M/s. Balaji Constructions, Pune V. Income-tax Officer,

MA 8/PUN/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5481 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S N DOSHI
• Keywords: Principle of natural justice; Ignorance of law
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , , ' BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURV EDI, AM ## . /MA NO.08 /PUN/2016 ARISING OUT OF ITA NO.694/PUN/2014 ASSESSMENT YEAR : 2009-10 M/S. BALAJI CONSTRUCTION, C/O. RAJAN D. SADRE, C-801, 8 TH FLOOR, THE LEGEND, LAKE TOWN ROAD, BIBVEWADI, PUNE - 37 ... APPLICANT PAN: AAIFB0285C VS. THE INCOME TAX OFFICER, WARD-5(4), PUNE ... RESPONDENT APPLICANT BY : SHRI S.N. DOSHI RESPONDENT BY : SHRI P.L. KUREEL / DATE OF HEARING : 13.01.2017 / DATE OF PRONOUNCEMENT: 03.03.2017 / ORDER PER SUSHMA CHOWLA, JM : THE PRESENT MISCELLANEOUS APPLICATION HAS BEEN FIL ED BY THE ASSESSEE APPLICANT AGAINST THE ORDER OF TRIBUNAL IN ITA NO.6 94/PUN/2014 RELATING TO ASSESSMENT YEAR 2009-10, ORDER DATED 28-10-2015. 2. THE APPLICANT IS RESPONDENT IN THIS APPEAL. THE GRIEVANCE OF THE APPLICANT IS THAT THE SAID ORDER HAS BEEN PASSED RE LYING ON RULE24/25 OF THE INCOME TAX RULES, 1963. THE CASE OF THE ASSESSEE W AS THAT ON THE PREVIOUS DATE OF HEARING 13-08-2015 AN ADJOURNMENT APPLICATI ON WAS MOVED BY ONE OF 2 MA NO.08/PUN/2016 ARISING OUT OF ITA NO.694/PUN/2014 THE PARTNERS, WHO WAS NOT AWARE OF THE PROCEEDINGS BEFORE THE TRIBUNAL. SHE, AFTER GIVING THE ADJOURNMENT APPLICATION HAD NOT WA ITED FOR THE ADJOURNMENT TO BE GRANTED AND HENCE THE NEXT DATE OF HEARING AS PR ONOUNCED IN THE OPEN COURT WAS NOT KNOWN. HENCE, THE DEFAULT IN APPEARANCE ON THE DATE OF HEARING, I.E. 13-10-2015. IN THIS REGARD, THE APPLICANT STATES A S UNDER : THE RESPONDENT ASSESSEE HAD NO OCCASION TO GET THE GUIDANCE OF TAX CONSULTANT AS THE MAIN PARTNER MR. RAJAN SADRE HAS HIS ENGAGEMENT AWAY FROM PUNE MAINLY AT NAGPUR AS AN EMPLOYEE OF R AJDEEP BUILDERS PVT. LTD. DURING THAT RELEVANT PERIOD. THE RESPOND ENT ASSESSEE ALSO COULD NOT ENGAGE THE TAX CONSULTANT AS THE MAIN PAR TNER WAS AWAY FROM THE PUNE. THIS IS THE HONEST AND BONAFIDE REASON THAT PREVENT ED THE RESPONDENT ASSESSEE TO ATTEND ON 13-10-2015 FOR WHICH THE PART NERS GREATLY REGRET. MRS. SWATI SADRE NOT BEING AWARE OF THE PROCEDURE P ARTICULARLY THE REMAINING PRESENT IN THE COURT ON 13-08-2015 TO KNO W THE OUTCOME OF THE ADJOURNMENT APPLICATION AND THE NEXT DATE OF HEARIN G IS AFFIRMING THESE FACTS ON A SWORN AFFIDAVIT ENCLOSED SEPARATELY. 3. FURTHER THE GRIEVANCE OF THE APPLICANT IS AGAINS T THE ESTIMATION OF INCOME MADE IN THE HANDS OF ASSESSEE AND IN THIS REGARD IT IS STATED AS UNDER : THE TOTAL WIP SHOWN TO THE CREDIT OF P & L A / C INCLUDES THE OPENING WIP OF RS. 2,79,25,297/- SUGGESTING THAT THERE WAS VALU E ADDITION TO THE WIP DURING THE YEAR WAS RS. 3,29,17,352/- (RS. 6,02,42, 649 LESS RS. 2,79,25,297) (REFER PARA 4.2.3 OF CIT(A) ORDER) . THEREFORE AT THE OUTSET THE AMOUNT TO BE CONSIDERED AS THE BASIS FOR ESTIMATION OF PROFIT IS RS. 3,29,17,352/- AS CORRECTLY TAKEN BY THE LD CIT( A). THE ASSESSING OFFICER AND THE HON'BLE BENCH HAVE BA SED THE ESTIMATION AT 8% BY INVOKING THE PROVISIONS OF SEE 44AD. IN T HE CASE OF A PARTNERSHIP FIRM EVEN IN THAT CASE SAID ESTIMATION NEEDS TO BE FURTHER REDUCED BY THE AMOUNT OF SALARY TO THE PARTNERS RS. 2,00,000/- AND INTEREST TO PARTNERS RS. 2,00,000/- TOTALING TO RS. 4,00,000/- AND IN WHICH CASE QUANTUM OF ADDITION WOULD BE DIFFERENT. RESPONDENT ASSESSEE IS NOT CHALLENGING THE INVOKING OF PROVISION OF SEE 145(3) NEVERTHELESS ESTIMATION OF PROFIT NEEDS TO B E REASONABLE. TAKING INTO CONSIDERATION THE FINANCIAL DATA OR PERFORMANC E THE HON'BLE BENCH IN PARA 10 AND ON PAGE 7 HAS CORRECTLY ANALYZED THE LEGISLA TIVE INTENTION WHILE BRINGING SEE 44AD ON THE STATUTE . THE HON'BLE BENCH OBSERVED THAT PROVISION OF SEE 44AD ENTITLES THE ASSESSEE OF RELA TIVELY SMALLER SIZE AND NOT REQUIRE TO MAINTAIN THE BOOKS OF ACCOUNTS AND P ROVIDE ESTIMATING THE NET PROFITS @ 8% OF TOTAL TURNOVER . THE BENCH OBSERVES THAT THIS IS A BENEFICIAL PROVISION TO REDUCE THE HARDSHIPS AND TA X HASSLES TO THE ASSESSEES RELATIVELY OF SMALLER SIZE ENGAGED IN SUC H ELIGIBLE BUSINESS . IT IS ON CONSIDERATION OF THESE ASPECTS THE STATUTORY PERCENTAGE IS ESTIMATED 3 MA NO.08/PUN/2016 ARISING OUT OF ITA NO.694/PUN/2014 AT 8% OF TOTAL TURNOVER MADE BY THE ASSESSEES OF SM ALLER SIZE I . E. HAVING THE TURNOVER OF LESS THAN 40 LAKHS. NOW CONSIDERING THE RESPONDENT ASSESSEE TURNOVER OF RS. 6,02,42,649/- THE BENCH WOULD APPRECIATE THAT THE RESPONDENT ASSE SSEE IS NOT THE ASSESSEE OF SMALLER SIZE. THEREFORE GOING BY THE VI EW EXPRESSED BY THE HON'BLE BENCH THE ESTIMATION AT 8% TO THE TURNOVER OF RESPONDENT ASSESSEE DOES NOT APPEAR TO BE CORRECT . THE RESPONDENT ASSESSEE PRAYS THAT THE APPEAL MAY K INDLY BE RECALLED IN THE INTEREST OF NATURAL JUSTICE FOR WHICH RESPON DENT ASSESSEE WILL REMAIN HIGHLY OBLIGED. 4. THE APPLICANT HAS ALSO FILED AN AFFIDAVIT WHEREI N THE HIGHLIGHT IS THAT, BEING UNAWARE OF THE PROCEDURE REQUIRING TO REMAIN PRESENT IN THE COURT TILL THE ADJOURNMENT APPLICATION IS DISPOSED OF BY THE BENCH , THE NEXT DATE OF HEARING COULD NOT BE KNOWN. THE REQUEST HAS BEEN MADE TO R ECALL THE ORDER PASSED BY THE TRIBUNAL DATED 28-10-2015. 5. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESS EE TOOK US THROUGH THE MISCELLANEOUS APPLICATION FILED AND STRESSED THAT B ECAUSE OF GENUINE REASONS THERE WAS NON-APPEARANCE ON 13-10-2015. IN RESPECT OF THE MERITS DECIDED BY THE TRIBUNAL, HE CONTENDED THAT THE RATE APPLIED TO ESTIMATE THE INCOME WAS VERY HIGH AND THE ESTIMATION OF INCOME SHOULD HAVE BEEN REASONABLE. HE FURTHER POINTED OUT THAT THE ASSESSEE WAS NOT A SMA LL TRADER BUT HAD A TURNOVER OF RS.6 CRORES AND HENCE THE ESTIMATION BY APPLYING NET PROFIT RATE WAS HIGH. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE HEARING OF THE APPEAL WAS FIXED ON 13-08-2015 ON WH ICH DATE AN ADJOURNMENT APPLICATION WAS MOVED BY THE PARTNER OF THE ASSESSE E FIRM SEEKING ADJOURNMENT. THE SAID APPLICATION WAS DECIDED IN T HE OPEN COURT AND THE NEXT 4 MA NO.08/PUN/2016 ARISING OUT OF ITA NO.694/PUN/2014 DATE OF HEARING WAS ANNOUNCED TO BE 13-10-2015, I.E . AFTER A GAP OF 2 MONTHS. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE SAID DATE OF HEARING AND THE MATTER WAS DECIDED EXPARTE THE ASSESSEE BUT AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. THIS WAS AN APPEAL FI LED BY THE REVENUE. IN THE FIRST INSTANCE, THE NOTICE OF HEARING WAS DULY SERV ED UPON THE ASSESSEE ON 13- 08-2015 AND THEREAFTER IT WAS INCUMBENT UPON THE AS SESSEE TO EITHER ARGUE THE APPEAL ON THE SAID DATE OR AS IN THE PRESENT CASE, ASK FOR ADJOURNMENT. ONCE THE ADJOURNMENT HAS BEEN ASKED FOR BY THE ASSESSEE AND THE SAME HAS BEEN GRANTED, THEN THE ONUS IS UPON THE APPLICANT TO FIN D OUT THE NEXT DATE OF HEARING. IT IS NOT A CASE WHERE THE ADJOURNMENT WAS GIVEN FO R A SHORT TIME BUT THE MATTER WAS ADJOURNED FOR A PERIOD OF 2 MONTHS. THE PARTNE R FOR THE APPLICANT CLAIMS THAT SHE WAS NOT AWARE OF THE PROCEDURE FOLLOWED, H OWEVER, IGNORANCE OF LAW OR THE PROCEDURE FOLLOWED BY THE TRIBUNAL CANNOT EXCUS E THE ASSESSEE, ESPECIALLY IN A CASE WHERE THE ASSESSEE WAS REPRESENTED BY AN AUTHORISED REPRESENTATIVE IN THE PROCEEDINGS BEFORE LOWER AUTH ORITIES. 8. NOW COMING TO THE MERITS OF THE CASE, THE TRIBUN AL VIDE PARA 10 HAS NOTED THAT IT WAS AN ADMITTED POSITION THAT BOOKS O F ACCOUNT WERE NOT PRODUCED AT ALL FOR THE RELEVANT ASSESSMENT YEAR. THE TAX A UDIT REPORT WAS FILED BEFORE THE CIT(A) FOR THE FIRST TIME WHICH HAD SERIOUS DIS CREPANCIES AND EVEN THE METHOD ADOPTED FOR VALUING THE INTERNAL STOCK/WORK IN PROGRESS WAS NOT CLEAR. FURTHER DISCREPANCIES IN THE AUDIT REPORT ARE NOTED BY THE TRIBUNAL IN PARA 10 ITSELF. THE TRIBUNAL HELD THAT IN VIEW OF SUCH DIS CREPANCIES THERE WAS NO JUSTIFICATION TO SCALE DOWN THE ESTIMATION MADE BY THE ASSESSING OFFICER. REFERENCE WAS MADE TO THE STATUTORY PROVISIONS OF S ECTION 44AD OF THE ACT WHICH ENTITLES THE ASSESSEE OF RELATIVELY SMALLER S IZE ENGAGED IN ELIGIBLE BUSINESS, ENTITLED TO PRESUMPTIVE TAX @8% OF THE TO TAL TURNOVER OR GROSS RECEIPTS. THE TRIBUNAL FURTHER DWELT UPON THE RATI ONALE FOR ADOPTING RATE OF 8% 5 MA NO.08/PUN/2016 ARISING OUT OF ITA NO.694/PUN/2014 OF THE CONTRACT RECEIPTS AND WHERE THE ASSESSEE HAS FAILED TO MAINTAIN THE BOOKS OF ACCOUNT AND FAILED TO PRODUCE THE BASIC DO CUMENTS THE RELIEF GRANTED BY THE CIT(A) WAS REVERSED AND THE INCOME WAS ESTIM ATED @8% IN THE HANDS OF THE ASSESSEE. 9. THE LD. AUTHORISED REPRESENTATIVE FOR THE APPLIC ANT BEFORE US FAIRLY ADMITTED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT ES TIMATION OF INCOME HAS TO BE MADE IN THE HANDS OF ASSESSEE, HOWEVER, THE RATE APPLIED FOR ESTIMATING THE INCOME IS HIGH. HE STRONGLY POINTED OUT THAT THE D EFECT IN THE ORDER OF THE TRIBUNAL WAS IN ADOPTING THE ESTIMATION FIGURE AT 8 % OF THE TOTAL TURNOVER. UNDER THE PROVISIONS OF SECTION 254(2) OF THE ACT, THE TR IBUNAL IS EMPOWERED TO RECTIFY ANY MISTAKE WHICH IS APPARENT FROM RECORD. THE LIM ITED POWER AVAILABLE TO THE TRIBUNAL UNDER SECTION 254(2) OF THE ACT IS TO RECT IFY THE MISTAKE APPARENT FROM RECORD AND NOT RE-ADJUDICATE THE ISSUE. IN THE PRE SENT CASE, RATE OF 8% ON THE TOTAL TURNOVER HAS BEEN HELD TO BE REASONABLE BY TH E TRIBUNAL, TO BE APPLIED FOR WORKING OUT THE INCOME OF THE ASSESSEE. THE ASSESS EE IS AGGRIEVED BY SUCH ESTIMATION. WE FIND NO MERIT IN THE PLEA OF THE AS SESSEE SINCE THE ESTIMATION AT A FIGURE OR OTHERWISE CANNOT BE STATED TO BE A MIST AKE APPARENT FROM RECORD, WHICH SHOULD BE RECTIFIED BY EXERCISE OF POWERS UND ER SECTION 254(2) OF THE ACT. ACCORDINGLY, THE MISCELLANEOUS APPLICATION FILED BY THE APPLICANT IS DISMISSED. 10. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 03 RD DAY OF MARCH, 2017. SD/- SD/- ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 03 RD MARCH, 2017 SATISH 6 MA NO.08/PUN/2016 ARISING OUT OF ITA NO.694/PUN/2014 % &'# (# / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPLICANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-III, PUNE; 4. / THE CIT-III, PUNE 5. ! $$% , % , / DR A, ITAT, PUNE; 6. ) / GUARD FILE. / BY ORDER, ! $ // TRUE COPY // .//ASSISTANT REGISTRAR % , / ITAT, PUNE