Shri Ganesh S.Pandit, Ahmedabad v. The Income tax Officer,Ward-9(2),, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'SMC' (BEFORE SHRI N S SAINI ACCOUNTANT MEMBER) ITA NO.3196/AHD/2009 (ASSESSMENT YEAR:- 2006-07) SHRI GANESH S PANDIT 20 GOPAL SURYA COMPLEX SOLA ROAD AHMEDABAD V/S THE INCOME-TAX OFFICER WARD-9(2) AHMEDABAD [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI S N DIVATIA AR RESPONDENT BY:- SHRI MAHESH KUMAR SR. DR O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) DATED 7 TH OCTOBER 2009 FOR ASSESSMENT YEAR 2006-07. 2 GROUND NO.1.1 AND 1.2 ARE AS UNDER: 1.1 THE ORDER PASSED U/S 250 OF THE ACT ON 7-10-2009 FO R AY 2006-07 BY CIT(A)-XV AHMEDABAD UPHOLDING THE ADDIT ION MADE BY AO OF RS.1 92 595 IS WHOLLY ILLEGAL UNLAWF UL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLDING TH E ADDITION OF RS.1 92 595 WITHOUT CONSIDERING FULLY AND PROPER LY THE EXPLANATION OFFERED AND EVIDENCE PRODUCED BY THE AP PELLANT APART FROM A REASONED ORDER. 3 AT THE OUTSET THE LEARNED AUTHORISED REPRESENTA TIVE OF THE ASSESSEE DID NOT PRESS THE ABOVE GROUND NOS.1.1 AND 1.2 OF THE APPEAL. THEREFORE THE SAME ARE DISMISSED AS NOT P RESSED. 4 GROUND NO.2.1 AND 2.2 IN THE APPEAL READ AS UNDE R: 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND / OR ON FACTS IN UPHOLDING THE ADDITION OF RS.1 92 595/- TOWARDS CON TRACT RECEIPTS MADE BY AO. 2 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION OF RS.1 92 59 5/- TOWARDS CONTRACT RECEIPTS MADE BY AO . 5 THE FACTS OF THE CASE ARE THAT IN PARA 3 OF THE ASSESSMENT ORDER THE AO HAS MENTIONED THAT AS PER TDS CERTIFIC ATE FILED ALONG WITH THE RETURN THE TOTAL RECEIPTS COME TO RS.34.72 423 WHEREAS TOTAL RECEIPTS OF RS.33 72 423 ONLY HAVE BEEN CREDITED IN THE P&L ACCOUNT THUS LEAVING THE DIFFERENCE OF RS. L LAKH. THE CONTENTION OF THE ASSESSEE THAT THE RECEIPTS WERE ACCOUNTED FOR O N ACTUAL RECEIPT BASIS AS PER HIS BANK STATEMENT AND NOT ON THE BASI S OF TDS CERTIFICATES DID NOT FIND FAVOUR WITH THE AO. THE A O HAS STATED THAT THE LAST TDS CERTIFICATE IS FROM PRATIGNA PROPERTIE S PVT.LTD. WHICH IS DATED 9.4.2006 SO THERE WAS NO REASON FOR THE ASSES SEE NOT TO DECLARE THE RECEIPTS AS PER TDS CERTIFICATES. 6 BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THE ASSESSEE SUBMITTED VIDE WRITTEN SUBM ISSIONS DATED 28- 8-2009 AS UNDER: '3.3. THE APPELLANT BEGS TO SUBMITS THAT THOUGH THE SAID PARTY HAS CREDITED IN ALL RS.9 81 396 TOWARDS THE CONTRAC T CHARGES IN THE ACCOUNT OF THE APPELLANT FOR THE YEAR UNDER APP EAL THE SAID PARTY HAD MADE TDS ONLY IN RESPECT OF RS.8 88 801 B ECAUSE THE SAID CHARGES WERE PAYABLE TO THE APPELLANT WHEREAS THE DIFFERENCE OF RS.92 595 BELONGED TO WORKERS WHO HAD CARRIED OUT THE EXTRA WORK. SINCE THE SAID WORKERS WERE FRO M APPELLANT'S GANG THE SAID PARTY HAD CREDITED THE C HARGES TO APPELLANT'S ACCOUNT. THE AO HAS FAILED TO APPRECIAT E THAT HAD THE SAID WORK BEEN CARRIED OUT BY THE APPELLANT TH E SAID PARTY OUGHT TO HAVE MADE TDS LIKE ANY OTHER PAYMENTS MADE TO THE APPELLANT. WHEN THE DEDUCTOR IS WELL AWARE ABOUT TH E TDS PROVISIONS IT COULD NOT ESCAPE HIS ATTENTION OR EV EN LATER DATE HE COULD HAVE RECTIFIED THE 'MISTAKE. 3.4. WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNAT IVE THE APPELLANT BEGS TO SUBMIT THAT HE HAD FILED HIS RETU RN OF INCOME SHOWING LABOUR CONTRACT INCOME U/S .44AD AND CONTRA CT RECEIPTS HAVE BEEN SHOWN AT RS.33 72 423 FOR THIS P URPOSE. THEREFORE THE INCOME @8% ON THE ALLEGED DIFFERENCE IN THE CONTRACT RECEIPTS OF RS. 1 92 595 WOULD WORK OUT RS . 15 408 3 WHEREAS AO HAS MADE THE ADDITION OF ENTIRE LABOUR R ECEIPTS WHICH IS WHOLLY UNJUSTIFIED. IT IS WELL-SETTLED POS ITION IN LAW THAT WHAT IS CHARGEABLE TO TAX IS INCOME AND NOT TH E RECEIPTS AS IN THE HELD IN THE CASE OF PRESIDENT INDS. (258 ITR 6540(GUJ) AND GURUBACHAN SINGH JUNEJA (302 ITR 63)(GUJ). THER EFORE THE IMPUGNED ADDITION MAY PLEASE BE REDUCED ACCORDI NGLY.' 7 GROUND NOS.3.1 AND 4.1 READ AS UNDER: 3.1 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT A PPELLANTS WORKERS HAD INDEPENDENTLY DONE WORK FOR SATHYAPRIYA REALITY PVT. LTD. FOR RS.92 595 SO THAT THE SAID RECEIPTS B ELONGED TO THEM AND EVEN NO TDS WAS MADE THEREON. 4.1 WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTER NATIVE THE LD. CIT(A) OUGHT TO HAVE RESTRICTED THE ADDITION TO THE EXTENT OF GROSS PROFIT IN RESPECT OF THE ADDITIONS CONFIRM ED BY HER. 8 THE BRIEF FACTS ARE THAT TDS CERTIFICATES FROM SATYAPRIYA REALITY PVT. LTD. SHOWED RECEIPTS OF RS.8 88 801/- BY THE APPELLANT WHEREAS ENQUIRIES MADE BY THE AO FROM THIS PARTY U/ S. 133(6) REVEALED THAT THIS PARTY HAD CREDITED THE APPELLANT FOR AN AMOUNT OF RS.9 81 396. THE ARGUMENT GIVEN IN THE ASSESSMENT P ROCEEDINGS THAT SATYPRIYA REALITY P. LTD. DEDUCTED TDS ONLY AT RS.8 88 801 AND THAT IT HAD CREDITED THE ASSESSEE FOR AN AMOUNT OF RS.92 595 FOR EXTRA WORK DONE THROUGH ASSESSEE'S WORKERS DID NOT FIND F AVOUR WITH THE AO. 9 BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THE ASSESSEE SUBMITTED VIDE WRITTEN SUBM ISSIONS DATED 28- 8-2009 AS UNDER: '3.3. THE APPELLANT BEGS TO SUBMITS THAT THOUGH THE SAID PARTY HAS CREDITED IN ALL RS.9 81 396 TOWARDS THE CONTRAC T CHARGES IN THE ACCOUNT OF THE APPELLANT FOR THE YEAR UNDER APP EAL THE SAID PARTY HAD MADE TDS ONLY IN RESPECT OF RS.8 88 801 B ECAUSE THE SAID CHARGES WERE PAYABLE TO THE APPELLANT WHEREAS THE DIFFERENCE OF RS.92 595 BELONGED TO WORKERS WHO HAD CARRIED OUT THE EXTRA WORK. SINCE THE SAID WORKERS WERE FRO M 4 APPELLANT'S GANG THE SAID PARTY HAD CREDITED THE C HARGES TO APPELLANT'S ACCOUNT. THE AO HAS FAILED TO APPRECIAT E THAT HAD THE SAID WORK BEEN CARRIED OUT BY THE APPELLANT TH E SAID PARTY OUGHT TO HAVE MADE TDS LIKE ANY OTHER PAYMENTS MADE TO THE APPELLANT. WHEN THE DEDUCTOR IS WELL AWARE ABOUT TH E TDS PROVISIONS IT COULD NOT ESCAPE HIS ATTENTION OR EV EN LATER DATE HE COULD HAVE RECTIFIED THE 'MISTAKE. 3.4. WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNAT IVE THE APPELLANT BEGS TO SUBMIT THAT HE HAD FILED HIS RETU RN OF INCOME SHOWING LABOUR CONTRACT INCOME U/S .44AD AND CONTRA CT RECEIPTS HAVE BEEN SHOWN AT RS.33 72 423 FOR THIS P URPOSE. THEREFORE THE INCOME @8% ON THE ALLEGED DIFFERENCE IN THE CONTRACT RECEIPTS OF RS. 1 92 595 WOULD WORK OUT RS . 15 408 WHEREAS AO HAS MADE THE ADDITION OF ENTIRE LABOUR R ECEIPTS WHICH IS WHOLLY UNJUSTIFIED. IT IS WELL-SETTLED POS ITION IN LAW THAT WHAT IS CHARGEABLE TO TAX IS INCOME AND NOT TH E RECEIPTS AS IN THE HELD IN THE CASE OF PRESIDENT INDS. (258 ITR 6540(GUJ) AND GURUBACHAN SINGH JUNEJA (302 ITR 63)(GUJ). THER EFORE THE IMPUGNED ADDITION MAY PLEASE BE REDUCED ACCORDI NGLY.' 10 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSES SEE CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 9. AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS SEE N THAT NO EXPLANATION HAS BEEN FURNISHED FOR RECEIPTS LESS SH OWN OF RS. 1 00 000. TDS CERTIFICATES CLEARLY SHOW RECEIPTS OF RS.34 72 423 WHEREAS THE APPELLANT HAD CREDITED IN THE P & L ACCOUNT RECEIPTS OF RS.33 72 423 ONLY. THE ADDITION OF RS.1 00 000 MADE BY THE AO IS THEREFORE CONFIRMED. WITH RESPECT TO RS.92 595 SHOWN LESS RECEIPT FROM SATYAP RIYA REALITY PVT. LTD. EXPLANATION OF THE APPELLANT THAT THE TDS WAS NOT DEDUCTED BY SATYAPRIYA REALITY PVT. LTD. ON THI S AMOUNT CANNOT BE MADE AN EXCUSE BY THE APPELLANT FOR NOT S HOWING THE RECEIPTS IN THE RETURN. THE APPELLANT HAS HIMSELF C ONCEDED THAT HIS WORKERS HAD DONE WORK FOR SATYAPRIYA REALITY PV T. LTD. FOR AN AMOUNT OFRS.92 595/-. THE ADDITION MADE BY THE A O IS CONFIRMED. 11. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINE SS AS A CONTRACTOR DOING LABOUR WORK IN PLASTER AND CHANTER. DURING T HE YEAR UNDER 5 CONSIDERATION THE ASSESSEE DISCLOSED TOTAL BUSINES S TURNOVER OF RS.33 72 423/- AND DECLARED NET PROFIT OF RS.2 78 5 60/- WHICH WAS 8.25% OF THE TURNOVER. DURING THE COURSE OF THE AS SESSMENT THE LEARNED ASSESSING OFFICER FOUND THAT THE ASSESSEE H AS NOT INCLUDED RS.1 92 595/- IN ITS TURNOVER. THEREFORE HE ADDED THE SUM TO THE INCOME OF THE ASSESSEE. IN APPEAL LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) CONFIRMED THE SAME. BEFORE ME THE LEA RNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS STATE D RS.92 595/- WAS NOT THE ASSESSEES BUSINESS RECEIPTS BUT THE S AME WAS ON ACCOUNT OF LABOURERS WHICH WERE DIRECTLY EMPLOYED B Y THE PARTIES AND PAYMENT OF WHICH WAS MADE THROUGH HIM AND NO AM OUNT OF INCOME OF THE ASSESSEE WAS EMBEDDED IN THIS RECEIPT AS EVIDENCED BY THE FACT THAT NO I.TDS OF THE ASSESSEE WAS DEDUCTED IN RESPECT OF THE SAME. IN RESPECT OF BALANCE AMOUNT OF RS.1 00 000/ - HE CONTENDED THAT AS THE PROFIT DISCLOSED BY THE ASSESSEE IN RES PECT OF HIS CONTRACT BUSINESS WAS IN ACCORDANCE WITH THE PROVISIONS OF S ECTION 44AD OF THE ACT THEREFORE THE ADDITION SHOULD HAVE BEEN M ADE ONLY IN RESPECT OF THE AMOUNT OF PROFIT EMBEDDED IN THE REC EIPT AND NOT OF THE ENTIRE GROSS RECEIPTS. I FIND THAT NO MATERIAL WAS BROUGHT BEFORE THE LOWER AUTHORITIES OR BEFORE ME TO SHOW THAT THE ENTIRE AMOUNT OF RS.92 595/- WAS REIMBURSED TO THE LABOURERS ON ACCO UNT OF THIS RECEIPT. I THEREFORE AGREE WITH THE FINDINGS OF T HE LOWER AUTHORITIES THAT THE ASSESSEE HAS SHOWN LESSER RECEIPT FROM CON TRACT BUSINESS OF RS.1 92 595/-. HOWEVER I FIND THAT UNDER THE INCO ME TAX ACT ONLY INCOME IS TAXABLE NOT THE GROSS RECEIPTS. AS IT IS NOT IN DISPUTE THAT THE ASSESSEES BUSINESS IS COVERED BY THE PROVISION S OF SECTION 44AD OF THE ACT AND THE ASSESSEE HAS DECLARED NET PROFIT @ 8.25% OF THE DISCLOSED TURNOVER. AS ONLY INCOME ELEMENT EMBEDDE D IN THE TURNOVER OF RS.1 92 595/- IS CHARGEABLE TO TAX I DI RECT THE LEARNED ASSESSING OFFICER TO TAKE NET PROFIT @ 8.25% OF THE SAID TURNOVER AS INCOME EARNED BY THE ASSESSEE FROM THE SAID TURNOVE R. I THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIREC T THE LEARNED 6 ASSESSING OFFICER TO RECOMPUTE THE INCOME OF THE AS SESSEE IN THE MANNER INDICATED ABOVE. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 29-01- 2010 SD/- (N S SAINI) ACCOUNTANT MEMBER DATE : 29-01-2010 COPY OF THE ORDER FORWARDED TO : 1. SHRI GANESH S PANDIT 20 GOPAL SURYA COMPLEX S OLA ROAD AHMEDABAD 2. THE ITO WARD-9(2) AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XV AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABA