The Commissioner Of Income Tax-I v. M/S California Design & Construction Inc India Ltd

ITA No. 400 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 400 of 2009 Date of Decision: 4.4.2011 The Commissioner of Income Tax-I Versus M/s California Design & Construction INC India Ltd. ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. Mr. M.R. Sharma, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 400 and 555 of 2009as learned counsel for the parties are agreed that they raise identicalissues. For brevity, the facts are being taken from ITA No. 400 of 2009. 2.This appeal has been filed by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 27.11.2008 passed by the Income Tax Appellate Tribunal,Chandigarh Bench “A”, Chandigarh, (hereinafter referred to as “theTribunal”) in ITA No. 433/Chandi/2008, relating to the assessment year2001-02, raising the following substantial question of law:- “Whether on the facts and in the circumstances of the case the Hon'ble Tribunal was right in law inscaling down of net profit rate to 5% against 8% onthe work done by the assessee?” 3.Put shortly, the facts necessary for adjudication as narratedin the appeal are that upon notice under Section 148 of the Act dated26.3.2003, the assessee-company filed its return on 30.10.2003declaring an income of Rs.1,98,380/-, whereas it was required to filethe same within a period of 30 days from the date of service but as theassessee failed to do so, notice under Section 142(1) of the Act wasissued on 22.10.2003. The assessment was completed by applyingthe provisions of Section 44AD of the Act in the case of a CivilContractor computing the profit at the rate of 8% of the total receipt forthe work done by the assessee at Rs.4,56,880/-. Feeling aggrieved bythe assessment framed, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”] who videorder dated 4.3.2008 dismissed the appeal. On further appeal by theassessee, the Tribunal vide order dated 27.11.2008 directed theAssessing Officer to apply the rate of 5% as against 8% applied by it.Hence, the present appeal by the revenue. 4.We have heard learned counsel for the parties. 5.The issue that arises for consideration in this appeal iswhether the net profit rate of 5% applied by the Tribunal was justified. 6.The Assessing Officer had taken the rate of profit to be 8%which was affirmed by the CIT(A) but on appeal the Tribunal whilereducing the net profit rate to 5% had recorded as under:- “We have considered the rival submissions and 4.We have heard learned counsel for the parties. 5.The issue that arises for consideration in this appeal iswhether the net profit rate of 5% applied by the Tribunal was justified. 6.The Assessing Officer had taken the rate of profit to be 8%which was affirmed by the CIT(A) but on appeal the Tribunal whilereducing the net profit rate to 5% had recorded as under:- “We have considered the rival submissions and perused the material available on the file. Brief factsare that the assessee company was engaged in thecontract work of Govt. of Haryana. The assessmentwas completed under Section 144 on 03.03.2003 andthe order was duly served upon the assessee. TheAssessing Officer rejected the accounts of theassessee and determined the profit from the contractwork @ 10% of the gross work done by it. Theassessment, so framed, was challenged before thefirst appellate authority where it was partly allowedand after giving appeal effect, the net profit wasworked out at 1.236% vide order dated 05.08.2003.The order of the first appellate authority waschallenged before the first appellate authoritywherein vide order in ITA No. 576/Chandi/2003, thenet profit was determined at 1.5% of the total workdone. On the basis of the aforesaid order forassessment year 2000-01, the assessee for theimpugned assessment year, is claiming that thesame percentage of profit may be applied. However,the claim of the assessee is that the accounts of theassessee are audited one and the assessment hasbeen framed without rejecting the books of accountand by taking the profit @ 8% against the returnedincome of Rs.1,98,380/-. The total work done by theassessee was to the tune of Rs.58,95,571/- on which the assessee has claimed expenses on account ofpayment made to sub-contractors for execution ofwork. In the present assessment year, the ld counselfor the assessee contended that the net profit wasdeclared at 3.07%, therefore, the ratio of theaforesaid decision, in our opinion, will not beapplicable as there is a difference of material facts.However, without going into much deliberationspecially when both the learned representativesagreed that the net profit may be 5% of the total workdone, we are holding so. Therefore, the AssessingOfficer is directed to apply the rate of 5% against 8%applied in the impugned order, consequently, thisground of the assessee is partly allowed. This orderwas pronounced in the open court in the presence ofboth the learned representatives.” 7.A simple reading of the aforesaid finding clearly shows thatthe Tribunal had reduced the net profit rate to 5% on the premises thatcounsel for both the parties had agreed for the same. However, a copyof the order of the Tribunal dated 11.2.2011 has been produced whereinthe department had filed MA Nos. 117 & 118/Chd/2009 in ITA Nos. 433and 434/Chd/2008 bringing the fact to the notice of the Tribunal that thedepartmental representative had never agreed for the concession asrecorded by the Tribunal in its order dated 27.11.2008. The Tribunalrejected the said application by observing that the case was decided onmerits and not on the basis of concession of the departmental ITA No. 400 of 2009 representative. However, that is not the factual position, discerniblefrom the reading of the aforesaid finding. 8.In view of the above, the appeals are allowed and the orderdated 27.11.2008 is set aside. The matter is remitted to the Tribunal todecide the same afresh on merits, in accordance with law. (AJAY KUMAR MITTAL) JUDGE April 4, 2011gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 400 of 2009 -6- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 555 of 2009 (O&M) Date of Decision: 4.4.2011 The Commissioner of Income Tax-I ....Appellant. Versus M/s California Design & Construction INC India Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. ITA No. 400 of 2009 representative. However, that is not the factual position, discerniblefrom the reading of the aforesaid finding. 8.In view of the above, the appeals are allowed and the orderdated 27.11.2008 is set aside. The matter is remitted to the Tribunal todecide the same afresh on merits, in accordance with law. (AJAY KUMAR MITTAL) JUDGE April 4, 2011gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 400 of 2009 -6- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 555 of 2009 (O&M) Date of Decision: 4.4.2011 The Commissioner of Income Tax-I ....Appellant. Versus M/s California Design & Construction INC India Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant.for the appellant. Mr. M.R. Sharma, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see the order of even date recorded in ITA No. 400 of 2009 (The Commissioner of Income Tax-I v. M/sCalifornia Design & Construction INC India Ltd). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE