Sh. Jagdish Prasad Bansal, Shivpuri V. A.C.I.T., Cicle-3(1), Gwalior

CO 54/AGR/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7913 (ITAT-AGRA)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KM ANURADHA
• Assessee Lawyers: K C AGARWAL
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 300/AGRA/2012 ASSTT. YEAR : 2009-10 A.C.I.T., CIRCLE 3(1), VS. SHRI JAGDISH PD. BANS AL, GWALIOR. NEAR KHARA KUA, SHIVPURI (M.P.) (PAN: AAJFM 2570 N) C.O. NO. 54/AGRA/2012 (ITA NO. 300/AGRA/2012) ASSTT. YEAR : 2009-10 SHRI JAGDISH PD. BANSAL, VS. A.C.I.T., CIRCLE 3( 1), NEAR KHARA KUA, GWALIOR. SHIVPURI (M.P.) (APPELLANT) (RESPONDENT) REVENUE BY : KM. ANURADHA, JR. D.R. ASSESSEE BY : SHRI K.C. AGARWAL, ADVOCATE DATE OF HEARING : 21.11.2012 DATE OF PRONOUNCEMENT OF ORDER : 30.11.2012 ORDER PER BHAVNESH SAINI, J.M.: THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR D ATED 16.04.2012 FOR THE ASSESSMENT YEAR 2009-10. ITA NO. 300 AND CO 54/AGRA/2012 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS ENGAGED IN BUSINESS OF CIVIL CONSTRUCTION WORK. THE ASSESSEE HAS DECLAR ED RECEIPTS OF RS.7,70,07,965/-, ON WHICH THE NET PROFIT OF RS.39, 88,857/- (BEFORE REMUNERATION AND INTEREST TO THE PARTNERS) HAS BEEN EARNED. THE AO HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY AP PLYING THE PROVISIONS OF SECTION 145(3) AND ASSESSED THE INCOME OF THE ASSES SEE BY APPLYING G.P. RATE OF 12.5% OF THE GROSS RECEIPTS AND COMPUTED THE INC OME OF THE ASSESSEE. THE AO IN NUTSHELL HAS GIVEN REASONS FOR REJECTION OF A CCOUNTS BECAUSE NO BILLS OR VOUCHERS WERE PRODUCED IN SUPPORT OF THE EXPENDITUR E CLAIMED IN CONTRACT AND PROFIT AND LOSS ACCOUNT. ON VERIFICATION OF THE LED GER, IT WAS NOTICED THAT MAJORITY OF THE EXPENDITURES HAVE BEEN PAID IN CASH AND VOUCHERS WERE NOT PRODUCED FOR VERIFICATION. IN THE ABSENCE OF SUPPOR TING EVIDENCE, THE GENUINENESS OF THE EXPENDITURE COULD NOT BE ESTABLI SHED BEYOND DOUBT AND IT WAS OBSERVED THAT EXPENDITURE HAVE BEEN INFLATED. T HE AO ALSO NOTED THAT AS PER AUDIT REPORT, THE VOUCHERS ARE THE PRIMARY DOCU MENTS, WHICH ARE SUPPOSED TO BE MAINTAINED ON DAY-TO-DAY BASIS, BUT THESE EVI DENCES ARE NOT AVAILABLE WITH THE ASSESSEE. THEREFORE, THE BOOK RESULTS WERE REJECTED BECAUSE REASONABLE PROFIT COULD NOT BE COMPUTED AND ACCORDI NGLY, INCOME WAS ESTIMATED BY APPLYING PROFIT RATE OF 12.5% AGAINST THE RECEIPTS AND INCOME WAS COMPUTED AT RS.96,25,996/- AND AFTER GIVING DED UCTION OF INTEREST AND ITA NO. 300 AND CO 54/AGRA/2012 3 REMUNERATION PAID TO THE PARTNERS AND DEPRECIATION, TOTAL INCOME WAS COMPUTED AT RS.70,84,820/- AGAINST THE RETURNED INC OME OF RS.21,11,490/-. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) A ND THE ASSESSEES SUBMISSIONS HAVE BEEN INCORPORATED IN THE APPELLATE ORDER, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT THE BOOKS OF ACCOUN T ARE AUDITED AND COMPLETE DETAILS HAVE BEEN NOTED. CERTAIN BILLS AND VOUCHERS WERE NOT AVAILABLE WITH THE ASSESSEE BECAUSE THE WORK WAS CARRIED OUT AT INTERI OR PLACES AND THE MATERIAL WAS ALSO OBTAINED FROM LOCAL PEOPLE. THEREFORE, THE RE WAS NO REASON TO REJECT THE BOOKS OF ACCOUNT AND THE AO APPLIED VERY HIGH A ND EXORBITANT PROFIT RATE OF 12.5% WITHOUT CONSIDERING THE ASSESSEES OWN HIS TORY AND THE COMPARABLE CASE. IT WAS ALSO SUBMITTED THAT THE AO HAS NOT CON SIDERED THE PAYMENTS MADE TO SUB-CONTRACTORS AND DEDUCTION OF TDS AND PAYMENT S FOR COMMERCIAL-TAX AND LABOUR WELFARE CESS WERE DEDUCTED BY THE ASSESS EE. THE ASSESSEE SUBMITTED THAT IN EARLIER YEARS, I.E., 2006-07, 200 7-08 AND 2008-09, THE ASSESSEE HAS DECLARED GP RATE OF 5.13%, 5.39% AND 5 .01% BEFORE REMUNERATION AND INTEREST AND IN ASSESSMENT YEAR UN DER APPEAL, IT WAS SHOWN AT 5.18%. IN THE COMPARABLE CASES ALSO MORE OR LESS SIMILAR PROFIT RATE HAS BEEN SHOWN AND ACCEPTED BY THE DEPARTMENT. IN THE C ASE OF RAKESH CHAUHAN, THERE IS A PROFIT RATE OF 5.79% IN THE ASSESSMENT Y EAR 2008-09. IN THE CASE OF M/S. GULAB CHAND BISHAMBHAR DAYAL, THERE HAS BEEN P ROFIT RATE OF 5.12% AND ITA NO. 300 AND CO 54/AGRA/2012 4 5.13% IN THE ASSESSMENT YEARS 2008-09 AND 2009-10. IN THE CASE OF TULSI NARAYAN GARG, THE PROFIT RATE IN THE ASSESSMENT YEA R 2007-08, 2008-09 AND 2009-10 HAS BEEN AT 3.50%, 5.97% AND 3.42% AND IN T HE CASE OF M/S. LAKHPAT SINGH CONTRACTOR, THE PROFIT RATE IN ASSESSMENT YEA R 2007-08 AND 2008-09 HAS BEEN 5.72% AND 6%. IT WAS, THEREFORE, SUBMITTED THA T EVEN IN THE COMPARABLE CASES, THE PROFIT RATE IS MORE OR LESS SIMILAR TO T HE CASE OF THE ASSESSEE. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE FOUND THAT THE BOOKS HAVE BEEN REJECTED ON THE REASONS BECAUSE THE ASSESSEE D ID NOT PRODUCE BILLS AND VOUCHERS AND AS SUCH, THE AO DOUBTED THE GENUINENES S AND REASONABLENESS OF THE EXPENDITURE CLAIMED IN THE ABSENCE OF SUPPORTIN G BILLS AND VOUCHERS. THE LD. CIT(A), HOWEVER, NOTED THAT NO SPECIFIC DEFECTS HAVE BEEN MENTIONED IN THE AUDIT REPORT OR VARIOUS STATEMENTS OF ACCOUNTS PRODUCED. THEREFORE, IN THE ABSENCE OF ANY SPECIFIC DEFECTS, THE AO WAS NOT JUS TIFIED IN APPLYING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT. THE LD. CIT(A) ALSO CONSIDERED THE OTHER DECISIONS OF THE TRIBUNAL WHERE THE PROFIT HA S BEEN SHOWN AT ABOUT 5 TO 6%. THE LD. CIT(A), CONSIDERING THE HISTORY OF THE ASSESSEE AND THE COMPARABLE CASES WAS OF THE VIEW THAT SINCE THE ASS ESSEE HAS NOT MAINTAINED AND PRODUCED BILLS AND VOUCHERS IN RESPECT OF VARIO US EXPENSES, WHICH IS ALSO NOT DISPUTED BEFORE HIM, THEREFORE, IT WOULD BE FAI R AND REASONABLE TO APPLY THE NET PROFIT AT THE RATE OF 6% IN PLACE OF 5.18% DECL ARED BY THE ASSESSEE AGAINST ITA NO. 300 AND CO 54/AGRA/2012 5 THE RECEIPTS AND COMPUTED THE INCOME OF THE ASSESSE E AT RS.46,20,478/- (BEFORE REMUNERATION AND INTEREST) AND ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. 3. THE REVENUE IS IN APPEAL CHALLENGING THE ORDER O F THE LD. CIT(A) IN HOLDING THE REJECTION OF ACCOUNTS U/S. 145(3) OF TH E IT ACT AS INVALID AND ALSO IN ADOPTING THE PROFIT RATE OF 6% IN PLACE OF 12.5% ADOPTED BY THE AO. THE ASSESSEE IN THE CROSS OBJECTION HAS CHALLENGED THE APPLICATION OF NET PROFIT RATE OF 6% IN PLACE OF 5.18% DECLARED BY THE ASSESSEE AN D THE ASSESSEE SOUGHT DELETION OF THE ENTIRE ADDITION. 4. THE LD. DR RELIED UPON THE ORDERS OF THE AO AND SUBMITTED THAT IN THE ABSENCE OF SUPPORTING VOUCHERS AND DOCUMENTS, REJEC TION OF THE BOOKS OF ACCOUNT WAS JUSTIFIED AND FURTHER REDUCTION OF THE PROFIT RATE IS UNJUSTIFIED. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE HAS NOT MAINTAINED AND PRODUCED THE COMPLETE BILLS AND VOUCHERS IN SUPPORT OF VARIOUS EXPENSES. THEREFORE, THE REJECTION OF ACCOU NTS IS NOT DISPUTED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER , SUBMITTED THAT THE PROFIT RATE ADOPTED BY THE LD. CIT(A) IS EXCESSIVE AND HIG HER AS COMPARED TO THE ITA NO. 300 AND CO 54/AGRA/2012 6 COMPARABLE CASES AND PAST HISTORY OF THE ASSESSEE. THEREFORE, THE PROFIT RATE MAY BE REDUCED FURTHER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT MAINTAI NED AND PRODUCED COMPLETE BILLS AND VOUCHERS IN SUPPORT OF VARIOUS EXPENDITUR E CLAIMED IN THE BOOKS OF ACCOUNT, WHICH WAS ALSO NOT DISPUTED BEFORE THE AUT HORITIES BELOW. EVEN DURING THE COURSE OF ARGUMENTS, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT DISPUTE REJECTION OF BOOKS OF ACCOUNT. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE AO IS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT. SINCE THE ASSESSEE DID NOT PRODUCE COMPLETE BI LLS AND VOUCHERS IN SUPPORT OF THE EXPENSES, THEREFORE, THE REJECTION OF BOOKS OF ACCOUNT WAS JUSTIFIED. THE ORDER OF THE LD. CIT(A) TO THAT EXTENT IS, THEREFOR E, SET ASIDE AND THE ORDER OF THE AO IS RESTORED. GROUND NO. 1 OF APPEAL OF THE R EVENUE IS, ACCORDINGLY ALLOWED. 6. AS REGARDS THE APPLICATION OF PROFIT RATE OF 6% OR MORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF TH E LD. CIT(A) IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE BY APPLYING THE PRO FIT RATE OF 6% IN PLACE OF ITA NO. 300 AND CO 54/AGRA/2012 7 5.18% DECLARED BY THE ASSESSEE. HISTORY OF THE ASSE SSEE AND THE COMPARABLE CASES ARE THE BASIS TO ESTIMATE THE PROFIT OF THE A SSESSEE WHEN THE BOOKS OF ACCOUNT ARE REJECTED. THE ASSESSEE IN THE EARLIER Y EARS HAS DECLARED PROFIT RATE OF 5.13%, 5.39% AND 5.01%. TWO OF THE PROFIT RATES AS ABOVE ARE BELOW THE PROFIT RATE DECLARED BY THE ASSESSEE IN ASSESSMENT YEAR UNDER APPEAL AND HIGHER OF THE PROFIT RATE DECLARED IN EARLIER ASSESSMENT Y EAR 2007-08 IS 5.39%. IN THE COMPARABLE CASES, CITED BEFORE THE LD. CIT(A), IN W HICH INCOME OF VARIOUS DEALERS AT PROFIT RATE UPTO 6% HAVE BEEN ACCEPTED B Y THE DEPARTMENT WHICH RANGES FROM 5.72% TO 6%. THEREFORE, EVEN IN THE COM PARABLE CASES, PROFIT RATE OF 6% HAS BEEN CITED BY THE ASSESSEE BEFORE THE LD. CIT(A). CONSIDERING THE FACTS THAT THE ASSESSEE DID NOT PRODUCE COMPLETE BI LLS AND VOUCHERS OF THE EXPENSES CLAIMED, IT WAS REASONABLE AND APPROPRIATE FOR THE LD. CIT(A) TO HOLD THAT PROFIT RATE OF 6% IS FAIR AND REASONABLE FOR T HE PURPOSE OF COMPUTING BUSINESS INCOME OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN SO HOLDING. THE AO H AS APPLIED EXORBITANT AND UNREASONABLE PROFIT RATE OF 12.5% WITHOUT CONSIDERI NG THE HISTORY OF THE ASSESSEE AND SIMILARLY PROFIT RATE OF 6% APPLIED BY THE LD. CIT(A) AGAINST 5.18% SHOWN BY THE ASSESSEE COULD NOT BE SAID TO BE UNREASONABLE AND EXORBITANT. CONSIDERING THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN COMPUTING THE BUSINE SS INCOME OF ASSESSEE BY ITA NO. 300 AND CO 54/AGRA/2012 8 APPLYING THE PROFIT RTE OF 6%. IN THE RESULT, GROUN D NO. 2 OF THE DEPARTMENTAL APPEAL AND BOTH THE GROUNDS OF CROSS-OBJECTION OF T HE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY