BRAJA KISHORE DAS,SAMBALPUR vs. DCIT, CIRCLE-1, SAMBALPUR

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IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.110/CTK/2016 Assessment Year : 2011-2012

Braja Kishore Das, Sambal Vs. DCIT, Circle 1(1) Aayakar Bhumi Colony, NH-6, Bhavan, Sambalpur Dhankauda, Sambalpur PAN/GIR No.AAUPD 0351 M (Appellant) .. ( Respondent)

Assessee by : Shri Sambhulal Agarwal, AR Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 25/10/ 2017 Date of Pronouncement : /10/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order of the

CIT(A)- Cuttack dated 11.12.2015 for the assessment year 2011-12.

CIT(A) erred in confirming the order of the Assessing Officer in rejecting

the books of account of the proprietorship business of M/s. Das

Constructions u/s.145(3) of the Act and calculating net profit @ 8% of the

net contractual receipts on the ground of low rate of net profit.

that the assessee was engaged in execution of works contract and runs

the business of travel and has shown net profit @ 1.015% from the gross

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receipts of works contract and 2.62% of net profit from the gross receipts

from travels. The Assessing Officer found the net profit shown by the

assessee is very low and highly unrealistic by any standard of imagination

in those lines of business. While verifying the genuineness of the claims of

the assessee for the accounts in the works contract, the Assessing Officer

found that the assessee produced only expenditure ledgers but did not

support the claim with any bills and vouchers. The Assessing Officer felt

the books of accounts are not properly maintained as the expenditures

claimed by the assessee are neither reliable nor verifiable. Therefore, the

Assessing Officer invoked provisions of section 145(3] of the Act and

rejected the books of accounts. After allowing statutory deduction by the

Government Departments and after following the decisions of the

Hyderabad Benches of the Tribunal in the case of M/s. KMC Construction

Limited Vs. DCIT, Cir-2(1), Hyderabad and the decision of Hon’ble

Allahabad High Court in the case of C1T Vs. s. Sahu Construction Pvt.

Limited (2013), estimated the net profit @ 8% of the gross receipts from

works contracts. The Assessing Officer further found in the travel business

where the assessee had shown very low net profit, expenditures claimed

by the assessee in the profit and loss account were not supported by

corresponding bills and vouchers to justify the claim. Therefore, he

rejected the accounts and invoked the provisions of section 145(3) and

estimated the net income of the assessee at 8% of the gross receipts

from travel business.

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and stated that the Assessing Officer has not been able to single out any

lacuna in the books of accounts maintained by the assessee along with

bills and vouchers maintained were produced before the Assessing Officer

but the Assessing Officer had rejected the books of accounts. It was

submitted that the low rate of net profit in the case of M/s. Das Travels

was reported because of higher depreciation claimed during the year

because of addition of new bus for plying during the year and not because

of higher expenditure claimed by the assessee.

that he finds substance from the finding of the Assessing Officer that the

assessee had shown lower net profit from both the businesses i.e. from

works contract business and travels business. In such lines of business if

the supporting bills and vouchers for the claim of expenditure are not

produced, it is not possible for the Assessing Officer to ascertain the

correctness of the expenditure claimed. Though, the assessee submitted

that all the bills and vouchers of the expenses claimed were produced, he

actually did not try to produce the same before him, which could have

been forwarded to the Assessing Officer for further verification. Under the

circumstances, he held that he was inclined to agree with the findings of

the Assessing Officer and confirmed the action of estimating the net profit

from civil contract work @ 8% of the gross receipts. Further, the action

of the Assessing Officer was also supported from plethora of decisions of

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higher authorities including the Cuttack Bench of the Tribunal. In the

following cases, the Tribunal confirmed the action of the Assessing Officer

in estimating the net profit from contract work at 8% where books of

account are rejected.:

. i) 1TO Vs. Nityananda Swain in 1TA No. - 491/CTK/2011 Dated 22/03/2012 ii.) 1T0 Vs. S.N.Kanungo & Associates in ITA No. 090/CTK/2011 dated 27.5.2011. iii.) 1T0 Vs. R.K.Das &Partners in ITA No.- 006/CTK/2012 iv) ITO Vs. Gangadhar Jena in ITA No. - 495/2013-14

Therefore, the CIT(A) upheld the action of the Assessing Officer.

observed that the Assessing Officer's action in estimating the net profit

after rejecting the accounts in the absence of supporting bills and

vouchers of claims of expenses is upheld. He observed that the travel

business may not be equated with works contract business and the fact

that the assessee had claimed Rs.4,87,696/- as depreciation, the

Assessing Officer is directed to deduct the depreciation from the gross

receipts and estimate the net income of the assessee from such net gross

receipts @ 6 % of the same.

all books of accounts and bills and vouchers were produced before the

Assessing Officer and, therefore, the Assessing Officer was not justified in

observing that bills and vouchers were not produced before him and,

therefore, the expenditures claimed are not verifiable.

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on record, we find that the undisputed facts of the case are that the

assessee is in the business of works contract and travel business. The

assessee maintains books of account, which were audited. The Assessing

Officer found that the assessee has shown net profit from contract works

at 1.015% and 2.62% from gross receipts from travel business. He

observed that the profit shown in these lines of business was low. He

further observed that the assessee failed to produce bills and vouchers for

the expenditures claimed by him in its books of account and, therefore,

he rejected books of account and estimated the income by applying the

net profit rate at 8% in case of works contract and also net profit at 8%

from gross receipts from travel business.

observing that the Assessing Officer has stated in his order that the

assessee failed to produce bills and vouchers in support of the

expenditures claimed in contract business and travel business. Even after

this, the assessee failed to produce evidence before him or verification

and, therefore, he was inclined to agree with the observation of the

Assessing Officer.

with respect to contract business and travel business the bills and

vouchers were produced before the Assessing Officer has not produced

any bills and vouchers for verification. Further, it is observed that the

Assessing Officer has adopted the rate of 8% to estimate the net profit

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from contract business was based on the decision of the Cuttack Bench of

the Tribunal. No contrary decision to the same was cited by ld A.R. of the

assessee during the course of hearing to controvert the findings of the

CIT(A).

that the CIT(A) has accepted the claim of the assessee that estimation of

profit @ 8% was higher and, therefore, directed the Assessing Officer to

estimate the same at 6%. No material was brought on record by ld A.R.

before us to show that estimation of net profit @ 6% would determine the

income of the assessee at a higher figure and that estimation at a lower

than 6% would be justified in the case of the assessee. Hence, we find

no good reason to interfere with the order of the CIT(A), which is hereby

confirmed and Ground Nos.1 & 2 are dismissed.

the CIT(A) erred in confirming the action of the Assessing Officer in

treating the interest earned on fixed deposits with Banks at

Rs.21,61,961/-as income from other sources in place of business income

shown by the assessee.

the assessee has earned an amount of Rs.21,61,961/- as interest income

during the year and the assessee has shown the same as business income

in place of income from other sources. The Assessing Officer observed

that the Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals &

Fertilisers Ltd vs CIT, 227 ITR 172 (SC) has held that interest received by

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the assessee on fixed deposit should be taxed under the head “ income

from other sources” .

Rs.21,61,961/- should be part of the business income of the assessee as

it was incidental to the business of the assessee and that the decision of

Hon’ble Supreme Court in the case of Alkali Chemicals & Fertilisers

(supra) cited by the Assessing Officer was not applicable in the case of

the assessee. It was submitted that the fixed deposits were made with

the banks for the purpose of business.

for the purpose of business was filed before him. Therefore, he found the

reasoning and explanation given by the Assessing Officer convincing that

the income from fixed deposits earned by the assessee should be

assessed under the head “ income from other sources”.

Allahabad Bank dated 17.7.2017 and 20.7.2017 to show that these fixed

deposits were made by the assessee to give as security deposits to the

Government Departments from where the construction works were

allotted to the assessee and, therefore, claimed that the fixed deposits

were inextricable linked with the construction business of the assessee

and interest earned therefrom was business income of the assessee and

should be taxed accordingly.

before the Tribunal for the first time and submitted that the assessee

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cannot be allowed to submit at this stage as the same was not filed either

before the Assessing Officer or before the CIT(A).

the case in its entirety, we are of the considered opinion that in order to

render substantial justice, the matter should be remanded back to the file

of the Assessing Officer for verification of the certificate of Allahabad Bank

filed before us to show that interest on fixed deposits was earned by the

assessee from the fixed deposits which were placed with the Government

Department from which the construction contracts were obtained by the

assessee. We, therefore, set aside the orders of lower authorities and

restore this issue to the file of the Assessing Officer for adjudication

afresh after allowing reasonable and proper opportunity of hearing to the

assessee.. Hence, this ground is allowed for statistical purposes.

the CIT(A) erred in confirming the order of the Assessing Officer in

assessing insurance claim received by the assessee at Rs.80,000/- on

account of accident of assets of the business of the assessee M/s. Das

Constructions and credited to the profit and loss account separately and

not considering the same as part of business income of the assessee.

the assessee has not shown income from insurance claim amounting to

Rs.80,000/-. Therefore, the Assessing Officer added the same to the

income of the assessee.

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of Rs.80,000/- was credited to the profit and loss account separately.

ground that the assessee failed to show why the same should not be

considered as income of the assessee for the year and confirmed the

action of the Assessing Officer.

year, the assets of the contract business were damaged and same was

repaired by the assessee and expenses were claimed in the profit and loss

account and allowed to the assessee. In this year, the assessee received

Rs.80,000/- from insurance company as claimed towards damages

suffered by the assessee which was shown in the profit and loss account

as income by the assessee. He submitted that Rs.80,000/- received as

insurance claim was included in the profit of the year and therefore,

separate addition of Rs.80,000/- to the income of the assessee would

amount to double addition.

submissions, we find that the submission of the assessee that Rs.80,000/-

has been separately credited to the profit and loss account has not been

controverted by the Assessing Officer and ld CIT(A).. Thus, further a

deduction of Rs.80,000/- received as insurance claim credited to profit

and loss account would amount to double addition. Hence, we set aside

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the orders of lower authorities and delete the addition of Rs.80,000/- and

allow this ground of appeal of the assessee.

purposes.

Order pronounced on 26 /10/2017. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 26 /10/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Braja Kishore Das, Sambal Bhumi Colony, NH-6, Dhankauda, Sambalpur 2. The Respondent. DCIT, Circle 1(1) Aayakar Bhavan, Sambalpur 3. The CIT(A)- Cuttack 4. Pr.CIT- Cuttack BY ORDER, 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack