I.T.O.-1(3), Agra v. Sh. Ravi Dubey, Agra

ITA 228/AGR/2010 | 2006-2007
Pronouncement Date: 21-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 22820314 RSA 2010
Assessee PAN AFWPD8351C
Bench Agra
Appeal Number ITA 228/AGR/2010
Duration Of Justice 1 year(s) 5 month(s) 16 day(s)
Appellant I.T.O.-1(3), Agra
Respondent Sh. Ravi Dubey, Agra
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 21-11-2011
Date Of Final Hearing 17-11-2011
Next Hearing Date 17-11-2011
Assessment Year 2006-2007
Appeal Filed On 04-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI H.S. SIDHU JUDICIAL MEMBER AND SHRI B.P. JAIN ACCOUNTANT MEMBER ITA NO.228/AGR/2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER 1(3) VS. SHRI RAVI DUBEY AGRA. 117-B NEHRU NAGAR AGRA. (PAN: AFWPD 8351 C). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA JR. D.R. RESPONDENT BY : SHRI RAJESH MALHOTRA C.A. DATE OF HEARING : 17.11.2011 DATE OF PRONOUNCEMENT : 21.11.2011 ORDER PER BENCH : THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF LD. CIT(A)-I AGRA DATED 31.3.2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE CIT(A)-1 AGRA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.29 88 132/- MAD E ON ACCOUNT OF NET PROFIT RATE OF 8% TO THE GROSS RECEIPTS BY DIRECTIN G THE ASSESSING OFFICER TO APPLY THE NET PROFIT @ 8% ON NET RECEIPT AFTER REDUCTION OF ITA NO.228/AGR/2010 A.Y. 2006-07 2 COST OF MATERIAL AD OTHER CHARGES DEDUCTED BY M/S. GAMMON INDIA LIMITED; 2. THAT THE LD. CIT(A)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.3 23 00 625 /- ON THE GROUND THAT SINCE THE APPELLANTS PROFIT HAS BEEN CALCULATE D AFTER APPLYING NET PROFIT THE SEPARATE ADDITION U/S. 40(A)(IA) CANNOT BE SUSTAINED AND WITHOUT APPRECIATING THE FACT THAT THE ASSESSEES T URNOVER FOR A.Y. 2005-06 WAS WORKED OUT AT RS.40 60 239/-; 3. THAT THE CIT(A)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.2 24 890/- MADE ON ACCOUNT OF OPENING BALANCE IN CAPITAL ACCOUNT WITHOUT APPRECIA TING THE FACT THAT DURING A.Y. 2005-06 NO BOOKS OF ACCOUNT WERE MAINTA INED BY THE ASSESSEE AND INCOME OF RS.73 000/- WAS SHOWN FROM F AST FOOD BUSINESS ON ESTIMATE BASIS; 4. THAT THE CIT(A)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.8 95 000/- + RS .38 000/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CAR AND SCOOTE R RESPECTIVELY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE NEV ER PRODUCED THE BOOKS OF ACCOUNTS WITH BILLS AND VOUCHERS EITHER DU RING ASSESSMENT PROCEEDINGS OR REMAND PROCEEDINGS. THEREFORE CASH FLOW STATEMENT FURNISHED DURING APPEAL PROCEEDINGS MAY NOT BE RELI ED UPON. 5. THAT THE ORDER OF THE CIT(APPEALS)-1 AGRA IS ER RONEOUS IN LAW AND ON THE FACTS OF THE CASE AND THAT THE ORDER OF THE A.O. BE RESTORED; 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR DELETE OR ALTER OR MODIFY ANY GROUND DURING THE APPELLATE PROCEEDINGS. 3. AS REGARDS GROUND NO.1 THE FACTS ARE THAT THE A SSESSEE IS THE PROPRIETOR OF THE BUSINESS OF SUB-CONTRACTOR OF ROAD CONSTRUCTION. T HIS IS THE FIRST YEAR OF BUSINESS AND THE RECEIPTS DECLARED ARE FROM M/S. GAMMON INDI A LIMITED. SUB-CONTRACT WORK HAS BEEN SHOWN AT RS.3 73 51 661/- ON WHICH N ET PROFIT OF RS.3 13 394/- HAS ITA NO.228/AGR/2010 A.Y. 2006-07 3 BEEN DECLARED AT 0.839% ONLY. IN THE ABSENCE OF DE TAILS OF BOOKS OF ACCOUNT THE ASSESSING OFFICER ADOPTED 8% OF THE RECEIPTS AT RS. 29 88 132/-. THE LD. CIT(A) AFTER ACCEPTING THE ADDITIONAL EVIDENCE UNDER RULE 46A AND THE REPORT OF THE A.O. ADOPTED 8% OF THE NET RECEIPTS I.E. CONTRACT RECEIP T MINUS THE RECEIPT ON ACCOUNT OF MATERIAL PURCHASED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE CO ST OF MATERIAL REIMBURSED CANNOT BE A PART OF THE CONTRACT RECEIPT WHICH HAS RIGHTLY BEEN DEDUCTED BY THE LD. CIT(A) AND THEREFORE WE FIND NO ERROR IN HIS ORDER. THUS GROUND NO.1 OF THE REVENUE IS DISMISSED. 5. A REGARDS GROUND NO.2 OF THE REVENUE THE ASSESS ING OFFICER HAS INVOKED SECTION 40(A)(IA) OF THE ACT AND MADE ADDITIONS ACC ORDINGLY. THE ASSESSEE MADE THE SUBMISSIONS BEFORE THE LD. CIT(A) WHICH WERE FO RWARDED TO THE A.O. FOR HIS COMMENTS AND THE A.O. REITERATED THE VIEWS TAKEN IN ASSESSMENT ORDER. THE LD. CIT(A) WAS OF THE VIEW THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN REJECTED BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF THE ACT. THEREFORE SEPARATE DISALLOWANCE UNDER SECTION 40(A)(IA) OF TH E ACT IS NOT TENABLE AND ACCORDINGLY DELETED THE ADDITION MADE BY THE A.O. ALSO THE ASSESSEES TURNOVER IN ITA NO.228/AGR/2010 A.Y. 2006-07 4 THE PRECEDING YEAR WAS NOT EXCEEDING ` 40 LACS THEREFORE PROVISIONS OF SECTION 194C ARE NOT ATTRACTED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE DO NOT CONCUR WITH THE FINDING OF THE LD. CIT(A) TH AT ONCE THE BOOK HAVING BEEN REJECTED BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF THE ACT THEN SEPARATE DISALLOWANCE UNDER SECTION 140(A)(IA) OF THE ACT IS NOT TENABLE. IN THIS REGARD HONBLE ALLAHABAD HIGH COURT LUCKNOW BENCH IN THE CASE OF CIT VS. PRADESHIYA INDUSTRIAL AND INVESTMENT CORPORATION OF U.P. LIMIT ED REPORTED IN (2010) 325 ITR 583 (ALL.) HAS CLEARLY HELD AS UNDER (HEAD NOTE REP RODUCED FOR THE SAKE OF CONVENIENCE) :- THE SUPREME COURT IN SHREE SAJJAN MILLS LIMITED VS . CIT (1985) 156 ITR 585 (SC) HELD THAT FOR GRATUITY TO BE DEDUCTIBL E UNDER THE INCOME TAX ACT 1961 IT MUST FULFILL THE CONDITIONS LAID DOWN IN SECTION 40A(7) OF THE ACT. THE DEDUCTION CANNOT BE ALLOWED ON GENERAL PRINCIPLES UNDER ANY OTHER SECTION OF THE ACT BECAU SE SUB-SECTION (1) OF SECTION 40A MAKES IT CLEAR THAT THE PROVISIONS O F THE SECTION SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRAR Y CONTAINED IN ANY OTHER PROVISION OF THE ACT RELATING TO THE COMPUTAT ION OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. FOR THE ASSESSMENT YEAR 1984-85 THE ASSESSEE CLAI MED DEDUCTION FOR AN AMOUNT OF ` 41 790 REPRESENTING THE INSURANCE PREMIUM PAID TO THE LIC TO INSURE AGAINST ALL THE L IABILITIES THAT MIGHT ARISE UNDER THE PAYMENT OF GRATUITY ACT 1972. THE ASSESSING OFFICER HELD THAT THE AMOUNT WAS NOT DEDUCTIBLE BUT THE TRI BUNAL HELD THAT THE AMOUNT WAS ALLOWABLE UNDER SECTION 37(1). ON A REF ERENCE : ITA NO.228/AGR/2010 A.Y. 2006-07 5 HELD THAT THE PAYMENT REPRESENTING THE PREMIUM PA ID TO THE LIC SECURING AN INSURANCE AGAINST THE LIABILITIES A RISING UNDER THE 1972 ACT WAS HIT BY THE PROVISIONS OF SECTION 40A(7 )(A) OF THE ACT AND WAS NOT AN ALLOWABLE DEDUCTION UNDER SECTION 37(1) OF THE ACT. 7. THE HONBLE ALLAHABAD HIGH COURT IN THE AFOREMEN TIONED JUDGEMENT HAS FOLLOWED THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF SHREE SAJJAN MILLS LIMITED VS. CIT 156 ITR 585 WHERE IT HAS ALS O BEEN HELD BY THE HONBLE SUPREME COURT AS UNDER (TAKEN FROM THE HEAD NOTES O F SHREE SAJJAN MILLS LIMITED CASE AT PAGE 586) :- ACTUAL PAYMENTS OR PROVISIONS OF PAYMENT COULD HAV E BEEN ELIGIBLE FOR DEDUCTION OR COULD HAVE BEEN DEDUCTED EITHER UNDER SECTION 28 OR UNDER SECTION 37 OF THE ACT. BUT THE USE OF THE NON OBSTANTE EXPRESSION IN SECTION 40A(1) MAKES IT CLEA R THAT IF THERE IS ANY LEGISLATIVE BASE DEALING WITH THE PROVISION FOR GRATUITY THEN THE SAME WOULD BE APPLICABLE IN SPITE OF AND NOTWITHSTA NDING ANY OTHER PROVISION OF THE ACT. READ WITH THE MARGINAL NOTE TO SECTION 40A THE NON OBSTANTE CLAUSE OF SUB-SECTION (1) OF SECTION 4 0A HAS AN OVERRIDING EFFECT OVER THE PROVISIONS OF ANY OTHER SECTION BY PROVIDING THAT THE PROVISIONS OF THE SECTION WILL HAVE EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PRO VISION RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD PROFITS A ND GAINS OF BUSINESS OR PROFESSION. EXPENDITURES OR ALLOWANCE S WHICH ARE DEDUCTIBLE UNDER ANY OTHER PROVISION RELATING TO TH E HEAD BUSINESS OR PROFESSION WILL BE DISALLOWED IN CASES TO WHICH THE PROVISIONS OF SECTION 40A APPLY. 8. THEREFORE FROM THE READING OF THE ABOVE JUDGEME NTS OF THE HONBLE HIGH COURT AND THE HONBLE SUPREME COURT BY THE USE OF NON OBSTANTE EXPRESSION UNDER ITA NO.228/AGR/2010 A.Y. 2006-07 6 SECTION 40A(1) WHICH HAS AN OVERRIDING EFFECT OVER THE PROVISIONS OF ANY OTHER SECTION BY PROVIDING THAT THE PROVISIONS OF THE SEC TION WILL HAVE EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD PROFIT S AND GAINS OF BUSINESS OR PROFESSION. IN THE PRESENT CASE THERE IS NON-OBST ANTE CLAUSE IN SECTION 40 ALSO WHICH READS AS UNDER :- NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38 THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSI NESS OR PROFESSION 9. THEREFORE IN THE CIRCUMSTANCES AND FACTS OF THE CASE THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IS INDEPENDENT O F ANY OTHER PROVISIONS OF THE ACT. THE CASES RELIED UPON BY THE LD. AUTHORISED REPRESE NTATIVE CANNOT GIVE ANY BENEFIT TO THE ASSESSEE IN VIEW OF THE JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PRADESHIYA INDUSTRIAL AND INVESTMENT CORPOR ATION LIMITED (SUPRA) AND THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF S HREE SAJJAN MILLS LIMITED (SUPRA). 10. MOREOVER THE TURNOVER OF THE TOTAL SALES GROS S RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION IS LESS THAN THE MONITORY LI MIT AS PROVIDED UNDER SECTION 44AB IS WITHOUT ANY MATERIAL ON RECORD IN THE PRECE DING ASSESSMENT YEAR. ITA NO.228/AGR/2010 A.Y. 2006-07 7 NOTHING HAS BEEN PLACED BY THE ASSESSEE IN THE PAPE R BOOK CONTAINING 85 PAGES. FURTHER THE REMAND REPORT HAS ALSO NOT CONFIRMED T OTAL SALES GROSS RECEIPTS OR TURNOVER TO BE BELOW THE MONITORY LIMIT SPECIFIED U NDER SECTION 44AB OF THE ACT IN THE PRECEDING YEAR. THEREFORE IN THE CIRCUMSTANCE S AND THE FACTS OF THE CASE THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITI ON MADE BY THE ASSESSING OFFICER. THUS GROUND NO.2 OF THE REVENUE IS ALLOWED. 11. IN GROUND NO.3 THE BRIEF FACTS ARE THAT THE A. O. MADE ADDITION OF RS.2 24 890/- ON ACCOUNT OF UNEXPLAINED OPENING BAL ANCE OF THE ASSESSEES CAPITAL. THE LD. CIT(A) DELETED THE SAME AFTER HAVING THE RE MAND REPORT AND THE EXPLANATION GIVEN BY THE A.O. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THIS IS THE FIRST YEAR OF THE ASSESSEE AND THEREFORE IT WAS ARGUED THAT THERE IS NO POSSIBILITY OF ANY INCOME AND WHICH CANNOT BE INTRO DUCED AS OPENING CAPITAL WHICH OF COURSE SUBMITTED BY THE LD. AUTHORISED REPRESENT ATIVE IN HIS SUBMISSION DATED 16.06.2009 IS OUT OF THE SAVINGS BANK ACCOUNT OF TH E ASSESSEE MAINTAINED WITH ICICI BANK SANJAY PLACE AS AT 01.04.2005. THE BAN K ACCOUNT NUMBER IS 628701501674. THEREFORE IN THE CIRCUMSTANCES AND FACTS OF THE CASE WE FIND NO ITA NO.228/AGR/2010 A.Y. 2006-07 8 ERROR IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTL Y DELETED THE ADDITION. THUS GROUND NO.3 OF THE REVENUE IS DISMISSED. 13. IN GROUND NO.4 THE BRIEF FACTS ARE THAT HE A.O . HAS MADE AN ADDITION OF RS.8 95 000/- ON ACCOUNT OF INVESTMENT IN CAR AND R S.38 000/- AS INVESTMENT IN SCOOTER. THE ASSESSEE SUBMITTED EXPENSES BEFORE TH E LD. CIT(A) WHICH WERE FORWARDED TO THE A.O. FOR REMAND REPORT WHICH WAS R ECEIVED AND THE LD. CIT(A) AFTER RECEIVING THE REMAND REPORT AND FACTS AND CIR CUMSTANCES OF THE CASE DELETED THE ADDITION MADE BY THE A.O. IT WAS SUBMITTED THA T THE CAR HAS BEEN PURCHASED FROM THE BORROWED FUND FROM ICICI BANK AGRA AND TH E COPY OF LOAN ACCOUNT WAS SUBMITTED AND THE SCOOTER WAS INTRODUCED IN BUSINES S AS CAPITAL CONTRIBUTION BY THE PROPRIETOR AT ITS COST PRICE WHICH WAS TAKEN ON LOA N AND AN INSTALLMENT OF RS.3010/- PER MONTH WAS BEING PAID TO REPAY THE LOAN ON SCOOT ER. THEREFORE IN THE CIRCUMSTANCES AND FACTS OF THE CASE WE FIND NO ERR OR IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY DELETED THE ADDITION MADE BY THE A. O. THUS GROUND NO.4 OF THE REVENUE IS DISMISSED. 14. GROUND NOS.5 & 6 OF THE REVENUE ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. ITA NO.228/AGR/2010 A.Y. 2006-07 9 15. IN THE RESULT APPEAL OF THE REVENUE IN ITA NO. 228/AGR/2010 IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21.11.2011) SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21 ST NOVEMBER 2011 PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT/RESPONDENT/CIT CONCERNED/CIT(APPEALS) CO NCERNED/D.R. ITAT AGRA BENCH AGRA/GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY