ACIT, Tirunelveli V. S.Arunachalam, Kadayanallur

ITA 918/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6381 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 13-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! . , ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.918/MDS/2017 /ASSESSMENT YEAR: 2013-14 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, TIRUNELVELI. VS. SHRI S.ARUNACHALAM, 295, MAIN ROAD, KRISHNAPUAM, KADAYANALLUR. [PAN: AATPA 2354 C ] ( & /APPELLANT) ( '(& /RESPONDENT) ASSESSEE BY : MR.K.BALASUBRAMANIAN, ADV. TAX CONSULTANT. DEPARTMENT BY : MR.AR.V.SREENIVASAN, CIT * /DATE OF HEARING : 17.08.2017 * /DATE OF PRONOUNCEMENT : 17.08.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.918/MDS/2017 IS AN APPEAL FILED BY THE REVE NUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, MA DURAI, IN ITA NO.0014/2016-17 DATED 31.01.2017 FOR THE AY 2013-14 . 2. MR.AR.V.SREENIVASAN, CIT REPRESENTED ON BEHALF OF THE REVENUE AND MR.K.BALASUBRAMANIAN, ADV. TAX CONSULTANT REPRESENT ED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LD.DR THAT THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONTRACT. IT WAS A SUBMISSION THAT THE RE TURN FILED BY THE ASSESSEE ITA NO.918/MDS/2017 :- 2 -: CAME TO BE TAKEN UP FOR SCRUTINY. IT WAS A SUBMISS ION THAT AS THE ASSESSEE WAS UNABLE TO PROVE THE CORRECTNESS OF THE WAGES/SALARY EXPENDITURE WHICH CONSTITUTED A MAJOR PART OF THE T OTAL EXPENDITURE INCURRED BY THE ASSESSEE, THE AO INVOKED THE PROVIS IONS OF SEC.145(3) OF THE ACT AND HAD CONSEQUENTLY COMPLETED THE ASSESSME NT U/S.144 BY ESTIMATING THE ASSESSEES INCOME AT 8% OF THE TURNO VER. IT WAS A SUBMISSION THAT THE AO HAD ADOPTED @8% BY APPLYING THE STATUTORY PROVISIONS AS PROVIDED U/S.44AD OF THE ACT. IT WAS A SUBMISSION THAT ON APPEAL, THE LD.CIT(A) HAD HELD THAT THE AO HAD NOT REJECTED THE ASSESSEES BOOKS OF ACCOUNTS AND HAD CONSEQUENTLY R EDUCED THE ADDITION TO RS.20.00 LAKHS TO THE RETURNED INCOME HOLDING TH AT IT WOULD JUSTIFY THE DISALLOWANCE IN RESPECT OF LABOUR WAGES AND SALARY DISALLOWANCES. IT WAS A SUBMISSION THAT THE AO HAVING INVOKED THE PROVISI ONS OF SEC.145(3) AND SHOW CAUSE NOTICE HAVING BEEN ISSUED TO THE ASSESSE E, INFORMING THE ASSESSEE, THE INTENTION TO ESTIMATE THE INCOME OF T HE ASSESSEE AT 8%, THE SAME AMOUNTED TO THE REJECTION OF THE ASSESSEES BO OKS OF ACCOUNTS. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WA S LIABLE TO BE REVERSED. 4. IN REPLY, THE LD.AR SUBMITTED THAT THE ASSESSEE IS DOING HIGHWAY BUILDING CONTRACT. THE LD.AR FURTHER DREW OUR ATTE NTION TO THE STATEMENT OF FACTS AS SUBMITTED ALONG WITH THE GROUNDS OF APP EAL BY THE AO. IT WAS A SUBMISSION THAT IN THE FACTS OF THE CASE AS MEN TIONED BY THE AO, THE AO SUBMITTED THAT THE ASSESSEES REPRESENTATIVE HA VE PRODUCED THE ITA NO.918/MDS/2017 :- 3 -: SALARY REGISTER FOR SITE ENGINEERS, SUPERVISORS AND SITE-IN-CHARGES. HE ALSO PRODUCED VOUCHERS IN RESPECT OF LABOUR CHARGES FOR PERUSAL. IT WAS NOTICED THAT THE SOME OF THE VOUCHERS WERE NOT IN O RDER AND WERE SELF- MADE AND HENCE, THE BOOKS WERE REJECTED AND INCOME ESTIMATED AT 8%. IT WAS A SUBMISSION THAT THIS IS NOT A CASE WHERE T HE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS. IT WAS A SUBMISSIO N THAT THE VOUCHERS WERE DISBELIEVED BY THE AO. IT WAS A SUBMISSION TH AT IN THE ASSESSMENT ORDER, THERE IS NO MENTION OF THE REJECTION OF BOOK S OF ACCOUNTS. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.CIT(A) WAS LIAB LE TO BE CONFIRMED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, ONCE THE PROVISIONS OF SEC.145(3) ARE SPECIFICALLY INVOKED, IT MEANS THAT THE AO IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. FOR THE PURPOSE OF REJECTION OF THE BOOK S OF ACCOUNTS, TO INVOKE THE PROVISIONS OF SEC.145(3) IS COMPULSORY. JUST B ECAUSE, THE AO HAS NOT SPECIFICALLY MENTIONED THAT THE BOOKS ARE REJECTED, WILL NOT MAKE A DIFFERENCE ESPECIALLY WHEN THE PROVISIONS OF SEC.14 5(3) HAVE BEEN SPECIFICALLY INVOKED AND THE SHOW CAUSE NOTICE HAS BEEN ISSUED TO THE ASSESSEE. THIS BEING SO, THE FINDINGS OF THE LD.CI T(A) ON THIS ISSUE, IS LIABLE TO BE REVERSED AND WE DO SO. 6. HOWEVER, IN REGARD TO THE ESTIMATION OF THE INCO ME BY APPLYING 8% MORE SPECIFICALLY THE PROVISIONS OF SEC.44AD OF THE ACT ESPECIALLY IN A CASE WHERE TURNOVER FAR EXCEEDS THE LIMIT OF RS.40.00 LA KHS AS APPLICABLE FOR ITA NO.918/MDS/2017 :- 4 -: THE RELEVANT ASSESSMENT YEAR WOULD NOT BE A VALID M ETHOD. IT IS KNOWN FACT THAT AS THE TURNOVER INCREASES THE PERCENTAGE OF PROFIT REDUCES. FOR THE PURPOSE OF ESTIMATION OF ASSESSEES NET PROFIT, THE BEST METHOD IS THE ASSESSEES OWN PAST AND LATER RECORDS. IN THE PRES ENT ASSESSEES CASE, THE ASSESSEE HAS DISCLOSED THE NET PROFIT VARYING B ETWEEN @6.18% FOR THE AY 2011-12 TO @5.22% FOR THE AY 2014-15. CONSIDERI NG THE ASSESSEES OWN RECORDS, WE ARE OF THE VIEW THAT THE NET PROFIT OF THE ASSESSEE IS LIABLE TO ESTIMATED AT 6.18%, WHICH IS THE NET PROFIT DECL ARED BY THE ASSESSEE FOR THE AY 2011-12. IN THESE CIRCUMSTANCES, THE AO HAS DIRECTED TO ADOPT THE NET PROFIT @6.18% AS AGAINST @8% ADOPTED BY HIM IN THE COURSE OF THE ASSESSMENT. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 17, 2 017, AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 0 /DATED: AUGUST 17, 2017. TLN * '12 32 /COPY TO: 1. & /APPELLANT 4. 4 /CIT 2. '(& /RESPONDENT 5. 2 ' /DR 3. 4 ( ) /CIT(A) 6. /GF