DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE, JHUNJHUNU V. M/s. Laxminath Infra-Structure Pvt. Ltd., CHURU

ITA 1249/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5170 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 02-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASH MEENA
• Keywords: Rejection of books of accounts; Business income; Depreciation; Question of law; Tax effect; TDS; Set aside
• Section: 37; 154; 40A(3); 143(3); 40(a)(ia); 194C; 44AB; 13; 145(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES B, JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA -@ ITA NO. 801, 802 & 1249/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEARS : 2013-14, 2014-15 & 2015-16 DY. COMMISSIONER OF INCOME TAX, CIRCLE- JHUNJHUNU. CUKE VS. M/S LAXMINATH INFRASTRUCTURE PVT. LTD., C-91, AGRASEN NAGAR, CHURU. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AABCL 3531 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI PREM PRAKASH MEENA (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI R.P. SHARMA (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/08/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/10/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF LD.CIT(A)-3, JAIPUR DATED 01/03/2018 AND 23/03/2018 FOR THE A.Y. 2013-14 AND 2014-15 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN ITA NO. 801/JP/2018 FOR THE A.Y. 2013-14, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN GIVING ITS DECISION ON ESTIMATION BASIS WITHOUT CONSIDERING THE FACTS IN TOTALITY. WITHOUT ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 2 CONSIDERING FACT OF THE CASE IT JUST GIVEN DECISION ON THE BASIS OF PAST HISTORY IN AY 2010-11 AND IN AY 2012-13 AS WELL. THE DECISION IS NOT ACCEPTABLE AS MERE ESTIMATION ON THE PAST HISTORY OF THE ASSESSEE DOES NOT GIVE ANY TRUE PICTURE OF PROFIT FOR THE YEAR UNDER CONSIDERATION. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN LAW IN DELETING APPROXIMATELY THE FULL TRADING ADDITION OF RS.2,49,12,081/- AND CONFIRMING THE ADDITION OF RS.2,49,559/- ONLY WHICH WAS MADE AFTER REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE IT ACT, 1961 ? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN LAW DELETING THE ENTIRE ADDITION MADE U/S 40A(3 )& 40(A)(IA) OF THE ACT, WHEREIN IT WAS ESTABLISHED FACT THAT THE ASSESSEE HAD VIOLATED THE PROVISION OF SECTION 40A(3) & 40(A) (IA) OF THE ACT. ? (IV) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, WITHDRAW OR INSERT ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL.' 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS IN BRIEF ARE THAT T HE ASSESSEE COMPANY IS A CIVIL CONSTRUCTION CONTRACTOR FOR LAST FIVE YEARS. ITS BOOKS OF ACCOUNT ARE REGULARLY AUDITED U/S 44AB OF THE ACT. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A.O. AFTER POINTING OUT DEFECTS IN THE BOOKS OF ACCOUNT, INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOK RESULTS AND ESTIMATED NET PROFIT @ 8.5% OF THE TOTAL RECEIPTS BY OBSERVING THAT IN THE PRECEDING A.Y. 2012-13, BOOKS OF ACCOUNT WAS REJECTED BY THE A.O. AND ACTION OF THE A.O. WAS CONFIRMED BY THE LD. CIT(A). ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 3 4. BY THE IMPUGNED ORDER, THE ADDITION SO MADE BY THE A.O. WAS SUBSTANTIALLY DELETED BY THE LD. CIT(A) AFTER OBSERVING AS UNDER: I HAVE PERUSED THE RECORD I FIND THAT THE ASSESSING OFFICER APPLY 8.5% NET PROFIT RATE WITHOUT GIVING ANY REASON AND THAT IS WITHOUT ANY BASIS AND UNREASONABLE. THERE IS FORCE IN THE SUBMISSION THAT PAST HISTORY IS THE BEST METHOD FOR ESTIMATION OF THE PROFIT RATE HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN VARIOUS CASES. THE TRADING RECORD OF THREE YEAR AS UNDER:- ASST.YEAR GROSS RECEIPTS GROSS PROFIT G.P. RATE NET PROFIT N.P. RATE 2011-12 235650422 1063786.70 4.51% 1688746.00 0.71% 2012-13 199135193 9392348.11 4.71% 1531462.60 0.76% 2013-14 379449445 16657123.00 4.39% 3499935.00 0.92% THE HON'BLE ITAT JODHPUR BENCH HELD IN APPELLANT OWN CASE VIDE DECISIONS THE ITA NO. 532/JODHPUR/2015 DATED 31/03/2017 HELD WE ARE INCLINED TO FOLLOW THE FINDING OF THE ITAT JODHPUR BENCH IN ASSESSES OWN CASE FOR A.Y. 2011-12 AND WE HOLD THAT FOR A.Y. 2012-13 THERE IS NO SUBSTANTIAL CHANGE OF FACTS AND THEREFORE NP RATE AS APPLIED BY THE ITAT IN ASSESSEE CASE FOR 2011-12 SEEMS TO BE REASONABLE AND THE SAME HAS TO BE APPLIED FOR A.Y. 2012-13. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE NP RATE @ 1% THEREBY MAINTAINING STATUS QUO FROM A.Y. 2011-12 ONWARDS. THEREFORE, FOLLOWING THE ABOVE OBSERVATION AND CITED DECISION I ESTIMATION THE NET PROFIT @, 1% ON TOTAL TURNOVER OF RS.37,94,49,445/-SUBJECT TO THE ALLOWABILITY OF THE DEPRECIATION OF RS.35,46,628/-. THUS, THE NET PROFIT COMES TO RS.37,94,494/-. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 4 5. THE A.O. HAS ALSO TREATED THE INTEREST INCOME ON FDR AS INCOME FROM OTHER SOURCES. BY THE IMPUGNED ORDER, THE LD. CIT(A) BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE HELD THAT INTEREST INCOME IS ALSO BUSINESS INCOME. THE PRECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER: THE ASSESSING OFFICER TREATED THE FDR INTEREST OF RS.27,37,478/- AS INCOME FROM OTHER SOURCES. THE A/R OF THE APPELLANT SUBMISSION HAD THAT THE ASSESSEE HAD TO MAKE FDR FOR TAKING THE CONTRACT WORK FROM THE DEPARTMENT. THE ASSESSEE HAS TO DEPOSITS THE FDR AS SECURITY IN THE DEPARTMENTS FOR OBTAINING CONTRACT WORK, WHICH ARE PURELY FOR BUSINESS PURPOSES. THE INTEREST RECEIVED FROM THE FDR RELATE TO THE PROFIT OF BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. THE A/R OF THE APPELLANT RELIED UPON THE FOLLOWING CASE LAWS THE HONBILE I.T.A.T. JODHPUR BENCH HAS ALSO ADMITTED IN THE ASSESSMENT YEAR 2010-11. 2011-12 AND 2012-13, IS ALSO HELD THAT THE A.O. HAS IGNORED THE CONTENTION OF THE ASSESSEE THAT FDR WERE PURCHASED FOR TAKING CONTRACT WORK AND THEREFORE THE INTEREST OCCURRING ON THESE F.D.R. WOULD BECOME AS BUSINESS INCOME. THE ASSESSEE WED COPIES OF FDR WHICH WERE PLEDGED WITH VARIOUS GOVERNMENT DEPARTMENTS. THE A.O OR THE ID. CIT APPEALS HAS NOT DISPUTED THE ABOVE MENTION FACTS. IN OUR CONSIDERATION OPINION HIS INTEREST INCOME WOULD PARTAKE THE CHARACTER OF BUSINESS INCOME ONLY IN SUCH LIKE CASES WE HAVE TAKEN NUMEROUS DECISIONS IN THE SAME LINES. ACCORDINGLY OFFER CONSIDERATION THIS INTEREST INCOME AS - PART OF BUSINESS INCOME AS HAS BEEN CLAIMED BY THE ASSESSEE SO THE FDR INTEREST IS BUSINESS INCOME AND NO SEPARATE ADDITION IS CALLED FOR. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 5 THEREFORE FOLLOWING THE ABOVE CITED DECISION OF VARIOUS CASES AND THE DECISIONS IN THE APPELLANT OWN CASE FOR A.Y. 2012-13 BY THE HON'BLE ITAT. I DIRECT THE ASSESSING OFFICER TO TREAT INTEREST INCOME IN THE HEAD OF BUSINESS INCOME AS HAS BEEN CLAIMED BY THE APPELLANT. THESE GROUNDS ARE PARTLY ALLOWED. 6. DURING THE COURSE OF ASSESSMENT, THE A.O. ALSO MADE ADDITION OF RS. 2.50 LACS U/S 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT TO JCB HIRE CHARGES WITHOUT DEDUCTION OF TAX U/S 194(1) OF THE ACT. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE AFTER OBSERVING AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFORE ME. I FIND THAT THE A/R OF THE APPELLANT SUBMITTED THAT THE ASSESSING OFFICER HAS ERRED IN DISALLOWANCE THAT THE JCB IS INCLUDED IN GOODS CARRIAGE 'SHALL HAVE THE MEANING ASSIGNED IN SUB SEC.2 OF THE MOTOR VEHICLE ACT, 1988, IN THIS ACT THE JCB IS INCLUDED IN GOODS CARRIAGE' A COPY OF THIS WAS ALSO FILED, BUT THE ASSESSING OFFICER HAS DENIED THE CONTENTION OF THE ASSESSEE WHICH IS UNLAWFUL, BECAUSE ACCORDING TO SEC. 194C(6) NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF CONTRACT DURING THE COURSE OF BUSINESS OF PLYING HIRING OR LEASING GOODS CARRIAGE, ON FURNISHING OF HIS PAN NO. TO THE PERSON PAYING OR CREDITED SUCH SUM, SO THE ASSESSEE COMPANY IS NOT LIABLE TO THE DEDUCTED TDS, SO THE ASSESSEE COMPANY IS NO LIABLE TO DEDUCTED TDS AND THE JCB OWNER HAS SUBMITTED HIS PAN FOR NON- DEDUCTED TO TDS. SO THE ADDITION MADE BY ASSESSING OFFICER IS LIABLE TO BE DELETED. 7. IN THE COURSE OF ASSESSMENT, THE A.O. ALSO MADE DISALLOWANCE IN RESPECT OF CASH PAYMENT BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 6 ACT. THIS ADDITION WAS ALSO DELETED BY THE LD. CIT(A) AFTER OBSERVING AS UNDER: ADDITION AN AMOUNT OF RS. 1125460/- ON ACCOUNT CONTRAVENTION OF SEC. 40A(3) . IT IS STATED THAT THE ASSESSEE HAS MADE THE PAYMENT TO THE PARTIES AS THEY INSIST FOR PAYMENT ON THE VERY DAY. DUE TO GENUINE HARDSHIP OF THE PARTIES THE ASSESSEE HAS TO PAY IN CASH. TECHNICALLY THE PAYMENT ARE COVERED BY THE PROVISION OF SEC. 40 (A)(3) BUT THE SAME WAS CONSIDERED ALONG WITH RULE 6DD (B) AS IT EXISTED THEN WHICH DULLY PROVIDED FOR THE GENUINE HARDSHIP THAT MAY BE CAUSED TO THE TAX PAYERS. THE INTENTION OF THE PROVISION WAS TO CURVE THE USE OF BLACK MONEY. HOWEVER IT WAS NEVER INTENDED RIGHT FROM THE INCEPTION OF THIS SECTION, READ WITH RULE CIRCULAR ISSUE EXPLAINING THE REASON FOR SUCH PROVISION, TO RESTRICT THE TRADING ACTIVITIES OF THE ASSESSEE OR THE TAX PAYERS. THE A/R OF THE APPELLANT RELIED UPON THE CASE OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSIDHAR REPORTED IN 148 CTR 533 AND CIT VS G. K. CONTRACTOR 19 DTR 305 (RAJ.) HAS HELD THAT WHEN NO DEDUCTION WAS ALLOWED IN REGARDS TO THE PURCHASES OF THE ASSESSEE, THERE WAS NO NEED TO LOOK IN TO THE PROVISION OF SEC. 40(A)(3) AND RULE 6DD AS NO DEDUCTION WAS ALLOWED TO AND CLAIMED BY THE ASSESSEE IN RESPECT OF THE PURCHASES. WHEN THE GROSS PROFIT RATE AS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSEE. I PURSUED THE RECORD I FIND THAT ASSESSING OFFICER APPLY THE PROVISION U/S 145(3) OF THE I.T. ACT AND APPLY NET PROFIT RATE WHICH INCLUDES THE ADDITION U/S 40(A)(IA) AND 40A(3) OF THE I.T. ACT AS HELD BY THE HON'BLE ITAT JAIPUR BENCH IN THE CASE OF ACIT V/S M/S CHOUDHARY & BROTHERS, JAIPUR VIDE DECISIONS THE ITA NO. 58/JPR/2013 DATED 18.01.2018 AS UNDER:- ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 7 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE FIND THAT SO FAR AS THE ISSUE OF THE AMOUNT PAID OR PAYABLE AT THE END OF THE YEAR FOR THE PURPOSE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS CONCERNED, THE SAME IS NOW COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN CASE OF M/S PALAM GAS SERVICE VS. CIT (SUPRA). THEREFORE, THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE IS NOT SUSTAINABLE AND LIABLE TO BE SET ASIDE. HOWEVER, THE ASSESSEE HAD ITA NO. 58/JP/2013 ACIT V/S M/S CHOUDHARY & BROTHERS, JAIPUR CONTESTED BEFORE THE LD. CIT(A) AGAINST THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT AND THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON ONE ASPECT OF THE ISSUE WITHOUT GOING INTO THE ISSUE OF DISALLOWABILITY U/S 40(A)(IA) OF THE ACT WHEN THE INCOME OF THE ASSESSEE IS ESTIMATED BY APPLYING NET PROFIT RATE. EVEN IF THE SAID PARTICULAR ASPECT OF THE ISSUE WAS NOT BEFORE THE LD. CIT(A) IT IS TO BE SEEN WHETHER ANY DISALLOWANCE U/S 40(A)(IA) WOULD BE MADE WHEN THE INCOME OF THE ASSESSEE IS ASSESSED ON THE BASIS OF NET PROFIT ESTIMATED BY THE ID. CIT(A) AFTER REJECTION OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3). AT THE OUTSET, WE NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF M/S POWER LINER VS. ACIT HAS CONSIDERED THIS ISSUE IN PARA 5 AS UNDER:- '5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIALS AVAILABLE ON THE RECORD. THERE IS NO DISPUTE THAT THE INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER ON THE BASIS OF THE ESTIMATION AND BEST JUDGMENT AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. THE ASSESSING OFFICER HAS APPLIED N.P. RATE OF 8% ON THE TOTAL RECEIPTS OF RS. 1,53,44,942/- AND ACCORDINGLY, THE ADDITION OF RS. 2 ; 18,277/- WAS MADE BY THE ASSESSING OFFICER. THE LD CIT(A) HAS CONFIRMED THE ADDITION OF THE ASSESSING OFFICER BY REJECTING THE CONTENTION OF THE ASSESSEE. THE AMOUNT WAS ALREADY PAID DURING THE PREVIOUS YEAR AND NOT PAYABLE AT THE END OF THE YEAR. THUS, IT IS CLEAR THAT THE CONTENTION RAISED BY THE ASSESSEE BEFORE US THAT AFTER REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME OF ITA NO. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 8 58/JP/2013 ACIT V M/S CHOUDHARY & BROTHERS, JAIPUR THE ASSESSEE, NO FURTHER ADDITION CAN BE MADE BY THE ASSESSING OFFICER, HAS NOT BEEN CONSIDERED OR DECIDED BY THE LD. CIT(A). WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RAKESH CONSTRUCTION CO. VS. ACIT (SUPRA) WHILE DEALING WITH THE IDENTICAL ISSUE HAS HELD IN PARA 2.4 AS UNDER: '2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE BOOKS OF ACCOUNTS WERE REJECTED U/S 145(3) OF THE ACT AND THEREAFTER THE AO HAS ESTIMATED NET PROFIT @ 5.05% ON CONTRACT RECEIPT AFTER DEDUCTION OF DEPRECIATION, INTEREST AND REMUNERATION PAID TO PARTNERS AS AGAINST NET PROFIT OF 2.39% DECLARED BY THE ASSESSEE. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS NOTED THAT THERE HAVE BEEN DISCUSSIONS BETWEEN THE AO AND THE ASSESSEE IN TERMS OF ESTIMATING THE NET PROFIT RATE ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED. AS PART OF THAT DISCUSSION, IT IS NOTED THAT IN RESPONSE TO AO'S SHOW-CAUSE AS TO WHY 8.5% NET PROFIT RATE SHOULD NOT BE ALLOWED, THE ID. AR HAS SUBMITTED THAT IF THE NET PROFIT AT THE RATE OF 8.5% IS APPLIED, THEN THE DEDUCTION ON ACCOUNT OF PAYMENT OF HIRING CHARGES FOR MACHINERY TAKEN ON RENT AMOUNTING TO RS. 22,41,600/- AND RS. 21,60,000/- ARE ALSO TO BE ALLOWED. THE LD. AO FINALLY DECIDED TO APPLY NET PROFIT OF 5.05% WHICH HAS BEEN AGREED UPON BY THE ASSESSEE. IT IS THEREFORE SEEN THAT ISSUE OF ALLOWANCE OF PAYMENTS OF MACHINERY HIRE CHARGES HAS BEEN DULY TAKEN INTO CONSIDERATION BY THE AO WHILE ESTIMATING THE N.P. RATE OF 5.05% FURTHER, IT IS NOTED THAT THE DECISION OF HON'BLE KOLKATTA HIGH COURT IN THE CASE OF ARJUN BHOWMICK (SUPRA) DIRECTLY SUPPORT THE CASE OF THE ASSESSEE. IN THAT CASE, THE VIEW TAKEN BY THE KOLKOTTA BENCH OF THE ITAT HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT WHEREIN IT HAS HELD THAT 'ONCE THE N.P. RATE IS ESTIMATED, THE AO CANNOT BASED THIS DISALLOWANCE ON THE SAME BOOKS OF ACCOUNTS FOR THE PURPOSE OF DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT OR GENERAL DISALLOWANCE U/S 37 OF THE ACT. THE ESTIMATION MADE BY THE AO OF ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 9 NET PROFIT WILL TAKE CARE OF EVERY ADDITION RELATED TO BUSINESS INCOME OR BUSINESS RECEIPTS AND NO FURTHER DISALLOWANCE CAN BE MADE.' IT IS ALSO NOTED THAT JAIPUR BENCH OF ITAT IN THE CASE OF BANAS SAND TOLL TAX COLLECTION (SUPRA) HAS TAKEN A SIMILAR VIEW IN THE MATTER FOLLOWING THE DECISION IN CASE OF HON'BLE ANDHRA PRADESH HIGH COURT IN ITA NO. 58/JP/2013 ACIT V M/S CHOUDHARY & BROTHERS, JAIPUR THE CASE OF INDWELL CONSTRUCTION (232 ITR 776). IN LIGHT OF ABOVE, WE SEE NO REASON FOR AO TO INVOKE PROVISIONS OF SECTION 154 OF THE ACT. HENCE, THE ORDER PASSED BY THE AO U/S 154 IS QUASHED AND THE ORIGINAL ORDER PASSED U/S 143(3) OF THE ACT IS SUSTAINED.' FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL (SUPRA) WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. THUS, IT IS CLEAR THAT THE TRIBUNAL IN THE ABOVE SAID CASE AS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL AS WELL AS THE DECISIONS OF HON'BLE KOLKATTA BENCHES OF TRIBUNAL IN CASE OF DCIT VS. ARJUN BHUMIK 55 SOT 82 AS WELL AS DECISION OF HON'BLE ALLAHABAD HIGH COURT IN CASE OF GEEP INDUSTRIAL LTD. VS. CIT 232 ITR 456. FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' THEREFORE FOLLOWING THE ABOVE CITED DECISION OF VARIOUS CASES AS DISCUSSED ABOVE I AM THE VIEW THAT ADDITION MADE U/S 40(A))(IA) OF RS. 2,50,000/- AND ADDITION MADE U/S 40A(3) OF I.T. ACT OF RS. 11,25,460/- IS NOT REQUIRED. HENCE, I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 2,50,000/- U/S 40(A)(IA) AND RS. 11,25,460/- U/S 40A(3) OF I.T. ACT. THESE GROUNDS ARE ALLOWED. 8. AGAINST THE ABOVE ORDER OF THE LD. CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE THE ITAT. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 10 9. THE LD AR OF THE ASSESSEE PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2010-11 TO 2012-13 AND CONTENDED THAT AFTER ACCEPTING REJECTION OF BOOKS OF ACCOUNT, THE TRIBUNAL HAVE UPHELD THE ADDITION BY ESTIMATING NP RATE @ 1% OF THE GROSS RECEIPTS. THE LD AR ALSO PLACED ON RECORD, ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT DATED 17/11/2015 CONFIRMING THE ORDER PASSED BY THE TRIBUNAL. THE PRECISE OBSERVATION OF THE HONBLE HIGH COURT WAS AS UNDER: BY THE JUDGMENT IMPUGNED, THE LEARNED INCOME TAX APPELLATE TRIBUNAL BY RELYING UPON THE JUDGMENT OF THIS COURT ARRIVED AT THE CONCLUSION THAT IN CASE THE ASSESSEE SHOWS BETTER RESULT DURING THE YEAR UNDER CONSIDERATION AS COMPARED TO PAST YEAR, THEN THERE IS NO NEED FOR MAKING ANY FURTHER ADDITION. THE FINDING ARRIVED BY THE TRIBUNAL IS IN CONSONANCE WITH THE SETTLED LAW, THEREFORE, NO ADDITION IN THE INCOME COULD HAVE BEEN MADE BY THE ASSESSING OFFICER. THE TRIBUNAL RIGHTLY DECLARED THE ADDITION MADE AS ERRONEOUS. THE APPEAL DOES NOT INVOLVE ANY SUBSTANTIAL QUESTION OF LAW, HENCE, DISMISSED. 10. THE LD AR ALSO PLACED ON RECORD THE ORDER OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF M/S CHOUDHARY & BROTHERS, PHAGI, JAIPUR VS DCIT, CIRCLE- JAIPUR IN DB ITA NO. 355 & 356/2017 DATED 31/08/2018 IN SUPPORT OF THE PROPOSITION THAT THE INTEREST INCOME EARNED FROM FDR PLACED WITH THE GOVERNMENT DEPARTMENT FOR TAKING WORK CONTRACT IS LIABLE TO BE ASSESSED AS INCOME FROM BUSINESS. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 11 11. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDER OF THE A.O. AND CONTENDED THAT AFTER POINTING OUT VARIOUS DEFECTS, THE A.O. HAS REJECTED BOOKS OF ACCOUNT AND CONSIDERING THE NET PROFIT RATE DECLARED IN THE SIMILAR CONTRACT BUSINESS BY SOME OTHER COMPANIES CORRECTLY APPLIED THE NP RATE OF 8.5% FOR COMPUTING BUSINESS INCOME OF THE ASSESSEE. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND ENGAGED IN SAME ACTIVITIES SINCE LAST FIVE YEARS. ITS BOOKS OF ACCOUNT WERE REGULARLY AUDITED U/S 44AB OF THE ACT. IN EARLIER YEARS ALSO SCRUTINY ASSESSMENT ORDERS WERE FRAMED WHICH TRAVELLED UPTO ITAT AND FURTHER THE HONBLE HIGH COURT. THE PREVIOUS HISTORY OF THE CASE IS AS FOLLOWS: A.Y. GROSS RECEIPT GROSS PROFIT G.P. RATE NET PROFIT N.P. RATE HON'BLE ITAT JODHPUR DIRECTED TO ADOPT 2010-11 69071257 3696900.00 5.35% 1275779.00 1.85% ACCEPTED THE N P RATE 2011-12* 235650422 1063786.70 4.51% 1688746.00 0.71% 1% CONFIRMED 2012-13 199135193 9392348.11 4.71% 1531462.60 0.76% 1% CONFIRMED 2013-14 379449445 16657123.00 4.39% 8499935.00 0.92% LD. CIT APPEAL ADOPT 1% AS PER PREVIOUS ORDER OF HON'BLE ITAT JODHPUR ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 12 13. WE HAD CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS AND FOUND THAT IN THE A.Y. 2011-12, THE ASSESSEE HAD SHOWN GROSS RECEIPTS OF RS. 23.56 CRORES WHEREIN G.P. OF 4.51% WAS SHOWN AND N.P. @ 0.71% WAS SHOWN. THE A.O. HAS REJECTED BOOKS OF ACCOUNT U/S 145(3) AND APPLIED NP RATE @ 8.5%, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O.. THE ASSESSEE WENT IN FURTHER APPEAL AND THE TRIBUNAL AFTER CONSIDERING ALL THE FACTS VIS A VIS NET PROFIT RATE AND THE TURNOVER DECLARED IN THE EARLIER YEARS APPLIED 1% NP RATE. SIMILARLY, IN THE A.Y. 2012-13 WHERE THE ASSESSEE SHOWN GROSS RECEIPTS OF 19.91 CRORES WHEREIN G.P. @ 4.71% AND N.P. 0.76% WAS SHOWN, THE TRIBUNAL HAS UPHELD THE ADDITION BY APPLYING NP RATE OF 1%. DURING THE CURRENT YEAR UNDER CONSIDERATION WHERE THE A.O. HAS APPLIED 8.5% NP RATE AFTER REJECTING BOOKS OF ACCOUNT, THE LD. CIT(A) HAS RESTRICTED THE ADDITION BY ESTIMATING NP RATE OF 1% AFTER FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND ALSO VARIOUS OTHER DECISIONS OF THE COORDINATE BENCH AND THE HONBLE HIGH COURT. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME AS DEALT WITH BY THE TRIBUNAL IN ASSESSEES OWN CASE AND THE DECISION OF THE TRIBUNAL WAS UPHELD BY THE HONBLE HIGH COURT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AND ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 13 APPLYING NP RATE OF 1% ON THE GROSS RECEIPTS FOR ESTIMATING BUSINESS INCOME. 14. FROM THE RECORD WE FOUND THAT THE A.O. HAS REJECTED BOOKS OF ACCOUNT U/S 145(3) AND ESTIMATED INCOME FOR THE PURPOSE OF COMPUTATION OF TAX. WHILE ESTIMATING THE PROFIT, THE A.O. IS TO SEE PAST HISTORY OR HISTORY OF THE SIMILARLY SITUATED OTHER BUSINESSMAN/TRADERS. HOWEVER, BY IGNORING THE SAME, THE A.O. HAS APPLIED 8.5% NET PROFIT RATE WITHOUT ANY BASIS. BY THE IMPUGNED ORDER AFTER FOLLOWING THE PAST HISTORY OF THE ASSESSEE AND ALSO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE APPLIED NP RATE OF 1%. WE FOUND THAT THE FINDING OF ITAT JODHPUR IS BASED ON VARIOUS JUDICIAL PRONOUNCEMENTS: (I) IN THE CASE OF CIT VS GUPTA KN CONSTRUCTION COMPANY [2015] 371 ITR 325 (RAJ.) THEIR LORDSHIP HELD WHERE THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT 1961 ARE INVOKED, ONE HAS TO CONSIDER EITHER THE PAST HISTORY OF THE ASSESSEE OR HISTORY OF SIMILARLY SITUATED OTHER BUSINESSMEN OR TRADERS. (II) IN THE CASE OF CIT VS INANI MARBLES (P) LTD [2009] 316 ITR 125 (RAJ.) HELD THAT THE TRIBUNAL HELD THAT IN THE ABSENCE OF ANY CHANGE IN THE FACTUAL POSITION NORMALLY THE PROFIT RATE DECLARED AND ACCEPTED IN THE PRECEDING YEAR, CONSTITUTES A GOOD BASIS FOR WORKING OUT THE GROSS PROFIT. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 14 SO, JURISDICTION OF HONBLE RAJASTHAN HIGH COURT GIVE SUPPORT TO VERDICT OF LOWER AUTHORITIES. THAT ITAT JODHPUR BENCH CONFIRMED THE N.P. RATE IN THE ASSESSEES OWN CASE AS FOLLOWS: A.Y. N.P. RATE DECLARED BY ASSESSEE FINDING OF ITAT JODHPUR 2011-12 0.71% 1.00% 2012-13 0.76% 1.00% SO, LD. CIT (A) FOLLOWED THE FINDING OF THE ITAT JODHPUR BASED ON PAST HISTORY. DEPARTMENT OF INCOME TAX ALSO PREFERRED AN APPEAL AGAINST THE ORDER OF THE ITAT BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WHICH WAS DISMISSED BY THE HONBLE HIGH COURT. THE ITAT JODHPUR MENTIONED FROM THE ABOVE CHART IT IS CLEAR THAT FOR A.Y. 2010-11, THE ASSESSING OFFICER HAD APPLIED N.P. RATE AT 8.50%, HOWEVER, THE ITAT JODHPUR BENCH HAS ACCEPTED THE DECLARED RESULT OF 1.85%, WHICH WAS ALSO APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT. WE FIND THE COPY OF THE ORDER PLACED IN THE PAPER BOOK FILED BEFORE US. THE AO HAS NOT REFERRED ANY EXAMPLE OF OTHER BUSINESSMEN OR TRADERS. SO, PAST HISTORY OF THE ASSESSEE IS BEST EXAMPLE. SO FAR GROUNDS (I) AND (II) ARE CONCERNED, LD. CIT(A) RIGHTLY APPLIED NET PROFIT RATE 1% BY INCREASING FROM 0.92% TO 1% N.P. RATE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 15 APPLYING THE NP RATE OF 1%. IN THE RESULT, GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 15. WITH REGARD TO DELETION OF ADDITION MADE U/S 40(A)(IA) AND 40A(3) OF THE ACT, WHICH WERE DELETED BY THE LD. CIT(A) IN RESPECT OF PAYMENT MADE FOR JCB HIRE CHARGES, THE LD. CIT(A) OBSERVED THAT THE JCB IS INCLUDED IN THE GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED IN SUB- SECTION (2) OF THE MOTOR VEHICLES ACT, 1988. IN THIS ACT, THE JCB IS INCLUDED IN GOODS CARRIAGE. ACCORDING TO SECTION 194C (6), NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF CONTRACT DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGE, ON FURNISHING OF HIS PAN NUMBER TO THE PERSON PAYING OR CREDITING SUCH SUM SO THAT ASSESSEE COMPANY WAS NOT LIABLE TO DEDUCT TDS AS THE JCB OWNER HAS SUBMITTED HIS PAN FOR NON-DEDUCTION OF TDS. 16. WE ALSO OBSERVE THAT THE COORDINATE BENCH IN VARIOUS CASES HAVE HELD THAT WHEN THE PROFIT IS ESTIMATED BY REJECTING BOOKS OF ACCOUNT, NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS TO BE MADE. 17. IN RESPECT OF DISALLOWANCE MADE BY THE A.O. U/S 40A(3) AMOUNTING TO RS. 11,25,460/-, WE FOUND THAT THE ASSESSEE HAS MADE THE PAYMENT TO THE PARTIES AS THEY INSIST FOR PAYMENT ON THE VERY DAY. DUE TO GENUINE ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 16 HARDSHIP OF THE PARTIES, ASSESSEE HAS TO PAY IN CASH. TECHNICALLY, THE PAYMENT ARE COVERED BY THE PROVISIONS OF SECTION 40A(3) BUT THE SAME WAS CONSIDERED ALONG WITH RULE 6 DD (B) AS IT EXISTED THEN WHICH DULY PROVIDED FOR THE GENUINE HARDSHIP THAT MAY BE CAUSED TO THE TAXPAYER. NOWHERE THE A.O. FOUND THAT THE PAYMENT WAS NOT GENUINE OR THAT THE PAYMENT WAS NOT FOR THE PURPOSE OF BUSINESS. 18. IN VARIOUS CASES, THE COORDINATE BENCH HAVE HELD THAT AFTER APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT, NO SEPARATE DISALLOWANCE U/S 40A(3) OF THE ACT IS WARRANTED. THE CO-ORDINATE BENCH IN THE CASE OF ACIT VS. M/S CHOUDHARY & BROTHERS JAIPUR ITA NO. 58/JPR/2013 DATED 18/1/2018 HELD THAT, ONCE THE NP RATE IS ESTIMATED, THE AO CANNOT BASE THIS DISALLOWANCE ON THE SAME BOOKS OF ACCOUNTS FOR THE PURPOSE OF DISALLOWANCE BY INVOKING PROVISIONS OF SEC 40 (A) (I) OF THE ACT OR GENERAL DISALLOWED U/S 37 OF THE ACT. IN THE CASE OF MALPANI HOUSES OF STONE VS CIT (2017) 395 ITR 385 (RAJ), THE HONBLE HIGH COURT HAS HELD THAT WHEN INCOME IS ESTIMATED AND WHILE ASSESSING IT AND REJECTING THE BOOKS OF ACCOUNTS, IT WOULD NOT BE APPROPRIATE TO RELY ON THE BOOKS OF ACCOUNTS FOR ANY ADDITION OTHER THAN THE ESTIMATE MADE BY ASSESSING OFFICER. ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 17 WHERE BOOKS ARE REJECTED BY THE AO, NO FURTHER ADDITION CAN BE MADE BY RELYING ON THE SAME BOOKS OF ACCOUNTS AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF G.K. CONTRACTOR (2009) 19 DTR 0305 (RAJ). THE COORDINATE BENCH OF JAIPUR ITAT IN THE CASE OF NARDEV KUMAR GUPTA [2013] 142 ITD 303 (JAIPUR - TRIB.) HELD THAT THERE IS NO DISPUTE TO THE FACT THAT THE AO REJECTED THE BOOK RESULTS U/S 145(3) OF THE ACT. NOW THE QUESTION ARISES AS TO WHETHER ANY ADDITION INTER ALIA U/S 40A(3) CAN BE MADE BY MAKING DISALLOWANCE OVER AND ABOVE AD HOC ADDITION MADE AND/OR WHEN GROSS PROFIT RATE IS APPLIED AFTER REJECTING BOOKS RESULTS. ITAT JAIPUR BENCH, IN ITS ORDER DATED 15.07.2015, IN THE CASE OF COSMOPOLITAN TRADING CORPORATION (ITA NO. 298/JP/2013) RELIED ON THE JUDGMENT OF BANWARI LAL BANSHIDHAR (SUPRA) AND NARDEV KUMAR GUPTA (SUPRA) WHILE ADJUDICATING THE MATTER WITH REGARD TO DISALLOWANCE U/S 40(A)(IA) IN THE CASE OF REJECTION OF BOOKS OF ACCOUNTS, HELD THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED THEN NO OTHER DISALLOWANCE CAN BE MADE. IN THE CASE OF CIT VS SMT. SANTOSH JAIN [2008] 296 ITR 324 (P & H), IT WAS HELD THAT WHERE THE INCOME OF THE ASSESSE HAS BEEN COMPUTED BY APPLYING A GROSS PROFIT RATE, THERE IS NO NEED TO LOOK INTO THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961, AS APPLYING THE GROSS ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 18 PROFIT RATE TAKES CARE OF EXPENDITURE OTHERWISE THAN BY WAY OF CROSSED CHEQUES ALSO. FOLLOWING THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY MERIT IN THE ADDITION MADE BY THE A.O. U/S 40(A)(IA) AND 40A(3) OF THE ACT. ACCORDINGLY, WE CONFIRM THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE SO MADE BY THE A.O. 19. NOW WE TAKE ITA NO. 1249/JP/2018 FOR THE A.Y. 2015-16. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-3, JAIPUR DATED 20/08/2018 FOR THE A.Y. 2015-16. 20. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS CONTENDED THAT THE TAX EFFECT IN THE FILE BY THE REVENUE IS BELOW RS. 50.00 LACS, THEREFORE, IN VIEW OF THE CBDT CIRCULAR NO.17/2019 DATED 08 TH AUGUST, 2019, THE APPEAL FILED BY THE REVENUE DESERVES TO BE DISMISSED. 21. IN THE RESULT, ALL THESE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2019. SD/- SD/- FOT; IKY JKO JES'K LH 'KEKZ (VIJAY PAL RAO) (RAMESH C SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 ST OCTOBER, 2019 ITA 801, 802 & 1249/JP/2018_ DCIT VS. M/S LAXMINATH INFRASTRUCTURE P LTD. 19 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE- JHUNJHUNU 2. IZR;FKHZ @ THE RESPONDENT- M/S LAXMINATH INFRASTRUCTURE PVT. LTD., CHURU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 801, 802 & 1249/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR