ESSED NO SEPARATE ADDITION CAN NOT BE MADE U/S 68 IF THE ASSESSEE FAI LS TO GIVEN EXPLANATION RELATING TO A PARTICULAR CREDIT. 13 AS FAR AS THE DECISION IN CASE OF CIT V. AGGARWA L ENGG. COMPANY IS CONCERNED THE SAME IS DISTINGUISHABLE B ECAUSE IN THAT CASE THE ISSUE WAS WHETHER THE SEPARATE ADDITI ON ON ACCOUNT OF CASH INTRODUCED AND PAYMENT FOR PURCHASE OF OUTSIDE THE BOOKS CAN BE MADE IN ADDITION TO ESTIMA TING PROFIT. IN ANY CASE THE HON'BLE COURT HAS OBSERVED AT PARA 7 & 8 AS UNDER: WE HAVE ALSO PERUSED THE LAW LAID DOWN BY THE HON' BLE ALLAHABAD HIGH COURT IN CIT V. BANWARI LAL BANSHIDHAR, 229 IT R 229 WHEREIN IT WAS OB SERVED: WHEN THE GROSS PROFIT RATE IS APPLIED THAT WOULD TA KE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURC HASE BY THE ASSESSEE. NO CONTRARY VIEW HAS BEEN SHOWN OR RELIED UPON IN T HE MEMO OF APPEAL. WE ARE OF THE VIEW THAT THE LD. CIT(A) AND THE TRIBUNAL WERE JUSTIFIED IN HOLDING THAT ONCE THE NET PROFIT RATE WAS APPLIED NO FURTHER ADDITION WAS CALLED FOR IN RESPECT OF P URCHASES AND INTRODUCTION OF CASH IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ABOVE MAKES IT CLEAR THAT THE DECISION OF HON'BLE S UPREME COURT WAS NEVER BROUGHT TO THE NOTICE OF THE HON'BL E COURT AND THAT IS WHY IT WAS OBSERVED THAT ONCE GROSS PROFIT RATE IS 6 APPLIED SAME WOULD TAKE CARE OF EVERYTHING. IN THE PRESENT CASE, THE LD. CIT(A) HIMSELF HAS RELIEDON THE DECIS ION OF HON'BLE SUPREME COURT IN CASE OF KALE KHAN MOHAMMAD HANIF V CIT (SUPRA) AND CIT V. DEVI PRASAD VISHWANATH PRA SAD (SUPRA). THEREFORE WHEN TWO DECISIONS ARE AVAILABL E FROM HON'BLE SUPREME COURT SAME HAVE TO BE FOLLOWED. AC CORDINGLY WE UPHOLD THE ORDER OF LD. CIT(A). 13 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27.11.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR