M/s. N.D. Doomra and sons, Muktsar V. The Assistant Commissioner of Income tax, Bathinda

CO 14/ASR/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9320 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P N ARORA
• Keywords: Business income; Depreciation; Rule of consistency; Additional evidence; Question of law
• Section: 143(3); 133(6); 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.104(ASR)/2012 ASSESSMENT YEAR:2007-09 PAN :AAEFN1186A ASSTT. COMMR. OF INCOME TAX, VS. M/S. N.D.DOOMRA & SONS, CIRCLE-II, BATHNDA. MUKTSAR. (APPELLANT) (RESPONDENT) C.O.14(ASR)/2012 (ARISING OUT OF I.T.A. NO.104(ASR)/2012 ASSESSMENT YEAR:2007-09 PAN :AAEFN1186A M/S. N.D.DOOMRA & SONS, VS. ASSTT. COMMR. OF INCOME TAX, MUKTSAR. CIRCLE-II, BATHNDA. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH.MAHAVIR SINGH, DR RESPONDENT BY: SH. P.N.ARORA, ADVOCATE DATE OF HEARING: 26/03/2014 DATE OF PRONOUNCEMENT:31/03/2014 ORDER PER BENCH ; ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 2 THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE CIT(A), BATHINDA DATED 12.12.2011 FOR THE ASSESSMENT YEAR 2 008-09.THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN ACCEPTING THE BOOK VERSION OF THE ASSE SSEE EXCEPT PETTY DISALLOWANCE, IGNORING THE FACT THAT SEVERAL DEFECTS/DISCREPANCIES WERE FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS POINTED OUT IN THE ASSESS MENT ORDER BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS.1, 59,65,455/- AFTER RESTRICTING A PETTY ADDITION BEING DISALLOWAN CE OF RS.9,03,715/- @ 2% OF THE EXPENSES CLAIMED BY THE A SSESSEE ON ACCOUNT OF LABOUR PAYMENT OF RS.4,51,85,780/-, AS A GAINST RS.1,68,69,170/- MADE BY THE AO AFTER APPLYING PR OVISIONS OF SEC. 145(3) OF THE ACT AND APPLYING THE NET PROFIT RATE OF 10% SUBJECT TO DEPRECIATION, INTEREST AND SALARY TO PAR TNERS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN FOLLOWING THE ORDER U/S 143(3) OF THE AO FOR THE A.Y. 2007-08 IN THE CASE OF ASSESSEE WITHOUT APPREC IATING THE FACTS OF THE CASE THAT THE CONTRACTS AWARDED TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WERE ABOVE 30% TO 34% OF THE ESTIMATED COST AND ALSO THAT THE PRINCIPLE OF RES-J UDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.8,57,309/- MADE UNDER THE HEAD INCOME FROM OTHER SOURCES BY HOLDING TH AT THE INTEREST FROM THE BANK DEPOSITS IS TAXABLE UNDER TH E HEAD INCOME FROM BUSINESS AND PROFESSION, WITHOUT APPR ECIATING THE FACT THAT IN THE CASE OF A CIVIL CONTRACTOR A N ET PROFIT RATE IS TO BE APPLIED ON GROSS RECEIPTS WHERE BOOKS RESULT OF THE ASSESSEE IS NOT ACCEPTABLE AND THAT THE INTEREST INCOME RECE IVED FROM BANKS ON FDRS HAS NO BEARING ON NET PROFIT DERIVED BY THE ASSESSEE FROM SUCH CONTRACT RECEIPTS. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 3 5. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 2. THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED T HE SOLE GROUND, WHICH READS AS UNDER: THE LD. CIT(A), BATHINDA, ERRED ON FACTS AND LAW I N UPHOLDING THE DISALLOWANCE OF RS.903715/- BEING 2% OF PAYMENT OF LABOUR OF RS.4,51,85,780/- ON ADHOC BASIS, WITHOUT BRINGING A NY MATERIAL ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM, A CIVIL CONTACTOR HAS FILED ITS RETURN DECLARING INCOME OF RS.92,57,9 30/- ON 28.09.08 ACCOMPANYING AUDITED STATEMENTS OF ACCOUNTS, AUDIT REPORT U/S 44AB. AFTER THE CASE HAS BEEN PROCESSED U/S 143(1) ON THE SAME FIGURES, IT WAS TAKEN UP FOR SCRUTINY BEING COVERED UNDER COMPULSORY SCRUTI NY IN VIEW OF THE CBDT GUIDELINES. BOOKS WERE EXAMINED ON TEST CHECK BASI S. THE AO OBSERVED THAT THE TRADING RESULTS ARE ON THE LOWER SIDE AS IS EVI DENT FROM FOLLOWING CHART: ASSTT. YR. GROSS CONTRACT RTS NET PROFIT N/P RATE (%) 08-09 28,31,26,857 92,87,925 3.269% 07-08 08,10,58,979 33,50,818 4.134% THE A.O. HAS INDICATED MAJOR HEADS OF EXPENSES IN H IS ASSTT. ORDER. AFTER CONSIDERING THE ASSESSEES REPLIES AND AFTER ALLOWI NG NUMEROUS HEARINGS THE AO RESORTED TO REJECT THE ASSESSEES BOOK VERSION F ROM WHICH ACTUAL PROFITS CANNOT BE DEDUCTED BY INVOKING THE PROVISIONS WHICH ACTUAL PROFITS CANNOT ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 4 BE DEDUCTED BY INVOKING THE PROVISIONS OF SECTION 1 45(3) & PROCEEDED AHEAD TO WORK OUT THE ASSESSEES TAXABLE INCOME BY APPLYI NG N.P. RATE OF 10% ON THE GROSS CONTRACT RECEIPTS & COMPUTED NET BUSINE SS INCOME OF RS.2,52,69,787/- AFTER ALLOWING DEPRECIATION, INTER EST TO PARTNERS AND SALARY TO PARTNERS THEREFROM. THE ADDITION HAS BEEN MADE B Y THE AO FOR RELYING ON VARIOUS CASE LAWS. FURTHER, THE AO HAS REJECTED THE ASSESSEES BOOKS OF ACCOUNT U/S 145(3) AFTER INDICATING VARIOUS DISCREP ANCIES, MAINLY NON- FURNISHING LABOUR EXPENSES DETAILS. APART FROM THIS , THE AO NOTICED THAT ALTHOUGH THE ASSESSEE HAS REFLECTED ACCRUED INTT. A S ON 31.3.08 AT RS.11,12,879/- AND FDR OF RS.2,18,30,131/-, BUT IT HAS FAILED TO DECLARE ANY FDR ACCRUED INTT. AMOUNTING TO RS.8,57,309/- AS PER TDS CERTIFICATES. ACCORDINGLY, THE A.O. MADE FURTHER ADDITION OF RS. 8,57,309 TOWARDS FDR ACCRUED INTEREST UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE A SSESSEE RAISED ADDITIONAL GROUNDS AND SUBMITTED WRITTEN SUBMISSION S, SUPPLEMENTARY WRITTEN SUBMISSIONS ETC. WHICH WERE SENT TO THE AO AND THE REMAND REPORT TAKEN. THE LD. CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE, ARGUMENTS AND REPORT OF THE AO, WAS OF TH E VIEW THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. HO WEVER, HE MADE THE DISALLOWANCE ON ACCOUNT OF LABOUR EXPENSES @ 2% ON TOTAL EXPENSES OF ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 5 RS.4,51,87,780/- AT RS.9,03,715 AND ACCORDINGLY RES TRICTED THE ADDITION TO RS. 9,03,715/- AS COMPARED TO RS.1,59,65,455/- MADE BY THE AO. 5. THE LD. CIT(A) DELETED THE ADDITION OF INTEREST INCOME SINCE THE SAME HAS BEEN DECLARED BY THE ASSESSEE UNDER THE HE AD BUSINESS INCOME AMOUNTING TO RS.8,57,309/-. 6. THE LD. DR, MR. MAHAVIR SINGH, ARGUED THAT THE ASSESSEE HAS NOT PRODUCED COMPLETE BOOKS OF ACCOUNT BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A) AND IN THE REMAND PROCEEDINGS. THEREFORE, TH E LD. CIT(A) IS NOT JUSTIFIED IN INCLUDING THAT THE AO CANNOT REJECT TH E BOOKS OF ACCOUNT. THIS FINDING OF THE LD. CIT(A) IS AGAINST THE FACTS OF T HE PRESENT CASE. THEREFORE, THE LD. DR PRAYED TO REVERSE THE ORDER OF THE LD. C IT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 7. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE ARGUED ON THE SIMILAR LINES AS ARGUED BEFORE THE LD. CIT(A) A ND RELIED UPON THE ORDER OF THE LD. CIT(A) AND PRAYED TO CONFIRM THE ORDER OF T HE LD. CIT(A). HE FURTHER PRAYED TO REDUCE THE PERCENTAGE OF DISALLOWANCE OF LABOUR AT 1% INSTEAD OF 2%. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT IS RELEVANT TO REPRODUCE THE WRITTEN SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE LD. CIT(A), WHICH ARE REPRODUCED IN PARA 5 OF LD. CIT(A)S ORDER: ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 6 WE HAVE TO VERY HUMBLY SUBMIT THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF WORKS CONTRACT EXC LUSIVELY FOR MES DEPARTMENT SINCE LONG. THE RETURN OF INCOME FOR THE A.Y. 2008-09 WAS FILED DECLARING INCOME OF RS.92,57,930/- AND THE A CIT ASSESSED THE INCOME AT RS.2,61,27,100/- AGAINST WHICH THE ASSESS EE HAS FILED AN APPEAL BEFORE YOUR GOODSELF. THE BRIEF FACTS OF THE CASE IS AS UNDER: 1. THE ASSESSEE IS DOING THE BUSINESS OF WORKS CONTRAC TOR FOR MES DEPARTMENT SINCE LONG. 2. THE BOOKS OF ACCOUNT I.E. CASH BOOK, LEDGER, BILLS FOR MATERIAL AND VOUCHER RELATING TO EXPENSES LIKE LABOUR, CARRI AGE, DIESEL ETC. WERE PRODUCED FOR VERIFICATION AND DETAILED CO PY OF ACCOUNTS WERE ALSO FURNISHED DURING THE COURSE OF A SSESSMENT PROCEEDINGS. THE LD. ACIT HAS ACCEPTED THE FACT IN PARAGRAPH 1 & 2 OF THE ASSTT. ORDER BUT THE AO HAS REJECTED T HE BOOKS OF ACCOUNT AND APPLIED THE PROVISIONS OF SEC. 145(3) FOR MAKING THE ASSESSMENT ORDER OBSERVING THAT THE FOLLOWING D ISCREPANCIES WERE NOTICED. I. NO DAY TO DAY STOCK REGISTER HAS BEEN MAINTAINED. II. THE MUSTER ROLL/LABOUR PAYMENT REGISTER WERE NOT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. III. NO LOG BOOK HAS BEEN MAINTAINED TO VERIFY THE DIESE L EXPENSES. IV. THE DETAILS OF WORK IN PROGRESS WAS NOT PRODUCED. V. CONTRACTORS WERE ALLOTTED TO THE ASSESSEE ON ABOVE THE ESTIMATED COST. 3. I) THE AO ASKED THE ASSESSEE TO FURNISH THE FOLLOWI NG INFORMATION ON 23.11.2010.. A) DETAILED ACCOUNT OF SUNDRY CREDITORS AS SHOWN I N BALANCE SHEET IN RESPECT OF WHICH PAYMENTS WERE MADE IN SUB SEQUENT YEARS. B) COMPARATIVE RATE OF MATERIAL AS ON DATE OF AWARDING THE CONTRACT AND DURING THE YEAR ON AVERAGE BASIS. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 7 C) COMPARATIVE COMPONENTS OF WORK EXPENSES I.E. PURCHA SE OF BRICKS, STEEL, CEMENT AND LABOUR ETC. FOR PAST TWO YEARS. D) DETAILS OF PAYMENTS RECEIVED BY THE ASSESSEE IN APR IL, 2009 IN RESPECT OF WIP SHOWN AS ON 31.03.2009. II) THE ASSESSEE HA S FILED LETTER DATED 29.11.2010 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE FIRM CONS ISTED OF THREE PARTNERS I.E.SH. OM PARKASH, SH. RAJ KUMAR AN D SH. VIJAY KUMAR. SH. VIJAY KUMAR AGED ABOUT 40YEARS DIE D ON 15.03.2010 AND THE DEATH CERTIFICATE WAS ENCLOSED W ITH THE LETTER. IT WAS FURTHER BROUGHT TO THE KIND NOTICE O F THE ACIT THAT THE BUSINESS OF THE FIRM WAS CLOSED DUE TO FINANCI AL PROBLEM AND THE ACCOUNTANT SH. S.K.MADAN HAD ALSO LEFT THE FIRM. THE BANK CERTIFICATE OF STATE BANK OF PATIALA , BATHIND A CANTT. CONFIRMING THAT THERE WAS OUTSTANDING BALANCE OF RS.28463938/- AS ON 26.11.2010 WAS ALSO ENCLOSED. T HE BANK HAS NOW FILED A SUIT OF RECOVERY AGAINST THE FIRM. THE ACIT WAS REQUESTED TO PROVIDE TIME FOR FIFTEEN DAYS TO FILE THE INFORMATION. THE ASSESSMENT PROCEEDINGS WERE CLOSE DON 29.11.201 0 AFTER REJECTING THE REQUEST OF THE ASSESSEE BUT THE ORDER WAS PASSED ON 09.12.2010 AND SERVED ON THE ASSESSEE ON 27.12.2 010. THUS THE ASSESSEE WAS NOT PROVIDED SUFFICIENT OPPORTUNIT Y TO PROVIDE INFORMATION AS REQUIRED BY THE ACIT. 4. I) THE ACIT ALSO REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE APPLIED NET PROFIT RATE OF 10% AND FURTHER MADE ADDITION OF RS.857309/- ON ACCOUNT OF PRESUMPTION T HAT INTEREST ON FDRS WAS DECLARED. II) THAT ACIT RELIED ON THE FOLLOWING JUDGMENTS WI THOUT CONFRONTING THE SAME TO THE ASSESSEE DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. A) PARBHAT KUMAR CONTRACTOR (323 ITR 675 (P&H) B) SHIVAM CONSTRUCTION CO. (UNREPORTED JUDGMENT OF PUN JAB & HARYANA HIGH COURT) C) ESS ESS BUILDERS (P) LTD. (ITAT JUDGMENT) D) CIT VS. JAIN CONSTRUCTION CO. & OTHERS ( 245 ITR 52 7 RAJ) 5. THE FOLLOWING INFORMATION IS ENCLOSED HEREWITH A S THE SAME COULD NOT BE FURNISHED DURING THE COURSE OF ASSESSM ENT PROCEEDINGS: ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 8 I) COPY OF ACCOUNTS OF SUNDRY CREDITORS AS SHOWN IN TH E BALANCE SHEET IN RESPECT OF WHICH THE PAYMENT WAS M ADE IN SUBSEQUENTLY YEARS. J) DETAILS OF PAYMENTS RECEIVED IN APRIL, 2008 AGAINS T WORK IN PROGRESS SHOWN AS ON 31.03.2008. 6. I) IT IS FURTHER BROUGHT TO THE KIND NOTICE OF Y OUR GOODSELF THAT IN THE CASE OF THE ASSESSEE THE ASSESSMENT FOR AY 2001 -02, 2003-04, 2005-06, 2006-07 & 2007-08 WAS FINALIZED U/S 143(3) AND THE BOOKS OF ACCOUNT WERE ACCEPTED. THE ADDITIONS/DISALLOWANC ES WERE MADE ONLY ON ACCOUNT OF UNVERIFIABLE EXPENSES AND ON ACC OUNT OF NON CHARGING OF INTEREST FROM DEBTORS. THE CHART GIVING DETAILS OF ADDITIONS/DISALLOWANCES ON ACCOUNT OF UNVERIFIABLE EXPENSES IS ON PAGE 63. THE DEPARTMENT HAS NEVER REJECTED THE BOOK S OF ACCOUNT IN PREVIOUS YEARS. II. THE ACIT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND PASSED THE ASSESSMENT ORDER U/S 143(30 INSPITE OF T HE FACT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE ACCEPTED BY THE DEPARTMENT IN PREVIOUS YEARS AND THE RELEVANT INFORMATION WAS PRO DUCED BEFORE THE ACIT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. T HE FINDINGS OF THE ACIT THAT THE BOOK RESULTS SHOWN BY THE ASSESS EE ARE NOT SUBJECT TO VERIFICATION, IS FACTUALLY WRONG. 7. I) ALTERNATIVELY WITHOUT PREJUDICE TO THE ABOVE SAID SUBMISSIONS THAT THE ACIT ERRED IN REJECTING THE BO OKS OF ACCOUNT AND APPLYING THE PROVISIONS OF SECTION 145(30 IS HIGHLY EXCESSIVE AND WITHOUT BRINGING ANY COMPARABLE CASES ON RECORD. TH E RELIANCE OF THE SAME IS PLACED ON THE JUDGMENT OF THE BATHINDA TRUC K OPERATOR UNION, BATHINA VS. ITO IN ITA NO.380(ASR).2003 IN W HICH THE HONBLE ITAT, AMRITSAR BENCH VIDE ORDER DATED 28.04 .2006 HELD IN PARAGRAPH 8 ON PAGE 7 AS UNDER: IT IS SETTLED LAW THAT EVEN IF BOOK RESULTS ARE R EJECTED THE AO IS DUTY BOUND TO MAKE A FAIR AND REASONABLE ESTIMATE O F INCOME BASED ON EVIDENCE AND MATERIAL ON RECORD. HE CANNOT MAKE AN ADDITION IN AN ARBITRARY MANNER OR ON THE BASIS OF PERSONAL VEN DETTA. THE INCOME ESTIMATED SHOULD BE A FAIR ESTIMATE WHICH NO DOUBT INVOLVES CERTAIN AMOUNT OF GROSS WORK. RELIANCE IN THIS REGARD IS PL ACED ON THE ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 9 JUDGMENT OF PRIVY COUNCIL IN THE CASE OF CIT CENTRA L AND UNITED PROVINEER VS. LAXMI NARAIN BADRI DASS 5 ITR 370. IT HAS BEEN FURTHER HELD IN PARA 8 ON PAGE 7 OF THE APPELLATE ORDER THAT WHILE ESTIMATING THE INCOME OF THE ASSESSEE THE AO CAN: A) REFER TO THE PAST HISTORY OF THE CASE WHICH ACTS AS A GOOD GUIDE. B) THE AO CAN REFER TO COMPARATIVE CASES ENGAGED IN SIMILAR TRADE AND ESTIMATE THE INCOME ON THE BASIS OF GP/NP SHOWN/ESTIMATED ON THOSE CASES. II) THE ACIT HAS OBSERVED IN THE ASSESSMENT ORDER T HAT THE NET PROFIT RATE OF THE ASSESSEE IS ON LOWER SIDE AS COM PARED TO LAST YEAR. THE CHART GIVING DETAILS OF EXPENSES ON THE BASIS O F PERCENTAGE TO GROSS RECEIPTS AND A PERUSAL OF THE SAME WOULD DISC LOSE THAT EXCEPT CARRIAGE THE PERCENTAGE OF ALL THE EXPENSES INCLUDI NG MATERIAL RS,.199899116/-, LABOUR RS.45185780/- AGAINST GROSS RECEIPTS OF RS.283126857/- ARE ON LOWER SIDE. KINDLY REFER TO P AGE 61 OF THE CHART. III) IT IS FURTHER BROUGHT TO THE KIND NOTICE OF YO UR GOODSELF THAT DURING AY 2007-08 THE RETURN OF INCOME DECLARING IN COME OF RS.3350820/- WAS FILED AND DISALLOWANCE OF EXPENSES TO THE TUNE OF RS,459800/- WAS MADE AND AFTER TAKING INTO CONSIDER ATION THE SAME, THE NET PROFIT RATE COMES TO 4.801%. IV) THE AO INSTEAD OF MAKING A REFERENCE TO THE NET PROFIT RATE IN THE CASE OF THE ASSESSEE AFTER CONSIDERING THE ADDI TION MADE BY THE DEPARTMENT WHICH COMES TO 4.701% APPLIED NET PROFIT RATE OF 10% WHILE RELYING ON THE JUDGMENT OF ITAT & HIGH COURT WITHOUT CONFRONTING THE FACTS OF THE SAME TO THE ASSESSEE. V) THAT AS FAR AS THE COMPARATIVE CASES IN BATHINDA CHARGE ARE CONCERNED THE REFERENCE CAN BE MADE TO BE LATEST CA SES OF WORKS CONTRACTOR DECIDED BY THE WORTHY CIT(A) BATHINDA AN D ITAT, AMRITSAR BENCH, AMRITSAR AGAINST WHICH THE DEPARTME NT HAS NOT FILED ANY APPEAL BEFOR ETEH HONBLE P & H HIGH COURT. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 10 A) IN THE CASE OF DEEPAK GUPTA PROP. ENGINEER & CON STRUCTION, BATHINDA, THE AO APPLIED THE NET PROFIT RATE OF 5% WHICH WAS REDUCED TO 4.75% BY THE CIT(A0 AND THE SAME WAS FURTEHR RED UCED TO 4.50% BY THE ITAT AMRITSAR BENCH, VIDE ORDER DA TED 31.05.2010 IN ITA NO.119(ASR)/2010 FOR THE A.Y. 2007-08. B) IN THE CASE OF KESAR SINGH S/O SUKHDEV SINGH, MA NSA THE AO APPLIED THE N.P. RATE OF 8% IN AN EX-PARTE ASSESSME NT ORDER AND THE SAME WAS REDUCED TO 4% BY THE CIT(A) AND THE SAME W AS UPHELD BY THE ITAT, AMRITSAR BENCH, IN ITA NO. 216(ASR)/2009 DATED 12.12.2009. C) IN THE CASE OF VIJAY ROADWAYA, BAIBIWALA ROAD, B ATHINDA, FOR A.Y. 2006-07, THE AO APPLIED N.P. RATE OF 6% BECAUS E THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT AND ASSESSME NT WAS FAMED U/S 144. THE CIT(A), BATHINDA ESTIMATED THE N.P. RATE O F 3% OF GROSS RECEIPTS WHILE RELYING ON THE JUDGMENT OF THE ITAT, AMRITSAR BENCH IN THE CASE OF THE BATHINDA TRUCK OPERATION UNION, BAT HINDA, DISCUSSED SUPRA AND HELD THAT PAST HISTORY OF THE CASE ACTS A S A GOOD GUIDE TO THE AO BUT ESTIMATE THE HIGHER NET PROFIT RATE BECAUSE THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT. THE ITAT UPHELD TH E APPELLATE ORDER AND DISMISSED THE APPEAL OF THE DEPARTMENT. VI) THE AO HAS RELIED ON THE FOLLOWING JUDGMENTS WH ICH ARE DISTINGUISHABLE ON FACTS AND THE COPIES OF THE JUDG MENTS OF SHIVAM CONSTRUCTION CO. AND ESS ESS BUILDERS PVT. LTD MAY KINDLY BE PROVIDED TO THE ASSESSEE AS THESE ARE UNREPORTED JU DGMENTS. HOWEVER, THE FACTS OF THE FOLLOWING CASES ARE BEING DISCUSSE D AS THESE ARE REPORTED JUDGMENTS: A) PARBHAT KUMAR CONTRACTOR (323 ITR 675) THE QUESTION OF LAW REFERRED TO THE HIGH COURT PRO VES THAT THERE WAS ADMISSION ON BEHALF OF THE ASSESSEE DURIN G APPELLATE PROCEEDINGS BEFORE THE TRIBUNAL THAT THE ACCOUNT OF WAGES IS UNVERIFIABLE AND THE CASE PERTAINS TO A.Y. 2001-02 FOR CONTRACT RECEIPTS OF RS.91655025/- B) SHIVAM CONSTRUCTION CO. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 11 C) ESS ESS BUILDERS PVT. LTD. D) JAIN CONSTRUCTION CO. (245 ITR 527) A PERUSAL OF THE JUDGMENT WOULD DISCLOSE THAT ONLY ISSUE BEFORE THE CIT THAT THE ASSESSEES GROUND OF APPEAL BEFORE THE CIT(A) AND THE ITAT JAIPUR BENCH, JAIPUR RELATED TO THE IS SUE THAT IF NET PROFIT RATE IS APPLIED, THE ASSESSEE IS ENTITLE D TO INTEREST AND SALARY TO THE PARTNERS BECAUSE IN THIS CASE CIT, JO DHPUR INVOKED THE PROVISIONS OF SEC. 263 ON THE BASIS THA T AS A RESULT OF DEDUCTION BY WAY OF DEPRECIATION, INTEREST AND S ALARY TO THE PARTNERS, THE NET PROFIT ON ASSESSEES CASE CAME DO WN TO THE RATE OF 1.10% AND THE ISSUE REGARDING NET PROFIT RA TE WAS NEVER TAKEN BY THE ASSESSEE BEFORE THE APPELLATE AUTHORIT Y. VII) IT IS CRYSTAL CLEAR FROM THE ABOVE STATED JUDG MENTS OF ITAT, AMRITSAR BENCH, ON WHICH WE HAVE PLACED THE RELIANC E AND MORE PARTICULARLY FROM THE JUDGMENT OF THE BATHINDA TRU CK OPERATOR UNION, BATHINDA THAT THE AO CAN REFER TO THE PAST H ISTORY OR THE COMPARABLE CASES BUT THE AO IN OUR CASE INSTEAD OF MAKING FERENCE EITHER TO THE PAST HISTORY OR THE LATEST COMPARABLE CASES OF THE BATHINDA CASES OF SOME OTHER AREAS WHICH ARE ALSO D ISTINGUISHABLE ON FACTS. 5. THE ACIT HAS FURTHER MADE ADDITION OF RS.897309/ - ON ACCOUNT OF INTEREST ON FDR WHICH WAS ALLEGEDLY NOT DISCLOSE D BY THE ASSESSEE. THIS FACT WAS NEVER CONFRONTED TO THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, A PERUSAL OF THE DETAILS OF THE INTEREST A CCOUNT FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WOULD D ISCLOSED THAT THE ACCRUED INTEREST ON FDR WAS DULY DISCLOSED IN THE R ETURN OF INCOME. KINDLY REFER TO PAGE 64 FOR DETAILS OF INTEREST ACC OUNT. IN VIEW OF THE ABOVE STATED FACTS AND LAW, THE APP EAL OF THE ASSESSEE MAY KINDLY BE ACCEPTED AND THE ADDITIONS B E DELETED. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 12 THESE WRITTEN SUBMISSIONS OF THE ASSESSEE WERE FOR WARDED TO THE A.O., WHO HAS SENT HIS COMMENTS WHICH ARE REPRODUCED AT P AGES 10 TO 17 OF LD. CIT(A)S ORDER, WHO SUPPORTED THE ORDER OF THE A.O. 9. THE LD. COUNSEL FOR THE ASSESSEE MADE A REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH WERE FORWARDED TO THE AO VIDE LETTER DATED 12.10.2011 WHO SUBMITTED THE COMMENTS VIDE LETTER D ATED 25.11.2011 AND THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE COUN TER COMMENTS. THE COMMENTS OF THE AO AND COUNTER COMMENTS OF THE LD. COUNSEL FOR THE ASSESSEE, FOR THE SAKE OF CONVENIENCE ARE BEING RE PRODUCED HEREUNDER: IN CONTINUATION TO THIS OFFICE LETTER 02.06.2011 VI DE WHICH COMMENTS ON WRITTEN SUBMISSION FILED BY THE ASSESSEE WERE SU BMITTED, THE REQUISITE REPORT U/R 46A REGARDING ADMISSION OF ADD ITIONAL EVIDENCE FILED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS, IS SUBMITTED AS UNDER: IN COMPLIANCE OF DIRECTIONS OF YOUR GOODSELF, THE A SSESSEE WAS ASKED TO PRODUCE THE ADDITIONAL EVIDENCES TO BE ADMITTED U/R 46A AS FILED DURING APPELLATE PROCEEDINGS, VIDE THIS OFFICE LETT ER DATED 13.10.2011. THE ASSESSEE HAS FILED FOLLOWING ADDITIONAL EVIDENC ES:- I) DETAILS OF WORK IN PROGRESS. II) SUMMARY OF LABOUR MUST ROLLS AND LEDGER ACCOUNT. III) COMPARATIVE RATE OF STEEL. THE ASSESSEE ALSO PRODUCED COPIES OF MUSTER ROLLS F OR VERIFICATION OF THE SAME. FURTHER, IN SUPPORT OF IT S CONTENTION THAT ONE OF THE PARTNERS DEALING WITH ACCOUNTS DIED ON 15.03.2010 AND THE ACCOUNTANT OF THE FIRM SH. S.K. MADAAN HAD LEFT THE ASSESSEE-FIRM, THE COPIES OF DEATH CERTIFI CATES AND AN AFFIDAVIT RESPECTIVELY HAVE BEEN FILED. THE SAME HA VE BEEN GONE THROUGH. AS SUBMITTED EARLIER AND DISCUSSED IN THE ASSESSMENT ORDER, THE ASSESSEE WAS PROVIDED AMPLE OPPORTUNITIE S TO ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 13 PRODUCE NECESSARY DETAILS/DOCUMENTS FOR COMPLETION OF ASSESSMENT, BUT DUE TO THE REASONS BEST KNOWN TO I T, THE ASSESSEE FAILED TO PRODUCE CERTAIN DOCUMENTS TILL T HE COMPLETION OF ITS ASSESSMENT. AS PER THE ORDER SHEET DATED 23. 11.2010, THE ASSESSEE WAS ASKED TO FURNISH FOLLOWING DETAILS /IN FORMATION. I) DETAILS OF SUNDRY CREDITORS SHOWING PAYMENTS MADE I N SUBSEQUENT YEAR. II) COMPARATIVE RATE OF MATERIAL AS ON DATE OF AWARDING THE CONTRACT AND DURING THE YEAR ON AVERAGE BASIS. III) COMPARATIVE CHART OF EXPENSES FOR LAST TWO YEARS. IV) DETAILS OF PAYMENTS RECEIVED IN NEXT YEAR IN THE MO NTH OF APRIL, 2008. BUT THE A/R OF THE ASSESSEE, ON DATE OF HEARING I.E . 29.11.2011 AGAINST SOUGHT LONG ADJOURNMENT WHICH WAS NOT POSSIBLE AS T HE CASE WAS GOING TO BARRED BY LIMITATION WITHIN A MONTH AND SU BSTANTIAL INFORMATION/DETAILS WERE PENDING FOR FURTHER INVEST IGATION, HENCE, THE CASE WAS COMPLETED ON 09.12.2010 AFTER MAKING CERTA IN ENQUIRIES. HOWEVER, AFTER CONSIDERATION, THE AFFIDAVIT OF THE ACCOUNTANT WHO LEFT THE SERVICE AND WAS WORKING WITH THE ASSES SEE FIRM DURING THE PERIOD UNDER CONSIDERATION AND THAT WHO COULD TRACE OUT THE MUSTER ROLLS OF THE ASSESSEE NOW, THE SAME MAY BE ADMITTED AS AN ADDITIONAL EVIDENCE. BUT WITH REGARD TO FURNISHING THE OTHER D ETAILS I.E. DETAILS OF WORK IN PROGRESS, COMPARATIVE RATES OF MATERIAL, DE TAILS OF SUNDRY CREDITORS TO WHOM PAYMENTS WERE MADE IN SUBSEQUENT YEARS AND DETAILS OF PAYMENTS RECEIVED IN THE MONTH OF APRIL OF THE ENSUING YEAR, THE ASSESSEE COULD HAVE SUBMITTED WELL IN THE MONTH OF APRIL OF THE ENSUING YEAR; THE ASSESSEE COULD HAVE SUBMITTED WEL L IN TIME AS THE ASSESSEE WAS PROVIDED AMPLE OPPORTUNITIES DURING AS SESSMENT PROCEEDINGS. IT IS FURTHER SUBMITTED THAT ON GOING THROUGH THE MUSTER ROLLS SUBMITTED BY THE ASSESSEE, IT IS NOTICED THAT IN MOSTLY CASES, THUMB IMPRESSION HAVE BEEN TAKEN ON MUSTER ROLLS AS TAKEN OF RECEIPT OF PAYMENT BY THE LABOURERS, NO COMPLETE ADDRESSES ARE AVAILABLE WITH THE ASSESSEE. HENCE, THEY ARE NOT SUBJECT TO V ERIFICATION. ON BEING POINTED OUT, IT HAS BEEN REPLIED BY THE ASSES SEE THAT THE LABOURERS WERE HIRED ON TEMPORARY BASIS FOR WHICH N O COMPLETE DOCUMENT WERE KEPT AND MAINTAINED WHEREAS THEIR NA MES, FATHERS NAME AND NATURE OF DUTIES THEREOF HAVE BEEN DULY ME NTIONED IN THE ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 14 MUSTER ROLLS. THE COPIES OF THE MUST ROLLS ALONGWIT H SUMMARY OF PAYMENTS MADE BY THE ASSESSEE FOR DIFFERENT SITES A ND PERIODS ARE ENCLOSED FOR YOUR KIND PERUSAL, EVEN IF THE SAME AR E ADMITTED AS ADDITIONAL EVIDENCES U/R 46A, THE BOOKS OF THE ASSE SSEE ARE STILL LIABLE TO BE REJECTED. THEREFORE, IT IS REQUESTED THAT THE CASE OF THE ASSESSEE MAY KINDLY BE DECIDED ON MERITS KEEPING IN VIEW THE REPORT ON WRITTEN SUBMISSION SUBMITTED BY THE UNDERSIGNED. 8. THE A/R OF THE ASSESSEE HAS FILED COUNTER COMMEN TS WHICH ARE REPRODUCED AS UNDER: ISSUE REMAND REPORT OF THE AO REPLY OF THE ASSESSEE 1. BOOKS OF ACCOUNT VIS A VIS I) MUST ROLLS RELATING TO PAYMENT OF LABOUR II) DETAILS OF WORK IN PROGRESS III)COMPARATIVE CHART OF EXPENSES IV) PAYMENT TO SUNDRY CREDITORS IN SUBSEQUENT YEAR PRODUCED BEFORE YOUR GOODSELF DURING THE COURSE OF APPELLATE PROCEEDINGS WITH A REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE U/R 46A 1.(I) THE AO IN HIS REMAND REPORT DATED 25.11.2011 GIVING COMMENTS ON ADDITIONAL EVIDENCE SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDINGS HAS STATED THAT THE ACCOUNTANT IN HIS AFFIDAVIT HAS CONFIRMED THAT THE MUSTER ROLLS WERE HANDED BY HIM TO THE PARTNERS AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS BUT REGARDING THE DETAILS OF WORK IN PROGRESS AND OTHER DETAILS HE HAS STATED THAT THEY COULD BE FURNISHED WELL IN TIME. 1(II) THE AO FURTHER STATED THAT THE MUSTER ROLLS ARE NOT SUBJECT 1(I)THE AO HAS IGNORED THE FACT THAT ACCOUNTANT IN PARA 3 OF THE AFFIDAVIT DISCUSSED IN THE REMAND REPORT BY THE AO HAS STATED THAT THE DETAILS OF WORK IN PROGRESS ETC. WERE PREPARED AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS. MOREOVER, THE AO HAS NOT POINTED OUT ANY DEFECT IN THE DETAILS PRODUCED BY THE ASSESSEE AS ADDITIONAL EVIDENCE. 1(II) THE AO HAS IGNORED THE FACT THAT DURING A.Y. 2007-08 THE DEPARTMENT HAS ONLY DISALLOWED 2% OF THE LABOUR EXPENSES FOR THE SAME REASONS BUT THE BOOKS OF ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 15 TO VERIFICATION AS COMPLETE ADDRESS OF THE LABOUR IS NOT AVAILABLE. ACCOUNT WERE NOT REJECTED. 2. THE CASE LAW REGARDING N.P.RATE APPLIED @ 10% BY THE A.O. THE AO HAS PROVIDED THE COPIES OF THE JUDGMENTS WHICH WERE NOT EARLIER SUPPLIED TO THE ASSESSEE. THE CASE LAW RELIED UPON BY THE AO IS DISTINGUISHABLE ON FACTS. THE SAME ARE ENCLOSED HEREWITH. 3. THE ASSESSMENT OF INTEREST RECEIVED FROM BANK AS INCOME FROM OTHER SOURCES BY THE A.O. THE AO HAS RELIED ON THE JUDGMENT OF KERALA HIGH COURT 325 ITR 201. THE KERALA HIGH COURT HAS RELIED OF THE JUDGMENT OF SUPREME COURT 227 ITR 172 THE JUDGMENT RELIED UPON BY THE AO ARE DISTINGUISHABLE ON FACTS AND CASE LAW APPLICABLE ON THE FACTS OF THE CASE THAT WHERE THE INVESTMENT IN FIXED DEPOSITS HAS BEEN MADE FOR GIVING BANK GUARANTEE TO THE CONTRACTEE IN THE CASE OF A CONTRACTOR, THE BANK INTEREST HAS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME, IS SEPARATELY ENCLOSED. I) (2206) 285 ITR 479 (DEL) II) II) (1999) 236 ITR 315 (SC) III) (2000) 243 ITR 2 (SC 10. ON PERUSAL OF THE FINDINGS OF THE LD. CIT(A), T HE SUBMISSIONS OF THE ASSESSEE AND COUNTER COMMENTS OF THE LD. COUNSEL FO R THE ASSESSEE BEFORE THE ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 16 LD. CIT(A). WE CONCUR WITH THE VIEWS OF THE LD. CI T(A) THAT THE ASSESSEE HAS FAILED TO FILE THE INFORMATION WITH REGARD TO DETAI LED ACCOUNT OF SUNDRY CREDITORS FOR WHICH PAYMENT WAS MADE IN SUBSEQUENT YEAR, DETAILS OF WORK IN PROGRESS, COMPARATIVE RATE OF MATERIAL ETC. IS FACT UALLY CORRECT. THE ASSESSEE ALSO DID NOT PRODUCE MUSTER ROLL/LABOUR PAYMENT REG ISTER TO PROVE THE PAYMENTS TO LABOUR. BUT DURING THE COURSE OF APPEL LATE PROCEEDINGS THE ASSESSEE FILED REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH WAS FORWARDED TO THE AO AND THE AO HAS FILED NO COMMENT S VIDE LETTER DATED 25.11.2011 REPRODUCED ABOVE AND THE ASSESSEE HAS BE EN ABLE TO SUBMIT ALL THE DOCUMENTS/EVIDENCE WHICH WERE NOT PRODUCED DURN G THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO IN THE LETTER DATED 25.11.2011 DISCUSSED SUPRA ON PAGE 2 POINTED OUT THAT THE COMPLETE ADDR ESSES OF THE LABOURERS WERE NOT AVAILABLE ON THE MUSTER ROLLS BUT THEIR NA MES, FATHER NAMES AND NATURE OF DUTY HAS BEEN MENTIONED IN THE MUSTER ROL LS. THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF AC COUNT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND MUSTER ROLLS/O THER ADDITIONAL EVIDENCE PRODUCED DURING THE COURSE OF APPELLATE PROCEEDING BUT HAS STATED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE LIABLE TO BE R EJECTED. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 17 11. FURTHER, WE CONCUR WITH THE VIEWS OF THE LD. CI T(A) THAT IN VIEW OF THE REMAND REPORT OF THE AO ON THE ADMISSION OF ADD ITIONAL EVIDENCE DATED 25.11.2011 AND THE FACT THAT THE ASSESSEE PRODUCED BOOKS OF ACCOUNT AND RELEVANT RECORD DURING THE COURSE OF ASSESSMENT PRO CEEDINGS AND MUSTER ROLLS RELATING TO THE PAYMENT OF LABOUR DURING THE COURSE OF APPELLATE PROCEEDINGS, THE BOOKS OF ACCOUNT ARE NOT LIABLE TO BE REJECTED AND THE NET PROFIT RATE CANNOT BE APPLIED FOR ESTIMATION OF PROFITS IN SPIT E OF THE FACT THAT THE AO HAS MADE A SPECIFIC REQUEST FOR REJECTION OF BOOKS OF ACCOUNT. THE LD. CIT(A) FOUND THAT THE JUDGMENTS RELIED UPON BY THE AO ARE DISTINGUISHABLE ON FACTS AND THE DEPARTMENT IN THOSE CASES FOUND THAT EITHER NO BOOKS OF ACCOUNT WERE MAINTAINED OR POINTED OUT SPECIFIC DEFECTS IN THE B OOKS OF ACCOUNT. IT IS SETTLED LAW THAT THE BOOKS OF ACCOUNT CANNOT BE REJ ECTED UNLESS SPECIFIC DEFECTS ARE POINTED OUT. EVEN AT THE TIME OF SUBMIT TING REMAND REPORT, THE AO HAS MENTIONED THAT THE ASSESSEE ALSO PRODUCED CO PIES OF MUSTER ROLLS FOR VERIFICATION OF THE SAME. FURTHER, IN SUPPORT OF TH E CONTENTION THAT ONE OF THE PARTNERS DEALING WITH ACCOUNTS DIED ON 15.03.2010 A ND THE ACCOUNTANT OF THE FIRM HAD LEFT THE ASSESSEE FIRM, THE COPIES OF DEAT H CERTIFICATE AN AFFIDAVIT RESPECTIVELY HAVE BEEN FILED AND PERUSED BY THE A.O . HOWEVER, WITH REGARD TO OTHER DETAILS I.E. DETAILS OF WORK IN PROGRESS, COMPARATIVE RATES OF MATERIAL, DETAILS OF SUNDRY CREDITORS TO WHOM PAYME NTS WERE MADE IN ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 18 SUBSEQUENT YEARS AND DETAILS OF PAYMENTS RECEIVED I N THE MONTH OF APRIL OF THE ENSUING YEAR, THE AO HAS SUBMITTED THAT THE ASS ESSEE COULD HAVE FILED THESE DETAILS AT THE TIME OF REGULAR ASSESSMENT THO UGH THE ASSESSEE WAS AFFORDED AMPLE OPPORTUNITIES DURING ASSESSMENT PROC EEDINGS. THE AO HAS SUBMITTED THAT THE AFFIDAVIT OF THE ACCOUNTANT MAY BE ADMITTED., WHO HAS LEFT THE SERVICES AND WAS ABLE TO TRACE OUT THE MUSTER R OLLS PERTAINING TO THE PERIOD UNDER CONSIDERATION. FURTHER ACCORDING TO TH E AO EVEN PERUSAL OF THE MUSTER ROLLS REVEALS THAT IN MOST CASES, THUMB IMPR ESSION HAVE BEEN TAKEN AS TOKEN OF RECEIPT OF PAYMENT BY THE LABOURERS, NO CO MPLETE ADDRESSES ARE AVAILABLE WITH THE ASSESSEE. HENCE, THEY ARE NOT S UBJECT TO VERIFICATION. ON BEING ASKED, THE ASSESSEE SUBMITTED THAT LABOURERS WERE HIRED ON TEMPORARY BASIS FOR WHICH NO COMPLETE DOCUMENTS WERE KEPT AND MAINTAINED WHEREAS THEIR NAMES, FATHERS NAME AND NATURE OF DUTIES THE REOF HAVE BEEN DULY MENTIONED IN THE MUSTER ROLLS. THE AO SUBMITTED COP IES OF MUSTER ROLLS ALONG WITH SUMMARY OF PAYMENTS MADE BY THE ASSESSEE FOR DIFFERENT SITES AND PERIODS ALONGWITH HIS REMAND REPORT BUT OPINED THAT EVEN IF THE SAME ARE ADMITTED AS ADDITIONAL EVIDENCE U/R 46A, THE BOOKS OF ASSESSEE ARE STILL LIABLE TO BE REJECTED. THOUGH, NO SPECIFIC DEFECT OR DEFIC IENCY HAS BEEN POINTED OUT BY THE A.O. THE AOS REMAND REPORT IS SELF CONTRADI CTORY. ON ONE SIDE, HE IS ADMITTING THE CIRCUMSTANTIAL EVIDENCE I.E. DEATH CE RTIFICATE OF ONE OF THE ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 19 PARTNERS HAPPENED ON 15.3.2010 AND AFFIDAVIT OF THE ERSTWHILE ACCOUNTANT, THE AO IS OPTING TO ADMIT MUSTER ROLLS AND OTHER DE TAILS BEING PRESSED UPON DURING THE APPELLATE PROCEEDINGS AS ADDL. EVIDENCE U/S 46A ON THE OTHER HAND, HE IS STILL OF THE VIEW THAT THE ASSESSEES A CCOUNT ARE LIABLE TO BE REJECTED BY ATTRACTING THE PROVISIONS OF SEC. 145 (3). THE AO HAS SUBMITTED THAT THE AFFIDAVIT OF THE ACCOUNTANT MAY BE ADMITTE D, WHO HAS LEFT THE SERVICE AND WAS ABLE TO TRACE OUT THE MUSTER ROLLS PERTAINING TO THE PERIOD UNDER CONSIDERATION. FROM FACTS BROUGHT ON RECORD, IT TRANSPIRES THAT THE ASSESSEE WAS UNDER THE COMPELLING CIRCUMSTANCES DU E TO WHICH IT COULD NOT PRODUCE ALL THE EVIDENCE REQUISITIONED BY THE A.O. IF IT IS TAKEN A PLEA BY THE AO THAT ALL THESE DOCUMENTS SHOULD BE TAKEN AS A S OUND GROUND TO REJECT THE CLAIM OF THE ASSESSEE IN VIEW OF THE CIRCUMSTANCES AS EXPLAINED AND ADMITTED BY THE AO IN HIS REMAND REPORT. AS PER PAST ACCEPTE D HISTORY OF THE ASSESSEES CASE, NO SUCH HIGH-PITCHED TRADING ADDIT ION WAS EVER MADE. THE AO BY ADMITTING THE CIRCUMSTANTIAL EVIDENCE AND OTH ER DOCUMENTARY EVIDENCE NOW ADDUCED DURING THE APPELLATE PROCEEDIN GS, IN HIS REPORT U/S 46A OF THE I.T. RULES, 1962, THE AO OPINED THAT AS TO WHY THESE ADDL. EVIDENCES WERE NOT PRODUCED DURING THE REGULAR ASSE SSMENT PROCEEDINGS. IN THIS RESPECT, THE LD. CIT(A) WAS OF THE VIEW THAT T HE ASSESSEE HAS BEEN ABLE TO EXPLAIN THAT ALTHOUGH THE ABOVE INFORMATION HAD DULY BEEN ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 20 MAINTAINED/PREPARED IN THE REGULAR COURSE OF BUSINE SS, BUT THE SAME COULD NOT BE PRODUCED AS THE SAME WAS NOT READILY TRACEAB LE AT THE RELEVANT MOMENT OWING TO THE FACT THAT FIRSTLY HIS ONE OF TH E ACTIVE PARTNER HAD DIED ON15.3.2010 AND SECONDLY HIS EXPERIENCED ERSTWHILE ACCOUNTANT HAD LEFT ITS SERVICES AT THE FAG END OF THE ACCOUNTING PERIOD. 12. THE AO CONTENDED THAT NEVERTHELESS THE MUSTER R OLLS PRODUCED DURING THE REMAND PROCEEDINGS CONTAIN NAME OF THE LABOUR, HIS FATHERS NAME, AMOUNT PAID, SIGNATURE/THUMB IMPRESSION OF THE RECI PIENT, BUT IT COULD NOT BE GIVEN CREDENCE AS IT DOES NOT CONTAIN COMPLETE ADDR ESS OF THE RECEIPT. NON MENTION OF ADDRESS CAN BE VIEWED AS A SHEER NEGLIGE NCE ON THE PART OF ASSESSEES EMPLOYEE WHO HAS BEEN ENTRUSTED THE DUT Y OF MAINTAINING MUSTER ROLL. FURTHER IT IS THE ASSESSEES CASE THAT THE CL AIM OF LABOUR PAYMENTS ARE DULY SUPPORTED BY VARIOUS POCKET WISE MUSTER ROLLS BEARING SIGNATURES OF THE RECIPIENTS RUNNING IN HUNDREDS IN NUMBER WHICH CANN OT BE SAID TO BE ABRUPTLY COMPLIED AND PREPARED OTHERWISE THAN IN R EGULAR COURSE OF BUSINESS AND ON THE SIMPLE DEFICIENCY OF NON-INDICATION OF L ABOURERS ADDRESSES WHO BELONGED TO DIFFERENT STATES, THE FACT OF INCURRING OF INCIDENTAL AND FUNDAMENTAL LABOUR EXPENSES IN THE LINE OF ASSESSEE S BUSINESS DOES NOT GET VITIATED/NULLIFIED AS A WHOLE. FURTHER, IT IS THE ASSESSEES CASE THAT UNLIKE REGULARLY EMPLOYED/ENGAGED EMPLOYEES, IT IS NOT MAN DATORY TO KEEP FULL ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 21 COMPLETE AND ACCURATE ADDRESS IN RESPECT OF A CASUA L AND UNSKILLED LABOUR DEPLOYED AND ENGAGED PURELY ON TEMPORARY BASIS MORE OVER THEY LIVE GENERALLY IN HUTS/TEMPORARY SHEDS IN SLUM AREA COL ONIES/DERAS IN ORDER TO ENSURE COMPLETION OF VARIOUS WORK ALLOTTED AT DIFF ERENT SITES, THE MAIN PURPOSE ON WHICH THE ATTENTION WAS REQUIRED TO BE F OCUSED IS TO ENGAGED SUCH HARDLY AVAILABLE LABOUR COMING FROM VARIOUS OT HER STATES AT ALL COSTS WITHOUT GOING INTO THE FORMALITIES OF ENQUIRING ABO UT ALLOTTED ASSIGNMENTS COMPLETED TIMELY. THUS, THE AO HAS NOT PROPERLY AP PRECIATED THE GROUND REALITIES OF THE CASE IN THE RIGHT PERSPECTIVE. IT IS NOW WELL SETTLED LAW THAT THE AO SHOULD NOT SIT ON THE ASSESSEES CHAIR WHILE FRAMING AN ASSESSMENT IN CASE FOR ARRIVING AT A REALISTIC AND OBJECTIVE VIEW OF THE ISSUE. MOREOVER, LD. CIT(A) WAS OF THE VIEW THAT THE AO B Y PLACING RELIANCE ON MERE TECHNICALITIES AND FLAWS OF ROUTINE NATURE, IT IS NOT APPROPRIATE ON HIS PART TO REJECT ASSESSEES BOOK VERSION WITHOUT POIN TING OUT ANY BASIC DEVIATION IN ACCOUNTING SYSTEM OR DISCREPANCIES OF FAR REACHING CONSEQUENCES IN THE REGULARLY MAINTAINED ACCOUNTS O F THE ASSESSEE AND EVEN FOR THIS, THE AO WAS NOT DEBARRED TO OBTAIN SPECIAL AUDIT REPORT UNDER PROVISIONS OF SEC. 142(2A) OF THE ACT, WHICH HAS NO T BEEN DONE IN THIS CASE. IN RESPECT OF PAYMENTS MADE DURING APRIL, 2008 IN DISCHARGE OF LIABILITIES OF SUNDRY TRADE CREDITORS, THE AO HAS FAILED TO OBTAIN CONFIRMATION EVEN ON TEST ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 22 CHECK BASIS FROM THE MAJOR SUNDRY CREDITORS BY WAY OF VERIFICATIONS U/S 133(6) OF THE ACT EVEN DURING REMAND PROCEEDINGS. A S REGARDS THE NON FILING OF COMPARATIVE DETAILS IN RESPECT OF YEAR EARLIER T HAN IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE LD. CIT(A) WAS OF THE OPINION THAT THE AO COULD HAVE CARRY OUT EFFECTIVE COMPARATIVE ANALYSIS ITSELF EVE N ON THE BASIS OF LAST YEARS FIGURES DULY FURNISHED BY THE ASSESSEE. FURTHER, A S FAR AS THE AOS OBSERVATION THAT NO STOCK INVENTORY OF THE LEFT OVE R MATERIAL LYING AT VARIOUS SITES CONFORMING ASSESSEES WORK IN PROGRESS COMPR ISING OF VARIOUS ITEMS OF DIFFERENT VARIETIES AND OF VOLUMINOUS QUANTITIES, I T IS THE ASSESSEES CASE THAT SINCE IT INVOLVES BOTH RAW MATERIAL SUPPLIED BY VAR IOUS DEPARTMENTS/CONTRACTEES AS WELL AS RAW MATERIAL PUR CHASED ITSELF BY THE ASSESSEE, SCATTERED AT VARIOUS SITES OF WORK, IT WA S NOT FEASIBLE IN THIS PECULIAR LINE OF BUSINESS TO WORK OUT EXACT QUANTIT Y OF CLOSING STOCKS OR W.I.P AND THIS IS A COMMON PHENOMENON AND FEATURE W ITH ALMOST ALL THE CONTRACTORS ENGAGED IN THIS LINE OF BUSINESS. IN SU CH CIRCUMSTANCES, THE ASSESSEE HAS TO WORK OUT WORK IN PROGRESS IN RESPEC T OF VARIOUS SITES ON ESTIMATE BASIS, WHICH IS CLAIMED TO BE WELL WITHIN THE PRE-PONDERANCE OF HUMAN PROBABILITIES. 13. FROM THE FACTS BROUGHT ON RECORD, IT TRANSPIRES THAT THE ASSESSEE HAS SUFFICIENTLY AND SATISFACTORILY EXPLAINED THE COMPE LLING CIRCUMSTANCES WHICH ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 23 PREVENTED IT TO PRODUCE ALL THE REQUISITE DOCUMENTA RY EVIDENCES BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. BUT NO SPECIFIC DEFECTS OR DEFICIENCY HAS BEEN POINTED OUT BY THE AO AT THE TI ME OF ASSESSMENT PROCEEDINGS OR DURING REMAND PROCEEDINGS. BUT AT T HE SAME, THE LD. CIT(A) WAS OF THE VIEW THAT THE AO WHILE DECIDING THE CASE FOR THE A.Y. 2007-08 MADE DISALLOWANCE OF RS.4598007 BEING 2% OF LABOUR EXPENSES, THE ASSESSEE ON A SPECIFIC QUERY STATED THAT NO APPEAL WAS FILED BY THE ASSESSEE AGAINST THE ORDER U/S 143(3) FOR A.Y. 2007-08. ACC ORDINGLY, THE LD. CIT(A) HELD THAT 2% OF THE EXPENSES ON ACCOUNT OF LABOUR I.E. RS.9,03,715/- ON THE TOTAL EXPENSES OF RS.4,51,85,780/- DESERVES TO BE D ISALLOWED KEEPING IN VIEW THE FACTS AND PAST HISTORY OF THE CASE. LD. CI T9A) WAS OF THE VIEW THAT THE JUDGMENT OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF BATHINDA TRUCK OPERATOR UNION, BATHINDA IN WHICH IT HAS BEEN HELD THAT THE AO CAN REFER TO THE PAST HISTORY OF THE CASE WHICH ACTS AS A GOOD G UIDE TO THE AO. THE ITAT HAS FURTHER RELIED ON THE JUDGMENT OF BERGER PAINTS LTD. VS. CIT 266 ITR 99 AND HAS HELD THAT THE PRINCIPLE OF CONSISTENCY AN D UNIFORMITY IN APPROACH IS REQUIRED TO BE FOLLOWED. 14. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY RESTRICTED THE ADDITION TO RS.9,03,715/-. WE ALSO FIND NO INFIRMITY IN THE ORD ER OF THE LD. CIT(A) WITH ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 24 REGARD TO THE INCLUSION OF INTEREST INCOME WHICH HA S ALREADY BEEN DECLARED AS BUSINESS INCOME OF THE ASSESSEE AND HAS THEREFORE, RIGHTLY DELETED THE ADDITION OF RS.8,57,309/- VIDE PARA 10.4 OF HIS OR DER. THUS, IN THE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHICH IS WELL REASONED ORDER AND IS UPHELD ACCORDINGLY. ACCO RDINGLY, WE DISMISS THE C.O. OF THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.104(ASR)/2012 AS WELL AS C.O. NO.14(ASR)/2012 OF THE ASSESSEE ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MARCH, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31ST MARCH, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. N.D. DOOMRA & SONS, MUKTSAR 2. THE ACIT, CIR.II. BATHINDA. 3. THE CIT(A), BATHINDA. 4. THE CIT, BATHINDA. ITA NO.104(ASR)/2012 C.O.NO.14(ASR)/2012 25 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.