ACIT, Jaipur V. SOKHAL BUILDERS & CONSTRCTION PVT. LTD., Jaipur

ITA 190/JPR/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1983 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA; R A VERMA CIT LQUO
• Keywords: Unexplained cash credit; Bogus Share capital; Depreciation; Difference of opinion; Onus to prove; Change of opinion
• Section: 40A(3); 143(3); 37(1); 68; 69; 145; 263; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 128/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., 105, GANPATI ENCLAVE, CENTRAL SPINE, VIDHYADHAR NAGAR, JAIPUR. CUKE VS. THE COMMISSIONER OF INCOME - TAX, JAIPUR-II, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAKCS 4569 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 131/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., 105, GANPATI ENCLAVE, CENTRAL SPINE, VIDHYADHAR NAGAR, JAIPUR. CUKE VS. THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAKCS 4569 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 190/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-4, JAIPUR. CUKE VS. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., 105, GANPATI ENCLAVE, CENTRAL SPINE, VIDHYADHAR NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAKCS 4569 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT) & SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25.07.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27/07/2017. 2 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE ARE THREE APPEALS TWO APPEALS ARE FILED BY THE ASSESSEE AND ONE APPEAL BY THE REVENUE AGAINST THE ORDERS OF LD. CIT JAIPUR-II/CIT (APPEALS)-2, JAIPUR DATED 03.01.2014 AND 15.12.2014 PERTAINING TO ASSES SMENT YEAR 2010-11. ALL THESE APPEALS ARE BEING DISPOSED OFF FOR THE SAKE OF CONV ENIENCE. WE, FIRST TAKE UP THE ASSESSEES APPEAL IN ITA NO. 128/JP/2014 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (ADM.), JAIPUR-II, JAIPUR HAS GROSSLY ER RED IN PASSING THE IMPUGNED ORDER U/S 263 OF THE I.T. ACT, 1961 WITHOU T CONSIDERING THE SUBMISSIONS MADE AND THE FACTS ON RECORD, THUS THE IMPUGNED ORDER DESERVES TO BE QUASHED AND BE HOLD AS BAD IN LAW. 1.1. THAT THE LD. CIT (ADM.) HAS FURTHER ERRED IN IGNORI NG THE FACT THAT MISTAKE IN INVOKING THE PROVISIONS OF SECTION 69A B Y THE LD. AO IN PLACE OF SECTION 68 IS CURABLE U/S 292B OF THE INCOME TAX ACT, 1961 AND DOES NOT REQUIRE INVOKING THE PROVISIONS OF SECTION 263, THUS THE IMPUGNED ORDER DESERVES TO BE QUASHED. 1.2. THAT THE LD. CIT (ADM.) HAS FURTHER ERRED IN HOLDIN G THAT LD. AO HAS WRONGLY ALLOWED THE BENEFIT OF TELESCOPING OF THE A LLEGED UNEXPLAINED SHARE CAPITAL AND SHARE PREMIUM RECEIVED (AT RS. 72 ,50,000/-) DURING THE YEAR OUT OF THE TRADING ADDITIONS MADE TO THE T UNE OF RS. 83,32,254/- AND THEREBY HOLDING THE ASSESSMENT ORDE R PASSED U/S 143(3) AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS NEI THER ADMITTED THE TRADING ADDITION OF RS. 83,32,254/- NOR ADMITTED TH E SHARE CAPITAL AND SHARE PREMIUM CREDITS AS UNEXPLAINED CREDITS AND HA VE CHALLENGED THE SAME BEFORE THE LD. CIT (A) WHERE THE APPEAL IS STI LL PENDING FOR ADJUDICATION THUS SAME DOES NOT REQUIRE INVOKING TH E PROVISIONS OF SECTION 263. 3 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. 1.3. THAT THE LD. CIT (ADM.) HAS FURTHER ERRED IN IGNORI NG THE FACT THAT TRADING ADDITION OF RS. 83,32,254/- WAS MADE BY THE LD. AO BY DISALLOWING THE EXPENSES AFTER INVOKING THE PROVISI ONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 RESULTED INTO APPLYING G.P. RATE 13.58% AS AGAINST DECLARED G.P.@ 6.20% AND THE ADDITION U/ S 68 IN RESPECT OF SHARE APPLICATION MONEY AND SHARE PREMIUM STOOD COV ERED IN THE TRADING ADDITION MADE IN VIEW OF VARIOUS JUDICIAL D ECISION AND WHILE ALLOWING THE BENEFIT OF TELESCOPING THE LD AO HAS D ULY CONSIDERED THE ESTABLISHED PRECEDENTS AS PER HER OWN WISDOM THUS T HE ACTION OF THE LD. CIT (ADM.) BEING PURELY CHANGE OF OPINION DESER VES TO BE HOLD BAD IN LAW. 1.4. THAT THE LD. CIT (ADM.) HAS FURTHER ERRED IN IGNORI NG THE BINDING DECISION OF HONBLE JURISDICTIONAL HIGH COURT GIVEN IN CASE OF CIT V. TYARYAMAL BALCHAND (1987) 165 ITR 453 WHEREIN THE H ONBLE HIGH COURT HAS HELD THAT THE TRIBUNAL HAD COMMITTED NO E RROR OF LAW IN HOLDING THAT THE UNPROVED CASH CREDIT SHOULD BE TA KEN TO HAVE COME OUT OF INTANGIBLE ADDITIONS THUS THE ACTION OF THE LD. CIT (ADM.) IN HOLDING ORDER AS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE DESERVES TO BE HOLD BAD IN LAW. 2. THAT THE APPELLANT CRAVES THE RIGHT TO ADD, DELETE, AMEND OR ABANDON THE GROUND OF THIS APPEAL AT THE TIME OR BEFORE THE ACT UAL HEARING OF THE CASE. 2. THE APPEAL IS FILED AGAINST THE ORDER PASSED UND ER SECTION 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). ON THE LAST DATE OF HEARING I.E. 06.04.2017 THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS WITHDRAWN HIS POWER OF ATTORNEY. THE MATTER WAS FIXED FOR HEARIN G ON 29.05.2017. ON 29.05.2017 NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, A NOTICE WAS ISSUED TO THE ASSESSEE FIXING THE DATE OF HEARING ON 25 TH JULY, 2017. ON THE DATE OF HEARING ON 25.07.2017 ALSO NO ONE APPEARED ON BEHALF OF THE AS SESSEE NEITHER ANY APPLICATION IS FILED. THEREFORE, IT IS PRESUMED THAT THE ASSES SEE IS NOT INTERESTED IN PURSUING ITS APPEAL. UNDER THE CIRCUMSTANCES, RESPECTFULLY FOLL OWING THE JUDGMENT OF HONBLE 4 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. MADHYA PRADESH HIGH COURT IN THE CASE OF LATE SHRI TUKOJI RAO HOLKAR VS. CWT, 223 ITR 480 (MP) AND THE DECISION OF ITAT DELHI BENCHES IN THE CASE OF CIT VS. MULTIPLAN INDIA PVT. LTD. (1991) 38 ITD 320, WE DISMISS THE A PPEAL OF THE ASSESSEE AS ANNOUNCED IN THE OPEN COURT. 3. NOW WE TAKE UP THE CROSS APPEALS OF THE ASSESSEE AND REVENUE I.E. ITA NO. 131/JP/2015 AND 190/JP/2015 RESPECTIVELY. NO ONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE SENT TO THE ASSESSEE AT THE ASSESSEES ADDRESS. UNDER THESE FACTS, THE APPEALS ARE TAKEN UP FOR HEARING IN THE ABSENCE OF THE ASSESSEE. FIRST, WE TAKE UP REVENUES APPEAL IN ITA NO. 190/JP/2015. T HE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING DISALLO WANCE MADE OUT OF MATERIAL PURCHASE EXPENSES AMOUNTING TO RS. 46,28,8 44/-. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING DISALLO WANCE OUT OF LABOUR AND WAGES EXPENSES AMOUNTING TO RS. 32,88,398/-. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING DISALLO WANCE OUT OF VEHICLE EXPENSES AMOUNTING TO RS. 4,08,899/-. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING DISALLO WANCE OF RS. 6113/- OUT OF TELEPHONE EXPENSES. (V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DIRECTING TO APP LY NP RATE OF 8.76% ON THE TOTAL GROSS RECEIPTS BEFORE DEPRECIATION, IN TEREST AND WCT AND DIRECTED TO DELETE THE DISALLOWANCE MADE ABOVE. (VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING ADDITIO N OF RS. 12,50,000/- OUT OF TOTAL ADDITION OF RS. 62,50,000/- MADE ON AC COUNT OF UNEXPLAINED SHARE CAPITAL. 5 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. (VII) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING ADDITIO N OF RS. 1,45,800/- MADE ON ACCOUNT OF NON DEDUCTION OF TDS ON RENT PAY MENT LIABLE U/S 194 I OF THE ACT. (VIII) THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR AL TER ANY OF THE GROUNDS ON OR BEFORE HEARING. 4. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 28 TH MARCH, 2013. WHILE FRAMING THE ASSESSMENT, THE AO MADE TRADING ADDITION BY DISALLOWING THE EXPENSES AND ALTERNATIVELY MADE ADD ITION BY ADOPTING THE NP RATE @ 8.76%. THE AO FURTHER MADE ADDITION BY INVOKING TH E PROVISIONS OF SECTION 40 (A)(IA) FOR NON DEDUCTION OF TAX RS. 1,45,800/-. H ENCE THE AO COMPUTED THE INCOME AT RS. 1,56,00,600/- AGAINST THE INCOME DECLARED BY THE ASSESSEE AT RS. 71,22,550/-. AGAINST THIS, THE ASSESSEE HAS PREFERRED APPEAL BEF ORE LD. CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPE AL. WHILE PARTLY ALLOWING THE APPEAL, THE LD. CIT (A) RESTRICTED THE TRADING ADDI TION BY APPLYING NP RATE OF 8.76% ON THE GROSS RECEIPTS BEFORE DEDUCTION FOR DEPRECIA TION, INTEREST AND WCT AND ALSO DELETED THE ADDITION MADE ON ACCOUNT OF NON-DEDUCTI ON OF TAX. AGAINST THE ORDER OF LD. CIT (A), THE REVENUE AND ASSESSEE HAS PREFERRED THE APPEALS. 6 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. 5. IN THE ABSENCE OF A/R OF THE ASSESSEE, WE HAVE H EARD LD. D/R AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. IN RES PECT OF GROUNDS NO. (I) TO (V) ABOVE, THE AO HAS MADE THE ADDITIONS BY OBSERVING A S UNDER :- DURING THE YEAR, UNDER CONSIDERATION, THE ASSESSE E HAS INCURRED EXPENDITURE AMOUNTING TO RS. 10,84,75,677/- ON ACCO UNT OF PURCHASES OF MATERIAL INCLUDING BAJRI, GRIT, RODI ETC. OUT OF WHICH MATERIAL WORTH RS. 6,21,87,234/- WAS PROVIDED BY THE AWARDER I.E. BIRLA PUBLIC SCHOOL. THE BALANCE MATERIAL WORTH RS. 4,62,88,443/- WAS PU RCHASED BY THE ASSESSEE COMPANY. THE ASSESSEE WAS ASKED TO PRODUCE THE STOCK REGISTER AND INVENTORIES OF OPENING AND CLOSING STO CK. THE ASSESSEE ADMITTED THAT DAY TO DAY STOCK REGISTER WAS NOT MAI NTAINED. FURTHER THE ASSESSEE DID NOT PRODUCE INVENTORIES OF OPENING AND CLOSING STOCK. THUS NEITHER ANY DAY TO DAY REGISTER FOR RAW MATERI AL CONSUMED AND FINISHED STRUCTURE IS MAINTAINED NOR ANY DETAILS OF MATERIAL PURCHASED AND CONSUMED DURING THE YEAR. BESIDES, THE ASSESSEE HAS NOT MAINTAINED THE VOUCHERS FOR STONE, GRIT, SAND, BRIC KS, BINDING WIRES ETC. GENERALLY INTERNAL BILLS HAVE BEEN MAINTAINED FOR T HESE MATERIALS. MOST OF THESE EXPENSES ARE UNVOUCHED FOR WHICH CASH PAYM ENTS HAVE BEEN MADE. IN ABSENCE OF NECESSARY DETAILS IN RESPECT OF PURCHASES & CONSUMPTION OF RAW MATERIAL THE EXPENSES CLAIMED BY THE ASSESSEE AS INCURRED ON PURCHASE OF RAW MATERIAL ARE NOT VERIFI ABLE. THEREFORE, AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE, 10% OF THESE EXPENSES AMOUNTING TO RS. 46,28,844/- ARE DIS ALLOWED AS UNVERIFIABLE EXPENDITURE BEING VERY JUST AND REASON ABLE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SAME IS THE POSITION WITH EXPENSES ON ACCOUNT OF LA BOUR AND WAGES. THE ASSESSEE HAS DEBITED RS. 3,28,83,984/- AS EXPEN SES ON ACCOUNT OF LABOUR CHARGES IN ITS P & L ACCOUNT. THE ASSESSEE V IDE ITS REPLY DATED 10.07.2012 HAS ADMITTED THAT THEY DO NOT HAVE WAGE REGISTER AND MUSTER ROLLS OF THE PROJECTS BUT MAINTAIN LABOUR SH EET FOR PAYMENT OF LABOUR CHARGES ON MONTHLY BASIS. THESE RECORDS ARE TEMPORARILY MAINTAINED AT WORK SITES OF THE ASSESSEE. MOST OF T HE LABOURS ARE OF CASUAL NATURE AND SUBJECT TO CHANGE ON REGULAR BASI S SO THE DETAILED ADDRESSES ARE NOT KEPT IN THE RECORD. THUS THESE EX PENSES ARE NOT SUBJECT TO PROPER VERIFICATION. IT IS ALSO FOUND TH AT FOR THE EXPENSES VIZ LABOUR AND WAGES, THE ASSESSEE HAS MAINTAINED CASH BILLS AND INTERNAL VOUCHERS AGAINST WHICH THE CASH PAYMENTS HAVE BEEN MADE. FURTHER PART OF THESE EXPENSES ARE UNVOUCHED AS WELL. IN VI EW OF THE ABOVE FACTS, THE WAGE EXPENSES ARE NOT COMPLETELY VERIFIA BLE. THEREFORE, AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE 10% OF THESE EXPENSES AMOUNTING TO RS. 32,88,398/- ARE DISALLOWE D AS UNVERIFIABLE 7 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. EXPENDITURE BEING VERY JUST AND REASONABLE AND ADDE D BACK TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER IT HAS BEEN NOTICED THAT SOME OF THE EXPENS ES HAVE BEEN CLAIMED ON HIGHER SIDE IN COMPARISON TO THE IMMEDIA TELY PRECEDING YEAR AND THAT SOME EXPENSES CLAIMED IN INCOME AND E XPENDITURE ACCOUNT ARE NOT FULLY VOUCHED AND ARE NOT VERIFIABL E. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DEBITED THE F OLLOWING EXPENSES IN THE P & L ACCOUNT AS BEING INCURRED ON THE RUNNI NG AND MAINTENANCE OF THESE VEHICLES :- A. POWER AND FUEL RS. 17,86,544/- B. CAR REPAIRING RS. 1,65,419/- C. CAR INSURANCE CHARGES RS. 35,347/- D. DEPRECIATION ON CAR RS. 57,189/- TOTAL : RS.20,44,499/- THESE EXPENSES WERE CLAIMED TO HAVE BEEN INCURRED O N RUNNING AND MAINTENANCE OF THE ABOVE VEHICLES BEING USED FOR BU SINESS PURPOSE. NO LOG BOOK HAS BEEN MAINTAINED FOR THE ABOVE VEHIC LES. THE ASSESSEE DOES NOT HAVE ANY OTHER VEHICLE FOR HIS PERSONAL US E. IN SUCH CIRCUMSTANCES, THE PERSONAL USE OF THE VEHICLES EIT HER BY THE PARTNERS OF THE ASSESSEE FIRM OR THEIR FAMILY MEMBERS CANNOT BE DENIED WHICH IS NOT ALLOWABLE U/S 37(1) OF I.T. ACT. THEREFORE, AFT ER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE 20% OF THESE EX PENSES INCLUDING PROPORTIONATE DISALLOWANCES ON ACCOUNT OF REPAIRS O N VEHICLES AND DEPRECIATION ETC. AMOUNTING TO RS. 4,08,899/- ARE D ISALLOWED AS UNVERIFIABLE EXPENDITURE BEING VERY JUST AND REASON ABLE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS DEBITED EXPENSES OF RS. 61,133/- IN THE P & L ACCOUNT UNDER THE HEAD OF TELEPHONE. THE ASSESSEE DOES NOT MAINTAIN ANY CALL REGISTER. ON THE PERUSAL OF THE BILLS AND VOUCHERS FOR THESE EXPENSE S, IT WAS FOUND THAT THE ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF TEL EPHONES INSTALLED AT THE RESIDENCES OF THE PARTNERS AS WELL. IN SUCH CIRCUMSTANCES, THE PERSONAL USE OF THE TELEPHONE EITHER BY THE PARTNER S OF THE ASSESSEE FIRM OR THEIR FAMILY MEMBERS CANNOT BE DENIED WHICH IS NOT ALLOWABLE U/S 37(1) OF I.T. ACT. THEREFORE, AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, 10% OF THESE EXPENSES AM OUNTING TO RS. 6,113/- IS DISALLOWED AS UNVERIFIABLE EXPENDITURE B EING VERY JUST AND REASONABLE AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. THOUGH THE DISALLOWANCES IN EXPENSES HAVE BEEN MADE INDIVIDUALLY AS ABOVE, BUT ALTERNATIVELY IF THE NET PROFIT IS TO BE TAKEN THEN IT IS WORKED OUT AT RS.1,55,28,425/- @ 8.76% AS AGAOMST RS/ 71,9 6,171/- DECLARED 8 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. BY THE ASSESSEE, WHICH RESULTS INTO AN ADDITION OF RS. 83,32,254/- (RS.1,55,28,425 RS. 71,96,171/-). 6. AFTER GOING THROUGH THE ORDER OF THE LD. CIT (A) , WE FIND THAT THE LD. CIT (A) WHILE DEALING WITH THE GROUND NO. 12 IN RESPECT ADD ITION ON ACCOUNT OF NP RATE OF 8.76% APPLIED BY THE AO, HAS ALSO CONSOLIDATED THE GROUNDS NO. 1 TO 4 OF THE ASSESSEES APPEAL IN RESPECT OF ADDITION ON ACCOUNT OF PURCHASE OF BAJRI, GRID, RODI, ADDITION ON ACCOUNT OF LABOUR & WAGES, ADDITION ON ACCOUNT OF POWER AND FUEL, CAR REPAIRING, CAR INSURANCE, DEPRECIATION ON CAR AND A DDITION ON ACCOUNT OF TELEPHONE EXPENSES AND DECIDED THE GROUNDS IN FAVOUR OF THE A SSESSEE BY DIRECTING THE AO TO DELETE THE ADDITIONS BY OBSERVING IN PARA 4.4 OF HI S ORDER AS UNDER :- 4.4. I HAVE PERUSED THE FACTS OF THE CASE, THE A SSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IT HAS BEEN STATE D BY THE ASSESSING OFFICER THAT AFTER DISALLOWANCES OF MATERIAL EXPENS ES LABOUR AND WAGES, VEHICLE AND TELEPHONE EXPENSES, THE NET PROFIT AMOU NTS TO 8.76% OF THE GROSS RECEIPTS WHICH IS REASONABLE IN VIEW OF T HE JUDGEMENT OF ITAT, JAIPUR IN THE CASE OF CHOUDHARY & BROTHERS WH EREIN A NET PROFIT RATE OF 11.5% WAS SUSTAINED. THE APPELLANT HAS STA TED THAT ITS NET PROFIT FOR THE YEAR IS 4.06% WHICH IS COMPARABLE TO THE RECEDING YEARS. IT HAS ALSO BEEN STATED THAT THE CASE OF CHOUDHARY & BROTHERS IS NOT COMPARABLE BECAUSE THAT CONCERN WAS A GOVERNMENT CO NTRACTOR WHEREAS THE APPELLANT IS A CONTRACTOR FOR PRIVATE P ARTIES. ALSO IN THE CASE OF CHOUDHARY & BROTHERS, THE ITAT HAS TAKEN NO TE OF THE PAST HISTORY. THE APPELLANT HAS ALSO STATED THAT ITS NET PROFIT BEFORE DEPRECIATION, INTEREST AND WCT AMOUNTS TO 7.52% OF THE GROSS RECEIPTS WHICH IS REASONABLE. LOOKING TO THE DEFECTS POINTED OUT BY THE ASSESSING OFFICER AND THE FACT THAT NET PROFIT OF T HE APPELLANT IS ON THE LOWER SIDE, IN MY VIEW IT WOULD BE REASONABLE TO ES TIMATE THE NET PROFIT AT 8.76% OF THE GROSS RECEIPTS BEFORE DEDUCTION FOR DEPRECIATION, INTEREST AND WCT. THE ASSESSING OFFICER IS DIRECTED TO ADD THE ABOVE AMOUNT AS TRADING ADDITION IN THE CASE OF THE APPEL LANT AND DELETE THE AD-HOC DISALLOWANCES OUT OF EXPENSES, AS DISCUSSED ABOVE. THIS GROUND IS PARTLY ALLOWED. 9 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. IN THE LIGHT OF ABOVE OBSERVATIONS, WE FIND NO REAS ON TO INTERFERE IN THE ORDER OF LD. CIT (A), WHICH IS HEREBY UPHOLD. GROUND NOS. (I) T O (V) ARE DISPOSED OFF ACCORDINGLY. 7. IN RESPECT OF GROUND NO. (VI), THE LD. CIT (A) H AS DISCUSSED THE ISSUE AT GREAT LENGTH AND PARTLY DECIDED THE GROUND BY OBSERVING A S UNDER :- 5.4.2. THE APPELLANT HAS STATED THAT IT HAS DISCH ARGED ITS ONUS WITH RESPECT TO THE SHARE CAPITAL CREDITED IN ITS BOOKS BY PRODUCING SIX OF THE TWELVE SHARE HOLDERS. ALSO, IT HAS POINTED OUT THAT THE ASSESSING OFFICER HAS WRONGLY INVOKED THE PROVISIONS OF SECTI ON 69A. THIS CONTENTION OF THE APPELLANT IS CORRECT. THE PROVISI ON TO BE INVOKED IS SECTION 69 AND NOT SECTION 69A. THE APPELLANT HAS F URNISHED RETURNS OF INCOME OF THE THREE DIRECTORS. IT HAS CITED CASE LA WS STATING THE LEGAL POSITION WITH RESPECT TO ADDITIONS IN THE CASES OF UNEXPLAINED SHARE CAPITAL. THE APPELLANT HAS STATED THAT ALL SHARE HO LDERS HAVE ACCEPTED HAVING GIVEN MONEY FOR THE SHARES. THIS IS NOT CORR ECT BECAUSE SOME SHARE HOLDERS VIZ SHRI KARTARAM PRAJAPAT HAVE DENIE D HAVING GIVEN ANY MONEY FOR THE SHARE CAPITAL. 5.4.3. THE RATIO OF THE VARIOUS CASE LAWS CITED BY THE APPELLANT IS THAT THE BURDEN OF PROOF WITH RESPECT TO SHARE APPLICATI ON MONEY RECEIVED THROUGH BANKING CHANNELS LIES ON THE ASSESSEE ONLY TO THE EXTENT OF PROVING THE IDENTITY OF THE SHARE APPLICANT. ONCE T HE EXISTENCE OF THE SHARE APPLICANT IS PROVED, THE BURDEN SHIFTS TO THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE ITS ELF (SHREE BARKHA SYNTHETICS LTDF.(2006) 155 TAXMAN 289 (RAJ.). IN T HIS CASE, THE APPELLANT HAS RECEIVED THE SHARE APPLICATION MONEY IN CASH. THEREFORE, THE CASE OF THE APPELLANT IS ON A MUCH WEAKER GROUN D AS COMPARED TO THE FACTS IN THE CASES, CITED IN THE CASE LAWS. TH E APPELLANT HAS NOT DISCHARGED HIS ONUS WITH RESPECT TO THE IDENTITY OF THE SHARE APPLICANTS WHO HAVE GIVEN SHARE APPLICATION MONEY TO THE APPLI CANT IN CASH, AND WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. THE APPELLANT HAS DISCHARGED HIS ONUS WITH RESPECT TO IDENTITY ONLY W ITH RESPECT TO THOSE SHARE HOLDERS WHICH IT PRODUCED AND WHO ADMITTED TO HAVE APPLIED FOR THE SHARES. THEREAFTER THE ONUS HAS SHIFTED TO REVE NUE WHICH HAS MADE A CASE THAT THE SOURCE OF THIS SHARE APPLICATI ON MONEY IS NOT EXPLAINED AND THEREFORE, IT APPEARS TO HAVE BEEN GI VEN BY THE APPELLANT. MERELY PROVING THE IDENTITY OF THE SHARE APPLICANTS WHO HAVE GIVEN MONEY THROUGH CASH WILL NOT SUFFICE IN SUCH A SITUATION. THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY SATISFACT ORY EXPLANATION TO COUNTER THE FINDINGS OF THE ASSESSING OFFICER THAT THE SOURCE OF THE SHARE APPLICATION MONEY HAS NOT COME FROM THE SHARE APPLICANT, BUT FROM THE ASSESSEE. 10 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. 5.4.4. ALL THE SHARE HOLDERS HAVE SUBSCRIBED TO THE SHARE CAPITAL MOSTLY IN CASH. ON THE BASIS OF THE STATEMENT RECORDED, IT HAS BEEN HELD THAT SHRI KARTARAM PRAJAPAT, SHRI ANNA RAM, SHRI PAWAN K UMAR AND SHRI NAND LAL SOKHAL HAVE NOT INVESTED THEIR MONEY IN TH E SHARE CAPITAL OF THE APPELLANT COMPANY. THEREFORE, IT IS CLEAR THAT THE APPELLANT COMPANY HAS ROUTED ITS MONEY IN THE FORM OF SHARE C APITAL IN THE CASES OF THESE PERSONS. ALSO, THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE SIX SHARE HOLDERS WHO ARE AGRICULTURALISTS AND HAVE INV ESTED IN THE SHARE CAPITAL IN CASH. IN THESE CASES ALSO, IT IS HELD TH AT THEY HAVE NOT INVESTED THEIR MONEY IN THE SHARE CAPITAL OF THE AP PELLANT COMPANY AND THE APPELLANT COMPANY HAS ROUTED ITS MONEY IN THE F ORM OF SHARE CAPITAL IN THE CASES OF THESE PERSONS. THE ASSESSIN G OFFICER HAS NOT BEEN ABLE TO DRAW ANY ADVERSE INFERENCE IN THE CASE OF SHRI RAM GOPAL SOKHAL (WHO HAS SUBSCRIBED TO SHARE CAPITAL OF RS. 6,25,000/-) AND SHRI SHARWAN KUMAWAT WHO HAS SUBSCRIBED TO SHARE CAPITAL OF RS. 6,25,000/-). SHARE CAPITAL, AMOUNTING TO RS. 12,50 ,000/- FROM THESE TWO PERSONS WHO ARE ALSO DIRECTORS IN THE APPELLANT COMPANY IS HELD TO BE EXPLAINED. THEREFORE, FINDING OF THE ASSESSING O FFICER IN TREATING UNEXPLAINED SHARE CAPITAL TO THE EXTENT OF RS. 12,5 0,000/- IN THE CASES OF SHRI RAM GOPAL SOKHAL AND SHRI SHARWAN KUMAWAT I S NOT SUSTAINED WHILE THE FINDING OF THE ASSESSING OFFICER TREATING THE BALANCE AMOUNT OF RS. 50,00,000/- AS UNEXPLAINED SHARE CAPITAL INT RODUCED IN THE NAMES OF THE OTHER TEN SHARE HOLDERS IS SUSTAINED. THIS GROUND IS PARTLY ALLOWED. WITH THE ABOVE OBSERVATIONS OF THE LD. CIT (A), WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A), WHICH IS HEREBY AFFIRMED. THE GROUND O F THE REVENUE IS REJECTED. 8. IN RESPECT OF GROUND NO. (VII) REGARDING DELETIO N OF ADDITION OF RS. 1,45,800/- MADE ON ACCOUNT OF NON DEDUCTION OF TDS ON RENT PAY MENT LIABLE U/S 194-I, THE LD. CIT (A) AFTER DISCUSSING THE ISSUE IN DETAIL AND PL ACING RELIANCE IN THE CASE OF CIT (CENTRAL) LUDHIANA VS. SMT. SANTOSH JAIN (2007) 159 TAXMAN 392 (P&H) DELETED THE ADDITION BY OBSERVING AS UNDER :- 6.3.1. I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THIS IS A CASE WH ERE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AND THE NET PROFIT HAS BEEN ESTIMATED. THEREAFTER, THE ASSESSING OFFICER HAS DISALLOWED EX PENDITURE U/S 11 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. 40(A)(IA). THE APPELLANT HAS STATED THAT NO FURTHER DISALLOWANCE CAN BE MADE AFTER ESTIMATING THE NET PROFIT IN VIEW OF VAR IOUS DECISIONS OF THE COURTS. I HAVE PERUSED THE CASE LAWS CITED THE APPE LLANT. IN THE CASE OF COMMISSIONER OF INCOME-TAX (CENTRAL), LUDHIANA V. S MT. SANTOSH JAIN (2007) 159 TAXMAN 392 (PUNJ. & HAR.), IT HAS BEEN H ELD AS UNDER SECTION 40A(3) OF THE INCOME-TAX ACT, 1961 BUSI NESS DISALLOWANCE CASH PAYMENT EXCEEDING PRESCRIBED LIMITS WHETHE R WHEN INCOME OF ASSESSEE WAS COMPUTED BY APPLYING GROSS PROFIT R ATE, PROVISIONS OF SECTION 40A(3) COULD NOT INVOKED HELD, YES. 6. WE ARE OF THE VIEW THAT WHEN INCOME OF THE ASSES SEE WAS COMPUTED BY APPLYING GROSS PROFIT RATE, THERE W AS NO NEED TO LOOK INTO THE PROVISIONS OF SECTION 40A(3) OF THE ACT, A S APPLYING THE GROSS PROFIT RATE TAKES CARE OF EXPENDITURE OTHERWISE BY WAY OF CROSS CHEQUE ALSO. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY T HE ALLAHABAD HIGH COURT IN BANWARI LAL BANSHIDHARS CASE (SUPRA) TO T HE FOLLOWING EFFECT :- THE QUESTION FOR CONSIDERATION IS WHEN NO DEDUCT ION WAS SOUGHT AND ALLOWED UNDER SECTION 40A(3), WAS THERE ANY NEED TO GO INTO SECTION 40A(3)L AND RULE 6DD(J). WE SEE FORCE IN THE VIEW TAKEN BY THE APPELLATE TRIBUNAL THAT WHEN THE INCOME OF THE ASSESSEE WAS COMPUTED APPLYING THE GROSS PROFIT RATE AND WHEN NO DEDUCTION WAS ALLOWED IN REGARD TO THE PURC HASES OF THE ASSESSEE, THERE WAS NO NEED TO LOOK INTO THE PR OVISIONS OF SECTION 40A(3) AND RULE 6DD(J). NO DISALLOWANCE COU LD HAVE BEEN MADE IN VIEW OF THE PROVISIONS OF SECTION 40A( 3), READ WITH RULE 6DD(J) AS NO DEDUCTION WAS ALLOWED TO AND CLAI MED BY THE ASSESSEE IN RESPECT OF THE PURCHASES. WHEN THE GROS S PROFIT IS APPLIED THAT WOULD TAKE CARE OF EVERYTHING AND THER E WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSEE. IN THE CASE OF INDWELL CONSTRUCTIONS V. COMMISSIONE R OF INCOME-TAX (1998) 232 ITR 776 (AP) IT HAS BEEN HELD THAT THE PATTERN OF ASSESSMENT UNDER THE ACT IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BU SINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINE D IN SECTIONS 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENE RALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAI NTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLET E, THE ASSESSING OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INC OME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS I N SUBSTITUTION OF 12 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. THE INCOME THAT IS TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECT ION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH A N ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 4 0 IS ALSO TAKEN INTO ACCOUNT. 6.3.2. IN THE ABOVE JUDGMENTS, IT HAS BEEN HELD THA T WHEN GROSS PROFIT OR NET PROFIT HAS BEEN ESTIMATED AFTER REJECTING TH E BOOKS OF ACCOUNTS NO FURTHER (STATUTORY) DISALLOWANCES CAN BE MADE SI NCE THE INCOME OF THE ASSESSEE (AFTER TAKING INTO CONSIDERATION THE E XPENDITURE DEBITED IN THE BOOKS OF ACCOUNTS, HAS BEEN SUBSTITUTED BY AN E STIMATE OF THE ASSESSING OFFICER. THIS ESTIMATE SUBSUMES THE ADMIS SIBILITY OR INADMISSIBILITY OF THE EXPENDITURE CLAIMED. FOLLOWI NG THE ABOVE JUDGMENTS, THE DISALLOWANCE U/S 40(A)(IA) MADE BY T HE ASSESSING OFFICER IS DIRECTED TO BE DELETED. THIS GROUND IS A LLOWED. TAKING INTO CONSIDERATION THE ABOVE FINDINGS OF LD. CIT (A), WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT (A), WHICH IS HER EBY AFFIRMED. THE GROUND OF THE REVENUE IS REJECTED. ITA NO. 131/JP/2015 (ASSESSEE) : 9. THE GROUNDS TAKEN BY THE ASSESSEE IN THIS APPEAL ARE IDENTICAL TO THE GROUNDS RAISED IN THE REVENUES APPEAL IN ITA NO. 190/JP/20 15. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE, THEREFORE, ON THE IDENTICAL GROUNDS IN THE ASSESSEES GROUNDS HAVE BECOME INFRUCTUOUS AND THE APPEAL IS DISMISSED . 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AS WELL AS APPEAL OF THE REVENUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.07.20 17. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 27/07/2017. DAS/ 13 ITA NOS. 128/JP/14, 131 & 190/JP/15. M/S. OM SOKHAL BUILDERS & CONSTRUCTIONS PVT. LTD., JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. OM SOKHAL BUILDERS & CONSTR UCTIONS PVT. LTD., JAIPUR. 2. THE RESPONDENT THE ACIT, CIRCLE-4, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 128(3)/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR