Income Tax Appellate Tribunal - Lucknow
A.P Associates, Basti vs Assessee on 15 March, 2016
1
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.240/LKW/2015
Assessment Year 2010-11
DCIT, Vs M/s A.P. Associates,
Circle-Gonda Shiva Colony,
Basti (U.P.) 272001
PAN AAMFA 2610 C
ITA No.258/LKW/2015
Assessment Year 2010-11
M/s A.P. Associates, Vs ACIT,
Shiva Colony, Circle-Gonda
Basti (U.P.) 272001
PAN AAMFA 2610 C
(Appellant) (Respondent)
Appellant by Shri Amit Nigam, CIT DR
Respondent by Shri R.C. Jain, CA
Date of hearing 03/02/2016
Date of pronouncement 15/03/2016
ORDER
PER A. K. GARODIA, A.M.
These are cross appeals filed by the Revenue and the assessee, which are directed against the order of Ld. CIT(A), Faizabad dated 23.01.2015 for Assessment Year 2010-11.
2. The grounds raised by the assessee in its appeal i.e. 258/Lkw/2015 are as under:-
2"1. Because the learned first Appellate Authority erred in upholding the decision of A.O. of rejection of books of accounts and framing order u/s 144 of the Income tax Act, 1961 2.1 Without prejudice to the above, the learned Assessing Officer having applied the net profit of 8% and the learned first Appellate authority erred in upholding it to the extent of 4%.
2.2 Because the learned first Appellate authority had no warrant to uphold the net profit rate @ 4% of Gross Receipts against 1.84%, returned by the assessee.
3. Because the learned first appellate authority erred in separately adding interest on FDRs to the total income of the assessee.
4. Because the learned first appellate authority erred in separately adding truck income to the total income of the assessee.
5. Because the learned first appellate authority had no warrant to disallow interest of Rs.9,24,238/- to the partners even though the same was allowed by the assessing officer.
6. Because the learned first appellate authority had no warrant to disallow remuneration of Rs.6,00,000/- to the partners even though the same was allowed by the assessing officer.
7. Because the disallowance of interest to partners Rs.
9,24,238 and remuneration to partners Rs. 6,00,000 without giving notice of enhancement to the assessee - and without giving any opportunity to the assessee to put up its case.
8. Because the learned 1st appellate authority ought to have allowed depreciation separately.
9. Because the order appealed against is contrary to the facts, law and principles of natural justice.
10. Any other grounds that may be taken at the time of hearing."3
3. The grounds raised by the Revenue in its appeal i.e. 240/Lkw/2015 are as under:-
"1. The Ld. CIT(A), Faizabad has erred in law and on facts by estimating net profit of the appellant at Rs. 46,75,1937- @ 4% as against Rs. 93,50,3867- @ 8% applied by the AO on the gross receipts of Rs. 11,68,79,3847- relying on the past history of assessee's own case without appreciating the fact that the himself has confirmed the stand of the AO for rejection of books of account in terms of provision of section 145(3) of the I.T. Act and the AO had righty estimated the net profit @ 8% of the gross receipts.
2. The Ld. CIT(A), Faizabad has erred in law and on facts by estimating the net profit @ 4% as against 8% applied by AO on the gross contract receipts relying on the past history of assessee's own case without appreciating the fact that the facts of the present case are totally different from the facts of assessee's case in preceding assessment years and also principles of res-judicata are not applicable under Income Tax Act.
3. The Ld. CIT(A), Faizabad has erred in law and on facts while comparing the past history of assessee's own case without appreciating the fact that the net profit disclosed by the assessee was on the basis of the books of account for the year under consideration which the AO had rejected in terms of provisions of section 145(3) of I.T. Act & the action of the AO has been confirmed by Ld. CIT(A) hence, business results prepared on the basis of these books have no legs to stand.
4. That the appellant also craves to modify, amend, change and revise the above grounds of appeal and add further grounds of appeal, if necessary."
4. Regarding the assessee's appeal, it was submitted by the Ld. AR of the assessee that Ground No.1 is not pressed and accordingly Ground No.1 is rejected as not pressed.
5. Regarding Ground Nos. 2 to 9, he submitted that as per the Tribunal's order in the assessee's own case for Assessment Year 2008-09 in 4 ITA No. 622/Lkw/2011 dated 03.08.2012, the Tribunal confirmed the order of Ld. CIT(A) in that year as per which Ld. CIT(A) has applied net profit rate of 4% subject to deduction for interest and salary paid to partners. He submitted that the profit and loss account for accounting year ending on 31.03.2008 relevant to Assessment Year 2008-09 is available on page 19 of the paper book and from the same, it can be seen that there is income on account of interest accrued on FDR of Rs.3,29,551/-. He further submitted that assessment order for the Assessment Year 2008-09 is available on pages 24 to 25 of the paper book as per which the taxable income was computed by the Assessing Officer by applying net profit rate of 7% to the gross receipts of Rs.7,81,39,170/- and the interest income declared by the assessee in P&L account was not added separately and in the present case also, even if rate of 4% net profit is applied, the same should not be considered as exclusive of interest and Truck Hire Charges received by the assessee in the present year of Rs.8,71,002.26 and Rs.4,87,620/- as credited in the P&L account available on page 2 of the paper book. Regarding non allowing of deduction on account of interest and remuneration to partners by invoking the provisions of Section 184(5) of the Act on this basis that the assessment was completed u/s 144 of the Act, it was submitted that even if the assessment is completed u/s 144, Section 184 (5) is not applicable if the assessee can sow that there is some compliance of the notices issued in course of assessment proceedings. He placed reliance on the Tribunal's order rendered in the case of Surendra Prasad Misra Vs. ITO reported in 104 TTJ (Lucknow) 292, copy available on pages 51 to 55 of the paper book. At this juncture, the Bench wanted to know as to whether any evidence is available in the paper book in support of this contention that substantial compliance was made by the assessee by showing the notice issued by the Assessing Officer u/s 142(1) and the 5 compliance made by the assessee. In reply, it was submitted by Ld. AR of the assessee that such documents are not readily available.
6. Ld. DR of the Revenue supported the orders of te authorities below.
7. We have considered the rival submissions. We find that in Assessment Year 2008-09 also, the Assessing Officer applied net profit rate of 7% as against 8% in the present year and when the assessee carried the matter before the Ld. CIT(A), Ld. CIT(A) held that net profit rate of 4% should be applied subject to allowing of deduction for interest and salary paid to the partners. In this manner, Ld. CIT(A) reduced the assessed income to Rs.16,01,949/- as against income computed by the Assessing Officer at Rs.43,31,680/- in that year. Hence, we are of the considered opinion that regarding applicability of net profit rate of 4%, the issue is covered by the Tribunal's order in assessee own case. Therefore, respectfully following the same, we hold that in the present year also, net profit of the assessee should be assessed at 4% of gross receipt of Rs.11,68,,79,834/- as has been held by the Ld. CIT(A) because we do not find any reason to take a contrary view in the present year. Regarding this contention of Ld. Ld. AR of the assessee that such income computed at the rate of 4% of gross receipt should be inclusive of interest income Rs.8,71,002/- and truck income of Rs.4,87,620/-, we find no merit in this contention although this is true that in Assessment Year 2008-09 also, there was interest income of Rs.3,29,551/- but in the assessment order for that year available on pages 24 to 25 of the paper book, the Assessing Officer applied net profit rate of 7% to the gross receipt in that year of Rs.781.39 lakh and computed the gross business income at Rs.54,69,731/- and after allowing deduction on account of interest to partners and salary to working partners, net income was computed of Rs.43,31,680/- and interest income was not separately added by the Assessing Officer in that 6 year and on appeal in that year, Ld. CIT(A) reduced the net profit rate to 4% as against 7% applied by the Assessing Officer and the Tribunal confirmed the order of Ld. CIT(A) in that year. Hence in that year, the net profit rate ultimately applied at the rate of 4% was inclusive of interest income of that year but in our considered opinion, that is a mistake committed in the assessment order of that year and it cannot be said that application of any rate of net profit to the gross receipt of business can be inclusive of interest income or truck plying income etc. In the name of rule of consistency, mistake cannot be allowed to be perpetuated and therefore, we hold that the Assessing Officer was justified in separately adding the income on account of interest and truck income over and above the net profit computed by him after applying net profit rate of 8% which has been reduced by Ld. CIT(A) to 4%.
8. Regarding the deduction on account of interest and remuneration paid to partners, we find that it is held by Ld. CIT(A) that since the assessment was completed by the Assessing Officer u/s 144, in view of the provisions of Section 184(5) and section 185, such deduction on account of interest and remuneration to the partners is not allowable. Now, we deal with the Tribunal's order cited by Ld. AR of the assessee having been rendered in the case of Surendra Prasad Mishra Vs. ITO (Supra). In this case, it was held by the Tribunal that for the purpose of applying section 184(5) of the Act there has to be complete failure as envisaged u/s 144 and mere non cooperation of the assessee making it difficult to determine the correct income may justify an assessment u/s 144 of the Act but that by itself is not sufficient to assess the firm as an AOP u/s 184(5). In the present case, we find that initially the Assessing Officer issued notice u/s 142(1) of the Act but the same was not complied with and thereafter, the Assessing Officer issued notice u/s 142(1) again for which part compliance was made by the assessee by appearing before the Assessing Officer along 7 with the copy of cash book and audit report of the assessee firm but the assessee firm did not comply fully to the questionnaire annexed to the notice u/s 142(1) of the Act. The assessee has not produced the copy of such questionnaire attached by the Assessing Officer along with notice issued u/s 142(1) and the letter submitted by the assessee before the Assessing Officer in compliance thereof. Hence, in the present case, it cannot be said that there is some non cooperation of the assessee making a difficult to determine the correct income but in the present case, there is substantial non compliance if not full non compliance by the assessee and therefore, in the facts of present case, this Tribunal's order cited by Ld. AR of the assessee is not applicable. There is no other argument of the Ld. AR of the assessee as to why and how deduction should be allowed to the assessee in respect of interest and remuneration to the partners. Hence, on this issue, we find no reason to interfere in the order of Ld. CIT(A).
9. In the result, appeals of the Revenue and assessee are dismissed.
(Order was pronounced in the open court on the date mentioned on the caption page) Sd/- Sd/-
(SUNIL KUMAR YADAV) (A.K. GARODIA ) Judicial Member Accountant Member Dated: 15/03/2016 Aks Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar