Shri Hribu Bose, Asansol v. I.T.O, Ward-1(2), Asansol, Asansol

ITA 2214/KOL/2013 | 2009-2010
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 221423514 RSA 2013
Assessee PAN AEIPB7702A
Bench Kolkata
Appeal Number ITA 2214/KOL/2013
Duration Of Justice 3 year(s) 1 month(s) 23 day(s)
Appellant Shri Hribu Bose, Asansol
Respondent I.T.O, Ward-1(2), Asansol, Asansol
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 30-09-2016
Date Of Final Hearing 21-07-2016
Next Hearing Date 21-07-2016
Assessment Year 2009-2010
Appeal Filed On 06-08-2013
Judgment Text
ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH KOLKATA BEFORE SHRI P.M JAGTAP ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI JUDICIAL MEMBER I.T.A. NO. 2214/KOL/2013 A.Y: 200910 SHRI HRIBU BOSE VS. INCOME TAX OFFICER PAN: AEIPB 7702A WARD 1(2) A SANSOL (APPELLANT) (RESPONDENT) I.T.A. NO. 2323/KOL/2013 A.Y: 200910 INCOME TAX OFFICER VS. SHRI HRIBU BOSE WARD 1(2) ASANSOL (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI U. DASGUPTA ADVOCATE LD.AR SHRI PINAKI MUHERJEE JCIT LD. SR. DR DATE OF HEARING : 21-07- 2016 DATE OF PRONOUNCEMENT : 30 -09-2016 O R D E R SHRI S.S. VISWANETHRA RAVI JM :- THESE TWO APPEALS BY THE ASSESSEE IN ITA NO.2214/KOL/2013 AND THE REVENUE IN ITA NO.2323/KOL /2013 ARE DIRECTED AGAINST THE ORDER DATED 14-06-2013 PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS) ASANSOL FOR TH E ASSESSMENT YEAR 2009-10. ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 2 ITA NO.2214/KOL/2013 AY 2009-10 (BY THE ASSESSEE) 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. FOR THAT THE ORDER OF LD. COMMISSIONER OF INCOM E TAX (A) IS ARBITRARY EXCESSIVE HENCE BAD IN LAW. 2. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A ) WAS NOT LEGALLY JUSTIFIED IN ESTIMATING THE NET PROFIT @ 11 % OF GROSS CONTRACT RECEIPTS WHICH IS VERY MUCH ON THE HIGHER SIDE AND THE SAME MAY PLEASE BE MODIFIED. 3. FOR THAT ON THE FACTS OF THE CASE THE OBSERVATI ON OF THE CIT(A) IN PAGE NO.- 8 9 AND 10 OF THE APPELLATE ORD ER ARE CONTRADICTORY. 4. A) FOR THAT ON THE FACTS OF THE CASE THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION AMOUNTING TO R S.18 00 000/- ON DOZER HIRE CHARGES RS.12 57 600/- ON EXCAVATOR HIR E CHARGES AND RS.12 05 200/- ON PAY LOADER HIRE CHARGES U/S. 40(A )(IA) OF THE ACT61 WHEN BOOK RESULTS HAS BEEN REJECTED AND PRO FIT HAS BEEN ESTIMATED AT A CERTAIN PERCENTAGE OF GROSS CONTRACT RECEIPTS AND LEGALLY THERE IS NO SCOPE FOR MAKING ANY FURTHER AD DITIONS AND AS SUCH THE ADDITIONS MAY PLEASE BE DELETED. 4. (B) FOR THAT. ON THE FACTS OF THE CASE THE C.I.T (A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION AMOUNTING TO R S. 18 00 0001- ON DOZER HIRE CHARGES RS. 12 57 6001- ON EXCAVATOR HI RE CHARGES AND RS. 12 05 2001- ON PAY LOADER HIRE CHARGES U/S 40( A)(IA) OF THE ACT'61 WHEN THE MACHINES WERE TAKEN ON HIRE FROM O PEN MARKET ON AS PER REQUIREMENT BASIS AND PAYMENTS TO EACH P ERSON NEVER EXCEEDED THE STATUTORY LIMIT U/S 194 I OF THE ACT' 61 DURING THE FINANCIAL YEAR AND AS SUCH THE SAID ADDITIONS MAY PLEASE BE DELETED. 5) FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A ) WAS NOT LEGALLY JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 11 42 6001- ON A/C OF LABOUR WAGES WHEN THE SAID PAYMENTS MADE TO LABOUR SARDARS (SUPPORTED BY WAGE SHEETS) ARE NOT HIT BY SEC 40(A)(IA) OF THE ACT'61 AND THE SAME MAY PLEASE BE DELETED. 6) FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A ) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.8 63 688 /- ON A/C OF MR. SUNIL KUMAR ( THE PRINCIPAL CONTRACTOR) WHEN THE SAME IS NOT COMMISSION BUT THE SAME IS THE PART OF HIS PROFITS RETAINED BY HIM AGAINST THE GROSS CONTRACT JOB SUB-LET TO THE APPEL LANT( SUB CONTRACTOR) AND THE ADDITION WRONGLY MADE MAY PLEA SE BE DELETED. ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 3 ITA NO.2323/KOL/2013 AY 2009-10 (BY THE REVENUE) 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1) THAT LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS. 33 50 562/- ON ACCOUNT OF UNDISCLOSED TURNOVER AND RESTRICTED THE ADDITION TO 11 % OF UNDISCLOSED TURNOVER AS ASSESSEE HAS NEVER DIS CLOSED THIS UNDISCLOSED TURNOVER DURING SCRUTINY PROCEEDINGS. T HE SPECIFIC FINDING OF A.O. IS NOT BEING TAKEN INTO CONCERN BY LD.CIT (A). 2) THAT LD. COMMISSIONER OF INCOME TAX (APPEAL) ERR ED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS. 1 18 0 58/- ON ACCOUNT OF PARTLY DISALLOWANCE OF REPAIR & MAINTENA NCE CHARGES. 3) THAT LD. COMMISSIONER OF INCOME TAX (APPEAL) ERR ED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS. 11 35 369/- ON ACCOUNT OF DISALLOWANCE OF EXCESS DEPRECIATION ON D UMPERS. WHEREAS A.O. HAD MADE HIS DECISION JUDICIOUSLY RELY ING UPON DECISION OF CIT VS GUPTA GLOBAL EXIM (P) LTD. (2008 ) 171 TAXMANN 474/305 ITR 132(SC) THAT DEPRECIATION BLOCK OF 30% IS APPLICABLE ONLY WHEN ASSESSEE IS IN BUSINESS OF HIR ING OUT ITS BUSES LORRIES OR TAXIES. HERE ASSESSEE USED HIS AL L DUMPERS FOR OWN BUSINESS. THE SPECIFIC AND RATIONALE FINDING OF A.O. IS NOT BEING TAKEN INTO CONCERN BY LD.CIT (A). 4) THAT LD. COMMISSIONER OF INCOME TAX (APPEAL) ERR ED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS. 10 92 8801- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF IT. AC T DESPITE OF THE FACT ENOUGH OPPORTUNITIES WERE GIVEN TO ASSESS EE TO OFFER HIS EXPLANATION BUT HE TOTALLY NON COMPLIED. 4. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL IN ITA NO.2214/KOL/2013 FOR THE A.Y 2009-10. ITA NO.2214/KOL/2013 FOR THE A.Y 2009-10 5. THE BRIEF FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS A CIVIL CONTRACTOR AND ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS AND OTHER MISCELLANEOUS CONTRACT S AND CONDUCTED ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 4 HIS BUSINESS IN THE NAME AND STYLE OF M/S. BOSE INF RASTRUCTURE AND M/S. CONTINENTAL TECHNO CO. FILED HIS RETURN OF IN COME ON 30-09- 2009 DECLARING TOTAL INCOME AT RS.2 47 760/-.UNDER SCRUTINY NOTICES U/S. 143(2)/142(1) WERE ISSUED. IN RESPONSE TO WHICH THE LD.AR OF THE ASSESSEE APPEARED AND REPLIED ON THE Q UESTIONNAIRES ISSUED BY THE AO. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT AN AMOUNT OF RS.33 50 562/- IS AN UNDISC LOSED INCOME OF THE ASSESSEE AS IT WAS NOT MENTIONED IN THE SAID RETURN OF INCOME. THE AO ON VERIFICATION OF LEDGER AS FILED B Y THE ASSESSEE WAS OF THE VIEW THAT THE ASSESSEE HAS CLAIMED HIRE CHARGES OF RS.11 09 000/- AND RS.6 91 000/- PAID TO SRI DIPAK ROY AND BINOD YADAV WITHOUT DEDUCTING THE TDS ON SUCH PAYMENTS AN D ADDED THE SAID AMOUNT OF RS.33 50 562/- U/S. 194I OF THE ACT TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY THE AO ON VERIFI CATION OF LEDGER FOUND THAT THE ASSESSEE HAS PAID EXCAVATOR HIRE CHA RGES OF RS.12 57 600/- TO SRI PRABAL CHANDA WITHOUT DEDUCTI NG THE TDS U/S. 194(I). THE AO ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE. LIKEWISE THE AO ADDED THE SUM OF RS.12 05 200/- TOWARDS PAY LOADER HIRE CHARGES RS.11 25 000/- TO WARDS ROLLER HIRE CHARGES U/S. 194C RS.11 42 600/- AND RS.8 63 688/- TOWARDS LABOUR CHARGES AND COMMISSION CHARGES U/S. 194H OF THE ACT. THE AO ALSO ADDED THE SUM OF RS.1 18 058 RS.11 35 369/ - AND RS.10 92 880/-TOWARDS REPAIRS AND MAINTENANCE DEP RECIATION CHARGES AND CASH CREDIT U/S.68 OF THE ACT RESPECTIV ELY AND FINALLY HE DETERMINED THE TOTAL INCOME AT RS.1 33 38 720/- BY AN ORDER U/S. 143(3) DATED 22-12-2011. 6. AGGRIEVED BY SUCH ASSESSMENT ORDER PASSED U/S. 1 43(3) OF THE ACT THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT-A AND CONTENDED THAT ACTUAL DELETION IS OF RS.2 24 88 355 /- WHICH IS ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 5 MORE THAN WHAT WAS DISCLOSED BEFORE THE AO. IT WAS THE SUBMISSION THAT BOOKS OF ACCOUNT NEVER EXISTED AND THE TAX AUDIT REPORT WAS DISOWNED. THUS THE LD.AR OF THE ASSESSE E BEFORE THE CIT-A URGED THAT NET PROFIT PERCENTAGE SHOULD BE D ETERMINED AT LESS THAN THE PERCENTAGE DETERMINED BY THE AO. THE AO MADE THE ADDITIONS/DISALLOWANCES IN VIEW OF COMPUTING THE NE T PROFIT ON ESTIMATION BASIS. CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE THE CIT-A OPINED THAT THERE WAS NO REFLECTION OF TRUE A ND CORRECT FIGURES AND DIRECTED THE AO TO ESTIMATE THE NET PRO FIT AT 11% AND TO REDUCE THE VALUE OF MATERIAL SUPPLY AND RETENTIO N OF MONEY AND FURTHER TO ENQUIRE WITH REGARD TO DEDUCTION CLAIMED ON RECEIPTS OF MACHINERY HIRE CHARGES. 7. AGGRIEVED BY SUCH ORDER OF THE CIT-A BOTH THE A SSESSEE AND REVENUE ARE IN APPEAL BEFORE US BY RAISING RESPECTI VE GROUNDS OF APPEAL WHICH HAVE BEEN MENTIONED HEREINABOVE. 8. BEFORE US THE LD.AR SUBMITS THAT THE ASSESSEE HA S FILED THE AUDITED ACCOUNTS BUT COULD NOT PRODUCE THE BOOKS O F ACCOUNT. HE FURTHER SUBMITTED THAT THE CIT-A HAS ESTIMATED THE NET CONTRACT RECEIPTS @11% WHICH IS HIGHER THAN THE ESTIMATION OF EARLIER YEARS AND SUCH ASSESSMENTS WERE COMPLETED BY APPLYI NG THE NET PROFIT AT 8% U/S. 143(3) OF THE ACT. THE LD.AR ARGU ED THAT WHEN THE AUTHORITIES HAVE ACCEPTED THE GROSS RECEIPTS T HEN THE IMPUGNED ADDITIONS MADE BY THE AO ARE INVALID. THE LD.AR FOR THE ASSESSEE FURTHER RELIED ON THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI ARJUN BHOWMI CK IN GA NO.2683 OF 2014/ITAT NO.134 OF 2014. ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 6 9. IN REPLY THE LD.DR SUBMITS THAT THE ASSESSEE FI LED HIS RETURN OF INCOME ALONG WITH THE TAX AUDIT REPORT. BASING O N WHICH THE IMPUGNED ASSESSMENT WAS COMPLETED U/S. 143(3). HE F URTHER SUBMITTED THAT DISOWNING OF THE TAX AUDIT REPORT AN D BOOKS OF ACCOUNT BEFORE THE CIT-A IS INCORRECT AND NOT FAIR ON THE PART OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION HE RELI ED ON THE ORDER/DECISION OF THE CO-ORDINATE BENCH OF ITAT PA TNA REPORTED IN 2015 TAXMANN.COM 37. THE LD. DR URGED TO REMAND THE MATTER TO THE FILE OF THE AO FOR FURTHER VERIFICATION IN RESP ECT OF ADDITIONS MADE TOWARDS MACHINERY HIRE CHARGES AND COMMISSION. 10. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD INCLUDING THE CASE LAWS CITED BY BOTH THE PA RTIES BEFORE US. WE FIND THAT ACCORDING TO THE AO THE ASSESSEE FILE D HIS RETURN OF INCOME ALONG WITH TAX AUDIT REPORT AND BOOKS OF ACC OUNT. BUT ON SUBSEQUENT PROCEEDINGS BEFORE THE CIT-A THE ASSESSE E DISOWNED BOTH THE TAX AUDIT REPORT AND NON EXISTENCE OF BOOK S OF ACCOUNT. WE FIND THAT THE AO MADE THE ADDITIONS/DISALLOWANCE S BASED ON BOOKS OF ACCOUNT AS SUBMITTED BEFORE HIM. THE CIT-A TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE APPLI ED THE NET PROFIT AT 11% AND THE CIT-A ALSO UPHELD AND MODIFIE D THE OTHER ADDITIONS/DISALLOWANCES AS MADE BY THE AO. THEREFOR E THE QUESTION BEFORE US IS TO BE DECIDED THAT WHETHER TH E CIT-A IS JUSTIFIED IN DIRECTING THE AO TO ADOPT THE NET PROF IT AT 11% IN THE FACTS AND CIRCUMSTANCES OF THE CASE. PARTICULARLY WHEN THE ASSESSEE DISOWNED THE TAX AUDIT REPORT AND NON EXIS TENCE OF BOOKS OF ACCOUNT. IN THIS REGARD WE MAY REFER TO THE DECI SION OF THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE C ASE OF ARJUN BHOWMICK SUPRA HELD AS THE ESTIMATION MADE BY AO OF NET PROFIT ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 7 WILL TAKE CARE OF EVERY ADDITION RELATED TO BUSINES S INCOME OR BUSINESS RECEIPTS AND NO FURTHER DISALLOWANCE CAN B E MADE THE RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER:- WE FIND THAT THE LEARNED TRIBUNAL WHILE ALLOWING TH E APPEAL OF THE ASSESSEE HAD HELD AS UNDER:- 'WE FIND THAT THERE IS NO DISPUTE THAT THERE ARE N O BOOKS OF ACCOUNT AS THE ASSESSEE FAILED TO PRODUCE THE SA ME. IT IS ALSO AN ADMITTED POSITION THAT ASSESSEE HAS ACCEPTE D THE APPLICATION OF NET PROFIT RATE @ 8% ON THE GROSS R ECEIPTS. THE DISPUTE ONLY IS AS REGARDS TO DISALLOWANCE ON ACCOU NT OF HIRE CHARGES TRANSPORTATION CHARGES AND SLURRY REMOVABL E CHARGES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FURTHER DISALLOWANCE OF SUPERVISION CHARGES LABOU R CHARGES SITE EXPENSES LOAD TESTING EXPENSES AT 50%. WHETHE R THE AO CAN DISALLOW THE EXPENSES WHICH ARE DIRECTLY RELATE D TO GROSS RECEIPT OF THE ASSESSEE ON WHICH THE AO HAS ESTIMAT ED NET PROFIT BY APPLYING THE RATE OF 8%. IT IS A FACT THA T THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNT IT MEANS THAT TH E AO HAS NOT RELIED ON BOOKS OF ACCOUNT FOR ESTIMATION OF PR OFITS. THIS FACT IS ACCEPTED BY ASSESSEE AS WELL AS BY REVENUE. WE ARE OF THE VIEW THAT ONCE THE NET PROFIT RATE IS ESTIMATED THE AO CANNOT BASE HIS DISALLOWANCE ON THE SAME BOOKS OF A CCOUNT FOR THE PURPOSE OF DISALLOWANCE BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) OF THE ACT OR GENERAL DISALLOWANC E U/S. 37 OF THE ACT. THE ESTIMATION MADE BY AO OF NET PROFIT WI LL TAKE CARE OF EVERY ADDITION RELATED TO BUSINESS INCOME OR BUS INESS RECEIPTS AND NO FURTHER DISALLOWANCE CAN BE MADE. W E SEE FORCE IN THE ARGUMENT OF THE ASSESSEE THAT WHEN THE INCOME OF THE ASSESSEE WAS COMPUTED APPLYING GROSS PROFIT RAT E AND NO DEDUCTION WAS ALLOWED IN REGARD TO THE EXPENSES CLA IMED BY THE ASSESSEE THERE WAS NO NEED TO LOOK INTO THE PR OVISIONS OF SECTION 40(A)(IA) OF THE ACT OR SECTION 37 OF THE A CT. ACCORDINGLY NO DISALLOWANCE COULD HAVE BEEN MADE I N VIEW OF THE ABOVE FACTS THAT ONCE THE PROFIT IS ESTIMATED B Y APPLYING NET PROFIT RATE. ACCORDINGLY WE DIRECT THE AO TO D ELETE THE OTHER DISALLOWANCES AND RESTRICT THE ADDITION BY AP PLYING NET PROFIT RATE @8% OF GROSS RECEIPTS. WE FIND VALID REASONS GIVEN BY THE TRIBUNAL IN SUPP ORT OF THIS ORDER. THEREFORE NO SUBSTANTIAL QUESTION OF L AW ARISES. HENCE THE APPLICATION AND APPEAL ARE DISMISSED. 11. FURTHER WE MAY REFER TO THE ANOTHER DECISION AS RELIED ON BY THE LD.AR PASSED BY THE HONBLE HIGH COURT OF AN DHRA PRADESH IN THE CASE OF INDWELL CONSTRUCTIONS V. COMMISSIONER OF ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 8 INCOME-TAX [1998] 232 ITR 776 (ANDHRA PRADESH) WHEREIN THE IN COME- TAX OFFICER REJECTED THE BOOKS AND ESTIMATED THE IN COME AT RS. 2 50 000. THE COMMISSIONER OF INCOME-TAX CONSIDERED THAT THIS ESTIMATE WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE AND ADDED A SUM OF RS. 63 859 UNDER SECTION 263 OF THE ACT. THE CONTENTION OF THE ASSESSEE WAS THAT WHERE THE BOOKS OF ACCOUNT WERE REJECTED THE REVENUE CANNOT RELY ON THE SAME BOOKS FOR ADDITION OF CASH CREDITS. THE TRIBUNAL REFERRED THE FOLLOWING QUESTION TO THE HO BLE HIGH COURT. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IT IS CORRECT IN LAW TO MAKE A SEPARATE ADDITION OF RS. 63 859 REPRE SENTING THE INTEREST AND REMUNERATION PAID TO PARTNERS TO THE INCOME AL READY ESTIMATED AND ASSESSED FROM CONTRACTS?' 12. THE HONBLE HIGH COURT HELD THAT IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE THE INCOME-TAX OFFICER MAY REJECT THOSE B OOKS AND ESTIMATE THE INCOME WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME IN OTHER WORDS ALL THE DEDUCTIONS ARE DEE MED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE AN D THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW: THE PATTERN OF ASSESSMENT UNDER THE INCOME-TAX ACT IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINE D IN SECTIONS 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENE RALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE THE INCOME -TAX OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF T HE INCOME THAT IS TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECTION 29 ARE DEEMED TO HAVE BEE N TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. NO DOUBT THERE IS A BIG DIFFERENCE BETWEEN PROFIT E ARNED WITH OWN CAPITAL AND PROFIT EARNED WITH BORROWED CAPITAL AND SUCH A DIFFERENCE COULD HAVE BEEN TAKEN INTO ACCOUNT BY THE INCOME-TAX OFFICER W HILE MAKING AN ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 9 ESTIMATE. IF THE COMMISSIONER HAD SET ASIDE THE EST IMATE ON THE GROUND THAT THE VITAL FACT THAT THE BUSINESS WAS CARRIED O N WITH OWN CAPITAL AND NOT WITH BORROWED CAPITAL HAS BEEN IGNORED BY THE INCOM E-TAX OFFICER THERE MAY NOT HAVE BEEN ANY DIFFICULTY IN UPHOLDING THAT ORDER. BUT WHEN HE PROPOSES TO ADD BACK AN EXACT ITEM IN THE PROFIT AN D LOSS ACCOUNT HE WAS RELYING ON THE REJECTED BOOKS WHICH HE COULD NOT DO AS HELD BY THE BENCH OF THIS COURT IN MADDI SUDARSANAM OIL MILLS CO. V. CIT [1959] 37 ITR 369 . THERE IS ALSO A FURTHER DIFFICULTY IF SECTION 40 A S ARGUED BY LEARNED COUNSEL IS TO BE TAKEN INTO ACCOUNT EVEN AFTER MAKING AN ES TIMATE. WHEN THERE ARE CERTAIN OTHER DEDUCTIONS WHICH ARE TO BE DISALLOWED SUCH AS WEALTH-TAX PAYMENT IN SECTION 40 CAN IT BE SAID THAT AFTER MA KING AN ESTIMATE THE WEALTH-TAX CHARGED IN THE PROFIT AND LOSS ACCOUNT S HOULD AGAIN BE ADDED BACK TO THE PROFIT. THIS EXAMPLE ILLUSTRATES HOW TH E CONTENTION OF THE REVENUE THAT SECTION 40(B) MAKES A DIFFERENCE IN T HE SITUATION IS UNTENABLE. IN OUR CONSIDERED OPINION THE ANSWER TO THE QUESTION HAS TO BE IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 13. IN THE AFORESAID DECISION THE HONBLE HIGH CO URT WAS PLEASED TO REFER TO A DECISION IN THE CASE OF MADDI SUDARSANA M OIL MILLS CO. V. COMMISSIONER OF INCOME-TAX REPORTED IN [1959] 37 I TR 369 (AP) PASSED BY HIGH COURT OF ANDHRA PRADESH. THE FACTS THEREIN ARE THAT THE ASSESSEE DISCLOSED A TURNOVER OF RS. 18.18 LAKHS AN D A GROSS PROFIT OF RS. 92 726 IN THE BOOKS WHICH WORKED OUT TO 5.1%. THE N ET INCOME DISCLOSED BY THE ASSESSEE WAS RS. 25 454. THIS FIGURE HOWEVE R WAS NOT ACCEPTED BY THE INCOME-TAX OFFICER WHO ADDED FOUR SUMS ON AC COUNT OF THE VALUE OF THE YIELD OF OIL AND CAKE FROM UNACCOUNTED FOR K ERNEL RS. 34 795 THE VALUE OF DEFICIT YIELD OF OIL AND CAKE FROM KERNEL DISCLOSED IN THE BOOKS RS. 46 001 UNACCOUNTED FOR PROFIT ON SALE OF PERMITS R ESTRICTED TO THE UNPROVED CASH CREDITS RS. 56 345 AND INTEREST OF R S. 48 IN RESPECT OF ONE OF THE IMPUGNED CASH CREDITS MAKING A TOTAL OF RS. 1 37 189. AN APPEAL AGAINST THESE ADDITIONS WAS REJECTED. THE TRIBUNAL WHILE MAINTAINING THE ADDITIONS REJECTED THE BOOKS. THE FOLLOWING HAS B EEN REFERRED TO THE HONBLE HIGH COURT OF ANDHRA PRADESH. 'WHETHER ON THE MATERIAL PLACED BEFORE IT THE TRIBU NAL IS JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 1 37 189.' ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 10 14. THE HONBLE HIGH COURT OBSERVED HAVING COMPUTED THE GROSS PROFIT AT 9.5% FURTHER ADDITION A SUM OF RS. 56 345 ON AC COUNT OF UNPROVED CASH CREDITS AND SUCH ADDITION IS WRONG WHEN A FLAT RATE OF 9.5% ON THE TOTAL TURNOVER IS BEING ADOPTED IN COMPUTING THE GR OSS PROFITS AND THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELO W: THE CONTENTION OF THE LEARNED ADVOCATE SHRI KUPPUSW AMY IS THAT THE TRIBUNAL HAVING ADOPTED AS THE BASIS OF ASSESSMENT A GROSS PROFIT OF 9.5% INSTEAD OF 5.1% HAD COMPUTED THE FIGURE OF RS. 1 37 189 WRONGLY. THIS CONTENTION IN OUR VIEW IS VALID. THE TRIBUNAL HAS MADE AN ARITHMETICAL ERROR IN THE COMPUTATION BECAUSE THE ADDITIONS ON ACCOUNT OF THE VALUE OF THE YIELD OF OIL AND CAKE FROM THE UNACCOUNTED FOR KERNEL OF RS. 34 795 AND ON ACCOUNT OF THE YIELD OF OIL AND CAKE FROM KERNEL DISCLOSED IN THE BOOKS OF RS. 46 001 WOULD COME TO RS. 80 796 AND ENHANCE THE PROFIT TO RS. 1 72 522 WHICH ON A TOTAL TURNOVER OF RS. 18 18 308 WORKS OUT TO ABOUT 9.5%. THE APPELLATE ASSISTANT COMMISSIONER HAS ALSO COMPUTED THESE FIGURES AS SHOWING A YIELD OF 9.5% GROSS PROFIT W HICH IS THE GROSS PROFIT IN THREE OTHER SIMILAR CASES IN GUNTUR. HAVING THUS CO MPUTED THE GROSS PROFIT AT 9.5% THE APPELLATE ASSISTANT COMMISSIONER FURTH ER ADDED A SUM OF RS. 56 345 ON ACCOUNT OF UNACCOUNTED FOR PROFIT ON SALE OF PERMITS RESTRICTED TO THE UNPROVED CASH CREDITS. THIS ADDITION IS OBVIOUS LY WRONG WHEN A FLAT RATE OF 9.5% ON THE TOTAL TURNOVER IS BEING ADOPTED IN C OMPUTING THE GROSS PROFITS. THE ASSESSEE HAD RECOURSE TO THE SEVERAL E NTRIES OF CASH CREDITS ONLY FOR THE PURPOSES OF BALANCING THE ACCOUNTS WIT H A VIEW TO REDUCING THE RATE OF GROSS PROFITS. IF ONCE THE INCOME-TAX AUTHO RITIES HAVE REJECTED THE BOOKS THEY CANNOT HAVE IT BOTH WAYS NAMELY ADOPT ING A FLAT RATE TO COMPUTE GROSS PROFIT AS WELL AS RELY ON THE BOOKS F OR THE PURPOSES OF ADDING UNEXPLAINED CASH CREDITS WHICH WERE PART OF THE SCHEME OF BALANCING THE ACCOUNTS. THE TRIBUNAL QUITE PROPERL Y REJECTED THIS BASIS AND HAVING DONE SO MERELY CONFIRMED THE ADDITIONS OF THE INCOME-TAX AUTHORITIES PROBABLY UNDER THE IMPRESSION THAT THE TWO ITEMS OF YIELD OF OIL AND CAKE FROM UNACCOUNTED KERNEL AND THE VALUE OF D EFICIT YIELD OF OIL AND CAKE FROM KERNEL DISCLOSED IN THE BOOKS WOULD AMOUN T TO RS. 1 37 189. WE CANNOT HAVING REGARD TO THE CATEGORICAL OBSERVATIO NS OF THE TRIBUNAL THAT THE ADDITION SHOULD BE UNITARY WHERE THE PROVISO TO SECTION 13 OF THE ACT IS APPLIED BY MAKING AN ESTIMATE ASSUME THAT THE TRIB UNAL INTENDED TO NEGATIVE THE STATEMENT BY ALSO ADDING CASH CREDITS IN COMPUTING THE GROSS PROFITS. IN THE CIRCUMSTANCES WE HAVE NO HESITATION IN HOLDING THAT THE ADDITION ON THE FLAT RATE OF 9.5% ADOPTED BY THE TR IBUNAL IN ESTIMATING THE GROSS PROFIT IS PROPER AND THAT THE AMOUNT OF RS. 1 37 189 WAS WRONGLY COMPUTED. OUR ANSWER TO THE REFERENCE IS IN THE NEGATIVE. THE ASSESSEE WILL RECEIVE COSTS FROM THE DEPARTMENT. 15. NOW WE SHALL EXAMINE THE DECISION RELIED ON B Y THE LD.DR IN THE CASE OF PRABHAT CONSTRUCTION COMPANY REPORTE D IN (2015) 60 ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 11 TAXMANN.COM 37(PATNA-TRIB) PASSED BY PATNA BENCH OF TRIBUNAL. THE RELEVANT PORTION WHICH IS REPRODUCED HEREIN BEL OW: WITH REGARD TO THE DISALLOWANCE U/S.40(A)(IA) BEING NOT PERMISSIBLE EVEN WHERE APPLICABLE I.E. WHERE THE ASSESSMENT IS FRAMED ON ESTIMATION BASIS WE HAVE FOUND THE ARGUMENT AS NOT LEGALLY TENABLE. THIS IS AS THE ASSESSMENT OF INCOME EVEN UNDER THE ESTIMATION REGIME IS OF THE TOTAL IN COME UNDER THE ACT AND NOT OF THE BUSINESS PROFIT ALONE AND WHICH COULD ONLY BE UPON CONSIDERING THE APPLICABILITY OR OTHERWISE IN THE FACTS OF THE CASE OF ALL THE RELEVANT PROVISIONS OF LAW TO WHICH SECTION 40(A)(IA) IS OR CANNOT BE ANY EXCEPTION. THE SAME IN FACT IS A STATUTORY DISALLOWANCE ARTIFICIALLY INFLATING TH E ASSESSEE-PAYER'S INCOME FOR THE TIME BEING WHICH IS LIABLE TO BE ALLOWED AS DEDUCT ION UPON COMPLYING WITH THE CONDITION PRESCRIBED FOR ITS NON APPLICABILITY I.E . OF THE DEPOSIT OF TDS TO THE CREDIT OF THE PAYEE IN THE YEAR IN WHICH IT STANDS COMPLIED WITH INTRODUCING THUS A TIMING EFFECT. NOT SO CONSIDERING; RATHER LEADS TO AN ANOMALOUS UNACCEPTABLE SITUATION. OUR REASONS IN SUPPORT OF OUR DECISION S TAND LISTED IN THE FOREGOING PARAGRAPHS OF THIS ORDER. OUR DECISION BASED ON FI RST LEGAL PRINCIPLES IS SUPPORTED BY THE DECISIONS IN THE CASE OF SHYAM BIHARI (SUPRA ) BY THE HON'BLE JURISDICTION HIGH COURT AND SHRI RAM JHANWAR LAL (SUPRA). IN BOT H THESE DECISIONS THE HON'BLE HIGH COURTS HAVE HELD IN FAVOUR OF DEDUCTION OF STA TUTORY ALLOWANCES EVEN WHERE THE INCOME IS ESTIMATED ON GLOBAL BASIS WHICH HAS BEEN UNDERSTOOD BY THE TRIBUNAL TO IMPLY THAT IN-AS-MUCH AS THE SAID ALLOW ANCES HAVE NOT BEEN CONSIDERED OR FACTORED INTO BY THE A.O. IN ARRIVING AT HIS ESTIMATION THE SAME BEING OTHERWISE DEDUCTIBLE WITH HIS PURVIEW BEING TO ASSESS THE TOTAL (ASSESSABLE) INCOME UNDER THE ACT WOULD HAVE TO BE GIVEN EFFECT TO. TRUE THERE IS REFERENCE TO THE CIRCULAR BY THE BOARD OF WHICH SUPPORT IS DRAWN BY THE HON'BLE COURTS. HOWEVER THE SAID CIRCULAR DOES NOT AND CAN NOT OVERRIDE THE LAW NOR IS THE SAME BINDING ON APPELLATE AUTHORITIES. THE PREM ISE OR THE UNDERLYING CONCERN IT NEEDS TO BE APPRECIATED IS TO ARRIVE A T THE BEST ESTIMATE OF THE TOTAL INCOME AFTER CONSIDERING ALL THE RELEVANT PROVISION S OF LAW BE IT QUA AN ALLOWANCE OR DISALLOWANCE IN-AS-MUCH AS THE ASSESSMENT IS TO BE ONLY IN ACCORDANCE WITH THE LAW. THE ASSESSEE'S ARGUMENT THUS IS NOT VALID AND ACCORDINGLY WE FIND NO INFIRMITY IN THE DIRECTION OF THE LD. CIT IN RESTOR ING THE ASSESSMENT FOR THE CONSIDERATION OF THE RELEVANT ISSUES TO THE FILE OF THE ASSESSING AUTHORITY. WE DECIDE ACCORDINGLY. 16. THE PATNA TRIBUNAL ABOVE HAS OPINED THAT THE AR GUMENT OF THE ASSESSEE NOT LEGALLY TENABLE IN RESPECT OF THE DISA LLOWANCE U/S.40(A)(IA) NOT PERMISSIBLE WHEN THE ASSESSMENT IS FRAMED ON ESTIMA TION BASIS. THE TRIBUNAL COME TO SUCH CONCLUSION BASING ON THE RATIO LAID DO WN BY THE DECISIONS IN THE CASE OF SHYAM BIHARI (SUPRA) AND SHRI RAM JHANWAR L AL (SUPRA) BY THE HON'BLE JURISDICTIONAL HIGH COURT WHEREIN THE HON'B LE HIGH COURTS HAVE HELD IN FAVOUR OF DEDUCTION OF STATUTORY ALLOWANCES EVEN WH ERE THE INCOME IS ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 12 ESTIMATED ON GLOBAL BASIS. IN OUR OPINION THE ORDE R OF PATNA TRIBUNAL IS NOT BINDING ON US FOR THE REASON THE HONBLE HIGH COUR T OF CALCUTTA HAVING JURISDICTION WAS PLEASED TO HOLD ALREADY DISCUSSED ABOVE IN AFOREMENTIONED PARAS AS THE ESTIMATION MADE BY AO OF NET PROFIT WI LL TAKE CARE OF EVERY ADDITION RELATED TO BUSINESS INCOME OR BUSINE SS RECEIPTS AND NO FURTHER DISALLOWANCE CAN BE MADE. RESPECTFULLY F OLLOWING THE SAME WE DIRECT THE AO TO FIX THE INCOME OF THE AS SESSEE AT 8% AND IN VIEW OF THE SAME DELETE ALL OTHER DISALLOW ANCES MADE U/SEC 40(A)(IA) OF THE ACT. THEREFORE THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 17. NOW WE SHALL DEAL WITH APPEAL OF REVENUE IN IT A NO.2323/KOL/2013 AY 2009-10 ITA NO.2323/KOL/2013 AY 2009-10 18. IN THIS APPEAL THE REVENUE CHALLENGED THE ORDE R OF CIT-A BY AFOREMENTIONED GROUNDS OF APPEAL. WE FIND THAT THE CIT-A DELETED THE ADDITION OF RS.33 50 562/- MADE ON ACCOUNT OF U NDISCLOSED TURNOVER ON THE BASIS OF SUCH DIRECTION GIVEN TO TH E AO TO FIX THE INCOME OF ASSESSEE AT 11% OF THE TURNOVER. LIKEWISE THE CIT-A ALSO DELETED THE ADDITIONS MADE ON ACCOUNT OF DISAL LOWANCE OF REPAIR AND MAINTENANCE CHARGES EXCESS DEPRECIATION ON DUMPERS AND ADDITION MADE U/S. 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT. AS WE HAVE DECIDED THE APPEAL FILED BY THE ASSESSEE WHEREIN WE CAME TO A CONCLUSION BASING ON THE DECIS ION OF HONBLE JURISDICTIONAL HIGH COURT OF CALCUTTA IN TH E CASE OF SUPRA. RESPECTFULLY FOLLOWING THE SAME WE HAVE DIRECTED THE AO TO FIX THE INCOME OF THE ASSESSEE AT 8% AND DELETE DISALLO WANCES MADE BY THE AO THEREIN. IN VIEW OF THE SAME BY ADOPTING THE SAME ITA NOS. 2214 & 2323/KOL/13 SHRI HRIBU BOSE 13 CONCLUSION ARRIVED AS IN ASSESSEES APPEAL THE GRO UNDS RAISED BY REVENUE IN ITA NO.2323/KOL/2013 AY 2009-10 DOES NOT REQUIRE FURTHER CONSIDERATION. ACCORDINGLY THE GROUNDS OF REVENUES APPEAL ARE DISMISSED. 19. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IN ITA NO.2214/KOL/2013 FOR THE A.Y 2009-10 IS ALLOWED AND APPEAL OF THE REVENUE IN ITA NO.2323/KOL/2013 AY 2009-10 IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016 SD/- SD/- P.M JAGTAP S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 /09/2016 1. THE APPELLANT/ ASSESSEE: SRI HRIBU BOSE E - 58 ROAD NO.4 NEW TOWN BURNPUR 713325(WB). 2 . THE RESPONDENT/ DEPARTMENT; THE INCOME TAX OFFICER WARD 1 ( 2 ) SAHANA BUILDING LOWER CHELIDNAGA PIN 713304 ASANSO L. 3. CIT 4. CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGIS TRAR ** PRADIP SPS INCOME TAX APPELLATE TRIBUNAL KOLKAT A BENCHES KOLKATA COPY OF THE ORDER FORWARDED TO : -