Shri Sunil Kumar Agrawal, Raigarh V. Assistant Commissioner Of Income tax (Central-2), Raipur

CO 7/RPR/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3058 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 2 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 24-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts; Depreciation; Search and seizure; Additional evidence; Corroborative evidences
• Section: 145; 132; 153A; 143(2); 191; 145(3)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.79/RPR/2018 CO No.04/RPR/2018 Ǔनधा[रण वष[ / Assessment Year : 2013-14 The Deputy Commissioner of Income Tax (Central)-2, Raipur (C.G.) .......अपीलाथȸ / Appellant बनाम / V/s. Shri Sunil Kumar Agrawal, Near Girls College, Sewa Kunj Road, Raigad (C.G.) PAN : ACIPA0138M ......Ĥ×यथȸ / Respondent आयकर अपील सं. / ITA No.108/RPR/2018 CO No.07/RPR/2018 Ǔनधा[रण वष[ / Assessment Year : 2014-15 The Assistant Commissioner of Income Tax Central-2, Raipur (C.G.) .......अपीलाथȸ / Appellant बनाम / V/s. Shri Sunil Kumar Agrawal, Near Girls College, Sewa Kunj Road, Raigad (C.G.) PAN : ACIPA0138M ......Ĥ×यथȸ / Respondent 2 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 Assessee by : Shri R.B Doshi, CA Revenue by : Shri P.K Mishra, CIT-DR स ु नवाई कȧ तारȣख / Date of Hearing : 01.08.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 29.08.2022 आदेश / ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the department are directed against the orders passed by the CIT(Appeals)-I, Bilaspur and CIT(Appeals)-II, Raipur dated 05.03.2018 & 28.03.2018 which in turn arises from the orders passed by A.O u/s.143(3) of the Income Tax Act, 1961 (for short ‘the Act’) dated 28.12.2015 & 29.12.2016 for the assessment years 2013-14 & 2014-15. Also, the assessee is before us as a cross-objector. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. 3 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 2. We shall take up the appeal in ITA No.79/RPR/2018 for the assessment year 2013-14 as the lead matter. Before us the department has assailed the impugned order on the following grounds of appeal: “1. On the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in deleting addition of Rs.12,52,24,366/- made by the A.O on account of rejecting books of account u/s.145 and adopting the net profit at the rate of 10% of the gross contract receipt of Rs.125,22,43,661/- without appreciating the facts and evidences brought into light by the A.O during assessment proceedings. 2. Without prejudice to the above, the learned CIT(A) failed to appreciate the fact that the assessee himself had computed the net profit rate @10% of the gross contract receipt before the Hon’ble ITSE, Addl. Bench, Kolkata for the last seven A.Ys. 2006-07 to 2012-13 and the same has also been considered by the ITSE while passing the order u/s.245D(4) of the Income Tax Act, 1961. 3. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal.” On the other hand the assessee as a cross-objector (CO No.04/RPR/2018) has assailed the impugned order on the following grounds: “1. Ld. CIT(A) was not justified in rejecting the application filed by the assessee for admission of additional evidence u/r. 46A. Rejection of additional evidence is contrary to provisions of law and is not justified. 2. The cross objector reserves the right to add, amend or alter any of the ground/s of cross objection.” 4 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 3. Succinctly stated, the assessee who is a civil contractor and derives income from the business of construction of canals, dams and other infrastructural projects a/w income from various other streams of income booked under the other heads of income, had e-filed his return of income for assessment year 2013-14 on 27.03.2014, declaring an income of Rs. 5,44,73,270/-. Case of the assessee was thereafter selected for scrutiny assessment under Sec. 143(2) of the Act. 4. During the course of the assessment proceedings, it was observed by the AO that search and seizure proceedings were conducted on the assessee u/s 132(1) of the Act on 17.10.2011. On a perusal of the record it was gathered by the AO that apart from unaccounted cash several incriminating documents were also found and seized in the course of the aforesaid search proceedings from the premises of the assessee. Notice u/s 153A for the AYs 2006-07 to 2011-12 and Notice u/s 143(2) for AY 2012-13 were issued to the assessee. It was observed by the AO that the assessee a/w three other persons of his group had thereafter in order to settle their income-tax matters for the AYs 2006-07 to 2012-13 5 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 approached the Income-tax Settlement Commission, Additional Bench, Kolkata (“ITSC”, for short) by filing applications on 14.03.2014. It was noticed by the AO that the assessee had in his application filed before the ITSC submitted that due to peculiar nature of his business as proper bills of expenses could not be obtained by him, therefore, in order to set-off the same either some bills were arranged from outside parties or in some cases such unaccounted expenses were set-off by inflating the expenses. It was observed by the AO that the assessee on the basis of the aforesaid discrepancies had voluntarily rejected his books of accounts and offered to declare his income from the contract business @8% of the gross contract receipts of his business for all the years i.e AY 2006-07 to 2012-13. It was further noticed by the AO that the assessee had thereafter vide his letter dated 18.09.2015 that was filed before the ITSC, Kolkata enhanced his aforesaid offer to declare his income from the contract business @ 10% of the amount of his gross contract receipts for all the aforementioned years. It was observed by the AO that the ITSC, Kolkata on the basis of the aforesaid offer of the assessee, had thereafter vide its order passed u/s 245D(4) of the Act, 6 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 dated 28.09.2015 determined his total income for the aforesaid period i.e AYs 2006-07 to 2012-13 @10% of the gross contract receipts, which was accepted by the assessee and the corresponding amount of demand therein raised was paid by him. Also, it was observed by the A.O that ITSC in the case of the real brother of the assessee, viz. Shri Sanjay Kumar Agarwal who too was engaged in a business akin to that of the assessee had in his case for A.Y.2013-14 applied the net profit @10% of his gross receipts. 5. On the basis of the aforesaid facts, it was observed by the AO that as the assessee had voluntarily rejected his books of accounts for all the preceding years i.e AYs 2006-07 to 2012-13, therefore, the correctness of the opening and closing balances of different ledger accounts pertaining to the books of accounts of the assessee for the year under consideration could not be relied upon. Accordingly, the AO on the basis of his conviction that the opening and the closing balances of the various ledger accounts of the assessee for the year under consideration i.e AY 2013-14 could not be relied and acted upon, thus, rejected his books of 7 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 accounts. Observing, that as the assessee had on a suo-motto basis after rejecting his books of accounts for the preceding years i.e AYs 2006-07 to 2012-13 declared his income from contract business @10% of the amount of gross contract receipts, the AO called upon him to put forth an explanation that as to why the estimation of his income from contract business may not be similarly worked out i.e @10% of the amount of his gross contract receipts for the year under consideration. Fortifying his aforesaid conviction as regards estimation of the assessee’s income from contract business @10% of the amount of gross contract receipts, the AO had drawn support from certain observations that were recorded by the ITSC, Kolkata in its order passed u/s 245D(4), dated 28.09.2015, viz. (i). that the assessee had suo-motto rejected his books of accounts for AYs 2006-07 to 2012-13 and had offered to declare his income from contract business for all the said years @10% of the amount of gross contract receipts; and (ii). that the Standard operating rate (“SoR”, for short) was usually around 10% to 13% of total cost. After deliberating on the explanation of the assessee and not finding favor with the same, the AO on the basis of his aforesaid observations estimated the 8 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 assessee’s income from contract business @10% of the amount of gross contract receipts at Rs. 12,52,24,366/- [10% of Rs. 1,25,22,43,661/-]. 6. Aggrieved, the assessee assailed the assessment order before the CIT(Appeals). It was noticed by the CIT(Appeals) that the AO while framing the assessment had though not brought on record any irregularity or defect in the books of accounts, bills, vouchers and confirmation of accounts pertaining to the year under consideration, but had rejected his book results and estimated the income from contract business @10% of the amount of gross contract receipts for two fold reasons, viz. (i) that the assessee in the course of proceedings before the ITSC, Kolkata for the earlier years i.e AYs. 2006-07 to 2012-13 had on a suo-motto basis rejected his books of accounts and had finally admitted profit rate of 10% of his gross receipts; and (ii). that the assessee in his application filed before the ITSC, Kolkata for the earlier years i.e AYs 2006-07 to 2012-13 had after referring to the peculiar nature of his business admitted that the expense in the absence of availability of proper supporting bills were debited in the books in the 9 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 form of some bogus bills. Accordingly, it was observed by the CIT(Appeals) that for the aforesaid reasons the AO had after rejecting the books of accounts of the assessee estimated his income @10% of the amount of gross contract receipts. However, the CIT(Appeals) was not persuaded to subscribe to the view taken by the AO. It was observed by the CIT(Appeals) that the contention of the AO that once the rate of profit was voluntarily declared by an assessee in any previous year owing to the facts and circumstances of that year, the same rate of profit could safely be made a basis for assessing his income for the subsequent years without considering the facts and circumstances of the earlier years or the year in question was bereft of any merit and could not be accepted. It was observed by the CIT(Appeals) that as each year assessment was a separate assessment, thus, the same would not govern that of the later years. It was further observed by him that the assessment of each year has to be framed after separately considering the facts and circumstances of the said year. Elaborating on the facts involved in the case of the assessee before him, it was observed by the CIT(Appeals) that the books of accounts of the assessee were subjected to a tax audit 10 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 and the same a/w bills, vouchers, confirmations etc. were produced before the AO who after carrying out necessary examination and cross- verifications had not pointed out any infirmity in the same. It was noticed by the CIT(Appeals) that there was no such finding by the AO that the assessee had either booked any expenditure without having incurred it or had claimed any bogus expenditure which was not supported by bills and vouchers. Apropos the observation of the AO that the assessee had suo-moto rejected his books of accounts for the preceding years i.e AYs 2006-07 to 2012-13, the CIT(Appeals) was of the view that the said fact on a standalone basis would not make him liable for rejection u/s 145 during the year under consideration. Observing that the AO had not brought on record any specific defect or irregularity in the books of accounts of the assessee to support his contention that the correct profits of his business could not be deduced, the CIT(Appeals) did not find favour with the rejection of his books of account by the AO. On the basis of his aforesaid observations it was noticed by the CIT(Appeals) that the AO had without giving any reasons rejected the books of accounts of the assessee for the year under consideration. Observing, 11 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 that a suo-motto rejection of the books of accounts by an assessee for a year or some years on the basis of facts and discrepancies prevailing in those years would not ipso facto and directly lead to an inference that the books of accounts of the assessee for the subsequent years were also to be rejected, the CIT(Appeals) did not find favour with the view taken by the AO that as the assessee after admitting certain specific defects in his books for the preceding years had voluntarily rejected the same, therefore, the rejection of the books of accounts of the assessee for the subsequent year under consideration would be justified. On the basis of his aforesaid observations the CIT(Appeals) concluded that a mere rejection of the books of accounts of the assessee for the preceding years i.e AYs 2006-07 to 2012-13 did not justify their rejection u/s 145(3) during the year under consideration i.e AY 2013-14, specifically when the attributes for rejection of the books of accounts for the aforesaid preceding years was not prevailing during the year under consideration. In so far the estimation of the net profit rate @10% of the gross contract receipts, it was observed by the CIT(Appeals) that the same was not based on any cogent material, but was a mere 12 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 extrapolation by the AO of the net profit rate that was adopted by the assessee in the preceding years i.e AYs 2006-07 to 2011-12. Also, it was observed by the CIT(Appeals) that in the case of two similarly placed group entities of the assessee, viz. Shri. Radhey Sham Agrawal; and Shri. Sanjay Kumar Agrawal, a similar rejection of books of accounts and estimation of their income @10% of gross receipts by the AO was vacated by his predecessor vide his order dated 03.01.2018. It was, thus, noticed by the CIT(Appeals) that the AO had failed to place on record any supporting or corroborating material which would justify adoption of net profit @10%. Observing, that as a decline in the net profit rate during a year cannot on a standalone basis justify rejection of the book results of an assessee u/s 145(3) of the Act, the CIT(Appeals) was of the view that there was no material which would point out towards unreliability of the books of accounts of the assessee. Accordingly, on the basis of his aforesaid observations the CIT(Appeals) not finding favor with the rejection of the books of accounts of the assessee a/w estimation of his income @10% of the amount of gross 13 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 contract receipts, thus, vacated the consequential addition that was made by the AO. 7. The department being aggrieved with the order of the CIT (Appeals) has carried the matter in appeal before us. 8. We have heard the ld. Authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR to drive home his contentions. On a perusal of the order of the CIT(Appeals) we find that he had observed as under : “6.1.3. Decision: I have carefully considered the submission filed by the assessee. The case of the Assessing Officer in applying net profit rate of 10% is based on the appellant's own admission in his application before the Income-tax Settlement Commission under sec. 245D of the Act for the A.Yrs. 2006-07 to 2012-13. According to the Assessing Officer, the appellant, in the very first paragraph of his submission, has accepted that the accounts were not being maintained meticulously and that the expenses were debited in the books in the form of some bogus bills in absence of availability of proper supporting bills for the A.Yrs. covered by the appellant's application before the Settlement Commission. It was further submitted by the appellant that in the years under settlement, expenses were inflated and hence, the book results were voluntarily rejected and initially the assessee offered rate of profit of 8% which was further enhanced by him only to 10% of gross contract receipts before the Settlement Commission. 14 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 6.1.4 On the other hand, the submission of the appellant's that after the search, there has been change in the pattern of maintenance of books of account and has started debiting expenses which are backed by proper bills etc. It is thus pleaded that the net profit adopted by the Assessing Officer at 10% is excessive and that the disclosed profit be accepted as such. 6.1.5. Application under Rule 46A of the IT Rules: Along with the written submission as reproduced above, the appellant has filed application for admission of additional evidence in the form of comparable cases, where net profit rate of 3.87% and below was accepted in assessment. It is claimed that the Assessing Officer refused to admit the explanation and evidence with regard to net profit disclosed by him, and therefore, it is requested that the additional evidence be admitted under Rule 46A of the IT Rules. 6.1.6. The additional evidence sought to be admitted, as aforesaid, is in the form of comparable cases where net profit rate of 3.87% and below was accepted in assessment, Rule 46A of the IT Rules reads as under: [Production of additional evidence before the [Deputy Commissioner (Appeals)] [and Commissioner (Appeals)]. "(1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely:— (a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer]; or (c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal." 15 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 None of the conditions laid down in Rule 46A is fulfilled in the appellant's case. The facts of the appellant's case are different from those sought to be relied upon by the appellant. Therefore, it cannot be said that the so-called additional evidence goes to the root of the matter to entitle the appellant a second innings to present the case before the Assessing Officer, particularly when there is no evidence to show that the appellant was prevented by sufficient cause from producing such argument/evidence before the Assessing Officer. I, therefore, refuse to admit the application seeking admission of additional evidence in the form of comparable cases under Rule 46A(2) of the IT Rules. 6.1.7. Be it as may, it is a fact that the Assessing Officer heavily relied upon the proceedings before the Income-tax Settlement Commission, Kolkata for A.Yrs. 2006-07 to 2012-13. He has not recorded any finding as to how the facts of the case and the position of maintenance of accounts are the same in the present assessment year as those in the earlier assessment years. Neither has the Assessing Officer did point out any specific defects in the accounts to warrant rejection of the books of account for the assessment year under consideration. Thus, there is no reason as to why the income of the appellant as for the A.Y.2013-14 should be adopted by applying net profit rate of @10% on the gross contract receipts. 6.1.8. From the documents placed on record, it is noticed that in the case of two assessees of the same group, who are involved in the same line of business, similar addition was made by AO in assessment of AY 2014/15 by rejecting the books and estimating the profit at 10%, relying upon the offer of 10% profit given before Hon'ble Settlement Commission. These parties had also filed application before Settlement Commission, as the appellant had done. In those cases also, the AO was the same and similar findings have been given in the assessment orders. As submitted on behalf of the appellant, the appeals of the two assessees of the group, M/s Radheshyam Agrawal and Sanjay Kumar Agrawal have been recently decided by Ld. CIT(A) - II, Raipur vide appeal no. 68/17-18 and 70/17-18 respectively, vide order dt. 03.01.2018. The CIT(A) - II, Raipur in those two cases held that rejection of books of accounts and estimation of income @ 10% of gross contract receipts does not have justification and he accordingly deleted entire edition made on this account vide his order dt. 03.01.2018. 6.1.8. The facts and circumstances of the appellant's case are similar and identical. Apparently, the AO has based his assessment on the outcome of Settlement Commission proceedings for the block period covered during the search Action u/s 132 and has extended the same to the assessment year 2014-15. The AO has not brought on record any irregularity or defects in the books, bills and vouchers etc. as aforesaid. There is no specific finding of the 16 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 AO that the appellant had booked expenditure without having incurred it or there is inflation in the amount of expenses or that the appellant had claimed any bogus expenditure. Merely because books of accounts of appellant were rejected in the preceding year will not make them liable for rejection u/s 145 during the year under consideration. Furthermore, the AO has not pointed out suppression of income based on any cogent material brought on record. There is no material showing financial nexus for making the addition and no document showing any financial dealings by appellant justifying the adoption of net profit @ 10% has been referred in the assessment order in the case of the appellant. The application of net profit and the consequent addition has been made on pure guess work only. 6.1.10. In view of the discussion made in the preceding paragraphs, the action of the Assessing Officer in rejecting the book results and applying net profit rate of 10% for the assessment year under consideration as against net profit disclosed by the appellant at 4.36% after depreciation is held to be unjustified and unwarranted. The addition of Rs. 7,13,86,270/- is, therefore, directed to be deleted.” 9. As observed by us hereinabove, it is a matter of fact borne from the record that the AO had examined and cross-verified the books of accounts, bills, vouchers and confirmation of accounts etc. pertaining to the year under consideration that were produced by the assessee in the course of the assessment proceedings before him. Although the AO had not brought on record any irregularity or defect in the books of accounts, but had rejected the same for the reason that as the assessee in the course of proceedings before the ITSC, Kolkata for the earlier years i.e AYs. 2006-07 to 2012-13 had on a suo-motto basis rejected his books of accounts, therefore, the opening and closing balances of different 17 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 ledger accounts pertaining to his books of accounts for the year under consideration i.e AY 2013-14 could not be relied upon. However, we find that the AO except for harping on his aforesaid contention, i.e, the opening and closing balances of different ledger accounts pertaining to the books of accounts of the assessee for the year under consideration could not be verified by him, had however, not brought on record any such material defect in the books of accounts on the basis of which the deducing of the correct profits of the assessee’s business for the aforesaid reason was jeopardized. 10. Before adverting any further, we deem it fit to cull out the provisions of Sec. 145(3) of the Act which contemplates the circumstances under which the books of accounts of an assessee can be rejected, and reads as under: “(3). Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.” 18 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 On a perusal of the aforesaid statutory provision, it can safely be gathered that the books of accounts of an assessee can be rejected on satisfaction of either of the three situations, viz. (i). where the AO is not satisfied about the correctness or completeness of the accounts of the assessee; or (ii). where the method of accounting i.e, cash or mercantile system of accounting is not being regularly followed by the assessee; or (iii). where the assessee is not regularly following any accounting standard that had been notified by the Central government in the official gazette and is to be followed by any class of assessee or in respect of any class of income. In the case of the present assessee before us, it transpires that the AO had tried to justify the rejection of his book results for the reason that he was not satisfied about the correctness or completeness of the accounts of the assessee. However, we find that though the assessee in the course of the assessment proceedings had produced before the AO his books of accounts which had been subjected to a tax audit a/w bills, vouchers, confirmations etc., which were examined and cross-verified by him, but there is not a word of whisper in the assessment order about any defect or irregularity emerging 19 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 therefrom. On the contrary, as observed by the CIT(Appeals), there is no such finding by the AO that the assessee had either booked any expenditure without having incurred it or had claimed any bogus expenditure which was not supported by bills and vouchers. In our considered view the AO is obligated to point out the specific defects or irregularities contemplated in sub-section (3) of Sec. 145 of the Act before rejecting the books of accounts of an assessee. Our aforesaid view is supported by the judgment of the Hon’ble High Court of Punjab & Haryana in the case of CIT Vs. Om Overseas (2009) 315 ITR 185 (P&H). In its aforesaid order the Hon’ble High Court while upholding the order of the Tribunal had observed, that as the AO had rejected the books of accounts of the assessee without pointing out any specific defect, therefore, the impugned addition was rightly deleted by the lower authorities. Also, the Hon’ble High Court of Allahabad in the case of Dr. Prabhu Dayal Yadav Vs. CIT (2018) 253 Taxman 191 (All), had observed, that the rejection of the books of accounts is unsustainable where the assessee had maintained his accounts and recorded his professional receipts and there is no evidence to doubt the correctness 20 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 or completeness of the books of account. Our aforesaid view that existence of infirmities and discrepancies in the accounts maintained by the assessee is a pre-requisite for invoking the provisions of Sec. 145 of the Act and the AO has to show that the accounts are either incomplete or incorrect is supported by the judgment of the Hon’ble High Court of Himachal Pradesh in the case of CIT Vs. Swastik Food Products (2015) 275 CTR 109 (HP). 11. As observed by the CIT(Appeals) the fact as it so remains is that the AO had rejected the books of accounts of the assessee for the year under consideration i.e AY 2013-14, for the reason that as the assessee in his application filed before the ITSC, Kolkata for the earlier years i.e AYs 2006-07 to 2012-13 after referring to the peculiar nature of his business had admitted certain irregularities in his books of accounts for the said preceding years and, on the said count had on a suo-motto basis declared his income from the contract business @10% of the gross contract receipts of all the said years, therefore, he was of the view that as the nature of the assessee’s business during the year under 21 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 consideration remained the same, thus, his income from the said stream of business i.e contract business after rejection of his books of accounts justifiably be estimated @10% of the amount of gross contract receipts. In sum and substance, the AO going by the suo-motto rejection of books of accounts and declaration of net profit rate @10% of the amount of gross contract receipts by the assessee before the ITSC, Kolkata in the preceding years i.e AYs. 2006-07 to 2012-13, had as a matter of fact tried to extrapolate both the facts and the net profit rate declared by the assessee in those preceding years to his case for the year under consideration i.e AY 2013-14. 12. We are unable to persuade ourselves to concur with either the aforesaid view or the basis that had been adopted by the AO for rejecting the books of accounts of the assessee for the year in question and estimating his income from contract business by adopting the net profit @10% of the amount of gross contract receipts. Although the book results of an assessee in a preceding year could be adopted as a yardstick for comparing those shown by him in a subsequent year, but 22 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 the same by no means can be stretched any further to form a standalone reason for rejecting his books of accounts for the said subsequent year. Our aforesaid conviction is fortified by the following judicial pronouncements: (i). RMP Perianna Pillai & Co. Vs. CIT (1961) 42 ITR 370 (Mad) (ii). CIT Vs. Winner Constructions Pvt. Ltd. (2012) 81 CCH 91 (Del) (iii). CIT Vs. K S Bhatia (2004) 269 ITR 57 (P&H) At this stage, we may herein observe that the AO while rejecting the books of accounts of the assessee for the year under consideration, i.e AY 2013-14, had observed, that as the assessee in the preceding years i.e AYs 2006-07 to 2012-13 had on a suo-motto basis rejected his books of accounts for all the years and declared his income from the contract business @10% of the gross contract receipts thus, the nature of his business during the year under consideration i.e AY 2013-14 remaining the same, his income could be estimated on the similar lines. However, the AO while so observing had lost sight of certain material facts on the basis of which the aforesaid estimation of income was carried out by the assessee in the preceding years i.e AYs 2006-07 to 2012-13. One of the material aspect that the AO had failed to take cognizance of was that in 23 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 the aforementioned preceding years the assessee in his application filed before the ITSC, Kolkata had categorically admitted that due to the peculiar nature of his business as proper bills could not be obtained, therefore, to set-off the same either bills were arranged from outside parties; or in some cases such unaccounted expenses were set-off by introducing inflated expenses. As such, the aforesaid admission of the assessee in his application filed with the ITSC. Kolkata for the preceding years i.e AYs 2006-07 to 2012-13 in itself formed a substantial piece of evidence about the existence of the aforesaid infirmities and irregularities in his books of accounts for the said years. However, neither of any such infirmity, viz. (i). booking of any bogus purchases; or (ii). inflating of expenses by the assessee had either been pointed out by the AO while framing the assessment in the case of the assessee for the year under consideration i.e AY 2013-14 or ever admitted by the assessee. Apart from that, it is also a matter of fact borne from record that though certain incriminating documents evidencing the aforesaid infirmities had surfaced in the course of the search proceedings conducted u/s 132(1) in aforementioned preceding years, however, no 24 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 such material evidencing such infirmities or irregularities in the books of the assessee for the year under consideration is discernible from the records. We, thus, are of the considered view that as the aforesaid peculiar facts as were prevailing in the preceding years were not there during the year under consideration i.e AY 2013-14, therefore, it was absolutely incorrect on the part of the AO to have tried to justify the rejection of the assessee’s book results by drawing support from the suo-motto rejection of his books of accounts in the preceding years, which, as observed by us hereinabove was prompted by substantially differently placed circumstances in the said years. 13. Also, we are unable to comprehend the observation of the AO, who had rejected the books of account of the assessee for the year under consideration and estimated his income from the contract business @10% of gross contract receipts, for the reason that as the assessee in his application filed before the ITSC, Kolkata for the preceding years i.e AYs. 2006-07 to 2012-13 had admitted certain defects and irregularities in his books of accounts, therefore, it was to 25 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 be presumed that he would have continued with such accounting malpractices and irregularities in the subsequent years too. Our aforesaid conviction is all the more fortified by the fact that the AO had after calling for and examining the books of accounts of the assessee for the year under consideration a/w bills, vouchers, confirmations etc. had not referred to even a single instance of any such defect or irregularity which would have evidenced that the assessee even during the year under consideration had continued with the accounting malpractices that were adopted by him in the preceding years. Presumption drawn by the AO that that as the assessee had indulged into accounting malpractices in the preceding years, therefore, he would have continued with the same in the succeeding years in the absence of any supporting evidence cannot be subscribed on our part. As stated by the Ld. AR, and rightly so, as each years assessment is a separate assessment, therefore, the facts emanating from the assessment for a specific year cannot in the absence of any supporting evidence be extrapolated to another year. Our aforesaid conviction is supported by the judgment of the Hon’ble Supreme Court in the case of, viz. (i). M.M Ipoh & Ors. Vs. CIT (1968) 26 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 67 ITR 106 (SC); (ii). ITO Vs. Murlidhar Bhagwandas (1964) 52 ITR 335 (SC); and (iii). Bharat Sanchar Nigam Ltd. & Anr. Vs. UPI & Ors. (2006) 282 273 (SC). Interestingly, if the observation of the AO is to be accepted, then, it would mean that once an assessee is visited with search proceedings and he after considering the incriminating documents unearthed during the course of such proceedings comes forth with a disclosure of his unaccounted income, then, in all the subsequent years despite there being no iota of evidence that the assessee had indulged in any such nefarious activities for garnering unaccounted income it is to be so presumed because of his chequered past. By no means such an incomprehensible observation of the AO can be accepted. As regards the reference to the “Standard Operating Rate” (SoR) by the AO to support his conviction that the income of the assessee from his contract business was justifiably determined by applying a net profit rate @10% to the gross contract receipts for the year under consideration, we are unable to concur with the same. As claimed by the ld. AR, and rightly so, as the SoR for works contracts fixed by the Government departments merely indicates the estimated 27 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 price of the inputs and expenses and also an estimate of the physical quantity that would be required for execution of the contract, the same, thus, considering manifold factors is too far from the ground realties to have justified earning of a profit margin @10% of the gross contract receipts by the assessee. 14. We, thus, in terms of our aforesaid observations and concurring with the well-reasoned view taken by the CIT(Appeals) that there was no justification on the part of the AO in rejecting the books of accounts of the assessee and estimating his income from the contract business @10% of the gross contract receipts, uphold his order. 15. Resultantly, the appeal filed by the revenue in ITA No.79/RPR/2018 for the assessment year 2013-14 being devoid and bereft of any merit is dismissed. 16. Adverting to the grounds raised in cross-objection filed by the assessee, it is evident from Para 6.1.5 & 6.1.6 of the CIT(Appeals)’s order that he had rejected the additional evidence due to not fulfilling 28 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 the conditions contemplated in Rule 46A of the Income Tax Rules, 1963. Since, we have dismissed the revenues appeal, therefore, the grounds raised by the assessee in his cross-objection having been rendered as merely academic in nature is accordingly dismissed. 17. In the combined result, appeal filed by the revenue and cross- objection filed by the assessee are dismissed in terms of our aforesaid observations. ITA No.108/RPR/2018 CO No.07/RPR/2018 A.Y.2014-15 18. As the facts and issue involved in the captioned appeal remains the same as were there before us in the aforesaid appeal, viz. ITA No.79/RPR/2018 for assessment year 2013-14, therefore, our order therein passed while disposing off the said appeal shall apply mutatis- mutandis for disposing off the captioned appeal viz. ITA No.108/RPR/2018 for the assessment year 2014-15. In this case also, we uphold the order of the CIT(Appeals) with similar directions as observed by us in ITA No.79/RPR/2018 for assessment year 2013-14. 29 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 19. As the cross-objection filed by the assessee is merely supportive of the order of the CIT(Appeals), therefore, the same as per concession of the Ld. AR is dismissed as not pressed. 20. In the result the cross-objection filed by the assessee in CO No.07/RPR/2018 is dismissed as not pressed. 21. In the combined result, both, the appeals filed by the revenue and cross objections filed by the assessee are dismissed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 29 th August, 2022 SB 30 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-II, Raipur (C.G) 4. The Pr. CIT (Central), Bhopal(C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 31 ACIT Vs. Shri Sunil Kumar Agrawal ITA Nos.79 & 108/RPR/2018 CO Nos.4 & 7/RPR/2018 Date 1 Draft dictated on 03.08.2022 Sr.PS/PS 2 Draft placed before author 04.08.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order