No penalty merely because audit report is not furnished in time, unless deliberation on part of assessee

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I have found the following order of ITAT Mumbai as very important as it has been held that Merely because, the assessee did not furnish the report before the due date of filing of the return, that may not automatically attract the penalty.
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Addition referable to previous year's loans in subsequent year not justified

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Mumbai ITAT has in the following case deleted the additions made on account of opening balances of unsecured loans and the notional interest on such loans. The Tribunal held that only fresh loans or additions to the loans during the year in question can be considered for the purpose of addition. Previous years loans cannot be added to subsequent year's income by claiming them to be unexplained.

This is one case law which I will suggest everyone to go through. The AO has made arbitrary additions during assessment proceedings, which the Tribunal has deleted by taking strict note of the same and the appeal has been dismissed with costs to the revenue. The AO in this case has made additions on irrelevant grounds.
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Undisclosed contract receipts are not income but gross receipts

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Kolkata ITAT has held in the following case namely ITO Vs. M/s St. Joseph Construction that where contract receipts are not disclosed in the return of income, the whole receipt cannot be added to the income of assessee as its a part of gross receipts only, It is the net profit arising or estimated from it, should be added to the income.

In this case ITO added the whole of undisclosed contract receipts to the income of the assessee but CIT(A) deleted the addition and added only 8% of such receipts to the income of the assesee, which was upheld by the Tribunal on subsequent appeal.

The facts of the case are not complicated and it can be simply understood even by a student studying income tax that contract receipts are always the gross receipts wherefrom the expenses are borne by the assessee and net profit is arrived at thereby. But how the assessing officer fails to understand the same? The assessee had to go for appeal to get the justice.

It is generally seen that  AO decides the case prima facie only and whenever the question of interpretation of law or fact comes before the AO, they tend to interpret the same in the favour of revenue as if they are representatives of the revenue only. One basic thing should be understood that the assessment proceedings are quasi judicial in nature and the assessee should be met with justice while concluding the proceedings. The AO should not favour either revenue or the assessee, but the case in hand should be decided on the merits.






INCOME TAX APPELLATE TRIBUNAL , KOLKATA

I.T.A No. 1057/Kol/2011-  Assessment Year: 2008-2009

 Income Tax Officer

 Vs

 M/s. St. Joseph Construction

Date of Pronouncement: 26.12.2011

ORDER

Per Shri S.V. Mehrotra, Accountant Member

This appeal filed by the Revenue is against the order of ld. Commissioner of Income- Tax (Appeals)-XXXVI, Kolkata dated 18.05.2011 for the assessment year 2008-09.

2. Brief facts of the case are that in the relevant assessment year, the assessee-firm derived income from business of civil construction. The assessee had filed its return of income declaring total income of  Rs. 68,970/-. The Assessing Officer noticed from the audited Balance sheet and Profit & Loss A/c. the total receipt shown by the firm was at  Rs. 57,73,804/-. In support of its receipts, the assessee-firm had filed TDS certificates received from Missionaries of Charity, which certified making a total payment of  Rs. 57,73,804/- during the financial year 2007-08. The Assessing Officer observed that while examining the 26AS of the assessee-firm generated from the Departmental data base, it was found that the assessee-firm received the following amounts during the financial year 2007-08 from different organizations and TDS had been deducted accordingly as per chart below :-

SNTANName      of     the
concern         from
whom      payment
received            for
construction work
Amount paid by the concern to the assessee-firm during               the
financial        year
TDS
  by the assessee- firm2007-08 
  1. 1.
CALJ03089CJesus and Mary
West          Bengal
Education Society
Rs.4,55,543/-Rs.10,323/-
  1. 2.
CALMO3197FMissionaries      of
Charity
Rs.57,73,804/-Rs.1,30,628/-
3.CALTO4029EThe              Roma
Catholic     Diocese
of Krishnanagar
Rs.50,00,000/-Rs.1,08,158/-
  TotalRs. 1,12,29,347/-Rs.2,49, 109/-

From these information’s, the Assessing Officer concluded that the assessee had not disclosed receipts totaling to  Rs. 54,55,543/- in its accounts. The Assessing Officer issued summons under section 131 to the Accountant of The Roman Catholic Diocese of Krishnanagar, Nadia, who produced following documents before the Assessing Officer :-

(1) Work order of The Roman Catholic Diocese of Krishnanagar given to assessee vide Memo No. CM(K) 2006 dated 20.02.2006,

(2) Photocopy of TDS certificate;

(3) Photocopy of payment certificate for the financial year 2007-08;

(4) Provisional receipt copy of submission of TDS return in Form No. 26Q.

From these documents, the Assessing Officer concluded that the assessee-firm had received an amount of  Rs. 50,00,000/- from The Roman Catholic Diocese of Krishnanagar during the financial year 2007-08, but the assessee-firm did not disclose this gross receipt as well as income to the revenue. The Assessing Officer has also examined the date of issue of cheque by The Roman Catholic Diocese of Krishnanagar, and also deposit in the assessee’s Bank a/c., the details of which are given at pages 5-6 of assessment order and from these details, he pointed out that the partners of the assessee-firm admitted that an additional amount was received besides the amount specified earlier in the return filed for the assessment year 2008-09. He has reproduced the details from the written submissions of the partners. The Assessing Officer also examined the purchases made by the assessee and from all the details after considering the assessee’s explanation concluded that the assessee concealed the receipts from different organizations amounting to  Rs. 54,55,53/- and made an addition of  Rs. 54,55,543/-. He also observed that the details of purchases furnished by the assessee from Hindustan Hardware, Krishnanagar, Nadia amounting to  Rs. 17,56,021/- were genuine and, therefore, no action was called for on this account.

3. Ld. CIT(Appeals) after considering the assessee’s submissions directed the Assessing Officer to reject the books of accounts of the assessee-firm since the assessee had concealed huge contractual receipts to the tune of  Rs. 54,55,543/-. He also directed the Assessing Officer to estimate the profit @ 8% on the entire receipts of  Rs. 1,12,29,347/- equivalent to  Rs. 8,98,348/-, net of all expenses including salary and interest payments to partners.

4. At the time of hearing, none appeared on behalf of the assessee. Learned Departmental Representative relied on the order of Assessing Officer.

5. We have considered the submissions of ld. D.R. By considering the totality of the facts and circumstances of the case, in our opinion, no interference is called for in the order of ld. CIT(Appeals) as he has directed the Assessing Officer to compute net profit at 8% on the entire receipts including the receipts found to have been concealed by the assessee. In any case, the entire receipts, as added by the Assessing Officer, could not be added because it is not disputed that the impugned amount had been received from the contract work carried on by the assessee. It is not the case of Assessing officer that the source of impugned sum of  Rs. 54,55,543/- was other than the business. Therefore, we confirm the order of ld. CIT(Appeals) and reject the ground of appeal taken by the Revenue.

6. In the result, the appeal filed by the Revenue is dismissed.





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