ITA No.6011/Del/2012
Asstt.Year: 2008-09
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `E'NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 6011/DEL/2012
ASSTT.YEAR: 2008-09
Income Tax Officer, vs Madhav Propcon Pvt. Ltd.
Ward-6(1), H-54, 2nd Floor, DDA Flats,
New Delhi. Ashok Vihar, Phase-I,
New Delhi-110052
(PAN: AAFCM5920R)
(Appellant) (Respondent)
Appellant by: Shri Rajiv Saxena, Adv.
Miss Sumangla Saxena, Adv.
Respondent by: Shri P. Dam Kanunjna , Sr.DR
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
The above appeal has been filed by the Revenue against the order of
CIT(A)-IX, New Delhi dated 8.8.2012 in Appeal No.151/10-11 for AY 2008-
09. The sole ground raised by the revenue reads as under:-
"1.Whether in the facts and circumstances of the case
and in Law, the Learned CIT(A) has erred in directing the
A.O. to adopt the income of assessee at 2.24% of gross
receipts by admitting additional evidences in the form of
details of comparable cases without providing any opportunity
of rebuttal to the A.O. under Rule 46A?"
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ITA No.6011/Del/2012
Asstt.Year: 2008-09
2. Brief facts giving rise to this appeal are that the assessee company was
engaged in the business of land development work during the year under
consideration. The assessee company filed return of income on 25.09.2008
declaring an income of Rs.1211/- and the same was processed u/s 143(1) of the
Act. Subsequently, the case was selected for scrutiny and statutory notice u/s
143(2) of the Act was issued and duly served upon the assessee. The AO
rejected the books of accounts of the assessee and completed assessment u/s
143(3) of the Act vide order dated 15.12.2010 at an income of Rs.3,74,17,210
making an addition of Rs.3,74,16,000 disallowing 75% of the land development
expenses claimed by the assessee as per profit and loss account. Being
aggrieved by the above assessment order, the assessee preferred an appeal
before the CIT(A) which was allowed by passing the impugned order. The
CIT(A) upheld the rejection of books of account but the estimated addition of
75% of expenses was dismissed and the AO was directed to adopt the income of
the assessee at 2.24% of the total gross receipts during the year under
consideration. Now, the aggrieved revenue is before this Tribunal with the sole
ground as reproduced hereinabove.
3. We have heard arguments of both the sides and carefully perused the
relevant material placed on record.
4. On the issue of violation of Rule 46A of the Income Tax Rules 1962,
from vigilant perusal of the assessment order, we note that the assessee has not
filed any additional evidence during the first appellate proceedings and we are
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Asstt.Year: 2008-09
unable to see that the CIT(A) has admitted any additional evidence in
contravention to provisions of Rule 46A of Income Tax Rules, 1962.
Therefore, legal objection of the revenue is not found to be sustainable.
5. Ld. DR submitted that the CIT(A) was not correct in directing the AO to
adopt the income of the assessee at 2.24% of gross receipts by admitting
additional evidence in the form of details of comparable cases. Ld. DR further
submitted that the CIT(A) ought to have considered other better comparable
cases on the issue of estimation of net profit. Ld. DR has placed reliance on the
decision of Hon'ble High Court of Punjab & Haryana dated 20.11.2014 in
ITA No. 269 and 225 of 2014 in the case of Telelinks vs CIT, Bathinda and
CIT vs Mattewal Cooop L/C Society, decision of Hon'ble Punjab &
Haryana High Court dated 5.2.2013 in ITA NO. 825/2010 in the case of
CIT vs Smt. Kamlesh & Other cases and the decision of Hon'ble
Jurisdictional High Court of Delhi dated 9.12.2014 in ITA No. 80/2014 CIT
vs Subodh Gupta and submitted that even if Rule 44AB of the Act is not
applicable, then also 8% of gross receipts of the assessee should be adopted for
estimation of net profit rate.
6. Ld. Counsel of the assessee replied that the case of the assessee is
squarely covered in favour of the assessee by various decisions of the Tribunal
on the similar set of facts and circumstances including decision of ITAT Delhi
"F" Bench in ITA No.2044/Del/2011 for AY 2008-09 in the case of ITO vs
Radha Ballabh Nest Build Pvt. Ltd. wherein net profit @2.24% has been upheld
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Asstt.Year: 2008-09
by the Tribunal dismissing the appeal of the revenue. Ld. Counsel further
contended that the ratio of the case laws relied upon by the ld. DR are not
applicable to the present case.
7. On careful consideration of above submissions, at the very outset, we
note that in the similar set of facts and circumstances in the case of ITO vs
Radha Ballabh Nest Build Pvt. Ltd. (supra) dismissing the appeal of the
revenue, the coordinate bench of this Tribunal has upheld the estimation of net
profit @2.24% of the gross receipts from M/s PACL India Ltd. The operative
part of this order of the Tribunal reads as under:-
"6. Since, the issues raised in the grounds are covered by
earlier decision of the Tribunal in the group case of the
assessee as well as the recent order of the Tribunal for the
similar assessment year 2008-09 in ITA No. 2042 and
2043/D/2011 (Supra) we do not find infirmity in the first
appellate order. In that case also the Tribunal has upheld the
first appellate order on identical issues. Addition made by the
AO on account of TDS treating the amount claimed from PACL
India Ltd. and PGF India Ltd. as real income of the assessee
deleted by the Ld. CIT(A) has been upheld. The Tribunal has
also upheld the action of the 1st appellate authority in
restricting the addition made on account of 4% commission on
debit and credit entries ITA No. 2044/D/2011 5 regarding
providing of accommodation entries to the said companies to
2.4% of the gross receipt shown in the profit and loss account
from the above companies.
7. Under the above background, we do not find reason to
interfere to the first appellate order in this regard. The same is
upheld. The grounds are accordingly rejected."
8. First of all, it would be just and proper to consider the applicability of the
decisions relied by the ld. DR appearing for the Revenue. In the case of
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Asstt.Year: 2008-09
Telelink (supra), the AO estimated net profit @12% and the CIT(A) reduced the
same @6%. The Tribunal, allowing the appeal by the revenue, set aside the
order of the CIT(A) by restoring that of the AO affirming the net profit rate at
12%. The Hon'ble High Court held that if net profit rate is perverse and
arbitrary, the findings so rendered shall be illegal and restored the matter to the
file of the AO for re-determination of net profit by reference to and after due
consideration of relevant factors. Hence in our humble understanding, Hon'ble
High Court held that if net profit rate is perverse and arbitrary, then the findings
so rendered shall be illegal and with this proposition, the matter is restored to
the file of the AO for re-determination of net profit. We also respectfully note
that Hon'ble High Court did not determine any net profit rate, hence, there is no
guideline about suitable and appropriate percentage of profit.
9. We further note that the Hon'ble Punjab & Haryana High Court in the
case of CIT vs Kamlesh & other cases (supra), their lordships in the cases of
individuals held that the income disclosed by the assessee as their income has
been assessed to tax as income in terms of section 44AD of the Act, then it was
held to be sustainable. Ld. Counsel of the assessee submitted that the present
case is related to a company having turnover of about Rs.5,00 crores, hence, the
net profit rate admitted by individual assessee u/s 44AD of the Act is not
applicable and the cases of CIT vs Kamlesh (supra) is related to individual
assessee who do not maintain books of accounts and surrender themselves to
provisions of Section 44AD of the Act. Ld. DR could not lead us to hold that
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Asstt.Year: 2008-09
facts of these cases are similar to the present case. Thus, we agree with these
contentions of the ld. Counsel as the facts of the extant case are clearly
distinguishable from the facts of the case of CIT vs Kamlesh etc. (supra).
10. In the case of CIT vs Subodh Gupta, the Hon'ble Jurisdictional High
Court of Delhi held that the appellate authorities have not applied section 44AD
of the Act but where difficulty arose as they had to estimate reasonable rate of
net profit, hence in absence of any data and details, they applied net profit rate
as mentioned in section 44AD of the Act. In that case, their lordships further
also noted that the AO in the subsequent years accepted the figure of 8% of net
profit. Ld. Counsel of the assessee submitted that in the case of Subodh Gupta
(supra), no instance was quoted by the Revenue about any higher profit rate and
in absence of any contrary data and details the net profit rate of 8% was
approved by Hon'ble High Court but in the present case, there were number of
cases wherein in the similar set of facts and circumstances, net profit rate of
2.24% was accepted by the department in several suitably comparable cases
including order in the case of Radha Ballabh Nest Build Pvt. Ltd. (supra),
therefore, the ratio of the decision of Subodh Gupta (supra) does not support the
case of the Revenue in the present appeal.
11. On careful consideration of above contentions of both the sides, first of
all, we noted that on our specific query from ld. DR, we have been informed by
the ld. DR that the decisions of the Tribunal (supra) as relied by the assessee
and accepted by the CIT(A) as suitable comparables have not been set aside or
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Asstt.Year: 2008-09
modified or disturbed by the Tribunal itself or by Hon'ble High Court. Hence,
in absence of any other order, which may lead us to take a different view or
opinion, we are of the considered opinion that the CIT(A) was quite justified in
considering the suitable comparable cases for determination of net profit rate of
2.24% of gross receipts of the assessee.
12. On careful consideration of the order of the coordinate bench of this
Tribunal in the case of Radha Ballabh Nest Build Pvt. Ltd.(supra), we are of the
considered opinion that the issue raised by the revenue in the sole ground is
covered by the decision of the Tribunal for similar AY 2008-09 passed in ITA
No.2044/Del/2011 (supra). We are unable to see any ambiguity, infirmity or any
other valid reason to interfere with the impugned order of the first appellate
authority. In the case of ITO vs Radha Ballabh Nest Build Pvt. Ltd.(supra), the
Tribunal, on identical set of facts and circumstances, has upheld the order of the
CIT(A) and the addition made by the AO has been deleted by upholding the
order of the CIT(A) which adopted rate of 2.24% of the gross receipts from M/s
PACL India Ltd. for estimation of net profit in a peculiar situation when the
conclusion of rejection of books of accounts by the AO has been upheld by the
CIT(A). The Tribunal has also upheld the conclusion of the CIT(A) in this
regard and we are unable to see any valid reason to take a different view on the
similar issue. We also respectfully hold that the benefit of the ratio of the
decisions relied by the revenue is not available for the revenue as the facts and
circumstances of these cases are clearly distinguishable from the factual matrix
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Asstt.Year: 2008-09
of the present case. Therefore, we hold that the present case of the assessee is
squarely covered in favour of the assessee by the order of the Tribunal in the
case of Radha Ballabh Nest Build Pvt. Ltd. (supra). Accordingly, sole ground
of the revenue being devoid of merits is dismissed.
13. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 12.3.2015.
Sd/- Sd/-
(G.D. AGRAWAL) (CHANDRAMOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
DT. 12th MARCH 2015
`GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T. 5. DR
By Order
Asstt. Registrar
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