ARUN KUMAR CHOUDHURY,BHUBANESWAR vs. ITO, BERHAMPUR

This is an appeal filed by the assessee against the order of CIT(A)-1,

Bhubaneswar, dated 30.4.2015, for the assessment year 2010-2011.

“1. That the Learned CIT (A) has erred in upholding the contention of Learned AO who has mis-appreciated/misconstrued the facts and his conclusion that the arrangement of pooling turnover and business between the firm and its partner Karta is not acceptable. This has clearly led to double taxation as the following income is included in revenue of the firm and this disallowance WILL LEAD TO DOUBLE TAXATION AND HENCE thus his aforesaid conclusion is unjustified, excessive, arbitrary, erroneous and bad in law. These income are detailed below :

2 ITA No. 342/CT K/ 2015 Asse ssment Year :20 10- 201 1

a. An interest income derived from the deposits made from the funds sourced from the firm were rightly added to the firm income and offered to tax as a matter of practice and precedence. The learned CIT has erred in confirming the improper addition made by the Learned ITO of Rs 12,93,062 as interest income although the same was included in the income of the Firm source of the funds being taken from the Firm. This clearly led to double taxation and hence bad in law.

b. The assessee procured the contract business as technical entrepreneur license holder and clubbed it with the firm turnover as a matter of practice and precedence. The learned CIT has erred in confirming the improper addition made by the Learned ITO of Rs 38,365/- as 8% income on contract turnover executed and included in the turnover of the Firm. This clearly led to double taxation and hence bad in law.”

authorities and materials available on record. The Assessing Officer found

from Form 26AS statement that the assessee had received interest of

Rs.7,61,960/- from banks and gross contract receipts amounting to

Rs.4,79,567/- from the Executive Engineer, Ganjam R&B Division-II,

Berhampur. The assessee did not disclose income from these sources in the

return of income. Therefore, the Assessing Officer added Rs.12,93,062/-

to the income of the assessee. He further estimated the income at

Rs.38,365/- @ 8% of the gross contract receipts of Rs. 4,79,567/- and

added the same to the income of the assessee.

assessee is a partnership firm M/s. Jagannath Choudhury and the interest

amount of Rs.12,93,062/- is included in the total interest of Rs.59,74,435/-

3 ITA No. 342/CT K/ 2015 Asse ssment Year :20 10- 201 1

which has been offered to tax in the hands of the firm. It was also submitted

that the contract receipts of Rs.4,79,567/- has also been included in the

gross contract receipts of the firm. The assessee did not furnish any

evidence for the said claims and, therefore, the explanation of the assessee

was not accepted by the Assessing officer.

before the Assessing Officer. It was submitted that the assessee is an A-

Class Engineer Contractor and is a partner in the firm M/s. Jagannath

Choudhury. The interest added by the Assessing Officer and the contract

receipts considered in the hands of the appellant are already offered to tax

in the hands of the firm M/s. Jagannath Choudhury and, therefore, the

additions made by the Assessing Officer amounts double addition. It was

further stated that as per the agreement between the firm M/s. Jagannath

Choudhury and the assessee as a partner, the assessee was prohibited

to carry on competing business separately and if he gets any

independent business, the same shall be transferred to the firm. It was

submitted that the contract receipts considered in the hands of the

assessee had been transferred to the firm and the interest receipt was in

respect of security deposits and performance guarantee given out of the

funds of the firm and hence, interest had been offered to tax in the hands

of the firm M/s. Jagannath Choudhury.

4 ITA No. 342/CT K/ 2015 Asse ssment Year :20 10- 201 1

The Assessing Officer in his remand report dated 8.10.2013 stated that

M/s. Jagannath Choudhury has offered interest of Rs.59,74,435/- and as

per the sub-ledger, the same includes interest of Rs.14,87,328/- on

account of Sri Arun Kumar Choudhury. The amount does not exactly tally

with the interest assessed in the hands of the assessee. It was further

stated that as per the re-constituted partnership deed, Arun Kumar

Choudhury(HUF) is a partner and the assessee is not a partner in the firm

M/s. Jagannath Choudhury which contradicts the assessee's submissions

during the assessment proceedings as well as appeal proceedings. In view

of the same, the Assessing Officer opinioned that the assessee is not

contractually bound to include or transfer the contract business solicited or

acquired by him to the firm M/s. Jagannath Choudhury. The contract is

between M/s. Jagannath Choudhury and the partner Arun Kumar

Choudhury(HUF) which requires the latter to pool the business or transfer

the business to the firm M/s. Jagannath Choudhury, hence there is no

restraint on the assessee in carrying out independent business outside the

business of the firm M/s. Jagannath Choudhury.

the remand report has held that the assessee during the course of

assessment proceedings as well as during the course of appeal hearing

submitted that that the assessee is a partner in the firm M/s. Jagannath

5 ITA No. 342/CT K/ 2015 Asse ssment Year :20 10- 201 1

Choudhury is false and misleading as has been found by the Assessing

Officer in the remand report. The assessee is not under contractual

obligation to transfer any business to the firm M/s. Jagannath Choudhury.

Hence, the contract receipts in the name of the assessee have to be

considered in the hands of the assessee. It is not the case that the firm

M/s. Jagannath Choudhury has executed the contract taken in the name of

the assessee. The assessee has received interest from banks in respect of

various deposits in his name and he is not under contractual obligation to

transfer such income to the firm M/s. Jagannath Choudhury. It is also

found that TDS has been made in respect of interest paid in the name of

the assessee as per 26AS statement. The agreement between the firm and

the partner Arun Kumar Choudhury (HuF) cannot be binding on the

assessee. The record shows that the assessee has received interest and

executed contracts in his name and TDS made on the interest is credited in

the name of the assessee. In view of the same, there is no reason that

interest of Rs.12,93,062/- should not be assessed in the hands of the

assessee. Since the contract receipts of Rs.12,93,062/- has been received

by the assessee for the contract works executed by him and no accounts

have been submitted for the same, the Assessing Officer is justified in

estimating income of Rs.38,365/- @ 8% which is reasonable. Hence, he

confirmed the addition of Rs.12,93,062/- and dismissed the appeal of the

assessee.

6 ITA No. 342/CT K/ 2015 Asse ssment Year :20 10- 201 1

the submissions made before the lower authorities.

Officer in his remand report dated 8.10.2013 submitted to the CIT(A) that

as per the re-constituted partnership deed, Arun Kumar Choudhury(HUF)

is a partner and the assessee is not a partner in the firm M/s. Jagannath

Choudhury and, therefore, the assessee is not contractually bound to

include or transfer the contract business solicited or acquired by him to the

firm M/s. Jagannath Choudhury, ld A.R. of the assessee conceded to this

fact. Further, no specific error or mistake in the findings of the CIT(A) could

be pointed out by ld A.R. of the assessee. Therefore, I am of the considered

view that no interference with the order of the CIT(A) is called for and

ground of appeal of the assessee is dismissed.

Order pronounced in the open court on 29/03/2017 in the presence

of parties.

Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 29/03/2017 B.K.Parida, SPS

7 ITA No. 342/CT K/ 2015 Asse ssment Year :20 10- 201 1

Copy of the Order forwarded to : 1. The Appellant : Arun Kumar Choudhury, 3rd Canal Street, Gandhi Nagar, Berhampur. 2. The respondent: ITO, Ward-1, Berhampur 3. The CIT(A)-1, Bhubaneswar. 4. Pr.CIT-1, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack