Taratarini Constructions, Koraput v. ITO, Jeypore

ITA 282/CTK/2010 | 2005-2006
Pronouncement Date: 21-01-2011

Appeal Details

RSA Number 28222114 RSA 2010
Bench Cuttack
Appeal Number ITA 282/CTK/2010
Duration Of Justice 5 month(s) 29 day(s)
Appellant Taratarini Constructions, Koraput
Respondent ITO, Jeypore
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 21-01-2011
Assessment Year 2005-2006
Appeal Filed On 23-07-2010
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. 282 AND 283/CTK/2010 / ASSESSMENT YEAR 2005 - 06 TARATARINI CONSTRUCTIONS NEW BANK COLONY JEYPORE KORAPUT PAN: AACFT 00665 Q - - - VERSUS - INCOME - TAX OFFICER JEYPORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI N.ANAND RAO AR / FOR THE RESPONDENT: / SHRI J.KHANRA DR / ORDER . . SHRI K.K.GUPTA ACCOUNTANT MEMBER . IN ITA NO.282/CTK./2010 THE ASSESSEE AGITATES THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING CERTAIN DISALLOWANCE OF EXPENSES BY GIVING PART RELIEF ON THE BASIS OF ASSESSMENT FRAMED UNDER THE PROVISIONS OF SECTIONS 143(3)/147/148 OF THE INCOME - TAX ACT 1 961 WHEREAS IN IN ITA NO.283/CTK/2010 IT AGITATES THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 271(1)(B) OF THE ACT AMOUNTING TO 10 000. 2. WE TAKE UP BOTH THESE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING ARGUMENTS SUBMITTED THE BRIEF FACTS IN THE CASE OF THE ASSESSEE. HE POINTED OUT THAT IN VIEW OF AN INTERNAL AUDIT OBJECTION POINTED TO THE ASSESSING OFFICER TO THE CARRY FORWARD LOSS AND DEPRECIATION IN THE CASE OF THE ASSESSEE FROM THE EARLIER ASSESSMENT YEAR HAD BEEN WRONGLY CLAIMED IN SO FAR AS THE AMOUNT OF INCOME ADJUSTED AGAINST THE CARRY FORWARD LOSS AND DEPRE CIATION HAD EXHAUSTED TO THE EXTENT / I.T.A.NO. 282 AND 283/CTK/2010 2 OF INCOME GENERATED IN THE IMMEDIATELY PRECEDING YEAR. IN REPLY TO NOTICE U/S.147/148 THE ASSESSEE EXPLAINED THAT HE HAD NO OBJECTION THAT IF THE SAID CARRY FORWARD LOSS AND DEPRECIATION IS CONSIDERED TAXABLE IN THE IMPU GNED ASSESSMENT YEAR IN VIEW OF THE ASSESSEE MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING HAD NOT RECONCILED THE SAME WITH THE INCOME AS DETERMINED BY THE INCOME - TAX AUTHORITIES TILL THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESS EE IS A CONTRACTOR INDULGED IN UNDERTAKING CONTRACT WORKS AND HAD RENDERED TAXABLE INCOME IN THE EARLIER YEARS AT MORE THAN 8% OF THE GROSS RECEIPTS ALTHOUGH NOT COVERED BY THE PROVISIONS OF SECTION 44AE. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT TH AT HAVING BEEN SATISFIED WITH THE ASSESSEES CONCEDING TO BE TAXED ON THE PORTION OF CARRY FORWARD LOSS AND DEPRECIATION THE ASSESSING OFFICER INSISTED FURTHER FOR PRODUCTION OF BOOKS OF ACCOUNTS TO VERIFY THE OTHER ITEMS OF EXPENDITURES CLAIMED IN THE PRO FIT & LOSS ACCOUNT DULY AUDITED UNDER THE PROVISIONS OF SECTION 44AB. THE ASSESSING OFFICER WAS GUIDED BY THE FACT THAT THE CHARTERED ACCOUNTANTS HAD VERIFIED THE BOOKS OF ACCOUNT WHICH BOOKS OUGHT TO HAVE BEEN PRODUCED BEFORE HIM FOR VERIFICATION FOR WHIC H HE INITIATED SEPARATE PROCEEDINGS FOR LEVYING PENALTY U/S.271(1)(B). IN THE ABSENCE OF BOOKS OF ACCOUNTS WITHOUT ANY REASON HE PROCEEDED TO DISALLOW A SUM OF 5 11 000 ARBITRARILY ON PRESUMPTIONS AND ASSUMPTIONS ON THE GROUND OF EXPANSES CLAIMED UNDER T HE HEAD MISC. EXPENSES /OTHERS - 1.72 LAKHS WORK SITE EXPENSES 14.54 LAKHS PETROL & DIESEL EXPENSES 17.91 LAKHS TRUCK PARTS AND MAINTENANCE 8.32 LAKHS AND SALARY & WAGES - 9.50 LAKHS COMBINED. IN OTHER WORDS HE SOUGHT TO DISALLOW A SUM OF 5 11 000 FROM THE EXPENSES CLAIMED AMOUNTING TO 51.98 LAKHS BEING 10% APPROXIMATELY. HE VEHEMENTLY ARGUED THAT ALL THESE EXPENSES ARE DIRECT EXPENSES AND THERE CANNOT BE ANY PRESUMPTIONS AND ASSUMPTIONS THAT ONCE 8% MARGIN IS / I.T.A.NO. 282 AND 283/CTK/2010 3 ACCEPTABLE UNDER THE PROVISION S OF THE ACT THEN A GROSS MARGIN COULD NOT BE SUPER IMPOSED TO ASSUME THAT THE ASSESSEE MAY HAVE EARNED 18% SIMPLY BECAUSE THE ASSESSING OFFICER FEELS SO. NO SPECIFIC FINDING OF ANY SORT EITHER IN THE AUDIT REPORT OR BY THE ASSESSING OFFICER HAS BEEN POINT ED OUT AS CAN BE PERUSED IN THE ORDER. THE BOOKS OF ACCOUNTS WERE NOT AVAILABLE BUT THE VOUCHERS AND DOCUMENTS WERE AVAILABLE WHICH THE ASSESSING OFFICER COULD HAVE VERIFIED FOR A PARTICULAR AMOUNT FOR DISALLOWANCE TO BE CONSIDERED FOR NOT HAVING INCURRED FOR BUSINESS OF THE ASSESSEE. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO GAVE A PART RELIEF OF 1 09 000 BUT HAS NOT BEEN CODIFIED AS TO HOW THE PART RELIEF HAS BEEN ARRIVED AT. IN HIS BRIEF ORDER THE LEARNED CIT(A) HAS ONLY CONSIDERED THE NON - AVAILABILITY OF THE BOOKS OF ACCOUNT WHICH THE ASSESSEE HAS REPEATEDLY CLAIMED AS LOST DURING THE PERIOD OF ITS RETENTION AFTER THE AUDIT THEREFORE WAS TO BE SUBJECT FOR VERIFICATION BY THE AUDITORS POINT OF VIEW WHEN NONE OF THE EXPENS ES HAVE BEEN CONSIDERED AS FOR PERSONAL USE. THE AUDITORS IN THEIR REPORT HAVE NOTED THAT THE EXPENSES INCURRED ARE FOR THE BUSINESS OF THE ASSESSEE. 4. HE ARGUED THAT ONCE THE AUDIT OBJECTION WAS RENDERED IN FAVOUR OF THE REVENUE THE ASSESSING OFFICER O UGHT TO HAVE STOPPED AT THAT AND NOT PROCEEDED TO ASSUMPTIONS AND PRESUMPTION THEORY WITHOUT INDICATING THE BASIS FOR SUCH ENQUIRY FOR THE BOOKS OF ACCOUNT INSOFAR AS ONCE HAVING ACCEPTED THE RATE OF RETURN ON THE BASIS OF GROSS RECEIPTS HE HAD NO REASON TO DISALLOW 10% EXPENSES WHEN THE GROSS RECEIPTS HAD BEEN DECLARED AT 71 24 446.THE INCOME RENDERED TO TAX ALSO INCLUDED OTHER INCOME OF 6 17 917 WHICH MET THE REQUIREMENT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT THEREFORE OUGHT TO HAVE REMAINED UNTOUCHED. THE ASSESSING OFFICER HAS PASSED THE ORDER U/S.144 BY INDICATIN G THE ABSENCE OF BOOKS OF ACCOUNT / I.T.A.NO. 282 AND 283/CTK/2010 4 FOR WHICH HE LEVIED THE PENALTY U/S.271(1)(B) WHICH MAY ALSO BE CONSIDERED IN THE LIGHT OF THE ABOVE SAID. 5. THE LEARNED DR SUBMITTED THAT THE DISALLOWANCE OF CLAIM UNDER THE PROVISIONS OF SECTIONS 144/147/148 IS MOST REA SONABLE ON THE BASIS OF FACTS AND FIGURES AS NOTED BY THE AUTHORITIES BELOW. THE LEARNED CIT(A) ON THE OTHER HAND HAS GIVEN PART RELIEF ON THE BASIS OF ASSESSEES SUBMISSIONS BEFORE HIM THEREFORE REQUIRE NO FURTHER DELIBERATION. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT SUBSTANTIATED THE BASIS TO AGITATE THE LEVY OF PENALTY U/S.271(1)(B) WHICH MAY ALSO BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL PERUSAL OF THE FACTS AND CIRCUMSTANCE S WE ARE INCLINED TO HOLD THAT ON THE BASIS OF AUDIT OBJECTION THE ASSESSEE HAD THE BELIEF OF INCOME HAVING ESCAPED ASSESSMENT IN THE NATURE OF ADJUSTMENT OF CARRY FORWARD LOSS AND DEPRECIATION WHICH THE ASSESSEE IMMEDIATELY CONCEDED IN FAVOUR OF THE DEPA RTMENT IN SO FAR AS HE HAD BEEN INTIMATED U/S.143(1) ONLY. ON OUR PERUSAL OF THE ASSESSMENT ORDER WE ARE INCLINED TO HOLD THAT THE ASSESSING OFFICER HAD NO MATERIAL ON INSISTING REQUIREMENT OF THE BOOKS OF ACCOUNT WHEN THE ASSESSEE HIMSELF RENDERED THAT MERCANTILE SYSTEM OF ACCOUNTING DOES NOT REQUIRE HIM TO RECONCILE THE CARRY FORWARD LOSS AND DEPRECIATION IN ACCORDANCE WITH THE INCOME - TAX AUTHORITIES RECORD OF ADJUSTMENT OF ASSESSED INCOME VIS - Z - VIS THE INCOME AS GIVEN IN THE P & L ACCOUNT AND THE BALAN CE SHEET. THE AUDITORS HAVE CERTIFIED THE FINANCIAL STATEMENTS UNDER THE PROVISIONS OF THE I.T.ACT THEREFORE REQUIRE NO FURTHER DELIBERATION IN SO FAR AS THE ASSESSING OFFICER APPROXIMATELY DISALLOWED 10% OF THE EXPENSES CLAIMED BUT HAVING OBSERVED THAT T HE GROSS CONTRACT RECEIPT OF 71.24 LAKHS WAS RENDERED FOR TAXATION. HAVING GENERATED MORE 8% / I.T.A.NO. 282 AND 283/CTK/2010 5 INCOME TAXABLE FROM THE CONTRACT RECEIPTS THE ASSESSING OFFICER SOUGHT TO DISALLOW EXPENSES WHICH DIRECTLY RELATED TO RENDERING OF THE CONTRACT WORKS INSTEAD OF DETERMINING AS TO WHAT EXPENS ES MAY HAVE BEEN INFLATED AND ARE NOT PART OF THE CONTRACT WORKS RENDERED WHEN THE GROSS RECEIPTS THE ASSESSING OFFICER HAS ARBITRARILY DISALLOWED 10% WHICH WOULD HAVE IN ANY CASE DISTURBED THE VERY FINDING OF ADJUSTMENT OF CARRY FORWARD LOSS AND DEPRECIA TION TO BE ADJUSTED AGAINST THE RE - VERIFICATION MADE BY THE ASSESSING OFFICER. WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT SAID ARBITRARY DISALLOWANCE ONLY MAR THE VERY FACT THAT A CONTRACT IS SUBJECT TO VARIOUS AUTHORITIE S FOR CLAIMING EXPENSES AND WOULD BE IN ITS OWN INTEREST TO KEEP THE EXPENSES TO THE LOWEST IN ORDER TO MEET THE REQUIREMENT OF THE CONTRACTEE. WE FIND NO BASIS IN THE LEARNED CIT(A) ARBITRARILY GIVING A PART RELIEF AS WELL. THERE APPEARS TO BE NO METHOD A DOPTED BY EITHER OF THE AUTHORITIES TO CONSIDER THE DISALLOWANCE OF EXPENSES DULY AUDITED AND SUPPORTED BY THE BOOKS OF ACCOUNT AS WERE VERIFIED BY THE CA/AUDITORS UNDER THE PROVISIONS OF THE I.T.ACT. FINDING NO BASIS FOR THE DISALLOWANCE WE DIRECT THE AS SESSING OFFICER TO DELETE THE DISALLOWANCE OF 5 11 000. THE ORDER OF THE LEARNED CIT(A) IS SET ASIDE WHO HAD ONLY GIVEN A PART RELIEF WITHOUT ANY BASIS. THE APPEAL FILED BY THE ASSESSEE ON THIS SCORE IS ALLOWED. 7. HOWEVER ON THE LEVY OF PENALTY U/S.271( 1)(B) WE ARE INCLINED TO UPHOLD THE SAME IN VIEW OF THE FACT THAT THE ASSESSEE HAS PRODUCED NO EVIDENCE FOR LOSS OF THE BOOKS OF ACCOUNT AS THEY WERE PRODUCED BEFORE THE AUDITORS NOTED BY THEM IN THEIR REPORT DULY VERIFIED AND CERTIFIED OUGHT TO HAVE BEEN PRODUCED. THE APPEAL RELATING TO LEVY OF PENALTY U/S.271(1)(B) IS DISMISSED. / I.T.A.NO. 282 AND 283/CTK/2010 6 8. IN THE RESULT ITA NO.282/CTK/2010 IS ALLOWED AND ITA NO.283/CTK/2010 IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 21 ST JANUARY 2011 ( . . . ) ( K.S.S.PRASAD RAO) JUDICIAL MEMBER (. . ) (K.K.GUPTA) ACCOUNTANT ME MBER. () DATE: 21 ST JANUARY 2011 - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : TARATARINI CON STRUCTIONS NEW BANK COLONY JEYPORE KORAPUT 2 / THE RESPONDENT: INCOME - TAX OFFICER JEYPORE. 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.