M/S. PARIDA LABOUR SUPPLIERS,KHURDA vs. ITO, KHURDA

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ITA 115/CTK/2013Status: DisposedITAT Cuttack07 June 2017AY 2008-095 pages
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What did the Tribunal hold?

The Tribunal directed the Assessing Officer to allow deductions for partner's interest and remuneration from the estimated income, after verification, following precedent.

What were the facts?

The assessee's assessment order was passed without regular books of account, leading the Assessing Officer to estimate income at 8% of gross receipts. The CIT(A) confirmed this estimation.

What were the issues?

Whether deductions for partner's interest and remuneration should be allowed from income estimated under Section 145(3) and 144 of the IT Act.

Which sections of the Income-tax Act were involved?

Section 145(3),Section 144,Section 40(b)

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, CUTTACK

Before: SHRI N.S SAINI

For Appellant: Shri P.C Sethi, AR
For Respondent: Shri B.N.Das, DR

This is an appeal filed by the assessee against the order of CIT(A)-II,

Bhubaneswar, dated 6.11.2012 for the assessment year 2008-09.

2.

The assessee has taken the following grounds of appeal:

“ 1.That, the order of the learned CIT (A) is illegal, arbitrary, unjust and is clear violation to the provisions of the Income-tax Act, 1961 (hereinafter referred as "the I.T. Act") and for which the order of assessment alongwith appellate order of learned CIT(A) is liable to be quashed.

2.

That, the learned CIT (A) has committed serious error in not quashing the assessment order which has been passed without serving notice u/s 143(2) of the I.T. Act on the appellant.

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3.That, the learned CIT (A) has committed serious error in not quashing the assessment order which has been passed without processing the return u/s 143(1) of the I.T. Act. 4.That, the learned CIT (A) has committed serious error in not quashing the assessment order which has been passed without taking cognizance to the prayer made by the appellant u/s 144A of the I.T. Act.

5.

That, the learned CIT (A) has committed serious error in not quashing the order of assessment which has been served 45 days beyond the period of limitation and for that matter the said assessment order is liable to be quashed

6.

That, the learned CIT (A) has committed serious error in not quashing the assessment order as there is no cogent reason under the IT. Act in issuing notice u/s 143(2) of the I.T. Act.

7.

That, the learned CIT (A) has committed serious error in not deleting the addition which has been estimated @ 8% of the gross turnover without having any comparable case.

8 That, the learned CIT (A) has committed serious error in not allowing the interest of partners and salary which is liable to be allowed and for which order of the learned CIT(A) is suffers from serious legal infirmities.

9.

That, the appellant may add. alter, delete or modify any of the grounds of appeal with the leave of the Hon'ble ITAT.”

3.

At the time of hearing, ld A.R. of the assessee submitted that he is

not pressing Ground Nos.1 to 6 of the appeal. Hence, these grounds are

dismissed for want of prosecution.

4.

Ground Nos. 8 & 9 of the appeals are general in nature and hence,

requires no separate adjudication by me.

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5.

The only ground which remains to be adjudicated is Ground No.7 of

the appeal, wherein, the grievance of the assessee is that the CIT(A) erred

in confirming the order of the Assessing Officer in estimating the income @

8% of the turnover.

6.

I have heard the rival submissions, perused the orders of lower

authorities and materials available on record. In the instant case, the

Assessing Officer observed that in absence of regular set of books of

account/ Bills or vouchers, it was difficult to derive the correct profit,

therefore, he held that the correctness and completeness of the accounts

of the assessee is not satisfactory within the meaning of section 145(3) of

the Act. Hence, he proceeded to make the assessment u/s.144 of the Act.

The Assessing Officer determined the income of the assessee by applying

the rate of 8% to the gross contract receipts of Rs.39,72,277/- and arrived

at the income of the assessee at Rs.3,17,782/-.

7.

On appeal, the CIT(A) confirmed the action of the Assessing Officer.

8.

Before me, the submission of the ld A.R. of the assessee is that from

the income estimated by the Assessing Officer by applying the rate of 8%

to gross contract receipts, the assessee should be allowed deduction for

interest and remuneration paid to the partners of Rs.1,08,656/- and

Rs.76,704/, respectively.

9.

Ld D.R. relied on the orders of lower authorities.

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10.

I find that Hyderabad Benches of the Tribunal in the case of ACIT,

Circle-10(1), Hyderabad vs M/s. Gopal Krishna Builders, in ITA

No.601/Hyd/2011, Assessment year 2008-09 order dated 24.1.2013 has

held that the Assessing Officer should allow deduction towards interest and

remuneration paid to partners from the income estimated by him at 10%

of the receipts, relying on the following decisions:

i) Ram Jhanwarlal V/s. ITO (321 ITR 400) (Raj)

ii) Bharat Construction Co. V/s. CIT 258 ITR 140 (Raj)

iii) CIT V/s. Jain Constructions Co. (245 ITR 527) (Raj)

Hence, respectfully following the decision of the Hyderabad Benches of the

Tribunal in the case of Gopal Krishna Builders (supra), I direct the Assessing

Officer to allow deduction towards interest and remuneration paid to

partners from the estimated income of 8% of gross contract receipts after

verifying the partnership deed and in accordance with section 40(b) of the

Act.

6.

In the result, appeal filed by the assessee is partly allowed.

Order pronounced in the open court on -7 /06/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 07 /06/2017

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B.K.Parida, SPS

Copy of the Order forwarded to : 1. The appellant : M/s. Panda labour Suppliers, Banpur Odagaon, Gambharimunda, Dist: Khurda 2. The Respondent. ITO, Khurda Ward, Khurda 3. The CIT(A) II, Bhubaneswar 4. Pr.CIT-II, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack

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