ROHIT ENTERPRISES, MUMBAI v. THE JT.C.I.T. RANGE 25(1), MUMBAI

ITA 5925/MUM/2008 | 2005-2006
Pronouncement Date: 23-07-2010 | Result: Allowed

Appeal Details

RSA Number 592519914 RSA 2008
Assessee PAN AAEFR0167P
Bench Mumbai
Appeal Number ITA 5925/MUM/2008
Duration Of Justice 1 year(s) 9 month(s) 24 day(s)
Appellant ROHIT ENTERPRISES, MUMBAI
Respondent THE JT.C.I.T. RANGE 25(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 23-07-2010
Date Of Final Hearing 29-06-2010
Next Hearing Date 29-06-2010
Assessment Year 2005-2006
Appeal Filed On 29-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 5925/MUM/2008 (ASSESSMENT YEAR: 2005-06) M/S. ROHIT ENTERPRISES JCIT - RANGE 25(1) A-1 103 ORCHID PLAZA BANDRA KURLA COMPLEX R.K. THAKUR ROAD DAHISAR VS. BANDRA MUMBAI MUMBAI 400068 PAN - AAEFR 0167 P APPELLANT RESPONDENT APPELLANT BY: SHRI H.S. RAHEJA RESPONDENT BY: SHRI JITENDRA YADAV O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXV MUMBAI DATED 30.07.2008. 2. ASSESSEE HAS RAISED IN ALL 11 GROUNDS OUT OF WHICH GROUND NOS. 1 TO 7 ARE WITH REFERENCE TO THE ACTION OF THE A.O. IN REJ ECTING THE BOOKS OF ACCOUNT UNDER SECTION 145 AND ESTIMATING THE INCOME AT 8% A ND GROUND 8 IS WITHOUT PREJUDICE TO THE ABOVE ESTIMATING THE PROFIT AT 8% WHICH IS HIGH. GROUND NOS. 9 & 10 ARE WITH REFERENCE TO THE ACTION OF THE CIT(A) IN DIRECTING THE A.O. TO MAKE ADDITIONS UNDER SECTION 40(A)(IA) WITH OUT GIVING OPPORTUNITY TO THE ASSESSEE. GROUND NO 11 IS GENERAL IN NATURE. 3. BRIEFLY STATED ASSESSEE FILED RETURN OF INCOME DEC LARING TOTAL INCOME OF RS.67 06 340/-. THE ASSESSEE IS A CIVIL CONTRACTOR MORE SO SUB-CONTRACTOR OF PRINCIPAL CONTRACTOR OF GOVERNMENT AUTHORITIES/L OCAL BODIES (AS PER PARA 3 OF THE ASSESSMENT ORDER). IT HAS FURNISHED AUDIT REPORT AND VARIOUS OTHER STATEMENTS. THE A.O. NOTICED THAT THERE ARE CERTAIN GLARING MISTAKES IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE REASONS FOR REJECTION OF BOOKS AS RECORDED BY HIM AT PAR 7 ARE AS UNDER: - 7. BOOKS OF A/CS ARE MAINTAINED BY AN ASSESSEE SO THAT INCOME PROFITS AND GAINS CAN BE PROPERLY DEDUCED THEREFROM . HENCE IT IS ITA NO. 5925/MUM/2008 M/S. ROHIT ENTERPRISES 2 ESSENTIAL THAT THE SAME ARE PROPER AND THAT ENTRIES MADE IN THE JOURNAL/LEDGER/CASH BOOK/BANK BOOK SHOULD BE CORREC TLY REFLECTED IN EACH. BECAUSE IT IS FROM THESE A/CS THAT THE PROFIT AND LOSS/TRADING A/C AND BALANCE SHEET ARE DRAWN. THE ENTRIES MADE IN TH E BOOKS NEED TO BE CORRECT AND COMPLETE IN ORDER TO GIVE A CORRECT AND TRUE PICTURE OF THE FINANCIAL STATEMENT OF AN ASSESSEE. IN THE CASE OF THE ASSESSEE IT IS SEEN THAT THE BO OKS OF A/C ARE UNRELIABLE INCOMPLETE AND INCORRECT. ENTRIES FROM THE BANK BOOK TO THE PARTNERS CAPITAL A/C HAVE BEEN OMITTED; THE CASH BO OK SHOWS A NEGATIVE CASH BALANCE STILL PAYMENTS HAVE BEEN MADE; VOUCHER S HAVE NOT BEEN PRODUCED FOR CERTAIN EXPENSES; TDS HAS NOT BEEN DED UCTED EITHER THROUGH OVERSIGHT OR IGNORANCE OR BOTH. NOW THESE M ISTAKES MADE BY THE ASSESSEE CANNOT BE TERMED AS TRIFLE OR INSIGNIFI CANT IF THE ACCOUNT BOOKS ARE A PART OF THE YEAR ARE UNRELIABLE THE AC COUNT BOOKS FOR THE ENTIRE YEAR CAN BE REJECTED. [CIT V/S. GARMUDYOG JA IN SOCIETY (1976) 37 STC 328 (BOMBAY); AUGUSTINE SCO VS. STATE OF KERALA (1975) 36 STC 237 (KERALA). HENCE AS AN ASSESSING OFFICER THE UNDERSIGNED IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOU NTS OF THE ASSESSEE AS REFLECTED IN HIS BOOKS OF ACCOUNT FOR THE REASON S STATED IN THE ABOVE PARAGRAPHS AND THE BOOKS OF A/CS MAINTAINED BY THE ASSESSEE ARE REJECTED UNDER SECTION 145(3) OF THE INCOME TAX ACT 1961. 4. THE REASONS FOR ESTIMATING THE INCOME AT 8% WAS GIV EN IN PARA 8 AS UNDER: - 8. ..... IN THIS CONNECTION IT IS SEEN THAT THE A SSESSEE HAS FILED AUDITED P&L ACCOUNT WITH RETURN OF INCOME WHEREIN IT IS NOT ICED THAT IT HAS BIFURCATED THE TRADING RESULTS FOR 2 PERIOD ON ACCO UNT OF CHANGE IN CONSTITUTION OF THE FIRM. THE FIRST PERIOD RELATES TO 9 MONTHS AND SECOND PERIOD RELATES TO ONLY THREE MONTHS. FROM THE ACCEP TED RESULTED BY THE ASSESSEE HIMSELF FOR FIRST PERIOD THERE IS LOSS OF RS.31.68 LACS ON GROSS RECEIPTS OF RS.7.32 CRORES WHEREAS IN THE SECOND PE RIOD THE PROFIT DECLARED IS RS.1 CRORE ON GROSS RECEIPTS OF RS.8.64 CRORES AND THAT TOO BY DEBITING DEPRECIATION OF RS.37 LACS FOR THE WHOLE Y EAR IN THE SECOND PERIOD (I.E. 11.58% OF CONTRACTUAL RECEIPTS). IT IS NOTED THAT IF THE DEPRECIATION OF RS.37 LACS IS APPORTIONED TO 1 ST PERIOD THEN THE LOSS DECLARED BY THE ASSESSEE IS LIKELY TO GO UP TO AROU ND RS.58 LACS. IT MAY BE FURTHER THAT THERE IS NO CHANGE IN THE BUSINESS ACTIVITY OF THE ASSESSEE IN FIRST PERIOD AND SECOND PERIOD. HENCE KEEPING IN VIEW ALL FACTS AND CIRCUMS TANCES OF THE CASE ALONG WITH THE VARIOUS PROVISIONS OF THE I T ACT 1961 TH E PROFIT OF THE ASSESSEE IS REASONABLY ESTIMATED AT 8%................. 5. THE ASSESSEE CONTESTED THE SAME BEFORE THE CIT(A) A ND SUBMITTED THAT THE A.O. HAS ISSUED SUMMONS AND ASSESSEE HAS COMPLI ED WITH MOST OF THE DETAILS ASKED FOR AND A.O. HAS EXAMINED THE BOOKS O F ACCOUNT. REGARDING ITA NO. 5925/MUM/2008 M/S. ROHIT ENTERPRISES 3 THE ERROR IN EXCESS PAYMENT ON 01-04-04 IT WAS THE SUBMISSION THAT THE PAYMENT WAS CASH WITHDRAWN BY THE PARTNER ON 21.04. 2004 WHICH WAS DEPOSITED IN HIS PERSONAL BANK ON 24.04.2004 BUT BY MISTAKE THE TALLY OPERATOR HAS ENTERED AS 01.04.2004 RESULTING IN A D EFICIT CASH BALANCE. THIS WAS BY MISTAKE NOT CORRECTED AND SUBMITTED THE NECE SSARY DOCUMENTS TO SUPPORT THAT THE MONEY WAS DRAWN ON 21.04.2004 RATH ER THAN ON 01.04.2004 AS POINTED BY THE A.O. FURTHER IT WAS SU BMITTED THAT THERE IS NO NEED FOR DEDUCTING TDS ON THE FREIGHT CHARGES PAID AS THE FREIGHT CHARGES IN THE CASE OF PURCHASES OF CEMENT ON WHICH TDS IS NOT REQUIRED. ASSESSEE HAS GIVEN A DETAILED SUBMISSION TO THE CIT(A) TO SUBMIT THAT THERE IS NO NEED FOR REJECTING THE BOOKS OF ACCOUNT. HOWEVER THE CIT(A ) HAS NOT SATISFIED WITH THE SUBMISSION GIVEN BY THE ASSESSEE. SHE HOWEVER HELD THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON LABOUR CONTRACT CHARGES WHI CH IS DISALLOWABLE UNDER SECTION 40(1)(IA). CONSEQUENTLY WHILE UPHOLD ING THE 8% ESTIMATION THE CIT(A) ALSO GAVE AN ALTERNATE DIRECTION THAT IF AT ANY STAGE DUE TO FURTHER APPEAL IN THIS CASE ESTIMATION OF INCOME IS NOT UPH ELD THEN ADDITION UNDER SECTION 40(A)(IA) OF RS.11 28 486/- DUE TO NON-DEDU CTION OF TDS ON FREIGHT CHARGES RS.1 65 80 906/- ON PAYMENT TO CONTRACTORS ON LABOUR CHARGES DUE TO LATE PAYMENT OF TDS ON RS.1 30 23 923/- OF T RANSPORT AFTER STIPULATED DATES RS.86 43 062/- ON HIRE CHARGES DUE LATE PAYM ENT OF TDS AND RS.2 74 910/- OUT OF LEGAL AND PROFESSIONAL FEES DU E TO LATE PAYMENT OF TDS MAY BE TREATED AS CONFIRMED ADDITION UNDER SECTION 40(A)(IA) WHICH HAS NOT BEEN MADE BY THE A.O. DUE TO REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME. THIS ALTERNATE CONFIRMATION OF HUGE AMOU NTS UNDER SECTION 40(A)(IA) WITHOUT GIVING AN OPPORTUNITY TO THE ASS ESSEE WAS CONTESTED IN GROUND NOS. 9 & 10. 6. THE LEARNED COUNSEL SUBMITTED THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT WHEN THE ASSESSEE HA S MAINTAINED THE BOOKS OF ACCOUNT IN COMPUTER TALLY PACKAGE AND BY A WRO NG POSTING OF ENTRY THE DATE 21.04.2004 WAS ENTERED AS 01.04.2004 WHICH RES ULTED IN THE SO CALLED SHORTAGE OF CASH. THIS OMISSION WAS UNNOTICED EVEN DURING THE AUDIT PERIOD. WITH REFERENCE TO OTHER OBSERVATIONS OF THE A.O. IT WAS SUBMITTED THAT THE ASSESSEE IS A CONTRACTOR AND WHEREVER PROVISIONS AR E APPLICABLE ASSESSEE ITA NO. 5925/MUM/2008 M/S. ROHIT ENTERPRISES 4 MADE TDS AND DEDUCTED TAX AND PAID WITH SLIGHT DELA Y BUT THAT DOES NOT MEAN THAT ALL THE AMOUNTS ON VARIOUS HEADS CAN BE D ISALLOWED AND ADDED TO THE INCOME AS WAS DONE BY THE CIT(A) WHILE REJECTIN G ASSESSEES APPEAL. IT WAS HIS SUBMISSION THAT THE A.O. HAS NOT MADE ANY D ISALLOWANCE UNDER SECTION 40(A)(IA) EVEN THOUGH HE HAS DISCUSSED THE PROVISIONS IN THE ASSESSMENT ORDER WITHOUT ESTABLISHING HOW THE PROV ISIONS OF TDS ARE APPLICABLE TO THOSE PAYMENTS AND THE CIT(A) INSPIT E OF MAKING VARIOUS SUBMISSIONS REJECTED THE SAME WITHOUT ANY EXAMINAT ION AND FURTHER ALSO CONFIRMED LARGE AMOUNTS OF ENTIRE EXPENDITURE CLAIM ED WITHOUT GIVING AN OPPORTUNITY WHICH IN FACT IS A SORT OF ENHANCEMENT . IT WAS HIS SUBMISSION THAT NEITHER THE A.O. HAS GIVEN PROPER OPPORTUNITY NOR THE CIT(A) HAS CONSIDERED THE FACTS PROPERLY. 7. THE LEARNED D.R. RELIED ON THE ORDERS OF THE A.O. A ND CIT(A). 8. WE HAVE EXAMINED THE ISSUE PERUSED THE PAPER BOOK FILED IN THIS REGARD AND ORDERS OF THE AUTHORITIES. IN OUR OPINIO N THE A.O. WAS NOT CORRECT IN REJECTING THE BOOKS OF ACCOUNT WHEN HE HIMSELF S TATES THAT THE ASSESSEE HAS MAINTAINED COMPUTERISED ACCOUNTS AND FURNISHED COPY OF THE ACCOUNTS. THE SO CALLED DEFICIENCIES INDEED ARE NOT MAJOR ENO UGH TO PREVENT HIM IN ARRIVING AT THE CORRECT INCOME. THERE IS NO NEED TO INVOKE PROVISIONS OF SECTION 145 AND REJECT BOOKS OF ACCOUNT. IN CASE THERE IS S HORTAGE OF CASH EXPLANATION OF THE ASSESSEE WAS THAT IT HAS WRONGLY ENTERED A DATE AND IF IT IS TAKEN FOR THE CORRECT DATE THERE IS NO DEFICIENCY A ND SINCE THE ASSESSEE IS MAINTAINING ACCOUNTS ON A COMPUTER PACKAGE THIS WEN T UNNOTICED. THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT WITH OUT CONSIDERING THE EXPLANATION OF THE ASSESSEE. THERE ARE MANY OTHER I SSUES WHICH REQUIRE VERIFICATION PARTICULARLY THE AMOUNTS THAT ARE TO BE COVERED BY TDS WHICH THE CIT(A) DIRECTED TO BE ADDED IN CASE THE BOOKS O F ACCOUNT ARE ACCEPTED AND REJECTION OF BOOKS OF ACCOUNT IS SET ASIDE BY THE A PPELLATE AUTHORITY. THIS AMOUNTS TO ENHANCEMENT WITHOUT GIVING NOTICE TO THE ASSESSEE. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE ORDERS OF THE A.O. AND CIT(A) ARE TO BE SET ASIDE AND THE ENTIRE ASSESSMENT IS TO BE RESTORED B ACK TO THE A.O. TO EXAMINE AFRESH BY GIVING AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN VARIOUS ISSUES RAISED BY THE A.O. ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY TO SUPPORT THE ITA NO. 5925/MUM/2008 M/S. ROHIT ENTERPRISES 5 BOOKS OF ACCOUNT AND VARIOUS CLAIMS MADE BY IT. WIT H THESE DIRECTIONS THE ORDER OF THE A.O. AND CIT(A) ARE SET ASIDE AND THE ASSESSMENT IS RESTORED TO THE A.O. IN VIEW OF THIS THE GROUNDS ARE CONSIDERED DEEMED ALLOWED. 9. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 23 RD JULY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXV MUMBAI 4. THE CIT XXV MUMBAI CITY 5. THE DR D BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.