ACIT, Circle,Haldia, Purba Medinipur V. Shri Purna Chandra Maity, Purba Medinipur

ITA 863/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3121 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2013
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Court: TRIBUNAL
• Department Lawyers: AMITABHA ROY
• Section: 44AD; 145; 144

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [ () . .. . . .. . , ,, , , ! ' #!' ' #!' ' #!' ' #!', ,, , ] ]] ] [BEFORE HONBLE SRI N.S.SAINI AM & HONBLE SRI M AHAVIR SINGH, JM] !% !% !% !% /ITA NO.863/KOL/2012 #& '(/ ASSESSMENT YEAR : 2008-09 (*+ / APPELLANT ) - - ( -.*+ /RESPONDENT) A.C.I.T., CIRCLE SHRI PURNA CHANDRA MAITY HALDIA -VERSUS- PURBA MEDINIPUR. (PAN : AEYPM 0604 G) *+ / 0 / FOR THE APPELLANT: SHRI AMITABHA ROY, SR.DR -.*+ / 0 / FOR THE RESPONDENT: NONE 1 2 / 3 /DATE OF HEARING : 12.06.2013 4' / 3 /DATE OF PRONOUNCEMENT : 5 / ORDER PER SHRI N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-XXXIII, KOLKATA DATED 09.03.2012. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN REDUCING THE ESTIMATION OF NET PROFIT TO 3% IN PLACE OF 8% T AKEN BY THE AO AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO PRODUCE BOOKS OF ACCOU NT ALONG WITH BILLS AND VOUCHERS ETC. NO SUCH DOCUMENTS WERE PRODUCED. THE AO THEREF ORE REJECTED THE ACCOUNTS AND APPLIED DEEMING PROVISIONS OF SECTION 44AD OF THE I T ACT AND ESTIMATED THE PROFIT AT RS.22,35,875/-. THE ASSESSEE FILED APPEAL BEFORE TH E LD. CIT(A) AND OBJECTED TO THE ACTION OF THE AO BY STATING THAT THE ASSESSEES TUR N OVER IS MUCH HIGHER THAN MONETARY LIMIT OF RS.40 LAKHS AND PROVISIONS OF SECTION 44AD OF THE ACT ARE NOT APPLICABLE. THE IT A NO.863/KOL/2012 ACIT.CIRCLE.HALDIA VS SHRI PURN A CHANDRA MAITY, PURBA MEDINIPUR A.YR.2008- 09 2 LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESEE DIRECTED THE AO TO ESTIMATE THE INCOME OF THE ASSESSEE @3% OF THE TOTA L CONTRACT RECEIPTS BY OBSERVING AS UNDER :- 4 . I HAVE CONSIDERED FACTS OF THE CASE . IT I S UNDISPUTED FACT THAT THE APPELLAN T D I D N O T PRODUCE BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS DURING T HE COURSE O F ASSESS MEN T PROCEEDINGS . EVEN DURING THE APPELLATE PROCEEDINGS , NO SUCH BOOKS AN D DOCUM E NT S WE R E P R ODUCED . UNDER T HESE C IR CUMSTANCES THE ASSESSING O FFICER W AS OBVIOU SL Y N OT SATISF I ED ABOU T THE CO R RECTNESS AND COMPLETENESS OF AC CO UNTS . S EC TI ON 145 ( 3) P R OV I DES THA T W H E N THE ASSESS I NG OFFICER I S NOT SATISF I E D ABOU T C ORREC T N ESS OF ACCOUNTS , HE MAY ASSESS THE INCOME I N THE MANNER PROVIDED U / S . 1 44 O F I . T . ACT . IN TU R N , SECTION 144 PROVIDES THAT THE ASSESSING OFFICER MAY M AKE ASSESSMENT AS P E R BEST JUDGMENT BASED ON ALL THE MATERIAL GATHE R ED AND AFTE R GI VIN G DUE OPPORTUNITY T O THE ASSESSEE . SINCE IN TH I S CASE THE ASSESSING OFFICE R HAS RI GHT LY R EJECTED BOO K R ESULTS , HE WAS EMPOWERED TO ASSESS I NCOME BASED ON H IS BEST JUDG E M E NT . THE ASSESSING O F F I CER , I N HIS BEST J UDGEMENT , DEEMED IT FIT TO APPLY NET P R OFIT R A T E O N T UR N OVER T O ASSESS THE I NCOME . IN ORDER TO DECIDE THE APPROPR I ATE NET P R OFI T R AT E H E WAS GU I DED BY SECT I O N 44AD WH I CH PROV I DES THAT IN CASE OF A C ONT R A CTO R CO VERED BY THAT SECT I ON , I NCOME FROM THAT BUSINESS I S TAKEN AT 8 % O F GRO SS R E C E I PTS . IT I S T RUE TH AT T HE SAID SECTIO N APPL I ES TO A CASE WHERE T U RN OVE R OF BU S IN ES S D OES N OT E XC EED RS . 40 L AK H AND THE APPE L LANT I S , PER SE , NOT COVERED BY T HE SA I D SECTION . HOWEVER , S I NCE THE ASSESS I NG OFF I CER WAS MAKING ASSESSMEN T ON BEST JU DGEMENT BASIS , HE APP L IED N ET PROFIT RATE OF 8% , EVEN THOUGH SECTION 44 AD AS AD OPTED FIGU R E OF 8 % FOR N ET PROF I T RA T E WHICH IS PRESCRIBED U/S . 44AD , AS THE SA I D SECT I O N DEA L S WITH T HE ASSESSEES E N GAGED I N CONTRACT BUSINESS , I NCLUDING CON TR ACT F O R SUPPLY OF L ABOUR AND T HE APPEL L AN T IS A L SO I N THE S I M I LAR LINE OF BUSINESS . OBV I OUSLY , T HE PROFIT R A TE P R ESC RI BED U/S 44AD FO R THE ASSESSES ENGAGED IN THE SIMILAR A C T I VITY , IN ABSENCE O F AN Y S I GN I FICANT DISTINGU I SH I NG FACTOR , I S A GOOD INDICATOR OF P R OFIT RAT E , EVE N I F S T RICT L Y S P EAKING T HE SECTION MAY N OT APPLY UPON THE APPELLANT DUE TO THE HIGHE R T URNOV E R . IT I S TRUE THAT ASSESSING OFFICER HAS , I N THE ASSESSMENT O R DER , MENTIONED T HAT HE W AS IN VOK I NG P R OV I S I ON OF SEC . 44 AD , BUT PERUSA L OF THE RELEVANT PA R A OF THE A SSESSMENT O R DE R AS A WHOLE MAKES IT AMPLY CLEA R THAT HE WAS , I N FACT , MAK I NG BEST J U DGEM E NT ASSESSME N T BY APPLYING NET P R OFIT R ATE ON TURNOVER AND FOR THIS PURPOSE HE JU ST AD OPTED THE N ET P R OFIT RATE PRESCR I BED IN SEC . 44AD . IT IS WELL SETTLED PR I NC I PL E THA T WHAT I S I MP O R TANT I N SUBSTANCE AND NOT THE FORM A N D THEREFORE , SOME SHORTCOMING IN T H E LAN G U AGE USE D I N THE ASSESSMENT O R DE R DOES IN NO WAY MEA N THAT THE ACTION OF TH E AS S E S SING OFFICER I S WRO N G . I N V I EW OF T HE FOREGO I NG DISCUSS I ON , THE REJECTION OF BOOK RESULT S AN D ES TI MAT I ON OF PR OFI T MADE BY THE ASSESSING OFF I CER IS , IN P R INC I PLE , U PHELD. 4. THE LD. DR ARGUED AND SUBMITTED THAT THE TAX AUD ITOR OF THE ASSESSEE AT SL.NO.2 OF PAGE 2 OF FORMNO.3CD STATED THAT PROFIT ON THE C ONTRACTUAL RECEIPT WAS DETERMINED AT RS.7,33,970/- ON PRESUMPTIVE BASIS U/S 44AD OF T HE ACT AND THEREFORE THE AO WAS JUSTIFIED IN DETERMINING THE RATE @8% IN ESTIMATING THE INCOME OF THE ASSESSEE AFTER REJECTING THE BOOKS OF ACCOUNT. HE THEREFORE PRAYED THAT THE ORDER OF THE AO SHOULD BE RESTORED AND THAT OF THE LD. CIT(A) BE SET ASIDE. 5. ON THE OTHER HAND NONE APPEARED ON BEHALF OF THE ASSESSEE. NOTICE OF HEARING WAS SENT BY REGISTERED POST WITH AD ON 17.12.2012 W HICH HAS NOT BEEN RETURNED BY THE POSTAL AUTHORITIES UNSERVED. THE BENCH WAS OF T HE VIEW THAT THE APPEAL CAN BE IT A NO.863/KOL/2012 ACIT.CIRCLE.HALDIA VS SHRI PURN A CHANDRA MAITY, PURBA MEDINIPUR A.YR.2008- 09 3 DISPOSED OFF WITHOUT THE ASSISTANCE OF THE LD. AR A ND THEREFORE THE APPEAL WAS HEARD EXPARTE QUA THE RESPONDENT ASSESSEE AND DISPOSED OF F CONSIDERING THE SUBMISSIONS OF THE LD. DR AND THE MATERIALS AVAILABLE ON RECORD. 6. AFTER HEARING THE LD. DR WE FIND THAT IN THE INS TANT CASE THE UNDISPUTED FACTS ARE THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS REJEC TED BY THE AO FOR THE REASON THAT THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNT ALONG WITH RELEVANT BILLS AND VOUCHERS AND THE SAME WERE NOT PRODUCED BEFORE HIM. HE, THEREFORE, REJECTING THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME OF THE AS SESSEE AT 8% OF THE DISCLOSED CONTRACTUAL RECEIPTS AT RS.2,79,23,443/- AND DETERM INED THE INCOME AT RS.22,33,875/-. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). TH E LD. CIT(A) OBSERVED THAT THE ASSESSEE WAS ASKED TO GIVE A STATEMENT SHOWING NET PROFIT RATE PREVAILING IN PRECEDING AND SUBSEQUENT YEARS. HE OBSERVED THAT THE NET PROF IT RATE SHOWN DURING THE YEAR AT 2.62% WAS HIGHER THAN THE NET PROFIT RATE OF 2.01% SHOWN IN THE IMMEDIATELY PRECEDING YEAR. EVEN IN THE YEARS PRIOR TO THAT THE NET PROFIT RATE WAS ABOUT 2% ONLY. HE FURTHER OBSERVED THE TURN OVER OF THE ASSESSEE H AS INCREASED SUBSTANTIALLY FROM RS.1,76,78,967/- IN THE IMMEDIATELY PRECEDING YEAR TO RS.2,79,23,443/-. THEREFORE HE HELD THAT THE PRESENT YEAR IS NOT COMPARABLE WITH T HE PRECEDING YEAR. HE FURTHER OBSERVED THAT THE TURN OVER IN THE IMMEDIATELY SUCC EEDING FINANCIAL YEAR 2008-09 WAS RS.2,26,27,588/- WHICH RELATIVELY COMPARABLE WITH T HE YEAR UNDER CONSIDERATION. IN THE FINANCIAL YEAR 2008-09 THE NET PROFIT RATE SHO WN BY THE ASESSEE WAS 2.73%. CONSIDERING ALL THESE FACTS THE LD. CIT(A) ESTIMATE D THE RATE OF NET PROFIT AT 3% OF THE TOTAL CONTRACT RECEIPTS. WE FIND THAT THE AO HAS AP PLIED THE RATE OF 8% IN VIEW OF THE PROVISION OF SECTION 44AD OF THE IT ACT. WE FIND TH AT THE TURN OVER OF THE ASSESSEE IS MORE THAN RS.40 LAKHS AND HENCE SECTION 44AD OF THE ACT DOES NOT APPLY TO THE ASSESSEE. WE FIND THAT THE LD. CIT(A) HAS ESTIMATED THE RATE OF NET PROFIT BY TAKING INTO CONSIDERATION THE RATE OF NET PROFIT DISCLOSED BY T HE ASSESSEE IN THE IMMEDIATELY PRECEDING AND SUCCEEDING YEARS. THEREFORE WE FIND T HAT THE ESTIMATION MADE BY THE LD. CIT(A) IS ON A REASONABLE BASIS AND THEREFORE WE CO NFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. IT A NO.863/KOL/2012 ACIT.CIRCLE.HALDIA VS SHRI PURN A CHANDRA MAITY, PURBA MEDINIPUR A.YR.2008- 09 4 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE COURT ON 18.06.2013. SD/- SD/- [ .' #!' , ] [ .., ,, , ] [MAHAVIR SINGH ] [N.S.SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (3 3 3 3) )) ) DATE: 18.06.2013. R.G.(.P.S.) 5 / -##6 76'8- COPY OF THE ORDER FORWARDED TO: 1. SHRI PURNA CHANDRA MAITY, PROP.MECEL CONSTRUCTION, SHERPUR TELANGA BARH CONTAI, PURBA MEDINIPUR, PIN:721401. 2 A.C.I.T., CIRCLE, HALDIA. 3 . CIT KOLKATA 4. CIT (A)-XXXIII, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY 51/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES