The Dy. Commissioner of Income-tax, Srinagar V. Sh. Ghulam Mohd. Khanday, Kashmir

ITA 108/ASR/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1415 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MALIK MANJOOR AHMAD
• Keywords: Rejection of books of accounts; Depreciation; Non compliance
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR [BEFORE S/SHRI A.D. JAIN, JM AND T. R. MEENA, AM] I.T.A.NO.108(ASR)/2013 ASSESSMENT YEAR: 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, SRINAGAR VS. SH. GHULAM MOHD. KHANDAY, NIPORA, QAZIGUND, KASHMIR PAN ANYPK3644B APPELLANT RESPONDENT FOR THE APPELLANT: SH. TARSEM LAL, DR FOR THE RESPONDENT: SH. MALIK MANJOOR AHMAD, ADV. DATE OF HEARING: 27-08-2015 DATE OF PRONOUNCEMENT: 16-09-2015 ORDER PER T. R. MEENA, AM THIS IS REVENUES APPEAL EMANATING FROM THE ORDER OF THE LEARNED CIT(A), JAMMU DATED 19.12.2012 FOR ASSESSMENT YEAR 2009-10. THE EFFECTING GROUNDS ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DIRECTING THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE ASSESSING OF FICER WHEN THE ASSESSEE HAD FAILED TO COMPLY WITH THE NOTICES ISSUED U/S 14 2(1) OF THE INCOME TAX ACT, 1961 AND EX PARTE ASSESSMENT MADE. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT DIRECTING THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE ASSESSING OF FICER IN VIEW OF THE DECISION OF HONBLE ITAT CHANDIGARH A BENCH IN T HE CASE OF M/S SHIVAM CONSTRUCTION CO. AND AFFIRMED BY THE HONBLE HIGH C OURT OF PUNJAB & HARYANA IN THEIR ORDER IN ITA NO.183 OF 2007 DATED 14-05.2007. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT IN DIRECTING THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE ASSESSING OF FICER WHEN THE JURISDICTIONAL BENCH OF ITAT AMRITSAR IN THE CASE O F M/S POOJA CONSTRUCTION CO., REPORTED IN I.T.A NO.750(ASR)/1992 HAD HELD TH AT THE APPLICATION OF NET PROFIT RATE OF 10% ON GROSS RECEIPTS IS PROPER. THE SAID ORDER OF THE 2 I.T.A. NO 108 /ASR/2013 ASST YEAR: 2009-10 JURISDICTIONAL ITAT HAS BEEN CONFIRMED BY THE HONB LE HIGH COURT OF PUNJAB & HARYANA IN THEIR ORDER IN ITA NO. 166 OF 1999 DAT ED 10-09-2010. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR AND HAS SHOWN INCOME OF RS.40,73,505/-. THE CASE WAS DECIDE D BY THE A.O UNDER SECTION 144 OF THE I.T. ACT. THE LEARNED A.O. HAS GIVEN VARIOUS OPPORTUNITIES TO THE ASSESSEE, BUT THE RESPONSE OF THE ASSESSEE WAS NOT POSITIVE. THER EFORE, THE A.O DECIDED THE CASE UNDER SECTION 144 OF THE I.T. ACT. THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS.62,006,278/- AND NET PROFIT @ 6.5%. AS PER THE A .O., THE NET PROFIT SHOWN BY THE ASSESSEE WAS EXTREMELY LOW AND HE ESTIMATED NET PRO FIT @ 10% ON THE TURN OVER OF RUPEES MORE THAN 1 CRORES. THE ASSESSEE HAS DEBITE D EXPENSES OF RS.25,770,553/- ON ACCOUNT OF WAGES AND RS.60,55,932/- ON ACCOUNT OF S ERVICE TAX. NO PRIMARY BILLS/ VOUCHERS WERE SUBMITTED DURING THE COURSE OF ASSESS MENT PROCEEDINGS BEFORE THE A.O. EVEN, THE PRELIMINARY QUESTIONNAIRE DATED 26.09.201 1, REMAINS NON-COMPLIED WITH. NO BOOKS HAD BEEN PRODUCED BEFORE THE A.O. THE LEARNED A.O HAD REJECTED THE BOOKS OF ACCOUNTS IN ABSENCE OF PRIMARY DOCUMENTS/ BILLS AND VOUCHERS UNDER SECTION 145(3) OF THE IT ACT AND NET PROFIT WAS ESTIMATED AS UNDER : RELYING ON THE CASE LAW OF M/S SHIVAM CONSTRUCTION COMPANY VS. ACIT NOS. 383 & 384/2004, 622/2005, 385 & 386/2004 AND 728/20 05 OF THE HONBLE ITAT, CHANDIGARH BENCH A, CHANDIGARH THE INCOME FRO M BUSINESS OF CONTRACT WILL BE DETERMINED @ 10% ON GROSS CONTRACTUAL RECEI PTS. THIS VIEW HAS BEEN DULY ENDORSED BY THE HONBLE PUNJAB & HARYANA HIGH COURT ALSO. THE NET PROFIT @ 10% ON GROSS CONTRACTUAL RECEIPTS (RS.62,006,278/ - = RS.6200627/-) HE FINALLY ESTIMATED THE INCOME FROM CONTRACT BUSIN ESS OF THE ASSESSEE AT RS. 62,00,627/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHO HAD ALLOWED THE APPEAL PARTL Y BY OBSERVING AS UNDER: 3 I.T.A. NO 108 /ASR/2013 ASST YEAR: 2009-10 THE APPELLANT HAS STRONGLY CONTESTED THE SERVICE OF NOTICE U/S 143(2) AND THE SHOW CAUSE NOTICE STATING THAT THE ADDRESS WAS NOT CORRECTLY MENTIONED WHILE SENDING THROUGH POST. I HAVE CONSIDERED ASSESSMENT ORDER PASSED BY THE A .O. AND THE REPLY OF THE APPELLANT. IT IS OBSERVED THAT THE A.O. HAD NO ALTE RNATIVE BUT TO INVOKE THE PROVISIONS OF SECTION 145(3) OF THE ACT BY REJECTIN G THE BOOKS OF ACCOUNTS AND PROCEED FOR BEST JUDGMENT ASSESSMENT AS NECESSARY C OMPLIANCE OF NOTICES WERE NOT MADE AS EVIDENCE FROM THE ASSESSMENT ORDER. THE A.O. WAS NOT SATISFIED ABOUT THE COMPLETENESS AND CORRECTNESS OF ACCOUNTS. NOW COMING TO APPLICATION OF RATE OF PROFIT, IT IS SEEN THAT THE RELIANCE OF THE A.O. ON THE CASE OF M/S. SHIVAM CONSTRUCTION (SUPRA) IS NOT FULLY APPLICABLE TO THIS CASE, AS THE APPLICATION OF NET PROFIT RATE OF 10% WAS SUBJECT T O ALLOWANCE OF SALARY AND INTEREST. IT IS FURTHER OBSERVED THAT THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION BUSINESS AND IS OPERATING IN REMOTE AR EAS OF SRINAGAR WHERE THE PROFIT MARGINS ARE LOW DUE TO HARD WEATHER CONDITIO NS AND INTERMITTENT STOPPAGE OF WORK LEADING TO THE HIGHER COST OF INPU T AND LABOUR. THE ONLY COMPARABLE CASES WHICH WOULD APPLY ARE THE CASES OF SIMILAR OTHER ASSESSEES IN SIMILAR WORKING LOCATIONS. THE APPELLANT IS OPERATI NG IN KASHMIR. IN A CASE OF M/S. CONSTRUCTION ENGINEERS, SRINAGAR THE JURISDICT IONAL HONBLE ITAT, AMRITSAR IN ITA NO.493(ASR)/2010 DATED 11.05.2012 H AD DIRECTED TO APPLY A NET PROFIT RATE OF 7% SUBJECT TO NO FURTHER ALLOWANCES. IN THAT CASE ALSO THE ASSESSMENT WAS MADE UNDER SECTION 144 OF I.T. ACT. THUS CONSIDERING THE NET PROFIT SHOWN BY THE APPELLANT AND NON COMPLIANCE OF NOTICES, I FIND THAT IT WOULD BE APPROPRIATE TO FOLLOW THE JURISDICTIONAL H ONBLE ITAT, AMRITSAR AND A NET PROFIT RATE OF 7% IS TO BE APPLIED WITHOUT ANY FURTHER ALLOWANCE INCLUDING THAT OF DEPRECIATION. THE A.O. IS DIRECTED TO APPLY A NET PROFIT RATE OF 7% ON THE GROSS RECEIPT OF RS.6,20,06,278/- INSTEAD OF 10% AP PLIED BY HER. 4. NOW, THE REVENUE IS IN APPEAL BEFORE US. THE LEARNED DR ARGUED THAT THE LEARNED CIT(A) HAS NOT GIVEN ANY BASIS IN APPLYING NET PROFIT @ 7% IS ALSO LOW. AS PER SECTION 44AD, NET PROFIT RATE HAS BEEN PROVI DED IN THE STATUTE @ 8% WHICH IS FOR ASSESSEE WHO ARE HAVING TURNOVER OF LE SS THAN RS.40 LACS AND FILING THE RETURN WITHOUT BOOKS OF ACCOUNT. THEREFORE, HE REQUESTED FOR CONFIRMING THE ORDER OF THE AO. AT THE OUT SET, LEARNED AR OF THE ASSESSEE ARGUED THAT THE ASSESSEES TURNOVER HAS GONE UP TO RS.62,006,278/- SUBSTANTIALLY COMPARED TO THAT OF THE PRECEDING YEAR AT RS.2,68,78,722/-. THE NET PROFIT RATE HAS ALSO 4 I.T.A. NO 108 /ASR/2013 ASST YEAR: 2009-10 BEEN INCREASED @ 6.5 % DURING THE YEAR COMPARED TO THE PRECEDING YEAR @ 5.24%. THUS, HE REQUESTED TO CONFIRM THE ORDER OF CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIALS ON RECORD. THE ARGUMENT PUT FORTH BY THE AR SUPPORTING THE CASE OF THE CIT(A). THE LEARNED CIT(A) APPLIED THE 7% NE T PROFIT RATE ON THE BASIS OF DECISION GIVEN BY THE ITAT, AMRITSAR BENCH IN THE C ASE OF M/S. CONSTRUCTION ENGINEERS, SRINAGAR, [ITA NO.493(ASR)/2010 DATED 11 .05.2012]. FURTHER, THE NET PROFIT RATE APPLIED BY THE AO @ 10% WAS SUBJECT TO ALLOWANCE OF SALARY AND INTEREST, THEREFORE, WE UPHELD THE ORDER OF THE CIT (A). 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16-09-2015. SD/- SD/- (A. D. JAIN) (T. R.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED, AMRITSAR, 16.09.2015 P.K/ PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: 2. THE RESPONDENT: 3. THE CIT, 4. THE CIT(A), 5. DR, ITAT, AMRITSAR 6. GUARD FILE. TRUE COPY// BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH, AMRITSAR