Income Tax Appellate Tribunal - Agra
Ravi Dubey, Agra vs Department Of Income Tax on 17 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND
SHRI B.P. JAIN, ACCOUNTANT MEMBER
ITA No.228/Agr/2010
Assessment Year: 2006-07
Income Tax, Officer - 1(3), vs. Shri Ravi Dubey,
Agra. 117-B, Nehru Nagar, Agra.
(PAN: AFWPD 8351 C).
(Appellant) (Respondent)
Appellant by : Shri A.K. Sharma, Jr. D.R.
Respondent by : Shri Rajesh Malhotra, C.A.
Date of Hearing : 17.11.2011
Date of Pronouncement : 21.11.2011
ORDER
PER BENCH :
This appeal of the Revenue arises from the order of ld. CIT(A)-I, Agra dated 31.3.2010 for the Assessment Year 2006-07.
2. The Revenue has raised the following grounds of appeal :-
"1. That the CIT(A)-1, Agra has erred in law and on facts of the case in deleting the addition of Rs.29,88,132/- made on account of net profit rate of 8% to the gross receipts by directing the Assessing Officer to apply the net profit @ 8% on net receipt after reduction of 2 ITA No.228/Agr/2010 A.Y. 2006-07 cost of material ad other charges deducted by M/s. Gammon India Limited;
2. That the Ld. CIT(A)-1, Agra has erred in law and on the facts of the case in deleting the addition of Rs.3,23,00,625/- on the ground that since the appellants profit has been calculated after applying net profit, the separate addition u/s. 40(a)(ia) cannot be sustained and without appreciating the fact that the assessee's turnover for A.Y. 2005-06 was worked out at Rs.40,60,239/-;
3. That the CIT(A)-1, Agra has erred in law and on the facts of the case in deleting the addition of Rs.2,24,890/- made on account of opening balance in capital account without appreciating the fact that during A.Y. 2005-06 no books of account were maintained by the assessee and income of Rs.73,000/- was shown from fast food business on estimate basis;
4. That the CIT(A)-1, Agra has erred in law and on the facts of the case in deleting the addition of Rs.8,95,000/- + Rs.38,000/- made on account of unexplained investment in car and scooter respectively without appreciating the fact that the assessee never produced the books of accounts with bills and vouchers either during assessment proceedings or remand proceedings. Therefore, cash flow statement furnished during appeal proceedings may not be relied upon.
5. That the order of the CIT(Appeals)-1, Agra is erroneous in law and on the facts of the case and that the order of the A.O. be restored;
6. That the appellant craves leave to add or delete or alter or modify any ground during the appellate proceedings.
3. As regards ground no.1, the facts are that the assessee is the proprietor of the business of sub-contractor of road construction. This is the first year of business and the receipts declared are from M/s. Gammon India Limited. Sub-contract work has been shown at Rs.3,73,51,661/- on which net profit of Rs.3,13,394/- has 3 ITA No.228/Agr/2010 A.Y. 2006-07 been declared at 0.839% only. In the absence of details of books of account, the Assessing Officer adopted 8% of the receipts at Rs.29,88,132/-. The ld. CIT(A), after accepting the additional evidence under rule 46A and the report of the A.O., adopted 8% of the net receipts i.e. contract receipt minus the receipt on account of material purchased.
4. We have heard the rival contentions and perused the facts of the case. We concur with the views of the ld. CIT(A) that the cost of material reimbursed cannot be a part of the contract receipt which has rightly been deducted by the ld. CIT(A) and therefore, we find no error in his order. Thus, ground no.1 of the Revenue is dismissed.
5. A regards ground no.2 of the Revenue, the Assessing Officer has invoked section 40(a)(ia) of the Act and made additions accordingly. The assessee made the submissions before the ld. CIT(A) which were forwarded to the A.O. for his comments and the A.O. reiterated the views taken in assessment order. The ld. CIT(A) was of the view that the books of account of the assessee have been rejected by invoking the provisions of section 145(3) of the Act. Therefore, separate disallowance under section 40(a)(ia) of the Act is not tenable and accordingly deleted the addition made by the A.O. Also the assessee's turnover in 4 ITA No.228/Agr/2010 A.Y. 2006-07 the preceding year was not exceeding `40 lacs, therefore provisions of section 194C are not attracted.
6. We have heard the rival contentions and perused the facts of the case. We do not concur with the finding of the ld. CIT(A) that once the book having been rejected by invoking the provisions of section 145(3) of the Act then separate disallowance under section 140(a)(ia) of the Act is not tenable. In this regard, Hon'ble Allahabad High Court, Lucknow Bench, in the case of CIT vs. Pradeshiya Industrial and Investment Corporation of U.P. Limited reported in (2010) 325 ITR 583 (All.) has clearly held as under (head note reproduced for the sake of convenience) :-
"The Supreme Court in Shree Sajjan Mills Limited vs. CIT (1985) 156 ITR 585 (SC) held that for gratuity to be deductible under the Income Tax Act, 1961, it must fulfill the conditions laid down in section 40A(7) of the Act. The deduction cannot be allowed on general principles under any other section of the Act because sub-section (1) of section 40A makes it clear that the provisions of the section shall have effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head "Profits and gains of business or profession".
For the assessment year 1984-85, the assessee claimed deduction for an amount of ` 41,790 representing the insurance premium paid to the LIC to insure against all the liabilities that might arise under the Payment of Gratuity Act, 1972. The Assessing Officer held that the amount was not deductible but the Tribunal held that the amount was allowable under section 37(1). On a reference : 5 ITA No.228/Agr/2010
A.Y. 2006-07 Held, that the payment representing the premium paid to the LIC securing an insurance against the liabilities arising under the 1972 Act was hit by the provisions of section 40A(7)(a) of the Act and was not an allowable deduction under section 37(1) of the Act."
7. The Hon'ble Allahabad High Court in the aforementioned judgement has followed the judgement of Hon'ble Supreme Court in the case of Shree Sajjan Mills Limited vs. CIT, 156 ITR 585 where it has also been held by the Hon'ble Supreme Court as under (taken from the head notes of Shree Sajjan Mills Limited case at page 586) :-
"Actual payments or provisions of payment could have been eligible for deduction or could have been deducted either under section 28 or under section 37 of the Act. But the use of the non obstante expression in section 40A(1) makes it clear that if there is any legislative base dealing with the provision for gratuity, then the same would be applicable in spite of and notwithstanding any other provision of the Act. Read with the marginal note to section 40A, the non obstante clause of sub-section (1) of section 40A has an overriding effect over the provisions of any other section by providing that the provisions of the section will have effect notwithstanding anything to the contrary contained in any other provision relating to the computation of income under the head "Profits and gains of business or profession". Expenditures or allowances which are deductible under any other provision relating to the head "Business or profession" will be disallowed in cases to which the provisions of section 40A apply."
8. Therefore, from the reading of the above judgements of the Hon'ble High Court and the Hon'ble Supreme Court, by the use of non obstante expression under 6 ITA No.228/Agr/2010 A.Y. 2006-07 section 40A(1) which has an overriding effect over the provisions of any other section by providing that the provisions of the section will have effect notwithstanding anything to the contrary contained in any other provision relating to the computation of income under the head "profits and gains of business or profession". In the present case there is non-obstante clause in section 40 also which reads as under :-
"Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "profit and gains of business or profession"
9. Therefore, in the circumstances and facts of the case, the disallowance made under section 40(a)(ia) of the Act is independent of any other provisions of the Act. The cases relied upon by the ld. Authorised Representative cannot give any benefit to the assessee in view of the judgement of Hon'ble Allahabad High Court in the case of Pradeshiya Industrial and Investment Corporation Limited (supra) and the judgement of Hon'ble Supreme Court in the case of Shree Sajjan Mills Limited (supra).
10. Moreover, the turnover of the total sales, gross receipts or turnover from the business or profession is less than the monitory limit as provided under section 44AB is without any material on record in the preceding Assessment Year. 7 ITA No.228/Agr/2010
A.Y. 2006-07 Nothing has been placed by the assessee in the Paper Book containing 85 pages. Further, the remand report has also not confirmed total sales, gross receipts or turnover to be below the monitory limit specified under section 44AB of the Act in the preceding year. Therefore, in the circumstances and the facts of the case, the ld. CIT(A) is not justified in deleting the addition made by the Assessing Officer. Thus, ground no.2 of the Revenue is allowed.
11. In ground no.3, the brief facts are that the A.O. made addition of Rs.2,24,890/- on account of unexplained opening balance of the assessee's capital. The ld. CIT(A) deleted the same after having the remand report and the explanation given by the A.O.
12. We have heard the rival contentions and perused the facts of the case. This is the first year of the assessee and, therefore it was argued that there is no possibility of any income and which cannot be introduced as opening capital which of course submitted by the ld. Authorised Representative in his submission dated 16.06.2009 is out of the Savings Bank Account of the assessee maintained with ICICI Bank, Sanjay Place as at 01.04.2005. The bank account number is 628701501674. Therefore, in the circumstances and facts of the case, we find no 8 ITA No.228/Agr/2010 A.Y. 2006-07 error in the order of the ld. CIT(A) who has rightly deleted the addition. Thus, ground no.3 of the Revenue is dismissed.
13. In ground no.4, the brief facts are that he A.O. has made an addition of Rs.8,95,000/- on account of investment in Car and Rs.38,000/- as investment in scooter. The assessee submitted expenses before the ld. CIT(A) which were forwarded to the A.O. for remand report which was received and the ld. CIT(A) after receiving the remand report and facts and circumstances of the case deleted the addition made by the A.O. It was submitted that the car has been purchased from the borrowed fund from ICICI Bank, Agra and the copy of loan account was submitted and the scooter was introduced in business as capital contribution by the proprietor at its cost price which was taken on loan and an installment of Rs.3010/- per month was being paid to repay the loan on scooter. Therefore, in the circumstances and facts of the case, we find no error in the order of the ld. CIT(A) who has rightly deleted the addition made by the A.O. Thus ground no.4 of the Revenue is dismissed.
14. Ground nos.5 & 6 of the Revenue are general in nature and therefore do not require any adjudication.
9 ITA No.228/Agr/2010
A.Y. 2006-07
15. In the result, appeal of the Revenue in ITA No.228/Agr/2010 is partly allowed.
(Order pronounced in the open Court on 21.11.2011) Sd/- Sd/-
(H.S. SIDHU) (B.P. JAIN)
Judicial Member Accountant Member
Date: 21st November, 2011
PBN/*
Copy of the order forwarded to:
Appellant/Respondent/CIT concerned/CIT(Appeals) concerned/D.R., ITAT, Agra Bench, Agra/Guard File.
By Order Assistant Registrar Income-tax Appellate Tribunal, Agra True Copy