ACIT Circle 2 , Salem V. K.Rajagopalan & Co., Salem

ITA 1537/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6370 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 15-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHAJ
• Assessee Lawyers: G BASKAR
• Keywords: Rejection of books of accounts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , ! ' ! # . $ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1537/MDS./2017 / ASSESSMENT YEAR :2013-14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, SALEM. VS. M/S.K.RAJAGOPALAN & CO., NO.6/6,EAST MAIN ROAD, METTUR DAM, SALEM 636 401. [PAN AABFK 7733 P] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MS.S.VIJAYAPRABHA,JCIT,DR /RESPONDENT BY : MR.G.BASKAR,ADVOCATE / DATE OF HEARING : 17 - 08 - 2017 / DATE OF PRONOUNCEMENT : 23 - 08 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SALEM D ATED 22.03.2017 PERTAINING TO ASSESSMENT YEAR 2013-14. ITA NO.1537/MDS./17 :- 2 -: 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FOR OUR ADJUDICATION. 1. THE LD.CIT(A) IS CONTRARY TO LAW AND AGAINST T HE F ACTS AND CIRCUMSTANCES OF THE CASE; 2. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THAT TH E ASSESSEE FAILED TO PRODUCE ANY CORROBORATIVE EVIDENCE FOR WA GES PAYMENT TO THE TUNE OF RS.9,70,69,358/- WHICH ACCOU NTS FOR 44.5% OF TOTAL CONTRACT RECEIPTS. 3. THE LD.CIT(A) HAS NOT CONSIDERED THE REASONS E VIDENTLY RECORDED BY THE AO FOR REJECTING THE BOOKS OF ACCOU NTS OF THE ASSESSEE. IN ADDITION, THE AO CLEARLY BROUGHT OUT T HAT THE SUB CONTRACTOR OF THE ASSESSEE PAID ONLY 5.7% OF GROSS INCOME TOWARDS WAGES AND ASSESSEE FIRM IS NOT MAINTAINING ANY WAGES REGISTER OR LABOUR ATTENDANCE REGISTER. AS NEARLY 5 0% OF THE EXPENDITURE WERE SUPPORTED ONLY BY SELF MADE VOUCHE RS, THE AO REJECTED THE BOOKS OF ACCOUNTS. HENCE, THE MADRA S HIGH COURT DECISION CGT VS. A.VAJJRAM BROS (326 ITR 551) (MDS.) SQUARELY COVER THE ISSUE IN HAND. 4. THE LD.CIT(A) HAS NOT CONSIDERED THAT THE AO HA S ADOPTED INCOME REASONABLY AT 8% IN VIEW OF THE ORDER OF THE MADRAS HIGH COURT IN 326 ITR 551 (MAD.)CITED SURPA. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL ENGINEERING CONTRACTOR AND IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE TURNOVER WAS AT ` 21,68,15,304/-. THE AO FOUND THAT THE ASSESSEE CLAIMED THE EXPENSES AT 44.5% OF TOTAL RECIEPTS IN RESPECT OF CIVIL CONTRACT, WHICH WAS SAID TO BE VERY HIGH AS COMPARED TO LABOUR EXPENSES AT 5.7% AND 5.3 8% IN RESPECT OF SUB-CONTRACTS. HENCE, THE AO WAS OF THE OPINION TH AT THE BOOKS OF ACCOUNTS ARE NOT VERIFIABLE AND RELIABLE, HENCE, RE JECTED IT. THE AO ESTIMATED THE INCOME OF ASSESSEE AT 8% OF THE GROSS PROFIT BY PLACING ITA NO.1537/MDS./17 :- 3 -: RELIANCE IN THE JUDGEMENT OF JURISDICITIONAL HIGH C OURT IN THE CASE OF CGT VS. A.VAJJRAM BROS., IN 326 ITR 551 (MAD.). AGG RIEVED BY THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIE D THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, LD.CIT(A) CONSIDERING T HE GP RATE FOR ASSESSMENT YEARS 2010-11, 2011-12 & 2012-13, WHICH ARE AT 1.88%, 1.87% & 2.16% OF THE GROSS PROFITS RESPECTIVELY AND ADOPTED GP RATE AT 2.5% OF THE GROSS PROFIT OF THE ASSESSEE AND WOR KED OUT AT ` 54,20,382/-. AGAINST THE ORDER OF LD.CIT(A), NOW TH E REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY IN THE ASSESSEES CASE, THE ASSE SSMENT WAS FRAMED U/S.144 OF THE ACT AND THE ASSESSEE HAS NOT PRODUCE D BOOKS OF ACCOUNTS BEFORE THE LD. ASSESSING OFFICER. HOWEVER , THE LD.CIT(A) WITHOUT EXAMINING THE BOOKS OF ACCOUNTS, BASED HIS CONCLUSION ON THE PREVIOUS ASSESSMENT YEARS GP RATE AND COMPUTED THE INCOME OF ASSESSEE AT 2.5% OF THE GROSS TURNOVER. IN THIS CAS E, THE AO HAS GIVEN A SPECIFIC FINDING THAT THE ASSESSEE CLAIMED THE EX PENDITURE VERY EXORBITANT COMPARED TO THE ASSESSEES IN SIMILAR LIN E OF BUSINESS. IN OUR OPINION, THE ASSESSEE TURNOVER IS ` 21,68,15,304/- AND THE ASSESSEE REQUIRED TO MAINTAIN REGULAR BOOKS OF ACCO UNTS AND TO BE AUDITED U/S.44AB OF THE ACT. HENCE, IT IS APPROPRIA TE TO FRAME THE ITA NO.1537/MDS./17 :- 4 -: ASSESSMENT ON THE BASIS OF BOOKS OF ACCOUNTS OF THE ASSESSEE, WHICH WAS NOT PRODUCED BEFORE THE AO. ACCORDINGLY, WE ARE OF THE OPINION THAT IT IS APPROPRIATE TO REMIT THE ENTIRE ISSUE TO THE FILE OF AO WITH A DIRECTION TO THE ASSESSEE TO PLACE ALL BOOKS OF ACC OUNTS MAINTAINED FOR ASSESSMENT YEAR UNDER CONSIDERATION FOR THE PURPOSE OF ASSESSMENT. IF THE AO FINDS THAT THE BOOKS OF ACCOUNTS NOT VERIFIA BLE, THEN HE HAS TO REJECT THE BOOKS OF ACCOUNTS AND THEREAFTER, HE IS AT LIBERTY TO ESTIMATE THE INCOME OF ASSESSEE. WITH THIS OBSERVATION, WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF AO FOR FRESH CONSIDERATION. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23 RD AUGUST, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 23 RD AUGUST, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF