The Principal Commissioner of Income-tax, Kochi v. Silpa Project & Infrastructure (India) Pvt. Ltd
[Citation -2017-LL-0925-17]

Citation 2017-LL-0925-17
Appellant Name The Principal Commissioner of Income-tax, Kochi
Respondent Name Silpa Project & Infrastructure (India) Pvt. Ltd.
Court HIGH COURT OF KERALA AT ERNAKULAM
Relevant Act Income-tax
Date of Order 25/09/2017
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags gross profit rate • income returned • total turnover • total income
Bot Summary: Assessee filed its return for the assessment year 2010-11 returning an income of 4,06,96,700/- and claimed refund of 32,92,907/- on account of excess tax paid through TDS. The return was selected for scrutiny under Section 143(3) and notice under Section 143(2) was issued to the assessee. I.T.A. No.178 of 2016 -2- The assessee filed appeal before the Commissioner of Income Tax who by Annexure-B order found it appropriate to consider gross profit, instead of net profit, as the basis for levy of tax. Thereafter, the first appellate authority made reference to the gross turnover, gross profit and percentage of gross profit returned by the assessee for the Assessment Years 2009-10, 2010-11 and 2011-12 and found that average gross profit returned was 16.94. Gross Turnover Gross Profit of G.P. Average Year age 2009-10 62,34,40,558 11,43,65,379 18.34 2010-11 90,53,06,363 14,99,85,294 16.50 16.94 2011-12 80,38,25,083 12,81,03,397 16.00 Out of the average gross profit of 16.94, if the gross profit declared by the assessee at 16.50 is reduced, the difference comes to 0.44 which has been directed by the Ld. CIT(A) to adopt on the total turnover. While the learned Senior Counsel for the Revenue found no justification whatsoever in the order of the Tribunal in excluding certain items of turnover from the gross turnover of the assessee, it was contended by the learned counsel for the assessee that having regard to the fact that the items to be excluded are reimbursements, cannot form part of the turnover of the assessee. Further, the assessee itself has no case that in the gross turnover for the previous years relied on by the first appellate authority, it had excluded the items which are now ordered to be excluded by the Tribunal. According to us, if it is to be so estimated, firstly, the percentage of the gross profit should have been worked out on the reduced gross turnover applying the gross profit of 14,99,85,294/-.


IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT: HONOURABLE MR.JUSTICE ANTONY DOMINIC & HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, 25TH DAY OF SEPTEMBER 2017/3RD ASWINA, 1939 ITA.No. 178 of 2016 AGAINST ORDER IN ITA 224/2015 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 10-06-2016 APPELLANT/RESPONDENT: PRINCIPAL COMMISSIONER OF INCOME TAX KOCHI-I, KOCHI, INCOME TAX OFFICES, CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI 682 018. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: M/S. SILPA PROJECT & INFRASTRUCTURES (INDIA) PVT LTD 3RD FLOOR, NORTH AVENUE, PARAMARA ROAD, KOCHI 682 018 R1 BY ADV. SRI.K.SRIKUMAR (SR.) R1 BY ADV. SRI.P.K.RAVISANKAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25-09-2017, COURT ON SAME DAY DELIVERED FOLLOWING: ANTONY DOMINIC, & DAMA SESHADRI NAIDU, JJ. I.T.A. No.178 of 2016 Dated this 25th day of September, 2017 JUDGMENT Antony Dominic, J. 1. Aggrieved by order passed by Income Tax Appellate Tribunal, Cochin Bench in I.T.A. No.224/2015 concerning Assessment Year 2010-11, Revenue has filed this appeal. 2. assessee is contractor undertaking construction works. Assessee filed its return for assessment year 2010-11 returning income of `4,06,96,700/- and claimed refund of `32,92,907/- on account of excess tax paid through TDS. return was selected for scrutiny under Section 143(3) and notice under Section 143(2) was issued to assessee. After completing procedural formalities, Assessing Officer passed Annexure-A order whereby `1,75,00,000/- was added to total income returned and assessment was completed. I.T.A. No.178 of 2016 -2- assessee filed appeal before Commissioner of Income Tax (Appeals) who by Annexure-B order found it appropriate to consider gross profit, instead of net profit, as basis for levy of tax. Thereafter, first appellate authority made reference to gross turnover, gross profit and percentage of gross profit returned by assessee for Assessment Years 2009-10, 2010-11 and 2011-12 and found that average gross profit returned was 16.94%. Then, he took note of fact that for assessment year in question, assessee had returned gross profit at 16.5% only. On that basis, it was ordered that 0.44%, being difference in average gross profit and returned gross profit, should be applied and ordered that addition to total income be restricted to `39,83,347/-. 3. assessee carried matter in appeal to Tribunal. Tribunal made extensive reference to orders of statutory authorities and thereafter, directed that `31,07,29,889/- be excluded from total turnover and that additional 0.44% be levied on `59,45,76,475/-. reasoning of I.T.A. No.178 of 2016 -3- Tribunal is contained in paragraph 10 of its order which reads as under: 10. However, Ld. CIT(A) has discarded said estimation made by Assessing Officer and has gone into estimation of income of assessee on basis of average gross profit of three years as under: Asst. Gross Turnover Gross Profit % of G.P. Average Year %age 2009-10 62,34,40,558 11,43,65,379 18.34% 2010-11 90,53,06,363 14,99,85,294 16.50% 16.94% 2011-12 80,38,25,083 12,81,03,397 16.00% Out of average gross profit of 16.94%, if gross profit declared by assessee at 16.50% is reduced, difference comes to 0.44% which has been directed by Ld. CIT(A) to adopt on total turnover. While estimating income, Ld. CIT(A) has committed error that cost of material amounting to Rs.24,39,40,964/- and cost of shuttering materials at Rs.5,05,85,544/-, Kerala VAT at Rs.1,12,17,821/-, Goa VAT at Rs.3,95,726/- and other expenses where no profit element has been involved, were not excluded which totals to Rs.31,07,29,889/-. Therefore, said amount of Rs.31,07,29,889/- included in turnover, has to be essentially excluded while estimating income and accordingly, Assessing Officer is directed to apply gross profit rate of 0.44% after excluding said turnover of Rs.31,07,29,889/- at Rs.59,45,76,475/-. It is ordered accordingly. Thus assessee gets part relief and appeal of assessee is partly allowed. I.T.A. No.178 of 2016 -4- 4. It is this order which is challenged before us and questions of law framed by Revenue read as under: "a) Whether on facts and in circumstances of case, exclusion of no profit expenditure from turnover in absence of any factual finding by Tribunal and on any evidence being brought in by assessee is right and in accordance with law? (b) Is not order of Tribunal perverse, illogical and in light of ground (C) militating? (c) Did assessee discharge burden of proof? 5. We heard learned Senior Counsel for Revenue and learned Counsel appearing for assessee. 6. While learned Senior Counsel for Revenue found no justification whatsoever in order of Tribunal in excluding certain items of turnover from gross turnover of assessee, it was contended by learned counsel for assessee that having regard to fact that items to be excluded are reimbursements, cannot form part of turnover of assessee. 7. We have considered submissions made by both I.T.A. No.178 of 2016 -5- sides. 8. As held by Apex Court in its judgment in CIT v. Punjab Stainless Steel Industries [2014] 364 ITR 144 (SC), turnover is term which is required to be understood in manner as term is used in accounting parlance and commercial parlance. If so, as rightly contended by learned counsel for Revenue, every part of turnover, irrespective of its nature, should form part of turnover. If that is standard to be adopted, there cannot be any justification for excluding any of items while computing total turnover of assessee. 9. Insofar as this case is concerned, turnover has been returned by assessee itself and such returned turnover of assessee included items which are now ordered to be excluded by Tribunal. Further, assessee itself has no case that in gross turnover for previous years relied on by first appellate authority, it had excluded items which are now ordered to be excluded by Tribunal. If that be so, assessee could not have contended that for assessment year I.T.A. No.178 of 2016 -6- in question, Revenue should not have estimated its gross turnover including items that are now ordered to be excluded. 10. Yet another fallacy in order of Tribunal is that, Tribunal has ordered that 0.44% be estimated on `59,45,76,475/-. According to us, if it is to be so estimated, firstly, percentage of gross profit should have been worked out on reduced gross turnover applying gross profit of `14,99,85,294/-. If it is so done, percentage of gross profit for Assessment Year in question would have been 25.23%, and if so, average percentage of gross profit would have been 19.86%, as against 16.94% now adopted. Consequently, addition to be made would also have been 3.36% as against 0.44% now ordered by Tribunal. Similar exercise would have been needed for other years as well. 11. Therefore, for both grounds, exclusion now ordered by Tribunal cannot be sustained. We, therefore, set aside order of Tribunal and dispose of this appeal answering questions of law in favour of I.T.A. No.178 of 2016 -7- Revenue and against assessee. Sd/- ANTONY DOMINIC JUDGE Sd/- DAMA SESHADRI NAIDU JUDGE kns/- //TRUE COPY// P.S. TO JUDGE Principal Commissioner of Income-tax, Kochi v. Silpa Project & Infrastructure (India) Pvt. Ltd
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