ITO, Vellore v. M/s Sri Rajarajeswari Construction, Arakkonam

ITA 1309/CHNY/2008 | 2005-2006
Pronouncement Date: 04-03-2011 | Result: Dismissed

Appeal Details

RSA Number 130921714 RSA 2008
Bench Chennai
Appeal Number ITA 1309/CHNY/2008
Duration Of Justice 2 year(s) 8 month(s) 18 day(s)
Appellant ITO, Vellore
Respondent M/s Sri Rajarajeswari Construction, Arakkonam
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 04-03-2011
Date Of Final Hearing 24-02-2011
Next Hearing Date 24-02-2011
Assessment Year 2005-2006
Appeal Filed On 16-06-2008
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI.ABRAHAM P. GEORGE A.M. I.T.A. NO.1309/MDS/2008 ASSESSMENT YEAR: 2005-06 THE INCOME TAX OFFICER WARD I(3) VELLORE. VS. M/S. SRI RAJARAJESWARI CONSTRUCTION NO.6 NEHRUJI NAGAR 5 TH STREET STUARPET ARAKKONAM VELLORE DT. [PAN:AABFS1359P] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. SRINIVAS ASSESSEE BY : SHRI S. SRIDHAR ORDER PER U.B.S. BEDI J.M . THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) IX CHENNAI DATED 25.03. 2008 RELEVANT TO THE ASSESSMENT YEAR 2005-06. 2. IN THIS CASE EARLIER ORDERS PASSED BY THE TRIBUNAL CAME TO BE RECALLED AT THE INSTANCE OF THE ASSESSEE. 3. THE DEPARTMENT HAS C HALLENGED THE ORDER OF THE LD. CIT(A) WITH REGARD TO DELETION OF ADDITION MADE IN RESPECT OF SALE OF BRICKS AND JELLY AS THE ASSESSEE HAS NOT INCLUDED THE SALES IN THE TOTAL TU RNOVER AND THE LD. CIT(A) HAS FAILED TO NOTE THAT AS PER THE SALES TAX ASSE SSMENT ORDER THE ASSESSEE HAS DONE THE SALE OF BRICKS AND JELLY AND THE ASSESSEE HAS NOT OFFERED THE PROFIT ON SALE OF BRICKS AND JELLY TO TAX. 4. FACTS INDICATE THAT THE ASSESSEE IS A CIVIL CONTRACTOR. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSE SSEE FIRM HAS NOT PRODUCED BOOKS OF I.T.A. NO.1309/MDS/08 2 ACCOUNT ON THE GROUND THAT THE THERE WAS DISPUTE BET WEEN THE PARTNERS. ON THE BASIS OF MATERIALS ON RECORD THE ASSESS ING OFFICER HAS TAKEN THE NET PROFIT AT 8% ON THE TOTAL CONTRACT RECEIPTS OF ` .1.25 CRORES SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER HAS FURTHER POINTED OUT THAT THE SALES TAX DEPARTMENT HAS SHOWN TOTAL TURNOVER OF ` .85 72 983/- ON RESALE OF JELLY BRICKS CEMENT ETC. THE ASSESSING OFFICER HAS CALCULATED 10% OF THESE SALES AS NET INCOME AND AGGRIEVED BY THIS ADDITION THE ASSESSEE HAD FILED APPEAL BEFOR E THE LD. CIT(A). IN THE FIRST APPEAL PROCEEDING THE LD. AR OF THE ASSESSEE PL EADED THAT DUE TO DIFFERENCE OF OPINION AMONG THE PARTNERS BOOKS OF A CCOUNT WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND HE FURT HER PLEADED THAT THE ASSESSING OFFICER HAS ESTIMATED NET INCOME AT THE RATE OF 8% PROBABLY TAKING THE STRENGTH OF SECTION 44AD OF THE INCOME TAX ACT. HE PLEADED THAT 8% OF NET INCOME IS APPLICABLE FOR RECEIPTS LESS THAN ` .40 LAKHS. THE ASSESSEES TURNOVER IS ` .124 LAKHS AND 8% NET PROFIT IS VERY HIGH. REGARDING THE RESALE OF BRICKS CEMENT JELLY AND OTHER HARDWARES HE PLEADED THAT THE ASSESSING OFFICER HAS MISUNDERSTOOD THE FACTS MENTIONED IN THE SA LES TAX ORDER. HE SU BMITTED THAT THE ASSESSEE HAS PURCHASED MATERIAL WORTH OF ` .79 64 762/- AND THE SALES TAX OFFICER HAS TREATED IT AS RESALE TO THE PARTY FROM WHOM THE ASSESSEE FIRM GOT CONTRACT. TO ARRIVE AT SALES TAX TURNOVER SALES TAX AUTHORITY HAS CALCULATED THIS AMOUNT. IT IS NOT ACTUALLY A SEPARATE SALE OF THESE ITEMS AS SAME IS INCLUDED IN THE TOTAL CONTRACT WORK. ACCORDINGLY HE SUBMITTED THAT KEEPING IT AS A SEPARATE INCOME BY THE ASSESSING OFFICER IS ERRONEOUS. I.T.A. NO.1309/MDS/08 3 5. THE LD. CIT(A) WHILE CONSIDERING AND ACCEPTING THE PLEA OF THE ASSESSEE ON ESTIMATION OF INCOME UNDER SECTION 44 AD HE DETERMINED THE SAME AT 5% OF THE TURNOVER AND DIRECTING THE ASSESSING OFFI CER TO ADOPT 5% AS NET PROFIT AND ALLOW THE REMUNERATION PAID TO THE PARTNERS FROM T HE NET PROFIT. 5.1 REGARDING TREATING OF S EPARATE BUSINESS OF SALE OF BRICKS JELLY ETC. THE LD. CIT(A) OPINED THAT THE ASSESSING OFFI CER HAS NOT VERIFIED THE PROFIT AND LOSS ACCOUNT THERE IS NO SALE CREDITED IN THE PROFIT AND LOSS ACCOUNT. SO THE ASSESSING OFFICER HAS WRONGLY TAKEN THE TOTA L TURNOVER CALCULATED IN THE SALES TAX ORDER AS SEPARATE BUSINESS. ACCO RDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER AGAINST THE RESALE OF JELLY BRICKS ETC. AMOUNTING TO ` .8 57 298/- CAME TO BE DELETED. 6. THE DEPARTMENT HAS CHALLENGED THE SECOND LIMP OF RELIEF GIVEN WITH RESPECT TO ALLEGED BUSINESS OF SALE OF BRICKS JELLY ETC. AND IT WAS PLEADED BY THE LD. DR THAT SINCE FIGURES TAKEN FOR WORK ING OUT FOR SALE OF BRICKS AND JELLY IS VERY MUCH THERE IN THE SALES TAX ORDER THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED IN ESTIMATING THE PROFIT OF 10% ON THE RESALE OF BRICKS AND JELLY ETC. TO WORK OUT THE ADDITION OF ` .8 57 298/- AND THE LD. CIT(A) IS NOT LEGALLY OR FACTUALLY CORRECT IN DELETING THE ADDITION THEREFOR E IT WAS THUS PLEADED FOR SETTING ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORING THAT OF THE ASSESSING OFFICER IN THIS REGARD. 7. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT NOW FRESH CIRCULAR OF CBDT HAS COME WHICH HAS RAISED THE FINANCIAL LIMIT FOR FILING OF APPEAL BEFORE THE TRIBUNAL TO ` .3.00 LAKHS OF TAX EFFECT AGAINST THE EARLIER LIMIT OF I.T.A. NO.1309/MDS/08 4 ` .2.00 LAKHS AND BY FILING COPY OF INSTRU CTION NO.3 OF 2011 DATED 09.02.2011 IT WAS PLEADED FOR DISMISSING THE APPEA L OF THE DEPARTMENT AS TAX ON ` . 8 57 298/- WILL COME BELOW ` .3.00 LAKHS AND THE LD. DR ON THE OTHER HAND SUBMITTED THAT IN THIS FRESH CIRCUL AR DATED 09.02.2011 THERE IS SPECIFIC STIPULATION [AS PER PAR A 11 OF THE INSTRUCTION] THAT TH IS INSTRUCTION SHALL APPLY TO APPEALS FILED ON OR AFTER 09.02.2011 AND EA RLIER FILED APPEALS WILL BE GOVERNED BY EARLIER INSTRUCTIONS ON THIS SUBJECT OPERATIVE WHEN SUCH APPEAL WAS FILED AND THE LD. DR HAS PLEADED FOR DISMISSAL OF THE PLEA OF THE ASSESSEES COUNSEL AND TO DECIDE THE APPEAL ON MERITS. 7.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT O PERATION OF EARLIER INSTRUCTION WHICH IS SIMILARLY WORDED IN THIS REGARD HAS BEEN HELD TO BE RETROSPECTIVE EFFECTIVE IN VIEW OF THE DECISIONS OF HONBLE BOMBAY AND PUNJAB & HARYANA HIGH COURTS. THEREFORE IT WAS PLEADED THAT THE PLEA OF THE DEPARTMENT IN THIS REGARD SHOULD NOT BE ENTERTAI NED AND THE APPEAL SHOUL D BE DISMISSED AS NOT MAINTAINABLE. 8. WITHOUT PREJUDICE TO THE ABOVE STAND OF THE LD. COUNSEL FOR THE ASSESSEE HE FURTHER SUBMITTED THAT OTHERWISE ALSO THE ADDITION WAS NOT CALLED FOR WHICH WAS UNNECESSARILY MADE AND IF ASSESSMENT ORDER PASSED UNDER SALES TAX PROVISIONS DATED 23.01.2006 FOR THE ACCOUNTI NG YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06 IS CAREFULLY LOOKED INTO IT INDICATES THAT THE NATURE OF BUSINESS OF ASSESSEE AS MENTIONED IN COL. III IS W ORKS CONTRACT AND TOTAL TURNOVER WAS ` .85 72 983/- AND TAXABLE TURNOVER WAS ` .22 20 053/- AND RESALE TURNOVER WAS TO THE EXTENT OF ` .2 58 846/- WHICH WAS DISCL OSED BY THE ASSESSEE AND I.T.A. NO.1309/MDS/08 5 ACCEPTED BY THE SALES TAX AUTHORITIES. SI NCE TOTAL CONTRACT WORKS UNDERTAKEN BY THE ASSESSEE ARE TO THE EXTENT OF ` .1.24 CRORES AND TAXABLE TURNOVER WAS TO THE EXTENT OF ` .22 20 053/- AND IF 10% IS CALCUL ATED ON THAT IT COMES TO ` .2 22 000.05 AND NOT ` .8 57 298/- AS DETERMINED BY THE ASSESSING OFFICER. THEREFORE THE ADDITION IS NOT CALLED FO R WHICH HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A) WHOSE ACTION IS BEING IN C ONFORMITY WITH LAW WHICH SHOULD BE CONFIRMED AND THE APPEAL OF THE D EPARTMENT SHOULD BE DISMISSED. 9. WE HAVE CONSIDERED RIVAL SUBMISSI ONS AND MATERIAL ON RE CORD. SO FAR AS FIRST OBJECTION OF THE ASSESSEES COUNSEL IS CONCERNED ABOUT LESS TAX EFFECT WE FIND THAT IN THE CBDT INSTRUCTION NO .3/2011 DATED 09.02.2011 THERE IS CLEAR STIPULATION AS PER PARA 11 OF THE SAID INSTRUCTION THAT THESE INSTRUCTIONS WILL BE APPLICABLE TO THE APPEALS FILED ON OR A FTER 09.02.2011. BUT SIMILAR TYPE OF STIPULATION WAS THERE IN IN STRUCTION NO.3 OF 2008 DA TED 15.05.2008 IN CLAUSE 11 OF SAID INSTRUCTION AND MORE THAN ONE HIGH COURTS STATED TO HAVE HELD THAT REVISED MONETARY LIMIT WOULD APPLY TO ALL PENDING APPEALS AND SUCH ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN REFUTED BY THE LD. DR AND OTHERWISE THE DEPARTM ENT HAS NOT MADE OUT A CASE TO ESTABLISH THAT THE ISSUE FALLS WITHIN THE EXCEPTIONS PROVIDED IN THE SAID CIRCULAR/ INSTRUCTION. 9.1 FURTHER IN THE CASE OF CIT V. ASSOCIATED AGENCIES CHENNAI-600 034 REPORTED IN 295 ITR 496 T HE HONBLE MADRAS HIGH CO URT HAS HELD THAT APPEALS CANNOT BE FILED IN VIOLATION OF THE SAID CIRCULAR. THE HONBLE MADRAS HIGH COURT HAD ALSO REFERRED TO THE J UDGMENT OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DIGVIJAY SINGH REPORTED IN (2007) 292 ITR 314 THE JUDGMENT OF I.T.A. NO.1309/MDS/08 6 HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. ZOEB Y. TOPIWALS (2006) 284 ITR 379 AND ALSO ANOTHER JUDGM ENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CAMCO COLOUR CO. (2002) 254 ITR 565 FOR THE PROPOSITION THAT DIRECTIONS ISSUED BY THE BOARD ARE BI NDING ON THE DEPARTMENT AND APPEAL FILED WHERE THE TAX EFFECT IS LESS THAN THAT PROVIDED IN THE SAID INSTRUCTION IS NOT MAINTAINABLE. 9.2 HENCE IN VIEW OF THE SAID CI RCULAR AND RESPECTFULLY FOLLOWING THE PRECEDENTS FROM HONBLE JURISDICTIONAL HI GH COURT AS NOTED ABOVE THE APPEAL IS DISMISSED IN LIMINE. 10 IN THE RESULT THIS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 04.03.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI DATED THE. 04.03.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R.