ITO, Etawah v. M/s M.P.Singh,Contractor, Etawah

ITA 626/AGR/2008 | 2006-2007
Pronouncement Date: 25-05-2010 | Result: Dismissed

Appeal Details

RSA Number 62620314 RSA 2008
Assessee PAN AAFCM4688C
Bench Agra
Appeal Number ITA 626/AGR/2008
Duration Of Justice 1 year(s) 7 month(s) 15 day(s)
Appellant ITO, Etawah
Respondent M/s M.P.Singh,Contractor, Etawah
Appeal Type Income Tax Appeal
Pronouncement Date 25-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-05-2010
Date Of Final Hearing 23-04-2010
Next Hearing Date 23-04-2010
Assessment Year 2006-2007
Appeal Filed On 10-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.625/AGR/2008 ASST. YEAR: 2006-07 M/S. M.P. SINGH CONTRACTOR VS. INCOME-TAX OFF ICER NUMAISH CHAURAHA ETAWAH. ETAWAH. (PAN : AAFCM 4688 C) ITA NO.626/AGR/2008 ASST. YEAR: 2006-07 INCOME-TAX OFFICER VS. M/S. M.P. SINGH CONTR ACTOR ETAWAH. NUMAISH CHAURAHA ETAWAH. (PAN : AAFCM 4688 C) (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI NAVIN GARGH ADVOCATE REVENUE BY : SHRI R.C. SHARMA JR. D.R. ORDER PER P.K. BANSAL A.M.: THESE ARE CROSS APPEALS FILED AGAINST THE ORDER OF THE CIT(A) DATED 12.08.2008. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- (1) THAT THE APPELLANT IS A CIVIL CONTRACTOR AND D ISCLOSED 2.09% NET PROFIT RATE BEFORE ALLOWING DEDUCTION U/S 40(B). VARIOUS REASO NS WERE SUBMITTED BEFORE THE AUTHORITIES BELOW FOR ALLEGED LOW NET PROFIT RATE. (2). THAT LEARNED I.T.O. APPLIED NET PROFIT RATE AT 8% WHICH WAS REDUCED TO 5% BY THE LEARNED C.I.T. (APPEALS). 2 (3) THAT IN ANY VIEW OF THE MATTER THE NET PROFIT R ATE APPLIED BY THE LEARNED C.I.T. (APPEALS) IS EXCESSIVE CONSIDERING THE HISTO RY OF THE LAST SEVERAL YEARS AND ALSO CONSIDERING GREAT IMPROVEMENT IN BUSINESS OF T HE APPELLANT. (4) THAT INTERNET INCOME WHICH WAS RECEIVED ON THE SECURITY & FDRS ETC. PLEDGED WITH THE VARIOUS DEPARTMENTS IS BUSINESS IN COME AND SHOULD NOT BE ADDED SEPARATELY. 2. WHILE THE REVENUE HAS TAKEN THE FOLLOWING EFFECT IVE GROUNDS OF APPEAL :- (1) THAT THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS)-II AGRA HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW REL IEF OF 3% BY LOWERING RATE OF PROFIT FROM 8% TO 5%. (2) THAT THE AORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-II AGRA IS ERRONEOUS IN LAW AND ON FACTS BEING CONTRAD ICTORY; BY JUSTIFYING AOS ACTION OF REJECTING THE BOOKS OF ACCOUNT UNDER SECT ION 145(3) OF THE IT ACT 1961 ON ONE HAND AND ALLOWING RELIEF ON THE OTHER HAND W ITHOUT ASSIGNING ANY REASON. 3) THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS)-II AGRA HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW INT EREST PAYMENT TO THIRD PARTIES. 3. ALL THE THREE GROUNDS TAKEN BY THE REVENUE AND T HE GROUNDS TAKEN BY THE ASSESSEE RELATE TO THE REDUCTION AND SUSTENANCE OF NET PROFIT (N.P. ) IN THE BUSINESS OF THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SUBMITTED THE RETURN BEING A CIVIL CONTRACTOR DECLARING AN INCOME OF RS.4 70 270/-. T HE A.O. ASKED THE ASSESSEE TO PRODUCE COMPLETE SET OF BOOKS OF ACCOUNTS ALONG WITH ALL TH E BILLS/VOUCHERS. BUT THE ASSESSEE DID NOT SUBMIT ALL THE BOOKS. ONLY THE CASH BOOK LEDGER AND SOME PURCHASE VOUCHERS WERE PRODUCED. THE ASSESSEE ALSO ADMITTED THAT NO STOCK REGISTER W AS MAINTAINED BY HIM. THE A.O. REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE INCOM E-TAX ACT 1961 (THE ACT HEREINAFTER) AND COMPUTED THE PROFIT @ 8% ON THE GROSS RECEIPTS SUBJ ECT TO DEPRECIATION AND SALARY TO THE PARTNERS. 3 THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE A.O. SO FAR IT RELATES TO THE REJECTION OF THE BOOKS ARE CO NCERNED BUT DIRECTED THE A.O. TO APPLY A FLAT RATE OF 5% ON TOTAL CONTRACT RECEIPTS SUBJECT TO DEPRECI ATION AND DEDUCTION UNDER SECTION 40(B) OF THE ACT. BOTH THE ASSESSEE AS WELL AS THE REVENUE HAVE COME IN APPEAL AGAINST THE AFORESAID DIRECTION. 5. LD. A.R. BEFORE US SUBMITTED THAT THE ASSESSEE I S A CIVIL CONTRACTOR AND DURING THE YEAR THE ASSESSEE HAS DISCLOSED N.P. RATE @ 2.09% ON THE BASIS OF THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY HIM AND BEFORE ALLOWING DEDUCTION UND ER SECTION 40(B) OF THE ACT. BY REFERRING TO THE SUBMISSION MADE BEFORE THE CIT(A) IT WAS POINT ED OUT THAT THE N.P. RATE OF THE ASSESSEE VARIED FROM A.Y. 1999-2000 TO 2005-06 FROM 1.39% TO 6.62%. FOR THIS OUR ATTENTION WAS DRAWN TOWARDS PAGE NO.3 OF THE ORDER OF THE CIT(A) SHOWIN G THE TURNOVER N.P. AND N.P. RATE FOR ALL THESE YEARS. THE A.O. HAD APPLIED THE RATE @ 8% ON GROSS RECEIPTS WITHOUT ASSIGNING PROPER REASONS. IT WAS POINTED OUT THAT CONTRACT OBTAINED FROM M.P.R.R.D.A.P.T.U. BHIND WAS 17.51 BELOW THE SCHEDULED RATE. IN THE CASE OF THE ASSES SEE THE G.P. RATE COMES TO 11.1%. OUR ATTENTION WAS DRAWN TOWARDS THE ORDER OF THE I.T.A. T. AGRA BENCH IN ITA NOS.183 & 186/AGR/2008 FOR THE A.Y. 2005-06 IN THE CASE OF TH E ASSESSEE WHERE ALSO WHEN THE A.O. APPLIED THE N.P. RATE @ 8% AND CIT REDUCED IT TO 5% BUT TRI BUNAL DIRECTED THE A.O. TO APPLY N.P. RATE AS PER N.P. DECLARED IN THE IMMEDIATELY PRECEDING YEAR SUBJECT TO DEPRECIATION AND DEDUCTION UNDER SECTION 40(B) OF THE ACT. IN THE PRECEDING YEAR T HE N.P. DECLARED BY THE ASSESSEE WAS 3.95% AND THUS THE LD. A.R. CONTENDED THAT THE N.P. RATE COU LD NOT BE MORE THAN THAT. 4 6. THE LD. D.R. ON THE OTHER HAND RELIED ON THE OR DER OF THE A.O. AND VEHEMENTLY CONTENDED THAT THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS BY NOTING THE DEFICIENCY IN THE BOOKS. REFERRING TO ORDER OF THE TRIBUNAL IT WAS POINTED OUT THAT T HE REJECTION OF BOOKS OF ACCOUNTS WAS ALSO CONFIRMED IN THE PRECEDING A.Y. ONCE THE BOOKS ARE REJECTED THE A.O. HAS TO ESTIMATE THE N.P. ON THE BASIS OF THE COMPARATIVE CASES. SECTION 44A D ALTHOUGH NOT APPLICABLE TO THE ASSESSEE IN ITS CASE BUT PROVIDES THE GUIDE THAT IN THE CASE O F CIVIL CONTRACTOR THE N.P. HAS TO BE ESTIMATED @ 8%. EVEN THE DEDUCTION FOR THE DEPRECIATION AS WEL L AS REMUNERATION TO THE PARTNERS UNDER SECTION 40(B) ARE NOT SEPARATELY ALLOWED IN VIEW OF SECTION 44AD(2). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ALONG WITH ORDERS OF THE TAX AUTHORITIES. WE NOTED THAT IN THE PRECEDING YEAR A LSO THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE REJECTED ON THE SAME BASIS AS HAS BEE N REJECTED DURING THE YEAR. THE TRIBUNAL IN ITA NOS.183 & 186/AGR/2008 FOR A.Y. 2005-06 HAS CON FIRMED THE ACTION OF THE A.O. REJECTING THE BOOKS OF ACCOUNTS. EVEN THE TRIBUNAL HAS DIREC TED THE A.O. TO ESTIMATE THE N.P. AT THE RATES AS WERE DECLARED IN THE IMMEDIATELY PRECEDING YEAR BY THE SAME ASSESSEE SUBJECT TO DEPRECIATION AND DEDUCTION UNDER SECTION 40(B) OF THE ACT. THE ORDER OF THE TRIBUNAL HAS ATTAINED FINALITY. EVEN THOUGH BOTH THE PARTIES HAVE VEHEMENTLY CONTEN DED BUT DID NOT DISAGREE THAT THE FACTS DURING THE YEAR ARE THE SAME AS WERE IN THE IMMEDIA TELY PRECEDING A.Y. FOR WHICH THE I.T.A.T. HAS PASSED THE ORDER. EVEN NO COGENT MATERIAL OR E VIDENCE WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY PROVE THAT THE FACTS INVOLVED IN THIS A.Y. ARE DIFFERENT AS TO THE EARLIER A.Y. 2005-06. WE THEREFORE ARE BOUND TO FOLLOW THE ORDER OF THIS TR IBUNAL IN THE CASE OF THE ASSESSEE IN ITA NOS.183 & 186/AGR/2008. RESPECTFULLY FOLLOWING THE SAID ORDER WE DIRECT THE A.O. TO APPLY THE N.P. RATE AS PER THE N.P. DECLARED IN THE IMMEDIATE LY PRECEDING YEAR BY THE ASSESSEE SUBJECT TO 5 DEPRECIATION AND DEDUCTION UNDER SECTION 40(B) OF T HE ACT. THUS GROUNDS NO.1 & 2 IN REVENUES APPEAL ARE DISMISSED WHILE GROUNDS NO.1 TO 3 IN ASS ESSEES APPEAL ARE PARTLY ALLOWED. 8. GROUND NO.3 IN REVENUES APPEAL RELATES TO THE A LLOWANCE OF INTEREST PAID TO THE THIRD PARTIES. 9. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE A.O. DID NOT ALLOW THE DEDUCTION OF RS.1 32 868/- PAID TO THIRD PARTIES FROM THE GROSS RECEIPTS WHILE ESTIMATING THE N.P. @ 8%. WHEN THE MATTER WENT BEFORE THE CIT(A) THE ASSESSE E CONTENDED THAT HE HAS BORROWED THE MONEY FROM THE THIRD PARTIES AND HAS PAID INTEREST TO THEM AND THEREFORE THE INTEREST WAS ALLOWABLE AS DEDUCTION OUT OF THE PROFIT BY APPLYIN G N.P. RATE. THE CIT(A) ALLOWED THE DEDUCTION TO THE ASSESSEE. 10. LD. D.R SUPPORTED THE ORDER OF THE TAX AUTHORIT IES WHILE THE LD. A.R. RELIED ON THE ORDER OF THE TRIBUNAL FOR A.Y. 2005-06 IN THE CASE OF THE ASSESSEE IN ITA NO.183 & 186/AGR/2008. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL. WE NOTED THAT THIS TRIBUNAL HAS CONF IRMED THE ORDER OF THE CIT(A) ALLOWING INTEREST PAID TO THIRD PARTIES. RESPECTFULLY FOLLO WING THE DECISION OF THIS TRIBUNAL DATED 13.10.2009 IN ITA NO.183 & 186/AGR/2008 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY CONFIRM THE SAME. 6 12. GROUND NO.4 IN ASSESSEES APPEAL RELATES TO THE FACT THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE ON THE SECURITY & F.D.RS. SHOULD BE AS SESSED AS INCOME FROM BUSINESS. WE NOTED THAT SIMILAR ISSUE HAS ARISEN IN THE CASE OF THE AS SESSEE DURING THE A.Y. 2005-06 AND IN THAT A.Y. ALSO THIS TRIBUNAL IN ITA NO.183 & 186/AGR/2008 VID E ORDER DATED 13.10.2009 CONFIRMED THE ORDER OF THE CIT(A) FOLLOWING THE ORDER OF THE SPEC IAL BENCH IN THE CASE OF DCIT VS. ALLIED CONSTRUCTION 105 ITD 1 (DELHI) WHERE THE INTEREST INCOME HAS TO BE TREATED AS INCOME FROM OTHER SOURCES AND NOT AS A BUSINESS INCOME. RESPEC TFULLY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE DATED 13.10.2009 WE CONFI RM THE ORDER OF THE AUTHORITIES BELOW ASSESSING THE INTEREST AS INCOME FROM OTHER SOURCES AND NOT AS A BUSINESS INCOME AND THUS GROUND NO.4 OF THE ASSESSEES APPEAL STANDS DISMISSED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHILE THAT THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.05.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH MAY 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY