M/s. Bahufort Constructions P.Ltd, Jammu V. The Dy. Commissioner of Income-tax, Jammu

CO 21/ASR/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7549 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LAXMAN SINGH
• Assessee Lawyers: RAJKUMAR GUPTA CAS; SSH RATISH GUPTA
• Keywords: Depreciation; Opportunity of being heard; Additional evidence
• Section: 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.430(ASR)/2011 ASSESSMENT YEAR:2007-08 PAN :AABCB9275A THE DY.COMMR. OF INCOME-TAX, VS. M/S. BAHUFORT CON STN.PVT. LTD. CIRCLE-2, JAMMU. JAMMU. (APPELLANT) (RESPONDENT) C.O. NO.21(ASR)/2011 (ARISING OUT OF I.T.A. NO.430(ASR)/2011) ASSESSMENT YEAR:2007-08 M/S. BAHUFORT CONSTN. PVT. LTD. VS. DY. COMMR. OF I NCOME-TAX, JAMMU. CIR.2, JAMMU. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. LAXMAN SINGH, CIT(DR) ASSESSEE BY: S/SH. RATISH GUPTA AND RAJKUMAR GUPTA, CAS DATE OF HEARING:22/08/2012 DATE OF PRONOUNCEMENT:03/09/2012 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU, DATED 22.08.2012 RELATING TO ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS ALSO FILED C.O. AGAINST THE APPEAL OF THE REVE NUE. ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) H AS ERRED IN REDUCING THE AMOUNT OF CONTRACT RECEIPTS TO RS.3,56 ,06,534/- AS AGAINST RS.11,64,16,700/- WORKED OUT BY THE A.O. ON THE BASIS OF RECORDS FURNISHED BY THE ASSESSEE AND ADMITTING THE ADDITIONAL EVIDENCE SUPPLIED BY THE ASSESSEE WITHOU T CONFRONTING THE SAME TO THE A.O. 2. ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) HA S ERRED IN DIRECTING THE A.O. TO ADOPT NET PROFIT @ 8% OF THE GROSS RECEIPTS WITHOUT APPRECIATING THAT THE HONBLE HIGH COURT OF P & H UPHELD NET PROFIT @ 12% AND 10% RESPECTIVELY IN THE CASE OF SH. PRABHAT KUMAR & M/S. SHIVAM CONSTRUCTION CO. IN BOTH THESE CASES THE BOOKS OF ACCOUNT HAD BEEN REJECTED U/S 145(3) OF THE INCOME-TAX ACT, 1961 AND SIMILARLY IN THE CASE OF THE ASSESSEE PROVISIONS OF SECTION 145(3) HAVE BEEN INV OKED WHILE REJECTING BOOKS OF ACCOUNTS. MOREOVER, THE LD. CIT( A) HAS ERRED IN NOT APPRECIATING THE DECISION OF JURISDICT IONAL ITAT AMRITSAR IN THE CASE OF M/S. POOJA CONSTRUCTION CO. REPORTED AT 64 ITJ 733 RELIED UPON BY THE A.O. WHEREIN N.P. RAT E OF 10% WAS UPHELD WHERE BOOKS OF ACCOUNTS WERE REJECTED U/ S 145 OF THE I.T.ACT, 1961. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THE C.O. 1. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE T HAT AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT MER ELY ON THE BASIS THAT THE ASSESSEE COULD NOT PRODUCE SUPPORTIN G BILLS AND VOUCHERS IN SUPPORT OF GENERAL LEDGER PRODUCED FOR VERIFICATION ON 12/11/2009. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE TH AT AO CONVENIENTLY IGNORED THE MATERIAL ON RECORD FILED D URING ASSESSMENT PROCEEDINGS ALONG WITH REPLY DATED 12.11 .2009 IN WHICH IT HAS BEEN CLEARLY MENTIONED AT POINT NO.14 THAT AS PER TERMS OF CONTRACT MATERIAL WAS TO BE SUPPLIED BY JA I PARKASH ASSOCIATES. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE TH AT AO ALSO IGNORED THE FACT BROUGHT ON RECORD DURING ASSESSMEN T ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 3 PROCEEDINGS THAT THE LOW PROIT WAS DUE TO FORECLOSU RE OF CONTRACT BETWEEN IRCON AND JAIPARKASH ASSOCIATES LIMITED DUE TO ABNORMAL WORKING CONDITIONS. 4. THAT THE FACTS AND CIRCUMSTANCES OF THE ASSESSE E WERE TOTALLY DIFFERENT AND ABNORMAL FROM THAT OF THE ORD ER OF A.O. VS. POOJA CONSTRUCTION CO., REPORTED IN 64 ITJ 733 OF T HE JURISDICTIONAL ITAT AMRITSAR BENCH, AMRITSAR. 5. THAT THE AO HAS INFLATED THE CONTRACTUAL WORK D ONE FROM 10,53,99,209/- TO 11,64,16,631/- BY INCLUDING THE M ATERIAL SUPPLIED BY JAI PARKASH ASSOCIATES LTD. LYING AT TH E STORES. 6. THAT THE A.O. HAS LOST SIGHT OF THE CASE DECIDE D BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR, E.T.C. VS. CIT 115 ITR 524, WHERE I T HAS BEEN HELD THAT NO ELEMENT OF PROFIT IS INVOLVED IN CONTRACT RECEIPTS REPRESENTED BY COST OF STORES/MATERIALS SU PPLIED AND PROFIT IS TO BE DETERMINED ON CASH RECEIPTS EXCLUDI NG COST OF MATERIAL SUPPLIED TO THE ASSESSEE. 7. THAT THE ADDITION IS BAD IN LAW AND HAS TO BE D ELETED. 4. THE BRIEF FACTS IN THE APPEAL OF THE REVENUE AND C.O. OF THE ASSESSEE ARE THAT THE ASSESSEE IS A CONTRACTOR WHO WAS ENGAGED IN THE CONSTRUCTION BUSINESS RELATED TO RAILWAY AND POWER PROJECT UNDERTAKEN FOR M/S. JAIPARKASH ASSOCIATES LTD.. THE ASSESSEE DID N OT PRODUCE BOOKS OF ACCOUNT , BILLS AND VOUCHERS INSPITE OF MANY OPPORT UNITIES GIVEN. THE AO ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 145(3 ) OF THE ACT AND APPLIED THE N.P. RATE OF 10% ON THE TOTAL RECEIPT AND MATER IAL BY RELYING UPON THE DECISION OF THE ITAT, AMRITSAR BENCH, IN THE CASE O F POOJA CONSTRUCTION ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 4 COMPANY REPORTED IN 64 ITJ 733. THE AO FURTHER DID NOT ALLOW DEPRECIATION OR INTEREST DUE TO NON-VERIFIABILITY OF THE BOOKS O F ACCOUNT.. 5. BEFORE THE LD. CIT(A), THE ASSESSEE FILED WRITTE N SUBMISSION AND ARGUED THAT THERE WAS NO CHANGE IN THE METHOD OF AC COUNTING AS COMPARED TO THE PRECEDING YEARS 2004-05 TO 2006-07, WHERE TH E ASSESSEE HAD DECLARED A N.P. RATE OF 1.72% TO 1.94% AND 1.44% RESPECTIVEL Y AND THE AO HAD NOT CONSIDERED THE PAST HISTORY OF THE CASE. THE AO SH OULD NOT HAVE APPLIED THE NP RATE ON THE VALUE OF THE MATERIAL SUPPLIED BY M/ S. JAIPARKASH ASSOCIATES LTD. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND CONTRACT BETWEEN THE ASSESSEE AND M/S. JAIPARKASH A SSOCIATES CONFIRMED THE INVOCATION OF PROVISION OF SECTION 145(3) OF THE AC T. THE LD. CIT(A) CONSIDERED THE CONTRACT BETWEEN THE ASSESSEE AND M/ S. JAIPARKASH ASSOCIATES LTD. WAS OF THE VIEW THAT THE AO SHOULD HAVE RESTRI CTED THE APPLICATION OF PROFIT TO THE AMOUNT OF RS.3,56,06,534/- INSTEAD OF RS.11,64,16,700/-. THE LD. CIT(A) RELYING UPON THE DECISION OF HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BRIJ PAL SHARMA, 323 I TR 1 DIRECTED THE AO TO APPLY RATE OF 8% AND ACCORDINGLY ALLOWED THE RELIE F TO THE ASSESSEE. 6. THE LD.CIT( DR), SH. LAXMAN SINGH, ARGUED THAT THERE IS NO MATERIAL PLACED BEFORE THE AO TO COME AT A CONCLUSION THAT M /S. JAIPARKASH ASSOCIATES LTD. HAD SUPPLIED THE PARTICULAR AMOUNT OF THE MATERIAL TO THE ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 5 ASSESSEE. MR. LAXMAN SINGH POINTED OUT VARIOUS DOC UMENTS AND COPY OF ACCOUNT FILED IN THE PAPER BOOK. HE FURTHER ARGUED THAT EVEN NOW THE LD. COUNSEL WILL NOT BE ABLE TO SUBSTANTIATE HIS CLAIM OF SUPPLY OF MATERIAL AND THE QUANTITY OF MATERIAL SUPPLIED BY M/S. JAIPARKAS H ASSOCIATES LTD. THE LD. CIT(A) CANNOT ACCEPT THE CONTRACT BETWEEN THE ASSES SEE AND M/S. JAIPARKASH ASSOCIATES LTD; AND THE EXPLANATION GIVEN BY THE AS SESSEE, WHICH WAS NOT BEFORE THE AO WITHOUT ADMITTING THE SAME AS AN ADDI TIONAL EVIDENCE UNDER RULE 46A OF THE I.T. RULES, 1962. THE LD. CIT(A) HA S ACTED IN CONTRAVENTION OF RULE 46A AND THEREFORE, ON THIS GROUND ITSELF, T HE APPEAL OF THE REVENUE DESERVES TO BE ALLOWED. THE LD. CIT(DR), SH. LAXMAN SINGH TRIED TO DISTINGUISH THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF BRIJ BHUSHN LAL PARDUMAN KUMAR, ETC VS. CIT, 115 ITR 524 RELIED UPON BY THE LD. CIT(A) AND HAS READ AT PAGE 31 OF THE PAPER BOO K THAT THE MATERIAL ALWAYS REMAINS THE PROPERTY OF THE DEPARTMENT. THE LD. CIT(DR), SUPPORTED THE ORDER OF THE AO AND RELIANCE BY THE AO IN THE C ASE OF M/S. POOJA CONSTRUCTION COMPANY (SUPRA) WITH REGARD TO THE AP PLICABILITY OF NP RATE. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, SUPPORTED THE ORDER OF THE LD. CIT(A). HE FURTHER ARGUED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 6 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON PERUSAL OF THE RECORD AND THE ARGUMENTS MADE BY BOTH THE PARTIES WE ARE CONVINCED WITH THE ARGUMENTS MADE BY SH. LAXMAN SIN GH, CIT(DR) THAT THERE IS NO RECORD AVAILABLE WHICH HAS BEEN PRODUCE D BEFORE THE AO WITH WHICH THE AO COULD COME TO THE CONCLUSION THAT M/ S. JAIPARKASH ASSOCIATES LTD; HAD SUPPLIED THE MATERIAL FOR WHIC H CREDIT HAS BEEN GIVEN BY THE LD. CIT(A). NO STATEMENT OF EXACT MATERIAL SUP PLIED WITH DOCUMENTARY EVIDENCE, WAS FILED BEFORE THE AO. THE LD. COUNSEL COULD NOT SUBSTANTIATE HIS CLAIM. ON BEING ASKED BY THE BENCH FROM LD. AR TO SUBSTANTIATE HIS CLAIM BEFORE THE BENCH WITH REGARD TO THE MATERIAL SUPPLIED BY M/S. JAIPARKASH ASSOCIATES LTD. BUT IT WAS POINTED OUT T HAT THERE IS A MENTION IN THE LETTER SUBMITTED BEFORE THE AO THAT THERE IS MA TERIAL SUPPLIED BY M/S. JAIPARKASH ASSOCIATES LTD. TO THE ASSESSEE AND AS P ER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BRIJ BHUSHN LA L PARDUMAN KUMAR, ETC VS. CIT, 115 ITR 524 (SUPRA), THE COST OF MATE RIALS SUPPLIED HAS TO BE DEDUCTED OUT OF CONTRACT RECEIPTS. THE LD. CIT(A) H AD ACCEPTED THE EXPLANATION OF THE ASSESSEE THOUGH SUCH EXPLANATION COULD NOT BE SUBSTANTIATED BY THE LD. COUNSEL FOR THE ASSESSEE B EFORE US. NO OPPORTUNITY OF BEING HEARD HAD BEEN GIVEN TO THE AO WHILE ACCEPTIN G THE EXPLANATION OF THE ASSESSEE FOR EXCLUDING THE MATERIAL FROM THE CONTRA CT RECEIPTS DECLARED BY THE ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 7 ASSESSEE. AS REGARDS THE APPLICABILITY OF NP RATE O F 8%, WHETHER THE FACTS IN THE CASE OF BRIJ BHUSHN LAL PARDUMAN KUMAR, ETC VS. CIT (SC) (SUPRA) ARE IDENTICAL TO THE ASSESSEES CASE, HAS NOT BEEN BROU GHT ON RECORD BY THE LD. CIT(A). THE ASSESSEE HAS MENTIONED BEFORE THE AO TH AT THE MATERIALS HAD BEEN SUPPLIED BY M/S. JAIPARKASH ASSOCIATES LTD. . BUT IN THE ABSENCE OF ANY CORROBORATION BEFORE THE AO, THE AO HAD NO ALTERNA TIVE BUT TO APPLY THE NP RATE ON THE TOTAL CONTRACT RECEIPTS WHICH INCLUDED THE MATERIAL. SINCE THE ASSESSEE HAD MENTIONED BEFORE THE AO THAT THERE ARE SUPPLIES OF MATERIAL BY M/S. JAIPARKASH ASSOCIATES, BUT NO EXACT QUANTITY W ITH DOCUMENTARY EVIDENCE WAS PRODUCED BEFORE ANY OF THE AUTHORITIES BELOW. IT WILL BE IN THE INTEREST OF JUSTICE, IF THE MATTER IS RESTORED TO T HE FILE OF AO, WHO WILL VERIFY THE MATERIAL SUPPLIED BY M/S. JAIPARKASH ASSOCIATES LTD. TO THE ASSESSEE AND DECIDE THE ISSUE DENOVO BY AFFORDING REASONABLE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO IS ALSO DIRECTED TO RECONSI DER THE APPLICATION OF NP RATE KEEPING IN VIEW THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF BRIJ BHUSHN LAL PARDUMAN KUMAR, ETC VS. CIT, 115 ITR 524, RELIED UPON BY THE LD. CIT(A) AND DECIDE THE ISSUE ON THE APPLICABILITY OF NP RATE ALSO DENOVO BUT BY AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, ALL THE GROUNDS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.403(ASR)2011 C.O.NO.21(ASR)/2011 8 9. AS REGARDS THE C.O. OF THE ASSESSEE, THE SAME IS ALSO SENT TO THE FILE OF THE A.O. WHO WILL READJUDICATE THE MATTER BY AFFORD ING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN VIEW OF OUR DECISION HEREINABOVE. 10. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND C.O. OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD SEPTEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 RD SEPTEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. BAHUFORT CONST. PVT. LTD. 2. THE DCIT, CIR.2, JAMMU. 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.