Income Tax Appellate Tribunal - Pune
S.N.Mantri, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench B, Pune
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri G.S. Pannu, Accountant Member
I.T.A. No. 225/PN/2009 : A.Y. 2005-06
Asstt. CIT Cir. 2, Nasik Appellant
Vs.
M/s. S.N. Mantri,
Subhash Road, Nasik Road
PAN ABBFS 9437 P Respondent
Appellant by: Shri Hemant Kumar Leuva
Respondent by: Shri Sunil Pathak
ORDER
PER SHAIALENDRA KUMAR YADAV, JM
This appeal by the revenue is directed against order of the CIT(A)-II Nasik dated 24-11-2008 for A.Y. 2005-06 on the point of disallowance u/s 40(a)(ia) of the Act amounting to Rs. 1,12,63,407/-.
2. The relevant facts of the case are that the assessee is a partnership firm engaged in the business of transport contracts. During the assessment proceedings, the Assessing Officer noticed that the assessee offered the total contract receipts of Rs. 2,60,13,951/- including the receipts attributable to their own trucks amounting to Rs. 29,09,527/-. The assessee admitted an amount of Page 2 of 7 ITA No. 225/PN/2009 S.N. Mantri A.Y. 2005-06 Rs. 5,40,000/- out of the receipts of Rs. 29,09,527/- u/s 44AE of the Act. In respect of other receipts amounting to Rs. 2,31,04,424/- the assessee estimated the profit @ 30% before payment of interest and remuneration to the partners. Thus, the assessee admitted income in respect of their own trucks u/s 44AE of the Act and income in respect of transport contracts on estimated basis. After arriving at the income, the assessee claimed interest on capital and remuneration to the partners and finally arrived at the business income of Rs. 44,97,999/-.
3. Before the Assessing Officer, the assessee stated that there were no regular books of accounts which could be produced before him and hence it was not possible to work out its liability for TDS u/s 194C of the Act. In view of this, the assessee claimed that the provisions of section 40(a)(ia) were not applicable. The Assessing Officer conducted a survey u/s 133A of the Act on 19-12-2007 and found that there were no regular books of accounts for the financial year 2004-05 relevant to the assessment year under consideration. During the course of survey, a statement of a partner Shri M.B. Mantri, was recorded who admitted that there were no books of accounts and that there might have been some default u/s 194C and Page 3 of 7 ITA No. 225/PN/2009 S.N. Mantri A.Y. 2005-06 accordingly agreed for a disclosure of Rs. 30,00,000/-. When the partner was confronted with the details about the transport payments it was submitted that in view of the amendment to the First proviso to section 194C(3) w.e.f. 1-10-2004, he agreed to make a disclosure of Rs. 13,51,221/- in respect of the payments made after 1-10-2004 which were hit by the amendment, instead of disclosure of Rs. 30,00,000/- made earlier. However, the Assessing Officer was not satisfied with the submissions of the assessee and proceeded to compute the income on estimated basis. The Assessing Officer was of the view that the provisions of section 194C were applicable even if the income was computed on estimated basis and that in view of the amendment, if the payments/credits during the whole financial year exceeded Rs. 50,000/- even though such payments/credits were less than Rs. 20,000/- individually even prior to 1-10-2004. The Assessing Officer accordingly worked out the estimated liability on account of default u/s 194C(3) at Rs. 1,12,63,407/-.
4. On appeal, the CIT(A) held that the Assessing Officer should not have estimated the disallowance u/s 40(a)(ia) of the Act in the absence of any books of accounts or details of payees, etc. The CIT(A) also held that the payments Page 4 of 7 ITA No. 225/PN/2009 S.N. Mantri A.Y. 2005-06 made by the assessee are clearly liable for disallowance u/s 40(a)(ia) r.w.s. 194C of the Act. After considering the various submissions put forth by the assessee, the CIT(A) restricted the disallowance to Rs. 27,23,908/- u/s 40(a)(ia) of the Act. Considering the disallowance u/s 40(a)(ia) of the Act the gross income of the assessee in respect of transport receipts was taken at Rs. 56,11,961/- by the CIT(A). According to the CIT(A) if the interest on capital and remuneration to the partners amounting to Rs. 29,73,328/- is considered as allowed by the Assessing Officer the net income would work out to Rs. 26,38,633/-. Whereas in the instant case, the assessee offered the business income of Rs. 39,57,999/- in the return in respect of other transport receipts, thus the income declared by the assessee taking into account the possible payments made in violation of the provisions of section 40(a)(ia) of the Act in respect of transport business is reasonable and hence no separate addition was required to be made u/s 40(a)(ia) of the Act. Therefore, the Assessing Officer was directed to accept the income of Rs. 44,97,999/- offered by the assessee in respect of transport business including the income in respect of their own trucks offered u/s 44AE of the Act.
Page 5 of 7ITA No. 225/PN/2009
S.N. Mantri A.Y. 2005-06
5. Aggrieved, the department is in appeal before us on the ground that the CIT(A) erred in directing the Assessing Officer to accept the income as returned by the assessee and that the Assessing Officer had correctly estimated the disallowance u/s 40(a)(ia) of the Act at Rs. 1,12,63,407/-.
6. The learned counsel for the assessee supporting the decision of the CIT(A) placed reliance on the decision of Hyderabad 'A' Bench of the Tribunal in the case of Teja Constructions Vs. ACIT (2010) 36 DTR 220 and submitted that the CIT(A) was right in directing the Assessing Officer to accept the income as returned by the assessee. On the other hand, the learned DR supported the order of the Assessing Officer.
7. We have heard both the parties and considered the material on record. We find that the issue involved in this appeal, is covered by the decision of the Hyderabad Bench 'A' of the Tribunal in the case of Teja Constructions (supra) wherein it has been held as under:
"The assessee's past track records show that the assessee has neglected the presenting of the books of account in accordance with law. When the assessee claimed any expenditure, it is mandatory on the part of the assessee to produce the books of account supported by proper bills and vouchers. Since the assessee has not produced the proper books of account, true profits or loss cannot be deducted from Page 6 of 7 ITA No. 225/PN/2009 S.N. Mantri A.Y. 2005-06 the books of account of the assessee. The A.O having no other option rejected the books of account and estimated the income at 10% of gross receipts. But the position is that, the assessee is carrying on three kinds of contracts, as in earlier years, i.e. (i) own contracts, (ii) contracts taken from the sub- contractors, (iii) contracts given to other parties on sub-contracts. The assessee had a higher rate of profit on the contracts executed by the assessee itself. In these contracts, the assessee agreed that his income is at 9% of the gross receipts. Thus, accordingly the A.O is directed to estimate the income on the contracts executed by the assessee's own at 9%. In case of contracts taken by assessee on sub- contract, the income to be estimated at 8% of the gross receipts. In case of contracts given by the assessee to the third party on sub-contract, income to be estimated at 4%. This is, because, when the assessee gives contract to the other parties on sub- contract, the assessee cannot keep the same percentage of profit at 9%, it has to forgo certain portion of profit i.e. around 5% to the sub-contractors. Similar is the position in the case of contracts taken by assessee on sub-contract from other parties. Further, the assessee is entitled for depreciation and remuneration, and interests to partners on the profit estimated by A.O at applicable rates, because the income estimated as above of the assessee is before the depreciation and interest ad remuneration of the partners. Accordingly, the A.O is directed to compute the income of the assessee afresh."
8. So, following the aforesaid decision of Hyderabad Bench A' of the Tribunal in the case of Teja Constructions (supra) we restore the matter to the file of the Assessing Officer with a direction to re-compute the income of assessee as held in M/s. Teja Constructions (supra) after affording adequate opportunity of hearing to the assessee. Page 7 of 7 ITA No. 225/PN/2009
S.N. Mantri A.Y. 2005-06
9. In the result, the appeal of the revenue is allowed for statistical purposes.
Decision pronounced in the open court on 10th February 2011.
Sd/- sd/-
(G.S. Pannu) (Shailendra Kumar Yadav)
Accountant Member Judicial Member
Pune dated the 10th February 2011
Ankam
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT - (A)-II Nasik
4. The CIT Nasik
5. The D.R, 'B' Bench, Pune
6. Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Pune