ACIT, Range-1, Nashik V. Shri Sandeep Shantilal Khivansara, Nashik

ITA 2174/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76335 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Gross profit estimation
• Section: 133(6); 194C; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA NO.2174/PN/2012 (ASSESSMENT YEAR 2007-08) ITO, WARD-1(3), NASHIK .. APPELLANT VS. SHRI SANDEEP SHANTILAL KHINVASARA, IST FLOOR, HIRALAL TOWERS, NEAR S.T. STAND, SINNAR, NASHIK-422103 PAN NO.AGFPK4160Q .. RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 13-03-2014 DATE OF PRONOUNCEMENT : 20-03-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 31-08-2012 OF THE CIT(A)-II, NASHIK RELATING TO ASSESSMENT YEAR 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTIO N UNDER THE NAME AND STYLE OF M/S. VARUN ASSOCIATES. HE IS ALSO ENG AGED IN THE AGENCY BUSINESS OF ITC PRODUCTS UNDER THE NAME AND STYLE O F ARIHANT AGENCIES. THE ASSESSEE FILED HIS RETURN OF INCOME ON 31-10-2007 DECLARING TOTAL INCOME OF RS.31,46,220/-. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAS SHOWN CONTRACT RECEIPT OF RS.8,24,79,4 99/- IN RESPECT OF 2 VARUN ASSOCIATES WHILE IN THE CASE OF ARIHANT AGENC IES THE SALES DURING THE YEAR WERE RS.3,17,60,521/-. 2.1 THE ASSESSING OFFICER ANALYSED THE GROSS PROFIT OF VARUN ASSOCIATES ENGAGED IN CONSTRUCTION BUSINESS WHEREIN GROSS PROFIT WAS SHOWN AT RS.61,63,073/- ON THE CONTRACT RECEIPT OF RS.8.24 CRORES AND THUS THE GROSS PROFIT WORKS OUT TO 7.47%. THE NET PROFIT RATIO WAS 3.09%. THE ASSESSING OFFICER OBSERVED THAT IN THE IMMEDIATELY PRECEDING YEAR THE GROSS PROFIT WAS DECLARED AT 9.2 4% AND NET PROFIT AT 3.18% AGAINST THE CONTRACT RECEIPT OF RS.3.33 CRORE S. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE FALL IN THE GROSS PROFIT RATIO AS WELL AS THE NET PROFIT RATIO. HE ALSO DREW THE ATTENTION O F THE ASSESSEE TO THE NET PROFIT RATIO DECLARED BY SOME OF THE CONTRACTOR S FOR A.Y. 2007-08 WHICH ARE AS UNDER : SR. NO. NAME OF THE ASSESSEE A.Y. GROSS RECEIPTS NET PROFIT NET PROFIT RATE 1 REMAC EARTHMOVERS PVT. LTD. 07-08 11,09,69,966 76,39,813 6.88% 2 M/S. SAMBHASHIVA REDDY 07-08 4,68,64,708 26,50,481 5.66% 3 B.M. CHAPHALKAR & SONS 07-08 9,71,27,895 51,02,800 5.25% 4 B.M. CHAPHALKAR & COMPANY 07-08 3,49,33,146 14,85,089 4.25% 2.2 IT WAS EXPLAINED THAT THE DECREASE IN GROSS PRO FIT RATIO IS ON ACCOUNT OF SUBSTANTIAL INCREASE IN TURNOVER. THE A SSESSEE TRIES TO OBTAIN MAXIMUM NUMBER OF CONTRACTS IN A COMPETITION ENVIRONMENT FOR WHICH HE QUOTED VERY LOW MARGINS. FURTHER, THE ASSESSEE BEING AN INDIVIDUAL IS NOT ABLE TO EXERCISE EFFECTIVE CONTRO L OVER THE EXPENSES IN OUTSTATION SITES. 3 2.3 HOWEVER, THE ASSESSING OFFICER WAS NOT FULLY CO NVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT NOTICES ISSUED U/S.133(6) TO SOME OF THE PARTIES ON A TEST CHECK B ASIS TO VERIFY THE GENUINENESS OF THE EXPENSES CLAIMED WERE RETURNED U NSERVED IN FOUR CASES OUT OF 8 SUCH NOTICES . ON BEING INFORMED BY THE ASSESSING OFFICER ABOUT THE ABOVE, THE ASSESSEE PRODUCED CONF IRMATION OF ACCOUNTS FROM 3 OF THE PARTIES. HOWEVER, THE ASSES SEE COULD NOT BRING ANY CONFIRMATION FROM MR. M.S. REDDY TOWARDS LABOUR CHARGES OF RS.2,79,000/- NOR ANY REPLY WAS RECEIVED FROM THE S AID PARTY. THE ASSESSING OFFICER FURTHER NOTED THAT IN THE MONTH O F MARCH THE ASSESSEE HAS CLAIMED TOTAL LABOUR CHARGES OF RS.96 LAKHS, PURCHASE OF MATERIALS AT RS.33 LAKHS AND TRANSPORTATION AND OTH ER EXPENSES AT RS.22 LAKHS LEADING TO TOTAL EXPENSES OF RS.1.51 CR ORES. AGAINST THIS THE ASSESSEE HAS REFLECTED CLOSING WORK IN PROGRESS AT RS.1.06 CRORES AND NIL RECEIPTS. ON BEING QUESTIONED BY THE ASSES SING OFFICER TO EXPLAIN AS TO WHY EXPENSES INCURRED IN THE MONTH OF MARCH ARE NOT COMPLETELY REFLECTED EITHER AS CLOSING WORK IN PROG RESS OR SALES IT WAS EXPLAINED THAT SOME OF THE EXPENSES BOOKED IN THE M ONTH OF MARCH ARE AGAINST WORK DONE AND BILLED IN THE MONTH OF FEBRUA RY. IT WAS SUBMITTED THAT IN THE MONTH OF FEBRUARY THE TOTAL S ALES WERE SHOWN AT RS.2.56 CRORES. IT WAS FURTHER POINTED OUT THAT AD VANCES HAVE BEEN GIVEN TO LABOUR CONTRACTORS THROUGHOUT THE YEAR WHI LE A MAJOR PORTION OF THEIR BILLS HAVE BEEN RAISED ONLY IN THE MONTH O F MARCH. THUS, OUT OF THE TOTAL LABOUR PAYMENT OF RS.2.01 CRORES APPRO XIMATELY 96 LAKHS 4 HAS BEEN SHOWN AS BILLED IN THE MONTH OF MARCH 2007 WHILE WORK WAS DONE IN THE EARLIER MONTHS. 2.4 HOWEVER, THE ASSESSING OFFICER WAS NOT FULLY SA TISFIED WITH THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM IN THE CASE OF CIVIL CONSTRUCTION BILLS ARE RAISED ONLY WH EN WORK OR PART THEREOF IS CERTIFIED AS COMPLETED, THEREFORE, THE B ILLS RAISED IN THE MONTH OF FEBRUARY 2006 REFLECT WORK WHICH WAS COMPL ETED BEFORE THE DATE OF THE BILL, THEREFORE, THE EXPENSES ON THE SA ME WOULD HAVE ALREADY BEEN INCURRED. HE OBSERVED THAT THE EXPENS ES INCURRED IN THE MONTH OF MARCH AMOUNT TO RS.1.51 CRORES AGAINST WHI CH THE ONLY ENTRY REFLECTED IS CLOSING WORK IN PROGRESS OF RS.1 .06 CRORES. ACCORDING TO HIM EVEN IF PART OF THE LABOUR EXPENSE S PERTAIN TO EARLIER MONTHS, IT CANNOT BE DENIED THAT CLOSING WORK IN PR OGRESS DOES NOT REFLECT THE ENTIRE AMOUNT OF EXPENDITURE INCURRED S UBSEQUENT TO THE LAST SALE BILL (RUNNING BILL). HE FURTHER OBSERVED THAT THERE ARE SUBSTANTIAL CASH PAYMENTS IN RESPECT OF LABOUR AND IN THE CASE OF M.S. REDDY, NO CONFIRMATION COULD BE FILED. IN VIEW OF THE ABOVE, THE AO WAS OF THE OPINION THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE DO NOT ACCURATELY REFLECT THE PROFIT EARNED DURING THE YEAR FOR WHICH HE REJECTED THE BOOK RESULTS U/S.145 OF THE I.T. ACT. THE AO ADOPTED NE T PROFIT RATE OF 5% ON GROSS CONTRACT RECEIPTS OF RS.8,24,79,499/- AND DETERMINED THE PROFIT AT RS.41,23,975/- AS AGAINST RS.25,51,948/- REFLECTED BY THE ASSESSEE. HE CALCULATED THE DIFFERENCE AT RS.15,72 ,027/- AND ACCORDINGLY MADE AN ADDITION OF RS.15,70,000/- TO T HE TOTAL INCOME OF THE ASSESSEE. THE AO FURTHER ADDED AN AMOUNT OF RS .50,000/- ON 5 ADHOC BASIS OUT OF TELEPHONE, PETROL AND MISCELLANE OUS EXPENSES BEING PERSONAL IN NATURE. 3. IN APPEAL THE LD.CIT(A) RESTRICTED THE DISALLOWA NCE TO RS. 1 LAKH ON ACCOUNT OF LOW GROSS PROFIT SHOWN IN CONSTR UCTION BUSINESS AS AGAINST RS.15,70,000/- MADE BY THE ASSESSING OFFICE R. HE, HOWEVER, CONFIRMED THE ADDITION OF RS.50,000/- ON ACCOUNT OF PERSONAL EXPENSES BY OBSERVING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R, DETAILED SUBMISSION OF THE APPELLANT AND THE MATERIAL AVAILABL E ON RECORD. THE AO HAS REJECTED BOOKS OF ACCOUNTS AND HAS ADOPTED NET PROFIT @ 5% ON GROSS CONTRACT RECEIPTS AMOUNTING TO RS.8,24,79,499/- AND THEREFORE, WORKED OUT NET PROFIT AT RS.41,23,975/- AS AGAINST RS.25,51,948/- SHOWN BY THE APPELLANT. AN ADDITION OF RS.15,72,027 /- HAS THEREFORE, BEEN MADE ON ACCOUNT OF LOW GP RATE. BESIDES, AN AD DITION OF RS.50,000/- HAS BEEN MADE ON ACCOUNT OF PERSONAL US E OF TELEPHONE, VEHICLES ETC. THE AO FOUND THAT EXPENSES OF RS.1.51 CRORE WERE INCURRED IN MARCH VIS-A-VIS CLOSING WORK-IN-PROGRESS AMOUNTING TO R S.1.06 CRORE AND THERE WERE SUBSTANTIAL CASH PAYMENTS ON ACCOUNT OF LABOUR EXPENDITURE. AO FOUND THAT APPELLANT'S GP RATE OF 7 .47 % IN THE AY UNDER APPEAL WAS LOWER THAN GP RATE OF 9.24% IN AY 2006-0 7. SIMILARLY, THERE WAS FALL IN NP RATE IN THIS YEAR AS COMPARED TO THE I MMEDIATELY PRECEDING YEAR. (3.09% IN AY 2007-08 AS AGAINST 3.1 8% IN AY 2006-07). AO CONFRONTED THE APPELLANT WITH SOME COMPARABLE CA SES WHERE NP RATE VARIED FROM 4.25% TO 6.88%. AO DID NOT FIND FAVOUR WITH APPELLANT'S CONTENTION THAT FALL IN GP RATE WAS DUE TO INCREASE IN TURNOVER FROM RS. 3.33 CRORE IN AY 2006-07 TO RS. 8.24 CRORE IN AY 20 07-08. IN ORDER TO VERIFY GENUINENESS OF EXPENSES AO ISSUED NOTICES U/ S 133(6) TO 8 PARTIES. HOWEVER, 4 NOTICES RETURNED UNDELIVERED IN RESPONSE TO WHICH, APPELLANT PRODUCED CONFIRMATION IN RESPECT OF 3 PA RTIES. HOWEVER, NO CONFIRMATION WAS FILED IN THE CASE OF M. S. REDDY ( LABOUR CHARGES RS. 2.79 LAC). APPELLANT HAS QUESTIONED THE ACTION OF THE AO IN REGARD TO REJECTION OF BOOKS, ADOPTING NET PROFIT @ 5% AND DISALLOWANCE OF ? 50.000/- ON ACCOUNT OF PERSONAL USE OF TELEPHONE AND CAR ETC. 6. I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE APPELLANT. AS REGARDS AO'S OBSERVATIONS THAT CLOSING STOCK AND WORK IN PROGRESS AS ON 31/03/2007 DO NOT REFLECT THE ENTIRE AMOUNT OF E XPENDITURE INCURRED SUBSEQUENT TO THE LAST SALE BILL, THE APPELL ANT HAS GIVEN DETAILS OF EXPENSES ON ACCOUNT OF PURCHASES, LABOUR AND OTHER DIRECT EXPENSES BIFURCATING THE SAME INTO 2 PERIODS I.E. PRIOR TO 28/ 2/2007 AND AFTER 28/2/2007 (LAST SALE BILL WAS DATED 28/2/2007). THE D ETAILS ARE REPRODUCED BELOW : 6 SR.NO. NATURE OF EXPENSES PRIOR TO 28/02/2007 (RS.) AFTER 28/02/2007 (RS.) TOTAL (RS. ) 1 PURCHASES 89,034 32,28,202 33,17,236 SUB TOTAL 89,034 32,28,202 33,17,236 2 WEEKLY LABOUR CHARGES (DEPT. LABOUR) 9,810 1,49,215 1,59,025 3 LABOUR CHARGES 67,95,159 25,51,266 93,46,425 4 HIRE CHARGES 37,500 60,650 98,150 5 SUPERVISION CHARGES 83,000 0 83,000 SUB TOTAL 69,25,469 27,61,131 96,86,600 6 DIESEL EXPENSE 0 7,570 7,570 7 LABOUR WELFARE EXP. 0 3,591 3,591 8 WATER EXPENSES 29,250 37,050 66,300 9 TRANSPORTATION EXPENSES 6,65,320 12,95,641 19,60,961 SUB TOTAL 6,94,570 13,43,852 20,38,422 TOTAL 77,09,073 73,33,185 1,50,42,258 THUS, IT IS CLEAR FROM THE ANALYSIS OF THE PERIOD OF TH E BILLS THAT THOUGH EXPENSES OF NEARLY RS.1.51 CRORES ARE BOOKED IN THE MON TH OF MARCH, 2007, OUT OF THE SAME, EXPENSES OF NEARLY RS.77.10 LAC S PERTAIN TO THE PERIOD UPTO 28/02/2007, I.E. DATE OF LAST SALE BILL R AISED DURING THE YEAR AND EXPENSES OF ONLY RS.73.33 LACS PERTAIN TO TH E MONTH OF THE MARCH, 2007. CLOSING STOCK AND WIP AS ON 31/03/2007 IS RS. 32.67 LACS. IN THESE CIRCUMSTANCES, SINCE AMOUNT OF EXPENDITURE PER TAINING TO THE PERIOD AFTER LAST SALE BILL IS LESS THAN THE AMOUNT OF CLOSING STOCK AND WORK IN PROGRESS, IT CANNOT BE SAID THAT CLOSING ST OCK AND WORK IN PROGRESS DO NOT REFLECT THE ENTIRE AMOUNT OF EXP ENDITURE INCURRED SUBSEQUENT TO THE LAST SALE BILL. BESIDES, APPELLAN T'S BOOKS ARE AUDITED U/S.44AB OF THE ACT. NO DISCREPANCY HAS BEEN HIG HLIGHTED BY THE AUDITORS. APPELLANT IS ALSO SUBJECT TO VAT AUDIT. NO SPECIFIC DEFECT IN REGARD TO PURCHASES, SALES, LABOUR/SUB-CONTRACTI NG CHARGES HAS BEEN BROUGHT ON RECORD BY AO. APPELLANT HAS DEDUCTED TAX AT SOURCE IN THE CASE OF LABOUR CONTRACTORS AS PER THE PROVISIO NS OF SEC 194C OF THE ACT. DETAILS OF SUCH TDS WERE STATED TO HAVE BEE N FILED BEFORE AO BESIDES VAT AUDIT REPORT FOR AY 2007-08. THE APP ELLANT'S BOOK RESULTS HAVE BEEN ACCEPTED IN THE EARLIER YEARS ALSO. FURTHER, AO HAS COMPARED NP RATE OF CERTAIN OTHER CONTRACTORS (COMPARABLE CASES) TO EXAMINE APPELLANT'S LOW GP RATE IN AY 2007-0 8 VIS-A-VIS 2006-07. I FIND THAT NO PROPER OPPORTUNITY WAS GIVEN TO THE APPELLANT TO EXPLAIN WHY HIS NP RATE WAS LOWER THAN THESE CONTRACTORS. IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE, I AM OF THE CONSIDERED VIEW THAT REJECTION OF BOOKS BY AO MERELY ON ACCOUNT OF SUBSTANTIAL CASH PAYMENTS TO LABOUR CONTRACTORS OR NON SUBM ISSION OF CONFIRMATION FROM M. S. REDDY (RS.2,79,000/- WHICH IS ONLY 2.95% OF TOTAL LABOUR CHARGES) OR ON THE BASIS OF NP RATE OF 4.25% TO 6.88% IN THE CASE OF OTHER CONTRACTORS OR HIS OBSERVATION IN RE GARD TO CLOSING STOCK VIS-A-VIS WORK IN PROGRESS IN RELATION TO EXPENDIT URE INCURRED IN MARCH WAS NOT JUSTIFIED ESPECIALLY WHEN BOOKS ARE AU DITED U/S 44AB AND NO IRREGULARITY WAS HIGHLIGHTED BY THE AUDI TORS. FURTHER, AO 7 DID NOT FIND ANY BOGUS BILL IN REGARD TO LABOUR EXPENS ES. AO ALSO DID NOT TAKE INTO ACCOUNT THE INCREASED TURNOVER IN AY 2007-08 WHICH IS ALSO ONE OF THE FACTORS FOR DECREASE IN GP RATE. IN VIEW OF THE ABOVE, AO'S ACTION OF ESTIMATING NP RATE @ 5% OF TOTAL CONTRACT R ECEIPTS BY REJECTING BOOKS OF ACCOUNTS U/S 145 OF THE ACT WAS NOT JUST IFIED. THE ADDITION OF RS.15,70,000/- MADE ON ACCOUNT OF LOW GP IS THE REFORE, DELETED. HOWEVER, IN REGARD TO EXPENSES THE AUDITORS IN TH E AUDIT REPORT HAVE COMMENTED THAT SOME PAYMENTS FOR LABOUR C HARGES, PURCHASING PARTIES, SALARIES, TRAVELLING TRANSPORTATIO N, PURCHASE PETROL EXPENSES ETC. ARE SUPPORTED BY HOMEMADE VOUCHERS ONLY. KEEPING IN VIEW THE ABOVE AND THE FACT THAT SUBSTANTIAL C ASH PAYMENTS FOR LABOUR CHARGES HAVE BEEN MADE AND CONFIRMATION I N RESPECT OF M. S. REDDY WAS NOT FILED, I AM OF THE VIE W THAT DISALLOWANCE OF RS. 1,00,000/- OUT OF LABOUR EXPENSES WOULD BE RATIONAL TO PLUG THE LEAKAGE. THIS IN MY VIEW, WILL MEET THE ENDS OF JUST ICE. THE APPELLANT THEREFORE, GETS A RELIEF OF RS.14,70,000/-. AS REGARD S ADDITION OF RS.50,000/- ON ACCOUNT OF PERSONAL USE OF TELEPHONE AN D CAR, I FIND THAT THE APPELLANT IS A PROPRIETOR, ENGAGED IN THE BUSINESS OF CONSTRUCTION AND THEREFORE, POSSIBILITY OF HIS USING CAR S AND TELEPHONE BELONGING TO BUSINESS CONCERN FOR HIS PERSONAL USE CANNOT BE RULED OUT. ADDITION OF RS.50,000/- SEEMS TO BE QUITE REASONA BLE IN VIEW THE COMMENTS OF THE AUDITORS AND THE TOTAL TURNOVER/EXPEN SES OF HIS BUSINESS CONCERN. THE SAME IS THEREFORE, CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE APPELLANT IS PART LY ALLOWED. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ONLY GROUND IS THAT HONBLE CIT(A)-II, NASHIK HAS ERRE D IN GRANTING RELIEF OF RS.14,70,000/- OUT OF THE ADDITION MADE AT RS.15,70,000/- ON ACCOUNT OF LAW GROSS PROFIT RATE. THE CIT(A) HAS RES TRICTED THE ADDITION OF RS.15,70,000/- TO RS.1,00,000/-. THE CIT (A) HAS DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE WITHOUT APPRECIATI NG THE FACTS OF THE CASE. BY OBSERVING VARIOUS DISCREPANCIES, THE BOOKS RESULTS WERE REJECTED. EVEN BEFORE THE CIT(A) THE ASSESSEE HAS NOT F ILED CONFIRMATION FROM M.S. REDDY (LABOUR CHARGES OF RS.2, 79,000/-). THE CIT(A) HAS ADMITTED ADDITIONAL INFORMATION FROM THE ASSESSEE, WHICH WERE NOT PRODUCED OR EXPLAINED BEFORE THE AO. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, IT IS REQUESTED TO QUASH THE ORDER OF THE HONBLE CIT(A)-II , NASHIK AND RESTORE THE ORDER OF THE AO. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). WE FIND THE ASSESSING OFFICER IN THE INSTANT CASE ADOP TED THE NET PROFIT 8 RATE OF 5% ON THE CONTRACT TURNOVER OF RS.8,24,79,4 99/- ON THE GROUND THAT (A) NET PROFIT DECLARED BY THE ASSESSEE AT 3.1 8% IS LESS THAN OTHER COMPARABLE CONTRACTORS, (B) THE CLOSING WORK IN PRO GRESS SHOWN AT RS.1.06 CRORES IS LESS THAN THE EXPENSES INCURRED I N THE MONTH OF MARCH AMOUNTING TO RS.1.51 CRORES, (C) SUBSTANTIAL CASH PAYMENTS HAVE BEEN MADE IN RESPECT OF LABOUR CHARGES AND (D) NO CONFIRMATION WAS FILED IN THE CASE OF M.S. REDDY. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.15,70,000/- BEING T HE DIFFERENCE BETWEEN THE NET PROFIT ADOPTED BY HIM AT 5% AND THE PROFIT DECLARED BY THE ASSESSEE. 5.1 WE FIND THE LD.CIT(A) RESTRICTED THE ADDITION T O RS.1 LAKH AS AGAINST RS.15,70,000/- ADDED BY THE ASSESSING OFFIC ER ON THE GROUND THAT OUT OF THE EXPENSES INCURRED IN THE MONTH OF M ARCH TOTALLING TO RS.1.51 CRORES, EXPENSES OF NEARLY RS.77.10 LAKHS P ERTAIN TO THE PERIOD UPTO 28-02-2007, I.E. THE DATE OF LAST SALE BILL RA ISED AND EXPENSES OF ONLY RS.73.33 LAKHS PERTAIN TO THE MONTH OF MARCH, 2007 AND THE CLOSING WORK IN PROGRESS WAS RS.1.06 CRORES. THERE FORE, ACCORDING TO HIM, THE AMOUNT OF EXPENDITURE PERTAINING TO THE PE RIOD AFTER LAST SALE BILL IS LESS THAN THE AMOUNT OF CLOSING WORK IN PRO GRESS. ACCORDINGLY, THE OBSERVATION OF THE AO THAT THE CLOSING WORK IN PROGRESS SHOWN AT RS.1.06 CRORES IS LESS THAN THE EXPENSES INCURRED I N THE MONTH OF MARCH WAS HELD TO BE INCORRECT. FURTHER, HE GAVE A FINDING THAT THE BOOKS OF ASSESSEE ARE AUDITED U/S.44AB AS WELL AS S UBJECT TO VAT AUDIT, NO DISCREPANCY HAS BEEN HIGHLIGHTED BY THE A UDITORS, NO SPECIFIC DEFECT IN REGARD TO PURCHASES, SALES, LABO UR AND SUB- 9 CONTRACTING CHARGES HAS BEEN BROUGHT ON RECORD BY T HE ASSESSING OFFICER. HE FURTHER NOTED THAT TDS HAS BEEN DULY D EDUCTED AT SOURCE IN THE CASE OF LABOUR CONTRACTORS AS PER PROVISIONS OF SECTION 194C OF THE ACT AND THE BOOK RESULTS OF THE ASSESSEE WERE A CCEPTED IN THE PAST. HE HAD ALSO GIVEN A FINDING THAT NO PROPER OPPORTUN ITY WAS GIVEN TO THE ASSESSEE TO EXPLAIN WHY HIS NET PROFIT WAS LOWE R THAN THE COMPARABLE CASES ADOPTED BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES, THE LD.CIT(A) HELD THAT THE ACTION O F THE ASSESSING OFFICER IN ESTIMATING THE NET PROFIT RATE OF 5% OF THE TOTAL CONTRACT RECEIPT IS NOT JUSTIFIED. THE LD. DEPARTMENTAL REP RESENTATIVE COULD NOT CONTROVERT ANY OF THE ABOVE FINDINGS GIVEN BY T HE LD.CIT(A). UNDER THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF T HE CIT(A) THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING TH E BOOK RESULTS OF THE ASSESSEE BY ESTIMATING THE GROSS PROFIT. WE FIND T HE LD.CIT(A) SUSTAINED AN AMOUNT OF RS. 1 LAKH ON THE GROUND THA T SOME PAYMENTS TOWARDS LABOUR CHARGES, PURCHASE, SALARIES, TRAVELL ING, TRANSPORTATION, PETROL EXPENSES ARE SUPPORTED BY SELF-MADE VOUCHERS AND THE ASSESSEE HAS NOT FILED ANY CONFIRMATION IN RESPECT OF MR.M.S . REDDY WHICH IN OUR OPINION IS REASONABLE UNDER THE FACTS AND CIRCU MSTANCE OF THE CASE. THUS, THE ORDER OF THE CIT(A) IN OUR OPINION IS A R EASONED ONE WHICH DOES NOT CALL FOR ANY INTERFERENCE FROM OUR SIDE. WE ACCORDINGLY UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 5.2 SO FAR AS THE GROUND TAKEN BY THE REVENUE THAT THE CIT(A) HAS ADMITTED ADDITIONAL INFORMATION FROM THE ASSESSEE, WE FIND THE 10 ASSESSEE IN THE INSTANT CASE HAS FILED ONLY DETAILS BEFORE THE CIT(A) AS PER BOOKS OF ACCOUNTS TO SUPPORT ITS CASE. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS PRODUCED THE BOOKS OF ACC OUNTS FROM WHICH THE ASSESSING OFFICER HAS NOT FOUND ANY DEFECT. TH E ASSESSEE HAS ONLY FILED DETAILS OF EXPENSES PRIOR TO 28-02-2007 AND EXPENSES AFTER 28-02-2007 IN A SUMMARISED MANNER RELATING TO THE E XPENSES FOR THE MONTH OF MARCH, WHICH IN OUR OPINION, CANNOT BE TR EATED AS ADDITIONAL INFORMATION. IT HAS BEEN HELD IN VARIOUS JUDICIAL D ECISIONS THAT THE POWERS OF THE CIT(A) ARE CO-TERMINUS WITH THAT OF T HE ASSESSING OFFICER. THE CIT(A) CAN EXAMINE THE DETAILS WHICH THE ASSESSING OFFICER HAS FAILED OR OMITTED TO VERIFY. SINCE THE LD.CIT(A) IN THE INSTANT CASE HAS GONE THROUGH THE DETAILS FILED BEF ORE HIM BY THE ASSESSEE AND CONSIDERING THAT THE DETAILS ARE ALREA DY THERE IN THE BOOKS OF ACCOUNTS WHICH THE ASSESSING OFFICER FAILED TO V ERIFY PROPERLY, THEREFORE, THE OBJECTION OF THE REVENUE THAT THE CI T(A) HAS ADMITTED ADDITIONAL INFORMATION WHICH WERE NOT PRODUCED OR E XPLAINED BEFORE THE ASSESSING OFFICER IS NOT CORRECT. IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE CIT(A) AND THE GROUNDS RAIS ED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20-03-2014. SD/- SD/- (R.S.PADVEKAR ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 20 TH MARCH, 2014 11 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II, NASHIK 4. THE CIT-II, NASHIK 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPEL LATE TRIBUNAL, PUNE