Sargam Construction Pvt.Ltd.,, Surat v. The ACIT.,Circle-4,, Surat

ITA 4443/AHD/2007 | 2005-2006
Pronouncement Date: 28-05-2010 | Result: Allowed

Appeal Details

RSA Number 444320514 RSA 2007
Bench Ahmedabad
Appeal Number ITA 4443/AHD/2007
Duration Of Justice 2 year(s) 5 month(s) 11 day(s)
Appellant Sargam Construction Pvt.Ltd.,, Surat
Respondent The ACIT.,Circle-4,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 28-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 28-05-2010
Date Of Final Hearing 19-05-2010
Next Hearing Date 19-05-2010
Assessment Year 2005-2006
Appeal Filed On 17-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AT SURAT CAMP AHMEDABAD BEFORE SHRI T.K. SHARMA JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.4443/AHD/2005 ASSESSMENT YEAR:2005-06 DATE OF HEARING:19..5.10 DRAFTED:20.5.10 SARGAM CONSTRUCTION PVT. LTD. 1G SIDDH SHILA APARTMENT TIMALIAWAD NNPURA SURAT PAN NO.AADCS3947C V/S . ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-4 SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RASESH SHAH AR RESPONDENT BY:- SHRI SIDDHARTHA MUKHERJEE CIT-DR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER:- THIS APPEAL IS FILED BY THE ASSESSEE RAISING FOLLO WING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF INCOME-TAX(APP EALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION OF RS.50 24 581/-ON ACCOUNT OF DISALLOWANCE OF EXPENSE S. ITA NO.4443/AHD/2007 A.Y. 2005-06 SARGAM CONSTRUCTIONS PVT. LTD. V. ACIT CIR-4 SRT PAGE 2 2. THE ONLY ISSUE INVOLVED IN THE APPEAL IS THAT LD . CIT(APPEALS) HAS CONFIRMED THE ORDER OF ASSESSING OFFICER IN DISALLO WING EXPENSES OF RS.50 24 581/- OUT OF ON-MONEY DECLARED BY THE ASSE SSEE. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BUILDER/CONTRACTOR. A SEARCH U/S.133A WAS CARRIED OUT AT HIS BUSINESS PRE MISES. DURING THE COURSE OF SURVEY CERTAIN DOCUMENTS MARKED AS ANNEXURE-B-1 AN D B-3 WERE FOUND FROM THE PREMISES OF SHRI BHARAT V SHAH AND WERE IMPOUND ED. FROM THE EXAMINATION OF THESE DOCUMENTS THE ASSESSING OFFICER NOTICED T HAT ASSESSEE HAS RECEIVED CASH OF RS.4 38 27 621/-. WHEN BOOKS OF ACCOUNTS W ERE EXAMINED BY AO IT WAS NOTICED THAT ASSESSEE HAS RECORDED ONLY A SUM O F RS.69 14 888/- IN THE REGULAR BOOKS OF ACCOUNTS AND REMAINING SUM OF R.3 69 12 733/- WAS NOT RECORDED. WHEN SHRI BHARAT V SHAH DIRECTOR OF THE COMPANY WAS INTERROGATED HE FAIRLY ADMITTED THAT ON-MONEY OF RS.3 CRORE WAS NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. BUT ACCORDING TO THE AS SESSING OFFICER THE BALANCE SUM OF RS.69 12 733/- WAS ALSO NOT OFFERED FOR TAXA TION. WHEN ASKED TO EXPLAIN THE ASSESSEE SUBMITTED FOLLOWING BIFURCATION OF THE CASH RECORDED IN THE IMPOUNDED DIARY/DOCUMENTS:- DETAILS OF AMOUNT RECORDED IN DIARY ARE AS BELOW:- TOTAL RECEIVED AS DIARY 43827621 LESS: COLLECTED ON BEHALF OF LAND OWNERS 234000 COLLECTED FOR EXTRA WORK AND DIRECTLY PA ID TO 1654152 SUB-CONTRACTOR 18888152 NET RECEIPT 41939469 LESS: ESTIMATED EXPENSES 5024581 36914888 LESS: RECORDED IN BOOKS 6914888 NET INCOME-TAX CREDITED IN BOOKS 30000000 THE ASSESSEE FURTHER EXPLAINED VARIOUS ENTRIES IN T HE ABOVE CONTRACT WORK AS UNDER:- ITA NO.4443/AHD/2007 A.Y. 2005-06 SARGAM CONSTRUCTIONS PVT. LTD. V. ACIT CIR-4 SRT PAGE 3 PAYMENTS FOR EXTRA WORK ARE DIRECTLY PAID TO THE C ONTRACTOR BY THE PARTIES. OUT OF TOTAL OF EXTRA WORK OF RS.16.54 LAC S RS.13.91LACS PAID TO AISHVARYA ENTERPRISE AND RS.2.63 LACS TO MSP ENTERP RISE. THESE AMOUNTS HAVE BEEN PAID BY CHEQUES. THE AMOUNT IS RECORDED I N THE DIARY TO KEEP THE ACCOUNT UPTO-DATE. WE RE SUBMITTING CONFIRMATIO NS OF AISHWARYA ENTERPRISE AND MSP ENTERPRISE REGARDING EXTRA WORK FOR YOUR PERUSAL AS REGARDS RS.2.34 LACS WE WOULD LIKE TO STATE THA T SAME AMOUNT IS RECEIVED TOWARDS LAND PAYMENT. THE SAME AMOUNT IS F OR LAND. IT MIGHT BE THAT THE SAME AMOUNT IS GIVEN TO THE COMPANY TO MAK E PAYMENT TO THE LAND OWNER. WE HAVE RECEIVED THIS AMOUNT ONLY TO BE DIRECTLY REPAID TO LAND OWNER. THE LAND OWNER HAS DULY RECEIVED THE SA ME. IN VIEW OF THE ABOVE TOTAL RECEIPT AS PER BOOK COM ES TO RS.419939469. AS AGAINST THIS RS.69 14 888 IS RECORDED IN THE BOOKS AND RS.50 24 581 ARE INCURRED AS EXPENDITURE FOR EARNING THIS INCOME-TAX . AS PER PROVISIONS OF THE ACT ONLY NET PROFIT / NET INCOME-TAX IS TO BE TAXED NOT GROSS RECEIPTS. THIS CAN BE SUPPORTED BY THE SCHEME OF ACT IN VARIOUS SECTIONS. AS PER S.44AD 92% IS CONSIDERED A S EXPENDITURE AND 8% OF GROSS RECEIPT IS CONSIDERED TO BE NET INCOME- TAX IN THE CASE OF CIVIL CONSTRUCTIONS BUSINESS. AS PER S.44AF 95% OF GROSS RECEIPT IS CONSIDERED AS EXPENDITURE AND 5% OF GROSS RECEIPT I S CONSIDERED TO BE NET INCOME-TAX IN THE CASE OF RETAILS BUSINESS. AS PER S.44AB 92.5% OF GROSS RECEIPT IS CONSIDERED AS EXPENDITURE AND 7.5% OF GR OSS RECEIPT IS CONSIDERED TO BE NET INCOME-TAX IN THE CASE OF SHIP PING BUSINESS OF NON- RESIDENT. AS PER S.44BB 90% OF GROSS RECEIPT IS CO NSIDERED AS EXPENDITURE AND 10% OF GROSS RECEIPT IS CONSIDERED TO BE NET INCOME-TAX IN THE CASE OF BUSINESS OF EXTRACTION ETC. OF MINER AL OILS. THIS VERY WELL SHOWS THAT ONLY NET INCOME-TAX / NET PROFIT IS CHAR GEABLE TO TAX NOT GROSS RECEIPT OF THE BUSINESS. THE ASSESSING OFFICER CONSIDERED THE REPLY OF THE A SSESSEE BUT DID NOT AGREE TO THE CLAIM OF EXPENDITURE OF RS.50 24 581/- AND ADDE D THE SAME INTO THE TOTAL INCOME-TAX OF THE ASSESSEE. 4. WHEN MATTER WENT TO LD. CIT(APPEALS) HE CONFIRME D THE ADDITION ON THE GROUND THAT ASSESSEE DID NOT FURNISH ANY EVIDENCE O F EXPENDITURE OF RS.50 24 581/-. HIS OBSERVATION IN THIS REGARD ARE AS UNDER:- ITA NO.4443/AHD/2007 A.Y. 2005-06 SARGAM CONSTRUCTIONS PVT. LTD. V. ACIT CIR-4 SRT PAGE 4 2.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. THERE IS NO DOUBT IN THE FAC T THAT ONLY INCOME-TAX CAN BE TAXED AND NOT GROSS RECEIPTS AND THEREFORE T HE VARIOUS DECISIONS OF GUJARAT HIGH COURT OTHER HIGH COURTS ADDITION ITAT S ARE NOT DISCUSSED SEPARATELY BECAUSE THIS POINT IS WELL TAKEN. HAVING SAID THAT IT IS SEEN THAT THE TOTAL AMOUNT AS PER DIARY IS RS.4.38 CRORES. TH E ASSESSEE HAS GIVEN SOME EXPLANATION REGARDING RS.18.89 LACS AS CAN BE SEEN ABOVE. OUT OF THE NET RECEIPTS OF RS.4.19 CRORES THE ASSESSEE HAS RECORDED IN THE BOOKS OF ACCOUNTS RS.69 14 888/-. AGAINST THIS INCOME-TAX THE ASSESSEE WOULD HAVE ALSO RECORDED VARIOUS EXPENSES IN THE BOOKS OF ACCOUNTS. IN THE ENTIRE STATEMENT OF MR. BHRATBHAI SHAH DATED 4.3.05 NOWHERE THE WORKING WAS GIVEN TO SHOW THAT THERE WAS UNACCOUNTED EXPEND ITURE OF RS.50 24 581/- WHICH IS BEING CLAIMED DURING THE AS SESSMENT PROCEEDINGS FOR THE FIRST TIME. THE CLAIM IS THEREFORE CLEARLY FALSE. UNLESS THE ASSESSEE GIVES THE DETAILS SUCH A CLAIM CANNOT BE ALLOWED BE CAUSE FIRST OF ALL IT IS NOT PART OF THE STATEMENT AND SECONDLY IT CANNOT BE ALLOWED IN VIEW OF THE PROVISIONS OF EXPLANATION BELOW SECTION 37(1). THER EFORE THE ADDITION MADE BY THE AO IS CONFIRMED AND GROUNDS OF APPEAL A RE DISMISSED. 5. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THAT IN THE CONSTRUCTION BUSINESS IF ON-MONEY IN CASH IS RECEIVED THEN THER E ARE LARGE AMOUNT OF CASH EXPENDITURE WHICH ARE CARRIED OUT BY THE ASSESSEE I N ORDER TO COMPLETE THE PROJECT. SUCH PAYMENTS ARE MADE ON PURCHASE OF LAND AND TO VARIOUS CONNECTED PERSONS WHO MATTERS IN SUCCESSFUL COMPLETION OF THE PROJECT. HE SUBMITTED THAT IF TOTAL AMOUNT OF CASH DECLARED BY THE ASSESSEE AS ON-MONEY IS INCLUDED IN THE TOTAL RECEIPT THEN PROFIT DECLARED BY HIM WOULD BE AT 42.97% AS UNDER:- PARTICULARS ON MONEY (RS) IN BOOKS (RS) TOTAL RECEI PTS (RS) RECEIPTS 3 50 24 581 3 86 78 711 7 37 03 292 PROFITS 3 00 00 000 16 66 660 3 16 66 660 PERCENTAGE 85.65% 4.31% 42 .97% HE FURTHER SUBMITTED THAT TRIBUNAL IN SEVERAL CASES HAVE ALLOWED EXPENDITURE OUT OF ON-MONEY AND THEY HAVE IN MANY CASES ONLY UP HELD NET PROFIT OF 15% TO 20%. ON SUCH ON-MONEY HE REFERRED TO THE DECISION S OF TRIBUNAL AS UNDER:- ITA NO.4443/AHD/2007 A.Y. 2005-06 SARGAM CONSTRUCTIONS PVT. LTD. V. ACIT CIR-4 SRT PAGE 5 I) NARESHKUMAR B AGARWAL (HUF) & MANGTULAL HARLALK A (HUF) V. ACIT ITA NO.65/AHD/1997 DATED 08-02-1999; KISHORE MOHANLAL TELWALA V. ACIT 64 TTJ 543 (AHD) AND CIT V. S.M. OMER 201 ITR 608 (CAL) IN VIEW OF THIS CLAIM OF EXPENDITURE OF RS.50 24 58 1/- WHICH IS LESS THAN 15% OF TOTAL RECEIPT OF ON-MONEY SHOULD HAVE BEEN ALLOWED BY THE AUTHORITIES. 6. AGAINST THIS LD. SR-DR SUBMITTED THAT WHEN THERE IS NO EVIDENCE OF EXPENSES INCURRED THE CLAIM OF EXPENDITURE CANNOT B E ALLOWED. NO SUCH EVIDENCES WERE FOUND DURING THE COURSE OF SURVEY OR WAS SUBMITTED BY THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS ON RECORD. IN OUR CONSIDERED VIEW WHEREVER EVIDENCE R EGARDING RECEIPT OF ON- MONEY IS FOUND THEN BOOKS OF ACCOUNTS ARE LIABLE FO R REJECTION. ONCE PROFIT DECLARED AS PER BOOKS CANNOT BE ACCEPTED THEN A FAI R ESTIMATION OF INCOME HAS TO BE DONE. THE ASSESSING OFFICER HAS NO OPTION BUT TO REJECT THE BOOKS OF ACCOUNTS AND TAKE RECOURSE TO ESTIMATION OF INCOME BY INVOKI NG SEC.145(3). HONBLE DELHI HIGH COURT IN THE CASE OF ACTION ELECTRICALS V. DCIT (2007) 250 ITR 188 (DEL) HELD THAT WHERE UNACCOUNTED SALES WERE DISCOV ERED AND ASSESSEE SURRENDERED RS.5 LAKHS THEN IT CONSTITUTED SUFFICI ENT MATERIAL FOR THE A.O TO BASE HIS SATISFACTION THAT BOOKS OF ACCOUNTS OF THE ASSE SSEE ARE NOT CORRECT AND COMPLETE. AND IN SUCH CIRCUMSTANCES ESTIMATION OF PROFITS ON POST RESULTS WOULD BE PROPER. IF ASSESSEE IS RECEIVING ON-MONEY THEN IT CANNOT BE SAID THAT HIS BOOKS OF ACCOUNTS ARE CORRECT AND COMPLETE. FUR THER IT CANNOT BE DENIED THAT IT HAS TO PAY ON-MONEY WHILE CARRYING OUT THE BUSIN ESS OF CONSTRUCTION. IN THE CASES CITED BY THE ASSESSEE TRIBUNAL HAVE ALLOWED S UBSTANTIAL AMOUNT OF EXPENDITURE AND HAVE DIRECTED THE ASSESSING OFFICER TO TAX ONLY 15% TO 20% OF INCOME OUT OF THE TOTAL ON-MONEY. ONCE THIS IS SO THEN CLAIM OF EXPENDITURE AT ITA NO.4443/AHD/2007 A.Y. 2005-06 SARGAM CONSTRUCTIONS PVT. LTD. V. ACIT CIR-4 SRT PAGE 6 RS.54 24 581/- IS NOMINAL AND IS ONLY ABOUT 15% OF THE TOTAL RECEIPTS OF ON- MONEY AS POINTED OUT BY LD. AR. IF TOTAL RECEIPTS IN THE PROJECTS ARE INCLUDED THEN TOTAL PROFIT WORKED OUT WOULD BE 42.97% OF THE TOTAL RECEIPTS AT RS.7 37 03 292/- WHICH IS QUITE REASONABLE. IN VIE W OF THIS CLAIM OF THE EXPENDITURE MADE BY THE ASSESSEE SHOULD BE ALLOWED. AS A RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28/05/2010 SD/- SD/- (T.K.SHARMA) (D.C.AGRAWAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD DATED : 28/05/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. S 3. THE CIT(APPEALS)-I SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD