Gurmail Singh, Contractor, Kurukshetra V. ITO, Kurukshetra

ITA 1247/CHANDI/2010

• Counselvise Citation: 124721514 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• 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.1247/CHD/2010 (ASSESSMENT YEAR : 2007-08) GURMAIL SINGH, CONTRACTOR, VS. THE INCOME TAX OFF ICER, VILLAGE MANGRA, P.O. PEHOWA. WARD 1, KURUKSHETRA. KURUKSHETRA. PAN: AKNPS8489E (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI AJAY JAIN & RAVI SHANKAR RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 07.03.2012 DATE OF PRONOUNCEMENT : 26.03.2012 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 18.08.2010 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LEARNED C.I.T. (A) IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE AND ALSO AGAINST NATURAL JUSTICE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL) HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN ARBITRARY UPHOLDING THE ARBITRARY ORDERS OF THE ASSESSING OFFICER WHILE SUSTAINING NET PROFIT RATE @ 12%. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ASSESSMENT ORDER WITHOUT APPRECIATING THE FACTS TJHAT IN THE INSTANT YEAR TURNOVER BEING MORE THAN THREE TIMES THAN THE IMMEDIATELY PRECEDING YEAR, MUCH LESSER NET PROFIT RATE SHOULD HAVE BEEN APPLIED, INASMUCH AS EVEN AFTER REJECTING THE BOOKS OF ACCOUNT, PROFIT IS TO BE ESTIMATED NEAR THE TRUTH 2 AND SHOULD NOT BE BARE SUSPICION AND BASED ON SURMISES, SUSPICIONS AND CONJECTURES AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. V CIT, 26 ITR 775 (SC). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CIVIL CONTRACTOR ENGAGED IN THE BUSINESS OF EXECUTING WOR KS OF HARYANA STATE AGRICULTURE MARKETING BOARD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED GROSS PAYMENT OF RS.4,03,74,3 31/- ON WHICH NP RATE OF 0.99% WAS DECLARED BY THE ASSESSEE. THE AS SESSING OFFICER REJECTED THE BOOK RESULTS SHOWN BY THE ASSESSEE IN VIEW OF THE ASSESSEE HAVING FAILED TO PRODUCE THE NECESSARY BILLS AND VO UCHERS IN RESPECT OF VARIOUS EXPENSES DEBITED TO THE PROFIT & LOSS ACCOU NT. THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND ONLY FILED P HOTOCOPY OF MATERIAL REGISTER, DIESEL EXPENSES AND LABOUR REGISTER. THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNT APPLIED NP RAT E OF 12% TO DETERMINE THE INCOME OF THE ASSESSEE AT RS.39,54,360/-. 4. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER IN VIEW OF THE RATIO LAID DOWN BY HON'BLE PUNJAB & HAR YANA HIGH COURT IN CIT HISSAR VS. PRABHAT KUMAR OF SIRSA (P&H) ITA NO. 293 OF 2008. 5. SHRI AJAY JAIN & RAVI SHANKAR APPEARED ON BEHALF OF THE ASSESSEE AND SHRI AKHILESH GUPTA APPEARED FOR THE REVENUE. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITTED THAT DURING THE LAST Y EAR THE NP RATE OF 8% WAS APPLIED AND THE SAME MAY BE ADOPTED FOR THE YEA R UNDER APPEAL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS CARRYING OUT THE WORK OF CIVIL CONSTRUC TION AWARDED BY HARYANA STATE AGRICULTURE MARKETING BOARD. THE ASS ESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE AUTHORITIES BELOW EXCEPT FOR FILING SOME PHOTOCOPIES OF LEDGER ACCOUNTS. IN VI EW THEREOF, WE UPHOLD 3 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. 7. WE FIND THAT SIMILAR ISSUE OF ADOPTION OF NET PR OFIT RATE TO DETERMINE THE INCOME IN THE HANDS OF THE ASSESSEE, 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 & 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 4 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 CIV IL CONSTRUCTION WORK OF MARKETING BOARD, THERE IS NO MERIT IN APPLYING N ET PROFIT RATE OF 12% TO DETERMINE THE INCOME OF THE ASSESSEE FOR THE YEA R UNDER APPEAL. THE ASSESSEE HAD DECLARED NET PROFIT RATE OF 0.99% FOR THE YEAR UNDER APPEAL. DURING THE PRECEDING YEAR, NP RATE OF 8% WAS APPLIE D. WE DIRECT THE ASSESSING OFFICER TO APPLY THE NET PROFIT RATE OF 8 % TO WORK OUT THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEAL. ACCORDINGLY, UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT, WE DIR ECT THE ASSESSING OFFICER TO RECOMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 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 26 TH DAY OF MARCH, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH MARCH, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5