SUDHIR SHARMA,JAIPUR vs. ITO, JAIPUR

PER BHAGCHAND, AM

The appeal filed by the assessee emanates from the order of the ld.

CIT(A)-5, Jaipur dated 18-10-2016 for the Assessment Year 2010-11

raising therein following grounds of appeal.

‘’1. The impugned addition made in the order u/s 143(3) r/w 147 of the Act dated 14-07-2014 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted. 2. The very action taken u/s 147 r/w 148 is bad in law without jurisdiction and being void ab-initio, the same kindly be

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur quashed. Consequently, the impugned assessment framed u/s 143(3) r/w 147 of the Act dated 14-07-2014 also kindly be quashed. 3. Rs.69,727/-. The CIT erred in law as well as on the facts of the case in making addition of Rs. 69,727/- [i.e. NP Rate @ 6% on difference amount of contract receipt of Rs. 11,62,123] on account of alleged difference between the contract receipt. The addition so made by the AO and confirmed by the ld. CIT(A) are contrary to the provisions of law and facts of the case hence, the same kindly be deleted in full. 4. The ld AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B, 234C and 234D of the Act and as also in withdrawing interest u/s 244A of the Act. The appellant totally denies its liability of charging and withdrawal of any such interest. The interest so charged/ withdrawn being contrary to the provisions of law and facts, kindly be deleted in full.

2.1 Apropos Ground No. 1, 2 of the assessee, the facts as emerges from

the order of the ld. CIT(A) are as under:-

‘’3.3 I have considered the facts of the case, the assessment order and the submissions of the appellant. The main arguments of appellant are that there was no fresh material which cam to the notice of AO while reopening the assessment. It is thus argued that the reopening of assessment is on account of change of opinion of the AO which is not allowable as per various judgements cited. It is further cited that the assessee had requested for the reasons for reopening the assessment which were however not supplied to him. The third argument of appellant is that once the AO had rejected books of account and applied net profit rate on receipts of business in the original assessment, the reopening of assessment without any fresh material amounts to having a different view of the original assessment and hence implies a change of opinion.

I have considered the facts of the case and arguments put forth by the appellant. It is observed that the assessment was reopened on account of difference of Rs. 11,62,123/- in

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur the turnover as per Form 26AS and the turnover declared as well as assessed in the original assessment . In the original assessment, there is no query raised by the AO regarding the said difference and also no discussion thereon in the original assessment order. It is therefore, not a case of change in opinion. Further the notice u/s 148 was issued on 03-01-2014 which is within 4 years of the end of the assessment order. It is further seen that the AO supplied the reasons for reopening of assessment which is evident from order sheet noting dated 23-06-2014 mentioning that the reasons for reopening u/s 147 have been provided to the assessee. The third argument of the appellant is also not tenable since the AO rejected the books of account of and applied net profit rate in the original assessment order on the receipts of business which were evidently less by an amount of Rs. 11,62,123/- which was not taken into account in the original assessment. Thus there is no infirmity or change of opinion while reopening the assessment. Ground Nos. 1,2 & 3 of appeal are accordingly dismissed.

2.2 None appeared on behalf of the assessee during the course of

hearing. However, the written submission filed by the ld.AR of the

assessee has been taken into consideration.

2.3 On the other hand, the ld. DR supported the order of the lower

authorities.

2.4 We have heard the ld. DR and perused the materials available on

record including the written submissions of the assessee. Brief facts of the

case are that the assessee e-fiiled the original return of income on

11-10-2010 declaring income of Rs. 7,43,720/-. Subsequently case was

completed u/s 143(3) on 27-11-2012 and total income was assessed at

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur Rs. 15,49,360/-. It is noted that in this case notice u/s 148 was issued on

3-01-2014 after recording reasons and taking approval from the Addl.

LD. CIT, Range-5, Jaipur which was duly served upon the assessee.

Reasons of reopening the assessee's case are as under:-

‘’The total contract receipts as per Form 16A was Rs. 2,86,51,493/- against which the amount shown in trading and profit & loss a/c was Rs. 2,74,89,370/-. Thus contract receipts are taken less by Rs. 11,62,123/- in trading and profit & loss a/c. The omission has resulted into under computation of income by Rs. 69,727/-. In view of the above, I have reason to believe that income of Rs. 69,727/- for A.Y. 2010-11 has escaped assessment within the meaning of section 147 of the I.T. Act, 1961 on account of failure on the part of the assessee to disclose fully and truly all the materials facts in respect of computation of income.’’

Regarding issuance of notice, the ld.AR of the assessee vide letter dated

25-06-2014 submitted the reply before the AO. However, the AO was not

convinced with the reply of the assessee and held that the notice u/s 148

of the Act had rightly been issued in this case. The relevant observation

of the AO to this effect is as under:-

‘’I am not convinced with the reply of the assessee's A/R that issuance of notice is invalid ab initio. This issue was never examined during original assessment proceeding. No query or verification was done. This fact is evident from notice u/s 142(1) dated 10-07-2012. Hence, the defect noticed later on does not preclude the department to initiate proceedings u/s 148. Therefore, to examine the issue of difference of contract receipts, notice u/s 148 has rightly been issued in this case.’’

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur In appellate proceedings, the ld. CIT(A) has confirmed the action of the

AO holding that the AO supplied the reasons for reopening the

assessment which is evident from the order sheet noting dated

23-06-2014 mentioning that the reasons for reopening u/s 147 have been

provided to the assessee. It is noted from the available records that the ld.

CIT(A) has elaborately discussed the issue in question and confirmed the

action of the AO. We have taken into consideration the orders of the

lower authorities and written submission of the assessee but we did not

find any controverting material against the findings of the lower

authorities. In this view of the matter, we concur with the findings of the

ld. CIT(A). Thus Ground No. 1 and 2 of the assessee are dismissed.

3.1 Apropos Ground No. 3 of the assessee, the facts as emerges from

the order of the ld. CIT(A) are as under:-

‘’4.3 I have considered the facts of the case and arguments put forth by the appellant. The difference in turnover amounting to Rs. 11,62,123/- is on account of contract receipts from Elite Buildcon and Triton Hotels which have accrued to the assessee and TDS thereon has been deducted by the parties and credit of such TDS has been claimed by the assessee in the return. It has however, been claimed by the assessee that the amount corresponding to the said difference of Rs. 11,62,123/- was actually disputed with both parties and was not received eventually. The assessee is following mercantile system of accounting. Based on the bills raised by the assessee against work undertaken for the above 2 parties, the said amount was credited in the assessee's account in their books and parties also deducted TDS thereon. The

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur difference amounts were reversed much later after a gap of almost 2 years. Thus the assessee could not have known during the year that the said amount would not be received by him. Therefore, the only correct option available to the assessee was to credit the full amount in the turnover as per bills raised by the assessee and to write off such amounts as and when such amounts became not receivable. In fact the assessee was asked to submit the ledger accounts of above parties during the appellate proceedings in order to ascertain the accounting treatment given by the assessee in his books of account. However, the assessee has faield to furnish the copy of such ledger accounts. Nonetheless the fact remains that the said contract receipts needed to be booked as turnover for the year under consideration in view of the facts stated above. Thus the addition of Rs. 69,727/- being the net profit at the rate of 6% of the contract receipts of Rs. 11,62,123/- is in order and is accordingly upheld.

4.4. Before parting it would be pertinent to note that while the assessee has not shown the contract receipts of Rs. 11,62,123 he has claimed the credit of the corresponding TDS amount which is also not correct since as per Sec 199 read with Rule 37BA, credit for TDS has to be limited in accordance with the amount of corresponding income shown. Therefore, it was not correct on the part of the assessee to have claimed the credit of entire amount of TDS. However, since the entire contract receipts have not been taken for assessment of profits, the AO may allow credit of the entire amount of TDS.

3.2 We have heard the ld. DR and perused the materials available on

record including the written submission of the assessee. Brief facts of the

case are that the AO made the addition of Rs. 69,727/- by observing as

under:- ‘’I am not convinced with the reply of the assessee’s A/R. The total contract receipts as per Form 16A was Rs. 2,86,51,493/- against

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur which the amount shown in trading and profit & loss a/c was Rs. 2,74,89,370/-. Thus the assessee has declared contract receipt short by Rs. 11,62,123/-. During the assessment proceeding, the assessee's A/r was failed to reconcile the difference in contract receipts of Rs. 11,62,123/-. Further the assessee has claimed whole TDS as made by the deductors in his original return of income. In view of the facts, I am not agree with the plea of the assessee's A/R. In the assessment order u/s 143(3) dated 27-11-2012 has applied N.P. Rate of 6%. Therefore, on the similar line, I apply N.P. Rate of 6% of difference of contract receipt of Rs. 11,62,123/- on which net profit comes to Rs. 69,727/- which is added to the total income of the assessee.’’

In first appeal, the ld. CIT(A) has confirmed the action of the AO by

observing that ‘’in fact the assessee was asked to submit the ledger

accounts of above parties during the appellate proceedings in order to

ascertain the accounting treatment given by the assessee in his books of

accounts. However, the assessee failed to furnish the copy of such ledger

accounts. Nonetheless the fact remains that the said contract receipts

needed to be booked as turnover for the year under consideration in view

of the facts stated above. Thus the addition of Rs. 69,727/- being the net

profit at the rate of 6% of the contract receipts of Rs. 11,62,123/- is in

order and is accordingly upheld.’’ We have taken into consideration the

submissions of the assessee, however, we find no merit in the

submissions of the assessee. In this view of the matter, we concur with

the findings of the ld. CIT(A). Thus Ground No. 3 of the assessee is

dismissed.

ITA No.68/JP/2017 Shri Sudhir Sharma vs ITO, Ward- 5(2), Jaipur 4.1 The Ground No. 4 of the assessee is regarding charging of interst u/s 234A, 234B, 234C & 234D and withdrawing interest u/s 244A of the Act are mandatory in nature and the assessee will get the consequential relief, if any. 5.0 In the result, the appeal of the assessee is dismissed Order pronounced in the open Court on 28-06-2018.

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