DCIT, Varanasi V. M/s A.K. Construction Company, Varanasi

ITA 120/ALLD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63330 (ITAT-ALLAHABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTA VA
• Assessee Lawyers: ARVIND SHUKLA; O P SHUKLA
• Keywords: Depreciation
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.120/A/2011 ASSESSMENT YEAR: 2006-07 DY. COMMISSIONER OF INCOME TAX, VS. M/S. A.K. CONST RUCTION COMPANY, CIRCLE-3, VARANASI. VILL. BHADINWA, POST AMBA, VARANASI. (PAN: AAIFA2911 J) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI Y.P. SRIVASTAVA, DR RESPONDENT BY : SHRI ARVIND SHUKLA & SHRI O.P. SHUKLA, ADVOCATES DATE OF HEARING : 30.10.2012 DATE OF PRONOUNCEMENT : 02.11.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 25.03.2011 PASSED BY THE LD. CIT(A), VARANASI FOR THE ASSESSME NT YEAR 2006-07. 2. THE EFFECTIVE GROUND RAISED IN THIS APPEAL IS IN RESPECT OF DELETION OF ADDITION OF RS.21,24,833/- ON ACCOUNT OF PROFIT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR. BEFORE THE A.O., THE ASSESSEE DID NOT PUT HIS PRESENCE. U NDER THE CIRCUMSTANCES, THE A.O. ITA NO.120/A/2011 A.Y. 2006-07 2 MADE EX-PARTE ASSESSMENT UNDER SECTION 144 OF THE I NCOME TAX ACT, 1961 (THE ACT HEREINAFTER). THE A.O. NOTICED THAT THE TOTAL CONTRACT RECEIPT FOR THE YEAR UNDER CONSIDERATION WAS RS.3,78,69,035/-. THE ASSE SSEE HAS SHOWN NET PROFIT RATE OF 1.61%. THE A.O. APPLIED 8% NET PROFIT RATE ON T OTAL CONTRACT RECEIPT BEFORE DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS , EXCLUDING INCOME FROM OTHER SOURCES. THE A.O. ACCORDINGLY CALCULATED THE AMOUNT OF ADDITION AT RS.21,24,833/-. IN FIRST ROUND OF LITIGATION, THE CIT(A) DELETED TH E ADDITION AGAINST WHICH THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL VIDE I.T.A NO.152/ALLD/2010. THE I.T.A.T. VIDE ITS ORDER DATED 19.08.2010 SENT BACK THE MATTER TO THE FILE OF CIT(A). THE CIT(A) IN COMPLIANCE TO THE DIRECTION OF THE I. T.A.T, ACCEPTED THE RESULT DECLARED BY THE ASSESSEE. THE RELEVANT FINDING OF CIT(A) IS REPRODUCED AS BELOW :- (PAGE NOS.8 & 9) 5. ON PERUSAL OF ASSESSMENT ORDER AND ASSESSEES S UBMISSION IT APPEARS THAT MORE OR LESS SAME N.P. RATES DISCLOSED BY THE ASSESSEE IN EARLIER YEARS HAS ALREADY BEEN ACCEPTED BY ASSESSIN G OFFICER. A COMPARATIVE CHART OF NET PROFIT OF THE ASSESSEE IS REPRODUCED AS UNDER:- A.Y. TURNOVER NET PROFIT (INCLUDING SALARY, INTEREST AND DEPRECIATION % OF N.P. REMARK 2004-05 11,30,66,413/- 10,60,335/- 0.94 ACCEPTED 2005-06 4,47,26,327 21,06,635/- 4.71 ACCEPTED 2006-07 3,78,69,035/- 16,02,610/- 4.23 ACCEPTED IT IS OBSERVED THAT, THE APPELLANT HAS SHOWN THE PR OFIT MORE OR LESS SAME AS PER ABOVE MENTIONED CHART. EVER IN TH E ENTERPRISES ENGAGED IN THE SAME LINE OF BUSINESS MORE OR LESS S AME PROFIT RATE HAS ALREADY BEEN ACCEPTED BY THE ASSESSING OFFICERS WHI CH IS AS UNDER :- ITA NO.120/A/2011 A.Y. 2006-07 3 PARTICULARS A.Y. TURNOVER NET PROFIT (INCLUDING SALARY, INTEREST AND DEPRECIATION) % OF PROFIT REMARK CHANDRAWATI CONSTRUCTION 2006-07 1,23,32,182/- 528548/- 4.28 ACCEPTED UNDER SECTION 143(3) J.P. YADAV 2006-07 6,10,69,830/- 25,95,599/- 4.25 A CCEPTED UNDER SECTION 143(3) DEVI ENTERPRISES 2006-07 20,59,97,339/- 61,27,530/- 2.97 ACCEPTED UNDER SECTION 143(3) THEREFORE, THE PROFIT SHOWN BY DIFFERENT CONCERNS O F SAME LINE OF BUSINESS IS EQUAL AS DISCLOSED BY THE APPELLANT. THEREFORE, THE N.P. RATE SHOWN BY THE ASSESSEE IS QUITE REASONABLE AND REQUIRES NO INTERFERENCE. 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. WE NOTICE THAT THE ASSESSEE HAS FILED RET URN OF INCOME DECLARING TOTAL INCOME OF RS.6,09,920/- WHICH INCLUDES INTEREST ON INCOME TAX REFUND RS.27,846/-, INTEREST ON FDR RS.6,18,729/- AND AGAIN INTEREST ON FDR RS.51,346/-, TOTAL AMOUNTING TO RS.6,97,921/-. THE ASSESSEE DID NOT A PPEAR BEFORE THE A.O. THE A.O. UNDER THE COMPELLING CIRCUMSTANCES MADE THE AS SESSMENT UNDER SECTION 144 OF THE ACT. THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS BEFORE THE A.O. THE A.O. HAS INVOKED SECTION 145(3) OF THE ACT. UNDER THE CIRCUMSTANCES AND FACTS OF THE CASE, THE A.O. APPLIED 8% NET PROFIT RATE BEFOR E DEPRECIATION RS.3,86,818/-, SALARY AND REMUNERATION AND INTEREST TO PARTNERS RS .6,05,872/-. THE CIT(A) ITA NO.120/A/2011 A.Y. 2006-07 4 DIRECTED THE A.O. TO ACCEPT BOOK RESULT OF THE ASSE SSEE WHICH IS APPARENTLY AN INCORRECT DIRECTION WITHOUT APPRECIATING THE FACTS NOTED BY THE A.O. THAT THE ASSESSEE NEITHER APPEARED BEFORE THE A.O. NOR PRODU CED ANY BOOKS OF ACCOUNT BEFORE THE A.O. THE CIT(A) MERELY ON THE BASIS OF MATHEMATICAL FORMULA COMPARED THE NET PROFIT RATE WITHOUT CONSIDERING TH E CRUCIAL FACT THAT THE ASSESSEE WAS HAVING INCOME FROM OTHER SOURCES IN THE FORM OF INTEREST ETC. OF RS.6,97,921/-, WHEREAS, THE ASSESSEE HAS DECLARED INCOME OF RS.6,0 9,920/- IN THE RETURN OF INCOME. IN OTHER WORDS, IF THE INCOME FROM OTHER SOURCES IS REDUCED FROM THE INCOME DECLARED IN THE RETURNED INCOME, THERE IS A LOSS IN CONTRACTOR-SHIP BUSINESS. TO APPRECIATE THE PROPER FACT, WE WOULD LIKE TO REPROD UCE THE FINAL CALCULATION OF TOTAL INCOME CALCULATED BY THE A.O. AS UNDER :- (A.O. PAR AGRAPH NOS.4 & 5) THE ASSESSEE DID NOT PRODUCE THE BOOKS OF A/C AND SOUGHT FOR ADJOURNMENT. CASE WAS FIXED FOR 15.12.2008 AS A LA ST OPPORTUNITY TO PRODUCE THE BASIC BOOKS OF A/C. IT WILL BE PERTINE NT TO MENTION THAT BOOKS OF A/C HAS BEEN ASKED TO PRODUCE FROM LAST 17 MONTHS. HOWEVER, A FRESH OPPORTUNITY WAS PROVIDED TO THE AS SESSEE IN SPITE OF THE FACT THAT THERE IS ONLY 10 WORKING DAYS IS LEFT FOR THIS ASSESSMENT PROCEEDING. AGAIN ASSESSEE FAILED TO PRODUCE THE B OOKS OF A/C ON 15.12.2008. IN ABSENCE OF BOOKS OF A/CS, IT IS PRE SUMED THAT ASSESSEE IS NOT MAINTAINING PROPER BOOKS OF A/C AND REJECTED UNDER SECTION 145(3) OF THE INCOME TAX ACT, 1961. THE PROFIT OF THE ASSESSEE IS COMPUTED AS UNDER :- 5. COMPUTATION OF EXTRA PROFIT INCOME IN NP RATE AS DISCUSSED ABOVE 1. TOTAL CONTRACT RECEIPT RS.3,78,69,035/- 2. NET PROFIT @ 8% OF TOTAL TURN OVER RS.30,29,522/- 3. LESS: DEPRECIATION (-)RS.3,86,818/- SALARY/REMUNERATION/INTEREST TO PARTNER (-)RS.6,05, 872/- 4. CONTRACT INCOME (2-3) RS.20,36,832/- ITA NO.120/A/2011 A.Y. 2006-07 5 5. INCOME FROM OTHER SOURCES RS.6,97,921/- (INTT. ON INCOME TAX REFUND RS.27,846/-, INTT. ON FDR ACCD.618729, INTT, ON FDR RECD.51346/-) 6. ASSESSED INCOME (4+5) RS.27,34,753/- 7. INCOME DECLARED BY THE ASSESSEE RS.6,09,920/- 8. EXTRA PROFIT ADDITION IN NP AS DISCUSSED ABOVE (6-7) RS.21,24,833/- (EXTRA PROFIT ADDITION: RS.21,24,833/-) TOTAL ASSESSED INCOME BUSINESS PROFIT FROM CONTRACT RS.20,36,832/- INCOME FROM OTHER SOURCES RS.6,97,921/- TOTAL RS.27,34,735/- (CORRECT FIGURE IS RS.27,34,753/-) 5. THE CIT(A) FOUND THAT THE NET PROFIT RATE INCLUD ING SALARY, INTEREST AND DEPRECIATION @ 4.23% IS A REASONABLE PROFIT RATE. THE CIT(A) HAS IGNORED THE FACT NOTED BY THE A.O. THAT THE NET PROFIT RATE SHOWN BY THE ASSESSEE IS 1.61%. THEREFORE, THE FINDING OF CIT(A) THAT THE NET PROFI T SHOWN BY THE ASSESSEE IS QUITE REASONABLE AND REQUIRES NO INTERFERENCE IS AN INCOR RECT FINDING AND WITHOUT APPRECIATING THE FACTS OF THE CASE. THE ASSESSEE R ELIED UPON VARIOUS ORDERS OF I.T.A.T., ALLAHABAD BENCH AND OTHERS IN SUPPORT OF THE FACT THAT THE NET PROFIT/GROSS PROFIT RATE 4 5% IS A REASONABLE RATE IN THIS LIN E OF BUSINESS. EVEN ON ACCEPTANCE OF CIT(A)S COMPARATIVE POSITION OF NET PROFIT THAT THE NET PROFIT IS ABOUT 4% IS REASONABLE RATE OF NET PROFIT THEN THIS NET PROFIT RATE IS REQUIRED TO BE SUBSTITUTED AGAINST 8% NET PROFIT RATE APPLIED BY THE A.O. THE A.O. HAS CALCULATED THE NET PROFIT BY APPLYING 8% PROFIT RATE OF WHICH CALCULAT ION COMES TO RS.30,29,522/- AND IF 4% OF RATE OF PROFIT IS APPLIED THAT WILL BE RS. 15,14,761/-. THUS, THE INTERFERENCE ITA NO.120/A/2011 A.Y. 2006-07 6 IN THE ORDER OF ASSESSING OFFICER REQUIRED IS ONLY TO THAT EXTENT TO SUBSTITUTE FIGURES OF PROFIT OF RS.30,29,522/- TO RS.15,14,761 /-. WE, THEREFORE, MODIFY THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO APPLY 4% NET PROFIT RATE INSTEAD OF 8% AND RECALCULATE THE TOTAL INCOME, AFTER ALLOW ING DEPRECIATION OF RS.3,86,818/, SALARY REMUNERATION AND INTEREST TO PARTNERS RS.6,0 5,872/- AND AFTER CONSIDERING THE INCOME FROM OTHER SOURCES RS.6,97,921/-. BUSINESS PROFIT FROM CONTRACT IS TO BE TAKEN AT RS.5,22,071/- INSTEAD OF RS.20,36,832/- TA KEN BY THE A.O. THE TOTAL INCOME WILL BE AS UNDER:- BUSINESS PROFIT FROM CONTRACT RS.5,22,071/- INCOME FROM OTHER SOURCES RS.6,97,921/- ------------------ TOTAL RS.12,19,992/- ------------------- 6. THE A.O. IS DIRECTED ACCORDINGLY. WE MAY STATE HERE THAT THE CALCULATION OF PROFIT FROM CONTRACT BUSINESS IN THIS CASE IS ESTIM ATED UNDER PECULIAR FACTS OF THIS CASE, THEREFORE, IT IS NOT REFERABLE TO OTHER CASE WHERE PROFIT IS TO BE ESTIMATED BY APPLYING NET PROFIT RATE IN CASE OF CONTRACTOR. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED AS INDICATED ABOVE. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* ITA NO.120/A/2011 A.Y. 2006-07 7 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY