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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: Shri N.V.Vasudevan, & Shri M. Balaganesh
SHRI M.BALAGANESH, AM
This appeal of the revenue and cross objection of the assessee arise out of the order of the Learned CIT(A), Asansol in Appeal No. 241/CIT(A)/Asl/Cir-1/Asl/10-11 dated 18-02-2013 against the order assessment of the Learned AO for the Asst Year 2008-09 framed u/s. 143(3) of the Income Tax Act , 1961 (hereinafter referred to as the ‘Act’).
The revenue has raised the following ground:- “ That the ld. CIT(A), Asansol has erred in law and on facts by allowing the relief of Rs.31,27,000/-, disallowed by the AO on account of violation of section 40A(3). “
1 ITA No.1050 & CO No.75/K/2013-B-AM Subhasish Acharyya
In the C.O ( No.75/K/2013 arising out of ITA No. 1050/K/2013 A.Y 2008-09), the assessee has raised the following ground:- 1) For that on the facts of the case the ld. CIT(A) was not justified in estimating the net Profit from Contract business @ 8% of Gross Receipts and the same may please be reduced.
The brief facts of the issue are that the assessee is engaged in the business of civil construction. During the course of assessment proceedings the ld.AR of the assessee was asked by the ld. AO to produce the relevant books of account, deposit reconciliation statement, details of work-in-progress, details of projects and major expenses shown in the audited statement of accounts. On 1-12-2010, the assessee appeared along with his authorized representative and produced the TDS certificate of Rs.40,90,171/-, which was not disclosed as his income in the audited accounts filed. The assessee has also filed an undisclosed saving bank account bearing account no.30991 maintained with Bank of India, Burnpur Branch. The ld. AO observed that the assessee during the course of hearing admitted that he did not maintain any books of account. It was further observed by the ld.AO that revised statement of accounts was submitted by the assessee on 24-11-2010 showing gross contract receipts of Rs. 2,72,85,498/- instead of Rs. 2,30,26,408/-. The assessee also submitted that he could not produce any corroborative evidence in support of the revised statements of account submitted before the ld.AO. The ld. AO found the following discrepancies in the statement of accounts filed by the assessee, which are tabulated as below:-
Particulars Original Revised Particulars Original Revised Liabilities statement of statement of Assets statement of statement of a/cs a/cs a/cs a/cs TDS 5,16,844 6,08,240 Kotak NIL 1,00,000 Mahindra Securities Ltd Bank of 8,59,415 20,00,000 Loan to NIL 2,50,000 India (Loan) Niru Enter- Prise
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B.O.I NIL 42,81,648 S.B A/C NO.30991 B.O.I NIL 15,00,000 C.C A/C NO. 300078 Cheque in NIL 26,40,585 hand Cash in 1,07,106 27,107 hand Work in 9,62,841 NIL progress
Profit & Loss A/c Particulars Original Revised Particulars Original Revised of Expendi- statement of statement of Income statement of statement ture a/cs a/cs a/cs of a/cs Deduction NIL 41,78,521 Contract 2,30,26,408 2,72,85,498 from bills receipts Staff welfare 20,650 40,650 Last year’s 5,42,911 5,42,911 Bill Bank interest 1,80,284 1,85,269 & charges Sales tax 4,52,439 5,26,022 Accounting 18,000 NIL Charge
4.1 The ld. AO also observed that in response to show cause notice dated 15-12- 2010, the assessee submitted a reply showing gross contract receipts to the tune of Rs.3,11,48,484/- instead of Rs.2,72,85,498/- and materials deduction on it amounting to Rs. 48,28,417/-. The ld. AO found that gross contract receipts has been revised by the assessee for the second time. Accordingly, the ld. AO observed that the revised statement of accounts and original statement of accounts as submitted by the assessee could not be examined. Hence, he resorted to estimate the N.P at 8% of net contract receipts and made an addition of Rs.21,70,612/- . Apart from this, the ld.AO also made disallowance of Rs.31,27,000/- u/s. 40A(3) of the Act.
3 ITA No.1050 & CO No.75/K/2013-B-AM Subhasish Acharyya
On 1st appeal, the ld.CIT(A) upheld the addition made on account of estimation 5. of N.P @ 8% by holding as under:- “ 5. The appellant in the ground 2 has pleaded to reduce the same. In written submission the plea was to reduce to 5%. I had considered all aspects of the same. The matter of compulsory maintenance of accounts was seriously violated. No evidence enabling Assessing Officer to compute income correctly has been submitted. The deficiency in according is far too serious to fix income on a flat rate at a low level. In the circumstance the estimate at 8% made by the Assessing Officer is liberal. I confirm the estimation at 8%. The ground is dismissed.”
5.1 With regard to disallowance made u/s. 40A(3) of the Act, the ld. CIT(A) held that once the N.P is estimated, there is no question of making any separate disallowance u/s. 40A(3) of the Act.
Aggrieved, the revenue as well as the assessee are in appeal before us by raising the aforesaid ground.
The ld.DR relied on the order of the ld.AO. In respect of cross objection, the ld. AR has filed before us comparative chart containing the net profit disclosed by the assessee from A.Y 2005-06 onwards and fair estimation of the net profit.
We have heard the rival submissions. We find that the ld.AR has filed a comparative statement of gross contract receipts and net profit details from A.Y 2005- 06 onwards, which are reproduced herein below:- “Comparative Statement of Gross Contract Receipts And Net Profit Assessed Assessment Year GrossContract Assessed % Remarks Receipts Net Profit 2005-06 2,564,845.00 210,317.00 8.19 u/s. 143(1) 2006-07 7,334,574.00 306,728.00 4.18 u/s. 143(1) 2007-08 7,634,817.00 432,472.00 5.66 u/s.143(1) 2008-09 26,742,587.00 718,434.00 2.68 Disclosed by Assessee. Assessed at 8%
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We find that the average of net profit for last three years works out to 6%. We feel the estimation of net profit at 6% of net receipts in the facts and circumstances of the case would meet the ends of justice. The Ld. AO is directed accordingly. The Cross objection of the assessee is partly allowed to that extent.
With regard to the revenue’s appeal, we feel that the ld.CIT(A) had rightly concluded that when net profit is estimated, then there cannot be any separate disallowance/addition u/s. 40A(3) of the Act. We place reliance on the following decisions in support of this proposition:- • CIT Vs. Mohammad Dhurabudeen (2008) 4 DTR (Mad) 218 • CIT Vs. Banwarilal Banshidar (1998) 229 ITR 229(All) • CIT Vs. Smt. Santosh Jain (2008) 296 ITR 324(P&H) 159 Taxman 392(P & H) • CIT Vs. Purushottamlal Tamrakar Uchehra (2003) 184 CTR (MP) 349(2004) 270 ITR 314(MP) • Indwell Construction Vs. CIT (1999) 232 ITR 776(AP)
In view of the above, the ground raised by the revenue is dismissed.
In the result, the appeal of the revenue is dismissed and cross objection of the assessee is partly allowed as stated above. ORDER PRONOUNCED IN THE OPEN COURT ON 15-4-2016.
Sd/- Sd/- (N.V.Vasudevan, Judicial Member ) (M. Balaganesh, Accountant Member) Date: Date 15 -4 -2016
Copy of the order forwarded to:-
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1.. The Appellant/department: The ACIT, Cir-1, Asansol, Lower Chelidanga, Asansol-4. 2 The Respondent/assessee: Shri Subhasish Acharyya, Shanti Nagar Vivekanda Road, Burnpur, Dist Burdwan. 3 /The CIT, 4.The CIT(A)
DR, Kolkata Bench 6. Guard file. True Copy, By order, Asstt Registrar
**PRADIP SPS
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