Shri Lal Chand Choudhary, JODHPUR V. ACIT, BARMER

ITA 191/JODH/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1561 (ITAT-JODHPUR)
• Duration Of Justice: 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: U C JAIN
• Keywords: Business income; Depreciation; Rule of consistency
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 191/JU/2012 (ASSESSMENT YEAR 2008-09) SHRI LAL CHAND CHOUDHARY VS ACIT, CIRCLE-1 S/O SHRI LAKHA RAM CHOUDHARY BARMER P/O M/S MOHANGARH CONSTRUCTION JAISALMER PAN NO. AAOPC 6671 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN DEPARTMENT BY : SH. A.K. KHANDELWAL, CIT(DR). DATE OF HEARING : 21/02/2013. DATE OF PRONOUNCEMENT : 07/03/2013. PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2008-09 IS DI RECTED AGAINST THE ORDER OF LD. CIT(A) DATED 16/03/2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE CIVIL CONTRACT WORK WHICH HE USUALLY GETS FROM PRIVATE COMPANIES LIKE ENERCON INDIA LT, LARSEN AND TUBRO L TD, RISHAB TELENIC, ETC. DURING THE YEAR UNDER CONSIDERATION, THE ASS ESSEE HAS DECLARED A 2 GROSS PROFIT RATE OF 10.20% AS COMPARED TO 15% DECL ARED IN THE IMMEDIATELY PRECEDING YEAR. THE A.O. HAS NOTICED T HAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER FOR THE MATERIAL CO NSUMED ON THE DAY- TO-DAY BASIS. HE HAS ALSO NOT MAINTAINED PROPER VO UCHERS FOR THE EXPENSES, INTER ALIA. ACCORDINGLY, THE BOOKS OF AC COUNT OF THE ASSESSEE WERE REJECTED AND PROVISIONS OF SECTION 145(3) INVO KED. IN THE ASSESSMENT ORDER MADE U/S 143(3) ON 24.12.2010 VARI OUS ADDITIONS ARE MADE AND TOTAL INCOME HAS BEEN COMPUTED AT RS. 3,49 ,53,380/-. AGGRIEVED, BY THESE ADDITIONS THE ASSESSEE FILED FI RST APPEAL AND THE LD. CIT(A) HAS DELETED SOME OF THE ADDITIONS. BUT, BEI NG NOT SATISFIED, THE ASSESSEE HAS COME IN SECOND APPEAL AGAINST THE SUSTAINED ADDITIONS. 3. AT THE TIME OF HEARING, THE APPELLANTS AUTHORIZ ED REPRESENTATIVE, SHRI U.C. JAIN, THE LD. ADVOCATE CH OSE NOT TO PRESS GROUND NO. 1. THEREFORE, THIS GROUND STANDS DISMISS ED AS NOT PRESSED. 4. FACTS OF SECOND GROUND ARE THAT THE A.O. HAS DIS ALLOWED PORTION OF EXPENDITURE CLAIMED IN THE BUSINESSES CARRIED UN DER THE FOLLOWING NAMES: 3 A. M/S L.R. FILLING STATION, JAISALMER OF RS. 30,0 00/- B. M/S NAVEEN TRACTOR, JAISALMER OF RS. 1,00,000/- BOTH THESE DISALLOWANCES ARE MADE ON ACCOUNT OF NON -MAINTENANCE OF PROPER VOUCHERS/BILLS FOR VARIOUS EXPENSES AND BECA USE FULL RECORD OF THE EXPENSES DID NOT TALLY WITH THE CLAIM OF THE AS SESSEE. HOWEVER, A.O. HAS MADE A LUMPSUM DISALLOWANCE OUT OF THE TOT AL EXPENSES CLAIMED. THE LD. CIT(A) HAS REDUCED THEM TO RS. 50 ,000/- ADDITION MADE ON RS. 1 LAKH IN THE CASE OF M/S NAVEEN TRACTO R, JAISALMER. BUT HE HAS MAINTAINED THE DISALLOWANCE IN M/S L.R. FILL ING STATION AT RS. 30,000/-. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND IN T HE LIGHT OF RECORDS AVAILABLE BEFORE US, WE HAVE FOUND THAT THESE DISAL LOWANCES ARE ADHOC AND VAGUE IN NATURE. BUT KEEPING IN VIEW THE FACT THAT THESE EXPENSES ARE NOT PROPERLY VOUCHED, WE REDUCE THE EXPENSES FU RTHER BY SUSTAINING ADDITION IN THE CASE OF M/S L.R. FILLING STATION AT RS. 10,000/- AND IN THE CASE OF M/S NAVEEN TRACTOR AT R S. 20,000/-. THUS, OUT OF TOTAL ADDITION SUSTAINED BY THE LD. CIT(A) I N BOTH BUSINESS AT RS. 80,000/-, WE SUSTAIN THE ADDITION OF RS. 30,000/- A ND PARTLY ALLOW THIS GROUND. 4 6. FACTS APROPOS GROUND NOS. 3 AND 4 WHICH ARE INTE RCONNECTED, ARE THAT THE ASSESSEE HAS BEEN CARRYING ON THE CONTRACT BUSINESS IN THE NAME AND STYLE OF M/S MOHAN CONSTRUCTION COMPANY. IN THE ORIGINAL GROUND THERE WAS A CLERICAL ERROR WHICH HAS BEEN RE VISED BECAUSE THE FIGURE OF ADDITION SUSTAINED AS PER THE LD. A.R./AS SESSEE IS RS. 36,04,876/- AND NOT RS. 26,25,393/-. DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE HAS DECLARED GROSS PROFI T RATE OF 10.20% IN RESPECT OF BUSINESS CONDUCTED IN THE NAME OF M/S MO HAN CONSTRUCTION CO. WHICH IS FOUND TO BE LOWER AS COMPARED TO 15% D ISCLOSED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. HOWEVER, AFT ER REJECTING THE BOOKS OF ACCOUNT ON VARIOUS GROUNDS STATED IN THE E ARLIER PART OF THIS ORDER, THE A.O. HAS APPLIED A NET PROFIT RATE OF 12 .50% FURTHER SUBJECT TO DEPRECIATION AND INTEREST TO THIRD PARTIES. ALT HOUGH THE ASSESSEE HAS NOT DISPUTED THE REJECTION OF BOOKS OF ACCOUNT BUT HAS VEHEMENTLY CONTESTED ADDITION MADE AND SUSTAINED IN THIS ACCOU NT. IT WAS SUBMITTED THAT THERE CANNOT BE UNIFORMITY IN THE MA RGIN OF PROFIT FROM THE YEAR-AFTER-YEAR AS THE RATE OF PROFIT EARNED BY THE ASSESSEE DEPENDED ON VARIOUS FACTORS INCLUDING HUGE INCREASE IN THE TURNOVER. IT WAS ARGUED THAT EVEN AFTER A FALL IN THE GROSS PROF IT RATE THE NET PROFIT RATE IS BETTER IN THE YEAR, SO NO ADDITION IS WARRA NTED. HE ALSO ATTRIBUTED FALL IN GROSS PROFIT RATE TO FIRST TIME INTRODUCTION OF ENTRY TAX 5 WHICH IS RS. 9,69,454/- IN THIS YEAR. TO JUSTIFY T HIS POSITION HE HAS RELIED ON VARIOUS DECISIONS, WHICH ARE AS UNDER: A. 259 ITR 78 [JODHPUR] B. JAIN CONSTRUCTION CO. VS. ACIT, CIRCLE BARMER ITA NO. 532/JU/2010 C. 69 ITR 366 STEEL WORTH LTD. VS. CIT [ASAM] D. 72 ITR 328 VENKANNA VS. CIT [MYSORE] 7. ON THE OTHER HAND, THE LD. D.R. HAS SUPPORTED TH E ORDER OF THE LD. CIT(A) AND HAS FURTHER SUBMITTED THAT THE ASSES SEE HAS NOT CHALLENGED THE REJECTION OF THE BOOKS AND APPLICATI ON OF THE GROSS PROFIT RATE U/S 145(3), SO HE CANNOT QUESTION ON TH IS ADDITION. 8. WE HAVE CAREFULLY PERUSED THE ENTIRE RECORD. WE HAVE ANALYZED THE FACTS OF THIS CASE VIS-A-VIS THE LEGAL POSITION ON THIS ISSUE. IT IS FOUND THAT THE A.O. AFTER REJECTING THE BOOKS OF AC COUNTS US/ 145(3) AND BY ADOPTING A N.P. RATE OF 12.5% HAS MADE ADDIT IONS IN THE TRADING RESULTS OF ASSESSEES BUSINESSES CARRIED UNDER BOTH THE NAMES I.E., IN M/S. MOHANGARH CONSTRUCTION COMPANY OF RS. 26,25,39 3/-. THE LD. CIT(A) HAS ALSO SUSTAINED THESE ADDITIONS. 6 9. AFTER HEARING BOTH SIDES WE HAVE NOTICED THAT G. P. RATE DISCLOSED IN THIS YEAR IS SLIGHTLY LOW AS COMPARED TO THE IMM EDIATELY PRECEDING YEAR BUT N.P. RATE HAS INCREASED. THE COMPARATIVE P OSITION OF THESE RATES CAN BE EASILY CAPTURED FROM THE FOLLOWING CHA RT :- CHART OF G.P. FOR THE LAST FOUR YEARS A.Y. GROSS RECEIPTS G.P. G.P. RATE NET PROFIT N.P. RATE 2005 - 06 146100246.00 14934095.00 10.22% 8610081.00 5.89% 2006 - 0 7 70388982.00 7521542.00 10.69% 4636778.00 6.59% 2007 - 08 40246198.00 6155118.00 15.00% 2236893.00 5.56% 2008 - 09 114390319.00 10653914.00 09.32% 7561682.00 5.72% FROM THE ABOVE IT BECOMES EVIDENT THAT THERE IS SLI GHT FALL IN G.P. RATE BUT THERE IS SLIGHT INCREASE IN THE N.P. RATE AS CO MPARED TO IMMEDIATELY PRECEDING YEARS, WHEREAS THE TURNOVER H AS TREMENDOUS BY INCREASED MANIFOLDS IN THE YEAR AS COMPARED TO THE EARLIER YEAR. IT IS ALSO FOUND THAT NO DEFECT MUCH LESS ANY MATERIAL DE FECT HAS BEEN POINTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED REGULARLY DURING THE COURSE OF BUSINESS. NO MATTER WHAT IF THE ASSESSEE HAS NOT CHALLENGED REJECTION OF THE BO OKS OF ACCOUNTS, BUT THE A.O. HAS NOT DISTURBED THE FIGURES OF TURNOVER ETC, WHICH ARE VITAL FOR ARRIVING AT THE TRADING RESULTS. BUT AFTER REJE CTION OF BOOKS IT IS NOT THE WORLD OPEN FOR THE A.O. TO MAKE ANY ILLOGICAL O R AD HOC ADDITION. IF AT ALL ANY SUCH ADDITION HAS TO BE MADE IT SHOULD R EST ON SOME VALID 7 BASIS AND IT SHOULD NOT BE ARBITRARY. WHEREFROM THE FIGURE OF N.P. RATE OF 2.5% HAS BEEN BORROWED IS NOT FOUND TO BE A VALI D BASIS. AFTER REJECTION OF THE BOOKS OF ACCOUNTS, THE A.O. CAN LO OK TOWARDS THE PAST HISTORY OF THE ASSESSEE OR OF ANY COMPARABLE CASE. HE CANNOT DRAW SUPPORT FROM ANY AND EVERY DECISION WITHOUT COMPARI NG THE FACTS OF THAT CASE WITH THAT OF THE ASSESSEE. HE CANNOT TEAR OUT OF CONTEXT BY CHERRY PICKING NO SUCH ADDITION CAN BE ALLOWED TO B E MADE. THE A.O. HAS ADOPTED THE N.P. RATE BUT HAS IGNORED THE N.P. RATE OF THE ASSESSEE DISCLOSED IN THE IMMEDIATELY PRECEDING YEA R. THE N.P. RATE OF THIS YEAR IS BETTER THAN THE EARLIER YEAR. THEREFOR E, NO ADDITION, LIKE ONE MADE BY THE A.O. IS NOT JUSTIFIED. THE LD. CIT( A) HAS ALSO CONFIRMED THE SAME. ON A WRONG PREMISE BY FOLLOWING THE REASONS GIVEN BY THE A.O. AND BY NOT CONSIDERING THE CONTEN TION OF THE ASSESSEE. IN OUT CONSIDERED OPINION THE FIRST TIME IMPOSITION OF ENTRY TAX OF HUGE AMOUNT OF RS. 9,69,454/- AS PER ASSESSE E PAPER BOOK PAGE 18, WHICH FACT HAS NOT BEEN DENIED OR DISPUTED BY T HE REVENUE, IS A GOOD GROUND AND FACTOR TO JUSTIFY SMALL FALL IN THE G.P. RATE. THE DECISIONS ON WHICH THE LD. A.R. HAS RELIED ARE INCO RPORATED IN THE EARLIER PART OF THIS ORDER. ALL THESE DECISIONS SUP PORT THE CASE OF THE ASSESSEE. ACCORDINGLY, WE ORDER TO DELETE THE ENTIR E ADDITION OF RS. 26,25,393/- MADE AND ALLOW GROUND NOS. 3 AND 4 OF T HIS APPEAL. 8 10. THE FACTS APROPOS GROUND NO. 5 AND 6 ARE IN RES PECT OF SUSTAINED ADDITION OF RS. 35,36,307/- IN THE TRADING ACCOUNT OF M/S. CHOUDHARY STONE CRUSHING COMPANY. THE FACTS AND ARGUMENTS OF BOTH PARTIES IN THIS REGARD ARE MORE OR LESS SAME AND SIMILAR. THE COMPARATIVE POSITION OF TRADING RESULTS IN THIS BUSINESS ARE AS UNDER :- A.Y. GROSS RECEIPTS G.P. G.P. RATE NET PROFIT N.P. RATE 2006 - 07 140200 14018 10. 0 % ( - )63042 ( - )45 9% 2007 - 08 54958588 3846518 07 .00% 3354497 6 . 10 % 2008 - 09 48870101 3301603 0 6 . 75 % 2936308 6 . 01 % OUR REASONING GIVEN FOR DELETION OF RS. 26,25,393/- IN RESPECT OF BUSINESS OF MOHANGARH CONSTRUCTION COMPANY WOULD AP PLY MUTATIS MUTANDIS IN THE BUSINESS OF CHOUDHARY CRUSHING COMP ANY WHICH MAINLY CARRIED ON THE WORK OF FOUNDATION OF THE WIND-MILLS . ITS P & L ACCOUNT OF THE YEAR IS ENCLOSED AT ASSESSEE PAPER BOOK 21 . ACCORDINGLY, WE ORDER THE DELETION OF ADDITION OF RS. 35,96,307/- A LSO AND ALLOW GROUND NOS. 5 AND 6 OF ASSESSEES APPEAL. 11. THE FACTS APROPOS GROUND NO. 7 AND 8 OF THIS AP PEAL ARE THAT THE ASSESSEE HAD CLAIMED INTEREST INCOME ON FDRS OF RS. 14,16,842/-. AS PER THE ASSESSEE THESE FDRS OR NSCS WERE PURCHASED ON ACCOUNT OF BUSINESS EXIGENCY FOR THE PURPOSE OF OBTAINING CONT RACT AND THE SAME 9 ARE PLEDGED WITH THE PWD AUTHORITIES. THEREFORE, TH E INTEREST INCOME HAS TO BE TREATED AS A PART OF BUSINESS RECEIPTS. B UT AS PER A.O. THE INTEREST INCOME HAS TO BE TREATED AS INCOME FROM O THER SOURCE. THE LD. CIT(A) HAS ALSO SUSTAINED ADDITION OF RS. 14,16 ,842/-. IN THIS REGARD LD. A.R. SHRI JAIN HAS PLACED HIS RELIANCE ON THE D ECISION OF THIS VERY BENCH RENDERED IN THE CASE OF JAIN CONSTRUCTION CO. ON THE OTHER HAND LD. D.R. HAS RELIED ON A DECISION OF JAIPUR BENCH. 12. AFTER HEARING BOTH SIDES WE ARE OF THE CONSIDER ED OPINION THAT THE RULE OF CONSISTENCY DEMANDS US TO FOLLOW THE DE CISION OF THIS VERY BENCH. THE JODHPUR BENCH HAS HELD SO IN THE CASE OF JAIN CONSTRUCTION CO. WE EXTRACT PARAS 13 AND 14 OF THE JAIN CONSTRUC TION COMPANY IN ITA NO. 532/JU/2010 A.Y. 2007-08 (COPY ENCLOSED AT PAGE 29 ONWARDS), IN WHICH HAS BEEN HELD THUS :- WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE ASSESSEE HAS DECLARED INTEREST PAID TO THIRD PARTIE S AMOUNTING TO RS.35,83.211/-. INTEREST RECEIVED TO T HE EXTENT OF RS.3,00,681/- WAS REDUCED FROM THE INTERE ST FOR CLAIMING DEDUCTION IN RESPECT OF ME INTEREST PAID T O THIRD PARTIES. IN CASE INTEREST IS TO BE TREATED AS INCOM E FROM OTHER SOURCES THEN DEDUCTION OUT OF NET PROFIT RATE ON ACCOUNT OF INTEREST TO THIRD PARTIES WILL HAVE TO B E 10 ALLOWED TO THE EXTENT OF RS.35,38,211/-. THUS IT IS ONLY A REVENUE NEUTRAL ISSUE. THE IT AT, JODHPUR BENCH IN THE CASE OF RADHA KRISHAN BENIWAL VS. ACJT (ITA NO. 115/JU/0 9 DATED 09.07.2009) HELD THAT INTEREST IS TO BE TREAT ED AS BUSINESS INCOME BECAUSE FDRS AND NSCS WERE PURCHASE D IN SUPPORT OF LENDERS TO BE CONSIDERED FOR ACCEPTANCE. THE A.O. IN HIS ORDER HAS NOWHERE MENTIONED THAT SUCH FDRS A ND NSCS WERE NOT PURCHASED FOR SUBMITTING THE TENDERS. HENC E, WE HOLD THAT INTEREST SHOULD BE TREATED AS INCOME FROM BUSINESS IN VIEW OF THE ORDER OF THE JODHPUR TRIBUN AL. 13. SINCE ON IDENTICAL SET OF FACTS, THE I.T.A.T. H AS HELD THAT INTEREST RECEIVED FROM F.D.RS. AND N.S.CS. PLACED W ITH GOVERNMENT WHILE OBTAINING CONTRACT FROM GOVERNMENT IS REQUIRE D TO BE ASSESSED AS INCOME FROM BUSINESS. SINCE THIS INTERE ST INCOME IS BUSINESS INCOME WHICH HAS BEEN CONSIDERED IN ESTIMA TION OF INCOME BY APPLYING N.P. RATE, WE, THEREFORE, ARE OF THE CO NSIDERED VIEW THAT NO SEPARATE ADDITION IS WARRANTED. ACCORDING LY, BY FOLLOWING THE ABOVE JODHPUR BENCH DECISION, WE HAVE TO ALLOW THESE GROUNDS OF APPEAL BECAUSE THE LD. D.R. HAS NOT PRODUCED ANY CO NTRARY DECISION OF ANY HIGH COURT OR OF HONBLE SUPREME COURT. 14. GROUND NO. 9 AND 10 ARE GENERAL IN NATURE. 11 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 7 TH MARCH , 2013. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR