BHUVNESH DWIVEDI, Kota V. ACIT, Kota

ITA 189/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5485 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJINDER SINGH JCIT DR DHK
• Assessee Lawyers: B L BHOJWANI
• Keywords: Business income; Depreciation

Judgement Text

ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO. 189/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI BHUVNESH DWIVEDI PROP. M/S. RAJA CONSTRUCTION, 1-DHA-23, VIGYAN NAGAR, KOTA CUKE VS. THE ACIT CIRCLE- 1 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AFCPD 2196 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI B.L. BHOJWANI, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJINDER SINGH, JCIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 12 /02/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM: - THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORD ER OF THE LD. CIT(A), KOTA DATED 28-12-2012 FOR THE ASSESSMENT YEAR 2009- 10 WHEREIN FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE . 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING TH E REJECTION OF BOOKS OF ACCOUNT BY THE LD. AO AND THEREBY APPLY ING THE PROVISIONS OF SECTION 145(3). 2. THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION BY APPLYING THE NET PROFIT RATE OF 10% SUBJECT TO D EPRECIATION AS ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 2 AGAINST NET PROFIT RATE OF 12% SUBJECT TO DEPRECIAT ION, APPLIED BY THE LD. AO 3. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE SEPARATE ADDITION OF RS. 59,796/- MADE BY THE LD. AO ON ACCO UNT OF INTEREST INCOME. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF CIVIL CONTRACT I.E. MAINLY ROAD MAINTENANCE. THE BOOKS OF ACCOUNTS ARE CLAIMED BY THE ASSESSEE AS AUDITED AND RETURN OF IN COME FILED ON 30-09-2009 DECLARING INCOME OF RS. 20,89,230/- BASED ON THE AU DITED ACCOUNTS. THE AO OBSERVED THAT THE ASSESSEE DID NOT PRODUCE THE BOOK S OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CONSEQUENTLY THE RESULTS DECLARED BY ASSESSEE STOOD REJECTED. THE ASSESSEE DECLARED THE NET PROFIT AT 6.96% AS AGAINST PRECEDING YEARS NET PROFIT RATE OF 5.61%. SINCE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNTS DESPITE REPEATED REQUESTS LD. AO ESTIMATED THE NET PROFIT @ 12% SUBJECT TO DEPRECIATION. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHERE LD. CIT(A) FOUND THAT BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE HIM ALSO, ATTRIBUTING IT TO BE LOST DUE TO FIRE. IN THESE CIRCUMSTANCES LD. CIT(A) UPHELD THE REJECTION OF BOOK RESULTS BY FOLLOWING OBSERVATIONS:- 4.12 THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUN T BEFORE ASSESSING OFFICER. ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 3 BEFORE ME ALSO NEITHER BOOKS OF ACCOUNTS NOR ANY OT HER SUPPORTING DOCUMENT (BILLS, VOUCHERS ETC) WERE PROD UCED, DESPITE GIVING ENOUGH OPPORTUNITIES. THEREFORE, REJECTION OF BOOKS OF ACCOUNT IS UPHEL D. ON MERITS ALSO, THE LD. CIT(A) REDUCED THE NET PROF IT RATE ADDITION FROM 12% TO 10% BY FOLLOWING OBSERVATION. 4.12. THE ASSESSING OFFICER APPLIED AN NET PROFIT RATE OF 12% SUBJECT TO DEPRECIATION. IN MY OPINION, IT WOULD BE FAIR IF AN N.P. RATE OF 10% SUBJECT TO DEPRECIATION IS APPLIED. THE ASSESSI NG OFFICER IS DIRECTED TO APPLY NET PROFIT RATE OF 10% SUBJECT TO DEPRECIATION THIS GROUND OF APPEAL IS, THEREFORE, PARTLY ALLOWED. 2.3 AGGRIEVED, THE ASSESSEE IS BEFORE US. 2.4 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE FACTS AND RELIED ON THE WRITTEN SUBMISSION FILED ALONG WITH PAPER BOOK AND CONTENDS THAT :- THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE AUDITOR CERTIFIED THEM TO BE TRUE AND FAIR. AFTER THE AUDIT , THE BOOKS OF ACCOUNT WERE LOST IN FIRE, AS SUCH THEY COULD NOT BE PRODUC ED BEFORE THE AO. THE BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY ON T HE GROUND THAT WERE NOT PRODUCED FOR THE PURPOSE OF EXAMINATION IN THE COURSE OF ASSESSMENT- ADDL. CIT VS. JAY ENGINEERING WORKS LTD . (1978) 113 ITR 389 (DEL); DCIT VS. SETALVAD BROTHERS (2004) 90 TTJ (AHD.) 193. THE REJECTION OF BOOKS OF ACCOUNT WERE NOT HELD TO BE JUSTIFIED WHERE ACCOUNT BOOKS COULD NOT BE PRODUCED BUT A STA TEMENT OF A ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 4 CERTIFIED PUBLIC ACCOUNT WAS FURNISHED CIT VS. AM ERICAN CONSULTING CORPORATION (1980) 123 ITR 513 (ORI.) THE MAXIMUM WORK DONE BY THE ASSESSEE IS OF A ROAD MAINTENANCE WHILE THE JUDGEMENT REFERRED TO BY THE LD ASSESSING OFFICER RELATES TO CIVIL WORK. FURTHER THE CONTRACT RECEIPTS OF THE ASSESSEE HAVE JUMPED FROM RS. 1,86,53,307/- LAST YE AR TO RS. 3,10,85,582/- THIS YEAR, REGISTERING A PHENOMENAL I NCREASE OF 67%. THE NP RATE TOO HAS GONE UP FROM 5.62% LAST YEAR TO 7.00% THIS YEAR. IF THE ASSESSEE FAILS TO SATISFY THE ITO AS TO THE CORRECTNESS OF THE PROFITS RETURNED BY HIM, IT IS OPEN TO THE ITO TO TAKE A HIGHER PERCENTAGE CONSISTENT WITH THE STATE OF TRADE IN TH E LOCALITY OR WITH ANY SPECIAL CIRCUMSTANCES OF THE A WHICH WARRANT HIGHER RATE OF PROFITS. HOWEVER, THE ITO MUST DISCLOSE THE BASIS AND MANNER OF COMPUTATION AND MAKE HIS ORDER A SPEAKING ORDER SETH NATHURAM MUNALAL VS. CIT [1954] 25 ITR 216 (NAG.) CIT VS. GUPTA K.N. CONSTRUCTION CO. (2015) 371 ITR 325 (RAJ.) ESTIMATE SHOULD BE BASED ON PAST HISTORY AND COMPAR ATIVE CASES. THIS COURT IN THE CASE OF CIT VS. INANI MARB LES (P) LTD. (2009) 316 ITR 125 (RAJ.) AND ALSO THE DELHI HIGH COURT IN THE CASE OF ACTION ELECTRICALS VS. DCIT (2002) 258 ITR 188 (DEL HI) HAVE OBSERVED THAT THE PAST HISTORY OF THE ASSESSEE WOUL D BE ONE OF THE RELIABLE GUIDELINES TO MAKE OR NOT TO MAKE ANY ESTI MATION/ ADDITION. WE HAVE ALREADY REFERRED TO HEREINABOVE HAT THE ASS ESSING OFFICER HAS FAILED TO BRING ON RECORD ANY COMPARABLE CASE S O AS O JUSTIFY ANY ESTIMATION/ ADDITION, THE ADDITION HAS BEEN DELETED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL AS UPH ELD BY THE INCOME-TAX (APPEALS) AS WELL AS UPHELD BY THE INCOM E-TAX APPELLATE TRIBUNAL. IT IS CONTENDED THAT ASSESSEE'S CURRENT GROSS PROFI T RATE WAS HIGHER THAN PRECEDING YEAR, THEREFORE, NO ESTIMATION OF INCOME OR ADDITION WAS CALLED FOR. ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 5 2.5 APROPOS SECOND GROUND, IT IS CONTENDED THAT THE ASSESSEE HAS EARNED INTEREST OF RS. 59,796/- ON BANK FDRS, WHICH WERE R EQUIRED FOR THE PURPOSE OF SECURITY AGAINST MARGIN MONEY FOR BANK GUARANTEE TO BE FURNISHED TO AWARDERS, EARNEST MONEY ETC WHICH WAS INTRINSICALLY LINKED WITH THE BUSINESS, CONSEQUENTLY THE INTEREST EARNED WAS BUSI NESS RECEIPT. THIS IS NOT A CASE WHERE THE ASSESSEE HAD UNUTILIZED SURPLUS FUND S WHICH WAS DEPOSITED WITH INTENTION TO EARN INTEREST. THE ACTIVITY WAS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE AND HAD INEXTRICABLE NEXUS FOR SECURI NG BUSINESS CONTRACTS. THE INTEREST SO EARNED IS BUSINESS RECEIPT, RELIANCE WA S PLACED AS UNDER:- (I) CIT VS. JAYPEE DSC VENTURES LTD. 355 ITR 132 (D EL.) (II) SHYAM BIHARI VS. CIT (2012) 345 ITR 284 (PATNA) (III) CHINNA NACHIMUTHU CONSTRUCTION 297 ITR 70 (K ARN) IT IS PLEADED THAT INTEREST INCOME BEING BUSINESS I NCOME, IF THE SAME IS ESTIMATED THEN ALTERNATIVELY SEPARATE ADDITION IN T HIS BEHALF AS INCOME FROM OTHER SOURCES SHOULD NOT BE MADE. 2.6 THE LD. DR ON THE OTHER HAND CONTENDS THAT THE CASES CITED BY THE ASSESSEE ARE DISTINGUISHABLE ON THE SIMPLE REASON T HAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT ON A LAME EXCUSE THAT BOOKS OF ACCOUNT WERE DESTROYED IN FIRE. NEITHER ANY FIR NOR ANY FIRE DEP ARTMENT EVIDENCE WAS ADDUCED TO SUPPORT THE CLAIM THAT THE BOOKS OF ACCO UNT WERE DESTROYED. IN ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 6 THESE CIRCUMSTANCES, THE CASE OF ASSESSEE CREATES A CLEAR SITUATION FOR DRAWING AN ADVERSE INFERENCE. ALL THE CASES LAWS CI TED BY THE ASSESSEE ARE DISTINGUISHABLE ON THIS FACT THAT THE ASSESSEE DID NOT AT ALL PRODUCE THE BOOKS OF ACCOUNT ON AN UNSUBSTANTIATED CLAIM THAT THEY WE RE DESTROYED IN FIRE. CONSEQUENTLY REJECTION OF BOOK RESULTS WAS INEVITAB LE FULLY JUSTIFIED. 2.7 APROPOS MERITS OF ESTIMATION, IT IS TRITE LAW T HAT ESTIMATE IS TO BE MADE BY THE REVENUE AUTHORITIES TAKING INTO CONSIDERATIO N THE PECULIARITIES OF THE FACTS OF THE EACH CASE. THE ASSESSEE'S CLAIM OF NON -PRODUCTION OF BOOKS OF ACCOUNT WAS FOUND TO BE TOTALLY WRONG AND MOTIVATED . IN THESE CIRCUMSTANCES, THE AO WAS LEFT WITH NO ALTERNATIVE BUT TO ESTIMATE BUISNESS @ 12% SUBJECT TO DEPRECIATION WHICH IS ALSO ACCEPTE D BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAIN ENTER PRISE. THE LD. CIT(A) TAKING A VERY LENIENT VIEW HAS REDUCED THE NP % FRO M 12% TO 10% WHICH IS ACCEPTED BY THE DEPARTMENT. 2.8 THE ASSESSEE HAS FAILED TO DEMONSTRATE IN THE F ACTS AND CIRCUMSTANCES OF THE CASE THAT REDUCTION OF ESTIMATE BY THE LD. C IT(A) IS IN ANY WAY UNJUSTIFIED OR ARBITRARY. IT HAS BEEN SETTLED BY CO URTS THAT ESTIMATE BY LOWER AUTHORITIES SHOULD NOT BE GENERALLY INTERFERED UNLE SS JUSTIFIABLE AND COMPELLING REASONS ARE DEMONSTRATED BY THE ASSESSEE IN THIS BEHALF ON THE CONTRARY ASSESSEE WANTS A PREMIUM ON WANTON MISDEME ANOR OF NON- ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 7 PRODUCTION OF ALLEGED AUDITED BOOKS OF ACCOUNTS. AS SESSEE HAS FAILED TO BRING ON ANY RECORD PARITY TO THE FACTS WITH THE CITED CA SE LAWS WITH ASSESSEE; IN THESE CIRCUMSTANCES THE ORDER LD. CIT(A) DESERVES T O BE UPHELD. 2.9 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. DR AS IT CLEARLY EMERGES THAT THE ASSESSEE COULD NOT SUBSTAN TIATE ITS CLAIM THAT THE AUDITED BOOKS OF ACCOUNTS WERE IN FACT DESTROYED IN ALLEGED FIRE RATHER THIS CLAIM RAISES MORE QUESTION THAN ANSWERS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, THE ESTIMATE OF BUSINESS INCOME WAS INEVITABLE. TAKING A LENIENT VIEW AOS ESTIMATE HAS BEEN ALREAD Y REDUCED FROM 12% TO 10% BY THE LD. CIT(A). THE CASE LAWS CITED HAVE NO PARITY OF THE FACTS AS IN NONE OF THE CITED CASES THE ASSESSEE WANTONLY AVOID ED PRODUCING ACCOUNT BOOKS. IN ASSESSEE'S CASE, NON-PRODUCTION OF BOOKS OF ACCOUNTS ARE WANTON AND IMPLIEDLY LEADS TO STRONG ADVERSE INFERENCE. AS SESSEE EXCEPT CITING CASES WHICH WE DONT FIND ON PARITY, HAS FAILED TO DEMONS TRATE AS TO HOW ESTIMATE MADE BY THE LD. CIT(A) IS ARBITRARY OR EXCESSIVE. C ONSEQUENTLY, WE SEE NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS U PHELD. THUS GROUND NO. 1 AND 2 OF THE ASSESSEE ARE DISMISSED. 2.10 APROPOS NEXT GROUND, WE FIND MERIT IN THE ARGU MENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FDRS IN QUESTION WERE PURCHASED FOR THE ITA NO. 189/JP/2013 SHRI BUVNESH DWIVEDI VS. ACIT CIRCLE- 1, KOTA 8 BUSINESS NECESSITY. IN VIEW OF THE DECISION OF HON' BLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAYPEE DSC VENTURES LTD. (SUPRA ) AND OTHER JUDGEMENTS MENTIONED ABOVE, WE HOLD THAT INTEREST INCOME IS PA RT OF BUSINESS INCOME; SINCE IT IS ALREADY ESTIMATED, THE INTEREST INCOME CANNOT BE TAXED SEPARATELY AS INCOME FROM OTHER SOURCES. THE SEPARATE ADDITION THIS BEHALF IS DELETED, LAST GROUND OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 /02/20 16. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 12 /02/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI BHUVNESH DWIVEDI, KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT , CIRCLE- 1, KOTA 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 189/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR