Jaswant Singh Contractor, Kurukshetra V. ACIT, Kurukshetra

ITA 1109/CHANDI/2011

• Counselvise Citation: 110921514 RSA 2011
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 15-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: SURESHS GUPTA
• Keywords: Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1109/CHD/2011 (ASSESSMENT YEAR : 2008-09) SH.JASWANT SINGH CONTRACTOR, VS. THE A.C.I.T., THANESAR, KURUKSHETRA. CIRCLE KURUKSHETRA PAN: ABJPS6027K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SURESHS GUPTA DEPARTMENT BY : SHRI AKHILESH GUPTA, DR DATE OF HEARING : 21.02.2012 DATE OF PRONOUNCEMENT : 29.02.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), KARNAL DATED 1 7.08.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT LD. CIT(A) HAVE ERRED IN CONFIRMING THE ADDITION OF RS.2776114/- AFTER APPLYING NET PROFIT RATE AT 12% ON GROSS RECEIPTS AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE IT ACT. WHEREAS THE BOOKS WERE ACCEPTED IN THE PREVIOUS YEARS AND ALSO IN PROCEEDING YEAR. 2. THAT THE LD. CIT(A) HAS ERRED IN INITIATION OF PENALTY PROCEEDING U/S 2711)(C) OF THE INCOME TAX ACT, 1961 ON ACCRUED INTEREST OF REFUND OF INCOME TAX ACT, WHEREAS THE SAME IS REFLECTED ON RECEIPT BASIS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR ENGAGED WITH THE UNIVERSITY OF KURUKSHET RA. THE ASSESSEE 2 DURING THE YEAR UNDER CONSIDERATION HAD DECLARED NP RATE OF 4.5%. THE CASE OF THE ASSESSEE IS THAT THE CEMENT AND STEEL I S SUPPLIED BY THE UNIVERSITY OF KURUKSHETRA AND ONLY ALLIED ITEMS LIK E SAND AND BAJRI IS PURCHASED BY THE ASSESSEE THROUGH AGENT AND ALL THE PAYMENTS ARE MADE BY WAY OF CHEQUE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT MAINTAINED STOCK REGISTER AND MUSTER ROLLS. FURTHE R NO VOUCHERS/BILLS IN RESPECT OF EXPENSES DEBITED TO PROFIT & LOSS ACCOUN T WERE MAINTAINED. THE ASSESSING OFFICER ACCORDINGLY SHOW CAUSED THE A SSESSEE AS TO WHY THE BOOKS OF ACCOUNT BE NOT REJECTED UNDER SECTION 145(3) OF THE ACT AND NET PROFIT RATE OF 12% BE APPLIED IN VIEW OF THE RA TIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT, HISAR VS. PARBHAT KUMAR, CONTRACTOR, SIRSA [323 ITR 675 (P&H)]. ACCORDINGLY , THE INCOME OF THE ASSESSEE WAS RECOMPUTED BY THE ASSESSING OFFICER BY APPLYING NET PROFIT RATE OF 12%. 4. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICTIONAL H IGH COURT IN CIT, HISAR VS. PARBHAT KUMAR, CONTRACTOR, SIRSA (SUPRA) . 5. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF NET PROFIT RATE TO TH E RECEIPTS SHOWN BY THE ASSESSEE. 6. SHRI SURESH GUPTA APPEARED FOR THE ASSESSEE AND SHRI AKHILESH GUPTA APPEARED FOR THE REVENUE AND PUT FORWARD THEI R CONTENTIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS CARRYING OUT THE WORK OF CIVIL CONSTRUC TION AWARDED BY THE UNIVERSITY OF KURUKSHETRA. THE CASE OF THE ASSESSE E IS THAT THE PRINCIPLE ITEMS NEEDED FOR CONSTRUCTION I.E. CEMENT AND STEEL ARE SUPPLIED BY THE UNIVERSITY OF KURUKSHETRA AND ONLY ALLIED ITEMS LIK E SAND AND BAJRI ARE 3 PURCHASED BY THE ASSESSEE THROUGH THE AGENT. IT IS CATEGORICALLY SUBMITTED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE TOTAL PAYMENT FOR THE PURCHASE OF SAND AND BAJRI ARE THROUGH CHEQUES THOUGH THE BILLS IN RESPECT THEREOF ARE NOT PROPERLY MAINTAINED. ADMIT TEDLY, THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER BUT IS MAINTAINI NG WAGES REGISTER ON WHICH THE SIGNATURE OF THE WORKERS IS TAKEN. IN VI EW THEREOF, WE UPHOLD THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER, IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE NATURE OF THE CIVIL CONSTRUCTION WORK CARRIED OUT BY THE ASSESSEE, THE ADOPTION OF N ET PROFIT RATE OF 12% TO DETERMINE THE INCOME OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION, IS UNWARRANTED. WE FIND THAT SIMILAR ISSUE OF ADOP TION OF NET PROFIT RATE TO DETERMINE THE INCOME IN THE HANDS OF THE ASSESSE E, WHERE THE BOOKS OF ACCOUNT HAD BEEN REJECTED, AROSE BEFORE THE TRIBUNA L IN SHRI SUKHWINDER SINGH VS. ITO. THE TRIBUNAL IN SUKHWINDER SINGH VS . JCIT, KURUKSHETRA IN ITA NO.1461/CHD/2010 VIDE DATED 24.1 1.2011 HELD AS UNDER : 10. THE SECOND ISSUE TO BE ADDRESSED IN THE CASE I S THE APPLICATION OF NP RATIO. THE TRIBUNAL (SUPRA) IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2005-06 HAD DIRECTED THE APPLICATION OF NET PROFIT RATE OF 1.08% TO THE GROSS RECEIPTS OF RS.3.22 CROR ES IN COMPARISON TO NET PROFIT RATE OF 6.5% TO THE TOT AL RECEIPTS APPLIED BY THE ASSESSING OFFICER. THE CIT (A) DURING THE YEAR UNDER CONSIDERATION HAD REJECTE D THE CLAIM OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S PRABHAT KUMAR CONTRACTOR (SUPRA) WHEREIN THE RATE OF PROFIT @ 12% WAS APPLIED BY THE HONBLE COURT. 11. THE ASSESSEE IS A ROAD CONTRACTOR AND NOT CIVIL CONTRACTOR AS IN THE CASE BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE ASSESSEE HAD DISCLOSED THE INCOME FOR THE YEAR UNDER CONSIDERATION AT NET PROF IT RATE OF 1.20% AND THE ASSESSING OFFICER FOR COMPUTING TH E INCOME OF THE YEAR HAD APPLIED NET PROFIT RATE OF 6 .5%. THE BASIS FOR THE APPLICATION OF THE SAID NET PROFI T RATE BY THE ASSESSING OFFICER WAS SIMILAR RATE APPLIED IN ASSESSMENT YEAR 2005-06 AND THE CIT (A) HAD PLACED RELIANCE TO THE RATIO LAID DOWN BY THE HON'BLE PUNJ AB & 4 HARYANA HIGH COURT IN THE CASE OF ANOTHER CONTRACTO R IN CIT VS. PARBHAT KUMAR CONTRACTOR (SUPRA). THE CIT (A) HAD APPLIED NET PROFIT RATE OF 6.5% IN VIEW OF THE RATE APPLIED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. IN THE FACTS OF THE CASE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT, THE REASONS FOR THE APPLICATION OF THE SAID RATE WAS THE UN-VERIFIABILITY OF THE WAGES CLAIMED AS EXPENDITURE. THERE IS NO MERIT IN THE STAND OF THE CIT (A) THAT IN CASE OF CONTRACTORS, HIGHER RATE TO GRO SS RECEIPTS IS TO BE APPLIED IN ALL CASES IN VIEW OF R ATIO LAID DOWN IN CIT VS. PRABHAT KUMAR, CONTRACTOR (SUPRA). WE FIND THAT THE HON'BLE PUNJAB & HARYANA HIGH COURT I N RAJA RAM CONTRACTORS VS. CIT IN ITA NO. 689 OF 20 09, DATE OF DECISION 7.4.2010, HAS UPHELD APPLICATION O F NET PROFIT RATE OF 10% AS NET PROFIT RATE. IT HAS BEEN FURTHER LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT THAT WHERE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED, THE ESTIMATION OF INCOME BY APPLYING OF FLAT RATE INHER ENTLY INVOLVES AN ELEMENT OF SUBJECTIVITY. 8. THE APPLICATION OF NET PROFIT RATE OF 12% IN ALL THE CASES OF CIVIL CONTRACTORS IS THUS UNWARRANTED AS THE HON'BLE PUNJ AB & HARYANA HIGH COURT ITSELF IN DIFFERENT SET OF FACTS HAD APPLIED A NET PROFIT RATE OF 10%. IN VIEW THEREOF, WE HOLD THAT IN THE PRESENT SET OF FACTS AND CIRCUMSTANCES WHERE THE ASSESSEE WAS ENGAGED IN PET TY CIVIL CONSTRUCTION WORK, WHERE EVEN CEMENT AND STEEL WAS SUPPLIED BY T HE UNIVERSITY OF KURUKSHETRA, THERE IS NO MERIT IN APPLYING NET PROF IT RATE OF 12% TO DETERMINE THE INCOME OF THE ASSESSEE FOR THE YEAR U NDER APPEAL. THE ASSESSEE HAD DECLARED NET PROFIT RATE OF 4.5% FOR T HE YEAR UNDER APPEAL. WE DIRECT THE ASSESSING OFFICER TO APPLY THE NET PR OFIT RATE OF 6% TO WORK OUT THE INCOME OF THE ASSESSEE. ACCORDINGLY, UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT, WE DIRECT THE ASSESS ING OFFICER TO RECOMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 5 9. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS IN RELATION TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, WHICH IS PREMATURE AND THE SAME IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF FEBRUARY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH FEBRUARY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH