Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, AMRITSAR BENCH; AMRITSAR.
Before: SH. SANJAY ARORA & SH. N. K. CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 373/(Asr)/2017 Assessment Year: 2009-10
Income Tax Officer Vs. Nikhil Infra-Tech Ltd., F-101, Ward-2(2), Jammu Ashok Vihar, Phase-1, Wazirpur, Delhi-110052 [PAN: AACCN 8664L] (Appellant) (Respondent)
Appellant by : Sh. Charan Dass (D.R.) Respondent by: Sh. R. L. Gupta (Adv.) Date of Hearing: 27.03.2018 Date of Pronouncement: 28.03.2018
ORDER Per Sanjay Arora, AM: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals), Jammu ('CIT(A)', for short) dated 31.03.2017, partly allowing the assessee’s appeal contesting its assessment u/s. 147 r.w.s. 144 of the Income Tax Act, 1961 ('the Act' hereinafter) dated 27.03.2015 for Assessment Year (AY) 2009-10.
The Revenue’s appeal raises the following grounds:
‘1. Whether the ld. CIT(A) was right in law and fact in accepting the explanation of the assessee without evidence or records despite the fact that numerous opportunities of being heard were granted to the assessee.
2 ITA No. 373 (Asr)/2017 (AY 2009-10) ITO v. Nikhil Infra-Tech Ltd. 2. Whether the ld. CIT(A) was right in law and fact in reducing the net profit rate of the assessee to 3.5% by relying on the order of ITAT Amritsar in case of M/s. Construction Engineers where the net profit was held at 7%. 3. Whether the ld. CIT(A) was right in law and fact in allowing the appeal of the assessee despite the fact that no books of account were produced by the assessee during the assessment proceedings.’
The brief facts of the case are that an assessment u/s. 144 of the Act was framed by the Assessing Officer (AO) in view of the continuous non-compliances of the assessee to the various notices u/s. 142(1), beginning dated 09.10.2013, to 19.12.2014, i.e., issued pursuant to issue of notice u/s. 148 on 03.04.2013. The non compliance, which was total, was deliberate in-as-much as all the notices, sent per speed post, were confirmed as served by the AO by verification of their status online from the site of the Indian Posts and Telegraphs. The assessment by him was also preceded by a final show cause notice u/s. 144, in response to which the directors of the assessee-company, namely, Shri Nikhil Jain and Shri Navin Jain, attended on 24.03.2015, and requested for further time as the third director, Shri R. K. Goyal, who was stated to be handling the accounting and tax matters of the company, had expired on 17.04.2012. The AO proceeded to frame the assessment, the time limit for which would expire on 31.03.2015. The assessee’s – a civil contractor, profit was assessed by him at 10%, i.e., as against the disclosed profit rate of 1.39% (of the turnover, i.e., Rs.167.29 lacs), following the decision in Assessing Officer v. Pooja Construction Company [1999] 69 ITD 147 (Asr). That apart, disallowances toward depreciation allowance (Rs.3.18 lacs) and interest u/s. 361(iii) (at Rs.9.46 lacs), as well as addition u/s. 68 qua a secured loan (Rs.97.01 lacs), were effected. In first appeal, the ld. CIT(A) called for a remand report from the AO in pursuance to the assessee’s Ground 2 before him challenging the assessment u/s. 144 in view of the attendance of the two directors on 24.03.2015, indicating the assessee’s willingness to cooperate in the assessment proceedings.
3 ITA No. 373 (Asr)/2017 (AY 2009-10) ITO v. Nikhil Infra-Tech Ltd. Per his remand report dated 21.03.2017, the AO reiterated his earlier findings, further indicating that no improvement in its case had been made by the assessee before him. The ld. CIT(A), however, was of the view that the AO ought to have examined the books of account of the assessee in the remand proceedings, and issued his finding afresh, i.e., rather than (almost) repeating what he had already stated earlier in the assessment order. The profit rate of 10% was certainly in excess as the AO had overlooked the fact that the assessee was during the relevant year a sub-contractor (of M/s. Satish Aggarwal and Co.), undertaking the contract work (of black topping roads for Border Roads Organization (BRO) - a Government of India undertaking) in a remote part of the Rajouri District of J&K. A rate of 7%, as decided by him in several other cases of contractors operating in the region, was considered reasonable by him, and which was further reduced to 3.5% as the assessee was working as a sub-contractor. The other addition/ disallowances would not survive as the net profit rate had been estimated, implying that all the expenses had been allowed for the balance amount. Aggrieved, the Revenue is in appeal, raising the grounds noted supra.
We have heard the parties, and perused the material on record. The first issue that confronts us is if the ld. CIT(A) has, in modifying the assessment, i.e., the net profit rate as assessed by the AO, relied upon any material. This as he could not do so without first assailing the invocation of section 144 by the AO. This is as it is his best judgment assessment, and not of anyone else, even as clarified by the Hon'ble Court in CIT vs. Rayala Corporation Pvt. Ltd. [1995] 215 ITR 883 (Mad). The purview of an appellate authority, as further explained by it, is only to reappraise the evidence relied upon by the AO. Of course, the same has to be reliable, i.e., could be relied upon. The ld. CIT(A) has in the present case not impugned the framing of assessment u/s. 144. He, though called for the remand
4 ITA No. 373 (Asr)/2017 (AY 2009-10) ITO v. Nikhil Infra-Tech Ltd. report, modified, as we observe, the AO’s estimation of the net profit not on the basis of any material, but by relying on the decision by the Amritsar Bench of the Tribunal in Construction Engineers, Srinagar (in ITA No. 493/Asr/2010, dated 11.05.2012). And, two, reduced it upon considering the assessee to be not a contractor but a sub-contractor. In our considered view, a difficult terrain may not necessarily imply a lower profit. Rather, economic theory would suggest the profit to match the risk involved, so that a higher risk would entail a higher rate of profit. Further, again, the assessee as the person undertaking the work would, both in theory and in practice, be entitled to a larger share of the profit, i.e., even if the same is to be considered as in the range of 7% to 8%. Considering these facts, we modify the estimation of the assessee’s net profit rate to, even as conceded to by the ld. AR, the assessee’s counsel, during hearing, 5% of the turnover. The disallowance on account of depreciation (u/s. 32(1)) and interest (u/s. 361(iii)) shall not survive in view of the estimation of the net profit rate. That leaves us with the addition u/s. 68 qua a secured loan/s. Though the same could be made in principal, and we do not agree with the ld. CIT(A) that the same could not be in view of the assessee’s profit rate being estimated (CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC)), we find no basis for the said addition in the facts and circumstances of the case. True, the burden of proof u/s. 68 is on the assessee, which has not furnished any material in the assessment proceedings. However, it is not clear if the AO had in any of the notices u/s. 142(1) required the assessee to support its’ claim qua the said loan with any material/ evidence. This does not appear to be the case as there is no reference thereto by him either in the assessment order or in the remand report. The addition under the circumstances could only be on the basis of some adverse material brought on
5 ITA No. 373 (Asr)/2017 (AY 2009-10) ITO v. Nikhil Infra-Tech Ltd. record by the Assessing Officer. The addition, in fact, has not even been impugned by the Revenue. We decide accordingly.
In the result, the Revenue’s appeal is partly allowed. Order pronounced in the open court on March 28, 2018
Sd/- Sd/- (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member Date: 28.03.2018 /GP/Sr. Ps. Copy of the order forwarded to: (1) Appellant: The ITO Ward-2(2), Jammu (2) Respondent: Nikhil Infra-Tech Ltd., F-101, Ashok Vihar, Phase-1, Wazirpur, Delhi-110052 (3) The CIT(Appeals), Jammu (4) The CIT concerned (5) The Sr. DR, I.T.A.T