Principal Commissioner of  Income-tax-­29, Mumbai v. Quick Builders
[Citation -2017-LL-1030-20]

Citation 2017-LL-1030-20
Appellant Name Principal Commissioner of  Income-tax-­29, Mumbai
Respondent Name Quick Builders
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 30/10/2017
Judgment View Judgment
Keyword Tags contract work • profit margin • total income • rejection of books of accounts
Bot Summary: While dismissing the appeal, following findings were rendered by the First Appellate Authority: 4.5 The appellant has stated that during the previous year pertaining to assessment year 2007 08 it is only the contractual sale and no construction contract receipts and hence results for assessment year 2007 08 should not be disturbed. We have already quoted paragraph 4.5 of the order of the first Appellate Authority in which a finding of fact was recorded that the Books of Accounts maintained by the assessee were defective and liable for rejection. This finding of the First Appellate Authority is brushed aside by the Appellate Tribunal by observing that the said finding recorded by the First Appellate Authority that Books of Accounts of the respondent assessee were defective has been recorded without following principles of natural justice. After recording the said reason, all that the Appellate Tribunal has recorded is that it is not the case of the Appellant revenue during the year under consideration that the assessee's net profit margin was not comparable with previous assessment years. 6 As indicated earlier, no cogent reasons have been recorded by the Appellate Tribunal for setting aside the finding of the First Appellate Authority in paragraph No.4.5 of its Judgment. Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: 5 itxa141 Therefore, by no stretch of imagination, the Appellate Tribunal could have held that the finding recorded in paragraph 4.5 of the Judgment of the First Appellate Authority was recorded without following principles of natural justice. As stated earlier, no other reason has been recorded by the Appellate Tribunal for upsetting the findings recorded in paragraph 4.5 of the Judgment of the First Appellate Authority.


1 itxa141 ssp IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.141 OF 2015 Principal Commissioner of Income Tax 29, Mumbai ...Appellant vs. Quick Builders ...Respondent Mr.Arvind Pinto for appellant Mr.Vishnu S. Hadade for respondent CORAM : A.S.OKA, & A.K.MENON,JJ. DATE : OCTOBER 30, 2017 P.C.: 1 Heard learned counsel for appellant and learned counsel for respondent. respondent assessee is carrying on business as builder and developer. In facts of this case, we are concerned with previous year 2006 2007. respondent assessee filed return declaring total income of Rs.51,41,467/ on basis of turn over of approximate 12.75 crores. net profit shown by respondent assessee was at rate 4.67%. 2 While passing assessment order, Assessing Officer (AO) relied upon computation of industrial margin for construction for various builders and developers as recorded in paragraph 6.2 of assessment order. Based on said data, he proceeded to calculate profit by using ::: Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: 2 itxa141 Capitaline database Version 3.1.0.6 at 12.8%. He made functional adjustment of 1%. shortfall was calculated at rate of 7.13%. He made upward adjustment to profit at Rs.90,96,499/ . assessment order was challenged by assessee before Commissioner of Income Tax (Appeals). By order dated 17th December 2010, appeal was dismissed. While dismissing appeal, following findings were rendered by First Appellate Authority: 4.5 appellant has stated that during previous year pertaining to assessment year 2007 08 it is only contractual sale and no construction contract receipts and hence results for assessment year 2007 08 should not be disturbed. This plea is no more sustainable in view of defects pointed out. Since books of accounts are defective result are liable for rejection and hence are rejected. 4.6 Having done so now I come to elaborate discussion and working made by Assessing Officer in his assessment order as reflected in para 6.1, 6.2 and 6.3. Assessing Officer has taken average profit margin of industry basis on profit margin of selected comparable cases with data available on Capitaline i.e 12.80% and has made addition for difference from average profit margin of ::: Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: 3 itxa141 12.80% and that shown by appellant which is 4.67%. Thus, for difference of 7.13% in profit margin addition of Rs.90,96,499/ has been made which I find is fully justified in view of fact that books of accounts are maintained in way by appellant that they do not reflect profit or loss on contract work undertaken separately from their project work and further they do not reflect any profit as they claim to follow project completion method. Accordingly addition made by Assessing Officer for amount of Rs.90,96,381/ is sustained. 3 matter was carried by way of appeal by respondent assessee before Income Tax Appellate Tribunal, J Bench, Mumbai (Appellate Tribunal). By impugned judgment and order which is subjected to challenge by appellant revenue, appeal filed by respondent assessee was allowed. 4 learned counsel for appellant revenue submits that substantial questions of law set out in paragraphs 6.1 to 6.3 arise in this appeal. learned counsel for respondent has no objection if appeal is forthwith taken up for final disposal on aforesaid substantial questions of law. 5 After having heard submissions of learned counsel for appellant and learned counsel for respondent, we find that ::: Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: 4 itxa141 impugned Judgment and order borders on perversity. We have already quoted paragraph 4.5 of order of first Appellate Authority in which finding of fact was recorded that Books of Accounts maintained by assessee were defective and liable for rejection. This finding of First Appellate Authority is brushed aside by Appellate Tribunal by observing that said finding recorded by First Appellate Authority that Books of Accounts of respondent assessee were defective has been recorded without following principles of natural justice. No other reason is recorded for setting aside said finding. After recording said reason, all that Appellate Tribunal has recorded is that it is not case of Appellant revenue during year under consideration that assessee's net profit margin was not comparable with previous assessment years. Thereafter, Appellate Tribunal observed that considering facts in totality and in particular manner in which assessment order is framed, additions made by AO are uncalled for. 6 As indicated earlier, no cogent reasons have been recorded by Appellate Tribunal for setting aside finding of First Appellate Authority in paragraph No.4.5 of its Judgment. finding was recorded in Appeal preferred by respondent assessee through his Chartered Accountant who was present at time of hearing and that his submissions were specifically heard and recorded. ::: Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: 5 itxa141 Therefore, by no stretch of imagination, Appellate Tribunal could have held that finding recorded in paragraph 4.5 of Judgment of First Appellate Authority was recorded without following principles of natural justice. As stated earlier, no other reason has been recorded by Appellate Tribunal for upsetting findings recorded in paragraph 4.5 of Judgment of First Appellate Authority. 7 Hence, in our view, Appellate Tribunal has not done its duty. Considering nature of aforesaid findings and considering fact that detailed reasons have not been assigned for setting aside assessment order, this is fit case for de novo consideration of Appeal preferred by appellant. 8 Accordingly, appeal must succeed in part and we pass following order: (I) Impugned Judgment and order dated 21 st March 2014 in Income Tax Appeal No.1780/Mum/2011 is hereby quashed and set aside and said Appeal is restored to file of Income Tax Appellate Tribunal, J Bench, Mumbai; (II) appeal shall be decided by Appellate Tribunal afresh in light of observations made in this Judgment and order; (III) Considering fact that appeal is of year 2011, we are sure that ::: Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: 6 itxa141 Appellate Tribunal will give necessary priority to hearing of appeal; (IV) For purpose of fixing date for hearing, parties shall appear before Appellate Tribunal on Monday 4th December 2017 at 11.00 a.m; (V) All contentions on merits of Appeal are kept open; (VI) Appeal is partly allowed on above terms with no order as to costs. (A.K.MENON,J.) (A.S.OKA,J.) ::: Uploaded on - 27/11/2017 ::: Downloaded on - 28/11/2017 09:34:08 ::: PrincipalCommissionerof Income-tax-29,Mumbai v. QuickBuilder
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