M/s SN Kanungo & Associates, Cuttack V. ACIT, Cuttack

ITA 90/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4393 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 25-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D IGANTA DASP K MISHRA ARS
• Section: 144

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. 090/CTK/2011 (ASSESSMENT YEAR 2006 - 07) M/S.S.N.KANUNGO & ASSOCIATES, RAUSAPAT NA, CUTTACK PAN : AAZFS 0913 K VERSUS ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), CUTTACK. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D IGANTA DAS/P.K.MISHRA, ARS FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE AGITATES THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THE SOLITARY ISSUE OF ESTIMATING THE NET PROFIT AT 10% OF THE CONTRACT RECEIPTS ON THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE BEING A CONTRACTO R. 2. THE BRIEF FACTS AS WERE BEFORE THE AUTHORITIES BELOW ARE THAT THE ASSESSEE IS A FIRM DERIVING INCOME FROM EXECUTION OF CONTRACT WORKS FILED RETURN SHOWING INCOME OF RS.2,37,460 WHICH WAS SUBJECTED TO ASSESSMENT U/S.144. THE ASSESSING OFFICER ON PERU SING THE AUDITED FINANCIAL STATEMENTS MADE ADHOC DISALLOWANCE UNDER THE VARIOUS HEADS NAMELY, WAGES AND LABOUR CHARGES, DIESEL OIL AND LUBRICANTS, REPAIR & MAINTENANCE, ESTABLISHMENT EXPENSES. HE ALSO COMPUTED INCOME FROM TIPPERS U/S.44AE. HE ADDED UN EXPLA INED CASH CREDIT S U/S.68 AND DISALLOWED THE SALARY TO THE PARTNERS HAVING PASSED THE ORDER U/S.144. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CASE OF THE ASSESSEE APPELLANT IN DETAIL AND METICULOUSLY CONSIDERE D DELETION OF THESE DISALLOWANCES OF EXPENSES SO MADE BY THE ASSESSING OFFICER UNDER VARIOUS HEADS. HOWEVER, HE SOUGHT TO HOLD A VIEW THAT THE INCOME FROM THE CONTRACT WORK RESULTING IN GROSS RECEIPT OF RS.91,82,399 SHOULD BE SUBJECTED TO TAX AT NET PROFIT OF 10% THEREOF UNDER THE PROVISIONS OF SECTION 144 AND ALSO THAT ITA NO.090/CTK/2011 2 THE MACHINERY HIRE CHARGES RECEIVED AMOUNTING TO RS.11,60,000 SHOULD BE TAXED @5% THEREON. HE ALSO NOTED THAT THE ASSESSING OFFICER WAS JUSTIFIED TO ASSESS THE ASSESSEE AS AN AOP BY DENYING THE SALARY TO PARTNERS AMOUNTING TO RS.2,40,000 AS PER THE PROVISIONS OF SECTION 184(5). 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ON THE SOLITARY ISSUE THAT THE ASSESSING AUTHORITIES HAVE RESORTED TO ESTIMATION FROM ALL SIDES. OF HAVING ASSESSED U/S.144 AND BY MAKING SPECIFIC DISALLOWANCE, THE ASSESSING OFFICER SOUGHT TO TAX THE GROSS RECEIPT S AT ABOUT 19% WHICH HE COULD NOT OTHERWISE WAS FINE TUNED BY THE LEARNED CIT(A) WHEN HE HELD THAT THE UNEXPL AINED CASH CREDIT OF RS.5,69,125 AND INCOME FROM TIPPERS ESTIMATED U/S. 44AE AMOUNTING TO RS.1,31,250 CANNOT BE TAXED AS SUCH U/S.144. HAVING REDUCED THE INCOMES, HE SOUGHT TO TAX THE INCOME FROM CONTRACT RECEIPTS AT 10% WHICH WAS AGAIN WITHOUT ANY COGENT BASIS AS CAN BE PERUSED IN HIS ORDER. IN OTHER WORDS, HE TRIED TO TAX A PORTION OF SALARY TO THE PARTNERS BY ENHANCING THE PROFITS AS RETURNED BY THE ASSESSEE BY INCORPORATING THE DISALLOWANCE OF REMUNERATION TO PARTNERS WHICH OTHERWISE WAS ACCEPTABLE TO T HE ASSESSEE AT 8% UNDER THE PROVISIONS OF SECTION 44AD. THE LEARNED COUNSEL FOR THE ASSESSEE AGREED TO THE PROPOSITION FOR TAXATION @8% ON THE CONTRACT RECEIPTS AMOUNTING TO RS.91,82,399 WOULD MEET THE ENDS OF JUSTICE INSOFAR AS THE ASSESSING OFFICER HAD O NLY DISALLOWED THE DIRECT EXPENSES INCURRED BY THE ASSESSEE NOT TO BE CONFIRMED BY THE LEARNED CIT(A) OUGHT TO HAVE AGREED TO THE PROPOSITION THAT THE INCOME RETURNED BY THE ASSESSEE WAS AT 5% OF THE GROSS RECEIPTS. WE ARE INCLINED TO HOLD THAT ON THE BASI S OF FINDINGS GIVEN IN BOTH THE ORDERS OF THE AUTHORITIES BELOW, THE COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE ASSESSEE HAS TO BE UNDER THE PROVISIONS OF THE I.T.ACT WHEN ESTIMATION HAS BEEN RESORTED TO. ONCE THE BASIS FOR DISALLOWANCE HAS BEEN EST ABLISHED ITA NO.090/CTK/2011 3 TO HAVE NO COGENT BASIS OR REASONING, THE ESTIMATION ALSO TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT, WHICH THE LEARNED COUNSEL FOR THE ASSESSEE AGREED AT 8% AS PROVIDED U/S.44AD. WE DIRECT THE ASSESSING OFFICER TO ADOPT THE NET PROFIT @8% ON THE GROSS RECEIPTS FROM CONTRACT AMOUNTING TO RS.91,82,399 TO BE TAXE D BY PARTLY ALLOWING THE GROUND OF APPEAL. THIS BEING THE SOLITARY GROUND THEREFORE STANDS PARTLY ALLOWED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNC ED IN OPEN COURT ON DT. 27 TH MAY, 2011 SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 27 TH MAY, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FOR WARDED TO : 1. THE APPELLANT: M/S.S.N.KANUNGO & ASSOCIATES, RAUSAPATNA, CUTTACK 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.