DEEP JYOTI COMPANY, JAIPUR V. ACIT, CIRCLE-5, JAIPUR

ITA 134/JPR/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6168 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 31-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Depreciation; Revised return
• Section: 145; 144; 154; 139; 143(3); 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 BENCH A,(VC) JAIPUR JH LANHI XKSLKBZ] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSIAN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 134/JP/2020 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2016-17. DEEP JYOTI COMPANY, B-219, JANTA COLONY, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAAFD 7795 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.S. NEHRA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08.12.2020. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 02/02/2021 . VKNS'K@ ORDER PER SANDEEP GOSIAN, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 29.11.2019 OF LD. CIT (A)-2, JAIPUR FOR THE ASSESSMENT YEAR 2016- 17. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LEARNED CIT (APPEAL) SUSTAIN THE ADDI TION OF RS. 21,99,341.00 ON ACCOUNT OF GROSS PROFIT AS CIT (A)- 1, JAIPUR APPLIED GROSS PROFIT RATIO 8.5% AGAINST ASSESSEE FI RM RECORDED 7.99% GROSS PROFIT RATIO WITHOUT CONSIDERATION OF B OOKS RESULTS I.E. GP & NP OF THE ASSESSEE WHICH ARE MORE THAN PR EVIOUS YEAR. 2. THAT THE APPELLANT HAVE CRAVE PERMISSION TO ADD , ALTER, AMEND OR DELETE ANY GROUND OR GROUNDS OF APPEAL ON OR BEF ORE THE HEARING OF THIS APPEAL. 2 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE CONSTRUCTION WORK FOR VARIOUS DEPARTMENTS OF GO VERNMENT OF RAJASTHAN AND HAVING INCOME FROM CIVIL CONSTRUCTION WORKS. THE A SSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,65,42,230/- ON 31.0 3.2018 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND SE EKING REPLY OF THE ASSESSEE, THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT WAS PASSED BY THE AO ON 24.12.2018 DETERMINING THE TOTAL INCOME AT RS. 4 ,26,93,520/- BY APPLYING THE NP RATE @ 9% INSTEAD OF NP RATE OF 7.99% DECLARED BY T HE ASSESSEE SUBJECT TO THE INTEREST, DEPRECIATION AND REMUNERATION TO PARTNERS . WHILE MAKING THE ASSESSMENT, THE AO WRONGLY ADDED THE REMUNERATION ALLOWABLE TO THE ASSESSEE FIRM TO THE TOTAL INCOME OF THE ASSESSEE INSTEAD OF DEDUCTION FROM IN COME. SUBSEQUENTLY, BY PASSING ORDER UNDER SECTION 154 OF THE IT ACT, 1961 THE MIS TAKE WAS RECTIFIED AND THE INCOME WAS DETERMINED AT RS. 3,90,93,520/- WHICH RE SULTED AN ADDITION OF RS. 1,25,51,290/-. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED FIRST APPEAL BEFORE THE LD. CIT (A) WHO AFTER CONSIDERING THE MATERIALS AVAILABLE ON RECORD PARTLY ALLOWED THE RELIEF BY APPLYING THE NP RATE OF 8.5% AS AGAIN ST 9% APPLIED BY THE ASSESSING OFFICER AND THEREBY RESTRICTING THE ADDITION TO THE EXTENT OF RS. 21,99,341/-. 4. NOW AGGRIEVED BY THE ORDER OF THE LD. CIT (A), T HE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE US ON THE GROUND MENTIONED HE REINABOVE. 5. THE SOLITARY GROUND RAISED BY THE ASSESSEE RELAT ES TO CHALLENGING THE ORDER OF THE LD. CIT (A) IN SUSTAINING THE ADDITION OF RS. 2 1,99,341/- ON ACCOUNT GROSS PROFIT 3 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. AS CIT (A)-1, JAIPUR APPLIED GROSS PROFIT RATIO 8.5 % AGAINST ASSESSEE FIRM RECORDED 7.99% GROSS PROFIT RATIO WITHOUT CONSIDERATION OF B OOKS RESULTS I.E. GP & NP OF THE ASSESSEE WHICH ARE MORE THAN PREVIOUS YEAR. THE LD . COUNSEL OF THE ASSESSEE RELIED UPON THE FOLLOWING WRITTEN SUBMISSIONS FILED BY HIM BEFORE THE LD. CIT (A) WHICH ARE CONTAINED IN PARA 2.2 OF THE LD. CIT (A)S ORDER : 2.2 THE RELEVANT EXTRACT OF THE SUBMISSION OF THE APPELLANT IS AS UNDER:- 'THE ASSESSEE IS PARTNERSHIP FIRM AND ENGAGED IN CI VIL CONTRACT BUSINESS WHICH RECEIVED FROM GOVERNMENT AND GOVERNMENT DEPAR TMENTS FOR VARIOUS PLACES. THE ASSESSEE HAD TOTAL CONTRACT REC EIPTS FOR THE YEAR UNDER APPEAL OF RS. 434372451/-. THE ACCOUNTS OF TH E PARTNERSHIP FIRM WAS MAINTAINED AS PER ACCOUNTING PRINCIPLES AND ON THE SAME LINE AS MAINTAINED IN PREVIOUS YEARS, WHICH WAS AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT AS PER THE PROVISIONS OF SEC. 44AB OF THE INCOME TAX ACT, 1961. IN THE AUDIT REPORT THERE IS NO ADVE RSE OBSERVATION MADE BY THE CHARTERED ACCOUNTANT FOR THE MAINTENANCE OF BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM. THE ASSESSEE MAINTAINED PROPE R BOOKS OF ACCOUNTS AND RECORDED ALL THE TRANSACTIONS MADE BY HIM ON DAY TO DAY BASIS. HE MAINTAINED COMPUTERIZED CASH BOOK, BANK B OOK, JOURNAL & LEDGER. IT ALSO MAINTAINED PROPER VOUCHERS FOR EXPE NSES AND PURCHASES MADE. THE AUDITORS OF THE ASSESSEE GAVE CLEAN REPOR T AFTER EXAMINING THE BOOKS OF ACCOUNTS AND OTHER RECORDS OF THE FIRM AND NO QUALIFICATION WAS MADE IN THEIR REPORT. AT THE TIME OF ASSESSMENT PROCEEDINGS ASSESSEE FILE D EACH AND EVERY DETAILS WHICH REQUIRED BY A.O. ASSESSEE ALSO PRODUC ED BOOKS OF ACCOUNTS AND PURCHASE VOUCHER ALONG WITH EXPENSES V OUCHERS ONLINE ON E PROCEEDING. ASSESSEE FIRM ALSO PRODUCED LIST OF S UNDRY CREDITORS FOR LABOUR, MATERIAL AND FILED CONFIRMATION FOR OTHER C REDITORS. IN PARA 3.2 OF ASSESSMENT ORDER THE A.O. SAID THAT THE TRADING RESULT FURNISHED BY THE AR DOES NOT MATCH WITH THE TRADING RESULT DECLARED BY ASSESSEE IN THE AUDIT REPORT IN FORM 3CD. IT IS TOTALLY WRONG THAT THE A.O. SAID THE TRADING RESULT FURNISHED BY AR OF THE ASSESSEE NOT MATCHED WITH RESULT DECLARED IN 3CD. IN THE 3CD THE GROSS PROFIT MATCHED WITH THE RESULT FURNISHED BY A/R: 4 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. A.Y. G.P. RATIO AS PER 3CD G.P. RATIO FURNISHED BY AR 2014-15 8.59 8.59 2015-16 9.37 9.37 2016-17 9.82 9.82 THE ABOVE CHART CLEARLY SHOWN THAT G.P. RATIO FURNI SHED BY AR MATCH WITH RESULT SHOWN IN FORM 3CD. NOW WE COME ON THE N.P. RATIO, THE TRADING RESULT F URNISHED BY AR WAS ADJUSTED RESULT AS HE ADDED IN THE NET PROFIT, DEPR ECIATION, INTEREST PAID TO THE PARTNERS AND REMUNERATION PAID TO PARTNERS, WHI LE IN THE FORM 3CD NET PROFIT SHOWN AFTER INTEREST PAID TO PARTNERS AND RE MUNERATION PAID TO PARTNERS, DUE TO THIS RESULT OF N.P. NOT MATCHED. W E SUMMARIZE THE SAME AS UNDER:- A.Y. 2014-15 2015-16 2016-17 NET PROFIT 5.52% 5.06% 6.11% TRADING RESULT FURNISHED BY A/R A.Y. 2014-15 (RS.) 2015-16 (RS.) 2016-17 (RS.) NET PROFIT AS PER P&L 17000685 13047410 26542223 ADD: DEPRECIATION 2186308 4892558 6975264 INTEREST PAID TO PARTY 4207010 6108173 7767083 REMUNERATION PAID TO PARTNERS 1500000 1800000 1800000 TOTAL 24894003 25848141 43084570 5 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. LESS: FDR INTEREST & OTHER INCOME 2081275 5669942 8362256 ADJUSTED PROFIT 22812728 20178199 34722314 TOTAL TURNOVER 307983890 258056977 434372451 NET PROFIT FURNISHED BY A/R VIDE LETTER DATED 17-12-2018 7.40 7.81 7.99 THE ABOVE REPLY CLEARLY SHOWS THAT THE STATEMENT OF A.O. IN THE ASSESSMENT ORDER TOTALLY WRONG AND THIS IS NOT THE REASON FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, ACT AND FRAME ASSESSMENT UNDER SECTION 144 OF THE ACT. IN POINT NO 3.4 TO 4 ON PAGE NO. 4 TO 6 OF ASSESSME NT ORDER A.O. SAID THE ASSESSEE FIRM NOT FILED DETAILS EG. CREDITORS FOR L ABOUR AND MATERIAL OF RS. 14,56,79,014/, ON THE OTHER HAND HE SAID IN POINT N O. 3.5 THAT AR OF THE ASSESSEE HAS SUBMITTED A LIST MENTIONING THE NAME O NLY OF DRIVERS &AND MAJDOORS TO ESTABLISH THE GENUINENESS, CREDITWORTHI NESS OR IDENTITY IN SUPPORT OF HIS CASE. IN THIS RESPECT WE WANT TO SAY THAT THE ASSESSEE FI RM IS A CIVIL CONTRACTOR AND RECEIVED CIVIL CONTRACT FROM GOVT. AND GOVT. DE PARTMENT FROM VARIOUS PLACES AND ASSESSEE COMPLETE THE SAME ON THAT PLACE . IN THE COMPLETION OF THESE CONTRACTS HEAVY LABOUR, SAND, GRIT AND LALMIT TI CONSUMED WHICH ASSESSEE FIRM RECEIVED THESE SERVICES FROM LOCAL PE RSON. WE HIGHLIGHTED THAT APPROX. 30% OF TOTAL CONTRACT ONLY LABOUR INVO LVED, FOR THIS ASSESSEE ENGAGED LOCAL LABOUR ON THE CONDITION WHEN PAYMENT RECEIVED FROM GOVT. FIRM PAID MAJOR LABOUR PAYMENTS. HOWEVER FIRM PAID REGULARLY TO LABOURS FOR THEIR REGULAR NEEDS SUCH AS FOOD, MEDICINES ETC . AS ASSESSEE INVOLVED LOCAL LABOUR AND PURCHASED MATERIAL SUCH AS SAND, G RIT, BAJARI FROM LOCAL PARTIES/ SUPPLIERS FOR WHICH ASSESSEE FIRM ISSUED A CARD TO THEM FOR THEIR SUPPLY AND LABOUR WORK. ASSESSEE FIRM NOT MAINTAINE D THEIR COMPLETE ADDRESS, ASSESSEE KNOWN ONLY THEIR NAME AND DESIGNA TION SUCH AS DRIVER, LABOUR ETC. WHICH IS SUBMITTED TO A.O. AT THE TIME OF ASSESSMENT. ON THE OTHER HAND WE SAY THAT THESE CREDITORS ARE B ELOW RS. 1 LAKH BY EACH PERSON, IT IS BETTER TO MENTION HERE THAT THES E CREDITORS ARE NOT CASH CREDITORS, THESE ARE ONLY CREDITORS FOR LABOUR AND RAW FORM MATERIAL WHICH PURCHASED FROM LOCAL PERSON ON CREDIT BASIS AS REPU TATION OF THE ASSESSEE 6 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. ON THAT AREA ARE VERY GOOD. AS THESE CREDITORS ARE RELATING TO SUPPLY OF LABOUR AND SUPPLY OF RAW FORM MATERIAL AND SUPPLIED BY INDIVIDUALLY WHICH MOSTLY BELOW RS. 1LAKH NOT REQUIRED TO ESTABLISH TH E GENUINENESS, CREDITWORTHINESS AND ALSO NOT REQUIRED CONFIRMATION FOR SO BULK PERSONS/ CREDITORS. ASSESSEE MAINTAINED NAME AND DESIGNATION AND OUTSTANDING BALANCE OF THESE CREDITORS WHICH ALREADY SUBMITTED TO A.O. A COPY OF SAME IS ENCLOSED. IN PARA NO. 4 ON PAGE NO 5& 6 THE A.O. COMMENT AS U NDER AND REJECT THE BOOKS OF ACCOUNTS U/S 145(3) AND APPLY THE PROVISIO N OF SECTION 144 OF THE INCOME TAX ACT,1961. THE REPLY OF THE ASSESSEE TO THE SHOW CAUSE NOTICE HAS BEEN CONSIDERED AND FOUND UNACCEPTABLE. DURING THE YEAR THE ASSESSE E HAS CLAIMED PAYABLE LIABILITY OF RS. 15,41,77,052/- AS ON 31.03.2016 ON ACCOUNT OF SUNDRY CREDITORS RELATED TO LABOUR AND MATERIAL AND DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO PROVE THE GENUIN ENESS OF LIABILITY UP TO THE EXTENT OF RS. 14,56,79,014/- REPRESENTING TO LA BOUR AND MATERIAL, AS EXCEPT THE NAME OF DRIVERS AND MAJDOORS HE COULD NO T EVEN PRODUCE THE COMPLETE ADDRESS OF THE LABOURS AND MAJDOORS. IN AB SENCE OF THE CONFIRMATION AND THE COMPLETE DETAILS OF THE CREDIT ORS, THE UNDERSIGNED IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENES S OF BOOKS OF ACCOUNTS OF THE ASSESSEE THEREFORE, THE BOOKS OF ACCOUNTS MA INTAINED BY THE ASSESSEE IS REJECTED U/S 145(3) OF I. T. ACT,1961 A ND THE ASSESSMENT ORDER U/S 144 OF THE 1. T. ACT, 1961 IS TO BE PASSED BY A PPLYING 9% NET PROFIT RATE ON THE TOTAL TURNOVER OF THE ASSESSEE AT RS. 4 3,43,72,451/- AGAINST THE NET PROFIT RATE DECLARED BY THE ASSESSEE OF 6.11% D URING THE YEAR WHICH IS CLEARLY MENTIONED BY THE AUDITOR IN THE AUDIT REPOR T IN FORM 3CD. NOW WE SEE SECTION 145 AND SECTION 144 WHICH REPROD UCED AS UNDER:-METHOD OF ACCOUNTING. '145. (1) INCOME .OF INCOME.' SECTION 145 METHOD OF ACCOUNTING SECTION 145(1) SAID AS UNDER INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FROM OTHER SOURCES' SHALL, S UBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. 7 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. SUB SECTION 2 OF SECTION 145 SAID THAT THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICIAL GAZETTE FROM TIME TO TIME INCOME CO MPUTATION AND DISCLOSURE STANDARDS TO THE FOLLOWED BY ANY CLASS O F ASSESSEES. IN RESPECT OF ANY CLASS OF INCOME. WHEN WE GO THROUGH WORDING OF SECTION 145(1) WHICH SAID INCOME TO BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTI LE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THIS SECTION SAID THAT INCOME COMPUTED AS PER SYSTE M REGULARLY EMPLOYED BY THE ASSESSEE. SECTION 145(3) AGAIN SAID IF THE METHOD OF ACCOUNTI NG NOT EMPLOYED AS PER SECTION 145(1) MEANS IT IS CLEAR THAT INCOME COMPUT ED AS PER ACCOUNTING METHOD REGULARLY EMPLOYED BY THE ASSESSEE THEN A.O. NOT REJECTED BOOKS OF ACCOUNTS AND NOT COMPLETED ASSESSMENT U/S 144 OF THE ACT. 'APPELLANT CALCULATED ITS INCOME REGULARLY EMPLOYED ACCOUNTING SYSTEM IN PREVIOUS YEARS. HENCE REJECTION OF BOOKS OF ACCOUNT S IS ILLEGAL AND UNJUSTIFIED. HENCE WE PRAY FOR GOOD SELVES KINDLY ALLOW THIS GRO UND OF APPEAL. NOW WE GO WORDINGS OF SECTION 144 OF THE ACT. SUBSE CTION 1(A) OF SECTION 144 SAID THAT FAILS TO MAKE THE RETURN REQUIRED UNDER S UB-SECTION (1) OF SECTION 139 AND HAS NOT MADE A RETURN OR A REVISED RETURN U NDER SUB-SECTION (4) OR SUBSECTION (5) OF THAT SECTION. 'IN THE APPELLANT CASE, APPELLANT FILE RETURN OF IN COME IN TIME.' SUBSECTION 1(B) OF SECTION 144 OF THE ACT SAID FAIL S TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF S ECTION 142 OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2 A) OF THAT SECTION. 'APPELLANT COMPLIES ALL THE TERMS OF NOTICE ISSUED TO THE APPELLANT U/S 2A OF SECTION 142.' SUBSECTION 1(C) OF SECTION 144 OF THE ACT SAID HAVI NG MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UND ER SUB-SECTION (2) OF SECTION 143. 'APPELLANT COMPLIES WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUBSECTION 2 OF SECTION 143.' AS THE APPELLANT COMPLY ALL THE PROVISIONS OF SECTI ON 144, DUE TO THIS SECTION 144 OF THE ACT, NOT APPLICABLE ON THE ASSES SEE AND A.O. NOT JUSTIFIED TO COMPLETE THE ASSESSMENT U/S 144 WHICH IS ILLEGAL AND UNJUSTIFIED. WE PRAY TO FOR GOODSELVES KINDLY ALLOW THIS GROUND OF APPEAL. 8 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. IN THE APPELLANT CASE THE A.O. REJECT THE BOOKS OF ACCOUNT ONLY AND ONLY ON THE BASIS OF NOT FILLING CONFIRMATION AND ADDRES S OF THE OUTSTANDING CREDITORS FOR LABOUR AND RAW FORM MATERIAL OF RS14, 56,79,014/. EXCEPT THIS HE HAD NOT FIND ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. CREDITORS ALSO NOT CASH CREDITORS THEY WERE ONLY FO R INVOLVING OF LABOUR AND MATERIAL FOR LOCAL PURCHASE AS THE ASSESSEE IS CIVI L CONTRACTOR AND PURCHASE MATERIAL SUCH AS SAND, GRIT, LALMITTI FROM LOCAL IN DIVIDUALLY SUPPLIERS. ALL THE CONTRACT RECEIPT OF THE ASSESSEE THROUGH BANKING CH ANNEL. ASSESSEE NOT RECEIVED ANY PAYMENT IN CASH FOR ITS CONTRACT RECEI PT DURING THE YEAR OF APPEAL. AS WE SAY THAT ASSESSEE EMPLOYED ACCOUNTING SYSTEM REGULARLY AS IN PREVIOUS YEARS AND ASSESSMENT ALSO COMPLETED U/S 14 3(3) OF THE ACT IN SAME CIRCLE WHICH PROVE OUR CONTENTION THAT ASSESSE E MAINTAIN SAME ACCOUNTING SYSTEM WHICH MAINTAINED IN PREVIOUS YEAR S AND ASSESSEE ALSO SHOWS ITS BETTER RESULT DURING THE YEAR UNDER APPEA L AGAINST PREVIOUS YEARS, WHICH ALSO COMPLETED U/S 143(3). TRADING RESULT OF THE ASSESSEE/APPELLANT FIRM ASSESSMENT YEAR 2014-15 (RS.) 2015-16 (RS.) 2016-17 (RS.) TURNOVER 307983890 258056977 434372451 NET PROFIT AS PER P&L A/C BEFORE ALLOWING INTEREST PAID TO PARTNER AND REMUNERATION TO PARTNER BUT INCLUDES INCOME FROM OTHER SOURCES I.E. RETURN INCOME. 17000685 13047410 26542223 NET PROFIT RATE 5.52 5.06 6.11 INCOME AS PER ORDER U/S 143(3) COMPLETED BY A.O. 17000685 14047410 39093520 ADDITION MADE BY A.O. NIL 1000000 12551297 9 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. RELIEF ALLOWED BY HONBLE CIT APPEAL NIL 400000 UNDER APPEAL BEFORE YOUR BALANCE ADDITION BY HONBLE TRIBUNAL 600000 HONOUR NET INCOME AS PER ORDER OF A.O. 170000685 13047410 39093520 NET PROFIT RATE AS PER ASSESSED INCOME 5.52 5.06 8.99 SUNDRY CREDITORS FOR LABOUR & MATERIAL 362258300 96638514 145679014 % OF CREDITORS FOR TURNOVER 11.77 37.44 33.53 ABOVE CHART CLEAR THAT ASSESSEE FIRM MAINTAINED ITS ACCOUNTING SYSTEM REGULARLY EMPLOYED IN PREVIOUS YEARS. OUTSTANDING C REDITORS FOR LABOUR AND MATERIALS ALSO STANDS IN PREVIOUS YEARS, EVEN THIS A.O. NOT REJECTED BOOKS OF ACCOUNTS OF THE ASSESSEE, EVEN IN A.Y. 2014-15 N O ADDITION MADE FOR CREDITORS OR ASSESSMENT WAS COMPLETED ON RETURN INC OME. IN A.Y. 2015-16 A LUMP-SUM ADDITION MADE OF RS. 10,00,000/- BUT NOT REJECTED BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM ON APPEAL, YOUR HONOU R REDUCED ADDITION TO RS. 6,00,000/- AND HON'BLE TRIBUNAL DELETE THE ADDI TION IN TOTO I.E. ACCEPTED RETURN INCOME OF THE ASSESESE. ON GOING TH ROUGH PERCENTAGE OF CREDITORS WE FIND 33.53% CREDITORS AS AGAINST 37.44 % IN PREVIOUS YEAR.(COPY OF THE ORDER OF HON'BLE TRIBUNAL IS ENCL OSED.) ON GOING THROUGH N.P. RATE WE FIND THAT N.P. RATE I S BETTER FROM PREVIOUS YEAR AS 6.11% AGAINST 5.06% IN A.Y. 2015-16 AND 5.52% IN A.Y. 2014-15. ON THE ABOVE ANALYSIS IT IS CLEAR THAT THE ASSESSEE HAD CREDITORS FOR OUTSTANDING LABOUR AND MATERIAL IN PREVIOUS YEARS A LSO. IT IS REGULAR FEATURE IN THE ASSESSEE'S TRADE THAT PAYMENT RECEIVED FROM GOVT. & GOVT. DEPARTMENT IN LAST DATE OF MARCH WHICH DEPOSITED IN BANK IN NEXT YEAR, DUE TO THIS CREDITORS NOT PAID IN TIME. IN THE PREVIOUS YEARS A.O. NOT REJECTED BOOKS OF ACCOUNTS OF THE ASSESSEE FOR ON THE BASIS OF OUTSTANDING CREDITORS FOR LABOUR AND MATERIAL. IT IS ALSO IMPORTANT THAT THE ASSESSEE FIRM SHOWN I TS BETTER TRADING RESULT DURING THE YEAR UNDER APPEAL AS AGAINST IN THE PREV IOUS YEARS WHICH CLEAR FROM ABOVE CHART 10 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. NOW WE PRAY TO YOUR GOODSELVES. KINDLY ALLOW THE AP PEAL IN TOTO. WE RELIED ON THE ORDER OF AUTHORITIES BELOW. (JODH-ITAT) 2019 ITL 3374 INCOME-TAX OFFICER WD-(1) , JODHPUR, RAJASTHAN VS. M/S ASHOK TRANSPORT CO. UDAU SERVICE STATION ( JR-TRIB.) 2014 ITL 1351 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S BALAJI WI NER RAJ PAL YADAV AND R C SHARMA, JJ. ITA NO.08/JP/2003 DATED MAY 30- 05-2014 MANGALORE GANESH BEEDI WORKS VERSUS COMMISSIONER OF INCOME TAX AND ANOTHER - 2005 (1) TM! 15 - SUPREME COURT COMMISSIONER OF INCOME-TAX VERSUS BRITISH PAINTS IN DIA LIMITED SUPREME COURT COMMISSIONER OF SALES-TAX, MADHYA PRADESH VERSUS HM ESUFALI HM ABDULALI SUPREME COURT SN. NAMASIVAYAM CHETTIAR VERSUS COMMISSIONER OF INC OME-TAX, MADRAS SUPREME COURT COMMISSIONER OF INCOME-TAX. VERSUS MCMILLAN AND COM PANY SUPREME COURT RAGHUBAR MANDAL HARIHAR MANDAL VERSUS THE STATE OF BIHAR - SUPREME COURT OF INDIA DIRECTOR OF INCOME-TAX (EXEMPTION) VERSUS SHIA DAWO ODIBOHRAJAMAT - GUJARAT HIGH COURT COMMISSIONER OF INCOME-TAX VERSUS DEEPAK M. KOTHARI - ALLAHABAD HIGH COURT COMMISSIONER OF INCOME-TAX VERSUS SUNIL TALWARMURLI DHAR& PARTY - HIGH COURT OF RAJASTHAN AWADHESHPRATAP SINGH ABDUL REHMANAND BROTHERS VERSU S COMMISSIONER OF INCOME-TAX ALLAHABAD HIGH COURT LAL CHAND WALAITI RAM VERSUS COMMISSIONER OF INCOME -TAX- PUNJAB AND HARYANA HIGH COURT. 11 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. BOMBAY CYCLE STORES CO. LTD. VERSUS COMMISSIONER OF INCOME-TAX, MADHYA PRADESH AND BHANADRA, NAGPUR BOMBAY HIGH COURT GANGA RAM BALMOKAND VERSUS COMMISSIONER OF INCOME-T AX LAHORE HIGH COURT COMMISSIONER OF INCOME TAX, CENTRAL AND UNITED PROV INCES VS. LAXMINARAIN BADRIDAS - 1937 (2) TMI 1 - PRIVY COUNCIL (JP-ITAT)2019 ITL 3927 M/S MATAJI REALITY DEVELOPERS PVT. LTD. VS. THE ITO , WARD-1, BEAWAR IN THE ITAT OF JAIPUR SHRI RAMESH C.SHARMA, AM &SHRI VIJAY PAL RAO, JM NO. NO. 548/JP/2019 DATED-4-07-2019 INCOME TAX APPELLATE TRIBUNAL MUMBAIR- 'C' BENCH MU MBAI ITA NOS. 3408 MUM 2010 & 3559/MUM/2011 PODDARASHISH DEVELOPERS DATE OF PRONOUNCEMENT: 12-03-2014 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE HAVE ALSO CAREFULLY CONSIDERED THE GUIDANCE NOTE S ISSUED BY ICAI AS WELL AS ACCOUNTING STANDARDS AS- 7&9 IN THE LIGHT O F PROVISION OF SECTION 145 OF ACT. PRINCIPLES APPLICABLE WITH REGARD TO TH E METHOD OF ACCOUNTING CAN BE SUMMARIZED AS UNDER: (I) THE ACCOUNTS WHICH ARE REGULARLY MAINTAINED IN THE COURSE OF BUSINESS AND ARE DULY AUDITED, FREE FROM ANY QUALIFICATION B Y THE AUDITORS, SHOULD NORMALLY BE TAKEN AS CORRECT UNLESS THERE ARE ADEQU ATE REASONS TO INDICATE THAT THEY ARE INCORRECT OR UNRELIABLE. THE ONUS IS UPON THE AO TO SHOW THAT EITHER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE INCORRECT OR INCOMPLETE OR THAT THE METHOD OF ACCOU NTING ADOPTED BY HIM WAS THAT TRUE PROFITS OF THE ASSESSEE CANNOT BE DED UCTED THEREFROM. (325 ITR 13, PARADISE HOLIDAYS- DEL.) (II) IF A PARTICULAR ACCOUNTING SYSTEM HAS BEEN FOL LOWED AND ACCEPTED AND THERE IS NO ACCEPTABLE REASON TO DIFFER WITH IT, TH E DOCTRINE OF CONSISTENCY WOULD COME INTO PLAY. (339ITR 382 JAGATHIT INDUSTRI ES LTD., DEL.) 12 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. PRAYER WE REQUEST TO YOUR HONOUR KINDLY DELETE THE ADDITIO N MADE BY THE A.O. ON ACCOUNT OF GP/NP OF RS. 12551297.00 AND OBLIGE. 6. AT THE TIME OF HEARING OF THE APPEAL, THE LD. A/ R OF THE ASSESSEE SUBMITTED THAT THE LD. CIT (A) THOUGH ADMITTED THAT THE ASSES SEE HAS DECLARED BETTER RESULTS OVER THE LAST YEAR WHERE NP/GP RATE WERE LOWER COMP ARED TO THE YEAR UNDER CONSIDERATION EVEN THEN HAS APPLIED THE NP RATE OF 8.5% AS AGAINST 7.99% DECLARED BY THE ASSESSEE WITHOUT ANY BASIS. THE LD. COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CAS E FOR THE PRECEDING YEAR I.E. A.Y. 2015-16 IN ITA NO. 961/JP/2019 DATED 26.09.2019 WHE REBY ADDITION WAS DELETED ON IDENTICAL FACTS. 7. ON THE OTHER HAND, THE LEARNED D/R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT A N IDENTICAL ISSUE WAS CONSIDERED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE I N ITA NO. 961/JP/2010 DATED 26.09.2019 FOR THE ASSESSMENT YEAR 2015-16 WHEREIN THE AO HAD MADE AN IDENTICAL ADDITION OF RS. 10,00,000/- WITHOUT CONSIDERATION O F BOOK RESULTS, GP & NP ETC. WHICH WAS RESTRICTED BY THE LD. CIT (A) TO RS. 6,00 ,000/-. ON FURTHER APPEAL, THE TRIBUNAL HAS CONSIDERED THE ISSUE IN PARA 2.6 AS UN DER :- 13 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE NOTICED THAT AS PER FACTS O F THE PRESENT CASE THE ASSESSEE HAD SHOWN SUNDRY CREDITORS TO THE TUNE OF RS. 10,22,847/- AND ON VERIFICATION BY THE AO IT WAS FO UND THAT SINCE THE ASSESSEE COULD NOT PRODUCE THE PARTIES BEFORE HIM, THEREFORE, IN ORDER TO PROTECT PROBABLE LEAKAGE OF REVENUE, THE AO MADE DISALLOWANCE OF RS. 10.00 LACS OUT OF LABOUR EXPENSES. WE HAVE ALSO CONSIDERED THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BEFORE THE LD. CIT(A). IN THAT WRITTEN SUBMISSION AND THE ARGUMENTS BEFORE US, IT WAS THE SPECIFIC STAND OF THE ASSESSEE THAT ASSESSEE FIRM COMPLETED ITS CIVIL CONSTRUCTION WORKS AT DIFFERENT PLACES IN REMOTE AR EAS WHERE NO BANKING CHANNEL WAS AVAILABLE. THEREFORE, DUE TO TH AT FACT, THE ASSESSEE HAD PAID LABOUR CHARGES TO LABOURERS IN CA SH. THE ASSESSEE HAD ALSO SUBMITTED THE COMPARATIVE CHART OF LAST YE AR IN ORDER TO SHOW THAT RESULTS OF GP/NP RATES WERE BETTER AND THE SAI D CHART IS ALSO CONTAINED IN THE SAID WRITTEN SUBMISSION BEFORE THE LD. CIT(A). AFTER PERUSAL OF THE RESULT CHART, WE ALSO NOTICED THAT T HE ASSESSEE FIRM HAD SHOWN BETTER RESULTS AND IT HAD ALSO PAID TAXES ON BETTER PROFIT IN COMPARISON TO LAST YEAR WHICH SHOWS THAT THERE WAS NO LEAKAGE OF REVENUE. IT IS PERTINENT TO MENTION THAT LD. CIT(A) IN HER FINDINGS HAD ADMITTED THAT THE ASSESSEE FILED THE CHART OF NP/GP WHICH SHOWS THAT PROFIT RATE WAS BETTER IN COMPARISON TO LAST YEAR A ND THUS THE NPR DECLARED BY THE ASSESSEE WAS BETTER AS COMPARED TO EARLIER YEARS. WE HAVE ALSO CONSIDERED THE DECISION OF ITAT JAIPUR BE NCH IN THE CASE OF GOODWILL IMPEX LTD VS DCIT (SUPRA) AND ITS OPERATIV E PORTION IS REPRODUCED AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFF ICER HAS REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) AND THE SAME HAS BEEN SUSTAINED BY THE LD CIT(A). ONCE THE BOOKS OF ACCO UNTS 14 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. ARE REJECTED, ONLY COURSE OF ACTION LEFT WITH THE A SSESSING OFFICER IS TO ASSESS THE INCOME OF THE ASSESSEE ON THE BASIS OF BEST JUDGEMENT. WHERE THE ASSESSEE HAS A SETTLED PAST HISTORY, IN SUCH CASES, ACCEPTED G.P R ATE FOR THE PAST YEARS IN ASSESSEES OWN CASE HAS BEEN HELD BY THE RAJASTHAN HIGH COURT AS PROPER AND REASONABLE B ASIS FOR ESTIMATION OF G.P RATE FOR THE CURRENT YEAR. I N THE INSTANT CASE, THE AO HAS MADE AN ADHOC TRADING ADDI TION OF RS 2 LACS AND IN THE PROCESS, HAS ESTIMATED THE G.P RATE OF 16.47% ON THE DECLARED TURNOVER OF THE ASSE SSEE AND WHICH HAS BEEN UPHELD BY THE LD CIT(A). THERE IS NO BASIS WHICH HAS BEEN SPECIFIED BY THE AO WHILE MAKI NG THE ADDITION OF RS 2 LACS AND WE ALSO FIND THAT THE ASSESSEES OWN PAST HISTORY HAS ALSO NOT BEING TAKE N INTO CONSIDERATION. ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED DUE TO NON-MAINTENANCE OF STOCK REGISTER, QUALITATIVE RECORDS, ETC AND PROVISIONS OF SECTION 145(3) HAVE BEEN INVOKED, THE AUTHORITIES CANNOT RESORT TO MAKE ADDITION ON AN ADHOC BASIS TO PREVENT LEAKAGE OF RE VENUE AS SO STATED BY THE AO. ONLY COURSE LEFT WITH THE AUTHORITIES IS TO ESTIMATE THE GROSS PROFIT RATE BA SED ON BEST JUDGEMENT AND THE PAST RESULTS OF THE ASSESSEE PROVIDES A REASONABLE BASIS FOR SUCH ESTIMATION. FO R THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED G.P RATE OF 16.38% AS AGAINST 14.14 % IN AY 2012-13, 12.05% IN AY 2011-12 AND 11.97% IN AY 2010-11 AND HAS THUS DECLARED A BETTER G.P RATE FOR THE YEAR UN DER CONSIDERATION AS COMPARED TO AVERAGE G.P RATE FOR T HE PAST THREE YEARS. EVEN WHERE THE BOOKS OF ACCOUNTS ARE REJECTED, THERE IS THUS NO BASIS FOR MAKING THE ADD ITION IN THE HANDS OF THE ASSESSEE COMPANY. IT IS A SETTLED LEGAL PROPOSITION THAT MERE REJECTION OF BOOKS OF ACCOUNT S ARE NOT SUFFICIENT TO HOLD THAT THE TRADING ADDITIONS H AVE TO BE NECESSARILY MADE IN THE HANDS OF THE ASSESSEE COMPANY. WHERE THE ASSESSEE COMPANY HAS DECLARED A BETTER TRADING RESULTS AS COMPARED TO PREVIOUS YEAR S, SUCH RESULTS PROVIDE A REASONABLE BASIS TO HOLD THA T THERE SHOULD NOT BE ANY ADDITION IN THE HANDS OF THE ASSE SSEE COMPANY. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASES, T HE TRADING ADDITION SO MADE BY THE AO AND SO CONFIRMED BY THE LD CIT(A) ARE HEREBY DIRECTED TO BE DELETED AND THE TRADING RESULTS SO DECLARED BY THE ASSESSEE ARE DIR ECTED TO BE ACCEPTED. THE ISSUE REGARDING REJECTION OF B OOKS OF ACCOUNTS SO RAISED BY THE ASSESSEE THUS BECOMES 15 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. ACADEMIC AND WE DONOT DEEM IT APPROPRIATE TO ADJUDI CATE THE SAME ON MERITS. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND ALSO THE DECISION RELIED ON BY THE LD.AR OF THE ASSESSEE (SUPRA), WE FIND THAT THE ITAT JAIPUR BENCH IN THE CASE OF GOOD WILL IMPEX LTD VS DCIT (SUPRA) HAD CATEGORICALLY HELD THAT WHE RE THE ASSESSEE COMPANY HAD DECLARED BETTER TRADING RESULT S AS COMPARED TO PREVIOUS YEAR AND SUCH RESULT PROVIDES A REASONABLE BASIS TO HOLD THAT THERE SHOULD NOT BE A NY ADDITION IN THE HANDS OF THE ASSESSEE COMPANY. IT IS ALSO NOTED THAT THE AO HAD NOT DETECTED ANY DEFECT IN THE BOOKS OF THE ASS ESSEE AND AO HAS NOT INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT FOR REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE BUT MADE THE LUMSUM/ ADHOC ADDITION ON ACCOUNT OF LABOUR EXPENSE S ON ESTIMATION BASIS WITHOUT FINDING ANY DEFECTS IN THE BOOKS OF ACCOUNT AND VOUCHERS OF THE ASSESSEE. HENCE, RELYIN G UPON THE DECISION OF ITAT JAIPUR IN THE CASE OF GOODWILL IMP EX LTD VS DCIT (SUPRA), WE ARE OF THE VIEW THAT ONCE THE ASSE SSEE COMPANY HAD DECLARED BETTER TRADING RESULTS AS COMP ARED TO PREVIOUS YEAR, SUCH RESULTS PROVIDE A REASONABLE BA SIS TO HOLD THAT THERE SHOULD NOT BE ANY ADDITION IN THE HANDS OF THE ASSESSEE COMPANY. THUS IN THE LIGHT OF THE ABOVE DI SCUSSIONS AND KEEPING IN VIEW THE ENTIRETY OF THE FACTS AND C IRCUMSTANCES OF THE CASE, THE ADDITION SO MADE BY AO AND RESTR ICTED BY LD. CIT(A) ARE DELETED. THUS THE SOLITARY GROUND OF THE ASSESSEE IS ALLOWED. 16 ITA NO. 134/JP/2020 DEEP JYOTI COMPANY, JAIPUR. THUS ON IDENTICAL FACTS, FOLLOWING THE EARLIER ORDE R OF THIS TRIBUNAL, THE DISALLOWANCE SUSTAINED BY THE LD. CIT (A) IS LIABLE TO BE DELETE D. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 02/02/20 21. SD/- SD/- FOE FLAG ;KNO LANHI XKSLKBZ (VIKRAM SINGH YADAV) ( SANDEEP GOSIAN ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 02/02/2021. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. DEEP JYOTI COMPANY, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE ACIT, CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 134/JP/2020} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR