Income Tax Appellate Tribunal - Panji
Deputy Commissioner Of Income-Tax,, vs M/S. S.S. Patil Construction Pvt. ... on 13 December, 2017
आयकर अपीलीय अिधकरण, पुणे ायपीठ "बी
बी"
बी पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी डी.
डी क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.204/PUN/2016
िनधा रण वष / Assessment Year : 2012-13
S.S. Patil Construction Pvt. Ltd.,
Nirmal, Vivekand Nagar,
Pachora - 425 301
Dist. Jalgaon
PAN : AAGCS7726N .... अपीलाथ /Appellant
Vs.
DCIT, Circle-2,
Jalgaon .... यथ / Respondent
आयकर अपील सं. / ITA No.586/PUN/2016
िनधा रण वष / Assessment Year : 2012-13
DCIT, Circle-2,
Jalgaon .... अपीलाथ /Appellant
Vs.
S.S. Patil Construction Pvt. Ltd.,
Nirmal, Vivekand Nagar,
Pachora - 425 301
Dist. Jalgaon
PAN : AAGCS7726N .... यथ / Respondent
Assessee by : Shri Sunil Ganoo
Revenue by : Dr. Vivek Aggarwal, CIT
सुनवाई क तारीख
/ घोषणा क तारीख /
Date of Hearing : 22.11.2017 Date of Pronouncement: 13.12.2017
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
These are cross appeals filed by the Assessee and the Revenue for the assessment year 2012-13. They are filed against the order of CIT(A)-2, Nashik dated 07-01-2016. 2
ITA Nos.204 & 586/PUN/2016 S.S. Patil Construction Pvt. Ltd.,
2. Grounds raised by the Assessee and the Revenue are extracted as under :
Grounds by Assessee :
"[1] On the facts and in the prevailing circumstances of the case and in law , the learned CIT(A) is not justified in confirming the estimated addition of Rs.1,74,85,623/- (@10% of contract receipt), out of the estimated addition made by the A.O of Rs.2,32,2,434/-(@15% of contract receipt), without considering the nature of business and with any comparable cases in the similar line of business of contracts. Therefore, estimated addition sustained at Rs.85,69,659/- (1,74,85,623(-)89,15,964) by CIT(A) may please be deleted.
[2] On the facts and in the prevailing circumstances of the case and in law, if the estimated addition as per appellate order of CIT(A) is considered, then Net Profit would be at Rs. 2,38,99,600/- [Rs.1,74,85,623/- as per CIT(A)+ Depreciation Rs. 57,22,177/-+ Interest.Rs.6,91,800/-], which will be rated at 13.66 % [Rs. 2,38,99,600/Rs.17,48,56,225.x100], as against profit shown by appellant at Rs.1,53,29,941- [Rs.89,15,964+ Depreciation Rs. 57,22,177+ /-+ Interest.Rs.6,91,800/-] which is rated @ 8.76%% [Rs.1,53,29,941./ 17,48,56,225.x100] As the appellant has shown reasonable profit, further estimated addition retained at Rs.85,69,659/- (1,74,85,623(-)89,15,964) by the CIT(A) is not justified and hence, addition may please be deleted.
[3] On the facts and in the prevailing circumstances of the case and in law and as the appellant has shown net profit @8.76%,subject to interest and depreciation is more than 8%, no separate trading addition is required to be made. Therefore, estimated addition sustained at Rs.85,69,659/- (1,74,85,623(-)89,15,964) by CIT(A) may please be deleted."
Grounds by Revenue :
"1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in estimating the net income of the assessee @10% as against 15% estimated by the Assessing Officer without appreciating various defects as pointed out by the Assessing Officer in the assessment order.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering the incriminating material impounded during the course of survey action u/s.133A of the Income Tax Act, 1961 and various defects pointed out during the assessment proceedings.
3. The order of the Ld.CIT(A) be cancelled and that of the A.O. be restored."
3. Briefly stated relevant facts of the case include that assessee is a Private Limited Company and engaged in the business of Construction of Roads mainly for Govt. of Maharashtra and other 3 ITA Nos.204 & 586/PUN/2016 S.S. Patil Construction Pvt. Ltd., local bodies. A survey action u/s.133A of the Act was conducted on the business premises of the assessee on 03-04-2012 and also on the business premises of the Directors of the company during which various incriminating documents were seized. Statement of Mr. Sanjay Patil, Director of the assessee was recorded. He stated that certain expenses were required to be made as part of the system for which no evidence can be given. Such expenses were adjusted under the head of expenditure. Eventually, Mr. Sanjay Patil surrendered the income of the assessee for A.Y. 2012-13 at Rs.96,04,925/- being the difference in net profit and Rs.40 lakhs being the investment made by Mrs. Archana Sanjay Patil and Mrs. Vaishali Patil out of undisclosed income of the assessee.
4. The above statement by Mr. Sanjay Patil, Director recorded was retracted by filing an affidavit on 30-07-2012 on the ground that declaration was obtained under coercion and pressure. He stated in the said affidavit that he studied only upto XII Standard in Marathi Medium and was unable to write and understand the English. The statement was written by the officers as per their own choice and convenience obtained his signature on dotted lines. He further submitted that at the time of survey action the books of account of the assessee are incomplete and hence the gross profit was estimated at Rs.13,25,00,000/- whereas after the audited final accounts the same are shown at Rs.17,48,56,225/-. In view of various discrepancies in the books of account, AO rejected the same u/s.145(3) of the Act and proceeded to estimate the net profit @15% of gross profits. Eventually, AO assessed the income of the assessee at Rs.3,01,73,942/-. CIT(A) restricted the income @10% of the gross profits.
4
ITA Nos.204 & 586/PUN/2016 S.S. Patil Construction Pvt. Ltd.,
5. Aggrieved with the said decision of the CIT(A) in determining the net profit @10%, the assessee is in appeal before us. Aggrieved with the relief to the tune of 5% on the gross receipts, the Revenue is in appeal before us with the grounds referred above.
6. Before us, at the outset, Ld. Counsel for the assessee brought our attention to the grounds and mentioned that the issue now stands covered by the order of the Tribunal in assessee's own case for A.Yrs. 2009-10 to 2011-12 vide ITA Nos. 1613 to 1615/PUN/2014 & ITA Nos. 1682 to 1684/PUN/2014 order dated 28-07-2017. He submitted that facts relating to nature of business are identical, therefore, the decision taken by the Tribunal in assessee's own case for the earlier assessment years with regard to the extent of profits of the assessee from business are relevant and the issue raised by both the assessee and the revenue now stands settled by the said order of the Tribunal.
7. On hearing both the parties, we perused the said order of the Tribunal (supra). We find the net profit of the assessee was originally estimated applying the flat rate of 15% as in the earlier A.Yrs. 2009-10 to 2011-12. Further, the CIT(A) held the net profit @10% of the receipts is reasonable. Aggrieved with the said decision of the CIT(A) both the Revenue and the assessee are in cross appeal before us. On similar facts, we have already held in the order of the Tribunal (supra) that estimation of profits @9% on the gross receipts is reasonable. Having decided the issue as per the discussion given in the Para Nos. 13 to 16 of the order of the Tribunal (supra), we proceed to extract the said paras for the sake of completeness as under :
5
ITA Nos.204 & 586/PUN/2016 S.S. Patil Construction Pvt. Ltd., "13. We heard both the Counsels/Representatives on the issues raised in the Crosss Appeals for all the assessment years under consideration. We perused the paper book filed before us. The adjudication on both the issues, i.e. proper Net Profit rate for all three years, addition of Sundry Creditors raised in both the appeals given as under.
14. Regarding the reasonable Net Profit rate in this line of Civil Contract business for all three years in this case of the assessee, we find the dispute is that while the assessee in respect of favour of 8% as outlined in section 44AD of the Act, the revenue is in favour of 15% as discussed by the AO in the assessment order. However, the AO has not given any specific reason or justification with evidence by way of any incriminating material, in support of his decision. The statement of the assessee is the only available evidence for the AO. No sustainable reason is given by the AO why the retraction is not valid.
15. Further, we find that the CIT(A) has disapproved the Net Profit rate of 15% on the contract receipts holding the same as on high side.
Further, with reference to addition on account of Sundry Creditors. CIT(A) held no further addition on this account is warranted, when the profits of the business is estimated after rejecting the books of the assessee. In our view, the CIT(A) has fairly disapproved the AO's point of view in the said issue. We affirm the same.
16. However, when it comes to the percentage of Net Profit rate of 10% adopted by the CIT(A), we find again the said rate is not borrowed from any comparable case. The contents of Para 6.3.2 to 6.3.3 extracted above supports the same. Therefore, Net profit rate of 10% adopted by the CIT(A) is not sacrosanct. Hence, we proceed to examine if the 8% advocated by the Ld. Authorised Representative needs to be approved in this case. But the fact is that said provisions of section 44AD are not strictly applicable here. Turnover allegation of sundry creditors etc. make some difference. Therefore, we cannot approve the said Net Profit rate of 8% to the facts of the case. Hence, we are of the view that, considering the concession given by the Ld. Authorised Representative, the estimation of Profit @9% for the Assessment Years under consideration should meet both ends of justice. AO is directed to restrict the addition to Net Profit of 9% on the contract receipts for the A.Y. 2009-10. Accordingly, the grounds on the related issues, discussed in a composite manner, should be partly allowed."
8. From the above, it is evident that the Tribunal did not approve the estimation of profit applying the flat rate of 15% as done by the Assessing Officer, or 10% as done by the CIT(A) or 8% as submitted by the Ld. Counsel for the assessee. We already held that the estimation of profits @9% on the gross profits should meet the ends of justice. Considering the same parity of reasoning, we are of the opinion that the AO should be directed to follow our ratio given for the earlier assessment years 2009-10 to 2011-12 vide order dated 28-07-2017 and estimate the profits accordingly. 6
ITA Nos.204 & 586/PUN/2016 S.S. Patil Construction Pvt. Ltd., Therefore, the grounds raised by the assessee are partly allowed and the grounds raised by the revenue are dismissed.
9. In the result, appeal of the assessee is partly allowed and the appeal of the revenue is dismissed.
Order pronounced in the open court on this 13th day of December, 2017.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
याियक सद य /JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 13th December, 2017.
सतीश आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-2, Nashik
4. CIT-2, Nashik
5. िवभागीय %ितिनिध, आयकर अपीलीय अिधकरण, "B Bench"
Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, स यािपत ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune