ACIT, Gwalior v. M/s Osho Associates, Gwalior

ITA 704/AGR/2008 | 2005-2006
Pronouncement Date: 17-09-2010 | Result: Dismissed

Appeal Details

RSA Number 70420314 RSA 2008
Assessee PAN AAIFA8181C
Bench Agra
Appeal Number ITA 704/AGR/2008
Duration Of Justice 8 month(s) 29 day(s)
Appellant ACIT, Gwalior
Respondent M/s Osho Associates, Gwalior
Appeal Type Income Tax Appeal
Pronouncement Date 17-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 17-09-2010
Date Of Final Hearing 26-08-2010
Next Hearing Date 26-08-2010
Assessment Year 2005-2006
Appeal Filed On 19-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.704/AGR/2008 ASST. YEAR: 2005-06 ASSTT. COMMISSIONER OF INCOME-TAX VS. M/S. OSHO ASSOCIATES CIRCLE-3 GWALIOR. 30 SATYADEV NAGAR GWALIOR (M.P.) (PAN : AAIFA 8181 C). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD KUMAR JR. D.R. RESPONDENT BY : SHRI RAJENDRA SHARMA ADVOCATE ORDER PER P.K. BANSAL A.M.: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 21.08.2008 BY TAKING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS IN DELETI NG THE ADDITION OF RS.18 09 416/-. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS IN ALLOWI NG DEDUCTION ON ACCOUNT OF SALARY PAID TO PARTNER BY THE FIRM U/S 184(5) AND A LSO IGNORING NON-COMPLIANCE OF ALL THE TERMS OF NOTICES ISSUED UNDER SECTION 143(2 ) AND 142(1) AND COMPLETION OF ASSESSMENT MADE IN THE MANNER LAID DOWN IN SECTION 144 OF THE I.T. ACT. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THERE HAD B EEN SURVEY IN THE CASE OF THE ASSESSEE ON 23.09.2005 IN WHICH VOUCHERS BILLS RECORDS AND DO CUMENTS WERE IMPOUNDED BY THE SURVEY PARTY. NOTICE UNDER SECTION 142(1) DATED 05.07.200 7 WAS SERVED ON THE ASSESSEE ON 11.07.2007 AND FIXED THE CASE FOR 20.07.2007. THE ASSESSEE DI D NOT PRODUCE THE BOOKS OF ACCOUNTS AND THE RELIANT INFORMATION. THE A.O. THEREFORE PROCEEDE D TO COMPLETE THE ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 144 BY APPLYING A NET PROFIT RATE @ 8% IN VIEW OF THE STATUTORY PROVISIONS CONTAINED IN SECTION 44AD OF THE ACT. THE ASSESSEE OBJECTED THERETO AND POINTED OUT THAT ABOUT 60% OF THE COST UNDER PRADHANMANTRI SADAK GRAMEEN Y OJNA IS INCREASED ON DIESEL BITUMEN AND CEMENT AND THE REMAINING AMOUNT IS SPENT ON LABOUR ETC. AND THERE HAS BEEN INCREASE IN THE PRICE OF DIESEL BITUMEN AND CEMENT BETWEEN 15% TO 25% AN D IN THE A.Y. 2003-04 THE CIT(A) HAS APPLIED A NET PROFIT RATE OF 2% AND THE SAME NET PR OFIT BE APPLIED. THE A.O. DID NOT AGREE WITH THE ASSESSEE DUE TO THE FACT THAT THE ASSESSEE DID NOT COMPLY WITH THE NOTICE UNDER SECTION 143(2) AND THE SUMMON FOR THE PRODUCTION OF THE BOOKS OF A CCOUNTS. THE A.O. MADE THE ASSESSMENT IN THE MANNER STATED UNDER SECTION 144 BY APPLYING A R ATE OF 8% ON CONTRACTUAL RECEIPT AND THE NET PROFIT AS SUCH AT RS.21 89 628/-. EVEN ON ACCOUNT OF INTEREST AND SALARY PAID BY THE FIRM TO ITS PARTNERS WAS ALSO NOT ALLOWED IN VIEW OF THE PROVIS IONS OF SECTION 184(5) OF THE ACT. BUT THE ASSESSEE WAS ASSESSED AS FIRM. THE ASSESSEE WENT I N APPEAL BEFORE THE CIT(A). THE CIT(A) REDUCED THE ADDITION TO RS.1 00 000/- BY OBSERVING AS UNDER :- AS REGARDS THE GROUND NO.1 THE AO HAS HELD THAT TH E PROFIT RETURN WAS LOW WHICH REMAINED UNVERIFIED SINCE BOOKS OF ACCOUN TS AND THE BILLS AND VOUCHERS WERE NOT PRODUCED. ON THE CONTRARY THE LEARNED COU NSEL FOR THE APPELLANT HAS VEHEMENTLY CHALLENGED THE SAME STATING THAT IN CASE OF THE APPELLANT A SURVEY U/S 133A WAS CONDUCTED IN WHICH THE VOUCHERS BILLS RE CORDS AND DOCUMENTS WERE IMPOUNDED BY THE SURVEY PARTY. FURTHER THE APPELLA NT HAS ADMITTEDLY FILED BEFORE THE ASSESSING OFFICER THE DETAILS RELATING TO DIFFE RENT EXPENSES COPIES OF WHICH 3 HAVE ALSO BEEN FILED FORMING PART OF THE RECORDS. AS REGARDS LOW PROFITS THE APPELLANT HAS ALREADY EXPLAINED BEFORE THE ASSESSIN G OFFICER VIDE LETTERS SUPPORTED BY DOCUMENTS THAT THE TENDERS WERE TAKEN BELOW 7.9% TO 12.1% OF THE STANDARD RATE. THE ASSESSING OFFICER HAS ALSO QUOT ED APPELLANTS VERSION AT PG.6 OF THE ASSESSMENT ORDER AS PER WHICH THE APPELLANT HAS EXPLAINED PROFIT RATE AS FOLLOWS : AS REGARDS THE PROFIT RATE IT HAS BEEN SUBMITTED I N AFORESAID LETTER THAT ABOUT 60% OF THE COST UNDER PRADHANMANTRI SADA K GRAMEEN YOJANA IS INCREASED ON DIESEL BITUMEN AND CEMENT AND THE REMAINING AMOUNT ON LABOUR ETC. AND THAT THERE HAS BEEN INCREASE IN THE PRICE OF DIESEL BITUMEN AND CEMENT BETWEEN 15 TO 25% AND THAT THE ASSESSMEN T YEAR 2003-04 THE CIT(A) HAS APPLIED A NET PROFIT RATE OF 2%. IT HAS BEEN THEREFORE URGED THAT THE PROFIT & LOSS ACCOUNT AS FILED MAY BE ACCE PTED. FURTHER THE APPELLANT EXPLAINED THAT WHEN THE TENDE RS WERE TAKEN THEY WERE BELOW 7.9% TO 12.1% THE STANDARD RATE. AT THE TIME OF MAKING OF TENDERS THE RATE OF DIESEL WAS 36/LITRE WHICH SHOT UP TO RS.37 /LITRE. FURTHER AT THE TIME OF GIVING TENDERS THE RATE OF CEMENT WAS 130/BAG WHIC H INCREASED TO RS.180/BAG. FURTHER THE RATES OF BITUMEN WERE RS.12/KG AT THE T IME OF TAKING TENDER WHICH AT THE TIME OF EXECUTION BECAME THE RS.22/KG. THE APPELLANT HAS ALSO RELIED UPON THE APPEAL ORDER NO.87/IT/05- 06/GWL/DATED 20/12/2005 IN ITS OWN CASE FOR THE ASS ESSMENT YEAR 2002-03. CONSIDERING THE ABOVE IT IS EVIDENT THAT THE ASSES SING OFFICER HAS NOT MADE OUT A CASE FOR THE REJECTION OF BOOKS OF ACCOUNTS A NUMBE R OF WHICH WERE ALREADY IN POSSESSION OF THE DEPARTMENT AS WERE IMPOUNDED DURI NG THE COURSE OF SURVEY U/S 133A OF THE INCOME TAX HENCE APPLICATION OF NET PRO FIT RATE AT 8% WAS NOT JUSTIFIED. THE APPELLANT HAS COMPLIED WITH NUMBER OF NOTICES ISSUED BY THE ASSESSING OFFICER FROM TIME TO TIME AND HAS FURNISH ED VOLUMINOUS INFORMATION IN RESPECT OF THE QUERIES RAISED BY THE ASSESSING OFFI CER FROM TIME TO TIME. HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PROCEEDI NG TO ASSESS THE INCOME U/S 144 OF THE INCOME TAX ACT AT 8%. CONSIDERING THE FACTS AND CIRCUMSTANCES AS STATED ABOVE IT WOULD HOWEVER BE REASONABLE TO CONFIRM AND ADDITION OF RS.1 00 000/- OUT OF THE ADDITION MADE BY THE ASSESSING OFFICER S O AS TO TAKE CARE OF INADMISSIBLE AND A PART EXPENDITURE CLAIMED BUT NOT RELATING TO THE BUSINESS OF THE APPELLANT BEING OF PERSONAL OR NON-BUSINESS NATURE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 3. SIMILARLY THE A.O. WAS DIRECTED TO ALLOW SALARY AND INTEREST TO THE ASSESSEE. 4 4. BEFORE US THE LD. D.R. RELIED ON THE ORDER OF T HE A.O. WHILE THE LD. A.R. CONTENDED THAT THE ASSESSEE HAS SUBMITTED ALL THE INFORMATION. EV EN THE ASSESSEE HAS DULY PRODUCED THE BOOKS OF ACCOUNTS ETC. BEFORE THE A.O. FOR THIS OUR ATTENT ION WAS DRAWN TO PAGE NO.6 OF THE CIT(A)S ORDER. IT WAS CONTENDED THAT THE ASSESSEE HAS GIVE N ALL THE DETAILS OF EXPENSES INCLUDING THE BUSINESS AND RESIDENTIAL ADDRESS OF THE CONTRACTOR CASH AND BALANCE SHEET. THE ASSESSEE HAS DULY EXPLAINED THE REASONS FOR THE FALL IN G.P. BY POINT ING OUT THAT THE TENDERS WERE TAKEN BELOW 7.9% TO 12.1% HE STANDARD RATE. AT THE TIME OF MAKING O F TENDERS THE RATE OF DIESEL WAS RS.26/- PER LITTER WHICH SHOT UP TO RS.37/- PER LITTER. FURTH ER AT THE TIME OF GIVING TENDERS THE RATE OF CEMEN T WAS RS.130/- PER BAG WHICH INCREASED TO RS.180/- P ER BAG AND THE RATES OF BITUMEN WERE RS.12/- PER KG AT THE TIME OF TAKING TENDER WHICH INCREASE D TO RS.22/- PER KG AT THE TIME OF EXECUTION. THUS IT WAS POINTED OUT THAT THE COST OF EXECUTION OF THE CONTRACT HAS INCREASED DURING THE YEAR TO 60% AND THE EXPENSES ARE TO BE INCURRED ONLY ON DIE SEL BITUMEN AND CEMENT. IT IS ONLY 4% AMOUNT WHICH HAS TO BE INCURRED ON LABOUR. THE PRI CES OF DIESEL BITUMEN AND CEMENT HAVE INCREASED TREMENDOUSLY. IT WAS ALSO POINTED OUT TH AT IN THE A.Y. 2002-03 THE CIT(A) HAS APPLIED N.P. RATE @ 2%. THE ACCOUNTS ARE DULY AUDITED AND WERE FIELD ON RECORD. THE BOOKS WERE ALSO SUBMITTED. NO PARTICULAR DISCREPANCY IS BEING POIN TED OUT EVEN DURING THE COURSE OF SURVEY CARRIED OUT AT THE BUSINESS PLACE OF THE ASSESSEE. THUS IT WAS CONTENDED THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ASSESSMENT IN THE MANNER AS SPECIFIED UNDER SECTION 144 OF THE ACT AS THE ASSESSEE HAS COMPLIED WITH ALL THE PROVISIONS. REL IANCE WAS PLACED ON THE DECISION OF THE CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE TAX AUTHORITIES BELOW AS WELL AS THE MATERIAL SUBMITTED BEFORE US. THE ASSESSEE HAD GROSS RECEIPTS 5 DURING THE YEAR TO THE EXTENT OF RS.2 73 70 360/-. THE ASSESSEE HAS SUBMITTED THE INCOME-TAX RETURN DECLARING AN INCOME OF RS.3 80 212/-. THE R ETURN WAS SUBMITTED ALONG WITH THE AUDIT REPORT. THERE HAD BEEN SURVEY IN THE CASE OF THE A SSESSEE AND NOTHING ADVERSE AS HAS BEEN FOUND DURING THE COURSE OF SURVEY HAD BEEN BROUGHT ON RE CORD. THE ALLEGATION OF THE A.O. IS THAT THE ASSESSEE HAS NOT COMPLIED WITH THE NOTICES AS REQUI RED UNDER THE INCOME TAX ACT BUT THE FACT THAT DURING THE A.Y. 2002-03 THE INCOME HAS BEEN ASSESSE D BY APPLYING A NET PROFIT RATE OF 2% WHICH IS NOT DENIED BY THE REVENUE. THE ASSESSEE IS A CO NTRACTOR. THE GROSS RECEIPTS IN THE CASE OF THE ASSESSEE EXCEEDED RS.40 LACS. SECTION 44AD IS APPL ICABLE TO THE PERSONS WHO ARE ENGAGED IN THE CIVIL CONSTRUCTION WORK WHOSE TURNOVER DOES NOT EXC EED RS.40 LACS. IN THE CASE OF THE ASSESSEE THE TURNOVER EXCEEDED RS.40 LACS. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS WHICH FACT IS NOT DENIED BY THE REVENUE. THE A.O. AS PER THE REASON FOR THE FALL IN G.P. THE ASSESSEE HAS EXPLAINED REASON WHICH HAS NOT BEEN DENIED OR CONTR OVERTED BY THE REVENUE. UNDER THESE FACTS AND CIRCUMSTANCES IN OUR VIEW THE CIT(A) WAS FAIR AND REASONABLE TO SUSTAIN THE ADDITION TO THE EXTENT OF RS.1 00 000/-. SECTION 44AD OF THE ACT IN OUR VIEW IS NOT DIRECTLY APPLICABLE IN THE CASE OF THE ASSESSEE AS IN THE CASE OF THE ASSESSEE THE GROSS RECEIPTS FROM THE CIVIL CONSTRUCTION BUSINESS EXCEEDED RS.40 LACS. WE ACCORDINGLY CONFI RM ORDER OF THE CIT(A) SUSTAINING THE ADDITION OF RS.1 00 000/-. THUS THIS GROUND TAKEN BY THE REVENUE STANDS DISMISSED. 6. SO FAR AS GROUND NO.2 IS CONCERNED AFTER HEARIN G THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 144 ARE NOT APP LICABLE IN THE CASE OF THE ASSESSEE AS THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN COMPLYING WI TH THE PROVISIONS OF SECTION 144 OF THE ACT. THEREFORE IN OUR VIEW THE CIT(A) WAS CORRECT IN L AW THAT THE PROVISIONS OF SECTION 184(5) OF THE 6 ITA NO.704/AGR/2008 ASST. YEAR: 2005-06 ACT ARE NOT APPALICABLE AND ACCORDINGLY HE HAS RIGH TLY DELETED THE DISALLOWANCE MADE BY THE A.O. IN RESPECT OF INTEREST AND SALARY TO THE PARTN ERS. THUS THIS GROUND STANDS DISMISSED. 7. IN THE RESULT APPEAL FIELD BY THE REVENUE STAND S DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 17 TH SEPTEMBER 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY