Paresh Kumar Nayak, Bhubaneswar v. ITO, Bhubaneswar

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. /AND . . . S HRI K.S.S.PRASAD RAO JUDICIAL MEMBER / I.T.A.NO. 129/CTK/2010 STAY PETITION NO.16/CTK/2010 / ASSESSMENT YEAR 2006 - 07) P A RESH KUMAR NAYA K PROP. M/S.SAI ENTERPRISES BISWASUDHA BHAWAN OPLOT NO.1350/1493 TANKAPANI ROAD BHU BANESWAR 18 PAN : ACPPN 0351 C - - - VERSUS - INCOME - TAX OFFICER WARD 1(2) BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI N.PANDA/SNEHASIS SAHU ARS / FOR THE RESPONDENT: / SHRI J.KHANRA DR / ORDER . . SHRI K.K.GUPTA ACCOUNTANT MEMBER. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING THE ARGUMENTS ON APPEAL PRAYED FOR THE CONSIDERATION OF THE APPEAL PRIOR TO CONSIDERATION OF THE STAY P ETITION WHICH IN CONSEQUENCE TO ADJU DI CATING THE APPEAL BE CONSIDERED THEREAFTER . 2. THE ASSESSEE IN ITS APPEAL HAS AGITATED THAT THE LEARNED CIT(A) REDUCED THE ESTIMATION OF INCOME COMPUTED AT 8% OF THE GROSS RECEIPTS THE ASSESSEE BEING A WORKS CONTRAC TOR TO 6% AS AGAINST RETURNED BY THE ASSESSEE FOR THE CONSECUTIVE THREE EARLIER YEARS BETWEEN 2 TO 5% AND ALSO HOLDING THE VIEW THAT THE INCOME RETURNED BY THE ASSESSEE HAD BEEN ESTIMATED AT A PERCENTAGE OF 8% REQUIRE D SEPARATE CONSIDERATION OF THE UNSEC URED LOAN REMAINING UNEXPLAINED UNDER THE PROVISIONS OF SECTION 68 OF THE ACT TO BE TAXED AS INCOME. I.T.A.NO. 129/CTK/2010 STAY PETITION NO.16/CTK/2010 2 3. THE BRIEF FACTS OF THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE DERIVES INCOME FROM EXECUTION OF WORKS CONTRACT AND FILED RETURN OF INCOME AT 1 72 350. I NSPITE OF SEVERAL OPPORTUNITIES GRANTED NONE APPEARED BEFORE THE ASSESSING OFFICER WHO WAS CONSTRAINT TO FRAME THE ASSESSMENT U/S.144 BY ESTIMATING THE NET INCOME @8% OF THE GROSS RECEIPTS AND ALSO TAXED THE ENTIRE AMOUNT OF 5 LAKHS SHOWN AS UNSECURED L OAN BY THE ASSESSEE. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO GAVE DUE CONSIDERATION TO THE MATTER AND AFTER TAKING COGNIZANCE OF THE AMOUNT ON NET INCOME ON THE BASIS OF GROSS RECEIPTS FOR THE PRECEDING AND SUCCEEDING YEARS AT 4.82% AND 5.05% RESPECTIVELY AS AGAINST 2.33% RETURNED IN THE IMPUGNED ASSESSMENT YEAR DIRECTED THE AO TO ESTIMATE THE NET PROFIT AT 6% OF THE GROSS TURNOVER. HOWEVER HE CONFIRMED THE UNEXPLAINED UNSECURED LOAN AMOUNTING TO 5 LAKHS WHEN THE ASSESSEE APPELLANT BEFORE HIM FURNISHED LETTERS FROM 25 PERSONS EACH STATING TO HAVE PAID 20 000 AS LOAN IN CASH. THE PROVISIONS OF SECTION 2 69SS R.W.S. 68 WAS HELD BY HIM AS RIGHTLY INVOKED BY THE ASSESSING OFFICER AND CONFIRMED THE ADDITION. 4. THE LEARNED COU NSEL INITIATING HIS ARGUMENTS SUBMITTED THAT THE ASSESSEE IS A WORKS CONTRACTOR AND EXCLUSIVELY EXECUTES WORKS AT DIFFERENT RETAIL OUTLETS OF BHARAT PETROLEUM CORPORATION LTD. IN THE STATE OF ORISSA. HE HAD FILED THE RETURN OF INCOME TO WHICH THE LEARNED ASSESSING OFFICER FAILED TO GRANT A REASONABLE OPPORTUNITY TO PRESENT AND ASSESS IN ACCORDANCE WITH LAW. BEING TIME BARRING THE ASSESSING OFFICER WAS CONSTRAINT TO PASS THE ORDER ON 24.12.2008.FURTHER THE LEARNED CIT(A) DID NOT ALLOW FOR REMAND FROM THE ASSESSING OFFICER HOLDING IT WOULD BE IN VIOLATION TO RULE 46A.HE SUBMITTED THAT ONCE THE LEARNED CIT(A) RESORTED TO ESTIMATION BUT AT 6% IN I.T.A.NO. 129/CTK/2010 STAY PETITION NO.16/CTK/2010 3 THE IMPUGNED ASSESSMENT YEAR BASING HIS CONSIDERATION ON THE PRECEDING AND SUCCEEDING AYS HE SHOULD HAVE MADE A CA SE FOR DISALLOWANCE OF EXPENSES INSTEAD OF ESTIMATING THE INCOME @6% WHICH IN ANY CASE IS HIGHER THAN THE RATE AS HAD BEEN CONSIDERED BY HIM IN THE PRECEDING AND SUCCEEDING YEARS. HE SUBMITTED THAT AN AVERAGE RATE MAY KINDLY BE CONSIDERED FOR ASSESSMENT I N THE IMPUGNED ASSESSMENT YEAR . FURTHERMORE ON THE ISSUE OF ADDITION OF 5 LAKHS UPHELD AS UNSECURED LOANS UNDER THE PROVISIONS OF SECTION 68 R.W.S. 269SS AS THE ASSESSMENT HA D BEEN FRAMED U/S.1 44 AND THE ASSESSING OFFICER HAD SOUGHT TO TAX THE DIFFERENCE IN THE RETURNED INCOME AND ESTIMATION THERE WAS NO CAUSE OF ALARM TO BRING THE AMOUNT TO TAXABILITY AN AMOUNT WHICH IS LESS THAN THE AMOUNT ESTIMAT ED AS INCOME VIS - - VIS AS NO REBUTTAL HAD BEEN FURNISHED OR WAS REFUSED UNDER THE PROVISIONS OF RULE 4 6A BY THE LEARNED CIT(A). HE PRAYED THAT ONCE ESTIMATION OF INCOME HAS BEEN RESORTED TO ON A RATE OF INCOME FROM THE TOTAL RECEIPTS THE UNSECURED LOANS WHICH BECOME PART OF PROFIT SO ESTIMATED CANNOT BE SEPARATELY TAXED WHILE RENDERING THE SAME TO DOUBLE TAXATION. HE PRAYED THAT A SUITABLE DIRECTION MAY BE GIVEN TO DELETE THE SAME. 5. THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER WAS CONSTRAINT TO FRAME THE ASSESSMENT U/S.144 WHEN THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND GIVE THE DETAILS FOR CLAIMING EXPENSES BY THE ASSESSEE IN THE FINANCIAL STATEMENTS SUBMITTED ALONG WITH THE RETURN. AS HAS BEEN NOTED BY THE LEARNED CIT(A) THAT THE LETTERS IN SUPPORT OF THE ASSESSEES CONTENTION WERE FOR CONFIRMING UNSECU RED LOAN S WAS DISPROVED BY THE LE ARNED CIT(A) INVOKING THE PROVISIONS OF RULE 46A. T HE SAME COULD NOT BE CONSIDERED AS HAS BEEN SUGGESTED BY THE LEARNED COUNSEL FOR THE ASSESSEE APPELLANT AS OF NOW TO THE EXTENT THAT THE ASSESSEE HAD RETURNED INCOME OF 1 72 350 @ 2.33% I.T.A.NO. 129/CTK/2010 STAY PETITION NO.16/CTK/2010 4 WHEN THE MANDATORY REQUIREMENT OF RATE OF INCOME AT 8% HAS BEEN PROVIDED IN THE INCOME - TAX ACT FOR CONSIDERATION IN ABSENCE OF BOOKS OF ACCOUNT. HE PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILA BLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCE WE ARE OF THE CONSIDERED VIEW THAT ONCE THE ASSESSING OFFICER RESORTED TO ESTIMATION OF ENHANCING THE RATE OF INCOME ON THE BASIS OF GROSS RECEIPTS THE ASSESSEE BEING A WORKS CONTR ACTOR THE INCOME WHICH HE HA D PROPOSED IN HIS ORDER WAS MORE THAN SUFFICIENT TO MEET THE UNSECURED LOANS WHICH IN ANY CASE WHETHER IN VIOLATION OF RULE 46A OR ON THE BASIS OF INSUFFICIENT EVIDENCE WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER OR THE LEARN ED CIT(A) COULD BE HELD AGAINST THE ASSESSEE. ONCE THE ASSESSING AUTHORITIES TRIED TO DETERMINE ON THE BASIS OF RATE ON THE GROSS INCOME THE UNDISCLOSED INCOME UNDER THE PROVISIONS OF SECTION 68 OR SECTION 69 HAD TO BE SPECIFICALLY BROUGHT ON RECORD WHICH AMOUNTS TO LESS THAN THE ESTIMATED INCOME THEREFORE HAS BEEN TAKEN CARE OF BY THE ASSESSING AUTHORITIES THEMSELVES REQUIRING ONLY FURTHER CLARIFICATION. WE ARE OF THE VIEW THAT ONCE THE RATE OF 6% HAS BEEN ACCEPTED AS WAS PUT FORTH TO THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING THE DIFFERENCE BETWEEN THE RETURNED INCOME AND THE INCOME AT 6% WAS SUFFICIENT TO TAKE CARE OF THE AMOUNT OF UNSECURED LOAN THEREFORE CANNOT BE BROUGHT TO TAX SEPARATELY AS INCOME FROM UNDISCLOSED SOURCES. IN THE LI GHT THEREOF CONFIRMING THE NET INCOME @6% WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF UNSECURED LOAN AMOUNTING TO 5 LAKHS AS CONFIRMED BY THE LEARNED CIT(A) IN VIOLATION TO RULE 46A OF THE INCOME - TAX RULES 1962. I.T.A.NO. 129/CTK/2010 STAY PETITION NO.16/CTK/2010 5 7. IN THE RESUL T THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. CONSEQUENT HERETO THE STAY PETITION FILED BY THE ASSESSEE IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 25 TH FEBRUARY 2011 SD/ - SD/ - ( . . . ) ( K.S.S.PRASAD RAO) JUDICIAL MEMBER ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( ) DATE: 25 TH FEBRUARY 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : PARESH KUMAR NAYAK PROP. M/S.SAI ENTERPRISES BISWASUDHA BHAWAN OPLOT NO.1350/1493 TANKAPANI ROAD BHUBANESWAR 18 2 / THE RESPONDENT: INCOME - TAX OFFICER WARD 1(2) BHUBANESWAR. 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY ( ) ( H.K.PADHEE ) SENIOR.PRIVATE SECRETARY.