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Order Under Section 254(1) of Income tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of Learned Commissioner of Income Tax (Appeals) [in short ‘Ld. CIT(A)’] / Learned National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 22.11.2022 for Assessment Year (AY) 2011-12. The assessee has raised the following grounds: “
1. The Ld. Faceless CIT(A) has erred on the facts of the case and in law in confirming the additional of income @ 8.00% of the contract receipts.
2. The Ld. Faceless CIT(A) has erred on the facts of the case and in law in remuneration to working partners and interest on partner’s capital out of the estimated income of the firm.
2 ITA. 1/SRT/2023/AY.2011-12 Rajkamal Construction 3. The Ld. Faceless CIT(A) has erred on the facts of the case and in law in confirming the addition of Rs. 1,19,000/- being cash deposit in the bank account.
The Ld. Faceless CIT(A) has erred on the facts of the case and in law in confirming the addition of Rs. 80,055/- being Professional receipts as per 26AS.
PRAYER 5.1 The additions made per ground no. 1, 3 & 4 may be kindly deleted. 5.2 The deduction on a/c of Remuneration and Interest may be kindly allowed. 5.2 Personal hearing may be granted. 5.3 Any other relief that your honours may deem fit may be granted.
6. The assessee craves leave to add, amend, modify alter or delete any of the grounds at the time of hearing.”
Brief facts of the case are that assesse has not filed its return of income for AY.2011-12. As per the information, the assessee has earned income of Rs.27,41,680/- from Mandavi Municipal Borough, Mandavi. On the basis of such information, the Assessing Officer was of the view that income of assessee to that extent has escaped assessment. The Assessing Officer after recording reasons for reopened the case of the assessee under section 147. Notice under section 148 dated 24.12.2008 was served on the assessee. The Assessing Officer recorded that neither assessee filed return of income nor furnished any reply to various notices of the Assessing Officer. The Assessing Officer served final show cause notice and proceeded under section 144 3 ITA. 1/SRT/2023/AY.2011-12 Rajkamal Construction for completing best judgment assessment. The Assessing Officer estimated the income @ 8% of the total receipt on Rs.26,61,595/- received from Mandavi Municipal Borough and thereby made addition of Rs.2,12,928/-. The Assessing Officer also noted that assessee has received professional/technical receipts on Rs. 80,085/- from Institute Management Committee (IMC), ITI, Mandavi. No reply against show cause was filed by assesse thereby Assessing Officer treated the said receipt as income of assessee. The Assessing Officer further noted that there were cash deposits in Bank of Baroda, Mandavi Branch in Rs.1,19,000/-. No reply was filed against the show cause notice by assessee the Assessing Officer treated such cash deposit in bank account as income from “other sources” in the assessment order dated 24.12.2018 passed under section 143(3) r.w.s. 147.
On appeal before Ld. CIT(A), the assessee filed detailed written submission. In the submission, the assessee submitted that assessee is a partnership firm and total amount credit as per detailed in Form 26AS is Rs.25,31,240/- Mandavi Municipality, Rs. 80,085/- from ITI, Mandavi and of Rs.1,30,355/- from Nagar Palika Tarsadi. The Assessing Officer estimated the income of assessee under section 44AD, while making addition on the receipt from Mandavi Municipality. Thus, the assessee is eligible for remuneration and interest of the partnership as the contract 4 ITA. 1/SRT/2023/AY.2011-12 Rajkamal Construction of partnership. The assessee also furnished the working of such remuneration and interest and submitted that after allowing such interest & remuneration only of Rs. 75,257/- is eligible to be taxed. On the second addition of Rs. 80,085/-, the assessee submitted that this is a part of professional/technical receipt which is also to be taxed @ 8% and assesse has furnished the all receipt in his submission. On the other addition of cash deposit taxed under the head “other income”, the assessee submitted that once the income of assessee is taxed on presumptive basis, no other addition is to be made and prayed for deleting such addition.
4. The Ld. CIT(A) after considering the submission of assessee held that neither the Assessing Officer had invoked section 44AD nor made addition under section 69C. The Assessing Officer in absence of any response made estimation of taxable profit at the rate of 8% of gross receipt from contract with Mandavi Municipal, Borough and also added Rs. 80,085/- on account of technical and professional receipt and addition of Rs.1,19,000/- on account of cash deposits. The Ld. CIT(A) further held that professional /technical receipt from ITI Mandavi and deposits in bank cannot be treated as covered in the contract receipt from Mandavi Municipal, Borough. The Ld. CIT(A) also held that assessee failed to file return of income voluntarily and 5 ITA. 1/SRT/2023/AY.2011-12 Rajkamal Construction accordingly the assessee is not eligible for taxing professional receipt under the provision of section 44AD. Further aggrieved, the assesse has filed present appeal before Tribunal.
5. I have heard the submissions of learned authorized representative (Ld. AR) of the assessee and the learned senior departmental representative (Ld. Sr. DR) for the Revenue and have gone through the orders of lower authorities carefully. As recorded above, the Assessing Officer made addition at the rate of 8% of contract receipt from Mandavi Municipal, Borough of Rs.26,61,595/-, thereby worked out addition of Rs.2,12,928/-. The Assessing Officer brought to tax the entire professional receipt of Rs. 80,085/- from ITI, Mandavi instead of taxing income component. The Assessing Officer also added entire cash deposits in bank account and in absence of any explanation. The Ld. AR of the assessee submits that as per Form 296AS, receipt of Rs.25,31,240/- is received from Mandavi Nagar Palika, Rs. 80,085/- from ITI, Mandavi and Rs.1,30,355/- from Nagar Palika Tarsadi. The Ld. AR submits that as per section 44AD, the presumptive income can be taxed only at the rate of 8%. Further, case relates to assessment year 2011-12, therefore the assessee is also entitled for the benefit of second proviso to section 44AD available during the relevant period, which was omitted by Finance Act, 2016. The ld. AR further submits that once the 6 ITA. 1/SRT/2023/AY.2011-12 Rajkamal Construction income of assessee is assessed on presumptive basis/ estimated, no other addition on account of cash deposits or otherwise to be sustained.
On the other hand, Sr. DR for the Revenue submits that all the submission of assesse was considered by Ld. CIT(A). The assessee has not filed return of income under section 139, therefore, not eligible for claiming any beneficial provision in the Act.
I have considered the submission of both the parties and perused the material available on record carefully. On perusal of record, I find that before ld CIT(A), the assessee has shown total contract receipt/professional receipt of Rs.25,31,240/- + Rs. 80,085/- and Rs.1,30,355/-, which are reflected in Form-26 AS, for taxation and voluntarily offered at the rate of 8% of the presumptive income under section 44AD. The assesse also prayed for allowing benefit of second proviso of section 44AD which was available in AY.2011-12. I find merit in the submissions of the ld AR for the assessee that only income component is to be brought to tax and not the entire receipt. Therefore, I direct the Assessing Officer to tax all the receipts contract, professional receipt shown in Form-26 AS at the rate of 8% and allow the benefit of proviso to section 44AD(2) as existed during AY-2011-12.
7 ITA. 1/SRT/2023/AY.2011-12 Rajkamal Construction 8. In the result, ground no.1, 2 and 4 of the appeal are allowed. 9. So far as the ground No.3 is concerned, I find that once the income of assessee is taxed/estimated on presumptive basis, no other addition is warranted. Therefore, ground no.3 is also allowed. 10. In the result, appeal filed by the assesse is allowed. Order pronounced in open court on 30/06/2023.