Income Tax Appellate Tribunal - Pune
Acit , Nashik vs Department Of Income Tax on 19 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 845/PN/2009
(Assessment Year 2004-05)
M/s. Mangalmurti Constructions,
13, Shriram Sankul,
Opp: Hotel Panchwati,
Vakilwadi, Nashik-1
PAN No. AAGFM 7492Q .. Appellant
Vs.
ITO, Ward-1(2), Nashik .. Respondent
ITA No. 846/PN/2009
(Assessment Year 2005-06)
M/s. Mangalmurti Constructions,
13, Shriram Sankul,
Opp: Hotel Panchwati,
Vakilwadi, Nashik-1
PAN No. AAGFM 7492Q .. Appellant
Vs.
ACIT (OSD), (HQ-II), Nashik .. Respondent
Assessee by : Shri Sunil Pathak
Respondent by : Shri Rajesh Damor
Date of Hearing : 19-09-2013
Date of Pronouncement : 23-09-2013
ORDER
PER R.K. PANDA, AM :
The above 2 appeals filed by the assessee are directed against the common order dated 15-12-2008 passed u/s.263 by the CIT-I, Nashik relating to Assessment Years 2004-05 and 2005-06 respectively. Since identical grounds have been taken by the assessee in both these appeals, therefore, these were heard together and are being disposed of by this common order.
2
2. The assessee in both the appeals has challenged the order passed u/s.263 by the Ld.CIT. The above 2 appeals were earlier decided by the Tribunal in favour of the assessee vide order dated 29-06-2011 allowing the appeals filed by the assessee. Subsequently, the Tribunal vide MA No.35/PN/2012 order dated 23-08-2013 recalled the order since certain errors had crept in the order of the Tribunal passed earlier. Hence, these are recalled matters.
3. The delay in filing of both the appeals have already been condoned by the Tribunal in the order passed earlier. Hence, we are not touching upon that issue.
4. Now coming to the grounds of appeals we first take up ITA No.845/PN/2009. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of builder and developer. During the course of assessment proceedings the assessee declared gross profit of Rs.25,88,420/- on gross receipts of Rs.61,19,000/- which works out to 42.30%. After claiming deduction u/s.80IB(10) at Rs.25,69,861/- the assessee declared net profit of Rs.1,248/- which was on account of sundry balances written off. The Assessing Officer in the order passed u/s.143(3) dated 19-06-2006 accepted the income declared by the assessee and allowing the claim of deduction u/s.80IB(10). 4.1 Subsequently, the Ld.CIT called for the records and noted that all the partners of the firm are engaged in similar line of business, i.e, land development and civil construction and they are showing net profit at around 2%. The main partner Shri D.R. Bagad has the proprietary concern named Bagad Associates which has shown net profit at 2.05% 3 and 2% for A.Y. 2002-03 and 2003-04 respectively. Similarly the Amruta Land Developer which is the proprietary concern of Mr. Vilas Bagad is showing net profit at 2.7% for A.Y. 2003-04. He noted that the Assessing Officer has computed net profit at 10% for A.Y. 2003-04 by invoking the provisions of section 80IA(10). However, for the impugned assessment years 2004-05 and 2005-06 the assessee firm had shown profit at 42% and 54% which has been accepted by the Assessing Officer in a mechanical manner without examining the applicability of provisions of section 80IA(10). Since the rate of profit at 42% and 54% declared by the assessee for both the assessment years appears to be unreasonably high when compared with assessees engaged in similar line of business and since the Assessing Officer has not applied his mind, the Ld.CIT, invoking the provisions of section 263 set aside the order passed by the Assessing Officer on the ground that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. He directed the Assessing Officer to make the assessment afresh after conducting proper enquiries and allowing reasonable opportunity of being heard to the assessee. 4.2 Aggrieved with such order of the CIT the assessee is in appeal before us.
5. The Ld. Counsel for the assessee at the outset submitted that the issue stands covered in favour of the assessee by the decision of the Tribunal in assessee's own case for A.Y. 2003-04 wherein the Tribunal has dismissed the appeal filed by the Revenue. The Revenue in the said appeal had challenged the order of the CIT(A) in deleting the addition of 4 Rs.28,51,858/- to the taxable income of the assessee by holding that provisions of section 80IA(10) are not applicable to the assessee. 5.1 Referring to Para 6 of the order the Ld. Counsel for the assessee submitted that the assessee is consistently showing more than 40% gross profit and more than 38% net profit during assessment years starting from A.Y. 2001-02 to 2005-06. He further submitted that profit from any housing project depends on so many factors including the cost of land, its location etc. He submitted that the Assessing Officer after conducting proper enquiries had completed the assessment u/s.143(3) and the CIT was not justified in invoking the provisions of section 263.
6. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT. He submitted that the assessee had shown huge profit just to get the benefit of deduction u/s.80IB(10) which was not properly examined by the Assessing Officer. He accordingly submitted that the CIT was justified in the instant case in setting aside the assessment u/s.263 and directing the Assessing Officer to complete the assessment afresh after giving due opportunity of being heard to the assessee.
7. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT and the Paper Book filed on behalf of the assessee. There is no dispute to the fact that the assessee in the instant case has declared net profit of 42.00% for A.Y. 2004-05 and net profit of 53.90% for A.Y. 2005-06. There is also no dispute to the fact that the Assessing Officer in the body of the assessment order had calculated the rate of gross profit and net profit on 5 gross receipts disclosed by the assessee. We find the Ld. CIT invoked the provisions of section 263 on the ground that the percentage of profit declared by the assessee for the A.Y. 2004-05 and A.Y. 2005-06 are abnormally high and the Assessing Officer did not examine the applicability of provisions of section 80IA(10) for which the order has become erroneous and prejudicial to the interest of the Revenue. We find the Tribunal in assessee's own case for A.Y. 2003-04 has dismissed the appeal filed by the Revenue in which the Revenue has challenged the order of the CIT(A) in deleting the addition of Rs.28,51,858/- added by the Assessing Officer to the taxable income of the assessee by applying provisions of section 80IA(10). The relevant observations of the Tribunal at Para 6 of the order read as under :
"6. Considering the above submissions, especially in absence of rebuttal by comparative instances showing the similar result or better result in comparison to the assessee cited before the Ld CIT(A) or any other specific reason shown by the A.O that net profit shown by the assessee was inflated, we do not find reason to interfere with the action of the Ld CIT(A) on this issue. Before the Ld CIT(A), instances of M/s. Vishnu Construction and M/s. Indralok Construction for the same A.Y. under consideration have been cited. In the case of M/s. Vishnu Construction, the A.O has accepted the net profit rate shown at 45.46% and in the case of M/s. Indralok Construction, A.O has accepted the net profit rate shown at 31.04%. From the following result of the assessee in different years, it is also evident that assessee has been showing net profit rate varying from 38.66% to 53.90% :
Financial Sales Gross Profit Net Profit % of Gross % of Net year Profit Profit 2000-2001 67,47,001.00 28,76,986.17 28,76,986,17 42.64% 42.34% 2001-2002 74,60,350.00 30,05,269.82 28,84,411.97 40.285 38.66% 2002-2003 80,43,000.00 37,43,054.86 36,53,752.00 46.54% 45.43% 2003-2004 61,19,000.00 25,88,420.00 25,69,861.21 42.30% 42.00% 2004-2005 21,54,000.00 12,02,054.00 11,61,094.00 55.91% 53.90% Total Rs. 3,05,23,351.00 1,34,15,784.85 1,31,46,105.35 43.95% 43.07%
7. Before the Ld CIT(A), the assessee has also tried to explain the reasons for showing the above net profit. Under the above circumstances, we do not find reason to interfere with the first appellate order on the issue.
The same is upheld. The grounds are accordingly rejected." 6 7.1 From the above, it can be seen that not only during these 2 years, even in the preceding years also the assessee was showing higher gross profit and net profit which has already been considered by the Tribunal in the order for A.Y. 2003-04. Under these circumstances, we find no justification by the Ld. CIT in presuming that the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Further, such type of higher profit issue was also before the Assessing Officer who after considering the relevant details furnished by the assessee passed the order u/s.143(3). Merely because the CIT does not agree with the order of the Assessing Officer, the same, in our opinion cannot be a ground to disturb the assessment order by invoking the provisions of section 263.
7.2 It has been decided in various judicial decisions that for invoking the provisions of section 263, the twin conditions, namely (a) that the order must be erroneous and (b) the order must be prejudicial to the interest of the Revenue have to be satisfied. Absence of any one condition cannot give powers to the CIT to assume jurisdiction u/s.263. In the instant case the order of the Assessing Officer may be prejudicial to the interest of the Revenue since the assessee declared higher net profit and has claimed deduction u/s.80IB(10) and has not paid any tax. At the same time, the order cannot be said to be erroneous especially when similar higher profit had been shown by the assessee in the past and the Tribunal in assessee's own case for A.Y 2003-04 has already accepted such higher profit. In view of the above, we are of the considered opinion that the CIT was not justified in invoking the 7 provisions of section 263. We accordingly set aside the order of the CIT and the grounds raised by the assessee are allowed.
ITA No.846/PN/2009 (A.Y. 2005-06) :
8. After hearing both the sides we find the grounds raised by the assessee are identical to grounds of appeal in ITA No.845/PN/2009. We have already decided the issue and the grounds raised by the assessee have been allowed. Following the same ratio, grounds raised by the assessee have been allowed.
9. In the result, both the appeals filed by the assessee are allowed.
Pronounced in the open court on this the 23rd day of September 2013 Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: 23rd September 2013
Satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. CIT-I, Nashik
4. The D.R, "B" Pune Bench
5. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune