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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MAHAVIR PRASAD & SHRI MANISH BORAD
The above captioned appeal filed at the instance of the Assessee for Assessment Year 2015-16 is directed against the order of Ld. Pr. Commissioner of Income Tax (in short ‘Ld. Pr. CIT],-Ujjain dated 23.03.2020 framed u/s 263 of the Act. The assessee has raised following grounds of appeal:
Shri Lav Nagrang Ld. CIT is illegal and bad in law and hence be set aside. 2.The Ld. CIT has erred in passing the order u/s 263 on the ground that the order passed by the Ld.AO is erroneous and prejudicial to the interest of the revenue.
3. It was proved before the ld. CIT that the assessment was framed after due scrutiny of facts and after verification of the details.
4. The assessment was framed after applying the net applying the net profit from the contract. The matter was decided by the Hon'ble Tribunal after considering all the facts.
5. That the order of the ld. AO has merged with the order of the Hon'ble Tribunal and as such the provisions of section 263 are not applicable. The order passed is illegal and bad in law.
Brief facts as culled out from the records are that the assessee is an individual engaged in the business of Civil Contractor. Income of Rs.49,15,730/- declared in the e-return of income filed on 31.10.2015. Case selected for scrutiny through CASS due to reasons “Receipt u/s 194C and 194J( As per 26AS) are more than the receipts shown in ITR5/5/6”. Notices u/s 143(2) & 142(1) of the Act were served upon the assessee. It was admitted before Ld. AO that books of account are not maintained, statutory requirement of getting the books of account audited u/s 44AB of the Act not complied. As per the 26AS the contractual receipts stood at Rs. 6,96,81,297/- whereas the turnover declared by the assessee was Rs.8,08,21,143/-. Assessee declared net profit @ 5% on the total turnover at Rs.40,39,907/-. Ld. AO finalized the assessment estimating net profit @10% on the gross receipt shown
Shri Lav Nagrang Rs.8,08,21,143/-. Income assessed at Rs.8,08,2114/-.
3. Subsequently, Ld. Pr. CIT, Bhopal after examining the assessment records, invoked the provisions of section 263 of the Act and issued following show cause notice to the assessee (relevant extract is reproduced below):
“In this case, assessee filed return of income of the A.Y.2015-16 on 31.10.2015 declaring total income of Rs.49,15,730/-. The assessment was completed u/s 143(3) on 30.12.2017 by the AO Ujjain at the total income of Rs.80,82,114/- which is considered erroneous and prejudicial to the interest of revenue for the following reasons: On perusal and examination of recorded, it is noticed that:
1. 1. The assessee received interest from the bank of India of Rs.9,97,465/- and Rs.45,970/- from Shri Lokesh Narang. Tax deducted at source on such interest was duly claimed in the return of income. The assessee has not considered such interest income in the total turnover nor under the head “income from other Sources. The same should be added back of the total income.
2. The assessee had purchased 51 residential developed plots on 12.09.2014 from M/s Shree Atharva Devcon Pvt. Ltd. for Rs.2,27,00,000/- and registration & stamp duty expenses of Rs.18,42,985/-. Further the assessee paid Rs.45,40,000/- in cash to the seller between 02.09.2014 to 31.03.2015. The assessee has not maintained any books of accounts regarding plots so purchased and sold. Since the assessee purchased the plots for business purposes, cash payment of Rs.45,40,000/- to sellers is not allowable and required to added back u/s 40A(3).
Out of 51 residential plots purchased, the assessee sold 6 plots during the months of Mr. 2014 and worked capital loss of Rs.1,81,455/-. As per purchase deed of Plot No.151 available on record, the registration expenses and stamp duty fee of Rs.40,735/- was paid by the seller. Therefore, the capital; loos worked by the assessee on seller the six plots were not in order. In the light of entire facts discussed above, I am of the considered view that the assessment order passed u/s 143(3) on 30.12.2017 for A.Y. 2015-16 in your case is erroneous as well as prejudicial to the interest of revenue, which required to be revised u/s 263. However, before I proceed to invoke the powers u/s 263 and pass an appropriate order, I deem it proper to give you’re an opportunity of being heard in the matter.
In compliance to the above show cause notice u/s 263 of the Act assessee filed following written submissions through email on 12.03.2020:
1. The assessee has paid interest of Rs.10,08,020/- to Bank of India on CC Limit. The CC Limit is used for business purpose. The assessee has earned interest of Rs.9,97,465/- on FDRs. The assessee has made FDRs for providing bank guarantee and as security deposit to the government departments for which contract work is undertaken. Thus the interest on FDs is in nature of business income. The assessee has shown income on percentage basis. The assessee has not claimed deduction for interest paid separately. Similarly income is also not shown separately. If interest income is considered separately then deduction of interest paid should be allowed from interest income.
2. The plots purchased are not for business purpose but are fixed assets of assessee. This is prove from the fact that the income from six plots sold has been shown under the head capital gain. 3. If the registration expenses and stamp duty are paid by seller then it 4
Shri Lav Nagrang will increase the capital loss. Thus there is no loss to the revenue in such a case.
Apart from the above referred submissions, no other supporting evidence were filed by the assessee before the Ld. Pr. CIT. After going through the assessment records, and the submissions made by the assessee before the lower authorities, Ld. Pr. CIT was of the view that the order of the Ld. Assessing Officer is erroneous so far as prejudicial to the interest of revenue, as the issues raised in the show cause notice have not been examined by the Ld. Assessing Officer and accordingly the assessment order was set aside to the file of the Ld. Assessing Officer with direction to examine the issues as discussed in the impugned order after affording proper opportunity to the assessee.
Aggrieved assesse is now in appeal before this Tribunal. Ld. Counsel for the assessee referring to the paper book dated 05.07.2021 containing 43 pages, paper book dated 10.08.2021 containing 5 pages submitted that as regards the first issue of interest received from FDR with Bank of India and the TDS deducted thereon claimed in the Income Tax Return the FDR’s are part of the business of Civil Construction which are utilized for providing bank guarantee and security deposit to the Government 5
Shri Lav Nagrang Department. As regards the second issue of purchase of 51 residential plots it was stated that these plots were not purchased for business purpose but are fixed assets and income from sale of six plots has been disclosed in the income tax Return and details were also filed before Ld. Assessing Officer during the course of assessment proceedings.
Per contra Ld. Departmental Representative(DR) vehemently argued supporting the order of Ld. Pr. CIT and also submitted that the was no occasion for the Ld. Assessing Officer to examine these issues referred in the show cause notice as the assessee did not maintain any regular books of account.
We have heard rival contentions and perused the records placed before us and carefully gone through the details filed by the Ld. Counsel for the assessee. We find that the assessee is engaged in the business of Civil Construction. In the Income Tax Return assessee has shown gross turnover of Rs.8,08,21,143/-. The Assessee also disclosed income from house property at Rs.2,73,000/-, Short Term Capital Gain from sale of six plots at Rs. 1,81,455/- and income of Rs.4,79,500/- the difference in guidelines value for plots purchased. It is an admitted fact at the end of Shri Lav Nagrang assessee that he has not maintained books of account even when the turnover declared is at Rs.8,08,21,143/- and no audit u/s 44AB of the Act could be carried out. In absence of books of account Ld. Assessing Officer estimated the income from civil construction business @ 10% at Rs. 80,82,114/-. We further find that notice u/s 263 of the Act was issued by ld. Pr. CIT, Bhopal for the following two issues:
The assessee received interest from the Bank of India of Rs.9,97,465/- and Rs.45,970/- from shri Lokesh Narang. Tax deducted at source on such interest was duly claimed in the return of income. The assessee has not considered such interest income in the total turnover nor under the head “income from other sources”.
The same should be added back to the total income.
2(a). The assessee had purchased 51 residential developed plots on 12.09.2014 from M/s Shri Atharva Devcon Pvt. Ltd. for Rs.2,27,00,000/- and registration & stamp duty expenses of rs.18,42,985/-. Furtehr the assesse paid Rs.45,40,000/- in cash to the seller between 02.09.2014 to 31.03.2015. The assessee has not maintained any books of accounts regarding plots so purchased and sold. Since the assessee purchased the plots for business purposes,
Shri Lav Nagrang Rs.45,40,000/- to sellers is not allowable and required to added back u/s 40A(3).
2(b) Out of 51 residential plots purchased, the assessee sold 6 plots during the months of Mar. 2015 and worked capital loss of Rs.1,81,455/-. As per purchase deed of plot No.151 available on record, the registration expenses and stamp duty fee of Rs.40,735/- was paid by the seller. Therefore, the capital losses worked by the assessee on selling the six plots were not in order.
9.1 As far as the first issue is concerned, assessee has claimed that he has to make Bank FDR for providing Bank Guarantee and security deposit to the Government Department. It is also claimed by the assessee that CC Limit used for business purpose and interest of Rs.10,08,020/- was paid to Bank of India on the CC limit. It is also claimed that interest on FDs as the nature of business income.
9.2 We, however, find no merit in this contention of Ld. Counsel for the assessee because books of account are not maintained, no such details were ever filed during the course of assessment
Shri Lav Nagrang proceedings. Assessee has himself declared the income on estimated basis. Even Ld. Assessing Officer has also estimated the income on estimated basis so all expenditures if any incurred for the business are deemed to have been allowed. The fixed deposit on which interest was received at Rs. 9,97,465/- and interest on Shri Lokesh Narang at Rs. 45,970/- are in the nature of business income or income from other sources remained to be examined by the ld. Assessing Officer. Therefore in our considered view this issue was rightly remitted to the Ld. Assessing Officer for examination so as to compute the correct income of the assessee.
As regards the second issue wherein the assessee has purchased 51 residential plots on 12.09.2014 out of which six plots were sold during the year on which the assessee has claimed capital loss of Rs.1,81,455/-, we find that the ld. Assessing Officer firstly raised quarry about the details of immovable property purchased during the year in point no.8 of the questionnaire issued u/s 142(1) of the Act to which assessee did not reply in its first reply. Thereafter in the second reply assessee has given some brief details about tax deducted on sale of property but not claimed in the income tax return. In the reply assessee stated that “during the year the assesse has purchased 51 plots at Mahamangal City 9
Shri Lav Nagrang Out of the plot purchased the assessee has sold six plots. List of plots purchase and sale along with calculation of capital gain is attached here with. The copy of registries of sale is also attached.
The source of investment is ?”
10.1 From the above reply it is loud and clear that firstly the assessee has not furnished complete details of plots purchased, and secondly there was no information about the source of investment. Even the Ld. Assessing Officer has not raised any query about the details of plots purchased, purchase consideration paid, fair market value of the property/valuation as per stamp valuation authority, whether they are part of business transaction and most importantly source of investment to purchase these properties. The information called by the ld. Assessing Officer as well as the assessment order are silent on this issue. It is also noteworthy that in the computation of income assessee has shown income from house property, profit and gain of business, income from sale and profit of firm, income from capital gain and income from other source and after claiming the deduction u/s 80C of the Act total income has been shown at Rs. 49,15,731/- whereas surprisingly on looking to the assessment order dated 30.12.2017 we find that the assessment has been completed only by estimating 10
Shri Lav Nagrang the income @10% on the turnover disclosed by the assessee at Rs.8,08,21,143/-. Ld. Assessing Officer has not made any reference of various other incomes shown by the assessee in its computation of income. This fact in itself shows that there is no application of mind by the Ld. Assessing Officer in framing the assessment order for A.Y. 2015-16 in the case of assessee and there is complete lack of enquiry by him on the issues raised in the impugned order.
We, therefore, under the given facts and circumstances of the case and our discussions made herein above, are of the considered view that assessment order framed by the Ld. Assessing Officer is erroneous as well as prejudicial to the interest of revenue and Ld. Pr. CIT has rightly set aside the same. We accordingly confirm the finding of Ld. Pr. CIT in the impugned order. Thus, ground no.2,3 & 4 raised by the assessee stands dismissed.
Ground No.1 is general in nature which needs no adjudication.
As regards ground no.5, through which the assessee has claimed that the order of the Ld. Assessing Officer is merged with the order of Hon’ble Tribunal and as such provisions of section 263 are not applicable, we find that there is no merit in this ground 11
Shri Lav Nagrang 263 of the Act relates to A.Y.
2015-16 whereas the order of this Tribunal ITANo.33/Ind/2018 dated 22.01.2020 in the case of assessee pertains to A.Y. 2014-15.
Therefore, since both the assessment years are different there remains no merit in the ground no.5 raised by the assessee and same is dismissed.
In result, appeal filed by the assessee in ITANo.166/Ind/2020 is dismissed.
Order was pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 30.11.2021.