Milkhi Ram, Contractor, Kurukshetra V. ITO, Kaithal

ITA 214/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73530 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: TEJ GIRISH ANEJA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS.214/CHD/2012 ASSESSMENT YEAR : 2008-09 SHRI MILKHI RAM, VS INCOME TAX OFFICER, HOUSE NO. 2050, WARD 3, SECTOR 4, KAITHAL. KURUKSHETRA. PAN : AFIPR2032N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ GIRISH ANEJA RESPONDENT BY : SHRI J.S.NAGAR DATE OF HEARING : 20.02.2014 DATE OF PRONOUNCEMENT : 25.02.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) KARNAL DATED 1 8.11.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE PENALTY ORDE R PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 ( 'THE A CT' FOR SHORT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ACTION OF THE A.O IN ESTIMATING THE INCOME OF THE ASSESSEE AT 12% OF THE GROSS RECEIPTS, IGNORING THE PAST HISTORY OF THE ASSESSEE AND THE INFO RMATION FURNISHED, IS WHOLLY ILLEGAL, ARBITRARY AND UNCALLED FOR AND THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING THE SAME. 2. THAT WITHOUT PREJUDICE TO THE ABOVE GRO UND OF APPEAL, EVEN THE CONTRACTUAL RECEIPTS HAVE BEEN EXCESSIVELY CALCULATED AS SALES TAX DEDUCTED @ 5,41,533/- FROM GROSS RECEIPTS BY THE V ARIOUS GOVERNMENT DEPARTMENTS HAS NOT BEEN REDUCED BY THE A.O WHILE ESTIMATING THE IN COME @ 12% AND HENCE THE ORDER IS BAD IN LAW. 3. THAT WITHOUT PREJUDICE TO THE ABOVE GRO UNDS OF APPEAL, THE APPLICATION OF NET PROFIT RATE OF 12% IS VERY MUCH ON THE HIGHER S IDE AND DESERVES TO BE CONSIDERABLY REDUCED LOOKING TO THE PAST HISTORY OF THE ASSESSEE AND RESULTS OF 2 OTHER ASSESSEES IN THE LINE OF CIVIL EXECUTION CONT RACTS. 4. THE GROUND NOS. 1 TO 3 RAISED BY THE ASSESSEE A RE AGAINST ESTIMATION OF INCOME BY APPLYING NP RATE TO THE GRO SS RECEIPTS. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE WAS A CIVIL ROAD CONTRACTOR AND DURING THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME OF RS. 4,28,160/- IN THE RETURN OF INCOME. THE GRO SS RECEIPTS OF THE ASSESSEE FROM THE CONTRACT WORK WERE OF RS. 1.35 CR AND THE COST OF MATERIAL WAS RS. 40,92,190/-. THE ASSESSING OFFICE R, THUS COMPUTED THE NET RECEIPTS OF THE ASSESSEE FROM CONTRACT WORK AT RS. 94,46,121/-. VARIOUS OPPORTUNITIES WERE AFFORDED TO THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT. HOWEVER, THE SAME WERE NOT PRODUCED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER, IN VIEW OF THE JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COUR T DATED 14.11.2008 IN CASE NO. ITA NO. 293 OF 2008 IN THE C ASE OF CIT, HISSAR VS M/S PRABHAT KUMAR, CONTRACTOR, SIRSA APPLIED RAT E OF 12% ON NET RECEIPTS OF RS. 94,46,121/- AND COMPUTED THE INCOME OF THE ASSESSEE AT RS. 11,33,535/- AS AGAINST RS. 4,72,160/- DECLARED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ORD ER OF THE ASSESSING OFFICER. 6. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ESTI MATION OF INCOME IN THE HANDS OF THE ASSESSEE. 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH ERE WAS NO MERIT IN APPLYING THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT, HISSAR VS M/S PRABHAT CONTRACTOR (SUP RA) TO THE FACTS OF THE PRESENT CASE AS THE ASSESSEE WAS A ROAD CONTRAC TOR AS AGAINST THE CASE OF CIVIL CONTRACTOR BEFORE THE HON'BLE PUNJAB & HAR YANA HIGH COURT. THE LD. AR FOR THE ASSESSEE FURTHER POINTED OUT THAT BO OKS OF ACCOUNT WERE 3 LOST DURING THE COURSE OF ASSESSMENT PROCEEDINGS, W HICH WERE LATER TRACED BUT THE SAME WERE NOT LOOKED INTO BY THE COM MISSIONER OF INCOME TAX (APPEALS). THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE NET PROFIT RATE DECLARED IN THE EARLIER YEARS HAS BEEN ACCEPTE D IN THE HANDS OF THE ASSESSEE AND DURING THE YEAR UNDER CONSIDERATION, T HE GROSS RECEIPTS HAD TOUCHED RS.1.35 CR ALTHOUGH IN THE EARLIER YEARS, T HE SAME WERE ON THE LESSER SIDE. 8. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE RECORD. WE FIND THAT SIMILAR ISSUE OF ADOPTION OF NET PROFIT R ATE TO DETERMINE THE INCOME IN THE HANDS OF THE ASSESSEE, WHERE THE BOOK S OF ACCOUNT HAD BEEN REJECTED, AROSE BEFORE THE TRIBUNAL IN SHRI SU KHWINDER SINGH VS. ITO. THE TRIBUNAL IN SUKHWINDER SINGH VS. JCIT, KU RUKSHETRA IN ITA NO.1461/CHD/2010 VIDE DATED 24.11.2011 HELD AS UNDE R : 10. THE SECOND ISSUE TO BE ADDRESSED IN THE CASE I S THE APPLICATION OF NP RATIO. THE TRIBUNAL (SUPRA) IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 200 5-06 HAD DIRECTED THE APPLICATION OF NET PROFIT RATE OF 1.08% TO THE GROSS RECEIPTS OF RS.3.22 CRORES IN COMPARISON TO NET PROFIT RATE OF 6.5% TO THE TOTAL RECEIPTS APPLIED B Y THE ASSESSING OFFICER. THE CIT (A) DURING THE YEAR UND ER CONSIDERATION HAD REJECTED THE CLAIM OF THE ASSESSE E IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S PRABHAT KUMAR CONTRACTOR (SUPRA) WHEREIN THE RATE OF PROFIT @ 12% WAS APPLIED BY THE HONBLE COURT. 11. THE ASSESSEE IS A ROAD CONTRACTOR AND NOT CIVIL CONTRACTOR AS IN THE CASE BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE ASSESSEE HAD DISCLOSED THE INCOME F OR THE YEAR UNDER CONSIDERATION AT NET PROFIT RATE OF 1.20% AND THE ASSESSING OFFICER FOR COMPUTING THE INCOME OF THE Y EAR HAD APPLIED NET PROFIT RATE OF 6.5%. THE BASIS FOR THE APPLICATION OF THE SAID NET PROFIT RATE BY THE ASSESSING OFFICE R WAS SIMILAR RATE APPLIED IN ASSESSMENT YEAR 2005-06 AND THE CI T (A) HAD PLACED RELIANCE TO THE RATIO LAID DOWN BY THE HON'B LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ANOTHER CONTRACTO R IN CIT VS. PARBHAT KUMAR CONTRACTOR (SUPRA). THE CIT (A) HAD APPLIED NET PROFIT RATE OF 6.5% IN VIEW OF THE RATE APPLIED BY 4 THE HON'BLE PUNJAB & HARYANA HIGH COURT. IN THE F ACTS OF THE CASE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT , THE REASONS FOR THE APPLICATION OF THE SAID RATE WAS TH E UN- VERIFIABILITY OF THE WAGES CLAIMED AS EXPENDITURE. THERE IS NO MERIT IN THE STAND OF THE CIT (A) THAT IN CASE OF C ONTRACTORS, HIGHER RATE TO GROSS RECEIPTS IS TO BE APPLIED IN A LL CASES IN VIEW OF RATIO LAID DOWN IN CIT VS. PRABHAT KUMAR, C ONTRACTOR (SUPRA). WE FIND THAT THE HON'BLE PUNJAB & HARYANA HIGH COURT IN RAJA RAM CONTRACTORS VS. CIT IN ITA NO. 689 OF 2009, DATE OF DECISION 7.4.2010, HAS UPHELD APPLICA TION OF NET PROFIT RATE OF 10% AS NET PROFIT RATE. IT HAS BEEN FURTHER LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT THAT WHERE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED, THE ESTIMATION OF INCOME BY APPLYING OF FLAT RATE INHERENTLY INVOLVES AN ELE MENT OF SUBJECTIVITY. 10. IN THE ENTIRETY OF THE ABOVESAID FACTS AND CIRCUMST ANCES, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 8% TO THE G ROSS RECEIPTS. HOWEVER, THE RECEIPTS ARE TO BE ADOPTED AFTER EXCLU DING THE SALES TAX DEDUCTED AT RS. 541,533/- AND THE NET PROFIT RATE I S TO BE APPLIED ON THE NET CONTRACT RECEIPTS. THE GROUNDS OF APPEAL NOS. 1 TO 3 RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED: 25 TH FEBRUARY,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR. ASSISTANT REGISTRAR ITAT,CHD.