Income Tax Appellate Tribunal - Indore
Sanjay Palia, Pipariya vs Assessee on 21 November, 2011
1
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
AND
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No.23/Ind/2011
A.Y. 2006-07
Sanjay Palia, Bhopal
PAN - ABXPP 5864 H ... Appellant
vs
ACIT-1(1), Bhopal ... Respondent
And,
ITA No.48/Ind/2011
A.Y. 2006-07
DCIT-1(1), Bhopal ... Appellant
vs
Sanjay Palia, Bhopal
PAN - ABXPP 5864 H ... Respondent
2
Assessee by : S/Sh. H.P. Verma & Ashish Goyal
Revenue by : Shri Arun Dewan, Sr. DR
Date of Hearing : 21.11.2011
Date of Pronouncement : 21.11.2011
O R D E R
PER JOGINDER SINGH These cross-appeals are by the Revenue & the assessee challenging the order of learned Commissioner of Income Tax (Appeals) dated 6.1.2011.
In the appeal of the assessee (ITA No.23/Ind/2011), the following grounds have been raised:
"1. That on the facts and circumstances of the case, the ld. CIT(A) erred in holding that the Assessing Officer has rightly invoked the provisions of Section 145(3) thereby rejecting the books of account and assessing the income in the manner as provided u/s 144 of the Act without considering the explanation offered by the assessee and without considering the fact that the regular and proper books of account are maintained which are audited u/s 44AB of the Act.
2. That on the facts and circumstances of the case, the ld. CIT(A) erred in allowing 3 relief of Rs.13,39,608/- only out of the total addition of Rs.20,02,052/- and thus confirming the addition of Rs.6,62,444/- made on account of net profit by estimating the same @5% without accepting the explanation offered by the assessee which is unjust, unfair and on very higher side.
3. That on the facts and circumstances of the case, the ld. CIT(A) erred in allowing relief of Rs.10,49,520/- only out of total addition of Rs.13,50,000/- made on account of unexplained cash credit u/s 68 and thus confirming addition of Rs.3,00,480/- which is unjust, unfair and bad in law."
whereas, in the appeal of the Revenue (ITA No.48/Ind/2011), the following grounds have been raised:
"On the facts and in the circumstances of the case, the ld. first appellate authority erred in
1. Directing to apply net profit rate of 5% as against 8% applied by the Assessing Officer on total sales of Rs.4,46,53,586/-.
2. Deleting the addition of Rs.10,49,520/- out of total addition of Rs.13,50,000/- on account of disallowance of unexplained credit u/s 68 of the I.T. Act, 1961."
2. During hearing of these appeals, the learned counsel for the assessee Shri H.P. Verma alongwith Shri Ashish Goyal 4 (for ITA No. 23/Ind/2011) on the issue of rejection of accounts and profit rate submitted that the net profit rate of 3.52% was declared by the assessee against which the Assessing Officer adopted the same at 8% and the same was reduced to 5% by learned Commissioner of Income Tax (Appeals). The learned Sr. DR contended that the issue has been put to finality by the Tribunal by upholding the profit rate of 6% for which our attention was invited to pages 33 to 39 of the paper book.
3. We have considered the rival submissions and perused the material available on file. In view of the above we are reproducing hereunder the relevant portion of the order of the Tribunal dated 21st April, 2011 (ITA No. 383 and 410/Ind/2008 for assessment year 2005-06) :-
" These cross appeals by the assessee and the revenue against the order of the learned CIT(A) dated 27.6.2008.
2. In the appeal of the assessee the first ground is that on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in confirming the invocation of the provisions of section 145(3) by rejecting the books of accounts and assessing the income in the manner as provided u/s 144 of the Act. During hearing, the learned representatives of both the sides asserted that on this issue, their arguments are identical to the ground raised in group case of R.C. Construction vs. Additional CIT (ITA Nos.382 and 409/Ind/2008).5
3. After hearing the rival submissions since in the case of R.C. Construction (supra) on this issue, we have dismissed the appeal of the assessee, therefore, since the facts and the arguments of the ld. Counsel for the assessee is identical, on the same reasoning, this ground of the assessee is also dismissed.
4. The next ground pertains to sustaining the addition of Rs.13,67,908/- by estimating the net profit rate at 5% without accepting the explanation given by the assessee. The revenue in its appeal has challenged the deletion of addition of Rs.13,58,580/- out of the addition of Rs.27,26,491/- by taking the net profit rate of 8% by the Assessing Officer on the gross receipts after invoking the provisions of section 145(3) of the Act.
5. The crux of arguments on behalf of the assessee is that there is no basis for application of profit rate at 8% especially when depreciation increased substantially from Rs. 6,58,880/- to Rs. 18,42,865/- which has not been disputed by the department. A plea was also raised that the profit rate is very reasonable compared to earlier years and there is three times increase in turnover from Rs. 1.65 crores to Rs. 4.52 crores. It was also submitted that about 50% of the work was done on sub-contract basis. Before coming to any conclusion, we are reproducing hereunder the profit rate of earlier years :-
Turnover N.P. Before NP after NP Ratio Depreciation Depreciation depreciation after A.Y. depreciation Amount Rate 2003-04 92,47,272 6,07,945 6.57 1,58,943 4,49,002 4.86% 2004-05 1,64,89,379 11,73,368 7.12% 6,58,880 5,14,488 3.12% 2005-06 4,52,86,042 27,89,257 6.16% 18,42,865 9,46,392 2.09% (Relevant If the totality of facts is analysed, it is seen that though the learned Commissioner of Income Tax (Appeals) has considered the distance of various places where the work was executed from the head office which is about 3 to 40 kms in the case of work done by self and in the case of sub-contracts it is also between 3 to 40 kms and about 50% and the assessee has done nearly 51% of the work on sub-contract where the margin of profit is bound to decrease. At the same time, it is also an admitted position that the Assessing Officer was not satisfied about the correctness/completeness of the accounts of the assessee and due to the reason, the provisions of section 145(3) of the Act were rightly invoked. In the absence of production of complete details or maintenance of part report, the 6 Assessing Officer adopted the net profit rate at against 2.9% shown by the assessee and reduced to 5% by the learned Commissioner of Income Tax (Appeals). However, the fact remains at both the stages that it was based on estimation. The total contract receipt for the impugned assessment year is to the tune of Rs.4,52,86,042/-. Keeping in view the totality of facts and the assertion made by the learned respective counsels, it would meet the ends of justice if the net profit rate is increased to 6% in place of 5% maintained by the learned Commissioner of Income Tax (Appeals) and 8% adopted by the learned Assessing Officer, therefore, this ground of revenue is partly allowed. By this adoption, the identical ground raised in the appeal of the revenue is also disposed of accordingly."
In the aforesaid order the Tribunal has applied the net profit rate from 6%. against the adoption of 8% by the learned Assessing Officer and 5% by learned Commissioner of Income Tax (Appeals). Neither any contrary facts nor any contrary decision was brought to our notice by either side. We, therefore, following the aforesaid order of the Tribunal, direct the Assessing Officer Assessing Officer to adopt the net profit rate at 6%, therefore, ground nos. 1 and 2 of the appeal of the assessee and ground no. 1 of the appeal of the revenue are disposed of in the aforesaid manner.
4. The next ground i.e. ground no. 3 pertains to confirming the addition of Rs. 3,00,480/- by learned Commissioner of Income Tax (Appeals) out of the total addition of Rs. 13,50,000/- and thus allowing relief of Rs. 10,49,520/- made on 7 account of unexplained cash credit u/s 68 of the Act. The crux of arguments on behalf of the assessee is that when a particular profit rate has been applied, therefore, no separate addition is required for which reliance was placed upon the decision in CIT v. Agarwal Engg. Company; 302 ITR 246 (P&H). A plea was also raised that evidence was produced for cash credit for which our attention was invited to the creditor nos. 1 and 7 namely Shri Bhagwatiprasad and Shri M.N. Raghuvanshi, respectively along with page 48 of the paper book. The payment was made through cheque. On the other hand, the learned Sr. DR strongly defended the impugned order by submitting that the ld. first appellate authority was justified in confirming the addition.
5. We have considered the rival submissions and perused the material available on file. Brief facts of the case are that the assessee is an individual deriving income from civil contract work. As discussed above, the learned Commissioner of Income Tax (Appeals) estimated the net profit at the rate of 5% and allowed the relief of Rs.10,49,520/- out of the addition of 8 Rs.13,50,000/- and thus confirmed the addition of Rs.3,00,480/- on account of unexplained cash credit u/s 68 of the Act. Before coming to any conclusion, we are summarising hereunder the facts on account of such cash credits.
S.No Name Disallowe Confirme Deleted by Evidences P.B. Ref Remarks
d by ld. d by ld. ld. CIT(A)
. A.O.(Rs.) CIT(A) (Rs.)
(Rs.)
1 Bhagwati 2,00,000 49,520 1,50,480 i. confirmation letter 42 Ld.
Prasad ii.Copy of account 43 CIT(A)
iii Copy of Bank 44-47 held that
account 48-50 only sale
iv.Copy of sale bill of bill of
agicultural produce agricultur
v.Copy of pension 51-56 al
certificate 57-58 produce
vi. Copy of statement for Rs.
on oath 49,520
were
given. It
is
submitted
that once
more
receipt
was
given PB
50. Also
creditor
got
commutat
ion of
pension
Rs.
94,266.
P.B. 55
2 Charan Patel 2,00,000 - 2,00,000 i. Confirmation letter 59
ii.Copy of account 60
iii. Copy of bank 61
account 62
iv. Copy of sale bill of
agricultural produce 63-65
v. Copy of land
documents 66-67
vi. Copy of statement
on oath
3. Kamal 2,00,000 - 2,00,000. i. Confirmation letter 68-69
Raghuwanshi ii.Copy of account 70
iii. Copy of sale bill of 71
agricultural produce
iv. Copy of land 72-73
documents
v. Copy of statement 74-75
on oath
9
4. Keshav Singh 2,00,000 - 2,00,000 i. Confirmation letter 76
Patel ii Copy of account 77
iii.Copy of bank 78
account 79-80
iv. Copy of sale bill of
agricultural produce 82-86
v. Copy of land
documents 88-89
vi. Copy of statement
on oath.
5 Mahesh Shukl.a 2,00,000 2,00,000 i. Confirmation letter 91
ii.Copy of account 92
iii. Copy of bank 93
account 94
iv. Copy of sale bill of 95-98
agricultural produce
v. Copy of land
documents 99-100
vi. Copy of statement
on oath
6. Phool Singh 2,00,000 - 2,00,000 i. Confirmation letter 103
Rajput ii.Copy of account 104
iii. Copy of bank 105-106
account 107
iv. Copy of sale bill of 108-109
agricultural produce 111-113
v. Copy of land
documents
vi. Copy of statement
on oath
7. M.L. 1,50,000 1,50,000 - i. Confirmation letter 114 Ld.
Raghuvanshi ii. Copy of account 115 CIT(A)
iii.Copy of land 116-117 confirmed
documents the
iv. Copy of statement 118 addition
on oath holding
that no
proof of
sale
proceeds
of
agricultur
al
produce
was
given.
There is no dispute to the fact that the net profit rate was adopted at 8% by the learned Assessing Officer against 3.52% declared by the assessee and ultimately the Tribunal adopted the same at 6%, which has reached finality as no contrary decision was brought to our notice by either side. 10
6. Even otherwise, if the facts narrated in the aforesaid chart are analysed, we find that the remaining addition pertains to Shri Bhagwatiprasad (Sr. No. 1 in the aforesaid chart) and Shri M.L. Raghuvanshi (Sr. No. 7). We find that confirmation letter (page 42), copy of account (page 43), copy of bank account (pages 44 to 47), copy of sale bill of agricultural produce (pages 48 to 50), copy of pension certificate (pages 51 to 56|, copy of statement on oath (pages 57 to 58) of Shri Bhagwati Prasad Shukla were duly filed by the assessee. If the statement recorded on oath on 4.11.2008 is analysed in specific reply to question no. 9 to 11 it was replied and affirmed as under :-
"Q. No.9 How do you know Mr. Sanjay Palia and have you ever given him any loan or advance. If yes kindly specify the purpose, tenure and source of such loan/advance. Ans. Mr. Sanjay Palia is my nephew. I gave him Rs. 2,00,000/- as loan and the same was funded partially by amount received at the time of retirement and partially by amount saved from farming income Q. No. 10 When was the said loan given to whom and for what purpose ? When was due to be repaid ? If it was interest free, specify reasons. Fromwhere did you get this amount and if the same was not taken back, 11 specify reasons for this. The said loan was given on whose require.
Ans. The above mentioned person is my relative.
He was in need of money so I helped him.
The loan is interest free and unconditional. Further, no time limit was given for its repayment.
Q. No. 11 Apart from the abovementioned loan have you ever given/received any loan ? If yes, mention full details regarding the same. Ans. Apart from Sanjay Palia, I have not given any loan to any person.
The aforesaid statement tendered by Shri Bhagwatiprasad clearly supports the claim of the assessee. He has duly confirmed the transaction, therefore, under the aforementioned facts, no addition is required to be made against the assessee.
This view is further fortified by the decision from Hon'ble jurisdictional High Court in Metachem Industries Limited; 245 ITR 160 (M.P.) and Umesh Electricals; 131 ITD 127 (Agra) (TM). So far as the addition in respect of Shri M.L. Raghuvanshi is concerned, the addition was sustained merely on the ground that no proof of sale proceeds of agricultural produce was produced. We find that in the statement recorded by the department, Mr. Raghuvanshi on 4.11.2008 has clearly 12 tendered that he was having agricultural income from 15 acres of land. In reply to question no. 8 he has tendered that he is having net income of about Rs. 1 lac from agriculture. He further affirmed (reply to question no. 9) that he was having individual good relations with the assessee namely Sanjay Palia and he gave Rs. 1,50,000/- and the amount was given out of savings from agricultural income. In reply to question no.
10 he further tendered that the loan was given in 2005 without interest and the same has not been returned so far, meaning thereby, Shri Raghuvanshi duly confirmed the loan along with its source, therefore, no addition is required especially when the identity, genuineness of loan and source have been explained, therefore, from this angle also there is merit in the appeal of the assessee, consequently, the Assessing Officer is directed to delete the addition.
7. The revenue vide ground no. 2 has challenged the deletion of the addition of Rs.10,49,520/- out of the total addition of Rs. 13,50,000/- on account of unexplained credit u/s 68 of the Act. Since we have deleted the entire addition, 13 therefore, it has remained for academic interest only and, therefore, does not survive.
Finally, the appeal of the assessee as well as of the revenue are partly allowed.
Order was pronounced in the open in the presence of learned representatives from both the sides at the conclusion of the hearing on 21.11.2011.
Sd sd (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21 .11.2011
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-