SHRI BALAJI J BHAGNURE,SURAT vs. INCOME TAX OFFICER, WARD-2(3)(1), SURAT

आयकर अपील�य अ�धकरण, सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT “SMC” BENCH, BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA No.250/SRT/2022 (AY 2012-13) (Hearing in virtual Court) Shri Balaji J. Bhagnure Income Tax Officer, 98, Santkrupa Society, In Ward-2(3)(1) Aayakar Vs Lane of Mahadev Mandir, Bhawan, Majura Gate, Godadara Devadh Road, Surat-395001 Godadara, Surat-394210 PAN No: ALKPB 8794 M अपीलाथ�/Appellant ��यथ� /Respondent �नधा�रती क� ओर से /Assessee by Shri Sapnesh R Sheth, C.A राज�व क� ओर से /Revenue by Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of hearing 27.12.2022 उ�घोषणा क� तार�ख/Date of 27.12.2022 pronouncement 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 National Faceless Appeal Centre [for short to as “NFAC/ ld.CIT(A)”] dated 26.07.2022 for assessment year 2012-13, which in turn arises out assessment order passed by Assessing Officer under section 144 r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 11.11.2019. The assessee has raised the following grounds of appeal: - “1. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer has erred in reopening assessment by issuing notice u/s 148 of the I.T. Act 1961.

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure 2. On the facts and circumstances of the case as well law on the subject, the learned Assessing Officer has erred in passing ex-parte order u/s 144 of the I.T. Act.

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure furnish the details of his income. Therefore, in absence of any explanation the Assessing Officer completed the assessment under section 144 of the Act and treated the entire alleged contractual receipt of Rs. 7,38,882/-as unexplained cash credit under section 68 of the Act, while passing assessment order on 11.11.2019. 3. Aggrieved by the reopening as well as addition under section 68 of the Act, the assessee filed appeal before Ld. CIT(A). The appeal of assessee was migrated before NFAC/ ld.CIT(A). Before Ld.NFAC/CIT(A) the assessee filed detailed written submission against reopening as well as addition made under section 68 of the Act. The assessee in his submission, submitted that Assessing Officer made reopening on the basis of ITS/AIR data. The assessee submitted that during the relevant period, the assessee was doing labour work on contract basis for M/s Desco Infratech Pvt. Ltd. and received an amount of Rs.3,69,441/-, which is evident from the contents of Form 26AS. The assessee also received salary income of Rs. 50,000/- from the same M/s Desco Infratech Private Limited. The assessee furnished copy of Form 26AS and on the basis of entries on Form

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure 26AS, the assessee explained that he has received Rs. 3,96,441/- on which TDS was made @ 10% under section 194C. The receipt is nominal and the income of assessee was below taxable limit. Thus, the issuance of notice under section 148 was not valid. 4. For non-compliance of notice of Assessing Officer, the assessee explained that assessee (he) is a small person and is not well versed with income tax matters. Therefore, he could not make proper compliance otherwise he has no intention to disregard the notice issued by Assessing Officer. On merit, the assessee submitted that it is evident from the entries of Form 26AS, that assessee has received a meagre sum of Rs.3,69,441/-. The assessee is a labour contractor and his case is covered by the provision of section 44AD of the Act and profit can be estimated @ 8% of gross receipt, which will be only Rs. 29,555/-, which is below taxable limit. Thus, the assessee was not required to file his return of income and Assessing Officer was not justified in making such addition. To support his submission, the assessee also relied on the decision of Hon'ble jurisdictional High Court in the case of CIT vs. President Industries (2002) 124 Taxman

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure 654 (Guj), wherein it is held that addition of 100% sales cannot be made and only profit can be taxed. The assessee also made a prayer that to admit the additional evidence in the interest of natural justice, being vital to prove the genuineness of his transaction of contractual receipt. 5. The NFAC/CIT(A) considering the submission of assessee affirmed the action of Assessing Officer on reopening as well as on the issue of under section 68 of the Act. On the issue of reopening, the NFAC/CIT(A) held that Assessing Officer was having information available with ITS/AIR data, which is sufficient for making foundation of initiation of reopening. Therefore, the contention of the assessee was rejected. On the addition under section 68 of the Act, the NFAC/ ld.CIT(A) held that assessee filed additional evidence under Rule 46A for admission of additional evidence. The case of assessee does not fall with in the scope of Rule 46A for admission of additional evidence, thereby rejected the plea of assessee and ultimately upheld the addition made by Assessing Officer under section 68 of the Act. Further aggrieved the assessee has filed present appeal before the Tribunal.

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure 6. I have heard the submissions of Ld. Authorized Representative (Ld.AR) for the assessee and Ld. Senior Departmental-Representative (Ld. Sr-DR) for the Revenue and perused the materials available on record and the orders of lower authorities carefully. The Ld.AR for the assessee submits that issue involved in the present appeal is very limited. The Ld.AR for the assessee submits that, though, he has a good case on reopening as reopening is permissible when an income chargeable to charge has escaped assessment, however, he may not press such issue, if he succeeds to convince the Bench that addition of Rs.7,38,880/- is not liable to be sustained. 7. Before me the Ld. AR for the assessee submits that during the relevant period, the assessee was working as a supplier of labours to M/s Desco Infratech Pvt. Ltd. The M/s Desco Infratech Pvt. Ltd. made total payment of Rs.3,69,441/- and deducted TDS of Rs. 3,694/- under section 194C. The Assessing Officer made addition of Rs. 738,882/-, which is double addition of contractual receipt, it may be due to the fact that Assessing Officer may have received information twice from different sources. In fact, the assessees total

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure contractual receipts is only Rs.3,69,441/- and the addition made by the Assessing Officer is exactly double. The Ld. AR for the assessee submits that it is settled proposition under law that entire receipt cannot be treated as “income” and only “income component can only be taxed”. The Ld. AR for the assessee submits that as per the provision of 44AD, the presumptive tax is only @ 8%. And if @ 8% of total receipt of Rs.3,69.441/- is considered as income, which would be of Rs.29,555/-, which is below taxable limit. The Ld. AR for the assessee submits that even if for the sake of argument, the receive is treated as Rs.7,38,882/-, the above income would not be more than Rs.60,000/-which is also below the taxable income. Thus, even then the income of assessee was not chargeable tax and no addition is liable to be sustained. 8. On the other hand, Ld. Sr-DR for the Revenue after hearing the submission of Ld.AR for the assessee and going through the record submits that he supports the order of lower authorities. 9. I have considered the rival submission of both the parties and have also gone through the order of lower authorities carefully. I find that there is no dispute that Assessing

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure Officer made the assessment order under section 144 r.w.s. 147 on 11.11.2019 and added addition of Rs.7,38,882/- on contractual receipt under section 68 of the Act. The Assessing Officer was not verified figure of contractual receipt from ITS/AIR date or information that how much contractual receipts was received by the assessee. I find that before NFAC/CIT(A), the assessee specifically provided that as per Form 26AS, the assessee has received only Rs.3,69,441/- and assessee also made a prayer to admit to consider the additional submission and Form AS-26. The NFAC/CIT(A) instead of considering the plea of assessee sympathetically, by considering the fact that the evidence in the form of Form-AS 26 has direct bearing and relevance for determining the issue before him, dismissed the plea of assessee. In my view, even if the assessee may not have filed copy of Form 26AS, it was the duty of NFAC/CIT(A) either to verify the fact by himself or to get to verify from the Assessing Officer about the actual contractual receipt credited to the account of assessee. The lower authority must always have kept the fact in their mind that no tax be collected without authority of law and only legitimate tax is

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure collected from the assessees. In my considered view, the action of NFAC/CIT(A) is rejecting the plea of assessee for considering the evidence, which was Form-26AS, which is part of ITS/AIR data of their own system, is not justified. 10. I find that the assessee actually received Rs.3,69,441 from M/s Desco Infratech Pvt. Ltd. and it is settled law that entire receipt cannot be treated as income rather only profit element embedded of such receipt can only be taxed as also been held by Hon'ble jurisdictional High Court in the case of President Industries (supra). Therefore, only taxable income, if any, would be at Rs. 29,555/- which is below the taxable limit. Therefore, I direct the Assessing Officer to restrict the addition to the extent of Rs. 2,9555/-. Further I find that the assessee in his all fairness has accepted that he was having a salaried income of Rs. 50,000/- from tax, though it was not the subject matter of assessment, in my constrained view, even if salary income and “income from contractual receipt” of Rs. 29,555/- is added and admissible deduction of chapter VIA is given to the assessee, the same still would be below taxable limit.

ITA No.250/SRT/2022 (A.Y 12-13) Sh. Balaji J Bhagnure 11. Considering the fact that I have granted relief to the assessee on merit, therefore adjudication on the reopening under section 147 has become academic in nature. 12. In the result, appeal of the assessee is allowed partly in above terms. Order pronounced in the open court on 27/12/2022. Sd/- (PAWAN SINGH) [�याियक सद�य JUDICIAL MEMBER] सूरत /Surat, Dated: 27/12/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat