ACIT, JHUNJHUNU V. PARUL CONSTRUCTION CO., Jaipur

ITA 1047/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1795 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: K L MOOLCHANDANI CA DHK
• Keywords: Rejection of books of accounts; Depreciation
• Section: 145; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 1047/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE, JHUNJHUNU. CUKE VS. M/S PARUL CONSTRUCTION CO., VPO-KODESAR, JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACFP 3708 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI K.L. MOOLCHANDANI (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26/12/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/12/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE REVENUE EMANATES FRO M THE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 27/09/2016 FOR THE A.Y. 2013-14. THE ONLY ISSUE INVOLVED IN THE APPEAL IS AGAINST ALLOWING THE INTEREST PAID TO BANK AT RS. 85,28,468/-. 2. THE RETURN OF INCOME WAS E-FILED ON 21/09/2013 DEC LARING TOTAL INCOME OF RS. 3,92,09,964/-. THE CASE WAS SELECTED FO R SCRUTINY. THE ASSESSEE DERIVES INCOME FROM CIVIL CONSTRUCTION WORK . THE ASSESSEE HAS ITA 1047/JP/2016_ ACIT VS PARUL CONSTRUCTION CO. 2 SHOWN GROSS TURNOVER OF RS. 60,59,76,642/- AND GROSS PROFIT OF RS. 5,00,12,542/-. THE DEPRECIATION CLAIMED WAS RS. 26,28 ,393/-. THE ASSESSEE HAS ALSO SHOWN INTEREST INCOME OF RS. 89,58 ,980/-, THE SAME WAS CREDITED IN THE P&L ACCOUNT. THE ASSESSING OFFICE R REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 14 5(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND ESTIMATED THE NET PROFIT @ 8.5% SUBJECT TO DEPRECIATION, INTEREST AND REMUNERATION PAID TO THE PARTNERS. 3. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE ASS ESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT BUT ALLOWED THE BANK INTEREST AND CHARGES TO THE TUNE OF RS. 85,28,468/- CLAIMED BY THE ASSES SEE IN THE P&L ACCOUNT. THE REVENUE CLAIMS THAT THE LD. CIT(A) HAS A LLOWED THE BANK INTEREST AND OTHER CHARGES OF RS. 85,28,468/- WITHOU T CONSIDERING THE FACT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJEC TED AND THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNT FOR VERIFICATI ON BEFORE THE ASSESSING OFFICER. SINCE THE INTEREST EXPENDITURE AND CHARGES WERE UNVERIFIABLE DUE TO NON PRODUCTION OF BOOKS OF ACCOUNT, THEREFORE, T HE GENUINENESS OF THE EXPENDITURE IS NOT ESTABLISHED AND THE LD. CIT(A) ON THE ONE HAND CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT AND ON THE OTHER HAND ALLOWED THE APPEAL OF THE ASSESSEE ON THIS GROUND. TH E LD. CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UN DER: ITA 1047/JP/2016_ ACIT VS PARUL CONSTRUCTION CO. 3 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF APPELLANT, FINDINGS OF THE A.O AS ALSO OTHER RELEVANT FACTS RELATING TO THIS G ROUND. IT MAY BE NOTED THAT THE APPELLANT HAS OBJECTED TO THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME BY APPLYING NP RATE 8.5% S UBJECT TO DEPRECIATIONS, INTEREST AND REMUNERATION TO PARTNER S. AS PER A.O. THE APPELLANT NEVER PRODUCED BOOKS OF ACCOUNTS INCLUDIN G BILLS & VOUCHERS AND ONLY CASH BOOK WAS PRODUCED. THUS THE COMPLETE DETAILS OF CONTRACT EXPENSES VIZ A VIZ EXPENSES INCURRED UNDER DIFFEREN T HEADS WERE NOT FURNISHED. THE PURCHASES WERE NOT FULLY VOUCHED AND WHEN SPECIFICALLY ASKED, THE ASSESSEE RELIED UPON THE PAST HISTORY OF APPELLANT WHERE LUMPSUM DISALLOWANCES WERE CONFIRMED BY CIT(A). THE AO ACCORDINGLY INVOKED THE PROVISION OF SECTION 145(3) AND APPLIED PROFIT RATE OF 8.5% SUBJECT TO DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS WHICH RATE IS BASED ON JUDGEMENTS OF JAIPUR ITAT. ON CAREFUL CONSIDERATION OF RELEVANT FACTS IT MAY BE NOTED THAT THE A.O. HAS FIXED THE PROCEEDINGS ON DIFFERENT DATES AS MEN TIONED IN THE ASSESSMENT ORDER AND THE APPELLANT FAILED TO PRODUC E THE REGULAR BOOKS OF ACCOUNTS FOR EXAMINATION. IN THIS BACKGROUND IT CAN BE SAID THAT EXPENSES CLAIMED WERE NOT SUBJECT TO PROPER VERIFIC ATION AND THEREFORE THE BOOKS OF ACCOUNTS OF THE APPELLANT CANNOT CONSI DERED TO BE CORRECT OR COMPLETE AND THEREFORE THE A.O. HAS RIGHTLY REJE CTED THE BOOKS OF ACCOUNTS AND MADE THE ASSESSMENT IN THE MANNER PROV IDED U/S 144 OF IT ACT. THEREFORE THE ACTION OF THE A.O. IN REJECTI ON OF BOOKS OF ACCOUNTS AND APPLYING PROVISIONS OF 145(3) OF IT ACT IS CONF IRMED. AS REGARDS ESTIMATION OF PROFIT, IT MAY BE STATED THAT IT IS A SETTLED LAW THAT EVEN AFTER INVOKING THE PROVISIONS OF SEC. 145 (3), THE AO IS NOT EMPOWERED TO ASSESS THE INCOME AT WHATEVER FIGURES HE WANTS AND THE AO IS SUPPOSED TO MAKE AN HONEST ESTIMATION EITHER BASED ON THE PAST ITA 1047/JP/2016_ ACIT VS PARUL CONSTRUCTION CO. 4 HISTORY OF THE APPELLANTS OWN CASE OR ON THE BASIS OF ANY COMPARABLE CASE. THE PAST RESULTS MAY ALSO INDICATE THAT THE C LAIM OF THE EXPENSES SHOULD ALSO BE BROADLY SIMILAR TO THE PAST YEARS AN D IF THERE IS WIDE VARIATIONS THEN THERE SHOULD BE SPECIFIC REASONS FO R THE SAME. FOR SUCH PROPOSITION RELIANCE IS PLACED ON THE FOLLOWING CAS E LAWS: (I) M/S BRIJBHUSHAN LAI PRADHUMAN KUMAR VS. CIT, 1 15 ITR 524 (II) SHREE SHANKAR KHANDSARI SUGAR MILLS VS. CIT, 193 ITR 669 (II) CIT VS DR. A.P. BAHEL 2 DTR 387 (RAJ) (IV) CIT VS. SURESH MARBLES PVT. LTD. 18 DTR 118 ( RAJ) (V) SHRI RAM JHANWAR VS ITO (2005) 98 TTJ 639 (ITA T, JODHPUR) (VI) AJAY GOYAL VS. ITO 99 TTJ, ITAT, JODHPUR. LOOKING TO THE FACTS OF THE CASE AND CONSIDERING T HE DECISION OF HONBLE ITAT JAIPUR BENCH IN CASES OF RAJENDRA SINGH BHAMBO O AND JAGDISH PRASAD HUDDA, THE PROFIT RATE APPLIED AT 8.5% SUBJE CT TO DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS IS HEREBY CON FIRMED. FURTHER THE HONBLE BENCH IN THE AFORESAID CASES HAS ALLOWED TH E INTEREST PAID TO BANK. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS BHAWAN PATH NIRAMAN SAMITI REPORTED IN 258 ITR 440 ALSO AL LOWED INTEREST TO BANK AFTER APPLICATION OF PROFIT RATE. KEEPING IN M IND THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT AND TRIBUNAL (SUP RA), THE AO IS DIRECTED TO FURTHER ALLOW THE INTEREST PAID TO BANK FIRM THE INCOME COMPUTED AFTER APPLICATION OF NET PROFIT @ 8.5% SUBJECT TO D EPRECIATION, INTEREST AND REMUNERATION TO PARTNERS. THE GROUNDS OF APPEAL AND ADDITIONAL GROUNDS ARE PARTLY ALLOWED. 4. THE LD DR HAS RELIED ON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THE LD. CIT(A) IS COMPLETELY UNJUSTIF IED IN GRANTING RELIEF TO THE ASSESSEE. ITA 1047/JP/2016_ ACIT VS PARUL CONSTRUCTION CO. 5 5. ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HAS RELIED ON THE ORDER OF THE LD. CIT(A). 6. THE BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSUE . THE BENCH NOTE THAT THE ASSESSING OFFICER REJECTED THE BOOKS OF AC COUNT, WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A) IN HIS ORDER. THE LD. CIT( A) HAS DIRECTED TO ALLOW THE INTEREST PAID TO THE BANK ESTIMATING INCOM E @ 8.5% OF TURNOVER AND REJECTING BOOKS OF ACCOUNT. SINCE, THIS WAS THE EXPENDITURE DEBITED IN P&L ACCOUNT, WHICH NEEDS VERIFICATION FROM THE BOOKS OF ACCOUNT WHICH ASSESSEE HAD NOT PRODUCED BEFORE AUTHORITIES BELOW. FROM THE FINDINGS OF THE LD. CIT(A), IT IS NOT CLEAR WHETHER THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM AND WHY THE EXPENSES GOT SEPARATE TREATME NT WHEN BOOK RESULTS WERE REJECTED AND OTHER EXPENSES DEEMED TO H AVE BEEN ALLOWED. IN THIS BACKGROUND, THE BENCH DEEM IT FIT TO RESTOR E THE FILE TO THE ASSESSING OFFICER AND DIRECT THE ASSESSEE TO FILE N ECESSARY BOOKS OF ACCOUNT FOR VERIFICATION IN SUPPORT OF THE CLAIM. A CCORDINGLY, THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES ONLY. ITA 1047/JP/2016_ ACIT VS PARUL CONSTRUCTION CO. 6 ORDER PRONOUNCED IN THE OPEN COURT ON 27/12/2017. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 TH DECEMBER, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE, JHUNJHUNU. 2. IZR;FKHZ @ THE RESPONDENT- M/S PARUL CONSTRUCTION CO., JHUNJHUN U. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1047/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR