Shri Rakesh Kumar Bansal, Agra V. A.C.I.T.-1, Agra

ITA 211/AGR/2013

• Counselvise Citation: 21120314 RSA 2013
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: RAKESH KUMAR JAIN
• Keywords: Rejection of books of accounts; Corroborative evidences
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 211/AGRA/ 2013 ASSESSMENT YEAR 2008-2009 RAKESH KUMAR BANSAL VS. A.C.I.T.-1 C/O. BATRA JAIN & CO. INCOME TAX OFFICER, 26/209, SANJAY PLACE, SANJAY PLACE, AGRA AGRA (PAN AEEPB 1603 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH KUMAR JAIN, C.A. RESPONDENT BY SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 22.08.2013 DATE OF PRONOUNCEMENT : 27.08.2013 ORDER PER A.L. GEHLOT,ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-I, AGRA DATED 31.01.2013 FOR A.Y. 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL :- 1. THE LEARNED CIT(APPEALS-1) HAS ERRED IN CONFIRM ING THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE WITHOUT PROPER LY APPRECIATING THE FACTS & CIRCUMSTANCES OF THE CASE. ITA NO.211 /AGRA/2013, A.Y. 2008-09 2 2. THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEARNED CIT(APPEALS-I) HAS ERRED IN ESTIMATING THE INCOME O F THE ASSESSEE @ 5% OF GROSS RECEIPTS WITHOUT PROPERLY APPRECIATING THE FACTS & CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(APPEALS-I) HAS ERRED IN CONFIRMI NG AN ADDITION OF RS.1,28,651/- AND RS.1,47,729/- RESPECTIVELY TO THE INCOME OF ASSESSEE BEING INTEREST CREDITED TO P&L A/C, WITHOUT PROPERL Y APPRECIATING THE FACTS & CIRCUMSTANCES OF THE CASE. 3. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODI FY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF SHAKTI CONSTRUCTION CO. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT MOST OF THE LABOUR VOUCHERS WERE SELF PREPARED VOUC HERS WHICH CANNOT BE VERIFIED. THE A.O. VIDE ORDER SHEET DATED 15.12.201 0 ASKED ASSESSEE WHY THE BOOKS OF ACCOUNT OF THE ASSESSEE IS NOT REJECTED. T HE A.O. AFTER CONSIDERING THE ASSESSEES SUBMISSION FOUND THAT THE SELF MADE VOUCHERS WERE NOT HAVING ANY SUPPORTING EVIDENCE BASED ON WHICH THE EXPENDIT URE CLAIMED CAN BE VERIFIED INCLUDING THE LABOUR EXPENDITURE AND OTHER S. THE A.O. NOTICED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ON THE BASIS OF WHICH CORRECT PROFIT CAN NOT BE DETERMINED. THE A.O. ACCO RDINGLY REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. T HE A.O. AFTER REJECTING BOOKS OF ACCOUNT APPLIED 6% PROFIT RATE ON TOTAL RE CEIPT OF RS.4,16,02,496/- AND CALCULATED PROFIT RS.24,96,150/-. THE A.O. HAS ALSO MADE ADDITION OF RS.14,729/- BANK INTEREST ON RS.1,26,851/- FDRS INT EREST. ITA NO.211 /AGRA/2013, A.Y. 2008-09 3 4. THE CIT(A) CONFIRMED THE ACTION OF THE A.O. FOR REJECTION OF BOOKS OF ACCOUNT AS UNDER:- (CIT(A) PARA 5.2) 5.2. I HAVE CONSIDERED THE ARGUMENT TAKEN BY THE L D. A.R. HOWEVER, FACTS REMAIN THAT THE LABOUR EXPENSES SHOW N BY THE ASSESSEE(APPELLANT) ARE NOT VERIFIABLE AND DURING T HE COURSE OF ASSESSMENT PROCEEDING, THE AO HAS GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE(APPELLANT) TO ESTABLISH THE CORRECTNES S AND GENUINENESS OF THE ENTIRE LABOUR EXPENSES CLAIMED B Y THE ASSESSEE(APPELLANT), BUT NO SUPPORTING EVIDENCE COU LD BE PRODUCED TO ESTABLISH THE GENUINENESS OF THE ENTIRE EXPENSES . THE AO HAS ALSO FOUND THAT THE NP RATE SHOWN BY THE ASSESSEE(A PPELLANT) IS QUITE AT LOWER SIDE BEING 3.01% AND, THEREFORE, HE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT OF THE ASSESSEE(APPELLANT) AT 6%. AFTER GOING THROUGH THE ENTIRE CASE RECORDS AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY ERROR IN THE DECISION OF THE AO WIT H REGARD TO THE REJECTION OF THE BOOKS OF ACCOUNT U/S.145(3) BECAUS E DUE TO NON VERIFIABLE NATURE OF THE LABOUR EXPENSES SHOWN BY T HE ASSESSEE, CORRECTNESS OF THE BOOKS OF ACCOUNT MAINTAINED BY T HE ASSESSEE(APPELLANT) ARE AUDITED ON THE BASIS OF SEL F MADE VOUCHERS WITHOUT ANY SUPPORTING EVIDENCE IN THE POSSESSION T O SHOW THAT SUCH AMOUNT OF LABOUR EXPENSES HAVE BEEN SPENT BY H IM. IT CANNOT BE ACCEPTED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE(APPELLANT) IS CORRECT WHEN THE AO HAS GIVE N CLEAR FINDING THAT THE EXPENSES SHOWN BY THE ASSESSEE(APPELLANT) FOR LABOUR CHARGES WERE NOT VERIFIABLE. THEREFORE, I CONFIRM T HE DECISION OF THE AO FOR REJECTING THE BOOKS OF ACCOUNT U/S 145(3 ) OF THE ACT AND ACCORDINGLY, GROUND NO.2 ARE DISMISSED. 5. THE CIT(A) WHILE DEALING THE MATTER REGARDING RA TE OF PROFIT FOUND THAT A.O. HAS APPLIED EXCESS RATE BY 1%. THE CIT(A) ACCORDINGLY HELD THAT 5% RATE OF PROFIT IS REASONABLE AND CALCULATED PROF IT OF RS.20,80,125/- INSTEAD OF RS.24,96,150/- COMPUTED BY THE A.O. AND RELIEF OF RS.4,16,025/- ITA NO.211 /AGRA/2013, A.Y. 2008-09 4 WAS ALLOWED. THE CIT(A) FOUND THAT THE INTEREST INC OME OF RS.1,26,851/- AND RS.14,729/- HAS BEEN CORRECTLY ADDED BY THE A.O . OBSERVING AS UNDER :- (CIT(A) PARA NO.7) IN GROUND NO.5, THE APPELLANT HAS CONTENDED THAT T HE AO ERRED, ARBITRARILY IN MAKING AN ADDITION OF RS.1,26,851/- AND RS.14,729/- TO THE INCOME OF THE ASSESSEE BEING INTEREST EARNED WHILE THE SAME WAS ALREADY SHOWN IN THE PROFIT & LOSS ACCOUNT OF P ROPRIETARY FIRM OF THE ASSESSEE NAMED M/S SHAKTI CONSTRUCTION CO. THIS CONTENTION OF THE ASSESSEE(APPELLANT) HAS BEEN VERI FIED FROM THE PROFIT & LOSS ACCOUNT OF M/S SHAKTI CONSTRUCTION CO . AND I HAVE FOUND THAT THE ASSESSEE(APPELLANT) HAS TAKEN INTERE ST INCOME OF RS.14,729/- AND RS.1,26,851/- ON THE CREDIT SIDE OF PROFIT & LOSS ACCOUNT. HOWEVER, THE AO HAS NOT COMPUTED THE INCO ME OF THE ASSESSEE(APPELLANT) FROM THE NET PROFIT SHOWN IN TH E PROFIT & LOSS ACCOUNT. INSTEAD OF STARTING THE COMPUTATION OF INC OME FROM THE NET PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT, THE AO H AS DIRECTLY COMPUTED THE INCOME OF THE ASSESSEE(APPELLANT) FROM THE CONTRACT WORK BY TAKING THE PROFIT RATE OF 6% ON GROSS RECEI PT OF RS.4,16,02,496/- AND, THEREFORE, HE HAS FURTHER ADD ED OTHER INCOME SHOWN BY THE ASSESSEE(APPELLANT) IN THE PROFIT & LO SS ACCOUNT WHICH INCLUDES INTEREST INCOME OF RS.14,729/- AND R S.1,26,851/-. THEREFORE, I DO NOT FIND THAT THE AO HAS COMMITTED ANY ERROR IN ADDING THESE TWO INTEREST INCOME SEPARATELY IN THE PROFIT ESTIMATED BY HIM BY APPLYING A PROFIT RATE OF 6% ON GROSS REC EIPTS. IN VIEW OF MY ABOVE FINDING, I DO NOT FIND THAT THE APPELLANT IS JUSTIFIED IN TAKING THE GROUND NO.5 BECAUSE THERE IS NO DOUBLE A DDITION OF INCOME SHOWN BY THE ASSESSEE(APPELLANT) BECAUSE INT EREST OF RS.14,729/- AND RS.1,26,851/- HAVE BEEN TAXED AS PE R DISCLOSURE MADE BY HIM IN THE PROFIT & LOSS ACCOUNT AND ACCORD INGLY, GROUND NO.5 IS DISMISSED. 6. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. WE FIND THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE A CTION OF THE A.O. REGARDING REJECTION OF BOOKS OF ACCOUNT AS THE A.O. FOUND THAT CERTAIN VOUCHERS WERE SELF PREPARED VOUCHERS AND RELATED EX PENDITURES COULD NOT BE ITA NO.211 /AGRA/2013, A.Y. 2008-09 5 VERIFIED. AT THE TIME OF HEARING, IT WAS ASKED BY T HE BENCH WHETHER THE ASSESSEE MAINTAINED LABOUR REGISTER AND QUANTITY DE TAILS OF THE MATERIAL, THE LD. A.R. WAS UNABLE TO REPLY THIS QUERY. IN THE LIG HT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE A.O. INVOKING SECTION 145(3) OF THE A CT. THUS, ORDER OF THE CIT(A) IS CONFIRMED ON GROUND 1 REGARDING REJECTION OF BOOKS OF ACCOUNT. AFTER REJECTING BOOKS OF ACCOUNT THE NEXT STEP IS C ALCULATION OF CORRECT PROFIT OF BUSINESS. THE A.O. HAS APPLIED 6% PROFIT RATE WH ICH HAS BEEN REDUCED BY THE CIT(A) TO THE EXTENT OF 5%. IF WE CONSIDER THE COMPARATIVE POSITION OF THE FINANCIAL RESULT FOR FINANCIAL YEAR ENDED 2006- 07 AND 2007-08 WHICH IS GIVEN ON PAGE NO.103 OF THE ASSESSEES PAPER BOOK A S UNDER:- (PAGE NO.103 ASSESSEES PAPER BOOK) WORKING RESULTS FOR BOTH YEARS FOR YOUR READY REFE RENCE IS AS FOLLOWS: F.Y.06-07 F.Y.07-08 (RS.IN LACS) SALES 146.03 416.02 NP 4.38 12.76 % NP 3.00% 3.06% 7. WE NOTICED THAT THE ASSESSEE HAS SHOWN COMPARATIVEL Y REASONABLE NET PROFIT RATE 3.06% AS AGAINST 3% FOR THE LAST YEAR. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOTAN LIME KHANIJ UDHYOG, [2002] 256 ITR 243 WHEREIN IT HAS BEEN HELD THAT SECTION 145 O F THE I.T. ACT ONLY ITA NO.211 /AGRA/2013, A.Y. 2008-09 6 PROVIDES THE BASIS ON WHICH COMPUTATION OF INCOME I S TO BE MADE FOR THE PURPOSE OF DETERMINING THE AMOUNT OF TAX PAYABLE BY THE ASSESSEE. THE PROVISION BY ITSELF DOES NOT DEAL WITH ADDITION OR DELETION OF THE INCOME. THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING INCOM E OF RS.11,87,700/- AGAINST WHICH THE A.O. ASSESSED OF RS.26,39,600/- W HICH IS APPARENTLY ON HIGHER SIDE. 8. CONSIDERING THE NATURE OF BUSINESS OF THE ASSESS EE AND PAST HISTORY AND OTHER FACTS ON RECORD, WE FIND THAT THE ADDITION TO THE EXTENT OF RS.1,00,000/- IS REASONABLE AND SUFFICIENT TO COVER THE LAPSES PO INTED OUT BY THE A.O. ACCORDINGLY, WE CONFIRM THE ADDITION TO THE EXTENT OF RS.1,00,000/- AND BALANCE ADDITION IS DELETED. THE A.O. IS DIRECTED T O MAKE THE ADDITION OF RS.1,00,000/- ONLY IN THE INCOME DECLARED BY THE AS SESSEE. 9. AS REGARDS, THE GROUND NO.3, WE FIND THAT SINCE WE SUSTAINED RS.1,00,000/- IN THE INCOME DECLARED BY THE ASSESSE E AND DIRECTED A.O. TO TAKE THE COMPUTATION OF TOTAL INCOME ON THE BASIS O F RETURNED IN WHICH THE ASSESSEE HAS ALREADY SHOWN THE INTEREST INCOME ON T HE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT, THEREFORE, SEPARATE ADDITI ON IS NOT WARRANTED. THEREFORE, THE SAME IS DELETED. THE A.O. IS DIRECTE D TO COMPUTE THE TOTAL INCOME TAKING BASIS OF RETURN OF INCOME DECLARED BY THE ASSESSEE AND MADE ITA NO.211 /AGRA/2013, A.Y. 2008-09 7 ADDITION OF RS.1,00,000/- AS DISCUSSED ABOVE. THERE FORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 10. GROUND NO.4 IS GENERAL NATURE REQUIRES NO INDEP ENDENCE FINDINGS. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. (ORDER PRONOUNCED IN THE OPEN COURT.) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTA NT MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY