M/s. Aarkee Engineers, Ahmedabad V. The Income tax Officer, Ward-2(5), Baroda

ITA 1005/AHD/2006

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0104 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-01-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 24-04-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: ANIL R SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 19/ 01 /2010 DRAFTED ON: 19/ 01/2010 ITA NO.1005/AHD/2006 ASSESSMENT YEAR : 2001-02 M/S.ARKEE ENGINEERS 5/B, CHETNA SOCIETY HARIOM NAGAR ROAD RACE COURSE, BARODA VS. THE ITO WARD-2(5) BARODA PAN/GIR NO. : AACFA 0034 C (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI ANIL R.SHAH, A.R. RESPONDENT BY: SHRI C.K.MISHRA, SR. D.R. O R D E R PER BHAVNESH SAINI, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.CIT(APPEALS)-II, BARODA, DATED 10/03/2006 PASSE D FOR ASSESSMENT YEAR 2001-02. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE LOWER AUTHORITIES AND CONSIDERE D THE MATERIAL AVAILABLE ON RECORD. 3. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUND NOS.4 & 5. THESE GROUNDS OF APPEALS OF THE ASSESSEE ARE, ACCOR DINGLY, DISMISSED AS NOT PRESSED. ITA NO .1005 /AHD/2006 M/S.AARKEE ENGINEERS VS. ITO ASST.YEAR 2001-02 - 2 - 4. THE ONLY ADDITION IS NOW CHALLENGED OF RS.6,21,0 59/- ON ACCOUNT OF ADDITION MADE FOR GROSS PROFIT BY REJECTING THE BOO K RESULTS U/S.145 OF THE I.T. ACT, 1961 ON WHICH ASSESSEE HAS RAISED GROUND NOS.1 TO 3. 5. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT GR OSS PROFIT HAS FALLEN STEEPLY FROM THE LAST YEAR FIGURE OF 27.9% TO 13.4 7% THIS YEAR. THE ASSESSING OFFICER NOTED THAT THE BOOK RESULTS OF TH E ASSESSEE CANNOT BE ACCEPTED BECAUSE THE BOOKS OF ACCOUNT OF THE ASSESS EE ARE NOT CORRECT AND COMPLETE. BOOK RESULTS WERE ACCORDINGLY REJECTED U /S.145(2) OF THE I.T. ACT, 1961. IT HAS BEEN NOTICED BY THE ASSESSING OF FICER THAT THE ASSESSEE HAS NOT MAINTAINED REGISTERS, SUCH AS, DAY-TO-DAY C ONSUMPTION REGISTER, STOCK REGISTER, PURCHASE REGISTER, ETC. IN THE A BSENCE OF SUCH RECORDS, IT WAS NOT POSSIBLE TO VERIFY THE CORRECTNESS OF THE P URCHASES AND CONSUMPTION OF THE RAW-MATERIAL. THE EXPENDITURE W ERE ALSO NOT SUBJECTED TO VERIFICATION AND WORK-IN-PROGRESS OF THE CLOSING STOCK COULD NOT HAVE BEEN VERIFIED. IN VIEW OF THE ABOVE AFTER REJECTI ON OF THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS ESTIMATED THE GR OSS PROFIT RATE AT 23.39% TAKING THE AVERAGE OF THREE PRECEDING ASSESS MENT YEARS AND, ACCORDINGLY, MADE AN ADDITION OF RS.6,21,059/-. 6. IT WAS SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT ASSESSEE IS CARRYING ON JOB ORIENTED WORK, UNLIKE OTHER CIVIL CONTRACTORS AND WAS NOT MAINTAINING ANY TRADING ACCOUNT SHOWING OPENING AND CLOSING STOCK. IT WAS, FURTHER, CONTENDED THAT THIS METHOD IS CONSIST ENTLY FOLLOWED AND NOT DISTURBED BY THE REVENUE DEPARTMENT. IT WAS SUBMIT TED THAT ADDITION IS, THEREFORE, UNJUSTIFIED. THE LEARNED CIT(APPEALS) CONSIDERING THE SUBMISSION OF THE ASSESSEE IN THE LIGHT OF THE OBJE CTIONS RAISED BY THE ITA NO .1005 /AHD/2006 M/S.AARKEE ENGINEERS VS. ITO ASST.YEAR 2001-02 - 3 - ASSESSING OFFICER, NOTED THAT THERE IS A STEEP FALL IN THE PROFIT, THEREFORE, ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDIT ION. ADDITION WAS ACCORDINGLY CONFIRMED. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T ASSESSEE IS A PARTNERSHIP-FIRM ENGAGED IN THE BUSINESS OF CIVIL C ONSTRUCTION AND FURTHER MAINTENANCE WORK OF IPCL IN THE FORM OF ANNUAL MAIN TENANCE CONTRACT. THE MAIN WORK INVOLVED IS CIVIL WORK, CARPETING, MI SSIONARY/PLASTERING, PLUMPING, DRAINAGE WORK, GRASS-CUTTING, FABRICATION AND ANY OTHER WORK SPECIFICALLY REQUIRED FOR MAINTENANCE. HE HAS SUB MITTED THAT ASSESSEE DID NOT DO ANY OTHER WORK FOR OTHER PARTIES, THEREFORE, THERE WAS NO NEED TO MAINTAIN THESE STOCK REGISTERS. HE HAS REFERRED TO PAPER-BOOK 84 WHICH IS THE CONTRACT WITH IPCL TO SHOW THAT PROFIT MARGIN I S ABOUT 8% OUT OF THE WORK ASSIGNED BY IPCL. HE HAS ALSO REFERRED TO PA PER-BOOK 68 WHICH IS THE CHART OF THE GROSS PROFIT AND NET PROFIT RATE F OR THE PRECEDING SUBSEQUENT ASSESSMENT YEARS TO SHOW THAT THE NET PR OFIT OF THE ASSESSEE VARIES FROM 8.04% TO 10.08% IN SIX ASSESSMENT YEARS INCLUDING THE ASSESSMENT YEAR IN QUESTION. HE HAS SUBMITTED THAT THE INCOME IS FROM THE JOB-WORK, THEREFORE, FINDINGS OF THE AUTHORITIES BE LOW ARE FACTUALLY INCORRECT AND ADDITION IS LIABLE TO BE DELETED. 8. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT ADDITION IS STILL ON EXCESSIVE SIDE AND REQUIRES MO DIFICATION. THE ITA NO .1005 /AHD/2006 M/S.AARKEE ENGINEERS VS. ITO ASST.YEAR 2001-02 - 4 - ASSESSING OFFICER HAS POINTED OUT SPECIFIC INSTANCE S FOR THE PURPOSE OF REJECTION OF THE BOOK RESULTS. THE LD. COUNSEL FO R THE ASSESSEE ALSO ADMITTED THAT NO STOCK REGISTER IS MAINTAINED BECAU SE ASSESSEE WAS DOING THE WORK OF IPCL. HE HAS SUBMITTED THAT SINCE ON LY THE WORK OF IPCL IS DONE, THEREFORE, THE MATERIAL REMAINED AT THIS SPOT WHICH WOULD BE OPENING STOCK IN THE NEXT YEAR. THE ABOVE SUBMISSION OF TH E LD. COUNSEL FOR THE ASSESSEE CLEARLY SHOWS THAT BOOK RESULTS OF THE ASS ESSEE WERE NOT CORRECTLY ACCEPTED BY THE ASSESSING OFFICER. IN THE ABSENCE OF STOCK REGISTER, IT WAS NOT POSSIBLE TO VERIFY THE UTILIZATION OF THE MATER IAL WHILE COMPLETING THE CONTRACT WORK ASSIGNED BY IPCL. THE OTHER FACTORS NOTED BY THE ASSESSING OFFICER CLEARLY PROVED THAT THE EXPENDITU RE OF THE ASSESSEE ALONGWITH PURCHASES ARE NOT SUBJECTED TO VERIFICATI ON. CONSIDERING THE FINDINGS OF THE AUTHORITIES BELOW AND SPECIFIC INST ANCES NOTED BY THE ASSESSING OFFICER, WE ARE OF THE VIEW THAT ASSESSI NG OFFICER WAS JUSTIFIED IN REJECTING THE BOOK RESULTS U/S.145(2) OF THE I.T . ACT, 1961 BECAUSE OF THE SPECIFIC DISCREPANCIES NOTED BY THE ASSESSING OFFIC ER IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER, THE FACT REMAIN ED THAT THE ASSESSEE WAS DOING JOB-WORK ONLY FOR ONE PARTY; I.E. IPCL. IT IS GENERALLY SEEN THAT IN THE JOB-WORK, THE PROFIT MARGIN IS ALWAYS LOWER AS COMPARED TO THE WORK DONE BY THE CONTRACTOR DOING THE CIVIL CONSTRUCTION WORK. THE ASSESSEE HAS SHOWN NET PROFIT RATE OF 8.04% IN THE ASSESSMEN T YEAR IN QUESTION AND IN THE PRECEDING ASSESSMENT YEARS THE SAME REMAINED AT 9.40%, 9.50% AND 10.08%. IN THE SUBSEQUENT ASSESSMENT YEARS, THE N ET PROFIT REMAINED AT 8.95% AND 9.51%. CONSIDERING THE HISTORY OF THE AS SESSEE AND ASSESSEE WAS DOING ONLY THE JOB-WORK FOR ONE PARTY, IT COULD BE REASONABLE AND PROPER TO MAKE LUMP-SUM ADDITION INSTEAD OF TAKING THE AVERAGE GROSS ITA NO .1005 /AHD/2006 M/S.AARKEE ENGINEERS VS. ITO ASST.YEAR 2001-02 - 5 - PROFIT RATE ON THE BASIS OF PRECEDING ASSESSMENT Y EARS. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO MAKE THE ADDITION O F RS.2,50,000/- INSTEAD OF RS.6,21,059/- IN ALL ON THIS ISSUE. 10. AS A RESULT, WE MODIFY THE ORDERS OF THE AUTHOR ITIES BELOW AND RESTRICT THE ADDITION TO RS.2,50,000/- ONLY AS AGAI NST RS.6,21,059/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(APPEALS). 11. AS A RESULT, GROUND NOS.1, 2 & 3 OF THE APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED. 12. NO OTHER POINT IS ARGUED OR PRESSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 22/ 01 /2010 SD/- SD/- ( A.N. PAHUJA ) ( BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/ 01 /2010 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT 3. THE CIT CONCERNED. 4. THE L D. CIT(APPEALS)-II, BARODA 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FI LE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD