ITO, Jaipur V. KUMAWAT CONTRACTORS, Jaipur

ITA 115/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99349 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: S L JAIN DHK
• Keywords: Depreciation; Question of law
• Section: 143(3); 145; 6; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 115/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE ITO WARD- 3 (1) JAIPUR CUKE VS. M/S. KUMAWAT CONTRACTORS 48, RAM NAGAR, KALWAR ROAD JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABFK 8213 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. JAIN, ADVOCATE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/09/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09/10/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 27-11-2012 FOR THE ASSESSME NT YEAR 2008-09 WHEREIN THE SOLITARY GROUND RAISED BY THE REVENUE IS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DEL ETING THE ADDITION OF RS. 17,16,639/- MADE BY THE AO ON ACCOU NT OF TRADING ADDITION. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 22-10-2008 DECLARING ITS INCOME AT RS. 22 ,84,310/-. THE CASE ITA NO. 115/JP/2013 ITO, WARD- 3(1), JAIPUR VS. M/S. KUMAWAT CONTRACTOR S, JAIPUR 2 OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AN OR DER U/S 143(3) OF THE ACT WAS PASSED ON 27-09-2010 DETERMINING TOTAL INCO ME OF THE ASSESSEE AT RS. 49,80,010. THE AO OBSERVED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION WORK AND HAD DISCLOSED RECEIPTS OF RS. 8,58,31,903/-. THE NET PROFIT RATE BEFORE IN TEREST AND REMUNERATION WAS DISCLOSED AT 5.48% BY THE ASSESSEE. THE AO WHIL E EXAMINING THE WAGES AND LABOUR EXPENSES AMOUNTING TO RS. 2,21,96, 168/- OBSERVED THAT THEY WERE PAID IN CASH BY SELF MADE VOUCHERS AND SO ME OF WHICH WERE UNSIGNED BY THE RECIPIENTS. SIMILARLY, OTHER EXPENS ES LIKE CAR RUNNING EXPENSES, OFFICE EXPENSE ETC. HAD ALSO BEEN PAID IN CASH. THE ASSESSEE DID NOT MAINTAIN THE STOCK REGISTER. THUS THE EXPENSES INCURRED IN CASH REMAINED UNVERIFIABLE PURCHASES AND THE AUTHENTICIT Y OF THE SAME WAS ALSO NOT VERIFIABLE BY THE AO. SIMILARLY, IN THE ABSENC E OF STOCK REGISTER, QUANTITATIVE AND QUALITATIVE DETAILS OF OPENING STO CK AND CLOSING STOCK COULD NOT BE VERIFIED BY THE AO. THE AO OBSERVED T HAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE FIRM ARE NOT CORRECT AND COMPLETE. FOR WANT OF COMPLETE DETAILS OF RECORDS/ BOOKS OF ACCOUNT, THE AO HAD NO OPTION EXCEPT REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE AND TO INVOKE THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE AO OBS ERVED THAT FOR WANT OF COMPLETE DETAILS, IT WOULD NOT BE POSSIBLE TO DE DUCE THE CORRECT PROFITS FROM THE CONTRACT WORK DONE BY THE ASSESSEE FIRM. T HE AO OBSERVED THAT ITA NO. 115/JP/2013 ITO, WARD- 3(1), JAIPUR VS. M/S. KUMAWAT CONTRACTOR S, JAIPUR 3 THE ON GROSS RECEIPTS OF RS. 8,58,31,903/-, THE ASS ESSEE HAD DISCLOSED NET PROFIT BEFORE REMUNERATION AND INTEREST AT 5.48% WH ICH WAS LOW IN THIS KIND OF BUSINESS. THE AO ESTIMATED THE NET PROFIT R ATE AT 8% OF GROSS RECEIPTS OF RS. 8,58,31,903/-,SUBJECT TO ALLOWABILI TY OF DEPRECIATION, INTEREST TO PARTNERS AND REMUNERATION TO PARTNERS W HICH COMES TO RS. 68,66,552/- . 2.2 THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO HAD ALLOWED NET PROFIT RATE AT 6% OF THE GROSS RECEIPTS OF RS. 8,58,31,903 WHICH COMES TO RS. 51,49,914/-, BEFORE DEPRECIATION , INTEREST AND REMUNERATION TO PARTNERS. THE LD. CIT(A) HAS GIVEN RELIEF OF RS. 17,16,639/- (RS. 68,66,552 MINUS RS. 51,49,914) BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE AR AND FIND THAT WHILE T HE AO HAS MADE A SPECIFIC OBSERVATIONS REGARDING THE DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNT OF THE APPELLANT, T HESE HAVE NOT BEEN REBUTTED BY THE A.R. OF THE APPELLANT. THEREFO RE, THE DECISION OF THE AO TO INVOKE THE PROVISIONS OF SECTION 145(3 ) IN THE CASE OF THE APPELLANT IS CONFIRMED. RELIANCE IS PLACED ON T HE HON'BLE JURISDICTIONAL H.C. IN THE CASE OF GOTAN LIME KHANI J UDYOG VS. CIT 256 ITR 243 WHEREIN IT HAS BEEN HELD THAT THE ASSES SEE'S OWN CASE IS THE BEST COMPARABLE CASE FOR ESTIMATING THE N.P. FOR ESTIMATING THE INCOME OF THE APPELLANT. IT IS SEEN THAT DURING THE ASSESSMENT YEAR THE ASSESSEE HAS SHOWN CONTRACT RECEIPTS AT RS . 8,58,31,903/- AS COMPARED TO THE CONTRACT RECEIPTS OF RS. 2,10,63 ,327/- IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE RATE OF N.P. BEFORE DEPRECIATION, INTEREST AND REMUNERATION DURING THIS ASSESSMENT YEAR WAS 5.72% AS COMPARED TO 6.72% IN THE IMMEDIA TELY PRECEDING ASSESSMENT YEAR. IT IS A GENERALLY ACCEPT ED FACT THAT N.P. MAY HAVE TO BE COMPRISED BY A BUSINESSMAN TO INCREA SE ITS ITA NO. 115/JP/2013 ITO, WARD- 3(1), JAIPUR VS. M/S. KUMAWAT CONTRACTOR S, JAIPUR 4 RECEIPTS. THEREFORE, THE NET PROFIT RATE BEFORE DEP RECIATION, INTEREST AND REMUNERATION IS CONFIRMED AT 6% RESULTING IN A N.P. ADDITION OF RS. 2,40,022/- AGAINST 5.72% SHOWN BY THE APPELLANT . 2.3 NOW THE REVENUE IS BEFORE US WHEREIN THE LD. DR RELIED ON THE ORDER OF THE AO. 2.4 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE R ELIED ON THE ORDER OF THE LD. CIT(A) AND ALSO FILED THE WRITTEN SUBMISSIO N ALONGWITH THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CA SE OF CIT VS. GUPTA K.N. CONSTRUCTION COMPANY (VIDE D.B. INCOME TAX APP EAL NO. 59/2014 DATED 18 TH AUG. 2014) TO THIS EFFECT. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE RECORD THAT DURING THE YEAR THE ASSESSEE HAD DISCLOSED CONTRACT RECEIPTS OF RS. 8,5 8,31,903/- AND NET PROFIT BEFORE DEPRECIATION, INTEREST AND REMUNERAT ION TO PARTNERS HAD BEEN SHOWN AT 5.72% WHICH IN THE EYES OF THE AO WAS LOW IN THIS KIND OF BUSINESS. THE AO OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN THE BOOKS OF ACCOUNT PROPERLY FOR WHICH HE INVOKED THE PROVIS IONS OF SECTION 145(3) OF THE ACT AND THUS REJECTED THE BOOKS OF AC COUNT OF THE ASSESSEE FIRM AND ESTIMATED NET PROFIT RATE AT 8% BEFORE DEP RECIATION, INTEREST AND REMUNERATION TO PARTNERS. THE LD. CIT(A) IN HIS AP PELLATE ORDER HAS CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT MADE BY THE AO U/S 145(3) OF THE ACT BUT THE LD. CIT(A) APPLIED THE NET PROFI T RATE AT 6% BEFORE ITA NO. 115/JP/2013 ITO, WARD- 3(1), JAIPUR VS. M/S. KUMAWAT CONTRACTOR S, JAIPUR 5 DEPRECIATION, INTEREST AND REMUNERATION TO THE PART NERS BY DELETING THE ADDITION OF RS. 17,16,639/-. WE FIND FROM THE RECOR DS THAT IN THE ABSENCE OF THE ANY SPECIFIC FINDINGS BY THE AO, THE LD. CIT (A) HAS RIGHTLY APPLIED THE NET PROFIT RATE OF 6% BY DELETING THE ADDITION OF RS. 17,16,639/- MADE BY THE AO CONSIDERING THE PAST HISTORY OF THE ASSES SEE. 2.6 THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. GUPTA K.N. CONSTRUCTION COMPANY (SUPRA) HAS ALSO OBSERVED TO T HIS EFFECT AS UNDER:- 2. BRIEF FACTS WHICH HAVE BEEN NOTICED FROM THE IMPUGNED ORDER AND OTHER MATERIAL ON RECORD ARE THA T THE RESPONDENT-ASSESSEE BEING A PARTNERSHIP FIRM IS ENG AGED IN THE BUSINESS OF CIVIL CONTRACTOR AND HAS FURNISHED HIS INCOME TAX RETURN FOR THE ABOVE ASSESSMENT YEAR UNDER APPE AL ALONGWITH AUDIT REPORT AND OTHER INFORMATION. THE RESPONDENT-ASSESSEE DECLARED TOTAL CONTRACT WORK AT RS. 12,32,57,523/- DECLARING NET PROFIT RATE OF 5.38% S UBJECT TO INTEREST AND REMUNERATION TO THE PARTNERS. ON PERUS AL OF THE ORDER, IT IS NOTICED THAT NET PROFIT RATE IN IMMEDI ATE PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2008-09 WAS 5. 02% 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE RESPONDENT ASSESSEE WAS DIRECTED TO PROVIDE MATER IAL TO JUSTIFY THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT VIS-A-VIS RECEIPTS AND NUMBER OF QUERIES WERE RAISE D. 4. HOWEVER, THE ASSESSING OFFICER WAS DISSATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE AND NOT ONL Y INVOKED THE PROVISIONS OF SECTION 145 OF THE ACT AND REJECT ED THE BOOK RESULTS, BUT HE FURTHER DISALLOWED EXPENSES TO THE RUNE OF RS. 1,17,75,202/- THUS THE ASSESSING OFFICER IN EFFECT BY DISALLOWING RS. 1,17,75,202/- DETERMINED NET PRO FIT AT 13.7% 9. IN OUR VIEW, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE OUT OF THE IMPUGNED ORDER AS IT IS ESSENTI ALLY A ITA NO. 115/JP/2013 ITO, WARD- 3(1), JAIPUR VS. M/S. KUMAWAT CONTRACTOR S, JAIPUR 6 FINDING OF FACT BY THE TWO APPELLATE AUTHORITIES. I T IS ADMITTED FACT THAT PROVISIONS OF SECTION 145(3) OF THE ACT H AVE RIGHTLY BEEN INVOKED BY THE ASSESSING OFFICER SO ALSO UPHEL D BY THE APPELLATE AUTHORITIES, BUT IN A CASE WHERE PROVISIO NS OF SECTION 145(3) ARE INVOKED ONE HAS TO CONSIDER EITH ER THE PAST HISTORY OF THE ASSESSEE OR HISTORY OF SIMILAR SITUATED OTHER BUSINESSMAN / TRADERS. HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER, WE NOTICE THAT THE ASSESSING OFFICER IS ABSOLUTELY SILENT AS TO JUSTIFYING NET PROFIT RATE TO THE EXTENT OF 13.7%,WHETHER THE ADDITION/ DISALLOWANCE MADE BY THE AO CAN BE SAID TO BE APPROPRIATE. THE ASSESSMENT OR DER IS TOTALLY SILENT ABOUT SIMILARLY SITUATED OTHER TRADERS/BUSINESSMAN SHOWING NET PROFIT OVER AND ABO VE WHAT THE ASSESSEE HAD SHOWN AND COMPARED BY THE ASSESSIN G OFFICER AND NO EVIDENCE HAS BEEN BROUGHT ON RECORD AS TO HOW THE ASSESSING OFFICER WAS JUSTIFIED IN APPLYING NET PROFIT RATE AT 13.7%. IN OUR VIEW WHILE COMPARING W ITH THE PAST HISTORY, IF THE RESULTS ARE FAIR AND REASONABL E THEN INVARIABLY NO ADDITION NEEDS TO BE MADE. 11. THOUGH THE ARGUMENT OF THE LD. OFFICER OF THE R EVENUE CAN BE SAID TO BE PROPER AND JUSTIFIED THAT IN A CA SE WHERE THE ASSESSEE MANIPULATES THE ACCOUNTS BY KEEPING THE PR OFIT MARGINS COMMENSURATE WITH PAST ASSESSMENT YEARS OR SLIGHTLY INCREASES AND THAT ITSELF BY AND LARGE CAN NOT BE A BASIS FOR ACCEPTANCE OF THE RESULTS. BUT IN THE FAC T OF THE SAID FACTS, IT IS FOR THE ASSESSING OFFICER TO BRING ON RECORD SOME CONCRETE MATERIAL / EVIDENCE TO MAKE A PROPER ADDIT ION. WE HAVE ALREADY NOTICED HEREINABOVE THAT THE ASSESSING OFFICER HAS MERELY DISALLOWED 20% OR 10% AS THE CASE MAY B E OUT OF THE VARIOUS EXPENSES, WHICH IN OUR VIEW IS NOT P ROPER AND HE HAD TO BRING ON RECORD JUSTIFIABLE BASIS FOR MAK ING OF AN ADDITION AND BRING ON RECORD SOME EVIDENCE FOR MAKI NG OF ADDITION. 2.7 THUS CONSIDERING THE ABOVE FACTS AND IN THE CIR CUMSTANCES OF THE CASE, IN ABSENCE OF ANY SPECIFIC FINDING BY THE AO TO JUSTIFY INCREASE IN NET PROFIT RATE FROM 5.72% TO 8% AND IN LIGHT OF PA ST ASSESSMENT HISTORY OF ITA NO. 115/JP/2013 ITO, WARD- 3(1), JAIPUR VS. M/S. KUMAWAT CONTRACTOR S, JAIPUR 7 THE ASSESSEE WHICH HAS BEEN DULY CONSIDERED BY THE LD. CIT(A) AND FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS. GUPTA K.N. CONSTRUCTION COMPANY (SUPRA), W E FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHERE NET PROFIT RAT E OF 6% BEFORE DEPRECIATION, INTEREST AND REMUNERATION TO PARTNER S HAD BEEN ADOPTED. HENCE, THE SOLITARY GROUND OF THE REVENUE IS DISMIS SED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /1 0/2015. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09 /10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- 3 (1),JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. KUMAWAT CONTRACTORS 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.115/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR