ITO, Paradeep V. Tribhuban Das, Jagatsinghpur

ITA 94/CTK/2012

• Counselvise Citation: 9422114 RSA 2012
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 24-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2012
• Court: TRIBUNAL
• Department Lawyers: M R
• Assessee Lawyers: S K JENA
• Keywords: Unexplained investment; Depreciation
• Section: 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM, AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 094/CTK/2012 (ASSESSMENT YEAR 2008 - 09) INCOME - TAX OFFICER, WARD 2, PARADEEP VERSUS SRI TRIBHUBAN DAS, M - III - 18, MADHUBAN, PARADEEP,JAGATISINGHPUR PAN: AFJPD 6472 R (APPELLANT) (RESPONDENT) ITA NO.169/CTK/2012 (ASSESSMENT YEAR 2008 - 09) SRI TRIBHUBAN DAS, M - III - 18, MADHUBAN, PARADEEP,JAGATISINGHPUR PAN: AFJPD 6472 R VERSUS INCOME - TAX OFFICER, WARD 2, PARADEEP (APPELLANT) (RESPONDENT) FOR THE ASSESSEE : SHRI S.K.JENA, AR FOR THE DEPARTMENT: M.R.PANIGRAHI, DR DATE OF HEARING : 24.05.2012 DATE OF PRONOUNCEMENT : 25.05.2012 ORDER SHRI K.K.GUPTA, AM : THESE APPEALS BY THE REVENUE AS WELL AS THE ASSESSE E ARISE FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.22.11.2011 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE BRIEF FACTS ON THE ISSUES RAISED BY THE RIVAL PARTIES ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM EXECUTION OF CONTRACT WORKS FILED ITS RETURN ELECTRONICALLY O N 31.10.2008 DECLARING INCOME OF 4,78,733. THE CASE WAS TAKEN UP FOR SCRUTINY VIDE ISSUE OF NOTICE U/S.142(1) WHEN THE ASSESSING OFFICER REQUIRE D THE ASSESSEE TO PRODUCE THE DE TAILS WITH RESPECT TO THE BANK LOANS, ADDITION TO FIXED ASSETS AND OTHER EXPENDITURES CLAIMED IN THE P & L ACCOUNT DULY AUDITED WHICH WERE PRODUCED BY THE AR OF THE ASSESSEE IN THE MONTH OF JUNE, 2010. THE ASSESSING OFFICER FURTHER RAISED VARIOUS QUERIES AND HOLDING VIEW THAT THE ASSESS EE DOES NOT MAINTAIN BOOKS OF ACCOUNT PROPERLY INSPITE OF THE AUDITOR OBSERVING IN HIS REPORT IN FORM 3CD THAT BOOKS OF ACCOUNT LIKE CASH BOOK, LEDGER, BANK PASS BOOK, BILLS REGISTER ITA NOS.94 AND 169/CTK/2012 (CROSS APPEALS) 2 AND PART Y REGISTER ARE BEING MAINTAINED, HE HELD A VIEW THAT THE ASSESSEE SOMEHOW MANAGED TO GET AN AUDIT REPORT, WITHOUT ACTUALLY HOLDING SUCH BOOKS. HE PROCEEDED TO INVOKE THE PROVISIONS OF SECTION 144 AND NOTED THE GROSS RECEIPTS OF 58.58 CRORES ON WHICH HE ESTIMATED PROFIT @10% AND ALSO BROUGHT TO TAX THE ADDITIONS TO THE FIXED ASSETS OF 12,37,930 AS THEY WERE NOT VERIFIED FROM THE BILLS AND VOUCHERS ON THE ASKING BY THE ASSESSING OFFICER. 3. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY ON THESE ISSUES SUBMITTING THAT DUE TO UNFORESEEN CIRCUMSTANC ES THE AR OF THE ASSESSEE COULD NOT MEET THE REQUIREMENTS OF THE ASSESSING OFFICER AS PER THE QUERIES RAISED BY HIM U / S.142(1) WHICH WERE ALREADY AVAILABLE TO THE AO IN THE DETAILED AUDIT REPORT SUBMITTED BY THE ASSESSEE AT THE TIME OF FIRST HEARING. IT WA S SUBMITTED THAT THE ESTIMATION BY THE ASSESSING OFFICER WAS ON A HIGHER FIGURE INSOFAR AS THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT ARE GENERALLY ESTIMATED @8% OF THE GROSS BILLS WHICH WAS NOT THE CASE OF THE ASSESSING OFFICER. SIMILARLY THE ADDIT I O NS DISALLOWANCE OF THE NEW ASSETS PURCHASED F OR WANT OF ORIGINAL BILLS AND VOUCHERS COULD NOT BE MADE UNDER THE PROVISIONS OF SECTION 144 INSOFAR AS THEY WERE PART AND PARCEL OF THE FINANCIAL STATEMENTS INDICATING THE NATURE AND SOURCE UTILISED FOR THE PU RCHASE OF THESE ASSETS. THE ASSESSING OFFICER, THEREFORE, ERRED IN BRINGING TO TAX THE SAME WHEN HE ALLOWED THE DEPRECATION CLAIMED AS PER THE DETAILS FURNISHED WERE ALSO CONSIDERED ALLOWABLE UNDER THE PROVISIONS OF SECTION 32. 4. THE LEARNED CIT(A) IN HIS ORDER HAS HELD THAT IT WAS TO BE CONSTRUED THAT THE ASSESSING OFFICER ESTIMATED THE PROFIT INVOKING THE PROVISIONS OF SECTION 145 THEREFORE HAVING ESTIMATED THE INCOME AT 10% HAD NO BASIS TO DISALLOW THE ADDITION TO THE FIXED ASSETS WHEN THE ESTIMATION AT HIGHER RATE ITA NOS.94 AND 169/CTK/2012 (CROSS APPEALS) 3 HAS TAKEN CARE THEREOF. HE DELETED THE ADDITION OF 12,37,930 BEING THE ADDITION TO THE FIXED ASSETS BUT CONFIRMED THE ESTIMATION OF INCOME AT 10% AMOUNTING TO 54,61,919 AFTER DEPRECIATION. 5. THE REVENUE IS IN APPEAL ON THE FOLLOWING GROUNDS. 01. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . FIRST APPELLATE AUTHORITY IS JUSTIFIED TO HOLD THAT COST OF THE NEWLY PURCHASED FIXED ASSETS DURING THE YEAR OF CONSIDERATION TO THE TUNE OF AMOUNT OF RS. 12,37,930/ - COULD NOT BE DISALLOWED SEPARATELY WHILE COMPUTING TAXABLE PROFIT ULS.144 OF THE LT.ACT ,1961. 02. WHETHER WITHIN THE MEANING OF SECTION 144 OF THE I.T.ACT,1961 WHILE MAKING AN ASSESSMENT OF TAXABLE INCOME TO THE BEST OF HIS JUDGMENT THE ASSESSING OFFICER IS LAWFULLY RESTRICTED NOT TO DISALLOW ANY FURTHER DEDUCTIONS WHICH ARE REFERRED TO U/S .29 AS DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING TAXABLE ASSESSED INCOME ON AN ESTIMATE BASIS WHERE THE DISALLOWANCE MADE IN THE INSTANT CASE IS NOT IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43D - RATHER IT IS ANY INVESTMENT OF THE ASSESSEE FROM HIS UNDISCLOSED SOURCE. 6. THE ASSESSEE IS IN APPEAL RAISING THE FOLLOWING GROUNDS. 1. THAT THE ASSESSMENT ORDER PASSED U/S. 144 OF THE ACT THEREAFTER CONFIRMED BY THE LD. CIT (A) AND THE ESTIMATION OF PROFIT ADOPTED BY THE AUTHORIT IES BELOW IS HIGHLY ARBITRARY, EXCESSIVE, COMPLETELY IGNORANCE AUDIT REPORT, BOOKS OF ACCOUNTS AND COMPARABLE CASES, THEREFORE THE IMPUGNED ORDERS ARE VERY MUCH ARBITRARY, ILLE GAL AND LIABLE TO BE SET ASIDE/ QUASHED ON THIS GROUND ONLY. 2. THAT THE ESTIMAT ION OF NET PROFIT @ 10% OF THE GROSS CONTRACTUAL RECEIPTS IS ARBITRARY AND EXCESSIVE IN COMPARISON TO APPELLANTS OWN ASSESSMENTS RELATING TO THE OTHER PREVIOUS YEARS, WHICH WERE ACCEPTED BY THE DEPARTMENT, THEREFORE WITHOUT ANY BASIS AND LIABLE TO BE REDU CED TO THE SAME . 7. WE HAVE HEARD THE RIVAL PARTIES AT LENGTH. FOR THE REVENUES APPEAL, THE LEARNED DR HAS INDICATE D THAT THE PURPORTED ADDITION ON ACCOUNT OF ITA NOS.94 AND 169/CTK/2012 (CROSS APPEALS) 4 UNEXPLAINED INVESTMENT IN THE FIXED ASSETS WAS THE CONTENTION OF THE ASSESSING OFF ICER WAS PART OF THE BEST JUDGMENT U/S.144 IN VIEW OF THE FACT THAT THE ESTIMATION OF INCOME COULD ONLY BE CONSIDERED FOR EXPENDITURE CLAIMED IN THE P & L ACCOUNT. HAVING AGREED TO THE ESTIMATION OF INCOME AT 10% IT COULD N OT BE SAID THAT 90% EXPENDITURE C LAIMED WAS FOR THE PURPOSE OF INCREASE IN THE FIXED ASSETS INSOFAR AS THE ASSESSEE HAD FAILED TO EXPLAIN THE SOURCE OF INVESTMENT IN SUCH ASSETS ALTHOUGH NOT MENTIONED BY THE ASSESSING OFFICER BUT BROUGHT TO TAX U/S.69 OF THE I.T.ACT. WE ARE UNABLE TO ACCE PT THIS CONTENTION OF THE LEARNED DR FOR THE SIMPLE REASON THAT THE ASSESSING OFFICER HIMSELF AGREED TO THE PROPOSITION THAT THE DEPRECIATION WAS ALLOWABLE TO THE ASSESSEE AS PER THE CLAIM MADE BY THE ASSESSEE IN THE FINANCIAL STATEMENTS ON THE INCREASE IN THE FIXED ASSETS AS PER THE FIXED ASSETS SCHEDULE ANNEXED TO THE BALANCE SHEET FORMING PART OF THE REPORT UNDER THE PROVISIONS OF S E CTI O N 44AB OF THE I.T.ACT. THE ASSESSING OFFICER HIMSELF ACKNOWLEDGES THAT IT WAS NOT THE CASE OF THE ABSENCE OF BOOKS OF A CCOUNT BUT WAS TO MAKE A BEST JUDGMENT ACKNOWLEDGED THE FACT THAT HE HAD NOT INVOKED THE PROVISIONS OF SECTION 145 WHEN THE INCOME COULD NOT BE CORRECTLY COMPUTED BY THE ASSESSING OFFICER FOR SUCH REQUIREMENT. DEPRECIATION IS A CHARGE ON THE P & L ACCOUNT AND IS ALLOWED UNDER THE PROVISIONS OF SECTION32 WHEN THE PRIME CONDITION FOR SUCH ALLOWANCE IS THAT THE ASSET AS OWNED BY THE ASSESSEE AND PUT TO USE IN THE IMPUGNED ASSESSMENT YEAR. ON THIS SCORE, THEREFORE, WE ARE INCLINED TO FIND THE LEARNED CIT(A) ACT ION IN DELETING THIS ADDITION JUSTIFIABLE, ALTHOUGH HE MADE A REFERENCE TO ESTIMATION OF INCOME TAKING CARE OF OF THE EXPENDITURES CLAIMED U/S.30 TO 43D RATHER CLARIFIED THAT DEPRECIATION CHARGED U/S.32 WAS ALLOWABLE INSOFAR AS THE AO HAS REDUCED THE SAME FROM THE ESTIMATED 10% OF THE ITA NOS.94 AND 169/CTK/2012 (CROSS APPEALS) 5 GROSS RECEIPTS WHICH CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE ADDITION WAS NOT MADE UNDER THE PROVISIONS OF SECTION 69. THEREFORE, THE SOURCE OF INVESTMENT AS ADDITIONAL ASSETS HAVE BEEN TAKEN CARE O F FROM THE CAPITAL AND LOANS WHICH ARE NOT FORMING PART OF THE EXPENDITURE CLAIMED U/SS.30 TO 43D CANNOT BE IMPORTED FOR THE PURPOSE OF HOLDING A VIEW THAT THE ESTIMATION DOES NOT TAKE CARE OF ADDITION TO FIXED ASSETS. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY MERIT N THE GROUNDS RAISED BY THE REVENUE AND THEREFORE, WE DISMISS THE APPEAL FILED BY THE REVENUE. 8. NOW ADVERTING TO T HE APPEAL FILED BY THE ASSESSEE. F INDING OURSELVES TO ADDRESS THE ISSUES RAISED BY THE ASSESSEE IN ITS APPEAL, W E ARE INCLIN ED TO HOLD THAT THE AUDITED P & L ACCOUNT AND BALANCE SHEET INDICATED THE INCOME GENERATED FROM HAVING RAISED GROSS BILLS AMOUNTING TO 58.58 CRORES. BY NO STRETCH OF IMAGINATION , EVEN IF BOOKS ARE REJECTED , CAN IT BE SAID THAT THE PROFIT FOR ESTIMATION HAS TO BE AT 10%. THE LEARNED CIT(A) THEREFORE, ERRED IN CONFIRMING THE SAME ONLY O N THE PREMISE THAT INTEREST EARNED BY THE ASSESSEE WAS TO BE TAXED AS INCOME FROM OTHER SOURCES NOT RELATING TO THE BUSINESS OF THE ASSESSEE WHEN TH E MAJOR RECEIPTS AMOUNTING TO 58.44 CRORES ARE ON THE B ASIS OF BILLS RAISED O N CONTRACTEES. WITHOUT REFERRING TO THE INABILITY OF THE ASSESSEE TO HAVE EXPLAINED THE QUERIES RAISED BY THE ASSESSING OFFICER IN NOTICE U/S.142(1), THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT THE INFORMATION AVAILABLE THEREIN WAS SUFFICIENT FOR HIM TO COMPUTE THAT THE EXPENDITURE CLAIMED DIRECTLY RELATED TO THE CONTRACT WORK RENDER ED BY THE ASSESSEE WHICH RESULTED IN INCOME OF 14,65,000 AND THAT INCLUDED INTEREST INCOME AMOUNTING TO 1,37,570. THE LEARNED COUNSEL FOR THE ASSESSEE THEREFORE SUBMITTED THAT TH E AUTHORITIES BELOW INCLUDING THE ITA NOS.94 AND 169/CTK/2012 (CROSS APPEALS) 6 ASSESSING OFFICER MISINTERPRETED THE FINANCIAL STATEMENTS INSOFAR AS HAVING GRANTED THE DEPRECIATION ON THE ASSETS WHICH WERE ACQUIRED DURING TH E IMPUGNED ASSESSMENT YEAR ON WHICH DEPRECIATION TOTALING 3,96,358 WAS ALLOWABLE COULD LEAVE NO ROOM FOR ESTIMATION AT SUCH AN EXORBITANT RATE AT 10% WHEN THE RETURN AS PER THE AUDITED BOOKS OF ACCO UNT INDICATED PROFIT OF 0.2% .WE DO FIND IT HIGHLY UNJUST AND UNFAIR AS A BEST JUDGMENT U/S.144. TAKING CLUE IN THE MANNER FROM THE DISALLOWANCE BEING THE ADDITION OF THE FIXED ASSETS WASMADE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT REQUIRES RECON SIDERATION AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD INSOFAR AS THE ASSESSEE HAS FURNISHED THE AUDITED FINANCIAL STATEMENTS WHICH CERTIFIED THAT THE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED HA S ONLY BEEN DOUBTED BY THE ASSESSING OF FICER WHICH IN OUR VIEW DOES NOT APPEAR TO BE PROPER. WE, THEREFORE, SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER FOR RE - COMPUTING THE INCOME AFRESH ON EXAMINATION OF THE BOOKS OF ACCOUNT . WE DIRECT ACCORDINGLY BY ALLOWING THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES . SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 25.05.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NOS.94 AND 169/CTK/2012 (CROSS APPEALS) 7 COPY OF THE ORDER FORWARDED TO : 1. THE A SSESSEE: SRI TRIBHUBAN DAS, M - III - 18, MADHUBAN, PARADEEP,JAGATISINGHPUR PAN: AFJP D 6472 R 2. THE DEPARTMENT : INCOME - TAX OFFICER, WARD 2, PARADEEP 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.