COMMISSIONER OF INCOME TAX V. BRIJ PAL SHARMA

ITA/868/2008

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Faridabad, against Brij Pal Sharma, a contractor, concerning the assessment of income for the year 2000-2001. The primary issues were the appropriate net profit percentage to be applied under Section 44AD of the Income Tax Act, 1961, and the admissibility of certain income items not related to the contract business. The Assessing Officer had initially estimated the profit at 8% of gross receipts due to non-submission of books, which was contested. The CIT(A) and subsequently the Tribunal, after considering fresh evidence, found the assessee's declared income to be accurate, leading to the dismissal of the appeal.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 734948 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 29-07-2009
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S K MUKHI
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Assessment; Income Tax; Interest income; Loading Charges; Net Profit; Loading Commission
• Section: 44AD; 260A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 868 of 2008 (O&M) Date of decision: 29.7.2009 The Commissioner of Income Tax,Faridabad. ......Appellant Vs. Brij Pal Sharma, Prop M/s B.P.Sharma & Co,Faridabad. ...Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT: Mr.Rajesh Katoch, Advocate, for the appellant. Mr.S.K.Mukhi, Advocate, for the respondent. **** ADARSH KUMAR GOEL, J. (Oral) 1. The Revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 ( for short, “the Act”) against the order dated 23.11.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench “I” New Delhi in ITA No. 1310/DEL/2005 for the assessment year 2000-2001, proposing to raise the following substantial questions of law: i) “ Whether on the facts and circumstances of the case, the order of the Tribunal is perverse by not dealing with the findings of the assessing authority in respect of computation of net profit of 8%, which is fair and judicious keeping in view the provisions of Section 44AD of the Income Tax Act,1961, especially when the assessee failed to produce the account books as well as the requisite information in spite of repeated opportunities?” I.T.A. No. 868 of 2008 -2- ii) “ Whether on the facts and circumstances of the case, the Hon'ble Tribunal is right in law in affirming the decision of the learned CIT(A) in deleting the addition of Rs.7,15,625/- made by the Assessing Officer on account of interest income, loading charges and loading commission as credited in the Profit & Loss account on the ground that the same were not related to the contract business of the assessee?” 2. Notice was issued to consider the question referred to in the order dated 17.2.2009, which is as follows: “ Learned counsel for the appellant has invited the attention of this Court to Section 44AD of the Income Tax Act, 1961, and inter alia, contended, firstly, that the respondent-assessee did not produce his books of accounts before the Assessing Officer inspite of repeatedly having been required to do so, and secondly, the respondent -assessee's income during the previous assessment year in respect of the same work, was much much higher than the present assessment year. Notice of motion for 5.5.2009.” 3. The assessee is a contractor. Assessing Officer called for I.T.A. No. 868 of 2008 -3- information for finalizing the assessment, which the assessee failed to furnish. The Assessing Officer made assessment by treating 8% for gross receipts as income. On appeal, the assessee produced fresh evidence in support of its claim. The CIT(A) held that there was no justification for assessing income by estimating the profit to be 8% of the gross receipts. The assessee had audited accounts and there was nothing in the order of the Assessing Officer that sales had not been recorded or properly declared. The Commissioner also relied upon the appellate order of the previous assessment in which it was held that no case was made out by the Assessing Officer for making addition. The Tribunal affirmed the finding of the CIT (A). 4. We have heard learned counsel for the parties. 5. No doubt, the assesses failed to produce books of accounts and in such a situation, it may have been permissible for the Assessing Officer to draw an inference and proceed on the basis of material available or even on the basis of best judgment. The Assessing Officer did so. However, the CIT(A) considered the fresh evidence led by the assessee and found estimate of the A.O. to be not sustainable. The finding so recorded was upheld by the Tribunal as follows: “In this case, the assesses was successful in satisfying the CIT)(A) that the fresh evidence in the shape of the books of account, details of expenses etc. deserved to be admitted as per Rules. The CIT(A) enjoys plenary powers which are co- I.T.A. No. 868 of 2008 -4- terminus with that of the AO. The action of the CIT(A) in admitting the fresh evidence has not been specifically challenged by the revenue before us as the ground of appeal as taken in the memo of appeal does not expressly bring it out. Be that as it may de hors the aforesaid , we have examined the matter and find that the CIT(A) has admitted the fresh evidence led by the assesses for justifiable reasons. Now, the aspect to be considered is as to whether the AO was provided with an adequate opportunity to examine the evidence led by the assessee. In this regard, it is notable from the remand report of the AO that the assessee duly appeared before the AO and furnished the requisite details. So, however, it is also clear from the remand report that the AO was not satisfied on various counts. Such objections have been detailed by the CIT(A) in para 5 of his order. We have perused the same and also the conclusion of the CIT(A) in this regard contained in para 5.3 of his order. After a perusal of the same, we find no infirmity in I.T.A. No. 868 of 2008 -5- the approach of the CIT(A). The CIT(A) after appraising the factual position manifested by the books of account and other details led by the assessee was satisfied that the profit as declared by the assessee in the books of account was fair and proper. Apart from the aforesaid, we find that in the remand report, there is no specific infirmity or defect brought out by the AO to justify any of the disallowances. Mere general observations have been made, which in our view, has been rightly negated by the CIT(A).” 6. In view of the above, the questions proposed cannot be held to be substantial questions of law. The assessee having satisfied the appellate authority by leading evidence that the income declared by the assessee was the correct income, we do not find any ground to interfere. 7. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) July 29, 2009 JUDGE raghav Note: Whether this case is to be referred to the Reporter? ........Yes/No I.T.A. No. 868 of 2008 -6- I.T.A. No. 868 of 2008 -7- "