M/s. Kirti Construction Co., Baroda V. The Dy.CIT.,Circle-2(1), Baroda

ITA 932/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1855 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 932/AHD/2012 (ASSESSMENT YEAR: 2007-08) KIRTI CONSTRUCTION CO. 9, D.J. PATEL PARK NIZAMPURA BARODA V/S D.C.I.T., CIRCLE-2(1), BARODA (APPELLANT) (RESPONDENT) PAN: AAHFK5163H APPELLANT BY : SHRI M.K. PATEL, AR RESPONDENT BY : SHRI NARENDRA SINGH, SR. D.R . ( )/ ORDER DATE OF HEARING : 30 -03-201 6 DATE OF PRONOUNCEMENT : 05-04-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-II, BARODA DATED 28.02.2012 PERTAINING TO A. Y. 2007-08. 2. THE GRIEVANCE OF THE ASSESSEE READ AS UNDER:- 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION U/S . 68 AMOUNTING TO RS. 6,10,500/-. ITA NO. 932/ AHD/2012 . A.Y. 2007-0 8 2 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION U/S . 40(A)(IA) OF THE ACT AMOUNTING TO RS. 75,63,523/-. 3. THE LD. CIT(A) ERRED IN CONFIRMING ESTIMATION OF PR OFITS MADE BY THE ASSESSING OFFICER AT 8% AND CONFIRMING THE ADDITION OF RS. 14 ,53,184/-. GROUND NO. 1 RELATES TO THE ADDITION MADE U/S. 68 O F THE ACT. 3. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FO UND THAT THE BALANCE SHEET OF THE ASSESSEE HAS UNSECURED LOANS OF 8 PERS ONS TOTALING TO RS. 6,10,500/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE C REDITORS IN THE LIGHT OF THE PROVISIONS OF SECTION 68 OF THE ACT. O N RECEIVING NO PLAUSIBLE REPLY, THE A.O TREATED THE UNSECURED LOAN S AMOUNTING TO RS. 6,10,500/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF TH E ACT. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL COULD NOT ADDUCE ANY EVI DENCE TO EXPLAIN THE GENUINENESS OF THE TRANSACTION AND THE CAPACITY OF THE LOAN CREDITORS. IN OUR CONSIDERED OPINION, THE INITIAL ONUS CAST UPON THE ASSESSEE BY VIRTUE OF THE PROVISIONS OF SECTION 68 HAS NOT BEEN DISCHARGED. THEREFORE, WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE FIRST APPELLATE AUTHORITY; GROUND NO. 1 IS DISMISSE D. GROUND NO. 2 RELATES TO THE ADDITION MADE U/S. 4 0(A)(IA) OF THE ACT. 6. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E A.O FOUND THAT THE ASSESSEE HAS DEBITED VARIOUS EXPENSES WITHOUT D EDUCTING TAX AT SOURCE. THE ASSESSEE WAS ASKED TO FURNISH THE DETAI LS. AFTER PERUSING THE DETAILS, THE A.O NOTICED THAT THE ASSESSEE HAS DEDUCTED TAX AT ITA NO. 932/ AHD/2012 . A.Y. 2007-0 8 3 SOURCE ONLY FOR RS. 5 LACS OUT OF THE TOTAL LIABILI TY OF RS. 94,67,962/-. THE A.O DISALLOWED THE BALANCE OF RS. 89,67,962/- U /S. 40(A)(IA) OF THE ACT. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CI T(A) AND FILED COMPLETE DETAILS ALONG WITH CHALLANS OF TAX PAYMENT . HOWEVER, THE LD. CIT(A) FOUND THAT THE PAYMENTS HAVE BEEN MADE ON 7 TH APRIL, 2007. THE LD. CIT(A) FURTHER VERIFIED THE SITE-WISE DETAI LS AND WAS CONVINCED THAT RS. 75,63,523/- NEED TO BE DISALLOWED U/S. 40( A)(IA) OF THE ACT AS THE TAX HAS BEEN DEPOSITED AFTER THE CLOSE OF THE A CCOUNTING YEAR. 8. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US . THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT THE EXPLANATION ADDED TO SECTION 40(A)(IA) OF THE ACT HAS BEEN HELD TO HAVE RETROSPE CTIVE EFFECT AND AS THE ASSESSEE HAS DEPOSITED THE TAX BEFORE FILING TH E RETURN OF INCOME AND WHICH FACT HAS NOT BEEN DENIED BY THE REVENUE A UTHORITIES, DISALLOWANCE NEED TO BE DELETED. 9. PER CONTRA, THE LD. D.R. STRONGLY STATED TH AT IT IS NOT A CASE OF TDS MADE ON THE LAST DAY OF THE ACCOUNTING YEAR, TH E ASSESSEE HAS DEDUCTED TAX IN MONTH OF FEBRUARY AND THE SAME WAS DEPOSITED IN APRIL, 2007. THEREFORE, THE DISALLOWANCE MADE BY TH E A.O HAS TO BE UPHELD. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC TS ON RECORD. THERE IS NO DENYING THAT THE TAX WAS DEPOSITED BY T HE ASSESSEE IN THE MONTH OF APRIL, 2007. IT IS ALSO AN ADMITTED FACT T HAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHECKMATE SERVICES P. LTD. IN TAX APPEAL NO. 680 OF 2014 HAS HELD THAT THE AMENDM ENTS TO SECTION 40(A)(IA) ALLOWING DEDUCTION FOR THE PAYMENT, ON WH ICH TDS HAS BEEN ITA NO. 932/ AHD/2012 . A.Y. 2007-0 8 4 MADE AND PAID INTO GOVERNMENT ACCOUNT BEFORE THE DU E DATE FOR FURNISHING THE RETURN OF INCOME IS TO TAKE EFFECT R ETROSPECTIVELY. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE DIRECT THE A.O TO DELETE THE ADDITION OF RS. 75,63,523/-.GROUND NO. 2 IS ALLOWED. GROUND NO. 3 RELATES TO THE ESTIMATION OF PROF ITS @ 8%. 12. WHILE SCRUTINIZING THE STATEMENT OF ACCOUNTS, THE A .O NOTICED THAT THE ASSESSEE HAS SHOWN TOTAL RECEIPTS AT RS. 2 ,44,35,218/- ON WHICH GROSS PROFIT IS SHOWN AT RS. 34,99,238/- AND NET PROFIT AT RS. 5,01,633/- WHICH COMES TO 2.02% . AS THE ASSESSEE C OULD NOT PRODUCE BOOKS OF ACCOUNTS, BILLS/VOUCHERS IN SUPPORT OF ITS CLAIM, THE A.O WAS LEFT WITH NO CHOICE BUT TO ESTIMATE THE PROFITS AND ACCORDINGLY ESTIMATED THE NET PROFIT AT 10% AND MADE AN ADDITIO N OF RS. 19,41,887/-. 13. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE SUBMITTED THE AUDITED BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUC HERS. THE LD. CIT(A) REFERRED THE MATTER TO THE A.O FOR COMMENTS. IN THE REMAND PROCEEDINGS, THE ASSESSEE WAS REQUESTED TO FILE FUR THER DETAILS ALONG WITH JUSTIFICATION OF GP AND NP. ON RECEIVING NO PL AUSIBLE REPLY, THE A.O JUSTIFIED THE ADDITIONS MADE. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE REMAND REPORT OF THE A.O, THE L D. CIT(A) OBSERVED THAT SINCE THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS AND OTHER DETAILS DURING THE COURSE OF THE ASSESSMENT P ROCEEDINGS. THE A.O WAS JUSTIFIED IN MAKING THE ASSESSMENT U/S. 144 OF THE ACT. HOWEVER, THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT IN THIS KIND OF ITA NO. 932/ AHD/2012 . A.Y. 2007-0 8 5 BUSINESS A NET PROFIT RATE OF 8% SHOULD MEET THE EN DS OF JUSTICE AND WHICH IS IN LINE WITH THE PROVISIONS OF SECTION 44A D OF THE ACT. THE LD. CIT(A) ACCORDINGLY DIRECTED THE A.O TO RESTRICT THE ADDITION TO 8%. 14. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE ONCE AGAIN STATED THAT THE BOOKS OF AC COUNTS ARE AUDITED; THEREFORE, NO ADVERSE INFERENCE SHOULD BE DRAWN. TH E LD. COUNSEL FURTHER DREW OUR ATTENTION TO THE NET PROFIT EARNED IN A.Y. 2006-07. IT IS THE SAY OF THE LD. COUNSEL THAT IN THE IMMEDIATE LY PRECEDING YEAR, THE ASSESSEE HAS EARNED NET PROFIT AT 2.49%. THEREF ORE, THERE IS NO JUSTIFICATION IN ESTIMATING THE NET PROFIT @ 8%. 15. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE ASS ESSMENT ORDERS. 16. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC TS IN ISSUES AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHOR ITIES BELOW. UNDISPUTEDLY, THE ASSESSMENT IS MADE U/S. 144 OF TH E ACT., SINCE THE ASSESSEE DID NOT COMPLY WITH VARIOUS NOTICES/OPPORT UNITIES, THE A.O ESTIMATED THE PROFIT @ 10%. 17. HOWEVER, SINCE THE AUDITED BOOKS OF ACCOUNTS WITH S UPPORTING EVIDENCES WERE PRODUCED BEFORE THE LD. CIT(A), THE FIRST APPELLATE AUTHORITY SHOULD HAVE EXAMINED THE BOOKS OF ACCOUNT S AS HIS POWERS ARE CO-TERMINUS TO THAT OF THE A.O. WE FIND THAT TH E FIRST APPELLATE AUTHORITY HAS NOT VERIFIED THE DETAILS HIMSELF AND AGAIN DEPENDED UPON THE A.O. WE FURTHER FIND THAT IN THE IMMEDIATELY PR ECEDING ASSESSMENT YEAR ON A TURNOVER OF RS. 1.49 CRORES, THE ASSESSEE HAS SHOWN NET PROFIT @ 2.49%, WHEREAS FOR THE YEAR UNDER CONSIDER ATION ON A ITA NO. 932/ AHD/2012 . A.Y. 2007-0 8 6 TURNOVER OF RS. 2.49 CRORES, THE ASSESSEE HAS SHOWN NET PROFIT @ 2.02%. ON AN INCREASE OF THE TURNOVER BY RS. 1 CROR E, THERE IS MARGINAL FALL IN THE NET PROFIT RATE WHICH IS 0.47% . WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION IN ESTIMATING THE NET PR OFIT AT 8%. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO ACCEPT THE NET PROFIT SHOWN BY THE ASSESSEE. GROUND NO. 3 IS ACCORDINGLY ALLOWED. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 05 - 04 - 201 6. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD