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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Revenue, and Cross Objections filed by the Assessee, pertaining to assessment year 2011-12, are directed against the order passed by the ld. Commissioner of Income Tax(Appeals)-Jalpaiguri, in Appeal No.06/CIT(A)-SLG/2014-15, dated 08.05.2014, which in turn arises out of an order passed by the Assessing Officer Under Section 144 of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 28.02.2014. CO. No.86/14 Sriniwas Agarwal 2. Brief facts of the case qua the assessee are that the assessee filed its return of income on 13.02.2012 declaring total income at Rs.15,69,548/-. The Assessee’s case was selected for scrutiny u/s.143(2) of the Act and Assessing Officer made the assessment U/s 144 of the Act by making various additions. The AO has given seven opportunities to the assessee and requested the assessee to submit, documents, bills, invoices, books of accounts and other evidences. But the assessee has not made any compliance of any notices issued by the AO. However, the assessee has submitted the audited accounts on 19.08.2013 and in response to the audited accounts, the AO sent the assessee, some objections/questions which are to be answered by the assessee. The assessee did not provide any submission/answers, therefore, the AO did not have any option but to complete the assessment as per his best judgment u/s.144 of the Income Tax Act. While doing the best judgment assessment u/s.144 of the I.T.Act, the AO has added on account of unsecured loans Rs.24,72,000/- because the assessee did not submit any evidence in support of such unsecured loan. The AO made addition on account of advance from customers at Rs. 24,00,000/-, treating it false and bogus. The AO found some discrepancies between ITS data and assessee`s audit report and made additions at Rs. 96,419/-. The AO also disallowed the depreciation claimed by the assessee on new assets at Rs.7,72,236/-.
Aggrieved from the order of AO u/s.144 of the I.T.Act, the assessee filed an appeal before the CIT(A). The CIT(A) observed that no doubt the AO has completed the assessment u/s.144 of the I.T.Act, but while completing the assessment u/s.144 of the Act, the AO did not take into account the material available with him and the order passed by him u/s.144 was unrealistic and unreasonable. Therefore, ld. CIT(A) thought that the turnover during the year of the assessee was at Rs.2,44,26,283/- and there was a discrepancy of Rs.96,419/- detected by the AO from IT’s CO. No.86/14 Sriniwas Agarwal data, therefore, the total turnover come to Rs.2,45,22,702/-. For the assessment year 2010-2011, the appeal of the assessee against the order u/s.143(3) had been decided by the CIT(A) on dated 29.4.2013. In the previous order of the AO u/s.143(3), the AO has been directed by CIT(A), to compute the income @8% of the contract receipts and @10% of the machine hire charges. Therefore, ld. CIT(A) directed the AO to apply the same net profit ratio of contract receipt and machine hire charges for the assessment year 2011-2012. Further, ld. CIT(A) directed to AO that he should add rent income and the interest from bank to the income computed by the estimation as directed by CIT(A). This way, ld. CIT(A) deleted the addition made by the AO and directed the AO to estimate @8% on contract receipts and 10% of machine hire charges.
Not being satisfied with the order of CIT(A), the Revenue is in appeal before us and has taken the following grounds of appeal :-
1. That the Ld. CIT(A) has erred in fact and in law, in relying on the judgement of the Hon'ble ITAT, Kolkata, in M/s M.K. Gupta & Company Vs ACIT, Circle-2, Siliguri, in 945, 946/KOL/2007 without appreciating the fact that in the instant case, the assessee had maintained regular books of account which had been duly audited by chartered accountant.
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A), Jalpaiguri, was justified in law in entertaining explanations tendered at the appellate stage, disregarding the fact numerous opportunities had been granted to the assessee whose deliberate non- compliance at the assessment stage has been clearly detailed in the assessment order.
3. That the Ld. CIT(A) has erred in fact and in law in directing the AO to estimate the assessee's income on the basis of declared revenue receipts while disregarding the fact that additions made on unsubstantiated unsecured loans and advances are not CO. No.86/14 Sriniwas Agarwal revenue in nature and would not be covered by such estimation of income.
4. That the Ld.CIT(A) has erred in not including in computation of the assessee's income, the amount of Rs.16,000/- declared in the assessee's profit & loss account under 'Miscellaneous Receipts'
5. That the appellant craves leave to add, amend or alter the grounds of appeal, if any.
The assessee in its cross objection has raised the following grounds :- 1. For that on the facts and in the circumstances of the case, the ld. CIT(A) ought to have estimated reasonable profits on account of contractual receipts and machine hire charges.
The ld. DR for the Revenue has primarily reiterated the stand taken by the AO, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
On the other hand, ld. Counsel for the assessee has submitted that the ld. CIT(A) has passed a fair and reasonable order estimating the income @8% of contract receipt and 10% of the machine hire charges. Therefore, ld. Counsel has defended the order passed by the ld. CIT(A). The ld Counsel also relied on the judgment of the Hon`ble Kolkata Tribunal in the case of ACIT Vs. M/s M.K. Gupta & Co, to 946/Kol/2007, dated 05.06.2007, wherein it was held as under: “6Heard both the parties, perused the record and find force in the contention of the ld Counsel appearing on behalf of the assessee that the Assessing Officer was not justified in applying the provisions of section 44AD for estimating the income of the assessee @ 8% of the total CO. No.86/14 Sriniwas Agarwal contract receipt in the case of the assessee whose turnover was much more than the prescribed limit of Rs. 40 Lakhs U/s 44AD of the Act. Since the turnover of the assessee runs between Rs. 1.77 crores and Rs. 7.67 crores in different years, the net income @ 8% was definitely on a higher side. The ld CIT(A) though has reduced this rate from 8% to 6.2%, still we feel that this too is on a higher side keeping the turnover of the assessee in view. However, we are not inclined to accept the contention of the assessee that the net income @4% of total contract receipt to be reasonable as has been held in the case of M/s D.D.S.D. Construction by the Hon`ble ITAT. We find that in that case proper books of accounts were maintained by the assessee and therefore, the Hon`ble ITAT thought it proper to take the net profit rate @ 4% of the contract receipt. In the instant case, books of accounts have not been maintained, therefore, the ratio of that order is not applicable to the facts of this case. We therefore, are of the considered opinion that in this case to meet the ends of justice, the net profit rate of 5% of the total receipt should be taken to arrive at taxable income of the assessee in all the three years. We hold accordingly.”
Having heard the rival submissions, perused the material available on records, we are of the view that the addition made by the AO u/s.144 of the I.T.Act (best judgment) were quite unreasonable. However, the estimation of income done by the CIT(A) @8% of the contract receipts and 10% of the machine hire charges are quite reasonable, considering the past assessments of the assessee. That is, in preceding previous years the ld CIT(A) upheld the same percentage. The case law cited by the counsel, in the case of M/s M.K. Gupta & Co, to 946/Kol/2007, does not apply to the facts under consideration because in the assessee`s case under consideration the nature of receipts, that is, machine hire charges, is different. Therefore, considering the factual position, we are of the view that the order passed by the ld. CIT(A) does CO. No.86/14 Sriniwas Agarwal not contain any infirmity. Therefore, we confirm the order passed by ld. CIT(A).
In regard to grounds raised in cross objection by the assessee, ld. Counsel for the assessee has not pressed the same, therefore, the cross objection of the assessee is dismissed, as not pressed.
In the result, the appeal filed by the Revenue as well as cross objections filed by the assessee, are dismissed. Order pronounced in the open court on this 07 / 07/2017. (A.T.VARKEY) (DR. A.L.SAINI) (ए .ट". वक") (डा. अजु"न लाल सैनी) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER कोलकाता /Kolkata; "दनांक Dated 07/ 07/2017 SB,Sr.PS.