M/s. Babu Lal & Company, Bikaner V. ACIT, Circle-1, Bikaner

ITA 205/JODH/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5726 (ITAT-JODHPUR)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 07-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SINGI J
• Keywords: Depreciation
• Section: 234B

Judgement Text

1 IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI N.K. SAINI, HONBLE VICE-PRESIDENT AND SHRI N.K. CHOUDHRY, HONBLE JUDICIAL MEBMER ITA NO. 205/JODH/2018 (A.Y. 2014-15) M/S. BABU LAL & COMPANY, VS ACIT, CIRCLE-1, C/O. SH. RAJENDRA JAIN, ADVOCATE, BIKANER. 106, AKSHAY DEEP COMPLEX, 5 TH B ROAD, SARDARPRUA, JODHPUR. PAN NO. AAGFB3045A (APPELLANT) (RESPONDENT) DATE OF HEARING : 03/05/2019 DATE OF PRONOUNCEMENT : 03/05/2019 ASSESSEE BY : SHRI RAJENDRA JAIN, ADVOCATE. DEPARTMENT BY : SH. P.K. SINGI, JCIT-DR. ORDER PER N. K. SAINI, V.P.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 07.12.2017 OF THE CIT(A), BIKANER. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) GROSSLY ERRED IN UPHOLDING THE APPLICATION OF PROVISIONS OF SECTION 145(3). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CA SE, THE LD. CIT(A) GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 5,00,000/- TO TRADIN G ACCOUNT ON ESTIMATION BASIS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) GROSSLY ERRED IN NOT CONSIDERING THE EXPLANATION AND SUBMISSION OF T HE ASSESSEE THAT THE DECLARED TRADING RESULT IS VERY REASONABLE LOOKING TO NATURE OF BUSINESS OF THE ASSESSEE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN CHARGING INTEREST U/S 234A, 234B AND 234C. 2. VIDE GROUND NO. 1 TO 3 THE GRIEVANCE OF THE ASSE SSEE RELATES TO THE SUSTENANCE OF ADDITION OF RS. 5,00,000/- OUT OF TRADING ACCOUNT O N ESTIMATION BASIS. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 30.11.2014 DECLARING AN INCOME OF RS. 44,22,310/-. LATER ON THE CASE WAS SELECTED FOR 2 SCRUTINY. THE AO DURING THE COURSE OF ASSESSMENT PR OCEEDING NOTICED THAT THE ASSESSEE HAD NOT MAINTAINED DAY TO DAY STOCK REGISTER IN RESPECT OF MATERIAL CONSUMPTION AND CERTAIN CASH PAYMENTS HAD BEEN MADE EXCEEDING RS. 20000/- O N A SINGLE DAY AND THERE WERE OTHER INFIRMITIES. HE, THEREFORE, REJECTED THE BOOKS OF A CCOUNT U/S 145(3) TO THE I.T. ACT, 1961.(HEREIN AFTER REFERRED AS TO ACT). THE AO NOT ICED THAT FOR THE A.Y. 2013-14 THE ASSESSEE HAD SHOWN NET PROFIT RATE OF 3.03% ON THE TURNOVER OF RS. 4,9425563/- WHILE FOR THE YEAR UNDER CONSIDERATION NET PROFIT SHOWN WAS 2 .74% ON THE TURNOVER OF RS. 16,11,50,379/-. 4. ACCORDING TO THE AO THE ASSESSEE WAS BOUND TO IN CREASE THE NET PROFIT WHEN THE TURNOVER INCREASED. HE ESTIMATED THE NET PROFIT RAT E OF 11% SUBJECT TO DEPRECIATION, INTEREST AND REMUNERATION TO THE PARTNERS. ACCORDIN GLY, NET PROFIT WAS DETERMINED AT RS. 70,89,682/- AS AGAINST RS. 44,52,310/- DECLARED BY THE ASSESSEE. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND F URNISHED THE WRITTEN SUBMISSION WHICH HAS BEEN INCORPORATED AT PAGE NO. 3 TO 5 OF THE IMP UGNED ORDER BY THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT THE ASSESSEE, OUT OF GROSS T URNOVER OF RS. 16,11,50,379/- EXECUTED CONTRACT WORK OF RS. 15,41,64,363/- AS SUB CONTRACT OR WHEREIN THE PROFIT WAS LOW IN COMPARISON TO MAIN CONTRACT. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD SHOWN NET PROFIT RATE OF 9.35% SUBJECT TO DEPRECIATION, PARTNERS IN TEREST & SALARY AND IF THE RECOVERY MADE ON ACCOUNT OF MATERIAL SUPPLIED BY THE MAIN CONTRAC TOR WAS TO BE DEDUCTED FROM THE GROSS TURNOVER, THE NET PROFIT RATE CAME AT 9.77%. IT WAS FURTHER STATED THAT THE AO WHILE APPLYING THE NET PROFIT RATE OF 11% HAD NOT CITED ANY COMPAR ABLE CASE. THEREFORE, THE INCOME ESTIMATED BY THE AO WAS UNREASONABLE. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO WAS NOT JUSTIFIED IN APPLYING NET PROFIT RATE OF 11% AND THAT AT THE SAME TIME THE BOOKS OF ACCOUNTS MAINTAINED BY ASSESSEE SUFFERED FROM VA RIOUS DEFECTS, HE, THEREFORE, SUSTAINED THE ADDITION OF RS. 5,00,000/- TO COVER UP ALL POSS IBLE LEAKAGE OF THE REVENUE. NOW THE ASSESSEE IS IN APPEAL. 3 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AO WHILE MAKING THE ADDITION BY APPLYING NET PROFIT RATE OF 11% HAD NOT CITED ANY COMPARABLE CASE. IT WAS FURTHER SUBMITTED THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) WAS HIGHLY EXC ESSIVE PARTICULARLY WHEN HE HAD ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE. IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CA SE IT APPEARS THAT THE AO HAD NOT CONSIDERED THE FACTS OF THE PRESENT CASE IN RIGHT P ERSPECTIVE PARTICULARLY HE HAS NOT CONSIDERED THIS VITAL FACT THAT THE ASSESSEE WAS DO ING THE MAJOR WORK AS A SUB CONTACTOR AND ALSO CERTAIN DEDUCTIONS WERE MADE BY THE CONTRACTOR ON ACCOUNT OF MATERIAL SUPPLIED TO THE ASSESSEE. THEREFORE, THE NET PROFIT RATE AT 11% APP LIED BY THE AO WITHOUT CITING ANY COMPARABLE CASE WAS NOT JUSTIFIED. IT IS ALSO NOTIC ED THAT THE LD.CIT(A) WHILE SUSTAINING THE ADDITION OF RS. 5,00,000/- HAS NOT GIVEN ANY COGENT REASON. IN OUR OPINION THE ADDITION SUSTAINED BY THE LD. CIT(A) IS ON HIGHER SIDE, WE T HEREFORE, TO MEET THE ENDS OF JUSTICE DEEM IT APPROPRIATE TO SUSTAIN THE ADDITION OF RS. 2,00 ,000/- TO COVER UP THE LEAKAGE OF REVENUE IF ANY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 03/05/2019. SD/- [N. K. CHOUDHRY] [N. K. SAINI] JUDICIAL MEMBER VICE PRESIDENT DATED : 03/05/2019. A/N COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 4 ASSISTANT REGISTRAR ITAT, JODHPUR.