M/s. Rajendra & Co., Baroda V. The Income tax Officer,Ward-2(2), Baroda

ITA 956/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0320 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-08-2010
• Assessment Year: 1993-1994
• Appeal Filed On: 13-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Principle of natural justice; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI G.D.AGRAWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER DATE OF HEARING :11/08/2010 DRAFTED ON: 12/08/2 010 ITA NO.956/AHD/2008 ASSESSMENT YEAR : 1993-94 M/S.RAJENDRA PATEL & CO. 19, VISHWAS COLONY ALKAPURI, BARODA VS. THE INCOME TAX OFFICER WARD-2(2) BARODA PAN/GIR NO. : AACFP0297Q (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.K. PATEL RESPONDENT BY: SHRI K.M.MAHESH SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II, BARODA DATED 03/12/2007 PASSED FOR ASSESSMENT YEAR 1993-94 AGAIN ST THE CONFIRMATION OF PENALTY LEVIED U/S.271(1)(C) OF THE I.T. ACT, 1961. 2. AT THE OUTSET, IT HAS BEEN INFORMED THAT VIDE IM PUGNED ORDER OF THE PENALTY DATED 31/10/2006, THE QUANTUM OF PENALTY WA S AFFIXED AT RS.14,91,000/- U/S. 271(1)(C) OF THE I.T.ACT, 1961, HOWEVER, AFTER THE APPEAL EFFECT THE SAME GOT REDUCED TO RS.5,69,957/- VIDE AN ORDER DATED 03/03/2008. MEANING THEREBY, AT PRESENT, THE PEN ALTY IN QUESTION I.E. U/S.271(1)(C) OF THE I.T. ACT, 1961 IS IN RESPECT O F THE REVISED QUANTUM OF PENALTY. ITA NO .956/AHD/2008 M/S.RAJENDRA PATEL & CO. VS. ITO ASST.YEAR - 1993-94 - 2 - 3. THE ASSESSEE IS A CIVIL CONTRACTOR. THE FIRM HAD CARRIED THE SAID ACTIVITY AT TWO PLACES. AT ONE PLACE, I.E. AT DAMA N, THE ASSESSEE HAS CARRIED OUT CONSTRICTION OF RESIDENTIAL UNITS. TH ERE WAS SOME DISPUTE, HOWEVER, AS PER FINAL SETTLEMENT A SUM OF RS.68,46, 792/- WAS AWARDED TO THE ASSESSEE. THE ASSESSING OFFICER HAS TREATED TH E ENTIRE AMOUNT AS INCOME OF THE YEAR. THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITION, HOWEVER, THE TRIBUNAL HAS HELD THAT THE PRINCIPAL A MOUNT OF RS.45 LACS PERTAINED TO THE ORIGINAL COMPONENT, THEREFORE, IN THE NATURE OF BUSINESS RECEIPTS LIABLE TO BE TAXED, HOWEVER, AFTER ALLOWIN G THE LEGAL EXPENSES INCURRED. IT WAS ONE OF THE REASONS OUT OF THE TW O ON THE BASIS OF WHICH THE IMPUGNED PENALTY WAS IMPOSED. 3.1. THE OTHER REASON FOR IMPOSITION OF THE IMPUGNE D PENALTY IS IN RESPECT OF NET PROFIT ASSESSED ON THE CONTRACT RECE IPTS. THE ASSESSING OFFICER HAD WORKED OUT THE NET PROFIT ON CONTRACT R ECEIPT AT THE RATE OF 8%, HOWEVER, THE TRIBUNAL HAS DIRECTED TO ADOPT THE PROFIT RATE AT 7%. THESE ARE THE TWO REASONS FOR THE IMPOSITION OF THI S PENALTY WHICH WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 4. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES, FE W FACTS HAVE BEEN NOTICED THAT THE ASSESSEE HAS SUO MOTU DISCLOSED THE TOTAL CONTRACT RECEIPTS EMERGING OUT OF THE DAMAN CONSTRUCTION CONTRACT AND BECAUSE OF THAT REASON THE ASSESSING OFFICER HAS COMMENTED THAT THE GROSS PROFIT HAD GONE UP FOR THE YEAR UNDER CONSIDERATION COMPARING THE EARLIER YEARS. IT HAS ALSO BEEN AN ACCEPTED POSITION THAT THE ENTIRE FACT AS DISCLOSED BY THE ASSESSEE OF RS.68,46,347/- HAD A COMPONENT OF RS.4 5 LACS AS AN ARBITRATION AWARD RELATING TO AN OLD CIVIL CONTRACT OF CONSTRUCTION OF ITA NO .956/AHD/2008 M/S.RAJENDRA PATEL & CO. VS. ITO ASST.YEAR - 1993-94 - 3 - RESIDENTIAL QUARTERS. THE DISPUTE WAS THAT THE AP PELLANT HAS CLAIMED THE EXPENDITURE AGAINST THE ENTIRE AMOUNT, HOWEVER, THE VIEW WAS TAKEN THAT IN RESPECT OF THE ARBITRATION AWARD OF RS.45 LACS W HICH PERTAINED TO EARLIER YEARS, THE ASSESSEE WOULD HAVE ALREADY CLAIMED THE EXPENSES IN THE PAST, THEREFORE, THE AMOUNT BEING AN ORIGINAL COMPENSATIO N TO BE TAXED AS BUSINESS RECEIPTS FOR THE YEAR UNDER CONSIDERATION. THESE FACTS HAVE THEREFORE CLEARLY INDICATED THAT THE FIGURES OF THE TOTAL CONTRACT RECEIPTS INCLUSIVE OF THE ARBITRATION AWARD WAS DULY DISCLOS ED BY THE ASSESSEE AS A TOTAL RECEIPT OF THE YEAR, HOWEVER, THE DIFFERENCE OF OPINION WAS WHETHER THE EXPENDITURE HAS RIGHTLY BEEN CLAIMED FOR THE YE AR UNDER CONSIDERATION AGAINST AN AMOUNT OF ARBITRATION AWARD WHICH ADMITT EDLY PERTAINED TO THE PAST CONSTRUCTION ACTIVITY. FACTS AS REVEALED BY T HE ASSESSEE IN RESPECT OF THE CONTRACT RECEIPTS, DULY DISCLOSED IN THE RETURN OF INCOME HAVE NOT BEEN FOUND FALSE. THE ADDITION WAS UPHELD BECAUSE OF A N OPINION FORMED BY THE TRIBUNAL THAT THE AWARD WAS NOTHING BUT THE INC OME OF THE YEAR WHICH WAS SEGREGATED FROM THE TOTAL AMOUNT AND, ACCORDING LY, TAXED. ONCE THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND F ALSE AND THERE WAS NO CONCEALMENT OF THE FIGURES, THEREFORE, IT IS DIFFIC ULT TO HOLD THAT IT IS A CASE OF CONCEALMENT ON THE PART OF THE ASSESSEE. LIKEW ISE, IN RESPECT OF THE OTHER ADDITION BEING THE BASIS FOR IMPOSITION OF IM PUGNED PENALTY, THE MATTER HAS SWITCHED FROM ONE ESTIMATE OF 8% TO AN A NOTHER ESTIMATE OF 7% WHICH WAS FINALLY AFFIRMED BY THE TRIBUNAL. I N THIS REGARD, AS WELL, THE ASSESSING OFFICER HAS FOUND THAT LABOUR PAYMENT S WERE EXCESSIVE, HENCE, REJECTED THE BOOK RESULTS AND APPLIED THE NE T PROFIT AT THE RATE OF 8% ON THE CONTRACT RECEIPTS. THE TRIBUNAL HAS TAK EN A VIEW THAT KEEPING NATURAL JUSTICE INTO CONSIDERATION THE ADDITION BE RESTRICTED TO 7% OF THE NET PROFIT TO MEET THE ENDS OF JUSTICE. THEREFORE , THE ARGUMENT BEFORE US ITA NO .956/AHD/2008 M/S.RAJENDRA PATEL & CO. VS. ITO ASST.YEAR - 1993-94 - 4 - IS THAT THE DISCLOSURE OF THE CONTRACT RECEIPTS WER E TRUE AND CORRECT, HOWEVER, THE DISPUTE WAS WHETHER THE CORRECT RATE O F PROFIT WAS DISCLOSED BY THE ASSESSEE OR NOT. ON ACCOUNT OF THIS FACT, THE VEHEMENT ARGUMENT WAS THAT THERE WAS NO CONCEALMENT OF THE AMOUNT IN QUESTION. WITH THIS FACTUAL BACKGROUND, RELIANCE HAS BEEN PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT.LTD. REPORTED AS (2010)322 ITR 158(SC) AND ON THE DECISI ON OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. NEPANI BIRI COMPANY TRUST REPORTED AS (1991)190 ITR 402 (ALLA.) FOR THE PRO POSITION THAT MERELY DISALLOWANCE OF CLAIM BY ITSELF DO NOT AMOUNT TO FU RNISH OF INACCURATE PARTICULARS OF INCOME. THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION O F HON'BLE GUJARAT HIGH COURT IN THE CASE OF NAVJIVAN OIL MILLS VS. CIT REP ORTED AS (2001) 252 ITR 417 (GUJ.) FOR THE PROPOSITION THAT AN ADDITIO N ON ESTIMATE BASIS IS MERELY AN ADDITION ON ACCOUNT OF ARITHMETICAL DIFFE RENCE AND FOR THE PURPOSE OF LEVY OF PENALTY ONCE THE ASSESSEE HAS DI SCHARGED THE BURDEN OF PROVING THE CORRECTNESS OF THE CLAIM AND REASONABLE NESS OF THE PROFIT DISCLOSED, THERE IS NO OCCASION TO SUSTAIN THE PENA LTY. ALL THESE DECISIONS, DEFINITELY SUPPORT THE ARGUMENTS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE, HENCE, WE ACCEPT TH E SAME AND DIRECT TO DELETE THE PENALTY. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13 / 08 /2010. SD/- SD/- ( G.D.AGRAWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 13/ 08 /2010 T.C. NAIR, SR. PS ITA NO .956/AHD/2008 M/S.RAJENDRA PATEL & CO. VS. ITO ASST.YEAR - 1993-94 - 5 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD