M/s S.K Mishra & Sons, Ranchi V. ACIT, Ranchi

ITA 106/RAN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0021 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY KUMAR
• Keywords: Rejection of books of accounts; Presumptive income; Depreciation; Revenue expenditure
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI SMC BENCH, RANCHI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER ITA NO.106/RAN/2015 ASSESSMENT YEAR :2008-09 M/S S.K.MISHRA & SONS, L.N.MISHRA COLONY, LTKI ROAD, RANCHI-834 005 JHARKHAND V S ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-3, RANCHI PAN/GIR NO. : AASFS 6163 L (APPELLANT ) .. (RESPONDENT) APPELLANT BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI ABHAY KUMAR, DR DATE OF HEARING : 08-09-2016 DATE OF PRONOUNCEMENT : 12-09-2016 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 26.03.2015 OF COMMISSIONER OF INCOME TAX (APPEALS), RANCHI (JHARKHAND) RELATING TO ASSESSMENT YEAR (AY) 2008-0 9. 2. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN E STIMATING THE INCOME OF THE ASSESSEE FROM EXECUTION OF CONSTRUCTI ON CONTRACTS AT 8% OF THE GROSS CONTRACT RECEIPTS OF RS.1,47,15,709/-. 3. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF CARRYING OUT CIVIL CONTACT WORKS FOR CENTRAL COAL F IELDS LTD. THE TURNOVER OF THE ASSESSEE FOR AYS 2006-07 TO 2008-09 AND THE NET PROFIT RATIO AS DECLARED BY THE ASSESSEE WERE AS FOLLOWS: - 2 ITA NO.106/RAN/2015 AY:2008-09 A.Y A.Y. A.Y. 06.07 07-08 08-09 CONTRACT RECEIPTS 29,53,000 38,54,000 1,47,15,709 NET PROFIT DECLARED 8.08% 8.40% 5.08% 4. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE NET PROFIT OF THE ASSESSEE HAS DRASTICALLY REDUCED IN AY 2008-09 COMP ARED TO A.YS 2006-07 AND 2007-08. HE NOTICED THAT THE ASSESSEE F AILED TO PRODUCE PARTY-WISE DETAILS OF MATERIAL PURCHASED WHICH CONS TITUTED 56% OF THE GROSS RECEIPTS OF THE ASSESSEE. HE ALSO FOUND THAT EXPENSES LIKE FUEL, REPAIRS, TRANSPORTATION ETC., WERE INCURRED IN CASH BY THE ASSESSEE AND WERE NOT SUPPORTED BY BILLS OR VOUCHERS. THE ASSESS ING OFFICER THEREFORE REJECTED THE BOOKS AND ESTIMATED PROFIT O F THE ASSESSEE BY APPLYING NET PROFIT PERCENTAGE OF @ 8% ON THE GROSS RECEIPTS OF THE ASSESSEE OF RS.1,47,15,709/- RESULTING IN DETERMINI NG INCOME OF THE ASSESSEE FROM CIVIL CONTRACTS AT RS.11,77,256/-. 5. ON APPEAL BY THE ASSESSEE THE LD. CIT(A) CONFIRM ED THE ORDER OF THE ASSESSING OFFICER HENCE, THIS APPEAL BY THE ASS ESSEE BEFORE THE TRIBUNAL. 6. I HAVE HEARD THE RIVAL SUBMISSIONS. BEFORE ME TH E REJECTION OF BOOKS OF ACCOUNTS U/S. 145(3) OF THE INCOME TAX ACT , 1961 (ACT) IS NOT CHALLENGED. WHEN BOOKS OF ACCOUNTS ARE REJECTE D THE BEST YARDSTICK TO ESTIMATE INCOME OF THE ASSESSEE IS ON THE BASIS OF PAST HISTORY. SINCE THE ASSESSEES TURNOVER FOR AYS 2006 -07 AND 2007-08 WAS LESS THAN RS.40 LACS, THE PRESUMPTIVE INCOME U/ S 44AD OF THE ACT AT 8% OF THE CONTRACT RECEIPTS WHICH WAS ADOPTED. IN AY 2008-09 THE TURNOVER IS MORE THAN RS.40 LACS AND THEREFORE 8% P ROFIT ON CONTRACT RECEIPTS CANNOT BE ESTIMATED AS INCOME OF THE ASSES SEE. BESIDES THE ABOVE, IN ASSESSEES OWN CASE IN AY 2005-06, THE IT AT ACCEPTED NET PROFIT PERCENTAGE OF 6.5% OF THE CONTRACT RECEIPTS, COPY OF THE ORDER OF ITAT IN ITA NO. 50/RAN/2015 DATED 28.10.2015 IS PLA CED ON RECORD. 3 ITA NO.106/RAN/2015 AY:2008-09 7. KEEPING IN MIND ALL THE ABOVE FACTS AND CONSIDER ING THE HUGE INCREASE IN TURNOVER OF THE ASSESSEE AND THE FACT T HAT PROFIT MARGINS ARE BOUND TO GO DOWN WHENEVER THIS IS JUMP IN TURNO VER, I HOLD THAT THE ADDITION MADE BY ESTIMATION OF INCOME AT 8% OF THE CONTRACT RECEIPTS, CANNOT BE SUSTAINED. THE ADDITION IS DIRE CTED TO BE DELETED. 8. THE SECOND ISSUE RAISED IN THIS APPEAL IS WITH R EGARD TO DISALLOWANCE OF DEPRECIATION OF 100% CLAIMED ON VAL UE OF TEMPORARY HUTMENT. KEEPING IN MIND THE NATURE OF BUSINESS OF THE ASSESSEE HUTMENT CONSTRUCTED AT SITE WHICH ARE PURELY TEMPOR ARY IN NATURE HAVE TO BE ALLOWED AS REVENUE EXPENDITURE. IN ANY EVENT, WHEN INCOME IS ESTIMATED THERE CANNOT BE ANY SEPARATE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. THE ADDITION MADE IS THEREFORE DELETED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/09/2016 SD/- (N.V.VASUDEVAN ) JUDICIAL MEMBER RANCHI , DATED 12/09/2016 *DKP ,PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT CONCERNED 2. THE RESPONDENT CONCERNED 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE. BY ORDER, //TRUE COPY // SR.PS, ITAT, RANCHI