M/S DREAMAX INFRA DEVELOPERS PVT. LTD., JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR

ITA 160/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9187 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 11-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Keywords: Gross profit estimation; Rejection of books of accounts; Depreciation
• Section: 143(3); 251; 139(1); 13; 145(3); 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 160 & 161/JP/2019 FU/KZKJ.K O'KZ @ ASSESSMENT YEARS : 2013-14 & 2014-15 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD., 22, SATYA VIHAR, LALKOTHI,NEAR VIDHANSABHA, JAIPUR CUKE VS. THE ACIT CIRCLE-6 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAECD 2360 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY GOYAL, CA JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA, JCIT LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 06/08/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 11 /08/2020 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THESE APPEALS FILED BY THE ASSESSEE ARE AGAINST TWO DIFFERENT ORDERS OF LD. CIT(A)-2, JAIPUR DATED 20.12.2018 AND 08-11-2018 FOR THE A.YS. 2013-14 AND 2014-15, IN THE MATTER OF ORDERS PASSED BY THE A.O. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE A CT). THE GROUNDS TAKEN BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS ARE AS UNDER:- ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 2 ITA NO.160/JP/2019 A.Y. 2013-14 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN L AW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO REGARDI NG REJECTING THE BOOKS OF ACCOUNTS OF ASSESSEE BY INVOKING THE PROVI SIONS OF SECTION 145(3) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.28,68 ,475/- OUT OF TOTAL ADDITION OF RS.38,06,768/- MADE BY THE AO. TH E LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF AO REGARD ING APPLYING THE NET PROFIT RATE (BEFORE DEPRECIATION AND INTEREST) @ 8% ON GROSS CONSTRUCTION RECEIPT OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.73,780/- WHICH WAS MADE BY THE AO U/ S 2(24)(X) READ WITH SECTION 36(1)(VA) OF INCOME TAX ACT, 1961 ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEE CONTRIBUTION TO EPF MORE SO THE SAME WAS DEPOSITED BY THE ASSESSEE BEFORE FILING RETURN OF I NCOME U/S 139(1) OF THE ACT. HOWEVER, NO SEPARATE ADDITION WAS MADE BY AO IN THE TOTAL INCOME OF ASSESSEE ON THIS ACCOUNT AS THE PRO FIT WAS ESTIMATED BY APPLYING NP RATE. ITA NO.161/JP/2019 A.Y. 2014-15 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN L AW THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO REGARDI NG REJECTING THE BOOKS OF ACCOUNTS OF ASSESSEE BY INVOKING THE PROVI SIONS OF SECTION 145(3) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.30,84 ,987/- OUT OF TOTAL ADDITION OF RS.37,09,931/- MADE BY THE AO. TH E LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF AO REGARD ING APPLYING THE NET PROFIT RATE (BEFORE DEPRECIATION AND INTEREST) @ 8% ON GROSS CONSTRUCTION RECEIPT OF THE ASSESSEE AND NOT TREATI NG THE INTEREST FROM PARTIES & I.TAX AS PAR OF BUSINES INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.87,777/- WHICH WAS MADE BY THE AO U/ S 2(24)(X) READ WITH SECTION 36(1)(VA) OF INCOME TAX ACT, 1961 ON ACCOUNT OF ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 3 LATE DEPOSIT OF EMPLOYEE CONTRIBUTION TO EPF MORE SO THE SAME WAS DEPOSITED BY THE ASSESSEE BEFORE FILING RETURN OF I NCOME U/S 139(1) OF THE ACT. HOWEVER, NO SEPARATE ADDITION WAS MADE BY AO IN THE TOTAL INCOME OF ASSESSEE ON THIS ACCOUNT AS THE PRO FIT WAS ESTIMATED BY APPLYING NP RATE. 2.1 COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION WHICH RELATE T O AOS ACTION AGAINST REJECTION OF BOOKS OF ACCOUNT AND DISALLOWANCE OF E XPENSES. 2.2 RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS P ERUSED. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGE D IN INFRASTRUCTURE AND INDUSTRIAL PROJECTS VIZ ROAD, INDUSTRIAL TOWNSHIP, SECURITY BARRACKS ETC. UPTO AY 2012-13, THE SAME BUSINESS WAS CARRIED OUT UNDER THE STATUS OF PARTNERSHIP FIRM M/S DREAMAX INFRASTRUCTURE DEVELOP ERS. THE ASSESSEE COMPANY IS A PRIVATE LIMITED INCORPORATED ON 24 TH DAY OF APRIL 2012 AND IN AY 2013-14, THE BUSINESS OF THE SAID PARTNERSHIP FI RM WAS TAKEN OVER BY THE COMPANY. DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE COMPANY WAS UNDERTAKEN ROAD AND INDUSTRIAL TOWNSHIP PROJECT OF M/S LAFARGE INDIA PRIVATE LIMIT ED FOR THEIR GREEN FIELD CEMENT PROJECT AT NIMBAHERA TEHSHIL IN DISTRICT OF CHITTORGARH AND HIGHWAY ROAD PROJECT AT PUNE OF M/S ILFS ENGINEERING & CONS TRUCTION COMPANY ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 4 LIMITED. THE ASSESSEE COMPANY HAD LEFT THE PUNE PR OJECT DUE TO NON-VIABILITY AND GEOGRAPHICAL LIMITATION IN SAME Y EAR. DURING THE SCRUTINY, ASSESSEE COMPANY HAS SUBMITTED ALL REQUISITE INFORM ATION, PRODUCED BOOKS OF ACCOUNTS AND EXPLANATIONS AS SOUGHT BY THE AO TI ME TO TIME HOWEVER, FINALLY AO REJECTED BOOKS OF ACCOUNT BY INVOKING OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT:- (I) TOTAL LABOUR EXPENSES ARE OF RS. 86,77,822/- AN D MOST OF LABOUR PAYMENTS ARE IN CASH; HENCE NOT VERIFIABL E (II) IN RESPECT OF MATERIAL ALSO SOME EXPENSES HAVE BEEN PAID IN CASH AND SUPPORTED BY INTERNAL VOUCHERS HENCE NO T VERIFIABLE. 2.3 THE AO IN HIS ORDER U/S 143(3) OF THE ACT ESTIM ATED INCOME FROM CONTRACT @ OF 8% OF CONTRACT RECEIVED SUBJECT TO SE PARATELY ALLOWABLE DEPRECIATION AND INTEREST WHICH WAS CALCULATED AT R S. 60,77,860/-. HOWEVER WHILE COMPUTING THE ESTIMATED INCOME FROM CONTRACT, THE AO ALLOWED INTEREST EXPENSES AT RS. 29,84,683/- AS AGAINST FIN ANCE COST OF RS. 40,75,834/- CLAIMED BY THE ASSESSEE AND HE SEPARATE LY ASSESSED THE INCOME FROM CONSULTANCY AT RS. 3,01, 371/- AND INTE REST FROM FDR RS. 9,38,293/-. HE FURTHER HELD THAT AN AMOUNT OF RS. 7 3,780/- IS NOT ALLOWABLE ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 5 U/S 36(1)(VA) R.W.S 2(24)(X) ON ACCOUNT OF LATE DEP OSIT OF EPF CONTRIBUTION OF EMPLOYEES. HOWEVER, HE HAS NOT MADE SEPARATE ADD ITION FOR THIS AMOUNT SINCE HE ESTIMATED THE PROFIT BY APPLYING NP RATE. IN THIS WAY THE AO ASSESSED INCOME ON ESTIMATED BASIS AT RS. 73,17,520 /- AGAINST THE DECLARED INCOME OF RS. 35,10,760/-, RESULTANTLY ADD ITION OF RS. 37,99,760/- WAS MADE. 2.4 BY THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD TH E REJECTION OF BOOKS OF ACCOUNT BY HOLDING THAT THE FACTS OF THIS YEAR A RE DIFFERENT THAN LAST YEAR. SHE FURTHER UPHELD THE ESTIMATION OF THE PROFIT BY APPLYING 8% OF NP RATE SUBJECT TO INTEREST AND DEPRECIATION. HOWEVER SHE D IRECTED TO TREAT THE INTEREST ON FDR OF RS. 9,38,293/- AS BUSINESS INCOM E. FURTHER, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 73,780/- M ADE BY THE AO ON ACCOUNT OF LATE DEPOSIT OF EPF CONTRIBUTION OF EMPL OYEES . 2.5 NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US . 2.6 AT THE OUTSET OF THE HEARING, THE LD. AR OF THE ASSESSEE PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2012-13 IN ITA NO.374/JP/ 2017 DATED 25-05-2018 WHERE SIMILAR ISSUE WAS DECIDED BY THE T RIBUNAL IN ASSESSEES FAVOUR. ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 6 2.7 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CA REFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. WE FIND THAT UPTO A.Y 2012-13 THE CONTRACT BUSINESS WAS CARRIED ON UNDER PARTNERSHIP FIRM IN THE NAME A ND STYLE M/S DREAMAX INFRASTRUCTURE DEVELOPERS. THE BUSINESS OF PARTNERS HIP FIRM WAS TAKEN OVER BY THIS COMPANY FROM A.Y 2013-14. IN A.Y 2012-13, B OOKS OF ACCOUNTS WERE REJECTED AND THE PROFIT WAS ESTIMATED BY APPLY ING NP RATE. THE ITAT JAIPUR BENCH HELD THAT INSIGNIFICANT DEFECTS IN SU PPORTING EVIDENCE CANNOT A REASON FOR REJECTION OF BOOKS OF ACCOUNTS AND HEL D THAT THE ASSESSEE'S CASE DOES NOT WARRANT REJECTION OF BOOKS OF ACCOUNT U/S 145(3). THE FINDINGS OF ITAT IS IN PARA 5. THE ASSESSEE IS MAI NTAINING SAME SET OF BOOKS OF ACCOUNT AND THE FACTS OF THIS YEAR ARE SIM ILAR TO A.Y 2012-13. S.NO GROUNDS TAKEN FOR REJECTION OF BOOKS OF ACCOUNT FOR AY 2012-13 GROUNDS TAKEN FOR REJECTION OF BOOKS OF ACCOUNT FOR AY 2013-14 1 EXPENDITURE ON ACCOUNT OF WAGES WERE INCURRED IN CASH AND NOT VERIFIABLE SAME GROUND IS IN A.Y 2013-14 2 VERY LOW GP SOME OF MATERIAL HAS BEEN PURCHASED IN CASH AND SUPPORTED BY INTERNAL VOUCHERS 3 SEPARATE TRADING ACCOUNT OF EACH CONTACT WORK NOT MAINTAINED NO SUCH GROUND IN A.Y 2013-14 ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 7 4 EXPENDITURE ON ACCOUNT OF WAGES WAS MOSTLY INCURRED DURING THE PERIOD FROM DECEMBER TO MARCH WHEREAS THE CONTRACT RECEIPTS THROUGHOUT THE YEAR NO SUCH GROUND IN A.Y 2013-14 5 ASSESSEE GAVE MAJOR WORK TO SUB CONTRACTOR WITHOUT HAVING WRITTEN AGREEMENT NO SUCH GROUND IN A.Y 2013-14 THEREFORE, THE ASSESSEE'S CASE IS FULLY COVERED BY DECISION OF HON'BLE ITAT IN ITS OWN CASE I.E. M/S DREAMAX INFRASTRUCTURE DEV ELOPERS FOR A.Y 2012-13. 2.8 ON MERIT, WE OBSERVED THAT MOST OF LABOUR EXPEN SES WERE PAID IN CASH BUT IT IS NOT TANTAMOUNT THAT THE EXPENSES PAI D IN CASH ARE NOT VERIFIABLE. IT IS KNOWN PRACTICE NOT ONLY IN ASSESS EE INDUSTRY BUT IN ALL INDUSTRIES THAT THE WAGES PAID IN CASH ON FIXED DAT ES OR REGULAR INTERVAL DUE TO THEIR OWN NATURE. THE ASSESSEE HAS ALSO ADOP TED THE SAME PRACTICE AND WAGES PAID MONTHLY. THE COMPANY HAS C LAIMED RS. 86.78 LACS ONLY TOWARDS LABOUR EXPENSES WHICH WAS REPRESE NTS ONLY 7.13% OF TOTAL GROSS RECEIPTS OF CONSTRUCTION BUSINESS. FURT HER, THE COMPANY ACCOUNT WAS ALSO SUBJECT TO STATUTORY AUDIT UNDER T HE COMPANY ACT, 1956 AND ALSO TAX AUDITED UNDER THE INCOME TAX ACT, 1961 . 2.9 FROM THE RECORD, WE FOUND THAT THE COMPANY HAS ALREADY PRODUCED BOOKS OF ACCOUNTS INCLUDING SUPPORTING DOCUMENTS. I N FACT, ASSESSEE HAS ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 8 MAINTAINED COMPLETE RECORDS OF LABOUR EXPENSES IN T HE SHAPE OF WAGES SHEETS AND PAYMENT THEREOF WHICH WAS PRODUCED DURIN G ASSESSMENT PROCEEDING HAVING DETAILS OF: NAME OF LABOUR DESIGNATION OR NATURE OF WORK WHERE LABOUR ENGAGED FATHER OR HUSBAND NAME DATE OF BIRTH DATE OF JOINING SEX GROSS WAGES RATE PER DAY NUMBER OF DAY ATTENDED OR LABOUR WORKED IN THE MONT H GROSS WAGES PAYABLE IN A MONTH DEDUCTION OF PF NET WAGES PAYABLE DETAILS OF EMPLOYER CONTRIBUTION TOWARDS PF RECEIPTS OF AMOUNT PAID TO LABOUR ON VOUCHERS DURING THE YEAR UNDER CONSIDERATION, THERE WERE MOR E THAN TWO THOUSANDS OF TRANSACTION OF PAYMENT AND EACH TRANSACTION SUPP ORTED BY WAGES SHEET CONTAINING INFORMATION AS MENTIONED ABOVE (SUPRA) AND PAYMENT VOUCHERS . A SAMPLE COPY OF WAGES SHEET IS PLACED ON RECORD. 2.10 MOREOVER THE ASSESSEE COMPANY ALSO REGISTERED WITH THE PF DEPARTMENT AND THE SAME EXPENSES WAS SUBJECT TO VER IFICATION BY LABOUR DEPARTMENT. IT IS ALSO WORTHWHILE TO NOTE THAT THE SAME WAGES HAVE ALREADY BEEN VERIFIED BY THE LABOUR DEPARTMENT/ AWA RDER TIME TO TIME. THE COPY OF INSPECTION AND OBSERVATION REPORT CARRIED O UT BY RELEVANT DEPARTMENT IS PLACED ON RECORD WHEREIN NO DEFICIENC Y WAS OBSERVED BY THE ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 9 INSPECTION TEAM EXCEPT PETTY ISSUES. THE COMPANY HA S ALSO SUBMITTED PF RETURN TO LABOUR DEPARTMENT WHICH ITSELF SUBSTANCE THE CLAIM OF WAGES PAYMENT ON THOSE CASES WHERE THE PF APPLICABLE. HEN CE, MERELY PAYMENT MADE IN CASH IS NOT TANTAMOUNT THAT THESE EXPENSES ARE NOT VERIFIABLE. 2.11 FROM THE RECORD, WE ALSO FOUND THAT THE COMPAN Y HAD PURCHASED MATERIAL AMOUNTING RS. 10.81 CRORE FROM VARIOUS VEN DORS AND ALL PAYMENTS WERE PAID THROUGH BANKING CHANNEL EXCEPT AMOUNT OF RS. 13,87,988/- WHICH WAS PAID IN CASH IN COMPARE TO T OTAL GROSS RECEIPTS OF THE COMPANY OF RS. 12.16 CRORE IN AY 2013-14. THIS CONSTITUTES 1.15% ONLY OF TOTAL REVENUE AND 1.30% OF TOTAL MATERIAL P URCHASED BY THE ASSESSEE COMPANY . ON VERY FEW OCCASION, ASSESSEE COMPANY HAS PURCHASED FEW MATERIALS LOCALLY ON URGENT BASIS IN CASH OR PART PAYMENT MADE FOR THE SAME IN CASH WHICH CONSTITUTES 1.15% O NLY OF TOTAL REVENUE AND 1.30% OF TOTAL MATERIAL PURCHASED BY THE ASSESS EE COMPANY DURING THE RELEVANT YEAR. THESE MATERIALS WERE USED IN PRO JECTS ONLY. THE MATERIAL PURCHASED IN CASH OR PART PAYMENT MADE IN CASH IS F ULLY SUPPORTED BY INVOICES OR VOUCHERS. THE SAME INVOICES WERE PRODUC ED DURING THE ASSESSMENT PROCEEDING. EACH PAYMENT DULY SUPPORTED BY THE EXTERNAL ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 10 INVOICES. HENCE, THIS IS INCORRECT CONTENTION THAT THESE ARE SUPPORTED BY INTERNAL VOUCHERS ONLY. 2.12 IN VIEW OF THE ABOVE, THE REJECTION OF BOOKS O F ACCOUNT ON THE BASIS OF INSIGNIFICANT DEFECTS IN ALL RESPECT, IS NOT JUS TIFIED AND BOOKS OF ACCOUNT DESERVES TO BE ACCEPTED. BEFORE INVOKING THE PROVIS IONS OF SECTION 145(3) OF THE ACT, THE AO HAS TO BRING ON RECORD MATERIAL ON THE BASIS OF WHICH HE HAS ARRIVED AT THE CONCLUSION WITH REGARD TO CORREC TNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR THE METHOD OF ACCOU NTING EMPLOYED BY IT. IN THE INSTANT CASE, IT WAS NOT THE CASE THAT THE A SSESSEE HAD NOT FOLLOWED EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING. IT WAS ALSO NOT THE CASE THAT THE CENTRAL GOVERNMENT HAD NOTIFIED ANY PARTIC ULAR ACCOUNTING STANDARD NOT FOLLOWED BY ASSESSEE. HENCE, THE SECON D PART OF SUB-SECTION (3) OF SECTION 145 WOULD NOT APPLY TO THE INSTANT C ASE. 3.1 GROUND NO. 2 RELATES TO CONFIRMING THE ADDITION OF RS. 28,68,475/- ON ESTIMATION BASIS BY APPLYING NP RATE OF 8% SUBJECT TO DEPRECIATION AND INTEREST. 3.2 IN THIS REGARD, WE OBSERVED THAT THE ASSESSEE C AME IN THIS BUSINESS SINCE AY 2012-13. IN AY 2012-13. THIS BUSINESS WAS CARRIED OUT UNDER THE STATUS OF PARTNERSHIP. THE ASSESSEE WAS AWARDED THE CONTRACTS BY PRIVATE ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 11 PARTIES AND THE ASSESSEE ACCEPTED THE CONTRACT JUST TO CREATE AN EXISTENCE IN MARKET AS THE ASSESSEE WAS NEW IN THE FIELD I.E. EXPERIENCE OF 1 YEAR ONLY IN THE FIELD. DUE TO THIS, GOVT CONTRACTS WER E NOT AWARDED TO THE ASSESSEE. THE MAIN REASON OF LOW PROFIT WAS ACCEPTI NG THE WORK ORDER AT MOST COMPETITIVE RATES TO SETTLE IN THE MARKET. THE AO ASSESSED ESTIMATED INCOME @ 8% OF GROSS CONTRACTUAL RECEIPTS AFTER DED UCTING CONSULTATION RECEIPT AND HE ALLOWED DEPRECIATION FULLY BUT ALLOW ED INTEREST TO THE EXTENT OF RS. 29,84,683/- INSTEAD OF RS. 40,75,834/-. BESI DE ABOVE, HE ALSO MADE ADDITION SEPARATELY FOR INCOME FROM CONSULTANCY REC EIPT DERIVED FROM THE SAME 'REJECTED' BOOKS OF ACCOUNT AND INTEREST INCOM E. 3.3 FROM THE RECORD, WE FOUND THAT THE ASSESSEE COM PANY DECLARED INCOME OF RS. 35,10,760/- AFTER DEPRECIATION OF RS. 5,31,296/- AND FINANCE OR INTEREST EXPENSES OF RS. 40,75,834/-. THUS, COMP ANY HAS SHOWN GROSS INCOME OF RS. 81,17,890/- I.E. 6.68% OF GROSS CONTR ACTUAL RECEIPT OF RS. 12,16,08,395/- WHICH IS SIGNIFICANT LOOKING TO SECO ND YEAR OF THE OPERATION IN THE CONTRACT BUSINESS AND PARTICULARLY WHEN THE CONTRACTS WERE AWARDED BY PRIVATE PARTIES IN REMOTE AREA. 3.4 ACCORDINGLY, THERE IS NO JUSTIFICATION FOR ESTI MATION OF INCOME MADE BY THE AO @ 8% OF GROSS CONTRACTUAL RECEIPTS. ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 12 3.5 THE AO CONSIDERED THE SEPARATE RECEIPTS OF RS 1 6,84,500/-ON ACCOUNT OF CONSULTANCY INCOME AND ESTIMATED INCOME AFTER DE DUCTION OF CERTAIN EXPENSES. 3.6 THIS ISSUE IS ALSO COVERED BY DECISION OF HON'B LE ITAT IN A.Y 2012-13. THE FINDINGS OF ITAT JAIPUR BENCH IS AT PAGE 10 O F THE ORDER. THE RELEVANT PART IS REPRODUCED AS UNDER:- '... THE ASSESSING OFFICER HAS SEPARATELY TREATED T HE INCOME FROM LIASIONING AND CONSULTANCY THOUGH THE WORK OF GETTI NG NOC FROM NHA FOR CONSTRUCTION OF ROAD AND DEALING WITH LOCAL VILLAGERS IN RESPECT OF THE LANDS ARE PART AND PARTIAL OF THE W ORK ORDER AND SCOPE OF THE WORK ORDER UNDER THE SAME CONTRACT. TH EREFORE, FOR THE PURPOSE OF COMPUTING THE PROFIT RATIO OF THE ASSESS EE THE ENTIRE RECEIPT UNDER THE CONTRACT IN QUESTION HAS TO BE CO NSIDERED...' 3.7 THE AO ALLOWED INTEREST TO THE EXTENT OF RS. 29 ,84,683/- INSTEAD OF RS. 40,75,834/-. 3.8 IN THIS REGARD, WE OBSERVED THAT DURING THE YEA R UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS INCURRED FINANCE COST OF R S. 40,75,834/- AS UNDER: ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 13 INTEREST 29,84,683/- BANK GUARANTEE CHARGES 10,22,156/- PROCESSING FEES PAID TO BANK FOR OBTAINING LIMIT 38,202/- OTHER BANK CHARGES 30,793/- TOTAL 40,75,834/- THE AO HAS ALLOWED DEDUCTION OF RS. 29,84,683/- ONL Y AS INTEREST COST INSTEAD OF RS. 40,75,834/- AS SHOWN ABOVE. WE DO NOT FIND AN Y JUSTIFICATION FOR ALLOWING INTEREST COST AT RS.29,84,683/- IN PLACE OF RS.40,7 5,834/-. 3.9 ACCORDINGLY, WE DIRECT THE AO TO ALLOW DEDUCTION OF 40,75,384/- INSTEAD OF RS. 29,84,683/- AS INTEREST COST WHILE INCOME DERIVE D ACCORDING TO NET PROFIT FORMULA. 3.10 WE ALSO OBSERVED THAT THE PROFIT DECLARED BY T HE ASSESSEE IS @ 6.62% (CALCULATION CHART IS AS BELOW) SUBJECT TO FINANCE C OST AND DEPRECIATION WHICH IS MOST REASONABLE CONSIDERING THE FACT THAT (I) THE ASSESSEE IS NEW IN THIS BUSINESS (II) CONTRACT WAS AWARDED BY PRIVATE PARTY (III) IN ROAD CONSTRUCTION CONTRACT THERE IS CUT T HROAT COMPETITION, (IV) THE LOCATION OF THE WORK IN VERY REMOTE AREA AND (V) THE ASSESSEE LEFT THE PUNE PROJECT AWARDED BY M/S ILFS ENGINEERING AND CONSTRUCTION COMPANY LIMITED DUE TO NON-VIABILITY A ND GEOGRAPHICAL LIMITATION IN SAME YEAR . ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 14 TOTAL CONTRACT RECEIPT CONSIDERED BY AO 11,99,22,995 ADD: - CONSULTATION RECEIPT (PARA 2.6.1) 16,85,400 ADD: -INTEREST INCOME ON BANK FDR (PARA 2.6.3) 9,38 ,293 TOTAL CONTRACT RECEIPT 12,25,46,688 NP @ 6.62% 81,12,591 LESS: - DEPRECIATION 5,31,296 LESS: - TOTAL FINANCE COST INCLUDING INTEREST EXP. (2.6.3 READ WITH PARA 2.6.2) 40,75,384 TOTAL INCOME OR NET PROFIT 35,05,911 INCOME DECLARED BY THE ASSESSEE IN RETURN 35,10,760 4.1 THE AO HAS ALSO MADE DISALLOWANCE OF RS. 73,780 /- TREATING THE LATE DEPOSIT OF EMPLOYEE CONTRIBUTION AS INCOME U/S 2(24 )(X) READ WITH SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961. 4.2 IT IS CLEAR THAT ENTIRE CONTRIBUTIONS RECEIVED FROM THE EMPLOYEES HAVE BEEN DEPOSITED BEFORE FILING OF RETURN OF INCOME U/ S 139(1) OF THE ACT. ACCORDINGLY, NO DISALLOWANCE IS WARRANTED IN TERMS OF FOLLOWING JUDICIAL PRONOUNCEMENTS. (I) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. (2014) 366 ITR 163 (RAJ ) (II) CIT VS STATE BANK OF BIKANER & JAIPUR [2014] 363 ITR 70 (R AJASTHAN) (III) COMMISSIONER OF INCOME-TAX V. JAIPUR VIDYUT VITRAN NIGAM LIMITED [2014] 49 TAXMAN N.COM 540 (RAJASTHAN) (IV) ALLIED MOTORS PVT. LTD. VS. CIT 224 ITR 677 (S C); 298 ITR 141 (KAR) (V) 2015 (1) TMI 974 GUJARAT HIGH COURT IN THE CA SE OF CIT V/S NOBLE DETECTIVE & SECURITY SERVICES PVT. LTD APPEAL NO. 251 OF 2007 AND (VI) CIT V/S AIMIL LTD & ORS (2010) 229 CTR (DEL) 4 18. (VII) THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF ACIT CIRCLE-6, JAIPUR VS KANHAIYA LAL KALYANMAL ITA NO 135,760 & 136/JP/2013 VIDE ORDER DATED 26/01/201 4 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO.159&160/JP/2019 M/S. DREAMAX INFRA DEVELOPERS PVT. LTD. VS ACIT, CIRCLE-6, JAIPUR 15 6.0 THE FACTS AND CIRCUMSTANCES DURING THE ASSESSME NT YEAR 2014-15 ARE PARI MATERIA AS AGREED BY BOTH THE LD. AR AND LD. D R. ACCORDINGLY, IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY JUSTIF ICATION FOR THE ADDITIONS SO MADE. 7.0 IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 11 /08/ 2020. SD/- SD/- FOT; IKY JKO JESK LH0 KEKZ (VIJAY PAL RAO) (RAMESH. C. SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/08/2020. *MISHRA . VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S.DREAMAX INFRA DEVELOPERS PVT.LTD . JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-6, 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. 160 & 161/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR