ACIT, Jaipur V. SHRI MAN MOHAN KUMBHAJ, Jaipur

ITA 1441/JPR/2010

• Counselvise Citation: 144123114 RSA 2010
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Tax effect

Judgement Text

1 ITA 1441-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 1441/JP/2010 ASSTT. YEAR : 2006-07. THE ACIT, CIRCLE-3, VS. SHRI MAN MOHAN KUMBHAJ, JAIPUR. M/S. M.M. CONSTRUCTIONS, F-55, GHIYA MARG, BANI PARK, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K. MEENA RESPONDENT BY : SHRI MANISH AGARWAL DATE OF HEARING : 01.9.2011 DATE OF PRONOUNCEMENT : 09.9.2011. ORDER DATE OF ORDER : 09/09/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2006-07. 2. THE DEPARTMENT IS OBJECTING IN DIRECTING TO APPL Y N.P. RATE OF 6% ON TURNOVER/GROSS CONTRACT RECEIPTS AS AGAINST 8% APPL IED BY THE A.O. 3. ON TURNOVER OF RS. 5,89,70,047/-, THE ASSESSEE D ECLARED N.P. RATE OF 5.03% WHICH WAS LOWER THAN 5.36% SHOWN IN THE IMMEDIATELY PRECE DING YEAR. THE AO REJECTED THE BOOKS OF ACCOUNT AND APPLIED A N.P. RATE OF 8% ON T OTAL RECEIPTS SHOWN BY ASSESSEE. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE ASSESSEE IS A CONTRACTOR DOING JOB WORKS OF 2 CONVERSION OF SIGNALING SYSTEM. THE CONTRACTS WERE AWARDED BY THE RAILWAYS THROUGH OPEN TENDER SYSTEM AND WORK EXECUTED IS SUBJECT TO THE CRITICAL INSPECTION AND SUPERVISION BY THE RAILWAY AUTHORITIES REQUIRING FREQUENT RE-DO ING OF THE JOB. THE JOB REQUIRES VERY HIGH TECHNICAL COMPETENCE AND IS ALWAYS MATERIAL IN TENSIVE. THE TOTAL MATERIAL PURCHASED WAS OF RS. 4.56 CRORES OUT OF THE TOTAL TURNOVER OF RS. 5.89 CRORES. THE MATERIAL HAS TO BE PROCURED FROM THE SUPPLIERS APPROVED BY THE RAILWAY S, COMMONLY KNOWN AS RDSO APPROVED SUPPLIERS. SINCE THE NUMBER OF RDSO APPRO VED SUPPLIERS ARE VERY FEW, THEY CHARGED HIGHER RATES AND THUS THE COST OF MATERIALS IS COMPARATIVELY HIGHER. 4. REGARDING THE DECREASE IN PROFIT, IT WAS SUBMITT ED THAT IT IS MAINLY DUE TO INCREASE IN COST OF MATERIAL AND STIFF COMPETITION. 5. REGARDING APPLICATION OF PROVISIONS OF SECTION 1 45(3), IT WAS STATED THAT ASSESSEE IS NOT A CIVIL CONTRACTOR AND THE MATERIAL INVOLVED IS COMPULSORILY REQUIRED TO BE PROCURED FROM RDSO APPROVED SUPPLIERS. THE QUALITY CONTROL OVER THE MATERIAL AND ERECTION JOB AT RAILWAY IS VERY STRONG AND THE ASSESSEE FIRM HAS TO SUFFER REPEATED REJECTIONS. IT WAS SUBMITTED THAT WITHOUT CONSIDERING THESE SUBMISSION S, THE AO HAS APPLIED NET PROFIT RATE OF 8% BY OBSERVING THAT TRIBUNAL HAS APPLIED THE SA ME RATE IN SIMILARLY PLACED CONTRACTORS. HOWEVER, NO CASE OF SIMILAR FACTS WAS CITED TO THE ASSESSEE SO THAT A REPLY COULD HAVE BEEN FILED. RELIANCE WAS PLACED IN CASE OF GOTAN LIME KHANIZ UDYOG, 256 ITR 243 AND IN CASE OF MALANI RAMJEEVAN JAGANNATH V S. ACIST, 316 ITR 120. 6. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT ( A) FOUND THAT SITE-WISE STOCK REGISTERS ARE NOT MAINTAINED AND, THEREFORE, PROFIT IN EACH WORKS CANNOT BE FIND OUT. THE INHERENT NATURE OF BUSINESS IS SUCH THAT MOSTLY PAY MENTS ARE MADE IN CASH AND MAY NOT BE SUPPORTED BY BILLS AND VOUCHERS AS WELL AS STOCK RE GISTER MAY NOT BE MAINTAINED. ON THIS 3 BASIS THE LD. CIT (A) CONFIRMED THE REJECTION OF BO OKS OF ACCOUNT. HOWEVER, LOOKING TO THE PAST HISTORY OF THE CASE, THE DOWN FALL IN GROS S PROFIT RATE, THE LD. CIT (A) NOTED THAT ASSESSEES CASE IS NOT SUBSTANTIATED. THEREFORE, K EEPING IN MIND THE PAST HISTORY THAT ASSESSEE HAS DECLARED GROSS PROFIT RATE OF 5.36% IN THE IMMEDIATELY PRECEDING YEAR, THE AO WAS DIRECTED TO WORK OUT THE PROFIT BY APPLYING 6% NET PROFIT RATE AGAINST 8% APPLIED BY THE AO. 7. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 8. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. 9. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE FIRSTLY PLACED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THAT EVEN THE TAX EFFECT IS LESS THAN RS. 3,00,000/-, THEREFORE, IN VIEW OF BOARDS CIRCULAR THE APPEAL OF THE DEPARTMENT IS NOT MAINTAINABLE. 10. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT THOUGH THE APPEAL OF THE DEPARTMENT IS NOT MAINTAINABLE IN VIEW OF BOARDS C IRCULAR THAT WHERE TAX EFFECT IS LESS THAN RS. 3 LACS, THE DEPARTMENT SHOULD NOT FILE APP EAL BEFORE THE TRIBUNAL. HOWEVER, WE FIND THAT ON MERIT ALSO THE LD. CIT (A) HAS GIVEN A VERY REASONABLE FINDING WHICH COULD NOT BE CONTROVERTED BY LD. D/R BY BRINGING ANY MATE RIAL ON RECORD. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE CONFIRM THE ORDER OF LD . CIT (A). 11. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 .9.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, 4 D/- COPY FORWARDED TO :- THE ACIT, CIRCLE-3, JAIPUR. SHRI MAN MOHAN KUMBHAJ, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1441/JP/2010) BY ORDER, AR ITAT JAIPUR.