M/s Sujata Engineering, Koraput v. ITO, Koraput

ITA 464/CTK/2010 | 2006-2007
Pronouncement Date: 27-01-2011

Appeal Details

RSA Number 46422114 RSA 2010
Assessee PAN ABEFS5467N
Bench Cuttack
Appeal Number ITA 464/CTK/2010
Duration Of Justice 29 day(s)
Appellant M/s Sujata Engineering, Koraput
Respondent ITO, Koraput
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2011
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 27-01-2011
Assessment Year 2006-2007
Appeal Filed On 29-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (SMC) CUTTACK BENCH CUTTACK () BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. / ITA NO.464/CTK/2010 / ASSESSMENT YEAR 2006 - 07 M/S.SUJATA ENGINEERING : AT: A - 35 SECTOR 1 DAMANJODI DIST.KORAPUT (ORISSA) PAN: ABEFS 5467 N - - - VERSUS - INCOME - TAX OFFICER WARD 1 AT/P.O.JEYPORE DIST. KORAPUT. ( /APPELLANT ) (/ RESPONDENT ) / FOR THE APPELLANT : / SHRI P.K.MISHRA AR / FOR THE RESPONDENT: / SHRI J.KHANRA DR / ORDER (SMC) . . SHRI K.K.GUPTA ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE AGITATES THE AC TION OF THE LEARNED CIT(A) IN CONFIRMING TWO ADDITIONS ASSESSED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 143(3)/147. 2. THE FIRST ISSUE RELATES TO DISALLOWANCE OF REMUNERATION NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40(B) AND WAS T HE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT UNDER THE PROVISIONS OF SECTION 147/148. THE SECOND ISSUE AGITATED BEFORE ME IS WITH RESPECT TO ADDITION OF 2 LAKHS IN THE INCOME OF THE ASSESSEE ON THE GROUND THAT INVESTMENT HAS BEEN MADE FROM UNDISCLOSED SOURCES FOR PURCHASE OF A TRACTOR AMOUNTING TO 2 LAKHS INSPITE OF THE ASSESSING OFFICER ACCEPTING THE ASSESSEES RETURN OF INCOME U/S.44AD BUT ONLY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS ON CERTAIN INFORMATION MADE AVAILABLE WITH RESPECT TO THE HOLDING OF ASSETS AND LIABILITIES OF THE ASSESSEE U/S.139(9). THE LEARNED CIT(A) HAS ALSO CONFIRMED BOTH THE ADDITIONS BUT ON ENTIRELY DIFFERENT BA SIS. 3. I HAVE HEARD THE RIVAL CONTENTIONS AT LENGTH. THE ASSESSING OFFICER IN HIS ORDER HAS NOTED THAT THE ASSESSEE OUGHT TO HAVE CLAIMED NET PROFIT AT 36 990 AFTER ALLOWING 1 40 400 REMUNERATION TO PARTNERS WHICH ACCORDING TO IT COULD ONLY BE OF 1 23 456. HOWEVER AS THE SALARY HAD CHANGED DURI NG / ITA NO.464/CTK/2010 2 THE IMPUGNED ASSESSMENT YEAR AND THERE WAS NO DOCUMENTARY EVIDENCE OF HAVING PAID THE SAME THE ASSESSING OFFICER DISALLOWED 1 25 000 AS EXCESS REMUNERATION IN VIEW OF THE FACT THAT THE NET PROFIT WAS LESS THAN THE REMUNERATION. SIMILARLY THE ASSESSIN G OFFICER ON REQUIRING REMOVAL OF DEFECT U/S.139(9) HELD THAT A TRUCK VALUED AT 2 LAKHS HAD BEEN PURCHASED WHICH SOURCE HAS NOT BEEN DECLARED IN THE RETURN. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO ACCEPTED THE CONTENTIO N OF THE LEARNED ASSESSING OFFICER THAT THE REMUNERATION HAS ENHANCED ON A RESOLUTION GIVING EFFECT THERETO HAD BEEN PASSED ON THE 1 ST DAY OF APRIL 2005 ON A STAMP PAPER PURCHASED ON 28.3.2008. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRODUCED THE COPY OF THE STAMP PAPER WHICH CLEARLY INDICATES THAT THE STAMP PAPER IS DATED MARCH 2005 THEREFORE WAS IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT WHEN THE SAME COULD NOT BE RELATED TO EXCESS PAYMENT OF REMUNERATION. THE ASSESSING OFFICER HAD INDICATED THAT 1 23 456 WAS IN ANY CASE AVAILABLE TO THE ASSESSEE U/S.40(B) IN TERMS OF RETURN FILED DISCLOSING INCOME OF 36 990 AFTER THE REMUNERATION. THE ASSESSEE HAD PURCHASED A TRACTOR AND NOT A TRUCK AS ORIGINALLY NOTED BY THE ASSESSING OFFICER WHICH REGISTRAT ION BOOK WAS FILED BEFORE THE ASSESSING OFFICER BUT WAS CONSIDERED AS A PURCHASE FROM OUTSIDE THE BOOKS OF ACCOUNT OR FROM UNDISCLOSED SOURCES WHEN THE ASSESSEE HAS BEEN SPECIFICALLY SUBMITTING THAT IT FILED RETURN U/S.44AD BEING A PETTY CONTRACTOR. THE L EARNED DR HAS SUBMITTED THAT BOTH THESE DOCUMENTS WERE NOT AVAILABLE TO THE ASSESSING OFFICER AS WERE ALSO NOTED BY THE LEARNED CIT(A) WHEN THE ASSESSEE HIMSELF TRIED TO DEVIATE ON THE ISSUE BEFORE ASSESSING OFFICER. NOTICING THAT THE INVESTMENT IN THE TRACTOR HAD NOT BEEN MADE BY THE FIRM THE LEARNED DR THEREFORE SUBMITTED THAT THE LEARNED CIT(A) COULD NOT APPRECIATE THE ASSESSEES CONTENTION BEFORE HIM THAT THE SOURCE HAS BEEN MET BY ONE OF THE PA RTNER OF THE ASSESSEE FIRM. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND ON CONSIDERING THE FACTS AND CIRCUMSTANCES I AM OF THE VIEW THAT BOTH THESE ISSUES REQUIRE RECONSIDERATION BY THE ASSESSING OFFICER IN VIEW OF THE FACT THAT ONCE HAVING ACCEPTED THE RET URN U/S.44AD REMUNERATION IS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT WHEN THE REMUNERATION PLUS NET PROFIT RIGHTLY COMBINED CANNOT BE DISALLOWED ONLY BECAUSE IT CONTRAVENES THE VERY PROVISIONS WHICH RESULTED IN ITS ACCEPTANCE IN THE FIRST PLACE. THE LEARNED CIT(A)S CONTENTION THEREFORE HAS NO LEGS TO STAND ON HOLDING THAT THE STAMP / ITA NO.464/CTK/2010 3 PAPER HAD BEEN ANTEDATED THE REASON FOR CONFIRMING DISALLOWANCE. THE ASSESSEE IS DIRECTED TO PRODUCE THE ORIGINAL BEFORE THE ASSESSING OFFICER WHO HAD DI SALLOWED THE ASSESSEES CLAIM OF REMUNERATION ON NOT HAVING BEEN APPRISED OF THE RESOLUTION REGARDING REMUNERATION TO THE PARTNERS APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE IS ALSO REQUIRED TO EXPLAIN THE SOURCE OF 2 LAKHS INSOFAR AS THE AS SESSEE - FIRMS PARTNERS ARE HOLDING SUFFICIENT CAPITAL TO INVEST IN THE SAID TRACTOR WHICH THE ASSESSING OFFICER HAD PRESUMED WAS NOT HELD THE BALANCE THE ASSET. NEEDLESS TO SAY A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BE GIVEN. BOTH ADDITIO NS/DISALLOWANCES ARE TO BE DELETED IN ACCORDANCE WITH LAW. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES . THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 27.01.2011 S D/ - (. . ) (K.K.GUPTA) ACCOUNTANT MEMBER. () DATE: 27.01.2011 - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : M/S.SUJATA ENGINEERING : AT: A - 35 SECTOR 1 DAMANJODI DIST.KORAPUT (ORISSA) 2 / THE RESPONDENT: INCOME - TAX OFFICER WARD 1 AT/P.O.JEYPORE DIST. KORAPUT. 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.