M/s. Ario Brothers,, Baroda v. The ACIT., Circle-2,, Baroda

ITA 354/AHD/2007 | 2003-2004
Pronouncement Date: 26-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 35420514 RSA 2007
Assessee PAN AAKFA4748B
Bench Ahmedabad
Appeal Number ITA 354/AHD/2007
Duration Of Justice 3 year(s) 2 month(s) 7 day(s)
Appellant M/s. Ario Brothers,, Baroda
Respondent The ACIT., Circle-2,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 26-03-2010
Date Of Final Hearing 23-03-2010
Next Hearing Date 23-03-2010
Assessment Year 2003-2004
Appeal Filed On 19-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING: 23.03.10 DRAFTED ON:23.03.10 ITA NO.351/AHD/2007 352/AHD/2007 353/AHD/2007 AND 354/AHD/2007 ASSESSMENT YEAR : 1999-00 2000-01 2002-2003 AND 2003-2004 M/S. ARIO BROTHERS 1 ST FLOOR ANJALI CHAMBERS R.C.DATT ROAD ALKAPURI BARODA. VS. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-2 AYAKAR BHAVAN BARODA. PAN/GIR NO. : AAKFA 4748 B (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI MUKUND BAKSHI RESPONDENT BY: SHRI M.C.PANDIT SR. D.R. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT(APPEALS)-II BARO DA DATED 30.10.2006. 2. THE COMMON GROUND OF THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-00 2000-01 AND 2002-03 READS AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II BARODA HAS ERRED IN FACTS AND IN LAW IN CONFIRMING THE PENALTY U/S. 271(1)(C) AMOUNTING TO RS.3 13 220/- F OR ASSESSMENT YEAR 1999-2000 RS.1 60 634/- FOR ASSESSMENT YEAR 2000-01 AND RS.1 72 959/- FOR ASSESSMENT YEAR 2002-03 LEVIED BY THE LD. AO IN COMPLETE DISREGARD OF THE AVAILABLE MATERIAL ON REC ORD AND - 2 - THE SUBMISSIONS MADE BY THE APPELLANT. THE PENALTY OF RS.3 13 220/- FOR ASSESSMENT YEAR 1999-2000 RS.1 60 634/- FOR ASSESSMENT YEAR 2000-01 AND RS.1 72 959/- FOR ASSESSMENT YEAR 2002-03 SO LEVIED IS BAD IN LAW IS PRAYED TO BE CANCELLED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER MADE ADDITIONS TO THE GROSS PROFIT OF THE A SSESSEE AFTER REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROV ISIONS OF SECTION 145(3) OF THE ACT. THESE ADDITIONS WERE CONFIRMED B Y THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESSEE BY THE LEARNED ASS ESSING OFFICER. THEREAFTER THE LEARNED ASSESSING OFFICER BY INVOKI NG EXPLANATION-I TO SECTION 271(1)(C) LEVIED PENALTY AND REJECTED TH E ASSESSEES PLEA THAT THE ADDITIONS WERE BASED ON ESTIMATION. THE L EARNED ASSESSING OFFICER HELD THAT THE BOOKS OF ACCOUNT WERE REJECTE D AFTER MAKING INQUIRIES AS PER SECTION 133(6) WITH RESPECT TO PAY MENTS TO SUBCONTRACTOR AND HENCE THE ESTIMATION IS BASED ON SCIENTIFIC AND VALID GROUND. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IN EARLIER YEARS THE ADDITION WAS D ELETED BY THE AHMEDABAD BENCH OF THE TRIBUNAL. IT WAS FURTHER CON TENDED THAT NON- TRACEABILITY OF THE SUBCONTRACTOR WAS DUE TO SHIFTI NG OF PLACES BY THEM. RELIANCE WAS PLACED ON THE FOLLOWING DECISIO NS. 1. SHIVLAL TAK VS CIT 251 ITR 373 (RAJ) 2. CIT VS. SMT. K. MEENAKSHI KUTTY 258 ITR 494(MAD ) 3. HARIGOPAL SINGH VS. CIT 258 ITR 85 (P&H) 4. ITO VS. SMT. PURNIMADEVI GUPTA 83 TTJ 586 (JODH PUR) - 3 - 5. DY. CIT VS. MADAD ALI ANSARI & CO. 69 TTJ 279 (JODHPUR) 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)A FTER CONSIDERING THE SUBMISSIONS HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNS EL AND FACTS OF THE CASE. THE FINDINGS GIVEN BY THE ASSESS ING OFFICER WITH RESPECT TO THE INQUIRIES MADE U/S.133(6) HAVE NOT BEEN REBUTTED. THE REJECTION OF THE BOOKS OF ACCOUNTS HA VE BEEN CONFIRMED BY MY LD. PREDECESSOR. THEREFORE ADDITIO NS HAVE BEEN MADE ON VALID GROUNDS AND CANNOT BE TREATED AS AD-HOC ADDITIONS AS SUCH. THE FACTS OF THE CASES RELIED UP ON BY THE LD. COUNSEL ARE DIFFERENT FROM THOSE OF THE PRESENT CAS E. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE I DO NOT INTEND THE INTERFERE WITH THE ACTION OF THE LEARNED ASSESSING OFFICER AND HENCE PENALTIES IMPOSED U/S.271(1)(C) BY THE ASSESS ING OFFICER ARE CONFIRMED. 6. WE 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 A CONTRACTOR ENGAGED I N THE BUSINESS OF MECHANICAL CONSTRUCTION DOING THE VARIOUS JOBS OF C ONSTRUCTING MECHANICAL STRUCTURES AND ALSO LAYING OF PIPELINE F OR CARRIAGES OF LIQUIDS AND GAS. IN THE COURSE OF ASSESSMENT THE LEARNED ASSESSING OFFICER WHILE EXAMINING BOOKS OF ACCOUNT OF THE ASS ESSEE HAS OBSERVED THAT EXPENSES UNDER VARIOUS HEADS NAMELY P AYMENT TO SUB CONTRACTOR ELECTRICITY EXPENSES CLOSING STOCK AND OTHER EXPENSES WERE NOT FULLY SUPPORTED BY BILLS VOUCHERS AND SUP PORTING EVIDENCES ETC. IN VIEW OF THESE DEFECTS THE BOOKS OF ACCOUNT WERE REJECTED BY THE LEARNED ASSESSING OFFICER AND NET PROFIT WAS ES TIMATED @ 10% IN ASSESSMENT YEAR 1999-2000 @ 8% IN BOTH THE ASSESSM ENT YEAR - 4 - 2000-2001 AND 2002-03. ON APPEAL THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) ALLOWED PART RELIEF TO THE ASSE SSEE AND ON FURTHER APPEAL THE TRIBUNAL ACCEPTED THE NET PROFI T OF THE ASSESSEE FOR ASSESSMENT YEAR 1999-2000 AND 2000-01 AT 8% SUBJECT TO DEDUCTION THEREFROM IN RESPECT OF DEPRECIATION INTEREST AND P ARTNERS SALARY. THE TRIBUNAL FOR THE ASSESSMENT YEAR 2002-03 DIRECTED T O ACCEPT THE NET PROFIT OF THE ASSESSEE @ 4% OF THE TURNOVER SUBJECT TO THE CONDITION THAT SUCH INCOME SHOULD NOT BE LOWER THAN THE RETUR NED INCOME. ON THE ABOVE FACTS THE LEARNED ASSESSING OFFICER LEVI ED THE PENALTY UNDER SECTION 271(1)(C) OF RS.3 13 220/- FOR ASSESS MENT YEAR 1999- 2000 RS.1 60 634/- FOR ASSESSMENT YEAR 2000-01 RS .1 72 959/- FOR ASSESSMENT YEAR 2002-03. THE ABOVE PENALTY WAS LEV IED BEFORE THE PASSING OF THE ORDER BY THE TRIBUNAL IN QUANTUM APP EAL. THE PENALTY SO LEVIED WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 7. BEFORE US THE ASSESSEE SUBMITTED THAT IN VIEW O F THE ORDER OF THE TRIBUNAL PASSED IN QUANTUM APPEAL THE ASSESSED INCOME OF THE ASSESSEE WAS SUBSTANTIALLY REDUCED AND THEREFORE T HE PENALTY ON THE BASIS OF THE ASSESSED INCOME PRIOR TO THE ORDER OF THE TRIBUNAL IS NOT SUSTAINABLE. HE FURTHER SUBMITTED THAT IN THE INST ANT CASE NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT T HE ASSESSEE HAS NOT ACCOUNTED FOR ANY CONTRACT RECEIPT OR ANY EXPEN SES CLAIMED BY THE ASSESSEE WAS FOUND BOGUS OR INFLATED. HE CONTENDED THAT ENHANCEMENT TO THE RETURNED INCOME WAS ONLY ON THE BASIS OF ESTIMATION AND THEREFORE PENALTY UNDER SECTION 271 (1)(C) IS NOT LEGALLY IMPOSABLE IN THE INSTANT CASE. - 5 - 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE ORDERS OF THE LOWER AUTHORITIES. 9. WE FIND THAT LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE SUBMISSION OF THE ASSESSEE TO THE EF FECT THAT NO MATERIAL WAS FOUND DURING THE COURSE OF THE ASSESSMENT TO SH OW THAT ANY EXPENSE CLAIMED BY THE ASSESSEE WAS ACTUALLY BOGUS OR INFLATED OR ANY CONTRACT RECEIPT WAS SUPPRESSED BY THE ASSESSEE. IN ABSENCE OF ANY SUCH MATERIAL MERELY BECAUSE INCOME WAS ESTIMATED AT A HIGHER AMOUNT AFTER REJECTING BOOKS OF ACCOUNT BY ITSELF C ANNOT BE A VALID GROUND FOR IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. WE THEREFORE DELETE THE PENALTY SO LEVIED UNDER SECTI ON 271(1)(C) FOR ALL THE THREE YEARS UNDER APPEAL. 10. GROUND NO.1 OF THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2003-04 READS AS UNDER:- 1. THE LD. CIT(APPEALS) II BARODA HAS ERRED IN FA CTS AND IN LAW IN UPHOLDING THE ACTION OF THE LD. AO IN ESTIMATING THE INCOME OF THE APPELLANT A MECHANICA L CONTRACTOR @ 8% OF CONTRACT RECEIPTS BEFORE ALLOWAN CE OF DEPRECIATION AND INTEREST AND REMUNERATION TO TH E PARTNERS. THE ESTIMATION OF INCOME IN THE ABOVE MAN NER HAS RESULTED INTO AN ADDITION OF RS.11 04 473/- TO THE RETURNED INCOME WHICH IN THE FACTS AND CIRCUMSTANC ES OF APPELLANTS CASE OUGHT TO BE DELETED. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNE D ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESS EE BY INVOKING PROVISIONS OF SECTION 145(2) OF THE ACT AND ESTIMAT ED THE PROFIT FOR THE YEAR BY ADOPTING RATE OF 8% OF TOTAL GROSS REC EIPTS WHICH WAS PRIOR TO DEDUCTION OF DEPRECIATION INTEREST AND REM UNERATION PARTNERS. - 6 - 12. IN APPEAL THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) OBSERVED THAT THE FACTS IN THE YEAR AND THE ISSUE A RE THE SAME AS IN THE PRECEDING ASSESSMENT YEARS AND CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER ESTIMATING THE NET PROFIT @ 8%. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE ASSESSEE IS A CONTRACTOR ENGAGED IN THE BUSINESS OF MECHANICAL CONSTRUCTION DOING THE VARIOUS JOBS OF CONSTRUCTING MECHANICAL STRUCTURES AND ALSO LAYING OF PIPELINE FOR CARRIAGE S OF LIQUIDS AND GAS. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE NET PROFIT DISCLOSED BY THE ASSESSEE COMES TO 4.14% OF THE TURNOVER. HE ALSO OBSERVED THAT EXPENSES CLAIMED UNDER THE HEAD SUB CONTRACT EXPENSES ARE PAID IN CASH AND IN ABSENCE OF FULL DETAILS OF PAYEE IN THE VOUCHERS THE SAME ARE NOT VERIFIABLE. IN VIEW OF THE DEFECT FOUN D IN THE BOOKS OF ACCOUNT THE LEARNED ASSESSING OFFICER REJECTED THE BOOK RESULT AND ESTIMATED THE NET PROFIT OF THE ASSESSEE @ 8% OF TH E TURNOVER SUBJECT TO DEDUCTION OF DEPRECIATION INTEREST AND PARTNER S SALARY THEREFROM. THUS THE LEARNED ASSESSING OFFICER COMPUTED THE TO TAL INCOME OF THE ASSESSEE AT RS.37 79 400/- IN PLACE OF RETURNED INCOME OF RS. 26 74 931/-. IN APPEAL THE LEARNED COMMISSION ER OF INCOME TAX(APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASS ESSING OFFICER. 14. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE POINTED OUT THAT IN THE IMMEDIATELY PRECED ING ASSESSMENT YEAR 2002-03 THE TRIBUNAL IN THE CASE OF THE ASSES SEE HAS ACCEPTED - 7 - THE NET PROFIT @ 4% OF THE TURNOVER AND AS THE ASSE SSEE HAS DISCLOSED NET PROFIT @ 4.14% THE SAME SHOULD BE ACCEPTED. 15. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE POINTED OUT THAT THE TRIBUNAL IN THE CASE OF THE AS SESSEE FOR ASSESSMENT YEARS 1999-2000 AND 2000-2001 HAS ACCEPT ED THE INCOME OF THE ASSESSEE @ 8% OF THE TURNOVER SUBJECT TO ALLOWANCE OF DEDUCTION FOR DEPRECIATION INTEREST AND PARTNERS SALARY. AS THE ORDERS OF THE LOWER AUTHORITIES ARE INCONFORMITY WITH THE ORDER OF THE TRIBUNAL THEREFORE NO INTERFERENCE WITH THE SAID ORDER IS WARRANTED. 16. WE FIND THAT THE ASSESSEE HAS NOT DISPUTED THE DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY IT WHICH WAS POINTED OUT BY THE LEARNED ASSESSING OFFICER IN THE ORDER OF ASSESSMEN T UNDER APPEAL. IN VIEW OF THE ABOVE DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN OUR CONSIDERED OPINION THE BOOK RESULT OF THE ASSE SSEE CANNOT BE ACCEPTED. CONSIDERING THE FULL FACTS AND CIRCUMSTAN CES OF THE CASE AND THE PAST ACCEPTED POSITION IN THE CASE OF THE ASSES SEE IN OUR CONSIDERED OPINION IT SHALL MEET THE ENDS OF JUSTI CE TO ACCEPT THE NET INCOME OF THE ASSESSEE @ 4.50% OF THE TURNOVER FROM CONTRACT BUSINESS. WE THEREFORE MODIFY THE ORDERS OF THE LO WER AUTHORITIES AND DIRECT THE LEARNED ASSESSING OFFICER TO ACCEPT NET INCOME FROM CONTRACT BUSINESS @ 4.50% OF THE TURNOVER. THUS TH IS GROUND OF APPEAL IS PARTLY ALLOWED. 17. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. THE LD. A.O. HAS ERRED IN LAW AND FACTS MAKING AN ADDITION OF RS.4 31 838/- IN RESPECT OF MISCELLANEO US INCOME RECEIVED DURING THE YEAR WHERE THE INCOME I S - 8 - ESTIMATED BY INVOKING THE PROVISIONS OF SECTION 145 (1) 145(2) AND 145A NO SEPARATE ADDITION IS REQUIRED T O BE MADE. IT IS THUS PRAYED THAT THE ADDITION OF RS.4 3 1 838/- BE DELETED. 18. WE FIND THAT THIS GROUND OF APPEAL DOES NOT ARI SE FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) AND THEREFORE THE SAME IS DISMISSED. 19. IN THE RESULT THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 1999-2000 2000-2001 AND 2002-2003 ARE ALLOWED AND THAT FOR THE ASSESSMENT YEAR 2003-2004 IS PARTLY ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 26/03/2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD; DATED 26/03/2010 PREPARED AND COMPARED BY : PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS) 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD