M/s. Star Constructions, Srinagar (KMR) V. The Addl. Commissioner of Incomet-ax, Srinagar (KMR)

ITA 106/ASR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76962 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Depreciation
• Section: 44AD; 40A(3); 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 106(ASR)/2012 ASSESSMENT YEAR: 2007-08 PAN: AATFS0796A M/S STAR CONSTRUCTIONS, VS. THE ASSISTANT COMMIS SIONER ALNOOR SHOPPING COMPLEX, OF INCOME TAX, SRINAGAR RANGE, HYDERPORA BY PASS ROAD, SRINAGAR SRINAGAR, KMR (APPELLANT) (RESPONDENT) AND I.T.A. NO. 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 PAN: AATFS0796A DEPUTY COMMISSIONER OF VS. M/S STAR CO NSTRUCTIONS, OF INCOME TAX, CIRCLE-3, SRINAGAR, SHAH ANWAR COLONY, HYDERPORA BY PASS, SRINAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. S.K. KAUL, ADV. DEPARTMENT BY: SH. MAHAVIR SINGH, SR. DR DATE OF HEARING: 05.05.2014 DATE OF PRONOUNCEMENT: 20.05.2014 ORDER PER BENCH 1. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE IMPUGNED ORDER 06.12.2011 P ASSED BY LEARNED 2 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 CIT(A), JAMMU, FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: I. THE ORDER PASSED BY THE AUTHORITIES BELOW IS NON-SP EAKING ORDER. II. THAT THE ENTIRE ASSESSMENT IS PREDETERMINED AFFAIR BASED ON WHIMS, ASSUMPTIONS AND PRESUMPTIONS AS THERE IS NOTHING ON RECORD TO SUGGEST THAT THE RECORDS MAINTAINED ARE INCORRECT A ND UNRELIABLE. III. THE BOOKS OF ACCOUNTS HAVE NOT BEEN CHALLENGED AS N O SPECIFIC DEFECTS WERE EITHER POINTED OUT OR CONVEYED TO THE APPELLANT. THE COURSE TO SECTION 145(3) IS UNCALLED FOR. IV. THAT THE AUTHORITY BELOW HAS IN TOTALITY THE FACTS AND MATERIAL EVIDENCE PLACED ON RECORD AND WITHOUT RECORDING OR FINDING ANY ERROR CONTRARY TO THE FACTS ON RECORD, HAS IN AN AR BITRARY MANNER REJECTED THE BOOK RESULTS OF THE APPELLANT. V. THAT THE INTEREST U/S 234A/B AND C HAS BEEN CHARGED ERRONEOUSLY AS THERE IS NO DEFAULT UNDER THE PROVISIONS OF THE ACT AS THE PAYMENTS ARE DEDUCTED AT SOURCE IN RESPECT OF THE O NLY INCOME THAT IS TAXED BY THE AUTHORITIES BELOW. VI. THAT THE APPELLANT CRAVES LEAVE TO ADD/AMEND ANY GR OUND OF APPEAL AT THE TIME OF HEARING OF THE APPEAL. PRAYER:- THEREFORE, IN THE PREMISES, IT IS PRAYED THAT THE G ROUNDS OF APPEAL URGE BE CONSIDERED AND RELIEF GIVEN TO THE APPELLAN T. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN DIRECTING THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 6.5% OF THE TOTAL RECEIPTS INSTEAD OF 9% APPLIED BY THE ASSESSING OFFICE WHEN THE BOOK S OF ACCOUNT WERE FOUND INCOMPLETE AND REJECTED U/S 1459 3 OF THE OF THE INCOME TAX ACT, 1961. II. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT DIRECTING THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 6.5% OF THE TOTAL RECEIPTS INSTEAD OF 9% APPLIED BY THE ASSESSING OFFICER IN VIEW OF T HE DECISION OF HON'BLE I.T.A.T. CHANDIGARH A BENCH I N 3 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 THE CASE OF M/S SHIVAM CONSTRUCTION CO. AND AFFIRME D BY THE HON'BLE HIGH COURT OF PUNJAB & HARYANA IN TH EIR ORDER IN ITA NO. 183 OF 2007 DATED 14.05.2007. III. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN DIRECTING THE ASSESSING OFFICE R TO ADOPT NET PROFIT RATE OF 6.5% OF THE TOTAL RECEIPTS INSTEAD OF 9% APPLIED BY THE ASSESSING OFFICER WHEN THE JURISDICTIONAL BENCH OF I.T.A.T. AMRITSAR IN THE CA SE OF M/S POOJA CONSTRUCTION CO., REPORTED IN ITA NO. 750(ASR)/1992 HAD HELD THAT THE APPLICATION OF NET PROFIT RATE OF 10% ON GROSS RECEIPTS IS PROPER. THE SAID O RDER OF THE JURISDICTIONAL I.T.A.T. HAS BEEN CONFIRMED BY T HE HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THEIR ORD ER IN ITA NO. 166 OF 1999 DATED 10.09.2010 IV. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS IN INCLUDING THE INTEREST ON FDRS IN THE NET PROFIT RATE WHEN THE INTEREST ACCRUED ON FDRS IN TH E NET PROFIT RATE WHEN THE INTEREST ACCRUED ON FDRS HAS NOTHING TO DO WITH CONTRACT INCOME AND BOTH ARE INDEPENDENT OF EACH OTHER. V. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MOR E GROUNDS OF APPEAL. 3. THE FACTS NARRATED BY LEARNED FIRST APPELLATE AU THORITY IN PARA NOS. 3 & 4 (PAGE NOS. 2 TO 4) OF THE IMPUGN ED ORDER ARE NOT DISPUTED BY BOTH THE PARTIES, THEREFORE FOR THE SAKE OF CONVENIENCE, THE SAME ARE REPRODUCED AS UNDER:- 3. BRIEF FACTS ARE THAT THE RETURN OF INCOME WAS FILED ON 23.11.2007 SHOWING AN INCOME OF RS. 41,70,930/-. TH E ASSESSEE IS ENGAGED IN THE BUSINESS AS CIVIL CONTRA CTOR. DURING THE YEAR THE GROSS CONTRACT RECEIPTS SHOWN WERE AT RS. 19,14,43,601/- AND A NET PROFIT AT 2.17%. DURING TH E ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE TO SUBMIT DETAILS IN RESPECT OF MATERIAL PURCHASES AS SHOWN A T RS. 16,34,19,940/-. THE A.O. NOTED THAT A TOTAL CASH PU RCHASES WERE MADE AT RS. 4,54,55,530/- DURING THE YEAR. THE ADDRESSES 4 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 OF SELLERS WERE NOT PROVIDED AND THE DETAILS WERE N OT SUPPORTED BY THE BILLS/VOUCHERS. THE A.O. NOTED THA T IN VIEW OF THIS, THE CASH PURCHASES MADE WERE NOT VERIFIAB LE. SIMILARLY IN RESPECT OF LABOUR CHARGES IT WAS OBSER VED BY THE A.O. THAT THEY TOO WERE ALSO NOT COMPLETELY VERIFIA BLE. ON A SHOW CASE ISSUED BY THE A.O. AS TO WHY THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED U/S 145(3) OF I.T. ACT, THE ASSESSEE REPLIED TO A.O. AS UNDER; THE ASSESSEE OPPOSES THE APPLICATION ON THE GROUND THAT COMPLETE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED IN SUPPORT OF THE SUBMISSION BASED ON FINANCIAL STATEM ENTS. THE ASSESSEE RESPECTIVELY SUBMITS APPLICATION OF NE T PROFIT RATE OF 10% AS DESIRED WILL NOT BE IN THE INTERESTS OF JUSTICE & EQUITY. IT WILL BE PERTINENT TO MENTION HERE THAT LAW DOES NOT OBLIGE THE TRADER TO EARN MAXIMUM PROFITS NOR D OES IT BRING PROFITS TO TAX WHICH COULD HAVE BUT DID NOT E ARN. IT MAY BE FURTHER SUBMITTED HERE THAT EVEN ASSESSEE CA RRYING AN ILLEGAL BUSINESS IS ENTITLE TO CLAIMS OF LOSS/IN CIDENTAL TO SUCH BUSINESS, WHERE AS MY ASSESSEE IS DOING GENUIN E BUSINESS IS BEING REFUSED TO INCIDENTAL EXPENSES. I INVITE YOUR KIND ATTENTION TO 67 ITR PAGE 11 & 113 ITR PAG E 467. AS A MATTER OF FACT THE DESIRED APPLICATION OF NET N.P. RATE OF 10% WILL BE FATAL FOR ASSESSEE & WE SEE NO REASO N FOR SUCH APPLICATIONS. OUR ACCOUNTS & TRADING RESULTS A RE AT PAR WITH SALES TAX & OUR RELIANCE ON THE SAID ASSES SMENT CANNOT BE BRUSHED ASIDE. THIS IS A SIMPLE CASE WHER E THERE CAN BE MINOR DISAGREEMENTS/AGREEMENTS BUT IT IS CER TAINLY NOT A CASE OF APPLICATION OF RATE. THEREFORE, IT IS PRAYED THAT OUR SUBMISSION MAY B E CONSIDERED AND JUSTICE DONE WITH THE ASSESSEE. BEFORE CONCLUDING IT IS WITH DEGREE OF GREAT EFFORT PUT IN BY THE ASSESSEE FOR EARNING PROFITS AS AT THE BEGINNIN G OF THE JOBS WITH IRCON, THE RATES QUOTED FOR TENDER7 RATES AT THE TIME OF EXECUTION OF WORK HAVE GONE VERY HIGH. THIS IS DUE TO THE FACT THAT ENTIRE VALLEY WAS FOLDED & THE COS T OF RAW MATERIAL ESPECIALLY BRICKS WERE ALL TIME HIGH MORE THAN 70% WITH THIS RISE IN THE PRICES THE ASSESSEE COULD NOT COPE 5 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 UP WITH THE WORK WHICH LED TO TERMINATION OF CONTRA CTS. THIS SUBMISSION IS SUPPORTED BY TERMINATION LETTERS ISSU ED BY IRCON INTERNATIONAL LTD. & HAS ALSO AFFECTED OUR FU TURE WORKS, RESULTING IN DRASTIC DECLINE IN TURNOVER FOR SUBSEQUENT YEARS. FURTHER THE IRCON HAS FORFEITED OUR SECURITY DEPOSITS AMOUNTING TO RS. 31.00 LACS IN PL ACE OF ENCASHMENT OF BANK GUARANTEES. KEEPING THESE FACTS IN VIEW, IT MAY BE SUBMITTED TH AT THE ASSESSEE DESERVES A TREATMENT RATHER THAN PUNISHMEN T. THEREFORE, IT IS PRAYED THAT OUR SUBMISSION MAY BE CONSIDERED AND JUSTICE DONE WITH THE ASSESSEE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE A.O. REJECTED THE BOOKS OF ACCOUNTS OF ASSESSEE AND GIVI NG ALLOWANCE FOR THE RISING COST OF RAW MATERIAL DUE T O WHICH SOME CONTRACT OF ASSESSEE WAS TERMINATED, AS SUBMIT TED BY THE ASSESSEE, ESTIMATED THE NET PROFIT OF ASSESSEE AT 9 % INSTEAD OF 10% AS PER SHOW CAUSE NOTICE. THE REASONS ADVANCED FOR SUCH REJECTION, AS ADVANCED BY THE A.O. ARE AS UNDER: DURING THE ASSESSMENT PROCEEDINGS AS DISCUSSED ABO VE, THE A.R./ ASSESSEE PRODUCED WAGE SHEETS IN THE SUPP ORT OF LABOUR EXPENSES WHICH HAVE BEEN EMPLOYED BY THE ASS ESSEE. THE RECORD PRODUCED BY THE A.R. WAS EXAMINED AND IT WAS NOTED THAT THE SAME SUFFERS FROM MANY DEFECTS. THE WAGE SHEETS FOR DAILY LABOUR EMPLOYED BY THE ASSESSEE WE RE NOT CONTAINING ANY PARAMETER WHICH IS VERIFIABLE. THE A .R. DID NOT PRODUCE ANY VOUCHER IN THE SUPPORT OF PAYMENTS MADE TO THE LABOUR. NO DAILY ATTENDANCE REGISTERS WERE P RODUCED. THE ASSESSEE WAS DOING ITS WORK FOR DIFFERENT PARTI ES AT DIFFERENT SITES. THE WAGE SHEETS PRODUCED WERE NOT HAVING ANY DETAIL FOR THE SITE WHERE THE WORK HAS BEEN DON E. ALL THE SHEETS PRODUCED FOR DIFFERENT MONTHS HAVE BEEN PREPARED MECHANICALLY ON COMPUTERIZED SHEETS AND HA VE BEEN SIGNED. HOW IT IS POSSIBLE THAT THE ASSESSEE W HO HAS BEEN WORKING AT DIFFERENT SITES WE ABLE TO GET LABO UR SHEETS SIGNED BY ALL THE LABOURERS ON A SINGLE SHEET SERIA LLY FOR ALL THE SITE TOGETHER. IT IS NOT CLEAR HOW WORKERS WORK INGS AT 6 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 DIFFERENT SITE HAVE SIGNED THE SAME SHART ALTOGETHE R. THEREFORE, IT IS NOT POSSIBLE EVEN TO VERIFY THE G ENUINENESS OF THE EXPENSE CLAIM ON ACCOUNT OF PAYMENT MADE TO THE LABOUR. THE WAGE RECEIPTS WERE JUST HAVING NAMES OF THE LABOURERS. IT WAS NOT CONTAINING VERIFIABLE INFORMA TION. IN VIEW OF THESE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS NOT PRODUCED THE RECORD IN THE SUPPORT OF LABOUR EXPENS ES CLAIMED IN ITS BOOKS OF ACCOUNT WHICH IS GENUINELY VERIFIABLE AND WHICH COULD HAVE BEEN SUBSANTED THE CLAIM OF EXPENSE. THE CLAIM FOR LABOUR EXPENSES IS NOT SU PPORTED BY PROPER DOCUMENTARY EVIDENCE. THE RECORD PRODUCED DURING THE PROCEEDINGS FOR THE WAGES IS NOT FOUND T O BE GENUINE AND VERIFIABLE. FURTHER THE A.R. PRODUCED THE RECORD FOR THE CASH PURCHASES MADE FOR THE MATERIAL. ON GOING THROUGH T HE DOCUMENTARY EVIDENCE AS PRODUCED BY THE A.R., IT WA S NOTED THAT THE SUBSTANTIAL PORTION OF THESE PURCHAS ES HAVE BEEN PAID THROUGH SELF PREPARED VOUCHERS. ON THE PE RUSAL OF THE VOUCHERS, IT WAS NOTED THAT THERE WAS NO VER IFIABLE PARTICULAR MENTIONED IN THESE SELF MADE VOUCHERS BY THE ASSESSEE. THESE WERE NOT EVEN SIGNED BY THE PERSON WHO HAS RECEIVED THE PAYMENTS HAVE BEEN MADE FOR RS. 20,000 /- ON MOST OF OCCASIONS IN CASH. THEREFORE, THE EVIDENCE PRODUCED BY THE A.R. IN THE SUPPORT OF CASH PURCHAS ES MADE WAS FOUND TO BE NON-VERIFIABLE. THEREFORE, IT IS NO TED THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS PURCHASES M ADE IN CASH THROUGH NECESSARY EVIDENCE. THE EVIDENCE PRODU CED WAS NOT HAVING ANY PARTICULAR THROUGH WHICH ITS GENUINENESS COULD HAVE BEEN VERIFIED. NO ADDRESS OF THE PERSON TO WHOM PAYMENT HAS BEEN MADE WAS NOT RECORD ED. THE ASSESSEE HAS NOT BEEN MARINATING ANY STOCK REGI STER FOR THE MAJOR MATERIALS BEING CONSUMED IN THE CONSTRUCT ION ACTIVITIES BEING DONE AT VARIOUS SITES. IN THE ABSE NCE OF WHICH IT WAS NOT POSSIBLE TO VERIFY THE FIGURE OF C LOSING STOCK WHICH HAS BEEN SHOWN BY THE ASSESSEE AT RS. 32,30,357/- IN THE FORM OF CLOSING STOCK AND WIP. I N THIS CASE, THIS FACT IS NOT VERIFIABLE BECAUSE NO RECORD HAS BEEN MAINTAINED FOR THIS PURPOSE. 7 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 4. THE A.O. IN ADDITION TO THIS, MADE AN EXERCIS E AND DISCUSSED THE SAME IN ASSESSMENT ORDER AS TO WORKIN G OUT THE DISALLOWANCE U/S 40A(3) OF I.T. ACT, AT RS. 19,83,8 76/-. HE ALSO RE-CASTED THE STOCK POSITION AND HELD THAT AS PER HIS WORKING THE CLOSING WORK-IN-PROGRESS SHOULD HAVE BE EN AT RS. 1,09,39,907/- INSTEAD OF RS. 32,30,357/- SHOWN BY A SSESSEE. IN VIEW OF ESTIMATION OF NET PROFIT RATE @ 9% HE MADE NO ADDITION SEPARATELY. HE MADE ONLY ON ADDITION OTHER THAN THE APPLICATION OF PROFIT RATE I.E. INTEREST ON FDRS TO THE EXTENT OF RS. 1,82,000/-. 4. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT O N 30.12.2009 FOR THE ASSESSMENT YEAR 2007-08 UNDER SE CTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) AND MADE THE ADDITION IN DISPUTE. AGGRIEVED BY THE ASSE SSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LEAR NED FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 06.12.2011, PARTLY ALLOWED THE APPEAL OF THE ASSESS EE AND GAVE RELIEF TO THE ASSESSEE BY REDUCING THE NET PROFIT R ATE FROM 9% TO 6.5%. NOW, BEING AGGRIEVED WITH THE IMPUGNED ORD ER, BOTH THE ASSESSEE AND THE REVENUE HAVE FILED THE PRESENT APPEALS. 5. AT THE TIME OF HEARING, LEARNED DR RELIED UPON T HE ORDER PASSED BY THE ASSESSING OFFICER AND ON THE CO NTRARY LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE GR OUNDS OF APPEAL RAISED BY THE ASSESSEE. 8 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITY AND WE ARE OF THE V IEW THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY U PHELD THE ACTION OF THE ASSESSING OFFICER FOR REJECTING THE B OOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT AND RIGHTLY REDUCED THE NET PROFIT RATE AT 6.5% FROM 9% ON THE BASIS OF VARIOUS DECISIONS CITED IN THE IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDINGS OF THE LEARNED F IRST APPELLATE AUTHORITY, ON THE ISSUES RAISED BY BOTH T HE PARTIES IN THE PRESENT APPEALS, IN PARA NOS. 8, 9 & 10 (PAGE N OS. 10 TO 11), ARE REPRODUCED AS UNDER: 8. IN VIEW OF THE ABOVE DISCUSSION, I FIND THERE EXISTED VALID REASONS BEFORE A.O. FOR REJECTION OF BOOKS RE SULTS. FROM THE CHART FOR NET PROFIT FILED BY THE ASSESSEE, IT IS ALSO FOUND THAT THE NET PROFIT AS WELL AS GROSS PROFIT IN THIS YEAR IS LOWER THAN THE IMMEDIATELY PRECEDING YEAR, THOUGH THIS NO T PRECISELY THE REASON FOR WHICH THE BOOKS OF ACCOUNTS WERE REJ ECTED U/S 145(3) OF THE I.T. ACT, AFTER CONSIDERING THE ABOVE DISCUSSION MADE BY ME AS ABOVE, I HOLD THAT THE ACTION OF A.O. IN REJECTING THE BOOKS OF ACCOUNT WAS JUSTIFIED. 9. AS FOR AS APPLICATION OF NET PROFIT RATE IS CO NCERNED, THE RELIANCE OF ASSESSEE ON THE DECISION OF HON'BLE I.T.A.T., AMRITSAR IN CASE OF M/S ASSOCIATED CONTRACTORS IS M ISPLACED WHERE A NET PROFIT PERCENTAGE @ 4% WAS APPLIED, AS THAT CASE HAPPENED TO BE OF A TRANSPORT CONTRACTOR AND HENCE NOT COMPARABLE. WHILE RELYING ON ANOTHER CASE OF M/S 9 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 CONSTRUCTION ENGINEERS THE ASSESSEE HAS CONTENDED T HAT IN VIEW OF THE FACTS IN ITS CASE EVEN A PERCENTAGE LOW ER THAN 6.5% AS APPLIED IN THE CASE OF M/S CONSTRUCTION ENG INEERS, HAS TO BE APPLIED, IN VIEW OF COMPLIANCE BY THE ASSESSE E AND THE FACT THAT ORDER IN THIS CASE IS PASSED U/S 143(3) O F I.T. ACT WHEREAS IN CASE OF M/S CONSTRUCTION ENGINEER, THE O RDER WAS PASSED U/S 144 OF I.T. ACT. I HAVE CAREFULLY CONSID ERED THE PLEA OF ASSESSEE AND FIND THAT AS PER RETURN OF INC OME THE NET PROFIT RATE WAS SHOWN AT 2.17%. THE REJECTION OF BO OKS OF ACCOUNTS U/S 145(3) OF I.T. ACT BY THE A.O. HAS ALR EADY BEEN UPHELD. IT IS TRUE THAT THE TOTAL TURNOVER SHOWN IS AT RS. 19,14,43,601/- WHICH IS COMPARABLE TO THE CASE OF M /S CONSTRUCTION ENGINEER & THE BENCHMARK OF PROFIT RAT E @ 8% IS IN RESPECT OF CASES WHERE THE TURNOVER IS LESS THAN 40 LACS AS PER THE PROVISION OF SECTION 44AD OF I.T. ACT. THE MORE THE TURNOVER, THE LESSER THE PROFITS IS ALSO TO BE CONS IDERED. TAKING TOTALITY OF THE CIRCUMSTANCES AND FOLLOWING THE DEC ISION OF HON'BLE I.T.A.T., AMRITSAR IN CASE OF M/S CONTRACTI ON ENGINEER, I DEEM IT FIT TO APPLY A NET RATE OF PROF IT @ 6.5% SUBJECT TO NO DEDUCTION ON ACCOUNT OF DEPRECIATION, AS DONE IN THAT CASE. THE ADDITION OF RS. 1,82,000/- ON ACCOUN T OF INTEREST OF FDRS IS ALSO TO BE INCLUDED IN THIS NET RATE OF PROFIT IN VIEW OF THE DECISION OF HON'BLE HIGH COURT OF PUNJAB AND HARYANA IS CASE OF M/S AGGRAWAL ENGG. CO. 206 CTR 648 WHERE IN IT IS HELD THAT NO OTHER ADDITION COULD BE MADE IN CASE T HE NET PROFIT-RATE IS APPLIED. IT IS TO BE MENTIONED THAT THE INTEREST INCOME IS TAKEN AS BUSINESS INCOME IS THE ASSESSMEN T ORDER. DURING THE COURSE OF APPELLATE PROCEEDINGS FOLLOWI NG ADDITIONAL GROUNDS WERE FILED, FOR CONSIDERATION: (I) THAT THE APPELLANT HAS BEEN WRONGLY DISALLOWED OF THE BENEFITS OF SALARY AND INTEREST PAID TO THE PARTNER S INCLUSIVE OF DEPRECIATION IN THE ASSESSMENT COMPLET ED U/S 143(3) (II) THAT THE BENEFIT OF THE STATUS OF FIRM HAS BE EN DENIED FOR WRONG REASONS WHICH IS UNJUST AND ARBITRARY AND NOT PERMISSIBLE BY THE LAW IN FORCE. 10 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 IT IS SEEN THAT THESE GROUNDS ARISE FROM THE ASSESS MENT ORDER AND BEING LEGAL IN NATURE, ARE TO BE ADMITTED. 10. GROUND NO. 2 IS PRECISELY WHAT IS GROUND NO. 1 . THE ALLOWANCE OF DEPRECIATION IS NOT TO BE CONSIDERED, AS DISCUSSED IN THIS ORDER, FOLLOWING THE DECISION OF HON'BLE I. T.A.T., AMRITSAR IN CASE OF U/S CONSTRUCTION ENGINEER AS FO R AS ALLOWANCE OF SALARY AND INTEREST IS CONCERNED, IT I S NOTED THAT THE ASSESSMENT IS MADE U/S 143(3) OF THE I.T. ACT. THE ALLOWANCE OF SALARY AND INTEREST IS BARRED IN VIEW OF VIOLATION OF SECTION 184(5) OF THE I.T. ACT, WHICH IS NOT APP LICABLE IN THE PRESENT CASE. IN VIEW OF THIS SALARY AND INTERE ST PAYABLE TO PARTNERS IS ALLOWABLE AND HENCE ALLOWED. 7. KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMST ANCES AND THE RELEVANT FINDINGS OF LEARNED FIRST APPELLAT E AUTHORITY REPRODUCED ABOVE, WE ARE OF THE VIEW THAT THE LEARN ED FIRST APPELLATE AUTHORITY HAS REDUCED THE NET PROFIT RATE ON THE BASIS OF COMPARATIVE CHART OF NET PROFIT FOR A.Y. 2005-06 AND 2006- 07 AS WELL AS THE MATERIALS AVAILABLE ON RECORD AND THE CASE- LAWS CITED BY THE PARTIES. LEARNED FIRST APPELLATE AUTHORITY HAS ALSO DISCUSSED IN DETAIL THE DECISIONS OF THIS BENC H IN THE CASE OF M/S ASSOCIATED CONTRACTORS PASSED IN ITA NO. 121(ASR)/2010, DATED 11.06.2010 AS WELL AS IN THE C ASE OF M/S CONSTRUCTION ENGINEERS PASSED IN ITA NO. 266(ASR)/2 010, DATED 24.12.2010, AND REDUCED THE NET PROFIT RATE @ 6.5% FROM 9% ADOPTED BY THE ASSESSING OFFICER. THUS, WE FIND NO 11 I.T.A. NOS. 106 & 126(ASR)/2012 ASSESSMENT YEAR: 2007-08 INFIRMITY IN THE IMPUGNED ORDER. THEREFORE, THE IMP UGNED ORDER DATED 06.12.2011 PASSED BY LEARNED CIT(A), JA MMU IS UPHELD AND THE APPEALS FILED BY THE ASSESSEE AS WEL L AS BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE AS WELL AS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20 TH MAY, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S STAR CONSTRUCTIONS, ALNOOR SHOP PING COMPLEX, HYDERPORA BY PASS ROAD, SRINAGAR, KMR 2. ACIT, SRINAGAR RANGE, SRINAGAR 3. DCIT, CIRCLE-3, SRINAGAR 4. THE CIT(A), 5. THE CIT, 6. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.