Ram Kumar Govt. Contractor, Sangrur V. CIT (Appeals), Patiala

ITA 1082/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86151 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: BRIJ BHUSHAN BANSAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO.1082 /CHD/2014 (ASSESSMENT YEAR : 2011-12) RAM KUMAR GOVT. CONTRACTOR, VS. THE D.C.I.T., C/O ASHOK KUMAR BANSAL, CIRCLE SANGRUR. CH.BRIJ LAL STREET, CLUB ROAD, SANGRUR. PAN: AAEFR7094R AND ITA NO.1055 /CHD/2014 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T., VS. RAM KUMAR GOVT. CONTRACTOR, CIRCLE SANGRUR. C /O ASHOK KUMAR BANSAL, CH.BRIJ LAL STREET, CLUB ROAD, SANGRUR. PAN: AAEFR7094R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BRIJ BHUSHAN BANSAL DEPARTMENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 16.02.2015 DATE OF PRONOUNCEMENT : 16.02.2015 O R D E R PER BHUVNESH SAINI, J.M. : BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), P ATIALA DATED 28.9.2014 FOR THE ASSESSMENT YEAR 2011-12. 2 2. BRIEFLY, THE FACTS OF THE CASE AS NOTED IN THE I MPUGNED ORDER ARE THAT THE ASSESSING OFFICER NOTICED VARIOU S DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE SAME ARE HIGHLIGHTED IN THE ASSESSMENT ORDER AND SHOW CA USE NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN VARIOU S POINTS AS NO STOCK REGISTER OF MATERIAL HAS BEEN MAINTAINED A ND NO DETAILS OF RAW MATERIAL USED IN THE CONSTRUCTION WO RK WERE PRODUCED FOR VERIFICATION. NO PURCHASE REGISTERS F OR ISSUE OF RAW MATERIAL GOODS FOR CONSTRUCTION WORK AND ISSUE OF DIESEL/PETROL USED FOR VEHICLES/CARS HAVE BEEN MAIN TAINED. NO MEASUREMENT BOOK HAS BEEN PRODUCED FOR VERIFICAT ION. THE ASSESSEE HAS NOT MAINTAINED MUSTER ROLL REGISTER AN D DAY- TODAY CONSUMPTION REGISTER. NO DETAILS OF TRUCK O WNERS OR DRIVERS HAVE BEEN MAINTAINED THROUGH WHICH THE BUIL DING MATERIAL WAS PURCHASED. NO QUANTITATIVE DETAILS OF THE MATERIAL HAVE BEEN PRODUCED. CERTAIN EXPENDITURE HAVE NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. NO DET AILS OF MISCELLANEOUS RECEIPTS HAVE BEEN FURNISHED. THERE WAS ALSO DIFFERENCE BETWEEN THE GROSS RECEIPTS RECEIVED FROM VARIOUS DEPARTMENTS. NO DOCUMENTARY EVIDENCE OF PAYMENTS MADE TO THE LABOUR THROUGH SITE MUNSHIS HAS BEEN FURNISHED. NO AGREEMENTS WITH THE SUB-CONTRACTORS HAVE BEEN PRODU CED. IT WAS, THEREFORE, PROPOSED WHY THE BOOKS OF ACCOUNT M AY NOT BE REJECTED. THE ASSESSEE, HOWEVER, EXPLAINED THAT N O STOCK REGISTER IS MAINTAINED BECAUSE HE IS NOT TRADER OF THESE COMMODITIES AND RAW MATERIAL HAVE BEEN USED AT DIFF ERENT SITES. IT WAS SUBMITTED THAT THERE WAS NO NECESSIT Y TO MAINTAIN THE STOCK REGISTER OF RAW MATERIAL AS THE SAME ARE 3 CONSUMED IN DAY OR TWO. THE ASSESSEE PURCHASED DI ESEL DIRECTLY FROM THE PETROL PUMP WHENEVER REQUIRED. IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED MEAS UREMENT BOOK BECAUSE THE ASSESSEE IS ENGAGED IN BRIDGE WORK . THE MUSTER ROLL WAS NOT MAINTAINED. THE ASSESSING OFF ICER WAS, THEREFORE, OF THE VIEW THAT THERE WAS NO VERIFICATI ON OF CONSUMPTION OF STOCK AND RAW MATERIAL AND NO OTHER DETAILS HAVE BEEN MAINTAINED. THERE IS DISCREPANCY IN THE RECEIPTS FROM DIFFERENT DEPARTMENTS. THE ASSESSING OFFICER , THEREFORE, REJECTED THE BOOK RESULTS UNDER SECTION 145(3) OF T HE ACT AND COMPUTED THE PROFIT BY APPLYING THE PROFIT RATE OF 10% ON THE GROSS RECEIPTS OF RS.20.64 CRORES AND COMPUTED THE INCOME ACCORDINGLY. SINCE THE ASSESSEE IS A FIRM, THEREF ORE, INTEREST AND SALARY PAID TO THE PARTNERS WERE ALLOWED. HOW EVER, INTEREST ON DEPRECIATION HAS NOT BEEN ALLOWED AS WA S NOT ALLOWED IN THE EARLIER YEAR. 3. THE ASSESSEE CHALLENGED THE COMPUTATION OF INCOM E BEFORE THE LEARNED CIT (APPEALS) AND WRITTEN SUBMIS SION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WH ICH THE ASSESSEE HAS SUBMITTED THAT THE BOOKS OF ACCOUNT FR OM TIME TO TIME HAVE BEEN PRODUCED AND HAVE BEEN AUDITED BY TH E CHARTERED ACCOUNTANT. THE DEPRECIATION HAS NOT BEE N ALLOWED WITHOUT ANY REASONS AND ALSO REFERRED TO OTHER DECI SIONS TO THE FACT THAT IN OTHER CASES EVEN PROFIT RATE OF 6% OR BELOW HAVE BEEN APPLIED AND EVEN THE DEPRECIATION HAS ALS O BEEN ALLOWED. THE LEARNED CIT (APPEALS) CONFIRMED THE FINDING OF THE ASSESSING OFFICER WITH REGARD TO REJECTION OF B OOKS OF ACCOUNT BECAUSE NO DOCUMENTARY EVIDENCE WAS FURNISH ED TO 4 JUSTIFY THE CONSUMPTION OF RAW MATERIAL AND CORRESP ONDING VALUE OF THE STOCK AT THE YEAR END. THERE WAS DIF FERENCE IN THE RECEIPTS ALSO. HOWEVER, CONSIDERING THE PROFI T RATE ESTIMATED IN ASSESSMENT YEAR 2010-11 IN WHICH PROFI T WAS ESTIMATED @ 6.5% AGAINST 5.29% SHOWN BY THE ASSESSE E DIRECTED THE ASSESSING OFFICER TO APPLY PROFIT RATE OF 7.5% AND AS PER THE DECISION OF THE I.T.A.T. CHANDIGARH BENC H IN THE CASE OF HARBHAJAN SINGH & CO. VS. JCIT, SANGRUR RAN GE, SANGRUR DIRECTED TO ALLOW DEPRECIATION AS WELL. T HE APPEAL OF THE ASSESSEE WAS THUS PARTLY ALLOWED. 4. THE ASSESSEE IN ITS APPEAL CHALLENGED THE APPLIC ATION OF PROFIT RATE OF 7.5% AND ENHANCEMENT OF THE GROSS RE CEIPTS FROM 20.43 CRORES TO 20.64 CRORES. 5. THE REVENUE IN THEIR APPEAL CHALLENGED THE ORDER OF THE LEARNED CIT (APPEALS) IN REDUCING THE PROFIT RATE F ROM 10% TO 7.5% ON THE BASIS OF THE LAST YEAR PROFIT ESTIMATE. IT IS ALSO STATED THAT THE DECISION IN THE CASE OF HARBHAJAN S INGH & CO. (SUPRA) HAS BEEN CHALLENGED IN HIGH COURT BY THE DE PARTMENT. THEREFORE, THE LEARNED CIT (APPEALS) SHOULD NOT FOL LOW THE DECISION. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE ASSESSING OFFICER HAS GIVEN VARIOUS REASONS FOR REJ ECTION OF BOOKS OF ACCOUNT. THE ASSESSEE IS NOT IN APPEAL AG AINST THE REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFI CER AND CONFIRMED BY THE LEARNED CIT (APPEALS). THEREFORE , IT STANDS ESTABLISHED ON RECORD THAT THE ASSESSEES BOOKS OF ACCOUNT 5 WERE NOT RELIABLE AND AS SUCH, NO OPTION WAS LEFT W ITH THE AUTHORITIES BELOW EXCEPT TO ESTIMATE THE PROFIT OF THE ASSESSEE. SIMILARLY, THE REVENUE MERELY CONTENDED THAT FOR GR ANT OF DEPRECIATION THE LEARNED CIT (APPEALS) SHOULD NOT F OLLOW THE DECISION OF THE TRIBUNAL IN THE CASE OF HARBHAJAN S INGH & CO. (SUPRA) BECAUSE IT HAS BEEN CHALLENGED IN HIGH COUR T. MERELY BECAUSE THE APPEAL OF THE DEPARTMENT IS PENDING IN HIGH COURT IS NO GROUND TO CHALLENGE THE DECISION OF THE TRIBUNAL THE LEARNED CIT (APPEALS) WAS BOUND TO FOLLOW THE D ECISION OF THE TRIBUNAL UNLESS IT IS REVERSED. THE ONLY Q UESTION LEFT IN BOTH THE CROSS APPEALS IS THE ESTIMATE OF THE PR OFIT BY APPLYING PROFIT RATE OF 7.5%. THE LEARNED CIT (APP EALS) CONSIDERED THE HISTORY OF THE ASSESSEE IN WHICH THE PROFIT WAS ESTIMATED LAST YEAR BY APPLYING PROFIT RATE OF 6.5% AND ACCORDINGLY APPLIED THE PROFIT RATE OF 7.5%. THE I .T.A.T. CHANDIGARH BENCH RECENTLY IN THE CASE OF ASHOK KUMA R IN ITA NO.340/CHD/2014 AND C.O.NO.24/CHD/2014 VIDE ORDER D ATED 6.2.2014 CONSIDERED THE FACTS OF THE CASE AND THE D ECISION OF HON'BLE HIGH COURT RELIED UPON BY THE LEARNED D.R F OR THE REVENUE DIRECTED TO APPLY NET PROFIT RATE OF 8%. SINCE IT IS A CASE OF FIRM, THEREFORE, THE ASSESSING OFFICER HAS ALLOWED STATUTORY DEDUCTION WHICH COULD NOT BE SUBJECT MATT ER IN CHALLENGE BEFORE THE TRIBUNAL. FURTHER THE ASSESS EE HAS NOT RECONCILED THE RECEIPTS BEFORE THE CIT (APPEALS) AS WELL AS BEFORE US. THEREFORE, NO FURTHER INTERFERENCE IS CALLED FOR IN THE ESTIMATE OF TOTAL RECEIPTS. THE ASSESSEES AP PEAL THUS WOULD HAVE NO MERIT AND IS LIABLE TO BE DISMISSED. SIMILARLY, THE LEARNED CIT (APPEALS) CONSIDERING THE HISTORY O F THE 6 ASSESSEE IN WHICH LOWER PROFIT RATE HAVE BEEN APPLI ED BY THE ASSESSING OFFICER IN PRECEDING YEAR 2010-11 HAVE AL READY APPLIED THE PROFIT RATE OF 7.5% FOR THE PURPOSE OF ESTIMATING THE PROFIT OF THE ASSESSEE. THEREFORE, THE DEPARTM ENTAL APPEAL WOULD HAVE ALSO NO MERIT AND IS LIABLE TO BE DISMIS SED. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ME RIT IN BOTH THE CROSS APPEALS. THEREFORE, BOTH THE CROSS APPEA LS ARE ACCORDINGLY, DISMISSED. 6. IN THE RESULT, BOTH THE CROSS APPEALS FILED BY T HE ASSESSEE AND REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF FEBRUARY, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 TH FEBRUARY, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH