Sudarshan Kumar Shekhar, Kurukshetra V. ACIT, Kurukshetra

ITA 1158/CHANDI/2011

• Counselvise Citation: 115821514 RSA 2011
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAISHREE SHARMADR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1158/CHD/2011 (ASSESSMENT YEAR : 2008-09) SUDARSHAN KUMAR SHEKHAR, VS. THE A.C.I.T., PROP. M/S YOGESH CONTRACTOR & CIRCLE KURUKSHERT RA. BUILDERS, KURUKSHETRA. PAN: ACGPS9738R (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SMT.JAISHREE SHARMA,DR DATE OF HEARING : 19.01.2012 DATE OF PRONOUNCEMENT : 27.01.2012 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 17.08.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE LND. ACIT AND CIT(A) WERE NOT JUSTIFIED IN APPLYING THE PROVISION OF SECTION 145(3) OF THE I.T. ACT. 3. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE LND. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE N.P.RATE OF 12% ON THE NET CONTRACT RECEIPT AND THE APPLICATION OF FLAT N.P.RATE OF 12% IS HIGHLY EXCESSIVE WITHOUT ANY BASIS, MATERIAL AND DATA ON THE RECORD. 3. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. WE PROCEED TO DECIDE THE APPEAL AFTER HEARING LEARN ED D.R. FOR THE 2 REVENUE IN VIEW OF THE SMALLNESS OF THE ISSUE. THE ISSUE RAISED BY THE ASSESSEE IS AGAINST REJECTION OF BOOKS OF ACCOUNT U NDER THE PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLICATION OF NET PR OFIT RATE OF 12% ON THE NET CONTRACT RECEIPTS. THE ASSESSEE IS AGGRIEVED B Y APPLICATION OF SAID PROFIT RATE. 4. FROM THE PERUSAL OF THE RECORD WE FIND THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND WAS ENGAGED IN THE BUSINESS OF EXECU TION OF CONSTRUCTION WORK WITH VARIOUS GOVERNMENT DEPARTMENTS. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO APPE AR BEFORE THE ASSESSING OFFICER AND ALSO THE REQUISITE INFORMATIO N/DETAILS WERE NOT FILED THOUGH VARIOUS OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE. THE ASSESSING OFFICER ACCORDINGLY SHOW CAUSED THE ASSES SEE AS TO WHY THE NET PROFIT RATE @ 12% SHOULD NOT BE ESTIMATED IN VI EW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT HISAR VS. M/S PRABHAT KUMAR, CONTRACTOR, SIRSA IN I TA NO.293 OF 2008. THE COUNSEL FOR THE ASSESSEE APPEARED ON 30.11.2010 BEFORE THE ASSESSING OFFICER BUT FURNISHED INCOMPLETE INFORMAT ION/DETAILS. THE ASSESSEE FAILED TO PRODUCE THE ORIGINAL VOUCHERS OF EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT, MUSTER ROLL AND STOCK REGIST ER. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE BOOKS OF ACCOUNT PRODUCED WERE ALSO INCOMPLETE AND WERE NOT PROPERLY VOUCHED. IN THE ABSENCE OF THE SAME THE ASSESSING OFFICER REJECTED THE BOOK VERSION OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED THE NET PROFIT RATE OF 12% TO DETERMINE THE INCOME OF THE ASSESSEE. 5. DURING THE APPELLATE PROCEEDINGS, THE EXPLANATIO N OF THE ASSESSEE WAS THAT IT WAS CARRYING ON THE BUSINESS OF EXECUTI NG THE CONTRACT OF LAYING MATTLED ROAD AS CIVIL CONTRACTOR. THE ASSES SEE CLAIMED THAT ITS RETURN OF INCOME WAS BACKED BY TAX AUDIT REPORT AND TRADING, PROFIT & 3 LOSS ACCOUNT AND BALANCE SHEET WERE ANNEXED TO THE RETURN OF INCOME. THE ASSESSEE FURTHER CLAIMED THAT BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ACIT WHICH WERE REJECTED AS THE ASSESSEE HAD NO T MAINTAINED STOCK REGISTER AND MUSTER ROLL AND ALSO NOT PRODUCED PROP ER VOUCHERS IN RESPECT OF EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT. THE ASSESSEE CLAIMED THAT THERE WAS A THEFT FROM HIS CAR IN WHICH MUSTER ROLL , BANK STATEMENT, ETC. WERE STOLEN AND COPY OF FIR WAS FILED BEFORE THE AC IT. FURTHER IT WAS POINTED OUT THAT THE ASSESSEE HAD SHOWN NP RATE OR 5.23% ON THE NET PAYMENTS AFTER DEDUCTION OF MATERIAL SUPPLIED. IT WAS FURTHER CLAIMED THAT HE HAD SUFFERED PARALYSIS OF LIMBS. THE ENTIR E BUSINESS WAS HANDLED BY THE EMPLOYEES AND THE PROFIT EARNED WAS AT A LOW ER SCALE. THE ASSESSEE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF SHRI SUKHWINDER SINGH VS. ITO, KURUKSHE TRA IN ITA NO.140/CHD/2009 DATED 23.9.2009. THE CIT (APPEALS) REJECTING THE CLAIM OF THE ASSESSEE IN ENTIRETY UPHELD THE ORDER OF THE ASSESSING OFFICER. 6. WE FIND THAT THE ASSESSEE BEFORE US IS A ROAD CO NTRACTOR AND HAD DECLARED GROSS RECEIPTS OF RS.3.46 CRORES ON WHICH IT HAD DECLARED THE NP RATE OF 5.23% AFTER CLAIMING INTEREST PAID TO THE B ANK AND DEPRECIATION. IN VIEW OF THE ASSESSEE HAVING FAILED TO PRODUCE CO MPLETE BOOKS OF ACCOUNT WITH SUPPORTING VOUCHERS, THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT AND APPLYING THE PRO VISIONS OF SECTION 145(3) OF THE ACT FOR ESTIMATING THE INCOME OF THE ASSESSEE NEEDS TO BE UPHELD. ACCORDINGLY, WE UPHOLD THE ADOPTION OF BOO K RESULTS IN VIEW OF THE PROVISIONS OF SECTION 145(3) OF THE ACT. 7. THE SECOND ISSUE WHICH ARISES IN THE PRESENT APP EAL IS APPLICATION OF NET PROFIT RATE FOR DETERMINING THE INCOME IN TH E HANDS OF THE ASSESSEE. THE AUTHORITIES BELOW HAD APPLIED NET PR OFIT RATE OF 12% IN 4 VIEW OF THE RATIO LAID DOWN BY THE JURISDICTIONAL H IGH COURT IN THE CASE OF M/S PRABHAT KUMAR, CONTRACTOR, SIRSA (SUPRA). W E FIND THAT SIMILAR ISSUE OF ADOPTION OF NET PROFIT RATE TO DETERMINE T HE INCOME IN THE HANDS OF THE ASSESSEE, WHERE THE BOOKS OF ACCOUNT HAD BEE N REJECTED, AROSE BEFORE THE TRIBUNAL IN SHRI SUKHWINDER SINGH VS. IT O (SUPRA). THE TRIBUNAL IN SUKHWINDER SINGH VS. JCIT, KURUKSHETRA IN ITA NO.1461/CHD/2010 VIDE DATED 24.11.2011 HELD AS UNDE R : 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 & 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 5 ESTIMATION OF INCOME BY APPLYING OF FLAT RATE INHER ENTLY INVOLVES AN ELEMENT OF SUBJECTIVITY. 8. IN VIEW OF THE AFORESAID DECISION AND THE FACTS BEING SIMILAR, WE FIND NO MERIT IN THE ADOPTION OF NP RATE OF 12% TO DETERMINE THE INCOME IN THE HANDS OF THE ASSESSEE. WE DIRECT THE ASSESS ING OFFICER TO DETERMINE THE INCOME IN THE HANDS OF THE ASSESSEE B Y APPLYING THE NET PROFIT RATE OF 7% AS THE ASSESSEE HAS FAILED TO PRO DUCE COMPLETE VOUCHERS TO ESTABLISH ITS CASE. THE GROUND NO.2 OF APPEAL R AISED BY THE ASSESSEE IS DISMISSED AND GROUND NO.3 IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF JANUARY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JANUARY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6