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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SMT. DIVA SINGH
The present appeal has been filed by the assessee, assailing the correctness of the order dated 24.10.2017 of CIT(A)-1, Gurgaon pertaining to 2013-14 AY on various grounds which are repetitive and argumentative and can be said to be summed up in ground nos. 2 & 4 which are reproduced hereunder: “2. That the learned Commissioner of Income Tax (Appeals) has ignored the basic fact that the assessee-appellant was carrying on the business of civil and interior contracting work and income declared in its revised computation of income was at presumptive rate of tax of 8% as specified under section 44AD of the Act, which claim of the assessee-appellant has been arbitrarily rejected without understanding the legal mandate of the provisions of section 44AD of the Act and as such, the additions so made by the learned Assessing Officer and so sustained by the learned CIT (Appeals) should be deleted.
4. That each of the above grounds is without prejudice to one another and assessee- appellant prays for determination of net profit from contract business on presumptive rate of net profit of 8 percent on gross receipts , being the legislative approved rate prescribed under section 44AD of the Act.”
The relevant facts of the case are that the assessee returned an income of Rs. 2,04,690/-. The said return was picked up for scrutiny. In the scrutiny proceedings the assessee was required to reconcile the gross receipts of Rs. 7,79,729/- shown vis-à-vis the gross receipts as per Form no. 26AS. The assessee in response to the same attempted to justify the gross receipts shown by it and also vide reply dt. 4.1.2016 submitted that he is a small contractor and not maintaining any books of accounts. Finally, it was his prayer that the assessment may be concluded as per the provision of sec. 44AD on the gross receipts of Rs. 74,58,816/- as noticed in the Form 26AS. The AO though took note of the fact that the payments were received after deducting TDS u/s 194C however, considering the past history of the assessee, he made an addition by applying the net profit rate of 26%. The assessee challenged this action before the CIT(A) who considering the net profit of 2012-13 & 2014-15 assessment years granted part relief by estimating the net profit at 18.5% and sustained part of the addition. Aggrieved the assessee is before the ITAT.
The Ld. AR relying upon the submissions advanced before the CIT(A) extracted in the order and referring to the fact that the claim for being assessed in terms of sec. 44AD was made in the course of the assessment proceedings submitted that the order may be reversed granting the assessee statutory relief available under law.
The Ld. Sr. DR, on the other hand, relying upon the orders of the authorities below submitted that the assessee’s own history has been taken into consideration and thus, since the gross receipts disclosed by the assessee were shown to be inconsistent with the gross receipts as per Form 26AS the order may be upheld. On a specific query, as to how the statutory benefit claimed u/s 44AD on facts be denied to the assessee, the ld. Sr.DR was unable to address and reiterated that assessee's own history has been considered.
I have heard the submissions and perused the material available on record. Section 44AD of the Act specifically carves out a special provision for computing profits and gains of business on presumptive basis and the statutory bar fixed by the legislature for the specific period admittedly is Rs.1 crore. It is seen that the assessee’s written submissions were filed before the CIT(Appeals) who made them available to the AO. The AO considering the submissions and the evidences in para 4, 5 & 6 of his order extracted by the CIT(A) in page 6 first sets out the information as available in Form no. 26AS which is as under: Receipts shown in 26AS Simplex Infrastructure Ltd. 5,000 Fedex Express Transportation & Supply Chain services (I) Pvt. Ltd. 27,89,351 Fedex Express Services India Pvt. Ltd. 6,44,345 Receipts as per bank other than 26AS Syndicate Bank 3,00,000 37,20,000 Karur Vasya Bank Total Receipts 74,58,816 5.1 Thereafter, he goes on to reject the assessee's explanation on the following reasoning: 5. On perusal of the contract agreements furnished by the assessee with the aforesaid some parties such as Simplex Infrastructure Ltd., Fedex Express Transportation & Supply Chain services (l) Pvt. Ltd., Fedex Express Services India Pvt. Ltd. and Bhardex Hospitality & services Pvt. Ltd, it appears that the main work required to be done by the assesses as per agreement was only interior work such as repairing of flooring, furniture electrification and pops on the ceilings with the help of hired staff/labours under the supervision of the assesses. The TDS has been deducted u/s 194C of the Income lax Act. The section 194C states any person responsible for paying any sum to any resident contractor for carrying ow any work under a contract. Under the provisions of section 44AD of the Income tax Act in the case of eligible assessee engaged in a eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assesses in the previous year on account of such business or, as ihe case may be, a sum higher than the aforesaid sum claimed so have been earned by the eligible assesses, shall be deemed to be the profit and gains of such busings chargeable to tax under the heor "profit and gains of business or profession ". ………………… I have gone through, the work agreements executed by the parties with Shri Inam Ahmed Prop. M/s Hayaat Interior. On perusal of these agreements, it is revealed that the assessee has done various job works assigned to him such as provision of flooring, white washing, polishing, wooden work and POP. Apart from this the assessee had also provided the readymade wooden as well as steel furniture to the parties. He has only executed the work as a contractor as per the guidelines and instructions and designs provided by the owner/engineer and interior designer. In one case of Shri Mohamad Abdulla, Shri Galhotra designed the work and the assesses accordingly completed the task. Source at page No, 46 of the paper book filed by the assesses on 28, 06. 2016. All the other parties who have got the work from the assesses has deducted the TDS u/s 194C of the Act on the payments made to the assesses. The provisions under this section are applicable on contractors only. Besides this, a statement of the assesses has also been recorded to ascertain whether the assessee deals as interior decorator or a civil contractor. The assessee in his statement has stated that ……………….”
5.2. On going through the submissions and the reasoning, I find that apart from suspicions nothing has been placed on record by the AO or the CIT(A) to rebut the consistent stand of the assessee that he was a contractor carrying out the activities of flooring white washing, polishing, wood work, POP etc. I find no fact or evidence has been placed on record to support the presumption that the major charges were for creating designs and not ordinary civil works as canvassed consistently by the taxpayer. The suspicion that the name of “Proprietorship is M/s Hyatt Interiors” dehors facts does not justify the department to treat the taxpayer as a high flying interior decorator. In facts where the taxpayer claims that he is a civil contractor, then the mere usage of aspirational ambitions expressed in naming the proprietorship concern cannot be the basis for discarding the explanation. The alleged suspicion so aroused on account of the word “Interiors” should be supported by concrete facts. Since it is the department’s case that the assessee was an Interior Decorator, the burden of proof lay on the department. To support the conclusions, I find no effort has been made to either address the qualification of the assessee nor the supposed experience or expertise or recognition or fame in the stated creative work. The taxpayer claims that he was carrying out mere civil works etc. In the absence of any evidence to the contrary, the submissions cannot be discarded on suspicions. The arguments that with a name like “Hyatt Interiors” necessarily the work being done is of a creative professional designer is a presumption based on no facts. I also find that the argument that in the earlier year the assessee has shown a higher net profit rate by itself is also not an argument which would justify the denial of the statutory play of sec. 44AD in the peculiar facts and circumstances of the present case. In the absence of anything on record apart from the past history of the assessee itself and the return filed in the subsequent assessment year, wherein the assessee may have remained ignorant about the applicability of sec. 44AD. I find the departmental actions for denying