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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
PER AMARJIT SINGH, JM:
This order shall disposed off three appeals mentioned above against the order of learned CIT(A) 33, Mumbai [hereinafter referred to as the learned “CIT(A)”] dated 28.02.2014 against the quantum of assessment u/s. 143(3) of the Income Tax Act, 1961( in short “the Act”) and against the penalty orders relevant to A.Y. 2009-10. Since the parties are the same and ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
the controversy between the parties revolves around the assessment order for the year 2009-10 therefore, all these appeals are being taken up together for adjudication for the sake of convenience.
The assessee is a Contractor / Interior Decorator and filed his return of income on 06.07.2010 declaring income of Rs.4,06,450/-. The assessee has showed his income under the head ‘Business and Profession’. The return was processed under the provisions of section 143(1) of the Act on 29.03.2011 and the returned income was accepted. Subsequently, the case was selected for scrutiny u/s. 143(3) and notice under section 143(2) of the Act was issued on 18.08.2010 and was duly served upon the assessee. Notice u/s. 142(1) of the Act was issued on 22.03.2011 and 23.08.2011 which were also served upon the assessee. The assessee shown gross receipt from business of civil contractor to the tune of Rs.38,54,755/- in the Profit & Loss Account filed with return of income. However it was observed from the information received through AIR that gross receipts on which TDS was deducted is to the tune of Rs.71,09,140/-. The assessee was asked to explain the issue and furnish the copy of its bank account. Thereafter, assessee furnished its revised Profit & Loss Account showing gross turnover of Rs.1,22,95,988/- but keeping its net profit at Rs.5,12,380/- only as filed in the original return of income. It was observed that the assessee filed his return of income below 40 lakhs just to avoid tax. Thereafter, the income of the assessee was assessed to the tune of Rs.15,28,470/- and penalty was initiated u/s. 271B and u/s. 271(1)(c) of the Act. Subsequently, the assessee filed the appeal before learned CIT(A) who also dismissed the appeals of the ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
assessee, therefore feeling aggrieved, the present appeal has been filed before the Tribunal.
ITA No.2210/M/14
Firstly, we take up the issue under the appeal bearing ITA No.2210/M/14 on the quantum of assessment. The issue raised in this appeal is that the learned Assessing Officer has erred in applying Net Profit ratio @ 13.29% on total turnover of Rs.1,22,95,988/-. Apparently, the assessee is not raising any question on turnover of Rs.1,22,95,988/-. Now it is to be seen whether the Assessing Officer has erred in applying the Net Profit ratio @ 13.29% on the total turnover of Rs.1,22,95,988/- or not. The representative of the assessee has argued that the assessee is very poor person and studied up to 9th standard and he is not maintaining the books of accounts. Assessee had showed contract receipts at Rs.38,54,755/- and also showed his business profit from civil contracts to the tune of Rs,5,12,380/-. AIR information revealed the gross receipts of Rs.71,09,140/-. Thereafter, the assessee filed the revised statement showing his receipt to the tune of Rs.1,22,95,988/- however worked out the profit to the tune of Rs.5,12,380/-. It has been argued that the Assessing Officer has wrongly worked out the ratio upon gross receipts @13.29%. Whereas, the guidelines issued by the CBDT for selection of cases for scrutiny, the benchmark rate for contractors having turnover more than Rs.1 crore has to be taken as 5% only and in this regard the representative of the assesses also placed reliance upon the order passed by the Hon’ble Pune Tribunal in ITA No.01/PN/2011 titled as Dy. ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
argued that where the gross receipts exceed to the tune of Rs.40 lacs then the Net Profit is required to be estimated between 5 to 8% as held in many of the cases such as:
i) CIT v. P. Sudhakar [2015] 61 taxmann.com 17 (Karnataka) ii) CIT v. Earth Tech Engineers [2014] 224 Taxman 358 (Punjab & Haryana) iii) CIT v. Subodh Gupta [2015] 229 Taxman 367 (Delhi) iv) Hamid Khan v. ITO [2014] 65 SOT 185(Jodhpur - Trib.) v) Nishikant T. Patne v. ACIT [2013] 60 SOT 146 (Pune - Trib.) vi) Ram Prasad Bhatta v. ACIT [2015] 68 SOT 509 (Cuttack - Trib.) vii) Eastern Construction Company v. ITO[1997] 59 TTJ 723 (Delhi) viii) Dhalewan Co-operative L & C Society v. ITO[2006] 157 Taxman 239 (ASR.) (MAG.)
However, on the other hand the learned Departmental Representative strongly supported the order of learned CIT(A).
As discussed above the assessee showed his contract receipt to the tune of Rs.1,22,95,988/- voluntarily. No doubt after the initiation of scrutiny the Assessing Officer has took the ratio @13.29% on the basis of earlier ration of profit declared by assessee. Since the matter was reassessed therefore, the profit upon the disclosed receipt was required to be reassessed in accordance with law and the parameters should be adopted as applicable
ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
to the facts and circumstances of the case. The present appeal is in connection with the assessment year of 2009-10. No doubt law applicable at the time should be relied upon to decide the matter of controversy. On the basis of similar facts and circumstances the Hon’ble High Court of Punjab & Haryana in case cited as [2014] 224 taxman 358 titled as CIT II, Amritsar Vs. Earth Tech Engineers has held that 8% profit is quite justifiable. Subsequently Delhi High Court has also held that Net Profit rate @ 8% on total turnover is quite justified in case cited as [2015] 229 Taxman 367 (Delhi) titled as CIT-XII Vs. Subodh Gupta. In the instant case the facts are quite similar to the above case therefore we are of the view that the order of learned CIT(A) is not liable to be sustainable in the eyes of law. Therefore, we set aside the same and Assessing Officer is hereby directed to adopt the Net Profit @ 8% on the contract receipt and to reassess the return of income tax after giving full and adequate opportunity of being heard to assessee in accordance with law. Accordingly, the appeal of the assessee is hereby allowed.
ITA No.2209/M/2014 & ITA 2211/M/2014
In the penalty appeals bearing ITA No.2209/M/14 & ITA No.2211/M/14 assessee has challenged the penalty to the tune of Rs.3,74,513/- u/s. 271(1)(c) of the Act and has challenged the penalty to the tune Rs.61,480/- u/s. 271B of the Act respectively. The representative of the assessee has argued that the assessee did not conceal the particulars of his income nor furnished any inaccurate particulars of such income therefore the penalty to the tune of Rs.3,74,513/- u/s. 271(1)(c) of the Act is wrong
ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
against law and facts therefore the same is liable to be set aside. It is also argued that in case of ITA No.2211/M/214 the Assessing Officer has levied penalty to the tune Rs.61,480/- u/s. 271B of the Act wrongly and illegally therefore, the said penalty is also liable to be set aside. In support of these contentions the learned representative of the assessee has placed reliance upon the law settled in [1996] 222 ITR 691 Hon’ble Gauhati High Court in case titled as Surajmal Parsuram Todi Vs. Commissioner of Income Tax, [2010] 322 ITR 86 Hon’ble Allahabad High Court in case titled as Commissioner of Income Tax Vs. S.K.Gupta & Co. & [2014] 360 ITR 385 Hon’ble Gujarat High Court in case titled as Commissioner of Income Tax Vs. Whitelene Chemicals. In the instant case the assessee has filed the return of income by declaring his total income of Rs.5,12,380/-. The appellant is in the profession of civil contractor. An information was received from AIR that gross receipt from Contract work was reflected at Rs.71,09,140/-. Assessing Officer also observed that as per P&L Account the gross receipts from business of civil contractor was shown to the tune of Rs.38,54,755/-. When the question with regard to the difference between AIR and gross receipt reflected by the assessee was asked then the assessee filed the revised return by showing the gross receipt of Rs.1,22,95,988/- and declared his net profit to the tune of Rs.5,12,380/- as per original P&L Account. Thereafter, the income of the assessee was worked out to the tune of Rs.16,34,401/-. As we have directed to the Assessing Officer to recompute the assessee’s income by taking 8% of gross receipt as discussed above, accordingly we direct the Assessing Officer to recalculate the penalty u/s 271(1)(c) as per the revised calculation of income. We direct accordingly.
ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
So far as the appeal bearing ITA No.2211/M/14 is concern the learned representative of the assessee has argued that the order of learned CIT(A) in question is wrong against the law and facts in confirming the penalty to the tune of Rs.61,480/- u/s. 271B of the Act. Here it is pertinent to mention that the learned representative of the assessee has relied upon the law mentioned above (Supra) wherein the penalty was imposed on account of non-maintaining of accounts books u/s. 271A is erroneous. No doubt when a person is not maintaining the Account book as contemplated by section 44AB therefore, the penalty is leviable u/s. 271A of the Act. Here in the instant case the penalty was levied by the Assessing Officer on account of non-audited the Account in view of 44AB. After the reopening of the case in scrutiny, assessee filed P&L Account showing sales to the tune of Rs.1,22,95,988/- and claimed the purchases of Rs.59,24,014. The assessee also filed the Balance Sheet apparently assessee did not follow the provision u/s 44AB wherein he was under statutory obligation to get his account audited when the gross receipt exceed more than one crore rupees. If the assessee failed to comply the said provision then the penalty is leviable under section 271B of the Act whereas the law relied by the representative of the assessee speaks about the non-maintaining of the account books and to levy the penalty in view of the provision contented in section 271A. The facts of the present case is not quite similar with the law relied by the representative of the assessee. In the instant case the assessee after issuance of the notice showed his account book which was not got audited while the gross receipt was more than exceed Rs.1 crore. The law relied by the ITA No. 2209/M/14 To ITA No.2211/M/14 A.Y. 2009-10
assessee is not applicable to the present case having distinguishable facts and circumstances. Accordingly this appeal is also hereby order to be dismissed.
In the result, ITA No.2210/M/14 is partly allowed for statistical purposes whereas ITA No.2209/M/14 & ITA No.2211/M/14 are hereby ordered to be dismissed.
Order pronounced in the open court on 23rd December, 2015. (AMARJIT SINGH) (R.C.SHARMA) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 23rd December, 2015 MP MP MP MP
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant
""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT
"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार (Dy./Asstt.