M/s. Kasana Brothers, Srinagar V. The Deputy Commissioner of Income tax, Srinagar

CO 31/ASR/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6108 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 18-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Section: 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. I.T.A. NO.337(ASR)/2010. (ASSESSMENT YEAR: 2006-07) THE DY. C.I.T., M/S.KASANA BROTHERS, CIRCLE-3, SRINAGAR. NAGINA LAKE, SRINAGAR. (APPELLANT) VS. (RESPONDENT) AND C.O. NO.31(ASR)/2010. (ARISING OUT OF ITA NO.337(ASR)/2010) (ASSESSMENT YEAR: 2006-07) M/S.KASANA BROTHERS, THE DY. C.I.T., NAGINA LAKE, CIRCLE 3, SRINAGAR. SRINAGAR. (APPLICANT) VS. (RESPONDENT) ASSESSEE BY: NONE DEPARTMENT BY: SHRI AMRIK CHAND, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), BTD D ATE 31-5-2010, RELATING TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS:- 2 1. ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) W AS NOT JUSTIFIED IN DELETING THE ADDITION REGARDING APPLICATION @ 10 % ON GROSS RECEIPTS WAS APPLIED BY THE AO WHILE RELYING ON THE DECISION OF HONBLE ITAT IN THE CASE OF M/S.SHIVAM CONSTRUCTION COMPANY VS. ACIT IN ITA NOS.3873, 384/2004, 622/200 5, 385 & 386/2004 & 728/2005 OF HONBLE ITAT, CHANDIGARH B ENCH AND THE SAME IS UPHELD BY THE HONBLE PUNJAB AND HA RYANA HIGH COURT IS REASONABLE AS THE ASSESSEE HAS NOT PR ODUCED ANY EVIDENCE REGARDING MAINTENANCE OF PROPER BILLS AND VOUCHERS. 2. THE LD. CIT(A) IGNORED THE FACT THAT THE BEST JU DGMENT ASSESSMENT HAS BEEN MADE U/S.144 ONLY AFTER AFFORDI NG NUMBER OF OPPORTUNITIES TO THE ASSESSEE AND THESE ARE DULY RECORDED. 3. THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING REL IEF TO THE ASSESSEE ON THE BASIS OF REMAND REPORT OBTAINED FRO M THE AO AS PRESENT AO HAS NOT STATED IN HIS REPORT ANYTHING RE GARDING ACCEPTANCE OF RATE LOWER THAN ONE ADOPTED BY THE TH EN AO WHO PASSED ORDER U/S.144. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PARTNERSHIP FIRM. DURING THE YEAR, THE ASSESSEE FI RM IS A CONTRACTOR. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.26,98,634/-. IN THIS CASE, THE A.O. COMPLETED THE ASSESSMENT UND ER SECTION 144 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). THE A. O. OBSERVED THAT THE ASSESSEE FIRM IS A CONTRACTOR AND DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAS EXECUTED CONTRACTS TO THE TUNE OF RS.7 ,12,20,720/-. ON THIS CONTRACTOR RECEIPTS, THE ASSESSEE HAS SHOWN NET PRO FIT OF RS.26,98,634/- AFTER CLAIMING INTEREST AND REMUNERATION OF RS.5,86,053/- AND RS.4,08,000/- RESPECTIVELY TO THE PARTNERS. ACCORDING TO THE A.O ., THE ASSESSEE HAS DECLARED NET PROFIT @ 3.79%.THEA.O. FURTHER OBSERVE D THAT NUMBER OF OPPORTUNITIES WERE AFFORDED TO THE ASSESSEE AND THE ASSESSEE HAS COMPLETELY FAILED TO SUBSTANTIATE ITS CLAIM OF EXPENSES. AS S UCH, THE A.O. FRAMED THE 3 ASSESSMENT IN THIS CASE, EXPARTE, I.E. UNDER SECTIO N 144 OF THE ACT BY APPLYING NET PROFIT RATE OF 10% TO THE GROSS CONTRA CTUAL RECEIPTS. THEREFORE, THE NET CONTRACTUAL INCOME FOR THE YEAR FROM THE BU SINESS OF CONTRACT WAS DETERMINED AT RS.71,22,072/-, WHICH WAS 10% OF THE GROSS CONTRACTUAL RECEIPTS OF RS.7,12,20,720/-. 4. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT IT HAD FILED ITS RETURN OF INCOME ON 30-10-2006 SHOWIN G INCOME OF RS.26,98,634/- ON TURNOVER OF RS.7,12,20,720/- SHOW ING NET PROFIT OF 3.79%. THE ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED BY A FIRM OF CHARTERED ACCOUNTANTS UNDER SECTION 44AB OF THE ACT. IT WAS ALSO CLAIMED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE NET PROFIT RATE DETERMINED AT 10% OF THE GROSS CONTRACTUAL RECEIPTS INSTEAD OF 3.79%, AS CLA IMED BY THE ASSESSEE WAS NOT JUSTIFIED. IT WAS ALSO SUBMITTED BY THE ASSESSE E BEFORE THE CIT(A) THAT THE A.O. HAS FURTHER FAILED TO APPRECIATE THAT THE PERI OD OF NOVEMBER AND DECEMBER, 2008 WERE NEITHER COMFORTABLE CLIMATICALL Y NOR WERE STABLE POLITICALLY. THERE WERE STRIKES AND CLASHES ON AMAR NATH YATRA LAND ISSUE AND MOVEMENTS IN ACTIVITIES WERE DISRUPTED. THE ASSESS EE ALSO FURNISHED A CHART WHEREIN IT IS MENTIONED THAT ITS AVERAGE NET PROFIT AFTER ALLOWING INTEREST TO PARTNERS AND SALARY TO PARTNERS IN THE PAST YEARS A ND SUBSEQUENT YEAR HAS BEEN AS UNDER:- YEAR AVERAGE NET PROFIT 2002-03 1.59% 2003-04 2.42% 2004-05 2.59% 2005-06 3.79% 2006-07 3.58% 4 4.1 IN VIEW OF THE ABOVE, IT WAS SUBMITTED BY THE A SSESSEE BEFORE THE CIT(A) THAT THE NET PROFIT RATE OF 10% APPLIED BY T HE A.O. IS IRRATIONAL AND ILLOGICAL. 4.2 IN THIS CASE, THE CIT(A) HAS CALLED FOR A REMAN D REPORT FROM THE A.O., WHICH READS AS UNDER:- KINDLY REFER TO YOUR OFFICE LETTER NO.CIT(A)/09-10 /14 DATED 07-04-2010 IN CONNECTION WITH THE SUBJECT CITED ABO VE. AS DESIRED I HAVE CALLED FOR THE BOOKS OF ACCOUNT O F THE ASSESSEE WHICH WERE PRODUCED BEFORE ME BY SH. AMIR JAN CHART ERED ACCOUNTANT COUNSEL FOR THE ASSESSEE. ON MAKING THE TEST CHECK OF THE BOOKS OF ACCOUNT, IT HAS BEEN OBSERVED BY THE UNDER SIGNED THAT THE EXPENSES DEBITED UNDER THE VARIOUS HEADS E.G. RAW MATERIAL/TRANSPORTATION CHARGES/WAGES AMOUNTING TO RS.6,13,20,459/- REPRESENT VARIOUS EXPENSES ON ACCOUNT OF PURCHASE O F RAW MATERIAL, LABOUR/WAGES, COST OF TENDERS, TOLL TAX AND SALES T AX. HEAD WISE BIFURCATION OF EXPENSES DEBITED UNDER THI S HEAD IS AS UNDER:- S. NO. HEAD AMOUNT IN RS. 1. RAW MATERIAL TRANSPORTATION CHARGES/ OIL/LUBRICANTS ETC. 49746608.98 2. LABOUR/WAGES 10282781.33 3. SALES TAX 727368.00 4. COST OF TENDER 492100.00 5. TOLL TAX 71601.00 TOTAL 61320459.31 AN AMOUNT OF RS.4,97,46,608.98 DEBITED UNDER THE HE AD PURCHASE RAW MATERIAL TRANSPORTATION CHARGES/OIL/LUBRICANTS ETC. REPRESENTS MOST OF THE PAYMENTS OF PURCHASE OF CEMENTS, IRON, TIMBER ETC. SUPPORTING VOUCHERS WERE PRODUCED HOWEVER, IT WAS OBSERVED THAT SOME OF THE PURCHASES WERE NOT SUPPORTED BY VOUCHER S. FEW INSTANCES ARE AS UNDER:- 5 DATE PARTICULARS AMOUNT 8-4-2005 TO FAROOQ ENTERPRISES 20,000/- 26-4-2005 TO JEHLUM VALLEY AUTOMOBILES 1,99,750/- 25-5-2005 TO ROK WAS STORE COUSHER 22,840/- 15-7-2005 TO UTTAM FILLING STATION 37,890/- 12-8-2005 TO MEHRAJ UD DIN 20,000/- 6-9-2005 TO MAHAJAN 46,880/- 17-9-2005 TO GH. RASOOL DAR TIMBER 6,509/- AS REGARDS TO THE EXPENSES DEBITED UNDER THE HEAD LABOUR/WAGES TO THE TUNE OF RS.1,02,82,781/- IT IS SUBMITTED THA T MOST OF THE PAYMENTS MADE TO THE LABOURERS ARE ROUTE THROUGH FE W PERSONS E.G. SH. M.M. RATHER, SH. ASHWANI KUMAR AND SH. DARSHAN TO W HOM PAYMENTS IN CASH HAVE BEEN MADE ON VARIOUS DATES DU RING THE YEAR. COUNSEL OF THE ASSESSEE HAS INTIMATED THAT THESE PA YMENTS REPRESENT THE AMOUNT OF WAGES PAID TO THE LABOURERS THROUGH T HESE PERSONS WHO ARE INCHARGE OF RESPECTIVE SITES. IN ABSENCE OF SU PPORTING EVIDENCE SUCH AS MUSTER ROLLS, IT IS NOT POSSIBLE FOR ME TO COMMENT UPON THE EXTENT OF EXPENDITURE HAVING ACTUALLY INCURRED ON A CCOUNT OF WAGES BY THE ASSESSEE. HOWEVER, THE ASSESSEE HAS MAINTAINED PAYMENT VOUCHERS. THERE ARE OTHER EXPENSES DEBITED UNDER THE HEAD ST AFF BEVERAGES, PETROL EXPENSES, STAFF CONVEYANCE AND GE NERAL EXPENSES, LEGAL FEES. ASSESSEE COULD NOT PRODUCE 100% VOUCHER S IN SUPPORT OF THESE HEADS. AS FAR AS WRITTEN SUBMISSION MAD BY THE COUNSEL OF ASSESSEE, I WOULD LIKE TO COMMENT AS UNDER:- 1. IT IS FACT THAT THE ASSESSEE HAS REFLECTED THE NET PROFIT @ 3.5% FOR THE YEAR UNDER REFERENCE. 2. AUDIT REPORT IN THE SHAPE OF FORMS 3CB AND 3CD FROM WERE SUBMITTED ALONGWITH FINAL ACCOUNTS WITH THE RE TURN. AS PER RECORD SH. PANKAJ GANDOGRA AND COMPANY HAS AUDITED THE ACCOUNTS OF THE ASSESSEE FOR THE PERIOD UNDER CONSI DERATION ON 28-8-2006. 3. THE THEN AO HAD ISSUED NOTICE U/S.143(2) ON 1-6- 2007 6 WHICH WAS SERVED BY WAY OF SPEED POST ON 5-6-2007 V IDE SPEED POST NO.EE89640578 IN. THEREAFTER, VARIOUS N OTICES WERE ISSUED TO THE ASSESSEE WHICH ARE PART OF THE R ECORD AND WERE DULY SERVED BY WAY OF SPEED POST. THESE FACTS ARE AVAILABLE IN BODY OF ASSESSMENT ORDER/AND ARE ON RE CORD. 4. IT IS A MATTER OF FACT THAT THE THEN AO AFTER AF FORDING NUMBER OF OPPORTUNITIES AS CAN BE SEEN FROM THE BOD Y OF THE ASSESSMENT ORDER PASSED U/S.144 OF IT ACT, 1961 IN WHICH 10% NET PROFIT RATE HAS BEEN APPLIED IN VIEW OF THE JUD GMENT PASSED BY THE HONBLE ITAT, CHANDIGARH BENCH, CHANDIGARH W HICH DULY ENDORSED BY THE HONBLE HIGH COURT OF PUNJAB A ND HARYANA HIGH COURT IN THE CASE OF M/S.SHIVAM CONSTR UCTION CO. VS. ACIT IN ITA NO.383 AND 384/2004, 622/2005, 385 AND 386/2004 AND 728/2005. 5. THE PLEA OF THE ASSESSEE THAT MR. JALEEL KASANA PARTNER OF THE ASSESSEE WAS NOT IN THE TOWN DURING THIS PERIOD CAN BE ACCEPTED ON TWO GROUNDS. FIRSTLY, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE IN ORDER TO JUSTIFY HIS ABSENCE FOR TH ESE MONTHS FROM THE STATION, SECONDLY IT IS A CASE OF FIRM AND EACH AND EVERY PARTNER IS UNDER LEGAL OBLIGATION TO DEAL WIT H THE AFFAIRS OF THE FIRM IN WHAT SO EVER MANNER INCLUDING THE TAXAT ION MATTERS. HENCE, THE ASSESSE FIRM CANNOT BE ABSOLVED ON THESE PLEA THAT ONE OF OUR PARTNERS WAS NOT AVAILABLE AT THAT TIME. 6. IN PARA 6 OF THE SUBMISSION OF THE ASSESSEE HAS SUBMITTED THAT PERIOD OF 11/2008 AND 12/2008 WAS NOT STABLE P OLITICALLY AS THERE WAS STRIKE AND CLASHES ON ACCOUNT OF SHREE AM ARNATH YATRA IN THE CITY. IN THIS CONTEST I WOULD LIKE TO DISCUSS THAT SHREE AMAR NATH YATRA LAND DISPUTE WAS THERE SOME W HERE IN THE MONTH OF JUNE, 2008 AND LASTED FOR ABOUT TWO MO NTHS ION THE JAMMU PROVINCE OF THE STATE. IF FALLS OUT IN TH E VALLEY TO SOME EXTENT IN THE SUCCEEDING MONTHS CANNOT BE RULE D OUT. 7. IN THE NEXT PARA OF THE SUBMISSION OF THE ASSESS EE IT HAS BEEN CLAIMED THAT THERE WAS DISPUTE AMONGST THE PA RTNERS AND RECORD OF THE ASSESSEE WAS WITH HELD BY ONE OF THE PARTNER. IN THIS CONTEXT IT IS SUBMITTED THAT THERE IS ONE LETT ER ADDRESSED BY THE ASSESSEE SUBMITTED IN THIS OFFICE ON 26-12-2008 THAT IS THE 7 DATE ON WHICH THE ASSESSMENT ORDER WAS PASSED BEARS SUCH MENTION. 8. AS REGARDS THE NET PROFIT IT IS A MATTER OF RECO RD SINCE THE OLD RECORD IS NOT READILY AVAILABLE AND IT IS NOT P OSSIBLE FOR ME AT THIS MOMENT TO OFFER COMMENTS ON THE AVERAGE NET PROFIT RATE REFLECTED BY THE ASSESSEE OVER THE LAST FEW YEARS. 9. AS PER PARA 9 OF THE SUBMISSION MADE BY THE ASSE SSEE, THE SAME CANNOT BE ACCEPTED AS NUMBER OF OPPORTUNITIES HAVE BEEN AFFORDED TO THE ASSESSEE BY THE AO WHICH ARE DULY M ENTIONED BY THE THEN AO AT THE TIME OF PASSING OF THE ASSESS MENT ORDER. 10. PARA 10 OF THE SUBMISSION RELATES TO THE OBJECT ION OF THE ASSESSEE REGARDING TREATMENT OF THE FIRM AS ASSOCI ATION OF PERSON. IN THIS CONTEXT IT IS SUBMITTED THAT THE A SSESSMENT HAS BEEN MADE U/S.144 OF THE IT ACT, 1961, READ WITH SE CTION 184(5) OF THE IT ACT, 1961. THUS AS PER LAW THE AO WAS JU STIFIED IN TREATING THE STATUS OF THE ASSESSEE AS THAT OF ASSO CIATION OF PERSON AND THEREBY DENYING THE BENEFITS OF INTEREST PAYABLE TO THE PARTNERS U/S.184(5) OF THE IT ACT. THE REPORT IS SUBMITTED FOR NECESSARY ACTION AT Y OUR KIND END. 4.2 THE ABOVE REPORT OF THE A.O. WAS CONFRONTED TO THE ASSESSEE AND AFTER RECEIVING THE COMMENTS OF THE ASSESSEE, THE CIT(A) OBSERVED AS UNDER:- THE AO IN HIS REMAND REPORT HAS OBSERVED THAT THE BOOKS OF ACCOUNT AND VOUCHERS WERE PRODUCED BEFORE HIM FOR HIS VERIF ICATION AND THAT THE SAME HAS BEEN TEST CHECKED BY HIM. THE APPELLAN TS BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO. THEREFOR E, IN VIEW OF THE ABOVE FACTS, THE APPLICATION OF 10% PROFIT RATE WOU LD NOT BE PROPER IN THE CASE OF THE APPELLANT. 4.3 THE CIT(A) ALSO OBSERVED THAT THE A.O. HAS POIN TED OUT THAT CERTAIN DEFICIENCIES IN THE ACCOUNT OF THE ASSESSEE, WHICH HAS BEEN MENTIONED AT PAGE 8 OF THE IMPUGNED ORDER. 8 4.4 THE CIT(A) SUSTAINED THE DISALLOWANCE OF RS.3,5 3,869/- ON ACCOUNT OF PURCHASES. HE HAS ALSO SUSTAINED THE DISALLOWANCE O F RS.5,14,140/- BEING 5% OF THE TOTAL EXPENDITURE OF RS.1,02,82,781/- CLAIME D UNDER THE HEAD LABOUR/WAGES EXPENSES. THE CIT(A) ALSO DISALLOWE D 20% OF THE EXPENDITURE BOOKED UNDER THE HEAD STAFF BEVERAGE, PETROL EXPENSES, STAFF CONVEYANCE, GENERAL EXPENSES AND LEGAL FEES. THE CIT(A) DECIDED THE ISSUE OBSERVING AS UNDER:- ON DUE CONSIDERATION I HOLD:- 1. THAT THE PURCHASES OF RS.3,53,869/-, WHICH REMAI NED UNSUPPORTED BY VOUCHERS, COULD NOT VERIFIED, HENCE, THE SAME CANNOT BE CONSIDERED AS ALLOWABLE EXPENSES. THEREFORE, I CONCUR WITH THE OBSERVATIONS OF THE AO , AS CONTAINED IN HIS REMAND REPORT, AND SUSTAIN THE DISALLOWANCE OF RS.3,53,869/- ON THIS ACCOUNT. 2. THAT AS FOR AS LABOUR/WAGES AMOUNTING TO RS.1,02,82,781/- DEBITED TO THE PROFIT AND LOSS ACC OUNT ARE CONCERNED, THE AO HAS NOT DOUBTED THE PAYMENTS AS PAYMENT VOUCHERS WERE PRODUCED BEFORE HIM DURING TH E COURSE OF REMAND PROCEEDINGS. HOWEVER, THE PAYMENT VOUCHERS WERE NOT SUPPORTED BY MUSTER ROLL. IN THI S REGARD THE A/R OF THE APPELLANT HAS ARGUED BEFORE M E ABOUT THE PROCEDURE OF PAYMENT TO THE LABOUR AND AL SO PRODUCED COPY OF MUSTER ROLL IN SUPPORT OF HIS CLAI M. AFTER CONSIDERING THE FACTS IT IS OBSERVED THAT WIT HOUT LABOUR IT IS NOT POSSIBLE TO COMPLETE THE CONTRACT WORK BY THE APPELLANT. FURTHER, THE LABOUR CHARGES DEBITED TO THE PROFIT AND LOSS ACCOUNT ARE LESS THAN 20% OF TOTAL DIRECT COST OF CONTRACTS. THEREFORE, THE CONTENTION OF TH E APPELLANT APPEARS TO BE GENUINE TO SOME EXTENT. HOWEVER, IT IS PERTINENT TO MENTION HERE THAT THERE IS A POSSIBILITY THAT EXPENDITURE MIGHT HAVE BEEN INFLAT ED, HENCE I DEEM IT FIT TO HOLD THAT 5% OF THE TOTAL EXPENDITURE BOOKED UNDER THIS HEAD DESERVES TO BE DISALLOWED. HENCE THE DISALLOWANCE OF RS.5,14,140/- (5% OF RS.1,02,82,781/-) IS SUSTAINED ON THIS ACCOUNT. 9 3. THAT IN RESPECT OF THE EXPENDITURE BOOKED UNDER THE HEAD STAFF BEVERAGE, PETROL EXPENSES, STAFF CONVEYANCE, GENERAL EXPENSES AND LEGAL FEES, THE APPELLANT COULD NOT PR ODUCE 100% VOUCHERS IN SUPPORT OF THESE HEADS. 5. THE APPEAL WAS FIXED FOR HEARING ON 13-6-2011. H OWEVER, NOBODY APPEARED ON BEHALF OF THE ASSESSEE. THE NOTICE OF H EARING WAS SENT TO THE ASSESSEE BY RPAD, WHICH HAS BEEN RECEIVED BACK WITH THE POSTAL REMARKS INCOMPLETE ADDRESS. THE ASSESSEE HAS NOT FURNISH ED NEW ADDRESS. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT INTERESTED TO PURSUE THE MATTER AND, HENCE, WE PROCEED TO DISPOSE OF THE APP EAL AND THE CROSS OBJECTION AFTER HEARING THE LEARNED D.R. 6. WE HAVE HEARD THE LEARNED D.R. AT LENGTH AND HAV E ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS REGARDS FRAMING O F ASSESSMENT UNDER SECTION 144 OF THE ACT, THE CIT(A) OBSERVED THAT A NUMBER OF OPPORTUNITIES HAVE BEEN PROVIDED TO THE ASSESSEE BUT THE ASSESSEE REMAINED NON- COOPERATIVE DURING THE COURSE OF ASSESSMENT PROCEED INGS. HE, THEREFORE, STATED THAT THE A.O. WAS JUSTIFIED IN PASSING THE O RDER UNDER SECTION 144 OF THE ACT. 7. AS REGARDS THE MERITS OF THE CASE, WE ARE OF THE OPINION THAT THE CIT(A) HAS PASSED A WELL REASONED ORDER AFTER CONSI DERING THE REMAND REPORT SUBMITTED BY THE A.O. AND ALSO THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. IT IS APPARENT FROM THE RECORD THAT BOOK S OF ACCOUNT WERE PRODUCE BEFORE THE AO DURING THE COURSE OF REMAND PROCEEDIN GS. THE ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED BY THE FIRM OF CHAR TERED ACCOUNTANTS UNDER SECTION 44AB OF THE ACT. IT IS ALSO SEEN THAT FOR T HE ASSESSMENT YEARS 2002- 03, 2003-04 AND 2004-05, THE ASSESSEE HAS SHOWN THE NET PROFIT RATE OF 1.59%, 2.42% AND 2.59% RESPECTIVELY, WHICH HAVE BE EN ACCEPTED BY THE REVENUE. IN OUR VIEW, THE CIT(A) HAS CORRECTLY OBSERVED THAT NET CONTRACT RATE OF 10 10% APPLIED BY THE A.O. IS IRRATIONAL AND ILLOGICAL . IT IS ALSO TRUE THAT THE RATIO OF NET PROFIT RATE NOT ONLY DIFFERS FROM PLAC E TO PLACE, IT ALSO DIFFERS FROM PERSON TO PERSON AND FROM NATURE OF ONE CIVIL CONTRACT TO ANOTHER. THEREFORE, THE A.O. WAS NOT JUSTIFIED IN APPLYING T HE NET PROFIT RATE OF 10%.IT IS ALSO SEEN THAT THE A.O. HAS NOT REJECTED THE BOO KS OF ACCOUNT UNDER SECTION 145 OF THE ACT. IN THE INSTANT CASE, BOOKS OF ACCO UNT ARE MAINTAINED AND VERIFIABLE AND VERIFIED AS PER THE AUDITORS REPORT. IN OUR VIEW, APPLICATION OF NET RATE IS UNWARRANTED. WE ALSO OBSERVE THAT MERE LY PROCEEDINGS UNDER SECTION 144 OF THE ACT IN A GIVEN CASE, WHERE ACCOU NTS ARE AUDITED AND THE ASSESSEE ALSO HAVE A COMPLETE AUDIT REPORT AS PER T HE PROVISIONS OF I.T. ACT. THE A.O. HAS NO RIGHT TO TAKE STAND WHICH IS AGAINS T THE LAID NORMS AND PRINCIPLES BASED ON LAW. THE A.O. SHOULD HAVE CONS IDERED THE PAST RECORDS OF ASSESSEES CASE BEFORE APPLYING THE RATE OF 10%. NO COMPARABLE CASE HAS BEEN CITED BY THE A.O. CONSIDERING THE ENTIRE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE CIT(A ) HAS CORRECTLY OBSERVED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE PRES ENT CASE, THE APPLICATION OF 10% NET PROFIT RATE WAS NOT PROPER. HOWEVER, THE C IT(A) HAS CORRECTLY SUSTAINED CERTAIN ADDITIONS OBSERVING THAT PURCHASE S WERE OF RS.3,53,869/- REMAINED UNVERIFIED BY THE VOUCHERS. SIMILARLY, T HE CIT(A) HAS CORRECTLY DISALLOWED 5% OF RS.1,02,83,781/- UNDER THE HEAD L ABOUR/WAGES. IN OUR VIEW, THE CIT(A) HAS ALSO CORRECTLY DISALLOWED 20% OF STAFF BEVERAGE, PETROL EXPENSES, STAFF CONVEYANCE, GENERAL EXPENSES AND LE GAL FEES. 7.1 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT SEE ANY MERITS IN THE APPEAL FIELD BY THE REVENUE AND, THEREFORE, THE SAM E IS DISMISSED. 8. C.O. NO.31(ASR)/2010 (ARISING OUT OF ITA NO.337( ASR)/2010):- 11 IN C.O. NO.31(ASR)/2010, THE ASSESSEE HAS NOT CLAI MED ANY EFFECTIVE RELIEF. THE C.O. FILED BY THE ASSESSEE MERELY SUPP ORTS THE ORDER OF THE CIT(A) AND, THEREFORE, WE DISMISS THE SAME. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 13 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.KASANA BROTHERS, NAGIN LAKE, SGR. (2) THE DCIT, CIRCLE 3, SGR. (3) THE CIT, JAMMU. (4) THE CIT(A), JAMMU. (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.