CRS Infra Projects Ltd., New Delhi V. DCIT, Circle- 6(2), New Delhi

ITA 1974/DEL/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9723 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 21-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Rejection of books of accounts; Application of stay; Bad and doubtful debts
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B , NEW DELHI BEFORE S H. N. K. BILLAIYA , ACCOUNTANT MEMBER AND S H . K.N. CHARY , JUDICIAL MEMBER ITA NO. 4518 /DEL/201 8 STAY APPLICATION NO.611/DEL/2018 ( A/O 4518/DEL/2018 ) ASSESSMENT YE AR: 20 09 - 10 M/S. CRS INFRA PROJECTS LTD. B - 201, VIKAS TOWER, PLOT NO.8, G - BLOCK, COMMUNITY CENTRE, NEAR PVR VIKAS PURI, NEW DELHI - 110018 PAN AAACC4794N VS ADDL. CIT RANGE - 3 NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 1974 /DEL/201 8 STAY APPLICATION NO.610/DEL/2018 (A/O 1974/DEL/2018) ASSESSMENT YEAR: 2012 - 13 M/S. CRS INFRA PROJECTS LTD. B - 201, VIKAS TOWER, PLOT NO.8, G - BLOCK, COMMUNITY CENTRE, NEAR PVR VIKAS PURI, NEW DELHI - 110018 PAN AAACC4794N VS DCIT CIRCLE 6 (2) NEW DELHI (APPEL LANT) (RESPONDENT) ITA NO. 4518 / /DE L/20 1 8, 1974 /DEL/201 8 & STAY APPLICATION NO.610 TO 611/DEL/2018 2 APPELLANT BY SH. VED JAIN, ADVOCATE RESPONDENT BY MS. ASHIMA NEB, SR. DR DATE OF HEARING: 24 /0 9 /2018 DATE OF PRONOUNCEMENT: 26 / 0 9 /2018 ORDER PER N. K. BILLAIYA , AM: ITA NO. 4518 /DEL/201 8 AND 1974 /DEL/201 8 ARE TWO SEPARATE APPEALS FILED BY ASSESSEE S PREFERRED AGAINST THE TWO SEPARATE ORDERS OF CIT (A) - 2, DELHI DATED 16.03.2018 PERTAINING TO A. Y. 20 09 - 1 0 AND 2012 - 13 . 2. BOTH THESES APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND GRAVITY . 3. WE FIRST TAKE UP ITA NO.4518/DEL/2018 A.Y.2009 - 10. REPRESENTATIVES OF BOTH THE SIDES WERE HEARD AT LENGTH. BRIEFLY STATED THAT THE FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONS TRUCTION . F OR THE YEAR UNDER CONSIDERATION IT HAS SHOWN SALE S OF RS.62.17CRORES BESIDES OTHER INCOME OF RS.55.87 LACS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE RE IS DECLINE IN THE PROFIT RATIO WHEN COM PARED WITH THAT OF EARLIER YEARS. THE ASSESSING OFFICER OBSERVED THAT IN A. Y. 207 - 08 THE N. P. RATE WAS 6.27% WHICH DECLINED TO 5.17 % IN A. Y. 2008 - 09 AND FURTHER DECLINED TO 3.95% DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER WAS OF THE OP INION THAT THE BOOK RESULTS ARE NOT LIABLE AND ACCORDINGLY PROCEEDED BY REJECTING THE BOOKS OF ACCOUNTS. THE NET PROFIT WAS ESTIMATED AT 6.5% WHICH RESULTED INTO AN ADDITION OF RS.4.07 CRORES. ITA NO. 4518 / /DE L/20 1 8, 1974 /DEL/201 8 & STAY APPLICATION NO.610 TO 611/DEL/2018 3 AFTER ESTIMATING THE NET PROFIT THE ASSESSING OFFICER FURTHER MADE ADDITION ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, DISALLOWANCES MADE U/S 43 B AND 40(A) (IA) OF THE ACT. 4. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE CIT(A) AND CHALLENGED THE REJECTION OF BOOKS OF ACCOUNTS AND CONSEQUENT ESTIM AT ION OF PROFIT BY THE ASSESSING OFFICER. 5. AFTER CONSIDERING THE FACTS AND SUBMISSION THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. COMING TO THE ESTIMATION OF PROFIT THE CIT(A) FOUND THAT TH E NET PROFIT RATE OF 3.95% IS LOWER THAN NET PROFIT RATE OF 6.27% AND 5.17% SHOWN IN EARLIER YEARS . THE CIT(A) WAS CONVINCED THAT THE TRADING RESULTS NEED TO BE ESTIMATED AND ACCORDINGLY ESTIMATED NET PROFIT OF 5.2% OF THE TURNOVER AND DIRECTED THE ASSESSI NG OFFICER TO TAKE THE NET PROFIT AT RS.3.26 CRORES AS AGAINST 4.07 CRORES TAKEN BY THE ASSESSING OFFICER. HOWEVER, THE CIT(A) AFTER ESTIMATING THE NET PROFIT FURTHER CONFIRMED THE ADDITION ON ACCOUNT OF PROVISION OF BAD AND DOUBTFUL DEBTS, DISALLOWANCES MADE U/S 43B AND 40 (A) (IA) OF THE ACT. 6 . BEFORE US THE COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT THE NET PROFIT RATE OF 5.2% IS ON THE HIGHER SIDE CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE. IT IS THE SAY OF THE COUNSEL THAT THE NET PROFIT RATE IS ON DECLINE SINCE PAS T ASSESSMENT YEARS PER CONTRA THE DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 7 . WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE NET PROFIT RATE IS DECLIN ING FROM A. Y. 2007 - 08 ONWARDS WHICH CAN BE SEEN FROM THE FACT IN A. Y. 2007 - 08 NET PROFIT RATE WAS 6.27% WHICH DROPPED DOWN TO 5.17% IN A. Y. 2008 - 09 AND FURTHER ITA NO. 4518 / /DE L/20 1 8, 1974 /DEL/201 8 & STAY APPLICATION NO.610 TO 611/DEL/2018 4 CAME DOWN TO 3.95% DURING THE YEAR UNDER CONSIDERATION. THUS, THE FALL IN NET PROFIT RATE CA NNOT BE BRUSHED ASIDE LIGHTLY. HOWEVER, WE FIND THAT THE ESTIMATION OF PROFIT AT 5.2% IS FROM REASONABLE ON THE FACTS OF THE CASE AND SHOULD MEET THE ENDS OF JUSTICE. WE, THEREFORE, DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A) SO FAR AS THE ESTIMATION OF PROFIT IS CONCERNED. HOWEVER, IN OUR CONSIDERED OPINION ONCE NET PROFIT IS ESTIMATED AS A P ERCENTAGE OF SALES NO FURTHER DISALLOWANCES SHOULD BE MADE IN THE PROFIT AND LOSS ACCOUNT. SINCE WE HAVE CONFIRMED THE ESTIMATION OF NET PROFIT , WE DO NOT FIND ANY MERIT IN THE ADDITIONS / DISALLOWANCES MADE BY THE ASSESSING OFFICER. 8. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF DISALLOWANCES MADE U/S 43B OF THE ACT AND DISALLOWANCE MADE U/S 40(A) (IA) OF THE ACT. 9. IN SO FAR AS THE ADDITION ON ACCOUNT OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS IS CONCERNED. WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED THE SAME BECAUSE HE WAS OF THE OPINION THAT THE PROVISIONS FOR BAD DEBTS IS NOT ALLOWABLE. WHEN T HE MATTER WAS AGITATED BEFORE THE FIRST APPELLATE AUTHORITY THE FIRST APPELLATE AUTHORITY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER STATING THAT THE CLAIM OF BAD DEBTS IS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 36 (2) OF THE IT ACT A ND THEREFORE CANNOT BE ALLOWED. 10. WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN NOT APPRECIATING THE FACTS IN T RUE P ERS PECTIVE. BOTH THE LOWER AUTHORITIES HAVE IGNORED THE FACT THAT THE A S SET S IDE IS ACTUALLY REDUCED BY THE AMOUNT OF B AD DEBTS WHICH MEANS THAT THE DEBT HA S BEEN ACTUALLY WRITTEN OF. THE HON BLE SUPREME COURT IN THE CASE OF VIJAYA BANK 323 ITR 166 HAS CATEGORICALLY HELD THAT IF THE AS SET SIDE IS REDUCED BY THE PROVISION IT ITA NO. 4518 / /DE L/20 1 8, 1974 /DEL/201 8 & STAY APPLICATION NO.610 TO 611/DEL/2018 5 AMOUNTS TO WRITING OF THE DEBTS. DREW ING SUPPORT F ROM THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT (SUPRA) , W E DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE ON ACCOUNT OF PROVISION FOR BAD DEBTS. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1974/DEL/2018 A. Y. 2012 - 13 12 . FACTS ON RECORD SHOW THAT IN THE YEAR UNDER CONSIDERATION THE NATURE OF BUSINESS OF THE ASSESSEE REMAINED THE SAME AS IT WAS IN A. Y. 2009 - 10 (SUPRA). FOR SIMILAR REASONS THE BOOKS OF ACCOUNTS WERE REJECTED BY THE ASSESSING OFFICER BUT IN THIS YEAR THE ASSESSING OFFICER HAS DISALLOWED 10% OF THE EXPENSES WHICH WERE CONFIRMED BY THE FIRST APPELLATE AUTHORITY. 13 . IN OUR UNDERSTANDING OF THE FACTS WHEN PROFIT HAS BEEN ESTIMATED IN EARLIER YEAR AFTER REJECTING THE BOOKS OF ACCOUNTS WE D O NOT FIND ANY REASON WHY THE SAME SHOULD NOT BE DONE FOR THE YEAR UNDER THE CONSIDERATION ALSO. SINCE, THE CIT(A) HAS ESTIMATED 5.2% IN A. Y. 2009 - 10 AND THE ORDER OF THE CIT(A) HAS BEEN ACCEPTED BY THE REVENUE AND TO THIS EXTENT CONFIRMED BY US SUPRA. WE ARE OF THE OPINION THAT THE SAME RATE OF NET PROFIT SHOULD BE ADOPTED FOR THIS YEAR ALSO WHICH SHOULD MEET THE ENDS OF JUSTICE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ADOPT THE NET PROFIT RATE OF 5.2 % INSTEAD OF MAKING AD - HOC DISALLOWANCES OF 10% OF THE TOTAL EXPENDITURE. THIS APPEAL IS ALSO PARTLY ALLOWED. 14 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 4518 / /DE L/20 1 8, 1974 /DEL/201 8 & STAY APPLICATION NO.610 TO 611/DEL/2018 6 STAY APPLICATION NO. 610 TO 611/DEL/2018 (A. Y. 2012 - 13 & 2009 - 10) 1 5 . SINCE APPEALS FOR BOTH THE YEARS UNDER CONSIDERATION HAVE BEEN DECIDED THE STAY PETITIONS BECOME OT I OS E . 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.2018 . SD/ - SD/ - (K. NAR A SIMHA CHARY) ( N. K. BILLAIYA ) JUDICIAL MEMBER ACC OUNTANT MEMBER *NEHA* DATE: - 26 .0 9 .2018 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 4518 / /DE L/20 1 8, 1974 /DEL/201 8 & STAY APPLICATION NO.610 TO 611/DEL/2018 7 DATE OF DICTATION 25.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 26.09.2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 26.09.2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 26.09.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS / PS 26.09.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 26.09.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.09.2018 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DA TE OF DISPATCH OF THE ORDER