M/s Avtar Singh Construction Co. Pvt. Ltd., Chandigarh V. ITO, Chandigarh

ITA 1240/CHANDI/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8419 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 27-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Depreciation; Corroborative evidences

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NOS. 1240 & 1241/CHD/2012 ASSESSMENT YEARS: 200708 & 2008-09 M/S AVTAR SINGH CONSTRUCTION CO. PVT. LTD. VS. THE ACIT, CHANDIGARH CIRCLE, PATIALA PAN NO. AABCA9381L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PRIKSHIT AGGARWAL RESPONDENT BY : SH. SUSHIL KUMAR DATE OF HEARING : 09.02.2016 DATE OF PRONOUNCEMENT : 11.03.2016 . ORDER PER H.L.KARWA, VP BOTH THE APPEALS CONCERN THE SAME ASSESSEE AND THEY WERE HEARD TOGETHER BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRSTLY, WE WILL TAKE UP ITA NO. 1240/CHD/2012 RELATING TO ASSESSMENT YEAR 2007-08. IN THIS APPEAL, THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, WORTHY CIT (APPEALS) THROUGH HIS ORDER DATED 21.05.2012 HAS ERRED IN PASSING THAT ORDER IN CONTR AVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME T AX ACT, 1961. 2 THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , WORTHY C!T(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. 2 A.O. WHEREIN HE REJECTED THE BOOKS OF ACCOUNTS OF T HE APPELLANT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF LD. A.O. WHEREIN HE APPLIED ESTIMATED NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS OF THE APPELLANT WHICH IS HIGHLY UNJUSTIFIED AND TOO HIGH, UNREASONABLE AND A GAINST THE FACTS AND LEGAL POSITION OF THE CASE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, WORTHY CIT(A) HAS ERRED IN CONFIRMING T HE ACTION OF LD. A.O. OF NOT ALLOWING THE AMOUNT OF IN TEREST AND DEPRECIATION OUT OF INCOME COMPUTED ON ESTIMATE D BASIS BY LD. AO BY APPLYING NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS OF THE APPELLANT. 3. GROUND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND, HENCE, NO C OMMENTS ARE BEING GIVEN. 4. BRIEFLY STATED, THE FACTS OF THE CASE WITH REGAR D TO GROUND NOS. 2 TO 4 ARE THAT ASSESSEE IS A SUB-CONTRACTOR UNDER THE PRINCIP AL CONTRACTOR OF M/S JMC PROJECTS INDIA LTD AND M/S AFCON INFRASTRUCTURES LT D. THE CONTRACT RECEIPTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WE RE AT RS. 7,43,41,061/-. WHILE EXAMINING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTICED THAT SOME OF THE EXPENSES WERE NOT SUPPORTED BY PROPER BILLS AND SOME OTHER BILLS WERE SELF-PREPARED. THE EXPENSES WERE CLAIMED UNDER THE HEADS CONSTRUCTION EXPENSES. THE ASSESSING OFFICER ALSO NOTED THAT T HE ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER. AS PER ORDER-SHEET ENTRY DATED 30.12.009, THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE BOOKS OF A CCOUNT SHOULD NOT BE REJECTED U/S 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'T HE ACT'). IN RESPONSE TO THE ABOVE QUERY, THE REPLY OF THE ASSESSEE WAS THAT SOM E VOUCHERS WERE MISPLACED AND NOT TRACEABLE AND, THEREFORE, THE SAME COULD NO T BE PRODUCED. IT WAS ALSO 3 CONTENDED THAT IN ASSESSEES LINE OF BUSINESS, MAIN TENANCE OF COMPLETE VOUCHERS IS NOT PRACTICABLE. THE ASSESSING OFFICER DID NOT F IND ANY MERIT IN THE EXPLANATION OF THE ASSESSEE AND HE, THEREFORE, REJE CTED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER DOUBTED THE CORRECTNESS OF THE AC COUNTS OF THE ASSESSEE AND, HENCE, THE NET PROFIT RATE OF 10% WAS APPLIED. THE ASSESSING OFFICER COMPUTED THE TAXABLE INCOME OF THE ASSESSEE AS UNDER;- GROSS CONTRACT RECEIPTS : RS. 7,43,41,061/- LESS RECOVERY OF MATERIAL : RS. 3,08,21,342/- BALANCE : RS. 4,35,19,719/- NET PROFIT @ 10% AS DISCUSSED ABOVE : RS. 43,51,9 72/- 5. IN VIEW OF THE ABOVE, THE BUSINESS INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 43,51,972. 6. ON APPEAL, THE CIT(A) HELD AS UNDER:- NO REPLY HAS BEEN FILED IN RESPECT OF THESE GROUND S OF APPEAL. AS THE BILLS / VOUCHERS HAD NOT BEEN PRODUC ED AND THE APPELLANT WAS NOT MAINTAINING ANY STOCK REGISTER, THE ASSESSING OFFICER WAS RIGHT IN REJECT ING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND ESTIMATI NG THE INCOME @ 10% IN VIEW OF THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SHIVAM CONSTRUCTIONS CO. (SUPRA) AND HIS ACTION IN THIS RE GARD IS UPHELD. GROUNDS OF APPEAL NO. 1,2,3 ARE DISMISSE D. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN THIS CA SE, THE GROSS CONTRACT RECEIPTS WERE TO THE TUNE OF RS. 7,43,41,061/-. THE ASSESSING OFFICER ALLOWED A RELIEF OF RS. 3,08,21,342/- ON ACCOUNT OF LESS RECO VERY OF MATERIAL. THUS, THE 4 BALANCE GROSS CONTRACT RECEIPT CAME TO RS. 4,35,197 ,19/- AND APPLIED NET PROFIT @ 10% ON THE AMOUNT OF RS. 4,35,19,719/- WHICH COME S TO RS. 43,51,972/-. IN THIS CASE THE ASSESSING OFFICER HAS POINTED OUT THE DEFICIENCIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT SUPPO RTED BY PROPER BILLS AND SOME OTHER BILLS WERE SELF PREPARED. THE ASSESSEE D ID NOT MAINTAIN ANY STOCK REGISTER. THE ASSESSEE FAILED TO PRODUCE SOME VOUC HERS STATING THAT SAME WERE MISPLACED AND ALSO STATED THAT MAINTENANCE OF COMPL ETE VOUCHERS WERE NOT PRACTICABLE IN ASSESSEES LINE OF BUSINESS. IN THE ABSENCE OF SUPPORTING EVIDENCE, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE CORRECTLY REJECTED BY THE ASSESSING OFFICER, AND THE ACTION OF THE ASSESSING OFFICER HAS BEEN UPHELD BY THE CIT(A). ON THIS ISSUE, WE DO NOT FIND ANY INFI RMITY IN THE ORDERS OF THE LOWER AUTHORITIES. AS REGARDS THE APPLICATION OF N ET PROFIT RATE OF 10%, IN OUR OPINION, THE AUTHORITIES BELOW HAVE CORRECTLY PLACE D RELIANCE ON THE JUDGEMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V SHIVAM CONSTRUCTION CO IN ITA NO. 167 OF 2007 DATED 7.5.20 07, WHEREIN THE APPLICATION OF NET PROFIT RATE OF 10% WAS HELD TO BE REASONABLE . IN THE INSTANT CASE, THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION TO SHOW AS T O WHY THE NET PROFIT RATE OF 10% APPLIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS EXCESSIVE AND UNREASONABLE. IN THE ABSENCE OF SUCH EXPLANATIO N, WE DO NOT SEE ANY MERIT IN THESE GROUNDS OF APPEAL. WE MAY ADD HERE THAT JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT HISSAR VS PARBHAT KUMAR (2012) 323 ITR 675 (P&H) AND RAJA RAM CONTRACTOR VS. CIT IN ITA NO. 689 OF 2009 DATED 7. 4.2010, HAS HELD THAT THE NET PROFIT RATE OF 12% ON CONTRACT RECEIPTS IS REAS ONABLE AND JUSTIFIED. ACCORDINGLY, WE DISMISS GROUND NO. 2 TO 4 OF THE A PPEAL. 8. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 9. IN THE RESULT, THE APPEAL IS DISMISSED. 5 ITA NO. 1241/CHD/2012 10. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, WORTHY CIT (APPEALS) THROUGH HIS ORDER DATED 21.05.2012 HAS ERRED IN PASSING THAT ORDER IN CONTR AVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME T AX ACT, 1961. 2 THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , WORTHY C!T(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. A.O. WHEREIN HE REJECTED THE BOOKS OF ACCOUNTS OF T HE APPELLANT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF LD. A.O. WHEREIN HE APPLIED ESTIMATED NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS OF THE APPELLANT WHICH IS HIGHLY UNJUSTIFIED AND TOO HIGH, UNREASONABLE AND A GAINST THE FACTS AND LEGAL POSITION OF THE CASE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, WORTHY CIT(A) HAS ERRED IN CONFIRMING T HE ACTION OF LD. A.O. OF NOT ALLOWING THE AMOUNT OF IN TEREST AND DEPRECIATION OUT OF INCOME COMPUTED ON ESTIMATE D BASIS BY LD. AO BY APPLYING NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS OF THE APPELLANT. 11. GROUND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND, HENCE NO CO MMENTS ARE BEING GIVEN. 12. THE ISSUE RAISED BY THE ASSESSEE VIDE GROUND NO S. 2 AND 3 OF THE APPEAL IS SIMILAR AS THAT IN ITA NO. 1240/CHD/2012 FOR ASSESS MENT YEAR 2007-08. FOR THE DETAILED REASONS GIVEN THEREIN, WE UPHOLD THE ORDER OF CIT(A) AND THE DECISION 6 RENDERED IN ITA NO. 1240/CHD/2012 IN RESPECT OF GRO UND NOS. 2 & 3 OF THE APPEAL ALSO APPLY TO THESE GROUNDS WITH EQUAL FORC E. ACCORDINGLY, WE REJECT GROUND NO.2 AND 3 OF THE APPEAL. 13. GROUND NO.4 OF THE APPEAL RELATES TO DISALLOWA NCE OF INTEREST AND DEPRECIATION OUT OF INCOME COMPUTED ON ESTIMATED BA SIS BY APPLYING NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS. 14. AT THE VERY OUTSET, SHRI PARIKSHIT AGGARWAL, LD . COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE AMOUNT CLAIMED ON ACCOUNT OF INTEREST IS NOT ALLOWABLE IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GIRDHARI LAL V CIT AND ANOTHER (2002) 256 ITR 318(P &H). ACCORDINGLY, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. SHRI PARIK SHIT AGGARWAL POINTED OUT THAT THE DEPRECIATION IS ALLOWABLE AS PER THE DECISION O F HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V HARBHAJAN SINGH AND CO., SANGRUR IN ITA NO.31 OF 2014 DATED 13.11.2014. HOWEVER, THE LD. DR COULD NOT CONTROVERT THE ABOVE CONTENTION OF SHRI AGGARWAL. ACCORDINGLY, WE DIREC T THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION IN ACCORDANCE WITH LAW. 15. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY AS MENTIONED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 11.03.2016 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 11 TH MARCH, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR