Odisha Builder and Engineering Construction Company, Rayagada v. ITO, Rayagada

ITA 243/CTK/2010 | 2005-2006
Pronouncement Date: 14-03-2011

Appeal Details

RSA Number 24322114 RSA 2010
Assessee PAN AABFO1123F
Bench Cuttack
Appeal Number ITA 243/CTK/2010
Duration Of Justice 8 month(s) 28 day(s)
Appellant Odisha Builder and Engineering Construction Company, Rayagada
Respondent ITO, Rayagada
Appeal Type Income Tax Appeal
Pronouncement Date 14-03-2011
Appeal Filed By Assessee
Bench Allotted DB
Assessment Year 2005-2006
Appeal Filed On 16-06-2010
Judgment Text
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. 243 AND 244/C TK/2010 / ASSESSMENT YEAR S 2005 - 06 AND 2006 - 07 ODISHA BUILDER AND ENGINEERING CONSTRUCTION CO. PANCHAVATI NAGAR AT/P.O.RAYAGADA 765 001 PAN: AABFO 1123 F - - - VERSUS - INCOME - TAX OFFICER RAYAGADA. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SETH/M.SETH/S.C.CHOUDHURY ARS / FOR THE RESPONDENT: / SHRI K/LJAMARA.DR / ORDER . . . SHRI K.S.S.PRASAD RAO JUDICIAL MEMBER . THESE TWO APPEALS ARE FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE RESPECTIVE ORDERS OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE AYS 2005 - 06 AND 2006 - 07 IN THE CASE OF THE ASSESSEE. 2. THE GROUNDS OF APPEAL PLEADED BY THE ASSESSEE IN THESE TWO APPEALS ARE SIMILAR AND THE ASSESSEE BEING THE SAME THEY WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3 . THE COMMON GROUND PLEADED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE AS FOLLOWS : 1. THAT THE ESTIMATION OF NET PROFIT RATIO AT 7% OF GROSS CONTRACT RECEIPT BY THE LEARNED CIT (APPEALS) IS HIGH EXCESSIVE AND BAD IN LAW . I.T.A.NO. 243 AND 244/CTK/2010 2 2. THAT INCASE OF CIVIL CONTRACTORS IN SO MANY CASES ASSESSING OFFICER AS WELL AS CIT (APPEAL) HAS ESTIMATED NET PROFIT AT 5 % OF GROSS CONTRACT RECEIPT WHERE NO PROPER BOOKS ARE MAINTAINED . BUT IN THE PRESENT CASE DISCRETION HAS BEEN MADE AND SAME PRINCIPAL IS NOT FOLLOWED .WHICH SPECKS DOUBLE STANDARD OF THE AC SUCH DISCRETION IS NOT SYNONYMOUS WITH CAPRICE AND DISCRETION SHALL HE EXERCISED REGARDS BEING HAD TO THE PROVISION OF LAW AND PRINCIPAL OF NATURAL JUSTICES. 3. THAT THE CIT(APPEALS) AS WELL AS TH E ASSESSING OFFICE HAS NOT CONSIDERED THE ORDERS OF ITAT CUTTACK BENCH CUTTACK WHERE IN SO MANY CASES IT HELD NET PROFIT AT 5% ON CONTRACT RECEIPTS IS REASONABLE. 4. THAT END OF JUSTICES REQUIRED THE ASSESSEE SHALL NOT PENALIZE FOR SUCH CHANGE OF BEHAV IOR OR IRREGULAR STYLE OF FUNCTION . WHERE ALL ASSESSEE ARE ENJOYING THE NET PROFIT RATIO OF 5 % WHY THE ASSESSEE IS DEPRIVED OF THE SAME WHICH IS AGAINST THE PRINCIPLE OF NATURAL JUSTICES AND BAD IN LAW. 5. THAT IN THE FACT OF THE CASE IT IS PRAYED THE BEFORE THE HONORABLE COURT TO RESTRICT THE NET PROFIT AT 5% OF GROSS CONTRACT RECEIPT AS HELD IN OTHER CASE. 4. BOTH PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEE AND THEIR LEGAL IMPLICATIONS. 5. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL THE UNDISPUTED FACTS RELATING TO THE ISSUES IN BOTH THE YEARS ARE THAT THE ASSESSEE IS A TRANSPORT CONTRACTOR AND HAD FILED ITS RETURN FOR THESE TWO YEARS WHICH WERE TAKEN UP FOR SCRUTINY BY THE ASSESSING OFFICER. IN COURS E OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER FOUND THAT THE MAJOR EXPENSES OF LABOUR PAYMENT EXTRA LABOUR MAINTENANCE AND RENT OF HIRED VEHICLES OIL & I.T.A.NO. 243 AND 244/CTK/2010 3 LUBRICANTS PAYMENT OF BONUS AND ARREAR PAYME NTS ARE NOT SUPPORTED OR EVIDENCED BY VOUCHERS. THEREFORE HE REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) AND ESTIMATED THE PROFIT @5% OF THE GROSS CONTRACT RECEIPTS. AGGRIEVED BY THIS ORDER THE AS SESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) AND BEING UNSUCCESSFUL HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY ARGUED CONTENDING THAT ESTIMATION OF PROFIT @5% ON GROSS CONTRACT RECEIPTS MADE BY THE LOWER AUTHORITIES IS VERY HIGH EXCESSIVE AND BAD IN LAW AS THE ASSESSEE IS NOT A CIVIL CONTRACTOR BUT ONLY A TRANSPORT CONTRACTOR. APART FROM THAT BOTH THE AUTHORITIES HAVE DENIED THE DEPRECIATION TO T HE ASSESSEE WHICH IS CONTRARY TO THE DECISION OF HONBLE P & H HIGH COURT IN THE CASE CIT V. BHULLAR BUILDERS (2006) 286 ITR 686. APART FROM THAT HE BROUGHT TO THE ATTENTION OF THE TRIBUNAL THAT IN CASE OF SIMILAR ASSESSEES THE CIT(A) HAS ESTIMATED PROFI T @3% OF THE CONTRACT RECEIPTS BUT HE HAS NOT ADOPTED THE SAME RATE IN THE CASE OF THE ASSESSEE THAT TOO WITHOUT GIVING ANY REASON FOR SUCH DEVIATION IN THE CASE OF THE ASSESSEE. THE REASON GIVEN BY THE CIT(A) FOR NOT FOLLOWING THE DECISION OF HONBLE DE LHI HIGH COURT IS UNSUSTAINABLE FOR WANT OF POINTING OUT AS TO HOW IT IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE REASON GIVEN BY THE LEARNED CIT(A) THAT AS PER PROVISIONS OF LAW THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 145(3) O F THE I.T.ACT AND HENCE ALL DEDUCTIONS WHICH REFERRED TO IN SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING ESTIMATION BY THE ASSESSING OFFICER. THIS REASONING GIVEN BY THE LEARNED CIT(A) IS NOT AT ALL CORRECT IN VIEW OF THE CBDT CIRCU LAR NO. 29D(XIX - 14) WHICH CATEGORICALLY STATES THAT DEPRECIATION I.T.A.NO. 243 AND 244/CTK/2010 4 AS A STATUTORY CLAIM IS ALLOWABLE TO THE ASSESSEE PROVIDED THE CLAIM IS PROVED TO BE TRUE AND CORRECT BY FACTUAL ASPECTS. THEREFORE UNDER THESE FACTS AND CIRCUMSTANCES THE ORDERS PASSED BY BOTH THE AUTHORITIES BELOW ARE NOT SUSTAINABLE FOR LEGAL SCRUTINY AND REQUIRE TO BE SET ASIDE BY ALLOWING THE APPEAL OF THE ASSESSEE. 7. CONTRARY TO THIS THE LEARNED DR HAS VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE DEPARTMENTAL AUTHORITIES CONTENDING THAT THE ORDERS ARE REASONED ORDERS AND PASSED ON FACTUAL ASPECTS AND THEREBY THEY ARE NOT INFIRM IN ANY WAY REQUIRING INTERFERENCE. THEREFORE HE SOUGHT FOR UPHOLDING THE SAME BY DISMISSING THE APPEAL OF THE ASSESSEE. 8. ON CAREFUL ANALYSIS OF THE FACTUA L ASPECTS AND MATERIAL MADE AVAILABLE TO THE TRIBUNAL IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS THE LEGAL ASPECTS INVOLVED THEREIN IT IS FOUND THAT UNDISPUTEDLY THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE AND RESORTED TO SECTION 145(3) AND ESTIMATED THE PROFIT TO BE TAXABLE IN THE HANDS OF THE ASSESSEE. WHILE DOING SO THE ASSESSING OFFICER HAS TO FOLLOW THE PREVIOUS HISTORY OF THE ASSESSEE WHEN IT IS AVAILABLE. INCOME RETURNED BY THE ASSESSEE IS BELOW 5% OF THE GROSS CONTRACT RECEIPTS WHICH MADE THE AO TO START SCRUTINY ASSESSMENT IN THE CASE OF THE ASSESSEE. AT THE SAME TIME THE ASSESSING OFFICER HAS FORGOT THE PERCENTAGE OF PROFIT ESTIMATED BY THE LEARNED CIT(A) IN THE CASE OF ASSESSEES CAR RYING ON SIMILAR BUSINESS WITHIN THE SAME VICINITY AS ENUMERATED IN THE IMPUGNED ORDERS. THE REASON GIVEN BY THEM TO DEVIATE THOSE ORDERS IS NOT TENABLE UNDER LAW. SO ALSO THE REASONS GIVEN BY THE DEPARTMENTAL AUTHORITIES FOR NOT FOLLOWING THE CBDT CIRCLE NO.29D (XIX - 14) AND THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. BHULLAR BUILDERS (2006) 286 ITR 686 (SUPRA) IS ALSO NOT TENABLE UNDER LAW. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE I.T.A.NO. 243 AND 244/CTK/2010 5 WE ARE OF THE CONSIDERED VIEW THAT THE ESTIMATI ON OF PROFIT MADE BY THE LEARNED CIT(A) AGAINST THE ASSESSEE @5% OF THE GROSS RECEIPTS IS NOT CORRECT AND HENCE IT IS HEREBY SUBSTITUTED BY NET PROFIT OF 3% AS ESTIMATED BY THE LEARNED CIT(A) IN CASES OF OTHER SIMILAR CONTRACTORS IN THE SAME VICINITY SINC E THE ESTIMATION OF NET PROFIT IS DETERMINED @3% NO SEPARATE CLAIM FOR DEPRECIATION NEED TO BE GIVEN AS THE NET PROFIT IS ALWAYS AFTER DEPRECIATION. WE DIRECT ACCORDINGLY. 9. IN THE RESULT BOTH THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 14 TH MARCH 2011 S D/ - S D/ - ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( . . . ) (K.S.S.PRASAD RAO) JUDICIAL MEMBER. ( ) DATE : 14 TH MARCH 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ODISHA BUILDER AND ENGINEERING CONSTRUCTION CO. PANCHAVATI NAGAR AT/P.O.RAYAGADA 765 001. 2 / THE RESPONDENT: INCOME - TAX OFFICER RAYAGADA. 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.