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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI CHANDRA MOHAN GARG & LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK
BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA Nos.476 to 478/CTK/2017 Assessment Years : 2012-13 to 2014-15
DCIT, Circle 4(1), Bhubaneswar. Vs. M/s. Jagannath Chaudhury, 98, Kharvel Nagar, Keshari Talkies Complex, Bhubaneswar. PAN/GIR No.AADFJ 8103 A (Appellant) .. ( Respondent)
Assessee by : Shri B.K.Mohapatra, AR Revenue by : Shri Subhendu Dutta, DR
Date of Hearing : 07/08/ 2019 Date of Pronouncement : 04 /09/ 2019
O R D E R Per C.M.Garg,JM These are appeals filed by the revenue against separate orders of ld
CIT(A)-2, Bhubaneswar all dated 28.8.2017 for the assessment years 2012-13,
2013-14 & 2014-15, respectively.
Ground No.1 raised in all the three assessment years is general in nature.
Ground Noa.3,4 & 4.1 for the assessment year 2012-13, Ground Nos.2, 3 &
3.1 for the assessment year 2013-14 and Ground Nos.3 & 3.1 for the assessment
year are common except variance in addition, therefore, for the sake of reference
and for the purpose of adjudication, we take up the issues together. For the sake
of convenience, we reproduce the grounds raised in assessment year 2012-13 as
under:
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On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in directing the AO to allow further deduction towards depreciation, when the AO has estimated income from contract receipts applying net profit rate of 18% of gross contract receipts, in accordance with the provisions of sections u/s.44AD of the I.T. Act and when the provision of Sub-section(2) of Section 44AD clearly stipulates that the provisions of sections 30 to 38 shall be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.
On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in directing the AO to treat 10% of total interest receipts as income from other sources in absence of any documentary evidence substantiating its nexus with the business.
4.1 The Ld. CIT(A) ought to have appreciated that the interest receipts of Rs.37,83,707/- shown separately in the P&L Account by the assessee is distinct and entirely different from the contract receipts and thus the said entire amount is assessable to tax having regard to the decision of the Hon'ble lTAT, Special Bench, Delhi in the case of DCIT Vs. Allied Construction 105 ITD-1(Delhi)(SB).
The facts are that during the course of assessment proceedings, the
Assessing Officer noticed that the assessee is engaged in the business of execution
of contract works from government and government agencies. The assessee has
shown Rs.37,83,707.13 as interest receipts. The assessee has not produced cash
book, bank book, other related books of account, ledger copies alongwith
supporting bills/vouchers relating, however contended that the net profit @ 10%
be estimated on gross contract receipts as per the last year but the basis was not
provided by the assessee. The Assessing Officer further noticed that the total
receipt on account of interest received is not under the purview of the provisions
of section 44AD and, therefore, he estimated the income @ 8% and treated the
total receipt on account of interest receipt as income from other sources and
added the same to the total income of the assessee.
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Aggrieved, the assessee carried the matter in appeal before the CIT(A) and
submitted that the issue is covered in favour of the assessee in its own case for
the assessment year 2008-09 by the ITAT, Cuttack order dated 27.6.2017 in ITA
No.66/CTK/.2015, wherein, it was directed to the AO to estimate the income @
10% of interest income.
Following the decision of the Tribunal in assessee’s own case (supra), the
CIT(A) directed the AO to treat 10% of interest receipts of Rs.37,87,707/-
amounting to Rs.3,78,771/- as income of the assessee from other sources and
confirmed the addition of Rs.3,78,771/- and deleted the balance addition of
Rs.34,08,929/-.
Not satisfied with the decision of the CIT(A), the revenue is in appeal
before us.
Having heard both the sides, we find that before us, ld D.R. could not point
out any specific error in the order of the CIT(A). He could not point out any
distinguishing features in the order of the Tribunal quoted by the CIT(A) in his
order. He also could not bring any material on record to show that the order of
the Tribunal relied on by the CIT(A) while estimating the interest income @ 10%
was varied in appeal by any higher forum. Therefore, we find no infirmity in the
order of the CIT(A), which is hereby confirmed and grounds of appeal of the
revenue are dismissed. Consequently, similar Grounds of appeal for assessment
years 2013-14 and 2015 are also dismissed.
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In the assessment year 2012-13, the only other issue raised by the revenue
is that the CIT(A) is not justified in deleting the addition of Rs.1,70,45,708/- made
by the AO u/s.69C of the Act.
The Assessing officer found that the assessee has shown Rs.3,60,63,731/-
under the sub-head ‘unsecured loan”. In response to Assessing Officer’s
requisition, the assessee furnished balance sheet as at 31st March, 2012 vis-à-vis at
31st March, 2011. On verification of the same, the AO noticed that the assessee
has unsecured loan of Rs.1,69,16,768/- as at 31.3.2011, which is increased to
Rs.3,60,63,731/- as at 31.3.2012 thereby an addition of Rs.1,91,46,963/- over a
period of time from 01.04.2011 to 31.03.2012. On further asked by the AO, the
assessee also submitted details of Unsecured Loan as on 31.03.2012 the
verification of which revealed that the assessee has shown opening balance of
unsecured loan of Rs.3,39,62,476/- as at 01.04.2012 and shown a sum of
Rs.20,21,255/- as addition from three persons/concerns namely Sri Asit Kumar
Chaudhury of Rs.10,65,142/-, Rs.9,90,473/- from Sri Jagannath Nirman Udyog(P)
Ltd. and shown unsecured loan of Rs.45,640/- from one Shri Prafulla Kumar
Chaudhury, Ind. From the above analysis, it is seen that though the assessee has
shown Rs. 1,69,16,768/- as unsecured loan as at 31.03.2011 yet he has shown
Rs.3,39,62,476/- as opening balance as at 01.04.2011 while furnishing details of
unsecured loans thereby enhancing Rs.1,70,45,708/-. The assessee was required
to furnish the complete name, address, PAN and confirmation from the unsecured
loan creditors. However, inspite of opportunities provided, the assessee could not
furnish any details including confirmations from unsecured loan creditors. The
assessee has also not furnished the reasons for difference in the closing and
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opening balance of unsecured loan creditors. In view of the above, difference in
unsecured loan introduced during the year amounting to Rs.1,70,45,708/- , the AO
added the same to the total income of the assessee u/s.69C of the I.T. Act, 1961.
Before the CIT(A), the assessee submitted that the during the accounting
year 2011-12, the transfer from capital account of the decreased partner (Rama
Devi) of Rs.1,70,41,808/- has been shown under unsecured loan in the balance
sheet as at 31.3.2012 and details of which was furnished. It was submitted that
the aforesaid amount was stated as transfer from capital account and there is no
introduction of any unsecured loan of Rs.1,70,41,808/-. It was submitted that the
unsecured loan of Rs.3900/- from Jagannath Multiplex Ltd, the confirmation was
submitted.
After considering the submission of the assessee, the CIT(A) observed that
the capital account of the deceased partner (Rama Devi) of Rs.1,70,41,808/- has
been transferred to unsecured loan, which is part of balance sheet of the assessee.
Regarding small amount of Rs.3900/-, the transaction is with sister concern of the
assessee namely Jaganath Multiplex Ltd. and the assessee has explained increase
in unsecured loan of Rs.1,70,45,708/- and, accordingly, he deleted the addition.
Hence, the revenue is in appeal before us.
Supporting the assessment pertaining to assessment year 2012-13, Sr. D.R.
drew our attention towards para 5 at page 5 and submitted that the assessee did
not furnish any difference in the closing and opening balance of unsecured loan
creditors and the difference in unsecured loan introduced during the year,
therefore, same was rightly added to the total income of the assessee u/s.69C of
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the Act treating the same as unexplained income of the assessee. Ld D.R. further
contended that the CIT(A) has granted relief to the assessee without any justified
reason and basis, therefore, impugned order of the CIT(A) be set aside by
restoring that of the Assessing Officer. Ld D.R. also pointed out that the CIT(A)
has noted irrelevant facts i.e. the capital account of deceased partner has been
transferred to unsecured loan account without any basis, therefore, the findings
arrived at by the CIT(A) has no legs to stand. Thus, same may kindly be dismissed
by confirming the addition made by the Assessing officer.
Replying to above, ld A.R. strenuously contended that undisputedly, the
assessee is a partnership firm, who derives its income from execution of contract
work. Ld A.R. further submitted that it is also not in dispute that Smt. Rama Devi
was partner in the assessee’s firm, who died during the relevant financial period
and credit balance of her capital account was transferred as unsecured loan and
the same was added in the unsecured loan of creditor, which was also shown in
the balance sheet as unsecured loan, which resulted into the difference in the
closing and opening balance of unsecured loan creditors. Ld A.R. submitted that
these facts were noticed and appreciated by the CIT(A) in the right perspective in
the light of documentary evidence and balance sheet of the assessee. Therefore,
the order of the CIT(A) may kindly be confirmed on this count. Ld A.R. drew our
attention towards page 15 of assessee’s paper book, wherein, details of unsecured
loan has been shown and at sl. No.12 the name of late (Smt. Rama Devi, deceased
partner loan) transferred after death amounting to Rs.1,70,41,808/- has been
shown as an amount transferred from capital account after death on 14.5.2011.
The Assessing Officer has not brought any adverse material on record to
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controvert these detailed unsecured loan and factum of death of partner of
assessee’s firm Smt. Rama Devi and the credit balance of capital account, which
was transferred to the unsecured loan account. In view of these facts and
circumstances, we are of the considered view that the CIT(A) has appreciated the
explanation and documentary evidence filed by the assessee in a right perspective
to arrive at the conclusion that the impugned amount, which was treated as
unexplained investment u/s.69C by the AO is nothing but the amount pertaining
to credit balance of deceased partner Smt. Rama Devi, which was transferred to
unsecured loan after her death, resulting into difference in closing and opening
balance of unsecured loan amount. In view of above, we are unable to see any
ambiguity, perversity in the order of the CIT(A) to interfere. Hence, this ground of
revenue is dismissed.
Ground No.2 of appeal for the assessment year 2014-15 reads as under:
“ On the facts and in the circumstances of the case and having regards to the reasons stated by the AO in para 3.0 of the assessment order, the CIT(A) is not justified in deleting the addition of Rs.74,94,928/- made by the AO in the assessment from disallowance of expenses claimed under the head other expenses and directing the AO to compute business income from contract receipts in the manner stipulated in para 4.2 of his appellate order.”
Facts of the case are that on perusal of profit and loss account and return
of income filed by the assessee, the Assessing Officer noticed that the assessee
has debited a sum of Rs.4,99,66,188/- under the head “ other expenses” during
the year. Since the assessee could not substantiate the claim of expenditure by
producing relevant bills and vouchers and ledger account, the Assessing Officer
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disallowed 15% of the total expenditure of Rs.4,99,66,188/- which comes to
Rs.74,94,928/- and added the same to the income of the assessee.
On appeal, the CIT(A) deleted the addition by observing as under:
‘ I have carefully examined the submission of the appellant and the assessment order. I find that as per the order of Hon’ble Jurisdictional Tribunal dated 4.6.2013, in ITA No.511/CTK/2012 in appellant’s contractual income is to be determined @ 10% and depreciation is to be allowed. Similarly as per another order of Jurisdictional Tribunal dated 27.6.2017 in ITA No.66/CTK./2015, the appellant’s income out of interest receipts is to be determined @ 10%. Considering this the appellant’s business income will be Rs.63,42,707/- ( being 10% of contractual receipts of Rs.5,98,19,082/- + 10% of interest receipts of Rs.36,07,992/-). From this income depreciation of Rs.32,12,426/- is to be allowed. Income from house property is to be taken as per the return of income at Rs.64,049/-.. Accordingly, the grounds of appeal are allowed.” 18. Before us, ld D.R. could not point out any specific error in the findings of
the CIT(A). We find that the CIT(A) has followed the decisions of the Tribunal
cited supra and we are unable to see any valid reason to take a different view on
this issue from the view already taken by the Tribunal in assessee’s own case.
Hence, we find no infirmity to interfere with the order of the CIT(A), which is
hereby upheld. This ground of appeal of the revenue is dismissed.
In the result, appeals of the revenue are dismissed.
Order pronounced on 4/09/2019.
Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cuttack; Dated 4 /09/209 B.K.Parida, SPS
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Copy of the Order forwarded to : 1. The Appellant : DCIT, Circle 4(1), Bhubaneswar
The Respondent. M/s. Jagannath Chaudhury, 98, Kharvel Nagar, Keshari Talkies Complex, Bhubaneswar 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT- 2, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//
By order
Sr.Pvt.secretary ITAT, Cuttack
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