ITAT Chennai: Claim of Profit lower than 8% cannot be denied for mere non-submission of Tax Audit Report
Fact and Issue of the case
Brief facts are that the assessee is engaged in the business of civil construction. The assessee filed its return of income for the assessment year 2000-01 on 06.06.2001.The return was processed u/s.143(1) of the Act and subsequently the AO issued notice u/s.148 of the Act and reopened the assessment u/s.147 of the Act on the reason that the assessee has declared profit rate less than 8% of the gross contract receipts despite the fact that assessee has not got its accounts audited. The charges levied by the AO was that the assessee can claim income from contract receipts at a lesser rate than 8% of the gross contract receipts in case the accounts of the assessee are audited u/s.44AB of the Act. The assessee filed a letter dated 20.12.2003 requesting that the return of income filed originally may be treated as return filed u/s.148 of the Act. Accordingly, the AO issued notice u/s.143(2) of the Act. In response to the said notice, the assessee replied and produced original of the covering letter addressed to DCIT, City Circle, Chennai with a tapal stamp dated 24.10.2000 filed with Assistant Commissioner, Circle –IV(1), which clearly states that the tax audit report u/s.44AB of the Act is being filed. The AO doubted the evidentiary value or authenticity of the letter and stated that even if this letter is accepted, the audit report u/s.44AB of the Act is not filed with the jurisdictional AO. It was pointed out by the AO that even the letter of the assessee does not mention the officer before whom it should have been filed. Accordingly, the AO assessed the income at Rs.4,70,258/- as against return of income of the assessee at Rs.2,08,500/-. Aggrieved the assessee preferred appeal before CIT(A).
The CIT(A) noted that the assessee’s gross receipt from civil construction are at Rs.39,47,319/- and admitted net profit of the assessee was only Rs.2,08,501/-. The CIT(A) has gone into the letter filed by the assessee before the DCIT, Central Circle, Chennai vide letter dated Nil but stamped by Department dated 24.10.2000. This letter mentions that the assessee has filed tax audit report in Form No.3CA and audited report is in original for the assessment year 2000-01. The assessee has also enclosed copy of audit report in Form No.3CB & 3CD as required u/s.44AB of the Act, which is dated 15.10.2000. The CIT(A) in view of the above evidences noted that there is no reason to doubt these evidences because these are submitted before the Department and AO has not controverted the same. The CIT(A) going through the decision of Co-ordinate Bench in the case of M. Nandagopal vs. ITO in ITA No.1343/Mds/05, order dated 22.12.2006 and Cochin Bench in the case of Leyland Automobiles vs. ITO in ITA No.18/Coch/2005, order dated 07.04.2006 allowed the claim of assessee and deleted the addition made by the AO at Rs.2,61,758/-. Aggrieved, now the Revenue is in appeal before the Tribunal.
Observation of the Tribunal
The Tribunal has heard the rival contentions and perused the case records including the case laws cited before us. Admitted facts are that the assessee is a civil contractor having gross contract receipt of Rs.39,47,319/- and admitted net profit at Rs.2,08,500/- as against assessed by the AO at Rs.4,70,258/-. It is an admitted fact that the assessee has filed Form No.3CB & 3 CD for the assessment year 2000-01 as required u/s.44AB of the Act with the Department on 24.10.2000. The due date for filing of this audit report is 31.10.2000 and return of income is also 31.10.2000. The assessee has filed this evidence i.e., the audit report was filed with the Department and audit was carried out u/s.44AB of the Act on 15.10.2000. All these shows that these events are prior to due date of filing of audit report as well as return of income. Even now, before us the ld. senior DR could not controvert the above evidences filed or the authenticity of the same are not doubted. The ld.AR for the assessee before us placed reliance on the Co-ordinate Bench decision in the case of M. Nandagopal supra wherein the Tribunal has considered exactly identical aspect.
Further, it is noted that similar view is taken in the case of Leyland Automobiles, supra wherein the Co-ordinate Bench of Cochin has considered this issue and even gone to the extent that even if audit report is filed beyond the due date specified as per Section 44AB of the Act only consequence of failure is levy of penalty u/s.271B of the Act. In view of the admitted facts, we are of the view that the CIT(A) has rightly accepted the contention of the assessee and estimated the profit at a lower rate than 8% of the gross contract receipts. Therefore, we uphold the order of CIT(A).
Coming to assessee’s Cross Objection in C.O. No.80/Chny/2009, the Department has carried the matter before the Hon’ble Madras High Court in TCA No.1232 & 1233 of 2010, order dated 15.03.2021, wherein the issue of reopening is adjudicated and decided against the assessee because the assessee has given up the grounds raised before the Tribunal. In view of the above, the Cross Objection of the assessee is dismissed.
The tribunal has dismissed the appeal and ruled against the Revenue.