M/s. Arihant Builders, Jalandhar V. The Incom-tax Officer, Jalandhar

CO 18/ASR/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7326 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KULDIP BHAGAT
• Assessee Lawyers: R L CHHANALIA
• Keywords: Depreciation
• Section: 143(3); 142(1); 145

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. 401(ASR)/2011 ASSESSMENT YEAR:2007-08 PAN :AABFA4896P ASSTT. COMMR. OF INCOME-TAX, VS. M/S. ARIHANT BUILD ERS, CIRCLE IV, JALANDHAR. SODAL ROAD, JALANDHAR. (APPELLANT) (RESPONDENT) C.O. NO.18(ASR)/2011 (ARISING OUT OF I.T.A. NO. 401(ASR)/2011) ASSESSMENT YEAR:2007-08 PAN :AABFA4896P M/S. ARIHANT BUILDERS, VS. ASSTT. COMMR. OF INCOME -TAX, SODAL ROAD, JALANDHAR. CIRCLE IV, JALANDHAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. R.L. CHHANALIA, DR RESPONDENT BY: SH. KULDIP BHAGAT, CA DATE OF HEARING: 10/07/2012 DATE OF PRONOUNCEMENT:16/07/2012 ORDER PER BENCH ; THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST T HE IMPUGNED ORDER OF THE CIT(A), JALANDHAR, DATED 29.04.2011 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS ALSO FILED C.O. ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED IN LAW BY DIRECTING THE A.O. TO AP PLY THE N.P. RATE 4% ON THE TOTAL RECEIPT AS AGAINST 8% APPLIED BY THE A.O. 1A. WHILE DOING SO, THE LD. CIT(A) HAS FAILED TO AP PRECIATE THAT THE A.O. APPLIED THE N.P. RATE OF 8% AFTER EXAMINING TH E BOOKS OF ACCOUNT AND DULY ESTABLISHED HAT THE RECEIPTS ON AC COUNT OF SALE OF OLD DISMANTLED MATERIAL HAD BEEN SUPPRESSED, EXP ENDITURE ON ACCOUNT OF WAGES HAD BEEN INFLATED AND STOCK PARTIC ULARS WERE NOT VERIFIABLE. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET-ASIDE AND THAT OF THE A.O. BE RESTORED. 3. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 3. IN THE C.O. THE ASSESSEE HAS RAISED FOLLOWING GR OUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A), JALANDHAR, HAS GROSSLY ERRED IN UPHOLDING THE REJEC TION OF BOOK RESULTS BY THE A.O. U/S 145(3) OF THE INCOME-TAX AC T. 2. THAT THE LD. CIT(A) JALANDHAR, HAS WRONGLY APPLI ED N.P. RATE OF 4% OF THE GROSS RECEIPTS AGAINST THE 2.79% DECLA RED BY THE ASSESSEE, AS BOOKS OF ACCOUNTS PROPERLY MAINTAINED AND AUDITED U/S 44AB OF THE INCOME-TAX ACT. 3. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR ANNEX ANY OTHER GROUNDS OF CROSS OBJECTIONS BEFORE THE APPEAL IS HE ARD OR DISPOSED OFF. 4. THE DISPUTES IN THE APPEAL FILED BY THE REVENUE AS WELL AS C.O. FILED BY THE ASSESSEE ARE THAT WHETHER THE LD. CIT(A) HA S ERRED IN APPLYING N.P. RATE OF 4% ON THE TOTAL RECEIPTS AS AGAINST 8% AP PLIED BY THE A.O. AND ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 3 SECONDLY WHETHER THE LD. CIT(A), JALANDHAR, HAS RIG HTLY UPHELD THE ACTION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT U/S 145( 3) OF THE ACT INSPITE OF THE FACT THAT THE ASSESSEES BOOKS OF ACCOUNT HAS BEEN AUDITED UNDER SECTION 44AB OF THE ACT. 5. THE FACTS RELATING TO THE ISSUES IN DISPUTE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR, FILED ITS RETURN OF INCOME ON 30.10.200 7 DECLARING TOTAL INCOME OF RS.17,07,660/- AND THE SAME WAS PROCESSED UNDER SEC TION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) . THE AO SELECTED THE CASE FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT ON 24.09.2009, WHICH WAS SERVED ON THE ASSESSEE ON 26.09.2008. THE AO ALSO ISSUED ANOTHER NOTICES UNDER SECTION 143(2) AND 142(1) A LONGWITH QUESTIONNAIRE TO THE ASSESSEE ON 10.09.2009. IN RESPONSE TO THE SAID NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEED INGS BEFORE THE A.O. FROM TIME TO TIME AND FURNISHED ALL NECESSARY DOCUMENTA RY EVIDENCE ALONGWITH THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS IN SUPPORT OF EXPENSES CLAIMED ETC. THE AO EXAMINED THE SAME. AFTER EXAMINING ALL NECE SSARY DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE, THE AO FOUND THAT D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EXECUTED TWO CONTRACTS OF M.E.S. AS PER PROFIT & LOSS ACCOUNT OF THE ASSESSEE ANNEXED WITH THE RETUR N OF INCOME ON RECEIPTS OF ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 4 RS.5,93,57,918/-. DURING THE YEAR UNDER CONSIDERATI ON, THE N.P. OF RS.17,07,660/- HAS BEEN RETURNED, WHICH GAVE THE NE T PROFIT RATE OF 2.87% ONLY AS COMPARED TO 4.38% RETURNED DURING IMMEDIATE PRECEDING ASSESSMENT YEAR. THE AO ASKED THE ASSESSEE TO EXPLAIN THE DECL INE IN N.P. RATE AS COMPARED TO PRECEDING ASSESSMENT YEAR, THE ASSESSEE FILED ITS REPLY DATED 4 TH NOV., 2009 AND CONTENDED THAT FOR THE WORKS EXECUTE D BY THE ASSESSEE, THE COST OF CEMENT USED WAS RS.153/- PER BAG. HOWEVER, THE COST OF THE CEMENT GRADUALLY INCREASED TO RS.242/- PER BAG. THE PRICE OF THE CEMENT WHICH WAS SELLING AT RS.21.10. PER KG. DURING THE MONTH OF N OV., 2005 ROSE TO RS.28.88 PER KG. TOWARDS MARCH, 2007 AND THE PRICE OF THE B RICKS WHICH WAS AVAILABLE AT THE RATE OF RS.1000/- PER THOUSAND OF BRICKS ALS O ROSE TO RS.1400/- PER THOUSAND. THE ASSESSEE FURTHER PLEADED THAT ALMOST ALL MATERIAL PRICES WERE INCREASED TO 30% TO 35% AND THE ASSESSEE HAS ALSO A TTACHED THE COPIES OF THE RELEVANT PURCHASE BILLS IN SUPPORT OF ITS CONTENTIO N BEFORE THE AO. AFTER EXAMINING THE REPLY DATED 04.11.2009 FILED BY THE A SSESSEE ALONGWITH OTHER DOCUMENTARY EVIDENCE, THE AO AGAIN DOUBTED ON THE DECREASING N.P. RATE IN THE CASE OF THE ASSESSEE AND ASKED VARIOUS QUESTION S TO THE ASSESSEE AND THE ASSESSEE REPLIED THE SAME FROM TIME TO TIME WITH TH E SUPPORT OF THE DOCUMENTARY EVIDENCE. THE AO ALSO EXAMINED THE REGI STER FOR WAGES PRODUCED BY THE ASSESSEE AND LASTLY THE AO POINTED OUT VARIOUS ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 5 DEFECTS IN THE BOOKS OF ACCOUNT AS HE HAS DISCUSSED IN APPEAL IN PARAGRAPH 4(A), 4(B) & 4(C) IN THE ASSESSMENT ORDER AND FINAL LY, HE REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, BEING INCORRECT AND INCOMPLETE AND NOT REFLECTING TRUE AND CORRECT ASSESSABLE INCOME OF TH E ASSESSEE-FIRM BY INFLATING ALL EXPENSES AND SUPPRESSING THE RECEIPTS . 6. THE AO HAS RELIED UPON VARIOUS CASE LAWS ON THE SUBJECT AND USED THE SAME AGAINST THE ASSESSEE, WHICH IS AT PAGES 13 TO 15 AND LASTLY THE AO HELD THAT THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS THE ITAT HAVE UPHELD THE APPLICATION OF N.P. RATE @ 10% TO 12% IN THE C ASES OF CIVIL CONTRACTORS AND THE ASSESSEE IS ALSO NOT ENTITLED TO ANY FURTHE R DEDUCTION ON ACCOUNT OF DEPRECIATION. HE FINALLY HELD THAT IN THE CASE OF T HE ASSESSEE UNDER CONSIDERATION, THE TURNOVER IS MUCH MORE THAN RS.40 LACS. THE N.P. RATE IS EXTREMELY LOW AND THEREFORE, IT WOULD BE FAIR AND R EASONABLE TO ESTIMATE N.P. RATE IN THE CASE OF THE ASSESSEE @ 8% OF THE GROSS RECEIPTS AND HE COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 1 7.12.2009. 7. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNE D ORDER DATED 29.04.2011 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY REDUCI NG THE N.P. RATE TO 4% OF ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 6 THE GROSS RECEIPTS COMPUTED BY THE AO AND UPHELD TH E ACTION OF THE AO IN REJECTING THE BOOK RESULTS UNDER SECTION 145(3) OF THE ACT. 8. NOW, AGGRIEVED BY THE ORDER OF THE LD. CIT(A), T HE REVENUE AS WELL AS THE ASSESSEE HAS FILED APPEAL AND C.O. BEFORE US. THE REVENUE HAS CHALLENGED THE DIRECTION GIVEN BY THE LD. FIRST APP ELLATE AUTHORITY TO THE AO TO APPLY N.P. RATE OF 4% ON THE TOTAL RECEIPTS AS A GAINST 8% APPLIED BY THE A.O. AND THE ASSESSEE IS AGGRIEVED BY UPHOLDING THE REJECTION OF BOOK RESULTS BY THE A.O. UNDER SECTION 145(3) OF THE ACT AS WELL AS REQUESTING TO ACCEPT THE N.P. RATE OF 2.79% AS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AVAILABLE WITH US ESPECIALLY, THE ORDERS PASSED BY THE REVENUE AUT HORITIES ON THE ISSUES IN DISPUTE. WE ARE OF THE VIEW THAT AS A MATTER OF FAC T, THE ASSESSEE HAS EXECUTED TWO CONTRACTS OF M.E.S. AND AS PER PROFIT & LOSS A CCOUNT OF THE ASSESSEE ANNEXED WITH THE RETURN OF INCOME DURING THE YEAR U NDER CONSIDERATION. THE ASSESSEE HAS DECLARED NET PROFIT RATE OF 2.87% AS C OMPARED TO 4.38% RETURNED DURING THE YEAR IMMEDIATE PRECEDING ASSESS MENT YEAR. THE ASSESSEE HAS FURNISHED ITS REPLY DATED 4 TH NOV., 2009, WHICH WAS REPRODUCED BY THE AO IN PARA 3 OF HIS ORDER. THE AO HAVING STILL DOUB T ON THE SUBJECT AND ASKED VARIOUS QUESTIONS FOR WHICH THE ASSESSEE HAS GIVEN REPLY WITH THE ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 7 SUPPORT OF EVIDENCE. NO DOUBT, THERE ARE CERTAIN WA GES REGISTER REGARDING BOOKING OF LABOUR ETC. ARE NOT VERIFIABLE. IN OTHER WORDS THE ASSESSEE HAS NOT VERIFIED THE SAME TO THE SATISFACTION OF THE A.O. T HEREFORE, THE AO HAS RIGHTLY APPLIED THE PROVISIONS OF SECTION 145(3) OF THE ACT, FOR THE REASONS DISCUSSED IN DETAIL IN PARAS 4(A), 4(B) & 4(C) IN T HE ASSESSMENT ORDER AND HE REJECTED THE BOOKS OF ACCOUNT. THE LD. FIRST APPELL ATE AUTHORITY HAS ALSO RIGHTLY UPHELD THE ACTION OF THE A.O. BY DISCUSSING IN DETAIL IN THE IMPUGNED ORDER. THE LD. FIRST APPELLATE AUTHORITY HAS GIVEN AN AMPLE OPPORTUNITY TO THE ASSESSEE FOR APPLYING THE PROVISIONS OF SECTION 145 (3) OF THE ACT IN THE CASE OF THE ASSESSEE. HE HAS ALSO GIVEN FULL OPPORTUNIT Y TO THE AO TO CONTROVERT THE EVIDENCE FILED BY THE ASSESSEE UNDER RULE 46A O F THE INCOME TAX RULES, 1962. THE LD. FIRST APPELLATE AUTHORITY HAS DISCUSS ED IN DETAIL, THE SUBMISSIONS OF THE ASSESSEE AS WELL AS COMMENTS OF THE A.O. ON THE FRESH EVIDENCE PRODUCED BY THE ASSESSEE. HE HAS DISCUSSED IN DETAIL FROM PAGES 3 TO 32 ON THE SUBJECT WITH THE SUPPORT OF VARIOUS DE CISIONS RENDERED BY THE HONBLE COURTS AND ESPECIALLY THE CASE LAWS RELIED UPON BY THE AO IN THE ASSESSMENT ORDER. LASTLY, THE LD. FIRST APPELLATE A UTHORITY HAS RIGHTLY UPHELD THE APPLICABILITY OF PROVISION OF SECTION 145(3) OF THE ACT BECAUSE THE LD. FIRST APPELLATE AUTHORITY HAS PASSED A WELL REASONE D ORDER WITH THE SUPPORT OF ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 8 DECISIONS RENDERED BY VARIOUS HONBLE COURTS. ACCOR DINGLY, WE UPHOLD THE SAME. 9.1. AS REGARDS TO THE APPLICABILITY OF N.P. RATE @ 4% ON THE TOTAL RECEIPTS AS AGAINST 8% APPLIED BY THE AO, WE ARE OF THE VIEW THAT THE AO HAS APPLIED VARIOUS CASE LAWS IN THE CASE OF THE ASSESSEE WITHO UT CONFRONTING THE SAME TO THE ASSESSEE AND THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DISAGREED WITH THE ESTIMATION MADE BY THE AO AT N.P. RATE OF 8% ON LY ON THE BASIS OF CASE LAWS RELIED UPON BY THE A.O. WITHOUT CONFRONTING TH E SAME TO THE ASSESSEE. THE LD. FIRST APPELLATE AUTHORITY HAS REDUCED THE N .P. RATE OF 4% TO THE GROSS RECEIPTS COMPUTED BY THE A.O. INSTEAD OF 8% APPLIED BY THE A.O. ON THE BASIS OF PREVIOUS ASSESSMENT YEAR AND ESPECIALLY TH E INCREASE IN THE RATES OF THE MATERIAL USED BY THE ASSESSEE IN ITS CONSTRUCTI ON BUSINESS. THE LD. FIRST APPELLATE AUTHORITY HAS DISCUSSED EACH AND EVERY AS PECT ON THE ISSUE IN DISPUTE AND LASTLY HAS RIGHTLY DIRECTED THE A.O. TO APPLY N.P. RATE @ 4% TO THE GROSS RECEIPTS COMPUTED BY THE A.O. IN ORDER TO MEET ENDS OF JUSTICE. 9.2. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE EXPLAINED ABOVE AND THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY, WE ARE OF THE CONSIDERED VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AU THORITY ON THE ISSUE IN DISPUTE RAISED BY THE REVENUE AS WELL AS BY THE ASS ESSEE. THEREFORE, WE ITA NO.401(ASR)/2011 CO NO.18(ASR)/2011 9 UPHOLD THE IMPUGNED ORDER BY DISMISSING THE APPEAL FILED BY THE REVENUE AND C.O. FILED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.401(ASR)/2011 AND C.O. NO.18(ASR)/2011 OF THE ASSESSEE ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH JULY, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16TH JULY, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. ARIHANT BUILDERS, JALANDHAR. 2. THE ACIT, CIR.IV, JLR. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.