Shri Om Prakash Tripathi, Farrukhabad V. ACIT, Farrukhabad

CO 79/AGR/2005

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7093 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 8 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 02-09-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: P K SEHGAL
• Keywords: Rejection of books of accounts
• Section: 44AD; 40A(3); 234B; 133(6); 131; 68; 145

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.330/AGR/2005 ASSESSMENT YEAR: 2001-02 ASSTT. COMMISSIONER OF INCOME TAX, VS. SHRI OM PRAKASH TRIPATHI, CIRCLE-2(1), FARRUKHABAD. CONTRACTOR, JAI NARAIN VERMA ROAD, FATEHGARH. (PAN : ABAPT 4879 K). C.O. NO.79/AGR/2005 (IN ITA NO.330/AGR/2005) ASSESSMENT YEAR: 2001-02 SHRI OM PRAKASH TRIPATHI, VS. ASSTT. COMMISS IONER OF INCOME TAX, CONTRACTOR, CIRCLE-2(1), FARRUKHABAD. JAI NARAIN VERMA ROAD, FATEHGARH. (PAN : ABAPT 4879 K). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI A.K. SHARMA, JR. D.R. ASSESSEE BY : SHRI P.K. SEHGAL, ADVOCATE DATE OF HEARING : 25.04.2012 DATE OF PRONOUNCEMENT : 04.05.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 2 THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER DATED 02.02.2005 PASSE D BY THE LD. CIT(A)-I, AGRA FOR THE ASSESSMENT YEAR 2001-02. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN DELETING THE ADDITION OF ` 8,04,510/- MADE BY THE A.O. U/S 68 OF I.T. ACT BEING UNEXPLAINED DEPOSITS. THE ADDITION WAS M ADE AFTER MAKING ADEQUATE ENQUIRIES AND AFTER OBSERVING THE FACT THA T THE ASSESSEE HAD FAILED TO PRODUCE ALL THE DEPOSITORS EVEN AFTER OPP ORTUNITY TO PRODUCE THE SAME HAS BEEN PROVIDED TO THE ASSESSEE. THE AD DITION WAS ALSO BASED ON THE FACTS THAT THE ASSESSEE HAD FAILED TO PROVE THE CREDIT WORTHINESS OF THE DEPOSITORS AND ALSO THE GENUINENE SS OF THE TRANSACTION. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN DELEING THE ADDITION OF ` 1,51,400/- WHICH WAS MADE IN VIEW OF PROVISIONS OF SECTION 40A(3). THE ASSESSEE HAD MAD E CASH PAYMENTS/PAYMENT THROUGH BEARER CHEQUE OF AN AMOUNT OF ` 7,57,000/- AND THEREFORE, 20% THEREOF WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 40A(3). THUS, THE DISALLOWANCE HAS BEEN MADE A CCORDING TO THE PROVISIONS OF THE ACT. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN DELETING THE ADDITION OF ` 19,800/- MADE BY THE A.O. ON ACCOUNT OF REFUND OF SECURITY, WHICH WAS NOT TO BE DEDUCTED FR OM CONTRACTUAL RECEIPTS. 4. THAT THE ORDER OF THE LD. CIT(A), BEING ERRONEOU S IN LAW AND ON FACTS, BE SET-ASIDE AND THAT OF A.O. BE RESTORED. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION :- ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 3 1. THAT THE NET PROFIT OF ` 4,43,575/- (NET PROFIT RATE OF 5.32%) DECLARED BY THE ASSESSEE BEING PROPERLY VERIFIABLE, EXPLAINED AND SUPPORTED WITH REFERENCE TO THE DETAILED AUDITED BO OKS OF ACCOUNTS AND OTHER RECORDS AND THE SAME BEING QUITE REASONAB LE IN THE LINE OF BUSINESS CARRIED ON BY THE ASSESSEE, THUS THE SAME SHOULD HAVE BEEN ACCEPTED. 2. A) THAT THE LEARNED ASSESSING OFFICER HAD NEITHE R REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE NOR HA D APPLIED PROVISIONS OF SECTION 145 OVER THE ASSESSEES CASE. B) THAT THE LEARNED CIT(A)-I, AGRA HAS BEEN ARBITRA RY AND UNJUST IN HOLDING THAT THE PROVISIONS OF SECTION 145 ARE CLEARLY APPLICABLE TO THE FACTS OF ASSESSEES CASE, SOLELY ON THE BASIS OF GUESS WORK, UNILATERAL INFERENCES AND FOR THEORETIC AL CONSIDERATION AND EVEN POINTING OUT ANY SPECIFIC DEFECT/ANOMALY. 3. THAT THE LEARNED CIT(A)-I, AGRA HAS ERRED BOTH I N LAW AND ON FACTS IN INVOKING THE PROVISIONS OF SECTION 145 OF I.T. ACT, 1961 OVER THE ASSESSEES CASE. AS THE ASSESSEE HAS MAINTAINE D THE CORRECT AND COMPLETE ACCOUNTS, WHICH WERE DULY AUDITED AND WERE PRODUCED FOR VERIFICATION AND THE INCOME OF THE ASSESSEE BEING C OMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED THEREFORE SUCH ACTION OF THE LEARNED CIT(A)-I, AGRA IS ARBITRARY, UNJUST AND IS UNTENABLE. 4. THAT THE NET PROFIT RATE SHOWN @ 5.32% BY THE AS SESSEE BEING QUITE REASONABLE LOOKING TO THE TYPE AND VOLUME OF THE BUSINESS AND THE SAME BEING EXPLAINED WITH REFERENCE TO THE DETA ILED AUDITED BOOKS OF ACCOUNTS AND RECORDS, IT SHOULD HAVE BEEN ACCEPT ED AND FURTHER THE SAME BEING ACCEPTED BY THE ASSESSING OFFICER, THUS THE LEARNED CIT (A), AGRA HAS BEEN ARBITRARY AND UNJUST IN APPLYING FLAT NET PROFIT RATE OF 7% SOLELY ON THE BASIS OF SUSPICION, GUESS WORK AND FOR THEORETICAL CONSIDERATION. 5. THAT THERE BEING NO MATERIAL OF WHATSOEVER NATUR E IN SUPPORT OF THE NET PROFIT RATE APPLIED @ 7% WITH THE LEARNED C IT(A)-I, AGRA, THEREFORE ADOPTION OF SUCH ARBITRARY NET PROFIT RAT E IS ILLEGAL, FALLACIOUS AND IS UNSUSTAINABLE. ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 4 6. THAT THE ADDITION OF ` 99,450/- (NET PROFIT ADOPTED BY LEARNED CIT(A) RS.5,43,025 MINUS NET PROFIT DECLARED BY THE ASSESSEE ` 4,43,575) MADE TOWARDS ALLEGED LOW NET PROFIT RATE BY APPLYING 7% FLAT RATE IS TOTALLY AGAINST THE FACTS OF THE CASE, MATERIAL PLACED ON RECORDS AND AUDITED BOOK OF ACCOUNTS AND RECORDS MA INTAINED BY THE ASSESSEE. SUCH ADDITION BEING MADE DUE TO LACK OF UNDERSTANDING OF THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, COMPLETE DISREGARD TO THE PAST HISTORY AND BASED UPON MERE SUBJECTIVE OPINION, THEREFORE THE SAME IS MOST UNREALISTIC, ILLOGICAL AND UNJUSTI FIED, BASED UPON MERE SUBJECTIVE OPINION AND DESERVES TO BE DELETED. 7. THAT THE LEARNED CIT(A)-I, AGRA HAS FURTHER ERRE D BOTH IN LAW AND ON FACTS IN ENHANCING THE INCOME FROM CONTRACT DECLARED BY THE ASSESSEE AT ` 4,43,575/- TO ` 5,43,025/-, EVEN WITHOUT AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF SHOWING C AUSE AGAINST SUCH ENHANCEMENT, THUS HE HAS VIOLATED THE PROVISIONS OF SUB SECTION (2) OF SECTION 251 OF I.T. ACT, 1961, MAKING THE WHOLE ACT ION ILLEGAL. 8. THAT THE ASSESSEE SHOULD HAVE BEEN ALLOWED DEDUC TION OF ` 12,000/- U/S 80L (SPECIFIED UNDER CHAPTER VIA) TOWA RDS BANK/NSC INTEREST, MORE PARTICULARLY WHEN THE SAME WAS CLAIM ED BY THE ASSESSEE WHILE WORKING OUT HIS TOTAL DECLARED INCOME. 9. THAT THE AUTHORITIES BELOW HAVE ERRED IN SUSTAIN ING CHARGE OF INTEREST U/S 234B. THE CHARGE OF SUCH PENAL INTERE ST IS TOTALLY UNWARRANTED. LIKEWISE THE AUTHORITIES BELOW HAVE E RRED IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF I.T. ACT, 1961 . THE ASSESSEE ALSO SEEKS PERMISSION TO MODIFY AND/O R ADD ANY OTHER GROUND/GROUNDS OF APPEAL AS THE CIRCUMSTANCES OF THE CASE MIGHT REQUIRE OR JUSTIFY. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF CONTRACTS AT ` 77,57,501/- ON WHICH NET PROFIT HAS BEEN SHOWN AT ` 4,35,286/-. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAS ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 5 SHOWN CREDITS OUTSTANDING FOR PURCHASES OF GOODS IN THE BALANCE SHEET IN THE FOLLOWING NAMES:- 1. SHRI TAPESH JAIN ` 1,75,620/- 2. SHRI TRILOK JAIN ` 1,10,575/- 3. SHRI VIJAY SINGH ` 1,25,540/- 5. TO EXAMINE THE OUTSTANDING BALANCE OF ABOVE PART IES, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) OF THE INCOME TA X ACT, 1961 (THE ACT HEREINAFTER) WHICH WERE RETURNED BY POSTAL AUTHORIT IES UNSERVED WITH THE REMARK THAT THE PERSONS ARE NOT WORKING AT THE GIVEN ADDRE SS BUT THEY ARE RESIDING IN NEARBY TOWN KNOWN AS KIRAOLI BUT THEIR ADDRESSES WERE NOT KNOWN. IN THE CASE OF SHRI VIJAY SINGH THE PERSON WAS NOT FOUND ON THE AD DRESS GIVEN. IN ADDITION TO ABOVE, THE ASSESSING OFFICER HAS ALSO NOTICED THAT THE ASSESSEE HAS ALSO SHOWN LIABILITIES IN RESPECT OF THE UNDER MENTIONED SUB-C ONTRACTORS :- 1. SHRI JAWAHAR MISHRA ` 1,98,900/- 2. SHRI ASHUTOSH TRIPATHI ` 1,93,875/- 6. THE ASSESSING OFFICER MADE ADDITION UNDER SECTIO N 68 OF THE ACT OF THE ABOVE AMOUNT TOTALING TO ` 8,04,510/-. ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 6 7. THE ASSESSING OFFICER HAS ALSO NOTICED THAT THE ASSESSEE HAS VIOLATED SECTION 40A(3) OF THE ACT AND DISALLOWED 20% OF PAYMENT OF WHICH CALCULATION COMES TO ` 1,51,400/-. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF ` 1,51,400/-. 8. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS.1 9,800/- ON ACCOUNT OF SECURITIES. THE CIT(A) CALLED FOR THE REMAND REPOR T FROM THE ASSESSING OFFICER AND AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE D ELETED THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT ON TH E GROUND THAT AT THE TIME OF REMAND PROCEEDINGS THE ASSESSING OFFICER RECORDED T HE STATEMENT OF PARTIES WHEREIN THE PARTIES CONFIRMED HAVING OUTSTANDING BA LANCES IN RESPECT OF SHRI TAPESH JAIN & SHRI TRILOK JAIN. HOWEVER, IN RESPEC T OF VIJAY SINGH, THE CIT(A) NOTED THAT HE HAS DIED. HOWEVER, COPIES OF ACCOUNT S WERE PRODUCED BEFORE THE ASSESSING OFFICER. IN RESPECT OF SUB-CONTRACTOR, T HE CIT(A) DELETED THE ADDITION ON THE GROUND THAT AMOUNT WAS WITHDRAWN FROM THE BANK. THE SAME WAS ENTERED IN THE CASH BOOK AND PAYMENTS WERE MADE TO DIFFERENT P ARTIES. IN RESPECT OF ADDITION UNDER SECTION 68 OF THE ACT ON ACCOUNT OF SUB-CONTR ACTOR, THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE SUB-CONTRACTOR HAS APPEARED BEFORE THE ASSESSING OFFICER AND CONFIRMED THE BALANCE HAVING OUTSTANDIN G. HOWEVER, IN RESPECT OF DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, THE C IT(A) HELD AS UNDER :- ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 7 THE A.O. HAS MENTIONED THAT SHRI SURESH CHAND HAD WITHDRAWN ` 1,80,000/- ON 20.07.2000 AND FURTHER ` 5,77,000/- ON 28.11.2000 FROM THE BANK ACCOUNT OF THE APPELLANT. THE APPELLANT HAD CLARIFIED THAT SHRI SURESH CHANDRA WAS AN EMPLOYEE OF THE APPELLANT AND THE AMOUNT IN QUESTION HAD BEEN WITHDRAWN ON BE HALF OF THE APPELLANT AND WERE DULY RECORDED IN THE CASH BOOK. THIS FACT HAS BEEN ACCEPTED BY THE A.O. ALSO. HOWEVER THE A.O. W AS OF THE VIEW THAT THE PAYMENTS WERE MADE IN CASH AND HENCE WERE NOT SUBJECT TO VERIFICATION. THE A.O. HAS MADE A DISALLOWANCE OF 20% OUT OF THESE AMOUNTS U/S 40A(3). THE LD. REPRESENTATIVE OF THE APPELLANT HAD CLARIFIED THAT THESE PAYMENTS WERE MADE FOR MATERIA L PURCHASES, LABOUR PAYMENT AND MISC. EXPENSES DONE BY THE APPEL LANT. THESE PAYMENTS WERE VERIFIABLE FROM THE CASH BOOKS AND PA YMENT VOUCHERS. THE A.O. HAS APPLIED THE PROVISIONS OF SECTION 40A( 3). IN MAY VIEW THE SECTION 40A(3) WILL NOT BE APPLICABLE IN THE PR ESENT CASE BECAUSE THE A.O. HAS NOT POINTED OUT ANY CASH PAYMENT TO AN Y OF THE PARTIES EXCEEDING ` 20,000/-. HOWEVER THE FACT REMAINS THAT ALL THE EX PENSES HAD BEEN INCURRED BY THE APPELLANT IN CASH AND THE VOUCHERS WERE PREPARED. THE IDENTITIES OF THE RECIPIENTS COULD N OT BE ESTABLISHED. THE CROSS VERIFICATION OF THE PAYMENTS MADE WAS NOT POSSIBLE FROM THE BOOKS OF ACCOUNT AND VOUCHERS MAINTAINED BY THE APP ELLANT. EVEN THE BALLAST MATERIAL WAS PURCHASED ON CREDIT BUT THE PA YMENTS WERE MADE IN CASH. ONE OF THE CREDITORS COULD NOT BE PRODUCE D AND HENCE THE BALANCES APPEARING IN HIS HANDS WERE NOT SUBJECT TO VERIFICATION. THE OTHER CREDITORS WHO WERE PRODUCED DID NOT HAVE ANY BOOKS OF ACCOUNT ETC. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE , I AM OF THE VIEW THAT EVEN THOUGH THE PROVISIONS OF SECTION 40A(3) A RE NOT APPLICABLE STRICTLY SPEAKING YET THE BOOKS OF ACCOUNT HAVE BEE N MAINTAINED IN A MANNER THAT TRUE PROFIT CAN NOT BE DETERMINED FROM THE ACCOUNT SO MAINTAINED. IT IS A CASE WHERE THE A.O. WAS NOT SA TISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. THE PROVISION OF SECTION 145 CLEARLY APPLICABLE TO THE FACTS OF THE CASE. THE APPELLANT HAD SHOWN NET PROFIT OF ` 4,43,575/- ON GROSS RECEIPTS OF ` 77,57,501/-. NET PROFIT COMES TO 5.72%. I HAD ASK ED THE LD. REPRESENTATIVE OF THE APPELLANT TO GIVE REASONS AS TO WHY NET PROFIT RATE OF 8% SHOULD NOT BE APPLIED TO THE FACTS OF TH E APPELLANT. THE LD. REPRESENTATIVE OF THE APPELLANT STATED THAT EVEN WH ERE THE BOOKS OF ACCOUNT WERE NOT ACCEPTABLE, ONE HAS TO LOOK AT THE RESULTS SHOWN BY THE APPELLANT HIMSELF. IT WAS INFORMED THAT IN THE ASSESSMENT YEAR 2000-01 TURNOVER OF THE APPELLANT WAS ` 9,51,274/- AND THE APPELLANT ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 8 HAD SHOWN INCOME ON THE BASIS OF PROVISION OF SECTI ON 44AD. THIS YEAR THE TURNOVER HAD INCREASED TO ` 77,05,751/-. THE NET PROFIT DURING THE YEAR WAS 5.1%. THE BOOKS OF ACCOUNTS WE RE SAID TO BE AUDITED. IN REPLY TO FURTHER QUERIES HE INFORMED T HAT NET PROFIT DURING THE ASSESSMENT YEAR 2002-03 WAS 6.88% AND THE NET P ROFIT FOR THE A.Y. 2003-04 WAS 3.2%. CONSIDERING THE OVER ALL FACTS A ND CIRCUMSTANCES OF THE CASE AND RESULTS SHOWN BY THE APPELLANT HIMS ELF IN THE PAST (BY APPLYING PROVISION OF SECTION 44AD) AND ALSO THE NE T PROFIT SHOWN IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEARS, I AM O F THE VIEW THAT NET PROFIT RATE OF 7% WILL BE REASONABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THE A.O. IS DIRECTED TO APPLY NET PROFIT RATE OF 7% TO THE GROSS CONTRACT RECEIPTS OF THE AP PELLANT. THE TAXABLE INCOME OF THE ASSESSMENT YEAR UNDER CONSIDERATION S HOULD BE RECOMPUTED ACCORDINGLY. THE TOTAL INCOME IS COMPUT ED AS UNDER A:- @ 7% OF CONTRACT RECEIPTS OF 77,57,501/- 5,43,025 ADD.: INCOME FROM INTEREST ON FDR & NSC AS PER ASSESSMENT ORDER 20,279 TOTAL 5,63,304/- THE A.O. IS DIRECTED TO TAKE THIS AMOUNT AS THE TOT AL INCOME FOR THE YEAR UNDER CONSIDERATION. 9. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. WE NOTICE THAT THE CIT(A) WHILE DECIDING THE ISSUE RELATING TO ADDITION UNDER SECTION 40A(3) OF THE ACT CAME TO THE CONCLUSION TH AT SECTION 40A(3) IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERA TION AS THE ASSESSEE DID NOT MAKE CASH PAYMENT TO ANY OF THE PARTIES EXCEEDING ` 20,000/-. THE ASSESSING OFFICER FAILED TO APPRECIATE THE SYSTEM OF RECORDING EXPEND ITURE THROUGH HIS EMPLOYEE. THE CIT(A) HAS DELETED THE ADDITION AFTER A DETAILE D DISCUSSION, THE FINDING OF CIT(A) IS REPRODUCED ABOVE. IN THE LIGHT OF THE FA CTS, THERE IS NO PAYMENT ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 9 EXCEEDING ` 20,000/-, WE DO NOT FIND ANY ERROR IN THE ORDER OF CIT(A). THE ORDER OF CIT(A) ON THE ISSUE IS CONFIRMED. HOWEVER, THE CIT(A) NOTICED THAT THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNT. THE TRUE PROFIT CANNOT BE DETERMINED AS FROM THE ACCOUNT SO MAINTAINED BY THE ASSESSEE THE CIT(A) FOUND THAT THE PROVISO TO SECTION 145 OF THE ACT IS CLEAR LY APPLICABLE TO THE FACTS OF THE CASE. THE CIT(A) ASKED THE ASSESSEE TO ISSUE SHOW CAUSE WHY NET PROFIT RATE OF 8% SHOULD NOT BE APPLIED. THE CIT(A), AFTER CONSIDERI NG THE ASSESSEES SUBMISSION, APPLIED 7% NET PROFIT RATE AND DIRECTED THE ASSESSI NG OFFICER TO RECOMPUTE THE TOTAL INCOME ACCORDINGLY. WE FIND THAT THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNT. WE NOTICE THAT THE FACTS RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSEE INCURRED ALL EXPENSES IN CASH AND VOUCHERS WERE HAND MADE BY WHICH IDENTITY OF THE PAYEES CANNOT BE ESTABLISHED. THE CROSS VERIFICATION WAS NOT POSSIBLE FROM THE BOOKS OF ACCOUNT AND VOUCHER. AP ART FROM THIS FACT, THE ASSESSING OFFICER NOTICED THAT HUGE OUTSTANDING BAL ANCES WERE SHOWN IN THE NAME OF SUPPLIERS AND SUB-CONTRACTORS. IN THE REMAND RE PORT, THE ASSESSING OFFICER POINTED OUT THAT THE SUPPLIERS SHRI TRILOK JAIN & T APESH JAIN WERE NOT ASSESSED TO TAX. THEY DID NOT MAINTAIN ANY BOOKS OF ACCOUNT OR VOUCHERS OF PURCHASE OF STONE BALLAST. THEY ALSO DID NOT OWN TRUCK. THE SUPPLIE RS WERE HAVING NO CAPACITY TO JUSTIFY THE OUTSTANDING BALANCES SHOWN IN THEIR NAM ES. IN RESPECT OF SHRI JAWAHAR MISHRA, SUBCONTRACTOR, WHO HAS BEEN SUMMONED UNDER SECTION 131 OF THE ACT ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 10 WHERE THE SUB-CONTRACTOR STATED THAT HE IS A SUPERV ISOR OF LABOURERS. THE ASSESSEE HIMSELF ADMITTED BEFORE THE CIT(A) THAT THE SUPPLIE R IS IN FACT COMMISSION AGENT OF TRUCK OWNERS. THEY SUPPLY STONE BALLAST TO THE ASS ESSEE AND CHARGE THEIR COMMISSION FROM TRUCK OWNERS. THEY ACT AS A PARTY BETWEEN THE ASSESSEE AND TRUCK OWNERS. THE ASSESSEE DID NOT HAVE CONNECTION WITH THE TRUCK OWNERS. CONSIDERING THE BUSINESS ACTIVITIES OF THE ASSESSEE AND CONSIDE RING THE ABOVE FACTUAL POSITION, WE FIND THAT THE CIT(A) HAS RIGHTLY HELD THAT THE A SSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNTS. THE CIT(A) HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS. THOUGH THE ASSESSING OFFICER DID NOT REJECT THE BOO KS OF ACCOUNT DIRECTLY BUT IMPLIEDLY HE REJECTED THE BOOKS OF ACCOUNTS AS PER THE FACTS NOTED BY THE ASSESSING OFFICER IN HIS ORDER. EVEN OTHERWISE ALSO THE CIT( A) HAS CO-TERMINUS POWER OF THE ASSESSING OFFICER. THEREFORE, WE CONFIRM THE ACTIO N OF THE CIT(A) AS HE HAS DONE IT AFTER PROVIDING OPPORTUNITY OF HEARING TO THE AS SESSEE. THOUGH THE ASSESSEE HAS TAKEN GROUND NO.7 IN ITS CROSS OBJECTION IN REGARD TO NON-PROVIDING OF OPPORTUNITY FOR HEARING BY THE CIT(A), AT THE TIME OF HEARING B EFORE US LD. AUTHORISED REPRESENTATIVE DID NOT PRESS THIS GROUND. IN THE L IGHT OF THE ABOVE DISCUSSION, WE CONFIRM THE ORDER OF CIT(A) IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. AFTER REJECTING THE BOOKS OF ACCOUNTS, THE NEXT STE P TO BE TAKEN IS ESTIMATION OF PROFIT FOR THE YEAR. THE CIT(A) AFTER CONSIDERING THE PROVISIONS OF SECTION 44AD AND PAST HISTORY OF THE ASSESSEE FOUND THAT THE NET PROFIT RATE OF 7% WILL BE ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 11 REASONABLE RATE. WE NOTICE THAT THE ASSESSEE HIMSE LF HAS SHOWN THE DIFFERENT NET PROFIT RATES IN DIFFERENT YEARS I.E. 6.88% IN A.Y. 2002-03 & 3.2% IN A.Y. 2003-04. THE CALCULATION OF NET PROFIT RATE FOR THE YEAR UND ER CONSIDERATION COMES TO 5.1%. WE FIND THAT THE CIT(A) HAS RIGHTLY APPLIED THE NET PROFIT RATE OF 7% AND CONTRARY TO THAT THERE IS NO MATERIAL ON RECORD NEITHER THE SAME HAS BEEN POINTED OUT BY ANY OF THE PARTIES. THEREFORE, ORDER OF THE CIT(A) ON THE ISSUE IS CONFIRMED. THUS, GROUND NO.2 OF REVENUES APPEAL AND GROUND NOS.1 TO 6 RAISED IN CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. 10. IN RESPECT OF DELETION OF ADDITION OF RS.8,04,5 10/-/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT, WE NOTICE THAT THE CIT(A), AFTER PARTY-WISE DETAILED DISCUSSIONS FROM PAGE NOS.9 TO 12, FOUND T HAT THE ASSESSEE HAS DISCHARGED THE BURDEN OF SECTION 68. THE STATEMENTS OF THE PA RTIES WERE RECORDED. IN THE CASE OF SHRI TAPESH JAIN & SHRI TRILOK JAIN, THEY HAVE A PPEARED BEFORE THE ASSESSING OFFICER WHERE THE CREDITORS HAVE ACCEPTED THAT THEY HAVE SUPPLIED GOODS ON COMMISSION BASIS TO THE ASSESSEE. BOTH THE CREDITO RS HAVE CONFIRMED BALANCE AGAINST THEIR NAMES. IN RESPECT OF SHRI VIJAY SING H, IT WAS INFORMED AND NOTED BY THE CIT(A) THAT HE HAS DIED BUT THE LD. REPRESENTAT IVE OF THE ASSESSEE PRODUCED THE PHOTOCOPY OF ACCOUNTS BEFORE THE ASSESSING OFFICER AND TRANSACTION WAS FOUND GENUINE. IN RESPECT OF SHRI JAWAHAR MISHRA & SHRI ASHUTOSH TRIPATHI, THE AMOUNT ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 12 WAS THROUGH BANKING CHANNEL AND THE ASSESSING OFFIC ER DID NOT DISPUTE THIS FACT. THUS, IN THE LIGHT OF DETAILED DISCUSSIONS MADE BY THE CIT(A), WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.8,04, 510/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT. ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. THUS, GROUND NO.1 RAISED BY THE REVENUE IN ITS APPE AL IS DISMISSED. 11. GROUND NO.3 OF REVENUES APPEAL IS IN RESPECT O F DELETION OF ADDITION OF ` 19,800/- ON ACCOUNT OF REFUND OF SECURITY. THE CIT (A) DELETED THE SAID ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT ` 19,800/- WAS NOT PAYMENT FOR CONTRACT BUT WAS REFUND OF SECURITY. THE ASSESSING OFFICER HIMSELF ACCEPTED THAT THIS RECEIPT WAS CAPITAL IN NATURE. 12. AFTER HEARING THE LD. REPRESENTATIVES OF THE PA RTIES, WE NOTICE THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF ` 19,800/- AS THE SAID AMOUNT WAS SECURITY DEPOSIT AND NOT AGAINST THE PAYMENT OF CON TRACT WORK. THERE IS NO ERROR IN THE ORDER OF CIT(A). THEREFORE, ORDER OF THE CIT(A ) IS CONFIRMED ON THE ISSUE. THUS, GROUND NO.3 RAISED BY THE REVENUE IN ITS APPE AL IS DISMISSED. 13. GROUND NO.7 OF THE CROSS OBJECTION FILED BY THE ASSESSEE WAS NOT PRESSED BY THE LD. AUTHORISED REPRESENTATIVE, THEREFORE, THE S AME IS DISMISSED AS NOT PRESSED. ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 13 14. THE GROUND NO.8 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION REGARDING DEDUCTION UNDER SECTION 80L OF THE ACT IS CONSEQUEN TIAL IN NATURE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 15. THE GROUND NO.9 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS IN RESPECT OF CHARGING OF INTEREST UNDER SECTION 234B OF THE A CT WHICH IS CONSEQUENTIAL IN NATURE. THE ASSESSING OFFICER IS DIRECTED ACCORDIN GLY. THIS GROUND ALSO RELATES TO INITIATION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT WHICH IS PRE-MATURE GROUND AND THE SAME IS INFRUCTUOUS, THEREFORE DISMISSED. 16. IN THE RESULT, APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE, BOTH ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 04.05.2012) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 12 TH MAY, 2012 PBN/* ITA NO.330 & CO-79/AGR/2005 A.Y. 2001-02 14 COPY OF THE ORDER FORWARDED TO: APPELLANT RESPONDENT CIT CONCERNED CIT (APPEALS) CONCERNED D.R., ITAT AGRA BENCH, AGRA GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY