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2015 (8) TMI 706 - ITAT BANGALORE

2015 (8) TMI 706 - ITAT BANGALORE - TMI - Estimation of 8% profit on disclosed contract receipts - additional income on account of entries found in the diary seized in the search of Mr.Ashok Kumar Chowta - Held that:- As far as disclosed contract receipts in the books of account are concerned, as already stated, the addition was made only on the basis of statement recorded at the time of survey. The books of account have not been rejected by the AO u/s. 145 of the Act. In such circumstances, we .....

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2012, M.P. Nos.52 to 54/Bang/2015 - Dated:- 7-8-2015 - SHRI N.V. VASUDEVAN, AND SHRI JASON P. BOAZ, JJ. For The Appellant : Shri G. Venkatesh, Advocate For The Respondent : Shri P. Dhivahar, Jt. CIT(DR) ORDER Per N.V. Vasudevan, Judicial Member These miscellaneous petitions are filed by the assessee seeking to rectify certain mistakes apparent on the face of the common order dated 14.8.2014 passed in ITA Nos. 829, 830 & 852/B/2012 as well as CO No.24/Bang/2013. 2. The Tribunal disposed of th .....

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is an individual. He is a contractor carrying out contract work on behalf of others. For the A.Ys. 2004-05 to 2009-10, the assessee filed returns of income u/s. 139(1) of the Income Tax Act, 1961 (Act) declaring the following income:- A.Y Original return of Income (u/s. 139) (Rs.) 2004-05 1,46,686 2005-06 3,94,510 2006-07 18,09,501 2007-08 14,37,560 2008-09 2,77,670 2009-10 4,77,760 4. A search u/s. 132 of the Act was conducted in the residential premises of Shri Ashok Kumar Chowta at Flat No.1 .....

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f cash by Ashok Kumar Chowta to the assessee for contract work done by the assessee for Ashok Kumar Chowta. 5. A Survey u/s. 133A of the Act was conducted in the business premises of the assessee on 21.4.2009. In the course of survey, statement of the assessee was recorded. In such statement the Assessee stated that he was a civil contractor and had in the past 6 years constructed Regent Park, Concord Royal Park, Venkataramana Arcade, Venkataramana Towers. All the above projects were done for an .....

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s being reproduced: Q.No.13: Please explain the nature of contract work carried out for Shri Ashok Kumar Chowta was it only job-work contract or were you to procure the materials and construct the building? Ans: As per the understanding between me and Sri.Chowta, I was required to do the civil construction work on job work basis, but there was no written agreement between us to this effect. So far past two project the materials were also purchased by me and the contract work was completed by me .....

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g only the civil works for Sri.Ashok Kumar s projects. For two projects, Royal Park and Concord, I have done wood work for the window shutters. The plumbing, electrical, flooring works etc., were not done by me. Q.No.14: How was Sri.Ashok Kumar Chowta making payments to you, in cheque or any other mode? Ans: For the purchase of materials like cement & steel and also towards the labour charges, charges payable to me, Sri.Chowta was making payments in cheque. Sri.Chowta was making cash payment .....

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take measurement on completion of certain specified stages of work and used to draw bills in my name which I use to sign and submit to Sri.Chowta. However, Sri.Chowta has not passed even a single bill raised in my name. He use to make payments to me on weekly basis for the labour charges and for the materials purchased, so as to enable me to make payments to the labourers and the material suppliers. Certain payments for material suppliers were directly made by Sri.Ashok Kumar Chowta, but such pa .....

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d such payments against your name and obtained your signature. Please tell me to whom such payments were made by Sri.Chowta and what are the materials supplied by such persons? Ans: Sri.Ashok Kumar Chowta was making cash payments to suppliers poles, required for centering work, centering sheets, suppliers laterite stone etc. Q.No.17: Please furnish the names and address of the persons to whom such payments for supply of centering materials, laterite stone etc., is made by Sri.Ashok Kumar Chowta? .....

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xcluding the cost of steel. As per the oral agreement between me and Sri.Ashok Kumar Chowta, he is required to supply steel and I am required to procure all other materials including cement, laterite stone, blue metal, centering sheet, sand etc., and construct the building. This is the reason for Sri.Chowta booking the payments made to the suppliers of above materials against my name in his books of accounts. 6. The Assessee stated that the suppliers of materials referred to in answer to Q.No.15 .....

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centering poles and centering sheets. Sometimes when work is required to be completed urgently, Sri Chowta employees, labourers directly and makes payments directly but the books such expenses also against my name. Q.27 Why did you sign for the receipt of the payment if such payments are not made to you and when you do not know to whom such payments are made? Ans. He does not make payment to me for the work. I have done if I refuse to sign for the above-mentioned cash payments. So, I am forced .....

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re included in the turnover disclosed in your income tax returns? Ans: I have disclosed the turnover in my income tax return as per the bills raised on Sri.Ashok Kumar Chowta. I do not know whether the bills raised by me tally with the total cheque and cash receipt from Sri.Ashok Kumar Chowta, as per the materials seized in the search in his case. I request you to provide me the details of the payments made to me and acknowledged by me as per the books and other accounts seized from Sri.Ashok Ku .....

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er statement of the Assessee u/s.131 of the Act. Q.No.2 & 3 and answers thereto are important and the same are reproduced as under: Q.2: Please call back to your memory to the statement recorded u/s 131 of the I. T. Act on 21.4.2009 during the course of the survey u/s 133A in your business premises. In your above statement, you had stated that you will co-operate with the department and furnish any information that is required in connection with your I. T.Assessment. You had also stated that .....

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relevant portions of the diaries of Sri Ashok Kumar Chowta, which you had seized from his residence during the course of the search in his case. It is seen from the above scrutiny that the following cash receipts have not been included in the gross contract receipts disclosed in my returns of income for the relevant Asst. Years. FINANCIALYEAR PAYMENTS (Rs.) 2003-04 17,80,000 2004-05 1,27,35,005 2005-06 28,05,000 2006-07 60,26,250 2007-08 27,00,000 2008-09 5,75,000 Total 2,66,21,255 Q.3: As assur .....

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. These payments are received in cash only because the suppliers of the above materials insisted on cash payment. In fact, these payments are made for and on behalf of Sri Ashok Kumar Chowta for the construction of his projects. However, to purchase peace with the department, I am prepared to offer 8% of the above receipts as my additional income for the relevant Asst. years. 8. We may mention here that the incriminating document referred to by the AO is a diary seized from Ashok Kumar Chowta sh .....

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The diaries seized from Sri. Ashok Kumar Chowta also shows that you have purchased certain residential and commercial premises from him and that you have paid a part of the consideration to him in cash. On verification of your Balance Sheet, it is seen that the above cash payments are not included in the cost of the above assets disclosed in your balance Sheet and that the cost of those assets are accounted at the value for which payments are made in cheque. The above facts indicate that you hav .....

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ith the sole intention of purchasing peace with the department and to avoid protracted legal proceedings, I offer taxable income at 8% of the Gross Contract receipts including the contract receipts in cheque and cash mentioned above, as given below: Fin. Year Asst. Year Contract Receipts already offered in R/I Rs. Cash Receipts Rs. Gross Contract Receipts Rs. 8% of the Gross Receipts Rs. 2003-04 2004-05 18,33,579 17,80,000 36,13,579 2,89,086 2004-05 2005-06 3,17,64,494 1,27,35,005 4,44,99,499 35 .....

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is eligible to me u/s. 88/80C. Q.11. Do you want to state anything, else? Ans. : I will file my revised returns offering total income as given in my answer to your question No. 9 and pay the taxes. Considering the economic recession in general and also the financial difficulties that I am facing now, I request you to allow me sufficient time for payment of the tax. I assure that, I will pay the taxes in installments. I have fully co-operated with the department during the course of the Survey c .....

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various assessment years are as follows:- A.Y Gross receipts not included (Rs.) 2004-05 17,80,000 2005-06 1,27,35,005 2006-07 28,05,000 2007-08 60,26,250 2008-09 27,00,000 Total 2,66,21,255 10. On the aforesaid gross receipts not included in the books of account, the assessee agreed to offer 8% additional contract receipts as income for the various assessment years. As stated in the statement recorded the assessee did not in file return of income offering additional income. 11. The AO therefore .....

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account of entries found in the diary seized in the search of Mr.Ashok Kumar Chowta. 12. In the appeals filed before the Tribunal in concise grounds No.4 to 6 in all the assessment years, the assessee had challenged the estimation of 8% of the contract receipts as disclosed in the books of account of the assessee. The relevant concise grounds in this regard are as under:- 4. The learned Commissioner (Appeals) is not justified in upholding the action of the learned Assessing Officer of estimating .....

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d the books of accounts and other documents required under sub-section 2 of Section 44AA and got his accounts audited under section 44AB and without anything more, the learned Assessing Officer ought to have accepted the book profits. 13. The Tribunal decided the appeal by framing the following issues:- (i) Whether the initiation of reassessment proceedings u/s.147 for A. Ys.2004-05 to 2008-09 is valid ? (ii) Whether the action of the CIT (A) in deleting the addition of 8% of the undisclosed con .....

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r? 14. As can be seen from the aforesaid issues framed by the Tribunal for consideration, estimation of 8% profit on disclosed contract receipts in the books of account was not considered by the Tribunal at all. Therefore, there is an apparent error in the order of the Tribunal, inasmuch as the grounds raised by the assessee have not been adjudicated. 15. We have heard the parties on the question of estimation of 8% profit on disclosed contract receipts. It is seen from the assessment order that .....

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or the A. Ys. 2005-06 to 2007-08, which is placed at pages 145 to 167 of the assessee's paper book. We find that there is no break up of the amounts brought to tax in the case of Ashok Kumar Chowta. It is therefore not possible to ascertain as to whether the entries found in the seized diary pertaining to the assessee were also part of the undisclosed income by Ashok Kumar Chowta. Further it is also not clear as to whether undisclosed income is on account of undisclosed expenditure of Ashok .....

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f the assessee as recorded in the seized diary. 38. The assessment is based purely on statement made at the time of Survey as well as on 11.5.2009 before the ADIT (Inv.) Mangalore, which according to us is a conditional statement and cannot form the basis for making an assessment. In our view, the assessee has been consistently taking a stand that the cash payments recorded in the seized diary was for procuring materials on behalf of Chowta and has nothing to do with the contract receipts of the .....

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from answer by the assessee to question 27 in the statement recorded at the time of survey. Taking into consideration all the facts and circumstances, we are of the view that the Revenue has failed to bring in material on record to corroborate its conclusion that the entries found in the seized diary are unaccounted contract receipts of the assessee and therefore the profit element in executing such receipts has to be brought to tax. 39. In our view, there was no basis for the CIT (A) to have co .....

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