TaxTMI 
TaxTMI 
2021 (12) TMI 1177
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.... request of all the parties all the appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. We will first take up Cross Appeal bearing ITANo.374/KOL/2018 & ITANo.533/KOL/2018 pertaining to A.Y. 2012-13 3. Brief facts of the case as culled out from the records are that the assessee is a Private Ltd. Company engaged in the business of construction of building bridges. Income of Rs. 35,09,550/- declared in the return of income filed on 30th September 2012. Notices u/s 143(2)& 142(1) of the Act were issued but there was no compliance. Subsequently the assessee made submissions through Speed Post on 12.03.2015 but the said submission did not contain the requisite information asked by the Ld. AO. Since the ld. AO did not receive necessary information, he disallowed the total expenses claimed in the P & L Account. Similarly, Ld. AO possessed the information from AIR about sale of immovable property but due to lack of necessary details which were not furnished by the assessee, the sale consideration from immovable property was also disallowed. Based on the records available Ld. AO proceeded to frame ex-parte order u/s 144 of the....
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....eding before A.O. 2]. The Ld.CIT(A) erred in deleting the disallowances of expenses which was inclusive of purchase which remained unverified and therefore warranted disallowance of the entire sum. 3]. The Ld.CIT(A) erred in deleting the disallowances made towards expenses without appreciating the fact that the assessee had not been able to produce any supporting evidences of its claim and also Ld. CIT(A) decided the issue without reminding to AO for verification. 4]. The appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing. 6. Ld. counsel for the assessee has submitted following written submissions: 1] As regards ground of appeal No. 1 of assessee's appeal and ground of appeal No. 1 to 3 of departmental appeal. a] That in the audited financial statement the assessee had disclosed income and expenditure as under:- Particulars Amount Particulars Amount Opening stock 5,68,47,415 Contract receipts (sales) 87,45,69,722 Purchases [ work allotted to sub contractors back to back] 79,61,15,855 Commission and other receipts 11,17,53,928 Fright, Power ....
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....ent as per the Rules of justice & equity and goods concise. The Hon'ble Supreme Court in the case of State of Orissa v. Maharaja Shri B.P. Singh Deo reported in 76 ITR 690 (SC) held that the mere fact that the materials placed by the assessee were unreliable did not empower the Assistant Collector to make an arbitrary order of enhancement. The power to levy assessment on the basis of best judgment is not an arbitrary power. The assessment had to be based on relevant material. Further also same view had been taken by the Hon'ble Supreme Court in the case of BrijBhushanLalParduman Kumar vs. CIT reported in 115 ITR 524 (SC). Further also the Hon'ble Supreme Court in the case of CIT v. Excel Industries Limited (2013) 358 ITR 295 (SC), held that income tax cannot be levied on hypothetical income and it has really accrued to the assessee. f] From the order it is appeared that in the case of assessee the ld AO had used arbitrarily power and has rejected one side i.e. debit side of audited P&L a/c and disallowed the entire expenditure as claimed by assessee, however corresponding other side on such audited P&L a/c where the source of such expenditure had been recorded i.e. gross b....
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....jasthan High Court in case of Shree Ram JhanwarLalVs. ITO 10 DTR 229 held that "where gross receipt of a contractor exceed Rs. 40 lacs, section 44AD cannot be applied". ii. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Surinder Pal Anand [2010] 192 Taxman 264 (Punjab & Haryana), under identical circumstances has held as follows:- "7. Section 44AD of the Act was inserted by the Finance Act, 1994 with effect from 1-4-1994. Sub-section (1) of section 44AD clearly provides that where an assessee is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8 per cent, of the gross receipts paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in sections 28 to 43C of the Act. This income is to be deemed to be the profits and gains of said business chargeable of tax under the head "profits and gains" of business. However, the said provisions are applicable where the gross receipts paid or payable does not exceed Rs. ....
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.... estimation, although other material on record can also be taken into account. Our view finds support from the decision of the Hon'ble Chief Court of Oudh in the case of Abdul Qayum& Co. vs. CIT (1933) 1 ITR 375 (Oudh), wherein it was held that although the AO was not bound by strict judicial principles, he should be guided by rules of justice, equity and good conscious. In the case of State of Orissa vs. Maharaja Shri B.P. Singh Deo (1970) 76 ITR 690 (SC), Hon'ble Supreme Court held that the power of levy on best judgment was not an arbitrary power. The assessment had to be made on relevant material. Hon'ble Calcutta High Court, in the case of CIT vs. Ranicherra Tea Co. Ltd. (1995) 124 CTR (Cal) 113 : (1994) 207 ITR 979 (Cal), also held that although the AO is not bound by strict judicial principles, in making best judgment assessment, he does not possess absolutely arbitrary authority to assess any figure as he likes. He should be guided by the rules of justice, equity and good conscious. Looking to the ratio of these cases, if past results showed loss or nominal net profit rate, then, the AO will not be justified in applying 8 per cent rate." i] That when the profit rat....
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....etter result during the year under consideration as compared to past year, then there is no need for making any further addition. The finding arrived by the Tribunal is in consonance with the settled law, therefore, no addition in the income could have been made by the Assessing Officer. The Tribunal rightly declared the addition made as erroneous. The appeal does not involve any substantial question of law, hence, dismissed." iv. The Hon'ble ITAT Cuttak Bench in the case of Shreegopal Mundhravs ITO in ITA No.437/CTK/2016 for assessment year 2010-2011 order dated 30.1.2017 has held as under:- "I find that the rejection of books of account of the assessee is not under challenge before me. The only submission of the ld A.R. of the assessee is that the net profit rate applied to estimate the income is excessive. It is not in dispute that the net profit rate declared and accepted by the department in the immediately preceding assessment year's is in A.Y. 2007-08 @ 3.04%, in A.Y. 2008-09 @ 2.77% and in A.Y. 2009-10 @ 2.64%. In my considered view, after rejecting of book results of the assessee, the income of the assessee has to be estimated by the Assessing Officer....
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....nnot be equated as commission payments by any means. Hence, the provision of Section 194H have no applicability for such payments and consequently, the question of disallowance u/s 40(a)(ia) does not arise. I further find that the appellant has not complied before the AO. The appellant has not even produced complete books of account before me and I find from the record that there has been repeated non-compliance by the appellant before the AO. Therefore the books of account are liable to be rejected. However, I also agree with the logistic contention of the AR that disallowance of entire incentive to agents amounting to Rs. 6,64,83,650/- would only result in an absurd net profit rate of 13.90% in this particular line of business in which the appellant company is engaged in. Considering the facts and circumstances of the case as well as the normal profit rends in this line of business, I am of the view that book profit declared is liable to be rejected. The income of the company may be estimated keeping in view materials available on record. In this regard, I have already decided the appellant's appeal for the AYs 2001-11 & 2011-12 by adopting the theory of estimation. Following....
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....vernor India P. Ltd. [2009] 312 ITR 254 (SC) and CIT v. Realest Builders & Services Ltd [2008] 170 TAXMAN 218 (SC) has emphasized the importance of method of accounting regularly employed by the taxpayer. The Supreme Court in the case of Realest Builders & Services Ltd. has held that the tax department needs to provide facts and figures that the impugned method of accounting adopted by the taxpayer results in underestimation of profits for changing the method of accounting under Section 145 of the Act. Otherwise, it will be presumed that the entire exercise is revenue neutral. Method of Accounting regularly followed by the taxpayer which was accepted by the AO in past cannot be rejected in future years without expressing the dissatisfaction about the correctness or completeness of the accounts of the assessee. In light of above, the addition made by ld AO and partly sustained by Ld CIT(A) may kindly be deleted. 2] As regards ground of appeal No. 2 of assessee's appeal relating to addition of Rs. 2,81,70,890/- in respect of unexplained income from sale of property. a] As submitted that the assessee company is also dealing in sale and purchase of proper....
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.... the intension of assessee company was earn brokerage income on alleged sale and purchase of transaction of property. Further the department had not any material or evidence contrary to same. The income from brokerage from alleged transaction had been disclosed in P&L account which was dully accepted and as such the income arising from alleged transaction had been treated as genuine as how the receipts of such transaction as undisclosed income of assessee. On the identical facts the Hon'ble Rajasthan High Court in the case of CIT v/s Consulting Engineering Group Ltd. reported in 369 ITR 284 held that when the contract work allotted to sub contractor on commission basis and the ld AO found such transaction are not real transaction the ld AO should have made addition in respect of commission earned on such transaction not entire transaction as undisclosed income of the assessee. g] That in the 2011-12, the department had accepted the brokerage income on alleged transaction and the facts narrated in affidavit filed by director of assessee remained uncontroverted and as such the principle of consistency required that the view taken by the Department in the preceding years ....
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....disputed revenue just could not have come without incurring an expenditure,but based on his observation that the purchase made by the assessee in the past were in dispute and genuineness of the same had not been proved, Ld. CIT(A) computed the net profit applying the rate of 8% on the total revenue for the year of Rs. 87.46 Cr. 9.1Now the revenue has challenged the relief given by the Ld. CIT(A) and the assessee is agitating for the higher net profit rate applied by the ld. CIT(A) ignoring past net profit track of the assessee. 9.2 Beforeus the ld. counsel for the assessee stated that in one of the sister concern M/s B.B.C. Project Services Pvt. Ltd. This Tribunal vide its order dated 30.11.2018 in ITANo.1669/Kol/2016 for A.Y. 2009- 10,has adjudicated very same issue of estimation of net profit on the total turnover of Rs. 48.47 cr. and after considering the submission of both sides this tribunal held as follows: 2. The Revenue raises two substantive grounds in its instant appeal. Its former grievance pleads that CIT(A) has erred in estimating assessee's income @ 0.4% of the. total turnover of Rs. 48,47,08,894/- without appreciating the relevant facts. It then se....
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....er of Rs. 48,47,08,894/- which works to Rs. 19,38,835/-. The AO is directed accordingly. The appellant get a relief of Rs. '6,54,70,185/- (6, 74,09,020 - 19,38,835)"' 4. Learned CIT-DR vehemently contends during the course of hearing that CIT(A) has erred in law as well as on facts in estimating assessee's income @ 0.4% of its total turnover. He fails to dispute the fact the CIT(A) has gone by his findings in earlier assessment years thereby adopting the judicial consistency. The said estimation in earlier assessment years has admittedly attained finality. There is no other material to dispute correctness thereof failed during the course of hearing. We therefore find no fault in CIT(A)'s action estimating the assessee's income @ 0.4% of its turnover. 5. The Revenue's latter substantive ground seeking to revive u/s 40(a)(ia) (supra) that has no legs to stand since the relevant books forming foundation thereof already stand rejected. The Revenue fails in its both substantive grounds accordingly. 9.3. From perusal of the above finding of this tribunal we find that the net profit rate of 0.4% has been accepted by this Tribunal in one of the sist....
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....und No.1 of the assessee's appeal for A.Y. 2012-13 is partly allowed& Ground no.1,2& 3 of the Revenue's appeal for A.Y. 2012-13 stands dismissed. 10. Apropos to ground no.2 raised by the assessee relating to addition for sale of immovable property amounting to Rs. 2,81,70,890/- we notice that the basis of this addition is the information about the sale of immovable property in the name of assessee carried out during the year and this information was received from Sub-Registrar office. Ld. AO had no occasion to examine the details of this transaction since no such information was supplied. However, when the matter was carried before the Ld. CIT(A), various details were filed and even in the body of impugned order Ld. CIT(A) has observed that they were not one but many transactions of sale of immovable property which happened during the year. Still Ld. CIT(A) did not made any efforts to examine those transactions and proceeded just to confirm the addition made by the ld. AO. 10.1 We, however on perusal of the submissions made by the assessee as well as the copy of deed of conveyance, Memorandum of Understanding (in short MoU) and Board Resolution in respect of purchase of land ....
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....he erstwhile khatedar Shri Jivabhai S/o Shri Karsanbhai, vide the above sale deed dated 22/09/2011. The erstwhile had got the said land converted for Industrial use the order of S.D.O. Jaitaran dated 21/07/2011, bearing reference number F8/SP/RAJASVA/2011/1059. Therefore the said land is competent for being used for Industrial purposes." 10.5 We also note that during the year under consideration the assessee had shown such transaction in audited financial statement under the head other income of business and similarly had also claimed expenditure under business head and financial statements are already on record in the paper book. One of the copy of the conveyance deed executed by the appellant along with MoU& Board Resolution is at page 29 to 35 of the paper book. 10.6. On perusal of same we observe that on behalf of the purchaser the assessee companies enters into an agreement with sellers and thereafter transfer the property in the name of the purchaser. This business of earning commission from purchase and sale of land is being consistently carried out by the assessee in the previous year also and same are regularly entered in the books of account. Even for A.Y. 2011-12 t....
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.... on the date of deposit of the alleged amount with the HDFC Bank. In lack of necessary evidences, we find no merit in this ground raised by the assessee. Thus, ground no.3 of the assessee's appeal is dismissed. Ground no.4 is general in nature which needs no adjudication. 12. As a result, appeal of the assessee for A.Y. 2012-13 is partly allowed and the revenue's appeal for A.Y. 2012-13 stands dismissed as per terms indicated above. Now we take up assessee's appeal for A.Y. 2013-14 wherein following grounds of appeal : 1. That on the facts and in the circumstances of the case, the order passed by Ld. CIT(A) u/s 250 of Income Tax Act, 1961 dated 09.08.2018 is bad and is liable to be quashed so far as arbitrary estimation of profit from operations is concerned. 2.That on the fact and in the circumstances of the case, the Ld. CIT(A) is wrong and unjustified in determining profit at Rs. 9,46,84,148/- being 8% of turnover without properly examining Books of accounts and assessee's submission made on 12.01.2018. 3.That on the facts and in the circumstances of the case, Ld. CIT (A) is wrong and unjustified in determining profit @ 8% on turnover which i....
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....Rs. 53,906/- u/s 37 of the Income Tax Act, 1961. 3. That the appellant craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal. The grounds of appeal of the Revenue in ITANo. 375/Ind/2018 reads as under: 1. The Ld.CIT(A) has erred in deleting the addition of Rs. 62.01 cr. on account of "Advance from Customer" ignoring the fact that the assessee could not established the genuineness of M/s. Trishakti Power Pvt. Ltd. claimed to have been received Rs. 62.01 cr. by the assessee in spite of opportunities given. 2. The Ld.CIT(A) erred in holding that the notice uls.133(6) was a general one and that the existence of a web page is enough evidence for certifying the genuineness of the company's existence and its transaction. 3. The Ld.CIT(A) erred in deleting the additions made on account of bogus purchase amounting to Rs. 48.81 cr. and disallowances made on account of expenses amounting to Rs. 11.88 cr. and substituting the income of the assessee with the estimated net profit @ 8% of revenue from operation by completely overlooking the fact that the AO had made such additions and disallowanc....
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....subsequent year, showing it as the sales/turnover from contract business. Ld. CIT(A) deleted the impugned addition after observing that the identity of M/s. Trishkti Power Pvt. Ltd. is not in dispute since this company replied to the notice issued u/s 133(6) of the Act, complete details of the company and the projects undertaken by it are available on the website of this company. Ld. CIT(A) also held that the alleged cash creditors is having business transaction with the assessee is regard to contractual and engineering activities. 19.1 Before us Ld. counsel for the assessee submitted that the assessee had obtained the contract work from M/s Trishakti Power Private Limited through work order dated 04/10/2013. M/s Trishakti Power Private Limited had given advance of Rs. 62,01,00,000/- through banking channel. The advances so received are duly recorded and also appear in audited financial statement, which is part of the paper book. (P.B. Page 13 to 20).Further out of total trade advances of Rs. 66,48,50,000/- the assessee company had also given advance of Rs. 61,81,00,000/- to sub-contractor and remaining amount was shown as commission income in the subsequent year. The advances g....
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.... for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed". The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of CIT vsDurga Prasad More (1969) 72 ITR 807 (SC) in which it was held "If the amount represented the income of the assessee of the previous year, it was liable to be included in the total income and an enquiry whether for the purpose of bringing the amount to tax it was from a business activity or from some other source was not relevant". 19.6 We also note that the alleged sum appears in the balance sheet as advance from customers. Work order dated 4th October 2013 issued by M/s Trishakti Power P. Ltd. in favour of the assessee is placed on record which defines scope of work, consideration security deposit, etc. and confirmation of account is also placed at page 19 which shows that advance of Rs. 62.01 cr. have been received through banking channel. Further the customers namely M/s Trishakti Power P. Ltd has also certified to hav....