ITO Wd- 1[4] Pune, Pune V. Shri Sanjay D Malve, Nashik

ITA 810/PUN/2012

• Counselvise Citation: 81024514 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Assessee Lawyers: P S SHINGTE
• Keywords: Depreciation; Revised return
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.810/PN/2012 (A.Y: 2008-09) ITO, WARD 1(4), NASHIK APPELLANT VS. SHRI SANJAY DIGAMBER MALVE 4A, PLEASANT PARK, PUMPING STATION, GANGAPUR ROAD, NASHIK 422005 PAN: AFTPM5169A RESPONDENT APPELLANT BY : SHRI RAJIB J AIN RESPONDENT BY : SHRI P.S. SHINGTE DATE OF HEARING: 04.07.2014 DATE OF ORDER : 31.07.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, [IN SHORT CIT(A)] NASHIK, DATED 06.02.2012 FOR A.Y. 2008-09 ON THE FO LLOWING GROUNDS. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS P ER LAW, WHETHER THE CIT(A) WAS JUSTIFIED IN DELETING T HE ADDITION OF RS. 18,42,301/- ON ACCOUNT OF GROSS PRO FIT, MADE IN THE ASSESSMENT ORDER? 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS P ER LAW, WHETHER THE CIT(A) WAS JUSTIFIED IN DELETING T HE ADDITION OF RS.2,17,500/- ON ACCOUNT OF DEPRECIATIO N ON TEMPORARY SHED, MADE IN THE ASSESSMENT ORDER? 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS P ER LAW, WHETHER THE CIT(A) WAS JUSTIFIED IN HOLDING TH AT AFTER GIVING EFFECT TO APPELLATE ORDER FOR AY 2007- 08, 2 ITA NO.810 OF 12 SHRI SANJAY DIGAMBER MALVE THERE WILL NOT REMAIN ANY LOSS ASSESSABLE IN THE AY 2007-08 & AS SUCH THE GROUND OF APPEAL NO 7 HAS BECOME INFRUCTUOUS & OF NO CONSEQUENCE AND HENCE NEEDS NO ADJUDICATION ? 4. THE APPELLANT PRAYS TO ALTER, MODIFY AND ADD ANY GROUNDS OF APPEALS AT ANY STAGE OF APPELLATE PROCEEDINGS. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF CIVIL CONTRACTORS AND DEVELOPERS. THE ASSESSEE HAS FILED ORIGINAL RETURN OF INCOME DECLARING TOTAL INCOME OF 34,47,330/- ON 30.09.2008. THE ASSESSEE HAS FILED REVISED RETURN DECLARING TOTAL INCOME OF 10,73,080/- ON 20.03.2009. THE ASSESSING OFFICER HAS ASSESSED THE INCOME OF THE ASSESSEE AT 82,24,990/- BY MAKING ADDITION OF 71,54,915/-. THE DETAILS OF ADDITIONS ARE AS UNDER: PARTICULARS AMOUNT REMARKS G ROSS PRO FIT ADDITION (PARA 5 OF THE ASST.ORDER) 18,42,301 GROSS PROFIT IS ESTIMATED @ 19% AS AGAINST DECLARED @ 15.84% ON TURNOVER RS. 9,85,91,935/-. 2) DEPRECIATION ON TEMPORARY SHED DISALLOWED AT 50%. 2,17,500 TH E DEPRECIATION ON TEMPORARY SHED CLAIMED AT 100% BY THE APPELLANT DISALLOWED TO THE EXTENT OF 50% 3) DISALLOWANCE FOR PERSONAL USE OF VEHICLE ON ACCOUNT OF DEPRECIATION ON CAR) 36,527 THE DEPRECIATION ON VEHICLE IS DISALLOWED TO THE EXTENT OF 10% FOR PERSONAL USE OF CAR. 4 ) DISALLOWANCE OUT OF DIESEL AND PETROL, TRAVELLING, MOBILE, TELEPHONE AND REPAIRING AND MAINTENANCE EXPENSES. 64,252 THE A.O. HAS DISALLOWED 10% EXPENSES ON ACCOUNTS OF PERSONAL ELEMENT IN THE EXPENDITURE. 5 ) DISALLOWANCE OF SET OFF OF BROUGHT FORWARD LOSS OF A.Y.2007-08 CLAIMED IN REVISED RETURN FILED ON 24/2/2009 49,91,335 T HE A.O. HAS DISALLOWED THE LOSS STATING THAT THE REVISED RETURN FOR A.Y. 2007-08 CLAIMING LOSS WAS FILED ON 24/02/2009 WHICH IS BEYOND THE TIME LIMIT LAID DOWN IN SECTION 139(1) AND HENCE THE LOSS CANNOT BE ALLOWED TO BE CARRIED FORWARD IN VIEW OF SECTION 139(3) AND SECTION 80 OF THE I.T. ACT 3 ITA NO.810 OF 12 SHRI SANJAY DIGAMBER MALVE 2.1 AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE A PPEAL BEFORE CIT(A), WHO HAVING CONSIDERED THE SUBMISSIONS, HAS GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE C IT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF 18,42,301/- ON ACCOUNT OF GROSS PROFIT BECAUSE THE ASSESSEE HAS NOT MAINTAINE D PROPER BOOKS OF ACCOUNT AND THE ASSESSEES GP WAS CONSIDER ABLY LOW IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE LEA RNED DEPARTMENTAL REPRESENTATIVE HAS REQUESTED TO SET AS IDE THE ORDER OF CIT(A) AND THAT OF ASSESSING OFFICER BE RESTORED . ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUP PORTED THE ORDER OF CIT(A) ON THE ISSUE. 2.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF GROSS PROFIT OF 18,42,301/-. THE ASSESSEE CLAIMED TO HAVE MAINTAINED BOOKS OF ACCOUNT AND GOT THEM AU DITED. THE AUDITOR HAS NOT MENTIONED ANY SERIOUS DEFECT JUSTIF YING REJECTION OF BOOK RESULTS BY APPLYING PROVISIONS OF SECTION 1 45 OF THE ACT. THE ASSESSING OFFICER HAS POINTED OUT THAT THE GROS S PROFIT PERCENTAGE IN THE YEAR UNDER APPEAL WAS 15.84% AS A GAINST 19.48% IN THE PREVIOUS YEAR I.E. A.Y. 2007-08. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THAT THE GROSS PROFI T PERCENTAGE CANNOT REMAIN CONSTANT FOR EVERY YEAR AND DEPENDS U PON MARKET CONDITIONS OF EACH YEAR. THE REDUCTION IN GROSS PR OFIT PERCENTAGE SHOULD NOT BE THE BASIS FOR REJECTION OF BOOK RESUL TS. IF THREE YEARS AVERAGE GROSS PROFIT IS CONSIDERED, THEN THE GROSS PROFIT DURING THE YEAR IS MORE THAN AVERAGE GROSS PROFIT. THE ASSESSING OFFICER HAS POINTED OUT THAT THE ASSESSEE HAD MADE PAYMENT IN RESPECT OF EXPENDITURE TO THE PERSONS COVERED U/S.4 0A(2)(B) OF THE ACT. HOWEVER, THE ASSESSING OFFICER HAS NOT POINTE D OUT THAT THE SAID PAYMENT WAS EXCESSIVE COMPARED TO MARKET RATE. THE BOOKS OF ACCOUNT COULD BE REJECTED U/S.145 OF THE ACT ONL Y WHERE EITHER 4 ITA NO.810 OF 12 SHRI SANJAY DIGAMBER MALVE NO METHOD OF ACCOUNTING WAS EMPLOYED OR METHOD EMPL OYED WAS SUCH THAT IT DID NOT DISCLOSE THE TRUE PROFIT AS HE LD BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.L. BHATIA (2004) 269 ITR 577 (P&H). THE ASSESSING OFFICER HA S NOT POINTED OUT ANY SERIOUS DEFECT TO JUSTIFY REJECTION OF AUDI TED BOOK RESULTS. MOREOVER, THE ASSESSEE HAS EMPLOYED MERCANTILE METH OD OF ACCOUNTING AND ACCORDINGLY PROFIT WAS DISCLOSED. I N VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADD ITION OF 18,42,301/- MADE BY THE ASSESSING OFFICER BY MAKING GROSS PROFIT ADDITION. THIS REASONED FINDING OF CIT(A) N EEDS NO INTERFERENCE FROM OUR SIDE AS DISCUSSED ABOVE. WE UPHOLD THE SAME. 3. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION ON TEMPORARY SHED. THE ASSESSING OFFICER HAS DISAL LOWED 50% OF THE EXPENSES ON TEMPORARY SHEDS ON THE GROUND OF SE LF MADE VOUCHERS. THE MATTER WAS CARRIED BEFORE FIRST APPE LLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND THE CIT(A) HAVING CONSIDERED THE SAME, HAS GRAN TED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF 2,17,500/- ON ACCOUNT OF DEPRECIATION ON TEMPORARY SHED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE EXPENDITURE W AS SUPPORTED BY INTERNAL VOUCHERS AND BILLS WHICH WERE DULY SIGNED BY THE RECIPIENTS. 3.1 THE STAND OF THE ASSESSEE HAS BEEN THAT THE TEM PORARY SHED WAS AT THE SITES OF THE CUSTOMERS I.E. PUNE, NASHIK AND TAMILNADU. AFTER COMPLETION OF WORK, THE SAID SHED S BECOMES USELESS AND THE EXPENDITURE INCURRED WAS PERMANENTL Y LOST. THE SHEDS HAVE BEEN PREPARED BY USING BAMBOO, CHATAI, P ATRA AND TADPATRI. THE EXPENSES OF THE TEMPORARY SHED HAVE NOT BEEN 5 ITA NO.810 OF 12 SHRI SANJAY DIGAMBER MALVE DISPUTED BY THE ASSESSING OFFICER. HOWEVER, HE DIS ALLOWED THE DEPRECIATION STATING THAT THE SAME WAS NOT SUPPORTE D BY BILLS TO THE EXTENT OF 50%. IN APPEAL, THE CIT(A) SPECIFICA LLY HAD POINTED OUT THAT THE ASSESSING OFFICER TRIED TO MAKE OUT TH E CASE TO FALSIFY THE ENTRIES OF EXPENDITURE CLAIMED BY WAY OF VOUCHE RS WHILE THE SAID VOUCHERS WERE DULY SIGNED BY THE RECIPIENTS. MOREOVER, THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE REGULARLY BEE N MAINTAINED AND AUDITED. THE AUDITORS HAVE NOT QUANTIFIED THEI R REPORT STATING THAT THE VOUCHERS / BILLS OF AFORESAID EXPE NSES WERE NOT ON RECORD. IN VIEW OF THE ABOVE, THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN DISALLOWING 50% EXPENSES TO THE EXTENT OF 2,17,500/- IN RESPECT OF TEMPORARY SHED. ACCORDING LY, THE SAME HAS RIGHTLY DELETED BY THE CIT(A) BY REASONED FACTU AL FINDING, WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHO LD THE SAME. 4. THE NEXT ISSUE IS WITH REGARD TO ALLOWABILITY OF SET OFF OF CARRIED FORWARD LOSSES. THE ASSESSING OFFICER HAS DISALLOWED SET OFF OF CARRIED FORWARD LOSSES OF 49,91,335/- BROUGHT FORWARD FROM A.Y. 2007-08 VIDE PAGE NO.9 OF ITS ORDER STATI NG THAT SEVERAL LOSSES WERE NOT AS PER RETURN FILED U/S.139(1) OF T HE ACT FOR A.Y. 2007-08, BUT AS PER REVISED RETURN FILED COULD NOT BE ALLOWED UNDER THE PROVISIONS OF SECTION 139(3) AND SECTION 80 OF THE ACT. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY, WHEREIN CIT(A) ON VERIFICATION OF RECORD AND HAVING CONSIDE RED THE SUBMISSIONS OF ASSESSEE, HAS HELD THAT IN VIEW OF T HE DECISION OF ITAT AND THE DECISION OF HIS PREDECESSOR, THE ISSUE BECAME ACADEMIC AND OF NO CONSEQUENCE. AFTER GIVING EFFEC T, THE APPELLATE ORDER FOR A.Y. 2007-08, THERE WOULD NOT R EMAIN ANY LOSS ASSESSABLE. THEREFORE, PRACTICALLY, IT WAS DISMISS ED AS BEING INFRUCTUOUS. AGAIN, THIS REASONED FINDING OF CIT(A ) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED 6 ITA NO.810 OF 12 SHRI SANJAY DIGAMBER MALVE PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 31 ST OF JULY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST JULY, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE